Answer:
It is very difficult to record T accounts since there is not a lot of room here and things get complicated very easily. So I used an excel spreadsheet to post the accounts on an accounting equation format.
Assets increase when they are debited and they decrease when they are credited. The opposite happens to liabilities and equity, they increase when they are credited and decrease when they are debited. Service revenue is credited, while all expenses are debited.
The reason why the drawings account has a negative balance is that even though it is an equity account, it has a debit balance since it decreases capital.
In order for the equation to balance, you have to close the accounts, but that was not a requirement of the question.
What liabilities does the business have after all transactions have been recorded?
the only liability account is accounts payable with a credit balance of $24,700
Recording and Reporting Accrued Liabilities and Deferred Revenue with Discussion of Accrual Versus Cash Accounting
During its first year of operations, Walnut Company completed the following two transactions. The annual accounting period ends December 31.
A. Paid and recorded wages of $140,000 during Year 1; however, at the end of Year 1, three days' wages are unpaid and have not yet been recorded because the weekly payroll will not be paid to employees until January 6 of Year 2. Wages for the three days are $4,900.
B. Collected rent revenue of $4,800 on December 12 of Year 1 for office space that Walnut rented to another company. The rent collected was for 30 days from December 12 of Year 1 to January 10 of Year 2. Record the collection of rent on December 12.
Required:
1. With respect to wages, provide the adjusting entry required at the end of year 1 and the journal entry required on January 6 of year 2.
2. With respect to rent revenue, provide the journal entry for the collection of rent on December 10 and the adjusting entry required on December 31.
Answer:
Walnut Company
1. Adjusting Journal Entry:
December 31, Year 1:
Debit Wages Expense $4,900
Credit Wages Payable $4,900
To accrue unpaid wages at the end of the year.
General Journal Entry:
January 6, Year 2:
Debit Wages Payable $4,900
Credit Cash Account $4,900
To record the payment of accrued wages.
2. General Journal Entry:
December 12, Year 1:
Debit Cash Account $4,800
Credit Deferred Rent Revenue $4,800
To record the receipt of rent in advance.
Adjusting Journal Entry:
December 31, Year 1:
Debit Deferred Rent Revenue $3,200
Credit Rent Revenue $3,200
To adjust for rent revenue earned for 20 days.
Explanation:
The rent revenue of $4,800 according to the question is for 30 days. December 12 to December 31 has 20 days while January 1 to January 10 has 10 days. So the rent revenue for Year 1 is computed as $4,800 * 20/30 = $3,200 while the remaining balance will be for rent revenue in Year 1 ($4,800 * 10/30).
Effective versus nominal interest ratesBank A pays 8% interest compounded annually on deposits, while Bank B pays 7% compounded daily. Based on the EAR (or EFF%), which bank should you use?A. You would choose Bank A because its EAR is higher.B. You would choose Bank B because its EAR is higher.C. You would choose Bank A because its nominal interest rate is higher.D. You would choose Bank B because its nominal interest rate is higher.E. You are indifferent between the banks and your decision will be based upon which one offers you a gift for opening an account.Could your choice of banks be influenced by the fact that you might want to withdraw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest.A. If funds must be left on deposit until the end of the compounding period (1 year for Bank A and 1 day for Bank B), and you think there is a high probability that you will make a withdrawal during the year, then Bank A might be preferable.If funds must be left on deposit until the end of the compounding period (1 year for Bank A and 1 day for Bank B), and you have no intentions of making a withdrawal during the year, then Bank B might be preferable.B. If funds must be left on deposit until the end of the compounding period (1 day for Bank A and 1 year for Bank B), and you think there is a high probability that you will make a withdrawal during the year, then Bank B might be preferable.C. If funds must be left on deposit until the end of the compounding period (1 year for Bank A and 1 day for Bank B), and you think there is a high probability that you will make a withdrawal during the year, then Bank B might be preferable.D. If funds must be left on deposit until the end of the compounding period (1 day for Bank A and 1 year for Bank B), and you think there is a high probability that you will make a withdrawal during the year, then Bank A might be preferable.
Answer:
A. You would choose Bank A because its EAR is higher.
C) If funds must be left on deposit until the end of the compounding period (1 year for Bank A and 1 day for Bank B), and you think there is a high probability that you will make a withdrawal during the year, then Bank B might be preferable.
Explanation:
Effective interest rate(EFF%) or EAR=[ (1+r/n)^n -1]
r= nominal interest rate
n= number of compounding period per year.
For bank A we have 8%
%FF%)=[(1+0.08/1)^1 -1]
= 1.08-1
= 0.08×100
= 8%
For bank B we have 7%
EFF%)=[(1+0.07/365)^365 -1]
= 1.0725-1
= 0.0725×100
= 7.25%
You would choose Bank A because its EAR is higher. i.e bank A has 8% and bank B
7.25 respectively.
.Could your choice of banks be influenced by the fact that you might want to withdraw your funds during the year as opposed to at the end of the year?
Yes, it will , because bank B will bring interest every day, so it will be preferable, in the case that the funds is withdrawable during the year and that no interest will be generated.
because for bank A to earn interest you will need to leave the fund there for the whole year incase the fund will remain as deposit for the compounding period for interest sake.
a. Cash receipts from customers for services rendered __________ Operating __________Inflow
b. Sale of long-term investments for cash __________Investing__________ Inflow
c. Acquisition of PPE for cash _________ Investing _________ Outflow
d. Payment of income taxes ______ Operating __________ Outflow
e. Bonds payable issues for cash________ Financing __________ Outflow
f. Payment of cash dividends declared in previous year _________ Financing _______ Outflow
g. Purchase of short-term investments (not cash equivalents) for cash_______ Investing ______ Outflow
h. Purchases of inventory for cash _______ Operating _________ Outflow
Answer:
a. Cash receipts from customers for services rendered
Indication: Operating activities and Cash Inflow
b. Sale of long-term investments for cash
Indication: Investing actiivity and Cash Inflow
c. Acquisition of property, plant and equipment for cash
Indication: Investing activity and Cash Outflow
d. Payment of income taxes
Indication: Operating activity and Cash Outflow
e. Bonds payable issues for cash
Indication: Financing Activity and Cash Outflow
f. Payment of cash dividends declared in previous year
Indication: Financing activity and Cash Outflow
g. Purchase of short-term investments (not cash equivalents) for cash
Indication: Investing activity and Cash Outflow
h. Purchases of inventory for cash
Indication: Operating activity and Cash Outflow
Definition of terms
Operating Activity: This activity will show how much the cash flow from the business in operating . This included net profit and changes in assets and liabilities and amortization expenses .
Investing Activities: This part is shows the where the money is invested or investment is sold.
Financing Activities: This activities will show the cash flow from financing activities between the reporting period example. Raising or payment of the fund through the common stock , preference and bonds etc.
Marconi Co. has the following information available for the current year: Net Sales $ 765,000 Bad Debt Expense 45,000 Accounts Receivable, Beginning of Year 135,000 Accounts Receivable, End of Year 70,000 Allowance For Doubtful Accounts, Beginning of Year 57,000 Allowance For Doubtful Accounts, End of Year 77,000 What was the amount of write-offs during the year?
Answer:
$25,000
Explanation:
When there is a movement in allowance for bad debt account, it is usually as a result of bad debts and bad debts already written off.
The amount of write offs during the year is computed as follows;
Amount write off = Beginning allowance for doubtful accounts + Bad debt expenses - Closing allowance for doubtful accounts
= $57,000 + $45,000 - $77,000
= $25,000
Therefore, the amount of write offs during the year is $25,000
Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $42,000. The estimated useful life was five years and the residual value was $5,000. Assume that the estimated productive life of the machine is 20,000 units. Expected annual production was year 1, 4,500 units; year 2, 5,500 units; year 3, 4,500 units; year 4, 4,500 units; and year 5, 1,000 units.
Required: Complete a depreciation schedule for each of the alternative methods.
a. Straight-line.
b. Units-of-production.
c. Double-declining-balance.
Which method will result in the highest net income in year 2
Answer:
Depreciation schedule for :
Straight-line Units-of-production Double-declining-balance
Year 1 $ 7,400 $8,325 $16,800
Year 2 $ 7,400 $10,175 $10,080
Year 3 $ 7,400 $8,325 $6,048
Year 4 $ 7,400 $8,325 $3,629
Year 5 $ 7,400 $1,850 $2,177
Straight Line Method will result in the highest Net Income. This is because it provides for the lowest charge of depreciation expense
Explanation:
Straight-line
Straight line method charges the same amount of depreciation (fixed on cost) over the useful life of an asset.
Depreciation Charge = (Cost - Residual Value) ÷ Estimated Useful Life
= ($42,000 - $5,000) ÷ 5
= $ 7,400
Annual Straight line Depreciation Charge
Year 1 = $ 7,400
Year 2 = $ 7,400
Year 3 = $ 7,400
Year 4 = $ 7,400
Year 5 = $ 7,400
Units of Production
Depreciation Charge = (Cost - Residual Value) / Total Expected Production × Period`s Production
Therefore,
Depreciation Charge = Rate of depreciation × Period`s Production
then,
Rate of depreciation = ($42,000 - $5,000) / 20,000 units
= $1.85 per unit of production
Annual Units of Production Deprecation Charge
Year 1 = 4,500 units × $1.85 = $8,325
Year 2 = 5,500 units × $1.85 = $10,175
Year 3 = 4,500 units × $1.85 = $8,325
Year 4 = 4,500 units × $1.85 = $8,325
Year 5 = 1,000 units × $1.85 = $1,850
Double-declining-balance.
Depreciation Expense = 2 × SLDP × BVSLDP
Where,
SLDP = 100 ÷ Number of useful life
= 100 ÷ 5
= 20 %
Annual Double-declining-balance Expense
Year 1 = 2 × 20% × $42,000
= $16,800
Year 2 = 2 × 20% × ($42,000 - $16,800)
= $10,080
Year 3 = 2 × 20% × ($42,000 - $16,800 - $10,080)
= $6,048
Year 4 = 2 × 20% × ($42,000 - $16,800 - $10,080 - $6,048)
= $3,629
Year 5 = 2 × 20% × ($42,000 - $16,800 - $10,080 - $6,048- $3,629)
= $2,177
On January 1, 2021, NFB Visual Aids issued $720,000 of its 20-year, 8% bonds. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. NFB Visual Aids records interest expense at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2021, the fair value of the bonds was $600,000 as determined by their market value in the over-the-counter market. General (risk-free) interest rates did not change during 2021. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1, 2021.
1-b to 4. Prepare the necessary Journal entries.
Answer and Explanation:
The computation of price of the bonds is shown below:-
Interest on Bond = Bond Face Value × Interest rate × 6 ÷ 12 months
= $720,000 × 8% × 6 ÷ 12
= $28,800
Present Value of interest payments = Interest on bond × PVAF(i%, n)
i = semi annual discounting rate = 10% × 6 ÷ 12
= 5%
n = number of semi annual periods
= 20 years × 2 periods
= 40 periods
Present Value of interest payments = $28,800 × PVAF(5%, 40)
= $28,800 × 17.15909
= $494,182
Present Value of Redemption Value = Redemption Value × PVF(5%, 40)
= $720,000 × 0.142046
= $102,273
Price of Bonds = $494,182 + $102,273
= $596,455
1-b The Journal entries are shown below:-
a. Cash Dr, 596,455
Discount on Bonds Payable Dr, $123,545
To Bonds Payable $720,000
(Being the issuance of bonds is recorded)
b. Interest Expense Dr, $29,823 (596,455 × 10% × 6 ÷ 12)
To Discount on Bonds Payable $1,023
To Cash $28,800 ($720,000 × 8% × 6 ÷ 12)
(Being the first interest payment is recorded)
c. Interest Expense Dr, $29,874 (($596,455 + $1,023) × 10% × 6 ÷ 12)
To Discount on Bonds Payable $1,074
To Cash Dr, $28,800
($720,000 × 8% × 6 ÷ 12)
(To record the second interest payment)
d. Unrealized Holding Loss Dr, 1,448
To Fair Value Adjustment $1,448
(Being adjust the bonds to their fair value is recorded)
Working Notes:
1) Bonds Payable Value after adjusting Discount
= $596,455+$1,023+$1,074
= $598,552
Fair Value of Bonds as on Dec 31 = $600,000
Fair Value adjustment amount is
= $600,000 - $598,552
= $1,448
g Jefferson & Sons purchase $5,000 of merchandise from the Claremont Company with terms of 3/10, n/30. How much discount is Jefferson & Sons entitled to take if it pays within the allowed discount period of 10 days
Answer:
Discount Received = $150
Explanation:
The terms of the purchase of inventory are 3/10, n/30 which means that Jefferson & Sons can avail a discount of 3% if they pay within the 10 days of purchase of merchandise and the total time allowed for payment for merchandise is 30 days.
If the payment is made within the discount period, Jefferson can avail a discount of,
Discount Received = 5000 * 3%
Discount Received = $150
Assume that you are part of the accounting team for Logan Digital. The company currently expects to sell 362 units for total revenue of $16,300 each month. Logan Digital estimates direct materials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $2,100, and variable selling and administrative costs of $1,050. Fixed costs of $4,800 are also expected, which includes fixed overhead and selling and administrative costs. Using this information, complete the contribution margin income statement shown below.
Logan Digital is examining cost behavior patterns. Your recommendation is to first determine the break-even point in units. First, calculate the contribution margin (CM) per unit (rounded to the nearest dollar).
Next, complete the formula below to determine the break-even units.
Total Fixed Costs / Contribution Margin per Unit = Units
A profit-volume graph helps managers to visualize the relationship between profits and units sold. The data for Logan Digital has been used to construct the profit-volume graph below. The purple points (diamond symbols) plot the profit line. The operating loss is the shaded area bordered by the red points (cross symbols). The operating profit is the area bounded by the green points (triangle symbols). Graph the correct profit-value graph.
APPLY THE CONCEPTS: Effect of Changes to Sales Price, Variable Costs and Fixed Costs
Now consider each of the following scenarios for Logan Digital. Calculate the contribution margin (CM) per unit, rounded to nearest dollar, and the new break-even point in units, rounded to the nearest whole unit, for each scenario separately.
Scenario 1 Scenario 2 Scenario 3
Logan will dispose of a machine in the factory. The depreciation on that equipment is $500 per month. After some extensive market research, Logan has determined that a sales price increase of $2 per unit will not affect the sales volume and will be effective immediately. Logan has been experiencing quality problems with a materials supplier. Changing suppliers will improve the quality of the product but will cause direct materials costs to increase by $1 per unit.
Full question attached
Answer and Explanation:
Please find attached
In this exercise, decisions will be made in ethically ambiguous situations and then analyzed. As in the real world, all the background information on each situation will not be available, and assumptions will need to be made.It is recommended that the exercise be completed before reading the following mat e rial, and then revisited after you have completed the chapter.Name:Date:Part ISTEP 1Make decisions in the following situations. You will not have all the background information about each situation; instead you should make whatever assumptions you feel you would make if you were actually confronted with the decision choices described. Select the decision choice that most closely represents the decision you feel you would make personally. You should choose decision choices even though you can envision other creative solutions that were not included in the exercise.Situation 1. You are taking a very difficult chemistry course, which you must pass to maintain your scholarship and to avoid damaging your application for graduate school. Chemistry is not your strong suit, and because of a just-below-failing average in the course, you must receive a grade of 90 or better in the final examination, which is 2 days away. A janitor who is aware of your plight informs you that he found the master copy of the chemistry final in a trash barrel and saved it. He will make it available to you for a price, which is high, but which you could afford. What would you do?(a) I would tell the janitor thanks, but no thanks.(b) I would report the janitor to the proper officials.(c) I would buy the examination and keep it to myself.(d) I would not buy the examination myself, but I would let some of my friends, who are also flunking the course, know that it is available.
Situation 2. You have been working on some complex analytical data for 2 days now. It seems that each time you think you have them completed, your boss shows up with a new assumption or another "what if" question. If you only had a copy of a new software program for your personal computer, you could plug in the new assumptions and revise the estimates with ease.Then a colleague offers to let you make a copy of some software that is copyrighted. What would you do?(a) I would readily accept my friend’s generous offer and make a copy of the software.(b) I would decline to copy it and plug away manually on the numbers.(c) I would decide to go buy a copy of the software myself for $300 and hope I would be reimbursed by the company in a month or two.(d) I would request another extension on an already overdue project date.Situation 3. Your small manufacturing company is in serious financial difficulty. A large order of your products is ready to be delivered to a key customer, when you discover that the product is simply not right. It will not meet all performance specifications, will cause problems for your customer, and will require rework in the field; but this, you know, will not become evident until after the customer has received and paid for the order. If you do not ship the order and receive the payment as expected, your business may be forced into bankruptcy. And if you delay the shipment or inform the customer of these problems, you may lose the order and also go bankrupt. What would you do?(a) I would not ship the order and place my firm in voluntary bankruptcy.(b) I would inform the customer and declare voluntary bankruptcy.
(c) I would ship the order and inform the customer after I received payment.(d) I would ship the order and not inform the customer.
Answer and Explanation:
Situation 1: a) I would tell the janitor thanks, but no thanks. It would be wrong to cheat in the exam.
Situation 2:(c) I would decide to go buy a copy of the software myself for $300 and hope I would be reimbursed by the company in a month or two. Getting a copy of the software for the price would guarantee that are no copyright infringement problems which would affect the company and my job as well. Management would be happy at my dedication as I am willing to go an extra mile for the company and would likely reimburse me for expenses
situation 3: (b) I would inform the customer and declare voluntary bankruptcy. It is important that I inform the customer and let him know why the shipment didn't go through. Customers appreciate honesty and trustworthiness of sellers. He may be willing to help the company not declare bankruptcy by ordering anyways. However it is more important to not cheat the customer than it is for business to go bankrupt.
When given one variable value, the value of other variables can be easily estimated. This applies to which type of graph? a. Line c. Scale b. Bar d. Both A and B
Answer: d.
Both A and B
Explanation: 100% EDGE
Answer:
d. both A and B
Explanation:
When given one variable value, the value of other variables can be easily estimated with a line and scale graph.
Your parents are giving you $250 a month for 4 years while you are in college. At an interest rate of .57 percent per month, what are these payments worth to you when you first start college
Answer:
FV= $13,757.37
Explanation:
Giving the following information:
Monthly payment= $250
Interest rate= 0.0057
Number of periods= 4*12= 48
To calculate the future value, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= monthly payment
FV= {250*[(1.0057^48) - 1]} / 0.0057
FV= $13,757.37
Can anyone help me match these into the correct category?
Answer:
see below
Explanation:
Hotel chain owner
Owns all the products of the groupOwns the brand nameOwns all the properties in the groupRetains all profits of the groupFranchise hotel owner
Pays a fee to use the brand name and productsOwns one or more independent unitsA hotel chain owner owns the entire business either as an individual or in a group. They have exclusive rights to the brand name of the business. They keep all the profits from the business but suffer all the losses.
A franchise is a business relationship where the business owner( the franchisor) grants a license to a third party ( the franchisee) to start and run a business similar to that of the franchisor. The franchisee gets permission to operates under the franchisor's brand name, colors, design, layout, and operating processes. They are allowed to trade franchisor's products and services.
Given the following information about a fully amortizing loan, calculate the lender’s yield (rounded to the nearest tenth of a percent): loan amount: $166,950; term: 30 years; interest rate: 8%; monthly payment: $1,225.00; discount points: 2.
Answer:
c. 8.5%
Explanation:
Note: The following is the missing part. Other Closing Expenses: $3,611. A. 7.7% , B. 8.2%, C. 8.5%, D. 9.1%
Loan = $166,950
Rate = 8%
Life = 30 yrs
Period = 360
Installment = -1,225
Particulars Amount
Loan $166,950
Less: Discount points $3339
Less: Closing costs $3611
Net Borrowing $160,000
Now, we find the Effective borrowing Rate with the aid of MS Excel
Effective borrowing Rate = Rate(Nper, PMT, PV)
Effective borrowing Rate = Rate(360, -1225, 160000)
Effective borrowing Rate = 0.007044637(Monthly)
Annual Effective rate = 0.007044637 * 12
Annual Effective rate = 0.084535644
Annual Effective rate = 8.4535644%
Annual Effective rate = 8.5%
A lender is a person, a private or government institution, or a major bank that lends money to a person or a company with the anticipation of reimbursement. Repayment of every payment or cost will be included in the repayment.
The correct answer is c. 8.5%
The given information is:
Loan = $166,950
Rate = 8%
Life = 30 yrs
Period = 360
Installment = -1,225
Particulars Amount
Loan $166,950
Less: Discount points $3339
Less: Closing costs $3611
Net Borrowing $160,000
Calculation of the Effective borrowing Rate
Effective borrowing Rate = Rate(Nper, PMT, PV)
Effective borrowing Rate = Rate(360, -1225, 160000)
Effective borrowing Rate = 0.007044637(Monthly)
Annual Effective rate = [tex]0.007044637 \times 12[/tex]
Annual Effective rate = 0.084535644
Annual Effective rate = 8.4535644%
Annual Effective rate = 8.5%
To know more about determining the lender's yield, refer to the link below:
https://brainly.com/question/24503832
External Influences on Consumer Behavior SaGa is a European fashion store chain that specializes in accessible, trendy clothes and accessories for men and women. Its target audience includes fashion-conscious young men and women, ages 16-30. After success in Europe, SaGa is getting ready to launch its flagship stores in five U.S. markets-New York, Los Angeles, Chicago, San Francisco, and Miami. Based on its product offerings, SaGa is targeting millennials (those born between 1982 and 2000, also called gen Y). As a group, millennials are open to making impulse purchases, and are socially connected as demonstrated by their use of Twitter to tweet about products and brands. Also, based on its "accessible" price for its fashion offerings, Saga is targeting middle-to upper-middle-class millennials. SaGa's advertising agency of record was excited about the impending launch campaign in the U.S. and its first-ever foray into the American market, which is heavily influenced by celebrity and pop culture. The agency was developing a campaign that focused on "usage occasion"—the ad would show a group of friends, in their 20s, getting together for a Friday night out in the city. A social occasion such as a night out with friends, combined with the setting of a city street lined with trendy clubs and restaurants, highlighted a perfect usage occasion for wearing fashionable clothes from SaGa. In the ad, the friends walk through a busy city street that has a party atmosphere, and pass several other people whose fashion sense is not as trendy as theirs. As they pass these people, the contrast between their group and the other people is highlighted by the use of muted, fading colors (for the other people) versus bright and pleasing colors (for the group of friends wearing SaGa). The agency was thus contrasting those who do not wear SaGa, a dissociative group, with those who do. Meanwhile, Raza, a high-end fashion store chain in Europe, is planning to enter the Japanese market. RaZa's promotional strategy decisions include highlighting the purchase situation in their ads by showing the exclusive boutique store atmosphere, and by using international supermodels that denoted an aspirational group for their target audience. RaZa targeted older and more affluent consumers compared to SaGa; their target market consisted of upper-class gen X'ers in Japan (those born between 1946 and 1976). RaZa's research revealed that the Japanese culture understood and respected high-end fashion. The consumer does not make purchase decisions in isolation. A number of external factors have been identified that may influence consumer decision-making, such as culture, subcultures, social class, reference groups, and situational determinants. Match the various external (or environmental) influences on consumer behavior to the relevant situations in SaGa's promotional decisions. Then match these external influences to examples found in RaZa's decisions. Born between 1965-1976 SaGa's Promotional Decisions External Influences Examples of External on Consumer Influence from Behavior RaZa's Promotional Decisions Affluent consumers Exclusive boutique-like shopping atmosphere Decision to launch in America, which represented a new culture, compared to their existing markets. Supermodels Target consumers: millennials Situational determinants Target consumers: middle and upper-middle class Social class Ads featured people that the target consumers identify with (associative groups), and also people that the target group does not belong to (dissociative groups). Subculture Ads featured a typical usage occasion for SaGa's product offerings - a Friday night out with friends. Japanese appreciation for high-end fashion Reference groups Culture
Part of question attached
Answer and Explanation:
Please find attached answer and explanation
Warrix Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.
Sales (3,000 units) $120,000
Variable expenses 90,000
Contribution margin 30,000
Fixed expenses 27,000
Net operating income $3,000
a. If sales increase to 3,100 units, net operating income would be closest to: ____________
b. If sales increase to 3,100 units, the breakeven point in units would:_____________
c. If sales increase to 3,100 units, the degree of operating leverage would:___________
Answer:
Results are below.
Explanation:
Giving the following information:
Sales (3,000 units) $120,000
Variable expenses 90,000
Contribution margin 30,000
Fixed expenses 27,000
Net operating income $3,000
First, we need to calculate the unitary contribution margin:
Unitary contribution margin= 30,000/3,000= $10
a) Sales= 3,100
Contribution margin= 3,100*10= 31,000
Fixed expense= (27,000)
Net operating income= 4,000
b) To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 27,000/10
Break-even point in units= 2,700
c) Finally, the degree of operating leverage:
Degree of operating leverage= % change in income/ % change in sales
Degree of operating leverage= [(4,000-3,000)/3,000] / [(3,100-3,000) / 3,000]
Degree of operating leverage= 10
Cost of Goods Manufactured for a Manufacturing Company The following information is available for Ethtridge Manufacturing Company for the month ending July 31:
Cost of direct materials used in production $1,150,000
Direct labor 966,000
Work in process inventory, July 1 316,400
Work in process inventory, July 31 355,500
Total factory overhead 490,500
Determine Ethtridge's cost of goods manufactured for the month ended July 31.
Ethtridge Manufacturing Company
Statement of Cost of Goods Manufactured
For the Month Ended July 31
Factory overhead 1,150,000
Manufacturing costs incurred during July Cost of direct materials used in production $1,150,000
Direct labor 966,000
Factory overhead 490,500
Total manufacturing costs incurred Work in process inventory, July 31
355,500 Total factory overhead 490,500
Determine Ethtridge's cost of goods manufactured for the month ended July 31
Ethtridge Manufacturing Company
Statement of Cost of Goods Manufactured
For the Month Ended July 31
Factory overhead 1,150,000
Manufacturing costs incurred during July Cost of direct materials used in production 1,150,000
Direct labor 966,000
Factory overhead 490,500
Total manufacturing costs incurred $ 2,606,500
Total manufacturing costs
Factory overhead -355,500
Cost of goods manufactured 2,567,400
Answer:
Ethtridge Manufacturing Company
Statement of Cost of Goods Manufactured
For the Month Ended July 31
Work in Process July 1 $316,400
Add: Cost of direct material used $1,150,000
in production
Direct labour $966,000
Total factory overhead $490,500
Total manufacturing costs incurred $2,606,500
Total manufacturing cost $2,922,900
Less: Work in process July 31 $355,500
Cost of goods manufactured $2,567,400
PinaCompany is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.
Sales: Sales for the year are expected to total 1,200,000 units. Quarterly sales are 20%, 25%, 26%, and 29%, respectively. The sales price is expected to be $40 per unit for the first three quarters and $43 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 15% higher than the budgeted sales for the first quarter of 2017.
Production: Management desires to maintain the ending finished goods inventories at 25% of the next quarter’s budgeted sales volume.
Direct materials: Each unit requires 2 pounds of raw materials at a cost of $10 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2018 are 510,000 pounds.
Required:
Prepare the sales, production, and direct materials budgets by quarters for 2017.
Answer:
where is the question
Explanation:
Park Corporation is planning to issue bonds with a face value of $710,000 and a coupon rate of 7.5 percent. The bonds mature in 8 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)
Required 1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Journal Entry
Issuance of bond
Dr. Cash $$669,387
Dr. Discount on Bond $40,613
Cr. Bond Payable $710,000
Explanation:
Price of the bond is the present value of all cash flows associated with bond.
Use following formula to calculate the issuance price f the bond
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
As per given data
Face Value = $710,000
Coupon payment = $710,000 x 7.5% x 6/12 = $26,625 semiannually
Number of periods = n = 8 years x 2 period per year = 16 period s
Market interest rate = 8.5% annually = 8.5% / 2 = 4.25% semiannually
PLacing values in the formula
Price of the Bond = $26,625 x [ ( 1 - ( 1 + 4.25% )^-16 ) / 4.25% ] + [ $710,000 / ( 1 + 4.25% )^16 ]
Price of the Bond = $304,598.24 + $364,788.66 = $669,386.90 = $669,387
Discount on the bond = $710,000- $669,387 = $40,613
On average, your firm sells $33,100 of items on credit each day. The average inventory period is 35 days and your operating cycle is 55 days. What is the average accounts receivable balance
Answer:
The average account receivable balance is $662,000
Explanation:
The computation of the average account receivable balance is shown below:
= Sells items on credit each day × (operating cycle - average inventory period)
= $33,100 × (55 days - 35 days )
= $33,100 × 20 days
= $662,000
hence, the average account receivable balance is $662,000. The same is to be considered
Moreno Motors Inc. identifies that bikers are usually the first users of their newly launched products. The firm sends consultants to biker rallies to discover how bikers who use Moreno motorcycles modify them to extend their usage, as well as the desired benefits. Recent visits revealed that bikers were seeking items, such as bolt-on chrome products, horsepower performance enhancers, and improved braking systems in Moreno motorcycles. In this example, Moreno Motors Inc. is studying which of the following groups of customers?
a) lead users.
b) mainstream customers.
c) laggards.
d) captive customers.
e) spinners.
Answer:
a) lead users.
Explanation:
Lead users are very skilled and experienced users in certain products and this users know extensively about the product application and how this products can be modified to satisfy their needs.
Lead users find solutions to problems through the use of innovation thereby improving or changing parts of the products thereby they are significant evaluating products.
The income statement lists all the
account balances for the period.
A. revenue and expense
B. liability and capital
C. temporary and permanent
D. asset and withdrawal
Answer:
A. revenue and expense
Explanation:
An income statement is among the three important financial statements prepared by a business entity. It summarizes all incomes (revenues) and expenses (costs) of a company in a particular financial year. Total costs are subtracted from the total revenue to get the net income.
An income statement is prepared to show the profits of a business in a particular financial year. A positive net income indicates profits, while a negative net income denotes losses.
The following is a condensed version of the comparative balance sheets for Tamarisk Corporation for the last two years at December 31.
2020 2019
Cash $ 354,000 $ 156,000
Accounts receivable 360,000 370,000
Investments 104,000 148,000
Equipment 596,000 480,000
Accumulated Depreciation-Equipment (212,000 ) (178,000 )
Current liabilities 268,000 302,000
Common stock 320,000 320,000
Retained earnings 614,000 354,000
Additional information:
Investments were sold at a loss of $20,000; no equipment was sold; cash dividends paid were $60,000; and net income was $320,000.
Prepare a statement of cash flows for 2020 for Swifty Corporation. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Answer:
Cash Flow Statement
Cash flow from Operating Activities
Net Income $296,000
Adjustments
Depreciation $34,000
(212,000- 178,000)
Loss on sale of Investments $20,000
Decrease in Accounts Receivable $10,000
(370,000 - 360,000)
Decrease in Current Liabilities -$34,000
(268,000 - 302,000)
Total Adjustments $30,000
Cash from operating activities $326,000
Cash flow from Investing Activities
Purchase of Equipment -$116,000
(480,000 - 596,000)
Sale of Investment $24,000
(148,000 - 104,000 -20,000)
Cash used in investing activities -$92,000
Cash flow from Financing Activities
Issue of shares $-
Dividend Paid -$60,000
Cash from financing activities -$60,000
Net Increase in cash $ 174,000
Opening Balance of Cash $156,000
Closing Balance of Cash $330,000
What can you conclude about a firm in the short run from its marginal product numbers as its output approaches capacity production
Answer: Law of Diminishing returns would apply
Explanation:
The Law of Diminishing returns is used to describe the phenomenon where after a certain level of input, the output produced no longer increases at an increasing rate but instead starts increasing at a decreasing rate.
For instance;
Labor Output
2 4
4 8
6 16
8 20
10 22
Notice how at first the output increased by 4 then by 8 but then started increasing by 4 and then by 2. This is the Law of Diminishing Marginal returns and a reality that normally faces a firm in the short run as its output approaches capacity production.
To raise operating funds, Coyne Incorporated sold its office building to an insurance company on January 1, 2021, for $1,600,000 and immediately leased the building back. The operating lease is for 12 years of the building's estimated 20-year remaining useful life. The building has a fair value of $1,600,000 and a book value of $1,300,000 (its original cost was $2 million). The rental payments of $200,000 are payable to the insurance company each December 31. The lease has an implicit rate of 9%.
Prepare the appropriate entries for National Distribution Center on January 1, 2018 and December 31, 2018, to record the sale-leaseback and necessary adjustments.
1. Record Sale of Building
2. Record the beginning of the lease for National
3. Record the lease and interest expense for National
4. Record the amortization expense for national
Answer:
1. 1-Jan-21
Dr Cash $1,600,000
Dr Accumulated Depreciation $700,000
Cr Building $2,100,000
Cr Gain On Sale of Building (BF) $200,000
2. 1-Jan-21
Dr Right Of Use Assets ( 200000* PVAF 9% for 12 year) $1,432,000
Cr Lease Payable $1,432, 000
3. 31-Dec-21
Dr Interest Expense $128,880
Dr Lease Payment (BF) $71,120
Cr Cash $200,000
4. 31-Dec-21
Dr Amortization Expenses $71,120
Cr Right Of Use Assets $71,120
Explanation:
1. Preparation of the Journal entry to Record Sale of Building
1-Jan-21
Dr Cash $1,600,000
Dr Accumulated Depreciation $700,000
(2,000,000-1,300,000)
Cr Building $2,100,000
[(1,600,000+700,000)-200,000]
Cr Gain On Sale of Building (BF) $200,000
(To Record Lease)
2. Preparation of the journal entry to Record the beginning of the lease for National
1-Jan-21
Dr Right Of Use Assets ( 200000* PVAF 9% for 12year)
(200,000*7.16) $1,432,000
Cr Lease Payable $1,432, 000
(To Record The Leae Payable)
3. Preparation of the journal entry to Record the lease and interest expense for National
31-Dec-21
Dr Interest Exp
(1,432,000*9%) $128,880
Dr Lease Payment (BF) $71,120
(200,000-128,880)
Cr Cash $200,000
(To Record First Lease payment)
4. Preparation of the journal entry to Record the amortization expense for national
31-Dec-21
Dr Amortization Expenses $71,120
Cr Right Of Use Assets $71,120
(To Record Amortisation Expense)
Sandy Kupchack just graduated from State University with a bachelor’s degree in history. During her four years at the university, Sandy accumulated $10,000 in student loans. She asks for your help in determining the amount of the quarterly loan payment. She tells you that the loan must be paid back in five years and that the annual interest rate is 8%. Payments begin in three months.
Required:
Determine Sandy's quarterly loan payment.
Answer: $611.57 or $612 rounded to nearest dollar.
Explanation:
She would have to make a constant payment per quarter which makes it an annuity.
The $10,000 is the present value of the annuity.
The quarters remaining are = 5 years * 4 = 20 quarters
Quarterly interest = 8%/4 = 2%
10,000 = Annuity * Present Value of Annuity factor, 20 periods, 2%
10,000 = Annuity * 16.3514
Annuity = 10,000/16.3514
= $611.57
Materials and manufacturing labor variances, standard costsDunn, Inc., is a privately held furniture manufacturer. For August 2014, Dunn had the following standards for one of its products, a wicker chair:The following data were compiled regarding actual performance: actual output units (chairs) produced, 2,000; square yards of input purchased and used, 3,700; price per square yard, $5.10; direct manufacturing labor costs, $8,820; actual hours of input, 900; labor price per hour, $9.80.Required:1. Show computations of price and efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each variance occurred.2. Suppose 6,000 square yards of materials were purchased (at $5.10 per square yard), even though only 3,700 square yards were used. Suppose further that variances are identified at their most timely control point; accordingly, direct materials price variances are isolated and traced at the time of purchase to the purchasing department rather than to the production department. Compute the price and efficiency variances under this approach.
Answer:
Please see answers below
Explanation:
1. Material price variance = AQ [ AP - SP]
= [ $5.10 - $5.0] × 3,700
= $370 (U)
Material efficiency variance = [AQ - SQ] × SP
= [3,700 - 2,000*2] × $5.0
= - $1,500 (F)
Flexible variance budget variance = Material price variance + Material efficiency variance
= $370(U) + -$1,500(F)
= -$1,130(F)
Reasons for unfavorable price variance
• When the purchase manager is not too skillful at buying materials needed for production
• When there is an unexpected increase in price of materials
Reasons for favorable efficiency variance
• Usage of high quality material
• Skilled labourers use less materials than budgeted
Direct labor rate variance = [AR - SR] × AH
= [$9.80 - $10] × 900
= -$180 (F)
Direct labor efficiency variance = [AH - SH] × SR
= [900 - 2,000*0.5] × $10
= -$1,000(F)
Flexible budget variance = Direct labor rate variance + Direct labor efficiency variance
= -$180(F) + -$1,000(F)
= -$1,180
Reasons for favorable rate variance
• When there is reduction in labor rate due to recession in an economy
• When more of semi skilled or unskilled labor are employed.
Reasons for favorable efficiency variance
• Usage of high quality raw materials
• When plant facilities are restructured, it means that labor would be more effective.
2. Material price variance = [$AP - SP] × AQ
= [$5.10 - $5.0] × 6,000
= $600(F)
Material efficiency variance = [AQ - SQ] × SP
= [6,000 - 2,000 × 0.5] × $5.0
= $25,000(F)
Presented below is information related to Cheyenne Corp. for the year 2017.
Net sales $1,307,700 Write-off of inventory due to obsolescence $84,810
Cost of goods sold 783,400 Depreciation expense omitted by accident in 2016 44,900
Selling expenses 70,400 Casualty loss 46,800
Administrative expenses 57,500 Cash dividends declared 41,910
Dividend revenue 24,700 Retained earnings at December 31, 2016 1,018,730
Interest revenue 7,450 Effective tax rate of 34% on all items
Prepare a separate retained earnings statement for 2017. (List items that increase adjusted retained earnings first.)
CHEYENNE CORP.
Retained Earnings Statement
For the Year Ended December 31, 2017
Retained Earnings, January 1, as reported
Correction for Overstatement of Net Income in Prior Period
Retained Earnings, January 1, as adjusted
Add:Net Income/(Loss)
Less . Dividends Declared
Retained Earnings, December 31
Answer:
Retained earning at end $1,357,521
Explanation:
To calculate retain earning at end, we need to calculate first the net profit or loss.
Sales
$1,307,700
Less: cost of goods sold
($783,400 - $84,810)
($698,590)
Less: Selling & administrative expenses ($70,400 + $57,500)
($127,900)
Gross profit.
$481,210
Add: Dividend revenue
$24,700
Profit before tax
$505,910
Tax ($505,910 × 34%)
$172,009
Less: Deduction of casualty loss
($46,800)
Tax liability
$125,209
Profit after tax
$505,910 - $125,209
= $380,701
Nash Corp. Statement of retained earning.
Retained earning(opening)
$1,018,730
Less : Dividend declared
($41,910)
$976,820
Add : Profit
$380,701
Retained earning at end $1,357,521
Your supervisor has come to you with the following list of expenditures for the year and is asking you whether they should be capitalized or expensed as repairs and maintenance. Indicate all of the expenditures that would most appropriately be capitalized.
1. Re-painted the office building.
2. Added a new wing onto the office building.
3. Took their fleet of cars in for servicing (changing the oil, etc.).
4. Added newer electronic locks on the doors in the production building.
5. Had an engine rebuilt in one of their fleet cars.
Answer:
Capitalized Expenditures:
2. Added a new wing onto the office building.
5. Had an engine rebuilt in one of their fleet cars.
Explanation:
Capitalization is the process of delaying the full recognition of an expense for the acquisition of a new asset with long-term life so that the costs can be treated as an expense gradually over its useful life through an accounting method known as depreciation or amortization.
The criteria for capitalizing expenditure depend on whether the expenditure is necessary to bring the asset to the condition and location where it can be operated as desired by the management. It must also meet the threshold amount set by management for capitalization. This is because some assets can be used for more than one year and still they are not regarded as capital assets. Example is a stapling machine that costs less than a dollar.
Fortuna Company issued 70,000 shares of $1 par stock, with a fair value of $5 per share, for 80% of the outstanding shares of Acappella Company. The firms had the following separate balance sheets prior to the acquisition:
Assets Fortuna Acappella
Current assets $2,100,000 $ 960,000
Property, plant, and equipment (net) 4,600,000 1,300,000
Goodwill -- 240,000
Total assets $6,700,000 $2,500,000
Liabilities and Stockholders' Equity
Liabilities $3,000,000 $ 800,000
Common stock ($1 par) 800,000
Common stock ($5 par) 200,000
Paid-in capital in excess of par 2,200,000 300,000
Retained earnings 700,000 1,200,000
Total liabilities and equity $6,700,000 $2,500,000
Book values equal fair values for the assets and liabilities of Acappella Company, except for the property, plant, and equipment, which has a fair value of $1,400,000. Compute goodwill or gain recognized in the consolidated statements .
Book values equal fair values for the assets and liabilities of Acappella Company, except for the property, plant, and equipment, which have a fair value of $1,600,000.Required:
a. What is the Goodwill/Gain associated with the acquisition:
b. What is the Non-Controlling Interest recorded in the consolidated balance sheet
c. What is the balance of the assets and liabilities side of the consolidated balance sheet after the acquisition:
d.Record the two elimination entries associated with the acquisition of the company
Answer:
Part 1
$1,730,000 (Gain)
Part 2
a. $1,890,000 (Gain)
b. $560,000
c. Consolidated Assets = $9,850,000 and Consolidated Liabilities = $3,800,000
d. Journals
Journal 1
Property Plant and Equipment $300,000 (debit)
Revaluation Reserve $300,000 (credit)
Revaluation of Acappella`s Property Plant and Equipment item
Journal 2
Common Stock $1,300,000 (debit)
Retained Earnings $1,200,000 (debit)
Revaluation Reserve $100,000 (debit)
Investment in Subsidiary $350,000 (credit)
Non-Controlling Interest $560,000 (credit)
Gain on Bargain Purchase $1,890,000 (credit)
Main Elimination Journal
Explanation:
Goodwill is the excess of Purchase Consideration over the Net Assets Acquired.
Purchase Consideration (70,000 shares × $5) = $350,000
Part 1
Calculation of Net Assets Acquired
Retained Earnings $1,200,000
Common Stock $1,300,000
Revaluation $100,000
Total Net Assets Acquired $2,600,000
Therefore,
Net Assets Attributable to Fortuna Company = $2,600,000 × 80%
= $ 2,080,000
Purchase Consideration $350,000 < Net Assets Acquired ($ 2,080,000), therefore we have a gain situation of $1,730,000
Part 2
2a.
Calculation of Net Assets Acquired
Retained Earnings $1,200,000
Common Stock $1,300,000
Revaluation $300,000
Total Net Assets Acquired $2,800,000
Therefore,
Net Assets Attributable to Fortuna Company = $2,800,000 × 80%
= $ 2,240,000
Purchase Consideration $350,000 < Net Assets Acquired ($ 2,240,000), therefore we have a gain situation of $1,890,000
2b.
Calculation of Non - Controlling Interest
Note : I have elected to measure Non-Controlling Interest as proportionate to the fair value of Net Identified Assets Acquired !
Non - Controlling Interest = Non Controlled Interest % × Total Net Assets Acquired
= 20 % × $2,800,000
= $560,000
2c.
Consolidation is 100 % of Parent/ Acquirer and 100% of subsidiary (Acquired) combined.
Assets :
Fortuna Company = $6,700,000 + $350,000 = $7,050,000
Acappella Company = $2,500,000 + $300,000 = $2,800,000
Total Assets = $9,850,000
Liabilities :
Fortuna Company = $3,000,000
Acappella Company = $ 800,000
Total Liabilities = $3,800,000
2d.
Journal 1
Property Plant and Equipment $300,000 (debit)
Revaluation Reserve $300,000 (credit)
Revaluation of Acappella`s Property Plant and Equipment item
Journal 2
Common Stock $1,300,000 (debit)
Retained Earnings $1,200,000 (debit)
Revaluation Reserve $100,000 (debit)
Investment in Subsidiary $350,000 (credit)
Non-Controlling Interest $560,000 (credit)
Gain on Bargain Purchase $1,890,000 (credit)
a. Using the information below, and assuming that you want to maintain your purchasing power from 2011, what nominal wage should you demand in each of the given years? Instructions: Round your answers to 2 decimal places. CPI Values and Nominal Wages YearCPINominal Wage (dollars)2011211.7$78,5202012213.5370902013223.82014221.1 b. Assume that your annual wage in 2014 was $82,920. This represents
Answer:
a)
Year CPI Nominal Wage (dollars)
2011 211.7 $78,520
2012 213.5 = (213.5/211.7) x $78,520 = $79,187.62
2013 223.8 = (223.8/211.7) x $78,520 = $83,007.92
2014 221.1 = (221.1/211.7) x $78,520 = $82,006.48
b) if you annual wage in 2014 was $82,920, it would be equivalent to (211.7/221.1) x $82,920 = $79,394.68 in 2011.
The CPI can be used to calculate equivalent dollars and works both ways, to determine past or future equivalencies.