Answer:
A. 1.89 years
B. 2.33 years
Explanation:
According to the scenario, computation of the given data are as follows,
(A) After-tax income = $72,115
Expected cost = $250,000
Useful life = 4 years
Salvage value = $10,000
Depreciation Value = ($250,000 - $10,000) ÷ 4 = $60,000
Annual net cashflow = After tax income + Depreciation
= $72,115 + $60,000 = $132,115
Payback Period = Machine expected cost ÷ Annual net cash flow
= $250,000 ÷ $132,115
= 1.89 years
(B) After-tax income = $39,000
Machine cost = $200,000
Useful life = 8 years
Salvage value = $13,000
Depreciation value = ($200,000 - $13,000) ÷ 4 = $46,750
Annual net cashflow = After tax income + Depreciation
= $39,000 + $46,750 = $85,750
Payback Period = Machine expected cost ÷ Annual net cash flow
= $200,000 ÷ $85,750
= 2.33 years
Two methods can be used to produce expansion anchors. Method A costs $65,000 initially and will have a $18,000 salvage value after 3 years. The operating cost with this method will be $28,000 in year 1, increasing by $3600 each year. Method B will have a first cost of $108,000, an operating cost of $8000 in year 1, increasing by $8000 each year, and a $38,000 salvage value after its 3-year life. At an interest rate of 8% per year, which method should be used on the basis of a present worth analysis
Answer:
Method B should be used
Explanation:
Note: See the attached excel file for the calculation of the present worth of Method A and Method B.
From the attached excel file, we have:
Present worth of Method A = –$210,889.85
Present worth of Method B = –$118,011.18
Since the present worth of Method A and B above imply Method A costs more than Method B, Method B should be used.
Nick has a job. The first place he should look for health care coverage is because the costs will probably be the for the generous terms and coverage. Sam does not have a job. He is a member of the alumni association of his alma mater. Sam will probably find better coverage for a lower cost through plans offered by because plans spread the costs and risks among more people than plans do. To begin their research, Nick and Sam should look at in order to .
Speed World Cycles sells high-performance motorcycles and motocross racers. One of Speed World’s most popular models is the Kazomma 900 dirt bike. During the current year, Speed World Cycles purchased eight of these bikes at the following costs.
Purchase Date Units Purchased Unit Cost Total Cost
July 1 2 $ 4,950 $ 9,900
July 22 3 5,000 15,000
Aug. 3 3 5,100 15,300
8 $ 40,200
On July 28, Speed World Cycles sold four Kazomma 900 dirt bikes to the Vince Wilson racing team. The remaining four bikes remained in inventory at September 30, the end of Speed World’s fiscal year.
Assume that Speed World Cycles uses a perpetual inventory system. (See the data provided.)
Required:
a-1. Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using Average cost.
a-2. Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using FIFO method.
a-3. Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using LIFO method.
b-1. Which of the three cost flow assumptions will result in Speed World Cycles reporting the highest net income for the current year?
b-2. Which of the three cost flow assumptions minimizes the income taxes owed by Speed World Cycles for the year?
b-3. May Speed World Cycles use the cost flow assumption that results in the highest net income for the current year in its financial statements, but use the cost flow assumption that minimizes taxable income for the current year in its income tax return?
Answer:
Speed World Cycles
a. Average Cost FIFO LIFO
Cost of goods sold $20,100 $19,900 $20,300
Ending inventory $20,100 $20,300 $19,900
b-1. FIFO will result in Speed World Cycles reporting the highest net income for the current year, because of the reduced cost of goods sold.
b-2. LIFO minimizes the income taxes owed by Speed World Cycles for the year, because it reduces the income before taxes.
b-3. Yes. However, the cost flow assumptions self-correct in later years, by which time it is not allowed to be jumping from one cost flow assumption to another.
Explanation:
a) Data and Calculations:
Purchase Date Units Purchased Unit Cost Total Cost
July 1 2 $ 4,950 $ 9,900
July 22 3 5,000 15,000
Aug. 3 3 5,100 15,300
Total 8 $ 40,200
July 28 Sold 4
September 30 4 (8 - 4)
Average cost = $40,200/8 = $5,025
a-1. Cost of goods sold = $20,100 (4 * $5,025)
Ending inventory = $20,100 (4 * $5,025)
a-2. FIFO:
Ending inventory = $20,300 (3 * $5,100 + 1 * $5,000)
Cost of goods sold = Cost of goods available minus cost of ending inventory
= $40,200 - $20,300
= $19,900
a-3 LIFO:
Cost of goods sold = $20,300 (3 * $5,100 + 1 * $5,000)
Ending inventory = Cost of goods available minus cost of goods sold
= = $40,200 - $20,300
= $19,900
At the beginning of 2021, Terra Lumber Company purchased a timber tract from Boise Cantor for $3,510,000. After the timber is cleared, the land will have a residual value of $720,000. Roads to enable logging operations were constructed and completed on March 30, 2021. The cost of the roads, which have no residual value and no alternative use after the tract is cleared, was $279,000. During 2021, Terra logged 620,000 of the estimated 6.2 million board feet of timber.Required:Calculate the 2021 depletion of the timber tract and depreciation of the logging roads assuming the units-of-production method is used for both assets. (Do not round intermediate calculations. Enter values in whole dollars.)
Answer:
A. $279,000
B. $27,900
Explanation:
A. Calculation for 2021 depletion of the timber tract
2021 Depletion=[($3,510,000 - $720,000) / 6.2 million] *$620,000
2021 Depletion=0.45x 620,000
2021 Depletion= $279,000
Therefore 2021 depletion of the timber tract is $279,000
B. Calculation to determine the depreciation of the logging roads
Depreciation=($279,000 / 6.2 million)*$620,000 Depreciation= 0.073*$620,000
Depreciation= $27,900
Therefore the depreciation of the logging roads is $27,900
Adamson Corporation is considering four average-risk projects with the following costs and rates of return:
Project Cost Expected Rate of Return
1 $2,000 16.00%
2 3,000 15.00
3 5,000 13.75
4 2,000 12.50
The company estimates that it can issue debt at a rate of rd = 10%, and its tax rate is 30%. It can issue preferred stock that pays a constant dividend of $5 per year at $48 per share. Also, its common stock currently sells for $33 per share; the next expected dividend, D1, is $4.00; and the dividend is expected to grow at a constant rate of 5% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock.
Required:
a. What is the cost of each of the capital components?
b. What is Adamson's WACC?
Answer:
a. Cost of debt = Interest * (1 - Tax rate)
= 10%*(1 - 0.30)
= 7%
Cost of preferred stock = Dividend/ Issue price
= 5/48
= 10.42%
Cost of common stock (Cost of retained earnings) = (D1/P0) + g
= (4/33) + 0.07
= 0.12 + 0.07
= 0.19
= 19%
b. Fund Cost Weight Cost * Weight
Debt 7% 0.15 1.05%
Preferred stock 10.42% 0.10 1.042%
Retained earnings 19% 0.75 14.25%
WACC 16.342%
An amount for which of the following accounts would not appear in the Balance Sheet columns of the end-of-period spreadsheet?
a. Terry James, Drawing and Unearned Revenue
b. Service Revenue
c. Terry James, Drawing
d. Unearned Revenue
Answer:
Service revenue
Explanation:
Service revenue does not appear on a balance sheet. It appears on an income statement.
Skyler Manufacturing recorded operating data for its shoe division for the year. Sales $4,500,000 Contribution margin 500,000 Controllable fixed costs 200,000 Average total operating assets 900,000 How much is controllable margin for the year
Answer:
Controllable margin= $300,000
Controllable margin in %= 33.3%
Explanation:
Controllable margin is sales revenue less controllable variable costs and fixed cost.
Controllable margin= Sales revenue - controllable variable cost - controllable fixed costs
Controllable margin= contribution margin - fixed costs
= 500,000 - 200,000= 300,000
Controllable margin in %= 300,000/900,000 × 100 =33.3%
Controllable margin in %= 33.3
The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 2.0. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $20 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 18% per year on all reinvested earnings forever
a. What is the intrinsic value of a share of Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Intrinsic valueS
b-1. If the market price of a share is currently $108, and you expect the market price to be equal to the intrinsic value one year from now, calculate the price of the share after one year from now. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price
b-2. What is your expected one-year holding-period return on Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected one-year holding-period return
Answer:
$109
$118.81
18.26%
Explanation:
Intrinsic value can be determined using the constant growth dividend model
according to the constant dividend growth model
price = d1 / (r - g)
d1 = next dividend to be paid
r = cost of equity
g = growth rate
dividend, growth rate and cost of equity are not given and they have to be calculated
growth rate = retention rate x ROE
Retention rate = 1 - payout ratio = 1 - 0.5 = 0.5 = 50%
0.5 x 18% = 9%
According to the capital asset price model: cost of equity = risk free + beta x (market rate of return - risk free rate of return)
9% + 2x (14% - 9%) = 19%
dividend = payout ratio x earnings per share
0.5 x $20 = $10
Intrinsic value = [tex]\frac{10( 1 + 0.09)}{0.19 - 0.09}[/tex] = $109
Stock price in a year
[tex]\frac{10(1 + 0.9)^{2} }{0.19 - 0.09}[/tex] = 118.81
(dividend return + price return)
price return is the return on investment as a result of appreciation or depreciation of share price
Dividend return is the return on investment from dividend earned
price return = price at the end of the year - price at the beginning of the year
Review each of the following independent sets of conditions. For each condition, calculate the (1) sample rate of deviation, and use the AICPA sample evaluation tables to identify the (2) upper limit rate of deviation, and (3) allowance for sampling risk (n = sample size, d = deviations. ROO = risk of overreliance). (Round your answers to 1 decimal place.)
a. n = 100. d = 8. ROO = 5%.
b. n = 100. d = 4. ROO = 5%.
c. n = 100. d = 8. ROO = 10%.
Answer: See explanation
Explanation:
a. n = 100. d = 8. ROO = 5%.
i. Sample rate of deviation will be:
= Number of Deviations / Sample size
= 8/100
= 8%
ii. Upper limit rate of deviation = 14%
iii. Allowance for sampling risk will be:
= Upper Limit Rate of Deviation - Sample rate of devaition
= 14% - 8%
= 6%
b. n = 100. d = 4. ROO = 5%.
i. Sample rate of deviation will be:
= Number of Deviations / Sample size
= 4/100
= 4%
ii. Upper limit rate of deviation = 9%
iii. Allowance for sampling risk will be:
= Upper Limit Rate of Deviation - Sample rate of devaition
= 9% - 4%
= 5%
c. n = 100. d = 8. ROO = 10%.
i. Sample rate of deviation will be:
= Number of Deviations / Sample size
= 8/100
= 8%
ii. Upper limit rate of deviation = 12.7%
iii. Allowance for sampling risk will be:
= Upper Limit Rate of Deviation - Sample rate of devaition
= 12.7% - 8%
= 4.7%
Snowy Mountain Financial Advisors is a network of branches providing investing and financial advising services. It discloses that it uses a balanced scorecard with the following six performance measures.
Required:
Link the measures to the perspective number(s) of the balanced scorecard.
Perspective
1. Financial
2. Customer
3. Learning and growth
4. Internal business processed
Procedure Measure Prespective number
Market share
Regulatory compliance
New cutomer refresh from existing customer
Order errors
Brach profit
Answer:
Financial : market share and Branch profit Customer : New customer referrals from existing customer Learning and Growth : Not available on the score card Internal business processed : Regulatory compliance, Order errorsExplanation:
Linking the measures to the perspective number(s) of the balanced scorecard
Financial : market share and Branch profit Customer : New customer referrals from existing customer Learning and Growth : Not available on the score card Internal business processed : Regulatory compliance, Order errorsThe Market share is simply a portion of the general market that is been controlled by a product or organization
New customer referrals form existing customers is one way a company can get new and returning customers to patronize them
Regulatory compliance and order errors is been handled by the management of the business
You have received a research report done by a consultant for your firm, a life insurance company. The study is a survey of morale in the home office and covers the opinions of about 500 secretaries and clerks plus about 100 executives. You are asked to comment on its quality.
What will you look for?
Answer:
The research report must have the following attributes:
Easy to read and prepared in very simple languageA good report must outlay all arguments and results, facts, and arguments in a way that aligns properly with the objective of the reportthe report must be prepared on time It must be straightforward. The presentation must be very well articulated, properly spaced, aligned using very clear font types.Cheers
The Xtra Store has a Human Resources Department and a Janitorial Department that provide service to three sales departments. The Human Resources Department cost is allocated on the basis of employees, and the Janitorial Department cost is allocated on the basis of space. The following information is available:______.
Human
Resources Janitorial Sales #1 Sales #2 Sales #3
Budgeted cost $54,000 $39,000
Space in square feet 13,000 10,000 26,000 40,000 64,000
Number of employees 10 15 20 40 25
1. Using the direct method, the amount of Janitorial Department cost allocated to Sales Department no. 2 is: (Do not round your intermediate calculations. Round your final answer to nearest whole dollar amount.)
a. $17,696.
b. $10,636.
c. $9,941.
d. $13,750.
e. $12,000.
2. Using the step-down method and assuming that the Human Resources Department is allocated first, the amount of Human Resources cost allocated to Sales Department no. 3 is (Do not round your intermediate calculations. Round your final answer to nearest whole dollar amount):
a. $12,273.
b. $22,500.
c. $13,382.
d. $13,500.
e. $15,882.
3. Using the direct method, the amount of Janitorial Department cost allocated to Sales Department no. 2 is: (Do not round your intermediate calculations. Round your final answer to nearest whole dollar amount.)
a. $17,696.
b. $12,000.
c. $10,636.
d. $13,750.
e. $9,941.
4. Using the step-down method and assuming that the Human Resources Department is allocated first, the amount of Human Resources cost allocated to Sales Department no. 3 is (Do not round your intermediate calculations. Round your final answer to nearest whole dollar amount):______.
a. $22,500.
b. $13,500.
c. $12,273.
d. $13,382.
e. $15,882.
Answer:
The Xtra Store
1. Using the direct method, the amount of Janitorial Department cost allocated to Sales Department no. 2 is:
e. $12,000.
2. Using the step-down method and assuming that the Human Resources Department is allocated first, the amount of Human Resources cost allocated to Sales Department no. 3 is:
d. $13,500.
3. Using the direct method, the amount of Janitorial Department cost allocated to Sales Department no. 2 is:
b. $12,000.
4. Using the step-down method and assuming that the Human Resources Department is allocated first, the amount of Human Resources cost allocated to Sales Department no. 3 is:
b. $13,500.
Explanation:
a) Data and Calculations:
Human Resources Janitorial Sales #1 Sales #2 Sales #3
Budgeted cost $54,000 $39,000
Space in square feet 13,000 10,000 26,000 40,000 64,000
Number of employees 10 15 20 40 25
1. Direct method of allocation:
Janitorial Department cost of $39,000
Sales #2 = $12,000 ($39,000 * 40,000/130,000)
2. Step-down method:
Human Resources cost of $54,000
Sales #3 = $13,500 ($54,000 * 25/100)
The stockholders’ equity section of Whisper Co. at December 31, 2018 is as follows. Common stock—$15 par value, 100,000 shares authorized, 45,000 shares issued and outstanding $ 675,000 Paid-in capital in excess of par value, common stock 70,000 Retained earnings 430,000 Total stockholders' equity $ 1,175,000 During 2019, the company has the transactions including the following.
Jan. 2 Purchased 6,000 shares of its own stock at $20 cash per share.
Jan. 5 Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record.
Feb. 28 Paid the dividend declared on January 5.
July 6 Sold 2,250 of its treasury shares at $24 cash per share.
Aug. 22 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Sept 5 Sold 3,750 of its treasury shares at $17 cash per share.
Oct. 28 Paid the dividend declared on September 5.
Dec. 31 Closed the $368,000 debit balance (from net loss) in the Income Summary account to Retained Earnings.
Required:
1. Prepare journal entries to record each of these transactions.
2. Prepare a statement of retained earnings for the year ended December 31, 2019.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2019.
Answer:
Whisper Co.
1. Journal Entries to record transactions:
Jan. 2 Debit Treasury stock $90,000
Debit Paid-in Capital in Excess $30,000
Credit Cash $120,000
To record the purchase of 6,000 shares of its own stock at $20 cash per share.
Jan. 5 Debit Cash Dividend $78,000
Credit Dividend Payable $78,000
To record the declaration of a $2 per share cash dividend payable on 39,000 (45,000 - 6,000) shares
Feb. 28 Debit Dividend Payable $78,000
Credit Cash $78,000
To record the payment of the dividends.
July 6 Debit Cash $54,000
Credit Treasury stock $33,750
Credit Paid-in Capital in Excess $20,250
To record the resale of 2,250 of its treasury shares at $24 cash per share.
Aug. 22 Debit Cash Dividend $90,000
Credit Dividend Payable $90,000
To record the declaration of a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record (45,000 shares).
Sept 5 Debit Cash $63,750
Credit Treasury stock $56,250
Credit Paid-in Capital in Excess $7,500
To record the resale of 3,750 of its treasury shares at $17 cash per share.
Oct. 28 Debit Dividend Payable $90,000
Credit Cash $90,000
To record the payment of the dividends.
Dec. 31 Debit Retained earnings $368,000
Credit Income Summary $368,000
To close the net loss to the retained earnings.
2. Statement of Retained Earnings for the year ended December 31, 2019
Retained earnings, December 31, 2018 $430,000
Net loss -368,000
Dividends paid -168,000
Retained earnings, December 31, 2019 ($106,000)
3. Stockholders' Equity, December 31, 2019:
Common stock—$15 par value, 100,000 shares authorized,
45,000 shares issued and outstanding $ 675,000
Paid-in capital in excess of par value, common stock 67,750
Retained earnings ($106,000)
Total stockholders' equity $ 636,750
Explanation:
a) Data and Calculations:
Stockholders' Equity (December 31, 2018)
Common stock—$15 par value, 100,000 shares authorized,
45,000 shares issued and outstanding $ 675,000
Paid-in capital in excess of par value, common stock 70,000-30,000+20,250+7,500 = 67,750
Retained earnings 430,000
Total stockholders' equity $ 1,175,000
Transaction Analysis:
Jan. 2 Treasury stock $90,000 Paid-in Capital in Excess $30,000 Cash $120,000 purchase of 6,000 shares of its own stock at $20 cash per share.
Jan. 5 Cash Dividend $78,000 Dividend Payable $78,000
a $2 per share cash dividend payable on 39,000 (45,000 - 6,000) shares
Feb. 28 Dividend Payable $78,000 Cash $78,000
July 6 Cash $54,000 Treasury stock $33,750 Paid-in Capital in Excess $20,250 2,250 of its treasury shares at $24 cash per share.
Aug. 22 Cash Dividend $90,000 Dividend Payable $90,000
$2 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Sept 5 Cash $63,750 Treasury stock $56,250 Paid-in Capital in Excess $7,500 3,750 of its treasury shares at $17 cash per share.
Oct. 28 Dividend Payable $90,000 Cash $90,000
Dec. 31 Retained earnings $368,000 Income Summary $368,000
Dec. 31 Retained earnings $168,000 Cash Dividend $168,000
Market Structure and Market Power
The marginal revenue curve of a firm with market power will always lie below its demand curve because of:_____.
a. the discount effect and the substitution effect.
b. the substitution effect and the income effect.
c. the output effect and the discount effect.
d. the output effect and the substitution effect.
Answer: c. the output effect and the discount effect.
Explanation:
The output effect is how firms with market power control their production in honest to make profit.
A firm with market farm will have to reduce it's marginal revenue curve to increase sales.
The marginal revenue will therefore be below the Demand curve to show that the marginal revenue has to be reduced for a team to sell more goods.
a. Describe an important decision in your academic or personal life that you will have to make in the near future.
b. Using the five-step decision-making approach , analyze your decision and conclude with your "best" choice.
Explanation:
a. Describe an important decision in your academic or personal life that you will have to make in the near future.
An important decision for all people is to choose which professional career to follow, since there are people with different skills, which can cause some difficulty in choosing which academic course to follow.
It is essential that the student does research on the professions that are most consistent with their profile, it is important to read about the functions of each profession, take vocational tests, talk to other professionals, etc., so that their decision is more effective.
b. Using the five-step decision-making approach , analyze your decision and conclude with your "best" choice.
1- Identify your goals: In choosing a professional career, identifying your life goals is essential to set more achievable goals and stay focused.
2- Gather information: The more you research about the career options you intend to pursue, the easier it will be to understand the aspects that will lead to a successful decision. It is important to gather information from different sources, through internet searches, books, conversations with other workers, etc.
3- Check the consequences: This step is important for the individual to be able to see his decision in a broad sense, from the positive and negative aspects that every profession has, and thus analyze whether he will be able to deal with all of them in the best way.
4- Make the decision: In the penultimate stage the decision is made, so far you have already gathered essential information that will lead you to the decision. In the example of career choice, the decision is extremely important and can impact a person's entire life, so it is common for doubts and uncertainties to arise from the decision.
5- Evaluation of the decision: This is the step that will assist in the realization of a good decision, as in the correction of problems and development of skills that contribute to make your decision the best possible and in line with your objectives.
The comparative balance sheets and income statement for Bingky Barnes Inc. are as follows:
Current Year Prior Year
Balance sheet at December 31
Cash $37,300 $29,400
Accounts receivable 32,700 28,900
Merchandise inventory 42,000 38,300
Property and equipment 121,500 100,800
Less: Accumulated depreciation (30,700) (25,300)
$202,800 $172,100
Accounts payable $36,700 $27,900
Accrued wages expense 1,400 1,800
Note payable, long-term 44,500 50,800
Common stock and additional paid-in capital 89,600 72,900
Retained earnings 30,600 18,700
$202,800 $172,100
Income statement for current year Sales $123,000
Cost of goods sold 73,000
Other expenses 38,100
Net income $11,900
Additional Data:
a. Equipment bought for cash, $20.700.
b. Long-term notes payable was paid off for $4,800.
c. Issued new shares of stock for $16,400 cash.
d. No dividends were declared or paid.
e. Other expenses included depreciation, $5,200, wages, $20,100; taxes, $6,100; other, $6,500 f. Assume that expenses were fully paid in cash, when there are no liabilities account related to them. For example, tax expenses are paid in cash since there is no taxes payable.
Required:
Prepare the statement of cash flows for the year ended December 31, current year, using the Indirect method.
Answer:
Bingky Barnes Inc.
Statement of Cash Flows for the year ended December 31, Current Year
(using the indirect method)
Operating activities:
Net income $11,900
Add non-cash expenses:
Depreciation 5,400
Adjusted operating $17,300
Changes in working capital:
Accounts receivable -3,800
Merchandise inventory -3,700
Accounts payable +8,800
Accrued wages expense -400
Net operating cash flow $18,200
Investing activities:
Property & equipment -$20,700
Financing activities:
Note payable, long-term -6,300
Common stock and
additional paid-in capital +16,700
Net cash from financing $10,400
Net cash flows $7,900
Explanation:
a) Data and Calculations:
Comparative balance sheets and income statement
Current Year Prior Year Change
Balance sheet at December 31
Cash $37,300 $29,400 +7,900
Accounts receivable 32,700 28,900 +3,800
Merchandise inventory 42,000 38,300 +3,700
Property and equipment 121,500 100,800 +20,700
Less: Accumulated depreciation (30,700) (25,300)
Total assets $202,800 $172,100
Accounts payable $36,700 $27,900 +8,800
Accrued wages expense 1,400 1,800 -400
Note payable, long-term 44,500 50,800 -6,300
Common stock and
additional paid-in capital 89,600 72,900 +16,700
Retained earnings 30,600 18,700
Total liabilities and equity $202,800 $172,100
Income statement for current year
Sales $123,000
Cost of goods sold 73,000
Other expenses 38,100
Net income $11,900
Additional Data:
a. Equipment bought for cash, $20,700
b. Long-term notes payable was paid off for $4,800?
c. Issued new shares of stock for $16,400 cash.
d. No dividends were declared or paid.
e. Other expenses:
Depreciation, $5,400
Wages 20,100
Taxes, 6,100
Other, 6,500
f. Assume that expenses were fully paid in cash, when there are no liabilities account related to them. For example, tax expenses are paid in cash since there is no taxes payable.
Wages Payable
Beginning balance $1,800
Wages expense $20,100
Ending balance 1,400
Cash paid 19,700
Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below:
Standard Quantity or Hours Standard Price or Rate Standard Cost
Direct materials 7.90 pounds $2.10 per pound $16.59
Direct labor 0.50 hours $5.00 per hour $2.50
During the most recent month, the following activity was recorded:
a. 14,850.00 pounds of material were purchased at a cost of $2.00 per pound.
b. All of the material purchased was used to produce 1,500 units of Zoom.
c. 600 hours of direct labor time were recorded at a total labor cost of $4,200.
Required:
1. Compute the materials price and quantity variances for the month.
2. Compute the labor rate and efficiency variances for the month.
Answer:
Results are below.
Explanation:
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (2.1 - 2)*14,850
Direct material price variance= $1,485 favorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (7.9*1,500 - 14,850)*2.1
Direct material quantity variance= $6,300 unfavorable
To calculate the direct labor efficiency and rate variance, we need to use the following formulas:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Direct labor time (efficiency) variance= (1,500*0.5 - 600)*5
Direct labor time (efficiency) variance= $750 favorable
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Direct labor rate variance= (5 - 7)*600
Direct labor rate variance= $1,200 unfavorable
Actual rate= 4,200/600= $7
Orion Flour Mills purchased a new machine and made the following expenditures: Purchase price $56,000
Sales tax 5,050
Shipment of machine 810
Insurance on the machine for the first year 510
Installation of machine 1,620
The machine, including sales tax, was purchased on account, with payment due in 30 days. The other expenditures listed above were paid in cash.
Required:
Record the above expenditures for the new machine.
Answer:
Debit : Machine $58,430
Debit : Insurance expense $510
Debit : Sales tax $5,050
Credit : Cash $63,990
Being Cost of machine recognized as well as other expenses on the machine
Explanation:
The cost of the machine includes the purchase price plus any costs directly incurred in putting the asset in the location and condition indented by the management.
Cost of Machine is calculated as :
Purchase price $56,000
Shipment of machine $810
Installation of machine $1,620
Total $58,430
Other Costs are recognized as expenses in the income statement and not as part of the asset.
Skysong, Inc. reported net income of $194,500 for 2020. Skysong also reported depreciation expense of $47,500 and a loss of $6,200 on the disposal of plant assets. The comparative balance sheet shows a decrease in accounts receivable of $18,200 for the year, a $20,200 increase in accounts payable, and a $5,000 decrease in prepaid expenses. Prepare the operating activities section of the statement of cash flows for 2020. Use the indirect method.
Answer:
Net cashflow from operating activities =$271,400
Explanation:
The cash flow statement is a financial statement that provides information about the sources and the usage of cash during a particular accounting period usually a year.
It provides the cash inflow and outflows under three (3 ) categories of activities operating investing, financing.
The net operating activities section of the cash flow is prepared below:
$
Net income 194,500
Add Depreciation expense 47,500
Add Loss on disposal 6,200
Add Decrease in account receivable 18,200
Add Increase in accounts payable 5,000
Net cashflow from operating activities 271,400
A review of the ledger of Wildhorse Co. at December 31, 2022, produces these data pertaining to the preparation of annual adjusting entries.
1. Prepaid Insurance $16,824. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2021, for $10,080. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2022, for $8,424. This policy has a term of 18 months.
2. Unearned Rent Revenue $314,240. The company began subleasing office space in its new building on November 1. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease.
Date Term (in months) Monthly Rent Number of Leases
Nov.1 8 $5,380 5
Dec. 1 7 $8,120 4
3. Notes Payable $46,800. This balance consists of a note for 6 months at an annual interest rate of 7%, dated October 1.
4. Salaries and Wages Payable $0. There are 11 salaried employees. Salaries are paid every Friday for the current week.
5 employees receive a salary of $635 each per week, and 6 employees earn $ 765 each per week. Assume December 31 is a Wednesday. Employees do not work weekends. All employees worked the last 3 days of December.
Required:
Prepare the adjusting entries at December 31, 2017.
Answer:
1. Debit Insurance expense for $8,976; and Credit Prepaid insurance for $8,976.
2. Debit Unearned revenue for $86,280; and Credit Rent revenue for $86,280.
3. Debit Interest expense for $819; and Credit Interest payable for $819.
4. Debit Salaries expense for $4,659; Credit for Salaries payable for $4,659.
Explanation:
Note: The correct date in the requirement is 2022 not 2017 as mistakenly stated.
The adjusting journal entries will look as follows:
Date Accounts Title & Explanation Debit ($) Credit ($)
Dec. 31 Insurance expense (w.1) 8,976
Prepaid insurance 8,976
(To record insurance expenses)
Dec. 31 Unearned revenue 86,280
Rent revenue (w.2) 86,280
(To record rent revenue.)
Dec. 31 Interest expense (w.3) 819
Interest payable 819
(To record interest on note payable.)
Dec. 31 Salaries expense (w.4) 4,659
Salaries payable 4,659
(To record salaries accrued.)
Workings:
w.1. Prepaid Insurance $16,824. The company has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on July 1, 2021, for $10,080. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on January 1, 2022, for $8,424. This policy has a term of 18 months.
Expired insurance Policy B4564 adjustment = $10,080 / 3 = $3,360
Expired insurance Policy A2958 adjustment = ($8,424 /18 months) * 12 months = $5,616
Total insurance expense = Expired insurance Policy B4564 adjustment + Expired insurance Policy A2958 adjustment = $3,360 + $5,616 = $8,976
w.2. Unearned Rent Revenue $314,240. The company began subleasing office space in its new building on November 1. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease.
Earned revenue = Monthly rent * Accrued month * Number of lease
Therefore, we have:
Total earned revenue = ($5,380 * 2 * 5) + ($8,120 * 1 * 4) = $86,280
w.3. Notes Payable $46,800. This balance consists of a note for 6 months at an annual interest rate of 7%, dated October 1.
Interest expense on note payable = Principal * Rate * Time = $46,800 * 7% * (3 / 12) = $819
w.4. Salaries and Wages Payable $0. There are 11 salaried employees. Salaries are paid every Friday for the current week. 5 employees receive a salary of $635 each per week, and 6 employees earn $ 765 each per week. Assume December 31 is a Wednesday. Employees do not work weekends. All employees worked the last 3 days of December.
Total salaries accrued = (5 employees * $635 each per week * 3/5 days) + (6 employees * $765 each per week * 3/5 days) = $4,659
Fultz Company has accumulated the following budget data for the year 2017. 1 Sales: 31,450 units, unit selling price $85. Cost of one unit of finished goods: direct materials 1 pound at $5 per J pound, direct labor 3 hours at $13 per hour, and manufacturing overhead $6 per direct labor hour, j Inventories (raw materials only): beginning, 10,290 pounds; ending, 15,250 pounds. Selling and administrative expenses: $170,000; interest expense: $30,000. Income taxes: 30% of income before income taxes.
Prepare a schedule showing the computation of cost of goods sold for 2017.
Answer:
See below
Explanation:
Computation of Cost of goods sold
Direct materials
Direct labor
Manufacturing overheads
Total cost
Net Zero Products, a wholesaler of sustainable raw materials, prepares the following aging of receivables analysis. Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable $ 185,000 $ 100,000 $ 38,000 $ 17,000 $ 14,000 $ 16,000 Percent uncollectible 1 % 2 % 4 % 6 % 10 % 1. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. 2. Prepare the adjusting entry to record bad debts expense assuming the unadjusted balance in the Allowance for Doubtful Accounts is a $3,000 credit.
Answer:
1)
Days Past Due
Total 0 1 to 30 3 1 to 60 61 to 90 Over 90
$185,000 $100,000 $38,000 $17,000 $14,000 $16,000
1% 2% 4% 6% 10%
Bad debts $1,000 $760 $680 $840 $1,600
Total bad debt = $4,880
2)
Dr Bad debt expense 4,880
Cr Allowance for doubtful accounts 4,880
What types of money are included in the M2 category? Check all that apply.
currency
savings accounts
checking accounts
commodity money
O short-term investment accounts
Answer:
A B C E
Explanation:
on edge :)
Answer:
A
B
C
E
CORECT ON EDGE
Explanation:
. Bartholomew Corp's master budget calls for the production of 6,000 units of products monthly. The master budget includes indirect labor of $396,000 annually; Bartholomew considers indirect labor to be a variable cost. During the month of September, 5,600 units of product were produced, and indirect labor costs of $30,970 were incurred. A performance report utilizing flexible budgeting would report a flexible budget variance for indirect labor of:
Answer:
$170 Unfavorable
Explanation:
Budgeted monthly indirect labor = $396,000/12 = $33,000
Budgeted indirect labor per unit = $33,000/6,000 = $5.5 per unit
Flexible budgeted cost = 5,600*$5.5 = $30,800
Flexible budget variance = Actual cost - Flexible cost
Flexible budget variance = $30,970 - $30,800
Flexible budget variance = $170 Unfavorable
The shareholders’ equity section of the balance sheet of TNL Systems Inc. included the following accounts at December 31, 2020: Shareholders' Equity ($ in millions) Common stock, 210 million shares at $1 par $ 210 Paid-in capital—excess of par 1,260 Paid-in capital—share repurchase 1 Retained earnings 1,200 Required: 1. During 2021, TNL Systems reacquired shares of its common stock and later sold shares in two separate transactions. Prepare the entries for both the purchase and subsequent resale of the shares assuming the shares are (a) retired and (b) viewed as treasury stock. On February 5, 2021, TNL Systems purchased 9 million shares at $10 per share. On July 9, 2021, the corporation sold 3 million shares at $12 per share. On November 14, 2023, the corporation sold 3 million shares at $7 per share. 2. Prepare the shareholders’ equity section of TNL Systems’ balance sheet at December 31, 2023, comparing the two approaches. Assume all net income earned in 2021–2023 was distributed to shareholders as cash dividends.
Answer:
TNL Systems Inc.
Journal Entries:
Retired shares:
February 5, 2021:
Debit Treasury stock $9
Debit Paid-in capital - excess of par $81
Credit Cash $90
To record the repurchase of shares.
Debit Common stock $9
Credit Treasury stock $9
To record the retirement of shares.
b) Viewed as treasury stock:
February 5, 2021:
Debit Treasury Stock $9
Debit Paid-in capital - excess of par $81
Credit Cash $90
To record the repurchase of 9 million shares at $10 each.
July 9, 2021:
Debit Cash $36
Credit Treasury Stock $3
Credit Paid-in capital - excess of par $33
To record the resale of 3 million treasury shares at $12 each.
November 14, 2023:
Debit Cash $21
Credit Treasury Stock $3
Credit Paid-in capital - excess of par $18
To record the resale of 3 million treasury shares at $7 each.
2a. Retired Shares
At December 31, 2020:
Shareholders' Equity ($ in millions)
Common stock, 210 million shares at $1 par $ 201
Paid-in capital—excess of par 1,161
Paid-in capital—share repurchase 1
Retained earnings 1,200
2b. Treasury stock:
At December 31, 2020:
Shareholders' Equity ($ in millions)
Common stock, 210 million shares at $1 par $ 210
Paid-in capital—excess of par 1,230
Paid-in capital—share repurchase 4
Retained earnings 1,200
Explanation:
a) Data and Calculations:
At December 31, 2020:
Shareholders' Equity ($ in millions)
Common stock, 210 million shares at $1 par $ 210
Paid-in capital—excess of par 1,260
Paid-in capital—share repurchase 1
Retained earnings 1,200
Transactions Analysis:
Retired shares:
February 5, 2021:
Common stock $9 Paid-in capital - excess of par $81 Cash $90
Treasury stock:
February 5, 2021:
Treasury Stock $9 Paid-in capital - excess of par $81 Cash $90
July 9, 2021:
Cash $36 Treasury Stock $3 Paid-in capital - excess of par $33
November 14, 2023:
Cash $ 21 Treasury Stock $3 Paid-in capital - excess of par $18
Treasury stock
Beginning balance $1
February 5, 2021 9
July 9, 2021 (3)
November 14, 2023 (3)
Ending balance $4
Paid-in capital - excess of par
Beginning balance $1,260
February 5, 2021 (81)
July 9, 2021 33
November 14, 2023 18
Ending balance $1,230
Clampett, Incorporated, converted to an S corporation on January 1, 2020. At that time, Clampett, Incorporated, had cash ($54,000), inventory (FMV $74,000, basis $37,000), accounts receivable (FMV $54,000, basis $54,000), and equipment (FMV $74,000, basis $94,000). In 2021, Clampett, Incorporated, sells its entire inventory for $74,000 (basis $37,000). Assume the corporate tax rate is 21 percent. Clampett, Incorporated's taxable income in 2021 would have been $1,000,000 if it had been a C corporation. How much built-in gains tax does Clampett, Incorporated, pay in 2021
Answer:
$3,570
Explanation:
Particulars FMV Basis Differences
Inventory $74,000 $37,000 $37,000
Accounts receivable $54,000 $54,000 $0
Equipment $74,000 $94,000 -$20,000
Taxable gain $17,000
Tax rate = 21%
So, Built-in gains tax = Taxable gain × tax rate
= $17,000 × 21%
= $3,570
Norris Company has the following capital structure: Common stock, $1 par, 100,000 shares issued and outstanding. On October 1, 2020, the company declared a 5% common stock dividend when the market price of the common stock was $15 per share. The stock dividend will be distributed on October 15, 2020, to stockholders on record on October 10, 2020. Upon declaration of the stock dividend, Norris Company would record:
Answer: Debit to retained earnings of $75000
Explanation:
Based on the information given, the stock dividend will be:
= 100,000 shares x 5%
= 100000 × 0.05
= 5,000 shares.
Since the market price is $15 per share, then the retained earnings will be:
= $15 × 5000
= $75000
Stock dividend distributable will be:
= 5,000 x $1
= $5000
Paid in capital in excess of par = $75000 - $5000 = $70000
The journal entry will be:
Debit Retained earnings $75000
Credit Stock dividend distributable $5,000
Credit Paid in capital in excess of par $70000
During the current year, the company purchased equipment for $212,000 on October 1. It is estimated the equipment will have a useful life of 8 years and a salvage value of $12,000. Estimated production is 40,000 units and estimated working hours are 20,000. During the current year, the company uses the equipment for 525 hours and the equipment produced 1,000 unites. The company uses December 31 as its fiscal year end.
Part 1: For the current year, compute depreciation expense using the straight-line method.
Part 2: For the current year, compute depreciation expense using the activity method (units of output).
Part 3: For the current year, compute depreciation expense using the activity method (working hours).
Answer:
$6250
$5000
$5250
Explanation:
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
($212,000 - $12,000) / 8 = $25,000
The machine was used for only 3 months in the fiscal year. Thus, the depreciation expense = $25,000 x (3/12) = $6250
Activity method based on output = (output produced that year / total output of the machine) x (Cost of asset - Salvage value)
(1000 / 40,000) x ($212,000 - $12,000) = $5000
Activity method based on hours worked = (hours worked that year / total hours of the machine) x (Cost of asset - Salvage value)
($212,000 - $12,000) x (525 / 20,0000) = $5250
The following facts relate to Coronado Corporation.
1. Deferred tax liability, January 1, 2020, $20,200.
2. Deferred tax asset, January 1, 2020, $0.
3. Taxable income for 2020, $95,950.
4. Pretax financial income for 2020, $202,000.
5. Cumulative temporary difference at December 31, 2020, giving rise to future taxable amounts, $242,400.
6. Cumulative temporary difference at December 31, 2020, giving rise to future deductible amounts, $35,350.
7. Tax rate for all years, 20%.
8. The company is expected to operate profitably in the future.
Compute income taxes payable for 2020:
Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Prepare the income tax expense section of the income statement for 2020, beginning with the line "Income before income taxes." (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer: See explanation
Explanation:
a. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020.
Debit Income Tax Expense $40400
Debit Defered Tax Asset $7070
Credit Income Tax Payable $19190
Credit Defered tax liability $28280
(To record income tax expense and defered tax/liability).
Note that:
Income Tax Expense was gotten as:
= $202,000 × 20%
= $202000 × 0.2
= $40,4000
Income Tax Payable was gotten as:
= $95,950 × 20%
= $95950 × 0.2
= $19,190
2. Prepare the income tax expense section of the income statement for 2020.
Income statement for year ended 31 December 2020
Income before tax = $202000
Less: Income Tax expense - Current = $19190
Less: Income Tax expense - Defered = $21210
Net income = $161600
Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information: Activity Cost Driver Amount M XY Production setups Number of setups $82,000 8 12 Material handling Number of parts 48,000 56 24 Packaging costs Number of units 130,000 80,000 50,000 $260,000 What is the total overhead per unit allocated to Product M using activity-based costing (ABC)
Answer:
Unitary cost= $1.83
Explanation:
First, we need to calculate the allocation rates:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Production setups= 82,000/20= $4,100 per setup
Material handling= 48,000/80= $600 per part
Packaging costs= 130,000/130,000= $1 per unit
Now, we allocate cost to Product M:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Production setups= 4,100*8= 32,800
Material handling= 600*56= 33,600
Packaging costs= 1*80,000= 80,000
Total= $146,400
Finally, the unitary cost:
Unitary cost= 146,400 / 80,000
Unitary cost= $1.83
