Answer:
Since there is not enough room here, I prepared the general ledger, the accounts receivable ledger and the schedule of accounts receivable in an excel spreadsheet (attached).
Explanation:
Management of Carla Vista, Inc., is planning to raise $1,215,000 in new equity through a private placement. If the sale price is $20.25 per share, how many shares does the company have to issue
Answer:
Number of shares to be issued = 60,000 units
Explanation:
A private placement involves the issue of new shares to a few number of individual and institutional investors. Unlike initial public offering, here the shares are not offered to the general public.
The number of units to be issued is determined as follows
Units to be issued = Total capital to be raised / issue price per share
Number of units to be raised = $1215,000/$20.25 per share= 60,000 units
Number of shares to be issued = 60,000 units
Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2013, net credit sales totaled $4,500,000, and the estimated bad debt percentage is 1.5%. The allowance for uncollectible accounts had a credit balance of $42,000 at the beginning of 2013 and $40,000, after adjusting entries, at the end of 2013.
Required:
1. What is bad debt expense for 2013?
2. Determine the amount of accounts receivable written off during 2013.
3. If the company uses the direct write-off method, what would bad debt expense be for 2013?
Answer:
1. The Bad debt expense for 2013 is $67,500
2. The amount of accounts receivable written off during 2013 is $69,500
3. If the company uses the direct write-off method, the bad debt expense for 2013 would be $69,500
Explanation:
1. In order toCalculate the bad debt expense for 2013 we would have to make the following calculation:
Bad debt expense=1.5% of Net Credit Sales
=1.5%×$4,500,000
=$67,500
The Bad debt expense for 2013 is $67,500
2. In order to Determine the amount of accounts receivable written off during 2013 we would have to make the following calculation:
amount of accounts receivable written off=$42,000+$67,500-$40,000
amount of accounts receivable written off=$69,500
The amount of accounts receivable written off during 2013 is $69,500
3. Using direct write off method, the bad debt expense is recognized only when the actual bad debt is incurred. The actual bad expense would be the amount of accounts receivable written off during the year. Accounts receivable written off during the year would be same in both the methods.
Thus, the bad debt expense for the year 2013 would be $69,500.
A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $ 345,000 debit Allowance for uncollectible accounts 700 debit Net Sales 790,000 credit All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?
Answer: $5,440
Explanation:
When using the percent of sales method to determine bad debts, the company estimates a percentage that it believes will results in uncollectible debt and then applies it to the sales/revenue figure. The figure that is calculated is then debited along with the debit balance on the Allowance for doubtful accounts to the Bad debts account for the year and credited to the Allowance for doubtful accounts.
This company estimates that they will have 0.6% of credit sales uncollectible.
There are also $790,000 in sales of which all are on credit.
The Uncollectible estimate is therefore,
= 790,000 * 0.6%
= $4,740
This figure is then added to the debit amount on the Allowance for Uncollectible Accounts.
= 4,470 + 700
= $5,440
Note; A debit balance on the Allowance for doubtful debt account signifies that the bad debts were higher than anticipated the last time. This is why the figure is added to the current bad debts expense.
Fairfield Company’s raw materials inventory transactions for the most recent month are summarized here: Beginning raw materials $ 20,000 Purchases of raw materials 90,000 Raw materials issued Materials requisition 1445 25,000 For Job 101 Materials requisition 1446 35,000 For Job 102 Materials requisition 1447 30,000 Used on multiple jobs 1. How much of the raw materials cost would be added to the Work in Process Inventory account during the period? 2. How much of the raw materials costs would be added to the Manufacturing Overhead account? 3. Compute the ending balance in the Raw Materials Inventory account.
Answer:
1. $60,000
2. $30,000
3. $20,000
Explanation:
1. How much of the raw materials cost would be added to the Work in Process Inventory account during the period?
The amount to add add to the Work in Process Inventory account during the period is the direct material used calculated as follows:
Direct raw materials used = Materials requisition 1445 For Job 101 + Materials requisition 1446 For Job 102 = $25,000 + $35,000 = $60,000
2. How much of the raw materials costs would be added to the Manufacturing Overhead account?
Manufacturing overhead refers to all indirect costs that are incurred during the production process. Therefore, the raw materials costs that would be added to the Manufacturing Overhead account is the indirect materials used on multiple jobs.
Therefore, we have:
Amount to add to the Manufacturing Overhead account = Indirect materials used = $30,000
3. Compute the ending balance in the Raw Materials Inventory account.
Ending raw materials balance = Beginning raw materials + Purchases of raw materials - Direct raw materials used - Indirect materials used = $20,000 + $90,000 - $60,00 - $30,000 = $20,000
The following information is available for Marigold Corp.: Allowance for doubtful accounts at December 31, 2019 $23000 Credit sales during 2020 1250000 Accounts receivable deemed worthless and written off during 2020 26800 As a result of a review and aging of accounts receivable in early January 2021, it has been determined that an allowance for doubtful accounts of $16700 is needed at December 31, 2020. What amount should Marigold record as "bad debt expense" for the year ended December 31, 2020?
Answer: $20500
Explanation:
Bad debt is the amount of money that a credit owes the company and is not willing to be paid hence may not be collected.
The amount that Marigold should record as "bad debt expense" for the year ended December 31, 2020 goes thus:
Bad debt allowance balance needed =
$16700
Add: Bad debt that are written off = $26800
Less: Allowance for doubtful accounts = $23000
Bad debt expense will now be:
= $16700 + $26800 - $23,000
= $43500 - $23000
= $20500
Lily wants to build a business. She has very little capital. She does, however, have a partner with which she could run a business. Lily wants to be able to avoid being held personally liable for any problems the business has. Which of the following would lead Lily to choose a sole proprietorship organization for her business?
a. Possession of a partner
b. Little capital
c. Avoidance of personal liability
d. None of the above
Answer:
The correct answer is option (b) Little capital
Explanation:
Solution
With a little capital this will help Lily to choose a sole proprietorship organization for her business. a sole proprietorship can begin with a little capital.
The option (a) is not correct as possession of a partner will not lead her to start a sole proprietorship business.
Also the option (c) is not correct the avoidance of personal liability is not the reason because in sole proprietorship, Lily will be liable for her debts.
In the airline industry, frequent flyer programs, ticket kiosks, and e-ticketing are all examples of capabilities that are __________ but no longer __________. a. valuable; rare b. rare; valuable c. valuable; causally ambiguous d. socially complex; rare
Answer:
a. valuable; rare
Explanation:
There are various examples of capabilities like
1. Frequent flyer programs are nothing but while booking an online flight you just need to sign up so that the chances of earning reward points could be high
2. The ticket kiosks refer to the self service in which you can purchase the tickets related to the entertainment
3. E-ticketing is online ticketing which you can store online instead of keeping it with you in a paper form
These are valuable examples but there are no longer rare
Hence, the first option is correct
Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer.Ken won $1,200 in an illegal game of poker (the game was played in Utah, where gambling is illegal).Ken sold 1,000 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share.Ken received $25,000 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $210,000.Ken received $13,000 in disability benefits for the year. He purchased the disability insurance policy last year.Ken decided to go back to school to learn about European history. He received a $500 cash scholarship to attend. He used $300 to pay for his books and tuition, and he applied the rest toward his new car payment.Ken’s son, Mike, instructed his employer to make half of his final paycheck of the year payable to Ken as a gift from Mike to Ken. Ken received the check on December 30 in the amount of $1,100.Ken received a $610 refund of the $3,600 in state income taxes his employer withheld from his pay last year. Ken claimed $12,050 in itemized deductions last year (the standard deduction for a single filer was $12,000).Ken received $30,000 of interest from corporate bonds and money market accounts.What is his gross income?
Answer:
Gross Income = 46950
Explanation:
SOURCE AMOUNT
Illegal gross income (from poker) 1200
Gain on stock sale 1000
Annuity (25000 - 210000/20) 14500
Scholarship (excess of book allowance paid, for taxable car) 200
Tax refund (tex benefit of last year) 50
Interest Income 30000
Total Gross Income 46950
Disability benefit is excluded as the policy was purchased by taxpayer. Income from son is also not included, as income is taxed to taxpayer who earned the incomeComplex companies adopt decentralization in order to realize all of the following benefits, except:________.
1. delegation of control to lower levels of management, thus facilitating their training and development
improved awareness of, and response to, local conditions
2. reduced record-keeping
3. shorter elapsed time from problem identification to decision-making and implementation
4. no exceptions above
Answer:
2. reduced record-keeping
Explanation:
The decentralization is the chain of the processes in which the proper process of all department is followed
Just like from top-level to middle level and then lower level
And, the inverse is lower level to middle level to top level.
The authority and responsibility are delegated to each level of management so that the day to day operations could be performed in a smooth, effective and efficient manner
For the complex companies who adopt decentralization, they have all the benefits like delegation, problem identification but do not reduce record keeping as it is not an easy task for every company
Hence, option 2 is correct
Which of the following statements is incorrect? Group of answer choices Cost of goods available for sale will always be equal to or greater than cost of goods sold. Ending inventory exceeds beginning inventory when purchases are greater than cost of goods sold. Cost of goods sold exceeds purchases when ending inventory is less than beginning inventory. Ending inventory is greater than beginning inventory when purchases are less than cost of goods sold.
Answer:
Ending inventory is greater than beginning inventory when purchases are less than cost of goods sold.
Explanation:
Ending inventory is greater than beginning inventory when purchases are less than cost of goods sold is the wrong answer option
Ending inventory is the amount of inventory a company has in stock at the end of it's fiscal year. It is the beginning inventory plus net purchases minus cost of goods sold.
When the beginning inventory is greater than the ending inventory, then has been sold in the period than you bought.
The VP of operations requests that ending inventory of 1-gallon containers on December 31, 2018, be 300 comma 000 units. If the production budget calls for Saphire to produce 1 comma 200 comma 000 1-gallon containers during 2018, what is the beginning inventory of 1-gallon containers on January 1, 2018?
Answer:
Hi, the information you have provided is missing information regarding the Budgeted Sales of 1-gallon containers During the year.
However, the following points are provided to help solve the problem.
The Beginning inventory of 1-gallon containers on January 1, 2018 can be determined using the missing figure approach.
Production Budget for the year end December 31, 2018
1-gallon containers
Budgeted Production 1,200,000
Less Budgeted Sales (amount missing) XXX
Less Budgeted Closing Stock (300,000)
Budgeted opening Stock XXX
Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $ 1 comma 000, and a coupon rate of 7.0 % (annual payments). The yield to maturity on this bond when it was issued was 6.0 %. What was the price of this bond when it was issued?
Answer:
$1,073.60
Explanation:
bond's current price = PV of face value + PV of coupons
maturity = 10 years
face value = $1,000
coupon rate = 7% annual
market rate = 6%
PV of face value = $1,000 / (1 + 6%)¹⁰ =$558.39
PV of coupons = coupon x annuity factor (10 years, 6%) = $70 x 7.3601 = $515.21
market value at issue date = $558.39 + $515.21 = $1,073.60
since the bond's coupon rate was higher than the market rate, the bond was sold at a premium.
The annual premium for a $ 15 comma 000 15,000 insurance policy against the theft of a painting is $ 300 300. If the (empirical) probability that the painting will be stolen during the year is 0 . 03 .03, what is your expected return from the insurance company if you take out this insurance?
Answer:
P(x)=0.97
E(x)=$150
Explanation:
The expected return from the insurance company if the I nsurance is taken out will be:
A.Let assume x is the random variable for the amount received from the Insurance company.
Therefore:
x =$300-$0
=$300-$15,000
P(x)=1-0.03=0.97
P(x)=0.03
B.
E(x)=0.97×$300-$14,700×0.03
=$291-$441
=$150
*Reintermediation takes place when Intermediaries provide only matching services between buyers and sellers. O Disintermediated entitles or newcomers take on new Intermediary roles O Intermediaries provide only relevant information about demand O Disintermediated entitles or newcomers take on existing intermediary roles O
Answer: Disintermediated entitles or newcomers take on new Intermediary roles
Explanation:
Disintermediation refers to, for example, stockbrokers who only execute trade manually being left behind because of the development of online transactions.
However, new developments might bring new intermediary roles. Following our example, brokers who turn to electronic intermediation (or newcomers who take on the new intermediary role) prosper through reintermediation
A beekeeper lives adjacent to an apple orchard. The orchard owner benefits from the bees because each hive pollinates about one acre of apple trees. The orchard owner pays nothing for this service, however, because the bees come to the orchard without his having to do anything. Because there are not enough bees to pollinate the entire orchard, the orchard owner must complete the pollination by artificial means, at a cost of $10 per acre of trees. Beekeeping has a marginal cost
MC = 10 + 5Q
where Q is the number of beehives. Each hive yields £50 worth of honey.
A) Assuming the beekeeper wishes to maxmise his profits, how many beehives will the beekeeper maintain?
B) What is the socially effiecient number of hives?
Answer:
A. The number of beehives to be maintained is 8
B. The socially effiecient number of hives is 10
Explanation:
A. In order to calculate the amount of beehives that the beekeeper will maintain assuming the beekeeper wishes to maxmise his profits we would have to use the equality of MC and the price and can be calculated as follows:
P=MC
50=10 + 5Q
Q=8
The number of beehives to be maintained is 8
B. To calculate the socially effiecient number of hives we would have to equating the marginal social benefit and marginal cost as follows:
The orchard owner must complete the pollination by artificial means, at a cost of $10 per acre of trees, therefore,
MSB=MC
50+10=10 + 5Q
Q=10
The socially effiecient number of hives is 10
Unfortunately, Tori doesn't have enough money in her account right now. She needs to make additional contributions at the end of each of the next three years to be able to pay for the repairs. Her account currently has $5,000, which, along with her additional contributions, is expected to continue earning 9% annual interest. If she makes equal contributions each year, how large must each contribution be for Tori to have $9,000 after three years
Answer:
Annual deposit= $770.22
Explanation:
Giving the following information:
PV= 5,000
FV= 9,000
i= 0.09
n= 3
First, we need to calculate the final value of the first $5,000. We will use the following formula:
FV= PV*(1+i)^n
FV= 5,000*1.09^3
FV= 6,475.15
Now, we calculate the annual deposits for the difference:
Investment difference= 9,000 - 6,475.15= 2,524.85
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (2,524.85*0.09) / [(1.09^3)-1]
A= $770.22
Classify the following activities in providing medical services at Healthsmart Clinic.
Activity Control Level Activity Driver
A. Registering patients
B. Cleaning beds
C. Stocking examination rooms
D. Washing linens
E. Ordering medical equipment
F. Heating the clinic
G. Providing security services
H. Filling prescriptions
1. classify each activity as unit level (U), batch level (B), product level (P), or facility level (F).
2. identify an activity driver that might be used to measure these activities at the clinic.
Answer:
The following Classification of activities for medical services at health smart clinic is categorized below
Explanation:
Solution
Given that:
The following activities for providing medical services at health smart Clinic is stated below:
Activity Control level Activity Driver
A. Patient registering - Unit level - Number of patients
B. Cleaning beds - Unit level - bed, patients, labor hours
C. Stocking examination rooms - Facility Level - Number of rooms
D. Washing linens - Batch level - Loads
E. Ordering medical equipment - Facility Level - Cost of equipment, Number of suppliers
F. Heating the clinic - Facility Level - Degree days, space
G. Providing security services - Facility level - No. of days , area covered
H. Filing prescriptions - Batch level - No. of prescriptions
The balance sheet of Sand Sportswear reports total equity of $500,000 and $650,000 at the beginning and end of the year, respectively. The return on equity for the year is 20%. What is Sand Sportswear's net income for the year
Answer:
Sand Sportswear's net income for the year is $115,000
Explanation:
In order to calculate the net income for the year we would have to us the following formula:
Return on equity = Net income / Average total equity
Return on equity=20%
Average total equity=($500,000 + $650,000) / 2 = $575,000
Therefore, Net income=Average total equity*Return on equity
Net income=$575,000*20%
Net income=$115,000
Sand Sportswear's net income for the year is $115,000
Q1 The following is a description of the conversion cycle of Central Production Limited: The conversion cycle of the company is triggered by a report from the warehouse. When the quantity of an inventory item falls below a pre-set minimum level, the warehouse manager sends an online inventory status report to production department advising them to schedule a production batch run for the item. Upon receipt of the report, the production clerk assesses the digital bill of materials and the route sheet files for the item to be produced and adds the production details to the online production schedule. The system automatically adds a record to the open work order file and sends an online work order to the work centre supervisor’s computer and to the accounting clerk’s computer. The work centre supervisor receives the work order from his computer and print hard-copy move tickets and materials requisitions for each production process. Production employees take the materials requisitions to store clerk and receives the materials and subassemblies needed to perform the production tasks. If additional materials beyond the standard amount is needed, the work centre supervisor prepares additional materials requisitions. Production employees complete job time tickets after completing a production process to record the time spent on the job. The job time tickets are then sent together with the move tickets to the accounting department. After releasing the materials into production, the store clerk updates the material inventory records and send the materials requisitions to accounting department. The clerk prepares a journal voucher and posts to the general ledger material control account at the end of each day. The accounting clerk assesses the work orders and set up a work-in-process account for a production batch. Throughout the production period, the clerk also receives move tickets, job tickets, and materials requisitions, which he uses to post to the work-in-process account. At the end of each day, the accounting clerk prepares a digital journal voucher and post it to the general ledger work-inprocess and finished goods control accounts. Q) Identify the risks exist in the conversion cycle of Central Production Limited. (10 marks 300 words) Q3 Elegant Limited sells restored classic cars. Most of its customers are private buyers who buy cars for themselves. However, some of them are investors who buy multiple cars and hold them for resale. All sales of Elegant Limited are for cash. Depict the association and cardinality for the sales of cars at Elegant Limited based on REA model. (10 marks, maximum 300 words) Q4 You are currently working in a mid-tier accounting firm. In an engagement meeting with a client, the management of your client is concerned that the audit tests that you perform will disrupt operations. Your client has recently implemented a data warehouse and the management suggests that you draw the data for analytical reviews and substantive testing from the data warehouse instead of the operational database. The management points out that operational data are copied weekly into the data warehouse and all data you need are contained there. Outline your response to the management’s proposal and mention any concerns you might have. (10 marks, maximum 300 words) Q5 The Chief Information Officer (CIO) and the Managing Director (MD) of Illustrious Limited recently had the following conversation regarding the development of a new information system for the company: CIO: The way to go about the analysis is to first examine the old system, such as reviewing key documents and observing the workers performing their tasks. Then we can determine which aspects are working well and which should be preserved. MD: We have been through these types of projects before, and what always ends up happening is that we do not get the new system we are promised. Instead we get a modified version of the old system. CIO: I can assure you that will not happen this time. My team just want a thorough understanding of what is working well and what is not. MD: I would feel much more comfortable if we first started with a list of our requirements. We should spend more time in determining what exactly we want the system to do upfront. Then your team can come in and determine what portions to salvage if you wish. Just don’t constrain us to the old system! Required: a) The CIO and MD have different views on how the system analysis should be performed. Comment on whose position you sympathise with the most. (6 marks, maximum 200 words) b) What method would you recommend to Illustrious Limited for system analysis? Explain. (4 marks, maximum 150 words)
Answer:
a)
To my view, the MD viewpoint is better. In companies the existing process is usually analyzed and the pain points identified whenever there is a need for change. The new system is simply a change to the existing system. The stakeholders' specific needs are not completely addressed. The MD calls for a collection of and analysis of demands from scratch to share its needs , requirements and inhibitions between the principal stakeholders. The CIO and their staff would be able to assess in the requirements review process what worked and what did not work well for the organization.
In assessing the current process, the CIO and his team will align their thinking process with the pain points and correct the existing system. They are not going to build the system in a fresh light. A new system that meets the needs of stakeholders can be developed. For everybody, this is a win-win situation. The point of view of MD is therefore more logical and related.
b)
In the particular case, the most logical and comprehensive system analysis method is:
Primary stakeholder requirements collection: Primary stakeholders using the system must be consulted on their specific requirements and needs. It is also necessary to consider the limitations identified by stakeholders.
Comprehension of existing system and pain points: the current system can be analysed based on requirements collection and pain points can be emphasized in the current system.
A new system that will win for everyone: the new system must primarily comply with the needs of the stakeholders.
Presentation and approval of the system blueprint to stakeholders
Development and implementation of the system: system development can be carried out by the agile method of sprinting.
Monitoring and control of the system: to check for performance deviations, the system implemented should be observed. In order to monitor deviations, specific intervention can be implemented.
On December 31, 2017, Reggit Company held the following short-term investments in its portfolio of available-for-sale securities. Reggit had no short-term investments in its prior accounting periods. Prepare the December 31, 2017, adjusting entry to report these investments at fair value.
Complete Question:
Fair Value Adjustment Journal General Computation of fair value adjustment. Fair Value Adjustment Computation - Available for Sale Portfolio Cost Fair ValueUnrealized Verrizano Corporation bonds payable Preble Corporation notes payable Lucerne Company common stock Total $ 66,500 S 61,900 46,400 85,100 $ 208,400 $ 193,400 54,000 87,900 Fair Value Adjustment General Journal
Answer:
Dr Unrealized loss — Equity $15,000
Cr Available-For-Sale Securities $15,000
Explanation:
The difference of the cost and fair value of the portfolio gives us the loss of $15,000 which must be accounted for in accounting books as under:
Dr Unrealized losses $15,000
Cr Available-For-Sale Securities $15,000
Exhibit 9-1 Refer to Exhibit 9-1. If the economy is self-regulating, the price level is:_________.
a) lower in short-run equilibrium than in long-run equilibrium.
b) lower in long-run equilibrium than in short-run equilibrium.
c) higher in long-run equilibrium than in short-run equilibrium.
d) lower when the economy is in a recessionary gap than when it is in long-run equilibrium.
e) a and c
Answer: b) lower in long-run equilibrium than in short-run equilibrium.
Explanation:
A self regulating economy will try to move to the long run Equilibrium.
From the graph attached you will notice that the Price Level at the point where the Long Run Curve intersects with the Aggregate Demand curve is lower than the point where the Short Run Supply curve intersects with the same Aggregate Supply.
This means that Prices in the long term at equilibrium will be less than prices in the short term at Equilibrium should the Economy be a self regulating type that will move towards a long term Equilibrium.
nventory records for Water Incorporated revealed the following: Date Transaction Number of Units Unit Cost July 1 Beginning inventory 520 $ 2.48 July 25 Purchase 330 2.67 Water Inc. sold 630 units of inventory during the month. Ending inventory assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimal places and final answer to the nearest dollar amount.)
Answer:
$562
Explanation:
Date Transaction Units Unit Cost Total
July 1 Beginning inventory 520 $2.48 $1,289.60
July 25 Purchase 330 $2.67 $881.10
subtotal 850 $2.554 $2,171
Sales 630 $2.554 $1,609.09
July 31 Ending inventory 220 $2.554 $561.91
July 31's ending inventory = 220 units at $2.554 per unit, total cost $561.91
g "At the end of the current year, the owners' equity in Barclay Bakery is $260,000. During the year, the assets of the business had increased by $134,000 and the liabilities had increased by $79,000. Owners' equity at the beginning of the year must have been:"
Answer:
$205,000
Explanation:
Let us assume Owners' equity at the beginning be X
So, the Increase in Owners' equity is $260,000 - X
As we know that
Accounting equation is
Total assets = Total liabilities + total stockholder equity
So,
Total Increase in Assets = Total Increase in Liabilities + Increase in Owners' equity
$134,000 = $79,000 + $260,000 - X
$134,000 = $339,000 - X
So, the X =
= $339,000 - $134,000
= $205,000
upino Products provides the foundational data for this problem given that the unit product costs at a normal level of 5,000 units per month and selling price of $90 are as follows: Manufacturing costs: Direct materials............................................... $ 35 Direct labor...................................................... 12 Variable overhead............................................ 8 Fixed overhead (total for year = $300,000)...... 5 Selling and Admin costs: Variable............................................................ $ 15 Fixed (total for year = $480,000)...................... 8 This product is sold at a rate of 60,000 units per year. It is predicted that a price increase of $98 will decrease volume by 10%. An advertising campaign is proposed to support the price increase. How much can advertising expense be spent to support the price increase and without having operating income fall below the current levels?
Answer:
Available for advertizing campaing 480,000
Explanation:
First we calculate the current operating income:
sales price less all uniit operating cost
90 - 35 - 12 - 8 - 5 - 15 - 8 = 7
$7 x 60,000 units = $420,000 operating income
Now we calculate the new contribution margin and operating income
materials + labor + variable overhead + variable sale = total variable
35 + 12 + 8 + 15 = 70
new contribution margin per unit
98 - 70 = 28
sales 60,000 units less 10% = 54,000 units
contribution margin
28 x 54,000 = 1,512,000
Fixed overhead 300,000
Fixed selling and adming 480,000
operating income 732,000
Potential contribution from additional sales:
6,000 units x $28 = 168,000
Less: before raising income (420,000)
Available for advertizing campaing 480,000
Answer:
Explanation:
Statement showing calculation of current income
Particulars Amount
Sales (60000x90) $5400000
Less Material cost (60000x$35) $2100000
Less: labour cost (60000x$12) $720000
Less: Variable Overhead(60000x$8) $480000
Less: Variable selling and admin Exp.(60000x$15) $900000
Less: Fixed overhead $300000
Less: Fixed selling and admin expenses $480000
Net inome $420000
Proposed increase in Selling price = $98/unit
Resultant decrease in production = 10%X60000 = 6000 units
Revised income = 54000(98-35-12-8-15) - 300000 - 480000
= $732000
Maximum amount that can be spent on advertising so as to manitain the current level of income of $420000 is $312000 (i.e., $732000-$420000).
Harry owns a Cadillac and a Porsche. Ryan has always wanted a Porsche and knows Harry owns one. Harry decides to sell his Cadillac and buy a BMW. A mutual friend of Ryan and Harry tells Ryan, "Harry's selling his car." Thinking Harry is selling the Porsche (he does not know he also has a Cadillac), Ryan calls Harry and says, "I'll give you $9,500 for your car." Harry, thinking Ryan is talking about the Cadillac, says, "You've got a deal." On what grounds is the above agreement open for rescission
Answer:
mutual mistake
Explanation:
A mutual mistake happens when all the parties involved in a contract (two or more) are mistaken or do not know the correct information about some specific material fact that is relevant to the contract. In this case, the contract can be rescinded because Harry believes that Ryan wants to buy his Cadillac, while Ryan believes Harry is selling his Porsche.
Since both of them are mistaken and do not know relevant material facts regarding the contract, the contract can be terminated.
Analyzing Accounts Receivable Changes The comparative balance sheets of Sloan Company reveal that accounts receivable (before deducting allowances) increased by $15,000 in 2013. During the same time period, the allowance for uncollectible accounts increased by $2,100. If sales revenue was $120,000 in 2013 and bad debts expense was 2.5% of sales, how much cash was collected from customers during the year?
Answer:
Cash was collected from customers during the year was $ 104,100
Explanation:
Sales revenue = $120,000
Bad debt expense = 2.5% of sales
Therefore, Bad debt expense = $120,000 x 2.5% = $3,000
Thus, allowance for uncollectible accounts should have increased by $3,000. But it increased by $2,100.
Therefore, uncollectible accounts receivable of $900 ($3,000 - $2,100) were written off during that year.
Cash collected from customers = Sales revenue - Increase in accounts receivable - Uncollectible accounts written off
= $120,000 - $15,000 - $900
= $104,100
Pat's Custom Tuxedo Shop maintains its records on the cash basis. During this past year Pat's collected $42,900 in tailoring fees, and paid $12,800 in expenses. Depreciation expense totaled $1900. Accounts receivable increased $1200, supplies increased $3600, and accrued liabilities increased $1650. Pat's accrual-basis net income was:
Answer:
$31,350
Explanation:
Calculation for Pat's accrual-basis net income
Cash receipts$42,900
Less Cash disbursements(12,800)
Cash basis net income 30,100
Less depreciation expense(1,900)
Add increase in accounts receivable1,200
Add increase in supplies 3,600
Less increase in accrued liabilities(1,650)
Accrual-basis net income$31,350
Journalize the following transactions using the allowance method of accounting for uncollectible receivables.
April 1 Sold merchandise on account to Jim Dobbs, $6,800. The cost of the merchandise is $6,700.
June 10 Received $1,400 from Jim Dobbs and wrote off the remainder owed of $5,400.
Oct. 11 Reinstated the account of Jim Dobbs and received $5,400 cash in full payment.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs for and received cash in full payment.
Answer:
See the journal entries with narration below.
Explanation:
a. For the first set of transactions, the journal entries will look as follows:
Date Details Dr ($) Cr ($)
April 1 Account Receivable - J. Dobbs 6,800
Sales 6,800
To record sale of merchandising on account to Jim Dobbs.
April 1 Cost of goods sold 6,700
Inventory 6,700
To record cost of goods sold to Jim Dobbs.
June 10 Cash 1,400
Allow. for doubtful acct. (B. debt) 5,400
Account Receivable - J. Dobss 6.800
To record cash receipt J. Dobbs and amount written off.
Oct. 11 Account Receivable - J. Dobbs 5,400
Allowance for doubtful accounts 5,400
To reinstate Jim Dobbs' account receivable.
Oct. 11 Cash 5,400
Account Receivable 5,400
To record cash received from Jim Dobbs' in full.
b. For the first set of transactions, the journal entries will look as follows:
Date Details Dr ($) Cr ($)
April 1 Account Receivable - J. Dobbs 7,200
Sales 7,200
To record sale of merchandising on account to Jim Dobbs.
April 1 Cost of goods sold 5,400
Inventory 5,400
To record cost of goods sold to Jim Dobbs.
June 10 Cash (1/3 * 7,200) 2,400
Allow. for doubtful acct. (B. debt) 4,800
Account Receivable - J. Dobss 7,200
To record cash receipt J. Dobbs and amount written off.
Oct. 11 Account Receivable - J. Dobbs 4,800
Allowance for doubtful accounts 4,800
To reinstate Jim Dobbs' account receivable.
Oct. 11 Cash 4,800
Account Receivable 4,800
To record cash received from Jim Dobbs' in full.
An inexperienced accountant for Cheyenne Corp. showed the following in the income statement: income before income taxes $371,000 and unrealized gain on available-for-sale securities (before taxes) $88,700. The unrealized gain on available-for-sale securities and income before income taxes are both subject to a 35% tax rate. Prepare a correct statement of comprehensive income.
Answer:
An correct statement was prepared for a comprehensive income which is given below.
Explanation:
Solution
Given that:
Cheyenne Corporation
Correct Statement of Comprehensive/General Income
Income before income taxes $371,000
The less Tax ($371,000 * 35%) $129,850
The Net Income $241,150
Other Comprehensive income
Unrealized profit on present for
sales securities, net of tax $57,655
The comprehensive income
($241,150 +$57,655) $298,805
Note:
The Unrealized profit on present for sales securities, net of tax is given as
=($88,700 * (100% -35%))
=$88,700 * 65%
=$57,655
A cost center
A) only incurs costs and does not directly generate revenues.
B) incurs costs and generates revenues.
C) is a responsibility center of a company which incurs losses.
D) is a responsibility center which generates profits and evaluates the investment cost of earning the profit.
Answer: A---incurs costs and does not directly generate revenue.
Explanation:
A cost center is a department or unit in an organization which incurs cost on the organisation for its operation but does not directly add profit or directly generate revenue to the company.
Examples of a cost centre in a company include, The IT department., Research and Development Department.
For example the way in which an IT department, a cost centre in a company can indirectly generate revenue by operating efficiently and for the Research and Development Department is to develop a new promising product.
