Emily Lim owns and runs an ice cream parlor in San Diego. Last year, she had sales of $490,000 and an average tax rate of 32%. She spent $49,000 on ingredients, $24,500 on utilities, and $88,200 to rent the premises. Emily has a few employees and paid them $98,000 in wages in total. She also paid herself a salary of $73,500 and spent $49,000 to pay for employee benefits. A few years ago, Emily borrowed money to buy the ice making equipment. Last year, she paid $24,500 in interest on that loan. Depreciation for the equipment was $14,700.

Required:
a. What was operating income (EBIT) for the year?
b. What was net income for the year?

Answer:

1). EBIT = Sales - Expenses - Depreciation

= $490,000 -($49,000 - $24,500 - $73,500 - $98,000 - $73,500 - $49,000) - $14,700

= $490,000 - $367,500 - $14,700

= $107,800

2. Net Income = [EBIT - Interest] x [1 - t]

= ($107,800 - $24,500) *(1 - 32%)

= $83,300 * 0.68

= $56,644

Recording sales, purchases, shipping, and returns—buyer and seller LO P1, P2
Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions.
May
11 Sydney accepts delivery of $29,500 of merchandise it purchases for resale from Troy: invoice dated May 11, terms 3/10, n/90, FOB shipping point. The goods cost Troy $19,765. Sydney pays $590 cash to Express Shipping for delivery charges on the merchandise.
12 Sydney returns $1,200 of the $29,500 of goods to Troy, who receives them the same day and restores them to its inventory. The returned goods had cost Troy $804.
20 Sydney pays Troy for the amount owed. Troy receives the cash immediately.
(Both Sydney and Troy use a perpetual inventory system and the gross method.)
1. Prepare journal entries that Sydney Retailing (buyer) records for these three transactions.
2. Prepare journal entries that Troy Wholesalers (seller) records for these three transactions.

Basic job Costing

1. Our company makes customized jewelry Customer 101 orders a ring (job 101).
2. It requires 2 grams of 14k gold, 1 diamond and 3 rubies.
c. Customer 102 orders a pendant (job 102). It requires 4 grams of 14 k gold, and 1 ruby.
d. Purchasing buys 1,000 grams of 14k gold for $24,000. 10 diamonds for $28,000, and 10 rubies for $14,000.
e. For the month, the company had factory labor costs of $280,000 and 10,000 hours.

Required:
Prepare the journal entry for the purchases/receivings.
Prepare the journal entry for the direct materials requisitions (by job).
Prepare the journal entry for factory payroll.

Pizza Express Inc. began the Year 2 accounting period with $2,500 cash, $1,400 of common stock, and $1,100 of retained earnings. Pizza Express was affected by the following accounting events during Year 2:

1. Purchased $3,600 of supplies on account.
2. Earned and collected $12,300 of cash revenue.
3. Paid $2,700 cash on accounts payable.
4. Adjusted the records to reflect the use of supplies. A physical count indicated that $250 of supplies was still on hand on December 31, Year 2.

Required
a. Show the effects of the events on the financial statements.
b. Explain the difference between the amount of net income and amount of net cash flow from operating activities.

This activity is important marketing managers need to understand how buy-classes affect organizational buying behavior. Organizations face three different types of buying situations called buy-class situations; new buy, straight rebuy, and modified rebuys. The type of buy-class affects the way buying centers make purchase decisions.
The goal of this exercise is to demonstrate your understanding of the three different types of buy-classes.
Hover over the product name to reveal the hint. Then match the product with the correct buy-class situation
Legal pads and pens
Service trucks
Shipping crane
Solar panels
Copier paper
Record-keeping software
Buy-Class Situation New Buy Straight Rebuy Modified Rebuy

Supply Company reported the following information in its comparative financial statements for the fiscal year ended January​ 31.
January 31 January 31
2018 2017
Net sales $91,000 $89,500
Net earnings $6,370 $6,220
Average total assets $65,000 $64,400
Requirement
1. Compute net profit margin ratio​ (%) for the years ended January​ 31, and 2017. Did it improve or worsen in ​2018?
2. Compute asset turnover for the years ended January 31, 2018 and 2017. Did improve or worsen in 2018? 2018 2017 91,000 $ 89,500 Net sales
3. Compute return on assets for the years ended January 31, 2018 and 2017. Did it improve or worsen in 2018? Which component-net profit margin ratio or asset turnover-was mostly responsible for the change in the company's return on assets?

Nelson Ovalles worked as a cable installer for Cox Rhode Island Telecom, LLC, under an agreement with a third party, M&M Communications, Inc. The agreement stated that no employer-employee relationship existed between Cox and M&M’s technicians, including Ovalles. Ovalles was required to designate his affiliation with Cox on his work van, clothing, and identification badge, but Cox had minimal contact with him and limited power to control the manner in which he performed his duties. Cox supplied cable wire and similar items, but the equipment was delivered to M&M, not to Ovalles. On a workday, while Ovalles was fulfilling a work order, his van rear ended a car driven by Barbara Cayer.

a. Is Cox liable to Cayer?
b. Are independent contractors the same as employees?
c. What is the difference?

Compare this to Case 16, a case that resulted in a legislative change requested by an advocacy group after a fatal event. In this instance, the family is looking to effect change via the political process. However, this approach is rarely successful. Do you think the concepts of social marketing could be used in this instance or one like it? What are the six basic steps of social marketing?

A production line has three machines A, B, and C, with reliabilities of .92, .97, and .87, respectively. The machines are arranged so that if one breaks down, the others must shut down. Engineers are weighing two alternative designs for increasing the line’s reliability. Plan 1 involves adding an identical backup line, and plan 2 involves providing a backup for each machine. In either case, three machines (A, B, and C) would be used with reliabilities equal to the original three.
A. Compute overall system reliability under Plan 1.
B. Compute overall system reliability under Plan 2.
C. Which plan will provide the higher reliability?1. Plan 2.2. Plan 1.

Christopher likes cupcakes (C) and muffins (M). His preferences can be represented by the utility function U(C, M) = C0.5M0.5. He received a gift basket with 16 cupcakes and 4 muffins, but when he was about to eat them, he found out his younger brother Dan had eaten 14 cupcakes and 2 muffins. Christopher made Dan buy what he'd eaten back. However, the bakery was out of muffins and Dan only bought cupcakes. How many cupcakes did Dan buy if, in addition to what he had not eaten from the basket, the new cupcakes provide Christopher with the same level of utility as the original gift basket?

Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $128,800 of manufacturing overhead for an estimated allocation base of $92,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:
Purchase of raw materials $ 136,000
Direct labor cost $ 88,000
Manufacturing overhead costs:
Indirect labor $ 136,100
Property taxes $ 8,200
Depreciation of equipment $ 19,000
Maintenance $ 12,000
Insurance $ 7,400
Rent, building $ 32,000
Beginning Ending
Raw Materials $ 27,000 $ 13,000
Work in Process $ 49,000 $ 37,000
Finished Goods $ 69,000 $ 55,000
Required:
1. Compute the predetermined overhead rate for the year.
2. Compute the amount of underapplied or overapplied overhead for the year.
3. Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials.
4. Compute the unadjusted cost of goods sold for the year. Do not include any underapplied or overapplied overhead in your answer.
5. Assume that the $37,000 ending balance in Work in Process includes $8,000 of direct materials. Given this assumption, supply the information missing below:
Required 1 Required 2 Required 3 Required 4 Required 5
Compute the predetermined overhead rate for the year. 19% redetermined overhead rate

Use the following items to determine the total assets, total liabilities, net worth, total cash inflows, and total cash outflows. Rent for the month $ 1,360 Monthly take-home salary $ 3,260 Cash in checking account $ 1,270 Savings account balance $ 1,990 Spending for food $ 560 Balance of educational loan $ 2,390 Current value of automobile $ 8,530 Telephone bill paid for month $ 94 Credit card balance $ 334 Loan payment $ 147 Auto insurance $ 326 Household possessions $ 3,970 Stereo equipment $ 2,590 Payment for electricity $ 166 Lunches/parking at work $ 181 Donations $ 122 Home computer $ 2,140 Value of stock investment $ 1,810 Clothing purchase $ 137 Restaurant spending $ 167 Total assets $ Total liabilities $ Net worth $ Total cash inflows $ Total cash outflows $

Lewis Bros. currently has outstanding debt but has decided to issue additional debt for expansion purposes. The pretax cost of the new debt is best estimated at the ________ of the currently outstanding debt.

An employee's skills is provided to businesses in which market in the circular flow
model?

Prepare adjusting journal entries, as needed, for the following items.
A. The Supplies account shows a balance of $530, but a count of supplies reveals only $280 on hand at year-end.
B. The company initially records the payments of all insurance premiums as prepaid insurance. The unadjusted trial balance at year-end shows a balance of $570 in Prepaid Insurance. A review of insurance policies reveals that $140 of insurance is unexpired.
C. Employees work Monday through Friday, and salaries of $2,900 per week are paid each Friday. The company's year-end falls on Tuesday.
D. At year-end, the company received a utility bill for December's electricity usage of $250 that will be paid in early January.

Presented below are selected accounts for Sheffield Company as reported in the worksheet at the end of May 2020.
Complete the worksheet by extending amounts reported in the adjusted trial balance to the appropriate columns in the worksheet.
Accounts Adjusted Trial Balance Income Statement Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr.
Cash 8,800
Inventory 77,750
Sales Revenue 446,000
Sales Returns and
Allowances 9,210
Sales Discounts 4,730
Cost of Goods Sold 243,700

Acton Quest Games Inc. adjust accounts annually. The following information is available for the year ended December 31, 2017.

Purchased a 1-year insurance policy on June 1 for $1,320 cash.
Paid $6,100 on August 31 for 5 months' rent in advance.
On September 4, received $3,240 cash in advance from e corporation to sponsor a game each month for a total of 9 months for the most improved students at local school.
Signed a contract for cleaning services starting December 1 for $1,150 per month. Paid for the first 2 months on November 30. (Hint: use the account Prepaid Cleaning to record
On December S, received $2,600 in advance from a gaming dub. Determined that on December 32, $350 of these games had not yet been played.

Required:
For each of the above transactions, record the adjustment that is required on December 31.

During 2019, Ocean Consulting had the following transactions with it clients (customers): On February 1, 2019, the company received cash of $5,500 from clients in payment of their account balances as of December 31, 2018. On November 1, 2019, the company received $2,500 cash as payments in advance for services to be performed in 2020. The company received a total of $15,500 in cash for services that were performed during 2019. The company sent bills totaling $4,500 to clients for services performed during 2019; this amount was unpaid as December 31, 2019.
As a result of these transactions during 2019, the firm's stockholders' equity will:__________

Digger Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year.
Budgeted Actual Overhead cost $975,000 $950,000
Machine hours 50,000 45,000
Direct labor hours 100,000 92,000
Overhead is applied on the basis of direct labor hours.
A) Compute the predetermined overhead rate. (Round answer to 2 decimal places, e.g. 12.25.) Pre-determined overhead rate = budgeted overhead / budgeted direct labor hours
= 975,000 / 100,000
= $9.75 per direct labor hoursB) Determine the amount of overhead applied for the year.?overhead applied = actual hours *overhead rate = 92000 * 9.75
= $897,000C) Explain how an activity-based costing system might differ in terms of computing a predetermined overhead rate.

Amazon.com, Inc., headquartered in Seattle, WA, started its electronic commerce business in 1995 and expanded rapidly. The following transactions occurred during a recent year (dollars in millions):
Issued stock for $6 cash.
Purchased equipment costing $6,320, paying $4,893 in cash and charging the rest on account.
Paid $513 in principal and $91 in interest expense on long-term debt.
Earned $88,988 in sales revenue; collected $87,949 in cash with the customers owing the rest on account.
Incurred $10,766 in shipping expenses, all on credit.
Paid $28,241 cash on accounts owed to suppliers.
Incurred $4,332 in marketing expenses; paid cash.
Collected $620 in cash from customers paying on account.
Borrowed $6,359 in cash as long-term debt.
Used inventory costing $62,752 when sold to customers. Paid $177 in income tax recorded as an expense in the prior year.
For each of the transactions, indicate the effects (positive value for increase, negative value for decrease, and leave blank if no effect) on Income Statement and Balance Sheet.

Consider an economy that is composed of identical individuals who live for two periods. These individuals have preferences over consumption in periods 1 and 2 given by U = ln(C1) + ln(C2). They receive an income of 100 in period 1 and an income of 50 in period 2. They can save as much of their income as they like in bank accounts, earning an interest rate of 10% per period. They do not care about their children, so they spend all their money before the end of period 2.
Each individual’s lifetime budget constraint is given by C1 + C2/(1 + r) = Y1 + Y2/(1 + r). Individuals choose consumption in each period by maximizing lifetime utility subject to this lifetime budget constraint.
What is the individual’s optimal consumption in each period? How much saving does he or she do in the first period?
Now the government decides to set up a social security system. This system will take $10 from each individual in the first period, put it in the bank, and transfer it to him or her with interest in the second period. Write out the new lifetime budget constraint. How does the system affect the amount of private savings? How does the system affect national savings (total savings in society)? What is the name for this type of social security system?

Forest Components makes aircraft parts. The following transactions occurred in July.

1. Purchased $119,000 of materials on account.
2. Issued $117,600 in direct materials to the production department.
3. Issued $8,400 of supplies from the materials inventory.
4. Direct labor employees earned $217,000, which was paid in cash.
5. Purchased miscellaneous items for the manufacturing plant for $120,400 on account.
6. Recognized depreciation on manufacturing plant of $245,000.
7. Applied manufacturing overhead for the month.
8. Job X that cost $533,000 was completed.
9. Some units in Job X, that cost $521,500, were sold for $800,000 cash.
10. After all of the previous transactions posted, the Manufacturing overhead control account shows a debit balance of $373,800, and the Applied manufacturing overhead account shows a credit balance of $201,800. The over- or under-applied overhead was closed to Cost of goods sold. Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $3,000,000. Estimated overhead for the year was $2,790,000.

Required:
a. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.
b. Prepare journal entries to record these transactions.

Pasadena Candle Inc. budgeted production of 715,000 candles for the January. Wax is required to produce a candle. Assume 10 ounces of wax is required for each candle. The estimated January 1 wax inventory is 18,600 pounds. The desired January 31 wax inventory is 12,800 pounds. If candle wax costs $2.10 per pound, determine the direct materials purchases budget for January. (One pound = 16 ounces.) Round all computed answers to the nearest whole number. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Its unadjusted trial balance as of December 31 follows along with descriptions of items a through h that require adjusting entries on December 31.

Additional Information:

1. An analysis of WTI's insurance policies shows that $2,542 of coverage has expired.
2. An inventory count shows that teaching supplies costing $2,204 are available at year-end.
3. Annual depreciation on the equipment is $10,170.
4. Annual depreciation on the professional library is $5,085.
5. On September 1, WTI agreed to do five courses for a client for $2,400 each. Two courses will start immediately and finish before the end of the year. Three courses will not begin until next year. The client paid $12,000 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees.
6. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $6,498 of the tuition has been earned by WTI.
7. WTI's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee.
8. The balance in the Prepaid Rent account represents rent for December.


Debit Credit
Cash $26,944
Accounts receivable 0
Teaching supplies 10,362
Prepaid insurance 15,545
Prepaid rent 2,073
Professional library 31,088
Accumulated depreciation—Professional library $9,328
Equipment 72,533
Accumulated depreciation—Equipment 16,582
Accounts payable 37,202
Salaries payable 0
Unearned training fees 11,500
Common stock 11,000
Retained earnings, December 31, 2017 54,908
Dividends 41,452
Tuition fees earned 105,701
Training fees earned 39,379
Depreciation expense—Professional library 0
Depreciation expense—Equipment 0
Salaries expense 49,743
Insurance expense 0
Rent expense 22,803
Teaching supplies expense 0
Advertising expense 7,254
Utilities expense 5,803
Totals $285,600 $285,600

Required:
a. Prepare Wells Technical Institute's income statement for the year 2018.
b. Prepare Wells Technical Institute's statement of retained earnings for the year 2018.
c. Prepare Wells Technical Institute's balance sheet as of December 31, 2018.

The minimum downside projection from a head and shoulders top pattern is derived a. by projecting downward from the neckline, the vertical distance from the top of the head to the neckline b. by measuring the width of the left shoulder and subtracting that distance from the neckline c. by measuring the distance from the penetration of the neckline by the left shoulder to the penetration of the neckline by the right shoulder and extending down from the point of penetration of the right shoulder d. by estimating the length of the primary price cycle

The following data were taken from the balance sheet accounts of Masefield Corporation on December 31, 2019.

Current assets $540,000
Debt investments (trading) 624,000
Common stock (par value $10) 500,000
Paid-in capital in excess of par 150,000
Retained earnings 840,000

Required:
Prepare the required journal entries for the following unrelated items.

a. A 5% stock dividend is declared and distributed at a time when the market price per share is $39.
b. The par value of the common stock is reduced to $2 with a 5-for-1 stock split.
c. A dividend is declared January 5, 2020, and paid January 25, 2020, in bonds held as an investment. The bonds have a book value of $100,000 and a fair value of $135,000.

The Johnson Materials Inc. has an EBIT of $3,500,000. Its Times Interest Earned (TIE) ratio is 5, Profit Margin is 16% and the tax rate is 35%. Costs of Goods Sold (COGS) is $6 million. Develop an income statement by filling in the blanks in the following table:


Sales = _________
COGS = 6000000
EBITDA =
Depreciation & amortization=
EBIT= 3500000
Interest Expense =
EBT =
Tax =
Net Income =

The following transactions pertain to year 1, the first-year operations of Campbell Company. All inventory was started and completed during year 1. Assume that all transactions are cash transactions.
Acquired $4,700 cash by issuing common stock.
Paid $630 for materials used to produce inventory.
Paid $1,940 to production workers.
Paid $1,210 rental fee for production equipment.
Paid $120 to administrative employees.
Paid $116 rental fee for administrative office equipment.
Produced 360 units of inventory of which 260 units were sold at a price of $13 each.
RequiredPrepare an income statement and a balance sheet in accordance with GAAP.

The following trial balance of Pronghorn Traveler Corporation does not balance. Pronghorn Traveler Corporation Trial Balance April 30, 2020 Debit Credit Cash $6,632 Accounts Receivable 5,600 Supplies 3,327 Equipment 6,460 Accounts Payable $7,404 Common Stock 8,360 Retained Earnings 2,360 Service Revenue 5,560 Office Expense 4,680 $26,699 $23,684 An examination of the ledger shows these errors.
1. Cash received from a customer on account was recorded (both debit and credit) as $1,940 instead of $2,210.
2. The purchase on account of a computer costing $3,080 was recorded as a debit to Office Expense and a credit to Accounts Payable.
3. Services were performed on account for a client, $2,610, for which Accounts Receivable was debited $2,610 and Service Revenue was credited $585.
4. A payment of $455 for telephone charges was entered as a debit to Office Expense and a debit to Cash.
5. The Service Revenue account was totaled at $5,560 instead of $5,640.

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2100 units, while 1600 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is $149,315. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:
Expected activity
Estimated
Activity cost Overhead
pool cost Toasters Blenders Total
Setup costs $8,585 215 batches 450 batches 665 batches
Engineering costs $73,980 870 engineering 820 engineering 1,690 engineering
hours hours
Maintenance costs $66,750 2,7250 direct 1,195 direct 3,945 direct
labor hours labor hours labor hours
Total $149,315
The overhead cost per Blenders using the traditional costing system would be closest to:____.
A. $28.27.
B. $37.85.
C. $93.32.
D. $19.40.

Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of retained earnings by completing the following sentence.

In order to prepare the statement of retained earnings, the balance of the _____________ account balance as well as any debit balance in the ______________ account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the Income statement.