Answer:
a. Consolidated Copyright
Penske (Book value) $900,000
Stanza (Book value) $400,000
Allocation $120,000
Less: Excess Amortization ($20,000)
Total $1,400,000
b. Consolidated Net Income 2019
Revenues $1,100,000
Expenses:
Cost of goods sold $350,000
Depreciation Expenses $350,000
$700,000
Excess amortization $20,000 $720,000
Consolidated Net Income $380,000
Workings
Cost of goods sold = 250,000 + 100,000 = 350,000
Depreciation Expenses = 150,000 + 200,000 = 350,000
3. Consolidated Retainer earnings on December 31,2018
Retained Earnings 1/1/28 $600,000
Net Income 2018 $380,000
Less: Dividend Declared 2018 (Penske) ($80,000)
Total $900,000
d. Consolidated Balance to be reported for goodwill
Stanza acquisition fair value $680,000
(10,000 in stock issue costs reduced
additional paid in capital)
Book value of subsidiary $480,000
(1/1/18 Stockholder equity balance)
Fair value in excess of book value $200,000
Less: Excess fair value allocated $120,000
to copy right based on fair value
Goodwill $80,000
Workings
Stockholder equity balance 1/1/18
Common stock 200,000
Additional paid-in capital 80,000
Retained earnings 200,000
Stockholder equity 480,000
Excess fair value
Copyright fair value 560,000
Less Copyright book value 440,000
Excess fair value allocated 120,000
Copyright year 6 years
Annual Excess Amortization $20,000
In May direct labor was 35% of conversion cost. If the manufacturing overhead for the month was $116,350 and the direct materials cost was $20,200, the direct labor cost was:
Answer:
Direct labor= $62,650
Explanation:
Giving the following information:
In May direct labor was 35% of conversion cost.
The manufacturing overhead for the month was $116,350.
The conversion costs are the sum of the direct labor and the manufacturing overhead:
Overhead= 65%= 116,350
Direct labor= 35%= ?
First, we need to determine the total amount of conversion costs:
Conversion costs= 116,350/0.65= 179,000
Now, the direct labor cost:
Direct labor= 179,000*0.35
Direct labor= $62,650
You invest a single amount of $14,800 for 7 years at 15 percent. At the end of 7 years you take the proceeds and invest them for 14 years at 17 percent. How much will you have after 21 years
Answer:
Value of investment after 21 years = $354,608.11
Explanation:
The value of an amount invested at a certain rate of return for certain number of years where interest compounded annually is known as the future value.
The future value of an investment can be determined using the future value formula. This formula is stated below:
FV = PV × (1+r)^(n)
FV - Future Value , PV- Present Value, r-rate of return, n- number of years
For the first round of investment 15% for 7 years, future value would be:
FV = 14,800 × (1.15)^(7) = 39,368.29
Second round of investing 17% for 14 year, future value would be
FV = 39,368.29 × (1.17)^(14)= 354,608.11
Future Value =$354,608.11
Value of investment after 21 years = $354,608.11
Following are the transactions of a new company called Pose-for-Pics.
Aug.1 Madison Harris, the owner, invested $8,300 cash and $35,300 of photography equipment in the company in exchange for common stock.
2 The company paid $3,900 cash for an insurance policy covering the next 24 months.
5 The company purchased office supplies for $1,060 cash.
20 The company received $5,131 cash in photography fees earned.
31 The company paid $855 cash for August utilities.
1 Madison Harris, the owner, invested $8,300 cash and $35,300 of photography equipment in the company in exchange for common stock.
2 The company paid $3,900 cash for an insurance policy covering the next 24 months.
3 The company purchased office supplies for $1,060 cash.
4 The company received $5,131 cash in photography fees earned.
5 The company paid $855 cash for August utilities.
Question Requirement:
Prepare an August 31st Trial Balance
Answer:
Pose-for-PicsTrial Balance as of August 31st
Description Debit Credit
Cash $7,616
Photography Equipment 35,300
Common Stock $43,600
Prepaid Insurance 3,900
Supplies 1,060
Photography fees earned 5,131
Utilities 855
Total $48,731 $48,731
Explanation:
a) Common Stock
Cash 8,300
Equipment 35,300
Total 43,600
b) Cash account:
Common stock $8,300
Insurance (3,900)
Supplies (1,060)
Fees 5,131
Utilities (855)
Balance $7,616
c) A trial balance is a list of general ledger balances at the end of a period. It is an accounting tool to ensure that the two sides of the double entry bookkeeping are in balance. Discrepancies are sorted out, if any. It forms the basis for preparing the financial statements whereby temporary accounts are transferred to the income summary while the permanent accounts are taken to the balance sheet, after all adjustments have been made.
A unit of a business that not only incurs costs but also generates revenues is called a: Group of answer choices Performance center. Profit center. Cost center. Responsibility center. Expense center.
Answer: Profit Center
Explanation:
A Profit Center in a business is defined as a unit or segment that incurs cost but generates revenue as well. It therefore expends company resources in other to make the company revenue and so is the embodiment of the quote, spend money to make money.
An example of a Profit Center in a business would be the Sales Department. Here money is spent on wages, telephone bills, transport costs etcetera. However, by incurring these costs to sell the products of the company, the department makes revenue as well.
Polly Smith, a supervisor at Kroger's, was recently evaluated by her subordinates. Their responses indicated that Polly uses Theory X assumptions when dealing with employees. For example, one of the comments indicated that she treats employees as if they:_______.
a. naturally like work.
b. will work toward goals they are committed to.
c. have little ambition.
d. have the potential to accomplish the organization's goals.
e. seek out and accept responsibility.
Answer:
c. have little ambition.
Explanation:
Theory X is a theory that refers to people's behavior at work and suggests that managers tend to think that people are not motivated and don't like to work, avoid responsibility, don't have ambition and because of that, they have to be rewarded or punished to complete their job. According to that, the answer is that for example, one of the comments indicated that she treats employees as if they have little ambition because theory X says that managers have a negative opinion of people.
The other options are not right because they all refer to theory Y in which managers tend to have a positive view of their workers and think that they like their work, are motivated and are willing to take responsibility.
The Western Capital Growth mutual fund has: Total assets$812,000,000Total liabilities$12,000,000Total number of shares 40,000,000 What is the fund's net asset value (NAV) per share?
Answer:
The fund's net asset value (NAV) per share is $20.
Explanation:
Net Asset Value (NAV) = (Assets - Liabilities) ÷ Number of Shares
= ($812,000,000 - $12,000,000) ÷ 40,000,000
= $20
Conclusion :
The fund's net asset value (NAV) per share is $20.
Ownership in a corporation:_______.
a. is difficult to transfer.
b. is more easily transferable than ownership in other forms of organization.
c. is transferred in much the same way as stock in a partnership.
d. noticeably affects the operation of the business.
Answer:
B
Explanation:
Ownership in a corporation is more easily transferable than ownership in other forms of organization.
A corporation is owned and managed by all the members of the corporation. Each of the members are regarded as shareholders and the amount of shares they own in the corporation is what determines the ownership, control, and profits of the corporation. The corporation is distinct from the owners.
The cost of equity is: Group of answer choices equal to the amount of asset turnover the weighted average cost of capital the interest associated with debt the rate of return required by investors to incentivize them to invest in a company
Answer:
the rate of return required by investors to incentivize them to invest in a company
Explanation:
In finance, the cost of equity is the Cost of Equity is the rate of return which an organization pays those that invested in equity. The organization uses cost of equity to check how attractive investments are.
It can be calculated by using the CAPM which is Capital Asset Pricing Model
Patty Corporation holds 75 percent of Slider Corporation's voting common stock, acquired at book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 25 percent of the book value of Slider Corporation. On December 31, 20X8, Slider Corporation acquired 25 percent of Janet Corporation's stock. Slider records dividends received from Janet as nonoperating income. In 20X9, Janet reported operating income of $100,000 and paid dividends of $40,000. During the same year, Slider reported operating income of $75,000 and paid $20,000 in dividends.
1) Based on the information provided, what amount will be reported as consolidated net income for 20X9 under the treasury stock method?
a. $150,000
b. $100,000
c. $75,000
d. $175,000
2) Based on the information provided, what amount will be reported as income assigned to the controlling interest for 20X9 under the treasury stock method?
a. $18,750
b. $156,250
c. $175,000
d. $100,000
Answer:
1) d. $175,000
2) b. $156,250
Explanation:
1. The computation of net income for 20X9 under the treasury stock method is shown below:-
Net income for 20X9 under the treasury stock method = Janet Operating income + Slider operating income
= $100,000 + $75,000
= $175,000
2. The computation of income assigned to the controlling interest for 20X9 is shown below:-
income assigned to the controlling interest for 20X9 = Janet Operating income + (Slider operating income × Remaining percentage)
= $100,000 + ($75,000 × 75%)
= $100,000 + $56,250
= $156,250
Therefore we have applied the above formulas.
Which of the following terms refers to the necessary stress that activates and motivates people to achieve goals and change their environments?
a. distress.
b. cognitive dissonance
c. general adaptation syndrome.
d. eustress.
e. emotional dissonance
Answer:
d. eustress
Explanation:
Eustress can be seen or refers to the stress which can be beneficial to the person or individual involved, and this stress can either be psychological or physical such as exercising ,which is why EUSTRESS can tend to be a positive response that a person or an individual has to a stressor and can depend on one's current feelings of control, desirability as well as timing of the stressor .
Therefore EUSTRESS help to produces positive feelings such as excitement, fulfillment, satisfaction that activates and motivates people to achieve goals and change their environments.
Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $12.00, excluding fixed costs. If 38,423 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?
Answer:
$115,269 decrease
Explanation:
Below are the following information given in the question.
Purchase price = $15
Variable cost per unit = $12
Fixed cost per unit = $10. i.e $22-$10
Production in units = 38,423
N.B. As in the above scenario, we will need to factor in the variable cost per unit only in order to determine whether it is convenient to make the part in house or purchase it. Also, we will have to ignore fixed costs because of the fact that it is constant in the option of whether to buy or make part in house.
Therefore,
Option at purchasing/Buying
= $38,423 × $15
= $576,345
Option at making the part in house
= $38,423 × $12
= $461,076
Cost difference is therefore = $115,269 decrease
Your firm has total sales of $22,980, costs of $14,715, and depreciation of $6,045. The tax rate is 34 percent. There are no interest expenses or other income. What is the operating cash flow?
Answer:
Thus, Operating cash flow for company is $7,510.20.
Explanation:
Total Sales = $22,980
Cost of goods sold = $14,715
Depreciation = $6,045
Profit before tax = Total Sales – Cost of goods sold – Depreciation
= $22,980 – $14,715 – $6,045
=$2,220
Profit before tax is $2,220
Tax rate = 34%
Net profit = profit before tax × (1 – 34%)
= $1,465.20
Net profit for company is $1,465.20.
Operating cash flow = Net profit + Depreciation
= $1,465.20 + $6,045
= $7,510.20
Thus, Operating cash flow for company is $7,510.20.
intext:"ABC Co. purchased merchandise on August 5 at a $1,000 invoice price with terms of 2/10,n/30 and paid for the merchandise on August 14. Determine its entry to record this purchase and the subsequent payment under both the gross method and the net method by matching the action on the left with the method on the right."
Answer:
August 5 : Purchase
Merchandise Inventory $1,000 (debit)
Accounts Payable $1,000 (credit)
August 14 : Payment
Accounts Payable $1,000 (debit)
Discount Received $20 (credit)
Cash $800 (credit)
Explanation:
When ABC Co purchased merchandise entries would be :
Merchandise Inventory $1,000 (debit)
Accounts Payable $1,000 (credit)
When ABC Co subsequently makes payment for the merchandise entries would be :
Note : Payment is made within the cash discount period of 15 days and ABC Co is eligible for the 2 % cash discount on the purchase. Payment is made net of the 2% cash discount.
Accounts Payable $1,000 (debit)
Discount Received $20 (credit)
Cash $800 (credit)
Carly Corporation issued $200,000 of 30-year, 8% bonds at 106 on January 1, 2016. Interest is payable semiannually on June 30th and December 31st. The straight-line method of amortization is to be used. After 11 years, what is the carrying value of the bonds?
Answer:
$207,600
Explanation:
The journal entry to record the issuance of the bonds:
January 1, 2016
Dr Cash 212,000
Cr Bonds payable 200,000
Cr Premium on bonds payable 12,000
Premium on bonds payable $12,000 / 60 semiannual coupons = $200 amortization per coupon payment
after 11 years, 22 coupons were paid 22 x $200 = $4,400
bonds carrying value after 11 years = $200,000 + $12,000 - $4,400 = $207,600
The Atlantic Company sells a product for $150 per unit. The variable cost is $60 per unit, and fixed costs are $270,000. What is the break-even point in sales units?_____________________________________ What is the break-even points in sales units if the company desires a target profit of $36,000?
Answer:
The break even units are 3000 units and when it desires the profit of $36000 then sales unit is 3400 units.
Explanation:
The selling price of a product (SP) = $150 per unit.
Variable cost (VC) = $60 per unit.
Fixed cost of the company = $270000
Break-even units can be calculated by dividing the fixed cost from the difference in selling price and variable cost.
Break even Units = (fixed cost) / ( SP – VC)
= 270000 / (150-60)
= 3000 units.
Break-even units when a company desires a profit of $36000.
Desired units for sales = (Fixed Cost + Profit)/ Contribution per unit
= (270,000 + 36,000) / (150 - 60)
= 3,400 units
Max Company uses 20,000 units of Part A in producing its products. A supplier offers to make Part A for $7. Max Company has relevant costs of $8 a unit to manufacture Part A. If there is excess capacity, the opportunity cost of not buying Part A from the supplier is:________
a) $20,000.
b) $0.
c) $160,000.
d) $140,000.
Answer:
$20,000
Explanation:
Max company makes use of 20,000 units of part A to manufacture its product
A supplier offers to produce part A for $7
Max company has relevant costs to $8 per unit to produce part A
Therefore, the opportunity cost of not buying part A from the supplier can be calculated as follows
Opportunity cost= 20,000 units of part A($8-$7)
= 20,000 units×$1
= 20,000×$1
= $20,000
Hence the opportunity cost of not buying part A from the supplier when there is excess capacity is $20,000
The_____ will solve for the expected return measured in an investor’s domestic currency for a foreign asset denominated its own currency.
Answer:
The Intertemporal Capital Asset Pricing Model (ICAPM)
Explanation:
The Intertemporal Capital Asset Pricing Model (ICAPM) is an useful way to calculate investor returns.
This method which involves predicting model allows an investor to measure their expected return in his own domestic currency. In a sense, It tells the investors the risk to profit gain of an investment.
A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now
Answer:
$ 930.20
Explanation:
We need to first of all determine the yield to maturity using excel rate function:
=rate(nper,pmt,-pv,fv)
nper is the number of annual coupons i.e 25
pmt is the annual coupon=face value*coupon rate=$1000*8.5%=$85
pv is the current market price of $925
fv is the face value of $1000
=rate(25,85,-925,1000)=9.28%
In 5 years time,the bond would have 20 years remaining to maturity, as a result, only 20 years coupon would be left to be paid.
The formula for bond price is excel pv function given below:
=-pv(rate,nper,pmt,fv)
=-pv(9.28% ,20,85,1000)=$ 930.20
Assume ExxonMobil's price dropped to $35 overnight. Given the dividend growth rate of ExxonMobil of 8.00% and the last annual dividend of $1.70, what is the implied required rate of return necessary to justify the new lower market price of $ 35? What is the implied required rate of return necessary to justify the new lower market price of $ 35?
Answer:
Re = 13.26%
Explanation:
we can use the dividend growth model:
P₀ = Div₁ / (Re - g)
P₀ = $35Div₁ = $1.70 x 1.08 = $1.836g = 8%Re = cost of equity or required rate of return = ?$35 = $1.836 / (Re - 0.08)
Re - 0.08 = $1.836 / $35 = 0.0526
Re = 0.0526 + 0.08 = 0.1326 = 13.26%
What is the present worth of an equal quarterly payment series of $2,000 for six years, if the interest rate is 8% per year, compounded quarterly?
Answer:
PV= $37,827.85
Explanation:
Giving the following information:
Cf= $2,000 quarterly
Number of periods= 4*6= 24
i= 0.08/4= 0.02
To calculate the present worth, first, we need to determine the future value using the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {2,000*[(1.02^24) - 1]} / 0.02
FV= $60,843.72
Now, the present value:
PV= FV/(1+i)^n
PV= 60,843.72/(1.02^24)
PV= $37,827.85
Adams Bautista needs $26,700 in 8 years. Click here to view factor tables
Required:
a. What amount must he invest today if his investment earns 12% compounded annually?
b. What amount must he invest today if his investment earns 12% compounded annually?
Answer:
a. $10,783.68
b. $10,510.36 semi annual compounding
Explanation:
a. This question requires the present value of $26,700 given 8 years and compounded annually at 12%.
Present Value = [tex]\frac{Future Value}{ ( 1 + interest)^{number of periods} }[/tex]
Present Value = [tex]\frac{26,700}{ 1.12^{8} }[/tex]
Present Value = $10,783.68
He would need to invest $10,783.68 today.
b. This is a duplicate of question 1 but I will solve it assuming semi-annual compounding just in case.
12% per annum would become = 12/2 = 6% per semi annum
Number of periods would become = 8 * 2 = 16 periods
Present Value = [tex]\frac{Future Value}{ ( 1 + interest)^{number of periods} }[/tex]
Present Value = [tex]\frac{26,700}{ 1.06^{16} }[/tex]
Present Value = $10,510.36
He would need to invest $10,510.36 today.
The value of Mike Jackson’s shares in the New Frontiers Technology Fund is $51,400. The management fee for this particular fund is 0.80 percent of the total asset value. Calculate the management fee Mike must pay this year. (Round your answer to 2 decimal places.)
Answer:
$411.2
Explanation:
The value of Mike Jackson's shares in the New frontiers technology fund is $51,400
The management fee is 0.80%
= 0.80/100
= 0.008
Therefore, the amount of management fee that Mike must pay this year can be calculated as follows
Management fee= Total amount of investment × management fee percent
= $51,400×0.008
= $411.2
Hence the management percent fee that Mike must pay this year is $411.2
The faculty member on my study abroad trip to Costa Rica has traveled there many times and is quite knowledgeable about the country and places we visited. She gave us guidance about the country, local culture, and safety issues while we were interning with the local farmers. The faculty member was using
A. Coercive power
B. Expert power
C. Referent power
D. Positional power
Answer:
B. Expert power
Explanation:
Based on the information provided regarding this scenario it can be said that the faculty member was using Expert Power. Expert Power is defined as the use of expert knowledge in order to get a subordinate to follow an instruction or order. Which in this specific scenario, the faculty members unique knowledge and experiences regarding Costa Rica allowed the other faculty members to look to him for guidance when dealing with topics revolving around Costa Rica.
When a multi-product plant is being operated at capacity, the products that should be emphasized are those that provide the highest contribution margin:_______.
a. ratio.
b. per sales dollar.
c. per unit of product.
d. per unit of the limited resource.
Answer: per unit of the limited resources.
Explanation:
When a multi-product plant is being operated at the full capacity, it is necessary for the manager that is in charge of the multi-product plant to select the products that provide the highest contribution margin per unit of the limited resources.
This is typically a short run decision and helps to know which product to emphasize.
Gabriele enterprises has bonds on the market making annual payments, with seven years to maturity, a par value of 1000, and selling for 962. At this price, this price, the bonds yield 6.6 percent.
What must the coupon rate be on the bonds?
Answer:
The answer is =5.91%
Explanation:
N(Number of periods) = 7 years
I/Y(Yield to maturity) = 6.6percent
PV(present value or market price) = $962
PMT( coupon payment) = ?
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 7; I/Y = 6.6; PV = -962; FV= $1,000; CPT PMT= $59.05
Therefore, the coupon rate of the bond is of the bond is $59.05/1000
=5.91%
You are pitching a marketing proposal to a company that sells electronic equipment. For a particular product line, their current sales price is $20 per unit, cost is $9 per unit and they have $20,000 in fixed costs associated with this line. Last year, they sold 8,200 units. You are proposing that the company implement your marketing plan which will cost $3,000 per year. You believe this will increase their sales units by 350 units. Calculate the contribution margin ratio at the projected levels, the projected change in operating income of your proposal and the projected ROI. Additionally, if the company requires a 12% return on its investments, calculate the maximum you could charge for your marketing plan.
Answer:
without marketing with marketing differential
plan plan amount
total sales 8,200 8,550 350
sales revenue $164,000 $171,000 $7,000
variable costs ($73,800) ($76,950) ($3,150)
contribution $90,200 $94,050 $3,850
margin
contribution 55% 55% -
margin ratio
fixed and ($20,000) ($23,000) ($3,000)
marketing costs
operating $70,200 $71,050 $850
income
The return on investment (ROI) from your marketing plan = $850 / $3,000 = 28.33%
If the required ROI is 12%, then you could charge = net increase in operating profits / (1 + required ROI) = $3,850 / 1.12 = $3,437.50
Arctic Cat sold Seneca Motor Sports a shipment of snowmobiles. The snowmobiles were delivered on January 1, 2021, and Arctic received a note from Seneca indicating that Seneca will pay Arctic $39,700 on a future date. Unless informed otherwise, assume that Arctic views the time value of money component of this arrangement to be significant and that the relevant interest rate is 8%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Assume the note indicates that Seneca is to pay Arctic the $39,700 due on the note on December 31, 2021. Prepare the journal entry for Arctic to record the sale on January 1, 2021. Assume the same facts as in requirement 1, and prepare the journal entry for Arctic to record collection of the payment on December 31, 2021. Assume instead that Seneca is to pay Arctic the $39,700 due on the note on December 31, 2022. Prepare the journal entry for Arctic to record the sale on January 1, 2021. Assume instead that Arctic does not view the time value of money component of this arrangement to be significant, and that the note indicates that Seneca is to pay Arctic the $39,700 due on the note on December 31, 2021. Prepare the journal entry for Arctic to record the sale on January 1, 2021.
Answer:
Assume the note indicates that Seneca is to pay Arctic the $39,700 due on the note on December 31, 2021. Prepare the journal entry for Arctic to record the sale on January 1, 2021.
Dr Notes receivable 39,700
Cr Sales revenue 36,759.26
Cr Discount on notes receivable 2,940.74
Discount on notes receivable is a contra asset account that decreases the net amount of notes receivable.
Assume the same facts as in requirement 1, and prepare the journal entry for Arctic to record collection of the payment on December 31, 2021.
Dr Cash 39,700
Cr Notes receivable 36,759.26
Cr Interest revenue 2,940.74
Assume instead that Seneca is to pay Arctic the $39,700 due on the note on December 31, 2022. Prepare the journal entry for Arctic to record the sale on January 1, 2021.
Dr Notes receivable 39,700
Cr Sales revenue 34,036.35
Cr Discount on notes receivable 5,663.65
Discount on notes receivable is a contra asset account that decreases the net amount of notes receivable.
Assume instead that Arctic does not view the time value of money component of this arrangement to be significant, and that the note indicates that Seneca is to pay Arctic the $39,700 due on the note on December 31, 2021. Prepare the journal entry for Arctic to record the sale on January 1, 2021.
Dr Notes receivable 33,900
Cr Sales revenue 33,900
Explanation:
Non interest bearing notes must be recorded at present value, so we need to determine the present value of the payment:
Payment due December 21, 2021, PV = $39,700 / (1 + 8%) = $36,759.26
Payment due December 21, 2022, PV = $39,700 / (1 + 8%)² = $34,036.35
We use the discount on notes receivable account (contra asset account) to decrease the net value of notes receivable.
P11-45. Statement of Cash Flows (Indirect Method). Artic Company’s income statement and comparative balance sheet follow. ARTIC COMPANY Income Statement For Year Ended December 31, 2019. Sales……………………………………………………………….. $728,000 Cost of goods sold $534,000 Wages expense 190,000 Advertising expense 31,000 Depreciation expense 22,000 Interest expense 18,000 Gain on sale of land (25,000) 770,000 Net loss $ (42,000) ARTIC COMPANY Balance Sheet December 31, 2019 December 31, 2018 Assets Cash……………………………………… 49,000 28,000 Accounts receivable …………. 42,000 50,000 Inventory ……………………………… 107,000 113,000 Prepaid advertising……………….. 10,000 13,000 Property, plant, equipment……. 360,000 222,000 Accumulated depreciation……... (78,000) (56,000) Total assts………………………………. 490,000 370,000 Liabilities and Stockholders’ Equity. Accounts payable……………………….. 17,000 31,000 Interest payable…………………………. 6,000 - Bonds payable……………………………. 200,000 - Common stock………………………….. 245,000 245,000 Retained earnings…………………….. 52,000 94,000 Treasury Sock……………………………. (30,000) - Total liabilities and equity…………. 490,000 370,000 During 2019, Artic sold land for $70,000 cash that had originally cost $45,000. Artic also purchased equipment for cash, acquired treasury stock for cash, and issued bonds payable for cash in 2019. Accounts payable relate to merchandise purchases. Required. a. Compute the change in cash that occurred during 2019 b. Prepare a 2019 statement of cash flows using the indirect method.
Answer and Explanation:
a. The computation of change in cash during 2019 is shown below:-
Change in cash = Cash balance on 31 Dec 2019 - Cash balance on 31 Dec 2018
= $49,000 - $28,000
= $21,000
b. The Preparation of statement of cash flows using the indirect method of 2019 is shown below:-
Artic Company’s
By using the direct method
For the year ended 2019
Particulars Amount
Cash flow from operating activities
Net income/loss ($42,000)
Adjustment to reconcile the net income
Depreciation expenses $22,000
Less: Gain on sales of land ($25,000)
Changes in current assets and current liabilities
Decrease in accounts receivable $8,000
($50,000 - $42,000)
Decrease in Inventory $6,000
($113,000 - $107,000)
Decrease in Prepaid advertising $3,000
($13,000 - $10,000)
Increase in Interest payable $6,000
Less: Decrease in accounts payable ($14,000) $6,000
($31,000 - $17,000)
Net cash provided by operating activities ($36,000)
Cash flow from investing activities
Cash received from sale of land $70,000
Cash paid for equipment ($183,000)
($360,000 - ($222,000 - $45,000)
Cash flow provided by investing activities ($113,000)
Cash flow from financing activities
Cash received from issue of bonds payable $200,000
Cash payment for Treasury stock ($30,000)
Net cash provided by financing activities $170,000
Net Increase (Decrease) in cash $21,000
Cash baalance on 21 Dec 2018 $28,000
Cash balance on 31 Dec 2019 $49,000
The computation of change in cash during 2019 is shown below:-
Change in cash = Cash balance on 31 Dec 2019 - Cash balance on 31 Dec 2018Change in cash = $49,000 - $28,000Change in cash = $21,000Answer B:The Preparation of statement of cash flows using the indirect method of 2019 is shown below:-
Artic Company’s
By using the direct method
For the year ended 2019
Particulars Amount
Cash flow from operating activitiesNet income/loss ($42,000)
Adjustment to reconcile the net income
Depreciation expenses $22,000
Less: Gain on sales of land ($25,000)
Changes in current assets and current liabilities
Decrease in accounts receivable $8,000
($50,000 - $42,000)
Decrease in Inventory $6,000
($113,000 - $107,000)
Decrease in Prepaid advertising $3,000
($13,000 - $10,000)
Increase in Interest payable $6,000
Less: Decrease in accounts payable ($14,000) $6,000
($31,000 - $17,000)
Net cash provided by operating activities ($36,000)
Cash flow from investing activitiesCash received from sale of land $70,000
Cash paid for equipment ($183,000)
($360,000 - ($222,000 - $45,000)
Cash flow provided by investing activities ($113,000)
Cash flow from financing activitiesCash received from issue of bonds payable $200,000
Cash payment for Treasury stock ($30,000)
Net cash provided by financing activities $170,000
Net Increase (Decrease) in cash $21,000
Cash balance on 21 Dec 2018 $28,000
Cash balance on 31 Dec 2019 $49,000
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Journalize the following transactions for the Scott company:
Nov 4. Received a $6,500, 90-day, 6% Note from Michael Tim's in payment of his account.
Dec 31. Accrued interest on the Tim's note.
Feb 2. Received the amount due from Tim's on his note.
Answer:
Journalize the following transactions for the Scott company:
Nov 4. Received a $6,500, 90-day, 6% Note from Michael Tim's in payment of his account.
Dr Notes receivable 6,500
Cr Accounts receivable 6,500
Dec 31. Accrued interest on the Tim's note.
Dr Interest receivable ($6,500 x 6% x 57/365) = 60.90
Cr Interest revenue 60.90
Feb 2. Received the amount due from Tim's on his note.
Dr Cash 6,596.16
Cr Notes receivable 6,500
Cr Interest receivable 60.90
Cr Interest revenue 35.26
I did all my calculation based on a 365 day calendar year. Generally banks calculate interest on a 360 day calendar year.
A June sales forecast projects that 5,000 units are going to be sold at a price of $11.00 per unit. The desired ending inventory of units is 15% higher than the beginning inventory of 600 units. Merchandise purchases for June are projected to include how many units
Answer:
Purchases= 5,090 units
Explanation:
Giving the following information:
A June sales forecast projects that 5,000 units are going to be sold.
The desired ending inventory of units is 15% higher than the beginning inventory of 600 units.
To calculate the merchandise purchase, we need to use the following formula:
Purchases= sales + desired ending inventory - beginning inventory
Purchases= 5,000 + 600*1.15 - 600
Purchases= 5,090 units