Answer:
1. $4,100
2a. Dr Income tax Expense $4,100
Cr Income tax payable $4,100
2b. Dr Income tax payable $33,926
Cr Cash $33,926
Explanation:
1. Calculation to Determine the amount of the accounting adjustment
Income tax payable for quarter 4 $33,926
Less: Unadjusted balance in Income tax payable account $29,826
Accounting adjustment to be done as on Dec 31 $4,100
2a. Preparation of journal entries to record December 31
Adjustment to the Income as on Dec 31
Dr Income tax Expense $4,100
Cr Income tax payable $4,100
2b. Preparation of the Journal entry to record later January 20 payment of the fourth-quarter taxes.
January 20 payment of the fourth-quarter taxes.
Dr Income tax payable $33,926
Cr Cash $33,926
Consider the following independent situations at December 31:
a. On October 1, a business collected $3,000 rent in advance, debiting Cash and crediting Unearned Revenue. The tenant was paying one year's rent in advance. On December 31, the business must account for the amount of rent it has earned.
b. Salaries expense is $1,800 per day-Monday through Friday-and the business pays employees each Friday. This year, December 31 falls on a Thursday.
c. The unadjusted balance of the Office Supplies account is $3,000. Office supplies on hand total $1,900.
d. Equipment depreciation was $500.
e. On April 1, when the business prepaid $4,320 for a two-year insurance policy, the business debited Prepaid Insurance and credited Cash.
Journalize the adjusting entry needed on December 31 for each situation. Use the letters to label the journal entries.
Answer:
All the entries are made on December 31.
a.
Unearned Rent Revenue 750 Dr
Rent Revenue 750 Cr
b.
Salaries expense 7200 Dr
Salaries Payable 7200 Cr
c.
Supplies expense 1100 Dr
Supplies 1100 Cr
d.
Depreciation expense-Equipment 500 Dr
Accumulated depreciation-Equipment 500 Cr
e.
Insurance expense 1620 Dr
Prepaid Insurance 1620 Cr
Explanation:
a.
The rent received in advance is for one year. On December 31 the 3 months of rent becomes earned. So, we debit the unearned rent revenue account and credit the rent revenue.
b.
The salaries expense per day is $1800 and as the 31 December is a thursday, the salary for 4 days becomes an expense which is still not paid as salaries are paid on friday. So we debit the salaries expense by 1800 * 4 = 7200 and credit the salaries payable by the same amount.
c.
The supplies of 1100 (3000 - 1900) have been consumed and the supplies expense will be recorded for 1100 and the supplies account will be reduced by 1100.
d.
The depreciation on equipment is recorded.
e.
The insurance paid in advance in April of the current year is for 2 years or 24 months. The per month insurance expense is 4320 / 24 = 180
Till 31 December, the 9 months of insurance policy has been consumed and should be recorded as an expense and a reduction in the prepaid asset.
The amount is = 180 * 9 = 1620
Answer: the unadjusted balance of the office supplies account is $3,000 office supplies on hand total
Explanation:
Cost of Goods Sold, Cost of Goods Manufactured
Glenville Company has the following information for April:
Cost of direct materials used in production $52,000
Direct labor 67,000
Factory overhead 21,000
Work in process inventory, April 1 38,000
Work in process inventory, April 30 48,000
Finished goods inventory, April 1 22,000
Finished goods inventory, April 30 17,000
Required:
a. For April, determine the cost of goods manufactured.
b. For April, determine the cost of goods sold.
Answer:
cost of goods manufactured= $130,000
COGS= $135,000
Explanation:
To calculate the cost of goods manufactured, we need to use the following formula:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
cost of goods manufactured= 38,000 + 52,000 + 67,000 + 21,000 - 48,000
cost of goods manufactured= $130,000
Now, we can determine the cost of goods manufactured:
COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory
COGS= 22,000 + 130,000 - 17,000
COGS= $135,000
Star Repairs Co. does all the repair work for a medium-sized manufacturer of handheld computer games. The games are sent directly to Star, and after the games are repaired, Star bills the game manufacturer for cost plus a 20 percent markup. In the month of February, purchases of parts (replacement parts) by Star amounted to $97,000, the beginning inventory of parts was $38,500, and the ending inventory of parts was $15,250. Payments to repair technicians during the month of February totaled $52,500. Overhead incurred was $121,000. a. What was the cost of materials used for repair work during the month of February
Answer:
The correct answer is "$120,250".
Explanation:
The given values are:
Opening inventory
= $38,500
Closing inventory
= $15,250
Purchases
= $97,000
Now,
The cost of materials used during the month of February will be:
= Opening Inventory + Purchases - Closing Inventory
On putting the estimated values in the above formula, we get
= [tex]38,500+97,000-15,250[/tex]
= [tex]120,250[/tex] ($)
Based on what we have learned about shortages and surpluses in a market, which one do you think is more harmful to the overall economy: a shortage or a surplus of a good? Provide a detailed explanation to demonstrate your thinking.
Answer:
A surplus of a good
Explanation:
Although we think that having a lot of something sounds like a good idea that is not always the case. Sometimes its better to have less of an item but therefore sell it for. For example when there was a shortage of hand sanitzer, masks and toilet paper people bought more of it for a higher price because they were afraid not to have enough. A surplus can take up a lot of storage and use up a lot of money. For example if a car manafacturer has a surplus of cars they are just sittinng there taking up space in a lot that needs to be payed for and mantained. I find it is especially bad if there are lot of that item and people are not interested in purchasing it. The company would be losing money because they would be most likely selling it at a lower price. Therefore the economy would be losing money while during a shortage they would be gaining money.
Liquidity risk would be greatest for an investor whose portfolio was primarily composed of A) ADRs listed on the NYSE B) municipal bond UITs C) Nasdaq stocks D) municipal bonds
Answer: D) municipal bonds
Explanation:
Liquidity risk is the risk that an instrument or security can not be easily sold such that actual hard currency can be recuperated.
ADRs on the NYSE can be easily sold and so can NASDAQ stocks. Municipal bond Unit Investment Trust (UITs) can be redeemed in a non-complicated manner so are liquid as well.
Municipal bonds will prove to be the least liquid as the market for municipal bonds is not a heavily traded one.
WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows: Product X Product Y Product Z Units produced 1,800 2,300 3,300 Per unit sales value at split-off $ 16.00 $ 19.00 $ 18.00 Added processing costs per unit $ 3.00 $ 5.00 $ 5.00 Per unit sales value if processed further $ 20.00 $ 20.00 $ 25.00 The cost of the joint raw material input is $71,000. Which of the products should be processed beyond the split-off point
Answer:
Product X and Product Z should be processed beyond the split-off point because their Profits beyond split-off point are greater than Profits at split-off point.
Explanation:
Note: The data in this question are merged together. They are therefore sorted before answering the question. See the attached pdf file for the complete question with the sorted data.
The explanation to the answer is now given as follows:
Also note: See the attached excel file for the calculation of the Profit at split-off point and profit Profit beyond split-off point.
In the attached excel file, the share cost of joint raw material input is calculated as follows:
Units produced of Product X = 1,800
Units produced of Product Y = 2,300
Units produced of Product Z = 3,300
Total units = Units produced of Product X + Units produced of Product Y + Units produced of Product Z = 1,800 + 2,300 + 3,300 = 7,400
Share of cos joint raw material input = (Units of a Product / Total unit) * Cost of the joint raw material input …. (1)
Using equation (1), we have:
Product X share of cost of joint raw material input = (1,800 / 7,400) * $71,000 = $17,270
Product Y share of cost of joint raw material input = (2,300 / 7,400) * $71,000 = $22,068
Product Z share of cost of joint raw material input = (3,300 / 7,400) * $71,000 = $31,662
Decision Rule:
A product should be processed beyond the split-off point if its Profit beyond split-off point is greater than Profit at split-off point.
From the attached excel file, only Product X and Product Z meet this requirement as determined as follows:
For Product X
Profit at split-off point = $11,530
Profit beyond the split-off point = $13,330
Since Profit beyond split-off point is greater than Profit at split-off point, Product X should be processed beyond the split-off point.
For Product Y
Profit at split-off point = $21,632
Profit beyond the split-off point = $12,432
Since Profit beyond split-off point is less than Profit at split-off point, Product X should NOT be processed beyond the split-off point.
For Product Z
Profit at split-off point = $27,738
Profit beyond the split-off point = $34,338
Since Profit beyond split-off point is greater than Profit at split-off point, Product Z should be processed beyond the split-off point.
Based on the analysis above, only Product X and Product Z should be processed beyond the split-off point since their Profits beyond split-off point are greater than Profits at split-off point.
During April, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Of these transferred units, 60,000 were in process in the production department at the beginning of April and 240,000 were started and completed in April. April's beginning inventory units were 60% complete with respect to materials and 40% complete with respect to conversion. At the end of April, 82,000 additional units were in process in the production department and were 80% complete with respect to materials and 30% complete with respect to conversion.Compute the number of units transferred to finished goods.
Answer: $320,000
Explanation:
Number of Units transferred to Finished Goods = Beginning Work in Process in April + Units started and Completed in April
= 60,000 + 240,000
= $320,000
Home Inspirations Mary works for her father in a family-owned business called Home Inspirations, a bedding company that has been in operation since the 1800s. When her father retires, Mary plans on taking over the business. Mary is aware of many things about the company that she likes, and a few things that she does not. She has particularly noted that when the economy has low unemployment and high total income, sales are great. However, any other time, sales are not so good. Currently, all of the bedding items are created in one place and everyone works on various tasks every day. Mary is thinking about streamlining the production process so that individuals would be responsible for only one task. She believes that if production would increase, she could sell her products at a lower price and increase revenue. She knows that most bedding products available in the market are very similar in nature and satisfy the same need. However, if she were able to lower prices, this might give her company the competitive advantage that it needs. She would then be able to invest money in differentiating her products by providing unique features, building the brand name, and offering services such as free delivery. She is also considering selling her products on the Internet. Mary knows that her father does not like change very much, but she feels these changes are important for the future of the company.
Refer to Home Inspirations.Mary noticed that when sales were up,the economy was in a
A) depression.
B) peak period.
C) grace period.
D) recession.
E) stagnant mode.
Answer:
Option B (peak period) is the correct choice.
Explanation:
The time throughout the day as well as a period where this production is at its peak for items and/or services. A peak seems to be the tallest structure of such a global economy between some of the completion of economic growth as well as the beginning of a recession. Hailey found that perhaps the economy must have been at a peak time although profits were up.The remaining four options are not aligned with the situation in question. So, the solution above is the right one.
Compute, Disaggregate, and Interpret RNOA of CompetitorsHalliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements.$ millions HAL SLBTotal revenue $23,995 $32,815Pretax net nonoperating expense 653 426Net income 1,657 2,177Average operating assets 23,361 67,836Average operating liabilities 5,888 16,499Marginal tax rate 22% 19%Return on equity 18.56% 5.86%a. Compute return on net operating assets (RNOA) for each company.b. Disaggregate RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for each company.Do not round until your final answer. Round answers to two decimal places (percentage example: 0.12345 = 12.35%). HAL SLBRNOA Answer AnswerNOPM Answer AnswerNOAT Answer Answer
Answer:
a. Return on net operating assets (RNOA) = Net Operating Income after tax / Average Net Operating Assets
Net Operating Income after Tax HAL SLB
Net Income (before tax) 2,124 2,688
Add : Pre tax net non operating Expense 653 426
Net Operating Income before Tax 2,777 3,114
Marginal Tax Rate 22% 19%
Less Tax Expense -611 -592
Net Operating Income after tax 2,166 2,522
Net Income before tax = (Net Income (after tax)*1/(1 -Tax Rate)
Hal = 1,657 * 1/(1 - 22%)
= $2,124
SLB = 2,177 1/(1 - 22%)
= $2,688
HAL SLB
Average Operating Assets 23,361 67,836
Average Operating Liability 5,888 16,499
Average Net Operating Assets 17,473 51,337
Return on net operating assets (RNOA) 12.40% 4.91%B. Net Operating Profit Margin = Net Operating Profits after tax/ Total Revenue
HAL SLB
Net Operating Income after tax 2,166 2,522
Total Revenue 23,995 32,815
Net Operating Profit Margin 9.03% 7.69%Net Operating Asset Turnover = Total Revenue/ Average Net Operating Assets
HAL SLB
Total Revenue 23,995 32,815
Average Net Operating Assets 17,473 51,337
Net Operating Asset Turnover 1.37 times 0.64 timesAllison and Leslie, who are twins, just received $10,000 each for their 25th birthdays. They both have aspirations to become millionaires. Each plans to make a $5000 annual contribution to her "early retirement fund" on her birthday, beginning a year from today. Allison opened an account with the Safety First Bond Fund, a mutual fund that invests in high quality bonds whose investors have earned 8% per year in the past. Leslie invested in the New-Issue Bio Tech Fund, which invests in small, newly issued bio-tech stocks and whose investors have earned an average of 13% per year in the fund’s relatively short history.
a. If the two women’s funds earn the same returns in the future as in the past, how old will each be when she becomes a millionaire?
b. How large would Allison’s annual contributions have to be for her to become a millionaire at the same age as Leslie, assuming that their expected returns are realized?
Answer:
a. If the two women’s funds earn the same returns in the future as in the past, how old will each be when she becomes a millionaire?
Allison:
1,000,000 = 5,000 x [(1 + i)ⁿ - 1 ] / i
200 = [(1 + 8%)ⁿ - 1 ] / 8%
16 = 1.08ⁿ - 1
17 = 1.08ⁿ
n = log 17 / log 1.08 = 1.230448921 / 0.033423755 = 36.81 years
Leslie:
1,000,000 = 5,000 x [(1 + i)ⁿ - 1 ] / i
200 = [(1 + 13%)ⁿ - 1 ] / 13%
26 = 1.13ⁿ - 1
27 = 1.13ⁿ
n = log 27 / log 1.13 = 1.43133764 / 0.053078443 = 26.97 years
b. How large would Allison’s annual contributions have to be for her to become a millionaire at the same age as Leslie, assuming that their expected returns are realized?
1,000,000 = payment x [(1 + i)ⁿ - 1 ] / i
1,000,000 = payment x [(1 + 8%)²⁶°⁹⁷ - 1 ] / 8%
80,000 = payment x [1.08²⁶°⁹⁷ - 1 ]
80,000 = payment x 6.969639658
payment = 80,000 / 6.969639658 = $11,478.36
On January 1, 2020, Pearl Company sold 11% bonds having a maturity value of $400,000 for $415,163, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Pearl Company allocates interest and unamortized discount or premium on the effective-interest basis.
A. Prepare a schedule of interest expense and bond amortization for 2020-2022.
Date Account Titles and Explanation Debit Credit
January 1, 2020 Cash 518,953
Bonds Payable 500,000
Premium on Bonds Payable 18953
B. Prepare the journal entry to record the interest payment and the amortization for 2020.
Schedule of Interest Expense and Bond Premium Amortization
Effective-Interest Method
Date Cash Interest Premium Carrying Amount
Paid Expense Amortized of Bonds
1/1/20
12/31/20 55000
12/31/21 55000
12/31/22 55000
C. Prepare the journal entry to record the interest payment and the amortization for 2022.
Date Account Titles and Explanation Debit Credit
December, 31 51895
Premium on Bonds Payable
Cash
Answer:
I will start with B and C)
The journal entry to record bond issuance:
January 1, 2020, bonds issued at a premium
Dr Cash 415,163
Cr Bonds payable 400,000
Cr premium on bonds payable 15,163
December 31, 2020, first coupon payment
Dr Interest expense 41,616.30
Dr Premium on bonds payable 2,383.70
Cr Cash 44,000
amortization of bond premium = (415,163 x 10%) - 44,000 = 2,383.70
December 31, 2021, second coupon payment
Dr Interest expense 41,277.93
Dr Premium on bonds payable 2,722.07
Cr Cash 44,000
amortization of bond premium = (412,779.30 x 10%) - 44,000 = 2,722.07
December 31, 2023, third coupon payment
Dr Interest expense 41,005.72
Dr Premium on bonds payable 2,994.28
Cr Cash 44,000
amortization of bond premium = (410,057.23 x 10%) - 44,000 = 2,994.28
A) I used an excel spreadsheet to prepare the amortization schedule
Financial Management 317
Financial Statements
Bombay Energy recently reported (in million USD) $12,500 of Sales, $9,500 of Operating Costs other than Depreciation, and $925 of Depreciation. The company had $3,900 of outstanding bonds that carry a 6% Interest Rate, and its Federal-plus-State Income Tax Rate was 37%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to make $1,500 of Capital Expenditures on new fixed assets and to invest $450 in Net Operating Working Capital. Calculate Bombay's Net Income and Free Cash Flow.
2. Tangent Corporation, recently reported the following information:
• Net Income - $756,000
• Tax Rate -37% Interest Expense - $300,000
• Total Investor Supplied Capital - $10.5 million
• Weighted Average Cost of Capital -10%
What is the company's EVA?
Answer:
Bombay Energy and Tangent Corporation
1. Bombay Energy
a) Net Income:
Sales $12,500
Operating Costs $9,500
Gross profit $3,000
Depreciation $925
EBIT $2,075
Interest Expense $234
EBT $1,841
Taxes (37%) (681)
Net Income $1,160
b) Free Cash Flow:
= $283
2. Tangent Corporation
a) EVA:
= -$762,720
Explanation:
a) Bombay Data:
Sales $12,500
Operating Costs $9,500
Depreciation $925
Outstanding bonds = $3,900
Interest Rate on bonds = 6%
Interest expense = $234 ($3,900 * 6%)
Federal and State Income Tax Rate = 37%
Capital expenditures = $1,500
Net Operating Working Capital investment = $450
b) Bombay' Free Cash Flow equals its earnings before interest and taxes multiplied by (1 − tax rate), add depreciation and amortization, and then subtract changes in working capital and capital expenditure.
EBIT $2,075 (1 - 37%)
Depreciation 925
Capital expenditure (1,500)
Net working capital (450)
Free Cash Flow $283
= $1,307 + 925 - ($1,500 + 450)
= $283
c) Tangent Data:
Net Income - $756,000
Interest Expense - $300,000
Income before tax $456,000
Tax Rate -37% (168,720)
NOPAT $287,280
Total Investor Supplied Capital - $10.5 million
Weighted Average Cost of Capital -10%
The formula for calculating EVA is:
EVA = NOPAT - (Invested Capital * WACC)
Where:
NOPAT = Net operating profit after taxes
Invested capital = Debt + capital leases + shareholders' equity
WACC = Weighted average cost of capital
= $287,280 - ($10,500,000 * 10%)
= $287,280 - 1,050,000
= -$762,720
Pro forma balance sheet Peabody & Peabody has 2019 sales of $10 million. It wishes to analyze expected performance and financing needs for 2021, which is 2 years ahead. Given the following information, respond to parts a and b.
1. The percent of sales for items that vary directly with sales are as follows: Accounts receivable, 12% Inventory, 18% Accounts payable, 14% Net profit margin, 3%
2. Marketable securities and other current liabilities are expected to remain unchanged.
3. A minimum cash balance of $480,000 is desired.
4. A new machine costing $650,000 will be acquired in 2020, and equipment costing $850,000 will be purchased in 2017. Total depreciation in 2017 is forecast as $290,000, and in 2017 $390,000 of depreciation will be taken.
5. Accruals are expected to rise to $500,000 by the end of 2017.
6. No sale or retirement of long-term debt is expected.
7. No sale or repurchase of common stock is expected.
8. The dividend payout of 50% of net profits is expected to continue.
9. Sales are expected to be $11 million in 2017 and $12 million in 2017.
10. The December 31, 2017, balance sheet follows
Peabody & Peabody Balance Sheet December 31, 2017 ($000)
Assets:
Cash 400
Marketable securities 200
Accounts receivable 1200
Inventories 1800
Total current assets 3600
Net fixed assets 4000
Total assets 7600
Liabilities and Stockholders equity:
Accounts payable 1400
Accruals 400
Other current liabilities 80
Total current liabilities 1880
Long-term debt 2000
Total liabilities 3880
Common equity 3720
Total liabilities and stockholders’ equity $7,600
Required:
a. Prepare a pro forma balance sheet dated December 31, 2017.
b. Discuss the financing changes suggested by the statement prepared in part a.
Answer:
Peabody & Peabody
a. Peabody & Peabody
Pro Forma Balance Sheet
December 31, 2021 ($000)
Cash 480
Marketable securities 200
Accounts receivable 1,440
Inventories 2,160
Total current assets 4,280
Net fixed assets 4,820
Total assets 9,100
Liabilities and Stockholders equity:
Accounts payable 1,680
Accruals 500
Other current liabilities 80
Total current liabilities 2,260
Long-term debt 2,000
Total liabilities 4,260
Common equity 3,900
Total liabilities and stockholders’ equity $8,160
Required Finance 940
b. From the statement prepared in part a, it is clear that Peabody & Peabody requires new financing of $940,000 for 2020 to meet the projected assets base.
Explanation:
a) Data and Calculations:
2019 Sales = $10 million
Pro Forma Balance Sheet
December 31, 2017 ($000)
Assets:
Cash 400
Marketable securities 200
Accounts receivable 1,200
Inventories 1,800
Total current assets 3,600
Net fixed assets 4,000
Total assets 7,600
Liabilities and Stockholders equity:
Accounts payable 1,400
Accruals 400
Other current liabilities 80
Total current liabilities 1,880
Long-term debt 2,000
Total liabilities 3,880
Common equity 3,720
Total liabilities and stockholders’ equity $7,600
Purpose: To analyze expected performance and financing needs for 2021.
1. Percent of Sales ($12 million)
Accounts receivable, 12% $1,440
Inventory, 18% $2,160
Accounts payable, 14% $1,680
Net profit margin, 3% $360
2. Market securities $200
3. Cash balance (desired minimum) $480
4. Net fixed assets 4,000
New equipment in 2020 650
Depreciation, 2020 (290)
New equipment in 2021 850
Depreciation, 2021 (390)
Net fixed assets $4,820
5. Accruals $500
8. Dividend payout = 50% of $360 = $180
Retained Earnings (current) = $180
Common Equity:
2019 3,720
Income 180 (Retained Earnings)
2020 3,900
Splish Corporation had income from continuing operations of $10,703,000 in 2020. During 2020, it disposed of its restaurant division at an after-tax loss of $205,000. Prior to disposal, the division operated at a loss of $322,000 (net of tax) in 2020 (assume that the disposal of the restaurant division meets the criteria for recognition as a discontinued operation). Splish had 10,000,000 shares of common stock outstanding during 2020. Prepare a partial income statement for Splish beginning with income from continuing operations. (Round earnings per share to 2 decimal places, e.g. 1.48.)
Answer and Explanation:
The Preparation of partial income statement for Splish is shown below:-
Splish Corporation
Partial income statement
For the year 2020
Particulars Amount
Income from operations $10,703,000
Less:
Discontinued operations:
Loss from operations $322,000
Loss from disposal $205,000 $527,000
Net income $10,176,000
Earnings per share:
Income from continuing
operations 1.07
($10,703,000 ÷ 10,000,000)
Less:
Discontinued operations, net of tax 0.05
($527,000 ÷ 10,000,000)
Net income 1.02
($10,176,000 ÷ 10,000,000)
The following information pertains to Blue Flower Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.
Assets:
Cash and short-term investments $45,000
Accounts receivable (net) 30,000
Inventory 25,000
Property, plant and equipment 210,000
Total Assets $310,000
Liabilities and Stockholders' Equity Current liabilities $60,000
Long-term liabilities 95,000
Stockholders' equity—common 155,000
Total Liabilities and Stockholders' Equity $310,000
Income Statement
Sales revenue $121,000
Cost of goods sold 66,000
Gross margin 55,000
Operating expenses 30,000
Net income $25,000
Number of shares of common stock 6,000
Market price of common stock $20
Dividends per share on common stock 0.50
Cash provided by operations $40,000
What is the current ratio for this company?
a. 1.25
b. 1.50
c. 0.67
d. 1.00
Answer:
Blue Flower Company
Current Ratio = Current Assets/Current Liabilities
= $100,000/$60,000
= 1.67 : 1
This ratio implies that Blue Flower Company can pay its current or short-term liabilities 1.67 times, using its current assets, made up of cash, receivables, and inventory, including short-term investments.
Explanation:
a) Data and Calculation:
Cash and short-term investments $45,000
Accounts receivable (net) 30,000
Inventory 25,000
Total current assets $100,000
Current liabilities = $60,000
b) Blue Flower's Current Ratio is a financial measure of the company's ability to settle maturing current liabilities (obligations) with its current assets without resorting to sale of long-term assets.
At the beginning of 2013, the Harding Construction Company received a contract to build an office building for $10 million. Harding will construct the building according to specifications provided by the buyer, and the project is estimated to take three years to complete. According to the contract, Harding will bill the buyer in installments over the construction period according to a prearranged schedule. Information related to the contract is as follows:
2013 2014 2015
Cost incurred during the year $2,300,000 $3,600,000 $2,100,000
Estimated costs to complete 5,300,000 2,000,000 0
Billings during the year 1,700,000 4,000,000 4,300,000
Cash collections during the year 1,600,000 3,600,000 4,300,000
Calculate the following:
Gross profit : Percentage of completion Completed contract
recognized Method Method
2013
2014
2015
Total gross profit:
Answer:
gross profit percentage of completion method:
2013: 726,300
2014: 841,700
2015: 432,000
completed contract
we recognize the profit at the end:
2013: zero
2014: zero
2015: 2,000,000
Explanation:
percentage of completion
2013:
we incurred 2,300,000
over a total cost of 2,300,000 + 5,300,000 = 7,600,000
the percentage complete will be:
2,300,000 / 7,600,000 = 30.263% percentage of completion
we multiply this be the revenue:
$10,000,000 x 30,263% = $3,026,300
less 2,300,000 cost
gross profit: 726,300 dollars
2014:
we incurred 3,600,000
so far we have cost for 2,300,000 + 3,600,000 = 5,900,000
for a total cost of 7,900,000
5,900,000 / 7,900,000 = 74.68% percentage of completion
we multiply this but, subtract previous revenue recognized:
10,000,000 x (74.68% - 30,263%) = 4,441,700 revenue
less 3,600,000 cost: 841,700 gross profit
2015:
we complete the project so we recognize the rest of the revenue.
10,000,000 x (100% - 74.68%) = 2,532,000
cost of the year 2,100,000
gross profit: 432,000
completed contract:
10,000,000 contract value less cost:
2013 2,300,000
2014 3,600,000
2015 2,100,000
total 8,000,000
gross profit 2,000,000
Baab Corporation is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year:
Beginning Balance Ending Balance
Raw materials $14,350 $22,350
Work in process $27,350 $9,350
Finished Goods $62,350 $77,350
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 33,350 machine-hours and incur $256,795 in manufacturing overhead cost. The following transactions were recorded for the year: Raw materials were purchased, $315,350. Raw materials were requisitioned for use in production, $307,350 ($280,650 direct and $26,700 indirect). The following employee costs were incurred: direct labor, $377,350; indirect labor, $96,350; and administrative salaries, $172,350. Selling costs, $147,350. Factory utility costs, $10,350. Depreciation for the year was $148,000 of which $131,000 is related to factory operations and $17,000 is related to selling, general, and administrative activities. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,070 machine-hours. Sales for the year totaled $1,267,000.
Required:
a. Prepare a schedule of cost of goods manufactured.
b. Was the overhead underapplied or overapplied? By how much?
c. Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold.
Answer:
A. $938,339
B. $2,061 Underapplied
C. $4,900
Explanation:
a. Preparation of a schedule of cost of goods manufactured.
Baab Corporation
Schedule of Cost of Goods Manufactured
DIRECT MATERIAL
Opening 14,350
Add Purchased 315,350
Total Raw Material Available 329,700
Less: Closing Raw Material (22,350)
Less: Indirect Raw Material used in Production (26,700)
Raw Material used in production (A) 280,650
DIRECT LABOR (B) 377,350
FACTORY OVERHEAD APPLIED
($7.7*34070) (C ) 262,339
TOTAL MANUFACTURING COSTS (A+B+C) 920,339 (280,650+377,350+262,339)
Add Opening Work in Progress 27,350
Less: Closing Work in Progress (9,350)
Cost of goods manufactured 938,339
Calculation for Factory Overhead Recovery Rate using this formula
Factory Overhead Recovery Rate = Budgeted Factory Overhead/Machine Hours
Let plug in the formula
Factory Overhead Recovery Rate=256,795/33,350
Factory Overhead Recovery Rate= $ 7.70
2. Calculation for the overhead underapplied or overapplied
First step is to compute for Total Manufacturing Overhead
Computation of Manufacturing Overhead Incurred
Indirect Material 26,700
Indirect Labour 96,350
Factory Utilities Cost 10,350
Depreciation 131,000
Total Manufacturing Overhead 264,400
Second step is to Compute for Manufacturing Overhead Under or Over applied using this formula
Let plug in the formula
Manufacturing Overhead Under or Over applied = Actual Manufacturing Overhead Incurred - Manufacturing Overhead applied
Manufacturing Overhead Under or Over applied= 264,400 - 262,339
Manufacturing Overhead Under or Over applied= $2,061 Underapplied
3. Preparation of an income statement for the year.
Baab Corporation Income Statement
Sales 1,267,000
Add: Closing Finised Goods 77,350
Less: Opening Finished Goods (62,350)
Less: Selling & Administrative Expense:
Administrative Salaries 172,350
Depreciation relating to the selling, general & administrative activities 17,000
Selling Costs 147,350
Total Selling & Administrative Expense(336,700)
Less: Underapplied Overheads (2,061)
Less: Cost of Goods Manufactured (938,339 )
Profit/Loss $4,900
Journal Entries, T-Accounts
Ehrling Brothers Company makes jobs to customer order. During the month of July, the following occurred: Materials were purchased on account for $45,760. Materials totaling $40,880 were requisitioned for use in producing various jobs. Direct labor payroll for the month was $19,200 with an average wage of $12 per hour. Actual overhead of $8,860 was incurred and paid in cash. Manufacturing overhead is charged to production at the rate of $5.40 per direct labor hour. Completed jobs costing $59,000 were transferred to Finished Goods. Jobs costing $58,000 were sold on account for $ 73,750. Make the entry to record the revenue from the sale first, followed by the entry to record the cost of the jobs. Beginning balances as of July 1 were:
Materials Inventory $1,200
Work-in-Process Inventory 3,400
Finished Goods Inventory 2,640
Required:
1. Prepare the journal entries for the preceding events.
a.
b.
c.
d.
e.
f.
g (1).
g (2).
2. Calculate the ending balances of:
a. Materials Inventory $
b. Work-in-Process Inventory $
c. Overhead Control $
d. Finished Goods Inventory $
Answer:
1. Journal Entries
S/n Account Title Debit Credit
a Raw materials inventory $45,760
Accounts payable $45,760
b Work in process inventory $40,880
Raw materials inventory $40,980
c Work in process inventory $19,200
Wages payable $19,200
d Manufacturing overhead $8,860
Cash $8,860
e Work in process inventory $7,406
(19,200 /14*5.40)
Manufacturing overhead $7,406
f Finished goods inventory $59,000
Work in process inventory $59,000
g1) Accounts receivable $73,750
Sales $73,750
g2) Cost of goods sold $58,000
Finished goods inventory $58,000
2. Ending balances
a. Materials Inventory = $ 1,200 + 45,760 - $40,880 = $6,080
b. Work-in-Process Inventory = $ 3,400 + $40,880 + $19,200 + $7,406 - $59,000 = $11,886
c. Overhead Control = $ 8,860 - $7,406 = $1,454
d. Finished Goods Inventory = $2,640 + $59,000 - $58,000 = $3,640
On June 30, 2012, Oriole Company issued 12% bonds with a par value of $770,000 due in 20 years. They were issued at 98 and were callable at 103 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on June 30, 2021, and to issue new bonds. New 10% bonds were sold in the amount of $1,000,000 at 102; they mature in 20 years. Oriole Company uses straight-line amortization. Interest payment dates are December 31 and June 30.Instructions:
a. Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021.
b. Prepare the entry required on December 31, 2021, to record the payment of the first 6 months' interest and the amortization of premium on the bonds.
Answer:
A. OLD BOND REDEMPTION :
June 30, 2021
Dr 12% Bonds payable 770,000
Dr Loss on retirement of bonds 31,570
Cr Cash 793,100
Cr Discount on bonds 8,470
NEW BOND ISSUE:
June 30, 2021
Dr Cash 1,020,000
Cr 10% Bonds payable 1,000,000
Cr Premium on bonds 20,000
B. Dec 31, 2021
Dr Interest expense 49,500
Dr Premium on bonds payable 500
Cr Cash 50,000
Explanation:
a. Preparation of the journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021.
OLD BOND REDEMPTION :
June 30, 2021
Dr 12% Bonds payable 770,000
Dr Loss on retirement of bonds 31,570
Cr Cash 793,100
(103*770,000)
Cr Discount on bonds 8,470
(To record redemption of old bonds)
NEW BOND ISSUE:
June 30, 2021
Dr Cash 1,020,000
(1,000,000 * 102/100)
Cr 10% Bonds payable 1,000,000
(1,000,000 * 100/100)
Cr Premium on bonds 20,000
(1,000,000 * 2/100)
(To record issue of new bonds at premium)
CALCULATION for unamortized discount :
Discount at the time of issue 15,400
(2%*770,000)
Less: Discount amortised till june 30, 2021 (15,400 / 40 * 18) (6,930)
Unamortized discount 8,470
We made use of 18 because the interest was been given twice in a year which is December 31 and June 30
CALCULATION for loss on redemption :
Redemption of bonds 793,100
(103*770,000)
Less: Carrying value (761,530)
(770,000 - 8,470)
Loss on redemption 31,570
b. Preparation of the entry required on December 31, 2021, to record the payment of the first 6 months' interest and the amortization of premium on the bonds.
Dec 31, 2021
Dr Interest expense 49,500
(50,000-500)
Dr Premium on bonds payable 500
(20,000 / 40)
Cr Cash 50,000
(1,000,000 * 10% * 6/12)
(To record the interest expense for 6 months)
answer:
Credit Card Interest Charges January-June 2012
The bank that issues Card X
✔ exceeded
the legal interest rate for five of the six months.
Because of this, the bank that issues Card X is likely to be investigated by the
✔ CFPB
.
You would like to be a millionaire when you retire in 40 years, and how much you must invest today to reach that goal clearly depends on what rate of return you can earn. First, suppose you can earn 10.4% per year, and calculate how much you would have to invest today. Second, suppose you can only earn half that percentage rate, and calculate how much you would have to invest today. Divide the second by the first, to see how many times more you must invest today at half that annual rate grow it to $1 million over 40 years.
Answer:
1.
PV = $19108.96057 rounded off to $19108.96
So, $19108.96057 have to be invested today at 10.4% p.a. rate for 40 years for it to turn into a million dollars.
2.
PV = $131634.7058 rounded off to $131634.71
So, $131634.7058 have to be invested today at 5.2% p.a. rate for 40 years for it to turn into a million dollars.
3.
Times more investment = 6.888637682 times rounded off to 6.89 times
Explanation:
1.
To calculate how much we need to invest today for it to turn into $1 million in 40 years at 10.4% per annum rate, we will use the Present value of a sum formula as we need to determine the present value of $1 million earned after 40 years from today. The formula for present value of a sum is,
PV = FV / (1+r)^t
Where,
PV is present valueFV is future valuer is the rate of interest or returnt is the time period in yearsPV = 1,000,000 / (1+0.104)^40
PV = $19108.96057 rounded off to $19108.96
So, $19108.96057 have to be invested today at 10.4% p.a. rate for 40 years for it to turn into a million dollars.
2.
Half the percentage rate of 10.4% p.a. = 10.4% / 2 = 5.2%
PV = 1,000,000 / (1+0.052)^40
PV = $131634.7058 rounded off to $131634.71
So, $131634.7058 have to be invested today at 5.2% p.a. rate for 40 years for it to turn into a million dollars.
3.
Times more investment = 131634.7058 / 19108.96057
Times more investment = 6.888637682 times rounded off to 6.89 times
You are the owner of a restaurant in a competitive market. You want to improve your restaurant's profile by increasing your quality of service to patrons while also growing profits. In addition to hiring better chefs and changing the menu, you are considering whether to offer a coat check. As one option, you could install hooks for customers to use, which may or may not help your business. Alternatively, you could offer a coat check for a fee, which would increase labor costs but give you a source of revenue in the process. Evaluate the various issues from a business and legal perspective, as well as steps to minimize any liability.
Answer:
Follows are the solution to this question:
Explanation:
Its coat test is a viable and cost-effective alternative also for the cafe. Restaurant visitors have a big issue about managing their clothing in winter. Straps would not even ensure security so its risks will be burglary.
A sitting room with such a guide ensures safety and would be used in the customers. Its restaurateur will be charged with additional costs because an employee has to be recruited. The business prospects would be improved when customers get a guaranteed spot to preserve their jackets. An operator must be careful enough to not exchange or mislocate any clothes. It would be a source of revenue for the business because the service available was being used by other people.Answer:
all of the above
Explanation:
Hudson Corporation is considering three options for managing its data processing operation: continuing with its own staff, hiring an outside vendor to do the managing (referred to as outsourcing), or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows:
Demand
Staffing Options High Medium Low
Own staff 650 650 600
Outside vendor 900 600 300
Combination 800 650 500
a) If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data processing operation?
Own staff, Outside vendor, Combination
What is the expected annual cost associated with that recommendation?
Expected annual cost = $
(b) Construct a risk profile for the optimal decision in part (a).
What is the probability of the cost exceeding $700,000?
Probability =
Answer:
Kindly check explanation
Explanation:
Given the data :
______________DEMAND______________
Staffing option __High ___Medium______Low
Own staff ______650_____ 650 _______600
Outside vendor _900_____ 600 _______ 300
Combination ___ 800 _____650_______ 500
a) If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data processing operation?
Expected cost :Σp(x) *x
Expected value for OWN STAFF:
(650*0.2) + (650*0.5) + (600*0.3) = 635
Expected value for OUTSIDE VENDOR:
(900*0.2) + (600*0.5) + (300*0.3) = 570
Expected value for COMBINATION:
(800*0.2) + (650*0.5) + (500*0.3) = 635
The decision alternative which will minimize expected cost is OUTSIDE VENDOR as it has the lowest expected value.
Expected annual cost associated with outside vendor is 570
(b) Construct a risk profile for the optimal decision in part (a).
Risk portfolio for outside vendor:
Demand ____cost ____probability
Low _______900 ______ 0.2
Medium ____600 ______ 0.5
High ______ 500 _______0.3
What is the probability of the cost exceeding $700,000?
Probability : This is the probability associated with the low demand of the optimal risk portfolio = 0.2 (0.2 * 100) = 20%
South Texas Luxury Apartments reports pretax financial income of $68,400 for 2019. The following items cause taxable income to be different than pretax financial income. 1. Depreciation on the tax return is greater than depreciation on the income statement by $17,000. 2. Rent collected on the tax return is greater than rent recognized on the income statement by $21,000. 3. Fines for pollution appear as an expense of $10,300 on the income statement. South Texas Luxury Apartments tax rate is 40% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2019.
Required:
Prepare a reconciliation between Financial Income and Taxable Income and then prepare the journal entry to record income taxes.
Answer:
Pretax financial income for 2017 $68,400
Excess Depreciation tax -$17,000
Excess rent collected $21,000
Nondeductible fines $10,300
Taxable income $82,700
Enacted tax rate 40% 0.4
Income tax payable $33,080
Date Account Title Debit Credit
Income Tax expense $31,480
Deferred tax asset $8,400
(21,000*40/100)
Income tax payable $33,080
Deferred tax liability $6,800
(17,000*40/100)
Suppose that you are working as a financial analyst in Bank of America Merrill Lynch. Your boss have just asked to analyze three different money market instrument yields and to suggest investment advice to its rich clients. Which of following instruments is the most desirable to invest in ? A six month T-bill rate of 1.9 % A six moth Eurodollar deposit of 1.9% A six month CD rate of 1.9 %
Answer: A six month T-bill rate of 1.9 %
Explanation:
As all the instruments are similar in terms of maturity period and return rate, the most desirable will be in terms of the one with the lowest risk.
The United States T-bill is one of the safest instruments in the world as it is backed by the full faith of the United States Government which has technically never defaulted on debt. This is therefore the lowest instrument listed and is therefore the most desirable.
Following are the merchandising transactions of Dollar Store.
Nov. 1 Dollar Store purchases merchandise for $2,200 on terms of 2/5, n/30, FOB shipping point, invoice dated November 1.
5 Dollar Store pays cash for the November 1 purchase.
7 Dollar Store discovers and returns $200 of defective merchandise purchased on November 1, and paid for on November 5, for a cash refund.
10 Dollar Store pays $110 cash for transportation costs for the November 1 purchase.
13 Dollar Store sells merchandise for $2,376 with terms n/30. The cost of the merchandise is $1,188.
16 Merchandise is returned to the Dollar Store from the November 13 transaction. The returned items are priced at $295 and cost $148; the items were not damaged and were returned to inventory.
Required:
Journalize the above merchandising transactions for the Dollar Store assuming it uses a perpetual inventory system and the gross method.
Answer and Explanation:
The Journal entries are given below:-
1. Merchandise Inventory Dr, $2,200
To Accounts Payable $2,200
(Being merchandise purchase on account is recorded)
2. Accounts Payable Dr, $2,200
Merchandise Inventory Dr, $44 ($2,200 × 2%)
To Cash $2,244
(Being cash paid is recorded)
3. Cash Dr, $196 ($200 - ($200 × 2%)
To Merchandise Inventory $196
(Being cash received is recorded)
4. Merchandise Inventory Dr, $110
To Cash $110
(Being cash paid is recorded)
5. Accounts Receivable Dr, $2,376
To Sales $2,376
(Being sales is recorded)
6. Cost of goods sold Dr, $1,188
To Merchandise Inventory $1,188
(Being cost of goods sold is recorded)
7. Sales Returns and allowances Dr, $295
To Account Receivables $295
(Being sales return is recorded)
8. Merchandise Inventory Dr, $148
To Cost of goods sold $148
(Being cost return is recorded)
Peanut Company acquired 90 percent of Snoopy Company’s outstanding common stock for $270,000 on January 1, 20X8, when the book value of Snoopy’s net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, are as follows:
Peanut Company Snoopy Company
Debit Credit Debit Credit
Cash $158,000 $80,000
Accounts Receivable 165,000 65,000
Inventory 200,000 75,000
Investment in Snoopy
Stock 319,500 0
Land 200,000 100,000
Buildings and
Equipment 700,000 200,000
Cost of Goods Sold 200,000 125,000
Depreciation Expense 50,000 10,000
Selling & Administrative
Expense 225,000 40,000
Dividends Declared 100,000 20,000
Accumulated
Depreciation 450,000 20,000
Accounts Payable 75,000 60,000
Bonds Payable 200,000 85,000
Common Stock 500,000 200,000
Retained Earnings 225,000 100,000
Sales 800,000 250,000
Income from Snoopy 67,500 0
Total $2,317,500 $2,317,500 $715,000 $715,000
Required:
A. Prepare any equity method entry(ies) related to the investment in Snoopy Company during 20X8.
B. Prepare a consolidated worksheet on the acquisition date, January 1, 2018.
Answer:
Investment in Snoopy co : 270000
Cash : 270000
Initial investment in snoopy co
investment in snoopy co : 67500
income from snoopy co : 67500
Peanut co's 90% share of snoopy co's 20x8 income
Cash : 18000
investment in snoopy co : 18000
Explanation: prepare any equity method entriesInvestment in Snoopy co : 270000
Cash : 270000
Initial investment in snoopy co
investment in snoopy co : 67500
income from snoopy co : 67500
Peanut co's 90% share of snoopy co's 20x8 income
Cash : 18000
investment in snoopy co : 18000
attached below are the equity entries
Use the following data to determine the total amount of working capital.
Windsor, Inc. Balance Sheet December 31, 2022
Cash $129200 Accounts payable $153500
Accounts receivable 122600 Salaries and wages payable 28400
Inventory 209300 Note payable (due 2025) 268000
Short-term investments 86400 Total liabilities $449900
Land (held for future use) 255000 Land 289000
Buildings $338500 Common stock $355500
Less: Accumulated depreciation (60200) 278300 Retained earnings 771000
Franchise 206600 Total stockholders' equity $1126500
Total assets $1576400 Total liabilities and stockholders' equity $1576400
Answer:
$279,200
Explanation:
The computation of working capital is shown below:-
As we know that
Working capital = Current assets - Current liabilities
where,
Current assets = cash balance + account receivable + Inventory
= $129,200 + $122,600 + $209,300
= $461,100
And,
Current liabilities = Account payable + Salaries & wages payable
= $153,500 + $28,400
= $181,900
now we will put the values of the above working capital formula
= $461,100 - $181,900
= $279,200
In the run up to the war in Iraq that began in 2003, one of the many concerns raised was that a war could result in a decrease in the supply of oil. At the same time, the U.S. economy was having a hard time recovering from the recession of 2001 and, as a result, incomes of many consumers had decreased (due to layoffs, wage cuts, and so forth). All else constant, it was reasonable to predict, with certainty, that the combination of these two factors would cause the equilibrium:__________
a. quantity of oil to decrease.
b. quantity of oil to increase.
c. price of oil to increase.
d. price of oil to decrease.
A rise in demand will result in an increase in a good's equilibrium price and output. Hence option C is correct .
What is equilibrium ?According to formal definitions, equilibrium is a condition of balance or rest brought on by the equal activity of opposing forces. Supply and demand are these forces in economics. We shall see that when there is an imbalance between supply and demand, economic forces will operate until the equilibrium is restored.
Depicts the hot dog market's competitive nature, with aggregate supply in yellow and aggregate demand in blue. Hot dog demand decreases as price increases, while supply increases. This diagram contains two crucial details. Equilibrium quantity comes first (QE). QE occurs when the amount supplied and the quantity required are equal.
It is crucial to understand the means through which we arrive at this value. Only one price, known as equilibrium price, can be correlated with equilibrium quantity (PE). The question of how to achieve equilibrium still stands. Let's start by thinking about what happens when the price is too high.
Learn more about Equilibrium here
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Barth Interior provides decorating advice to its clients. Three recent transactions of the company include:
a. Providing decorating services of $500 on account to one of its clients.
b. Paying $1,200 for an employee's salary in the current period.
c. Purchasing office equipment for $2,700 by paying cash.
Required: Write a memo to your instructor describing each step of the six-step measurement process presented in Illustration 2-1 in the book specifically for each of the three transactions. To emphasize, your memo should be specific to the three transactions indicated above..
Answer:
Memo Describing Each Step of the Six-Step Measurement Process
To: Ms. Teagantigan, PhD, Financial Accounting
From: Okwukwe Faith, Financial Accounting Student
Subject: The Six-Step Measurement Process
Date: October 11, 2020
Find below the description you requested on the above subject.
1st Step: Identifying the accounts involved using the source documents:
For the provision of decorating services of $500 to a client, the invoice for the service will be reviewed for the accounts involved in the transaction. It will show that Accounts receivable and Service Revenue are involved. A review of the payroll check will also show the payment of salary to an employee, in which Cash Account and Salaries Expense account are involved. Similarly, a review of the purchasing invoice will show that Office Equipment and Cash Account are involved for the purchase of equipment.
2nd Step: Analysis of the impact on the accounting equation: For a) Accounts Receivable and Service Revenue will increase by $500 respectively. Cash Account will decrease while Salaries Expense account will increase by $1,200 for b). For c) Office Equipment will increase and Cash will decrease by $2,700.
3rd Step: Assessing the accounts to be debited or credited: For a) Accounts Receivable will be debited and Service Revenue credited. For b) Salaries Expense will be debited and Cash credited. For c) Office Equipment will be debited and Cash credited.
4th Step: With the above identification, the journal will be recorded for transactions a - c as detailed above.
5th Step: The above transactions will then be posted to the general ledger in their respective accounts.
6th Step: At the end of the period, the accounts will be balance and a list of balances extracted in the Trial Balance.
I hope I have understood the steps enough.
Regards,
Okwukwe Faith
Explanation:
We have detailed above the six-step measurement process for evaluating business transactions and events. These steps help to identify the accounts involved in each business event and determine how the events are recorded in the accounting books.
1. Purchased raw materials on account $49,400.
2. Raw Materials of $41,300 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $8,000 was classified as indirect materials.
3. Factory labor costs incurred were $65,200.
4. Time tickets indicated that $54,600 was direct labor and $10,600 was indirect labor.
5. Manufacturing overhead costs incurred on account were $84,900.
6. Manufacturing overhead was applied at the rate of 150% of direct labor cost.
7. Goods costing $96,300 were completed and transferred to finished goods.
8. Finished goods costing $80,700 to manufacture were sold.
Required:
Record the transactions.
Answer and Explanation:
The journal entries are shown below:
1. Raw material inventory A/c Dr.$49,400
To accounts payable $49,400
(To record raw material purchased)
2. Work in process inventory A/c Dr. $33,300
Manufacturing overhead A/c Dr. $8,000
To Raw material inventory Cr. $41,300
(To record the raw material requisitioned is recorded)
3. Factory payroll A/c Dr.$65,200
To cash $65,200
(To record factory labor cost incurred)
4. . Work in process inventory A/c Dr. $54,600
Manufacturing overhead A/c Dr. $10,600
To factory payroll Cr. $65,200
(To record the direct labor and indirect labor is recorded)
5. Manufacturing overhead A/c Dr. $84,900
To accounts payable Cr. $84,900
(To record the manufacturing overhead is recorded)
7. Work in process inventory A/c Dr. $81,900 ($54,600×150%)
To Manufacturing overhead Cr. $81,900
(To record the applied manufacturing overhead is recorded)
8. Finished goods inventory A/c Dr. $96,300
To Work in process inventory Cr. $96,300
(To record the transferred goods are recorded)
9. Cost of goods sold A/c Dr. $80,700
To finished goods inventory Cr. $80,700
(To record the cost of goods sold is recorded)