Question 2 Week 8 (7 marks)
The P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each
valued at $1.50. The summary statement of the financial position of the subsidiary company immediately
following the acquisition is:
Fair value of assets acquired $2,640,000
Fair value of liabilities acquired $720,000
Total shareholders’ equity of the subsidiary company $800,000
Retained earnings of the subsidiary company $1,120,000
Required:
(a) Pass the necessary journal entry to record the acquisition (2 marks)
(b) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition (2 marks)
(c) Pass the necessary consolidation entry to eliminate the subsidiary by the parent company (2 marks)
(d) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase
consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50 (1 marks)
Answers
Answer: See explanation
Explanation:
a. Pass the necessary journal entry to record the acquisition.
Check the attachment. Note that common shares was calculated as:
= $800,000 × 1.5
= $1,200,000
b. Determine the amount of goodwill (or bargain purchase) arising out of the acquisition.
Fair value of assets acquired = $2,640,000
Less: fair value of liabilities = (720,000)
Net asset of S. LTD = 1,920,000
Purchase consideration = 1,000,000 + 1,200,000 = 2,200,000
Goodwill on acquisition will be:
= $2,200,000 - $1,920,000
= $280,000
c. Pass the necessary consolidation entry to eliminate the subsidiary by the parent company
Check the attachment
d. Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase
consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50.
Fair value of assets acquired = $2,640,000
Less: fair value of liabilities = (720,000)
Net asset of S. Ltd = 1,920,000
Purchase consideration = (1,000,000 + 400,000) × 1.5 = 1,600,000
Bargain purchase on the acquisition will be:
= 1,920,000 - 1,600,000
= $320,000
Related Questions
Aruba Company had a checkbook balance on December 31,
Problem 1-18 (AICPA Adapted)
2,000,000
2020 of P8,000,000 and held the following items in the safe
Check payable to Araba, dated January 5, 2021,
included in December 31 checkbook balance
Check payable to Araba, deposited December 20,
and included in December 31 checkbook balance,
but returned by bank on December 30, stamped
"NSF.The check was redeposited January 2, 2021,
and deared January 3, 2021
500,000
Check drawn on Aruba's account and payable to a vendor,
dated and recorded December 31 but not mailed
until January 15, 2021
1,500,000
Cash on hand - undeposited collections
Change fund
Time deposit for plant expansion
Treasury bill
Money market placement
Postage stamps unused
400.000
40,000
1,000,000
2,500,000
3,000,000
10,000
1. What total amount should be reported as cash on
December 31, 2020?
a 7,400,000
b. 7,440,000
c. 8,440,000
d. 7,450,000
2. What total amount should be reported as cash
equivalents on December 31, 2020?
a. 6,500,000
b. 3,000,000
c. 5,600,000
d. 2,500,000
Answers
Answer:
$7,440,000$5,500,000Explanation:
1. Checkbook balance of $8,000,000 in December 2020.
Check payable to Aruba of $2,000,000 has not yet being deposited so it should be removed from cash balance
Check payable that was returned by the bank of $500,000 should not be included either because it did not clear.
Check drawn on Aruba account of $1,500,000 was recorded but not yet mailed so it should be added back.
Cash on hand - undeposited collections and Change fund are actual cash that should be added as well.
= 8,000,000 - 2,000,000 - 500,000 + 1,500,000 + 400,000 + 40,000
= $7,440,000
2. Cash equivalents are those instruments that can be easily converted to cash. They typically mature within 3 months.
The Cash equivalents here are Treasury bills and Money Market placements
= 2,500,000 + 3,000,000
= $5,500,000
The total amount to be reported as cash on December 31, 2020 is $7,440,000 and the total amount to be reported as cash equivalents on December 31, 2020 is $5,600,000.
1. CASH = Checkbook balance of $8,000,000 + Check payable to Aruba of $2,000,000 + Check payable $500,000 + Check drawn $1,500,000 + Cash on hand - Undeposited collections
CASH = 8,000,000 - 2,000,000 - 500,000 + 1,500,000 + 400,000 + 40,000
CASH = $7,440,000
Cash equivalents = Treasury bills + Money Market placements
Cash equivalents = 2,500,000 + 3,000,000
Cash equivalents = $5,500,000
In conclusion, the total amount to be reported as cash on December 31, 2020 is $7,440,000 and the total amount to be reported as cash equivalents on December 31, 2020 is $5,600,000.
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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?
Answers
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
a law firm seeks to recruit top quality experienced lawyers. the total package offered is the sum of three separate components: a basic salary which 1.2 times the candidate's current salary together with an addintional $3000 for each year worked as a qualified lawyer and an extra $1000 for every year that they are over the age of 21.
Work out a formula that could be used to calculate the total salary, S, offered to someone who is A years of age, has E years of relevant experienced and who is 30 years old with five years experienced and who currently earns $150.000.
Answers
Answer:
S = 1.2N + 3,000E + 1,000 * (A - 21)$204,000Explanation:
1. An extra $1,000 for every year that they are over the age of 21. If the person is A years of Age then the expression is 1,000 * (A - 21).
An additional $3,000 for each year worked as a qualified lawyer. If the person has E years experience. Expression = 3,000E.
The basic salary is 1.2 time the candidate current salary. If the person currently earns $N the expression is; 1.2N
Putting that all together;
S = 1.2N + 3,000E + 1,000 * (A - 21)
2. Variables are; N = 150,000; E = 5 ; A = 30
S = 1.2N + 3,000E + 1,000 * (A - 21)
= 1.2 * 150,000 + 3,000 * 5 + 1,000 * (30 - 21)
= $204,000
S = 1.2N + 3,000E + 1,000 * (A - 21)
$204,000
What is the current salary?
1. an additional $1,000 for each year that they're over the age of 21. If the person could be years old then the expression is 1,000 * (A - 21).
An additional $3,000 for every year worked as a professional lawyer. If the person has E years experience. Expression = 3,000E.
The basic salary is 1.2 times the candidate's current salary.
When If the person currently earns $N the expression is; 1.2N
Putting that every one together; S = 1.2N + 3,000E + 1,000 * (A - 21)
2. Now, the Variables are; N = 150,000; E = 5 ; A = 30
S = 1.2N + 3,000E + 1,000 * (A - 21)
= 1.2 * 150,000 + 3,000 * 5 + 1,000 * (30 - 21)
= $204,000
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The council members of a small town have decided that the earth levee that protects the town from flooding should be rebuilt and strengthened. The town engineer estimates that the cost of the work at the end of the first year will be $68,000. He estimates that in subsequent years the annual repair costs will decline by $7000, making the second-year cost $61,000; the third-year $54,000, and so forth. The council members want to know what the equivalent present cost is for the first 5 years of repair work if interest is 6%.
Answers
Answer:
$230,899
Explanation:
Calculation for what the equivalent present cost is for the first 5 years
Present cost of the repair work = 68,000 * (P/A, 6%,5) - 7,000 * (P/G, 6%,5)
Present cost of the repair work= 68,000 * 4.212364 - 7,000 * 7.934549
Present cost of the repair work= $230,898.90 Approximately $230,899
Therefore the Present cost of the repair work will be $230,899
When Patey Pontoons issued 6% bonds on January 1, 2018, with a face amount of $600,000, the market yield for bonds of similar risk and maturity was 7%. The bonds mature December 31, 2021 (4 years). Interest is paid semiannually on June 30 and December 31. (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:
1. Determine the price of the bonds at January 1, 2018.
2. Prepare the journal entry to record their issuance by Patey on January 1, 2018.
3. Prepare an amortization schedule that determines interest at the effective rate each period.
4. Prepare the journal entry to record interest on June 30, 2018.
5. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2018
Answers
Answer:
Follows are the solution to this question:
Explanation:
Some of the missing data is defined in the attached file, please find it.
Bond problem rates
Diagram values are based on the following:
[tex]N = 4\times 2 \\\\[/tex]
[tex]= 8 \ Years \\[/tex]
[tex]i = 10.00 \% \times \frac{1}{2} \\\\[/tex]
[tex]= 5.00 \% \\[/tex]
[tex]\left\begin{array}{ccc} Cash \ Flow&\ \ \ \ \ \ \ Table \ Value \times Amount& \ \ \ \ \ \ \ \ = Present \ Value\\ Principal &0.676839 \times \$ 600,000& =\$ 406,104 \\ Semi-annual \ interest& 6.463213 \times \$ 18,000 & =\$ 116,337\end{array}\right \\[/tex]
Bond issuance price
Timetable for bond amortization:
please find the attachment.
Consider a Treasury bill with a rate of return of 5% and the following risky securities: Security
Security A: E(r)= 0.15; variance= 0.400
Security B: E(r)= 0.10; variance= 0.0225
Security C: E(r)=0.12; variance= 0.1000
Security D: E(r)=0.13; variance= 0.0625
The investor must develop a complete portfolio by combining the risk-free asset with one of the securities mentioned above. The security the investor should choose as part of her complete portfolio to achieve the best CAL would be:
a. security D
b. security C
c. security A
d. security B
Answers
Answer:
b. security C
Explanation:
Risk averse investors are investors that are not risk takers or are risk averse and so from the above, such investors will go for a less variable portfolio which has less risk. The security with the least risk from the options is option B. This is the security that the risk averse investor will choose to add to the portfolio with the risk free t bill
In the following summary of data for a payroll period, some amounts have been intentionally omitted:
Earnings:
1. At regular rate ?
2. At overtime rate $64,500
3. Total earnings ?
Deductions:
4. Social security tax 25,800
5. Medicare tax 6,450 6.
Income tax withheld 109,700
7. Medical insurance 14,800
8. Union dues ?
9. Total deductions 159,000
10. Net amount paid 271,000
Accounts debited:
11. Factory Wages 227,900
12. Sales Salaries ?
13. Office Salaries 86,000
A. Calculate the amounts omitted in lines (1), (3), (8), and (12).
B. Journalize the entry to record the payroll accrual.
C. Journalize the entry to record the payment of the payroll.
Answers
Answer:
A. Calculation of the amounts omitted in lines (1), (3), (8), and (12):
1. At regular rate
= $365,500
3. Total earnings
= $430,000
8. Union dues
= $2,250
12. Sales Salaries
= $116,100
B. Journal to record the payroll accrual:
Debit:
11. Factory Wages $227,900
12. Sales Salaries $116,100
13. Office Salaries $86,000
Credit Payables:
4. Social security tax $25,800
5. Medicare tax $6,450
6. Income tax withheld $109,700
7. Medical insurance $14,800
8. Union dues $2,250
10. Salaries Payable $271,000
To record the payroll accrual.
C. Journal Entry to record the payment of the payroll:
Debit Payables:
4. Social security tax $25,800
5. Medicare tax $6,450
6. Income tax withheld $109,700
7. Medical insurance $14,800
8. Union dues $2,250
10. Salaries Payable $271,000
Credit Cash Account $430,000
To record the payment of the payroll.
Explanation:
a) Data and Calculation of the amounts omitted in lines (1), (3), (8), and (12):
Earnings:
1. At regular rate $365,500
2. At overtime rate 64,500
3. Total earnings 430,000
Deductions:
4. Social security tax 25,800
5. Medicare tax 6,450
6. Income tax withheld 109,700
7. Medical insurance 14,800
8. Union dues 2,250
9. Total deductions 159,000
10. Net amount paid 271,000
Accounts debited:
11. Factory Wages 227,900
12. Sales Salaries 116,100
13. Office Salaries 86,000
1. At regular rate = 3. Total earnings - 2. At overtime rate
= $430,000 - 64,500
= $365,500
3. Total earnings = 9. Total deductions + 10. Net amount paid
= $159,000 + 271,000
= $430,000
8. Union dues = 9. Total deductions - other deductions from 4 to 7.
= $159,000 - (25,800 + 6,450 + 109,700 + 14,800)
= $2,250
12. Sales Salaries = 3. Total earnings - 11. Factory Wages - 13. Office Salaries)
= (430,000 - 227,900 - 86,000)
= $116,100
Compute, Disaggregate, and Interpret RNOA of CompetitorsHalliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements.$ 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
Answers
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 timesWhich term describes all of the money circulating in a country's economic
system?
A. Fiat money
B. Near money
C. Measure of Value
D. Monetary base
Answers
Answer:
D, monetary base
Explanation:
just got it right:)
Monetary base describes all of the money circulating in a country's economic system. Therefore, option D is correct.
What is monetary base?Monetary base refers to the total amount of currency in circulation in a country, including physical currency, reserves held by banks at the central bank, and any other money that is considered part of the country's money supply. It is also referred to as the "money base" or "high-powered money".
The monetary base is controlled by the central bank of a country, which can influence it through its monetary policy decisions, such as setting interest rates and buying or selling government securities.
By controlling the monetary base, the central bank can affect the supply of money in the economy, which can in turn impact factors such as inflation, economic growth, and employment levels.
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Ellyn Kole is the assistant chief accountant at Doman Company, a manufacturer of computer chips and cellular phones. The company presently has total sales of $20 million. It is the end of the first quarter. Ellyn is hurriedly trying to prepare a transaction analysis to assist her in preparing the financial statements. The total of the liabilities and owner's equity exceeds the total assets by $1,000. In order to meet the 4 pm deadline, Ellyn decides to force the transaction analysis into balance by adding the amount of the difference to the Equipment account. She chooses Equipment because it is one of the larger account balances; percentage-wise, it will be the least misstated. Ellyn "plugs" the difference! She believes that the difference will not affect anyone's decisions. She wishes that she had another few days to find the error but realizes that the final information is already late.
In your discussion posting address ALL questions but not limit to the following questions:
a. Who are the stakeholders in this situation?
b. What are the ethical issues involved in this case?
c. What are Ellyn's alternatives?
Answers
Answer and Explanation:
A. Stakeholders in the situation are:
1. Ellyn
2. The company
3. People using the financial statements
B. Ethical issues include:
1. Ellyn being dishonest by adding $1000 to the equipment asset and mistating the numerical value. This could cause loss as the $1000 could be from a liability account
C. Alternatives:
1. Creating a suspense account for the difference of $1000
2. Postponing finalisation and escalating the issue to a senior accountant to find out where the difference is from
a. The name of the stakeholders mentioned in the context are:
Ellyn The company People using the financial statements
b. Misstatement or the manipulation of the data records is the ethical issue that has been involved in the case mentioned over the context.
c. The final alternative that has been in the hand of Ellyn is to create the suspense account of the misstated amount and also extend the finalization date of the data.
a. The stakeholders are termed as the person who is also a member of the company and are included in the roles, operations, and functions of the company.
In this context, Ellyn, the company, and the People using the financial statements are the owners of the company and also the stakeholders of the company. these have purchased or invested in part of the company and have their part of share in the firm.
b. The ethical issues in the firm are termed as the issues that arose because of not following the laid norms of the firm.
In this context, Ellyn has misstated the amount of $1000 and decided to adjust it in the equipment account as it carries a high amount. This is the ethical issue of manipulation of the data.
c. The alternative that Ellyn has is she needs to adjust the difference amount in the suspense account that is created in order to adjust the unknown amount or the mistaken amount.
In order to get the time to correct the mistake of the data, she also has options to extend the date of the finalization of the data.
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The following trial balance of Wanda Landowska Company does not balance. Your review of the ledger reveals the following.
a. Each account had a normal balance.
b. The debit footings in Prepaid Insurance, Accounts Payable, and Property Tax Expense were each understated $100.
c. A transposition error was made in Accounts Receivable and Service Revenue; the correct balances for Accounts Receivable and Service Revenue are $2,750 and $6,690, respectively.
d. A debit posting to Advertising Expense of $300 was omitted.
e. A $1,500 cash drawing by the owner was debited to Owner's Capital and credited to Cash.
Debit Credit
Cash 4,800
Accounts Receivable 2,570
Prepaid Insurance 700
Equipment 8,000
Accounts payable 4,500
Property Taxes Payable 560
Owner Capital 11,200
Service Revenue 6,960
Salaries and Wages Expense 4,200
Advertising Expense 1,100
Property Tax Expense 800
20,890 24,500
Required:
Prepare a corrected trial balance.
Answers
Answer:
Debit Credit
Cash $4,800
Accounts Receivable $2,750
Prepaid Insurance $800
Equipment $8,000
Account Payable(debit understated) $4,500
Property Taxes Payable $560
Owner Capital(Overstated by $1,500) $12,700
Drawings $1,500
Service Revenue $6,690
Salaries and Wages Expense $4,200
Advertising Expense(omission) $1,400
Property Tax Expense(understa..) $900
Totals $24,350 $24,350
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.
Answers
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
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
Answers
Answer:
The correct answer is "$120,250".
Explanation:
The given values are:
Opening inventory
= $38,500
Closing inventory
= $15,250
Purchases
= $97,000
Now,
The cost of materials used during the month of February will be:
= Opening Inventory + Purchases - Closing Inventory
On putting the estimated values in the above formula, we get
= [tex]38,500+97,000-15,250[/tex]
= [tex]120,250[/tex] ($)
Marc and Michelle are married and earned salaries this year of $64,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc contributed $2,500 to an individual retirement account, and Marc paid alimony to a prior spouse in the amount of $1,500 (under a divorce decree effective June 1, 2005). Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $2,000 child tax credit for Matthew. Marc and Michelle paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $3,500 in federal income taxes withheld from their paychecks during the year. (Use the tax rate schedules)
A. What is Marc and Michelle’s gross income?
B. What is Marc and Michelle’s adjusted gross income?C. What is the total amount of Marc and Michelle’s deductions from AGI?D. What is Marc and Michelle’s taxable income?E. What is Marc and Michelle’s taxes payable or refund due for the year?
Answers
Answer:
Since we are not given any specific year, I will use the 2020 tax schedule:
Marc and Michelle's gross income = Marc's and Michelle's salaries + interest from corporate bonds = $64,000 + $12,000 + $500 = $76,500
they should choose the standard deduction since it is higher than their itemized deductions = ($24,400)
contribution to IRA = ($2,500)
alimony payment = ($1,500) the divorce agreement was settled before 2019
Marc and Michelle's taxable income = $48,100
Marc and Michelle's tax liability = $1,975 + [12% x ($48,100 - $19,750)] = $5,377
Interests on municipal bonds is not taxable.
The amount of taxes that they owe = $5,377 - $3,500 (federal tax withholdings) = $1,877
Since they are allowed a $2,000 child tax credit, that will wipe out any taxes owed and result in a $2,000 - $1,877 = $123 refund.
At Wiki Co., all supply purchases were recorded as Supplies Expenses upon purchase. The balance sheet on 12/31/2017 reports a balance for Supplies in the amount of $800. During the year the firm purchased $2,000 supplies. On 12/31/2018, actual supplies on hand amounted to $1,250. Provide the adjusting entry on 12/31/2018. For account names, please use the following account names exactly as it is spelled (you can use copy/paste): Supplies Expenses; Supplies; Cash; Supplies Payable; Other. For amounts, please do not use $ or . (decimal points) or , (1000 separator); just put down the number.
Answers
An investor buys 100 shares of a stock for $20,000. After 5 years the stock is sold for $32,000. If interest is compounded continuously, what annual nominal rate of interest did the original $20,000 investment earn? Round the final answer to the nearest hundredth.
Answers
Answer: 9.4%
Explanation:
From the question,
Investment, Po = 20000
The formula to use will be:
P = Po × e^rt
where r = rate
t = time
Check the attachment for further details and explanation.
Rick Wing, salesperson for Wave Soldering Systems, Inc. (WSSI), has provided you with a proposal for improving the temperature control on your present machine. The machine uses a hot-air knife to cleanly remove excess solder from printed circuit boards; this is a great concept, but the hot-air temperature control lacks reliability. According to Wing, engineers at WSSI have improved the reliability of the critical temperature controls. The new system still has the four sensitive integrated circuits controlling the temperature, but the new machine has a backup for each. The four integrated circuits have reliabilities of 0.88, 0.90, 0.92, and 0.94. The four backup circuits all have a reliability of 0.88.
The overall reliability of the new temperature controller = nothing% (enter your response as a percentage rounded to two decimal places).
Answers
Answer:
The answer is "A, B , C, D is now considered a single one".
Explanation:
[tex]\to (A = 0.84) \\\\ \to (B=0.86)\\\\ \to (C = 0.88)\\\\ \to (D =0.90)\\\\[/tex]
In the question, the components will be in series throughout or they must both work while the machine operates. The inability of one part fails. ABCD In each adjacent component is assisted and if those modules stop running the system works.
This device for one central ingredient and then one back up becomes perpendicular from each circuit throughout the given problem. For example, Is the device with two adjacent components
Parallel sequence method
Some modules were replicated in parallel here and in sequence. The whole four-circuit welding system is one.
Consistency in parallel systems
The probability each component would fail
The formula for calculating the Probability:
[tex]\text{Probability (single failed component) = 1-(component reliability)}[/tex]
Probability (A-key IC component failure)=1-(component reliability)=1-0.84
Probability (B-key IC component failure) = 1-(component reliability) = 1-0.86
Probability (C-key IC component failure) = 1-(component reliability) = 1-0.88
Probability (D-key IC component failure) = 1-(component reliability) = 1-0.90
Probability (backup fails)=1-0.84
Device stable = probability (at least one part works)
Using the approach as a supplement,
P (The function of at least one component)
= 1-Probability (Failure in all parts)
= 1- The result of single potential error probabilities
= 1-[Probability (Main IC-Fails) \times Probability \times (Backup-Fails)]
The Durability of A[tex]=1- [ (1-0.84)(1-0.84)] \\\\[/tex]
[tex]= 1- 0.256\\\\=0.9744[/tex]
The Durability of B [tex]=1- [ (1-0.86)(1-0.84)]\\[/tex]
[tex]=1- [ (0.14)(0.16)]\\\\=1- 0.0224\\\\= 0.9776[/tex]
The Durability of C [tex]=1- [ (1-0.88)(1-0.84)]\\\\[/tex]
[tex]=1- [ (0.12)(0.16)]\\\\=1- [0.0192]\\\\= 0.9808[/tex]
The Durability of D [tex]=1- [ (1-0.90)(1-0.84)]\\\\[/tex]
[tex]=1- [ (0.10)(1-0.16)]\\\\= 1- 0.016\\\\=0.984[/tex]
Durability of the system sequence
Durability of Device = consumer durability of series components
[tex]=0.9744\times 0.9766 \times 0.9808 \times 0.9840 \\\\=0.9184 \ \ or\ \ 91.84 \% \ \ reliability[/tex]
Note:
Any single part A, B , C, D is now considered a single one
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.
Answers
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
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.
Answers
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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who represents the company in professional, social, and civic activities?
Answers
Answer:
The President/CEO represents the company in all professional, social, and civic activities.
Explanation:
While the President/CEO represents the company in all professional, social, and civic activities, she or he can always appoint another company employee to do the representation. Some companies call their leadership heads, presidents, others call the leadership heads "chief executive officer" abbreviated to CEO.
Consulting life (10 points) Mt. Kinley is a strategy consulting firm that divides its consultants into three classes: associates, managers, and partners. The firm has been stable in size for the last 20 years, ignoring growth opportunities in the 90s, but also not suffering from a need to downsize in the recession at the beginning of the 21st century. Specifically, there have been -- and are expected to be -- 200 associates, 60 managers, and 20 partners. The work environment at Mt. Kinley is rather competitive. After four years of working as an associate, a consultant goes ``either up or out''; that is, becomes a manager or is dismissed from the company. Similarly, after six years a manager either becomes a partner or is dismissed. The company recruits MBAs as associate consultants; no hires are made at the manager or partner level. A partner stays with the company for another 10 years (a total of 20 years with the company).a. How many new MBA graduates does Mt. Kinley have to hire every year? b. What are the odds that a new hire at Mt. Kinley will become partner (as opposed to being dismissed after 4 years or 10 years).
Answers
Answer:
A. 50
B. 4%
Explanation:
We can easily find out how many new MBA graduates do Mt. Kinley has to hire every year by calculating the flow rate of associates by dividing the average inventory of associates by flow time of associates.
Requirement A:
The flow rate of associates = Average inventory of associates / Flow time of associates
The flow rate of associates = 200/4
The flow rate of associates = 50
Therefore the firm should assign 50 new MBAs every year.
Requirement B
Probability of associate becoming a partner = 20% x 20%
Probability of associate becoming a partner = 4%
The chances that a new hire at Mt. Kinley will become partner are 4%
Working
The flow rate of manager = Average inventory of manager/ Flow time of manager
The flow rate of manager = 60/6
The flow rate of manager = 10 managers/year
The flow rate of partner = Average inventory of partner/ Flow time of partner
The flow rate of manager = 20/10
The flow rate of manager = 2 partners/year
probability of becoming a manager = 10/50
probability of becoming a manager = 20%
Probability of becoming a partner = 2/10
Probability of becoming a partner = 20%
Below are the transactions for Ute Sewing Shop for March, the first month of operations.
March 1 Issue common stock in exchange for cash of $2,000.
March 3 Purchase sewing equipment by signing a note with the local bank, $1,700.
March 5 Pay rent of $500 for March.
March 7 Martha, a customer, places an order for alterations to several dresses. Ute
estimates that the alterations will cost Martha $700. Martha is not required
to pay for the alterations until the work is complete.
March 12 Purchase sewing supplies for $120 on account. This material will be used
to provide services to customers.
March 15 Martha receives altered dresses and pays $700 to Ute.
March 19 Bob needs 100 pairs of overalls expanded as he purchased too many
small and medium sizes. He pays $600 to Ute for services and expects
the overalls to be completed by March 25.
March 25. March 25 Bob receives his completed overalls.
March 30 Pay utilities of $85 for the current period.
March 31 Pay dividends of $100 to stockholders.
Required:
1. Record each transaction.2. Post each transaction to the appropriate T-accounts.3. Prepare a trial balance as of March 31.
Answers
Answer:
1)
March 1 Issue common stock in exchange for cash of $2,000.
Dr Cash 2,000
Cr Common stock 2,000
March 3 Purchase sewing equipment by signing a note with the local bank, $1,700.
Dr Equipment 1,700
Cr Notes payable 1,700
March 5 Pay rent of $500 for March.
Dr Rent expense 500
Cr Cash 500
March 7 Martha, a customer, places an order for alterations to several dresses. Ute estimates that the alterations will cost Martha $700. Martha is not required to pay for the alterations until the work is complete.
no journal entry required
March 12 Purchase sewing supplies for $120 on account. This material will be used to provide services to customers.
Dr Supplies 120
Cr Accounts payable 120
March 15 Martha receives altered dresses and pays $700 to Ute.
Dr Cash 700
Cr Service revenue 700
March 19 Bob needs 100 pairs of overalls expanded as he purchased too many small and medium sizes. He pays $600 to Ute for services and expects the overalls to be completed by March 25.
Dr Cash 600
Cr Deferred revenue 600
March 25. March 25 Bob receives his completed overalls.
Cr Deferred revenue 600
Cr Service revenue 600
March 30 Pay utilities of $85 for the current period.
Dr Utilities expense 85
Cr Cash 85
March 31 Pay dividends of $100 to stockholders.
Dr Dividends 100
Cr Cash 100
2)
Cash Common stock
debit credit debit credit
2,000 2,000
500
700
600
85
100
2,615
Equipment Notes payable
debit credit debit credit
1,700 1,700
Rent expense Supplies
debit credit debit credit
500 120
Accounts payable Service revenue
debit credit debit credit
120 700
600
1,300
Deferred revenue Utilities expense
debit credit debit credit
600 85
600
0 0
Dividends
debit credit
100
3) Ute Sewing Shop
Trial Balance
For the month ended March 31, 202x
Debit Credit
Cash $2,615
Supplies $120
Equipment $1,700
Accounts payable $120
Notes payable $1,700
Common stock $2,000
Dividends $100
Service revenue $1,300
Rent expense $500
Utilities expense $85
Totals $5,120 $5,120
Golden Eagle Company prepares monthly financial statements for its bank. The November 30 and December 31 adjusted trial balances include the following account information:30-Nov 31-Decdebit credit debit creditsupplies $ 2,000 $ 3,500 prepaid Insurance $ 8,000 $ 6,000 salaries payable $ 11,000 $ 16,000unearned revenue $ 3,000 $ 1,500The following information also is known:
1. Purchases of supplies in December total $4,500.
2. No insurance payments are made in December.
3. $11,000 is paid to employees during December for November salaries.
4. On November 1, a tenant pays Golden Eagle $4,500 in advance rent for the period November through January. Unearned Revenue is credited.Required:Show the adjusting entries that were made for supplies, prepaid insurance, salaries payable, and unearned revenue on December 31.
Answers
Answer:
30-Nov 31-Dec
debit credit debit credit
supplies $2,000 $3,500
prepaid Insurance $8,000 $6,000
salaries payable $11,000 $16,000
unearned revenue $3,000 $1,500
1. Purchases of supplies in December total $4,500.
Dr Supplies expense 3,000
Cr Supplies 3,000
beginning balance = $2,000 + $4,500 = $6,500
supplies expense = $6,500 - ending balance
2. No insurance payments are made in December.
Dr Insurance expense 2,000
Cr Prepaid insurance 2,000
Insurance expense = November 30's balance - December 31's balance
3. $11,000 is paid to employees during December for November salaries.
Dr Salaries expense 16,000
Cr Salaries payable 16,000
The beginning balance of salaries payable = $11,000, then it was paid (balance = $0), so any ending balance represents wages expense.
4. On November 1, a tenant pays Golden Eagle $4,500 in advance rent for the period November through January.
Dr Unearned revenue 1,500
Cr Rental revenue 1,500
Monthly rent revenue = $4,500 / 3 = $1,500
unearned revenue balance Nov. 30 = $3,000
unearned revenue balance Dec. 31 = $1,500
rental revenue = Nov. 30's balance - Dec. 31's balance
Chris owns his own business restoring antique cars. Last year, he restored 24 cars, which he sold for $1,100,000. The parts and supplies necessary for the restoration totaled $400,000. He paid $360,000 to his six employees and a salary of $110,000 to himself. The rent and utilities on his building were $80,000. Recently, Chris received an offer to work as Jay Leno’s personal auto restorer, at a salary of $275,000. Chris also received a $180,000 offer to host a car-related reality TV show for the Discovery Channel. Chris can only work one job.
1. What is Chris's accounting cost?
a. $950,000.
b. $1,115,000.
c. $760,000.
d. $840,000.
What is his accounting profit?
a. $15,000.
b. $260,000.
c. $340,000.
d. -$150,000. .
2. What is Chris's economic cost?
a. $1,115,000.
b. $345,000.
c. $165,000.
d. $950,000.
What is his economic profit?
a. $755,000.
b. $935,000.
c. $150,000.
d. -$15,000.
3. Comparing what Chris earns in his current job—both his salary and his company's accounting profit—with his best outside offer, you can conclude that economic profits and losses show:_____.
a. how much an individual would earn in the individual's next best alternative minus how much he or she currently earns?
b. how much an individual currently earns minus how much the individual would earn in his or her next best alternative?
Answers
Answer:
a. $950,000.$150,000.a. $1,115,000.d. -$15,000.b. how much an individual currently earns minus how much the individual would earn in his or her next best alternative.Explanation:
1. Chris's accounting cost
The accounting cost is the explicit cost of the business. The normal costs so to speak;
= Parts and supplies necessary for the restoration + Salaries to employees + Salary to himself + Rent and utilities
= 400,000 + 360,000 + 110,000 + 80,000
= $950,000
2. Chris's accounting profit
= Revenue - Accounting cost
= 1,100,000 - 950,000
= $150,000
3. Chris's economic cost
These are explicit + implicit (opportunity) cost.
The opportunity cost is the next best alternative which would have been the $275,000 if he had worked at Jay Leno’s personal auto restorer.
He would therefore forfeit the salary he earns now of $110,000.
= Accounting cost + Salary foregone - Salary
= 950,000 + 275,000 - 110,000
= $1,115,000
4. Chris's economic profit
= 1,100,000 - 1,115,000
= -$15,000
5. b. how much an individual currently earns minus how much the individual would earn in his or her next best alternative.
On November 1, Arvelo Corporation had $38,500 of raw materials on hand. During the month, the company purchased an additional $71,500 of raw materials. During November, $82,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,300. Prepare journal entries to record these events. Use those journal entries to answer the following questions:
The credits to the Raw Materials account for the month of November total:_________
Answers
Answer:
$73,400
Explanation:
The computation of Raw Materials account for the month of November total is shown below:-
Raw Materials account for the month of November = Work in progress inventory - Manufacturing overheads
= ($82,000 - $4,300) - $4,300
= $77,700 - $4,300
= $73,400
Therefore for computing the raw materials we simply applied the above formula.
Comans Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:
Milling Customizing
Machine-hours 26,000 29,000
Direct labor-hours 11,000 5,000
Total fixed manufacturing overhead cost $153,400 $18,500
Variable manufacturing overhead per machine-hour $1.30
Variable manufacturing overhead per direct labor-hour $5.00
During the current month the company started and finished Job A319. The following data were recorded for this job:
Job A319: Milling Customizing
Machine-hours 70 30
Direct labor-hours 50 60
Direct materials $450 $190
Direct labor cost $580 $570
If the company marks up its manufacturing costs by 20% then the selling price for Job A319 would be closest to:_____.
a. $563.
b. $2,816.
c. $3,379.
d. $4,055.
Answers
Answer:
Selling price= $3,379.2
Explanation:
First, we need to calculate the predetermined overhead rate for each department:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Milling= (153,400/26,000) + 1.3= $7.2 per machine hour
Customizing= (18,500/5,000) + 5= $8.7 per direct labor hour
Now, we can allocate overhead and calculate the total cost:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Milling= 7.2*70= $504
Customizing= 8.7*60= $522
Total cost= (450 + 190) + (580 + 570) + (504 + 522)
Total cost= $2,816
Finally, the selling price:
Selling price= 2,816*1.2= $3,379.2
Schweser Satellites Inc. produces satellite earth stations that sell for$70,000 each. The firm's fixed costs, F, are $3 million, and 50 earth stations are produced and sold each year. Profits total $100,000 , and the firm's assets (all equity financed) are $4 million. The firm estimates that it can change its production process, adding $3 million to assets and $200,000 to fixed operating costs. This change will reduce variable costs per unit by $5,000 and increase output by 30 units. However, the sales price on all units must be lowered to $45,000 to permit sales of tile additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 16%and it uses no debt.
Required:
a. What is the incremental profit?
b. Would the firms break-even point increase or decrease if it made the change?
c. Would the new situation expose the firm to more or less business risk than the old one?
Answers
Answer:
Please see attached explanations
Explanation:
a Incremental profit would be
= $160,000 - $100,000
= $60,000
b. The firm's break even point will increase by 27.8 units if it makes the change.
c. The new situation would have more business risk than the old one due to;
• Increase in fixed costs
• Business risk will also increase in new situations due to increase in break even point.
Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff (when the product is brought to market) is $24 million. If the DVDR fails, the present value of the payoff is $8.5 million. If the product goes directly to market, there is a 50 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.2 million to test market the DVDR. Test marketing would allow the firm to improve the product and increase the probability of success to 80 percent. The appropriate discount rate is 11 percent.
Required:
Calculate the NPV of going directly to market and the NPV of test marketing before going to market.
Answers
Answer:
NPV of going directly to the market:
Expected value of future cash flows = ($24 x 50%) + ($8.5 x 50%) = $16.25 million
There is a 50/50 chance of being a success or a failure, so to determine the expected value you just multiply each option by 50% and add them.
NPV of test marketing before going directly to the market:
Expected value of future cash inflows = ($24 x 80%) + ($8.5 x 20%) = $20.9 (but delayed by 1 year)
PV of expected cash flows = -1.2 (marketing costs) + $20.9/1.11 = $17.80 million
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:
Answers
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
Prepare journal entries to record each of the following transactions of a merchandising company. The company uses a perpetual inventory system and the gross method.
Nov. 5 Purchased 950 units of product at a cost of $12 per unit. Terms of the sale are 5/10, n/60; the invoice is dated November 5.
Nov. 7 Returned 40 defective units from the November 5 purchase and received full credit.
Nov. 15 Paid the amount due from the November 5 purchase, minus the return on November 7
Answers
Answer:
November 5, 202x, merchandise purchased on account, credit terms 5/10, n/60
Dr Merchandise inventory 11,400
Cr Accounts payable 11,400
November 7, 202x, 40 defective units returned
Dr Accounts payable 480
Cr Merchandise inventory 480
November 15, 202x, paid invoice within discount term
Dr Accounts payable 10,920
Cr Cash 10,374
Cr Purchase discounts 546