Answer:
However, Raphael's decision regarding how many workers to use can vary from week to week because his workers tend to be students. Each Monday, Raphael lets them know how many workers he needs for each day of the week. In the short run, these workers are variable inputs, and the ovens are fixed inputs.
Explanation:
In the long run, all inputs are variable because eventually lease contracts expire, or they can move to new facilities. But on the short run, some inputs are fixed due to certain restraints. In this case, the restraints are the size of the kitchen and the lease contract for three ovens.
In the short run, the only input that Raphael can vary is the number of workers that he employs every week.
You have just made your first $5,000 contribution to your individual retirement account. Assume you earn an annual return of 10.65 percent and make no additional contributions.
Required:
a. What will your account be worth when you retire in 42 years?
b. What if you wait 10 years before contributing?
Answer:
Results are below.
Explanation:
Giving the following information:
Initial investment= $5,000
i= 10.65%
To determine future value, we need to use the following formula:
FV= PV(1+i)^n
For 42 years:
FV= 5,000*(1.1065^42)
FV= $350,695
Now, for 32 years:
FV= 5,000*(1.1065^32)
FV= $127,472.17
A real estate broker agrees to manage a property for its owner, but only on the condition that when the owner decides to sell, he must list the property with the broker. This would be a violation of the:
Answer:
Sherman Antitrust Act of 1890
Explanation:
In this specific scenario, the real estate broker would be in violation of the Sherman Antitrust Act of 1890. This is a federal statute that prohibits activities that restrict interstate commerce and competition in the marketplace. Therefore, by telling the owner that he must list the property with his broker, the agent is preventing the other competitors from having a fair shot at obtaining the listing, making this a violation.
Dodero Company produces a single product which sells for $100 per unit. Fixed expenses total $12,000 per month, and variable expenses are $60 per unit. The company's sales average 500 units per month. Which of the following statements is correct?
a. The company's break-even point is $12,000 per month.
b. The fixed expenses remain constant at $24 per unit for any activity level within the relevant range.
c. The company's contribution margin ratio is 40%.
d. Responses A, B, and C are all correct.
Answer:
c. The company's contribution margin ratio is 40%.
Explanation:
Contribution margin ratio = contribution margin / revenue
contribution margin = total revenue - total variable cost
$100 - $60 = $40
$40 / $100 = 0.4
Breakeven pont = fixed cost / price - variable cost
$12,000 / $100 - $60 = 300
fixed cost per unit decreases as sales increases and decreases as sales decreases
A company has net working capital of $2,204, current assets of $6,475, equity of $22,215, and long-term debt of $10,535. What is the company's net fixed assets?
Answer:
Net fixed assets is $30546.
Explanation:
Given the net working capital = $2204
The current assets of the company = $6475
The equity of the company = $22215
Long term debt of the company = $10535
Net Working Capital = Current Assets – Current Liabilities
2204 = 6475 – current liabilities
Current liabilities = 6475 – 2204 = 4271
Total assets = Current Liabilities + Long term Debt + Total Equity
= 4271 + 10535 + 22215
= $37021
Total Liabilities and Stockholders Equity = Total Assets
Total assets = $37021
Total Assets = Current Assets + Net Fixed Assets
37021 = 6475 + net fixed assets
Net fixed assets = 37021 – 6475 = $30546
On January 1, 20X7, Server Company purchased a machine with an expected economic life of five years. On January 1, 20X9, Server sold the machine to Patron Corporation and recorded the following entry:
Cash 45,000
Accumulated Depreciation 28,000
Machine 70,000
Gain on Sale of Equipment 3,000
Patron Corporation holds 75 percent of Server's voting shares. Server reported net income of $50,000, and Patron reported income from its own operations of $100,000 for 20X9. There is no change in the estimated economic life of the equipment as a result of the intercorporate transfer. Based on the preceding information, in the preparation of the 20X9 consolidated income statement, machine will be what amount and will it be debited or credited in the consolidation entry?
Answer:
Consolidation entry is given below
Explanation:
Consolidated Entry DEBIT CREDIT
Machinery(w) $42,000
Loss on purchase $3,000
Cash $45,000
NOTE: We will record a loss in consolidation entry because the consideration paid is greater than the machinery's carrying value.
Working
Carrying value = Net book value - Accumulated Depreciation
Carrying value = $70,000 - $28,000
Carrying value = $42,000
Mercedes, Co. has the following quarterly financial information. 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Sales revenue $ 913,800 $ 923,300 $ 921,600 $ 929,400 Cost of goods sold 305,100 317,700 317,300 322,500 Operating expenses 248,300 259,700 257,900 262,000 Interest expense 3,900 3,900 3,900 3,800 Income tax expense 84,900 87,800 87,800 90,300 Average number of common shares outstanding 796,030 791,064 792,670 806,000 Stock price when Q4 EPS released $ 24 a. Calculate the gross profit percentage for each quarter. (Do not round your intermediate calculations and round your final answer to 2 decimal places.)
Answer:
Mercedes, Co.
Gross profit percentage for each quarter:
= Gross profit / Sales x 100
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
Gross profit $ 608,700 $ 605,600 $ 604,300 $ 606,900
Sales revenue $ 913,800 $ 923,300 $ 921,600 $ 929,400
Gross profit $ 66.61% 65.59% 65.57% 65.30%
Explanation:
a) Data and Calculations:
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
Sales revenue $ 913,800 $ 923,300 $ 921,600 $ 929,400
Cost of goods sold 305,100 317,700 317,300 322,500
Gross profit $ 608,700 $ 605,600 $ 604,300 $ 606,900
Operating expenses 248,300 259,700 257,900 262,000 Interest expense 3,900 3,900 3,900 3,800
Income tax expense 84,900 87,800 87,800 90,300
Average number of common
shares outstanding 796,030 791,064 792,670 806,000
b) The Gross profit percentage of Mercedes, Co for each quarter is calculated as the gross profit divided by sales revenue, and then multiplied by 100. To obtain the gross profit, the cost of goods sold is deducted from the sales revenue. The gross profit represents a financial measure that shows the performance of management in controlling the cost of goods sold in comparison with the sales revenue. It is from the gross profit that operating expenses, interests, and taxes will be offset to arrive at the net income.
Speedy Auto Repairs uses a job-order costing system. The company’s direct materials consist of replacement parts installed in customer vehicles, and its direct labor consists of the mechanics’ hourly wages. Speedy’s overhead costs include various items, such as the shop manager’s salary, depreciation of equipment, utilities, insurance, and magazine subscriptions and refreshments for the waiting room.
The company applies all of its overhead costs to jobs based on direct labor-hours. At the beginning of the year, it made the following estimates:
Direct labor-hours required to support estimated output 20,000
Fixed overhead cost $ 350,000
Variable overhead cost per direct labor-hour $ 1.00
Required:
1. Compute the predetermined overhead rate.
2. During the year, Mr. Wilkes brought in his vehicle to replace his brakes, spark plugs, and tires. The following information was available with respect to his job:
Direct materials $ 590
Direct labor cost $ 109
Direct labor-hours used 6
Compute Mr. Wilkes’ total job cost.
3. If Speedy establishes its selling prices using a markup percentage of 40% of its total job cost, then how much would it have charged Mr. Wilkes?
Answer:
Instructions are below.
Explanation:
Giving the following information:
Direct labor-hours required to support estimated output 20,000
Fixed overhead cost $ 350,000
Variable overhead cost per direct labor-hour $ 1.00
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (350,000/20,000) + 1
Predetermined manufacturing overhead rate= $18.5 per direct labor hour
Job:
Direct materials $ 590
Direct labor cost $ 109
Direct labor-hours used 6
Total cost= 590 + 109 + 6*18.5
Total cost= $810
Finally, the selling price:
Selling price= 810*1.4= $1,134
Jack uses his personal vehicle in his sole proprietorship. He keeps no records of any kind regarding his business use of the car and doesn't really know for certain when and where he used the automobile for business. Jack will not be claiming the EITC this year. Which of the following is correct?
Answer:
To comply with due diligence, every effort should be made to reconstruct Jack's vehicle expenses. If the records cannot be reconstructed then Casey should not claim the EITC this year.
Explanation:
Earned Income Tax credit (EITC) is a refundable tax that is returned to small to medium income earners. It can either reduce your tax of you will get a refund.
Sole proprietors often use their personal vehicles for business purposes. The expense for this is tax deductible. Deduction can be based on true cost of expenses like gasoline bought, or by standard mileage rate.
Vehicle use for personal purposes is not tax deductible.
In this scenario Jack has no records of his vehicle use for business and personal running. There is a need to seperate his use of the vehicle for business purposes.
Every effort should be made to reconstruct Jack's vehicle expenses. If the records cannot be reconstructed then Casey should not claim the EITC this year.
In the film Islam and America: Through the eyes of Imran Khan, which of the following best describes how average Pakistanis responded when the interviewer asked them about the IMF (International Monetary Fund)?
a. They did not know what the IMF is.
b. They considered the IMF a benevolent source of funding to help economic growth.
c. They criticized or disparaged the IMF.
Answer: c. They criticized or disparaged the IMF.
Explanation:
In the 2001 film, Islam and America: Through the eyes of Imran Khan, it is shown that the average person in Pakistan know what the IMF is and detests them. They criticized and disparaged the IMF with some reasons given being that;
the IMF is a way for the Developed world to economically colonise Pakistanthe IMF is tool for the Americans to use and try to assert controlthe IMF forces governments to raise utility prices to meet their conditions or pay back loans which makes poor people suffer the most.Journalizing issuance of stock—at par and at a premium
Colorado Corporation has two classes of stock: common, $3 par value; and preferred $30 par value.
Requirements
Journalize Colorado’s issuance of 4,500 shares of common stock for $6 per share.
Journalize Colorado’s issuance of 4,500 shares of preferred stock for a total of $135,000.
Answer:
a.
Cash 27000 Dr
Common Stock 13500 Cr
Paid in capital in excess of par-Common stock 13500 Cr
b.
Cash 135000 Dr
Preferred Stock 135000 Cr
Explanation:
a.
When we issue stock at premium, we always record the amount received from such issuance of stock at full. So, the cash account will be debited for 4500 * 6 = 27000
However, we record the common stock issued at par value and the remaining is credited under the reserve account which is Paid in capital in excess of par.
Thus the common stock will be credited by its par value of 4500 * 3 = 13500 and the remaining 4500 * 3 will be credited to the Paid in Capital account.
b.
The par value of the preferred stock is 4500 * 30 = 135000
Thus the preferred stock is issued at par and we simply debit the cash received from the issue and credit the preferred stock.
Polly Smith, a supervisor at Kroger's, was recently evaluated by her subordinates. Their responses indicated that Polly uses Theory X assumptions when dealing with employees. For example, one of the comments indicated that she treats employees as if they:_______.
a. naturally like work.
b. will work toward goals they are committed to.
c. have little ambition.
d. have the potential to accomplish the organization's goals.
e. seek out and accept responsibility.
Answer:
c. have little ambition.
Explanation:
Theory X is a theory that refers to people's behavior at work and suggests that managers tend to think that people are not motivated and don't like to work, avoid responsibility, don't have ambition and because of that, they have to be rewarded or punished to complete their job. According to that, the answer is that for example, one of the comments indicated that she treats employees as if they have little ambition because theory X says that managers have a negative opinion of people.
The other options are not right because they all refer to theory Y in which managers tend to have a positive view of their workers and think that they like their work, are motivated and are willing to take responsibility.
Nathan works for a major automobile manufacturing company. His company is being sued by hundreds of customers who have been injured when the steering wheel airbags exploded upon a low-impact collision. The customers are demanding monetary damages. This lawsuit is based on
Answer:
Product liability, is the right answer.
Explanation:
The liability of a manufacturer or seller for handing over a defective commodity into the hands of the consumers is known as the product liability. The responsibility for handing over the defective product that causes injuries lies with the retailers of the product who are a part of the distribution chain. The law requires that the good sold to the consumer meets the ordinary expectations of the consumer. If the consumer's ordinary expectations aren't met due to an unexpected defect or danger, the consumer may ask for monetary damages.
Jason has many roles in life. He is an engineering student in college, he's the oldest son in his family, and he earns extra money as an editor for the local newspaper. In his spare time, Jason likes to hike nature trails. In an economic sense, in which role is Jason functioning as a worker? A. Walking on nature trails B. Oldest son in family C. Editor for the local newspaper D. College student
Answer:
C.
Explanation:
Being an editor for a local newspaper counts as an economic sense because that is the only part that takes part as a job and helps the economy.
Sudoku Company issues 7,000 shares of $7 par value common stock in exchange for land and a building. The land is valued at $45,000 and the building at $85,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building.
Answer:
The journal entry to record this exchange is :
Land $45,000 (debit)
Buildings $85,000 (debit)
Common Stocks $49,000 (credit)
Share Premium $81,000 (credit)
Explanation:
The price of Common Stock is equivalent to the price required to settle the Market Cost of Land and Buildings.
Also note that the Common Stocks have a par vale of $7, this means that any amount paid in excess of the par value is accounted in the Share Premium Reserve.
The journal entry to record this exchange is :
Land $45,000 (debit)
Buildings $85,000 (debit)
Common Stocks $49,000 (credit)
Share Premium $81,000 (credit)
Land $45,000
Building $85,000
To Common stock $49,000 (7,000 shares × $7)
To Premium on issue of common stock 81,000
(Being recording of the issuance of the stock in exchange for the land and building)
Learn more: brainly.com/question/17429689
1. Do you think that punishments deter crime? Why or why not? Do you think there is a better way to reduce crime than punishment?
Explanation:
In my honest opinion i don not think punishment deter crime, but it does to a great extent reduce the rate of crime, if actually punishment deter crime, then there will not be offenders anymore.
Another possible way to reduce crime than punishment is to place a fine for offender to pay and also place offenders on community service, in this way offenders get to move freely in the society while they get to pay a huge sum for the offence they have committed
Answer:
I really believe that punishments reduce crime, if someone has done something wrong they have to be punished because, if not, how are they going to know that what they have done is wrong? So, in this way, some criminals stop committing crimes because they see that what they have done is not good and has consequences.
Punishment is known to be a bad stimulus to reduce crime; instead, education has been much more effective, because in this way criminals learn what they can do to improve their lives.
Explanation:
Portal Palace is a door manufacturer that is considering moving into a new regional market. Which of the following would be information on a balanced scorecard?a. Employee satisfaction b. The company's mission statement c. Number of people that buy doors in the region d. A list of popular door styles
Answer:
C
Explanation:
Because they need to know they will be successful in the new market.
Janice and Thom form Level Corporation. Janice transfers equipment (worth $60,000, basis of $40,000) for 50% of the stock in Level. Thom transfers inventory (worth $20,000, adjusted basis of $15,000) and provides services worth $40,000 for 50% of the stock.
Because this transaction_______(meet or not) the control of the corporation requirement, Janice has income of $_______and Thom has income of $______.
Answer:
Because this transaction MEET the control of the corporation requirement, Janice has income of $0 and Thom has income of $
Explanation:
Based on the information we were told that Thom provide service that is worth $40,000 which means that the amount of $40,000 is Thom income but we were not told that Janice has an income, which means that Janice will have an income of $0.
Hence, Because this transaction MEET the control of the corporation requirement, Janice has income of $0 and Thom has income of $
40,000.
Suppose that the government immediately pursues an _____________ policy by increasing government purchases in response to the short-run economic impact of the higher oil prices.
Answer:
The answer to the blank space is: expansionary fiscal policy
Explanation:
Expansionary fiscal policy consists in either the increase of government purchases (fiscal spending), or the reduction of taxes, or both.
Expansionary fiscal policy is recommended when the economy is experiencing a downturn, and can be helpful in reducing the damage that the economic slump generates.
In the case of the question, higher oil prices for an importing country will result in less economic activity because this important fuel becomes more expensive, both for manufacturing, agriculture and services. For this reason, the government responds by increasing spending with the goal of reactivating the economy as soon as possible, and reducing the damange that was already done.
A unit of a business that not only incurs costs but also generates revenues is called a: Group of answer choices Performance center. Profit center. Cost center. Responsibility center. Expense center.
Answer: Profit Center
Explanation:
A Profit Center in a business is defined as a unit or segment that incurs cost but generates revenue as well. It therefore expends company resources in other to make the company revenue and so is the embodiment of the quote, spend money to make money.
An example of a Profit Center in a business would be the Sales Department. Here money is spent on wages, telephone bills, transport costs etcetera. However, by incurring these costs to sell the products of the company, the department makes revenue as well.
You experiment by offering free warranties for your product in market A but not in market B. Sales in A rise from 240 to 360 units per week while sales in B rise from 410 to 430. The Difference-in-difference estimate of the effect of the free warranty is:
Answer:
Difference in difference estimate = 50 - 5% = 45 %
Explanation:
a) Data and Calculations:
Market A Market B
Sales 240 410
Sales rise 360 430
Rise difference 120 20
Percentage of rise 50% 5%
120/240 x 100 = 50%
20/41 x 100 = 4.878% or 5%
Therefore, the Difference in difference estimate = 50 - 5% = 45 %
One can then say that the free warranties in market A brought about a difference in difference of 45% in Market A when compared to the no warranties in Market B. This can be seen from the presented data. Sales in A rose from 240 units to 360 units, an increase of 120 units or 50%. Sales in market B only rose from 410 to 430, an increase of 20 units or 5%. This difference in difference estimator shows the effect of the free warranty on market A and market B. This means that the firm could do better by introducing the free warranties for its product in market B, all things being equal.
Explain why a firm might want to continue operating and producing goods even after diminishing marginal returns have set in and marginal cost is rising.
Answer:
Explanation:
Overall in a scenario such as this one, a firm may continue operating and producing goods if they believe demand may go back up and result in higher returns or if they expect the tastes of consumers to change in the near future. Both of these will in term cause the market sentiment surrounding the firm's product to change and begin seeing more profitable times. Otherwise, a firm would cut their loses and stop operating and producing goods.
The bond has a coupon rate of 6.23 percent, it makes semiannual payments, and there are 4 months to the next coupon payment. A clean price of $989 and the par value is $1,000. What is the invoice price?
Answer:
Invoice price = $999.38
Explanation:
DATA
coupon rate = 6.23%
clean price = $989
par value = $1,000
invoice price = ?
Solution
As mentioned above the interest is paid semi-annually and there are 4 months to the next coupon payment it means that the last coupon payment was made 2 months ago therefore the accrued interest will be paid for 2 months.
Working
6 months coupon payment = $1000 x 6.23% x 6/12
6 months coupon payment = $31.15
Accrued interest for 2 months = $31.15 x 2/6
Accrued interest for 2 months = $10.38
Invoice price = Clean price + Accrued interest
Invoice price = $989 + $10.38
Invoice price = $999.38
According to Debra, the vice president of Theo Chocolate, one of the results of offering simpler products is that people are:
Answer:
c. less interested in paying a premium for fair trade
Explanation:
Indeed, in this case, according to Debra, who serves as the vice president of Theo Chocolate, one of the results of offering simpler products is that people find it less interesting to pay a premium for fair trade.
If people lost confidence in the government what kind of money would have the least value?
If people lost confidence in the government which would have the least value?
a) fiat money
b) representative money
c) commodity money
d) gold standard
Answer:
Fiat money
Explanation:
Fiat money is a type of money or currency that is used as money because it is issued and backed by the government but it does not have any intrinsic value.
It has no intrinsic value which means that it does not have any value of its own and it is maintained by the government. Therefore, If people lost confidence in the government the kind of money that would have the least value is fiat money
A person presently owes $5,000 on a credit card bill. As a penalty, he/she has to pay a uniform amount of $700 per month for a year. The rate of return per month that the credit card company make in a year is closest to: g
Answer:
The company get $283.33 return per monthExplanation:
Given that the person is to pay $700 per month for one year
Hence after one year elapse he will pay a total of
$700*12= $8,400
The returns the credit card company will get after one year is
yearly return= $8,400-$5,000= $3,400.
The rate of return per month= $3,400/12= $283.33.
You have a portfolio worth $63,500 that has an expected return of 13.3 percent. The portfolio has $16,900 invested in Stock O, $24,700 invested in Stock P, with the remainder in Stock Q. The expected return on Stock O is 18.1 percent and the expected return on Stock P is 11.3 percent. What is the expected return on Stock Q
Answer:
Return on Stock Q is 11.85%
Explanation:
Investment in Q = ($63,500 - $16,900 - $24700)
Investment in Q =21900
Portfolio return = Respective return * Respective investment weight
13.3= (16900 / 63500 * 18.1%) + ( $24,700 / $63,500 * 11.3% ) + ( $21900 / $63,500 * Return on Q)
13.3 = 4.817165354 + 4.39533071% + (21900 / 63500*Return on Q)
13.3 = 9.21259843% + (21900 / 63500*Return on Q)
Return on Q = (13.3% -9.21259843%) *63500/21900
Return on Q = (4.08740157 * 2.899543379)
Return on Q = 11.85159816%
Return on Q =11.85%
Ruby is 25 and has a good job at a biotechnology company. She currently has $10,000 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Ruby estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year). a. How much will Ruby’s IRA be worth when she needs to start withdrawing money from it when she retires? Use Exhibit 1-A. (Round FV factor to 3 decimal places and final answer to the nearest whole dollar.) b. How much money will she have to accumulate in her company’s 401(k) plan over the next 40 years in order to reach her retirement income goal? (Round your answer to the nearest whole dollar.)
Answer:
a. How much will Ruby’s IRA be worth when she needs to start withdrawing money from it when she retires?
the future value of Ruby's IRA = $10,000 x 21.725 (FV factor, 8%, 40 periods) = $217,250
b. How much money will she have to accumulate in her company’s 401(k) plan over the next 40 years in order to reach her retirement income goal?
she needs to accumulate $875,000 - $217,250 = $657,750 during the next 40 years
the annual contribution = FV / FV annuity factor = $657,750 / 259.057 (FV annuity factor, 8%, 40 periods) = $2,539.02 per year
Unrealized holding gains and losses on debt securities classified as available-for-sale would have the following effects on accumulated other comprehensive income: Gains Losses a. Increase Increase b. Decrease Decrease c. Decrease Increase d. Increase Decrease
Answer: d. Increase Decrease
Explanation:
Available - For - Sale securities are accounted for in the Equity section of the balance sheet under Other Comprehensive income (OCI). As the gains cannot be realised until the security is sold, it is accounted for here to show an increase or a decrease in value. When the security gains in value over what it cost, this will increase OCI and when it losses value below what it cost, this will reduce the OCI.
Flounder Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2017, Flounder had the following transactions related to notes payable.
Sept. 1 Issued a $14,400 note to Pippen to purchase inventory. The 3-month note payable bears interest of 8% and is due December 1. (Flounder uses a perpetual inventory system.)
Sept. 30 Recorded accrued interest for the Pippen note.
Oct. 1 Issued a $21,600, 8%, 4-month note to Prime Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1.
Oct. 31 Recorded accrued interest for the Pippen note and the Prime Bank note.
Nov. 1 Issued a $26,400 note and paid $8,900 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 7% and matures in 12 months.
Nov. 30 Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note.
Dec. 1 Paid principal and interest on the Pippen note.
Dec. 31 Recorded accrued interest for the Prime Bank note and the vehicle note.
a) Prepare journal entries for the transactions noted above.
b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts.
c) Show the balance sheet presentation of notes payable and interest payable at December 31
d) How much interest expense relating to notes payable did Flounder incur during the year?
interest expense incurred during the year: $ ?
Answer:
a) Prepare journal entries for the transactions noted above.
Sept. 1 Issued a $14,400 note to Pippen to purchase inventory. The 3-month note payable bears interest of 8% and is due December 1. (Flounder uses a perpetual inventory system.)
Dr Inventory 14,400
Cr Notes payable 14,400
Sept. 30 Recorded accrued interest for the Pippen note.
Dr Interest expense 96
Cr Interest payable 96
Oct. 1 Issued a $21,600, 8%, 4-month note to Prime Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1.
Dr Cash 21,600
Cr Notes payable 21,600
Oct. 31 Recorded accrued interest for the Pippen note and the Prime Bank note.
Dr Interest expense 240
Cr Interest payable 240
Nov. 1 Issued a $26,400 note and paid $8,900 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 7% and matures in 12 months.
Dr Vehicle 35,300
Cr Notes payable 26,400
Cr Cash 8,900
Nov. 30 Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note.
Dr Interest expense 394
Cr Interest payable 394
Dec. 1 Paid principal and interest on the Pippen note.
Dr Notes payable 14,400
Dr Interest payable 288
Cr Cash 14,688
Dec. 31 Recorded accrued interest for the Prime Bank note and the vehicle note.
Dr Interest expense 298
Cr Interest payable 298
b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts.
notes payable interest payable
debit credit debit credit
14,400 96
21,600 240
26,400 394
14,400 288
48,000 298
740
interest expense
debit credit
96
240
394
298
1,028
c) Show the balance sheet presentation of notes payable and interest payable at December 31
notes payable balance December 31 = $48,000
interest payable balance December 31 = $740
d) How much interest expense relating to notes payable did Flounder incur during the year?
$1,028
intext:"ABC Co. purchased merchandise on August 5 at a $1,000 invoice price with terms of 2/10,n/30 and paid for the merchandise on August 14. Determine its entry to record this purchase and the subsequent payment under both the gross method and the net method by matching the action on the left with the method on the right."
Answer:
August 5 : Purchase
Merchandise Inventory $1,000 (debit)
Accounts Payable $1,000 (credit)
August 14 : Payment
Accounts Payable $1,000 (debit)
Discount Received $20 (credit)
Cash $800 (credit)
Explanation:
When ABC Co purchased merchandise entries would be :
Merchandise Inventory $1,000 (debit)
Accounts Payable $1,000 (credit)
When ABC Co subsequently makes payment for the merchandise entries would be :
Note : Payment is made within the cash discount period of 15 days and ABC Co is eligible for the 2 % cash discount on the purchase. Payment is made net of the 2% cash discount.
Accounts Payable $1,000 (debit)
Discount Received $20 (credit)
Cash $800 (credit)