Answer:
1.
Total current assets = $112500
2.
Short term investments = $2300
3.
Retained earnings = $15500
Explanation:
1.
The total current assets can be determined using the current ratio provided for 2021. The current ratio is calculated by dividing the value of total current assets by the value of the total current liabilities.
1.5 = Total current assets / (51000 + 23000 + 1000)
1.5 = Total current assets / 75000
1.5 * 75000 = Total current assets
Total current assets = $112500
2.
Short term investments are a part of the current assets. The value of short term investments is,
112500 = 6200 + 32000 + 72000 + Short term investments
112500 = 110200 + Short term investments
112500 - 110200 = Short term investments
Short term investments = $2300
3.
The basic accounting equation states that the total assets is always equal to the value of total liabilities plus total equity.
Total assets = Total Liabilities + Total Equity
(112500 + 180000) = [(51000 + 23000 + 1000) + 42000] + (160000 + Retained earnings)
292500 = 117000 + 160000 + Retained earnings
Retained earnings = 292500 - 277000
Retained earnings = $15500
Sparty Corporation has provided the following information for its most recent year of operation: Revenues earned were $84,000, of which $9,000 were uncollected at the end of the year. Operating expenses incurred were $46,000, of which $8,000 were unpaid at the end of the year. Dividends declared were $19,000, of which $3,000 were unpaid at the end of the year. Income tax expense is $13,300.
Required:
How much net income was reported on Sparty's income statement?
Answer: $247000
Explanation:
The following can be deduced from the question:
Revenue 84,000
Less: Operating Expenses 46,000
Profit Before Tax 38,000
Less Taxes 13,300
Net Income 24700
Therefore, the net income that was reported on Sparty's income statement will be $24700.
How much would a worker have to be paid per hour in 2016 to keep her real wage the same as in 1980 if she earned $10 per hour in 1980
Answer:
In order to calculate this question we need the CPI for both 1980 and 2016. I looked for them on the internet and found that the CPI for 1980 was 82.4 and the CPI for 2016 is 240.
This means that in real dollars (dollars adjusted to inflation), $10 back in 1980 were $10/0.824 = $12.1359
In order to convert 1980 real dollars to nominal dollars in 2016, we have to multiply $12.1359 x 2.4 = $29.1262 ≈ $29.13.
This means that $10 back in 1980 could purchase the same amount of goods or services that $29.13 dollars purchased in 2016.
Zander Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed to cost of goods sold at the end of the month. In July the company completed job F21X that consisted of 29,850 units of one of the company's standard products. No other jobs were in process during the month. The job cost sheet for job F21X shows the following costs: Beginning balance $80,595 Direct materials $937,290 Direct labor cost $316,410 Manufacturing overhead cost applied $543,270 During the month, the actual manufacturing overhead cost incurred was $537,300 and 19,900 completed units from job F21X were sold. No other products were sold during the month. The unadjusted cost of goods sold (in other words, the cost of goods sold BEFORE adjustment for any underapplied or overapplied overhead) for July is closest to:_______.
Answer:
The answer is "$ 1,251,710".
Explanation:
Formula:[tex]\text{Overall cost for Job F21X completed during the month = } \\\text{Beginning balance + Direct materials + Direct labor + Manufacturing overhead applied }[/tex]
[tex]= \$ 80,595 + \$ 937,290 +\$ 316,410 + \$ 543,270 \\\\= \$ 1,877,565[/tex]
Complete unit in Job = 29,850 units
Per unit cost units
[tex]= \$ 62.9[/tex] per unit
Sold units= 19,900 units
Sold goods cost [tex]= 19,900 \times \$ 62.9[/tex]
[tex]= \$ 1,251,710[/tex]
Hart, Attorney at Law, experienced the following transactions in 2016, the first year of operations: 1.Accepted $36,000 on April 1, 2016, as a retainer for services to be performed evenly over the next 12 months. 2. Performed legal services for cash of $54,000. 3. Purchased $2,800 of office supplies on account. 4. Paid $2,400 of the amount due on accounts payable. 5. Paid a cash dividend to the stockholders of $5,000. 6. Paid cash for operating expenses of $31,000. 7. Determined that at the end of the accounting period $200 of office supplies remained on hand. 8. On December 31, 2016, recognized the revenue that had been earned for services performed in accordance with Transaction 1. Required Show the effects of the events on the financial statements using a horizontal statements model like the following one. In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, NC for net change in cash and NA to indicate accounts not affected by the event. The first event has been recorded as an example. (Do not round intermediate calculations. Enter any decreases to account balances and cash outflows with a minus sign.)
Answer:
Find attached the effects of the events on the financial statements using a horizontal statements model.
No. 7 is -$2,600 because only $200 remains from the Material purchase in No. 2.
No. 8. April to December is 9 months so 9 months of the service revenue would have been earned = 9/12 * 36,000 = $27,000.
Ian loaned his friend $25,000 to start a new business. He considers this loan to be an investment, and therefore requires his friend to pay him an interest rate of 9% on the loan. He also expects his friend to pay back the loan over the next four years by making annual payments at the end of each year. Ian texted and asked that you help him calculate the annual payments that he should expect to receive so that he can recover his initial investment and earn the agreed-upon 9% on his investment.
Required:
Calculate the annual payment.
Answer: $7,716.76
Explanation:
Ian's friend will have to pay a specific annual payment per year so this is an annuity.
The $25,000 is the present value of the payments.
25,000 = Annuity * Present Value interest factor of Annuity, 9%, 4 years
25,000 = Annuity * 3.2397
Annuity = 25,000/3.2397
= $7,716.76
Assume that Firm ABC has revenues of $120,000 for both 2017 and 2018. It also has operating expenses of $40,000 for each of these years. In addition, Firm ABC accrues a loss and related liability of $10,000 for financial reporting purposes because of pending litigation. Firm ABC cannot deduct this amount for tax purposes until it pays the liability, expected in 2018. As a result, a deductible amount will occur in 2018 when Firm ABC settles the liability, causing taxable income to be lower than pretax financial information.
2017 2018
Revenues 120,000 120,000
Expenses 40,000 40,000
Litigation Loss 10,000
Pretax Financial Income 70,000 80,000
Income Tax Expense (40%) 28,000 32,000
2017 2018
Revenues 120,000 120,000
Expenses 40,000 40,000
Litigation Loss 10,000
Taxable Income 80,000 70,000
Income Tax Expense (40%) 32,000 28,000
Q1) Journalize the entry at 12/31/2017 to record income tax expense, deferred tax asset, and income taxes payable:
Q2) Journalize the entry at 12/31/2018 to record income tax expense, deferred tax asset, and income taxes payable:
Answer:
1) deferred tax asset = 4000
2) deffered tax Liability = 4000
Explanation:
1) Journalizing entry at 12/31/2017
deferred tax asset = tax ( per income tax) - tax ( per book tax )
= 32000 - 28000 = 4000
Journal Entry made for Income tax and deferred tax asset)
Account Debit Credit
Income Tax Expense 28000
Deffered Tax Asset 4000
Income Tax Payable 32000
2) Journalizing entry at 12/31/2018
Deffered tax Liability = Tax (per book) - Tax ( Income tax )
deffered tax Liability = 32000 - 28000 = 4000
Journal Entry made for Income tax and deffered tax liability
Account Debit Credit
Income Tax Expense 32000
To Deffered Tax Liability 4000
To Income Tax Payable 28000
Cortina Company accumulates the following adjustment data at December 31.
Indicate (1) the type of adjustment (prepaid expense, accrued revenue, and so on) and (2) the status of the accounts before adjustment (overstated or understated). (Enter your answers in alphabetical order.)
Item (1)
Type of Adjustment (2)
Accounts Before Adjustment
(a) Supplies of $400 are on hand. Supplies account shows $1,600 balance.
Entry field with correct answer Prepaid ExpensesAccrued RevenuesAccrued ExpensesUnearned Revenues
Entry field with incorrect answer now contains modified data Expenses UnderstatedLiabilities UnderstatedExpenses OverstatedRevenues OverstatedAssets UnderstatedAssets OverstatedRevenues UnderstatedLiabilities Overstated
Entry field with incorrect answer now contains modified data Revenues UnderstatedAssets UnderstatedLiabilities UnderstatedLiabilities OverstatedExpenses UnderstatedExpenses OverstatedAssets OverstatedRevenues Overstated
(b) Services performed but unbilled total $700.
Entry field with correct answer Unearned RevenuesAccrued ExpensesPrepaid ExpensesAccrued Revenues
Entry field with incorrect answer now contains modified data Assets UnderstatedAssets OverstatedLiabilities OverstatedExpenses UnderstatedExpenses OverstatedRevenues UnderstatedRevenues OverstatedLiabilities Understated
Entry field with correct answer Assets OverstatedExpenses OverstatedRevenues UnderstatedLiabilities UnderstatedLiabilities OverstatedAssets UnderstatedExpenses UnderstatedRevenues Overstated
(c) Interest of $300 has accumulated on a note payable.
Entry field with correct answer Prepaid ExpensesAccrued ExpensesAccrued RevenuesUnearned Revenues
Entry field with incorrect answer now contains modified data Assets UnderstatedExpenses UnderstatedRevenues OverstatedExpenses OverstatedLiabilities UnderstatedAssets OverstatedRevenues UnderstatedLiabilities Overstated
Entry field with correct answer Assets UnderstatedAssets OverstatedLiabilities UnderstatedRevenues UnderstatedLiabilities OverstatedRevenues OverstatedExpenses UnderstatedExpenses Overstated
(d) Rent collected in advance totaling $1,100 has been earned.
Entry field with correct answer Unearned RevenuesPrepaid ExpensesAccrued ExpensesAccrued Revenues
Entry field with incorrect answer now contains modified data Liabilities OverstatedAssets UnderstatedRevenues UnderstatedLiabilities UnderstatedRevenues OverstatedExpenses OverstatedExpenses UnderstatedAssets Overstated
Entry field with incorrect answer now contains modified data Expenses UnderstatedRevenues OverstatedLiabilities UnderstatedAssets UnderstatedExpenses OverstatedRevenues UnderstatedLiabilities OverstatedAssets Overstated
Answer:
(a) Supplies of $400 are on hand. Supplies account shows $1,600 balance.
Supplies (asset account) are overstated and supplies expense (expense account) is understated. Adjusting journal entry:
Dr Supplies expense 1,200
Cr Supplies 1,200
(b) Services performed but unbilled total $700.
Both service revenue (revenue account) and accounts receivable (asset account) are understated. Adjusting journal entry:
Dr Accounts receivable 700
Cr Service revenue 700
(c) Interest of $300 has accumulated on a note payable.
Interest expense (expense account) and interest payable (liability account) are both understated. Adjusting journal entry:
Dr Interest expense 300
Cr Interest payable 300
(d) Rent collected in advance totaling $1,100 has been earned.
Unearned revenue (liability account) is overstated, while rental revenue (revenue account) is understated. Adjusting journal entry:
Dr Unearned revenue 1,100
Dr Rental revenue 1,100
Suppose that, in a competitive market without government regulations, the equilibrium price of donuts is $1.50 each. Complete the following by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding.
a. The government has instituted a legal minimum price of $1.80 each for donuts.
b. Due to new regulations, donut shops that would like to pay better wages in order to hire more workers are prohibited from doing so.
c. The government prohibits donut shops from selling donuts for more than $1.10 each.
Answer:
Option A is a price floor, option B is binding and option C is price ceiling.
Explanation:
It is stated that the equilibrium price of a donut is $1.50.
If the government institutes a legal minimum price of $1.80 for a donut, that would be an example of price floor because the price cannot be lower than that. $1.80 is higher than $1.50 so it serves a purpose.
Option B is binding since any donut shop that wants to pay better wages is prohibited from hiring more workers.
The government prohibiting donut shops from selling a donut for more than $1.10 is an example of floor ceiling because the price can not go higher than $1.10.
I hope this answer helps.
[The following information applies to the questions displayed below.]Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow: Direct Labor-Hours per unit Annual Production Rims 0.30 26,000 units Posts 0.50 70,000 units Additional information about the company follows: Rims require $15 in direct materials per unit, and Posts require $11. The direct labor wage rate is $15 per hour. Rims are more complex to manufacture than Posts and they require special equipment. The ABC system has the following activity cost pools: Estimated Activity Activity Cost Pool Activity Measure Estimated Overhead Cost Rims Posts Total Machine setups Number of setups $ 32,900 60 140 200 Special processing Machine-hours $ 114,800 4,000 0 4,000 General factory Direct labor-hours $ 1,404,000 6,000 72,000 78,000Required:1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)2. Determine the unit product cost of each product according to the ABC system. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Answer:
1) activity rate per:
machine setup = $164.50 per setupspecial processing = $28.70 per machine hourgeneral factory = $18 per direct labor hour2) unit cost per product
total cost per rim = $28.45total cost per post = $37.34Explanation:
Direct Labor-Hours per unit Annual Production Total
Rims 0.30 26,000 units 7,800
Posts 0.50 70,000 units 35,000
Rims require $15 in direct materials per unit, and Posts require $11.
The direct labor wage rate is $15 per hour.
The ABC system has the following activity cost pools:
Estimated Activity
Activity Activity Estimated Rims Posts Total
cost pool measure OH cost
Machine setups # of setups $32,900 60 140 200
Special processing machine H $114,800 4,000 0 4,000
General factory direct LH $1,404,000 6,000 72,000 78,000
activity rate per:
machine setup = $32,900 / 200 = $164.50 per setup
special processing = $114,800 / 4,000 = $28.70 per machine hour
general factory = $1,404,000 / 78,000 = $18 per direct labor hour
total machine setup costs assigned to rims = $9,870 / 26,000 units = $0.38 per unit
total special processing costs assigned to rims = $114,800 / 26,000 units = $4.42 per unit
total general factory costs assigned to rims = $108,000 / 26,000 units = $4.15 per unit
direct labor cost per unit = 0.3 x $15 = $4.50
direct materials = $15
total cost per rim = $28.45
total machine setup costs assigned to posts = $23,030 / 70,000 units = $0.33 per unit
total special processing costs assigned to posts = $0 / 70,000 units = $0 per unit
total general factory costs assigned to posts = $1,296,000 / 70,000 units = $18.51 per unit
direct labor cost per unit = 0.5 x $15 = $7.50
direct materials = $11
total cost per post = $37.34
Yancey Productions is a film studio that uses a job-order costing system. The company’s direct materials consist of items such as costumes and props. Its direct labor includes each film’s actors, directors, and extras. The company’s overhead costs include items such as utilities, depreciation of equipment, senior management salaries, and wages of maintenance workers. Yancey applies its overhead cost to films based on direct labor-dollars. At the beginning of the year, Yancey made the following estimates:
Direct labor-dollars to support all productions $8,000,000
Fixed overhead cost $4,800,000
Variable overhead cost per direct labor-dollar $0.05
Required:
1. Compute the pre-determined overhead rate.
2. During the year, Yancey produced a film titled You Can Say That Again that incurred the following costs:
Direct materials $1,259,000
Direct labor cost $2,400,000
Compute the total job cost for this particular film.
Answer:
Yancey Productions
1. Predetermined overhead rate = $0.65
2. Computation of the total job cost for "You Can Say That Again:"
Direct materials $1,259,000
Direct labor cost $2,400,000
Overhead cost $1,560,000 ($0.65 * $2,400,000)
Total job cost = $5,219,000
Explanation:
a) Estimates:
Direct labor-dollars to support all productions $8,000,000
Fixed overhead cost $4,800,000
Variable overhead cost per direct labor-dollar $0.05
b) Computation of total estimated overhead costs:
Fixed overhead cost = $4,800,000
Variable overhead = 400,000 ($0.05 * $8,000,000 )
Total overhead cost = $5,200,000
c) Computation of predetermined overhead rate:
Predetermined overhead rate = Estimated overhead costs divided by direct labor-dollars
= $5,200,000/$8,000,000
= $0.65
Life, Inc., experienced the following events in 2018, its first year of operation.
1. Performed counseling services for $22,000 cash.
2. On February 1, 2018, paid $18,000 cash to rent office space for the coming year
3. Adjusted the accounts to reflect the amount of rent used during the year.
Required:
Based on this information alone:
A. Record the events under an accounting equation.
B. Prepare an income statement, balance sheet, and statement of cash flows for the 2016 accounting period.
C. Ignoring all other future events, what is the amount of rent expense that would be recognized in 2017?
Answer:
Life, Inc.
A. Recording the events under the accounting equation:
Debit Cash Account (Assets) $22,000
Credit Service Revenue (Equity) $22,000
To record the receipt of cash for counseling services performed.
Debit Prepaid Rent (Assets) $18,000
Credit Cash Account (Assets) $18,000
To record the payment of cash for office space.
Debit Rent Expense (Equity) $16,500
Credit Prepaid Rent (Assets) $16,500
To record the rent expense for the year.
B. Life, Inc. Income Statement for the year ended December 31, 2018:
Service Revenue $22,000
Rent expense 16,500
Net Income $5,500
C. The amount of rent expense to be recognized in 2019 is $18,000.
Explanation:
a) Data and Calculations:
Service Revenue = $22,000
Prepaid Rent = $18,000 (from February 1, 2018 to January 31, 2019)
Rent Expense for 2018 = $16,500 ($18,000 * 11/12)
b) The accounting equation is Assets = Liabilities + Equity. The equation shows that every business transaction affects the assets, liabilities, and equity. This is why it is always in balance with every given transaction.
On January 1, Merry Walker and other stockholders established a catering service. Listed below are accounts to use for transactions (a) through (f), each identified by a number. Following this list are the transactions that occurred in Walker’s first month of operations. You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box.1. Cash2. Accounts Receivable3. Supplies4. Prepaid Insurance5. Equipment6. Truck7. Notes Payable8. Accounts Payable9. Common Stock10.Dividends11.Fees Earned12.Wages Expense13.Rent Expense14.Utilities Expense15.Truck Expense16.Miscellaneous Expense17.Insurance Expense TransactionsAccount(s) DebitedAccount(s) Crediteda. Recorded jobs completed on account and sent invoices to customers. b. Received an invoice for truck expenses to be paid in February. c. Paid utilities expense d. Received cash from customers on account. e. Paid employee wages. f. Paid dividends to stockholders. What will be an ideal response?
Answer with Explanation:
Part A. Recorded jobs completed on account and sent Invoices to customers
The entry would include the recognition of revenue earned and thus this would be increase in Fees Earned account which will be credited. The amount is yet not paid which means that the Accounts Receivable account will be debited with an equal amount.
Dr Accounts receivable a/c
Cr Fees Earned a/c
Part B. Received an invoice for truck expense to be paid in February
The truck expense would related to repair and maintenance of truck which is on credit. This would be recorded as increase in Truck expenses a/c which would be debited and increase in Accounts payables a/c which must be credited.
Dr Truck expense a/c
Cr Accounts payable a/c
Part C. Paid utilities expense.
The entry would be increase an increase in the utility expense account which would be debited and the cash paid would be credited because there is a decrease in cash due to payment.
Dr Utilities a/c
Cr Cash a/c
Part D. Received cash from customers on account.
The receipt of cash asset is increase in asset and must be debited and the accounts receivables must credited because the debt paid to the customer has be decreased.
Dr Cash a/c
Cr Accounts Receivable a/c
Part E. Paid employee wages.
The wages paid is an expense and thus wage expense account must be debited. The wages are paid in cash which means there is a decrease in cash asset which must be credited.
Dr Wages Expense a/c
Cr Cash a/c
Part F. Paid dividends to stockholders.
The dividends are paid out of retained earnings and are debit in nature so this means that it is an increase in dividends which must be debited. On the other hand, decrease in cash must be credited.
Dr Dividends a/c
Cr Cash a/c
Managerial accounting differs from financial accounting in several areas. Specify whether each of the following characteristics relates to managerial accounting or financial accounting. a. Reports are usually prepared quarterly and annually. ▼ b. Information is verified by external auditors. ▼ Financial accounting Managerial accounting c. Focus is on the past. ▼ Financial accounting Managerial accounting d. Main characteristic of information is that it must be relevant. ▼ Financial accounting Managerial accounting e. Reports tend to be prepared for the parts of the organization rather than the whole organization. ▼ Financial accounting Managerial accounting f. Primary users are internal (i.e., company managers). ▼ Financial accounting Managerial accounting g. It is governed by Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). ▼ Financial accounting Managerial accounting h. The primary characteristics of information are that it must be reliable and objective. ▼ Financial accounting Managerial accounting i. Reports are prepared as needed. ▼ Financial accounting Managerial accounting j. It is not governed by legal requirements. ▼ Financial accounting Managerial accounting k. Primary users are external (i.e., creditors, investors). ▼ Financial accounting Managerial accounting l. Focus is on the future. ▼ Financial accounting Managerial accounting m. Reporting is based mainly on the company as a whole.
Answer:
Financial accounting encompasses established policies, rules and standards of recording and reporting of financial activities to achieve established plans and verification of results by auditors to obtain true monetary position of the organization for gaining stakeholder's and external users interests.
Managerial accounting can be defined as an internal process which revolves around monetary and non-monetary affairs without outside influence of auditing standards or accounting constraints.
a. Reports are usually prepared quarterly and annually
Account Relation: Financial accounting
b. Information is verified by external auditors.
Account Relation: Financial accounting
c. Focus is on the past.
Account Relation: Financial accounting
d. Main characteristic of information is that it must be relevant.
Account Relation: Managerial accounting
e. Reports tend to be prepared for the parts of the organization rather than the whole organization.
Account Relation: Managerial accounting
f. Primary users are internal (i.e, company managers).
Account Relation: Financial accounting
i. Reports are prepared as needed.
Account Relation: Financial accounting
j. The primary characteristics of information are that it must be reliable and objective
Account Relation: Financial accounting
k. Primary users are external (i.e., creditors, investors)
Account Relation: Financial accounting
l. Focus is on the future.
Account Relation: Managerial accounting
m. Reporting is based mainly on the company as a whole.
Account Relation: Financial accounting
SNC is considering an opportunity to add a large customer, Midwest Miracles, a recently launched weight-loss center that is in a precarious financial situation because its entrepreneurial founder took on a significant debt burden. Acquiring Midwest Miracles would allow SNC to increase sales by 30% in 2019. Some analysts have forecasted a 20% probability that Midwest Miracles will declare bankruptcy, and they estimate a recovery rate for suppliers of 50%. Midwest Miracles would be willing to pay significantly higher prices for SNC's products, which can increase the EBIT margin of the whole company by almost 1%. However, Midwest Miracles is likely to take a longer-than-average time to pay its invoices. Therefore, SNC's DSO is likely to increase significantly. What would you like to do about this opportunity?
2019 2020 2021
Incrementa Income ($ in thousands)
Summary Statement
Change in Sales $8,439 $8,439 $8,439
Change in Cost of Sales $7,523 $7,523 $7,523
Change in EBIT $916 $916 $916
Incremental Balance Sheet
($ in thousands)
Change in Accounts
Receivable $4,309 $4,309 $4,309
Change in Inventories $1,907 $1,907 $1,907
Change in Accounts Payable $817 $817 $817
Answer:
Even without calculating any extra costs related to the long collection time of Midwest Miracles's invoices, the expected value of selling products to them is negative. This means that if SNC sells products to Midwest, they should expect to lose money. That doesn't make any sense at all, therefore, SNC should not take this opportunity.
The reason why Midwest Miracles is willing to pay a higher price than other retailers is simple, they are desperate. They will do anything to try to save themselves, even if it means hurting other companies if they fail to do so.
The reason why a good credit score lowers interest rates, while a terrible credit score means that no bank will lend you any money is simply, businesses are risk averse. That is why no bank lends any money to Donald Trump. He has filed for bankruptcy so many times that no bank will risk lending money to him.
Angel investors take this type of risks, but if they are successful, a $200,000 investment may result in a $10 billion gain. In this case, you have to choose between losing a lot of money and earning a much smaller amount. Accepting this type of clients will soon make SNC file for bankruptcy itself.
Explanation:
If Midwest Miracles declares bankruptcy, then SNC will lose $8,439,000 x 50% (recovery rate for suppliers) = $4,219,500. If it doesn't declare bankruptcy, then SNC will make additional profits of $916,000 per year.
We must determine the expected value of MW's operation:
expected value = (-$4,219,500 x 20%) + ($916,000 x 80%) = -$843,900 + $732,800 = -$111,100
Suppose you’ll have an annual nominal income of $65,000 for each of the next three years, and the inflation rate is 5 percent per year.
Required:
a. Find the real value of your $65,000 salary for each of the next three years.
b. If you have a COLA in your contract, and the inflation rate is 5 percent per year, what is the real value of your salary of 70.000 for each year?
Answer:
a) real income in one year = $65,000/1.05 = $61,904.76
real income in two year = $65,000/1.05² = $58,956.92
real income in three year = $65,000/1.05³ = $56,149.44
b) if you have a COLA agreement, then your salary will adjust to inflation. This means that your real salary will remain the same during the 3 years = $70,000 per year.
In this case, your nominal salary will increase by 5% each year, but your salary will remain equal.
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:_____.
Activity Cost Pool Activity Measure Expected Overhead Cost Expected Activity Labor-related Direct labor-hours $ 269,100 29,900 DLHs Purchase orders Number of orders $ 11,000 220 orders Parts management Number of part types $ 78,440 106 part types Board etching Number of boards $ 85,050 1,890 boards General factory Machine-hours $ 242,400 20,200 MHs
Required:
1. Compute the activity rate for each of the activity cost pools.
2. The expected activity for the year was distributed among the company’s four products as follows:_________.
Expected Activity Activity Cost Pool Product A Product B Product C Product D Labor-related (DLHs) 7,500 13,400 3,800 5,200 Purchase orders (orders) 66 30 32 92 Parts management (part types) 29 19 47 11 Board etching (boards) 580 750 560 0 General factory (MHs) 2,600 7,300 3,700 6,600 Using the ABC data, determine the total amount of overhead cost assigned to each product.
Answer:
Activity Activity Expected Expected
cost pool measure overhead cost activity
Labor-related Direct labor-hours $269,100 29,900 DLHs
Purchase orders Number of orders $11,000 220 orders
Parts management # of part types $78,440 106 part types
Board etching # of boards $85,050 1,890 boards
General factory Machine-hours $242,400 20,200 MHs
1) cost per direct labor hour = $269,100 / 29,900 = $9
cost per order = $11,000 / 220 = $50
cost per number of parts = $78,440 / 106 = $740
cost per # of boards = $85,050 / 1,890 = $45
cost per machine hour = $242,400 / 20,200 = $12
Expected Activity
Activity Cost Pool Product A Product B Product C Product D
Labor-related (DLHs) 7,500 13,400 3,800 5,200
Purchase orders (orders) 66 30 32 92
Parts management 29 19 47 11
Board etching (boards) 580 750 560 0
General factory (MHs) 2,600 7,300 3,700 6,600
2) Using the ABC data, determine the total amount of overhead cost assigned to each product.
overhead cost assign to product A = ($9 x 7,500) + ($50 x 66) + ($740 x 29) + ($45 x 580) + ($12 x 2,600) = $149,560
overhead cost assign to product B = ($9 x 13,400) + ($50 x 30) + ($740 x 19) + ($45 x 750) + ($12 x 7,300) = $257,510
overhead cost assign to product C = ($9 x 3,800) + ($50 x 32) + ($740 x 47) + ($45 x 560) + ($12 x 3,700) = $140,180
overhead cost assign to product D = ($9 x 5,200) + ($50 x 92) + ($740 x 11) + ($45 x 0) + ($12 x 6,600) = $138,740
Ontario Resources, a natural energy supplier, borrowed $79.0 million cash on November 1, 2021, to fund a geological survey. The loan was made by Quebec Banque under a short-term financing arrangement. Ontario Resources issued a 6-month, 12% promissory note with interest payable at maturity. Ontario Resources' fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of the note by Ontario Resources. 2. Prepare the appropriate adjusting entry for the note by Ontario Resources on December 31, 2021 and journal entry for the payment of the note at maturity.
Answer:
1. Nov 1, 2021
Dr Cash 79,000,000
Cr Note payable 79,000,000
2. Dec 31, 2021
Dr Interest expense 1,580,000
Cr Interest payable 1,580,000
3. May 1, 2022
Dr Note payable 79,000,000
Dr Interest payable 1,580,000
Dr Interest expense 3,160,000
Cr Cash 83,740,000
Explanation:
1. Preparation of the journal entry for the issuance of the note
Nov 1, 2021
Dr Cash 79,000,000
Cr Note payable 79,000,000
(To record issue of note)
2. Preparation of the appropriate adjusting entry for the note
Dec 31, 2021
Dr Interest expense 1,580,000
Cr Interest payable 1,580,000
(79,000,000 x 12% x 2/12)
(To record interest expense at year end)
3. Preparation of journal entry for the payment of the note at maturity.
May 1, 2022
Dr Note payable 79,000,000
Dr Interest payable 1,580,000
(79,000,000 x 12% x 2/12)
Dr Interest expense 3,160,000
(79,000,000 x 12% x 4/12)
Cr Cash 83,740,000
(79,000,000+1,580,000+3,160,000)
(To record payment of note at maturity)
Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:
Activity Cost Pool Estimated Overhead Cost Expected Activity
Labor-related $16,800 2,000 direct labor-hours
Machine-related $16,000 8,000 machine-hours
Machine setups $30,400 800 setups
Production orders $6,600 200 orders
Product testing $12,000 500 tests
Packaging $51,000 3,400 packages
General factory $55,600 2,000 direct labor-hours
1. Compute the activity rate for each activity cost pool.
2. Compute the company's pre-determined overhead rate, assuming that the company uses a single plantwide pre-determined overhead rate based on direct labor-hours.
Answer:
Results are below.
Explanation:
To calculate the activity rate for each activity cost pool, we need to use the following formula on each activity:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Labor-related= 16,800/2,000= $8.4 per direct labor hour
Machine-related= 16,000/8,000= $2 per machine-hour
Machine setups= 30,400/800= $38 per setup
Production orders= 6,600/200= $33 per order
Product testing= 12,000/500= $24 per test
Packaging= 51,000/3,400= $15 per package
General factory= 55,600/2,000= $27.8 per direct labor-hour
Now, the plantwide predetermined factory overhead:
Total overhead= $188,400
Total direct labor hours= 2,000
Predetermined manufacturing overhead rate= 188,400/2,000
Predetermined manufacturing overhead rate= $94.2 per direct labor hour
Bonita Marina has 300 available slips that rent for $900 per season. Payments must be made in full by the start of the boating season, April 1, 2021. The boating season ends October 31, and the marina has a December 31 year-end. Slips for future seasons may be reserved if paid for by December 31, 2021. Under a new policy, if payment for 2022 season slips is made by December 31, 2021, a 5% discount is allowed. If payment for 2023 season slips is made by December 31, 2021, renters get a 20% discount (this promotion hopefully will provide cash flow for major dock repairs).
On December 31, 2017, all 300 slips for the 2018 season were rented at full price. On December 31, 2018, 240 slips were reserved and paid for the 2019 boating season, and 56 slips were reserved and paid for the 2020 boating season.
Prepare the appropriate journal entries for December 31, 2017, and December 31, 2018.
Answer and Explanation:
The Journal entry is shown below:-
1. Cash Dr, $270,000 (300 × $900)
To Unearned rent revenue $270,000
(Being cash receipts is recorded)
2. Unearned rent revenue $270,000
To rent revenue $270,000
(being unearned rent revenue is recorded)
3. Cash Dr, $205,200 (240 × $900 * 95%)
To Unearned rent revenue $205,200
(Being cash receipts is recorded)
4. Cash Dr, $40,320 (56 900 80%)
To Unearned rent revenue $40,320
(being unearned rent revenue is recorded)
Suppose that a firm has both fixed-rate and floating-rate debt outstanding. What effect will a decline in interest rates have on the firm's times-interest-earned ratio
Answer and Explanation:
The times interest earned ratio refers to the ration that shows a relationship between the earnings before interest and taxes and the interest payments. In the case when the rate of interest declines so the interest payment would also be reduced that result in an increment of the times earned ratio keeping the EBIT unchanged.
This represents that the company has the good capacity to coverup the interest payments
A selected list of accounts used by Cline Manufacturing Company follows: Code Code A. Cash F Accounts Payable B. Accounts Receivable G Factory Labor C. Raw Materials Inventory H Manufacturing Overhead D. Work In Process Inventory Cost of Goods Sold E. Finished Goods Inventory JSales Revenue Cline Manufacturing Company uses a job order system and maintains perpetual inventory records. Instructions Place the appropriate code letter in the columns indicating the appropriate account(s) to be debited and credited for the transactions listed below.Account(s) Account(s)Transactions Debited Credited1. Raw materials were purchased on account.2. Issued a check to Dixon Machine Shop for repair work on factory equipment.3. Direct materials were requisitioned for Job 280.4. Factory labor was paid as incurred.5. Recognized direct labor and indirect labor used.6. The production department requisitioned indirect materials for use in the factory.7. Overhead was applied to production based on a predetermined overhead rate of $8 per labor hour.8. Goods that were completed were transferred to finished goods.9. Goods costing $80,000 were sold for $105,000 on account.10. Paid for raw materials purchased previously on account
Answer:
1. Raw materials were purchased on account.
Account to be Debited: Raw Materials Inventory
Account to be Credited: Accounts Payable
2. Issued a check to Dixon Machine Shop for repair work on factory equipment.
Account to be Debited: Manufacturing Overhead
Account to be Credited: Cash
3. Direct materials were requisitioned for Job 280.
Account to be Debited: Work In Process Inventory Cost of Goods Sold
Account to be Credited: Raw Materials Inventory
4. Factory labor was paid as incurred.
Account to be Debited: Factory Labor
Account to be Credited: Accounts Payable
5. Recognized direct labor and indirect labor used.
Account to be Debited: Work In Process Inventory Cost of Goods Sold, Manufacturing Overhead
Account to be Credited: Accounts Payable
6. The production department requisitioned indirect materials for use in the factory.
Account to be Debited: Manufacturing Overhead
Account to be Credited: Raw Materials Inventory
7. Overhead was applied to production based on a predetermined overhead rate of $8 per labor hour.
Account to be Debited: Work In Process Inventory Cost of Goods Sold
Account to be Credited: Manufacturing Overhead
8. Goods that were completed were transferred to finished goods.
Account to be Debited: Finished Goods Inventory
Account to be Credited: Work In Process Inventory Cost of Goods Sold
9. Goods costing $80,000 were sold for $105,000 on account.
Account to be Debited: Cost of Goods Sold
Account to be Credited: Finished Goods Inventory
10. Paid for raw materials purchased previously on account
Account to be Debited: Accounts Payable
Account to be Credited: Cash
Walker & Co. (Walker) signed a written contract to lease a large neon advertising sign to Herbert Harrison, who is in the dry-cleaning business, for $148.50 a month. The contract stated that Walker, as the lessor of the sign, would "at its expense maintain and service the sign [and would perform] cleaning and repainting of sign in original color scheme as often as deemed necessary by lessor to keep sign in first-class advertising condition and make all necessary repairs to sign and equipment installed by lessor." A few weeks the sign was installed, someone hit the sign with a tomato and "little spider cobwebs" appeared in the sign's corners. Harrison repeatedly asked Walker to fix the sign, but Walker did not do so. As a result, Harrison made no further payments and Walker sued Harrison for remainder of the lease payments pursuant to the contract's terms. Did Walker make a material breach of the contract?
Answer:
I believe that Walter breached the contract because they failed to clean the sign, but I wouldn't consider it a material breach (this would be a non-material breach).
A material breach of a contract takes place when the breaching party does something (or fails to do something) that goes against the basic reason why the contract was signed. A material breach would be that Walter didn't provide the sign or that the sign never worked (didn't turn on). But in this case, the sign was a little bit dirty with little spider cobwebs appearing at its corners.
Walter broke the contract by failing to wipe the sign, but it wasn't a material breach in my opinion (this would be a non-material breach).
When a breaching party does anything (or fails to do something) that goes against the core reason for the contract's signing, it is called a substantial breach of contract.
About material breach:
A material breach would be if Walter failed to give the sign or if the sign was never turned on. However, the sign was a little dusty in this case, with small spider cobwebs emerging at its corners.
For example, if you hired a contractor to build a house, a substantial breach would be if the contractor failed to complete the project.
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Greater indirect costs are associated with:
a. Specialized engineering drawings
b. Quality specifications and testing
c. Inventoried materials and material control systems
d. All of these answers are correct.
Answer:
d. All of these answers are correct.
Explanation:
Indirect cost are cost that are not directly associated to the cost of a particular project. It could be overhead cost or subsidiary cost.example of indirect cost are; personel cost, rent, utilities cost and so on.
It should be noted that Greater indirect costs are associated with Quality specifications and testing,Inventoried materials and material control systems as well as Specialized engineering drawings.
Equity Method Investment with Basis Differences Several Years LaterSaxton Corporation purchased 25 percent of Taylor Company's voting stock on January 1, 2013, for $3 million in cash. At the date of acquisition, Taylor reported its total assets at $60 million and its total liabilities at $56 million. Investigation revealed that Taylor's plant and equipment (15-year life) was overvalued by $1.8 million and it had an unreported customer database (2-year life) valued at $500,000. Taylor declares and pays $100,000 in dividends and reports net income of $250,000 in 2016.RequiredPrepare the necessary journal entries on Saxton's books to report the above information for 2016 assuming Saxton uses the equity method to report its investment.Enter answers in thousands. For example, $1 million is $1,000 and $100,000 is $100.Calculation of 2016 Equity in Taylor's Net Income:Saxton's share of Taylor's reported income $Answer+/- Revaluation adjustments AnswerEquity in net income of Taylor $Answer General JournalDate Description Debit Credit1/1/16 AnswerCashInvestment in TaylorEquity in net income of Taylor Answer Answer AnswerCashInvestment in TaylorEquity in net income of Taylor Answer Answer12/31/16 AnswerCashInvestment in TaylorEquity in net income of Taylor Answer Answer AnswerCashInvestment in TaylorEquity in net income of Taylor Answer Answer
Answer:
Calculation of Saxton's equity in Taylor's net Income
Saxton's share of Taylor reported Income $62,500
($250,000 * 25%)
Less: Revaluation adjustment $30,000
($1,800,000/15)*25%
Equity in net income of Taylor $32,500
Saxton's equity in Taylor's net income is $32,500
Preparation of the required Journal entries
Account Titles and Explanation Debit Credit
Cash ($100,000*25%) $25,000
Investment in Taylor $25,000
(To record receipt of dividends)
Investment in Taylor $32,500
Equity in Net Income of Taylor $32,500
(To record earnings of the investee)
Manta Ray Company manufactures diving masks with a variable cost of $25. The masks sell for $34. Budgeted fixed manufacturing overhead for the most recent year was $792,000. Actual production was equal to planned production.
Required: Under each of the following conditions, state (a) whether operating income is higher under variable or absorption costing and (b) the amount of the difference in reported operating income under the two methods. Treat each condition as an independent case.
1. Production ............................................... 110,000 units
Sales ........................................................ 108,000 units
2. Production ............................................... 90,000 units
Sales ........................................................ 95,000 units
3. Production ............................................... 79,200 units
Sales ........................................................ 79,200 units
Answer:
(First Case) Absorption cost income is higher by 14,200 dollars
(Second Case) variable costing income is higher by 44,000 dollars
(Third Case) they are equal as produciton = sales
Explanation:
the difference arises when production differs with sales.
that's because variable will consider the entire amount of fixed cost as cost of the period while, absorption will capitalizethe fixed cost through inventory. If production matches sales then in both cases the fixed cost are entire expressed in the income statement. If they don't the difference is the difference times unit fixed cost.
(First Case)
fixed cost per unit $792,000 / 110,000 = $7.2
difference (110,000 - 108,000) x $7.2 = $14,200
(Second Case)
fixed cost per unit: 792,000 / 110,000 = $8.8
difference (90,000 - 95,000) x $8.8 = $44,000
(Third Case)
They match thus, no difference arises.
Assume that you are a high-level manager for a shoe manufacturer. You know that your firm could increase its profit margin by producing shoes in Indonesia, where you could hire women for $100 a month to assemble them. You also know that human rights advocates recently accused a competing shoe manufacturer of engaging in exploitative labor practices because the manufacturer sold shoes made by Indonesian women for similarly low wages. You personally do not believe that paying $100 a month to Indonesian women is unethical because you know that in their country, $100 a month is a better-than-average wage rate.
Write 1-2 paragraphs explaining whether you would have the shoes manufactured in Indonesia and make higher profits for the company or avoid the risk of negative publicity and its potential adverse consequences for the firm's reputation. Are there other alternatives? Consider the impact of the route you choose and short-term vs. long-term profits, as well as the ethical decision making criteria.
Answer:
The issue here is that you need to balance your company's profits and possible negative due to bad press.
On one side (the good and righteous side), if you do not produce shoes in Asia, your long term survival economic is doubtful, but people view your company as a company that does the right thing no matter what. Will it increase sales? Theoretically it should, but in practice it doesn't. Are Nike sales hurt because each shoe is produced in an Asian country that pays $0.25 per day? No, they aren't. The same applies to Reebok, Adidas, Puma, New Balance and every single major shoe manufacturer in the world. Bad press hurt tuna back in the 80's, but some companies are not affected by it.
The alternative (the evil, dark side of the force side) results in your company being able to survive on the long term. It will not necessarily mean that your company will grow and become the world's largest shoe manufacturer, but you will be able to survive and continue to operate.
There is also a trick that you can use to avoid reputational damage and bad press, and that is to establish a foreign subsidiary in Indonesia using a different name. Then your foreign subsidiary sells you the manufactured goods, and the blame fall son the subsidiary. Believe it or not, that simple solution is used by most corporations including clothing manufacturers, electronics, toys, etc.
If you analyze this from an ethical point of view, the alternative is much simpler. Producing in Indonesia (or India, or Burma, or Pakistan, or Vietnam, etc.) and paying a $100 salary will allow a family to live a very decent life and probably even prosper. They will have a much better lifestyle than the rest of their neighborhood. Each Indonesian worker represents one less poor family in Indonesia. On the other hand, American families will probably get hurt, but it is also much easier for an American worker to get another job that pays a normal wage (in US standards) and allows them to live well.
Business ethics applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organization.
What is business ethics?Business ethics is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical problems that can arise in a business environment.
If you analyze this from a business ethics point of view, something else is much simpler. Producing in Indonesia (or India, Burma, Pakistan, Vietnam, etc.) and paying a $ 100 salary will allow the family to live a dignified and possibly successful life.
They will have the best way of life possible. Each Indonesian worker represents one of the poorest families in Indonesia.
On the other hand, American families are more likely to be harmed, but it is also much easier for an American worker to find another job that pays the normal wage (according to US standards) and allows us to live a normal life.
Hence, this is the right approach to following ethics in business wherein the business focuses on the right path for its growth and survival in the market. Paying $100 to Indonesian workers and producing the shoes will give them a stable life to lead.
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What is the PV of an ordinary annuity with 7 annual payments of $10,000 each if the appropriate annual interest rate is 5%?
Answer:
PV= $57,8563.73
Explanation:
Giving the following information:
Number of periods= 7 years
Annual cash flow= $10,000
Interest rate= 5%
First, we need to calculate future value:
FV= {A*[(1+i)^n-1]}/i
A= annual cash flow
FV= {10,000*[(1.05^7) - 1]} / 0.05
FV= $81,420.08
Now, the present value:
PV= FV/(1+i)^n
PV= 81,420.08/1.05^7
PV= $57,8563.73
Key figures for the recent two years of both Apple and Google follow. Apple Google $ millions Current Year Prior Year Current Year Prior Year Net income $ 48,351 $ 45,687 $ 12,662 $ 19,478 Net sales 229,234 215,639 110,855 90,272 Current assets 128,645 106,869 124,308 105,408 Current liabilities 100,814 79,006 24,183 16,756 Required: 1. Compute profit margins for (a) Apple and (b) Google for the two years of data reported above. 2. In the current year, which company is more successful on the basis of profit margin? 3. Compute current ratios for (a) Apple and (b) Google for the two years reported above. 4. In the current year, which company has the better ability to pay short-term obligations according to the current ratio?
Answer:
Please see solution below
Explanation:
1. Profit margins :
= Net income / sales
Current year.
• Apple
= (48,351/229,234) × 100
= 21.1%
= (12,662/110,855) ×100
= 11.4%
Prior year
• Apple
= (45,687/215,639) × 100
= 21.2%
= (19,478/90,272) × 100
= 21.6%
2. Apple is more successful . This is because the profit margin of Apple is higher than the profit margin of Google in the current year.
3. Current ratio
=Current asset / Current liabilities
Current year
• Apple
= 128,645/100,814
= 1.28 times
= 124,308/24,183
= 5.14 times
Prior year
• Apple
= 106,869/79,006
= 1.35 times
= 105,408/16,756
= 6.29 times
4. Google, because it has the highest current ratio, compared to Apple, in the current year.
levon files a suit against manufacturing corporation the defendant believes that even if the plaintiff manufactoring corporation should
Answer: d. file a motion to dismiss.
Explanation:
A Motion to Dismiss can be filed by either the Plaintiff or the Defendant but is usually done by the defendant when they believe that there is no validity to the claims of the plaintiff.
In this instance, Manufacturing Corporation does not believe that it is liable for the claims made by the Plaintiff which means they are question the validity of those claims. They can therefore file a motion to dismiss the case.
Which of the following corectly illustrates how prices serve as signals to consumers
Answer:
Most word-processing programs allow the user to select a command from the menu to insert a graphic. Clicks in the document where you want your file, choose insert and picture click from file select the image the press open and you picture will become inserted in to the document.
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