It is common for supermarkets to carry both generic (store-label) and brand-name (producer-label) varieties of sugar and other products. Many consumers view these products as perfect substitutes, meaning that consumers are always willing to substitute a constant proportion of the store brand for the producer brand. Consider a consumer who is always willing to substitute four pounds of a generic store-brand sugar for two pounds of a brand-name sugar. Do these preferences exhibit a diminishing marginal rate of substitution between store-brand and producer-brand sugar.
Required:
a. Do these preferences exhibit a diminishing marginal rate of substitution? Assume that this consumer has $24 of income to spend on sugar, and the price of store-brand sugar is $1 per pound and the price of producer-brand sugar is $3 per pound.
b. How much of each type of sugar will be purchased?
c. How would your answer change if the price of store-brand sugar was $2 per pound and the price of producer-brand sugar was $3 per pound?
Answer:
a. Do these preferences exhibit a diminishing marginal rate of substitution?
no, because the consumer is actually purchasing a higher amount of goods, the only difference is that they are paying a lower price.Assume that this consumer has $24 of income to spend on sugar, and the price of store-brand sugar is $1 per pound and the price of producer-brand sugar is $3 per pound.
The consumer will purchase 24 pounds of price of store sugar simply because the price is much lower, not because he/she wants to consume less. Actually a lower price might result in an increase of consumption.b. How much of each type of sugar will be purchased?
If the consumer is willing to spend the whole $24 on sugar, he/she will purchase 24 pounds of store brand sugar. The alternative is to buy 8 pounds of producer brand sugar, and that is not a good deal.c. How would your answer change if the price of store-brand sugar was $2 per pound and the price of producer-brand sugar was $3 per pound?
The consumer would purchase 12 pounds of store brand sugar instead of 24, but he/she will still not purchase producer brand sugar since the difference in price is still too high. Remember that consumers view both types of sugar as perfect substitutes, so they will purchase the brand with the lower price.On February 1, 2018, Cromley Motor Products issued 6% bonds, dated February 1, with a face amount of $65 million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $65,000 of the bonds as a long-term investment. The fiscal years of both firms end 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 issued on February 1, 2018.
2-a. Prepare amortization schedules that indicate Cromley’s effective interest expense for each interest period during the term to maturity.
2-b. Prepare amortization schedules that indicate Barnwell’s effective interest revenue for each interest period during the term to maturity.
3. Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell’s investment on February 1, 2018.
4. Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2020.
Answer:
1. Determine the price of the bonds issued on February 1, 2018.
the market value of each bond:
PV of face value = $1,000 / (1 + 4%)⁸ = $730.69PV of coupon payments = $30 x 6.7327 (PV annuity factor, 4%, 8 periods) = $201.98market price per bond = $932.67
2-a. I used an excel spreadsheet since there is not enough room here: Cromley Motors PDF
2-b. Again I used an excel spreadsheet since there is not enough room here:
3. February 1, 2018, bonds issued at a discount
Dr Cash 60,623,550
Dr Discount on bonds payable 4,376,450
Cr Bonds payable 65,000,000
4. Cromley's records:
July 31, 2018, first coupon payment
Dr Interest expense 2,424,942
Cr Cash 1,950,000
Cr Discount on bonds payable 474,942
January 31, 2019, second coupon payment
Dr Interest expense 2,443,940
Cr Cash 1,950,000
Cr Discount on bonds payable 493,940
July 31, 2019, third coupon payment
Dr Interest expense 2,463,697
Cr Cash 1,950,000
Cr Discount on bonds payable 513,697
January 31, 2020, fourth coupon payment
Dr Interest expense 2,484,245
Cr Cash 1,950,000
Cr Discount on bonds payable 534,245
Barnwell's records:
July 31, 2018, first coupon payment
Dr Cash 1,950
Dr Discount on bonds payable 2,425
Cr Interest revenue 475
January 31, 2019, second coupon payment
Dr Cash 1,950
Dr Discount on bonds payable 494
Cr Interest revenue 2,444
July 31, 2019, third coupon payment
Dr Cash 1,950
Dr Discount on bonds payable 514
Cr Interest revenue 2,464
January 31, 2020, fourth coupon payment
Dr Cash 1,950
Dr Discount on bonds payable 556
Cr Interest revenue 2,484
Is the coffee market growing or shrinking and why
Technology Accessories Inc. is a designer, manufacturer, and distributor of accessories for consumer electronic products. Early in 20Y3, the company began production of a leather cover for tablet computers, called the iLeather. The cover is made of stitched leather with a velvet interior and fits snugly around most tablet computers. In January, $750,000 was spent on developing marketing and advertising materials. For the first six months of 20Y3, the company spent an additional $1,400,000 promoting the iLeather. The product was ready for manufacture on January 21, 20Y3. Technology Accessories Inc. uses a job order cost system to accumulate costs for the iLeather. Direct materials unit costs for the iLeather are as follows:________.Leather $10.00
Velvet 5.00
Packaging 0.40
Total $15.40
The actual production process for the iLeather is fairly straightforward. First, leather is brought to a cutting and stitching machine. The machine cuts the leather and stitches an exterior edge into the product. The machine requires one hour per 125 iLeathers.
After the iLeather is cut and stitched, it is brought to assembly, where assembly personnel affix the velvet interior and pack the iLeather for shipping. The direct labor cost for this work is $0.50 per unit. The completed packages are then sold to retail outlets through a sales force. The sales force is compensated by a 20% commission on the wholesale price for all sales. Total completed production was 500,000 units during the year. Other information is as follows:
Number of iLeather units sold in 20Y3 460,000
Wholesale price per unit $40
Factory overhead cost is applied to jobs at the rate of $1,250 per machine hour. An additional 22,000 cut and stitched iLeathers were waiting to be assembled on December 31, 20Y3.
Instructions
1. Prepare an annual income statement for the iLeather product, including supporting calculations, from the information provided.
2. Determine the balances in the finished goods and work in process inventories for the iLeather product on December 31, 20Y3.
Answer:
1. Net income = $656,000
2. Balance in finished goods inventories is $1,036,000; and balance in work in progress inventories is $558,800.
Explanation:
1. Prepare an annual income statement for the iLeather product, including supporting calculations, from the information provided.
Note: See the attach excel file for the annual income statement.
In the excel file, the following calculations are use:
Workings:
w.1: Units of ending finished goods = Units of finished goods produced - Units of finished goods sold = 500,000 - 460,000 = 40,000
w.2: Sales revenue = Selling price per unit * Unit of finished goods sold = $40 * 460,000 = $18,400,000
w.3: Overhead cost per unit = Cost per machine hour / Number of iLeather per machine hour = $1,250 / 125 = $10
w.4: Cost of goods manufactured per unit = Material cost per unit + Direct labor cost per unit + Overheads per unit = 15.4 + 0.5 + 10 = $25.90
w.5: Cost of goods sold = Cost of goods manufactured per unit * Units of finished goods sold = $25.90 * 460,000 = $11,914,000
w.6: Salespersons commission = Percentage of commission * Sales revenue = 20% * $18,400,000 = $3,680,000
2. Determine the balances in the finished goods and work in process inventories for the iLeather product on December 31, 20Y3.
Balance in finished goods inventories = Unit of ending finished goods * Cost of goods manufactured per unit = 40,000 * $25.90 = $1,036,000
Balance in work in progress inventories = Units of work in progress * (Material cost + Overhead per unit) = 22,000 * (15.4 + $10) = 22,000 * 25.4 = $558,800
Therefore, balance in finished goods inventories is $1,036,000; and balance in work in progress inventories is $558,800.
1. The preparation of the annual income statement for the iLeather product is as follows:
Technology Accessories Inc.
Income Statement for the iLeather Product
For the Year ended December 31, 20Y3
Sales revenue $18,400,000
Cost of goods sold 11,914,000
Gross profit $6,486,000
Expenses:
Marketing and advertising 750,000
Sales promotion 1,400,000
Sales commission 3,680,000
Total expenses $5,830,000
Net operating income $656,000
2. The balances in the finished goods and work in process inventories on December 31, 20Y3 are as follows:
Finished goods inventory = $1,036,000
Work in process inventory = $558,800
Data and Calculations:
Marketing and advertising materials = $750,000
Product promotion costs = $1,400,000
Total direct materials cost per unit = $15.40
Total direct labor cost per unit = $0.50
Production units = 500,000 units
Units sold = 460,000 units
Finished goods inventory = 40,000 units (500,000 - 460,000)
Machine hours used = 4,000 hours (500,000/125)
Factory overhead costs = $5,000,000 ($1,250 x 4,000).
Work in process inventory costs:
Factory overhead costs = $220,000 (22,000/125 x $1,250).
Direct materials = $338,800 ($15.40 x 22,000)
The total work in process inventory costs = $558,800 ($220,000 + $338,800)
Wholesale price per unit = $40
Sales revenue = $18,400,000 ($40 x 460,000)
Sales commission = 20% of wholesale price or $8 per unit ($40 x 20%)
The total sales commission = $3,680,000 ($8 x 460,000).
Production costs:
Direct materials costs = $7,700,000 ($15.40 x 500,000)
Direct labor costs = $250,000 ($0.50 x 500,000)
Factory overhead costs = $5,000,000
Total production costs = $12,950,000
Cost per unit = $25.90 ($12,950,000/500,000)
Finished goods inventory costs = $1,036,000 ($25.90 x 40,000)
Cost of goods sold = $11,914,000 ($25.90 x 460,000)
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An Internet company in South Florida is receiving frequent requests from employees who want to telecommute. The company's CTO wants to be flexible and accommodate as many employees as possible. At the same time, the CTO wants to achieve productivity goals and keep to a minimum any legal issues that may arise from this new work alternative. After reading the information presented in this chapter and other sources, answer the following questions and support your answers with references: Provide three guidelines that telecommuters need to follow and why?
Answer with Explanation:
Following are the three guidelines that telecommuters must follow along with its benefits:
Confidentiality must not be breached because the employee is working from home or somewhere he feel comfortable. So the employee must ensure that the he doesn't intentionally and unintentionally breach confidentiality agreement.Ensure Time management which means if they are not giving agreed time to the company affairs then they are not affecting several tasks that will end up in increase in cost and decrease in customer satisfaction.Achieve daily goals because they are accountable for the tasks they are assigned and must remain focused. This will fulfill the purpose of recruiting them which means that the employee is fulfilling his promise of delivering the work agreed. This will help the company gain the benefit for which the company has recruited the employee.Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies that can't raise funds through other means. In exchange for this financing, VCs receive a share of a company's equity, and the founders of the firm typically stay on and continue to manage the company. A VC firm wants management to focus on improving , while the managers may also act to increase . VC investments have two typical components:_______.
(1) managers maintain some ownership in the company and often earn additional equity if the company performs well;
(2) VCs demand seats on the company's board. Management ownership serves to the alignment of the incentives of managers with the incentives of owners.
Answera dnd Explanation:
A. The incentive conflict in principal-agent relationship as it concerns venture capitalism is conflict between venture capitalists who are the principals and the managers of the business investment who are the agents. The conflict is that venture capitalists are put to increase value of their investment and make profit while salaried managers are only out to feel their pockets through their managerial role in the company as they do not have an interest in the company and are unaffected by the loss or failure of the company. This is known as the principal agent moral hazard issue in venture capitalism
B. By managers maintaining some ownership in the company, there us reduced conflict as managers now see a reason to make sure company succeeds since they have an interest
Venture capitalists aim to have a seat in the board to make sure managers do not take bad decisions since they are able to veto such decisions
Chance Enterprises leased equipment from Third Bank Leasing on January 1, 2018. Third Bank purchased the equipment at a cost of $1,000,000. Chance elected the short-term lease option. Appropriate adjusting entries are made annually.
Related Information:
Lease term 1 year (4 quarterly periods)
Quarterly lease payments $40,000 at Jan. 1, 2018, and at Mar. 31, June 30, and Sept. 30.
Economic life of asset 5 years
Interest rate charged by the lessor 8%
Required:
Prepare appropriate entries for Chance from the beginning of the lease through December 31, 2018.
Answer:
Since this is a short lease, you do not need to make any journal entries regarding right of use asset or lease liabilities. You only record the total lease payment as an expense in your income statement (similar to renting an office).
January 1, 2018, first lease payment to Third Bank Leasing
Dr Lease expense 40,000
Cr Cash 40,000
March 31, 2018, second lease payment to Third Bank Leasing
Dr Lease expense 40,000
Cr Cash 40,000
June 30, 2018, third lease payment to Third Bank Leasing
Dr Lease expense 40,000
Cr Cash 40,000
September 30, 2018, fourth lease payment to Third Bank Leasing
Dr Lease expense 40,000
Cr Cash 40,000
Nickleson Company had an unadjusted cash balance of $6,558 as of May 31. The company’s bank statement, also dated May 31, included a $86 NSF check written by one of Nickleson’s customers. There were $1,223 in outstanding checks and $240 in deposits in transit as of May 31. According to the bank statement, service charges were $85, and the bank collected an $1,050 note receivable for Nickleson. The bank statement also showed $18 of interest revenue earned by Nickleson.
Required
Determine the true cash balance as of May 31.
Answer:
True cash balance $7,455
Explanation:
Calculation to Determine the true cash balance as of May
Unadjusted cash balance of $6,558
Add bank collection note $1,050
Add interest revenue $18
Less NSF check $86
Less service charges $85
True cash balance $7,455
Therefore True cash balance is $7,455
Grady is a member of a large family and received the following payments this year. For each payment, determine whether the payment constitutes realized income and determine the amount of each payment Grady must include in his gross income. (Leave no answer blank. Enter zero if applicable.)
A gift of $60,000 of Ford Motor Bonds. Grady received the bonds on October 31, and he received $1,800 of semiannual interest from the bonds on December 31.
Answer:
Since Grady received the $60,000 gift, he does not owe any taxes on that transaction. When a gift is made, the receiving party pays no taxes, but the giving party has to pay taxes if it exceeds the $15,000 annual threshold or the $11.4 million lifetime exclusion.
But Grady must include the interests that he earned from the bonds as part of his gross income ($1,800). Interests are taxed as ordinary income.
7 reasons why marketing must be studied.
hope this help!
Moon Company sells Product Q at $6 a unit. In 20XO fixed costs are expected to be $200,000 and variable costs are estimated at $4 a unit. How many units of Product Q must Moon sell to generate operating income of $40,000
Answer:
Break-even point in units= 120,000
Explanation:
Giving the following information:
Selling price= $6
Unitary variable cost= $4
Fixed costs= $200,000
Desired profit= $40,000
To calculate the number of units to be sold, we need to use the following formula:
Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit
Break-even point in units= (200,000 + 40,000) / (6 - 4)
Break-even point in units= 120,000
Cost of money Four fundamental factors affect the cost of money: (1) the return that borrowers expect to earn on their investments, (2) the preference of savers to spend their income in the current period rather than delay their consumption until some future period, (3) the risks associated with the investment, and (4) expected inflation. Consider the following statements that address these factors, and indicate which you think are true.
Statement 1: All things being equal, rational savers and investors prefer to invest in an asset that provides a 12% return rather than one that provides an 8% return.
Statement 2: All things being equal, savers and investors prefer more risk to less risk and prefer lower risk premiums on projects exhibiting higher levels of risk.
Statement 3: On average and everything else held constant, borrowers will attempt to pay the maximum possible cash flows that will motivate savers and investors to participate in the transaction.
Statement 4: All things being equal, savers and investors expect to receive some amount of maturity premium as compensation for their deferred consumption.
The true statements are:______.
a. 1, 2, and 3.
b. 1 and 3.
c. 2 and 4.
d. 1, 2, 3, and 4.
Answer:
b. 1 and 3.
Explanation:
The investors are of two types either they are risk averse or risk seekers. Risk averse are those who are not willing to take risks for their investments. They accept lower returns but they are not ready to take more risks than their appetite. Risk seekers are those who demand more risk for more returns. The risks level is so high that even their whole investments can go away but they take this risk to achieve high extra ordinary returns.
Kirk wants to get an FHA loan. Which of the following is Kirk himself not likely to do during the application process?
Answer:
C. Find a lender who is willing to do FHA-loans.
Explanation:
The Federal Housing Administration loan program was instituted by the United States government to make owning homes by the citizens easier. To be qualified, an applicant's minimum credit score should be 500 with a downpayment of 3.5% with a credit score of 580 and 10% for a credit score which is between 500 to 579. He must be willing to do, mortgage insurance, and the house which he wishes to own must meet the FHA's requirements.
However, it does not depend on him to find a lender willing to do FHA loans, rather, the lender must be approved by the Federal Housing Administration. He can only obtain his loan from an FHA-approved lending financial institution.
The Federal Housing Administration loan program was established by the US government to make homeownership more accessible to individuals.
To be considered, an applicant's credit score must be at least 500, with a downpayment of 3.5 percent for a credit score of 580 and 10% for a credit score of 500 to 579.
He must be ready to pay for mortgage insurance, and the home he seeks to purchase must fulfill FHA guidelines.
However, finding a lender ready to offer FHA loans is not his responsibility; rather, the lender must be approved by the Federal Housing Administration. Only an FHA-approved lending financial institution can provide him with a loan.
So, Option C is correct.
The other Options are incorrect as
Option A is incorrect as finding a home for an FHA loan is the most important thing so this is not the correct option.
Option B is incorrect as visiting an FHA office and ordering an appraisal on the home is also one of the important steps for an FHA loan.
Option D is incorrect as paying mortgage insurance lowers the risk to the lender making a loan to you.
Thus Option C is correct as this is the only option that is not necessary for an FHA loan.
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The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31.On July 31, the company’s Cash account has a $25,199 debit balance, but its July bank statement shows a $27,607 cash balance. Check No. 3031 for $1,530, Check No. 3065 for $541, and Check No. 3069 for $2,298 are outstanding checks as of July 31. Check No. 3056 for July rent expense was correctly written and drawn for $1,260 but was erroneously entered in the accounting records as $1,250. The July bank statement shows the bank collected $9,000 cash on a note for Branch. Branch had not recorded this event before receiving the statement. The bank statement shows an $805 NSF check. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF. The July statement shows a $14 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received. Branch’s July 31 daily cash receipts of $10,132 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.Transaction General journal Debit Credit g. Record the adjusting entry required, if any, related to the July 31 cash balance.Record the adjusting entry required, if any, related to the outstanding checks.Record the adjusting entry required, if any, related to Check No. 3056.Record the adjusting entry required, if any, for the collection of the note by bank for Branch.Record the adjusting entry required, if any, related to the NSF check.Record the adjusting entry required, if any, related to bank service charges.Record the adjusting entry required, if any, related to the July 31 deposit.
Answer:
Bank account reconciliation:
bank account balance $27,607
- outstanding checks ($4,369)
+ deposits in transit $10,132
reconciled balance $33,370
Cash account reconciliation:
cash account balance $25,199
- error in processing check no. 3056 ($10)
+ collection of note $9,000
- NSF check ($805)
- bank fees ($14)
reconciled balance $33,370
adjusting journal entries:
Dr Rent expense 10
Cr Cash 10
Dr Cash 9,000
Cr Notes receivable 9,000
Dr Accounts receivable 805
Cr Cash 805
Dr Miscellaneous expenses 14
Cr Cash 14
Here are comparative statement data for Duke Company and Lord Company, two competitors. All balance sheet data are as of December 31, 2020, and December 31, 2019.
Duke Company Lord Company
2020 2019 2020 2019
Net sales $1,866,000 $559,000
Cost of goods sold 1,059,888 297,388
Operating expenses 264,972 78,819
Interest expense 7,464 4,472
Income tax expense 54,114 6,149
Current assets 323,000 $311,200 82,000 $78,300
Plant assets (net) 521,400 501,200 138,300 125,100
Current liabilities 66,000 75,600 36,200 31,000
Long-term liabilities 108,200 90,200 29,000 24,600
Common stock, $10 par 496,000 496,000 122,000 122,000
Retained earnings 174,200 150,600 33,100 25,800
A) Prepare a vertical analysis of the 2020 income statement data for Duke Company and Lord Company.
Condensed Income Statement
For the Year Ended December 31, 2017
Duke Company Lord Company
Dollars % Dollars %
Net Sales 1,849,000 100% $546,000 100%
Cost of Goods Sold 1,063,200 57.5% 289,000 52.9%
Gross Profit $785,800 42.52% 57,000 47%
Operating Expenses 240,000 12.9% 82,000 15%
Income from Operations 545,800 29.5% 175,000 32%
Other Expenses and Loses
Interest Expense 6,800 0.4% 3,600 0.7%
Income Before Income
Tax 539,000 29.2% 171,400 31.4%
Income Tax Expense 62,000 3.4% 28,000 5.1%
Net Income/Loss $477,000 25.8% $143,400 26.3%
B) Compute the 2017 return on assets and the return on common stockholders’ equity for both companies.
Answer:
See explanation as attached.
Explanation:
a. Please find attached vertical analysis
Note that the percentage for Duke company and lord company were computed as;
(Particular of amount / Sales) × 100
b. Return on assets
• Duke company 57.59%
• Lord company 67.69%
Return on common stockholder equity
• Duke company 72.44%
• Lord company 94.68%
Breakdown of the above answers are attached.
Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking compound that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May:
Production data:
Pounds in process, May 1; materials 100% complete; conversion 80% complete 10,000
Pounds started into production during May 100,000
Pounds completed and transferred out _____
Pounds in process, May 31; materials 70% complete; conversion 30% complete 50,000
Cost data:
Work in process inventory, May 1:
Materials cost $152,300
Conversion cost $63,300
Cost added during May:
Materials cost $791,450
Conversion cost $348,100
Required:
a. Compute the equivalent units of production for materials and conversion for May.
b. Compute the cost per equivalent unit for materials and conversion for May.
c. Compute the cost of ending work in process inventory for materials, conversion, and in total for May.
d. Compute the cost of units transferred out to the next department for materials, conversion, and in total for May.
e. Prepare a cost reconciliation report for May.
Answer:
a. Equivalent units
Materials = Beginning inventory + Units started and completed + Ending Inventory
Units started and completed = Pounds started into production - Pounds in process
= 100,000 - 50,000 = 50,000
= 10,000 + 50,000 + (70% * 50,000)
= 95,000
Conversion
= 10,000 + 50,000 + (30% * 50,000)
= 75,000
b. Material Cost per equivalent unit = Material cost/ Equivalent material units
= (Beginning material cost + Cost during May) / 95,000
= (152,300 + 791,450)/95,000
= $9.93
Conversion cost per Equi unit = Conversion cost/ Equivalent Conversion units
= (63,300 + 348,100)/75,000
= $5.49
c. Cost of Ending WIP Material = Material ending WIP * Cost per equivalent unit
= (70% * 50,000) * 9.93
= $347,550
Cost of Ending WIP Conversion = Conversion ending WIP * Cost per equivalent unit
= (30% * 50,000) * 5.49
= $82,350
Total = 347,550 + 82,350 = $429,900
d. Units completed and transferred out = Beginning WIP inventory + Units started during May - Ending inventory
= 10,000 + 100,000 - 50,000
= 60,000
Materials cost transferred
= 60,000 *9.93
= $595,800
Conversion Cost transferred
= 60,000 * 5.49
= $329,400
Total = 595,800 + 329,400 = $925,200
e.
Beginning WIP inventory(152,300 + 63,300) $215,600
Current costs (791,450 + 348,100) $1,139,550
Total costs $1,355,150
Cost accounted:
Cost of units completed and transferred $925,200
Cost of ending work in process $429,900
Total costs accounted for $1,355,150
Use the financial statements of Heifer Sports Inc. to find the information below for Heifer. (Use 365 days a year. Round all answers to 2 decimal places except $ amounts.)
Income Statement 2020
Sales $ 5,760,000
Cost of goods sold 3,045,000
Depreciation 302,500
Selling and administrative expenses 1,620,000
EBIT $ 792,500
Interest expense 174,000
Taxable income $ 618,500
Taxes 281,300
Net income $ 337,200
Balance Sheet, Year-End 2020 2019
Assets
Cash $ 41,100 $ 95,000
Accounts receivable 590,000 1,648,200
Inventory 438,100 1,146,500
Total current assets $ 1,069,200 $ 2,889,700
Fixed assets 2,821,000 6,771,000
Total assets $ 3,890,200 $ 9,660,700
Liabilities and Stockholders' Equity Accounts payable $ 312,400 $ 1,176,000
Short-term debt 505,000 1,445,500
Total current liabilities $ 817,400 $ 2,621,500
Long-term bonds 1,733,800 5,777,400
Total liabilities $ 2,551,200 $ 8,398,900
Common stock $ 313,900 $ 313,900
Retained earnings 1,025,100 947,900
Total stockholders' equity $ 1,339,000 $ 1,261,800
Total liabilities and stockholders' equity $ 3,890,200 $ 9,660,700
a. Inventory turnover ratio
b. Debt/equity ratio in 2020
c. Cash flow from operating activities in 2020
d. Average collection period
e. Asset turnover ratio
f. Interest coverage ratio
g. Operating profit margin
h. Retun on equity
J. Compound leverage ratio
k. Net cash provided by operating activities
Answer:
See calculations below
Explanation:
a. Inventory turn over ratio = 1.92
b. Debt equity ratio = 1.67
c. Cash flow from operating activities in 2020 = $3,269,900
d. Average collection period = 71 days
e. Asset turnover ratio = 1.48
f. Interest coverage ratio = 4.56
g. Operating income = 13.76%
h. Return on equity = 25.18%
j. Compound leverage ratio = 2.27
K. Net cash provided by operating activities = $3,269,900
Please see the whole breakdown in the attached
Ricky’s Piano Rebuilding Company has been operating for one year. On January 1, at the start of its second year, its income statement accounts had zero balances and its balance sheet account balances were as follows:______
Cash $6,000
Accounts Payable $8,000
Accounts Receivable 25,000
Deferred Revenue (deposits) 3,200
Supplies 1,200
Notes Payable (long-term) 40,000
Equipment 8,000
Common Stock 8,000
Land 6,000
Retained Earnings 9,000
Buildings 22,000
Following are the January transactions:______
A. Received a $500 deposit from a customer who wanted her piano rebuilt in February.
B. Rented a part of the building to a bicycle repair shop; $300 rent received for January.
C. Delivered five rebuilt pianos to customers who paid $14,500 in cash.
D. Delivered two rebuilt pianos to customers for $7,000 charged on account.
E. Received $6,000 from customers as payment on their accounts.
F. Received an electric and gas utility bill for $350 for January services to be paid in February.
G. Ordered $800 in supplies.
H. Paid $1,700 on account in January.
I. Paid $10,000 in wages to employees in January for work done this month.
J. Received and paid cash for the supplies in (g).
1. Prepare an income statement for the month ended and at January 31.
2. Prepare a statement of retained earnings for the month ended and at January 31.
3. Prepare a classified balance sheet for the month ended and at January 31.
4. Prepare a statement of retained earnings for the month ended and at January 31.
Answer and Explanation:
1. The Preparation of income statement is presented below:-
Ricky's Piano Rebuilding Company
Income Statement
For the Month Ended January 31
Particulars Amount
Rent Revenue $300
Service Revenue $21,500 $21,800
Less: Expenses
Utility Expense $350
Wages Expense $10,000
Total expenses $10,350
Net income $11,450
2. The preparation of retained earnings is prepared below:-Ricky's Piano Rebuilding Company
Retained Earning Statement
For the Month Ended January 31
Particulars Amount
Retained Earnings $9,000
Add:
Net income $11,450
Less:
Dividends $0
Retained earnings, January 31 $20,450
3. The Preparation of balance sheet is presented below:-
Ricky's Piano Rebuilding Company
Budgeted Balance Sheet
As at January 31
Assets Amount
Current Assets:
Cash $14,800
Accounts Receivable $26,000
Supplies $2,000
Total Current Assets $42,800
Equipment $8,000
Building $22,000 $30,000
Land $6,000
Total Assets $78,800
Liabilities and stockholders equity
Liabilities
Current Liabilities
Accounts Payable $6,300
Deferred Revenue $3,700
Utility Payable $350
Total Current Liabilities $10,350
Notes Payable $40,000
Total Stockholders' Equity
Common Stock $8,000
Retained Earnings $20,450
Total Stockholders' Equity $28,450
Total Liabilities and stockholders’
equity $78,800
1. The Preparation of income statement is presented below:-
Ricky's Piano Rebuilding Company
Income Statement
For the Month Ended January 31
Particulars Amount
Rent Revenue $300
Service Revenue $21,500 $21,800
Less: Expenses
Utility Expense $350
Wages Expense $10,000
Total expenses $10,350
Net income $11,450
2. The preparation of retained earnings is prepared below:-
Ricky's Piano Rebuilding Company
Retained Earning Statement
For the Month Ended January 31
Particulars Amount
Retained Earnings $9,000
Add:
Net income $11,450
Less:
Dividends $0
Retained earnings, January 31 $20,450
3. The Preparation of balance sheet is presented below:-
Ricky's Piano Rebuilding Company
Budgeted Balance Sheet
As at January 31
Assets Amount
Current Assets:
Cash $14,800
Accounts Receivable $26,000
Supplies $2,000
Total Current Assets $42,800
Equipment $8,000
Building $22,000 $30,000
Land $6,000
Total Assets $78,800
Liabilities and stockholders equity
Liabilities
Current Liabilities
Accounts Payable $6,300
Deferred Revenue $3,700
Utility Payable $350
Total Current Liabilities $10,350
Notes Payable $40,000
Total Stockholders' Equity
Common Stock $8,000
Retained Earnings $20,450
Total Stockholders' Equity $28,450
Total Liabilities and stockholders’
equity $78,800
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The following is a December 31, 2021, post-closing trial balance for Almway Corporation.
Account Title Debits Credits
Cash $65,000
Investment in equity securities 130,000
Accounts receivable 70,000
Inventory 210,000
Prepaid insurance (for the next 9 months) 8,000
Land 110,000
Buildings 430,000
Accumulated depreciation—buildings $110,000
Equipment 120,000
Accumulated depreciation—equipment 70,000
Patent (net) 20,000
Accounts payable 95,000
Notes payable 160,000
Interest payable 30,000
Bonds Payable 250,000
Common stock 330,000
Retained earnings 118,000
Totals $1,163,000 $1,163,000
Additional information:
The investment in equity securities account includes an investment in common stock of another corporation of $40,000 which management intends to hold for at least three years. The balance of these investments is intended to be sold in the coming year.The land account includes land which cost $35,000 that the company has not used and is currently listed for sale.The cash account includes $25,000 restricted in a fund to pay bonds payable that mature in 2024 and $33,000 restricted in a three-month Treasury bill.The notes payable account consists of the following:
a $40,000 note due in six months.
a $60,000 note due in six years.
a $60,000 note due in five annual installments of $12,000 each, with the next installment due February 15, 2022.
The $70,000 balance in accounts receivable is net of an allowance for uncollectible accounts of $7,000.The common stock account represents 110,000 shares of no par value common stock issued and outstanding. The corporation has 500,000 shares authorized.
Required:
Prepare a classified balance sheet for the Almway Corporation at December 31, 2021.
Answer:
Almway Corporation
Classified Balance Sheet
As at December 31, 2021
Assets:
Current Assets:
Cash:
Balance- unrestricted $7,000
Restricted Cash - short-term 33,000
Restricted Cash - long-term 25,000
Short-term Investment 90,000
Accounts receivable 77,000
Less Uncollectible (7,000) 70,000
Inventory 210,000
Prepaid insurance
(for the next 9 months) 8,000 $443,000
Land 110,000
Buildings 430,000
Accumulated
depreciation (110,000) 320,000
Equipment 120,000
Accumulated
depreciation (70,000 ) 50,000
Patent (net) 20,000
Long-term Investment 40,000 $540,000
Total Assets $983,000
Liabilities + Equity:
Current Liabilities:
Accounts payable 95,000
Short-term Notes payable 52,000
Interest payable 30,000 $177,000
Long-term Notes Payable 108,000
Bonds Payable 250,000 $358,000
Total liabilities $535,000
Common stock
500,000 Authorized, no par
110,000 Issued & outstanding 330,000
Retained earnings 118,000 $448,000
Total Liabilities + Stockholders Equity $983,000
Explanation:
a) Data and Calculations:
Almway Corporation
Trial Balance
December 31, 2021:
Account Title Debits Credits
Cash $65,000
Investment in equity securities 130,000
Accounts receivable 70,000
Inventory 210,000
Prepaid insurance
(for the next 9 months) 8,000
Land 75,000
Land (available for sale) 35,000
Buildings 430,000
Accumulated depreciation—buildings $110,000
Equipment 120,000
Accumulated depreciation—equipment 70,000
Patent (net) 20,000
Accounts payable 95,000
Notes payable 160,000
Interest payable 30,000
Bonds Payable 250,000
Common stock 330,000
Retained earnings 118,000
Totals $1,163,000 $1,163,000
Investment in equity securities 130,000
Short-term Investment (90,000)
Long-term Investment (40,000)
Land 110,000
Available for Sale Investment (35,000)
Land balance 75,000
Cash $65,000
Restricted Cash - short-term (33,000)
Restricted Cash - long-term (25,000)
Balance- unrestricted $7,000
Notes payable 160,000
Short-term payable (40,000 +12,000) (52,000)
Long-term payable (60,000 + 48,000) (108,000)
Accounts receivable (70,000 + 7,000) 77,000
Less uncollectible accounts (7,000)
Accounts receivable balance 70,000
Drake Appliance Company, an accrual basis taxpayer, sells home appliances and service contracts. Determine the effect of each of the following transactions on the company's 2020 gross income assuming that the company uses any available options to defer its taxes.
a. In December 2019. the company received a $1,200 advance payment from a customer for an appliance that Drake special ordered from the manufacturer. The appliance did not arrive from the manufacturer until January 2019, and Drake immediately delivered it to the customer. The sale was reported in 20IS for financial accounting purposes.
b. In October 2019. the company sold a 6-month service contract for $240. The company also sold a 36-month service contract for $1,260 in July 2019.
Answer:
The correct solution is:
(a) $1200
(b) $330
Explanation:
(a)
The advance payment was issued throughout 2019, but perhaps the items were not shipped in 2019. The products will be shipped in 2020 as well as revenues for financial accounting requirements will be published in 2020. Thus, $1200 would include total sales for 2020.
So,
The $1200 total is reflected in the taxable profits for 2020.
(b)
The service contract, for 6 months will be:
⇒ [tex]Gross \ income=240\times \frac{3}{6}[/tex]
[tex]=120[/tex] ($)
The service contract, for 36 months will be:
⇒ [tex]Gross \ income = 1260\times \frac{6}{36}[/tex]
[tex]=210[/tex] ($)
In 2020, the total gross income included will be:
[tex]=120+210[/tex]
[tex]=330[/tex] ($)
So,
The amount $330 seems to be included throughout 2020 gross income.
The following is a payroll sheet for Otis Imports for the month of September 2020. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal income tax rate for all employees and a 7.65% FICA tax on employee and employer on a maximum of $128,400. In addition, 1.45% is charged both employer and employee for an employee’s wages in excess of $128,400 per employee.
Name Earnings to Aug. 31 September Earnings Income Tax Withholding FICA Unemployment Tax State Federal
B.D. Williams $ 6,800 $ 800
D. Raye 6,500 700
K. Baker 7,600 1,100
F. Lopez 13,600 1,900
A. Daniels 116,900 13,000
B. Kingston 121,900 16,000
Instructions
a. Complete the payroll sheet and make the necessary entry to record the payment of the payroll.
b. Make the entry to record the payroll tax expenses of Otis Imports.
c. Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of each month.
Answer:
a) I used an excel spreadsheet since there is not enough room here.
September 30, 202x, wages expense
Dr Wages expense 33,500
Cr Federal income tax withholdings payable 3,350
Cr FICA taxes (withholdings) payable 2,722.25
Cr Wages payable 27,427.75
b) September 30, 202x, payroll taxes expense
Dr FICA taxes expense 2,722.25
Dr FUTA tax expense 5.60
Dr SUTA tax expense 7
Cr FICA taxes withholdings payable 2,722.25
Cr FUTA taxes payable 5.60
Cr SUTA taxes payable 7
c) September 30, 202x, payment of payroll liabilities
Dr Wages payable 27,427.75
Dr Federal income tax withholdings payable 3,350
Dr FICA taxes withholdings payable 5,444.50
Dr FUTA taxes payable 5.60
Dr SUTA taxes payable 7
Cr Cash 36,234.85
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $624,000. Depreciation and amortization expense of $87,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash:
Decrease in accounts receivable $22,000
Increase in inventories 9,200
Increase prepaid expenses 8,500
Increase in salaries payable 10,000
Decrease in income taxes payable 14,000
Required:
Prepare the operating activities section of the 2011 statement of cash flows.
Answer:
711,300
Explanation:
Net cash generated from operating activities can be calculated by deducting and adding back the cash and non-cash items respectively from the net income for the year. Such as depreciation will be added back in net income due to it is a non-cash expense
Net Income 624,000
Depreciation and amortization 87,000
Decrease in accounts receivable 22,000
Increase in inventories (9,200)
Increase prepaid expenses (8,500)
Increase in salaries payable 10,000
Decrease in income taxes payable (14,000 )
Net cash generated from operating activities 711,300
You have a total of $289,416 in your retirement savings. You want to withdraw $2,500 from your account at the end of every month for living expenses and expect to earn 4.6 percent per year on your money, compounded monthly. How long will it be until you run out of money
Answer:
You will be able to withdraw $2,500 for 153 months or 12 years, 9 months. The last withdrawal (154th withdrawal) will be smaller, around $782 only.
Explanation:
We can use the present value of an ordinary annuity formula to determine how long it will take to empty the account.
present value of annuity = payment x [1 - 1/(1 + i)ⁿ] / i
289,416 = 2,500 x [1 - 1/(1 + 0.00383333)ⁿ] / 0.00383333
289,416 / 2,500 = [1 - 1/(1 + 0.00383333)ⁿ] / 0.00383333
115.7664 = [1 - 1/(1 + 0.00383333)ⁿ] / 0.00383333
115.7664 x 0.00383333 = 1 - 1/1.00383333ⁿ
0.443770814 = 1 - 1/1.00383333ⁿ
1/1.00383333ⁿ = 1 - 0.443770814
1/1.00383333ⁿ = 0.556229185
1 / 0.556229185 = 1.00383333ⁿ
1.797820081 = 1.00383333ⁿ
n = log 1.797820081 / log 1.00383333 = 0.254746227 / 0.001661611345 = 153.3128 months
You will be able to withdraw $2,500 for 153 months or 12 years, 9 months. The last withdrawal will be smaller, around $782 only.
he Lubricant is an expensive oil newsletter to which many oil giants subscribe, including Ken Brown (see Problem 3-17 for details). In the last issue, the letter described how the demand for oil products would be extremely high. Apparently, the American consumer will continue to use oil products even if the price of these products doubles. Indeed, one of the articles in the Lubricant states that the chance of a favorable market for oil products was 70%, while the chance of an unfavorable market was only 30%. Ken would like to use these probabilities in determining the best decision. What decision model should be used
Answer: Expected Monetary Value decision model
Explanation:
The Expected Monetary Value (EMV) model is a statistical method used to calculate future payoffs that accounts for the risk and probability of different events happening.
It essentially takes the average of the scenarios that could happen based on their probabilities and their expected payoff and then adds them together to give a value that the investor can base their expectations upon.
For instance, in the above question, assuming that Ken Brown in a favorable market, Ken Brown can sell $500,000 worth of oil products but in an unfavorable one, they can only sell $100,000.
Based on the probabilities of the market conditions, EMV would show a value of;
= (500,000 * 70%) + (100,000 * 30%)
= $380,000
Newton Inc. uses a calendar year for financial reporting. The company is authorized to issue 9,000,000 shares of $10 par common stock. At no time has Newton issued any potentially dilutive securities. Listed below is a summary of Newton's common stock activities. 1. 1Number of common shares issued and outstanding at December 31, 2018 2,000,000 2. 1Shares issued as a result of a 10% stock dividend on September 30, 2019 200,000 3. 1Shares issued for cash on March 31, 2020 2,000,000 1Number of common shares issued and outstanding at December 31, 2020 4,200,000 4. 1A 2-for-1 stock split of Newton's common stock took place on March 31, 2021 Instructions a. Compute the weighted-average number of common shares used in computing earnings per common share for 2019 on the 2020 comparative income statement. b. Compute the weighted-average number of common shares used in computing earnings per common share for 2020 on the 2020 comparative income statement. c. Compute the weighted-average number of common shares to be used in computing earnings per common share for 2020 on the 2021 comparative income statement. d. Compute the weighted-average number of common shares to be used in computing earnings per common share for 2021 on the 2021 comparative income statement.
Answer:
A. $2,200,000
B. $3,700,000
C. $7,400,000
D. $ 8,400,000
Explanation:
a. Computation for the weighted-average number of common shares used in computing earnings per common share for 2019
Jan 1, 2019-Sept. 30, 2019 2,000,000 /12 * 9 =1,500,000
Adjustment for stock dividend 10%
Jan 1, 2019-Sept. 30, 2019 as adjusted (1,500,000 *1. 10) 1,650,000
Add Oct. 1, 2019- Dec. 31, 2019
( 2,200,000 /12 x 3 ) 550,000
Total weighted average Outstanding shares $2,200,000
(1,650,000+550,000)
b. Computation for the weighted-average number of common shares used in computing earnings per common share for 2020
Jan.1, 2020 - Mar. 31,2020
(2,000,000 /12 x 3) 550,000
Add:Apr. 1, 2020 - Dec. 31, 2020
(4,200,000 /12 x 9 )=3,150,000
Total weighted average Outstanding shares $3,700,000
(3,150,000+550,000)
c. Computation for the weighted-average number of common shares to be used in computing earnings per common share for 2020
2020 weighted average number of shares previously computed 3,700,000
×Adjustment for stock split (2 for 1) 2
= Total weighted average Outstanding shares $7,400,000
d. Computation for the weighted-average number of common shares to be used in computing earnings per common share for 2021
Jan. 1, 2021 - Mar. 31, 2021
4,200,000/ 12 x 3 =(1,050,000)
Adjustment for stock split (2 for 1) 2
Jan. 1, 2021- Mar. 31, 2021 adjusted
(1,050,000 x 2) 2,100,000
Add (4,200,0000*2) 8,400,000 1 April,2021 - 31 December,2021
( 8,400,000 * 9 / 12) = 6,300,000 (After split up)
Total weighted average Outstanding shares $ 8,400,000
(6,300,000+2,100,000)
The Valley Wine Company produces two kinds of wine—Valley Nectar and Valley Red. The wines are produced from 64 tons of grapes the company has acquired this season. A 1,000-gallon batch of Nectar requires 4 tons of grapes, and a batch of Red requires 8 tons. However, production is lim- ited by the availability of only 50 cubic yards of storage space for aging and 120 hours of process- ing time. A batch of each type of wine requires 5 cubic yards of storage space. The processing time for a batch of Nectar is 15 hours, and the processing time for a batch of Red is 8 hours. Demand for each type of wine is limited to seven batches. The profit for a batch of Nectar is $9,000, and the profit for a batch of Red is $12,000. The company wants to determine the number of 1,000-gallon batches of Nectar ( x 1 ) and Red ( x 2 ) to produce in order to maximize profit.Formulate a linear programming model for this problem.Solve this model by using graphical analysis.
Answer:
maximize 9000n + 12000r
constraints:
4n + 8r ≤ 645n + 5r ≤ 5015n + 8r ≤ 120n ≤ 7r ≤ 7n ≥ 0r ≥ 0
using solver, the solution is:
4 1,000 gallon batches of nectar wine and 6 1,000 gallon batches of red wine
maximum profit = (4 x $9,000) + (6 x $12,000) = $108,000
Buyers who are aware of Firm’s ___________________ might desire to purchase its products because price no longer remains a limiting factor
1)location
2)prestige
3)competition
whixh one is correct
Answer:
2) prestige.
Explanation:
Buyers who are aware of Firm’s prestige might desire to purchase its products because price no longer remains a limiting factor.
which institution offers debt counseling?
select the best answer from the choices provided.
A. a stare or local government
B. nonprofit agency
C. credit union associated with a workplace
D. All answers are correct.
Answer:
the answer to the question is d
Explanation:
:)
Your grandfather wants to establish a scholarship in his father’s name at a local university and has stipulated that you will administer it. As you’ve committed to fund a $25,000 scholarship every year beginning one year from tomorrow, you’ll want to set aside the money for the scholarship immediately. At tomorrow’s meeting with your grandfather and the bank’s representative, you will need to deposit how much money so that you can fund the scholarship forever, assuming that the account will earn 4.50% per annum every year?
a. $111,111
b. $88,889
c. $100,000
d. $133,333
Oops! The bank representative just reported that he misquoted the available interest rate on the scholarship’s account. Your account should earn 3.50%. The amount of your required deposit should be revised to:________
a. $60,715
b. $53,572
c. $71,429
d. $67,858
Answer:
$555,555.56$714,285.71Explanation:
1. This scholarship is forever so this is a perpetuity. The amount you need to put in is the present value of a perpetuity.
= Perpetuity/ Rate
= 25,000/4.5%
= $555,555.56
2. = Perpetuity/ Rate
= 25,000/3.5%
= $714,285.71
Options are probably for a related question.
Owens Corporation uses a process costing system. For March, the beginning work in process inventory consisted of 60,000 units that were 60% complete with respect to processing. The ending work in process inventory for the month consisted of units that were 20% complete with respect to processing. A summary of unit and cost data for the month follows:
Units Processing Cost
Work-in-process inventory, March 1 60,000 $ 35,000
Units started into production and costs incurred during the month 190,000 $ 700,000
Units completed and transferred out 200,000
Assuming that Owens Corporation uses the FIFO method, which of the following is closest to the cost per equivalent unit for processing cost for March?
A) $3.23
B) $3.98
C) $4.02
D) $4.22
Answer:
C) $4.02
Explanation:
The computation of cost per equivalent unit for processing cost for March is shown below:-
As we know that
Beginning work in process inventory units + Units started into production = Ending work in process inventory units + Units completed and transferred out
60,000 + 190,000 = Units in ending work in process inventory + 200,000
Units in ending work in process inventory is
= 60,000 + 190,000 - 200,000
= 50,000
To complete the beginning work in process inventory:-
Processing: 24,000
60,000 units ×(100% - 60%) a
Units started and completed 140,000
(200,000 − 60,000) b
Ending work in process inventory Processing:
50,000 units × 20% c 10,000
Equivalent units of production 174,000
Cost added throughout the period e 7,00,000
Equivalent units of production f 174,000
Cost per equivalent unit e ÷ f $4.02