Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 5%. For example, if a hospital buys supplies from Worley that had cost Worley $100 to buy from manufacturers, Worley would charge the hospital $105 to purchase these supplies.
For years, Worley believed that the 5% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown below:
Activity Cost Pool (Activity Measure) Total Cost Total Activity
Customer deliveries (Number of deliveries) $ 500,000 5,000 deliveries
Manual order processing (Number of manual orders) 248,000 4,000 orders
Electronic order processing (Number of electronic orders) 200,000 12,500 orders
Line item picking (Number of line items picked) 450,000 450,000 line items
Other organization-sustaining costs (None) 602,000
Total selling and administrative expenses $ 2,000,000
Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (both hospitals purchased a total quantity of medical supplies that had cost Worley $30,000 to buy from its manufacturers):
Activity
Activity Measure University Memorial
Number of deliveries 10 25
Number of manual orders 0 30
Number of electronic orders 15 0
Number of line items picked 120 250
Required:
Compute the total revenue that Worley would receive from University and Memorial.
Answer is complete and correct
Total Revenue
University $ 31,500
Memorial $ 31,500

Answers

Answer 1

Answer:

Worley Company

Computation of Total Revenue from University and Memorial:

Total Cost =                                        $38,541.00

Mark-up (5%)                                        $1,927.05

Total Revenue                                  $40,468.05

Explanation:

a) Data and Calculations:

Activity Cost Pool         (Activity Measure)       Total Cost    Total Activity

Customer deliveries (Number of deliveries)    $ 500,000  5,000 deliveries

Manual order        (Number of manual orders)   248,000  4,000 orders

 processing

Electronic order (Number of electronic orders) 200,000 12,500 orders

processing  

Line item picking (Number of line items picked) 450,000 450,000 line items

Other organization-sustaining costs (None)       602,000

Total selling and administrative expenses  $ 2,000,000

Data on University and Memorial Hospitals:

Activity Measure                     University       Memorial

Number of deliveries                     10                 25  

Number of manual orders              0                 30  

Number of electronic orders        15                   0  

Number of line items picked      120              250

Activity Rates:

Customer deliveries (Number of deliveries)    $ 500,000/5,000 = $100

Manual order        (Number of manual orders)   248,000/4,000   = $62

 processing

Electronic order (Number of electronic orders) 200,000/12,500 = $16

processing  

Line item picking (Number of line items picked) 450,000/450,000 = $1

Other organization-sustaining costs (None)       602,000

Cost of Selling and Administrative Expenses to the two hospitals:

Activity Measure                   University    Memorial Total  Total Cost

Number of deliveries                  10              25           35       $3,500

Number of manual orders           0              30          30        $1,860

Number of electronic orders     15                0            15          $240

Number of line items picked   120           250        370          $370

Total Selling and Administrative Expenses                         $5,970

Cost of medical supplies =                  $30,000

Selling and administrative expenses = $5,970

Fixed costs =                                          $2,571

($5,970/$1,398,000 x $602,000)

Total Cost =                                         $38,541

Mark-up (5%)                                        $1,927.05

Selling price                                      $40,468.05

b) The case stated that both University and Memorial had purchased a total quantity of medical supplies that had cost Worley $30,000 to buy from its manufacturers.  This implies that each hospital did not buy supplies that had cost Worley $30,000 for each.  Based on this assumed fact from the case, the total revenue that Worley would collect from the two hospitals after keying in the selling and distribution and head office fixed costs, to get a total cost of $38,541.00 and adding the 5% markup, the revenue that Worley would receive would be $40,468.05 ($38,541 x 1.05).


Related Questions

Journalizing issuance of stock—at par and at a premium
Colorado Corporation has two classes of stock: common, $3 par value; and preferred $30 par value.
Requirements
Journalize Colorado’s issuance of 4,500 shares of common stock for $6 per share.
Journalize Colorado’s issuance of 4,500 shares of preferred stock for a total of $135,000.

Answers

Answer:

a.

Cash                                                                           27000 Dr

     Common Stock                                                            13500 Cr

     Paid in capital in excess of par-Common stock         13500 Cr

b.

Cash                                                    135000 Dr

     Preferred Stock                                   135000 Cr

Explanation:

a.

When we issue stock at premium, we always record the amount received from such issuance of stock at full. So, the cash account will be debited for 4500 * 6 = 27000

However, we record the common stock issued at par value and the remaining is credited under the reserve account which is Paid in capital in excess of par.

Thus the common stock will be credited by its par value of 4500 * 3 = 13500 and the remaining 4500 * 3 will be credited to the Paid in Capital account.

b.

The par value of the preferred stock is 4500 * 30 = 135000

Thus the preferred stock is issued at par and we simply debit the cash received from the issue and credit the preferred stock.

Flounder Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2017, Flounder had the following transactions related to notes payable.
Sept. 1 Issued a $14,400 note to Pippen to purchase inventory. The 3-month note payable bears interest of 8% and is due December 1. (Flounder uses a perpetual inventory system.)
Sept. 30 Recorded accrued interest for the Pippen note.
Oct. 1 Issued a $21,600, 8%, 4-month note to Prime Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1.
Oct. 31 Recorded accrued interest for the Pippen note and the Prime Bank note.
Nov. 1 Issued a $26,400 note and paid $8,900 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 7% and matures in 12 months.
Nov. 30 Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note.
Dec. 1 Paid principal and interest on the Pippen note.
Dec. 31 Recorded accrued interest for the Prime Bank note and the vehicle note.
a) Prepare journal entries for the transactions noted above.
b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts.
c) Show the balance sheet presentation of notes payable and interest payable at December 31
d) How much interest expense relating to notes payable did Flounder incur during the year?
interest expense incurred during the year: $ ?

Answers

Answer:

a) Prepare journal entries for the transactions noted above.

Sept. 1 Issued a $14,400 note to Pippen to purchase inventory. The 3-month note payable bears interest of 8% and is due December 1. (Flounder uses a perpetual inventory system.)

Dr Inventory 14,400

    Cr Notes payable 14,400

Sept. 30 Recorded accrued interest for the Pippen note.

Dr Interest expense 96

    Cr Interest payable 96

Oct. 1 Issued a $21,600, 8%, 4-month note to Prime Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1.

Dr Cash 21,600

    Cr Notes payable 21,600

Oct. 31 Recorded accrued interest for the Pippen note and the Prime Bank note.

Dr Interest expense 240

    Cr Interest payable 240

Nov. 1 Issued a $26,400 note and paid $8,900 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 7% and matures in 12 months.

Dr Vehicle 35,300

    Cr Notes payable 26,400

    Cr Cash 8,900

Nov. 30 Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note.

Dr Interest expense 394

    Cr Interest payable 394

Dec. 1 Paid principal and interest on the Pippen note.

Dr Notes payable 14,400

Dr Interest payable 288

    Cr Cash 14,688

Dec. 31 Recorded accrued interest for the Prime Bank note and the vehicle note.

Dr Interest expense 298

    Cr Interest payable 298

b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts.

    notes payable                                           interest payable

debit               credit                                  debit               credit

                       14,400                                                       96

                       21,600                                                       240

                       26,400                                                      394

14,400                                                       288

                       48,000                                                     298

                                                                                         740                  

  interest expense                                          

debit               credit      

96

240

394

298                            

1,028

c) Show the balance sheet presentation of notes payable and interest payable at December 31

notes payable balance December 31 = $48,000

interest payable balance December 31 = $740

d) How much interest expense relating to notes payable did Flounder incur during the year?

$1,028

In May direct labor was 35% of conversion cost. If the manufacturing overhead for the month was $116,350 and the direct materials cost was $20,200, the direct labor cost was:

Answers

Answer:

Direct labor= $62,650

Explanation:

Giving the following information:

In May direct labor was 35% of conversion cost.

The manufacturing overhead for the month was $116,350.

The conversion costs are the sum of the direct labor and the manufacturing overhead:

Overhead= 65%= 116,350

Direct labor= 35%= ?

First, we need to determine the total amount of conversion costs:

Conversion costs= 116,350/0.65= 179,000

Now, the direct labor cost:

Direct labor= 179,000*0.35

Direct labor= $62,650

A June sales forecast projects that 5,000 units are going to be sold at a price of $11.00 per unit. The desired ending inventory of units is 15% higher than the beginning inventory of 600 units. Merchandise purchases for June are projected to include how many units

Answers

Answer:

Purchases= 5,090 units

Explanation:

Giving the following information:

A June sales forecast projects that 5,000 units are going to be sold.

The desired ending inventory of units is 15% higher than the beginning inventory of 600 units.

To calculate the merchandise purchase, we need to use the following formula:

Purchases= sales + desired ending inventory - beginning inventory

Purchases= 5,000 + 600*1.15 - 600

Purchases= 5,090 units

The bond has a coupon rate of 6.23 percent, it makes semiannual payments, and there are 4 months to the next coupon payment. A clean price of $989 and the par value is $1,000. What is the invoice price?

Answers

Answer:

Invoice price = $999.38

Explanation:

DATA

coupon rate = 6.23%

clean price = $989

par value = $1,000

invoice price = ?

Solution

As mentioned above the interest is paid semi-annually and there are 4 months to the next coupon payment it means that the last coupon payment was made 2 months ago therefore the accrued interest will be paid for 2 months.

Working

6 months coupon payment = $1000 x 6.23% x 6/12

6 months coupon payment = $31.15

Accrued interest for 2 months = $31.15 x 2/6

Accrued interest for 2 months = $10.38

Invoice price = Clean price + Accrued interest

Invoice price = $989 + $10.38

Invoice price = $999.38

Carly Corporation issued $200,000 of 30-year, 8% bonds at 106 on January 1, 2016. Interest is payable semiannually on June 30th and December 31st. The straight-line method of amortization is to be used. After 11 years, what is the carrying value of the bonds?

Answers

Answer:

$207,600

Explanation:

The journal entry to record the issuance of the bonds:

January 1, 2016

Dr Cash 212,000

    Cr Bonds payable 200,000

    Cr Premium on bonds payable 12,000

Premium on bonds payable $12,000 / 60 semiannual coupons = $200 amortization per coupon payment

after 11 years, 22 coupons were paid 22 x $200 = $4,400

bonds carrying value after 11 years = $200,000 + $12,000 - $4,400 = $207,600

Jason has many roles in life. He is an engineering student in college, he's the oldest son in his family, and he earns extra money as an editor for the local newspaper. In his spare time, Jason likes to hike nature trails. In an economic sense, in which role is Jason functioning as a worker? A. Walking on nature trails B. Oldest son in family C. Editor for the local newspaper D. College student

Answers

Answer:

C.

Explanation:

Being an editor for a local newspaper counts as an economic sense because that is the only part that takes part as a job and helps the economy.

You invest a single amount of $14,800 for 7 years at 15 percent. At the end of 7 years you take the proceeds and invest them for 14 years at 17 percent. How much will you have after 21 years

Answers

Answer:

Value of investment after 21 years = $354,608.11

Explanation:

The value of an amount invested at a certain rate of return for certain number of years where  interest compounded annually is known as the future value.

The future value of an investment can be determined using the future value formula. This formula is stated below:

FV = PV × (1+r)^(n)

FV - Future Value , PV- Present Value, r-rate of return, n- number of years

For the first round of investment 15% for 7 years, future value would be:

FV = 14,800 × (1.15)^(7) =   39,368.29  

Second round of investing 17% for 14 year, future value would be

FV = 39,368.29 × (1.17)^(14)= 354,608.11

Future Value =$354,608.11

Value of investment after 21 years = $354,608.11

Ruby is 25 and has a good job at a biotechnology company. She currently has $10,000 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Ruby estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year). a. How much will Ruby’s IRA be worth when she needs to start withdrawing money from it when she retires? Use Exhibit 1-A. (Round FV factor to 3 decimal places and final answer to the nearest whole dollar.) b. How much money will she have to accumulate in her company’s 401(k) plan over the next 40 years in order to reach her retirement income goal? (Round your answer to the nearest whole dollar.)

Answers

Answer:

a. How much will Ruby’s IRA be worth when she needs to start withdrawing money from it when she retires?

the future value of Ruby's IRA = $10,000 x 21.725 (FV factor, 8%, 40 periods) = $217,250

b. How much money will she have to accumulate in her company’s 401(k) plan over the next 40 years in order to reach her retirement income goal?

she needs to accumulate $875,000 - $217,250 = $657,750 during the next 40 years

the annual contribution = FV / FV annuity factor = $657,750 / 259.057 (FV annuity factor, 8%, 40 periods) = $2,539.02 per year

Portal Palace is a door manufacturer that is considering moving into a new regional market. Which of the following would be information on a balanced scorecard?a. Employee satisfaction b. The company's mission statement c. Number of people that buy doors in the region d. A list of popular door styles

Answers

Answer:

C

Explanation:

Because they need to know they will be successful in the new market.

In the film Islam and America: Through the eyes of Imran Khan, which of the following best describes how average Pakistanis responded when the interviewer asked them about the IMF (International Monetary Fund)?
a. They did not know what the IMF is.
b. They considered the IMF a benevolent source of funding to help economic growth.
c. They criticized or disparaged the IMF.

Answers

Answer: c. They criticized or disparaged the IMF.

Explanation:

In the 2001 film, Islam and America: Through the eyes of Imran Khan, it is shown that the average person in Pakistan know what the IMF is and detests them. They criticized and disparaged the IMF with some reasons given being that;

the IMF is a way for the Developed world to economically colonise Pakistanthe IMF is tool for the Americans to use and try to assert controlthe IMF forces governments to raise utility prices to meet their conditions or pay back loans which makes poor people suffer the most.

Nathan works for a major automobile manufacturing company. His company is being sued by hundreds of customers who have been injured when the steering wheel airbags exploded upon a low-impact collision. The customers are demanding monetary damages. This lawsuit is based on

Answers

Answer:

Product liability, is the right answer.

Explanation:

The liability of a manufacturer or seller for handing over a defective commodity into the hands of the consumers is known as the product liability. The responsibility for handing over the defective product that causes injuries lies with the retailers of the product who are a part of the distribution chain. The law requires that the good sold to the consumer meets the ordinary expectations of the consumer. If the consumer's ordinary expectations aren't met due to an unexpected defect or danger, the consumer may ask for monetary damages.

When a multi-product plant is being operated at capacity, the products that should be emphasized are those that provide the highest contribution margin:_______.
a. ratio.
b. per sales dollar.
c. per unit of product.
d. per unit of the limited resource.

Answers

Answer: per unit of the limited resources.

Explanation:

When a multi-product plant is being operated at the full capacity, it is necessary for the manager that is in charge of the multi-product plant to select the products that provide the highest contribution margin per unit of the limited resources.

This is typically a short run decision and helps to know which product to emphasize.

Your firm has total sales of $22,980, costs of $14,715, and depreciation of $6,045. The tax rate is 34 percent. There are no interest expenses or other income. What is the operating cash flow?

Answers

Answer:

Thus, Operating cash flow for company is $7,510.20.

Explanation:

Total Sales = $22,980

Cost of goods sold = $14,715

Depreciation = $6,045

Profit before tax = Total Sales – Cost of goods sold – Depreciation  

= $22,980 – $14,715 – $6,045

=$2,220

Profit before tax is $2,220

Tax rate = 34%

Net profit = profit before tax × (1 – 34%)

= $1,465.20

Net profit for company is $1,465.20.

Operating cash flow = Net profit + Depreciation

= $1,465.20 + $6,045  

= $7,510.20

Thus, Operating cash flow for company is $7,510.20.

What is the present worth of an equal quarterly payment series of $2,000 for six years, if the interest rate is 8% per year, compounded quarterly?

Answers

Answer:

PV= $37,827.85

Explanation:

Giving the following information:

Cf= $2,000 quarterly

Number of periods= 4*6= 24

i= 0.08/4= 0.02

To calculate the present worth, first, we need to determine the future value using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {2,000*[(1.02^24) - 1]} / 0.02

FV= $60,843.72

Now, the present value:

PV= FV/(1+i)^n

PV= 60,843.72/(1.02^24)

PV= $37,827.85

You have just made your first $5,000 contribution to your individual retirement account. Assume you earn an annual return of 10.65 percent and make no additional contributions.

Required:
a. What will your account be worth when you retire in 42 years?
b. What if you wait 10 years before contributing?

Answers

Answer:

Results are below.

Explanation:

Giving the following information:

Initial investment= $5,000

i= 10.65%

To determine future value, we need to use the following formula:

FV= PV(1+i)^n

For 42 years:

FV= 5,000*(1.1065^42)

FV= $350,695

Now, for 32 years:

FV= 5,000*(1.1065^32)

FV= $127,472.17

intext:"ABC Co. purchased merchandise on August 5 at a $1,000 invoice price with terms of 2/10,n/30 and paid for the merchandise on August 14. Determine its entry to record this purchase and the subsequent payment under both the gross method and the net method by matching the action on the left with the method on the right."

Answers

Answer:

August 5 : Purchase

Merchandise Inventory $1,000 (debit)

Accounts Payable $1,000 (credit)

August 14 : Payment

Accounts Payable $1,000 (debit)

Discount Received  $20 (credit)

Cash $800 (credit)

Explanation:

When ABC Co purchased merchandise entries would be :

Merchandise Inventory $1,000 (debit)

Accounts Payable $1,000 (credit)

When ABC Co subsequently makes payment for the merchandise entries would be :

Note : Payment is made within the cash discount period of 15 days and ABC Co is eligible for the 2 % cash discount on the purchase. Payment is made net of the 2% cash discount.

Accounts Payable $1,000 (debit)

Discount Received  $20 (credit)

Cash $800 (credit)

Unrealized holding gains and losses on debt securities classified as available-for-sale would have the following effects on accumulated other comprehensive income: Gains Losses a. Increase Increase b. Decrease Decrease c. Decrease Increase d. Increase Decrease

Answers

Answer: d. Increase Decrease

Explanation:

Available - For - Sale securities are accounted for in the Equity section of the balance sheet under Other Comprehensive income (OCI). As the gains cannot be realised until the security is sold, it is accounted for here to show an increase or a decrease in value. When the security gains in value over what it cost, this will increase OCI and when it losses value below what it cost, this will reduce the OCI.

A unit of a business that not only incurs costs but also generates revenues is called a: Group of answer choices Performance center. Profit center. Cost center. Responsibility center. Expense center.

Answers

Answer: Profit Center

Explanation:

A Profit Center in a business is defined as a unit or segment that incurs cost but generates revenue as well. It therefore expends company resources in other to make the company revenue and so is the embodiment of the quote, spend money to make money.

An example of a Profit Center in a business would be the Sales Department. Here money is spent on wages, telephone bills, transport costs etcetera. However, by incurring these costs to sell the products of the company, the department makes revenue as well.  

Explain why a firm might want to continue operating and producing goods even after diminishing marginal returns have set in and marginal cost is rising.

Answers

Answer:

Explanation:

Overall in a scenario such as this one, a firm may continue operating and producing goods if they believe demand may go back up and result in higher returns or if they expect the tastes of consumers to change in the near future. Both of these will in term cause the market sentiment surrounding the firm's product to change and begin seeing more profitable times. Otherwise, a firm would cut their loses and stop operating and producing goods.

Dodero Company produces a single product which sells for $100 per unit. Fixed expenses total $12,000 per month, and variable expenses are $60 per unit. The company's sales average 500 units per month. Which of the following statements is correct?
a. The company's break-even point is $12,000 per month.
b. The fixed expenses remain constant at $24 per unit for any activity level within the relevant range.
c. The company's contribution margin ratio is 40%.
d. Responses A, B, and C are all correct.

Answers

Answer:

c. The company's contribution margin ratio is 40%.

Explanation:

Contribution margin ratio = contribution margin / revenue

contribution margin = total revenue - total variable cost

$100 - $60 = $40

$40 / $100 = 0.4

Breakeven pont = fixed cost / price - variable cost

$12,000  / $100 - $60 = 300

fixed cost per unit decreases as sales increases and decreases as sales decreases

Sudoku Company issues 7,000 shares of $7 par value common stock in exchange for land and a building. The land is valued at $45,000 and the building at $85,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building.

Answers

Answer:

The journal entry to record this exchange is :

Land  $45,000 (debit)

Buildings $85,000 (debit)

Common Stocks $49,000 (credit)

Share Premium $81,000 (credit)

Explanation:

The price of Common Stock is equivalent to the price required to settle the Market Cost of Land and Buildings.

Also note that the Common Stocks have a par vale of $7, this means that any amount paid in excess of the par value is accounted in the Share Premium Reserve.

The journal entry to record this exchange is :

Land  $45,000 (debit)

Buildings $85,000 (debit)

Common Stocks $49,000 (credit)

Share Premium $81,000 (credit)

The journal entry for recording the issuance of the stock for exchange for the land and building:

Land $45,000  

Building $85,000  

          To Common stock $49,000 (7,000 shares × $7)

          To Premium on issue of common stock  81,000

(Being recording of the  issuance of the stock in exchange for the land and building)

Learn more: brainly.com/question/17429689

A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now

Answers

Answer:

$ 930.20  

Explanation:

We need to first of all determine the yield to maturity using excel rate function:

=rate(nper,pmt,-pv,fv)

nper is the number of annual coupons i.e 25

pmt is the annual coupon=face value*coupon rate=$1000*8.5%=$85

pv is the current market price of $925

fv is the face value of $1000

=rate(25,85,-925,1000)=9.28%

In 5 years time,the bond would have 20 years remaining to maturity, as a result, only 20 years coupon would be left to be paid.

The formula for bond price is excel pv function given below:

=-pv(rate,nper,pmt,fv)

=-pv(9.28% ,20,85,1000)=$ 930.20  

Polly Smith, a supervisor at Kroger's, was recently evaluated by her subordinates. Their responses indicated that Polly uses Theory X assumptions when dealing with employees. For example, one of the comments indicated that she treats employees as if they:_______.
a. naturally like work.
b. will work toward goals they are committed to.
c. have little ambition.
d. have the potential to accomplish the organization's goals.
e. seek out and accept responsibility.

Answers

Answer:

c. have little ambition.

Explanation:

Theory X is a theory that refers to people's behavior at work and suggests that managers tend to think that people are not motivated and don't like to work, avoid responsibility, don't have ambition and because of that, they have to be rewarded or punished to complete their job. According to that, the answer is that for example, one of the comments indicated that she treats employees as if they have little ambition because theory X says that managers have a negative opinion of people.

The other options are not right because they all refer to theory Y in which managers tend to have a positive view of their workers and think that they like their work, are motivated and are willing to take responsibility.

If people lost confidence in the government what kind of money would have the least value?

Answers

If people lost confidence in the government which would have the least value?

a) fiat money

b) representative money

c) commodity money

d) gold standard

Answer:

Fiat money

Explanation:

Fiat money is a type of money or currency that is used as money because it is issued and backed by the government but it does not have any intrinsic value.

It has no intrinsic value which means that it does not have any value of its own and it is maintained by the government. Therefore, If people lost confidence in the government the kind of money that would have the least value is fiat money

P11-45. Statement of Cash Flows (Indirect Method). Artic Company’s income statement and comparative balance sheet follow. ARTIC COMPANY Income Statement For Year Ended December 31, 2019. Sales……………………………………………………………….. $728,000 Cost of goods sold $534,000 Wages expense 190,000 Advertising expense 31,000 Depreciation expense 22,000 Interest expense 18,000 Gain on sale of land (25,000) 770,000 Net loss $ (42,000) ARTIC COMPANY Balance Sheet December 31, 2019 December 31, 2018 Assets Cash……………………………………… 49,000 28,000 Accounts receivable …………. 42,000 50,000 Inventory ……………………………… 107,000 113,000 Prepaid advertising……………….. 10,000 13,000 Property, plant, equipment……. 360,000 222,000 Accumulated depreciation……... (78,000) (56,000) Total assts………………………………. 490,000 370,000 Liabilities and Stockholders’ Equity. Accounts payable……………………….. 17,000 31,000 Interest payable…………………………. 6,000 - Bonds payable……………………………. 200,000 - Common stock………………………….. 245,000 245,000 Retained earnings…………………….. 52,000 94,000 Treasury Sock……………………………. (30,000) - Total liabilities and equity…………. 490,000 370,000 During 2019, Artic sold land for $70,000 cash that had originally cost $45,000. Artic also purchased equipment for cash, acquired treasury stock for cash, and issued bonds payable for cash in 2019. Accounts payable relate to merchandise purchases. Required. a. Compute the change in cash that occurred during 2019 b. Prepare a 2019 statement of cash flows using the indirect method.

Answers

Answer and Explanation:

a. The computation of change in cash during 2019 is shown below:-

Change in cash = Cash balance on 31 Dec 2019 - Cash balance on 31 Dec 2018

= $49,000 - $28,000

= $21,000

b. The Preparation of statement of cash flows using the indirect method of 2019 is shown below:-

                                       Artic Company’s

                                 By using the direct method

                                For the year ended 2019

Particulars                                                                    Amount

Cash flow from operating activities

Net income/loss                                                            ($42,000)

Adjustment to reconcile the net income

Depreciation expenses                     $22,000

Less: Gain on sales of land                ($25,000)

Changes in current assets and current liabilities

Decrease in accounts receivable       $8,000

($50,000 - $42,000)

Decrease in Inventory                          $6,000

($113,000 - $107,000)

Decrease in Prepaid advertising          $3,000

($13,000 - $10,000)

Increase in Interest payable                  $6,000

Less: Decrease in accounts payable    ($14,000)           $6,000

($31,000 - $17,000)

Net cash provided by operating activities                     ($36,000)

Cash flow from investing activities    

Cash received from sale of land               $70,000

Cash paid for equipment                            ($183,000)

($360,000 - ($222,000 - $45,000)

Cash flow provided by investing activities                       ($113,000)

Cash flow from financing activities

Cash received from issue of bonds payable $200,000

Cash payment for Treasury stock                   ($30,000)

Net cash provided by financing activities                        $170,000    

Net Increase (Decrease) in cash                                        $21,000

Cash baalance on 21 Dec 2018                                          $28,000

Cash balance on 31 Dec 2019                                             $49,000

Answer A:

The computation of change in cash during 2019 is shown below:-

Change in cash = Cash balance on 31 Dec 2019 - Cash balance on 31 Dec 2018Change in cash = $49,000 - $28,000Change in cash = $21,000

Answer B:

The Preparation of statement of cash flows using the indirect method of 2019 is shown below:-

                                      Artic Company’s

                                By using the direct method

                               For the year ended 2019

Particulars                                                                    Amount

Cash flow from operating activities

Net income/loss                                                            ($42,000)

Adjustment to reconcile the net income

Depreciation expenses                     $22,000

Less: Gain on sales of land                ($25,000)

Changes in current assets and current liabilities

Decrease in accounts receivable       $8,000

($50,000 - $42,000)

Decrease in Inventory                          $6,000

($113,000 - $107,000)

Decrease in Prepaid advertising          $3,000

($13,000 - $10,000)

Increase in Interest payable                  $6,000

Less: Decrease in accounts payable    ($14,000)           $6,000

($31,000 - $17,000)

Net cash provided by operating activities                     ($36,000)

Cash flow from investing activities    

Cash received from sale of land               $70,000

Cash paid for equipment                            ($183,000)

($360,000 - ($222,000 - $45,000)

Cash flow provided by investing activities                       ($113,000)

Cash flow from financing activities

Cash received from issue of bonds payable $200,000

Cash payment for Treasury stock                   ($30,000)

Net cash provided by financing activities                        $170,000    

Net Increase (Decrease) in cash                                        $21,000

Cash balance on 21 Dec 2018                                          $28,000

Cash balance on 31 Dec 2019                                             $49,000

Learn more about Cash Flow:

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Suppose that the government immediately pursues an _____________ policy by increasing government purchases in response to the short-run economic impact of the higher oil prices.

Answers

Answer:

The answer to the blank space is: expansionary fiscal policy

Explanation:

Expansionary fiscal policy consists in either the increase of government purchases (fiscal spending), or the reduction of taxes, or both.

Expansionary fiscal policy is recommended when the economy is experiencing a downturn, and can be helpful in reducing the damage that the economic slump generates.

In the case of the question, higher oil prices for an importing country will result in less economic activity because this important fuel becomes more expensive, both for manufacturing, agriculture and services. For this reason, the government responds by increasing spending with the goal of reactivating the economy as soon as possible, and reducing the damange that was already done.

Jack uses his personal vehicle in his sole proprietorship. He keeps no records of any kind regarding his business use of the car and doesn't really know for certain when and where he used the automobile for business. Jack will not be claiming the EITC this year. Which of the following is correct?

Answers

Answer:

To comply with due diligence, every effort should be made to reconstruct Jack's vehicle expenses. If the records cannot be reconstructed then Casey should not claim the EITC this year.

Explanation:

Earned Income Tax credit (EITC) is a refundable tax that is returned to small to medium income earners. It can either reduce your tax of you will get a refund.

Sole proprietors often use their personal vehicles for business purposes. The expense for this is tax deductible. Deduction can be based on true cost of expenses like gasoline bought, or by standard mileage rate.

Vehicle use for personal purposes is not tax deductible.

In this scenario Jack has no records of his vehicle use for business and personal running. There is a need to seperate his use of the vehicle for business purposes.

Every effort should be made to reconstruct Jack's vehicle expenses. If the records cannot be reconstructed then Casey should not claim the EITC this year.

You are pitching a marketing proposal to a company that sells electronic equipment. For a particular product line, their current sales price is $20 per unit, cost is $9 per unit and they have $20,000 in fixed costs associated with this line. Last year, they sold 8,200 units. You are proposing that the company implement your marketing plan which will cost $3,000 per year. You believe this will increase their sales units by 350 units. Calculate the contribution margin ratio at the projected levels, the projected change in operating income of your proposal and the projected ROI. Additionally, if the company requires a 12% return on its investments, calculate the maximum you could charge for your marketing plan.

Answers

Answer:              

                           without marketing         with marketing           differential

                           plan                                plan                             amount

total sales           8,200                             8,550                          350

sales revenue    $164,000                       $171,000                      $7,000

variable costs    ($73,800)                       ($76,950)                     ($3,150)

contribution        $90,200                        $94,050                      $3,850  

margin

contribution            55%                              55%                               -

margin ratio

fixed and            ($20,000)                     ($23,000)                     ($3,000)

marketing costs                                                                                          

operating            $70,200                        $71,050                       $850

income

The return on investment (ROI) from your marketing plan = $850 / $3,000 = 28.33%

If the required ROI is 12%, then you could charge = net increase in operating profits / (1 + required ROI) = $3,850 / 1.12 = $3,437.50        

Janice and Thom form Level Corporation. Janice transfers equipment (worth $60,000, basis of $40,000) for 50% of the stock in Level. Thom transfers inventory (worth $20,000, adjusted basis of $15,000) and provides services worth $40,000 for 50% of the stock.

Because this transaction_______(meet or not) the control of the corporation requirement, Janice has income of $_______and Thom has income of $______.

Answers

Answer:

Because this transaction MEET the control of the corporation requirement, Janice has income of $0 and Thom has income of $

Explanation:

Based on the information we were told that Thom provide service that is worth $40,000 which means that the amount of $40,000 is Thom income but we were not told that Janice has an income, which means that Janice will have an income of $0.

Hence, Because this transaction MEET the control of the corporation requirement, Janice has income of $0 and Thom has income of $

40,000.

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