Answer:
a. Requested responses directly from customers as to amounts due.
Audit Procedure: Confirmation
Classification of Audit Procedure: Substantive procedures
b. Compared total bad debts this year with the totals for the previous two years.
Audit Procedure: Analytical procedure
Classification of Audit Procedure: Substantive procedures
c. Questioned management about likely total uncollectible accounts.
Audit Procedure: Inquiry
Classification of Audit Procedure: Substantive procedures
d. Watched the accounting clerk record the daily deposit of cash receipts.
Audit Procedure: Observation
Classification of Audit Procedure: Test of controls
e. Examined invoice to obtain evidence in support of the ending recorded balance of a customer.
Audit Procedure: Inspection of records or documents
Classification of Audit Procedure: Substantive procedures
f. Compared a sample of sales invoices to credit files to determine whether the customers were on the approved customer list.
Audit Procedure: Reperformance
Classification of Audit Procedure: Test of controls
g. Examined a sample of sales invoices to see if they were initialized by the credit manager indicating credit approval.
Audit Procedure: Inspection of records or documents
Classification of Audit Procedure: Test of controls
Question 3
20 pts
Solve the problem
A normal distribution has a limited range and can be skewed in either direction.
True
0 False
Next >
1. Stockholders invest $90,000 cash to start the business.
2. Purchased three digital copy machines for $400,000, paying $118,000 cash and signing a 5-year, 6% note for the remainder.
3. Purchased $5,500 paper supplies on credit.
4. Cash received for photocopy services amounted to $8,400.
5. Paid $500 cash for radio advertising.
6. Paid $800 on account for paper supplies purchased in transaction 3.
7. Dividends of $1,600 were paid to stockholders.
8. Paid $1,200 cash for rent for the current month.
9. Received $2,200 cash advance from a customer for future copying.
10. Billed a customer for $500 for photocopy services completed.
No. Account Titles and Descriptions Debit Credit
1.
2.
3.
4.
5.
Answer:
S/n General journal Debit Credit
1. Cash $90,000
Common stock $90,000
2. Equipment $400,000
Cash $180,000
Notes payable $282,000
3 Supplies $5,500
Account payable $5,500
4. Cash $8,400
Service revenue $8,400
5. Advertising expense $500
Cash $500
6. Account payable $800
Cash $800
7. Dividends $1,600
Cash $1,600
8. Rent expense $1,200
Cash $1,200
9. Cash $2,200
Unearned service revenue $2,200
10. Account receivable $500
Service revenue $500
Modern Movables Corporation is a Virginia-based manufacturer of furniture. In a recent quarter, it reported the following activities:
Net income $4,435
Purchase of equipment 901
Borrowings under line of credit (bank) 1,447
Proceeds from issuance of common stock 14
Cash received from customers 29,464
Payments to reduce notes payable (long-term) 49
Sale of investments 137
Proceeds from sale of equipment 6,894
Dividends paid 280
Interest paid 93
Required:
Based on this information, present the cash flows from investing and financing activities sections of the cash flow statement. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
Modern Movables Corporation
Statement of cash flows
Cash flows from investing activities:
Proceeds from sale of equipment $6,894
Purchase of equipment ($901)
Sale of investments $137
Net cash from investing activities $6,130
Cash flows from financing activities:
Proceeds from issuance of common stock $14
Borrowings under line of credit (bank) $1,447
Payments to reduce notes payable ($49 )
Dividends paid ($280 )
Net cash from financing activities $1,132
Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer.
a. Ken won $1,200 in an illegal game of poker (the game was played in Utah, where gambling is illegal).
b. Ken sold 1,000 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share.
c. Ken received $25,000 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $210,000.
d. Ken received $13,000 in disability benefits for the year. He purchased the disability insurance policy last year.
e. Ken decided to go back to school to learn about European history. He received a $500 cash scholarship to attend. He used $300 to pay for his books and tuition, and he applied the rest toward his new car payment.
f. Ken's son, Mike, instructed his employer to make half of his final paycheck of the year payable to Ken. Ken received the check on December 30 in the amount of $1,100.
g. Ken received a $610 refund of the $3,600 in state income taxes his employer withheld from his pay last year. Ken claimed $6,250 in itemized deductions last year (the standard deduction for a single filer was $6,200).
h. Ken received $30,000 of interest from corporate bonds and money market accounts.
Determine Ken's gross income
Answer: $46,950
Explanation:
a. All sources of income should be included including illegal ones.
b. Gain = 1,000 (32 - 31)
= $1,000
c. Gain = Amount received - Amount paid apportioned per year
= 25,000 - (210,000/20)
= 25,000 - 10,500
= $14,500
d. Not included as disability benefits are not included.
e. The $300 is deductible but the $200 that went towards car payment is not.
f. Taxation principles require that the person taxed should be the person earning the income so Ken will not be charged on the $1,100
g. The relevant figure here is the tax benefit before the $610 refund.
Ken claimed $6,250 in itemized deduction but the standard deduction is $6,200. Ken gained;
= 6,250 - 6,2000
= $50
h. The $30,000 is included as Ken earned it.
Gross Income = 1,200 + 1,000 + 14,500 + 200 + 50 + 30,000
= $46,950
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Operations managers typically make more money than operators.
O True
O False
Label the statements regarding the Patient Protection and Affordable Care Act (ACA) as true or false.
a. The ACA establishes a national healthcare system for the United States in which the government rather than insurance companies pays for all health related expenses.
b. Under the ACA, the government has the right to fine employers or individuals for not having or providing health insurance.
c. Assume the ACA is in effect. A health insurance company is looking over a prospective individual, Alfred, and finds that Alfred goes cliff diving regularly, which was the cause of his past six concussions. He now suffers from frequent headaches. The insurance company can deny
Alfred coverage because of his preexisting medical condition.
d. To fund the ACA, new taxes will be imposed on items including medical devices and indoor tanning.
e. Under the ACA, until age 26, you can be covered under your parent's health insurance policy.
Answer:
a. FALSE
Both Employers and Employees do most of the paying not the Federal government which only steps in for subsidies to lower income households.
b. TRUE
The Government can indeed fine employers or individuals for not having or providing health insurance.
c. FALSE
They cannot deny him coverage based on his pre-existing medical condition as a result of the ACA and neither can they charge higher premiums.
d. TRUE
Funding the ACA will need the Government to raise more revenue and they plan to do so by imposing new taxes on items including medical devices and indoor tanning.
e. TRUE.
A person under the age of 26 is to be a dependent under this Act and this includes married people under the age of 26 as well as unmarried.
Because there isn't one single measure of inflation, the government and researchers use a variety of methods to get the most balanced picture of how prices fluctuate in the economy. Two of the most commonly used price indexes are the consumer price index (CPI) and the GDP deflator.
The GDP deflator for this year is calculated by dividing the____________________ using by_____________________________ the using___________ and multiplying by 100. However, the CPI reflects only the prices of all goods and services .
Indicate whether each scenario will affect the GDP deflator or the CPI for the United States.
a. A decrease in the price of a Chinese-made car that is popular among U.S. consumers.
b. An increase in the price of a Waterman Industries deep-water reel, which is a commercial fishing product used for deep-sea fishing, made in the U.S., but not bought by U.S. consumers.
Answer:
1. The GDP deflator for this year is calculated by dividing the Value of all goods and services produced in the economy this year using this year's prices by the Value of all goods and services produced in the economy in the base year using the base year's prices and multiplying by 100.
However, the CPI reflects only the prices of all goods and services bought by consumers.
2. a. A decrease in the price of a Chinese-made car that is popular among U.S. consumers. Affects CPI.
This affects CPI because the CPI reflects only the prices of goods and services purchased by customers.
b. An increase in the price of a Waterman Industries deep-water reel, which is a commercial fishing product used for deep-sea fishing, made in the U.S., but not bought by U.S. consumers. Affects GDP Deflator.
This is a good produced in the United States so it will affect the GDP Deflator as that deals with GDP.
t a sales volume of 36,500 units, Peres Corporation's sales commissions (a cost that is variable with respect to sales volume) total $576,700. To the nearest whole dollar, what should be the total sales commissions at a sales volume of 35,000 units? (Assume that this sales volume is within the relevant range.
Answer:
$553,000
Explanation:
Calculation for the total sales commissions
First step is to compute the Sales commission per unit using this formula
Sales commission per unit = Total sales commissions ÷ Unit sales
Let plug in the formula
Sales commission per unit= $576,700 ÷ 36,500
Sales commission per unit= $15.80
Last step is to find the Total sales commission using this formula
Total sales commission = Sales commission per unit × Unit sales
Let plug in the formula
Total sales commission= $15.80 × 35,000
Total sales commission=$553,000
Therefore the Total sales commission will be $553,000
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the month are summarized as follows:
1 Sales $10,800,000.00
2 Manufacturing costs:
3 Direct materials $6,400,000.00
4 Direct labor 1,600,000.00
5 Variable manufacturing cost 1,280,000.00
6 Fixed manufacturing cost 320,000.00 9,600,000.00
7 Selling and administrative expenses:
8 Variable $1,080,000.00
9 Fixed 180,000.00 1,260,000.00
Required:
1. Prepare an income statement based on the absorption costing concept.*
2. Prepare an income statement based on the variable costing concept.*
3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).
* Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Labels and Amount Descriptions
Labels
August 31
Cost of goods sold
Fixed costs
For the Month Ended August 31
Variable cost of goods sold
Amount Descriptions
Contribution margin
Contribution margin ratio
Cost of goods manufactured
Fixed manufacturing costs
Fixed selling and administrative expenses
Gross profit
Income from operations
Inventory, August 31
Loss from operations
Manufacturing margin
Planned contribution margin
Sales
Sales mix
Selling and administrative expenses
Total cost of goods sold
Total fixed costs
Total variable cost of goods sold
Variable cost of goods manufactured
Variable selling and administrative expenses
Absorption Costing Income Statement
Shaded cells have feedback.
1. Prepare an income statement based on the absorption costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative nmber using a minus sign.
Score: 64/64
Kodiak Fridgeration Company
Absorption Costing Income Statement
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Sales - (Cost of Goods Manufactured - Ending Inventory*) = Gross Profit; Gross Profit - Selling and Administrative Expenses = Income from Operations
* (Manufactured Units - Sold Units) x (Total Manufacturing Costs/Manufactured Units)
Variable Costing Income Statement
Shaded cells have feedback.
2. Prepare an income statement based on the variable costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if rquired. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Score: 23/106
Kodiak Fridgeration Company
Variable Costing Income Statement
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Sales - Variable Cost of Goods Sold* = Manufacturing Margin; Manufacturing Margin - Variable Selling and Administrative Expenses = Contribution Margin; Contribution Margin - (Fixed Manufacturing Costs + Fixed Selling and Administrative Expenses) = Income from Operations.
*Variable Cost of Goods Sold = Variable Cost of Goods Manufactured - [(Manufactured Units - Sold Units) x (Variable Manufacturing Costs/Manufactured Units)]
Final Question
Shaded cells have feedback.
3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).
The income from operations reported under absorption costing exceeds the income from operations reported under variable costing by the difference between the two, due to fixed manufacturing costs that are deferred to a future month under absorption costing.
Answer:
1. Income statement based on the absorption costing concept.*
Sales $10,800,000.00
Less Cost of Goods Sold
Beginning Inventory $0
Add Cost of Goods Manufactured $9,600,000.00
Less Ending Inventory ($960,000.00) ($8,640,000.00)
Gross Profit $2,160,000.00
Less Expenses :
Selling and administrative expenses:
Variable $1,080,000.00
Fixed $180,000.00 ($1,260,000.00)
Net Income/(loss) $900,000.00
2. Income statement based on the variable costing concept.*
Sales $10,800,000.00
Less Cost of Goods Sold
Beginning Inventory $0
Add Cost of Goods Manufactured 9,280,000.00
Less Ending Inventory ($928,000.00) ($8,352,000.00)
Contribution $2,448,000.00
Less Expenses :
Fixed manufacturing cost $320,000.00
Selling and administrative expenses:
Variable $1,080,000.00
Fixed $180,000.00 ($1,580,000.00)
Net Income/(loss) $868,000.00
3. Reason
Fixed Costs that are deferred in Ending Inventory units under adsorption costing has resulted in absorption costing having a larger profit.
Explanation:
Production units 80,000
Less units Sold (72,000)
Ending Inventory units 8,000
absorption costing calculations
Manufacturing Cost - absorption costing
$
Direct materials 6,400,000.00
Direct labor 1,600,000.00
Variable manufacturing cost 1,280,000.00
Fixed manufacturing cost 320,000.00
Total Manufacturing Cost 9,600,000.00
Ending Inventory = 9,600,000.00 × 8,000/ 80,000
= $960,000
variable costing calculations
Manufacturing Cost - variable costing
$
Direct materials 6,400,000.00
Direct labor 1,600,000.00
Variable manufacturing cost 1,280,000.00
Total Manufacturing Cost 9,280,000.00
Ending Inventory = 9,280,000.00 × 8,000/ 80,000
= $928,000
The stockholders’ equity accounts of Castle Corporation on January 1, 2020, were as follows.
Preferred Stock (8%, $50 par, 10,000 shares authorized) $400,000
Common Stock ($1 stated value, 2,000,000 shares authorized) 1,000,000
Paid-in Capital in Excess of Par—Preferred Stock 100,000
Paid-in Capital in Excess of Stated Value—Common Stock 1,450,000
Retained Earnings 1,816,000
Treasury Stock (10,000 common shares) 50,000
During 2020, the corporation had the following transactions and events pertaining to its stockholders’ equity.
Feb. 1 Issued 25,000 shares of common stock for $120,000.
Apr. 14 Sold 6,000 shares of treasury stock—common for $33,000.
Sept. 3 Issued 5,000 shares of common stock for a patent valued at $35,000.
Nov. 10 Purchased 1,000 shares of common stock for the treasury at a cost of $6,000.
Dec. 31 Determined that net income for the year was $452,000.
Instructions:
A) Journalize the transactions and the closing entry for net income.
B) Enter the beginning balances in the accounts, and post the journal entries to the stockholders’ equity accounts. (Use J5 for the posting reference.)
C) Prepare a stockholders’ equity section at December 31, 2017.
Answer:
Castle Corporation
A) Journal Entries:
Feb. 1:
Debit Cash Account $120,000
Credit Common Stock $25,000
Credit Paid-in Capital in Excess of Stated Value—Common Stock $95,000
To record the issue of 25,000 common stock shares for $120,000
Apr. 14:
Debit Cash Account $33,000
Credit Treasury Stock $33,000
To record the reissue of 6,000 shares of treasury stock- common for $33,000.
Sept. 3:
Debit Patent $35,000
Credit Common Stock $5,000
Credit Paid-in Capital in Excess of Stated Value—Common Stock $30,000
To record the issue of common stock shares for a patent valued at $35,000
Nov. 10:
Debit Treasury Stock $6,000
Credit Cash $6,000
To record the purchase of treasury stock for $6,000
Dec. 31:
Debit Net Income (Income Statement) $452,000
Credit Retained Earnings $452,000
To close the net income on the income statement to the Statement of retained earnings.
B) Stockholders' Equity Accounts:
Preferred Stock (8%, $50 par, 10,000 shares authorized)
Date Accounts Titles Debit Credit
Jan. 1, 2020 Beginning balance $400,000
Common Stock ($1 stated value, 2,000,000 shares authorized)
Date Accounts Titles Debit Credit
Jan. 1, 2020 Beginning balance $1,000,000
Feb. 1, 2020 Cash Account 25,000
Sept. 3 Patent 5,000
Dec. 31 Ending balance $1,030,000
Paid-in Capital in Excess of Par—Preferred Stock
Date Accounts Titles Debit Credit
Jan. 1, 2020 Beginning balance $100,000
Paid-in Capital in Excess of Stated Value—Common Stock
Date Accounts Titles Debit Credit
Jan. 1, 2020 Beginning balance $1,450,000
Feb. 1, 2020 Cash Account 95,000
Sept. 3 Patent 30,000
Dec. 31 Ending balance $1,575,000
Retained Earnings
Date Accounts Titles Debit Credit
Jan. 1, 2020 Beginning balance $1,816,000
Dec. 31 Net Income 452,000
Dec. 31 Ending balance $2,268,000
Treasury Stock (10,000 common shares)
Date Accounts Titles Debit Credit
Jan. 1, 2020 Beginning balance $50,000
Apr. 14 2020 Cash Account $33,000
Nov. 10 2020 Cash Account 6,000
Dec. 31 2020 Ending balance $23,000
C. Stockholders' Equity accounts on December 31, 2020:
Preferred Stock (8%, $50 par, 10,000 shares authorized) $400,000
Common Stock ($1 stated value, 2,000,000 shares authorized) 1,030,000
Paid-in Capital in Excess of Par—Preferred Stock 100,000
Paid-in Capital in Excess of Stated Value—Common Stock 1,575,000
Retained Earnings 2,268,000
Treasury Stock (5,000 common shares) (23,000)
Explanation:
Stockholders' Equity accounts on January 1, 2020:
Preferred Stock (8%, $50 par, 10,000 shares authorized) $400,000
Common Stock ($1 stated value, 2,000,000 shares authorized) 1,000,000
Paid-in Capital in Excess of Par—Preferred Stock 100,000
Paid-in Capital in Excess of Stated Value—Common Stock 1,450,000
Retained Earnings 1,816,000
Treasury Stock (10,000 common shares) 50,000
Carmel Corporation is considering the purchase of a machine costing $38,000 with a 4-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment?
Answer:
$19,000
Explanation
Calculation for Carmel's average investment
Using this formula
Average investment=Investment/2
Let plug in the formula
Average investment=($38,000 + $0)/2
Average investment=$19,000
Therefore Carmel's average investment will be $19,000
How can an organization employ social computing technologies and applications to benefit its business processes?
Answer:
I. For effective communication
II. For Effective collaboration
III. For problem solving
IV. To improve the performance of team members.
Explanation:
Social computing is a term used in computer science to describe the process through which social attributes and behaviours interact or are intersected with computational systems and processes.
Social computing helps to ensure improved collaboration as people can have face to face interactions,problems and issues affecting Organisations can be effectively identified and possibly solved which will help to improve team Performance etc
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Lean and Six Sigma models contradict one another,
True
False
Gary mails an offer to Brian on June 15. Brian receives the offer on June 16. Gary mails a revocation of the offer on June 17. Brian mails a letter of acceptance on June 18 and Gary receives the acceptance on June 20. Brian receives the revocation on June 19. Was a contract formed?
Answer:
Yes. Contract formed on June 18.
Explanation:
A contract is an agreement between two interest parties that has rights and obligations attached to them.
The fact that Brian mails a letter of acceptance on June 18 entails that an agreement has been reached.
Thus the date of the Contract is June 18.
The company evaluates all projects by applying the IRR Rule. If the appropriate interest rate is 9%, should the company accept this project?
Answer: The project should be accepted.
Explanation:
The Internal Rate of Revenue is used to evaluate projects before they are accepted. It is a rate that equates the Net Present Value of cashflows to zero.
If the IRR is higher than the Required return then the Project will be accepted because it means that NPV will be higher than zero. The reverse is true.
Given the cashflows in the question, the IRR is;
= 18.8% according to Excel.
With the IRR higher than the required return of 8%, the project should be accepted.
Kirkwood acquires 100 percent of the outstanding voting shares of Soufflot Company on January 1, 2018. To obtain these shares, Kirkwood pays $400 cash (in thousands) and issues 10,000 shares of $20 par value common stock on this date. Kirkwood's stock had a fair value of $36 per share on that date. Kirkwood also pays $15 (in thousands) to a local investment firm for arranging the acquisition. An additional $10 (in thousands) was paid by Kirkwood in stock issuance costs.
The book values for both Kirkwood and Souflout as of January 1, 2018 follow. The fair value of each of Kirkwood and Soufflot accounts is also included. In addition, Soufflot holds a fully amortized trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any related question also is in thousands.
Kirkwood Inc Book Value Fair Value
Cash 900 80 80
Receivables 480 180 160
Inventory 660 260 300
Land 300 120 130
Buildings (net) 1,200 220 280
Equipment 360 100 75
Accounts payable 480 60 60
Long-term liabilities 1,140 340 300
Common stock 1,000 80
Additional paid-in capital 200 0
Retained earnings 1,080 480
Required:
What amount will be reported for consolidated cash after the acquisition is completed?
Answer:
$555,000
Explanation:
Calculation for the amount that will be reported for consolidated cash after the acquisition is completed
Cash at Kirkwood Inc $475,000
(900-400-15-10)
Add Cash at Soufflot Company $80,000
Consolidated cash after acquisition is completed $555,000
Therefore the amount that will be reported for consolidated cash after the acquisition is completed will be $555,000
One-year Treasury securities yield 4.85%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 5.2%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities
Answer:
5.025%
Explanation:
When we assume that the pure expectations theory is correct, then we are assuming that there is no risk premium involved. The formula to determine the yield for the 2 year treasury security:
(1 + i)² = (1 + 4.85%) x (1 + 5.2%)
(1 + i)² = 1.0485 x 1.052
(1 + i)² = 1.103022
√(1 + i)² = √1.103022
1 + i = 1.050248542
i = 0.050248542 = 5.025%
Tom purchased a bond today with a 20-year maturity and a yield to maturity (YTM) of 6%. The coupon rate is 8% and coupons are paid annually. The par value is $1,000. Tom is going to hold this bond for 3 years and sell the bond at the end of year 3. The bond's yield to maturity will change to 8% at the time when Tom sells the bond. Assume coupons can be reinvested in short term securities over the next three years at an annual rate of 10%. Which of the following regarding Tom’s annual holding period return (HPR) of this bond investment is correct?
I. Tom’s annual HPR will be higher than 6% due to a capital gain from selling the bond at year 3
II. Tom’s annual HPR will be lower than 6% due to a capital loss from selling the bond at year 3
III. Tom’s annual HPR will be higher than 6% due to the higher reinvestment rate of 10%
IV. Tom’s annual HPR will be lower than 6% because gains from the 10% reinvestment rate will be largely offset by the capital loss from selling the bond at year 3
a. I only
b. II only
c. III only
d. I and III only
e. II and IV only
Answer:
The answer happens to be:
e. II and IV only
II. Tom’s annual HPR will be lower than 6% due to a capital loss from selling the bond at year 3
IV. Tom’s annual HPR will be lower than 6% because gains from the 10% reinvestment rate will be largely offset by the capital loss from selling the bond at year 3
Explanation:
William Company owns and operates a nationwide chain of movie theaters. The 500 properties in the William chain vary from low volume, small town, single-screen theaters to high volume, big city, multi-screen theaters. The management is considering installing machines that will make popcorn on the premises. These machines would allow the theaters to sell popcorn that would be freshly popped daily rather than the pre-popped corn that is currently purchased in large bags. This proposed feature would be properly advertised and is intended to increase patronage at the company's theaters.
Annual rental costs and operating costs vary with the size of the machines. The machine capacities and costs are as follows:
Economy Regular Super
Annual capacity (boxes) Cost 50,000 120,000 300,000
Annual machine rental $8,000 $11,000 $20,000
Popcorn cost per box 130 130 130
Other costs per box 220 140 050
Cost of each box 080 080 080
Required:
a. Calculate the volume level in boxes at which the economy popper and regular popper would earn the same profit (loss).
b. Management can estimate the number of boxes to be sold at each of its theaters. Present a decision rule that would enable William's management to select the most profitable machine without having to make a separate cost calculation for each theater.
c. Could management use the average number of boxes sold per seat for the entire chain and the capacity of each theater to develop this decision rule? Explain your answer.
Answer:
William Company
a) Volume level in boxes at which the economy popper and the regular popper would earn the same profit (loss):
Economy Regular Difference in costs
Total Fixed costs $58,000 $131,000 $73,000
Total Variable costs per unit $430 $350 $80
Volume = Difference in fixed costs/Difference in variable = $73,000/$80
= 912.5 boxes
b. Decision rule: We assume a selling price of $1,000 per box, then based on this selling price, we calculate the contribution per box. The decision rule is to purchase the machine that has the least break-even point in sales unit.
Economy Regular Super
Total fixed annual costs $58,000 $131,000 $320,000
Selling price per box $1,000 $1,000 $1,000
Total variable cost per box $430 $350 $260
Contribution per box $570 $650 $740
Break-even point = 101.75 201.54 432.43
The most profitable machine is the Economy Popper since it has the least break-even point. This is the point at which management will start realizing some profits after covering all the fixed costs.
c. Management may not be able to use the average number of boxes sold per seat for the entire chain and the capacity of each theater to develop this decision rule. Using this will be complicated. But, using the break-even point for each machine is a lot easier and simpler to implement.
Explanation:
a) Machine Capacities and Costs Data and Calculations:
Economy Regular Super
Annual capacity (boxes) Cost 50,000 120,000 300,000
Annual machine rental $8,000 $11,000 $20,000
Total fixed annual costs $58,000 $131,000 $320,000
Popcorn cost per box 130 130 130
Other costs per box 220 140 050
Cost of each box 080 080 080
Total variable cost per box $430 $350 $260
Exercise 2-8 Preparing T-accounts (ledger) and a trial balance LO P2 Following are the transactions of a new company called Pose-for-Pics Aug. 1 Madison Harris, the owner, invested $6,see cash and $33,509 of photog company paid $2,100 cash for an insurance policy covering the next 24 month:s s The company purchased office supplies for $888 cash. 20 The company received $3,331 cash in photography fees earned. 31 The company paid $675 cash for August utilities.
Required:
1. Post the transactions to the T-accounts.
2. Use the amounts from the T-accounts in Requirement (1) to prepare an August 31 trial balance for Pose-for-Pics. Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Post the transactions to the T-accounts Cash ies Balance
Answer:
Pose-for-Pics
1. T-accounts:
Cash Account
Date Accounts Titles Debit Credit
Aug. 1 Common Stock $6,500
Aug. 1 Prepaid Insurance $2,100
Aug. 1 Supplies 888
Aug. 20 Service Revenue 3,331
Aug. 31 Utilities Expense 675
Aug. 30 Ending balance $6,168
Common Stock
Date Accounts Titles Debit Credit
Aug. 1 Cash $6,500
Aug. 1 Equipment 33,509
Aug. 30 Ending Balance $40,009
Photography Equipment
Date Accounts Titles Debit Credit
Aug. 1 Common Stock $33,509
Prepaid Insurance
Date Accounts Titles Debit Credit
Aug. 1 Cash $2,100
Supplies
Date Accounts Titles Debit Credit
Aug. 1 Cash $888
Service Revenue
Date Accounts Titles Debit Credit
Aug. 20 Cash $3,331
Utilities Expense
Date Accounts Titles Debit Credit
Aug. 31 Cash $675
2. Pose-for-Pics
TRIAL BALANCE
As of August 31
Accounts Titles Debit Credit
Cash $6,168
Common Stock $40,009
Photography Equipment 33,509
Prepaid Insurance 2,100
Supplies 888
Service Revenue 3,331
Utilities Expense 675
Totals $43,340 $43,340
Explanation:
Correctly posting the transactions of Pose-for-Pics to the general ledger ensures that the two sides of the Trial Balance are equal as of August 31. The balanced Trial Balance assures the arithmetical accuracy of the entries and postings in the general ledger. This trial balance will then form the basis for preparing the financial statements after effecting the necessary adjusting entries.
Multiple-Step and Single-Step Income Statements, and Statement of Comprehensive Income On December 31, 2019, Opgenorth Company listed the following items in its adjusted trial balance:
Loss from fire (pretax) $8,000 General and administrative expenses $17,000
Interest revenue 3,000 Sales 180,000
Selling expenses 15,000 Unrealized decrease in fair value of available-for-sale securities 1,800
Cost of goods sold 90,000 Loss on sale of equipment (pretax) 2,000
Additional data:
Seven thousand shares of common stock have been outstanding the entire year. The income tax rate is 30% on all items of income.
Required:
Prepare a 2019 multiple-step income statement. Disregard EPS disclosure.
Answer:
Net income $35,700
EPS $5.10
Explanation:
Preparation of 2019 multiple-step income statement.
OPGENORTH COMPANY Income Statement
For Year Ended December 31, 2019
Sales $180,000
Less Cost of goods sold 90,000
Gross profit $90,000
(180,000-90,000)
OPERATING EXPENSES
Selling expense $15,000
General and administrative expenses 17,000
Total operating expense 32000
Operating income $58,000
(90,000-32,000)
OTHER INCOME
Interest revenue $3,000
Loss on sale of equipment (pretax)
(2,000)
Loss from fire (8,000) (7,000)
(3,000-2,000-8,000)
Income before tax 51,000
(58,000-7,000)
Income tax $15,300
(30%*51,000)
Net income $35,700
(51,000-15,300)
Components of Income EPS
EPS ($35,700/$7,000) $5.10
Therefore the Net income for 2019 multiple-step income statement will be $35,700 and the EPS is $5.10
Rachel pushed very hard to go with Project A rather than Project B. There have been several cost overruns, the project is two weeks beyond its projected finish date, and the technology just isn't working out as planned. Rachel increases the funding for the third time and hires three new designers to help revamp the look of the product. Rachel is engaging in _____.
Answer: escalation of commitment
Explanation:
Escalation of commitment is when an individual or firm chooses an option which tends to be unsuccessful but the individual or firm still continues with the project because there has been investment which has already been made on it.
From the question, we are told that Rachel pushed very hard to go with Project A rather than Project B. From the information given, despite the fact that project A has been unsuccessful, Rachel continued with it and invested more in it rather than changing or leaving it for project B. This shows that Rachel is engaging in escalation of commitment.
Entries into T accounts and Trial Balance Connie Young, an architect, opened an office on October 1, 2019. During the month, she completed the following transactions connected with her professional practice:
a. Transferred cash from a personal bank account to an account to be used for the business, $36,000.
b. Paid October rent for office and workroom, $2,400.
c. Purchased used automobile for $32,800, paying $7,800 cash and giving a note payable for the remainder.
d. Purchased office and computer equipment on account, $9,000
e. Paid cash for supplies, $2,150
f. Paid cash for annual insurance policies, $4,000
g. Received cash from a client for plans delivered, $12,200.
h. Paid cash for miscellaneous expenses, $815
i. Paid cash to creditors on account, $4,500
J. Paid $5,000 on note payable.
k. Received an invoice for blueprint service, due in November, $2,890.
L Recorded fees earned on plans delivered, payment to be received in November, 18,300,
m. Paid salary of assistants, $6,450
n. Paid gas, oil, and repairs on an automobile for October, $1,020
Required:
1. Record the above transactions (in chronological order) directly in the following T accounts, without journalizing. Cash; Accounts Receivable; Supplies; Prepaid Insurance Automobiles; Equipment; Accounts Payable; Notes Payable: Connie Young, Capital; Professional Fees; Salary Expense; Blueprint Expense; Rent Expense; Automobile Expense; s Expense. To the left of each amount entered in the accounts, select the appropriate letter to identify the transaction.
2. Determine the account balances of the T accounts. Accounts containing a single entry only (such as Prepaid Insurance) do not need a balance.
Answer:
Cash
debit credit
a. 36,000
b. 2,400
c. 7,800
e. 2,150
f. 4,000
g. 12,200
h. 815
i. 4,500
j. 5,000
m. 6,450
n. 1,020
13,865
Accounts Receivable
debit credit
l. 18,300
Supplies
debit credit
e. 2,150
Prepaid Insurance
debit credit
f. 4,000
Equipment
debit credit
d. 9,000
Automobiles
debit credit
c. 32,800
Accounts Payable
debit credit
d. 9,000
i. 4,500
k. 2,890
7,390
Notes Payable
debit credit
c. 25,000
j. 5,000
20,000
Connie Young, Capital
debit credit
a. 36,000
Professional Fees
debit credit
g. 12,200
l. 18,300
30,500
Salary Expense
debit credit
m. 6,450
Blueprint Expense
debit credit
k. 2,890
Rent Expense
debit credit
b. 2,400
Automobile Expense
debit credit
n. 1,020
Miscellaneous Expense
debit credit
h. 815
1 and 2. Recording the transactions in T-accounts and balancing the T-accounts are as follows:
Cash
Account Titles Debit Credit
a. Connie Young, Capital $36,000
b. Rent Expense $2,400
c. Automobile Cash 7,800
e. Supplies 2,150
f. Prepaid Insurance 4,000
g. Professional Fees 12,200
h. Miscellaneous Expenses 815
i. Accounts Payable 4,500
j. Notes Payable 5,000
m. Salary Expense 6,450
n. Automobile Expense 1,020
Ending balance $14,065
Totals $48,200 $48,200
Accounts Receivable
Account Titles Debit Credit
l. Accounts Receivable $18,300
Supplies
Account Titles Debit Credit
e. Cash $2,150
Prepaid Insurance
Account Titles Debit Credit
f. Cash $4,000
Automobiles
Account Titles Debit Credit
c. Cash $7,800
c. Notes Payable $25,000
Ending balance $32,800
Equipment
Account Titles Debit Credit
d. Accounts Payable $9,000
Accounts Payable
Account Titles Debit Credit
d. Equipment $9,000
i. Cash $4,500
Ending balance $4,500
Notes Payable
Account Titles Debit Credit
c. Automobiles $25,000
j. Cash $5,000
Ending balance $20,000
Connie Young, Capital
Account Titles Debit Credit
a. Cash $36,000
Professional Fees
Account Titles Debit Credit
g. Cash $12,200
l. Accounts Receivable 18,300
Ending balance $30,500
Salary Expense
Account Titles Debit Credit
m. Cash $6,450
Blueprint Expense
Account Titles Debit Credit
k. Accounts Payable $2,890
Rent Expense
Account Titles Debit Credit
b. Cash $2,400
Automobile Expense
Account Titles Debit Credit
n. Cash $1,020
Miscellaneous Expense
Account Titles Debit Credit
h. Cash $815
Data Analysis:
a. Cash $36,000 Connie Young, Capital $36,000
b. Rent Expense $2,400 Cash $2,400
c. Automobile $32,800 Cash $7,800 Notes Payable $25,000
d. Equipment $9,000 Accounts Payable $9,000
e. Supplies $2,150 Cash $2,150
f. Prepaid Insurance $4,000 Cash $4,000
g. Cash $12,200 Professional Fees $12,200
h. Miscellaneous Expenses $815 Cash $815
i. Accounts Payable $4,500 Cash $4,500
j. Notes Payable $5,000 Cash $5,000
k. Blueprint Expense $2,890 Accounts Payable $2,890
l. Accounts Receivable $18,300 Professional Fees $18,300
m. Salary Expense $6,450 Cash $6,450
n. Automobile Expense $1,020 Cash $1,020
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Character is one factor used in determining credit worthiness
-true
-false
Which best explains why there are many job opportunities in the Lodging pathway?
O The pathway requires a college education.
O The pathway offers seasonal positions.
O The pathway includes low-paying jobs.
The pathway has a high turnover rate.
Answer:
the pathway includes low-paying jobs.
Explanation:
The pathway has a high turnover rate. Because there are many job opportunities are there, In the lodging pathway.
What is employment?In most cases, employment refers to the status of having a paid job—of being employed. Employing someone is paying them to work. Employees are employed by an employer. Employment can also refer to the act of hiring individuals, as in We're trying to hire more women.
An excessively high turnover rate indicates that more employees than is typical for your industry to have left the company. Depending on the sector you work in, a high turnover rate can mean different things. The anticipated turnover rates fluctuate between industries and nations.
Therefore. The correct option is (D)
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Jim's Espresso expects sales to grow by 10.3 % next year. Using the following statements and the percent of sales method, forecast:
a. Costs
b. Depreciation
c. Net Income
d. Cash
e. Accounts receivable
f. Inventory
g. Property, plant, and equipment (Note: Make sure to round all intermediate calculations to at least five decimal places.)
The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career.
Balance Sheet
Assets
Cash and Equivalents $15,050
Accounts Receivable 2070
Inventories 4090
Total Current Assets $21,210
Property, Plant and Equipment 10050
Total Assets $31,260
Liabilities and Equity:
Accounts Payable $1,580
Debt 3930
Total Liabilities $5,510
Stockholders' Equity 25750
Total Liabilities and Equity $31,260
Income Statement:
Sales $204,560
Costs Except Depreciation (99,880)
EBITDA $104,680
Depreciation (5,960)
EBIT $98,720
Interest Expense (net) (410)
Pretax Income $98,310
Income Tax (34,409)
Net Income $63,901
The forecasted costs will be :___________
Answer:
Jim's Espresso
The forecasted costs will be :___________
a. Costs = $110,168
b. Depreciation = $6,575
c. Net Income = $70,482
d. Cash = $16,600
e. Accounts receivable = $2,283
f. Inventory = $4,511
g. Property, plant, and equipment = $11,085
Explanation:
a) Data and Calculations:
Sales growth = 10.3%
Balance Sheet
Assets Percentage of sales
Current Forecast
Cash and Equivalents $15,050 0.07357 $16,600
Accounts Receivable 2070 0.01012 2,283
Inventories 4090 0.01999 4,511
Total Current Assets $21,210
Property, Plant and Equipment 10,050 0.04913 11,085
Total Assets $31,260
Liabilities and Equity:
Accounts Payable $1,580
Debt 3930
Total Liabilities $5,510
Stockholders' Equity 25750
Total Liabilities and Equity $31,260
Income Statement: Current % Forecast
Year
Sales $204,560 1 $225,630
Costs Except Depreciation (99,880) 0.48827 (110,168)
EBITDA $104,680 0.51173
Depreciation (5,960) 0.02914 (6,575)
EBIT $98,720 0.48260
Interest Expense (net) (410) 0.00200
Pretax Income $98,310 0.48059
Income Tax (34,409) 0.16821
Net Income $63,901 0.31238 $70,482
The forecasts are based on sales of the current year and the next year.
Two carmakers have developed a strange but successful partnership. Ford, a U.S. automaker,and Mazda, an Asian carmaker, have collaborated on several models, including the Explorer, the Probe, the Mazda 323, and the Mazda MX-6. The U.S. automaker has supplied Mazda with help in marketing, finance, and styling. In return, Mazda has provided manufacturing and product development expertise to Ford. Both companies have worked together toward a common goal and both have benefited as a result of theirA. strategic alliance.B. international contract.C. free trade agreement.D. collaborative treaty.E. global oligopoly.
Answer:
A. strategic alliance
Explanation:
A strategic alliance refers to an agreement that is made between the two companies to work for accomplishing a common objective also in this the independence is there for working. It is less difficult and less binding as compared with the joint venture
Therefore in the given situation, it represents upon the strategic alliance and the same is to be considered
hence, the correct option is A.
Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2019, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 4%, and the forecasted payout ratio is 45%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000.
Do not round intermediate calculations. Round your answer to the nearest dollar.
Answer: $412,600
Explanation:
AFN = Increase in assets - Increase in Liabilities - Addition to Retained Earnings
Increase in Assets
= 5,000,000 * 15%
= $750,000
Increase in Liabilities
Only use Accruals and Accounts Payable
= (450,000 + 450,000) * 15%
= $135,000
Additional to Retained Earnings
= After tax Profit
= 9,200,000 * 4%
= $368,000
Addition to retained earnings = 368,000 * ( 1 - payout ratio)
= 368,000 * ( 1 - 45%)
= $202,400
Additional Funds Needed (AFN) = 750,000 - 135,000 - 202,400
= $412,600
Norton Associates is an advertising agency in Austin, Texas. The company's controller estimated that it would incur $264,000 in overhead costs for the current year. Because the overhead costs of each project change in direct proportion to the amount of direct professional hours incurred, the controller decided that overhead should be applied on the basis of professional hours. The controller estimated 22,000 professional hours for the year. During October, Norton incurred the following costs to make a 20-second TV commercial for Central Texas Bank:Direct materials $ 32,000Direct professional hours ($65/hour) 1,200The industry customarily bills customers at 150% of total cost.1. Compute the predetermined overhead rate.2. What is the total amount of the bill that Norton will send Central Texas Bank?
Answer:
$186,600
Explanation:
The computation of the predetermined overhead rate is shown below:
= Estimated manufacturing overhead / expected tptal labor hours
= $264,000 / 22,000 hours
= $12
Now for determining the total amount of bill first determine the total cost which is shown below:
Total cost is
= Direct material + direct cost + overhead cost
= $32,000 + 1,200 * $65 + 1,200 * $12
= $32,000 + $78,000 + $14,400
= $124,400
Now the total amount of the bill is
= 150% of $124,400
= $186,600
On September 1, 2018, Evansville Lumber Company issued $80 million in 20-year, 10 percent bonds payable. Interest is payable semiannually on March 1 and September 1. Bond discounts and premiums are amortized at each interest payment date and at year-end. g The company’s fiscal year ends at December 31.
Required:
A-1. Prepare the necessary adjusting entries at December 31, 2018, and the journal entry to record the payment of bond interest on March 1, 2019, under the assumption that the bonds were issued at 98.
A-2. Prepare the necessary adjusting entries at December 31, 2018, and the journal entry to record the payment of bond interest on March 1, 2019, under the assumption that the bonds were issued at 101.
B. Compute the net bond liability at December 31, 2019, under assumptions A-1 and A-2 above.
C. Under which of these assumptions, 1 or 2, would the investor's effective rate of interest be higher? Explain.
Answer:
A-1
interest payable 2,693,334 debit
Interest payable 2,666,667 credit
discount on bond payable 26,667 credit
--to record Dec 31st adjusting entry--
interest expense 1,346,666 debit
interest payable 2,666,667 debit
discount on bond payable 13,333 credit
cash 4,000,000 credit
--to record March 1st Payment
A-2
interest expense 2,653,334 debit
premium on bond payable 13,333 debit
Interest payable 2,666,667 credit
--to record Dec 31st adjusting entry--
interest expense 1.326.666 debit
interest payable 2,666,667 debit
premium on bond payable 6,667 debit
cash 4,000,000 credit
--to record March 1st Payment
B)
A-1
78,400,000 + 26,667 = 78,426,667
A-2
80,800,000 - 13,333 = 80,786,667
C)
the effective interest rate is higher under A-1 as the company is paying the same nominal amount of $4,000,000 every six months but, received less cash for the bonds in A-1 case making the effective rate higher .
Explanation:
A-1 issued at 98 points
cash received:
80,000,000 x 98/100 = 78,400,000
discount on bonds: 80,000,000 - 78,400,000 = 1,600,000
On Dec 31st we solve for accrued discoutn and interest:
amortization
1,600,000 / 40 payment = 40,000 per payment
proportional amortization: 40,000 x 4/6 (month accrued) = 26,667
interest paid
principal x rate x time
80,000,000 x 10% x 4/12 = 2,666,667
payment:
8,000,000 x 10% x 6/12 = 4,000,000
proportional amortization: 40,000 x 2/6 (month accrued) = 13,333
accrued interest 8,000,000 x 10% x 2/12 = 1,333,333
A-2 we issue a 101 point
cash received:
80,000,000 x 101/100 = 80,800,000
premuim on bonds: 800,000
On Dec 31st we solve for accrued discount and interest:
amortization
800,000 / 40 payment = 20,000 per payment
proportional amortization: 20,000 x 4/6 (month accrued) = 13,333
interest paid
principal x rate x time
80,000,000 x 10% x 4/12 = 2,666,667
payment:
8,000,000 x 10% x 6/12 = 4,000,000
proportional amortization: 40,000 x 2/6 (month accrued) = 6,667
accrued interest 8,000,000 x 10% x 2/12 = 1,333,333