Question Completion:
A company acquires a natural resource for $1,400,000 and spends another $530,000 on development of the site and $320,000 for a non-movable tangible asset installed at the site and $150,000 for tangible movable equipment. Both assets have an expected useful life of 10 years. The natural resource is expected to yield 140,000 units over its expected life. In year 1, 45,000 units are extracted from the resource. What is the depletion expense for year 1?
Answer:
The depletion expense for Year 1 is:
= $77,143.50.
Explanation:
a) Data and Calculations:
Acquisition cost of the natural resource = $1,400,000
Site development cost = 530,000
Cost of non-movable equipment = 320,000
Cost of movable equipment = 150,000
Total cost of natural resource = $2,400,000
Expected useful life of assets = 10 years
Expected units yield from the natural resource = 140,000
Resource extracted in Year 1 = 45,000
Depletion rate = $2,400,000/140,000 = $1.7143
Depletion expense for Year 1 = $1.7143 * 45,000 = $77,143.50
According to the survey article on mergers by Mukherjee et al,
A) a minority of managers believe that diversification can be a good reason to merge.
B) acquiring managers discount targets’ cash flows at the targets’ cost of capital.
C) managers do not believe operating synergies to be important in merger decisions.
D) managers do not use the discounted cash flow formula to value a target in a merger.
Question: According to a Honda press release on October 23, 2006, sales of the fuel-efficient four-cylinder Honda Civic rose by 7.1% from 2005 to 2006. Over the same period, according to data from the U.S. Energy Information Administration, the average price of regular gasoline rose from $2.27 per gallon to $2.57 per gallon. Using the midpoint method, calculate the cross-price elasticity of demand between Honda Civics and regular gasoline. According to your estimate of the cross-price elasticity, are the two goods gross complements or gross substitutes
Explanation:
because im a grade 3Kierofree Air Tours has the following payroll data for its November 5 pay date:
Nov 5 Wages and salaries expense 522 $199,023.00
Federal withholding tax payable 220 $33,833.91
Social Security tax payable 221 11,442.35
Medicare tax payable 222 2,676.03
401(k) contributions payable 223 6,965.81
Health Insurance payable 224 14,468.97
Union Dues payable 227 4,975.58
Wages and salaries payable 226 ???
How much is the net pay?
a) $199,023.00
b) $185,216.26
c) $142,578.94
d) $124,660.35
Answer:
a probably as far as I can solve
Do It! Review 11-3a Skysong, Inc. has 2,600 shares of 7%, $130 par value preferred stock outstanding at December 31, 2019. At December 31, 2019, the company declared a $132,000 cash dividend. Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios.
Answer:
1. We have:
Dividend paid to preferred stockholders = $23,660
Dividend paid to common stockholders = $108,340
2. We have:
Dividend paid to preferred stockholders = $23,660
Dividend paid to common stockholders = $108,340
3. We have:
Dividend paid to preferred stockholders = $70,980
Dividend paid to common stockholders = $61,020
Explanation:
1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years.
Dividend paid to preferred stockholders = Number of preferred stock outstanding * Preferred stock par value * Preferred stock = 2,600 * $130 * 7% = $23,660
Dividend paid to common stockholders = Dividend declared - Dividend paid to preferred stockholders = $132,000 - $23,660 = $108,340
2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years.
Since the preferred stock is noncumulative, the answers are the as in part 1 as follows:
Dividend paid to preferred stockholders = Number of preferred stock outstanding * Preferred stock par value * Preferred stock = 2,600 * $130 * 7% = $23,660
Dividend paid to common stockholders = Dividend declared - Dividend paid to preferred stockholders = $132,000 - $23,660 = $108,340
3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years.
Since the preferred stock is cumulative, this means that the accrued fixed dividends for the two previous years have to be paid together with the current year’s dividend making 3 fixed dividends as follows:
Dividend paid to preferred stockholders = (Number of preferred stock outstanding * Preferred stock par value * Preferred stock) * 3 = (2,600 * $130 * 7%) * 3 = $70,980
Dividend paid to common stockholders = Dividend declared - Dividend paid to preferred stockholders = $132,000 - $70,980 = $61,020
Corporation M has $40,000 of current earnings and profits and $10,000 of accumulated earnings and profit. During the year Corporation M distributes $60,000 to is only shareholder – N. Before the distribution, N has basis in their stock of $100,000. What amount of capital gain income will N recognize related to this distribution?
Answer:
$40,000
Explanation:
Calculation to determine What amount of capital gain income will N recognize related to this distribution
Using this formula
N Capital gain income=N stock basis- M distribution
Let plug in the formula
N Capital gain income=$100,000-$60,000
N Capital gain income=$40,000
Therefore The amount of capital gain income that N will recognize related to this distribution is $40,000
Accents Associates sells only one product, with a current selling price of $130 per unit. Variable costs are 60% of this selling price, and fixed costs are $40,000 per month. Management has decided to reduce the selling price to $125 per unit in an effort to increase sales. Assume that the cost of the product and fixed operating expenses are not changed by this reduction in selling price. At the current selling price of $130 per unit, what dollar volume of sales per month is required for Accents to earn a monthly operating income of $20,000
Answer:
Break-even point (dollars)= $150,000
Explanation:
Giving the following information:
Selling price= $130
Unitary variable cost= 130*0.6= $78
Fixed costs= $40,000
Desired profit= $20,000
To calculate the sales in dollars to reach the desired profit, we need to use the following formula:
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= (20,000 + 40,000) / [(130 - 78) / 130]
Break-even point (dollars)= 60,000 / 0.4
Break-even point (dollars)= $150,000
Riverboat Adventures pays $170,000 plus $14,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $22,000, a building appraised at $79,200, and paddleboats appraised at $118,800. Compute the cost that should be allocated to the building. Multiple Choice $66,240. $61,200. $79,200.
Answer:
Total cost allocated to building = $66,240
Explanation:
Given:
Total amount pay = $170,000 + $14,000 = $184,000
Land appraised amount = $22,000
Building appraised amount = $79,200
Paddleboats appraised price = $118,800
Find:
Total cost allocated to building
Computation:
Total appraisal price = Land appraised amount + Building appraised amount + Paddleboats appraised price
Total appraisal price = $22,000 + $79,200 + 118,800
Total appraisal price = $220,000
Total cost allocated to building = [Total amount pay / Total appraisal price]Building appraised amount
Total cost allocated to building = [184,000/220,000]79,200
Total cost allocated to building = $66,240
The accounting records of EZ Company provided the data below. Net income $ 52,850 Depreciation expense 8,350 Increase in inventory 2,175 Decrease in salaries payable 1,355 Decrease in accounts receivable 2,900 Amortization of patent 605 Amortization of premium on bonds 2,185 Increase in accounts payable 5,350 Cash dividends paid 13,500 Prepare a reconciliation of net income to net cash flows from operating activities
Answer:
$64,340
Explanation:
Cash flows from operating activities
Net income $52,850
Adjustments for non cash effects
Depreciation expense $8,350
Amortization of patent $605
Changes in operating assets and liabilities
Increase in inventory -$2,175
Decrease in bonds premium -$2,185
Decrease in salaries payable -$1,355
Decrease in accounts receivable $2,900
Increase in accounts payable $5,350
Net Cash flow from operating activities $64,340
A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $379,650 and is expected to generate cash inflows of $150,000 each year for three years. The approximate internal rate of return on this project is
Answer:
9%
Explanation:
- $379,650 CF 0
$150,000 CF 1
$150,000 CF 1
$150,000 CF 1
The approximate internal rate of return on this project is 9%
The balance sheet of ABC reports total assets of $1,500,000 and $1,700,000 at the beginning and end of the year, respectively. Net income and sales for the year are $240,000 and $2,000,000, respectively. What is ABC's return on assets (round to nearest whole percentage, just put in the number with no %)
Answer:
15%
Explanation:
Average Assets = (Opening asset + Closing asset) / 2
Average Assets = ($1,500,000 + $1,700,000) / 2
Average Assets = $3,200,000 / 2
Average Assets = $1,600,000
Return on assets = Net Income / Average assets
Return on assets = $240,000 / $1,600,000
Return on assets = 0.15
Return on assets = 15%
On January 1, 2021, Ellison Company granted Sam Wine, an employee, an option to buy 1,000 shares of Ellison Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $6,000. Wine exercised his option on October 1, 2021 and sold his 1,000 shares on December 1, 2021. Quoted market prices of Ellison Co. stock in 2021 were:
July 1 $30 per share
October 1 $36 per share
December 1 $40 per share
The service period is for three years beginning January 1, 2021. As a result of the option granted to Wine, using the fair value method, Ellison should recognize compensation expense for 2021 on its books in the amount of:________
a. $6,000 21
b. $2,000
c. $1,500
d. $0
Answer:
b. $2,000
Explanation:
Using a fair value option pricing model, total compensation expense is determined to be $6,000.
The service period is for three years beginning January 1, 2021.
So, Ellison should recognize compensation expense for 2021 on its books in the amount of:
= $6,000 / 3 years
= $2,000.
As a result of the option granted to Wine, using the fair value method, Ellison should recognize $2,000 as compensation expense.
If there were no beginning work in process and no ending work in process under the weighted-average process costing method, the number of equivalent units for direct materials, if direct materials were added at the start of the process, would be __________________ A. More than the units started or transferred in during the period. B. Equal to the units completed during the period. C. Less than the units completed during the period. D. Equal to total of units started and units completed during the period.
Answer:
Equal to total of units started and units completed during the period
Explanation:
Equivalent units
These are said to be numbers of complete whole units that could be gotten from the material and effort evident or contained in partially completed units.
Equivalent units of production usually of weighted-average method is defined as the number of units taking oit or transferred to the next department or to finished goods during the timeframe in addition with the equivalent units in the departments' ending work in process inventory.
Equivalent Units of Production is simply known to be equal to the Units Transferred Out plus the Ending Units in Process.
Ending work-in-process
Beginning work in process is the addition that is Started in Process, minus units to be accounted for and minus units transferred out which will equal to ending work in process. Therefore, as a result of the fact that no beginning work-in-process and ending work-in-process is evident, the units started during the period is also the completed units on the same period.
Suppose you've just inherited $66,000 from your rich Aunt. You're trying to decide whether to keep the $66,000 in cash so that you can use it for transactions or to deposit the entire amount in a savings account for one year. Suppose that the interest rate on a savings account is 2.5% per year. What would be the opportunity cost of holding the $66,000 as money
Answer:
Opportunity cost of holding the money = $1.650
Explanation:
Opportunity cost is the value of the next best alternative sacrificed in favour of a decision.
The opportunity cost of holding the money is the interest on deposit that would be have been earned should it be invested at the savings rate.
Interest on savings deposit = interest rate × deposit
= 2.5%× 66,000= $1,650
Opportunity cost of holding the money = $1.650
The opportunity cost of holding the money is $1,650.
Opportunity cost can be described as the cost of the next best option forgone when one alternative is chosen over other alternatives. The opportunity cost of holding the cash is the interest on the deposit that would be forgone.
Interest rate = amount deposited x interest rate
$66,000 x 2.5%
= $66,000 x 0.025 = $1,650
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7. Which of the following is NOT a function of money * 3 points A Unit of account B Store of value C Protection against inflation D Medium of exchange
Answer:
C Protection against inflation
Explanation:
As we know that there are three functions of money i.e.
1. Unit of account
2. Store of value
3. Medium of exchange
There is only 3 functions of money that are shown above
So the protection against inflation would not be considered for the same
And, these 3 would represent the functions of money and can be treated as the unit of account, store of value and the medium of exchange
Hence, the option c is correct
Jasmine owned rental real estate that she sold to her tenant in an installment sale. Jasmine acquired the property in 2008 for $1,840,000; took $644,000 of depreciation on it; and sold it for $1,012,000, receiving $101,200 immediately and the balance (plus interest at a market rate) in equal payments of $91,080 for 10 years. What is the nature of the recognized gain or loss from this transaction?
Answer:
The nature of recognized gain or loss from this transaction is known as capital gain or loss and its important for the computation of individual income taxes
Explanation:
Given the above information, the gain or loss on sale of real estate is computed as;
Original cost
$1,840,000
Less:
Depreciation
($644,000)
Current value of property
$1,196,000
Less:
Sales value
($1,012,000)
Loss on sale
$184,000
Here, there is loss on sale because sales is less than the present value of the property taken into consideration, hence a capital loss is recognized.
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Answer:
what this?
Explanation:
thanks for the points have great day im so sorry if this was suppose to be an educational question
Rebecca wants to start her own hair salon as a side business. In order to do so, she needs to buy a professional hair dryer for $700.00 and hair coloring supplies for $232.00. She believes she will be able to schedule 18 clients in per week. If she wants to begin making a profit at the end of two weeks, how much will each client need to pay Rebecca for their hair
Answer:$25.89
Explanation:
The amount that each client need to pay Rebecca for their hair in order to make a profit goes thus:
Total cost = $700 + $232 = $932
Number of clients in 2 weeks = 2 × 18 = 36
Therefore, each client will pay:
= $932/36
= $25.89
1. The petty cash fund of the Brooks Agency is established at $280. At the end of the current period, the fund contained $198 and had the following receipts: entertainment, $50; postage, $24; and printing, $8. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period.
Answer:
1a
Dr Petty cash $ 280
Cr Cash $ 280
1b
Dr Entertainment $ 50
Dr Postage $ 24
Dr Printing $ 8
Cr Cash $ 82
Explanation:
A. Preparation of the journal entries to record establishment of the fund
Dr Petty cash $ 280
Cr Cash $ 280
( To record petty cash fund created)
1b. Preparation of the journal entries to record
reimbursement of the fund at the end of the current period.
Dr Entertainment $ 50
Dr Postage $ 24
Dr Printing $ 8
Cr Cash $ 82
(50+24+8)
(To Record reimbursement of the fund)
Visited, Not Yet Judged 3.Not Answered 4.Not Answered 5.Not Answered 6.Not Answered 7.Not Answered 8.Not Answered 9.Not Answered 10.Not Answered Question Workspace Suppose DeGraw Corporation, a U.S. exporter, sold a solar heating station to a Japanese customer at a price of 130.5 million yen, when the exchange rate was 140.0 yen per dollar. In order to close the sale, DeGraw agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction. The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would DeGraw actually receive after it exchanged yen for U.S. dollars
Answer:
DeGraw Corporation
The dollar amount that DeGraw would actually receive after it exchanged yen for U.S. dollars is:
= $845,207
Explanation:
a) Data and Calculations:
Japanese Yen U.S. Dollar
Price Price
Sale of a solar heating station 130.5 million $932,143.86 (130.5m/140 yen)
Payment in 6 months' time 130.5 million $845,207.25 (130.5m/154.4 yen)
b) When the yen fell against the dollar from 140 yen to 154.4 yen, the dollar amount that DeGraw would receive reduced from $932,143 to $845,207.25. This is a loss of $86,935.61 due to exchange rate fluctuations.
Although the Fed has very strong influence over the money supply, it does not have complete control a.Because the Fed has no idea how much reserves will change when it buys or sells securities. b.Because of unpredictable changes in the public's desire to hold cash or borrow and banks' desires to hold reserves or lend. c.Because of unpredictable changes in reserve requirements. d.Because the FOMC meets only twice a year.
Answer: b. Because of unpredictable changes in the public's desire to hold cash or borrow and banks' desires to hold reserves or lend.
Explanation:
The Fed is able to embark on monetary policy that influences the entire country - and the world to some extent - because they have very strong influence over the money supply of the US$.
This influence is not absolute however because as the old adage goes, "you can lead a horse to water but you can't make him drink". In other words, the Fed can relax(impose) restrictions to make money more(less) available but they cannot force people to borrow(hold) that money.
They can't force banks either to either hold reserves or lend money out because banks are free to impose their own reserve limits on top of those of the Fed.
SME Ads Inc. (SME) Steven Monahan owns SME Ads Inc., an advertising agency. At present, the company focuses on advertising only. However, Steven plans to expand the company's focus to include all the major elements of an organization's promotional mix. Steven feels that expanding the focus in such a way will allow the firm to meet customer needs in a more coordinated fashion. Currently, the firm organizes its work according to the media being used. Steven believes this is the most effective way to subdivide advertising. Since television is the most widely used advertising medium, the company spends most of its time on television advertising. SME knows what it takes to get the job done, and it is committed to success. Refer to SME Ads Inc. In developing the advertising campaign for a client, in which of the following steps should SME include the important selling points or features of the client's products?
A) Identifying and analyzing the industry.
B) Defining the advertising objectives.
C) Creating the advertising platform.
D) Determining the advertising appropriation.
E) Developing the media plan.
Answer:
SME Ads Inc.
In developing the advertising campaign for a client,
SME should include the important selling points or features of the client's products in the following step:
A) Identifying and analyzing the industry.
Explanation:
It is at this step that the SWOT analysis is carried out. The client's selling points form part of the client's strengths. Therefore, during the identification and analysis of the industry in which the client plays a role, its selling points or special features must be prominently developed to achieve great advert value for money.
Never-Die Battery manufactures batteries for industrial and consumer use. The company purchased a commercial package policy (CPP) to cover its property exposures. In addition to common policy conditions and declarations, the policy contains a building and personal property coverage form and an equipment breakdown protection coverage form. The policy also contains the causes-of-loss broad form. With respect to each of the following losses, indicate whether or not the loss is covered.
a. An explosion occurred that damaged the building where finished batteries are stored.
b. Because of the explosion, the company incurred expenses for expedited shipping of replacement parts for machines used to manufacture the batteries.
c. The explosion injured several employees who received emergency treatment at a local hospital.
d. An automatic sprinkler system accidentally discharged in the finished goods building. Some recently manufactured batteries were ruined because of water damage and corrosion.
Answer:
a. An explosion occurred that damaged the building where finished batteries are stored. COVERED.
The policy covers their property exposures which includes a building and property coverage which means that damage to the building will be covered.
b. Because of the explosion, the company incurred expenses for expedited shipping of replacement parts for machines used to manufacture the batteries. COVERED.
There is a coverage for equipment breakdown as well and because some machines were damaged in the explosion, they will need to be replaced and as they qualify as broken down, they will be covered.
c. The explosion injured several employees who received emergency treatment at a local hospital. COVERED.
With business and property insurance, employees are covered in the policy when they incur injuries related to business operations so these employees are covered.
d. An automatic sprinkler system accidentally discharged in the finished goods building. Some recently manufactured batteries were ruined because of water damage and corrosion. COVERED.
The sprinkler is considered equipment so in breaking down its effects are covered by the equipment breakdown so this is covered as well.
What is an example of goods?
O a hotel room
O a good haircut
O a car wash
O a hard cover book
Answer:
Hotel Room
Explanation:
a
An example of goods in the case is a hard cover book.
What is a goods?Most time, this are often tangible product that are felt and seen, unlike the service which are rendered and often intangible product
An example of service includes a hotel room, a good haircut and a car wash.
Therefore, the Option D is correct.
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Bryant Company has a factory machine with a book value of $93,700 and a remaining useful life of 7 years. It can be sold for $34,700. A new machine is available at a cost of $378,500. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $605,900 to $457,900. Prepare an analysis showing whether the old machine should be retained or replaced
Answer:
Retain Replace Net income
Increase/Decrease
Variable manufacturing costs 4241300 3205300 1036000
New machine cost 0 378500 -378500
Sell old machine 0 -34700 34700
Total 4241300 3549100 692,200
Conclusion: The old factory machine should be replaced as its net income is lesser
Workings
Variable manufacturing costs
a. Retain Equipment = 605900*7 = 4241300
b. Replace Equipment =457900*7 = 3205300
Peeler Company was incorporated as a new business on January 1, 2017. The corporate charter approved on that date authorized the issuance of 1,100 shares of $100 par, 7% cumulative, non participating preferred stock and 14,000 shares of $5 par common stock. On January 10, Peeler issued for cash 590 shares of preferred stock at $124 per share and 4,100 shares of common stock at $80 per share. On January 20, it issued 1,300 shares of common stock to acquire a building site at a time when the stock was selling for $70 per share.
During 2017, Peeler established an employee benefit plan and acquired 500 shares of common stock at $60 per share as treasury stock for that purpose. Later in 2017, it resold 100 shares of the stock at $65 per share. On December 31, 2017, Peeler determined its net income for the year to be $40,000. The firm declared the annual cash dividend to preferred stockholders and a cash dividend of $5 per share to the common stockholders. The dividends will be paid in 2018.
Required
Develop the Stockholders’ Equity category of Peeler’s balance sheet as of December 31, 2017. Indicate on the statement the number of shares authorized, issued, and outstanding for both preferred and common stock.
Answer:
Peeler Company
Stockholders' Equity
Peeler's Balance Sheet as of December 31, 2017
Authorized share capital:
1,100 shares of $100 par, 7% cumulative, non-participating preferred stock
14,000 shares of $5 par, common stock
Issued share capital:
590 shares of $100 par, 7% cumulative,
non-participating preferred stock $59,000
Additional paid-in capital-Preferred 14,160
5,400 shares of $5 par, Common stock 27,000
400 shares,Treasury stock (2,000)
5,000 shares outstanding, Common stock 25,000
Additional paid-in capital-Common stock 392,000
Additional paid-in capital (treasury stock) (21,500) 370,500
Retained earnings 10,870
Explanation:
a) Data and Analysis:
January 10: Cash $73,160 Preferred stock $59,000 Additional Paid-in Capital-Preferred stock $14,160
January 10: Cash $328,000 Common stock $20,500 Additional Paid-in Capital-Common stock $307,500
January 20: Building site $91,000 Common stock $6,500 Additional Paid-in Capital-Common stock $84,500
Treasury stock $2,500 Additional Paid-in Capital-Common stock $27,500 Cash $30,000
Cash $6,500 Treasury stock $500 Additional Paid-in Capital-Common stock $6,000
Retained earnings:
Net income = $40,000
Dividends:
Preferred stock $4,130 ($59,000 * 7%)
Common stock $25,000 (5,000 * $5)
Total dividends $29,130
Retained earnings $10,870 ($40,000 - $29,130)
Ramses Corporation produces a product that passes through two processes. During April, the first department transferred 19,000 units to the second department. The cost of the units transferred was $30,000. Material are added uniformly in the second process. The following information is provided about the second department's operations during October:
Units: beginning work-in-process, 4,000
Units: ending work-in-process, 5,500
A) Calculate the number of units started in the second department during April.
B) Calculate the number of units completed in the second department during April.
C) Calculate the number of units started and completed in the second department during April.
Answer: See explanation
Explanation:
A. The number of units started in the second department during April will be the number of units that is transferred in from the first department. This will be
= 19000 units
B. The number of units completed in the second department during April will be:
= Beginning units + Started Unit - Ending units
= 4000 + 19000 - 5500
= 17500 units
C. The number of units started and completed in the second department during April will be:
= Completed units - units in beginning WIP
= 17500 – 4000
= 13500 units.
The following credit sales are budgeted by Sunland Company: January $274000 February 350000 March 470000 April 360000 The company's past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of April is
Answer:
$374,000
Explanation:
April Collection = $360000 x 70 % + $ 470000 x 20 % + $ 350000 x 8 %
= $374,000
The anticipated cash inflow for the month of April is $374,000
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Answer:
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Explanation:
Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data summarize the results for July: 1 Sales (38,000 units) $9,500,000.00 2 Production costs (44,000 units): 3 Direct materials $4,400,000.00 4 Direct labor 1,760,000.00 5 Variable factory overhead 1,100,000.00 6 Fixed factory overhead 660,000.00 7,920,000.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,170,000.00 9 Fixed selling and administrative expenses 200,000.00 1,370,000.00 Required: a. Prepare an income statement according to the absorption costing concept\.\* b. Prepare an income statement according to the variable costing concept\.\* c. What is the reason for the difference in the amount of Operating income reported in (a) and (b)
Answer:
a.
income statement according to the absorption costing concept.
Sales $9,500,000.00
Less Cost of Sales ($6,840,000.00)
Gross Profit $2,660,000.00
Less Expenses
Variable selling and administrative expenses ($1,170,000.00)
Fixed selling and administrative expenses ($200,000.00)
Net Income $1,290,000.00
b.
income statement according to the variable costing concept
Sales $9,500,000.00
Less Cost of Sales ($6,270,000.00)
Contribution $3,230,000.00
Less Expenses
Fixed factory overhead ($660,000.00)
Variable selling and administrative expenses ($1,170,000.00)
Fixed selling and administrative expenses ($200,000.00)
Net Income $1,200,000.00
c.
The difference is due to fixed cost included in closing inventory under the absorption costing concept.
Explanation:
Production Cost - Absorption Costing
Direct materials $4,400,000.00
Direct labor $1,760,000.00
Variable factory overhead $1,100,000.00
Fixed factory overhead $660,000.00
Total $7,920,000.00
therefore,
Cost of Sales = 38,000 units/ 44,000 units x $7,920,000.00
= $6,840,000
Production Cost - Variable Costing
Direct materials $4,400,000.00
Direct labor $1,760,000.00
Variable factory overhead $1,100,000.00
Total $7,260,000.00
therefore,
Cost of Sales = 38,000 units/ 44,000 units x $7,260,000.00
= $6,270,000
a. Income Statement according to Absorption Costing Concept:
Sales: $9,500,000.00
Cost of Goods Sold:
Direct Materials: $4,400,000.00
Direct Labor: $1,760,000.00
Variable Factory Overhead: $1,100,000.00
Fixed Factory Overhead: $660,000.00
Total Manufacturing Costs: $7,920,000.00
Gross Profit: $1,580,000.00
Selling and Administrative Expenses:
Variable Selling and Administrative Expenses: $1,170,000.00
Fixed Selling and Administrative Expenses: $200,000.00
Total Selling and Administrative Expenses: $1,370,000.00
Operating Income: $210,000.00
b. Income Statement according to Variable Costing Concept:
Sales: $9,500,000.00
Variable Costs:
Direct Materials: $4,400,000.00
Direct Labor: $1,760,000.00
Variable Factory Overhead: $1,100,000.00
Variable Selling and Administrative Expenses: $1,170,000.00
Total Variable Costs: $8,430,000.00
Contribution Margin: $1,070,000.00
Fixed Costs:
Fixed Factory Overhead: $660,000.00
Fixed Selling and Administrative Expenses: $200,000.00
Total Fixed Costs: $860,000.00
Operating Income: $210,000.00
In absorption costing, fixed manufacturing overhead is treated as a product cost and is included in the cost of goods sold. This means that a portion of fixed overhead is allocated to each unit produced, resulting in higher inventory values and a higher cost of goods sold.
In variable costing, fixed manufacturing overhead is treated as a period cost and is not included in the cost of goods sold. It is instead expensed in the period incurred. This means that fixed overhead is only expensed when it is incurred and is not allocated to units in inventory.
Since the number of units produced (44,000 units) exceeded the number of units sold (38,000 units), the fixed overhead allocated to the 6,000 unsold units under absorption costing contributes to the difference in reported operating income between the two methods. In this case, the absorption costing method reports higher operating income due to the allocation of fixed overhead to units in inventory.
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Which of the following statements represents a correct and sequentially accurate economic explanation? a. If net exports rise, total expenditures on goods and services rises, and the AD curve shifts rightward. b. If investment increases, total expenditures on goods and services falls, and the AD curve shifts leftward. c. If consumption falls, total expenditures on goods and services falls, and the AD curve shifts rightward. d. If consumption falls, total expenditures on goods and services rises, and the AD curve shifts leftward.
Answer:
The statement that represents a correct and sequentially accurate economic explanation is:
a. If net exports rise, total expenditures on goods and services rises, and the AD curve shifts rightward.
Explanation:
Some of the factors that can cause the AD curve to shift rightward are increased consumer spending, declining marginal propensity to save, and an expansionary monetary and fiscal policy. Increased consumer spending can be brought about by increased net exports, which increase the propensity to spend. Declining marginal propensity to save increases the marginal propensity to spend, and this causes the AD curve to shift rightward. When government, through its monetary and fiscal policies, makes more money available, the AD curve shifts rightward, with an increased demand for goods and services.
The statement that represents a correct and sequentially accurate economic explanation is:
a. If net exports rise, total expenditures on goods and services rises, and the AD curve shifts rightward.
The following information should be considered:
Some of the factors that can cause the AD curve to shift rightward are increased consumer spending, declining marginal propensity to save, and an expansionary monetary and fiscal policy. Increased consumer spending can be brought about by increased net exports, which increase the propensity to spend. Declining marginal propensity to save increases the marginal propensity to spend, and this causes the AD curve to shift rightward. When government, through its monetary and fiscal policies, makes more money available, the AD curve shifts rightward, with an increased demand for goods and services.Learn more: brainly.com/question/16911495