Answer and Explanation:
The computation of the variance is shown below;
a) Material price variance is
= (Standard price - actual price) × actual quantity
= ($1.5 - $1.48) × 25000
= $500 F
b. Material quantity variance is
= (Standard quantity - actual quantity) × Standard price
= (3000 × 6 - 20,000) × 1.5
= $3,000 U
c) Labor rate variance is
= (Standard rate - actual rate) × actual hours
= ($21 × 4000 - $88,000)
= $4,000 U
d. Labor efficiency variance is
= (Standard hour - actual hour) × Standard rate
= (3000 × 1.3 - 4000) × 21
= $2,100 U
if you are going to create or own a business, what would it be? List at least 3 and cite your reasons why you have listed them.
Answer:
If I were to create a business, and had to choose three alternatives of commercial sectors in which to get involved, I would choose the following:
-Renewable energies, given that given the eventual disappearance of fossil fuels and the rise of electric cars, renewable energies will become the main source of power in the medium-term future.
-Mining of cryptocurrencies, inasmuch as these currencies have been classified as the money of the future, and the exponential growth they have had since their inception has been remarkable.
-Retail of essential consumer goods, such as food, as it is a necessary industry and whose consumption, despite the ups and downs of the economy, never declines.
Marigold Corp. issued at a premium of $10500 a $192000 bond issue convertible into 4700 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $4000, the market value of the bonds is $212000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds
Answer: $102000
Explanation:
The following can be deduced fkem the question:
Face value of bonds = $192000
Unamortized Premium = $4000
Conversion of Equity Shares = 4700 x $20 = $94000
Paid in Capital in Excess of Par = $192000 + $4000 - $94000
= $102000
There is an investment with the discount rate of 6 %. What should be the present value of the investment if we want to get a net cash flow of $17500;
a) After 1 year
b) After 2 years
c) After 3 years
Answer:
a. $16,509.434
b. $15,574.94
c. $14,693.34
Explanation:
The calculation of the present value for the following cases is
we know that
Present Value = Future Value ÷ (1+ rate of interest)^number of years
a. After one year
= $17,500 ÷ (1 + 0.06)^1
= $16,509.434
b. After 2 years
= $17,500 ÷ (1 + 0.06)^2
= $17,500 ÷ 1.1236
= $15,574.94
c. After 3 years
= $17,500 ÷ (1 + 0.06)^3
= $17,500 ÷ 1.191016
= $14,693.34
Therefore, the present value after one year, 2 years and third year is $16,509.434 ,$15,574.94 and $14,693.34 respectively
Clare, a florist, opened a new store and wanted to purchase a new refrigeration display cabinet for fresh-flower arrangements. She entered into a deal with Alpha Refrigeration Systems for two refrigeration units at $600 each. But, after delivering the units, the salesperson demanded another $100 as delivery charges, which was not mentioned in the deal. Identify the win-lose strategy used by the salesperson.
The question is incomplete:
Clare, a florist, opened a new store and wanted to purchase a new refrigeration display cabinet for fresh-flower arrangements. She entered into a deal with Alpha Refrigeration Systems for two refrigeration units at $600 each. But, after delivering the units, the salesperson demanded another $100 as delivery charges, which was not mentioned in the deal. Identify the win-lose strategy used by the salesperson.
-Good guy-bad guy routine
-Browbeating
-Red herring
-Trial balloon
-Lowballing
Answer:
-Red herring
Explanation:
-Goog buy-bad guy routine is a strategy in which one person appears to be on your side and when you get to an agreement, this person goes to the bad guy for approval who will renegotiate.
-Browbeating is a strategy in which the buyer tries to affect the saleperson atittude by saying unflattering things.
-Red herring is a strategy in which one of the parties tries to distract the other one from certain isues to get an advantage.
-Trial balloon is an strategy in which one of the parties says something to the other one to get information about its position in the negotiation.
-Lowballing is an strategy in which the buyer makes a really low offer to test the seller.
According to the definitions, the answer is that the win-lose strategy used by the salesperson is red herring because Clara didn't consider the information related to the delivery when purchasing the units as she was probably distracted by other aspects and didn't consider this.
A band sells shirts, CDs, and other merchandise online. They are using Excel to track sales by date and by name
of the buyer. They would like for any purchases over $50 to be highlighted automatically so that they can send a
special gift to those buyers.
Which is the best way to make Excel automatically highlight these sales?
Answer:
its 3
Explanation:
Leandro Corp. manufactures wooden desks. Production consists of three processes: cutting, assembly, and finishing. The following costs are given for April: Cutting Assembly Finishing direct materials $7,000 $10,000 $3,000 direct labor 3,000 14,000 2,000 applied overhead 4,000 5,000 6,000 There were no work in process inventories and 1,000 podiums were produced. What is the cost transferred out of the assembly department. a.$29,000 b.$43,000 c.$54,000 d.$14,000 e.None of these choices are correct.
Answer:
a. $29,000
Explanation:
With regards to the above, the cost transferred out of the assembly department is computed as;
We would sum up all the cost associated with the Assembly department.
= Direct materials + Direct labor + Overhead
Direct materials = $10,000
Direct labor = $14,000
Overhead = $5,000
Therefore, cost transfered out of the assembly department is
= $10,000 + $14,000 + $5,000
= $29,000
Inside Incorporated was issued a charter on January 15 authorizing the following capital stock:
Common stock, $6 par, 100,000 shares, one vote per share
Preferred stock, 7 percent, par value $10 per share, 5,000 shares, nonvoting.
The following selected transactions were completed during the first year of operations in the order given:
a. Issued 21,000 shares of the $6 par common stock at $19 cash per share.
b. Issued 3,100 shares of preferred stock at $23 cash per share.
c. At the end of the year, the accounts showed net income of $39,000
Prepare the stockholders' equity section of the balance sheet at December 31
Answer:
Total stockholders' equity = $509,300
Explanation:
Before the stockholders' equity section of the balance sheet is prepared, the following are calculated first:
Common stock = Number of common shares issued * Par value of common share = 21,000 * $6 = $126,000
Additional-paid-in-capital (APIC) – Common stock = Number of common shares issued * (Common stock cash per share - Par value of common share) = 21,000 * ($19 - $6) = $273,000
Preferred stock = Number of preferred stock issued * Par value of preferred stock = 3,100 * $10 = 31,000
APIC – Preferred stock = Number of preferred stock issued * (Preferred stock cash per share - Par value of preferred stock) = 3,100 * ($23 - $10) = $40,000
Therefore, the stockholders' equity section of the balance sheet at December 31 can now be prepared as follows:
Inside Incorporated
Balance Sheet (Partial)
At December 31
Details $
Stockholders' equity:
Common stock 126,000
APIC – Common stock 273,000
Preferred stock 31,000
APIC – Preferred stock 40,000
Net income 39,000
Total stockholders' equity 509,300
emiannual coupon bonds with the same risk (Aaa) and maturity (20 years) as your company's bonds have a nominal (not EAR) yield to maturity of 9%. Your company's treasurer is thinking of issuing, at par, some $1,000 par value, 20-year, quarterly payment bonds. She has asked you to determine what quarterly interest payment, in dollars, the company would have to set in order to provide the same effective annual rate (EAR) as those on the 20-year, semiannual payment bonds. What would the quarterly, dollar interest payment be
Answer:
quarterly coupon payment = $22.25
Explanation:
effective annual interest rate of current bonds = (1 + 9%/2)² - 1 = 9.2025%
if the new bonds will have quarterly payments, then the nominal interest rate should be:
1.092025 = (1 + r/4)⁴
⁴√1.092025 = ⁴√(1 + r/4)⁴
1.02225 = 1 + r/4
0.02225 = r/4
r = 8.9% annual
quarterly rate = 2.225%
quarterly coupon payment = $22.25
Hoyle Company owns a manufacturing plant with a fair value of $4,600,000, a recorded cost of $8,500,000, and accumulated depreciation of $3,650,000. Patterson Company owns a warehouse with a fair value of $4,400,000, a recorded cost of $6,900,000, and accumulated depreciation of $2,800,000. Hoyle and Patterson exchange assets, with Hoyle also receiving cash of $200,000 from Patterson. The exchange is considered to have commercial substance.
Required:
Record the exchange on the books of:
a. Hoyle
b. Patterson
Answer:
A. Hoyle
Dr Warehouse $4,400,000
Dr Cash $200,000
Dr Accumulated depreciation $3,650,000
Dr Loss on sale of asset $250,000
Cr Manufacturing plant $8,500,000
B. Patterson
Dr Manufacturing plant $4,600,000
Dr Accumulated depreciation $2,800,000
Cr Gain on sale of asset
$300,000
Cr Warehouse $6,900,000
Cr Cash $200,000
Explanation:
A. Preparation of the Jounal entry to Record the exchange on the books of Hoyle
Dr Warehouse $4,400,000
Dr Cash $200,000
Dr Accumulated depreciation $3,650,000
Dr Loss on sale of asset $250,000
(8,500,000-4,400,000-200,000-3,650,000)
Cr Manufacturing plant $8,500,000
B. Preparation of the Jounal entry to Record the exchange on the books of Patterson
Dr Manufacturing plant $4,600,000
Dr Accumulated depreciation $2,800,000
Cr Gain on sale of asset
$300,000
(4,600,000+2,800,000-6,900,000-200,000)
Cr Warehouse $6,900,000
Cr Cash $200,000
Home Inspirations. Hailey works for her father in a family-owned business called Home Inspirations, a bedding company that has been in operation since the 1800s. When her father retires, Hailey plans on taking over the business. Hailey is aware of many things about the company that she likes, and a few things that she does not. She has particularly noted that when the economy has low unemployment and high total income, sales are great. However, at any other time, sales are not so good.
Currently, all of the bedding items are created in one place and everyone works on various tasks every day. Hailey is thinking about streamlining the production process so that individuals would be responsible for only one task. She believes that if production would increases, she could sell her products at a lower price and increase revenue. She knows that most bedding products available in the market are very similar in nature and satisfy the same need. However, if she were able to lower prices, this might give her company the competitive advantage that it needs. She would then be able to invest money in differentiating her products by providing unique features, building the brand name, and offering services such as free delivery. She is also considering selling her products on the Internet. Hailey knows that her father does not like change very much, but she feels these changes are important for the future of the company.
Hailey feels that for productivity to improve, the company must practice: _________.
a. Free enterprise,
b. Work ethics,
c. Specialization,
d. Cultural diversity,
e. Pure competition.
Answer:
c. Specialization,
Explanation:
Since in the question it is mentioned that she selling her product on the internet and she knows her father does not like the changes but she knows that it would be important for the company .
So here if she wants to improve the productivity of the product so she must practice in specialization as if the product is different from the competitor in terms of quality, price, quantity, attractiveness, etc so the chances of increasing the sales would be high
Hence, the option c is correct
Match each phrase that follows with the term it describes.
1. Budget
2. Capital expenditures budget
3. Sales budget
4. Production budget
5. Cash budget
6. Budgeted balance sheet
A. an accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period
B. plans an important role for organizations in planning, directing, and controlling a company's future goals
C. a plan showing the units of goods to be sold and the sales to be derived; usually the starting point in the budgeting process
D. a plan that lists dollar amounts to be both spent on purchasing additional pant assets to carry out the budgeted business activities
E. a plan showing the number of units to be produced each month
F. a plan that shows the expected cash inflows and outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans
Answer and Explanation:
The matching is as follows:
1. Budget - B. It would be play a significant role with respect to planning, directing, controlling for an upcoming goals of the company
2. Capital expenditure budget -D. As the capital expenditure is the one time expenditure that should be done for purchasing the extra plant asset
3. Sales budget - C. The plan that represent the sales unit and the sales value.
4. Production budget - E. The budget that represent the no of units produced each month
5. Cash budget - F. It represent the cash inflows and cash outflow position
6. Budgeted balance sheet - A. It involved the assets, liabilities and stockholder equity
Which of the following is NOT a correct statement about diversification? A) As Dr. Melton stated in class, most diversification benefits are realized with just 20 to 25 stocks. B) Diversification is the process of reducing the riskiness associated with individual assets by spreading an investment across numerous assets. C) There is no limit to the amount of risk that can be eliminated through diversification. D) Non-diversifiable risk is the only risk that matters to a diversified investor. E) None of the above.
Answer: C. There is no limit to the amount of risk that can be eliminated through diversification.
Explanation:
Diversification is referred to as the process of reducing the riskiness associated with individual assets such that an investment is spread across numerous assets.
All the options given in the question are correct about diversification except that "There is no limit to the amount of risk that can be eliminated through diversification".
There is a limit to the amount of risk that diversification can eliminate. We should note that the risk in the investment cannot be completely eliminated no matter how the economic agent diversifies their portfolio. Even though the risks are reduced, every stock are still affected by general market risks.
Marshall Welding Company has two service departments (Cafeteria and Human Resources) and two production departments (Machining and Assembly). The number of employees in each department follows. Cafeteria 20 Human Resources 30 Machining 100 Assembly 150 Marshall Welding uses the step-down method of cost allocation and allocates cost on the basis of employees. Human Resources cost amounts to $1,200,000, and the department provides more service to the firm than Cafeteria. How much Human Resources cost would be allocated to Machining
Answer:
the cost of Human Resources would be allocated to Machining is $480,000
Explanation:
The computation of the cost of Human Resources would be allocated to Machining is given below:
= Cost of the human resource × machining department ÷ (machining department + assembly department)
= $1,200,000 × 100 ÷ (100 + 150)
= $480,000
hence, the cost of Human Resources would be allocated to Machining is $480,000
On January 1, 2020, Doone Corporation acquired 80 percent of the outstanding voting stock of Rockne Company for $448,000 consideration. At the acquisition date, the fair value of the 20 percent noncontrolling interest was $112,000, and Rockne's assets and liabilities had a collective net fair value of $560,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $170,000 in 2021. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $230,000 in 2020 and $330,000 in 2021. Approximately 30 percent of the inventory purchased during any one year is not used until the following year.
Requied:
a. What is the noncontrolling interest's share of Rockne's 2021 income?
b. Prepare Doone's 2021 consolidation entries required by the intra-entity inventory transfers
Answer:
(A). $32,800
(B). Entries are shown below.
Explanation:
(A) According to the scenario, computation of the given data are as follows,
Net income of Rockne Company in 2021 = $170,000
Unrealized profit 2020 = $230,000 × 30% × 20% = $13,800
Unrealized profit 2021 = $330,000 × 30% × 20% = $19,800
So, Total income = $170,000 + $13,800 - $19,800 = $164,000
Now, noncontrolling interest's share of Rockne's 2021 income can be calculated as follows,
NCI share of Rockne's 2021 income = Total income × 20%
= $164,000 × 20%
= $32,800
(B). Journal entries for the given data are as follows,
1. Retained Earnings A/c Dr. $13,800
To, COG sold A/c. $13,800
( Being event *G entry is recorded)
2. Sales A/c Dr. $330,000
To, COG sold A/c. $330,000
( Being event TI entry is recorded)
3. COG sold A/c Dr. $19,800
To, Inventory A/c. $19,800
( Being event G entry is recorded)
Utilize the following financial information to answer the question. Current value of land $2,000,000 Cost to rebuild the physical structure $7,500,000 Furniture, fixtures and equipment $ 500,000 Economic deductions $ 800,000 Functional obsolescence $ 200,000 Physical deterioration $1,000,000 Based on the cost replacement approach, how much would be estimated value of the property
Answer: $8,000,000
Explanation:
Based on the cost replacement approach:
Estimated value = Land Value + Replacement Value - Deductions from value
Replacement value = Cost to rebuild physical structures + Furniture
= 7,500,000 + 500,000
= $8,000,000
Economic deductions:
= 800,000 + 200,000 + 1,000,000
= $2,000,000
Estimated value = 2,000,000 + 8,000,000 - 2,000,000
= $8,000,000
Gamegirl Inc., has the following transactions during August. August 6 Sold 72 handheld game devices for $210 each to DS Unlimited on account, terms 2/10, net 60. The cost of the 72 game devices sold, was $190 each. August 10 DS Unlimited returned seven game devices purchased on 6th August since they were defective. August 14 Received full amount due from DS Unlimited.
Required:
Prepare the transactions for GameGirl, Inc., assuming the company uses a perpetual inventory system.
Answer:
Aug 6
Dr Accounts Receivable $15,120
Cr Sales $15,120
Dr Cost of Goods Sold $13,680
Cr Inventory $13,680
Aug 10
Dr Sales Return $1,470
Cr Accounts Receivable $1,470
Aug 14
Dr Cash $13,513
Dr Sales Discount $137
Cr Accounts Receivable $13,650
Explanation:
Preparation of the transactions for GameGirl, Inc., assuming the company uses a perpetual inventory system.
Aug 6 Accounts Receivable $15,120
Sales $15,120
(72*$210)
Dr Cost of Goods Sold $13,680
Cr Inventory $13,680
(72*$190)
Aug 10
Dr Sales Return $1,470
Cr Accounts Receivable $1,470
(7*$210)
Aug 14
Dr Cash $13,513
($13,650-$137)
Dr Sales Discount $137
Cr Accounts Receivable $13,650
Computation of Sales Discount:
Sales $15,120
Less: Sales Return $1,470
Total Sales $13,650
Multiply: Percentage of Discount 1%
Sales Discount $137
When you undertook the preparation of the financial statements for Oriole Company at January 31, 2021, the following data were available: At Cost At Retail Inventory, February 1, 2020 $83,470 $99,500 Markdowns 35,200 Markups 64,000 Markdown cancellations 19,200 Markup cancellations 9,000 Purchases 226,000 286,500 Sales revenue 310,000 Purchases returns and allowances 4,900 5,900 Sales returns and allowances 9,400 Compute the ending inventory at cost as of January 31, 2021, using the retail method which approximates lower of cost or market. Ending inventory at cost
Answer:
See below
Explanation:
Cost Retail
Beginning inventory 83,470 99,500
Add: Purchases 226,000 286,500
Less:
Purchases return (4,900) (5,900)
Add:
Net markups
(64,000 - 9,000) ---------- 55,000
Balance 304,570 380,100
Cost to retail percentage 80%
304,570/380,100
Less:
Net markdowns
(35,200 - 19,200) ----------- (16,000)
Goods available for sale 304,570 364,100
Less: Net sales
(310,000 - 9,400) ------- (300,600)
Estimated ending inventories at retail prices ---------- 63,500
Estimated ending inventory at cost
(63,500 × 80%) (50,800) ---------
Estimated cost of goods sold 253,770
Ending inventory at cost using the retail method is $50,800
Bond prices depend on the market rate of interest, stated rate of interest, and time. Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount:a. The market interest rate is 4%. Denton issues bonds payable with a stated rate of 4%.b. Starkville issued 8% bonds payable when the market interest rate was 8.25%.
Answer:
a. Par value
b. Discount
Explanation:
a. As the market interest rate is 4% and the stated rate is also 4% so that means the bond would be issued at face value because both the rates are same
b. The bond rate is 8% and the market interest rate is 8.25%
so the stated interest rate is lower than the market interest rate, that means the bond would be issued at discount
hence, the same would be considered
3. The price elasticity of demand for wine is estimated to be 1 at all possible quantities. Currently, 200 million gallons of wine are sold per year, and the price averages $6 per bottle. Assuming that the price elasticity of supply of wine is 1 and the current tax rate is $1 per bottle, calculate the current excess burden of the tax on wine. Suppose the tax per bottle is increased to $2 per bottle. What will happen to the excess burden of the tax as a result of the tax increase
Answer:
The excess burden would quadruple to $33,333
Explanation:
In order to calculate the excess burden as a result of the tax increase, we first calculate the excess burden at current tax rate which is $1 per bottle. Excess burden is calculated using the following formulae:
W = 1/2(T)²(Q/P) x (Es x Ed / (Es - Ed))
where:
T = Tax per unit
Q = Total Quantity
P = Price per unit
Es = Elasticity of Supply
Ed = Elasticity of Demand
W = 1/2(1)² (200,000/6) x (1 x 1 / (1 - (-1)))
W = 1/2 (33.333) x (1/2)
W = $8,333
Now after-tax rate goes up to $2, the excess burden would as follow:
W = 1/2(2)² (200,000/6) x (1 x 1 / (1 - (-1)))
W = 2 (33.333) x (1/2)
W = $33,333 per year
Hence, the excess burden is $33,333 after the increase in tax.
A sporting goods manufacturer budgets production of 59,000 pairs of ski boots in the first quarter and 50,000 pairs in the second quarter of the upcoming year. Each pair of boots requires 2 kilograms (kg) of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 23,600 kg and the cost per kg is $8. What is the budgeted materials purchases cost for the first quarter?
Answer:
Purchases= 114,400 kg
Total purchase cost= $915,200
Explanation:
Giving the following information:
Beginning inventory= 23,600 kg
Cost per kg= $8
Production= 59,000 pairs
Desired ending inventory= (50,000*0.2)*2= 20,000 kg
To calculate the purchases, we need to use the following formula:
Purchases= production + desired ending inventory - beginning inventory
Purchases= 59,000*2 + 20,000 - 23,600
Purchases= 114,400 kg
Total purchase cost= 114,400*8= $915,200
Folklore Music manufactures harmonicas. Folklore uses standard costs to judge performance. Recently, a clerk mistakenly threw away some of the records, and only partial data for July exist. Folklore knows that the total direct labor variance for the month was $350 F and that the standard labor rate was $11 per hour. A recent pay cut caused a favorable labor rate variance of $0.40 per hour. The standard direct labor hours for actual July outputs were 5,910.
Required:
a. Find the actual number of direct labor hours worked during July. First, find the actual direct labor rate per hour. Then, determine the actual number of direct labor hours worked by setting up the computation of the total direct labor variance as given.
b. Compute the direct labor rate and efficiency variances. Do these variances suggest that the manager may have made trade-offs? Explain.
Answer: See explanation
Explanation:
a. The actual direct labor rate per hour will be:
= Standard direct labor rate per hour - favorable labor rate variance
= $11 - $0.40
= $10.60
Then, the actual direct labor hours worked during July will be calculated as:
= (5910 × $11) - $350 / $10.6
= ($65010 - $350) / $10.6
= $64660 / $10.6
= 6100
b. The direct labor rate variance will be:
= (Actual rate per hour - standard rate per hour) × Actual labor hours
= (10.60 - 11.00) × 6100
= 2440F
Direct labor efficiency variance will be:
= (6900 - 5910) × $11
= 2090U
The direct labor rate variance that was favorable shows that the manager paid a lower rate to its staffs while the direct labor efficiency variance that was unfavorable implies that the manager used less efficient workers. This indicates that a trade-off took place.
= (6900
Fore Farms reported a pretax operating loss of $210 million for financial reporting purposes in 2021. Contributing to the loss were (a) a penalty of $10 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2021 and (b) an estimated loss of $20 million from accruing a loss contingency. The loss will be tax deductible when paid in 2022. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2021 other than those described above. Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2021. 2. What is the net operating loss reported in 2021 income statement
Answer:
Fore Farms
1. Journal Entry
Debit Net operating loss $180 million
Credit Loss Carryforward Relief $180 million
To record the income tax benefit of the net operating loss.
2. The net operating loss reported in 2021 income statement is $180 million.
Explanation:
a) Data and Calculations:
Enacted tax rate = 25%
2021 Reported pretax operating loss = $210 million
Less:
Penalty for EPA violation = 10 million
Loss contingency accrued
(temporary difference) = 20 million
Net pretax operating loss = $180 million
b) The net operating loss (NOL) suffered by Fore Farms, after adjusting non-allowable penalty for EPA violation and temporary differences, will be used to offset the company's tax payments in subsequent tax periods. This is an Internal Revenue Service (IRS) tax provision called a "loss carryforward." It allows some tax relief to Fore Farms for losing money in 2021.
On the worksheet the adjusted balance of a contra asset account would be extended to:
Answer: the Balance Sheet Credit column.
Explanation:
A contra account is simply an asset account which has a credit balance, unlike the normal asset account that typically has a debit balance.
The two main types of contra account include the accumulated depreciation and the allowance for bad debt. We should note that on the worksheet the adjusted balance of a contra asset account would be extended to the credit column of the balance sheet.
Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $7 million. The installment receivable account at year-end 2021 had a balance of $8 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $112 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):
Answer:
1. Taxable income = $76 million
2. Net income = $65.25 million
3-a. Net current Deferred Tax Asset = $1.95 million
3-b. Net current Deferred Tax Liability = $6.25 million
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question. See the attached pdf file for the complete question.
The explanation of the answers I now provided as follows:
1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.
1-a. Note: See the attached excel file for the determination of the amounts necessary to record income taxes for 2021 and the taxable income.
From the attached excel file, we have:
Taxable income = $76 million
1-b. The journal entries will look as follows:
Details Debit ($'m) Credit ($'m)
Tax expense (6.75 + 19 - 3) 22.75
Deferred tax asset (25% * (1 + 13 - 2)) 3.00
Deferred tax liability (25% * (7 + 20)) 6.75
Tax payable (25% * 76) 19.00
(To record tax expense.)
2. What is the 2021 net income?
This can be determined as follows:
Net income = Pretax accounting income - Tax expense = $88 million - $ 22.75 million = $65.25 million
3. Show how any deferred tax amounts should be classified and reported in the 2021 balance sheet.
3-a. The deferred tax amounts should be classified as follows.
From installment receivable in point (a) in the question:
Current deferred tax liability in 2022 (25%* ($4 / 2)) = $1
Noncurrent deferred tax liability in 2023 (25%* ($4 / 2)) = $1
From the depreciation in point (c.) in the question:
Noncurrent deferred tax liability (25%* ((24 + 24) - (14 + 7))) = $6.75
From the Warranty Expense/Payable in point (d.) of the question:
Current deferred tax asset (40%* 3) = $1.20
From the Acrrued Expense/Payable in point (e.) of the question:
Current deferred tax asset (25%* 7) = $1.75
Noncurrent deferred tax liability (25% * $6) = $1.50
3-b. These will be reported reported in the 2021 balance sheet as follows:
Sherrod, Inc.,
Balance Sheet (Partial)
As the Year Ended 31 December, 2021
Details $'Million
Assets:
Current Deferred Tax Asset (1.20 + 1.75) 2.95
Current Deferred Tax Liability -1.00
Net current Deferred Tax Asset 1.95
Liabilities:
Noncurrent Deferred Tax Asset (A) 1.50
Noncurrent Deferred Tax Liabiity (1.0 + 6.75) (B) 7.75
Net current Deferred Tax Liability (C = B - A) 6.25
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Carrie is creating a personal balance sheet. The heading includes the period of time that the balance sheet represents Which could be the heading of Carrie's balance sheet?
Carrie's Balance Sheet (January 1, 2021)
Carrie's Balance Sheet (January)
Carrie's Balance Sheet (Friday, January 3) Carrie's Balance Sheet (January 2011 - January 2021)
Answer: Carrie's Balance Sheet (January 1, 2021)
Explanation:
The heading of the balance sheet should include as much as possible, the month and year of the balance sheet. It can also include the exact date.
This is done so that the Balance sheet can have a particular reference date such that stakeholders who use the balance sheet can know relate the financial performance of the company as of a certain day which would enable for better analysis.
The heading of Carrie's balance sheet is: Carrie's Balance Sheet (January 2021).
What is balance sheet?Balance sheet help to summarize a company or an organization financial position or financial statement.
Since she is preparing the balance sheet for herself, what will be the heading of the balance sheet is Carrie's Balance Sheet (January 2021).
Therefore the heading of Carrie's balance sheet is: Carrie's Balance Sheet (January 2021).
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Mercury Inc. purchased equipment in 2019 at a cost of $497,000. The equipment was expected to produce 580,000 units over the next five years and have a residual value of $33,000. The equipment was sold for $253,600 part way through 2021. Actual production in each year was: 2019 = 83,000 units; 2020 = 133,000 units; 2021 = 67,000 units. Mercury uses units-of-production depreciation, and all depreciation has been recorded through the disposal date.
Required:
1. Calculate the gain or loss on the sale.
2. Prepare the journal entry to record the sale.
3. Assuming that the equipment was instead sold for $280,000, calculate the gain or loss on the sale.
4. Prepare the journal entry to record the sale in requirement 3.
Answer:
1.
Gain or (Loss) on sale = (17000) Loss
2.
Cash 253600 Dr
Accumulated Depreciation 226400 Dr
Loss on Sale 17000 Dr
Equipment 497000 Cr
3.
Gain or (Loss) on sale = 9400 Gain
4.
Cash 280000 Dr
Accumulated Depreciation 226400 Dr
Gain on Sale 9400 Cr
Equipment 497000 Cr
Explanation:
We first need to calculate the carrying value of the equipment at the date of disposal. The carrying value is calculated as follows,
Carrying value = Cost - Accumulated depreciation
Depreciation 2019 = (497000 - 33000) * 83000 / 580000
Depreciation 2019 = 66400
Depreciation 2020 = (497000 - 33000) * 133000 / 580000
Depreciation 2020 = 106400
Depreciation 2021 = (497000 - 33000) * 67000 / 580000
Depreciation 2021 = 53600
Carrying value = 497000 - [ 66400 + 106400 + 53600 ]
Carrying value = $270600
1.
Gain or (Loss) on sale = Sales price - Carrying Value
Gain or (Loss) on sale = 253600 - 270600
Gain or (Loss) on sale = (17000) Loss
2.
Cash 253600 Dr
Accumulated Depreciation 226400 Dr
Loss on Sale 17000 Dr
Equipment 497000 Cr
3.
Gain or (Loss) on sale = Sales price - Carrying Value
Gain or (Loss) on sale = 280000 - 270600
Gain or (Loss) on sale = 9400 Gain
4.
Cash 280000 Dr
Accumulated Depreciation 226400 Dr
Gain on Sale 9400 Cr
Equipment 497000 Cr
The company is now using only 70% of its normal capacity; it could fully use its normal capacity by processing the assembly further and selling it for $51 per unit. If the company does this, material and labor costs will each increase by $2 per unit and variable overhead will go up by $1 per unit. Fixed costs will increase from the current level of $160,000 to $225,000.
Required:
Prepare an analysis showing whether Jensen should process the assemblies further.
Answer and Explanation:
The preparation of the analysis shows whether the assemblies should process further or not is presented below:
Differential revenue (38,000 units × ($51 - $44)) $266,000
Differential costs:
Direct material (38,000units × $2 per unit) ($76,000)
Direct labor (38,000units × $2 per unit) ($76,000)
Variable overhead (38,000units × $1 per unit) ($38,000)
Fixed costs ($160,000 - $225,000) ($65,000)
Additional income (loss) from processing further $11,000
Since the amount comes in positive so it should be processed further
Condensed financial data are presented below for the Phoenix Corporation: 20X2 20X1 Accounts receivable $ 267,500 $ 230,000 Inventory 312,500 257,500 Total current assets 670,000 565,000 Intangible assets 50,000 60,000 Total assets 825,000 695,000 Current liabilities 252,500 200,000 Long-term liabilities 77,500 75,000 Sales 1,640,000 Cost of goods sold 982,500 Interest expense 10,000 Income tax expense 77,500 Net income 127,500 Cash flow from operations 71,000 Cash flow from investing activities (6,000 ) Cash flow from financing activities (62,500 ) Tax rate 30 % If the intangible assets in 20X2 are $50,000, then the long-term debt to tangible assets for 20X2 is:
Answer:
Phoenix Corporation
The long-term debt to tangible assets for 20X2 is:
= 0.74.
Explanation:
a) Data and Calculations:
20X2 20X1
Accounts receivable $ 267,500 $ 230,000
Inventory 312,500 257,500
Cash 90,000 77,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Tangible assets 105,000 70,000
Total assets 825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Equity 495,000 420,000
Total liabilities/Equity 825,000 695,000
Income Statement for year 20X2
Sales 1,640,000
Cost of goods sold 982,500
Gross profit 657,500
Operating expenses 442,500
EBIT 215,000
Interest expense 10,000
Pretax income 205,000
Income tax expense 77,500
Net income 127,500
Statement of Cash Flows:
Cash flow from operations 71,000
Cash flow from investing activities (6,000 )
Cash flow from financing activities (62,500 )
Net cash flows = 2,500
Tax rate 30 %
Long-term debt to Tangible assets = 77,500/105,000 = 0.74
b) This ratio describes the percentage of the tangible assets financed by long-term debts. It is a financial leverage ratio. The computation compares the long-term debts to the tangible assets.