Answer:
Explanation:
From the give information; we are to:
1. Determine the correct amount of the company’s gross profit in each of the years 2016–2018.
The correct amount of the company's gross profit in each of the years 2016 - 2018 can be seen as computed in the table below.
VIbrant Company Income statement
2016 2017 2018
Sales 970,000 970,000 970,000
-
Cost of good
sold:
Beginning 270,000 270,000 270,000
Inventory
+
Purchase 535,000 535,000 535,000
The cost of good
available for sale 805000 805000 805000
is:
-
Ending Inventory 270,000 270,000 270,000
Cost of good sold 535,000 535,000 535,000
Gross Profit 435 000 435000 435000
N:B ;
Gross Profit = Sales - Cost of good sold
Gross Profit = 970000- 535000
Gross Profit = 435000
2. Prepare comparative income statements to show the effect of this error on the company's cost of goods sold and gross profit for each of the years 2016−2018.
For 2016; the comparative income statement is computed as follows:
Debit Credit
Sales 970000
Less:(-)
Cost of good sold
Beginning Inventory 270000
Add Purchase 535000
Cost of goods available 805000
for sale
Less (-)
Ending Inventory 250000
Cost of good sold 555000
Gross profit 415000
For 2017; the comparative income statement is computed as follows:
Debit Credit
Sales 970000
Less:(-)
Cost of good sold
Beginning Inventory 250000
Add Purchase 535000
Cost of goods available 785000
for sale
Less (-)
Ending Inventory 270000
Cost of good sold 515000
Gross profit 455000
For 2018; the comparative income statement is computed as follows:
Debit Credit
Sales 970000
Less:(-)
Cost of good sold
Beginning Inventory 270000
Add Purchase 535000
Cost of goods available 805000
for sale
Less (-)
Ending Inventory 270000
Cost of good sold 535000
Gross profit 435000
A plant asset is acquired by a business on January 2, 20X6, for $10,000. The asset's estimated residual value is $2,000 and it's estimated useful life is 5 years. Management chooses to use straight-line depreciation. On January 2. 20X8. the asset is sold for $5,000. The entry to record the sale has what effect on the financial statements? a. Assets decrease, expenses increase, and net income and owners' equity decrease. b. Assets decrease and owners' equity and expenses both increase. c. Has no effect on the financial statements if the journal entry is in balance. d. Assets increase, expenses decrease, and net income and owners' equity increase.
Answer:
Option A
Explanation:
From the calculation below, it is clearly seen that Assets are being decreased and expenses are increased therefore Option A is correct.
Workings
Depreciation expense = (cost - residual value) / useful life
Depreciation expense = 10,000 - 2,000 / 5
Depreciation expense = $1600
Accumulated depreication = depreciation x 2 years -= $3,200
Carrying value = 10,000 - 3,200
Carrying value = $6,800
Disposal = $5,000
Loss on disposal = $1,800
Mr. and Ms. Kingsley owned acre as joint tenants in fee simple absolute. Ms Kingsley secretly conveyed her interest to herself in an instrument that added, "I hereby terminate the joint tenancy in Black-acre with Mr. Kingsley." Ms. Kingsley thereafter leased a portion of the property to Mr. Matthew, over the objections of Mr. Kingsley for Mr. Matthew to use for holding boxing matches. Their lease provided that Mr. Matthew would pay $1000.00 on the first day of each month during which he was permitted to use the property. Mr. Kingsley demanded from Ms. Kingsley one-half of the rents received from Mr. Matthew.
Required:
Describe the property relations between the parties and Mr. Kingsley's rights and remedies.
Answer:
Mr. and Ms. Kingsley as Joint Tenants
1. Property Relations between Mr. and Ms. Kingsley: The titles show that the Kingsleys are living together but not married partners. However, the Black-acre is jointly owned by these partners. Each has equal rights and obligations over the acre. Ms. Kingsley does not have absolute right to sell or lease any part of the acre without the consent of Mr. Kingsley or without obtaining a court permit to sell or lease, especially upon Mr. Kingsley's objections. She also lacks the legal right to secretly "terminate the joint tenancy in Black-acre" without the knowledge of Mr. Kingsley or without going through the applicable court process.
2. Mr. Kingsley's Rights and Remedies: Having leased a portion of the acre to Mr. Matthew, Mr. Kingsley is entitled to half of the monthly lease payments. He also has the right to demand from Ms. Kingsley one-half of the rents from the lease. He can, in the absence of Ms. Kingsley's refusal, initiate a court process to enforce his joint-tenancy rights.
Explanation:
Joint-tenancy can exist between Mr. Kingsley and Ms. Kingsley, whether they are legally married or not. Joint-tenancy can also exist between two or more parties without the intention of marriage. The term is a legal term that describes an equally shared ownership interest in a property. Joint-tenancy deeds are established in order to avoid the need for a probate in the case of a party's death.
Rizio Co. purchases a machine for $12,500, terms 210, n60, FOB shipping point. Rizio paid within the discount period and took the $250 discount. Transportation costs of $360 were paid by Rizio. The machine required mounting and power connections costing $895. Another $475 is paid to assemble the machine, and $40 of materials are used to get it into operation. During installation, the machine was damaged and $180 worth of repairs were made. Compute the cost recorded for this machine.
Answer:
Cost of machine= $14,200
Explanation:
According to International Accounting standards(IAS) 16 property plan and equipment (PPE), the cost of an asset is the purchase cost plus other costs of bringing it to the intended working conditions.
So we will add the purchase cost to the installation cost , freight charges.
Note that the cost of the power connections, assembling and material used for installations all represent cost associated to bring the machine into ready for use.
Cost of machine = (12,500 - 250) + 360 + 895 + 475 + 40 + 180= 14,200
Cost of machine= $14,200
What is the value of a zero-coupon bond with a yield to maturity of 9 percent, a par value of $1,000, and 10 years to maturity? (Assume semi-annual compounding)
Answer:
$414.64
Explanation:
For computing the value of zero-coupon bond we need to apply the present value formula i.e to be shown in the attachment
Given that,
Future value = $1,000
Rate of interest = 9% ÷ 2 = 4.5%
NPER = 10 years × 2 = 20 years
PMT = $0
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after applying the above formula, the present value is $414.64
A bond that pays interest annually yielded 6.01 percent last year. The inflation rate for the same period was 3 percent. Given that information, the actual real rate of return on this bond for last year was _____percent.
Answer:
2.3%
Explanation:
The computation of the actual real rate of return is shown below:-
Actual real rate of return on this bond for last year = ((1 + Nominal rate of interest ) ÷ (1 + Inflation rate of return)) - 1
= ((1 + 0.0601) ÷ (1 + 0.03)) - 1
= 1.0601 ÷ 1.03 - 1
= 1.023 - 1
= 0.023
or
= 2.3%
Therefore for computing the actual rate of return we simply applied the above formula.
Assume that ExxonMobil uses a standard cost system for each of its refineries. For the Houston refinery, the monthly fixed overhead budget is $8,000,000 for a planned outputs of 5,000,000 barrels. For September, the actual fixed cost was $8,750,000 for 5,100,000 barrels.
Required
a. Determine the fixed overhead budget variance.
b. If fixed overhead is applied on a per-barrel basis, determine the volume variance.
c. Provide formulas and an explanation.
Answer:
a. Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead
= $8,000,000 - $8,750,000
= $750,000 Unfavorable
b. Predetermined overhead rate per barrel = $8,000,000 / 5,000,000
= $1.60 per barrel
Fixed overhead applied = 5,100,000 * $1.60
= $8,160,000
Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead
= $8,160,000 - $8,000,000
= $160,000 Favorable
c. Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead
Predetermined overhead rate per barrel = Budgeted fixed overhead / Planned outputs
Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead
Playa Inc. owns 85 percent of Seashore Inc. During 20X8, Playa sold goods with a 25 percent gross profit to Seashore. Seashore sold all of these goods in 20X8. How should 20X8 consolidated income statement items be adjusted g
Answer:
Debit the Cost of Sales and,
Credit the Revenue.
Explanation:
Transactions that occur within a group of companies must be eliminated. Playa is a Parent (85%) and Seashore Inc is a Subsidiary.
The effect of the Sale by Playa to Seashore is that Group Cost of Sales and Revenue would be over-valued by the price of intragroup sale.
Thus, the adjustment for this intragroup sale, is to Debit the Cost of Sales and Credit the Revenue.
Golden Corp.'s current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes.
GOLDEN CORPORATION Comparative Balance Sheets December 31
Current Year Prior Year
Assets
Cash $167,000 $110,300
Accounts receivable 87,500 74,000
Inventory 605,500 529,000
Total current assets 860,000 713,300
Equipment 343,000 302,000
Accum. depreciation—Equipment (159,500) (105,500)
Total assets $1,043,500 $909,800
Liabilities and Equity:
Accounts payable $93,000 $74,000
Income taxes payable 31,000 26,600
Total current liabilities 124,000 100,600
Equity:
Common stock, $2 par value 595,600 571,000
Paid-in capital in excess of par value, common stock 201,400 164,500
Retained earnings 122,500 73,700
Total liabilities and equity $1,043,500 $909,800
GOLDEN CORPORATION Income Statement For Current Year Ended December 31
Sales $1,807,000
Cost of goods sold 1,089,000
Gross profit 718,000
Operating expenses
Depreciation expense $54,000
Other expenses 497,000 551,000
Income before taxes 167,000
Income taxes expense 26,200
Net income $140,800
Additional Information on Current Year Transactions:
Purchased equipment for $41,000 cash.
Issued 12,300 shares of common stock for $5 cash per share.
Declared and paid $92,000 in cash dividends.
Required:
Prepare a complete statement of cash flows: report its cash inflows and cash outflows from operating activities according to the indirect method.
Answer:
Golden Corp.
Statement of Cash Flows for the year ended December 31, using the indirect method:
Net Income before taxes $167,000
Add non-cash expenses:
Depreciation 54,000
Adjustment of current assets:
Accounts receivable (13,500)
Inventory (76,500)
Adjustment of current liabilities:
Accounts payable 19,000
Income taxes payable (4,400)
Net Cash Flow from operations $145,600
Financing Activities:
Common Stock $61,500
Dividend paid 92,000
Net Cash Flow from financing activities $153,500
Investing Activities:
Equipment purchase $41,000
Net Cash Flow from investing activities $41,000
Net Cash Flow $340,100
Explanation:
The Golden Corp.'s statement of cash flows depicts the flow of cash under three main activity headings: operating, financing, and investing. There are two methods under which Golden Corp. can prepare the statement. They include the indirect method, which starts from the net income, adjusts the non-cash expenses and the changes in working capital, and the direct method, which shows the cash inflows and outflows for each cash flow item.
The cash flow for the company is analyzed below:
Net Income before taxes $167,000
Add: non-cash expenses:
Depreciation $54,000
Adjustment of current assets:
Accounts receivable (13,500)
Inventory (76,500)
Adjustment of current liabilities:
Accounts payable 19,000
Income taxes payable (4,400)
Net Cash Flow from operations $145,600
Financing Activities:
Common Stock $61,500
Add: Dividend paid 92,000
Net Cash Flow from financing activities $153,500
Investing Activities:
Equipment purchase $41,000
Net Cash Flow from investing activities $41,000
Net Cash Flow $340,100
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On the first day of 2016, Holthausen COmpany acquired the assets of Leftwich Company including several intangible assests. These include a patent on Ledtwicj's primary product, a device called a plentiscope. Leftwich carried the patent on its book for $1,500, but Holthausen believes that the fair value is $200,000. The patent expires in seven years, but companies can be expected to develop competing patents within three years. Holthausen believes that, with expected technlogical improvements, the product is marketable for a t least 20 years.
The registration of the trademark for the Leftwich name is scheduled to expire in 15 years. However, the Leftwich brand name, which Holthausen believes is worth $500,000, could be applied to related products for many years beyond that.
As part of the acquisition, Leftwich's principal researcher left the company. As part of the acquisition, he signed a five-year noncompetition agreement that prevents him from developing competing products. Holthausen paid the scientist $300,000 to sign the agreement.
a. What amount should be capitalized for each of teh identifiable intangible assets?
b. What amount of amortization expense should Holthausen record in 2016 for each asset?
Answer:
Holthausen Company and Leftwich Company
Intangible Assets:
a) Amount to be capitalized:
1) Patent: $200,000
2) Trademark: $500,000
3) Non-competition Agreement: $300,000
b) Amount of Amortization Expense for 2016:
1) Patent: $200,000/7 years = $28,571.43
2) Trademark: $500,000/15 years = $33,333,33
3) Non-competition Agreement: $300,000/5 = $60,000
Explanation:
The fair values of the "plentiscope" patent and Leftwich's branded trademark should be capitalized as intangible assets, while the cost of the non-competition agreement with Leftwich's principal researcher should be capitalized.
For the amortization of the Leftwich-connected intangibles, we have adopted the straight-line method, in the absence of any prescribed method. The patent expiration in 7 years was used as the basis for its useful life, despite Holthausen belief that the product could be marketable for at least 20 years.
The trademark was amortized over its remaining useful life of 15 years as given, while the non-competition agreement was amortized for 5 years when the agreement remains effective.
Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of five years. Determine the second-year depreciation using the straight-line method.
Answer:
$9,600
Explanation:
When you use the straight line depreciation method, the depreciation expense is the same for every year. The only difference can result if the asset was purchased during the year, and the depreciation for year 1 would only be partial and proportionate to the number of months of use.
In this case, the depreciation expense per year = (purchase price - residual value) / useful life = ($57,000 - $9,000) / 5 = $48,000 / 5 = $9,600 per year (the depreciation expense is the same for all the five years).
The Freeman Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 34 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project.
a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.)
b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)
c. Suppose the appropriate discount rate is 12 percent. What is the NPV of the project?
Complete question is given at the end of the question.
Answer with Explanation:
Requirement 1:
Net Income is an accounting profits which includes both cash flow items and non cash flow items. It can be calculated as under:
Net Income = (Sales - Cost - Depreciation) - (Income Before Tax * Tax Rate)
The computation is given in the Second excel sheet attached.
Requirement 2:
According to relevant costing principles if the cost is relevant then it must satisfy following conditions:
Must be cash flow in nature.Must be Future related (no past commitments).Differential or must be incrementalSo this means that the depreciation would not be taken into account as it is not a relevant cost and thus must not be included as an incremental cost.
Incremental Cash flow can be calculated using the following formula:
Incremental Cash Flow = Net Income + Depreciation (Removing its impact) - Working Capital Injection + Working Capital Withdrawal
The calculation for each year is shown in the second attachment.
Requirement 3:
The NPV can be calculated by discounting each year cash flow by the rate of return which in this case is 12%.
The formula for calculating the NPV is as under:
NPV = Investment in year zero - Net Cash Flow of Y1 / (1 + r)^1 - Net Cash Flow of Y2 / (1 + r)^2 - Net Cash Flow of Y3 / (1 + r)^3 - Net Cash Flow of Y4 / (1 + r)^4
The computation of NPV is given in the second attachment given below:
Builtrite bonds have the following: 5 ½% coupon, 11 years until maturity, $1000 par and are currently selling at $1054. If you want to make an 5% return, what would you be willing to pay for the bond?
Answer:
$1,041.53
Explanation:
The price that a rational investor would pay for the bond yearning for 5% rate of return can be determined using excel pv function below:
=-pv(rate,nper,pmt,fv)
rate is the yield expected by the investor
nper is the number of annual coupons remaining i.e 11
pmt is the amount of annual coupon=face value*coupon rate=$1000*5.5%=$55
fv is the face value of $1000
=-pv(5%,11,55,1000)=$1,041.53
An account is today credited with its annual interest thereby bringing the accountbalance to $12,490. The interest rate is 5.70% compounded annually. You plan tomake annual withdrawals of $1,450 each. The first withdrawal is in exactly one yearand the last in exactly 9 years. Find the account balance immediately after the lastwithdrawal.
Answer:
Explanation:
Let the account balance be B .
Equating the present value of money at 5.7 % discount
12490 = 1450 ( PVIFA , 5.7 , 9 ) + B ( PVIF , 5.7 , 9 )
= 1450 x 6.8938 + .6072 x B
= 9996.01 + .6072B
.6072 B = 2494
B = 4107
The manufacturer Mike and Ike, the fruit-flavored chewy candies, has changed its packaging and developed contests all geared to 12- to 17-year-olds. What type of market segmentation identifies its market
Answer:
Demographic
Explanation:
A market is segmented so as to narrow down a large market into a narrow base, or a target market. This helps the organization to be better focused on providing its services to these target groups of people. A market can be segmented on the basis of demography, psychography, behavior, and geography. Demography deals more with statistical data of the population being studied and would typically include; age, gender, race, income levels, etc.
So, when the manufacturer Mike and Ike changes its packaging and developed contests all geared to 12-17-years-old, he has segmented the market according to demography and age.
Answer:
im sorry
Explanation:
The comparative cash flow statements from Sears and Wal-Mart are presented above. Amounts presented are in millions. Review both statements considering what you've learned in this chapter about the cash flow statement. Answer the following questions: When analyzing a company's cash flow statement, which section of the statement (operating, investing or financing) do you believe is the best predictor of a company's future profitability? Why? Which company do you believe is healthier based on the cash flow statements presented? Provide at least two specific examples from the statements. Your initial post is due four (4) days prior to the discussion due date or points will be deducted from your discussion score. Please review the discussion board requirements above.
The complete question is attached.
Answer:
Sears Holding Corporation and Wal-Mart Stores, Inc.
1. The section of the cash flow statement that is the best predictor of a company's future profitability is the Operating Activities Section. The reason is that the operating activities section shows the net cash from operating activities or the core business activities of the entity. A business entity's profitability is not determined by subsidiary activities like financing and investing activities. But it is ascertained by reviewing its operating activities which also define the mission of the business and show the strategies it can deploy to attain its goals.
2. Walmart Stores, Inc. is by far healthier than Sears Holdings Corporation, at least based on the January 30, 2016 statements of cash flows. For instance, Walmart Stores recorded a Net Cash Flow from operations in the sum of $27,389 million while Sears recorded a negative Net Cash Flow from operations in the sum of $2,167 million. Again, from the operating activities sections, one can see that Walmart Stores, Inc. was able to make a net income before adjustments of $15,080 million, whereas Sears Holding Corporation performed abysmally poor by incurring a net loss of $1,128 million.
Explanation:
The Sears and Walmart's statements of cash flows are one of the three main financial statements prepared and presented by Sears Holding Corporation or Walmart Stores, Inc. to its stockholders and the general public to show financial information about its activities. Specifically, the statements of cash flows for Sears and Walmart show the flow of cash under three main activity headings: operating, financing, and investing.
Two methods can be used by Sears and Walmart to prepare the statement. They include the indirect method, which starts from the net income, and the direct method, which shows the cash inflows and outflows for each cash flow item for Sears and Walmart.
Which of the following is a characteristic of both the sales approach for service-type warranties and the expense approach for assurance-type warranties?
a. Estimated liability under warranties
b. Warranty expense
c. Unearned warranty revenue
d. Warranty revenue
Answer: Unearned warranty revenue
Explanation:
Unearned warranty revenue is usually shown as an unearned revenues in the accrued liabilities during the preparation of the balance sheets.
It should be noted that the unearned warranty revenue is a characteristic of both the sales approach for service-type warranties and the expense approach for assurance-type warranties.
Bonita Industries applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job No. 130, the only job still in process at the end of August, has been charged with manufacturing overhead of $5100. What was the amount of direct materials charged to Job 130 assuming the balance in Work in Process inventory is 45000?
Answer:
Direct Materials $ 33525
Explanation:
Bonita Industries
Job No. 130,
Manufacturing overhead $5100.
Direct Labor = $ 6375
5100 80
x 100
Using cross product direct labor = 5100 *100/80= 6375.
We have
Work in Process inventory $ 45000
Less
Manufacturing overhead $5100.
Direct Labor $ 6375
Direct Materials $ 33525
The Work in Process is debited with Direct Materials, Direct Labor and Manufacturing Overheads.
As we know the Direct Labor and Manufacturing Overheads we can find out the Direct Materials by subtracting the Direct Labor and Manufacturing Overheads from the Work In Process Inventory balance.
XYZ Corporation’s bonds have 14 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $950. What is their yield to maturity? Show your work.
Answer:
The answer is 10.71%
Explanation:
N(Number of periods) = 14 years
I/Y(Yield to maturity) = ?
PV(present value or market price) = $950
PMT( coupon payment) = $100 ( 10 percent x $1,000)
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 14; PV= -950 ; PMT = 100; FV= $1,000; CPT I/Y= 10.71
Therefore, the yield to maturity of the bond is 10.71%
Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. At December 31 Year 2 Year 1 Equipment $ 600,000 $ 750,000 Accumulated Depreciation-Equipment 428,000 500,000
Answer:
Mercury Company
Sale of Equipment account:
Equipment $150,000
Acc. Depreciation 112,000
Book value $38,000
Cash received $38,000
Explanation:
a) Data and Calculations:
Equipment Account:
Beginning balance $750,000
Ending balance 600,000
Sale of equipment $150,000
Accumulated Depreciation - Equipment account:
Beginning balance $500,000
Depreciation expense 40,000
Ending balance 428,000
Sale of Equipment $112,000
b) The Cash received from the sale of Mercury Company's equipment is equal to the book value in Year 2 according to the question. Since the book value (value after accumulated depreciation) is $38,000, that means that the equipment was sold at $38,000 recording no profit or loss for the company on the sale.
At December 31, 2017, Hawke Company reports the following results for its calendar year.
Cash sales $1,905,000
Credit sales 5,682,000.
In addition, its unadjusted trial balance includes the following items.
Accounts receivable $1,270,100 debit
Allowance for doubtful accounts 16,580 debit
Reqiured:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.
A. Bad debts are estimated to be 1.5% of credit sales.
B. Bad debts are estimated to be 1% of total sales.
C. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet given the facts in part 1a.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet given the facts in part 1c.
Answer:
Hawke Company
1. Adjusting Entries to recognize bad debts under the following independent assumptions:
A. Bad debts are estimated to be 1.5% of credit sales:
Debit Bad Debts Expense $73,400
Credit Allowance for Doubtful Accounts $73,400
To record bad debts expenses and bring the allowance for doubtful accounts balance to $56,820.
B. Bad debts are estimated to be 1% of total sales:
Debit Bad Debts Expense $92,450
Credit Allowance for Doubtful Accounts $92,450
To record bad debts expenses and bring the allowance for doubtful accounts balance to $75,870.
C. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible:
Debit Bad Debts Expense $80,085
Credit Allowance for Doubtful Accounts $80,085
To record bad debts expenses and bring the allowance for doubtful accounts balance to $63,505.
2. Balance Sheet as of December 31, 2015:
A. Accounts Receivable $1,270,100
less allowance for doubtful accounts 56,820
Net balance $1,213,280
3. Balance Sheet as of December 31, 2015:
C. Accounts Receivable $1,270,100
less allowance for doubtful accounts 63,505
Net balance $1,206,595
Explanation:
a) Data:
Cash sales $1,905,000
Credit sales 5,682,000
Accounts Receivable $1,270,100
Allowance for doubtful accounts $16,580 debit
1. Bad debts = 1.5% of $5,682,000 = $56,820
2. Bad debts are estimated to be 1% of total sales:
Bad debts = 1% of $7,587,000 = $75,870
3. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible:
Bad debts = 5% of $1,270,100 = $63,505
The adjusting entries to recognize bad debts including how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015 balance sheet are:
1a. Journal entry to estimate Bad debts at 1.5% of credit sales.
First step is to calculate the Bad debt accrual
Bad debt accrual=Total credit sales × Bad debt accrual percentage
Bad debt accrual=$ 5,682,000×1.5%
Bad debt accrual=$85,230
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $85,230
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $101,810
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $101,810
Credit Allowance for doubtful account $101,810
(To record Bad debts at 1.5% of credit sales)
1b. Journal entry to estimate Bad debts at 1% of credit sales.
First step is to calculate the Bad debt accrual
Total credit sales $5,682,000
Total cash sales $1,905,000
Total sales $7,587,000
($5,682,000+$1,905,000)
Bad debt accrual % 1%
Bad debt accrual $75,870
($7,587,000× 1%)
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $75,870
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $92,450
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $92,450
Credit Allowance for doubtful account $92,450
(To record Bad debts at 1% of credit sales)
1c. Journal entry to estimate 5% of year-end accounts receivable are uncollectible
First step is to calculate the Bad debt accrual
Accounts Receivable $1,270,100
Bad debt accrual % 5.0%
Bad debt accrual $63,505
($1,270,100×5%)
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $63,505
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $80,085
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $80,085
Credit Allowance for doubtful account $80,085
(To record accounts receivable uncollectible)
2. How Accounts Receivable and the Allowance for Doubtful Accounts should appear on its December 31, 2015, balance sheet:
Balance Sheet as on December 31, 2015
Accounts Receivable (gross) $1,270,100
Less: Allowance for doubtful accounts $101,810
Accounts Receivable (net) $1,168,290
3. How Accounts Receivable and the Allowance for Doubtful Accounts should appear on its December 31, 2015, balance sheet:
Balance Sheet as on December 31, 2015
Accounts Receivable (gross) $1,270,100
Less: Allowance for doubtful accounts $80,085
Accounts Receivable (net) $1,190,015
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At the beginning of its current fiscal year, Willie Corp.’s balance sheet showed assets of $11,400 and liabilities of $5,700. During the year, liabilities decreased by $1,200. Net income for the year was $3,050, and net assets at the end of the year were $6,150. There were no changes in paid-in capital during the year.
Required:
Calculate the dividends, if any, declared during the year.
Stockholders' Equity
Assets = Liabilities + PIC + RE
Beginning $11,900 = $6,300 + 0 +
Changes = (1,200) + 0 +
Ending = + +
Answer:
$8,750
Explanation:
ASSETS = LIABILITIES + PAID IN CAPITAL + RETAINED EARNINGS
beginning of the year:
$11,400 = $5,700 + paid in capital + retained earnings
paid in capital + beginning retained earnings = $5,700
end of the year:
$6,150 = $4,500 + paid in capital + retained earnings
paid in capital + ending retained earnings = $1,650
ending retained earnings = beginning retained earnings + net income - dividends = beginning retained earnings + $3,050 - dividends
paid in capital + beginning retained earnings - $5,700 = 0
paid in capital + beginning retained earnings + $3,050 - dividends - $1,650 = 0
let X = paid in capital
let Y =beginning retained earnings
X + Y - $5,700 = X + Y + $3,050 - dividends
we eliminate X and Y
-$5,700 = $3,050 - dividends
dividends = $5,700 + $3,050 = $8,750
Which of the following is not considered to be a liability? Answers: a. Wages Payable b. Unearned Revenues c. Accounts Payable d. Accounts Receivable
Answer:
d. Accounts Receivable.
Explanation:
In Financial accounting, liability can be defined as the amount of money being owed by an individual or organization to another.
Simply stated, liability is a debt being owed and as such it usually has "payable" in its account title on the balance sheet.
Generally, liabilities are recorded on the right side of the balance sheet and it comprises of financial informations such as warranties, bonds, loans, deferred revenues, mortgages, account payable etc.
Accounts Receivable is not considered to be a liability because it is the payment a business firm would receive from its customers for goods purchased or services taken on credit. Accounts Receivable are recorded in the current assets section of the balance sheet because they add value to a business firm.
Consider a product with a daily demand of 600 units, a setup cost per production run of $200, a monthly holding cost per unit of $5.00, and an annual production rate of 300,000 units. The firm operates and experiences demand 300 days per year.
Required:
a. What is the optimum size of the production run?
b. What is the average holding cost per year?
c. What is the setup cost per year?
d. What is the total cost per year if cost of each unit is 10 dollars?
e. Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the POQ model. How much money per year has that mistake cost the company?
Answer:
a. 3,795 units
b. $1,897.50
c. $2,845.80
d. $42,693.80
Explanation:
Optimum size for the Production ran is the size that minimizes Set-up costs and Holding costs.
Optimum size for the Production = √ (2 × Annual Production × Set-up cost) / Holding Cost per unit
Optimum size for the Production = √ (2 × 600 × 300 × $200) / $5.00
= 3,794.73 or 3,795 units
Average Holding Cost = Optimum size for the Production / 2
= 3,795 units / 2
= $1,897.50
Set - up Cost = Total Annual Production / Optimum size for the Production × Set - up cost per unit
= ((600 × 300) / 3,795)× $5.00
= $237.15
Annual cost = $237.15 × 12
= $2,845.80
Total Cost Calculation
Purchase Price (3,795 × $10) = $37,950.50
Holding Cost = $1,897.50
Set - up Cost = $2,845.80
Total Cost = $42,693.80
POQ = Optimum size for the Production / Annual Demand
= 3,795 units / (300 × 600)
= 0.021
Sampson Co. sold merchandise to Batson Co. on account, $46,000, terms 2/15, net 45. The cost of the merchandise sold is $38,500. Batson Co. paid the invoice within the discount period. Assume both Sampson and Batson use a perpetual inventory system.
Required:
Prepare the entries that both Sampson and Batson Companies would record.
Answer:
Sampson Company
Dr Accounts Receivable -Batson Co.45,080
Cr Sales 45,080
Dr Cost of Merchandise Sold38,500
Cr Merchandise Inventory38,500
Dr Cash 45,080
Cr Accounts Receivable-Batson Co.45,080
Batson Company
Dr Merchandise Inventory45,080
Cr Accounts Payable - Sampson Co.45,080
Dr Accounts Payable -Sampson Co.45,080
Cr Cash45,080
Explanation:
Preparation of the Journal entries for both Sampson and Batson Companies would record
Based on the information given we were told that Sampson Company sold merchandise to Batson Company At the amount of $46,000 with 2/15 term while the merchandise was sold at the amount of $38,500 and since we are Assuming that both of them uses a perpetual inventory system this means the transaction will be recorded as:
Journal Entries for Sampson Company
Dr Accounts Receivable -Batson Co.45,080
Cr Sales 45,080
(2%*46,000=920)
(45,000-920=45,080)
Dr Cost of Merchandise Sold38,500
Cr Merchandise Inventory38,500
Dr Cash 45,080
Cr Accounts Receivable-Batson Co.45,080
Journal Entries for Batson Company
Dr Merchandise Inventory45,080
Cr Accounts Payable - Sampson Co.45,080
(2%*46,000=920)
(45,000-920=45,080)
Dr Accounts Payable -Sampson Co.45,080
Cr Cash45,080
(2%*46,000=920)
(45,000-920=45,080)
An investor considers investing $10,000 in the stock market. He believes that the probability is 0.30 that the economy will improve, 0.40 that it will stay the same, and 0.30 that it will deteriorate. Further, if the economy improves, he expects his investment to grow to $15,000, but it can also go down to $8,000 if the economy deteriorates. If the economy stays the same, his investment will stay at $10,000.a. What is the expected value of his investment?b. Should he invest the $10,000 in the stock market if he is risk neutral?c. Is the decision clear-cut if he is risk averse? Explain.
Answer:
a. What is the expected value of his investment?
$10,900b. Should he invest the $10,000 in the stock market if he is risk neutral?
If the investor is risk neutral, then he pays little attention to market risk, therefore, he/she should invest because the expected value is higher than the investment.c. Is the decision clear-cut if he is risk averse?
If the investor is risk averse, it means that he/she is afraid of market risk and likes to make decisions that involve the least possible risk. In this case, the possibility of losing money is not that large (in my opinion) and the expected value is relatively high, but a risk averse investor would probably prefer an investment that yields a lower rate but is more secure, e.g. US securities.Explanation:
total investment $10,000
if economy improves = 0.30 x $15,000 = $4,500if economy remains the same = 0.40 x $10,000 = $4,000if economy deteriorates = 0.30 x $8,000 = $2,400total expected value = $10,900
Which of the following statements regarding a partner's basis of inventory received in a liquidating distribution is True?
A) Partners may either increase or decrease the basis in inventory distributed in a liquidating distribution.
B) Partners may only increase the basis in inventory distributed in a liquidating distribution.
C) Partners may only decrease the basis in inventory distributed in a liquidating distribution.
D) None of these statements is True.
Answer:
C) Partners may only decrease the basis in inventory distributed in a liquidating distribution.
Explanation:
Liquidating distribution refers to the absence of dividend distribution that is to be allocated to the shareholders in case of the partial or complete liquidation. In this, the whole equity is allocated along with the profit-sharing
In case fo inventory received based on a partner basis, the partners are only eligible to decrease the inventory basis
hence, the option c is correct
Sinking fund bonds: A. Are bearer bonds. B. Are registered bonds. C. Require equal payments of both principal and interest over the life of the bond issue. D. Require the issuer to set aside assets at specified amounts to retire the bonds at maturity. E. Decline in value over time.
Answer:
The answer is D.
Explanation:
Sinking funds require the issuer(borrower) to set aside assets at specified amounts to retire the bonds at maturity. Sinking fund helps the issuer to secure a bond with lower yield.
An agreed amount is deposited at an agreed period (e.g yearly) so as to pay of the par value or principal value at maturity.
The aggregate demand and aggregate supply model is a useful simplification of the macroeconomy used to explain short-run fluctuation in economic activity around its long-run trend.
a) The vertical axis of a diagram of the aggregate demand and aggregate supply curves measures which of the following?
A. An economy's price level.
B. The amount of a particular representative good produced in the economy.
C. The price of a particular representative good produced in the economy.
b) Which of the following are reasons that the short-run aggregate supply curve slopes upward?
A. As the price level rises, firms expand their production because they can sell their output for more money.
B. As the price level rises, firms find it more profitable to hire workers at any given wage.
C. As the price level rises, firms decrease their investment, because it is more expensive to purchase capital.
Answer:
The correct answers are:
a) A. An economy's price level.
b) A. As the price level rises, firms expand their production because they can sell their output for more money.
Explanation:
On the one hand, in this type of economic model, the aggregate supply and demand represent the economy's price and quantity level regarding the output of the country as a whole. Therefore that in the vertical axis of the diagram the curves measures the price level of the economy and in the horizontal axis the curves measure the output that the economy produces at that given price.
On the other hand, the slope of the aggregate supply is upward because of the same reason as it is in the supply curve, because of the law of the supply, that states that there is a direct relationship between the price of the good an its quantity offered. Thefore that when the price level rises the firms will produce more because they can sell their production at a higher price.
1. Stock A has an expected return of 7%, a standard deviation of expected returns of 35%, a correlation coefficient with the market of -0.3, and a beta coefficient of -0.5. Stock B has an expected return of 12% a standard deviation of returns of 10%, a 0.7 correlation with the market, and a beta coefficient of 1.0. Which security is riskier
Answer:
Option A is riskier
Explanation:
In this question, we want to know which of the two stocks is riskier.
To answer this, we can use the standard deviation of returns as a risk measure.
For a security with a big value for standard deviation of returns, its per period returns are wider making its range per day large.
Hence, what this means is that out of the two stocks, the one with a larger value of standard deviation of returns will guarantee more risk as it is expected to give a better ranges of price
Now back to the values in the question, we can see that the standard deviation of returns of stock A is greater than that of stock B which this makes it a more risky option
10. You recently sold 200 shares of Apple stock to your brother. The transfer was made through a broker, and the trade occurred on the NYSE. This is an example of:
Answer:
A secondary market transaction
Explanation:
Secondary market transaction: In this transaction, the transaction which is already issued to the public are sold by another investors.
In this type market, the investors buy and sell securities which are theirs . It is what most people typically think of as the "stock market," though stocks are also sold on the primary market when they are first issued.
So in the question, the transfer was made through a broker which implies it deals in the secondary market.
Primary market transaction: In this transaction, the company directly sells the new stocks, bonds, etc to the public for the first time.
Future market transaction: This is the transaction which occurs in the near future to buy some specific quantities at the future price.