Answer:
Difference = 4418.64
Explanation:
We first need to determine the present value of the contract 1. We already have the present value of contract 2.
The present value of contract 1 will be,
Present value = 10000/(1.08) + 10000*(1.04)/(1.08)^2 +
10000*(1.04)^2/(1.08)^3 + 10000*(1.04)^3/(1.08)^4 + 10000*(1.04)^4/(1.08)^5 + 10000*(1.04)^5/(1.08)^6 + 10000*(1.04)^6/(1.08)^7 + 10000*(1.04)^7/(1.08)^8 + 10000*(1.04)^8/(1.08)^9 + 10000*(1.04)^9/(1.08)^10 +
10000*(1.04)^10/(1.08)^11
Present Value-Contract 1 = 84938.63563 rounded off to 84938.64
Difference = 84938.64 - 80520 = $4418.64
Cobe Company has already manufactured 25,000 units of Product A at a cost of $15 per unit. The 25,000 units can be sold at this stage for $480,000. Alternatively, the units can be further processed at a $240,000 total additional cost and be converted into 5,400 units of Product B and 11,100 units of Product C. Per unit selling price for Product B is $104 and for Product C is $53
Prepare an analysis that shows whether the 21,000 units of Product A should be processed further or not.
Sell as in Process further
Sales
Relevant costs:
Total relevant costs
Income (loss)
Incremental net income (or loss) if processed further
The company should _______________________
Answer:
Incremental income from further processing $534,900
The company should process further
Explanation:
A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.
Also note that all cost incurred up to the split-off point are irrelevant to the decision to process further .
$
Revenue after split-off point
(104×5400) + (53× 11,100) 1,149,900
Revenue at the slit of point
(25,000× $15) (375,000 )
Additional income from further processing 774,900
Further processing cost (240,000)
Incremental income from further processing 534,900
Incremental income from further processing $534,900
The company should process further
A company struggling to finish the required accounting work for Its year -end. The employees are unwilling to stay late to complet the work . If the company does not complete work , It will be in serious trouble . So , the managers decide to pay the staff a bonus for every hour they stay during this period . After the employees worked extra hours for a few days , the work was completed and everyone was happy What was the Incentive for the employees this scenario ?
Answer: The hourly bonus is the incentive
Explanation:
Answer:
B. Money
Hope this helps!
Explanation:
Consider the simple leisure model in which the individual chooses between leisure (L) and money income (M). The marginal utility of leisure (MUL) is 15 and the marginal utility of money (MUM) is 3. At the optimum, the wage rate:_______
a. $45
b. $0.20
c. $5
d. $15
Answer:
Wage rate is $5
Explanation:
The marginal utility of money=marginal utility of leisure/wage rate
When the formula is rearranged,wage rate is given thus:
wage rate=marginal utility of leisure/marginal utility of money
wage rate=15/3
wage rate =$5
In other words, the correct option is C,wage rate is $5
Option D would have been correct if the requirement was to calculate marinal utility of leisure
Debbie and Alan open a web-based bookstore together. They have been friends for so long that they start their business on a handshake after discussing how they will share both work and profits or losses from the business. Have Debbie and Alan formed a real partnership given that they have signed no written partnership agreement?
Answer:
Yes
Explanation:
Debbie and Alan have formed a real partnership even though they have signed no written partnership agreement because partnership does not require legal Documentation.
Many partnerships are formed naturally because the people who are involved in the business share similar goals, so their partnerships don't need formation documents to exist.
Taco Hut purchased equipment on May 1, 2021, for $12,000. Residual value at the end of an estimated eight-year service life is expected to be $3,000. Calculate depreciation expense using the straight-line method for 2021 and 2022, assuming a December 31 year-end. (Do not round your intermediate calculations. Round your final answers to the nearest whole dollar.)
Answer:
Depreciation expense in 2021 = $750
Depreciation expense in 2021 = $1125
Explanation:
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
($12,000 - $3,000) / 8 = $1125
Depreciation expense each year would be $1125.
Depreciation expense in 2021
There are 12 months in a year, so the depreciation expense each month would be $1125 / 12 = $93.75
Number of months in 2021 for which asset is used ( May to December) = 8 months
$93.75 x 8 = $750
Depreciation expense in 2022 would be $1125 since the machine was used for a full year.
I hope my answer helps you
A Project Engineer at the Michigan office is excited about an engineering software change to improve the reliability of the central processing unit. Unfortunately, the change involves some conflicting proprietary rights due to the Chief Designer's past work ties to Bridgeway's major competitor. Even though the Project Engineer was warned of this issue, she really wants to be the first to market with this change. There may be future financial rewards for her and the company that may be too good to pass up. As the Chief Liaison Officer, should you suggest the Project Engineer go forward with this engineering change
Answer:
9 76
Explanation:
9
The pre-tax cost of debt is 11%, preferred stock costs 14%, and equity costs 15%. What is the weighted average cost of capital assuming a tax rate of 40% and a target capital structure of 40% debt, 20% preferred stock, and 40% equity
Answer:
WACC is 11.4%
Explanation:
The weighted average cost of capital (WACC) is the average cost of all the various sources of long-term finance used by a business weighted according to the proportion which each source of finance bears to the the entire pool of fund.
To calculate the weighted average cost of capital, follow the steps below:
Step 1: Calculate cost of individual source of finance(this is already given)
Cost of Equity= 15%
After-tax cost of debt:
= (1- T) × before-tax cost of debt
= 11%× (1-0.4)= 6.6%
Cost of preferred stock costs= 14%
Step 2 : calculate the proportion or weight of the individual source of finance . (This already given)
Equity = 40%
Debt= 40%
Preferred stock : 20%
Step 3; Work out weighted average cost of capital (WACC)
WACC = ( 15%× 40%) + ( 6.6%× 40%) + (14%× 20%)= 11.4%
WACC is 11.4%
Consider the all-units quantity discount schedule below. Quantity Ordered Price Per Unit EOQ at that Price 1-499 $300 952 500-999 $280 986 1000-1499 $260 1023 1500-1999 $230 1087 2000 and over $200 1166 Which of the following sets of order quantities is guaranteed to contain the optimal solution (i.e., best order quantity)?A. {986, 1023, 1500 B. 1023, 1500, 2000} C. (986, 1000, 1500, 2000) D. {1, 500, 1000, 1500, 2000} E. [952, 986, 1023,1087, 1166]
Answer: B. 1023, 1500, 2000}
Explanation:
The Optimal solution should contain the set of quantities that would require the lowest no. of orders to achieve a discount in a class.
1,023 is quite close to the lowest amount required of 1,000 in the 1,000 to 1,499 range.
So are 1,500 and 2,000.
Option D can also work but it has too many order quantities and will inflate the price.
The Optimal Solution therefore has to be from this option.
Gomez Company uses a sales journal, purchases journal, cash receipts journal, cash payments journal, and general journal. Journalize the following transactions that should be recorded in the purchases journal.
July 1 Purchased $20,500 of merchandise on credit from Hector Co., terms n/15.
4 Sold merchandise costing $920 to C. Paul for $1,030 cash.
8 Purchased $660 of office supplies from Zhang Co. on credit, terms n/30.
15 Paid Hector $20,500 cash for the merchandise purchased on July 1.
21 Purchased $1,065 of store supplies on credit from Staples, terms n/30.
22 Sold merchandise costing $2,600 to MicroTran for $3,100 on credit, terms n/30.
23 Purchased office supplies from Depot for $365 cash.
25 Purchased $5,400 of merchandise on credit from Alfredo Co., terms n/30.
27 Paid employee salaries of $2,250 in cash.
Answer:
I prepared an excel spreadsheet because there is not enough room here
On a purchase journal you only record entries regarding purchases, you do not record any payments or other expenses.
During an interview, the analyst has asked several open-ended questions regarding the procedures that are followed to handle a delinquent customer. Although the supervisor being interviewed has answered the questions, the analyst is still unclear about several details of the process. The analyst's best course of action is to:
Answer:
- Ask probing questions to try and get more detail.
Explanation:
The role of an analyst is crucial to the effective management of a project in an organization. He/she primarily works for the evaluation of
In the given situation, the most appropriate course of action would be 'to ask probing questions which will help in seeking more detail' that would assist him in better analysis and evaluation of business processes regarding the customer dealings in order to anticipate the requirements. After knowing the needs only, the analyst would be able to provide solutions for ensuring the effective dealing of delinquent customers that will help in improving the process and optimize the results.
You have been offered an investment that will pay you $10,000 in 10 years. You think a 7% annual rate compounded annually is an appropriate rate of return or interest rate for this investment. What is the most you would be willing to pay for this investment today based on this information
Answer:
Present value = $5,803.50 (Approx)
Explanation:
Given:
Future value = $10,000
Number of year = 10
Rate of return = 7% = 0.07
Find:
Present value = ?
Computation:
[tex]Present\ value = \frac{Future\ value}{(1+Rate\ of\ return)^{Number\ of\ year}} \\\\Present\ value = \frac{10,000}{(1+0.07)^{10}} \\\\Present\ value = \frac{10,000}{1.96715136} \\\\Present\ value = 5,083.49[/tex]
Present value = $5,803.50 (Approx)
Answer:
$5083.49
Explanation:
Given: future value =$ 10,000
present value = future value/(1+r)^t
= 10000/(1+0.07)^10
= $5083.49
the most you would be willing to pay for this investment today based on this information =$5083.49
Torque Manufacturing forecasts that its production will require 600,000 tons of bauxite over its planning period. Demand for Torque's products is stable over time. Ordering costs amount to an average of $15.00 per order. Holding costs are estimated at $1.25 per ton of bauxite. If Torque uses an inventory quantity of 3,000 tons, what will be the total annual cost of inventory
Answer:
Total annual cost of inventory is 4875.
Explanation:
The demand for bauxite by Torque manufacturing (A) = 600000 tons.
It is given that the demand is stable.
The average ordering cost of bauxite (O) = $15 per order.
The cost of holding to bauxite (CP) = $1.25 per ton.
The economics order quantity (EOQ) = 3000
The total annual cost of inventory = ordering cost + inventory cost
[tex]\text{Total annual cost} = \frac{A}{EOQ} \times O + \frac{EOQ}{2} \times CP \\[/tex]
[tex]\text{Total annual cost} = \frac{600000}{3000} \times 15 + \frac{3000}{2} \times 1.25 = 4875[/tex]
QS 9-8 Percent of sales method LO P3 Warner Company’s year-end unadjusted trial balance shows accounts receivable of $105,000, allowance for doubtful accounts of $660 (credit), and sales of $340,000. Uncollectibles are estimated to be 1% of sales. Prepare the December 31 year-end adjusting entry for uncollectibles.
Answer:
Bad Debts Expense $ 2740 Debit
Allowance for doubtful accounts $ 2740 Credit
Explanation:
Warner Company
Accounts receivable $105,000,
Allowance for doubtful accounts $660 (credit),
Sales $340,000
Uncollectibles are estimated to be 1% of sales.
Uncollectibles of 1% of sales means that after adjusting entry is passed the uncollectible amount must be $3400 ( 1% of $340,000) .
We have a credit balance of $ 660
The debit balance in the Allowance for doubtful accounts must be $ 3400.
The adjustment will be = $3400- $660= $ 2740
The Adjusting Entry will be
Bad Debts Expense $ 2740 Debit
Allowance for doubtful accounts $ 2740 Credit
In the business gift-giving world, if a company gives a gift to a potential client for the purpose of influencing their behavior in their favor, it is unethical. What are the three criteria and dimensions of evaluating a business gift? Multiple Choice Question
Answer:
Context, culture and content
Explanation:
Gift giving in business is common and also contentious. Business gifts are often for advertising, sales promotion, and marketing communication medium.
These kind of gifts are for the following reasons:
1. In appreciation.
2. In the hopes of creating a positive first impression.
3. Returning a favor or expecting a favor in return for something.
When it comes to considering appropriate business gifts it is helpful for one to think about the content of the gift, the context of the gift, and the culture in which it will be received.
Giving a gift to a potential client for the purpose of influencing their behavior is a form of Bribery.
_________review sessions are meetings between a manager and employee, during which the strengths and weaknesses of the employee's performance are discussed and improvement goals agreed upon.
a. Performance testingb. Performance appraisalc. Performance engineeringd. Performance budget
Answer:
b. Performance appraisal
Explanation:
-Performance testing is a technique that is used to find out the performance of a software to be sure that it will work well.
-Performance appraisal is an evaluation of the performance of the employees in which they get feedback about the good and the bad things they have done and performance improvements are defined.
-Performance engineering is a technique that is used to make sure that a system is stable.
-Performance budget is a budget in which there is a link between the funds that are assigned for a specific activity and the results that are expected from that.
According to this, the answer is that performance appraisal review sessions are meetings between a manager and employee, during which the strengths and weaknesses of the employee's performance are discussed and improvement goals agreed upon because performance appraisal review sessions are meetings in which an employee receives feedback about the job done.
Cost Flow Methods The following three identical units of Item LO3V are purchased during April: Item Beta Units Cost April 2 Purchase 1 $314 April 15 Purchase 1 317 April 20 Purchase 1 320 Total 3 $951 Average cost per unit $317 ($951 ÷ 3 units) Assume that one unit is sold on April 27 for $403. Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost method. Gross Profit Ending Inventory a. First-in, first-out (FIFO) $ $ b. Last-in, first-out (LIFO) $ $ c. Weighted average cost $ $
Answer:
a. Gross Profit =$89, Ending Inventory = $640
b. Gross Profit =$83, Ending Inventory = $631
c. Gross Profit =$86, Ending Inventory = $634
Explanation:
FIFO
a.Gross Profit
Sales ( 1 unit × $403) $403
Less Cost of Sales ( 1 unit × $314) ($314)
Gross Profit $89
b. Ending Inventory
Ending Inventory = Units Left × Earliest Price
= 2 units × $320
= $640
LIFO
a.Gross Profit
Sales ( 1 unit × $403) $403
Less Cost of Sales ( 1 unit × $320) ($320)
Gross Profit $83
b. Ending Inventory
Ending Inventory : 1 unit × $314 = $314
1 unit × $317 = $317
Total = $631
Weighted Average Cost method
a.Gross Profit
Sales ( 1 unit × $403) $403
Less Cost of Sales ( 1 unit × $317) ($317)
Gross Profit $86
b. Ending Inventory
Ending Inventory = Units Left × Average Price
= 2 units × $317
= $634
GroundCover Pools, Inc., agrees to build a swimming pool for Franci, but fails to complete the job. Franci hires EquiAqua, Inc., to finish the project. Candy may recover from GroundCover:___________.
a. the contract price less costs of materials and labor.
b. the contract price.
c. the costs needed to complete construction.
d. profits plus the costs incurred up to the time of the breach.
When the United States imports more than it exports, then the balance of payments would record a negative entry in the financial account. record a negative entry in the current account. record a positive entry in the financial account. record a positive entry in the current account. remain the same.
Answer:
The answer is B a negative entry in the current account.
Explanation:
Balance of payments accounts of a country is the recording economic transactions (the payments and receipts) of the residents of the country with residents of other countries during a period of time.
Balance of Payments is in deficit or negative if imports are more than the exports and it is in surplus or positive if exports are more than imports during a period of time.
We have three categories of Balance of Payments:.
1. The current account which records the inflow and outflow of goods and services.
2. The Financial account which records
monetary flow like investment in real estates, fixed income(bonds), stocks etc.
3. The capital account which records the investments in fixed assets like land.
Categories of expenditures
Bob and Cho Iverson live in Swarthmore, PA. Their son, Eric, owns his own plumbing business.
For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply.
Transaction
1. Bob buys a sweater made in Guatemala.
2. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.
3. Cho gets a new video camera made in the United States.
4. Eric buys a new set of tools to use in his plumbing business.
5. Bob's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China.
Answer:
1. Bob buys a sweater made in Guatemala. - it is an import (M), not included in GPD.
Imports are substracted from exports to reach net exports, which are part of GDP. This is an import because Bob lives in the U.S. and the sweater was made in Guatemala.
2. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. - Government purchases (G), included in GDP.
It is a government purchase because it is the state authority who is investing the resources in repaving the highway.
3. Cho gets a new video camera made in the United States. - it is consumption (C), included in GDP.
Cho lives in the U.S. and buys a camera made in the U.S., this is private consumption.
4. Eric buys a new set of tools to use in his plumbing business. - it is investment (I), included in GDP.
Investment are the purchases of goods, by private individuals or firms, with the goal of obtaining future economic benefits from their use. In other words, Investment is the purchase of assets. Eric is buying an asset for his business: a set of tools.
5. Bob's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China. - it is an export (X), included in GDP.
Exports are goods and services, produced domestically, but sold abroad. Bob is providing a service to a foreign company, and as an person living in the U.S., the value of that service is an export, and included in the GDP calculation.
Sunshine LLC sold furniture for $75,650. Sunshine bought the furniture for $89,870 several years ago and has claimed $24,935 of depreciation expense on the machine. What is the amount and character of Sunshine's gain or loss
Answer:
The gain is $10,715
Explanation:
Solution
Given that:
The cost of furniture =$89,870
Accumulation of depreciation = $24,935
Thus
The book value of furniture= $89,870 - $24,935
=$64,935
The sale value of the furniture = $75,650
Now,'
The gain on sale of the furniture is given below:
Gain on sale of furniture = sale price - book value
= $75,650 - $64,935
=$10,715
The gain is The long term capital gain on sale of furniture is $10,715
When a grocery store makes sure they always have 10 extra dozen eggs in the back storage area "just in case" they are needed, this type of inventory is typically called: A. Cycle Stock B. Safety Stock C. Anticipation Inventory D. Transportation Inventory E. Smoothing Inventory
Answer: Safety Stock
Explanation:
Safety stock is the additional quantity of a product that is kept by a company on its inventory so to reduce the risk of running out of the item in stock. The safety stock can be used when the sales of the product is more than the planned sales.
Regarding the question, when a grocery store makes sure they always have 10 extra dozen eggs in the back storage area "just in case" they are needed, this type of inventory is typically called the safety stock.
On January 1, 2014 (the date of grant), Lutz Corporation issues 2,780 shares of restricted stock to its executives. The fair value of these shares is $78,300, and their par value is $11,400. The stock is forfeited if the executives do not complete 3 years of employment with the company.Prepare journal entries for January 1, 2014, and on December 31, 2014, assuming the service period is 3 years.
Answer:
Lutz Corporation Journal entry
1/1/14
Dr Unearned Compensation 78,300
Paid-in Capital in Excess of Par 66,900
($78,300-11,400)
Cr Common Stock 11,400
12/31/14
Dr Compensation Expense 26,100
(78,300/3years)
Cr Unearned Compensation 26,100
Explanation:
On January 1 2014 fair value of shares was $78,300, and their par value is $11,400 we have to Debit Unearned Compensation with 78,300 and credit Paid-in Capital in Excess of Par with 66,900 ($78,300-11,400) and Common Stock with 11,400.
On 12 December 2014 the stock will be forfeited if the executives do not complete 3 years of employment with the company which means we have to Debit Compensation Expense with 26,100(78,300/3years) and Credit Unearned Compensation with 26,100.
Lassen Corporation sold a machine to a machine dealer for $24,000. Lassen bought the machine for $52,000 and has claimed $20,500 of depreciation expense on the machine. What gain or loss does Lassen realize on the transaction
Answer:
Gain/loss= $7,500 loss
Explanation:
Giving the following information:
Selling price= $24,000.
Lassen bought the machine for $52,000 and has claimed $20,500 of depreciation expense on the machine
First, we need to calculate the book value:
Book value= original price - accumulated depreciation
Book value= 52,000 - 20,500= $31,500
If the selling price is higher than the book value, the company gain from the sale.
Gain/loss= 24,000 - 31,500= $7,500 loss
Paper Clip Company sells office supplies. The following information summarizes the company's operating activities for the year: Utilities for the store $ 10 comma 300 Sales commissions 10 comma 300 Sales revenue 164 comma 100 Purchases of merchandise 89 comma 000 January 1 inventory 27 comma 400 Rent for store 14 comma 200 December 31 inventory 24 comma 000 What is operating income?
Answer:ummarizes the company's operating activities for the year: Utilities for the store $ 10 comma 300 Sales commissions 10 comma
Paper Clip Company sells office supplies. The following information summarizes the company's o
Explanation:ies for the store $ 10 comma 300 Sales commissions 10 comma 300 Sa
ies. The following information summarizes the company's operating activities for the year: Utilities for the store $ 10 comma 300 Sales commissions 10 comma 300 Sales revenue 164 comma 100 Purchases of merchandise 89 comma 000 January 1 inventory 27 comma 400 Rent for st
The expected average rate of return for a proposed investment of $636,800 in a fixed asset with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total net income of $191,560 for the 4 years is (round to two decimal points)
Answer: 15.96
Explanation:
The expected rate of return will be the Average income divided by the average cost.
It is stated that the asset has a useful life of 4 years with no residual value so at the end of 4 years it will be worth $0.
The Average Cost/ Value of the Asset is calculated as;
= (Beginning Asset value - Ending Asset Value) / 2
= (600,000 - 0) /2
= 300,000
Total Income of $191,560 for the 4 years so Average income will be,
= 191,560/4
= $47,890
Expected Average Rate of Return = 47,890/300,000
= 15.96%
Computing unit and inventory costs under absorption costing LO P1
Trio Company reports the following information for the current year, which is its first year of operations.
Direct materials $ 13 per unit
Direct labor $ 17 per unit
Overhead costs for the year $100,000 per year
Variable overhead 200,000 per year
Fixed overhead Units produced this year 25,000 units
Units sold this year 19,000 units
Ending finished goods inventory in units 6,000 units
Compute the cost per unit using absorption costing Cost per unit of finished goods using: Absorption costing Cost per unit of finished goods
Determine the cost of ending finished goods inventory using absorption costing
Answer:
Unitary production cost= $42
Ending inventory= $252,000
Explanation:
Giving the following information:
Direct materials $ 13 per unit
Direct labor $ 17 per unit
Fixed overhead costs for the year= $100,000 per year
Variable overhead= 200,000 per year
Units produced this year 25,000 units
Ending finished goods inventory in units 6,000 units
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
First, we need to calculate the unitary fixed and variable cost:
Unitary overhead= (100,000 + 200,000)/25,000= $12
Unitary production cost= 13 + 17 + 12= $42
COGS= 19,000*42= $798,000
Ending inventory= 6,000*42= $252,000
On March 31. 2019, Home Decorating Pavilion received a bank statement showing a balance of $9,810. The balance in the firm's checkbook and Cash account on the same date was $10,276. The difference between the two balances is caused by the items listed below.
a. A $2,935 deposit made on March 30 does not appear on the bank statement.
b. Check 358 for $515 issued on March 29 and Check 359 for $1,710 published on March 30 have not yet been paid by the bank.
c. A credit memorandum shows that the bank has collected a $1,200 note receivable and interest of $120 for the firm.
d. A service charge of $31 appears on the bank statement.
e. A debit memorandum shows an NSF check for $555. The check was Issued by Dane Jarls, a credit customer.)
f. The firm's records indicate that Check 341 of March 1 was issued for $900 to pay the month's rent. However, the canceled check and the listing on the bank statement show that the actual amount of the check was $800.
g. The bank made an error by deducting a check for $590 issued by another business from the balance of Home Decorating Pavilion's account.
Required:
1. Prepare a bank reconciliation statement for the firm as of March 31, 2019.
2. Prepare a bank reconciliation statement for the firm as of March 31, 2019. (Enter all amounts as positive values.)
Answer:
Both requirements 1 and 2 are the same, but I guess one refers to a bank reconciliation statement and the other one to a cash account reconciliation.
Bank account reconciliation:
bank balance $9,810
+ deposits in transit $2,935
- outstanding checks 358 and 359 ($2,225)
+ check deducted by mistake $590
reconciled bank account $11,110
Cash account reconciliation:
Cash account balance $10,276
+ note and interest collected $1,320
- bank fees ($31)
- NSF check Dane Jarls ($555)
+ error on check 341 $100
reconciled cash account $11,110
Problem 7-4A Accounts receivable transactions and bad debts adjustments LO C1, P2, P3Liang Company began operations in Year 1. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows.Year 1Sold $1,351,000 of merchandise (that had cost $976,900) on credit, terms n/30.Wrote off $20,300 of uncollectible accounts receivable.Received $671,700 cash in payment of accounts receivable.In adjusting the accounts on December 31, the company estimated that 1.40% of accounts receivable would be uncollectible.Year 2Sold $1,525,600 of merchandise (that had cost $1,329,200) on credit, terms n/30.Wrote off $31,700 of uncollectible accounts receivable.Received $1,354,800 cash in payment of accounts receivable.In adjusting the accounts on December 31, the company estimated that 1.40% of accounts receivable would be uncollectible.Required:Prepare journal entries to record Liang’s Year 1 and Year 2 summarized transactions and its year-end adjustments to record bad debts expense. (The company uses the perpetual inventory system and it applies the allowance method for its accounts receivable.) (Round your intermediate calculations to the nearest dollar.)
Answer:
Liang CompanyGeneral Journal:
Year 1
Debit Accounts Receivable $1,351,000
Credit Sales Revenue $1,351,000
To record sales on credit, terms n/30.
Debit Uncollectible Accounts Expenses $20,300
Credit Accounts Receivable $20,300
To write off uncollectibles.
Debit Cash Account $671,700
Credit Accounts Receivable $671,700
To record the receipt of cash on account.
Year 2:
Debit Accounts Receivable $1,525,600
Credit Sales Revenue $1,525,600
To record the sales of goods on credit, terms n/30.
Debit Uncollectible Expenses $31,700
Credit Accounts Receivable $31,700
To write off uncollectibles.
Debit Cash Account $1,354,800
Credit Accounts Receivable $1,354,800
To record the receipt of cash on account.
Adjusting Journal:
Year 1
Dec. 31
Debit Uncollectible Expenses $3,988.60
Credit Allowance for Uncollectible Accounts $3,988.60
To record the 1.4% estimated allowance for collectibles.
Year 2:
Dec. 31
Debit Allowance for Uncollectible Accounts $802.20
Credit Uncollectible Expense $802.20
To bring the balance of Allowance for Uncollectible Accounts to 1.4% accounts receivables
Explanation:
Dec. 31, Year 1:
i) Accounts Receivable Balance:
Sales = $976,900
Uncollectible $20,300
Cash receipts $671,700
Balance = $284,900
ii) Allowance for Uncollectible Accounts = $3,988.60 ($284,900 x 1.4%)
Year 2:
Dec. 31, Year 2:
i) Accounts Receivable Balance:
Beginning balance = $284,900
Sales = $1,329,200
Uncollectible $31,700
Cash receipts $1,354,800
Balance = $227,600
ii) Allowance for Uncollectible Accounts:
Beginning balance = $3,988.60
Reduction Difference = $802.20 ($3,186.40 - $3,988.60)
Year 2 Allowance = $3,186.40 (($227,600 x 1.4%)
Suppose that the average annual malpractice cost is $50,000 for reckless doctors and $1,000 for careful doctors. If half of an insurance company's insured doctors are reckless, the company will earn zero economic profit if the price of insurance is $______nothing. If careful doctors are not willing to pay more than $5,000 for insurance, the price required for zero economic profit is $_______nothing.
Answer:
1. $25,500
2. $50,000
Explanation:
Company will earn zero economic profit if the price is $25,500
Insurance price = (50% x $50,000) + (50% x $ 1,000)
Insurance price = $25,000 + $500
Insurance price = $25,500
If the careful doctors are not willing to pay more than $5,000 for insurance then I am afraid reckless doctors will take the insurance with price of $50,000
Sherry and John Enterprises are using the kaizen approach to budgeting for 2018. The budgeted income statement for January 2018 is as follows: Sales (168,000 units) $1,010,000 Less: Cost of goods sold 690,000 Gross margin 320,000 Operating expenses 400,000 (includes $55,000 of fixed costs) Operating income -$80,000 Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month. What is the budgeted operating income for March 2018
Answer:
February Kaizen Budgeted Operating income -$ 69,650
March Kaizen Budgeted Operating income-$ 59,405.5
Explanation:
The Kaizen costing primarily focuses on production processes and in it the cost reductions are obtained through increasing efficiency.
Sales (168,000 units) $1,010,000
Less: Cost of goods sold 690,000
Gross margin 320,000
Operating expenses 400,000 (includes $55,000 of fixed costs)
Operating income -$80,000
Calculations For February
Decrease by 1% of COGS $ 690,000= $ 690,000-$6900=$ 683,100
Decrease by 1% of Variable Expenses $ 345000= $ 345000-3450= $ 341550
Budgeted Operating Income Under Kaizen Costing For February
Sales (168,000 units) $1,010,000
Less: Cost of goods sold 683,100
Gross margin 326,900
Operating expenses
Variable Expenses $ 341550
Fixed Costs $55,000
Operating income -$ 69,650
Calculations For March
Decrease by 1% of COGS $ 683,100= $ 683,100-$6831=$ 676,269
Decrease by 1% of Variable Expenses $ 341 550= $ 341550-3415.5= $ 338134.5
Budgeted Operating Income Under Kaizen Costing For March
Sales (168,000 units) $1,010,000
Less: Cost of goods sold $ 676,269
Gross margin 333,731
Operating expenses
Variable Expenses $ 338134.5
Fixed Costs $55,000
Operating income -$ 59,405.5