Answer:
A) sales revenue 26,569.40
B)
cash 3,000 debit
lease receivables 23,569.40 debit
sales revenues 26,569.40 credit
COGS 25,000 debit
Truck Inventory 25,000 credit
--entries for the lessor--
truck 26,569.40 debit
cash 3,000 credit
lease payable 23,569.40 credit
C)
[tex]\left[\begin{array}{cccccc}$Time&$Beg&$Cuota&$Interes&$Amort&$Ending\\0&26569.4&3000&&3000&23569.4\\1&23569.4&3000&707.08&2292.92&21276.48\\2&21276.48&3000&638.29&2361.71&18914.77\\3&18914.77&3000&567.44&2432.56&16482.21\\4&16482.21&3000&494.47&2505.53&13976.68\\5&13976.68&3000&419.3&2580.7&11395.98\\6&11395.98&3000&341.88&2658.12&8737.86\\7&8737.86&9000&262.14&8737.86&0\end{array}\right][/tex]
For the lessor, the interest will be revenue.
For the lessee, the interest will be an expense
D)
cash 3,000 debit
lease receivable 2,292.92 credit
interest revenue 707.08 credit
--entry for the lessor---
lease payable 2,292.92 debit
interest expense 707.08 debit
cash 3,000 credit
--entry for the lessee--
E)
cash 9,000 debit
lease receivable 8,737.86 credit
interest revenue 262.14 credit
--entry for the lessor---
lease payable 8,737.86 debit
interest expense 262.14 debit
cash 9,000 credit
--entry for the lessee--
Explanation:
1) The sales revenue will be the present value of the future payment.
Present Value of Annuity
[tex]C \times \displaystyle \frac{1-(1+r)^{-time} }{rate}(1+rate) = PV\\[/tex]
C 3,000
time 8
rate 0.03
[tex]3000 \times \displaystyle \frac{1-(1+0.03)^{-8} }{0.03}(1+0.03) = PV\\[/tex]
PV $21,690.8489
PRESENT VALUE OF LUMP SUM
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 6,000.00
time 7.00
rate 0.03
[tex]\frac{6000}{(1 + 0.03)^{7} } = PV[/tex]
PV 4,878.55
Sales revenue: 21,690.85 + 4,878.55 = 26,569.40
journal entries explanation:
we debit cash for the lessor as it is receiving it.
we credit cash for the lessee as it is paying with cash.
the lease receivables will be credited when the lessor collects from the lessee as it is a decreasing asset
Lease payables will be debited as payments are made because, the obligation to pay decreases.
For the borrower the interest is revenue. For the lessee the interest represents expense
A technological improvement in apple production will: A. Increase the demand for apples, lowering the equilibrium price but raising the equilibrium quantity of apples. B. Increase the supply of apples, raising the equilibrium price but lowering the equilibrium quantity of apples. C. Increase the supply of apples, lowering the equilibrium price and quantity of apples. D. Increase the supply of apples, lowering the equilibrium price but raising the equilibrium quantity of apples. E. Increase the supply apples, raising the equilibrium price and quantity of apples.
Answer:
C. Increase the supply of apples, lowering the equilibrium price and quantity of apples.
Explanation:
Technological improvement can be regarded as an positive change or rise in efficiency of a product as well as the process which in turn results in tangible increase in output, even though there is no significant increase in input. It should be noted that technological improvement in apple production will Increase the supply of apples, lowering the equilibrium price and quantity of apples.
Marsha is 23 years old and single. She cannot be claimed as a dependent by another taxpayer. Marsha earned wages of $18,500 and had $1,500 of federal income tax withholding in tax year 2020. Marsha gave birth to Shelby on November 10, 2020. Marsha paid all the cost of keeping up a home and support for Shelby. Shelby and Marsha are U.S. citizens and have valid Social Security numbers. Marsha filed Single with no dependents on her 2019 tax return and received a $1,200 Economic Impact Payment in May 2020.
1. Which of the following statements is true?
a. Marsha is required to file a tax return.
b. Marsha is not required to file a tax return, but should file a tax return to claim a
refund of her federal income tax withholding.
c. Marsha does not qualify for the earned income credit because she is under the
age of 25.
d. Both a and c.
2. Marsha qualifies for the recovery rebate credit of $500 for Shelby.
Note: Congress may have enacted additional legislation that will affect taxpayers
after this publication went to print. Please answer questions based on the information
provided in Publication 4491, VITA/TCE Training Guide and Publication 4012, VITA/
TCE Resource Guide.
a. True
b. False
Answer:
1. d. Both a and c.
2. True.
Explanation:
Marsha and Shelby both are U.S. citizen. Marsha can claim Income credit once she is 25 years older up to 65 years of age. The individual below 25 years of age cannot claim income credit according to the tax law prevailing in U.S.
On October 28, 2018, Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2018, the end of the company's fiscal year.
The division's loss from operations for 2018 was $2,000,000. The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement?
Answer:
$2,500,000
Explanation:
Calculation for What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement
Division's loss from operations for 2018 $2,000,000
Add division's book value and fair value less cost to sell $500,000
($3,000,000- $2,500,000)
Loss on discontinued operations in 2018 $2,500,000
Therefore what before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement is $2,500,000
Sarasota Company sells on credits goods that cost $310,000 to Ricard Company for $409,500 on January 2, 2020. The sales price includes an installation fee, which has a standalone selling price of $42,500. The standalone selling price of the goods is $367,000. The installation is considered a separate performance obligation and is expected to take 6 months to complete. (a) Prepare the journal entries (if any) to record the sale on January 2, 2020
Answer and Explanation:
The journal entries are shown below:
Account Receivable $409,500
To Sales Revenue $367,000
To Unearned Service Revenue $42,500
(Being account receivable is recorded)
Cost of Goods Sold $310,000
To Merchandised Inventory $310,000
(Being cost of goods sold is recorded)
These two journal entries are to be recorded
The manager at the Overton Hotel in Lubbock believes that the success of the Texas Tech Red Raider Basketball team has an impact on the occupancy rate at the hotel during the first quarter of every year. Below are the number of victories for the Red Raiders in during the last three seasons and the hotel occupancy rate. This year, (year 4) the Red Raiders Basketball Team is expected to have another phenomenal season and win 31 games and the manager at the Overton has asked you to determine their first quarter occupancy rate for the upcoming year (year 4) using associative forecasting, given that the SLOPE = 0.0474 and the INTERCEPT =0.4743
Year Wins First Quarter Occupancy Rate
1 15 60%
2 28 90%
3 31 93%
a. 93.4%
b. 88.1%
c. 91.7%
d. 36.9%
e. 90.0%
Answer: 99.51%
Explanation:
This is a linear regression problem.
The relationship between the success of the team and the occupancy rate is in the form:
y = mx + c
y = occupancy rate
m = slope
x = number of games
c = slope
Intercept is supposed to be negative in question:
= 0.0474 * 31 + (-0.4743)
= 99.51%
Options are most probably for a variant of this question.
On October 29, 2012, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is S20 and its retail selling price is S75 in both 2012 and 2013. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred.
2012
Nov. 11 Sold 105 razors for S7,875 cash.
30 Recognized warranty expense related to November sales with an adjusting entry.
Dec. 9 Replaced 15 razors that were returned under the warranty.
16 Sold 220 razors for S16,500 cash.
29 Replaced 30 razors that were returned under the warranty.
31 Recognized warranty expense related to December sales with an adjusting entry.
2013
Jan. 5 Sold 150 razors for S11,250 cash.
17 Replaced 50 razors that were returned under the warranty.
31 Recognized warranty expense related to January sales with an adjusting entry.
Required:
a. Prepare journal entries to record these transactions and adjustments for 2012 and 2013.
b. How much warranty expense is reported for November 2012 and for December 2012?
c. How much warranty expense is reported for January 2013?
d. What is the balance of the Estimated Warranty Liability account as of December 31, 2012?
Answer:
a. See the attached excel file for the journal entries for 2012 and 2013.
b. We have the following:
Warranty Expense reported for November 2012 = $630
Warranty Expense reported for December 2012 = $1,320
Total Warranty Expense reported for 2012 = $1,950
c. Warranty Expense reported for January 2013 = $900
d. Balance of the Estimated Warranty Liability account as of December 31, 2012 = $1,050
Explanation:
a. Prepare journal entries to record these transactions and adjustments for 2012 and 2013.
Note: See the attached excel file for the journal entries for 2012 and 2013.
In the attached excel, the following workings are used:
w.1: Cost of Goods Sold = Units sold * Cost per unit = 105 * $20 = $2,100
w.2: Warranty Expense = Sales * 8% = $7,875 * 8% = $630
w.3: Estimated Warranty Liability = Units replaced * Cost per unit = 15 * $20 = $300
w.4: Cost of Goods Sold = Units sold * Cost per unit = 220 * $20 = $4,400
w.5: Estimated Warranty Liability = Units replaced * Cost per unit = 30 * $20 = $600
w.6: Warranty Expense = Sales * 8% = $16,500 * 8% = $1,320
w.7: Cost of Goods Sold = Units sold * Cost per unit = 150 * $20 = $3,000
w.8: Estimated Warranty Liability = Units replaced * Cost per unit = 50 * $20 = $1,000
w.9: Warranty Expense = Sales * 8% = $11,250 * 8% = $900
b. How much warranty expense is reported for November 2012 and for December 2012?
Warranty Expense reported for November 2012 = Sales for November 2012 * 8% = $7,875 * 8% = $630
Warranty Expense reported for December 2012 = Sales for December 2012 * 8% = $16,500 * 8% = $1,320
Total Warranty Expense reported for 2012 = Reported Warranty Expense for November 2012 + Reported Warranty Expense for December 2012 = $630 + $1,320 = $1,950
c. How much warranty expense is reported for January 2013?
Warranty Expense reported for January 2013 = Sales for January 2013 * 8% = $11,250 * 8% = $900
d. What is the balance of the Estimated Warranty Liability account as of December 31, 2012?
Total Warranty Expense reported for 2012 = $1,950
Value of returned 15 razors replaced on Dec. 9, 2012 = Units replaced * Cost per unit = 15 * $20 = $300
Value of returned 30 razors replaced on Dec. 29, 2012 = Units replaced * Cost per unit = 30 * $20 = $600
Total value of returned razors replaced in 2012 = Value of returned 15 razors replaced on Dec. 9, 2012 + Value of returned 30 razors replaced on Dec. 29, 2012 = $300 + $600 = $900
Therefore, we have:
Balance of the Estimated Warranty Liability account as of December 31, 2012 = Total Warranty Expense reported for 2012 - Total value of returned razors replaced in 2012 = $1,950 - $900 = $1,050
Extend the application of a method or conclusion
a.Segmentation b.Extrapolate
c.Diffusion d.Multinational
Answer:
B - Extrapolate
Explanation:
Extrapolate means to extend the application of (a method or conclusion, especially one based on statistics) to an unknown situation by assuming that existing trends will continue or similar methods will be applicable.
Richards Corporation uses the weighted-average method of process costing. The following information is available for October in its Fabricating Department:
Units:
Beginning Inventory: 94,000 units, 80% complete as to materials and 25% complete as to conversion.
Units started and completed: 278,000.
Units completed and transferred out: 372,000.
Ending Inventory: 37,000 units, 40% complete as to materials and 15% complete as to conversion.
Costs:
Costs in beginning Work in Process - Direct Materials: $47,200.
Costs in beginning Work in Process - Conversion: $89,700.
Costs incurred in October - Direct Materials: $759,920.
Costs incurred in October - Conversion: $929,300.
Required:
Calculate the cost per equivalent unit of materials.
Answer:
386,800 units
Explanation:
Note that, Richards Corporation uses the weighted-average method of process costing.
This method focuses on units completed and units in ending work in process.
therefore,
Equivalent units calculation
Materials = 372,000 x 100 % + 37,000 x 40 % = 386,800 units
Therefore, the cost per equivalent unit of materials is 386,800 units.
On January 1, 2021, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing’s lease amortization schedule appear below: Jan. 1 Payments Effective Interest Decrease in Balance Outstanding Balance 308,032 2021 30,000 30,000 278,032 2022 30,000 23,633 6,367 271,665 2023 30,000 23,092 6,908 264,757 2024 30,000 22,504 7,496 257,261 2025 30,000 21,867 8,133 249,128 2026 30,000 21,176 8,824 240,303 2027 30,000 20,426 9,574 230,729 — — — — — — — — — — — — — — — 2038 30,000 6,513 23,487 53,135 2039 30,000 4,516 25,484 27,651 2040 30,000 2,350 27,650 0 Required: 1. What is Majestic’s lease liability after the first lease payment?2. What amount would Majestic record as a right-of-use asset? 3. What is the lease term in years? 4. What is the effective annual interest rate? (Round your percentage answers to 1 decimal place.) 5. What is the total amount of lease payments? 6. What is the total effective interest expense recorded over the term of the lease?
1. Majestic’s lease liability after the first lease payment is $278,032.
2. The amount that Majestic would record as a right-of-use asset is $308,032.
3. The lease term in years is 20 years.
4. The effective annual interest rate is 8.5%.
5. The total amount of lease payments is $600,000.
6. The total effective interest expense recorded over the term of the lease is $29,1968.
Data and Calculations:Lease Amortization Schedule
Jan. 1 Payments Effective Interest Decrease Outstanding
in Balance Balance
308,032
2021 30,000 30,000 278,032
2022 30,000 23,633 6,367 271,665
2023 30,000 23,092 6,908 264,757
2024 30,000 22,504 7,496 257,261
2025 30,000 21,867 8,133 249,128
2026 30,000 21,176 8,824 240,303
2027 30,000 20,426 9,574 230,729
— — — — — — — — — — — — — — —
2038 30,000 23,487 6,513 53,135
2039 30,000 25,484 4,516 27,651
2040 30,000 27,650 2,350 0
Lease term = 20 years (2040 - 2020).
Effective annual interest rate = 8.5% ($23,633/$278,032 x 100).
Total amount of lease payments = $600,000 ($30,000 x 20).
Total effective interest expense recorded over the term of the lease = $29,1968 ($600,000 - $308,032).
Thus, the total effective interest expense recorded over the term of the lease is $29,1968.
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Trade credit and discounts are important strategies used by firms in the daily operations of their business. Calculate the cost of a firm's trade credit in each of the following situations (answers should be carried out to 2 decimal points, e.g. 35.78%, not 35% or 36% !) a) 2/12, Net 32 b) 3/15, Net 36 c) 2.5/18, Net 35 d) 2.25/20, Net 38
Answer:
When a discount is given as 2/12, Net 32, it means that the customer is allowed a 2% discount if they pay off their purchase in 12 days. If they don't, they would have to pay off the full amount in 32 days.
The Cost of a firm's credit is calculated by the formula:
= Discount %/ ( 100% - Discount %) * (360/Allowed payment days - Discount days)
a. 2 / 12, Net 32
= (2%/ (100 - 2% )) * (360 / (32 - 12))
= 36.73%
b) 3/15, Net 36
= (3%/ (100 - 3% )) * (360 / (36 - 15))
= 53.02%
c) 2.5/18, Net 35
= (2.5%/ (100 - 2.5% )) * (360 / (35 - 18))
= 54.30%
d) 2.25/20, Net 38
= (2.25%/ (100 - 2.25% )) * (360 / (38 - 20))
= 46.04%
You just got a job and plan to save for the college expenses for your kids. You have a son and a daughter. Your son is 4 years old, and your daughter is only 1 year old. Both of them plan to go to a four-year college at the age of 18. The estimated college expense is about $40,000 per year. Assume you plan to invest into a portfolio that offers you return about 6% per year until your daughter is graduated from college. How much money do you need to save every year if your first saving is in one year
Answer:
$11,508.25
Explanation:
your son will start college in 14 years, and the present value of his college tuition = $40,000 x 3.4651 (PVIFA, 6%, 4 periods) = $138,604
your daughter will start college in 17 years, so you need in today's dollars $138,604
you will need to save enough money to cover both tuitions;
money required to cover your son's tuition = $138,604 / 21.015 (FVIFA, 6%, 14 periods) = $6,595.48
money required to cover your daughter's tuition = $138,604 / 28.213 (FVIFA, 6%, 14 periods) = $4,912.77
total annual savings = $11,508.25
A small town is considering paving paradise hotel to put up a parking lot. The land will cost $25,000 and the construction of the lot is estimated to be $150,000. Each year, costs associated with the parking lot are estimated to be $17,500. The income from the lot is expected to be $18,000 the first year and increase by $3,500 each year for the 12 year life of the lot. Determine the B/C ratio if interest rate is 12%. [4 points]
Answer:
0.71
Explanation:
The benefit cost ratio is used to determine the profitability of an investor. It is determined by dividing the present value of benefit by the present value of cost
Benefit cost ratio (BC) = present value of benefits / present value of costs
if BC is greater than 1, the project is profitable
If BC is less than 1, the project is not profitable
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Present value of the benefits
Cash flow in year 1 = $18,000
Cash flow in year 2 = $18,000 + 3500 = $21500
Cash flow in year 3 = $18,000 + (3500 x 2) = $25,000
Cash flow in year 4 = $18,000 + (3500 x 3) = $28500
Cash flow in year 5 = $18,000 + (3500 x 4) = $32,000
Cash flow in year 6 = $18,000 + (3500 x 5) = $35,500
Cash flow in year 7 = $18,000 + (3500 x 6) = $39,000
Cash flow in year 8 = $18,000 + (3500 x 7) = $42,500
Cash flow in year 9 = $18,000 + (3500 x 8) = $46,000
Cash flow in year 10 = $18,000 + (3500 x 9) = $49500
Cash flow in year 11 = $18,000 + (3500 x 10) = $53,000
Cash flow in year 12 = $18,000 + (3500 x 11) = $56,500
I = 12 %
PV = $202,331.70
Present value of the cost
Cash flow in year 0 = $25,000 + $150,000 = $175,000
Cash flow in year 1 to 12 = $17,500.
I = 12 %
PV = $283,401.55
B/C ratio = $202,331.70 / $283,401.55 = 0.71
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
The following information applies to the questions displayed below.]
Selected comparative financial statements of Korbin Company follow.
KORBIN COMPANY
Comparative Income Statements
For Years Ended December 31, 2017, 2016, and 2015
2017 2016 2015
Sales $ 555,000 $340,000 $278,000
Cost of goods sold 283,500 212,500 153,900
Gross profit 271,500 127,500 124,100
Selling expenses 102,900 46,920 50,800
Administrative expenses 50,668 29,920 22,800
Total expenses 153,568 76,840 73,600
Income before taxes 117,932 50,660 50,500
Income taxes 40,800 10,370 15,670
Net income $ 77,132 $40,290 $34,830
KORBIN COMPANY
Comparative Balance Sheets
December 31, 2017, 2016, and 2015
2017 2016 2015
Assets
Current assets $ 52,390 $37,924 $51,748
Long-term investments 0 500 3,950
Plant assets, net 100,000 96,000 60,000
Total assets $152,390 $134,424 $115,698
Liabilities and Equity
Current liabilities $22,800 $19,960 $20,300
Common stock 72,000 72,000 60,000
Other paid-in capital 9,000 9,000 6,000
Retained earnings 48,590 33,464 29,398
Total liabilities and equity 152,390 $134,424 $115,698
Complete the table below to calculate income statement datain common size percents.
Korbin company
common size comparative income statement
For year ended December 31 2017,2016,2015
2017 2016 2015
Sales
Cost of goods sold
Gross profit
Selling expenses
Administrative expenses
Total expenses
Income before taxes
Income tax expense
Net income
Answer:
KORBIN COMPANY
Common Size Comparative Income Statements
For Years Ended December 31, 2017, 2016, and 2015
2017 % 2016 % 2015 %
Sales $ 555,000 100 $340,000 100 $278,000 100
Cost of goods sold 283,500 51.1 212,500 62.5 153,900 55.4
Gross profit 271,500 48.9 127,500 37.5 124,100 44.6
Selling expenses 102,900 18.5 46,920 13.8 50,800 18.3
Administrative expenses 50,668 9.1 29,920 8.8 22,800 6.0
Total expenses 153,568 27.7 76,840 22.6 73,600 26.5
Income before taxes 117,932 21.2 50,660 14.9 50,500 18.2
Income taxes 40,800 7.4 10,370 3.1 15,670 5.6
Net income $ 77,132 13.9 $40,290 11.9 $34,830 12.5
Explanation:
a) Data and Calculations:
KORBIN COMPANY
Common Size Comparative Income Statements
For Years Ended December 31, 2017, 2016, and 2015
2017 % 2016 % 2015 %
Sales $ 555,000 100 $340,000 100 $278,000 100
Cost of goods sold 283,500 51.1 212,500 62.5 153,900 55.4
Gross profit 271,500 48.9 127,500 37.5 124,100 44.6
Selling expenses 102,900 18.5 46,920 13.8 50,800 18.3
Administrative expenses 50,668 9.1 29,920 8.8 22,800 6.0
Total expenses 153,568 27.7 76,840 22.6 73,600 26.5
Income before taxes 117,932 21.2 50,660 14.9 50,500 18.2
Income taxes 40,800 7.4 10,370 3.1 15,670 5.6
Net income $ 77,132 13.9 $40,290 11.9 $34,830 12.5
KORBIN COMPANY
Comparative Balance Sheets
December 31, 2017, 2016, and 2015
2017 2016 2015
Assets
Current assets $ 52,390 $37,924 $51,748
Long-term investments 0 500 3,950
Plant assets, net 100,000 96,000 60,000
Total assets $152,390 $134,424 $115,698
Liabilities and Equity
Current liabilities $22,800 $19,960 $20,300
Common stock 72,000 72,000 60,000
Other paid-in capital 9,000 9,000 6,000
Retained earnings 48,590 33,464 29,398
Total liabilities and equity $152,390 $134,424 $115,698
b) Korbin's common size income statement shows each line item expressed as a percentage of the revenue or sales value. This analysis of individual financial statement items is also known as a vertical analysis of the financial statement, making line items comparison to a common base easy.
At Eady Corporation, maintenance is a variable overhead cost that is based on machine-hours. The performance report for July showed that actual maintenance costs totaled $10,110 and that the associated rate variance was $310 unfavorable. If 5,600 machine-hours were actually worked during July, the standard maintenance cost per machine-hour was:
Answer:
"$1.75" is the appropriate approach.
Explanation:
The given values are:
Rate variance
= $310 (unfavorable)
Actual maintenance costs
= $10,110
Machine hours
= 5,600
Now,
⇒ [tex]Rate \ variance=(5600\times Standard \ maintenance \ cost \ per \ machine \ hour)-(Actual \ maintenance \ cost)[/tex]
On substituting the values, we get
⇒ [tex]-310=(5600\times Standard \ maintenance \ cost \ per \ machine \ hour)-10110[/tex]
⇒ [tex]Standard \ maintenance \ cost \ per \ machine \ hour=\frac{10110-310}{5600}[/tex]
⇒ [tex]=\frac{9,800}{5600}[/tex]
⇒ [tex]=1.75[/tex] ($)
Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $15,000 (original cost of $34,000 less accumulated depreciation of $19,000) and a fair value of $9,600. Kapono paid $26,000 cash to complete the exchange. The exchange has commercial substance. Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value of $530,000 and a fair value of $760,000. Kapono paid $56,000 cash to complete the exchange. The exchange has commercial substance.
Required:
a. What is the amount of gain or loss that Kapono would recognize on the exchange of the land?
b. What is the amount of gain or loss that Kapono would recognize on the exchange of the tractor?
c. Assume the fair value of the old tractor is $20,000 instead of $9,600. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new tractor?
Answer:
a. Gain on sale of land = $230,000
b. Loss on the exchange of the tractor = $5,400
c-1. Gain on Exchange of the tractor = $5,000
c-2. Initial value of new tractor = $35,600
Explanation:
a. What is the amount of gain or loss that Kapono would recognize on the exchange of the land?
This can be determined as follows:
Details Amount $
Fair value of land 760,000
Book value of land (530,000)
Gain (loss) on sale of land 230,000
b. What is the amount of gain or loss that Kapono would recognize on the exchange of the tractor?
This can be determined as follows:
Details Amount $
Original Cost of Tractor 34,000
Accumulated Depreciation (19,000)
Book Value of Tractor 15,000
Therefore, we have:
Loss on Exchange of the tractor = Fair value - Book Value of Tractor = $9,600 - $15,000 = $5,400
c. Assume the fair value of the old tractor is $20,000 instead of $9,600. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new tractor?
c-1. Calculation of the amount of gain or loss that Kapono would recognize on the exchange
From part b, we have:
Book Value of Tractor = $15,000
And, we have:
Fair Value = $20,000
Therefore, we have:
Gain on Exchange of the tractor = Fair value - Book Value of Tractor = $20,000 - $15,000 = $5,000
c-2. Calculation of the initial value of the new tractor
This can be determined as follows:
Initial value of new tractor = Fair Value of tractor given + Cash paid = $9,600 + $26,000 = $35,600
Sheen Co. manufactures laser printers. It has outlined the following overhead cost drivers. Overhead Costs Pool Cost Driver Overhead Cost Budgeted cost driver Quality control Number of inspections $ 64,800 1,080 Machine operation Machine hours 132,000 1,100 Materials handling Number of batches 900 30 Miscellaneous overhead cost Direct labor hours 48,000 4,000 Sheen Co. has an order for 1,000 laser printers that has the following production requirements: Number of Inspections 175 Machine Hours 180 Number of Batches 5 Direct Labor Hours 650 Use activity-based costing to determine a unit cost for the laser printers
Answer:
Sheen Co.
The overhead unit cost for the laser printers is:
= $40.05
Explanation:
a) Data and Calculations:
Overhead Costs Pool Cost Driver Overhead Budgeted
Cost cost driver
Quality control Number of inspections $ 64,800 1,080
Machine operation Machine hours 132,000 1,100
Materials handling Number of batches 900 30
Miscellaneous Direct labor hours 48,000 4,000
Overhead Rates:
Quality control = $60 ($64,800/1,080)
Machine operation = $120 ($132,000/1,100)
Materials handling = $30 ($900/30)
Miscellaneous overhead costs = $12 ($48,000/4,000)
Quantity of order = 1,000 laser printers
Requirements of the order: Overhead Rate Total
Number of Inspections 175 $60 (175*$60) $10,500
Machine Hours 180 $120 (180*$120) 21,600
Number of Batches 5 $30 (5*$30) 150
Direct Labor Hours 650 $12 (650*$12) 7,800
Total overhead allocated to 1,000 laser printers = $40,050
Unit overhead cost for the printers = $40.05 ($40,050/1,000)
Kentucky Lumber and MillWork Company contracted to supply Rommell Company millwork for use in the construction of a school building. While the work was in progress the Kentucky Lumber mill was destroyed by fire. For two months thereafter, Kentucky Lumber and Millwork Company supplied Rommell with mill work purchased by it from a third party. The Kentucky Lumber mill did not wish to continue this plan and declared that the contract was ended. Rommell Company brought an action against Kentucky Lumber to enforce the contract. How will the court decide?
Answer:
Kentucky can gain advantage since it has not breached any terms of the contract.
Explanation:
Kentucky Lumber will be beneficiary of the decision since it is Rommel company who is ending up the contract but Kentucky Lumber is willing to continue the service according to the terms of the contract. Kentucky mill work was destroyed but it bought the equipment from a third party to continue providing the service according to the contract terms.
Answer:
Kentucky Lumber and MillWork Company Vs Rommell Company
Most likely, the court will decide that Kentucky should continue to perform its contract obligations. We note that following the destruction of the mill by fire, Kentucky never invoked the clause of force majeure. It continued to fulfill its obligations for a period of two months.
Before the case comes to the court, Kentucky should have requested for a renegotiation of the contract price with Rommell if it had discovered that the cost of buying from third-party suppliers could prevent it from continuing with the contract. Note that the fulfilment of a contract is not based on mere wishes but on facts, supported by the prevailing circumstances.
Explanation:
The court will decide to answer Rommell's prayers for an equitable relief by forcing Kentucky Mill to continue with the specific performance of the contract or to pay damages to Rommell for losses arising from the failure of Kentucky to fulfil the contract.
Peyton Manufacturing has the following data:
Work-in-process inventory, January 1, 20x8 $ 57,000
Work-in-process inventory, December 31, 20x8 62,500
Conversion costs during the year 429,000
If direct materials used during the year were $149,000, what was cost of goods manufactured?
a. $572,500.
b. $154,500.
c. $567,000.
d. $423,500.
e. None of the answers is correct.
Answer:
a. $572,500
Explanation:
With regards to the above information, cost of goods manufactured is computed as;
= Conversion cost + Direct materials used - (Change in WIP balances)
= $429,000 + $149,000 - ($62,500 - $57,000)
= $429,000 + $149,000 - $5,500
= $572,500
Based on the direct materials, conversion and other costs, the cost of goods manufactured was $572,500.
Cost of goods manufactured is calculated as:
= Beginning work in process + Total manufacturing cost - Ending Work in process
Total manufacturing cost:
= Conversion cost + Direct material
= 429,000 + 149,000
= $578,000
Cost of goods manufactured is therefore:
= 57,000 + 578,000 - 62,500
= $572,500
Find out more at https://brainly.com/question/14347684.
Cane Company manufactures two products called Alpha and Beta that sell for $210 and $172, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 128,000 units of each product. Its unit costs for each product at this level of activity are given below :
Alpha Beta
Direct materials $40 $24
Direct labor $38 $34
Variable manufacturing overhead $25 $23
Traceable fixed manufacturing overhead $33 $36
Variable selling expenses $30 $26
Common fixed expenses $33 $28
Total cost per unit $199 $171
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars.
Assume that Cane expects to produce and sell 113,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 28,000 additional Alphas for a price of $152 per unit. If Cane accepts the customer's offer, it will decrease Alpha sales to regular customers by 13,000 units.
a. Calculate the incremental net operating income if the order is accepted. (Loss amount should be indicated with a minus sign.)
b. Assume that Cane normally produces and sells 108,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
c. Assume that Cane normally produces and sells 58,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?
d. Assume that Cane normally produces and sells 78,000 Betas and 98,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 11,000 units. If Cane discontinues the Beta product line, how much would profits increase or decrease?
e. Assume that Cane expects to produce and sell 98,000 Alphas during the current year. A supplier has offered to manufacture and deliver 98,000 Alphas to Cane for a price of $152 per unit. If Cane buys 98,000 units from the supplier instead of making those units, how much will profits increase or decrease?
f. Assume that Cane expects to produce and sell 73,000 Alphas during the current year. A supplier has offered to manufacture and deliver 73,000 Alphas to Cane for a price of $152 per unit. If Cane buys 73,000 units from the supplier instead of making those units, how much will profits increase or decrease?
Answer:
Cane Company
a) The incremental net operating income
= -$964,000
b. Profits would decrease by $3,132,000.
c. Profits would decrease by $1,682,000.
d. Profits would decrease by $1,778,000.
e. If Cane buys 98,000 units from the supplier instead of making those units, profits (savings) would increase by $588,000.
f. If Cane buys 73,000 units from the supplier instead of making those units, profits (savings) would increase by $438,000.
Explanation:
Products manufactured Alpha Beta
Selling price per unit $210 $172
Annual production capacity 128,000 $128,000
Units costs:
Direct materials $40 $24
Direct labor $38 $34
Variable manufacturing overhead $25 $23
Traceable fixed manufacturing overhead $33 $36
Variable selling expenses $30 $26
Common fixed expenses $33 $28
Total cost per unit $199 $171
Avoidable (Incremental) Costs:
Products manufactured Alpha Beta
Direct materials $40 $24
Direct labor $38 $34
Variable manufacturing overhead $25 $23
Traceable fixed manufacturing overhead $33 $36
Variable selling expenses $30 $26
Total incremental per unit $166 $143
Selling price per unit $210 $172
Contribution margin per unit $44 $29
Total Revenue for 28,000 at $152 per unit $4,256,000
Total avoidable cost for 28,000 at $166 (4,648,000)
Loss: Revenue due to decrease in regular
customers (13,000 *$210) 2,730,000
Total avoidable cost of 13,000 * $166 2,158,000 (572,000)
Operating loss if the order is accepted -$964,000
Beta:
Selling price per unit = $172
Incremental cost per unit = $143
Contribution per unit = $29
Total contribution margin = $3,132,000 ($29 * 108,000)
Total contribution margin = $1,682,000 ($29 * 58,000)
Total contribution margin = $2,262,000 ($29 * 78,000)
Increase in alpha contribution (484,000) ($44 * 11,000)
Loss of profit = $1,778,000
Cost price for outside supply = $152
Incremental unit cost (internal) $166
Difference in cost per unit $6
Profits increase from outside supplier = $6 * 98,000 = $588,000
Profits increase from outside supplier = $6 * 73,000 = $438,000
The following table presents Generic Motors Company's production budget. GM's inventory policy is to have ending inventory equal to20% of next month's sales.
February March April
Ending inventory 5,000
Beginning inventory 2,000
Budgeted sales 13,000 17,000 18,000
Budgeted production
Required:
a) Fill in the missing numbers in the table above.
(Hint if you get stuck: What is the relation between ending inventory for one month and beginning inventory for the following month?)
b) Why do firms want to hold inventory of finished goods? (an alternative could be to produce exactly the amount they are going to sell, and hold zero inventories)
Answer:
a.
________________________________February__March__April
Ending inventory 20% of next Months sale _3400___3600__5,000
Beginning inventory__________________ 2,000__ 3400__ 3600
Budgeted sales _____________________ 13,000__17,000_ 18,000
Budgeted production_________________ 14,400__ 17,200_ 19,400
b.
Firms wants to hold the finished goods inventry in order to deal with the future demand
Explanation:
a.
Use the following formula to calculate the Budgeted production
Budgeted Production = Beginning Inventory - Ending Inventory + Busgeted Sales
Working
________________________________February__March__April
Ending inventory 20% of next Months sale _3400___3600__5,000
Less: Beginning inventory______________2,000__ 3400__ 3600
Add: Budgeted sales _________________ 13,000__17,000_ 18,000
= Budgeted production________________14,400__ 17,200_ 19,400
b.
The finished goods inventory is held to deal with the future market demand. If the firm produce the uniits equals o the current demand then in case of increase in demand or unexpected demand increase the firms will not be able to fulfil the demand and will lose the opportunity.
A nation's GDP at purchasing power parity (PPP) exchange rates refers to:_____.
a. the value of the GDP divided by the population of the country.
b. the value of all the goods and services produced by a country in a single year.
c. the value of the GDP adjusted for purchasing power.
d. a country's average achievements in health, knowledge, and standard of living.
e. the sum value of all goods and services produced in the country valued at prices prevailing in the United States.
Answer:
c
Explanation:
Brown Cow Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows:
(1) not yet due, $13,000;
(2) up to 120 days past due, $6,000; and
(3) more than 120 days past due, $5,500. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is
(1) 2 percent,
(2) 12 percent, and
(3) 30 percent, respectively.
At December 31 (end of the current year), the Allowance for Doubtful Accounts balance is $710 (credit) before the end-of-period adjusting entry is made. Data during the current year follow:
a. During December, an Account Receivable (Patty's Bake Shop) of $660 from a prior sale was determined to be uncollectible; therefore, it was written off immediately as a bad debt.
b. On December 31, the appropriate adjusting entry for the year was recorded.
Required:
1. Give the required journal entries for the two items listed above.
2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for the current year. Disregard income tax considerations.
Answer:
1. Journal Entries :
a. Bad Debt Expense (Dr.) $660
Accounts Receivable (Cr.) $660
2. Accounts receivable Ending Balance :
Not yet due $13,000 * 98% = 12,740
Up to 120 days $6000 * 88% = 5280
More than 120 days $5500 * 70% = 3850
Totals = 21,870
Bad debt expense Ending balance :
Not yet due $13,000 * 2% = $260
Up to 120 days $6000 * 12% = $720
More than 120 days $5500 * 30% = $1,650
Totals = 2630
Explanation:
Bad debt expense is the expected uncollectible amount from accounts receivable. Usually company maintains an allowance for doubtful debt. Brown cow dairy uses aging approach for estimating bad debts of the company. The uncollectible amount is expensed out in Income Statement and asset is decreased in Balance Sheet.
You want to save at least $10,000 for a down payment on a new car. In cell B6, enter a formula to calculate how much you will have saved by putting away $500 per month for 24 months at a 1.5% annual interest rate. Use the appropriate cell references. Remember to use a negative value for the Pmt argument. There is no money in the account yet and payments are applied at the end of every month, so omit both the Pv and Type arguments. (Hint: Use the FV function.)
Answer:
$14,316.76
Explanation:
How much you will have saved?
Using MS Excel to calculate the FV function
= FV(Rate, Nper, Pmt)
= FV(1,5%, 24, 500)
= 14316.7604
= $14,316.76
So, the total amount you will have saved by putting away $500 per month for 24 months at a 1.5% annual interest rate is $14,316.76
A company had the following items and amounts in its unadjusted trial balance as of December 31 of the current year: (3 points)
Debit Credit
Cash sales……………………………………………….. $188,000
Credit sales……………………………………………… 275,000
Accounts receivable…………………………………….. $76,000
Allowance for doubtful accounts……………………….. 1,000
Prepare the adjusting entry to estimate bad debts assuming an aging analysis estimates that 8% of the outstanding accounts receivable will be uncollectible.
Answer:
Particulars Amount
Provision for uncollectible $6,080 ($76000*8%)
Less: Provision already made $1,000
Provision to be made $5,080
Date Particulars Debit Credit
31-Dec Bad Debts $5,080
To Allowance for Doubtful Accounts $5,080
(Being the adjusting entry to estimate bad debts)
Virginia Enterprises makes all purchases on account, subject to the following payment pattern: Paid in the month of purchase: 30% Paid in the first month following purchase: 65% Paid in the second month following purchase: 5% If purchases for April, May, and June were $200,000, $160,000, and $250,000, respectively, what was the firm's budgeted payables balance on June 30
Answer:
$18,000
Explanation:
Prepare an Accounts Payables Budget
The firm's budgeted payables balance on June is $18,000
Lowell Corporation paid $80,000 to acquire all of Boston Company's net assets. Boston reported assets with a book value of $60,000 and fair value of $98,000 and liabilities with a book value and fair value of $23,000 on the date of combination. Lowell also paid $3,000 to a search firm for finder's fees related to the acquisition. What amount will be recorded as goodwill by Lowell Corporation while recording its investment in Boston
Answer:
Lowell Corporation
The amount that will be recorded as goodwill by Lowell Corporation to record its investment in Boston is:
= $5,000.
Explanation:
a) Data and Calculations:
Investment in Boston Company = $83,000
Fair value of assets = $98,000
Fair value of liabilities 23,000
Net value of assets = $75,000
Goodwill = $5,000 ($80,000 - $75,000)
b) Acquired Goodwill is the difference between the cost of purchasing Boston Company ($80,000) and the net identifiable assets of Boston Company ($75,000). The net identifiable assets are calculated by subtracting the fair value of the liabilities from the fair value of the assets.
A company produces a single product. Variable production costs are $13.20 per unit and variable selling and administrative expenses are $4.20 per unit. Fixed manufacturing overhead totals $48,000 and fixed selling and administration expenses total $52,000. Assuming a beginning inventory of zero, production of 5,200 units and sales of 4,200 units, the dollar value of the ending inventory under variable costing would be:
Answer:
the ending inventory is $13,200
Explanation:
The computation of the dollar value of the ending inventory under variable costing is shown below:
= Variable production cost per unit × difference in units
= $13.20 per unit × (5,200 units - 4,200 units)
= $13.20 per unit × 1,000 units
= $13,200
hence, the ending inventory is $13,200
Using the appropriate present value table and assuming a 12% annual interest rate, determine the present value on December 31, 2018, of a five-period annual annuity of $5,000 under each of the following situations: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
1. The first payment is received on December 31, 2019, and interest is compounded annually.
2. The first payment is received on December 31, 2018, and interest is compounded annually.
3. The first payment is received on December 31, 2019, and interest is compounded quarterly.
Answer:
1. Present value on December 31, 2018 = $18,023.88
2. Present value on December 31, 2018 = $20,186.75
3. Present value on December 31, 2018 = $17,780.59
Explanation:
1. The first payment is received on December 31, 2019, and interest is compounded annually.
This is an example of ordinary annuity. Therefore, the present value on December 31, 2018 can be calculated using the formula for calculating the present value of an ordinary annuity as follows:
PV = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)
Where;
PV = present value on December 31, 2018 = ?
P = Annual annuity = $5,000
r = Annual interest rate = 12%, or 0.12
n = number of years = 5
Substitute the values into equation (1), we have:
PV = $5,000 * ((1 - (1 / (1 + 0.12))^5) / 0.12)
PV = $5,000 * 3.60477620234501
PV = $18,023.88
2. The first payment is received on December 31, 2018, and interest is compounded annually.
This is an example of annuity due. Therefore, the present value on December 31, 2018 can be calculated using the formula for calculating the present value of an annuity due as follows:
PV = P * ((1 - [1 / (1+r))^n) / r) * (1+r) .................................. (2)
Where;
Where;
PV = present value on December 31, 2018 = ?
P = Annual annuity = $5,000
r = Annual interest rate = 12%, or 0.12
n = number of years = 5
Substitute the values into equation (1), we have:
PV = $5,000 * ((1 - [1 / (1+0.12))^5) / 0.12) * (1+0.12)
PV = $5,000 * 3.60477620234501 * 1.12
PV = $5,000 * 4.03734934662641
PV = $20,186.75
3. The first payment is received on December 31, 2019, and interest is compounded quarterly.
Note: See the calculation of the present value on December 31, 2018 in the attached excel file.
This is also an example of ordinary annuity.
In the attached excel file, the following formula is used:
Discounting factor = 1 / (1 + r)^n .............. (1)
Where;
r = Quarterly interest rate = Annual interest rate / Number of quarters in a year = 12% / 4 = 0.12 / 4 = 0.03
n = number of quarters = number of years * Number of quarters in a year
From the attached excel file, we have:
Present value on December 31, 2018 = Total present value = $17,780.59
Mortensen Industries, which uses a process-costing system, adds material at the beginning of production and incurs conversion cost evenly throughout manufacturing. The following selected information was taken from the company's accounting records:
Total equivalent units of materials: 5,000
Total equivalent units of conversion: 4,400
Units started and completed during the period: 3,500
On the basis of this information, the ending work-in-process inventory's stage of completion is:_____.
a. 80%.b. 70%.c. 60%.d. 40%.
Answer:
c. 60%.
Explanation:
Calculation for what the ending work-in-process inventory's stage of completion is:
First step is to calculate the Ending WIP
Ending WIP = 5,000 - 3,500
Ending WIP = 1,500 units
Now let calculate the ending work-in-process inventory's stage of completion using this formula
Ending work-in-process inventory's stage of completio
4,400 = 3,500 + (x% * 1,500)
4,400 = 3,500 + 15x
15x = 4,400 - 3,500
15x = 900
x = 900/15
x = 60%
Therefore the ending work-in-process inventory's stage of completion is:60%
Sheridan Enterprises reported cost of goods sold for 2020 of $1,322,900 and retained earnings of $4,854,000 at December 31, 2020. Sheridan later discovered that its ending inventories at December 31, 2019 and 2020, were overstated by $106,470 and $36,820, respectively. Determine the corrected amounts for 2020 cost of goods sold and December 31, 2020, retained earnings. Corrected cost of goods sold $enter a dollar amount Corrected 12/31/20 retained earnings $enter a dollar amount
Answer:
See below
Explanation:
With regard to the above information,
1. Corrected cost of goods sold is computed as
= Cost of goods sold + Overstated ending inventories 2019 - overstated ending inventories 2020
= $1,322,900 + $106,470 - $36,820
= $1,253,250
2. Corrected 12/31/2020 retained earnings is computed as
= Retained earnings DEC 2020 - overstated ending inventories 2020
= $4,854,000 - $36,820
= $4,817,180