Answer:
b) credit to Rent Expense for $1530
Explanation:
Date Accounts and Explanation Debit Credit
Income Summary $5,550
Salaries & Wages Expense $2,900
Rent Expense $1,530
Advertising Expense $740
Supplies Expense $270
Insurance Expense $110
(To Close the expense accounts)
Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours 32,300 Total fixed manufacturing overhead cost$581,400 Variable manufacturing overhead per machine-hour$2.00 Recently, Job T687 was completed with the following characteristics: Number of units in the job 10 Total machine-hours 40 Direct materials$630 Direct labor cost$1,260 If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to
Answer:
See below
Explanation:
Given the above information, first we will calculate the overhead rate
Overhead rate = Cost of manufacturing overhead / Cost driver
= $581,400 / 32,300
= $18
Then,
Predetermined overhead rate = $18 fixed + $2 variable = $20
Now, we will apply this to job machine hours
Job machine hours 40
Overhead: Machine hours x
Predetermined rate = 40 × $20 = $80
Total cost = $630 + $1,260 + $880 = $2,770
The unit cost would be
= Total cost / Units
= $2,770 / 10
= $277
The selling price would therefore be;
Selling price : 40% over product cost
Selling price = Cost + 40% cost
Selling price = $227 + 40%($227)
Selling price = $227 + $90.8
Selling price = $317.8
Rembrandt Paint Company had the following income statement items for the year ended December 31, 2021 ($ in thousands):
Sales revenue $25,000 Cost of goods sold $14,000
Interest revenue 240 Selling and administrative expense 3,200
Interest expense 440 Restructuring costs 1,500
In addition, during the year the company completed the disposal of its plastics business and incurred a loss from operations of $3.2 million and a gain on disposal of the component’s assets of $5.2 million. 600,000 shares of common stock were outstanding throughout 2018. Income tax expense has not yet been recorded. The income tax rate is 40% on all items of income (loss).
Required:
Prepare a multiple-step income statement for 2021, including EPS disclosures.
Answer:
Net income = $4,860,000
Earning Per Share
Income From Continuing Operations ($3660/600) 6.10
Income From Discontinued Operations )$1,200/600) 2.0
Net Income 8.10
Explanation:
The multiple-step income statement can be described as an income statement that differentiate a company's operating revenues and operating expenses from its nonoperating revenues, nonoperating expenses, gains, and losses. It also shows gross profit separately as net sales revenue minus the cost of goods sold.
The required multiple-step income statement can be prepared as follows:
Rembrandt Paint Company
Income Statement
For the Year Ended December 31, 2021
Particulars $'000 $'000
Sales revenue 25,000
Cost of goods sold 14,000
Gross profit 11,000
Operating expenses
Selling and administrative expense (3,200)
Restructuring costs (1,500)
Total operating expenses (4,700)
Operating income 6,300
Other income (expense)
Interest revenue 240
Interest expense (440)
Net interest revenue (expense) (200)
Income from continuing op. b4 tax 6,100
Taxes (40% * $6,100) (2,440)
Income From Continuing Operations 3,660
Discontinued operation
Loss from op. (3,200 * (1-Tax rate)) (1,920)
Gain on disposal (5,200 * (1-Tax rate)) 3,120
Income from discontinued op. 1,200
Net income 4,860
Number of common shares outstanding 600
Earning Per Share
Income From Continuing Operations ($3660/600) 6.10
Income From Discontinued Operations )$1,200/600 2.00
Net Income 8.10
Given the following information, calculate the current value of the stock: current dividend is $3.00, projected super normal growth for three years at 20%, growth rate after year 3 should remain constant at 11% and you want to earn a 16% annual return. What should you pay for the stock?
A.$67.55
B.$83.34
C.$74.39
D.$61.46
Answer:
B. $83.34
Explanation:
Current Dividend (D0) = $3.00
Super Normal growth for next three years (g1) = 20% = 0.20
Growth Rate after three year (g2) = 11% = 0.11
Required rate of Return (r) = 16% or 0.16
P3 = D4/(r-g2) = D0*(1+g1)^3*(1+g2)/(r-g2)
P3 = $3.00*(1+0.20)^3*(1+0.11)/(0.16-0.11)
P3 = $115.0848
Value of Share (P0) = [D1/(1+r)] + [D2/(1+r)^2] + [D3/(1+r)^3] + [P3/(1+r)^3]
Value of Share (P0) = [D0*(1+g1)/(1+r)1] + [D0*(1+g1)^2/(1+r)^2] + [D0*(1+g1)^3/(1+r)^3] + [P3/(1+r)^3]
Value of Share (P0) = [$3.00*(1+0.20)/(1+0.16)^1] + [$3.00*(1+0.20)^2/(1+0.16)^2] + [$3.00*(1+0.20)^3/(1+0.16)^3] + [$115.0848/(1+0.16)^3]
Value of Share (P0) = $3.10 + $3.21 + $ 3.32 + $73.72
Value of Share (P0) = $83.34
As a long-term investment at the beginning of the 2021 fiscal year, Florists International purchased 25% of Nursery Supplies Inc.'s 18 million shares for $66 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $28 million and distributed cash dividends of $2.00 per share. At the end of the year, the fair value of the shares is $62 million. Required: Prepare the appropriate journal entries from the purchase through the end of the year.
Answer:
Dr Investment in Nursery supplies $66 million
Cr Cash $66 million
Dr Investment in Nursery supplies $7 million
Cr Investment Revenue $7 million
Dr Cash $9 million
Cr Investment in Nursery supplies $9 million
No Entry
Explanation:
Preparation of the appropriate journal entries from the purchase through the end of the year.
Dr Investment in Nursery supplies $66 million
Cr Cash $66 million
(To record purchase of 25% shares for $66 million)
Dr Investment in Nursery supplies ($28 million x 25%) $7 million
Cr Investment Revenue $7 million
(To record investor share of investee's net income)
Dr Cash (18 million shares x 25% share x $2 per share) $9 million
Cr Investment in Nursery supplies $9 million
(To record receipt of dividend)
No Entry
Why aren't they hiring kids to work for Epic Games? They could give the workers more ideas. Not that they don't have good ideas already. Wouldn't they?
Pharoah Inc. loans money to John Kruk Corporation in the amount of $976,000. Pharoah accepts an 8% note due in 7 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Pharoah needs money and therefore sells the note to Chicago National Bank, which demands interest on the note of 10% compounded semiannually. What is the amount Pharoah will receive on the sale of the note
Answer: $900,635
Explanation:
Amount Pharaoh will receive is:
= Present value of the interest payments + Present value of the note
2 years have gone by which leaves 5 years.
Period = 5 * 2 = 10 semi annual periods
Periodic interest = 8% / 2 = 4%
Periodic discount = 10% / 2 = 5% per period
Interest payment = 976,000 * 4%
= $39,040
Amount to be received:
= (39,040 * Present value interest factor of annuity, 5%, 10 periods) + 976,000/(1 + 5%)¹⁰
= (39,040 * 7.7217) + 599,179.34
= $900,635
Anna owns the Sweet Alps Chocolate store. She charges $10 per pound for her hand made chocolate. You, the economist, have calculated the elasticity of demand for chocolate in her town to be 2.5. If she wants to increase her total revenue, what advice will you give her and why? Use diagrams and economic terms to explain your answer.
Answer: Decrease her prices.
Explanation:
The elasticity of demand shows the change in quantity demanded as a result of a change in price.
In this case, if price decreases by 1%, quantity demanded for chocolate would increase by 2.5%.
If she wants to increase her revenue therefore, she should decrease the price.
For example:
If the demand was 10 chocolate bars a day, she would earn:
= 10 * 10
= $100 a day
If she decreased the price by 10%, price would be:
= 10 * ( 1 -10%)
= $9.00
Quantity demanded would be:
= 10 * (1 + 25%)
= 12.5 bars
Revenue would become:
= 12.5 * 9
= $112.50 which is more than the previous $100 she was making.
Under absorption costing, a company had the following unit costs when 8,000 units were produced. Compute the total production cost per unit under variable costing if 20,000 units had been produced. Direct labor $8.50 per unit Direct material $9.00 per unit Variable overhead $6.75 per unit Fixed overhead ($60,000/8,000 units) $7.50 per unitCompute the total production cost per unit under variable costing if 20,000 units had been produced. a. $26.25 b. $27.25 c. $24.25 d. $31.75 e. $17.50
Answer:
d. $31.75
Explanation:
Computation for the total production cost per unit
Direct labor $8.50 per unit
Direct material $9.00 per unit
Variable overhead $6.75 per unit
Fixed overhead ($60,000/8,000 units) $7.50 per unit
Total production cost per unit $31.75
($8.50 + $6.75 + $9.00 + $7.50)
Therefore the total production cost per unit under variable costing if 20,000 units had been produced will be $31.75
Testbank Multiple Choice Question 100 Bramble Corp. purchased machinery on January 2, 2015, for $880000. The straight-line method is used and useful life is estimated to be 10 years, with a $86000 salvage value. At the beginning of 2021 Bramble spent $188000 to overhaul the machinery. After the overhaul, Bramble estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $42000. The depreciation expense for 2021 should be
Answer:
33,585.71
Explanation:
Other than culture, what other organizational factors should be used to determine which project structure should be used?
Answer:
The two major considerations are the percentage of core work that involves projects and resource availability.
Jones Furniture Company produces beds and desks for college students. The production process requires carpentry and varnishing. Each bed requires 6 hours of carpentry and 4 hour of varnishing. Each desk requires 4 hours of carpentry and 8 hours of varnishing. There are 36 hours of carpentry time and 40 hours of varnishing time available. Beds generate $30 of profit and desks generate $40 of profit. Demand for desks is limited, so at most 8 will be produced.a. Formulate the LP model for this problem. b. Solve the problem using the graphical method.
Explanation:
To formulate the LP model for this problem,
Let,
X1 = Number of beds to produce
X2 = Number of Desks to produce
Our objective function:
Max: 30X1 + 40X2
Constraints:
6X1 + 4X2 ≤ 36 available carpentry hours 4X1 + 8X2 ≤ 40 available vanishing hoursX2 ≤ 8 (demand for X2)X1, X2 ≥0Based on the constraints information as well as the objective function you can then solve using the graphical method.
Marlin Corporation reported pretax book income of $1,005,000. During the current year, the net reserve for warranties increased by $26,000. In addition, book depreciation exceeded tax depreciation by $100,500. Finally, Marlin subtracted a dividends received deduction of $15,500 in computing its current year taxable income. Marlin's current income tax expense or benefit would be:
Answer: $234360
Explanation:
Marlin's current income tax expense or benefit would be calculated thus:
Pre-tax book income = $1,005,000
Add: net reserve for warranties = $26,000
Add: Increase in Book depreciation over tax depreciation = $100,500.
Less: Dividend deduction = ($15500)
Taxable income = $1,116,000
Since tax rate = 21%, then the income expense will be:
= 21% × $1,116,000
= 0.21 × $1,116,000
= $234360
During 2016 Green Thumb Company introduced a new line of garden shears that carry a two-year warranty against defects. Experience indicates that warranty costs should be 2% of net sales in the year of sale and 3% in the year after sale. Net sales and actual warranty expenditures were as follows: Net sales Actual warranty expenditures 2016 $ 45,000 $ 1,000 2017 120,000 3,500 At December 31, 2017, Green Thumb should report as a warranty liability of:
Answer:
See below
Explanation:
Given the above information, the computation of warranty liability is shown below;
Warranty liability = (Net sales of 2016 × After sale percentage) + (Net sales of 2017 × Year of sale percentage)
= ($45,000 × 3%) + ($120,000 × 2%)
= $1,350 + $2,400
= $3,750
Therefore, Green Thumb should report as a warranty liability of $3,750
A start-up company decides salespeople should visit college campuses to
persuade students to try a new party game. The company realizes that selling
time is short and the salespeople are relatively inexperienced. Which
presentation method is likely to be most effective?
A. Formula selling
B. A prepared sales presentation
C. Telemarketing
D. Consultative selling
Answer prepared sales presentation
Explanation:
The presentation method is likely to be most effective a prepared sales presentation. Thus, option (b) is correct.
What is presentation?A presentation should have a solid theme, match the aim, best fit the audience, and be properly arranged. A speech communicates from a person to a listener. They offer a formal speech, often to sell something or gain support for a proposition.
According to the case was the based on the start-up company are the experienced sales people are the salespeople should visit college are the persuade students to try a new party game. There was the prepared the sales presentation are the sales people are the presentation method was the more to the effective.
As a result, the presentation method is likely to be most effective a prepared sales presentation. Therefore, option (b) is correct.
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You have been asked to estimate the market value of an apartment complex that is producing annual net operating income of $44,500. Four highly similar and competitive apartment properties within two blocks of the subject property have sold in the past three months. All four offer essentially the same amenities and services as the subject. All were open-market transactions with similar terms of sale. All were financed with 30-year fixed-rate mortgages using 70 percent debt and 30 percent equity. The sale prices and estimated first year net operating incomes were as follows:
Comparable 1: Sales price $500,000; NOI $55,000
Comparable 2: Sales price $420,000; NO/ $50,400
Comparable 3: Sales price $475,000; NO/ $53,400
Comparable 4: Sales price $600,000; NOI $69,000
Required:
What is the indicated value of the subject property using direct capitalization?
Sunland Company uses a perpetual inventory system. Its beginning inventory consists of 83 units that cost $56 each. During June, (1) the company purchased 248 units at $56 each on account, (2) returned 10 units for credit, and (3) sold 206 units at $83 each on account. Journalize the June transactions. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer:
Item 1
Debit : Merchandise $13,888
Credit : Accounts Payable $13,888
Item 2
Debit : Merchandise $560
Credit : Accounts Payable $560
Item 3
Debit : Accounts Receivable $17,098
Debit : Cost of Sales $11,536
Credit : Sales Revenue $17,098
Credit : Merchandise $11,536
Explanation:
See the journal entries prepared above.
A manufacturer of cedar shingles has supplied the following data: Bundles of cedar shakes produced and sold 360,000 Sales revenue $ 2,412,000 Variable manufacturing expense $ 1,170,000 Fixed manufacturing expense $ 714,000 Variable selling and administrative expense $ 414,000 Fixed selling and administrative expense $ 82,000 Net operating income $ 32,000 The company's break-even in unit sales is closest to:
Answer:
Break-even point in units= 346,087
Explanation:
First, we need to calculate the unitary selling price and unitary variable cost:
Selling price= 2,412,000 / 360,000= $6.7
Unitary variable cost= (1,170,000 + 414,000) / 360,000= $4.4
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= (714,000 + 82,000) / (6.7 - 4.4)
Break-even point in units= 346,087
2. On January 1, 2017, Gaskin Cabinetry Company purchases $300,000 of equipment by paying $50,000 in cash and
signing a 10-year mortgage note at 13% for the balance. Gaskin will make yearly payments of $46,072. The
amortization schedule for the first five payments is provided.
01/01/2017
01/01/2018
01/01/2019
01/01/2020
01/01/2021
01/01/2022
Beginning Principal Interest Total Ending
Balance Payment Expense Payment Balance
$250,000
$250,000 $13,572 $32,500 $46,072 236,428
236,428 15,336 30,736 46,072 221,092
221,092 17,330 28,742 46,072 203,762
203,762 19,583 26,489
46,072 184,179
184,179 22,129 23,943 46,072 162,050
Prepare the journal entry for the purchase of the equipment and for the January 1, 2018 mortgage payment.
Answer.
Answer:
(a) Debit Equipment for $300,000; Credit Cash for $50,000; and Credit Mortgage Note for $250,000
(b) Debit Mortgage Note for $13,572; Deebit Interest expense - Mortgage for $32,500; Credit Cash for $46,072.
Explanation:
(a) Prepare the journal entry for the purchase of the equipment.
The journal entries will look as follows:
Date Accounts Name and Explanation Debit ($) Credit ($)
1 Jan 2017 Equipment 300,000
Cash 50,000
Mortgage Note 250,000
(To record purchase of the equipment.)
(b) Prepare the journal entry for the January 1, 2018 mortgage payment.
The journal entries will look as follows:
Date Accounts Name and Explanation Debit ($) Credit ($)
1 Jan 2018 Mortgage Note 13,572
Interest expense - Mortgage 32,500
Cash 46,072
(To record mortgage and interest payments.)
Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2014.
Cash $50,000
Administrative expenses $100,000
Selling expenses $80,000
Net sales $540,000
Cost of goods sold $210,000
Cash dividends declared (2014) $20,000
Cash dividends paid (2014) $15,000
Discontinued operations (loss before income taxes) $40,000
Depreciation expense, not recorded in 2013 $30,000
Retained earnings, December 31, 2013 $90,000
Effective tax rate 30%
Required:
a. Compute net income for 2014.
b. Prepare a partial income statement beginning with income from continuing operations before income tax and including appropriate earnings per share
Answer:
Income from continuing operations:
= Net sales - COGS - Selling expense - Admin expenses
= 540,000 - 210,000 - 80,000 - 100,000
= $150,000
Discontinued operations net of tax:
= 40,000 * ( 1 - 30%)
= $28,000
Net income and Partial income statement
Income from continuing operations before tax $150,000
Income tax expense (150,000 * 30%) ($45,000)
Income from continuing operations $105,000
Discontinued operations net of taxes loss ($28,000)
Net income $77,000
Earnings per share
Income from continuing operations(105,000/10,000) $10.50
Discontinued operations(28,000 / 10,000) $2.80
Net income (77,000 / 10,000) $7.70
Earnings per share calculated assuming 10,000 shares.
Which statement describes why the people in a nation with a command
economy might resist a shift to a free market economy?
A. People who hold political power are threatened by fundamental changes.
B. Workers are reluctant to give up their participation in a classless society.
C. Workers are reluctant to accept complete government control of their economy.
D. Factory and business owners are reluctant to place their capital under worker
authority Xd
Answer:
People who hold political power are threatened by fundamental changes.
Explanation:
People who hold political power are threatened by fundamental changes is the statement describes why the people in a nation with a command economy might resist a shift to a free market economy. Thus, option (a) is correct.
What is economy?The mechanism through which a nation or region organizes its money, industry, and trade is concerned to as its “economy.” The economy is the important part of the country. The primary sector of the economy is the industrial sector and agriculture sector. The family (consumption) and company (product sales) are both parts of the economy.
According to the population is the important part of the economy. The individual citizen in the nation is a command economy might resist a shift to a free market economy. A people are the special rights to hold political power are imperiled by fundamental changes.
As a result, the significance of the economy are the aforementioned. Therefore, option (a) is correct.
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You are the Accounting Director for SpaceX based in New York. Your department is implementing new accounting software (called First Launch) that will affect all 300 locations across the United States. The purpose of the changeover is to improve efficiency, increase security, and provide more transparency. Each accountant will need to install the software within 48 hours of receiving the new product. Failure to do so will result in the product password expiring and require resending of the product. Once installed, accountants will have to restart all computers on the premises. Technical issues may arise during the two-day software rollout starting at 9:00 a.m. on March 1, 2021.
Required:
Write one email addressing all 300 location accountants to inform them of the changeover (you decide the order of information)
Answer:
The change will impact all 300 locations. The letter should be written to entire staff of the SpaceX.
Explanation:
To: All Staff SpaceX Team
Subject: Change over details (First Launch)
As you all are already aware about the implementation of new software named First Launch . The software installation run will start from March 1, 2021 at 9:00 a.m. Every accountant receiving the new product will require to install the software within 48 hours. Failure to do will result in expiry of the password which will require resending the software. After installation all accountants must restart the computer.
This change will affect all 300 locations across the United States. The changeover will result in improved efficiency, increase in security and there will be more transparency.
If there is any concern or query regarding this change feel free to write the team implementing the change.
Regards,
Director Accounts.
In perfect competition, an individual firm Question 4 options: can not affect its price nor determine the quantity it sells in the marketplace. sets the price and determines the quantity it sells in the marketplace. sets the price but does not determine the quantity it sells in the marketplace. determines the quantity it sells in the marketplace but has no influence over its price.
Answer:
sets the price and determines the quantity it sells in the marketplace.
Explanation:
In a perfect competition, there are many buyers and sellers of homogeneous products, and there is free entry and exit in the market.
This simply means that, in a perfectly competitive market, there are many buyers and sellers (price takers) of homogeneous products (standardized products with substitute) and the market is free (practically open) to all individuals or business entities that are willing to trade all their goods and services.
Generally, a perfectly competitive market is characterized by the following features;
1. Perfect information.
2. No barriers, it is typically free.
3. Equilibrium price and quantity.
4. Many buyers and sellers.
5. Homogeneous products.
Examples of a perfectly competitive market are the Agricultural sector, e-commerce and the foreign exchange market.
In perfect competition, an individual firm sets the price and determines the quantity it sells in the marketplace.
Kingston anticipates total sales for June and July of $370,000 and $318,000, respectively. Cash sales are normally 60% of total sales. Of the credit sales, 25% are collected in the same month as the sale, 60% are collected during the first month after the sale, and the remaining 15% are collected in the second month after the sale. Determine the amount of accounts receivable reported on the company’s budgeted balance sheet as of July 31.
Answer:
$117,600
Explanation:
Given that the company has Cash sales that are normally 60% of total sales and Of the credit sales, 25% are collected in the same month as the sale, 60% are collected during the first month after the sale, and the remaining 15% are collected in the second month after the sale
In June, total sales $370,000
Amount that would not have been collected from this sale at the end of July
= 40% * 15% * $370,000
= $22,200
In July, total sales is $318,000,
Amount that would not have been collected from this sale at the end of July
= 40% *75% * $318,000
= $95,400
Hence the amount of accounts receivable reported on the company’s budgeted balance sheet as of July 31
= $22,200 + $95,400
= $117,600
Prepare a cost estimate for the construction of a small, high quality, office building that contains 18,525 square feet of floor area. Use the data on the last page to prepare the estimate. Assume the cost of design for the project is 7% of construction, and a site-work cost of $180,000. What range or percentage of this cost would you recommend to define the level of accuracy
Answer: $2197570
Explanation:
The cost estimate is prepared below:
Base cost = $101.15 × 18525 = $1873804
Add: Site work cost = $180000
Total = $1,873,804 + $180,000 = $2053804
Add: Design fees = 7% × $2053804 = 0.07 × $2053804 = $143766
Estimated cost = $2053804 + $143766 = $2197570
The range or percentage of this cost will be +50%.
NuEditions Book Company uses a final average salary formula to calculate an employee’s pension benefits. The amount used in the calculations is the salary average of the final 3 years of employment. The retiree will receive an annual benefit that is equivalent to 1.75% of the final average for each year of employment. Mike and Rob are both retiring at the end of this year. Calculate their annual retirement pension given the following information:
Mike: Years of employment: 25;
Final three annual salaries: $84,780, $84,900, $85,000
Kristy: Years of employment: 27;
Final three annual salaries: $71,600, $73,400, $78,000
Answer:
Mike : $37140.83
Kristy : $35,122.50
Explanation:
Given the data:
Mike:
Years of employment: 25;
Final three annual salaries: $84,780, $84,900, $85,000
Average :
$(84,780 + 84,900 + 85,000) /3
$254680 ÷ 3
= $84893.333
1.75% of average
0.0175 * $84893.333
= $1485.6333
$1485.6333 * number of years
$1485.6333 * 25
= $37140.833
Kristy:
Years of employment: 27;
Final three annual salaries: $71,600, $73,400, $78,000
Average = $(71,600 + 73,400 + 78,000) / 3
Average = $223,000 / 3
= $74,333.333
1.75% * $74333.333
= $1300.8333
$1300.8333 * 27
= $35,122.5
The Fantastic Ice Cream Shoppe sold 8,800 servings of ice cream during June for Dollar 5 per serving. The shop purchases the ice cream in large tubs from the Deluxe Ice Cream Company. Each tub costs the shop $14 and has enough ice cream to fill 28 ice cream cones. The shop purchases the ice cream cones for $0.15 each from a local warehouse club. The Fantastic Ice Cream Shoppe is located in a strip mall, and rent for space is $2,050 per month. The shop expenses $220 a month for the depreciation of the shop's furniture and equipment. During June, the shop incurred an additional $2,800 of other operating expenses (75% of these were fixed costs).
Required:
a. Prepare the Fantastic Ice Cream Shoppe's June income statement using a traditional format.
b. Prepare the Fantastic Ice Cream Shoppe's June income statement using a contribution margin format
Answer:
The Fantastic Ice Cream Shoppe
a) Fantastic Ice Cream Shoppe
June Income Statement, using traditional format
Sales Revenue $44,000
Cost of goods sold 5,720
Gross profit $38,280
Expenses:
Rent expense 2,050
Depreciation exp. 220
Other operating exp. 2,800
Total expenses $5,070
Net Income $33,210
b) Fantastic Ice Cream Shoppe
June Income Statement, using contribution margin format
Sales Revenue $44,000
Direct materials 5,720
Operating expense 700
Total variable expense 6,420
Contribution margin $37,580
Fixed expenses:
Rent expense 2,050
Depreciation exp. 220
Other operating exp. 2,100
Total expenses $4,370
Net income $33,210
Explanation:
a) Data and Calculations:
Sales of ice cream during June = 8,800 servings
Price per serving = $5
Sales revenue = $44,000 ($5 * 8,800)
Purchase cost of ice cream in large tubs = $14 * 8,800/28 = $4,400
Purchase cost of ice cream cones = $0.15 * 8,800 = $1,320
Total cost of direct materials = $5,720
Fixed costs:
Rent = $2,050 per month
Depreciation = $220
Other operating expenses:
Fixed operating expense = $2,100 ($2,800 * 75%)
Variable operating expense = $700 ($2,800 * 25%)
Foundry uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the year, the company expected to incur the following:
Manufacturing overhead costs. . . . . . . . $640,000
Direct labor cost. . . . . . . . . . . . . . . . . . . $1,600,000
Machine hours. . . . . . . . . . . . . . . . . . . . . 80,000
At the end of the year, the company had actually incurred the following:
Direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,190,000
Depreciation on manufacturing plant and
equipment. . . . . . . . . . . . . . . . . . . . . . . . $490,000
Property taxes on plant. . . . . . . . . . . . . . . . . . . . . . $19,500
Sales salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,000
Delivery drivers' wages. . . . . . . . . . . . . . . . . . . . . . $16,500
Plant janitors' wages. . . . . . . . . . . . . . . . . . . . . . . . $8,500
Machine hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,000 hours
Floral's accountant found an error in the expense records from the year reported. Depreciation on manufacturing plant and equipment was actually$400,000 not the $490,000 that had originally been reported. The unadjusted Cost of Goods Sold balance at year-end was$570,000 The manufacturing overhead allocated to jobs was$448,000
Requirement:
Prepare the journal entry (entries) to record manufacturing overhead costs incurred
Explanation:
Metal Foundry uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the year, the company expected to incur the following: EE (Click the icon to view the costs.) Metal’s accountant found an error in the expense records from the year reported. Depreciation on manufacturing plant and equipment was actually $405,000, not the $490,000 that had originally been reported. The unadjusted Cost of Goods Sold balance at year-end was $640,000. The manufacturing overhead allocated to jobs was $452,000 Read the requirements. Requirement 1. Prepare the journal entry to record manufacturing overhead costs incurred (Record debits first, then credits. Exclude explanations from any journal entries.)
Sweet Corporation purchased 360 shares of Sherman Inc. common stock for $11,900 (Sweet does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.50 per share. Prepare Sweet's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.)
Answer:
(a) Debit Equity Investments for $11,900; and Credit Cash for $11,900.
(b) Debit Cash for $1,170; and Credit Dividend Revenue for $1,170.
(c) Debit Fair Value Adjustment for $1,600; and Unrealized Holding Gain or Loss - Income for $1,600.
Explanation:
(a) Journal entries to record the purchase of the investment
The journal entries will look as follows:
Accounts Title and Description Debit ($) Credit ($)
Equity Investments 11,900
Cash 11,900
(To record the purchase of the investment.)
(b) Journal entries to record the dividends received
The journal entries will look as follows:
Accounts Title and Description Debit ($) Credit ($)
Cash (w.1) 1,170
Dividend Revenue 1,170
(To record the dividends received.)
(c) Journal entries to record the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.
The journal entries will look as follows:
Accounts Title and Description Debit ($) Credit ($)
Fair Value Adjustment (w.2) 1,600
Unrealized Holding Gain or Loss - Income 1,600
(To record the fair value adjustment.)
Workings:
w.1: Cash = Dividend received = Number of shares * Cash dividend per share = 360 * $3.25 = $1,170
w.2: Fair Value Adjustment = Fair value - Common stock purchase cost = (Number of shares * Selling price per share) - Common stock purchase cost = (360 * $37.50) - $11,900 = $1,600
Practice Drawing Timelines!
Purpose: This section describes how to draw a timeline and visualizing the problem being presented. It is important because a time problem that is set up incorrectly will lead to incorrect answers. For each of the descriptions below, draw the timeline on your own.
Inserted a picture of your timeline (the picture can be a jpeg or pasted in a word document).
Criteria: Full points will be based three separate timelines attached as a picture. Your work should be original and not copied, borrowed, or obtained from another student (this would be cheating as defined by Texas Tech University and stated in the syllabus).
Consider an asset that generates $3,000 in 5 years and $5,000 in 1 year; discount rate - 6% (These are uneven cash flows- there is no pattern).
2. Consider an asset that pays $500 per year for 8 years (This is an annuity- it is the same cash flow, evenly spaced, for a finite time (it has an end)).
3. Consider an asset that pays $50 per year starting at the end of year 3 (This is a delayed perpetuity- it is the same cash flow evenly spaced forever, but does not begin until a future date).
Answer:
1. Since the last cash flow occurs at year 5, the timeline ends at 5th year.
2. Since the same cash flow for a finite time of 8 years, the timeline ends at 8th year.
3. The 3 dots at the end of the timeline indicates a perpetuity.
Explanation:
A timeline refers to a line that shows the timing and amount of cash flows. Therefore, we have:
1. Consider an asset that generates $3,000 in 5 years and $5,000 in 1 year; discount rate - 6% (These are uneven cash flows- there is no pattern).
Note: See number 1 in the attached photo for the timeline.
The fact that the last cash flow occurs at year 5 makes the timeline to end at 5th year.
It can also be seen in the timeline that the 6% discount rate is shown in between the previous period and the next.
2. Consider an asset that pays $500 per year for 8 years (This is an annuity- it is the same cash flow, evenly spaced, for a finite time (it has an end)).
Note: See number 2 in the attached photo for the timeline.
The fact that the same cash flow for a finite time of 8 years makes the timeline to end at 8th year.
3. Consider an asset that pays $50 per year starting at the end of year 3 (This is a delayed perpetuity- it is the same cash flow evenly spaced forever, but does not begin until a future date).
Note: See number 3 in the attached photo for the timeline.
It should be noted the 3 dots at the end of the time line indicates a perpetuity.
what is a savings and loans bank? advantages and disadvantages.
Three advantages of savings accounts are the potential to earn interest, it's easy to open and access, and FDIC insurance and security. Three disadvantages of savings accounts are minimum balance requirements, lower interest rates than other accounts/investments, and federal limits on saving withdrawal.