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8. At the beginning of 2014, Mask Ltd. had a Retained Earnings balance of $31,860. For...

8. At the beginning of 2014, Mask Ltd. had a Retained Earnings balance of $31,860. For the next three years, the firm reported the following net income (loss) and cash dividends declared and paid:

Year:	Net Income (loss):	Cash Dividends:
2014	$9,040	$425
2015	$16,850	$1,220
2016	($3,895)	$0

What would be the balance of Retained Earnings reported on the year-end balance sheet as of 12/31/2016?

	a.	$60,000
	b.	$55,500
	c.	$52,210
	d.	$53,855
	e.	$27,965

-2.

Consider the following list of accounts:

Service Revenue
Deferred Revenue
Inventory
Prepaid Rent
Common Stock
Cost of Goods Sold
Accumulated Depreciation-Equipment
Rent Expense
Retained Earnings
Sales Revenue

How many of these accounts are reported on the income statement?

	a.	Six
	b.	Two
	c.	Four
	d.	Three
	e.	Five

-3. LPM Ltd. uses units produced as its measure of activity. During August, the company budgeted for 48,900 units of output, but actually produced 46,700 units of output. The company uses the following revenue and cost formulas in its budgeting, where q is the number of units of output:

Revenue: $11.60q

Salaries: $31,050 + $2.45q

Supplies: $1.25q

Utilities: $0.60q

Insurance: $23,090

Miscellaneous expenses: $13,800 + $0.21q

The company reported the following actual results for August:


Revenue	$	611,250
Salaries	$	148,360
Supplies	$	55,795
Utilities	$	31,920
Insurance	$	22,100
Miscellaneous expense	$	20,845

The spending variance in August for ‘Supplies’ is:

Solutions

Expert Solution

Answer- The balance of Retained Earnings would be reported on the year-end balance sheet as of 12/31/2016 = $52210.

Explanation- Ending balance of Retained Earnings on 12/31/2016 = Retained Earnings balance, 01/01/2016 + Net income – Cash dividends paid

= $56105-$3895

= $52210

Where- Retained Earnings balance, 01/01/2016 = Retained Earnings balance, 01/01/2015 + Net income (Net loss) - Cash dividends paid

= $40475 +$16850-$1220

= $56105

Where- Retained Earnings balance, 01/01/2015 = Retained Earnings balance, 01/01/2014 + Net income (Net loss) - Cash dividends paid

= $31860+$9040-$425

= $40475

Answer- Number of accounts are reported on the income statement = Four.

Explanation- Number of accounts are reported on the income statement = Service Revenue, Cost of goods sold, Rent expense, Sales revenue.

Answer- The spending variance in August for ‘Supplies’ is = $2580 Favorable.

Explanation- Spending variance for Supplies = Actual costs – Flexible budget

= $55795 – (46700 units*$1.25 per unit)

= $55795 - $58375

= $2580 Favorable

ekkarill92 answered 1 year ago

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