1. Financial information for Sigma Company is presented below. Calculate the following ratios for 2018:
(a) Inventory turnover.
(b) Accounts receivable turnover.
(c) Return on total assets.
(d) Times interest earned.
(e) Total asset turnover.
2018 |
2017 |
|
Assets: |
||
Cash |
$ 18,000 |
$ 22,000 |
Marketable securities |
25,000 |
0 |
Accounts receivable |
38,000 |
42,000 |
Inventory |
61,000 |
52,000 |
Prepaid insurance |
6,000 |
9,000 |
Long-term investments |
49,000 |
20,000 |
Plant assets, net |
218,000 |
225,000 |
Total assets |
$415,000 |
$370,000 |
Net income after interest expense and taxes |
$ 62,250 |
|
Sales (all on credit) |
305,000 |
|
Cost of goods sold |
123,000 |
|
Interest expense |
15,600 |
|
Income tax expense |
27,000 |
|
In: Accounting
3. Xavier is starting an online business called ‘footbook’ that is a social networking website where people post pictures of their feet. Xavier has a lunch meeting with his sister to discuss whether she would like to invest in the business. He tells her “if I don’t hear from you by 2 Friday I will assume you agree to my offer.” Friday passes and Sally has not contacted Xavier. Can Xavier legally claim the investment money from Sally?
In: Accounting
Current operating income for Bay Area Cycles Co. is $32,000. Selling price per unit is $100, the contribution margin ratio is 20%, and fixed expense is $128,000.
Required:
1. Calculate Bay Area Cycle’s per unit variable expense and contribution margin. How many units are currently being sold?
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2. How many additional unit sales would be necessary to achieve operating income of $80,000?
In: Accounting
Assume the company
requires a 12% rate of return on its investments. Compute the net
present value of each potential investment. (PV of $1, FV of $1,
PVA of $1, and FVA of $1) (Use appropriate factor(s) from
the tables provided.)
A new operating system for an existing machine is expected to cost $710,000 and have a useful life of six years. The system yields an incremental after-tax income of $155,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $21,800. (Round your answers to the nearest whole dollar.)
A machine costs $570,000, has a $33,800 salvage value, is expected to last eight years, and will generate an after-tax income of $84,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)
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In: Accounting
51. On January 1, a company issues bonds dated January 1 with a par value of $580,000. The bonds mature in 5 years. The contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The market rate is 7% and the bonds are sold for $555,871. The journal entry to record the second interest payment using the effective interest method of amortization is:
Debit Interest Expense $15,344.52; debit Discount on Bonds Payable $2,055.48; credit Cash $17,400.00.
Debit Interest Expense $15,344.52; debit Premium on Bonds Payable $2,055.48; credit Cash $17,400.00.
Debit Interest Expense $19,527.42; credit Discount on Bonds Payable $2,127.42; credit Cash $17,400.00.
Debit Interest Payable $17,400.00; credit Cash $17,400.00.
Debit Interest Expense $19,455.48; credit Discount on Bonds Payable $2,055.48; credit Cash $17,400.00.
58. Sweet Company’s outstanding stock consists of 1,800 shares of cumulative 5% preferred stock with a $100 par value and 11,800 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.
Dividend Declared | ||
year 1 | $ | 3,800 |
year 2 | $ | 6,200 |
year 3 | $ | 41,000 |
The amount of dividends paid to preferred and common shareholders
in year 3 is:
$41,000 preferred; $0 common.
$17,000 preferred; $24,000 common.
$0 preferred; $41,000 common.
$9,000 preferred; $32,000 common.
$27,000 preferred; $14,000 common.
62. Marwick Corporation issues 12%, 5 year bonds with a par value of $1,030,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%. What is the bond's issue (selling) price, assuming the following Present Value factors:
n= | i= | Present Value of an Annuity | Present value of $1 | |||||
5 | 12 | % | 3.6048 | 0.5674 | ||||
10 | 6 | % | 7.3601 | 0.5584 | ||||
5 | 10 | % | 3.7908 | 0.6209 | ||||
10 | 5 | % | 7.7217 | 0.6139 | ||||
$819,244
$1,030,000
$1,109,518
$1,507,201
$552,799
65. Eastline Corporation had 11,500 shares of $5 par value common stock outstanding when the board of directors declared a stock dividend of 3,795 shares. At the time of the stock dividend, the market value per share was $15. The entry to record this dividend is:
Debit Common Stock Dividend Distributable $56,925; credit Retained Earnings $56,925.
Debit Retained Earnings $56,925; credit Common Stock Dividend Distributable $56,925.
No entry is needed.
Debit Retained Earnings $56,925; credit Common Stock Dividend Distributable $18,975; credit Paid-In Capital in Excess of Par Value, Common Stock $37,950.
Debit Retained Earnings $18,975; credit Common Stock Dividend Distributable $18,975.
In: Accounting
Chenango Industries uses 11 units of part JR63 each month in the production of radar equipment. The cost of manufacturing one unit of JR63 is the following:
Direct material | $ | 4,000 | |
Material handling (20% of direct-material cost) | 800 | ||
Direct labor | 33,000 | ||
Manufacturing overhead (150% of direct labor) | 49,500 | ||
Total manufacturing cost | $ | 87,300 | |
Material handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Chenango Industries’ annual manufacturing overhead budget is one-third variable and two-thirds fixed. Scott Supply, one of Chenango Industries’ reliable vendors, has offered to supply part number JR63 at a unit price of $57,000.
Required:
In: Accounting
In: Accounting
Winner’s Circle, Inc. manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 3,400 medals each month. Current monthly production is 2,550 medals. The company normally charges $490 per medal. Variable costs and fixed costs for the current activity level of 75 percent of capacity are as follows:
Production Costs | |||
Variable costs: | |||
Manufacturing: | |||
Direct labor | $ | 510,000 | |
Direct material | 165,750 | ||
Marketing | 191,250 | ||
Total variable costs | $ | 867,000 | |
Fixed costs: | |||
Manufacturing | $ | 209,100 | |
Marketing | 147,900 | ||
Total fixed costs | $ | 357,000 | |
Total costs | $ | 1,224,000 | |
Variable cost per unit | $ | 340 | |
Fixed cost per unit | 140 | ||
Average unit cost | $ | 480 | |
Winner’s Circle has just received a special one-time order for 850 medals at $295 per medal. For this particular order, no variable marketing costs will be incurred. Cathy Donato, a management accountant with Winner’s Circle, has been assigned the task of analyzing this order and recommending whether the company should accept or reject it. After examining the costs, Donato suggested to her supervisor, Gerard LePenn, who is the controller, that they request competitive bids from vendors for the raw material as the current quote seems high. LePenn insisted that the prices are in line with other vendors and told her that she was not to discuss her observations with anyone else. Donato later discovered that LePenn is a brother-in-law of the owner of the current raw-material supply vendor.
In: Accounting
The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows:
Dec. 31, 20Y9 | Dec. 31, 20Y8 | ||||
Assets | |||||
Cash | $302,680 | $279,940 | |||
Accounts receivable (net) | 109,650 | 100,540 | |||
Inventories | 309,540 | 297,690 | |||
Investments | 0 | 115,330 | |||
Land | 158,760 | 0 | |||
Equipment | 341,510 | 263,180 | |||
Accumulated depreciation—equipment | (79,950) | (70,970) | |||
Total assets | $1,142,190 | $985,710 | |||
Liabilities and Stockholders' Equity | |||||
Accounts payable | $206,740 | $194,180 | |||
Accrued expenses payable | 20,560 | 25,630 | |||
Dividends payable | 11,420 | 8,870 | |||
Common stock, $10 par | 61,680 | 48,300 | |||
Paid-in capital: Excess of issue price over par-common stock | 231,860 | 134,060 | |||
Retained earnings | 609,930 | 574,670 | |||
Total liabilities and stockholders’ equity | $1,142,190 | $985,710 |
Additional data obtained from an examination of the accounts in the ledger for 20Y9 are as follows:
Required:
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.
Merrick Equipment Co. | ||
Statement of Cash Flows | ||
For the Year Ended December 31, 20Y9 | ||
Cash flows from operating activities: | ||
$ | ||
Adjustments to reconcile net income to net cash flow from operating activities: | ||
Changes in current operating assets and liabilities: | ||
Net cash flow from operating activities | $ | |
Cash flows from (used for) investing activities: | ||
$ | ||
Net cash flow used for investing activities | ||
Cash flows from (used for) financing activities: | ||
Net cash flow from financing activities | ||
$ | ||
Cash at the beginning of the year | ||
Cash at the end of the year | $ |
In: Accounting
Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company’s two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new and improved version. Cost accountants at company headquarters have prepared costs for the two reels for the most recent period. The plant manager is concerned. The cost report does not coincide with her intuition about the relative costs of the two models. She has asked you to review the cost accounting and help her prepare a response to headquarters.
Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $326,400. During that time, the company produced 14,400 units of the M-008 and 2,400 units of the M-123. The direct costs of production were as follows. M-008 M-123 Total Direct materials $ 115,200 $ 96,000 $ 211,200 Direct labor 115,200 48,000 163,200
Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Activity Level Cost Driver Costs M-008 M-123 Total Number of machine-hours $ 154,900 8,000 2,000 10,000 Number of production runs 80,000 20 20 40 Number of inspections 91,500 15 35 50 Total overhead $ 326,400
Required: a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product?
In: Accounting
National Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $56; white, $86; and blue, $111. The per unit variable costs to manufacture and sell these products are red, $41; white, $61; and blue, $81. Their sales mix is reflected in a ratio of 2:2:1 (red:white:blue). Annual fixed costs shared by all three products are $151,000. One type of raw material has been used to manufacture all three products. The company has developed a new material of equal quality for less cost. The new material would reduce variable costs per unit as follows: red, by $11; white, by $21; and blue, by $11. However, the new material requires new equipment, which will increase annual fixed costs by $21,000. |
Required: | |
1. |
Assume if the company continues to use the old material, determine its break-even point in both sales units and sales dollars of each individual product. (Round up your composite units to whole number. Omit the "$" sign in your response.) |
Break-Even Points | Sales Units | Sales Dollars |
Red at break-even | $ | |
White at break-even | $ | |
Blue at break-even | $ | |
2. |
Assume if the company uses the new material, determine its new break-even point in both sales units and sales dollars of each individual product. (Round up your composite units to whole number. Omit the "$" sign in your response.) |
Break-Even Points | Sales Units | Sales Dollars |
Red at break-even | $ | |
White at break-even | $ | |
Blue at break-even | $ | |
In: Accounting
Share your understanding of a tax preparer’s professional responsibilities. What penalties, if any, can accrue to a tax preparer who makes errors on a company’s tax return? Does intent (malicious vs. accidental) change those penalties?
In: Accounting
A private not-for-profit entity is working to create a cure for a deadly disease. The charity starts the year with cash of $751,000. Of this amount, unrestricted net assets total $417,000, temporarily restricted net assets total $217,000, and permanently restricted net assets total $117,000. Within the temporarily restricted net assets, the entity must use 90 percent for equipment and the rest for salaries. No implied time restriction has been designated for the equipment when purchased. For the permanently restricted net assets, 80 percent of resulting income must be used to cover the purchase of advertising for fund-raising purposes and the rest is unrestricted.
During the current year, the organization has the following transactions:
Prepare a statement of activities for this not-for-profit entity for this year.
Prepare a statement of financial position for this not-for-profit entity for this year.
Prepare a statement of activities for this not-for-profit entity for this year.
For the statement of activities below, I started to fill in what I understood, Can you complete the entire statement correctly. I will comment and like
* Required A
Prepare a statement of activities for this not-for-profit entity for this year.
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Prepare a statement of financial position for this not-for-profit entity for this year.
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In: Accounting
You are an eager and ambitious young graduate of the Reginal F. Lewis College of Business at Virginia State University with a new Accounting degree and a great life ahead of you. One of your closest friends is an inventor and an entrepreneur who wants to start a business selling a break-through new drywall screw that he has invented and that he believes works much better than the drywall screws currently on the market. He wants to start the business by opening a factory to produce the screws which can then be sold to either wholesalers or retailers who will then sell them to the general public. After searching all over creation for the right sized building in the perfect location to properly meet the needs of his target customers, he found that the ideal building in which to put up his factory was right here in Petersburg all along. To begin, he was able to purchase the building he needed outright for $525,000. Useful life of the building is 40 years and it is depreciated on a straight-line basis. Estimated salvage value is $25,000. Property taxes on the building each year are $3,500. There is a new machine that another fellow VSU grad has invented that takes the metal for the screws and molds them into their proper size and shape, and takes the plastic for the anchors and molds them into their proper size and shape; an assembly line is attached to the machine where workers put the screws and anchors into boxes. The finished product is a box of 32 drywall screws and their plastic anchors that work unlike any that have come before them. He purchased this machine outright for $175,000. The machine has a useful life of 25 years with no residual value and is depreciated on a straight-line basis. The machine can produce 23,000 boxes of screws and anchors per year. He is sure that he can sell every unit produced. It is determined that to produce the 32 screws in each box will require 112 ounces of metal which is the only material used to make the screws and to produce the 32 anchors in each box will take 48 ounces of plastic which is the only material used to make the anchors. The metal you need is produced by multiple suppliers and you've found one so far that will allow you to buy it at $1.50 per pound. The plastic used is also produced by multiple suppliers and you've found one so far that will allow you to buy it at $.15 per pound. It takes 15 minutes for the workers on the assembly line to box the screws and anchors because they are put in there in a way that prevents them from becoming disorderly. This is part of the quality aspect of the product. Assembly line workers are paid at a rate of $17.00 per hour. Your friend hired a Vice President (VP) who has a degree in Marketing from VSU. She did some market research and determined that in order to be competitive with your new product you are going to charge $20.75 per box of screws and anchors. The Vice President is paid $58,000 per year. He also hired a Chief Operating Officer who will be paid $58,000 per year. Your friend has also asked you to serve as a consultant to his company to make sure that the business gets off to a good start. Your fee has not yet been determined and is not part of this problem Please answer only these questions,
Prepare a variable costing format income statement assuming that the company makes and sells the maximum possible number of units. If the income is negative, what is the reason? What is the new break-even point after implementing your solution? What is the maximum income the company can make after implementing your solution? Is this enough profit to justify going into business?
Prepare both an absorption costing income statement and a variable costing income statement to reflect your solution. State your assumptions about the number of units produced and the number sold.
In: Accounting
Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products.
Blender | Electric Mixer | ||||||
Direct material | $ | 22 | $ | 37 | |||
Direct labor | 16 | 29 | |||||
Manufacturing overhead @ $46 per machine hour | 46 | 92 | |||||
Cost if purchased from an outside supplier | 64 | 109 | |||||
Annual demand (units) | 24,000 | 36,000 | |||||
Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $34. Kitchen Magician’s management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.
Required:
In: Accounting