Questions
1. Financial information for Sigma Company is presented below. Calculate the following ratios for 2018: (a)...

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...

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,...

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?

Per Unit Volume Total Ratio
Revenue $100.00 100 %
Variable expense ? ? %
Contribution margin ? ? ? 20 %
Fixed expense (128,000)
Operating income $32,000

2. How many additional unit sales would be necessary to achieve operating income of $80,000?

In: Accounting

A new operating system for an existing machine is expected to cost $710,000 and have a...

  1. 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.
  2. 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.

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.)

Cash Flow Select Chart Amount x PV Factor = Present Value
Annual cash flow =
Residual value =
Net present value
Cash Flow Select Chart Amount x PV Factor = Present Value
Annual cash flow =
Residual value =
Net present value

In: Accounting

51. On January 1, a company issues bonds dated January 1 with a par value of...

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....

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:

  1. If Chenango Industries purchases the JR63 units from Scott, the capacity Chenango Industries used to manufacture these parts would be idle. Should Chenango Industries decide to purchase the parts from Scott, the unit cost of JR63 would increase (or decrease) by what amount?
  2. Assume Chenango Industries is able to rent out all its idle capacity for $87,000 per month. If Chenango Industries decides to purchase the 11 units from Scott Supply, Chenango’s monthly cost for JR63 would increase (or decrease) by what amount?
  3. Assume that Chenango Industries does not wish to commit to a rental agreement but could use its idle capacity to manufacture another product that would contribute $171,000 per month. If Chenango’s management elects to manufacture JR63 in order to maintain quality control, what is the net amount of Chenango’s cost from using the space to manufacture part JR63?

In: Accounting

During August, a factory commenced work on 20 000 units. At the start of the month,...

During August, a factory commenced work on 20 000 units. At the start of the month, there were no partly finished units but at the end of the month, there were 2000 units which were only 40% complete. Costs in the month were. $3 722 400.00.

What is the total value of fully completed output which would show in the process account

In: Accounting

Winner’s Circle, Inc. manufactures medals for winners of athletic events and other contests. Its manufacturing plant...

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.

  1. 2-a. Compute both the new average unit cost and the incremental unit cost for the special order.
  2. 2-b. Should Winner’s Circle, Inc. accept the special order?

In: Accounting

The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as...

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:

  1. Equipment and land were acquired for cash.
  2. There were no disposals of equipment during the year.
  3. The investments were sold for $103,800 cash.
  4. The common stock was issued for cash.
  5. There was a $81,590 credit to Retained Earnings for net income.
  6. There was a $46,330 debit to Retained Earnings for cash dividends declared.

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...

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...

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...

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...

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:

  • Received unrestricted cash gifts of $227,000.
  • Paid salaries of $97,000 with $37,000 of that amount coming from restricted funds. Of the total salaries, 50 percent is for administrative personnel and the remainder is evenly divided among individuals working on research to cure the designated disease and individuals employed for fund-raising purposes.
  • Bought equipment for $334,000 with a long-term note signed for $267,000 and restricted funds used for the remainder. Of this equipment, 90 percent is used in research, 5 percent is used in administration, and the remainder is used for fund-raising.
  • Collected membership dues of $47,000. The members receive a reasonable amount of value in exchange for these dues including a monthly newsletter describing research activities.
  • Received $27,000 from a donor that must be conveyed to another charity doing work on a related disease.
  • Received investment income of $30,000 generated by the permanently restricted net assets. As mentioned above, the donor has stipulated that 80 percent of the income is to be used for advertising, and the remainder may be used at the entity’s discretion.
  • Paid advertising of $3,700.
  • Received an unrestricted pledge of $270,000 that will be collected in three years. The entity expects to collect the entire amount. The pledge has a present value of $95,000 and related interest (additional contributed support) of $4,700 in the year.
  • Computed depreciation on the equipment acquired as $37,000.
  • Spent $110,000 on research supplies that it utilized during the year.
  • Owed salaries of $22,000 at the end of the year. Half of this amount is for individuals doing fund-raising and half for individuals doing research.
  • Received a donated painting that qualifies as a museum piece. It has a value of $970,000. Officials do not want to record this gift if possible.
  1. Prepare a statement of activities for this not-for-profit entity for this year.

  2. 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.

Statement of Activities
Unrestricted Net Assets Temporarily Restricted Net Assets Permanently Restricted Net Assets
Public support
Contributions $227,000 $95,000
Contribution - interest 4,700
Revenue
Membership dues 47,000
Investment income 6,000 24,000
Net assets released from restriction 107,700 (107,700)
Total public support and revenue $387,700 $16,000 $0
Expenses
Program service expenses - cure disease
Salaries
Depreciation (33,300)
Supplies (110,000)
Total $(143,300) $0 $0
Supporting service expenses - general and administrative
Salaries
Depreciation
Total $0 $0 $0
Fundraising
Salaries
Advertising
Depreciation
Total $0 $0 $0
Total expenses $(143,300) 0 0
Change in net assets
Net assets - Beginning of year 417,000 217,000 117,000
Net assets - End of year $417,000 $217,000 $117,000
  • Required B

Prepare a statement of financial position for this not-for-profit entity for this year.

Statement of Financial Position
Assets
Total assets $0
Liabilities
Total liabilities $0
Net assets
Total net assets $0
Total liabilities and net assets $0

In: Accounting

You are an eager and ambitious young graduate of the Reginal F. Lewis College of Business...

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...

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:

  1. If 58,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?
  2. With all other things constant, if management is able to reduce the direct material for an electric mixer to $22 per unit, how many units of each product should be manufactured? Purchased?

In: Accounting