Project 2: Review of Merchandising Cycle
[The following information applies to the questions displayed below.]
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Wally’s Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the end of each month. Balances in the accounts at the end of January are as follows: |
| Cash | $ | 20,720 | Unearned Revenue (25 units) | $ | 5,050 | ||
| Accounts Receivable | $ | 11,750 | Accounts Payable (Jan Rent) | $ | 2,700 | ||
| Allowance for Doubtful Accounts | $ | (1,600) | Notes Payable | $ | 13,000 | ||
| Inventory (30 units) | $ | 2,550 | Contributed Capital | $ | 6,400 | ||
| Retained Earnings – Feb 1, 2012 | $ | 6,270 | |||||
| • | WWC establishes a policy that it will sell inventory at $170 per unit. |
| • | In January, WWC received a $5,050 advance for 25 units, as reflected in Unearned Revenue. |
| • | WWC’s February 1 inventory balance consisted of 30 units at a total cost of $2,550. |
| • | WWC’s note payable accrues interest at a 12% annual rate. |
| • | WWC will use the FIFO inventory method and record COGS on a perpetual basis. |
| February Transactions | |
| 02/01 |
Included in WWC’s February 1 Accounts Receivable balance is a $2,000 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow problems and cannot pay its balance at this time. WWC arranges with Kit Kat to convert the $2,000 balance to a note, and Kit Kat signs a 6-month note, at 12% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012. |
| 02/02 |
WWC paid a $750 insurance premium covering the month of February. The amount paid is recorded directly as an expense. |
| 02/05 |
An additional 180 units of inventory are purchased on account by WWC for $13,500 – terms 2/15, n30. |
| 02/05 |
WWC paid Federal Express $360 to have the 180 units of inventory delivered overnight. Delivery occurred on 02/06. |
| 02/10 |
Sales of 150 units of inventory occurred during the period of 02/07 – 02/10. The sales terms are 2/10, net 30. |
| 02/15 |
The 25 units that were paid for in advance and recorded in January are delivered to the customer. |
| 02/15 |
20 units of the inventory that had been sold on 2/10 are returned to WWC. The units are not damaged and can be resold. Therefore, they are returned to inventory. Assume the units returned are from the 2/05 purchase. |
| 02/16 | WWC pays the first 2 weeks wages to the employees. The total paid is $2,200. |
| 02/17 |
Paid in full the amount owed for the 2/05 purchase of inventory. WWC records purchase discounts in the current period rather than as a reduction of inventory costs. |
| 02/18 | Wrote off a customer’s account in the amount of $1,700. |
| 02/19 |
$5,400 of rent for January and February was paid. Because all of the rent will soon expire, the February portion of the payment is charged directly to expense. |
| 02/19 |
Collected $9,400 of customers’ Accounts Receivable. Of the $9,400, the discount was taken by customers on $6,000 of account balances; therefore WWC received less than $9,400. |
| 02/26 |
WWC recovered $540 cash from the customer whose account had previously been written off (see 02/18). |
| 02/27 |
A $650 utility bill for February arrived. It is due on March 15 and will be paid then. |
| 02/28 | WWC declared and paid a $850 cash dividend. |
| Adjusting Entries: |
| 02/29 |
Record the $2,200 employee salary that is owed but will be paid March 1. |
| 02/29 |
WWC decides to use the aging method to estimate uncollectible accounts. WWC determines 8% of the ending balance is the appropriate end of February estimate of uncollectible accounts. |
| 02/29 | Record February interest expense accrued on the note payable. |
| 02/29 | Record one month’s interest earned Kit Kat’s note (see 02/01). |
Note: Enter debits before credits.
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In: Accounting
problem 2.3
the following account balances are available for The Clothing Outlet, Inc., a discount retailer, as of and for the year ended December 31, 20X9, except for the retained earnings balance which is stated below as of January 1, 20X9:Label each of the accounts listed above as an asset (A), liability (L), permanent equity account (PE), or temporary equity account (TE).
Cash .................................................................. $11,600,000
Accounts receivable ...................................................$9,000,000
Marketable securities ................................................ $4,000,000
Prepaid insurance ....................................................$400,000
Inventory ............................................................... $8,000,000
Equipment ............................................................... $7,000,000
Accumulated depreciation: equipment ........................... $22,000,000
Buildings ............................................................ $22,000,000
Accumulated depreciation: buildings .............................. $5,000,000
Land ..................................................................... $6,000,000
Investments (long-term) ............................................. $4,000,000
Accounts payable ...................................................... $9,000,000
Salaries payable......................................................... $1,000,000
Dividends payable ...................................................... $500,000
Interest payable.........................................................$800,000
$Notes payable (long-term) ....................................... $11,000,000
Bonds payable (long term) .......................................$ 14,000,000
Common stock ......................................................$18,000,000
Retained Earnings (as of Jan. 1, 20X9) ........................ $7,400,000
Dividends declared ...................................................$500,000
Sales .................................................................. $80,000,000
Cost of goods sold ................................................... $48,000,000
Interest revenue ...................................................... $200,000
Interest expense ......................................................$1,700,000
Income tax expense ................................................... $1,900,000
Selling expenses:
Sales salaries and commissions ................................. $6,900,000
Insurance expense ................................................$2,100,000
Advertising expense .............................................$300,000,00
Utilities expense ................................................... $3,000,000
Depreciation expense: equipment .............................. $300,000
Delivery expense ...................................................$500,000
General and administrative expenses:
Executive and administrative salaries ........................ $5,800,000
Utilities expense ................................................... $3,100,000
Rental expense...................................................... $600,000
Depreciation expense: buildings..............................$500,000
In: Accounting
Shaftel Ready Mix is a processor and supplier of concrete, aggregate, and rock products. The company operates in the intermountain western United States. Currently, Shaftel has 14 cement-processing plants and a labor force of more than 375 employees. With the exception of cement powder, all materials (e.g., aggregates and sand) are produced internally by the company. The demand for concrete and aggregates has been growing steadily nationally. In the West, the growth rate has been above the national average. Because of this growth, Shaftel has more than tripled its gross revenues over the past 10 years.
Of the intermountain states, Arizona has been experiencing the most growth. Processing plants have been added over the past several years, and the company is considering the addition of yet another plant to be located in Scottsdale. A major advantage of another plant in Arizona is the ability to operate year round, a feature not found in states such as Utah and Wyoming.
In setting up the new plant, land would have to be purchased and a small building constructed. Equipment and furniture would not need to be purchased. These items would be transferred from a plant that opened in Wyoming during the oil boom period and closed a few years after the end of that boom. However, the equipment needs some repair and modifications before it can be used. The equipment has a book value of $200,000, and the furniture has a book value of $30,000. Neither has any outside market value. Other costs, such as the installation of a silo, well, electrical hookups, and so on, will be incurred. No salvage value is expected. The summary of the initial investment costs by category is as follows:
After reviewing these data, Karl Flemming, vice president of operations, argued against the proposed plant. Karl was concerned because the plant would earn significantly less than the normal 8.3% return on sales. All other plants in the company were earning between 7.5 and 8.5% on sales. Karl also noted that it would take more than 5 years to recover the total initial outlay of$582,000. In the past, the company had always insisted that payback be no more than 4 years. The company's cost of capital is 10%. Assume that there are no income taxes.
Required:
Please answer number differently from the answer key
In: Accounting
The following transactions occurred during March 2018 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.
1. Issued 50,000 shares of capital stock in exchange for $500,000 in cash.
2.Purchased equipment at a cost of $80,000. $30,000 cash was paid and a note payable was signed for the balance owed.
3.Purchased inventory on account at a cost of $130,000. The company uses the perpetual inventory system.
4.Credit sales for the month totaled $140,000. The cost of the goods sold was $90,000.
5.Paid $7,000 in rent on the warehouse building for the month of March.
6.Paid $8,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2018.
7.Paid $90,000 on account for the merchandise purchased in 3.
8.Collected $75,000 from customers on account.
9.Recorded depreciation expense of $3,000 for the month on the equipment.
Required: Prepare a statement of cash flows, using the direct method to present cash flows from operating activities. Assume the cash balance at the beginning of the month was $60,000.
In: Accounting
On May 1, 2018, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $9.9 million. Additional costs and purchases included the following (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.):
| Development costs in preparing the mine | $ | 3,100,000 | |
| Mining equipment | 146,300 | ||
| Construction of various structures on site | 63,200 | ||
After the minerals are removed from the mine, the equipment will be
sold for an estimated residual value of $12,000. The structures
will be torn down.
Geologists estimate that 790,000 tons of ore can be extracted from
the mine. After the ore is removed the land will revert back to the
state of New Mexico.
The contract with the state requires Hecala to restore the land to
its original condition after mining operations are completed in
approximately four years. Management has provided the following
possible outflows for the restoration costs:
| Cash Outflow | Probability | |||
| $ | 590,000 | 40% | ||
| 690,000 | 30% | |||
| 790,000 | 30% | |||
Hecala’s credit-adjusted risk-free interest rate is 7%. During
2018, Hecala extracted 119,000 tons of ore from the mine. The
company’s fiscal year ends on December 31.
Required:
1. Determine the amount at which Hecala will record the mine.(Round your final answer to nearest whole dollar.)
| Cost of mine | $ |
2. Calculate the depletion of the mine and the depreciation of the mining facilities and equipment for 2018, assuming that Hecala uses the units-of-production method for both depreciation and depletion. (Do not round your intermediate calculations. Round "Depreciation" and "Depletion" rates to 4 decimal places. Round your final answers to the nearest whole dollar.)
| Depletion | $ |
| Depreciation of machinery | |
| Depreciation of structures | $ |
3. How much accretion expense will the company record in its income statement for the 2018 fiscal year? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.)
| Accretion expense | $ |
4. Are depletion of the mine and depreciation of the mining facilities and equipment reported as separate expenses in the income statement?
| separate expenses in the income statement | Yes OR No |
5. During 2019, Hecala changed its estimate of the total amount of ore originally in the mine from 790,000 to 990,000 tons. Calculate the depletion of the mine and depreciation of the mining facilities and equipment for 2019 assuming Hecala extracted 149,000 tons of ore in 2019.(Do not round your intermediate calculations. Round "Depreciation" and "Depletion" rates to 4 decimal places. Round your final answers to the nearest whole dollar.)
| 2019 | |
| Depletion | $ |
| Depreciation of machinery | $ |
| Depreciation of structures | $ |
In: Accounting
Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2016, for $724,000 cash. Greenburg’s accounting records showed net assets on that date of $560,000, although equipment with a 10-year life was undervalued on the records by $87,500. Any recognized goodwill is considered to have an indefinite life.
Greenburg reports net income in 2016 of $108,500 and $121,000 in 2017. The subsidiary declared dividends of $20,000 in each of these two years.
Account balances for the year ending December 31, 2018, follow. Credit balances are indicated by parentheses.
| Foxx | Greenburg | ||||||
| Revenues | $ | (996,000 | ) | $ | (804,000 | ) | |
| Cost of goods sold | 124,500 | 201,000 | |||||
| Depreciation expense | 366,000 | 359,000 | |||||
| Investment income | (20,000 | ) | 0 | ||||
| Net income | $ | (525,500 | ) | $ | (244,000 | ) | |
| Retained earnings, 1/1/18 | $ | (1,236,000 | ) | $ | (328,000 | ) | |
| Net income | (525,500 | ) | (244,000 | ) | |||
| Dividends declared | 120,000 | 20,000 | |||||
| Retained earnings, 12/31/18 | $ | (1,641,500 | ) | $ | (552,000 | ) | |
| Current assets | $ | 391,000 | $ | 104,000 | |||
| Investment in subsidiary | 724,000 | 0 | |||||
| Equipment (net) | 986,000 | 602,000 | |||||
| Buildings (net) | 976,000 | 552,000 | |||||
| Land | 610,000 | 142,000 | |||||
| Total assets | $ | 3,687,000 | $ | 1,400,000 | |||
| Liabilities | $ | (1,145,500 | ) | $ | (548,000 | ) | |
| Common stock | (900,000 | ) | (300,000 | ) | |||
| Retained earnings | (1,641,500 | ) | (552,000 | ) | |||
| Total liabilities and equity | $ | (3,687,000 | ) | $ | (1,400,000 | ) | |
Determine parent's investment income for 2018 under partial equity method and equity method.
What would be Foxx’s balance for retained earnings as of January 1, 2018, if each of the following methods had been in use?
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In: Accounting
Trump, Clinton, and Mueller are forming a partnership.
Trump and Clinton are each contributing $100,000 while Mueller is contributing $70,000 and his expertise.
They will be equal partners and each will show the same beginning capital account.
REQUIRED: A) MAKE THE JOURNAL ENTRY USING THE BONUS METHOD
B) MAKE THE JOURNAL ENTRY USING THE GOODWILL METHOD
In: Accounting
The Polaris Company uses a job-order costing system. The following transactions occurred in October:
Required:
1. Prepare journal entries to record the transactions given above.
2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $37,000.
In: Accounting
The Accounts Receivable balance for Gold, Inc. at December 31, 2017, was $27,000. During 2018, Gold earned revenue of 461,000 on account and collected $326,000 on account. Gold wrote off $6,400 receivables as uncollectible. Industry experience suggests that uncollectible accounts will amount to 2% of accounts receivable.
1. Assume Gold had an unadjusted $1,800 credit balance in Allowance for Bad Debts at December 31, 2018. Journalize Gold's December 31, 2018, adjustment to record bad debts expense using the percent-of-receivables method.
2. Assume Gold had an unadjusted $1,500 debit balance in Allowance for Bad Debts at December 31, 2018. Journalize Gold's December 31, 2018, adjustment to record bad debts expense using the percent-of-receivables method.
In: Accounting
Chaz Corporation has taxable income in 2018 of $312,000 for purposes of computing the §179 expense and acquired the following assets during the year: Placed in Asset Service Basis Office furniture September 12 $ 780,000 Computer equipment February 10 930,000 Delivery truck August 21 68,000 Qualified improvement property September 30 1,500,000 Total $ 3,278,000 What is the maximum total depreciation deduction that Chaz may deduct in 2018?
In: Accounting
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:
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Fixed Cost per Month |
Cost per Car Washed |
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| Cleaning supplies | $ | 0.50 | |||||
| Electricity | $ | 1,400 | $ | 0.09 | |||
| Maintenance | $ | 0.25 | |||||
| Wages and salaries | $ | 4,100 | $ | 0.30 | |||
| Depreciation | $ | 8,300 | |||||
| Rent | $ | 1,800 | |||||
| Administrative expenses | $ | 1,700 | $ | 0.03 | |||
For example, electricity costs are $1,400 per month plus $0.09 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.00 per car washed.
The actual operating results for August appear below.
| Lavage Rapide | ||
| Income Statement | ||
| For the Month Ended August 31 | ||
| Actual cars washed | 8,600 | |
| Revenue | $ | 53,100 |
| Expenses: | ||
| Cleaning supplies | 4,750 | |
| Electricity | 2,135 | |
| Maintenance | 2,365 | |
| Wages and salaries | 7,010 | |
| Depreciation | 8,300 | |
| Rent | 2,000 | |
| Administrative expenses | 1,855 | |
| Total expense | 28,415 | |
| Net operating income | $ | 24,685 |
Required:
Calculate the company's revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
In: Accounting
Domino Co. has the following data related to an item of inventory: Beginning Inventory, March 1 - 100 units @ $2.10 Purchase, March 7 - 350 @ $2.20 Purchase, March 16 - 70 @ $2.25 Ending Inventory, March 31 - 130 The value assigned to cost of goods sold if Domino uses FIFO is The value assigned to ending inventory if Domino uses LIFO is
Can anyone please explain the steps and thinking order to get the answers? I know the answers but still don't understand.
In: Accounting
Examine the shortcomings of GDP in measuring a country’s economic health?
In: Accounting
Using financial leverage: All of the following are correct except:
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a. |
results in a fixed charge that may materially affect earnings available to common shareholders. |
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b. |
increases risk to the firm as interest rates rise and returns to shareholders decrease. |
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c. |
may be favorable when earnings generated by use of borrowed funds exceeds borrowing costs. |
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d. |
requires reviewing planned business transactions for the potential impact they may have on operating income and the ability to cover fixed interest charges. |
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e. |
all of the above are correct. |
In: Accounting
5. Jasper Corp, has the following Stockholders’ Equity account balances and activity for Year 2.
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Net income |
$14,750,000 |
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Retained earnings |
$13,250,000 |
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Preferred stock shares outstanding |
1,000 |
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Common stock shares outstanding at January 1, Year 2 |
6,855,000 |
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Additional Common shares issued at July 1, Year 2 |
20,000 |
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3-for-1 stock split at December 31, Year 2 |
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Preferred Dividends |
$15,000 |
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Common Dividends |
$58,000 |
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Year 1 EPS |
$2.06 |
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Earnings per share = __________________ / ___________________* = ________
* Compute Denominator: Weighted average common shares outstanding
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Date |
Shares |
Portion of year |
Weighted Average Shares |
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January 1, Y2 |
6,855,000 |
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July 1, Y2 |
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Weighted Average December 31 before split |
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Stock split 3-for-1 |
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*Total Weighted Average, 12/31/Y2 |
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Note: Year 1 restated |
$2.06 / 3 =_____ |
Did performance improve in Year 2 as compared to Year 1? _________________Why?
In: Accounting