Define
Define
(a)Negotiated transfer pricing method
(b)Marketing based transfer pricing method
Effect of each method on the divisional performance
In: Accounting
On August 31, 2016, the Silva Company sold merchandise to the Bendix Corporation for $650,000. Terms of the sale called for a down payment of $130,000 and four annual installments of $130,000 due on each August 31, beginning August 31, 2017. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The book value of the merchandise on Silva's books on the date of sale was $390,000. The perpetual inventory system is used. The company's fiscal year-end is December 31. |
Required: |
1. |
Complete the table below by entering the amount of gross profit to be recognized in each of the five years of the installment sale applying each of the following methods: |
a. Point of delivery revenue recognition. | |
b. Installment sales method. | |
c. Cost recovery method. | |
2. |
Prepare journal entries for each of the five years applying for the three revenue recognition methods. Ignore interest charges. |
3. |
Prepare a partial balance sheet as of the end of 2016 and 2017 listing the items related to the installment sale applying each of the above three methods. |
In: Accounting
Exercise 12-5 The following information is available for Splish Brothers Inc. for the year ended December 31, 2017. Beginning cash balance $ 47,835 Accounts payable decrease 3,933 Depreciation expense 172,206 Accounts receivable increase 8,717 Inventory increase 11,693 Net income 301,998 Cash received for sale of land at book value 37,205 Cash dividends paid 12,756 Income taxes payable increase 4,996 Cash used to purchase building 307,207 Cash used to purchase treasury stock 27,638 Cash received from issuing bonds 212,600 Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) Splish Brothers Inc. Statement of Cash Flows—Indirect Method $ Adjustments to reconcile net income to $ $
In: Accounting
Explain the concept of benchmarking with respect to the analysis and interpretation of profit. Discuss the advantages and disadvantages of the different ways of monitoring profit.
In: Accounting
ACCT 301
ASSIGNMENT 4
In: Accounting
The two discussion questions for this week are as follows:
In: Accounting
On April 1, 2020, Blossom Ltd. paid $150 for a call to buy 530 shares of NorthernTel at a strike price of $25 per share any time during the next six months. The market price of NorthernTel’s shares was $25 per share on April 1, 2020. On June 30, 2020, the market price for NorthernTel’s stock was $35 per share, and the fair value of the option was $8,200.
Prepare the journal entry to record the purchase of the call option on April 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date |
Account Titles and Explanation |
Debit |
Credit |
---|---|---|---|
April 1, 2020 |
enter an account title |
enter a debit amount |
enter a credit amount |
enter an account title |
enter a debit amount |
enter a credit amount |
eTextbook and Media
List of Accounts
Prepare the journal entry to recognize the change in the call option’s fair value as at June 30, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date |
Account Titles and Explanation |
Debit |
Credit |
---|---|---|---|
June 30, 2020 |
enter an account title |
enter a debit amount |
enter a credit amount |
enter an account title |
enter a debit amount |
enter a credit amount |
eTextbook and Media
List of Accounts
Prepare the journal entry that would be required if Blossom Ltd. exercised the call option and took delivery of the shares as soon as the market opened on July 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date |
Account Titles and Explanation |
Debit |
Credit |
---|---|---|---|
July 1, 2020 |
enter an account title |
enter a debit amount |
enter a credit amount |
enter an account title |
enter a debit amount |
enter a credit amount |
|
enter an account title |
enter a debit amount |
enter a credit amount |
|
enter an account title |
enter a debit amount |
enter a credit amount |
In: Accounting
Barings Bank collapsed about two decades ago as a result of derivative trading. Identify any other high profile corporate bankruptcy attributable to derivative trading and. Describe the events that created the problem outlining the differences and similarities between Barings Bank and your chosen institution. What are the lessons that financial institutions, investors and regulators can learn from the occurrence of such events.
In: Accounting
compare the IMA code of conduct to the AICPA code of professional conduct and assess the effectiveness of the two codes
In: Accounting
Bank Reconciliation and Entries
The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,890. During May, the total cash deposited was $75,440 and checks written totaled $70,050. The bank statement indicated a balance of $25,570 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
Instructions:
1. Prepare a bank reconciliation as of May 31.
Brentwood Bike Co. | ||
Bank Reconciliation | ||
May 31 | ||
Cash balance according to bank statement | $ | |
Add deposit of May 31, not recorded by bank | $ | |
$ | ||
Adjusted balance | $ | |
Cash balance according to company's records | $ | |
$ | ||
$ | ||
Adjusted balance | $ |
2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.
a. May 31 | |||
b. May 31 | |||
3. If a balance sheet is prepared for Brentwood
Bike Co. on May 31, what amount should be reported as cash?
$
In: Accounting
Collin Zucs, CFO of Travel United, Inc., invested some of the firm's excess cash in the common shares of what he thought were three undervalued securities. At year-end, he reviewed how the portfolio of securities had done.
Security Name |
Cost Basis |
Market Value at Year-End |
Classification |
---|---|---|---|
Microsoft Corporation | $100,000 | $134,200 | Trading security |
Pfizer, Inc. | 75,000 | 80,300 | Trading security |
Boeing, Inc. | 50,000 | 52,800 | Available-for-sale security |
$225,000 | $267,300 |
Required
1. Calculate the value that would be assigned to the portfolio of securities on Travel United's balance sheet at year-end.
$Answer
2. Calculate the income statement effect of the portfolio of securities at year-end.
$Answer Answer
3. Calculate the income statement effect of the portfolio of securities at year-end assuming all securities are classified as available-for-sale.
$Answer
4. Are the company's reported earnings impacted by whether the portfolio of securities are classified as trading versus available-for-sale?
Answer
Will the company's income taxes be impacted?
In: Accounting
The Skysong, Inc. opened for business on May 1, 2020. Its trial
balance before adjustment on May 31 is as follows.
Skysong, Inc. |
||||||
Account Number | Debit | Credit | ||||
101 | Cash | $ 3,400 | ||||
126 | Supplies | 2,050 | ||||
130 | Prepaid Insurance | 3,000 | ||||
140 | Land | 14,000 | ||||
141 | Buildings | 59,400 | ||||
149 | Equipment | 14,900 | ||||
201 | Accounts Payable | $ 11,900 | ||||
208 | Unearned Rent Revenue | 3,100 | ||||
275 | Mortgage Payable | 40,000 | ||||
311 | Common Stock | 35,800 | ||||
429 | Rent Revenue | 10,750 | ||||
610 | Advertising Expense | 650 | ||||
726 | Salaries and Wages Expense | 3,300 | ||||
732 | Utilities Expense | 850 | ||||
$101,550 | $101,550 |
In addition to those accounts listed on the trial balance, the
chart of accounts for Skysong, Inc. also contains the following
accounts and account numbers: No. 142 Accumulated
Depreciation—Buildings, No. 150 Accumulated Depreciation—Equipment,
No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No.
619 Depreciation Expense, No. 631 Supplies Expense, No. 718
Interest Expense, and No. 722 Insurance Expense.
Other data:
1. | Prepaid insurance is a 1-year policy starting May 1, 2020. | |
2. | A count of supplies shows $800 of unused supplies on May 31. | |
3. | Annual depreciation is $2,976 on the buildings and $1,488 on equipment. | |
4. | The mortgage interest rate is 12%. (The mortgage was taken out on May 1.) | |
5. | Two-thirds of the unearned rent revenue has been earned. | |
6. | Salaries of $800 are accrued and unpaid at May 31. |
Do the following:
A. Journalize the adjusting entries on May 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)
B. Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post sthe adjusting entries. (Post entries in the order of journal entries posted in the previous part of the question. Round answers to 0 decimal places, e.g. 5,275.)
C. Prepare an adjusted trial balance on May 31. (Round answers to 0 decimal places, e.g. 5,275.)
D. Prepare an income statement for the month of May 31. (Round answers to 0 decimal places, e.g. 5,275.)
E. Prepare an retained earnings statement for the month of May 31. (Round answers to 0 decimal places, e.g. 5,275.)
F. Prepare a balance sheet at May 31.
(List Assets in order of liquidity. List Property,
plant and equipment in order of land, buildings and equipment.
Round answers to 0 decimal places, e.g. 5,275.)
In: Accounting
Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below:
Superior Markets, Inc. Income Statement For the Quarter Ended September 30 |
||||||||||||
Total | North Store |
South Store |
East Store |
|||||||||
Sales | $ | 3,900,000 | $ | 820,000 | $ | 1,560,000 | $ | 1,520,000 | ||||
Cost of goods sold | 2,145,000 | 480,000 | 829,000 | 836,000 | ||||||||
Gross margin | 1,755,000 | 340,000 | 731,000 | 684,000 | ||||||||
Selling and administrative expenses: | ||||||||||||
Selling expenses | 835,000 | 240,400 | 319,500 | 275,100 | ||||||||
Administrative expenses | 428,000 | 115,000 | 164,400 | 148,600 | ||||||||
Total expenses | 1,263,000 | 355,400 | 483,900 | 423,700 | ||||||||
Net operating income (loss) | $ | 492,000 | $ | (15,400 | ) | $ | 247,100 | $ | 260,300 | |||
The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional information is available for your use:
The breakdown of the selling and administrative expenses that are shown above is as follows:
Total | North Store |
South Store |
East Store |
|||||
Selling expenses: | ||||||||
Sales salaries | $ | 241,600 | $ | 56,800 | $ | 85,400 | $ | 99,400 |
Direct advertising | 174,000 | 60,000 | 81,000 | 33,000 | ||||
General advertising* | 58,500 | 12,300 | 23,400 | 22,800 | ||||
Store rent | 305,000 | 94,000 | 111,000 | 100,000 | ||||
Depreciation of store fixtures | 20,500 | 5,500 | 6,900 | 8,100 | ||||
Delivery salaries | 23,700 | 7,900 | 7,900 | 7,900 | ||||
Depreciation of delivery equipment |
11,700 | 3,900 | 3,900 | 3,900 | ||||
Total selling expenses | $ | 835,000 | $ | 240,400 | $ | 319,500 | $ | 275,100 |
*Allocated on the basis of sales dollars.
Total | North Store |
South Store |
East Store |
|||||
Administrative expenses: | ||||||||
Store managers' salaries | $ | 83,500 | $ | 25,500 | $ | 34,500 | $ | 23,500 |
General office salaries* | 58,500 | 12,400 | 23,400 | 22,700 | ||||
Insurance on fixtures and inventory | 34,000 | 10,200 | 13,500 | 10,300 | ||||
Utilities | 93,405 | 31,010 | 31,320 | 31,075 | ||||
Employment taxes | 61,095 | 15,390 | 22,680 | 23,025 | ||||
General office—other* | 97,500 | 20,500 | 39,000 | 38,000 | ||||
Total administrative expenses | $ | 428,000 | $ | 115,000 | $ | 164,400 | $ | 148,600 |
*Allocated on the basis of sales dollars.
The lease on the building housing the North Store can be broken with no penalty.
The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed.
The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $11,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $12,400 per quarter. All other managers and employees in the North store would be discharged.
The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person’s salary is $4,900 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete.
The company pays employment taxes equal to 15% of their employees' salaries.
One-third of the insurance in the North Store is on the store’s fixtures.
The “General office salaries” and “General office—other” relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person’s compensation is $6,200 per quarter.
Required:
1. How much employee salaries will the company avoid if it closes the North Store?
2. How much employment taxes will the company avoid if it closes the North Store?
3. What is the financial advantage (disadvantage) of closing the North Store?
4. Assuming that the North Store's floor space can’t be subleased, would you recommend closing the North Store?
5. Assume that the North Store's floor space can’t be subleased. However, let's introduce three more assumptions. First, assume that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store?
In: Accounting
Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.
The pizzeria’s cost formulas appear below:
Fixed Cost per Month |
Cost per Pizza |
Cost per Delivery |
||||||||
Pizza ingredients | $ | 4.30 | ||||||||
Kitchen staff | $ | 5,890 | ||||||||
Utilities | $ | 600 | $ | 0.20 | ||||||
Delivery person | $ | 3.00 | ||||||||
Delivery vehicle | $ | 620 | $ | 1.40 | ||||||
Equipment depreciation | $ | 392 | ||||||||
Rent | $ | 1,850 | ||||||||
Miscellaneous | $ | 720 | $ | 0.10 | ||||||
In November, the pizzeria budgeted for 1,530 pizzas at an average selling price of $14 per pizza and for 210 deliveries.
Data concerning the pizzeria’s actual results in November appear below:
Actual Results | |||
Pizzas | 1,630 | ||
Deliveries | 190 | ||
Revenue | $ | 23,360 | |
Pizza ingredients | $ | 7,030 | |
Kitchen staff | $ | 5,830 | |
Utilities | $ | 880 | |
Delivery person | $ | 570 | |
Delivery vehicle | $ | 984 | |
Equipment depreciation | $ | 392 | |
Rent | $ | 1,850 | |
Miscellaneous | $ | 784 | |
Required:
1. Compute the revenue and spending variances for the pizzeria for November. (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.)
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In: Accounting
Birch Company normally produces and sells 46,000 units of RG-6 each month. The selling price is $25 per unit, variable costs are $17 per unit, fixed manufacturing overhead costs total $200,000 per month, and fixed selling costs total $40,000 per month.
Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company’s sales to temporarily drop to only 9,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $49,000 per month and its fixed selling costs by 8%. Start-up costs at the end of the shutdown period would total $14,000. Because Birch Company uses Lean Production methods, no inventories are on hand.
Required:
1. What is the financial advantage (disadvantage) if Birch closes its own plant for two months?
2. Should Birch close the plant for two months?
3. At what level of unit sales for the two-month period would Birch Company be indifferent between closing the plant or keeping it open?
In: Accounting