Vincent Fairfield, CEO of MetroAir, sat at his desk, examining the company's latest financial statements. “This just doesn't make sense to me,” Vincent thought. “We're reporting $1,662,015 in net income, yet our Cash balance decreased by over $350,000. With these results, I would think the Cash balance should go up by at least $1,000,000.”
|
MetroAir Income Statement For the Year Ended December 31, 2016 |
|
|---|---|
|
Sales |
$78,555,000 |
|
Cost of goods sold |
58,146,480 |
|
Gross profit |
20,408,520 |
|
Selling expense |
5,168,505 |
|
Administrative expense |
3,814,660 |
|
Salaries expense |
7,408,490 |
|
Depreciation expense |
1,016,835 |
|
Interest expense |
625,725 |
|
Income before taxes |
2,374,305 |
|
Tax expense |
712,290 |
|
Net income |
$ 1,662,015 |
|
MetroAir Balance Sheets As of December 31 |
||
|---|---|---|
|
2016 |
2015 |
|
|
Cash |
$ 266,280 |
$ 631,710 |
|
Accounts receivable, net |
9,355,695 |
8,751,435 |
|
Inventories |
9,605,580 |
8,206,635 |
|
Other assets |
691,380 |
359,640 |
|
Total current assets |
19,918,935 |
17,949,420 |
|
Machinery and equipment, net |
8,142,870 |
9,009,705 |
|
Total assets |
$28,061,805 |
$26,959,125 |
|
Accounts payable |
$ 6,624,030 |
$ 6,675,210 |
|
Accrued expenses |
563,371 |
1,023,738 |
|
Salaries payable |
615,940 |
595,380 |
|
Interest payable |
58,143 |
55,412 |
|
Income taxes payable |
63,781 |
59,860 |
|
Short-term debt |
2,175,000 |
1,950,000 |
|
Total current liabilities |
10,100,265 |
10,359,600 |
|
Long-term debt |
4,200,000 |
4,500,000 |
|
Total liabilities |
14,300,265 |
14,859,600 |
|
Common stock |
3,150,000 |
3,150,000 |
|
Retained earnings |
10,611,540 |
8,949,525 |
|
Total stockholders' equity |
13,761,540 |
12,099,525 |
|
Total liabilities and stockholders' equity |
$28,061,805 |
$26,959,125 |
Required
(a)
Prepare MetroAir's statement of cash flows using either the indirect or the direct method, as specified by your professor. During the year, the company purchased equipment, issued short-term debt, and retired long-term debt.
(b)
Prepare a memo to Vincent explaining why he should not necessarily expect an increase in cash when the company reports net income. Be specific and include any issues that should cause Vincent concern.
In: Accounting
Ross Company had the following adjusted trial balance:
Additional Resources
| Account Titles | Debit | Credit | |||||
| Cash |
$25,580 |
||||||
| Accounts Receivable |
18,500 |
||||||
| Supplies |
9,800 |
||||||
| Equipment |
35,100 |
||||||
| Accumulated Depreciation |
$9,800 |
||||||
| Accounts Payable |
4,530 |
||||||
| Deferred Rent Revenue |
1,540 |
||||||
| Capital Stock |
21,510 |
||||||
| Retained Earnings |
22,400 |
||||||
| Dividends |
13,600 |
||||||
| Commission Revenue |
56,800 |
||||||
| Rent Revenue |
5,500 |
||||||
| Depreciation Expense |
5,900 |
||||||
| Utilities Expense |
8,500 |
||||||
| Supplies Expense |
5,100 |
||||||
| Total |
$122,080 |
$122,080 |
|||||
The president of Ross Company has asked you to close the books (prepare and process the closing entries).
Required:
After the closing process has been completed, answer the following questions:
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In: Accounting
What is meant by due professional care? What is sufficient appropriate audit evidence?
In: Accounting
What are Pepsi Company's products and operations? Also, what are 5 costs that the company would probably incur and their cost behavior?
In: Accounting
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In: Accounting
Multiple-Step Income Statement
On March 31, 2018, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture wholesaler, are as follows:
<| Accounts Receivable | $170,000 | Inventory | 980,000 | |
| Accumulated Depreciation—Building | $750,000 | Notes Payable | 250,000 | |
| Administrative Expenses | 435,000 | Office Supplies | 20,000 | |
| Building | 3,500,000 | Retained Earnings | 1,987,000 | |
| Cash | 80,000 | Salaries Payable | 8,000 | |
| Common Stock | 300,000 | Sales | 8,245,000 | |
| Cost of Goods Sold | 5,500,000 | Selling Expenses | 575,000 | |
| Dividends | 175,000 | Store Supplies | 90,000 | |
| Interest Expense | 15,000 |
a. Prepare a multiple-step income statement for the year ended March 31, 2018.
| Royal Furnishings Company | ||
| Income Statement | ||
| For the Year Ended March 31, 2018 | ||
| $ | ||
| Gross profit | $ | |
| Expenses: | ||
| $ | ||
| Total expenses | ||
| $ | ||
| Other revenue and expense: | ||
| $ | ||
b. What is a major advantage of the multiple-step income statement over the single-step income statement?
In: Accounting
lizabeth, David and Ethan form a new partnership (EDE) to which Elizabeth and David each contribute assets worth $50,000 and basis of $20,000, and Ethan contributes his technical services worth $50,000. The value of the services is based upon what Ethan regularly charges unrelated parties for similar services. Elizabeth, David and Ethan each receive in exchange a one-third interest in the partnership. The transferors are tax-free to all three partners. Question 5 options: 1) True. 2) False.
In: Accounting
Complete the balance sheet and sales information using the
following financial data:
Total assets turnover: 1.4×
Days sales outstanding: 36.5 daysa
Inventory turnover ratio: 5×
Fixed assets turnover: 2.5×
Current ratio: 2.0×
Gross profit margin on sales: (Sales - Cost of goods sold)/Sales =
35%
aCalculation is based on a 365-day year.
Do not round intermediate calculations. Round your answers to the nearest dollar.
| Balance Sheet | ||||
| Cash | $ | Current liabilities | $ | |
| Accounts receivable | Long-term debt | 78,000 | ||
| Inventories | Common stock | |||
| Fixed assets | Retained earnings | 136,500 | ||
| Total assets | $390,000 | Total liabilities and equity | $ | |
| Sales | $ | Cost of goods sold | $ | |
In: Accounting
Sales-Related Transactions, Including the Use of Credit Cards
Journalize the entries for the following transactions:
a. Sold merchandise for cash, $25,000. The cost of the goods sold was $17,500. (Record the sale first.)
b. Sold merchandise on account, $98,000. The cost of the goods sold was $58,800. (Record the sale first.)
c. Sold merchandise to customers who used MasterCard and VISA, $475,000. The cost of the goods sold was $280,000. (Record the sale first.)
d. Sold merchandise to customers who used American Express, $63,000. The cost of the goods sold was $39,000. (Record the sale first.)
e. Received and paid an invoice from National Clearing House Credit Co. for $13,450, representing a service fee paid for processing MasterCard, VISA, and American Express sales.
In: Accounting
Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then prepares the frozen fish fillets for distribution to its retail sales department. Direct materials are added at the initiation of the cycle. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some fillets are spoiled due to undetectable defects. Inspection occurs when units are 40% converted. Spoiled fillets generally constitute 6% of the good fillets. Data for April 2017 are as follows: WIP, beginning inventory 4/1/2017 85,000 fillets Direct materials (100% complete) Conversion costs (50% complete) Started during April 134,000 fillets Completed and transferred out 4/30/2017 183,000 fillets WIP, ending inventory 4/30/2017 24,000 fillets Direct materials (100% complete) Conversion costs (25% complete) Costs for April: WIP, beginning Inventory: Direct materials $140,000 Conversion costs 105,910 Direct materials added 309,000 Conversion costs added 390,130 What cost is allocated to abnormal spoilage using the weightedaverage processcosting method? (Round any cost per unit calculations to the nearest cent.)
In: Accounting
Suppose you win the lottery when the jackpot amount is $162 million. You can receive the jackpot amount paid out evenly over 26 years or you can elect to take an immediate payment of $95 million, before taxes. Ignore all tax effects. Considering this scenario, which option is most advantageous and why? (Be specific as to any calculations performed.) What other factors should be considered in making your decision?
Important Note: Please be sure your response is based on our course concepts: the time value of money. Your post should include calculations for both payout options using the time value of money, explain your assumptions, and interpret the results of your calculations. You may also discuss any and all other factors that will impact the decision as to which type of payout option you would choose but only after you have completed the calculations necessary to support your response.
In: Accounting
Purchase-Related Transactions
The debits and credits from four related transactions are presented in the following T accounts.
| Cash | Accounts Payable | |||||||
| (2) | 300 | (3) | 3,920 | (1) | 20,580 | |||
| (4) | 16,660 | (4) | 16,660 | |||||
| Inventory | ||||||||
| (1) | 20,580 | (3) | 3,920 | |||||
| (2) | 300 | |||||||
Describe each transaction.
| 1. |
| 2. |
| 3. |
| 4. |
In: Accounting
How defined benefit, defined contribution, and postretirement benefit plans are reported on financial statements?
In: Accounting
The following selected transactions were completed by Amsterdam Supply Co., which sells office supplies primarily to wholesalers and occasionally to retail customers. Also note that the company uses a clearing house to take care of all bank as well as non-bank credit cards used by its customers.
Record on page 10 of the journal
| Mar. | 2 | Sold merchandise on account to Equinox Co., $18,900, terms FOB destination, 1/10, n/30. The cost of the goods sold was $13,300. |
| 3 | Sold merchandise for $11,350 plus 6% sales tax to retail cash customers. The cost of the goods sold was $7,000. | |
| 4 | Sold merchandise on account to Empire Co., $55,400, terms FOB shipping point, n/eom. The cost of the goods sold was $33,200. | |
| 5 | Sold merchandise for $30,000 plus 6% sales tax to retail customers who used MasterCard. The cost of the goods sold was $19,400. | |
| 12 | Received check for amount due from Equinox Co. for sale on March 2. | |
| 14 | Sold merchandise to customers who used American Express cards, $13,700. The cost of the goods sold was $8,350. | |
| 16 | Sold merchandise on account to Targhee Co., $27,500, terms FOB shipping point, 1/10, n/30. The cost of the goods sold was $16,000. | |
| 18 | Issued credit memo for $4,800 to Targhee Co. for merchandise returned from sale on March 16. The cost of the merchandise returned was $2,900. |
Record on page 11 of the journal
| Mar. | 19 | Sold merchandise on account to Vista Co., $8,250, terms FOB shipping point, 2/10, n/30. Added $75 to the invoice for prepaid freight. The cost of the goods sold was $5,000. |
| 26 | Received check for amount due from Targhee Co. for sale on March 16 less credit memo of March 18. | |
| 28 | Received check for amount due from Vista Co. for sale of March 19. | |
| 31 | Received check for amount due from Empire Co. for sale of March 4. | |
| 31 | Paid Fleetwood Delivery Service $5,600 for merchandise delivered during March to customers under shipping terms of FOB destination. | |
| Apr. | 3 | Paid City Bank $940 for service fees for handling MasterCard and American Express sales during March. |
| 15 | Paid $6,544 to state sales tax division for taxes owed on sales. |
Journalize the entries to record the transactions of Amsterdam Supply Co. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
Amsterdam Supply Co.General Ledger
| ASSETS | |
| 110 | Cash |
| 121 | Accounts Receivable-Empire Co. |
| 122 | Accounts Receivable-Equinox Co. |
| 123 | Accounts Receivable-Targhee Co. |
| 124 | Accounts Receivable-Vista Co. |
| 125 | Notes Receivable |
| 130 | Inventory |
| 131 | Estimated Returns Inventory |
| 140 | Office Supplies |
| 141 | Store Supplies |
| 142 | Prepaid Insurance |
| 180 | Land |
| 192 | Store Equipment |
| 193 | Accumulated Depreciation-Store Equipment |
| 194 | Office Equipment |
| 195 | Accumulated Depreciation-Office Equipment |
| LIABILITIES | |
| 210 | Accounts Payable |
| 216 | Salaries Payable |
| 218 | Sales Tax Payable |
| 219 | Customer Refunds Payable |
| 221 | Notes Payable |
| EQUITY | |
| 310 | Common Stock |
| 311 | Retained Earnings |
| 312 | Dividends |
| 313 | Income Summary |
| REVENUE | |
| 410 | Sales |
| 610 | Interest Revenue |
| EXPENSES | |
| 510 | Cost of Goods Sold |
| 521 | Delivery Expense |
| 522 | Advertising Expense |
| 524 | Depreciation Expense-Store Equipment |
| 525 | Depreciation Expense-Office Equipment |
| 526 | Salaries Expense |
| 531 | Rent Expense |
| 533 | Insurance Expense |
| 534 | Store Supplies Expense |
| 535 | Office Supplies Expense |
| 536 | Credit Card Expense |
| 539 | Miscellaneous Expense |
| 710 | Interest Expense |
In: Accounting
The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2018:
| Cash | $ 240,000 |
| Accounts receivable | 966,000 |
| Inventory | 1,690,000 |
| Estimated returns inventory | 22,500 |
| Office supplies | 13,500 |
| Prepaid insurance | 8,000 |
| Office equipment | 830,000 |
| Accumulated depreciation-office equipment | 550,000 |
| Store equipment | 3,600,000 |
| Accumulated depreciation-store equipment | 1,820,000 |
| Accounts payable | 326,000 |
| Customer refunds payable | 40,000 |
| Salaries payable | 41,500 |
| Note payable (final payment due 2024) | 300,000 |
| Common stock | 500,000 |
| Retained earnings | 2,949,100 |
| Dividends | 100,000 |
| Sales | 11,343,000 |
| Cost of goods sold | 7,850,000 |
| Sales salaries expense | 916,000 |
| Advertising expense | 550,000 |
| Depreciation expense-store equipment | 140,000 |
| Miscellaneous selling expense | 38,000 |
| Office salaries expense | 650,000 |
| Rent expense | 94,000 |
| Depreciation expense-office equipment | 50,000 |
| Insurance expense | 48,000 |
| Office supplies expense | 28,100 |
| Miscellaneous administrative expense | 14,500 |
| Interest expense | 21,000 |
| Required: | |
| 1. | Prepare a multiple-step income statement. In the Other income and expenses section only, enter amounts that represent other expenses as negative numbers using a minus sign.* |
| 2. | Prepare a retained earnings statement. Negative amount should be indicated by the minus sign.* |
| 3. | Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.* |
| 4. | Briefly explain how multiple-step and single-step income statements differ. |
| * Be sure to complete the statement headings. Refer to the problem data and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. |
| Labels | |
| Administrative expenses | |
| Current assets | |
| Current liabilities | |
| For the Year Ended May 31, 2018 | |
| Long-term liabilities | |
| May 31, 2018 | |
| Operating expenses | |
| Other revenue and expense | |
| Property, plant, and equipment | |
| Selling expenses | |
| Amount Descriptions | |
| Change in retained earnings | |
| Gross profit | |
| Income from operations | |
| Dividends | |
| Net income | |
| Net income for the year | |
| Net loss | |
| Net loss for the year | |
| Note payable (current portion) | |
| Retained earnings, June 1, 2017 | |
| Retained earnings, May 31, 2018 | |
| Total administrative expenses | |
| Total assets | |
| Total current assets | |
| Total current liabilities | |
| Total liabilities | |
| Total liabilities and stockholders’ equity | |
| Total operating expenses | |
| Total property, plant, and equipment | |
| Total selling expenses | |
| Total stockholders’ equity |
In: Accounting