Problem 8-3 Some of the transactions of Splish Company during August are listed below. Splish uses the periodic inventory method. August 10 Purchased merchandise on account, $11,900, terms 2/10, n/30. 13 Returned part of the purchase of August 10, $1,300, and received credit on account. 15 Purchased merchandise on account, $16,100, terms 1/10, n/60. 25 Purchased merchandise on account, $20,500, terms 2/10, n/30. 28 Paid invoice of August 15 in full. Assuming that purchases are recorded at gross amounts and that discounts are to be recorded when taken: Prepare general journal entries to record the transactions. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses: Prepare general journal entries to enter the transactions. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Aug. 28 SHOW LIST OF ACCOUNTS Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses: Prepare the adjusting entry necessary on August 31 if financial statements are to be prepared at that time. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Aug. 31

Cherry Blossom Products Inc. produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Cherry Blossom Products sold 8,900 DVDs and 4,450 equipment sets. Information on the two products is as follows:

   DVDs    Equipment Sets

Price    $7.80    $25.40

Variable cost per unit    $3.60 $15.40

Total fixed cost is $60,720.

Required:

1. What is the sales mix of DVDs and equipment sets?

2. Compute the break-even quantity of each product.

1. Two friends are considering opening a driving range for golfers. Because of the growing popularity of golf, they estimate such a range could generate rentals of 20,000 buckets at $3 a bucket the first year, and that rentals will grow at 7% a year thereafter. The price will remain a $3 per bucket.

            Equipment requirements include:

                        Incorporated fee                        $2,500

                        ball dispensing machine             $2,000

                        ball pick-up vehicle                    $8,000

                        tractor and accessories                $8,000

            All the equipment is 7-year ACRS property and is expected to have a salvage value of 10% of cost after 8 years.

2. Stocking a small shop selling tees, visors, gloves, towels, sun-block, etc., plus a checking account for the business make net working capital needs $3,000 to start. This amount is expected to grow at 5% per year.

            Annual fixed operating costs are expected as follows:

                        Land lease                                 $12,000

                        Water                                       1,500

                        Electricity                                 3,000

                        Labor                                       30,000

                        Seed & Fertilizer                       2,000

                        Gasoline                                   1,500

                        Equipment maintenance             1,000

                        Insurance                                  1,000

                        Other                                        1,000

                        Total                                         $53,000

Expenditures for balls and baskets, initially $4,000, are expected to grow at 7% per year. The relevant tax rate is 15% and the required return is also 15%. The project is to be evaluated over an 8-year life. Should the friends proceed?

1. The three categories of the accounting equation are:

2. Companies need a way to organize their accounts so they use a chart of accounts. Accounts starting

with 1 are usually Assets, 2 – Liabilities, 3 – Equity, 4 – Revenues, and 5 – Expenses. The second

and third digits in account numbers indicate:

3. A chart of accounts and a ledger are similar in that they both list the account names and account

numbers of the business. A ledger, though, provides the following:

4. With a double-entry you need to record the dual effects of each transaction. Every transaction affects

at least ____ accounts.

5. A T-account is a shortened form of each account in the ledger. The debit is on the ____ side, credit on

the _____ side, and the account name is shown on _____.

Pat Inc. purchased the $100,000 face value outstanding bonds of Slinger Company, its 80%-owned subsidiary, for $97,000 on January 1, 20X3. The bonds mature on January 1, 20X6. The bonds have a stated interest rate of 8% and were sold for $101,000 on January 1, 20X1. The bonds pay interest each January 1. Amortization of the issue premium and /or discount will be on the straight-line basis. Instruction:

1. Record the entries Slinger Company would make on its books for 20X3

2. Record the entries Pat Inc. would make on its books for 20X3

The following accounts were unintentionally omitted from the aging schedule:

Wig Creations has a past history of uncollectible accounts by age category, as follows:

Required:

1. Determine the number of days past due for each of the preceding accounts. If an account is not past due, enter a zero.

2. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals. If an amount box does not require an entry, leave it blank.

3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
$

4. Assume that the allowance for doubtful accounts for Wig Creations has a credit balance of $1,820 before adjustment on December 31, 20Y1. Journalize the adjustment for uncollectible accounts.

5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

On the balance sheet, assets would be   by   because the allowance for doubtful accounts would be   by  . In addition, the owner’s capital account would be   by   because bad debt expense would be   and net income   by   on the income statement.

Discuss the partnership taxation topic of hot assets.

Post the total amounts from the journal in the following general ledger accounts and in the accounts receivable subsidiary ledger accounts for Paula Kohr, Page Alistair, and Nic Nelson.

[The following information applies to the questions displayed below.]

Wiset Company completes these transactions during April of the current year (the terms of all its credit sales are 2/10, n/30).

Distinguish between recourse and non recourse debt within a partnership.

Discuss guaranteed payments within the confines of partnership operations.

Westside produces pillows with monthly unit sales and costs given as:  Unit Sales: 4000 units  Price: $10.00 per unit  Variable costs: $5.50 per unit  Fixed costs: $15,000

1. Westside is considering a 5% price cut without additional fixed cost. By what % would sales need to increase to keep profit constant for the 5% price cut?

2. Replacing goose feathers with synthetic filler will decrease the unit variable cost by $0.22. By what % would sales have to increase to assure the 5% price cut?

3. Given the production capacity of 4,000, the company has to install another workstation at a monthly cost of $800 (assume no change of variable costs). The new station raises plant capacity by 1,000 units. By what % would sales have to increase to justify a 5% price cut?

Brightstone Tire and Rubber Company has capacity to produce 176,500 tires. Brightstone presently produces and sells 131,600 tires for the North American market at a price of $190 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 15,100 tires for $115.30 per tire. Brightstone’s accounting system indicates that the total cost per tire is as follows:

Brightstone pays a selling commission equal to 4% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $7.06 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $121,253.

A. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.

Score: 6/143

B. Determine whether the company should reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors.

Reject

Accept

The company is indifferent since the result is the same regardless of which alternative is chosen.

Points:

0 / 1

C. What is the minimum price per unit that would be financially acceptable to Brightstone?

Required

For each of the following events, determine the amount of freight paid by The Box Company. Also indicate whether the freight cost would be classified as a product or period (selling and administrative) cost.

1. Purchased inventory with freight costs of $1,900. The goods were shipped FOB shipping point.

2. Sold merchandise to a customer. Freight costs were $2,200. The goods were shipped FOB shipping point.

3. Purchased merchandise inventory with freight costs of $2,800. The merchandise was shipped FOB destination.

4. Shipped merchandise to customers, freight terms FOB destination. The freight costs were $1,700

(Not all cells will require input.)

onestoga Corporation operates manufacturing facilities in State P and State Q. In addition, the corporation owns nonbusiness rental property in State Q. Conestoga incurred the following compensation expenses:

Sixty percent of the time is spent by the administrative staff located in State Q and 30% of the time spent by officers located in State Q are devoted to the operation, maintenance, and supervision of the rental property. Both states exclude such rent income from the definition of apportionable income.

Round your answers to four decimal places before converting to a percentage. If required, round your final answers to two decimal places.

Conestoga's payroll factor for State P is % and for State Q is %.

A-13 Present Value of Cash Flows Rush Corporation plans to acquire production equipment for $625,000 that will be depreciated for tax purposes as follows: year 1, $125,000; year 2, $215,000; and in each of years 3 through 5, $95,000 per year. A 14 percent discount rate is appropriate for this asset, and the company’s tax rate is 40 percent. Use Exhibit A.8 and Exhibit A.9. Required: a. Compute the present value of the tax shield resulting from depreciation. (Round PV factor to 3 decimal places and other intermediate calculations to nearest whole number.) b. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($125,000 per year). (Round PV factor to 3 decimal places and other intermediate calculations to nearest whole number.)