Do the pluses of using credit cards out-weigh the minuses?

Mauro Products distributes a single product, a woven basket whose selling price is $15 and whose variable expense is $12 per unit. The company's monthly fixed expense is $4,200.

Required:

1. Solve for the company's break-even point in unit sales using the equation method.
2. Solve for the company's break-even point in sales dollars using the equation method and the CM ratio.
3. Solve for the company's break-even point in unit sales using the formula method.
4. Solve for the company's break-even point in sales dollars using the formula method and the CM ratio.

Whitelands, Inc. had $100 of cash and shareholders’ equity as the result of its initial sale of stock on January 1, 2012. During its first month of operations, Whitelands had the following operating transactions: Date Transaction 1/1 Paid $24 cash in advance to rent a store for one year 1/1 Purchased 2 units of inventory on credit costing $4 each 1/3 Purchased 3 units of inventory on credit costing $5 each 1/10 Purchased 4 units of inventory on credit costing $6 each 1/21 Paid for the January 1 inventory purchase 1/23 Paid for the January 3 inventory purchase 1/30 Sold 7 units of inventory at $10 each on credit 1/30 Matched the inventory cost to January 30 sales on a FIFO basis 1/31 Estimated that 10% of credit sales will not be realized in cash 1/31 Adjusted the prepaid rent account Required: 1. Record the journal entries for the above transactions. 2. Present Whitelands’ income statement for January 2014. 3. Report Whitelands’ balance sheet on January 31, 2014. 4. Close the revenue and expense accounts to retained earnings.  

The following expenditures are related to land, land improvements and buildings, which were acquired on November 1, 2015.

Cost of real estate acquired for a new manufacturing plant S365,000 (the land is appraised for $262,800 and the building for $102,200)

Real estate taxes paid by the purchaser......$20,000

Cost of removing a barn..... $8,500

Architect's fees for updating the building..... $6750

Attorneys fees for closing the sale..... $12500

Grading land.... $3500

paving parking lot......$7000

Planting trees and shrubs.......$9250

Cost of repairs to building due to storm during construction..... $1300

lights placed on driveway .... $750

fee to real estate broker..... $2500

a) determine the cost of the land, the building and the improvements (round to nearest dollar)

b)prepare journal entries on Dec. 31, 2015 for depreciation assuming the building will have a useful life of 20 years and no residual value. Use double declining balance method and the half-year convention. Depreciate the land improvements using straight line method, a 5 year life, to the nearest month with zero residual value (to the nearest dollar).

1. Why do businesses use budgets?
2. What information can you learn from a business about its priorities from reading its budget?
3. What would you change about the budgeting process if you could change one thing?

The company's chart of accounts follows:

Use the following information:

1. Prepaid insurance of $139 has expired this month.
2. At the end of the month, $600 of office supplies are still available.
3. This month’s depreciation on the computer equipment is $500.
4. Employees earned $320 of unpaid and unrecorded salaries as of month-end.
5. The company earned $2,200 of commissions that are not yet billed at month-end.

Required:
1. & 2. Prepare journal entries to record the transactions for April and post them to the ledger accounts in Requirement 6b. The company records prepaid and unearned items in balance sheet accounts.
3. Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30.
4. Journalize the adjusting entries for the month and prepare the adjusted trial balance.
5a. Prepare the income statement for the month of April 30.
5b. Prepare the statement of retained earnings for the month of April 30.
5c. Prepare the balance sheet at April 30.
6a. Prepare journal entries to close the temporary accounts and then post to Requirement 6b.
6b. Post the journal entries to the ledger.
7. Prepare a post-closing trial balance.

Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:

In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:

Required:

1. Prepare a contribution format income statement segmented by divisions.

2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $24,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented?

2-b. Would you recommend the increased advertising?

1.

2.

The Marketing Department has proposed increasing the West Division's monthly advertising by $24,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? (Do not round intermediate calculations.)

3.

Would you recommend the increased advertising?

Yogurt Vi (pronounced vee) is a frozen yogurt restaurant with several locations in Ohio. Customers will select the flavor of frozen yogurt they want and fill their cup from the self-serve machine with the desired amount of the frozen yogurt. Next the customer will proceed to the toppings bar, where they can select from a large variety of toppings including strawberries, kiwis, gummy bears, chocolate chips, crushed Oreos, M&M candies, sprinkles, salted caramels, and many other toppings. Once the customer has finished adding toppings, the customer then proceeds to the cash register where the cup of frozen yogurt and toppings is weighed. The customer is charged a flat fee of $0.48 per ounce.

Questions 1: Do you think that Yogurt Vi pays the same amount to its suppliers for each of the toppings? For example, is it probable that fresh strawberries cost the exact same amount as M&M candies? Do you think the toppings would cost the same amount as the frozen yogurt mix that is put into the soft-serve machines?

Question 2: From a technical viewpoint, do you think Yogurt Vi would use a job costing system or a process costing system for calculating the cost of each customer’s order? Explain.

Question 3: From a practical standpoint, do you think Yogurt Vi would use a job costing system or a process costing system for calculating the cost of each customer’s order? Explain.

1. Gloria J Company provided the following information for 2019.

Required: Prepare an income statement using “functional method” for the year with supporting notes

*Hint: don't miss out income tax

lator

Mastery Problem: Cash Payback and Average Rate of Return (Advanced)

Companies use capital investment analysis to evaluate long-term investments. Capital investment evaluation methods that do not use present values are (1) Average rate of return method and (2) Cash payback method.

Methods that do not use present value

One category of capital investment evaluation methods does not use present value. The primary difference between the category of methods that do use present value and this category is that this category does not  take the time value of money into account. The basic premise of the time value of money is that a dollar today is worth more than  a dollar tomorrow.

True or False: Considering the fact that most firms use methods from each category, it can be concluded that both categories have value.
True

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Cash Payback Method

This method identifies how long it will take (in years) to recover the initial investment . The particulars of the method vary depending on whether the cash flows from an investment are even or uneven.

Cash Payback Method (Even cash flows)

Suppose that a particular investment required an up-front capital outlay of $100,000. This investment is expected to yield cash flows of $50,000 per year for 10 years. What is the payback period for this investment? If required, round your answer to two decimal places.

Cash Payback Period = $ / $ =  years

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Payback Period (Uneven cash flows)

When the annual cash flows are unequal, the payback period is computed by adding the annual cash flows until such time as the original investment is recovered. If a fraction of a year is needed, it is assumed that cash flows occur evenly within each year.

The steps for determining the payback period with uneven cash flows is as follows:

1. Add the annual cash flows to one another until the investment is recovered.
2. For each full year's worth of cash flows consumed, add that year to your calculation for total payback years.
3. If you arrive at a point where only part of the year's cash flows are needed, only add the fraction of the year's cash flows relevant to recovering the initial investment to the total payback years.
4. If the unrecovered investment is greater than the annual cash flow, the payback period is "1". If the unrecovered investment is less than the annual cash flow the time needed for payback is computed by dividing the unrecovered investment by the annual cash flow for than year.

Compute the time needed for payback for the following example assuming the investment required an up-front capital outlay of $100,000 and the uneven annual cash flows for each year are provided in the table. If an amount is zero, enter "0". For the time needed for payback, enter your answer to one decimal place, if less than one year (i.e. 0.2, 0.5, etc.).

Total time needed for payback (to the nearest tenth of a year) = years

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Average Rate of Return

The average rate of return is another method that does not use present value and is commonly used in making capital investment decisions. Unlike the cash payback method, the average rate of return focuses on income rather than cash flow.

Assume that the investment involves an initial outlay of $100,000 with a five-year useful life and no salvage value under straight-line depreciation. The revenues are as follows: Year 1 - $10,000, Year 2 - $20,000, Year 3 - $30,000, Year 4 - $40,000 and Year 5 - $50,000.

Use the minus sign to indicate a net loss. If an amount is zero, enter "0".

Total Net Income (five years) = $

Winnebago Industries, Inc. is a leading manufacturer of recreational vehicles (RVs), including motorized and towable products. The company designs, develops, manufactures, and markets RVs as well as supporting products and services. The RVs are sold to consumers through a dealer network. On the August 29, 2015, balance sheet, Winnebago reported inventory of approximately $112 million. Of this amount, approximately $12 million, about 11%, was Finished Goods Inventory (Notes to Consolidated Financial Statements, Note 3). Suppose Winnebago motor homes have an average sales price of $96,000 and cost of goods sold is 89% of sales. Thor Industries, Inc., a major competitor, has an average cost of goods sold of 86% of sales. For year ending August 29, 2015, Winnebago sold 9,097 motor homes (Form 10-K, Item 1 Business).
Requirements

1. Why would the Finished Goods Inventory be such a relatively small portion of total inventory?

2. What is the average cost of goods sold (in dollars) for a Winnebago motor home? What is the average gross profit?

3. If Winnebago could reduce production costs so that the average cost of goods sold is equal to their competitor’s average cost of goods sold, how much more profit would Winnebago earn on each motor home sold?

4. Based on 2015 sales, how much would operating income increase if the company reduced the average cost of goods sold to equal their competitor’s average cost of goods sold?

5. How could managers at Winnebago use managerial accounting to reduce costs and increase profits?

1. Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000.

Using the sum-of-the-years'-digits method, depreciation for 2019 and book value at December 31, 2019, would be:

Multiple Choice

• $19,200 and $30,800 respectively.

• $19,200 and $28,800 respectively.

• $17,600 and $26,400 respectively.

• $17,600 and $32,400 respectively.

  2. Cutter Enterprises purchased equipment for $66,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $7,500.
  
  Using the sum-of-the-years'-digits method, depreciation for 2018 and book value at December 31, 2018, would be: (Do not round depreciation rate per year)

  Multiple Choice

• $22,000 and $36,500 respectively.

• $19,500 and $46,500 respectively.

• $22,000 and $44,000 respectively.

• $19,500 and $39,000 respectively.

Make sure you understand the two alternatives.

• The "make" means that KCSB assembles and ships all of its regular bicycles.
• The "buy" means that KCSB pays another firm to assemble and ship some of its regular bicycles and uses the freed-up resources to assemble and ship specialty racing bicycles.
• TIP: Ignore revenues from regular bike sales - they will be the same under both alternatives and are therefore common costs that can be ignored.

______________________________________________________

King City Specialty Bikes (KCSB) produces high-end bicycles. Costs to manufacture and market the bicycles at last year's volume level of 2,100 bicycles per month are shown in the following table:

KCSB expects to produce and sell 2,500 bicycles per month in the coming year. The bicycles sell for $580 each.

KCSB receives a proposal from an outside contractor who, for $170 per bicycle, will assemble 750 bicycles per month and ship them directly to KCSB's customers as orders are received from KCSB's sales force. KCSB would provide the materials for each bicycle, but the outside contractor would assemble, box, and ship the bicycles. The variable manufacturing costs would be reduced by 30% for the 750 bicycles assembled by the outside contractor, and variable nonmanufacturing costs for the 750 bicycles would be cut by 55%.

KCSB's marketing manager thinks that it could sell 80 specialty racing bicycles per month for $6,000 each, and its production manager thinks that it could use the idle resources to produce each of these bicycles for variable manufacturing costs of $5,000 per bicycle and variable nonmanufacturing costs of $450 per bicycle.

If KCSB accepts the proposal, it would be able to save $14,595 of fixed manufacturing costs; fixed nonmanufacturing costs would be unchanged.

REQUIRED [Note: Round unit cost computations to the nearest cent]

What is the difference in KCSB's monthly costs between accepting the proposal and rejecting the proposal?   (Note: If the costs of accepting the proposal are less than the costs of rejecting it, enter the difference as a positive number; if the accept costs are more than the reject costs, enter the difference as a negative number.)

Rita owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home (500 square feet) where she meets with clients, prepares bills, and performs other work-related tasks. Her business expenses, other than home office expenses, total $5,820. The following home-related expenses have been allocated to her home office under the actual expense method for calculating home office expenses.

Also, assume that, not counting the sole proprietorship, Rita’s AGI is $62,200.

Assume Rita’s consulting business generated $15,550 in gross income. (Leave no answer blank. Enter zero if applicable.)

a. What would Rita’s home office deduction be if her business generated $10,550 of gross income instead of $15,550? (Answer for both the actual expense method and the simplified method.)

b. Given the original facts, what is Rita’s AGI for the year?

(Deferred Income Taxes)

This year, a company has each of the following income statement items:

1. Gross profits on installment sales.
2. Revenues on long-term construction contracts.
3. Estimated costs of product warranty contracts.
4. Premiums on officers’ life insurance policies with the company as beneficiary.

Indicate where deferred income taxes are reported in the financial statements. Specify when deferred income taxes would need to be recognized for each of the items above, and indicate the rationale for such recognition.