Prepare in good form:
an Income Statement, Statement of Owner’s Equity
2. Classified Balance Sheet,
3. Calculate the Current Ratio and prepare the Closing Entries in a
general journal
Question #1 – 35 Marks
The following is the adjusted trial balance for Reid Tax and
Accounting Services for the year ended December 31, 2017
Reid Tax and Accounting Services Adjusted Trial Balance December
31, 2017
Account Title Dr Cr
Accounts payable 6,300
Accounts Receivable 9,000
Accumulated Depreciation Building 41,000
Accumulated Depreciation Equipment $4,200
Building 350,000
Cash $98,000
Depreciation expense, building 7,000
Depreciation expense, equipment 800
Insurance expense 5,200
Interest payable 2,000
Land 700,000
Long-term note payable 52,000
Fred Reid, Capital 1,010,000
Fred Reid, Withdrawals 200,500
Office equipment 8,000
Office supplies 3,300
Prepaid Insurance 9,000
Prepaid Rent 15,000
Rent expense 6,000
Salaries expense 89,000
Salaries payable 14,500
Service fees earned 370,800
Totals $1,500,800 $1,500,800
Additional Information:
• A $10,000 installment on the long-term note payable is due within
one year.
• Fred Reid invested $40,000 into her business during the
year
Required:
1. Prepare in good form, an Income Statement, Statement of Owner’s
Equity and a Classified Balance Sheet for the year ended December
31, 2017. – 26 Marks
2. Calculate the Current Ratio at December 31, 2017 – 4 Marks
3. Prepare the Closing Entries at December 31, 2017.in a general
journal – 5 Marks
In: Accounting
On October 31, 2017, Lexington Corp. declared and issued a 12% common stock dividend. Prior to this dividend, Lexington had 302,000 shares of $0.001 par value common stock issued and outstanding. The fair value of Lexington's common stock was $16.75 per share on October 31, 2017. As a result of this stock dividend, the company's total stockholders' equity please explain in details
In: Accounting
Prepare journal entries to record the following merchandising
transactions of Lowe’s, which uses the perpetual inventory system
and the gross method. (Hint: It will help to identify each
receivable and payable; for example, record the purchase on August
1 in Accounts Payable—Aron.)
| Aug. | 1 | Purchased merchandise from Aron Company for $9,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. | ||
| 5 | Sold merchandise to Baird Corp. for $6,300 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $4,000. | |||
| 8 | Purchased merchandise from Waters Corporation for $8,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. | |||
| 9 | Paid $100 cash for shipping charges related to the August 5 sale to Baird Corp. | |||
| 10 | Baird returned merchandise from the August 5 sale that had cost Lowe’s $500 and was sold for $1,000. The merchandise was restored to inventory. | |||
| 12 | After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe’s received a credit memorandum from Waters granting a price reduction of $800 off the $8,000 of goods purchased. | |||
| 14 | At Aron’s request, Lowe’s paid $230 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron. | |||
| 15 | Received balance due from Baird Corp. for the August 5 sale less the return on August 10. | |||
| 18 | Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12. | |||
| 19 | Sold merchandise to Tux Co. for $5,400 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $2,700. | |||
| 22 | Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s sent Tux a $900 credit memorandum toward the $5,400 invoice to resolve the issue. | |||
| 29 | Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22. | |||
| 30 | Paid Aron Company the amount due from the August 1 purchase. |
In: Accounting
Exercise 12-9 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO12-1, LO12-2]
| Selected sales and operating data for three divisions of three different companies are given below: |
| Division A | Division B | Division C | |||||||
| Sales | $ | 6,000,000 | $ | 10,000,000 | $ | 8,000,000 | |||
| Average operating assets | $ | 1,500,000 | $ | 5,000,000 | $ | 2,000,000 | |||
| Net operating income | $ | 300,000 | $ | 900,000 | $ | 180,000 | |||
| Minimum required rate of return | 15 | % | 18 | % | 12 | % | |||
| Required: | |
| 1. |
Compute the margin, turnover and return on investment (ROI) for each division, using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round "Margin" answers to 2 decimal places.) |
|
|||||||||||||||||||||||||
| 2. |
Compute the residual income (loss) for each division. (Loss amounts should be indicated by a minus sign.) |
|
| 3. |
Assume that each division is presented with an investment opportunity that would yield a rate of return of 17%. |
| a. |
If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? |
| Division A | Accept/Reject |
| Division B | Accept/Reject |
| Division C | Accept/Reject |
| b. |
If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? |
| Division A | Accept/Reject |
| Division B | Accept/Reject |
| Division C | Accept/Reject |
In: Accounting
Keep-Or-Drop Decision, Alternatives, Relevant Costs
Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below.
| Model 1 | Model 2 | Model 3 | Total | ||||||
| Sales | $265,000 | $574,000 | $601,500 | $1,440,500 | |||||
| Less variable costs of goods sold | (86,500) | (150,440) | (351,200) | (588,140) | |||||
| Less commissions | (4,700) | (31,500) | (22,000) | (58,200) | |||||
| Contribution margin | $173,800 | $392,060 | $228,300 | $794,160 | |||||
| Less common fixed expenses: | |||||||||
| Fixed factory overhead | (415,000) | ||||||||
| Fixed selling and administrative | (291,000) | ||||||||
| Operating income | $88,160 | ||||||||
While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company’s controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered:
| Driver Usage by Model | ||||||||||||||||
| Activity | Activity Cost | Activity Driver | Model 1 | Model 2 | Model 3 | |||||||||||
| Engineering | $85,000 | Engineering hours | 740 | 77 | 183 | |||||||||||
| Setting up | 175,000 | Setup hours | 12,200 | 13,400 | 29,183 | |||||||||||
| Customer service | 110,000 | Service calls | 13,600 | 1,400 | 19,183 | |||||||||||
In addition, Model 1 requires the rental of specialized equipment costing $19,000 per year.
Required: 1. Reformulate the segmented income statement using the additional information on activities. Use a minus sign to indicate any negative margins. Do NOT round interim calculations and, if required, round your answer to the nearest dollar. ( can you please provide detail solutions)
|
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2. Using your answer to Requirement 1, assume
that Reshier Company is considering dropping any model with a
negative product margin. What are the alternatives?
- Select your answer -Keeping Model, Dropping Model, Keeping Model
1 or dropping it
Which alternative is more cost effective and by how much? (Assume that any traceable fixed costs can be avoided.) Do NOT round interim calculations and, if required, round your answer to the nearest dollar. Select your answer -Keeping Model 1Dropping Model: will add $ _____to operating income
3. What if Reshier Company can only avoid 190 hours of engineering time and 5,150 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 2? Which alternative is more cost effective and by how much? Do NOT round interim calculations and, if required, round your answer to the nearest dollar. Select your answer -Keeping Model or Dropping Model : will add $_______ to operating income
In: Accounting
3) The December 31, 2019, trial balances for Paul Corporation and its subsidiary Stuart are listed below.
Paul Corporation Stuart Company
Debit Credit Debit Credit
Cash $ 30,000 $ 8,000
Receivables (net) 13,000 12,000
Inventory, 1/1 12,000 10,000
Investment in S 150,000
Plant and equipment (net) 250,000 195,000
Land 100,000 80,000
Accounts payable $ 30,000 $ 10,000
Other liabilities 85,000 100,000
Common stock ($10 par) 250,000 100,000
Retained earnings, 1/1 168,000 84,000
Dividends declared 15,000 20,000
Sales 132,000 91,000
Dividend income 15,000
Purchases 60,000 30,000
Other expenses 50,000 _______ 30,000 _______
$680,000 $680,000 $385,000 $385,000
Inventory, 12/31 $15,000 $12,000
A. Prepare the journal entries found on Paul’s books for 2019
|
To record P’s share of S’s dividends |
||
B. Prepare the workpaper entries for 2019
|
To establish reciprocity (convert to equity) |
||
|
To eliminate P’s share of S’s equity |
||
|
To allocate the difference between implied and book value |
||
|
To eliminate P’s share of S’s dividends |
||
In: Accounting
Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment is as follows
Initial investment (2 limos) $960,000
Useful life 10 years
Salvage value $120,000
Annual net income generated $82,560
LLT's cost of capital 13%
Assume straight line depreciation method is used. Required Help LLT evaluate this project by calculating each of the following:
1. Accounting rate of return. (Round your percentage answer to 1 decimal place.)
2. Payback period. (Round your answer to 2 decimal places.)
3.Net present value.
I require answer for all the 3 questions. Thank you
In: Accounting
Pureform, Inc., uses the weighted-average method in its process costing system. It manufactures a product that passes through two departments. Data for a recent month for the first department follow:
| Units | Materials | Labor | Overhead | ||||
| Work in process inventory, beginning | 79,000 | $ | 99,000 | $ | 34,200 | $ | 46,700 |
| Units started in process | 749,000 | ||||||
| Units transferred out | 770,000 | ||||||
| Work in process inventory, ending | 58,000 | ||||||
| Cost added during the month | $ | 1,309,400 | $ | 421,230 | $ | 576,520 | |
The beginning work in process inventory was 80% complete with respect to materials and 65% complete with respect to labor and overhead. The ending work in process inventory was 60% complete with respect to materials and 50% complete with respect to labor and overhead.
Required:
1. Compute the first department's equivalent units of production for materials, labor, and overhead for the month.
2. Determine the first department's cost per equivalent unit for materials, labor, and overhead for the month. (
In: Accounting
List the steps of the Accounting Cycle. Identify the effects of various business transactions. Compare internal accounting methods.
Please answer the following questions with supporting examples and full explanations. For each of the learning objectives, provide an analysis of how the course supported each objective. Explain how the material learned in this course, based upon the objectives, will be applicable to the professional application.
In: Accounting
roblem 5-3A Record transactions related to accounts receivable (LO5-3, 5-5) [The following information applies to the questions displayed below.] The following events occur for The Underwood Corporation during 2018 and 2019, its first two years of operations. June 12, 2018 Provide services to customers on account for $41,000. September 17, 2018 Receive $25,000 from customers on account. December 31, 2018 Estimate that 45% of accounts receivable at the end of the year will not be received. March 4, 2019 Provide services to customers on account for $56,000. May 20, 2019 Receive $10,000 from customers for services provided in 2018. July 2, 2019 Write off the remaining amounts owed from services provided in 2018. October 19, 2019 Receive $45,000 from customers for services provided in 2019. December 31, 2019 Estimate that 45% of accounts receivable at the end of the year will not be received. References Section BreakProblem 5-3A Record transactions related to accounts receivable (LO5-3, 5-5) 11.value: 0.27 pointsRequired information Problem 5-3A Part 1 Required: 1. Record transactions for each date
In: Accounting
Gear Company records $2,000 of depr
eciation under the sum-of-ye
ars’-digits method in
2019, the company’s first year
of operations. In 2020, the comp
any decides to change to the
straight-line method f
or accounting purposes. If the straight-l
ine method were used in 2019,
depreciation would have b
een $1,500. Depreciation in 2020 under
the straight-line method is
$1,800 (depreciated based on the
book value on January 1, 2020)
. The tax rate is 25%.
Income from continuing operati
ons before tax and before deducti
ng depreciation in 2020 is
$12,000.
REQUIRED:
Provide the 2020 entry to record t
his change and calculate 2020
net income.
In: Accounting
Larry company is considering the purchase of an investment that has a positive net present value based on a discount rate of 12%. The internal rate of return would be: a. zero b. 12% c. greater than 12% d. Less than 12%?
In: Accounting
Suppose you can afford $11,700 per year to invest into a savings annuity. Write this value down, as you'll be using it throughout this entire problem. We are going to explore various options and how these options will impact the interest you are making.
Payment Frequency
Monthly
If you deposit your available money on a monthly basis, how much are you depositing per month? $
If you are earning 6.4% annual interest, what is the total value of the annuity at the end of 30 years? $
How much interest is earned at the end of 30 years? $
Weekly
If you deposit your available money on a weekly basis, how much are you depositing per week (52 weeks per year)? $
If you are earning 6.4% annual interest, what is the total value of the annuity at the end of 30 years? $
How much interest is earned at the end of 30 years? $
Rate
r = 6.4%
If you are making monthly deposits from your available funds, what is the total value in your annuity at the end of 30 years, given the rate is 6.4%? $
How much interest did you earn? $
r = 6.9%
If you are making monthly deposits from your available funds, what is the total value in your annuity at the end of 30 years, given the rate is 6.9%? $
How much interest did you earn? $
r = 7.4%
If you are making monthly deposits from your available funds, what is the total value in your annuity at the end of 30 years, given the rate is 7.4%? $
How much interest did you earn? $
Time
25 years
If you make monthly deposits at an annual rate of 6.4%, what is the total value in the account after 25 years? $
How much interest did you earn? $
30 years
If you make monthly deposits at an annual rate of 6.4%, what is the total value in the account after 30 years? $
How much interest did you earn? $
35 years
If you make monthly deposits at an annual rate of 6.4%, what is the total value in the account after 35 years? $
How much interest did you earn? $
40 years
If you make monthly deposits at an annual rate of 6.4%, what is the total value in the account after 40 years? $
How much interest did you earn? $
Conclusion
Which factor had the greatest impact on the amount of interest that you earned? Select an answer Payment Frequency? Rate? Time?
In: Accounting
Midlands Inc. had a bad year in 2019. For the first time in its
history, it operated at a loss. The company’s income statement
showed the following results from selling 80,000 units of product:
net sales $1,600,000; total costs and expenses $1,824,800; and net
loss $224,800. Costs and expenses consisted of the
following.
|
Total |
Variable |
Fixed |
||||
|---|---|---|---|---|---|---|
| Cost of goods sold | $1,160,000 | $652,000 | $508,000 | |||
| Selling expenses | 515,800 | 91,000 | 424,800 | |||
| Administrative expenses | 149,000 | 57,000 | 92,000 | |||
| $1,824,800 | $800,000 | $1,024,800 |
Management is considering the following independent alternatives
for 2020.
| 1. | Increase unit selling price 25% with no change in costs and expenses. | |
| 2. | Change the compensation of salespersons from fixed annual salaries totaling $195,000 to total salaries of $41,985 plus a 5% commission on net sales. | |
| 3. | Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. |
(a) Compute the break-even point in dollars for
2019. (Round contribution margin ratio to 4 decimal
places e.g. 0.2512 and final answer to 0 decimal places, e.g.
2,510.)
| Break-even point |
$Enter the break-even point in dollars rounded to 0 decimal places |
(b) Compute the break-even point in dollars under
each of the alternative courses of action for 2020.
(Round contribution margin ratio to 3 decimal places
e.g. 0.251 and final answers to 0 decimal places, e.g.
2,510.)
|
Break-even point |
||||
|---|---|---|---|---|
| 1. | Increase selling price |
$Enter a dollar amount |
||
| 2. | Change compensation |
$Enter a dollar amount |
||
| 3. | Purchase machinery |
$Enter a dollar amount |
In: Accounting
Catherine is a U.S. citizen who is employed by DSC, Inc., a global company. Beginning on August 1, 2018, Catherine began working in Augsburg, Germany. She worked for 153 days of 2018. She worked there until March 31, 2019, when she transferred to Kamnik, Slovenia. She worked in Kamnik for the remainder of 2019. Her salary for the first seven months of 2018 was $225,000, and it was earned in the United States. Her salary for the remainder of 2018 was $165,000, and it was earned in Augsburg. Catherine's 2019 salary from DSC was $425,000, with part being earned in Augsburg and part being earned in Kamnik.
Assume the 2019 indexed statutory amount is the same as the 2018 indexed amount. Assume a 365-day year.
When required, round any fractions out to four decimal places. Round final answers to the nearest dollar.
a. Is Catherine eligible for the foreign income exclusion for 2018? Yes
b. Catherine may exclude $ ? from her gross income for 2018.
c. Is Catherine eligible for the foreign income exclusion for 2019? Yes
d. Catherine may exclude $ 103,900 from her gross income for 2019.
In: Accounting