7) The following information is from Carter Corp.’s year-end financial statements.:

a) Calculate Carter’s current ratio, quick (acid test) ratio, and days’ sales ratio for the year. (Last year Carter’s accounts receivables were $225.)

b) Last year, Carter’s current ratio was 2, Carter’s quick ratio was 1.4, and Carter’s days’ sales ratio was 31 days. Comment on whether these ratios have improved or worsened this year.

Specifically look at the AICPA website. What is the function of the AICPA? What standards to they enforce? How can you become a member? Are there any ethical implications? Do you think it is a good idea to have an organization like this?

) Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2017. As of that date, Jackson had the following trial balance: Debit Credit Accounts payable $ 60,000 Accounts receivable $ 50,000 Additional paid-in capital 60,000 Buildings (net) (20-year life) 140,000 Cash and short-term investments 70,000 Common stock 300,000 Equipment (net) (8-year life) 240,000 Intangible assets (indefinite life) 110,000 Land 90,000 Long-term liabilities (mature 12/31/19) 180,000 Retained earnings, 1/1/17 120,000 Supplies 20,000 Totals $ 720,000 $ 720,000 - During 2017, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2018, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2017, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years. Matthews decided to use the equity method for this investment. Required: (A.) Prepare consolidation worksheet entries for December 31, 2017. (B.) Prepare consolidation worksheet entries for December 31, 2018.

wo items are omitted from each of the following three lists of cost of goods sold data from a manufacturing company income statement. Determine the amounts of the missing items, identifying them by letter.

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $58,000 and $100,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments

On January 1, 2018, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable lease payments equal to 3% of Taco King’s sales revenue, with a quarterly sales minimum of $460,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous 5-year period, Taco King has generated quarterly sales of over $680,000. Fogelman’s interest rate, known by Taco King, was 4%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entries for Taco King at the beginning of the lease at January 1, 2018. 2. Prepare the journal entries for Taco King at April 1, 2018. First quarter sales were $690,000. Amortization is recorded quarterly.

Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. Cast Iron’s December 31, 2021, fiscal year-end inventory consisted of the following (listed in chronological order of acquisition):

The replacement cost of the grills throughout 2022 was $700. Cast Iron sold 34,000 grills during 2022. The company's selling price is set at 200% of the current replacement cost.

Required:
1. & 2. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 under two different assumptions. First, that Cast Iron purchased 35,000 units and, second, that Cast Iron purchased 18,500 units during the year.
4. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2022 assuming that Cast Iron purchased 35,000 units (as per the first assumption) and 18,500 units (as per the second assumption) during the year and uses the FIFO inventory cost method rather than the LIFO method.

Cost of Goods Manufactured for a Manufacturing Company

Two items are omitted from each of the following three lists of cost of goods manufactured statement data. Determine the amounts of the missing items, identifying them by letter.

United States Motors Inc. (USMI) manufactures automobiles and light trucks and distributes them for sale to consumers through franchised retail outlets. As part of the franchise agreement, dealerships must provide monthly financial statements following the USMI accounting procedures manual. USMI has developed the following financial profile of an average dealership that sells 3,100 new vehicles annually:

USMI is considering a major expansion of its dealership network. The vice president of marketing has asked Jack Snyder, corporate controller, to develop some measure of the risk associated with the addition of these franchises. Jack estimates that 90% of the mixed costs shown are variable for purposes of this analysis. He also suggests performing regression analyses on the various components of the mixed costs to more definitively determine their variability.

Required:

1. Calculate the composite dealership profit if 4,400 units are sold.

3. The regression equation that Jack Snyder developed to project annual sales of a dealership has an R-squared of 60% and a standard error of the estimate of $9,300,000. If the projected annual sales for a dealership total $58,900,000, determine the approximate 95% confidence interval for Jack’s prediction of sales. (Hint: The 95% confidence interval uses 2 standard errors in determining the interval.)

The following information relates to YogaGuru for the year ended 30 June 2020.

Required: Prepare an Income Statement , a fully classified Balance Sheet in narrative format and a Statement of Changes in Equity for the year ended 30 June 2020 for YogaGuru.

Income Statement:

Fully narrative Balance Sheet:

Statement of Changes in Equity

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows:

Required:

Answer each question independently based on the original data:

1. What is the product's CM ratio?

2. Use the CM ratio to determine the break-even point in dollar sales.

3. If this year's sales increase by $59,000 and fixed expenses do not change, how much will net operating income increase?

4-a. What is the degree of operating leverage based on last year's sales?

4-b. Assume the president expects this year's sales to increase by 13%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year?

5. The sales manager is convinced that a 12% reduction in the selling price, combined with a $69,000 increase in advertising, would increase this year's unit sales by 25%.

a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented?

b. Do you recommend implementing the sales manager's suggestions?

6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.30 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $1,440,000 net operating income as last year? Do not prepare an income statement; use the incremental analysis approach.

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.

Last year, the company sold 30,000 of these balls, with the following results:

Required:

1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level.

2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls?

3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year?

4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs?

5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls?

6. Refer to the data in (5) above.

a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year?

b. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as sold last year). Prepare a contribution format income statement and Compute the degree of operating leverage.

Case 2: Sam’s Paint and Drywall

Questions:

1. Determine each of the 5 ratios listed in the table below. Note also that a list of ratios and the equations are included in this document (at the end).
2. Evaluate each ratio against Dun and Bradstreet’s Key Business Ratios on industry norms (given on the following page).

1

Palmer Hand Clinic has the following accounts and balances:

Cash, $2,350
Accounts Receivable, $280
Professional Equipment, $1,200
Office Equipment, $6,700
Accounts Payable, $4,380
P. Palmer, Capital, $2,000
Income from Services, $6,000
Rent Expense, $1,850

What is the amount of owner's equity?

a.$6,150

b.$4,150

c.$8,000

d.$2,000

2

Which of the following is an example of an asset?

a.Accounts Payable

b.Outstanding Rent

c.Prepaid Insurance

d.Capital

3

When an owner withdraws cash from the business, it results in a decrease in:

a.Cash and Long-term Liabilities.

b.Cash and Contingent Liabilities.

c.Cash and Accounts Payable.

d.Cash and Accounts Receivable.

e.Cash and Capital.

4

If an owner invests his or her computer, printer, and cash in the business, there is an increase in:

a.Computer Equipment, Cash, and Capital.

b.Cash and Accounts Payable.

c.Cash and Drawing.

d.Computer Equipment, Accounts Payable, and Drawing.

e.Computer Equipment and Expenses.

5

Magna Company paid $2,400 for a 6-month liability insurance policy. At the time of payment, this transaction should be recorded as

a.Insurance Expense, $400.

b.Insurance Expense, $2,400.

c.Prepaid Insurance, $2,400.

d.Prepaid Insurance, $400.

6

The purchase of an asset (like Equipment) on account will

a.increase total liabilities and decrease total assets.

b.increase total assets and increase total liabilities.

c.increase total assets and increase owner's equity.

d.have no effect on total assets or total liabilities.

e.increase total assets and decrease owner's equity.

7

Petkus Company paid Perkins Products, a creditor, on account, $7,500. What are the effects on the fundamental account equation?

a.Assets increase $7,500; liabilities decrease $7,500; owner's equity, no effect.

b.Assets decrease $7,500; liabilities, no effect; owner's equity decreases $7,500.

c.Assets increase $7,500; liabilities, no effect; owner's equity increases $7,500.

d.Assets decrease $7,500; liabilities decrease $7,500; owner's equity, no effect.

8

Jamie's Lighting Company paid rent for the month, $2,500. What are the effects on the fundamental accounting equation?

a.Assets increase $2,500; liabilities, no effect; owner's equity increases $2,500.

b.Assets decrease $2,500; liabilities, decrease $2,500; owner's equity, no effect.

c.Assets decrease $2,500; liabilities, no effect; owner's equity increases $2,500.

d.Assets decrease $2,500; liabilities, no effect; owner's equity decreases $2,500.