My question about the Allowance Method is why do you still estimate a total of the allowance of doubtful accounts when you are going to figure out who will not pay at the end anyway?
In: Accounting
On January 1, 2018, Instaform, Inc., issued 10% bonds with a
face amount of $54 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 12%. Interest is paid semiannually. (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-a. Determine the price of the bonds at January 1,
2018.
1-b. Prepare the journal entry to record their
issuance by Instaform.
2-a. Assume the market rate was 9%. Determine the
price of the bonds at January 1, 2018.
2-b. Assume the market rate was 9%. Prepare the
journal entry to record their issuance by Instaform.
3. Assume Broadcourt Electronics purchased the
entire issue in a private placement of the bonds. Using the data in
requirement 2, prepare the journal entry to record the purchase by
Broadcourt.
In: Accounting
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Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $4,140,000 investment in equipment with a useful life of five years and no salvage value. Holston Company’s discount rate is 16%. The project would provide net operating income each year for five years as follows: |
| Sales | $ | 3,400,000 | |
| Variable expenses | 1,450,000 | ||
| Contribution margin | 1,950,000 | ||
| Fixed expenses: | |||
| Advertising, salaries, and other
fixed out-of-pocket costs |
$670,000 | ||
| Depreciation | 670,000 | ||
| Total fixed expenses | 1,340,000 | ||
| Net operating income | $ | 610,000 | |
|
Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. |
| Required: |
| 1. |
Compute the project's net present value. (Use the appropriate table to determine the discount factor(s), intermediate calculations and final answer to the nearest dollar amount.) |
| 2. |
Compute the project's simple rate of return. (Round your answer to 1 decimal place. i.e. 0.123 should be considered as 12.3%.) |
| 3-a. | Would the company want Derrick to pursue this investment opportunity? | ||||
|
| 3-b. | Would Derrick be inclined to pursue this investment opportunity? | ||||
|
In: Accounting
Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Lon, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Lon has gathered the following investment information.
| 1. | Five used vans would cost a total of $75,300 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation. | |
| 2. | Ten drivers would have to be employed at a total payroll expense of $47,990. | |
| 3. | Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $15,990, Maintenance $3,310, Repairs $4,000, Insurance $4,200, and Advertising $2,510. | |
| 4. | Lon has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 15%. Use this rate for cost of capital. | |
| 5. | Lon expects each van to make ten round trips weekly and carry an average of six students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12.05 for a round-trip ticket. |
(a)
Determine the annual (1) net income and (2) net annual cash flows
for the commuter service. (Round answers to 0 decimal
places, e.g. 125.)
| Net income | $ ?????? | |
| Net annual cash flows | $ ?????? |
(b)
Compute (1) the cash payback period and (2) the annual rate of
return. (Round answers to 2 decimal places, e.g.
10.50.)
| Cash payback period | ???? years | ||
| Annual rate of return | ???? % |
(c)
Compute the net present value of the commuter service.
(Round answer to 0 decimal places, e.g. 125. If the net
present value is negative, use either a negative sign preceding the
number eg -45 or parentheses eg (45). For
calculation purposes, use 5 decimal places as displayed in the
factor table provided.)
| Net present value | ? |
In: Accounting
In: Accounting
In: Accounting
Jeeler's Netballs is a manufacturer of high-quality basketballs and volleyballs. Setup costs are driven by the number of batches. Equipment and maintenance costs increase with the number of machine-hours, and lease rent is paid per square foot. Capacity of the facility is 14,000 square feet, and Jeeler is using only 80% of this capacity. Jeeler records the cost of unused capacity as a separate line item and not as a product cost. The following is the budgeted information for Jeeler:
|
Jeeler's Netballs |
|
|
Budgeted Costs and Activities |
|
|
For the Year Ended December 31, 2017 |
|
|
Direct materials—basketballs |
$219,800 |
|
Direct materials—volleyballs |
464,150 |
|
Direct manufacturing labor—basketballs |
111,200 |
|
Direct manufacturing labor—volleyballs |
110,250 |
|
Setup |
99,000 |
|
Equipment and maintenance costs |
120,000 |
|
Lease rent |
168,000 |
|
Total |
$1,292,400 |
Other budget information follows:
|
Basketballs |
Volleyballs |
|
|
Number of balls |
57,000 |
120,000 |
|
Machine-hours |
13,000 |
12,000 |
|
Number of setups |
200 |
250 |
|
Square footage of production space used |
3,450 |
7,750 |
1.Calculate the budgeted cost per unit of cost driver for each indirect cost pool.
2.What is the budgeted cost of unused capacity?
3.What is the budgeted total cost and the cost per unit of resources used to produce (a) basketballs and (b) volleyballs?
4.Why might excess capacity be beneficial for JeelerJeeler? What are some of the issues JeelerJeeler should consider before increasing production to use the space?
In: Accounting
The Stellar Inc., a manufacturer of low-sugar, low-sodium,
low-cholesterol TV dinners, would like to increase its market share
in the Sunbelt. In order to do so, Stellar has decided to locate a
new factory in the Panama City area. Stellar will either buy or
lease a site depending upon which is more advantageous. The site
location committee has narrowed down the available sites to the
following three very similar buildings that will meet their
needs.
Building A: Purchase for a cash price of $618,100,
useful life 26 years.
Building B: Lease for 26 years with annual lease
payments of $70,340 being made at the beginning of the year.
Building C: Purchase for $653,200 cash. This
building is larger than needed; however, the excess space can be
sublet for 26 years at a net annual rental of $6,540. Rental
payments will be received at the end of each year. The Stellar Inc.
has no aversion to being a landlord.
Click here to view factor tables
In which building would you recommend that The Stellar Inc. locate,
assuming a 12% cost of funds? (Round factor values to 5
decimal places, e.g. 1.25124 and final answer to 0 decimal places,
e.g. 458,581.)
|
Net Present Value |
||
|---|---|---|
|
Building A |
$enter a dollar amount rounded to 0 decimal places | |
|
Building B |
$enter a dollar amount rounded to 0 decimal places | |
|
Building C |
$enter a dollar amount rounded to 0 decimal places |
| The Stellar Inc. should locate itself in | select a building |
In: Accounting
Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing.
Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,580,000 based on production of 350,000 handheld consoles and 85,000 home consoles. Direct labor and direct materials costs were as follows:
| Handheld | Home | Total | |||||||
| Direct labor | $ | 1,570,000 | $ | 405,000 | $ | 1,975,000 | |||
| Materials | 770,000 | 707,000 | 1,477,000 | ||||||
Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows:
| Activity Level | ||||||
| Cost Driver | Costs Assigned | Handheld | Home | Total | ||
| Number of production runs | $ | 840,000 | 45 | 15 | 60 | |
| Quality tests performed | 544,000 | 14 | 20 | 34 | ||
| Shipping orders processed | 196,000 | 100 | 40 | 140 | ||
| Total overhead | $ | 1,580,000 | ||||
Required:
a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round "Total cost per unit" to 2 decimal places.)
b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? (Do not round intermediate calculations. Round "Total cost per unit" to 2 decimal places.)
In: Accounting
The accounting records of Wall’s China Shop reflected the
following balances as of January 1, Year 3:
| Cash | $ |
17,700 |
||
| Beginning inventory | 20,680 | (220 @ $94) | ||
| Common stock | 14,700 | |||
| Retained earnings |
23,680 |
|||
The following five transactions occurred in Year 3:
Required
a. Compute the cost of goods sold and ending
inventory, assuming (1) FIFO cost flow, (2) LIFO cost flow, and (3)
weighted-average cost flow. Compute the income tax expense for each
method.
b. Use a vertical model to show the Year 3 income
statement, balance sheet, and statement of cash flows under FIFO,
LIFO, and weighted average. (Hint: Record the events under
an accounting equation before preparing the statements.)
In: Accounting
When preparing government-wide statements, which of the following is not true?
Multiple Choice
Entries are necessary to adjust revenues to the accrual basis, record expenses not recognized under the modified accrual basis.
Entries are necessary to eliminate fiduciary funds.
General capital assets, general long-term debt, and internal service funds are added through worksheet journal entries.
Worksheet entries eliminate elements of the modified accrual basis fund statements that do not conform to accrual accounting, such as expenditures for capital assets and principal repayments.
In: Accounting
The capital accounts of Trent Henry and Tim Chou have balances of $147,400 and $92,600, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry’s interest for $27,400 and one-fourth of Chou’s interest for $19,000. Clarke contributes $75,000 cash to the partnership, for which she is to receive an ownership equity of $75,000.
| Required: | |
| A. | On December 31, journalize the entries to record the admission of (1) Gilbert and (2) Clarke. Refer to the Chart of Accounts for exact wording of account titles. |
| B. | What are the capital balances of each partner after the admission of the new partners? |
In: Accounting
Assume that you are the owner of a wholesale store and that you operate as a sole trader. On April 1, 2019 you had the following items in your business:
Stock, $14,500,000; Motor vehicles, $15,000,000; Creditors/Accounts payable- J. Downey $1,500,000, P. Wright $2,000,000; Cash in hand, $300,000; Pre-paid insurance, $80,000; Bank loan, $4,000,000; Furniture & fittings, $3,600,000; Accrued rent, $100,000; Cash at Bank, $12,000,000; Debtors/Accounts receivable-A. Howard $3,000,000, S. Simpson $2,800,000; K. Kirk $350,000.
During April 2019 the following business were transacted:
April 1- Bought goods on credit from B. Burke $4,500,000.
3- Paid rent with cheque $150,000.
5- Sold goods on credit to A. Harvey, $5,600,000.
7- Cash sales, $400,000.
10- Paid electricity bill $130,000 cash.
12- Paid J. Downey $1,000,000 by cheque.
15- Sold goods on credit to S.Simpson, $7,000,000.
15- Paid P. Wright $1,500,000 by cheque.
18- S.Simpson paid $3,500,000 by cheque.
19- Bought goods on credit from F. Smith, $2,400,000.
22- Sold goods for cash to T. Royal, $1,800,000.
24- Returned damaged goods valued at $300,000 to B.Burke.
25- Paid wages by cheque, $3,000,000.
27- Paid insurance $70,000 cash.
28- Paid $50,000 cash for transportation charge for goods bought from F. Daley.
28- Received a cheque for $2,200,000 from A. Howard.
29- Sold goods on credit to V. James, $6,200,000.
29- Miscellaneous expenses paid with cheque, $1,250,000.
29- Bought goods for cash from C. Croft for $350,000.
30- Banked $1,000,000.
30- A. Harvey returned incorrect goods delivered to him valued at $200,000.
30- The balance on K. Kirk’s account was written off as irrecoverable.
30- Received $300,000 cash as commission for selling goods for D. Riley.
Notes:
(i) On April 30, 2019 stock on hand was valued at $11,000,000.
(ii) Office furniture and motor vehicles are to be depreciated at 10% and 20% per annum respectively using the straight line method.
(iii) $100,000 in rent was owed on April 30, 2019.
(iv) On April 30, 2019 wages paid in advance amounted to $200,000.
(v) There was no accumulated depreciation on fixed assets as at April 1, 2019.
Required:
Use the above information to prepare the following for the month of April 2019
(g) The Sales Ledger.
(h) The Purchases Ledger.
(i) The General/Nominal Ledger.
In: Accounting
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1.
Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10% next year, but the firm’s cost structure will remain the same.
| T-1 | T-2 | |||||
| Sales | $ | 285,000 | $ | 328,000 | ||
| Variable costs: | ||||||
| Cost of goods sold | 87,000 | 164,000 | ||||
| Selling & administrative | 27,000 | 67,000 | ||||
| Contribution margin | $ | 171,000 | $ | 97,000 | ||
| Fixed expenses: | ||||||
| Fixed corporate costs | 77,000 | 92,000 | ||||
| Fixed selling and administrative | 29,000 | 38,000 | ||||
| Total fixed expenses | $ | 106,000 | $ | 130,000 | ||
| Operating income | $ | 65,000 | $ | (33,000 | ) | |
Required:
1. Find the expected change in annual operating income by dropping T-2 and selling only T-1.
2. By what percentage would sales from T-1 have to increase in order to make up the financial loss from dropping T-2? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).)
3. What is the required percentage increase in sales from T-1 to compensate for lost margin from T-2, if total fixed costs can be reduced by $54,000? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).)
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In: Accounting
Sinkal Co. was formed on January 1, 2018 as a wholly owned foreign subsidiary of a U.S. corporation. Sinkal's functional currency was the stickle (§). The following transactions and events occurred during 2018: Jan. 1 Sinkal issued common stock for §1,000,000. June 30 Sinkal paid dividends of §20,000. Dec. 31 Sinkal reported net income of §80,000 for the year. Exchange rates for 2018 were: Jan.1 § 1 = $ 0.42 June 30 § 1 = $ 0.46 Dec.31 § 1 = $ 0.48 Weighted average rate for the year § 1 = $ 0.44 What was the amount of the translation adjustment for 2018? Multiple Choice $52,000 negative translation adjustment. $62,800 negative translation adjustment. $62,800 positive translation adjustment. $440,000 negative translation adjustment. $26,000 positive translation adjustment.
In: Accounting