Transactions of Sky Company for the month of December 2017 are presented below: 1. The owner invested $400,000 to start his business. 2. Purchased equipment for $48,000, paying $12,000 cash and the remaining amount will be paid after 10 days. 3. Purchased office supplies on credit for $3,200. 4. Invested additional $160,000 cash in the business. 5. Services billed to customers amounted to $20,000. 6. Received a bill for $1,200 for advertising of the current month. 7. Paid $10,000 as salaries of the month. 8. The owner withdrew $1,400 cash from the business for his personal use. Required: a. Using the following table, show the effect of the above transactions on the accounting equation b. Prepare the income statement, statement of owner’s equity, and balance sheet of Sky Company on 31 December 2017
In: Accounting
Helix Company purchased tool sharpening equipment in April 1, 2010 for $72,000. The equipment was expected to have a useful life of four years, or 9,000 operating hours, and a residual value of $2,700. The equipment was used for 2,400 hours during 2010, 4,000 hours in 2011, 2,000 hours in 2012, and 600 hours in 2013.
Instructions: Determine the amount of depreciation expense for the years ended December 31, 2010, 2011, 2012, and 2013 by each of the following methods:
1. Straight-line
2. The units of activity method
3. Double Declining balance method
In: Accounting
Turner Video will invest $84,500 in a project. The firm’s cost of capital is 6 percent. The investment will provide the following inflows. Use Appendix A for an approximate answer but calculate your final answer using the formula and financial calculator methods.
| Year | Inflow | ||
| 1 | $ | 28,000 | |
| 2 | 30,000 | ||
| 3 | 34,000 | ||
| 4 | 38,000 | ||
| 5 | 42,000 | ||
The internal rate of return is 12 percent.
a. If the reinvestment assumption of the net
present value method is used, what will be the total value of the
inflows after five years? (Assume the inflows come at the end of
each year.) (Do not round intermediate calculations and
round your answer to 2 decimal places.)
Total value of inflows: ___________________.
b. If the reinvestment assumption of the internal
rate of return method is used, what will be the total value of the
inflows after five years? (Use the given internal rate of
return. Do not round intermediate calculations and round your
answer to 2 decimal places.)
Total value of inflows: ___________________.
c. Which investment assumption is
better?
| Reinvestment assumption of IRR | |
| Reinvestment assumption of NPV |
In: Accounting
a large hotel chain, has been using activity-based costing to determine the cost of a night's stay at their hotels.
One of the activities, "Inspection," occurs after a customer has checked out of a hotel room.
Fitzgerald
inspects every
10th
room and has been using "number of rooms inspected" as the cost driver for inspection costs. A significant component of inspection costs is the cost of the supplies used in each inspection.
Dawn
McAdams,
the chief inspector, is wondering whether inspection labor-hours might be a better cost driver for inspection costs.
Dawn
gathers information for weekly inspection costs, rooms inspected, and inspection labor-hours as follows:
|
Week |
Rooms Inspected |
Inspection Labor-Hours |
Inspection Costs |
|---|---|---|---|
|
Week 1 |
260 |
85 |
$1,800 |
|
Week 2 |
328 |
129 |
2,560 |
|
Week 3 |
341 |
101 |
2,310 |
|
Week 4 |
437 |
142 |
2,850 |
|
Week 5 |
200 |
67 |
1,460 |
|
Week 6 |
245 |
80 |
1,750 |
|
Week 7 |
258 |
127 |
1,780 |
|
Week 8 |
331 |
146 |
2,260 |
Dawn
runs regressions on each of the possible cost drivers and estimates these cost functions:
Inspection
Costs=$246.60
+
($6.17
x Number of rooms inspected)
Inspection
Costs=$787.71
+
($11.94
x Inspection labor-hours)
|
1. |
Explain why rooms inspected and inspection labor-hours are plausible cost drivers of inspection costs. |
|
2. |
Plot the data and regression line for rooms inspected and inspection costs. Plot the data and regression line for inspection labor-hours and inspection costs. Which cost driver of inspection costs would you choose? Explain. |
|
3. |
Dawn expects inspectors to inspect306 rooms and work for124 hours next week. Using the cost driver you chose in requirement 2, what amount of inspection costs shouldDawn budget? Explain any implications ofDawn choosing the cost driver you did not choose in requirement 2 to budget inspection costs. |
In: Accounting
Keller Construction is considering two new investments. Project
E calls for the purchase of earthmoving equipment. Project H
represents an investment in a hydraulic lift. Keller wishes to use
a net present value profile in comparing the projects. The
investment and cash flow patterns are as follows: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
| Project E | Project H | |||||||
| ($37,000 Investment) | ($35,000 Investment) | |||||||
| Year | Cash Flow | Year | Cash Flow | |||||
| 1 | $ | 9,000 | 1 | $ | 17,000 | |||
| 2 | 12,000 | 2 | 18,000 | |||||
| 3 | 18,000 | 3 | 17,000 | |||||
| 4 | 20,000 | |||||||
a. Determine the net present value of the projects
based on a zero percent discount rate.
Project E - ____________________
Project H - _____________________
b. Determine the net present value of the projects
based on a discount rate of 9 percent. (Do not round
intermediate calculations and round your answers to 2 decimal
places.)
Project E - ____________________
Project H - _____________________
c. If the projects are not mutually exclusive,
which project(s) would you accept if the discount rate is 9
percent?
| Project E | |
| Project H | |
| Both H and E |
In: Accounting
During the first month of its current fiscal year, Green Co. incurred repair costs of $24,000 on a machine that had 4 years of remaining depreciable life. The repair cost was inappropriately capitalized. Green Co. reported operating income of $164,000 for the current year.
a. Assuming that Green Co. took a full year's straight-line depreciation expense in the current year, calculate the operating income that should have been reported for the current year.
b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $932,000 and $1,012,000, respectively. Calculate ROI (based on operating income) for the current year using the originally reported data and then using corrected data. (Round your answers to 1 decimal place.)
c. Indicate the effect on ROI of subsequent years if the error is not corrected.
| ROI will be too low. | |
| ROI will be too high. | |
| ROI will remains the same. |
In: Accounting
Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
|
1 |
Estimated Fixed Cost |
Estimated Variable Cost (per unit sold) |
|
|
2 |
Production costs: |
||
|
3 |
Direct materials |
— |
$58.00 |
|
4 |
Direct labor |
— |
38.00 |
|
5 |
Factory overhead |
$194,000.00 |
20.00 |
|
6 |
Selling expenses: |
||
|
7 |
Sales salaries and commissions |
102,000.00 |
8.00 |
|
8 |
Advertising |
42,000.00 |
— |
|
9 |
Travel |
8,000.00 |
— |
|
10 |
Miscellaneous selling expense |
7,800.00 |
1.00 |
|
11 |
Administrative expenses: |
||
|
12 |
Office and officers’ salaries |
135,200.00 |
— |
|
13 |
Supplies |
10,000.00 |
2.00 |
|
14 |
Miscellaneous administrative expense |
14,600.00 |
1.00 |
|
15 |
Total |
$513,600.00 |
$128.00 |
It is expected that 21,400 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 26,000 units.
| Required: | |
| A. | Prepare an estimated income statement for 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. |
| B. | What is the expected contribution margin ratio? |
| C. | Determine the break-even sales in units and dollars. Round your answers to the nearest whole number. |
| D. | Construct a cost-volume-profit chart on your own paper. What is the break-even sales? |
| E. | What is the expected margin of safety in dollars and as a percentage of sales? Round your answers to the nearest whole number. |
| F. | Determine the operating leverage. Round to one decimal place. |
Income Statement
A. Prepare an estimated income statement for 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries.
|
Wolsey Industries Inc. |
|
Estimated Income Statement |
|
For the Year Ended December 31, 2016 |
|
1 |
||||
|
2 |
||||
|
3 |
||||
|
4 |
||||
|
5 |
||||
|
6 |
||||
|
7 |
||||
|
8 |
||||
|
9 |
Selling expenses: |
|||
|
10 |
||||
|
11 |
||||
|
12 |
||||
|
13 |
||||
|
14 |
||||
|
15 |
Administrative expenses: |
|||
|
16 |
||||
|
17 |
||||
|
18 |
||||
|
19 |
||||
|
20 |
Total expenses |
|||
|
21 |
Additional Questions
B. What is the expected contribution margin ratio?
C. Determine the break-even sales in units and dollars. Start by using the contribution margin ratio (part B.) and then round your answers to the nearest whole number.
| Units | units |
| Dollars | $ |
D. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
$
Final Questions
E. What is the expected margin of safety in dollars and as a percentage of sales? If applicable, use amounts previously computed and then round your answers to the nearest whole number.
| Dollars | $ |
| Percentage |
F. Determine the operating leverage. Round to one decimal place.
| Labels and Amount Descriptions | |
| Advertising | |
| Contribution margin | |
| Cost of goods sold | |
| Direct labor | |
| Direct materials | |
| Expenses | |
| Factory overhead | |
| Gross profit | |
| Income from operations | |
| Manufacturing margin | |
| Miscellaneous administrative expense | |
| Miscellaneous selling expense | |
| Office and officers’ salaries | |
| Sales | |
| Sales salaries and commissions | |
| Supplies | |
| Total administrative expenses | |
| Total expenses | |
| Total selling expenses | |
| Travel | |
| Variable cost of goods sold |
In: Accounting
18.(Determination of property tax rate)The City of Weston is preparing its budget for calendar year 2009. After estimating revenues from all other sources, the City calculates that it must raise $7,000,000 from property taxes. You are given the following information regarding the tax rate:
| Property taxes to be collected | $ 7,000,000 |
| Allowance for uncollectible property taxes = | 1% of the levy |
| Total assessed value of property at beginning of 2009 | $ 65,000,000 |
| Expected reduction in assessed value from appeals | $ 200,000 |
| Assessed value of City property, not subject to tax | $ 1,400,000 |
| Adjustments to assessed values for senior citizen exemptions | $ 1,000,000 |
a. Compute the gross amount of property taxes required to be levied.
b. Compute the tax rate per $100 of net assessed valuation.
c. Determine the amount of property tax that a home owner whose property is assessed at $35,000 will have to pay.
In: Accounting
In: Accounting
Why is it critical to reconcile the bank statement on a timely basis each month?
In: Accounting
Corp. had 468,000 shares of common stock outstanding. During 2021, it had the following transactions that affected the Common Stock account.
|
On January 1, 2021, Coronado Corp. had 468,000 shares of common stock outstanding. During 2021, it had the following transactions that affected the Common Stock account.
Determine the weighted-average number of shares outstanding as of December 31, 2021.
Assume that Coronado Corp. earned net income of $3,288,000 during 2021. In addition, it had 105,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2021. Compute earnings per share for 2021, using the weighted-average number of shares determined in part (a). (Round answer to 2 decimal places, e.g. $2.55.)
Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2021. (Round answer to 2 decimal places, e.g. $2.55.)
Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $411,000 (net of tax). Compute earnings per share for 2021. |
||||||||||||||||||||||||||
In: Accounting
Natalie has prepared the balance sheet and income statement of Cookie & Coffee Creations Inc. and would like you to prepare the cash flow statement. The comparative balance sheet of Cookie & Coffee Creations Inc. at October 31, 2020 for the years 2020 and 2019 and the income statement for the year ended October 31, 2020, are presented below.
Additional information:
1. Equipment (cost $4,500 and book value $3,000) was disposed of at the beginning of the year for $500 cash and replaced with new equipment purchased for $4,000 cash.
2. Additional equipment was bought for $14,000 on November 1, 2019. A $12,000 note payable was signed. The terms provide for equal semi-annual installment payments of $2,000 on May 1 and November 1 of each year, plus interest of 5% on the outstanding principal balance.
3. Other equipment was bought for $13,000 cash.
4. Dividends were declared on the preferred and common stock on October 15, 2020, to be paid on November 15, 2018.
5. Accounts payable relate only to merchandise creditors.
6. Prepaid expenses relate only to other operating expenses.
Instructions:
(a) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended October 31, 2020, using the indirect method.
*(b) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended October 31, 2020, using the direct method.
COOKIE & COFFEE CREATIONS INC.
Balance Sheet
October 31,
|
Assets |
2020 |
2019 |
|
Cash |
$ 22,324 |
$5,550 |
|
Accounts receivable |
3,250 |
2,710 |
|
Inventory |
7,897 |
7,450 |
|
Prepaid expenses |
5,800 |
6,050 |
|
Equipment |
102,000 |
75,500 |
|
Accumulated depreciation— |
||
|
equipment |
(25,200) |
(9,100) |
|
Total assets |
$116,071 |
$88,160 |
COOKIE & COFFEE CREATIONS INC.
Balance Sheet
October 31,
|
Liabilities and Stockholders’ Equity |
2020 |
2019 |
|
|
Accounts payable |
$ 1,150 |
$ 2,450 |
|
|
Income taxes payable |
9,251 |
7,200 |
|
|
Dividends payable |
27,000 |
27,000 |
|
|
Salaries and wages payable |
7,250 |
1,280 |
|
|
Interest payable |
188 |
0 |
|
|
Note payable |
10,000 |
0 |
|
|
Preferred stock, no par, $6 cumulative, |
|||
|
3,000 and 2,800 shares issued, |
|||
|
respectively |
15,000 |
14,000 |
|
|
Common stock, $1 par—25,180 shares |
|||
|
issued and outstanding |
25,180 |
25,180 |
|
|
Additional paid-in capital—treasury stock |
250 |
250 |
|
|
Retained earnings |
20,802 |
10,800 |
|
|
Total liabilities and stockholders’ equity |
$116,071 |
$88,160 |
COOKIE & COFFEE CREATIONS INC.
Income Statement
Year Ended October 31, 2020
|
Sales |
$485,625 |
|
|
Cost of goods sold |
222,694 |
|
|
Gross profit |
262,931 |
|
|
Operating expenses |
||
|
Salaries and wages expense |
$147,979 |
|
|
Depreciation expense |
17,600 |
|
|
Other operating expenses |
48,186 |
213,765 |
|
Income from operations |
49,166 |
|
|
Other expenses |
||
|
Interest expense |
$ 413 |
|
|
Loss on disposal of plant |
||
|
assets |
2,500 |
2,913 |
|
Income before income tax |
46,253 |
|
|
Income tax expense |
9,251 |
|
|
Net income |
$ 37,002 |
In: Accounting
What does liquidity mean for accounting purposes?
In what order should assets be listed on the balance sheet?
Can an account that is not listed in the chart of accounts be used to prepare journal entries? Why or why not?
What does posting to the general ledger mean?
What is the purpose of the trial balance?
In: Accounting
IceCap Hotels operates a series of northern European hotels and reports under IFRS. On June 30, 2016, IceCap purchased land for €3,000,000. IceCap reports land values on the balance sheet under Property, plant, and equipment. The appraisal value for the land (which you can assume is the same as the recoverable amount) was reported as:
| Appraisal Date | Land Value | ||
| 12/31/2016 | € | 3,150,000 | |
| 12/31/2017 | € | 2,750,000 | |
| 12/31/2018 | € | 2,850,000 | |
Required:
In: Accounting
Branif Leasing leases mechanical equipment to industrial consumers under sales-type leases that earn Branif a 10% rate of return for providing long-term financing. A lease agreement with Branson Construction specified 20 annual payments beginning December 31, 2018, the beginning of the lease. The estimated useful life of the leased equipment is 20 years with no residual value. Its cost to Branif was $936,492. The lease qualifies as a finance lease to Branson. Maintenance of the equipment was contracted for through a 20-year service agreement with Midway Service Company requiring 20 annual payments of $3,000 beginning December 31, 2018. Progressive Insurance Company charges Branif $3,000 annually for hazard insurance coverage on the equipment. Both companies use straightline depreciation or amortization. (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:
Prepare the appropriate entries for both the lessee and lessor to record the second lease payment and depreciation on December 31, 2019, under each of three independent assumptions:
1. The lessee pays maintenance costs as
incurred. The lessor pays insurance premiums as incurred. The lease
agreement requires annual payments of $100,000.
2. The contract specifies that the lessor pays
maintenance costs as incurred. The lessee’s lease payments were
increased to $103,000 to include an amount sufficient to reimburse
these costs.
3. The lessee’s lease payments of $103,000
included $3,000 for hazard insurance on the equipment rather than
maintenance.
In: Accounting