[The following information applies to the questions displayed below.]
The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2016 and 2017.
| December 31 | 2016 | 2017 | ||||
| Cash | $ | 42,759 | $ | 6,324 | ||
| Accounts receivable | 23,210 | 18,197 | ||||
| Office supplies | 3,661 | 2,682 | ||||
| Office equipment | 112,390 | 119,717 | ||||
| Trucks | 43,980 | 52,980 | ||||
| Building | 0 | 146,610 | ||||
| Land | 0 | 36,583 | ||||
| Accounts payable | 61,020 | 30,264 | ||||
| Note payable | 0 | 83,193 | ||||
Required:
1. Prepare balance sheets for the business as of
December 31, 2016 and 2017. (Hint: Report only total
equity on the balance sheet and remember that total equity equals
the difference between assets and liabilities.)
In: Accounting
In the current year, Mick, Hank, and Dawn form Ares Corporation. Mick contributes land (a capital asset) having a $62,500 FMV in exchange for 200 shares of Ares stock. He purchased the land three years ago for $110,000. Hank contributes machinery (Sec. 1231 property purchased four years ago) having a $75,000 adjusted basis and a $37,500 FMV in exchange for 120 shares of Ares stock. Dawn contributes services worth $25,000 in exchange for 80 shares of Ares stock.
a. What is the amount of Mick's recognized gain or loss?
b. What is Mick's basis in his Ares shares? When does his holding period begin?
c. What is the amount of Hank's recognized gain or loss?
d. What is Hank's basis in his Ares shares? When does his holding period begin?
e. How much income, if any, does Dawn recognize?
f. What is Dawn's basis in her Ares shares? When does her holding period begin?
g. What is Ares's basis in the land and the machinery? When does its holding period begin? How does Ares treat the amount paid to Dawn for her services?
In: Accounting
No matter what your business, to stay in business you have to attract and retain customers. How do you do that? One way is to deliver a quality product or service in a high-quality manner. In other words, it is a combination of what is offered and how it is offered that determines whether a buyer will become a loyal customer. Training is one way to make sure that employees’ technical skills and customer-service skills meet customer expectations. When making a business decision, two basic elements are typically considered: costs and benefits. In the case of training, the issues are: (1) how much does the training reduce costs? and (2) how much does the training increase revenues? If the training sufficiently reduces costs and/or increases revenues, then there is a strong business case to conduct the training. Your ability to identify the potential sources of revenue and costs and to estimate their levels can be an important business skill. It can be the basis by which you can successfully make the case for needed training for your employees.
1) Given your answers to the previous questions (1. How much does the training reduce cost? and 2) How much does the training increase revenues - no data necessary), estimate the combined impact on the bottom line of direct and indirect savings generated by training. Extrapolate this number over a one- or two-year time period.
2) As you have read, training can increase revenue. The revenue could come from increased quality of the customer experience due to the impact of training. Consider, as an example, the following table of customer survey responses before and after training. The number are percentages of customers in each satisfaction category six months before and six months after employees received their training. A key change is a reduction in the "Very dissatisfied-will never return" category of customers, which fel from 15 to 5 percent.
A) What will this 10-percent change mean to the bottom line? Assume that the avergae revenue renerated per month by a customer is $500. Also assume that you have 500 customers.
B) What is the increased revenue due to the training for the past six months?
C) What would be the revenue generated if you had 1,000 customers?
| Very dissatisfied-will never return | OK, but would return | Satisfied- would return | |
| before training | 15 | 15 | 70 |
| After training | 5 | 15 | 80 |
3) Make assumptions about the costs in each of these direct cost categories and any other direct costs you can think of. Also assume that you can expect a 10-percent reduction in each of these categories. Generate the direct cost savings estimate due to the training. Training can also impact the bottom line by reducing indirect costs. These are costs that may not be obvious, but that are still important. For example, the safety of work processes or equipment can be improved due to training if workers handle materials or equipment more safely. Employee turnover can also be reduced, because of improved job satisfaction due to the training.
4)Assume that training results in a 10-percent reduction in your turnover rate. Also, assume that the cost of a turnover is 1.5 times the departing employee’s salary. For a given average employee salary of your choosing, estimate the reduced costs due to the reduction in turnover.
In: Accounting
the owner-manager (OM) would sell a part of his/her equity shares to outside investors, mostly because OM (1) needs external funds to finance growth & expansion; (2) wants to reduce the risk of business failure (risk sharing); and (3) enjoys the perks at the expense of outside investors.
(i) Suppose that OM, instead of selling equity shares, decides to sell unsecured long-term debt like debenture (under the firm's name). Would reasonable investors in the financial market be interested in buying the firm's debenture? If not, why not?
(ii) Do you think the role of auditors to those debenture-holders should be different from that to the equity-holders?
Hint for (i) - In reality, stock IPO (or venture capital) is only a plausible option for initial external financing for OM. So, short answer to the question would be no (because of market failure).
In: Accounting
On-the-Go, Inc., produces two models of traveling cases for laptop computers: the Programmer and the Executive. The bags have the following characteristics: Programmer Executive Selling price per bag $ 70 $ 100 Variable cost per bag $ 30 $ 50 Expected sales (bags) per year 8,000 12,000 The total fixed costs per year for the company are $661,000. Required: a. What is the anticipated level of profits for the expected sales volumes? b. Assuming that the product mix is the same at the break-even point, compute the break-even point. (Round your final answer up to the nearest whole unit.) c. If the product sales mix were to change to nine Programmer-style bags for each Executive-style bag, what would be the new break-even volume for On-the-Go? (Round your final answer up to the nearest whole unit.)
In: Accounting
Saldina Hardware is organized into 3 departments. The following sales and cost data are available for the prior year.
Dept A Dept B Dept C
Sales $265,000 $850,000 $900,000
Variable costs 106,000 510,000 720,000
Contribution Margin 159,000 340,000 180,000
Less fixed costs 60,000 85,000 92,000
Profit 99,000 255,000 88,000
Required:
a. What is the weighted average contribution margin ratio?
b. What level of sales is needed to earn a profit of $500,000 assuming the current mix?
c. Saldina Hardware places an advertisement in the local paper each week. All else equal, which department would you emphasize in the advertisement?
In: Accounting
Steinar loan a friend 9000 to buy some stock 3 years ago. I the current year the debt became worthless. a. How much is Steinar's deduction for bad debt for this year ? Assume he has no other capital gains or losses) $----- as a -'--- bad debt. b. What can Steinar do with the deduction not used this year? The remaining$---- can carried forward as--- and deducted in future years , subject to ----.
In: Accounting
Exercise 13-14 Comparison of Projects Using Net Present Value [LO13-2]
Labeau Products, Ltd., of Perth, Australia, has $18,000 to invest. The company is trying to decide between two alternative uses for the funds as follows:
| Invest in Project X |
Invest in Project Y |
|||
| Investment required | $ | 18,000 | $ | 18,000 |
| Annual cash inflows | $ | 7,000 | ||
| Single cash inflow at the end of 6 years | $ | 41,000 | ||
| Life of the project | 6 years | 6 years | ||
The company’s discount rate is 17%.
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.
Required:
1. Compute the net present value of Project X.
2. Compute the net present value of Project Y.
3. Which project would you recommend the company accept?
In: Accounting
4. John buys shares of stock in Acme Corp. on January 1, 2018 for $50. John dies July 1, 2018 when the stock has a fmv of $60. Mary inherits the stock from John’s estate. Mary sells the stock on September 1, 2018 for $80.
a. What is the gain /loss recognized by John’s estate? ______________
What is the character of the gain/loss? _____________
b. What is the gain /loss recognized by Mary? ______________
What is the character of the gain/loss? _____________
5. Same facts as in Question 4 except the value of the shares is $40 on John’s date of death.
a. What is the gain /loss recognized by John’s estate? ______________
What is the character of the gain/loss? _____________
b. What is the gain /loss recognized by Mary? ______________
What is the character of the gain/loss? _____________
6. Same facts as in Question 4 except Mary sells the stock for $30.
a. What is the gain /loss recognized by John’s estate? ______________
What is the character of the gain/loss? _____________
b. What is gain /loss recognized by Mary? ______________
What is the character of the gain/loss? _____________
7. Same facts as in Question 4 except Mary Sells the stock on May 1, 2019.
a. What is the gain /loss recognized by John’s estate? ______________
What is the character of the gain/loss? _____________
b. What is the gain /loss recognized by Mary? ______________
What is the character of the gain/loss? _____________
In: Accounting
1. John buys shares of stock in Acme Corp. on January 1, 2018 for $50. He gifts the stock to Mary on July 1, 2018 when the stock has a fair market value (fmv) of $60. Mary sells the stock on September 1 , 2018 for $80.
a. What is the gain /loss recognized by John? ______________
What is the character of the gain/loss? _____________
b. What is the gain /loss recognized by Mary? ______________
What is the character of the gain/loss? _____________
2. Same facts as in Question 1 except the value of the shares when the gift is made is $40.
a. What is the gain /loss recognized by John? ______________
What is the character of the gain/loss? _____________
b. What is the gain /loss recognized by Mary? ______________
What is the character of the gain/loss? _____________
3. Same facts as in Question 1 except Mary Sells the stock on May 1, 2019.
a. What is the gain /loss recognized by John? ______________
What is the character of the gain/loss? _____________
b. What is the gain /loss recognized by Mary? ______________
What is the character of the gain/loss? _____________
In: Accounting
Max, Nat and Roberta formed a partnership to operate a dry-cleaning business. They agreed to share initial capital and subsequent income in a 5:3:2 ratio. Each partner’s contributions to the new venture are listed next.
Max: $25,000 cash, dry-cleaning equipment worth $180,000 and the ability to keep the equipment in good operating condition.
Nat: $15,000 cash and extensive experience in the dry-cleaning business.
Roberta: $20,000 cash and a 2-year $75,000 note, payable to the firm, with 3 percent interest on the unpaid balance.
(a) Record the formation using the goodwill approach.
(b) Record the formation using the bonus approach.
In: Accounting
Derby Phones is considering the introduction of a new model of headphones with the following price and cost characteristics:
| Sales price | $ | 17 | per unit |
| Variable costs | 8 | per unit | |
| Fixed costs | 20,000 | per month | |
Assume that the projected number of units sold for the month is 6,500. Consider requirements (b), (c), and (d) independently of each other.
Required:
a. What will the operating profit be?
b. What is the impact on operating profit if the sales price decreases by 10 percent? Increases by 20 percent? (Do not round intermediate calculations.)
c. What is the impact on operating profit if variable costs per unit decrease by 10 percent? Increase by 20 percent? (Do not round intermediate calculations.)
d. Suppose that fixed costs for the year are 10 percent lower than projected, and variable costs per unit are 10 percent higher than projected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much? (Do not round intermediate calculations.)
In: Accounting
Derby Phones is considering the introduction of a new model of headphones with the following price and cost characteristics:
| Sales price | $ | 355 | per unit |
| Variable costs | 140 | per unit | |
| Fixed costs | 451,500 | per month | |
Required:
a. What number must Derby sell per month to break even?
Break even sales in units
b. What number must Derby sell to make an
operating profit of $279,500 for the month?
Number of units sold
In: Accounting
What are especif audit objectves? explain their relashionship to the general audit objectives
In: Accounting
Miller and Sons' static budget for 10,000 units of production includes $36,700 for direct materials, $45,400 for direct labor, variable utilities of $6,100, and supervisor salaries of $16,500. A flexible budget for 13,300 units of production would show
Round your final answer to the nearest dollar. Do not round interim calculations.
direct materials of $48,811, direct labor of $60,382, utilities of $8,113, and supervisor salaries of $16,500
direct materials of $48,811, direct labor of $60,382, utilities of $8,113, and supervisor salaries of $19,800
total variable costs of $104,700
the same cost structure in total
In: Accounting