explain how the ledger provides the information needed to prepare the operating statement?

What are the three categories used within the statement of cash flows? WHY are these categories important for understanding an organization's cash situation?

Revenue and cash receipts journals; accounts receivable subsidiary and general ledgers

Transactions related to revenue and cash receipts completed by Crowne Business Services Co. during the period April 2–30 are as follows:

Apr. 2.		Issued Invoice No. 793 to Ohr Co., $6,970.
Apr. 5.		Received cash from Mendez Co. for the balance owed on its account.
Apr. 6.		Issued Invoice No. 794 to Pinecrest Co., $2,510.
Apr. 13.		Issued Invoice No. 795 to Shilo Co., $3,740.
		Post revenue and collections to the accounts receivable subsidiary ledger.
Apr. 15.		Received cash from Pinecrest Co. for the balance owed on April 1.
Apr. 16.		Issued Invoice No. 796 to Pinecrest Co., $7,810. Post revenue and collections to the accounts receivable subsidiary ledger.
Apr. 19.		Received cash from Ohr Co. for the balance due on invoice of April 2.
Apr. 20.		Received cash from Pinecrest Co. for balance due on invoice of April 6.
Apr. 22.		Issued Invoice No. 797 to Mendez Co., $10,280.
Apr. 25.		Received $2,840 note receivable in partial settlement of the balance due on the Shilo Co. account.
Apr. 30.		Received cash from fees earned, $17,550. Post revenue and collections to the accounts receivable subsidiary ledger.

Required:

1. Insert the following balances in the general ledger as of April 1:

11	Cash	$15,970
12	Accounts Receivable	19,450
14	Notes Receivable	8,460
41	Fees Earned	-

After completing the recording of the transactions in the journals in part 3, total each of the columns of the special journals, and post the individual entries and totals to the general ledger. Insert account balances after the last posting. When posting to the general ledger, post in chronological order. However, if there is more than one entry on the same date, be sure to post transactions from the revenue journal before posting transactions from the cash receipts journal.

If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

GENERAL LEDGER
Date	Item	Post. Ref.	Debit	Credit	Balance Dr.	Balance Cr.
Account: Cash # 11
Apr. 1	Balance	✔
Apr. 30
Account: Accounts Receivable # 12
Apr. 1	Balance	✔
Account: Notes Receivable # 14
Apr. 1	Balance	✔
Account: Fees Earned # 41

2. Insert the following balances in the accounts receivable subsidiary ledger as of April 1:

Mendez Co.	$11,180
Ohr Co.	-
Pinecrest Co.	8,270
Shilo Co.	-

After completing the recording of the transactions in the journals in part 3, post to the accounts receivable subsidiary ledger in chronological order, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer's account before recording a cash receipt. If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
Date	Item	Post. Ref.	Debit	Credit	Balance
Account: Mendez Co.
Apr. 1	Balance	✔
Account: Ohr Co.
Account: Pinecrest Co.
Apr. 1	Balance	✔
Account: Shilo Co.

3. Prepare a single-column revenue journal (p. 40) and a cash receipts journal (p. 36). Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. The Fees Earned column is used to record cash fees.

4. Using the two special journals and the two-column general journal (p. 1), journalize the transactions for April. Post to the accounts receivable subsidiary ledger, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer’s account before recording a cash receipt.

5. Total each of the columns of the special journals and post the individual entries and totals to the general ledger. Insert account balances after the last posting.

If an amount box does not require an entry, leave it blank.

REVENUE JOURNAL				PAGE 40
Date	Invoice No.	Account Debited	Post. Ref.	Accounts Rec. Dr. Fees Earned Cr.
			✔
			✔
			✔
			✔
			✔
				() ()

CASH RECEIPTS JOURNAL					PAGE 36
Date	Account Credited	Post. Ref.	Fees Earned Cr.	Accts. Rec. Cr.	Cash Dr.
		✔
		✔
		✔
		✔
		✔
			()	()	()

JOURNAL				PAGE 1
Date	Description	Post Ref.	Debit	Credit

6. What is the sum of the customer balances?
$

Does the sum of the customer balances agree with the accounts receivable controlling account in the general ledger?
  

7. Would an automated system omit postings to a controlling account as performed in step 5 for Accounts Receivable?

Scenario Mr. Mat lives in Barbados and is desirous of starting his own business from inheritances that his parents left him. He approached you for advice on the best type of business to register. Mr. Mat said he would love to gain benefits from any tax relief that is available that the government has to offer.

1. Would it be more beneficial to start a Company or an Individual Trading Business. In your answer you should outline why setting up either a company, or a trading as business is more advantageous over the other.

You are to cover matters like:

a. Tax rates

b. Available tax reliefs and or tax credits

c. Ease of operations of a company, as well as ease of operations of an individual trading business

2.  it is more beneficial to operate as a company or as a sole trader.

Menlo Company distributes a single product. The company’s sales and expenses for last month follow:

	Total			Per Unit
Sales	$	302,000		$	20
Variable expenses		211,400			14
Contribution margin		90,600		$	6
Fixed expenses		75,000
Net operating income	$	15,600

What is the monthly break even point in unit sales and in dollar sales?

Break-even point in unit sales units Break-even point in sales dollars

2.	Without resorting to computations, what is the total contribution margin at the break-even point?

	Total contribution margin

3-a.	How many units would have to be sold each month to earn a target profit of $36,000? Use the formula method.

	Units sold

-b. Verify your answer by preparing a contribution format income statement at the target sales level Menlo Company Contribution Income Statement Total Per unit Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).
Dollars Percentage Margin of safety %

5.	What is the company’s CM ratio? If monthly sales increase by $53,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

	CM ratio % Net operating income increases by

Transactions related to revenue and cash receipts completed by Crowne Business Services Co. during the period April 2–30 are as follows:

Apr. 2.		Issued Invoice No. 793 to Ohr Co., $7,580.
Apr. 5.		Received cash from Mendez Co. for the balance owed on its account.
Apr. 6.		Issued Invoice No. 794 to Pinecrest Co., $2,730.
Apr. 13.		Issued Invoice No. 795 to Shilo Co., $4,070.
		Post revenue and collections to the accounts receivable subsidiary ledger.
Apr. 15.		Received cash from Pinecrest Co. for the balance owed on April 1.
Apr. 16.		Issued Invoice No. 796 to Pinecrest Co., $8,500. Post revenue and collections to the accounts receivable subsidiary ledger.
Apr. 19.		Received cash from Ohr Co. for the balance due on invoice of April 2.
Apr. 20.		Received cash from Pinecrest Co. for balance due on invoice of April 6.
Apr. 22.		Issued Invoice No. 797 to Mendez Co., $11,190.
Apr. 25.		Received $3,090 note receivable in partial settlement of the balance due on the Shilo Co. account.
Apr. 30.		Received cash from fees earned, $19,090. Post revenue and collections to the accounts receivable subsidiary ledger.

Required:

1. Insert the following balances in the general ledger as of April 1:

11	Cash	$16,990
12	Accounts Receivable	20,690
14	Notes Receivable	9,000
41	Fees Earned	-

After completing the recording of the transactions in the journals in part 3, total each of the columns of the special journals, and post the individual entries and totals to the general ledger. Insert account balances after the last posting. When posting to the general ledger, post in chronological order. However, if there is more than one entry on the same date, be sure to post transactions from the revenue journal before posting transactions from the cash receipts journal.

If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

2. Insert the following balances in the accounts receivable subsidiary ledger as of April 1:

Mendez Co.	$11,890
Ohr Co.	-
Pinecrest Co.	8,800
Shilo Co.	-

After completing the recording of the transactions in the journals in part 3, post to the accounts receivable subsidiary ledger in chronological order, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer's account before recording a cash receipt. If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

3. Prepare a single-column revenue journal (p. 40) and a cash receipts journal (p. 36). Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. The Fees Earned column is used to record cash fees.

4. Using the two special journals and the two-column general journal (p. 1), journalize the transactions for April. Post to the accounts receivable subsidiary ledger, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer’s account before recording a cash receipt.

5. Total each of the columns of the special journals and post the individual entries and totals to the general ledger. Insert account balances after the last posting.

If an amount box does not require an entry, leave it blank.

6. What is the sum of the customer balances?
$

Does the sum of the customer balances agree with the accounts receivable controlling account in the general ledger?
  

7. Would an automated system omit postings to a controlling account as performed in step 5 for Accounts Receivable?

Problem 6-30B Comprehensive problem including special order, outsourcing, and segment elimination decisions

Rooney Company’s electronics division produces a DVD player. The vice president in charge of the division is evaluating the income statement showing annual revenues and expenses associated with the division’s operating activities. The relevant range for the production and sale of the DVD player is between 50,000 and 150,000 units per year.

Income Statement
Revenue (60,000 units × $70)	$4,200,000
Unit-level variable costs
Materials cost (60,000 × $40)	(2,400,000)
Labor cost (60,000 × $16)	(960,000)
Manufacturing overhead (60,000 × $3)	(180,000)
Shipping and handling (60,000 × $1)	(60,000)
Sales commissions (60,000 × $4)	(240,000)
Contribution margin	360,000
Fixed expenses
Advertising costs related to the division	(60,000)
Salary of production supervisor	(252,000)
Allocated companywide facility-level expenses	(240,000)
Net loss	$   (192,000)

Required (Consider each of the requirements independently.)

An international trading firm has approached top management about buying 30,000 DVD players for $63 each. It would sell the product in a foreign country, so that Rooney’s existing customers would not be affected. Because the offer was made directly to top management, no sales commissions on the transaction would be involved. Based on quantitative features alone, should Rooney accept the special order? Support your answer with appropriate computations. Specifically, by what amount would profitability increase or decrease if the special order is accepted?

Rooney has an opportunity to buy the 60,000 DVD players it currently makes from a foreign manufacturer for $62 each. The manufacturer has a good reputation for reliability and quality, and Rooney could continue to use its own logo, advertising program, and sales force to distribute the products. Should Rooney buy the DVD players or continue to make them? Support your answer with appropriate computations. Specifically, how much more or less would it cost to buy the DVD players than to make them? Would your answer change if the volume of sales were increased to 140,000 units?

Because the electronics division is currently operating at a loss, should it be eliminated from the company’s operations? Support your answer with appropriate computations. Specifically, by what amount would the segment’s elimination increase or decrease profitability?

Problem 6-28B Eliminating a segment

Pam’s Grocery Store has three departments—meat, canned food, and produce—each of which has its own manager. All departments are housed in a single store. Recently, the produce department has been suffering a net loss and is expected to continue doing so. Last year’s income statements follow:

	Meat Department	Canned Food Department	Produce Department
Sales	$ 350,000	$ 320,000	$ 237,500
Cost of goods sold	(160,000)	(190,000)	(147,500)
Gross margin	190,000	130,000	90,000
Departmental manager’s salary	(21,000)	(15,000)	(17,500)
Rent on store lease	(40,000)	(40,000)	(40,000)
Store utilities	(10,000)	(10,000)	(10,000)
Other general expenses	(49,000)	(49,000)	(49,000)
Net income (loss)	$ 70,000	$   16,000	$ (26,500)

Required

Determine whether to eliminate the produce department.

Confirm the conclusion you reached in Requirement a by preparing a before and an after income statement, assuming that the produce department is eliminated.

Eliminating the produce department would allow the meat department to expand. It could add seafood to its products. Suppose that management estimates that offering seafood would increase the store’s net earnings by $80,000. Would this information affect the decision that you made in Requirement a? Explain your answer.

[The following information applies to the questions displayed below.]

Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 49,000 units and sold 44,000 units.

  

Variable costs per unit:
Manufacturing:
Direct materials	$	28
Direct labor	$	14
Variable manufacturing overhead	$	4
Variable selling and administrative	$	6
Fixed costs per year:
Fixed manufacturing overhead	$	686,000
Fixed selling and administrative expenses	$	510,000

  

The company sold 32,000 units in the East region and 12,000 units in the West region. It determined that $230,000 of its fixed selling and administrative expenses is traceable to the West region, $180,000 is traceable to the East region, and the remaining $100,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

   

1.

value:
0.66 points

Required information

Required:
1.	What is the unit product cost under variable costing?

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

2.

value:
0.66 points

Required information

2.	What is the unit product cost under absorption costing?

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

3.

value:
0.66 points

Required information

3.	What is the company’s total contribution margin under variable costing?

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

4.

value:
0.66 points

Required information

4.	What is the company’s net operating income (loss) under variable costing?

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

5.

value:
0.66 points

Required information

5.	What is the company’s total gross margin under absorption costing?

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

6.

value:
0.66 points

Required information

6.	What is the company’s net operating income (loss) under absorption costing?

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

7.

value:
0.66 points

Required information

7.	What is the amount of the difference between the variable costing and absorption costing net operating incomes (losses)?

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

8.

value:
0.66 points

Required information

1.	What is the company’s break-even point in unit sales?

  
   

  

2.	Is it above or below the actual sales volume?
	Below Above

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

9.

value:
0.66 points

Required information

9.	If the sales volumes in the East and West regions had been reversed, what would be the company’s overall break-even point in unit sales?

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

10.

value:
0.66 points

Required information

10.	What would have been the company’s variable costing net operating income (loss) if it had produced and sold 44,000 units?

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

11.

value:
0.66 points

Required information

11.	What would have been the company’s absorption costing net operating income (loss) if it had produced and sold 44,000 units?

  
      

rev: 07_07_2017_QC_CS-92071

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

12.

value:
0.66 points

Required information

12.	If the company produces 5,000 fewer units than it sells in its second year of operations, will absorption costing net operating income be higher or lower than variable costing net operating income in Year 2?

       

	Higher
	Lower

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

13.

value:
0.66 points

Required information

13.	Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions.

  
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

14.

value:
0.66 points

Required information

14.

Diego is considering eliminating the West region because an internally generated report suggests the region’s total gross margin in the first year of operations was $14,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it drops the West region, the East region's sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2?

      
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

15.

value:
0.76 points

Required information

15.	Assume the West region invests $39,000 in a new advertising campaign in Year 2 that increases its unit sales by 20%. If all else remains constant, what would be the profit impact of pursuing the advertising campaign?

    
      

References

eBook & Resources

WorksheetLearning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method.Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ.

Difficulty: 2 MediumLearning Objective: 06-02 Prepare income statements using both variable and absorption costing.Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions.

Check my work

I have 1 done, but am unsure about 2 and 3

You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.

The company sells many styles of earrings, but all are sold for the same price—$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):

January (actual)	21,200	June (budget)	51,200
February (actual)	27,200	July (budget)	31,200
March (actual)	41,200	August (budget)	29,200
April (budget)	66,200	September (budget)	26,200
May (budget)	101,200

The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.

Suppliers are paid $4.60 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.

Monthly operating expenses for the company are given below:

Variable:
Sales commissions		4	% of sales
Fixed:
Advertising	$	260,000
Rent	$	24,000
Salaries	$	118,000
Utilities	$	10,000
Insurance	$	3,600
Depreciation	$	20,000

Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $19,000 in new equipment during May and $46,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $19,500 each quarter, payable in the first month of the following quarter.

The company’s balance sheet as of March 31 is given below:

Assets
Cash	$	80,000
Accounts receivable ($43,520 February sales; $527,360 March sales)		570,880
Inventory		121,808
Prepaid insurance		24,000
Property and equipment (net)		1,010,000
Total assets	$	1,806,688
Liabilities and Stockholders’ Equity
Accounts payable	$	106,000
Dividends payable		19,500
Common stock		920,000
Retained earnings		761,188
Total liabilities and stockholders’ equity	$	1,806,688

The company maintains a minimum cash balance of $56,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $56,000 in cash.

Required:

Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules:

1. a. A sales budget, by month and in total.

    b. A schedule of expected cash collections, by month and in total.

    c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total.

    d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.

2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $56,000.

3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.

4. A budgeted balance sheet as of June 30.

19.       Which of the following terms describes the act of stealing cash revenue after it has been recorded in the accounting system?

            A) cash larceny

            B) register disbursement

            C) less cash scheme

            D) skimming

20.          Diana, a forensic accountant, obtained the financial statements of Ryer Inc. from its accountant. She noted that Ryer generated a profit of $152.7 million in the previous year. This is an example of

            A) third-party data.

            B) quantitative data.

            C) fourth-party data.

            D) qualitative data.

21.          Which of the following is an example of nonexistent data?

            A) The check slips for the month of June and July were misplaced. The bank maintains a copy of this at the client's request.

            B) Some entries were changed to reflect a higher value of assets. The invoices containing the original amount are yet to be altered.

            C) The client refused to divulge the details of the sale contract. The supplier does not have a copy of the contract.

            D) The company maintains documents supporting transactions only for three years. The transaction in question was made five years ago.

22.          Which of the following is an advantage of third-party data source?

            A) It can be obtained independently by the forensic accountant, without the assistance of the subject or engaging counsel.

            B) It is outside the subject's ability to manipulate.

            C) It is direct and accessible.

            D) It can give an insight on the environment in which the subject operates.

23.          If the opposing party fails to comply with discovery requests or does not have access to        the data, it may be necessary for the attorney to issue a

            A) writ.

            B) subpoena.

            C) order.

            D) search warrant.

24.          Which of the following is a feature of a normal distribution?

            A) It is positively skewed.

            B) Its mean, median, and mode are all equal.

            C) It is completely described by its median and variance.

            D) The normal distribution curve is s-shaped.

The comparative balance sheets of Maynard Movie Theater Company at June ​30, 2018 and 2017​, reported the​ following:

			June 30,
			2018	2017
	Current assets:
	Cash and cash equivalents		$18,700	$15,000
	Accounts receivable		14,600	21,500
	Inventories		63,300	60,800
	Prepaid expenses		17,200	2,800
	Current liabilities:
	Accounts payable		$57,900	$55,900
	Accrued liabilities		36,900	16,900
	Income tax payable		15,100	10,100

Acquisition of land				Proceeds from sale of long-
by issuing note payable		$104,000		term investment. . . . . .			$13,400
Amortization expense. . . . . . . .		4,300		Depreciation expense. . . . . . .			16,000
Payment of cash dividend. . . .		41,000		Cash purchase of building. . .			41,000
Cash purchase of				Net income. . . . . . . . . . . . . . . .			25,000
	equipment. . . . . . . . . . . . .	50,000		Issuance of common
Issuance of long-term note				stock for cash. . . . . . . .			17,000
payable to borrow cash		43,000		Stock dividend. . . . . . . . . . . . .			10,000

1.
Prepare Maynard Movie Theater ​Company's statement of cash flows for the year ended June ​30, 2018​, using the indirect method to report cash flows from operating activities. Report noncash investing and financing activities in an accompanying schedule.
2.
Evaluate Maynard​'s cash flows for the year. Mention all three categories of cash​ flows, and give the rationale for your evaluation.

Requirement 1. Prepare Maynard Movie Theater ​Company's statement of cash flows for the year ended June ​30, 2018​, using the indirect method to report cash flows from operating activities. Report noncash investing and financing activities in an accompanying schedule.
Start by completing the cash flows from operating activities. Then complete the remaining statement of cash flows and the accompanying schedule of noncash investing and financing activities. ​(Use parentheses or a minus sign for numbers to be subtracted and for a net decrease in​ cash.)

Maynard Movie Theater Company
	Statement of Cash Flows (Indirect Method)
	Year Ended June 30, 2018
	Cash flows from operating activities:
	Adjustments to reconcile net income to
	net cash provided by (used for) operating activities:
	Net cash provided by (used for) operating activities

	Cash flows from investing activities:
	Net cash provided by (used for) investing activities

	Cash flows from financing activities:
	Net cash provided by (used for) financing activities

	Net increase (decrease) in cash
	Noncash investing and financing activities:

Requirement 2. Evaluate Maynard​'s cash flows for the year. Mention all three categories of cash​ flows, and give the rationale for your evaluation.
Maynard Movie Theater ​Company's cash flows look
▼
strong
weak
.
▼
Financing activities
Investing activities
Operating activities
are the main source of cash.
Maynard Movie Theater generated a
▼
negative
positive
cash flow from investing activities largely due to the
▼
purchase
sale
of equipment and a building. It generally bodes
▼
poorly
well
for the future when a company invests in new capital assets.
Maynard Movie Theater generated a
▼
negative
positive
cash flow from financing activities. These financing activities indicate that the Maynard Movie Theater
▼
is considered
is not considered
​credit-worthy to be able to issue​ long-term notes. We also see that the company has
▼
insufficient
sufficient
funds to pay cash dividends.

Wayne Manufacturing Company has four operating divisions. During the first quarter of 2016, the company reported the divisional results shown below and aggregate income shown below.
Division:	North	South	East	West	Aggregate Income
Sales	$             459,000	$              351,000	$              279,000	$              162,000
Cost of goods sold	270,000	225,000	243,000	135,000
Selling and administrative expenses	54,000	72,000	58,500	63,000
Income (loss) from operations	$             135,000	$                 54,000	$               (22,500)	$               (36,000)	$         130,500
Analysis reveals the following percentages of variable costs in each division.
Division:	North	South	East	West
Cost of goods sold	70%	80%	75%	90%
Selling and administrative expenses	40%	50%	65%	70%
Discontinuance of any division would save 50% of the fixed costs and expenses for that division.
Top management is very concerned about the unprofitable divisions (East and West). Consensus is that one or both of the divisions should be discontinued.
Instructions - Your solutions should be clearly labeled on Solutions of this workbook.
(a) Compute the contribution margin for the East and West Divisions. (See illustration 20-17 for guidance, if needed.)
(b) Prepare an incremental analysis concerning the possible discontinuance of (1) East Division and (2) West Division. What course of action do you recommend for each division? Should either be closed? (See illustration 20-18 for guidance, if needed.)
(c) Prepare a columnar condensed income statement for Wayne Manufacturing, assuming the division(s) that should be eliminated are eliminated. Use the CVP format. Remember: Closed division's unavoidable fixed costs are allocated equally to the continuing divisions. (See Illustrations 20-16 and 20-17 for guidance, if needed.)

From your readings in the Special Module on foreign currency translation adjustments, summarize U.S. GAAP and IFRS differences on this topic and from the example in that module of one item that goes in Accumulated Other Comprehensive Income can you find such treatment in a company's equity section, either a US parent company or a foreign parent company?

I know the differences between GAAP and IFRS, Can anybody give an example that goes in Accumulated other comprehensive income? and find such treatment in a company's equity section?

Mauro Products distributes a single product, a woven basket whose selling price is $14 per unit and whose variable expense is $12 per unit. The company’s monthly fixed expense is $4,200. 1. Calculate the company’s break-even point in unit sales. . Calculate the company’s break-even point in dollar sales. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales?