Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:
| Selling price per unit on the intermediate market | $ | 128 |
| Variable costs per unit | $ | 110 |
| Fixed costs per unit (based on capacity) | $ | 8 |
| Capacity in units | 25,000 | |
Sako Company has a Hi-Fi Division that could use this speaker in
one of its products. The Hi-Fi Division will need 5,000 speakers
per year. It has received a quote of $125 per speaker from another
manufacturer. Sako Company evaluates division managers on the basis
of divisional profits.
Required:
1. Assume the Audio Division sells only 20,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the
transfer take place?
2. Assume the Audio Division is selling 22,500 speakers per year to
outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
3. Assume the Audio Division is selling 25,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
In: Accounting
The Fashion Shoe Company operates a chain of women’s shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary.
The following data pertains to Shop 48 and is typical of the company’s many outlets:
| Per Pair of Shoes |
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| Selling price | $ | 30.00 | ||||
| Variable expenses: | ||||||
| Invoice cost | $ | 13.50 | ||||
| Sales commission | 4.50 | |||||
| Total variable expenses | $ | 18.00 | ||||
| Annual | ||||||
| Fixed expenses: | ||||||
| Advertising | $ | 30,000 | ||||
| Rent | 20,000 | |||||
| Salaries | 100,000 | |||||
| Total fixed expenses | $ | 150,000 | ||||
2. Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000 pairs of shoes sold each year. Clearly indicate the break-even point on the graph
3. If 12,000 pairs of shoes are sold in a year, what would be Shop 48’s net operating income (loss)?
4. The company is considering paying the Shop 48 store manager an incentive commission of 75 cents per pair of shoes (in addition to the salesperson’s commission). If this change is made, what will be the new break-even point in unit sales and dollar sales? (Do not round intermediate calculations. Round your final answers to the nearest whole number.)
4. The company is considering paying the Shop 48 store manager an incentive commission of 75 cents per pair of shoes (in addition to the salesperson’s commission). If this change is made, what will be the new break-even point in unit sales and dollar sales? (Do not round intermediate calculations. Round your final answers to the nearest whole number.)
5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 50 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating income (loss) if 15,000 pairs of shoes are sold?
6. Refer to the original data. The company is considering eliminating sales commissions entirely in its shops and increasing fixed salaries by $31,500 annually. If this change is made, what will Shop 48's new break-even point in unit sales and dollar sales? (Do not round intermediate calculations.)
In: Accounting
Question:
Need to identify accounting issues within the following 2 scenarios and how they should be handled:
Scenario 1:
At HLJ's 2017 year-end, the company held an inventory of 300 ounces of gold having a purchase cost of $1,150 U.S. per ounce (which at an exchange rate of $1 Canadian = $0.9388 U.S. resulted in a cost of $1,225 per ounce Canadian). At July 31, 2017, the market value for gold was $1,130 U.S. per ounce (also $1,130 Canadian). As a result, for fiscal 2017 year- end, gold inventory was written down by $28,500.
Currently, gold has increased in value to $1,305 U.S. per ounce ($1,350 Canadian). 200 ounces of the gold in the 2017 inventory will still be held by HLJ at its fiscal 2018 year-end.
Scenario 2:
In August 2017, HLJ initiated a new promotional program called "Engagement Embarrassment Insurance" (EEI) intended for individuals who purchase surprise diamond engagement rings for their prospective partners. If the marriage proposal is not accepted (or for any other reason within three months of purchase), HLJ will repurchase the ring from the customer.
HLJ will refund the original sales price of the diamond portion of the ring (on average $2,000) but will not provide a refund for the gold component of the ring (which averages $1,000) as HLJ considers the ring's band and setting to be custom-made for the customer, whereas each diamond has a grading certificate to ensure its individual features. The average cost of gold is $600, and $1,200 for diamond.
Since beginning the EEI program, the company has had, on average, 60 customers in the potential repurchase period at any point in time. Total number of rings sold under this program in fiscal 2018 is expected to be 240.
Useful information to know: The company has no debt other than accounts payable, the owners take a salary of $150,000 to $200,000 each. The company's pre tax income has, over the last few years been around $250,000. Their year end is July 31. They expect their sales to increase to $6 million in 2018, from last year's $5.4 million. The company uses ASPE, and taxes payable method of accounting.
In: Accounting
Reflect on this week's lecture and assignments. In your own words (150-200), summarize the key differences in accounting for partnerships versus accounting for corporations.
In: Accounting
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In: Accounting
The president of the retailer Prime Products has just approached the company’s bank with a request for a $30,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories. Because the company has had some difficulty in paying off its loans in the past, the loan officer has asked for a cash budget to help determine whether the loan should be made. The following data are available for the months April through June, during which the loan will be used:
On April 1, the start of the loan period, the cash balance will be $42,600. Accounts receivable on April 1 will total $187,700, of which $154,500 will be collected during April and $26,200 will be collected during May. The remainder will be uncollectible.
Past experience shows that 30% of a month’s sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% is bad debts that are never collected. Budgeted sales and expenses for the three-month period follow:
| April | May | June | ||||
| Sales (all on account) | $ | 280,000 | $ | 522,000 | $ | 299,000 |
| Merchandise purchases | $ | 241,000 | $ | 170,500 | $ | 139,500 |
| Payroll | $ | 23,000 | $ | 23,000 | $ | 26,600 |
| Lease payments | $ | 23,000 | $ | 23,000 | $ | 23,000 |
| Advertising | $ | 60,400 | $ | 60,400 | $ | 78,020 |
| Equipment purchases | $ | − | − | 108,000 | ||
| Depreciation | $ | 28,000 | $ | 28,000 | $ | 28,000 |
Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid in April, total $180,000.
In preparing the cash budget, assume that the $30,000 loan will be made in April and repaid in June. Interest on the loan will total $1,100.
Required:
1. Calculate the expected cash collections for April, May, and June, and for the three months in total.
2. Prepare a cash budget, by month and in total, for the three-month period.
In: Accounting
Sam Forbes and Jenny Hewes are senior vice-presidents of the First Creek Investment Council . They are co-directors of the company's pension fund management division, with Sam having responsibility for fixed income securities (primarily bonds) and Jneey being responsible for equity investments. A major new client has requested that council present an investment seminar to Executive Committee, and Forbes and Hewes, who will make the actual presentation, have asked you, a recent UCW graduate to help them.
to illustrate the common stock valuation process, Sam and Jenny have asked you to analyze the Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporarily heavy workloads. You are to answer the following questions.
a. Describe briefly the legal rights and privileges of common stockholders.
b. Assume that Temp Force is a constant growth company whose last dividend (Do, which was paid yesterday) was $2.00, and whose dividend is expected to grow indefinitely at a 5 percent rate.
(1.) What is the firm’s expected dividend stream over the next 3 years?
(2.) What is the firm’s current stock price?
(3.) What is the stock's expected value 1 year from now?
(4.) What are the expected dividend yield, the capital gains yield, and the total return during the first year?
c. Now assume that the stock is currently selling at $43.75. What is the expected rate of return on the stock? (
f. What would the stock price be if its dividends were expected to have zero growth?
g. Now assume that Temp Force is expected to experience supernormal growth of 30 percent for the next 3 years, then to return to its long-run constant growth rate of 5 percent. What is the stock's value under these conditions? What is its expected dividend yield and capital gains yield in Year 1? In Year 4? (
h. Is the stock price based more on long-term or short-term expectations? Answer this by finding the percentage of Temp Force current stock price based on dividends expected more than 3 years in the future.
i. Suppose Temp Force is expected to experience zero growth during the first 3 years and then to resume its steady-state growth of 5% in the fourth year. What is the stock's value now? What is its expected dividend yield and its capital gains yield in Year 1? In Year 4?
j. Finally, assume that Temp Force’s earnings and dividends are expected to decline by a constant 6 percent per year, that is, g = -5%. Why would anyone be willing to buy such a stock and at what price should it sell? What would be the dividend yield and capital gains yield in each year?
l. Temp Force recently issued preferred stock. It pays an annual dividend of $1.60, and the issue price was $25 per share. What is the expected return to an investor on this preferred stock?
In: Accounting
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In: Accounting
Use the following information to prepare a trial balance and
figure out the missing numbers.
Cash 720,000
Interest revenue 215,000
Bonds payable 485,000
Sales discounts 70,000
Sales returns and allowances 80,000
Equipment 1,470,000
Land 480,000
Accounts payable 490,000
Buildings 1,640,000
Notes payable (to banks) 300,000
Unsecured notes payable (long-term) 1,600,000
Notes receivable 445,700
Administrative and general expenses 220,000
Payroll taxes payable 177,591
Interest expense 175,750
Accumulated depreciation—equipment 292,000
Loss from impairment of plant assets 85,000
Rent payable (short-term) 45,000
Income taxes receivable 97,630
Long-term rental obligations 531,700
Accumulated depreciation- Buildings 270,200
Share capital—ordinary, €1 par value 200,000
Income taxes payable 98,362
Trading securities 70,000
Share capital—preference, €10 par value 150,000
Goodwill 192,420
Prepaid expenses 20,200
Selling expenses 100,000
Retained earnings ?
Purchases and sales transactions during the year were as
follows, the company uses the perpetual inventory system, and it
applies the FIFO cost flow
assumption to account for its inventory:
date purchases date sales
units Unit price units Unit price
1/1/18 30000 30.00 4/1/18 30000 35.00
3/4/18 15000 30.08 9/4/18 15000 36.00
6/5/18 7000 30.40 23/5/2018 3000 37.00
7/6/18 3500 30.50 4/6/18 1400 39.00
21/8/18 8000 30.80 23/11/18 10600 40.00
19/11/18 5000 30.90
all seal and purchase were in cash
if the account receivable in the beginning of the year had a balance 950000 allowance doubtful account had a credit balance 15000, management estimate that 9% of receivable will be uncollectable during the year. management wrote of 75000
Prepare the trial balance of the provided company after figuring out the missing number
In: Accounting
You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked you to perform a comprehensive analysis of the company’s financial statements, including comparing Lydex’s performance to its major competitors. The company’s financial statements for the last two years are as follows:
| Lydex Company Comparative Balance Sheet |
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| This Year | Last Year | |||
| Assets | ||||
| Current assets: | ||||
| Cash | $ | 880,000 | $ | 1,120,000 |
| Marketable securities | 0 | 300,000 | ||
| Accounts receivable, net | 2,380,000 | 1,480,000 | ||
| Inventory | 3,520,000 | 2,200,000 | ||
| Prepaid expenses | 240,000 | 180,000 | ||
| Total current assets | 7,020,000 | 5,280,000 | ||
| Plant and equipment, net | 9,360,000 | 8,970,000 | ||
| Total assets | $ | 16,380,000 | $ | 14,250,000 |
| Liabilities and Stockholders' Equity | ||||
| Liabilities: | ||||
| Current liabilities | $ | 3,930,000 | $ | 2,820,000 |
| Note payable, 10% | 3,620,000 | 3,020,000 | ||
| Total liabilities | 7,550,000 | 5,840,000 | ||
| Stockholders' equity: | ||||
| Common stock, $75 par value | 7,500,000 | 7,500,000 | ||
| Retained earnings | 1,330,000 | 910,000 | ||
| Total stockholders' equity | 8,830,000 | 8,410,000 | ||
| Total liabilities and stockholders' equity | $ | 16,380,000 | $ | 14,250,000 |
| Lydex Company Comparative Income Statement and Reconciliation |
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| This Year | Last Year | |||
| Sales (all on account) | $ | 15,780,000 | $ | 12,780,000 |
| Cost of goods sold | 12,624,000 | 9,585,000 | ||
| Gross margin | 3,156,000 | 3,195,000 | ||
| Selling and administrative expenses | 1,794,000 | 1,572,000 | ||
| Net operating income | 1,362,000 | 1,623,000 | ||
| Interest expense | 362,000 | 302,000 | ||
| Net income before taxes | 1,000,000 | 1,321,000 | ||
| Income taxes (30%) | 300,000 | 396,300 | ||
| Net income | 700,000 | 924,700 | ||
| Common dividends | 280,000 | 462,350 | ||
| Net income retained | 420,000 | 462,350 | ||
| Beginning retained earnings | 910,000 | 447,650 | ||
| Ending retained earnings | $ | 1,330,000 | $ | 910,000 |
To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:
| Current ratio | 2.3 | |
| Acid-test ratio | 1.0 | |
| Average collection period | 30 | days |
| Average sale period | 60 | days |
| Return on assets | 8.4 | % |
| Debt-to-equity ratio | 0.7 | |
| Times interest earned ratio | 5.7 | |
| Price-earnings ratio | 10 | |
rev: 04_27_2020_QC_CS-209476
Problem 14-15 Part 1
Required:
1. You decide first to assess the company’s performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places.)
a. The times interest earned ratio.
b. The debt-to-equity ratio.
c. The gross margin percentage.
d. The return on total assets. (Total assets at the beginning of last year were $12,990,000.)
e. The return on equity. (Stockholders’ equity at the beginning of last year totaled $7,947,650. There has been no change in common stock over the last two years.)
f. Is the company’s financial leverage positive or negative?
2. You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $78 per share and that at the end of last year it was $46. For both this year and last year, compute: (Round your "Percentage" answers to 1 decimal place and other intermediate and final answers to 2 decimal places.)
a. The earnings per share.
b. The dividend yield ratio.
c. The dividend payout ratio.
d. The price-earnings ratio.
e. The book value per share of common stock.
3. You decide, finally, to assess the company’s liquidity and asset management. For both this year and last year, compute:
a. Working capital.
b. The current ratio. (Round your final answers to 2 decimal places.)
c. The acid-test ratio. (Round your final answers to 2 decimal places.)
d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,590,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.)
e. The average sale period. (The inventory at the beginning of last year totaled $1,950,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.)
f. The operating cycle. (Round your intermediate calculations and final answers to 2 decimal place.)
g. The total asset turnover. (The total assets at the beginning of last year totaled $12,990,000.) (Round your final answers to 2 decimal places.)
In: Accounting
On January 1, Year 1, Camdenton Corporation issues $100,000 of 5% bonds maturing in 10 years when the market rate of interest is 4%. Interest is paid semiannually on June 30 and December 31. When using the PV function in Excel to compute the issue price of the bonds, the applicable interest payment (“PMT”) is:
a. 2500
b. 4000
c. 5000
In: Accounting
Questions
1. What are the 3 problems that might arise from the application of
ABC costing?
2. Describe and explain the evolution of a management control
system, including how
budgets became a major feature of that system.
3. What is an accounting tool and why is budgeting described as an
accounting tool?
4. Define kaizen budgeting and its importance for cost
management. How would you
incorporate kaizen budgeting in your organization? Give
example.
In: Accounting
Examine the statement of cash flows for Amazon. Where is Amazon generating its cash? What investments did Amazon make over the past fiscal year? Did Amazon have financing activities? How would you describe the overall cash position of your company? Again, use the notes to the financial statements (not ratio analysis) to support your findings.
In: Accounting
What is included in the equity portion of the debt to equity ratio? Is anything eliminated?
In: Accounting
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In: Accounting