Required information
[The following information applies to the questions displayed below.]
“We really need to get this new material-handling equipment in operation just after the new year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can get a short-term loan down at MetroBank.” This statement by Beth Davies-Lowry, president of Intercoastal Electronics Company, concluded a meeting she had called with the firm’s top management. Intercoastal is a small, rapidly growing wholesaler of consumer electronic products. The firm’s main product lines are small kitchen appliances and power tools. Marcia Wilcox, Intercoastal’s General Manager of Marketing, has recently completed a sales forecast. She believes the company’s sales during the first quarter of 20x1 will increase by 10 percent each month over the previous month’s sales. Then Wilcox expects sales to remain constant for several months. Intercoastal’s projected balance sheet as of December 31, 20x0, is as follows:
| Cash | $ | 35,000 | |
| Accounts receivable | 288,000 | ||
| Marketable securities | 20,000 | ||
| Inventory | 154,000 | ||
| Buildings and equipment (net of accumulated depreciation) | 550,000 | ||
| Total assets | $ | 1,047,000 | |
| Accounts payable | $ | 220,500 | |
| Bond interest payable | 5,000 | ||
| Property taxes payable | 6,000 | ||
| Bonds payable (8%; due in 20x6) | 150,000 | ||
| Common stock | 500,000 | ||
| Retained earnings | 165,500 | ||
| Total liabilities and stockholders’ equity | $ | 1,047,000 | |
Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of 20x1. In the process, the following information has been accumulated:
Projected sales for December of 20x0 are $400,000. Credit sales typically are 80 percent of total sales. Intercoastal’s credit experience indicates that 10 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month.
Intercoastal’s cost of goods sold generally runs at 70 percent of sales. Inventory is purchased on account, and 25 percent of each month’s purchases are paid during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to half of the next month’s projected cost of goods sold.
Hanson has estimated that Intercoastal’s other monthly expenses will be as follows:
| Sales salaries | $ | 18,000 | |
| Advertising and promotion | 16,000 | ||
| Administrative salaries | 18,000 | ||
| Depreciation | 30,000 | ||
| Interest on bonds | 1,000 | ||
| Property taxes | 1,500 | ||
In addition, sales commissions run at the rate of 3 percent of sales.
Intercoastal’s president, Davies-Lowry, has indicated that the firm should invest $110,000 in an automated inventory-handling system to control the movement of inventory in the firm’s warehouse just after the new year begins. These equipment purchases will be financed primarily from the firm’s cash and marketable securities. However, Davies-Lowry believes that Intercoastal needs to keep a minimum cash balance of $30,000. If necessary, the remainder of the equipment purchases will be financed using short-term credit from a local bank. The minimum period for such a loan is three months. Hanson believes short-term interest rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary, Davies-Lowry has decided it should be paid off by the end of the first quarter if possible.
Intercoastal’s board of directors has indicated an intention to declare and pay dividends of $50,000 on the last day of each quarter.
The interest on any short-term borrowing will be paid when the loan is repaid. Interest on Intercoastal’s bonds is paid semiannually on January 31 and July 31 for the preceding six-month period.
Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period.
Required:
Prepare Intercoastal Electronics Company’s master budget for the first quarter of 20x1 by completing the following schedules and statements.
In: Accounting
[The following information applies to the questions displayed below.]
“We really need to get this new material-handling equipment in operation just after the new year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can get a short-term loan down at MetroBank.” This statement by Beth Davies-Lowry, president of Intercoastal Electronics Company, concluded a meeting she had called with the firm’s top management. Intercoastal is a small, rapidly growing wholesaler of consumer electronic products. The firm’s main product lines are small kitchen appliances and power tools. Marcia Wilcox, Intercoastal’s General Manager of Marketing, has recently completed a sales forecast. She believes the company’s sales during the first quarter of 20x1 will increase by 10 percent each month over the previous month’s sales. Then Wilcox expects sales to remain constant for several months. Intercoastal’s projected balance sheet as of December 31, 20x0, is as follows:
| Cash | $ | 35,000 | |
| Accounts receivable | 405,000 | ||
| Marketable securities | 25,000 | ||
| Inventory | 231,000 | ||
| Buildings and equipment (net of accumulated depreciation) | 545,000 | ||
| Total assets | $ | 1,241,000 | |
| Accounts payable | $ | 264,600 | |
| Bond interest payable | 3,125 | ||
| Property taxes payable | 2,400 | ||
| Bonds payable (5%; due in 20x6) | 150,000 | ||
| Common stock | 500,000 | ||
| Retained earnings | 320,875 | ||
| Total liabilities and stockholders’ equity | $ | 1,241,000 | |
Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of 20x1. In the process, the following information has been accumulated:
Projected sales for December of 20x0 are $600,000. Credit sales typically are 75 percent of total sales. Intercoastal’s credit experience indicates that 10 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month.
Intercoastal’s cost of goods sold generally runs at 70 percent of sales. Inventory is purchased on account, and 40 percent of each month’s purchases are paid during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to half of the next month’s projected cost of goods sold.
Hanson has estimated that Intercoastal’s other monthly expenses will be as follows:
| Sales salaries | $ | 30,000 | |
| Advertising and promotion | 16,000 | ||
| Administrative salaries | 30,000 | ||
| Depreciation | 25,000 | ||
| Interest on bonds | 625 | ||
| Property taxes | 600 | ||
In addition, sales commissions run at the rate of 3 percent of sales.
Intercoastal’s president, Davies-Lowry, has indicated that the firm should invest $105,000 in an automated inventory-handling system to control the movement of inventory in the firm’s warehouse just after the new year begins. These equipment purchases will be financed primarily from the firm’s cash and marketable securities. However, Davies-Lowry believes that Intercoastal needs to keep a minimum cash balance of $15,000. If necessary, the remainder of the equipment purchases will be financed using short-term credit from a local bank. The minimum period for such a loan is three months. Hanson believes short-term interest rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary, Davies-Lowry has decided it should be paid off by the end of the first quarter if possible.
Intercoastal’s board of directors has indicated an intention to declare and pay dividends of $75,000 on the last day of each quarter.
The interest on any short-term borrowing will be paid when the loan is repaid. Interest on Intercoastal’s bonds is paid semiannually on January 31 and July 31 for the preceding six-month period.
Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period.
Required:
Prepare Intercoastal Electronics Company’s master budget for the first quarter of 20x1 by completing the following schedules and statements.
In: Accounting
Blue DevilCorporation manufactures and sells wireless keyboards. Expected sales of keyboardsfor upcoming months are as follows:March50,000April55,000May60,000June52,000July58,000November37,000December39,000Management likes to maintain a finished goods inventory equal to 20% of the next month's estimated sales.Required:Prepare the company'sproduction budget for the secondquarter of this year. Include a column for each month and a total column for the entire quarter.
In: Accounting
Economists would like to know how sticky wages are. However, one issue that makes this difficult is there isn't a log of high frequency data on wages. Most data on wages is reported
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annually |
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weekly |
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monthly |
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hourly |
A change in investment spending can affect supply as well as demand. However, supply will not be affected if
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the new equipment does not add new technology |
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the new equipment adds new technology |
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if no additional workers are hired along with the new equipment |
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the new equipment simply replaces old equipment |
If investment spending on net adds to the capital stock, we would expect that
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output would decline |
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at first aggregate supply increases and later aggregate demand increases |
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at first aggregate demand increases and later aggregate supply increases |
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both aggregate demand and aggregate supply increase simultaneously |
A change to personal income tax rates has both an income and a substitution effect on labor supply. If personal income tax rates decline,
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both the income effect and the substitution effect would lead people to decrease labor supply |
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both the income effect and the substitution effect would lead people to increase labor supply |
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the income effect would lead people to decrease labor supply while the substitution effect would lead people to increase labor supply |
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the income effect would lead people to increase labor supply while the substitution effect would lead people to decrease labor supply |
In: Economics
Patti Devine owns Devine Decorating. One of her most popular items is the Remind-a-Chime digital clock. This programmable clock issues "voice-based" reminders of important events like birthdays, anniversaries, etc. Following is the Remind-a-Chime inventory activity for January. The clocks on hand at January 1 had a unit cost of $140.
| Date | Purchases | Sales | Amt on Hand |
| 1 Jan | 40 | ||
| 5 Jan | 60 units @ $150 each | 100 | |
| 16 Jan | 70 units @ $255 each | 30 | |
| 23 Jan | 90 units @ $170 each | 120 | |
| 28 Jan | 55 units @ $295 each | 65 |
(a) If Devine uses the first-in, first-out (FIFO) inventory method (periodic approach), what values would be assigned to ending inventory and cost of goods sold? How much is gross profit? (b) If Devine uses the last-in, first-out (LIFO) inventory method (periodic approach), what values would be assigned to ending inventory and cost of goods sold? How much is gross profit? (c) If Devine uses the weighted-average inventory method (periodic approach), what values would be assigned to ending inventory and cost of goods sold? How much is gros
In: Accounting
Priya Industries, a software manufacturer, uses the periodic inventory system. They had the following transactions for the month of June: Beginning Inventory 400 units @ $32 per unit Purchase #1 420 units @ $33 per unit Purchase #2 480 units @ $35 per unit Purchase #3 500 units @ $37 per unit Purchase #4 550 units @ $39 per unit Priya sold 1,330 units throughout the period. Required: 1. Calculate the a) Ending Inventory and b) Cost of Goods Sold, assuming that the company uses the Last-in, First-out (LIFO) inventory valuation method. 2. Calculate the a) Ending Inventory and b) Cost of Goods Sold, assuming that the company uses the First-in, First-out (FIFO) inventory valuation method. 3. Calculate the a) Ending Inventory and b) Cost of Goods Sold, assuming that the company uses the Average Cost inventory valuation method. 4. Which inventory valuation method produces the highest Net Income? Which method produces the highest Ending Inventory? Which method reduces taxes? 5. What method would Priya Industries most likely use for the physical flow of the inventory? (This means, how would they physically move the inventory out of their warehouse). Why?
In: Accounting
Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $213,000 and the following divisional results.
| Division | |||||||||
| I | II | III | IV | ||||||
| Sales | $250,000 | $200,000 | $500,000 | $450,000 | |||||
| Cost of goods sold | 200,000 | 192,000 | 300,000 | 250,000 | |||||
| Selling and administrative expenses | 75,000 | 60,000 | 60,000 | 50,000 | |||||
| Income (loss) from operations | $ (25,000) | $ (52,000) | $140,000 | $150,000 | |||||
| I | II | III | IV | ||||||||||
| Cost of goods sold | 70 | % | 90 | % | 80 | % | 75 | % | |||||
| Selling and administrative expenses | 40 | 60 | 50 | 60 |
Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II’s unavoidable fixed costs are allocated equally to the continuing divisions.
In: Accounting
In: Accounting
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
| Current assets as of March 31: | ||
| Cash | $ |
8,500 |
| Accounts receivable | $ |
24,000 |
| Inventory | $ |
45,600 |
| Building and equipment, net | $ |
121,200 |
| Accounts payable | $ |
27,300 |
| Common stock | $ |
150,000 |
| Retained earnings | $ |
22,000 |
The gross margin is 25% of sales.
Actual and budgeted sales data:
| March (actual) | $ | 60,000 |
| April | $ | 76,000 |
| May | $ | 81,000 |
| June | $ | 106,000 |
| July | $ | 57,000 |
Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.
Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.
One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.
Monthly expenses are as follows: commissions, 12% of sales; rent, $3,300 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $909 per month (includes depreciation on new assets).
Equipment costing $2,500 will be purchased for cash in April.
Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Required:
Using the preceding data:
1. Complete the following schedule:
2. Complete the following:
3. Complete the following cash budget:
4. Prepare an absorption costing income statement for the quarter ended June 30.
5. Prepare a balance sheet as of June 30.
Complete the following schedule:
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Complete the following:
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Complete the following cash budget: (Cash deficiency, repayments and interest should be indicated by a minus sign.)
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Prepare an absorption costing income statement for the quarter ended June 30.
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Prepare a balance sheet as of June 30.
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In: Accounting
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
| Current assets as of March 31: | ||
| Cash | $ |
8,500 |
| Accounts receivable | $ |
24,000 |
| Inventory | $ |
45,600 |
| Building and equipment, net | $ |
121,200 |
| Accounts payable | $ |
27,300 |
| Common stock | $ |
150,000 |
| Retained earnings | $ |
22,000 |
The gross margin is 25% of sales.
Actual and budgeted sales data:
| March (actual) | $ | 60,000 |
| April | $ | 76,000 |
| May | $ | 81,000 |
| June | $ | 106,000 |
| July | $ | 57,000 |
Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.
Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.
One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.
Monthly expenses are as follows: commissions, 12% of sales; rent, $3,300 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $909 per month (includes depreciation on new assets).
Equipment costing $2,500 will be purchased for cash in April.
Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Required:
Using the preceding data:
1. Complete the following schedule:
2. Complete the following:
3. Complete the following cash budget:
4. Prepare an absorption costing income statement for the quarter ended June 30.
5. Prepare a balance sheet as of June 30.
Complete the following schedule:
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Complete the following:
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Complete the following cash budget: (Cash deficiency, repayments and interest should be indicated by a minus sign.)
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Prepare an absorption costing income statement for the quarter ended June 30.
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Prepare a balance sheet as of June 30.
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In: Accounting