You plan to take a personal loan of Rs.50,000 at a rate of 12% per annum to buy a computer. The loan is to be paid in 5 equal quarterly installments, the first of which is to be paid at the time of buying and rest four at end of each quarter henceforth.

1. What is the installment amount?

2. Prepare the amortization schedule.

Eaton Electronics uses a periodic inventory system. On March 31, Eaton has two plasma TVs on hand at a cost of $3,100 each (serial numbers 11534892 and 11534894). In April, the company purchases four more identical TVs from Toshiba for $2,250 each (serial numbers 11542631 through 11542634). In May, the company purchases five more identical TVs for $3,200 each (serial numbers 11550964 through 11550968). In June, Eaton sells two of these TVs (serial numbers 11534894 and 11542631). There were no additional purchases or sales during the remainder of the year.

Eaton Electronics uses the specific identification method. What is its cost of goods sold?

Multiple Choice

• $6,400

• $5,350

• $5,700

• $6,200

Sugar, Inc. sells $829,300 of goods during the year that have a cost of $578,600. Inventory was $31,583 at the beginning of the year and $35,838 at the end of the year.

What is the inventory turnover ratio? (Round your final answer to 1 decimal place.)

Multiple Choice

• 24.6 times

• 18.3 times

• 17.2 times

• 7.4 times

Pacific Company starts the year with a beginning inventory of 3,900 units at $7 per unit. The company purchases 5,900 units at $6 each in February and 2,900 units at $8 each in March. Pacific sells 1,400 units during this quarter. Pacific has a perpetual inventory system and uses the FIFO inventory costing method. What is the cost of goods sold for the quarter?

Multiple Choice

• $8,400

• $11,200

• $10,500

• $9,800

The beginning inventory at Funky Party Supplies and data on purchases and sales for a three-month period ending March 31, 2016, are as follows:

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X

FIFO

1. Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the first-in, first-out method

The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.

and the periodic inventory system.

Points:

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none

X

LIFO

2. Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the last-in, first-out method

The method of inventory costing based on the assumption that the cost of merchandise sold is the cost of the most recent purchases.

and the periodic inventory system.

Points:

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none

X

Weighted Average

3. Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the weighted average cost method

The method of inventory costing in which a weighted average unit cost for each item is computed each time a purchase is made.

and the periodic inventory system. Round the weighted average unit cost to the nearest cent.

Points:

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none

X

Final Question

4. Compare the gross profit and the March 31, 2016, inventories, using the following column headings.

Question not attempted.

Solution

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The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are shown below

none

X

FIFO

1. Determine the inventory on June 30, 2016, and the cost of goods sold for the three-month period, using the first-in, first-out method

The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.

and the periodic inventory system.

Points:

Feedback

Check My Work

none

X

LIFO

2. Determine the inventory on June 30, 2016, and the cost of goods sold for the three-month period, using the last-in, first-out method

The method of inventory costing based on the assumption that the cost of merchandise sold is the cost of the most recent purchases.

and the periodic inventory system.

Points:

Feedback

Check My Work

none

X

Weighted Average Cost Method

3. Determine the inventory on June 30, 2016, and the cost of goods sold for the three-month period, using the weighted average cost method

The method of inventory costing in which a weighted average unit cost for each item is computed each time a purchase is made.

and the periodic inventory system. Round the weighted average unit cost to the dollar.

Points:

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none

X

Final Question

4. Compare the gross profit and June 30, 2016, inventories using the following column headings:

Question not attempted.

Solution

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Shadee Corp. expects to sell 570 sun visors in May and 330 in June. Each visor sells for $16. Shadee’s beginning and ending finished goods inventories for May are 85 and 45 units, respectively. Ending finished goods inventory for June will be 65 units.

It expects the following unit sales for the third quarter:

July: 530
August: 450
September: 450

Sixty percent of Shadee’s sales are cash. Of the credit sales, 50 percent is collected in the month of the sale, 37 percent is collected during the following month, and 13 percent is never collected.

Required:

Calculate Shadee’s total cash receipts for August and September. Do not round calculations, round answer to nearest whole number.

5.  An annuity pays $20,000 per quarter for 25 years and the payments are made at the end of each quarter. The first payment is made at the end of the first quarter. If the annual interest rate is 8 percent compounded quarterly for the first 10 years, and 12 percent compounded quarterly thereafter, what is the present value of the annuity (i.e, value of the annuity now)?

6. Your objective is to have $4,000,000 in an account that earns 8% annual return when you retire in 40 years.

a) If you make an equal deposit at the end of every year to the account for the next 40 years, what is the annual deposit? Assume that your first deposit occurs at the end of next year.

b) You retire after 40 years and have $4,000,000 in the account as planned. You expect to live for another 25 years after retirement. Assume that you leave the $4,000,000 in the account that continues to earn 8% annual return.  You plan to make an equal withdrawal from the account every year for the next 25 years. The first withdrawal is made at the end of the first year after your retirement and the account balance would be depleted after you make the 25th How much can you withdraw at the end of each year for the next 25 years?

7. You have found your dream home. The selling price is $300,000. You will put $60,000 as down payment and obtain a 30-year fixed-rate mortgage loan at 4.5 percent annual interest rate for the rest.

a) You are required to make an equal payment every month for 360 months to pay off the balance on the loan. Assume that the first payment begins in one month after you obtained the loan. What will each monthly payment be?

b) If you want to pay off the remaining principal on your mortgage loan after 10 years (i.e., 120 months), how much will you have to pay? Assume that you have never missed your payments during the first ten years after you obtained the loan. The bank that you obtained the loan from imposes no charges for early payoff of the loan.

Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter:

1. Budgeted monthly absorption costing income statements for April–July are:

*Includes $33,000 of depreciation each month

1.

Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter:

1. Budgeted monthly absorption costing income statements for April–July are:

2. Sales are 20% for cash and 80% on account.

3. Sales on account are collected over a three-month period with 10% collected in the month of sale; 70% collected in the first month following the month of sale; and the remaining 20% collected in the second month following the month of sale. February’s sales totaled $285,000, and March’s sales totaled $300,000.

4. Inventory purchases are paid for within 15 days. Therefore, 50% of a month’s inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable at March 31 for inventory purchases during March total $135,100.

5. Each month’s ending inventory must equal 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at March 31 is $102,200.

6. Dividends of $40,000 will be declared and paid in April.

7. Land costing $48,000 will be purchased for cash in May.

8. The cash balance at March 31 is $62,000; the company must maintain a cash balance of at least $40,000 at the end of each month.

9. 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 $200,000. 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:

1. Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in total.

.

2. Prepare the following for merchandise inventory:

a. A merchandise purchases budget for April, May, and June.

b. A schedule of expected cash disbursements for merchandise purchases for April, May, and June, and for the quarter in total.

3.

Prepare a cash budget for April, May, and June as well as in total for the quarter. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is shown below:

China: the challenges of an ageing population An ageing population is one usually associated with developed economies. Falling birth rates and increased life expectancy in many European countries and Japan has created a situation in which younger generations are facing the prospect of caring for an ageing population. This demographic situation is now a major problem in China. The origin lies in China’s one-child policy which has restricted the number of children that most urban families could have and was originally designed to reduce the rate of growth of a booming population. There havebeen positive outcomes from this policy. At present more than 70% of the population are able to work and produce goods – fuelling China’s high level of economic growth. Fewer new workers are now joining the labour force and many of those who are do not want to take on the low paid, unskilled jobs of the previous generation. In addition, China is facing a substantial increase in the number of old people, resulting in additional pressures on health and social care facilities. Projections suggest that the impact of demographic change could have an even more adverse eff ect on the economy. Historically, production in China has exceeded consumption, resulting in substantial trade surpluses with the rest of the world. In contrast, over the next few decades consumption may exceed production; what is certain is that by 2050 China will have far more elderly people than any other country, 26% of the total population.

Suggest the likely eff ects of these changes on
decisions concerning:
a what to produce
b how to produce
c for whom to produce.

Emanuel Products produces coat racks in Toronto, Canada. The accountant has presented you the following budgeted data for the third quarter of 2020. Sales are forecasted to be 70,000 units at a price per unit of $35. The budgeted beginning and ending finished goods inventories are 6,000 and 12,000 units respectively. It is estimated that each rack requires five kilograms of metal at a budgeted price of $3 per kg. The beginning raw materials inventory is estimated as 3,500 kilograms. George Products wants to keep ending raw materials inventory of 5,500 due to fluctuations in demand. Each rack requires 1.4 hours of direct labour and the standard hourly pay rate is $18.

Required: (please show all steps of your computation in proper format)

1. Prepare a sales budget for the third quarter of 2020.

2. Prepare a production budget for the third quarter of 2020. (1.5 marks)

3. Prepare a direct materials purchases budget for the third quarter of 2020. (1.5 marks)

4. Prepare a direct labour budget for the third quarter of 2020. (1 mark)

5. Mr Peter started a business by acquiring a medium sized manufacturing firm. He hired you to work in the accounting department. You are in charge of providing management accounting reports to aid him in the planning and control of operations and make sure that everything the company does is consistent to the plan. He advised you not to implement a standard costing system as he does not see any purpose in doing that. What is your reaction to his advice? If you don’t agree on his idea, how do you convince him to accept the importance of standard costing? (1 mark)

(Total 6 Marks)