Spritz Company owns 15% of the stock of Turner Corporation. The investment was purchased for $200,000. At the beginning of 2020, it had a fair value of $230,000. At the end of 2020, its fair value is $250,000. Turner reported net income of $100,000 for 2020, and declared and paid cash dividends of $60,000. Spritz sells products to Turner at a markup of 20% on cost. Turner’s ending inventory for 2020 included a balance of $10,800 for products purchased from Spritz.
Required
Prepare the journal entries Spritz makes in 2020 to record the above facts, assuming that Spritz treats its investment as having significant influence and uses the equity method.
In: Accounting
Part II: Wexler Wholesalers has an extensive line of sought after books, which has led to amassing an efficient distribution system to retailers. The following activities occurred during the first six months of 2020 with respect to its inventory:
1. Jan. 3, 2020: Wexler Wholesalers purchased 1,000 books from Jolly Publishers for $28 per book, terms 2/10,n30.
2. Jan. 7, 2020: Wexler Wholesalers returned 20 of the books purchased in transaction #1 for full credit.
3. Jan. 9, 2020: Wexler Wholesalers paid Jolly Publishers in full.
4. Feb. 1, 2020: Wexler Wholesalers purchased 1,200 books from Simon and Schuster for $34 each, terms 1/15,n30.
5. Feb. 2, 2020: Wexler Wholesalers phoned Simon and Schuster after receiving the order in transaction #4. The issue is the books were water damaged from sitting on a loading dock in the rain. Simon and Schuster offered Wexler Wholesalers a 75% allowance on the damaged books. Wexler Wholesalers accepted the offer.
6. Feb. 3, 2020: Wexler Wholesalers paid Simon and Schuster in full.
7. Feb. 27, 2020: Wexler Wholesalers sold inventory to Juniper Reading Nook costing $28 with a sales price of $60 each. A total of 180 books were sold, terms 3/15,n45.
8. Mar. 5, 2020: Wexler Wholesalers received payment from Juniper Retailers.
9. Jun. 3, 2020: Wexler Wholesalers sold 400 books to Read It Again Sam. The cost was $17 per book with a selling price of $55 each, terms 2/10,n30.
10. Jun. 8, 2020: Read It Again Sam returned 30 books to Wexler Wholesalers for full credit.
11. Jun. 9, 2020: Wexler Wholesalers received payment in full from Read It Again Sam.
12. Jun. 30, 2020: After being lost in the mail for months, Wexler Wholesalers received and paid $175 shipping costs associated with purchases from Simon and Schuster. Wexler Wholesalers is responsible for paying the shipping costs.
Part B: Prepare the income statement for Wexler Wholesalers for the first six months of the year through gross margin (gross profit). Part C: Wexler Wholesalers had opening inventory on January 1, 2020 of $11,500. What is the ending inventory as of June 30, 2020?
In: Accounting
Exercise 13-11 - TOPIC - Non-Financial and Current Liabilities
Martinez Limited began operations on January 2, 2019. The company employs 6 individuals who work 8-hour days and are paid hourly. Each employee earns 12 paid vacation days and 7 paid sick days annually. Vacation days may be taken after January 15 of the year following the year in which they are earned. Sick days may be taken as soon as they are earned; unused sick days accumulate. Additional information is as follows:
| Actual Hourly Wage Rate |
Vacation Days Used by Each Employee |
Sick Days Used by Each Employee |
||||||||
| 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||
| $20 | $21 | 0 | 11 | 4 | 5 | |||||
Martinez Limited has chosen to accrue the cost of compensated
absences at rates of pay in effect during the period when they are
earned and to accrue sick pay when it is earned. For the purpose of
this question, ignore any tax, CPP, and EI deductions when making
payments to the employees.
A.) Prepare the journal entries to record the transactions related to vacation entitlement during 2019 and 2020.
| Date | Account Name and Explanation | Debit | Credit |
| 2019 | |||
| To accrue the vacation pay entitlement earned by the employees | |||
| 2020 | |||
| To accrue the vacation pay entitlement earned by the employees | |||
| 2020 | |||
| To record payment for vacation time |
B.) Prepare the journal entries to record the transactions related to sick days during 2019 and 2020.
| Date | Account Name and Explanation | Debit | Credit |
| 2019 | |||
| To accrue the expense and liability for sick days | |||
| 2019 | |||
| To record payment for compensated time | |||
| 2020 | |||
| To accrue the expense and liability for sick days | |||
| 2020 | |||
| To record payment for compensated time when used by employees |
C.) Calculate the amounts of any liability for vacation pay and sick days that should be reported on the SFP at December 31, 2019, and 2020.
| 2019 | 2020 | |||
| Liability for vacation pay | $ | $ | ||
| Liability for sick pay | $ | $ |
D.)Prepare the journal entries to record the transactions related to sick days during 2019 and 2020 assuming the entitlement to sick days did not accumulate.
| Date | Account Title and Explanation | Debit | Credit |
| 2019 | |||
| To record payment for compensated time when used by employees | |||
| 2020 | |||
| To record payment for compensated time when used by employees |
E.) Calculate the amounts of any liability for vacation pay and sick days that should be reported on the statement of financial position at December 31, 2019, and 2020 assuming the entitlement to sick days did not accumulate.
| 2019 | 2020 | |||
| Liability for vacation pay | $ | $ | ||
| Liability for sick pay | $ | $ |
In: Accounting
National Electric Company (NEC) is considering to develop and market a new appliance using microprocessor technology.
NEC’s marketing manager believes that annual sales would be 20,000 units if the units were priced at RM2,200 each. The engineering department has reported that the firm would need additional manufacturing capability, and NEC currently has an option to purchase an existing building, at a cost of RM22 million which would meet this need. The building would be bought and paid for at the end of the year, i.e., December 31, 2020.
The necessary equipment would be purchased, installed and paid at the end of 2020. It would cost RM11 million, including transportation, installation and training.
The project would require an initial investment of RM7 million net working capital. The initial working capital investment would also be made at the end of 2020.
The project’s estimated economic life is five years. At the end of that time, the building is expected to have a market value of RM4 million and a book value of RM2 million, where the equipment would have a market value of RM1.5 million and a book value of RM1 million. The company is required to pay capital gain tax at the rate 0f 30%.
The production department has estimated that the variable manufacturing costs would total 62% of annual sales, and that of fixed overhead costs, excluding depreciation, would be RM6 million per year.
The depreciation for building and equipment would be determined using straight-line depreciation method.
NEC’s corporate tax rate is 30%: it weighted average cost of capital (WACC) is 14%. For capital budgeting purposes, the company’s policy is to assume that operating cash flows occur at the end of each year. Because the plant would begin its operations on January 1, 2021, the first operating cash flow would occur on December 31, 2021.
In: Accounting
preparation of adjusting entries at the end of the financial year is required:
| a. |
To ensure that cash inflows and cash outflows are accurately measured |
|
| b. |
To correct errors made during the year in the accounts |
|
| c. |
To provide for the correct recognition of income and expenses for the period |
|
| d. |
To achieve accurate reporting of all expenses paid at balance date |
|
| e. |
To eliminate the need for closing entries to be made in the accounts |
preparing the financial statements of a business, which of the following statements concerning the Equity figure found in the Balance Sheet is correct?
| a. |
It is decreased by any Drawings made by the owners |
|
| b. |
It is the amount owed by the entity to both outside and internal parties |
|
| c. |
It is the owners claim to the Liabilities of the entity after deducting Assets |
|
| d. |
It is fixed at the amount initially contributed when the business was formed |
|
| e. |
It is increased by a Net Loss during the financial period |
preparing the accounts, at the end of the financial year management forgot to include an item of Dividend Income earned during the period. This will result in an:
| a. |
Overstatement of liabilities and an understatement of net profit and equity |
|
| b. |
Understatement of assets and an overstatement of net profit and equity |
|
| c. |
Understatement of assets, net profit, and equity |
|
| d. |
Overstatement of assets, net profit, and equity |
|
| e. |
Overstatement of equity, and understatement of liabilities |
Van Gough Pty Ltd borrows $222 000 cash from Ozzie Bank Ltd in 2010 and intends to pay it back in 2020.
How would the transaction have originally been recorded in the books of Van Gough Pty Ltd back in 2010, when the loan was taken out.
| a. |
Debit - Accounts Payable $222 000; Credit - Cash at Bank $222 000 |
|
| b. |
Debit - Cash at Bank $222 000; Credit - Accounts Receivable $222 000 |
|
| c. |
Debit - Bank Loan $222 000; Credit - Cash at Bank $222 000 |
|
| d. |
Debit - Bank Loan $222 000; Credit - Capital $222 000 |
|
| e. |
Debit - Cash at Bank $222 000; Credit - Bank Loan $222 000 |
following is not an enhancing Qualitative Characteristic:
| a. |
Verifiability |
|
| b. |
Materiality |
|
| c. |
Timeliness |
|
| d. |
Understandability |
|
| e. |
Comparability |
following is not an important consideration in developing an accounting system:
| a. |
Eliminating all fraud |
|
| b. |
Compatibility |
|
| c. |
Internal Control |
|
| d. |
Flexibility |
|
| e. |
Costs incurred and benefits provided |
following statements concerning accrual accounting is correct?
| a. |
Net profit is the excess of cash inflows from income over cash outflows for expenses |
|
| b. |
Expenses should be recognised in the period in which they are paid |
|
| c. |
For most businesses the cash approach gives a better measure of economic performance than does the accrual approach |
|
| d. |
Net profit is the excess of income earned over expenses incurred during the financial period |
|
| e. |
Revenue is recognised in the period in which it is received in cash |
Closing the accounts refers to which of the following:
| a. |
Writing off all accounts in the balance sheet so there are zero balances |
|
| b. |
Establishing a zero balance in the cash at bank account |
|
| c. |
Establishing zero balances in all ledger accounts |
|
| d. |
Transferring income and expense account balances to the profit and loss summary account, which is then closed off to the equity account |
|
| e. |
All of the above |
publishers of ‘Guide to the Stock Market’, a magazine published monthly, received $396 in advance, including $36 GST on 1 March, 2019 for a whole one year’s subscription (12 issues) beginning with the March issue. On receipt of the subscription which entry will the company make in their books?
| a. |
Debit - Cash $396; Credit - Subscriptions Revenue $396 |
|
| b. |
Debit - Cash $396; Credit - GST Collections $36, Credit -Unearned Subscriptions (Liability) $360 |
|
| c. |
Debit - Cash $396; Credit - GST Collections $36, Credit - Subscriptions Received in Advance (Asset) $360 |
|
| d. |
Debit - Cash $360; Credit - Subscriptions Revenue $360 |
|
| e. |
None of the above |
In: Accounting
An expansion tank is a necessity in a chilled water cooling network because:
In: Mechanical Engineering
If an exothermic reaction produces more heat in an open container than it does in a closed, rigid container, what can you say about the numbers of moles of gases in the reaction? Explain your answer.
In: Chemistry
Be sure to address each point in the question and explain your argument carefully.
2. Describe one evidence to support the idea that economies open to the world economy grow faster than economies that are closed.
In: Economics
describe the symbiotic host-microbe relationship for human microbiome and you must include the following topics
A) open/closed system, B) partner fidelity, C) transmission, and D) function in your discussion
In: Biology
Consider a one period macroeconomic model for the closed economy of the island of Anabel. Describe the three agents in the model, the exogenous variables, and the endogenous variables in the model. Graph and describe the competitive equilibrium of Anabel's economy.
In: Economics