Problem 23-04
Sarasota Company had the following information available at the end of 2020.
|
SARASOTACOMPANY |
||||||
|
2020 |
2019 |
|||||
| Cash |
$9,950 |
$4,010 |
||||
| Accounts receivable |
20,550 |
12,960 |
||||
| Short-term investments |
21,830 |
29,800 |
||||
| Inventory |
42,340 |
35,030 |
||||
| Prepaid rent |
2,990 |
12,090 |
||||
| Prepaid insurance |
2,090 |
91 |
||||
| Supplies |
990 |
75 |
||||
| Land |
124,970 |
174,030 |
||||
| Buildings |
353,000 |
353,000 |
||||
| Accumulated depreciation—buildings |
(104,980 |
) |
(86,810 |
) |
||
| Equipment |
522,130 |
396,610 |
||||
| Accumulated depreciation—equipment |
(128,890 |
) |
(111,580 |
) |
||
| Patents |
44,790 |
49,520 |
||||
| Total assets |
$911,760 |
$868,826 |
||||
| Accounts payable |
$21,970 |
$31,740 |
||||
| Income taxes payable |
5,030 |
3,980 |
||||
| Salaries and wages payable |
4,980 |
3,020 |
||||
| Short-term notes payable |
10,080 |
10,080 |
||||
| Long-term notes payable |
60,150 |
70,050 |
||||
| Bonds payable |
396,540 |
396,540 |
||||
| Premium on bonds payable |
23,170 |
27,926 |
||||
| Common stock |
241,390 |
218,640 |
||||
| Paid-in capital in excess of par—common stock |
25,100 |
17,500 |
||||
| Retained earnings |
123,350 |
89,350 |
||||
| Total liabilities and stockholders’ equity |
$911,760 |
$868,826 |
||||
|
SARASOTA COMPANY |
||||||
| Sales revenue |
$1,170,900 |
|||||
| Cost of goods sold |
752,630 |
|||||
|
418,270 |
||||||
| Gross margin | ||||||
| Operating expenses | ||||||
| Selling expenses |
$78,540 |
|||||
| Administrative expenses |
156,760 |
|||||
| Depreciation/Amortization expense |
40,210 |
|||||
| Total operating expenses |
275,510 |
|||||
| Income from operations |
142,760 |
|||||
| Other revenues/expenses | ||||||
| Gain on sale of land |
7,960 |
|||||
| Gain on sale of short-term investment |
4,000 |
|||||
| Dividend revenue |
2,380 |
|||||
| Interest expense |
(51,710 |
) |
(37,370 |
) |
||
| Income before taxes |
105,390 |
|||||
| Income tax expense |
39,370 |
|||||
| Net income |
66,020 |
|||||
| Dividends to common stockholders |
(32,020 |
) |
||||
| To retained earnings |
$34,000 |
|||||
Prepare a statement of cash flows for Sarasota Company using the
direct method accompanied by a reconciliation schedule. Assume the
short-term investments are debt securities, classified as
available-for-sale.
In: Accounting
Sandhill Company had the following information available at the
end of 2020.
|
SANDHILLCOMPANY |
||||||
|
2020 |
2019 |
|||||
| Cash |
$10,100 |
$4,020 |
||||
| Accounts receivable |
20,580 |
12,830 |
||||
| Short-term investments |
22,020 |
29,750 |
||||
| Inventory |
42,390 |
34,710 |
||||
| Prepaid rent |
3,020 |
12,030 |
||||
| Prepaid insurance |
2,100 |
89 |
||||
| Supplies |
1,000 |
74 |
||||
| Land |
125,640 |
176,140 |
||||
| Buildings |
347,130 |
347,130 |
||||
| Accumulated depreciation—buildings |
(104,250 |
) |
(87,940 |
) |
||
| Equipment |
530,080 |
398,810 |
||||
| Accumulated depreciation—equipment |
(130,600 |
) |
(111,650 |
) |
||
| Patents |
44,570 |
49,920 |
||||
| Total assets |
$913,780 |
$865,913 |
||||
| Accounts payable |
$22,110 |
$32,240 |
||||
| Income taxes payable |
5,010 |
4,010 |
||||
| Salaries and wages payable |
5,000 |
2,990 |
||||
| Short-term notes payable |
10,010 |
10,010 |
||||
| Long-term notes payable |
59,650 |
70,450 |
||||
| Bonds payable |
402,050 |
402,050 |
||||
| Premium on bonds payable |
19,870 |
21,533 |
||||
| Common stock |
241,660 |
220,690 |
||||
| Paid-in capital in excess of par—common stock |
24,940 |
17,540 |
||||
| Retained earnings |
123,480 |
84,400 |
||||
| Total liabilities and stockholders’ equity |
$913,780 |
$865,913 |
||||
|
SANDHILL COMPANY |
||||||
| Sales revenue |
$1,161,810 |
|||||
| Cost of goods sold |
753,770 |
|||||
|
408,040 |
||||||
| Gross margin | ||||||
| Operating expenses | ||||||
| Selling expenses |
$79,370 |
|||||
| Administrative expenses |
150,640 |
|||||
| Depreciation/Amortization expense |
40,610 |
|||||
| Total operating expenses |
270,620 |
|||||
| Income from operations |
137,420 |
|||||
| Other revenues/expenses | ||||||
| Gain on sale of land |
7,980 |
|||||
| Gain on sale of short-term investment |
4,040 |
|||||
| Dividend revenue |
2,410 |
|||||
| Interest expense |
(51,610 |
) |
(37,180 |
) |
||
| Income before taxes |
100,240 |
|||||
| Income tax expense |
39,060 |
|||||
| Net income |
61,180 |
|||||
| Dividends to common stockholders |
(22,100 |
) |
||||
| To retained earnings |
$39,080 |
|||||
Prepare a statement of cash flows for Sandhill Company using the
direct method accompanied by a reconciliation schedule. Assume the
short-term investments are debt securities, classified as
available-for-sale.
In: Accounting
Moonbeam Company manufactures toasters. For the first 8 months of 2020, the company reported the following operating results while operating at 75% of plant capacity: Sales (350,000 units) $4,379,000 Cost of goods sold: 2,605,000 Gross profit 1,774,000 Operating expenses 839,600 Net income $934,400 Cost of goods sold was 72% variable and 28% fixed; operating expenses were 82% variable and 18% fixed. In September, Moonbeam receives a special order for 19,100 toasters at $7.99 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $2,900 of shipping costs but no increase in fixed costs. (a) Prepare an incremental analysis for the special order. (b) Should Moonbeam accept the special order?
In: Accounting
Moonbeam Company manufactures toasters. For the first 8 months of
2020, the company reported the following operating results while
operating at 75% of plant capacity:
| Sales (341,600 units) | $4,375,000 | ||
| Cost of goods sold | 2,610,800 | ||
| Gross profit | 1,764,200 | ||
| Operating expenses | 841,190 | ||
| Net income | $923,010 |
Cost of goods sold was 70% variable and 30% fixed; operating
expenses were 80% variable and 20% fixed.
In September, Moonbeam receives a special order for 23,100 toasters
at $7.85 each from Luna Company of Ciudad Juarez. Acceptance of the
order would result in an additional $3,100 of shipping costs but no
increase in fixed costs.
(a)
Prepare an incremental analysis for the special order.
(Round computations for per unit cost to 2 decimal
places, e.g. 15.25 and all other computations and final answers to
the nearest whole dollar, e.g. 5,725. Enter negative
amounts using either a negative sign preceding the number e.g. -45
or parentheses e.g. (45).)
In: Accounting
Here are comparative statement data for Duke Company and Lord Company, two competitors. All balance sheet data are as of December 31, 2020, and December 31, 2019.
Duke Company | Lord Company | |||||||
|---|---|---|---|---|---|---|---|---|
2020 | 2019 | 2020 | 2019 | |||||
| Net sales | $1,878,000 | $559,000 | ||||||
| Cost of goods sold | 1,100,508 | 296,829 | ||||||
| Operating expenses | 261,042 | 79,937 | ||||||
| Interest expense | 9,390 | 4,472 | ||||||
| Income tax expense | 54,462 | 6,149 | ||||||
| Current assets | 329,000 | $312,100 | 83,200 | $78,300 | ||||
| Plant assets (net) | 519,900 | 501,200 | 139,800 | 124,200 | ||||
| Current liabilities | 65,400 | 74,800 | 34,200 | 29,600 | ||||
| Long-term liabilities | 108,800 | 90,400 | 30,200 | 26,000 | ||||
| Common stock, $10 par | 499,500 | 499,500 | 120,500 | 120,500 | ||||
| Retained earnings | 175,200 | 148,600 | 38,100 | 26,400 | ||||
(a)
Prepare a vertical analysis of the 2020 income statement data for Duke Company and Lord Company. (Round percentages to 1 decimal place, e.g. 12.1%.)
Condensed Income Statement | |||||||
|---|---|---|---|---|---|---|---|
Duke Company | Lord Company | ||||||
Dollars | Percent | Dollars | Percent | ||||
select an income statement item Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | $enter a dollar amount | enter a percentage number rounded to 1 decimal place % | $enter a dollar amount | enter a percentage number rounded to 1 decimal place % | |||
select an income statement item Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | enter a dollar amount | enter a percentage number rounded to 1 decimal place % | enter a dollar amount | enter a percentage number rounded to 1 decimal place % | |||
select a summarizing line for the first part Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | enter a total amount for the first part | enter total percentages rounded to 1 decimal place % | enter a total amount for the first part | enter total percentages rounded to 1 decimal place % | |||
select an income statement item Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | enter a dollar amount | enter a percentage number rounded to 1 decimal place % | enter a dollar amount | enter a percentage number rounded to 1 decimal place % | |||
select a summarizing line for the second part Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | enter a total amount for the second part | enter total percentages rounded to 1 decimal place % | enter a total amount for the second part | enter total percentages rounded to 1 decimal place % | |||
select an opening name for the third part Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | |||||||
select an income statement item Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | enter a dollar amount | enter a percentage number rounded to 1 decimal place % | enter a dollar amount | enter a percentage number rounded to 1 decimal place % | |||
select a summarizing line for the third part Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | enter a total amount for all three parts | enter total percentages rounded to 1 decimal place % | enter a total amount for all three parts | enter total percentages rounded to 1 decimal place % | |||
select an income statement item Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | enter a dollar amount | enter a percentage number rounded to 1 decimal place % | enter a dollar amount | enter a percentage number rounded to 1 decimal place % | |||
select a closing name for this statement Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues | $enter a total net income or loss amount | enter total percentages rounded to 1 decimal place % | $enter a total net income or loss amount | enter total percentages rounded to 1 decimal place % | |||
In: Accounting
On April 5, 2020 Company A sell merchandise to Company L for P50,000 under the terms: 2/10, n/30 FOB Shipping point freight prepaid. Company A being the shipper paid the freight amounting to P2,000. On April 12, Company L paid in full the account amounting to P50,960. Company A notify Company L that the amount to be paid is not P50,960 but P51,000. Whose claim do you think is correct A or L? Explain
ABC Enterprise is a grocery store that sells high volume but relatively low-priced items. The entity has a computerized system (point-of-sale scanner) to account efficiently all items sold. The accountant decided to use the periodic inventory system because the entity sells high volume and low-priced items, anyway at the end of the period a physical count of goods has to be made to establish the unsold items (merchandise inventory end). Do you agree with the accountant? If Yes why, if No support your answer.
In: Accounting
Sandhill Company expects to have a cash balance of $69,000 on January 1, 2020. These are the relevant monthly budget data for the first two months of 2020.
|
1. |
Collections from customers: January $106,500, February $219,000. |
|
|
2. |
Payments to suppliers: January $60,000, February $112,500. |
|
|
3. |
Wages: January $45,000, February $60,000. Wages are paid in the month they are incurred. |
|
|
4. |
Administrative expenses: January $31,500, February $36,000. These costs include depreciation of $1,500 per month. All other costs are paid as incurred. |
|
|
5. |
Selling expenses: January $22,500, February $30,000. These costs are exclusive of depreciation. They are paid as incurred. |
|
|
6. |
Sales of short-term investments in January are expected to realize $18,000 in cash. Sandhill Company has a line of credit at a local bank that enables it to borrow up to $37,500. The.company wants to maintain a minimum monthly cash balance of $30,000. |
Prepare a cash budget for January and February. Show all your work for partial credits in your uploaded file. List items that increase cash balance first.
In: Accounting
Based on past experience, Maas Corp. (a U.S.-based company) expects to purchase raw materials from a foreign supplier at a cost of 1,200,000 francs on March 15, 2021. To hedge this forecasted transaction, on December 15, 2020, the company acquires a call option to purchase 1,200,000 francs in three months. Maas selects a strike price of $0.68 per franc when the spot rate is $0.68 and pays a premium of $0.005 per franc. The spot rate increases to $0.686 at December 31, 2020, causing the fair value of the option to increase to $10,000. By March 15, 2021, when the raw materials are purchased, the spot rate has climbed to $0.70, resulting in a fair value for the option of $24,000. The raw materials are used in assembling finished products, which are sold by December 31, 2021, when Maas prepares its annual financial statements.
Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials.
What is the overall impact on net income over the two accounting periods?
What is the net cash outflow to acquire the raw materials?
In: Accounting
Prepare all the necessary journal entries for the transactions listed above for Parker Corporation.
5. On December 1, 2018, Folks Wagon Company adopted a stock-option plan that granted options
to key executives to purchase 50,000 shares of the company’s $10 par value common stock. The
options were granted on January 1, 2019, and were exercisable 3 years after the date of grant if the
grantee was still an employee of the company. The options expired 5 years from the date of grant.
The option price was set at $35, and the fair value option-pricing model determines the total
compensation expense to be $450,000.
All of the options were exercised during the year 2022: 20,000 on February 23 when the market
price was $46, and 30,000 on August 8 when the market price was $85 a share.
a. Prepare the journal entries relating to the stock option plan for the years 2019, 2020, and 2021.
Assume that the employee performs services equally in 2019, 2020, and 2021.
b. Prepare the journal entries that record the two events of exercising the options in 2022
In: Accounting
Based on past experience, Maas Corp. (a U.S.-based company) expects to purchase raw materials from a foreign supplier at a cost of 1,500,000 francs on March 15, 2021. To hedge this forecasted transaction, on December 15, 2020, the company acquires a call option to purchase 1,500,000 francs in three months. Maas selects a strike price of $0.63 per franc when the spot rate is $0.63 and pays a premium of $0.005 per franc. The spot rate increases to $0.634 at December 31, 2020, causing the fair value of the option to increase to $13,000. By March 15, 2021, when the raw materials are purchased, the spot rate has climbed to $0.65, resulting in a fair value for the option of $30,000. The raw materials are used in assembling finished products, which are sold by December 31, 2021, when Maas prepares its annual financial statements.
Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials.
What is the overall impact on net income over the two accounting periods?
What is the net cash outflow to acquire the raw materials?
In: Accounting