Corporation is preparing its budget for the coming year. The first step is to plan for the first quarter of that coming year. Waterways gathered the following information from the managers.
Sales:
|
Actual unit sates for November |
113,500 |
|
Actual unit sales for December |
103,100 |
|
Expected unit sales for January |
114,000 |
|
Expected unit sales for February |
113,500 |
|
Expected unit sales for March |
116,000 |
|
Expected unit sales for April |
126,000 |
|
Expected unit sales for May |
138,500 |
|
Unit selling price |
$12 |
Waterways wants to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31 totaled 183,780.
Direct Materials:
The product uses metal, plastic, and rubber. In total, each unit requires 2 pounds of material at an average cost of 0.75 per pound.
Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Payment for materials is made within 15 days. 50% is paid in the month of purchase and 50% is paid in the month after purchase. Accounts Payable on December totaled $120,595. Raw materials on December 31 totaled 11,295 pounds.
Direct Labor:
Labor requires 12 minutes per unit for completion and is paid at a rate of $18 per hour.
Manufacturing Overhead:
|
Indirect materials |
30 cents per labor hour |
|
Indirect labor |
50 cents per labor hour |
|
Utilities |
45 cents per labor hour |
|
Maintenance |
25 cents per labor hour |
|
Salaries |
$52,000 per month |
|
Depreciation |
$16,800 per month |
|
Property taxes |
$2,675 per month |
|
Insurance |
$2,200 per month |
|
Janitorial |
$1,800 per month |
Selling and Administrative Expenses:
Variable selling and administrative cost per unit is $2.40.
|
Advertising |
$15,000 per month |
|
Insurance |
$1,400 per month |
|
Salaries |
$72,000 per month |
|
Depreciation |
$2,500 per month |
|
Other fixed costs |
$3,000 per month |
Other Information:
The cash balance on December 31 totaled $220,500, but management has decided that it wants to maintain a cash balance of at least $750,000 beginning January 31. Dividends are paid each month at the rate of $2.50 per share for 5,000 shares outstanding. The company has an open line of credit with the First National Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 8% interest. Waterways borrows on the first day of the month and repays on the last day of the month. Reserve repayment, if required, until Waterways can pay the entire amount. A $250,000 equipment purchase is planned for February.
Instructions (Do all parts):
Note: All budgets and schedules should be prepared by month for the first quarter (January, February, and March). Round all figures to the nearest dollar. For labor hours round to whole hours.
e. Prepare a manufacturing overhead budget.
f. Prepare a selling and administrative budget.
g. Prepare a schedule for expected cash collections from customers.
h. Prepare a schedule for expected payments for materials purchases.
i. Prepare a cash budget.
In: Accounting
The E.N.D. partnership has the following capital balances as of the end of the current year:
| Pineda | $ | 210,000 |
| Adams | 190,000 | |
| Fergie | 180,000 | |
| Gomez | 170,000 | |
| Total capital | $ | 750,000 |
|
|
||
Answer each of the following independent questions:
Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $211,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners?
Assume that the partners share profits and losses 4:3:2:1, respectively. Pineda retires and is paid $335,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital balance of the remaining three partners?
In: Accounting
The first audit of the books of Whispering Company was made for the year ended December 31, 2018. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are:
| 1. | At the beginning of 2016, the company purchased a machine for $483,000 (salvage value of $48,300) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in computing the depreciation base for the 3 years. | |
| 2. | At the end of 2017, the company failed to accrue sales salaries of $43,000 which was paid in 2018 and was debited to Salaries and Wages Expense. | |
| 3. | A tax lawsuit that involved the year 2016 was settled late in 2018. It was determined that the company owed an additional $89,000 in taxes related to 2016. The company did not record a liability in 2016 or 2017 because the possibility of loss was considered remote, and charged the $89,000 to a loss account in 2018. | |
| 4. | Whispering Company purchased a copyright from another company early in 2016 for $46,000. Whispering had not amortized the copyright because its value had not diminished. The copyright has a useful life at purchase of 20 years. | |
| 5. | In 2018, the company wrote off $86,000 of inventory considered to be obsolete; this loss was charged directly to Retained Earnings. |
Prepare the journal entries necessary in 2018 to correct the books, assuming that the books have not been closed. Disregard effects of corrections on income tax.
In: Accounting
What is the Payback period of a project with cash flows of -350,000 in year 0, then 100,000 each in years 1, 2 & 3, then 250,000 in year 4? Assume the cost of capital is 10%.
|
2.0 years |
||
|
2.75 years |
||
|
3.2 years |
||
|
can't tell from information given |
Consider the project in the previous question, what is its IRR?
|
5.56% |
||
|
9.83% |
||
|
14.1% |
||
|
17.54% |
In: Finance
Prepare a Statement of Cash Flows for Kitten Mittens on the following page for the year ended December 31, 2004. Use the indirect method to calculate cash flows from operations.
The Balance sheet and Income Statement for "KittenMittens" for the year ending December 31, 2004, are
as follows:
Kitten Mittens Comparative Balance Sheets
Assets
December 31, 2003 December 31, 2004
Current Assets:
|
Cash and cash equivalents |
$130,000 |
$189,000 |
|
Accounts Receivable, net |
420,000 |
471,000 |
|
Inventory 530.000 642,000 |
||
|
Total Current Assets |
1,080,000 |
1,302,000 |
|
Land |
242,500 |
321,000 |
|
Property &Equipment - at cost |
750,000 |
999,000 |
|
Less Accumulated depreciation |
(425,000) |
(546,000) |
|
Net Property & Equipment |
325,000 |
453,000 |
|
Total Assets |
$1,647,500 |
$2,076,000 |
Liabilities and Equity
Current Liabilities :
|
Accounts payable - trade |
$195,000 |
$249,000 |
|
Interest Payable |
20,000 |
21,000 |
|
Total Current Liabilities |
215,000 |
270,000 |
|
Note Payable |
250,000 |
240,000 |
|
Common Stock |
875,000 |
1,125,000 |
|
Retained Earnings |
307,500 |
441,000 |
Total Liabilities and Stockholders' Equity $1,647,500 $2,076,000
QUESTION CONTINUES ON FOLLOWING PAGE
Kitten Mittens
Income Statement
For year ended December 31, 2004
|
Revenues Expenses |
$2,400,000 |
|
|
Cost of Goods Sold |
1,354,000 |
|
|
Wages and Salaries Expense |
320,000 |
|
|
Depreciation Expense |
190,000 |
|
|
Interest Expense |
12,000 |
|
|
Income Tax Expense Total |
65,000 |
(1,941,000) |
|
Less: Loss on Sale of Equipment |
(38,000) |
|
|
Net Income |
$421,000 |
|
|
Other available information: |
- Kitten Mittens purchased $500,000 of new equipment during 2004. The new equipment replaced old equipment,whichwassoldfor$144,000 in cash. As indicated on the income statement, the sale of equipment resulted in a loss of $38,000.
- Dividends were declared and paid to common stockholders during the year.
- No new debt was issued and no land was sold during 2004.
Required:
Prepare a Statement of Cash Flows for Kitten Mittens on the following page for the year ended December 31, 2004. Use the indirect method to calculate cash flows from operations.
In: Accounting
At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget:
| Cash balance, September 1 (from a summer job) | $6,470 |
| Purchase season football tickets in September | 90 |
| Additional entertainment for each month | 220 |
| Pay fall semester tuition in September | 3,500 |
| Pay rent at the beginning of each month | 310 |
| Pay for food each month | 180 |
| Pay apartment deposit on September 2 (to be returned December 15) | 400 |
| Part-time job earnings each month (net of taxes) | 800 |
a. Prepare a cash budget for September, October, November, and December. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.
| Craig Kovar | ||||
| Cash Budget | ||||
| For the Four Months Ending December 31 | ||||
| September | October | November | December | |
| Estimated cash receipts from: | ||||
| Part-time job | $ | $ | $ | $ |
| Deposit | ||||
| Total cash receipts | $ | $ | $ | $ |
| Less estimated cash payments for: | ||||
| Season football tickets | $ | |||
| Additional entertainment | $ | $ | $ | |
| Tuition | ||||
| Rent | ||||
| Food | ||||
| Deposit | ||||
| Total cash payments | $ | $ | $ | $ |
| Cash increase (decrease) | $ | $ | $ | $ |
| Plus cash balance at beginning of month | ||||
| Cash balance at end of month | $ | $ | $ | $ |
In: Accounting
As part of the process of preparing the master budget for the coming year, you’ve been asked to perform what-if analyses, in the form of scenarios, on the original planning assumptions regarding Product A produced by your company. The following are the baseline planning data for the coming year for this product: Sales volume (annual, in units) 2,500 Selling price per unit $ 1,500 Variable cost per unit $ 1,000 Fixed costs (per year) $ 200,000 Required: 1. Based on the baseline planning data, what is the budgeted operating income for Product A for the coming year? 2. Determine the estimated operating income under each of the following scenarios (for each scenario you should report both the new budgeted operating income and the percentage change in operating income from the baseline budgeted result): a. Selling price per unit is 10% higher than planned, while fixed costs per year are also 10% higher than planned. b. Variable cost per unit is 5% higher than planned, while fixed costs are lower by this same percentage. c. Selling price per unit is 10% higher than planned, while volume is decreased by 8%.
In: Accounting
The information that follows is for Becky’s Baskets for the year ended December 31, 2017 and covers questions 20-27.
Sales 2,000 baskets at $50 per basket = $100,000
Costs: (2,000 baskets produced and sold)
Variable Costs Total Cost
Direct materials 16,000
Direct labor 14,000
Manufacturing overhead 16,000
Selling and Administrative Costs 10,000
Fixed Costs
Manufacturing overhead 30,000
Selling and Administrative Costs 14,000
Assume 2,000 baskets are produced and sold this year unless the question specifies otherwise. The relevant range is from zero to 5,000 units.
20. If 2,000 baskets are produced, what is the product cost per basket?
21. What is the variable cost per basket (including period costs) at 4,000 baskets?
22. What is the fixed product cost per basket at 3,000 baskets?
23. If 3,000 baskets are produced, what is the product cost per basket?
24. What is the incremental cost (increase in cost) by increasing production from 2,000 baskets to 2,001 baskets?
25. If the company sells produces and sells 3,000 baskets how much operating income will they make?
26. If the company produces and sells 2,000 baskets how much will their cost of goods sold be?
27. What is the contribution margin per unit at 2,000 units of production and sales?
In: Accounting
Revenue and expense data for the current calendar year for Dawg Electronics Company and for the electronics industry are as follows. Dawg Electronics Company data are expressed in dollars. The electronics industry averages are expressed in percentages.
| Dawg Electronics Company |
Electronics Industry Average |
||||
| Sales | $ 3,750,000 | 100 | % | ||
| Cost of goods sold | (2,062,500) | (61.0) | |||
| Gross profit | $1,687,500 | 39.0 | % | ||
| Selling expenses | $(1,125,000) | (23.0) | % | ||
| Administrative expenses | (262,500) | (10.0) | |||
| Total operating expenses | $(1,387,500) | (33.0) | % | ||
| Operating income | $300,000 | 6.0 | % | ||
| Other revenue and expense: | |||||
| Other revenue | 15,000 | 3.0 | |||
| Other expense | $(3,750) | (1.0) | |||
| Income before income tax | $ 311,250 | 8.0 | % | ||
| Income tax expense | (93,750) | (2.5) | |||
| Net income | $217,500 | 5.5 | % | ||
a. Prepare a common-sized income statement comparing the results of operations for Dawg Electronics Company with the industry average. If required, round percentages to one decimal place.
| Dawg Electronics Company | |||
| Common-Sized Income Statement | |||
| Dawg Electronics Company Amount |
Dawg Electronics Company Percent |
Electronics Industry Average |
|
| Sales | $3,750,000 | % | 100.0% |
| Cost of goods sold | (2,062,500) | % | (61.0)% |
| Gross profit | $1,687,500 | % | 39.0% |
| Selling expenses | $(1,125,000) | % | (23.0)% |
| Administrative expenses | (262,500) | % | (10.0)% |
| Total operating expenses | $(1,387,500) | % | (33.0)% |
| Operating income | $300,000 | % | 6.0% |
| Other revenue and expense: | |||
| Other revenue | 15,000 | % | 3.0% |
| Other expense | (3,750) | % | (1.0)% |
| Income before income tax | $311,250 | % | 8.0% |
| Income tax expense | (93,750) | % | (2.5)% |
| Net income | $217,500 | % | 5.5% |
In: Accounting
Paul and Anna plan to form the PA LLC by the end of the current year to produce and sell specialty athletic apparel. Paul and Anna will both serve as member-managers of the LLC and will be active in its operations. The members will each contribute $80,000 cash, and in addition, the LLC will borrow $440,000 from First State Bank. The $600,000 will be used to buy equipment and to lease a property they can use as a small manufacturing facility and a storefront.
The bank has stated that the debt must be guaranteed, and Anna has agreed to guarantee the entire amount. At the end of the year, the LLC also expects to have accounts payable of $40,000 for inventory and supplies.
The LLC's operating agreement provides that all LLC items will be allocated equally. The agreement also provides that capital accounts will be properly maintained and that each member must restore any deficit in the capital account upon the LLC's liquidation.
If the LLC claims 100% bonus depreciation, it will report a loss of about $580,000 in its first year, which the LLC members would like to deduct.
Paul and Anna would like to know how the debt ($440,000 loan and $40,000 of accounts payable) will be allocated between them, and how that allocation affects their ability to deduct the losses. Paul and Anna are single individual taxpayers.
Consider all potential loss limitations and assume that neither Paul nor Anna will have business income or losses from other sources.
Complete the memo for the PA LLC tax planning file for your manager's review that describes how the debt will be shared between Paul and Anna for purposes of computing the adjusted basis of each LLC interest.
If an amount is zero, enter "0".
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In: Accounting