The before-tax income for Whispering Co. for 2020 was $97,000 and $72,300 for 2021. However, the accountant noted that the following errors had been made:
| 1. | Sales for 2020 included amounts of $38,500 which had been received in cash during 2020, but for which the related products were delivered in 2021. Title did not pass to the purchaser until 2021. | |
| 2. | The inventory on December 31, 2020, was understated by $7,800. | |
| 3. | The bookkeeper in recording interest expense for both 2020 and 2021 on bonds payable made the following entry on an annual basis. |
|
Interest Expense |
16,200 |
|
|
Cash |
16,200 |
| The bonds have a face value of $270,000 and pay a stated interest rate of 6%. They were issued at a discount of $17,000 on January 1, 2020, to yield an effective-interest rate of 7%. (Assume that the effective-yield method should be used.) |
| 4. | Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2020 and 2021. Repairs in the amount of $8,100 in 2020 and $8,700 in 2021 were so charged. The company applies a rate of 10% to the balance in the Equipment account at the end of the year in its determination of depreciation charges. |
Prepare a schedule showing the determination of corrected income
before taxes for 2020 and 2021. (Enter negative amounts
using either a negative sign preceding the number e.g. -15,000 or
parentheses e.g. (15,000). Round answers to 0 decimal places, e.g.
125.)
|
2020 |
2021 |
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|---|---|---|---|---|
|
Income Before Tax |
$Enter a dollar amount |
$Enter a dollar amount |
||
|
Corrections: |
||||
|
Select an itemAdjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory Adjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory |
Enter a dollar amount |
Enter a dollar amount |
||
|
Select an itemAdjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory Adjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory |
Enter a dollar amount |
Enter a dollar amount |
||
|
Select an itemAdjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory Adjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory |
Enter a dollar amount |
Enter a dollar amount |
||
|
Select an itemAdjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory Adjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory |
Enter a dollar amount |
Enter a dollar amount |
||
|
Select an itemAdjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory Adjustment to Bond Interest ExpenseAdjustment to Bond Interest PayableDepreciation Not Recorded on Capitalized RepairsDepreciation Recorded on Improperly Capitalized RepairsOverstatement of 2020 Ending InventoryRepairs Erroneously Charged to the Equipment AccountRepairs Not Charged to Equipment AccountSales Erroneously Excluded in 2020 IncomeSales Erroneously Included in 2020 IncomeUnderstatement of 2020 Ending Inventory |
Enter a dollar amount |
Enter a dollar amount |
||
|
Corrected Income Before Tax |
$Enter a total amount for year 2020 |
$Enter a total amount for year 2021 |
In: Accounting
Jen and Larry’s Frozen Yogurt Company
In 2019, Jennifer (Jen) Liu and Larry Mestas founded Jean and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2019 and were estimated to be $1.2 million in 2020.
Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Administrative expenses, including Jen and Larry’s salary and expenses for an accountant and two other administrative staff, were estimated at $180,000 in 2020. Marketing expenses, largely in the form of behind-the-counter workers, in-store posters, and advertising in local newspapers, were projected to be $200,000 in 2020.
An investment in bricks and mortar was necessary to make and sell the yogurt. Initial specialty equipment and the renovation of an old warehouse building in lower downtown (known as LoDo) occurred at the beginning of 2019. Additional equipment needed to make the amount of yogurt forecasted to be sold in 2020 was purchased at the beginning of 2020. As a result, depreciation expenses were expected to be $50,000 in 2020. Interest expenses were estimated at $15,000 in 2020. The average tax rate was expected to be 25% of taxable income.
Show what would happen to the EBDAT breakeven point in terms of survival sales if an additional $30,000 was spent on advertising in 2020 while the other fixed costs remained the same, production costs remained at $1.50 per cup, and the selling price remained at $3.00 per cup.
Now assume that, due to competition, Jen and Larry must sell their frozen yogurt for $2.80 per cup in 2020. The cost of producing the yogurt is expected to remain t $1.50 per cup and cash fixed costs are forecasted to be $395,000 ($180,000 in administrative, $200,000 in marketing, and $15,000 in interest expenses). Depreciation expenses and the tax rate are also expected to remain the same as projected in the initial discussion of Jen and Larry’s venture. Calculate the EBDAT breakeven point in terms of survival breakeven revenues.
In: Finance
Suppose the Chinese economy recovers more quickly than the US economy from our current global recession. Illustrate and describe how this asymmetric recovery across countries will impact our simultaneous equilibrium model from the perspective of the US. Be sure to highlight the changes in the rate of return on $-denominated assets, the rate of return on yuan (CNY)-denominated assets and the exchange rate ($/CNY).
In: Economics
Agree or Disagree? Explain your thoughts and add any new
It is surprising to me that the US GAAP is so different from IFRS in regard to costing concepts. If an analyst was to look at financial statements from other parts of the world and wishes to compare them to US financial statements, it is not a straightforward comparison. To me, the need for convergence is obvious -- but which way should we go and why?
In: Accounting
In 1999 when Carlos was appointed CEO/COO for Nissan in Japan, he had to show results to the shareholders of Nissan and Renault. What do you think are the key performance criteria that Carlos must achieve as the CEO/COO for Nissan in 1999? Describe the THREE key performance criteria. Your answer must be relevant with the context.
In: Operations Management
A company expects to receive the following two payments from
their client in China.
January
6,2021 ¥1,000,000.00
April 6,
2021 ¥1,000,000.00
Given the follow data, answer the following questions.
Spot rate today (October 6,
2020) $0.1455 Spot
rate on Expiration
Jan 6, 2021
Futures $0.1440 Spot
rate on Jan 6, 2021= $0.1550
Apr 6, 2021
Futures $0.1430 Spot
rate on Apr 6, 2021= $0.1425
a) Should the company be worried of the dollar depreciating or
appreciating?
b) How should the company hedge the two receivables using
futures?
c) What will be the outcome of the hedges if the spot rate on
expiration is as shown above? Show all work.
d) Explain margin requirements and maintenance margin when trading
futures contracts.
In: Finance
On January 1, 2018, Byner Company purchased a used tractor.
Byner paid $3,000 down and signed a noninterest-bearing note
requiring $44,000 to be paid on December 31, 2020. The fair value
of the tractor is not determinable. An interest rate of 11%
properly reflects the time value of money for this type of loan
agreement. The company’s fiscal year-end is December 31. (FV of $1,
PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
(Use appropriate factor(s) from the tables
provided.)
Required:
1. Prepare the journal entry to record the
acquisition of the tractor.
2. How much interest expense will the company
include in its 2018 and 2019 income statements for this note?
3. What is the amount of the liability the company
will report in its 2018 and 2019 balance sheets for this
note?
In: Accounting
Conch Republic Electronics Part 1
Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other household appliances. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. Jay McCanless, a recent MBA graduate, has been hired by the company's finance department.
One of the major revenue-producing items manufactured by Conch Republic is a smart phone. Conch Republic currently has one smart phone model on the market, and sales have been excellent. The smart phone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However, as with any electronic item, technology changes rapidly, and the current smart phone has limited features in comparison with newer models. Conch Republic spent $750,000 to develop a prototype for a new smart phone that has all the features of the existing smart phone but adds new features such as WiFi tethering. The company has spent a further $200,000 for a marketing study to determine the expected sales figures for the new smart phone.
Conch Republic can manufacture the new smart phones for $215 each in variable costs. Fixed costs for the operation are estimated to run $6.1 million per year. The estimated sales volume is 155,000, 165,000, 125,000, 95,000, and 75,000 per year for the next five years, respectively. The unit price of the new smart phone will be $520. The necessary equipment can be purchased for $40.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $6.1 million.
As previously stated, Conch Republic currently manufactures a smart phone. Production of the existing model is expected to be terminated in two years. If Conch Republic does not introduce the new smart phone, sales will be 95,000 units and 65,000 units for the next two years, respectively. The price of the existing smart phone is $380 per unit, with variable costs of $145 each and fixed costs of $4.3 million per year. If Conch Republic does introduce the new smart phone, sales of the existing smart phone will fall by 30,000 units per year, and the price of the existing units will have to be lowered to $210 each. Net working capital for the smart phones will be 20 percent of sales and will occur with the timing of the cash flows for the year; for example, there is no initial outlay for NWC, but changes in NWC will first occur in Year 1 with the first year's sales. Conch Republic has a 35 percent corporate tax rate and a required return of 12 percent.
Shelley has asked Jay to prepare a report that answers the following questions.
Conch Republic Electronics Part 2
Shelley Couts, the owner of Conch Republic Electronics, had received the capital budgeting analysis from Jay McCanless for the new smart phone the company is considering. Shelley was pleased with the results, but she still had concerns about the new smart phone. Conch Republic had used a small market research firm for the past 20 years, but recently the founder of that firm retired. Because of this, she was not convinced the sales projections presented by the market research firm were entirely accurate. Additionally, because of rapid changes in technology, she was concerned that a competitor could enter the market. This would likely force Conch Republic to lower the sales price of its new smart phone. For these reasons, she has asked Jay to analyze how changes in the price of the new smart phone and changes in the quantity sold will affect the NPV of the project.
Shelley has asked Jay to prepare a memo answering the following questions.
QUESTIONS
5.How sensitive is the NPV to changes in the price of the new smart phone?
6.How sensitive is the NPV to changes in the quantity sold of the new smart phone?
In: Finance
In: Accounting
Identify whether each of the following would or would not be recorded as an intangible asset in the financial statement of Hummings as at the end of the reporting period of 30 June 2016 according to AASB 138 intangible assets.
Hummings has acquired copyrights for $240,000, The copyright (intangible)has a useful life of 50 years and over this time period is expected to generate future economic benefits well in excess of its cost of purchases.
Hummings spent $600,000 over the past 5 years on the design and promotion of its brad. It is expected that such expenditure will provide significant economic benefits well in excess of the costs of promoting the brand.
On 1 July 2015 Hummings acquired another company (XYZ Ltd). Goodwill of $35,000 has been recognized on the purchase.
In: Accounting