Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $800,000 in a start-up firm. He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year’s operations of the two firms he is considering and give him some business advice.

Required

Use the contribution margin approach to compute the operating leverage for each firm.

If the economy expands in coming years, Larson and Benson will both enjoy a 10 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.)

If the economy contracts in coming years, Larson and Benson will both suffer a 10 percent ­decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the ­number of units decreases, both total revenue and total variable cost will decrease.)

Kingston Company produces precision components. Kingston has 2 customer groups. One group, with 4 large customers, accounts for 60 percent of the sales. The remaining group, consisting of 20 small customers, accounts for the rest of the sales. Data for Q1 2020 concerning Kingston's customer group activity follow:

Q1 indirect costs consist of order-filling costs of $360,000 and sales-force costs of $300,000.

Kingston defines Group Profit = Sales revenue – Manufacturing costs – indirect costs

Required:

1. Allocate the indirect costs to the customer groups based on sales revenue. This represents a traditional allocation approach. Determine the group profit of each of the two groups of customers.
2. Allocate the indirect costs to the customer groups using an activity-based costing approach. Order-filling costs should be allocated based on orders placed and sales force costs allocated based on number of sales calls. Determine the group profit of each of the two groups of customers.
3. Briefly compare the results of the two alternatives. Which method of allocation provides a better assessment of actual performance?

Kingston Company produces precision components. Kingston has 2 customer groups. One group, with 4 large customers, accounts for 60 percent of the sales. The remaining group, consisting of 20 small customers, accounts for the rest of the sales. Data for Q1 2020 concerning Kingston's customer group activity follow:

Q1 indirect costs consist of order-filling costs of $360,000 and sales-force costs of $300,000.

Kingston defines Group Profit = Sales revenue – Manufacturing costs – indirect costs

Required:

1. Allocate the indirect costs to the customer groups based on sales revenue. This represents a traditional allocation approach. Determine the group profit of each of the two groups of customers.
2. Allocate the indirect costs to the customer groups using an activity-based costing approach. Order-filling costs should be allocated based on orders placed and sales force costs allocated based on number of sales calls. Determine the group profit of each of the two groups of customers.
3. Briefly compare the results of the two alternatives. Which method of allocation provides a better assessment of actual performance?

Required
Use the following information to prepare a multistep income statement and a classified balance sheet for Eller Equipment Co. for Year 1. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.)

Prepare a multistep income statement for Eller Equipment Co. for Year 1. (Amounts to be deducted should be indicated with a minus sign.)

Prepare a multistep Balance sheet for Eller Equipment Co. for Year 1. (Amounts to be deducted should be indicated with a minus sign.)

The following shows the unadjusted Trial Balance of Ramsha Logistics Pvt Ltd for the year ended 2020:

Ramsha Logistics Pvt Ltd

Unadjusted Trial Balance for the year August 31, 2020

Additional information:

1. Depreciation recorded on the Furniture using the straight-line method.Assume a useful life of five years with no salvage value

2. Prepaid insurance until the month of August has expired.Insurance was paid in advance of RM36,000 for 1 year on January 1,2020

3. Accrued salaries, expenses, RM10,000

4. Service revenue worth of Rm5,000 is yet to be earned.

5. Office supplies on hand,RM6,000

Required

(a)Prepaid on Adjusted Trial Balance for Ramsha Logistics Pvt Ltd for the year ended 31 August,2020

(b)Prepare Ramsha Logistics Pvt Ltd statement of Comprehensive income (income statement) of owner’s equity for the year ended August 31,2020

(c)Prepare Ramsha Logistics Pvt Ltd Statement of Financial Position (Balance sheet) as at August 31,2020

Askland Clinic uses client-visits as its measure of activity. During October, the clinic budgeted for 3,100 client-visits, buts its actual level of activity was 3,130 client-visits.  The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for October:

Data used in budgeting:

                                                                                                Fixed                            Variable

                                                                                           amount per                         amount per

                                                                                                month                          client-visit

Revenue ……………………………………………………                               -                                   $28.80

Personnel expenses ………………………………….                                $22,100                        $ 8.60

Medical supplies ……………………………………….                                   1,300                            5.50

Occupancy expenses………………………………..                                     6,300                            1.00

Administrative expenses ………………………….                                    3,500                              .40

Total expenses …………………………………………                                $33,200                        $15.50

Actual results for October:

Revenue ………………………………………………….                                 $86,454

                                                                                                   Total              Fixed Portion    

Personnel expenses………………………………..                                  $47,098            $24,350

Medical supplies……………………………………..                                  $18,925            $  1,290

Occupancy expenses………………………………                                   $  9,170            $  6,520

Administrative expenses………………………..                                   $  4,972            $  3,640

Required:

Part a—Prepare budgeted amounts for the planned visits and the actual visits (i.e. prepare a flexible

               budget)

Part b—Prepare a flexible budget performance report for October.

Part c—Answer the following questions:

1. What is the amount of the total personnel expenses in the planning budget for October?

2. What is the amount of total medical supplies in the flexible budget for actual visits in October?

3. What is the amount of the revenue variance for October?  Is the variance favorable or

unfavorable?  Explain why it is favorable or unfavorable.

4. What is the total spending variance for personnel expenses for October?  Is the variance favorable or unfavorable?  Explain why it is favorable or unfavorable.

The following shows the unadjusted Trial Balance of Satyam Logistics Sdn Bhd during August 2018:

Additional information:

Depreciation was recorded on the Furniture using the straight-line method. Assume a useful life of five years with no salvage value.

Rent paid in advance for the month has expired. RM36,000 rent was paid in advance for four months period starting January 1.

Accrued Salaries Expenses, RM10,000.

Accrued Service Revenue, RM5,000.

Office Supplies on hand, RM6,000.

Required:

Prepare an Adjusted Trial Balance for Satyam Logistics Sdn Bhd’s as at August 31, 2018.

Prepare Satyam Logistics Sdn Bhd’s Statement of Comprehensive Income (Income Statement) and Statement of Owner’s Equity for the month ended August 31, 2018.                                                              

Prepare Satyam Logistics Sdn Bhd’s Statement of Financial Position (Balance Sheet) on August 31, 2018.                                       

Askland Clinic uses client-visits as its measure of activity. During October, the clinic budgeted for 3,100 client-visits, buts its actual level of activity was 3,130 client-visits.  The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for October:

Data used in budgeting:

                                                                                                Fixed                            Variable

                                                                                           amount per                         amount per

                                                                                                month                          client-visit

Revenue ……………………………………………………                               -                                   $28.80

Personnel expenses ………………………………….                                $22,100                        $ 8.60

Medical supplies ……………………………………….                                   1,300                            5.50

Occupancy expenses………………………………..                                     6,300                            1.00

Administrative expenses ………………………….                                    3,500                              .40

Total expenses …………………………………………                                $33,200                        $15.50

Actual results for October:

Revenue ………………………………………………….                                 $86,454

                                                                                                   Total              Fixed Portion    

Personnel expenses………………………………..                                  $47,098            $24,350

Medical supplies……………………………………..                                  $18,925            $  1,290

Occupancy expenses………………………………                                   $  9,170            $  6,520

Administrative expenses………………………..                                   $  4,972            $  3,640

Required:

Part a—Prepare budgeted amounts for the planned visits and the actual visits (i.e. prepare a flexible

               budget)

Part b—Prepare a flexible budget performance report for October.

Part c—Answer the following questions:

1. What is the amount of the total personnel expenses in the planning budget for October?

2. What is the amount of total medical supplies in the flexible budget for actual visits in October?

3. What is the amount of the revenue variance for October?  Is the variance favorable or

unfavorable?  Explain why it is favorable or unfavorable.

4. What is the total spending variance for personnel expenses for October?  Is the variance favorable or unfavorable?  Explain why it is favorable or unfavorable.

* Question 2

Ramsey Corporation's capital structure consists of 50,000 shares of common stock with a par value of $4. At December 31, 2020, an analysis of the accounts and discussions with company officials revealed the following information: Sales revenue $1,250,000 Discontinued operations loss (Note: you must adjust for tax) 90,000 Selling expenses 128,000 Cash 60,000 Accounts receivable 90,000 Common stock 200,000 Cost of goods sold 700,000 Accumulated depreciation-machinery 180,000 Dividend revenue 18,000 Unearned service revenue 4,400 Interest payable 1,000 Land 370,000 Patents 100,000 Retained earnings, January 1, 2020 270,000 Accumulated Other Comprehensive Income, Jan. 1, 2020 20,000 Unrealized holding loss from AFS debt securities, net of tax 5,000 Interest expense 17,000 Administrative expenses 170,000 Dividends declared common shareholders 14,000 Dividends declared preferred shareholders (and paid) 10,000 Allowance for doubtful accounts 5,000 Notes payable (maturity 7/1/26) 200,000 Machinery 450,000 Supplies 40,000 Accounts payable 60,000 Tax Rate is 30%

(a) Prepare a multiple-step income statement in good form (b) Prepare a statement of comprehensive income (separate from income statement) in good form. Note round EPS figures to the nearest penny. (c) Prepare a statement of stockholders’ equity in good form