Principal Skinner Company produces gourmet cheeses. Selected results from the most current year were as follows:

Sales Revenue: $3,500,000

Operating Income: $560,000

Assets 1/1: $5,000,000

Assets 12/31: $5,800,000

Current Liabilities 12/31: $925,000

Long-term Liabilities 12/31: $3,050,000

Production Manager Marge Simpson is considering investing in the purchase of a new fermenting station that will increase the plant’s production capacity. Based on her research, Marge thinks the station would cost $2,200,000 and would increase sales revenue by $1,750,000 and operating income by $450,000.


Required:
1. Calculate Principle Skinner’s current sales margin, asset turnover, and return on investment.

2. Calculate Principle Skinner’s sales margin, asset turnover, and return on investment assuming the company purchases the new fermentation station.

3. Assume Marge’s annual bonus is based on the company’s return on investment. Would Marge support the purchase of the new fermenting station? Why or why not?

PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, g, h] Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted Unit Sales 34,000 54,000 27,000 54,000 Each T-shirt is expected to sell for $18. The purchasing manager buys the T-shirts for $7 each. The company needs to have enough T-shirts on hand at the end of each quarter to fill 28 percent of the next quarter’s sales demand. Selling and administrative expenses are budgeted at $68,000 per quarter plus 14 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. 2. Determine budgeted cost of merchandise purchased for each quarter.

U8i4 Construction Company has the following account balances reported on its financial statements on December 31, 2019. In addition, the company did not issue any common stock during 2019. All accounts on financial statements have been adjusted and reported.

Equipment (net) $550               

Deferred revenue 145

Salaries expense 60

Depreciation for the year 90

Common stock 60

Supplies 100                             

Notes payable 180

Service revenue   360

Cash 100

Dividend paid during the year 20

Retained earnings                           ?

Required: Please choose the best answer for the following three questions based on the above information.

What is the net income reported in 2019?

multiple choice 1

• $125

• $190

• $210

• $280

What is the balance of total assets on December 31, 2019?

multiple choice 2

• $660

• $895

• $835

• $750

What is the balance of retained earnings on December 31, 2019?

multiple choice 3

• $595

• $295

• $365

• $675

the adjusted trial balance for china tea company at December 31 2018, is presented below
cash 11,300
account receivable 158,000
prepaid rent 5,800
inventory 33,000
equipment 380,000
accumulated depreciation- equipment 133,000
account payable.                                        38,000
notes payable- due in three months.      38,000
salaries payable.                                          4,800
interest payable                                          1,800
common stock.                                           240,000
retained earnings.                                      67,600
sales revenue.                                             480,000
costs of goods sold 220,000
salaries expense 128,000
rent expense 23,000
depreciation expense 38,000
interest expense 2,800
advertising expense 3,300
totals.                         1,003,200.               1,00,200
prepare the closing entries for china tea company for the year ended December 31 2018.(if no entry is required for a transaction/event select no journal entry required in the first account field.)
1record the entry to close the revenue accounts using the income summary.
2
record the entry to close the expense accounts using the income summary
3
record the entry to close the income summary account

Boston Automotive Company sold a car for a total price of $28,300 at the beginning of January 2017 (1/1/17) which included both the manufacturer’s 2-year, 20,000 mile warranty and an extended warranty for an additional 3 years and 30,000 miles. The extended warranty was $1,900 of the total price. Boston Automotive records revenue under its extended warranties using the straight line method. Boston Automotive has estimated the manufacturer’s 2-year warranty will cause the company to incur costs of $1,000 over the course of the two years. In 2017, Boston Automotive incurred actual warranty costs relative to the car of $200 for parts it had in inventory and $450 paid to its mechanics for labor.

Required:

Record all entries required in 2017 related to the sale of the car and the warranties.

What years would Boston Automotive recognize revenue under the extended warranty?

Prepare the journal entry Boston Automotive would prepare in those years for the extended warranty.

What are the internal control weaknesses in the following company's revenue cycle? And what are the potential impacts of these weaknesses on the organization? And give some suggested specific internal controls?

Customers place orders on the company’s website, via email, or by telephone. Due to a renewed interest in music, this year sales have increased significantly. All sales are on credit, with 17% of credit sales in the last 12 months needing to be written off as uncollectible. This included several large online orders to first-time customers who denied ordering or receiving the merchandise.

Customer orders are picked and sent to the warehouse, where they are placed near the loading dock in alphabetical sequence by customer name. The loading dock is used both for outgoing shipments to customers as well as receiving incoming deliveries. There are ten to twenty incoming deliveries every day, from a large number of sources.

The increased volume of sales orders has resulted in a large number of errors where customers have been sent the wrong items. There have also been delays in shipping as items that supposedly were in stock could not be found in the warehouse. Although a perpetual inventory is maintained, there has been no physical count of inventory for over two years. When an item is missing, the warehouse staff notes the information down in a log book. At the end of the week, the warehouse staff uses the log book to update the inventory records.

The system is configured to prepare the sales invoice only after shipping employees enter the actual quantities sent to a customer, thereby ensuring that customers are billed only for items actually sent and not for anything on back order. Terms of trade are payment within 21 days of invoicing, with a 2% discount offered for payments made within 5 days. Approximately 50% of Strings long standing repeat customers pay within the 5 days.

The trial balance before adjustment for Sheridan Company shows the following balances.

The following cases are independent:

Income statements for two different companies in the same industry are as follows:

Trimax Inc Quintex Inc

Sales $500,000 $500,000

Less: Variable costs 250,000 100,000

Contribution margin 250,000 400,000

Less: Fixed Costs 200,000 350,000

Operating income 50,000 50,000

Required:

1. Compute the degree of operating leverage for each company.

2. Compute the break-even point for each company. Explain why the break-even point for Quintex Inc. is higher.

3. Suppose that both companies experience a 50 percent increase in revenue. Compute the percentage change in profits for each company. Explain why the percentage increase in Quintex's profits is so much greater than that of Trimax.

Simun Company makes and sells a product that regularly sell for $38.95 each.

The following information is available for the current year:

A new customer approached the company with a one-time all-or-nothing order for 700 units. The special-order units are identical to the regular ones, with one exception: the customer would like their business logo engraved on each unit. It will cost $3 to engrave the logo.

Q) The minimum total sales revenue from the special order that would be acceptable to the company is: