(Accelerating collections) A company with a 12% cost of capital receives cash inflows from customers throughout the United States and Canada. Checks take 5 days on average to arrive, but a large commercial bank has proposed to implement a lock box concentration banking system for a $250,000 annual fee which would cut the time a check is in receivables float to an average of 11/2 days. The company’s marginal tax rate is 35%. What is the value of the proposed system to the company, and should it be implemented, if the company’s daily cash inflows average:

a. $150,000?

b. $300,000?

c. $450,000?

d. $600,000?

Bramble Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2020. The terms of acquisition for each truck are described below.

Prepare the appropriate journal entries for the above transactions for Bramble Corporation.

thanks!

Worst Buy Company has had a lot of complaints from customers of late, and its stock price is now only $2 per share. It is going to employ a one-for-six reverse stock split to increase the stock value. Assume Dean Smith owns 150 shares.

a. How many shares will he own after the reverse stock split? (Do not round intermediate calculations and round your answer to the nearest whole number.)

b. What is the anticipated price of the stock after the reverse stock split? (Do not round intermediate calculations and round your answer to 2 decimal places.)

c. Because investors often have a negative reaction to a revere stock split, assume the stock only goes up to 90 percent of the value computed in part b. What will the stock’s price be? (Do not round intermediate calculations and round your answer to 2 decimal places.)

d. How has the total value of Dean Smith’s holdings changed from before the reverse stock split to after the reverse stock split (based on the stock value computed in part c)? To get the total value before and after the split, multiply the shares held times the stock price. (Input the amount as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places.)

1. Rain Forest Lumber Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2018 balance sheet disclosed the following:

During 2019, credit sales were $1,810,000, cash collections from customers $1,890,000, and $51,000 in accounts receivable were written off. In addition, $4,200 was collected from a customer whose account was written off in 2018. An aging of accounts receivable at December 31, 2019, reveals the following:

1. Prepare summary journal entries to account for the 2019 write-offs and the collection of the receivable previously written off.
2. Prepare the year-end adjusting entry for bad debts according to each of the following three situations: 2a. Bad debt expense is estimated to be 4% of credit sales for the year. 2b. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. 2c. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

3. For situations (a)–(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2019 balance sheet?

ABC Company employs a periodic inventory system and sells its inventory to
customers for $32 per unit. ABC Company reported the following inventory
information for the month of May:

May 1    Beginning inventory 4,200 units @ $12 cost per unit
May 6    Purchased 2,000 units @ $9 cost per unit
May 8    Sold 3,000 units
May 13   Purchased 2,500 units @ $15 cost per unit
May 18   Sold 1,900 units
May 21   Purchased 4,000 units @ $8 cost per unit
May 28   Sold 2,200 units
May 30   Purchased 2,300 units @ $17 cost per unit

ABC Company reported operating expenses of $26,100 for May and they had a
tax rate of 34%.

- Calculate the dollar amount of ending inventory shown on ABC Company's
May 31 balance sheet using the FIFO method.

- Calculate the amount of gross profit shown on ABC Company's income statement
for May using the weighted average method. 

- Calculate the amount of net income shown on ABC Company's income statement
for May using the LIFO method.

ABC Company employs a periodic inventory system and sells
its inventory to customers for $23 per unit. ABC Company
had the following inventory information available for the
month of May:

May 1    Beginning inventory 1,600 units @ $12 cost per unit
May 8    Sold 1,100 units
May 13   Purchased 1,700 units @ $24 cost per unit
May 18   Sold 1,000 units
May 21   Purchased 1,500 units @ $18 cost per unit
May 28   Sold 800 units
May 30   Purchased 1,200 units @ $20 cost per unit

During May, ABC Company reported operating expenses of
$5,000 and had an income tax rate of 36%.

Calculate the amount of gross profit earned by ABC Company
during May using the weighted average method.

John’s Custom Computer Shop (JCCS) assembles computers for both individual and corporate customers. The company is organized into two divisions: Personal and Business. Once a computer is built, it is shipped to the customer. Billing for all customers is handled by the corporate Accounts Receivable Department. Accounts Receivable performs two major activities: billing and dispute resolution. Billing refers to preparing and sending the bills as well as processing the payments. Dispute resolution occurs when a customer refuses to pay, usually due to an error in billing. The costs of the Accounts Receivable Department are allocated to the two divisions based on the number of bills prepared. Kyle, the manager of the business division, has complained that the allocated costs from Accounts Receivable are beginning to make the business division look unprofitable and has asked you to recommend some changes to the allocation system. If he agrees with your recommendation, he will pass them on to the chief financial officer. Data on costs and activities in the Accounts Receivable Department follow:

Data on costs and activities in the Accounts Receivable Department follow:

he Accounts Receivable department incurred the following costs during the year:

Suppose the company implements an activity-based cost system for Accounts Receivable with two activities, billing and dispute resolution. What is the cost that will be allocated from Accounts Receivable to Personal? To Business? Use the number of bills prepared as the cost driver for billing costs and the number of disputes for dispute resolution costs.

Negligence and Strict Liability-But What If...

A Rock Climbing company, Rocky’s, takes many customers on rock climbing expeditions on the northern rim of the Grand Canyon. When James and Jenny signed up for an expedition, they were warned that rock-climbing was a dangerous activity. Additionally, James and Jenny signed a contract stating that during the climbing, they could possibly suffer from injury and, in the worst case scenario, death. The contract stated that James and Jenny assumed the risks posed by the expedition. James and Jenny went on the expedition, and on the fourth day of climbing, James’ rope get lodged between two sharp rocks, eventually ripped, and James fell 30 feet, breaking both of his legs on landing. James decided to take Rocky’s to court, alleging that the company had been negligent, by having not paid sufficient attention to the quality of the climbing rope they had used. Further, James’ attorney argued that it was a foreseeable result of the rock-climbing expedition that James might suffer harm. Rocky’s, however, defended that he was not liable for the injuries incurred by James as James and Jenny has signed contracts in which they assumed the risks of the expedition. The court found Rocky’s not liable on grounds that Rocky’s had warned James and Jenny of the potential risks of the activity, and that the customers had agreed to assume the risks in writing.

But what if the facts of the case were different? Select each set of facts below that could change the outcome of the case.

Check All That Apply

• The plaintiff did not sign a contract saying they would assume the risk. But the court found the defendant’s argument that there was an implied assumption of the risk just as persuasive as an expression of the risk argument.

• Rather than getting injured from a fall, James was injured in Rocky’s company van that was driving to the rock climbing site. Rocky’s driver had been speeding and had veered off the road a bit, causing the car to stop abruptly.

• Rather than providing a written contract that expressed risks of rock climbing, Rocky’s never warned James or Jenny of the risks of rock climbing, despite James and Jenny’s saying that they had no experience in rock climbing.

• Right before James’ rope got wedged between two rocks, James had been swinging himself on his rope, and going to areas on a cliff that the company had advised customers not to go to. The court found that this behavior satisfied a contributory negligence defense.

John’s Custom Computer Shop (JCCS) assembles computers for both individual and corporate customers. The company is organized into two divisions: Personal and Business. Once a computer is built, it is shipped to the customer. Billing for all customers is handled by the corporate Accounts Receivable Department. Accounts Receivable performs two major activities: billing and dispute resolution. Billing refers to preparing and sending the bills as well as processing the payments. Dispute resolution occurs when a customer refuses to pay, usually due to an error in billing.

The costs of the Accounts Receivable Department are allocated to the two divisions based on the number of bills prepared. Kyle, the manager of the Business division, has complained that the allocated costs from Accounts Receivable are beginning to make the business division look unprofitable and has asked you to recommend some changes to the allocation system. If he agrees with your recommendation, he will pass them on to the chief financial officer.

Data on costs and activities in the Accounts Receivable Department follow.

The Accounts Receivable Department incurred the following costs during the year.

Under the current allocation system, what is the cost that will be allocated from Accounts Receivable to Personal? To Business?

a.

b. Suppose the company implements an activity-based cost system for Accounts Receivable with two activities, billing and dispute resolution. What is the cost that will be allocated from Accounts Receivable to Personal? To Business? Use the number of bills prepared as the cost driver for billing costs and the number of disputes for dispute resolution costs.

Salem Corporation is producing product A. The company had problems related to quality. Customers have been returning the product in the last months.

            ABC costing method and ABM can be used to manage quality.

a.   Define each type of quality-related activity and give one example of each activity type.

b.   Suppose the managers implement an ABC system to measure the costs of quality. How could they use information from this system to improve the product?