A began operations on January 1, 2016. Below are selected data from XYZ Corp.'s balance sheets as of December 31, 2016 and December 31, 2017.
Account December 31, 2016 December 31, 2017
Cash 20,000 35,000
Accounts Receivable 10,000 33,000
Equipment 100,000 109,000
Less: Accumulated Depreciation(10,000) (20,000)
Current Liabilities 3,000 4,000
During 2017, XYZ bought $20,000 of equipment.
During 2017, XYZ sold equipment with a cost of $12,000 and accumulated depreciation of $5,000 for a $2,000 gain.
Net income for 2017 was $55,000.
Complete the following operating activities section using the indirect method that will be shown on Statement of Cash Flows for the year ended December 31, 2017.
Cash flows from operating
| net income | ? | |
| Depreciation expense | ? | |
| Gain on sale of equipment | ? | |
| Increase in accounts receivable | ? | |
| increase in current liabilities | ? | |
| Net cash provided by operating activities | ? | ? |
In: Accounting
The following table contains data obtained from annual reports of Reiff Inc, a sandal manufacturer and retailer:
Years ended December 31 (in $thousands)
|
2014 |
2015 |
2016 |
|
|
Sales |
$535,788 |
$569,413 |
$592,696 |
|
COGS |
($329,172) |
($349,597) |
($362,109) |
|
Gross profit |
$206,616 |
$219,816 |
$230,587 |
|
LIFO Liquidation |
$2,973 |
$3,337 |
$5,890 |
|
(net of taxes) |
Required:
a. Compute the gross margin percentage for each year 2014 - 2016.
b. REIFF INC. disclosed the effect of LIFO liquidations net of income tax. Assuming a tax rate of 30%, recompute REIFF INC.’s gross margin for the years 2014 - 2016 after removing the effect of LIFO liquidation. (Hint: This means that COGS above are determined after reflecting the effect of before-tax LIFO liquidation)
c. Explain why the trend in gross margin % shown in part b is a better indicator of REIFF INC.’s performance than the reported gross margin % in part a.
In: Accounting
Minta Corporation is a leading manufacturer of sports apparel,
shoes, and equipment. The company’s 2017 financial statements
contain the following information ($ in millions):
| 2017 | 2016 | ||||
| Balance sheets: | |||||
| Accounts receivable, net | $ | 4,282 | $ | 3,846 | |
| Income statements: | |||||
| Sales revenue | $ | 36,055 | $ | 34,081 | |
A note disclosed that the allowance for uncollectible accounts had
a balance of $30 million and $54 million at the end of 2017 and
2016, respectively. Bad debt expense for 2017 was $51 million.
Assume that all sales are made on a credit basis.
Required:
1. What is the amount of gross (total) accounts
receivable due from customers at the end of 2017 and 2016?
2. What is the amount of bad debt write-offs
during 2017?
3. Analyze changes in the gross accounts
receivable account to calculate the amount of cash received from
customers during 2017.
4. Analyze changes in net accounts receivable to
calculate the amount of cash received from customers during
2017.
In: Accounting
On Dec 31, 2016, Rawda Company had accounts receivable of $750,000 and allowance for doubtful accounts that had a debit balance of $10,000. The company uses an aging schedule (aging method) to estimate its uncollectible accounts as shown in the following table:
|
# of Days Outstanding |
Amounts |
Estimated % Uncollectible |
|
0-30 |
$ 200,000 |
2% |
|
31-60 |
200,000 |
4% |
|
61-90 |
200,000 |
6% |
|
Over 90 |
150,000 |
8% |
Requirements:
In: Accounting
|
Rembrandt Paint Company had the following income statement items for the year ended December 31, 2016 ($ in 000s): |
| Net sales | $ | 20,000 | Cost of goods sold | $ | 11,500 |
| Interest income | 220 | Selling and administrative expenses | 2,700 | ||
| Interest expense | 390 | Restructuring costs | 1,000 | ||
|
In addition, during the year the company completed the disposal of its plastics business and incurred a loss from operations of $1.8 million and a gain on disposal of the component’s assets of $2.4 million. 600,000 shares of common stock were outstanding throughout 2016. Income tax expense has not yet been recorded. The income tax rate is 40% on all items of income (loss). |
| Required: |
|
Prepare a multiple-step income statement for 2016, including EPS disclosures. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands except earnings per share. Round EPS answers to 2 decimal places.) |
In: Accounting
|
Rembrandt Paint Company had the following income statement items for the year ended December 31, 2016 ($ in 000s): |
| Net sales | $ | 20,000 | Cost of goods sold | $ | 11,500 |
| Interest income | 220 | Selling and administrative expenses | 2,700 | ||
| Interest expense | 390 | Restructuring costs | 1,000 | ||
|
In addition, during the year the company completed the disposal of its plastics business and incurred a loss from operations of $1.8 million and a gain on disposal of the component’s assets of $2.4 million. 600,000 shares of common stock were outstanding throughout 2016. Income tax expense has not yet been recorded. The income tax rate is 40% on all items of income (loss). |
| Required: |
|
Prepare a multiple-step income statement for 2016, including EPS disclosures. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands except earnings per share. Round EPS answers to 2 decimal places.) |
In: Accounting
Apple reported the following pre tax income (loss) during 2010-2017
| Income (Loss) | Tax Rate | Date rate enacted into law | ||
| 2010 | 180,000 | 35% | 1/1/02 | |
| 2011 | 125,000 | 35% | ||
| 2012 | 60,000 | 35% | ||
| 2013 | 80,000 | 35% | ||
| 2014 | 70,000 | 38% | 1/1/14 | |
| 2015 | (200,000) | 40% | 1/1/15 | |
| 2016 | 80,000 | 40% | ||
| 2017 | 220,000 | 35% | 1/1/17 | |
There are no temporary or permanent differences between taxable income and EBIT for ALL years
Assume Apple will elect to carryback losses to the extent possible
Also assume that at 12/31/15 Apple is reasonably confident that they will have $30,000 of taxable income in 2016
Required:
A) prepare journal entries for 2010-2017 for income tax expenses/benefit.
B) Draft the lower portion of the 2015 income statement starting with EBIT
C) Draft the lower portion of 2016 Income statement starting with EBIT
In: Accounting
On September 1, 2016, Carolina Electronics Company has 1,000 Blu-ray players ready for sale. On October 1, 2016, 900 are sold, on account, at $125 each with a 1-year assurance-type warranty. Carolina estimates that the warranty cost on each Blu-ray player sold will probably average $10 per unit. During the final 3 months of 2016, Carolina incurred warranty costs of $4,000, and in 2017 warranty costs were $5,000.
Required:
| 1. | Prepare the journal entries for the preceding transactions. |
| 2. | Show how the preceding items would be reported on the December 31, 2016, balance sheet. |
| 3. | Prepare the journal entries for the preceding transactions using the modified cash basis method. |
| 4. | Next Level Which method produces the better measure of income? Why? |
| CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Carolina Electronics Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepare the necessary journal entries to record:
| 1. the sale of Blu-ray players on account on October 1, 2016 | |
| 2. the related warranty accrual on October 1, 2016 | |
| 3. the warranty costs paid during the last quarter of 2016 | |
| 4. the warranty costs paid during the 2017 | |
| Additional Instructions |
PAGE 9
GENERAL JOURNAL
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
|
1 |
|||||
|
2 |
|||||
|
3 |
|||||
|
4 |
|||||
|
5 |
|||||
|
6 |
|||||
|
7 |
|||||
|
8 |
Prepare the necessary journal entries to record the above transactions using the modified cash basis method.
PAGE 9
GENERAL JOURNAL
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
|
1 |
|||||
|
2 |
|||||
|
3 |
|||||
|
4 |
|||||
|
5 |
|||||
|
6 |
Show how the items would be reported on the December 31, 2016, balance sheet under U.S. GAAP. Additional Instructions
|
Carolina Electronics Company |
|
Partial Balance Sheet |
|
December 31, 2016 |
|
1 |
Current Liabilities: |
|
|
2 |
Which method produces the better measure of income? Why?
Select the item below that is true in response to the better measure of income and the reason why.
The modified cash basis method provides the better measure of income because it properly matches warranty costs to the revenues that the warranties helped generate. This method also creates a contingent liability representing a company’s expected use of resources.
The accrual method provides the better measure of income because it properly matches warranty costs to the revenues that the warranties helped generate. This method also creates a contingent liability representing a company’s expected use of resources.
The direct expense method provides the better measure of income because it expenses warranty costs when incurred.
Under the accrual method, a company’s liabilities will be misstated. In addition, the accrual method misstates warranty expense, and income, because the actual warranty repair occurs in a period other than the period in which the sale occurs.
In: Accounting
Rule Ltd acquired all the issued capital of Book Ltd on 1 July 2014 for $1,500,000. At that date the shareholders' equity of Book Ltd was:
Share Capital $1,100,000
Retained Earnings $ 300,000
Additional information for the year ended 30 June 2016:
Inter-company sales:
Rule Ltd to Book Ltd $11,000
Book Ltd to Rule Ltd $19,000
Unrealised profits in closing inventory as at 30 June 2016 is $2,400 for goods sold by Book Ltd to Rule Ltd and $1,200 for goods sold by Rule Ltd to Book Ltd.
Unrealised profit in opening inventory for goods sold by Rule Ltd to Book Ltd as at 1 July 2015 is $2,100 and for goods sold by Book to Rule is $1,400.
Rule Ltd employees provide legal advice to Book Ltd. For these services, Book Ltd pays an annual fee of $8,000 per annum.
The final dividend of $16,500, declared as at 30 June 2015, was paid by Book Ltd in October 2015.
An interim dividend of $14,000 was paid on 31 January and a final dividend was declared $20,000 at 30 June, 2016.
On 30 June 2016, Rule Ltd purchased a motor vehicle from Book Ltd for $15,000. Book Ltd made profit on this sale of $3,500.
Book Ltd raised funds from Rule Ltd by borrowing $100,000 at an interest rate of 10% per annum. The annual interest charge was paid by Book Ltd on 30 June 2016.
The directors review the balance of goodwill each year. They agree that for the year ended 30 June 2016, goodwill is to be unpaired by $20,000.
Please complete a Consolidated Worksheet
|
Consolidation Worksheet 30 June 2016 |
Rule Ltd |
Book Ltd |
Eliminations Dr Cr |
Consolidated Accounts |
|
|
Sales |
1,485,000 |
825,000 |
|||
|
Less Cost of Sales |
|||||
|
Inventory 01/07/2015 |
120,000 |
52,000 |
|||
|
Purchases |
625,000 |
313,000 |
|||
|
745,000 |
365,000 |
||||
|
Inventory 30/06/2016 |
115,000 |
49,000 |
|||
|
Cost of Goods Sold |
630,000 |
316,000 |
|||
|
Gross Profit |
855,000 |
509,000 |
|||
|
Legal fees received |
8,000 |
0 |
|||
|
Gain on sale of plant |
0 |
3,500 |
|||
|
Dividends received |
30,500 |
0 |
|||
|
Interest received from Book Ltd |
10,000 |
0 |
|||
|
903,500 |
512,500 |
||||
|
Less: Expenses - selling expenses |
80,000 |
35,500 |
|||
|
- Admin expenses |
291,500 |
314,000 |
|||
|
- Financial expenses |
52,000 |
8,000 |
|||
|
423,500 |
357,500 |
||||
|
Operating profit before tax |
480,000 |
155,000 |
|||
|
Less tax expense |
144,000 |
46,500 |
|||
|
Profit after tax |
336,000 |
108,500 |
|||
|
Retained earnings 01/07/2015 |
588,000 |
421,500 |
|||
|
Available for appropriation |
924,000 |
530,000 |
|||
|
Appropriations |
|||||
|
Interim dividend paid |
80,000 |
14,000 |
|||
|
Final dividend declared |
140,000 |
20,000 |
|||
|
Total appropriations |
220,000 |
34.000 |
|||
|
Retained earnings 30/06/2016 |
704,000 |
496,000 |
|||
|
Share capital |
2,000,000 |
1,100,000 |
|||
|
Loan from Rule Ltd |
0 |
100,000 |
|||
|
Accounts payable |
72,000 |
36,000 |
|||
|
Dividends payable |
140,000 |
20,000 |
|||
|
Taxation Payable |
94,000 |
25,000 |
|||
|
3,010,000 |
1,777,000 |
||||
|
Property, Plant & Equip (net) |
732,000 |
900,000 |
|||
|
Shares in Book Ltd |
1,500,000 |
0 |
|||
|
Loan to Book Ltd |
100,000 |
0 |
|||
|
Other non-current assets |
335,000 |
650,000 |
|||
|
Inventory |
115,000 |
49,000 |
|||
|
Other current assets |
228,000 |
178,000 |
|||
|
Goodwill on consolidation |
|||||
|
3,010,000 |
1,777,000 |
||||
In: Accounting
Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December 2016:
|
1 |
Prius Company |
Volt Company |
|
|
2 |
Materials inventory, December 1 |
$280,280.00 |
$179,000.00 |
|
3 |
Materials inventory, December 31 |
(a) |
177,500.00 |
|
4 |
Materials purchased |
712,000.00 |
340,000.00 |
|
5 |
Cost of direct materials used in production |
752,000.00 |
(a) |
|
6 |
Direct labor |
1,059,600.00 |
(b) |
|
7 |
Factory overhead |
325,200.00 |
179,600.00 |
|
8 |
Total manufacturing costs incurred during December |
(b) |
1,035,000.00 |
|
9 |
Total manufacturing costs |
2,676,800.00 |
1,479,500.00 |
|
10 |
Work in process inventory, December 1 |
540,000.00 |
444,500.00 |
|
11 |
Work in process inventory, December 31 |
451,400.00 |
(c) |
|
12 |
Cost of goods manufactured |
(c) |
1,027,500.00 |
|
13 |
Finished goods inventory, December 1 |
478,400.00 |
201,000.00 |
|
14 |
Finished goods inventory, December 31 |
495,200.00 |
(d) |
|
15 |
Sales |
4,143,000.00 |
1,676,500.00 |
|
16 |
Cost of goods sold |
(d) |
1,053,500.00 |
|
17 |
Gross profit |
(e) |
(e) |
|
18 |
Operating expenses |
540,000.00 |
(f) |
|
19 |
Net income |
(f) |
383,000.00 |
| Required: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A. | Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B. | Prepare Volt Company’s statement of cost of goods manufactured for December.* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C. | Prepare Volt Company’s income
statement for December.*
|
In: Accounting