For the second quarter of the following year Cloaks Company has projected sales and production in units as follows:

Cash-related production costs are budgeted at $8 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the next month. $170,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $210,000, which will be paid in February.

All units are sold on account for $12 each. Cash collections from sales are budgeted at 60% in the month of sale, 20% in the month following the month of sale, and the remaining 20% in the second month following the month of sale. On January 1 accounts receivable totaled $630,000 ($100,000 from November’s sales and the remaining from December).

Required:

1. Prepare a schedule for each month showing budgeted cash disbursements for Cloaks Company.                                                                                                          (8 marks)

2. Prepare a schedule for each month showing budgeted cash receipts for Cloaks Company.

(8 marks)

Analysis of Receivables Method

At the end of the current year, Accounts Receivable has a balance of $480,000; Allowance for Doubtful Accounts has a debit balance of $4,500; and sales for the year total $2,160,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $17,100.

a. Determine the amount of the adjusting entry for uncollectible accounts.
$

b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.

c. Determine the net realizable value of accounts receivable.
$

Carlos lives in Philadelphia and runs a business that sells pianos. In an average year, he receives $851,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $476,000; he also pays wages and utility bills totaling $281,000. He owns his showroom; if he chooses to rent it out, he will receive $71,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Carlos does not operate this piano business, he can work as an accountant, receive an annual salary of $34,000 with no additional monetary costs, and rent out his showroom at the $71,000 per year rate. No other costs are incurred in running this piano business.

Complete the following table by determining Carlos’s accounting and economic profit of his piano business.

. During the current year, Lavender Corporation, a C corporation in the business of manufacturing tangible research equipment, made charitable contributions to qualified organizations as follows:

Lavender Corporation’s taxable income (before any charitable contribution deduction) is $1.5 million.

An advantage of Roth IRAs

a)They reduce taxable income in the year of contribution.

b)They can be passed from generation to generation without any estate or income tax implication.

c)One’s taxable income in retirement is reduced by the withdrawals from the account.

d)There is no tax on Roth withdrawals in retirement when tax rates are often higher.

Which of the following can you deduct from taxable income if you do not itemize:

a)Medical Expenses

b)Charitable contributions.

c)Mortgage interest.

d)Property taxes

e)IRA contributions

The Blue division of the Leaf Company reported the following data for the current year:

Senior Management is unhappy with the investment centre’s return on investment. It asks the manager of the Blue division to submit plans to improve the ROI in the next year. The manager believes it is reasonable to consider each of the following independent courses of action

1. Increase sales by $270,000 with no change in the contribution margin percentage

2. Reduce variable costs by $120,000 3. Reduce average operating assets by 4.5%

3. Reduce average operating assets by 4.5%

Required :

a. Calculate the return on investment for the current year.

b. Using the ROI formula, calculate the ROI under each of the proposed courses of action (Round to one decimal)

a) Adam wants to purchase a car and finance his purchase with a 3 year loan at 5% interest. If he wants his payments to be $475 per month, how much can he finance with this loan?

b) Bernard purchased a car and financed his purchase with a loan at 5% interest. His payments are $475 per month. If he has 3 years left on his loan, what is his remaining balance?

c) Carlton purchased a car and took out a loan for $33,607.12, at 5% interest for 6 years. If he has 3 years left on his loan, what is his remaining balance?

D) Emile bought a car for $27,000 three years ago. The loan had a 5 year term at 6% interest rate, and Emile has been making monthly payments for three years. How much does he still owe on the car?

(Hint: first you will need to figure out the monthly payment on the 5 year loan.)

For the second quarter of the following year Cloaks Company has projected sales and production in units as follows:

Cash-related production costs are budgeted at $8 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the next month. $170,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $210,000, which will be paid in February.

All units are sold on account for $12 each. Cash collections from sales are budgeted at 60% in the month of sale, 20% in the month following the month of sale, and the remaining 20% in the second month following the month of sale. On January 1 accounts receivable totaled $630,000 ($100,000 from November’s sales and the remaining from December).

Required:

1. Prepare a schedule for each month showing budgeted cash disbursements for Cloaks Company.   

2. Prepare a schedule for each month showing budgeted cash receipts for Cloaks Company.

The Allwardt Trust is a simple trust that correctly uses the calendar year for tax purposes. Its income beneficiaries (Lucy and Ethel) are entitled to the trust's annual accounting income in shares of one-half each.

For the current tax year, Allwardt reports the following.

a. How much income is each beneficiary entitled to receive?

b. What is the trust's DNI?

c. What is the trust's taxable income?

d. How much gross income is reported by each of the beneficiaries?