During 2020, Tamarisk Company started a construction job with a
contract price of $1,620,000. The job was completed in 2022. The
following information is available.
|
2020 |
2021 |
2022 |
||||
|---|---|---|---|---|---|---|
|
Costs incurred to date |
$373,700 | $749,360 | $1,070,000 | |||
|
Estimated costs to complete |
636,300 | 352,640 | –0– | |||
|
Billings to date |
302,000 | 907,000 | 1,620,000 | |||
|
Collections to date |
268,000 | 815,000 | 1,425,000 |
Compute the amount of gross profit to be recognized each year,
assuming the percentage-of-completion method is used.
|
Gross profit recognized in 2020 |
225,700 |
|
|---|---|---|
|
Gross profit recognized in 2021 |
126,540 |
|
|
Gross profit recognized in 2022 |
197,760 |
Prepare all necessary journal entries for 2021.
(Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts. For costs incurred use account Materials, Cash,
Payables.)
|
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|
|
enter an account title to record cost of construction |
enter a debit amount |
enter a credit amount |
|
enter an account title to record cost of construction |
enter a debit amount |
enter a credit amount |
|
(To record cost of construction.) |
||
|
enter an account title to record progress billings |
enter a debit amount |
enter a credit amount |
|
enter an account title to record progress billings |
enter a debit amount |
enter a credit amount |
|
(To record progress billings.) |
||
|
enter an account title to record collections |
enter a debit amount |
enter a credit amount |
|
enter an account title to record collections |
enter a debit amount |
enter a credit amount |
|
(To record collections.) |
||
|
enter an account title to recognize revenue |
enter a debit amount |
enter a credit amount |
|
enter an account title to recognize revenue |
enter a debit amount |
enter a credit amount |
|
enter an account title to recognize revenue |
enter a debit amount |
enter a credit amount |
|
(To recognize revenue.) |
In: Accounting
Bell Company, a manufacturer of audio systems, started its
production in October 2020. For the preceding 3 years, Bell had
been a retailer of audio systems. After a thorough survey of audio
system markets, Bell decided to turn its retail store into an audio
equipment factory.
Raw material costs for an audio system will total $75 per unit.
Workers on the production lines are on average paid $14 per hour.
An audio system usually takes 5 hours to complete. In addition, the
rent on the equipment used to assemble audio systems amounts to
$5,300 per month. Indirect materials cost $7 per system. A
supervisor was hired to oversee production; her monthly salary is
$3,700.
Factory janitorial costs are $1,600 monthly. Advertising costs for
the audio system will be $9,100 per month. The factory building
depreciation expense is $6,000 per year. Property taxes on the
factory building will be $8,400 per year.
Assuming that Bell manufactures, on average, 1,000 audio systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.
Compute the cost to produce one audio system
In: Accounting
6. Make revenue forecast for Pacific Shoes for 2020
based on historical data if the company generated the following
revenues for the last five years. Calculate the forecast error,
draw a graph with the actual and forecasted revenue by year, and
show the forecast error on the graph.
Year.
2015 2016 2017 2018 2019
Revenue (Million $) 23 27 27
32.
30
In: Economics
1. It is January 1 2020 and you have recently started a new company, GreenDrone, that produces flying drones for garden maintenance. You are still at the product development stage but would like to evaluate the financial feasibility of the project. Here are some information about the company: - R&D expenditures. In order to develop the drones, you need to hire an engineer for 5 years at an annual salary of $96,000. The salary is paid monthly at the end of the month in equal amounts, i.e. 96,000/12 per month for the first year. To stay competitive, you expect you will have to grow the annual salary at a rate of 3%, starting the next year. The engineer contract starts today, i.e., on January 1 2020. - Production cost. Once the product is developed in 5 years (January 1 2025), you will start the production of your drones. Each product is expected to cost $265 to produce. The cost is to be paid to the supplier at the beginning of a month. - Pricing and sales. You plan to sell the drones for $325 a unit over the next three years, i.e., until January 1 2028. All sales for products produced in a month are collected at the end of the month. The appropriate discount rate r is 5%, annually compounded. Denoting the quantity of drones sold in a month by Q. How many drones do you need to sell per month to make this project profitable (i.e., generate a positive NPV)?
In: Finance
It is January 1 2020 and you have recently started a new company, Green- Drone, that produces flying drones for garden maintenance. You are stillat the product development stage but would like to evaluate the financial feasibility of the project. Here are some information about the company:
- R&D expenditures. In order to develop the drones, you need to
hire an engineer for 5 years at an annual salary of $96,000. The
salary is paid monthly at the end of the month in equal amounts,
i.e. 96,000/12 per month for the rst year. To stay competitive, you
expect you will have to grow the annual salary at a rate of 3%,
starting the next year. The engineer contract starts today, i.e.,
onJanuary 1 2020.
- Production cost. Once the product is developed in 5 years
(January 1 2025), you will start the production of your drones.
Each product is expected to cost $265 to produce. The cost is to be
paid to the supplier at the beginning of a month.
- Pricing and sales. You plan to sell the drones for $325 a unit
over the next three years, i.e., until January 1 2028. All sales
for products produced in a month are collected at the end of the
month. The appropriate discount rate r is 5%, annually compounded.
Denoting the quantity of drones sold in a month by Q. How many
drones do you need to sell per month to make this project protable
(i.e., generate a positive NPV)?
In: Finance
It is January 1 2020 and you have recently started a new company, Green- Drone, that produces flying drones for garden maintenance. You are still at the product development stage but would like to evaluate the financial feasibility of the project. Here are some information about the company:
- R&D expenditures. In order to develop the drones, you need to hire an engineer for 5 years at an annual salary of $96,000. The salary is paid monthly at the end of the month in equal amounts, i.e. 96,000/12 per month for the first year. To stay competitive, you expect you will have to grow the annual salary at a rate of 3%, starting the next year. The engineer contract starts today, i.e., on January 1 2020.
- Production cost. Once the product is developed in 5 years (Jan- uary 1 2025), you will start the production of your drones. Each product is expected to cost $265 to produce. The cost is to be paid to the supplier at the beginning of a month.
- Pricing and sales. You plan to sell the drones for $325 a unit over the next three years, i.e., until January 1 2028. All sales for products produced in a month are collected at the end of the month.
The appropriate discount rate r is 5%, annually compounded. Denoting the quantity of drones sold in a month by Q. How many drones do you need to sell per month to make this project profitable (i.e., generate a positive NPV)?
In: Finance
A famous analyst once said it is not important what financial statement shows us- it’s what they hide that counts. What does the analyst mean by this statement? How would a company hide information inside financial statements? What is a pro forma financial statement and how is this used in the financial markets?
In: Accounting
Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance, using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31:
| Revenues—N Region | $1,013,100 |
| Revenues—S Region | 1,210,800 |
| Revenues—W Region | 2,084,700 |
| Operating Expenses—N Region | 642,000 |
| Operating Expenses—S Region | 720,600 |
| Operating Expenses—W Region | 1,260,700 |
| Corporate Expenses—Dispatching | 456,000 |
| Corporate Expenses—Equipment Management | 285,200 |
| Corporate Expenses—Treasurer’s | 154,100 |
| General Corporate Officers’ Salaries | 340,300 |
The company operates three support departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the railroad cars inventories. It makes sure the right freight cars are at the right place at the right time. The Treasurer’s Department conducts a variety of services for the company as a whole. The following additional information has been gathered:
| North | South | West | ||||
| Number of scheduled trains | 5,700 | 6,800 | 10,300 | |||
| Number of railroad cars in inventory | 1,200 | 1,800 | 1,600 |
Required:
1. Prepare quarterly income statements showing operating income for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations.
| Thomas Railroad Company | |||
| Divisional Income Statements | |||
| For the Quarter Ended December 31 | |||
| North | South | West | |
| Revenues | $ | $ | $ |
| Operating expenses | |||
| Operating income before support department allocations | $ | $ | $ |
| Support department allocations: | |||
| Dispatching | $ | $ | $ |
| Equipment Management | |||
| Total support department allocations | $ | $ | $ |
| Operating income | $ | $ | $ |
2. What is the profit margin of each region? Round to one decimal place.
| Region | Profit Margin |
| North Region | % |
| South Region | % |
| West Region | % |
Identify the most successful region according to the profit
margin.
3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the regions?
In: Accounting
Suppose the initial Brazilian real to US dollar exchange rate is 4 reals (or “reais”) to 1 US dollar. The cost to buy a specified market basket of same quality products is $500,000 in the U.S. and R$1,400,000 in Brazil. Valued in U.S. dollar terms, the market basket in Brazil costs $350,000. (This market basket cost represents the combined price of thousands of products, and so also indicates an average price for those products.)
(a) Product prices in the U.S. and Brazil have changed. Using the prices in domestic currencies
for the two countries, does the ratio of move toward or away from the initial nominal exchange rate?
· For (e and j), use the (Brazilian price/US price) ratio so as to match the (Brazilian reals/US dollar) ratio.
(b) There has been a change in the amount of imports that Brazilian firms (wholesalers, retailers etc.) buy. With this change in the buying of foreign products, what happens to the supply of Brazilian reals in foreign exchange markets? (Compared to the previous period, for example.)
(c) What happens to the price (strength, value) of the Brazilian real?
(d) There has been a change in the amount of imports that American firms (wholesalers, retailers etc.) buy. With this change in the buying of foreign products, what happens to the supply of American dollars in foreign exchange markets? (Compared to the previous period, for example.)
(e) What happens to the price (strength, value) of the US dollar?
(f) Does the nominal exchange rate move toward or away from the initial ratio for,
?
In: Economics
Santana Rey, owner of Business Solutions, decides to prepare a
statement of cash flows for her business using the following
financial data.
| BUSINESS SOLUTIONS | ||||||
| Income Statement | ||||||
| For Three Months Ended March 31, 2020 | ||||||
| Computer services revenue | $ | 25,107 | ||||
| Net sales | 17,793 | |||||
| Total revenue | 42,900 | |||||
| Cost of goods sold | $ | 14,152 | ||||
| Depreciation expense—Office equipment | 330 | |||||
| Depreciation expense—Computer equipment | 1,240 | |||||
| Wages expense | 2,450 | |||||
| Insurance expense | 525 | |||||
| Rent expense | 2,275 | |||||
| Computer supplies expense | 1,235 | |||||
| Advertising expense | 520 | |||||
| Mileage expense | 270 | |||||
| Repairs expense—Computer | 950 | |||||
| Total expenses | 23,947 | |||||
| Net income | $ | 18,953 | ||||
| BUSINESS SOLUTIONS | |||||||||||
| Comparative Balance Sheets | |||||||||||
| December 31, 2019, and March 31, 2020 | |||||||||||
| Mar. 31, 2020 | Dec. 31, 2019 | ||||||||||
| Assets | |||||||||||
| Cash | $ | 71,257 | $ | 51,752 | |||||||
| Accounts receivable | 24,067 | 4,868 | |||||||||
| Inventory | 664 | 0 | |||||||||
| Computer supplies | 2,025 | 510 | |||||||||
| Prepaid insurance | 1,110 | 1,615 | |||||||||
| Prepaid rent | 805 | 805 | |||||||||
| Total current assets | 99,928 | 59,550 | |||||||||
| Office equipment | 7,300 | 7,300 | |||||||||
| Accumulated depreciation—Office equipment | (660 | ) | (330 | ) | |||||||
| Computer equipment | 19,300 | 19,300 | |||||||||
| Accumulated depreciation—Computer equipment | (2,480 | ) | (1,240 | ) | |||||||
| Total assets | $ | 123,388 | $ | 84,580 | |||||||
| Liabilities and Equity | |||||||||||
| Accounts payable | $ | 0 | $ | 1,160 | |||||||
| Wages payable | 975 | 560 | |||||||||
| Unearned computer service revenue | 0 | 1,500 | |||||||||
| Total current liabilities | 975 | 3,220 | |||||||||
| Equity | |||||||||||
| Common stock | 99,000 | 73,000 | |||||||||
| Retained earnings | 23,413 | 8,360 | |||||||||
| Total liabilities and equity | $ | 123,388 | $ | 84,580 | |||||||
Required:
Prepare a statement of cash flows for Business Solutions using the
indirect method for the three months ended March 31, 2020.
Owner Santana Rey contributed $26,000 to the business in exchange
for additional stock in the first quarter of 2020 and has received
$3,900 in cash dividends. (Amounts to be deducted should be
indicated with a minus sign.)
|
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In: Accounting