E9-14 (L04) (Gross Profit Method) Mark Price Company uses the
gross profit method to estimate inventory for monthly
reporting purposes. Presented below is information for the month of
May.
Inventory, May 1 $ 160,000
Purchases (gross) 640,000
Freight-in 30,000
Sales revenue 1,000,000
Sales returns 70,000
Purchase discounts 12,000
Instructions
(a) Compute the estimated inventory at May 31, assuming that the
gross profit is 30% of sales.
(b) Compute the estimated inventory at May 31, assuming that the
gross profit is 30% of cost.
In: Accounting
| Information pertaining to ABC Company's sales budget is as follows: | ||||||
| October | November | December | ||||
| Unit sales | 1,800 | 2,000 | 2,800 | |||
| Unit sale price | $ 10.00 | |||||
| Credit card sales | 60% | |||||
| Cash sales | 40% | |||||
| Fees paid to credit card companies | 3% | |||||
| Cost of goods sold | 40% | of net sales | ||||
| Note: Net sales is gross sales less fees paid to credit card companies. | ||||||
| Required: | ||||||
| Compute the budgeted sales revenue, cost of goods sold and | ||||||
| gross margin for the month of November. | ||||||
In: Accounting
I. Gross Profit Method
ABC Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of December.
|
Cost |
Retail |
||
|
Inventory, Dec 1st. |
$ 250,000 |
$ 520,000 |
|
|
Purchases (gross) |
500,000 |
980,000 |
|
|
Freight-in |
25,000 |
||
|
Sales revenue |
|
500,000 |
|
|
Sales returns |
|
8,000 |
|
|
Purchase discounts |
10,000 |
b. How does the answer differ if the gross profit is 25% of cost instead?
In: Accounting
Presented here is the income statement for Fairchild Co. for March:
| Sales | $ | 78,500 | |
| Cost of goods sold | 42,500 | ||
| Gross profit | $ | 36,000 | |
| Operating expenses | 31,500 | ||
| Operating income | $ | 4,500 |
Based on an analysis of cost behavior patterns, it has been determined that the company's contribution margin ratio is 25%.
Required:
a. Rearrange the preceding income statement to the contribution margin format.
|
|
b. Calculate operating income if sales volume increases by 9%. (Do not round intermediate calculations.)
c. Calculate the amount of revenue required for Fairchild to break-even.
In: Accounting
On January 1, Morris Company offered a customer a 10% trade discount if the customer purchases 1,000 units of an item within the next 6 months. Each item sells for $100. Based on the customer’s previous purchase history, Morris believes there is a 60% chance that the customer will purchase more than 1,000 units. On January 10, the customer purchases 200 units on credit. Required: How much revenue should Morris recognize related to this customer? Prepare the entry to record the sale on account on January 10.
In: Accounting
Johnson Company leases computer equipment to customers under sales-type leases. The equipment has no residual value at the end of the lease and the leases do not contain purchase options. Johnson desires a return of 8% interest on a five-year lease of equipment with a fair value of $970,425.
(The present value of an annuity due of $1 at 8% for five years is 4.313.) OR
(Hint: Change the calculator setting to BGN for the annuity due.)
What is the annual lease payment?
)What is the total amount of interest revenue that Johnson will earn over the life of the lease?
In: Accounting
The trial balance of Scan House, Inc. included the following
selected accounts as of December 31, 2020: Debits Credits Sales
Revenue 16,755,000
Interest Revenue 75,000 Gain on sale of investments 150,000
Unrealized gains on investments 200,000 Other Income * 1,200,000
Foreign currency translation losses 125,000 Cost of Goods Sold
11,635,000
Selling expenses 975,000 Goodwill impairment loss 550,000 Interest
Expense 60,000 Administrative Expense** 780,000 Loss on sale of
land 225,000 Dividends declared 175,000
Additional information:
* Other Income consists of income from discontinued operations.
This includes $900,000 of income from operations and a $300,000
gain on the sale of investments.
** Administrative expense includes a $150,000 expense that was a
correction of an error made in the 2018 Income Statement, but
discovered during 2020.
Retained Earnings balance: January 1, 2020 = $725,000.
ScanHouse had 600,000 shares of common stock outstanding throughout
the year and 1,000,000 shares of common stock authorized. Income
tax expense had not yet been accrued. The effective tax rate is
21%.
Required: 1. Prepare a single, continuous 2020 statement of
comprehensive income for Scan House, Inc., including income tax
expense and Earnings Per Share (EPS). Use a multiple-step
income
2. Prepare a 2020 statement of retained earnings for Scan House, Inc.
In: Finance
Following is the balance sheet for Lowe’s Companies
Inc.
| LOWE’S COMPANIES INC. | |
|---|---|
| Consolidated Balance Sheet | |
| $ millions, except par value Feb. 1, 2019 | |
| Current assets | |
| Cash and cash equivalents | $1,124 |
| Short-term investments | 480 |
| Merchandise inventory—net | 27,634 |
| Other current assets | 2,064 |
| Total current assets | 31,302 |
| Property, less accumulated depreciation | 40,550 |
| Long-term investments | 563 |
| Deferred income taxes—net | 647 |
| Goodwill | 667 |
| Other assets | 2,189 |
| Total assets | $75,918 |
| Current liabilities | |
| Short-term borrowings | $1,588 |
| Current maturities of long-term debt | 2,442 |
| Accounts payable | 18,214 |
| Accrued compensation and employee benefits | 1,456 |
| Deferred revenue | 2,858 |
| Other current liabilities | 5,335 |
| Total current liabilities | 31,893 |
| Long-term debt, excluding current maturities | 31,660 |
| Deferred revenue—extended protection plans | 1,819 |
| Other liabilities | 2,528 |
| Total liabilities | 67,900 |
| Shareholders’ equity | |
| Preferred stock—$5 par value, none issued | - |
| Common stock—$0.50 par value | 882 |
| Capital in excess of par value | - |
| Retained earnings | 7,594 |
| Accumulated other comprehensive loss | 460 |
| Total shareholders’ equity | 8,936 |
| Total liabilities and shareholders’ equity | $76,836 |
Identify and compute net operating assets (NOA) as of February 1, 2019. Assume that long‑term investments are nonoperating.
In: Finance
In 2018, the Chicago Transit Authority (CTA) faced a large budget shortfall, due to state-wide budget cuts. In an effort to balance their budget, CTA raised the fare for one train ride from $2.25 to $2.50 on January 1, 2018. In 2017, prior to the fare hike, annual ridership was about 225 (measured in millions). CTA also conducted a study that year and found that the price elasticity of demand was ???? = −0.5. a) Estimate a linear market demand function for train rides in Chicago. Graph the (inverse) market demand curve and show the price/quantity point where the price of a ride is $2.25. What is the price elasticity of demand at that point? Did the increase in fare increase or decrease revenue in the short run, based on the information provided? Can you justify your answer without actually finding the new revenue? b) What is the predicted number of riders (in millions) in 2018? Show this price/quantity point on your graph. Suppose we also know that in 2018, gas prices were low and Uber and Lyft availability increased in Chicago. Would this information change your predicted ridership for 2018? If so, demonstrate this change on your graph, and explain why your graph is consistent with the information given. (Note: Do not try to find a new value for ridership; just describe whether it would be higher or lower than your original projection).
In: Economics
B. A consumer has $400. Good X costs $6 each. Good Y costs $7 each. Draw a new budget line, on a new graph. Label it “budget line B.” Once again, preferences are perfect complements: utility = min{X,Y}. Both are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers.
C. Herman Cain ran for president in the year 2000. He made the following policy proposal: Reduce the federal income tax, and make up the federal revenue shortfall with a new national sales tax charged, in addition to the state and local sales tax. Total federal tax revenue would be unchanged. Herman Cain stated that the average person would be better off. Use the objective of the consumer (utility maximization, as illustrated in parts A and B) to explain and evaluate if Herman Cain was right or wrong.
In: Economics