Assume you negotiated the sale as a real estate broker and are entitled to a six percent commission. The offer and acceptance contract calls for a sales price of $230,000. The buyer has tendered $2,000 for earnest money. The buyer has received loan approval on an 80% loan to value ratio loan. The property is presently encumbered with an existing mortgage with a balance of $150,691.73. The interest on the loan has been paid through April 30, 2019. The interest rate on the mortgage is 5%. Closing date is to be May 20, 2019. All prorations are based on a 360 day year and 30 day month. The 2018 taxes have not been paid and the 2019 taxes are to be prorated based on the 2018 taxes which were 51.5 mills on an assessed valuation of $50,000. A homeowner’s insurance policy costing $1,400 for a one-year period will be purchased by the buyer and paid at closing. The owner’s title insurance costing $1,000, a deed preparation fee of $75.00, and a termite policy costing $600 are to be paid by the seller. Title insurance costing $900, a credit report costing $60, and an appraisal fee of $450 will be paid by the buyer. The buyer’s loan fees include a 1 point origination fee and $700 of additional costs. In addition, the following documents will be recorded: 1 page deed, 15 page mortgage, and a 1 page release deed. The broker’s fee is payable at closing and revenue stamps at the usual rate must be paid by the seller and buyer. The closing fee of $600 will be split 50/50 between the buyer and seller.
1. How much is the loan amount?
2. How much would the payoff be for the existing loan?
3. How much are the 2018 property taxes?
4. How much would the 2019 tax proration be?
5. Regarding the 2019 tax proration, which party (Buyer or Seller) will receive a credit for the taxes on the closing statement?
6. How much are the buyer’s total loan fees?
7. How much will be the buyer’s charge to record the documents they customarily pay to record?
8. How much would be the total cost to purchase revenue stamps on this transaction from the state of Arkansas?
9. How much would be the seller’s share of the revenue stamps?
10. How much is the total real estate commission paid by the seller?
In: Accounting
| Outpatient Therapy Center | ||||||
| Financial Proforma-Years | ||||||
| Year | Year | Year | Year | Year | ||
| 1 | 2 | 3 | 4 | 5 | 5 Yr Total | |
| # OF VISITS | 2,268 | 2,940 | 3,533 | 3,974 | 4,783 | 17,498 |
| Revenue | ||||||
| Gross Revenue | 907,200 | 1,223,040 | 1,528,625 | 1,787,971 | 2,238,056 | 7,684,893 |
| Contractual Allowance | (544,320) | (726,486) | (898,694) | (1,040,114) | (1,287,900) | (4,497,514) |
| NET REVENUE | $362,880 | $496,554 | $629,931 | $747,857 | $950,157 | $3,187,379 |
| Direct Expenses | ||||||
| Rent | 96,000 | 98,000 | 100,000 | 102,000 | 104,000 | 500,000 |
| Common Area Maintenance Charges | 24,000 | 25,200 | 26,460 | 27,783 | 29,172 | 132,615 |
| Start Up Costs Depreciation | 7,143 | 14,286 | 14,286 | 14,286 | 14,286 | 64,286 |
| Technology Depreciation | 14,286 | 28,571 | 28,571 | 28,571 | 28,571 | 128,571 |
| Advertising | 12,000 | 1,500 | 1,500 | 1,500 | 1,500 | 18,000 |
| Salary | 248,976 | 298,954 | 335,884 | 342,884 | 383,631 | 1,610,330 |
| Benefits | 63,862 | 83,329 | 86,154 | 87,950 | 98,401 | 419,697 |
| Vacation Coverage | 2,160 | 2,246 | 2,336 | 2,430 | 2,527 | 11,699 |
| Extended Leave | 1,151 | 1,197 | 1,244 | 5,177 | 5,384 | 14,152 |
| Electric | 8,000 | 8,880 | 9,235 | 9,605 | 9,989 | 45,709 |
| Phone | 1,800 | 1,872 | 1,947 | 2,025 | 2,106 | 9,749 |
| Repairs & Maintenance | 500 | 1,000 | 2,000 | 4,000 | 8,000 | 15,500 |
| Total Direct Expenses | 479,877 | 565,035 | 609,619 | 628,210 | 687,567 | 2,970,308 |
| Indirect Expenses | ||||||
| Supplies | 454 | 588 | 707 | 795 | 957 | 3,500 |
| Laundry | 2,563 | 3,322 | 3,993 | 4,490 | 5,405 | 19,772 |
| Total Indirect Expenses | 3,016 | 3,910 | 4,699 | 5,285 | 6,361 | 23,272 |
| TOTAL EXPENSES | $482,894 | $568,946 | $614,318 | $633,495 | $693,928 | $2,993,580 |
| NET INCOME/LOSS | $(120,014) | $(72,391) | $15,613 | $114,362 | $256,229 | $193,799 |
| Income Percentage | -33.1% | -14.6% | 2.5% | 15.3% | 27.0% | 6.1% |
Physical Therapy Center Assignment
1. The operation will receive an interest free, non-amortizing loan of
$ 400,000 from the home office.
2. The pre-opening start up costs are $71,429 which will be
“capitalized” (treated as P,P,& E).
3. The investment in property, plant and equipment (AKA
technology) is $ 285,714 .
Assignment: Prepare the Cash Flow Proforma for 5 years based on
the above assumptions and Proforma Results of Operations posted on
Angel. What is the ending Cash balance?
In: Finance
1. The following information relates to inventory for Shoeless
Joe Inc.
| Date | Quantity | Price | |
| March 1 | Beginning Inventory | 20 | $2 |
| March 7 | Purchase | 15 | 3 |
| March 11 | Sale | 25 | 7 |
| March 12 | Purchase | 20 | 4 |
At what amount would Shoeless report ending inventory using FIFO cost flow assumptions?
2. Ace Bonding Company purchased inventory on account. The
inventory costs $2,000 and is expected to sell for $3,000. How
should Ace record the purchase using a perpetual inventory
system?
| A. | Inventory | 2,000 | |
| Accounts Payable | 2,000 | ||
| B. | Cost of Goods Sold | 2,000 | |
| Deferred Revenue | 1,000 | ||
| Sales Revenue | 3,000 | ||
| C. | Cost of Goods Sold | 2,000 | |
| Accounts Payable | 2,000 | ||
| D. | Cost of Goods Sold | 2,000 | |
| Gain | 1,000 | ||
| Accounts Payable | 3,000 |
3. Consider the following inventory data:
| Beginning inventory | $150,000 |
| Ending inventory | 100,000 |
| Purchases | 310,000 |
What is the average days in inventory for the year?
152.0 days.
101.4 days.
126.7 days.
111.7 days.
4. Given the information below, what is the gross profit?
| Sales revenue | $320,000 |
| Accounts receivable | 50,000 |
| Ending inventory | 100,000 |
| Cost of goods sold | 250,000 |
| Sales Returns | 20,000 |
|
$50,000. |
||
|
$250,000. |
||
|
$70,000. |
||
|
$220,000. |
5. The primary reason for the popularity of LIFO is that it gives:
|
Simplified recordkeeping. |
||
|
Better matching of physical flow and cost flow. |
||
|
A lower income tax obligation when inventory costs are rising. |
||
|
A simpler method to apply |
6. Ravens Inc. has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit?
|
$72,000. |
||
|
$76,000. |
||
|
$74,000. |
||
|
$80,000. |
7. Inventory records for Marvin Company revealed the
following:
| Date | Transaction | Number of Units | Unit Cost |
| Mar. 1 | Beginning inventory | 1,000 | $7.20 |
| Mar. 10 | Purchase | 600 | 7.25 |
| Mar. 16 | Purchase | 800 | 7.30 |
| Mar. 23 | Purchase | 600 | 7.35 |
Marvin sold 2,300 units of inventory during the month. Ending inventory assuming FIFO would be:
|
$5,140. |
||
|
$5,060. |
||
|
$5,050. |
||
|
$5,080. |
In: Accounting
Part 1: Match the term with the appropriate income taxes related definition.
Term Definition
Timing difference: _______ A. Taxable income higher than pretax financial income—in the future
Taxable income: _______ B. Organization responsible for the Internal Revenue Code
FASB: _______ C. Amount that reduces income taxes payable
Deduction: _______ D. Reported U.S. GAAP revenues or expenses are not the same amounts as reported tax income or tax deductions
IRS: _______ E. Taxable income lower than pretax financial income—in the future
Future taxable amounts: _______ F. Amount that increases income tax payable
Future deductible amounts: _______ G. Organization responsible for U.S. GAAP
Part 2: Match the term with the appropriate income taxes related definition.
Term Definition
Deferred tax asset: _______ A. A contra-asset that reduces a deferred tax asset
Deferred tax liability: _______ B. Book-tax differences that reverse in future years
Valuation allowance account: _______ C. An Internal Revenue Code benefit that allows taxpayers to spread-out their losses to prior and/or future years
Permanent difference: _______ D. A future tax benefit that indicates future taxes will be decreased because of a temporary book-tax difference
Temporary difference: _______ E. Reporting continuing income items at gross pre-tax and nonrecurring items at net after-tax
Net operating loss: _______ F. A future tax obligation that indicates future taxes will be increased because of a temporary book-tax difference
Intraperiod tax allocation: _______ G. Book-tax differences that do not reverse in future years
Part 3: Match each accounting transaction with the appropriate definition. Each definition may be used more than one time. Assume U.S. GAAP for financial statement purposes and Internal Revenue Code for tax purposes.
Accounting Transaction Definition
Cash basis sales receipts: _______ A. Transactions that result in a taxable amount in the future (i.e., future tax obligation ~ deferred tax liability)
Litigation accruals: _______
Depreciable property: _______ B. Transactions that result in a deductible amount in the future (i.e., future tax benefit ~ deferred tax asset)
Municipal bond interest received: _______
Advanced rental receipts: _______ C. Transactions that result in a permanent difference
Fines paid for breaking the law: ________
Product warranty liabilities: _________
In: Accounting
In: Economics
Bailey Dry Cleaners has six employees who were paid the following wages during 2016:
| Frank Johnson | $27,000 |
| Bill Long | 18,000 |
| Duff Morse | 125,000 |
| Laura Stewart | 28,000 |
| Cindy Sharpe | 26,000 |
| Melissa Ledbetter | 20,000 |
| Total | $244,000 |
The state allows the company a 1% unemployment compensation merit-rating reduction from the normal rate of 5.4%. The federal unemployment rate is 0.6%. The maximum unemployment wages per employee are $7,000 for both the state and the federal government. Income tax withholdings of 20% are applied to all employees. A F.I.C.A. tax rate of 8% on the employee and 8% on the employer is applied to the first $117,000 of each employee’s wages.
| Required: | |
| 1. | Calculate the amount of payroll taxes to be paid by Bailey. |
| 2. | Prepare the journal entries to record the payment of payroll and the payroll tax expense. |
| CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bailey Dry Cleaners | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Prepare the journal entries to record the payment of payroll and the payroll tax expense for 2016. Additional Instructions
PAGE 10
GENERAL JOURNAL
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
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1 |
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2 |
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3 |
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4 |
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5 |
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6 |
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7 |
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8 |
Calculate the amount of payroll taxes to be paid by Bailey.
Bailey’s total payroll taxes equal.
In: Accounting
Asian Adventure Holidays offers a series of holiday packages aimed at families, seniors and corporate groups. The financial controller, Jack Tallis, is preparing for the annual board meeting and is concerned about the loss that the business sustained in the past year. He has examined the profits for each of the three departments of the business—family, seniors and corporate—and it seems that the corporate department is the source of the problem.
Jack has asked you to assist him to look more closely at the three packages offered by the corporate department to see which holiday packages are yielding profits and which are not. The three packages are to Thailand, Malaysia and Indonesia. The sales and direct costs of each corporate package for last year are as follows:
|
Bali Adventure |
Thailand Discovery |
Malaysian Orienteering |
|
|
Number of packages sold |
10 |
20 |
10 |
|
Number of people per package |
5 |
6 |
8 |
|
Revenue per person |
$18 000 |
$12 000 |
$14 000 |
|
Direct cost per package: |
|||
|
Tour leader |
$5 000 |
$12 000 |
$9 000 |
|
Tour assistant |
2 000 |
3 000 |
6 000 |
|
Air travel |
28 000 |
30 000 |
32 000 |
|
Accommodation |
15 000 |
26 000 |
24 000 |
|
Equipment hire |
4 000 |
0 |
9 000 |
|
Meals |
18 000 |
15 000 |
8 000 |
To calculate the profitability of each package, a proportion of the overhead costs of running the corporate department needs to be allocated to the three packages. Jack has suggested that these costs could be allocated to each package in proportion to actual sales revenue. For last year these overhead costs were as follows:
|
Salaries |
$200 000 |
|
Phone |
2 000 |
|
Depreciation on equipment |
5 000 |
|
Utilities |
2 000 |
|
Rent and property taxes |
9 000 |
|
Other department costs |
12 000 |
|
Total |
$230 000 |
Required:
1. Calculate the profit per package and the total profitability of each of the three corporate packages.
2. Compare the profitability of the three corporate packages.
3. Do you consider that the allocation of the corporate department overhead to packages using actual sales revenue is appropriate? Can you suggest a better method?
4. Suggest what actions the company could take in regard to the three corporate packages.
In: Finance
Common-Size Income Statements and Horizontal Analysis
Income statements for Mariners Corp. for the past two years are
as follows:
| (amounts in thousands of dollars) |
||
| 2017 | 2016 | |
| Sales revenue | $60,000 | $50,000 |
| Cost of goods sold | 42,000 | 30,000 |
| Gross profit | $18,000 | $20,000 |
| Selling and administrative expense | 9,000 | 5,000 |
| Operating income | $9,000 | $15,000 |
| Interest expense | 2,000 | 2,000 |
| Income before tax | $7,000 | $13,000 |
| Income tax expense | 2,000 | 4,000 |
| Net income | $5,000 | $9,000 |
Required:
1. Using the format in Example 13-5, prepare common-size comparative income statements for the two years for Mariners Corp. Round percentages to one decimal point.
| Mariners Corp. | ||||
| Common-Size Comparative Income Statements | ||||
| For The Years Ended December 31, 2017 And 2016 (In Thousands of Dollars) | ||||
| 2017 Dollars | 2017 Percent | 2016 Dollars | 2016 Percent | |
| Sales revenue | $ | % | $ | % |
| Cost of goods sold | ||||
| Gross profit | $ | % | $ | % |
| Selling and administrative expense | ||||
| Operating income | $ | % | $ | % |
| Interest expense | ||||
| Income before tax | $ | % | $ | % |
| Income tax expense | ||||
| Net income | $ | % | $ | % |
Feedback
Prepare in correct form common-size comparative income statements for two years. Set up with five columns.
2. Based on Mariner's common size statements in 2017 compared to 2016, it can be concluded that
all of these are true.
gross profit as a percentage of sales declined due to higher cost of goods sold.
net income decreased both in dollars and as a percentage of sales.
selling and administrative expenses increased both in dollars as well as percentage of sales.
a
Feedback
Correct
3. Using the format in Example 13-2, prepare comparative income statements for Mariners Corp., including columns for the dollars and for the percentage increase or decrease in each item on the statement. Round all percentages to the nearest whole percent. If an answer is zero, enter "0".
| Mariners Corp. | ||||
| Comparative Statements of Income | ||||
| For The Years Ended December 31, 2017 And 2016 | ||||
| December 31, 2017 | December 31, 2016 | Increase/Decrease Dollars | Increase/Decrease (Percent) | |
| Sales revenue | $ | $ | $ | % |
| Cost of goods sold | ||||
| Gross profit | $ | $ | $ | |
| Selling and administrative expense | ||||
| Operating income | $ | $ | $ | |
| Interest expense | ||||
| Income before tax | $ | $ | $ | |
| Income tax expense | ||||
| Net income | $ | $ | $ | |
In: Accounting
The Starr Theater, owned by Meg Vargo, will begin operations in
March. The Starr will be unique in that it will show only triple
features of sequential theme movies. As of March 1, the ledger of
Starr showed: Cash $2,950, Land $22,000, Buildings (concession
stand, projection room, ticket booth, and screen) $10,000,
Equipment $10,000, Accounts Payable $6,000, and Owner’s Capital
$38,950. During the month of March, the following events and
transactions occurred.
| Mar. 2 | Rented the three Indiana Jones movies to be shown for the first 3 weeks of March. The film rental was $3,000; $1,400 was paid in cash and $1,600 will be paid on March 10. | |
| 3 | Ordered the Lord of the Rings movies to be shown the last 10 days of March. It will cost $150 per night. | |
| 9 | Received $4,000 cash from admissions. | |
| 10 | Paid balance due on Indiana Jones movies rental and $1,500 on March 1 accounts payable. | |
| 11 | Starr Theater contracted with Adam Ladd to operate the concession stand. Ladd is to pay 15% of gross concession receipts, payable monthly, for the rental of the concession stand. | |
| 12 | Paid advertising expenses $700. | |
| 20 | Received $5,000 cash from customers for admissions. | |
| 20 | Received the Lord of the Rings movies and paid the rental fee of $1,500. | |
| 31 | Paid salaries of $2,500. | |
| 31 | Received statement from Adam Ladd showing gross receipts from concessions of $5,000 and the balance due to Starr Theater of $750 ($5,000 × 15%) for March. Ladd paid one-half the balance due and will remit the remainder on April 5. | |
| 31 | Received $8,900 cash from customers for admissions. |
1.) Enter the beginning balances in the ledger.
2.) Journalize the March transactions. Starr records admission
revenue as service revenue, rental of the concession stand as rent
revenue, and film rental expense as rent
expense.(Credit account titles are automatically
indented when the amount is entered. Do not indent manually. Record
journal entries in the order presented in the problem. If no entry
is required, select "No Entry" for the account titles and enter 0
for the amounts.)
3.) Post the March journal entries to the ledger.
(Post entries in the order of journal entries presented
in the previous question.)
In: Accounting
Common-Size Income Statements and Horizontal Analysis
Income statements for Mariners Corp. for the past two years are
as follows:
| (amounts in thousands of dollars) |
||
| 2017 | 2016 | |
| Sales revenue | $60,000 | $50,000 |
| Cost of goods sold | 42,000 | 30,000 |
| Gross profit | $18,000 | $20,000 |
| Selling and administrative expense | 9,000 | 5,000 |
| Operating income | $9,000 | $15,000 |
| Interest expense | 2,000 | 2,000 |
| Income before tax | $7,000 | $13,000 |
| Income tax expense | 2,000 | 4,000 |
| Net income | $5,000 | $9,000 |
Required:
1. Using the format in Example 13-5, prepare common-size comparative income statements for the two years for Mariners Corp. Round percentages to one decimal point.
| Mariners Corp. | ||||
| Common-Size Comparative Income Statements | ||||
| For The Years Ended December 31, 2017 And 2016 (In Thousands of Dollars) | ||||
| 2017 Dollars | 2017 Percent | 2016 Dollars | 2016 Percent | |
| Sales revenue | $ | % | $ | % |
| Cost of goods sold | ||||
| Gross profit | $ | % | $ | % |
| Selling and administrative expense | ||||
| Operating income | $ | % | $ | % |
| Interest expense | ||||
| Income before tax | $ | % | $ | % |
| Income tax expense | ||||
| Net income | $ | % | $ | % |
Feedback
Prepare in correct form common-size comparative income statements for two years. Set up with five columns.
2. Based on Mariner's common size statements in 2017 compared to 2016, it can be concluded that
all of these are true.
gross profit as a percentage of sales declined due to higher cost of goods sold.
net income decreased both in dollars and as a percentage of sales.
selling and administrative expenses increased both in dollars as well as percentage of sales.
a
Feedback
Correct
3. Using the format in Example 13-2, prepare comparative income statements for Mariners Corp., including columns for the dollars and for the percentage increase or decrease in each item on the statement. Round all percentages to the nearest whole percent. If an answer is zero, enter "0".
| Mariners Corp. | ||||
| Comparative Statements of Income | ||||
| For The Years Ended December 31, 2017 And 2016 | ||||
| December 31, 2017 | December 31, 2016 | Increase/Decrease Dollars | Increase/Decrease (Percent) | |
| Sales revenue | $ | $ | $ | % |
| Cost of goods sold | ||||
| Gross profit | $ | $ | $ | |
| Selling and administrative expense | ||||
| Operating income | $ | $ | $ | |
| Interest expense | ||||
| Income before tax | $ | $ | $ | |
| Income tax expense | ||||
| Net income | $ | $ | ||
In: Accounting