1) XYZ Inc. sells a single product for $27 per unit. Direct materials costs were $5 per unit, while direct labour and variable manufacturing overhead costs were $3 and $2 respectively. Fixed overhead costs amount $20,000 per month. The company has a practical production capacity of 5,000 units per month. Variable selling costs are $2 per unit. Fixed selling costs are $2,000 per month. Last month, the company produced 5,000 units and sold 3,000 units. What is the company's operating income using variable costing?
2) XYZ Inc. sells a single product for $40 per unit. Direct materials costs were $5 per unit, while direct labour and variable manufacturing overhead costs were $3 and $2 respectively. Fixed manufacturing overhead costs amount $20,000 per month. The company has a practical production capacity of 5,000 units per month. Variable selling costs are $2 per unit. Fixed selling costs are $10,000 per month. Last month, the company produced 5,000 units and sold 3,000 units. What is the company's operating income using absorption costing?
3) XYZ Inc. sells a single product for $30 per unit. Direct materials costs were $5 per unit, while direct labour and variable manufacturing overhead costs were $3 and $2 respectively. Fixed manufacturing overhead costs amount $20,000 per month. The company has a practical production capacity of 10,000 units per month. Variable selling costs are $2 per unit. Fixed selling costs are $2,000 per month. During the company's first month of operations, the company produced 9,000 units and sold 6,000 units. The company's operating income under absorption costing for its first month of operations would be:
The same as its variable costing operating income.
$6,000 higher than its variable costing operating income.
$8,000 lower than its variable costing operating income.
$10,000 higher than its variable costing operating income.
In: Accounting
A client of your financial consulting firm, Omaha manufacturing company, is considering a new investment proposal that involves manufacturing and selling bright blue self driving taxi cabs. You are asked to create the NPV analysis.
Your client has assembled the following information.
A new machine will have to be purchased today (Year0) at a cost of $120,000.
It will generate revenues all of which are taxable, expected to be $265,000, $240,000, $215,000 in each of the 3 years (year 1,2,and 3) of the project life.
Gross profit expected to be 30% of sales revenue
The new machine will be depreciated straight-line down to its salvage value of $0 over the 3 year life.
Tax rate of client is 21%. The company has a WACC of 14%
1. Depreciation expense increases the amount of tax paid? T/F
2. What is the NPV of the project?(round to nearest dollar)
3. What is the payback period in years?(round to 2 decimal places)
4.What is the IRR?(Round to 2 decimal places, i.e. enter 10.1% as 0.101)
5.Regardless of your answer on question 2, assume that the NPV is >0. Should you invest?
6.Regardless of your answer on question 3, assume the payback is more than 3 years should you invest in the project?
7. Regardless of your answer on question 4, assume the project has an IRR of 12%. Should you invest?
In: Finance
QUESTION 1
If price is cut and demand is inelastic, then
1. total revenue will rise.
2. quantity demanded will fall
3. total revenue will fall.
4. total revenue will not change.
QUESTION 2
The presence of substitute goods will tend to make demand more
1. inelastic.
2. vertical.
3. elastic.
4. unit elastic.
QUESTION 3
Brand name products tend to have demand curves that are relatively more inelastic because
1. brand name products tend to have more substitutes.
2. brand names are not valued.
3. brand name products tend to have fewer substitutes.
4. consumers are very sensitive to the prices of brand names.
QUESTION 4
A manager can determine if her product is viewed as a normal good or an inferior good by considering
1. income elasticity.
2. cross elasticity.
3. price elasticity.
4. advertising elasticity.
QUESTION 5
A luxury good has
1. a very high income elasticity.
2. a cross elasticity of one.
3. a negative price elasticity.
4. a negative income elasticity.
QUESTION 6
Knowing demand is equivalent to knowing the
1. average investor.
2. customer.
3. employee.
4. economic profit.
In: Economics
Pitman Company is a small editorial services company owned and operated by Jan Pitman. On October 31, 2019 the end of the current year, Pitman Company’s accounting clerk prepared the following unadjusted trial balance:
Pitman Company
UNADJUSTED TRIAL BALANCE
October 31, 2019
| ACCOUNT TITLE | DEBIT | CREDIT | |
|---|---|---|---|
|
1 |
Cash |
7,710.00 |
|
|
2 |
Accounts Receivable |
37,935.00 |
|
|
3 |
Prepaid Insurance |
7,070.00 |
|
|
4 |
Supplies |
2,125.00 |
|
|
5 |
Land |
108,400.00 |
|
|
6 |
Building |
145,300.00 |
|
|
7 |
Accumulated Depreciation-Building |
85,610.00 |
|
|
8 |
Equipment |
134,800.00 |
|
|
9 |
Accumulated Depreciation-Equipment |
96,100.00 |
|
|
10 |
Accounts Payable |
12,625.00 |
|
|
11 |
Unearned Rent |
6,340.00 |
|
|
12 |
Jan Pitman, Capital |
219,690.00 |
|
|
13 |
Jan Pitman, Drawing |
15,120.00 |
|
|
14 |
Fees Earned |
323,700.00 |
|
|
15 |
Salaries and Wages Expense |
196,770.00 |
|
|
16 |
Utilities Expense |
42,265.00 |
|
|
17 |
Advertising Expense |
23,135.00 |
|
|
18 |
Repairs Expense |
17,195.00 |
|
|
19 |
Miscellaneous Expense |
6,240.00 |
|
|
20 |
Totals |
744,065.00 |
744,065.00 |
The data needed to determine year-end adjustments are as follows:
| a. | Unexpired insurance at October 31, $6,105. |
| b. | Supplies on hand at October 31, $485. |
| c. | Depreciation of building for the year, $7,140. |
| d. | Depreciation of equipment for the year, $4,445. |
| e. | Unearned rent at October 31, $1,890. |
| f. | Accrued salaries and wages at October 31, $3,330. |
| g. | Fees earned but unbilled on October 31, $11,475. |
| Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1. | Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; Depreciation Expense—Equipment; and Supplies Expense. Refer to the Chart of Accounts for exact wording of account titles. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2. |
Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance.
2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance. Pitman Company ADJUSTED TRIAL BALANCE October 31, 2019
|
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In: Accounting
In: Finance
You have been conducting an audit of the financial reports of Rainbow Forest Ltd (Rainbow Forest). Rainbow Forest Ltd is a publishing company, specialising in books and other promotional material for special industry sectors and professional bodies. Over the last three years Rainbow Forest has been experiencing difficult trading conditions resulting in operating losses and deferred dividends. In particular, Rainbow Forest has had difficulty managing its cash flow. Book sales are down on the prior year and longstanding customers are no longer making bulk purchases, but instead they are producing e-books which are emailed to members on the mailing list. Whilst Rainbow Forest can still provide online technical support services and web design advice, they have lost a major source of revenue and 20% of employees have been made redundant. You have been told by different sources that Senior Management is under a lot of pressure to turn this difficult situation around and improve both sales and profitability. You note that some of the reports you have been provided are either incomplete or are not consistent with what you have been told. Based on your initial understanding of the entity and its environment, you have concluded that Rainbow Forest Ltd is a going concern risk.
In: Accounting
The Diversified Portfolio Corporation provides investment advice
to customers. A condensed income statement for the year ended
December 31, 2021, appears below:
| Service revenue | $ | 1,080,000 |
| Operating expenses | 790,000 | |
| Income before income taxes | 290,000 | |
| Income tax expense | 72,500 | |
| Net income | $ | 217,500 |
The following balance sheet information also is
available:
| 12/31/2021 | 12/31/2020 | ||||
| Cash | $ | 399,500 | $ | 79,000 | |
| Accounts receivable | 138,000 | 109,000 | |||
| Accrued liabilities (for operating expenses) | 88,000 | 69,000 | |||
| Income taxes payable | 19,000 | 33,000 | |||
In addition, the following transactions took place during the
year:
Required:
1. Please help me prepare a statement of cash
flows for 2021 for the Diversified Portfolio Corporation. Use the
direct method for reporting operating activities.
2. Please help me prepare the cash flows from
operating activities section of Diversified’s 2021 statement of
cash flows using the indirect method.
In: Accounting
Problem 4-9 (Algo) Statement of cash flows [LO4-8]
The Diversified Portfolio Corporation provides investment advice
to customers. A condensed income statement for the year ended
December 31, 2021, appears below:
| Service revenue | $ | 1,080,000 |
| Operating expenses | 790,000 | |
| Income before income taxes | 290,000 | |
| Income tax expense | 72,500 | |
| Net income | $ | 217,500 |
The following balance sheet information also is
available:
| 12/31/2021 | 12/31/2020 | ||||
| Cash | $ | 399,500 | $ | 79,000 | |
| Accounts receivable | 138,000 | 109,000 | |||
| Accrued liabilities (for operating expenses) | 88,000 | 69,000 | |||
| Income taxes payable | 19,000 | 33,000 | |||
In addition, the following transactions took place during the
year:
Required:
1. Prepare a statement of cash flows for 2021 for
the Diversified Portfolio Corporation. Use the direct method for
reporting operating activities.
2. Prepare the cash flows from operating
activities section of Diversified’s 2021 statement of cash flows
using the indirect method.
In: Accounting
Women have been encouraged throughout the world to be
entrepreneurs. Many reasons, some of them being to support
themselves and their families; to attain the fulfillment of having
started something on their own and to satisfy their desire for
financial independence. Women not only create jobs for themselves
and others, but also work toward growing their businesses, and
constantly innovating new products and services. One such example
was the partnership venture of Ms. Rihab, Ms. Shaima, Ms. Yumna and
Ms Zahra. This partnership firm was called as “Family Events”.
Based in Bawsher since inception in 2009, this SME concentrated on
management and arrangement of family functions namely marriage
parties, birthday parties etc. Further, they expanded their
business and entered into managing events such as pre marriage
shoots, new born photography and outdoor catering service. In 2020,
this firm has failed to live up to the expectations of their
customers in terms of quality, innovation and cost. This has caused
huge loss in sales revenue, brand value and profits of the company.
Out of the four partners, two opine closure and settlement, while
the other two are devising ways to keep the firm afloat.
You are an Independent advisor based in Muscat and are required to
explain and critically compare the different situations that crop
up on following both opinions individually.
In: Accounting
Problem 4-9 Statement of cash flows [LO4-8]
The Diversified Portfolio Corporation provides investment advice
to customers. A condensed income statement for the year ended
December 31, 2018, appears below:
| Service revenue | $ | 1,180,000 |
| Operating expenses | 840,000 | |
| Income before income taxes | 340,000 | |
| Income tax expense | 68,000 | |
| Net income | $ | 272,000 |
The following balance sheet information also is
available:
| 12/31/18 | 12/31/17 | ||||
| Cash | $ | 469,000 | $ | 84,000 | |
| Accounts receivable | 148,000 | 114,000 | |||
| Accounts payable (operating expenses) | 98,000 | 74,000 | |||
| Income taxes payable | 24,000 | 43,000 | |||
In addition, the following transactions took place during the
year:
Common stock was issued for $128,000 in cash.
Long-term investments were sold for $64,000 in cash. The original cost of the investments also was $64,000.
$94,000 in cash dividends was paid to shareholders.
The company has no outstanding debt, other than those payables listed above.
Operating expenses include $44,000 in depreciation expense.
Required:
1. Prepare a statement of cash flows for 2018 for
the Diversified Portfolio Corporation. Use the direct method for
reporting operating activities.
2. Prepare the cash flows from operating
activities section of Diversified’s 2018 statement of cash flows
using the indirect method.
In: Accounting