QUESTION 1
Lucy Brown is the manager of one department in a big store. In this capacity, which of the following kinds of information would he be interested in?
| A. | Financial, economic, and nonfinancial data | |
| B. | Economic data | |
| C. | Nonfinancial Data | |
| D. | Financial Data |
QUESTION 2
A company has high operating leverage when:
| A. | small percentage changes in revenue produce large percentage changes in profit. | |
| B. | the organization makes purchases on credit instead of paying cash. | |
| C. | a company utilizes debt to finance its assets. | |
| D. | management buys enough of the company's shares of stock to take control of the corporation. |
QUESTION 3
In the graph below, which depicts the relationship between units produced and unit cost, the dotted line depicts which type ofcost per unit?
| A. | Mixed cost | |
| B. | Fixed cost | |
| C. | Variable cost | |
| D. | None of these |
In: Accounting
The trial balance before adjustment for W. Company shows the
following balances.
|
Dr. |
Cr. |
|||
| Accounts Receivable | $83,000 | |||
| Allowance for Doubtful Accounts | 2,140 | |||
| Sales Revenue | $477,700 |
Using the data above, give the journal entries required to record
each of the following cases. (Each situation is
independent.)
| 1. | To obtain additional cash, W. factors without recourse $26,900 of accounts receivable with S. Finance. The finance charge is 10% of the amount factored. | |
| 2. | To obtain a 1-year loan of $59,400, W. assigns $71,800 of specific receivable accounts to C. Financial. The finance charge is 9% of the loan; the cash is received and the accounts turned over to C. Financial. | |
| 3. | The company wants to maintain the Allowance for Doubtful Accounts at 6% of gross accounts receivable. | |
| 4. | Based on an aging analysis, an allowance of $6,306 should be
reported. Assume the allowance has a credit balance of
$1,078. |
In: Accounting
The accounting records of Ortiz Manufactoring Company (OMC) revealed that the company incurred $3 million of materials, $5 of production labor, $4 million of manufacturing overhead, and $6 million of selling, general, and administrative expense during 2014. It was discovered that OMC's chief financial officer (CFO) included $1.5 million dollars of upstream research and development expense in the manufacturing overhead account when it should have been classified as selling, general, and administrative expense . OMC made 5,000 units of product and sold 4,000 units of product in 2014.
A, Indicate whether the elements on the 2014 financial statements (i.e., assets, liabilities, equity, revenue, expense, and net income) would be overstated or understated as a result of the misclassification of the upstream research and development expense. Determine the amount of the overstatement for each element.
B. Speculate as to what would cause the CFO to intentionally misclassify the research and development expense.
In: Accounting
You're evaluating a new electron microscope for the QA (quality assurance) unit. The microscope will cost $19,000 to buy and another $2,000 to install, and will be sold for $1,800 after 3 years. It falls into the 3-year MACRS class, with depreciation rates as follows:
| Year | 1 | 2 | 3 | 4 |
| Depreciation rate | 33% | 45% | 15% | 7% |
The microscope will require an inventory of spare parts worth $5,000. The equipment will not increase revenue, but will save the company $10,000 in labor costs each year.
Your company's marginal tax rate (federal plus state) is 34% and its weighted average cost of capital is 8%.
What is the initial (year-0) free cash flow from the project? Choose the right sign.
What is the free cash flow in year 1?
What is the free cash flow in year 2?
What is the after-tax salvage value of the equipment at the end
of year 3?
What is the free cash flow in year 3?
What is the NPV of this project?
In: Finance
The comparative balance sheets for 2021 and 2020 and the
statement of income for 2021 are given below for Dux Company.
Additional information from Dux’s accounting records is provided
also.
| DUX COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in thousands) |
||||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Cash | $ | 33 | $ | 20 | ||||
| Accounts receivable | 48 | 50 | ||||||
| Less: Allowance for uncollectible accounts | (4 | ) | (3 | ) | ||||
| Dividends receivable | 3 | 2 | ||||||
| Inventory | 55 | 50 | ||||||
| Long-term investment | 15 | 10 | ||||||
| Land | 70 | 40 | ||||||
| Buildings and equipment | 225 | 250 | ||||||
| Less: Accumulated depreciation | (25 | ) | (50 | ) | ||||
| $ | 420 | $ | 369 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 13 | $ | 20 | ||||
| Salaries payable | 2 | 5 | ||||||
| Interest payable | 4 | 2 | ||||||
| Income tax payable | 7 | 8 | ||||||
| Notes payable | 30 | 0 | ||||||
| Bonds payable | 95 | 70 | ||||||
| Less: Discount on bonds | (2 | ) | (3 | ) | ||||
| Shareholders' Equity | ||||||||
| Common stock | 210 | 200 | ||||||
| Paid-in capital—excess of par | 24 | 20 | ||||||
| Retained earnings | 45 | 47 | ||||||
| Less: Treasury stock | (8 | ) | 0 | |||||
| $ | 420 | $ | 369 | |||||
| DUX COMPANY Income Statement For the Year Ended December 31, 2021 ($ in thousands) |
||||||
| Revenues | ||||||
| Sales revenue | $ | 200 | ||||
| Dividend revenue | 3 | $ | 203 | |||
| Expenses | ||||||
| Cost of goods sold | 120 | |||||
| Salaries expense | 25 | |||||
| Depreciation expense | 5 | |||||
| Bad debt expense | 1 | |||||
| Interest expense | 8 | |||||
| Loss on sale of building | 3 | |||||
| Income tax expense | 16 | 178 | ||||
| Net income | $ | 25 | ||||
Additional information from the accounting records:
Required:
Prepare the statement of cash flows of Dux Company for the year
ended December 31, 2021. Present cash flows from operating
activities by the direct method. (Do not round your
intermediate calculations. Enter your answers in thousands (i.e.,
10,000 should be entered as 10). Amounts to be deducted should be
indicated with a minus sign.)
In: Accounting
The comparative balance sheets for 2018 and 2017 and the
statement of income for 2018 are given below for Dux Company.
Additional information from Dux’s accounting records is provided
also.
|
DUX COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) |
||||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Cash | $ | 66 | $ | 38 | ||||
| Accounts receivable | 49 | 76 | ||||||
| Less: Allowance for uncollectible accounts | (4 | ) | (3 | ) | ||||
| Dividends receivable | 4 | 3 | ||||||
| Inventory | 85 | 80 | ||||||
| Long-term investment | 51 | 44 | ||||||
| Land | 85 | 70 | ||||||
| Buildings and equipment | 168 | 210 | ||||||
| Less: Accumulated depreciation | (44 | ) | (80 | ) | ||||
| $ | 460 | $ | 438 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 40 | $ | 59 | ||||
| Salaries payable | 3 | 6 | ||||||
| Interest payable | 9 | 3 | ||||||
| Income tax payable | 9 | 10 | ||||||
| Notes payable | 15 | 0 | ||||||
| Bonds payable | 80 | 55 | ||||||
| Less: Discount on bonds | (2 | ) | (3 | ) | ||||
| Shareholders' Equity | ||||||||
| Common stock | 210 | 200 | ||||||
| Paid-in capital—excess of par | 24 | 20 | ||||||
| Retained earnings | 83 | 88 | ||||||
| Less: Treasury stock (at cost) | (12 | ) | 0 | |||||
| $ | 460 | $ | 438 | |||||
|
DUX COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s) |
||||||
| Revenues | ||||||
| Sales revenue | $ | 340 | ||||
| Dividend revenue | 4 | $ | 344 | |||
| Expenses | ||||||
| Cost of goods sold | $ | 230 | ||||
| Salaries expense | 32 | |||||
| Depreciation expense | 6 | |||||
| Bad debt expense | 1 | |||||
| Interest expense | 9 | |||||
| Loss on sale of building | 2 | |||||
| Income tax expense | $ | 42 | 322 | |||
| Net income | $ | 22 | ||||
Additional information from the accounting records:
A building that originally cost $56,000, and which was three-fourths depreciated, was sold for $12,000.
The common stock of Byrd Corporation was purchased for $7,000 as a long-term investment.
Property was acquired by issuing a 15%, seven-year, $15,000 note payable to the seller.
New equipment was purchased for $14,000 cash.
On January 1, 2018, bonds were sold at their $25,000 face value.
On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $14 per share at that time.
Cash dividends of $12,000 were paid to shareholders.
On November 12, 1,000 shares of common stock were repurchased as treasury stock at a cost of $12,000.
Prepare the statement of cash flows for Dux Company. Use the T-account method to assist in your analysis. (Do not round your intermediate calculations. Enter your answers in thousands. Amounts to be deducted should be indicated with a minus sign.)
In: Accounting
The comparative balance sheets for 2018 and 2017 and the
statement of income for 2018 are given below for Dux Company.
Additional information from Dux’s accounting records is provided
also.
|
DUX COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) |
||||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Cash | $ | 66 | $ | 38 | ||||
| Accounts receivable | 49 | 76 | ||||||
| Less: Allowance for uncollectible accounts | (4 | ) | (3 | ) | ||||
| Dividends receivable | 4 | 3 | ||||||
| Inventory | 85 | 80 | ||||||
| Long-term investment | 51 | 44 | ||||||
| Land | 85 | 70 | ||||||
| Buildings and equipment | 168 | 210 | ||||||
| Less: Accumulated depreciation | (44 | ) | (80 | ) | ||||
| $ | 460 | $ | 438 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 40 | $ | 59 | ||||
| Salaries payable | 3 | 6 | ||||||
| Interest payable | 9 | 3 | ||||||
| Income tax payable | 9 | 10 | ||||||
| Notes payable | 15 | 0 | ||||||
| Bonds payable | 80 | 55 | ||||||
| Less: Discount on bonds | (2 | ) | (3 | ) | ||||
| Shareholders' Equity | ||||||||
| Common stock | 210 | 200 | ||||||
| Paid-in capital—excess of par | 24 | 20 | ||||||
| Retained earnings | 83 | 88 | ||||||
| Less: Treasury stock (at cost) | (12 | ) | 0 | |||||
| $ | 460 | $ | 438 | |||||
|
DUX COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s) |
||||||
| Revenues | ||||||
| Sales revenue | $ | 340 | ||||
| Dividend revenue | 4 | $ | 344 | |||
| Expenses | ||||||
| Cost of goods sold | $ | 230 | ||||
| Salaries expense | 32 | |||||
| Depreciation expense | 6 | |||||
| Bad debt expense | 1 | |||||
| Interest expense | 9 | |||||
| Loss on sale of building | 2 | |||||
| Income tax expense | $ | 42 | 322 | |||
| Net income | $ | 22 | ||||
Additional information from the accounting records:
A building that originally cost $56,000, and which was three-fourths depreciated, was sold for $12,000.
The common stock of Byrd Corporation was purchased for $7,000 as a long-term investment.
Property was acquired by issuing a 15%, seven-year, $15,000 note payable to the seller.
New equipment was purchased for $14,000 cash.
On January 1, 2018, bonds were sold at their $25,000 face value.
On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $14 per share at that time.
Cash dividends of $12,000 were paid to shareholders.
On November 12, 1,000 shares of common stock were repurchased as treasury stock at a cost of $12,000.
Required:
Prepare the T-accounts for Dux Company. (Do not round your
intermediate calculations. Enter your answers in
thousands. Amounts to be deducted should be
indicated with a minus sign.)
In: Accounting
Required information
The comparative balance sheets for 2018 and 2017 and the
statement of income for 2018 are given below for Dux Company.
Additional information from Dux’s accounting records is provided
also.
|
DUX COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) |
||||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Cash | $ | 66 | $ | 38 | ||||
| Accounts receivable | 49 | 76 | ||||||
| Less: Allowance for uncollectible accounts | (4 | ) | (3 | ) | ||||
| Dividends receivable | 4 | 3 | ||||||
| Inventory | 85 | 80 | ||||||
| Long-term investment | 51 | 44 | ||||||
| Land | 85 | 70 | ||||||
| Buildings and equipment | 168 | 210 | ||||||
| Less: Accumulated depreciation | (44 | ) | (80 | ) | ||||
| $ | 460 | $ | 438 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 40 | $ | 59 | ||||
| Salaries payable | 3 | 6 | ||||||
| Interest payable | 9 | 3 | ||||||
| Income tax payable | 9 | 10 | ||||||
| Notes payable | 15 | 0 | ||||||
| Bonds payable | 80 | 55 | ||||||
| Less: Discount on bonds | (2 | ) | (3 | ) | ||||
| Shareholders' Equity | ||||||||
| Common stock | 210 | 200 | ||||||
| Paid-in capital—excess of par | 24 | 20 | ||||||
| Retained earnings | 83 | 88 | ||||||
| Less: Treasury stock (at cost) | (12 | ) | 0 | |||||
| $ | 460 | $ | 438 | |||||
|
DUX COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s) |
||||||
| Revenues | ||||||
| Sales revenue | $ | 340 | ||||
| Dividend revenue | 4 | $ | 344 | |||
| Expenses | ||||||
| Cost of goods sold | $ | 230 | ||||
| Salaries expense | 32 | |||||
| Depreciation expense | 6 | |||||
| Bad debt expense | 1 | |||||
| Interest expense | 9 | |||||
| Loss on sale of building | 2 | |||||
| Income tax expense | $ | 42 | 322 | |||
| Net income | $ | 22 | ||||
Additional information from the accounting records:
A building that originally cost $56,000, and which was three-fourths depreciated, was sold for $12,000.
The common stock of Byrd Corporation was purchased for $7,000 as a long-term investment.
Property was acquired by issuing a 15%, seven-year, $15,000 note payable to the seller.
New equipment was purchased for $14,000 cash.
On January 1, 2018, bonds were sold at their $25,000 face value.
On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $14 per share at that time.
Cash dividends of $12,000 were paid to shareholders.
On November 12, 1,000 shares of common stock were repurchased as treasury stock at a cost of $12,000.
Required:
Prepare the T-accounts for Dux Company. (Do not round your
intermediate calculations. Enter your answers in
thousands. Amounts to be deducted should be
indicated with a minus sign.)
In: Accounting
Required information
The comparative balance sheets for 2018 and 2017 and the
statement of income for 2018 are given below for Dux Company.
Additional information from Dux’s accounting records is provided
also.
|
DUX COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) |
||||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Cash | $ | 66 | $ | 38 | ||||
| Accounts receivable | 49 | 76 | ||||||
| Less: Allowance for uncollectible accounts | (4 | ) | (3 | ) | ||||
| Dividends receivable | 4 | 3 | ||||||
| Inventory | 85 | 80 | ||||||
| Long-term investment | 51 | 44 | ||||||
| Land | 85 | 70 | ||||||
| Buildings and equipment | 168 | 210 | ||||||
| Less: Accumulated depreciation | (44 | ) | (80 | ) | ||||
| $ | 460 | $ | 438 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 40 | $ | 59 | ||||
| Salaries payable | 3 | 6 | ||||||
| Interest payable | 9 | 3 | ||||||
| Income tax payable | 9 | 10 | ||||||
| Notes payable | 15 | 0 | ||||||
| Bonds payable | 80 | 55 | ||||||
| Less: Discount on bonds | (2 | ) | (3 | ) | ||||
| Shareholders' Equity | ||||||||
| Common stock | 210 | 200 | ||||||
| Paid-in capital—excess of par | 24 | 20 | ||||||
| Retained earnings | 83 | 88 | ||||||
| Less: Treasury stock (at cost) | (12 | ) | 0 | |||||
| $ | 460 | $ | 438 | |||||
|
DUX COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s) |
||||||
| Revenues | ||||||
| Sales revenue | $ | 340 | ||||
| Dividend revenue | 4 | $ | 344 | |||
| Expenses | ||||||
| Cost of goods sold | $ | 230 | ||||
| Salaries expense | 32 | |||||
| Depreciation expense | 6 | |||||
| Bad debt expense | 1 | |||||
| Interest expense | 9 | |||||
| Loss on sale of building | 2 | |||||
| Income tax expense | $ | 42 | 322 | |||
| Net income | $ | 22 | ||||
Additional information from the accounting records:
A building that originally cost $56,000, and which was three-fourths depreciated, was sold for $12,000.
The common stock of Byrd Corporation was purchased for $7,000 as a long-term investment.
Property was acquired by issuing a 15%, seven-year, $15,000 note payable to the seller.
New equipment was purchased for $14,000 cash.
On January 1, 2018, bonds were sold at their $25,000 face value.
On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $14 per share at that time.
Cash dividends of $12,000 were paid to shareholders.
On November 12, 1,000 shares of common stock were repurchased as treasury stock at a cost of $12,000.
Prepare the statement of cash flows for Dux Company. Use the T-account method to assist in your analysis. (Do not round your intermediate calculations. Enter your answers in thousands. Amounts to be deducted should be indicated with a minus sign.)
In: Accounting
Required information
The comparative balance sheets for 2018 and 2017 and the
statement of income for 2018 are given below for Dux Company.
Additional information from Dux’s accounting records is provided
also.
|
DUX COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) |
||||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Cash | $ | 66 | $ | 38 | ||||
| Accounts receivable | 49 | 76 | ||||||
| Less: Allowance for uncollectible accounts | (4 | ) | (3 | ) | ||||
| Dividends receivable | 4 | 3 | ||||||
| Inventory | 85 | 80 | ||||||
| Long-term investment | 51 | 44 | ||||||
| Land | 85 | 70 | ||||||
| Buildings and equipment | 168 | 210 | ||||||
| Less: Accumulated depreciation | (44 | ) | (80 | ) | ||||
| $ | 460 | $ | 438 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 40 | $ | 59 | ||||
| Salaries payable | 3 | 6 | ||||||
| Interest payable | 9 | 3 | ||||||
| Income tax payable | 9 | 10 | ||||||
| Notes payable | 15 | 0 | ||||||
| Bonds payable | 80 | 55 | ||||||
| Less: Discount on bonds | (2 | ) | (3 | ) | ||||
| Shareholders' Equity | ||||||||
| Common stock | 210 | 200 | ||||||
| Paid-in capital—excess of par | 24 | 20 | ||||||
| Retained earnings | 83 | 88 | ||||||
| Less: Treasury stock (at cost) | (12 | ) | 0 | |||||
| $ | 460 | $ | 438 | |||||
|
DUX COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 000s) |
||||||
| Revenues | ||||||
| Sales revenue | $ | 340 | ||||
| Dividend revenue | 4 | $ | 344 | |||
| Expenses | ||||||
| Cost of goods sold | $ | 230 | ||||
| Salaries expense | 32 | |||||
| Depreciation expense | 6 | |||||
| Bad debt expense | 1 | |||||
| Interest expense | 9 | |||||
| Loss on sale of building | 2 | |||||
| Income tax expense | $ | 42 | 322 | |||
| Net income | $ | 22 | ||||
Additional information from the accounting records:
A building that originally cost $56,000, and which was three-fourths depreciated, was sold for $12,000.
The common stock of Byrd Corporation was purchased for $7,000 as a long-term investment.
Property was acquired by issuing a 15%, seven-year, $15,000 note payable to the seller.
New equipment was purchased for $14,000 cash.
On January 1, 2018, bonds were sold at their $25,000 face value.
On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $14 per share at that time.
Cash dividends of $12,000 were paid to shareholders.
On November 12, 1,000 shares of common stock were repurchased as treasury stock at a cost of $12,000.
Required:
Prepare the T-accounts for Dux Company. (Do not round your
intermediate calculations. Enter your answers in
thousands. Amounts to be deducted should be
indicated with a minus sign.)
In: Accounting