Simnet Solutions Inc. manufactures and sells cell phones. For the 2020 business plan, the company estimated the following:
Selling Price per Unit $750
Variable Cost per Unit $450
Annual Fixed Cost $180,000
Net Income After Tax $360,000
Tax Rate 25%
The January financial statements reported that sales were not
meeting expectations. For the first 3 months of the year, only 400
units had been sold at the established price. With variable cost
staying as planned, it was clear that 2020 after tax projection
would not be reached unless some action was taken. A management
committee presented the following mutually exclusive alternatives
to the president.
Reduce the selling price by $60. The sales team forecast that with
a significantly reduced selling price 3,000 units can be sold in
the remainder of the year. Total fixed and variable unit cost will
stay as budgeted.
Lower variable cost per unit by $20 through the use of less
expensive direct materials. The selling price will also be reduced
by $40, and sales of 2,800 units are expected for the remainder of
the year.
Cut fixed costs by $20,000 and lower the selling price by 5%.
Variable cost per unit will be unchanged and sales of 2,500 units
are expected for the remainder of the year.
PROBLEM 3 INSTRUCTIONS
Under the current production, policy determines the number of units
that the company must sell to:
break-even
achieve its desired operating income
Determine which alternative the company should select to achieve
its desired operating income.
In: Accounting
These financial statement items are for Rugen Company at
year-end, July 31, 2020.
Prepare a owner’s equity statement for the year.
Prepare a classified balance sheet at July 31.
| Salaries and wages payable | $2,980 | Notes payable (long-term) | $3,000 | |||
| Salaries and wages expense | 45,700 | Cash | 5,200 | |||
| Utilities expense | 21,100 | Accounts receivable | 9,780 | |||
| Equipment | 38,000 | Accumulated depreciation | 6,000 | |||
| Accounts payable | 4,100 | Owner’s Drawings | 4,000 | |||
| Service revenue | 57,200 | Depreciation expense | 4,000 | |||
| Rent revenue | 6,500 | Owner’s capital (beginning of the year) | 48,000 |
In: Accounting
Ratchet Company uses budgets in controlling costs. The August 2020 budget report for the company’s Assembling Department is as follows.
|
RATCHET COMPANY |
||||
|
Difference |
||||
|
|
|
|
Favorable |
|
| Variable costs | ||||
| Direct materials |
$51,600 |
$50,600 |
$1,000 |
Favorable |
| Direct labor |
56,400 |
53,600 |
2,800 |
Favorable |
| Indirect materials |
28,800 |
29,000 |
200 |
Unfavorable |
| Indirect labor |
22,800 |
22,380 |
420 |
Favorable |
| Utilities |
15,000 |
14,860 |
140 |
Favorable |
| Maintenance |
8,400 |
8,740 |
340 |
Unfavorable |
| Total variable |
183,000 |
179,180 |
3,820 |
Favorable |
| Fixed costs | ||||
| Rent |
12,200 |
12,200 |
–0– |
Neither Favorable nor Unfavorable |
| Supervision |
16,900 |
16,900 |
–0– |
Neither Favorable nor Unfavorable |
| Depreciation |
7,700 |
7,700 |
–0– |
Neither Favorable nor Unfavorable |
| Total fixed |
36,800 |
36,800 |
–0– |
Neither Favorable nor Unfavorable |
| Total costs |
$219,800 |
$215,980 |
$3,820 |
Favorable |
The monthly budget amounts in the report were based on an expected
production of 60,000 units per month or 720,000 units per year. The
Assembling Department manager is pleased with the report and
expects a raise, or at least praise for a job well done. The
company president, however, is unhappy with the results for August
because only 58,000 units were produced.
In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August.
In: Accounting
Sheffield Inc., a greeting card company, had the following
statements prepared as of December 31, 2020.
|
SHEFFIELD INC. |
||||||
|---|---|---|---|---|---|---|
|
12/31/20 |
12/31/19 |
|||||
|
Cash |
$5,900 |
$6,900 |
||||
|
Accounts receivable |
61,400 |
50,800 |
||||
|
Short-term debt investments (available-for-sale) |
35,000 |
17,800 |
||||
|
Inventory |
40,000 |
59,400 |
||||
|
Prepaid rent |
5,000 |
3,900 |
||||
|
Equipment |
155,200 |
129,000 |
||||
|
Accumulated depreciation—equipment |
(35,000 |
) |
(25,000 |
) |
||
|
Copyrights |
45,600 |
49,900 |
||||
|
Total assets |
$313,100 |
$292,700 |
||||
|
Accounts payable |
$46,300 |
$39,800 |
||||
|
Income taxes payable |
3,900 |
6,100 |
||||
|
Salaries and wages payable |
7,900 |
3,900 |
||||
|
Short-term loans payable |
8,000 |
10,100 |
||||
|
Long-term loans payable |
60,100 |
68,400 |
||||
|
Common stock, $10 par |
100,000 |
100,000 |
||||
|
Contributed capital, common stock |
30,000 |
30,000 |
||||
|
Retained earnings |
56,900 |
34,400 |
||||
|
Total liabilities & stockholders’ equity |
$313,100 |
$292,700 |
||||
|
SHEFFIELD INC. |
||||
|---|---|---|---|---|
|
Sales revenue |
$338,600 |
|||
|
Cost of goods sold |
174,500 |
|||
|
Gross profit |
164,100 |
|||
|
Operating expenses |
119,100 |
|||
|
Operating income |
45,000 |
|||
|
Interest expense |
$11,400 |
|||
|
Gain on sale of equipment |
1,900 |
9,500 |
||
|
Income before tax |
35,500 |
|||
|
Income tax expense |
7,100 |
|||
|
Net income |
$28,400 |
|||
Additional information:
| 1. | Dividends in the amount of $5,900 were declared and paid during 2020. | |
| 2. | Depreciation expense and amortization expense are included in operating expenses. | |
| 3. | No unrealized gains or losses have occurred on the investments during the year. | |
| 4. | Equipment that had a cost of $20,100 and was 70% depreciated was sold during 2020. |
Prepare a statement of cash flows using the indirect method.
(Show amounts that decrease cash flow with either a -
sign e.g. -15,000 or in parenthesis e.g.
(15,000).)
|
SHEFFIELD INC. |
|---|
In: Accounting
. On December 31, 2020, Heffner Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $100 par, cumulative preferred stock outstanding. On February 28, 2021, Heffner purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Heffner sold 6,000 of the treasury shares on September 30, 2021, for $47 per share. Net income for 2021 was $540,000. The income tax rate is 25%. Also outstanding at December 31, 2020, were fully vested incentive stock options giving key employees the option to buy 50,000 common shares at $40. The market price of the common shares averaged $50 during 2021. Five thousand 6% bonds were issued at par on January 1, 2021. Each $1,000 bond is convertible into 125 shares of common stock. None of the bonds had been converted by December 31, 2021, and no stock options were exercised during the year.
Required:
Compute basic and diluted earnings per share (rounded to 2 decimal places) for Heffner Company for 2021.
In: Accounting
Blossom Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to the lease agreement.
| 1. | The lease term is 6 years, with equal annual rental payments of $3,410 at the beginning of each year. | |
| 2. | Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. | |
| 3. | The building has a fair value of $18,900, a book value to Blossom of $11,900, and a useful life of 7 years. | |
| 4. | At the end of the lease term, Blossom and Walsh expect there to be an unguaranteed residual value of $2,975. | |
| 5. | Blossom wants to earn a return of 8% on the lease, and collectibility of the payments is probable. This rate is known by Walsh. |
(b) Using the original facts of the lease, show the journal entries to be made by both Blossom and Walsh in 2020. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
In: Accounting
On January 1, 2020, Tamarisk Company acquires $110,000 of Spiderman Products, Inc., 9% bonds at a price of $99,611. Interest is received on January 1 of each year, and the bonds mature on January 1, 2023. The investment will provide Tamarisk Company a 13% yield. The bonds are classified as held-to-maturity.
Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method. (Round answers to 0 decimal places, e.g. 2,500.)
|
Schedule of Interest Revenue and Bond Discount
Amortization |
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|---|---|---|---|---|---|---|---|---|
|
|
Cash |
Interest |
Bond Discount |
Carrying Amount |
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|
1/1/20 |
$enter a dollar amount |
$enter a dollar amount |
$enter a dollar amount |
$enter a dollar amount |
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|
1/1/21 |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
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|
1/1/22 |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
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|
1/1/23 |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
||||
Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest method. (Round answers to 0 decimal places, e.g. 2,500.)
|
Schedule of Interest Revenue and Bond Discount
Amortization |
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|---|---|---|---|---|---|---|---|---|
|
|
Cash |
Interest |
Bond Discount |
Carrying Amount |
||||
|
1/1/20 |
$enter a dollar amount |
$enter a dollar amount |
$enter a dollar amount |
$enter a dollar amount |
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|
1/1/21 |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
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|
1/1/22 |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
||||
|
1/1/23 |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
enter a dollar amount |
||||
| (c) | Prepare the journal entry for the interest revenue and discount amortization under the straight-line method at December 31, 2021. | |
| (d) | Prepare the journal entry for the interest revenue and discount amortization under the effective-interest method at December 31, 2021. |
(Round answers to 0 decimal places, e.g. 2,500. 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.)
|
No. |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
(c) |
enter an account title |
enter a debit amount |
enter a credit amount |
|
enter an account title |
enter a debit amount |
enter a credit amount |
|
|
enter an account title |
enter a debit amount |
enter a credit amount |
|
|
(d) |
enter an account title |
enter a debit amount |
enter a credit amount |
|
enter an account title |
enter a debit amount |
enter a credit amount |
|
|
enter an account title |
enter a debit amount |
enter a credit amount |
In: Accounting
On January 1, 2020, Drilling Company issued ten-year bonds with a face value of $10,000,000 and a stated interest rate of 4%, payable semiannually on June 30 and December 31. The bonds were sold to yield 3%.
Instructions
1-Calculate the issue price of the bonds.
2-Record the bond issuance
3-Record the first interest payment and use the straight line method to amortize the discount or premium.
In: Finance
Question 8
Queens Construction Company commences construction of a harbour on 1 July 2020. It signs a fixed-price contract for total revenue of $400 million. The project is expected to be completed by the end of June 2023. The expected cost at the commencement of construction was $300 million. The expected costs to complete a construction project can change throughout the project. The following data relates to the project:
|
2021 |
2022 |
2023 |
|
|
($ M) |
($ M) |
($ M) |
|
|
Costs for the year |
90 |
110 |
120 |
|
Costs incurred to date |
90 |
200 |
320 |
|
Estimated costs to complete |
210 |
120 |
- |
|
Progress billings during the year |
100 |
120 |
180 |
|
Cash collected during the year |
90 |
130 |
180 |
The contract is completed as expected on 30 June 2023. Queens Construction Company uses the percentage-of-completion method to account for its construction contract.
REQUIRED
Provide the numbers for the journal entries below. Assume the stage of completion can be reliably determined. Round the percentage complete (%) to one decimal place (i.e, 0.0%) if necessary. Complete the six blanks below. (You don't need to provide the numbers for "?")
-------------------------------------
Journal entry to record periodic income recognised for 2021, 2022, 2022
In: Accounting
Presented below is information related to equipment owned by Sheridan Company at December 31, 2020.
| Cost | $9,630,000 | |
| Accumulated depreciation to date | 1,070,000 | |
| Expected future net cash flows | 7,490,000 | |
| Fair value | 5,136,000 |
Assume that Sheridan will continue to use this asset in the future.
As of December 31, 2020, the equipment has a remaining useful life
of 4 years.
Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
Dec. 31 |
enter an account title to record the transaction on December 31, 2017 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the transaction on December 31, 2017 |
enter a debit amount |
enter a credit amount |
eTextbook and Media
List of Accounts
Prepare the journal entry to record depreciation expense for 2021. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
|
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|
|
enter an account title |
enter a debit amount |
enter a credit amount |
|
enter an account title |
enter a debit amount |
enter a credit amount |
eTextbook and Media
List of Accounts
The fair value of the equipment at December 31, 2021, is $5,457,000. Prepare the journal entry (if any) necessary to record this increase in fair value. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
Dec. 31 |
enter an account title to record the transaction on December 31, 2018 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the transaction on December 31, 2018 |
enter a debit amount |
enter a credit amount |
In: Accounting