Kyla Co. prepared an aging of its accounts receivable at December 31, 2020 and determined that the net realizable value of the receivables was $580,000. Additional information for calendar 2020 follows:
|
Allowance for doubtful accounts, Jan 1 |
$68,000 (cr.) |
|
Uncollectible account written off during year |
46,000 |
|
Bad debt expense for 2020 |
28,000 |
|
Uncollectible accounts recovered during year |
10,000 |
At the year end December 31, 2020, Kyla Co.’s Accounts receivable balance should be
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Consider an asset for which the following information is
available:
|
Original cost |
$48,000 |
|
Residual value |
$5,000 |
|
Estimated useful life |
5 years |
|
Depreciation method |
Double-declining balance method |
The depreciation expense for the last year of this asset's useful
life is
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Kayden Ltd. had a current ratio of 4.24 in 2019 and 5.64 in 2020. Which of the following is the best explanation?
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Annie Sweet Corporation is specialized in making wedding cakes. Customers are always required to pay a deposit equal to the full purchase price when they place orders. During the month of September 2019, Annie Sweet Corporation received $34,000 in customer deposits. The balance in its Unearned Revenue account was $14,000 at September 1, 2019 and $16,000 at September 30, 2019. How much revenue did Annie Sweet Corporation recognize during the month of September 2019?
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In: Accounting
ABC Limited is a family owned business that has been in
operation for the past ten years. The
company based in Kabwe manufactures one product: desks.
ABC limited Managing Director, Mr. Aubrey Bwalwa Chuungu has been
away on a business trip
to China for the past three months. He is worried that the current
outbreak of the Corona virus
and the subsequent restrictions imposed on commerce by the Zambian
government may have had
adverse financial consequences for the company.
You are the Management Accountant of ABC Limited.
On his return, Mr. Chuungu , who is a non-finance specialist, has
requested a financial review of
the company’s financial performance for the last month , May 2020
in order to put his fears to
rest.
You have just received an email from Mr. Chuungu to conduct a
financial performance analysis
for the month May, 2020.
You have retrieved the following computer printout from the
company’s management accounts
for the month of May, 2020:
Actual Budget
Sales volume 4,900 units 5,000 units
Selling price per unit K11.00 K10.00
Production volume 5,400 units 5,000 units
Direct materials:
Quantity 10,600 kg 10,000 kg
Price per kg K0.60 K0.50
Direct labour:
Hours 2,970 2,500
Rate per hour K3.80 K4.00
3
Fixed overheads:
Production K10, 300 K10, 000
Administration K3,100 K3,000
ABC Limited uses a standard absorption costing system, absorbing
overheads into products
using labour hours.
There was no opening or closing work-in-progress for the month of
May,2020.
Required:
(a) Prepare a statement that reconciles the budgeted profit with
the actual profit for the
month of May, 2020, showing individual variances in as much detail
as possible.
In: Accounting
Condensed balance sheet and income statement data for Jergan Corporation are presented here.
|
Jergan Corporation |
|||||||||
|
2020 |
2019 |
2018 |
|||||||
| Cash | $ 30,600 | $ 17,300 | $ 17,300 | ||||||
| Accounts receivable (net) | 50,900 | 44,500 | 48,600 | ||||||
| Other current assets | 90,100 | 94,800 | 64,900 | ||||||
| Investments | 54,700 | 70,600 | 44,600 | ||||||
| Plant and equipment (net) | 500,600 | 370,000 | 358,700 | ||||||
| $726,900 | $597,200 | $534,100 | |||||||
| Current liabilities | $85,600 | $79,000 | $70,700 | ||||||
| Long-term debt | 144,200 | 85,000 | 50,900 | ||||||
| Common stock, $10 par | 384,000 | 319,000 | 308,000 | ||||||
| Retained earnings | 113,100 | 114,200 | 104,500 | ||||||
| $726,900 | $597,200 | $534,100 | |||||||
|
Jergan Corporation |
||||||
|
2020 |
2019 |
|||||
| Sales revenue | $736,500 | $605,600 | ||||
| Less: Sales returns and allowances | 40,200 | 31,000 | ||||
| Net sales | 696,300 | 574,600 | ||||
| Cost of goods sold | 424,600 | 372,000 | ||||
| Gross profit | 271,700 | 202,600 | ||||
| Operating expenses (including income taxes) | 181,181 | 150,886 | ||||
| Net income | $ 90,519 | $ 51,714 | ||||
Additional information:
| 1. | The market price of Jergan’s common stock was $7.00, $7.50, and $8.50 for 2018, 2019, and 2020, respectively. | |
| 2. | You must compute dividends paid. All dividends were paid in cash. |
(a)
Compute the following ratios for 2019 and 2020. (Round
Asset turnover and Earnings per share to 2 decimal places, e.g.
1.65. Round payout ratio and debt to assets ratio to 0 decimal
places, e.g. 18%. Round all other answers to 1 decimal place, e.g.
6.8 or 6.8%.)
|
2019 |
2020 |
|||||||
| (1) | Profit margin | % | % | |||||
| (2) | Gross profit rate | % | % | |||||
| (3) | Asset turnover | times | times | |||||
| (4) | Earnings per share | $ | $ | |||||
| (5) | Price-earnings ratio | times | times | |||||
| (6) | Payout ratio | % | % | |||||
| (7) | Debt to assets ratio | % | % | |||||
In: Accounting
In 2018, the Westgate
Construction Company entered into a contract to construct a road
for Santa Clara County for $10,000,000. The road was completed in
2020. Information related to the contract is as follows:
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,400,000 | $ | 3,600,000 | $ | 2,200,000 | |||
| Estimated costs to complete as of year-end | 5,600,000 | 2,000,000 | 0 | ||||||
| Billings during the year | 2,000,000 | 4,000,000 | 4,000,000 | ||||||
| Cash collections during the year | 1,800,000 | 3,600,000 | 4,600,000 | ||||||
Westgate Construction uses the completed contract method of
accounting for long-term construction contracts.
Required:
1. Calculate the amount of revenue and gross profit (loss)
to be recognized in each of the three years.
2-a.In the journal below, complete the necessary
journal entries for the year 2018 (credit "Various accounts" for
construction costs incurred).
2-b.In the journal below, complete the necessary
journal entries for the year 2019 (credit "Various accounts" for
construction costs incurred).
2-c. In the journal below, complete the necessary
journal entries for the year 2020 (credit "Various accounts" for
construction costs incurred).
3. Complete the information required below to
prepare a partial balance sheet for 2018 and 2019 showing any items
related to the contract.
4. Calculate the amount of revenue and gross
profit (loss) to be recognized in each of the three years assuming
the following costs incurred and costs to complete
information.
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,400,000 | $ | 3,800,000 | $ | 3,200,000 | |||
| Estimated costs to complete as of year-end | 5,600,000 | 3,100,000 | 0 | ||||||
5. Calculate the amount of revenue and gross
profit (loss) to be recognized in each of the three years assuming
the following costs incurred and costs to complete
information.
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,400,000 | $ | 3,800,000 | $ | 3,900,000 | |||
| Estimated costs to complete as of year-end | 5,600,000 | 4,100,000 | 0 | ||||||
In: Accounting
Wildhorse Inc., a greeting card company, had the following
statements prepared as of December 31, 2020.
|
WILDHORSE INC. |
||||||
|---|---|---|---|---|---|---|
|
12/31/20 |
12/31/19 |
|||||
|
Cash |
$6,100 |
$6,900 |
||||
|
Accounts receivable |
61,900 |
50,600 |
||||
|
Short-term debt investments (available-for-sale) |
34,700 |
18,100 |
||||
|
Inventory |
40,000 |
59,400 |
||||
|
Prepaid rent |
5,000 |
4,000 |
||||
|
Equipment |
152,800 |
128,900 |
||||
|
Accumulated depreciation—equipment |
(34,900 |
) |
(25,100 |
) |
||
|
Copyrights |
46,100 |
50,400 |
||||
|
Total assets |
$311,700 |
$293,200 |
||||
|
Accounts payable |
$45,800 |
$40,100 |
||||
|
Income taxes payable |
3,900 |
6,000 |
||||
|
Salaries and wages payable |
8,100 |
4,000 |
||||
|
Short-term loans payable |
8,100 |
10,100 |
||||
|
Long-term loans payable |
59,900 |
69,400 |
||||
|
Common stock, $10 par |
100,000 |
100,000 |
||||
|
Contributed capital, common stock |
30,000 |
30,000 |
||||
|
Retained earnings |
55,900 |
33,600 |
||||
|
Total liabilities & stockholders’ equity |
$311,700 |
$293,200 |
||||
|
WILDHORSE INC. |
||||
|---|---|---|---|---|
|
Sales revenue |
$339,275 |
|||
|
Cost of goods sold |
174,600 |
|||
|
Gross profit |
164,675 |
|||
|
Operating expenses |
120,100 |
|||
|
Operating income |
44,575 |
|||
|
Interest expense |
$11,200 |
|||
|
Gain on sale of equipment |
2,000 |
9,200 |
||
|
Income before tax |
35,375 |
|||
|
Income tax expense |
7,075 |
|||
|
Net income |
$28,300 |
|||
Additional information:
| 1. | Dividends in the amount of $6,000 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).)
In: Accounting
Selected accounts included in the property, plant, and equipment
section of Tamarisk Corporation’s balance sheet at December 31,
2019, had the following balances.
| Land | $306,000 | |
| Land improvements | 142,800 | |
| Buildings | 1,122,000 | |
| Equipment | 979,200 |
During 2020, the following transactions occurred.
| 1. | A tract of land was acquired for $153,000 as a potential future building site. | |
| 2. | A plant facility consisting of land and building was acquired from Mendota Company in exchange for 20,400 shares of Tamarisk’s common stock. On the acquisition date, Tamarisk’s stock had a closing market price of $37 per share on a national stock exchange. The plant facility was carried on Mendota’s books at $112,200 for land and $326,400 for the building at the exchange date. Current appraised values for the land and building, respectively, are $234,600 and $703,800. | |
| 3. | Items of machinery and equipment were purchased at a total cost of $408,000. Additional costs were incurred as follows. |
| Freight and unloading | $13,260 | |
| Sales taxes | 20,400 | |
| Installation | 26,520 |
| 4. | Expenditures totaling $96,900 were made for new parking lots, streets, and sidewalks at the corporation’s various plant locations. These expenditures had an estimated useful life of 15 years. | |
| 5. | A machine costing $81,600 on January 1, 2012, was scrapped on June 30, 2020. Double-declining-balance depreciation has been recorded on the basis of a 10-year life. | |
| 6. | A machine was sold for $20,400 on July 1, 2020. Original cost of the machine was $44,880 on January 1, 2017, and it was depreciated on the straight-line basis over an estimated useful life of 7 years and a salvage value of $2,040. |
(a)
Calculate the balance at December 31, 2020 in each of the following
balance sheet accounts. (Hint: Disregard the related
accumulated depreciation accounts.)
| Balance at December 31, 2020 | ||
| Land |
$ |
|
| Land Improvements |
$ |
|
| Buildings |
$ |
|
| Equipment |
$ |
In: Accounting
On January 1, 2020, Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Inc., for $978,000 in cash and began to use the equity method for the investment. The price paid represented a $66,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books.
Bowden declares and pays a $102,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $396,000 in 2020 and $360,000 in 2021. Each income figure was earned evenly throughout its respective years.
On July 1, 2021, Fisher sold 10 percent (20,000 shares) of Bowden's outstanding shares for $334,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process.
Prepare the journal entries for Fisher for the years of 2020 and 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)
1 Record the acquisition of Bowden's shares.
2 Record the annual dividend declared and received from Bowden.
3 Record the accrual of income for 2020.
4 Record amortization for 2020.
5 Record the accrual of income through 07/01/21.
6 Record amortization through 07/01/21.
7 Record the sale of the shares.
8 Record annual dividend declared and received.
9 Record the accrual of income for the second half of the year.
10 Record the amortization for the second half of the year.
In: Accounting
The unadjusted trial balance of
Lady
Ltd. at
October
31,
2020,
appears in the solution step below. The adjustment data at
October
31,
2020,
is provided.
LOADING...
(Click the icon to view the month-end adjustment data.)Requirements
LOADING...
Requirement 1. Using the worksheet, prepare the adjusted trial balance of
Lady
Ltd. at
October
31,
2020.
The unadjusted balances have been entered for you. Key each adjusting entry by letter.
Calculate the adjusted balance of each account, and then total the debit and credit columns in the adjusted trial balance. (Leave unused cells blank. Round your answers to the nearest whole number.)
|
Lady Ltd. |
||||||||||
|
Trial Balance Worksheet |
||||||||||
|
October 31, 2020 |
|
Trial Balance |
Adjustments |
||||||
|
Account |
Debit |
Credit |
Debit |
Credit |
|||
|
Cash |
8,400 |
||||||
|
Accounts receivable |
10,000 |
||||||
|
Accrued service revenue |
|||||||
|
Prepaid rent |
2,400 |
||||||
|
Supplies |
2,700 |
||||||
|
Furniture |
37,800 |
||||||
|
Accumulated depreciation |
3,500 |
||||||
|
Accounts payable |
11,000 |
||||||
|
Salary payable |
|||||||
|
Share capital |
23,000 |
||||||
|
Retained earnings |
12,300 |
||||||
|
Dividends |
4,400 |
||||||
|
Service revenue |
20,000 |
||||||
|
Salary expense |
3,000 |
||||||
|
Rent expense |
|||||||
|
Utilities expense |
1,100 |
||||||
|
Depreciation expense |
|||||||
|
Supplies expense |
|||||||
|
Total |
69,800 |
69,800 |
|||||
Choose from any list or enter any number in the input fields and then click Check Answer.
Adjustment data at
October
31,
2020.
|
a. |
Accrued service revenue at
October 31, $1,600. |
|
b. |
Prepaid rent expired during the month. The unadjusted prepaid
balance of
$2,400 relates to the periodOctober throughDecember. |
|
c. |
Supplies used during
October, $2,700. |
|
d. |
Depreciation on furniture for the month. The estimated useful
life of the furniture is
three years. |
|
e. |
Accrued salary expense at
October 31 for Monday, Tuesday, and Wednesday. The five-day weekly payroll of$4,800 will be paid on Friday,November 2. |
In: Accounting
Carina Ltd has acquired all the shares of Finn Ltd on 1 July 2019 for $ 225 000. The accountant for Carina Ltd, having studied the requirements of AASB 3 Business Combinations, realises that all the identifiable assets and liabilities of Finn Ltd must be recognised in the consolidated financial statements at fair value. Although he is happy about the valuation of these items, he is unsure of a number of other matters including pre-acquisition entries and business combination valuation reserves associated with accounting for these assets and liabilities. He has approached you and asked for your advice.
The financial statements of Finn Ltd showed the equity of Finn Ltd at acquisition date to be:
Share capital — 20 000 $5.10 shares $102 000
General reserve 40 000
Retained earnings 60 000
All the assets and liabilities of Finn Ltd were recorded at amounts equal to their fair values at that date.
During the year ending 30 June 2020, Finn Ltd undertook the following actions:
• On 10 September 2019, paid a dividend of $20 000 from the profits earned prior to 1 July 2019.
• On 28 June 2020, declared a dividend of $20 000 to be paid on 15 August 2020.
Required
Write a report for the accountant at Carina Ltd advising on the following issues:
1. Should the adjustments to fair value be made in the consolidation worksheet or in the accounts of Finn Ltd?
2. What is the purpose of the pre-acquisition entries in the preparation of consolidated financial statements? Explain.
3. How to prepare the pre-acquisition entries at 1 July 2019.
4. How to prepare the pre-acquisition entries at 30 June 2020.
In: Accounting
Accounting for Consolidation
Carina Ltd has acquired all the shares of Finn Ltd on 1 July 2019
for $ 225 000. The accountant for Carina Ltd, having studied the
requirements of AASB 3 Business Combinations, realises that all the
identifiable assets and liabilities of Finn Ltd must be recognised
in the consolidated financial statements at fair value. Although he
is happy about the valuation of these items, he is unsure of a
number of other matters including pre-acquisition entries and
business combination valuation reserves associated with accounting
for these assets and liabilities. He has approached you and asked
for your advice.
The financial statements of Finn Ltd showed the equity of Finn Ltd
at acquisition date to be:
Share capital — 20 000 $5.10 shares $102 000
General reserve 40 000
Retained earnings 60 000
All the assets and liabilities of Finn Ltd were recorded at amounts
equal to their fair values at that date.
During the year ending 30 June 2020, Finn Ltd undertook the
following actions:
• On 10 September 2019, paid a dividend of $20 000 from the profits
earned prior to 1 July 2019.
• On 28 June 2020, declared a dividend of $20 000 to be paid on 15
August 2020.
• On 1 January 2020, transferred $15 000 from the general reserve
existing at 1 July 2019 to retained earnings.
Required
Write a report for the accountant at Carina Ltd advising on the
following issues:
1. Should the adjustments to fair value be made in the
consolidation worksheet or in the accounts of Finn Ltd?
2. What is the purpose of the
pre-acquisition entries in the preparation of consolidated
financial statements? Explain.
3. How to prepare the pre-acquisition
entries at 1 July 2019.
4. How to prepare the pre-acquisition
entries at 30 June 2020.
In: Accounting