A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $39,000 for A and $21,000 for B; variable costs per unit would be $10 for A and $11 for B; and revenue per unit would be $15.
Required:
a. Determine each alternative's break-even point in units.
b. At what volume of output would the two alternatives yield the same profit?
c. If expected annual demand is 12,000 units, which alternative would yield the higher profit?
Answer:
Instructions are below.
Explanation:
Giving the following information:
Fixed costs= 39,000
Unitary variable cost= $10
Selling price per unit= $15
Fixed costs= 21,000
Unitary variable cost= $11
Selling price per unit= $15
First, we need to calculate the break-even point for each alternative, using the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 39,000/ (15-10)
Break-even point in units= 7,800 units
Break-even point in units= 21,000/ (15 - 11)
Break-even point in units= 5,250 units
Now, we need to determine the indifference point:
Alternative A= 5x - 39,000
Alternative B= 4x - 21,000
We equal both income formulas:
5x - 39,000 = 4x - 21,000
At 18,000 units, both alternatives provide the same profit.
Finally, the best alternative for 12,000 units:
Alternative A= 5*12,000 - 39,000= $21,000
Alternative B= 4*12,000 - 21,000= $27,000
If Year 1 sales equal $900, Year 2 sales equal $1008, and Year 3 sales equal $1170, the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is 112%. 130%. 116%. 89%.
Answer:
The percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is 112%
Explanation:
In order to calculate the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, we would have to make the following calculation:
Year 2 trend analysis % = $ 1,008 sale in Year 2 / $ 900 Year 1 sale
Year 2 trend analysis % = $1,008 / $900
Year 2 trend analysis %= 112%
The percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is 112%
If inflation in the U.S. is projected at 3% annually for the next 5years and at 7% annually in Turkey for the same time period, and Lira/Dollar spot rate (L/$) is currently equal to 5.6702 then the exact relative PPP value of the spot rate (L/$) five years from now is given by:
Answer:
6.86011 Turkish liras per US dollar
Explanation:
US's inflation 3% for the next 3 years
Turkey's inflation 7% for the next 3 years
current Lira/Dollar spot rate (L/$) = 5.6702 (liras per dollar)
inflation rate US = (1 + 0.03)⁵ = 1.159274inflation rate Turkey = (1 + 0.07)⁵ = 1.402552
difference = 1.402552 / 1.159274 = 1.20985 x current spot rate = 1.20985 x 5.6702 = 6.86011
Since the Turkish inflation rate is higher than the American inflation rate, then the Turkish lira will depreciate faster than the US dollar.
Jones Corporation switched from the LIFO method of costing inventories to the FIFO method at the beginning of 2017. The LIFO inventory at the end of 20X0 would have been $80,000 higher using FIFO. Reported retained earnings at the end of 2016 were $1,750,000. Jones’s tax rate is 21%. Tax law requires a company using LIFO for tax purposes to use it for financial reporting as well. So, when Jones changes from LIFO to FIFO, it will have to do the same for tax purposes. Further, Jones must recognize taxable income equal to the amount by which it increases the inventory valuation when it makes the change. As a result, Jones will pay tax on an additional $80,000 of taxable income in 2017.
Required:
a. Calculate the balance in retained earnings at the time of the change (beginning of 2017) as it would have been reported had FIFO been previously used.
b. Prepare the journal entry to record the change in accounting principle at the beginning of 2017.
Answer:
a. Calculate the balance in retained earnings at the time of the change (beginning of 2017) as it would have been reported had FIFO been previously used.
b. Prepare the journal entry to record the change in accounting principle at the beginning of 2017.
Dr Inventory 80,000 Cr Income taxes payable 16,800 Cr Retained earnings 63,200
Explanation:
inventory under FIFO would have been $80,000 higher, that means that COGS were overstated by $80,000 and net earnings were understated by $80,000.
retained earnings 2016 = $1,750,000
Dr Inventory 80,000
Income taxes payable 16,800
Retained earnings 63,200
Retained earnings = $1,750,000 + $63,200 = $1,813,200
When companies change from LIFO to FIFO, they must adjust their income statement and balance sheet in a prospective way because it will affect the future value of their accounts. But when a company changes from FIFO to LIFO, no adjustment is required.
You just won a national sweepstakes! For your prize, you opted to receive never-ending payments. The first payment will be $12,500 and will be paid one year from today. Every year thereafter, the payments will increase by 3.5 percent annually. What is the present value of your prize at a discount rate of 8 percent?
Answer:
The present value of your prize at a discount rate of 8 percent is $277,777.78
Explanation:
In order to calculate the present value of your prize at a discount rate of 8 percent we would use the DDM to compute the present value today as follows:
As per ddm model value today = Expected earning next year / (required rate - growth rate)
expected cash flow after 1 year =$12,500
required rate =8%
Therefore, Value today =$12,500/(8%-3.5%)
Value today = $277,777.78
The present value of your prize at a discount rate of 8 percent is $277,777.78
Assume a stock had an historical equity risk premium of 5.49 percent and a standard deviation of 11.46 percent over the past two decades. What is the 95.4 percent range for the equity risk premium
Answer:
The range of equity risk premium would be -17.43% to 28.41%
Explanation:
Firstly, we need to know standard score value (z-score value) at 95.4% confidence level.
The z-value at 95.4% obtainable from a z-score table is 2.0 approximately.
Next, we compute the range of equity risk premium as follows;
Range of equity risk premium = Average equity risk premium ± (z-value × standard deviation)
From the question, the average equity risk premium = 5.49% , while the standard deviation = 11.46%
Inputting these values in the equation above, we have;
Range of equity risk premium = 5.49% ± (2.0 × 11.46%)
= 5.49%-(2.0 × 11.46%) to 5.49% + (2.0 × 11.46%)
Range of equity risk premium = -17.43% to 28.41%
Given a 7 percent interest rate, compute the present value of payments made in years 1, 2, 3, and 4 of $1,350, $1,550, $1,550, and $1,850, respectively. (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Answer:
The present value of cash flows is $ 5,292.13
Explanation:
The present value is today's equivalence of the company's future cash flow discounted using the 7% interest rate as a discount rate.
Formula for pv of a cash flow=cash flow/(1+r)^n
r is the 7% interest rate
n is the relevant year each cash flow relates to
Manufacturing cost data for Orlando Company, which uses a job order cost system, are presented below. Indicate the missing amount for each letter. Assume in all cases that manufacturing overhead is applied on the basis of direct labor cost and the rate is the same.
Case A Case B Case C
Direct materials used $Manufacturing cost data for Orlando Company, which (a) $91,200 $69,000
Direct labor 52,200 143,800 Manufacturing cost data for Orlando Company, which (h)
Manufacturing overhead applied 42,804 Manufacturing cost data for Orlando Company, which (d) Manufacturing cost data for Orlando Company, which (i)
Total manufacturing costs 149,800 Manufacturing cost data for Orlando Company, which (e) 216,100
Work in process 1/1/14 Manufacturing cost data for Orlando Company, which (b) 21,300 18,400
Total cost of work in process 208,600 Manufacturing cost data for Orlando Company, which (f) Manufacturing cost data for Orlando Company, which (j)
Work in process 12/31/14 Manufacturing cost data for Orlando Company, which (c) 11,900 Manufacturing cost data for Orlando Company, which (k)
Cost of goods manufactured 193,500 Manufacturing cost data for Orlando Company, which (g) 232,600
Answer:
a= 54796
e=$ 352196
b= 58,800
f= 373496
j= 234500
c= 15100
k= 1900
g=3721596
Explanation:
Orlando Company
Manufacturing Cost Data
Case A Case B Case C
Direct materials used (a) $91,200 $69,000
a=149,800 - 42,804- 52,200 54796
Direct labor 52,200 143,800 (h)
$69,000 +x+0.82h= 216100
h= 147100/1.82= 80,824 80,824
Manufacturing overhead applied 42,804 (d) (i)
d=82% of 143,800=117916 117916
i=82% of 80824 = 67915.68 67915.68
Total manufacturing costs 149,800 (e) 216,100
e=$91,200+ 143,800+ 117916 352196
Work in process 1/1/14 (b) 21,300 18,400
b=208,600- 149,800 58,800
Total cost of work in process 208,600 (f) (j)
f=352196+ 21,300 373496
j=216,100 + 18,400 234500
Work in process 12/31/14 (c) 11,900 (k)
c=208,600 - 193,500 15100
k=234500 -232,600 1900
Cost of goods manufactured 193,500 (g) 232,600
g=373496- 11,900 3721596
The formulas used are given below.
Total Manufacturing Cost = Direct Materials + Direct Labor + Factory Overheads
Total cost of work in process= Total manufacturing costs+ Opening Work in process
Cost of goods manufactured= Total cost of work in process - Closing Work in process
In each of these if two amounts are known we can find the third one.We can also do rearrange these to find the required amounts.The calculation of each of the missing amount has been done next to it.
When a salesperson calls on a new business prospect, A) the salesperson may have trouble identifying all of the buying center members. B) the salesperson usually must see the purchasing manager first. C) the probability of encountering a gatekeeper is high. D) All these answers are correct.
Answer:
Option(D) is the correct answer to the given question .
Explanation:
Whenever a salesperson led to a new business point of view then following are the point he always doing for the good business prospective .
Promotional tools are the trump card for the salespeople. Individuals or the user can obtaining the consumer 's objective and its use as well as it helps the influence a line of inquiry.Salesperson could have trouble recognizing all members of the purchasing center.The salesperson will check the list of the purchasing list of members . The salesperson must maintain the relationship that is the important step in creating the confidence to their possibilities.
Valuing assets at their fair value rather than at their cost is inconsistent with the: periodicity assumption. full disclosure principles. economic entity assumption. historical cost principle.
Historical cost principle.
Valuing assets is described as determining the fair value in market and also asset valuation which its inclusion are are bonds, stocks, property etc. And in above question it is known that cost is inconsistent with historical cost principle. Historical cost principle in the other hand is described as recording of assets when they are been purchased at it historical cost. It is also a bookkeeping basic principle. This has several tools that it works with which include cost, market value etc.
This here explains to us that every business has a cost that drives on and a market value which it is driven on.
You bought a sachet water machine from Indie Inc. The cost of the machine was GH¢35,000. At that time, you asked for the payment to be deferred, and a contract was written. Under the contract, you could delay paying for the sachet water machine if you purchased the material for packaging the water from Indie Inc. You will then pay for the machine in a lump sum at the end of 2 years, with interest at a rate of 2% per quarter-year. According to the contract, if you ceased buying the packaging material from Indie Inc. at any time prior to 2 years, the full payment due at the end of 2 years would automatically become due. One year later, you decided to buy the packaging material elsewhere and stopped buying from Indie Inc., whereupon Indie Inc., per the contract terms, asked for the full payment that is due at the end of 2 years to be paid immediately. You were unhappy about this, so Indie Inc. offered as an alternative to accept the GH¢35,000 with interest at 10% per semiannual period for the 12 months that you had been buying the packaging material from Indie Inc. Which of the alternatives should you accept? Explain.
Answer:
The answer is below
Explanation:
The first option of seeing the contract run as per the terms agreed at the beginning.
This is because the alternative of paying the 35000 at an interest of 10% for the 12 months would cost more by 1,342.
Where FV = Future value, PV = Present value, r = annual interest rate
n = number of periods
Assume that you are nearing graduation and that you have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination which covers several financial analysis techniques. The first section of the test addresses discounted cash flow analysis. See how you would do by answering the following questions:
Required:
a. Draw time lines for (a) a $100 lump sum cash flow at the end of Year 2 (b) an ordinary annuity of $100 per year for 3 years, and (c) an uneven cash flow stream of -$50, $100, $75, and $50 at the end of Years 0 through 3.
b. What is the future value of an initial $100 after 3 years if it is invested in an account paying 10 percent annual interest?
c. What is the present value of $100 to be received in 3 years if the appropriate interest rate is 10 percent?
Answer:
b) What is the future value of an initial $100 after 3 years if it is invested in an account paying 10 percent annual interest?
future value = present value x (1 + interest rate)ⁿ = $100 x (1 + 10%)³ = $100 x 1.331 = $133.10
c) What is the present value of $100 to be received in 3 years if the appropriate interest rate is 10 percent?
present value = future value / (1 + interest rate)ⁿ = $100 / (1 + 10%)³ = $100 / 1.331 = $75.13
Use the following information for exercises 15 to 18 LO P2 The following information applies to the questions displayed below] On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,540 in assets in exchange for its common stock to launch the business. On October 31, the company's records show the following items and amounts. 1,570 12,800 3,110 6,490 850 660 Cash 12,800 Consulting revenue office supplies Land office equipment Accounts payable Common Stock 2,850 Rent expense 45,940 Salaries expense 17,530 Telephone expense 8,110 Miscellaneous expenses 83,540 Exercise 1-17 Preparing a balance sheet LO P2 Using the above information prepare an October 31 balance sheet for Emst Consulting
Answer:
For the Month Ended October 31, 202x
Accounts receivable $12,800
Office supplies $2,850
Office equipment $17,530
Total assets $91,770
Liabilities and stockholders' equity:
Accounts payable $8,110
Common Stock $83,540
Retained earnings $120
Total liabilities and stockholders' equity $91,770
Explanation:
I ordered the accounts and included a couple that were missing:
Cash 12,650 Accounts receivable 12,800Consulting revenue 12,800office supplies 2,850Land 45,940 office equipment 17,530 Accounts payable 8,110 Cash dividends 1,570 Common Stock 83,540 Rent expense 3,110Salaries expense 6,490 Telephone expense 850 Miscellaneous expenses 660
First we need to determine net profit for the month:
Consulting revenue 12,800
Salaries expense -6,490
Rent expense -3,110
Telephone expense -850
Miscellaneous expenses -660
net profit = $1,690
retained earnings = net profit - dividends distributed = $1,690 - $1,570 = $120
Andrew Clark Company discovered the following errors made in January 2015.1. A payment of Salaries and Wages Expense of $700 was debited to Equipment and credited to Cash, both for $700.2. A collection of $1,000 from a client on account was debited to Cash $100 and credited to Service Revenue $100.3. The purchase of equipment on account for $760 was debited to Equipment $670 and credited to Accounts Payable $670.A. Correct the errors by reversing the incorrect entry and preparing the correct entry.B. Correct the errors without reversing the incorrect entry.
Answer:
.1. A payment of Salaries and Wages Expense of $700 was debited to Equipment and credited to Cash, both for $700.
The correct entry would be:
Account Debit Credit
Wage Expense $700
2. A collection of $1,000 from a client on account was debited to Cash $100 and credited to Service Revenue $100.
The correct entry would be:
Account Debit Credit
Accounts Receivable $1,000
3. The purchase of equipment on account for $760 was debited to Equipment $670 and credited to Accounts Payable $670.
The correct entry would be:
Account Debit Credit
Accounts Payable $760
Dorchester purchased investment realty in 2001 for $25,000. During the current year, he contributes it to the American Heart Association to use as the site for its new local headquarters. The realty has a value of $52,000 on the contribution date, and Dorchester's AGI is $100,000. Dorchester's maximum current year contribution deduction is:
Answer:
The answer is $30,000
Explanation:
Solution
Dorchester in 2001 purchased investment realty for = $25,000.
The value of the reality = $52,000
Dorchester's Adjusted gross income = $100,000
We find the maximum present year contribution deduction of Dorchester
The amount of deduction is shown as follows.
The reality value = $52,000
50% of the adjusted gross income is = $100,000 * 30% =$30,000
An investment has the potential of earning you $5000 at a 20 percent probability $3000 at a 50 percent probability, and $2000 at a 30 percent probability, based on the performance of the stock market. The expected value of the investment is:__________. $(round your answer to the nearest penny)
Answer:
The expected value of the investment is $3,100
Explanation:
In order to calculate the expected value of the investment we would have to make the following calculation:
The expected value is the summation of the (event * probability of happening that event).
Therefore, The expected value of the investment = ($5,000*0.20) + ($3,000* 0.50) + ($,2000* 0.30)
The expected value of the investment = $1,000 + $1,500 + 600
The expected value of the investment= $3,100
The expected value of the investment is $3,100
Selected data taken from the accounting records of Ginis Inc. for the current year ended December 31 are as follows: Balance, December 31 Balance, January 1Accrued expenses payable $12,650 $14,030(operating expenses)Accounts payable 96,140 105,800(merchandise creditors)Inventories 178,020 193,430Prepaid expenses 7,360 8,970During the current year, the cost of merchandise sold was $1,031,550, and the operating expenses other than depreciation were $179,400. The direct method is used for presenting the cash flows from operating activities on the statement of cash flows.a. Determine the amount reported on the statement of cash flows for cash payments for merchandise.b. Determine the amount reported on the statement of cash flows for cash payments for operating expenses.
Answer:
Cash payment for merchandise inventory is $1,025,800.00
Cash payment for operating expenses is $179,170.00
Explanation:
The amount of cash payments in respect of merchandise inventory is the cost of merchandise sold minus decrease in inventories plus decrease in accounts payable.
Cash paid for merchandise inventory=$1,031,550-($193,430-$178,020)+($105,800-$96,140)=$1,025,800.00
Cash paid for operating expenses=$179,400+($14,030-$12,650)-($8,970-$7,360)=$ 179,170.00
Chang Industries has 2,000 defective units of product that have already cost $14 each to produce. A salvage company will purchase the defective units as they are for $5 each. Chang's production manager reports that the defects can be corrected for $6 per unit, enabling them to be sold at their regular market price of $21. The incremental income or loss on reworking the units is
Answer:
If the company decides to rework the units, net income will increase by $20,000.
Explanation:
Giving the following information:
A salvage company will purchase the defective units as they are for $5 each.
Chang's production manager reports that the defects can be corrected for $6 per unit, enabling them to be sold at their regular market price of $21.
The firsts costs incurred are sunk costs, therefore, they are irrelevant. They will remain constant on both decisions.
Sell as-is:
Effect on income= 2,000*5= $10,000
Rework:
Effect on income= 2,000*(21 - 6)= $30,000 increase
If the company decides to rework the units, net income will increase by $20,000.
Headland, Inc. had outstanding $6,510,000 of 10% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $8,620,000 of 9%, 15-year bonds (interest payable July 1 and January 1) at 98. A portion of the proceeds was used to call the 10% bonds (with unamortized discount of $260,400) at 104 on August 1. Unamortized bond discount and issue cost applicable to the 12% bonds were $121,000 and $39,400, respectively.
Required:
Prepare the journal entries necessary to record the issue of the new bonds and the refunding of the bonds.
Answer and Explanation:
The Journal entry is shown below:-
Cash Dr, $8,447,600 ($8,620,000 × 98 ÷ 100)
Discount on issue of bonds Dr, $172,400
To Bonds payable $8,620,000
(Being issue of binds is recorded)
Here we debited the cash as it increased the assets and discount on issue of bonds as it increased the discount and we credited the bonds payable as it increased the liabilities
2. Bonds payable Dr, $6,510,000
Loss on redemption of bonds Dr, $36,400
To Cash $6,396,000 ($6,510,000 × 104 ÷ 100)
To Discount bonds payable $121,000
To Unamortized bond issue cost $29,400
(Being refunding of the bonds is recorded)
Here we debited the bonds payable and loss on redemption of bonds as it decreased the liabilities and increased the losses and we credited the cash, discount bonds payable as it reduced the assets, reduced the discount and credited the Unamortized bond issue cost
In each of the following situations, determine the depreciable basis of the asset:
a. Rudy inherits his father's pickup truck. The truck is immediately placed in service in Rudy's delivery business. The fair market value of the truck at the date of Rudy's father's death is $8,000, and the value on the alternate valuation date is $8,500. The executor of the estate does not make any special elections. The truck originally cost Rudy's father $15,000.
b. Maline purchases an office building to use as the main office of her mail order business. She pays the seller $100,000 in cash. In addition, she gives the seller her personal note for $250,000 plus 10 acres of real estate. At the date of the transaction, the real estate, which cost $20,000, is worth S50,000. Property tax records show the land is assessed at $10,000 and the building is assessed at $40,000.
c. Steve owns a computer that he bought for $3,000. The computer was used for personal family activities. When he starts his business, Steve takes the computer to his new office. The computer is worth $500 when he begins using it in his business.
d. Martha's aunt Mabel gives her a used table, which had been stored in Mabel's garage, to use in the conference room in Martha's office. Mabel paid $1,200 for the table several years ago, and it is worth only $700 at the date of the gift. Mabel does not pay any gift tax on the transfer.
Answer and Explanation:
a. Rudy's basis is equal to the valuation if the estate tax is applicable. The truck is valued at the date of death in such a scenario and the basis at that date is equal to the fair market value of $8,000. Please notice that pickups qualify for section 179. When elected, the depreciable basis in the asset is equal to zero.
The Answer is $8,000
b. Land and the building purchase price = Cash + Debt + Real estate - FMV
= $100,000 + $250,000 + $50,000
So, On the assessed property tax values
Allocated to the land and the remaining = Land and the building purchase price × Assessed land ÷ Worth amount
= ($400,000 × ($10,000 ÷ $50,000))
Now,
the Depreciable basis of the building = Land and the building purchase price × (Building assessed ÷ Worth amount)
= ($400,000 × ($40,000 ÷ $50,000))
= $320,000
c. When the adjusted base of the property at the conversion date exceeds the property's of FMV, the value of the personal property transferred to a company will be considered as subject to the split-basis law. So Steve's depreciable basis in the present situation is $500
The Answer is $500.
d. When the basis reaches the FMV at the date of the gift, the split-basis rule applies for gifts. And in the present case, Martha's depreciable basis is equivalent to the fair market value, $700
The Answer is $700.
Axiom Corporation reported the book value of its net assets at $600,000 when Zebra Corporation acquired 100 percent ownership. The fair value of Axiom's net assets was determined to be $900,000 on that date. What amount of goodwill will be reported in consolidated financial statements presented immediately following the combination if Zebra paid $950,000 for the acquisition
Answer:
Explanation:
Goodwill is the excess of purchase consideration over the net assets of the business acquired.
Purchase consideration in this case is $950,000
The net assets =fair value of assets-fair value of liabilities
The fair value of net assets is already computed at $900,000 as provided in the question.
Ultimately, the excess of purchase consideration over fair of net assets of the acquired business is $50,000
Assume Apple shares have a market capitalization of $50 billion. The company just paid a dividend of $0.25 per share and each share trades for $12. The growth rate in dividends is expected to be 4% per year. Also, Apple has $20 billion of debt that trades with a yield to maturity of 6%. If the firm's tax rate is 40%, compute the WACC
Answer:
WACC = 5.43%
Explanation:
First we need to determine the number of common shares of the company. The number of common stock shares outstanding can be calculated by dividing the market capitalization value by the current price per share.
Number of common shares outstanding = 50,000,000,000 / 12
Number of common shares outstanding = 4,166,666,667 or 4.166666667 billion shares
Now we need to determine the cost of common equity. It can be calculated using the fair price formula of constant growth model of dividend discount model. The formula for price today under this model is,
P0 = D0 * (1+g) / (r - g)
D0 * (1+g) is dividend expected for next periodr is the cost of equityg is the growth rate in dividends
Plugging in the available values for each component, we can calculate the cost of common equity to be,
12 = 0.25 * (1+0.04) / (r - 0.04)
12 * (r - 0.04) = 0.26
r = 0.06167 or 6.167%
Now we will plug in the values in the WACC formula.
Total value of debt and common equity = 20 bn + 50 bn = 70 bn
WACC = 20/70 * 0.06 * (1-0.4) + 50/70 * 0.06167
WACC = 0.0543 or 5.43%
Richard Palm is the accounting clerk of Olive Limited. He uses the source documents such as purchase orders, sales invoices and suppliers’ invoices to prepare journal vouchers for general ledger entries. Each day he posts the journal vouchers to the general ledger and the related subsidiary ledgers. At the end of each month, he reconciles the subsidiary accounts to their control accounts in the general ledger to ensure they balance. Discuss the internal control weaknesses and risks associated with the above proce
Answer:
Lack of segregation of duties.
Explanation:
Internal Controls are set of rules and guidelines that are followed to ensure effectiveness of business operations. The main risk in the business is weak internal controls. There are some organizations with strong internal controls but implementation of such controls is a challenge for organizations. There are human errors, IT security risks, fraud and compliance risk.
The risks associated with Olive limited is that there is no segregation of duties, Richard Palm is preparing journal vouchers, posts the journal vouchers and reconciles the balance himself. If he makes an error in recording a transaction there is no one who reviews his work and can identify an error. Also if Richard is involved in a fraud and collaborates with purchase department or sales department staff, he can pass a transaction without any supervision.
The following account balances relate to the stockholders’ equity accounts of Skysong, Inc. at year-end. 2020 2019 Common stock, 10,500 and 10,000 shares, respectively, for 2020 and 2019 $155,300 $145,000 Preferred stock, 5,000 shares 159,000 159,000 Retained earnings 305,000 249,100 A small stock dividend was declared and issued in 2020. The result of the stock dividend was to decrease retained earnings by $11,300 and increase common stock by $11,300. Cash dividends were $17,000 in both 2020 and 2019. The common stock has no par or stated value. (a) What was the amount of net income reported by Skysong, Inc. in 2020? Net income $
Answer:
$84,200
Explanation:
The Net Income for the 2020 financial period can be calculated through the Retained Earnings Account for 2020 as follows :
Retained Earnings at beginning of the year $249,100
Add Net Income for the year (Balancing figure) $84,200
Less Dividend Declared for the year ($11,300+$17,000) ($28,300)
Retained Earnings at end of the year $305,000
The facet of partnership that describes the requirement that every worker be responsible for defining the project's vision and goals is called: Exchange of purpose. Joint accountability. Absolute honesty. A right to say no.
Exchange of purpose
The facet of partnership that describes the requirement that every worker be responsible for defining the project's vision and goals is called Exchange of purpose
Swifty Corporation uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. Accounts receivable are $417,800 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,657. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (b) If the allowance for doubtful accounts had a debit balance of $932 instead of a credit balance of $2,657, prepare the adjusting journal entry for bad debt expense.
Answer: Please see explanation column for answer.
Explanation:
for Swifty Coporation .
To calculate the allowance for doubtful account with credit balance of $2657
Account Particulars Amount
Allowance from doubtful account 4% x $ 417, 800 $16, 712
credit balance ( less) $2,657
bad debt expense $14,055
A)Journal to record bad debt expense
Account Debit Credit
bad debts expense $14055
Allowance of doubtful accounts $14055
b) if the allowance for doubtful accounts had a debit balance of $932 instead of a credit balance of $2,657
Account Particulars Amount
Allowance from doubtful account 4% x $ 417, 800 $16, 712
debit balance ( add) $932
bad debt expense $17644
B)Journal to record bad debt expense
Account Debit Credit
bad debts expense $17,644
Allowance of doubtful accounts $17644
On October 15, 2018, Jon purchased and placed in service a used car. The purchase price was $25,000. This was the only business use asset Jon acquired in 2018. He used the car 80% of the time for business and 20% for personal use. Jon used the regular MACRS method. Calculate the total cost recovery deduction Jon may take for 2018 with respect to the car.
Answer:
The total cost recovery deduction Jon may take for 2018 with respect to the car is $1000
Explanation:
As per MACRS (modified accelerated cost recovery system), cars are in the automobiles category which has 5-years convention.
Hence, car will be depreciated at 20% in the first year. But in the case of used cars first depreciation is not applicable
In this case, MACRS statutory percentage is used as follows:
1. Cost Recovery Limit= Asset value * Statutory Percentage * Mid-quarter conversion
=$1,250 (maximum limit= $3,160)
The Cost recovery is $1,250
2. Cost recovery limit= Cost recovery limit - Personal use
Hence, the total deduction for Jon is $1,000
The used car is not eligible for additional first year depreciation
Annual limit on cost recovery for automobile for the year is limited to $3,160.
How much money would be in the bank at the end of 3 years if the proceeds from an investment that offers payments of $6,000 at the end of year 1; $4,000 at the end of year 2; and $2,000 at the end of year 3 were deposited in a savings account that paid 9 percent interest
Answer:
Explanation:
Giving the following information:
Interest rate= 9%
To calculate the final value, we need to apply the following formula:
FV= PV*(1+i)^n
Year 1= 6,000*1.09^2= 7,128.6
Year 2= 4,000*1.09= 4,360
On April 1, the price of gas at Bob’s Corner Station was $4.95 per gallon. On May 1, the price was $5.45 per gallon. On June 1, it was back down to $4.95 per gallon.Between April 1 and May 1, Bob’s price increased by$0.50 , or by ___ %.Between May 1 and June 1, Bob’s price decreased by $ , or ____ %.Suppose that at a gas station across the street, prices are always 20% higher than Bob’s. In absolute dollar terms, the difference between Bob’s prices and the prices across the street is _____ when gas costs $5.45 than when gas costs $4.95.Some economists blame high commodity prices (including the price of gas) on interest rates being too low.Suppose the Fed raises the target for the federal funds rate from 2% to 2.75%. This change of _____ percentage points means that the Fed raised its target by approximately_____.
Answer: Please refer to Explanation
1. a. Between April 1 and May 1, Bob’s price increased by $0.50 , or by ___ %.
To calculate, divide the difference in the amounts by the amount the change occured from.
The price increased by $0.50 from $4.95. Percentage Increase should be,
= 10.1%
b. Between May 1 and June 1, Bob’s price decreased by $ , or ____ %.
The Price by $0.5 from $5.95 to $4.95
= -9.17% (negative because it was a price decrease)
2. Across the street, their price is 20% higher than Bob's.
When Bob's prices are $5.45, there's are,
= $1.09
3. The Fed raised it's rate from 2% to 2.75%.
This is a percentage Change of,
This change of 0.75 percentage points means that the Fed raised its target by approximately 37.5%.
The calculation is as follows:1. a. Between April 1 and May 1, Bob’s price increased by $0.50 , or by ___ %.
To calculate, divide the difference in the amounts by the amount the change occured from.
The price increased by $0.50 from $4.95.
Percentage Increase should be,
b. Between May 1 and June 1, Bob’s price decreased by $ , or ____ %.
The Price by $0.5 from $5.95 to $4.95
= -9.17% (negative because it was a price decrease)
2. Across the street, their price is 20% higher than Bob's.
When Bob's prices are $5.45, there's are,
Difference is,
3. The Fed raised it's rate from 2% to 2.75%.
This is a percentage Change of,
This change of 0.75 percentage points means that the Fed raised its target by approximately 37.5%.
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Horton Company uses a normal costing system. Factory overhead is allocated on the basis of labor hours. At the beginning of the year, management estimated that the company would incur $1,050,000 of manufacturing overhead costs and use 70,000 labor hours. The company recorded the following events during the month of March.
(a) Purchased $800,000 of materials on account.
(b) Used $600,000 of materials in production, of which $80,000 were used as indirect materials.
(c) Incurred $250,000 of direct labor costs and $50,000 of indirect labor costs.
(d) Recorded depreciation on equipment for the month, $22,000.
(e) Paid $8,000 cash for utilities and other miscellaneous items for the manufacturing plant.
(f) Used 10,000 labor hours during March.
The debit to Work-in-Process Inventory account for materials is:_______.
a. $80,000
b. $520,000
c. $600,000
d. $800,000
The credit to Manufacturing Overhead Allocated account is:________.
a. $150,000
b. $140,000
c. $180,000
d. $160,000
Answer:
Explanation:
The debit to work in process Inventory account for materials is:$ 520,000
Materials Purchased $ 800,000
Materials Requisitioned $ 600,00
Less Indirect Materials $ 80,000
Direct Materials $ 520,000
The total Manufacturing Overheads are
Manufacturing Overheads $ 160,000
Indirect Materials $ 80,000
Indirect Labor $ 50,000
But the applied Manufacturing Overhead is calculated on direct labor hours as follows
Manufacturing Overhead Rate = $ 1050,000/ 70,000 = 15$ per hour
As 10,000 hours are used so 15 * 10,000= $ 150,000
The applied overhead is credited to the Manufacturing account which is $ 150,000.