Answer:
Total power cost= 1,250 + 1.375 * number of machine hours
Explanation:
Giving the following information:
Quarter Machine Hours Power Cost
1 20,000 $26,000
2 25,000 $38,000
3 30,000 $42,500
4 22,000 $37,000
5 21,000 $34,000
6 18,000 $29,000
7 24,000 $36,000
8 28,000 $40,000
To calculate the variable and fixed costs, we need to use the following formula:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (42,500 - 26,000) - (30,000 - 18,000)
Variable cost per unit= $1.375
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 42,500 - (1.375*30,000)
Fixed costs= 1,250
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 26,000 - (1.375*18,000)
Fixed costs= 1,250
A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?
a. units of direct material used
b. direct labor hours
c. direct labor cost
d. machine hours
Answer:
D)machine hours
Explanation:
It should be noted that department that is capital-intensive most likely would use a predetermined departmental overhead rate based on
machine hours.
A machine-hour can be regarded as measurement that is been used in applying factory overhead to manufactured goods. It's application is usually found in machine-intensive environments, environment whereby the amount of time that is expelled on processing by a machine is been regarded as largest activity that overhead allocations can be said to have based upon. Machine hour rate can be gotten by making division of the total running expenses of a machine by estimated number of hours for the machine to work at a specific period
Management at Bank ABC is attempting to determine which types of instruments to use for risk management. When comparing exchange-traded instruments to over-the-counter (OTC) instruments, which characteristic should the bank associate with exchange-traded instruments
Answer:
Options and Swaps.
Explanation:
Hedging is the process of offsetting risk associated with an asset by taking an opposite position in an underlying asset. The hedging may be profitable or it may be in no loss situation. The most common method of hedging is use of derivatives. It is used to minimize foreign exchange and interest rate movement risks. The few common derivatives are futures, swaps and options.
A cash register tape shows cash sales of $3180 and sales taxes of $210. The journal entry to record this information is
Answer:
Debit cash $3,390
Credit sales revenue $210
Cales tax payable $3,180
Explanation:
Preparation of the journal entry to record the information given.
Journal entry
Debit cash $3,390
($3,180+$210)
Credit sales revenue $210
Cales tax payable $3,180
Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 61% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $4 and $5, respectively. Normal production is 26,400 curtain rods per year.
A supplier offers to make a pair of finials at a price of $13.30 per unit. If Pottery Ranch accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the $40,400 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.
Required:
Prepare the incremental analysis for the decision to make or buy the finials.
Answer:
Pottery Ranch Inc.
Incremental Analysis
Make Buy Incremental
Production costs:
Variable manufacturing costs per unit:
Direct materials per unit $4.00
Direct labor per unit $5.00
Variable manufacturing per unit $3.05
Total variable manufacturing costs $12.05 $13.30 $1.25
Annual units of curtain rods 26,400 26,400 26,400
Variable manufacturing costs $318,120 $351,120 $33,000
Explanation:
a) Data and Calculations:
Production capacity = 100%
Variable manufacturing overhead = 61% of direct labor cost
Direct materials per unit = $4
Direct labor per unit = $5
Variable manufacturing per unit = $3.05 (61% of $5)
Total variable manufacturing cost per unit = $12.05
Normal production per year = 26,400 units
Total variable manufacturing costs = $318,120 ($12.05 * 26,400)
Fixed manufacturing overhead = $40,400
Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory. The acid-test (quick) ratio is: [Round your answer to the nearest two decimal places...ex: 3.246
Answer:
.77
Explanation:
Calculation to determine what The acid-test (quick) ratio is
Using this formula
Quick Assets = Cash+Accounts Receivable/Current liabilities
Let plug in the formula
Quick Assets=$62,000+43,000/$137,000
Quick Assets=$105,000/$137,000
Quick Assets= .77
Therefore The acid-test (quick) ratio is .77
Assume tuition at the University of Virginia cost $2,962 (per semester) in 2004 and $11,584 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say tuition has increased more slowly than inflation. tuition has increased much more rapidly than inflation. tuition has increased at about the same rate as inflation. nominal tuition has increased. tuition suffers from menu costs due to inflation.
Answer:
tuition has increased much more rapidly than inflation.
Explanation:
2.6
18.6
Murphy's, Inc., has 45,000 shares of stock outstanding with a par value of $1 per share. The market value is $10 per share. The balance sheet shows $70,500 in the capital in excess of par account, $45,000 in the common stock account, and $133,500 in the retained earnings account. The firm just announced a stock dividend of 12 percent. What will the balance in the capital in excess of par account be after the dividend?
Answer: $119100
Explanation:
The balance in the capital in excess of par account be after the dividend will be calculated thus:
Firstly, we'll calculate the change in capital in excess of par and this will be:
= Number of shares × dividend rate × (market value - par value)
= 45,000 × 12% × ($10 - $1)
= (45000 × 0.12) × $9
= 5400 × $9
= $48,600
Then, the balance in the capital in excess of par after the dividend will be:
= $70,500 + $48,600
= $119,100
Delaware Chemical Company uses oil to produce two types of plastic products, P1 and P2. Delaware budgeted 28,300 barrels of oil for purchase in June for $71 per barrel. Direct labor budgeted in the chemical process was $221,000 for June. Factory overhead was budgeted at $361,700 during June. The inventories on June 1 were estimated to be:
Question Completion:
The inventories on June 1 were estimated to be:
Oil $15,200
P1 8,500
P2 8,600
Work in process 12,900
The desired inventories on June 30 were:
Oil $16,100
P1 9,400
P2 7,900
Work in process 13,500
Use the preceding information to prepare a cost of goods sold budget for June 2015
Answer:
Delaware Chemical Company
The Cost of goods sold budgeted for June 2015 is:
= $2,597,500.
Explanation:
a) Data and Calculations:
Budgeted purchase of barrels of oil for June = $2,009,300 (28,300 * $71)
Budgeted direct labor for June 221,000
Budgeted factory overhead for June 361,700
The inventories on June 1 were estimated to be:
Oil $15,200
P1 8,500
P2 8,600
Work in process 12,900
Beginning inventory $45,200
The desired inventories on June 30 were:
Oil $16,100
P1 9,400
P2 7,900
Work in process 13,500
Ending inventory $39,700
Cost of goods sold:
Beginning inventory $45,200
Budgeted purchase 2,009,300
Budgeted direct labor 221,000
Budgeted factory overhead 361,700
Ending inventory (39,700)
Cost of goods sold = $2,597,500
A corporate bond with a 6% coupon (paid semiannually) has a yield to maturity of 7.5%. The bond matures in 20 years but is callable at $1050 in ten years. The maturity value is par. Calculate the bond’s yield to call. % terms w/o $ sign. (HINT: Find the current price and then solve for YTC.)
Answer:
Yield to Call = 8.66%
Explanation:
The computation of the yield to call is shown below:
First determine Current Price of Bond,
PV = [FV = 1,000, PMT = 30, N = 40, I = 0.075 ÷2]
PV = $845.87
Callable Price = $1,050
Now
Calculating Yield to Call,
I = [PV = -845.87, FV = 1,050, N = 20, PMT = 30]
I = 8.66%
Yield to Call = 8.66%
describe five ways in which contract management might adds value after the contract award stage of the sourcing process.
Answer:
The five ways for contract management are:
1 - how buyer and supplier work after contract has been awarded.
2 - Key decisions made.
3 - Risk of misunderstanding and disagreement.
4 - Identify opportunities and improve performance.
5 - Performance evaluation against KPIs.
Explanation:
Contract management is essential for any business to succeed. There are five ways in which contract management will add value after contract award stage. Usually value addition is achieved by the response of buyer and seller towards the services after the contract has been awarded. There should be right individuals involved in decision making process. The performance should be evaluated against the KPI mentioned in the contract. If both supplier and buyer work with mutual understanding there is very less chance for disagreement and value will be added to the contract performance.
what sets one organization apart from others and provides the firm with a distinctive edge for meeting marketplace needs is known as _____ a target market by decentralization c competitive distinction d competitive advantage e core competency
Answer: Competitive Advantage
Explanation:
The competitive advantage of a company is that thing that gives it an edge over its competitors such that it sells more than them even though they offer similar products.
A competitive advantage is therefore what gives a company abnormal profits in a competitive market and is necessary to survive in the tough markets of the world. Walmart for instance, has the competitive advantage of getting goods at the cheapest rates which allows them to make higher profits when they resell.
You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is $1000 and the one-year and 11-year spot interest rates are 5 and 7 percent respectively. What is the forward price of your contract
Answer:
$498.94
Explanation:
1 year interest rate = 5%
11 year interest rate = 7%
10 year spot interest rate at end of 1 year = [{(1+0.07)^11 / (1+0.05)}^(0.1) - 1]
10 year spot interest rate at end of 1 year = [(2.104852/1.05)^0.1] - 1
10 year spot interest rate at end of 1 year = 1.07202083615 - 1
10 year spot interest rate at end of 1 year = 0.072021
10 year spot interest rate at end of 1 year = 7.202%
Face value = $1,000
Forward Price of contract = $1000/(1+0.0720)^10
Forward Price of contract = $1000/2.00423136
Forward Price of contract = 498.944392915
Forward Price of contract = $498.94
On Mar 3, Lyons Company paid dividends of $1,000. Use your knowledge of what a correct journal entry should look like to identify what would be include
Answer:
Debit : Dividend $1,000
Credit : Cash $1,000
Explanation:
The Journal entry to record dividend payment include a Debit to Dividend Account and a Credit to Cash Account to depict the outflow of cash.
The short-run cost function of a company is given by the equation TC=10000+50q, where TC is the total cost and q is the total quantity of output.
a. What is the company's fixed cost?
b. If the company produced 2,000 units of goods what would be its average variable cost?
c. What would be its marginal cost of production?
d. What would be its average fixed cost?
e. Suppose the company borrows money and expands its factory. Its fixed cost rises by $5,000 but its variable cost falls to $45/unit. The cost of interest also enters the equation. Each 1 point increase in the interest rate raises costs by $250. Write the new cost equation.
Answer:
a. 10000
b. 50
c. 50
d. 5
e. TC = 15000+5Q+250r
Explanation:
TC = 10000+50Q
a. the fixed cost Is 10000
b. variable cost, VC = 50Q
at q =2000 units,
average variable cost = [tex]\frac{VC}{Q}[/tex]
= 50Q/Q
= 50
C. Marginsal cost = d(tc)/dq = 50
d. the average fixed cost = 10000/q
= 10000/2000
= 5
e. the final cost would be = 10000+5000= 15000
the variable cost woul be calculated as= (50-45)Q = 5Q
Interest rate = 250r
the new cost equation = TC = 15000+5Q+250r
A standard cost _____ indicates the amount of direct labor, direct materials and overhead for one unit of product. Multiple choice question. card variance rate report
Answer:
card
Explanation:
A standard cost card can be regarded as card that encompass all the itemization or list of overhead, labor and standard amounts of materials, which is required in creating one unit of a product. This card can multiplies quantities that is been required to get to the total standard cost of a product and standard cost of each of the items.
It should be noted that standard cost
card indicates the amount of direct labor, direct materials and overhead for one unit of product.
Lowden Company has a predetermined overhead rate of 160% and allocates overhead based on direct material cost.During the current period,direct labor cost is $50,000 and direct materials cost is $80,000.How much overhead cost should Lowden Company should apply in the current period?
A) $31,250.
B) $50,000.
C) $80,000.
D) $128,000.
E) $208,000.
The risk free rate currently have a return of 2.5% and the market risk premium is 5.77%. If a firm has a beta of 1.42, what is its cost of equity
Answer:
10.69%
Explanation:
Market risk premium = 5.77% or 0.0577
The beta = 1.42
Risk free rate = 2.5% or 0.025
Cost of equity = Risk free rate + Beta*Market risk premium
Cost of equity = 0.025 + 1.42*0.0577
Cost of equity = 0.025 + 0.081934
Cost of equity = 0.106934
Cost of equity = 10.69%
3. The USD depreciates 2% versus the JPY. The USD appreciates 1% versus the MXN. What is the approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate
Answer:
The approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate is 3%.
Explanation:
The approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate can be stated using the folowing 3 steps.
Step 1. State the initial exchange rates of the currency pairs.
Let first assume the initial exchange rates are as follows:
USD1 = JPY1
USD1 = MXN1
Therefore, we have the initial cross rate as follows:
MXN1 = USD1 = JPY1
MXN1 = JPY1
Step 2. Determine the new exchange rates
The new exchange rates can be determined as follows:
When the USD depreciates 2% versus the JPY, this implies that USD1 * (100% + 2%) = USD1.02 has to be exchanged for JPY1. Therefore, we now have:
USD1.02 = JPY1, or
USD1 = JPY1/1.02
USD1 = JPY0.98
Also, when The USD appreciates 1% versus the MXN, this implies that USD1 * (100% - 1%) = USD0.99 has to be exchanged for MXN1. Therefore, we now have:
USD0.99 = MXN1, or
USD1 = MXN1/0.99
USD1 = MXN1.01
Therefore, we have the new cross rate as follows:
MXN1.01 = USD1 = JPY0.98
MXN1.01 = JPY0.98
MXN1.01 / 1.01 = JPY0.98/1.01
MXN1 = JPY0.97, or
MXN1/0.97 = JPY0.97/0.97
MXN1.03 = JPY1
Therefore, the new exchange rates are as follows:
USD1.02 = JPY1
USD0.99 = MXN1
MXN1.03 = JPY1
c. Determination of appreciation or depreciation we might see in the MXN/JPY
Percentage of depreciation of MXN against JPY = ((Initial MXN/JPY - New MXN/JPY) / Initial MXN/YPY) * 100 = ((1.03 - 1) / 1) * 100 = 3%
Since the percentage of depreciation of MXN against JPY is 3%, this also implies that the percentage of appreciation of JPY against MXN is 3%.
Therefore, the approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate is 3%.
hamilton construction company uses the percentage of completion method of accounting. in 2020. hamilton began work under
Question Completion:
Hamilton construction company uses the percentage of completion method of accounting. In 2020, Hamilton began work on the construction of a hospital, which provides for a contract price of $2,195,000. Other details follow: 202O 2021 Costs incurred during the year 637,600 1,000,000 Total estimated cost 1,594,000 1,637,600 Billings during the year 427,000 2,195,000 Collections during the year 343,000 1,509,000 What portion of the total contract price would be recognized as revenue in 2020?
Answer options: 2,195,000 878,000 1,097,500 427,000 343,000
Answer:
Hamilton Construction Company
The portion of the total contract price would be recognized as revenue in 2020 is:
= $878,000.
Explanation:
a) Data and Calculations:
Contract price = $2,195,000.
2020 2021
Costs incurred during the year $637,600 $1,000,000
Total estimated cost 1,594,000 1,637,600
Billings during the year 427,000 2,195,000
Collections during the year 343,000 1,509,000
Percentage of completion= Cost incurred in 2020/Total estimated cost in 2020 * 100
= $637,600/$1,594,000 * 100
= 40%
Revenue to be recognized in 2020 = 40% * Contract Price
= $878,000 ($2,195,000 * 40%)
The three categories of manufacturing costs comprising the cost of work in process are direct labor, direct materials, and: __________
a) direct expenses
b) indirect expenses
c) factory overhead
d) sales salaries expense
Answer:
C)) factory overhead
Explanation:
Manufacturing cost can be regarded as the sum of all the costs resources that is been consumed during the process of making a product. manufacturing cost can be classified as;
✓direct materials cost
✓ manufacturing overhead.
✓direct labor cost
It can be regarded as factor in total delivery cost. Direct Material Cost can be regarded as total cost that is incurred in purchasing of raw material and cost of other components such as packaging, as well as freight and storage costs by the company
It should be noted that The three categories of manufacturing costs comprising the cost of work in process are direct labor, direct materials, and factory overhead.
An educational institution has total direct labor and material costs of $1964 per student. Its fixed costs are $352,800. Total revenues for the year were $1,800,000. It had 800 students in the past year. How many students should they accept in the next year to break even assuming the variable cost margins are equal to this year, and assuming fixed costs are to increase by $19,000 due to increased rent for expansion? (round to the nearest whole number).
Answer:
1300 students
Explanation:
The computation of the no of students to be accepted for break even is given below:
Fixed cost is
= $352,800 + $19,000
= $371,800
Revenue per student is
= $1,800,000 ÷ 800
= 2250
And,
Variable cost per student = 1964
So,
Contribution margin = Revenue - Variable cost
= $2,250 - $1,964
= $286
Break even point is
= Fixed cost ÷ Contribution margin per unit
= 371800÷ 286
= 1300 students
Identify each of the following reconciling items as:
a. an addition to the cash balance according to the bank statement
b. a deduction from the cash balance according to the bank statement
c. an addition to the cash balance according to the company's records
d. a deduction from the cash balance according to the company's records
Item Treatment
1. Bank service charges, $30.
2. Check of a customer returned by bank to company because of insufficient funds, $400.
3. Check for $320 incorrectly recorded by the company as $230.
4. Check for $1,100 incorrectly charged by bank as $110.
5. Deposit in transit, $3,300.
6. Outstanding checks, $7,950.
7. Note collected by bank, $10,500.
Answer:
Reconciling Items
Item Treatment
1. b. a deduction from the cash balance according to the bank statement
2. b. a deduction from the cash balance according to the bank statement
3. d. a deduction from the cash balance according to the company's records
4. a. an addition to the cash balance according to the bank statement
5. a. an addition to the cash balance according to the bank statement
6. a. an addition to the cash balance according to the bank statement
7. a. an addition to the cash balance according to the bank statement
Explanation:
a) Data and Analysis:
1. Bank service charges, $30 Cash $30
2. Accounts Receivable (NSF) $400 Cash $400
3. Accounts Payable $90 Cash $90
4. Cash $990 Bank $990.
5. Bank $3,300 Cash $3,300
6. Cash $7,950 Bank $7,950
7. Cash $10,500 Accounts Receivable $10,500
Big Chill, Inc. sells portable dehumidifier units at the current price of $184. Unit variable costs are $85. Fixed costs, made up primarily of salaries, rent, insurance and advertising, are $3,236,000. Calculate breakeven sales for Big Chill, Inc. Round your answer to the nearest whole number.
Answer:
$6,014,384
Explanation:
Break even point is the level at which a firm makes neither profit nor a loss. This is the point where Profit = $0.
Break even units = Fixed Costs ÷ Contribution per unit
therefore,
Break even units = $3,236,000 ÷ ($184 x $85)
= 32,687 units
thus,
Breakeven Sales = 32,687 units x $184 = $6,014,384
Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 100,000 shares of preferred 2% stock, $50 par and 650,000 shares of $25 par common stock. The following selected transactions were completed during the first year of operations:
Feb. 5. Issued 700,000 shares of common stock at par for cash.
Feb. 5. Issued 1,200 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
Apr. 9. Issued 40,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $120,000, $280,000, and $80.000, respectively.
June 14. Issued 25,000 shares of preferred stock at $82 for cash.
Journalize the transactions.
Answer:Please find answers below
Explanation:
Being the issue of 700,000 shares of common stock at par for cash
Date Accounts and explanation Debit Credit
5th Feb Cash (700,000 shares × $25) $17,500,000
To Common Stock $17,500,000
Being the issue of 1200 shares of common stock at par for legal fees
Date Accounts and explanation Debit Credit
5th Feb Legal Fees (1200 shares × $25) $30,000
To Common Stock $30,000
Being the issue of the common stock in exchange of assets
Date Accounts and explanation Debit Credit
9th Apr Land $120,000
Building $280,000
Equipment $80,000
To Common Stock (40,000 shares × $25) $1,000,000
To Paid in capital excess of par value
(error noticed as the debit and credit balance do not tall after computation the amount of land, building and equipment $120,000, $280,000, and $80.000,with respect to the common stock of 40,000 shares × $25)
Being the issuance of the preferred stock.
Date Accounts and explanation Debit Credit
14th Jun Cash (25,000 shares × $82) $2,050,000
To preferred Stock (25,000 shares × $50) $1,250,000
To Paid in capital excess of par value $800,000
A monetary growth rule means that :__________a) the Fed will raise interest rates if it thinks the economy is growing faster than potential. b) the Fed will lower interest rates if it thinks a recession is on the horizon. c) the money supply should grow in response to economic conditions. d) the money supply should grow at a constant rate.
Answer:
d) the money supply should grow at a constant rate.
Explanation:
The Federal Reserve System (popularly referred to as the 'Fed') was created by the Federal Reserve Act, passed by the U.S Congress on the 23rd of December, 1913. The Fed began operations in 1914 and just like all central banks, the Federal Reserve is a United States government agency.
Generally, the Fed controls the issuance of currency in United States of America: it promotes public goals such as economic growth, low inflation, and the smooth operation of financial markets.
Monetary growth rule is a theory that was proposed by Friedman and it states that the Federal Reserve System (Fed) should be required to set or target the money supply growth rate to be equal to the growth rate of Real gross domestic product (GDP) each year and leaving the price level of goods and services unchanged.
Basically, this growth rate of gross domestic product (GDP) is usually set between 1% and 4%. Also, the monetary growth rule is also referred to as the K-Percent rule.
Hence, a monetary growth rule means that the money supply should grow at a constant rate.
A young college student on a tight budget is campaigning for an open city council seat. A friend in her economics class estimates that voters are influenced by TV and newspaper ads according to the following function: Votes = 300TV0.6 NP0.2, where TV represents the number of television ads and NP represents the number of newspaper ads. Thus, the marginal product of a newspaper ad is 60TV0.6 NP–0.8 and the marginal product of a TV ad is 180TV–0.4 NP0.2. A local television ad costs $400, and a local newspaper ad costs $250. If the candidate needs 1,800 votes to win, what is the lowest-cost combination of newspaper and TV ads that will bring her victory?
Answer:
Explanation:
..
Selected account balances before adjustment for Atlantic Coast Realty at July 31, the end of the current year, are as follows: Debits CreditsAccounts Receivable $ 79,500 Equipment 342,700 Accumulated Depreciation—Equipment $102,700Prepaid Rent 9,300 Supplies 3,180 Wages Payable –Unearned Fees 14,100Fees Earned 670,200Wages Expense 329,600 Rent Expense – Depreciation Expense – Supplies Expense – Data needed for year-end adjustments are as follows:• Unbilled fees at July 31, $10,250.• Supplies on hand at July 31, $930.• Rent expired, $5,800.• Depreciation of equipment during year, $8,750.• Unearned fees at July 31, $2,100.• Wages accrued but not paid at July 31, $4,900. Required:1. Journalize the six adjusting entries required at July 31, based on the data presented. Refer to the Chart of Accounts for exact wording of account titles.2. What would be the effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?3. What would be the effect on the balance sheet if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?4. What would be the effect on the "Net increase or decrease in cash" on the statement of cash flows if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?Chart of AccountsCHART OF ACCOUNTSAlantic Coast RealtyGeneral Ledger ASSETS11 Cash12 Accounts Receivable13 Supplies14 Prepaid Rent15 Land16 Equipment17 Accumulated Depreciation-Equipment LIABILITIES21 Accounts Payable22 Unearned Fees23 Wages Payable24 Taxes Payable EQUITY31 Owner’s Equity32 Withdrawals REVENUE41 Fees Earned42 Rent Revenue EXPENSES51 Advertising Expense52 Insurance Expense53 Rent Expense54 Wages Expense55 Supplies Expense56 Utilities Expense57 Depreciation Expense59 Miscellaneous ExpenseJournal1. Journalize the six adjusting entries required at July 31, based on the data presented. Refer to the Chart of Accounts for exact wording of account titles.PAGE 10JOURNALACCOUNTING EQUATIONDATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY1 Adjusting Entries2345678910111213Final Questions2. What would be the effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year? Over/Understated AmountFees earned Wages expense Net income 3. What would be the effect on the balance sheet if the adjustments for unbilled fees and accrued wages were omitted at the end of the year? Over/Understated AmountAccounts receivable Total assets Wages payable Total liabilities Owner’s equity Total liabilities and owner’s equity 4. What would be the effect on the "Net increase or decrease in cash" on the statement of cash flows if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?
Answer:
Atlantic Coast Realty
1. Adjusting Journal Entries:
Debit 12 Accounts Receivable $10,250
Credit 41 Fees Earned $10,250
To record the unbilled fees at July 31.
Debit 55 Supplies Expense $2,250
Credit 13 Supplies $2,250
To record supplies used during the period.
Debit 53 Rent Expense $5,800
Credit 14 Prepaid Rent $5,800
To record expired rent.
Debit 57 Depreciation Expense $8,750
Credit 17 Accumulated Depreciation-Equipment $8,750
To record depreciation expense for the year.
Debit 41 Fees Earned $2,100
Credit 22 Unearned Fees $2,100
To record unearned fees.
Debit 54 Wages Expense $4,900
Credit 23 Wages Payable $4,900
To record accrued wages.
2. The effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year:
Income will be understated by $10,250.
Income will be overstated by $4,900.
3. The effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year:
Income will be understated by $10,250.
Income will be overstated by $4,900.
4. The effect on the "Net increase or decrease in cash" on the statement of cash flows if the adjustments for unbilled fees and accrued wages were omitted at the end of the year:
a. Net increase in cash will be less by $4,900 (if the indirect method is used).
b. Net decrease in cash will be more by $10,250 (if the indirect method is used).
Explanation:
a) Data and Calculations:
Unadjusted account balances at July 31:
Debits Credits
Accounts Receivable $ 79,500
Prepaid Rent 9,300
Supplies 3,180
Equipment 342,700
Accumulated Depreciation—Equipment $102,700
Wages Payable –Unearned Fees 14,100
Fees Earned 670,200
Wages Expense 329,600
Rent Expense –
Depreciation Expense –
Supplies Expense –
Analysis of Adjustments:
12 Accounts Receivable $10,250 41 Fees Earned $10,250
55 Supplies Expense $930 13 Supplies $2,250
53 Rent Expense $5,800 14 Prepaid Rent $5,800
57 Depreciation Expense $8,750 17 Accumulated Depreciation-Equipment $8,750
41 Fees Earned $2,100 22 Unearned Fees $2,100
54 Wages Expense $4,900 23 Wages Payable $4,900
CHART OF ACCOUNTS
Atlantic Coast Realty
General Ledger
ASSETS
11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Rent
15 Land
16 Equipment
17 Accumulated Depreciation-Equipment
LIABILITIES
21 Accounts Payable
22 Unearned Fees
23 Wages Payable
24 Taxes Payable
EQUITY
31 Owner’s Equity
32 Withdrawals
REVENUE
41 Fees Earned
42 Rent Revenue
EXPENSES
51 Advertising Expense
52 Insurance Expense
53 Rent Expense
54 Wages Expense
55 Supplies Expense
56 Utilities Expense
57 Depreciation Expense
59 Miscellaneous Expense
Error costs are costs associated with ______________ by the cost management system and measurement costs are the costs associated with making poor decisions.
Your best friend has an idea for a drive-through bar. Indicate the best explanation for why others have not taken advantage of her idea.
A. Unprofitable.
B. Government intervention.
C. True innovation.
D. Market failure.
Answer: B. Government intervention.
Explanation:
A Drive-through bar could be very profitable as it involves people simply pulling up to a window, ordering alcohol and driving away with it. It is not very workable though because it is dangerous.
Drinking and driving is one of the highest causes of road accidents and a drive-through bar is literally encouraging people to do that. The government has therefore intervened by enacting laws to limit the trading of liquor in such ways so as to reduce the instance of road accident.
During its first year of operations, Gavin Company had credit sales of $3,000,000; $600,000 remained uncollected at year-end. The credit manager estimates that $31,000 of these receivables will become uncollectible.
Required:
a. Prepare the journal entry to record the estimated uncollectibles.
b. Prepare the current assets section of the balance sheet for Gavin Company. Assume that in addition to the receivables it has cash of $90,000, inventory of $ 130,000, and prepaid insurance of $7, 500.
Answer:
a.
Date Account Title Debit Credit
XX-XX Bad debts expense $31,000
Allowance for doubtful debts $31,000
b. Current assets section of balance sheet
Current Assets
Cash $90,000
Accounts Receivable $569,000
Inventory $130,000
Prepaid Insurance $ 7,500
Total $796,000
Accounts Receivable = Unadjusted accounts received - allowance for doubtful debt:
= 600,000 - 31,000
= $569,000
a. Journal entry to record the estimated uncollectibles.
Date account and explanation Debit Credit
Dec 31 Bad debt expense 31,000
Allowance for doubtful accounts 31,000
b) Prepare the current assets section of the balance sheet for Gavin Company.
Cash 90,000
Account receivable 600,000
Less: Allowance for doubtful account (31,000) 569,000
Inventory 130,000
Prepaid insurance 7,500
Total current assets 796,500
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