Answer:
The correct option is debit to Dividends Payable
Explanation:
On the declaration date of dividends,the appropriate entries in the books of accounts would be to debit retained earnings since dividends are appropriated from retained earnings and a credit to dividends payable as an outstanding obligation owed to shareholders.
On payment date(August 15,2007),a debit would be passed in the dividends payable account and a credit sent to cash/bank account as an outflow of cash from the business to stockholders.
The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 10. Assume that Cane expects to produce and sell 72,000 Alphas during the current year. A supplier has offered to manufacture and deliver 72,000 Alphas to Cane for a price of $148 per unit. What is the financial advantage (disadvantage) of buying 72,000 units from the supplier instead of making those units
Answer:
The financial advantage of buying 72,000 units from the supplier instead of making those units is that Cane would not its traceable fixed manufacturing overhead.
If we assume that Cane's fixed costs are made up of traceable fixed manufacturing overhead of 60% or $60,000 and 40% of common fixed expenses or $40,000, then $60,000 would not be incurred by Cane in the period it decides to buy from the supplier.
Explanation:
Traceable fixed manufacturing overheads are the expenses that can be traced to production units. We can say that they are variable with production units or that production gives rise to them. This implies that when there is production, such costs are incurred, whereas, they are not when there is no production. They arise due to usage. For example, more utility energy is consumed based on production.
The common fixed expenses are allocated costs, including administrative expenses, for example. By their nature, they are generally unavoidable whether Cane decides to produce or buy from the supplier. And since they must be incurred and allocated, they are not relevant in making a buy or make decision.
Explanation of fixed costs and variable costs in business decisions.
Fixed costs remain constant regardless of production levels. Variable costs fluctuate with production levels. Average total cost includes all expenses divided by the number of units produced.
If fixed manufacturing overhead is avoidable, while common fixed expenses are unavoidable, considering a supplier offer involves analyzing the financial impact. The financial advantage or disadvantage of buying 72,000 units instead of producing them internally can be determined by comparing costs and benefits.
During November, the following summary transactions were completed. Nov. 8 Paid $3,195 for salaries due employees, of which $1,665 is for November and $1,530 is for October. 10 Received $1,710 cash from customers in payment of account. 11 Purchased merchandise on account from Dimas Discount Supply for $7,200, terms 2/10, n/30. 12 Sold merchandise on account for $4,950, terms 2/10, n/30. The cost of the merchandise sold was $3,600. 15 Received credit from Dimas Discount Supply for merchandise returned $270. 19 Received collections in full, less discounts, from customers billed on sales of $4,950 on November 12. 20 Paid Dimas Discount Supply in full, less discount. 22 Received $2,070 cash for services performed in November. 25 Purchased equipment on account $4,500. 27 Purchased supplies on account $1,530. 28 Paid creditors $2,700 of accounts payable due. 29 Paid November rent $337. 29 Paid salaries $1,170. 29 Performed services on account and billed customers $630 for those services. 29 Received $608 from customers for services to be performed in the future. (b) Journalize the November transactions.
Answer and Explanation:
The journal entries are shown below:
On Nov 8
Salary payable $1,530
Salary expense $1,665
To Cash $3,195
(Being the salary paid is recorded)
On Nov 10
Cash $1,710
To Account receivable $1,710
(being the amount received is recorded)
On Nov 11
Inventory $7,200
To Account payable $7,200
(being the purchase of merchandise on account is recorded)
On Nov 12
Account receivable $4,950
To Sales revenue $4,950
(being the sales is recorded)
Cost of goods sold $3,600
To Inventory $3,600
(Being the cost of goods sold is recorded)
On Nov 15
Account payable $270
To Inventory $270
(Being the purchase return is recorded)
On Nov 19
Cash ($4,950 × 98%) $4,851
Sales discount $99
To Account receivable $4,950
(Being the collection is recorded)
On Nov 20
Account payable ($7,200 - $270) $6,930
To Cash ($6,930 × 98%) $6,791.40
To Inventory $138.60
(being the amount paid is recorded)
On Nov 22
Cash $2,070
To Service revenue $2,070
(Being the service revenue is recorded)
On Nov 25
Equipment $4,500
To Account payable $4,500
(Being the purchase of equipment on account is recorded)
On Nov 27
Supplies $1,530
to Account payable $1,530
(Being purchase of supplies on account is recorded)
On Nov 28
Account payable $2,700
To Cash $2,700
(Being the amount paid is recorded)
On Nov 29
Rent expense $337
To Cash $337
(Being the rent paid is recorded)
On Nov 29
Salaries expense $1,170
To Cash $1,170
(Being salary paid is recorded)
On Nov 29
Account receivable $630
To Service revenue $630
(Being the service revenue is recorded)
On Nov 29
Cash $608
To Unearned revenue $608
(Being the advance payment is recorded)
Sobota Corporation has provided the following partial listing of costs incurred during August: Marketing salaries $ 50,600 Property taxes, factory $ 17,700 Administrative travel $ 99,500 Sales commissions $ 57,300 Indirect labor $ 41,200 Direct materials $ 174,800 Advertising $ 142,900 Depreciation of production equipment $ 41,700 Direct labor $ 90,200 Required: a. What is the total amount of product cost listed above? b. What is the total amount of period cost listed above?
Answer:
A.Product cost $365,600
B.Period cost $350,300
Explanation:
Direct materials $174,800
Direct labor $90,200
Manufacturing overhead:
Property taxes, factory $17,700
Indirect labor $41,200
Depreciation of production equipment $41,700
Total product cost $365,600
b.
Marketing salaries $50,600
Administrative travel $99,500
Sales commissions $57,300
Advertising $142,900
Total period cost $350,300
Using the intuitive least cost method for the given transportation problem, answer the following: Cleveland Dayton Erie Supply Allentown $22 $16 $21 100 Philadelphia $28 $27 $18 150 Harrisburg $25 $23 $19 175 Demand 175 175 175 What is the maximum quantity that can be shipped from Allentown to Erie? 100 What is the maximum quantity that can be shipped from Harrisburg to Cleveland? 175 What is the maximum quantity that can be shipped from Harrisburg to Dayton? 75 Which demand location will have an unmet demand? Cleveland Answer 1:
Answer:
The demand location where demand is unmet is equal to Cleveland. Received only 75 units. 100 units demand is unmet.
Explanation:
Solution
From the example given, we solve for which demand location will have an unmet demand
Now,
The maximum quantity that can be shipped from Allentown to Erie is 100.
The Maximum quantity that can be shipped from Harrisburg to Cleveland is 175
While,
The Maximum quantity that can be shipped from Harrisburg to Dayton is 175
Hence, in case we want an solution optimum to get the required demand as many as possible with the supply given and with a low costs, then we need to find the optimum solution.
By applying a least cost method called greedy, we need to remove our least costing node and then provide minimum of demand and supply unit a present to each cell.
Thus,
The first least cost is Allentown to Dayton.
From Allentown to Dayton 100 units. Next least cost is Philadelphia to Erie.
From Philadelphia to Erie 150 units. Next least cost is Harrisburg to Erie.
From Harrisburg to Erie 25 units. Next least cost is Harrisburg to Dayton.
From Harrisburg to Dayton 75 units. Next least cost is Harrisburg to Cleveland
From Harrisburg to Cleveland 75 units.
So, for the optimum solution, the right choice of answer will be
From Allentown to Erie = 0 units
From Harrisburg to Cleveland = 75 units
From Harrisburg to Dayton = 75 units
Therefore, The demand location where demand is unmet is equal to Cleveland. Received only 75 units. 100 units demand is unmet.
The maximum shipment from Allentown to Erie is 100 units, from Harrisburg to Cleveland is 175 units, and from Harrisburg to Dayton is 75 units. After these shipments, no location has unmet demand.
Explanation:The problem at hand relates to the Intuitive Least Cost Method which is a method used in the field of operations research for solving transportation problems. The methodology seeks to minimize the total transport cost while meeting the demand and supply constraints at various sites.
From the provided matrix, the maximum quantity that can be shipped from Allentown to Erie is 100 units as indicated by the supply limit of Allentown. Similarly, Harrisburg can ship a maximum of 175 units to Cleveland and 75 units to Dayton, since after fulfilling the Cleveland demand, 75 units remain for Dayton. Finally, observing the demand, we see that Cleveland will still require 175 - 175 = 0 units, Dayton 175 - 100 = 75 units and Erie 175 - 100 = 75 units. Therefore, no location remains with unmet demand.
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Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours 30,000 Total fixed manufacturing overhead cost $ 252,000 Variable manufacturing overhead per machine-hour $ 2.10 Recently, Job T687 was completed with the following characteristics: Number of units in the job 10 Total machine-hours 30 Direct materials $ 675 Direct labor cost $ 1,050 The estimated total manufacturing overhead is closest to:
Answer:
Total estimated manufacturing overhead= $315,000
Explanation:
Giving the following information:
Estimates:
Total machine-hours 30,000
Total fixed manufacturing overhead cost $ 252,000
Variable manufacturing overhead per machine-hour $ 2.10
Total estimated manufacturing overhead= fixed overhead + total variable overhead
Total estimated manufacturing overhead= 252,000 + 30,000*2.1
Total estimated manufacturing overhead= $315,000
Answer:
Manufacturing overhead applied 315
Total cost of Job T687 $2,040
Explanation:
Lupo Corporation
Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base
Hence:
$252,000 + ($2.10 per machine-hour × 30,000 machine-hours) = $252,000 + $63,000 = $315,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base
= $315,000 ÷ 30,000 machine-hours = $10.50 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job
= $10.50 per machine-hour × 30 machine-hours = $315
Direct materials$ 675
Direct labor 1,050
Manufacturing overhead applied 315
Total cost of Job T687 $2,040
Therefore the estimated total manufacturing overhead is closest to $315 and the Total cost of Job T687 is $2,040
Finney Company's condensed income statement is presented below: Revenues $988,000 Expenses Cost of goods sold $400,000 Operating and administrative expenses 204,000 Depreciation expense 39,000 643,000 Income before taxes 345,000 Income tax expenses 78,000 Net income $267,000 Earnings per share (100,000 shares) $2.67 The following data is compiled relative to Finney's operating segments: Percent Identified with Segment Hotels Grains Candy Revenues 42 % 51 % 7 % Cost of goods sold 46 48 6 Operating and administrative expense 34 51 15 Depreciation expense 46 43 11 Included in the amounts allocated to each segment on the above percentages are the following expenses which relate to general corporate activities: Operating Segment Hotels Grains Candy Totals Operating and administrative expense $13,000 $10,600 $4,500 $28,100 Depreciation expense 4,700 4,400 3,600 12,700 (a) Prepare a schedule showing the amounts distributed to each segment. Operating Segment Hotels Grains Candy Totals Revenues $ $ $ $ Expenses Cost of goods sold Operating and admin. expense Depreciation expense Total expenses Operating profit $ $ $ $
Answer:
Explanation:
Operating Segment
Hotels Grains Candy Totals
Revenues (1) $378,000 $450,000 $72,000 $900,000
Expenses—
Cost of goods sold (1) 192,000 196,000 12,000 400,000
Operating and admin. expense (2) 58,000 91,000 27,000 176,000
Depreciation expense (3) 14,900 12,800 2,300 30,000
Total expenses 264,900 299,800 41,300 606,000
Operating profit $113,100 $150,200 $30,700 $ 294,000
(1) Total times segment percentage.
(2) Hotels = ($200,000 × 35%) - $12,000 = $58,000
Grains = ($200,000 × 50%) - $9,000 = $91,000
Candy = ($200,000 × 15%) - $3,000 = $27,000
(3) Hotels = ($40,000 × 46%) - $3,500 = $14,900
Grains = ($40,000 × 42%) - $4,000 = $12,800
Candy = ($40,000 × 12%) - $2,500 = $2,300
Final answer:
To distribute amounts to each segment, multiply the consolidated income statement items by the corresponding segment percentages, subtract general corporate expenses, and calculate the operating profit by subtracting total expenses from revenues.
Explanation:
To calculate the amounts distributed to each operating segment of Finney Company based on the provided data and percentages, we need to allocate each line of the consolidated income statement (Revenues, Cost of Goods Sold, Operating and administrative expenses, and Depreciation expense) to these segments. Using the percentages identified with each segment (Hotels, Grains, and Candy) and the totals provided, we can allocate the consolidated amounts to each of the individual segments.
For example, we can allocate the Revenues to the Hotels segment by multiplying the total Revenues by the percentage corresponding to the Hotels segment (42%). Similar calculations can be done for other expenses by multiplying the respective total amounts by the percentages of each segment. Furthermore, we also need to subtract the general corporate activities expenses from the corresponding amounts in each segment. Once all the allocations and adjustments are made, we arrive at the operating profit for each segment by subtracting the total expenses from the revenues.
Hotelling. Two firms, labeled 1 and 2, are located at the ends of a Hotelling line of length 1. L customers are uniformly distributed along the line. Each customers wants to buy one unit of the product and the product is worth V to each customer. A customer located distance d from a given firm incurs travel cost td to purchase the product from that firm. Firms produce at constant marginal cost c < V, and they engage in Bertrand price competition.
The products of firms 1 and 2 are substitutes at the equilibrium prices if the demand for each firm's product increases with a small increase in the other firm's price, starting from the equilibrium price. If each firm's demand does not change with a small increase in the other firm's price starting from the equilibrium prices, ther independent in demand at the equilibrium prices. Which of the following statements is true?
a. The products are substitutes at the equilibrium prices regardless of the values of V, 1, and c.
b. The products are substitutes at the equilibrium prices If V is sufficiently large relative to t and c.
c. The products are independent in demand (and not substitutes) if iftis sufficiently large relative to V.
d. (a) and (b) are true
e. (b) and (c) are true
Answer:
(e) (b) and (c) are true
The products will surely act as substitutes if the consumer's valuation is larger than c and t at equilibrium prices. They would also act as substitutes when the values of distance and price are taken into account. Then if V is too small in comparison to t, the consumer may not demand either and they would not act as substitutes as the demand would now be independent just as stated in c
ABC Corporation makes a range of products. Management is considering a special order for 700 units of product J45 at $50 each. The normal selling price of product J45 is $75. The cost information is as follows: Direct materials ………………………………………….………….…….$17 per unit Direct labor ………………………………………………………………..$18 per unit Variable manufacturing overhead…………………………………………..$3 per unit Fixed manufacturing overhead……………………………………………..$13 per unit Variable selling and administrative expenses….………….………….…….$5 per unit Fixed selling and administrative expenses…..………………..……………..$12 per unit If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. (a). If the special order were accepted, what would be the impact on the company's overall profit? Please show all calculations and label items clearly. (15 points)
Answer:
Effect n income= $4,900
Explanation:
Giving the following information:
Management is considering a special order for 700 units of product J45 at $50 each.
Direct materials= $17 per unit
Direct labor= $18 per unit
Variable manufacturing overhead= 3 per unit
Variable selling and administrative expenses= $5 per unit
Because it is a special offer and there is unused capacity, we will not take into account the fixed costs.
First, we determine the unitary variable cost:
Unitary varaible cost= 17 + 18 + 3 + 5= $43
Now, we can calculate the effect on income:
Effect n income= 700*(50 - 43)= $4,900
A founder is thinking about retiring and has no children who are interested in taking over the family business, an agricultural products manufacturer with about 100 employees. The business is stable, profitable, and growing at a moderate rate. A team of managers has been assembled who are capable of running the business without the founder’s involvement and employee turnover is low. Which of the following "harvesting strategies" would give the founder a way to fund their retirement while also providing an incentive for managers and employees to continue to grow the business?A. Sell the businessB. Undertake an IPOC. Establish an ESOPD. All of the listed options are equal in their ability to accomplish the founder’s objective
Answer:
All the listed options are equal in their ability to accomplish the founder's objective.
Explanation:
The founder of the organisation has attained the age of retirement and has no children to continue with the management of the organisation, therefore a harvest strategy has to be carried out inorder to get value out of the business.
Harvesting strategy can be described as the discontinuation or reduction of the production of a particular product, it is carried out by entrepreneurs when they wish to exit a business. This strategy is carried out to extract the maximum amount of profit from the sales of the product in the market.
Oriole Company was formed on December 1, 2019. The following information is available from Oriole's inventory record for Product X.
Units Unit Cost
January 1, 2020 (beginning inventory) 2,000 $15
Purchases:
January 5, 2020 2,500 $17
January 25, 2020 2,200 $18
February 16, 2020 1,100 $19
March 15, 2020 2,200 $20
A physical inventory on March 31, 2020, shows 3,300 units on hand.
Required:
(a) Prepare schedules to compute the ending inventory at March 31, 2020, under FIFO method.
Answer:
FIFO Ending Inventory $ 64900
Explanation:
Oriole Company
Date Particulars Units Unit Cost Total Cost
January 1, (beginning inventory) 2,000 $15 30,000
January 5, Purchases: 2,500 $17 42500
January 25, Purchases: 2,200 $18 39600
February 16, Purchases: 1,100 $19 20900
March 15, Purchases: 2,200 $20 44000
Total 10,000 $ 177000
A physical inventory on March 31, 2020, shows 3,300 units on hand.
FIFO means first in first out. It is a method of calculating inventory items. In it the first items purchased are sold out first. Following this rulethe ending inventory FIFO can be calculated by moving backwards from March 15 purchases as follows.
FIFO Ending Inventory $ 64900
March 15 Purchases 2,200 units at $20=$ 44000
February 16,Purchases units 1,100 at $19 =$20900
Mr. Radon's favorite place to buy shrimp in New Orleans was the Cajun Seafood market on Claiborne. He always stocked up on shrimp after he inspected the house he bought as an investment a few years ago. His trip was 685 miles one way to visit the property and even though gas was available at $1.88 per gallon and the car achieved 25 miles per gallon, it was an expensive and lengthy trip. Therefore he bought the cheapest plane tickets he could muster at $299 round trip and packed a cooler with $12 worth of ice. The shrimp were a bargain at $7.99 per pound for jumbos and he always tried to fit 35 pounds of the crustaceans in the cooler. What is the landed cost of a pound of shrimp
Final answer:
To calculate the landed cost of a pound of shrimp, we add the purchase price, transportation, and additional costs, and divide by the number of pounds. The total cost of $590.65 divided by 35 pounds equates to approximately $16.8764 per pound.
Explanation:
The student is asking to determine the landed cost of a pound of shrimp, which includes all expenses associated with purchasing and transporting the shrimp to the final destination. To calculate this, we'll add the total cost of buying and transporting the shrimp and then divide by the number of pounds purchased.
First, we calculate the total cost of the shrimp:
35 pounds of shrimp at $7.99 per pound equals $279.65.
Round trip plane ticket is $299.
The cooler ice is $12.
Adding these together:
$279.65 (shrimp) + $299 (plane ticket) + $12 (ice) = $590.65.
To find the landed cost per pound, divide the total cost by the number of pounds:
$590.65 ÷ 35 pounds = $16.8764 per pound of shrimp when rounded to four decimal places.
The following information relates to next year's projected operating results of the Children's Division of Grunge Clothing Corporation: Contribution margin $ 200,000 Fixed expenses 500,000 Net operating loss $ (300,000 ) If the Children's Division is eliminated, $170,000 of the above fixed expenses could be avoided. The annual financial advantage (disadvantage) for the company of eliminating this division should be:
Answer:
The annual financial disadvantage of eliminating the division is $30,000.
Explanation:
contribution margin = revenue - variable costs = $200,000
fixed expenses = $500,000
net loss = $300,000.
If the division is eliminated, only $170,000 of the fixed expenses can be avoided, therefore the company's fixed expenses will remain at $330,000.
Therefore, eliminating the children's division will result in a $30,000 (= $330,000 - $300,000) decrease in net income.
A risk-averse individual _____. A. will avoid all risky investments no matter what the return B. will forgo a sure return in favor of an uncertain prospect generating the same expected return C. prefers a sure return to an uncertain prospect generating the same expected return D. is indifferent between a sure return and an uncertain prospect generating the same expected return
Park Co. is considering an investment that requires immediate payment of $27,000 and provides expected cash inflows of $9,000 annually for four years. Assume Park Co. requires a 10% return on its investments. 1-a. What is the internal rate of return? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.) 1-b. Based on its internal rate of return, should Park Co. make the investment?
Answer:
IRR is 12.59%
IRR of 12.59% is greater than the required return on the investment of 10%,as a result the project should be accepted
Explanation:
The internal rate of return is the rate where present value of cash inflows from a project equal the initial capital investment in the project,hence it could be termed the break-even project rate of return.
Using the IRR(Internal Rate of Return) formula in excel which is given below,one can compute the project IRR
=IRR(values)
The values are the relevant cash flows consisting of initial cash outflow as well as the subsequent years cash inflows as shown in the attached.
IRR=12.59%
On November 1, 2018, Arch Services issued $ 305 comma 000 of eightminusyear bonds with a stated rate of 11% at par. Interest payments occur each April 30 and October 31. On December 31, 2018, Arch made an adjusting entry to accrue interest at yearminusend. What is the amount of Interest Expense that will be recorded on December 31, 2018? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)
Answer:
$5,603
Explanation:
The calculation of Interest Expense is shown below:-
Interest made accrued on Dec 31, 2018 = Services issued × Stated rate × Remaining months ÷ Number of Months in a year
= $305,000 × 11% × 2 ÷ 12
= $305,000 × 11% × 0.167
= $5,603
Therefore for computing the Interest Expense we simply applied the above formula.
Which one of the following is an example of the circular flow model and shows the interdependence of households and firms? a. The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets. b. Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms. c. The firms in the factor markets pay to households in the form of wages, interest, rent and profit⎯for resources demanded. d. Households demand their resources from the firms in the factor markets and, in turn, supply in the product market the goods and services produced by firms.
Answer:
B. household
Explanation:
I took the quiz
The correct answer is a. The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets.
In the circular flow model, households and firms are interconnected through two main markets: the product market and the resource market. In option a, it illustrates the flow of resources and goods/services between households and firms.
Firms go to the resource market to obtain the resources (such as labor, capital, land) that households supply. In return, firms produce goods and services and supply them to households through the product market. This exchange demonstrates the interdependence of households providing resources and firms providing goods and services, creating a continuous flow of economic activity in the economy.
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The Molding Department of Kent Company has the following production data: beginning work in process 40,000 units (60% complete), started into production 680,000 units, and ending work in process 70,000 units (40% complete). Assuming conversion costs are incurred uniformly during the process, the equivalent units for conversion costs are Select one: a. 678,000. b. not able to be determined from the provided information. c. 732,000. d. 708,000. e. 718,000.
Answer:
e. 718,000.
Explanation:
The computation of the equivalent unit for conversion cost is shown below
= Completed & transferred units × completion percentage + ending work in process inventory units × completion percentage
= 690,000 units × 100% + 70,000 units × 40%
= 690,000 units + 28,000 units
= 718,000 units
We simply considered the completed & transferred units and the ending work in process inventory units
Concord Water is considering introducing a water filtration device for its 20-ounce water bottles. Market research indicates that 1,000,000 units can be sold if the price is no more than $3. If Concord Water decides to produce the filters, it will need to invest $2,000,000 in new production equipment. Concord Water requires a minimum rate of return of 18% on all investments. Determine the target cost per unit for the filter.
Answer:
Target cost per unit= $2.64
Explanation:
The target cost is arrived at by subtracting the a desired profit margin from a competitive selling price.
The target cost per unit =
((selling price × qty) - (cost of capital(%) × initial cost))/No of units
=( (3× 1,000,000) - (18%×2,000,000) )/ 1,000,000
= 2.64
Target cost per unit= $2.64
O’Connor Company ordered a machine on January 1 at a purchase price of $100,000.
On the date of delivery, January 2, the company paid $25,000 on the machine and signed a long-term note payable for the balance.
On January 3, it paid $1,000 for freight on the machine.
On January 5, O’Connor paid cash for installation costs relating to the machine amounting to $6,000.
On December 31 (the end of the accounting period), O’Connor recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $10,700.
Required:
1. Indicate the effects (accounts, amounts, and for increase or decrease) of each transaction (on January 1, 2, 3, and 5) on the accounting equation. (Enter any decreases to account balances with a minus sign.)
Answer and Explanation:
The effect of each transaction is shown below:-
Accounting equation
Assets = Liabilities (+) Equity
1 Jan No effect No effect No effect
2 Jan Cash -$25,000 Notes payable $75,000
Machine +$100,000
3 Jan Cash -$1,000
Machine +$1,000
5 Jan Cash -$6,000
Machine +$6,000
Here, + sign indicates the increase in amount and - sign indicated the decrease in amount.
The transactions affect the company's balance sheet by changing the value of different asset and liability accounts. They primarily include changes in Cash, Machinery, Notes Payable, and Accumulated Depreciation.
Explanation:The subject of this question is accounting equation which relates to O’Connor Company's different transactions from January 1 to January 5 and the depreciation that occurred on December 31. The accounting equation is Assets = Liabilities + Equity.
On January 1, the company ordered a machine for $100,000. No transaction occurs at this point as no payment has been made or received. On January 2, the company paid $25,000 and signed a long-term note for the balance $75,000. This would decrease Cash (an asset) by $25,000 and increase Machinery (an asset) by $100,000 and Notes Payable (a liability) by $75,000. On January 3, it paid $1,000 for freight which increases the Machinery (asset) by $1,000 and decreases Cash (asset) by $1,000. On January 5, it paid $6,000 for installation costs, increasing Machinery (asset) by $6,000 and decreasing Cash (asset) by $6,000. On December 31, the company recorded depreciation of (100,000+1,000+6,000-10,700)/10 = $9,630. This would decrease Machinery (asset) by $9,630 and increase Accumulated & Depreciation (contra-asset) by $9,630. Learn more about Accounting Equation here:
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On October 1, Eder Fabrication borrowed $55 million and issued a nine-month, 13% promissory note. Interest was payable at maturity. Prepare the journal entry for the issuance of the note and the appropriate adjusting entry for the note at December 31, the end of the reporting period.
Final answer:
A journal entry was made to record the borrowing of $55 million with a debit to cash and a credit to notes payable. An adjusting entry was also made to account for accrued interest expense of $1,787,500 with a debit to interest expense and a credit to interest payable on December 31.
Explanation:
Journal Entry for Issuance of the Note
When Eder Fabrication borrowed $55 million on October 1 and issued a nine-month, 13% promissory note where interest was payable at maturity, the journal entry on October 1 would be:
Debit Cash $55,000,000
Credit Notes Payable $55,000,000
This entry records the cash received and the company's obligation to pay back the principal amount of the note.
Adjusting Entry for Interest at December 31
To record the accrued interest at the end of the reporting period (December 31), the computation for the interest is as follows:
Interest = Principal x Rate x Time
Interest = $55,000,000 x 0.13 x (3/12)
Interest = $1,787,500
The journal entry on December 31 would be:
Debit Interest Expense $1,787,500
Credit Interest Payable $1,787,500
This entry recognizes the interest cost incurred during the period even though it has not been paid.
On January 1, a company issues bonds dated January 1 with a par value of $370,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $384,280. The journal entry to record the issuance of the bond is: Multiple Choice Debit Cash $384,280; credit Discount on Bonds Payable $14,280; credit Bonds Payable $370,000. Debit Cash $384,280; credit Premium on Bonds Payable $14,280; credit Bonds Payable $370,000. Debit Cash $384,280; credit Bonds Payable $384,280. Debit Cash $370,000; debit Premium on Bonds Payable $14,280; credit Bonds Payable $384,280. Debit Bonds Payable $370,000; debit Bond Interest Expense $14,280; credit Cash $384,280.
Answer and Explanation:
The journal entry is shown below:
Cash Dr $370,000
Discount on bond payable Dr $14,280
To Bond payable $384,280
(Being the issuance of the bond is recorded)
For recording this we debited the cash as it increase the assets and credited the bond payable as it also increased the liabilities and the difference is debited to the discount on bond payable
This is the answer but the same is not given in the options
The correct journal entry for this scenario is Debit Cash for $384,280 due to the bonds being sold for that amount; Credit Premium on Bonds Payable for $14,280 as the bonds were sold at a premium; Credit Bonds Payable $370,000, the par value of the bonds. This maintains the balance as per the fundamental accounting equation.
Explanation:The correct multiple choice option for this question pertaining to the journal entry associated with the issuance of a bond on January 1 is: 'Debit Cash $384,280; credit Premium on Bonds Payable $14,280; credit Bonds Payable $370,000.'
The reason for this is because the bonds were sold for more than their par value ($384,280 versus $370,000). The excess, $14,280, is known as a premium and is credited to the 'Premium on Bonds Payable' ledger. Hence, the total credit in the entry equals the debit for the cash received , maintaining the balance in accounting.
In financial terms, a bond is like an 'I owe you' note that an investor receives in exchange for money. The bond has a face or par value, which is the amount the borrower agrees to pay back at maturity. However, bonds can be sold for more (a premium) or less (a discount) than their face value, depending on the market condition and contract rate.
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Boysenberry Corp. has the following information for the months of January, February, and March of the current year: JanuaryFebruaryMarch Units produced10,00010,00010,000 Units sold9,5009,4009,800 Production costs per unit (based on 10,000 units) are as follows: Direct materials$20.00 Direct labor15.00 Variable factory overhead8.00 Fixed factory overhead4.00 Variable selling and admin. expenses10.50 Fixed selling and admin. expenses5.75 There was no beginning inventory in the month of January, and all units were sold for $75. Costs were stable over the three months. Calculate Boysenberry's ending inventory cost for February using the absorption costing method.
Answer:
$51,700
Explanation:
The computation of ending inventory cost is shown below:-
Product cost per unit = Direct material + Direct labor + Variable factory overhead + Fixed factory overhead
= $20 + $15 + $8 + $4
= $47
Ending inventory, February = 10,000 + 10,000 - 9,500 - 9,400
= 1,100
Ending inventory value under absorption costing = Product cost per unit × Ending inventory, February
= $47 × 1,100
= $51,700
Therefor for computing the ending inventory value under absorption costing we simply applied the above formula.
On January 10, 2022, Sweet Acacia Industries sold merchandise on account to Tompkins for $8,380, terms n/30. On February 9, Tompkins gave Sweet Acacia Industries a 7% promissory note in settlement of this account. Prepare the journal entry to record the sale and the settlement of the accounts receivable. (Omit cost of goods sold entries.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
The journal entry to record the sale of merchandise to Tompkins on account is: Account Receivable Dr $8,380, Sales Cr $8,380. When the account receivable is settled by a promissory note from Tompkins, the journal entry is: Notes Receivable Dr $8,380, Accounts Receivable Cr $8,380.
Explanation:The subject area of this question is related to accounting transactions and the creation of journal entries. Specifically, it pertains to the sale of goods on account and the settlement of this account receivable through a promissory note.
Let's work through this step by step:
The sale is recorded as follows:Remember, a promissory note is a financial instrument that contains a written promise by the issuer (Tompkins in this case) to pay a definite sum of money to the payee (Sweet Acacia Industries), either on demand or at a specified future date.
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The Mega Construction Company recently switched to activity-based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $60 per machine hour. The cost accountant for the Finishing Department has gathered the following data: Activity Cost Drivers Amount Material handling Tons of material handled $ 80 Machine setups Number of production runs 4,000 Utilities Machine hours 15 Quality control Number of inspections 600 During April, Mega purchased and used $115,000 of direct materials at $20 per ton. There were 8 production runs using a total of 11,000 machine hours in April. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $890,000 for the month. How much overhead costs were applied to the Work-in-Process Inventory during April using activity-based costing
Answer:
$664,200
Explanation:
Computation of the given data are as follow:-
Material Overhead = (Machine purchase price ÷ Direct material per ton) × Cost of material handling
= (115,000 ÷ 20) × 80
= $460,000
Set up of Machine = Production overhead =No. of production run × cost of production run
= 8 × $4,000 = $32,000
Quality Control = 12 × $600 = $7,200
Utilities Cost = 11,000 × $15 = $165,000
Work In Process Inventory During April = Material Overhead + Production Overhead + Quality Control + Utilities Cost
= $460,000 + $32,000 + $7,200 + $165,000
=$664,200
Using activity-based costing, the overhead applied to the Work-in-Process Inventory during April for Mega Construction Company is $664,200.
Explanation:The student asked about calculating the overhead costs applied to the Work-in-Process Inventory for the Mega Construction Company using activity-based costing (ABC) for the month of April. To determine this, we must apply the overhead rates for each activity to the actual amount of cost drivers incurred during the month.
First, since the Mega Construction Company purchased and used $115,000 of direct materials and we know they cost $20 per ton, we can calculate the tons of materials handled: $115,000 / $20 = 5,750 tons.
The overhead cost for each activity is calculated as follows:
Material handling: 5,750 tons * $80/ton = $460,000Machine setups: 8 setups * $4,000/setup = $32,000Utilities: 11,000 machine hours * $15/hour = $165,000Quality control: 12 inspections * $600/inspection = $7,200Adding these amounts together, the total applied overhead costs using activity-based costing for April are:
$460,000 + $32,000 + $165,000 + $7,200 = $664,200.
On January 2, 2021, David Corporation purchased a patent for $510,000. The remaining legal life is 10 years, but the company estimated that the patent will be useful only for six years. In January 2023, the company incurred legal fees of $60,000 in successfully defending a patent infringement suit. The successful defense did not change the company’s estimate of useful life. Required: Prepare journal entries related to the patent for 2021, 2022, and 2023. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
This answer provides the journal entries related to the patent for the David Corporation for the years 2021, 2022, and 2023, taking into account the initial purchase, annual amortization, and legal fees. The entries show the purchase of the patent, the amortization over its useful life, and the addition of legal fees after defending a successful patent infringement suit.
Explanation:Firstly, the patent is initially capitalized with the cost. For the year 2021, the cost of $510,000 would be recorded as a debit to Patent and a credit to Cash. David Corporation then amortizes the patent over its useful life. Since the company estimated the useful life as 6 years, the annual amortization expense would be $510,000 / 6, which equals $85,000. This would be recorded by a debit to Amortization Expense, and a credit to Accumulated Amortization. These entries will be repeated in 2022.
In 2023, time to handle the legal fees associated with the patent infringement suit. These costs are capitalized by debiting the Patent for $60,000 and crediting Cash. The amortization entry would also be recorded with a debit to Amortization Expense, and a credit to Accumulated Amortization.
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Kraft, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2013. Service cost $ 250,000 Contributions to the plan 220,000 Actual return on plan assets 180,000 Projected benefit obligation (beginning of year) 2,400,000 Fair value of plan assets (beginning of year) 1,600,000 The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2013 is
Answer:
The amount of pension expense reported for 2013 is $330,000
Explanation:
In order to calculate the amount of pension expense reported for 2013 we would have to use and calculate the following formula according to the given data:
amount of pension expense reported for 2013= $250,000 + ($2,400,000 × 0.10) - ($1,600,000 × 0.10)
amount of pension expense reported for 2013= $330,000
The amount of pension expense reported for 2013 is $330,000
Weston Corporation just paid a dividend of $3.75 a share (i.e., D0 = $3.75). The dividend is expected to grow 9% a year for the next 3 years and then at 4% a year thereafter. What is the expected dividend per share for each of the next 5 years? Do not round intermediate calculations. Round your answers to the nearest cent.
Answer:
D1 = $4.085
D2 = $4.46
D3 = $4.86
D4 = $5.01
D5 = $5.16
Explanation:
As per the data given in the question,
DO = $3.75
Dividend expected to grow = 9%
Dividend grow later = 4%
D1 = DO(1+ Dividend1) = $3.75(1+9%)
=$3.75(1.09)
=$4.085
D2 = DO(1+ Dividend1 )( 1 + Dividend2)
= $3.75(1+9%)(1+9%)
= $4.46
D3 = DO(1+Dividend1)(1+Dividend2)(1+Dividend3)
= $3.75(1+9%)(1+9%)(1+9%)
= $4.86
D4 = DO(1+Dividend1)(1+Dividend2)(1+Dividend3)(1+Dividend later)
= $3.75(1+9%)(1+9%)(1+9%)(1+3%)
= $5.01
D5 = DO(1+Dividend1)(1+Dividend2)(1+Dividend3)(1+Dividend later)(1+Dividend later)
= $3.75(1+9%)(1+9%)(1+9%)(1+3%)(1+3%)
= $5.16
You are saving for retirement. To live comfortably, you decide you will need to save $ 2 million by the time you are 65. Today is your 29 th birthday, and you decide, starting today and continuing on every birthday up to and including your 65 th birthday, that you will put the same amount into a savings account. If the interest rate is 7 %, how much must you set aside each year to make sure that you will have $ 2 million in the account on your 65 th birthday?
Answer:
Annual deposit= $12,473.70
Explanation:
Giving the following information:
Final value= $2,000,000
Number of years= 37
Interest rate= 7%
To calculate the annual deposit required to reach the final value. We need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= {2,000,000*0.07)/ [(1.07^37) - 1]
A= $12,473.70
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense:
a. A patent with a 15-year remaining legal life was purchased for $280,000. The patent will be commercially exploitable for another seven years.
b. A patent was acquired on a device designed by a production worker. Although the cost of the patent to date consisted of $44,100 in legal fees for handling the patent application, the patent should be commercially valuable during its entire remaining legal life of 18 years and is currently worth $378,000.
c. A franchise granting exclusive distribution rights for a new solar water heater within a three-state area for five years was obtained at a cost of $63,000. Satisfactory sales performance over the five years permits renewal of the franchise for another four years (at an additional cost determined at renewal).
a. Annual amortization expense for the patent is $40,000. Journal entry:
[tex]\[ \text{Amortization Expense} 40,000 \text{ Accumulated Amortization - Patent}[/tex] 40,000
b. Annual amortization expense for the patent is $21,000. Journal entry:
[tex]\[ \text{Amortization Expense} 21,000 \text{ Accumulated Amortization - Patent}[/tex] 21,000
c. Annual amortization expense for the franchise is $12,600. Journal entry:
[tex]\[ \text{Amortization Expense} 12,600 \text{ Accumulated Amortization - Franchise}[/tex] 12,600
a. For the patent with a 15-year remaining legal life purchased for $280,000, but commercially exploitable for another seven years:
Annual Amortization Expense = Total Cost / Remaining Commercially Exploitable Years
Annual Amortization Expense = $280,000 / 7 years
Annual Amortization Expense = $40,000 per year
Journal Entry:
[tex]\text{Amortization Expense} 40,000[/tex]
[tex]\[ \text{ Accumulated Amortization - Patent} 40,000\][/tex]
b. For the acquired patent on a device with a remaining legal life of 18 years, purchased for $378,000:
Annual Amortization Expense = Total Cost / Remaining Legal Life
Annual Amortization Expense = $378,000 / 18 years
Annual Amortization Expense = $21,000 per year
Journal Entry:
[tex]\[ \text{Amortization Expense} 21,000\][/tex]
[tex]\[ \text{ Accumulated Amortization - Patent}[/tex] 21,000
c. For the franchise granting exclusive distribution rights obtained for $63,000 with a life of five years, extendable for another four years upon renewal:
Annual Amortization Expense = Total Cost / Total Legal Life
Annual Amortization Expense = $63,000 / 5 years
Annual Amortization Expense = $12,600 per year
Journal Entry:
[tex]\[ \text{Amortization Expense}[/tex] 12,600
[tex]\[ \text{ Accumulated Amortization - Franchise}[/tex] 12,600
These journal entries record the annual amortization expenses for each scenario by debiting the Amortization Expense account and crediting the respective Accumulated Amortization accounts.
Cobe Company has already manufactured 19,000 units of Product A at a cost of $25 per unit. The 19,000 units can be sold at this stage for $400,000. Alternatively, the units can be further processed at a $200,000 total additional cost and be converted into 5,200 units of Product B and 11,000 units of Product C. Per unit selling price for Product B is $108 and for Product C is $55. 1. Prepare an analysis that shows whether the 19,000 units of Product A should be processed further or not.
Answer:
Incremental net income from further processing is $566,600
Explanation:
First of all, it would be necessary to compute profit from selling the product at cut off point and profit when it is further processed in order to determine whether or not it is worth processing further:
Sales revenue $400,000
cost of production(19,000*$25) $475,000
Loss from selling ($75,000)
Further processing:
sales revenue
Product B(5200*$108) $561,600
Product C(11,000*$55) $605,000
Total revenue $1,166,600
total cost
cost of production ($475,000)
cost of further processing ($200,000)
total costs ($675,000)
Profit $491600
By further processing the incremental net profit is $566,600 ($491,600-(-$75000)