Answer:
Direct material price variance = -$294 Unfavorable
Direct material quantity variance = $1,104 Favorable
Direct material purchase price variance = 549 Unfavorable
Direct labor rate variance = $432 Unfavorable
Direct labor efficiency variance = -$2,520 Unfavorable
Explanation:
The computation of given question is shown below:-
Standard hours = 530 × 4
= 2,120
Direct material price variance = (Standard price - Actual price) × Actual quantity
= ($1.38 - $1.41) × 9,800
= -$0.03 × 9,800
= -$294 Unfavorable
Direct material quantity variance = (Standard quantity - Actual quantity) × Standard price
= (530 × 20 - 9,600) × $1.38
= (10,600 - 9,800) × $1.38
= 800 × $1.38
= $1,104 Favorable
Direct material purchase price variance = (Standard price - Actual price) × Actual quantity
= ($1.38 - $1.41) × 18,300
= -$0.03 × 18,300
= $549 Unfavorable
Direct labor rate variance = (Standard rate - Actual rate) × Actual hours
= ($9 - $9.18) × 2,400
= -$0.18 × 2,400
= $432 Unfavorable
Direct labor efficiency variance = (Standard hours - Actual Hours) × Standard rate
= (2,120 - 2,400) × $9.00
= -280 × $9.00
= -$2,520 Unfavorable
1. Direct Material Price Variance: $549 Unfavorable. 2. Direct Material Quantity Variance: $1,104 Favorable 3. Direct Labor Rate Variance: $432 Unfavorable 4. Direct Labor Efficiency Variance: $2,520 Unfavorable
To compute the variances for the month of May for Joliet Fabrics Corporation, we need to calculate the following:
1. Direct Material Price Variance
2. Direct Material Quantity Variance
3. Direct Labor Rate Variance
4. Direct Labor Efficiency Variance
1. Direct Material Price Variance (DMPV)
[tex]\[ \text{DMPV} = (\text{Actual Price} - \text{Standard Price}) \times \text{Actual Quantity Purchased} \][/tex]
[tex]\[ \text{Standard Price} = \$1.38 \, \text{per yard} \][/tex]
[tex]\[ \text{Actual Price} = \$1.41 \, \text{per yard} \][/tex]
[tex]\[ \text{Actual Quantity Purchased} = 18,300 \, \text{yards} \][/tex]
[tex]\[ \text{DMPV} = (\$1.41 - \$1.38) \times 18,300 = \$0.03 \times 18,300 = \$549 \, \text{Unfavorable} \][/tex]
2. Direct Material Quantity Variance (DMQV)
[tex]\[ \text{DMQV} = (\text{Actual Quantity Used} - \text{Standard Quantity Allowed}) \times \text{Standard Price} \][/tex]
[tex]\[ \text{Standard Quantity Allowed}[/tex] = [tex]\text{Standard Quantity per Unit}[/tex] [tex]\times[/tex] Actual Output}
Standard Quantity per Unit = 20 [tex]\text{yards/unit}[/tex]
Actual Output = 530 , [tex]\text{units}[/tex]
[tex]\[ \text{Standard Quantity Allowed} = 20 \times 530 = 10,600 \, \text{yards} \][/tex]
[tex]\[ \text{Actual Quantity Used} = 9,800 \, \text{yards} \][/tex]
[tex]\[ \text{DMQV} = (9,800 - 10,600) \times \$1.38 = (-800) \times \$1.38 = -\$1,104 \, \text{Favorable} \][/tex]
3. Direct Labor Rate Variance (DLRV)
[tex]\[ \text{DLRV} = (\text{Actual Rate} - \text{Standard Rate}) \times \text{Actual Hours Worked} \][/tex]
[tex]\[ \text{Standard Rate} = \$9.00 \, \text{per hour} \][/tex]
[tex]\[ \text{Actual Rate} = \$9.18 \, \text{per hour} \][/tex]
[tex]\[ \text{Actual Hours Worked} = 2,400 \, \text{hours} \][/tex]
[tex]\[ \text{DLRV} = (\$9.18 - \$9.00) \times 2,400 = \$0.18 \times 2,400 = \$432 \, \text{Unfavorable} \][/tex]
4. Direct Labor Efficiency Variance (DLEV)
[tex]\[ \text{DLEV} = (\text{Actual Hours Worked} - \text{Standard Hours Allowed}) \times \text{Standard Rate} \][/tex]
[tex]\[ \text{Standard Hours Allowed}[/tex] =[tex]\text{Standard Hours per Unit}[/tex] [tex]\times[/tex] Actual Output
Standard Hours per Unit= 4 hours/unit
Actual Output} = 530units
Standard Hours Allowed = 4 ×530 = 2,120 hours
Actual Hours Worked = 2,400hours
DLEV = (2,400 - 2,120) × $9.00 = 280 × $9.00 = $2,520 Unfavorable
Which type of product advertisement can be used to sell a company’s product when two or more other companies are selling the same product?
A.
multiple advertising
B.
competitive advertising
C.
pioneering advertising
D.
purpose advertising
E.
reminder advertising
Answer:
i think it is D
Explanation:tell me if im wrong
Answer:
competitive advertising
Explanation:
Prepare adjusting journal entries, as needed, for the following items. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) The Supplies account shows a balance of $510, but a count of supplies reveals only $300 on hand at year-end. The company initially records the payments of all insurance premiums as prepaid insurance. The unadjusted trial balance at year-end shows a balance of $580 in Prepaid Insurance. A review of insurance policies reveals that $150 of insurance is unexpired. Employees work Monday through Friday, and salaries of $2,900 per week are paid each Friday. The company's year-end falls on Tuesday. At year-end, the company received a utility bill for December's electricity usage of $300 that will be paid in early January.
Answer and Explanation:
The adjusting entries are shown below:
1. Supplies expense $210 ($510 - $300)
To Supplies $210
(Being the supplies expense is recorded)
For recording this we debited the supplies expense as it increased the expense and credited the supplies as it reduced the assets
2. Insurance expense Dr $150
To Prepaid insurance $150
(Being the insurance expense is recorded)
For recording this we debited the insurance expense as it increased the expense and credited the prepaid insurance as it reduced the assets
3. Salaries expense Dr $1,160 ($2,900 × 2 days ÷ 5 days)
To Salaries payable $1,160
(Being the salaries expense is recorded)
For recording this we debited the salaries expense as it increased the expense and credited the salaries payable as it increased the liabilities
4. Electricity expense Dr $300
To Expense payable $300
(Being the electricity expense is recorded)
For recording this we debited the electricity expense as it increased the expense and credited the expense payable as it increased the liabilities
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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When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the depositor's records are: Multiple Choice To correct errors made by the bank in recording the dollar amounts of cash transactions during the period. To reconcile items that explain the difference between the balance per the books and the balance per the bank statement. To record outstanding checks and bank service charges. To record items that explain the difference between the balance per the accounting records and the adjusted cash balance.
Answer:
To record items that explain the difference between the balance per the accounting records and the adjusted cash balance.
Explanation:
A bank reconciliation mainly computed by an accountant, gives the difference between the balance in relation to the bank statement and the cash balance with respect to the accounting records of the depositor in a particular financial institution.
When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the depositor's records are to record items that explain the difference between the balance per the accounting records and the adjusted cash balance.
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
Kuhn does not have any retained earnings available to finance this project, so the firm will have to issue new common stock to help fund it. Its common stock is currently selling for $33.35 per share, and it is expected to pay a dividend of $1.36 at the end of next year. Flotation costs will represent 3% of the funds raised by issuing new common stock. The company is projected to grow at a constant rate of 8.7%, and they face a tax rate of 25%. What will be the WACC for this project
Answer:
WACC = 12.9%
Explanation:
The cost of common stock can be determined using the dividend valuation model.
According to the dividend valuation, the value of a stock is the present value of expected future dividends discounted at the required rate of return.
The model can me modified to determined the cost of equity having flotation cost as follows:
Cost of equity = D(1+r )/P(1-f) + g
d- dividend, p- price of stock , f - flotation cost , - g- growth rate
Cost of common stock for Kuhn
D(1+r) =1.36 , g- 5%, P= 33.35, f-3% g-8.7%
Cost of common stock = 1.36/(33.35× (1-0.03)) + 0.087= 12.9%
WACC = 12.9%
Note the tax rate is not needed for this calculation
Many manufacturing workers (such as factories in China and Russia) and service industry workers (such as call centers and help desks in India) complete their job functions in a different culture and environment than the company's headquarters. If you were an operations manager in the United States overseeing an international operation, what issues should you be aware of? How would you prepare yourself to manage different cultures?
Answer:
Part A: Here are the problems and features people work culture that I might ought to acquire to be ready to manage procedures:
Casual mode of statement within the hierarchy: To run processes in United States of America it's vital to know that we tend to report the manager, colleague, director, executive, chief executive officer together with his/her name and not as Sir/Madam or Boss. It’s vital to possess self-esteem and concentrate on work notwithstanding the hierarchy outlined. The philosophy of normal conferences: the United States of America follows a philosophy of consistent team meetings regardless of the schedule. The work philosophy strains people/ groups get along and set up the processes. The conferences don't seem to be essentially needed to possess thoughtful or main areas establishment agenda. Decision making concerning direct & authentic method: within the United States of America someone is revered for his straight feedback and authentic written report. the workers say specifically what the cruel and unknown evidences are gift throughout conferences. Admiration for promptness is high within the United States of America & they conjointly set up the months well earlier. it's vital to set up the calendar and add a scientific manner.
Part B: Here are sure things i might do to organize myself for dealing totally different cultures:
Embrace variety and find to understand every and each employee: Diversity brings with itself nice practices, sections and skills. it's vital to know every and each worker in relations of skills, voyage and private goals. It supports to achieve the group well. Clear assembly and precise announcement procedures facilitate to accomplish the society team in a very winning manner. I will outline norms, method flow and guarantee they're having endurance because it supports to guide various culture groups. Since they are available from totally different experiences it helps to avoid misconception and generates a transparent flow of consecutively on a daily basis to day processes. Monitoring of the workers is crucial to form certain that team isn't facing any work-culture problems. As a front-runner, i would like to remember of the role & accountability of every worker and make sure that I offer an surroundings of knowledge & development.
Derive the standard deviation of the returns on a portfolio that is invested in stocks x, y, and z , where twenty percent of the portfolio is invested in stock x and 35 percent is invested in Stock z. State of Economy Probability of State of Economy Rate of Return if State Occurs Stock x Stock y Stock z Boom .04 .17 .09 .09 Normal .81 .08 .06 .08 Recession .15 − .24 .02 − .13 1. 7.72 percent 2. 6.31 percent 3. 7.38 percent 4. 6.49 percent 5. 5.65 percent
Answer:
Explanation:
So, the variance and standard deviation of each stock is:
sA2 =.20(.01 – .0865)2 + .55(.09 – .0865)2 + .25(.14 – .0865)2
sA2 = .00189
sA = (.00189)1/2
sA = .0435 or 4.35%
sB2 =.20(–.25 – .1275)2 + .55(.15 – .1275)2 + .25(.38 – .1275)2
sB2 = .04472
sB = (.04472)1/2
sB = .2115 or 21.15%
Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, Styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below. Assets Current assets $ 38,000,000 Net plant, property, and equipment 101,000,000 Total assets $139,000,000 Liabilities and Equity Accounts payable $ 10,000,000 Accruals 9,000,000 Current liabilities $ 19,000,000 Long-term debt (40,000 bonds, $1,000 par value) 40,000,000 Total liabilities $ 59,000,000 Common stock (10,000,000 shares) 30,000,000 Retained earnings 50,000,000 Total shareholders' equity 80,000,000 Total liabilities and shareholders' equity $139,000,000 Market value of CGT’s stock = $15.25 per share CGT has $1,000 par value,20-year,7.25% coupon bonds with semiannual payments, selling for $875.00. CGT’s stock beta =1.25 6-month Treasury bill yield =3.50% 20-year Treasury bond yield =5.50%. Required return on S&P 500=11.50% The firm's tax rate is 40%. What is the best estimate of CGT’s after-tax cost of debt?
Answer:
5.14%
Explanation:
Determining the pretax cost of debt is the first to do prior to ascertaining after tax cost of debt.
Pretax cost of debt can be computed using the rate formula in excel.
=rate(nper,pmt,-pv,fv)
nper is the number of times the bond would coupon interest,hence paying coupon every six months for 20 years means 40 coupon payments
pmt is the semiannual coupon bondholders would received from the bond i.e $1000*7.25%*6/12=$36.25
pv is the current market price at $875
fv is the face value of $1000
=rate(40,36.25,-875,1000)=4.28% semiannually
=4.28% *2=8.56% annually
after tax cost of debt=8.56%*(1-t),where t is the tax rate of 40% or 0.40
after tax cost of debt=8.56%*(1-0.4)=5.14%
The adoption of a tighter, more anti-inflationary monetary policy might be politically unpopular because the Fed will:
A. increase the target inflation rate, decreasing the real interest rate at every rate of inflation, causing an inflationary gap and lowering unemployment above the natural rate.
B. lower the target inflation rate, increasing the real interest rate at every rate of inflation, causing a recessionary gap and increasing unemployment above the natural rate.
C. increase the target inflation rate, lowering the real interest rate at every rate of inflation, causing a recessionary gap and increasing unemployment above the natural rate.
D. lower the target inflation rate, increasing the real interest rate at every rate of inflation, causing an inflationary gap and increasing unemployment below the natural rate.
Answer:
The correct answer is B)
This is almost self explanatory.
Explanation:
A tighter and more anti-inflationary monetary policy will be politically unpopular because it reduces the amount of money in circulation.
Business owners will cringe at it because the rate at which they can access capital or investible funds from the commercial banks or other financial institutions will have taken an upward spiral.
Because business owners can no longer leverage off bank funds to operate their businesses, many may lay off workers thus creating unemployment.
Those who are being unemployed have less and less to spend and, this sort of economic move will attract unsavoury political responses though it is executed for the greater good.
On the other hand,
When there is too much money in circulation, it triggers inflation, in turn, reduces the spending power of businesses and consumers.
As inflation increases, and real income (purchasing power) reduces, Labour Unions begin to agitate for increment in their labour rates or wages. This puts a strain on the businesses who either increase and suffer lower bottom lines or are forced to cut down on demand for labour to satisfy the new wage rate being demanded.
Cheers!
Old School Publishing Inc. began printing operations on January 1. Jobs 301 and 302 were completed during the month, and all costs applicable to them were recorded on the related cost sheets. Jobs 303 and 304 are still in process at the end of the month, and all applicable costs except factory overhead have been recorded on the related cost sheets. In addition to the materials and labor charged directly to the jobs, $7,900 of indirect materials and $13,200 of indirect labor were used during the month. The cost sheets for the four jobs entering production during the month are as follows, in summary form:
Job 301
direct material 10,900
Direct Labor 8,900
Factory Overhead 5785
Total 25,585
Job 302
Direct Material 18,300
Direct Labor 17,700
Factory Overhead 11,505
Total 47505
Job 303
Direct Materials 26,000
Direct Labor 16,000
Factory Overhead -
Job 304
Direct Material 13700
Direct Labor 12300
Factory Overhead -
Required:
Journalize the Jan. 31 summary entries to record each of the following operations for January (one entry for each operation). Refer to the Chart of Accounts for exact wording of account titles.
A. Direct and indirect materials used.
B. Direct and indirect labor used.
C. Factory overhead applied to all four jobs (a single overhead rate is used based on direct labor cost).
D. Completion of Jobs 301 and 302.
Answer and Explanation:
The Journal entry is shown below:-
1. Work in progress Dr, $68,900
(10,900 + $18,300 + 26,000 + $13,700)
Factory overhead Dr, $7,900
To Material $76,800
(Being direct and indirect material used is recorded)
2. Work in progress Dr, $54,900
($8,900 + $17,700 + $16,000 + $12,300)
Factory overhead Dr, $13,200
To Wages payable $68,100
(Being direct and indirect labor used is recorded)
3. Work in progress Dr, $39,259
To Factory overhead $39,259
($54,900 × ($5,785 ÷ $8,090))
(Being factory over applied is recorded)
4. Finished goods Dr, $73,090
To Work in progress $73,090
($25,585 + $47,505)
(Being Completion of Job 301 and Job 302 is recorded)
CPR: Change in principle reported retrospectively CPP: Change in principle reported prospectively CES: Change in estimate CRE: Change in reporting entity PPA: Prior period adjustment required ____ Change from FIFO inventory costing to LIFO inventory costing. ____ Change from LIFO inventory costing to FIFO inventory costing. ____ Change in the composition of a group of firms reporting on a consolidated basis. ____ Change to the installment method of accounting for receivables. ____ Change in actuarial assumptions for a defined benefit pension plan. ____ Change from sum-of-the-years' digits depreciation to straight-line. ____ Change from expensing extraordinary repairs erroneously recorded as an expense to capitalizing the expenditures. ____ Change in the percentage used to determine warranty expense. ____ Change from reporting postretirement benefits according to the provisions of U.S. GAAP. ____ Change in the residual value of machinery.
Answer:
CPP: Change from FIFO inventory costing to LIFO inventory costing. CPR: Change from LIFO inventory costing to FIFO inventory costing. CRE: Change in the composition of a group of firms reporting on a consolidated basis.
CPR: Change to the installment method of accounting for receivables.
CES: Change in actuarial assumptions for a defined benefit pension plan.
CPP: Change from sum-of-the-years' digits depreciation to straight-line.
PPA: Change from expensing extraordinary repairs erroneously recorded as an expense to capitalizing the expenditures.
CES: Change in the percentage used to determine warranty expense.
CPP: Change from reporting postretirement benefits according to the provisions of U.S. GAAP.
CES: Change in the residual value of machinery.
Explanation:
CPR: Change in principle reported retrospectively.
CPP: Change in principle reported prospectively.
CES: Change in estimate.
CRE: Change in reporting entity. PPA: Prior period adjustment required.
Winsor Clothing Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $7,200,000. The average collection period of the accounts receivable in terms of days was
A) 30 days.
B) 365 days.
C) 45.1 days.
D) 42.9 days.
Answer:
The correct answer is 40.6 days. None of the options is correct.
Explanation:
The average collection period of the accounts receivable is how long it takes the company to collect its accounts receivable. It is expressed as: (Average accounts receivable / Net credit sales) x 365 days.
Average collection period = [($760,000 + $840,000)/2 / $7,200,000] x 365 days = 40.6 days
This means it takes the company 40.6 days to collect its accounts receivable.
On Pine Branch Department Stores' most recent balance sheet, the balance of its inventory at the beginning of the year was $ 18000. At the end of the year, the inventory balance was $ 21500. During that year, its cost of goods sold was $ 61000. All purchases of inventory throughout the year were on account. What was the total of Pine Branch's purchases during the year? Pine Branch's total purchases during the year were $
Answer:
$64,500= purchases
Explanation:
Giving the following information:
beginning inventory= $18,000
Ending inventory= $21,500
Cost of goods sold= $61,000.
To calculate the purchases during the year, we need to use the following formula:
COGS= beginning inventory + purchases - ending inventory
61,000= 18,000 + purchases - 21,500
64,500= purchases
Final answer:
Explanation on calculating Pine Branch Department Stores' total purchases during the year.
Explanation:
**Pine Branch Department Stores' Total Purchases Calculation:**
Calculate the Cost of Goods Sold (COGS) by subtracting the ending inventory from the beginning inventory value: $21,500 - $18,000 = $3,500.
Then, determine the total purchases by adding the COGS to the beginning inventory value: $3,500 + $61,000 = $64,500.
The law creates the foundation for ethical behavior.
True
False
Answer:
True.
Explanation:
The law can be defined as the system of principles, regulations and rules established by legislature, that is adopted in a community, society or country to regulate the actions of its citizens, members or employees.
The law is a tool used by individuals, organizations, and even government to ensure everybody is well behaved, non-criminal and civil in their actions.
The law creates the foundation for ethical behavior.
In circumstances where there are aberration, the law is enforced as a punishment and penalty.
Mattix Corporation's balance sheet and income statement appear below: Comparative Balance Sheet Ending Balance Beginning Balance Assets: Cash and cash equivalents $ 23 $ 22 Accounts receivable 39 40 Inventory 43 44 Property, plant, and equipment 587 500 Less accumulated depreciation 359 347 Total assets $ 333 $ 259 Liabilities and stockholders' equity: Accounts payable $ 30 $ 26 Accrued liabilities 15 18 Income taxes payable 39 40 Bonds payable 109 120 Common stock 51 50 Retained earnings 89 5 Total liabilities and stockholders' equity $ 333 $ 259 Income Statement Sales $ 972 Cost of goods sold 620 Gross margin 352 Selling and administrative expense 200 Net operating income 152 Gain on sale of equipment 14 Income before taxes 166 Income taxes 50 Net income $ 116 The company sold equipment for $20 that was originally purchased for $7 and that had accumulated depreciation of $1. It paid a cash dividend during the year and did not issue any bonds payable or repurchase any of its own common stock. Required: Determine the net cash provided by (used in) operating activities for the year using the indirect method.
Answer:
net income $116
+ depreciation (359 - 347 + 1) $13
change in current assets:
+ decrease in accounts receivables $1
+ decrease in inventory $1
change in current liabilities:
+ increase in accounts payables $4
- decrease in accrued liabilities ($4)
+ increase in taxes payable $1
net cash provided by operating activities $132
Explanation:
ending beginning
Assets
Cash and cash equivalents $ 23 $ 22
Accounts receivable 39 40
Inventory 43 44
Property, plant, and equipment 587 500
Less accumulated depreciation 359 347
Total assets $ 333 $ 259
Liabilities and stockholders' equity:
Accounts payable $ 30 $ 26
Accrued liabilities 15 18
Income taxes payable 39 40
Bonds payable 109 120
Common stock 51 50
Retained earnings 89 5
Total liabilities and stockholders' equity $ 333 $ 259
Income Statement Sales $ 972
Cost of goods sold 620
Gross margin 352
Selling and administrative expense 200
Net operating income 152
Gain on sale of equipment 14
Income before taxes 166
Income taxes 50
Net income $ 116
Sleep Tight manufactures comforters. The estimated inventories on January 1 for finished goods, work in process, and materials were $36,000, $34,000 and $26,000 respectively. The desired inventories on December 31 for finished goods, work in process, and materials were $42,000, $33,000 and $19,000 respectively. Direct material purchases were $580,000. Direct labor was $202,000 for the year. Factory overhead was $144,000. Prepare a cost of goods sold budget for Sleep Tight, Inc.
Answer:
Opening finished goods Inventory $36,000
Add Cost of Goods Manufactured $944,000
Less Closing finished goods Inventory ($42,000)
Cost of Goods Sold $938,000
Explanation:
Step 1 Calculate Raw Material Costs requisitioned for manufacturing.
Materials Requisites = Opening Raw Materials Inventory + Purchases of Raw Materials - Closing Stock of Raw Materials
= $36,000+$580,000-$19,000
= $ 597,000
Step 2 Calculate Cost of Goods Manufactured
Raw Materials $597,000
Direct labor $202,000
Factory overhead $144,000
Add Opening work in process Inventory $34,000
Less Closing work in process Inventory ($33,000)
Cost of Goods Manufactured $944,000
Step 3 Calculate the Cost of Goods Sold
Opening finished goods Inventory $36,000
Add Cost of Goods Manufactured $944,000
Less Closing finished goods Inventory ($42,000)
Cost of Goods Sold $938,000
Answer:
Sleep Tight, Inc.
Cost of Goods Sold Budget:
RAW MATERIALS COSTS
January 1 Inventory of materials = $26,000
Direct Materials Purchases = $580,000
Less December 31 Inventory = $19,000
Cost of Materials used in production = $587,000
PRODUCTION COSTS
January 1 work in process = $34,000
Cost of materials used in production = $587,000
Direct Labour = $202,000
Factory Overhead = $144,000
less December 31 work in process = $33,000
Cost of goods produced = $934,000
FINISHED GOODS COSTS
January 1 Finished Goods = $36,000
Cost of goods produced = $934,000
less December 31 Finished Goods = $42,000
Cost of Goods Sold = $928,000
Explanation:
An alternative way to prepare the above budget would be to add all the opening inventories to purchases, direct labour, and factory overhead. From the total, deduct the closing inventories.
January 1 Inventory of materials = $26,000
January 1 work in process = $34,000
January 1 Finished Goods = $36,000
Direct Materials Purchases = $580,00
Direct Labour = $202,000
Factory Overhead = $144,000
a) Total = $1,022,000
less:
December 31 Inventory = $19,000
December 31 work in process = $33,000
December 31 Finished Goods = $42,000
b) Total = $94,000
Cost of Goods Sold (a-b) = $928,000
However, this second approach is lacking in details. As such, it is not very informative. The first arrangement displayed the cost of raw materials used for production, cost of goods produced, and then the cost of goods sold.
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.
Axle Co.'s accounts receivable turnover was 9.9 for this year and 11.0 for last year. Betterman's turnover was 9.3 for this year and 9.3 for last year. These results imply that: Multiple Choice Betterman has the better turnover for both years. Axle has the better turnover for both years. Betterman's turnover is improving. Axle's credit policies are too loose. Betterman is collecting its receivables more quickly than Axle in both years.
Answer: Axle has the better turnover for both years.
Explanation:
Accounts Receivable Turnover ratio is used to measure the amount of times in a year that a company is able to collect payment from it's Receivables.
A higher Accounts Receivable Turnover ratio indicates that the company is doing well in collecting their Receivables and as such are not trying down working capital because it is not be reinvested to put back into the business.
Axle had a Turnover ratio of 11 last year and a Turnover of 9.9 this year which is better than Betterman in both years. This means that Axle had the best Turnover for both years.
Answer:
Axle has the better turnover for both years.
Explanation:
Accounts receivable turnover measure the average times the company received their receivable, It measure the efficiency of the company regarding collection from customers. Turnover will be higher if company has low ratio of receivables to sales value.
Current year Last year
Axle 9.9 11.0
Betterman 9.3 9.3
Axle is disproving the receivable turnover ratio and have a better turnover that Betterman.
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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Timberlake Company owns equipment with a cost of $165,000 and accumulated depreciation of $60,000 that can be sold for $82,000 less a 6% sales commission. Alternatively, Timberlake Company can lease the equipment to another company for five years for a total of $84,600, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Timberlake Company on the equipment would total $7,950 over the five years. Prepare a differential analysis on March 23 as to whether Timberlake Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Answer:
Income (loss) 77080 76650
Explanation:
Timberlake Company
Sell Lease
Revenue 82000 84600
Expense -4920 -7950
Income (loss) 77080 76650
Therefore Company should sell the equipment
6%×82,000 =4920
Answer:
Timberlake Company
Differential Analysis on March 23:
a) Lease (Alternative 1):
Revenue = $84,600
Expenses = -$7,950
Income = $76,650
b) Sell (Alternative 2):
Revenue = $82,000
6% Sales Commission = -$4,920
Income = $77,080
Explanation:
Alternative 2 looks more attractive than alternative 1. It will bring in a net income of $77,080 as opposed to alternative 1's .$76,650.
Moreso, alternative 2's cash inflow is immediate while alternative 1's cash inflow will come over a 5-year period. When discounted, the cash inflow will be far less than Alternative 2's cash inflow.
It is true that both alternatives will cause the company to lose on the book value of the equipment. But the cost of the equipment is a sunk cost, which is not relevant in making a differential analysis type of decision.
In differential analysis, only relevant costs are considered.
The annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $120,000 in the current year. It also declared and paid dividends on common stock in the amount of $2.20 per share. During the current year, Sneer had 1 million common shares authorized; 320,000 shares had been issued; and 118,000 shares were in treasury stock. The opening balance in Retained Earnings was $820,000 and Net Income for the current year was $320,000. Required: Prepare journal entries to record the declaration, and payment, of dividends on (a) preferred and (b) common stock. Using the information given above, prepare a statement of retained earnings for the year ended December 31. Prepare a journal entry to close the dividends account.
Answer and Explanation:
The journal entries are shown below:
1 Cash Dividend Dr $120,000
To Dividend Payable $120,000
(Being the dividend is declared)
2 Dividend Payable Dr $120,000
To Cash $120,000
(Being the dividend is paid)
3 Cash Dividend Dr [(320,000 - 118,000) × $2.20] $444,400
To Dividend Payable $444,400
(Being the dividend is declared)
4 Dividend Payable Dr $444,400
To Cash $444,400
(Being the dividend is paid)
Now the preparation of the retained earning statement is presented below:
Sneer Corporation
Retained Earning statement
For the year ended December 31
Beginning balance of retained earning $820,000
Add: Net income $320,000
Less: Cash Dividend paid -$564,400 ($120,000 + $444,400)
Ending balance of retained earning $575,600
And, the journal entry to close the dividend account is
Retained Earnings Dr ($120,000 + $444,400) $564,400
To Cash Dividends $564,400
(Being the closing entry for dividend is closed)
1. Cash Dividend Dr $120,000
To Dividend Payable $120,000
(To record the declaration of the dividend)
2. Dividend Payable Dr $120,000
To Cash $120,000
(To record the payment of the dividend)
3. Cash Dividend Dr [(320,000 - 118,000) × $2.20] $444,400
To Dividend Payable $444,400
(To record the declaration of the dividend)
4. Dividend Payable Dr $444,400
To Cash $444,400
(To record the payment of the dividend)
The preparation of the retained earnings statement is presented below:Sneer Corporation
Retained Earning statement
For the year ended December 31
Beginning balance of retained earning $820,000
Add: Net income $320,000
Less: Cash Dividend paid -$564,400 ($120,000 + $444,400)
Ending balance of retained earning $575,600
And, the journal entry to close the dividend account is
Retained Earnings Dr ($120,000 + $444,400) $564,400
To Cash Dividends $564,400
(To record the closing entry for dividend)
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Presented below is information related to Teal Mountain , Inc. Date End-of-Year Inventory (End-of-Year Prices) Price Index December 31, 2017 $1,250,000 100 December 31, 2018 1,575,000 105 December 31, 2019 1,573,000 110 December 31, 2020 1,872,000 117 Compute the ending inventory for Teal Mountain , Inc. for 2017 through 2020 using the dollar-value LIFO method.
Answer:
2017 $1,250,000
2018 $1,512,500
2019 $1,439,000
2020 $1,637,900
Explanation:
The computation of ending inventory is shown below:-
Year Inventory Price index Inventory at base Change from prior
at end year year years
2017 $1,250,000 100 $1,250,000 0
2018 $1,575,000 105 $1,500,000 $250,000
2019 $1,573,000 110 $1,430,000 ($70,000)
2020 $1,872,000 117 $1,600,000 $170,000
Inventory at base year prices
2017 = $1,250,000 ÷ 100 × 100 = $1,250,000
2018 = $1,575,000 ÷ 105 × 100 = $1,500,000
2019 = $1,573,000 ÷ 110 × 100 = $1,430,000
2020 = $1,872,000 ÷ 117 × 100 = $1,600,000
So, dollar value ending inventory
2017 $1,250,000 × 1.0 = $1,250,000
$1,250,000
2018 $1,250,000 × 1.0 = $1,250,000
$250,000 × 1.05 = $262,500
$1,512,500
2019 $1,250,000 × 1.0 = $1,250,000
($250,000 - $70,000) × 1.05 = $189,000
$1,439,000
2020 $1,250,000 × 1.0 = $1,250,000
($250,000 - $70,000) × 1.05 = $189,000
$170,000 × 1.17 = $198,900
$1,637,900
2017 $1,250,000
2018 $1,512,500
2019 $1,439,000
2020 $1,637,900
Which of the following mechanical principles must be adopted by organizations creating a lean production system? a. Implementing smooth production to support efficient operation. b. Acquiring a large stock of inventory to avoid stock out. c. Avoiding the use of signaling as a means to replenish stock. d. Planning larger lot sizes to support higher inventory levels.
Answer:
a. Implementing smooth production to support efficient operation.
Explanation:
Lean production is a manufacturing methodology that is focused on integrating activities that are designed to provide massive quantity with high quality production using minimal resources, raw materials, finished products and work-in-process features.
Lean production is basically a supply management process aimed at elimination of waste as much as possible.
It is a Just-in-Time (JIT) concept developed in 1930 by the automobile manufacturing company, Toyota in Japan.
Hence, organizations creating a lean production system should adopt implementing smooth production to support efficient operation.
A company must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be sold as is for $2.00 each, or they can be reworked for $4.50 each and then sold for the full price of $8.50 each. If the units are sold as is, the company will be able to build 22,000 replacement units at a cost of $6 each, and sell them at the full price of $8.50 each. What is the incremental income from selling the units as scrap and reworking and selling the units
Answer:
It is more profitable to sell the units as-is and produce new ones.
Explanation:
Giving the following information:
The company has 22,000 defective units that cost $6 per unit to manufacture.
Sell as-is:
Selling price= $2
Rework:
Additional cost= $4.5
Selling price= $8.5
If the units are sold as-is, the company will be able to build 22,000 replacement units for $6 each and sell them at the full price of $8.50 each.
The original cost of the 22,000 units is a sunk cost, it will remain no matter the decision.
Sell as-is:
Defective units= 22,000*3= 44,000
New units= 22,000*(8.5 - 6)= 55,000
Total income= $99,000
Rework:
Sales= 22,000*(8.5 - 4.5)= $88,000
It is more profitable to sell the units as-is and produce new ones.
You own Souvenir Gallore, a souvenir shop on Lane Avenue. You would like to do an ABC analysis based on annual dollar usage. You sell the following list of retail items in your store. Items Annual demand (units) Unit cost Greeting cards 1000 $1.50 Key chains 967 $2.50 Scented candles 700 $5.00 Caps 700 $8.50 Calendars 650 $9.00 Watches 1020 $65.00 The ABC class that Calendars belong to is ___________
Calendar belongs to B category
Computation of ABC class:
Items Annual demand Unit cost Total cost Category
Watches 1,020 $65 $66,300 A
Caps 700 $8.5 $5,950 A
Calendars 650 $9 $5,850 B
Scented
candles 700 $5 $3,500 B
Key chain 967 $2.5 $2,417.5 C
Greeting
cards 1,000 $1.5 $1,500 C
Here, for computing the total we simply multiply the annual demand with unit cost of each items. Also we have categorized the A, B and C into values which means A has highest value, B is lower than A and C has the lowest value in compare of A and B.
Therefore, as per the requirement the Calendar belongs to B category.
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The ABC class that Calendars belong to is likely 'B' or 'C' based on the provided annual demand and unit cost, although additional information such as total expenditure on other items is necessary for precise categorization.
In ABC analysis, inventory items are categorized into three classes ('A', 'B', 'C') based on their annual consumption value, with 'A' being the most valuable (typically the top 10-20% by value), 'C' the least valuable (typically the bottom 50-70% by value), and 'B' falling in between. To determine which class a particular item falls into, you need to calculate the annual dollar usage by multiplying the annual demand by the unit cost. For Calendars, this would be 650 units multiplied by $9.00, resulting in a total of $5,850. To finalize the categorization, one would compare this amount with that of other items, ranking them all and then applying thresholds to designate each class. Without the full context of expenditure on other items, it's difficult to definitively assign a class, but since Calendars do not have the highest unit cost nor the largest demand, they are unlikely to be classified as 'A' items and typically might fall into 'B' or 'C'.
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.
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
The following transactions and adjusting entries were completed by Robinson Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.
Year 1
Jan. 8. Purchased a used delivery truck for $24,000, paying cash.
Mar. 7. Paid garage $900 for changing the oil, replacing the oil filter, and tuning the engine on the delivery truck.
Dec. 31. Recorded depreciation on the truck for the fiscal year. The estimated useful life of the truck is four years, with a residual value of $4,000 for the truck.
Year 2
Jan. 9. Purchased a new truck for $50,000, paying cash.
Feb. 28. Paid garage $250 to tune the engine and make other minor repairs on the used truck.
Apr. 30. Sold the used truck for $9,500. (Record depreciation to date in Year 2 for the truck.)
Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $12,000 and an estimated life of eight years.
Year 3
Sept. 1. Purchased a new truck for $58,500, paying cash.
Sept. 4. Sold the truck purchased January 9, Year 2, for $36,000. (Record depreciation to date for Year 3 for the truck.)
Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $16,000 and an estimated useful life of 10 years.
Instructions:
Journalize the transactions and the adjusting entries.
Answer:
Year 1
Jan. 8. Purchased a used delivery truck for $24,000, paying cash.
Dr Truck 24,000 Cr Cash 24,000Mar. 7. Paid garage $900 for changing the oil, replacing the oil filter, and tuning the engine on the delivery truck.
Dr Maintenance expenses - Truck 900 Cr Cash 900Dec. 31. Recorded depreciation on the truck for the fiscal year. The estimated useful life of the truck is four years, with a residual value of $4,000 for the truck.
Depreciation expense = 2 x 0.25 x $24,000 = $12,000
Dr Depreciation expense 12,000 Cr Accumulated depreciation - truck 12,000Year 2
Jan. 9. Purchased a new truck for $50,000, paying cash.
Dr Truck new 50,000 Cr Cash 50,000Feb. 28. Paid garage $250 to tune the engine and make other minor repairs on the used truck.
Dr Maintenance expenses - Truck 250 Cr Cash 250Apr. 30. Sold the used truck for $9,500. (Record depreciation to date in Year 2 for the truck.)
depreciation expense = 2 x 0.25 x 4/12 x $12,000 = $2,000
Dr Depreciation expense 2,000 Cr Accumulated depreciation - truck 2,000truck sold at $9,500 - $10,000 (carrying value) = -$500 loss on sale
Dr Cash 9,500Dr Accumulated depreciation 14,000Dr Loss on sale - truck 500 Cr Truck 24,000Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $12,000 and an estimated life of eight years.
Depreciation expense = 2 x 0.125 x $50,000 = $12,500
Dr Depreciation expense 12,500 Cr Accumulated depreciation - truck new 12,500Year 3
Sept. 1. Purchased a new truck for $58,500, paying cash.
Dr Truck three 58,500 Cr Cash 58,500Sept. 4. Sold the truck purchased January 9, Year 2, for $36,000. (Record depreciation to date for Year 3 for the truck.)
Depreciation expense = 2 x 0.125 x 8/12 x $37,500 = $6,250
Dr Depreciation expense 6,250 Cr Accumulated depreciation - truck new 6,250truck sold at $36,000 - $31,250 (carrying value) = $4,750 gain on sale
Dr Cash 36,000Dr Accumulated depreciation 18,750 Cr Truck new 50,000 Cr Gain on sale - truck new 4,750Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $16,000 and an estimated useful life of 10 years.
Depreciation expense = 2 x 0.1 x 4/12 x $58,500 = $3,900
Dr Depreciation expense 3,900 Cr Accumulated depreciation - truck three 3,900The journal entries for the purchase of the truck on January 1, 2023, and the depreciation expense for the year 2023 using the double-declining-balance method are recorded.
To record the purchase of the truck and depreciation expense for the year 2023 using the double-declining-balance method:
Purchase of the Truck (January 1, 2023):
Debit: Delivery Truck (asset) $60,000
Credit: Cash or Accounts Payable $60,000
Depreciation Expense for 2023:
Calculate annual depreciation:
Annual Depreciation = (2 / Useful Life) * Book Value at Beginning of Year
For the first year (2023):
Depreciation Expense = (2 / 6) * (Cost - Accumulated Depreciation)
Debit: Depreciation Expense $20,000
Credit: Accumulated Depreciation $20,000
This entry reflects the application of the double-declining-balance method, where depreciation is accelerated, with a higher expense in the early years. The truck's book value at the end of 2023 will be $40,000 ($60,000 - $20,000).
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Complete question below:
A company purchased a new delivery truck for $60,000 on January 1, 2023, with an estimated useful life of six years and a residual value of $8,000. The company uses the double-declining-balance method of depreciation. Prepare the journal entries for the purchase of the truck and the depreciation expense for the year 2023.
Cho owns and operates a store in a country experiencing a high rate of inflation. In order to prevent the value of money in her cash register from falling too quickly, Cho sends an employee to the bank four times per day to make deposits in an interest-bearing account that protects the store's revenues from the effects of inflation.
a. This is an example of:_________
i. menu costs
ii. unit of account costs
iii. shoe leather costs
b. Explain briefly the nature of the costs imposed.
Answer:
Shoe leather costs
Explanation:
(A) Shoe leather costs
(B) Inflation can be defined as the persistent rise in the prices of goods and services. Shoe leather costs can be defined as the costs of time and effort that are encountered by individuals while trying to prevent the effect of inflation. It describes the costs incurred by individuals that visits the bank often inorder to withdraw money needed to purchase goods and services during the time of inflation.
Shoe leather cost arises during the period of high inflation, individuals do not hold large amount of cash because there will be a reduction in the value of the money.