Problem 14-16 Preparing a Sales Budget and Schedule of Cash Receipts
Dorough Pointers Inc. expects to begin operations in January 1, 2009.
Dorough expects sales in January 2009 to total $120,000 and to increase
10 percent per month in February and March. All sales are on account.
Dorough expects to collect 70 percent of accounts receivable in the
month of sale, 20 percent in the month following the sale, and 10
percent in the second month following the sale.
Required
a. Prepare a sales budget for the first quarter of 2009.
b. Determine the amount of sales revenue Dorough will report on the first 2009 quarterly pro forma income statement.
c. Prepare a cash receipts schedule for the first quarter of 2009.
d. Determine the amount of accounts receivable as of March 31, 2009.
Check:
c.Feb.: $116,400
March: $140,040
Click here for the solution: Dorough Pointers Inc. expects to begin operations in January1, 2009
Wednesday, June 17, 2015
(Determining and Interpreting Flexible Budget Variances) Use the standard price and cost data supplied in Problem 15-18. Assume that Holligan actually produce and sold 31,000 books
Problem 15-19 Determining and Interpreting Flexible Budget Variances
Use the standard price and cost data supplied in Problem 15-18. Assume that Holligan actually produce and sold 31,000 books. The actual sales price and costs incurred follow.
AND SO ON
Check:
Flexible Budget Variance of NI: $25,900 U
Click here for the solution: (Determining and Interpreting Flexible Budget Variances) Use the standard price and cost data supplied in Problem 15-18. Assume that Holligan actually produce and sold 31,000 books
Use the standard price and cost data supplied in Problem 15-18. Assume that Holligan actually produce and sold 31,000 books. The actual sales price and costs incurred follow.
AND SO ON
Check:
Flexible Budget Variance of NI: $25,900 U
Click here for the solution: (Determining and Interpreting Flexible Budget Variances) Use the standard price and cost data supplied in Problem 15-18. Assume that Holligan actually produce and sold 31,000 books
Quentin Giordano owns a small retail ice cream parlor
Problem 16-17 Using the Payback Period and Unadjusted Rate of Return to Evaluate Alternative Investment Opportunities
Quentin Giordano owns a small retail ice cream parlor. He is considering expanding the business and has identifies two attractive alternatives. One involves purchasing a machine that would enable him to serve frozen yogurt to customers. The machine would cost $4,050 and has an expected useful life of three years with no salvage value. Additional annual cash revenues and cash operating expenses associated with selling yogurt are expected to be $2,970 and $450, respectively.
Alternatively, he could purchase for $5,040 the equipment necessary to serve cappuccinos. That equipment has an expected useful life of four years and no salvage value. Additional annual cash revenue and cash operating expenses associated with selling cappuccinos are expected to be $4,140 and $1,215, respectively.
Income before taxes earned by the ice cream parlor is taxed at an effective rate of 20 percent.
A. Determine the payback period and unadjusted rate of return (use average investment.) for each alternative.
B. Indicate which investment alternative you would recommend. Explain your choice.
Check:
a. Payback Period of the Yogurt Investment: 1.77 Years
Unadjusted Rate of Return of the Cappuccino Investment: 52.86%
Click here for the solution: Quentin Giordano owns a small retail ice cream parlor
Quentin Giordano owns a small retail ice cream parlor. He is considering expanding the business and has identifies two attractive alternatives. One involves purchasing a machine that would enable him to serve frozen yogurt to customers. The machine would cost $4,050 and has an expected useful life of three years with no salvage value. Additional annual cash revenues and cash operating expenses associated with selling yogurt are expected to be $2,970 and $450, respectively.
Alternatively, he could purchase for $5,040 the equipment necessary to serve cappuccinos. That equipment has an expected useful life of four years and no salvage value. Additional annual cash revenue and cash operating expenses associated with selling cappuccinos are expected to be $4,140 and $1,215, respectively.
Income before taxes earned by the ice cream parlor is taxed at an effective rate of 20 percent.
A. Determine the payback period and unadjusted rate of return (use average investment.) for each alternative.
B. Indicate which investment alternative you would recommend. Explain your choice.
Check:
a. Payback Period of the Yogurt Investment: 1.77 Years
Unadjusted Rate of Return of the Cappuccino Investment: 52.86%
Click here for the solution: Quentin Giordano owns a small retail ice cream parlor
ACC 421 Week 5 (Time Value Concepts Applied to Solve Business Problems) Answer the following questions related to Derek Lee Inc
ACC 421 Week Five (Week 5)
Problem 6-7 (P6-7) (Time Value Concepts Applied to Solve Business Problems) Answer the following questions related to Derek Lee Inc.
(a) Derek Lee Inc. has $572,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $80,000 at the end of each year for 12 years, and the other is to receive a single lump sum payment of $1,900,000 at the end of the 12 years. Which alternative should Lee select? Assume the interest rate is constant over the entire investment.
(b) Derek Lee Inc. has completed the purchase of new Dell computers. The fair market value of the equipment is $824,150. The purchase agreement specifies an immediate down payment of $200,000 and semiannual payments of $76,952 beginning at the end of 6 months for 5 years. What is the interest rate, to the nearest percent, used in discounting this purchase transaction?
(c) Derek Lee Inc. loans money to John Kruk Corporation in the amount of $600,000. Lee accepts an 8% note due in 7 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Lee needs money and therefore sells the note to Chicago National Bank, which demands interest on the note of 10% compounded semiannually. What is the amount Lee will receive on the sale of the note?
(d) Derek Lee Inc. wishes to accumulate $1,300,000 by December 31, 2017, to retire bonds outstanding. The company deposits $300,000 on December 31, 2007, which will earn interest at 10% compounded quarterly, to help in the retirement of this debt. In addition, the company wants to know how much should be deposited at the end of each quarter for 10 years to ensure that $1,300,000 is available at the end of 2017. (The quarterly deposits will also earn at a rate of 10%, compounded quarterly.) (Round to even dollars.)
Click here for the solution: ACC 421 Week 5 (Time Value Concepts Applied to Solve Business Problems) Answer the following questions related to Derek Lee Inc
Problem 6-7 (P6-7) (Time Value Concepts Applied to Solve Business Problems) Answer the following questions related to Derek Lee Inc.
(a) Derek Lee Inc. has $572,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $80,000 at the end of each year for 12 years, and the other is to receive a single lump sum payment of $1,900,000 at the end of the 12 years. Which alternative should Lee select? Assume the interest rate is constant over the entire investment.
(b) Derek Lee Inc. has completed the purchase of new Dell computers. The fair market value of the equipment is $824,150. The purchase agreement specifies an immediate down payment of $200,000 and semiannual payments of $76,952 beginning at the end of 6 months for 5 years. What is the interest rate, to the nearest percent, used in discounting this purchase transaction?
(c) Derek Lee Inc. loans money to John Kruk Corporation in the amount of $600,000. Lee accepts an 8% note due in 7 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Lee needs money and therefore sells the note to Chicago National Bank, which demands interest on the note of 10% compounded semiannually. What is the amount Lee will receive on the sale of the note?
(d) Derek Lee Inc. wishes to accumulate $1,300,000 by December 31, 2017, to retire bonds outstanding. The company deposits $300,000 on December 31, 2007, which will earn interest at 10% compounded quarterly, to help in the retirement of this debt. In addition, the company wants to know how much should be deposited at the end of each quarter for 10 years to ensure that $1,300,000 is available at the end of 2017. (The quarterly deposits will also earn at a rate of 10%, compounded quarterly.) (Round to even dollars.)
Click here for the solution: ACC 421 Week 5 (Time Value Concepts Applied to Solve Business Problems) Answer the following questions related to Derek Lee Inc
(Computing and recording units-of-production depreciation) Brees Corporation purchased a delivery van for $ 35,500 in 2010
Problem 6-27 Computing and recording units-of-production depreciation
Brees Corporation purchased a delivery van for $ 35,500 in 2010. The firm’s financial condition immediately prior to the purchase is shown in the following horizontal statements model.
The van was expected to have a useful life of 150,000 miles and a salvage value of $ 5,500. Actual mileage was as follows.
2010 50,000
2011 70,000
2012 58,000
Required
a. Compute the depreciation for each of the three years, assuming the use of units-of-production depreciation.
b. Assume that Brees earns $ 21,000 of cash revenue during 2010. Record the purchase of the van and the recognition of the revenue and the depreciation expense for the first year in a financial statements model like the preceding one.
c. Assume that Brees sold the van at the end of the third year for $ 4,000. Calculate the amount of gain or lose from the sale.
Check: a. Depreciation Expense, 2010: $ 10,000 c. Loss on Sale: $(1,500)
Click here for the solution: (Computing and recording units-of-production depreciation) Brees Corporation purchased a delivery van for $ 35,500 in 2010
Brees Corporation purchased a delivery van for $ 35,500 in 2010. The firm’s financial condition immediately prior to the purchase is shown in the following horizontal statements model.
The van was expected to have a useful life of 150,000 miles and a salvage value of $ 5,500. Actual mileage was as follows.
2010 50,000
2011 70,000
2012 58,000
Required
a. Compute the depreciation for each of the three years, assuming the use of units-of-production depreciation.
b. Assume that Brees earns $ 21,000 of cash revenue during 2010. Record the purchase of the van and the recognition of the revenue and the depreciation expense for the first year in a financial statements model like the preceding one.
c. Assume that Brees sold the van at the end of the third year for $ 4,000. Calculate the amount of gain or lose from the sale.
Check: a. Depreciation Expense, 2010: $ 10,000 c. Loss on Sale: $(1,500)
Click here for the solution: (Computing and recording units-of-production depreciation) Brees Corporation purchased a delivery van for $ 35,500 in 2010
The Hunter Company purchased a light truck on January 2, 2010 for $18,000
Problem 11-11 (P11-11) Depreciation for Financial Statements and Income Tax Purposes
The Hunter Company purchased a light truck on January 2, 2010 for $18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: $3,000 Depreciation for financial statements: straight-line Depreciation for income tax purposes: MARCS (three- year-life) From 2010 through 2014, each year, the company had sales of $100,000, cost of goods sold of $60,000, and operating expenses (excluding depreciation) of $15,000. The truck was disposed of on December 31, 2014 for $2,000.
1. Prepare an income statement for financial reporting through pretax accounting income for each of the five years, 2010 through 2014.
2. Prepare, an income statement for income tax purposes through taxable income for each of the five years, 2010 through 2014.
3. Compare the total income for all five years under requirement 1 and Requirement 2.
Click here for the solution: The Hunter Company purchased a light truck on January 2, 2010 for $18,000
The Hunter Company purchased a light truck on January 2, 2010 for $18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: $3,000 Depreciation for financial statements: straight-line Depreciation for income tax purposes: MARCS (three- year-life) From 2010 through 2014, each year, the company had sales of $100,000, cost of goods sold of $60,000, and operating expenses (excluding depreciation) of $15,000. The truck was disposed of on December 31, 2014 for $2,000.
1. Prepare an income statement for financial reporting through pretax accounting income for each of the five years, 2010 through 2014.
2. Prepare, an income statement for income tax purposes through taxable income for each of the five years, 2010 through 2014.
3. Compare the total income for all five years under requirement 1 and Requirement 2.
Click here for the solution: The Hunter Company purchased a light truck on January 2, 2010 for $18,000
Tuesday, June 16, 2015
During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations
Problem 11-14 (P11-14) Changes and Corrections of Depreciation
During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations:
1. Machine A was purchased for $50,000 on January 1, 2005. Straight-line depreciation has been recorded for 5 years, and the Accumulated depreciation account has a balance of $25,000. The estimated residual value remains at $5,000, but the service life is now estimated to be one year longer than estimated originally.
2. Machine B was purchased for $40,000 on January 1, 2008. It had an estimated residual value of $5,000 and an estimated service life of 10 years. It has been depreciated under the double-declining-balance method for two years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method.
3. Machine C was purchased for $20,000 on January 1, 2009. Double-declining-balance depreciation has been recorded for one year. The estimated residual value of the machine is $2,000 and the estimated service life is five years. The computation of the depreciation erroneously included the estimated residual value.
Prepare the necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record the depreciation for 2010. (Assume that the debit is to Depreciation Expense.)
Click here for the solution: During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations
During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations:
1. Machine A was purchased for $50,000 on January 1, 2005. Straight-line depreciation has been recorded for 5 years, and the Accumulated depreciation account has a balance of $25,000. The estimated residual value remains at $5,000, but the service life is now estimated to be one year longer than estimated originally.
2. Machine B was purchased for $40,000 on January 1, 2008. It had an estimated residual value of $5,000 and an estimated service life of 10 years. It has been depreciated under the double-declining-balance method for two years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method.
3. Machine C was purchased for $20,000 on January 1, 2009. Double-declining-balance depreciation has been recorded for one year. The estimated residual value of the machine is $2,000 and the estimated service life is five years. The computation of the depreciation erroneously included the estimated residual value.
Prepare the necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record the depreciation for 2010. (Assume that the debit is to Depreciation Expense.)
Click here for the solution: During 2010 the controller of the Ryel Company asked you to prepare correcting journal entries for the following three situations
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