PR 6-5A The following were selected from among the transactions completed by Sandusky Company during December of the current year:
Dec 3: Purchased merchandise n account from Hillsboro Co., list price $38,000, trade discount 24%, terms FOB shipping point, 2/10, n/30, with prepaid freight of $900 added to the invoice.
Dec 5: Purchased merchandise on account from Deepwater Co., $18,750, terms FOB destination, 2/10,n/30.
Dec 7: Returned $3,000 of merchandise purchase on December 5 from Deepwater Co.
13. Paid Hillsboro Co. on account for purchase of Dec 3, less discount.
15. Paid Deepwater Co. on account for purchase of Dec 5, less return of December 7 and discount.
16. Received cash on account from sale of December 6 to Zion Co., less discount.
19. Sold merchandise on MasterCard, $58,000. The cost of the merchandise sold was $34,500.
22. Sold merchandise on account to Smith River Co., $15,400, terms 2/10,n/30. The cost of merchandise sold was $9,000.
23. Sold merchandise for cash, $33,600. The cost of merchandise sold was $20,000.
28. Received merchanfise returned by Smith River Co. from sale on December 22, $2,400. The cost of returned merchandise was $1,400.
31. Paid MasterCard service fee of $1,750.
Instructions: Journalize the transactions.
Click here for the solution: The following were selected from among the transactions completed by Sandusky Company during December of the current year
Sunday, September 27, 2015
(Case-It Co) The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010
PR 6-1A The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010:
Cash $37,700 Sales Returns and Allowances $37,800
Accounts Receivable 111,600 Sale Discounts 19,800
Merchandise Inventory 180,000 Cost of Merchandise Sold 1,926,000
Office Supplies 5,000 Sales Salaries Expense 378,000
Prepaid Ins. 12,000 Advertising Expense 50,900
Office Equipment 115,200 Depreciation Exp - Store Equip 8,300
Accumulated Depreciation - Office Equip 49,500 Misc Selling Expense 2,000
Store Equipment 311,500 Office Salaries Expense 73,800
Accumulated Depreciation - Store Equip 87,500 Rent Expense 39,900
A/P 48,600 Insurance Expense 22,950
Salaries Payable 3,600 Depreciation Expense - Office Equip 16,200
Note Payable (final payment due 2025) 54,000 Office Supplies Expense 1,650
Gina Hennessy, Capital 454,800 Misc Admin Exp 1,900
Gina Hennessy, Drawing 45,000 Interest Expense 4,400
Sales 2,703,600
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner's equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $8,000
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report form and account form balance sheets differ.
Click here for the solution: The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010
Cash $37,700 Sales Returns and Allowances $37,800
Accounts Receivable 111,600 Sale Discounts 19,800
Merchandise Inventory 180,000 Cost of Merchandise Sold 1,926,000
Office Supplies 5,000 Sales Salaries Expense 378,000
Prepaid Ins. 12,000 Advertising Expense 50,900
Office Equipment 115,200 Depreciation Exp - Store Equip 8,300
Accumulated Depreciation - Office Equip 49,500 Misc Selling Expense 2,000
Store Equipment 311,500 Office Salaries Expense 73,800
Accumulated Depreciation - Store Equip 87,500 Rent Expense 39,900
A/P 48,600 Insurance Expense 22,950
Salaries Payable 3,600 Depreciation Expense - Office Equip 16,200
Note Payable (final payment due 2025) 54,000 Office Supplies Expense 1,650
Gina Hennessy, Capital 454,800 Misc Admin Exp 1,900
Gina Hennessy, Drawing 45,000 Interest Expense 4,400
Sales 2,703,600
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner's equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $8,000
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report form and account form balance sheets differ.
Click here for the solution: The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010
Friday, September 25, 2015
The following data for Enrichment Industries, Inc. relate to the payroll for the week ended December 10, 2010
PR 11-5A The following data for Enrichment Industries, Inc. relate to the payroll for the week ended December 10, 2010:
Fed U.S. Accumulated
Employee Hours Worked Hourly Rate Weekly Salary Income Tax Savings Bonds Earnings Dec 3
Beilein 32 $16.00 $102.40 10 $24,576
Calhoun 32 32.00 369.60 10 84,480
Calipari 40 28.00 240.80 20 53,760
Knight 42 32.00 316.48 66,048
Odom $3,400 748.00 90 163,200
Olson 1,600 384.00 76,800
Pitino 34 18.00 91.80 29,376
Ryan 44 34.00 297.16 20 75,072
Thompson 40 26.00 218.40 35 49,920
Employees Olson and Odom are office staff, and all of the other employees are sales personnel. All sales personnel are paid 1.5 times the regular rate for all hours in excess of 40 hours per week. The social security tax rate is 6.0% on the first 100,000 of each employee's annual earnings, and Medicare tax is 1.5% of each employee's annual earnings. The next payroll check to used is No. 345.
1. Prepare a payroll register for Enrichment Industries, Inc for the week ended December 10, 2010. Use the following columns for the payroll register: Name, Total Hours, Reg Earnings, Overtime Earnings, Total Earnings, Social Security tax, Medicare Tax, Federal Income Tax, U.S. Savings Bonds, Total Deductions, Net Pay, Ck. No, Sales Salaries Expense, and Office Salaries Expense.
2. Journalize the entry to record the payroll sales for the week.
Click here for the solution: The following data for Enrichment Industries, Inc. relate to the payroll for the week ended December 10, 2010
Fed U.S. Accumulated
Employee Hours Worked Hourly Rate Weekly Salary Income Tax Savings Bonds Earnings Dec 3
Beilein 32 $16.00 $102.40 10 $24,576
Calhoun 32 32.00 369.60 10 84,480
Calipari 40 28.00 240.80 20 53,760
Knight 42 32.00 316.48 66,048
Odom $3,400 748.00 90 163,200
Olson 1,600 384.00 76,800
Pitino 34 18.00 91.80 29,376
Ryan 44 34.00 297.16 20 75,072
Thompson 40 26.00 218.40 35 49,920
Employees Olson and Odom are office staff, and all of the other employees are sales personnel. All sales personnel are paid 1.5 times the regular rate for all hours in excess of 40 hours per week. The social security tax rate is 6.0% on the first 100,000 of each employee's annual earnings, and Medicare tax is 1.5% of each employee's annual earnings. The next payroll check to used is No. 345.
1. Prepare a payroll register for Enrichment Industries, Inc for the week ended December 10, 2010. Use the following columns for the payroll register: Name, Total Hours, Reg Earnings, Overtime Earnings, Total Earnings, Social Security tax, Medicare Tax, Federal Income Tax, U.S. Savings Bonds, Total Deductions, Net Pay, Ck. No, Sales Salaries Expense, and Office Salaries Expense.
2. Journalize the entry to record the payroll sales for the week.
Click here for the solution: The following data for Enrichment Industries, Inc. relate to the payroll for the week ended December 10, 2010
The following items were selected from among the transactions completed by Emerald Bay Stores Co. during the current year
PR 11-1A The following items were selected from among the transactions completed by Emerald Bay Stores Co. during the current year.
Jan 15. Purchased merchandise on account from hood Co., $200,000, terms n/30.
Feb 14. Issued 60-day, %6 note for $200,000 to Hood Co on account.
April 15. Paid Hood Co. the amount owed on the note of February 14.
June2. Borrowed $187,500 from Acme Bank, issuing a 60-day, 8% note.
July 10. Purchased tools by issuing a $190,000, 90-day note to Columbia supply Co., which discounted the note at the rate of 6%.
Aug 1. Paid Acme Bank the interest rate due on the note of June 2 and renewed the loan by issuing a new 60-day, 10% not for $187,500 (Journalize both the debit and credit to the notes payable account.)
Sept 30. Paid Acme Bank the amount due on the note of August 1.
Oct 8. Paid Columbia Supply co. the amount due on the note of July 10.
Dec 1. Purchased office equipment from Mountain Equipment co. for $120,000 paying $20,000 and issuing a series of ten 6% notes for $10,000 each coming due at 30-day intervals.
Dec 5. Settled a product liability lawsuit with a customer for $76,000, payable in January. Emerald Bay accrued the loss in litigation claims payable account.
Dec 31. paid the amount due Mountain Equipment co. on the first note in the series issued on December 1.
Instructions:
1. Journalize the transactions.
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year.
(a) Product warranty cost $16,400;
(b) Interest on the nine remaining notes owed to Mountain Equipment Co
Click here for the solution: The following items were selected from among the transactions completed by Emerald Bay Stores Co. during the current year
Jan 15. Purchased merchandise on account from hood Co., $200,000, terms n/30.
Feb 14. Issued 60-day, %6 note for $200,000 to Hood Co on account.
April 15. Paid Hood Co. the amount owed on the note of February 14.
June2. Borrowed $187,500 from Acme Bank, issuing a 60-day, 8% note.
July 10. Purchased tools by issuing a $190,000, 90-day note to Columbia supply Co., which discounted the note at the rate of 6%.
Aug 1. Paid Acme Bank the interest rate due on the note of June 2 and renewed the loan by issuing a new 60-day, 10% not for $187,500 (Journalize both the debit and credit to the notes payable account.)
Sept 30. Paid Acme Bank the amount due on the note of August 1.
Oct 8. Paid Columbia Supply co. the amount due on the note of July 10.
Dec 1. Purchased office equipment from Mountain Equipment co. for $120,000 paying $20,000 and issuing a series of ten 6% notes for $10,000 each coming due at 30-day intervals.
Dec 5. Settled a product liability lawsuit with a customer for $76,000, payable in January. Emerald Bay accrued the loss in litigation claims payable account.
Dec 31. paid the amount due Mountain Equipment co. on the first note in the series issued on December 1.
Instructions:
1. Journalize the transactions.
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year.
(a) Product warranty cost $16,400;
(b) Interest on the nine remaining notes owed to Mountain Equipment Co
Click here for the solution: The following items were selected from among the transactions completed by Emerald Bay Stores Co. during the current year
Optix International is considering a significant expansion to its product line
E9-9 Optix International is considering a significant expansion to its product line. The sales force is excited about the opportunities that the new products will bring. The new products are a significant step up in quality above the company’s current offerings, but offer a complementary fit to its existing product line. Frank Renolds, senior production department manager, is very excited about the high-tech new equipment that will have to be acquired to produce the new products. Carol Fischer, the company’s CFO, has provided the following projections based on results with and without the new products.
Without New Products With New Products
Sales $10,000,000 $18,000,000
Net income $800,000 $1,800,000
Average total assets $5,000,000 $15,000,000
Instructions
(a) Compute the company’s return on assets ratio, profit margin ratio, and asset turnover ratio, both with and without the new product line.
(b) Discuss the implications that your findings in part (a) have for the company’s decision.
Click here for the solution: Optix International is considering a significant expansion to its product line
Without New Products With New Products
Sales $10,000,000 $18,000,000
Net income $800,000 $1,800,000
Average total assets $5,000,000 $15,000,000
Instructions
(a) Compute the company’s return on assets ratio, profit margin ratio, and asset turnover ratio, both with and without the new product line.
(b) Discuss the implications that your findings in part (a) have for the company’s decision.
Click here for the solution: Optix International is considering a significant expansion to its product line
Big A's Auto Service was started on January 1, 2012
Exercise 5-3 Effect of recognizing uncollectible accounts expense on financial statements percent of revenue allowance method
Big A's Auto Service was started on January 1, 2012. The company experienced the following events during its first two years of operation.
Events affecting 2012:
1. Provided $30,000 of repair services on account
2. Collected $25,000 cash from accounts receivable
3. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the service revenue on account.
Events affecting 2013:
1. Wrote of a $280 account receivable that was determined to be uncollectible
2. Provided $35,000 of repair services on account
3. Collected $31,000 cash from accounts receivable
4. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the service revenue on account
Required:
a. Organize the transaction data in accounts under an accounting equation.
b. Determine the following amounts:
1. Net income for 2012
2. Net cash flow from operating activities for 2012
3. Balance of accounts receivable at the end of 2012
4. Net realizable value of accounts receivable at the end of 2012
c. Repeat requirement b for the 2013 accounting period.
Click here for the solution: Big A's Auto Service was started on January 1, 2012
Big A's Auto Service was started on January 1, 2012. The company experienced the following events during its first two years of operation.
Events affecting 2012:
1. Provided $30,000 of repair services on account
2. Collected $25,000 cash from accounts receivable
3. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the service revenue on account.
Events affecting 2013:
1. Wrote of a $280 account receivable that was determined to be uncollectible
2. Provided $35,000 of repair services on account
3. Collected $31,000 cash from accounts receivable
4. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the service revenue on account
Required:
a. Organize the transaction data in accounts under an accounting equation.
b. Determine the following amounts:
1. Net income for 2012
2. Net cash flow from operating activities for 2012
3. Balance of accounts receivable at the end of 2012
4. Net realizable value of accounts receivable at the end of 2012
c. Repeat requirement b for the 2013 accounting period.
Click here for the solution: Big A's Auto Service was started on January 1, 2012
Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors
Complete Problem 6.6 on p. 232 (Ch. 6). Submit your answers to questions (a) and (b).
6.6. Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors regarding a planned plant expansion that will cost $10 million. At issue is whether the expansion should be financed with debt (a long-term note at First National Bank of Uvalde with an interest rate of 15%) or through the issuance of common stock (200,000 shares at $50 per share).
Uvalde Manufacturing currently has a capital structure of:
Debt (12% interest) 40,000,000
Equity 50,000,000
The firm's most recent income statement is presented next:
Sales $100,000,000
Cost of goods sold 65,000,000
Gross profit 35,000,000
Operating expenses 20,000,000
Operating profit 15,000,000
Interest expense 4,800,000
Earnings before tax 10,200,000
Income tax expense (40%) 4,080,000
Net income $ 6,120,000
Earnings per share (800,000 shares) $ 7.65
Laurel Street is aware that financing the expansion with debt will increase risk but could also benefit shareholders through financial leverage. Estimates are that the plant expansion will increase operating profit by 20%.The tax rate is expected to stay at 40%. Assume a 100% dividend payout ratio.
Required
a. Calculate the debt ratio, time interest earned, earnings per share, and the financial leverage index under each alternative, assuming the expected increase in operating profit is realized.
b. Discuss the factors the board should consider in making a decision.
Click here for the solution: Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors
6.6. Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors regarding a planned plant expansion that will cost $10 million. At issue is whether the expansion should be financed with debt (a long-term note at First National Bank of Uvalde with an interest rate of 15%) or through the issuance of common stock (200,000 shares at $50 per share).
Uvalde Manufacturing currently has a capital structure of:
Debt (12% interest) 40,000,000
Equity 50,000,000
The firm's most recent income statement is presented next:
Sales $100,000,000
Cost of goods sold 65,000,000
Gross profit 35,000,000
Operating expenses 20,000,000
Operating profit 15,000,000
Interest expense 4,800,000
Earnings before tax 10,200,000
Income tax expense (40%) 4,080,000
Net income $ 6,120,000
Earnings per share (800,000 shares) $ 7.65
Laurel Street is aware that financing the expansion with debt will increase risk but could also benefit shareholders through financial leverage. Estimates are that the plant expansion will increase operating profit by 20%.The tax rate is expected to stay at 40%. Assume a 100% dividend payout ratio.
Required
a. Calculate the debt ratio, time interest earned, earnings per share, and the financial leverage index under each alternative, assuming the expected increase in operating profit is realized.
b. Discuss the factors the board should consider in making a decision.
Click here for the solution: Laurel Street, president of Uvalde Manufacturing Inc. is preparing a proposal to present to her board of directors
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