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44. Last year Rain Repel Corporation had an ROA of 5 percent and a dividend payout ratio of 90...
Last year Rain Repel Corporation had an ROA of 5 percent and a dividend payout ratio of 90 percent. What is the internal growth rate?
45. Dr. Cravati, DMD., opened a dental clinic on August 1, 2011. The business transactions for August...
Dr. Cravati, DMD., opened a dental clinic on August 1, 2011. The business transactions for August are shown below:
Aug. 1 Dr. Cravati invested $280,000 cash in the business in exchange for 1,000 shares of capital stock.
Aug. 4 Land and a building were purchased for $400,000. Of this amount, $60,000 applied to the land and $340,000 to the building. A cash payment of $80,000 was made at the time of the purchase, and a note payable was issued for the remaining balance.
Aug. 9 Medical instruments were purchased for $75,000 cash.
Aug. 16 Office fixtures and equipment were purchased for $25,000. Dr. Cravati paid $10,000 at the time of purchase and agreed to pay the entire remaining balance in 15 days.
Aug. 21 Office supplies expected to last several months were purchased for $4,200 cash.
Aug. 24 Dr. Cravati billed patients $13,000 for services rendered. Of this amount, $1,000 was received in cash, and $12,000 was billed on account (due in 30 days).
Aug. 27 A $450 invoice was received for several newspaper advertisements placed in August.
The entire amount is due on September 8.
Aug. 28 Received a $500 payment on the $12,000 account receivable recorded August 24.
Aug. 31 Paid employees $2,200 for salaries earned in August. A partial list of account titles used by Dr. Cravati includes:
Cash Office Fixtures and Equipment
Accounts Receivable Land Office Supplies Building
Notes Payable Service Revenue Accounts Payable Advertising Expense Capital Stock Salary Expense Medical Instruments
Instructions
a. Analyze the effects that each of these transactions will have on the following six components of the company’s financial statements for the month of August. Organize your answer in tabu- lar form, using the column headings shown below. Use I for increase, D for decrease, and NE for no effect. The August 1 transaction is provided for you:
| Income Statement |
| Balance Sheet |
Transaction Aug. 1 | Revenue - Expenses = Net Income NE NE NE |
| Assets = Liabilities + Owners’ Equity I NE I |
b. Prepare journal entries (including explanations) for each transaction.
c. Post each transaction to the appropriate ledger accounts (use the T account format as illus- trated in Exhibit 3–8 on page 108).
d. Prepare a trial balance dated August 31, 2011.
e. Using figures from the trial balance prepared in part d, compute total assets, total liabilities, and owners’ equity. Did August appear to be a profitable month?
46. For each of the following, give an example of a physical control the client can use to protect..
For each of the following, give an example of a physical control the client can use to protect the asset or record:
1. Petty cash
2. Cash received by retail clerks
3. Accounts receivable records
4. Raw material inventory
5. Perishable tools
6. Manufacturing equipment
7. Marketable securities
47. If Stacy Tanner, Capital has instead decreased $30,000 after the closing entries were posted, and...
If Stacy Tanner, Capital has instead decreased $30,000 after the closing entries were posted, and the withdrawals remained the same, what would have been the amount of net income or net loss?
48. 25) Orange Corporation has budgeted sales of 16,000 units, targeted ending finished goods inventory.
25) Orange Corporation has budgeted sales of 16,000 units, targeted ending finished goods inventory of 4,000 units, and beginning finished goods inventory of 2,000 units. How many units should be produced next year?
A) 22,000 units
B) 20,000 units
C) 18,000 units
D) 16,000 units
26) For next year, Roberto, Inc., has budgeted sales of 15,000 units, targeted ending finished goods inventory of 750 units, and beginning finished goods inventory of 450 units. All other inventories are zero. How many units should be produced next year?
A) 14,700 units
B) 15,000 units
C) 15,300 units
D) 16,200 units
27) Antique Brass Company has budgeted sales volume of 120,000 units and budgeted production of 108,000 units, while 20,000 units are in beginning finished goods inventory. How many units are targeted for ending finished goods inventory?
A) 20,000 units
B) 32,000 units
C) 12,000 units
D) 8,000 units
Answer the following questions using the information below:
Kason, Inc., expects to sell 20,000 pool cues for $12.00 each. Direct materials costs are $2.00, direct manufacturing labor is $4.00, and manufacturing overhead is $0.80 per pool cue. The following inventory levels apply to 2016:
Beginning inventoryEnding inventory
Direct materials24,000 units24,000 units
Work-in-process inventory0 units0 units
Finished goods inventory2,000 units2,500 units
28) On the 2016 budgeted income statement, what amount will be reported for sales?
A) $246,000
B) $240,000
C) $312,000
D) $318,000
29) How many pool cues need to be produced in 2016?
A) 22,500 cues
B) 22,000 cues
C) 20,500 cues
D) 19,500 cues
30) On the 2016 budgeted income statement, what amount will be reported for cost of goods sold?
A) $139,800
B) $136,000
C) $132,600
D) $153,000
31) What are the 2016 budgeted costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively?
A) $48,000; $96,000; $19,200
B) $44,000; $88,000; $17,600
C) $41,000; $82,000; $16,400
D) $40,000; $80,000; $16,000
Answer the following questions using the information below:
Elton, Inc., expects to sell 6,000 ceramic vases for $20 each. Direct materials costs are $2, direct manufacturing labor is $10, and manufacturing overhead is $3 per vase. The following inventory levels apply to 2016:
Beginning inventoryEnding inventory
Direct materials1,000 units1,000 units
Work-in-process inventory0 units0 units
Finished goods inventory400 units500 units
32) On the 2016 budgeted income statement, what amount will be reported for sales?
A) $122,000
B) $118,000
C) $140,000
D) $120,000
33) How many ceramic vases should be produced in 2016?
A) 5,900 vases
B) 6,100 vases
C) 7,000 vases
D) 6,000 vases
34) On the 2016 budgeted income statement, what amount will be reported for cost of goods sold?
A) $105,000
B) $91,500
C) $90,000
D) $88,500
49. 151.Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A...
151.Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows:
Wood AluminumHard Rubber Total
Sales$500,000$200,000$65,000$765,000
Variable expenses 325,000 140,000 58,000 523,000
Contribution margin175,00060,0007,000242,000
Fixed expenses 75,000 35,000 22,000 132,000
Net income (loss)$100,000$ 25,000$(15,000)$110,000
Assume all of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?
a.$125,000
b.$103,000
c.$105,000
d.$140,000
152.What will most likely occur if a company eliminates an unprofitable segment when a portion of fixed costs are unavoidable?
a.All expenses of the eliminated segment will be eliminated.
b.Net income will decrease.
c.Net income will increase.
d.The company’s variable costs will increase.
153.A company has three product lines, one of which reflects the following results:
Sales$215,000
Variable expenses 125,000
Contribution margin90,000
Fixed expenses 130,000
Net loss$ (40,000)
If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company’s net income will
a.increase by $40,000.
b.decrease by $90,000.
c.decrease by $12,000.
d.increase by $12,000.
154.A company is considering eliminating a product line. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. If the product line is discontinued,
a.total net income will increase by the amount of the product line’s fixed costs.
b.total net income will decrease by the amount of the product line’s fixed costs.
c.the contribution margin of the product line will indicate the net income increase or decrease.
d.the company’s total fixed costs will decrease.
155.A segment has the following data:
Sales$700,000
Variable expenses300,000
Fixed expenses550,000
What will be the incremental effect on net income if this segment is eliminated, assuming the fixed expenses will be allocated to profitable segments?
a.$400,000 increase
b.$400,000 decrease
c.$5,000 decrease
d.Cannot be determined from the data provided.
156.Corn Crunchers has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2013:
Sales$1,400,000
Variable expenses 920,000
Fixed expenses 600,000
Net loss$ (120,000)
If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line?
a.$180,000
b.$1,520,000
c.$1,340,000
d.$1,100,000
157.North Division has the following information:
Sales$1,200,000
Variable expenses640,000
Fixed expenses620,000
If this division is eliminated, the fixed expenses will be allocated to the company’s other divisions. What is the incremental effect on net income if the division is dropped?
a.$60,000 increase
b.$620,000 decrease
c.$560,000 decrease
d.$580,000 increase
158.The potential effects of the decision to eliminate a line of business on existing employees and the community are
a.ignored in incremental analysis.
b.quantitative factors.
c.qualitative factors.
d.opportunity costs.
159.When will the elimination of a product line have no effect on the company’s overall profit?
a.When the avoidable fixed costs equal the product line’s contribution margin
b.When the unavoidable fixed costs equal the product line’s contribution margin
c.When there are no fixed costs incurred by the product line
d.When the product line contribution margin is negative
160.Accounting’s contribution to the decision-making process occurs in all of the following steps except to
a.identify the problem and assign responsibility.
b.determine possible courses of action.
c.review results of the decision.
d.make a decision.
50. Horizon Corporation manufactures personal computers. The company began operations in 2002 and report
Horizon Corporation manufactures personal computers. The company began operations in 2002 and reported profits for the years 2004 through 2009. Due primarily to increased competition and price slashing in the industry, 2010's income statement reported a loss of $20 million. Just before the end of the 2011 fiscal year, a memo from the company's chief financial officer to Jim Fielding, the company controller, included the following comments:
If we don't do something about the large amount of unsold computers already manufactured, our auditors will require us to write them off. The resulting loss for 2011 will cause a violation of our debt covenants and force the company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company's president and he will accept the merchandise and acknowledge the shipment as a purchase. We can record the sale in 2011 which will boost profits to an acceptable level. Then J.B. Sales will simply return the merchandise in 2012 after the financial statements have been issued.
Discuss the ethical dilemma faced by Jim Fielding.
What main ethical issues face Jim Fielding? Choose at least two issues, select an approach, and explain your justification using accounting principles learned in this module.