Tackling International Accounting Standards: Students Tips

Published: 1 year ago

Tackling International Accounting Standards: Students Tips

1. What is supply base rationalization, and what are its advantages and disadvantages?

What is supply base rationalization, and what are its advantages and disadvantages?

2. Prepare a corrected balance sheet at November 30, 2005.

Preparing a Balance Sheet; Discussion of Accounting Principles

Big Scripts is a service-type enterprise in the entertainment field, and its manager, William Pippin, has only a limited knowledge of accounting. Pippin prepared the following balance sheet, which, although arranged satisfactorily, contains certain errors with respect to such concepts as the business equity and the asset valuation. Pippin owns all of the corporation’s outstanding stock.

In discussion with Pippin and by inspection of the accounting records, you discover the following facts:

1. The amount of cash, Rs. 5,150, includes Rs. 3,400 in the company’s bank account, Rs. 540 on hand in the company’s safe, and Rs. 1,210 in Pippin’s personal savings account.


2. One of the notes receivable in the amount of Rs. 500 is an IOU that Pippin received in a poker game several years ago. The IOU is signed by “B.K.,” whom Pippin met at the game but has not heard from since.


3. Office furniture includes Rs. 2,900 for a Persian rug for the office purchased on November 20. The total cost of the rug was Rs. 9,400. The business paid Rs. 2,900 in cash and issued a note payable to Zoltan Carpet for the balance due (Rs. 6,500). As no payment on the note is due until January, this debt is not included in the liabilities above.


4. Also included in the amount for office furniture is a computer that cost Rs. 2,525 but is not on hand because Pippin donated it to a local charity.


5. The “Other Assets” of Rs. 22,400 represent the total amount of income taxes Pippin has paid the federal government over a period of years. Pippin believes the income tax law to be unconstitutional, and a friend who attends law school has promised to help Pippin recover the taxes paid as soon as he passes the bar exam.


6. The asset “Land” was acquired at a cost of Rs. 39,000 but was increased to a valuation of Rs. 70,000 when a friend of Pippin offered to pay that much for it if Pippin would move the building off the lot.


7. The accounts payable include business debts of Rs. 32,700 and the Rs. 3,105 balance owed on Pippin’s personal MasterCard.

Instructions

a. Prepare a corrected balance sheet at November 30, 2005.

b. For each of the seven numbered items above, use a separate numbered paragraph to explain whether the treatment followed by Pippin is in accordance with generally accepted accounting principles.

3. James Consol Company currently pays a dividend of $1.60 per share on its common stock. The company...

James Consol Company currently pays a dividend of $1.60 per share on its common stock. The company expects to increase the dividend at a 20 percent annual rate for the first four years and at a 13 percent rate for the next four years, and then grow the dividend at a 7 percent rate thereafter. This phased-growth pattern is in keeping with the expected life cycle of earnings. You require a 16 percent return to invest in this stock. What value should you place on a share of this stock?

4. Comparative financial statements for Weaver Company follow:

Comparative financial statements for Weaver Company follow:





During 2009, the company sold some equipment for $20 that had cost $40 and on which there was accumulated depreciation of $16. In addition, the company sold long-term investments for $10 that had cost $3 when purchased several years ago. Cash dividends totaling $30 were paid during 2009.

Required:

1.Using the indirect method, determine the net cash provided by operating activities for 2009.

2.Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2009.

5. Kunkel Company makes two products and uses a conventional costing system in which a single plantw...

*I am only looking for help on question two

Kunkel Company makes two products and uses a conventional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow: These products are customized to some degree for specific customers. the company's manufacturing overhead costs for the year are expected to be $336,000. Using the company's conventional costing system, compute the unit product costs for the two products. (Do not round intermediate calculation. Round your final answers to 2 decimal places.)

6. Suppose a company did $2,000,000 in annual maintains in 2013 and expects 90% of those to renew of...

Suppose a company did $2,000,000 in annual maintains in 2013 and expects 90% of those to renew of 2014. Suppose that product sales for 2013 were $2,000,000(which included free maintenance in2013) and 70% of those were expected to pay an annual maintenance of 15% of the purchase price in 2014. what will be the annual maintenance collected in 2014?

7. 5-5 MASTERY PROBLEM reconciling a bank statement; journalizing a bank service charge, a dishonour...

5-5 MASTERY PROBLEM reconciling a bank statement; journalizing a bank service charge, a dishonour check, and petty cash transactions James Aster up owns a business called Lawn Mow. Selected general ledger accounts are given below. 

8. Senger Company sold merchandise of 15 500 terms 2 10 n 30 to Senger Company sold merchandise of...

Senger Company sold merchandise of 15 500 terms 2 10 n 30 to

Senger Company sold merchandise of $15,500, terms 2/10, n/30, to Burns Inc. on April 23. Burns paid Senger for the merchandise on May 2. On May 12, Senger paid Burns $650 for costs incurred by Burns to repair defective merchandise.



(A) Journalize the entry by Senger Company to record the customer refund to Burris Inc.



(B) Assume that instead of paying Bums cash, Senger issued a credit memo to Burris to be used against Burris’s outstanding account receivable balance. Journalize the entry by Senger Company to record the issuance of the credit memo.



 

Senger Company sold merchandise of 15 500 terms 2 10 n 30 to

9. 74) Gilley, Inc., sells a single product. The company's most recent income statement is given...

74) Gilley, Inc., sells a single product.

The company's most recent income statement is given below.

Sales (4,000 units)              $120,000

Less variable expenses              (68,000)

Contribution margin              52,000

Less fixed expenses              (40,000)

Net income              $

12,000

Required:

a.Contribution margin per unit is$ ________ per unit

b.If sales are doubled to $240,000,

total variable costs will equal$ ________

c.If sales are doubled to $240,000,

total fixed costs will equal$ ________

d.If 10 more units are sold, profits will increase by$ ________

e.Compute how many units must be sold to break even. # ________

f.Compute how many units must be sold

to achieve profits of $20,000.# ________

 

74)_____________

75) Widget Company sells widgets for $20.00 each. The manufacturing costs, all variable, are $6 each. The company is planning on renting an exhibition booth for both display and selling purposes at the annual candy convention. The company's sales manager will earn a vacation bonus if she can earn a target net income of $150,000, for the sales operation at the convention.

The convention organizers provide the advertising and guarantee a certain level of traffic, in exchange for 15% of the net income.

Given the extra 15% surcharge, which operates like a tax on net income.

The company absorbs all of the fixed costs of production for the sales made at the convention.

How many widgets does the sales manager have to sell to earn the vacation bonus?

75)_____________

76) You have just been hired as the new management accountant for a pool chemical wholesaler.

The company sells packages of pool chemicals, consisting of all of the chemicals a typical pool would need for a week, to retail stores, for a price of $25, and a variable cost of $8.

The company has fixed costs of $125,000.

The previous accountant was promoted to an associated company but has left you her working papers for a project she was working on.

The project involves advising management whether to accept an advertising arrangement with an industry publication.

The arrangement being offered is a contract calling for a set payment per month (amount to be negotiated) for 6 months.

The industry is cyclical and has no sales for 4 months [16 weeks] of the year.

The previous accountant notes show her projection that this would result an increase of 50 units per week, above the normal 1,000 units per week that the company sells currently.

The increased demand would arise from more customers to existing outlets, and from new outlets as well.

The advertiser is suggesting a monthly fee of $1,800.

What is your advice, based on the previous accountant's notes and your own analysis?

76)_____________

77) Seamless Gutter sells 10 metre sections of eaves trough for $12. The unit variable costs per section are $8.80. Fixed costs total $4,800.

Required:

a.What is the contribution margin per section?

b.What is the breakeven point in sections? . . . in dollars?

c.How many sections must be sold to earn a pretax income of $4,000?

d.What is the margin of safety assuming 1,800 sections are sold?

77)_____________

78) The Holiday Card Company, a producer of specialty cards, has asked you to complete several

calculations based upon the following information:

Income tax rate 30%

Selling price per unit$6.60

Variable cost per unit $5.28

Total fixed costs $46,200.00

Required:

a.What is the breakeven point in cards?

b.What sales volume is needed to earn an after-tax net income of $13,028.40?

c.How many cards must be sold to earn an after-tax net income of $18,480?

 

78)_____________

79) Auto Tires, Inc. sells tires to service stations for an average of $45 each. The variable costs of each tire are $30 and monthly fixed manufacturing costs total $15,000. Other monthly fixed costs of the company total $12,000.

Required:

a.What is the breakeven level in tires?

b.What is the margin of safety assuming sales total $90,000?

c.What is the breakeven level in tires assuming variable costs increase by 20 percent?

d.What is the breakeven level in tires assuming the selling price goes up by 10 percent, fixed manufacturing costs decline by 10 percent and other fixed costs decline by $150?

79)_____________

80) Karen's Klothes sells blouses for women and girls. The average selling price and variable cost for each product are as follows:

Women: Selling Price $18.00 Girls: Selling Price $15.00

Variable Cost $12.75Variable Cost $10.50

Fixed costs are $30,000 and cannot be separated evenly between the two products.

Required:

a.What is the breakeven point in units for each type of blouse assuming the sales mix is 2:1 in favour of women's blouses? Total sales cannot exceed 7,000 units due to space constraints.

b.What is the operating income assuming the sales mix is 2:1 in favour of women's blouses, and sales total 9,900 blouses?

80)_____________

81) Popcorn, Inc. currently sells plain popcorn at the ballpark. During a typical month the stand reports a profit of $18,000 with sales of $100,000 and fixed costs of $42,000 and variable costs of $0.64 per box.

Next year the company plans to start selling candy-coated popcorn for $3 a box. The candy-coated popcorn will have a variable cost of $0.72. The new equipment and personnel to handle the popcorn will increase monthly fixed costs by $17,616. Initial sales of candy-coated popcorn should total 10,000 boxes. However, most of the candy-coated popcorn sales are anticipated to come from current plain popcorn purchasers. Consequently, monthly sales of plain popcorn will decline to $40,000.

After the first year of candy-coated popcorn sales, the company president believes that it will increase to 15,000 boxes a month and that plain popcorn sales will increase to $225,000 a month.

Required:

a.Determine the monthly breakeven sales in dollars before adding the candy-coated popcorn product.

b.Determine the monthly breakeven sales during the first year of candy-coated popcorn sales assuming a constant sales mix.

81)_____________

82) Heady Company sells headbands to retailers for $5. The variable cost of goods sold per headband is $1, with a selling commission of 10 percent. Fixed manufacturing costs total $25,000 per month, while fixed selling and administrative costs total $10,500. The income tax rate for Heady Company is 30 percent.

Required:

a.What is the breakeven point in headbands?

b.What are target sales in headbands to generate a before tax income of $3,000?

c.What are target sales in headbands to generate an after tax income of $3,080?

d.What is net income assuming Heady sells total 15,000 headbands?

82)_____________

83) Query Company sells pillows for $25.00 each.

The manufacturing cost, all variable, is $10 per pillow.The company is planning on renting an exhibition booth for both display and selling purposes at the

annual crafts and art convention.

The convention coordinator allows three options for each participating

company.

They are:

1.paying a fixed booth fee of $5,010, or

2.paying an $4,000 fee plus 10% of revenue made at the convention, or

3.paying 20% of revenue made at the convention.

Required:

a.Compute the breakeven sales in pillows of each option.

b.Which option should Query Company choose, assuming sales are expected to be 800 pillows?

 

83)_____________

84) Karen Hefner, a florist, operates retail stores in several shopping malls. The average selling price of an

arrangement is $30 and the average cost of each sale is $18.

A new mall is opening where Karen wants to

locate a store, but the location manager is not sure about the rent method to accept.

The mall operator

offers the following three options for its retail store rentals:

1.paying a fixed rent of $15,000 a month, or

2.paying a base rent of $9,000 plus 10% of revenue received, or

3.paying a base rent of $4,800 plus 20% of revenue received up to a maximum rent of $25,000.

Required:

a.For each option, compute the breakeven sales and the monthly rent paid at break-even.

b.Beginning at zero sales, show the sales levels at which each option is preferable up to 5,000 units.

 

84)_____________

85) ABC Grocery needs to know the kilograms of bananas to have on hand each day. Each kilogram of bananas costs $0.25 and can be sold for $0.40. Unsold bananas are worthless at the end of the day. The following demands were found after studying the last six month's sales:

200 kilograms of bananas one-fourth of the time

300 kilograms of bananas one-half of the time

400 kilograms of bananas one-fourth of the time

Required:

Determine whether ABC Grocery should order 200, 300, or 400 kilograms of bananas.

85)_____________

86) Yurus Manufacturing Company produces two products, X and Y.

The following information is presented

for both products:

XY

Selling price per unit$36$24

Variable cost per unit 2812

Total fixed costs are $234,000.

Required:

a.Calculate the contribution margin for each product.

b.Calculate breakeven point in units of both X and Y if the sales mix is 3 units of X for every unit of Y.

c.Calculate breakeven volume in total dollars if the sales mix is 2 units of X for every 3 units of Y.

 

86)_____________