Question 1
In preparation for the quarterly cash budget, the following revenue and cost information have been compiled. You are required to prepare and evaluate a cash budget for the months of October, November, and December based on the information shown below: Month Sales Purchases August (actual) $3,000,000 $3,500,000 September (actual) $4,500,000 $2,000,000 October (forecast) $1,000,000 $ 500,000 November (forecast) $1,500,000 $ 750,000 December (forecast) $2,000,000 $1,000,000 ?1? The firm collects 60 percent of sales for cash and 40 percent of its sales one month later. ?2? Interest income of $50,000 on marketable securities will be received in December. ?3? The firm pays cash for 40 percent of its purchases. ?4? The firm pays for 60 percent of its purchases the following month. ?5? Salaries and wages amount to 15 percent of the preceding month?s sales. ?6?Sales commissions amount to 2 percent of the preceding month?s sales. ?7? Lease payments of $100,000 must be made each month. ?8? A principal and interest payment on an outstanding loan is due in December of $150,000. ?9? The firm pays dividends of $50,000 at the end of the quarter. ?10? Fixed assets costing $600,000 will be purchased in December. ?11?Depreciation expense each month of $45,000. ?12?The firm has a beginning cash balance in October of $100,000 and maintains a minimum cash balance of $200,000.
Question 2
Week 2 Individual Chapter 8 - p. 399 ?3. What are the essential features of the allowance method of accounting for bad debts? ?4. Lauren Anderson cannot understand why the cash realizable value does not decrease when an uncollectible account is written off under the allowance method. Clarify this point for Lauren. EXERCISE 8-5 ? p. 401 Determine bad debt expense, and prepare the adjusting entry. (3) Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts. ? Balance, March 31 Month of Sale 2007 2006 March $65,000 $75,000 February 12,600 8,000 December and January 10,100 2,400 November and October 7,400 1,100 ? $95,100 $86,500 Credit terms are 2/10, n/30. At March 31, 2007, there is a $2,200 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company's estimates of bad debts are as shown on page 402. 1. Age of Accounts Estimated Percentage Uncollectible Current 2% 1?30 days past due 7 31?90 days past due 30 Over 90 days 50 2. Instructions a) Determine the total estimated uncollectibles. b) Prepare the adjusting entry at March 31, 2007, to record bad debts expense. c) Discuss the implications of the changes in the aging schedule from 2006 to 2007. EXERCISE 9.9 ? p. 401 The Write-Down of Impaired Assets LO4 LO7 For several years, a number of Food Lion, Inc., grocery stores were unprofitable. The company closed, and continues to close, some of these locations. It is apparent that the company will not be able to recover the cost of the assets associated with the closed stores. Thus, the current value of these impaired assets must be written down (see the Case in Point on page 381). A recent Food Lion income statement reports a $9.5 million charge against income pertaining to the write-down of impaired assets. Explain why Food Lion must write down the current carrying value of its unprofitable stores. Explain why the recent $9.5 million charge to write down these impaired assets is considered a noncash expense.
Question 3
please can someone help me???? "Birminham Contractors uses a job order costing system. In May 2010, the company made $3,300,000 bid to build a pedestrian overpass over the beach highway at Gulf Shores, Alabama. Birminham Contractors won the bid and assigned #515 to the project. Its completion date was set at December 15, 2010. The following costs were estimated for completion of the overpass: $1,240,000 for direct material, $670,000 for direct labor and $402,000 for overhead. During July, work began on job #515; direct material cost assigned to job #515 was $121,800, and direct labor cost associated with it was $175,040. The firm uses a pre-determined OH rate of 60% of direct labor cost. Birminham Contractors also worked on several other jobs during July and incurred the following costs: Direct Materials (including job #515) issued $579,300 Direct Labor (including job #515) accrued $84,000 Indirect Labor $55,800 Administrative salaries and wages accrued $39,600 Depreciation on construction equipment $26,400 Depreciation on office equipment $7,800 Client entertainment (on accounts payable) $11,100 Advertising for firm (paid in cash) $6,600 Indirect Material (from supplies inventory) $ 18,600 Misc. expenses (design-related; to be paid in the following month) $10,200 Accrued Utilities (for office, $1,800; for construction, $5,400) $7,200 During July, Birminham Contractors completed several jobs that had been in process before the beginning of the month. These completed jobs sold for $1,224,000 and payment will be made to the company in August. The related job cost sheets showed costs associated with those jobs of $829,000. At the beginning of July, Birminham Contractors had Work in Process Inventory $871,800."
Question 4
1. (TCO 1) Which financial statement is prepared first? (Points : 4) Balance sheet Income statement Retained earnings statement Statement of cash flows 2. (TCO 1) Management?s views on the company?s short-term debt paying ability, expansion financing, and results of operations are found in which of the following? (Points : 4) auditor?s report management discussion and analysis section notes to the financial statements president?s state of the company report 3. (TCO 4) Using the following balance sheet and income statement data, what is the earnings per share? Current assets $ 7,000 Net income $ 12,000 Current liabilities 4,000 Stockholders? equity 27,000 Average assets 40,000 Total liabilities 9,000 Total assets 30,000 Average common shares outstanding was 10,000 (Points : 4) $3.60 $4.00 $1.20 $0.83 4. (TCO 4) Which of the following is not considered a measure of liquidity? (Points : 4) Current ratio Working capital Debt to total assets ratio Each of the above are liquidity measures 5. (TCO 2) Which pair of accounts follows the rules of debit and credit, in relation to increases and decreases, in the same manner? (Points : 4) Accounts Payable and Rent Expense Repair Expense and Notes Payable Prepaid Insurance and Advertising Expense Service Revenues and Equipment 6. (TCO 2) Which of the following is not part of the recording process? (Points : 4) Analyzing transactions Preparing a trial balance Entering transactions in a journal Posting journal entries 7. (TCO 3) An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of _______________________ . (Points : 4) establishment of responsibility is violated independent internal verification is violated documentation procedures is violated segregation of duties is violated 8. (TCO 3) The following information was taken from Mitchell Company cash budget for the month of July: Beginning cash balance $50,000 Cash receipts 48,000 Cash disbursements 68,000 If the company has a policy of maintaining end of the month cash balance of $50,000, the amount the company would have to borrow is which of the following? (Points : 4) $20,000 $10,000 $30,000 $12,000 9. (TCO 11) The major reporting standard for presenting managerial accounting information is which of the following? (Points : 4) relevance generally accepted accounting principles the cost principle the current tax law 10. (TCO 11) A manufacturing process requires small amounts of glue. The glue used in the production process is classified as which of the following? (Points : 4) period cost indirect material direct material miscellaneous expense 11. (TCO 11) Sales commissions are classified as which of the following? (Points : 4) overhead costs period costs product costs indirect labor 12. (TCO 11) Manufacturing costs include which of the following? (Points : 4) direct materials and direct labor only direct materials and manufacturing overhead only direct labor and manufacturing overhead only direct materials, direct labor, and manufacturing overhead 13. (TCO 11) Hardigan Manufacturing Company reported the following year-end information: beginning work in process inventory, $80,000 cost of goods manufactured, $980,000 beginning finished goods inventory, $50,000 ending work in process inventory, $70,000 and ending finished goods inventory, $40,000 How much is Hardigan?s cost of goods sold for the year? (Points : 4) $980,000 $990,000 $970,000 $1,000,000 14. (TCO 5) Which statement below describes a variable cost? (Points : 4) It varies in total with changes in the level of activity. It remains constant in total over different levels of activity. It varies inversely in total with changes in the level of activity. It varies proportionately per unit with changes in the level of activity. 15. (TCO 5) Which of the following is an underlying assumption of CVP analysis? (Points : 4) Factors other than changes in activity may affect costs. Cost classifications are reasonably accurate. Increases in inventories cause increase in total fixed costs. Unit costs remain the same over the relevant range. 1. (TCO 5) A company has total fixed costs of $210,000 and a contribution margin ratio of 30%. How much sales are necessary to break even? (Points : 4) $125,000 $630,000 $700,000 $54,000 2. (TCO 5) How much sales are required to earn a target income of $80,000, if total fixed costs are $100,000 and the contribution margin ratio is 40%? (Points : 4) $300,000 $200,000 $450,000 $330,000 3. (TCO 6) Which one of the following is correct concerning a budget? (Points : 4) It can act as a substitute for management. It is a written statement of management?s plans for a specified future time period. It is required for all business operations. It is used only by manufacturing companies. 4. (TCO 6) Which one of the following is one of the factors that must be present, if budgets are to be effective? (Points : 4) All upper level managers should verify the validity of the amounts in the budget. Research and analysis should occur in order to set realistic goals. The company must have the stockholders? approval of the budget. The budget committee must prepare the budget. 5. (TCO 6) Long-range planning does which of the following? (Points : 4) generally presents more detailed information than an annual budget generally encompasses a longer period of time than an annual budget is usually more accurate than an annual budget is prepared on a quarterly basis if the budget is prepared on a quarterly basis 6. (TCO 6) Which one of the following is a source of information used to prepare the budgeted income statement? (Points : 4) Cash budget Budgeted balance sheet Selling and administrative expense budget Capital expenditure budget 7. (TCO 7) Which statement is true concerning a static budget report? (Points : 4) It considers performance at numerous activity levels. It is appropriate in evaluating a manager?s effectiveness in controlling fixed costs. It should be used when the actual level of activity is materially different from the master budget activity level. It is most effective when evaluating a manager?s effectiveness in controlling variable costs. 8. (TCO 7) Which type of center is the housekeeping department of a manufacturing company? (Points : 4) A segment A profit center A cost center An investment center 9. (TCO 7) The best measure of the performance of the manager of a profit center is which of the following? (Points : 4) rate of return on investment success in meeting budgeted goals for controllable costs amount of controllable margin generated by the profit center amount of contribution margin generated by the profit center 10. (TCO 7) Merck Pharmaceuticals is evaluating its Vioxx division, an investment center. The division has a $45,000 controllable margin and $300,000 of sales. How much will Merck?s average operating assets be when its return on investment is 10%? (Points : 4) $450,000 $495,000 $300,000 $255,000 11. (TCO 11) Financial and managerial accounting are both concerned with the economic events of an enterprise. Similarities between financial and managerial accounting do exist, but they have a different focus. Briefly distinguish between financial and managerial accounting as they relate to (1) the primary users, (2) the type and frequency of reports, (3) the purpose of reports, and (4) the content of reports. (Points : 20)
Question 5
Please look at attached document 10-8 Edelman Engineering is considering including two pieces of equipment, a truck and an ovefrhead pulley system, in this year?s capital budget. The projects are independent. The cash outlay for the truck is $17,100 and that for the pulley system is $22,430. The firm?s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley 1 5,100 7,500 2 5,100 7,500 3 5,100 7,500 4 5,100 7,500 5 5,100 7,500 Calculate the IRR, the NPV and the MIRR for each project, and indicate the correct accept/reject decision for each. 10-9 David Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Since both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost $22,000 and the gas-powered truck will cost $17,500. The cost of capital for both is 12%. The life for both is 6 years. The cash flows for the electric powered truck is $6,290 per year and those for the gas-powered truck will be $5,000 per year. Calculate NPV, IRR and decide which to recommend. 11-2 Cairn Communications is trying to estimate the first-year operating cash flow (at t=1) for a proposed project. The financial staff has collected the following information: Projected sales $10 million Operating costs (not including depreciation) $ 7 million Depreciation $ 2 million Interest expense $ 2 million The company faces a 40% tax rate. What is the project?s operating cash flow for the first year (t=1)? 11-3 Allen Air Lines is now in the terminal year of a project. The equipment originally cost $20 million, of which 80% has been depreciated. Carter can sell the used equipment today to another airline for $5 million, and its tax rate is 40%. What is the equipment?s after-tax net salvage value? ********************************************************************************** New-Project Analysis You have been asked by the president of your company to evaluate the proposed acquisition of a new spectrometer for the firm?s R&D department. The equipment?s basic price is $70,000, and it would cost another $15,000 to modify it for special use by your firm. The spectrometer, which falls into the MACRS 3-year class, would be sold after 3 years for $30,000. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000. The spectrometer would have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor. The firm?s marginal federal-plus-state tax rate is 40%. ? a. What is the net cost of the spectrometer? (That is, what is the Year-0 net cash flow?) ? b. What are the net operating cash flows in Years 1, 2, and 3? ? c. What is the additional (nonoperating) cash flow in Year 3? ? d. If the project?s cost of capital is 10%, should the spectrometer be purchased? TIPS and breakdown for above In part a, you will determine the net cost of the spectrometer by recognizing the price, modification costs and change in net working capital. 2. In part b, you will calculate the net cash flow for each year. This will essentially be the sum of the after tax savings plus the depreciation shield. To get the after tax savings, multiple the before-tax savings by 1-T. The depreciation shield is the annual depreciation expense multipled by the tax rate. The depreciation expense in each year is the depreciable basis times the MACRS allowance percentage of 0.33, 0.45, and 0.15 for Years 1, 2 and 3, respectively. 3. In part c, you will calculate the end of project cash flow as the sum of the salvage value minus the tax on the salvage value plus the return of net working capital. The tricky part is calculating the tax on the salvage value, which is the (salvage value minus the remaining book value) multiplied by the tax rate. How about a check figure for the remaining Year 4 book value? The remaining BV in Year 4 = $85,000(0.07) = $5,950. 4. In part d, you will calculate the NPV for the project. Part B: Make sure to use the depreciable base of $85,000 instead of $55,000. Part C: In determining the tax on salvage value, make sure that you first subtract the remaining book value in Year 4. Part D: When calculating NPV in Excel, use Excel to calculate the present value of the cash inflows. You will then need to subtract the cost manually from this total. In addition, make sure that the salvage value is incorporated into the Year 4 cash flow.
