Earth’s Best Company has sales of $200,000, a net income of $15,000, and the following balance sheet: Cash$ 10,000 Accounts payable$ 30,000 Receivables50,000 Other current liabilities20,000 Inventories150,000 Long-term debt 50,000 Net fixed assets 90,000 Common equity200,000 Total assets$300,000 Total liabilities and equity$300,000 The company’s new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5x, without affecting either sales or net income. If inventories are sold off and not replaced so as to reduce the current ratio to 2.5x, if the funds generated are used to reduce common equity (stock can be repurchased at book value), and if no other changes occur, by how much will the return on equity (ROE) change?
pounds in process
There were 2,000 pounds in process at the beginning of the period in the Finishing Department. The department received (direct materials) 22,000 pounds from the Blending Department during the period, and 3,000 pounds were in process at the end of the period. How many pounds were completed and transferred by the Finishing Department?
The role of metrics and measurement
A. What is the role of metrics and measurement in the strategy process? B. Why are they so important to the strategy process? C. What are the possible outcomes for a company that decides not to put metrics and measurement into its strategic plan?
Montejo Corporation expects sales to be $12 million
Montejo Corporation expects sales to be $12 million. Operating costs other than depreciation are expected to be 75 percent of sales, and depreciation is expected to be $1.5 million during the next year. All sales revenues will be collected in cash, and costs other than depreciation must be paid during The year. Montejo’s interest expense is expected to be $1 million, and it is taxed at a 40 percent rate. Set up an income statement and a cash flow statement (use two columns on one page) for Montejo. What is the expected cash flow from operations? Suppose Congress changed the tax laws so that Montejo’s depreciation expenses doubled, but no other changes occurred. What would happen to the net income and cash flow from operations expected during the year?
JOURNAL
1) On January 1, year 1, Luzak Company issued a $120,000, five year 6%, installment note to McGee Bank. The note requires annual payments of $28,488, beginning on December 31, Year 1. Journalize the entries to record the following. Year 1 January 1st. issued the note for cash at its face amount Dec. 31. Paid the annual payment on the note, which consisted of interest of $7,200 and principal of $21,288 Year 4 Dec. 31. Paid the annual payment on the note, including $3,134 of interest. The remainder of the payment reduced the principal balance on the note.
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Strategies for growing organizations
As the organization grows, does it become harder to communicate the strategy to everyone in the company? Does everyone still need to know the whole strategy, or can they get by with just knowing what their part of the company needs to achieve? There’s a common safety poster you find hanging in a lot of workplaces that says, “Safety is everyone’s responsibility.” Is the implementation of the strategy similarly everyone’s responsibility? And if so, do you exempt people from that responsibility if you don’t communicate the strategy to them?
Adam and Laura wish to open a pet grooming
Scenario:Adam and Laura wish to open a pet grooming shop called Dazzling Doggies Day Spa. Laura’s mother Beth would like to contribute the startup costs in exchange for a share of profits, but she doesn’t want to participate in the daily operations of the business. She also doesn’t want to have any personal liability in the business. Develop summary with the following information: Which business organizational form would be best given the above circumstances, and why? Unbeknownst to Laura and Beth, Adam begins to use Dazzling Doggies Day Spa’s checking account to pay all his personal bills. Are his actions ethical? Why or why not? Cite a minimum of two peer-reviewed references.
ACCOUNTING
On July 1, Year 1, Danzer Industies Inc. issued $40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of $37,282,062. Interest on the bonds is payable semiannually on Dec 31 and June 30. The fiscal year of the company is the calendar year. 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2. Journalize the entries to record the following. a. The first semiannual interest payment on Dec 31, Year 1, and the amortization of the bond discount, using the straight-line method. Round to the nearest dollar. b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight line method. Round to the nearest dollar. 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. Compare the price of $37,282,062, received for the bonds by using the present value tables. Round to the nearest dollar.
Budget Analysis and Performance Measurement in Decision Making
. Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer. 1. Loggin Midwifery’s cost formula for its wages and salaries is $2,380 per month plus $231 per birth. For the month of April, the company planned for activity of 100 births, but the actual level of activity was 102 births. The actual wages and salaries for the month was $25,510. What would the spending variance for wages and salaries in April be closest to? A. $30 F B. $432 U C. $432 F D. $30 U 2. For which cost(s) is a volume variance computed? A. Direct labor costs as well as overhead costs B. Fixed manufacturing overhead only C. Both variable and fixed manufacturing overhead D. Variable manufacturing overhead only 3. Marusarz Corporation has provided the following data concerning its most important raw material, compound F55M: When recording the purchase of materials, what would Raw Materials be? A. Credited for $74,120 B. Credited for $73,270 C. Debited for $74,120 D. Debited for $73,270 4. Krejci Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $41,430 per month plus $2,419 per flight plus $6 per passenger. The company expected its activity in March to be 84 flights and 222 passengers, but the actual activity was 81 flights and 220 passengers. The actual cost for plane operating costs in March was $239,870. What would the plane operating costs in the planning budget for March be closest to? A. $248,754 B. $245,958 C. $238,689 D. $239,870 5. Brletich Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: What was the delivery cycle time? A. 22.5 hours B. 21.1 hours C. 3.7 hours D. 9.1 hours 6. Ok Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: What was the manufacturing cycle efficiency (MCE) closest to? A. 0.12 B. 0.47 C. 0.02 D. 0.07 7. Compound B73G is used to make Vasconcellos Corporation’s major product. The standard cost of B73G is $27.60 per ounce and the standard quantity is 8.6 ounces per unit of output. In the most recent month, 3,200 ounces of the raw material were purchased at a cost of $26.70 per ounce. When recording the purchase of materials, what would Raw Materials be? A. Debited for $85,440 B. Credited for $85,440 C. Debited for $88,320 D. Credited for $88,320 8. Hoang Corporation makes three products that use compound W, the current constrained resource. Data concerning those products appear below: Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. A. RP,KI,LH B. RP,LH,KI C. LH,RP,KI D. KI,RP,LH 9. Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month. When the actual level of activity is less than budgeted, which of the following would be true? A. Fixed costs would show favorable variances. B. Fixed costs would show unfavorable variances. C. Variable costs would show unfavorable variances. D. Variable costs would show favorable variances. 10. Pettry Snow Removal’s cost formula for its vehicle operating cost is $2,170 per month plus $408 per snow day. For the month of December, the company planned for activity of 16 snow days, but the actual level of activity was 13 snow days. The actual vehicle operating cost for the month was $7,600. What would the vehicle operating cost in the planning budget for December be closest to? A. $7,474 B. $7,600 C. $8,698 D. $9,354 11. A study has been conducted to determine if one of the departments in Barry Corporation should be discontinued. The contribution margin in the department is $60,000 per year. Fixed expenses charged to the department are $75,000 per year. It is estimated that $34,000 of these fixed expenses could be eliminated if the department is discontinued. These data indicate that if the department is discontinued, what would happen to the company’s overall net operating income? A. Decrease by $26,000 per year B. Decrease by $15,000 per year C. Increase by $26,000 per year D. Increase by $15,000 per year 12. Part S00 is used in one of Morsey Corporation’s products. The company makes 6,000 units of this part each year. The company’s Accounting Department reports the following costs of producing the part at this level of activity: An outside supplier has offered to produce this part and sell it to the company for $16.10 each. If this offer is accepted, the supervisor’s salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier’s offer were accepted, only $6,000 of these allocated general overhead costs would be avoided. If management decides to buy part S00 from the outside supplier rather than to continue making the part, what would be the annual impact on the company’s overall net operating income? A. Net operating income would decrease by $65,400 per year. B. Net operating income would decrease by $3,000 per year. C. Net operating income would decrease by $77,400 per year. D. Net operating income would decrease by $71,400 per year. 13. The following standards for variable manufacturing overhead have been established for a company that makes only one product: The following data pertain to operations for the last month: What is the variable overhead efficiency variance for the month? A. $16,817 U B. $17,085 U C. $17,397 U D. $312 F 14. Towne Snow Removal’s cost formula for its vehicle operating cost is $1,470 per month plus $399 per snow day. For the month of November, the company planned for activity of 13 snow days, but the actual level of activity was 9 snow days. The actual vehicle operating cost for the month was $5,230. What would the vehicle operating cost in the flexible budget for November be closest to? A. $5,061 B. $5,230 C. $4,609 D. $6,657 15. Product Q77H has been considered a drag on profits at Zenke Corporation for some time and management is considering discontinuing the product altogether. Data from the company’s accounting system appear below: In the company’s accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $71,000 of the fixed manufacturing expenses and $43,000 of the fixed selling and administrative expenses are avoidable if product Q77H is discontinued. What would be the effect on the company’s overall net operating income if product Q77H were dropped? A. Overall net operating income would decrease by $95,000. B. Overall net operating income would increase by $95,000. C. Overall net operating income would increase by $4,000. D. Overall net operating income would decrease by $4,000. 16. Wexell Framing’s cost formula for its supplies cost is $1,230 per month plus $10 per frame. For the month of October, the company planned for activity of 592 frames, but the actual level of activity was 597 frames. The actual supplies cost for the month was $7,050. What would the activity variance for supplies cost in October be closest to? A. $50 U B. $50 F C. $100 F D. $100 U 17. Fahringer Corporation makes three products that use compound W, the current constrained resource. Data concerning those products appear below: Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. A. QR,XS,BJ B. XS,BJ,QR C. BJ,QR,XS D. QR,BJ,XS 18. Cybil Baunt just inherited a 1958 Chevy Impala from her late Aunt Joop. Aunt Joop purchased the car 40 years ago for $6,000. Cybil is either going to sell the car for
$8,000 or have it restored and sell it for $22,000. The restoration will cost $6,000. Cybil would be better off spending A. $10,000 to have the vehicle restored. B. $8,000 to have the vehicle restored. C. $2,000 to have the vehicle restored. D. $6,000 to have the vehicle restored. 19. Hairr Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $9.50 per machine-hour and fixed manufacturing overhead cost of $947,672 per period. If the denominator level of activity is 8,900 machine-hours, what would the predetermined overhead rate be? A. $950.00 B. $115.98 C. $9.50 D. $106.48 20. Diseth Corporation applies manufacturing overhead to products on the basis of standard machinehours. The company bases its predetermined overhead rate on 5,300 machine-hours. The company’s total budgeted fixed manufacturing overhead is $12,720. In the most recent month, the total actual fixed manufacturing overhead was $12,370. The company actually worked 5,350 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 5,540 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? A. $576 Favorable B. $120 Unfavorable C. $350 Favorable D. $120 Favorable End of exam
The following transactions were completed by Winklevoss Inc
The following transactions were completed by Winklevoss Inc, whose fiscal year is the calendar year; Year 1 July 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, Year 1, at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on Dec 31 and June 30. Oct 1. Barrowed $200,000 by issuing a six-year, 6% installment note to Nicks Bank. The note requires annual payments of $40,673 with the first payment occurring on Sept 30, Year 2. Dec 31. Accrued $3,000 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannually interest payment. Year 2 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $261.693 is combined with the semiannual interest payment. Sept 30. Paid the annual payment on the note, which consisted of interest of $12,000 and principal of $28,673 Dec 31. Accrued $2,570 of interest on the installment note. The interest is payable on the date of the nest installment note payment. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Year 3 June 30. Recorded the redemption of the bond, which were called at 98. The balance in the bond discount account is $9,420,961 after payment of interest and amortization of discount have been recorded. Record the redemption only. Sept 30. Paid the second annually payment on the note, which consisted of interest of $10,280 and principal of $30,393. 1. Journalize the entries to record the foregoing transactions. Round all amounts to the nearest dollar. 2. Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2. 3. Determine the carrying amount of the bonds as of Dec 31, Year 2.