PROBLEMS – READ CAREFULLY AND ANSWER WHAT IS BEING ASKED FOR SHOW YOUR WORK 1. T

Question

PROBLEMS – READ CAREFULLY AND ANSWER WHAT IS BEING ASKED FOR SHOW YOUR WORK

1. The Golden Broom Cleaning Service acquired new equipment: Cost $118,400 Residual 12,800 Estimated useful life 8 years or 40,000 units Required: a. Determine the book value of the asset at the end of the THIRD year if the straight-line depreciation method is used. b. Determine the depreciation expense for the SECOND year assuming double-declining balance method is used. c. What would be the depreciation expense for the FIRST year if the units-of-production method is used and 6,000 units were produced?

2. Grinder Enterprises purchased machinery on January 1, 2013, at a cost of $270,000. The machinery has an estimated useful life of eight years and $6,000 residual value. Grinder’s income, excluding depreciation and income taxes, for 2013 was $750,000. If Grinder has a 40% income tax rate, determine the amount of income tax expense and net income it will report, using the Required: a. straight-line method b. double declining balance method

3. Selected information for two companies is presented below: Pure Cane Sugar Ortho-Dental Co. Sales $6,000,000 $6,000,000 Total Expenses 3,500,000 3,500,000 Fixed costs 1,550,000 2,700,000 Variable costs 1,950,000 800,000 Required: a. Calculate net income for each company. b. Suppose sales decreased by 15%. Which company will report the highest net income? Why? c. Suppose sales increased by 15%. Which company will report the highest net income? Why?

4. Santiago Company reported the following items in its financial statements: 2013 2014 Sales $ 937,500 $1,125,000 Net income 75,000 135,000 Total assets 3,750,000 4,500,000 Required: Compute asset turnover, profit margin, and return on assets for each year.

5. Information is provided below for two companies for 2013 Corelle Padron Total assets $160,000 $300,000 Sales 140,000 540,000 Fixed costs 70,000 378,000 Other expenses* 42,000 108,000 Net income $28,000 $54,000 * Vary in proportion to sales Required: a. Compute profit margin, asset turnover, and return on assets. b. Compute profit margin, asset turnover, and return on assets for both firms if sales increased by 10%. c. Compute profit margin, asset turnover, and return on assets for both firms if sales decreased by 10%. 1.

6. Flextronics Corporation sold merchandise with a sales price of $20 million during 2013. Flextronics allowed its customers $4 million of quantity discounts. Flextronics expects a return rate of 6% of the amount billed, which is net of the discount. How much revenue (after discounts) should Flextronics report for 2013?

7. The following inventory information is available for Donaldson Company: Units Unit cost Total cost Beginning inventory 400 $56 $22,400 Jan. 14 purchase 1,000 66 66,000 Jan. 25 purchase 1,000 70 70,000 Ending inventory 600 Required: Fill in the table below (assume periodic inventory method). FIFO $ LIFO $ Weighted average $ Ending inventory Cost of goods sold

8. Seaside Ventures began 2013 with $150,000 of raw material inventory, $430,000 of work-in-process inventory, and $128,000 of finished goods inventory. During the year, Seaside purchased $700,000 of raw material and used $780,000 in production. Labor used in production during the year was $840,000. Overhead was $1,120,000. Cost of goods completed was $3,120,000 and cost of goods sold was $3,040,000. Required:

Prepare a schedule to determine ending balances for raw material, work-in-process, and finished goods inventories.

Explanation / Answer

1. Particulars Amount (in $) Cost of Equipment 118400.00 Less: Residual Value 12800.00 Depreciable Cost 105600.00 Annual Depreciation 13200.00 a) Book Value of the asset at the end of the 3rd year if the straight-line depreciation method Cost of Equipment 118400 Less: Depreciation for 3 years 39600 Book Value of Equipment at end of 3rd year 78800 b) Depreciation expense for the 2nd year assuming double-declining balance method is used Depreciation rate using straight line method 0.125 Depreciation rate using double-declining balance method 0.25 Cost of Equipment 118400 Less: Depreciation for year 1 29600 Book Value of Equipment at end of 1st year 88800 Less: Depreciation for year 2 22200 Depreciation expense for the 2nd year assuming double-declining balance method is used is $22,200.00 c) Depreciation expense for the 1st year if the units-of-production method is used Cost of Equipment 118400 Less: Depreciation for 1 years is 6000*(118400-12800)/40000 15840 Book Value of Equipment at end of 1st year 102560 2. Particulars Amount (in $) Amount (in $) Straight-line method Double declining balance method Income before depreciation and taxes 750000 750000 Less: Depreciation 33000 67500 Income before tax 717000 682500 Less: Tax 286800 273000 Net Income 430200 409500 3.a Particulars Amount (in $) Amount (in $) Pure Cane Sugar Ortho-Dental Co. Sales 6000000 6000000 Less: Variable Cost 1950000 800000 Less: Fixed Cost 1550000 2700000 Total Expenses 3500000 3500000 Net Income 2500000 2500000 3.b Sales decreased by 15% Particulars Amount (in $) Amount (in $) Pure Cane Sugar Ortho-Dental Co. Sales 5100000 5100000 Less: Variable Cost 1657500 680000 Less: Fixed Cost 1550000 2700000 Total Expenses 3207500 3380000 Net Income 1892500 1720000 Pure Cane Sugar Co has a higher net income since it has a higher percentage of variable cost that varies directly with sales. 3.c Sales increased by 15% Particulars Amount (in $) Amount (in $) Pure Cane Sugar Ortho-Dental Co. Sales 6900000 6900000 Less: Variable Cost 2242500 920000 Less: Fixed Cost 1550000 2700000 Total Expenses 3792500 3620000 Net Income 3107500 3280000 Ortho-Dental Co has a higher net income since it has a lower percentage of variable cost that varies directly with sales. 4. Particulars Amount (in $) Amount (in $) 2013 2014 Sales 937500 1125000 Net income 75000 135000 Total Assets 3750000 4500000 Asset Turnover 0.25 0.25 Profit Margin 8.00 12.00 Return on Assets 2.00 3.00 5.a. Particulars Amount (in $) Amount (in $) Corelle Padron Sales 140000 540000 Less: Variable Cost 42000 108000 Less: Fixed Cost 70000 378000 Total Expenses 112000 486000 Net Income 28000 54000 Total Assets 160000 300000 Asset Turnover 0.88 1.80 Profit Margin 20.00 10.00 Return on Assets 17.50 18.00 5.b. Particulars (sales increased by 10%) Amount (in $) Amount (in $) Corelle Padron Sales 154000 594000 Less: Variable Cost 46200 118800 Less: Fixed Cost 70000 378000 Total Expenses 116200 496800 Net Income 37800 97200 Total Assets 160000 300000 Asset Turnover 0.96 1.98 Profit Margin 24.55 16.36 Return on Assets 23.63 32.40 5.c. Particulars (sales decreased by 10%) Amount (in $) Amount (in $) Corelle Padron Sales 126000 486000 Less: Variable Cost 37800 97200 Less: Fixed Cost 70000 378000 Total Expenses 107800 475200 Net Income 18200 10800 Total Assets 160000 300000 Asset Turnover 0.79 1.62 Profit Margin 14.44 2.22 Return on Assets 11.38 3.60 6. Particulars Amount (in $) Sales Price 20000000.00 Quantity Discounts 4000000.00 Net Sales Price 16000000.00 Returns Expected 6% 960000 7. FIFO Amount (in $) Amount (in $) Amount (in $) Amount (in $) Amount (in $) Opening Stock Purchase Sale Closing Stock Total Jan.01 Beginning Inventory (400*$56) 22400 0 0 22400 22400 Jan.14 Purchase (1000*$66) 22400 66000 0 88400 88400 Jan.25 Purchase (1000*$70) 88400 70000 0 158400 158400 Sale (400*$56+1000*$66+400*$70) 158400 0 116400 42000 42000 Ending Inventory (600*$70) 42000 0 0 42000 42000 7. LIFO Amount (in $) Amount (in $) Amount (in $) Amount (in $) Amount (in $) Opening Stock Purchase Sale Closing Stock Total Jan.01 Beginning Inventory (400*$56) 22400 0 0 22400 22400 Jan.14 Purchase (1000*$66) 22400 66000 0 88400 88400 Jan.25 Purchase (1000*$70) 88400 70000 0 158400 158400 Sale (1000*$70+800*$66) 158400 0 122800 35600 35600 Ending Inventory (200*66+400*$56) 35600 0 0 35600 35600 7. Weighted Average Method Amount (in $) Amount (in $) Amount (in $) Amount (in $) Amount (in $) Amount (in $) Opening Stock Purchase Sale Closing Stock Total Average Jan.01 Beginning Inventory (400*$56) 22400 0 0 22400 22400 56.00 Jan.14 Purchase (1000*$66) 22400 66000 0 88400 88400 63.14 Jan.25 Purchase (1000*$70) 88400 70000 0 158400 158400 66.00 Sale (1800*$66) 158400 0 118800 39600 39600 66.00 Ending Inventory (600*$66) 39600 0 0 39600 39600 66.00 Particulars FIFO LIFO Weighted Average Method Amount (in $) Amount (in $) Amount (in $) Ending inventory 42000 35600 39600 Cost of goods sold 116400 122800 118800 8. Particulars Amount (in $) Opening Stock of raw materials 150000 Add: Purchase of raw materials 700000 Less: Closing Stock of raw materials 70000 Raw material consumption 780000 Add: Direct Labour 840000 Prime Cost 1620000 Add: Overhead 1120000 2740000 Add: Opening Stock of work in progress 430000 Less: Closing Stock of work in progress 50000 Factory Cost 3120000 Administration Overheads 0 Cost of goods completed 3120000 Add: Opening Stock of Finished Goods 128000 Less: Closing Stock of Finished Goods 208000 Cost of goods sold 3040000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.