Accounting Principles 10ThursdayEdition for International Students.
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School Name
E5-1Mr. Lucas has prepared the undermentioned list of statements about service companies and
Merchants.
- Measuring net income for a merchant is conceptually the same as for a service company.
Solution: True
- For a merchant, gross revenues less operating disbursals is called gross net income.
Solution: False
Gross Profit = Gross saless Revenue- Cost of goods sold
- For a merchant, the primary beginning of grosss is the sale of stock list.
Solution: True
- Gross saless wages and rewards is an illustration of an operating disbursal.
Solution: True
- The operating rhythm of a merchant is the same as that of a service company.
Solution: False
The added plus history for a ware Company is the Inventory Account.
6.In a ageless stock list system, no elaborate stock list records of goods on manus are
maintained.
Solution: False
In a ageless stock list system a elaborate record for the stock list in manus is maintained.
7.In a periodic stock list system, the cost of goods sold is determined merely at the terminal of the
accounting period.
Solution: True
8.A periodic stock list system provides better control over stock lists than a ageless system.
Solution: False
Since a ageless stock list system has a elaborate record of the stock list in manus, one can look into that the sum of goods agrees with the stock list record and any discrepancy in records can be investigated instantly.
E5-2Information related to Almond Co. is presented below.
1. On April 5, purchased ware from Morris Company for $ 23,000, footings 2/10, net/30,
FOB transportation point.
Instruction manuals
( a ) Prepare the diary entries to enter these minutess on the books of Almond Co. under
a ageless stock list system.
Solution:
Dr Merchandise Inventory 23,000
Cr Accounts Collectible 23,000
2. On April 6, paid cargo costs of $ 900 on ware purchased from Morris.
Dr Merchandise Inventory 900
Cr Cash 900
3. On April 7, purchased equipment on history for $ 26,000.
Dr Equipment 26,000
Cr Accounts Collectible 26,000
4. On April 8, returned damaged ware to Morris Company and was granted a $ 3,000
recognition for returned ware.
Dr Accounts Collectible 3000
Cr Merchandise Inventory 3000
- On April 15, paid the sum due to Morris Company in full.
Dr Accounts Collectible 20,000 ( 23000-3000 )
Cr Cash 19,600
Cr Merchandise Inventory 400 ( 2 % of 20,000 )
( B ) Assume that Almond Co. paid the balance due to Morris Company on May 4 alternatively of
April 15. Fix the journal entry to enter this payment.
Dr Accounts Collectible 20,000
Cr Cash 20,000
E5-13Presented below is fiscal information for two different companies.
|
Dae Company |
Kim Company |
|
|
$ |
$ |
|
|
Gross saless gross |
90,000 |
( vitamin D ) |
|
Gross saless returns |
( a ) |
5,000 |
|
Net gross revenues |
87,000 |
102,000 |
|
Cost of goods sold |
56,000 |
( vitamin E ) |
|
Gross net income |
( B ) |
41,500 |
|
Operating disbursals |
15,000 |
( degree Fahrenheit ) |
|
Net income |
( degree Celsius ) |
15,000 |
Instruction manuals
( a ) Determine the missing sums.
( B ) Determine the gross net income rates. ( Round to one denary topographic point. )
a )
Solution
a ) Gross saless Return =Sales Revenue – Net Gross saless
=90,000-87000
=3,000
B ) Gross net income =Net Gross saless – Cost of goods sold
=87,000-56000
=31,000
degree Celsiuss ) Net Income =Gross profit-Operating Expenses
=31,000-15,000
= 16,000
vitamin D ) Gross saless Revenue =Sales Returns + Net Gross saless
=102,000+5000
=107,000
vitamin E ) Cost of goods sold = Net Gross saless –Gross Net income
=102,000-41,500
=60,500
degree Fahrenheit ) Operating Expenses = Gross Profit – Net Income
= 41,500 – 15,000
= 26,500
Final Table would look like this:
|
Dae Company |
Kim Company |
|
|
$ |
$ |
|
|
Gross saless gross |
90,000 |
107,000 |
|
Gross saless returns |
3,000 |
5,000 |
|
Net gross revenues |
87,000 |
102,000 |
|
Cost of goods sold |
56,000 |
60,500 |
|
Gross net income |
31,000 |
41,500 |
|
Operating disbursals |
15,000 |
26,500 |
|
Net income |
16,000 |
15,000 |
( B ) Determine the gross net income rates. ( Round to one denary topographic point. )
Net income rates= Gross Profit/Net Gross saless
Dae company net income rates
Gross net income ?Net gross revenues = 31,000 ?87,000=35.6 %
Kim company net income rates
Gross net income ?Net gross revenues =41,500 ? 102,000=40.7 %
E18-8Selected comparative statement informations for Navin Products Company are presented on the
following page. All balance sheet informations are as of December 31.
2013 2012
Net gross revenues $ 760,000 $ 720,000
Cost of goods sold 480,000 440,000
Interest disbursal 7,000 5,000
Net income 50,000 42,000
Histories receivable 120,000 100,000
Inventory 85,000 75,000
Entire assets 580,000 500,000
Entire common stockholders’ equity 430,000 325,000
Instruction manuals
Calculate the undermentioned ratios for 2013.
( a ) Net income border.
( B ) Asset turnover.
( degree Celsius ) Return on assets.
( vitamin D ) Tax return on common stockholders’ equity.
Solution ;
( a ) Net income border = Net income/Net gross revenues = $ 50,000/ $ 760,000 = 6.58 % ( B ) Asset turnover = Net sales/Average entire assets = $ 760,000/540,000 = 1.41 times ( degree Celsius ) Return on assets = EBIT/Average entire assets = $ 57,000/540,000 = 10.56 % ( vitamin D ) Tax return on common stockholders’ equity = Net income/Average shareholders ‘ equity
= $ 50,000/377,500 = 13.25 %
Notes: Average Entire Assets= ( Total Assets 2013 + Total Assets 2012 ) /2
= ( 580,000+500,000 ) /2
= 540,000
Notes: Average shareholders ‘ equity = ( Entire common stockholders’ equity 2013 +
Entire common stockholders’ equity2012 ) /2
= ( 430,000+325,000 ) /2
= 377,500
E18-9The income statement for Mary Hatch, Inc. , appears below.
MARY HATCH, INC.
Income Statement
For the Year Ended December 31, 2012
Net gross revenues $ 400,000
Cost of goods sold 230,000
Gross net income 170,000
Expenses ( including $ 16,000 involvement and $ 24,000 income revenue enhancements ) 105,000
Net income $ 65,000
Extra information:
1.The weighted-average common portions outstanding in 2012 were 30,000 portions.
2.The market monetary value of Mary Hatch, Inc. stock was $ 13 in 2012.
3.Cash dividends of $ 26,000 were paid, $ 5,000 of which were to preferable shareholders.
Instruction manuals
Calculate the undermentioned ratios for 2012.
( a )Net incomes per portion.
( B )Price-earnings.
( degree Celsius )Payout.
( vitamin D )Timess involvement earned
Solutions:
a ) EPS = ( 65,000-5,000 ) /30,000 = $ 2.00.
( B ) Price Earnings =13/2= 6.5 times.
( degree Celsius ) Payout = 26,000/65,000= 40 % .
( vitamin D ) Times involvement earned = ( 65,000+16,000+24,000 ) /16,000
=105,000/16,000
=6.6 times.
E22-11In 2012, Paterno Company had a break-even point of $ 350,000 based on a merchandising monetary value
of $ 7 per unit and fixed costs of $ 105,000. In 2013, the merchandising monetary value and the variable cost per unit did non alteration, but the break-even point increased to $ 420,000.
Instruction manuals
( a ) Compute the variable cost per unit and the part border ratio for 2012.
( B ) Compute the addition in fixed costs for 2013.
Solutions
- Contribution border ratio = Unit part border ? Selling Price per Unit
To deduce this we need to cipher Unit Contribution Margin
Unit part border = Fixed costs ? Number of sale units to accomplish breakeven
= $ 105,000 ? ( $ 350,000 ? $ 7 )
= $ 2.10
Variable cost per unit = merchandising monetary value per Unit –contribution margin per unit
= $ 7.00 – $ 2.10
= $ 4.90
Therefore
Contribution border ratio = $ 2.10 ? $ 7.00 = 30 %
( B ) Break-even gross revenues ( $ ) = Fixed costs ? Contribution border ratio
Fixed costs = $ 420,000 ? 3= $ 126,000
Since fixed costs were $ 105,000 in 2011, the addition in 2012 is
= ( $ 126,000 – $ 105,000 ) .
= $ 21,000
E23-9Duke Company combines its operating disbursals for budget intents in a merchandising and
administrative disbursal budget. For the first 6 months of 2012, the undermentioned informations are available.
1. Gross saless: 20,000 units one-fourth 1 ; 22,000 units one-fourth 2.
2. Variable costs per dollar of gross revenues: Gross saless committees 5 % , bringing disbursal 2 % , and
publicizing 3 % .
3. Fixed costs per one-fourth: Gross saless salaries $ 10,000, office wages $ 6,000, depreciation $ 4,200,
insurance $ 1,500, public-service corporations $ 800, and repairs expense $ 600.
4. Unit of measurement selling monetary value: $ 20.
Instruction manuals
Fix a merchandising and administrative disbursal budget by quarters for the first 6 months of 2012.
Solution:
|
Half Year Selling AND ADMINISTRATIVE BUDGET |
||
|
FOR JAN 2012 TO JUNE 2012 |
||
|
One-fourth |
||
|
1 |
2 |
|
|
Budgeted Sale Unit of measurements |
20,000 |
22,000 |
|
Selling Price/Unit |
20 |
20 |
|
Variable Expenses |
||
|
Gross saless Commission |
20,000 |
22,000 |
|
Delivery Expense |
8,000 |
8,800 |
|
Ad |
12,000 |
13,200 |
|
Entire Variable Expenses |
40,000 |
44,000 |
|
Fixed Expenses |
||
|
Gross saless Wages |
10,000 |
10,000 |
|
Office Wages |
6000 |
6000 |
|
Depreciation |
4200 |
4200 |
|
Insurance |
1500 |
1500 |
|
Utilities |
800 |
800 |
|
Repairs |
600 |
600 |
|
Entire Fixed Expenses |
23,100 |
23,100 |
|
Entire Selling and Administrative Expense |
63,100 |
67,100 |
P22-2AHytek Company bottles and distributes Livit, a diet soft drink. The drink is sold for
50 cents per 16-ounce bottle to retail merchants, who charge clients 75 cents per bottle. For the twelvemonth
2012, direction estimates the undermentioned grosss and costs.
Net gross revenues $ 1,800,000 Selling expenses—variable $ 70,000
Direct stuffs 430,000 Selling expenses—fixed 65,000
Direct labour 352,000 Administrative disbursal
Manufacturing overhead variable 20,000
Variable 316,000 Administrative disbursals fixed 60,000
Manufacturing operating expense
Fixed 283,000
Instruction manuals
( a ) Fix a CVP income statement for 2012 based on management’s estimations.
( B ) Compute the break-even point in ( 1 ) units and ( 2 ) dollars.
( degree Celsius ) Compute the part border ratio and the border of safety ratio. ( Round to full per centums. )
( vitamin D ) Determine the gross revenues dollars required to gain net income of $ 238,000.
Solution
|
HYTEK COMPANY |
|
|
CVP Income Statement ( Estimated ) |
|
|
For the Year Ending December 31, 2012 $ |
|
|
Net gross revenues |
1,800,000 |
|
Variable disbursals |
|
|
Cost of goods sold |
1,098,000 |
|
Selling disbursals |
70,000 |
|
Administrative disbursals |
20,000 |
|
Entire variable disbursals |
1,188,000 |
|
Contribution border |
612,000 |
|
Fixed disbursals |
|
|
Cost of goods sold |
283,000 |
|
Selling disbursals |
65,000 |
|
Administrative disbursals |
60,000 |
|
Entire fixed disbursals |
408,000 |
|
Net income |
204,000 |
Notes
|
*Direct stuffs $ 430,000 + direct labour $ 352,000 + variable fabrication |
|
|
overhead $ 316,000 |
|
|
*Contribution border is Net Gross saless -Total Variable Costss |
B )
First Calculate Units of Bottles sold
No of Unit of measurements sold = Total Gross saless Revenue/Cost of one bottle
= 1,800,000/0.75
= 2,400,000 Unit of measurements
|
Entire Variable Cost ( $ ) |
|
|
Direct Material |
430,000 |
|
Direct Labor |
352,000 |
|
Manufacturing OHD |
316,000 |
|
Admin Expenses |
20,000 |
|
Selling Expenses |
70,000 |
|
Sum |
1,188,000 |
|
Unit of measurements Sold |
2,400,000 |
|
Entire Variable Cost |
$ 1,188,000 |
|
VC per Unit |
$ 0.50 |
|
Entire Fixed Cost ( $ ) |
|
|
Manufacturing OHD |
283,000 |
|
Admin Expenses |
60,000 |
|
Selling Expenses |
65,000 |
|
TOTAL FC |
$ 408,000 |
B ) I
Break-even=Fixed Costss + Entire Variable Costss = Entire Gross saless
= 408,000 + 0.50x = 0.75x ( where ten is the figure of units required )
=408,000=0.75x-0.50x
=408,000/0.25=x
= 1,632,000 =x
The figure of Unit of measurements required to breakeven is 1,632,000
B ) two
Number of Units required to breakeven = 1,632,000
Selling monetary value /Unit = $ 0.75
Breakeven in dollars = 1632,000 X 0.75
= $ 1,224,000
degree Celsius ) Contribution Margin=Sales Price – Variable Cost
=0.75- 0.50
=0.25
Contribution Margin Ratio=Contribution Margin / Selling monetary value
= 0.25/ 0.75
=33 %
Margin of Safety= Budgeted Gross saless – Break-Even Gross saless
= $ 1,800,000 – $ 1,224,000
= $ 576,000
Margin of Safety ( % ) =576,000/1,800,000
= 32 %
vitamin D ) Gross saless dollars required to gain net income of $ 238,000.
Net Income = Total Gross saless – ( Fixed Costs + Total Variable Costss )
Here x is the figure of units
238,000 = 0.75x – ( 408,000 + 0.50x )
238,000+ 408,000 =0.75x- 0.50x
646,000 = 0.25 ten
2,584,000 = ten
No of Unit of measurements required to gain net income of $ 238,000 are 2,584,000
Gross saless dollars required to gain net income of $ 238,000.
= 2,584,000 tens 0.75
= $ 1,938,000
P22-3AMagic Manufacturing’s gross revenues slumped severely in 2012. For the first clip in its history, it
operated at a loss. The company’s income statement showed the undermentioned consequences from selling
600,000 units of merchandise: Net gross revenues $ 2,400,000 ; entire costs and disbursals $ 2,540,000 ; and net loss
$ 140,000. Costss and disbursals consisted of the sums shown below.
Entire Variable Fixed
Cost of goods sold $ 2,100,000 $ 1,440,000 $ 660,000
Selling disbursals 240,000 72,000 168,000
Administrative disbursals 200,000 48,000 152,000
$ 2,540,000 $ 1,560,000 $ 980,000
Management is sing the undermentioned independent options for 2013.
1. Increase unit selling monetary value 20 % with no alteration in costs, disbursals, and gross revenues volume.
2. Change the compensation of sales representatives from fixed one-year wages numbering $ 150,000 to number
Wages of $ 60,000 plus a 3 % committee on net gross revenues.
3. Purchase new automated equipment that will alter the proportion between variable and
Fixed cost of goods sold to 54 % variable and 46 % fixed.
Instruction manuals
( a ) Compute the break-even point in dollars for 2012.
( B ) Compute the break-even point in dollars under each of the alternate classs of action.
( Round all ratios to nearest full per centum. ) Which class of action do you urge?
Solution
- Break-even=Fixed Costss + Entire Variable Costss = Entire Gross saless
Current gross revenues monetary value per unit = $ 2,400,000 / 600,000
= $ 4.00
Current variable cost per unit = 1,560,000/ 600,000
= $ 2.60
Break-even= 980,000 + 2.60x = 4x
=980,000 =4x – 2.60x
=980,000/1.4x
= 700,000 Unit of measurements
In dollars = 700,000 x 4
= $ 2,800,000
B )
1. Increase unit selling monetary value 20 % with no alteration in costs, disbursals, and gross revenues volume.
New selling monetary value = $ 4.00 x 1.20 = $ 4.80
= 980,000 + 2.60x = 4.80x
= 445,455 Unit of measurements
In dollars = 445,455 x 4.8
= $ 2,138,182
2. Change the compensation of sales representatives from fixed one-year wages numbering $ 150,000 to number
Wages of $ 60,000 plus a 3 % committee on net gross revenues.
Solution
When we change the compensation of the gross revenues individual as above,
The fixed cost for selling disbursals will be equal to:
$ 168,000 – $ 150,000 + $ 60,000 = $ 78,000
The entire variable Selling cost will be:
$ 72000 + 3 % ten $ 2,400,000= $ 144,000
The entire fixed cost and variable cost will be changed consequently:
|
|
Entire |
Variable |
Fixed |
|
Cost of goods sold |
$ 2,100,000 |
$ 1,440,000 |
$ 660,000 |
|
Selling disbursals |
$ 240,000 |
$ 144,000 |
$ 78,000 |
|
Administrative disbursals |
$ 200,000 |
$ 48,000 |
$ 152,000 |
|
Entire |
$ 2,540,000 |
$ 1,632,000 |
$ 890,000 |
Due to the alteration in variable cost, the variable cost per unit peers to:
= 1,632,000/600,000
= $ 2.72/ Unit
The break-even point in unit will be:
Break-even=Fixed Costss + Entire Variable Costss = Entire Gross saless
= 2.72x + $ 890,000 = 4x
=890,000=4x -2.72x
X = 695,312.50 Unit of measurements
In dollars
= 695,312.50 tens 4
= $ 2,781,250
3. Purchase new automated equipment that will alter the proportion between variable and
Fixed cost of goods sold to 54 % variable and 46 % fixed.
New variable Cost of goods sold =2,100,000 ten 54 %
= $ 1,134,000
New fixed Cost of goods sold = 2,100,000 ten 46 %
= $ 966,000 Selling monetary value per Unit =2,400,000 / 600,000
= $ 4.00
New Variable Cost per Unit = Variable Cost of goods sold + Variable Selling disbursals +
Variable Administrative disbursals
= ( 1,134,000 + 72,000 + 48,000 ) / 600,000
= $ 2.09 variable cost per unit
New Fixed Cost per Unit = Fixed Cost of goods sold + Fixed Selling disbursals +
Fixed Administrative disbursals
= 966,000 + 168,000 + 152,000
= $ 1,286,000 entire fixed costs
Break-even
=Fixed Costss + Entire Variable Costss = Entire Gross saless
=1,286,000 + 2.09x = 4x
ten = 673,298.43 Unit of measurements
In dollars = 673,298.43 ten $ 4.00
= $ 2,693,194 ( Rounded to nearest whole figure )
The break-even point in dollars for 3 classs are:$2,138,182 ; $ 2,781,250 ;$ 2,693,194. Therefore, the first class of action is recommended as it gives the smallest break-even point in dollars.
