Accounting

You are currently working as an independent consultant for Cong Nghiep Constructions and LPG (Liquefied Petroleum Gas) company. You have been asked by the president to evaluate the proposed acquisition of a new earth mover. The mover’s basic price is $50,000, and it would cost another $10,000 to modify it for special use. Assume that the mover falls into the MACRS 3- year class, it would be sold after 3 years for $20,000, and it would require an increase in net working capital (spare parts inventory) of $2,000.

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You are currently working as an independent consultant for Cong Nghiep Constructions and LPG (Liquefied Petroleum Gas) company. You have been asked by the president to evaluate the proposed acquisition of a new earth mover. The mover’s basic price is $50,000, and it would cost another $10,000 to modify it for special use. Assume that …

You are currently working as an independent consultant for Cong Nghiep Constructions and LPG (Liquefied Petroleum Gas) company. You have been asked by the president to evaluate the proposed acquisition of a new earth mover. The mover’s basic price is $50,000, and it would cost another $10,000 to modify it for special use. Assume that the mover falls into the MACRS 3- year class, it would be sold after 3 years for $20,000, and it would require an increase in net working capital (spare parts inventory) of $2,000. Read More »

Mayfield Software has a 2,000-square-foot cafeteria located on the lower level of Building 3, the company’s largest building. The vice president of operations for Mayfield insists that meal prices be reasonable so workers will stay on campus and avoid wasting time driving to restaurants with slow service. Employees at Mayfield are generally happy with the quality of food and the level of service in the cafeteria. Still, Mayfield is considering outsourcing to Regal Food Service. Mayfield is expanding and realizes that the future success of the company will require increased focus on its core competencies (and food service is not a core competency!). A cafeteria profit report for 2017 follows. In the report, the cafeteria is charged $20 per year per square foot for space and 3 percent of sales for general overhead (to cover the centrally administered costs of Mayfield Software, such as legal, brand advertising, salary of the CFO, etc.). All business units receive the same 3 percent charge. Cafeteria Profit Report for 2017 Sales Less expenses: Cost of food and supplies Salaries Space charge Depreciation of equipment General overhead charge Cafeteria profit $657,000 342,000 40,000 6,000 32,850 $1,095,000 1,077,850 $ 17,150 The terms of the agreement with Regal (which has not yet been signed) call for Regal to provide similar-quality meals and service at the same prices that were charged in 2017. Regal will use the current cafeteria space and existing equipment without cost. Regal will keep 96 percent of sales revenue and remit 4 percent of sales revenue back to Mayfield. Regal will pay for all food and supplies and hire and pay the salaries of all staff including the cafeteria manager, cooks, and servers. REQUIRED Evaluate the annual financial impact of the outsourcing decision assuming sales in the coming year, under Regal, will be the same as in 2017.

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EXPERT ANSWER Annual financial impact of outsourcing decision The annual profit will decrease by $ 52,200 Explanation To show the annual financial impact of outsourcing decision consider the following incremental analysis Cafeteria managed by the company Cafeteria outsourced Incremental impact of outsourcing Revenue $ 1,095,000 $ 43,800 ($ 1,051,200) Expenses Cost of food and supplies …

Mayfield Software has a 2,000-square-foot cafeteria located on the lower level of Building 3, the company’s largest building. The vice president of operations for Mayfield insists that meal prices be reasonable so workers will stay on campus and avoid wasting time driving to restaurants with slow service. Employees at Mayfield are generally happy with the quality of food and the level of service in the cafeteria. Still, Mayfield is considering outsourcing to Regal Food Service. Mayfield is expanding and realizes that the future success of the company will require increased focus on its core competencies (and food service is not a core competency!). A cafeteria profit report for 2017 follows. In the report, the cafeteria is charged $20 per year per square foot for space and 3 percent of sales for general overhead (to cover the centrally administered costs of Mayfield Software, such as legal, brand advertising, salary of the CFO, etc.). All business units receive the same 3 percent charge. Cafeteria Profit Report for 2017 Sales Less expenses: Cost of food and supplies Salaries Space charge Depreciation of equipment General overhead charge Cafeteria profit $657,000 342,000 40,000 6,000 32,850 $1,095,000 1,077,850 $ 17,150 The terms of the agreement with Regal (which has not yet been signed) call for Regal to provide similar-quality meals and service at the same prices that were charged in 2017. Regal will use the current cafeteria space and existing equipment without cost. Regal will keep 96 percent of sales revenue and remit 4 percent of sales revenue back to Mayfield. Regal will pay for all food and supplies and hire and pay the salaries of all staff including the cafeteria manager, cooks, and servers. REQUIRED Evaluate the annual financial impact of the outsourcing decision assuming sales in the coming year, under Regal, will be the same as in 2017. Read More »

You are currently working as an independent consultant for Cong Nghiep Constructions and LPG (Liquefied Petroleum Gas) company. You have been asked by the president to evaluate the proposed acquisition of a new earth mover. The mover’s basic price is $50,000, and it would cost another $10,000 to modify it for special use. Assume that the mover falls into the MACRS 3- year class, it would be sold after 3 years for $20,000, and it would require an increase in net working capital (spare parts inventory) of $2,000. The earth mover would have no effect on revenues, but it is expected to save the firm $30,000 per year in before-tax operating costs, mainly labor. The firm’s tax rate is 40%.

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You are currently working as an independent consultant for Cong Nghiep Constructions and LPG (Liquefied Petroleum Gas) company. You have been asked by the president to evaluate the proposed acquisition of a new earth mover. The mover’s basic price is $50,000, and it would cost another $10,000 to modify it for special use. Assume that …

You are currently working as an independent consultant for Cong Nghiep Constructions and LPG (Liquefied Petroleum Gas) company. You have been asked by the president to evaluate the proposed acquisition of a new earth mover. The mover’s basic price is $50,000, and it would cost another $10,000 to modify it for special use. Assume that the mover falls into the MACRS 3- year class, it would be sold after 3 years for $20,000, and it would require an increase in net working capital (spare parts inventory) of $2,000. The earth mover would have no effect on revenues, but it is expected to save the firm $30,000 per year in before-tax operating costs, mainly labor. The firm’s tax rate is 40%. Read More »

Sentry Oil Inc. is considering two mutually exclusive projects as follows:

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Sentry Oil Inc. is considering two mutually exclusive projects as follows: Year 0 1 2 3 4 Cash flow A ($185,000) $60,000 $75,000 $70,000 $70,000 Cash flow B ($125,000) ($60,000) $95,000 $90,000 $95,000 Sentry’s cost of capital is 14%. It can spend no more than $350,000 on capital projects this year. Which of the following …

Sentry Oil Inc. is considering two mutually exclusive projects as follows: Read More »

On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $85,360 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts. Retained earnings, October 1 as $0. Cash Accounts receivable Office supplies Land Office equipment Accounts payable Common stock $ 7,010 18,350 4,480 46,040 19,360 9,740 85,360 Cash dividends Consulting revenue Rent expense Salaries expense Telephone expense Miscellaneous expenses $ 3,390 18,350 4,820 8,370 910 720 Using the above information prepare an October income statement for the business. ERNST CONSULTING Income Statement For Month Ended October 31 Revenues Consulting revenue $ 18,350 $ 18,350 Total revenues Expenses Miscellaneous expenses Rent expense Telephone expense Salaries expense (720) (4,820) (910) 8,370 1,920 Total expenses Net income

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EXPERT ANSWER ERNST CONSULTING Income Statement For Month Ended October 31 Revenues Consulting Revenue $18350 Total Revenues $18350 Expenses Miscellaneous Expense $720 Rent Expense $4820 Telephone Expense $910 Salaries Expense $8370 Total Expenses $14820 Net Income $3530

Questions Cash budgeting 20 man Pet Treats Inc. specializes in gourmet pet treats and receives all income from sales The sales estimates are as follows: Current Year Quarter 1 = 500 million Current Year Quarter 2 = 600 million Current Year Quarter 3 = 650 million Current Year Quarter 4 = 800 million Next Year Quarter 1 = 550 million In addition to the sales figures, you are also provided with the following additional information: Beginning receivables = R250 million Average collection period = 30 days Purchases = 50% of next quarter’s sales Beginning payables = 125 million Accounts payable period is 45 days Wages, taxes and other expense are 30% of sales Interest and dividend payments are R50 million A major capital expenditure of R200 million is expected in the second quarter The initial cash balance is R80 million and the company maintains a minimum balance of R50 million. Beginning receivables = R250 million Average collection period = 30 days Purchases = 50% of next quarter’s sales Huginning payables = 125 million Accounts payable period is 45 days Wages, taxes and other expense are 30% of sales Interest and dividend payments are R50 million 1 A major capital expenditure of R200 million is expected in the second quarter The initial cash balance is R80 million and the company maintains a minimum balance of R50 million. – a. You are required to prepare a cash budget for Pet Treat Inc. indicating the cash balances at the end of each quarter using the template provided on (18 marks) the next page. b. How can Pet Treats Inc. use the cash surplus generated and how can it address its cash needs when it has a cash deficit? (2 marks) Question 5 -Cash Budget Template Q1 Q2 a3 Q4 Beginning Receivables Ending Rocelvables (1) (1) Cash receipts Sales for cash Collections from credit sales Total cash collections (11) Cash disbursements Payment of accounts Wages, taxes & other expenses Capital expenditures Interest and dividend payments Total cash disbursements (1) (1) () (1) (1) Net cash inflow Total cash collections Total cash disbursements Net cash inflow (outflow) (1) (1) Determination of cash needs Beginning cash balance Net cash inflow (outflow) Ending cash balance Minimum cash balance Cumulative cash surplus (deficit) 0 e (1) PE

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Brief Exercise 4-06 al-a2 The income statement for Salt Creek Golf Club for the month ending July 31 shows Service Revenue $17,800, Salaries and Wages Expense $9,66 Maintenance and Repairs Expense $2,500, and Net Income $5,700. Prepare the entries to close the revenue and expense accounts. (Credit account titles are automatically indented when amount entered. Do not indent manually.) Date Account Thules and Explanation Debit Credit July 31 (To close revenue account) July 31 (Todose expense accounts) OUT OF ACCOUNTS Post the entries to the revenue and expense accounts, and complete the closing process for these accounts using the three-column form of account. Service Revenue Debit Credit Balance Date Explanation Ref. 7/31 Balance 7/31 Closing entry Salaries and Wages Expense Date Explanation Ref. Debit Credit Balance 7/31 Balance 7/31 Closing entry dy Maintenance and Repairs Expense Date Explanation Ref. Debit Credit 7/31 Balance Balance */31 Closing entry Click if you would like to show Work for this question: Qren Show Work

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EXPERRT ANSWER Date Account Titles and Explanations Debit Credit July 31 Service Revenue $ 17,800 Income Summary $ 17,800 (To close Revenue account) July 31 Income Summary $ 12,100 Salaries and Wages expense $ 9,600 Maintenance and Repairs expense $ 2,500 (To close expense accounts) Service Revenue Date Explanaation Ref. Debit Credit Balance 7/31 Balance …

Brief Exercise 4-06 al-a2 The income statement for Salt Creek Golf Club for the month ending July 31 shows Service Revenue $17,800, Salaries and Wages Expense $9,66 Maintenance and Repairs Expense $2,500, and Net Income $5,700. Prepare the entries to close the revenue and expense accounts. (Credit account titles are automatically indented when amount entered. Do not indent manually.) Date Account Thules and Explanation Debit Credit July 31 (To close revenue account) July 31 (Todose expense accounts) OUT OF ACCOUNTS Post the entries to the revenue and expense accounts, and complete the closing process for these accounts using the three-column form of account. Service Revenue Debit Credit Balance Date Explanation Ref. 7/31 Balance 7/31 Closing entry Salaries and Wages Expense Date Explanation Ref. Debit Credit Balance 7/31 Balance 7/31 Closing entry dy Maintenance and Repairs Expense Date Explanation Ref. Debit Credit 7/31 Balance Balance */31 Closing entry Click if you would like to show Work for this question: Qren Show Work Read More »

Jenny Corporation manufactures a part for its production cycle. The costs per unit for 5,000 units of this part are as follows: Direct materials Php 16 Direct labor 20 Variable overhead 8 Fixed overhead 16 Total Php 60 Jacky Company has offered to sell Jenny Corporation 5,000 units of the part for Php 56 per unit. If Jenny Corporation accepts Jacky Company’s offer, total fixed costs will be reduced to Php 30,000. Which of the following is correct decision and correct increase in profit?

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Jenny Corporation manufactures a part for its production cycle. The costs per unit for 5,000 units of this part are as follows: Direct materials Php 16 Direct labor 20 Variable overhead 8 Fixed overhead 16 Total Php 60 Jacky Company has offered to sell Jenny Corporation 5,000 units of the part for Php 56 per …

Jenny Corporation manufactures a part for its production cycle. The costs per unit for 5,000 units of this part are as follows: Direct materials Php 16 Direct labor 20 Variable overhead 8 Fixed overhead 16 Total Php 60 Jacky Company has offered to sell Jenny Corporation 5,000 units of the part for Php 56 per unit. If Jenny Corporation accepts Jacky Company’s offer, total fixed costs will be reduced to Php 30,000. Which of the following is correct decision and correct increase in profit? Read More »

Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1 through June 30:

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Fact Pattern: Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1 through June 30: July 1 June 30 Direct material* 40,000 50,000 Work-in-process 10,000 20,000 Finished goods 80,000 50,000 * Two units of direct material …

Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1 through June 30: Read More »

WP XI CREDIT Q No.2 AUSTIN SOUND SEREO CENTER, INC. TRIAL BALANCE DECEMBER 31,2015 TITLE OF ACCOUNTS DEBIT Cash 110,350 Account receivable 54600 Note receivable 8000 Inventory-opening 40,500 Supplies 650 Prepaid insurance 1200 Furniture and Fixture 183,200 Accumulated depreciation-furniture Account payable Note payable (long-term) Capital-Frank Sales revenue Sales discount 1400 Sales return and allowance 2000 Interest revenue Purchases 89,300 Purchases discount Purchases return and allowances Freight in 5200 Rent expense 8400 TOTAL 504,800 2400 47,000 12,600 100,000 338,000 600 3000 1200 504,800 1. Inventory on hand at the end of the year $ 42,000 2. Depreciation on Furniture book value 2% 3. Tax rate is 10% applied Required: . Income Statement showing EBIT and EAT Balance Sheet .

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