Matching asset mix and financing plans (LO3) Winfrey Diet Food Corp. has $4,500,

Matching asset mix and financing plans (LO3)
Winfrey Diet Food Corp. has $4,500,000 in assets.
 
Temporary current assets $1,000,000
Permanent current assets 1,500,000
Fixed assets 2,000,000
Total assets $4,500,000
 
Short-term rates are 8 percent. Long-term rates are 13 percent.
Earnings before interest and taxes are $960,000. The tax rate is 40
percent.
If long-term financing is perfectly matched (synchronized) with
long-term asset needs, and the same is true of short-term
financing, what will earnings after taxes be? For an example of
perfectly matched plans

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COMPREHENSIVE PROBLEM Logan Distributing Company (receivables and inventory poli

COMPREHENSIVE PROBLEM
Logan Distributing Company (receivables and
inventory policy) (LO 04 & 05) Logan
Distributing Company of Atlanta sells fans and heaters to retail
outlets through out the Southeast. Joe Logan, the president of the
company, is thinking about changing the firm’s credit policy to
attract customers away from competitors. The present policy calls
for a 1/10, net 30 cash discount. The new policy would call for a
3/10, net 50 cash discount. Currently, 30 percent of Logan
customers are taking the discount, and it is anticipated that this
number would go up to 50 percent with the new discount policy. It
is further anticipated that annual sales would increase from a
level of $400,000 to $600,000 as a result of the change in the cash
discount policy.
The increased sales would also affect the inventory level.
The average inventory carried by Logan is based on a determination
of an EOQ. Assume sales of fans and heaters increase from 15,000 to
22,500 units. The ordering cost for each order is $200 and the
carrying cost per unit is $1.50 (these values will not change with
the discount). The average inventory is based on EOQ/2. Each unit
in inventory has an average cost of $12.
Cost of goods sold is equal to 65 percent of net sales;
general and administrative expenses are 15 percent of net sales,
and interest payments of 14 percent will only be necessary for the
increase in the accounts receivable and inventory balances. Taxes
will be 40 percent of before-tax income.
a. Compute the accounts receivable balance before and
after the change in the cash discount policy. Use the net sales
(total sales minus cash discounts) to determine the average daily
sales.
b. Determine EOQ before and after the change in the
cash discount policy. Translate this into average inventory (in
units and dollars) before and after the change in the cash discount
policy.
 
c. Complete the following income statement.

 

Before Policy
Change

After Policy Change

Net sales (Sales – Cash discounts)

 

 

Cost of goods sold

 

 

Gross profit

 

 

General and administrative expense

 

 

Operating profit

 

 

Interest on increase in accounts
receivable and inventory (14%)

 

 

Income before taxes

 

 

Taxes

 

 

Income after taxes

 

 

d. Should the new cash discount policy be utilized?
Briefly comment.

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A customer has asked Clougherty Corporation to supply 4,000 units of product M97

A customer has asked Clougherty Corporation to supply 4,000
units of product M97, with some modifications, for $40.10 each. The
normal selling price of this product is $48.00 each. The normal
unit product cost of product M97 is computed as follows.

Direct Materials

$18.50

Direct Labor

$1.20

Variable manufacturing overhead

$8.40

Fixed  manufacturing overhead

$3.90

Unit product cost

$32.00

Direct labor is a variable cost. The special order would have no
effect on the company’s total fixed manufacturing overhead costs.
The customer would like some modifications made to product M97 that
would increase the variable costs by $5.70 per unit and that would
require a one-time investment of $31,000 in special molds that
would have no salvage value. This special order would have no
effect on the company’s other sales. The company has ample spare
capacity for producing the special order.

Required:

Determine the effect on the company’s total net operating income of
accepting the special order. Show your work!

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The following information reflects Cash flow and other activities of Framer Comp

The following information reflects Cash flow and other
activities of Framer Company for six months ending June 30.
Paid for Equipment 45,000
Paid for income taxes 3,000
Paid for insurance 1,000
Paid for interest  900.
Paid for utilities 790.
Paid for advertising  560.
Paid to owners 5,000
Paid to suppliers 28,000
Paid to employees 17,000
Depreciation Expense 13,500
Received from customers 99,000
Received from issuing long-term 40,000
Received from sale of land 18,000
1). what are the net cash flows from the operating activity for
the period?
2). what are the net cash flow from the investing activity for
the period?
3). what are the net cash flow from the financing activity for
the period?
 4). what was the net change in cash flow for the
period?

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Saferoad Corporation has completed its comparative balance sheet and income stat

Saferoad Corporation has completed its comparative balance sheet
and income statement at year-end 2009.
• A payment of $7,500 was made on the loan principal during the
year
• Just before year-end, a dividend was distributed to
stockholders.
• A parcel of land was acquired early in the year.
• New shares of common stock were sold during the year.
 
Year 2009 Year 2008
 
Cash 1,090 4,000
Accounts receivable 2,910 6,150
Inventory 4,800 3,880
Prepaid advertising 700 1,775
Building and furnishings 40,000 40,000
Accumulated depreciation -10,000 -8,000
Land 27,000 15,000
TOTAL ASSETS 66,500 62,805
Rent payable 2,000 4,000
Taxes payable 1,900 1,500
Wages payable 3,300 2,200
Loan payable, long-term 19,600 26,805
Common stocks 31,000 25,000
Retained earnings 8,700 3,300
TOTAL LIABILITIES AND EQUITY 66,500 62,805
Income Statement for 2009
Sales Revenue 350,000
Cost of goods solD 250,600
Gross profit 99,400
Operating expenses:
Advertising 9,500
Depreciation 2,000
Insurance 4,100
Rent payable 28,900
Wages 40,450
Operating income 14,450
Interest expense 1,600
Income before tax 12,850
Taxes 3,850
Net income 9,000
 
Prepare a statement of cash flows using the indirect method
format, please left align all headings

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Diego Company manufactures one product that is sold for $80 per unit in two geog

Diego Company manufactures one product that is sold for $80 per
unit in two geographic regions-the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 40,000 units and sold 35,000
units.
The company sold 25,000 units in the East region and 10,000
units in the West region. It determined that $250,000 of its fixed
selling and administrative expenses is traceable to the West
region, $150,000 is traceable to the East region, and the remaining
$96,000 is a common fixed cost. The company will continue to incur
the total amount of its fixed manufacturing overhead costs as long
as it continues to produce any amount of its only product.
Required: Answer each question independently based on the
original data unless instructed otherwise. You do not need to
prepare a segmented income statement until question 13.
1. What is the unit product cost under variable costing?
2. What is the unit product cost under absorption costing?
3. What is the company’s total contribution margin under
variable costing?
4. What is the company’s net operating income under variable
costing?
5. What is the company’s total gross margin under absorption
costing?
6. What is the company’s net operating income under absorption
costing?
7. What is the amount of the difference between the variable
costing and absorption costing net operating incomes? What is the
cause of this difference?
8. What is the company’s break even point in unit sales? Is it
above or below the actual sales volume? Compare the break even
sales volume to your answer for question 6 and comment.
9. If sales volumes in the East and West regions had been
reversed, what would be the company’s overall break even point in
unit sales?
10. What would have been the company’s variable costing net
operating income if it had produced and sold 35,000 units? You do
not need to perform any calculations to answer this question.
11. What would have been the company’s absorption costing net
operating income if it had produced and sold 35,000 units? You do
not need to perform any calculations to answer this question.
12. If the company produces 5,000 fewer units than it sells in
its second year of operations, will absorption costing net
operating income be higher or lower than variable costing net
operating income in Year 2? Why? No calculations are necessary.
13. Prepare a contribution format segmented income statement
that includes a Total column and columns for the East and West
regions.
14. Diego is considering eliminating the West region because an
internally generated report suggests the region’s total gross
margin in the first year of operations was $50,000 less than its
traceable fixed selling and administrative expenses. Diego believes
that if it drops the West region, the East region’s sales will grow
by 5% in Year 2. Using the contribution approach for analyzing
segment profitability and assuming all else remains constant in
Year 2, what would be the profit impact of dropping the West region
in Year 2?
15. Assume the West region invests $30,000 in a new advertising
campaign in Year 2 that increases its unit sales by 20%. If all
else remains constant, what would be the profit impact of pursuing
the advertising campaign?

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Without the consent of the client, a CPA should not disclose confidential client

Without the consent of the client, a CPA should not
disclose confidential client information contained in working
papers to a

A client company has not paid its 1983 audit fees.
According to the AICPA Code of Professional Conduct, for the
auditor to be considered independent with respect to the 1984
audit, the 1983 audits fees must be paid before the

A CPA, who is a member of the American Institute of
Certified Public Accountants, wrote an article for publication in a
professional journal. The AICPA Code of Professional Conduct would
be violated if the CPA allowed the article to state that the CPA
was
 
Please see the attached file for details

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On January 1, 2014, the ledger of Shumway Company contains the following liabili

On January 1, 2014, the ledger of Shumway Company contains the
following liability accounts.
Accounts Payable …………………………. $52,000
Sales Taxes Payable ………………………..   
5,800
Unearned Service Revenue ………………..  
14,000
During January, the following selected transactions
occurred.
Jan. 5 Sold merchandise for cash totaling $22,470, which
includes 7% sales taxes.
12 Provided services for customers who had made advance payments
of $10,000.
(Credit Service Revenue.)
14 Paid state revenue department for sales taxes collected in
December 2013 ($5,800).
20 Sold 600 units of a new product on credit at $50 per unit,
plus 7% sales tax.
21 Borrowed $14,000 from DeKalb Bank on a 3-month, 8%, $14,000
note.
25 Sold merchandise for cash totaling $12,947, which includes 7%
sales taxes.
 
Instructions
(a) Journalize the January transactions.
(b) Journalize the adjusting entries at January 31 for the
outstanding notes payable.
(c) Prepare the current liabilities section of the balance sheet
at January 31, 2014. Assume no change in accounts payable.
 

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On January 1, 2010, Pele Company purchased the following two machines for use in

On January 1, 2010, Pele Company purchased the following two
machines for use in its production process. Machine A: The cash
price of this machine was $38,000. Related expenditures included:
sales tax $1,700, shipping costs $150, insurance during shipping
$80, installation and testing costs $70, and $100 of oil and
lubricants to be used with the machinery during its first year of
operations. Pele estimates that the useful life of the machine is 5
years with a $5,000 salvage value remaining at the end of that time
period. Assume that the straight-line method of depreciation is
used.
Machine B: The recorded cost of this machine was $160,000. Pele
estimates that the useful life of the machine is 4 years with a
$10,000 salvage value remaining at the end of that time period.
Instructions
(a) Prepare the following for Machine A.
(1) The journal entry to record its purchase on January 1,
2010.
(2) The journal entry to record annual depreciation at December
31, 2010.
(b) Calculate the amount of depreciation expense that Pele
should record for machine B each year of its useful life under the
following assumptions.
(1) Pele uses the straight-line method of depreciation.
(2) Pele uses the declining-balance method. The rate used is
twice the straight-line rate.
(3) Pele uses the units-of-activity method and estimates that
the useful life of the machine is 125,000 units. Actual usage is as
follows: 2010, 45,000 units; 2011, 35,000 units; 2012, 25,000
units; 2013, 20,000 units.
(c) Which method used to calculate depreciation on machine B
reports the highest amount of depreciation expense in year 1
(2010)? The highest amount in year 4 (2013)? The highest total
amount over the 4-year period?

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Journalize entries for disposal of plant assets. Presented below are selected tr

Journalize entries for disposal of plant assets. Presented below
are selected transactions at Thomas Company for 2006. Jan. 1
Retired a piece of machinery that was purchased on January 1, 1996.
The machine cost $62,000 on that date. It had a useful life of 10
years with no salvage value. June 30 Sold a computer that was
purchased on January 1, 2003. The computer cost $35,000. It had a
useful life of 5 years with no salvage value. The computer was sold
for $12,000. Dec. 31 Discarded a delivery truck that was purchased
on January 1, 2002. The truck cost $33,000. It was depreciated
based on a 6-year useful life with a $3,000 salvage value.
Instructions Journalize all entries required on the above dates,
including entries to update depreciation, where applicable, on
assets disposed of. Thomas Company uses straight-line depreciation.
(Assume depreciation is up to date as of December 31,
2005.) 

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