Answer all the questions, each question carries 20 marks.

 

Question: 1

 

What is accounting? Discuss its Advantages and Disadvantages in a detailed manner?                                                                       

Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events, which are, in part at least, of a financial character and interpreting the result thereof. According to the American Accounting Association [AAA];

 

Question:2

Yankee Hotel Foxtrot initiated operations on July 1, 2014. To manage the company officers and managers have requested monthly financial statements starting July 31, 2014. The adjusted trial balance amounts at July 31 are shown below.

 

  Debits   Credits
Cash $ 7,680 Accumulated Depreciation-
Equipment $ 840
Accounts Receivable      810 Notes Payable 6,000
Prepaid Rent   1,965 Accounts Payable 2,140
Supplies   1,160 Salaries and Wages Payable 360
Equipment 11,400 Interest Payable 40
Owner’s Drawings    800 Unearned Service Revenue 580
Salaries and Wages Expense   7,145 Owner’s Capital 10,640
Rent Expense   2,740 Service Revenue 14,390
Depreciation Expense      665
Supplies Expense     580
Interest Expense 45
Total debits $ 34990 Total Credits $34990

 

Instructions

(A) Determine the net income for the month of July

(B) Determine the amount for Owner’s, Capital at July 31, 2014

(C) Determine the Balance Sheet at July 31, 2014 for

 

 

Question : 3

Polk Company developed the following information for its product:

Per unit
Sales price $90
Variable cost 63
Contribution margin $27
Total fixed costs $1,080,000

 

Instructions

 

Answer the following independent questions and show computations using the contribution margin technique to support your answers.

 

  1. How many units must be sold to break even?
  2. What is the total sales that must be generated for the company to earn a profit of $60,000?
  3. If the company is presently selling 45,000 units, but plans to spend an additional $108,000 on an advertising program, how many additional units must the company sell to earn the same net income it is now making?
  4. Using the original data in the problem, compute a new break-even point in units if the unit sales price is increased 20%, unit variable cost is increased by 10%, and total fixed costs are increased by $210,000.


 

Question: 4

Rodie Company has budgeted sales revenues as follows:

Particulars June July August
Credit sales $135,000 $145,000 $  90,000
Cash sales     90,000   255,000   195,000
Total sales $225,000 $400,000 $285,000

 

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:

June $300,000
July 250,000
August 105,000

 

Other cash disbursements budgeted:  (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash.

The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 8% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.

 

Instructions

Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.

 

 

 

Question : 5

Using the financial statements for the Snider Corporation, calculate the 13 basic ratios found in the chapter.

SNIDER CORPORATION

Balance Sheet

December 31, 2013

Assets
Current assets:
            Cash $ 52,200
            Marketable securities 24,400
            Accounts receivable (net) 222,000
            Inventory   238,000
            Total current assets $536,000
            Investments 65,900
            Plant and equipment 615,000
            Less: Accumulated depreciation  (271,000)
            Net plant and equipment    344,000
Total assets $946,500
Liabilities and Stockholders’ Equity
Current liabilities
            Accounts payable $93,400
            Notes payable 70,600
            Accrued taxes      17,000
            Total current liabilities 181,000
            Long-term liabilities:
            Bonds payable 153,200
Total liabilities $334,200
Stockholders’ equity
            Preferred stock, $50 per value 100,000
            Common stock, $1 par value 80,000
            Capital paid in excess of par 190,000
            Retained earnings   242,300
Total stockholders’ equity 612,300
Total liabilities and stockholders’ equity $946,500

 


 

SNIDER CORPORATION

Income statement

For the Year Ending December 31, 2013

Sales (on credit) $2,064,000
Less: Cost of goods sold   1,313,000
Gross profit 751,000
Less: Selling and administrative expenses   496,000*
Operating profit (EBIT) 255,000
Less: Interest expense      26,900
Earnings before taxes (EBT) 228,100
Less: Taxes    83,300
Earnings after taxes (EAT) $   144,800

*Includes $36,100 in lease payments.

 

 

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