Answer all the questions, each question carries 20 marks.
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];
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.
|Cash||$ 7,680||Accumulated Depreciation-|
|Accounts Receivable||810||Notes Payable||6,000|
|Prepaid Rent||1,965||Accounts Payable||2,140|
|Supplies||1,160||Salaries and Wages Payable||360|
|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|
|Total debits||$ 34990||Total Credits||$34990|
(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:
|Total fixed costs||$1,080,000|
Answer the following independent questions and show computations using the contribution margin technique to support your answers.
- How many units must be sold to break even?
- What is the total sales that must be generated for the company to earn a profit of $60,000?
- 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?
- 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.
Rodie Company has budgeted sales revenues as follows:
|Credit sales||$135,000||$145,000||$ 90,000|
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:
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.
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.
December 31, 2013
|Accounts receivable (net)||222,000|
|Total current assets||$536,000|
|Plant and equipment||615,000|
|Less: Accumulated depreciation||(271,000)|
|Net plant and equipment||344,000|
|Liabilities and Stockholders’ Equity|
|Total current liabilities||181,000|
|Preferred stock, $50 per value||100,000|
|Common stock, $1 par value||80,000|
|Capital paid in excess of par||190,000|
|Total stockholders’ equity||612,300|
|Total liabilities and stockholders’ equity||$946,500|
For the Year Ending December 31, 2013
|Sales (on credit)||$2,064,000|
|Less: Cost of goods sold||1,313,000|
|Less: Selling and administrative expenses||496,000*|
|Operating profit (EBIT)||255,000|
|Less: Interest expense||26,900|
|Earnings before taxes (EBT)||228,100|
|Earnings after taxes (EAT)||$ 144,800|
*Includes $36,100 in lease payments.
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