Jack Sawyer is presently leasing a copier from John Office Equipment Company

Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $3,500 at the end of each year and provides the leaser (John) with an 8% return on its investment. You may use the following 8% interest factors: 9 Periods 10 Periods 11 Periods Future Value of 1 1.99900 2.15892 2.33164 Present Value of 1 .50025 .46319 .42888 Future Value of 12.48756 14.48656 16.64549 Ordinary Annuity of 1 Present Value of 6.24689 6.71008 7.13896 Ordinary Annuity of 1 Present Value of 6.74664 7.24689 7.71008 Annuity Due of 1 Instructions
 
(a) Assuming the computer has an eleven-year life and will have no salvage value at the expiration of the lease, what was the original cost of the copier to John?

(b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period?

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ABC Inc. shows gross sales of $730,600 for couches & $934,900 for recliners. It has determined that couches cost $534,000 & that recliners cost $391,400. The total gross profit of ABC Inc. is $

 
ABC Inc. shows gross sales of $730,600 for couches & $934,900 for recliners. It has determined that couches cost $534,000 & that recliners cost $391,400. The total gross profit of ABC Inc. is $___.
a. 196,000
b. 543,000
c. 740,100

2. Using Question 1, what is the gross profit percentage for the furniture dept. of ABC Inc. is ___%.
a. 4.45
b. 26.9
c. 58.1
d. 73.0
 

1. A company has 6,000 shares of common stock outstanding; total common stockholders' equity is $1,500,000. The book value per share of common stock is $

QUESTION                                          SOLUTION
1. A company has 6,000 shares of common stock outstanding; total common stockholders' equity is $1,500,000. The book value per share of common stock is $ ___.
a. 250
b. 300
c. 400
d. 6,000

2. The liabilities of a company at the end of the year are $700,000, and the total stockholders' equity at the end of the year is $1,400,000. The ratio of liabilities to stockholders' equity is ___.
a. .33 to 1
b. .5 to 1
c. .67 to 1
d. 2 to 1

3. The net income of the company for the current year ended is $230,000. Income tax is $190,000 & interest expense is $20,000. The times interest earned ratio is ___.
a. .9
b. 3.0
c. 21.0
d. 22.0
CLICK HERE FOR SOLUTION

1. The net income for a company was $200,000 last year & is $180,000 this year. Horizontal analysis reflects the percent of increase or decrease was ___%

1. The net income for a company was $200,000 last year & is $180,000 this year. Horizontal analysis reflects the percent of increase or decrease was ___%.

2. The net sales for a company were $2,500,000; gross profit was $500,000; and net income was $230,000. The net income to net sales ratio would be ___%.

3. A company has cash $75,000; temp. investments $20,000; net receivables $600,000. The quick or acid-test ratio is
a. .54 to 1
b. .58 to 1
c. 1.74 to 1
d. 1.84 to 1

4. Using Question 3, what is the current ratio?
a. .54 to 1
b. .58 to 1
c. 1.74 to 1
d. 1.86 to 1

5. A company has net sales on account of $1,500,000. net accounts receivable at the beginning of the year are $600,000 & net accounts receivable at the end of the year are $650,000. The accounts receivable turnover is ___.
a. .42
b. .53
c. 1.2
d. 2.4

6. Using Question 5, what is the merchandise inventory turnover for the year?
a. 1.7
b. 7.4
c. 57.5
d. 65.5

14-2A Straight-line amortization of both bond discount and bond premium. Heathrow issues $2,000,000 of 6%, 15 year bonds dated January 1, 2004

Straight-line amortization of both bond discount and bond premium

Heathrow issues $2,000,000 of 6%, 15 year bonds dated January 1, 2004, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,728,224.

Required
1. Prepare the January 1, 2004, journal entry to record the bonds’ issuance.
2. For each semiannual period. Compute (a) the cash payment, (b) the straight-line discount amortization, and (c) the bond interest expense.
3. Determine the total bond interest expense to be recognized over the bonds’ life.
4. Prepare the first two years of an amortization table like Exhibit 14.7 using the straight-line method.
5. Prepare the journal entries to record the first two interest payments.
6. Assume that the bonds are issued at a price of $2,447,990. Repeat parts 1 through 5
 
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Coach Bjourn Toulouse led the Big Red Herrings to several disappointing football seasons - Coach-Bjourn-1and5.doc

Operations Management Problems 1 & 5
1. Coach Bjourn Toulouse led the Big Red Herrings to several disappointing football seasons. Only better recruiting will return the Big Red Herrings to winning form. Because of the current state of the program, Boehring University fans are unlikely to support increases in the $192 season ticket price. Improved recruitment will increase overhead costs to $30,000 per class section from the current $25,000 per class section. The university’s budget plan is to cover recruitment costs by increasing the average class size to 75 students. Labor costs will increase to $6,500 per three-credit course. Material costs are about $25 per student for each three-credit course. Tuition will be $200 per semester credit, which is matched by state support of $100 per semester credit.

a. What is the productivity ratio? Compared to the result obtained in Example Solution, did productivity increase or decrease for the course process?
b. If instructors work an average of 20 hours per week for 16 weeks for each three-credit class of 75 students, what is the labor productivity ratio?

5. The Big Black Bird Company (BBBC) has a large order for special plastic-lined military uniforms to be used in an urgent military operation. Working the normal two shifts of 40 hours, the BBBC production process usually produces 2,500 uniforms per week at a standard cost of $120 each. Seventy employees work the first shift and 30 the second. The contract price is $200 per uniform. Because of the urgent need, BBBC is authorized to use around the-clock production, six days per week. When each of the two shifts works 72 hours per week, production increases to 4,000 uniforms per week but at a cost of $144 each.

a. Did the productivity ratio increase, decrease, or remain the same? If it changed, by what percentage did it change?
b. Did the labor productivity ratio increase, decrease, or remain the same? If it changed, by what percentage did it change?
c. Did weekly profits increase, decrease, or remain the same?

SOLUTION PREVIEW
Productivity ratio = output
                                Input
 
Value of output = (75 students)*(3 credit course)*($200 tuition + 100 state support)
                                       Class            student                          credit course
                                    = $67500/ class
 
Value of input = Labor cost + material cost + overhead cost
                                    = 6500 + ($25 * 75 students) + 30000 = 38375

 
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Castellino Company, operating at full capacity, sold 80000 units

Castellino Company, operating at full capacity, sold 80000 units at a price of $70.75 per unit during 2008. Its income statement for 2008 is as follows:

Sales 5,660,000
Cost of goods sold 2,100,000
Gross profit 3,560,000

Expenses:
Selling 1,500,000
Admin. 900,000
Total expenses..........2,400,000
Income from operations 1,160,000

The division of costs between fixed and variable is as follows:
Cost of Sales: fixed = 50% variable = 50%
selling expenses: fixed = 30% variable = 70%
Administrative expenses: fixed = 60% variable = 40%

Management is considering a plant expansion program that will permit an increase of $884,375 in yearly sales. The expansion will increase fixed costs by $265,000, but will not affect the relationship between sales and variable costs.

1. Determine for 2008 the total fixed costs and the total variable costs.
2. Determine for 2008 (a) the unit variable cost and (b) the unit contribution margin.
3. Compute the break-even sales (units) for 2008.
4. Compute the break-even sales (units) under the proposed program.
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $1,160,000 of income from operations that was earned in 2008.
6. Determine the maximum income from operations possible with the expanded plant.
 

The ledger of R. Rental Agency Inc. on March 31 of the current

 
The ledger of R. Rental Agency Inc. on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.

Debit Credit
Prepaid Insurance $ 3,600
Supplies 2,800
Equipment 25,000
Accumulated Depreciation—Equipment $ 8,400
Notes Payable 20,000
Unearned Rent 12,000
Rent Revenue 60,000
Interest Expense –0–
Wages Expense 14,000

An analysis of the accounts shows the following.
1. The equipment depreciates $300 per month.
2. One-third of the unearned rent was earned during the quarter.
3. Interest of $500 is accrued on the notes payable.
4. Supplies on hand total $1,100.
5. Insurance expires at the rate of $200 per month.

Instructions
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.

SOLUTION PREVIEW
Adjusting entries:
 
Particulars
Debit
Credit
1
Depreciation expenses (300 * 3)
900
 
 
    Accumulated depreciation-Equipment
 
900
2
Unearned Rent
4,000
 


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Radon Homes' current EPS is $6.50. It was $4.42 5 years ago

10-11 Radon Homes' current EPS is $6.50. It was $4.42 5 years ago. The company pays out 40% of its earnings as dividends, and stock sells for $36.

a) Calculate the past growth rate in earnings. (Hint: This is a 5-year growth period.)
b) Calculate the next expected dividend per share, D1 [D0 = 0.4($6.50) = $2.60].
Assume that the past growth rate will continue.
c) What is the cost of equity, rs, for Radon Homes?
 
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Perrson Company makes two types of backpacks


School Hiker
Model Model
Sales units 40,000 40,000
Selling price per unit $6 $18
Variable expense per unit $2 $10
The company's total fixed expenses are $80,000. There are no beginning or ending inventories.

A. What is the per unit contribution margin for each of the two models?
B. What is the break-even point in terms of sales dollars if the sales mix remains constant?
Break-even point (in sales) = Fixed cost * selling price per unit
Contribution margin
C. If the sales mix is changed to 60,000 units of the school model and 20,000 units of the hiker model, what will be the break-even point in terms of sales dollars?

Cost of debt - Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant

(Cost of debt) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with a 14 percent annual coupon rate and a 10-year maturity. The investors require a 9 percent rate of return.
1.Compute the market value of the bonds.
2.What will the net price be if flotation costs are 10.5 percent of the market price?
3.How many bonds will the firm have to issue to receive the needed funds?
4.What is the firm’s after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 34 percent?
 
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Scenario: Antonio Cleaning has asked you to help them determine the best method

12-59 Allocating Costs Using Direct and Step-Down Methods

Goal: Create an Excel spreadsheet to allocate costs using the direct method and the stepdown method. Use the results to answer questions about your findings.

Scenario: Antonio Cleaning has asked you to help them determine the best method for allocating costs from their service departments to their producing departments. Additional background information for your spreadsheet appears in Fundamental Assignment Material 12-B2. Exhibit 12-4 on page 532 illustrates the types of calculations that are used for allocating costs using the direct method and the step-down method.
 
Introduction to Management Accounting: Chapters 1-17, Fourteenth Edition, by Charles T. Horngren, Gary L. Sundem, William O. Stratton, David Burgstahler, and Jeff Schatzberg. Published by Prentice Hall. Copyright © 2008 by Pearson Education, Inc.
Chapter 12: Cost Allocation 585

When you have completed your spreadsheet, answer the following questions:
1. What are the total costs for the Residential department using the direct method? What are the total costs for the Commercial department using the direct method?
2. What are the total costs for the Residential department using the step-down method?
3. What are the total costs for the Commercial department using the step-down method?
4. Which method would you recommend that Antonio Cleaning use to allocate their service departments’ costs to their producing departments? Why?

Step-by-Step:
 
File name: 12-59-Allocating-Costs.xls File type: application/vnd.ms-excel Price: $8

12-59 Allocating Costs Using Direct and Step-Down Methods

12-59 Allocating Costs Using Direct and Step-Down Methods
Goal: Create an Excel spreadsheet to allocate costs using the direct method and the stepdown method. Use the results to answer questions about your findings.
Scenario: Antonio Cleaning has asked you to help them determine the best method for allocating costs from their service departments to their producing departments.

Additional background information for your spreadsheet appears in Fundamental Assignment Material
12-B2. Exhibit 12-4 on page 532 illustrates the types of calculations that are used for allocating costs using the direct method and the step-down method.

Introduction to Management Accounting: Chapters 1-17, Fourteenth Edition, by Charles T. Horngren, Gary L. Sundem, William O. Stratton, David Burgstahler, and Jeff Schatzberg. Published by Prentice Hall. Copyright © 2008 by Pearson Education, Inc.

Chapter 12: Cost Allocation 585
When you have completed your spreadsheet, answer the following questions:
1. What are the total costs for the Residential department using the direct method? What are the total costs for the Commercial department using the direct method?
2. What are the total costs for the Residential department using the step-down method?
3. What are the total costs for the Commercial department using the step-down method?
4. Which method would you recommend that Antonio Cleaning use to allocate their service departments’ costs to their producing departments? Why?

Step-by-Step:
1. Open a new Excel spreadsheet.
2. In column A, create a bold-faced heading that contains the following:
Row 1: Chapter 12 Decision Guideline
Row 2: Dallas Cleaning
Row 3: Cost Allocations from Service Departments to Producing Departments
Row 4: Today’s Date
3. Merge and center the four heading rows across columns A through H.
4. In row 7, create the following bold-faced, center-justified column headings:
Column B: Personnel
Column C: Administrative
Column D: Residential
Column E: Commercial
Column F: Total Res/Comm
Column G: Total Admin/Res/Comm
Column H: Grand Total
5. Change the format of the column headings in row 7 to permit the titles to be displayed on multiple lines within a single cell.
Alignment tab: Wrap Text: Checked
Note: Adjust column widths so that headings use only two lines.
Adjust row height to ensure that row is same height as adjusted headings.
6. In column A, create the following row headings:
Row 8: Direct Department Costs
Row 9: Number of Employees
Skip 2 rows

Note: Adjust the width of column A to 27.14.

7. In column A, create the following bold-faced, underlined row heading:
Row 12: Direct Method:

8. In column A, create the following row headings:
Row 13: Direct Department Costs
Row 14: Personnel Allocation
Row 15: Administrative Allocation
Row 16: Total Costs
Skip 2 rows

9. In column A, create the following bold-faced, underlined row heading:
Row 19: Step-down Method:

10. In column A, create the following row headings:
Row 20: Direct Department Costs
Row 21: Step 1—Personnel Allocation
Row 22: Step 2—Administrative Allocation
Row 23: Total Costs

11. Use data from Fundamental Assignment 12-B2 to enter the amounts in columns B through E for rows 8, 9, 13, and 20.

12. Use the appropriate calculations to do the totals in row 8 for columns F and H.
Use the appropriate calculations to do the totals in row 9 for columns F and G.

13. Use the appropriate formulas to allocate the costs from the service departments to the producing departments using each of the methods.

14. Use the appropriate calculations to do the totals in columns B through E and in column H,
rows 16 and 23.
 
File name: 12-59-Allocating-Costs.xls File type: application/vnd.ms-excel Price: $8

Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry

Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store’s operations follow:
· Sales are budgeted at $360,000 for November, $380,000 for December, and $350,000 for January.
· Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible.
· The cost of goods sold is 65% of sales.
· The company purchases 60% of its merchandise in the month prior to the month of sale and 40% in the month of sale. Payment for merchandise is made in the month following the purchase.
· Other monthly expenses to be paid in cash are $21,900.
· Monthly depreciation is $20,000.
· Ignore taxes.

Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.

SOLUTION PREVIEW
A
Cash Collections
November
December
 
Sales
$360,000
$380,000
 
75% in the same month
270,000
285,000
 
20% of previous month’s sales
74000
72000
 
    Total cash collected
344000
357000

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Fin200 Week 4 - Break-Even Analysis - Chapter 5 Healthy Foods Inc. Product 50 lb. bags Price

Break-Even Analysis Healthy Foods Inc. Product 60 -lbs bags Price $15.00 Per bag Fixed Costs $70,000 Variable Costs $0.15 Per lbs Annual Interest Exp $15,000
 
a. What is the break-even point in bags?
b. Calculate the profit or loss on 12,000 bags and 25,000 bags.
c. What is the degree of operating leverage at 20,000 bags and 25,000 bags? Why does the degree of operating leverage change as the quantity sold increases?
d. If Healthy Foods has an annual interest expense of $10,000, calculate the degree of financial leverage at 20,000 and 25,000 bags.
e. What is the degree of combined leverage at both sales levels? F
 
ile name: Healthy-Foods-revised.doc File type: application/msword Price: $7

The ledger of AISExperts Inc. showed the following balances after adjustment

The ledger of AISExperts Inc. showed the following balances after adjustment, but before closing, on December 31, 2007, the end of the current year:
Accounts payable 79000 Accounts receivable 104000 Accumulated depreciation – equipment 28000 Depreciation expense 800 Interest revenue 1925 Cash 80500 Common stock (10,000 shares outstanding) 100000 Cost of merchandise sold 635550 Dividend 19100 Equipment 139450 General expenses 114250 Interest expense 5600 Merchandise inventory 154250 Prepaid insurance 11225 Retained earnings ? Salaries Payable 14550 Sales 960250 Selling expenses 140700

The president of AISExperts Inc., has asked you to develop a flexible financial statement package (call the file yourlastnameyourfirstnameFinState07), using Excel that includes:
• a data entry sheet
• a trial balance,
• a single-step income statement,
• a multi-step income statement,
• a statement of retained earnings,
• a classified balance sheet, and
• a post-close trial balance (a trial balance with only accounts not “closed”)

Each statement must be on one sheet in the file and this file should allow the financial statements to be prepared quickly by entering account balances in the appropriate cells on the first sheet of the file (book) – data entry sheet.

Include percentages in the Income Statement (vertical analysis) i.e. gross profit percentage, % of selling expenses to sales, etc. (common sizing and vertical analysis are basically the same analysis techniques – every number in the multi-step income statement are divided by sales).

Your file must contain documentation with comments (Excel commands: INSERT, COMMENT). The comments should be included where you think explanation is required i.e. earnings per share on the bottom of the income statement should probably be explained or retained earnings might require some additional comments.

Use the financial information above as input for your statements. Only formulas/cell references should appear on all sheets except your data entry sheet (except titles and dates) – no hard coded numbers in the financial statements.


SOLUTION PREVIEW
Multi-step income statement
Particulars
Amount
Amount
% of sales
Revenue:
Sales
960250
100%
Less Cost of merchandise sold
635550
66.18589
    Gross profit
324700
33.81411

File name: The-ledger-of-AISExperts-Inc..xls File type: application/vnd.ms-excel Price: $10

McKinsee Inc. is developing a plan to finance its asset base. The firm has $5,000,000 in current assets, of which 20% are


a) Construct a conservative financing plan with 80% of assets financed by long-term sources. If McKinsee's earnings before interest and taxes are $6,000,000, what will their net income be?

b) An alternative and more aggressive plan would be to finance 60% of total assets with long-term financing. Assuming that EBIT was again $6,000,000, what will net income be under this alternative?

c) If interest rates were expected to increase, which plan would you recommend? Why?
                                                     CLICK HERE FOR SOLUTION

Described below are certain transactions of Beacon Company for 2004:


Described below are certain transactions of Beacon Company for 2004: a)On May 10, the company purchased goods from Jay Company for $90,000, terms 2/10, n/30. Purchases and accounts payable are recorded at net amounts. The invoice was paid on May 18. b)On June 1, the company purchased equipment for $120,000 from Nolan Company, paying $40,000 in cash and giving a one-year, 9% note for the balance. c)On September 30, the company discounted at 10% its $240,000, one-year zero-interest-bearing note at First State Bank. Instructions (a)Prepare the journal entries necessary to record the transactions above using appropriate dates. (b)Prepare the adjusting entries necessary at December 31, 2004 in order to properly report interest expense related to the above transactions. Assume straight-line amortization of discounts. (c)Indicate how the above transactions should be reflected in the Current Liabilities section of Beacon Company's December 31, 2004 balance sheet.

CLICK HERE FOR SOLUTION

Stock in Rich Corporation is currently selling for $25.00 per share

QUESTION                          SOLUTION

Part 1 - CAPITAL BUDGETING a. Consider the project with the following expected cash flows:

Part 1. Capital Budgeting Practice Problems
a. Consider the project with the following expected cash flows:
 
Year Cash flow
0 - $500,000
0 - $500,000
1 $100,000
2 $110,000
3 $550,000

• If the discount rate is 0%, what is the project's net present value?
• If the discount rate is 4%, what is the project's net present value?
• If the discount rate is 8%, what is the project's net present value?
• If the discount rate is 10%, what is the project's net present value?
• What is this project's internal rate of return?

Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis?
[Look at the graph you draw and write a short paragraph stating what the graph 'shows"].

b. Consider a project with the expected cash flows:
Year Cash flow
0 - $615,000
1 + 141,000
2 + 300,000
3 + $300,000

• What is this project's internal rate of return?
• If the discount rate is 0%, what is this project's net present value?
• If the discount rate is 4%, what is this project's net present value?
• If the discount rate is 8%, what is this project's net present value?
• If the discount rate is 12%, what is this project's net present value?

Draw a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis?
[Observe the graph and write a short paragraph stating what the graph 'shows

c. A project requiring a $3.2 million investment has a profitability index of 0.97
What is its net present value? (Remember: Profitability Index is defined as Present Value of the proceeds divided by the initial investment)
 
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