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Thermal Tent Inc. is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per yr. of a new product.

P20-1A Thermal Tent Inc. is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per yr. of a new product. The following estimates have been made of the company’s costs and expenses (other than income taxes).
 
P20-1A: Setting Sales Price and Computing the Break-Even Point
 
P20-1A Thermal Tent Inc. is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per yr. of a new product. The following estimates have been made of the company’s costs and expenses (other than income taxes).
                                                                                    Fixed               Variable per Unit
Manufacturing costs:
            Direct materials…………………………                                                          $47
            Direct labor……………………………..                                                          $32
Manufacturing overhead…………….....                      $340,000                                $ 4
Period costs:
            Selling expenses……………………….                                                                        $1       
            Administrative expenses………………           $200,000
TOTALS……………………………………..               = $540,000                          = $84
 
Instructions:
a.)    What should the company establish as the sales price per unit if it sets a target of earning an operating income of $260,000 by producing and selling 50,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.)
b.)    At the unit sales price computed in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold.)
c.)    What will be the margin of safety (in dollars) if the company produces and sells 50,000 units @ the sales price computed in part a? Using the margin of safety, compute operating income @ 50,000 units.
Assume that the marketing manager thinks that the price of this product must be no higher than $94 to ensure market penetration. Will setting the sales price @ $94 enables Thermal Tent to break even, given the plans to manufacture and sell 50,000 units? Explain your answer.
 
TUTORIAL PREVIEW
a.)    What should the company establish as the sales price per unit if it sets a target of earning an operating income of $260,000 by producing and selling 50,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.)
 
Desired sales =      fixed cost + desired operating income
                         Sales price per unit – variable cost per unit
 
File name: Thermal Tent Inc.doc File type: doc PRICE: $7

Irma Watts and John Lyon are forming a partnership to which Watts will devote one-half time and Lyon will devote full time. They have discussed the following alternative plans for sharing income and loss


Irma Watts and John Lyon are forming a partnership to which Watts will devote one-half time and Lyon will devote full time. They have discussed the following alternative plans for sharing income and loss

 
P12-2A Irma Watts and John Lyon are forming a partnership to which Watts will devote one-half time and Lyon will devote full time. They have discussed the following alternative plans for sharing income and loss


P12-2A Allocating partnership income and loss; sequential years L.O. P2

 
Irma Watts and John Lyon are forming a partnership to which Watts will devote one-half time and Lyon will devote full time. They have discussed the following alternative plans for sharing income and loss:


(a) in the ratio of their initial capital investments, which they have agreed will be $42,000 for Watts and $63,000 for Lyon; (b) in proportion to the time devoted to the business; (c) a salary allowance of $6,000 per month to Lyon and the balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $6,000 per month to Lyon, 10% interest on their initial capital investments, and the balance shared equally. The partners expect the business to perform as follows: Year 1, $36,000 net loss; Year 2, $90,000 net income; and Year 3, $150,000 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or

TUTORIAL PREVIEW
Watts and Lyon
Preliminary Calculations
Plans a and c
Percentage based on initial investments:
 
 
 
 
 
Watts
40%
<-Correct!
 
 
 
Lyon
60%
<-correct!
 
 
 
 
 
 
 
 

 
File name: P12-2A Irma Watts.xls File type: xls PRICE: $12

The comparative statements of Beulah Company are presented below.

P14-6A The comparative statements of Beulah Company are presented below.
BEULAH COMPANY
Income Statement
For the Years Ended December 31
2014
2013
Net sales (all on account)
$500,000
$420,000
Expenses
    Cost of goods sold
315,000
254,000
    Selling and administrative
120,800
114,800
    Interest expense
7,500
6,500
    Income tax expense
20,000
15,000
      Total expenses
463,300
390,300
Net income
$ 36,700
$ 29,700
 
BEULAH COMPANY
Balance Sheets
December 31
Assets
2014
2013
Current assets
    Cash
$ 21,000
$ 18,000
    Short-term investments
18,000
15,000
    Accounts receivable (net)
85,000
75,000
    Inventory
80,000
60,000
      Total current assets
204,000
168,000
Plant assets (net)
423,000
383,000
Total assets
$627,000
$551,000
Liabilities and Stockholders’ Equity
Current liabilities
    Accounts payable
$122,000
$110,000
    Income taxes payable
12,000
11,000
      Total current liabilities
134,000
121,000
Long-term liabilities
    Bonds payable
120,000
80,000
      Total liabilities
254,000
201,000
Stockholders’ equity
    Common stock ($5 par)
150,000
150,000
    Retained earnings
223,000
200,000
      Total stockholders’ equity
373,000
350,000
Total liabilities and stockholders’ equity
$627,000
$551,000
 
Additional data
The common stock recently sold at $19.50 per share.:
Compute the following ratios for 2014. (Round Earnings per share and Acid-test ratio to 2 decimal places, e.g. 1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8% .)
(a)
Current ratio
 :1
(b)
Acid-test ratio
 :1
(c)
Accounts receivable turnover
 times
(d)
Inventory turnover
 times
(e)
Profit margin
 %
 
File name: P14-6A Beulah Company.doc File type: doc PRICE: $8

CRP II - Mills Sporting Goods - College Accounting - Comprehensive Review Problem II - paradigm 5th edition

College Accounting - Comprehensive Review Problem II - paradigm 5th edition
 
Mills Sporting Goods Store - College Accounting  - Comprehensive Review Problem II - paradigm 5th edition
 
Mills Sporting Goods Store - EXCEL TEMPLATE 
You have now completed the accounting cycle for a merchandising business and are ready to try to put it all together in this second comprehensive review problem.
 
You are keeping the accounting records for Cindi Mills, owner of Mills Sporting Goods Store. You begin with the balances in her accounts and go through the accounting cycle for two months.
 
Directions:
1.      Open accounts in the general ledger with the following balances as of January 1, 20X1
Account                                                                      Balance
111                  Cash                                                                            $6,560
112                  Accounts Receivable                                                  2,955
113                  Office Supplies                                                           825
114                  Store Supplies                                                             1,915
115                  Merchandise Inventory                                               13,540
116                  Prepaid Insurance                                                       750
121                  Office Equipment                                                       9,500
121.1               Accumulated Depreciation-Office Equipment           2,600
122                  Store Equipment                                                         16,600
122.1               Accumulated Depreciation-Store Equipment             4,000
123                  Delivery Equipment                                                    13,000
123.1               Accumulated Depreciation-Delivery Equipment        7,000
211                  Accounts Payable                                                       3,880
311                  Cindi Mills, Capital                                                     48,165
312                  Cindi Mills, Drawing
313                  Income Summary
411                  Sales
412                  Sales Returns and Allowances
413                  Sales Discounts
511                  Purchases
512                  Purchases Returns and Allowances
513                  Purchases Discounts
514                  Freight in
611                  Salaries Expense
612                  Rent Expense
613                  Utilities Expense
614                  Office Supplies Expense
615                  Store Supplies Expense
616                  Insurance Expense
617                  Depreciation Expense-Office Equipment
618                  Depreciation Expense-Store Equipment
619                  Depreciation Expense-Delivery Equipment
2.  Open accounts in the accounts receivable ledger with the following balances as of January 1, 20X1:
Customer Name                                            Balance
Henry Galvin                                                  $1,025
Lee Maddox                                                   755
Neagle Co.                                                      1,175
Smitz, Inc                                                        -0-
3.  Open accounts in the accounts payable ledger with the following balances as of January 1, 20X1:
Creditor Name                                              Balance
W. Bedford Co.                                              $1,365
Jones Co.                                                         -0-
Lemke Brothers                                              1,540
Wohlers, Inc.                                                   975
4. Record the January transactions in a general journal (page 12), a one column sales journal (page26), a purchases journal (page 10), a five-column cash receipts journal (page 11), or a four column cash payments journal (page 9). All credit sales carry terms of 2/10, n/30. Freight on all purchases is charged to the freight in account.
20X1
January
2          Paid rent for the month, $1.070, Check No. 234
2          Sold merchandise to Smitz, Inc., $765, Invoice No. 176
4          Collected the balance due from Henry Galvin, less 2% discount
5          Sold merchandise to Henry Galvin, $1,670, Invoice No. 177
6          Collected the balance due from Neagle Co., less 2% discount
7          Issued a credit memorandum to Henry Galvin for the return of defective merchandise sold on January 5, $210
7          Purchased merchandise from Lemke Brothers, $1,045; terms 2/10,n/30; Invoice No. 187
8          Paid W. Bedford Co. the balance due, less 2% discount; Check No. 235
9          Paid Wohlers, Inc., the balance due, less 1% discount; Check No. 236
10        Returned defective merchandise purchased on January 7 from Lemke Brothers, receiving a credit memorandum for $105
10        Collected the balance due from Lee Maddox, Less 2% discount
11        Paid Lemke Brothers the January 1 balance; no discount; Check No 237
12        Received a check from Smitz, Inc., for the amount due from the sale of January 2
14        Purchased merchandise from Jones Co. $2,550; terms, 2/10,n/30; Invoice No. 188
15        Received a check from Henry Galvin for the amount due from the sale of January 5, less the return of January 7
15        Recorded cash sales for the first half of January, $1,665
15        Cindi invested an additional$3,000 cash in the firm
16        Purchased office equipment from Wohlers, Inc., $4,400; terms, 2/30,n/60 Invoice No. 189
17        Sold merchandise to Lee Maddox, $950, Invoice No. 178
17        Paid Lemke Brothers the amount due from the purchase of January 7, less the return of January 10; Check No. 238
18        Purchased office supplies from W. Bedford Co., $860; terms, n/30; Invoice No. 190
19        Returned defective office supplies to W. Bedford Co., receiving a credit memorandum for $110
20        Purchased store supplies from Jones Co.,$555; terms, n/30; Invoice No. 191
22        Cindi invested a used truck valued at $4,700 in the business
23        Sold merchandise to Neagle Co., $820, Invoice No. 179
24        Paid the balance due to Jones Co. from the purchase of January 14; Check No. 239
24        Cindi wrote check No. 240 to pay her home phone bill, $205
25        Sold Merchandise to Smitz, Inc., $1,995, Invoice No. 180
26        Sold store supplies to another firm at cost for cash, $110
27        Issued a credit memorandum to Smitz, Inc., for a shortage from the sale of January 25, $75
27        Purchased merchandise from Jones Co., $750; terms, 2/10,n/30; Invoice No. 192
29        Paid January’s electric bill, $595, Check No. 241
31        Recorded cash sales for the second half of January, $2,445
31        Paid freight on January purchases, $450, Check No. 242
31        Paid salaries for January, $4,450, Check No. 243
5. Total all special journals
6. Post all items that need to be posted
7. Prepare a trial balance on a work sheet as of January 31, 20X1
8. Prepare schedules of accounts receivable and accounts payable
9. Complete the worksheet. Adjustment data for January 31 are as follows:
            (a) Office Supplies on hand, $830
            (b) Store Supplies on hand, $750
            (c) Insurance Expired, $20
            (d) Depreciation of office equipment, $90
            (e) Depreciation of store equipment, $125
            (f) Depreciation of delivery equipment, $250
            (g) Merchandise Inventory (beginning), $13,540
            (h) Merchandise Inventory (ending), $12,210
10. Record and post adjusting entries as of January 31.
11. Record and post closing entries as of January 31.
12. Prepare a January 31 post-closing trial balance.
13. Prepare an income statement for the month of January. All salaries are sales salaries.
14. Prepare a statement of owner’s equity for the month of January
15. Prepare a January 31 balance sheet
16. Record the following February transactions
20X1
February
1          Paid rent for the month, $1,070, Check No. 244
2          Purchased merchandise from Lemke Brothers, $740; terms, 2/10,n/30; Invoice No. 193
3          Returned merchandise purchased from Lemke Brothers on February 2, receiving a credit memorandum for $75
3          Collected the balance due from Lee Maddox
4          Collected the balance due from Smitz, Inc., for the sale of January 25 less the credit of January 27 and less the 2% discount
5          Cindi took home $40 of office supplies for her personal use
6          Sold merchandise to Henry Galvin, $2,140, Invoice No. 181
6          Paid Jones Co. the balance due on purchases of $555 and $750, less a 2% discount on the $750 purchase; Check No. 245
7          Collected the balance due from Neagle Co.
8          Issued a credit memorandum to Henry Galvin for damaged merchandise sold on February 6, $195
9          Purchased merchandise for cash, $375, Check No. 246
11        Paid Lemke Brothers for the balance due from the purchase of February 2, less the return of February 3; Check No. 247
11        Returned $20 of the merchandise purchased on February 9, receiving a cash refund
12        Sold merchandise to Lee Maddox, $1,185, Invoice No. 182
13        Cindi wrote Check No. 248 for personal expenses, $350
14        Recorded cash sales for the first half of the month, $3,095
15        Paid Wohlers, Inc., the balance due, less 2% discount, Check No. 249
16        Received a check from Henry Galvin for the amount due from the sale of February 6, less the return of February 8
17        Sold office supplies for cash, $85
17        Paid W. Bedford Co. the balance due for the purchase of January 18, less the return of January 19; Check No. 250
19        Purchased store supplies from W. Bedford Co. $340; terms, n/30; Invoice No. 194
20        Returned $30 of the store supplies purchased on February 19, receiving credit
21        Purchased merchandise from Lemke Brothers, $940; terms, 2/10,n/30; Invoice No. 195
22        Sold merchandise to Neagle Co., $1,095; Invoice No. 183
24        Purchased merchandise from Jones Co., $1,045; terms, 2/10,n/30; Invoice No 196
25        Sold merchandise to Smitz, Inc., $1,755, Invoice No. 184
26        Purchased store equipment from Wohlers, Inc., $2700; terms 2/30,n/60; Invoice No. 197
27        Paid the electric bill for February, $550, Check No. 251
28        Recorded cash sales for the second half of the month, $2,985
28        Paid freight on February purchases, $435, Check No. 252
28        Paid salaries for February, $4,450, Check No. 253
17. Total all special journals.
18. Post all items that need to be posted
19. Prepare a trial balance on a work sheet as of February 28, 20X1
20. Prepare schedules of accounts receivable and accounts payable.
21. Complete the work sheet. Adjustment data for February 28 are as follows
            (a) Office Supplies on hand, $355
            (b) Store Supplies on hand, $275
            (c) Insurance Expired, $20
            (d) Depreciation of office equipment, $90
            (e) Depreciation of store equipment, $125
            (f) Depreciation of delivery equipment, $250
            (g) Merchandise Inventory (beginning), $12.210
            (h) Merchandise Inventory (ending), $12,780
22. Record and post adjusting entries as of February 28.
23. Record and post closing entries as of February 28.
24. Prepare a February 28 post-closing trial balance.
25. Prepare an income statement for the month of February. All salaries are sales salaries.
26. Prepare a statement of owner’s equity for the month of February.
27. Prepare a February 28 balance sheet.
 
Check figures for January only.
Net Loss: 4,946.75  Total Assets: 57,168.25  Cash Balance: 4,823.25
 
SOLUTION PREVIEW
CRP II Use an X instead of a check mark symbol, when needed. Data Entry Cells
1., 6., 10., 11., 18., 22., 23.
General Ledger
ACCOUNT 
Cash
ACCOUNT NO.
111
DATE
ITEM
P.R.
DEBIT
CREDIT
BALANCE
DEBIT
CREDIT
20X1
Jan.
1
Balance
 
 
 
        6,560.00
 
 
31
Cash Receipts Journal
 
    12,296.40
 
      18,856.40
 
 
31
Cash Payment Journal
 
 
      14,033.15
        4,823.25
 
Feb.
28
Cash Receipts Journal
 
    11,742.70
 
      16,565.95
 
 
28
Cash Payment Journal
 
 
      14,233.70
        2,332.25
 
ACCOUNT 
Accounts Receivable
ACCOUNT NO.
112
DATE
ITEM
P.R.
DEBIT
CREDIT
BALANCE
DEBIT
CREDIT
20X1
Jan.
1
Balance
 
 
 
        2,955.00
 
 
7
General Journal
 
 
            210.00
        2,745.00
 
 
27
General Journal
 
 
              75.00
        2,670.00
 
 
31
Sales Journal
 
      6,200.00
 
        8,870.00
 
 
31
Cash Receipt Jornal
 
 
        5,180.00
        3,690.00
 
Feb.
8
General Journal
 
 
            195.00
        3,495.00
 
 
28
Sales Journal
 
      6,175.00
 
        9,670.00
 
 
28
Cash Receipt Jornal
 
 
        5,635.00
        4,035.00
 
 
File name: CRPII-Mills sporting.xls File type: xls PRICE: $75
 
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