Answer:
A
Explanation:
the sales price increase and because the variable cost are the same the contribution margin will increase, which lead to think the BEP is lower.
But, because the fixed cost also increase we cannot determinate where the new BEP Will be higher or lower. The fixed cost could increase so much that nulifies the increase in the contribution margin or even be higher enought that the BEP goes higher.
So Option A is the only true statment.
Common stock 110,000 Warranties payable (short term) 6,500
Notes receivable (short term) 32,500 Gain on sale of equipment 19,000
Allowance for doubtful accounts 19,000 Operating expenses 65,000
Accumulated depreciation 66,000 Cash flow from investing activities 116,000
Notes payable (long term) 160,000 Prepaid rent 38,000
Salvage value of building 21,000 Land 95,000
Interest payable (short term) 6,000 Cash 41,000
Uncollectible accounts expense 45,000 Inventory 101,000
Supplies 6,500 Accounts payable 55,000 Equipment 243,000
Interest expense 36,000 Interest revenue 6,200
Salaries payable 68,000 Sales revenue 940,000
Unearned revenue 47,000 Dividends 20,000
Cost of goods sold 595,000 Warranty expense 9,200
Accounts receivable 108,000 Interest receivable (short term) 3,600
Depreciation expense 3,000
Answer:
Eller Equipment Co.
Income statement
Particular Amount($) Amount ($)
Sales revenue 940,000
Less: Cost of good sold (595,000)
Gross margin 345,000
Operating expenses
Salaries expenses 122,000
Operating expenses 65,000
Warranty expenses 9,200
Un-collectible account expenses 45,000
Depreciation expenses 3,000
Total operating expenses (244,200)
Operating income 100,800
Non-operating expenses
Interest revenue 6,200
Interest expenses (36,000)
Gain on sale of equipment 19,000
Total non-operating items (10,800)
Net Income $90,000
Balance Sheet
Assets Amount$
Current Assets
Cash 41,000
Accounts receivable 108,000
Less: Allowance for doubtful (19,000) 89,000
accounts
Merchandise inventory 101,000
Interest receivable 3600
Prepaid rent 38,000
Supplies 6,500
Notes receivable 32,500
Total current assets 311,600
Property Plant and Equipment
Equipment 243,000
Less: Accumulated depreciation (66,000) 177,000
Land 95,000
Total property plant and equipment 272,000
Total Assets 583,600
Liabilities and Stockholder Equity
Current liabilities
Account payable 55,000
Unearned revenue 47,000
Warranties payable 6,500
Interest payable 6,000
Salaries payable 68,000
Total current liabilities 182,500
Long-term liabilities
Notes payable 160,000
Total long-term liabilities 160,000
Stockholders equity
Common stock 110,000
Retained earning 131,100
Total stockholders equity 241,100
Total liabilities and stockholders equity $583,600
Workings
Retained earning = Beginning retained earning + Net income - Dividend
= 61,100 + 90,000 - 20,000
= 131,100
The multistep income statement and the classified balance sheet was prepared for the Eller Equipment Co. using the provided year 1 figures. The net income was found to be $98,200 and total assets for the company were calculated to be $541,000. These statements are essential tools for financial decision making in business.
Multistep Income Statement for Eller Equipment Co.
Start by listing the different income categories. The sales revenue is $940,000.
Deduct the cost of goods sold which is $595,000 to calculate the gross profit: $345,000.
Next, deduct the operating expenses that include salaries expense ($122,000), uncollectible accounts expense ($45,000), operating expenses ($65,000), depreciation expense ($3,000), and interest expense ($36,000) to arrive at an operating income: $73,000.
Lastly, consider the gain on sale of equipment ($19,000) and the interest revenue ($6,200) to find a net income of $98,200.
Classified Balance Sheet for Eller Equipment Co.
Start with assets that include cash ($41,000), accounts receivable ($108,000 - $19,000 = $89,000), inventory ($101,000), Prepaid Rent ($38,000), Land ($95,000), and Equipment ($243,000 - $66,000 = $177,000) to get a total asset of $541,000.
Next, consider liabilities which include accounts payable ($55,000), salaries payable ($68,000), interest payable ($6,000), unearned revenue ($47,000), warranties payable ($6,500), and notes payable ($160,000) to get a total liability of $342,500.
Finally, calculate the equity. The retained earnings are beginning retained earnings ($61,100) + net income ($98,200) - dividends ($20,000) = $139,300.
Adding the common stock ($110,000) will give a total equity of $249,300.
Check your work: Assets ($541,000) = Liabilities ($342,500) + Equity ($249,300)
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Answer:
a) Assets: Reserves $200,000; Liabilities: Deposits $200,000
b) Amount Deposited: $2000,000; Change in Excess Reserves: $190,000; and Change in Required Reserves: $10,000
c) See the calculation below and the attached excel file for the table.
d) the $200,000 injection into the money supply results in an overall increase of $4,000,000 in demand deposits.
Explanation:
These can be answered as follows:
a) Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans).
Note: See the attached excel file for the table.
The $200,000 deposited by Lorenzo to First Main Street Bank led to the creation of both an asset and a liability for First Main Street Bank.
As a result, the reserve of the bank is increased by $200,000 on the asset side of the T-account. It is therefore now possible for the ban to grant loan to other customers from these additional reserves.
In addition, the demand deposit of the bank is increased by $200,000 on the liability side of the T-account. This is recorded as a demand deposit because it is possible for Lorenzo to come at any time to the band to withdraw his deposit either by using a debit card or by writing a check.
b) Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 5%. Hint: If the change is negative, be sure to enter the value as negative number.
Note: See the attached excel file for the table. Just scroll the excel file down to part b.
The required reserve ratio of 5% indicates that First Main Street Bank has to hold 5% of the $200,000 the deposit or fresh fresh reserves, and this will result in having a 95% excess reserve which the bank can employ to grant loans.
From the amount deposited, the change in excess reserve and the change in the required reserve can be computed as follows:
Amount deposited = $200,000
Change in excess reserve = $200,000 * (1 - 5%) = $190,000
Change in required reserve = $200,000 * 5% = $10,000
c) Now, suppose First Main Street Bank loans out all of its new excess reserves to Juanita, who immediately uses the funds to write a check to Gilberto. Gilberto deposits the funds immediately into his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Lorenzo, who writes a check to Neha, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Teresa as well.Fill in the following table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar.
Note: See the attached excel file for the table. Just scroll the excel file down to part c.
As already computed in part b above, we have the following to show the effect of this ongoing chain of events at each bank, we have:
For First Main Street Bank:
Increase deposit = Deposit from Lorenzo = $200,000
increase in required reserve = $200,000 * 5% = $10,000
Increase in loans = Loan to Juanita = $200,000 * (1 - 5%) = $190,000
For Second Republic Bank:
Increase deposit = Deposit from Gilberto = $190,000
Increase in required reserve = $190,000 * 5% = $9,500
Increase in Loans = Loans to Lorenzo = $190,000 * (1 - 5%) = $180,500
For Third Fidelity Bank:
Increase deposit = Deposit from Neha = $180,500
Increase in required reserve = $180,500 * 5% = $9,025
Increase in Loans = Loans to Teresa = $180,500 * (1 - 5%) = $171,475
d) Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $200,000 injection into the money supply results in an overall increase of in demand deposits.
In order to calculate this, the formula for the money multiplier is used to multiply the initial deposit or injection of $200,000 by Lorenzo as follows:
Money multiplier = 1/r
Where r denotes required reserve ratio of 5%, or 0.05.
Therefore, we have:
Overall increase in demand deposits = Injection * (1 / r) = $200,000 * (1 / 0.05) = $200,000 * 20 = $4,000,000
Therefore, the $200,000 injection into the money supply results in an overall increase of $4,000,000 in demand deposits.
When the Federal Reserve buys a government bond from a client of First Main Street Bank, the bank's assets increase by the bond value and its liabilities increase by the same amount in deposits.
In this scenario, when the Federal Reserve buys a $200,000 government bond from Lorenzo, a client of First Main Street Bank, and he deposits the money into his checking account at the bank, there are changes in the bank's T-account. The bank's assets increase by $200,000 in reserves, while its liabilities increase by $200,000 in deposits.
Next, if First Main Street Bank loans out all of its new excess reserves to Juanita, who writes a check to Gilberto, Gilberto deposits the funds into his checking account at Second Republic Bank. This process continues with each successive loan deposited into a checking account at each bank. The increase in deposits, required reserves, and loans at each bank can be filled in the table provided.
Assuming this process continues with no banks keeping any excess reserves, the $200,000 injection into the money supply results in an overall increase of $200,000 in demand deposits.
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Answer:
Option D is false
Explanation:
EVC is not the same thing as willingness to pay because EVC is a measure of the value the product produces for a particular customer but doesn't have any effect on it's customers ability to pay for the estimated value.
$2,000 unfavorable.
$2,000 favorable.
$8,000 favorable.
$6,000 unfavorable.
Answer:
The correct answer is B.
Explanation:
Giving the following information:
At the normal capacity of 16,000 units, budgeted manufacturing overhead is $64,000 variable and $180,000 fixed. If Chambers had actual overhead costs of $250,000 for 18,000 units produced.
Variable overhead rate= 64,000/16,000= $4
Overhead variance= real - allocated
Overhead variance= 250,000 - (4*18,000 + 180,000)= 250,000 - 252,000= 2,000 favorable
B. 92
C. 5 hours
D. 4 hours
Answer:
B. 92
Explanation:
The intercept is the point at which a function met with the Y axis.
On the Y axis will be the score
On the X axis the videogames hours
At more videogames hours less score and at less videogames hours more score.
We are asked for the value of score for 0 hours of dividends:
at X = 0 then Y = 92
Answer:
92
Explanation:
Year 2 Year 3
Amounts billed to customers for services rendered $ 320,000 $ 420,000
Cash collected from credit customers 230,000 370,000
Cash disbursements:
Payment of rent 77,000 0
Salaries paid to employees for services rendered during the year 137,000 157,000
Travel and entertainment 27,000 37,000
Advertising 13,500 32,000
In addition, you learn that the company incurred advertising costs of $24,000 in year 2, owed the advertising agency $4,900 at the end of year 1, and there were no liabilities at the end of year 3. Also, there were no anticipated bad debts on receivables, and the rent payment was for a two-year period, year 2 and year 3.
Required:
1. Calculate accrual net income for both years.
2. Determine the amount due the advertising agency that would be shown as a liability on RPG’s balance sheet at the end of year 2.
Answer:
RPG Company
1. Accrual Net Income for Year 2 and Year 3:
Year 2 Year 3
Amounts billed to customers for services $ 320,000 $ 420,000
Expenses:
Rent 38,500 0
Salaries paid to employees for services 137,000 157,000
Travel and entertainment 27,000 37,000
Advertising 24,000 16,600
Net Income $93,500 $170,900
2. Determination of the liability for Advertising:
Advertising Expense:
Year 1 balance = $4,900
Year 2 = $24,000
Cash paid (13,500)
Balance $15,400
Explanation:
a) Data and Calculations:
RPG Company.
Year 2 Year 3
Amounts billed to customers for services $ 320,000 $ 420,000
Cash collected from credit customers 230,000 370,000
Cash disbursements:
Payment of rent 77,000 0
Salaries paid to employees for services 137,000 157,000
Travel and entertainment 27,000 37,000
Advertising 13,500 32,000
Year 2 Year 3
Service Revenue: $ 320,000 $ 420,000
Accounts Receivable
Service revenue $320,000
Cash collected 230,000
Balance Year 2 $90,000
Service revenue 420,000
Cash collected 370,000
Balance Year 3 $50,000
Advertising Expense:
Year 1 balance = $4,900
Year 2 = $24,000
Cash paid (13,500)
Balance $15,400
Year 3 = 16,600
Cash paid 32,000
Balance 0
The accrual net income for RPG Company in Year 2 is $55,000, and in Year 3 is $194,000. The amount due to the advertising agency shown as a liability on RPG's balance sheet at the end of Year 2 is $0, as it was completely paid off in that year.
In order to calculate the accrual net income and determine the liability of the advertising agency, we first need to correctly account for all the incomes and expenses. Here's how it works:
Accrual net income is calculated as revenues (Amounts billed to customers) minus expenses. For year 2, the expenses include Payments of rent, Salaries paid, Travel and entertainment, and Advertising costs. For year 3, as there was no rent payment and no liabilities at the end of the year, we deduct only the Salaries paid, Travel and entertainment, and Advertising costs from the revenues.
Revenues
Year 2: $320,000
Year 3: $420,000
Expenses
Year 2: Rent($77,000) + Salary($137,000) + Travel & Entertainment($27,000) + Advertising($24,000) = $265,000
Year 3: Salary($157,000) + Travel & Entertainment($37,000) + Advertising($32,000) = $226,000
Accrual Net Income
Year 2: $320,000 - $265,000 = $55,000
Year 3: $420,000 - $226,000 = $194,000
The amount owed to the advertising agency that should be considered as a liability at the end of year 2 can be figured out by taking into account the advertising expenses incurred in year 2 and the previous year's outstanding. But since we learn that there were no liabilities at the end of year 3, the outstanding $4,900 at the end of year 1 must be paid in year 2 along with the incurred cost of $24,000. Therefore, the liability at the end of year 2 would be $0.
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