Following are the budgeted income statements for the second quarter of 2010 for Marine Tech, Inc (A+)

Following are the budgeted income statements for the second quarter of 2010 for Marine Tech, Inc.:

April May June

Sales $266,000 $323,000 $361,000

Cost of goods sold* 182,400 216,600 239,400

Gross profit $83,600 $106,400 $121,600

Operating expenses† 41,800 47,500 51,300

Operating income $41,800 $58,900 $70,300

* Includes all product costs (i.e., direct materials, direct labor, and manufacturing overhead).

† Includes all period costs (i.e., selling, general, and administrative expenses).

The company expects about 30% of sales to be cash transactions. Of sales on account, 60% are expected to be collected in the first month after the sale is made, and 40% are expected to be collected in the second month after sale. Depreciation, insurance, and property taxes represent $22,800 of the estimated monthly cost of goods sold and $15,200 of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 80% are expected to be paid in the month in which they are incurred, and the balance is expected to be paid in the following month.

Current assets as of April 1, 2010, consist of cash of $26,600 and accounts receivable of $284,620 ($199,234 from March credit sales and $85,386 from February credit sales). Current liabilities as of April 1 consist of $34,200 of accounts payable for product costs incurred in March; $8,740 of accrued liabilities for operating expenses incurred in March; and a $76,000, 14%, 120-day note payable that is due on April 17, 2010.

An estimated income tax payment of $76,000 will be made in May. The regular quarterly dividend of $30,400 is expected to be declared in May and paid in June. Capital expenditures amounting to $32,680 will be made in April.

Required:

(a) Complete the monthly cash budgets for the second quarter of 2010 using the following format. Note that the ending cash balance for June is provided as a check figure. (Input all amounts as positive values. Use 360 days year for calculations.

(b) Assume that management of Marine Tech, Inc., desires to maintain a minimum cash balance of $18,100 at the beginning of each month and has arranged a $100,000 line of credit with a local bank at an interest rate of 10% to ensure the availability of funds. Borrowing transactions are to occur only at the end of months in which the budgeted cash balance would otherwise fall short of the $18,100 minimum balance. Repayments of principal and interest are to occur at the end of the earliest month in which sufficient funds are expected to be available for repayment. (Input all amounts as positive values. Use 360 days year for calculations

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Brass Creations Co. makes decorative candle pedestals (A+)

Brass Creations Co. makes decorative candle pedestals. An industrial engineer consultant developed ideal time standards for one unit of the Cambridge model pedestal. The standards follow, along with the cost accountant’s determination of current labor pay rates:

Worktype 1 0.19 hour @ $12.33 per hour

Worktype 2 0.33 hour @ $10.79 per hour

Worktype 3 0.63 hour @ $19.64 per hour

Required:

(a) Using the preceding data, calculate the direct labor cost for a Cambridge model pedestal. (Do not round your intermediate calculations.

(b) Would it be appropriate to use the cost calculated in part (a) as a standard cost for evaluating direct labor performance and valuing inventory?

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Osage Inc., has actual sales for June and July and forecast sales for August, September, October, and November as follows (A+)

Osage Inc., has actual sales for June and July and forecast sales for August, September, October, and November as follows:

Actual:

June 5,960 units

July 6,210 units

Forecasted:

August 6,030 units

September 6,710 units

October 5,630 units

November 5,280 units

Required:

(a) The firm’s policy is to have finished goods inventory on hand at the end of the month that is equal to 50% of the next month’s sales. It is currently estimated that there will be 3,900 units on hand at the end of July. Calculate the number of units to be produced in each of the months of August, September, and October.

(b) Each unit of finished product requires 5 pounds of raw materials. The firm’s policy is to have raw material inventory on hand at the end of each month that is equal to 55% of the next month’s estimated usage. It is currently estimated that 26,400 pounds of raw materials will be on hand at the end of July. Calculate the number of pounds of raw materials to be purchased in each of the months of August and September.(Round your answers to nearest whole number.)

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Olympia Productions, Inc., makes award medallions that are attached to ribbons (A+)

Olympia Productions, Inc., makes award medallions that are attached to ribbons. Each medallion requires 18 inches of ribbon. The sales forecast for February is 2,300 medallions. Estimated beginning inventories and desired ending inventories for February are:

Estimated Beginning Inventory Desired Ending Inventory

Medallions 1,000 720

Ribbon (yards) 70 26

Required:

(a) Calculate the number of medallions to be produced in February.

(b) Calculate the number of yards of ribbon to be purchased in February.

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Following are some transactions and events of Business Solutions (A+)

Following are some transactions and events of Business Solutions.

Feb. 26 The Company paid cash to Lyn Addie for eight days’ work at $135 per day.

Mar. 25 The Company sold merchandise with a $2,052 cost for $2,950 on credit to Wildcat Services, invoice dated March 25.

Required:

1. Assume that Lyn Addie is an unmarried employee. Her $1,080 of wages are subject to no deductions other than FICA Social Security taxes, FICA Medicare taxes, and federal income taxes. Her federal income taxes for this pay period total $108. Compute her net pay for the eight days’ work paid on February 26. FICA tax rates applicable are: 6.2% for Social security and 1.45% Medicare.

2. Record the journal entry to reflect the payroll payment to Lyn Addie as computed in part 1.

3. Record the journal entry to reflect the (employer) payroll tax expenses for the February 26 payroll payment. Assume Lyn Addie has not met earnings limits for FUTA and SUTA—the FUTA rate is 0.8% and the SUTA rate is 4% for Business Solutions.

4. Record the entry for the merchandise sold on March 25 if a 4% sales tax rate applies.

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Wrecker Computing sells merchandise for $5,000 cash on September 30 (cost of merchandise is $2,900) (A+)

Wrecker Computing sells merchandise for $5,000 cash on September 30 (cost of merchandise is $2,900). The sales tax law requires Wrecker to collect 4% sales tax on every dollar of merchandise sold. Record the entry for the $5,000 sale and its applicable sales tax. Also record the entry that shows the remittance of the 4% tax on this sale to the state government on October 15.

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2. Use the set of facts attached and addresses each of the following requirements (A+)

Use the set of facts attached and addresses each of the following requirements.

. Journalize the March transactions.

2. Post the entries to the ledger “T” accounts.

3. Prepare the trial balance as of March 31.

4. Journalize adjusting entries.

5. Post the entries to the ledger “T” accounts.

6. Prepare the adjusted trial balance as of March 31

7. Prepare the Income Statement

8. Prepare the Statement of Owners Equity

9. Prepare the Balance Sheet

10. Journalize the closing entries

11. Post the entries to the ledger “T” accounts.

12. Prepare the post-closing trial balance as of March 31.

Please use the following set of facts to address the requirements.

Laura Eddy opened Eddy\’s Carpet Cleaners on March 1. During March, the following transactions were completed.

Mar. 1 Invested $10,235 cash in the business.

1 Purchased used truck for $6,260, paying $3,130 cash and the balance on account.

3 Purchased cleaning supplies for $1,141 on account.

5 Paid $1,740 cash on one-year insurance policy effective March 1.

14 Billed customers $4,980 for cleaning services.

18 Paid $1,308 cash on amount owed on truck and $553 on amount owed on cleaning supplies.

20 Paid $1,785 cash for employee salaries.

21 Collected $1,394 cash from customers billed on March 14.

28 Billed customers $2,325 for cleaning services.

31 Paid gas and oil for month on truck $209.

31 Withdrew $610 cash for personal use.

The chart of accounts for Eddy\’s Carpet Cleaners contains the following accounts: No. 101 Cash, No. 112 Accounts Receivable, No. 128 Cleaning Supplies, No. 130 Prepaid Insurance, No. 157 Equipment, No. 158 Accumulated Depreciation-Equipment, No. 201 Accounts Payable, No. 212 Salaries Payable, No. 301 L. Eddy, Capital, No. 306, L. Eddy, Drawing, No. 350 Income Summary, No. 400 Service Revenue, No. 633 Gas & Oil Expense, No. 634 Cleaning Supplies Expense, No. 711 Depreciation Expense, No. 722 Insurance Expense, and No. 726 Salaries Expense

On March 30, the following adjustments are needed.

1. Earned but unbilled revenue at March 31 was $703.

2. Depreciation on equipment for the month was $263.

3. One-twelfth of the insurance expired.

4. An inventory count shows $394 of cleaning supplies on hand at March 31.

5. Accrued but unpaid employee salaries were $515.

Requirements:

Prepare a separate sheet for each of the 12 requirements below. Show all work.

1. Journalize the March transactions.

2. Post the entries to the ledger “T” accounts.

3. Prepare the trial balance as of March 31.

4. Journalize adjusting entries.

5. Post the entries to the ledger “T” accounts.

6. Prepare the adjusted trial balance as of March 31

7. Prepare the Income Statement

8. Prepare the Statement of Owners Equity

9. Prepare the Balance Sheet

10. Journalize the closing entries

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Freedom Village operates on the calendar year (A+)

Freedom Village operates on the calendar year. A $100,000 note (5-year 8%) to the Goodboy Bank was issued on January 10, 20X2. The proceeds of the note was recorded in a Capital Projects Fund. Interest and one-tenth of the principal are due semiannually, on January 10 and July 10, beginning July 10, 20X2. A Debt Service Fund has been established to service this debt; financing will come from General Fund transfers and a small approved debt service tax. The net assets of the fund at year-end are not restricted or committed. Required: a. Prepare the general journal entries (budgetary and actual) needed to record the following transactions and events. b. Prepare a balance sheet at December 31, 20X2, and a Statement of Revenues, Expenditures, and Changes in Fund Balance for the year then ended for the Debt Service Fund. Transactions 1. January 11 the Debt Service Fund budget for 20X2 was adopted. The General Fund contribution was estimated at$10,000; the tax levy was expected to yield $22,000. The appropriations included the January 10, 20X3, debt service payment. 2. The taxes were levied and received $20,000. 3. The July 5 payment of principal and interest was made. 4. The General Fund contribution of $15,000 was received. 5. The residual balance of a discontinued Capital Projects Fund $8,000 was transferred to the Debt Service Fund. 6. The January 10, 20X3 payment was accrued . 7. Closing entries were prepared at December 31, 20X2.

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For the city of Luranland record the following journal entries in the Building and Capital Purchases Capital Projects Fund for the year ended 20X2 (A+)

For the city of Luranland record the following journal entries in the Building and Capital Purchases Capital Projects Fund for the year ended 20X2. 1. Levied property taxes of 5,326,558 that are restricted for general government capital projects. Of the total amount $150,000 is expected to be uncollectible. 2. Collected 5,025,435 before the duedate for taxes. The balance of the property taxes became delinquent. 3. Issued $4,000,000 (face amount) of bonds at a premium of $33,479. 4. Received a General Fund contribution to the building projects, 2,500,000. 5. Signed contracts on building projects totaling $9, 000,500 6. Incurred construction cost of 6,500,000. 7. Incurred and paid unencumbered construction costs of $70,242. 8. Paid the contractors the amounts due less $393,000. 9. Billed grantor agencies $2,150,256 for costs reimbursable under grand awards. 10. Collected 1,775,987 from grantor agencies. Another $60,000 is expected to be collected within the first 60 days of 20X3

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Alan and Jamie, proprietors of Tai & Wong Interior Designs, are considering the purchase of new computer hardware and software (A+)

Alan and Jamie, proprietors of Tai & Wong Interior Designs, are considering the purchase of new computer hardware and software. This will allow speedier preparation of drawings and quotations to customers’ specification and should result in additional profits due to increased customer orders. The following estimates apply:

Initial cost of hardware and software £40,000

Useful life 4 years

Profit increase if bought:

Year 1 £2,000

Year 2 £6,000

Year 3 £6,000

Year 4 £8,000

Resale value at the end of Year 4 £4,000

The profit increases above are stated after deducting depreciation (which is calculated on a straight line basis) from the proposal’s projected net cash inflows. Alan and Jamie require an ARR of 15% and a PP of 2 years.

Required: 1. Advise Alan and Jamie as to whether the investment would meet their criteria.

2. Assuming a cost of capital of 15%, calculate NPV of project and advise Alan and Jamie as to whether to invest.

3. Using costs of capital of 15% and 25%, calculate the IRR of the project. What does this mean?

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