Accounting Answers

Draw up a cash budget for D. Sithole showing the balance at the end of each month, from the following information provided by her for the six months ended 31 December 19X2.

a) Opening Cash $ 1,200.

19X2 19X3

Sales at $20 per unit

JAN 260

Feb 250

MAR 260

APR 270

MAY 320

JUN 290

JUL 400

AUG 300

SEP 350

OCT 400

NOV 390

DEC 400

Cash is received for sales after 3 months following the sales.

c) Production in units: 240 270 300 320 350 370 380 340 310 260 250

d) Raw materials cost $5/unit. Of this 80% is paid in the month of production and 20% after production.

e) Direct labour costs of $8/unit are payable in the month of production.

f) Variable expenses are $2/unit. Of this 50% is paid in the same month as production and 50% in the month following production.

g) Fixed expenses are $400/month payable each month.

h) Machinery costing $2,000 to be paid for in October 19X2.

i) Will receive a legacy of $ 2,500 in December 19X2.

j) Drawings to be $300/month.

Shown below is the financial date of company A and company B at end of current year

company A company B

Netsales (All on credit) $ 1440000 $ 1190000

Cost of good sold 1260000 825000

Cash 36000 70000

Accounts receivable (Net) 180000 140000

Inventory 504000 165000

current liabilities 240000 150000

Assume that the year end balance shown for accounts receivables and for inventory also represent the average of those accounts throughout the years.

Required.

from the view point of short term creditors how you assess the the quality of each company working capital to which company you will prefer to sell merchandise of $ 50000 on 30 days open account?

shown below is the financial date of company A and Company B at end of current year

company A company B

netsales(all on credit) $1440000 $ 1190000

cost of goods sold 1260000 825000

cash 36000 70000

Accounts receivable (Net) 180000 140000

inventory 504000 165000

current liabilities 240000 150000

Assume that the year end balance shown for accounts receivables and for inventory also represent the average balances of these accounts throughout the years

compute the following. (1) working capital (2) current ratio (3) Quick ratio (4) Number of times inventory turned over during the year and the average number of days required to turn over the inventory (5) Number of times accounts receivables turned over during the year and the average numbers of days required to collect accounts receivables (6) operating cycle

Kevin decides to expand outside the college. On the first day of the month, KKCDK pays $20 in advance for advertising in the local paper. The advertisements will run during February and March.

13. The student groups paid for the 100 CDs not paid for in January.

14. KKCDK paid off its remaining accounts payable, salaries payable, taxes payable and interest payable.

15. KKCDK purchases 450 CDs for $135 on account.

16. KKCDK sells 500 CDs during the month for $0.80 each. KKCDK receives cash for 450 of them and is owed for the other 50.

17. KKCDK completes and delivers the advanced order of 50 CDs described in number 8 above.

18. KKCDK incurs $80 in tax expense. The taxes will be paid in March.

Required:

G. Prepare journal entries for the above events if needed.

H. Post the journal entries to the T-accounts.

I. Prepare an unadjusted trial balance for KKCDK for February.

J. Prepare adjusting entries for the following and post them to your T-accounts.

Jan Haley owns and operates Haley’s Dry Cleaners. The following occurred during December:

a. On December 1, Haley prepaid rent on her store for December and January with $2,000 cash.

b. On December 1, Haley purchased insurance with cash in the amount of $2,400 that will last six months.

c. Haley paid $900 of her accounts payable balance.

d. Haley paid off all of her salaries payable balance.

e. Haley purchased supplies on account in the amount of $2,400.

f. Haley paid a salary to her assistant of $1,000 in cash for work done in the first two weeks of December.

g. Haley dry-cleaned clothes for customers on account in the amount of $8,000.

h. Haley collected $6,300 of her accounts receivable balance.

i. Haley paid tax of $750 in cash.

Required:

A. Prepare the journal entry for each transaction.

B. Prepare all necessary T-accounts. Numbers already under the accounts represent the prior balance in that account.

Determine if the following transactions for Marlin Corporation require an adjustment or not. If an adjusting entry is required, give the correct entry.

1.

At the beginning of the month, Marlin agreed to perform services for the next three months for Catsui Corporation for $30,000 per month. Catsui paid Marlin $90,000 in advance. One month has now passed.

2.

Marlin pays its employees every two weeks. At the end of the month, Marlin owes its employees $480,000, but will not pay them until the following week.

3.

Marlin paid $300,000 for rent at the beginning of the month by debiting prepaid rent and crediting cash. The $300,000 covered six months of occupancy, but only one month has passed.

4.

At the beginning of the month, Marlin agreed to perform services for Ryland Company for

127 Financial Accounting

$16,000 per month for the next six months. Ryland has not yet paid any cash to Marlin and the work is not substantially complete

1.

Determine if the following adjusting entries are

◦

accrued expense (AE)

◦

prepaid expense (PE)

◦

accrued revenue (AR)

◦

unearned revenue (UR)

1.

_____ Atlas Magazine was previously prepaid $400,000 by subscribers and has delivered half of the magazines ordered.

2.

_____ Hornsby Company agreed to provide 1,000 units of its product to Michaels Inc. and has substantially completed the agreement.

3.

_____ Nancy and Sons owes its employees $30,000 for work done over the past two weeks.

4.

_____ Replay Inc. advertised on TV 44 during the month of April, but has not yet made an entry to record the event.

5.

_____ Centurion Company paid Reliable Insurance Company $54,000 for insurance for twelve months, six of which have passed.

6.

_____ Reliable Insurance Company received a payment of $54,000 for insurance for twelve months from Centurion Company and six months have passed.

1.

____ Determining when to recognize revenue can be difficult for accountants.

2.

____ Only permanent accounts are closed at the end of the financial statement cycle.

3.

____ Revenue may not be recorded until cash is collected.

4.

____ Some changes to accounts occur because of the passage of time.

5.

____ Accountants do not have to exercise much judgment because there are so many rules to follow.

6.

____ Assets, liabilities and owners’ equity accounts will start each financial statement cycle with the same balance they had at the end of the previous cycle.

7.

____ The word “accrue” means “to grow.”

8.

____ Companies have some discretion in how and when they record accruals.

9.

____ The purpose of adjusting entries is to bring the balance in temporary accounts to zero at the end of the reporting cycle.

10.

____ Only one trial balance is prepared during a financial statement cycle

true and false

Silver Company purchased USD 56,000 of merchandise from Milton Company on account.

Before paying its account, Silver Company returned damaged merchandise with an invoice price of USD 11,680.

Assuming use of periodic inventory procedure, prepare entries on both companies' books to record both the purchase/sale and the return.

b. Show how any of the required entries would change assuming that Milton Company granted an allowance of USD 3,360 on the damaged goods instead of giving permission to return the merchandise.

What is the last payment date on which the cash discount can be taken on goods sold on March 5 for USD 51,200; terms 3/10/EOM, n/60? Assume that the bill is paid on this date and prepare the correct entries on both the buyer's and seller's books to record the payment.