Economics Answers

1. Journalize each transaction in a two-column journal, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) 11 Cash 31 Emily Page, Capital 12 Accounts Receivable 32 Emily Page, Drawing 14 Supplies 41 Fees Earned 15 Prepaid Rent 51 Salary Expense 16 Prepaid Insurance 52 Rent Expense 18 Office Equipment 53 Supplies Expense 19 Accumulated Depreciation 54 Depreciation Expense 21 Accounts Payable 55 Insurance Expense 22 Salaries Payable 59 Miscellaneous Expense 23 Unearned Fees

12. Paid Office Depot Co. for part of the debt incurred on June 5, $750. 12. Recorded services provided on account for the period June 1–12, $5,100. 14. Paid part-time receptionist for two weeks’ salary, $1,100. 17. Recorded cash from cash clients for fees earned during the period June 1–16, $6,500. 18. Paid cash for supplies, $750. 20. Recorded services provided on account for the period June 13–20, $3,100. 24. Recorded cash from cash clients for fees earned for the period June 17–24, $5,150. 26. Received cash from clients on account, $6,900. 27. Paid part-time receptionist for two weeks’ salary, $1,100. 29. Paid telephone bill for June, $150. 30. Paid electricity bill for June, $400. 30. Recorded cash from cash clients for fees earned for the period June 25–30, $2,500. 30. Recorded services provided on account for the remainder of June, $1,000. 30. Emily withdrew $5,000 for personal use.

the past several years, Emily Page has operated a part-time consulting business from her home. As of June 1, 2010, Emily decided to move to rented quarters and to operate the business, which was to be known as Bottom Line Consulting, on a full-time basis. Bottom Line Consulting entered into the following transactions during June: June 1. The following assets were received from Emily Page: cash, $20,000; accounts receivable, $4,500; supplies, $2,000; and office equipment, $11,500. There were no liabilities received. 1. Paid three months’ rent on a lease rental contract, $6,000. 2. Paid the premiums on property and casualty insurance policies, $2,400. 4. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $2,700. 5. Purchased additional office equipment on account from Office Depot Co., $3,500. 6. Received cash from clients on account, $3,000. 10. Paid cash for a newspaper advertisement, $200.

Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark (✓) in the Posting Reference column. Journalize the transactions for July. 2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers. 3. Prepare an unadjusted trial balance. 4. At the end of July, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6). a. Merchandise inventory on July 31 $589,850 b. Insurance expired during the year 12,500 c. Store supplies on hand on July 314,700 d. Depreciation for the current year 18,800 e. Accrued salaries on July 31: Sales salaries $4,400 Office salaries 2,700 7,100

cost of the merchandise sold was $25,000. 21. For the convenience of the customer, paid freight on sale of July 20, $1,100. 21. Received $17,600 cash from Owen Co. on account, no discount. 21. Purchased merchandise on account from Nye Co., terms 1/10, n/30, FOB destination, $20,000. 24. Returned $2,000 of damaged merchandise purchased on July 21, receiving credit from the seller. 26. Refunded cash on sales made for cash, $3,000. The cost of the merchandise returned was $1,800. 28. Paid sales salaries of $22,800 and office salaries of $15,200. 29. Purchased store supplies for cash, $2,400. 30. Sold merchandise on account to Whitetail Co., terms 2/10, n/30, FOB shipping point, $18,750. The cost of the merchandise sold was $11,250. 30. Received cash from sale of July 20, less discount, plus freight paid on July 21. 31. Paid for purchase of July 21, less return of July 24 and discount.

During July, the last month of the fiscal year, the following transactions were completed: July 1. Paid rent for July, $5,000. 3. Purchased merchandise on account from Belmont Co., terms 2/10, n/30, FOB shipping point, $40,000. 4. Paid freight on purchase of July 3, $600. 6. Sold merchandise on account to Modesto Co., terms 2/10, n/30, FOB shipping point, $25,000. The cost of the merchandise sold was $15,000. 7. Received $26,500 cash from Yuba Co. on account, no discount. 10. Sold merchandise for cash, $80,000. The cost of the merchandise sold was $50,000. 13. Paid for merchandise purchased on July 3, less discount. 14. Received merchandise returned on sale of July 6, $6,000. The cost of the merchandise returned was $4,500. 15. Paid advertising expense for last half of July, $7,500. 16. Received cash from sale of July 6, less return of July 14 and discount. 19. Purchased merchandise for cash, $36,000. 19. Paid $18,000 to Bakke Co. on account, no discount.

Required: a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. . It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed below: Activity Cost Pool and Activity Measure Estimated Overhead cost Activity Deluxe Regular Total Purchase orders (number of orders) $ 60,000 500 1,000 1,500 Rework requests (number of requests) 280,000 800 2,000 2,800 Product testing (number of tests) 240,000 7,000 3,000 10,000 Machine-related (machine-hours) 2,500,000 4,500 8,000 12,500 $3,080,000 Required: b. Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools.

Weston Corporation manufactures a product that is available in both a deluxe and a regular model. The company has made the regular model for years; the deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company’s profits have steadily declined. Sales of the deluxe model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $3,080,000 in overhead costs would be incurred and the company would produce and sell 10,000 units of the deluxe model and 50,000 units of the regular model. The deluxe model requires 2.0 hours of direct labor time per unit, and the regular model requires 1.0 hours. Materials and labor costs per unit are given below: Deluxe Regular Direct materials cost per unit $50.00 $30.00 Direct labor cost per unit $30.00 $15.00

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Danika received a dividend of $0.37 per share. determine how much she will receive in total if she owns 720 shares?