Blago Wholesale Company began operations on January 1, 2017, and uses the average cost method in costing its inventory. Management is contemplating a change to the FIFO method in 2018 and is interested in determining how such a change will affect net income. Accordingly, the following information has been developed:

2017 2018
Final inventory:
Average cost $150,000 $255,000
FIFO 160,000 270,000

Condensed income statements for Blago Wholesale appear below:

2017 2018
Sales $1,000,000 $1,200,000
Cost of goods sold 600,000 720,000
Gross profit 400,000 480,000
Selling, general, and administrative 250,000 275,000
Net income $150,000 $205,000

Required:
Based on this information, what would 2018 net income be after the change to the FIFO method?

Answer:

Blago Wholesale Company

New Net income for 2018 =         $220,000

Explanation:

Data and Calculations:

Final inventory:    2017           2018

Average cost   $150,000   $255,000

FIFO                   160,000      270,000

Difference         $10,000       $15,000

                                      2017              2018

Sales                      $1,000,000    $1,200,000

Cost of goods sold    600,000        720,000

Gross profit                400,000        480,000

Selling, general, and

 administrative          250,000       275,000

Net income               $150,000    $205,000

2018 Net Income after the change to the FIFO method:

Cost of goods sold  (weighted average)   720,000

less adjustment for change of method        15,000

Adjusted cost of goods sold                      705,000

Income Statement after the change

Sales                      $1,200,000

Cost of goods sold    705,000

Gross profit                495,000

Selling, general, and

 administrative          275,000

Net income             $220,000

Assume that Ray is 38 years old and has 27 years for saving until he retires. He expects an APR of 7.5% on his investments. How much does he need to save if he puts money away annually in equal end-of-the-year amounts to achieve a future value of $1,200,000 dollars in 27 years' time

The premium on a three-year insurance policy expiring on December 31, 20x11, was paid in total on January 1, 20x9. The original payment was initially debited to a prepaid asset account. The appropriate journal entry has been recorded on December 31, 20x9. The balance in the prepaid asset account on December 31, 20x9 should be Select one: a. The same as the original payment b. The same as it would have been if the original payment had been debited initially to an expense account c. Higher than if the original payment had been debited initially to an expense account d. Zero Check

In early 2016, the same Germany machinery company has interest from four prospective clients from emerging markets: Indonesia, Brazil, Russia, and South Africa. They all want to buy ten machines, but the factory can only produce ten in time. Therefore, the company has to choose only one client. Given the volatility of the domestic currencies of the four prospective clients, the CFO would like to choose the client which is least likely to cancel the order due to currency volatility. The invoice comes due on June 30, 2016. According to volatility alone, which prospective client would be most likely to cancel the order?

One of the disadvantages of the sole proprietorship is related to the fact that the amount of equity capital that can be raised to finance the business is limited to the owner's personal wealth. ____________ is about determining how the firm should finance or pay for assets. The risk manager monitors and manages the firm's risk exposure in financial and commodity markets and the firm's relationships with insurance providers. Privately held, or closely held, corporations are typically owned by a small number of investors, and their shares are not traded publicly.

The adjusted trial balance of Gary Cooper Co. as of December 31, 2014, contains the following.
GARY COOPER CO.
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2020
Debit Credit
Cash $20,892
Accounts Receivable 8,340
Prepaid Rent 3,700
Equipment 19,470
Accumulated Depreciation-
Equipment $6,315
Notes Payable 7,120
Accounts Payable 6,892
Common Stock 21,420
Retained Earnings 12,730
Dividends 4,420
Service Revenue 13,010
Salaries and Wages Expense 8,260
Rent Expense 2,154
Depreciation Expense 251
Interest Expense 189
Interest Payable 189
$67,676 $67,676
Instructions:
(a) Prepare an income statement.
(b) Prepare a statement of retained earnings.
(c) Prepare a classified balance sheet.

During the current year, the Town of Salo Alto recorded the following transactions related to its property taxes:

a. Levied property taxes of $3,300,000, of which 2 percent is estimated to be uncollectible.
b. Collected current property taxes amounting to $2,987,500.
c. Collected $26,500 in delinquent taxes and $2,400 in interest and penalties on the delinquent taxes.
d. These amounts had been recorded as Deferred Inflows of Resources in the prior year.
e. Imposed penalties and interest in the amount of $3,750 but only expects to collect $3,100 of that amount. None is expected to be collected this year or within 30 days of year-end.
f. Reclassified uncollected taxes as delinquent. These amounts are not expected to be collected within the first 60 days of the following fiscal year.

Required:
Prepare the journal entries.

Wholemark is an Internet order business that sells one popular New Year greeting card once a year. The cost of the paper on which the card is printed is $0.40 per card, and the cost of printing is $0.10 per card. The company receives $3.75 per card sold. Since the cards have the current year printed on them, unsold cards have no salvage value. Their customers are from the four areas: Los Angeles, Santa Monica, Hollywood, and Pasadena. Based on past data, the number of customers from each of the four regions is normally distributed with mean 2,300 and standard deviation 200. (Assume these four are independent.)
What is the optimal production quantity for the card?

Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 20-year life when issued and the annual interest payment was then 13 percent. This return was in line with the required returns by bondholders at that point as described below:
Real rate of return 4 %
Inflation premium 5
Risk premium 4
Total return 13 %
Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 15 years remaining until maturity. Use Appendix B and Appendix D.

Minion, Inc., has no debt outstanding and a total market value of $211,875. Earnings before interest and taxes, EBIT, are projected to be $14,300 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 35 percent lower. The company is considering a $33,900 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,500 shares outstanding. Assume the company has a tax rate of 21 percent.

Required:
a. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued.
b. Calculate the percentage changes in EPS when the economy expands or enters a recession.
c. Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization.
d. Calculate the percentage changes in EPS when the economy expands or enters a recession assuming recapitalization has occurred.

Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic:

a. This is the rate for a riskless security that is exposed to changes in inflation.
b. Over the past several years, Germany, Japan, and Switzerland have had lower interest rates than the United States due to lower values of this premium.
c. This is the premium that reflects the risk associated with changes in interest rates for a long-term security.
d. This is the rate for a short-term riskless security when inflation is expected to be zero.
e. This premium is added when a security lacks marketability, because it cannot be bought and sold quickly without losing value.
f. This is the premium added as a compensation for the risk that an investor will not get paid in full.

A Corporation has two divisions: the South Division and the West Division. The corporation's net operating income is $26,900. The South Division's divisional segment margin is $42,800 and the West Division's divisional segment margin is $29,900. What is the amount of the common fixed expense not traceable to the individual divisions

The price of a stock is $55 at the beginning of the year and $50 at the end of the year. If the stock paid a $3 dividend and inflation was 3%, what is the real holding-period return for the year? -3.64% -6.36% -6.44% -11.74%

The CEO of Jaquar Consultancy Corp. informs Amy's supervisor that she has performed extremely well in her last project. Amy's supervisor sends an e-mail to the entire team about the good review received from the CEO. Jaquar is known for its regular performance-driven incentives that it awards to employees performing exceptionally well. This implies that Jaquar Consultancy Corp. operates by implementing:

a. internal marketing.
b. empathy marketing.
c.customer profiling.
d. benchmarking.

The Aleutian Company uses departmental overhead rates. The Fabrication Department uses machine hours for an allocation base, and the Assembly Department uses labor hours. What is the Assembly Department overhead rate per labor hour

Linder Corporation invested $70,000 cash in marketable securities on September 1. On September 7 the company sold $10,000 of these investments for $15,000. On September 28 Linder sold $6,000 of the securities for $4,000.

Required:
a. Record the purchase of marketable securities on September 1.
b. Record the sale of marketable securities on September 7.
c. Record the additional sale of marketable securities on September 28.
d. Record the necessary month end fair value adjustment on September 30. The market price for Linder Corporation's remaining unsold securities was $58,000.

Randy likes baseball more than football, football more than basketball, and basketball more than baseball. Which assumption about consumer preferences does this violate

Acute Company manufactures a single product. On December 31, 2014, it adopted the dollar-value LIFO inventory method. The inventory on that date using the dollar-value LIFO inventory method was determined to be $300,000. Inventory data for succeeding years follow:

Year Ended December 31 Inventory at Respective Year-End Prices Relevant Price Index (Base Year 2014)
2015 $363,000 1.10
2016 420,000 1.20
2017 430,000 1.25

Required:
Compute the inventory amounts at December 31, 2015, 2016, and 2017, using the dollar-value LIFO inventory method for each year.

During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the month are summarized as follows:
1 Sales $10,800,000.00
2 Manufacturing costs:
3 Direct materials $6,400,000.00
4 Direct labor 1,600,000.00
5 Variable manufacturing cost 1,280,000.00
6 Fixed manufacturing cost 320,000.00 9,600,000.00
7 Selling and administrative expenses:
8 Variable $1,080,000.00
9 Fixed 180,000.00 1,260,000.00
Required:
1. Prepare an income statement based on the absorption costing concept.*
2. Prepare an income statement based on the variable costing concept.*
3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).
* Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Labels and Amount Descriptions
Labels
August 31
Cost of goods sold
Fixed costs
For the Month Ended August 31
Variable cost of goods sold
Amount Descriptions
Contribution margin
Contribution margin ratio
Cost of goods manufactured
Fixed manufacturing costs
Fixed selling and administrative expenses
Gross profit
Income from operations
Inventory, August 31
Loss from operations
Manufacturing margin
Planned contribution margin
Sales
Sales mix
Selling and administrative expenses
Total cost of goods sold
Total fixed costs
Total variable cost of goods sold
Variable cost of goods manufactured
Variable selling and administrative expenses
Absorption Costing Income Statement
Shaded cells have feedback.
1. Prepare an income statement based on the absorption costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative nmber using a minus sign.
Score: 64/64
Kodiak Fridgeration Company
Absorption Costing Income Statement
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Sales - (Cost of Goods Manufactured - Ending Inventory*) = Gross Profit; Gross Profit - Selling and Administrative Expenses = Income from Operations
* (Manufactured Units - Sold Units) x (Total Manufacturing Costs/Manufactured Units)
Variable Costing Income Statement
Shaded cells have feedback.
2. Prepare an income statement based on the variable costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if rquired. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Score: 23/106
Kodiak Fridgeration Company
Variable Costing Income Statement
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Sales - Variable Cost of Goods Sold* = Manufacturing Margin; Manufacturing Margin - Variable Selling and Administrative Expenses = Contribution Margin; Contribution Margin - (Fixed Manufacturing Costs + Fixed Selling and Administrative Expenses) = Income from Operations.
*Variable Cost of Goods Sold = Variable Cost of Goods Manufactured - [(Manufactured Units - Sold Units) x (Variable Manufacturing Costs/Manufactured Units)]
Final Question
Shaded cells have feedback.
3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).
The income from operations reported under absorption costing exceeds the income from operations reported under variable costing by the difference between the two, due to fixed manufacturing costs that are deferred to a future month under absorption costing.

The following information pertains to Yuji Corporation:

January 1, 20X1 December 31, 20X1
Raw materials inventory $34,000 $38,000
Work-in-process inventory 126,000 145,000
Finished goods inventory 76,000 68,000
Costs incurred during the year 20X1 were as follows:

Raw material purchased $116,000
Wages to factory workers 55,000
Salary to factory supervisors 25,000
Salary to selling and administrative staff 40,000
Depreciation on factory building and equipment 10,000
Depreciation on office building 12,000
Utilities for factory building 5,000
Utilities for office building 7,500

Required:
Sales revenue during 20X1 was $300,000. The income tax rate is 21%. Compute the following:

a. Cost of raw materials used.
b. Cost of goods manufactured/completed.
c. Cost of goods sold.
d. Gross margin.
e. Net income.

Consider a simple example economy where there are two goods, coconuts and restaurant meals (coconut-based). There are two firms. A coconut producer collects and sells 10 million coconuts at $2.00 each. The firm pays $5 million in wages, $0.5 million in interest on an old loan, and $1.5 million in taxes to the government. We also know that 4 million coconuts are sold to the public for consumption, and 6 million coconuts are sold to the restaurant firm, which uses them to prepare meals. The restaurant sells $30 million in meals. The restaurant pays $4 million in wages and the government $3 million in taxes. The government supplies security and accounting services and employs only labor, and government workers are paid $5.5 million, collected in taxed by the government. Finally, consumers pay $1 million in taxes to the government in addition to the taxes paid by the two firms.

Required:
a. Compute GDP for this simple economy using the product approach.
b. Compute GDP for this simple economy using the expenditure approach.
c. Compute GDP for this simple economy using the income approach.
d. Now, suppose that the coconut producer cannot sell 1 million coconuts during the course of the year. These are collected coconuts that are not sold to the public (assume that sales to the other firm, the restaurant, remain the same).
e. How does this new piece of information affect your calculations in the expenditure approach? Explain.

Rachel pushed very hard to go with Project A rather than Project B. There have been several cost overruns, the project is two weeks beyond its projected finish date, and the technology just isn't working out as planned. Rachel increases the funding for the third time and hires three new designers to help revamp the look of the product. Rachel is engaging in _____.

You are analyzing two companies that manufacture electronic toys--Like Games Inc. and Our Play Inc. Like Games was launched eight years ago, whereas Our Play is a relatively new company that has been in operation for only the past two years. However, both companies have an equal market share with sales of $200,000 each. You've gathered up company data to compare Like Games and Our Play. Last year, the average sales for industry competitors was $510,000. As an analyst, you want to make comments on the expected performance of these two companies in the coming year. You've collected data from the companies' financial statements. This information is listed as follows:
Like Games
Accounts receivable: 5,400
Net fixed assets: 110,000
Total assets: 190,000
Our Play
Accounts receivable: 7,800
Net fixed assets: 160,000
Total assets: 250,000
Industry Average
Accounts receivable: 7,700
Net fixed assets: 433,500
Total assets: 469,200
Using this information, complete the following statements in your analysis.
1. A _____ days of sales outstanding represents an efficient credit and collection policy. Between the two companies, _____ is collecting cash from its customers faster than _____, but both companies are collecting their receivables less quickly than the industry average.
2. Our Play's fixed assets turnover ratio is _____ than that of Like Games. This could be because Our Play is a relatively new company, so the acquisition cost of it fixed assets is _____ that the recorded cost of Like Games's net fixed assets.
3. Like Games's total assets turnover ratios is _____, which is _____, than the industry's average total assets turnover ratio. In general, a higher total assets turnover ratio indicates greater efficiency.

University Printers has two service departments Maintenance and Personnel and two operating departments Printing and Developing. Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.
The following data appear in the company records for the current period:
Maintenance Personnel Printing Developing
Machine-hours ? 455 455 2,590
Labor-hours 315 ? 294 1,491
Department direct cost 11,000 $23,000 $25,000 $23,000
Required: Allocate the service department costs using the reciprocal method. Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.

The Weber Company purchased a mining site for $1,750,000 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 400,000 tons will be recovered. The estimated residual value of the property is $150,000. During the first year, the company extracted 6,500 tons of ore. The depletion expense is

At the local banking institution the branch manager doubles as the IT "go-to" by handling printer setups, resettingLAN passwords, and periodically monitoring the branch’s server health. Last week she noted that a handful of herbranch’s customers complained about suspicious activity in their checking accounts. She knew that the main branchwould handle it and repair any fraudulent charges. She also knew better than to bother the main branch with these customer complaints because the main branch is always ahead of things like this and quickly reminds her that they seewhat she does. Her only response, therefore, was to assure her customers that their accounts would be repaired withinten business days.The most likely law or regulation that becomes an issue upon her discovery i:__________.
a. The Gramm-Leach-Bliley Act’s Safeguards Rule
b. The Good Samaritan Law
c. Section 404 of the Sarbanes-Oxley Act
d. The FTC’s Red Flags Rule

A company has the following ratios:

Current ratio: 2.1 to 1.0

Accounts receivable turnover ratio. 350 to 1 Debt/ equity ratio. 20.0 to 1 Interest coverage ratio 7.0 to 1 Inventory turnover ratio 9.0 to 1 The industry averages are: A company has the following ratios: Current ratio: 4.1 to 1.0 Accounts receivable turnover ratio. 8 to 1 Debt/ equity ratio. 4.0 to 1 Interest coverage ratio 9.0 to 1 Inventory turnover ratio 8.0 to 1. Based on the above items, please compare and contrast the ratios between the company and the industry.

Required:
Analyze reasons why there could be differences and the overall financial position of the company. Also, what of the ways the company could finance the company without significant negative changes to the above financial metrics (ratios)?

The revenues budget identifies: a. expected cash flows for each product b. actual sales from last year for each product c. the expected level of sales for the company d. the variance of sales from actual for each product

Bristo Corporation has sales of 1,750 units at $40 per unit. Variable expenses are 30% of the selling price. If total fixed expenses are $39,000, the degree of operating leverage is:

CAM charges for retail leases in a shopping mall must be calculated. The retail mall consists of a total area of 2.8 million square feet, of which 800,000 square feet has been leased to anchor tenants that have agreed to pay $2 per rentable square foot in CAM charges. In-line tenants occupy 1.3 million square feet, and the remainder is a common area, which the landlord believeswill require $8 per square foot to maintain and operate each year. If the owner is to cover total CAM charges, how much will in-line tenants have to pay per square foot?

Despite its status as one of the richest countries in the world, Japan a. has a very low level of productivity. b. has few natural resources. c. has very little human capital. d. engages in a relatively small amount of international trade.