Problem 1 Inventory Journal Entries
Sean needs to record journal entries for various inventory purchases on account and subsequent payments. Record the journal entries using both the gross and net methods.
11/1 Sean purchased 20 tables on account from David's Place for $4,000 with terms of 2/15, n 30.
11/4 Sean returned 3 tables to David's Place because they were found defective.
11/12 Sean paid for ten of the tables.
11/15 Sean paid a shipping bill for the tables from UPS for $300.
12/2 Sean paid the balance due to David's Place for the table purchase.
Problem 2 Variance Analysis
Donnovan needs to analyze the actual material and labor costs for the month in their production of tables. The total actual labor cost was $31,500 as employees worked 1,800 hours and material cost was $55,275 for the purchase of 6,700 board feet of material. During the month 6,800 board feet of material was used in production. It takes two hours of labor and 7 board feet of material to complete a table. The standard rate for material is $8 per board foot and $18 per hour of labor. During the month there were 30 tables in various stage of completion at the start of the month, 1,000 tables were produced and 900 tables were sold.
Required: Compute the material and labor price and usage variances.
Problem 3 Long-Term Assets Acquire, Use and Disposal
Part A Shannon purchased a car for $30,000 by putting 20% down in cash, with the balance due as a note payable. Journalize this transaction.
Part B Shannon's car has a 4 year useful life and an estimated salvage value of $6,000. Shannon believes she will drive the car 100,000 miles in four years. (Assume she drives 30,000, 35,000, 25,000 and 10,000 miles in the next four years.) Compute the depreciation for Shannon's car for years one and two using the straight line method, units of production, and double declining balance methods.
Part C At the end of the third year, Shannon decided to trade in her car for a new car valued at $40,000. The car dealer has agreed to give her a trade in value of $9,000 for the old car. Assume the book value of the car is $12,000. She will pay $8,000 in cash and borrow the remaining funds. Journalize this transaction.
Ron & Levi's
Income Statement
For the Year Ending 12/31/2013
|
Sales Revenue
|
|
100,000
|
|
Less Cost of Goods Sold
|
|
-60,000
|
|
Equals Gross Margin
|
|
40,000
|
|
Operating Expenses
|
|
|
|
Selling and Administration
|
15,000
|
|
|
Depreciation
|
7,000
|
|
|
Total Operating Expense
|
|
-22,000
|
|
Operating Income
|
|
18,000
|
|
Tax
|
|
-7,200
|
|
Net Income
|
|
10,800
|
Ron & Levi's
Statement of Retained Earnings
For the Year Ending 12/31/2013
|
Beginning Balance
|
|
10,000
|
|
Net Income
|
|
10,800
|
|
Less Dividends
|
|
-3,400
|
|
Ending Balance
|
|
17,400
|
Ron & Levi's
Balance Sheet
12/31/2012 & 12/31/2013
|
Category
|
2012
|
2013
|
|
Cash
|
20,000
|
25,000
|
|
Accounts Receivable
|
15,000
|
12,000
|
|
Inventory
|
30,000
|
52,000
|
|
Total Current Assets
|
65,000
|
89,000
|
|
Equipment
|
70,000
|
65,000
|
|
Less Accumulated Depreciation
|
-15,000
|
-19,000
|
|
Equipment (Net)
|
55,000
|
46,000
|
|
Total Assets
|
120,000
|
135,000
|
|
|
|
|
|
Accounts Payable
|
15,000
|
29,000
|
|
Long-term Liabilities
|
25,000
|
18,600
|
|
Total Liabilities
|
40,000
|
47,600
|
|
|
|
|
|
Common Stock
|
70,000
|
70,000
|
|
Retained Earnings
|
10,000
|
17,400
|
|
Total Equity
|
80,000
|
87,400
|
|
Total Liabilities & Equity
|
120,000
|
135,000
|
Shares of Stock Outstanding 2,000 2,000
Market Price per Share Common Stock 7.00 8.00
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Problem 4 Cash Flow Statement
Use the financial information from Ron & Levi's Company to develop a cash flow statement for 2013.
Problem 5 Ratio Analysis
Use the financial information from Ron & Levi's Company to compute any three activity ratios, any one liquidity ratio, any one debt ratio, any three profitability ratios, and any two market ratios.