Evergreen Company sells lawn and garden products to wholesalers. The company’s fiscal year-end is December 31. During 2021, the following transactions related to receivables occurred:Feb. 28 Sold merchandise to Lennox, Inc., for $10,000 and accepted a 10%, 7-month note. 10% is an appropriate rate for this type of note.
Mar. 31 Sold merchandise to Maddox Co. that had a fair value of $7,200, and accepted a noninterest-bearing note for which $8,000 payment is due on March 31, 2022.
Apr. 3 Sold merchandise to Carr Co. for $7,000 with terms 2/10, n/30. Evergreen uses the gross method to account for cash discounts.
11 Collected the entire amount due from Carr Co.
17 A customer returned merchandise costing $3,200. Evergreen reduced the customer’s receivable balance by $5,000, the sales price of the merchandise. Sales returns are recorded by the company as they occur.
30 Transferred receivables of $50,000 to a factor without recourse. The factor charged Evergreen a 1% finance charge on the receivables transferred. The sale criteria are met.
June 30 Discounted the Lennox, Inc., note at the bank. The bank’s discount rate is 12%. The note was discounted without recourse.
Sep. 30 Lennox, Inc., paid the note amount plus interest to the bank.

Required:
1. Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold.
2. Prepare any necessary adjusting entries at December 31, 2021. Adjusting entries are only recorded at year-end.
3. Prepare a schedule showing the effect of the journal entries on 2021 income before taxes

Answers

Answer 1
Answer:

Final answer:

The answer provides the necessary journal entries for Evergreen, including transactions, adjusting entries, and the effect on income before taxes.

Explanation:

1. Journal Entries:

Feb. 28: Debit Notes Receivable-$10,000; Credit Sales-$10,000
Mar. 31: Debit Notes Receivable-$7,200; Credit Sales-$7,200
Apr. 3: Debit Accounts Receivable-$7,000; Credit Sales-$7,000
Apr. 11: Debit Cash-$6,860; Debit Sales Discounts-$140; Credit Accounts Receivable-$7,000
Apr. 17: Debit Sales Returns-$0; Debit Accounts Receivable-$5,000; Credit Cost of Goods Sold-$3,200; Credit Sales-$5,000
Apr. 30: Debit Cash-$49,500; Debit Finance Charge Expense-$500; Credit Transfer of Receivables-$50,000
June 30: Debit Cash-$9,105; Debit Loss on Discount of Note Receivable-$895; Credit Notes Receivable-$10,000
Sep. 30: Debit Cash-$10,560; Credit Notes Receivable-$10,000; Credit Interest Income-$560

2. Adjusting Entries:

Dec. 31: Debit Interest Receivable-$340; Credit Interest Income-$340 (to recognize accrued interest on the Lennox note)

3. Income Before Taxes:

The journal entries will impact the 2021 income before taxes as follows:
- Sales of merchandise will increase the income
- Sales returns and discounts will decrease the income
- Interest income and finance charge expense will affect the income

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Related Questions

Lorenzo Company applies overhead to jobs on the basis of direct materials cost. At year-end, the Work in Process Inventory account shows the following. Work in Process Inventory Date ExplanationDebit Credit Balance Dec.31 Direct materials cost1,900,000 1,900,000 31 Direct labor cost210,000 2,110,000 31 Overhead applied684,000 2,794,000 31 To finished goods 2,723,000 71,000 1. Determine the predetermined overhead rate used (based on direct materials cost). 2. Only one job remained in work in process inventory at December 31. Its direct materials cost is $22,000. How much direct labor cost and overhead cost are assigned to this job
A construction company entered into a fixed-price contract to build an office building for $20 million. Construction costs incurred during the first year were $6 million and estimated costs to complete at the end of the year were $9 million. The company recognizes revenue over time according to percentage of completion. How much revenue and gross profit or loss will appear in the company’s income statement in the first year of the contract? (Enter your answer in whole dollars.)
An increase in savings by consumers is seen as a(n):_________. a. decrease in investment spending in the economy increase in government spending in the economy. b. decrease in exports in the economy. c. increase in imports in the economy. d. leakage in spending in the economy.
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In the Month of March, Baldwin received orders of 113 units at a price of $15.00 for their product Bell. Baldwin uses the accrual method of accounting and offers 30 day credit terms. Baldwin delivers 113 units in April. They received payment for 57 units in March, and 57 units in April. In the March income statement, how much revenue is recognized on the March income statement from this order?

Draft an inquiry letter for purchase of 10 units of IBM P4 computers and 2 units of Lx 300 Epson printers to Kathmandu Computers and Engineering Kathmandu. ​

Answers

Based on writing standards, the inquiryletter for purchase should begin with the sender's address and be written like a formal letter.

Structures of Letter of Inquiry.

  • The sender's address should be written at the beginning of the letter, followed by the receiver's address.

  • The letter must contain all the elements of the enquiring item, including their quantities.

  • There must be the date and address of the receiver included.

  • The letter's subject must be written clearly before the letter's content.

  • Ensure you provide the expected salutation at the beginning of the letter.

  • Write clearly and straightforward.

  • Provide reasons and inquiry descriptions.

  • Add your signature, name, and designation at the end of the letter.

Hence, in this case, it is concluded that there are specific ways to write a good inquiry letter.

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For a particular flight from Dulles to SF, an airline uses wide-body jets with a capacity of 440 passengers. It costs the airline $4,000 plus $70 per passenger to operate each flight. Through experience the airline has discovered that if a ticket price is $T, then they can expect (440−0.64T) passengers to book the flight. Determine the ticket price, T, that will maximize the airline's profit.

Answers

Answer:

$378.75

Explanation:

Data provided:

Capacity = 440 passengers

Operating cost = $4,000 + $70(Number of passengers)

Expected number of passengers = 440 - 0.64T

Ticket price = T

Total operational cost = $4000 + $70( 440-0.64T )

Total operational cost = $34,800 - 44.8T

Thus,

Total revenue = Number of passengers × Ticket price

= (440 - 0.64T)T

= 440T - 0.64T²

also,

Total profit ,P(T) = Total revenue - Total operational cost

P(T) = ( 440T - 0.64T²) - (34,800 - 44.8T)

P(T) = - 0.64T² - 34,800 + 484.8T

Now,

Differentiating with respect to ticket price T

P'(T) = -0.64(2)T - 0 + 484.8(1)

or

P'(T) = - 1.28T + 484.8 ..............(1)

For point of maxima or minima

P'(T) = 0

or

 - 1.28T + 484.8 = 0

or

1.28T = 484.8

or

T = $378.75

now,

again differentiating (1) to check for maxima or minima

P''(T)= -1.26(1) + 0

P''(T) = -1.26

Since,

P"(T)  < 0

Hence,

T = $378.75 will maximise the profit

Final answer:

The airline's profit can be maximized with a ticket price of approximately $289.84 as calculated from the provided mathematical model. However, real-world variables may affect actual optimal pricing.

Explanation:

In this case, the airline's profit function (revenue minus costs) can be written as: P(T) = T*(440 - 0.64T) - (4000 + 70*(440 - 0.64T)). To maximize profit, you would take the derivative of P(T) with respect to T, resulting in the following polynomial: P'(T) = 440 - 1.28T - 70. Setting this derivative equal to zero and solving for T yields a ticket price of approximately $289.84.

Another way to check this solution would be to create a graph of the function P(T) and visually identify the maximum point. Mind you, this method requires precision and may not generate the accurate result as the calculus method.

It's important to keep in mind that this is a simplified model and doesn't account for other factors which can affect ticket pricing in the real world, such as competition, fuel prices, and demand for specific flights. That being said, this exercise highlights how mathematical models can be used in economics and business to optimize profit by adjusting pricing strategies.

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Hernandez, Inc. signed a ten-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $300,000 starting at the beginning of the first year, with title passing to Hernandez at the expiration of the lease. Hernandez treated this transaction as a operating lease. The drill press has an estimated useful life of 15 years, with no salvage value. Hernandez uses straight-line amortization for all of its plant assets. Aggregate lease payments were determined to have a present value of $1,800,000, based on implicit interest of 10%. What amount of amortization expense should be recorded for 2021?

Answers

Answer: $120,000

Explanation:

Depreciation is to be based on the cost of the asset being depreciated. In this scenario, the cost of the heavy duty drill press will be the Present Value of all the lease payments for the entire 10 years because it is said that the title will pass to Hernandez Inc. afterwards so the lease payments can be considered as payment.

Straight Line Amortisation = (Cost of Asset - Salvage Value)/(Estimated Useful Life)

Straight Line Amortisation = (1,800,000 - 0)/(15)

Straight Line Amortisation = $120,000 per year

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system: Driver and guard wages $ 960,000 Vehicle operating expense 390,000 Vehicle depreciation 270,000 Customer representative salaries and expenses 300,000 Office expenses 160,000 Administrative expenses 460,000 Total cost $ 2,540,000 The distribution of resource consumption across the activity cost pools is as follows: Travel Pickup and Delivery Customer Service Other Totals Driver and guard wages 50 % 35 % 10 % 5 % 100 % Vehicle operating expense 70 % 5 % 0 % 25 % 100 % Vehicle depreciation 60 % 15 % 0 % 25 % 100 % Customer representative salaries and expenses 0 % 0 % 90 % 10 % 100 % Office expenses 0 % 20 % 30 % 50 % 100 % Administrative expenses 0 % 5 % 60 % 35 % 100 % Required: Complete the first stage allocations of costs to activity cost pools.

Answers

Answer:

SecuriCorp

The First level Allocations will be:

Of a total cost of $2,540,000

Travel allocated costs is $915,000

Pick Up and Delivery is $451,000

Customer Service is $690,000

Others is $484,000

Explanation:

the next level of allocation will be to determine the cost rate based on the Activity Measures, however these were not provided in the question

Activity Based Costing is a costing technique that allocates costs based on the activity level of certain pre-determined cost drivers.

Instead of taking the pool of costs and dividing it by Volume to arrive at an Average Costs, Activity Based Costing believes all components leading to the cost generated should bear the burden of the cost by determining the Driver rate per activity.

If from the example we have worked above, we are told the number of miles covered is 20,000 miles and the actual Cost we worked out for Travels was $960,000. This implies we have an activity rate of $48 Per mile covered as travels costs.

The same would apply to Customer Services if for example 3,000 customers were attended to in the period, the Rate Per Customer will become $690,000 divided by 3,000 = $230 Per Customer

With these indices, it is easy to then allocate costs on the basis of miles traveled + Customers Attended to etc

Final answer:

To allocate costs to the activity cost pools, multiply the total costs by the resource consumption percentages provided for each activity.

Explanation:

In order to allocate costs to the activity cost pools, we need to use the distribution of resource consumption percentages provided. Let's calculate the cost allocation for each activity cost pool:

  1. Travel cost pool: Multiply total costs by 50% for driver and guard wages, 70% for vehicle operating expense, and 60% for vehicle depreciation.
  2. Pickup and Delivery cost pool: Multiply total costs by 35% for driver and guard wages, 5% for vehicle operating expense, and 15% for vehicle depreciation.
  3. Customer Service cost pool: Multiply total costs by 10% for driver and guard wages, 0% for vehicle operating expense, and 0% for vehicle depreciation, and 90% for customer representative salaries and expenses.
  4. Other cost pool: Multiply total costs by 5% for driver and guard wages, 25% for vehicle operating expense, and 25% for vehicle depreciation, and 10% for customer representative salaries and expenses, and 50% for office expenses, and 35% for administrative expenses.

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Walker Telecommunications has a quick ratio of 2.00x, $35,550 in cash, $19,750 in accounts receivable, some inventory, total current assets of $79,000, and total current liabilities of $27,650. The company reported annual sales of $200,000 in the most recent annual report. Over the past year, how often did Walker Telecommunications sell and replace its inventory?

a) 9.28x b) 8.01x c) 8.44x d) 2.86x

Answers

Answer:

c) 8.44x

Explanation:

Total current assets = cash + account receivable + inventory

⇔ $79,000 = $35,550 + $19,750 + Inventory

⇒ Inventory = $79,000 - $35,550 - $19,750 = $23,700

The inventory circles based on annual sales = Sales/ inventory = $200,000/ $23,700 = 8.44

The calculate how often Walker Telecommunications sold and replaced its inventory over the past year, we can use the Inventory Turnover Ratio formula.

Inventory Turnover Ratio = Cost of Goods Sold (COGS) / Average Inventory

However, we don't have the exact COGS information, but we can use the Cost of Goods Sold to Sales ratio (COGS/Sales) to estimate it.

Given that the company reported annual sales of $200,000, we need to find the COGS.

COGS/Sales = (COGS) / ($200,000)

We can rearrange the formula to find COGS:

COGS = (COGS/Sales) * ($200,000)

To find the average inventory, we can use the following formula:

Average Inventory = (Beginning Inventory + Ending Inventory) / 2

Since we are looking at how often inventory is sold and replaced, we don't need the specific values for beginning and ending inventory.

We can use the total current assets and the quick ratio to estimate the average inventory:

Quick Ratio = (Total Current Assets - Inventory) / Total Current Liabilities

Solving for Inventory:

Inventory = Total Current Assets - (Quick Ratio * Total Current Liabilities)

Now, we can calculate the inventory turnover ratio:

Inventory Turnover Ratio = COGS / Average Inventory

Substitute the values we found:

Inventory Turnover Ratio = (COGS) / [(Total Current Assets - (Quick Ratio * Total Current Liabilities)) / 2]

Inventory Turnover Ratio = [(COGS/Sales) * ($200,000)] / [(Total Current Assets - (Quick Ratio * Total Current Liabilities)) / 2]

Plugging in the given values:

Inventory Turnover Ratio = [(COGS/Sales) * ($200,000)] / [(79,000 - (2.00 * 27,650)) / 2]

Now, calculate the Inventory Turnover Ratio:

Inventory Turnover Ratio ≈ 8.44x

So, over the past year, Walker Telecommunications sold and replaced its inventory approximately 8.44 times.

Therefore, the answer is (c) 8.44x.

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Fixed costs are $1300000 and the variable costs are 80% of the unit selling price. What is the break-even point in dollars?

Answers

Answer:

the break-even point in dollars is $6,500,000

Explanation:

The computation of the break even point in dollars is shown below;

As we know that

Break even point in dollars is

= Fixed cost ÷ contribution margin ratio

Since the variable cost is 80%, so the contrbibution margin is 20% so that the total selling price would be 100%

now

= $1,300,000 ÷ 20%

= $6,500,000

Hence, the break-even point in dollars is $6,500,000