Actual and projected sales of an entity for September and October are a'-, follows:All credit sales are collected in the month following the month in which the sale is made. The September 30 cash balance is US $23, 000. Cash disbursements in October are projected to be US $94, 000. To maintain a minimum cash balance of US $15, 000 on October 31, the entity will need to borrow
Answer(s): B
This entity will collect US $80, 000$50, 000 from September credit sales + $30, 000 from October cash sales) in October. To reach its targeted cash balance on October 31, it will have to borrow US $6, 000.
Whenever an entity must use net realizable value rather than cost to value an inventory item, the inventory account is reduced and the account "expense due to decline of inventory to net realizable value" is increased. The balance of this account is reflected as a separate item on the
Answer(s): C
If a separate expense account is not used, the ending inventory will be reduced directly and the result will be an increase in cost of goods sold. No separate disclosure of the inventory write down will appear in the income statement_ The effect is to hide the loss in cost of goods sold. If the separate expense account is used, it appears on the income statement as a deduction from gross profitsales - cost of goods sold). One advantage is that cost of goods sold is not misstated. At the end of the accounting period, an entity has the partially completed financial statements shown as follows.
The entity had sales for the period of
Gross profit equals 30% of sales. Thus, dividing gross profit by 30% yields sales. Gross profit equals profit before interest and taxPBIT) plus administrative expensegiven as US $40, 000) and depreciationUS $500, 000 fixed assets 10 years = US $50, 000). Interest equals 10% of the long-term debt, or US $100, 000 x 10%). Profit before tax equals US $166, 667 [$100, 000 profit -1.0 40% tax rate)]. Hence, PBIT must equal US $266, 667$166, 667 + $100, 000), and gross profit must be US $356, 667$266, 667 PBIT+ $40, 000 administrative expense + $50, 000 depreciation). Sales is therefore US $1, 118, 890$356, 667 gross profit - 30% gross profit rate). At the end of the accounting period, an entity has the partially completed financial statements shown as follows.
The entity has current assets of
Return on total assets3%) equals profitUS $100, 000) divided by total assets. Consequently, total assets equal US $3, 333, 333$100, 000 - 03). Current assets must therefore equal US $3, 033, 333$3, 333, 333 total assets - $300, 000 other assets).
Lawson Ltd. has the opportunity to increase annual sales US $100, 000 by selling to a new, riskier group of customers. Based on sales, the uncollectible expense this increase to be 15%, and collection costs will be 5%. Manufacturing and selling expenses are 70% of sales, and the effective tax rate is 40%. If Lawson accepts this opportunity, the after-tax profit will increase by
Manufacturing and selling costs exclusive of bad debts equal 70% of sales. Hence, the gross profit en the US $100, 000 increase in sales will be US $30, 000$100, 000 x 305:Assuming US $15, 000 of bad debts and US $5, 000 of collection expense, the increase in pre-tax profit will beAn entity has the following statements:
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