RECENT ACCOUNTING QUESTIONS

                                       

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QUESTION 1

Jean Marsh Jean Marsh owns a small business making and selling children’s toys. The following trial balance was extracted from her books on 31 December 2020. DR$ CR $ 15,000 2,000 90,000 3,400 6,100 18,000 800 18,500 16,900 10,400 Capital Drawings Sales Inventory at 1 January 2020: Raw materials Finished goods Purchases of raw materials Carriage inwards Factory wages Office salaries J Marsh: salary and expenses General expenses: Factory Office Lighting Rent Insurance Advertising Bad debts Discount received Carriage outwards Plant and machinery, at cost less depreciation Car, at cost less depreciation Bank Cash in hand Accounts receivable and accounts payable 1,200 750 2,500 3,750 950 1,400 650 1,600 375 9,100 4,200 3,600 325 7,700 112,600 6,000 112,600 You are given the following additional information: 1. Inventory on 31 December 2020: Raw materials $2,900. Finished goods $8,200 there was no work in progress. 2. Depreciation for the year is to be charged as follows: Plant and machinery $1,500. Car $500. 3. On 31 December 2020 insurance paid in advance was $150 and office general expenses unpaid were $75. 4. Lighting and rent are to be apportioned: 4/5 factory; 1/5 office. Insurance is to be apportioned: 4 Factory; 4 offices. 5. Jean is a business salesperson and her salary and expenses are to be treated as selling expenses. She has sole use of the business car. Required: For the year ended 31 December 2020 prepare: (a) the manufacturing account showing prime cost and factory cost of production. (b) The trading account section of the Statement of Profit or Loss. (c) The profit or loss account section of the Statement of Profit or Loss distinguishes between administrative and selling costs. (d) A Statement of Financial Position as of 31 December 2020.

QUESTION 2

Mlangozi Limited sells plumbing fixtures on terms of 2/10 net 30. Its financial statements for the last three years are as follows: 2018 Sh.?000? 2019 Sh.?000? 2020 Sh.?000? Cash 30000 20000 5000 Accounts receivable 200000 260000 290000 Inventory 400000 480000 600000 Net fixed asset 800000 800000 800000 Accounts payable 230000 300000 380000 Accruals 200000 210000 225000 Bank loan, short term 100000 100000 140000 Long term debt 300000 300000 300000 Common stock 100000 100000 100000 Retained earnings 500000 550000 550000 Additional information: Sales 4000000 4300000 3800000 Cost of goods 3200000 3600000 3300000 sold Net profit 300000 200000 100000 Required:

  1. a) For each of the three years, analyze the company’s trends in profitability, liquidity, and efficiency (12 Marks)
  2. b) comment on the factors that may have caused the changes in profitability and liquidity from the above analysis (3 Marks)

QUESTION 3

Serra do Mar Corporation manufactures and distributes leisure clothing. Selected transactions completed by the Serra do Mar during the current fiscal year are as follows: 8. Split the common stock 3 for 1 and reduced the par from $18 to $6 per share. After the split, there were 600,000 common shares outstanding. Mar. 20. Declared semiannual dividends of $1 on 20,000 shares of preferred stock and $0.14 on the 600,000 shares of $10 par common stock to stockholders of record on March 31, payable on April 20. Jan. Apr. 20. Paid the cash dividends. May 8. Purchased 50,000 shares of the corporation’s own common stock at $48, recording the stock at cost. Actions: Organization, Capital Stock Transactions, and Dividends Aug. 2. Sold 30,000 shares of treasury stock at $56, receiving cash. Sept. 15. Declared semiannual dividends of $1 on the preferred stock and $0.07 on the common stock (before the stock dividend). In addition, a 1% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimated at $52. Oct. 15. Paid the cash dividends and issued the certificates for the con on the stock dividend. Instructions T? Journalize the transactions.

QUESTION 4

Discuss the effect of the intercompany sale of the building Khap Corporation acquired an 80 percent interest in Khun Corporation in 2014. On January 1, 2016, Khap sold a building with a five-year remaining useful life to Khun for $150,000 cash. The building’s book value was $100,000. Khun still owns the building on December 31, 2016.

REQUIRED

  1. How and in what amount will the sale of the building affect Khap’s income from Khun and net income for 2016, and the balance of Khap’s Investment in the Khun account on December 31, 2016?
  2. How will the consolidated financial statement of Khap Corporation and Subsidiary for 2016 be affected by the intercompany sale of the building?
  3. How and in what amount will the sale of the building affect Khap’s income from Khun and net income for 2017 and the balance of Khap’s Investment in Khun account on December 31, 2017, if Khun still owns the building in 2017?
  4. If Khun sold the building back to Khap at the same price and date, how and in what amount will the sale of the building affect Khap’s income from Khun and net income for 2016 and the balance of Khap’s Investment in Khun’s account at December 31, 2016?

 

QUESTION 5

The Glass Co. has a firm commitment dated April 1 to purchase cocoa with delivery on June 15. The commitment is for 1,000 metric tons of cocoa at P700 per ton. In order to hedge against decreases in the spot prices of cocoa, the company designated an option as a hedge against changes in the fair value of the commitment. The put option was acquired on April 1 for a premium of P1, 000 and has a strike price of P700 per ton. The option has a notional amount of 1,000 tons and an expiration date of June 15. Spot prices per ton and the value of the option at selected dates are as follows: April 1 April 30 May 31 June 15 Spot price per ton P701 P696 P697 P695 Fair value of option P1,000 P4,300 P3,500 P5,000 The change in the option’s time value will be excluded from an assessment of hedge effectiveness or split accounting is used. What is the gain or (loss) on firm commitment (hedged item) on May 31, gain or (loss) on option contract on May 31, gain or (loss) on firm commitment (hedged item) on June 15, and gain or loss on option contract on June 15, respectively?

 

 

QUESTION 6

2-38 Labor cost, overtime, and idle time. Jim Anderson works in the production department of Midwest Steelworks as a machine operator Jim, a long-time employee of Midwest, is paid on an hourly basis at a rate of $20 per hour. Jim works five-hour shifts per week Monday-Friday (40 hours). Any time Jim works over and above these 40 hours is considered overtime for which he is paid at a rate of time and a half 1830 per hour). If the overtime falls on weekends, Jim is paid at a rate of double time ($40 per hour), Jim is also paid an additional $20 per hour for any holidays worked, even if it is part of his regular 40 hours Jim is paid his regular wages even if the machines are down (not operating due to regular machine maintenance, slow order periods, or unexpected mechanical problems. These hours are considered “idle time.” During December Jim worked the following hours: Week 1 Week 2 Week 3 Week 4 Hours worked including machine downtime 44 3.5 43 6.4 48 5.8 46 2 60 CHAPTER 2 AN INTRODUCTION TO COST TERMS AND PURPOSES Included in the total hours worked are two company holidays Christmas Eve and Christmas Day during Week 4. All overtime worked by Jim was Monday-Friday, except for the hours worked in Week 3. All of the Week 3 overtime hours were worked on a Saturday Required 1. Calculate {n} direct manufacturing labor, (b) idle time, (c) overtime and holiday premium, and (d) total earnings for Jim in December 2 Is idle time and overtime premium a direct or indirect cost of the products that Jim worked on in December? Explain

QUESTION 7

Company XYZ is looking for a Finance/Accounting intern. The student filling this position will handle a wide range of important duties.

Responsibilities
*Assist with month-end financial reports
*Post journal entries
*Help with accounts receivable, payable, and bank statement reconciliation
*Assist with audits
*Balance sheet reconciliation
*Work with the finance team on yearly forecasting efforts*Manage the monthly tracking of our physical inventory
*Support the payment processing team
*Data entry
*Credit checks

Requirements
Applicants should be Business, Finance, Economics or Accounting majors, proficient in Microsoft Office applications. Attention to detail, the ability to multi-task and excellent communication skills are all essential to this position.

Majors
Business, Finance, Economics, Accounting

   QUESTION 8

Which of the following basic elements of financial statements is more associated with the balance sheet than the income statement?

A) Equity.

B) Revenue.

C) Gains.

D) Expenses.

D) Expenses.

 

 

 

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