Example Inc. has just closed the books for the year ending December 31, 2020. Based on...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Example Inc. has just closed the books for the year ending December 31, 2020. Based on the information provided, answer the questions that follow. December 31, 2020 Balance Sheet ASSETS Cash LIABILITIES AND EQUITY $75,000 Accounts Payable 1,185,000 Salary Payable Interest Payable $200,000 250,000 7,500 Accounts Receivable, net Inventories *** Finished Goods 346,500 Bank Line 20,000 Raw Materials 75,000 421.500 Current Assets 1,681,500 Current Liabilities Term Debt 477,500 900,000 Fixed Assets, net of accumulated depreciation 988,017 Total Liabilities 1,377,500 Common Stock 161,250 Retained Earnings Total Equity $2,669,517 Total Liabilities & Equity 1,130,767 1,292,017 $2,669,517 Total Assets *** Inventory Finished Goods represents 23,100 units of finished goods at a cost of $15 per unit, Raw materials for 30,000 units at $2.50 per units, Work-in process inventory is zero at December 31. The company is now in the process of finishing its projections for the year ended December 2021. Historical sales for the last quarter as well as sales projections for the next thirteen months are shown below: Month October 2020 (Actual) November 2020 (Actual) December 2020 (Actual) January 2021 February March April May Units Sold and Sales Price (60,000 units at $25.00 each) (60,000 units at S25.00 each) (60,000 units at $25.00 each) (66,000 units at $28.00 each) (69,000 units at $28.00 each) (73,000 units at $28.00 each) (77,000 units at $28.00 each) (79,000 units at $28.00 each) (80,000 units at $28.00 each) (85,000 units at $28.00 each) (89,000 units at $28.00 each) (92,000 units at $28.00 each) (100,000 units at $28.00 each) (100,000 units at $30.00 each) (100,000 units at $30.00 each) June July August September October November December Expected Monthly sales after December 2021 (110,000 units at $30.00 each) The company has had steady sales of 60,000 units per month for the past several years, but the factory has enough capacity to produce 110,000 units per month, without having to invest in significant additional fixed assets. Changes in the economy have resulted in higher sales forecasts For forecasting purposes, the company assumes 35% of sales are collected the month of the sale, 45% in the subsequent month, 17% in the second month after the sale and 3% uncollectible. The percent of sales method is used for allowance for Doubtful Accounts. Bad Debts are written off each month. Desired ending finished goods inventory is 30% of next month's sales. This is lower than the prior level. Purchases of raw materials are made in the month they are used in production and now cost $2.50 each. Two units of raw material is needed for each unit produced. Payments for raw materials are made 25% in the month of purchase and 75% in the month after purchase. Accounts payable represents unpaid purchases of raw materials. Raw material desired ending inventory is 20% of next month's material required for production. This percent has also changed for this budget. Labor costs are $20 per hour and each unit uses 4 hours of direct labor. Direct labor is paid half in the month incurred and half the following month. Direct labor rates have increased for this budget. Production overhead is allocated at $6 per unit produced and is paid in the month incurred. All production equipment is leased and therefore no depreciation is necessary as part of overhead. Work in Process Inventories equal zero at the end of each month. Selling and administrative total fixed costs are $50,000 per month and sales commissions are $5.00 per unit sold both are paid monthly. In addition, depreciation on Office Fixed assets is $5,000 per month. This is on equipment used in the office. The line of credit interest rate is 3% APR. Interest on the line is paid at the end of each month based on the ending lime balance at the end of the previous month. The interest of 5% on the Term Loan will be paid every November 1. However, interest is accrued on the loan every month. Additional office equipment will be purchased with cash at the end of June for $300,000 and the end of September for $350,000 and will be added to Office fixed assets. The equipment will be depreciated straight-line over four years with depreciation beginning in July. This results in an additional $3,000 per month beginning in July with no change to depreciation for the September purchase. The company will declare and pay a $500,000 dividend in December. Targeted Cash at each month end is $100,000 beginning January 2021, with any excess cash being used to pay down the Bank line of credit and any shortfall below $100,000 funded by borrowing against the line. Any excess cash above $100,000 will be invested in short term securities once the bank line of credit has been completely paid off. Accumulated short term investment balances can be used to cover cash shortfalls if available. (For simplicity, assume any investment does not yield any monthly cash flow and do not accrue the interest.) The company uses an estimated tax rate of 21%, with estimated payments made monthly. REQUIRED At Class time - For the 12 months of ending 1. PART 1 12/31/21 (Make sure all columns are on one page and it is readable. Use landscape Construct a Manufacturing Overhead budget for each month and the year including cost and cash payments. Calculate the total and per unit cost of producing the units each month and the е. f. year. g. Compute ending Inventory in Dollars and units for each month of the both Finished Goods and Raw Materials inventories. year for h. Compute total cost of goods sold for each month and the year using FIFO inventory valuation. Example Inc. has just closed the books for the year ending December 31, 2020. Based on the information provided, answer the questions that follow. December 31, 2020 Balance Sheet ASSETS Cash LIABILITIES AND EQUITY $75,000 Accounts Payable 1,185,000 Salary Payable Interest Payable $200,000 250,000 7,500 Accounts Receivable, net Inventories *** Finished Goods 346,500 Bank Line 20,000 Raw Materials 75,000 421.500 Current Assets 1,681,500 Current Liabilities Term Debt 477,500 900,000 Fixed Assets, net of accumulated depreciation 988,017 Total Liabilities 1,377,500 Common Stock 161,250 Retained Earnings Total Equity $2,669,517 Total Liabilities & Equity 1,130,767 1,292,017 $2,669,517 Total Assets *** Inventory Finished Goods represents 23,100 units of finished goods at a cost of $15 per unit, Raw materials for 30,000 units at $2.50 per units, Work-in process inventory is zero at December 31. The company is now in the process of finishing its projections for the year ended December 2021. Historical sales for the last quarter as well as sales projections for the next thirteen months are shown below: Month October 2020 (Actual) November 2020 (Actual) December 2020 (Actual) January 2021 February March April May Units Sold and Sales Price (60,000 units at $25.00 each) (60,000 units at S25.00 each) (60,000 units at $25.00 each) (66,000 units at $28.00 each) (69,000 units at $28.00 each) (73,000 units at $28.00 each) (77,000 units at $28.00 each) (79,000 units at $28.00 each) (80,000 units at $28.00 each) (85,000 units at $28.00 each) (89,000 units at $28.00 each) (92,000 units at $28.00 each) (100,000 units at $28.00 each) (100,000 units at $30.00 each) (100,000 units at $30.00 each) June July August September October November December Expected Monthly sales after December 2021 (110,000 units at $30.00 each) The company has had steady sales of 60,000 units per month for the past several years, but the factory has enough capacity to produce 110,000 units per month, without having to invest in significant additional fixed assets. Changes in the economy have resulted in higher sales forecasts For forecasting purposes, the company assumes 35% of sales are collected the month of the sale, 45% in the subsequent month, 17% in the second month after the sale and 3% uncollectible. The percent of sales method is used for allowance for Doubtful Accounts. Bad Debts are written off each month. Desired ending finished goods inventory is 30% of next month's sales. This is lower than the prior level. Purchases of raw materials are made in the month they are used in production and now cost $2.50 each. Two units of raw material is needed for each unit produced. Payments for raw materials are made 25% in the month of purchase and 75% in the month after purchase. Accounts payable represents unpaid purchases of raw materials. Raw material desired ending inventory is 20% of next month's material required for production. This percent has also changed for this budget. Labor costs are $20 per hour and each unit uses 4 hours of direct labor. Direct labor is paid half in the month incurred and half the following month. Direct labor rates have increased for this budget. Production overhead is allocated at $6 per unit produced and is paid in the month incurred. All production equipment is leased and therefore no depreciation is necessary as part of overhead. Work in Process Inventories equal zero at the end of each month. Selling and administrative total fixed costs are $50,000 per month and sales commissions are $5.00 per unit sold both are paid monthly. In addition, depreciation on Office Fixed assets is $5,000 per month. This is on equipment used in the office. The line of credit interest rate is 3% APR. Interest on the line is paid at the end of each month based on the ending lime balance at the end of the previous month. The interest of 5% on the Term Loan will be paid every November 1. However, interest is accrued on the loan every month. Additional office equipment will be purchased with cash at the end of June for $300,000 and the end of September for $350,000 and will be added to Office fixed assets. The equipment will be depreciated straight-line over four years with depreciation beginning in July. This results in an additional $3,000 per month beginning in July with no change to depreciation for the September purchase. The company will declare and pay a $500,000 dividend in December. Targeted Cash at each month end is $100,000 beginning January 2021, with any excess cash being used to pay down the Bank line of credit and any shortfall below $100,000 funded by borrowing against the line. Any excess cash above $100,000 will be invested in short term securities once the bank line of credit has been completely paid off. Accumulated short term investment balances can be used to cover cash shortfalls if available. (For simplicity, assume any investment does not yield any monthly cash flow and do not accrue the interest.) The company uses an estimated tax rate of 21%, with estimated payments made monthly. REQUIRED At Class time - For the 12 months of ending 1. PART 1 12/31/21 (Make sure all columns are on one page and it is readable. Use landscape Construct a Manufacturing Overhead budget for each month and the year including cost and cash payments. Calculate the total and per unit cost of producing the units each month and the е. f. year. g. Compute ending Inventory in Dollars and units for each month of the both Finished Goods and Raw Materials inventories. year for h. Compute total cost of goods sold for each month and the year using FIFO inventory valuation.
Expert Answer:
Related Book For
Financial Accounting An Integrated Statements Approach
ISBN: 978-0324312119
2nd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
Posted Date:
Students also viewed these accounting questions
-
Based on the information provided in Illustration Capsule 2.4, explain how corporate governance at Freddie Mac failed the enterprise's shareholders and other stakeholders . Which important...
-
Next, in the RawData worksheet: enter the formulas to complete the two missing column entries (note: you must complete this step before proceeding to the creation of the pivot table). In the State...
-
For the year ending December 31, 2012, Vail Inc. reports net income $140,000 and dividends $85,000. Prepare the retained earnings statement for the year assuming the balance in retained earnings on...
-
3. In this problem the bond sells for a premium, which indicates that interest rates have declined. The current yield is $70/$1,222 = 5.73%. To confirm that interest rates have declined, determine...
-
Explain the strengths and weaknesses of global companies versus multinational retailers.
-
What are organizational culture and change?
-
A contract is created to refurbish a luxury yacht: new color schemes, new furniture, new wall and floor coverings, new light fixtures, and window treatmentsthe whole works. Of course, it is not just...
-
Retail, LIFO Retail, and Inventory Shortage Late in 2007, Joan Seceda and four other investors took the chain of Becker Department Stores private, and the company has just completed its third year of...
-
Calculate the following for a 3 ft 4 ft window with the label to the right. The summer design conditions for peak cooling load are 70 and 60% RH inside; 90 and 90% outside; and a peak direct solar...
-
The Sock Company buys hiking socks for $6 a pair and sells then for $10. Management budgets monthly fixed costs to be $12,000 per month. Required (consider each of the following questions...
-
Explain how you would collect the data to gain insight into the adoption of the desired behavior change?
-
Consider the quarterly sales data for Worthington Health Club shown below: Quarter Total Year 1 2 3 4 Sales 1 5 4 2 6 3 11 4 5 11 19 1 262 2 +31 9 5 15 17 28 19 37 10 20 51 12 33 72 8 a. Develop a...
-
Explain how Benders decomposition work in general to solve mixed integer programming problems (MIP). Solve the MIP below with this method. Show all your steps. Max z2x1 + 4x2 + 5x3 + 3y1 +3y2 +5y3 =...
-
For the following Arrays, write a MATLAB code to: 1 2 3 6 7 8 11 12 13 a= 2 3 4 b= 7 8 9 C= 12 13 14 3 4 5 8 9 10 13 14 14 15 Q28-Add arrays a and b. Q29: Multiply a and b and add the result to...
-
Let S CR be a subset. We say S is a hyperplane in R" if there exist an (n - 1)- dimensional subspace W CR" and a vector v ER such that S=W+v={w+v|wW}. Prove the following statements. (a) A subset S...
-
Chuck Noland is a time-obsessed systems engineer who travels worldwide resolving productivity problems at FedEx depots. He is in a long-term relationship with Kelly Frears, with whom he lives in...
-
10. As we run the regression of American Standard Risk Premium on S&P Risk Premium, we got the following regression table: Intercept X Variable 1 Coefficients 0.001939 0.364911 Standard Error t Stat...
-
Refer to the data for problem 13-36 regarding Long Beach Pharmaceutical Company. Required: Compute each division's residual income for the year under each of the following assumptions about the...
-
The prepaid insurance account had a balance of $2,750 at the beginning of the year. The account was increased for $1,500 for premiums on policies purchased during the year. What is the adjustment...
-
An annotated statement of cash flows for Sara Lee Corporation is shown below. a. From Sara Lee's statement of cash flows, determine the free cash flow for the fiscal years ended 2003 and 2004. Assume...
-
Using the present value tables in Appendix A, calculate the present value of the following: 1. $250,000 to be received three years from today, assuming an annual interest rate of 6%. 2. $2,500 to be...
-
The codon change (Gly-12 to Val-12) in human H-ras that converts it to oncogenic H-ras has been associated with many types of cancers. For this reason, researchers would like to develop drugs to...
-
Outline the general strategy used in metagenomics.
-
You need to understand the approach described in question 3 in More Genetic TIPS before answering this question. A muscle-specific gene was cloned and then subjected to promoter bashing. As shown...
Study smarter with the SolutionInn App