Reference no: EM13197077
Problem 1
On 1 January, Johnson set up ValleyviewPlaygyms Company tomanufacture and sell children's outdoor playgyms. He was an engineer by profession but he understood the importance of accounting information and kept his accounting records meticulously throughout the year. At the end of the year he prepared the following income statement for the year:
ValleyviewPlaygyms Company
Income Statement
for the year ended 31st December, 2012
Sales
|
|
450,000
|
Less Operating expenses:
|
|
|
Purchase of Raw Material
|
$200,000
|
|
Purchase of factory supplies
|
10,000
|
|
Wages of the factory employees (who worked directly on the playgyms)
|
75,000
|
|
Wages for other factory employees
|
10,000
|
|
Managers' salary
|
40,000
|
|
Office staff salaries
|
10,000
|
|
Sales Staff salaries
|
22,000
|
|
Advertising
|
10,000
|
|
Administrative Expenses
|
8,000
|
|
Clearing costs
|
5,000
|
|
Rent
|
25,000
|
|
Electricity
|
4,500
|
|
Purchase of factory equipment
|
140,000
|
|
Purchase of Office Equipment
|
10,000
|
|
Purchase of Sales vehicles
|
15,000
|
|
Total Operating expenses
|
|
584,500
|
Net Loss
|
|
$(134,500)
|
Although disappointed, Johnson was not surprised. He knew that expenses were higher than sales because, throughout the year, he had been able to generate a cash surplus. His bank overdraft had blown out and his bank manager has asked him to present his financial statements for 2012 to the bank.
Required:
You are the bank's accountant and the bank manager has asked you to:
1. Review the performance of ValleyviewPlaygyms in 2012 and make a recommendation as to whether Johnson's overdraft facility should be cancelled.
2. Prepare a report for Johnson explaining the error she made in his income statement.
To perform this analysis you will need to recast Johnson's income statement. The following information may be useful:
- The factory occupies 80 per cent of the rented building, the sales area 15 per cent and the administration area 5 per cent.
- All the company's fixed assets are estimated to have a useful life for five years and no salvage value at the end of their life.
- Johnson spends 50 per cent of his time as factory manager and spends the remaining time equally on sales and general administration.
- Electricity costs are consumed almost entirely by the factory.
- At 31 December 2012, the following inventories existed:
- Raw Material $20,000
- Work in Process $40 000
- Finished Goods $51 500
Problem 2
Write a short essay on how management accounting can help the managers of an organization to run their business efficiently?
What is the significance of excess reserves
: Why does the Federal Reserve require commercial banks to have reserves Explain why reserves are an asset to commercial banks but a liability to the Federal Reserve Banks. What are excess reserves How do you calculate the amount of excess reserves ..
|
State the enthalpy of neutralization of hcl with naoh
: The enthalpy of neutralization of HCl with NaOH is -55.8 kJ/mol when very dilute solutions are mixed, but is -58.2 kJ/mol when 2M solutions are mixed, as in this experiment. The reaction is
|
By how much would value of the financial securities decline
: Assume that securitization combined with borrowing and irrational exuberance in Hyperville have driven up the value of existing financial securities at a geometric rate, specifically from $2 to $4 to $8 to $16 to $32 to $64 over a six-year time pe..
|
Compute the enthalpy change reaction per mole of x
: Calculate the enthalpy change, H, for this reaction per mole of X. Ignore any heat transfer to or from the calorimeter.
|
Recast johnsons income statement
: Write a short essay on how management accounting can help the managers of an organization to run their business efficiently and prepare a report for Johnson explaining the errorshe made in his income statement
|
Find both speeds
: A train travels 120 km in the same time that a plane covers 420 km. If the speed of the plane is 40 km per hr less than 4 times the speed of the train, find both speeds.
|
What is the deadweight loss associated with the monopoly
: A monopolist faces a demand curve given by: P = 70 - 2Q, where P is the price of the good and Q is the quantity demanded. The marginal cost of production is constant and is equal to $6. There are no fixed costs of production.
|
How much profit will the monopolist make
: A monopolist faces a demand curve given by: P = 220 - 3Q, where P is the price of the good and Q is the quantity demanded. The marginal cost of production is constant and is equal to $40. There are no fixed costs of production.
|
Depict a lewis structure for acyl chloride
: Draw a Lewis structure for acyl chloride R-C(=O)-Cl and state its 3D-structure around the central atom (C). R is an acyl substituent.
|