Reference no: EM13904008

Problem 1  Inventory Journal Entries

Sean needs to record journal entries for various inventory purchases on account and subsequent payments.  Record the journal entries using both the gross and net methods.  

11/1  Sean purchased 20 tables on account from David's Place for $4,000 with  terms of 2/15, n 30.

11/4  Sean returned 3 tables to David's Place because they were found defective.

11/12  Sean paid for ten of the tables.

11/15  Sean paid a shipping bill for the tables from UPS for $300.

12/2  Sean paid the balance due to David's Place for the table purchase.

Problem 2 Variance Analysis

Donnovan needs to analyze the actual material and labor costs for the month in their production of tables.  The total actual labor cost was $31,500 as employees worked 1,800 hours and material cost was $55,275 for the purchase of 6,700 board feet of material.  During the month 6,800 board feet of material was used in production.  It takes two hours of labor and 7 board feet of material to complete a table. The standard rate for material is $8 per board foot and $18 per hour of labor. During the month there were 30 tables in various stage of completion at the start of the month, 1,000 tables were produced and 900 tables were sold.

Required:  Compute the material and labor price and usage variances.

Problem 3  Long-Term Assets Acquire, Use and Disposal
Part A  Shannon purchased a car for $30,000 by putting 20% down in cash, with the balance due as a note payable.  Journalize this transaction.
Part B  Shannon's car has a 4 year useful life and an estimated salvage value of $6,000.  Shannon believes she will drive the car 100,000 miles in four years.  (Assume she drives 30,000, 35,000, 25,000 and 10,000 miles in the next four years.)  Compute the depreciation for Shannon's car for years one and two using the straight line method, units of production, and double declining balance methods.  
Part C  At the end of the third year, Shannon decided to trade in her car for a new car valued at $40,000.  The car dealer has agreed to give her a trade in value of $9,000 for the old car.  Assume the book value of the car is $12,000.  She will pay $8,000 in cash and borrow the remaining funds.  Journalize this transaction. 

 

Ron & Levi's

Income Statement

For the Year Ending 12/31/2013

 

Sales Revenue		100,000
Less Cost of Goods Sold		-60,000
Equals Gross Margin		40,000
Operating Expenses
Selling and Administration	15,000
Depreciation	7,000
Total Operating Expense		-22,000
Operating Income		18,000
Tax		-7,200
Net Income		10,800

 

Ron & Levi's

Statement of Retained Earnings

For the Year Ending 12/31/2013

 

Beginning Balance		10,000
Net Income		10,800
Less Dividends		-3,400
Ending Balance		17,400

 

Ron & Levi's

Balance Sheet

12/31/2012 & 12/31/2013

Category	2012	2013
Cash	20,000	25,000
Accounts Receivable	15,000	12,000
Inventory	30,000	52,000
Total Current Assets	65,000	89,000
Equipment	70,000	65,000
Less Accumulated Depreciation	-15,000	-19,000
Equipment (Net)	55,000	46,000
Total Assets	120,000	135,000
Accounts Payable	15,000	29,000
Long-term Liabilities	25,000	18,600
Total Liabilities	40,000	47,600
Common Stock	70,000	70,000
Retained Earnings	10,000	17,400
Total Equity	80,000	87,400
Total Liabilities & Equity	120,000	135,000

 

Shares of Stock Outstanding                                                                       2,000                                                         2,000

Market Price per Share Common Stock                                                    7.00                                                            8.00

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Problem 4  Cash Flow Statement

Use the financial information from Ron & Levi's Company to develop a cash flow statement for 2013.

Problem 5  Ratio Analysis

Use the financial information from Ron & Levi's Company to compute any three activity ratios, any one liquidity ratio, any one debt ratio, any three profitability ratios, and any two market ratios.