Accounting Answers

True or False

6. Companies infrequently take advantage of purchase discounts because they amount to so little savings.

7. Periodic inventory systems are, in general, less expensive to operate than perpetual systems.

8. In a periodic system, cost of goods sold is the difference between what a company has available for sale (beginning inventory and purchases) and what they didn’t sell (ending inventory).

9. Companies only follow the “lower-of-cost-or-market” guideline if they use a periodic inventory system.

10. The “purchases” account is not used in a perpetual inventory system.

True or False

1. If the market value of a company’s inventory increases, the company should record a gain.

2. A company should include costs of transporting an item to its store when determining the cost of the item.

3. A company that uses a perpetual inventory system should still perform a physical inventory count.

4. In a perpetual system, but not a periodic system, cost of goods sold is determined and recorded at the time of sale.

5. If inventory is shipped FOB shipping point, the buyer takes title as soon as the inventory leaves the seller’s warehouse.

a and b are equal partners with capitals 2,00,000 and 1,00,000 respectively. as per deed, they are allowed a interest @8% on capital . during the year the firm earned a profit of rs 12,000. interest in capital allowed to a will be

Discuss the steps of performing trend analysis on the financial statements of any company.

1. A company issued financial statements for the year ended December 31, but failed to include the following adjusting entries:

A. Accrued service fees earned of $2,200.

B. Depreciation expense of $8,000.

C. Portion of office supplies (an asset) used $3,100.

D. Accrued salaries of $5,200.

E. Revenues of $7,200, originally recorded as unearned, have been earned by the end of the year.

Determine the correct amounts for the December 31 financial statements by completing the following table:

Assets Liabilities        Equity Net Income

Reported amounts............... $350,000 $200,000   $150,000 $70,000

Add (subtract) to

correct for item:

A…………………………..

B…………………………..

C…………………………..

D…………………………..

E…………………………..

Corrected amounts……… $ $                      $ $

Mr. Akbar provides you with the following information-(all the transactions are separate and independent of each other)  Started business with cash Rs150000  Purchased goods for cash Rs 25000  Sold goods to C on credit Rs 20000  Paid salary for cash Rs15000  Deposited cash into the bank account Rs100000.

a. Identify the accounts being affected in the monetary transaction and Identify the type of accounts identified - real, personal or nominal

ABC has employees 300 workers as a team. Standard production of 800 pieces per hour. Each employee in the team is paid a bonus for the excess production in addition to wages at hourly rates.

The bonus= % of production more than the standard quantity is found. Five % is regarded as the employees share. The employee in the team is paid as a bonus this percentage of a wage  rate of $30 per hours.

Total hours worked=     2100                            

Total Production=2700000

During the week Paul worked 40 hours and was paid $20 per hour. Margaret also worked 40 hours and was paid $20.

Calculate

     The bonus rate for the week                               

     Total bonus for the Team                                   

     Total pay for Paul and Margaret.                               

Morgan Ltd is a retailer of Juice barrels. The company has an annual demand of 74,000 barrels. The barrels cost $20 each. Fresh supplies can be obtained immediately but ordering cost and the cost of carriage inwards are $300 per order. The annual holding cost of holding one barrel in inventory is estimated to be $2. The economic order quantity has been calculated to be 7,000 x 12 barrels.

The suppliers introduce a quantity discount of 3% (.97)  on orders of at least 9,000 barrels and 4% on orders of at least 10,000 barrels.

Calculate to determine whether the least cost order quantity is still the EOQ of 7,000 barrels

You have been appointed financial manager of AB Ltd which is listed on the

Johannesburg Stock Exchange. You need to establish the company’s current cost of

capital and you have been provided with the following information:

Ordinary share capital

There are 240 000 shares in issue at a nominal value of R2.00 each. A dividend of

R2.06 as recently been paid and this dividend amount is expected to continue in the

foreseeable future.

17% preference shares – R120 000

The preference shares dividends for the year end 31 December 2020 have been paid.

Similar preference shares are currently trading at 15% yield to maturity.

10% bonds– R1 280 000

The market interest rate for the same class of bonds as AB Ltd, is 12% per annum.

Additional information

AB Ltd’s beta is 1.57. The return on the market is 20%. The current return on Treasury

bills is 8% per annum. The company tax rate is 28% and the company is in a tax paying

position.

Required:

Calculate the WACC

Batch No 465 required $ Kgs of materials in stores which cost $15/Kg, and also a special

component had to be bought at a cost of $1,000. 30 Hours labor were spent on the Batch where the employees were paid at $ 90/Hour. In addition, 3 Hours were spent by supervisor who is paid at $ 150/Hour. Overheads are absorbed at the rate of $ 40/Labor hour. Calculate the total absorption cost of the Batch No 465