InClass exercise_ch1 Scavone
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Apr 3, 2024
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In-Class Exercise Chapter 1 Name
Victoria Scavone
_______________________________
1.
Use this information to answer the following questions
:
Alpaca Corporation had revenues of $200,000 in its first year of operations. The company has
not collected on $20,000 of its sales and still owes $25,000 on $70,000 of merchandise it
purchased. The company had no inventory on hand at the end of the year. The company paid
$15,000 in salaries. Owners invested $20,000 in the business and $20,000 was borrowed on a
five-year note. The company paid $2,000 in interest that was the amount owed for the year, and
paid $6,000 for a two-year insurance policy on the first day of business. Alpaca has an effective
income tax rate of 40% (Assuming that tax is paid in cash).
1) Compute net income for the first year for Alpaca Corporation.
2) Compute the cash balance at the end of the first year for Alpaca Corporation.
1.
Net Income = Revenue – Expense
= $200,000 – (70000 + 15000+2000+3000)
= $110,000
After Tax Net Income = 110,000 – 110,000*40%=66,000)
2.
2. Net operating Cash Flow = Cash Receipt – Cash payments
= 180,000 + 20000 +20000 – (45,000 + 15000 + 2000 + 6000
+44000) = 180,000
3.
Listed below are five terms are followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct number code for the term.
TERM
PHRASE
Term number that
matches the phrase.
1. Monetary unit assumption
Implies consensus among different observers.
2
2. Verifiability
Assumes all transactions can be
identified with a particular entity.
3
3.Economic entity
assumption
Assumes an entity will continue to operate
indefinitely.
4
4. Going concern assumption
Requires reporting the financial life of an
entity in discrete time frames.
5
5.Periodicity assumption
Measured in units of money. Ignores
the possibility of inflation.
1
4.
For each of the following situations, state whether you agree or disagree with the financial
reporting practice employed, and briefly explain the reason for your answer.
(1) Cantor Corporation's accountant increased the book value of a patent from its original cost of $1 million to its recently appraised value of $6 million
Disagree violation of historical cost principal. Patent should be measured at its original cost.
(2) Stanton Corporation paid for the personal travel of its chief financial officer and charged travel expense.
Disagree. Violation of economic entity assumption. CFO’s personal activity shouldn’t be recorded on corporate books.
(3) At the end of its 2021 fiscal year, Dower, Inc., received an order from a customer for $60,000. The merchandise will ship early in 2022. Because the sale was made to a longtime customer and the invoice was paid in 2021, the controller recorded the sale in 2021.
Disagree. Violation of revenue recognition principles. The seller has not delivered goods yet. So the earnings process is not complete.
(4) In the middle of its 2021 fiscal year, Sanguinetti, Inc. paid $12,000 to its insurance company for one-year comprehensive insurance coverage. Sanguinetti recorded the entire
expenditure as an expense in 2021.
Disagree. Violation of matching. In 2021, Insurance only covers half year, so they can only record 6,000 as insurance expense in 2021.
(5)
The Churchill Pharmaceutical Company included a note in its financial statements that described a pending lawsuit against the company.
Agree. This company is conforming to the full disclosure principle. (6) The Daily Corporation, a company whose securities are publicly traded, prepares monthly,
quarterly, and annual financial statements for internal use but disseminates to external users only the annual financial statements.
Disagree. Violation of periodicity assumption. Monthly, quarterly, and annual financial statements should be available to external users.
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QUESTION 4
XYZ Corporation had revenues of $350,000 in its first year of operations. The company has not collected on $70,000 of its sales and still owes
$50,000 on $180,000 of merchandise it purchased. There was no inventory on hand at the end of the year. The company paid S60,000 in
salaries. The owners invested S30,000 in the business and $40,000 was borrowed on a five-year note. The company paid S4,000 in interest that
was the amount owed for the year and paid $12,000 for a three-year insurance policy on the first day of business.
Save
Copy the question below and answer in the space provided:
1.) Compute the cash balance at the end of the first year for XYZ Corporation.
2.) Compute accrual based net income for the first year of operations for XYZ Corporation.
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View Policies
Current Attempt in Progress
A company has the following balances: Sales revenue $312.000: Sales Returns and Allowances $2.000: Sales Discounts $4,000: Cost
of Goods Sold $184,000: Operating Expenses $84,000. Assume there are no other revenues, other expenses, or income tax expense.
How much is the profit margin?
O 16.0%
O 12.2%
O 12.4%
O 41.0 %
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Required information
[The following information applies to the questions displayed below.]
The following transactions apply to Ozark Sales for Year 1:
1. The business was started when the company received $50,000 from the issue of common stock.
2. Purchased merchandise inventory of $175,000 on account.
3. Sold merchandise for $206,500 cash (not including sales tax). Sales tax of 7 percent is collected when the
merchandise is sold. The merchandise had a cost of $131,500.
4. Provided a six-month warranty on the merchandise sold. Based on industry estimates, the warranty claims would
amount to 3 percent of sales.
5. Paid the sales tax to the state agency on $156,500 of the sales.
6. On September 1, Year 1, borrowed $20,000 from the local bank. The note had a 5 percent interest rate and matured on
March 1, Year 2.
7. Paid $6,000 for warranty repairs during the year.
8. Paid operating expenses of $55,000 for the year.
9. Paid $124,000 of accounts payable.
10. Recorded accrued interest on…
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Related Questions
- Nonearrow_forward* Question Completion Status: 1. 2 4. 6. 8. 6. 10 11 12 QUESTION 4 XYZ Corporation had revenues of $350,000 in its first year of operations. The company has not collected on $70,000 of its sales and still owes $50,000 on $180,000 of merchandise it purchased. There was no inventory on hand at the end of the year. The company paid S60,000 in salaries. The owners invested S30,000 in the business and $40,000 was borrowed on a five-year note. The company paid S4,000 in interest that was the amount owed for the year and paid $12,000 for a three-year insurance policy on the first day of business. Save Copy the question below and answer in the space provided: 1.) Compute the cash balance at the end of the first year for XYZ Corporation. 2.) Compute accrual based net income for the first year of operations for XYZ Corporation. T T TT Paragraph vE - E •T- Arial 3 (12pt) 回i公 50 ABS Ofx Mashups HTML CSS 園田围 圍田困 囲 Path: p Words:0 Click Save and Submit to save and submit. Click Save All Answers to…arrow_forward1arrow_forward
- Bhaarrow_forwardI won't to correct answer this question general accountingarrow_forwardView Policies Current Attempt in Progress A company has the following balances: Sales revenue $312.000: Sales Returns and Allowances $2.000: Sales Discounts $4,000: Cost of Goods Sold $184,000: Operating Expenses $84,000. Assume there are no other revenues, other expenses, or income tax expense. How much is the profit margin? O 16.0% O 12.2% O 12.4% O 41.0 % eTextbook and Media Hint 4 ! Save for Later Using multiple attempts will impact your score 10% soore reduction after attempt 1 Attempts; unlimited Submit Answerarrow_forward
- Help me to this questionarrow_forwardIf u don't want unhelpful rate then don't give wrong answer or inappropriate answerarrow_forwardRequired information [The following information applies to the questions displayed below.] The following transactions apply to Ozark Sales for Year 1: 1. The business was started when the company received $50,000 from the issue of common stock. 2. Purchased merchandise inventory of $175,000 on account. 3. Sold merchandise for $206,500 cash (not including sales tax). Sales tax of 7 percent is collected when the merchandise is sold. The merchandise had a cost of $131,500. 4. Provided a six-month warranty on the merchandise sold. Based on industry estimates, the warranty claims would amount to 3 percent of sales. 5. Paid the sales tax to the state agency on $156,500 of the sales. 6. On September 1, Year 1, borrowed $20,000 from the local bank. The note had a 5 percent interest rate and matured on March 1, Year 2. 7. Paid $6,000 for warranty repairs during the year. 8. Paid operating expenses of $55,000 for the year. 9. Paid $124,000 of accounts payable. 10. Recorded accrued interest on…arrow_forward
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