Question No. 2 Contemporary Trends sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltimore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and eamings Much of this decline is attributable to the intemet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow:

Question No. 2 Contemporary Trends sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltimore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and eamings Much of this decline is attributable to the intemet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 5-25: Awards Etc. carries an inventory of trophies and ribbons for local sports teams and school clubs. The cost of trophies has dropped in the past year, which pleases the company except for the fact that it has on hand considerable inventory that was purchased at the higher prices. The president is not pleased with the lower profit margin the company is earning. “The lower profit margin will continue until we sell all of this old inventory,” he grumbled to the new accountant. “Not really,” said the accountant. “Let’s write down the inventory to the replacement cost this year, and then next year our profit margin will be in line with the competition.” Explain why the inventory can be carried at an amount less than its cost. Which accounts will be affected by the write-down? What will be the effect on income in the current year and future years?
TB 03-58 The Fastbank Motorcycle Company (FMC) receiv.. The Fastbank Motorcycle Company (FMC) receives a $10 million order from dealers wanting to buy its most popular model on credit. No money changes hands. Due balance sheet? excess demand, FMC cannot supply the motorcycles until next quarter. How will these events affect the Multiple Choice Both Accounts Receivable and Shareholders' Equity will increase by $10 million this quarter. Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next quarter. Both Accounts Receivable and Accounts Payable will increase by $10 million this quarter. These events will not impact the balance sheet this quarter.
Problem 1 GM is comparing its inventory costs to that of Toyota. GM has 45 cars in each of its 225 dealership with an average cost of P17,600 and a selling price of P23,900. Toyota has 34 dealership and has an average of 6 vehicles in each location with an average cost of P14,800 and a selling price of P19,650 per vehicle. The two companies sell about the same volume of cars per year. Insurance costs the company 2% of the cost of the vehicles, interest on the money tied up amounts to 12% per year, and other management costs amount to 6% of cost of these items. Req 1: How much would GM save per year if it uses the Toyota model and reduces its number of dealership to that of Toyota? Req 2: How much would GM save per year if it uses the Toyota model but keeps the same number of dealerships? Req 3: How much would GM save per year if it uses the Toyota model and reduces its number of dealerships to that of Toyota and reduces its costs also to the Toyota's level?