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Mamont248 [21]
3 years ago
5

Flo Choi owns a small business and manages its accounting. Her company just finished a year in which a large amount of borrowed

funds was invested in a new building addition as well as in equipment and fixture additions. Choi's banker requires her to submit semiannual financial statements so he can monitor the financial health of her business. He has warned her that if profit margins erode, he might raise the interest rate on the borrowed funds to reflect the increased loan risk from the bank's point of view. Choi knows profit margin is likely to decline this year. As she prepares year-end adjusting entries, she decides to apply the following depreciation rule: All asset additions are considered to be in use on the first day of the following month. (The previous rule assumed assets are in use on the first day of the month nearest to the purchase date.)Required:1. Identify decisions that managers like Choi must make in applying depreciation methods.2. Is Choi’s rule an ethical violation, or is it a legitimate decision in computing depreciation?3. How will Choi’s new depreciation rule affect the prot margin of her business?
Business
1 answer:
prohojiy [21]3 years ago
6 0

Answer:

See the answers below

Explanation:

Depreciation: when a valuable assets  loses value over time

the decision she took was to reduce salvage value, increase depreciation expenses and decrease profit tax

. Is Choi’s rule an ethical violation, or is it a legitimate decision in computing depreciation?

Choi's choice of rule is unethical but there are companies in recent tines who employ the same method. It is not keeping with best practices. However, she can employ the recent accounting methods. disclosed if there are changes made.

3. How will Choi’s depreciation rule affect the profit margin of her business?

Her profit margin will increase almost by double

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Answer:

c. $1.58.

Explanation:

The computation of the direct materials cost per equivalent unit is given below:

Equivalent units for material is

= 100% of 193,000 + 100% of 28,000

= 193,000 + 28,000

= 221,000

Equivalent cost for material is

= $94,100 + $254,800

= $348,900

So, the direct materials cost per equivalent unit is

= $348,900 ÷ 221,000

= $1.58

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1. Understanding opportunity costYou work as an assistant coach on the university basketball team and earn $15 per hour. One day
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Answer:

The correct answer is letter "D": $24.

Explanation:

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In this case, choosing to go to the local carnival will represent losing one hour of working as a coach assistant ($15). Besides, as there is a $9 admission fee to the carnival, you will need to spend that money. Thus, the total opportunity cost of going to the carnival instead of working is $24 (<em>$15+$9=$24</em>).

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On January 1, 2021, Red Flash Photography had the following balances: Cash, $25,000; Supplies, $9,300; Land, $73,000; Deferred R
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Answer:

Red Flash Photography

a. Journal Entries:

1. Feb. 15:

Debit Cash $33,000

Credit Common Stock $33,000

2. May 20:

Debit Cash $48,000

Debit Accounts Receivable $43,000

Credit Service Revenue $91,000

3. Aug. 31:

Debit Salaries Expense $36,000

Credit Cash $36,000

4. Oct. 1:

Debit Prepaid Rent $25,000

Credit Cash $25,000

5. Nov. 17:

Debit Supplies $35,000

Credit Account Payable $35,000

6. Dec. 30:

Debit Dividends $3,300

Credit Cash $3,300

b. Adjusting Journal Entries:

a. Debit Salaries Expense $5,300

Credit Salaries Payable $5,300

b. Debit Rent Expense $6,250

Credit Prepaid Rent $6,250

c. Debit Supplies Expense $38,000

Credit Supplies $38,000

d. Debit Deferred Revenue $6,300

Credit Service Revenue $6,300

c. Income Statement for the year ended December 31, 2022:

Service Revenue                      $97,300

Salaries Expense      41,300

Rent Expense            6,250

Supplies Expense   38,000

Dividends                  3,300    $88,850

Net Income                               $8,450

d. Statement of Stockholders' Equity

For the year ended December 31, 2022:

Common Stock                          $96,000

Beginning retained earnings       38,000

Net Income                                     8,450

Dividends                                      (3,300)

Ending Equity                           $139,150

Explanation:

a) Data and Calculations:

Trial balance

Account Titles             Debit    Credit

Cash                       $25,000

Supplies                   $9,300

Land                       $73,000

Deferred Revenue                 $6,300

Common Stock                    $63,000

Retained Earnings               $38,000

Totals                 $107,300 $107,300

Analysis of Transactions:

1. Feb. 15: Cash $33,000 Common Stock $33,000

2. May 20: Cash $48,000 Accounts Receivable $43,000 Service Revenue $91,000

3. Aus. 31: Salaries Expense $36,000 Cash $36,000

4. Oct. 1: Prepaid Rent $25,000 Cash $25,000

5. Nov. 17: Supplies $35,000 Account Payable $35,000

6. Dec. 30: Dividends $3,300 Cash $3,300

Adjustments:

a. Salaries Expense $5,300 Salaries Payable $5,300

b. Rent Expense $6,250 Prepaid Rent $6,250

c. Supplies Expense $38,000 Supplies $38,000 ($9,300+35,000-6,300)

d. Deferred Revenue $6,300 Service Revenue $6,300

T-accounts:

Cash

Account Titles             Debit      Credit

Beginning balance    $25,000

Common stock            33,000

Service Revenue         48,000

Salaries                                      $36,000

Prepaid Rent                               25,000

Dividends                                      3,300

Ending balance                           41,700

Prepaid Rent

Account Titles             Debit    Credit

Cash                       $25,000

Rent Expense                         $6,250

Ending balance                       18,750

Accounts Receivable

Account Titles             Debit    Credit

Service Revenue    $43,000

Supplies

Account Titles             Debit      Credit

Beginning balance    $9,300

Accounts payable     35,000

Supplies Expense                     $38,000

Ending balance                           $6,300

Land

Account Titles             Debit      Credit

Beginning balance    $73,000

Deferred Revenue

Account Titles             Debit      Credit

Beginning balance                  $6,300

Service Revenue        $6,300

Accounts Payable

Account Titles             Debit    Credit

Supplies                                 $35,000

Salaries Payable

Account Titles             Debit    Credit

Salaries expense                   $5,300

Common Stock

Account Titles             Debit      Credit

Beginning balance               $63,000

Cash                                        33,000

Ending balance        $96,000

Retained Earnings

Account Titles             Debit      Credit

Beginning balance               $38,000

Service Revenue

Account Titles             Debit    Credit

Cash                                      $48,000

Accounts Receivable              43,000

Deferred Revenue                    6,300

Income Summary   $97,300

Salaries Expense

Account Titles             Debit    Credit

Cash                        $36,000

Salaries Payable         5,300

Income Summary                 $41,300

Rent Expense

Account Titles             Debit    Credit

Prepaid Rent            $6,250

Income Summary                 $6,250

Supplies Expense

Account Titles             Debit    Credit

Supplies                 $38,000

Income Summary                 $38,000

Dividends

Account Titles             Debit    Credit

Cash                         $3,300

Retained earnings                  $3,300

Adjusted Trial Balance

Account Titles               Debit      Credit

Cash                          $41,700

Prepaid Rent               18,750

Accounts receivable 43,000

Supplies                      6,300

Land                          73,000

Accounts payable                      $35,000

Salaries payable                             5,300

Common Stock                            96,000

Retained earnings                       38,000

Service Revenue                         97,300

Salaries Expense      41,300

Rent Expense            6,250

Supplies Expense   38,000

Dividends                  3,300

Totals                  $271,600     $271,600

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2 years ago
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