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Masja [62]
3 years ago
12

Week 3 and week 4 calculation and explanation required

Business
1 answer:
igor_vitrenko [27]3 years ago
4 0

Answer:

RCK Ltd

Journal Entries:

July 2018:

Debit Stock Application Account with $90,000,000

Credit Common Stock with $90,000,000

To record issue of prospectus for 90 million shares at $1 per share on application.

Debit Cash Account with $108,000,000

Credit Stock Application Account with $90,000,000

Credit Stock Allotment Account with $18,000,000

To record receipt of subscription for 108 million shares.

August 15:

Debit Stock Allotment Account with $90,000,000

Credit Common Stock with $90,000,000

To record 90 million shares at $1 on allotment.

September 20:

Debit Cash Account with $54,000,000

Credit Stock Allotment with $54,000,000

To record receipt of allotment money.

September 30:

Debit Forfeited Stock Account with $18,000,000

Credit Stock Allotment Account with $18,000,000

To record the forfeiture of 18 million shares on allotment.

October 15:

Debit Cash Account with $36,000,000

Credit Forfeited Stock Account with $36,000,000

To record the resale of forfeited shares.

October 20:

Debit Forfeited Stock Account with $18,000,000

Credit Cash Account with $18,000,000

To record the refund of forfeited shares.

Explanation:

a) When shares are issued, the application money is debited to the Stock Application Account while the corresponding credit goes to the (Common) Stock Account.

b) When the application money is received, the Cash Account is debited with the amount received and a credit to the Stock Application Account to close the account.  If oversubscription is involved the difference is transferred to the allotment account for part settlement of allotment money.

c) The forfeiture of shares means that the potential shareholders failed to pay up the balance due on their allotted shares.  The shareholders therefore lose the balance they have already contributed.

d) The reissue of forfeited shares is done in such a way that the difference is received to balance off the forfeited shares account.  However, management may decide to receive the shares at par and refund the forfeited shares balance.

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a) The determination of the optimal size of the order assuming an EOQ model for the local coffee shop is <u>265 pounds</u>.

b) The total cost in the new coffee shop where the demand for coffee increased to 4,000 pounds at an order size of 265 pounds per order (assuming a unit cost of $3 per pound) is <u>$253,500</u>.

<h3>What is the EOQ Model?</h3>

The economic order quantity (EOQ) model calculates the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs.

It is determined using the following model:

EOQ = square root of: 2 (ordering costs)(demand rate) / holding costs.

Thus, the EOQ model can be worked out as follows:

  • Determine the demand units.
  • Determine the ordering cost.
  • Determine the holding cost.
  • Multiply the demand by 2.
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<h3>Data and Calculations:</h3>

a) The annual demand for coffee = 3,500 pounds

Holding cost per pound = $10

Ordering cost = $100

EOQ = square root of: 2 ($100 x 3,500) / $10

= 265 pounds

The annual demand for coffee = 4,000 pounds

Holding cost per pound = $60

Ordering cost = $100

EOQ (Order size) = 265 pounds

Assumed unit cost per pound = $3

The total cost in the new coffee shop = $

Annual holding cost = $240,000 ($60 x 4,000)

Annual ordering cost = $1,500 ($100 x 4,000/265)

Annual purchase cost = $12,000 (4,000 x $3)

Total costs = $253,500

Learn more about the economic order quantity at brainly.com/question/14625177

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