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erastova [34]
3 years ago
6

On July 15, 2018, the Nixon Car Company purchased 1,100 tires from the Harwell Company for $50 each. The terms of the sale were

3/10, n/30. Nixon uses a periodic inventory system and the gross method of accounting for purchase discounts.
Required:

1. Prepare the journal entries to record the purchase on July 15 and payment on July 23, 2018.
2. Prepare the journal entry to record the payment on August 15, 2018.
3. If Nixon instead uses a perpetual inventory system, explain any changes to the journal entries created in requirements 1 and 2.
Business
1 answer:
ella [17]3 years ago
4 0

Answer:

Purchases = Number of units × Price per unit

                 = 1,100 × $50

                 = $55,000

Purchase\ discount=\frac{Total\ purchases\ Amount\times Discount\ percentage}{100}

Purchase\ discount=\frac{55,000\times 3}{100}

                                       = $1,650

The journal entries are as follows:

(1) On July 15,

Purchases A/c ($55,000 - $1,650)      Dr. $53,350

To Accounts payable                                                  $53,350

(To record purchase of inventory on account)

On July 23,

Accounts payable A/c    Dr.     $53,350

To cash                                                      $53,350

(To record the payment of cash against accounts receivable)

(2) On August 15, 2018

Accounts payable A/c    Dr.    $53,350

Interest expenses A/c    Dr.    $1,650

To cash                                                               $55,000

(To record the payment on accounts payable)

(3) Perpetual inventory system:

(i) On July 15,

Merchandise Inventory A/c           Dr. $53,350

To Accounts payable                                                  $53,350

(To record purchase of inventory on account)

(ii) On July 23,

Accounts payable A/c    Dr.     $53,350

To cash                                                      $53,350

(To record the payment of cash against accounts receivable)

(iii)  On August 15, 2018

Accounts payable A/c    Dr.    $53,350

Interest expenses A/c    Dr.    $1,650

To cash                                                               $55,000

(To record the payment of cash against accounts payable and to recognize interest expense due lost discount)

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Romans Food Market, located in Saratoga, New York, carries a variety of specialty foods from around the world. Two of the stores leading products use the Romans Food Market name: Romans Regular Coffee and Romans DeCaf Coffee. These coffees are blends of Brazilian Natural and Columbian mild coffee beans, which are purchased from a distributor from New York City. Because Romans purchases large quantities the coffee beans may be purchased om an as need basis for the price of 10% higher than the market price the distributor pays for the beans. The current market price is $0.47 per pound for Brazilian Natural and $0.62 per pound for Columbian Mild The composition of each coffee blend are as follows:

                                                             

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Romans sells the Regular blend for $3.60 per pound and the DeCaf blend for $4.40 per pound. Romans would like to place an order for the Brazilian and Colombian coffee beans that will enable the production of 1000 pounds of Romans Regular coffee and 500 pounds of Romans DeCaf coffee. The production cost is $0.80 per pound for the Regular blend. Because of the extra steps required to produce DeCaf, the production cost for the DeCaf blend is $1.05 per pound. Packaging costs for both products are $0.25 per pound. Formulate a linear programming model that can be used to determine the pounds of Brazilian Natural and Colombian Mild that will maximize the total contribution to profit.

Answer:

\mathbf{Max \ Z =  2.033 BR + 2.583 BD + 1.868 CR + 2.418 CD}

Explanation:

From the given information:

The total revenue can be illustrated as :

Total revenue = 3.6 BR +  4.4 BD + 3.6 CR + 4.4 CD

On the other hand; the total cost  of the beans is:

= 1.1 (0.47 BR  + 0.47 BD + 0.62 CR + 0.62 CD)

=  0.517  BR + 0.517 BD + 0.682 CR + 0.682 CD

Also; The total production cost is :

= 0.8 BR + 1.05 BD + 0.8 CR + 1.05 CD

The total profit  = Total revenue - Total Cost of Beans - Total Production Cost

The total profit  =  \left[\begin{array}{}3.6 BR   + 4.4 BD + 3.6 CR + 4.4 CD\\- (0.517  BR + 0.517 BD + 0.682 CR + 0.682 CD)\\-(0.8 BR + 1.05 BD + 0.8 CR + 1.05 CD)\end{array}\right]

The total profit  = 2.033 BR + 2.583 BD + 1.868 CR + 2.418 CD

Therefore the  linear programming model represents the Objective function of the total profit as:

\mathbf{Max \ Z =  2.033 BR + 2.583 BD + 1.868 CR + 2.418 CD}

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Answer:

Capital Budgeting Analysis is a process of evaluating how we invest in capital assets; i.e. assets that provide cash flow benefits for more than one year.

An organization has to take many decisions regarding the expansion of business and investment. To do that, they will require the help of NPV method and base its decision on the same.

Net present value is used in Capital budgeting to analyze the profitability of a project or investment. It is calculated by taking the difference between the present value of cash inflows and present value of cash outflows over a period of time.

As the name suggests, net present value is nothing but net off of the present value of cash inflows and outflows by discounting the flows at a specified rate.

From the question the following are given:

  1. Capital Expenditure = $450,000
  2. Useful life of expenditure = 10 years
  3. Annual return from expenditure = $70,000
  4. Marginal cost of Capital = 8%

Step 1:                                  

It's formula is given as:

Formula for NPV

NPV = (Cash flows)/( 1+r)i

<em>Where</em>

i- Initial Investment

Cash flows= Cash flows in the time period

r  = Discount rate

i = time period

Computing with a spreadsheet, the Net Present Value of the Investment is given at $ 19,706.

Kindly see attached spreadsheet.

Judgement: Since the NPV is positive the investment is profitable and hence Nice Ltd can go ahead with the expansion.

Cheers!

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