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dangina [55]
3 years ago
9

Perry Investments bought 2,000 shares of Able, Inc. common stock on January 1, 20X1, for $20,000 and 2,000 shares of Baker, Inc.

common stock on July 1, 20X1 for $24,000. Baker paid $2,400 of previously declared dividends to Perry on December 31, 20X1. At the end of 20X1, the fair value of the Able stock was $18,000 and the fair value of the Baker stock was $28,000. The stocks were purchased for short-term speculation prior to the effective date of the change in accounting rules for equity investments. Perry owns 10% of each company.
Perry should record the receipt of the Baker dividend as:______

a. DR Cash 2,400 CR Investment in Baker 2,400
b. DR Cash 240 CR Dividend income 240
c. DR Cash 2,400 CR Dividends receivable 2,400
d. DR Dividends receivable 2,400 CR Dividend income 2,400
Business
1 answer:
alexandr402 [8]3 years ago
6 0

Answer:

Perry Investments

Perry should record the receipt of the Baker dividend as:______

c. DR Cash 2,400 CR Dividends receivable 2,400

Explanation:

a) Data and Calculations:

Investment in Able, Inc common stock = 2,000 on January 1, 20X1, at a cost of $20,000; December 31, 20X1 fair value = $18,000

Investment in Baker, Inc. common stock  = 2,000 on July 1, 20X1, at a cost of $24,000; December 31, 20X1 fair value = $28,000.

Baker's previously declared dividends on December 31, 20X1 = $2,400

b) Since Baker declared the dividends previously, Perry must have debited its Dividends Receivable account.  Now that payment had been made by Baker, the Dividends Receivable will be credited while the Cash account is debited.

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Answer:

Healthy Beverage Inc.

a) Differential Analysis

1) Continue Fruit Cola (Alt. 1)

Sales                            $12,750,000

Cost of goods sold         8,500,000

Gross profit                  $4,250,000

Operating expenses      6,000,000

Loss from operations ($1,750,000)

2) Discontinue Fruit Cola (Alt. 2)

Differential Effect on Income (Alternative 2):

Fixed costs:

Cost of goods sold        $2,125,000

Operating expenses          900,000

Income (Loss)               ($3,025,000)

b. Should Fruit Cola be retained ?

The production and sale of the Fruit Cola should be continued.  Discontinuing it would not save the company the incurrence of the fixed cost.

Explanation:

Differential analysis is a managerial accounting technique for analyzing the different costs and benefits that would arise from alternative solutions to a particular problem.

In the above scenario, discontinuing the production and sale of Fruit Cola would not save the company the fixed costs, so the product should be continued.  It is not the product that is causing the net loss but allocated fixed costs.  Fixed cost is a sunk cost that is not relevant in differential analysis type of decision making.

5 0
3 years ago
If your company does not have a manual that describes all the major product warranties, you should:
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Answer:

C. Decide on a general, neutral comment you can make if customers ask you about a warranty

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3 years ago
Classifying Costs as Materials, Labor, or Factory Overhead Indicate whether the following costs of Procter & Gamble, a maker
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Answer:

a. factory overhead cost

b. factory overhead cost

c. factory overhead cost

d. direct labor cost

e. direct materials cost

f. direct labor cost

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i.  direct materials cost

j. factory overhead cost

Explanation:

Direct Material Costs and Direct Labor Costs are easily traceable to the cost object whilst its difficult to trace Factory Overhead Costs to the cost object.

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Answer: Option B is correct.

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Option C is incorrect because Digi Now Inc. is offering services to upper class, which means it will charge higher prices for superior customer services. Silver Screen Cinemas Inc. will charge lower prices for lower level of customer services.

Option D is incorrect because one is competing on quality whereas the other is competing on cost. So it is impossible for the one who is competing on cost to offer everything to everyone.

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<h2>Activity Cost Pool </h2>

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Accordingly, the average cost per customer was $15.

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3 years ago
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