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Step2247 [10]
3 years ago
8

Let’s return to Tenisa and Randolf Singh and their retail and decorating business, Comfy Home.Comfy Home is a retail business se

lling a broad range of homeware, kitchen, and electrical appliances to consumers and small businesses. In addition to the home and kitchen appliances, Comfy Home makes and sells home decorating items including artisanal candles and holiday arrangements. The company has two stores located in the small city of Warmtown, USA. Its downtown store offers decorating services to the banks and small businesses in the vicinity. Tenisa Singh handles the candle making and decorating side of the business while Randolf Singh managers the stores. The business is wholly owned by Tenisa and Randolf Singh and was started by the couple in 2014.
As part of Comfy Home’sprepaid assets, there is a yearly insurance premium of $12,000. The new year has begun and Comfy Home’s accountant is preparing journal entries for the month of January. She has learned from Randolf that the insurance premium for this year is the same as for last year and was paid in cash on January 2, 2018 for the new year. What are the journal entries that the accountant will make at the end of the month of January to reflect the activity(ies) related to Comfy Home’s insurance?
Business
1 answer:
quester [9]3 years ago
6 0

Answer:

Comfy Home

Journal Entries:

Date      Account Title             Debit    Credit

Jan. 31  Insurance Expense   $1,000

            Prepaid Insurance                  $1,000

To record the insurance expense for January.

Previously:

Jan. 2  Prepaid Insurance   $12,000

           Cash                                      $12,000

To record the prepayment for insurance premium.

Explanation:

Insurance Expense for each month is calculated as Prepaid Insurance/Period of prepayment.  This is equal to $12,000/12 = $1,000. This implies that every month's account will be debited with $1,000 for Insurance Expense, while the Prepaid Insurance (asset) is credited to account for the use of the asset for the period (month).  For January's balance sheet, the Prepaid Insurance balance will be $11,000 ($12,000 - $1,000).

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Question

A new machine, with a 4-year life, has an initial cost of $1,200 and annual costs of $380. The equivalent annual cost of this machine is best described as the"

Assuming an interest rate of 10%

Note the interest rate was added by the tutor

Answer:

Equivalent Annual cost =  $758.56

Explanation:

The equivalent annual cost is the present value of cost of the new machine divided by the annuity factor.

PV of annuity cost = A× 1- (1+r)^(-n)/r

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PV of annual cost = 380 × (1- 1.1^(-4))/0.1=1,204.55

PV of total cost = 1,204.55 + 1,200 = 2,404.55

Equivalent annual cost = PV of cost /Annuity factor

Annuity factor =(1- 1.1^(-4))/0.1 = 3.1699

Equivalent Annual cost = 2,404.55 / 3.1699 = $758.5649

Equivalent Annual cost =  $758.56

8 0
3 years ago
During 2021, its first year of operations, a company provides services on account of $257,000. By the end of 2021, cash collecti
Dmitrij [34]

Answer:

Debit Bad debt expense $15,120

Credit Allowance for doubtful debt $15,120

Being entries to record estimated bad debts

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.  

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit bad debt expense.

Account receivables balance as at year end

=  $257,000 - $131,000

= $126,000

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4 0
3 years ago
During fiscal year 2019, Magic Kingdom had sales of $2 million. Its cost of goods sold, selling and general administrative expen
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Answer:

$300,000  

Explanation:

The computation of the operating cash flow is shown below:

But before that EBIT should be determined

Sales $ 2,000,000.00  

Less : Cost of Goods Sold $1,200,000.00  

Gross Profit    $800,000.00  

Less:  selling and general administrative expenses $500,000.00  

Less: Depreciation expense $900,000.00  

EBIT i.e. Operating Income/(Loss) $(600,000.00)  

Tax at 21% $(126,000.00)

Since it is negative so the tax loss would not be determined  

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= EBIT + Depreciation expense

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Answer:

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Planning refers to the method of focusing on the actions necessary to accomplish a specific goal. Achieving optimal outcomes was the first and paramount task. It requires designing and managing a strategy, including psychological factors that include analytical competencies.

Planning is essential for every business as it facilitates coordination, improves employees morals and helps the manage mt to operate as per the stated guidelines. Thus, every business whether small or large or whether working in stable or validate environment should do planning.

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3 years ago
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