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THREE ACCOUNTING QUESTIONS

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Question;Coyote Loco is a manufacturer of salsa. The follow;historical collection pattern for its credit sales are as follows: 70%;collected in month of sale 15% collected in first month after sale 10%;collected in second month after sale 4% collected in third month after sale 1%;uncollectible. The sales on account have been budgeted for the last seven;months as: June - $122,500 July - 150,000 August - 175,000 Sept - 200,000 Oct -;225,000 Nov - 250,000 Dec - 212,500 1. Compute estimated cash collections;during October from credit sales. 2. Compute the estimated total cash;collections during the fourth quarter from sales made on account during the;fourth quarter. 3. Construct an Excel spreadsheet to solve both of the;preceding requirements. Show how the solution will change if the following;information changes: sales in June and July were $100,000 and $130,000;respectively. 2? Sophisticates, Inc., a distributor of jewelry throughout;California, is in the process of assembling a cash budget for the first quarter;of 20x1. The following information has been extracted from the company?s accounting;records: ? All sales are on account. Sixty percent of customer accounts are;collected in the month of sale, 35 percent are collected in the following;month. Uncollectibles amounting to 5 percent of sales are anticipated, and;management believes that only 20 percent of the accounts outstanding on;December 31, 20x0, will be recovered and that the recovery will be in January;20x1. ? Seventy percent of the merchandise purchases are paid for in the month;of purchase, the remaining 30 percent are paid for in the month after;acquisition. ? The December 31, 20x0, balance sheet disclosed the following;selected figures: cash, $60,000, accounts receivable, $165,000, and accounts;payable, $66,000. ? Sophisticates, Inc., maintains a $60,000 minimum cash;balance at all times. Financing is available (and retired) in $1,000 multiples;at an 8 percent interest rate, with borrowings taking place at the beginning of;the month and repayments occurring at the end of the month. Interest is paid at;the time of repaying principal and computed on the portion of principal repaid;at that time. Additional data: JanuaryFebruary March Sales revenue................................................$450,000 $540,000 $555,000;Merchandise purchases................................. 270,000300,000420,000;Cash operating costs..................................... 93,000 72,000;135,000 Proceeds from sale of equipment.................... ? ? 15,000;Required: 1. Prepare a schedule that discloses the firm?s total cash;collections for January through March. 2. Prepare a schedule that discloses the;firm?s total cash disbursements for January through March. 3. Prepare a;schedule that discloses the firm?s cash needs, if any, for January through;March. The schedule should present the following information in the order;cited: Beginning cash balance, total receipts (from requirement 1), total;payments (from requirement 2), the cash excess (deficiency) before financing;borrowing needed to maintain minimum balance, loan principal repaid, loan;interest paid, and ending cash balance. 3. Concord Farms produces items made;from local farm products that are distributed to supermarkets. For many years;Concord?s products have had strong regional sales on the basis of brand;recognition, however, other companies have begun marketing similar products in;the area, and price competition has become increasingly important. Doug;Gilbert, the company?s controller, is planning to implement a standard cost;system for Concord and has gathered considerable information from his co-workers;on production and material requirements for Concord?s products. Gilbert;believes that the use of standard costing will allow Concord to improve cost;control and make better pricing decisions. Concord?s cost popular product is;strawberry jam. The jam is produced in 10-gallon batches, and each batch;requires six quarts of good strawberries. The fresh strawberries are sorted by;hand before entering the production process. Because of imperfections in the;strawberries and normal spoilage, one quart of berries is discarded for every;four quarts of acceptable berries. Three minutes is the standard direct-labor;time for sorting required to obtain one quart of acceptable strawberries. The;acceptable strawberries are then blended with the other ingredients. Blending;requires 12 minutes of direct-labor time per batch. After blending, the jam is;packaged in quart containers. Gilbert has gathered the following information;from Joe Adams, Concord?s cost accountant. ? Concord purchases strawberries at;a cost of $1.60 per quart. All other ingredients cost a total of $0.90 per;gallon. ? Direct labor is paid at the rate of $18.00 per hour. ? The total cost;of material and labor required to package the jam is $0.76 per quart. Adams has;a friend who owns a strawberry farm that has been losing money in recent years.;Because of good crops, there has been an oversupply of strawberries, and prices;have dropped to $1.00 per quart. Adams has arranged for Concord to purchase;strawberries from his friend and hopes that $1.60 per quart will help his;friend?s farm become profitable again. Required: 1. Develop the standard cost;for the direct-cost components of a 10-gallon batch of strawberry jam. The;standard cost should identify the following amounts for each direct-cost component;of a batch of strawberry jam: (a) standard quantity, (b) standard price or;rate, and (c) standard cost per batch. 2. Citing the specific ethical standards;of competence, confidentiality, integrity, and credibility for management;accountants (see ?IMA Statement of Ethical Professional Practice? in Chapter;1), explain why Joe Adams?s behavior regarding the cost information provided to;Doug Gilbert is unethical. 3. As part of the implementation of a;standard-costing system at Concord Farms, Doug Gilbert plans to train those;responsible for maintaining the standards in the use of variance analysis.;Gilbert is particularly concerned with the causes of unfavorable variances.;Discuss the possible causes of the following unfavorable variances and identify;the individual(s) who should be held responsible: (a) direct-material purchase;price variance and (b) direct-labor efficiency variance.

 

Paper#37535 | Written in 18-Jul-2015

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