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ACT 325 Portfolio Project Description

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Question;ACT325Portfolio;Project Description;Your portfolioprojectisdue bythe end;ofWeek8.Please;completethefollowingseven;problems basedon theserial problempresented;inthe textbook beginningwith Chapter13.Youarewelcome;touse the excelspreadsheetor theworking papersto create your answers.Pleasemakesure;to cite all sourcesthat support;youroverall conclusions.You;should paste anyrequired Exceltables andtypeyour;answersintoaMicrosoft;Word document,clearly;labeling label each problem.;Problem1;Santana Rey created Business;SolutionsonOctober;1,2011.Thecompany;has been successfulandSantana;plans to expand her business.Shebelievesthat;an additional$86,000 is needed;and isinvestigatingthesefunding sources.;a.;Santana's;sisterCicely iswilling;toinvest$86,000 inthe business asa common;shareholder.SinceSantana currentlyhad about$129,000 investedin;the business,Cicely's;investmentwillmeanthat Santanawillmaintain;about60%ownershipandCicelywill;have40%ownershipofBusiness Solutions.;b.;Santana's;UncleMarcello iswilling;to invest$86,000;inthe;businessasapreferred stockholder.Marcellowould purchase 860 sharesof$100par value;7%;preferred stock.;c.;Santana's;banker iswillingtolendher$86,000;ona 7%,10-years not payable.She would;makemonthly paymentsof$1,000 permonthfor10;years.;Questions;1. Prepare;thejournalentrytoreflect;the initial$86,000;investment undereachofthe options(a),(b),and(c).;2.;Evaluatethethreeproposals;forexpansion;providingthe prosandconsof;eachoption.;3.;Which;option didyou recommendSantana;adopt? Explain.;Problem2;While reviewingtheMarch31,2012;balance sheetofBusiness;Solutions, Santana Reynotesthat;the;business has built;a large cash balanceof$68,057.;Its;mostrecentbankmoney;market statement showsthat thefunds;are earningan annualizedreturnof0.75%,so Rey decided;to make severalinvestmentswith thedesiretoearna;higher returnon theidle;cash;balance.Accordingly, inApril, 2012,Business;Solutionsmakesthe following;investments in tradingsolutions;April16-Purchase400sharesof Johnson;Johnsonat $50;per shareplus $300;commission.April30-Purchase;200 sharesof Starbucks;Corporationat $22per share;plus$250 commission.;Questions;1.;Preparejournalentries;torecordthe April;purchasesof trading;securities byBusiness;Solutions.;2.;On June 30,2012, thepersharemarket price(fairvalue);ofthe;Johnson&Johnson sharesis;$55 and;theStarbucksshares;is$19.Prepare;theadjusting entryto;record any necessary fairvalue adjustment;toits portfolioof;trading securities.;Problem3;Use the followingselecteddata;fromBusiness Solutions' income statement for the;threemonthsendedMarch31,2012, and;fromitsMarch 31,2012;balancesheettocompletethe;requirementsbeforecomputer;servicesrevenue, $25,307;net sales (of goods), $18,693,total;sales and revenue,$44,000,costofgoods;sold,$14,052, netincome, $18,833;quick assets,$90,924;current assets,$95,568,totalassets,$120,268;current liabilities,$875;total liabilities, $875,and;total equity,$119,393.;Questions;1.;Compute;the grossmarginratio(bothwith;andwithout;servicesrevenues)andnet profitmarginratio.;2. Compare the;current ratio and acid-testratio.;3. Compute the;debtratioand;equity ratio.;4.;What percentof its;assetsare current?What percentarelong term?;Problem4;The computerworkstationfurniture;manufacturing that Santana Rey;started Januaryis progressingwell.As oftheendof;June,Business Solutions' job costsheets showthe;followingtotal costsaccumulated onthreefurniture;jobs.;Job6.02;Job6.03;Job6.04;Directmaterials;$1500;$3300;$2700;Directlabor;800;1420;2100;Overhead;400;710;1050;Job 6.02was started;in productioninMay,andthesecostswere;assigned toitin May;directmaterials;$600, direct labor, $180;and overhead,$90. Job6.03and6.04werestarted;in June. Overhead costsisapplied;witha predetermined ratebasedon direct labor;costs.Jobs6.02;and6.03arefinished in June,andJob;6.04 isexpected to;be finished in July.Norawmaterials;are used indirectly in June. (Assumethiscompany's;predeterminedoverheadrate;did;not change overthreemonths).;Questions;1.;Whatisthe costofthe rawmaterials;used in June foreach;of thethree jobs and;in total?;2.;Howmuchtotal direct;labor cost is incurred in June?;3.;What;predeterminedoverheadrateis used in June?;4.;Howmuch cost;istransferred;to finished goods inventoryinJune?;Problem5;After readinganarticle;about activity-based costingina trade;journal for the furniture industry,Santana;Rey wonderedif it was;time tocritically analyzeoverhead costsat Business Solutions.;Ina recentmonth;Reyfound thatsetupcosts;inspection costs,andutility costsmade;up;mostof itsoverhead. Additionalinformation aboutoverhead follows;Activity;Cost;Driver;Settingupmachines;$20,000;25batches;Inspectingcomponents;$7,500;5,000;parts;Providingutilities;$10,000;5,000machinehours;Overhead has been appliedto;outputat arateof50%if direct;labor costs.The followingdatapertaintoJob 6.15.;Directmaterials;$2500;NumberofParts;400parts;Directlabor;$3500;MachineHours;600;machinehours;Batches;2batches;Questions;1.;Whatisthe totalcostof Job 6.15 if Business;Solutionsapplies overheadat50%of;direct laborcost?;2. Whatisthe;totalcostof job 6.15 is Business;Solutionsusesactivity;based costing?;3.;Which;approachto assigning overheadgives;a betterrepresentationofthe;costsincurred toproduceJob;6.15? Explain.;Problem6;Santana Rey expectssecond;quarter 2012 salesof;her;new lineofcomputerfurniture;to;bethe same as;the firstquarter;sales(reported below)without;any changes;instrategy.Monthlysalesaveraged;40;desk units(salespriceof$1,250)and20 chairs(salesprice;of$500).;BusinessSolutionsSegment;IncomeStatement*;ForQuarterEndedMarch;31,2012;Sales?;$180,000;Costofgoods;sold?;115,000;GrossProfit;65,000;Expenses;Salescommissions(10%);18,000;Advertisingexpenses;9,000;Otherfixedexpenses;18,000;Totalexpenses;45,000;Netincome;$20,000;*Reflect;revenue and expense activityonly relatedto the computer;furniture segment.;?Revenue: (120 desksX;$1,250)+ (60 chairsX $500)=$150,000+$30,00;+ $180,000;? Cost of goods sold:(120;chairsC $750)+(60 chairs;X $250)+$10,000 =;$115,000;Santana Rey believesthatsales;will increase each month for;the nextthreemonths (April- 48;desks,32chairs;May- 52 desks,35chairs: June-56;desks,38 chairs) if selling prices are reduced to $1,150fordesks;and$450forchairs;and advertisingexpenses;are increased by10%and;remainatthat;level for allthreemonths. The;products' variablecostwill remainat $750;for desksand $250 for;chairs.The sales;staff willcontinue;to;earna10%commission,the;fixedmanufacturing costspermonth;willremainat;$10,000andother fixed;expenses willremainat$6,000 permonth.;Questions;1. Prepare;budgetedincomestatements for each ofthemonths;ofApril,May,andJune;that showthe expected results fromimplementing;the proposed changes.Use;athree-column;format,with one columnforeachmonth.;2.;Use the;budgeted incomestatementsfrompart1 torecommendwhetherSantana;Reyshouldimplementthe proposed;changes.Explain.;Problem7;Santana Reyis consideringthe purchaseofequipment;for Business Solutions;thatwould allowthecompany;to adda newproduct;toitscomputerfurniture;line. The equipmentisexpected tocost;$300,000 andtohavea;six-year life and nosalvage;value. Itwill be;depreciated ona straight linebasis.Business Solutionsexpectstosell 100;unitsof the equipment's productseachyear.Theexpected annualincomes related;tothisequipment;follows.;Sales;$375,000;Costs;Materials,labor;andoverhead(except;fordepreciation);200,000;Depreciationofnewequipment;50,000;Sellingand;administrativeexpenses;37,500;Total;costsand;expenses;287,500;Pretaxincome;87,500;Incometaxes(30%);26,250;Netincome;$61,250;Question;1. Compute;the (1);payback periodand(2) accounting;rateof returnforthisequipment.;(Recordanswers as;percents,rounded to one decimal.);Submit your portfolio;projectthrough the assignmentlink by;SundaymidnightofWeek 8.

 

Paper#40932 | Written in 18-Jul-2015

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