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    Various Accounting Problems

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    1. Today, Leila Lee, the manager of Technology Abounds, needs to make a decision on whether or not to outsource the Widget department. She needs to analyze the income statement and balance sheets for Technology Abounds' department to discover whether or not the Widget Department is performing as well as the other departments. Unfortunately, an ink accident caused the company's sole printer to malfunction. The printer department was able to get the following information from the printer before it lost all power (the computers were all being cleaned,) so Leila assigned Dr. Who, the company's accountant, the task of recreating the books before the end of the day. What were the numbers that Dr. Who recreated for Leila Lee? Here is the information obtained before the unfortunate accident:

    Technology
    Department Television
    Department Printer
    Department Widget
    Department
    Revenue $110,000 $230,000 ? ?
    Expenses ? ? $70,000 $70,000
    Net Income $40,000 ? $55,000 ?
    Retained Earnings, Jan 1 ? $377,000 $180,000 $5,000
    Dividends $60,000 $77,000 ? $1,000
    Retained Earnings, Dec 31 $145,000 $400,000 ? ?
    Current Assets ? $65,000 $30,000 ?
    Non-current Assets $420,000 ? $490,000 $310,000
    Total Assets $510,000 ? ? $400,000
    Current Liabilities ? $20,000 ? $20,000
    Non-current Liabilities $270,000 ? $270,000 ?
    Total Liabilities ? $150,000 ? ?
    Owner's Equity ? $425,000 $20,000 $180,000
    Total equity $180,000 ? $230,000 $190,000

    You will find the following relationships helpful:

    Retained Earnings, Jan 1 + Net Income - Dividends = Retained Earnings, Dec 31
    Total Assets = Current Assets + Non-current Assets
    Total Liabilities = Current Liabilities + Non-current Liabilities
    Total Equity = Retained Earnings (end of year) + Owner's Equity
    Helpful Hint: This problem is a chart that contains accounts from both the balance sheet and the income statement. It might be helpful to break the chart into these two statements and look for relationships. Your grade for this problem depends on your ability to demonstrate your understanding of the material. Therefore, you must, in addition to providing the correct answers, provide the equations that you used for each blank, the order in which you found the answers, and a brief explanation of your work. Remember you are trying to demonstrate your understanding of this material.

    2. Mallory is the sole proprietor of "Mallory's Specialty Foods." Her two main revenue streams are to cater food for special occasions, and to sell hard-to-find specialty ethnic foods. The following transactions occurred during the month of December 2006:

    a. Paid $1,300 for rent in December.
    b. Paid $1,000 advertising costs for the month of December.
    c. Catered a retirement party for a local business. The customer agreed to pay the bill of $2,200 within 30 days.
    d. Paid $6,400 in salaries for the month of December.
    e. Recorded credit card sales of $18,000 less a 2% service fee. Mallory's Specialty Foods allows customers to use Visa, Mastercard, and Discover.
    f. Catered a birthday party for which the customer had paid $1,000 cash in November.
    g. Paid miscellaneous expenses of $300 for the month.
    h. Cash sales of $12,500 for the month were recorded.
    i. Recognized that one month's liability insurance expired. The insurance was prepaid in January and cost $36,120 for the year.
    j. A physical count revealed that $14,000 of inventory was sold during the month.
    k. At the end of December, Mallory owes the employees $1,600 which is one week's salary.
    l. Recognized one month's depreciation on the store equipment. Mallory uses a 10-year straight-line depreciation to record depreciation each month. The store equipment originally cost $120,000 when she opened the store on January 1, 2000.
    m. Received, but did not pay the December utility bill of $1,500.
    Required
    a. Identify the accounts that are affected by each of the transactions. Identify whether the transaction increases or decreases each the accounts you have identified.
    b. Create a balance sheet for Mallory's Specialty Foods for the month ended December 31, 2006. Here is the balance sheet for Mallory's Specialty Foods for the month ended November 30, 2006.

    Mallory's Specialty Foods Balance Sheet
    For month ended November 30, 2006
    Assets:
    Cash $33,000.00
    Accounts Receivable $0.00
    Prepaid Insurance $3,010.00
    Inventory $60,000.00
    Total Current Assets $96,010.00
    Equipment $120,000.00
    Less Acc. Depreciation ($83,000.00)
    Net equipment $37,000.00
    Total Assets $133,010.00
    Liabilities:
    Prepaid Sales $1,000.00
    Salaries Payable $0.00
    Utilities Payable $0.00
    Total Liabilities $1,000.00
    Equity:
    Retained Earnings $42,010.00
    Owner's Equity $90,000.00
    Total Equity $132,010.00
    Total Liabilities and Equity $133,010.00

    Helpful Hints:

    (1) You have been given all of the necessary balance sheet accounts in the problem itself. You need to pair the two accounts that are affected by each transaction to complete the transactions listed. For each transaction the two accounts affected could both come from only the Income Statement, or they both could come from only the Balance Sheet, or one account could come from the Balance Sheet and one account from the Income Statement. Your book has very good descriptions on how to create and use balance sheets. We will use the format in the book's examples when evaluating your work.

    (2) For the transactions above you will need the following accounts that normally show up on the income statement.

    Revenue accounts:
    Sales Revenue

    Expense accounts:
    Cost of Goods Sold (COGS)
    Advertising Expense
    Depreciation Expense
    Insurance Expense
    Misc. Expenses
    Rent Expense
    Salaries Expense
    Service Fee
    Utility Expense

    3. Dr. Michaella Evans, an art history professor at the University of Maryland University College, supplements her income by selling cappuccino on campus to students and other faculty members when she is not teaching, doing research, creating curriculum, or attending committee meetings. She sells iced cappuccino in hot weather. Michaella has $550 invested in her cappuccino business, which consists of $100 of miscellaneous cash that she keeps in her cash drawer, plus the cappuccino machine (which originally cost $350,) and the ice shaver.
    Since there is a popular football game on the Friday of the last week of August, Michaella anticipates that Friday will be a busy day. She buys an unusually large amount of materials that goes into making and selling the cappuccino for $150 and increases the cash in her cash drawer to $200 to make change. Her supplier, Mallory's Specialty Foods, allows her to charge $100 of her total purchases, and she pays cash for the rest. Friday morning, she buys $30 for several bags of ice, and $45 for cups.
    With temperatures in the 90s, Michaella sells three-quarters of her stock for $1,035 in cash. At the end of the day, she returns home with her unsold cappuccino materials (except for the unsold ice which melted) with plans to replenish her inventory, pay her supplier bill, and obtain more ice and cups for finals week.

    Required
    a. Prepare an income statement to reflect the results of operations for Michaella's Friday business. List any items that you found difficult to measure.
    b. Evaluate Michaella's relative success in selling cappuccino.

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    https://brainmass.com/business/accounting/various-accounting-problems-117058

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    Kao-wen Peng

    1. Today, Leila Lee, the manager of Technology Abounds, needs to make a decision on whether or not to outsource the Widget department. She needs to analyze the income statement and balance sheets for Technology Abounds' department to discover whether or not the Widget Department is performing as well as the other departments. Unfortunately, an ink accident caused the company's sole printer to malfunction. The printer department was able to get the following information from the printer before it lost all power (the computers were all being cleaned,) so Leila assigned Dr. Who, the company's accountant, the task of recreating the books before the end of the day. What were the numbers that Dr. Who recreated for Leila Lee? Here is the information obtained before the unfortunate accident:

    Technology
    Department Television
    Department Printer
    Department Widget
    Department
    Revenue $110,000 $230,000 M. $125,000 S. $76,000
    Expenses A. $70,000 G. $130,000 $70,000 $70,000
    Net Income $40,000 H. $100,000 $55,000 T. $6,000
    Retained Earnings, Jan 1 B. $165,000 $377,000 $180,000 $5,000
    Dividends $60,000 $77,000 N. $25,000 $1,000
    Retained Earnings, Dec 31 $145,000 $400,000 O. $210,000 U. $10,000
    Current Assets C. 90,000 $65,000 $30,000 V. $90,000
    Non-current Assets $420,000 I. $910,000 $490,000 $310,000
    Total Assets $510,000 J. $975,000 P. $520,000 $400,000
    Current Liabilities D. $60,000 $20,000 Q. $20,000 $20,000
    Non-current Liabilities $270,000 K. $130,000 $270,000 W. $190,000
    Total Liabilities E. $330,000 $150,000 R. $290,000 X. $210,000
    Owner's Equity F. $35,000 $425,000 $20,000 $180,000
    Total equity $180,000 L. $825,000 $230,000 $190,000

    You will find the following relationships helpful:

    Retained Earnings, Jan 1 + Net Income - Dividends = Retained Earnings, Dec 31
    Total Assets = Current Assets + Non-current Assets
    Total Liabilities = Current Liabilities + Non-current Liabilities
    Total Equity = Retained Earnings (end of year) + Owner's Equity

    Helpful Hint: This problem is a chart that contains accounts from both the balance sheet and the income statement. It might be helpful to break the chart into these two statements and look for relationships. Your grade for this problem depends on your ability to demonstrate your understanding of the material. Therefore, you must, in addition to providing the correct answers, provide the equations that you used for each blank, the order in which you found the answers, and a brief explanation of your work. Remember you are trying to demonstrate your understanding of this material.

    A) Expenses = Revenue - Net Income
    Expenses = $110,000 - $40,000
    Expenses = $70,000

    B) Retained Earnings, Jan 1 + Net Income - Dividends = Retained Earnings, Dec 31
    Retained Earnings, Jan 1 + $40,000 - $60,000 = $145,000
    Retained Earnings, Jan 1 = $165,000

    C) Total Assets = Current Assets + Non-current Assets
    $510,000 = Current Assets + $420,000
    Current Assets = $90,000

    D) Total Liabilities = Current Liabilities + Non-current Liabilities
    $330,000 = Current Liabilities + $270,000
    Current Liabilities = $60,000

    E) Total Assets = Total Liabilities + Total Equity
    $510,000 = Total Liabilities + $180,000
    Total Liabilities = $330,000

    F) Total Equity = Retained Earnings (end of year) + Owner's Equity
    $180,000 = $145,000 + Owner's Equity
    Owner's Equity = $35,000

    G) Expenses = Revenue - Net Income
    Expenses = $230,000 - $100,000
    Expenses = $130,000
    H) Retained Earnings, Jan 1 ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer various accounting problems.

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