The following were transactions of Delphi Enterprise for the month of July:
- On 1 July, the company established that they cannot collect $8,000 from a customer and this amount has to be written off. Assumes the company uses the allowance method.
- On 15 July, the company purchased $3,000 of supplies on credit.
- On 18 July, the company received a utilities bill amounting to $400.
- On 20 July, the company entered a contract to buy a new machine costing $20,000 3 months later. The machine will be paid entirely in cash.
- On 23 July, a customer paid $5,000 owed to Delphi Enterprise.
- On 25 July, the company declared dividends of $20,000 to be paid 1 month later.
- On 31 July, the company hired new staff at a monthly salary of $3,100. The new staff will start work on 1 September.
Analyse the above and record the journal entries. Narrations are not required.
- An analysis of the liquidity and efficiency ratios for CBA Ltd shows the following results.
|Days’ sales in inventory||32 days||20 days|
|Days’ sales uncollected||35 days||25 days|
|Days’ purchases in accounts payables||70 days||29 days|
Use the above financial ratios to analyse the financial performance of CBA Ltd.
- On 1 May 2020, Ron Trading purchased a new machine. The following payments relate to the machine.
|Repair of damaged parts incurred in transporting the machine||1,000|
|Fees paid to test the machine before use||500|
|Fees paid to the installer to install the machine||800|
|Machine operator’s salary for the first month of operation||3,000|
|Maintenance costs for the first month of operation||300|
- Identify and compute the cost of the machine to be recognised. Explain your reasoning.
- Journalise the transactions. Assume the above payments are paid in cash.
- Smart Enterprise bought a machine costing $40,000 on 1 January 2015. The machine has a useful life of 4 years. The supplier which sold the machine had agreed to take back the machine for $4,000 at the end of the useful life. The company fiscal year-end is 31 December.
Compute the depreciation expense, accumulated depreciation, and net book value of the machine for the years 2015, 2016, 2017, and 2018 using:
- The straight-line method.
- The double-declining balance method.
- LCM Trading has the following beginning inventory, purchases, and sales of a particular product for the month of May:
|1 May||Beginning inventory||30 units at $30 each|
|4 May||Purchase||70 units at $35 each|
|8 May||Sale||60 units|
|10 May||Purchase||60 units at $40 each|
|15 May||Sale||25 units|
|20 May||Sale||35 units|
|26 May||Purchase||60 units at $50 each|
Using a perpetual inventory system, compute the cost of goods sold for May and the cost of the ending inventory on 31 May using the weighted average method.
- Extracts of the statement of cash flows for three companies in the same industry follows.
|Company A||Company B||Company C|
|Cash flows from operating activities||$50,000||$100,000||$200,000|
|Cash flows from investing activities Proceeds from the sale of plant assets||300,000||200,000||20,000|
|Purchase of plant assets||(100,000)||(100,000)||(100,000)|
|Cash flows from financing activities Proceeds from share issuance||50,000||100,000||180,000|
|Repayment of debt||(20,000)||(20,000)||(20,000)|
Examine the above information and explain which company you would invest in.
- Lean Technologies develops and installs learning software for companies.
In January this year, the company generated sales of $155,000 and incurred the following costs:
Assume there is no beginning and ending inventory.
Define and compute the following for Lean Technologies for January this year:
- Prime cost.
- Conversion cost.
- Operating income.
- Hendon Company produces and sells table lamps. For the year 2019, the company sold 60,000 units at $56 per unit. Other information includes:
|Less: Variable costs||1,008,000|
|Less: Fixed costs||1,254,400|
- Use CVP analysis to determine the breakeven point in units and breakeven point in dollars.
- Use CVP analysis to determine the margin of safety in units and in dollars. (4 marks)
- Suppose Hendon Company is considering spending more on advertising in the year 2020. They estimate that sales would increase by $200,000 (compared to the year 2019) with extra advertising costing $168,000. Describe how to use CVP analysis to explain whether the company should go ahead with the plan. Show workings.