Category: Accounting

Preparation of Journal Entries, Capital Accounts, and Opening Balance Sheet

Posted on | by Kelvin

 

A and B are partners in a firm. Their balance sheet as at 31 st March, 2022 was as follows :LiabilitiesProvision for Doubtful Debts 4,000 Cash 10,000Workmen Compensation Reserve 5,600 Sundry Debtors 80,000Outstanding Expenses 3,000 Stock 20,000Creditors 30,000 Fixed Assets 38,600Capitals: A 50,000 Profit & Loss A/c 4,000B 60,0001,52,600C was taken into partnership as from 1st April, 2022. C brought 40,000 as his capital but he isunable to bring any amount for goodwill. New profit sharing ratio is 3:2:1. Following terms wereagreed upon :1,52,6001. Claim on account of Workmens Compensation is 3,000.2. To write off Bad Debts amounting to 6,000.3. Creditors are to be paid 2,000 more.4. 2,000 be provided for an unforeseen liability.5. Outstanding expenses be brought down to 1,200.6. Goodwill is valued at years purchase of the average profits of last threeyears. Profits of 3 years amounted to 8,000; 10,000 and 18,000. Prepare Journal entries, capital accounts and opening Balance Sheet.

 

Computing Margin of Safety and Degree of Operating Leverage for Allison Corporation

Posted on | by Kelvin

 

The following is Allison Corporation’s contribution format income statement for last month:
Account title
Amount in SR
Sales 850,000
Variable Cost 250,000
Contribution Margin 600,000
Fixed Expenses 450,000
Net operating Income 150,000
The company has no beginning or ending inventories. The company produced and sold 15,000 units last month.
Required:
Compute Margin of Safety.
What is the company’s degree of operating leverage?

 

Activity-Based Costing Analysis for Latif Company

Posted on | by Kelvin

Latif Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company’s three activity cost pools are as follows:

Required:

Compute POHR per activity (Round off to two decimal places)
Calculate the overhead cost per unit, if the company produces 1,000 units of product A and 500 units of product B.

 

 

 

 

Internal Revenue Code that may apply and any other authorities such as IRS guidance

Posted on | by Kelvin

Prepare a one-page (approximately) statement of reasons the suggested answer is correct. Cite the relevant section(s) of the Internal Revenue Code that may apply and any other authorities such as IRS guidance. Your opinion, based on facts and authorities, is very welcome.
Question:
A real estate broker reported the following business income and expenses for the current year:
Commission income $100,000
Expenses:
Auto rentals 2,000
Referral fees to other brokers (legal under state law) 20,000
Referral fees to non-brokers (illegal under state law) 8,000
Parking fines 200
What amount should be reported on Schedule C, Profit or Loss from Business?
A. $69,800
B. $70,000
C. $77,800
D. $78,000

Analyzing Netflix Using Porter’s Five Forces

Posted on | by Kelvin

Find the information for this case in the file 2. Netflix FY21 10-K Excerpts.pdf. Using only the provided financial statement excerpts from Netflixs FY21 10-K, answer the questions below.

Use Porters Five Forces to analyze Netflix and its position in the industry. Be sure to use information from the Item 1 disclosures from the 10-K in your assessment. (Your answer should be succinct and can be presented in an exhibit style format.)
What is the book value of equity of Netflix as of the end of fiscal years 2020 and 2021?
What is Netflixs market value of equity as of the end of fiscal year 2021? (NFLX closed at $612.09 on Dec. 31, 2021.)
Calculate the ratio of the market value of equity to the book value of equity as of Dec. 31, 2021. Identify two primary reasons why you think the market value is different from the book value in the case of Netflix.
If Netflix recognized all payments from customers as revenue upon receipt, what would Revenues have been in fiscal years 2020 and 2021?
Why does Stock-based compensation expense show up as a positive adjustment in the operating section of the Statement of Cash Flows for fiscal year 2021?
On pages 26-27 of the Netflix 10-K, there is a calculation of Non-GAAP free cash flow. A generic definition of free cash flow that you might see is Cash flows from operation activities (CFO) Cash outlflows from investing activities (CFI). For both fiscal years 2020 and 2021, discuss whether Netflixs Non-GAAP calculation is better or worse than if they had simply used CFO CFI.
Why did Interest and other income (expense) increase from an expense of $618,441 in FY20 to income of $411,214 in FY21?
What was the average price paid for stock issued in fiscal year 2020 and 2021? How does this compare to the average market price of the stock during these two years? (Use the average 2020 Netflix daily closing stock price of $446.45 and average 2021 daily closing stock price of $558.04 in your calculations.)