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Homework answers / question archive / 1)Arlette Inc had 150,000 outstanding shares entitled to receive dividends
1)Arlette Inc had 150,000 outstanding shares entitled to receive dividends. Its par value is P5.75 per share while market value is P8.50. Required: 1. Assume that a 15% stock dividend was declared, determine the amount of debit to Retained Earnings at the date of declaration - 2. Assume that a 35% stock dividend was declared, determine the amount of debit to Retained Earnings at the date of declaration.
2)Assignment 1. Muscat Contribution Income Statement is presented below [ 7 marks]: Total Sales (600 units) $36,000 Variable expenses $12,000 Contribution Margin $24,000 Fixed expenses $6,000 Net Income $18,000 Required: a. Prepare Contribution Income Statement assuming that the business expects an increase in its total sales by $3,000 and decrease in variable cost per unit by 10%. (4 marks) b. Referring to the original contribution statement, calculate BEP in dollars. (1 mark) c. Referring to the original contribution statement, how many units would have to be sold by the business to earn a target profit of $26,000. Use the equation/ formula method and verify your answer by preparing Contribution Income Statement.
3)The following selected ledger balances are taken from the books of JOYFUL CORPORATION for the year ended December 31, 2017: January 1, 2017 balances 10% Preference Share Capital, P200 par value, authorized 20,000 shares, 11,000 shares issued P 2.200.000 Ordinary Share Capital, P100 par value, authorized 50.000 shares, 30,000 shares issued 3,000,000 Reserves 530,000 Accumulated profits 4,100,000 Summary of transactions during the year: 1,000,000 Issuance of 5,000 10% Preference shares 325,050 Share premium - Preference 240,000 Subscribed Preference share, 1,200 shares 120,000 Subscription receivable - Preference 1.200,000 Issuance of 12,000 Ordinary shares 237,000 Share premium - Ordinary
Subscribed Ordinary shares, 5.000 shares 500.000 Subscription Receivable - Ordinary 350.000 Share premium-Donated Shares 25.950 Net Income for the period 950.000 Cash Dividend Declared 500.000 Appropriated for Plant Expansion 1,000,000 20.000 Appropriated for Treasury Shares Treasury Shares: 40,000 Purchase of Preference shares - 400 shares at 100 per share Sale of Preference shares - 200 shares at P250 20.000 per share 30.000 Share premium - Preference Treasury Shares
On your worksheets, prepare a statement of changes in shareholder's equity. Then, provide the year-end balances of the following: 1. Preference Share Capital 2. Ordinary Share Capital 3. Total Reserves 4. Accumulated Profits - Free 5. Accumulated Profits - Appropriated = 6. Treasury Stock = 7. Total Shareholders' Equity
4)Blackerby Photo reported the following figures on its December 31, 2018, income statement and balance sheet: (Click the icon to view the figures.) Compute the asset turnover ratio for 2018. Round to two decimal places. 11 Asset turnover ratio 11
Net sales $ 441,000 Dec. 31, 2018 Dec. 31, 2017 Cash $ 31,000 $ 30,000 68,000 65,000 79,000 80,000 Accounts Receivable Merchandise Inventory Prepaid Expenses Property, plant, and equipment, net 16.000 5,000 175,000 18,000
1)
= 5.75×15%×150000
= 129375 (debit to Retained Earning)?
2. If that a 35 % stock dividend was declared then the amount of debit to Retained Earnig at the date of declaration :-
= 5.75×35%×150000
= 301875 ( debit to Retained Earnig )
2)
a) Contribution income statement
| Muscat | |
| Income statement | |
| Sales | $39,000 |
| Less: Variable expenses | $11,700 |
| Contribution margin | $27,300 |
| Less: Fixed expenses | $6,000 |
| Net income | $21,300 |
Working notes
1. Calculation of sales
Sales in original contribution income statement = $36,000
Increase in sales = $3,000
Total sales = 36,000 + 3,000 = $39,000
2. Calculation of variable expenses
First, let's calculate variable expense per unit and selling price per unit
| As per original contribution income format, | |
| Sales | $36,000 |
| Number of units sold | 600 units |
| Selling price per unit = 36,000 / 600 | $60 |
| Variable expenses | $12,000 |
| Variable expense per unit = 12,000 / 600 | $20 |
As per the information, variable expense per unit is decreased by 10%.
So, current variable expense per unit = $20 * 90% =$18
Total variable expenses = Number of units sold * $18
The sales has increased by $3,000 and total sales = $39,000
Number of unit sold = Total sales / Selling price per unit = 39,000 / 60 = 650 units
So, total variable expenses = 650 * $18 = $11,700
3. Fixed expense has no change
b) BEP in dollars as per original contribution income statement
BEP in dollars = Fixed expenses / contribution margin ratio
Fixed expenses = $6,000
Contribution margin ratio = Contribution margin / sales
Contribution margin = $24,000
Sales = $36,000
Contribution margin ratio = 24,000 / 36,000 = 0.6667
BEP IN DOLLARS = $6,000 / 0.6667 = $8,999.55 rounded to $9,000
c) Unit sales required to earn target profit of $26,000 (according to original contribution income statement)
Equation:
REQUIRED UNIT SALES = (FIXED EXPENSES + TARGET PROFIT) / CONTRIBUTION MARGIN PER UNIT
Fixed expenses = $6,000
Target profit = $26,000
Contribution margin per unit = Total contribution margin / Number of unit sold = 24,000 / 600 = $40
So,
Required unit sales = (6,000 + 26,000) / 40 = 32,000 / 40 = 800 units
800 units should be sold to earn a profit of $26,000.
Let's verify this by creating a contribution income statement:
| Sales(800 * $60) | $48,000 |
| Less:Variable expenses(800 * $20) | $16,000 |
| Contribution Margin | $32,000 |
| Less:Fixed expenses | $6,000 |
| Profit | $26,000 |
So, the target profit is earned by selling 800 units.
3)
| Statement of Equity of Joyful Corporation for the year ended 31st Dec 2017 | |||||
| Equity Share capital | Pref. Share capital | Retained earnings | Reserves | Total equity | |
| Balance at 1 January 2017 | 30,00,000.00 | 22,00,000.00 | 41,00,000.00 | 5,30,000.00 | 98,30,000.00 |
| Changes in accounting policy | - | - | - | - | - |
| Restated balance | 30,00,000.00 | 22,00,000.00 | 41,00,000.00 | 5,30,000.00 | 76,30,000.00 |
| Changes in equity for the year 2017 | |||||
| Issue of share capital | 5,00,000.00 | 2,40,000.00 | 7,40,000.00 | ||
| Purchase of Share | (40,000.00) | (40,000.00) | |||
| Sale of Purchased Shares | 20,000.00 | 20,000.00 | |||
| Dividends | (5,00,000.00) | (5,00,000.00) | |||
| Income for the year | 9,50,000.00 | 9,50,000.00 | |||
| Share Premium | 2,32,712.00 | 2,32,712.00 | |||
| Total | 5,00,000.00 | 2,20,000.00 | 4,50,000.00 | 2,32,712.00 | 14,02,712.00 |
| Balance at 31 December 2017 | 35,00,000.00 | 24,20,000.00 | 45,50,000.00 | 7,62,712.00 | 90,32,712.00 |
| Pref. Share capital | 24,20,000.00 | ||||
| Equity Share capital | 35,00,000.00 | ||||
| Total Reserve | 7,67,212.00 | ||||
| Accumulated Profit - Free | 41,00,000.00 | ||||
| Accumulated Profit - Appropriated | 35,30,000.00 | ||||
| Tresury Stock | 20,000.00 | ||||
| Total Shareholder's Equity | 90,32,712.00 | ||||
4)please see the attached file.
