ACCOUNTABILITY - INFLATION EFFECTS A company closes its fiscal year w
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COURSE: ACCOUNTABILITY - INFLATION EFFECTS
A company closes its fiscal year with assets of $150,000 and liabilities of $68,000. Initial capital contributed was $50,000. At end of period there was a new capital contribution of $30,000. Inflation rate for period is 10%.
Answer:
(a) Determine profit or loss for period without adjustment and with inflation adjustment.
b) Perform a comparative analysis and indicate how inflation affects performance. Comment on your results
HINT: be careful with those items (accounts) that are subject to inflation or are not
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Solved in 3 steps
- Reinhardt Company reported revenues of $122,000 and expenses of $83,000 on its 2019 income statement. In addition, Reinhardt paid of dividends during 2019. On December 31, 2019, Reinhardt prepared closing entries. The net effect of the closing entries on retained earnings was a(n): a. decrease of $4,000. b. increase of $35,000. c. increase of $39,000. d. decrease of $87,000.Roxannes Delightful Candies, Inc. began the year with a retained earnings balance of $45,000. The company had a great year and earned a net income of $80,000. However, the companys controller determined that it had made an error when calculating depreciation in the preceding year, resulting in an understated depreciation expense amount of $2,000. What is the ending retained earnings balance?^- Prepare an annual income statement from the following adjusted trial balance. Oriole EnterprisesAdjusted Trial BalanceDecember 31, 2020 Account Debit Credit Cash $1,700 Accounts Receivable 13,600 Allowance for Doubtful Accounts $500 Prepaid Insurance 1,800 Equipment 28,000 Accumulated Depreciation 4,100 Notes Payable 10,400 Accounts Payable 3,000 Salaries and Wages Payable 1,600 Interest Payable 100 Common Stock 17,500 Retained Earnings 7,200 Dividends 2,300 Service Revenue 125,100 Salaries and Wages Expense 85,700 Rent Expense 22,400 Supplies Expense 6,000 Insurance Expense 4,200 Interest Expense 600 Bad Debt Expense 900 Depreciation Expense 2,300 $169,500 Oriole EnterprisesIncome StatementYear ended December 31, 2020
- Choose the correct. Baton Company estimates that the amounts for total depreciation expense for the year ending December 31 will be $120,000 and for year-end bonuses to employees will be $200,000. What total amount of expense relating to these two items should Baton report in its quarterly income statement for the three months ended March 31?a. $0b. $30,000c. $50,000d. $80,000Richardson Company reported pretax income from continuing operations in the first six months of the current year in the amount of $100,000. Projected pretax operating income for the balance of the year is $110,000.Estimates of annual income include income from municipal bonds in the amount of $5,000 that will never be subject to income tax. Furthermore, it is anticipated that $8,000 of tax credits will be available during the year.During the third quarter of the current year, the company changed accounting principles that after retrospective application, resulted in pretax income for the first six months increasing by $20,000 and projections for the balance of the year increasing by $25,000. During the third quarter of the current year, the company experienced pretax operating income of $80,000 and projected a pretax operating income of $20,000 for the fourth quarter. At the end of the third quarter, the company estimated that annual income from municipal bonds would be $4,000 and the…Answers in Excel so I can understand how all figures were calculated. The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $200,000 per year for the next 4 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $94 and variable costs at 70% of revenue. The company’s policy is to pay out one-half of net income as dividends and to maintain a book debt ratio of 20% of total capital. 1. Produce an income statement for 2020. Assume that net working capital will equal 50% of fixed assets. 2. Produce a balance sheet for 2020. Assume that net working capital will equal 50% of fixed assets. 3. Now assume that the balancing item is debt and that no equity is to be issued. Prepare a…
- Choose the correct. March of the current year, Mooney Company estimated its year-end executive bonuses to be $800,000. The executive bonus paid in the previous year was $950,000. What amount of bonus expense, if any, should Mooney recognize in determining net income for the first quarter of the current calendar year?a. –0–b. $200,000c. $237,500d. $800,0003. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: a. Working capital. b. The current ratio. c. The acid-test ratio. d. The average collection period. (The accounts receivable at the beginning of last year totaled$1,560.000.)If answered within 40mins,it would be helpful The following balances and turnover ratios for individual operating assets and operating liabilities have been calculated using end-of-year figures based on Kamloops Inc.’s reformulated 2020 Balance Sheet: Balance Turnover Operating cash $ 150,000 26.67 Accounts receivable $ 250,000 16.00 Inventory $ 500,000 8.00 Property, plant & equipment $ 900,000 4.44 Accounts payable $ 275,000 14.55 Provisions $ 175,000 22.86 Net Operating Assets $1,350,000 2.96…
- Stephens, Inc. (SI) reported net income of $120,000 for the fiscal year that just ended and expects net income to grow at 5% per year indefinitely. SI also reported current assets of $700,000, net fixed assets of $220,000 and total assets of $920,00 for most recent fiscal year. SI’s current liabilities of $100,000 and long-term debt of $540,000. Assume that retained earnings is the only other equity account and that current assets and current liabilities vary with sales, but the other accounts do not. Additionally, assume that SI pays out 80% of net income as dividends. What is the addition to retained earnings (by how much will owner’s equity change) forecast for next year? Select one: a. $25,200 b. $32,000 c. $100,800 d. $126,000 e. None of the above.At the end of a fiscal year 2020, a commercial construction company reported a total revenue of $4,000,000 and a gross profit of $647,000. Also, the net profits before and after Tax were reported as (-$25,000) and (-$64,000), respectively. The company’s general overhead ratio has been recorded around 16.8%. Comment on the financial health of this company and, if you see the area of improvements, provide your recommendation for the company to get more profitable.Arundel Company disclosed the following information for its recent calendar year. Income Statement Data Selected Year-End Balance Sheet Data Revenues $ 100,000 Accounts receivable decrease S 24,000 Expenses Purchased a machine for cash 10,000 Salaries expense 84,000 Salaries payable increase 18,000 Utilities expense 14,000 Other accrued liabilities decrease 8,000 Depreciation expense 14,600 Other expenses 3,400 Net loss $ (16,000) Required: 1. Prepare the operating activities section of the statement of cash flows using the indirect method. (Any loss or amounts to be deducted should be indicated with a minus sign.)
