Which of these statements about the production order quantity model is FALSE? The production order quantity model is appropriate

A medium level profession can be characterized as someone who has progressed beyond the entry level but is not at the upper echelons. Conversely, a high level profession signifies that an individual has not only surpassed entry level but also reached the upper limits.

Answer:

A.

a. Dr Cash $2,300,000

Cr Notes payable $2,300,000

b. Dr Equipment $98,000

Cr Cash $98,000

c.Dr Inventory $35,000

Cr Accounts payable $35,000

D. Dr Repair expense $62,000

Cr Cash $62,000

e. Dr Cash $390,000

Cr Unearned revenue $390,000

f. Dr Accounts receivable $700

Cr Sales revenue $700

Dr Cost of of goods sold $400

Cr Inventory $400

g. Dr Cash $320,000

Cr Sales revenue $320,000

h. Dr Cash $3,500

Cr Unearned revenue-deposit $3,500

i. Dr Accounts payable $17,500

Cr Cash $17,500

j. Dr Cash $400

Cr Accounts receivable $400

k. Dr Wages expense $245,000

Cr Cash $245,000

B. $1,300

Explanation:

A. Preparation of Journal entries

a. Dr Cash $2,300,000

Cr Notes payable $2,300,000

[To acknowledge cash borrowed from the bank]

b. Dr Equipment $98,000

Cr Cash $98,000

[To record acquisition of a snowplow]

c.Dr Inventory $35,000

Cr Accounts payable $35,000

[To log purchase of inventory on credit]

D. Dr Repair expense $62,000

Cr Cash $62,000

[For payment of repair expenses]

e. Dr Cash $390,000

Cr Unearned revenue $390,000

[For sale of seasonal passes]

f. Dr Accounts receivable $700

Cr Sales revenue $700

[To record sales on credit]

Dr Cost of goods sold $400

Cr Inventory $400

[To record associated costs]

g. Dr Cash $320,000

Cr Sales revenue $320,000

[To document sales ]

h. Dr Cash $3,500

Cr Unearned revenue-deposit $3,500

[To log customer deposits]

i. Dr Accounts payable $17,500

[35,000 x 1/2]

Cr Cash $17,500

[For recording cash payments toward accounts payable]

j. Dr Cash $400

Cr Accounts receivable $400

[To log customer payments]

k. Dr Wages expense $245,000

Cr Cash $245,000

[To acknowledge wage payments]

B. To determine the ending balance in the Accounts Receivable account as of the end of December

Beginning Accounts Receivable 1,000

Add: Sales on account 700

Less: Cash received on account -400

Ending balance in Accounts Receivable $1,300

Consequently, the final balance in the Accounts Receivable by the end of December will amount to $1,300

Answer:

1. Create a statement for retained earnings.

Net income = $943,400

Retained earnings as of May 31, 2018 = $3,792,500

2. Construct a balance sheet, assuming a current portion of the note payable is $50,000.

Total Net Assets = Stockholder’s equity = $4,292,500

Explanation:

1. Create a statement for retained earnings.

The first step is preparing the income statement to find the net income as shown below:

Clairemont Co.

Income Statement

for the fiscal year ended May 31, 2018

Details                                                         $            

Sales                                                   11,343,000

Cost of goods sold                           (7,850,000)

Gross Income                                      3,493,000

Selling and Distribution expenses:

Sales salaries expense                        (916,000)

Advertising expense                           (550,000)

Depreciation expense - Store equipment        (140,000)

Miscellaneous selling expense            (38,000)

Administrative expenses:

Office salaries expense                     (650,000)

Rent expense                                        (94,000)

Insurance expense                               (48,000)

Depreciation expense - Office equipment   (50,000)

Office supplies expense                       (28,100)

Miscellaneous administrative expense         (14,500)  

Operating income                                964,400

Interest expense                                   (21,000)

Net income                                          943,400

Clairemont Co.

Retained Earnings Statement

for the fiscal year ended May 31, 2018

Details                                                             $            

Retained earnings at June 1, 2017         2,949,100

Net income for the year                            943,400

Dividends                                                  (100,000)

Retained earnings at May 31, 2018       3,792,500  

2. Construct a balance sheet, assuming a current portion of the note payable is $50,000.

Clairemont Co.

Balance sheet

for the fiscal year ended May 31, 2018

Details                                                     $                         $      

Fixed Assets

Office equipment                             830,000

Accumulated depreciation - office equip   (550,000)            280,000      

Store equipment                            3,600,000

Accumulated depreciation - store equip    (1,820,000)         1,780,000

Net Fixed Assets                                                        2,060,000

Current Assets

Cash                                                    240,000

Accounts receivable                          966,000

Inventory                                           1,690,000

Estimated returns inventory                 22,500

Office supplies                                       13,500

Prepaid insurance                                   8,000  

Total current assets                         2,940,000

Current Liabilities

Accounts payable                               (326,000)

Customer refunds payable                   (40,000)

Salaries payable                                     (41,500)

Note payable                                         (50,000)

Working Capital                                                               2,482,500

Long-term Liability

Note payable (300,000 - 50,000)                                 (250,000)

Net Total Assets                                                            4,292,500

Financed by:

Common stock                                                                 500,000

Retained earnings at May 31, 2018                                 3,792,500  

Stockholder’s Equity                                                     4,292,500

Note:

Since both the Total Net Assets and Stockholder’s equity are equal at $4,292,500, this indicates the financial statement is correctly prepared as both values are meant to coincide.

Answer:

Journal Entry for the partial year's depreciation on July 1, 2023:

Debit Depreciation Expense $7,500

Credit Accumulated Depreciation $7,500

1) When the machine is sold for $45,500 in cash:

Debit Cash $45,500

Debit Accumulated Depreciation $67,500

Credit Gain from Sale of Asset $8,000

Credit Machine Asset $105,000

(2) When the machine is sold for $25,000 in cash

Debit Cash $25,000

Debit Accumulated Depreciation $67,500

Debit Loss from Sale of Asset $12,500

Credit Machine Asset $105,000

Explanation:

Rayya Co. utilizes the straight-line depreciation approach, calculating the yearly Depreciation Expense using the formula:

Annual Depreciation Expense = (Cost of machine − Salvage Value )/Useful Life = ($105,000 - $0)/7 = $15,000

The machine was used for 6 months in 2023 (half a year)

Depreciation Expense = $15,000/2 = $7,500

The journal entry for partial year's depreciation on July 1, 2023 is recorded as follows:

Debit Depreciation Expense $7,500

Credit Accumulated Depreciation $7,500

By July 1, 2023, the total Accumulated Depreciation amounts to = $15,000 x 4 + $7,500 = $67,500

Carrying value of the machine = $105,000 - $67,500 = $37,500

(1) If the machine is sold for $45,500 cash:

Calculation of Sale Price minus Carrying Value = $45,500 - $37,500 = $8,000>0

=> Therefore, the company acknowledges a gain of $8,000 on the sale

Debit Cash $45,500

Debit Accumulated Depreciation $67,500

Credit Gain from Sale of Asset $8,000

Credit Machine Asset $105,000

(2) If the machine is sold for $25,000 cash

Calculation of Sale Price minus Carrying Value = $25,000 - $37,500 = -$12,500<0

=> Thus, the company records a loss of $12,500 on the sale

The entry needed is as follows:  

Debit Cash $25,000

Debit Accumulated Depreciation $67,500

Debit Loss from Sale of Asset $12,500

Credit Machine Asset $105,000