EXTRA CREDIT PROBLEMS (10 pts.) A company hasl a net income ot 550 s30 0,000, th

Question

EXTRA CREDIT PROBLEMS (10 pts.) A company hasl a net income ot 550 s30 0,000, they paid $5,000 in dividends, trough a $20,000 loan from a bank. Payables eth $20520 start and end of the year They started the year ventory were the same at the 060 cah heis account a net income of 530,000 tast year Teprosiation was es, receivables and How much cash did they have at the IH (15 pts.) The following data are from last years (some lines are missing) of Co the Jackson Co. Assume that there were no inventories Sales Direct labor Direct materials Variable Indirect Manuf cost 170 210 110 200 Contribution Margin Fixed Selling & Admin. Expenses 100 10 Operating Income Given the above, compute a) Variable manufacturing cost of goods sold b) Variable selling and administrative expenses c) Fixed indirect manufacturing costs III. (10 pts.) Gamble Company had the following transactions I. The owner started the company by investing $8,000 2· The company paid $3,000 for six months of rent. The rent was paid advance company acquired $3,300 in inventory, put one-third of the purchas account, and paid the rest in cash. 4. The company sold inventory costing 51,400 for $2,900 on account. lfher the above transactions, what is the balance in the cash account?

Explanation / Answer

Solution:

I. Net increase in cash = Net Income + Depreciation - Purchase of machinery - Dividends + Loan from bank

Net Increase in cash = $50,000 + $30,000 - $100,000 - $5,000 + $20,000

Net increase in cash = ($5,000)

Cash at the end of the year = Cash at the beginning of the year + Net increase in cash

Cash at the end of the year = $20,000 + ($5,000)

Cash at the end of the year = $15,000

II.

Sales                                                                                                $990

Variable expenses

   Direct materials                                                            $210

   Direct labor                                                                     170

   Variable indirect manufacturing                                110

   Variable manufacturing cost of goods sold                             490 1

   Variable selling and administrative expenses                        300 2

      Total variable expenses (990 - 200)                                     790

      Contribution margin                                                                200

Fixed expenses

   Fixed factory overhead                                                   90 3

   Fixed selling and administrative expenses                100     190

Operating income                                                                         $ 10

1 210 + 170 + 110 = 490

     2 990 - 200 = 790; 790 - 490 = 300

     3 Total fixed expenses = 200 - 10 = 190

Fixed factory overhead = 190 - 100 = 90

III.

Balance in cash account = $8,000 - $3,000 - (2/3 x $3,300)

Balance in cash account = $2,800

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