Accounting Questions - Accounting related
i have extracted few questions from a pdf file (see attachment). The questions are accounting related. i would have attached the entire pdf but the size of the file is 8mb (well above the threshold). anyways, i understand how Q12 is done but i am having a hard time with 13 and 14. for 13, i dont understand how the cash is at $80. for 14, i do not understand a,d,e,g. Thanks. Also, if you guys are interested in the entire attachment, please message me your email address and i will send it you. thanks
| Attachment | Size |
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| questions with soln.doc 417.5 KB | 417.5 KB |
I am also unable to figure out the cash situation. I think its a typo and supposed to be 800. maybe not tho.
for 14, e is calculated by taking 150050%=750, pretty straightforward. for g, you take 2400(6400) - 600(6100)=1800. then 1800-1500 (overhead cost)=300, then 30060%=180 again on 14 a I also dont understand the cash. but for d the revolver is just the excess cash needed to pay the 750 overhead costs, so cash should have originally been at 680? If someone could shed some light on this cash situation it would be very helpful.
Thanks for the prompt reply! for 14d, 50% of the overheads would be paid in cash and the rest accrued. However, we have only $80 in cash from the previous question, wouldnt the revolver be equal to the cash shortage, which is $680 (750-80)? let me know if you are interested in the entire pdf, i will PM it to you.
@FutureWaller - You have everything figured out correctly and if you assume that the taxes are paid with cash then you will be left with no cash and a credit balance of $70 for the revolver account. The answer is correct only if the taxes are paid with cash. Look at the steps below to get the cash balance: a) Start out with $800 in cash from the cash sale of the two goods b) Pay $750 in cash for expenses ($800-$750 = $50 cash balance) c)Need to pay $120 for taxes but you only have a $50 balance in the cash account d) Take $70 out of the revolver to pay for taxes ($70 cash from revolver + $50 cash balance = $120 in taxes)
@mashaus92 - so you are saying for 13a, the cash balance is $800 and not $80 (cash sale for the two goods). If thats the case, i dont understand when you say "taxes are paid with cash". How are you getting the $120 for taxes? thanks
Revenue = $4006 = $2400 COGS = $1006 = $600 Gross Margin = Rev - COGS = $1800 EBIT = Gross Margin - Overhead = $1800 - 1500 = $300 Taxes = EBIT * Tax Rate = $300 * .4 = $120 Net Income = EBIT - Taxes = $300 - 120 = $180 Net Income goes to Retained Earnings at end of period
Assume no depreciation or amortization in this example (i.e. able to skip the EBITDA calculation)
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