ACC 100 Lecture Notes - Perpetual Inventory, Profit Margin, 2 On
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Sound-Around Turntables (SAT) is aregional manufacturer of high fidelity turntables. It has been inbusiness in Detroit, Michigan since 2008 and has steadily increasedsales volume as U.S. sales of vinyl albums re-ignited.
Robert Ritchie, CEO for SAT received anorder for 2,500 turntables for Best Buy, a national electronicsretailer. Production for this order will begin in late March andthe customer order must be delivered on June 1. Since SAT builds toorder, Ritchie needs to begin ordering parts from his global supplybase soon.
An important needed component is theturntable motor that is normally purchased from Dongguan Electric.The supplier is located in Kaohsiung City, Taiwan. The product ishigh quality and SAT has worked with Dongguan for 7 years. Allunits in the order would be shipped at one time. However, thecompany recently raised its prices citing higher material costs dueto rising tariffs.
Last week, Ritchie received a proposalfrom an Argentinian company that wants to become a supplier to SAT.Maduro Motors promises to make monthly deliveries of 500 unitsstarting on December 15. Ritchie likes the idea of reducing thesupplier-to-factory distance and receiving monthly deliveries.However, Ritchie doesnât know much about this supplier or thepolitical environment in Argentina.
The Options
Dongguan Electric currently sells the20W synchronous motor to SAT for 825 TWD per unit. Order cycle timeis 46 days. Terms are listed as DAT, Chicago Tradeport.
Maduro Motor proposes to sell a similar20W electric motor to SAT for 875 ARS per unit. Order cycle time is18 days. Terms are listed as FAS, Port of Mar del Plata.
Dongguan | Maduro | |
Price Per Unit | 825 TWD | 875 ARS |
Estimated Ocean Shipping Cost per unit | 140 TWD | 78 ARS |
Estimated US Customs duty per unit | 39 TWD | 12 ARS |
Exchange Rates
Date | Taiwan New Dollar (TWD) | Argentine Peso (ARS) |
January 11, 201x | 30.75 | 29.88 |
Answer the following questions:
1. Evaluate the selling price and related costs per unit offeredby each supplier in US dollars.
Dongguan | Maduro | |
Price Per Unit | $ | $ |
Estimated Ocean Shipping Cost per unit | $ | $ |
Estimated US Customs duty per unit | $ | $ |
2 a. What costs, responsibilities and risks are assumed by thebuyer (SAT) and the seller (Dongguan Electric) under Incoterms2010, DAT, Chicago Tradeport?
b. What costs, responsibilities and risks are assumed by thebuyer (SAT) and the seller (Maduro Motor) under Incoterms 2010,FAS, Port of Mar del Plata?
DAT, Chicago Tradeport | FAS, Port of Mar del Plata | |
Packaging goods for export and loading thecontainer | ||
Factory to port transportation | ||
Payment of export duties (if any are due) | ||
Loading the container on the ship | ||
Paying for the ocean transport (carriagecharges) | ||
Paying for the insurance on the internationalvoyage | ||
Paying destination terminal charges for unloadingfreight | ||
Clearing US Customs (pay import duties &taxes) | ||
US transportation to final destination |
3. Given your responses to Questions 1 and 2, what is the totalknown cost per motor that SAT will incur and what other costs willSAT incur?
Dongguan | Maduro | |
Costs from Q1 paid by SAT | $ | $ |
Costs from Q2 that SAT will incur | ||
Which supplier do you believe will provide the lowesttotal cost per unit? | â¡ Dongguan | â¡ Maduro |
4. What other costs and factors would you consider during thesupplier selection process?
5. Which global supplier would you select? Why?
Palisade Creek Co. is a merchandising business that uses theperpetual inventory system. The account balances for Palisade CreekCo. as of May 1, 2016 (unless otherwise indicated), are asfollows:
110 | Cash | $ 83,600 |
112 | Accounts Receivable | 233,900 |
115 | Merchandise Inventory | 624,400 |
116 | Estimated Returns Inventory | 28,000 |
117 | Prepaid Insurance | 16,800 |
118 | Store Supplies | 11,400 |
123 | Store Equipment | 569,500 |
124 | Accumulated Depreciation-Store Equipment | 56,700 |
210 | Accounts Payable | 96,600 |
211 | Salaries Payable | â |
212 | Customers Refunds Payable | 50,000 |
310 | Lynn Tolley, Capital, June 1, 2015 | 685,300 |
311 | Lynn Tolley, Drawing | 135,000 |
312 | Income Summary | â |
410 | Sales | 5,069,000 |
510 | Cost of Merchandise Sold | 2,823,000 |
520 | Sales Salaries Expense | 664,800 |
521 | Advertising Expense | 281,000 |
522 | Depreciation Expense | â |
523 | Store Supplies Expense | â |
529 | Miscellaneous Selling Expense | 12,600 |
530 | Office Salaries Expense | 382,100 |
531 | Rent Expense | 83,700 |
532 | Insurance Expense | â |
539 | Miscellaneous Administrative Expense | 7,800 |
During May, the last month of the fiscal year, the followingtransactions were completed:
Record the following transactions on page 20 of the journal.Refer to the Chart of Accounts for exact wording of accounttitles.
May | 1 | Paid rent for May, $5,000. |
3 | Purchased merchandise on account from Martin Co., terms 2/10,n/30, FOB shipping point, $36,000. | |
4 | Paid freight on purchase of May 3, $600. | |
6 | Sold merchandise on account to Korman Co., terms 2/10, n/30,FOB shipping point, $68,500. The cost of the merchandise sold was$41,000. | |
7 | Received $22,300 cash from Halstad Co. on account. | |
10 | Sold merchandise for cash, $54,000. The cost of the merchandisesold was $32,000. | |
13 | Paid for merchandise purchased on May 3. | |
15 | Paid advertising expense for last half of May, $11,000. | |
16 | Received cash from sale of May 6. | |
19 | Purchased merchandise for cash, $18,700. | |
19 | Paid $33,450 to Buttons Co. on account. | |
20 | Paid Korman Co. a cash refund of $13,230 for returnedmerchandise from sale of May 6. The invoice amount of the returnedmerchandise was $13,500 and the cost of the returned merchandisewas $8,000. |
Record the following transactions on page 21 of the journal.Refer to the Chart of Accounts for exact wording of accounttitles.
May | 20 | Sold merchandise on account to Crescent Co., terms 1/10, n/30,FOB shipping point, $110,000. The cost of the merchandise sold was$70,000. |
21 | For the convenience of Crescent Co., paid freight on sale ofMay 20, $2,300. | |
21 | Received $42,900 cash from Gee Co. on account. | |
21 | Purchased merchandise on account from Osterman Co., terms 1/10,n/30, FOB destination, $88,000. | |
24 | Returned of damaged merchandise purchased on May 21, receivinga credit memo from the seller for $5,000. | |
26 | Refunded cash on sales made for cash, $7,500. The cost of themerchandise returned was $4,800. | |
28 | Paid sales salaries of $56,000 and office salaries of$29,000. | |
29 | Purchased store supplies for cash, $2,400. | |
30 | Sold merchandise on account to Turner Co., terms 2/10, n/30,FOB shipping point, $78,750. The cost of the merchandise sold was$47,000. | |
30 | Received cash from sale of May 20 plus freight paid on May21. | |
31 | Paid for purchase of May 21, less return of May 24. |
Required: | |||||||||||||||||||
1. | Download the spreadsheet in the Ledger panel and save the Excelfile to your computer. Use the spreadsheet to post the Maytransactions from the journal to a ledger of four-column accounts.Be sure to save your work in Excel as it will be used to completethe following steps in Part 1 of this problem as well as steps inPart 2 of this problem. Your input into the spreadsheet will not beincluded in your grade in CengageNOW on this problem.
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2. | Post the journal to the general ledger, extending the month-endbalances to the appropriate balance columns after all posting iscompleted. In this problem, you are not required to update or postto the accounts receivable and accounts payable subsidiary ledgers.Add the appropriate posting reference to the journal. | ||||||||||||||||||
3. | Prepare an unadjusted trial balance. Accounts with zerobalances can be left blank. | ||||||||||||||||||
4. | At the end of May, the following adjustment data wereassembled. Analyze and use these data to complete (5) and (6).
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5. | (Optional) On your own paper or spreadsheet, enter theunadjusted trial balance on a 10-column end-of-period spreadsheet(work sheet), and complete the spreadsheet. Find a blankend-of-period work sheet in the Excel spreadsheet you previouslydownloaded. | ||||||||||||||||||
6. |
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7. | Prepare an adjusted trial balance. Accounts with zero balancescan be left blank.
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