4th EditionDon Herrmann, J. David Spiceland, Wayne Thomas1,097 explanations
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1st EditionGlencoe McGraw-Hill548 explanations
ACCOUNTINGDuring December, Desimone Auction Co. completed the following transactions:
$$
\begin{matrix}
\text{Dec 1 } & \text{Desimone received \$23,000 cash and issued common stock to the stockholders. }\\
\text{5} & \text{Paid monthly rent, \$1,900. }\\
\text{9} & \text{Paid \$7,000 cash and signed a \$28,000 note payable to purchase land for an office site. }\\
\text{10} & \text{Purchased supplies on account, \$1,100.}\\
\text{19} & \text{Paid \$700 on account.}\\
\text{22} & \text{Borrowed \$19,000 from the bank for business use. Desimone signed a note payable to the bank in the name of the business. }\\
\text{31} & \text{Service revenue earned during the month included \$14,000 cash and \$6,000 on account. }\\
\text{31} & \text{Paid employees’ salaries (\$2,500), advertising expense (\$1,300), and utilities expense (\$1,700). }\\
\text{31} & \text{Declared and paid a cash dividend of \$2,500.}\\
\end{matrix}
$$
Desimone’s business uses the following accounts: Cash, Accounts Receivable, Supplies, Land, Accounts Payable, Notes Payable, Common Stock, Dividends, Service Revenue, Salary Expense, Rent Expense, Advertising Expense, and Utilities Expense. Journalize each transaction of Desimone Auction Co. Explanations are not required. Post to these T-accounts: Cash, Accounts Payable, and Notes Payable. After these transactions, how much cash does the business have? How much in total liabilities does it owe? ACCOUNTINGVocal Speakers makes wireless speakers that are sold to different customers in two main distribution channels. Recently, the company’s profitability has decreased. Management would like to analyze the profitability of each channel based on the following information:
$$
\begin{matrix}
& \text{Distribution Channel A} & \text{Distribution Channel B} & \text{Total}\\
\text{Revenue} & \text{\$850,000} & \text{\$910,000} & \text{\$1,760,000}\\
\text{Customer-level costs} & \text{628,000} & \text{532,400} & \text{1,160,400}\\
\text{Customer-level operating income} & \text{\$222,000} & \text{\$377,600} & \text{\$599,600}\\
\text{Customer-level operating income as a percentage of revenue} & \text{26.1\\\%} & \text{41.5\\\%} & \text{34.07\\\%}\\
\end{matrix}
$$
The company allocates distribution channel costs of marketing and administration as follows:
$$
\begin{matrix}
& \text{Total} & \text{Allocation basis}\\
\text{Distribution-channel costs}\\
\text{Marketing costs} & \text{\$260,000} & \text{Channel revenues}\\
\text{Administration costs} & \text{\$200,000} & \text{Customer-level costs}\\
\end{matrix}
$$
Based on a special study, the company allocates corporate costs to the two channels based on the corporate resources demanded by the channels as follows: Distribution Channel A, $45,000, and Distribution Channel B,$55,000. If the company were to close a distribution channel, none of the corporate costs would be saved. 1. Calculate the operating income for each distribution channel as a percentage of revenue after assigning customer-level costs, distribution-channel costs, and corporate costs. 2. Should Vocal Speakers close any distribution channel? Explain briefly including any assumptions that you made. 3. Would you allocate corporate costs to division? Why is allocating these costs helpful? What actions would it help you take?
