Highlands Accounting Project - Group 7_FINAL_Updated
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Southern New Hampshire University *
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Accounting
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Jan 9, 2024
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Accounting Project
Table of Contents
Highland Malt: Accounting Case Study Financial Analysis and Recommendations
.........................
2
Key Assumptions
.....................................................................................................................................................................
2
Recommendations
..................................................................................................................................................................
2
Financial Analysis
...................................................................................................................................................................
2
Financial Statements
.............................................................................................................................................................
3
Income Statement
...................................................................................................................................................................
3
Balance Sheet
............................................................................................................................................................................
3
Cash Flow Statements
...........................................................................................................................................................
4
Cash Flow Statement (High level Summary)
................................................................................................................
4
Financial Ratio Calculations
................................................................................................................................................
5
References
..................................................................................................................................................................................
6
© 2023 Quantic Holdings, Inc. All rights reserved. 1
Accounting Project
Highland Malt: Accounting Case Study Financial Analysis and Recommendations
Key Assumptions
All transactions between Highland Malt and Spencer are paid in Cash in US Dollars.
COGS calculations are considered using First in First-Out Method (FIFO).
The Lease expenses and fees paid to Adger are considered as Operating Expense.
Income Tax is not considered for the years 2018 and 2019.
All Financial ratios are calculated for 2019 year.
Reduction in Total Operating expense for 2020 and beyond can be possible with the
consideration that Adger may plan to have flat fee charge or may not even request
services.
Reduction of Overhead costs for 2020 and beyond can be possible due to increase in
labor market which can result in lower Production overhead costs.
Recommendations
Highland Malt can generate more Revenue by increasing the Production cost. This is
based on their entire Inventory replenishment in 107 days.
Highland Malt can negotiate with Spencer’s for reduction of Sales commission starting
2020. This would increase the ROI close to Industry average as our inventory
replenishment is less than Industry average.
Significant reduction in Operating Expenses and Overhead cost can also increase our ROI
and Gross Profit margin close to Industry average.
Sale of Whisky by bottle price would help increase the ROI by 15% compared to the sale
by Barrel price. (Increase of $125000 revenue)
Financial Analysis
Highland Malt is a conservative firm with sufficient assets and more implied cash to pay
of its short-term liabilities. It has lower debt ratios and higher Times interest earned
ratios to show its creditworthy ness.
Highland Malt has very good inventory replenish range of 107 days compared to
industry average of 157 days.
Highland Malt has better Asset Turnover ratios compared to industry average which
shows the efficiency of converting assets into Sales.
Highland Malt has to focus on improving the Gross Profit margin, Net profit, ROI and
ROE by reducing their Operating expense as well as Overhead costs to increase the
profitability.
© 2023 Quantic Holdings, Inc. All rights reserved. 2
Accounting Project
Financial Statements
Income Statement
Account
2018
2019
Revenue
-
2,500,000
COGS
-
1,700,000
Gross Profit
-
800,000
Operating Expenses
-
745,000
EBITDA
-
55,000
Depreciation Expense
-
-
EBIT
-
55,000
Interest Expense
5,000
5,000
Net Income
(5,000)
50,000
Income Statement
Highland Malt Inc.
INCOME STATEMENT
Year Ended 12/31/2019 (All values are in $)
© 2023 Quantic Holdings, Inc. All rights reserved. 3
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Related Questions
Expenditures—Operating—Salaries..........................................
Cash................................................................................
Salaries Payable for example? Incurred salaries of $300,000 $280,000 of which was paid. Where do i put these salaries.
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Describe the events that correspond to the following two journal entries:Questions For Review of Key Topics1. Inventory .................................................................................................................................. 20,000Accounts payable ............................................................................................................... 20,0002. Accounts receivable .............................................................................................................. 30,000Sales revenue ...................................................................................................................... 30,000Cost of goods sold ................................................................................................................. 18,000Inventory .............................................................................................................................. 18,000
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Record each of these transactions
1 Cash………………………………………. 300,000
Capital Stock…………………………………………… 300,000
Issued capital stock at $60 per share
4 Diagnostic Equipment……………………250,000
Cash………………………………………………… 100,000
Notes Payable……………………………………… 150,000
Purchased equipment, paying part in cash and signing a note payable for the balance
12 Account Payable…………….......6,000
Cash…………………………………. $6,000
Paid account payable to Zeller Laboratories
19 surgical supplies……………………4,000
Accounts Payable……………………… $ 4,000
25 Cash…………………..80,000
Accounts Retrievable…………………….. 80,000
30 Dividends……………$50,000
Cash…………….. 500,000
ADDITIONAL REQUIREMENT FOR 3.2
Posting of transaction from General Journal to T-Accounts
Prepare trial…
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Q#2 - The total invoice price is $ …………………………………… .
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#8Aaron Moses Company prepared the tabulation below at December 31, 2020.Net Income ............................................................................................................ $500,000Adjustments to reconcile net income to net cash provided by operating activities:Depreciation expense, $63,000 ..................................................................... ______Decrease in accounts receivable, $50,000 .................................................... ______Increase in inventory, $23,000 ....................................................................... ______Increase in accounts payable, $15,300 ......................................................... ______Increase in interest receivable, $7,000 .......................................................... ______Increase in supplies, $6,000 .......................................................................... ______Decrease in income taxes payable, $7,500…
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5. QR Code Inc. sales two products: Queen and Pia. Data concerning the company for March follows:
Product Queen Product Pia
Sales..................................................................... 200,000 300,000
Variable Expenses................................................ 50,000 100,000
Traceable Fixed Cost........................................... 80,000 150,000
In addition, there were common fixed expenses of 70,000 in March. What was the segment margin for Product Queen?
6. Same data in no. 5. Suppose advertising for product Pia is increased by P20,000 per month, which results in an increased in sales of P90,000 per month. With this, what would be the effect and the amount on Product’s Pia monthly segment margin?
put solution
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Dinner (per person) . . . . . . . . . . . . . . . . . . . . . $7Favors and program (per person) . . . . . . . . . . . $3Band . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,500Tickets and advertising . . . . . . . . . . . . . . . . . . . $700Riverboat rental . . . . . . . . . . . . . . . . . . . . . . . . $4,800Floorshow and strolling entertainers . . . . . . . . . . $1,000The committee members would like to charge $30 per person for the evening’s activities.Required:1. Compute the break-even point for the Extravaganza (in terms of the number of persons that must attend).2. Assume that only 250 persons attended the Extravaganza last year. If the same number attend this year, what price per ticket must be charged to break even?3. Refer to the original data ($30 ticket price per person). Prepare a CVP graph for the Extravaganza from zero tickets up to 600 tickets sold.
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Q.1 Following information relates to the Snowball Manufacturing Company:
Direct materials……………………………………………. $25,000
Indirect materials………………………………………….. 5,000
Direct labor………………………………………………… 30,000
Indirect labor……………………………………………….. 4,500
Factory overhead (excluding indirect materials and indirect labor) 15,000
Plant cost 500,000
Required: Compute the prime costs, conversion costs, and product costs?
Q.2. Allure Company produces women’s clothing. During 2004, the company incurred the following costs:
Factory rent
265,000
Direct labor
325,000
Utilities-Factory
88,000
Purchases of direct materials
465,000
Indirect materials
70,000
Indirect labors
35,000…
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4 Cost of got ld-atatoment. The following data are provided by hé conlroller of
Fonsacola Cofporatlon:
CAsh.
Accounts. rocelyáble..
Inventories:
$ 240,000
348,000
..........il....
........
.....................p......
........
Flnished goods.
Work In procese.
Materlals.
Maldrial piurchaopdii.. i.
January 1
$64,200,
29,800
88,000
December 31
$88,000
30,800
64,000
ti.......
366,000
8,000
488,400
344,200
Fiatory.overha KOxetuding depreciatiori).
Mirkelna, indinobirAlve.xpiņaan(axoludina dgpreciatlon) .
biprecia flon (0mandatuhoi, 10% markeling,and, adminia
...........
... .
116,000
1,844,000
523,600
0,800
Salos...
Direct labor:e
Frelght on materjah purchaed....in....it...
84,000
18,000
.........****
Rantal'Inicome.....
Interast on. bondeipayaple ...
........
.....'.
(CGAAC adapted)
Hoquired: Prepare a cost of goode sold statement:
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Twenty Twenty One Corp.Income StatementFor the month ended December 31, 2020Sales (P10/unit) ...................................................................................................... P900,000Variable Costs:Variable Cost of Goods Sold:Beginning Inventory ............................................................. P125,000Variable Cost of Goods Manufactured ............................... 400,000----------------Total Goods Available for Sale ........................................... 525,000Ending Inventory ................................................................. 75,000----------------Variable Cost of Goods Sold .............................................. 450,000Variable Selling Expense ....................................................... 90,000 540,000----------------- -------------------Contribution Margin ................................................................................................ P360,000Fixed Costs:Manufacturing…
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Raw materials……………………………………………………………….P 1,400,000
Advances for materials ordered…………………………………………. 200,000
Work in process……………………………………………………………. 650,000
Unexpired inventory insurance…………………………………………. 60,000
Advertising catalogs and packaging cartons…………………………. 150,000
Finished goods inventory in the warehouse…………………………... 2,000,000
Finished goods in the company owned retail store, stated at 50%
mark-up on its cost…………………………………………………… 750,000
Finished goods in the hands of consignees including 40%
profit on sales…………………………………………………………. 400,000
Finished goods in transit to customers, Shipped at FOB-Destination
stated at cost…………………………………………………………… 250,000
Finished goods out on customers’ approval, at cost…………………. 100,000
Unsalable finished goods, at cost………………………………………. 50,000
Office stationeries and supplies………………………………………… 40,000
Materials in transit,…
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