A 1. Bo Bo started his own consulting firm, Wedding Consulting, on May 1, 2020. The trial balance at May 31 is as follows WEDDING CONSULTING Trial Balance May 31, 2020 Debit Credit Cash Accounts Receivable $ 6,500 4,000 Prepaid Insurance 3,600 Supplies 1,500 Office Furniture 12,000 Accounts Payable $ 3,500 Unearned Service 3,000 Revenue Common Stock 19,100 Service Revenue 6,000 Salaries Expense 3,000 Rent Expense 1,000 $31,600 $31,600 Other data: i. $500 of supplies have been used during the month. = ii. Travel expense incurred but not paid on May 31, 2020, $200.. iii. The insurance policy is for 2 years. iv. V. $1,000 of the balance in the unearned service revenue account remains unearned at the end of the month. May 31 is a Wednesday, and employees are paid on Fridays. Wedding Consulting has two employees, who are paid $500 each for a 5-day workweek. vi. The office furniture has a 5-year life with no salvage value. It is being depreciated at $200 per month for 60 months. vii. Invoices representing $2,000 of services performed during the month 2 CODE: A CC501 have not been recorded as of May 31. Required: a. Prepare the adjusting entries for the month of May (10 marks) b. Prepare an adjusted trial balance at May 31, 2020 (10 marks) 2. What are the major differences between Management Accounting & Financial Accounting? (10 marks) 3. What are the assumptions underlying Cost Volume Profit analysis? marks) ( 10 Section-B 4. Shirts Unlimited operates a chain of shirt stores that carry many styles of shirts that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each shirt sold. Sales personnel also receive a small basic salary. The following worksheet contains cost and revenue data for Store 36. These data are typical of the company's many outlets A Selling price Variable expenses : Invoice cost Selling commission Total variable expense Fixed expenses: Rent Advertising 3 B Per shirt $ 40 $ 18.00 7.00 $ 25.00 Annual $ 80,000 150,000 Salaries 70,000 Total Fixed expenses $ 300,000 CODE: A CC 501 The company has asked you, as a member of its planning group, to assist in some basic analysis of its stores and company. Required: i. Calculate the annual break-even point in dollar sales and in unit sales for Store 36. marks) ii. ( 8 Prepare a CVP graph showing cost and revenue data for Store 36 from zero shirts up to 30,000 shirts sold each year. Clearly indicate the break- even point on the graph. marks) ( 7 iii. If 19,000 shirts are sold in a year, what would be Store 36's net operating income or loss? marks) (4 iv. The company is considering paying the store manager of Store 36 an incentive commission of $3 per shirt (in addition to the salespersons' commissions). If this change is made, what will be the new break-even point in dollar sales and in unit sales? (5 marks) V. Refer to the original data. The company is considering eliminating sales commissions entirely in its stores and increasing fixed salaries by $107,000 annually. (a) If this change is made, what will be the new break-even point in dollar sales and in unit sales in Store 36? ( 8 marks) (b) Would you recommend that the change be made? Explain. ( 3 marks) 5. Lamar Company is considering a project that would have an eight-year life and require a $2,400,000 investment in equipment. At the end of eight years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation Total fixed expenses Net operating income The company's discount rate is 12%. The present value of US$ 1 at 12 % discount rate 1 2 3 Year 12% 0.8929 0.7972 0.7118 Required: i. $3,000,000 1,800,000 1,200,000 $700,000 300,000 1,000,000 $ 200,000 4 5 6 7 8 0.6355 0. 0 0.4523 0.4039 5674 .5066 Compute the annual net cash inflow from the project. (6 marks) ii. Compute the project's net present value. Is the project acceptable? (6 marks) iii. Find the project's internal rate of return to the nearest whole percent. (4 marks) . iv Compute the project's payback period. (6 marks) V. Compute the project's accounting rate of return