General Accounting 2
General Accounting 2
General Accounting 2
QUESTION No. 1
Margin of safety - is the difference between the amount of expected profitability and the break-even
point. The margin of safety formula is equal to current sales minus the breakeven point, divided by
current sales.
Break Even Point - is the necessary level of output for a company’s revenue to be equal to its total costs
– or said differently, the inflection point at which a company begins to generate a profit.
Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or Fixed
Cost ÷ CM/unit
Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin.
Contribution margin - is a business’ sales revenue less its variable costs. The resulting contribution
dollars can be used to cover fixed costs (such as rent), and once those are covered, any excess is
considered earnings.
Contribution Margin (units) = Selling price per unit – Variable cost per unit
Contribution Margin (dollars) = Total Sales Revenue – Total Variable Costs
Given:
Selling price per unit = 42 kr/stk
Variable Cost per unit = 14kr/stk
Fixed Costs = 42.000 kr
Sold pieces in June/Actual sales = 4.000 stykki
All sales revenue that a company collects over and above its break-even point represents the margin
of safety.
= (42kr/stk - 14kr/stk )
= 42.000 kr/28
= 2.500 pieces
= 105.000 kr
QUESTION No. 2
Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases.
The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it
returned $1,500 worth of merchandise. On August 16, it paid the full amount due. The correct journal
entry to record the payment on August 16 is:
Multiple Choice
a.) Debit Merchandise Inventory $8,250; credit Cash $8,250.
b.) Debit Cash $8,250; credit Accounts Payable $8,250.
c.) Debit Accounts Payable $8,250; credit Merchandise Inventory $82.50; credit Cash $8,167.50.
d.) Debit Accounts Payable $9,750; credit Merchandise Inventory $97.50; credit Cash $9,652.50.
e.) Debit Accounts Payable $8,167.50; credit Cash $8,167.50.
Merchandise inventory - the cost of finished goods (COGS) that a retailer or wholesaler has available to
sell to its customers during a given accounting period. For a bookstore, merchandise inventory would
include the cost of the books or magazines it has for sale.
Question No. 3.2: The adjusted trial balance for Mosley Brown Tiles at December 31, 2024, is as follows:
Question No. 4
Calculation of percentage
= Increase or decrease amount / Base year amount (2021) x 100
= [(Current year amount – Previous year amount) / Previous year amount] x 100
Increase or (Decrease)
2022 2021 Amount Percentage
Assets
Current assets $ 123,400 $ 100,000 $ 23,400 23.4%
Plant assets (net) 394,350 330,000 64,350 19.5%
Total assets $ 517,750 $ 430,000 $ 87,750 20.4%
Liabilities
Current liabilities 86,328 72,000 14,328 19.9%
Long-term liabilities 133,280 85,000 48,280 56.8%
Total liabilities 219,608 157,000 62,608 39.9%
Stockholders' Equity
Common stock, $1 par 166,440 120,000 46,440 38.7%
Retained earnings 131,702 153,000 (21,298) (13.9%)
Total stockholders' equity 298,142 273,000 25,142 9.2%
Total liabilities and Stockholders'
$ 517,750 $ 430,000 $ 87,750 20.4%
equity