Description
Read the case scenario attached and answer the following questions. Make sure all calculations are clear and accurate
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ABC Corporation, a manufacturing company, is preparing its financial statements for the fiscal year
ending December 31, 2023. The company recently acquired new machinery for $200,000, with an
estimated useful life of 5 years and no salvage value. ABC uses the straight-line depreciation method.
Additionally, the company incurred $30,000 in maintenance expenses for the machinery during the year.
Throughout the year, ABC produced and sold 10,000 units of its flagship product. The production cost
per unit is $15, which includes direct materials, direct labor, and manufacturing overhead. The selling
price per unit is $25.
The company offers a 10% discount to customers who pay their invoices within 15 days. As of December
31, 2023, ABC has accounts receivable of $50,000, and it estimates that 80% of these receivables will be
collected within the next month.
Questions:
1.
2.
3.
4.
5.
What is the annual depreciation expense for the new machinery?
Calculate the net book value of the machinery at the end of the fiscal year.
Determine the total manufacturing cost for the year.
What is the gross profit for ABC Corporation?
If 70% of customers take advantage of the early payment discount, how much revenue will ABC
recognize from these sales?
6. Calculate the accounts receivable that ABC estimates will be collected in the next month.
7. What is the total cost of goods sold for the year?
8. Calculate the operating income for ABC Corporation.
9. If ABC Corporation had a tax rate of 25%, what is its income tax expense for the year?
10. Determine the net income for ABC Corporation for the fiscal year ending December 31, 2023.
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