Page 175 - Plant design and economics for chemical engineers

COST AND ASSET ACCOUNTING 149
2. During the month of October, the following information was obtained in an antifreeze
retailing concern:

Salaries $3,000
Delivery expenses 700
Rent 400
Sales 15,100
Antifreeze available for sale during October (at cost) 20,200
Antifreeze inventory on Oct. 31 (at cost) 11,600
Other expenses 1,200
Earned surplus before income taxes as of Sept. 30 800

Prepare an income statement for the month of October giving as much detail as
possible.
3. The following information applies to E Company on a given date:

Long-term debts 1,600
Debts due within 1 year 1,000
Accounts payable 2,300
Machinery and equipment (at cost) 10,000
Cash in bank 3,100
Prepaid rent 300
Government bonds 3,000
Social security taxes payable 240
Reserve for depreciation 600
Reserve for expansion 1,200
Inventory 1,600
Accounts receivable 1,700

Determine the current ratio, cash ratio, and working capital for Company E at the
given date.
4. On Aug. 1, a concern had 10,000 lb of raw material on hand which was purchased at a
cost of $0.030 per pound. In order to build up the reserve, 8000 lb of additional raw
material was purchased on Aug. 15 at a cost of $0.028 per pound, and 2 days later
6000 lb was purchased from another supplier at $0.031 per pound. If none of the raw
material was used until after the last purchase determine the total cost of 12,000 lb of
the raw material on an inventory or cost-of-sales account for the month of August by
(a) the current-average method, (b) the “fifo” method, and (c> the “lifo” method.
5. Prepare a complete list, with sample form sheets, of all cost-accounting records which
should be maintained in a large plant producing ammonia, nitric acid, and ammonium
nitrate. Explain how these records are used in recording, summarizing and interpret-
ing costs and profits.