Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below:

Required:

1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales.

2. The president believes that a $6,900 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $80,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income?

3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $33,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?

4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by 0.50 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,300?

5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $52,000 each month.

a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.

b. Assume that the company expects to sell 20,200 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)

c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,200)?

A farm purchased a new tractor for $30,000. They estimated the tractor would have a useful life of 5 years and would have a salvage value of $5,000. The farm uses the straight-line method and the half-year convention. The farm sold the tractor during year 3 for $19,000.

1. Compute the amount of depreciation expense to be taken in years 1, 2 and 3

Year 1

Year 2

Year 3

2. Prepare a journal entry to record the sale of the tractor in year 3.

1. The following accounts appear in the ledger of Sheldon Company on January 31, the end of this fiscal year.

   Cash	$16,400
   Accounts Receivable	15,100
   Merchandise Inventory	55,500
   Store Supplies	1,603
   Prepaid Insurance	3,080
   Store Equipment	24,900
   Accumulated Depreciation, Store Equipment	3,860
   Accounts Payable	14,400
   M. E. Sheldon, Capital	126,484
   M. E. Sheldon, Drawing	36,000
   Sales	227,000
   Sales Returns and Allowances	2,000
   Purchases	172,000
   Purchases Returns and Allowances	2,375
   Purchases Discounts	3,567
   Freight In	7,491
   Wages Expense	24,800
   Advertising Expense	5,912
   Rent Expense	12,900

   The data needed for adjustments on January 31 are as follows:

   a-b. Merchandise inventory, January 31, $55,750.

      c. Insurance expired for the year, $1,285.

      d. Depreciation for the year, $5,482.

      e. Accrued wages on January 31, $1,556.

      f. Supplies used during the year $1,503.

   Required:

   Prepare a work sheet for the fiscal year ended January 31. If an amount box does not require an entry, leave it blank. Enter all numbers as positive values.

   Sheldon Company
   Work Sheet
   For Year Ended January 31, 20--
   		TRIAL BALANCE		ADJUSTMENTS		INCOME STATEMENT		BALANCE SHEET
   	ACCOUNT NAME	DEBIT	CREDIT	DEBIT	CREDIT	DEBIT	CREDIT	DEBIT	CREDIT
   1	Cash									1
   2	Accounts Receivable									2
   3	Merchandise Inventory									3
   4	Store Supplies									4
   5	Prepaid Insurance									5
   6	Store Equipment									6
   7	Accumulated Depreciation, Store Equipment									7
   8	Accounts Payable									8
   9	M. E. Sheldon, Capital									9
   10	M. E. Sheldon, Drawing									10
   11	Sales									11
   12	Sales Returns and Allowances									12
   13	Purchases									13
   14	Purchases Returns and Allowances									14
   15	Purchases Discounts									15
   16	Freight In									16
   17	Wages Expense									17
   18	Advertising Expense									18
   19	Rent Expense									19
   20										20
   21	Income Summary									21
   22	Insurance Expense									22
   23	Depreciation Expense, Store Equipment									23
   24	Wages Payable									24
   25	Store Supplies Expense									25
   26										26
   27	Net Income (Loss)									27
   28										28
   29										29

   Prepare an income statement.

   Sheldon Company
   Income Statement
   For Year Ended January 31, 20--
   Revenue from Sales:
   			$
   Net Sales				$
   Cost of Goods Sold:
   		$
   	$
   Net Purchases		$
   			$
   				$
   Operating Expenses:
   			$
   Total Operating Expenses
   Net Loss

   Prepare a statement of owner's equity. No additional investments were made during the year.

   Sheldon Company
   Statement of Owner's Equity
   For Year Ended January 31, 20--
   		$
   	$
   		$

   Prepare a balance sheet.

   Sheldon Company
   Balance Sheet
   January 31, 20--
   Assets
   Current Assets:
   	$
   Total Current Assets		$
   Property and Equipment:
   	$
   Total Assets		$
   Liabilities
   Current Liabilities:
   	$
   Total Liabilities		$
   Owner's Equity
   Total Liabilities and Owner's Equity		$

E14-17B (L03) (Imputation of Interest) Presented below are two independent situations:

(a) On January 1, 2017, Excess Inc. purchased undeveloped land that had an assessed value of $261,000 at the time of purchase. A $500,000, zero-interest-bearing note due January 1, 2022, was given in exchange. There was no established exchange price for the land, nor a ready market value for the note. The interest rate charged on a note of this type is 15%. Determine at what amount the land should be recorded at January 1, 2017, and the interest expense to be reported in 2017 related to this transaction.

(b) On January 1, 2017, DonnAll Diamond borrowed $1,000,000 (face value) from Allstar Co., a major customer, through a zero-interest-bearing note due in 3 years. Because the note was zero-interest-bearing, DonnAll agreed to sell diamonds to this customer at lower than market price. A 12% rate of interest is normally charged on this type of loan. Prepare the journal entry to record this transaction and determine the amount of interest expense to report for 2017.

The T account balances for the accounts of Rya’s Planning Services as of January 31, 2019 are listed below.

1. Prepare an income statement for the Rya’s Planning Services for the month ended January 31, 2019.
2. Prepare a statement of owner’s equity for Rya’s Planning Services for the month ended January 31, 2019.
3. Prepare a balance sheet for Rya’s Planning Services as of January 31, 2019.

Sales Forecast and Flexible Budget

Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 14,960 for the Sleepeze, 12,080 for the Plushette, and 5,460 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

1. Salaries for his office (including himself at $62,550, a marketing research assistant at $44,900, and an administrative assistant at $27,450) are budgeted for $134,900 next year.
2. Depreciation on the offices and equipment is $17,050 per year.
3. Office supplies and other expenses total $20,900 per year.
4. Advertising has been steady at $19,000 per year. However, the Ultima is a new product and will require extensive advertising to educate consumers on the unique features of this high-end mattress. Gene believes the company should spend 10 percent of first-year Ultima sales for a print and television campaign.
5. Commissions on the Sleepeze and Plushette lines are 3 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores.
6. Last year, shipping for the Sleepeze and Plushette lines averaged $45 per unit sold. Gene expects the Ultima line to ship for $75 per unit sold since this model features a larger mattress.

Required:

1. Suppose that Gene is considering three sales scenarios as follows:

Prepare a revenue budget for the Sales Division for the coming year for each scenario.

2. Prepare a flexible expense budget for the Sales Division for the three scenarios above. If required, round answers to the nearest dollar.

Exercise 18-19 On June 3, 2017, Martinez Company sold to Ann Mount merchandise having a sales price of $8,700 (cost $6,090) with terms of n/60, f.o.b. shipping point. Martinez estimates that merchandise with a sales value of $870 will be returned. An invoice totaling $110 was received by Mount on June 8 from Olympic Transport Service for the freight cost. Upon receipt of the goods, on June 8, Mount returned to Martinez $300 of merchandise containing flaws. Martinez estimates the returned items are expected to be resold at a profit. The freight on the returned merchandise was $23, paid by Martinez on June 8. On July 16, the company received a check for the balance due from Mount. Prepare journal entries for Martinez Company to record all the events in June and July. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit (To record sales) (To record cost of goods sold) (To record sales returns) (To record cost of goods returned) (To record the freight cost) Click if you would like to Show Work for this question: Open Show Work

1- List and describe the different sources of American law and how they originate.

2- Briefly explain what is the difference between utilitarian and duty based ethics?

3- Discuss the differences and similarities between sole proprietorships and general partnerships as well as the advantages and disadvantages of one versus the other.

4- What is the difference between a de-jure and a de-facto corporation?

5- Discuss the role and powers of shareholders in a corporation. 6- What are the duties of the board of directors and how are they elected?

7- Discuss what type of conduct is prohibited and/or regulated by sections 1 and 2 of the Sherman Act.

8- Discuss the difference between patents and copyrights. 9- Discuss the meaning, applicability and the limitations of the doctrine of employment at will.

10- Discuss what does it mean to be Holder in Due Course (HDC), what are its benefits, and what are the requirements to qualify as an HDC.

11- What is a secured interest and what are the requirements for the creation of a secured interest?

12- Discuss the purpose, the similarities and differences of Chapter 7 and Chapter 13 types of bankruptcies.

Sylvan Inc. entered into a non-cancelable lease arrangement with Breton Leasing Corporation for a certain machine. Breton's primary business is leasing;it is not a manufacturer or dealer. Sylvan will lease the machine for a period of 3 years, which is 50% of the machine's economic life. Breton will take possession of the machine at the end of the initial 3-year lease and lease it to another, smaller company that does not need the most current version of the machine. Sylvan does not guarantee any residual value for the machine and will not purchase the machine at the end of the lease term.

Sylvan's incremental borrowing rate is 10%, and the implicit rate in the lease is 9%. Sylvan has no way of knowing the implicit rate used by Breton. Using either rate, the present value of the minimum lease payments is between 90% and 100% of the fair value of the machine at the date of the lease agreement.

Sylvan has agreed to pay all executory costs directly, and no allowance for these costs is included in the lease payments.

Breton is reasonably certain that Sylvan will pay all lease payments. Because Sylvan has agreed to pay all executory costs, there are no important uncertainties regarding costs to be incurred by Breton. Assume that no indirect costs are involved.

Instructions

(a)  With respect to Sylvan (the lessee), answer the following.

How should Sylvan compute the appropriate amount to be recorded for the lease or asset acquired?

What accounts will be created or affected by this transaction, and how will the lease or asset and other costs related to the transaction be recorded in earnings?

What disclosures must Sylvan make regarding this leased asset?

(b)  With respect to Breton (the lessor), answer the following.  

How should this lease be recorded by Breton, and how are the appropriate amounts determined?

How should Breton determine the appropriate amount of revenue to be recognized from each lease payment?

What disclosures must Breton make regarding this lease?

Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash payments (excluding cash payments for loan principal and interest payments) for the first three months of next year. Cash Receipts Cash payments January $ 526,000 $ 471,700 February 406,500 352,200 March 464,000 533,000 According to a credit agreement with the company’s bank, Kayak promises to have a minimum cash balance of $40,000 at each month-end. In return, the bank has agreed that the company can borrow up to $160,000 at a monthly interest rate of 1%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company repays loan principal with any cash in excess of $40,000 on the last day of each month. The company has a cash balance of $40,000 and a loan balance of $80,000 at January 1. Prepare monthly cash budgets for January, February, and March. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.)

The stockholders’ equity section of Stellar Inc. at the beginning of the current year appears below.

Common stock, $10 par value, authorized 1,043,000 shares, 321,000 shares issued and outstanding$3,210,000Paid-in capital in excess of par—common stock562,000Retained earnings624,000

During the current year, the following transactions occurred:

For your fourth assignment we will be covering the Partnership chapter. Partnerships are very similar to sole proprietorships in many ways but it adds the old mantra of "two heads are better than one" to the mix. After reading the chapter please complete the following questions.

1. What are some examples of industries that the business entities still commonly setup in the partnership business form?

2. Why would a group of people organize their business as a partnership?

3. What is the difference between the entity theory and aggregate theory of partnerships?

1.

A corporation issues $500,000 of 20-year, 7% bonds dated January 1 at 95. The journal entry to record the issuance will include

Group of answer choices

a credit to Bonds Payable for $500,000.

a credit to Premiums on Bonds Payable for $25,000.

a debit to Interest Expense for $25,000.

a credit to Discount on Bonds Payable for $25,000.

a debit to Cash for $500,000.

2.

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at

Group of answer choices

the conversion rate

a premium.

the termination rate

a discount.

par.