The Pritzker Music Pavilion in downtown Chicago is a technologically sophisticated and uniquely designed performing arts venue that hosts live concerts attended by over half a million patrons a year. A group of local organizers, led by a prominent local businesswoman, would like to use the pavilion for a concert to benefit Ceres, a non-profit, national network of investors and environmental organizations working with companies and investors to address sustainability challenges such as global climate change. If the pavilion management agrees to host the concert, the organizers will donate all profits to Ceres (or absorb any losses).
Based on the following revenue and cost information, the organizers would like answers to several questions.
There are three sources of revenue for the concert:
On the expense side, there are also three components:
REQUIRED [ROUND YOUR CM ANSWER TO THE NEAREST
CENT; ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST
DOLLAR.]
Part A (8 tries; 8 points)
1. What is the estimated contribution margin per ticket sold for
the benefit concert?
2. What are the estimated total fixed costs for the benefit
concert?
| Tries 0/8 |
Part B (8 tries; 8 points)
3. What is the estimated profit from the benefit concert if 9,000
tickets are sold?
4. How many tickets must be sold in order for concert profit to be
$90,000?
5. Assuming a tax rate of 31% on profits from the concert, what
must dollar ticket sales be in order for after-tax concert profits
to be $90,000?
| Tries 0/8 |
Part C (4 tries; 4 points)
6. Assume that the organizers can negotiate the fixed portion of
the pavilion's operating expenses. If the organizers expect to sell
9,000 tickets, how much operating fixed costs can they afford to
pay and still earn a profit of $90,000 (ignore
taxes)?
In: Accounting
Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below:
| Activity Cost Pool | Activity Measure | Total Cost | Total Activity | ||
| Customer deliveries | Number of deliveries | $ | 426,400 | 5,200 | deliveries |
| Manual order processing | Number of manual orders | 323,400 | 4,200 | orders | |
| Electronic order processing | Number of electronic orders | 205,740 | 12,700 | orders | |
| Line item picking | Number of line items picked | 567,000 | 420,000 | line items | |
| Total selling and administrative expenses | $ | 1,522,540 | |||
Med Max gathered the data below for two of the many hospitals that it serves—City General and County General:
| Activity | ||
| Activity Measure | City General | County General |
| Number of deliveries | 20 | 40 |
| Number of manual orders | 0 | 80 |
| Number of electronic orders | 15 | 0 |
| Number of line items picked | 120 | 280 |
Required:
1. Compute the activity rate for each activity cost pool.
2. Compute the total activity costs that would be assigned to City General and County General.
In: Accounting
In: Accounting
The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows:
|
1 |
Dec. 31, 20Y8 |
Dec. 31, 20Y7 |
|
|
2 |
Assets |
||
|
3 |
Cash |
$146,480.00 |
$179,640.00 |
|
4 |
Accounts receivable (net) |
225,010.00 |
241,920.00 |
|
5 |
Merchandise inventory |
321,600.00 |
298,870.00 |
|
6 |
Prepaid expenses |
13,030.00 |
10,420.00 |
|
7 |
Equipment |
654,380.00 |
537,900.00 |
|
8 |
Accumulated depreciation |
(169,970.00) |
(133,130.00) |
|
9 |
Total assets |
$1,190,530.00 |
$1,135,620.00 |
|
10 |
Liabilities and Stockholders’ Equity |
||
|
11 |
Accounts payable (merchandise creditors) |
$250,960.00 |
$236,720.00 |
|
12 |
Mortgage note payable |
0.00 |
335,410.00 |
|
13 |
Common stock, $10 par |
75,000.00 |
25,000.00 |
|
14 |
Paid-in capital: Excess of issue price over par—common stock |
440,000.00 |
310,000.00 |
|
15 |
Retained earnings |
424,570.00 |
228,490.00 |
|
16 |
Total liabilities and stockholders’ equity |
$1,190,530.00 |
$1,135,620.00 |
Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:
| A. | Net income, $348,560. |
| B. | Depreciation reported on the income statement, $82,480. |
| C. | Equipment was purchased at a cost of $162,120 and fully depreciated equipment costing $45,640 was discarded, with no salvage realized. |
| D. | 10,000 shares of common stock were issued at $18 for cash. |
| E. | The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty. |
| F. | Cash dividends declared and paid, $152,480. |
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.
|
Labels and Amount Descriptions |
|
| Cash used for dividends | |
| Cash used for equipment | |
| Cash used for merchandise | |
| Cash used for purchase of land | |
| Cash used to retire mortgage note payable | |
| Cash from customers | |
| Cash from sale of common stock | |
| December 31, 20Y8 | |
| Decrease in cash | |
| Decrease in merchandise inventory | |
| Decrease in accounts payable | |
| Decrease in accounts receivable | |
| Decrease in prepaid expenses | |
| Depreciation | |
| For the Year Ended December 31, 20Y8 | |
| Gain on disposal of equipment | |
| Gain on sale of investments | |
| Increase in accounts payable | |
| Increase in accounts receivable | |
| Increase in cash | |
| Increase in merchandise inventory | |
| Increase in prepaid expenses | |
| Loss on disposal of equipment | |
| Loss on sale of investments | |
| Net cash flow from financing activities | |
| Net cash flow from investing activities | |
| Net cash flow from operating activities | |
| Net cash flow used for financing activities | |
| Net cash flow used for investing activities | |
| Net cash flow used for operating activities | |
| Net income | |
| Net loss |
In: Accounting
Robinson Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 (taxed at 34%). During the year, Robinson reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. During the year, Congress reduced the corporate tax rate to 21%. Robinson's deferred income tax expense or benefit for the current year would be:
|
Net deferred tax benefit of $6,300. |
||
|
Net deferred tax expense of $6,300. |
||
|
Net deferred tax benefit of $6,700. |
||
|
Net deferred tax expense of $6,700. |
Angel Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, tax depreciation exceeded book depreciation by $100,000. Finally, Angel subtracted a dividends received deduction of $25,000 in computing its current year taxable income. Angel's hypothetical tax expense in its reconciliation of its income tax expense is:
=
$189,000.
$194,250.
$210,000.
$204,750.
In: Accounting
What is the type of assertion and evidence type?
Foot several accounts in the A/R subsidiary ledger and agree the total from the subsidiary ledger to the general ledger.
Select a sample of shipping documents representing credit sales during the year and trace them into the sales journal and A/R subsidiary ledger.
Select a sample of credit sales transactions during the last week of 2017 from the sales journal and vouch to related shipping documents and invoices noting whether they are recorded in correct period.
Discuss with the client personnel their method for computing allowance for doubtful accounts to determine reasonableness. Discuss the collectability of any large accounts 90 day past due.
In: Accounting
Fatima Hopkins, the CEO of Central Adventures, is having difficulties with all three of her top management level employees. With one manager making questionable decisions, another threatening to leave, and the third likely ‘in the red’, Fatima is hoping there is a simple answer to all her difficulties. She is asking you (her accountant) for some advice on how to proceed.
Central Adventures owns and operates three amusement parks in Michigan: Funland, Waterworld, and Treetops. Central Adventures has a decentralized organizational structure, where each park is run as an investment center. Park managers meet with the CEO at least once annually to review their performance, where each park manager’s performance is measured by their park’s return on investment (ROI). The park manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the cost of capital.
Fatima’s first difficulty is with the Funland park. Funland is an outdoor theme park, with twelve roller coaster rides and several other attractions. This park has first opened 1965, and most of the rides have been in operation for 20+ years. Attendance at this park has been relatively stable over the past ten years. The park manager of Funland, Janet Lieberman, recently shared with Fatima a proposal to replace one of their older rides with a new roller coaster, a hybrid steel and wood roller coaster with a 90 degree, 200 foot drop and three inversions. The proposal indicated that the ride would cost $8,000,000 with an estimated life of 20 years. In addition, this new style of coaster would require additional maintenance and insurance, costing $125,000 each year. However, it projected that this new attraction would boost attendance, earning the park an additional $1,190,000 per year in revenues. Janet ultimately decided not to invest in this new attraction. Fatima (doing a quick mental calculation) saw that the investment had a payback period of eight years—much shorter than the life of the roller coaster—and is perplexed at Janet’s decision.
The second dilemma concerns the Waterworld park. Waterworld is an indoor water park, operating year-round. Run by park manager David Copperfield, Waterworld was built in 2016 and has increased attendance by 20% every year since. David recently sent you an email complaining that, based on the current bonus payout schedule, Janet Lieberman’s bonus last year was significantly higher than his. He points to the increasing attendance, and says that his park is being punished for having opened so recently (his park assets are much more recent than the roller coasters at Funland). He currently has an employment offer from another company at the same base pay rate, which he says he will accept if his performance is not appropriately acknowledged. Fatima needs to look at the relative performance across parks to determine how to proceed with David.
Central Treetops includes a high ropes course and has a series of ziplines that criss-cross over the Chippewa River. For many years, it was a popular venue for corporate team-building activities, so it is equipped with a main indoor facility with cafeteria and overnight guest rooms. This park has lost popularity in recent years, and has been ‘in the red’ for the past two years. If the park is not profitable this year, you will need to decide whether to close it - permanently. Included in the ‘Fixed COGS’ for Treetops is a $86,000 mortgage payment on the land and buildings for the park, which would still need to be paid by Central Adventures if the park is closed. Incidentally, you recently had a conversation with the regional head of the YMCA, who would like to open a summer camp in the central Michigan region. If you decided to close Treetops, you are fairly certain that you could lease that land to the YMCA for $250,000 annually.
A partial report of this year’s financial results for Central Adventures shows the following:
|
Funland |
Waterworld |
Treetops |
|
|
Sales |
$59,460,690 |
$10,913,500 |
$1,965,600 |
|
Fixed COGS |
$10,351,870 |
$4,284,530 |
$170,430 |
|
Variable COGS |
$39,757,310 |
$2,220,695 |
$746,928 |
|
Selling and administrative costs |
$3,259,520 |
$944,620 |
$231,900 |
|
Average operating assets |
$21,014,000 |
$13,452,000 |
$420,000 |
|
# of tickets sold |
1,564,755 |
419,750 |
30,240 |
|
# of employees |
540 |
200 |
32 |
The ‘Selling and administrative costs’ are all incurred directly by each park, and are determined at the beginning of each year (that is, they do not change with the number of tickets sold). In addition to the information above, there are $2,542,920 in corporate costs, which are currently allocated evenly between the three parks. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Treetops park is closed, the allocated corporate costs would decrease by $12,000. Central Adventures has a cost of capital of 12 percent (and Fatima uses the cost of capital as their required rate of return) and are subject to 18% income taxes.
Fatima needs to evaluate this year’s performance results before she can make any decisions. Is David’s complaint about the performance evaluation metrics valid? Is that also affecting management decisions in the form of Janet’s rejection of the proposed new rollercoaster? And is the company better off without Treetops? She sets off to the company accountant’s office to help get some answers.
a. Create a segmented income statement for Central Adventures.
b. Calculate the current annual ROI, residual income and EVA for the three parks.
c. why it was/was not in Central Adventure’s overall best interest for Funland to reject the new rollercoaster.
d. is David Copperfield’s (the Waterworld park manager) complaint valid? Explain why it is (or is not valid), and what further information would be necessary.
e. why should they close/ not close treetops.
f. what should you recommend she do to improve the evaluation of park manager performance measurement at Central Adventures.
In: Accounting
Given only, the following information, answer the questions below. Increases and Decreases represent the change from prior year to current year. (Note to you are not told what the change in cash was for the year.)
Decrease in Accounts Receivable 32,000
Increase in Inventory 5,000
Increase in Property Plant and Equipment 10,000
Increase in Long –Term Investments 50,000
Increase in Long-Term Bonds Payable 120,000
Decrease in Accounts Payable 15,000
Increase in Retained Earnings 127,000
Increase in Common Stock 18,000
Increase in Salaries Payable 12,000
Decrease in Prepaid Expenses 7,000
Increase in Unearned Revenue 11,000
Increase in Accumulated Depreciation 15,000
Decrease in Dividends Payable 3,000
Other Info: Equipment was sold in the current year with original cost of $12,000 and a book value of $8,000 for cash proceeds of $6,000. Assume the increase in Long-Term Investments was the purchase of shares of another company. The company declared a $10,000 cash dividend during the year.
a)What amount would be included on the statement of cash flows under “Cash flows from Operating Activities”? USE THE INDIRECT METHOD TO SOLVE. b)What amount would be included on the statement of cash flows under “Cash flows from Investing Activities”? c)What amount would be included on the statement of cash flows under “Cash flows from Financing Activities”?
In: Accounting
In: Accounting
In: Accounting
Analysis and Interpretation of Profitability
Balance sheets and income statements for Nordstrom, Inc. follow.
Refer to these financial statements to answer the requirements.
| NORDSTROM, INC. Consolidated Statements of Earnings |
|||
|---|---|---|---|
| For Fiscal Years Ended ($ millions) | 2010 | 2009 | 2008 |
| Sales | $ 8,258 | $ 8,272 | $ 8,828 |
| Credit card revenues | 369 | 301 | 252 |
| Total revenues | 8,627 | 8,573 | 9,080 |
| Cost of sales and related buying and occupancy costs | (5,328) | (5,417) | (5,526) |
| Selling, general and administrative expenses | |||
| Retail | (2,109) | (2,103) | (2,130) |
| Credit | (356) | (274) | (177) |
| Earnings before interest and income taxes | 834 | 779 | 1,247 |
| Net interest expense | (138) | (131) | (74) |
| Earnings before income taxes | 696 | 648 | 1,173 |
| Income tax expense | (255) | (247) | (458) |
| Net earnings | $ 441 | $ 401 | $ 715 |
| NORDSTROM, INC. Consolidated Balance Sheets |
||
|---|---|---|
| ($ millions) | January 30, 2010 | January 31, 2009 |
| Assets | ||
| Current Assets | ||
| Cash and cash equivalents | $ 795 | $ 72 |
| Accounts receivable, net | 2,035 | 1,942 |
| Merchandise inventories | 898 | 900 |
| Current deferred tax assets, net | 238 | 210 |
| Prepaid expenses and other | 88 | 93 |
| Total current assets | 4,054 | 3,217 |
| Land, buildings and equipment, net | 2,242 | 2,221 |
| Goodwill | 53 | 53 |
| Other assets | 230 | 170 |
| Total assets | $ 6,579 | $ 5,661 |
| Liabilities and Shareholders' Equity | ||
| Current liabilities | ||
| Accounts payable | $ 726 | $ 563 |
| Accrued salaries, wages and related benefits | 336 | 214 |
| Other current liabilities | 596 | 525 |
| Current portion of long-term debt | 356 | 299 |
| Total current liabilities | 2,014 | 1,601 |
| Long-term debt, net | 2,257 | 2,214 |
| Deferred property incentives, net | 469 | 435 |
| Other liabilities | 267 | 201 |
| Shareholders' equity | ||
| Common stock, no par value | 1,066 | 997 |
| Retained earnings | 525 | 223 |
| Accumulated other comprehensive income (loss) | (19) | (10) |
| Total shareholders' equity | 1,572 | 1,210 |
| Total liabilities and shareholders' equity | $ 6,579 | $ 5,661 |
HINT: For Sales use "Total revenues" for your computations, when applicable.
(a) Compute net operating profit after tax (NOPAT) for 2010. Assume that the combined federal and statutory rate is: 37.0%. (Round your answer to the nearest whole number.)
(b) Compute net operating assets (NOA) for 2010 and 2009.
(c) Compute RNOA, net operating profit margin (NOPM), and net operating asset turnover (NOAT) for 2010. Do not use NOPM x NOAT to calculate RNOA. (Do not round until final answers. Round to two decimal places.)
(d) Compute net nonoperating obligations (NNO) for 2010 and 2009.
(e) Compute return on equity (ROE) for 2010. (Round your answers to two decimal places. Do not round until your final answer.)
(f) Infer the nonoperating return component of ROE for 2010. (Use answers from above to calculate. Round your answer to two decimal places.)
In: Accounting
Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,005 hours each month to produce 2,010 sets of covers. The standard costs associated with this level of production are:
| Total | Per Set of Covers |
||||
| Direct materials | $ | 28,542 | $ | 14.20 | |
| Direct labor | $ | 8,040 | 4.00 | ||
| Variable manufacturing overhead (based on direct labor-hours) | $ | 3,618 | 1.80 | ||
| $ | 20.00 | ||||
During August, the factory worked only 1,200 direct labor-hours and produced 2,600 sets of covers. The following actual costs were recorded during the month:
| Total | Per Set of Covers |
||||
| Direct materials (6,000 yards) | $ | 35,100 | $ | 13.50 | |
| Direct labor | $ | 10,920 | 4.20 | ||
| Variable manufacturing overhead | $ | 5,460 | 2.10 | ||
| $ | 19.80 | ||||
At standard, each set of covers should require 2.0 yards of material. All of the materials purchased during the month were used in production.
Required:
1. Compute the materials price and quantity variances for August.
2. Compute the labor rate and efficiency variances for August.
3. Compute the variable overhead rate and efficiency variances for August.
(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
In: Accounting
Hoodys for Good manufactures and sells hooded sweatshirts. The company locates its manufacturing facilities in areas with high unemployment rates and provides on-site daycare and education for its employees’ children. The company recently started a “one for one” program where they donate one sweatshirt for every one sold to an international charity to provide to a child in need. The customer pays the shipping cost for items purchased, but the company pays to ship to the international charities. Cost information is summarized below: Variable Costs Direct Materials $3.20 per unit produced Direct Labor $2.70 per unit produced Variable Manufacturing Overhead $0.70 per unit produced Shipping $2.80 per unit donated Fixed Costs Salaries $22,000 per month Advertising $55,000 per month Production Equipment $42,000 per month Answer each of the following independent questions. 1. Assume that the price of each sweatshirt sold is $30. a. How much contribution margin is earned on each unit sold to a paying customer? (Round your final answers to 2 decimal places.) b. How much contribution margin is lost on each unit donated to charity? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) c. If one sweatshirt is donated for each one sold, what is the weighted-average contribution margin per unit produced? (Round your answers to 2 decimal places.) d. How many total units must be produced to break-even? How many must be sold and how many donated? 2. If the company expects to sell 4,700 sweatshirts and donate 4,700 sweatshirts per month, what price must be charged to earn a target profit of $22,000 per month? 3. Assume that Hoodys for Good's managers are trying to decide whether to set the price at $40 or $65. If the price is set at $40, they think they can sell 10,200 units (and donate 10,200 units). If the price is set at $65, they only expect to be able to sell (and donate) 5,700 units. a. If the company’s goal is to maximize economic profit, what price should they charge? b. If the company’s goal is to do the most social good, what price should they charge?
In: Accounting
The long-term liability section of Twin Digital Corporation’s balance sheet as of December 31, 2017, included 10% bonds having a face amount of $50 million and a remaining discount of $1 million. Disclosure notes indicate the bonds were issued to yield 12%. Interest expense is recorded at the effective interest rate and paid on January 1 and July 1 of each year. On July 1, 2018, Twin Digital retired the bonds at 103 ($51.5 million) before their scheduled maturity. Required: 1. & 2. Prepare the necessary journal entries for Twin Digital on July 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollar.)
In: Accounting
Whistler Company determined that in the production of their products last period; they had a favorable price variance and an unfavorable quantity variance for direct
materials. What might be the cause of this pattern of variances?
In: Accounting