n 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)

In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record construction costs. / 2. Record progress billings. / 3. Record cash collections. / 4. Record gross profit (loss)

In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2018: 1. Record construction costs.​ / 2. Record progress billings. / 3. Record cash collections. / 4. Record gross profit (loss).

In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record construction costs.​ / 2. Record progress billings. / 3. Record cash collections. / 4. Record gross profit (loss).

Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract. (Do not round intermediate calculations.)

The Wilton is an all-inclusive spa and hotel in the heart of Brooklyn and uses guests as its measure of activity. During June, The Wilton budgeted for 2,000 guests, but it actually hosted 2,100 guests. The hotel used the following revenue and cost formulas in its budgeting, where q is the number of guests:

Revenue: $62.90q
Personnel expenses: $28,500 + $20.40q
Food and beverage supplies: $1,400 + $9.90q
Occupancy expenses: $8,200 + $3.30q
Spa expenses: $4,000 + $0.40q

The hotel reported the following actual results for June:

Revenue                                       $129,450

Personnel expenses                      $ 74,770

Food and beverage supplies           $ 22,940

Occupancy expenses                     $ 14,640

Spa expenses                                   $   4,740

Required:
a. Prepare a flexible budget performance report showing The Wilton’s revenue and spending variances and activity variances for June. Label each variance as favorable (F) or unfavorable (U), filling out the shaded squares. (22 points)

b. Describe at least two potential reasons for the revenue, spa expenses and food/beverage supplies variances found above. Are any of the variances related? Describe. (6 pts)

In January 2017, Mitzu Co. pays $2,700,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $570,000, with a useful life of 20 years and a $85,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $570,000 that are expected to last another 19 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,860,000. The company also incurs the following additional costs:

Journal entry worksheet

Record the cost of the plant assets, paid in cash.

8. Peter Griffin calculates that his portfolio's risk, as measured by the standard deviation, is 19.67%. His portfolio is made up of many stocks from just two companies, South Park Company and Quahog Company. South Park Co.'s returns have a standard deviation of 12.9% and Quahog Co.'s returns have a standard deviation of 28.84%. If the weight of Quahog Co. in his portfolio is 48.21%, what is the correlation between the returns of Quahog and South Park.

9.

A portfolio has an excess return of 15.9 % and a standard deviation of 15.23 %. What is the Sharpe Ratio for this portfolio?

3. Design and draw a circuit using the cascade system to operate two cylinders (A and B) which, on the operation of a start valve, produces the sequence A – B + B – A+. The cylinders should park in the positions B – A + when the start switch is in the ‘off’ position.

4. Modify the circuit designed for question 3 to provide an emergency stop which will park both cylinders in the extended position (i.e. A + B +).

5. Modify the circuit designed for question 3 to provide a fail safe. The fail safe should:

(a) act in the event of a reduced pressure at inlet to the group selecting valve

(b) park the cylinders in the retracted position

Case Study 2: Forecasting Box Office Returns

For years, people in the motion picture industry – critics, film historians, and others – have eagerly awaited the second issue in January of Variety. Long considered the show business bible, Variety is a weekly trade newspaper that reports on all aspects of the entertainment industry; movies, television, recordings, concert tours, and so on. The second issue in January, called the Anniversary Edition, summarizes how the entertainment industry fared in the previous year, both artistically and commercially.

In this issue, Variety publishes its list of All Time Film Rental Champs. This list indicates, in descending order, motion pictures and the amount of money they returned to the studio. Because a movie theater rents a film from a studio for a limited time, the money paid for admission by ticket buyers is split between the studio and theater owner. For example, if a ticket buyer pays $8 to see a particular movie, the theater owner keeps about $4 and the studio receives the other $4. The longer a movie plays in a theater, the greater the percentage of the admission price returned to the studio. A film playing for an entire summer could eventually return as much as 90% of the $8 to the studio. The theater owner also benefits from such a success because although the owner’s percentage of the admission price is small, the sales of concessions (candy, soda and so on) provide greater profits. Thus, both the studio and the theater owner win when a film continues to draw audiences for a long time. Variety lists the rental figures (the actual dollar amounts returned to the studios) that the films have accrued in their domestic releases (United States and Canada).

In addition, Variety provides a monthly Box-Office Barometer of the film industry, which is a profile of the month’s domestic box-office returns. This profile is not measure in dollars, but scaled according to some standard. By the late 1980’s, for example, the scale was based on numbers around 100, with 100 representing the average box-office return of 1980. The figures from 1987 and 1996 are given in the table below and in the file BoxOffice.xlsx in blackboard.

All the figures are scaled around the 1980’s box-office returns, but instead of dollars, artificial numbers are used. Film executives can get a relative indication of the box-office figures compared to the arbitrary 1980 scale. For example, in January 1987 the box-office returns to the film industry were 95% of the average that year, whereas in January 1988 the returns were 104% of the average of 1980 (or, they were 4% above the average of 1980’s figure).

From the time series given in the above table, you will make a forecast for the 12 months of the next year, 1997.

Managerial Report is due on … Thursday, 19 Sept (40 pts)

1. Produce a time series plot of the data. From this graph, do you see a pattern? Can you see any seasonality in the data?
2. Use exponential smoothing to fit the data. Select an appropriate constant a based on the variation you see in the data. Comment on the appropriateness of exponential smoothing on this data set. Plot the predictions from this model on the graph with the original data. How well does this technique fit the data? Make forecasts for 1997.
3. Use regression to build a linear trend model. Comment on the goodness-of-fit of this model to the data (or, how well does R² explain the variance in the data?). Plot the predictions from this model on the graph with the original data.
4. Develop multiplicative seasonal indices for the linear trend model developed in question 3. Use these indices to adjust predictions from the linear trend model from question 3 above for seasonal effects. Plot the predictions from this model on the graph with the original data. How well does this technique fit the data? Make forecasts for the next 12 months of 1997 using this technique.
5. Which forecasting method of those that you tried do you have the most confidence for making accurate forecasts for 1997? Use MAPE (mean absolute percent error) as your criterion to justify your decision.

Enrichment (5 pts): Use Optimization (and Solver in Excel) to find the optimal smoothing constant in problem 2 above (by minimizing the Mean Squared Error or MSE).

Question: What are the auditing implications to the Cash and Accounts Receivable accounts in the situation described below?

White, CPA audits LJM Supply. There is an issue as to the proper treatment of $60 million in capitalized costs related to the construction of a partially complete processing plant. This issue impacts the company's financial statements.

Six years ago, LJM started construction of the processing plant, with the original estimated cost of $37 million and completion expected within four years. Cost overruns have been huge with construction delayed by associated litigation. At this time, the project is only 59% complete, and construction is at a standstill, as LJM seeks more funding. If the processing plant gets finished, some of the costs may be recouped through state granted surcharges. Since it is the state, there is no assurance that the surcharges will be allowed or that they will cover all the costs associated with the construction of the plant. If the project was abandoned now, $0 of the construction costs would be recovered. The write-off would amount to 68% of LJM's shareholder's equity. It is likely, though, that the company would survive, even with the write-off.

The management at LJM is committed to completing the processing plant. Management has received authorization from the shareholders to issue $40 million in bonds and additional shares of common stock to provide funds for the project's completion. If LJM takes on this additional debt without making the processing plant operational, it is likely that company would have to file bankruptcy. LJM's management and shareholders are willing to roll-the-dice and take the risk with the new plant.

8. Consecutive losses of Ocean Park since 2016 and steadily losing visitors expose the park to the risk of forced closure in June if without the rescue money from the government.  Basing on the economic concepts/theories that you have learnt in the course and the information given here, explain why it has to close?

An amusement park wants to assess how much money its patrons intend to spend at the park today (aside from the price of admission). You will use convenience sampling.

1. Explain how you would select the sample.

2. Explain how you would gather the data.