15-25 Revenue allocation, bundled products. Couture Corp sells Samsung 7 cases. It has a Men’s Division and a Women’s Division. Couture is now considering the sale of a bundled product called Dynamic Duo consisting of Smarty, a men’s case, and Sublime, a women’s case. For the most recent year, Couture sold equal quantities of Smarty and Sublime and reported the following:
Product Retail Price
Smarty $40.00
Sublime $60.00
Dynamic Duo (Smarty and Sublime) $90.00
Allocate revenue from the sale of each unit of Dynamic Duo to Smarty and Sublime using the following:
A.) The stand-alone revenue-allocation method based on selling price of each product
B.)The incremental revenue-allocation method, with Smarty, ranked as the primary product
C.) The incremental revenue-allocation method, with Sublime, ranked as the primary product
D.) The Shapley value method
2.) Of the four methods in requirement 1, which one would you recommend for allocating Couture’s revenues to Smarty and Sublime? Explain.
SHOW ALL WORK
In: Accounting
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2017–2020 are as follows:
service revenue collections pre tax accounting income
| 2017 | $ | 688,000 | $ | 653,000 | $ | 220,000 | |||
| 2018 | 780,000 | 795,000 | 285,000 | ||||||
| 2019 | 745,000 | 715,000 | 255,000 | ||||||
| 2020 | 730,000 | 760,000 | 235,000 | ||||||
There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 40%.
(Hint: You may find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2017–2020.) Required: 1. Prepare the appropriate journal entry to record Alsup's 2018 income taxes, Alsup’s 2019 income taxes and Alsup’s 2020 income taxes.
In: Accounting
Alsup Consulting sometimes performs services for which it
receives payment at the conclusion of the engagement, up to six
months after services commence. Alsup recognizes service revenue
for financial reporting purposes when the services are performed.
For tax purposes, revenue is reported when fees are collected.
Service revenue, collections, and pretax accounting income for
2017–2020 are as follows:
| Service Revenue | Collections | Pretax Accounting Income |
|||||||
| 2017 | $ | 616,000 | $ | 581,000 | $ | 140,000 | |||
| 2018 | 700,000 | 710,000 | 205,000 | ||||||
| 2019 | 665,000 | 645,000 | 175,000 | ||||||
| 2020 | 650,000 | 675,000 | 155,000 | ||||||
There are no differences between accounting income and taxable
income other than the temporary difference described above. The
enacted tax rate for each year is 40%.
(Hint: You may find it helpful to prepare a schedule that shows the
balances in service revenue receivable at December 31,
2017–2020.)
Journal entry worksheet:
Record 2018 income taxes.
Record 2019 income taxes.
Record 2020 income taxes.
In: Accounting
The unadjusted trial balance at November 30 is below:
|
No. |
Account Name |
Debit |
Credit |
|
101 |
Cash |
$ 99,876 |
|
|
106 |
Accounts receivable |
5,300 |
|
|
125 |
Supplies - inventory |
10,000 |
|
|
128 |
Prepaid insurance |
6,400 |
|
|
131 |
Prepaid rent |
35,000 |
|
|
151 |
Office equipment |
20,000 |
|
|
152 |
Accumulated depreciation - office equipment |
$ 0 |
|
|
155 |
Computer equipment |
15,000 |
|
|
156 |
Accumulated depreciation - computer equipment |
0 |
|
|
201 |
Accounts payable |
0 |
|
|
205 |
Wages payable |
0 |
|
|
221 |
Unearned revenue |
1,500 |
|
|
301 |
Common stock |
150,000 |
|
|
315 |
Retained earnings |
0 |
|
|
401 |
Service revenue |
65,325 |
|
|
501 |
Depreciation expense - office equipment |
0 |
|
|
503 |
Depreciation expense - computer equipment |
0 |
|
|
515 |
Wages expense |
22,000 |
|
|
517 |
Insurance expense |
0 |
|
|
519 |
Rent expense |
0 |
|
|
521 |
Supplies expense |
0 |
|
|
523 |
Advertising expense |
1,940 |
|
|
525 |
Mileage expense |
704 |
|
|
595 |
Miscellaneous expense |
605 |
|
|
TOTALS |
$ 216,825 |
$ 216,825 |
|
Clown Around had the following transactions and events in December 2019:
|
Dec. |
2 |
Paid $1,050 for July 2019 through December 2019 print advertisements in a local magazine. |
|
3 |
Purchased $750 of additional supplies on credit. The terms of the account require payment in 30 days. |
|
|
5 |
Received $3,000 cash from receivables for bills sent out in November. |
|
|
10 |
Paid wages to part time clowns for six days of work at $200 per day. |
|
|
11 |
Notified by Hyatt Hotels that Clown Around's offer to provide entertainment at a gala in January for $9,500 was accepted. Hyatt sent an advance payment of $3,500. |
|
|
12 |
Interviewed and hired three new clowns to start work in January 2020 at $10 per hour. |
|
|
20 |
Performed at a company holiday party and received $5,500 cash. |
|
|
21 |
Performed at another company holiday party and sent a bill for services in the amount of $6,500. |
|
|
22-26 |
Took the week off for the holidays |
|
|
27 |
Reimbursed business mileage expense (350 miles at $0.50 per mile). |
|
|
28 |
Paid wages of $2,700 for the first 3 weeks of December. |
|
The following additional items were disclosed for use in making adjusting entries before preparing financial statements. No adjustments have been made during 2019.
a. The December 31 inventory count of supplies shows that only $2,500 remains unused.
b. The insurance premium of $6,400 was paid on April 1 and covers a term of two (2) years.
c. The prepaid rent account was created on January 1 when five (5) years rent was paid in advance.
d. As of December 31, the clowns had not been paid for one week of work in the amount of $750.
e. The office equipment was put into use on January 1, and has a useful life of ten (10) years with no salvage value. Clown Around, Inc. uses straight-line depreciation on all property, plant and equipment.
f. The computer equipment was also put into use on January 1, and is estimated to have a useful life of five (5) years with no salvage value.
g. The beginning balance in unearned revenue was earned when the clowns performed at a birthday party on December 7.
Required:
1. Enter the beginning balances.
2. Prepare journal entries to record each of the December transactions and events for Clown Around, Inc.
3. Prepare an unadjusted trial balance as of December 31, 2019.
4. Prepare adjusting entries to reflect a. through f.
5. Prepare an adjusted trial balance as of December 31, 2019.
6. Prepare an income statement and statement of retained earnings for the year ended December 31, 2019. Prepare a balance sheet as of December 31, 2019.
7. Prepare closing entries.
8. Prepare a post-closing trial balance
In: Accounting
Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. From time to time the company buys and sells securities. The following selected transactions relate to Amalgamated’s investment activities during the last quarter of 2018 and the first month of 2019. The only securities held by Amalgamated at October 1 were $50 million of 10% bonds of Kansas Abstractors, Inc., purchased on May 1 at face value and held in Amalgamated’s trading portfolio. The company’s fiscal year ends on December 31.
Required:
Prepare the appropriate journal entry for each transaction or
event.
| 2018 | ||||
| Oct. | 18 | Purchased 2 million preferred shares of Millwork Ventures Company for $74 million. | ||
| 31 | Received semiannual interest of $2.0 million from the Kansas Abstractors bonds. | |||
| Nov. | 1 | Purchased 10% bonds of Holistic Entertainment Enterprises at their $72 million face value, to be held until they mature in 2025. Semiannual interest is payable April 30 and October 31. | ||
| 1 | Sold the Kansas Abstractors bonds for $45 million because rising interest rates are expected to cause their fair value to continue to fall. No unrealized gains and losses had been recorded on these bonds previously. | |||
| Dec. | 1 | Purchased 12% bonds of Household Plastics Corporation at their $80 million face value, to be held until they mature in 2028. Semiannual interest is payable May 31 and November 30. | ||
| 20 | Purchased U. S. Treasury bonds for $6.7 million as trading securities, hoping to earn profits on short-term differences in prices. | |||
| 21 | Purchased 4 million common shares of NXS Corporation for $66 million, planning to earn profits from dividends or gains if prevailing market conditions encourage sale. | |||
| 23 | Sold the Treasury bonds for $7.1 million. | |||
| 29 | Received cash dividends of $3 million from the Millwork Ventures Company preferred shares. | |||
| 31 | Recorded any necessary adjusting entry(s) and closing entries relating to the investments. The market price of the Millwork Ventures Company preferred stock was $36.00 per share and $19.00 per share for the NXS Corporation common. The fair values of the bond investments were $54.6 million for Household Plastics Corporation and $17.8 million for Holistic Entertainment Enterprises. |
| 2019 | ||||
| Jan. | 7 | Sold the NXS Corporation common shares for $61 million. |
In: Accounting
Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. From time to time the company buys and sells securities. The following selected transactions relate to Amalgamated’s investment activities during the last quarter of 2018 and the first month of 2019. The only securities held by Amalgamated at October 1 were $60 million of 10% bonds of Kansas Abstractors, Inc., purchased on May 1 at face value and held in Amalgamated’s trading portfolio. The company’s fiscal year ends on December 31.
| 2018 | ||||
| Oct. | 18 | Purchased 2 million preferred shares of Millwork Ventures Company for $65 million. | ||
| 31 | Received semiannual interest of $2.4 million from the Kansas Abstractors bonds. | |||
| Nov. | 1 | Purchased 10% bonds of Holistic Entertainment Enterprises at their $126 million face value, to be held until they mature in 2025. Semiannual interest is payable April 30 and October 31. | ||
| 1 | Sold the Kansas Abstractors bonds for $53 million because rising interest rates are expected to cause their fair value to continue to fall. No unrealized gains and losses had been recorded on these bonds previously. | |||
| Dec. | 1 | Purchased 12% bonds of Household Plastics Corporation at their $50 million face value, to be held until they mature in 2028. Semiannual interest is payable May 31 and November 30. | ||
| 20 | Purchased U. S. Treasury bonds for $7.6 million as trading securities, hoping to earn profits on short-term differences in prices. | |||
| 21 | Purchased 4 million common shares of NXS Corporation for $56 million, planning to earn profits from dividends or gains if prevailing market conditions encourage sale. | |||
| 23 | Sold the Treasury bonds for $7.8 million. | |||
| 29 | Received cash dividends of $3 million from the Millwork Ventures Company preferred shares. | |||
| 31 | Recorded any necessary adjusting entry(s) and closing entries relating to the investments. The market price of the Millwork Ventures Company preferred stock was $30.00 per share and $16.50 per share for the NXS Corporation common. The fair values of the bond investments were $59.1 million for Household Plastics Corporation and $18.7 million for Holistic Entertainment Enterprises. |
| 2019 | ||||
| Jan. | 7 | Sold the NXS Corporation common shares for $54 million. |
In: Accounting
1. At a certain restaurant in Ohio, the number of minutes that diners spend at the table has a major impact on the profitability of the restaurant. Suppose the average number of minutes that diners spend at a table for dinner at the restaurant is 97 minutes with a standard deviation of 18 minutes. Assume the number of minutes diners spend at their table follows the normal probability distribution. Complete parts a through d.
a. Calculate the probability that the average number of minutes that diners spend at their table for dinner will be less than 100 minutes using a sample size of 9 tables.
(Round to three decimal places as needed.)
2. According to the Bureau of Labor Statistics, Americans spent on average $2, 913 in 2016 on entertainment. Assume the population standard deviation of this spending is $863. A random sample of 28 adults was selected and was found to have an average spending of $2,725 on entertainment. Complete parts a and b.
a. Does this sample provide support for the conclusions of the BLS poll?
There is a .... chance of observing a sample mean as low as $2 comma 7252,725. This probability is ▼ low not low enough (0.05) to contradict the findings of the poll.
(Type an integer or decimal rounded to three decimal places as needed.)
3. The average weight of a professional football player in 2009 was 246.2 pounds. Assume the population standard deviation is 25pounds. A random sample of 32 professional football players was selected. Complete parts a through e.
a. Calculate the standard error of the mean. σ-x
4. According to a certain organization, adults worked an average of 1,783 hours last year. Assume the population standard deviation is 370 hours and that a random sample of 50 adults was selected. Complete parts a through e below.
a. Calculate the standard error of the mean. sigma Subscript x overbarσxequals=n
(Round to two decimal places as needed.)
5. A college has 250 full-time employees that are currently covered under the school's health care plan. The average out-of-pocket cost for the employees on the plan is $11,910 with a standard deviation of $520. The college is performing an audit of its health care plan and has randomly selected 35 employees to analyze their out-of-pocket costs.
a. Calculate the standard error of the mean.
b. What is the probability that the sample mean will be less than $1,860?
c. What is the probability that the sample mean will be more than $1,880?
d. What is the probability that the sample mean will be between $1,930 and $1,960?
a. The standard error of the mean is nothing.
(Round to two decimal places as needed.)
In: Statistics and Probability
Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. From time to time the company buys and sells securities. The following selected transactions relate to Amalgamated’s investment activities during the last quarter of 2018 and the first month of 2019. The only securities held by Amalgamated at October 1 were $55 million of 10% bonds of Kansas Abstractors, Inc., purchased on May 1 at face value and held in Amalgamated’s trading portfolio. The company’s fiscal year ends on December 31.
| 2018 | ||||
| Oct. | 18 | Purchased 2 million preferred shares of Millwork Ventures Company for $62 million. | ||
| 31 | Received semiannual interest of $2.2 million from the Kansas Abstractors bonds. | |||
| Nov. | 1 | Purchased 10% bonds of Holistic Entertainment Enterprises at their $36 million face value, to be held until they mature in 2025. Semiannual interest is payable April 30 and October 31. | ||
| 1 | Sold the Kansas Abstractors bonds for $48 million because rising interest rates are expected to cause their fair value to continue to fall. No unrealized gains and losses had been recorded on these bonds previously. | |||
| Dec. | 1 | Purchased 12% bonds of Household Plastics Corporation at their $80 million face value, to be held until they mature in 2028. Semiannual interest is payable May 31 and November 30. | ||
| 20 | Purchased U. S. Treasury bonds for $6.1 million as trading securities, hoping to earn profits on short-term differences in prices. | |||
| 21 | Purchased 4 million common shares of NXS Corporation for $54 million, planning to earn profits from dividends or gains if prevailing market conditions encourage sale. | |||
| 23 | Sold the Treasury bonds for $6.6 million. | |||
| 29 | Received cash dividends of $3 million from the Millwork Ventures Company preferred shares. | |||
| 31 | Recorded any necessary adjusting entry(s) and closing entries relating to the investments. The market price of the Millwork Ventures Company preferred stock was $29.00 per share and $15.50 per share for the NXS Corporation common. The fair values of the bond investments were $61.2 million for Household Plastics Corporation and $17.2 million for Holistic Entertainment Enterprises. |
| 2019 | ||||
| Jan. | 7 | Sold the NXS Corporation common shares for $49 million. |
Required:
Prepare the appropriate journal entry for each transaction or
event.
In: Accounting
When Marginal Revenue is greater than Marginal Cost you should produce _________ output to maximize profit. When Marginal Revenue is less than Marginal Cost you should produce _______ output to maximize profit.
In: Economics
In: Economics