You are the revenue manager of a 200-room hotel in Memphis. The management controllable costs (variable room costs) incurred when selling 1 room are $50. You are interested in evaluating hotel performance for two scenarios: fixed pricing and differential pricing.

Scenario one is that you used a fixed pricing strategy: at a selling pricing $200 per night your hotel would sell 150 rooms on a given day.

Scenario two is that you implement a three-price strategy: low rate $150 per night, regular rate $200 per night, and high rate $250 per night. Your hotel would sell 100 low-priced rooms, 60 regular-priced rooms, and 20 high-priced rooms per day.

2. Discuss which scenario generates more revenue for your hotel and why?

Sales Revenue is $1,000,000, Earnings Before Interest and Taxes is $400,000, and Earnings After Interest and Taxes is $300,000. Accounts Receivable is $50,000. The Average Collection Period is (assume a 365 day year):

A manager of a ski-station restaurant collected $90,000 of revenue in April, serving 9000 customers. For May she predicts a decrease in guests of 40%. What will be the amount of revenue she will collect, if she is planning to reduce her fixed costs, by reducing number of staff by 20%.

For each of the following transactions, determine if Raymond Corporation has earned revenue during the month of May and, if so, how much it has earned.

1. Customers paid Raymond $1,500 for work Raymond will perform in June.
2. Customers purchased $6,000 of inventory for which they have not yet paid.
3. Raymond performed work for customers and was paid $3,400 in cash.
4. Customers paid Raymond $2,300 for inventory purchased in April
   
   
   Record the journal entries for above.

Which is NOT included in the five-step process of revenue recognition?

Select one:

a. Allocate price to performance obligation

b. Identify performance obligation

c. Recognize revenue when performance obligation is probable

d. Identify contract with customer

What does the Internal Revenue Code state about the personal and dependency exemption amounts?

Under ASC Topic 606 for revenue recognition, which of the following statements is not accurate regarding performance obligations?

Multiple Choice

• Firms must disclose qualitative information about their performance obligations.

• Firms must disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations.

• Firms must disclose warranties provided.

• Firms are not required to disclose any judgments used to apply the standard.

5. Tricolo Corporation made a total of $80 million in revenue in 2020. They spent $4.3 million in wages to their staff, $2 million in interest payments to bondholders, $0.5 million in dividends to shareholders, $300,000 in office supplies that were used within the year and $800,000 in capital assets (lasted for more than 1 year). Assume a real interest rate of 3%.

a. What was their taxable income for 2020:
If they were allowed to expense all capital assets? b. What was their taxable income for 2020:

If their capital assets all have a tax life of 4 years and straight-line depreciation?

c. What would be the present value of total tax savings if they were able to expense all of the capital assets as in part a relative to the depreciation given in part b. (assume a real interest rate of 3% and a flat tax rate of 20% for corporations)

d. What are two different ways in which the Corporate Income Tax is not just a “profits tax”. How does this tax create deadweight loss?