This week we have learned about four of the generally accepted accounting principles – revenue recognition, expense recognition, the matching principle, and the historical cost principle. Briefly explain what is meant by each of these and how they are applied to accrual accounting.

Fred’s Farm has the following costs and returns last year. $200,000 in revenue, $100,000 in input costs, $45,000 in labor, and $20,000 in overhead expenses. He paid $10,500 in income taxes. Use this information to answer the following questions. Hint: You will need to build the sensitivity analysis spread sheet.

1. How much before tax profit did Fred have last year and what is his average tax rate? What was his net income after tax?
2. Fred is considering raising his prices. What will a 10% increase in Fred’s prices do to his net income? (Provide new net income, and percentage change)
3. Fred is concerned that prices for his inputs (seed, fertilizer, fuel, et) may increase. What happens if Fred’s input prices increase by 5%? ((Provide new net income, and percentage change)
4. Fred is considering expanding. He would like to increase by 15%. He feels his labor would only increase by 5% and overhead would not increase. What would the results of the expansion be? (Provide new net income, and percentage change)

44.The Suds Corporation has just suffered significant losses of revenue for three quarters in a row, and the shareholders are furious. Much of the loss can be attributed to the board's decision to change from their traditional lager beer to a lighter and smoother brew. Unfortunately, the new recipe alienated current customers and failed to bring in new customers. Although Suds has announced that it will return to its original product, the shareholders are claiming the board violated its fiduciary duty of care, and they are suing the directors personally for their significant losses. What must the shareholders prove to win their lawsuit? What defense is available to the directors, and what must they prove to prevail?

1. Which revenue recognition method would most likely be used by a retailer?

Select one:

a. upon cash collection

b. upon delivery

c. during production

d. point of sale

2. Which of the following is a disadvantage of issuing bonds instead of common shares?

Select one:

a. The principal of the debt must be repaid at maturity.

b. Earnings per share will increase.

c. Shareholder control is not affected.

d. Income to common shareholders may increase.

3. When bonds are issued at a discount, the

Select one:

a. interest expense will not be a constant dollar amount over the life of the bond.

b. interest paid to bondholders will be the stated rate on the date the bonds are issued.

c. applicable interest rate used to calculate interest expense is the prevailing market interest rate on the date of each interest payment date.

d. amortized cost of the bonds will decrease each period.

4. The level of disclosure contained in the notes to the financial statements is limited by the

Select one:

a. accounting policies selected by the business.

b. time period assumption.

c. going concern assumption.

d. cost versus the benefit of providing the disclosures.

5. All of the following are included in comprehensive income EXCEPT

Select one:

a. income tax expense.

b. dividends paid.

c. gains and losses on equity investments.

d. profit reported on the traditional income statement.

6. Canadian GAAP allows private companies the choice to adopt ASPE instead of IFRS since the cost to private companies of providing financial statements prepared under IFRS is often greater than the benefits. This statement is an example of which of the following concepts and constraints?

Select one:

a. materiality constraint

b. reporting entity concept

c. full disclosure concept

d. cost constraint

7. Which of the following is the most accurate?

Select one:

a. Non-strategic investments are purchased to generate investment income.

b. Preferred shares and common shares are debt instruments.

c. Non-strategic investments maintain a long-term operating relationship with another company.

d. Strategic investments are always short-term instruments.

8. Under ASPE, a contingent liability must be accrued in the financial statements if

Select one:

a. it can be reasonably estimated and is unlikely to occur.

b. it is likely to occur but cannot be reasonably estimated.

c. it can be reasonably estimated and is likely to occur.

d. the amount of the potential loss is greater than the balance in the cash account.

9. What is the closing entry required for cash dividends?

Select one:

a. Retained Earnings
             Cash Dividends

b. Income Summary
             Cash Dividends

c. Cash Dividends
             Retained Earnings

d. Cash Dividend
             Income Summary

10. Which of the following is a factor that should be included in a partnership agreement?

Select one:

a. the rights and duties of all partners

b. the basis for sharing profit or loss

c. all of the above

d. procedures for the withdrawal, or addition, of a partner

11. A long-lived asset cost $ 24,000 and is estimated to have a $ 3,000 residual value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double diminishing-balance method would be

Select one:

a. $ 2,297.

b. $ 2,010.

c. $ 2,953.

d. $ 3,375.

12. The impact of the company’s shares being sold among investors will

Select one:

a. have no effect on the operating activities of the corporation.

b. cause total assets to decrease.

c. cause retained earnings to decrease.

d. cause total shareholders’ equity to increase.

13. Barbara Elliott is one of the partners in Elliott & Wan. Her drawings during the year were $ 10,000. She made an additional capital investment of $ 5,000 and her share of the loss for the year was $ 2,000. Her ending capital balance was $ 40,000. What was Barbara's beginning capital balance?

Select one:

a. $ 52,000

b. $ 45,000

c. $ 47,000

d. $ 37,000

14. The profit of the Miskell and Leblanc partnership is $ 30,000. Each partner had a beginning capital balance of $ 20,000.The partnership agreement specifies that Miskell and Leblanc have a salary allowance of $ 8,000 and $ 12,000, respectively. The partnership agreement also specifies an interest allowance of 10% on capital balances at the beginning of the year. Any remaining profit or loss is shared equally. What is Miskell's share of the $ 30,000 profit?

Select one:

a. $ 13,000

b. $ 11,000

c. $ 10,000

d. $ 8,000

15. Juang Company acquires land for $ 56,000 cash. Additional costs are as follows:
             Removal of shed                                      $ 1,800
             Filling and grading                                     1,500
             Paving of parking lot                                10,000
             Closing costs                                                 690
    

Juang will record the acquisition cost of the land as

Select one:

a. $ 59,990.

b. $ 56,690.

c. $ 56,000.

d. $ 69,990.

16. On October 1, Asus Computers borrows $ 75,000 from Small Town Bank on a $ 75,000, 3-month, 6% note. Assuming interest was accrued at December 31, the entry by Asus Computers to record payment of the note and accrued interest on January 1 is

Select one:

a. Notes Payable......................................................................................             76,125
                Cash.............................................................................................                                      76,125

b. Notes Payable......................................................................................             75,000
Interest Expense...................................................................................               1,125
                Cash.............................................................................................                                      76,125

c. Notes Payable......................................................................................             75,000
Interest Payable...................................................................................               4,500
                Cash.............................................................................................                                      79,500

d. Notes Payable.....................................................................................             75,000
Interest Payable...................................................................................               1,125
                Cash.............................................................................................                                      76,125

17. Which one of the following affects cash during a period?

Select one:

a. payment of an accounts payable

b. write off of an uncollectible account receivable

c. recording depreciation expense

d. declaration of a cash dividend

1. Accepting a special order is profitable whenever the revenue from the special order exceeds:

Multiple Choice

• The average unit cost of production multiplied by the number of units in the order.

• The incremental cost of producing the order.

• The materials and direct labor costs of producing the order.

• The fixed manufacturing costs for the period.

2.

Which of the following types of cost are always relevant to a decision?

Multiple Choice

• Sunk costs

• Average costs

• Incremental costs

• Fixed costs

3.  

A cost that has already been incurred and cannot be changed is called a(n):

Multiple Choice

• Opportunity cost.

• Out-of-pocket cost.

• Joint cost.

• Sunk cost.

Explain why the monopsonist's marginal-revenue-product curve is downward sloping. Include the role of the price for the final good or service in your answer.

I know that The monopsonist's marginal-revenue-product curve is downward sloping because of the law of diminishing returns, but how can tie back to the price for the final good or service?

A suburban hotel derives its revenue from its hotel and restaurant operations. The owners are interested in the relationship between the number of rooms occupied on a nightly basis and the revenue per day in the restaurant. Below is a sample of 25 days (Monday through Thursday) from last year showing the restaurant income and number of rooms occupied.

1. Choose the scatter diagram that best fits the data.

• Scatter diagram 1

• Scatter diagram 2

• Scatter diagram 3

2. Determine the coefficient of correlation between the two variables. (Round your answer to 3 decimal places.)

1. c-1. State the decision rule for 0.01 significance level: H₀: ρ ≤ 0; H₁: ρ > 0. (Round your answer to 3 decimal places.)

1. c-2. Compute the value of the test statistic. (Round your answer to 2 decimal places.)

1. c-3. Is it reasonable to conclude that there is a positive relationship between revenue and occupied rooms? Use the 0.01 significance level.

4. What percent of the variation in revenue in the restaurant is accounted for by the number of rooms occupied? (Round your answer to 1 decimal place.)

A suburban hotel derives its revenue from its hotel and restaurant operations. The owners are interested in the relationship between the number of rooms occupied on a nightly basis and the revenue per day in the restaurant. Below is a sample of 25 days (Monday through Thursday) from last year showing the restaurant income and number of rooms occupied.

Determine the coefficient of correlation between the two variables. (Round your answer to 3 decimal places.)

c-1. State the decision rule for 0.025 significance level: H0: ρ ≤ 0; H1: ρ > 0. (Round your answer to 3 decimal places.)

c-2Compute the value of the test statistic. (Round your answer to 2 decimal places.)

c-3. Is it reasonable to conclude that there is a positive relationship between revenue and occupied rooms? Use the 0.025 significance level.

What percent of the variation in revenue in the restaurant is accounted for by the number of rooms occupied? (Round your answer to 1 decimal place.)

How have sources of healthcare organizations changed and how does revenue cycle apply to the healthcare industry?

Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows:

P = 360 - 4Q MC = 4Q

What is the profit-maximizing level of price?

Humana Hospital is one of two hospitals in a small town, its markdown on wage in the local labor market most likely to decrease if

A multiplant monopolist can produce her output in either of two plants. She discovers that when marginal revenue is $ 50, the marginal cost in plant 1 is $20 while the marginal cost in plant 2 is $25. To maximize profits the firm will