Clifford Delivery Company purchased a new delivery truck for $72,000 on April 1, 2019. The truck is expected to have a service life of 5 years or 90,000 miles and a residual value of $3,000. The truck was driven 8,000 miles in 2019 and 20,000 miles in 2020. Clifford computes depreciation expenses to the nearest whole month.

Required:

1. Compute depreciation expense for 2019 and 2020 using the following methods: (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

2. For each method, what is the book value of the machine at the end of 2019? At the end of 2020? (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

3. Next Level The book value of the asset in the early years of the asset's service will be under an accelerated method as compared to the straight-line method. The method is appropriate when the service life of the asset is affected primarily by the amount the asset is used.

Green Landscaping Inc. is preparing its budget for the first quarter of 2020. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected. Prepare schedules for cash receipts and cash payments, and determine ending balances for balance sheet. Clients usually pay 60% of their fee in the month that service is performed, 30% the month after, and 10% the second month after receiving service. Actual service revenue for 2019 and expected service revenues for 2020 are November 2019, $80,000; December 2019, $90,000; January 2020, $100,000; February 2020, $120,000; and March 2020, $140,000. Purchases of landscaping supplies (direct materials) are paid 60% in the month of purchase and 40% the following month. Actual purchases for 2019 and expected purchases for 2020 are December 2019, $14,000; January 2020, $12,000; February 2020, $15,000; and March 2020, $18,000.

Instructions a. Prepare the following schedules for each month in the first quarter of 2020 and for the quarter in total:

1. Expected collections from clients.

2. Expected payments for landscaping supplies.

b. Determine the following balances at March 31, 2020:

1. Accounts receivable.

2. Accounts payable.

Depreciation for Partial Periods

Storm Delivery Company purchased a new delivery truck for $66,000 on April 1, 2019. The truck is expected to have a service life of 5 years or 90,000 miles and a residual value of $3,000. The truck was driven 12,000 miles in 2019 and 14,000 miles in 2020. Storm computes depreciation expense to the nearest whole month.

Required:

1. Compute depreciation expense for 2019 and 2020 using the following methods: (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

2. For each method, what is the book value of the machine at the end of 2019? At the end of 2020? (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

3. Next Level The book value of the asset in the early years of the asset's service will be   under an accelerated method as compared to the straight-line method. The   method is appropriate when the service life of the asset is affected primarily by the amount the asset is used.

Bar Delivery Company purchased a new delivery truck for $36,000 on April 1, 2019. The truck is expected to have a service life of 5 years or 120,000 miles and a residual value of $3,000. The truck was driven 10,000 miles in 2019 and 18,000 miles in 2020. Bar computes depreciation expense to the nearest whole month.

1. Compute depreciation expense for 2019 and 2020 using the following methods: (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

2. For each method, what is the book value of the machine at the end of 2019? At the end of 2020? (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

3. Next Level The book value of the asset in the early years of the asset's service will be lower  under an accelerated method as compared to the straight-line method. The sum-of-the-years-digits  method is appropriate when the service life of the asset is affected primarily by the amount the asset is used.

Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:

a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.

b. The vertical analysis indicates that the cost of goods sold as a percent of sales   by 5 percentage points, while selling expenses   by 2 percentage points, and administrative expenses   by 1 percentage points. Thus, net income as a percent of sales   by 2 percentage points.

Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:

a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.

b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 5 percentage points, while selling expenses by 2 percentage points, and administrative expenses by 1 percentage points. Thus, net income as a percent of sales by 3 percentage points.

Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Superior Markets, Inc. Income Statement For the Quarter Ended September 30 Total North Store South Store East Store Sales $ 3,000,000 $ 720,000 $ 1,200,000 $ 1,080,000 Cost of goods sold 1,657,200 403,200 660,000 594,000 Gross margin 1,342,800 316,800 540,000 486,000 Selling and administrative expenses: Selling expenses: 817,000 231,400 315,000 270,600 Administrative expenses 383,000 106,000 150,900 126,100 Total expenses 1,200,000 337,400 465,900 396,700 Net operating income (loss) $ 142,800 $ (20,600 ) $ 74,100 $ 89,300 The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional information is available for your use: a. The breakdown of the selling and administrative expenses is as follows: Total North Store South Store East Store Selling expenses: Sales salaries $ 239,000 $ 70,000 $ 89,000 $ 80,000 Direct advertising 187,000 51,000 72,000 64,000 General advertising* 45,000 10,800 18,000 16,200 Store rent 300,000 85,000 120,000 95,000 Depreciation of store fixtures 16,000 4,600 6,000 5,400 Delivery salaries 21,000 7,000 7,000 7,000 Depreciation of delivery equipment 9,000 3,000 3,000 3,000 Total selling expenses $ 817,000 $ 231,400 $ 315,000 $ 270,600 *Allocated on the basis of sales dollars. Total North Store South Store East Store Administrative expenses: Store management salaries $ 70,000 $ 21,000 $ 30,000 $ 19,000 General office salaries* 50,000 12,000 20,000 18,000 Insurance on fixtures and inventory 25,000 7,500 9,000 8,500 Utilities 106,000 31,000 40,000 35,000 Employment taxes 57,000 16,500 21,900 18,600 General office —other* 75,000 18,000 30,000 27,000 Total administrative expenses $ 383,000 $ 106,000 $ 150,900 $ 126,100 *Allocated on the basis of sales dollars. b. The lease on the building housing the North Store can be broken with no penalty. c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed. d. The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $11,000 per quarter. The general manager of the North Store would be retained at her normal salary of $12,000 per quarter. All other employees in the store would be discharged. e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person’s salary is $4,000 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete. f. The company’s employment taxes are 15% of salaries. g. One-third of the insurance in the North Store is on the store’s fixtures. h. The “General office salaries” and “General office—other” relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person’s compensation is $6,000 per quarter. Required: 1. Prepare a schedule showing the change in revenues and expenses and the impact on the company’s overall net operating income that would result if the North Store were closed. (Any losses/ reductions should be indicated by a minus sign.) 2. Based on your computations in (1) above, what recommendation would you make to the management of Superior Markets, Inc.? The North Store should be closed. The North Store should not be closed. 3. Assume that if the North Store were closed, at least one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. The East Store has enough capacity to handle the increased sales. You may assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in that store. a. Calculate the net advantage of closing the North Store. (Any losses should be indicated by a minus sign.) b. What recommendation would you make to the management of Superior Markets, Inc.? The North Store should be closed. The North Store should not be closed.

Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below:

The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional
information is available for your use:

a. The breakdown of the selling and administrative expenses is as follows:

*Allocated on the basis of sales dollars.

*Allocated on the basis of sales dollars.

b. The lease on the building housing the North Store can be broken with no penalty.

c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed.

d. The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $11,000 per quarter. The general manager of the North Store would be retained at her normal salary of $12,000 per quarter. All other employees in the store would be discharged.

e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person’s salary is $4,000 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete.

f. The company’s employment taxes are 15% of salaries.

g. One-third of the insurance in the North Store is on the store’s fixtures.

h. The “General office salaries” and “General office—other” relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person’s compensation is $6,000 per quarter.

Required:

1. Prepare a schedule showing the change in revenues and expenses and the impact on the company’s overall net operating income that would result if the North Store were closed. (Any losses/ reductions should be indicated by a minus sign.)

2. Based on your computations in (1) above, what recommendation would you make to the management of Superior Markets, Inc.?

3. Assume that if the North Store were closed, at least one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. The East Store has enough capacity to handle the increased sales. You may assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in that store.

a. Calculate the net advantage of closing the North Store. (Any losses should be indicated by a minus sign.)

b. What recommendation would you make to the management of Superior Markets, Inc.?