Case 1

John is the manager of a small computer sales and support chain. He has stores located throughout the state of California and is in strong competition with all of the major computer providers within that state. John’s company is known for providing quick support and friendly service. In the process of selling goods to customers, John’s company will often offer deals that include free service or low-priced service for the products being purchased. John’s competitors offer the same types of deals to their customers, but because of the small mobile size of John’s company, he is better able to provide quick service to his customers. John is the president of his company and has raised funding through issuing stock. He has not used external loan funding much in the past. John has approximately 50 stores located in California and is in the process of obtaining business locations outside of the state. John’s main goal is to be successful in the computer business because of the quick customer service his company provides. He believes his company will be able to charge higher prices because people will be willing to pay the initial higher price on computer components for the added customer service on the back end.

John has managers in all of the different stores who report directly to him. They do not communicate regularly with other store managers on inventory issues or customer service representative availabilities. John has found much success in the past because of the customer service he has been able to provide. In recent years, the competition has become more successful in duplicating his activities or in providing low-maintenance products. John’s company has provided financial statements on a yearly basis, so investors can follow the company’s success. With the growing success of competitors, John has found it more difficult to be successful. During the past year, John’s company recorded significant revenues from sales that will require warranty service over the next few years. However, John’s reported warranty expenses stayed the same. In addition, the reported inventory levels remained approximately the same as in previous years. No additional financing or loans were recorded on the financial statements, even though assets continued to grow. Revenue was the only financial statement amount that changed dramatically.

2. What could look like fraud but be explained by industry trends?

Case 1

John is the manager of a small computer sales and support chain. He has stores located throughout the state of California and is in strong competition with all of the major computer providers within that state. John’s company is known for providing quick support and friendly service. In the process of selling goods to customers, John’s company will often offer deals that include free service or low-priced service for the products being purchased. John’s competitors offer the same types of deals to their customers, but because of the small mobile size of John’s company, he is better able to provide quick service to his customers. John is the president of his company and has raised funding through issuing stock. He has not used external loan funding much in the past. John has approximately 50 stores located in California and is in the process of obtaining business locations outside of the state. John’s main goal is to be successful in the computer business because of the quick customer service his company provides. He believes his company will be able to charge higher prices because people will be willing to pay the initial higher price on computer components for the added customer service on the back end.

John has managers in all of the different stores who report directly to him. They do not communicate regularly with other store managers on inventory issues or customer service representative availabilities. John has found much success in the past because of the customer service he has been able to provide. In recent years, the competition has become more successful in duplicating his activities or in providing low-maintenance products. John’s company has provided financial statements on a yearly basis, so investors can follow the company’s success. With the growing success of competitors, John has found it more difficult to be successful. During the past year, John’s company recorded significant revenues from sales that will require warranty service over the next few years. However, John’s reported warranty expenses stayed the same. In addition, the reported inventory levels remained approximately the same as in previous years. No additional financing or loans were recorded on the financial statements, even though assets continued to grow. Revenue was the only financial statement amount that changed dramatically.

2. What could look like fraud but be explained by industry trends?

An insurance company has three types of annuity products: indexed annuity, fixed annuity, and variable annuity. You are given:

• None of the customers have both fixed annuity and variable annuity.
• 40% of the customers with fixed annuity also have indexed annuity.
• Half of the customers with two annuity products have variable annuity.
• 60% of the customers have indexed annuity.
• The number of customers who have only the variable annuity is the same as the number of customers who have two annuity products.
• All customers have at least one type of annuity.

Determine the proportion of the customers who only have the indexed annuity.

1. 0.35

2. 0.37

3. 0.39

4. 0.41

5. 0.43

In respect of the use of electronic payment systems, consumers have a much higher security risk
than banks. Critically examine the above statement with reference to the issues raised by Schulze
(2004).

RentAPhone is a new service company that provides European mobile phones to American visitors to Europe. The company currently has 90 phones available at Charles de Gaulle Airport in Paris. There are, on average, 25 customers per day requesting a phone. These requests arrive uniformly throughout the 24 hours the store is open. (Note:This means customers arrive at a faster rate than 1 customer per hour.) The corresponding coefficient of variation is 1.

Customers keep their phones on average 84 hours. The standard deviation of this time is 72 hours.

Given that RentAPhone currently does not have a competitor in France providing equally good service, customers are willing to wait for the telephones. Yet, during the waiting period, customers are provided a free calling card. Based on prior experience, RentAPhone found that the company incurred a cost of $1 per hour per waiting customer, independent of day or night.

(a) What is the average number of telephones the company has in its store? (Round your answer to nearest whole number.)

The average number of telephones are?

(b) How long does a customer, on average, have to wait for the phone? (Round your answer to two decimal places.)

The average waiting time is ___ Hours?

(c) What are the total monthly (30 days) expenses for telephone cards? (Round your answer to two decimal places.)

The total monthly expenses are ?

(e) How would waiting time change if the company decides to limit all rentals to exactly 84 hours? Assume that if such a restriction is imposed, the number of customers requesting a phone would be reduced to 15 customers per day. (Round your answer to five decimal places.)

The waiting time is ___ hours?

Santana Rey created Business Solutions on October 1, 2020. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer. The following chart of accounts includes the account number used for each account and any balance as of December 31, 2020. Santana Rey decided to add a fourth digit with a decimal point to the 106 account number that had been used for the single Accounts Receivable account. This change allows the company to continue using the existing chart of accounts.

In response to requests from customers, S. Rey will begin selling computer software. The company will extend credit terms of 1/10, n/30, FOB shipping point, to all customers who purchase this merchandise. However, no cash discount is available on consulting fees. Additional accounts (Nos. 119, 413, 414, 415, and 502) are added to its general ledger to accommodate the company’s new merchandising activities. Its transactions for January through March follow.

The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation.

1. The March 31 amount of computer supplies still available totals $2,095.
2. Prepaid Insurance coverage of $699 expired during this three-month period.
3. Lyn Addie has not been paid for seven days of work at the rate of $155 per day.
4. Prepaid rent of $2,655 expired during this three-month period.
5. Depreciation on the computer equipment for January 1 through March 31 is $1,090.
6. Depreciation on the office equipment for January 1 through March 31 is $210.
7. The March 31 amount of merchandise inventory still available totals $574.

2. Post the journal entries in part 1 to the accounts in the company’s general ledger. Note: Begin with the ledger’s post-closing adjusted balances as of December 31, 2020.

Santana Rey created Business Solutions on October 1, 2020. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer. The following chart of accounts includes the account number used for each account and any balance as of December 31, 2020. Santana Rey decided to add a fourth digit with a decimal point to the 106 account number that had been used for the single Accounts Receivable account. This change allows the company to continue using the existing chart of accounts.

In response to requests from customers, S. Rey will begin selling computer software. The company will extend credit terms of 1/10, n/30, FOB shipping point, to all customers who purchase this merchandise. However, no cash discount is available on consulting fees. Additional accounts (Nos. 119, 413, 414, 415, and 502) are added to its general ledger to accommodate the company’s new merchandising activities. Its transactions for January through March follow.

The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation.

1. The March 31 amount of computer supplies still available totals $2,095.
2. Prepaid Insurance coverage of $699 expired during this three-month period.
3. Lyn Addie has not been paid for seven days of work at the rate of $155 per day.
4. Prepaid rent of $2,655 expired during this three-month period.
5. Depreciation on the computer equipment for January 1 through March 31 is $1,090.
6. Depreciation on the office equipment for January 1 through March 31 is $210.
7. The March 31 amount of merchandise inventory still available totals $574.

Please give a brief justification for the correct answer you select:

1. Which of the following is NOT included in 2004’s GDP?

1. The value of a car produced in the United States and exported to England.
2. The profit earned in 2004 from selling a stock that you purchased in 2001.
3. The value of a computer chip that is used in the production of a personal computer.
4. The commission earned by an employment counsellor when she locates a job for a client.

2. Gross National Product is the total market value of

1. All final and intermediate goods and services produced by resources owned by a country in a given year.
2. All final and intermediate goods and services produced in a country in a given year, regardless of who owns the resources.
3. All final goods and services produced in a country in a given year, regardless of who owns the resources.
4. All final goods and services produced by resources owned by a country, regardless of where production takes place.

3. Which of the following is included in both the U.S. GDP and GNP?

1. The value of all cars produced by Ford in Mexico.
2. The value of all cars produced by General Motors in the US.
3. The value of all cars produced by Toyota in the US.
4. The value of cars produced by Nissan in Japan and the US.

4. The value of what Pizza Hut produces in Italy is included in the U.S. ____________ and in the Italian ____________.

1. GDP;GDP
2. GNP;GNP
3. GNP;GDP
4. GDP;GNP

5. The GDP of the U.S. in 2002 was around $10 trillion. This means

1. That the value of output in 2002 was around $10 trillion.
2. That total income in 2002 was around $10 trillion.
3. That total spending in 2002 was around $10 trillion.
4. All of the above

6. In 2004 the change in business inventories is $50 billion and GDP is $160 billion. Final sales in 2004

1. Are $110 billion.
2. Are $200 billion.
3. Are 210 billion.
4. Cannot be determined from this information.