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.

1) Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in operation and the number of passengers served —that it uses in its budgeting and performance reports. Data concerning the company’s cost formulas appear below:

For example, vehicle operating costs should be $6,800 per month plus $476 per bus plus $4.5 per passenger. The company’s sales revenue should average $31 per passenger. In July, the company operated 54 buses and served a total of 3,300 passengers. How much is the company’s flexible budget operating income for July?

2)

A cash budget for the first three quarters of Brister Incorporated is given below (000 omitted). The company requires a minimum cash balance of at least $5,000 to start each quarter. If necessary, the company will borrow money from its bank to maintain this balance. The company will pay no interest in Quarters 1, 2, and 3. It will repay as much of its borrowings as possible as soon as it has more than $5,000 in cash in a given quarter. Suppose the company starts the first quarter with no bank debt. How much total bank debt does the company expect to have at the end of the third quarter?

Analyzing Unearned Revenue Disclosures
The following disclosures (excerpted) are from the September 2, 2018, annual report of Costco Wholesale Corporation.

The Company generally recognizes sales, net of returns, at the time the member takes possession of merchandise or receives services. When the Company collects payments from members prior to the transfer of ownership of merchandise or the performance of services, the amounts received are generally recorded as deferred sales, included in other current liabilities in the consolidated balance sheets, until the sale or service is completed. The Company reserves for estimated sales returns based on historical trends in merchandise returns and reduces sales and merchandise costs accordingly. The Company accounts for membership fee revenue, net of refunds, on a deferred basis, ratably over the one-year membership.

The Company’s Executive members qualify for a 2% reward on qualified purchases (up to a maximum reward of approximately $1,000 per year), which can be redeemed only at Costco warehouses. The Company accounts for this reward as a reduction in sales. The sales reduction and corresponding liability (classified as accrued member rewards in the consolidated balance sheets) are computed after giving effect to the estimated impact of non-redemptions, based on historical data. The net reduction in sales was $1,394, $1,281, and $1,172 in 2018, 2017, and 2016, respectively.

(a) Which of the following statements best explains in layman terms how Costco accounts for the cash received for its membership fees?

Because Costco does not know how many of its members will continue to the end of the year, cash received from members is recorded as a liability and recognized as revenue only at year-end.

When it receives cash, the company records it as a current liability. Then, it recognizes revenue evenly over the year.

The company records revenue when the cash is received.

Because Costco has a refund policy, the company records revenue when the cash is received, less an allowance for expected membership terminations.

(b) Use the balance sheet information on Costco's Deferred Membership Fees liability account and its income statement revenues related to Membership Fees earned during fiscal 2018 to compute the cash that Costco received during fiscal 2018 for membership fees.
Total cash received (in $ millions) = $Answer

(c) Use the financial statement effects template to show the effect of the cash Costco received during fiscal 2018 for membership fees and the recognition of membership fees revenue for fiscal 2018.

Use negative signs with answers, when appropriate.

(e) Complete the following sentences:
Costco recorded sales of at least $_____ from the Company’s Executive members, during fiscal 2018.

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.

Use the following information to complete the subtotals for current assets, long-term investments, property plant and equipment, other assets, current liabilities and long-term liabilities.

The following represents a December 31, 2016, post-closing trial balance for Excell Company.

Additional Information:

The cash account includes $22,000 set aside in a legally restricted fund to pay bonds payable that mature in 2024 and $15,000 cash surrender value of a life insurance policy on the company's CEO.

2. The accounts receivable balance consists of the following:
      a. Amounts owed by customers with debit balances                             $ 217,100
      b. Allowance for uncollectible accounts - trade customers                         (9,400)
      d. Non-trade note receivable due in three equal payments on

June 25 over the next 3 years                             64,500
      e. Interest receivable on note due in nine months                                      7,800
                                    Total                                                                               $ 280,000

3. The prepaid expenses include $18,000 that will be consumed during 2017 and $14,000 that will be consumed during 2018.

4. The investments account is classified as Available for Sale Securities and includes an investment of $25,000 in bonds that mature July 1, 2017. Of the remaining investments balance, management intends to hold for at least the next three years. All investments in the portfolio have already been marked-to-market and are reported at Fair Value.

5. The land account includes land which cost $75,000 that the company purchased for speculative purposes and is currently held for sale. The remaining $100,000 is the cost of land on which the company's office building resides. The equipment account includes idle machinery with a book value of $45,000.

6. The unearned revenue represents customer prepayments for magazine subscriptions. Subscriptions are for five years and will be earned evenly over each of the years beginning January 1, 2017.

7. The notes payable account consists of the following:

a $50,000 note due in six months

a $100,000 bond due in eight year

a $150,000 note due in six annual installments of $25,000 each, with the next installment due Nov. 1, 2017.
*Interest on all notes has been properly accrued and is included in accrued expenses.

1. Yale Law School says 74% of their students pass the bar exam on their first try.

1. To simulate passing students, we could assign the random digits as:
   1. 00 to 49 = pass first try, 50 to 99 = fail first try
   2. 0 to 7 = pass first try, 8 to 9 = fail first try
   3. 00 to 73 = pass first try, 74 to 99 = fail first try
   4. 0 to 4 = pass first try, 5 to 9 = fail first try

Using the random digit assignment from part a), and starting at line 106 simulate a class of 20 students.

b) Which students was the first in the list to fail the exam?

c) What percentage of these 20 students passed on their first try?

4. How does that percentage compare to 74% we set up as our probability model? If there is a difference, why do you think that is?

Based on the following case study answer two of the questions

a. Dell is a pioneer in stimulating exchanges with customers through social media. With reference to Dell, discuss the differences between e-marketing and traditional marketing activities.

b. As more companies are moving towards green businesses, should Dell adopt a similar strategy to market its products? Justify your answer

Dell Direct and Not-So-Direct Case Study:

When Michael Dell started his Texas-based computer business in 1984, he chose a distribution strategy that was radically different from that of other computer marketers. Instead of selling through wholesalers and retailers, the company dealt directly with customers. This kept costs low and allowed Dell to cater to customers' needs by building each computer to order. Using a direct channel also minimized inventory costs and reduced the risk that parts and products would become obsolete even before customers placed their orders, a constant concern in high-tech industries.

By 1997, Dell's website alone was responsible for $1 million a day in sales. Relying on the strength of its online sales, catalogs, and phone orders, Dell expanded beyond the United States and added new products for four target markets: consumers, large corporations, small businesses, and government agencies. Meanwhile, Apple, Hewlett-Packard, and other competitors were reaching out to many of the same segments with a combination of direct and indirect channels. Apple Stores, for example, proved to be major customer magnets and gave a significant boost to sales of Macintosh computers and other Apple electronics. Hewlett-Packard forged strong ties with value-added resellers (VARs), intermediaries that assemble systems of computers, servers, and other products customized to meet the special needs of business buyers.

Although Dell tested retail distribution on a number of occasions, it never let the experiments go on too long. In the 1990s, it tried selling PCs through a few big U.S. retail chains, but soon discontinued the arrangement because the profit margins weren't as healthy as in the direct channel. Later, it opened a series of branded retail kiosks in major U.S. markets to display its products and answer customers' questions. Unlike stores, however, the kiosks didn't actually sell any-thing: Customers could only place orders for future delivery. Dell ultimately closed the kiosks down. By 2007, with competitors coming on strong, Dell was ready to rethink its worldwide channel strategy. As convenient as online shopping was for many U.S. computer buyers, it was much less popular in many other countries. To gain market share domestically and internationally, Dell would have to follow consumers into stores, malls, and downtown shopping districts. The company began selling a few models through Walmart's U.S. stores, Carphone Warehouse's U.K. stores,. Bic Camera's Japanese stores, and Gome's Chinese stores. In addition, it opened Dell stores in Moscow, Budapest, and other world capitals.
By 2010, sales through retailers had gained enough momentum that Dell sought out other retail deals. In another channel change, it began selling through VAR partners that serve small- and medium-sized businesses and lined up wholesalers to distribute its products in Europe, Latin America, and elsewhere. When Dell introduced a new line of smart-phones, it needed a new channel arrangement to reach buyers. Therefore, it arranged for cell phone carriers such as AT&T to sell the new models to their customers.

As successful as Dell has been in revamping its indirect channels, selling directly to customers remains a top priority. Dell invites orders around the clock through Web pages tailored to the needs of each 'target market. It also maintains an online outlet store to sell 4 discontinued and refurbished products. It mails millions of catalogs and direct-mail pieces every year. And its sales force calls on government officials and big businesses that buy in volume. Dell's website notes, with pride, that the 10 largest U.S. corporations and five largest U.S. commercial banks "run on Dell."

Moreover, the company is a pioneer in stimulating exchanges with customers through social media. Dell has 139,000 fans on Facebook, for example, and regularly posts offers that drive customers to its various websites. It's become a pioneer in selling directly to customers via the micro blog site Twitter. In less than three years, it generated $6.5 million in revenue from sales transactions that originated on Twitter. That may be a tiny sliver of Dell's $53 billion in annual revenue, but it demonstrates the company's flexibility in adapting to shifts in customer behavior and environmental forces, such as technological advances. With market share and profit-margin challenges still facing the company, and global demand just picking up steam after a long, difficult recession, watch for Dell to make more channel adjustments in the coming years.

On Sept 30th, 2011, Exxon Mobil (XOM) stock was traded at $72.63 while the December XOM put option with $75 exercise price is traded at $5.00 and the December XOM call option with $70 exercise price is traded at $5.60. The put option's delta is -0.65 and the call option's delta is 0.7.

A) On October 3rd, XOM stock price changed to $71.15 on Oct 3rd, what will be the values of the put and call options?

B) Consider a portfolio composed of:

1,005 XOM stocks

20 Dec XOM Call options

37 Dec XOM Put options

     What is the portfolio position delta?

C) Using the portfolio position delta, calculate the portfolio value before AND after the stock price change.

On Sept 30th, 2011, Exxon Mobil (XOM) stock was traded at $72.63 while the December XOM put option with $75 exercise price is traded at $5.00 and the December XOM call option with $70 exercise price is traded at $5.60. The put option's delta is -0.65 and the call option's delta is 0.7.

A) On October 3rd, XOM stock price changed to $71.15 on Oct 3rd, what will be the values of the put and call options?

B) Consider a portfolio composed of:

1,005 XOM stocks

20 Dec XOM Call options

37 Dec XOM Put options

     What is the portfolio position delta?

C) Using the portfolio position delta, calculate the portfolio value before AND after the stock price change.

On Sept 30th, 2011, Exxon Mobil (XOM) stock was traded at $72.63 while the December XOM put option with $75 exercise price is traded at $5.00 and the December XOM call option with $70 exercise price is traded at $5.60. The put option's delta is -0.65 and the call option's delta is 0.7.

A) On October 3rd, XOM stock price changed to $71.15 on Oct 3rd, what will be the values of the put and call options?

B) Consider a portfolio composed of:

1,005 XOM stocks

20 Dec XOM Call options

37 Dec XOM Put options

     What is the portfolio position delta?

C) Using the portfolio position delta, calculate the portfolio value before AND after the stock price change.