Decision Making Tree Scenarios

• For the past several years, you’ve been purchasing a product from a supplier at a high-volume cost and reselling the product at a lower price than your customers could buy it.
• You’d like to improve the product, but the manufacturer isn’t interested in doing this
• Would it make sense (cents) to buy the equipment and make it yourself with better quality?

Create decision trees using the following Scenario Information. There are 2 Scenarios;

Scenario A

• Expected Money Value (EVM) or Expected Value
• Equipment = $500,000 + 100,000 for training
• Chances of a good market next year are 60% so chances of a poor market are 40%
• A good market will yield $1,000,000 in gross revenue; a poor market will yield $200,00 in gross revenue
• If you continue selling the product as you currently do, a good market will generate $300,000 in gross revenue and a poor market $50,000 in gross revenue. Estimated costs for working with your supplier are $30,000/yr.

Scenario B

• What if with a higher quality product, the probability for good market increases to 80% and the probability of a good/poor market for purchasing remain the same

Evaluating Turnover and Nontraditional Efficiency Ratios Across Industries
The following information is taken from publicly traded retailers. The data come from the balance sheet, income statement, and Item 2 on the companies’ Form 10‑K filings. Use the information to answer the requirements.

Required

a. Compute the days inventory outstanding (DIO) for each company.
Note: Do not round until your final answer; round your final answer to the nearest whole day.

b. Compute the gross profit margin for each company.
Note: Round percentage to one decimal place (for example, enter 6.7% for 6.6555%).

c. Compute the following two nontraditional efficiency metrics: Revenue per square foot and Revenue per store.
Note: Round your answers to two decimal places (for example, enter 6.78 for 6.77555).

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1. Which is characteristic of a perfectly competitive market:

A) THere are many firms in the market

b) It is easy to enter/exit the industry

c) Every firm has a small market share in the industry

d) Information on prices are easily accessible

e) All of the above

2. The perfeclty competitive firm reaches a break even point when:

a) price=total cost

b)price=minimum average total cost

c) price=maximum average total cost

d) price=minimum average variable cost

e)price=maximum average variable cost

3) When a perfectly competitive firm is a price taker, this means that:

a) the firm faces perfectly elastic demand

b)the firm faces demand with elasticity of 1

c)firm faces perfectly inelastic demand

d)price of output=marginal revenue at all levels of output

e) firm faces perfectly elastic demand, AND price of output= marginal revenue at all levels of output.

4) IF a perfectly competitive firm sells 500 of a product at $300 per product. What is the firm's marginal cost and marginal revenue per unit?

a)None of these

b)MC=300, MR=300

c)MC=500, MR=300

d)MC=500, MR=500

e)MC=300, MR=500

5) A perfectly competitive firm produces where:

a)demand=marginal cost

b)marginal revenue=marginal cost

c)all of these

d)average revenue=marginal cost

e)price=marginal cost

Adelman Company received a $100,000, one year, 9 percent bank loan on October 31, 2016. Interest is payable at the end of the loan term.

Adelman’s adjusting entry at the end of their fiscal year on March 31, 2017 is:

At the beginning of the period, Cracker Corporation had $800 of supplies on hand. During the period, it purchased $1,800 of supplies and at the end of the period, the company determined that only $1,600 of supplies were still on hand.

What adjusting entry should Cracker Corporation make at the end of the period?

On June 1, 2016, Enne Brahtz Corporation received $3,600 as advance payment for 12 months' advertising. The receipt was recorded as a credit to Unearned Fees.

What adjusting entry is required on December 31, 2016?

Problem One

Prepare the seven (7) adjusting entries for the information given on the next page and write an explanation for each entry, tell what type of adjusting entry each is. For example,  number 1 is a Prepaid Expense. Round all amounts to the nearest dollar if necessary.

1.   Prepaid Insurance remaining in effect at the end of August is $900.

2.   Depreciation for the month of August for the equipment is $600.

3. Supplies used by August 31, $350.

4.   You owe 2 days of salary to employees at August 31. A five-day payroll is $15,000.

5.   You have completed Service Revenue of $17,000 but have not yet billed the client. Record the adjustment on August 31.

6.   There is $3,000 of the amount in Unearned Service Revenue still to be earned at August 31.

7.   You have earned $150 interest on your bonds and will receive the check on September 15.  

The unadjusted trial balance as of December 31, 2021, for the Bagley Consulting Company appears below. December 31 is the company’s reporting year-end.

Information necessary to prepare the year-end adjusting entries appears below.

1. The buildings have an estimated useful life of 50 years with no salvage value. The company uses the straight-line depreciation method.
2. The office equipment is depreciated at 10 percent of original cost per year.
3. Prepaid insurance expired during the year, $1,450.
4. Accrued salaries at year-end, $1,150.
5. Deferred rent revenue at year-end should be $700.

Required:
1. From the trial balance and information given, prepare adjusting entries.
2. Post the beginning balances and adjusting entries into the appropriate T-accounts.
3. Prepare an adjusted trial balance.
4. Prepare closing entries.
5. Prepare a post-closing trial balance.

Sandhill Machinery Corporation, a private company following ASPE sold manufacturing equipment for $2,100 each. Each machine carried with it a 2-year warranty against manufacturing defects. From experience, Sandhill Machinery Corporation determined that each machine sold would average $253 in replacement parts. In 2020, the company sold 1,000 machines. Also in 2020, the company incurred $125,000 in total repair costs (the cost of replacement parts from inventory). Sandhill Machinery Corporation also sold an extended warranty for its machines. For $430, customers could purchase an extended warranty that extended the warranty on the machine for an additional 2 years. 800 of the customers that bought machines also purchased the extended warranty. Assume the revenue is earned evenly over the two-year contract. Using the Revenue Approach, prepare the journal entry to record the sale of the machines and extended warranties. (Ignore any cost of goods sold entry).Using the Revenue Approach, prepare the journal entry to record the warranty costs incurred during 2020.

Using the Revenue Approach, prepare the journal entry to record the year-end adjusting entries at December 31, 2020,for the assurance-type warranties assuming Sandhill’s year-end is December 31. Using the Revenue Approach, prepare the journal entry to record the year-end adjusting entries at December 31, 2022 for the service-type warranties. (Note: assume that the cost of repairs has already been recorded during 2022 and prepare any other adjusting entry needed). (