Use computer software packages, such as Minitab or Excel, to solve this problem.
The owner of Showtime Movie Theaters, Inc., would like to predict weekly gross revenue as a function of advertising expenditures. Historical data for a sample of eight weeks follow.
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Use computer software packages, such as Minitab or Excel, to solve this problem. The owner of Showtime Movie Theaters, Inc., would like to predict weekly gross revenue as a function of advertising expenditures. Historical data for a sample of eight weeks follow.
a. Develop an estimated regression equation with the amount of television advertising as the independent variable (to 1 decimal). b. Develop an estimated regression equation with both television advertising and newspaper advertising as the independent variables (to 2 decimals). c. Is the estimated regression equation coefficient for television advertising expenditures the same in part (a) and in part (b)? d. Predict weekly gross revenue for a week when thousand is spent on television advertising and thousand is spent on newspaper advertising? NOTE: To compute the predicted revenues, use the coefficients you have computed rounded to two decimals, as you have entered them here. Then, also round your predicted revenue to two decimal places. in thousands |
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In: Statistics and Probability
Background Getswift Ltd (“Getswift”) is a newly listed company involved that provides a software distribution solution. The board has heard that a new revenue standard (IFRS 15) has been issued and as none of the board has a financial background, they are unsure what it means for them. They have heard though that the impact of the new standard on most businesses will be significant. As a result, they have engaged your consultancy firm to provide them with a letter of advice to explain the impact that the new standard will have on the income recognition of Getswift. REQUIRED You are required to provide a letter of advice to the board of Getswift explaining the requirements of the new revenue standard with a focus on how it will impact their particular revenue recognition. In addition, you are required to write a short transmittal email enclosing the letter of advice. Important Additional Information You are expected to research this company and gain an understanding of what they do so that you understand the nature of their revenue. The 2016/2017 annual report should be used as a starting point but you are expected to go further than this. This assessment requires much more than copying the requirements from the new standard and those students that just do this will be marked poorly. The majority of the marks will be for the application of the standard to Getswift’s revenue sources. Therefore, you need an understanding of what they do. The language of your letter of advice should be tailored to the audience and their level of financial literacy. Required Format and additional requirements You are required to produce: 1. A transmittal email to the Board 2. A Letter of Advice, addressed to the Board, which includes references
In: Accounting
|
Good luck (50% chance) |
Bad luck (50% chance) |
|
|
Low effort |
24,000 |
12,000 |
|
High effort |
40,000 |
24,000 |
(1) If the revenue is below or equal to 24,000, then the technician receives $5000.
(2) If the revenue is larger than 24,000, then the technician receives $5000 plus a bonus of X dollars.
If the bonus is 3000 dollars, would it encourage the technician to put in high effort? Make sure you support your answer with numerical values.
In: Finance
Part 1
Prior to closing, Syracuse Company's accounting records showed the following balances:
Retained earnings$16,800 Service revenue 21,750 Interest revenue 1,800 Salaries expense 12,300 Operating expense 3,450 Interest expense 900 Dividends 2,700
After closing, Syracuse's retained earnings balance would be?
Part 2
Revenue on account amounted to $9,000. Cash collections of accounts receivable amounted to $8,100. Cash paid for expenses was $7,500. The amount of employee salaries accrued at the end of the year was $900. Cash flow from operating activities was
A)900
B)600
C)1500
D)8700
Part 3
The purpose of the accrual basis of accounting is to:
Match assets and liabilities in the proper period.
Report expenses when cash disbursements are made.
Report revenue when received.
Match revenues and expenses in the proper period.
Part 4
Earning revenue on account would be classified as a/an?
claims exchange transaction.
asset use transaction.
asset source transaction.
asset exchange transaction.
Part 5
Which of the following describes the effects of a claims exchange transaction on a company's financial statements?
| Assets | = | Liab. | + | Equity | Rev. | - | Exp. | = | Net Inc. | Cash Flow | |
| A. | NA | = | NA | + | NA | NA | - | NA | = | NA | +OA |
| B. | + | = | + | + | NA | NA | - | NA | = | NA | +OA |
| C. | NA | = | + | + | - | NA | - | + | = | - | NA |
| D. | All of these could represent the effects of a claims exchange transaction. | ||||||||||
A) option A
B)option B
C) option C
D)option D
In: Accounting
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.
| Account Title | Debits | Credits | ||
| Cash | 7,650 | |||
| Accounts receivable | 7,750 | |||
| Prepaid insurance | 3,200 | |||
| Land | 215,000 | |||
| Buildings | 60,000 | |||
| Accumulated depreciation—buildings | 24,000 | |||
| Office equipment | 93,000 | |||
| Accumulated depreciation—office equipment | 37,200 | |||
| Accounts payable | 28,850 | |||
| Salaries payable | 0 | |||
| Deferred rent revenue | 0 | |||
| Common stock | 230,000 | |||
| Retained earnings | 46,950 | |||
| Service revenue | 82,000 | |||
| Interest revenue | 4,200 | |||
| Rent revenue | 5,100 | |||
| Salaries expense | 32,000 | |||
| Depreciation expense | 0 | |||
| Insurance expense | 0 | |||
| Utilities expense | 21,200 | |||
| Maintenance expense | 18,500 | |||
| Totals | 458,300 | 458,300 | ||
Information necessary to prepare the year-end adjusting entries
appears below.
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.
In: Accounting
|
Revenue Recognition The Company generally recognizes sales, which include shipping fees where applicable, net of estimated returns, at the time the member takes possession of merchandise or receives services. When the Company collects payments from customers 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 on 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, net of the estimated net realizable value of merchandise inventories to be returned and any estimated disposition costs. Amounts collected from members, which under common trade practices are referred to as sales taxes, are recorded on a net basis. The Company evaluates whether it is appropriate to record the gross amount of merchandise sales and related costs or the net amount earned as commissions. Generally, when Costco is the primary obligor, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, can influence product or service specifications, or has several but not all of these indicators, revenue and related shipping fees are recorded on a gross basis. If the Company is not the primary obligor and does not possess other indicators of gross reporting as noted above, it records the net amounts as commissions earned, which is reflected in net sales. The Company accounts for membership fee revenue, net of estimated refunds, on a deferred basis, whereby revenue is recognized ratably over the one-year membership period. The Company’s Executive Members qualify for a 2% reward (up to a maximum of $750 per year on qualified purchases), which can be redeemed 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 on 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 $970, $900, and $790 in 2013, 2012, and 2011, respectively. |
Required:
a. a. Explain in plain English how Costco recognizes revenue from annual memberships.
b. Does Costco recognize revenue in consistence with the revenue recognition principle in GAAP? Explain your answer.
In: Accounting
In: Accounting
On January 1, Year 1, a contractor agrees to build on the customer’s land a bridge that is expected to be completed at the end of Year 3. The bridge is a single performance obligation to be satisfied over time. The contractor determines that the progress toward completion of the bridge is reasonably measurable using the input method based on costs incurred. The contract price is $4,000,000, and initial expected total costs of the project are $2,400,000.
|
Year 1 |
Year 2 |
Year 3 |
||||
|
|
|
|
||||
|
Costs incurred during each year |
$ 600,000 |
$1,200,000 |
$1,100,000 |
|||
|
Costs expected in the future |
1,800,000 |
1,200,000 |
^ this is the question form the professor and I did the answers for
year 1-2-3 :
Year 1
By the end of Year 1, 25% [$600,000 ÷ ($600,000 + $1,800,000)] of
the total expected costs have been incurred. Using the input method
based on costs incurred, the contractor recognizes 25% of the total
expected revenue ($4,000,000 contract price × 25% ) = $1,000,000
and cost of goods sold $2,400,000.× 25%) = $600,000. The difference
between these amounts is the gross profit for Year 1.
Revenue $1,000,000, Cost of goods sold $600,000 , Gross profit
(1,000,000 – 600,000) =$400,000. The gross profit in Year 1 of
$400,000 also may be calculated as total expected gross profit from
the project of $1,600,000 ($4,000,000 - $2,400,000) times the
progress toward completion of the contract of 25%.
Year 2
By the end of Year 2, total costs incurred are $1,800,000
($600,000+ $1,200,000). Given that $1,200,000 is expected to be
incurred in the future, the total expected cost is $3,000,000
($1,800,000 + $1,200,000). The change in the total cost of the
contract must be accounted for prospectively. By the end of Year 2,
60% ($1,800,000 ÷ $3,000,000) of expected costs have been
incurred.
Thus, $2,400,000 ($4,000,000 × 60%) of cumulative revenue and
$1,800,000 ($ 3,000,000 × 60%) of cumulative cost of goods sold
should be recognized for Years 1 and 2.
Because $1,000,000 of revenue and $600,000 of cost of goods sold
were recognized in Year 1, revenue of $1,400,000 ($2,400,000
cumulative revenue - $1,000,000) and cost of goods sold of
$1,200,000 ($1,800,000 cumulative cost of goods sold - $600,000)
are recognized in Year 2.
Revenue
$1,400,000
Cost of goods sold
1,200,000
Gross profit -- Year 2
$200,000*
* The gross profit in Year 2 of $200,000 also may be calculated as
the cumulative gross profit for Years 1 and 2 of $600,000
[($4,000,000 - $3,000,000) × 60%] minus the gross profit recognized
in Year 1 of $400,000.
Year 3
At the end of Year 3, the project is completed, and the total costs
incurred for the contract are $2,900,000 ($600,000 + $1,200,000 +
$1,100,000). Given $2,400,000 of cumulative revenue and $1,800,000
of cumulative cost of goods sold for Years 1 and 2, $1,600,000
($4,000,000 contract price - $2,400,000) of revenue and $1,100,000
($2,900,000 total costs - $1,800,000) of cost of goods sold are
recognized in Year 3.
Revenue
$1,600,000
Cost of goods sold
1,100,000
Gross profit -- Year 3
$500,000
NOTE: (1) The total gross profit from the project of $550,000
($400,000 + $200,000 + $500,000) equals the contract price of
$4,000,000 minus the total costs incurred of $2,900,000. (2) When
progress toward completion is measured using the cost-to-cost
method, as in the example above, the cost of goods sold recognized
for the period equals the costs incurred during that period.
NOW : I need the answer for this question:
An entity may not be able to estimate the degree of completion of a project at the end of the first year, perhaps because this is the first time such a project has been undertaken by the firm. In that case, how much revenue would the firm recognize in that year if significant costs have been incurred in the construction process?
In: Accounting
Goal:
Please answer the questions below. The main goal of this homework
is to see if you can calculate the profit maximization point for
this small wedding cake business. I hope that you will be able to
merge your knowledge of basic accounting and microeconomic theory
in order to calculate the profit maximization point, make comments
about efficiency, and make logical recommendations to the firm's
management to ensure their future success.
Current Situation:
The local wedding cake business was very competitive during 2012.
Delicious Deserts was the only wedding cake bakery in the entire
county of two million people for several years. They often charged
as much as $300 to $500 for each wedding cake. But a new competitor
recently came into the market and started selling "discount wedding
cakes" for less than $150. The quality and the taste of the
discount wedding cakes were acceptable for most of their customers.
Both businesses operated in a low-to moderate-income county in
California where the average household income was not much higher
than $40,000 per year.
The Challenge For Delicious Deserts:
At first the news of a low-cost competitor was terrible news for
Delicious Deserts. They had no choice. They had to charge from $300
to $500 per wedding cake to cover their high costs. However,
because of this new competition, the husband and wife owners of
Delicious Deserts decided to make the business more efficient and
lower costs. They invested in better ovens and created better
tasting cakes using special ingredients. Their customers went crazy
over their new and unique 80 proof Italian Rum Wedding cake that
actually got people slightly drunk if they ate more than three
slices.
To boost sales during 2012 they hired part-time telemarketers and social media experts. They also increased their advertising in traditional media such as local wedding magazines. They also displayed eye-catching ads in local churches, entertainment centers and jewelry stores.
They also experimented with a new pricing model in which they lowered prices each quarter. Indeed, they found that as they lowered their prices, they sold more cakes. They hired an "A" student who took a microeconomics class with Professor Ed Torres to do an elasticity analysis. The student estimated that the price elasticity for wedding cakes was 1.25 (elastic) and that the income elasticity was 2.10 (a luxury good). The owners of Delicious Deserts were not aware of this information. The student told them that they made a huge pricing strategy error for many years by charging high prices on an elastic good within a low-to moderate-income county.
The profit and loss statement below shows that Delicious Deserts made a Total Revenue of $275,000 and sold 1,375 wedding cakes. During 2012, they made three times (3X) more than they did versus 2011. Of course, because they invested in new ovens, made more cakes, and hired new part-time staff, the cost of doing business also rose. The net profit for 2012 was a slim $32,175. The salary for a professional desert baker averaged $70,000 per year in California.
Please examine the profit and loss statement on the next page, then answer the questions on pages 4 through 6.
Delicious Deserts, Incorporated
Income Statement For The Year Ending December 31, 2012
Revenues
Gross
Sales....................................................................$275,000
Less: Sales Discounts
..................................................$ 2,500
Less: Returns (Cancelled Weddings)...........................$
2,000
Net
Sales...............................................................................................$270,500
Cost of Goods Sold
Beginning Inventory (January
1).................................$ 18,000
Cost Of Ingredients To Bake
Cakes............................$109,500
Total Cost of Goods For
Sale......................................$127,500
Less: Ending Inventory December 31.........................$
15,000
Cost of Goods
Sold..............................................................................$112,500
Gross
Profit.....................................................................................................$158,000
Operating Expenses
Selling Expenses
Sales Commissions........................................$
31,000
Advertising...................................................$
16,000
Other Selling Expenses (Internet).................$ 18,000
Total Selling
Expenses...............................................$
65,000
General and Administrative Expenses
Professional & Office
Salaries.................................$ 20,500
Utilities....................................................................$
5,000
Office
Supplies........................................................$
1,500
Bank Interest Paid on Loans....................................$
3,600
Insurance.................................................................$
2,500
Rent (Fixed
Cost)....................................................$
17,000
Total General & Administrative
Expense.............................$ 50,100
Total Operating
Expenses..................................................$115,100
Net Profit Before
Taxes..............................................................................$
42,900
Less: Federal/State/Local
Taxes................................................................$
10,725
NET
PROFIT.............................................................................................$
32,175
Question #1:
What was the Total Fixed Cost of running this business?
Free Answer:
The rent was the only fixed cost that Delicious Deserts had. They
paid $17,000 per year or $1,416.66 per month for rent. All other
expenses were variable costs.
Question #2:
What was the Total Variable Cost of running this business?
Answer: $________________________________________
Clue:
Add up Cost of Goods Sold, Total Operating Expenses (less Rent),
Income Tax Expense and include the write-off losses from Sales
Discounts & Wedding Cancellations.
Question #3:
Assuming that Delicious Deserts sold 150 cakes during Q1, 300 cakes
during Q2, 450 cakes during Q3, and 475 cakes during Q4, what was
the Total Revenue during each quarter assuming the prices were: Q1
- $275 per cake, Q2 - $240 per cake, Q3 - $180 per cake and Q4 -
$170 per cake?
Q1 - Total Revenue = $____________________________
Q2 - Total Revenue = $____________________________
Q3 - Total Revenue = $____________________________
Q4 - Total Revenue = $____________________________
The "A" student did a quarterly cost breakdown analysis for Delicious Deserts. A month-to-month analysis would have been better, but the owners just wanted a quick quarterly analysis. Q1 = 150 cakes sold, Q2 = 300 cakes sold, Q3 = 450 cakes sold and Q4 = 475 sold.
|
Quantity Sold |
0 |
150 |
300 |
450 |
475 |
|
|
Demand/Price |
$275 |
$275 |
$240 |
$180 |
$170 |
|
|
MR |
$275 |
$205 |
$ 60 |
($ 10) |
||
|
ATC |
$238 |
$207 |
$153 |
$151 |
||
|
MC |
$200 |
$175 |
$ 47 |
$283 |
||
|
TR |
$41250 |
$72000 |
$81000 |
$80750 |
||
|
TC |
$35750 |
$62000 |
$69000 |
$76075 |
||
|
Net Profit |
$ 5500 |
$10000 |
$12000 |
$ 4675 |
||
Challenge Question #4:
Hint: Use the instructions on page 7 of the Excel 2016
handout.
Can you plot a nice-looking graph to show how the demand curve, the average total cost, marginal cost, and marginal revenue curves look like? Paste it on this page or attach a separate page to this homework.
Question #5
What is the MC=MR Profit Maximization point? What quantity should
Delicious Deserts be producing at 'and' what price should they be
charging to maximize their profits?
Question #6
Why isn't it a good idea for them to produce and sell as many cakes
as they can? Is it more profitable to sell less cakes at this
current stage of their business?
Question #7
Do you have any other recommendations for Delicious Deserts to
increase their revenues, profits, market share, and client
retention?
In: Economics
The Terminator
Trans Ocean Shipping (“Trans Ocean”) provides domestic and international transportation and logistics services to customers. The company contracts shipping vessels, trucks, and aircraft to provide regional, long-haul, and international shipments of customer goods. Trans Ocean has entered into the following contracts:
In March 2019, Trans Ocean entered into a revenue contract with a customer, Asia Manufacturing (“Asia”), in which Trans Ocean would be the exclusive shipper of Asia’s products between Shanghai and Los Angeles. Trans Ocean’s contract with Asia is effective on July 1, 2019. Before signing the contract with Asia, Trans Ocean did not operate the Shanghai Los Angeles route, and to satisfy the contract with Asia, in April 2019, Trans Ocean leases a cargo ship from Heavy Vessel Manufacturing (“Heavy”), which commences on July 1, 2019.
Because the shipping route is new, on July 1, 2019, (1) Trans Ocean has no other customers to deliver goods on the Shanghai-Los Angeles route and (2) because of operational costs, Trans Ocean does not have alternative uses for the leased cargo ship.
Trans Ocean adopted ASC 842, Leases, on January 1, 2019.
The following are relevant facts about Trans Ocean’s revenue contract with Asia, and Trans Ocean’s lease with Heavy.
Trans Ocean’s Revenue Contract With Asia
• The revenue contract’s stated term with Asia is for one year.
• Asia can renew the contract annually for up to four additional years. Therefore, the revenue contract can extend to five full years.
• Asia pays a significant up-front nonrefundable fee for the initial one-year term; the same amount is due at the beginning of every renewal period.
• Asia can cancel at any time without incurring a penalty outside of forfeiting any up-front nonrefundable fees already paid or owed at the beginning of the initial contract term and any and each renewed period.
• Although the contract is new, Trans Ocean and Asia have entered into similar arrangements with similar terms and historically, Asia has renewed for one or more years.
• Trans Ocean appropriately concludes that (1) the revenue contract meets the scope of, and criteria in, ASC 606, Revenue From Contracts With Customers, and (2) the contract term for its revenue contract with Asia is one year.
Trans Ocean’s Lease With Heavy
• The contract between Trans Ocean and Heavy contains a lease under ASC 842.
• Rental payments are at market and fixed each year.
• To mitigate risks, Trans Ocean negotiated the lease period and renewal options to mirror those of Trans Ocean’s revenue contract with Asia. As a result, the fixed, noncancelable term of the lease is one year, and Trans Ocean can renew annually for four additional years (i.e., up to five full years).
Trans Ocean believes that since Asia can terminate the revenue contract after one year (even though Asia may need to ship products for longer than a year and has historically renewed under other similarly structured contracts), it is uncertain whether Asia will renew the revenue contract. Because of this uncertainty, Trans Ocean believes that the renewal options related to the lease are not reasonably certain at the commencement date of the lease.
As a result, Trans Ocean concludes that the lease term for its lease contract with Heavy is also one year.
1. Under US GAAP, do you agree with Trans Ocean’s conclusion that the lease term for the cargo vessel is one year because the revenue contract is for one year?
2. According to US GAAP, what factors should Trans Ocean consider in supporting its conclusion related to the lease term?
Additional Facts:
On December 1, 2019, Trans Ocean entered into a shipping contract with Eastern Manufacturing Company (“Eastern”) to ship Eastern’s products between Shanghai and Los Angeles. The contract with Eastern commences on January 1, 2020, and on the basis of Trans Ocean’s evaluation of its enforceable rights and obligations in the contract with Eastern, Trans Ocean concludes that term of the revenue contract with Eastern is for a period of two years. Further, Trans Ocean concludes that (1) because of its contract with Asia and Eastern, it would not be operationally feasible to deploy the leased cargo vessel on other routes; (2) the cargo vessel will have sufficient capacity to service both Asia and Eastern; and (3) the leased asset is needed for Trans Ocean to perform under its revenue contract with Eastern (because of economic reasons that would not allow Trans Ocean to use another vessel).
3. Under US GAAP, should Trans Ocean reassess the lease term of the cargo vessel? If so, why?
4. Please answer questions 1 and 3 under IFRS/IAS.
In: Accounting