Question:

Suppose you have organized another business under the name “PAPA’s Hotel & Restaurant” on December 1, 2019. In order to compete in the market, you have decided to avail of financing from Azizi Bank for further expansion. Bank requires a list of documents including financial statements for further process. The business transactions during the month of December are as follows:

Dec 01: You have invested cash of $2,500,000 in your business, PAPA’s Hotel & Restaurant.

Dec 01: Purchased hotel building for $550,000. Made a $180,000 cash down payment and issued a note payable for balance amount.

Dec 01: You have agreed with Unilever Corporation to provide meeting hall and charge fixed revenue of $5,000 per month. The entire six-month rent revenue of $30,000 was collected in advance and credited to Unearned Rent Revenue.

Dec 01: Purchased food items for the restaurant on credit $10,000

Dec 10: Received cash of $80,000 from customers as rent revenue from customers.

Dec 15: Paid $10,000 salary to employees for services during the first half of December.

Dec 18: Purchased restaurant supplies of $2,500 on account.

Dec 31: Paid cash $10,000 for food items purchased on Dec 01.

Dec 31: You withdrew $5,000 cash from the business for personal use.

As you are following the accrual basis of accounting so adjustments are needed as at December 31, 2019. The information regarding adjustments is as follows:

1. Salaries earned by employees but not paid amount to $10,000 for second half of Dec.
2. As of Dec. 31, you have earned $20,000 rent revenue but not received any amount yet.
3. On Dec 1, entire six-month rent revenue of $30,000 was collected in advance and credited to Unearned Rent Revenue. As at December 31, adjustment is needed.
4. A Toyota Corolla car had been rented on Dec 09, at daily rate of $80 to provide transportation facility. No rental payment has yet been made.
5. Depreciation on Hotel’s building is based on an estimated useful life of 15 years. The original cost of building was $550,000 and residual value of $50,000.

Instructions:

1. Prepare Journal Entries, Post to the ledger, Prepare Trial Balance, Prepare adjusting entries, and then Prepare adjusted Trial Balance
2. Prepare financial statements (balance sheet & income statement) as of December 31, 2019 based on above information as it is the compulsory requirement of Azizi bank.
3. Evaluate the financial position and profitability of your business?
4. If you have applied for the financing of $250,000, whether you are qualified against the collateral of hotel building as at December 31, 2019?

1.When a net loss has occurred, Income Summary is

2. On September 23, Reese Company received a $350 check from Mike Moluf for services to be performed in the future. The bookkeeper for Reese Company incorrectly debited Cash for $350 and credited Accounts Receivable for $350. The amounts have been posted to the ledger. To correct this entry, the bookkeeper should

3. Cash of $100 received at the time the service was provided was journalized and posted as a debit to Cash $100 and a credit to Accounts Receivable $100. Assuming the incorrect entry is notreversed, the correcting entry is

4. Whitman Company paid $630 cash on account to a creditor. The journal entry for this transaction was incorrectly recorded as a debit to Cash of $360 and a credit to Accounts Receivable of $360. The correcting entry is

5. In a classified balance sheet, assets are usually classified using the following categories:

6. Maxim Company had the following partial listing of accounts and balances at year-end: Cash, $7,000; Accounts Receivable, $6,000; Accounts Payable, $15,000; Equipment, $23,000; Inventories, $5,000; Supplies, $1,000; Investment in Real Estate, $75,000; Unearned Service Revenue, $13,000; and Prepaid Rent, $4,000. The total current assets for Maxim Company is

1)Lantz Company has provided the following information:

Cash sales totaled $200,000.

Credit sales totaled $480,000.

Cash collections from customers for services yet to be provided totaled $80,000.

A $16,000 loss from the sale of property and equipment occurred.

Interest income was $7,800.

Interest expense was $18,000.

Supplies expense was $300,000.

Rent expense for the store was $30,000.

Wages expense was $40,000.

Other operating expenses totaled $70,000.

Unearned revenue was 4,900.

What is the amount of Lantz’s income before income taxes?

2)

During 2016, Sensa Corporation incurred operating expenses amounting to $150,000 of which $90,000 was paid in cash; the balance will be paid during 2017. Which of the following is correct for the 2016 year-end balance sheet?

Stockholders' equity decreases $150,000, assets decrease $90,000, and liabilities increase $60,000.

Assets decrease $150,000, liabilities increase $60,000, and stockholders' equity decreases $150,000.

Stockholders' equity decreases $90,000 and assets decrease $90,000.

Assets decrease $150,000 and stockholders' equity decreases $150,000.

3)On December 31, 2016, Krug Company reported total liabilities of $190,000 prior to the following adjusting entries:

Depreciation expense: $41,000;

Accrued sales revenue: $39,000;

Accrued expenses: $28,000;

Used insurance: $7,000; the insurance was initially recorded as prepaid.

Rent revenue earned: $5,000; the rent was initially prepaid by the tenant and credited to unearned rent revenue.

How much are Krug's total liabilities after the adjusting entries?

$213,000.

$190,000.

$174,000.

$231,000.

4Lantz Company has provided the following information:

Cash sales totaled $370,000.

Credit sales totaled $497,000.

Cash collections from customers for services yet to be provided totaled $97,000.

A $22,000 loss from the sale of property and equipment occurred.

Interest income was $9,500.

Interest expense was $19,700.

Supplies expense was $440,000.

Rent expense for the store was $36,000.

Wages expense was $57,000.

Other operating expenses totaled $87,000.

Unearned revenue was $3,000.

What is the amount of Lantz’s income from operations (operating income)?

rev: 09_18_2017_QC_CS-100581

$184,800

$206,800

$225,000

$314,000

5)Top Company's 2016 sales revenue was $160,000 and 2015 sales revenue was $140,000. Top's total assets as of December 31, 2016 were $210,000 and total assets as of January 1, 2016 were $190,000. What is Top's total asset turnover ratio?

.79

.76

.85

.80

Tar Heel Travel Agency has purchased 5,000 tickets to the “Almost-A-Bowl” game which will host the Tarheels in December.   The company’s trip planners are suggesting three levels of service for their bowl travel packages: Premium, Value, and Cheap-Cheap. They have determined the following potential customer segments are interested in purchasing these packages:

·      Die-Hard Fans (1,500 maximum travelers)

·      Fair Weather Fans (3,000 maximum travelers)

·      Students (500 maximum travelers)

Further, assume for simplicity that:

·      Maximum willingness to pay (price) for each segment and package marginal costs are presented in table below.

·      There are no additional costs of market development.

·      There are no fixed costs incurred for setting up each package class.

·      Assume that segments that receive zero surplus, still will buy the ticket.

·      If customers get the same surplus from two fare classes, they will buy the higher class of service.

The trip planners are considering three levels of service for their bowl travel packages as follows:

a) What is the best price point for each class of ticket in order to maximize revenue?

Optimal Price Point Premium Package to maximize revenue: $     ____   .

Maximum Revenue for Premium Package: $      ____     Million

Optimal Price Point for Value Package to maximize revenue: $ ____      .

Maximum Revenue for Value Package: $       ____    Million

Optimal Price Point for Cheap-Cheap Package to maximize revenue: $ ______      .

Maximum Revenue for Cheap-Cheap Package: $       ____    Million

b) What is the best price point for each class of ticket in order to maximize profit (package costs are provided in the table above)?

Optimal Price Point Premium Package to maximize profit: $     ____   .

Maximum Profit for Premium Package: $      ____     Million

Optimal Price Point for Value Package to maximize profit: $ ____      .

Maximum Profit for Value Package: $       ____    Million

Optimal Price Point for Cheap-Cheap Package to maximize profit: $ ______      .

Maximum Profit for Cheap-Cheap Package: $       ____    Million

c) Without making any calculations, what suggestions do you have to allow the travel agency to increase its profits over what you presented in part (b)? What do you have to be concerned about when determining the correct pricing for the various options?

Exercise 13-22

Culver Machinery Co. manufactures equipment to a very high standard of quality; however, it must still provide a warranty for each unit sold, and there are instances where the machines do require repair after they have been put into use. Culver started in business in 2020, and as the controller, you are trying to determine whether to use the assurance-type or service-type warranty approach to measure the warranty obligation. You would like to show the company president how this choice would affect the financial statements for 2020, and advise him of the better choice, keeping in mind that the service-type approach is consistent with IFRS, and that there are plans to take Culver public in a few years.

You have determined that sales on account for the year were 1,100 units, with a selling price of $3,200 each. Ignore any cost of goods sold. The warranty is for two years, and the estimated warranty cost averages $210 per machine. Actual costs of servicing warranties for the year were $115,500. You have done some research and determined that if the service-type approach were to be used, the portion of revenue allocated to the warranty portion of the sale would be $350. Because the costs of servicing warranties are not incurred evenly, warranty revenues are recognized based on the proportion of costs incurred out of the total estimated costs.

A.) For the assurance-type approach, prepare the necessary journal entries to record all of the transactions described. Payments for completed warranty repairs are paid in cash.

Determine the warranty liability and expense amounts on the financial statements at the end of 2020.

Warranty Liability: $________

Warranty Expense: $_________

B.) For the service-type approach, prepare the necessary journal entries to record all of the transactions described.

Determine the unearned revenue and expense amounts on the financial statements at the end of 2020.

Unearned Revenue: $________

Warranty Expense: $_________

(List of Possible Accounts for all parts of question: No Entry, Accounts Receivable, Materials Cash Payables, Cash, Warranty Liability, Sales Revenue, Warranty Revenue, Unearned Revenue, Warranty Expense)

In 2021, the Westgate Construction company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2023. Information related to the contract is as follows.

Assume that Westgate Construction's contract with Santa Clara County does not qualify for revenue recognition over time.

Westgate recognizes revenue over time according to percentage of completion.

1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.

2a. In the journal below, complete the necessary journal entries for the year 2021 (credit "Various accounts" for construction costs incurred)

2b. In the journal below, complete the necessary journal entries for the year 2022 (credit "Various accounts for construction costs incurred)

2c. In the journal below, complete the necessary journal entries for the year 2023 (credit "Various accounts for construction costs incurred)

3.  Complete the information required below to prepare a partial balance sheet for 2021and 2022 showing any items related to the contract. Indicate whether any of the amounts shown are contract assets or contract liabilities

4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

5.Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

1. A company's fiscal year may:

Select one:

A. Be any portion of a year including a month or quarter

B. Be for a period either greater or less than 12 months

C. Be the same as the calendar year

D. All of the above are true of a company's fiscal year

2. David Bash's Landscaping Company has compiled the following list of account balances of various assets, liabilities, revenues and expenses on December 31, 2016, the end of its first year of operations.

The retained earnings for David Bash’s Landscaping on December 31, 2016 are:

Select one:

A. $12,600

B. $56,400

C. $36,400

D. $ 2,800

3.

In computing the price-earnings ratio, the current per share market price of the firm's common stock is divided by the:

Select one:

A. Earnings per common share

B. Net income for the year

C. Dividends per common share

D. Par value per common share

4.

The 2016 financial statements for Bloomington Company show the following:

Cash paid for merchandise is:

Select one:

A. $248,000

B. $244,000

C. $240,000

D. $236,000

5.

The full disclosure principle:

Select one:

A. States that personal contact and financial information for each member of senior management for the company be disclosed.

B. Requires that company maintain a record of activities separate from the economic and personal activities of its owners.

C. Requires that a business disclose all significant financial facts and circumstances in a company’s annual report.

D. States that sales revenue should be recorded when services are performed or goods are sold.

E. None of the above

6.

The revenue recognition principle:

Select one:

A. States that the recording of revenue should be based on reliable and verifiable evidence.

B. Only requires that sales revenue must be earned before it is recorded on the income statement.

C. Only requires that sales revenue must be realized or realizable before it is recorded on the income statement.

D. States that sales revenue should be recorded when services are performed or goods are sold.

E. None of the above

Wal-Mart is the second-largest retailer in the world. The data file (Wal-Mart Revenue 2004-2009 data.xlsx) is posted below the case study two file, and it holds monthly data on Wal-Mart’s revenue, along with several possibly related economic variables.

1. Develop a multiple linear regression model to predict Wal-Mart's revenue, using CPI, Personal Consumption, and Retail Sales Index as the independent variables. You also need to create residual plots and scatter plots by selecting residual plots box and line fit plots box under “Residuals”. Note: Those plots are for the individual independent variables.
2. To generate the residual plot for the entire model, you need to follow the instruction below. Check the Residuals box under “Residuals” and Excel will generate predicted values and residuals at the bottom of the output for the multiple regression model. Then, highlight these two output values to create the residual plot by Excel’s scatter chart (Insert tab > Charts > Scatter chart). Comment on what you see on the plot. Note: This residual plot is for the entire model.
3. Does it seem that Wal-Mart’s revenue is closely related to the general state of the economy? Use all the plots and statistical criteria on the Regression Analysis output generated by Excel to explain it.

Identify and delete those five cases (rows) corresponding to December revenue. Then, use the new data set (without the December data) to complete the following problems.

4. Develop a multiple linear regression model to predict Wal-Mart's revenue, using CPI, Personal Consumption, and Retail Sales Index as the independent variables. You also need to create residual plots and scatter plots by selecting residual plots box and line fit plots box under “Residuals”. Note: Those plots are for the individual independent variables.
5. Check the Residuals box under “Residuals” and Excel will generate predicted values and residuals at the bottom of the output for the multiple regression model. Then, highlight these two output values to create the residual plot by Excel’s scatter chart (Insert tab > Charts > Scatter chart). Comment on what you see on the plot. Note: This residual plot is for the entire model.
6. Does it seem that Wal-Mart’s revenue is closely related to the general state of the economy? Use all the plots and statistical criteria on the Regression Analysis output generated by Excel to explain it.
7. Compare these two multiple regression models, and decide which of these two models is better? Use R-square values, adjusted R-square values, Significance F values, p-values, scatter plots and residual plots to explain your answer.

Weight: 5%
This question is asking you for the publication method (that is, how is it published) for the town of Winston-Salem, NC compared to the town of Cary, NC.

What is the method/methods?

Are they the same for both or how are they different?

5.5 points

1b. Compare and contrast the Comprehensive Annual Financial Report (CAFR) of Winston-Salem, NC with the report from the Week 1 homework (Cary, NC). In your comparison, include audit and budget information in the CAFR.
Weight: 5%
The question is asking for the audit and budget information for the town of Winston-Salem, NC compared to Cary, NC. Examples---

How do their budgets compare?

What type of budgets? Object, performance, etc.?

How do their budget variances compare?

Were they both audited by public accounting firms?

5.5 points

1c. Compare and contrast the Comprehensive Annual Financial Report (CAFR) of Winston-Salem with the report from the Week 1 homework. (Cary, NC) In your comparison, include the type of audit report issued.
Weight: 5%
This question is asking what type of audit report was issued for Winston-Salem, NC and what type of audit report was issued for Cary, NC.

5.5 points

1d. Compare and contrast the Comprehensive Annual Financial Report (CAFR) of Winston- Salem, NC with the report from the Week 1 homework. (Cary, NC) In your comparison, include the existence or nonexistence of an internal audit function within the government entity.
Weight: 5%
This question is asking if the town of Winston-Salem, NC has an internal audit function and if the town of Cary, NC has an internal audit function. Note: an internal audit function is not the same as internal controls.

5.5 points

2. Prepare the analysis for Winston-Salem, including information on the introduction, financial section, and statistical section prepared in the CAFR from Chapter 2.
Weight: 20%
This question is asking you to answer all the questions for the Chapter 2 Continuing problem for the town of Winston-Salem, NC. Those questions are found on pages 82-83 of the textbook.

22 points

3. Analyze the methods used by Winston-Salem, NC in comparing the budget-to-actual reports. Your analysis should include an evaluation of the basis of accounting used for the budget and financial statements.
Weight: 20%
This question has two parts. First you are to analyze the methods used to prepare the budget to actuals – For example,

Which financial statements do they present these comparisons for?

Do they compare to original budget or year-end amended budget?

Are the variances positive or negative?

What does this indicate for the town of Winston-Salem?

22 points

4a. Analyze the sources of revenue for Winston-Salem. Your analysis should include information on both governmental and business-type activities of the government. In your report, be sure to examine property taxes and how they are accounted for.
Weight: 5%
Question is asking for the sources of revenue for Winston-Salem, NC for both governmental activities and business-type activities. It is the first of six questions about sources of revenue. This one is about property taxes and how they are accounted for. For example,

What percentage of revenues are from property taxes?

Property tax rate statistics – rate, per capita, etc.

Are they accounted for on the cash basis, modified accrual basis, or accrual basis? Explain what that means for Winston-Salem.

5.5 points

4b. Analyze the sources of revenue for the selected local government. Your analysis should include information on both governmental and business-type activities of the government. In your report, be sure to examine other sources identified as primary revenue for the entity.
Weight: 5%
This is the second question about sources of revenue for Winston-Salem, NC for both governmental and business-type activities. It is asking you to identify other sources of revenue (other than property taxes) for Winston-Salem and to determine if any of these sources are primary revenue sources for Winston-Salem.

5.5 points

4c. Analyze the sources of revenue for Winston-Salem. Your analysis should include information on both governmental and business-type activities of the government. In your report, be sure to examine deferred revenue.
Weight: 5%
This the third question and it ask you about deferred revenue. Does Winston-Salem have any? If so, what is it from? This analysis should include both governmental activities and business-type activities. How does the financial statement reader know about it?

5.5 points

4d. Analyze the sources of revenue for Winston-Salem. Your analysis should include information on both governmental and business-type activities of the government. In your report, be sure to examine year-to-year variations in the tax levels of income.
Weight: 5%
This is the fourth question and it ask you to examine the year-to-year variations in the tax levels of income. Hint: You can find this information in the statistical section.

5.5 points

4e. Analyze the sources of revenue for Winston-Salem, NC. Your analysis should include information on both governmental and business-type activities of the government. In your report, be sure to examine various management discussion and analysis items of note.
Weight: 5%
This is the fifth question and it asks you for the information provided in the management discussion and analysis about the sources of revenue (for both governmental and business-type activities) for the town of Winston-Salem, NC.

5.5 points

4f. Analyze the sources of revenue for Winston-Salem. Your analysis should include information on both governmental and business-type activities of the government. In your report, be sure to examine information about the general fund.
Weight: 5%
This is the sixth question and it ask you for information about the general fund. Remember, these questions are talking about the sources of revenue for Winston-Salem, NC. For example,

What are the sources of revenue for the General Fund?

How much (percentage) comes from property taxes? Sales taxes? Etc.

5.5 points

5. Clarity, writing mechanics, and formatting requirements.
Weight: 10%
Run your paper through a grammar checker, like Grammarly to correct spelling errors, typos and grammatical errors.

11 points

Assignment 1 Requirements Explained.pdf

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