Violet Sky Entertainment is evaluating the trampoline park project, a 2-year project that would involve buying equipment for 54,000 dollars that would be depreciated to zero over 2 years using straight-line depreciation. Cash flows from capital spending would be $0 in year 1 and 5,000 dollars in year 2. Relevant annual revenues are expected to be 83,000 dollars in year 1 and 83,000 dollars in year 2. Relevant expected annual variable costs from the project are expected to be 10,000 dollars in year 1 and 10,000 dollars in year 2. Finally, the firm has no fixed costs in year 1 and one fixed cost in year 2 of the project. Yesterday, Violet Sky Entertainment signed a deal with Indigo River Marketing to develop an advertising campaign. The terms of the deal require Violet Sky Entertainment to pay Indigo River Marketing either 55,000 dollars in 2 years from today if the trampoline park project is pursued or 27,000 dollars in 2 years from today if the trampoline park project is not pursued. The tax rate is 40 percent and the cost of capital for the trampoline park project is 17.97 percent. What is the net present value of the trampoline park project?

A hotel is looking to replace its outdated alarm system to comply with safety standards. It has two options: System A costs $35,000 and lasts nine years. System B costs $22,000 and lasts six years. Maintenance throughout the year will cost $2,000 for System A and $3000 for System B, recognized at the end of each year. The hotel’s cost of capital is 10%. Which alarm system should the hotel choose? (Please Show work and explain answer)

"Mike Dreskin manages a large Los Angeles movie theater complex called Cinema I, II, III, and IV. Each of the four auditoriums plays a different film; the schedule is set so that starting times are staggered to avoid the large crowds that would occur if all four movies started at the same time. The theater has a single ticket booth and a cashier who can maintain an average service rate of 280 movie patrons per hour. Service times are assumed to follow an exponential distribution. Arrivals on a typically active day are Poisson distributed and average 210 per hour. To determine the efficiency of the current ticket operation, Mike wishes to examine several queue operating characteristics.

(a) Find the average number of moviegoers waiting in line to purchase a ticket.

(b) What percentage of the time is the cashier busy?

(c) What is the average time that a customer spends in the system?

(d) What is the average time spent waiting in line to get to the ticket window? (e) What is the probability that there are more than two people in the system? More than three people? More than four?"

Please use an Excel Model. (MD1?)

In the construction industry, the percentage of completion (POC) method is the most common accounting method. Explain what business environments create favorable conditions for a company to use this POC method.

Destination Hotels currently owns an older hotel on the best beachfront property on Hilton Head Island, and it is considering either remodeling the hotel or tearing it down and building a new convention hotel, but because they both would occupy the same physical location, the company can only do one—that is, these are mutually exclusive projects.

Both these projects have the same initial outlay of $1,000,000. The first project, since it is a remodel of an existing hotel, has an expected life of 8 years and will provide free cash flows of $250,000 at the end of each year for all 8 years. In addition, this project can be repeated at the end of 8 years at the same cost and with the same set of future cash flows. The proposed new convention hotel has an expected life of 16 years and will produce cash flows of $175,000 per year. The required rate of return on both of these projects is 10 percent. Calculate the NPV using replacement chains to compare these two projects.

Electricians work in many different occupations, a small percentage of which are in construction. All the construction companies operating in the greater Pittsburgh, Pennsylvania, region have signed an agreement with each other that they will form a single entity to hire all electricians on each of their construction jobs. Assume this agreement is not illegal under the antitrust laws.  There is only one union of electricians in this geographic area, the International Brotherhood of Electrical Workers (“IBEW”), but some electricians do not belong to the union.  Electricians who work on construction and are members of the union have specific skills learned in training schools operated by the union and available only to union members.  Those electricians carry a certification of quality that helps some construction companies obtain lower insurance rates on their operations. Non-union electricians cannot obtain such certifications.

At any given time, there are always IBEW electricians looking for work in construction in Pittsburgh. By contrast, the non-union electricians are fully employed, all year long, whether in construction or other occupations.

a) Provide an explanation for why the construction companies would agree to hire electricians according to a common plan.

b) The construction companies pay a higher wage for union electricians than for non-union electricians. Provide at least one explanation for why this might be so. (Extra credit for more than one explanation.)

c) Provide an explanation for why some IBEW construction-electricians are not employed at any given time even though they would be willing to work for the union wage, while all the non-union electricians (who work in construction but in many other settings as well, e.g., repair, maintenance, odd-jobs) who want to work are employed all year long. (Do not base your answer on some conjecture about overall economic conditions in Pittsburgh.)

Green Earth Corp. is a construction company that uses the percentage of completion method. They won a contract to build an apartment building in 2019 for $60,000,000. Please record the journal entries relating to each of the events below. Also assume that the company has a December 31 year-end and records adjusting entries only at year-end.

a) Actual costs incurred to the end of 2019 were $36,000,000 and all was paid with cash.

b) Billings made to the client amounted to $40,000,000 during the year and all of this was collected in cash.

c) By the end of 2019, it was estimated that remaining costs to complete the project were $18,000,000. Record the entry needed at year end.

d) Present the balance sheet accounts relating to this contract and their amounts at the end of 2019. Be sure to indicate if the items are current or long-term assets or current or long-term liabilities.

Accorsi & Sons specializes in selling upscale home theater systems. As a package deal, Accorsi sells a premium home theater package that includes a projector and a one year subscription to premium cable channels for $2,100. Accorsi sells individual projectors for $2,000 and sells individual one-year subscriptions to premium cable channels for $500.

On March 1, 2018, Accorsi delivers a premium home theater package to Valley Hills Nursing Home, which includes the projector and the one-year subscription to the premium cable channels at a price of $2,100. On April 15, 2018, Accorsi receives $2,100 from Valley Hills Nursing Home.

Required:

1. Identify the performance obligation(s) in the premium home theater package?

2. How much revenue will be allocated to each performance obligation?

3. What journal entry (if any) will Accorsi record on March 1, 2018 to record the revenue from the sale of the premium home theater package?

4. What journal entry (if any) will Accorsi record on March 31, 2018?

5. What journal entry will Accorsi record when they receive payment from Valley Hills Nursing Home?

Waterway Construction Company began work on a $417,400 construction contract in 2017. During 2017, Waterway incurred costs of $280,300, billed its customer for $216,200, and collected $176,500. At December 31, 2017, the estimated additional costs to complete the project total $162,000.

Prepare Waterway’s journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method.