Recording Revenue Under Different Repurchase Agreements

On January 1, 2020, Miller Inc. sells equipment to Smith Inc. for $132,000. As stipulated in the revenue contract, Miller Inc. will buy back the equipment on December 31, 2020, for $141,240. The relevant interest rate is 7%

a. Prepare the seller’s journal entry on January 1, 2020.

b. Prepare the seller’s journal entry on December 31, 2020.

c. Assume instead that Miller has the option to buy back the equipment and the fair value of the equipment is expected to
decline through 2020. How would the answers to parts a and b change (if at all)?

d. Assume instead that Smith has the option to require Miller to buy back the equipment after one year for $141,240 (an amount greater than
the expected market value of the equipment at that time). How would the answers to parts a and b change (if at all)?

Island Novelties, Inc., of Palau makes two products, Hawaiian Fantasy and Tahitian Joy. Present revenue, cost, and sales data for the two products follow:

Fixed expenses total $270,000 per year. The Republic of Palau uses the U.S. dollar as its currency.

Required:

1. Assuming the sales mix given above, do the following:

a. Prepare a contribution format income statement showing both dollar and percent columns for each product and for the company as a whole.

b. Compute the break-even point in dollars for the company as a whole and the margin of safety in both dollars and percent.

2. The company has just developed a new product to be called Samoan Delight. Assume that the company could sell 12,000 units at $17.50 each. The variable expenses would be $14.00 each. The company’s fixed expenses would not change.

a. Prepare another contribution format income statement, including sales of the Samoan Delight (sales of the other two products would not change).

b. Compute the company’s new break-even point in dollars and the new margin of safety in both dollars and percent.

3. The president of the company examines your figures and says, “There’s something strange here. Our fixed costs haven’t changed and you show greater total contribution margin if we add the new product, but you also show our break-even point going up. With greater contribution margin, the break-even point should go down, not up. You’ve made a mistake somewhere.” Explain to the president what has happened.

13. Explain how Marginal Revenue of labor represents the firm’s demand curve. Explain factors shifting demand for labor.

8) If most people prefer Sunday daytime football games, how can a football team increase revenue using different pricing strategies for games on other days?

1. Question is to identify gaps in funding for my property rental business of10 years, using my financial statements 2.What area(s) do you notice a gap in funding (a shortfall in capital needed to fund future operations or projects)? Really evaluate, even if it’s $1,000 or $10,000; identify it. Evaluate those gaps to determine the cause of those gaps. Prioritize your funding needs. Priority for Funding Gap in Funding Example 1. Initial inventory Unsure ,Have not fully identified the amount of initial inventory needed. Example 2 Computer system $5,000 ,Do not have funding to cover this expense. 3 Submit matrix and a 2-page explanation for your prioritization. HOW DO I IDENTIFY FUNDING GAPS, ( A SHORTFALL IN CAPITAL TO FUND FUTURE OPERATIONS Larry I assume they are talking about gaps in working capital whn funding business cash flows.Larry

Topic:   Revenue & Misrepresentation by Clients

Characters: Rachel Hanson, Senior in CPA firm

Jim Thompson, Owner/manager of Fashion Line

Sharon, part-time bookkeeper of Fashion Line

In addition to the usual mix of compilation, review and audit clients for which Rachel Hunt

serves as a senior in a small office of a regional CPA firm, she has been assigned a new

client that recently engaged the firm. Fashion Line, an incorporated retail outlet, is a thriving

local store. The business is run by a single owner/manager, Jim Thompson, who makes

all major decisions. The business has not previously used the services of a CPA firm. In

addition to preparation of financial statements, the CPA firm will handle tax returns for the

business.

At her Line visit to the client’s office, Rachel is introduced to Sharon, the part-time

bookkeeper who is also a full-time accounting student at the local university. At a

subsequent meeting, Sharon confides to Rachel that she found the job at the beginning of the

semester after an extensive search. Sharon really needs the money to help finance her

education, and feels lucky to have found a good-paying job during the current economic

downturn. Feeling that Rachel is someone she can talk to and get advice from, Sharon

describes a situation that has been on her mind for some time now.

Sharon’s concern relates to the handling of sales revenues. When monies from sales revenues

are counted and deposited on a weekly basis, a chart is filled out with categories carefully

delineating the type of payment: cash, checks, American Express, or Visa/Mastercard.

Sharon’s employer, after depositing the weekly total, brings this chart back with his own

written-in total of the actual amount deposited.

After looking over some of these weekly deposit chats, Sharon noticed that $500 cash was

missing from each deposit. After a more thorough inspection of monthly tax documents that

Jim Thompson has filled out, Sharon noticed that the reported monthly gross revenue was

$2,000 less than what had been actually counted.

The employer is the only person handling the money after it has been counted. He is also the

only one to deposit the money. When Sharon asked Mr. Thompson about revenue not being

reported for tax purposes, he assured her that every dollar of income was reported on the tax

forms. Furthermore, Jim asserted, since Sharon wasn’t the person who signed the forms,

she shouldn’t be concerned.

1) What is the situation and the accounting issue(s)

2) Describe at least one ethical principle from the AICPA Code of Conduct and at least one accounting code rule (e.g.

independence, integrity, confidentiality, acts discreditable, etc.) that should be considered when analyzing the case?

3) What are your recommendations for the people involved?

Wildlife Escapes generates average revenue of $6,250 per person on its​ 5-day package tours to wildlife parks in Kenya. The variable costs per person are as​ follows:

Airfare

$1,100

Hotel accommodations

1,950

Meals

900

Ground transportation

600

Park tickets and other costs

700

Total

$5,250

Annual fixed costs total $590,000.

The Housekeeping Services Department of Ruger Clinic, had $100,000 in direct costs during the year.

Department          Revenue        HK Hours

Adult Services      $3,000,000     1,500

Pediatric Services  $1,500,000     3,000

Other Services      $  500,000      500

Total               $5,000,000     5,000

1. What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver?
2. What is the dollar allocation to each patient services department if hours of housekeeping support are used as the cost driver?
3. Which of the two drivers is better?  Why?

How to explain this strategic analysis? I have no idea how.

Financial Targets: •Revenue •EBITA•Dividend

Sustainability: •Zero injuries •Decrease Carbon Emission •Decrease Plastic Volume

Cash Ecosystem: •Add adjacent services•Mergers & Acquisitions•Create new services