Exercise 21-3 Thome and Crede, CPAs, are preparing their service revenue (sales) budget for the coming year (2017). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below. Department Quarter 1 Quarter 2 Quarter 3 Quarter 4 Auditing 2,540 1,930 2,200 2,740 Tax 3,330 2,510 2,110 2,780 Consulting 1,730 1,730 1,730 1,730 Average hourly billing rates are auditing $83, tax $95, and consulting $103. Prepare the service revenue (sales) budget for 2017 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue. THOME AND CREDE, CPAs Sales Revenue Budget Quarter 1 Quarter 2 Dept. Billable Hours Billable Rate Total Rev. Billable Hours Billable Rate Total Rev. Auditing $ $ $ $ Tax Consulting Totals $ $ THOME AND CREDE, CPAs Sales Revenue Budget Quarter 3 Quarter 4 Dept. Billable Hours Billable Rate Total Rev. Billable Hours Billable Rate Total Rev. Auditing $ $ $ $ Tax Consulting Totals $ $ THOME AND CREDE, CPAs Sales Revenue Budget Year Dept. Billable Hours Billable Rate Total Rev. Auditing $ $ Tax Consulting Totals $

3. James is a producer in a monopoly industry. His demand curve, total revenue, curve, marginal revenue curve and total cost curve are given as follows:

Q=100-4P

TR=25Q-0.25Q²

MR=25-0.5Q

TC=6Q

MC=6

a. (4 points) How much output will James produce?

b. (4 points) What price will James charge per unit of output?

c. (4 points) How much profit will James make?

d. (8 points) If this was a competitive firm. Calculate the profit maximizing price and quantity and compare with price and quantity under monopoly.

e. (6 points) Calculate the amount of deadweight loss incurred because James is a monopolist and not perfectly competitive firm.

EX 12-3 Minor differences in the terms of a contribution may justify major differences in revenue recognition.

Upon meeting with the executive director of the Crime Victims Advocacy Group, the president of a private foundation agreed to contribute in the following year $100,000 in support of the group’s proposed program to provide legal assistance to victims of violent crimes.

Suppose that the foundation’s formal letter describing its pledge was worded in three different ways:

1. “We are pleased to pledge $100,000 in support of your group’s efforts to assist victims of violent crimes.”

2. “We are pleased to pledge $100,000 in support of your group’s efforts to develop a new program to provide legal assistance to victims of violent crimes.”

3. “We are pleased to pledge $100,000 upon your developing a new program to provide legal assistance to victims of violent crimes.” For each of the three options:

a. Prepare the journal entries that should be made on receipt of the letter from the foundation. Assume that it was unlikely that the pledge would be fulfilled in the same period as it was made.

b. Prepare the journal entries that should be made to record the expenditure of $100,000 on activities related to the legal assistance program.

c. Prepare the journal entries that should be made on receipt of the $100,000 check, assuming that it was received shortly after the legal assistance program was established and the group spent the $100,000 on program related activities.

d. Comment on why minor differences in wording might justify major differences in accounting. Be sure to indicate the type of fund in which your entries would be made.

How would you interpret the below financials?

Question 3

The revenue cycle affects the bottom line of the business critically. Hence, there are many threats that could derail a successful cycle. Describe 5 threats that may hinder this sequence and its compensating controls for each threat.

EX 12-3 Minor differences in the terms of a contribution may justify major differences in revenue recognition.

Upon meeting with the executive director of the Crime Victims Advocacy Group, the president of a private foundation agreed to contribute in the following year $100,000 in support of the group’s proposed program to provide legal assistance to victims of violent crimes. Suppose that the foundation’s formal letter describing its pledge was worded in three different ways:

“We are pleased to pledge $100,000 in support of your group’s efforts to assist victims of violent crimes.”

“We are pleased to pledge $100,000 in support of your group’s efforts to develop a new program to provide legal assistance to victims of violent crimes.”

“We are pleased to pledge $100,000 upon your developing a new program to provide legal assistance to victims of violent crimes.”

For each of the three options:

a. Prepare the journal entries that should be made on receipt of the letter from the foundation. Assume that it was unlikely that the pledge would be fulfilled in the same period as it was made.

b. Prepare the journal entries that should be made to record the expenditure of $100,000 on activities related to the legal assistance program.

c. Prepare the journal entries that should be made on receipt of the $100,000 check, assuming that it was received shortly after the legal assistance program was established and the group spent the $100,000 on program related activities.

d. Comment on why minor differences in wording might justify major differences in accounting.

Be sure to indicate the type of fund in which your entries would be made.

10. List and explain at least 3 powers of the Inland Revenue Department?

11. Explain what Employment income is comprised of?

12 Define the following definitions ?

Emolument

Non-emolument

Employer

Chargeable Income

Allowable Deductions

Personal allowance/Income Tax Threshold

Tax Credit

Capital Gain Tax

(Note post a new post)

Prepare Adjusting Journal Entries

1. The 3/1/19 Notes Payable principle from First Hawaiian Bank is due in 5 years at an annual interest rate of 4%. Interest must be paid every 6-months.  

  2. The boat purchased on 3/1/19 is depreciated using the straight-line method over a useful life of 9 years. Salvage is zero.

3. ​​​​​​​Due to the use of office supplies, the Office Supplies and lures only added up to $100 at the end of the 2019 year.

​​​​​​​ 4. Insurance expense was recorded. The 18 month policy was purchased on 5/1/19 for $2900 and paid in full.

​​​​​​​ 5. On 12/30/19, 50% of the services were provided early from the customers that paid cash on 9/1/19.

Don’t worry about updating the General Ledger or the unadjusted trail balance.

Post to the Worksheet

Prepare Financial Statements:

1. Income Statement (Single-step)
2. Statement of Retained Earnings
3. Balance Sheet

Prepare Closing Journal Entries

1. Record all temporary accounts in Closing Journal Entries
2. $800 dividend was declared and paid at the end of the year 12/31/19.

           ** Ignore Tax