Cash Receipts
The sales budget for Perrier Inc. is forecasted as follows:

To prepare a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend has been established regarding cash collection of sales:

• 60 percent in the month of sale.
• 20 percent in the month following sale.
• 15 percent in the second month following sale.
• 5 percent uncollectible.

The company gives a 2 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $22,000, of which $7,000 represents uncollected March sales and $15,000 represents uncollected April sales. Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections.

Smokey's Garage, Inc., provides routine auto diagnostics for customers in the Atlanta, Georgia, metropolitan area. Tests are supervised by skilled mechanics using equipment produced by two leading competitors in the auto test equipment industry. Staff at the company estimate that 4 tests per hour could be performed if they added another Sunny Tune System (STS) machine and 6 tests per hour could be performed on a new machine, the Car Care Tower (CCT). The STS can be leased at a cost of $5,000 per month, and the CCT can be leased at a rate of $9,000 per month. Labor to operate either of the machines would cost $3,000 per month. All other costs are fixed. On average, each machine is operated 25 eight-hour days per month. Smokey’s receives $15 for each test performed.

A. Compute and interpret the net marginal revenue products for the two types of equipment?

B. Should the company lease more STS machines? What about more CCT machines? Explain your answer.

Problem 4-04

Calculate a Dow Jones Industrial Average for days 1 through 5. Do not round intermediate calculations. Round your answers to three decimal places.

Day 1:

Day 2:

Day 3:

Day 4:

Day 5:

You want to know the price of a 8% coupon bond that is currently being traded in the bond markets. The maturity of the bond is 3 years, its par value is $1000, and it pays its coupons annually. You do not know the corresponding market interest rates, but you know the YTM of 8 % for the bond.

(1) What is the price of this bond?

(2) Does this mean that YTM is equivalent to the market interest rate determined in the bond market? Why, or why not?

Problem 7.6A. Unmatched Elegance Gift Shop sells cards, supplies, and various holiday greeting cards. Sales to retail customers are subject to an 8 percent sales tax. The firm sells it merchandise for cash; to customers using bank credit cards, such as MasterCard and VISA; and to customers using American Express. The bank credit cards charge a 2 percent fee. American Express charges a 3 percent fee. Unmatched Elegance Gift Shop also grants trade discounts to certain wholesale customers who place large orders. These orders are not subject to sales tax. During February 2016, Unmatched Elegance Gift Shop engaged in the following transactions:

Instructions

1. Open the general ledger accounts indicated below and enter the balances a of February 1, 2016.
2. Record the transactions in a general journal. Use 10 as the journal page number.
3. Post the entries from the general journal to the appropriate accounts in the general ledger.

General Ledger Accounts

101                  Cash, $23,230 Dr.                              401                  Sales

121                  Accounts Receivable                         521                  Credit Card Expense

222                  Sales Tax Payable

Analyze: What was the total credit card expense incurred in February?

The owner of a restaurant that serves Continental-style entrées has the business objective of learning more about the patterns of patron demand during the Friday-to-Sunday weekend time period. She decided to study the i.) demand for dessert during this time period, ii.) the gender of the individual, and iii.) whether or not a beef entrée was ordered. Data were collected from 630 customers and organized in the following contingency tables:

gender

beef entree

1. At the ? = 0.05 level of significance, is there evidence of a difference between males and females in the proportion who order dessert?

2. At the ? = 0.05 level of significance, is there evidence of a difference in the proportion who order dessert based on whether a beef entrée was ordered?

The owner of a restaurant that serves Continental-style entrées has the business objective of learning more about the patterns of patron demand during the Friday-to-Sunday weekend time period. She decided to study the i.) demand for dessert during this time period, ii.) the gender of the individual, and iii.) whether or not a beef entrée was ordered. Data were collected from 630 customers and organized in the following contingency tables:

gender

beef entree

1. At the ? = 0.05 level of significance, is there evidence of a difference between males and females in the proportion who order dessert?

2. At the ? = 0.05 level of significance, is there evidence of a difference in the proportion who order dessert based on whether a beef entrée was ordered?

The owner of a restaurant that serves Continental-style entrées has the business objective of learning more about the patterns of patron demand during the Friday-to-Sunday weekend time period. She decided to study the i.) demand for dessert during this time period, ii.) the gender of the individual, and iii.) whether or not a beef entrée was ordered. Data were collected from 630 customers and organized in the following contingency tables:

Gender

Beef Entree

1. At the a = 0.05 level of significance, is there evidence of a difference between males and females in the proportion who order dessert?

2. At the a = 0.05 level of significance, is there evidence of a difference in the proportion who order dessert based on whether a beef entrée was ordered?

SST stock traded for $38/share on 4/1. You believe the stock will appreciate over the next few days and you decide you use three futures contracts to trade based on your belief. Futures contracts on SST have 300 shares attached. SST futures traded for $41/share on 4/1. The initial and maintenance margins are $1800 and $1200 per contract, respectively.

Find your initial margin balance the day you opened your position.

The price for SST futures is $40 on 4/2. Find your ending margin balance on 4/2. Assume deficits are eliminated to keep the position open.

The price for SST futures is $38.5 on 4/3. Find your ending margin balance on 4/3. Assume deficits are eliminated to keep the position open. Do not use the dollar sign when entering your answer.

Find your return on invested capital if you close your position on 4/4 when SST futures trade for $44/share.