1.If a company uses accrual basis accounting, accrued revenues differ from deferred revenues in that accrued revenues are

a) recorded as liabilities before the cash is collected from customers.

b) recorded as liabilities before they are recognized as revenue earned.

c) recognized as revenue earned after cash is collected from customers.

d) recognized as revenue earned before cash is collected from customers.

e) journalized only when cash is collected from customers.

2. A company paid $24,000 for six months of rent beginning June 1.   The company recorded its payment as prepaid rent. If it prepares financial statements dated June 30, the adjusting entry to be made by the company is

a) debit Rent Expense for $24,000 and credit Prepaid Rent for $24,000.

b) debit Rent Expense for $4,000 and credit Prepaid Rent for $4,000.

c) debit Prepaid Rent for $4,000 and credit Cash for $4,000.

d) debit Prepaid Rent for $4,000 and credit Rent Expense for $4,000.

e) debit Rent Expense for $20,000 and credit Prepaid Rent for $20,000.

In the market for labor:

Multiple Choice

• individuals make up the demand.

• firms create the supply.

• the price in the market is the wage.

• individuals are never paid above their productivity.

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For firms that sell one product in a perfectly competitive market, the market price is:

Multiple Choice

• constant, regardless of quantity sold.

• equal to average revenue for a firm.

• equal to marginal revenue for a firm.

• All of these are true.

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A monopolist can maximize profits by:

Multiple Choice

• selling as much as he can produce.

• producing at the level of output at which MR = 0.

• following the same rules as a perfectly competitive firm.

• selling an output where P = ATC.

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A firm realizes that the market price has fallen below its average total costs, and it is now earning a loss. What is the best action for the firm to take in the short run?

Multiple Choice

• Produce where MC = MR to minimize losses if P > AVC.

• Shut down if price is greater than average variable costs.

• Produce where MC = MR to minimize losses if P < AVC.

• Shut down if total revenue is less than fixed costs.

On January 1, 2020, the ledger of Bramble Company contains the following liability accounts.

During January, the following selected transactions occurred.

EXERCISE 4.9

Relationship of Adjusting Entries to Business Transactions

Among the ledger accounts used by Rapid Speedway are the following: Prepaid Rent, Rent Expense, Unearned Admissions Revenue, Admissions Revenue, Prepaid Printing, Printing Expense, Concessions Receivable, and Concessions Revenue. For each of the following items, provide the journal entry (if one is needed) to record the initial transaction and provide the adjusting entry, if any, required on May 31, assuming the company makes adjusting entries monthly.

1. On May 1, borrowed $600,000 cash from National Bank by issuing a 9 percent note payable due in three months.

2. On May 1, paid rent for six months beginning May 1 at $14,400 per month.

3. On May 2, sold season tickets for a total of $720,000 cash. The season includes 60 racing days: 15 in May, 20 in June, and 25 in July.

4. On May 4, an agreement was reached with Snack-Bars, Inc., allowing that company to sell refreshments at the track in return for 10 percent of the gross receipts from refreshment sales.

Orgler Label Company is thinking about replacing an existing press. The     existing press was purchased 6 years ago for $155,000 with a salvage value of $8,000. It will last for four more years and it is expected to be worthless at that time.   It can be sold today for $50,000.

                  A new high-speed press can be purchased for $195,000 with an expected salvage value of $30,000 at the end of its four-year life.

            Orgler current revenue is $2,000,000 and is expected grow 6% per annum. The new machine would have increased current revenue to $2,200,000. Firm revenue will continue to grow by 6% per annum if they acquire the new machine. Orgler average collection period is 55 days and pays it bills after 25 days.   Orgler has a gross profit margin of 28%. The new press will increase labor costs by $9,000 per year.   Orgler uses 9% for its cost of capital and has an ordinary income tax rate of 30%. The project will be 50% financed with a 7% 3-year loan. The firm uses straight line depreciation.   Calculate the project’s NPV.   

Question Set 3. A small manufacturing plant produces specialized stainless steel valves for high-pressure steam systems. Each valve costs $2000 to produce. The plant incurs $1,200,000 in fixed annual costs. The plant sells the valves directly to power plants for $6400 each. For this question set, use the following formulas:

[Total Profit] = [Total Revenue] – [Total Cost]

[Total Revenue] = [Production] x [Unit Revenue]

[Total Cost] = [Production] x [Variable Unit Cost] + [Fixed Costs]

1. Create a data table (as demonstrated during lab exercise 2), that shows what total profit would be if the company produced 100 to 400 valves, in increments of 20. You must use a data table structure to receive credit for this problem. (6pts)

2. Create a scatter chart that displays the variable total profit (and no other variables) as a function of the number of valves produced and sold. At low production quantities, total profit may be negative but should still be displayed. Label your chart axes appropriately. (6pts)