Stellar, Inc. began work on a $6,491,000 contract in 2020 to construct an office building. During 2020, Stellar, Inc. incurred costs of $1,941,020, billed its customers for $1,138,000, and collected $904,000. At December 31, 2020, the estimated additional costs to complete the project total $3,304,980.

Prepare Stellar’s 2020 journal entries using the percentage-of-completion method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For costs incurred use account Materials, Cash, Payables. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Via Gelato is a popular neighborhood gelato shop. The company has provided the following data concerning its operations: Fixed Element per Month Variable Element per Liter Actual Total for June Revenue $ 16.00 $ 90,540 Raw materials $ 5.05 $ 31,630 Wages $ 6,000 $ 1.80 $ 16,900 Utilities $ 2,030 $ 0.60 $ 6,000 Rent $ 3,000 $ 3,000 Insurance $ 1,750 $ 1,750 Miscellaneous $ 690 $ 0.75 $ 5,200 While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be $6,000 plus $1.80 per liter of gelato sold and the actual wages for June were $16,900. Via Gelato expected to sell 6,000 liters in June, but actually sold 6,200 liters. Required: 1. What is the amount of revenue that would be included in the flexible budget for Via Gelato in June? 2. What is the total amount of fixed expense per month in Via Gelato's flexible budget? 3. What is the variable expense per liter in Via Gelato's flexible budget for all expense lines combined? What is the total variable expense for the month in Via Gelato's flexible budget? 4. What is the Net Operating Income in Via Gelato's flexible budget? 5. What is the Via Gelato's actual Net Operating Income for the month? 6. Using your answers from steps 4 and 5, what is the overall revenue and spending variance (the revenue and spending variance for the Net Income column) for Via Gelato in June? (Input all amounts as positive values. Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

ch8 exer #3

Create T-accounts and then prepare a trial balance for the accounts below

Variable Costing Income Statement and Contribution Margin Analysis for a Service Company

The actual and planned data for Underwater University for the Fall term were as follows:

Registration, records, and marketing costs vary by the number of enrolled students, while instructional costs vary by the number of credit hours. Depreciation is a fixed cost.

a. Prepare a variable costing income statement showing the contribution margin and income from operations for the Fall term.

b. Prepare a contribution margin analysis report comparing planned with actual performance for the Fall term. If an amount is zero, enter "0".

On June 5, 2011, Fremont Corporation signed a contract with Jackson Associates under which Jackson agreed (1) to construct an office building on land owned by Fremont Corporation, (2) to accept responsibility for procuring financing for the project and finding tenants, and (3) to manage the property for 35 years. The annual net income from the project, after debt service, was to be divided equally between Fremont Corporation and Jackson Associates. Jackson was to accept its share of future net income as full payment for its services in construction, obtaining finances and tenants, and management of the project. By May 31, 2012, the project was nearly completed, and tenants had signed leases to occupy 90% of the available space at annual rentals totaling $4,000,000. It is estimated that, after operating expenses and debt service, the annual net income will amount to $1,500,000. The management of Jackson Associates believed that (a) the economic benefit derived from the contract with Fremont should be reflected on its financial statements for the fiscal year ended May 31, 2012, and directed that revenue be accrued in an amount equal to the commercial value of the services Jackson had rendered during the year, (b) this amount should be carried in contracts receivable, and (c) all related expenditures should be charged against the revenue.

On the basis of the above information, answer the following questions in the Essay Question area:

Explain the main difference between the economic concept of business income as reflected by Jackson’s management and the measurement of income under generally accepted accounting principles.

Discuss the factors to be considered in determining when revenue should be recognized for the purpose of accounting measurement of periodic income.

Is the belief of Jackson’s management in accordance with generally accepted accounting principles for the measurement of revenue and expense for the year ended May 31, 2012?

1/ On February 15, Jewel Company buys 7,100 shares of Marcelo Corp. common stock at $28.54 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is the company’s first and only investment in available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.16 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.31 per share less a brokerage fee of $250. The journal entry to record the dividend on April 15 is:

Multiple Choice

Debit Cash $7,511; credit Dividend Revenue $7,511.

Debit Cash $8,236; credit Dividend Revenue $8,236.

Debit Cash $8,236; credit Interest Revenue $8,236.

Debit Cash $7,511; credit Interest Revenue $7,511.

Debit Cash $8,236; credit Gain on Sale of Investments $8,236.

2/ On January 4, Year 1, Barber Company purchased 5,500 shares of Convell Company for $64,500 plus a broker's fee of $1,100. Convell Company has a total of 27,500 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During each of the next two years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $77,000 and $72,000 for Year 1 and Year 2, respectively. What is the book value of Barber's investment in Convell at the end of Year 2?

Multiple Choice

$65,600.

$86,050.

$56,250.

$95,400.

$94,400.

Consider a closed economy income-expenditure model of the economy where the country begins in a long-run equilibrium. • Investment (I) and government spending (G) are fixed: I = 41.5, G = 26. • The income tax rate is t = 6.25%, so tax revenue equals T = tY . • The consumption function is C = 12 + 0.8Yd, where Yd = (1 − t)Y . For the calculations below, write your answers as either a fraction or to two decimal places. (a) Write down the aggregate expenditure (AE) function using the above values. What is the value of the AE function’s intercept term? What is the value of the AE function’s slope term? What is equilibrium output? (b) Plot the aggregate expenditure function on a chart, with output (Y ) on the horizontal axis, in increments of 100 from 0 to 600. (c) In equilibrium, what is the level of consumption? What is the level of private saving? (d) What is the value of tax revenue, T? What is the value of government savings (T G)? Is the government running a surplus or deficit? (e) Suppose that the government reduces expenditure by 9.75 to 16.25. Suppose that this results in lower interest rates so that investment increases by 0.375 to 41.875. Following these changes, what is the new equilibrium level of output? (f) At the new level of equilibrium output, what is the new level of tax revenue? What is the new level of government savings? Is the surplus/deficit larger or smaller than it was in question (d)? (g) Simple income-expenditure models keep both the price level and interest rates fixed. In question (e), the interest rate was allowed to change. Discuss how allowing the price level to vary also would have changed output and tax revenue in equilibrium.

Dixie Showtime Movie Theaters, Inc., owns and operates a chain of cinemas in several markets in the southern U.S. The owners would like to estimate weekly gross revenue as a function of advertising expenditures. Data for a sample of eight markets for a recent week follow.

(a) Use the data to develop an estimated regression with the amount of television advertising as the independent variable. Let x represent the amount of television advertising. If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300)

(b) How much of the variation in the sample values of weekly gross revenue does the model in part (a) explain? If required, round your answer to two decimal places.

(c) Use the data to develop an estimated regression equation with both television advertising and newspaper advertising as the independent variables. Let x1 represent the amount of television advertising. Let x2 represent the amount of newspaper advertising. If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300)

(d) How much of the variation in the sample values of weekly gross revenue does the model in part (c) explain? If required, round your answer to two decimal places. %

1. A potential investor in your airline wants to know how his investment would compare with the share market as a whole. To do this, what ratio would he use? a) Dividend cover b) Dividend per share on historical basis c) Price earnings ratio d) Asset test e) None of the above

2.Return on equity should be above whic of these? a) Variable mortgage rates b) Fixed Mortgage rates c) Bank interest on long term deposits d) Bank interest on short term deposits e) None of the above

3.What is operating revenue in terms of aviation business? a) All except interline sales b) Revenue from frequent flyer sales c) Sub-leasing terminal space d) Interline sales e) Duty free sales f) All of the above g) Revenue from passenger services

4.In financial terms a Discounted cash flow valuation is mainly concerned with: a) Both selling cheaply and capital budgeting b) Capital budgeting c) Revenue from fare discounting d) Selling cheaply

5.Shares in a company entitle the owners of the shares to a proportional share of the profits, which is paid as a dividend. The level of the dividend is determined by the directors, who may elect to pay some or all of the profits. In general, what should they pay as dividends? a) They should defer dividends until realising two consecutive profit announcements b) The percentage depends on the number of directors c) At least some of the profits- but they can retain profits against future risk d) All of the profits. Thats what shareholders demand e) None of the profits. They are perfectly entitled to retain all profits for the future