Details of Notes Receivable and Related Entries

Gen-X Ads Co. produces advertising videos. During the current year ending December 31, Gen-X Ads received the following notes:

Required:

Assume 360 days in a year.

1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.

Feedback

Count the number of days in each month until the total number of days is reached for the term of the note and this will be the due date. Interest is not charged on the first day of the note.

Typically, the maker of a dishonored note fails to pay the note on the due date. A company that holds a dishonored note transfers the face amount of the note plus any interest due back to an accounts receivable account. Interest revenue is not dependent on receiving the interest at this point.

Cash received will include the maturity value of the note.

Learning Objective 6.

2. Journalize the entry to record the dishonor of Note (3) on its due date. If an amount box does not require an entry, leave it blank or enter "0".

Feedback

Count the number of days in each month until the total number of days is reached for the term of the note and this will be the due date. Interest is not charged on the first day of the note.

Typically, the maker of a dishonored note fails to pay the note on the due date. A company that holds a dishonored note transfers the face amount of the note plus any interest due back to an accounts receivable account. Interest revenue is not dependent on receiving the interest at this point.

Cash received will include the maturity value of the note.

Learning Objective 6.

3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31.

4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January. If an amount box does not require an entry, leave it blank or enter "0".

Feedback

Count the number of days in each month until the total number of days is reached for the term of the note and this will be the due date. Interest is not charged on the first day of the note.

Typically, the maker of a dishonored note fails to pay the note on the due date. A company that holds a dishonored note transfers the face amount of the note plus any interest due back to an accounts receivable account. Interest revenue is not dependent on receiving the interest at this point.

Cash received will include the maturity value of the note.

Learning Objective 6.

1.    Which statement below is FALSE?

A         A monopoly faces a downward-sloping demand curve for the good that it sells.

B          A single-price monopoly cannot sell further units of the good without cutting the price.

C          Total revenue is maximized where marginal revenue is zero.

D         In the short run, a single-price monopoly maximizes profit where average cost equals average revenue.

E          In the long run, a single-price monopoly seeking to maximize profit would exit the industry if average total cost were to exceed price.

2.    Which statement below is FALSE?

A         In the case of a monopoly, marginal revenue is less than price at each level of output.

B          In the case of a monopoly, marginal revenue rises as output increases.

C          Ceteris paribus, a single-price monopoly charges a higher price than if it were organized as a competitive industry.

D         Ceteris paribus, a single-price monopoly sells a lower output than if it were organized as a competitive industry.

3.         Which statement below is FALSE?

A         Ceteris paribus, a single-price monopoly sells a lower output than if it were organized as a competitive industry.

B          If the scope for price discrimination were sufficiently great, a monopoly might have a higher output than would occur if it were organized as a competitive industry.

C          If economies of scale were sufficiently great, a monopoly might have a higher output than if it were a competitive industry.

4.    Which statement is FALSE?

A         A monopoly faces a falling demand curve for the good that it sells.

B          A monopoly can never make a loss.

C          A single-price monopoly can sell another unit only by cutting the price.

D         A monopoly faces a marginal revenue curve that is below the demand curve that it faces.

E          A single-price monopoly charges a price that exceeds the marginal revenue obtained through the sale of the last unit.

5.         Which of the following is NOT a necessary condition for price discrimination?

A         A seller who faces a downward-sloping demand curve for the good that she sells.

B          A seller who can charge each customer a different price.

C          A seller who can identify people with different price elasticities of demand.

D         A seller who can separate these people into different groups.

E          A seller who can prevent resale of the good by members of one group to members of another.

6.    Which is NOT an example of price discrimination?

A         A seller charging two different prices for a good with the difference in price entirely explained by the difference in the cost of supply.

B          A seller charging the same price for a good in two different markets where costs of supply differ between the two markets.

C          A doctor charging different prices to different patients.

D         Simultaneous publication of cloth and paperback editions of a book.

E       Showing a movie on broadcast TV several years after its first run in movie theaters.

7.    Which statement below is TRUE?

A      Successful price discrimination necessarily increases output.

B       Successful price discrimination necessarily increases consumer welfare.

C       Successful price discrimination necessarily increases profit for the seller.

D      Successful price discrimination necessarily raises prices for everyone.

E       Successful price discrimination necessarily lowers prices for everyone.

8.         Tying and bundling both involve selling two or more goods. Which business practice always pairs complements?

A         tying

B          bundling

Prove your mastery! Your results will report to the gradebook. If you are not ready to submit work for a grade, you can try activities again or attempt the Practice Mastery. Your work will be saved as you work through each part.

Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answers to the questions.

Identify whether each account would appear on the Balance Sheet or the Income Statement.

Unearned Revenue            -                           Balance Sheet                           Income Statement                     

Income Taxes Payable            -                           Balance Sheet                           Income Statement                     

Advertising Expense            -                           Balance Sheet                           Income Statement                     

Mortgages Payable            -                           Balance Sheet                           Income Statement                     

Copyright            -                           Balance Sheet                           Income Statement                     

Common Stock            -                           Balance Sheet                           Income Statement                     

Fill in the t-accounts for each situation and label each transaction as Deferrals/Prepaid, Accrual, or Depreciation. Use Unadj. Bal. as the label for the opening balance of each account. Calculate the adjusted balance and use a Bal. posting reference to show the ending balance of each account. Enter each transaction on the first available line in the T-Account.

A T is drawn. The vertical line divides the account into its left and right sides. The left side of the T-account is called the debit side and the right side is called the credit side. The account name is at the top, above the horizontal line.

Journalize the adjusting entry needed at December 31 for each situation. Record debits first, then credits. Check your spelling carefully and do not abbreviate. Use account names exactly as given in the Chart of Accounts.

Customers were billed for $700 for work completed.

Rent for the year was prepaid on January 1 in the amount of $1,320. Record the transaction for December's rent that has expired.

Insurance for the next six months was paid on November 1st in the amount of $1,170. Record the journal entry for the two months of insurance expired at year-end.

suppose that the hotel acts as a monopolist whose manager chooses what quantity q of rooms to offer for rent. We want to determine the hotel’s optimal choice of quantity on game days.

Consider a hotel which can supply an unlimited number of hotel rooms at the constant marginal cost c = 20 per room per night, so that the hotel’s total cost function is given by C(q) = 20q.1 Assume that demand for hotel rooms in Tallahassee takes two possible values: on game days, demand is described by the demand curve q = 100 − p, while on non-game-days demand is described by the demand curve q = 60 − 2p.

Find the hotel’s total revenue on game days as a function of its quantity choice q. (Recall that total revenue equals price times quantity, where in this case price is described by the inverse demand curve.)

(e) Assuming the hotel maximizes profit, show that it will supply quantity q = 40 on game days.

(f) What will be the hotel price on game days? And what will be the hotel’s game-day profits?

(g) Still focusing on game days, graphically illustrate the demand curve, the hotel’s marginal revenue curve, and the hotel’s marginal cost curve. Indicate the hotel’s optimal quantity and price choices on the graph.

EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, performs automated collection, validation, indexing, and forwarding of submissions by companies and others who are required by law to file forms with the U.S. Securities and Exchange Commission (SEC). All publicly traded domestic companies use EDGAR to make the majority of their filings. (Some foreign companies file voluntarily.) Form 10-K, which includes the annual report, is required to be filed on EDGAR. The SEC makes this information available on the Internet.

Required:
1. Access EDGAR on the Internet. The web address is www.sec.gov. Search for the most recent 10-K’s of Expedia, Inc., and Booking Holdings Inc. (which includes Priceline). Search or scroll to find the revenue recognition note in the financial statements.

2. For each of the following types of revenue, indicate whether the amount shown in the income statement is “net” or “gross” (the terms used with respect to revenue recognition in the chapter), and briefly explain your answer.

1. Expedia’s “merchant hotel model” revenues

2. Priceline’s “‘Name Your Own Price’ services”

3. Priceline’s “Merchant Retail Services”

3. Consider your responses to 3a through 3c. Does it look like there is the potential for noncomparability when readers consider Expedia and Priceline? Indicate “yes” or “no,” and briefly explain your answer.

Techware Incorporated is considering the introduction of two new software products to the market. The company has four options regarding these products: introduce neither product, introduce product 1 only, introduce product 2 only, or introduce both products. Research and development costs for products 1 and 2 are $180,000 and $150,000, respectively. Note that the first option entails no costs because research and development efforts have not yet begun. The success of these software products depends on the national economy in the coming year. The company's revenues, depending on its decision and the state of the economy, are given in the file P09_33.xlsx. The probabilities of a strong, fair, or weak economy in the coming year are assessed to be 0.10, 0.60, and 0.30, respectively. a. Use PrecisionTree to identify the strategy that maximizes Techware's expected net revenue. Techware's optimal decision is to introduce . By following this strategy, Techware can expect to earn $ in net revenue. b. Perform a sensitivity analysis on the optimal decision, letting each of the inputs vary one at a time plus or minus 25% from its base value, and summarize your findings. Which of the inputs appears to have the largest effect on the best solution? The R&D cost for , and revenue for product introduction in the case of a national economy, have the largest effect on the best solution.

Lainney Inc decides to offer its consulting services valued at $125,000 to Ari Inc. Ari pays $16,000 down and Lainney agrees to accept a three-year instalment note for the balance owing. Notes of similar risk charge interest at 11.51% The instalment note requires Ari to make three annual equal payments of $45,000. Each payment pays down part of the note’s principal and interest due to Lainney. Required: i. Prepare the entry on Lainney’s books to record the issuance of the note receivable ii. Using the effective interest method, set up an amortization table with the following headings to show the amount of interest revenue booked each period and the carrying value of the note receivable at the end of each period for Lainney. Period Cash Received Interest Revenue Payment on the Note Receivable Carrying value – Note receivable iii) Prepare the journal entry to record cash received, interest revenue and note repayments for each year. iv) Prepare a partial statement of financial position for Lainney at the end of Year 1 to show how the note would be presented. v) From Lainney’s perspective, what are the advantages of an installment note compared with a non-interest bearing long term note? Be specific. Do not use point form. Use proper sentence structure

2. Copy and paste the following data into Excel:

a. Run OLS to determine the demand function as P = f(Q); how much confidence do you have in this estimated equation? Use algebra to invert the demand function to Q = f(P). b. Using calculus to determine dQ/dP, construct a column which calculates the point-price elasticity for each (P,Q) combination. c. What is the point price elasticity of demand when P=$140.25? What is the point price elasticity of demand when P=$135.50? d. To maximize total revenue, what would you recommend if the company was currently charging P=$122.04? If it was charging P=$135.50? e. Use your first demand function to determine an equation for TR and MR as a function of Q, and create a graph of P and MR on the vertical and Q on the horizontal axis. f. What is the total-revenue maximizing price and quantity, and how much revenue is earned there? (Round your price to the nearest cent, your quantity to the nearest whole unit, and your TR to the nearest dollar.) Compare that to the TR when P = $140.25 and P = $135.50.

Copy and paste the following data into Excel:

a. Run OLS to determine the demand function as P = f(Q); how much confidence do you have in this estimated equation? Use algebra to invert the demand function to Q = f(P).

b. Using calculus to determine dQ/dP, construct a column which calculates the point-price elasticity for each (P,Q) combination.

c. What is the point price elasticity of demand when P=$140.25? What is the point price elasticity of demand when P=$135.50?

d. To maximize total revenue, what would you recommend if the company was currently charging P=$122.04? If it was charging P=$135.50?

e. Use your first demand function to determine an equation for TR and MR as a function of Q, and create a graph of P and MR on the vertical and Q on the horizontal axis.

f. What is the total-revenue maximizing price and quantity, and how much revenue is earned there? (Round your price to the nearest cent, your quantity to the nearest whole unit, and your TR to the nearest dollar.) Compare that to the TR when P = $140.25 and P = $135.50.

a) The City of Chicago sold bonds in the amount of $5,000,000 to finance the construction of a sports center. The bonds are serial bonds and were sold at par on July1, 2002 the first day of a fiscal year. Shortly thereafter a construction contract in the amount of $4,500,000 was assigned and the contractor commenced work. By year-end, the contractor had been paid in full for all billings to date amounting to $2,000,000. Required: Prepare in general journal form all entries that should have been made during the fiscal year ended June 30, 2003 to record the above information in the capital projects fund(including closing entries) b) Compute the legal debt margin for the City of Huston given the following information regarding its bonded debt 1) The legal debt limit is 10 percent of total assessed valuation 2) Bonds outstanding and bonds authorized are: Face Amounts Description Authorized Outstanding General obligation street construction 12,000,000 12,000,000 Special assessment sidewalk construction 2,000,000 2,000,000 General obligation park acquisition 2,000,000 0 Water Utility Fund revenue 5,000,000 5,000,000 Industrial development revenue 6,000,000 6,000,000 Note: The City has no liability for the revenue bonds or the industrial development bonds. 3) Total assessed valuation of property within the City of Huston is $200,000,000.