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 following selected transactions were completed by Amsterdam Supply Co., which sells office supplies primarily to wholesalers and occasionally to retail customers:

Record on page 10 of the journal

Record on page 11 of the journal

Required:

Chart of Accounts

Journal

Journalize the entries to record the transactions of Amsterdam Supply Co. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Scroll down for page 11 of the journal.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

Assume the following is the current asset section from Intuit’s balance sheet.

Assume Intuit’s 2016 revenue was $2,038,000 thousand.

Compute days sales outstanding for 2016.

Select one:

a. 16.4 days

b. 29.9 days

c. 12.7 days

d. 15.0 days

Please, I need correct answers and clear explanation. Thanks,

Indicate whether each of the following statements is true or false:

• a.

  Under the accrual basis of accounting, when cash is collected on accounts receivable, revenue is recorded.

• b.

  Cash receipts from customers are debited to Accounts Receivable.

• c.

  The cash basis of accounting recognizes expenses when they are incurred.

• d.

  Under the cash basis of accounting, there is no such thing as a Prepaid Expenses account.

• e.

  Asset accounts and expense accounts normally have debit balances.

• f.

  Credits increase asset accounts.

• g.

  Revenues are recorded with credit entries.

• h.

  Dividends are an expense of doing business and should appear on the statement of income.

Suppose you are the manager of a theatre company. You have identified two groups of customers. Group 1 has a demand given by Q 1 = 100 - P and Group 2 has a demand given by Q 2 = 120 -3P. You are currently charging the same price - 40 euros - to both groups. To maximize revenue, you should charge a price of

(a) 12.50 euros to group 1 and 20 euros to group 2

(b) 50 euros to group 1 and 20 euros to group 2

(c) 30 euros to group 1 and 20 euros to group 2

(d) 25 euros to group 1 and 60 euros to group 2

InternationalClothiersLtd.hasofficesinCanada,Bermuda,EuropeandtheUnitedStates. Eachofthe following events have occurred after the company’s 31 December 2019 year-end, but before their financial statements had been finalized:

1. On January 25, International Clothiers Ltd entered into a long-term lease for a private airplane for the company president and CEO. The lease requires payments of US$75,000 per month for 60 months.

2. One of the company’s major retail customers declared bankruptcy on March 22. The retail customer accounted for 20% of International Clothier’s year-end receivables and 35% of International Clothier’s revenue in 2019.

Required:

Identify and explain the appropriate accounting treatment for the subsequent events described above.

For each of the situations described below, select the type of analytics that would address the specific organizational need and justify your selection.

b. A large retail chain wants to understand what factors contributed to the overall sales decline it experienced in a specific month in the past.

c. To support staffing analysis for a holiday season, a clothing store wants to improve its understanding of the number of customers that are likely to visit each of its stores during the November 15–January 15 time frame.

d. A gaming company wants to provide all of its employees an up-to-date graphical representation of the number of downloads of its game products and in-app revenue associated with them.

Rock Solid Bank and Trust (RSB&T) offers only checking accounts. Customers can write checks and use a network of automated teller machines. RSB&T earns revenue by investing the money deposited; currently, it averages 6.10 percent annually on its investments of those deposits. To compete with larger banks, RSB&T pays depositors 0.50 percent on all deposits. A recent study classified the bank’s annual operating costs into four activities.

Data on two representative customers follow.

Required:

a. Compute RSB&T's operating profits.

b. Compute the profit from Customer A and Customer B, assuming that customer costs are based only on deposits. Interest costs = 0.50 percent of deposits; operating costs are 4 percent (= $28,500,000/$712,500,000) of deposits.

c. Compute the profit from Customer A and Customer B, assuming that customer costs are computed using the information in the activity-based costing analysis.

Required A

Operating profit ??

Required B

Profit per customer

Customer A ??

Customer B ??

Required C

Customer A Customer B

Sales revenue ?? ??

Interest on deposit ?? ??

Total operating cost ?? ??

Customer profit / loss

5. Fancy Fish, a fine dining upscale restaurant in Northridge, California and 2016 Open Table Diners’ Choice award winner, is enjoying its eighteenth season of providing delectable food, exceptional service, and beautiful outdoor dining experiences. “Saturday - Half-off Bottled Wine Night” has made Fancy Fish one of the San Fernando Valley’s favorite restaurants. Every Saturday night, guests can enjoy half-off every bottle of wine on the wine list while dining in the restaurant or on the terrace. The owner began offering “Saturday - Half-off Bottled Wine Night” in 2010 as an incentive for guests to dine at Fancy Fish when the economy was in a recession. Now that the economy is booming, the owner is considering whether the promotion should be continued, or even expanded. One concern is the effect that the promotion is having on the overall revenue generated from sales to the participants.

A random sample of 28 checks was collected over the course of one month of Saturday nights. Fourteen checks were from customers participating in the half-off promotion, and the other 14 checks were from customers not participating. The total revenue from each check (less alcohol, tax, and tip) is presented below. Do these data present sufficient evidence that the checks of participants is significantly different from checks of non-participants? What is your recommendation to the owner regarding the status of the promotion?

With Wine Discount W/O Wine Discount

35 46

35 44

36 29

36 29

48 29

29 60

36 64

43 47

24 47

13 49

36 53

50 51

22 44

32 36