Tuscarora, Inc., a merchandising​ company, has the following budgeted​ figures:

Calculate the budgeted purchases for the month of January.

A. $50,800.00

B. $23,300.00

C. $3,200.00

D. $23,800.00

Nyree Company is preparing its budget for the third quarter. The cash balance on June 30 was $32,000.00.

Additional budgeted data are provided​ here:

What amount should be shown in the cash budget for the cash balance at the end of​ July?

a) 109,000.00

b) 85,000.00

c) 29,000.00

d) 24,000.00

Maintaining a clean shopping environment is a key success factor for Turner?, a large grocery chain based in Minnesota. Three of the most costly resources needed to clean a supermarket are? labor, equipment, and cleaning supplies.

The cost driver for all these resources is? "number of times? cleaned." Wages for cleaning laborers? (called porters) and rent for cleaning equipment are the same regardless of the number of times the supermarket is cleaned. Supplies used for each regular daily cleaning and for each special cleaning are about the same. A typical store has 52,000 square feet. Regular cleaning is performed each day from midnight until? 7:00 AM. Special cleaning of floors and fixtures is performed in the various departments as needed. Special cleaning varies from 10 to 30 times a month depending on the amount of traffic through the store. ? Thus, the number of times a store is cleaned varies from 40 to 60 times a month.

Suppose that in one of Turner?'s stores in? Minneapolis, cleaning was performed 60 times during March. For the? month, the cost of labor and rent on equipment was $ 21,000 and cleaning supplies used cost $ 9,600. The sales budget for the next quarter? (April through? June) and better weather conditions indicate that the store will need to be cleaned 50?, 48?, and 35 times in? April, May, and June respectively.

Requirement 1. Prepare a table that shows how labor? cost, rent, cleaning supplies? cost, total? cost, and total cost per cleaning changes in response to the number of times the store is cleaned. Show costs for 35?, 40?, 45?, 50?, 55?, and 60 cleanings. What is the predicted total cost of cleaning the Minneapolis store for the next? quarter? ?(Round the cost per cleaning amounts to two decimal? places.

Prepare a table that shows how labor cost, rent, cleaning supplies cost, total cost, and total cost per cleaning changes in response to the number of times the store is cleaned. Show costs for 35, 40, 45, 50, 55, and 60 cleanings. What is the predicted total cost of cleaning the Minneapolis store for the next quarter?

2. Prepare a single graph that can be used to predict the fixed, variable, and total cleaning cost of the Turner store.

3. Suppose the manager of the Turner store can hire an outside cleaning company to clean the store as needed. The charge rate is $ 680 per cleaning. If the outside cleaning company is hired, Turner can lay off the workers who are now cleaning the store, eliminate the need for equipment rent, and stop purchasing cleaning supplies. Will Turner save money with the outside cleaning company over the next quarter? Prepare a schedule that supports your answer.

In March 2006, General Motors (GM) announced that it needed to restate its previous year's financial statement. Excerpts from the Wall Street Journal describing the restatements include: GM, which already faces an SEC probe into its accounting practices, also disclosed that its 10-K report, when filed will outline a series of accounting mistakes that will force the car maker to restate its earnings from 2000 to the first quarter of 2005. GM also said it was widening by $2 billion the loss it reported for 2005. Many of the other GM problems relate to rebates, or credits, from suppliers. Typically, suppliers offer an upfront payment in exchange for a promise by the customer to buy certain quantities of products over time. Under accounting rules, such rebates can't be recorded until after the promised purchases are made. GM said it concluded it had mistakenly recorded some of these payments prematurely. The biggest impact was in 2001, when the company said it overstated pre-tax income by $405 million as a result of prematurely recording supplier credits. Because the credits are being moved to later years, the impact in those years was less, and GM said it would have a deferred credit of $548 million that will help reduce costs in future periods. The issue of how to book rebates and other credits from suppliers is a thorny one that has tripped up other companies, ranging from the international supermarket chain Royal Ahold, N.V. to the U.S.-based Kmart Corporation. GM also said it had wrongly recorded a $27 million pre-tax gain from disposing of precious-metals inventory in 2000, which it was obliged to buy back the following year. Gm told investors not to rely on its previously reported results for the first quarter of 2005, saying it had underreported its loss by $149 million. GM said it had prematurely boosted the value it ascribed to cars it was leasing to rental car companies, assuming they would be worth more after the car rental companies were done with them. GM previously had reported a loss of $1.1 billion, or $1.95 a share, for the first quarter. (March 18, 2006) You may assume the amounts are material.

C. Explain the rebates, or upfront rebates, from the companies supplies. Why would the supplies pay the up front credit? What is the proper accounting for the upfront credits? What controls should be in place to account for that upfront credits? How would the auditor test 1.) The controls over the accounting for the upfront credit and 2.) The expenses of certain accounts, are the liability accounts?

D.)Do you believe that the material and the statements were the result of errors or fried? Discuss the reason for your opinion.

1. The number of owners of mobile phones has grown rapidly and hence the demand for mobile phones has also grown rapidly. Yet the prices of mobile phones have fallen. Why? [20 points]

2. Given that there is a fixed supply of land in the world, what implications can you draw from the law of diminishing returns about the effects of an increase in world population for food output per head?

3. An economy is currently in equilibrium. The following figures refer to elements in its national income accounts.

(a) What is the current equilibrium level of national income?

(b) What is the level of injections?

(c) What is the level of withdrawals?

(d) Assuming that tax revenues are £140 billion, how much is the level of saving?

(e) If national income now rises to £1600 billion and, as a result, the consumption of domestically produced goods rises to £1160 billion, what is the mpcd?

(f) What is the value of the multiplier?

(g) Given an initial level of national income of £1600 billion, now assume that spending on exports rises by £80 billion, spending on investment rises by £20 billion and government expenditure falls by £40 billion. By how much will national income change?

4. Imagine that you had to determine whether a particular period of inflation was demand pull, or cost push, or a combination of the two. What information would you require in order to conduct your analysis?

5. If a developing country has a comparative advantage in the production of wheat, should it specialise as much as possible in the production of wheat and export what is not consumed domestically?

Pick three of the key terms that appears and briefly discuss it using your own words. Your response must consist of at least three sentences.

Key Terms:

Administrative expense budget

Budget committee

Budget director

Budgetary slack

Budgets

Capital expenditures budget

Cash budget

Continuous budget

Control

Controllable costs

Direct labor budget

Direct materials purchases budget

Dysfunctional behavior

Effectiveness

Efficiency

Ending finished goods inventory budget

Feature costing

Financial budgets

Flexible budget

Flexible budget variances

Goal congruence

Incentives

Incremental approach

Marketing expense budget

Master budget

Myopic behavior

Operating budgets

Overhead budget

Participative budgeting

Production budget

Pseudoparticipation

Research and development expense budget

Rolling budget

Sales budget

Static budget

Variable budget

Zero-base budgeting

Control limits

Currently attainable standards

Direct labor efficiency variance (LEV)

Direct labor rate variance (LRV)

Direct materials price variance (MPV)

Direct materials usage variance (MUV)

Favorable (F) variance

Fixed overhead spending variance

Fixed overhead volume variance

Ideal standards

Kaizen standards

Mix variance

Price (rate) variance

Price standards

Quantity standards

Standard bill of materials

Standard cost per unit

Standard cost sheet

Standard hours allowed

Standard quantity of materials allowed

Total budget variance

Unfavorable (U) variance

Unit standard cost

Usage (efficiency) variance

Variable overhead efficiency variance

Variable overhead spending variance

Yield variance

Solved parts a-e, need the rest.

1. Suppose the economy can be defined as the following:

Consumption Function: 3000+0.6*(Y-T)

Investment Function: 600-50r

Government Expenditure = 500; Tax = 500

Net Export = 300–30r

M = 10000

Money Demand Function: L(Y,r) =5Y–2500r

a) Derive the IS curve.

IS: r = 51.25 - .005Y

b) Derive the LM curve

LM: r = .002Y-4*(1/P)

c) Suppose P = 10, compute the equilibrium interest rate and output.

(e.g. If you compute r = 2.46, treat this as 2.46%)

r^∗=14.357, Y^∗=7378.571

d)Graphically illustrate the solution for part d, you should have four graphs: graph with the AD curve, the IS-

LM diagram, the Keynesian Cross (market of goods and services) and the theory of Liquidity Preference (market of real money balance).

Impact of Fiscal Policy

e)Suppose government spending increases to 700. Redo (a-d).

IS: r =53.75-.005Y, r^∗=15.071, Y^∗=7735.714

f)Compute the size of crowding out effect.

Crowding out size = _____________

g)Show how this increase of government expenditure affecting the graphs you draw on part (e)

(Don't need this one)

Special case

i)Suppose everything is the same, except now the LM curve is independent to interest rate, more specifically, LM : Y = 8000. Compute the equilibrium interest rates and outputs before and after the increase in government spending.

Before: r^* = ____, Y^* = _____

After:r^* = ____, Y* = _____

j) What is the size of the crowding out effect?

Crowding out size = _______

1. The crowing out effect of government spending will be less pronounced if

Select one:

a. government borrows mostly in the international financial markets

b. consumption spending is more sensitive to changes in the interest rate

c. none of the answers is correct

d. equilibrium GDP is further below potential GDP

2. Because of lower investment in basic research, the technological change in Australian economy slows down. As a result

Select one:

a. the economy will move down along the long-run aggregate supply curve.

b. the short-run aggregate supply curve will shift to the right.

c. the economy will move up along the long-run aggregate supply curve.

d. the long-run aggregate supply curve will shift to the left.

3. If the Reserve Bank of Australia sells bonds and securities in the open market, this is likely to lead to

Select one:

a. appreciation of the Australian dollar

b. none of the answers is correct

c. increase in investment spending by firms

d. negative balance on the Balance of Payments

4.

When considering the trend of an exchange rate over the period of 10-15 years, economist would expect the following variables to be important in explaining this trend

Select one:

a. Preferences for domestic and foreign goods across countries

b. Relative rates of productivity growth across countries

c. Relative price levels across countries

d. All of these answers are correct

5.

Australia’s financial account will not include

Select one:

a. An increase in asset holdings in foreign countries by Australian residents

b. all answers are incorrect

c. An increase in Australian government's asset holdings in foreign countries

d. Income received by Australian residents from investments made overseas

6.

Fiat money

Select one:

a. is the term that originated in Italy to denote banknotes convertible into gold.

b. can serve as a medium of exchange, but not as a store of value.

c. none of the answers is correct

d. is the primary reason why some economies experience deflation

7.

Suppose that the real GDP is $14 trillion, potential GDP is $16 trillion and taxes were cut by 500 billion to bring economy to the full employment. The implied value of the tax multiplier is

Select one:

a. -4

b. 1.6

c. None of these options is correct. Taxes should be increased in this case.

d. 2

Multiple-Choice Questions

1. 1.

   Troy, a minor, sells his collection of sports memorabilia to Vern for $250. On his eighteenth birthday, Troy learns that the collection may have been worth at least $2,500. Troy

   1. can disaffirm, because the contract has not been fully performed.

   2. can disaffirm, if he does so within a reasonable time after attaining majority.

   3. cannot disaffirm, because he has already attained majority.

   4. cannot disaffirm, because the contract has been fully performed.

2. 2.

   Doug has been drinking heavily. Joe offers to buy Doug’s farm for a fair price. Believing the deal is a joke, Doug writes and signs an agreement to sell and gives it to Joe. Joe believes the deal is serious. The contract is

   1. enforceable, if the circumstances indicate that Doug understands what he did.

   2. enforceable, because Joe believes that the transaction is serious.

   3. unenforceable, because the intoxication permits Doug to avoid the contract.

   4. unenforceable, because Doug thinks it is a joke.

3. 3.

   Ed is adjudged mentally incompetent. Irwin is appointed to act as Ed’s guardian. Irwin signs a contract to sell some of Ed’s property to pay for Ed’s care. On regaining competency, Ed

   1. can disaffirm, because he was mentally incompetent.

   2. can disaffirm, because he is no longer mentally incompetent.

   3. cannot disaffirm, because Irwin could enter into contracts on his behalf.

   4. cannot disaffirm, because he may become mentally incompetent again.

4. 4.

   Adam, a sixteen-year-old minor, enters into a contract for necessaries, which his parents could provide but do not. Adam disaffirms the contract. Adam’s parents

   1. must pay the reasonable value of the goods.

   2. must pay more than the reasonable value of the goods.

   3. can pay less than the reasonable value of the goods.

   4. do not have to pay anything for the goods.

5. 5.

   First Bank loans money to Patty, a sixteen-year-old minor. Patty must repay the loan

   1. if the loan is made for the express purpose of buying necessaries.

   2. if First Bank makes sure the money is spent on necessaries.

   3. if both a and b are true.

   4. in none of the above circumstances.

6. 6.

   Eve, a fifteen-year-old minor, buys a smartphone app from EZ Spyware. The contract is fully executed. Eve now wants to disaffirm it. In most states, Eve

   1. must return only the app to EZ.

   2. must return the smartphone with the app to EZ.

   3. must return just the smartphone to EZ.

   4. need do none of the above.

7. 7.

   Neal is adjudged mentally incompetent, and a guardian is appointed. Neal later signs an investment contract with Mary. This contract is

   1. valid.

   2. voidable.

   3. void.

   4. none of the above.

8. 8.

   Jeff, a fifteen-year-old minor, contracts with Online, Inc., for Internet access services. Considering that Jeff is a minor, which of the following is true?

   1. Online can disaffirm the contract.

   2. Jeff can disaffirm the contract.

   3. Both a and b are true.

   4. None of the above are true.

1. A company's fiscal year may:

Select one:

A. Be any portion of a year including a month or quarter

B. Be for a period either greater or less than 12 months

C. Be the same as the calendar year

D. All of the above are true of a company's fiscal year

2. David Bash's Landscaping Company has compiled the following list of account balances of various assets, liabilities, revenues and expenses on December 31, 2016, the end of its first year of operations.

The retained earnings for David Bash’s Landscaping on December 31, 2016 are:

Select one:

A. $12,600

B. $56,400

C. $36,400

D. $ 2,800

3.

In computing the price-earnings ratio, the current per share market price of the firm's common stock is divided by the:

Select one:

A. Earnings per common share

B. Net income for the year

C. Dividends per common share

D. Par value per common share

4.

The 2016 financial statements for Bloomington Company show the following:

Cash paid for merchandise is:

Select one:

A. $248,000

B. $244,000

C. $240,000

D. $236,000

5.

The full disclosure principle:

Select one:

A. States that personal contact and financial information for each member of senior management for the company be disclosed.

B. Requires that company maintain a record of activities separate from the economic and personal activities of its owners.

C. Requires that a business disclose all significant financial facts and circumstances in a company’s annual report.

D. States that sales revenue should be recorded when services are performed or goods are sold.

E. None of the above

6.

The revenue recognition principle:

Select one:

A. States that the recording of revenue should be based on reliable and verifiable evidence.

B. Only requires that sales revenue must be earned before it is recorded on the income statement.

C. Only requires that sales revenue must be realized or realizable before it is recorded on the income statement.

D. States that sales revenue should be recorded when services are performed or goods are sold.

E. None of the above