In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:
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2018 |
2019 |
2020 |
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Cost incurred during the year |
2,400,000 |
3,600,000 |
2,200,000 |
|
Estimated costs to complete as of year-end |
5,600,000 |
2,000,000 |
0 |
|
Billings during the year |
2,000,000 |
4,000,000 |
4,000,000 |
|
Cash collections during the year |
1,800,000 |
3,600,000 |
4,600,000 |
|
2-a. In the journal below, complete the necessary journal entries (construction costs, progress billings, cash collections, gross profit/loss) for the year 2018 (credit "Various accounts" for construction costs incurred). 2-b. In the journal below, complete the necessary journal entries (construction costs, progress billings, cash collections, gross profit/loss) for the year 2019 (credit "Various accounts" for construction costs incurred). 2-c. In the journal below, complete the necessary journal entries (construction costs, progress billings, cash collections, gross profit/loss) for the year 2020 (credit "Various accounts" for construction costs incurred). |
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In: Accounting
Required information
[The following information applies to the questions
displayed below.]
In 2018, the Westgate Construction Company entered into a contract
to construct a road for Santa Clara County for $10,000,000. The
road was completed in 2020. Information related to the contract is
as follows:
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,204,000 | $ | 3,192,000 | $ | 2,424,400 | |||
| Estimated costs to complete as of year-end | 5,396,000 | 2,204,000 | 0 | ||||||
| Billings during the year | 2,140,000 | 3,256,000 | 4,604,000 | ||||||
| Cash collections during the year | 1,870,000 | 3,200,000 | 4,930,000 | ||||||
Westgate recognizes revenue over time according to percentage of
completion.
rev: 09_15_2017_QC_CS-99734
5. Calculate the amount of revenue and gross
profit (loss) to be recognized in each of the three years assuming
the following costs incurred and costs to complete information.
(Do not round intermediate calculations and round your
final answers to the nearest whole dollar amount. Loss amounts
should be indicated with a minus sign.)
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,204,000 | $ | 3,870,000 | $ | 4,110,000 | |||
| Estimated costs to complete as of year-end | 5,396,000 | 4,240,000 | 0 | ||||||
In: Accounting
Required information
[The following information applies to the questions
displayed below.]
In 2018, the Westgate Construction Company entered into a contract
to construct a road for Santa Clara County for $10,000,000. The
road was completed in 2020. Information related to the contract is
as follows:
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,204,000 | $ | 3,192,000 | $ | 2,424,400 | |||
| Estimated costs to complete as of year-end | 5,396,000 | 2,204,000 | 0 | ||||||
| Billings during the year | 2,140,000 | 3,256,000 | 4,604,000 | ||||||
| Cash collections during the year | 1,870,000 | 3,200,000 | 4,930,000 | ||||||
Westgate recognizes revenue over time according to percentage of
completion.
rev: 09_15_2017_QC_CS-99734
4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)
| 2018 | 2019 | 2020 | |||||||
| Cost incurred during the year | $ | 2,204,000 | $ | 3,870,000 | $ | 3,270,000 | |||
| Estimated costs to complete as of year-end | 5,396,000 | 3,170,000 | 0 | ||||||
In: Accounting
NashFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $4,500,000 on January 1, 2020. Nash expected to complete the building by December 31, 2020. Nash has the following debt obligations outstanding during the construction period.
| Construction loan-12% interest, payable semiannually, issued December 31, 2019 | $1,800,000 | |
| Short-term loan-10% interest, payable monthly, and principal payable at maturity on May 30, 2021 | 1,260,000 | |
| Long-term loan-11% interest, payable on January 1 of each year. Principal payable on January 1, 2024 | 900,000 |
(a)
Assume that Nash completed the office and warehouse building on December 31, 2020, as planned at a total cost of $4,680,000, and the weighted-average amount of accumulated expenditures was $3,240,000. Compute the avoidable interest on this project.
*Answer 366,000 is incorrect.
(b)
Compute the depreciation expense for the year ended December 31, 2021. Nash elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $270,000.
In: Accounting
Price (dollars per pound)Quantity supplied (thousands of pounds per year)Quantity demanded (thousands of pounds per year)21120601810010015801401260180940220
The United States imports cheese from a variety of countries. The table gives the domestic supply of, and demand for, cheese in the United States. The world price of cheese is $12 per pound, and trade is unrestricted.
a. How many pounds of cheese are consumed in the U.S?
b. How many pounds of cheese are produced in the U.S?
c. How many pounds of cheese are imported into the U.S?
If a $3 per pound tariff is imposed,
d. How many pounds of cheese are consumed in the U.S?
e. How many pounds of cheese are produced in the U.S?
f. How many pounds of cheese are imported into the U.S?
g. How much will the U.S. government collect in tariff revenue?
h. Who benefits from the tariff? Who loses? (4 points)
Why is it not efficient to eliminate all pollution? (3 points)
In: Economics
Q3. Suppose the market for clothes in the U.S. is perfectly competitive and is characterized by the following demand and supply equations (Q=quantity and P=Price): (34 pts in total) Demand for clothes: Qd 40 – 0.2P Supply of clothes: Qs 0.4P - 20 A. Find the market clearing equilibrium price P* and quantity Q* and draw a carefully labeled graph illustrating the market equilibrium. Also calculate the consumer surplus and producer surplus. (8pts) B. Suppose that the U.S. opens up to the world market and the price for clothes is in the world market is 70. What is the quantity demanded by consumer (Qd)? What is the quantity supplied by U.S. suppliers (Qs)? What is the new equilibrium price P′ in the U.S.? Does the U.S. import or export clothes? What is the new CS for U.S. consumers and PS for the U.S. suppliers? Illustrate the new CS and PS on another graph(12 pts) Q* =20 P* =100 CS =1000 PS =500
In: Economics
During the past year, you had a portfolio that contained U.S. government T-bills, long-term government bonds, and common stocks. The rates of return on each of them were as follows:
| U.S. government T-bills | 4.90 | % |
| U.S. government long-term bonds | 6.70 | |
| U.S. common stocks | 8.50 |
During the year, the consumer price index, which measures the rate of inflation, went from 100 to 115 (1982 – 1984 = 100). Compute the rate of inflation during this year. Round your answer to one decimal place.
%
Compute the real rates of return on each of the investments in your portfolio based on the inflation rate. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to two decimal places.
| Real rate of return | |
| U.S. government T-bills | % |
| U.S. government long-term bonds | % |
| U.S. common stocks | % |
In: Finance
15. Topic: GAAP Approaches to Business Combinations Current GAAP identifies three approaches to assigning values to assets acquired in a business combination. Which of the following is not a recognized valuation technique for allocating the acquisition price to specific assets?
a. Market Approach
b. Residual Value Approach
c. Cost Approach
d. Income Approach
16. Topic: Acquired Research and Development Costs In-process intangible research and development costs acquired as part of a business combination are:
a. Expensed, consistent with the accounting treatment of a
firm's own R & D expenditures
b. Debited to the Equity of the acquirer
c. Recorded as an intangible asset
d. Included in Goodwill
In: Accounting
Drinkeverywhere is an American retailer located in Seattle, WA. The company president is Sam Cooper, who inherited the company. When the company was founded over 60 years ago, it originally focuses on retailing high-end beverage, wines, and finer foods to more than 30 states in the US. Over the years, the company still maintains its main business, which accounts for about 50 percent of its total revenue. Faced with stiff competition, the company also expanded into the business of manufacturing its own beverages. You and your team, the Carson College of Business graduates, are hired by the company's finance department to evaluate a new project for the company. One of the major revenue-producing items of Drinkeverywhere’s manufacture division is a sparkling soft drink. Drinkeverywhere currently has one flavor of this beverage, with size of 12 FL OZ each, and sales have been excellent. Drinkeverywhere’s main competitor on the beverage market is the Coca-Cola Company (KO). Drinkeverywhere’s drink is healthier but has similar taste to Coke. However, Drinkeverywhere wants to incorporate a new flavor into their products. Drinkeverywhere spent $100,000 to develop a new technology for its beverage that has all the features of the existing one but adds a new flavor, which can balance the original taste while having some new and exotic flavor to it. The new product also has much lower calories. The company has spent a further $25,000 for a marketing study to determine the expected sales figures for the new flavor. Drinkeverywhere can manufacture the new beverage for $0.5 per can in variable costs. Fixed costs for the operation are estimated to run $2.5 million per year. The estimated sales volume is 3,400,000, 2,550,000, 2,950,000, 2,680,000 and 1,978,000 cans per year for the next five years, respectively. The unit price of the new beverage will be $2.5 per can. The necessary equipment can be purchased for $12 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $2 million. As previously stated, Drinkeverywhere currently manufactures a beverage product. Production of the existing product is expecting to be terminated in three years. If Drinkeverywhere does not introduce the new beverage product, sales of the existing product will be 2,000,000, 1,990,000 and 187,000 cans per year for the next three years, respectively. The price of the existing drink is 2 $1.5 per can, with variable costs of $0.3 each and fixed costs of $0.8 million per year. If Drinkeverywhere does introduce the new beverage, sales of the existing one will fall by 5,000 cans per year, and the price of the existing drinks will have to be lowered to $1.2 each can. Net working capital for the beverage will be 20 percent of sales and will occur with the timing of the cash flows for the year; for example, there is no initial outlay for NWC, but changes in NWC will first occur in Year 1 with the first year's sales. Drinkeverywhere has a 25 percent corporate tax rate. The company has a target debt to equity ratio of .55 and is currently A+ rated (according to S&P 500 ratings). The overall cost of capital of the company is 12 percent. The finance department of the company has asked your team to prepare a report to Sam, the company’s CEO, and the report should answer the following questions.
QUESTIONS 1. Can you and your team prepare the income statement table, the operating cash flow (OCF) table, and the total cash flow from assets (CFFA) table for this project?
2. Can you use these tables to help explain to Sam the relevant incremental cash flows of this project?
3. James, a newly graduated MBA in the company’s finance department suggested that you should use 12% as the discount rate for the discounted cash flow (DCF) analysis for this new project. Do you and your team agree with James?
a) If Yes, can you explain to Sam, the president of the company, why you should use 12%?
b) If Not, please find the cost of capital for this project, and explain in details how your team comes up with this number and why it is proper for this DCF analysis?
4. What are the NPV and IRR of the project?
5. Should Sam take the new project? Why or why not?
In: Finance
One of your company's essential suppliers is located in Japan. Your company needs to make a 1 million Japanese yen payment in six months. Considering that your company primarily operates in U.S. dollars, you are assigned the task of deciding on a strategy to minimize your transactions exposure. Identify the spot and forward exchange rates between the two currencies. What factors influence your decision to use each? Which one would you choose? How many dollars must you spend to acquire the amount of yen required
In: Finance