A monopoly has the cost function c(y)=10y+100, and is facing a market demand D(p)=100-2p.

1. What is the inverse demand function, p(y)? Having profits be π = p(y)∙y – c(y), what is the profit maximizing output level? What is the corresponding market price?

2. Calculate the monopolist’s profit and producer surplus. What is the consumer surplus? What is the deadweight loss?

3. The government imposes a production tax, t_P=10, so that the new cost function is c(y)=(10+t_P)y+100. What happens to y and p? What happens to the firm’s profit and producer surplus? What happens to consumer surplus and the deadweight loss? How much is tax revenue?

4. The government imposes instead a lump sum tax, T=300, so that the new cost function is c(y)=10y+100+T. What happens to y and p? What happens to the firm’s profit and producer surplus? What happens to consumer surplus and the deadweight loss?

5. The government imposes instead a sales tax, t_S=25%, so that the new demand function is D(p)=100-2p(1+t_S). What happens to y and p? What happens to the firm’s profit and producer surplus? What happens to consumer surplus and the deadweight loss? How much is tax revenue?

6. The government imposes instead a profit tax, τ=40%, so that the new profit function is π=(1- τ)[p(y)∙y–c(y)]. What happens to y and p? What happens to the firm’s profit and producer surplus? What happens to consumer surplus and the deadweight loss? How much is tax revenue?

7. The government decides instead to subsidize production with a subsidy, s = 10, so that the new cost function is c(y)=(10-s)y+100. What happens to y and p? What happens to the firm’s profit and producer surplus? What happens to consumer surplus and the deadweight loss? How much is tax revenue?

1.

Reports that only compare actual results to static budget estimates.

Group of answer choices

Balanced Scorecard

Production budgets

Performance reports

Flexible budgets

2.

A report displaying the measurement of KPI's.

Group of answer choices

Balanced Scorecard

Flexible Budget

Performnce Report

Key Performance Indicator Report

3.

A part of an organization whose management is responsible for planning and controlling certain specific activities.

Group of answer choices

Responsibility center

A segment

A division

A transfer center

4.

Operating income divided by total assets. A measurement of the profitability of a business segment relative to the size of its assets.

Group of answer choices

Return on investment

Sales margin

Capital turnover

Residual income

5.

Operating income divided by sales revenue. Measures the profit earned for every dollar of sales revenue.

Group of answer choices

Sales margin

Residual income

Capital turnover

Return on investment

6.

The difference between actual and budgeted figures.

Group of answer choices

Variance

Segment margin

Differential income

Volume error

7.

Operating income minus minimum acceptable operating income based on the amount of assets invested.

Group of answer choices

Residual Income

Sales margin

Capital turnover

Return on investment

8.

Sales revenue divided by total assets. This performance measure shows how much sales revenue is being earned per dollar of asset invested.

Group of answer choices

Capital turnover

Sales margin

Residual Income

Return on investment

9.

These costs should not be included when measuring the performance of a business segment since they are not under the control of the segment manager.

Group of answer choices

Common fixed expenses

Transfer prices

Fixed costs

Responsibility center costs

10.

The process of organizing a company’s operations where authority and responsibility are delegated downward in the organization. As a result, companies can no longer rely on company-wide performance measures alone to assess performance.

Group of answer choices

Segmentation

Integration

Decentralization

Consolidation

AP2-5

Larry has been the chief financial officer (CFO) of Maxima Auto Service for the past 10 years. The company has reported profits each year it's been in business. However, this year has been a tough one. Increased competition and the rising costs of labor have reduced the company's profits. On December 30, Larry informs Robert, the company's president and Larry's closest friend for the past 10 years, that it looks like the company will report a net loss (total expenses will be greater than total revenues) of about $50,000 this year.

The next day, December 31, while Larry is preparing the year-end reports, Robert stops by Larry's office to tell him that an additional $75,000 of revenues needs to be reported and that the company can now report a profit. When Larry asks about the source of the $75,000, Robert tells lam, "Earlier in the month some customers paid for auto services with cash, and with this cash I bought additional assets for the company. That's why the $75,000 never showed up in the bank statement. I just forgot to tell you about this earlier." When Larry asks for more specifics about these transactions, Robert mumbles, "I can't recall where I placed the customer sales invoices or the purchase receipts for the assets, but don't worry; I know they're here somewhere. We've been friends for a lot of years and you can trust me. Now, let's hurry and finish those reports and I'll treat you to dinner tonight at the restaurant of your choice."

Required

1. Understand the reporting effect: What effect does reporting additional revenue have on reported profit?

2. Specify the options: If the additional revenue is not reported, do both Robert and Larry potentially lose benefits?

3. Identify the impact: Does reporting the additional revenue strengthen the company's financial appearance to those outside the company?

4. Make a decision: Should Larry report the additional revenue without source documents?

Multiple-Product Break-even, Break-Even Sales Revenue

Cherry Blossom Products Inc. produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Cherry Blossom Products sold 13,500 DVDs and 4,500 equipment sets. Information on the two products is as follows:

Total fixed cost is $74,460.

Suppose that in the coming year, the company plans to produce an extra-thick yoga mat for sale to health clubs. The company estimates that 9,000 mats can be sold at a price of $18 and a variable cost per unit of $12. Total fixed cost must be increased by $24,820 (making total fixed cost $99,280). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.

Part 1: Sales Mix Instructions and Part 2: Break-Even

1. What is the sales mix of DVDs, equipment sets, and yoga mats?
3:1:2

2. Compute the break-even quantity of each product.

Part 3a: Income Statement

3a. Prepare an income statement for Cherry Blossom Products for the coming year.

Feedback

3a. Prepare contribution margin income statement.

Part 3b: Contribution Margin Ratio and Part 4: Margin of Safety

3b. What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break-even sales revenue. (Note: Round the contribution margin ratio to the nearest whole percent; round the break-even sales revenue to the nearest dollar.)

4. Compute the margin of safety for the coming year in sales dollars.
$

Following are the 2016 income statements for Apple Inc. and Microsoft Corporation, competitors in the computer industry. Use these financial statements to answer the required.

Required:

a) How do Apple Inc. and Microsoft Corporation account for R&D expenditures?

b) Apple Inc.’s and Microsoft Corporation’s R&D expense includes many different types of costs. List three specific costs that could be included in R&D expense on the income statement.

c) What trend do you notice in the R&D expenses of each company over time?

Adjusting Journal Entries (AJE’s):

1. Wages earned by employees during December (’17) and to be paid in January (’18) are $35,875; associated payroll taxes on these wages are $2,910. (Record in two separate adjusting entries. The payroll taxes are an expense to the company for unemployment benefits and recorded as a payable to the state & federal taxing authority.)

2. The Unearned Consulting Revenue account has a balance of $261,220 as of December 31, 2017. On May 1,2017 a client paid CMC $153,000 cash in advance for a 12-month consulting services contract. CMC will earn revenue evenly over this 12-month period. This was the only prepayment received from clients during the entire 2017 fiscal year and recorded with a credit to Unearned Revenue. Of the remaining balance in Unearned Revenue (i.e. at Jan 1 2017), 65% of the work has now been completed by year end.

3. You discover that a sale of a product was made on account and recorded in December for $148,500; the product hasnot yet been shipped (i.e. delivered to the customer). The cost of the product was 55% of its selling price.CMC uses the perpetual inventory method.

4. Bad debt expense is estimated to be 6% of ending Accounts Receivable. (Round to the nearest whole dollar.)

5. CMC prepays for some insurance and advertising. The Prepaid Expense account has a balance of $26,774 at year end but before adjustment. This balance includes $12,200 for a two-year casualty insurance policy purchased on March 1, 2017. Of the remaining prepaid balance, 60% of the advertisinghas now been used. (Round to the nearest whole dollar.)

6. CMC records depreciation and amortization expense annually as one compound adjusting journal entry. They do not use an accumulated amortization account. Annual depreciation rates are 7% for Buildings/Equipment/Furniture, no salvage. (Round to the nearest whole dollar.) Annual Amortization rates are 10% of original cost, straight-line method, no salvage. The patent was acquired on October 1, 2015. The last time depreciation & amortization were recorded was December 31, 2016.  

Exercise 21-16 Presented below are four independent situations. (Round answers to 0 decimal places, e.g. 125. If answer is 0, please enter 0. Do not leave any fields blank.) (a) On December 31, 2017, Sandhill Inc. sold computer equipment to Daniell Co. and immediately leased it back for 10 years. The sales price of the equipment was $515,200, its carrying amount is $401,900, and its estimated remaining economic life is 12 years. Determine the amount of deferred revenue to be reported from the sale of the computer equipment on December 31, 2017. The amount of deferred revenue to be reported $

(b) On December 31, 2017, Teal Co. sold a machine to Cross Co. and simultaneously leased it back for one year. The sales price of the machine was $477,700, the carrying amount is $420,300, and it had an estimated remaining useful life of 14 years. The present value of the rental payments for the one year is $35,000. At December 31, 2017, how much should Teal report as deferred revenue from the sale of the machine? The amount of deferred revenue to be reported $

(c) On January 1, 2017, Flint Corp. sold an airplane with an estimated useful life of 10 years. At the same time, Flint leased back the plane for 10 years. The sales price of the airplane was $498,300, the carrying amount $375,100, and the annual rental $73,904. Flint Corp. intends to depreciate the leased asset using the sum-of-the-years’-digits depreciation method. How much gain on the sale should be reported at the end of 2017 in the financial statements? The gain on the sale should be reported $

(d) On January 1, 2017, Buffalo Co. sold equipment with an estimated useful life of 5 years. At the same time, Buffalo leased back the equipment for 2 years under a lease classified as an operating lease. The sales price (fair value) of the equipment was $214,700, the carrying amount is $303,000, the monthly rental under the lease is $6,100, and the present value of the rental payments is $116,494. For the year ended December 31, 2017, determine which items would be reported on its income statement for the sale-leaseback transaction. loss=$ and $ interest expense

Solve this following question:

Afia Agency was founded in January 2017. Presented below is the trial balance as of March 31, 2020, the end of the company’s fiscal year.

Instructions

a) Prepare the adjusting entries for these accounts:

- Art supplies (Supplies expense)

- Accumulated Depreciation – Printing Equipment

- Accumulated Depreciation – Building

- Allowance for doubtful Accounts (Bad debt expense)

- Notes receivable (Interest revenue)

- Notes payable (Interest expense)

- Salaries expense

- Rent Expense

- Unearned Advertising Revenue

You need to set your own assumptions in order to adjust the accounts. Those assumptions should be in consistency with your trial balance.

You need to do same for the other adjustments. You can follow the textbook pp 106-117.

b) Post the adjusting entries to the ledger

c) Prepare an adjusted trial balance

d) Prepare the worksheet

e) Prepare financial statements: Income statement, retained earnings statement, and statement of financial position

f) Journalize and post the closing entries

g) Prepare a post-closing trial balance

Required:

Complete the adjustment journal by indicating which account to debit and to credit.

Question 2                                                                                                 18 Marks

From the information given below prepare the income statement, statement of owner’s equity and balance sheet (classify balance sheet entries)

Question 3                                                                                                 10 Marks

Required:

Use the following information from the records of Preston Partners to prepare an income statement under the periodic inventory system for the year ended 30 June 2017.

QUESTION 1 (12 minutes)

Answer the following multiple-choice questions. Indicate your choice by selecting only one option from the four options given for each question answered.

(a) Which one of the following is not considered to be an enhancing qualitative characteristic to ensure the usefulness of information that is already relevant and faithfully represented in terms of The Conceptual Framework for Financial Reporting 2018?

1) Completeness;

2) Comparability;

3) Timeliness;

4) Understandability.

(b) Which one of the following is not an objective of financial statements to provide information of an entity that is useful to a wide range of users when making economic decisions as set out by IAS 1?

1) Statement of financial position;

2) Statement of financial performance;

3) Statement of cash flows;

4) Statement of budget forecasts.

(c) In accordance to IAS 2 the historical cost of inventories does not include:

1) Purchasing costs;

2) Selling expenses;

3) Conversion costs;

4) Other costs incurred in bringing inventories to their present location and condition.

(d) On 1 January 2020, Duma Ltd issued a bond with a nominal value of R500 000 and a coupon rate of 8% (annually in arrears) when the market rate was also 8%. The bond will be redeemed at a 10% premium above nominal value on 31 December 2022. Transaction costs paid by Duma Ltd amounted to R30 000. The effective interest rate is:

1) 8,00%

; 2) 10,99%;

3) 13,48%;

4) 10,43%.

(e) Moola Ltd sold goods to a customer for a total consideration of R181 500, payable 24 months after delivery. The customer obtained control of the products on delivery. The cash selling price of the goods amounted to R150 000 and represents the amount that the customer would pay upon delivery instead of over 24 months. Moola Ltd will recognize:

1) Revenue of R181 500 on delivery;

2) Revenue of R181 500 after 24 months;

3) Revenue of R150 000 on delivery and interest income of R31 500 over 24 months;

4) Revenue of R150 000 on delivery and interest income of R31 500 after 24 months.