The company has the following account balances on June 1, 2020. (all accounts have their ‘normal’ balances)

Drawings: 1000

Cash: 20000

Service revenue: 50000

Capital: 15000

Depreciation Expense: 700

Equipment: 30000

Accounts Payable: 5000

Insurance Expense: 500

Unearned Service Revenue: 4000

Prepaid Service Revenue: 500

Accounts Receivable: 4000

Rent Expense: 5000

Salaries Expense: 16000

Accumulated Depreciation - Equipment: 3000

During June 2018, the following events took place. Where appropriate, record a journal entry for each transaction. If no journal entry is required, write ‘no entry’.

1. On June 2, the company prepaid rent for July to September for $6,000.
2. On June 8, someone invested $3,000 cash and a computer system valued at $2,000 into the company.
3. On June 10, the company collected $4,000 it was owed on account.
4. On June 15, The company provided a quotation for membership fees to a corporation looking to provide fitness benefits to its employees. The quotation was for $10,000. The corporation will decide next month if it is a good fit.
5. On June 22 the company provided product and collected $5,000.
6. On June 24 the company received a $1,000 bill for advertising expense that it will pay in the near future.
7. On June 27 the company paid $2,000 cash on account.
8. On June 29, the owner withdrew $600 for personal use.
9. On June 30, the company purchased $1,000 of supplies on account.
10. On June 30, the company paid employee salaries of $3,000.

Question: Open T-accounts using the beginning balances provided and post entries into T-accounts. Calculate the balance of each one.

The company has the following account balances on June 1, 2020. (all accounts have their ‘normal’ balances)

Drawings: 1000

Cash: 20000

Service revenue: 50000

Capital: 15000

Depreciation Expense: 700

Equipment: 30000

Accounts Payable: 5000

Insurance Expense: 500

Unearned Service Revenue: 4000

Prepaid Service Revenue: 500

Accounts Receivable: 4000

Rent Expense: 5000

Salaries Expense: 16000

Accumulated Depreciation - Equipment: 3000

During June 2018, the following events took place. Where appropriate, record a journal entry for each transaction. If no journal entry is required, write ‘no entry’.

1. On June 2, the company prepaid rent for July to September for $6,000.
2. On June 8, someone invested $3,000 cash and a computer system valued at $2,000 into the company.
3. On June 10, the company collected $4,000 it was owed on account.
4. On June 15, The company provided a quotation for membership fees to a corporation looking to provide fitness benefits to its employees. The quotation was for $10,000. The corporation will decide next month if it is a good fit.
5. On June 22 the company provided product and collected $5,000.
6. On June 24 the company received a $1,000 bill for advertising expense that it will pay in the near future.
7. On June 27 the company paid $2,000 cash on account.
8. On June 29, the owner withdrew $600 for personal use.
9. On June 30, the company purchased $1,000 of supplies on account.
10. On June 30, the company paid employee salaries of $3,000.

Prepare the unadjusted trial balance for the company at June 31, 2018.

Woodland Hotels Inc. operates four resorts in the heavily wooded areas of northern California. The resorts are named after the predominant trees at the resort: Pine Valley, Oak Glen, Mimosa, and Birch Glen. Woodland allocates its central office costs to each of the four resorts according to the annual revenue the resort generates. For the current year, the central office costs (000s omitted) were as follows:

Please answer the following questions:

1. Based on annual revenue, what amount of the central office costs are allocated to each resort?

2. Suppose that the current methods were replaced with a system of four separate cost pools with costs collected in the four pools allocated on the basis of revenues, assets invested in each resort, square footage, and number of rooms, respectively. Which costs should be collected in each of the four pools?

3. Using the cost pool system in requirement 2, how much of the central office costs would be allocated to each resort?

Romero started his own consulting firm, Romero Company, on July 1, 2018. The trial balance at July 31 is shown below.

Other data:

1. Supplies on hand at July 31 are $750.

2. A utility bill for $350 has not been recorded and will not be paid until next month.

3. The insurance policy is for a year.

4. $1,200 of unearned service revenue remain unearned.

5. Romero company pays its employees total salaries of $7,250 every Monday for the preceding 5-day week (Monday through Friday). On Monday July 30, employees were paid for the week ending July 27. All employees worked the last 2 days of the month of July 2018.

6. The equipment is being depreciated over a 5-year life with no salvage value.

7. Invoices representing $3,200 of services performed during the month have not been recorded as of July 31.

8. Romero company borrowed $15,000 by signing a 7.3%, two-year note on July 11^th, 2018.

Instructions

a. Prepare the adjusting entries for the month of July.

b. Prepare the Classified Balance sheet at Dec. 31, 2018.

Romero started his own consulting firm, Romero Company, on July 1, 2018. The trial balance at July 31 is shown below.

Other data:

1. Supplies on hand at July 31 are $750.

2. A utility bill for $350 has not been recorded and will not be paid until next month.

3. The insurance policy is for a year.

4. $1,200 of unearned service revenue remain unearned.

5. Romero company pays its employees total salaries of $7,250 every Monday for the preceding 5-day week (Monday through Friday). On Monday July 30, employees were paid for the week ending July 27. All employees worked the last 2 days of the month of July 2018.

6. The equipment is being depreciated over a 5-year life with no salvage value.

7. Invoices representing $3,200 of services performed during the month have not been recorded as of July 31.

8. Romero company borrowed $15,000 by signing a 7.3%, two-year note on July 11^th, 2018.

Instructions

a. Prepare the adjusting entries for the month of July.

b. Prepare the Classified Balance sheet at Dec. 31, 2018.

Romero started his own consulting firm, Romero Company, on July 1, 2018. The trial balance at July 31 is shown below.

Other data:

1. Supplies on hand at July 31 are $750.

2. A utility bill for $350 has not been recorded and will not be paid until next month.

3. The insurance policy is for a year.

4. $1,200 of unearned service revenue remain unearned.

5. Romero company pays its employees total salaries of $7,250 every Monday for the preceding 5-day week (Monday through Friday). On Monday July 30, employees were paid for the week ending July 27. All employees worked the last 2 days of the month of July 2018.

6. The equipment is being depreciated over a 5-year life with no salvage value.

7. Invoices representing $3,200 of services performed during the month have not been recorded as of July 31.

8. Romero company borrowed $15,000 by signing a 7.3%, two-year note on July 11^th, 2018.

Instructions

a. Prepare the adjusting entries for the month of July.

b. Prepare the Classified Balance sheet at Dec. 31, 2018.

The manufacturing firm Rebo is considering a new capital investment project. The project will last for five years. The anticipated sales revenue from the project is $3 million in year 1 and $4.2 million in each of years 2 – 5. The cost of materials and labour is 50% of sales revenue and other expenses are $1 million in each year. The project will require working capital investment equal to 20% of the expected sales revenue for each year. This investment must be in place at the start of each year. Working capital will be recovered at the end of the project’s life. UL20/0419 Page 4 of 8 The project will require $2.5 million to be spent now on new machinery which will have zero value at the end of the project and will be depreciated each year at 20% of the original cost. The tax rate is 25%. Rebo uses a discount rate of 11% to evaluate its capital investment projects.

(i) What is the net income in each year?

(ii) What is the free cash flow in each year and the net present value (NPV)?

(iii)You discover the following additional information:

• The project will utilise a building that the firm leases. No other activities take place in it. If this project does not go ahead the firm will terminate the lease in one year’s time if no other use for it has been found.

• Part of each year’s cash flows from the project will be used to increase the dividend payment to shareholders.

For each of these items, explain briefly whether or not you would incorporate the information into your analysis of the project’s value.

In 2021, 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 2023. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

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.)

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.)

Woodland Hotels Inc. operates four resorts in the heavily wooded areas of northern California. The resorts are named after the predominant trees at the resort: Pine Valley, Oak Glen, Mimosa, and Birch Glen. Woodland allocates its central office costs to each of the four resorts according to the annual revenue the resort generates. For the current year, the central office costs (000s omitted) were as follows:

Required:

1. Based on annual revenue, what amount of the central office costs are allocated to each resort?

2. Suppose that the current methods were replaced with a system of four separate cost pools with costs collected in the four pools allocated on the basis of revenues, assets invested in each resort, square footage, and number of rooms, respectively. Which costs should be collected in each of the four pools?

3. Using the cost pool system in requirement 2, how much of the central office costs would be allocated to each resort?

The manufacturing firm Rebo is considering a new capital investment project. The project will last for five years. The anticipated sales revenue from the project is $3 million in year 1 and $4.2 million in each of years 2 – 5. The cost of materials and labour is 50% of sales revenue and other expenses are $1 million in each year. The project will require working capital investment equal to 20% of the expected sales revenue for each year. This investment must be in place at the start of each year. Working capital will be recovered at the end of the project’s life.

The project will require $2.5 million to be spent now on new machinery which will have zero value at the end of the project and will be depreciated each year at 20% of the original cost. The tax rate is 25%. Rebo uses a discount rate of 11% to evaluate its capital investment projects.

(i) What is the net income in each year?

(ii) What is the free cash flow in each year and the net present value (NPV)?

(iii)You discover the following additional information:

• The project will utilise a building that the firm leases. No other activities take place in it. If this project does not go ahead the firm will terminate the lease in one year’s time if no other use for it has been found.

• Part of each year’s cash flows from the project will be used to increase the dividend payment to shareholders.

  For each of these items, explain briefly whether or not you would incorporate the information into your analysis of the project’s value.