Use the following information to prepare a multi-step income statement and a balance sheet for Sherman Equipment Co. for Year 2. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.) (Balance Sheet only: Items to be deducted must be indicated with a minus sign.)

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose that a random sample of companies yielded the following data:

B: Percent for company 28 16 25 26 18 20 7 10

A: Percent for CEO 23 14 23 18 23 10 4 14

Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Use a 5% level of significance. Find (or estimate) the P-value.

Select one:

a. P-value = 0.50

b. P-value = 0.40

c. 0.02 < P-value < 0.05

d. 0.20 < P-value < 0.40

e. 0.01 < P-value < 0.02

4. A large corporation subjected to 21% marginal tax is investing in a new income producing asset that is depreciated on a MACRS 5 year schedule. The full price of the asset is 300,000 but the asset will be financed at an interest rate of 7.00% over 5 years after a down payment of 15%. The expected revenue and costs by year are given below. When retired, the asset will have no value. Year 1 2 3 4 5 6 Direct Revenue 120,000 280,000 360,000 320,000 210,000 90,000 Direct and Allocated Cost 85,000 120,000 160,000 150,000 110,000 65,000 Prepare a net after tax cash flow (ATCF) statement / exhibit for all 6 years of the new asset. a. What is the net cash flow in year 2? b. What is the net cash flow in year 5? c. What is the PW of the net cash flow applying an interest rate of 12.0%?

The following information is related to Buffalo Company for 2017.

Buffalo Company decided to discontinue its entire wholesale operations (considered a discontinued operation) and to retain its manufacturing operations. On September 15, Buffalo sold the wholesale operations to Rogers Company. During 2017, there were 490,600 shares of common stock outstanding all year.

Prepare a multistep income statement.

Suppose you are the manager of a restaurant that serves an average of 400 meals per day at an average price per meal of $20. On the basis of a survey, you have determined that reducing the price of an average meal to $18 would increase the quantity demanded to 450 per day.

1. Compute the price elasticity of demand between these two points.
   
2. Would you expect total revenues to rise or fall? Explain.
   
3. Suppose you have reduced the average price of a meal to $18 and are considering a further reduction to $16. Another survey shows that the quantity demanded of meals will increase from 450 to 500 per day. Compute the price elasticity of demand between these two points.
   
4. Would you expect total revenue to rise or fall as a result of this second price reduction? Explain.
   
5. Compute total revenue at the three meal prices. Do these totals confirm your answers in (b) and (d) above?

5. You own goods A and B. You are considering increasing price of good A by 10%. Here is the information you have

Pa = 20

Qa = 1000

For each $1 increase in Pa, Qa will decrease by 100.

Pb = 12

Qb = 750

For each $1 increase in Pa, Qb will increase by 100.

(The point of this exercise is to have you do everything the long way then use the delta r formula so you can see the difference)

h. What is the own price elasticity for good A?

i. What is the cross price elasticity of A and B?

j. Calculate the change of revenue using the formula provided in class.

k. Explain why the two methods have different answers.

l. To calculate the change in total revenue from the price change, which method do you prefer? Doing parts a-g or doing part h-j? Briefly explain.

3. What are the major determinants of price elasticity of demand? Use those determinants and your own reasoning in judging whether demand for each of the following products is probably elastic or inelastic: (a) bottled water; (b) toothpaste; (c) Crest toothpaste; (d) ketchup; (e) diamond bracelets; (f) Microsoft Windows operating system. LO4.1

6. How would the following changes in price affect total revenue? That is, would total revenue increase, decrease, or remain unchanged? LO4.2

1. Price falls and demand is inelastic.
2. Price rises and demand is elastic.
3. Price rises and supply is elastic.
4. Price rises and supply is inelastic.
5. Price rises and demand is inelastic.
6. Price falls and demand is elastic.
7. Price falls and demand is of unit elasticity.

11. Suppose the cross-elasticity of demand for products A and B is +3.6, and for products C and D is −5.4. What can you conclude about how products A and B are related? Products C and D? LO4.5

15. Consider an orange island economy that consists of only two companies: an orange company that produces oranges and an orange juice company that purchases oranges from the orange company to produce orange juice. Their income statements in 2015 are as follows:

Orange Company:

   Wages paid to employees                           $15,000

   Taxes paid to government                          $ 5,000

Sales revenue:

             Oranges sold to public                        $10,000

             Oranges sold to Juice Corp.                $25,000

Orange Juice Company:

   Wages paid to employees                           $10,000

   Taxes paid to government                          $ 2,000

   Juice boxes imported from China               $ 1,000

   Oranges purchased from orange corp.        $25,000

   Sales revenue                                              $40,000

1. Please calculate the 2015 GDP of this economy using Product approach, income approach and expenditure approach.
2. Suppose that, in addition to above transactions, the juice company imported juice boxes from China for $1000. Again, calculate the 2015 GDP of this economy using Product approach, income approach and expenditure approach.

The following information is relevant for an individual firm operating in a perfectly competitive market.

What will be the firm's production decision in the short-run?

• Exit

• Shutdown

• Other firms will enter into the market

• Operate

A fixed cost is a cost that:

• exists only in the long-run.

• does not vary with output.

• changes based on the number of workers.

• varies with output.

True or False:

A reason economies of scale exists is due to: Old tools and equipment can no longer be used.

• FALSE

• TRUE

Suppose you have the following information on a firm:

Assume it is their goal to maximize profit.

• Decrease output to maximize profit.

• Not enough iniformation to determine.

• They are producing the profit maximizing level of output.

• Increase output to maximize profit.