Exercise 1-4. Information Age [LO 4]

The Wellington Hotel is a posh hotel in Manhattan that uses a customer relationship management (CRM) system to track customer preferences and purchases.

Provide two examples of specific information the CRM system might capture and how the hotel could use the information to enhance revenue and/or the customer experience.

Toll Brothers is building some homes in Yorba Linda. The contract price is $250 million, the total estimate costs are $200 million. If the costs incurred to date at the end of first, second, and third year are $10 million, 40 million, and $100 million respectively, what is the amount of revenue recognized in year 3 if the percentage of completion method is used?

Answer each question by defining the term in your own words to demonstrate an understanding. Cite any pertinent Internal Revenue Code sections or Regulations when possible.

1. Applicable Credit Amount

2. Crummey Power

3. Unified Credit

4. Annual Exclusion

5. Net Gift

6. Disclaimer

7. Marital Deduction

Latter Corporation received an order from Murray, Inc. for electronic components. Because

Murray is struggling financially, Latter called the company and said it will get ready to fulfill

the order, but it will not ship the order until payment is received by cashier’s check.

Required:

Does Latter have a contract with Murray that is subject to the 5-step revenue recognition

model?

A company incurs the following costs on a particular project:

The total revenue from the project is expected to be $2,000,000. Under the percentage-of-completion method, the project’s net income in 2008 is closest to:

Group of answer choices

a. $300,000

b. $100,000

c. $600,000

You are a real estate agent thinking of placing a sign advertising your services at a local bus stop. The sign will cost $10,000 and will be posted for one year. You expect it will generate additional revenue of $1500 per month.
a.   What is the payback period?
b.   What is the discounted payback period if the discount rate is 1% per month?

1. ABC expends $500,000 for work performed under a contract with a total contract price of $3 million and estimated costs of $2.5 million. It sends a bill to the customer for $400,000 under the terms of the contract.

a. How much revenue and gross profit should the company recognize in the income statement?

b. How is the $400,000 billing reported on the balance sheet?

Even when there are no externalities in a market, a government may still tax a good such as petrol to earn revenue. Describe what happens to each of the surpluses (including total surplus) in the market for petrol when this occurs, and why.

What elasticity is the market for petrol likely to exhibit? Explain how elasticity influences the impact of the price change on total surplus.

Assume that the market of medical supplies is in perfect competition.

In early April, Trump administration proposed export bans on medical supplies. Suppose America is large economy and large exporter of medical goods.

Analyze the impact of the export bans on comsumer surplus, producer surplus, government revenue, and national welfare in the US. Use a graph to assist your analysis.

LG sold 800 G7 phones in October for LG Electronics. As the demand was so high, LG can just deliver the G7 phones in November and it allowed LG Electronics for paying for them just in December and January. When will LG record the revenue from this sale?

A. October

B. November

C. December

D. December and January