On January 1, 2017, Sandhill Co.'s accounting records contained these liability accounts.

During January, the following selected transactions occurred.

During January, the company’s employees earned wages of $72,900. Withholdings related to these wages were $5,577 for Social Security (FICA), $5,207 for federal income tax, and $1,562 for state income tax. The company owed no money related to these earnings for federal or state unemployment tax. Assume that wages earned during January will be paid during February. Wages or payroll tax expense have not been recorded as of January 31.

Traynor Corporation's capital structure consists of 50,000 shares of common stock at January 1 and as of year-end. At December 31, 2018 an analysis of the accounts and discussions with company officials revealed the following information:

Additional information:

• Income tax rate for all income items is 30%.
• Traynor decided to discontinue its entire wholesale operations and on August 31, Traynor sold the wholesale operations to Donald Corporation for a loss of $30,000. The wholesale division had a total loss on operations of $50,000 from January 1 to August 31.
• There was an error noted in the prior year financial statements whereas depreciation expense of $20,000 was omitted.

Instructions:

In an excel spreadsheet, prepare the following:

Create a general journal using the following information. Blunt Company makes credit sales of $25,000 during the month of February 2019. During 2019, collections are received on February sales of $24,500, accounts representing $500 of these sales are written off as uncollectible, and a $100 account previously written off is collected. 1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

2. Which method—recording bad debts at the time of sale or when they actually occur—is preferred?

Recording bad debts ______ is preferred because this approach enables companies to properly value their receivables and match expenses against revenues in the current period.

A. when they actually occur

B. at time of sale

The following trial balance before adjustments is for Snowcrest Ltd. on December 31, 2016:

Data for adjusting entries:

1.As at December 31, 2016, 80% of the wages that had been paid in advance to the salespeople had been earned.

2.A count of the supplies at year end revealed that $600 of supplies were still on hand.

3.Depreciation on the equipment for 2016 was $1,000.

4.The unearned revenue was advance receipts for future deliveries of goods. By December 31, 2016, two thirds of these deliveries had been made.

5.The bank loan was a six-month loan taken out on October 1, 2016. The interest rate on the loan is 9%, but the interest is not due to be paid until the note is repaid on April 1, 2017.

6.Salaries owed at year end and not yet recorded were $500.

7.The rent expense figure includes $600 paid in advance for January 2017.

8.Income tax for the year should be calculated using a tax rate of 25%. (Hint: After you finish the other adjusting entries, determine the income before income tax and then calculate the tax as 25% of this amount.)

Required

Prepare the adjusting entries for the year 2016.

Fill in the blanks in the following table. At which level of output do we obtain maximum profit? What is the relationship between marginal revenue and marginal cost at the profit-maximizing level of output?

Suppose that you need to buy a refrigerator for your office. You recognize that there are two alternative models in the market that might meet your needs. If you buy model A, you have to pay AZN 1000 but with this model you will decrease your electricity bills by AZN 50 per year for the next 5 years. If you prefer model B, you have to pay AZN 800 but you don’t see any decrease in your electricity bills. If the interest rate is 5%, which model will you buy?

Explain the effect of minimum wage policy on labor market. What are the arguments for supporters and opponents of minimum wage policy?

Suppose the price elasticity of demand for Azercell cards is -2. If Azercell managers want to increase their profits, how should they change the price of Azercell cards? Explain in detail.

Suppose the income elasticity of demand for AZAL flight tickets is 1.75. If the average income level decreases by 6%, what would be the effect of this recession on the demand for AZAL flight tickets? Explain in detail.

Problem 11-2A

Fechter Corporation had the following stockholders’ equity accounts on January 1, 2015: Common Stock ($4 par) $431,680, Paid-in Capital in Excess of Par—Common Stock $223,430, and Retained Earnings $119,370. In 2015, the company had the following treasury stock transactions.

Mar. 1 Purchased 6,770 shares at $8 per share.

June 1 Sold 1,230 shares at $12 per share.

Sept. 1 Sold 1,370 shares at $10 per share.

Dec. 1 Sold 1,160 shares at $6 per share.

Fechter Corporation uses the cost method of accounting for treasury stock. In 2015, the company reported net income of $27,060.

Prepare the stockholders’ equity section for Fechter Corporation at December 31, 2015.

List of accounts:

Accounts Payable
Accounts Receivable
Accumulated Depreciation-Buildings
Accumulated Depreciation-Equipment
Allowance for Doubtful Accounts
Bad Debts Expense
Buildings
Cash
Cash Dividends
Common Stock
Common Stock Dividends Distributable
Cost of Goods Sold
Depreciation Expense
Dividends Payable
Equipment
Income Summary
Interest Expense
Interest Payable
Land
No Entry
Operating Expenses
Organization Expense
Other Operating Expenses
Paid-in Capital from Treasury Stock
Paid-in Capital in Excess of Par-Common Stock
Paid-in Capital in Excess of Par-Preferred Stock
Paid-in Capital in Excess of Stated Value-Common Stock
Patents
Preferred Stock
Retained Earnings
Salaries and Wages Expense
Salaries and Wages Payable
Sales Revenue
Service Revenue
Stock Dividends
Supplies
Supplies Expense
Treasury Stock
Unearned Service Revenue

Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:

The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.

Required:

1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Sun Corporation received a charter that authorized the issuance of 101,000 shares of $6 par common stock and 20,000 shares of $100 par, 7 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first two years of operation:

Year 1

Year 2

Required
a. Prepare journal entries for these transactions for Year 1 and Year 2 and post them to T-accounts.

please comment on post

The major advantage of extending credit sales is that it will increase sales revenue. This is because customers who can't produce cash today are still able to buy the good or service of their choice.

Extending credit sales is usually a good idea for businesses, but there are a few important factors to consider. First, the business needs sufficient cash flow to account for Cost of Goods Sold (inventory). Customers' payments may delayed, but suppliers still have to get paid on time. Thus, the business has to be keenly aware of its cash levels.

This is especially true for businesses that sell large durable goods at low volumes, like airplane engines. If a customer is unable to pay its debt, this bad debt may have a big affect on cash levels available for suppliers and investment in other activities.

The most important factor to consider when deciding whether to offer credit sales is the anticipated bad debt expense. This is the percentage of credit sales that are not ultimately paid. The business will be forced to eventually write this off against the account receivables balance (credit). This may lead to a lower credit rating. A smaller account receivable balance, which is considered liquid, is not good if you wish to borrow against that balance (secured borrowing).

Ultimately, a business has to decide whether 1) the increase in sales revenue will be greater than the bad debt expense arising from extending credit to customers; and 2) whether the increase in sales revenue is sufficient to account for reduced and/or delayed cash flows.

It therefore goes without saying that the credit worthiness of customers should be evaluated before deciding to lend. Background checks and credit scores should be reviewed. The goal of course to minimize any future bad debt expense.

P. 1–1 Budgeting practices that satisfy cash requirements may not promote interperiod equity. The Burnet County Road Authority was established as a separate government to maintain county high- ways. The road authority was granted statutory power to impose property taxes on county residents to cover its costs, but it is required to balance its budget, which must be prepared on a cash basis. In its rst year of operations it engaged in the following transactions, all of which were consistent with its legally adopted cash‐based budget:

1. Purchased $10 million of equipment, all of which had an anticipated useful life of 10 years. To nance the acquisition the authority issued $10 million in 10‐year term bonds (i.e., bonds that mature in 10 years)

2. Incurred wages, salaries, and other operating costs, all paid in cash, of $6 million

3. Paid interest of $0.5 million on the bonds

4. Purchased $0.9 million of additional equipment, paying for it in cash; this equipment had a useful life of only three years

a. The authority’s governing board levies property taxes at rates that will be just suf cient to balance the authority’s budget. What amount of tax revenue will it be required to collect?

b. Assume that in the authority’s second year of operations, it incurs the same costs, except that it pur- chases no new equipment. What amount of tax revenue will it be required to collect?

c. Make the same assumption as to the tenth year, when it will have to repay the bonds. What amount of tax revenue will it be required to collect?

d. Comment on the extent to which the authority’s budgeting and taxing policies promote interperiod equity. What changes would you recommend?