Westerville Company reported the following results from last year’s operations:

At the beginning of this year, the company has a $175,000 investment opportunity with the following cost and revenue characteristics:

The company’s minimum required rate of return is 15%.

1-1.  What is last year’s margin?

1-2. What is last year’s turnover?

2. What is last year’s return on investment (ROI)?

3. What is the margin related to this year’s investment opportunity?

1. George sells pepperoni pizzas at $25 per pizza from a stall on the beach.   George’s pays $30 per hour to rent his stall and pays his worker $10 per hour to make and sell the pizzas. The ingredients cost $15 per pizza. These are George’s only costs.

NOTE: The hourly cost function (and table) are costs per hour. Note, however, that the total costs in any given hour depend on the number of pizzas sold that hour. The function and table should therefore only be a function of one variable, Q, the number of pizzas. But it should, of course, take into account any other hourly fixed costs.

1. (3 points) What is George’s (hourly) total cost function?

2. Fill in the following information in the table below:
   1. (3 points) Total (hourly) costs
   2. (3 points) Marginal costs
   3. (3 points) Total (hourly) revenue
   4. (3 points) Marginal revenue

The following transactions occurred during March 2018 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.

1. Issued 34,000 shares of common stock in exchange for $340,000 in cash.
2. Purchased equipment at a cost of $44,000. $12,000 cash was paid and a note payable was signed for the balance owed.
3. Purchased inventory on account at a cost of $86,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled $140,000. The cost of the goods sold was $74,000.
5. Paid $5,400 in rent on the warehouse building for the month of March.
6. Paid $6,400 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2018.
7. Paid $74,000 on account for the merchandise purchased in 3.
8. Collected $59,000 from customers on account.
9. Recorded depreciation expense of $1,400 for the month on the equipment.

Post the above transactions to the below T-accounts. Assume that the opening balances in each of the accounts is zero.

Prepare a trial balance from the ending account balances.

Cullumber Company expects to have a cash balance of $32,200 on January 1, 2022. These are the relevant monthly budget data for the first two months of 2022.

Prepare a cash budget for January and February.

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.

1. Issued 37,000 shares of common stock in exchange for $370,000 in cash.
2. Purchased equipment at a cost of $47,000. $13,500 cash was paid and a notes payable to the seller was signed for the balance owed.
3. Purchased inventory on account at a cost of $92,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled $155,000. The cost of the goods sold was $77,000.
5. Paid $5,700 in rent on the warehouse building for the month of March.
6. Paid $6,700 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021.
7. Paid $77,000 on account for the merchandise purchased in 3.
8. Collected $62,000 from customers on account.
9. Recorded depreciation expense of $1,700 for the month on the equipment.

Post the above transactions to the below T-accounts. Assume that the opening balances in each of the accounts is zero. Prepare a trial balance from the ending account balances.

Exercise 7-14

Sheridan Company expects to have a cash balance of $57,950 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017.

1.Collections from customers: January $82,950, February $157,950.

2.Payments to suppliers: January $51,950, February $86,950.

3.Wages: January $31,790, February $41,790. Wages are paid in the month they are incurred.

4.Administrative expenses: January $22,790, February $25,790. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.

5.Selling expenses: January $16,790, February $21,790. These costs are exclusive of depreciation. They are paid as incurred.

6.Sales of short-term investments in January are expected to realize $13,790 in cash. Sheridan Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $31,950.

Prepare a cash budget for January and February

PART A Blue Cow is a long-established soft drink organisation, manufacturing a popular product for major supermarket chains. The audit of the company has been straightforward in the past, and the company has reliable suppliers and loyal customers. In addition, the directors and senior management are highly respected for their abilities and the strong ethical culture they inspire, as well as the excellent internal controls they demand. The company only sells one product – a 300ml can, which has historically been priced at a 331/3 % markup on cost, yielding a gross profit percentage (GP%) of 25%. In the past any variations on the GP% have never been outside the range of 24% to 26%.

Required: a) Identify the three components of audit risk and explain what your assessment of risk is for each component, based on the above information (use only ‘high’, ‘medium’ or ‘low’).

b) Explain how your risk assessments in (a) above would impact on planned substantive procedures.

B1 - Snow Company started operations on February 1, 2020 by depositing $3,000,000 cash in the bank as capital. The following transactions took place during the first month of operations:

February 3: Purchased supplies for $22,500 in cash.

February 9: Purchased equipment for $255,000, paid $105,000 in cash and the remaining amount will be paid after 10 days.

February 12: Received a bill from Dubai News for advertising amounted to $1,650.

February 14: Paid $24,000 salaries in cash.

February 16: Paid $6,000 utilities expense in cash.

February 17: Provided services to customers for $195,000 in cash.

February 19: Paid $150,000 for equipment purchased on February 9.

February 28: The owner withdrew $7,500 cash for personal use.

Required:

1. Prepare the trial balance of Snow Company on February 29, 2020.
2. Prepare the financial statements of Snow Company on February 29, 2020.

The following transactions occurred during March 2018 for the Wainwright Corporation. The company owns and operates a wholesale warehouse. Issued 31,000 shares of common stock in exchange for $310,000 in cash. Purchased equipment at a cost of $41,000. $10,500 cash was paid and a note payable was signed for the balance owed. Purchased inventory on account at a cost of $80,000. The company uses the perpetual inventory system. Credit sales for the month totaled $125,000. The cost of the goods sold was $71,000. Paid $5,100 in rent on the warehouse building for the month of March. Paid $6,100 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2018. Paid $71,000 on account for the merchandise purchased in 3. Collected $56,000 from customers on account. Recorded depreciation expense of $1,100 for the month on the equipment. Post the above transactions to the below T-accounts. Assume that the opening balances in each of the accounts is zero. Prepare a trial balance from the ending account balances.

B1 - Snow Company started operations on February 1, 2020 by depositing $3,000,000 cash in the bank as capital. The following transactions took place during the first month of operations:

February 3: Purchased supplies for $22,500 in cash.

February 9: Purchased equipment for $255,000, paid $105,000 in cash and the remaining amount will be paid after 10 days.

February 12: Received a bill from Dubai News for advertising amounted to $1,650.

February 14: Paid $24,000 salaries in cash.

February 16: Paid $6,000 utilities expense in cash.

February 17: Provided services to customers for $195,000 in cash.

February 19: Paid $150,000 for equipment purchased on February 9.

February 28: The owner withdrew $7,500 cash for personal use.

Required:

1. Prepare the trial balance of Snow Company on February 29, 2020.
2. Prepare the financial statements of Snow Company on February 29, 2020.