Assignment No. 3.4

PROBLEM: Suppose you are the administrator in charge of setting the toll for crossing a toll bridge across a river. The current toll is $1 per trip and at that toll 1000 trips per hour are taken across the bridge. (a) If the price elasticity of demand for trips is 2.0, what will happen to the number of trips taken per hour if you raise the toll by 10 percent? How would this affect the total revenue collected per hour?(b) If the price elasticity of demand for trips is 0.5, what will happen to the number of trips taken per hour if you raise the toll by 10 percent? How would this affect the total revenue collected per hour?(c) Other things equal, at the current toll of $1, what do you think will happen to the elasticity of demand for trips, if the average incomes of people who use the bridge rise? Explain why.(d) Other things equal, at the current toll of $1, what do you think will happen to the elasticity of demand for trips if a non-toll bridge is built a few miles up the river? Explain why.

3. The components of planned aggregate spending in a certain economy are given by Consumption Function: C = 800 + 0.75(Y - T) – 2000r Planned Investment: I p = 400–3000r Government Revenue and Spending: T = 300 and G = 450 Net Export: NX = 75 where r is the real interest rate (For example, r = 0.01 means that the real interest rate is 1 percent). (1) Find the level of public saving. (2) Suppose that the real interest rate is 5%. Show the autonomous consumption level and the autonomous expenditure level. (3) How does a two percentage point decrease in the real interest rate affect the short-run equilibrium output? 7 (4) Suppose that the potential output of this economy equals 4800. Find the short-run equilibrium real interest rate that brings the economy to full employment. (5) Suppose Government Revenue T = tY (0< t <1); r stays at the initial level (5%), Please calculate the multiplier effect of the government spending increase on the output change (ΔY/ΔG).

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,100 per month plus $0.05 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.00 per car washed.

The actual operating results for August are as follows:

Required:

Calculate the company's revenue and spending variances for August.

PLEASE ANSWER THE LAST QUESTIONS (as many as you can starting with the last question)

On January 1, 2016, the following information was drawn from the accounting records of Carter Company: cash of $400; land of $2,400; notes payable of $700; and common stock of $1,540. Required a. Determine the amount of retained earnings as of January 1, 2016.

g. During 2016, Carter Company earned cash revenue of $660, paid cash expenses of $380, and paid a cash dividend of $58. (Hint: It is helpful to record these events under an accounting equation before preparing the statements.) (Enter any decreases to account balances with a minus sign. Select "NA" if there is no effect on the "Account Titles for Retained Earnings".)

g-2. Prepare a statement of changes in stockholders’ equity dated December 31, 2016.

g-3. Prepare a balance sheet dated December 31, 2016. g-4.

Prepare a statement of cash flows dated December 31, 2016. (Amounts to be deducted should be indicated with a minus sign.)

j. What is the balance in the Revenue account on January 1, 2016?

Bottoms Up approach
P5.12   A fast food restaurant uses a standard cost approach to aid in controlling its food cost.   The

             Following are the standard costs, selling prices and quantities sold of each of the five items

             Featured on the menu during a particular week:

Item         Cost         Selling Price            Quantity Sold

                  1             1.80                      3.95                               260

                  2             2.10                      4.95                               411

                  3             4.20                      8.95                               174

                  4             3.05                      6.95                              319

                  5             1.40                      3.95                              522

             Total actual cost for the week was $3,804.10 and total actual sales revenue was $8,873.40.

1.   Calculate total standard cost, total standard sales revenue and cost of sales percentages.

Comment on the results.

2.   The following week, with no change in menu or standard costs and selling prices, there was

   a change in the sales mix.   Although quantities sold of Items 2, 3 and 5 were virtually the

   same, many more of Item 4 and many less of Item 1 were sold.   As a result of this, would

   you expect the overall standard cost percentage to increase or decrease?   Explain your

   answer.

The Village of Seaside Pines prepared the following General Fund Trial Balance as of December 31, 2017, the last day of its fiscal year. Control accounts are used for budgetary entries.

Prepare the Statement of Revenues, Expenditures, and Changes in Fund Balance for the General Fund for the year ended December 31.

Lakeview Company completed the following two transactions. The annual accounting period ends December 31.

1. On December 31, calculated the payroll, which indicates gross earnings for wages ($68,000), payroll deductions for income tax ($6,800), payroll deductions for FICA ($5,100), payroll deductions for American Cancer Society ($2,550), employer contributions for FICA (matching), and state and federal unemployment taxes ($595). Employees were paid in cash, but payments for the corresponding payroll deductions have not yet been made and employer taxes have not yet been recorded.
2. Collected rent revenue of $5,775 on December 10 for office space that Lakeview rented to another business. The rent collected was for 30 days from December 12 to January 10 and was credited in full to Deferred Revenue.

Required:

1. 1. & 2. Prepare the journal entries to record payroll on December 31, the collection of rent on December 10 and adjusting journal entry on December 31.
2. 3. Show how any of the liabilities related to these items should be reported on the company’s balance sheet at December 31.

Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information:

• Each T-shirt is expected to sell for $16.
• The purchasing manager buys the T-shirts for $6 each.
• The company needs to have enough T-shirts on hand at the end of each quarter to fill 26 percent of the next quarter’s sales demand.
• Selling and administrative expenses are budgeted at $82,000 per quarter plus 12 percent of total sales revenue.

Required:
1. Determine budgeted sales revenue for each quarter.



2. Determine budgeted cost of merchandise purchased for each quarter.



3. Determine budgeted cost of good sold for each quarter.



4. Determine selling and administrative expenses for each quarter.



5. Complete the budgeted income statement for each quarter.

Dalton Construction Co. contracted to build a bridge for $8,000,000. Construction began in 2018 and was completed in 2019. Data relating to the construction are: 2018 2019 Costs incurred during the year $2,105,600 $2,408,400 Estimated costs to complete 2,374,400 ― Dalton uses the percentage-of-completion method.

Part 1 How much revenue should be reported for 2018?

Part 2 Make the entry to record progress billings of $2,905,600 during 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Part 3 Make the entry to record the revenue and gross profit for 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Part 4 How much gross profit should be reported for 2019?