Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):

On July 1, 2021, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2021, for $64,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:

In addition to the account balances above, several events occurred during 2021 that have not yet been reflected in the above accounts:

1. A fire caused $54,000 in uninsured damages to the main office building. The fire was considered to be an unusual event.
2. Inventory that had cost $44,000 had become obsolete because a competitor introduced a better product. The inventory was written down to its scrap value of $7,000.
3. Income taxes have not yet been recorded.

Required:
Prepare a multiple-step income statement for the Reed Company for 2021, showing 2020 information in comparative format, including income taxes computed at 25% and EPS disclosures assuming 500,000 shares of outstanding common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)

Contribution Margin, Break-Even Units, Break-Even Sales, Margin of Safety, Degree of Operating Leverage

Aldovar Company produces a variety of chemicals. One division makes reagents for laboratories. The division's projected income statement for the coming year is:

Required:

1. Compute the contribution margin per unit, and calculate the break-even point in units. Calculate the contribution margin ratio and use it to calculate the break-even sales revenue. (Note: Round contribution margin ratio to four significant digits, and round the break-even sales revenue to the nearest dollar.)

2. The divisional manager has decided to increase the advertising budget by $250,000. This will increase sales revenues by $1 million. By how much will operating income increase or decrease as a result of this action? Use your answers from part 1 to determine the amount.
$  Increase

3. Suppose sales revenues exceed the estimated amount on the income statement by $1,500,000. Without preparing a new income statement, by how much are profits underestimated? Use your answers from part 1 to determine the amount.
$

4. Compute the margin of safety based on the original income statement. Round your answer to the nearest dollar.
$

5. Compute the degree of operating leverage based on the original income statement. Round your answer to two decimal places.

If sales revenues are 8% greater than expected, what is the percentage increase in operating income? Round your answer to four decimal places before converting to a percentage. For example, 0.88349 would be rounded to 0.8835 and entered as 88.35%.
% = ?

The Red Fusion​, a local Thai​ restaurant, expects sales to be $ 300 comma 000 in January. Its average customer restaurant bill is $ 25. Only 40 % of the restaurant bills are paid with​ cash; 30 % are paid with credit cards and 30 % with debit cards. The transaction fees charged by the credit and debit card issuers are as​ follows:
Credit​ cards: $ 0.25 per transaction​ + 5 % of the amount charged
Debit​ cards: $ 0.45 per transaction​ + 4 % of the amount charged

How much of the total sales revenue is expected to be paid in​ cash?
2.
How many customer transactions does the company expect in​ January?
3.
How much of the total sales revenue is expected to be paid with credit​ cards?
4.
How many customer transactions will be paid for by customers using credit​ cards?
5.
When budgeting for​ January's operating​ expenses, how much should the restaurant expect to incur in credit card transaction​ fees?
6.
How much of the total sales revenue is expected to be paid with debit​ cards?
7.
How many customer transactions will be paid for by customers using debit​ cards?
8.
When budgeting for​ January's operating​ expenses, how much should the restaurant expect to incur in debit card transaction​ fees?
9.
How much money will be deposited in the​ restaurant's bank account during the month of January related to credit and debit card​ sales? Assume the credit and debit card issuers deposit the funds on the same day the transactions occur at the restaurant​ (there is no processing​ delay).
10.
What is the total amount of money that the restaurant expects to deposit in its bank account during the month of January from​ cash, credit​ card, and debit card​ sales? Again assume the credit and debit card issuers deposit the funds on the same day that the transaction occurs.

1. The basic data structure for a Pivot Table is

2. Which traits can describe big data?

3. When you only have one data series to visualize, you do need to add a legend.

True

False

4. Which of the following would NOT be a good choice to display as a pie chart?

5.

Suppose you build a model of your furniture business in Excel. Which of the following statements about the decision variables (also called “controllables”) and uncontrollables in the model is true?

6.

Which of the following analyses is the foundation for the advanced analyses?

7.

A: Prepare a ledger using the three-column form of account. Enter the trial balance amounts into the balance column and then post the adjusting entries. (Post entries in the order of journal entries posted in the previous part of the question. Round answers to 0 decimal places, e.g. 5,275.)

The Skyline Motel opened for business on May 1, 2017. Its trial balance before adjustment on May 31 is as follows.

In addition to those accounts listed on the trial balance, the chart of accounts for Skyline Motel also contains the following accounts and account numbers: No. 142 Accumulated Depreciation—Buildings, No. 150 Accumulated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No. 619 Depreciation Expense, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.

Other data:

Assignment #2 Integrated Audit Practice Case

1. AICPA auditing standards require a discussion among the engagement team about the susceptibility of the financial statements to material misstatement. What are some of the purposes of this discussion?

2. The auditor reviews important financial statement numbers and ratios at both the beginning and the completion of the audit. Compare and contrast the purposes of (1) preliminary analytical procedures and (2) analytical procedures performed near the completion of the audit.

3. When you identified income statement fluctuations in steps (e) and (f) of this assignment, which information did you find most helpful — comparisons of the current year’s and prior year’s balances, or comparisons of the current year’s and prior year’s balances as a percentage of sales? Explain.

4. The auditor should consider the results of analytical procedures performed in planning the audit that indicate possible implausible or unexpected relationships in assessing the risk of fraud. For example, if the auditor compares revenue reported by product line each month (i.e., monthly sales volume) with sales (or production) capacity, and determines that the number of items reported as sold exceeds capacity, then the auditor should be concerned that revenue may be materially overstated due to fraudulent revenue transactions. What other types of unexpected relationships, ratios, or trends might suggest an increased risk of fraud? Discuss any relationships, ratios, or trends you identified in this assignment that might represent an increased fraud risk.

5. The client’s “going concern” status is an audit reporting issue that is addressed at the conclusion of the audit. Auditing standards require the auditor to assess whether the client is likely to continue in existence for a reasonable period of time after the date of the financial statements. Indicate reasons why the auditor should also assess the company’s going concern status in the planning stage of the audit.

A young engineer is evaluating a 5-year investment, by looking at the cash flows at the end of each year. The capital cost of the project is considered as occurring at the end of a hypothetical year, 0. The project has no start-up revenue, but requires a start-up capital cost of $50,000. The project promises revenues of $0, $20,000; $30,000; $40,000; $50,000, and $100,000; at the end of years 0, 1, 2, 3, 4, and 5, respectively. In addition to the $50,000 start-up cost at the end of year, 0; the project has operating costs of $24,000 at the end of each year 1, 2, 3, 4, and 5.

The engineer needs to know the net present value of this investment at a given annual interest rate. This can be done by finding the present value of each yearly revenue, B_n, and each yearly Cost, C_n, at the given rate of interest, i. In this case, n, is the number of the year from 0 to 5.

The present value of a cash flow, P_n is given by the formula:

P_o = P_n (1 + i)^-n, where;

P_o is the present value of a cash flow, such as B_n or C_n

P_n is the cash flow item in year, n.

n, is the year; 0,1, 2, 3, 4, 5

i, is the annual interest rate expressed as a decimal.

1. Please construct an excel spreadsheet to display this information clearly. Be sure to show; each year n; from 0 to 5, each revenue amount, B_n, each Cost amount, C_n. Also show the calculated present value of each B_n term, the calculated present value of each C_n term, the net present value of each year’s cash flow, and at the end, the total net present value of the investment. Assume an annual interest rate of 5% (0.05). -

2. Use your spreadsheet to find the total net present value of the investment at an annual interest rate of 10%.   

Case Study: The Flower Shop

Anastasia owns a successful flower shop. She has been in business for four years and enjoys a good reputation in the community. She is a good marketer and good manager. The shop is in a prominent location with an ample parking lot which thus provides good foot traffic for the business. The shop is opened six days a week from 10am to 5pm. Recently, she has been thinking about extending the flower shop’s hours an extra three hours per opened day. She anticipates the cost to be consistent with historical averages and can forecast a realistic revenue stream.

The costs for the flower shop include the fixed cost of the building lease which is

$2,100 monthly along with interest on loans of $400 per month. The electricity and utilities on a monthly basis average $250. She views this cost as fixed as the heat and refrigeration systems are always on. The additional hours of lights are considered negligible.

The gross cost of compensation, which include wages and benefits, for an hour of labor is $15 per person. She is a good trainer which means she will not need to be on site for all extended hours. The average customer transaction in the store is

$56. She uses this number to estimate the per dollar average variable cost of bringing the raw flowers for sale per customer at 30 cents (.30). She further estimates the per dollar average variable cost of presentation (ex. Wrapping, vase, etc.) at 35 cents (.35).

She estimates that the additional revenue generated for the extended hours on an average basis will be as follows:

Q5: Describe the opportunities and challenges might encounter in extending the flower shop hours.