Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,980 pizzas at an average selling price of $13 per pizza and for 200 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)

Instructions – PLEASE READ THEM CAREFULLY

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Assignment Question(s):                                                   

Q1- Provide an example of each title here and then record the journal entries.

Following is the first given answer.

1-Purchasing Equipment for cash

Given answer:

ABC company purchased equipment for SAR20,000 cash .

Equipment 20,000

Cash                   20,000

2-Issuing common stocks receiving cash.

3-Providing service receiving cash.

4-Purchasing supplies on credit.

5-Borrowing money from a bank.

6-Paying employees their salaries.

Q2- What is the accrual basis of accounting? When should revenue and expense be recognized in the accrual basis? Provide an example.                         (1 Mark)

Q3- On your own words, explain the purpose and the importance of the income statement, and prepare the income statement for ABC company based on the following information taken from the trial balance in 2019.                               

The Pritzker Music Pavilion in downtown Chicago is a technologically sophisticated and uniquely designed performing arts venue that hosts live concerts attended by over half a million patrons a year. A group of local organizers, led by a prominent local businesswoman, would like to use the pavilion for a concert to benefit Ceres, a non-profit, national network of investors and environmental organizations working with companies and investors to address sustainability challenges such as global climate change. If the pavilion management agrees to host the concert, the organizers will donate all profits to Ceres (or absorb any losses).

Based on the following revenue and cost information, the organizers would like you to answer the question.

There are three sources of revenue for the concert:

1. Tickets will be sold for $14.00 each.
2. A large multinational corporation headquartered in Chicago will donate $2.00 per ticket sold.
3. Each concert attendee is expected to spend an average of $17.00 for parking, food, and merchandise. [Assume that everyone who buys a ticket will attend the concert.]

On the expense side, there are also three components:

1. A popular national group has agreed to perform at the concert. Normally, the group demands a significant fixed fee to perform, but to reduce the risk for the organizers, the group has agreed to perform for $5.50 per ticket sold.
2. The organizers will pay several companies to operate the parking, food, and merchandise concessions. They will pay $21,000 plus 14% of all parking, food, and merchandise revenue.
3. The organizers will pay the pavilion $85,000 plus $8.00 per person attending to cover its operating expenses (production, maintenance, advertising, etc.).

REQUIRED [ROUND YOUR CM ANSWER TO THE NEAREST CENT; ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST DOLLAR.]

Assume that the organizers can negotiate the fixed payment for the pavilion's operating expenses. If the organizers expect to sell 8,000 tickets, how much can they afford to pay and still earn a profit of $90,000 (ignore taxes)?

The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2021 ($ in thousands): sales revenue, $15,700; cost of goods sold, $6,400; selling expenses, $1,320; general and administrative expenses, $820; interest revenue, $80; interest expense, $200. Income taxes have not yet been recorded. The company’s income tax rate is 25% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2021 ($ in thousands). All transactions are material in amount.

1. Investments were sold during the year at a loss of $240. Schembri also had an unrealized gain of $360 for the year on investments in debt securities that qualify as components of comprehensive income.

2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,400.

3. During the year, Schembri completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP. The division had incurred a loss from operations of $580 in 2021 prior to the sale, and its assets were sold at a gain of $1,440.

4. In 2021, the company’s accountant discovered that depreciation expense in 2020 for the office building was understated by $220.

5. Negative foreign currency translation adjustment for the year totaled $260.

Required:

1. Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2021, including earnings per share disclosures. One million shares of common stock were outstanding at the beginning of the year and an additional 400,000 shares were issued on July 1, 2021.

2. Prepare a separate statement of comprehensive income for 2021.

The following incomplete balance sheet for the Sanderson Manufacturing Company was prepared by the company’s controller. As accounting manager for Sanderson, you are attempting to reconstruct and revise the balance sheet. SANDERSON MANUFACTURING COMPANY Balance Sheet At December 31, 2018 ($ in 000s) Assets Current assets: Cash $ 3,250 Accounts receivable 7,500 Allowance for uncollectible accounts (2,400 ) Finished goods inventory 8,000 Prepaid expenses 3,200 Total current assets 19,550 Long-term assets: Investments 5,000 Raw materials and work in process inventory 4,250 Equipment 29,000 Accumulated depreciation—equipment (6,200 ) Patent ? Total assets $ ? Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 7,200 Note payable 8,000 Interest payable—note 2,100 Deferred revenue 7,000 Total current liabilities 24,300 Long-term liabilities: Bonds payable 7,500 Interest payable—bonds 1,200 Shareholders’ equity: Common stock $ ? Retained earnings ? ? Total liabilities and shareholders’ equity ? Additional information ($ in 000s): Certain records that included the account balances for the patent and shareholders’ equity items were lost. However, the controller told you that a complete, preliminary balance sheet prepared before the records were lost showed a debt to equity ratio of 1.2. That is, total liabilities are 120% of total shareholders’ equity. Retained earnings at the beginning of the year was $8,000. Net income for 2018 was $2,550 and $600 in cash dividends were declared and paid to shareholders. Management intends to sell the investments in the next six months. Interest on both the note and the bonds is payable annually. The note payable is due in annual installments of $2,000 each. Deferred revenue will be recognized as revenue equally over the next two fiscal years. The common stock represents 700,000 shares of no par stock authorized, 450,000 shares issued and outstanding.

The following incomplete balance sheet for the Sanderson Manufacturing Company was prepared by the company’s controller. As accounting manager for Sanderson, you are attempting to reconstruct and revise the balance sheet. SANDERSON MANUFACTURING COMPANY Balance Sheet At December 31, 2018 ($ in 000s) Assets Current assets: Cash $ 3,250 Accounts receivable 7,500 Allowance for uncollectible accounts (2,400 ) Finished goods inventory 8,000 Prepaid expenses 3,200 Total current assets 19,550 Long-term assets: Investments 5,000 Raw materials and work in process inventory 4,250 Equipment 29,000 Accumulated depreciation—equipment (6,200 ) Patent ? Total assets $ ? Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 7,200 Note payable 8,000 Interest payable—note 2,100 Deferred revenue 7,000 Total current liabilities 24,300 Long-term liabilities: Bonds payable 7,500 Interest payable—bonds 1,200 Shareholders’ equity: Common stock $ ? Retained earnings ? ? Total liabilities and shareholders’ equity ? Additional information ($ in 000s): Certain records that included the account balances for the patent and shareholders’ equity items were lost. However, the controller told you that a complete, preliminary balance sheet prepared before the records were lost showed a debt to equity ratio of 1.2. That is, total liabilities are 120% of total shareholders’ equity. Retained earnings at the beginning of the year was $8,000. Net income for 2018 was $2,550 and $600 in cash dividends were declared and paid to shareholders. Management intends to sell the investments in the next six months. Interest on both the note and the bonds is payable annually. The note payable is due in annual installments of $2,000 each. Deferred revenue will be recognized as revenue equally over the next two fiscal years. The common stock represents 700,000 shares of no par stock authorized, 450,000 shares issued and outstanding.

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate Construction uses the completed contract method of accounting for long-term construction contracts.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2-a.In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred).
2-b.In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract.
4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information.

The Pritzker Music Pavilion in downtown Chicago is a technologically sophisticated and uniquely designed performing arts venue that hosts live concerts attended by over half a million patrons a year. A group of local organizers, led by a prominent local businesswoman, would like to use the pavilion for a concert to benefit Ceres, a non-profit, national network of investors and environmental organizations working with companies and investors to address sustainability challenges such as global climate change. If the pavilion management agrees to host the concert, the organizers will donate all profits to Ceres (or absorb any losses).

Based on the following revenue and cost information, the organizers would like answers to several questions.

There are three sources of revenue for the concert:

1. Tickets will be sold for $16.00 each.
2. A large multinational corporation headquartered in Chicago will donate $2.00 per ticket sold.
3. Each concert attendee is expected to spend an average of $19.00 for parking, food, and merchandise.

On the expense side, there are also three components:

1. A popular national group has agreed to perform at the concert. Normally, the group demands a significant fixed fee to perform, but to reduce the risk for the organizers, the group has agreed to perform for $5.50 per ticket sold.
2. The organizers will pay several companies to operate the parking, food, and merchandise concessions. They will pay $23,000 plus 13% of all parking, food, and merchandise revenue.
3. The organizers will pay the pavilion $90,000 plus $6.00 per ticket sold to cover its operating expenses (production, maintenance, advertising, etc.)

Assuming a tax rate of 31% on profits from the concert, what must dollar ticket sales be in order for after-tax concert profits to be $90,000?

Assume that the organizers can negotiate the fixed portion of the pavilion's operating expenses. If the organizers expect to sell 9,000 tickets, how much operating fixed costs can they afford to pay and still earn a profit of $90,000 (ignore taxes)?

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,950 pizzas at an average selling price of $20 per pizza and for 190 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,650 pizzas at an average selling price of $18 per pizza and for 250 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)