Knight Corporation produces and sells one product. Knight has provided the following annual per unit cost data at an activity level of 100,000 units: $ Per Unit Sales 100.00 Direct labor 25.00 Direct material 30.00 Variable manufacturing overhead 10.00 Fixed manufacturing overhead 20.00 Variable selling expenses 5.00 Fixed selling expenses 4.00 Fixed administrative expenses 8.00 The relevant range for is 90,000 - 120,000 units. You will be given facts for three different options. Using the facts given, calculate amounts as directed below. Take each option independent of the others (start with the original information given for each). You must enter your answer in the following format: $x,xxx At the current level of activity, calculate the following: Total sales revenue Blank 1 Total contribution margin Blank 2 Total fixed expenses Blank 3 Knight is thinking about taking a price reduction approach to increasing net income. The company believes that a 5% reduction in sales price will increase volume by 10%. Simultaneously, there will be a change in suppliers for direct material that will result in lowering direct material costs by 10%. Calculate the following: Total sales revenue Blank 4 Total contribution margin Blank 5 Total fixed expenses Blank 6 Knight is also considering an approach that will not alter sales price. The company believes that by laying off non-productive workers they can reduce direct labor to 20% of sales. Combined with a $5,000 increase in advertising per month, they estimate sales will increase 2% over current sales. Calculate the following: Total sales revenue Blank 7 Total contribution margin Blank 8 Total fixed expenses Blank 9

All of the current year's entries for Zimmerman Company have been made, except the following adjusting entries. The company's annual accounting year ends on December 31

On September 1 of the current year, Zimmerman collected six months' rent of $7,980 on storage space. At that date, Zimmerman debited Cash and credited Unearned Rent Revenue for $7,980.

On October 1 of the current year, the company borrowed $15,600 from a local bank and signed a one-year, 13 percent note for that amount. The principal and interest are payable on the maturity date.

Depreciation of $2,400 must be recognized on a service truck purchased in July of the current year at a cost of $23,000.

Cash of $4,200 was collected on November of the current year, for services to be rendered evenly over the next year beginning on November 1 of the current year. Unearned Service Revenue was credited when the cash was received.

On November 1 of the current year, Zimmerman paid a one-year premium for property insurance, $8,160, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount.

The company earned service revenue of $4,200 on a special job that was completed December 29 of the current year. Collection will be made during January of the next year. No entry has been recorded.

At December 31 of the current year, wages earned by employees totaled $14,100. The employees will be paid on the next payroll date in January of the next year.

On December 31 of the current year, the company estimated it owed $490 for this year's property taxes on land. The tax will be paid when the bill is received in January of next year

2. Using the following headings, indicate the effect of each adjusting entry and the amount of the effect. Use + for increase, − for decrease. (Reminder: Assets = Liabilities + Stockholders’ Equity; Revenues – Expenses = Net Income; and Net Income accounts are closed to Retained Earnings, a part of Stockholders’ Equity.)

Completion of a Work Sheet Showing a Net Loss 1. Complete the Adjustments columns. 2. Complete the work sheet. 3. Enter the adjustments in a general journal. If an amount box does not require an entry, leave it blank. The trial balance for Cascade Bicycle Shop, a business owned by David Lamond, is shown below. Cascade Bicycle Shop Trial Balance December 31, 20 -- ACCOUNT TITLE DEBIT BALANCE CREDIT BALANCE Cash 23,385 Accounts Receivable 14,985 Merchandise Inventory 31,390 Supplies 7,375 Prepaid Insurance 4,695 Land 28,045 Building 51,180 Accumulated Depr.—Building 16,440 Store Equipment 27,690 Accumulated Depr.—Store Equip. 9,230 Accounts Payable 3,915 Wages Payable Sales Tax Payable 2,890 Unearned Storage Revenue 5,605 Mortgage Payable 44,600 D. Lamond, Capital 162,650 D. Lamond, Drawing 32,680 Income Summary Sales 50,960 Sales Returns and Allowances 2,410 Storage Revenue Purchases 20,795 Purchases Returns and Allow. 1,295 Purchases Discounts 1,935 Freight-In 1,750 Wages Expense 35,240 Advertising Expense 5,715 Supplies Expense Phone Expense 2,135 Utilities Expense 9,160 Insurance Expense Depreciation Expense—Building Depreciation Exp.—Store Equipment Miscellaneous Expense 890 299,520 299,520 Year-end adjustment information is as follows: (a and b) Merchandise inventory costing $22,165 is on hand as of December 31, 20--. (The periodic inventory system is used.) (c) Supplies remaining at the end of the year, $2,410. (d) Unexpired insurance on December 31, $1,775. (e) Depreciation expense on the building for 20--, $3,860. (f) Depreciation expense on the store equipment for 20--, $3,692. (g) Unearned storage revenue as of December 31, $1,950. (h) Wages earned but not paid as of December 31, $790.

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 $116,000 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 $67,000 in uninsured damages to the main office building. The fire was considered to be an unusual event.
2. Inventory that had cost $57,000 had become obsolete because a competitor introduced a better product. The inventory was written down to its scrap value of $8,000.
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 800,000 shares of outstanding common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)

Decision Problem 1
Your friend, Amin Akmali, has asked your advice about the effects that certain business
transactions will have on his business. His business, Car Finders, finds the best deals on
automobiles for clients. Time is short, so you cannot journalize transactions. Instead, you
must analyze the transactions and post them directly to T-accounts. Akmali will continue in
the business only if he can expect to earn monthly net income of $8,000. The business had
the following transactions during March 2017:
a. Akmali deposited $50,000 cash in a business bank account.
b. The business borrowed $8,000 cash from the bank, which is recorded as a note payable
due within one year.
c. Purchased for cash a vehicle to drive clients to appointments, $27,000.
d. Paid $1,600 cash for supplies.
e. Paid cash for advertising in the local newspaper, $1,200.
f. Paid the following cash expenses for one month: commission, $12,400; office rent, $800;
utilities, $600; gas, $1,000; interest, $200.
g. Earned revenue on account, $20,600.
h. Earned $7,500 revenue and received cash.
i. Collected cash from customers on account, $2,400.
Required
1. Open the following T-accounts: Cash; Accounts Receivable; Supplies; Vehicle; Notes
Payable; Amin Akmali, Capital; Advising Revenue; Advertising Expense; Interest
Expense; Rent Expense; Commission Expense; Gas Expense; Utilities Expense.
2. Record the transactions directly in the T-accounts without using a journal. Identify each
transaction by its letter.
3. Prepare an unadjusted trial balance at March 31, 2017. List expenses alphabetically.
4. Compute the amount of net income or net loss for this first month of operations. Would
you recommend Akmali continue in business?

The following income statement items appeared on the adjusted trial balance of Foxworthy Corporation for the year ended December 31, 2018 ($ in 000s): sales revenue, $21,600; cost of goods sold, $14,150; selling expenses, $2,230; general and administrative expenses, $1,130; dividend revenue from investments, $130; interest expense, $230. Income taxes have not yet been accrued. The company’s income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2018 ($ in 000s). All transactions are material in amount.

1. Investments were sold during the year at a loss of $230. Foxworthy also had unrealized holding losses of $130 for the year on investments.
2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,300.
3. During the year, Foxworthy completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP regarding discontinued operations. The division had incurred operating income of $730 in 2018 prior to the sale, and its assets were sold at a loss of $1,940.
4. A positive foreign currency translation adjustment for the year totaled $670.

Required:

Prepare Foxworthy’s single, continuous statement of comprehensive income for 2018, including earnings per share disclosures. Use a multiple-step income statement format. Two million shares of common stock were outstanding throughout the year. (Enter your answers in thousands of dollars, except earnings per share. Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)

Europa Publications, Inc. specializes in reference books that keep abreast of the rapidly changing political and economic issues in Europe. The results of the company’s operations during the prior year are given in the following table. All units produced during the year were sold. (Ignore income taxes.)

Required:

1-a. Prepare a traditional income statement for the company.

1-b. Prepare a contribution income statement for the company.

2. What is the firm’s operating leverage for the sales volume generated during the prior year?

3. Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income?

4. Which income statement would an operating manager use to answer requirement (3)?

Req. 1-a.

Req. 1-b.

Req. 2

What is the firm’s operating leverage for the sales volume generated during the prior year? (Round your answer to 2 decimal places.)

Req. 3

Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income? (Do not round intermediate calculations. Round your answer to 1 decimal place.)

Req. 4

Which income statement would an operating manager use to answer requirement (3)?

16. In pure competition, price is determined where the market

A. Demand and supply curves intersect

B. Total cost is less than total revenue.

C. Average total cost equals total variable cost.

D. Demand intersects the individual firm's marginal cost curve.

20.  Long-run competitive equilibrium

A. Is realized only in constant-cost industries.

B. Is not economically efficient

C. Will never change once it is realized

D. Results in zero economic profit.

21. Marginal product is

A. The change in total revenue attributable to the employment of one more worker.

B. The change in total output attributable to the employment of one more worker.

C. Total product divided by the number of workers employed.

D. The change in total cost attributable to the employment of one more worker

24. Oligopoly is more difficult to analyze than other market models because

A. of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models

B. The marginal cost and marginal revenue curves of an oligopolist play no part in the determination of equilibrium price and quantity.

C. unlike the firms of other market models, it cannot be assumed that oligopolists are profit maximizers.

D. the number of firms is so large that market behavior cannot be accurately predicted.

30. The demand curve confronted by the individual, purely competitive firm is

A. Perfectly inelastic

B. Relatively elastic, that is, the elasticity coefficient is greater than unity

C. Relatively inelastic, that is, the elasticity coefficient is less than unity.

D. Perfectly elastic.

35. The short run is characterized by

A. Zero fixed costs.

B. Plenty of time for firms to either enter or leave the industry.

C. Fixed plant capacity.

D. Increasing but not diminishing returns.

Europa Publications, Inc. specializes in reference books that keep abreast of the rapidly changing political and economic issues in Europe. The results of the company’s operations during the prior year are given in the following table. All units produced during the year were sold. (Ignore income taxes.)

Required:

1-a. Prepare a traditional income statement for the company.

1-b. Prepare a contribution income statement for the company.

2. What is the firm’s operating leverage for the sales volume generated during the prior year?

3. Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income?

4. Which income statement would an operating manager use to answer requirement (3)?

Req. 1A

Req. 1B

Req. 2

What is the firm’s operating leverage for the sales volume generated during the prior year? (Round your answer to 2 decimal places.)

Req. 3

Suppose sales revenue increases by 12 percent. What will be the percentage increase in net income? (Do not round intermediate calculations. Round your answer to 1 decimal place.)

Req. 4

Which income statement would an operating manager use to answer requirement (3)?