On January 1, 2022, the ledger of Crane Company contained these liability accounts. Accounts Payable $44,900 Sales Taxes Payable 9,000 Unearned Service Revenue 21,400 During January, the following selected transactions occurred. Jan. 1 Borrowed $18,000 in cash from Apex Bank on a 4-month, 5%, $18,000 note. 5 Sold merchandise for cash totaling $5,406, which includes 6% sales taxes. 12 Performed services for customers who had made advance payments of $13,600. (Credit Service Revenue.) 14 Paid state treasurer’s department for sales taxes collected in December 2021, $9,000. 20 Sold 740 units of a new product on credit at $49 per unit, plus 5% sales tax. During January, the company’s employees earned wages of $54,000. Withholdings related to these wages were $4,131 for Social Security (FICA), $5,379 for federal income tax, and $1,614 for state income tax. The company owed no money related to these earnings for federal or state unemployment tax. Assume that wages earned during January will be paid during February. No entry had been recorded for wages or payroll tax expense as of January 31.

Alex is a single man who works for Dogs-R-Us, an animal breeding and training company specializing in finding the perfect home for each pet. Alex has a daughter, Abigail, who is 7 years old. The following financial information for 2019 is provided for you below. Alex is looking to supplement his income by starting a side business of selling products for pets:

Alex's Wages for Dogs-R-us are: 68,600

-Federal taxes withheld: $4,218
-Social Security taxes withheld: $4,714
-State income taxes withheld: $2,354
-Alex paid $2,200 in interest on his student loans in 2019
-Alex’s employer provided healthcare coverage for him and his daughter. The healthcare coverage premiums cost Alex $1,000 over the course of the year, while the employer incurred an additional $6,875 for the healthcare coverage premium for Alex and his daughter Abigail. Alex’s healthcare coverage premiums were taken out of his check on a pre-tax basis.
-Alex incurred an additional $625 in premiums for dental and vision plans. These amounts were also taken out of Alex’s gross pay on a pre-tax basis.
-Alex had an additional $3,625 taken out of his check for his contributions to an employee sponsored 401K plan. The amount was taken out on a pre-tax basis. The employed matched the $3,625 contribution to Alex’s 401K plan.
-Alex receives $2,000 in qualified dividend from Apple Co.
-Alex paid $2,600 in dependent care expenses for school and after school care for his daughter Abigail. These payments were made to the local elementary school.
-Alex paid $4,200 in mortgage interest for 2019.
-Alex also incurred an additional $1,200 of out of pocket dental expenses this year, which was his only medical expense.

2. Proposed Business: Alex has crunched a few numbers and the following is expected for his pet product company:

1. Gross receipts of $28,500 in the first year.

2. Cost of Goods Sold: $10,850

3. Home Office Expense: $800. Alex plans to devote a back room in his home to storing

   products.

4. Laptop Purchased 2 years ago for $1,800. Alex intends to convert this laptop to

   business use to keep track of accounting, handle internet orders, etc. The laptop is

   currently valued at $663.

5. Tablet Purchased for Christmas: $375. Alex lets Abigail use it for homework and

   learning, but assures you that he only uses it for the business, to keep track of

   customer orders on Facebook.

6. Pet care equipment currently valued at: $8,500. While Alex does use some of the

   product for his own pets, he believes that 80 percent of the time, the equipment will be used for clients’ pets. The equipment was purchased last year for $7,250, but not used.

1. Complete a tax return for Alex without his proposed business.
2. Complete a tax return for Alex with his proposed business.

On December 15, 2018, a US company imported 400,000 barrels of oil from a country in the Europe. The US company agreed to pay 40,000,000 euros on February 15, 2019. To reduce the risk of loss due to exchange rates, the company entered into a forward contract to buy 40,000,000 euros on February 15 at the forward rate of $.0269. Direct exchange rates on various dates were:

                                         Spot Rate          Forward Rate 2/15 Delivery

December 15, 2018        $.0239 $.0269

December 31, 2018 .0224             .0254

February 15, 2019                                   .0291

The US company is a calendar-year company.
(show calculations)
Compute the following:

1. The dollars to be paid on February 15, 2019, to acquire the 40,000,000 euros from the exchange dealer.

2. The dollars that would have been paid to settle the account payable had the US company not hedged the purchased contract with the forward contract.

3. The discount or premium on the forward contract.

4. The transaction gain or loss on the exposed liability related to the oil purchase in 2018 and 2019. 5. The transaction gain or loss on the forward contract in 2018 and 2019.

Vargas Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2019, the company began a program of granting its employees 10 days of paid vacation each   year. Vacation days earned in 2019 may first be taken on January 1, 2020. Any days not taken in one year can be carried forward for up to two years. Information relative to these employees is as follows: (5 points)

                   Hourly              Vacation Days Earned    Vacation Days Used

Year            Wages               by Each Employee         by Each Employee

2019           $11.50                             10                                       0

2020             12.50                             10                                       8

Vargas has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned.  

a. What is the amount of expense relative to compensated absences that should be reported on Vargas’s income statement for 2019?  (To receive credit for your answer, you must show all supporting computations.)

b. What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2020? (To receive credit for your answer, you must show all supporting computations.)

The following phrases are the six purposes of our Federal government found in the Preamble of the Constitution.

We the People of the United States, (1) in order to form a more perfect Union, (2) establish justice, (3) ensure domestic Tranquility, (4) provide for the common defense, (5) promote general Welfare, and (6) secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

The statements below describe actions that may be taken by the US government. Using the information above regarding the Preamble of the Constitution, match the statements below with the number associated (1,2,3,4,5, or 6) with the purpose of government that BEST fits the situation. Place your answer in the space beside the statement.

An ethical issue is one with an identifiable problem, situation or opportunity requiring an individual or organization to choose from among several actions that must be evaluated in terms of right and wrong. Ethics is therefore the study of right and wrong. You are asked therefore to consider the following scenario.

South Africa has one the highest AIDS population in the world and the great majority of the South African population is unable to pay for the viral drugs to combat the AIDS virus and the Government resources are stretched to the limit and they are unable to pay for drugs to make it available to the poor people of South Africa where the highest percent of the AIDS population exist.

In South Africa there is a company that manufactures the drugs to combat the AIDS virus. This company is a public company and raises its funds from shareholders who invest their money and is seeking a return on their investment. The company has had the experience in the past on one occasion where it did not perform well and their shareholders did not get a good return on investment causing many investors threatening to pull their investments, which would in turn cause the company to experience heavy financial losses and perhaps threaten its very existence.

The South African government has approached the South African company that manufacturers the drugs requesting that they sell the drugs below cost as well as donate some of the drugs to those who cannot afford the viral drugs because they are poor (which is by far the greater portion of the AIDS population). Without these drugs those people are almost guaranteed death.

The company has turned down the request of the South African government.

you are to present arguments supporting the position of the company.

An ethical issue is one with an identifiable problem, situation or opportunity requiring an individual or organization to choose from among several actions that must be evaluated in terms of right and wrong. Ethics is therefore the study of right and wrong. You are asked therefore to consider the following scenario.

South Africa has one the highest AIDS population in the world and the great majority of the South African population is unable to pay for the viral drugs to combat the AIDS virus and the Government resources are stretched to the limit and they are unable to pay for drugs to make it available to the poor people of South Africa where the highest percent of the AIDS population exist.

In South Africa there is a company that manufactures the drugs to combat the AIDS virus. This company is a public company and raises its funds from shareholders who invest their money and is seeking a return on their investment. The company has had the experience in the past on one occasion where it did not perform well and their shareholders did not get a good return on investment causing many investors threatening to pull their investments, which would in turn cause the company to experience heavy financial losses and perhaps threaten its very existence.

The South African government has approached the South African company that manufacturers the drugs requesting that they sell the drugs below cost as well as donate some of the drugs to those who cannot afford the viral drugs because they are poor (which is by far the greater portion of the AIDS population). Without these drugs those people are almost guaranteed death.

The company has turned down the request of the South African government.

you are to present arguments that disagree with the position of the company.

Here is a discussion dealing with bonuses and stock options: Geri Smart graduated from Troy University five years ago with a Masters degree in accounting. She obtained a position with a well-known professional services firm upon graduation and has become of its rising stars. Geri has developed a number of professional contacts in her work, both with clients and with outside companies. One of these companies, Busby Manufacturing Company, recently offered Geri a position as head of their financial services division. The offer includes a salary of $50,000 per year, annual bonuses of one percent of divisional operating income, and a stock option for 10,000 shares of Busby stock, to be exercised in two years at the current price of $15 per share. Last year, the financial services division earned $1,110,000. This year, it is budgeted to earn $1,600,000. Busby stock has increased in value at the rate of 16 percent per year over the past five years. Geri currently earns $65,000 per year. You are to advise Geri on the relative merits and downsides of the Busby offer.

Working with Brokers

An insurance company is starting to see some fundamental changes in the attitudes of its independent brokers. The salespeople for this insurance company called on independent brokers (i.e., insurance agents who are not employees and sell policies from a number of companies), who in turn sold to individual companies and households. In the past, brokers were primarily interested in getting the lowest price or “quotes” from the insurance company for a plan having features the broker’s customer requested. The lower the price, the easier it was for the broker to sell the plan and to show the customer the savings that resulted. Brokers were also interested in how quickly the company responded to a request for a quote. The role of the insurance company’s sales force was to ensure that brokers were aware of any new plans the company developed and to handle any possible service problems.

Increasingly, the insurance company’s salespeople were hearing a different story from the large brokers who had grown by merger and consolidation in the industry. Typical of the comments heard is the following from one of their largest brokers: “We need a lot of help. Every one of our offices does things its own way. We don’t have a common set of procedures, and we haven’t got a common information system. We’ll write a lot of business with you if your people are prepared to work with each office individually and help them get their act together.” The insurance company was not sure how to respond to this request, but knew that it could not afford to lose this customer’s business and that of other large brokers making similar requests.

Discussion Questions

1. How fundamentally different is the role of the sales force in addressing these new customer needs from that addressing the needs of more traditional brokers?
2. How will the selling effort change when addressing these new broker needs?
3. How will the changes affect sales management?

4. What are the threats and possible downside of addressing these emerging broker needs?