Scan House, a large campground in southern Florida, adjusts its accounts monthly. Most guests of the campground pay at the time they check out, and the amounts collected are credited to Camper Revenue. The following information is available as a source for preparing the adjusting entries at December 31:

1. Scan House invests some of its excess cash in certificates of deposit (CDs) with its local bank. Accrued interest revenue on its CDs at December 31 is $1,400. None of the interest has yet been received.

2. A six-month bank loan in the amount of $120,000 had been obtained on September 1. Interest is to be computed at an annual rate of 8 percent and is payable when the loan becomes due.

3. Depreciation on buildings owned by the campground is based on a 20-year life. The original cost of the buildings was $800,000. The Accumulated Depreciation: Buildings account has a credit balance of $300,000 at December 31, prior to the adjusting entry process. The straight-line method of depreciation is used.

4. Management signed an agreement to let 4H Troop 840 of Traverse City, Michigan, use the campground in June of next year. The agreement specifies that the 4H Troop will pay a daily rate of $50 per campsite, with a clause providing a minimum total charge of $3,500.

5. Salaries earned by campground employees that have not yet been paid amount to $2,800.

6. As of December 31, Scan House has earned $4,000 of revenue from current campers who will not be billed until they check out.

7. Several lakefront campsites are currently being leased on a long-term basis by a group of senior citizens. Nine months' rent of $54,000 was collected in advance and credited to Unearned Camper Revenue on October 1 of the current year.

8. A bus to carry campers to and from town and the airport had been rented the first week of December at a daily rate of $300. At December 31, no rental payment has been made, although the campground has had use of the bus for 25 days.

9. Unrecorded Income Taxes Expense accrued in December amounts to $15,000. This amount will not be paid until January 15.

Required: (prepare using an excel spreadsheet, include proper heading with your name, course name and number, and problem number – Chapter 2 Excel HW (1 of 2)

1. For each of the above numbered paragraphs, prepare the necessary adjusting entry (including an explanation). If no adjusting entry is required, explain why.

2. Indicate the effects that each of the adjustments in part a will have on the following sixtotal amounts in the campground's financial statements for the month of December. Organize your answer in tabular form, using the column headings shown below. Use the

letters I for increase, D for decrease, and NE for no effect. Adjusting entry 1 is provided as an example.

c. What is the amount of interest expense recognized for the entire current year on the $120,000 bank loan obtained September 1?

d. Compute the book value of the campground's buildings to be reported in the current year's December 31 balance sheet. (Refer to paragraph 3.)

Let P_Sand P_Drepresent the prices charged for each standard golf bag and deluxe golf bag respectively. Assume that “S” and “D” are demands for standard and deluxe bags respectively.

S = 2250 – 15P_S                                                                                                                                                                    (8.1)

D = 1500 – 5P_D                                                                                                                                                                      (8.2)

Revenue generated from the sale of S number of standard bags is P_S*S. Cost per unit production is $70 and the cost for producing S number of standard bags is 70*S.

So the profit for producing and selling S number of standard bags = revenue – cost = P_SS – 70S                            (8.3)

By rearranging 8.1 we get                                  

15P_S= 2250 – S or

                                    P_S= 2250/15 – S/15 or

                                    P_S= 150 – S/15                                                                                                                                                                     (8.3a)

Substituting the value of P_Sfrom 8.3a in 8.3 we get the profit contribution of the standard bag:

                                    (150 –S/15)S – 70S = 150S – S²/15 – 70S = 80S – S²/15                                                                                 (8.4)

Revenue generated from the sale of D number of deluxe bags is P_D*D. Cost per unit production is $150 and the cost for producing D number of deluxe bags is 150*D.

So the profit for producing and selling D number of deluxe bags = revenue – cost = P_DD – 150D                           (8.4a)

By rearranging 8.2 we get                                  

5P_D= 1500 – D or

                                    P_D= 1500/5 – D/5 or

                                    P_D= 300 – D/5                                                                                                                                                                       (8.4b)

Substituting the value of P_Dfrom 8.4b in 8.4a we get the profit contribution of the deluxe bags:

                                    (300 -D/5)D – 150D = 300D – D²/5 – 150D = 150D – D²/5                                                                          (8.4c)

By adding 8.4 and 8.4c we get the total profit contribution for selling S standard bags and D deluxe bags.

                                    Total profit contribution = 80S –S²/15 + 150D – D²/5                                                                                 (8.5)

Homework assignment:

Reconstruct new objective function for 8.5 by changing “15P_S” to “8P_S” in 8.1, “5P_D” to “10P_D” in 8.2, cost per unit standard bagfrom 70 to 91 and cost per unit deluxe bag from 150 to 125. Keep other parameter values unchanged. Use up to 2 decimal points accuracy. Substitute the new expression for 8.5 in the excel solver workbook as explained in the class and solve for the optimal combination values for S and D..Instructor will not accept any homework late or submitted outside the class. Make sure you submit the results (just one page excel printout). Write/type your full name (first name first) in upper case, last 4 of your student ID, and, your new objective function expression (like equation 8.5 above) on the printout. Use S and D instead of b15 or c15 in the formulation. If you fail to follow the instructions, you will lose points.

*PLEASE Show also Excel Solution*

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

CASE 2

Pandora is the Internet’s most successful subscription radio service. In May 2014, Pandora had 77 million registered users. Pandora accounts for over 9 percent of total U.S. radio listening hours. The music is delivered to users from a cloud server, and is not stored on user devices. It’s easy to see why Pandora is so popular. Users are able to hear only the music they like. Each user selects a genre of music based on a favorite musician or vocalist, and a computer algorithm puts together a “personal radio station” that plays the music of the selected artist plus closely related music by different artists. The algorithm uses more than 450 factors to classify songs, such as the tempo and number of vocalists. These classifications, in conjunction with other signals from users, help Pandora’s algorithms select the next song to play. People love Pandora, but the question is whether this popularity can be translated into profits. How can Pandora compete with other online music subscription services and online stations that have been making music available for free, sometimes without advertising? “Free” illegally downloaded music has also been a significant factor, as has been iTunes, charging 99 cents per song with no ad support. At the time of Pandora’s founding (2005), iTunes was already a roaring success. Pandora’s first model was to give away 10 hours of free music and then ask subscribers to pay $36 per month for a year once they used up their 10 free hours. Result: 100,000 people listened to their 10 hours for free and then refused to pay for the annual service. Facing financial collapse, in November 2005 Pandora introduced an ad-supported option. In 2006, Pandora added a “Buy” button to each song being played and struck deals with Amazon, iTunes, and other online retail sites. Pandora now gets an affiliate fee for directing listeners to sites where users can buy the music. In 2008, Pandora added an iPhone app to allow users to sign up from their smartphones and listen all day if they wanted. Today, 70 percent of Pandora’s advertising revenue comes from mobile. In late 2009 the company launched Pandora One, a premium service that offered no advertising, higher quality streaming music, a desktop app, and fewer usage limits. The service costs $4.99 per month. A very small percentage of Pandora listeners have opted to pay for music subscriptions, with the vast majority opting for the free service with ads. In fiscal 2013 Pandora’s total revenue was $427.1 million, of which $375.2 million (88 percent) came from advertising. Pandora has been touted as a leading example of the “freemium” revenue model, in which a business gives away some services for free and relies on a small percentage of customers to pay for premium versions of the same service. If a market is very large, getting just 1 percent of that market to pay could be very lucrative— under certain circumstances. Although freemium is an efficient way of amassing a large group of potential customers, companies, including Pandora, have found that it is challenging to convert people enjoying the free service into customers willing to pay. A freemium model works best when a business incurs very low marginal cost, approaching zero, for each free user of its services, when a business can be supported by the percentage of customers willing to pay, and when there are other revenues like advertising fees that can make up for shortfalls in subscriber revenues. In Pandora’s case, it appears that revenues will continue to come overwhelmingly from advertising, and management is not worried. For the past few years, management has considered ads as having much more revenue-generating potential than paid subscriptions and is not pushing the ad-free service. By continually refining its algorithms, Pandora is able to increase user listening hours substantially. The more time people spend with Pandora, the more opportunities there are for Pandora to deliver ads and generate ad revenue. The average Pandora user listens to 19 hours of music per month. Pandora is now intensively mining the data collected about its users for clues about the kinds of ads most likely to engage them. Pandora collects data about listener preferences from direct feedback such as likes and dislikes (indicated by thumbs up or down on the Pandora site) and “skip this song” requests, as well as data about which device people are using to listen to Pandora music, such as mobile phones or desktop computers. Pandora uses these inputs to select songs people will want to stick around for, and listen to. Pandora has honed its algorithms so they can analyze billions more signals from users generated over billions of listening minutes per month. As impressive as these numbers are, Pandora (along with other streaming subscription services) is still struggling to show a profit. There are infrastructure costs and royalties to pay for content from the music labels. Pandora’s royalty rates are less flexible than those of its competitor Spotify, which signed individual song royalty agreements with each record label. Pandora could be paying even higher rates when its current royalty contracts expire in 2015. About 61 percent of Pandora’s revenue is currently allocated to paying royalties. Advertising can only be leveraged so far, because users who opt for free ad-supported services generally do not tolerate heavy ad loads.

CASE 2 QUESTIONS:

1. What type of e-commerce is Pandora? What is Pandora’s ecommerce business model? Explain your answer?

2. What ecommerce revenue models are Pandora using? How does Pandora generate money with the revenue models? Explain your answer?

3. For Pandora, what business strategies are being supported by the use of data mining? Explain your answer.

The following information pertains to DEF Company, Inc. for the year 2018.

Liabilities at the end of the year, December 31, 2018 = $1,200

Contributed capital at the end of the year, December 31, 2018 = $700

Beginning retained earnings, January 1, 2018 = $300

Revenue during 2018 = $7,500

Expenses during 2018 = $6,800

Distributions to owners during 2018 = $100

What is the amount of the company's total assets at December 31, 2018?

On April 19, 2021, Millipede Machinery sold a tractor to Thomas Hartwood, accepting a note promising payment of $250,000 in five years. The applicable effective interest rate is 8%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

What amount of sales revenue would Millipede recognize on April 19, 2021, for the Hartwood transaction? (Round your final answer to nearest whole dollar.)