Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,200 per month plus $0.09 per car washed. The company expects to wash 8,000 cars in August and to collect an average of $6.80 per car washed.

The actual operating results for August are as follows:

Required:

Calculate the company's revenue and spending variances for August. (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. Do not round intermediate calculations.)

Brewer_8e_Rechecks_2019_10_17

Shown below is an income statement for 2017 that was prepared by a junior accountant at Junior Corporation.

Junior Corporation

Income Statement

December 31, 2017

       Sales revenue..........................................................................................................       $975,000

       Investment revenue...................................................................................................           19,500

       Cost of merchandise sold..........................................................................................       (408,500)

       Selling expenses......................................................................................................       (155,000)

       Administrative expense.............................................................................................       (215,000)

       Interest expense.......................................................................................................        (13,000)

       Income before special items.......................................................................................         203,000

       Special items

              Loss on disposal of a segment of the business........................................................         (30,000)

              Major fire loss.................................................................................................         (80,000)

       Net income tax liability............................................................................................        (27,900)

       Net income.............................................................................................................       $ 65,100

Required

In good form, prepare a multiple-step income statement for 2017 for Junior Corporation that is presented in accordance with generally accepted accounting principles (including format and terminology). Junior Corporation has 50,000 common shares outstanding and has a 20% income tax rate on all tax related items. As a private corporation, Junior does not disclose earnings per share information.

Required

In good form, prepare a partial 2017 income statement for Turnover, taking into account the effects (if any) of the above items. The statement should start with income from continuing operations before income taxes. Unless otherwise indicated, you may assume an income tax rate of 40% for all items. Earnings per share calculations are not required.

Exercise 9-17 Flexible Budget Performance Report [LO9-1, LO9-2, LO9-3, LO9-4]

AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,800 plus $33 per job, and the actual mobile lab operating expenses for February were $9,590. The company expected to work 150 jobs in February, but actually worked 160 jobs.

Required:

Prepare a flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February. (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.)

Financial Statement Creation – Use the information below to create B/S, I/S and Statement of Retained Earnings after adjusting for the four additional activities below.

1. Consider the following information from a company's unadjusted trial balance at December 31, 2018. All accounts have normal balances.

At year-end, the company accountant realizes that the following transactions have to be recorded:

• November 5, purchase 100 shares for the Treasury at a cost of $7 per share
• Perform half of the work customers paid for in advance
• Dec 1, Issue 1,200 shares of common stock at issue price of $10 per share
• Dec 31, declare and pay a dividend to common stock outstanding of $.50 per share

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,000 per month plus $0.05 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.10 per car washed.

The actual operating results for August appear below.

Required:

Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August. (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.)

Lavage Rapide is a Canadian company that owns and operates a large automatic carwash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,000 per month plus $0.08 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.20 per car washed.

The actual operating results for August appear below.

Required:

Complete the flexible budget performance report that shows the company’s activity variances and revenue and spending variances for August. (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.)

(1) “Sales taxes are fairer than income taxes because sales taxes cannot be avoided by the rich.” Discuss & evaluate this idea, using tax policy concepts to provide support for your evaluation. Is it possible to design a sales tax that is more progressive than a personal income tax? What would this tax structure look like?

(2) The two most important state taxes are income and general sales taxes, although states also make substantial use of excise taxes, direct business taxes (usually a corporate income tax), and others. List and discuss factors that might influence a state in choosing between an income and general sales tax. What can these differences tell us about both a State’s policy priorities and economies? What is the relevance of Charles Tiebout when examining or understanding a State’s fiscal choices as it relates to tax policy?

(3) States are increasingly relying on revenue from gambling to generate funds for their financial plans on annual basis. Lotteries, for example, have been on the rise with states providing their own jackpots, and increasing the jack-pots by utilizing multi-state games. Please provide some of the policy rationale for using this revenue source, along with some of the issues that policy makers should focus on in the future.

In 2017, the Metropolitan Transportation Authority (MTA) in New York City raised the price of a monthly subway pass from $116.50 to $121.00. According to an article in the New York Times, “Officials at the authority have said they must raise fares every two years to pay for the rising costs of providing service.” a. In order for the MTA’s strategy for covering its rising costs to be successful, what must be true about the price elasticity of demand for subway passes? b. Suppose that the MTA’s strategy in (a) doesn’t succeed. What then must be true about the price elasticity of demand for subway passes? On the same graph, draw a demand curve for subway passes assuming that the MTA’s strategy succeeds and a second demand curve assuming that the strategy fails. For each demand curve, your graph should indicate the areas representing the revenue the MTA receives following the price increase.

1. Suppose that the MTA’s strategy in (a) doesn’t succeed. What then must be true about the price elasticity of demand for subway passes? On the same graph, draw a demand curve for subway passes assuming that the MTA’s strategy succeeds and a second demand curve assuming that the strategy fails. For each demand curve, your graph should indicate the areas representing the revenue the MTA receives following the price increase.

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,000 per month plus $0.07 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.50 per car washed.

The actual operating results for August appear below.

Required:

Calculate the company's revenue and spending variances for August. (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. Do not round intermediate calculations.)