Johnson Associates is a catering firm in Tucson, Arizona, with revenue of $4 million. The business began ten years ago as a one-owner bakery, but has dramatically changed in size and function during the past five years. The four partners foresee the business doubling in sales revenue within two years, and expect the firm to expand into other services including flowers, furnishings, decorations, and music. Johnson Associates employs six full-time and ten part-time employees. The four partners also work full-time, each partner managing a separate business function. The firm currently uses a volume-based costing system installed seven years ago and modified three years later.

Required: (a) With just the above information, comment on Johnson Associates changing and future costing system needs. (b) Is Johnson Associates a probable candidate for an activity-based costing system (ABC)? Why or why not?

Question 2

Scranton Motors Ltd faced the following situations.

•     The business has interest expense of $9,000 early in January 2017.
•     Interest revenue of $2,000 has been earned but not yet received.
•     When the business collected $12,000 in advance three months ago, the accountant debited

Cash and credited Unearned Revenue. The client was paying for two cars, one delivered in

December, the other to be delivered in February 2017.

•     Salary expense is $500 per day – Monday through Friday – and the business pays employees

each Friday. For example, purposes, assume that this year, December 31 falls on a Tuesday.

•     The unadjusted balance of the Supplies account is $2,100. The total cost of supplies on hand is

$800.

•     Equipment was purchased at the beginning of this year at a cost of $40,000. The equipment’s

useful life is four years. Record the depreciation for this year and then determine the equipment’s carrying amount.

1.    Journalize the adjusting entry needed at year end for each situation. Each scenario should be

considered independently.

1. Net Present Value and Internal Rate of Return. Below are the projected revenues and expenses for a new clinical nurse specialist program being established by your healthcare organization. The nurses would provide education while patients are in the hospital and home visits are on a fee-for-service basis after patients have been discharged

Should the hospital undertake the program if its required rate of return is 12%?

Note: it must be assumed that the revenues and costs in this problem represent cash flows. Present value analysis is based on cash, not revenue or expenses. Provide a response to support the findings in the table listed below. Your response should be at least a half page long in addition to the table. Please include citations.

Assume that Ocean King Products sells three varieties of canned seafood with the following prices and costs:

The sales mix (in cases) is 60 percent Variety 1, 25 percent Variety 2, and 15 percent Variety 3.

Required:

a. At what sales revenue per month does the company break even? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)

b. Suppose the company is subject to a 35 percent tax rate on income. At what sales revenue per month will the company earn $42,640 after taxes assuming the same sales mix? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)

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:

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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

Assume that Ocean King Products sells three varieties of canned seafood with the following prices and costs:

The sales mix (in cases) is 50 percent Variety 1, 25 percent Variety 2, and 25 percent Variety 3.

Required:

a. At what sales revenue per month does the company break even? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)

b. Suppose the company is subject to a 35 percent tax rate on income. At what sales revenue per month will the company earn $54,470 after taxes assuming the same sales mix? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)

Assume you work as budget analyst for City of Blue Ridge and you are preparing the budget for Fiscal Year 2020-2021. The data of tax revenue of past 10 years have been obtained as following. You are using two of the three different forecast models - 3-year moving average (with the alpha 0.4), linear regression trend project, and exponential smoothing.

(1) What would be your forecasted revenue for 2020-2021based on your forecasting models, respectively?

(2) Which model gives you the better estimate? In other words, which model would you choose? Provide a justification for your choice.

Required information

[The following information applies to the questions displayed below.]
  
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 recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

Required information

[The following information applies to the questions displayed below.]
  
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 recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

Bottoms Up Diaper Service is considering the purchase of a new industrial washer for a 4-year project. The old machine was bought 3 years ago for $10,000 and will be depreciated to 1,000 using straight-line method with an assume life of 5 years. Actually, the old machine can be sold for $8,000 now. The new washer can be installed today for $12,000. The new machine will have a 3-year life and will be depreciated to $3,000 using straight-line depreciation. At the end of the project life, the after-tax cash flow of selling the machine is $3,000. With the new washer, the firm is expected to have revenue of $10,000, $12,000, and $13,000 for each of the next three years. The COGS is 40% of the revenue, and the SG&A is $3,000 each year. Suppose Bottoms Up Diaper Service’s inventories are 15% of total expense. If the opportunity cost of capital is 9%, and corporate tax rate is 35%, what is the project’s NPV?