Required information

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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?

"There are different sections that make up a classified income statement. The first section is operating revenue, this is the revenue that is earned from normal business activities. The next section is the cost of goods sold, where the information pertaining to the cost of merchandise sold during that period; three entries are needed for this section: beginning inventory, net delivered cost of purchases, and ending inventory. The next section is gross profit, which is the difference in net sales and cost of goods sold. Operating expenses are the expenses that are accumulated during normal business activities. Net income and net loss from operations is separated for easier readability. Other expenses and incomes are entered into different sections along with net income and net losses. Sometimes a condensed income statement is provided with summarized information in fewer lines of information." Is this information substantially different from the income statement that you would normally consider? Why do we call it classified?

In the Chicago mayor's race, candidate A proposes a project that will cost $200,000 today (t=0), $100,000 next year (t=1) and $15,000 to destroy it after ten years of operation (t=12) when the project is discontinued. Once finished in three years (t=3), it will generate a flow of revenue of $40,000 per year until it is discontinued in (t=12) - ie in t=12 the project generates that flow of revenue too.

1. Set the discount rate as r and write the expected present value of the costs and benefits.

2. Calculate the present value of the project if the discount rate is r=.1

3. Candidate B considers that a discount rate r=.3 is more realistic. Calculate the present value of the project with this new discount rate proposed by Candidate B. Why do you think Candidate B has an interest in convincing the public that her discount rate is more realistic?

Question 3 Scranton Motors Ltd faced the following situations. Journalize the adjusting entry needed at year end for each situation. Each scenario should be considered independently. The business has interest expense of $9,000 early in January 2017. Interest revenue of $3,000 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 $1,000 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 $3,100. The total cost of supplies on hand is $800. Equipment was purchased at the beginning of this year at a cost of $60,000. The equipment’s useful life is five years. Record the depreciation for this year and then determine the equipment’s carrying amount.

Suppose you are working at Air Italy, a commercial airline company in the European Union, and you recently purchased an order of 5 new planes of the Boeing 737 Max 8 for a total of $622 million from Boeing, a United States airplane manufacturer. Due to the news of two recent accidents likely linked to the software on these planes, Air Italy no longer wants to risk using them. Thus, Air Italy decides to return the order to Boeing for the full price. In order to receive all the funds, you must return this plane in 3 months (the remaining length of the warrantee), at which time Boeing will then pay you. However, you will have to convert this entire dollar payment into Euros in order to cover wages, routine maintenance costs, and administrative costs. You anticipate the dollar will depreciate relative to the euro and consider hedging the foreign exchange risk by using a forward contract to sell dollars for Euros. Today’s spot and 3-month forward exchange rates are given below.

Spot Price: $1 = € 0.901 3-Month Forward Price: $1 = € 0.889

a) Assuming that there are no transactions costs, how many Euros will Air Italy receive in three months if it enters into the forward contract?

b) If Air Italy does not hedge its risk and the exchange rate remains constant, how many Euros will it receive in three months?

c) Now, suppose that the dollar does in fact depreciate and that its spot price three months from today equals €0.876. If Air Italy does not hedge, how much revenue does the company lose from the exchange rate fluctuation (compared to what they would have made without hedging if the exchange rate had remained constant)?

d) Assuming the spot rate equals €0.876 three months from today, would entering into the forward contract have been a good idea in this case? Explain your answer.

e) If after three months the dollar has appreciated by exactly 5.0% and Air Italy has a hedged position, what is the value of its forgone revenue (i.e. what are the company's lost profits)?

Can annual sports team revenues be used to predict franchise​ values?

Team   Revenue ($mil)   Value ($mil)
Team 1   554   2806
Team 2   676   3437
Team 3   371   1333
Team 4   628   3202
Team 5   559   1852
Team 6   312   691
Team 7   342   858
Team 8   355   851
Team 9   394   869
Team 10   219   482
Team 11   258   579
Team 12   224   513
Team 13   516   414
Team 14   203   347
Team 15   156   329
Team 16   177   326
Team 17   162   307
Team 18   332   599
Team 19   411   863
Team 20   157   296

A. At the 0.05 level of​ significance, is there evidence of a linear relationship between the annual revenues generated and the value of a soccer​ franchise?

- The null and alternative hypotheses ?

- The value is?

- the test statistic is ?

B. Construct a 95​% confidence interval estimate of the mean value of all soccer franchises that generate ​$300 million of annual revenue.

C. Construct a 95​% prediction interval of the value of an individual soccer franchise that generates ​$300 million of annual revenue.

Question 1

If you lower the price of a product by 5% and the volume sold increases by 10%, this is considered _____.

1. inelastic demand
2. elastic demand

Question 2

A negative aspect of selecting unit volume as a pricing objective is that..

1. if price reductions are used to achieve volume objectives, it can sometimes come at the expense of profits
2. production often cannot keep up with demand
3. there are increased carrying costs with extensive inventories
4. it always positively correlates with a sales revenue objective
5. it can create competition between divisions within the organization itself causing conflicts over the allocation of resources

Question 3

Netflix used to charge $14.99 per month for its movie rental service. However, when Blockbuster introduced the same service at $13.99, Netflix dropped its price to $13.99. Netflix most likely made this price reduction in an attempt to...

1. decrease revenue but increase profit

2. increase efficiency
3. increase profit by decreasing revenue
4. maintain market share
5. decrease market share

Question 4

Buyers are more price sensitive when _____.

1. they need the product right away
2. they are more aware of substitutes for the product
3. the product is significantly more distinctive than others on the market
4. the product is a status symbol
5. the expenditure is small relative to their total income