CP4-2 Analyzing and Recording Adjusting Journal Entries [LO 4-1, LO 4-2]

[The following information applies to the questions displayed below.]

Toys is a large discount toy store in Valley Wood Mall. The store typically has slow sales in the summer months that increase dramatically and rise to a peak at Christmas. During the summer and fall, the store must build up its inventory to have enough stock for the Christmas season. To purchase and build up its stock during the months when its revenues are low, the store borrows money. Following is the store’s projected revenue and liabilities schedule for July through December (where revenues are received and bills are paid at the first of each month): Month Revenue Liabilities July 20,000.00 60,000.00 August 30,000.00 60,000.00 September 40,000.00 80,000.00 October 50,000.00 30,000.00 November December 80,000.00 100,000.00 30,000.00 20,000.00 At the beginning of July, the store can take out a 6-month loan that carries an 11% interest rate and must be paid back at the end of December. The store cannot reduce its interest payment by paying back the loan early. The store can also borrow money monthly at a rate of 5% interest per month. Money borrowed on a monthly basis must be paid back at the beginning of the next month. The store wants to borrow enough money to meet its cash flow needs while minimizing its cost of borrowing. Formulate a linear programming model for this problem.

Solve this model on EXCEL SPREADSHEET

please provide formulation also

Thanks!

You have been hired by the mayor of Philadelphia to provide sage economic advice. The mayor would like to implement a tax on large fountain soda drinks of $0.80 per drink which the buyers will pay when purchasing the drink. At the moment, soda lovers currently consume 1 million fountain drinks per year in the city (i.e. equilibrium quantity). You are given some data on both the demand and supply curves. For every $0.10 increase in the price of the fountain drink, the quantity demanded falls by 60,000. For every $0.10 increase in the price of the fountain drink the quantity that suppliers are willing to sell rises by 20,000. The mayor tells you that the $0.80 will generate a revenue of $800,000 for the city and that the price of fountain drinks will rise by the amount of the tax ($0.80). As usual, the politicians (the mayor in this case) are incorrect. Explain why they are incorrect by doing the following. (The value of the equilibrium price is not given)

a) Explain why it is impossible that the new tax will increase the price the consumer pays by the full amount of the tax (hint: sketching a small supply and demand graph might be helpful)

b) Calculate what the new equilibrium quantity in the market for fountain drinks will be in Philadelphia after the tax is implemented.

c) Calculate the correct increase in the price of the fountain drink at the register for the buyer after the tax.

d) Calculate the correct amount of tax revenue that the city will collect.

Nail_It company is a manufacture of a custom engraved hammer. For the year 2021, the weekly budget was as follows.

• Sales revenue $64,000: 2,000 hammers × price $32

• Variable costs: o Direct materials $10,000: 2,000 hammers × 1 lbs per hammer × price $5/lb o Direct labor $50,000: 2,000 hammers × 5 hour per hammer ×rate $5/hour o no variable overhead

• Fixed costs: $3,000 • Profit: $1,000

The actual performance of the week was as follows.

• Sales revenue $70,400: 2,200 hammers × price $32

• Variable costs: o Direct materials $13,200: 2,200 hammers × 1 lbs per hammer × price $6/lb o Direct labor $46,200: 2,200 hammers × 3 hour per hammer ×rate $7/hour o no variable overhead

• Fixed costs: $8,000 • Profit: $8,000

Required:

1) Compute the following variances

a) Sales Volume Variance b) Sales Price Variance c) Input Quantity Variance for Materials d) Input Price Variance for Materials e) Input Quantity Variance for Labor f) Input Price Variance for Labor

2) Nail_It company hired an experienced engineer and asked her to re-organize the production process. How could hiring an experienced engineer and their new production process explain the variances? Please comment on individual components of variances, their relations to other variances, and overall impact on profitability.

The City of Gurnee is preparing its Government-Wide financial statements for the year. Its accountant must prepare a number of journal entries to recognize assets and liabilities previously omitted from the Fund financial statements and to recognize revenues and expenses for the year under accrual accounting that were not recognized under the current financial resources measurement focus and the modified accrual basis of accounting used to prepare the Statement of Revenues, Expenditures, and Changes in Fund Balances for its Funds. The accountant identifies the following journal entries that must be made:

Recognize Capital Assets of $120,440 as of the beginning of the year.

Record Depreciation Expense of $6,850 for the year and reverse Expenditures of $7,360 for Capital Outlays during the year.

Recognize $21,000 of Bonds Payable as of the beginning of the year.

Reverse Other Financing Sources of $8,000 and Expenditures – Debt Payments of $3,100 relating to increases and decreases in the bond liability during the year.

Reverse Deferred Revenue of $10,340 as of the beginning of the year.

Reverse $1,430 of Deferred Revenue recognized during the year.

Recognize Compensated Absences of $1,980 as of the beginning of the year and an increase in that liability of $230 during the year.

Recognize $140 of Accrued Interest Payable as of the beginning of the year and an increase in that liability of $260 during the year.

Recognize a liability of $4,210 relating to the City’s landfill as of the beginning of the year. The estimate for this liability did not change during the year.

Required: Prepare journal entries for each of the items above.

Presented below isthe comparative statement of income, prepared on a cash basis, for Mingwei Ltd. for the past two years. The manager is puzzled by the fact that net income was lower in2023than 2022.MINGWEI LTD.Statementof Income, Cash BasisYears EndedDecember 31——————————————————————————————————————————20232022Service revenue.........................................................................$350,000$365,000ExpensesSalaries expense.................................................................200,000190,000Office expense....................................................................54,00055,000Repairs and maintenance expense.....................................20,00015,000Interest expense..................................................................15,0002,000Total expenses...........................................................................289,000262,000Income before income tax..........................................................61,000103,000Income tax expense...................................................................24,40041,200Net income.................................................................................$ 36,600$ 61,800In talking with the manager, you gather the following information, which was not reflected in the above statements:1.The company borrowed $200,000 on June 1, 2022and repaid the amount with interest on June 1, 2023. The interest rate was 6%. The journal entry to record the repayment on June 1, 2023was:Bank Loan Payable.............................................200,000Interest Expense..................................................12,000Cash.............................................................212,0002.A customer made a deposit of $15,000 on December 1, 2022for services to be performed in January 2023. The journal entry made on December 1, 2022was:Cash....................................................................15,000Service Revenue..........................................15,0003.A bill for $4,000 maintenance work done inDecember 2022was paid on January 15, 2023. The journal entry to record the payment in 2023was:Repairs and Maintenance Expense.....................4,000Cash.............................................................4,000InstructionsAssuming that no adjusting entries were made for the above transactions, prepare a revised comparativestatement of incomefor 2022and 2023. (Income tax is calculated at 40% of income before income tax.)(15marks)

The preliminary 2021 income statement of Alexian Systems, Inc., is presented below: ALEXIAN SYSTEMS, INC. Income Statement For the Year Ended December 31, 2021 ($ in millions, except earnings per share) Revenues and gains: Sales revenue $ 517 Interest revenue 13 Other income 130 Total revenues and gains 660 Expenses: Cost of goods sold 250 Selling and administrative expense 218 Income tax expense 48 Total expenses 516 Net Income $ 144 Earnings per share $ 14.40 Additional information: Selling and administrative expense includes $35 million in restructuring costs. Included in other income is $124 million in income from a discontinued operation. This consists of $90 million in operating income and a $34 million gain on disposal. The remaining $6 million is from the gain on sale of investments. Cost of goods sold was increased by $4 million to correct an error in the calculation of 2020’s ending inventory. The amount is material.

Required: Prepare a revised income statement for 2021 reflecting the additional facts. Use a multiple-step format. Assume that an income tax rate of 25% applies to all income statement items, and that 10 million shares of common stock were outstanding throughout the year. (Enter your answers in millions rounded to 2 decimal places. Round EPS answers to 2 decimal places.)

. Variance Analysis

Sourpatch company is a manufacturer of a custom engraved hammers. For the year 2021, the weekly budget was as follows.

• Sales revenue $64,000: 2,000 hammers × price $32
• Variable costs:
  • Direct materials $10,000: 2,000 hammers ×1 lbs per hammer×price $5/lb
  • Direct labour $50,000: 2,000 hammers× 5 hour per hammer× rate $5/hour
  • no variable overhead
• Fixed costs: $3,000
• Profit: $1,000

The actual performance of the week was as follows.

• Sales revenue $70,400: 2,200 hammers × price $32
• Variable costs:
  • Direct materials $13,200: 2,200 hammers ×1 lbs per hammer×price $6/lb
  • Direct labour $46,200: 2,200 hammers× 3 hour per hammer× rate $7/hour
  • no variable overhead
• Fixed costs: $8,000
• Profit: $8,000

Required:

1) Compute the following variances

a) Spending and Volume Variances of Materials

b) Spending and Volume Variances of Labour

c) Spending and Volume Variances of Fixed Overhead

c) Materials Quantity Variance

d) Materials Price Variance

e) Labour Efficiency Variance

f) Labour Rate Variance

2) SourPatch company hired an experienced engineer and asked her to re-organize the production process. How could hiring an experienced engineer and their new production process explain the variances? Please comment on individual components of variances, their relations to other variances, and overall impact on profitability.

Question 21

1. 21) How would an increase in the demand for labor occur:

   		a. when there is an increase in labor productivity
   		b. when there is an increase in the demand for the product labor produces
   		c. when there is an increase in the supply of labor
   		d. both (a) and (b)

3 points

Question 22

1. 22) What determines the quantity supplied of labor?

   		a, the wage rate
   		b. the demand for labor
   		c. the marginal revenue product of labor
   		d. the marginal revenue product of capital

3 points

Question 23

1. 23) What will lead to an increase in the wage rate?

   		a. a decrease in the demand for labor
   		b. an increase in the demand for labor
   		c. an increase in the supply of labor
   		d. a decrease in demand for the product labor produces

3 points

Question 24

1. 24) What will lead to a decrease in the wage rate?

   		a. an increase in the demand for labor
   		b. an increase in the supply of labor
   		c. a decrease in the supply of labor
   		d. an increase in demand for the product labor produces

3 points

Question 25

1. 25) Efficiency wage theory states:

   		a, it is efficient to pay labor the lowest wage rate possible
   		b. it is efficient to only pay labor the market wage rate
   		c. it is efficient to supply labor with the least amount of fringe benefits as possible
   		d. it is efficient to pay labor a higher than average wage rate (including benefits) as this will elicit a better work effort from labor and increase the firm's profits