MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion of instructional materials such as an overhead slide presentation, potential test questions, and classroom bulletin board materials for teachers. A summary of the expected costs and revenues for MSI’s two options follows:

1. Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to the CDs.

2. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 20,000 units. Complete the table given below based on Requirement 1 and 2 data.

The Ombudsman Foundation is a private not for profit organization providing training in dispute resolution and conflict management. The Foundation had the following preclosing trial balance at December 31, 2017, the end of its fiscal year:

Trial Balance December 31, 2017________________________________Debits_____________Credits

Accounts payable______________credit_______________________________23500

Accounts receivable (net) debit_______________45000

Accrued interest receivable debit______________15500

Accumulated depreciation ______credit______________________________________________3250500

Cash___debit__________________________________109000

Contributed services unrestricted____credit____________________________________________25000

Contributed unrestricted____credit____________________________________________________2300000

Contributions temporarily restricted______credit__________________________________________780000

Contributions permanently restricted_____credit__________________________________________2650000

Current pledges receivable (net)______debit_______________75000

Education program expenses____debit___________________1505000

Fund raising expense_____debit________________________116000

Grant revenue temporarily restricted____credit____________________________________________86000

Training seminar expenses___________debit______________4456000

Land, buliding, and equipment___debit___________________5500000

Long term investments___debit_________________________2690000

Management and general expense_____debit______________365000

net assets:

Unrestricted (January 1)______________credit_____________________________________________458000

Temporarily restricted (January 1)_______credit_____________________________________________659000

Permanently restricted (january 1)_______credit_____________________________________________1250000

Net gains on endowment investments unrestricted___credit______________________________________17500

Noncurrent pledge receivables_________debit_______________365000

Program service revenue unrestricted___credit_______________________________________________5592000

postemployment benefits payable____________credit_________________________________________188000

Reclassifications:

Satisfaction of program restrictions____________debit_________250000

Satisfaction of time restrictions________________debit________205000

Satisfaction of program restrictions______credit________________________________________________250000

Satisfaction of time restrictions_________credit_________________________________________________205000

Research program expenses___________debit______________1256000

Short term investments________________debit______________750000

Supplies inventory_______debit___________________________32000

totals______________________________17734500__________________________17734500

a) Prepare closing entries for the year end using separate entries for each net asset classification

b) Prepare a statemnet of activities for the year ended December 31, 2017

c) Prepare a statement of financial position as of December 31 2017

The results for July for Brahms & Sons follow:  

Required:

Prepare a profit variance analysis for Brahms & Sons. ( Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

The Rosa model of Mohave Corp. is currently manufactured as a very plain umbrella with no decoration. The company is considering changing this product to a much more decorative model by adding a silk-screened design and embellishments. A summary of the expected costs and revenues for Mohave’s two options follows:      

Required:
1. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

  

2. Should Mohave add decorations to the Rosa umbrella?

3-a. Suppose that the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 11,000 units. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

3-b. Should Mohave add decorations to the Rosa umbrella?

Yes?

No?

SEC Accounting and Auditing Enforcement Release (AAER) No. 108 specifies certain conditions or criteria that a bill and hold transaction of a public company should meet in order to qualify for revenue recognition. The AAER also specifies certain factors that should be considered in evaluating whether a bill and hold transaction meets the requirements for revenue recognition. AAER No. 108 states that a “bill and hold” transaction should meet the following conditions:

The risks of ownership must have passed to the buyer.

The customer must have made a fixed commitment to purchase the goods, preferably reflected in written documentation.

The buyer, not the seller, must request that the transaction be on a bill and hold basis. The buyer must have a substantial business purpose for ordering the goods on a bill and hold basis.

There must be a fixed schedule for delivery of the goods. The date for delivery must be reasonable and must be consistent with the buyer's business purpose (e.g., storage periods are customary in the industry).

The seller must not have retained any specific performance obligations such that the earning process is not complete.

The ordered goods must have been segregated from the seller's inventory and not be subject to being used to fill other orders.

The equipment must be complete and ready for shipment.

Required:

Identify and discuss the reliability of the types of evidence an auditor would need to determine whether each condition cited above was met for a bill and hold transaction.

Answer a, b and c

a) You are in the business of designing and selling websites .You currently charge $500 a website design and sell 5 websites a month. You are thinking of reducing the price to $400 in order to sell more websites. You go around asking people and find you can sell 3 more website.
How much more revenue do you gain from the increased sales? How much revenue do you lose from customers that used to buy it at the higher price?

b)

You currently charge $500 a website design and sell 5 websites a month. You are thinking of reducing the price to $400 in order to sell more websites. You go around asking people and find you can sell 3 more website. Consumers of your product have a price elasticity of demand that is:

( )       Elastic
()Inelastic
()Unitary elastic
()Cannot be determined

( )  Elastic
()Inelastic
()Unitary elastic
()Cannot be determined

C)

The demand for gasoline is relatively inelastic in the short run and gets more elastic in the longer run. If a tax was placed on gasoline, the tax would burden the gasoline stations (firms) more:

( )    in the short run
() in the long run
() Gasoline stations are burden by the tax in the same way in the short run or long run
() Gasoline stations are never not burden by the tax as they pass the tax on to consumers.

Problem 5-3A (Part Level Submission) The Deluxe Store is located in midtown Madison. During the past several years, net income has been declining because of suburban shopping centers. At the end of the company’s fiscal year on November 30, 2019, the following accounts appeared in two of its trial balances. Unadjusted Adjusted Unadjusted Adjusted Accounts Payable $25,200 $25,200 Inventory $29,000 $29,000 Accounts Receivable 30,500 30,500 Notes payable 37,000 37,000 Accumulated Depr.—Equipment 34,000 45,000 Prepaid Insurance 10,500 3,500 Cash 26,000 26,000 Property Tax Expense 2,500 Common Stock 40,000 40,000 Property Taxes Payable 2,500 Cost of Goods Sold 507,000 507,000 Rent Expense 15,000 15,000 Dividends 10,000 10,000 Retained Earnings 61,700 61,700 Freight-Out 6,500 6,500 Salaries and Wages Expense 96,000 96,000 Equipment 146,000 146,000 Sales Commissions Expense 6,500 11,000 Depreciation Expense 11,000 Sales Commissions Payable 4,500 Insurance Expense 7,000 Sales Returns and Allowances 8,000 8,000 Interest Expense 6,400 6,400 Sales Revenue 700,000 700,000 Interest Revenue 8,000 8,000 Utilities Expense 8,500 8,500

Prepare a balance sheet. Notes payable are due in 2022. (List Current Assets in order of liquidity.)

Broadway Company produces and sells two models of calculators. The following monthly data are provided:

Total monthly fixed costs are expected to be $15,000. What is the break-even point in sales dollars at the expected sales mix? (Do not round your intermediate calculations.)

$19,231

$43,478

$68,182

$64,286

When drawing a cost-volume-profit graph, how are the axes labeled?

The horizontal axis would be labeled with dollars (of cost or revenue), while the vertical axis would be labeled with number of units (volume or activity).

The horizontal axis would be labeled with dollars (of total fixed costs), while the vertical axis would be labeled with dollars (of total variable costs).

The horizontal axis would be labeled with number of units (volume or activity), while the vertical axis would be labeled with dollars (of cost or revenue).

None of these answers is correct.

When performing sensitivity analysis, which of the following is an example of a variable that management may consider changing to answer "what if" questions?

Variable cost per unit

Sales price per unit

Fixed cost per unit

Both Variable cost per unit and Sales price per unit are correct.

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,860 pizzas at an average selling price of $17 per pizza and for 240 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)

On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $330,000. The Cortland bonds have a stated interest rate of 5%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (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.):

Required:

1A - Bond fair value :
1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees), and prepare a journal entry to record the purchase.
2. Prepare all appropriate journal entries related to the bond investment during 2021, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.
3. Prepare all appropriate journal entries related to the bond investment during 2021, assuming that Ithaca chose the fair value option when the bonds were purchased, and that Ithaca determines fair value of the bonds semiannually. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.