Pitman Company is a small editorial services company owned and operated by Jan Pitman. On October 31, 2019 the end of the current year, Pitman Company’s accounting clerk prepared the following unadjusted trial balance:

Pitman Company

UNADJUSTED TRIAL BALANCE

October 31, 2019

The data needed to determine year-end adjustments are as follows:

1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; Depreciation Expense—Equipment; and Supplies Expense. Refer to the Chart of Accounts for exact wording of account titles.

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PAGE 10

JOURNAL

ACCOUNTING EQUATION

Score: 158/176

Pastina Company sells various types of pasta to grocery chains as private label brands. The company's reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below.

Information necessary to prepare the year-end adjusting entries appears below.

1. Depreciation on the office equipment for the year is $11,800.
2. Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $1,700.
3. On October 1, 2021, Pastina borrowed $53,600 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.
4. On March 1, 2021, the company lent a supplier $23,600 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022.
5. On April 1, 2021, the company paid an insurance company $9,600 for a one-year fire insurance policy. The entire $9,600 was debited to prepaid insurance.
6. $1,010 of supplies remained on hand at December 31, 2021.
7. A customer paid Pastina $3,800 in December for 1,650 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
8. On December 1, 2021, $2,800 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,400 per month. The entire amount was debited to prepaid rent.

rev: 09_14_2019_QC_CS-180268, 10_11_2019_QC_CS-184133

Required:

1. & 2. Post the unadjusted balances and adjusting entires into the appropriate t-accounts. (Enter the number of the adjusting entry in the column next to the amount. Do not round intermediate calculations. Round your final answers to nearest whole dollar.)

3. Prepare an adjusted trial balance

4. Prepare an income statement and a statement of shareholders’ equity for the year ended December 31, 2021, and a classified balance sheet as of December 31, 2021. Assume that no common stock was issued during the year and that $7,600 in cash dividends were paid to shareholders during the year.

5. Prepare closing entries

6. Prepare a post-closing trial balance

Waddell Company had the following balances in its accounting records as of December 31, 2018:

The following accounting events apply to Waddell Company’s 2019 fiscal year:

Required

Based on the preceding information, answer the following questions for Waddell Company. All questions pertain to the 2018 financial statements. (Hint: Enter items in general ledger accounts under the accounting equation before answering the questions.)

1. What two additional adjusting entries need to be made at the end of the year?

2. What amount would Waddell report for land on the balance sheet?

3. What amount of net cash flow from operating activities would be reported on the statement of cash flows? (Enter cash outflows as negative amounts.)

4. What amount of rent expense would be reported on the income statement? (Do not round intermediate calculations.)

5. What amount of total liabilities would be reported on the balance sheet?

6. What amount of supplies expense would be reported on the income statement?

7. What amount of unearned revenue would be reported on the balance sheet? (Do not round intermediate calculations.)

8. What amount of net cash flow from investing activities would be reported on the statement of cash flows? (Enter cash outflows as negative amounts.)

9. What amount of total expenses would be reported on the income statement? (Do not round intermediate calculations.)

10. What total amount of service revenue would be reported on the income statement? (Do not round intermediate calculations.)

11. What amount of cash flows from financing activities would be reported on the statement of cash flows? (Enter cash outflows as negative amounts.)

12. What amount of net income would be reported on the income statement? (Do not round intermediate calculations.)

13. What amount of retained earnings would be reported on the balance sheet? (Do not round intermediate calculations.)

Required information

Following is the June 30, 2019, statement of net position for the City of Bay Lake Water Utility Fund.

Following is the information of the Water Utility Fund for fiscal year 2020.

1. The amount in the Accrued Utility Revenue account was reversed.
2. Billings to customers for water usage during fiscal year 2020 totaled $2,844,495; $184,892 of the total was billed to the General Fund.
3. Cash in the amount of $247,965 was received. The cash was for interest earned on investments and $78,205 in accrued interest.
4. Expenses accrued for the period were management and administration, $343,725; maintenance and distribution, $657,204; and treatment plant, $663,057.
5. Cash receipts for customer deposits totaled $2,318.
6. Cash collections on customer accounts totaled $2,811,211, of which $200,121 was from the General Fund.
7. Cash payments for the period were as follows: Accounts Payable, $1,396,908; interest (which includes the interest payable), $378,133; bond principal, $409,000; machinery and equipment, $596,556; and return of customer deposits, $930.
8. A state grant amounting to $484,378 was received to help pay for new water treatment equipment.
9. Accounts written off as uncollectible totaled $10,211.
10. The utility fund transferred $815,822 in excess operating income to the General Fund.
11. Adjusting entries for the period were recorded as follows: depreciation on buildings was $244,805 and on machinery and equipment was $367,207; the allowance for uncollectible accounts was increased by $15,210; an accrual for unbilled customer receivables was made for $713,941; accrued interest income was $16,164; and accrued interest expense was $62,630.
12. The Revenue Bond Payable account was adjusted by $409,000 to record the current portion of the bond.
13. Closing entries and necessary adjustments were made to the net position accounts.

Required

1. a-1. For fiscal year 2020, prepare general journal entries for the Water Utility Fund. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

2. a-2. For fiscal year 2020, prepare closing entries for the Water Utility Fund. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Section 8.1 Expanded: Constructing the nonlinear profit contribution expression

Let P_S and P_D represent the prices charged for each standard golf bag and deluxe golf bag respectively. Assume that “S” and “D” are demands for standard and deluxe bags respectively.

S = 2250 – 15P_S                                                                                                                                                  (8.1)

D = 1500 – 5P_D                                                                                                                                                   (8.2)

Revenue generated from the sale of S number of standard bags is P_S*S. Cost per unit production is $70 and the cost for producing S number of standard bags is 70*S.

So the profit for producing and selling S number of standard bags = revenue – cost = P_SS – 70S                      (8.3)

By rearranging 8.1 we get                            

15P_S = 2250 – S or

                                P_S = 2250/15 – S/15 or

                                P_S = 150 – S/15                                                                                                                                                  (8.3a)

Substituting the value of P_S from 8.3a in 8.3 we get the profit contribution of the standard bag:

                                (150 –S/15)S – 70S = 150S – S²/15 – 70S = 80S – S²/15                                                                      (8.4)

Revenue generated from the sale of D number of deluxe bags is P_D*D. Cost per unit production is $150 and the cost for producing D number of deluxe bags is 150*D.

So the profit for producing and selling D number of deluxe bags = revenue – cost = P_DD – 150D                     (8.4a)

By rearranging 8.2 we get                            

5P_D = 1500 – D or

                                P_D = 1500/5 – D/5 or

                                P_D = 300 – D/5                                                                                                                                                   (8.4b)

Substituting the value of P_D from 8.4b in 8.4a we get the profit contribution of the deluxe bags:

                                (300 -D/5)D – 150D = 300D – D²/5 – 150D = 150D – D²/5                                                                 (8.4c)

By adding 8.4 and 8.4c we get the total profit contribution for selling S standard bags and D deluxe bags.

                                Total profit contribution = 80S –S²/15 + 150D – D²/5                                                                         (8.5)

Homework assignment:

Reconstruct new objective function for 8.5 by changing “15P_S” to “8P_S” in 8.1, “5P_D” to “10P_D” in 8.2, cost per unit standard bag from 70 to “70+last two digits of your UTEP student ID” and cost per unit deluxe bag from 150 to 125. Keep other parameter values unchanged. Use up to 2 decimal points accuracy. Substitute your new expression for 8.5 in the excel solver workbook as explained in the class and solve for the optimal combination values for S and D. Submit the printout from the excel solution in either March 02, 2019 or March 4, 2020 class. Instructor will not accept any homework late or submitted outside the class. Make sure you submit the results (just one page excel printout). Write/type your full name (first name first) in upper case, last 4 of your UTEP student ID, and, your new objective function expression (like equation 8.5 above) on the printout. Use S and D instead of b15 or c15 in writing the formulation. If you fail to follow the instructions, you will lose points.

*the last 2 digits of my ID are 61

1. Your firm designs training materials for computer training classes, and you have just received a request to bid on a contract to produce a complete set of training manuals for an 8-session class. From previous experience, you know that your firm follows an 85% learning rate. For this contract, it appears that the effort will be substantial, running 50 hours for the first session. Your firm bills at the rate of $100/hour and the overhead is expected to run a fixed $600 per session. The customer will pay you a flat fixed rate per session (Per Session Price.) If your profit markup is 20%, what will be the Total Price, the Per Session Price, and at what session will you break even?

Answer the following three questions:

1. What is the Total Price? This is what you would charge the customer so that you can have your profit markup of 20% over all of your costs. To calculate this, first figure out your cost per each session, add them up, and then add your profit.
2. What is the Per Session Price? This is the revenue that the customer pays you each time you complete a session. It is calculated by dividing the Total Price by the number of sessions.
3. What is the Break Even Point? At the beginning, your cost per session is more than your revenue per session. Gradually, your cumulative revenue matches the cumulative cost, and eventually exceeds it so that you can end up with the desired profit. The break-even point is the session at which, for the first time, your revenue exceeds your cost.

2. A manufacturing firm has set up a project for developing a new machine for one of its production lines. The most likely estimated cost of the project itself is $1 million, but the most optimistic estimate is $900,000 while the pessimists predict a project cost of $1,200,000. The real problem is that even if the project costs are within those limits, if the project itself plus its implementation cost exceed 1,425,000, the project will not meet the firm’s NPV hurdle. There are four cost categories involved in adding the prospective new machine to the production line: (1) engineering labor cost, (2) non-engineering labor cost, (3) assorted materials cost, and (4) production line down-time cost.

The engineering labor requirement has been estimated to be 600 hours, plus or minus 15% at a cost of $80 per hour. The non-engineering labor requirement is estimated to be 1500 hrs., but could be as low as 1200 hrs. or as high as 2200 hrs. at a cost of $35 per hour. Assorted material may run as high as $155,000 or as low as $100,000 but is most likely to be about $135,000. The best guess of time lost on the production line is 110 hours, possibly as low as 105 hours and as high as 120 hours. The line contributes about $500 per hour to the firms profit and overhead. What is the probability that the new machine project will meet the firm’s NPV hurdle? Use Crystal Ball simulation to answer the question.

ABC Corporation has three support departments with the following costs and cost drivers: Support Department Cost Cost Driver Graphics Production $200,000 number of copies made Accounting 500,000 number of invoices processed Personnel 400,000 number of employees ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows: Micro Macro Super Revenues $700,000 $850,000 $650,000 Direct operating expenses 50,000 70,000 100,000 Number of copies made 20,000 30,000 50,000 Number of invoices processed 700 800 500 Number of employees 130 145 125 The support department allocation rate for the Accounting Department is a.$714 b.$250 c.$625 d.$0.004

ABC Corporation has three support departments with the following costs and cost drivers:

ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows:

The support department allocation rate for the Personnel Department is

a.$2,758

b.$1,000

c.$3,200

d.$3,077

ABC Corporation has three support departments with the following costs and cost drivers:

ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows:

The support department cost that will be allocated to the Micro Division is

a.$145,000

b.$345,000

c.$60,000

d.$200,000

ABC Corporation has three support departments with the following costs and cost drivers:

ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows:

The support department cost that will be allocated to the Macro Division is

a.$305,000

b.$405,000

c.$130,000

d.$175,000

The Nutmeg Corporation produces three different? products, each in a? 1-pound can:? Almond-Lovers Mix,? Walnut-Lovers Mix, and Thrifty Mix. Three types of nuts are used in? Nutmeg's products:? almonds, walnuts, and peanuts. Nutmeg currently has 400 pounds of? almonds,200pounds of? walnuts, and 1,000 pounds of peanuts. Each of? Nutmeg's products must contain a certain percentage of each type of? nut, as shown in the following table. The table also shows the revenue per can as well as the cost per pound to purchase nuts.

a. Given? Nutmeg's current stock of? nuts, how many cans of each product should be produced to maximize? revenue?

Decision? variables:

X1

? = number of cans of? Almond-Lovers Mix to be produced                                               

X2

? = number of cans of? Walnut-Lovers Mix to be produced

X3

? = number of cans of Thrifty Mix to be producedObjective? function: Maximize

Zequals=nothingX1plus+nothingX2plus+nothingX3

. ?(Enter your responses rounded to two decimal? places.)

?Constraints: ?(Enter your responses for the coefficients rounded to two decimal? places.)

A linear programming software shows the optimal solution? as:

X1equals=250250?,

X2equals=00?,

What is the optimal value for

X3??

X3equals=nothing.

?(Enter your response rounded to the nearest whole? number.)b. Does the solution you developed in part? (a) change if Nutmeg is interested in maximizing contribution margin? (defined as revenue per unit

minus?

raw material? cost)?

First modify the objective function. ?(Enter your responses rounded to two decimal? places.)

Maximize

Zequals=nothingX1plus+nothingX2plus+nothingX3

A linear programming software shows the optimal solution? as:

X1equals=500500?,

X2equals=00?,

What is the optimal value for

X3??

X3equals=nothing.

?(Enter your response rounded to the nearest whole? number.)c. If

100100

additional pounds of walnuts became? available, how would your? contribution-margin maximizing solution from part? (b) change?

A.

The optimal value for

X1?,

the number of cans of? Almond-Lovers Mix to be? produced, would

decreasedecrease.

B.

The optimal value for

X3?,

the number of cans of Thrifty Mix to be? produced, would

decreasedecrease.

C.

The optimal value for

X2?,

the number of cans of? Walnut-Lovers Mix to be? produced, would decrease.

Click to select your answer(s).

Question 1:

Suppose that your group is the executive sales team for Starbucks. The CEO has just proposed lowering the price of regular coffee and increasing the price of specialty coffee drinks. The belief is that our customers are sensitive to a price change of regular coffee but much less sensitive to a change in the price of specialty coffee. As such, your team is tasked with providing an analysis on this proposal. In order to provide your analysis, you need to find out if the CEO’s theory about customer behavior, and their sensitivity to price changes for regular and specialty coffee, is correct. In order to find out how sensitive customers are to a price change, you will need to calculate the price elasticity of demand, describe what that means, and evaluate the impact on revenues.

For this activity, use the standard percent change formula (also known as the point method).

You have been given the following data on prices and changes in quantity demanded.

Regular Coffee:

Current Price per cup: $2.00 and quantity sold per month is 1 million

Proposed Price per cup: $1.80 and estimated quantity sold per month is 1.5 million

Specialty Coffee:

Current Price per cup: $4.00 and quantity sold per month is 50 million

Proposed Price per cup: $4.40 and estimated quantity sold per month is 47 million

Part 1: Find the elasticity of demand for regular and specialty coffee.

Part 2: Find the total change in revenue for regular and specialty coffee.

Part 3: Use a demand curve graph to explain the change in revenue. You only need to show the demand curve on your graph.

You may upload a picture/file of your graph or use the creately template.

Question 2:

Suppose that your group is the executive sales team for McDonalds. The CEO has given your team a proposal; To analyze the impact of raising the price of the Big Mac by 10% and raising the price of regular fries by 10%.

In order to provide your analysis, you need to find out how sensitive customers will be to a price change of Big Macs and fries. In order to find out how sensitive customers are to a price change, you will need to calculate the price elasticity of demand, describe what that means, and evaluate the impact on revenues.

For this activity, use the standard percent change formula (also known as the point method).

You have been given the following data on prices and changes in quantity demanded.

  Big Mac:

Current Big Mac Price: $2

Current Big Mac monthly sales: 1 million

Estimated monthly Big Mac sales at the new price: 980,000

Regular Fries:

Current regular fry Price: $1.50

Current regular fry monthly sales: 2 million

Estimated regular fry monthly sales at the new price: 1.4 million

Part 1: Find the elasticity of demand for the Big Mac and fries.

Part 2: Find the total change in revenue for the Big Mac and fries.

Part 3: Use a demand curve graph to explain the change in revenue. You only need to show the demand curve on your graph.

You may upload a picture/file of your graph or use the creately template.