Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2018, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,660,000. Curtiss concludes that the contract does not qualify for revenue recognition over time. The building was completed on December 31, 2020. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows: At 12-31-2018 At 12-31-2019 At 12-31-2020 Percentage of completion 10 % 60 % 100 % Costs incurred to date $ 405,000 $ 2,940,000 $ 5,031,000 Estimated costs to complete 3,260,000 2,030,000 0 Billings to Axelrod, to date 885,000 2,390,000 4,660,000 Required: 1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years. 2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profit or loss to be recognized in each of the three years. 3. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2018 and 2019 as either cost in excess of billings or billings in excess of costs.

Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2018, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $5,080,000. Curtiss concludes that the contract does not qualify for revenue recognition over time. The building was completed on December 31, 2020. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows:

Required:
1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years.
2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profit or loss to be recognized in each of the three years.
3. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2018 and 2019 as either cost in excess of billings or billings in excess of costs.
  

Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2018, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,780,000. Curtiss concludes that the contract does not qualify for revenue recognition over time. The building was completed on December 31, 2020. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows:

Required:
1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years.
2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profit or loss to be recognized in each of the three years.
3. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2018 and 2019 as either cost in excess of billings or billings in excess of costs.

Advanced Pharmaceuticals, Inc., is a wholesale distributor of prescription drugs to independent retail and hospital-based pharmacies. Management believes that top-notch customer representatives are the key factor in determining whether the company will be successful in the future. Customer representatives serve as the company’s liaison with customers—helping pharmacies monitor their stocks, delivering drugs when customer stocks run low, and providing up-to-date information on drugs from many different companies. Customer representatives must be ultra-reliable and are highly trained. Good customer representatives are hard to come by and are not easily replaced.

Customer representatives routinely record the amount of time they spend serving each pharmacy. This time includes travel time to and from the company’s central warehouse as well as time spent replenishing stocks, dealing with complaints, answering questions about drugs, informing pharmacists of the latest developments and newest products, reviewing bills, explaining procedures, and so on. Some pharmacies require more hand-holding and attention than others and consequently they consume more of the representatives’ time.

Recently, customer representatives have made more frequent complaints that it is impossible to do their jobs without working well beyond normal working hours. This has led to an alarming increase in the number of customer representatives quitting for jobs in other organizations. As a consequence, management is considering dropping some customers to reduce the workload on customer representatives. Data concerning a representative sample of the company’s customers appears below:

Customer service costs include all of the costs—other than the costs of the drugs themselves—that could be avoided by dropping the customer. These costs include the hourly wages of the customer representatives, their sales commissions, the mileage-related costs of the customer representatives’ company-provided vehicles, and so on.

Required:

1. Rank the four customers in terms of their profitability.

2. Customer representatives are currently paid $35 per hour plus a commission of 1% of sales revenues. If these four pharmacies are indeed representative of the company’s customers, could the company afford to pay its customer representatives more in order to retain them?

Advanced Pharmaceuticals, Inc., is a wholesale distributor of prescription drugs to independent retail and hospital-based pharmacies. Management believes that top-notch customer representatives are the key factor in determining whether the company will be successful in the future. Customer representatives serve as the company’s liaison with customers—helping pharmacies monitor their stocks, delivering drugs when customer stocks run low, and providing up-to-date information on drugs from many different companies. Customer representatives must be ultra-reliable and are highly trained. Good customer representatives are hard to come by and are not easily replaced. Customer representatives routinely record the amount of time they spend serving each pharmacy. This time includes travel time to and from the company’s central warehouse as well as time spent replenishing stocks, dealing with complaints, answering questions about drugs, informing pharmacists of the latest developments and newest products, reviewing bills, explaining procedures, and so on. Some pharmacies require more hand-holding and attention than others and consequently they consume more of the representatives’ time. Recently, customer representatives have made more frequent complaints that it is impossible to do their jobs without working well beyond normal working hours. This has led to an alarming increase in the number of customer representatives quitting for jobs in other organizations. As a consequence, management is considering dropping some customers to reduce the workload on customer representatives. Data concerning a representative sample of the company’s customers appears below: Leafcrest Pharmacy Providence Hospital Pharmacy Madison Clinic Pharmacy Jenkins Pharmacy Total revenues $328,860 $3,056,380 $1,487,010 $208,550 Cost of drugs sold $232,470 $2,248,480 $1,133,440 $129,920 Customer service costs $10,710 $76,500 $45,500 $7,980 Customer representative time 255 1,380 630 150 Customer service costs include all of the costs—other than the costs of the drugs themselves—that could be avoided by dropping the customer. These costs include the hourly wages of the customer representatives, their sales commissions, the mileage-related costs of the customer representatives’ company-provided vehicles, and so on. Required: 1. Rank the four customers in terms of their profitability. 2. Customer representatives are currently paid $40 per hour plus a commission of 1% of sales revenues. If these four pharmacies are indeed representative of the company’s customers, could the company afford to pay its customer representatives more in order to retain them? Yes No

Use the information given below to answer Questions 10 - 15. Robin Industries, Inc., [RI] manufactures and sells electronic solid fuel powered vehicles popularly known as BatKars [BK]. All units are sold with under a two-year warranty contract with a commitment to replace defective parts and provide the necessary labor services for such repair . During 2018 the corporation sold 6,000 BKs for cash at a unit price of $4,000. Based on past experience, the two-year warranty contracts are estimated to cost the company $380 per unit which included $80 per unit on parts and the balance for labor. These are recorded at the time when the sales are recorded. During 2018, RI incurred actual costs of $990,000 (which consisted of $444,000 for parts and the rest for labor) on repair work called for by customers on the sold units. Apply the expense-based (assurance-type) approach for answering Questions 10 - 12 stated below. NEXT You are then further informed that RI estimates $500 per unit of the product revenues from the above mentioned sales would would be considered as warranty revenues. 40% of these warranty revenues relate to year 2018 and the balance to year 2019. Now apply the revenue-based (service-type) approach for answering Questions 13 - 15.

10] The entry to record the warranty contracts issued in 2018 would be

a. Warranty Expenses ...... DR $1,080,000; Warranty Expenses Payable ...... CR $ 1,080,000.

b. Warranty expenses ...... DR $2,280,000; Cash ...... CR $2,280,000.

c. Warranty Expenses ...... DR $2,280,000; Estimated Warranty Liabilities ...... CR $2,280,000.

d. Warranty expenses ...... DR $2,280,000; Parts Inventory ...... CR $480,000; Direct Labor ...... CR $1,800,000

e. Warranty expenses ...... DR $24,000,000; Cash ...... CR $24,000,000.

11] Prepare the journal entry to record the actual warranty costs incurred by RI during 2018.

a. Warranty expenses ...... DR $1,080,000; Parts Inventory ...... CR $1,080,000.

b. Estimated Warranty Liabilities ...... DR $1,080,000; Parts Inventory ...... CR $1,080,000.

c. Estimated Warranty Liabilities ...... DR $990,000; Parts Inventory ...... CR $444,000; Direct Labor ...... CR $546,000; ..

d. Warranty expenses ...... DR $1,290,000; Estimated Warranty Liabilities ...... CR $1,290,000.

e. Warranty expenses ...... DR $1,080,000; CR Cash ...... $1,080,000.

12. How would the warranty transactions be reported on the financial statements for December 31, 2018 stating the appropriate classifications and amounts?

a. Income Statement: Sales Revenues ... $24,000,000; Warranty Expenses ... $2,280,000; and Balance Sheet: Non-Current Liability - Estimated Liability for Warranties ... $1,290,000.

b. Income Statement: Warranty Revenues ... $24,000,000; Warranty Expenses ... $2,280,000; and Balance Sheet: Current Liability - Estimated Liability for Warranties ... $1,290,000.

c. Income Statement: Sales Revenues ... $24,000,000; Warranty Expenses ... $990,000; and Balance Sheet: Current Liability - Warranties Payable ... $990,000.

d. Income Statement: Sales Revenues ... $24,000,000; Warranty Expenses ... $990,000; and Balance Sheet: Non-Current Liability - Estimated Liability for Warranties ... $1,290,000.

e. None of the above.

13] What would be the journal entry to record the sales of the BatKars and the warranty in 2018?

a. Cash ...... DR $24,000,000; Sales Revenue ...... CR $21,000,000; Warranty Payable ...... CR $3,000,000.

b. Cash ...... DR $24,000,000; Sales Revenue ...... CR $21,000,000; Unearned Warranty Revenue ...... CR $3,000,000.

c. Cash ...... DR $24,000,000; Sales Revenue ...... CR $21,000,000; Gain On Warranty ...... CR $3,000,000.

d. Cash ...... DR $24,000,000; Sales Revenue ...... CR $23,010,000; Warranty Payable ...... CR $990,000.

e. None of the above.

14] The journal entry to record the actual warranty costs incurred in 2018 would be

a. Warranty Expense ...... DR $990,000; Cash ...... CR $546,000; Parts Inventory ...... CR $444,000

b. Warranty Expense ...... DR $990,000; Warranty Payable ...... CR $990,000.

c. Warranty Expense ...... DR $990,000; Estimated Liability for Warranties ...... CR $990,000.

d. Warranty Revenues ...... DR $990,000; Cash ...... CR $546,000; Parts Inventory ...... CR $444,000.

e. Warranty Expense ...... DR $990,000; Direct Labor ...... CR $546,000; Parts Inventory ...... CR $444,000.

15] How would the warranty transactions be reported on the financial statements for December 31, 2018 stating the appropriate classifications and amounts?

a. Income Statement: Sales Revenue ...... $21,000,000; Warranty Revenue ...... $1,200,000; and Warranty Expenses ...... $990,000; and Balance Sheet: Current Liability - Estimated Liability for Warranties ...... $1,800,000.

b. Income Statement: Sales Revenue ...... $21,000,000; Warranty Revenue ...... $1,200,000; Warranty Expenses ...... $990,000; and Balance Sheet: Current Liability - Unearned warranty revenue ...... $1,800,000.

c. Income Statement: Sales Revenue ...... $21,000,000; Warranty Revenue ...... $1,200,000; Warranty Expenses ...... $990,000; and Balance Sheet: Non-Current Liability - Unearned warranty revenue ...... $1,800,000.

d. Income Statement: Sales Revenues ...... $24,000,000; Warranty Expenses ...... $1,200,000; and Balance Sheet: Current Liability - Unearned warranty revenue ...... $1,800,000.

10. Over the past year, the vice president for human resources at a large medical center has run a series of three-month workshops aimed at increasing worker motivation and performance. To check the effectiveness of the workshops, she selected a random sample of 35 employees from the personnel files. She collected the employee performance ratings recorded before and after workshop attendance and stored the paired ratings in the Excel data file for this assignment under the tab Perform.   

Conduct the appropriate hypothesis test and then state your findings and conclusions regarding the value of these workshops. (Significance level of 5%)

1. State your null and alternative hypothesis.
2. What is the conclusion of your test? Justify your answer, including an interpretation of the confidence interval and the p-value.
3. Assuming the cost of the training is $1000 per employee, what would be your decision regarding these workshops under the assumption that an increase in performance of at least 10% would justify the cost?

   Before	After
   59	72
   72	74
   89	62
   67	74
   81	78
   88	86
   71	81
   67	72
   78	77
   64	85
   72	80
   89	80
   87	76
   69	86
   61	84
   82	80
   82	87
   65	82
   80	76
   70	80
   76	79
   78	88
   77	83
   74	83
   63	81
   62	76
   84	79
   71	81
   68	86
   88	89
   73	75
   77	71
   83	78
   82	78
   60	94

The ledger of Crane Limited at October 31, 2021, contains the following summary data:

Your analysis reveals the following additional information:

Prepare a journal entry to correct the prior period error.

Prepare the journal entry to record the reacquisition of common shares

Calculate profit for the year ended October 31, 2021

Prepare the statement of retained earnings for the company for the year ended October 31, 2021.

Question 2 [15 marks]

Edwards Industries is a manufacturer of healthcare products. The company is evaluating the feasibility of a new household disinfectant product that uses ultraviolet radiation technology. The project has a lifespan of 10 years and is expected to generate a yearly revenue of $5.2 million and a yearly operating expense of $1.2. The new manufacturing equipment will cost $15 million, and production and sales will require an initial $5 million investment in working capital.  The equipment will be fully depreciated using the straight-line method over the life of the project with a salvage value of $2 million (after tax). In addition, the company spent $150,000 in research related to the product last year. Rather than acquiring a new building, the company plans to install the equipment in a building that it owns but currently unoccupied. The building could be sold for $3 million after taxes and relevant fees. The company's tax rate is 30%.  

If the expected return from shareholders is 12% per year, what is the project's NPV? Should the project be accepted?

The product development group of a high-tech electronics company developed five proposals for new products. The company wants to expand its product offerings, so it will undertake all projects that are economically attractive at the company’s MARR of 16% per year. The cash flows (in $1000 units) associated with each project are estimated. Which projects, if any, should the company accept on the basis of a present worth analysis?

The present worth of project A is $  .

The present worth of project B is $  .

The present worth of project C is $  .

The present worth of project D is $  .

The present worth of project E is $

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