Larime Corp. is forecasting 20X2 near the end of 20X1. The estimated year-end financial statements and a worksheet for the forecast are given below.

Management expects the following next year.

• An 9% increase in revenue.
• Price cutting will cause the cost ratio (COGS/sales) to deteriorate (increase) by 2% (of sales) from its current level.
• Expenses will increase at a rate that is three quarters of that of sales.
• The current accounts will increase proportionately with sales.
• Net fixed assets will increase by $5 million.
• All interest will be paid at 12%.
• Federal and state income taxes will be paid at a combined rate of 43%.

Make a forecast of Larime's complete income statement and balance sheet. Enter your dollar answers in thousands. For example, an answer of $12 thousands should be entered as 12, not 12,000. Round percentage values to 1 decimal place. Enter all amounts as a positive numbers.

1. Incremental Profits

Your firm, which currently sells its product only in South Texas, is considering starting to export your product across the border into Mexico. Currently, your firm’s revenues are $1,200,000 and your firm’s costs are $1,020,000. You estimate that if you start exporting to Mexico, your revenues will increase by $150,000 and your costs will increase by $200,000.

1. (3 points) What are your profits if you do not export your product to Mexico?

2. (3 points) What are your profits if you do export to Mexico?

3. (3 points) What are the incremental profits associated with exporting to Mexico?

4. (3 points) Should your firm export to Mexico? EXPLAIN WHY OR WHY NOT.

5. (3 points) Suppose that a previous manager had already decided to go ahead with the project (i.e., already decided to start exporting to Mexico). After spending $100,000 to start (but not finish) the exporting project, he was fired and you took the project over. You have to decide whether to continue with his project or not. If you continue, your additional revenue from exporting to Mexico will be $150,000 and your costs will be the $100,000 that the previous manager has already spent and $100,000 additional dollars that you will need to spend to complete the project. If you cancel the project, your firm will not start exporting, so additional revenue will be zero, but your only costs are the $100,000 the previous manager has already spent? Should you continue? EXPLAIN WHY OR WHY NOT.

Income statement reflect the accounting results of a firm's activity over a period of time (typically a quarter or fiscal year) and include which of the following:

Gross profit is the initial amount of profit generated after deducting:

Which of the following is an important qualitative consideration when evaluating the earnings record of a company or business?

BEFC reported cost of goods sold (COGS) of $1.8 million and average inventory for the year of $300,000. What was the Day's Sales in Inventory (DSOs) for the year?

A statement of cash flow will include all except:

Operating activities is defined as:

Chris P. Bacon is the chief accountant for CV Industries, a large manufacturing company. In addition to its normal business activities, the company has excess warehouse space that it rents out to local businesses. Because the typical renter is a small business, CV Industries requires renters to make lease payments for the entire rental period on the day the lease is signed. As a result, CV Industries typically reports a large unearned rent balance on its balance sheet.

After making adjusting entries for the current year, Chris prepares the adjusted trial balance and notices that the company’s earnings will decline significantly. He presents the adjusted trial balance to the company’s CFO, Antonio Beldin, who is concerned about the earnings decline. Mr. Beldin notices the large unearned rent balance and proposes making an additional end-of-period adjusting entry to recognize the entire unearned rent balance as revenue in the current period. Chris protests, reminding Mr. Beldin that the adjusting entry for unearned rent has already been made. Mr. Beldin assures Chris that his proposal is acceptable, reminding Chris that “because we have already received the cash, we have the right to recognize the revenue in the current period.” He instructs Chris to make the additional adjusting journal entry. Chris is hesitant to follow these instructions, but he is sensitive to the company’s emphasis on earnings growth and makes the adjusting entry as instructed.

1. Is Chris behaving ethically? Why?

2. Who is affected by Chris’s decision?

Crane Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms.
(A):Prepare any journal entries to record the revenue arrangement for Crane Bundle A on January 2, 2020, and December 31, 2020.

(B) Prepare any journal entries to record the revenue arrangement for Crane Bundle B on July 1, 2020, and December 31, 2020.

(C)Repeat the requirements for part (a), assuming that Crane Company has no reliable data with which to estimate the standalone selling price for the Internet service.

Swizzle, Inc. began operations in November of the current year with the following transactions occurring during the month:

Required:

Explain the impact of each transaction on the fundamental accounting equation, using the following format:

Transaction: August 1, Obtained a bank loan totaling $100,000

Example answer:

August 1:

• Cash (asset) increases by $100,000
• Bank Loan (liability) increases by $100,000

Make sure you specify the following:

The account(s) affected, the amount, whether it increases or decreases, and whether it is an asset, liability, equity, revenue or expense. For any amounts that are on the income statement, you should use the specific account (i.e. revenue, cost of goods sold, salaries expense, etc.).

Please use this information to solve this problem

If the depreciation expense during 2019 is $550 Million, calculate the Change in Cash from Operating Activities for this firm during 2019 based on above information. Also explain what this Change in Cash from Operating Activities for this firm during 2019 mean to investors?

ABC hotel has 200 rooms and has a policy to determine its room rates based on consumers capacity to pay. For example busniess clients pay $1,200 per night and group tours $900 per night. The incremental cost of servicing a room is worked out at $110 per room. On average, most guest stay for three (3) nights. Rooms division manager is trying to establish if four (4) week advance reservation should be taken for a group booking of 40 rooms and three (3) nights of 7th , 8th and 9th June 2018. According to the reservation record, 80 rooms for the three (3) nights of 7th , 8th , and 9th , June 2018 are already booked by various business clients, and the historical trends of the past four (4) years suggest that 90% of the remaing 120 rooms would be sold to other busniess clients. Your are required to a) Prepare a detailed recommendation document explaining the important facts and figures to support if the group tour booking of 40 rooms for three (3) nights, of 7th , 8th and 9th June 2018 should be accepted or rejected while considering the revenue maximisation, effect of revpar, incremental and relevant cost in preparing the recommendation documents b) In the highly competitive environment, tourism and hospitality busniess can aspire to optimise revenue for the long term survival. Discuss various pricing strategies and their effect on tourism and hospitality businesses as a whole focus on the pricing strategy in tourism and hospitality business and highlight their strengths and weaknesses as reported in the published literature.

Phil's Home Handyman Services (PHHS) is a small business providing home maintenance services in Christchurch and surrounding areas. Phil is interested in purchasing some new machinery for his business and has approached a bank for funding. In order to be given a loan the bank has requested an audited financial report. Phil has approached your firm for this service and you have been allocated the task of auditing PHHS’s financial statements. Your initial review of the business indicates that a substantive testing approach would be appropriate and you are now preparing audit programmes. In particular, you are working on the testing of the revenue cycle. The information you have obtained from your review is as follows:  Phil usually works 50 hours a week. Part of this time is spent travelling between clients and is not charged to the clients. The remaining time is charged at $40 per hour, regardless of the task undertaken.  Phil is usually paid in cash, except for a small number of regular small-business customers whom Phil allows to pay on account on a monthly basis by cheque.  In all cases Phil provides the customer with a written receipt. Receipts are prepared manually from a receipt book purchased at a bookstore. The book contains prenumbered blank receipts, which are completed in duplicate.

REQUIRED: (a) Define ‘tests of controls’ and ‘substantive testing’, and then compare and contrast these two forms of audit tests.

b) For each of the following financial statement assertion categories, identify two substantive audit procedures you could use to audit revenue: (i) Accuracy and Cut-off (ii) Completeness (iii) Occurrence

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 61 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,600 per month plus $46 per course plus $7 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 57 students. The actual operating results for September appear below:

Required:

1. Prepare the company’s planning budget for September.

2. Prepare the company’s flexible budget for September.

3. Calculate the revenue and spending variances for September.

Gourmand Cooking School

Planning Budget

For the Month Ended Sept 30