(Please show work so I can learn how to do it)

c.) For each company, compute net income as a percentage of revenue in 2017.              

d.) For each company, calculate working capital and current ratio for 2017 and 2016. How did they change from 2016 to 2017 (improve or worsen)? What may have caused those changes?    

Below are three independent and unrelated errors.

On December 31, 2017, Wolfe-Bache Corporation failed to accrue office supplies expense of $1,750. In January 2018, when it received the bill from its supplier, Wolfe-Bache made the following entry:

On the last day of 2017, Midwest Importers received a $89,000 prepayment from a tenant for 2018 rent of a building. Midwest recorded the receipt as rent revenue.

At the end of 2017, Dinkins-Lowery Corporation failed to accrue interest of $7,900 on a note receivable. At the beginning of 2018, when the company received the cash, it was recorded as interest revenue.

   
Required:
For each error:
1. What would be the effect of each error on the income statement and the balance sheet in the 2017 financial statements?
2. Prepare any journal entries each company should record in 2018 to correct the errors.
  

Below are three independent and unrelated errors.

On December 31, 2017, Wolfe-Bache Corporation failed to accrue office supplies expense of $1,300. In January 2018, when it received the bill from its supplier, Wolfe-Bache made the following entry:

Office supplies expense 1,300

Cash 1,300

On the last day of 2017, Midwest Importers received a $80,000 prepayment from a tenant for 2018 rent of a building. Midwest recorded the receipt as rent revenue.

At the end of 2017, Dinkins-Lowery Corporation failed to accrue interest of $7,000 on a note receivable. At the beginning of 2018, when the company received the cash, it was recorded as interest revenue.

Required:

For each error:

1. What would be the effect of each error on the income statement and the balance sheet in the 2017 financial statements?

2. Prepare any journal entries each company should record in 2018 to correct the errors.

One year ago your company purchased a machine for $110,000. You have learned that a new, much better machine is available for $150,000--it will be depreciated on a straight line basis and has no salvage value. You expect the machine to produce $60,000 per year in revenue and cost $20,000 per year to operate for the next ten years. The current machine is expected to produce $40,000 per year in revenue and also costs $20,000 per year to operate. The current machine’s depreciation expense is $10,000 per year for the next 10 years, after which it will be discarded. It will have no salvage value. The market value of the current machine today is $50,000. Your company’s tax rate is 45% and the opportunity cost of capital is 10%. Should your company replace its year-old machine?

PLEASE SHOW ALL WORK

The Katy Company engages in the manufacture and sale of books worldwide. Its income statement for the year ending June 30, 2019 and selected amounts from its June 30, 2019 balance sheet follow:

The variable costing concept removes fixed costs, which are uncontrollable, from the decision-making process (see variable costing income statement). This forces management to focus on the variable factors of production, sales revenue and variable costs. I remember learning this concept in economics at LBCC, where a company should shut down if a product’s price falls below variable cost and just incur fixed costs.

Have you ever heard the saying “The company loses $1.00 on every unit sold, but we are confident the losses can be made up on volume.” Really?

In theory, companies should not operate with a negative contribution margin (sales revenue-variable costs), but my guess is that some do especially in this economic environment?

Do you think companies actually operate (or produce products) with a negative contribution margin?

Pharmacologist Dr. Finch was asked by a drug company to compare the bioavailability of two brands of aspirin (brands A and B for simplicity). She randomly chose 10 healthy male subjects and asked each to take 3 pills of each brand on two separate days. The 1-hour urine concentrations (mg%) of aspirin for each subject on both occasions were carefully measured and tabulated as follows.

      Subject ID      Aspirin A 1-hour             Aspirin B 1-hour

1. Let µ_A and µ_B be the mean 1-hour concentration of aspirin A and B, respectively. Write down Dr. Finch’s research objective in terms of H₀ and H_A.
2. Perform an appropriate test at the 5% significance level.
3. If a 95% CI for the difference µ_A − µ_B is desired, would the number zero within or without this CI? Briefly explain why or why not.

A pharmaceutical company is testing a new drug to increase memorization ability. It takes a sample of individuals and splits them randomly into two groups: group 1 takes the drug, group 2 takes a placebo. After the drug regimen is completed, all members of the study are given a test for memorization ability with higher scores representing a better ability to memorize. Those 20 participants on the drug had an average test score of 24.62 (SD = 4.649) while those 27 participants not on the drug (taking the placebo) had an average score of 28.85 (SD = 6.365). You use this information to perform a test for two independent samples with hypotheses Null Hypothesis: μ₁ ≥ μ₂, Alternative Hypothesis: μ₁ < μ₂. What is the test statistic and p-value? Assume the population standard deviations are equal.

Question 3 options:

1. Cash discount (LO1) Compute the cost of not taking the following cash discounts. a. 2/10, net 40. b. 2/15, net 30. c. 2/10, net 45. d. 3/10, net 90.

2. Effective rate on discounted loan (LO2) Sol Pine borrows $5,000 for one year at 13 percent interest. What is the effective rate of interest if the loan is discounted?

3. Net credit position (LO1) McGriff Dog Food Company normally takes 27 days to pay for average daily credit purchases of $9,530. Its average daily sales are $10,680, and it collects accounts in 32 days. a. What is its net credit position? That is, compute its accounts receivable and accounts payable and subtract the latter from the former. b. If the firm extends its average payment period from 27 days to 37 days (and all else remains the same), what is the firm’s new net credit position? Has it improved its cash flow?

4. Effective rate under different terms (LO2) If you borrow $5,300 at $400 interest for one year, what is your effective interest rate for the following payment plans? a. Annual payment. b. Semiannual payments. c. Quarterly payments. d. Monthly payments.

5. Competing terms from banks (LO2) Summit Record Company is negotiating with two banks for a $151,000 loan. Fidelity Bank requires a 28 percent compensating balance, discounts the loan, and wants to be paid back in four quarterly payments. Southwest Bank requires a 14 percent compensating balance, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated rate for both banks is 10 percent. Compensating balances will be subtracted from the $151,000 in determining the available funds in part a. a. Calculate the effective interest rate for Fidelity Bank and Southwest Bank. Which loan should Summit accept? b. Recompute the effective cost of interest, assuming that Summit ordinarily maintains $42,280 at each bank in deposits that will serve as compensating balances. c. Does your choice of banks change if the assumption in part b is correct?