One Product Corp. (OPC) incorporated at the beginning of last year. The balances on its post-closing trial balance prepared on December 31, at the end of its first year of operations, were:

The following information is relevant to the first month of operations in the following year:

• OPC sells its inventory at $150 per unit, plus sales tax of 6%. OPC’s January 1 inventory balance consists of 180 units at a total cost of $12,760. OPC’s policy is to use the FIFO method, recorded using a perpetual inventory system.
• The $1,700 in Prepaid Rent relates to a payment made in December for January rent this year.
• The equipment was purchased on July 1 of last year. It has a residual value of $1,000 and an expected life of five years. It is being depreciated using the straight-line method.
• Employee wages are $4,000 per month. Employees are paid on the 16th for the first half of the month and on the first day of the following month for the second half of each month. Withholdings each pay period include $250 of income taxes and $150 of FICA taxes. These withholdings and the employer’s matching contribution are paid monthly on the second day of the following month. In addition, unemployment taxes of $50 are accrued each pay period, and will be paid on March 31.
• Deferred Revenue is for 30 units ordered and paid for in advance by two customers in late December. One order of 25 units is to be filled in January, and the other will be filled in February.
• Notes Payable arises from a three-year, 9 percent bank loan received on October 1 last year.
• The par value on the common stock is $2 per share.
• Treasury Stock arises from the reacquisition of 500 shares at a cost of $8 per share.

January Transactions

1. On 1/01, OPC paid employees’ salaries and wages that were previously accrued on December 31.
2. A truck is purchased on 1/02 for $10,000 cash. It is estimated this vehicle will be used for 50,000 miles, after which it will have no residual value.
3. Payroll withholdings and employer contributions for December are remitted on 1/03.
4. OPC declares a $0.50 cash dividend on each share of common stock on 1/04, to be paid on 1/10.
5. A $975 customer account is written off as uncollectible on 1/05.
6. On 1/06, recorded sales of 175 units of inventory on account. Sales tax is charged but not yet collected or remitted to the state.
7. Sales taxes of $500 that had been collected and recorded in December are paid to the state on 1/07.
8. On 1/08, OPC issued 300 shares of treasury stock for $2,400.
9. Collections from customers on account, totaling $13,043, are recorded on 1/09.
10. On 1/10, OPC distributes the $0.50 cash dividend declared on January 4. The company’s stock price is currently $5 per share.
11. OPC purchases on account and receives 70 units of inventory on 1/11 for $4,480.
12. The equipment purchased last year for $31,000 is sold on 1/15 for $30,000 cash. Record depreciation for the first half of January prior to recording the equipment disposal.
13. Payroll for January 1-15 is recorded and paid on 1/16. Be sure to accrue unemployment taxes and the employer’s matching share of FICA taxes.
14. Having sold the equipment, OPC pays off the note payable in full on 1/17. The amount paid is $23,099, which includes interest accrued in December and an additional $93 interest through January 17.
15. On 1/27, OPC records sales of 30 units of inventory on account. Sales tax is charged but not yet collected or remitted.
16. A portion of the advance order from December (25 units) is delivered on 1/29. No sales tax is collected on this transaction because the customer is a U.S. governmental organization that is exempt from sales tax.
17. To obtain funds for purchasing new equipment, OPC issued bonds on 1/30 with a total face value of $95,000, stated interest rate of 5 percent, annual compounding, and six-year maturity date. OPC received $85,944 from the bond issuance, which implies a market interest rate of 7 percent.
18. On 1/31, OPC records units-of-production depreciation on the vehicle (truck), which was driven 2,000 miles this month.
19. OPC estimates that 2% of the ending accounts receivable balance will be uncollectible. Adjust the applicable accounts on 1/31, using the allowance method.
20. On 1/31, adjust for January rent expired.
21. Accrue January 31 payroll on 1/31, which will be payable on February 1. Be sure to accrue unemployment taxes and the employer’s matching share of FICA taxes.
22. Accrue OPC’s corporate income taxes on 1/31, estimated to be $4,120

Prepare all January journal entries and adjusting entries for items (a)–(v). Review the 'General Ledger' and the adjusted 'Trial Balance' Tabs to see the effect of the transactions on the account balances. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Part 1:

Reba Dixon is a fifth-grade school teacher who earned a salary of $38,000 in 2017. She is 45 years old and has been divorced for four years. Reba rents out a small apartment building in Colorado Springs, Colorado. In 2017, Reba received $30,000 of rental payments from tenants and she incurred $19,500 of expenses associated with the rental. They had been living in Colorado for the past 15 years, but ever since her divorce, Reba has been wanting to move back to Georgia to be closer to her family. Luckily, in November 2016, a teaching position opened up and Reba and Heather decided to make the move.

Reba and her daughter Heather (20 years old at the end of 2017) moved to Georgia in December 2016 and purchased a home for $80,000. In 2017, Reba paid $2,000 for home mortgage interest and $1,500 in real estate taxes on this same home.

Heather decided to continue living at home with her mom, and she started attending school full-time in January 2017 at a nearby university. She was awarded a $3,000 taxabll tuition scholarship this year, and Reba helped out by paying the remaining $500 tuition and $700 textbook cost. If possible, Reba thought it would be best to claim the education credit for these expenses.

Reba wasn’t sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Reba paid $2,800 in state income taxes via withholding from her paycheck and $6,500 in cash charitable contributions during 2017. She also paid the following medical-related expenses for her and Heather:

Insurance premiums

$

$4,795

Medical care expenses

$1,100

Prescription medicine

$350

Nonprescription medicine

$100

New contact lenses for Heather

$200

A few years ago, Reba acquired several investments with her portion of the divorce settlement. In 2017, she reported the following income from her investments: $2,200 of interest income from ABC, Inc. corporate bonds and $1,500 interest income from City of Denver municipal bonds. Overall, Reba’s stock portfolio appreciated by $12,000.

Heather reported $3,200 of interest income in 2017 from corporate bonds she received as gifts from her father over the last several years. This was Heather’s only source of income for the year. Reba provides more than one-half of Heather’s support.

Reba had $10,000 of federal income taxes withheld by her employer in 2017. Reba did not make any estimated payments. Reba had qualifying insurance for purposes of the Affordable Care Act (ACA) (She is not subject to a “lack of health care insurance” penalty).

Part 2: In addition to the information in Part 1, now also assume the following for 2017:

The $19,500 of expenses associated with Reba renting out a small apartment building is comprised of the following items: $5,500 depreciation, $6,500 property taxes, $3,000 insurance, $1,000 repairs, and $3,500 utilities. Reba will report this information and the $30,000 of rental payments received from tenants on Schedule E.

Reba is a also a part-time chef who has developed a new way to prepare great tasting, low-carbohydrate meals using fresh ingredients. She teaches cooking classes during the summer months when she is not teaching and reports this activity as a sole proprietorship on Schedule C using a principal business code of 611000 in Box B. Activity for the year included: gross receipts = $15,670, food supplies = $3,850, legal expenses = $900, office expense = $410, advertising = $800, and the purchase of a portable convection oven on June 15 used 100% for business purposes = $1,300 (claim the largest depreciation deduction possible). Reba uses the cash basis of accounting for tax purposes. In addition, Reba occasionally uses her personal car for business. Assume that Reba maintains a mileage log showing that she drove her car a total of 10,000 miles during the year including 900 miles for business purposes. Reba does not maintain a home office.

Reba had two stock transactions during the year: 1) Sold 5,000 shares of LMN Corp. common stock for $110,000 on May 5. The shares were originally purchased for $60 each on August 7, 2013. Reba decided to sell the LMN stock before the market price dropped any lower. 2) Sold 900 shares of Home Depot, Inc. common stock for $150 per share on April 21, 2017. The shares were inherited from Reba’s Aunt on March 21, 1997. We will discuss in class how to determine the basis of these shares.

Reba borrowed $25,000 from a broker to purchase investment assets including stocks and bonds. During the year, she paid the broker $1,750 of interest related to this loan.

complete the spreadsheet belwo

income

salary

taxable interest

non taxable interest

business income schedule c

capital gain or loss

rental real estate

total income

less adjustments for agi

deductible part of self employment tax

adjusted gross income

itemized deductions

medical and dental

taxes

interest

gift to charity

total itemized deductions

less itemized deduction or standard deduction

less exemptions

taxable income

tax less credits

education credit

plus other taxes

self employment tax

less payments

federal income tax witheld

refund / tax due

4. The following is excerpted form an article about a U.S. Treasury auction of one-month bills that resulted in a zero-percent yield.

     When was the last time you invested in something that you knew wouldn’t make money? In the market equivalent of shoveling cash under the mattress, hordes of buyers were so eager on Tuesday to park money in the world’s safest investment, United States government debt, they agreed to accept a zero-percent rate of return. The news sent a sobering signal: in these troubled economic times, when people have lost vast amounts on stocks, bonds and real estate, making an investment that offers security but no gain is tantamount to coming out ahead.

     Investors accepted the zero-percent rate in the government’s auction Tuesday of $30 billion worth of short-term securities that mature in four weeks. Demand was so great even for no return that the government could have sold four times as much. In addition, for a brief moment, investors were willing to take a small loss for holding another ultra-safe security, the already-issued three-month Treasury bill.

     In these times, it seems, the abnormal has now become acceptable. As America’s debt and deficit spiral from a parade of billion dollar bailouts and stimulus packages, fund managers, foreign governments and big retail investors reckon they will get more peace of mind by stashing their cash, rather than putting it toward any of the higher-yielding risk that is entailed in stocks, corporate bonds and consumer debt.

     “The last time this happened was the Great Depression, when people are willing to accept no return on their money, or possibly even a negative return,” said Edward Yardeni, an independent analyst. “If people are so busy during the day just protecting the cash they have, it’s not a good sign.”

     There are several explanations for the flight to safety in the bond market. The world of short-term money market funds, for instance, is still reeling from troubles at the Reserve Primary Fund, a money market fund frozen in September after it lost money on investments in Lehman Brothers. Since then, individual and large investors have put more than $200 billion into money funds that only invest in safe Treasury bills. At the same time, investors have withdrawn nearly $400 billion from prime funds. Many investors are also pulling money out of mutual funds and hedge funds, forcing portfolio managers to sell more risky assets and hold Treasuries, which are easier to sell. [“Investors Buy U.S. Debt at Zero Percent,” Vikas Bajaj and Michael Grynbaum; NYT, 12-10-2008]

(a) Why is a zero yield on treasury bills equivalent to putting currency under the mattress? How could the existence of money market funds committed to invest in only treasury bills explain why the short-term yields could be negative?

(b) How could you determine if investors are expecting deflation over the next several months? What are the implications for risk premiums on bank time deposits? Carefully explain.

A. Calculate 95% and 99% confidence intervals for the Total Assessed Value, Heated Area, Air Conditioning, and Fireplaces based on your sample data. Keep in mind that these variables are not the same type. You'll need to decide which formula to use for each variable. There should be a total of 8 confidence intervals calculated, 2 for each of the 4 variables. Show your work in doing these calculations, showing which formula you are using, giving the critical value, standard error, margin of error, etc...

B. . Explain what each of the confidence intervals tell you concerning the homes in Wake County. Write these explanations in full sentences! Example: We are 95% confident that the mean assessed value of all homes in Wake County is... etc.

C. By increasing the confidence level, explain how the confidence intervals were affected and why that makes sense

D.  If more data was used in the sample, explain how the confidence intervals would be affected and why that makes sense.

E. Write a short report that summarizes what you discovered about the single family homes in Wake County

Zume Pizza: Cost-Volume-Profit Analysis

Zume Pizza uses a combination of robots, artificial intelligence (AI), and GPS in its food trucks to deliver pizzas to customers’ houses just as the pizza is finished baking. Pizzas are actually prepared and baked in the Zume pizza truck by an employee assisted by robots. Zume Pizza started operations in April 2016 and is currently selling about 250 pizzas per day.

The pizza delivery process starts with a customer using Zume Pizza’s app to order pizza. The pizza combinations offered by Zume have been derived by analyzing customer data to offer several popular options. These preset combination recipes are programmed into Zume’s computers, so that its robots can build and bake the pizzas efficiently.

All pizza preparation and baking happens in the Zume pizza truck. Once the customer orders a pizza, a worker in the Zume food truck will toss the dough, cut the vegetables, and put on toppings. A robot will put on the pizza sauce. Each Zume pizza truck has 56 pizza ovens, which are each individually connected to the order system and the truck’s GPS. A robot will put the pizza into the designated oven exactly four minutes before the truck reaches the customer’s house. A worker will pull out the pizza when it is finished and place it into the cutter, where a robot will cut the pizza. The pizza is boxed and the pizza is delivered to the customer’s door, all within a few minutes of finishing baking. Eventually, Zume’s owners hope to use a robot to remove pizzas from the oven as well.

Assume that average selling price per pizza is about $18. To follow are estimates of costs that might be incurred by Zume Pizza in its pizza business.

Description and Cost estimate (in dollars)

• Ingredient cost per pizza: $6.00
• Truck fuel cost per delivery: $3.00
• Cost of pizza delivery truck (estimated useful life 5 years, no salvage value): $80,000
• Cost of initial software development (estimated useful life 3 years): $30,000
• Annual maintenance/update costs of software: $25,000
• Supplies cost per pizza (box, napkins, etc.): $1.00
• Cost to park pizza delivery truck per year (garage facility): $24,000
• Insurance and other regulatory costs per year: $36,000
• Cost of cofounders’ salaries per year: $150,000
• Cost to rent restaurant kitchen facility for testing and food prep (per year): $45,000
• Direct labor cost per pizza (driving truck and preparing pizza in truck): $5.00

Initial Question:

Please address the question(s) below. In your post, please support your response (why do you think so?)

From the list above, what costs would you classify as variable with respect to the cost of a Zume pizza? Are there any other variable costs you could envision that Zume might incur per pizza? Explain.

From the list above, what costs would you classify as fixed with respect to the cost of a Zume pizza? Are there any other fixed costs you could envision that Zume might incur in its pizza business? Explain.

Bethesda Mining is a mid-sized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep mines as well as strip minds. Most of the coal mined is sold under contract, with excess production sold on the spot market.The coal mining industry, especially high-sulfur coal operations such as Bethesda, has been hard-hit by environmental regulations. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for high-sulfur coal. Bethesda has been approached by Mid-Ohio Electric Company with a request to supply coal for its electric generators for the next 4 years. Bethesda Mining does not have enough excess capacity at its existing mines to guarantee the contract. The company is considering opening a strip mine in Ohio on 5,000 acres of land purchased 10 years ago for $4 million. Based on a recent appraisal, the company feels it could receive $6.5 million on an after-tax basis if it sold the land today.Strip Mining is a process where the layers of topsoil above a coal vein are removed and the exposed coal is removed. Some time ago, the company would remove the coal and leave the land in an unusable condition. Changes in mining regulations now force a company to reclaim the land; that is, when the mining is completed, the land must be restored to near its original condition. The land can then be used for other purposes. Because it is currently operating at full capacity, Bethesda will need to purchase additional necessary equipment, which will cost $95 million. The equipment will be depreciated on a 7-year MACRS schedule. The contract runs for only 4 years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 60% of its initial purchase price in four years. The contract calls for the delivery of 500,000 tons of coal per year at a price of $86 per ton. Bethesda Mining feels that coal production will be 620,000 tons, 680,000 tons, 730,000 tons, and 590,000 tons, respectively, over the next four years. The excess production will be sold in the spot market at an average of $77 per ton. Variable costs amount to $31 per ton, and fixed costs are $4,100,000 per year. The mine will require a net working capital investment of 5% of sales. The NWC will be built up in the year prior to the sales. Bethesda will be responsible for reclaiming the land at termination of the mining. This will occur in Year 5. The company uses an outside company for reclamation of all the company’s strip minds. It is estimated the cost of reclamation will be $2.7 million. In order to get the necessary permits for the strip mine, the company agreed to donate the land after reclamation to the state for use as a public park and recreation area. This will occur in Year 6 and result in a charitable expense deduction of $6 million. Bethesda faces a 25% tax rate and has a 12% required return on new strip mine projects. Assume that a loss in any year will result in a tax credit.You have been approached by the president of the company with a request to analyze the project. Calculate the NPV, IRR for the new strip mine. Should Bethesda Mining take the contract and open the mine?

Bethesda Mining is a mid-sized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep mines as well as strip minds. Most of the coal mined is sold under contract, with excess production sold on the spot market.The coal mining industry, especially high-sulfur coal operations such as Bethesda, has been hard-hit by environmental regulations. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for high-sulfur coal. Bethesda has been approached by Mid-Ohio Electric Company with a request to supply coal for its electric generators for the next 4 years. Bethesda Mining does not have enough excess capacity at its existing mines to guarantee the contract. The company is considering opening a strip mine in Ohio on 5,000 acres of land purchased 10 years ago for $4 million. Based on a recent appraisal, the company feels it could receive $6.5 million on an after-tax basis if it sold the land today.Strip Mining is a process where the layers of topsoil above a coal vein are removed and the exposed coal is removed. Some time ago, the company would remove the coal and leave the land in an unusable condition. Changes in mining regulations now force a company to reclaim the land; that is, when the mining is completed, the land must be restored to near its original condition. The land can then be used for other purposes. Because it is currently operating at full capacity, Bethesda will need to purchase additional necessary equipment, which will cost $95 million. The equipment will be depreciated on a 7-year MACRS schedule. The contract runs for only 4 years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 60% of its initial purchase price in four years. The contract calls for the delivery of 500,000 tons of coal per year at a price of $86 per ton. Bethesda Mining feels that coal production will be 620,000 tons, 680,000 tons, 730,000 tons, and 590,000 tons, respectively, over the next four years. The excess production will be sold in the spot market at an average of $77 per ton. Variable costs amount to $31 per ton, and fixed costs are $4,100,000 per year. The mine will require a net working capital investment of 5% of sales. The NWC will be built up in the year prior to the sales. Bethesda will be responsible for reclaiming the land at termination of the mining. This will occur in Year 5. The company uses an outside company for reclamation of all the company’s strip minds. It is estimated the cost of reclamation will be $2.7 million. In order to get the necessary permits for the strip mine, the company agreed to donate the land after reclamation to the state for use as a public park and recreation area. This will occur in Year 6 and result in a charitable expense deduction of $6 million. Bethesda faces a 25% tax rate and has a 12% required return on new strip mine projects. Assume that a loss in any year will result in a tax credit.You have been approached by the president of the company with a request to analyze the project. Calculate the NPV, IRR for the new strip mine. Should Bethesda Mining take the contract and open the mine?

1)McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $489,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $71,800. Project B will cost $321,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $48,600. A discount rate of 7% is appropriate for both projects. Click here to view the factor table.

Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Which project should be accepted based on Net Present Value?

Which project should be accepted based on profitability index?

2)Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $158,800 and have an estimated useful life of 6 years. It can be sold for $69,100 at the end of that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $26,700. The company’s borrowing rate is 8%. Its cost of capital is 10%.
Click here to view the factor table.

Calculate the net present value of this project to the company and determine whether the project is acceptable. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places, e.g. 125.)

3)Kanye Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $179,000, has an estimated useful life of 7 years, a salvage value of zero, and will increase net annual cash flows by $37,987.

Click here to view the factor table.

What is its approximate internal rate of return? (Round answer to 0 decimal place, e.g. 13%.)

Garner Strategy Institute (GSI) presents executive-level training seminars nationally. Eastern University (EU) has approached GSI to present 40 one-week seminars during 2019. This activity level represents the maximum number of seminars that GSI is capable of presenting annually. GSI staff would present the week-long seminars in various cities throughout the United States and Canada. Terry Garner, GSI’s president, is evaluating three financial options for the revenues from Eastern: accept a flat fee for each seminar, receive a percentage of Eastern’s profit before tax from the seminars, and form a joint venture to share costs and profits. Estimated costs for the 2019 seminar schedule follow: Garner Strategy Institute Eastern University Fixed costs for the year: Salaries and benefits $ 200,000 N/A * Facilities 46,000 N/A * Travel and hotel 0 $ 360,920 Other 72,000 N/A * Total fixed costs $ 318,000 $ 360,920 Variable cost per participant: Supplies and materials 0 $ 47 Marketing 0 18 Other site costs 0 35 *Eastern’s fixed costs are excluded because the amounts are not considered relevant for this decision (i.e., they will be incurred whether or not the seminars are presented). Eastern does not include these costs when calculating the profit before tax for the seminars. EU plans to charge $1,200 per participant for each 1-week seminar. It will pay all variable marketing, site costs, and materials costs. Required 1. Assume that the seminars are handled as a joint venture by GSI and EU to pool costs and revenues. a. Determine the total number of seminar participants needed to break even on the total costs for this joint venture. b. Assume that the joint venture has an effective income tax rate of 30%. How many seminar participants must the joint venture enroll to earn an after-tax income of $97,209? 2. Assume that GSI and EU do not form a joint venture, but that GSI is an independent contractor for EU. EU offers two payment options to GSI: a flat fee of $9,500 for each seminar or a fee of 40% of EU’s profit before taxes from the seminars. Compute the minimum number of participants needed for GSI to prefer the 40% fee option over the flat fee. 1 Total Number of seminar participants needed to break even (per year). 2. Assume that the joint venture has an effective income tax rate of 30%. How many seminar participants must the joint venture enroll to earn an after-tax income of $97,209? what is required number of participants? (per year) 3. Assume that GSI and EU do not form a joint venture, but that GSI is an independent contractor for EU. EU offers two payment options to GSI: a flat fee of $9,500 for each seminar or a fee of 40% of EU’s profit before taxes from the seminars. Compute the minimum number of participants needed for GSI to prefer the 40% fee option over the flat fee. what is minimum number of seminar participants?