Business College

g Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Comfi’s base airport to the major city in the state, Metropolis. Each month, 40 round-trip flights are made. Shown below is a recent month’s activity in the form of a cost-volume-profit income statement. Fare revenues (400 passenger flights) $48,000 Variable costs Fuel $16,960 Snacks and drinks 720 Landing fees 2,100 Supplies and forms 1,100 20,880 Contribution margin 27,120 Fixed costs Depreciation 3,100 Salaries 11,600 Advertising 600 Airport hanger fees 1,650 16,950 Net income $10,170 Calculate the break-even point in dollars. Break-even point $Type your answer here eTextbook and MediaAssistance Used Calculate the break-even point in number of passenger flights. Break-even point Type your answer here flights eTextbook and MediaAssistance Used Without calculations, determine the contribution margin at the break-even point. Break-even point $Type your answer here eTextbook and MediaAssistance Used If ticket prices were decreased by 10%, passenger flights would increase by 25%. However, total variable costs would increase by the same percentage as passenger flights. (1) How much would net income be impacted by this change? Net income to $ (2) Should the ticket price decrease be adopted?

Answers

Answer 1

Answer:

Comfi Airways, Inc.

a. Break-even point in sales dollars = $30,000

b. Break-even point in passenger flights = 250

c. Contribution at break-even point = fixed costs = $16,950

d. Net income will increase to $10,950 (an increase of $780).

e. Yes. The ticket price decrease should be adopted.

Explanation:

a) Data and Calculations:

Number of airplanes = 2

Maximum number of passengers per flight = 10

Number of round-trip flights each month = 40

Number of passenger flights = 400 (40 * 10)

Total Unit

Fare revenues $48,000 $120 ($48,000/400)

Variable costs:

Fuel $16,960

Snacks and drinks 720

Landing fees 2,100

Supplies and forms 1,100 20,880 $52.20 ($20,880/400)

Contribution margin 27,120 $67.80 ($27,120/400)

Fixed costs:

Depreciation 3,100

Salaries 11,600

Advertising 600

Airport hanger fees 1,650 $16,950

Net income $10,170

Contribution margin ratio = $67.80/$120 = 0.565

Break-even point in sales dollars = Fixed costs/Contribution margin ratio

= $16,950/0.565

= $30,000

Break-even point in sales units = Fixed costs/Contribution per unit

= $16,950/$67.80

= 250 passenger flights

Contribution at break-even point = Fixed costs = $16,950

Decrease of ticket prices by 10% from $120 to $108 ($120 * 90%)

Passenger flights increased to 500 (400 * 1.25)

Fare revenues = $54,000 (500 * $108)

Total variable costs increased to $26,100 ($20,880 * 1.25)

Contribution = $27,900

Fixed costs = $16,950

Net income = $10,950

Increase in net income = $780 ($10,950 - $10,170)

Related Questions

A movie theater company obtains the following estimated elasticity of demand.

The absolute value of the short run price elasticity of demand for movie tickets is 0.85.
The absolute value of of the long run price elasticity of demand for movie tickets is 3.2.
The cross price elasticity of demand for good X, another product sold by the theater, with respect to the price of movie tickets is - 0.26
The income elasticity of demand for movie tickets is 0.75.

Answer each of the following by referring to the given elasticities.

a. If the theater raises movie ticket prices by 10 percent, by what percentage and in what direction will the quantity demanded for movie tickets change in the short run?
b. Explain why the short-run price elasticity of demand for movie tickets differs from the long-run price elasticity of demand for movie tickets.
c. What will happen to total revenue from movie ticket sales in the long run if movie ticket prices increase? Explain using the relative percentage changes in price and quantity.
d. Are movie tickets a normal good or an inferior good? Explain. (e) Given the increase in the price of movie tickets in part (a), what would be the impact on the demand for good X? Use the appropriate graph for good X to illustrate your answer.

Answers

Answer:

Explanation:

Given:

Short-run price elasticity = - 0.85

Long-run price elasticity = - 3.2

Cross-price elasticity = - 0.26

Income elasticity = 0.75

a. If the theater raises movie ticket prices by 10 percent it means that percentage of price change is 10%.

[tex]Elasticity = \frac{Percentage change in Quantity demanded}{Percentage change in price} \\\\-0.85 = \frac{Percent change in Quantity demanded\\}{10} \\\\Percent change in Quantity demanded = -0.85*10\\ \\ = -8.5[/tex]

Thus, quantity demanded falls by 8.5 percent.

b. Short-run price elasticity is different from long-run elasticity due to the time horizon. When individuals have more time they can switch to cheaper alternatives. While, it takes time to adjust in the short-run as the time horizon is not much. So short-run elasticity is less elastic than in the long-run.

In the long-run demand for movie tickets is very elastic. So as price rises in the long-run, quantity demanded falls by a greater proportion. This will cause total revenue to fall in the long-run.

d. Normal goods are goods which have a positive income elasticity. This means for normal goods demand increases as income increases. But in case of inferior goods, demand is inversely related to income. As income rises demand for inferior goods decreases.

Since in this case, income elasticity is 0.75 (positive) it can be concluded that movie tickets are normal goods.

e. Good X is the related good to movie tickets. As cross price elasticity is -0.26 it means that as price of movie tickets rises by 1 percent demand for good X will fall by 0.26 percent.

Thus, as demand for good X and price of movie tickets are inversely related to each other it can be said that they are complementary goods.

If the price of movie tickets are increased by 10%, quantity demanded would increase by 8.5%.

b. The short run elasticity of demand differs from the long run elasticity of demand because in the short run there is limited time to search for suitable suitable alternatives for movies.

c. If the price of movie tickets are increased revenue would decline because demand is elastic.

d. Movie tickets are a normal good. This is because its coefficient of elasticity is greater than zero.

e. If the price of movie tickets are increased, the demand for good X would decline. This is because the two goods are complements.

What is the price elasticity of demand?

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one.

What are normal and inferior goods?

Normal goods are goods that are goods whose demand increases when income increases and falls when income falls. Inferior goods are goods whose demand falls when income rises and increases when income falls.

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true or false educators are also administrators of their classrooms, but mostly outside of the classrooms

Answers

Answer:

false

Explanation:

They have to not only teach you but discipline you

False

They don’t have the right to do that, and plus they didn’t sign up for the other job.
Hope this helps!

Production Budget and Direct Materials Purchases Budget
Jani Subramanian, owner of Jani's Flowers and Gifts, produces gift baskets for various special occasions. Each gift basket includes fruit or assorted small gifts (e.g., a coffee mug, deck of cards, novelty cocoa mixes, scented soap) in a basket that is wrapped in colorful cellophane. Jani has estimated the following unit sales of the standard gift basket for the rest of the year and for January of next year.
September 250
October 200
November 230
December 380
January 100
Jani likes to have 10% of the next month's sales needs on hand at the end of each month. This requirement was met on August 31.
Two materials are needed for each fruit basket:
Fruit 1 pound
Small gifts 6 items
The materials inventory policy is to have 10% of the next month's fruit needs on hand and 30% of the next month's production needs of small gifts. (The relatively low inventory amount for fruit is designed to prevent spoilage.) Materials inventory on August 31 met this company policy.
Required:
1. Prepare a production budget for September, October, November, and December for gift baskets. (Note: Round all answers to the nearest whole unit.)
Jani's Flowers and Gifts
Production Budget for Gift Baskets
For September, October, November, and December
September October November December
Sales
Desired ending inventory
Needed
Less: Beginning inventory production
Total
2. Prepare a direct materials purchases budget for the two types of materials used in the production of gift baskets for the months of September, October, and November. (Note: Round answers to the nearest whole unit.)
Jani's Flowers and Gifts
Direct Materials Purchases Budget
For September, October, and November
Fruit: September October November
Production
Pounds of fruit
Required for production
Desired ending inventory
Total needs
Less: Beginning inventory
Pounds purchased
Small gifts:
Production
Items required
Needed for production
Desired inventory
Total needs
Less: Beginning inventory
Items purchased

Answers

Answer:

Jani's Flowers and Gifts

1. Jani's Flowers and Gifts

Production Budget for September, October, November, and December for Gift Baskets:

Sept Oct. Nov. Dec.

Estimated sales units 250 200 230 380

Estimated ending inventory 20 23 38 10

Units available for sale 270 223 268 390

Beginning inventory 25 20 23 38

Production required 245 213 245 352

2. Jani's Flowers and Gifts

Direct Materials Purchases Budget

For September, October, and November

Sept Oct. Nov.

Fruit (1 pound):

Production requirement 245 213 245

Ending inventory: 21 25 35

Total needs 266 238 280

Beginning inventory: 25 21 25

Pounds purchased 241 217 255

Small Gifts (6 items each):

Production requirement 1,470 1,278 1,470

Ending inventory: 383 441 634

Total needs 1,853 1,719 2,104

Beginning inventory: 441 383 441

Items Purchased 1,412 1,336 1,663

Explanation:

a) Data and Calculations:

Sept Oct. Nov. Dec. Jan.

Estimated sales units 250 200 230 380 100

Estimated ending inventory 20 23 38 10

Units available for sale 270 223 268 390

Beginning inventory 25 20 23 38 10

Production required 245 213 245 352

Jani's Flowers and Gifts

Direct Materials Purchases Budget

For September, October, and November

Sept Oct. Nov. Dec.

Fruit 1 pound:

Production requirement 245 213 245 352

Ending inventory: 21 25 35 106

Total needs 266 238 280 458

Beginning inventory: 25 21 25 35

Pounds purchased 241 217 255 423

Small Gifts 6 items each:

Production requirement 1,470 1,278 1,470 2,112

Ending inventory: 383 441 634 1,899

Total needs 1,853 1,719 2,104 4,011

Beginning inventory: 441 383 441 634

Items Purchased 1,412 1,336 1,663 3,377

XYZ Inc. is seeking an investment of $64,000 from your venture capital firm. After extensive economic analysis, you estimate that the exit value of the company will be $307,000 4 years from now. Because of the risk, you will only invest if you can generate of return of 14% per year on your investment. The founders want to have 100,000 shares of the company. What is the post-money valuation of the company

Answers

Answer:

$181,768.65

Explanation:

Post-money valuation = Exit value / (1 + Required return)^years

Post-money valuation = $307,000 / (1+14%)^4

Post-money valuation = $307,000 / (1.14)^4

Post-money valuation = $307,000 / 1.68896016

Post-money valuation = $181768.6451526482

Post-money valuation = $181,768.65

So, the post-money valuation of the company is $181,768.65.

Well-managed companies set aside money to pay for emergencies that inevitably arise in the course of doing business. A commercial solid-waste recycling and disposal company in Mexico City puts 0.5% of its after-tax income into such an account. (a) How much will the company have after 7 years if after-tax income averages $15.2 million and inflation and market interest rates are 5% per year and 9% per year, respectively

Answers

Answer:

$699,200

Explanation:

According to the scenario, computation of the given data are as follows,

After tax income = $15,200,000

Amount in account = 0.5% × $15,200,000 = $76,000

Time period = 7 years

inflation = 5%

Interest rate = 9%

So, Total amount after 7 years = $76,000 × (F/A, 9%, 7)

= $76,000 ×[ [tex]((1+.09)^{7}-1 )[/tex] ÷ .09]

= $76,000 × [.82803912082 ÷ .09]

= $76,000 × 9.2

= $699,200

what is human resource managment

Answers

Explanation:

Human resource management, or HRM, is defined as the process of managing employees in a company and it can involve hiring, firing, training and motivating employees.

An example of human resource management is the way in which a company hires new employees and trains those new workers.

noun

Answer:Human aid management is the strategic approach to the powerful management of people in a agency or corporation such that they assist their business gain a competitive benefit. it's far designed to maximise employee overall performance in provider of an corporation's strategic targets.

Explanation:

can u people help me to raid online class

Answers

I am sorry but I need the points. And good luck with school, I hate school

Your client took a complete physical inventory count under your observation as of December 15 and adjusted the inventory control account (perpetual tory method) to agree with the physical inventory count. After considering the count adjust ments as of December 15 and after reviewing the transactions recorded from December 16 to December 31, you are almost ready to accept the inventory balance as fairly stated. However, your review of the sales cutoff as of December 15 and December 31 disclosed the following items not previously considered Sales Date Cost Price Shipped Billed Credited to Inventory Control $28,400 $36,900 12/14 12/16 12/16 39,100 50,200 12/10 12/19 12/10 18,900 21,300 1/2 12/31 12/31
Required: what adjusting journal entries, if any, would you make for each of these items? Explain why each adjustment is necessary. (AICPA adapted)

Answers

Answer:

The adjustments made are as attached in the excel sheet. As the goods are entered prior to shipment in the first item, the inventory control variation is to be made.

Explanation:

As the goods are shipped before taking the physical inventory, the inventory control is not made. As the shipment got prior to the physical inventory, the control amount is credited. However, the auditee credited Inventory Control for the cost of these goods on December 16, one of these two credits must be removed.

For the third item, similar situation happened where the inventory control is made.

how market forces would act to return the market to state of equilibrium at the new equilibrium position.

Answers

Answer:

market forces would shift upwards or downwards

Explanation:

during a situation of high demand, supply would shift to the right in order to achieve more sales or in a situation of high supply the demand can be shifted to the right by decreasing prices. At low supply demand can be shifted leftwards by increasing prices and when demand is lower, supply falls due to lower sales

Market factors would change to the upside or downside would act to return the market to state of equilibrium at the new equilibrium position.

What do you mean by equilibrium?

When economic forces are in balance, there is said to be an economic equilibrium. In the absence of outside influences, economic variables essentially hold true to their equilibrium levels. Market equilibrium and economic equilibrium are two different concepts.

The set of economic factors that the economy is normally driven toward by supply and demand and other conventional economic processes is known as economic equilibrium.

The concept of economic equilibrium can also be used to describe a wide range of elements, including interest rates or overall consumer spending.

The point of equilibrium denotes a theoretical state of rest where all economic activities that "should" occur have actually happened, given the initial conditions of all significant economic variables.

Economists who think of economic processes as akin to physical phenomena like velocity, friction, heat, or fluid pressure draw the notion of equilibrium from the physical sciences. Nothing else changes once a system's physical forces are in equilibrium.

Learn more about equilibrium, here

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Tara incorporates her sole proprietorship, transferring it to newly formed Black Corporation. The assets transferred have an adjusted basis of $290,000 and a fair market value of $300,000. Also transferred by Tara was $50,000 in liabilities, all related to the business. In return for these transfers, Tara receives all of the stock in Black Corporation.

a. Black Corporation has a basis of $241,000 in the property.
b. Black Corporation has a basis of $240,000 in the property.
c. Tara’s basis in the Black Corporation stock is $241,000.
d. Tara’s basis in the Black Corporation stock is $249,000.
e. None of the above.

Answers

Answer:

Black Corporation

e. None of the above.

Explanation:

a) Data and Calculations:

Adjusted basis of assets = $290,000

Fair market value of assets = $300,000

Liabilities transferred = $50,000

Black Corporation's basis = $250,000 ( $300,000 - $50,000)

Tara's basis in the Black Corporation = $240,000

b) According to U.S. Code 351, no gain or loss shall be recognized for Tara if property is transferred to Black Corporation by Tara solely in exchange for stock in Black Corporation, and immediately after the exchange, Tara comes into the control of Black Corporation.

Desmond is 25 years old and he participates in his employer’s 401(k) plan. During the year, he contributed $3,000 to his 401(k) account. What is Desmond’s 2016 saver’s credit in each of the following alternative scenarios?
a) Desmond is not married and has no dependents. His AGI after deducting his 401(k) contribution is $34,000.
b) Desmond is not married and has no dependents. His AGI after deducting his 401(k) contribution is $17,500.
c) Desmond files as a head of household and has an AGI of $44,000.
d) Desmond and his wife file jointly and report an AGI of $30,000 for the year.

Answers

Answer: See explanation

Explanation:

The savers credit is mostly used to motivate taxpayers so that they'll contribute to their retirement plans.

a. Desmond is not married and has no dependents. His AGI after deducting his 401(k) contribution is $34,000.

In this case, there'll be no credit that's available for Desmond as he'll be all under files AGI and his maximum savers credit will be $0.

b) Desmond is not married and has no dependents. His AGI after deducting his 401(k) contribution is $17,500.

Since he's single and doesn't have dependents, and his AGI is $17500, therefore, the saver's credit of Desmond will be 50% of $2000 which will be:

= 50% × $2000.

= 0.5 × $2000

= $1000

c) Desmond files as a head of household and has an AGI of $44,000.

Here, his percentage of saver's credit will be 10% of $2000 because he AGI of $44,000 which falls between $30001 - $46125. Therefore savers income will be:

= 10% × $2000

= 0.1 × $2000

= $200

d) Desmond and his wife file jointly and report an AGI of $30,000 for the year.

Here, the saver's percentage used will be 50% of $2000 and this will be:

= 50% × $2000

= 0.5 × $2000

= $1000

Getaway Travel Company reported net income for 2021 in the amount of $68,000. During 2021, Getaway declared and paid $18,000 in cash dividends on its nonconvertible preferred stock. Getaway also paid $28,000 cash dividends on its common stock. Getaway had 58,000 common shares outstanding from January 1 until 28,000 new shares were sold for cash on July 1, 2021. A 2-for-1 stock split was granted on July 5, 2021. What is the 2021 basic earnings per share

Answers

Answer:

$0.35 per share

Explanation:

According to the scenario, computation of the given data are as follows,

Net income = $68,000

Preferred cash dividend = $18,000

So, we can calculate the basic earning per share by using following formula,

Basic Earning per share = ( Net income - Preferred cash dividend) ÷ Outstanding common shares

= ($68,000 - $18,000) ÷ [( 58,000 × 2) + (28,000 × 2 × 6/12)

= $50,000 ÷ [ 116,000 + 28,000]

= $50,000 ÷ 144,000

= $0.35 per share

EcoFabrics has budgeted overhead costs of $1,039,500. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 495,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $396,000 and $643,500 is allocated to the design cost pool. Additional information related to these pools is as follows.
Wool Cotton Total
Machine hours 110,000 110,000 220,000
Number of setups 1,100 550 1,650
1. Calculate the overhead rate using activity based costing.
2. Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing.
3. Calculate the overhead rate using traditional approach.
4. What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach, assuming direct labor hours were incurred evenly between the wool and cotton?

Answers

Answer:

1. Cutting $1.80 per machine hour

Design $390 per setup

2. Wool product line $627,000

Cotton Product line $412,500

3. Overhead rate $2.10

4. Wool Product line $519,750

Cotton Product line $519,750

Explanation:

1. Calculation to determine the overhead rate using activity based costing.

Overhead rate using the activity based costing

Cutting = Overhead / Total Machine hours

= $396,000 / 220,000

= $1.80 per machine hour

Design = Overhead / Number of setups

= $643,500 / 1,650

= $390 per setup

2. Calculation to determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing

Overhead allocated to the wool product line and the cotton product line

Wool product line = (110,000 * $1.80) + (1,100 * $390)

Wool product line= $198,000 + $429,000

Wool product line= $627,000

Cotton Product line = (110,000 * $1.80) + (550 * $390)

Cotton Product line= $198,000 + $214,500

Cotton Product line= $412,500

3.Calculation to determine the overhead rate using traditional approach.

Overhead rate using traditional approach

Overhead rate = Total Overhead / Direct labor hours

Overhead rate= $1,039,500 / 495,000

Overhead rate= $2.10

4. Calculation to determine What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach

Overhead allocated using the traditional method

Wool Product line = $1,039,500 / 2

Wool Product line= $519,750

Cotton Product line = $1,039,500 / 2

Cotton Product line= $519,750

Differential Analysis for a Lease or Buy Decision
Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $120,000. The freight and installation costs for the equipment are $1,500. If purchased, annual repairs and maintenance are estimated to be $2,200 per year over the six-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $25,000 per year for six years, with no additional costs.
Prepare a differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner). If an amount is zero, enter "0".
Differential Analysis
Lease (Alt. 1) or Buy (Alt. 2) Equipment
March 15
Lease
Equipment
(Alternative 1) Buy
Equipment
(Alternative 2) Differential
Effects
(Alternative 2)
Costs:
Purchase price $ $ $
Freight and installation
Repair and maintenance (6 years)
Lease (6 years)
Total costs $ $ $

Answers

Answer:

Lease Equipment $150,000

BUY EQUIPMENT$134,700

Differential Effects-$15,300

The company should choose BUY EQUIPMENT which is Alternative 2

Explanation:

Preparation of the differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment

Differential Analysis

Lease (Alt. 1) or Buy (Alt. 2) Equipment

March 15

Lease Equipment (Alternative 1); Buy Equipment

(Alternative 2); Differential Effects (Alternative 2)

Costs:

Purchase price $0 $120,000 $120,000

Freight and installation $0 $1,500 $1,500

Repair and maintenance (6 years) $0 $13,200.$13,200

($2,200*6=$13,200)

Lease (6 years) $150,000 $0 -$150,000

($25,000*6)

Total costs $150,000 $134,700 -$15,300

Based on the above calculation the company should choose BUY EQUIPMENT which is Alternative 2

Your best friend Sue has always wanted to be an FBI agent for the U.S. government. However, because of the recent restructured changes in the FBI (due to the in creased terrorism threat), Sue is uncertain whether she wants to pursue an FBI career. She feels that the FBI does not provide as much career security as she once thought that it did. Sue is excellent with numbers, taxes, law, and communication.

Required:
a. Explain the purpose and mission of the CI Division.
b. Explain what other governmental agencies the CI Division works with.
c. Explain the requirements for an entry-level CI spe cial agent.

Answers

Answer:

Explanation:

The purpose of Criminal Investigation Division, or popularly called the CI Division is to be able investigate tax related frauds, to bring to justice citizens who one way or the other do not file tax returns m(whether or not this is intentional) or those who refuse to pay their taxes or do not play complete taxes. Remember, paying of taxes is the civic responsibility of citizens. CI also looks into other cases that are related to money laundering crimes.

One of the major requirements is a bachelor's degree and a minimum of at least three years of experience in high-level investigative work or even in criminology. This is what is required.

The following items were selected from among the transactions completed by Aston Martin Inc. during the current year:
Apr. 15 Borrowed $225,000 from Audi Company, issuing a 30-day 6% not for that amount.
May 1. Purchased equipment by issuing a $320,000, 180-day not to Spyder Manufacturing Co., which disconted the not at the rate of 6%.
15. Paid Audi Company the interest due on the note of April 15 and renewed the loan by issuing a new 60-day, 8% not for $225,000. (Record both the debit and credit to the notes payable account.)
July 14. Paid Audi Company the amount due on the note of May 15.
Aug. 16. Purchased merchandise on the account for Exige Do., $90,000, terms, n/30.
Sept. 15. Issued a 45-day, 6% not for $90,000 to Exige Co., on account.
Oct. 28. Paid Spyder Manufacturing Co. the amount due on the note of May 1.
30. Paid Exige Co. the amount owed on the not of September 15.
Nov. 16. Purchased store equipment for Gallardo Co. for $20,000 each, coming due at 30-day intervals. Dec. 16. Paid the amount due Gallardo Co. on the first note in the series issued on November 16.
28. Settled a personal injoury lawsuit with a customer for $87,500, to be paid in January. Aston Martin Inc. accrued the loss in a litigation claims payable account.
Instructions
1. Journalize the transactions.
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year:
a. Product warranty cost, %$26,800.
b. Interest on the 19 remaining notes owed to Gallardo Co.

Answers

Question Completion:

November 16 - Purchased store equipment from Gallardo Co. for $450,000, paying $50,000 and issuing a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals.

Answer:

Aston Martin, Inc.

Apr. 15 Debit Cash $225,000

Credit 6% Notes payable (Audi Company) $225,000

To record the amount borrowed by issuing a 30-day 6% note.

May 1. Debit Equipment $320,000

Credit 6% Notes Payable (Spyder Manufacturing Co.) $320,000

To record the purchase of equipment by issuing a $320,000, 180-day note at the rate of 6%.

May 15. Debit Interest expense $1,125

Credit Cash $1,125

To record the payment of interest on note.

May 15 Debit 6% Notes payable (Audi Company) $225,000

Credit 8% Notes payable (Audi Company) $225,000

To record the exchange of notes, by issuing a new 60-day, 8% note for $225,000

July 14 Debit 8% Notes payable (Audi Company) $225,000

Credit Interest expense $3,000

Credit Cash $228,000

To record the full settlement of note with interest.

Aug. 16. Debit Inventory $90,000

Credit Accounts payable (Exige Co.) $90,000

To record the purchase of merchandise on account, terms, n/30.

Sept. 15. Debit Accounts payable (Exige Co.) $90,000

Credit 6% Note Payable (Exige Co.) $90,000

To record the settlement of account by issuing a 45-day, 6% note to Exige Co.

Oct. 28. Debit 6% Notes Payable (Spyder Manufacturing Co.) $320,000

Debit Interest expense $9,600

Credit Cash $329,600

To record the settlement of notes with interest.

30. Debit 6% Note Payable (Exige Co.) $90,000

Debit Interest Expense $675

Credit Cash $90,675

To record the settlement of notes with interest.

November 16 Debit Store equipment $450,000

Credit 9% Note payable (Gallardo Co.) $400,000

Credit Cash $50,000

To record the issuing of a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals.

Dec. 16. Debit 9% Note payable (Gallardo Co.) $20,000

Debit Interest expense $3,000

Credit Cash $23,000

To record the settlement of the first note with interest on all the notes.

Dec. 28. Debit Litigation Claims Loss $87,500

Credit Litigation Claims Payable $87,500

To record the litigation loss.

Explanation:

a) Data and Calculations:

Apr. 15 Cash $225,000 6% Notes payable (Audi Company) $225,000

, issuing a 30-day 6% note for that amount.

May 1. Equipment $320,000 6% Notes Payable (Spyder Manufacturing Co.) $320,000 by issuing a $320,000, 180-day note at the rate of 6%.

15. Interest expense $1,125 Cash $1,125

6% Notes payable (Audi Company) $225,000 8% Notes payable (Audi Company) $225,000

issuing a new 60-day, 8% not for $225,000

July 14. 8% Notes payable (Audi Company) $225,000 Interest expense $3,000 Cash $228,000

Aug. 16. Inventory $90,000 Accounts payable (Exige Co.) $90,000

, terms, n/30.

Sept. 15. Accounts payable (Exige Co.) $90,000 6% Note Payable (Exige Co.) $90,000 Issued a 45-day, 6% not for $90,000 to Exige Co., on account.

Oct. 28. 6% Notes Payable (Spyder Manufacturing Co.) $320,000 Interest expense $9,600 Cash $329,600

30. 6% Note Payable (Exige Co.) $90,000 Interest Expense $675 Cash $90,675

November 16 - Store equipment $450,000 9% Note payable (Gallardo Co.) $400,000 Cash $50,000

issuing a series of twenty 9% notes for $20,000 each, coming due at 30-day intervals.

Dec. 16. 9% Note payable (Gallardo Co.) $20,000 Interest expense $3,000 Cash $23,000

28. Litigation Claims Loss $87,500 Litigation Claims Payable$87,500

On January 1, 2019, the ledger of Whispering Winds Corp. contains the following liability accounts.

Accounts Payable $56,000
Sales Taxes Payable 8,800
Unearned Service Revenue 16,100

During January, the following selected transactions occurred.

Jan. 5 Sold merchandise for cash totaling $20,520, which includes 8% sales taxes.
12 Performed services for customers who had made advance payments of $11,500. (Credit Service Revenue.)
14 Paid state revenue department for sales taxes collected in December 2018 ($8,800).
20 Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax.
21 Borrowed $22,500 from Girard Bank on a 3-month, 8%, $22,500 note.
25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.

Required:
Journalize the January transactions.

Answers

Answer:

Whispering Winds Corp.

Journal Entries:

Jan. 5 Debit Cash $20,520

Credit Sales Revenue $19,000

Credit Sales Taxes Payable $1,520

To record the sale of goods for cash, including 8% sales tax.

Jan. 12 Debit Unearned Service Revenue $11,500

Credit Service Revenue $11,500

To record service revenue earned.

Jan. 14 Debit Sales Tax Payable $8,800

Credit Cash $8,800

To record the payment of December Sales Taxes.

Ja. 20 Debit Accounts Receivable $48,600

Credit Sales Revenue $45,000

Credit Sales Taxes Payable $3,600

To record the sale of goods on credit, including sales tax of 8%.

Jan. 21 Debit Cash $22,500

Credit 8% Notes Payable (Girard Bank) $22,500

To record the borrowing of cash for a 3-month, 8%, note.

Jan. 25 Debit Cash $12,420

Credit Sales Revenue $11,500

Credit Sales Taxes Payable $920

To record the sale of goods for cash, including 8% sales tax.

Explanation:

a) Data and Calculations:

Liability account balances:

Accounts Payable $56,000

Sales Taxes Payable 8,800

Unearned Service Revenue 16,100

Analysis of January transactions:

Jan. 5 Cash $20,520 Sales Revenue $19,000 Sales Taxes Payable $1,520

Jan. 12 Unearned Service Revenue $11,500 Service Revenue $11,500

Jan. 14 Sales Tax Payable $8,800 Cash $8,800

Ja. 20 Accounts Receivable $48,600 Sales Revenue $45,000 Sales Taxes Payable $3,600

Jan. 21 Cash $22,500 8% Notes Payable (Girard Bank) $22,500 a 3-month, 8%, note.

Jan. 25 Cash $12,420 Sales Revenue $11,500 Sales Taxes Payable $920

A credit signifies a decrease in
a. revenue
b. liabilities
c. assets
d. capital

Answers

Answer:

Explanation:

Extreme Adventurer, an outdoor nature magazine, marketed to potential customers who recently purchased camping equipment and four-wheel drive trucks. At the end of its marketing message pitch, the magazine exclaimed, “Tired of sitting in front of your computer? Explore the exciting outdoor world of nature. Subscribe today!” What does this call to action have the potential to do?

Answers

Answer:

potential customers who recently purchased camping equipment and four-wheel drive trucks.

Explanation:

The call to action has a huge potential hidden in reaching out to the customers and making them call for outdoor nature and adventure. The magazine tries to catch the reader's attention by making claims such as tired of sitting in front of your computer. Those people who usually stay at home and are unable to move out due to some reason can use their purchased camping equipment and four-wheel-drive trucks.

Assume that three identical units of merchandise are purchased during October, as follows: Units Cost October 5 Purchase 1 $ 5 12 Purchase 1 7 28 Purchase 1 9 Total 3 $21 Assume one unit is sold on October 31 for $15. Determine Cost of Merchandise Sold, Gross profit, and Ending Inventory under the FIFO method.

Answers

Answer:

Cost of merchandise sold = $5

Closing inventory=$16

Gross profit =$20

Explanation:

Under the FIFO system , inventories are priced using the price of the oldest batch in the stock, after which the price of the next oldest batch and this is done in turn. It is based on the principle that the first batch that arrives the store should be issued first.

Using the FIFO method of the perpetual inventory, the 1 unit sold by the company will be priced as follows:

1 units at a price of $5 = 1× $5= $5

Cost of merchandise sold = $5

Closing inventory = Total cost of golds in stock less the cost of goods sold

= 21 - 5= 16

Gross profit = Sales value - cost of goods sold

= $15-$5= $20

Cost of merchandise sold = $5

Closing inventory=$16

Gross profit =$20

In preparing a company's statement of cash flows for the most recent year, the following information is available:
Loss on the sale of equipment $14,500
Purchase of equipment 150,000
Proceeds from the sale of equipment 131,000
Re-payment of outstanding bonds 89,500
Purchase of treasury stock 64,500
Issuance of common stock 98,500
Purchase of land 120,000
Increase in accounts receivable
during the year 45,500
Decrease in accounts payable
during the year 77,500
Payment of cash dividends 37,500
Net cash flows from investing activities for the year were:_____.
a. $262,000 of net cash used.
b. $228.500 of net cash provided.
c. $139,000 of net cash used.
d. $124,500 of net cash used.
e. $139,000 of net cash provided.

Answers

Answer:

c. $139,000 of net cash used.

Explanation:

Investing Activities shows results from Purchase or Sales of Assets or Investments.

Cash flow from Investing Activities

Purchase of equipment (150,000)

Proceeds from the sale of equipment 131,000

Purchase of land (120,000)

Net Cash used by Investing Activities (139,000)

Net cash flows from investing activities for the year were: ($139,000)

Based on market values, Gubler's Gym has an equity multiplier of 1.46 times. Shareholders require a return of 10.91 percent on the company's stock and a pretax return of 4.84 percent on the company's debt. The company is evaluating a new project that has the same risk as the company itself. The project will generate annual aftertax cash flows of $277,000 per year for 7 years. The tax rate is 39 percent. What is the most the company would be willing to spend today on the project

Answers

Answer:

The answer is "5.4% and 15,23,500".

Explanation:

Calculating the capital cost:

[tex]=(1-\frac{1}{1.46})\times 10.91\% \times (1-39\%)+(\frac{1}{1.46})\times 4.84\% \\\\=(\frac{1.46-1}{1.46})\times \frac{10.91}{100} \times (\frac{100-39}{100})+(\frac{1}{1.46})\times \frac{4.84}{100} \\\\ =(\frac{0.46}{1.46})\times \frac{10.91}{100} \times (\frac{61}{100})+(\frac{1}{1.46})\times \frac{4.84}{100} \\\\=\frac{306.1346}{14600}+\frac{4.84}{146} \\\\= 0.021+0.033 \\\\ =0.054\\\\= 5.4\%[/tex]

Maximum amount to be spent

[tex]=\frac{277,000\times 100 }{5.4} \times (1-\frac{1}{(1.054)^7})\\\\=\frac{277,000\times 100 }{5.4} \times (1-\frac{1}{1.44})\\\\=\frac{277,000\times 100 }{5.4} \times (1-0.7)\\\\=277,000 \times 100\times 0.055\\\\=\$15,23,500\\[/tex]

White, Gray, and Greene enter into a contract to form a partnership, but the contract says nothing about the sharing of profits and losses. Which of the following will take place? A. Profits and losses will be shared in a ratio based on the dollar amount of their capital investments. B. Profits will be shared equally; losses will be absorbed based on dollar amount of capital investment. C. Profits will be based on amount of time each partner spends working for the firm; losses will be shared equally. D. Profits and losses will be shared equally.

Answers

Answer:

D. Profits and losses will be shared equally.

Should a room attendant share information with others about a guest if he/she thinks what the guest is doing is morally wrong?

Answers

Answer:

No, a room attendant should not share information with others about a guest if he/she thinks what the guest is doing is morally wrong.

Explanation:

Morality is a subjective issue. Even at that, what may be morally wrong can still be legal. Hence, there is no reason for a room attendant to share information with others about a guest if he/she thinks what the guest is doing is morally wrong.

For example, smoking shisha or drinking alcohol may be morally wrong to a room attendant, but it is legal for the guest to do in a guest house or hotel, hence the guest is within his rights to do so. Therefore, there is no need for a room attendant to inform others in as much it is legal.

How much interest (to the nearest dollar) would be saved on the following loan if the condominium were financed for 15 rather than 30 years? A $256,000 condominium bought with a 30% down payment and the balance financed for 30 years at 3.05%

Answers

Answer:

The interest saved is $49569.228 or $49569.

Explanation:

Total price of Condominium=$256,000

Downpayment=30% of total price=30%x$256,000= 76800

Amount Financed=Total Payment-Downpayment

Amount Financed=256000-76800=179200

Annual Interest rate=3.05%

Monthly interest rate =[tex]\frac{3.05\%}{12}[/tex]=0.25146%

The montly installment is calculated as follows:

[tex]M=\dfrac{P}{\dfrac{1-\left(\dfrac{1}{1+\dfrac{r}{100}}\right)^{nt}}{\dfrac{r}{100}}}[/tex]

Here

M is the montly installmentP is the amount financedr is the montly rate in percentagen is the number of yearst is the number of months in a year

Case 1 when the number of years is 30.

So the equation becomes

[tex]M=\dfrac{P}{\dfrac{1-\left(\dfrac{1}{1+\dfrac{r}{100}}\right)^{nt}}{\dfrac{r}{100}}}\\\\M=\dfrac{179200}{\dfrac{1-\left(\dfrac{1}{1+\dfrac{0.25146}{100}}\right)^{30*12}}{\dfrac{0.25146}{100}}}\\\\M=\dfrac{179200}{\dfrac{1-\left(\dfrac{1}{1+0.0025146}\right)^{30*12}}{0.0025146}}\\\\M=\dfrac{179200}{\dfrac{1-\left(\dfrac{1}{1.0025146}\right)^{30*12}}{0.0025146}}\\\\M=\dfrac{179200\times {0.0025146}}{1-\left(\dfrac{1}{1.0025146}\right)^{30*12}}\\M=\dfrac{450.61632}{0.59510 }\\M=\$757.2087[/tex]

So the total amount paid in installments is

[tex]T=M\times n\times t[/tex]

So the equation becomes

[tex]T=M\times n\times t\\T=757.2087\times 30\times 12\\T=\$272595.132[/tex]

So the interest is given as

[tex]I=T-P\\I=272595.132-179200\\I=\$93395.132[/tex]

So a total interest of $93395.132 is paid when the amount is financed for 30 years.

Case 2 when the number of years is 15.

So the equation becomes

[tex]M=\dfrac{P}{\dfrac{1-\left(\dfrac{1}{1+\dfrac{r}{100}}\right)^{nt}}{\dfrac{r}{100}}}\\\\M=\dfrac{179200}{\dfrac{1-\left(\dfrac{1}{1+\dfrac{0.25146}{100}}\right)^{15*12}}{\dfrac{0.25146}{100}}}\\\\M=\dfrac{179200}{\dfrac{1-\left(\dfrac{1}{1+0.0025146}\right)^{15*12}}{0.0025146}}\\\\M=\dfrac{179200}{\dfrac{1-\left(\dfrac{1}{1.0025146}\right)^{15*12}}{0.0025146}}\\\\M=\dfrac{179200\times {0.0025146}}{1-\left(\dfrac{1}{1.0025146}\right)^{15*12}}\\M=\dfrac{450.61632}{0.36368 }\\M=\$1239.0328[/tex]

So the total amount paid in installments is

[tex]T=M\times n\times t[/tex]

So the equation becomes

[tex]T=M\times n\times t\\T=1239.0328\times 15\times 12\\T=\$223025.904[/tex]

So the interest is given as

[tex]I=T-P\\I=223025.904-179200\\I=\$43825.904[/tex]

So a total interest of $43825.904 is paid when the amount is financed for 15 years.

The savings on interest if the condominium is financed for 15 years is given as

[tex]S=I_{30}-I_{15}\\S=93395.132-43825.904\\S=49569.228[/tex]

The interest saved is $49569.228 or $49569.

On January 3, 2020, Hanna Corporation signed a lease on a machine for its manufacturing operation and the lease commences on the same date. The lease requires Hanna to make six annual lease payments of $12,000 with the first payment due December 31,2020. Hanna could have financed the machine by borrowing the purchase price at an interest rate of 7%. a. Prepare the journal entries that Hanna Corporation would make on January 3 and December 31, 2020, to record this lease assuming. i. the lease is reported as an operating lease. ii. the lease is reported as a finance lease. b. Post the journal entries of part a to the appropriate T-accounts. c. Show how the entries posted in part b would affect the financial statements using the financial statement effects template.

Answers

Answer:

Hanna Corporation

a. Journal entries that Hanna Corporation would make on January 3 and December 31, 2020 to record this lease assuming:

i. the lease is reported as an operating lease:

January 3, 2020: No journal entry

December 31, 2020:

Debit Lease Expense $12,000

Credit Cash $12,000

To record the payment for the operating lease.

ii. the lease is reported as a finance lease:

January 3, 2020:

Debit Right to Use Asset $57,198.48

Credit Lease Liability $57,198.48

To recognize the right to the leased asset and establish the related liability.

December 31, 2020:

Debit Lease Liability $7,996,11

Debit Interest Expense $4,003.89

Credit Cash $12,000

To record the payment for the lease liability and interest expense.

b. T-accounts;

Operating lease:

Cash Account