Other sets by this creator
The Cook County Authority is considering the purchase of a small plane to transport government officials. It is hoped that the plane will save money on travel costs for government employees. Assume the county requires a 10 percent rate of return. If the plane's cost is $250,000 and it can be sold in five years for $75,000, what minimum annual savings in transportation costs is needed in order to make the plane a good investment?
Midwest Entertainment has 4 operating divisions: Bus Charters, Lodging, Concerts, and Ticket Services. Each division is a separate segment for fi nancial reporting purposes. Revenues and costs related to outside transactions were as follows for the past year (dollars in thousands):
|Bus Charters||Lodging||Concerts||Ticket Services|
Bus Charters Division participates in a frequent guest program with Lodging Division. During the past year, Bus Charters reported that it traded lodging award coupons for travel that had a retail value of $1.3 million, assuming that the travel was redeemed at full fares. Concerts Division offered 20 percent discounts to Midwest’s bus passengers and lodging guests. These discounts to bus passengers were estimated to have a retail value of$350,000. Midwest’s lodging guests redeemed $150,000 in concert discount coupons. Midwest’s hotels also provided rooms for Bus Charters’s employees (drivers and guides). The value of the rooms for the year was$650,000.
The Ticket Services Division sold chartered tours for Bus Charters valued at $200,000 for the year. This service for intracompany lodging was valued at$100,000. It also sold concert tickets for Concerts; tickets for intracompany concert admission were valued at $50,000.
While preparing all of these data for fi nancial statement presentation, Lodging Division’s controller stated that the value of the bus coupons should be based on their differential and opportunity costs, not on the full fare. This argument was supported because travel coupons are usually allocated to seats that would otherwise be empty or that are restricted similar to those on discount tickets. If the differential and opportunity costs were used for this transfer price, the value would be$250,000 instead of $1.3 million. Bus Charters’s controller made a similar argument concerning the concert discount coupons. If the differential cost basis were used for the concert coupons, the transfer price would be$50,000 instead of the $350,000.
Midwest reports assets in each division as follows (dollars in thousands):
What are the operating profits for each Midwest division using the differential cost basis for pricing transfers?
Recall that 60 randomly selected shoppers have rated a new bottle design for a popular soft drink. The data are given below.
Draw the frequency histogram for the ratings data, and describe the distribution shape.
The Colson Company issued $300,000 of 10% bonds on January 1, 2017. The bonds are due January 1, 2022, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Colson’s journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.