Gell Corporation manufactures computers. Assume that Gell:

• allocates manufacturing overhead based on machine hours
• estimated 12,000 machine hours and $93,000 of manufacturing overhead costs
• actually used 16,000 machine hours and incurred the following actual costs:

$$\begin{array}{lr} \hline \text { Indirect labor } & \$ 11,000 \\ \text { Depreciation on plant } & 48,000 \\ \text { Machinery repair } & 11,000 \\ \text { Direct labor } & 75,000 \\ \text { Plant supplies } & 6,000 \\ \text { Plant utilities } & 7,000 \\ \text { Advertising } & 35,000 \\ \text { Sales commissions } & 27,000 \\ \hline \end{array}$$

What is Gell's predetermined overhead allocation rate? a. $7.75/machine hour c.$6.92/machine hour b. $5.81/machine hour d.$5.19/machine hour

As T.C. Resort Properties seeks to improve its customer service, the company faces new competition from SunLow Resorts. SunLow has recently opened resort hotels on the islands where T.C. Resort Properties has its five hotels. SunLow is currently advertising that a random survey of 300 customers revealed that about 60% of the customers preferred its “Concierge Class” travel reward program over the T.C. Resorts “TCRewards Plus” program.

Open and review ConciergeClass.pdf, an electronic brochure that describes the Concierge Class program and compares it to the T.C. Resorts program. Then answer the following question:

What analyses of the survey data would lead to a more favorable impression about T.C. Resort Properties?

Many critics of television claim that there is too much violence and that it has a negative effect on society. There may also be a negative effect on advertisers. To examine this issue, researchers developed two versions of a cops-and-robbers made-for-television movie. One version depicted several violent crimes, and the other removed these scenes. In the middle of the movie, one 60-second commercial was shown advertising a new product and brand name. At the end of the movie, viewers were asked to name the brand. After observing the results, the researchers produced the following table of joint probabilities. What proportion of viewers remember the brand name?

Sales of a product, under relatively stable market conditions but in the absence of promotional activities such as advertising, tend to decline at a constant yearly rate. This rate of sales decline varies considerably from product to product, but it seems to remain the same for any particular product. The sales decline can be expressed by the function $S(t)=S_{0} e^{-a t}$, where S(t) is the rate of sales at time t measured in years, $S_0$ is the rate of sales at time t=0, and a is the sales decay constant. (a) Suppose the sales decay constant for a particular product is a=0.10. Let $S_0$=50.000 and find S(1) and S(3) to the nearest thousand. (b) Find S(2) and S(10) to the nearest thousand if $S_0$=80.000 and a=0.05.

A company is willing to renew its advertising contract with a local radio station only if the station can prove that more than 20% of the residents of the city have heard the ad and recognize the company's product. The radio station conducts a random phone survey of 400 people. a) What are the hypotheses? b) The station plan s to conduct this test using a 10% level of significance, but the company wants the significance level lowered to 5%. Why? c) What is meant by the power of this test? d) For which level of significance will the power of this test be higher? Why? e) They finally agree to use

$$\alpha = 0.05$$

, but the company proposes that the station call 600 people instead of the 400 initially proposed. Will that make the risk of Type II error higher or lower? Explain.

Roxy Theater Inc. was recently formed. All facilities were completed on March 31. On April 1, the ledger showed: Cash $6,300; Land$10,000; Buildings (concession stand, projection room, ticket booth, and screen) $58,000; Equipment$6,000; Accounts Payable $2,300; Mortgage Payable$38,000; and Common Stock $40,000. During April, the following events and transactions occurred.

Apr. 2 Paid film rental fee of$1,800 on first movie.
     3 Ordered two additional films at $750 each.
     9 Received$5,700 cash from admissions.
    10 Paid $2,000 of mortgage payable and$1,200 of accounts payable.
    11 Roxy Theater contracted with M. Gavin to operate the concession stand. Gavin agrees to pay Roxy Theater 17% of gross receipts, payable monthly.
    12 Paid advertising expenses $410.
    20 Received one of the films ordered on April 3 and was billed$750. The film will be shown in April.
    25 Received $3,000 cash from customers for admissions.
    29 Paid salaries$1,900.
    30 Received statement from M. Gavin showing gross receipts of $2,000 and the balance due to Roxy Theater of$340 ($2,000 x .17) for April. Gavin paid half of the balance due and will remit the remainder on May 5.
    30 Prepaid$1,200 rental fee on special fi lm to be run in May.

In addition to the accounts identified above, the chart of accounts shows Accounts Receivable, Prepaid Rent, Service Revenue, Rent Revenue, Advertising Expense, Rent Expense, Salaries and Wages Expense.

Instructions

(a) Enter the beginning balances in the ledger T-accounts as of April 1.

The manager of Colonial Furniture has been reviewing weekly advertising expenditures. During the past 6 months, all advertisements for the store have appeared in the local newspaper. The number of ads per week has varied from one to seven. The store’s sales staff has been tracking the number of customers who enter the store each week. The number of ads and the number of customers per week for the past 26 weeks were recorded. In your opinion, is it a worthwhile exercise to use the regression equation to predict the number of customers who will enter the store, given that Colonial intends to advertise five times in the newspaper? If so, find a 95% prediction interval. If not, explain why not.

Advertising researchers have developed a theory that states that commercials that appear in violent television shows are less likely to be remembered and will thus be less effective. After examining samples of viewers who watch violent and nonviolent programs and asking them a series of five questions about the commercials, the researchers produced the following probability distributions of the number of correct answers.

Calculate the mean and standard deviation of the number of correct answers among viewers of nonviolent television programs.

Quisp Co. had the following transactions in the last two months of its year ended December 31.

Nov. 1 Paid $1,500 cash for future newspaper advertising.
 1 Paid$2,160 cash for 12 months of insurance through October 31 of the next year.
 30 Received $3,300 cash for future services to be provided to a customer.

Dec. 1 Paid$2,700 cash for a consultant’s services to be received over the next three months.
 15 Received $7,650 cash for future services to be provided to a customer.
 31 Of the advertising paid for on November 1,$900 worth is not yet used.
 31 A portion of the insurance paid for on November 1 has expired. No adjustment was made in November to Prepaid Insurance.
 31 Services worth $1,200 are not yet provided to the customer who paid on November 30.
 31 One-third of the consulting services paid for on December 1 have been received.
 31 The company has performed$3,000 of services that the customer paid for on December 15.

Required
1. Prepare entries for these transactions under the method that records prepaid expenses as assets and records unearned revenues as liabilities. Also prepare adjusting entries at the end of the year.
2. Prepare entries for these transactions under the method that records prepaid expenses as expenses and records unearned revenues as revenues. Also prepare adjusting entries at the end of the year.

Analysis Component
3. Discuss why the alternative sets of entries in requirements 1 and 2 do not result in different financial statement amounts.

Vin Diesel owns the Fredonia Barber Shop. He employs four barbers and pays each a base rate of $1,250 per month. One of the barbers serves as the manager and receives an extra$500 per month. In addition to the base rate, each barber also receives a commission of $4.50 per haircut.

Other costs are as follows.

Vin currently charges$10 per haircut. Instructions (d) Determine net income, assuming 1,600 haircuts are given in a month.

In an article in the Journal of Advertising, Weinberger and Spotts compare the use of humor in television ads in the United States and in the United Kingdom. Suppose that independent random samples of television ads are taken in the two countries. A random sample of $400$ television ads in the United Kingdom reveals that $142$ use humor, while a random sample of $500$ television ads in the United States reveals that $122$ use humor.

Set up the hypotheses needed to attempt to establish that the difference between the proportions of U.K. and U.S. ads using humor is more than $.05$ (five percentage points). Test these hypotheses by using a $p$-value and by setting $\alpha$ equal to $.10$, $.05$, $.01$, and $.001$. How much evidence is there that the difference between the proportions exceeds $.05?$

A review of the ledger of Baylor Company at December 31, 2020, produces the following data pertaining to the preparation of annual adjusting entries.

1. Salaries and Wages Payable $0. There are eight employees. Salaries and wages are paid every Friday for the current week. Five employees receive$700 each per week, and three employees earn $600 each per week. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December.

2. Unearned Rent Revenue$429,000. The company began subleasing office space in its new building on November 1. Each tenant is required to make a $5,000 security deposit that is not refundable until occupancy is terminated. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease.

$$\begin{array}{lccccc} \underline{\hspace{20pt}\text{Date}\hspace{20pt}}&&\underline{\hspace{10pt}\text{Term (in months)}\hspace{10pt}}&\hspace{10pt}&\underline{\hspace{10pt}\text{Monthly Rent}\hspace{10pt}}&&\underline{\hspace{10pt}\text{Number of Leases}\hspace{10pt}}&\hspace{10pt}\\ \text{Nov. 1}&&6&\hspace{10pt}&\text{\$6,000}&&5\\ \text{Dec. 1}&&6&&\text{\$8,500}&&4\\ \end{array}$$

3. Prepaid Advertising $13,200. This balance consists of payments on two advertising contracts. The contracts provide for monthly advertising in two trade magazines. The terms of the contracts are as shown below.

$$\begin{array}{cccccc} \underline{\hspace{20pt}\text{Contract}\hspace{20pt}}&&\underline{\hspace{10pt}\text{Date}\hspace{10pt}}&\hspace{10pt}&\underline{\hspace{10pt}\text{Amount}\hspace{10pt}}&&\underline{\hspace{10pt}\text{Number of Magazine Issues}\hspace{10pt}}&\hspace{10pt}\\ \text{A650}&&\text{May 1}&\hspace{10pt}&\text{\$6,000}&&12\\ \text{B974}&&\text{Oct. 1}&&\text{\$7,200}&&24\\ \end{array}$$

The first advertisement runs in the month in which the contract is signed.

4. Notes Payable $60,000. This balance consists of a note for one year at an annual interest rate of 12%, dated June 1.

Prepare the adjusting entries at December 31, 2020. (Show all computations).

In 2018 , the controller of Sytec Corporation discovered that $\$ 42,000$ of inventory purchases were incorrectly charged to advertising expense in 2017. In addition, the 2017 year-end inventory count failed to include $\$ 30,000$ of company merchandise held on consignment by Erin Brothers. Sytec uses a periodic inventory system. Other than the omission of the merchandise on consignment, the year-end inventory count was correct. The amounts of the errors are deemed to be material.

Required:

1. Determine the effect of the errors on retained earnings at January 1, 2018. Explain your answer. (Ignore income taxes.)
2. Prepare a journal entry to correct the errors.
3. What other step(s) would be taken in connection with the correction of the errors?

Quake Co. had the following transactions in the last two months of its fiscal year ended May 31.

Apr. 1 Paid $3,450 cash to an accounting firm for future consulting services.
 1 Paid$2,700 cash for 12 months of insurance through March 31 of the next year.
 30 Received $7,500 cash for future services to be provided to a customer.

May 1 Paid$3,450 cash for future newspaper advertising.
 23 Received $9,450 cash for future services to be provided to a customer.
 31 Of the consulting services paid for on April 1,$1,500 worth has been received.
 31 A portion of the insurance paid for on April 1 has expired. No adjustment was made in April to Prepaid Insurance.
 31 Services worth $3,600 are not yet provided to the customer who paid on April 30.
 31 Of the advertising paid for on May 1,$1,050 worth is not yet used.
 31 The company has performed $4,500 of services that the customer paid for on May 23.

Required
1. Prepare entries for these transactions under the method that records prepaid expenses and unearned revenues in balance sheet accounts. Also prepare adjusting entries at the end of the year.
2. Prepare entries for these transactions under the method that records prepaid expenses and unearned revenues in income statement accounts. Also prepare adjusting entries at the end of the year.

Analysis Component
3. Discuss why the alternative sets of entries in parts 1 and 2 do not result in different financial statement amounts.