Greg Failla owns Showbiz Video. He uses the following accounts to record business transactions.

$$\begin{matrix} \text{General Ledger} & \text{ }\\ \hline \text{101 Cash in Bank} & \text{205 Accounts Payable—}\\ \text{105 Accounts Receivable—} & \text{Computer Horizons}\\ \text{Gabriel Cohen} & \text{207 Accounts Payable—}\\ \text{110 Accounts Receivable—} & \text{New Media Suppliers}\\ \text{James Coletti} & \text{301 Greg Failla, Capital}\\ \text{140 Computer Equipment} & \text{305 Greg Failla, Withdrawals}\\ \text{145 Video Tapes} & \text{401 Video Rental Revenue}\\ \text{ } & \text{405 VCR Rental Revenue}\\ \text{ } & \text{505 Equipment Repair Expense}\\ \text{ } & \text{520 Rent Expense}\\ \text{ } & \text{530 Utilities Expense}\\ \end{matrix}$$

For each transaction: 1. Prepare a T account for each account listed above. 2. Analyze and record each of the following transactions using the appropriate T accounts. Identify each transaction by number. 3. After recording all transactions, compute a balance for each account. 4. Test for the equality of debits and credits.

$$\begin{array}{rl} \text{Date} & \text{Transactions}\\ \hline \text{Jan. 1} & \text{1. Greg Failla invested $\$ 17,500$ cash in Showbiz Video.}\\ \text{3} & \text{2. Purchased computer equipment on account from Computer Horizons for $\$ 2,400$.}\\ \text{8} & \text{3. Purchased videos on account from New Media Suppliers for $\$ 375.$}\\ \text{10} & \text{4. Paid monthly rent of $\$ 750$, Check 1183.}\\ \text{13} & \text{5. Wrote Check 1184 to pay for new videos, $\$ 265$.}\\ \text{14} & \text{6. Sent a bill for $\$ 67$ to Gabriel Cohen for a VCR rental.}\\ \text{16} & \text{7. Deposited the receipts from video rentals, $\$ 233$.}\\ \text{19} & \text{8. Paid the gas and electric bill of $\$ 125,$ Check $1185 .$}\\ \text{21} & \text{9. Sent Check 1186 for $\$ 375$ to New Media Suppliers as payment on account.}\\ \text{22} & \text{10. Greg Failla withdrew $\$ 150$ for his personal use, Check $1187 .$}\\ \text{25} & \text{11. Paid $\$ 45$ for $\mathrm{VCR}$ repair, Check 1188.}\\ \text{30} & \text{12. Deposited VCR rental receipts of $\$ 264$ in the bank.}\\ \end{array}$$

Juanita Ortega operates Outback Guide Service. She uses the following accounts to record and summarize her business transactions.

$$\begin{array}{ll} \text{General Ledger} & \text{ }\\ \hline \text{101 Cash in Bank} \\ \text{301 Juanita Ortega, Capital}\\ \text{105 Accounts Receivable}-\text{Mary Johnson}\\ \text{302 Juanita Ortega, Withdrawals}\\ \text{401 Guide Service Revenue}\\ \text{150 Rafting Equipment}\\ \text{505 Maintenance Expense}\ \text{205 Accounts Payable}-\text{Peak Equipment Inc.}\\ \text{515 Rent Expense}\\ \text{520 Utilities Expense}\\ \end{array}$$

Richard Tang owns and operates a job placement service, Job Connect. The T accounts below summarize several business transactions for May. Use a form similar to the one presented below. For each of the 10 transactions: 1. Identify the account debited, and record the account name in the appropriate column. 2. Indicate whether the account debited is being increased or decreased. 3. Identify the account credited, and write the account name in the appropriate column. 4. Indicate whether the account credited is being increased or decreased. 5. Write a short description of the transaction.

$$\begin{matrix} \text{ } & \text{(1)} & \text{(2)} & \text{(3)} & \text{(4)} & \text{(5)}\\ \hline \text{Trans} & \text{Account} & \text{Increase (I)} & \text{Account} & \text{Increase (I)} & \text{Description}\\ \text{No.} & \text{Debited} & \text{or Decrease (D)} & \text{Credited} & \text{or Decrease (D)} & \text{ }\\ \hline \text{1} & \text{Cash in} & \text{I} & \text{Richard} & \text{I} & \text{Richard Tang}\\ \text{ } & \text{Bank} & \text{ } & \text{Tang,} & \text{ } & \text{invested}\\ \text{ } & \text{ } & \text{ } & \text{Capital} & \text{ } & \text{$\$ 15,000$ in}\\ \text{ } & \text{ } & \text{ } & \text{ } & \text{ } & \text{the business.}\\ \end{matrix}$$

$${\text{Cash in Bank}\\ \begin{matrix} \hline \text{Debit} & \text{Credit}\\ \text{$+$} & \text{$-$}\\ \text{(1) $15,000$} & \text{(4) $1,225$}\\ \text{(9) 225} & \text{(6) 900}\\ \text{ } & \text{(7) 995}\\ \text{ } & \text{(8) $2,000$}\\ \end{matrix}} \quad \quad {\text{Accounts Receivable}\\ \begin{matrix} \hline \text{Debit} & \text{Credit}\\ \text{$+$} & \text{$-$}\\ \text{(5) 225} & \text{(9) 225}\\ \end{matrix}}$$

$${\text{Office Equipment}\\ \begin{matrix} \hline \text{Debit} & \text{Credit}\\ \text{$+$} & \text{$-$}\\ \text{(2) 225} & \text{(5) 225}\\ \text{(3) 8,000} & \text{ }\\ \text{(4) 1,225} & \text{ }\\ \end{matrix}} \quad \quad {\text{Office Furniture}\\ \begin{matrix} \hline \text{Debit} & \text{Credit}\\ \text{$+$} & \text{$-$}\\ \text{(6) 900} & \text{ }\\ \text{(10) 145} & \text{ }\\ \end{matrix}}$$

$${\text{Computer Equipment}\\ \begin{matrix} \hline \text{Debit} & \text{Credit}\\ \text{$+$} & \text{$-$}\\ \text{(7) 995} & \text{ }\\ \end{matrix}} \quad \quad {\text{Accounts Payable}\\ \begin{matrix} \hline \text{Debit} & \text{Credit}\\ \text{$-$} & \text{$+$}\\ \text{(8) 2,000} & \text{(3) 8,000}\\ \text{ } & \text{(10) 145}\\ \end{matrix}}$$

$$\text{Richard Tang, Capital}\\ \begin{matrix} \hline \text{Debit} & \text{Credit}\\ \text{$-$} & \text{$+$}\\ \text{ } & \text{(1) 15,000}\\ \text{ } & \text{(2) 225}\\ \end{matrix}$$

Enter the number for the item that best completes each of the descriptions below.

$$\begin{matrix} \text{1. Asset} & \text{3. Account} & \text{5. Three}\\ \text{2. Equity} & \text{4. Liability}\\ \end{matrix}$$

a. Balance sheet accounts are arranged into ________ general categories. b. Common Stock and Dividends are examples of ________ accounts. c. Accounts Payable, Unearned Revenue, and Note Payable are examples of _________ accounts. d. Accounts Receivable, Prepaid Accounts, Supplies, and Land are examples of ___________ accounts. e. A(n) _________ is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

The general ledger for Show biz Video shows the following at December 31:

$$\begin{array}{llll} \mathbf{\text{General Ledger }} & \text{ } & \text{ } & \text{ }\\ \text{101 Cash in Bank} & \text{$12,000$} & \text{207 Accts. Pay. -} & \text{ }\\ \text{105 Accts. Rec. - G. Cohen} & \text{$3,000$} & \text{New Media Suppliers} & \text{$3,000$}\\ \text{110 Accts. Rec. - J. Coletti} & \text{900} & \text{209 Accts. Pay. - Palace Films} & \text{$14,000$}\\ \text{113 Accts. Rec. - Flannery} & \text{$1,800$} & \text{301 Greg Failla, Capital} & \text{$33,775$}\\ \text{115 Accts. Rec. - Spring} & \text{ } & \text{305 Greg Failla, Withdrawals} & \text{$4,000$}\\ \text{Branch School District} & \text{$1,500$} & \text{310 Income Summary} & \text{\_\_\_}\\ \text{130 Office Equipment} & \text{$5,000$} & \text{401 Video Rental Revenue} & \text{$9,600$}\\ \text{135 Office Furniture} & \text{$8,000$} & \text{405 VCR Rental Revenue} & \text{$3,500$}\\ \text{140 Computer Equipment} & \text{$10,000$} & \text{501 Advertising Expense} & \text{$1,600$}\\ \text{145 Video Tapes} & \text{$20,000$} & \text{505 Equipment Repair} & \text{ }\\ \text{150 Video Equipment} & \text{$9,000$} & \text{Expense} & \text{$1,200$}\\ \text{201 Accts. Pay. - Broad Street} & \text{ } & \text{510 Maintenance Expense} & \text{400}\\ \text{Office Supply} & \text{400} & \text{520 Rent Expense} & \text{$1,000$}\\ \text{205 Accts. Pay.} & \text{ } & \text{530 Utilities Expense} & \text{375}\\ \text{Computer Horizons} & \text{15,500} & \text{ } & \text{ }\\ \end{array}$$

Using the preceding account names and balances: 1. Prepare the six-column work sheet. The period covered is one month. 2. Prepare the financial statements. Greg Failla invested $10,000 during the month. 3. Record the closing entries on page 12 of the general journal. 4. Post the closing entries. 5. Prepare a post-closing trial balance.

The general ledger accounts and balances for Kits & Pups Grooming follow. $$ \begin{array}{ll} \mathbf{\text{General Ledger}} & \text{ }\\ \text{101 Cash in Bank} & \text{$\$ 4,296$}\\ \text{105 Accts. Rec. - Juan Alvarez} & \text{$1,528$}\\ \text{110 Accts. Rec. - Nathan Carlsbad} & \text{904}\\ \text{115 Accts. Rec. - Martha Giles} & \text{$1,219$}\\ \text{120 Grooming Supplies} & \text{$1,368$}\\ \text{125 Office Equipment} & \text{$8,467$}\\ \text{130 Office Furniture} & \text{$3,396$}\\ \text{135 Computer Equipment} & \text{$2,730$}\\ \text{140 Grooming Equipment} & \text{$1,974$}\\ \text{145 Kennel Equipment} & \text{$7,412$}\\ \text{201 Accts. Pay. - Able Store Equipment} & \text{$3,876$}\\ \text{205 Accts. Pay. - Dogs & - Cats Inc.} & \text{$2,746$}\\ \text{207 Accts. Pay. - Pet Gourmet} & \text{$1,281$}\\ \text{301 Abe Shultz, Capital} & \text{$30,928$}\\ \text{305 Abe Shultz, Withdrawals} & \text{$1,900$}\\ \text{310 Income Summary} & \text{\_\_\_}\\ \text{401 Boarding Revenue} & \text{$11,989$}\\ \text{405 Grooming Revenue} & \text{$4,420$}\\ \text{501 Advertising Expense} & \text{$3,934$}\\ \text{505 Equipment Repair Expense} & \text{943}\\ \text{510 Maintenance Expense} & \text{$2,483$}\\ \text{520 Rent Expense} & \text{$8,850$}\\ \text{530 Utilities Expense} & \text{$3,836$}\\ \end{array} $$ 1. Prepare a work sheet for the month ended September 30, 20--. 2. Prepare an income statement for the period. 3. Prepare a statement of changes in owner’s equity. Abe Shultz made an additional investment of $2,500 during the period. 4. Prepare a balance sheet in report form.

Abe Shultz, owner of Kits & Pups Grooming, uses the following accounts to record transactions for the month. $$ \begin{matrix} \text{General Ledger} & \text{ }\\ \hline \text{101 Cash in Bank} & \text{401 Boarding Revenue}\\ \text{105 Accounts Receivable—} & \text{405 Grooming Revenue}\\ \text{Juan Alvarez} & \text{501 Advertising Expense}\\ \text{140 Grooming Equipment} & \text{505 Equipment Repair Expense}\\ \text{205 Accounts Payable—} & \text{510 Maintenance Expense}\\ \text{Dogs & Cats Inc.} & \text{520 Rent Expense}\\ \text{301 Abe Shultz, Capital} & \text{530 Utilities Expense}\\ \text{305 Abe Shultz, Withdrawals} & \text{ }\\ \end{matrix} $$ For each transaction: 1. Prepare a T account for each account listed. 2. Enter a balance of $15,000 in the Cash in Bank account; also enter a balance of$15,000 in the Abe Shultz, Capital account. 3. Analyze and record each of the following business transactions, using the appropriate T accounts. Identify each transaction by number. 4. After all the business transactions have been recorded, write the word Balance on the normal balance side of each account. 5. Compute and record the balance for each account. $$ \begin{array}{rl} \text{Date} & \text{Transactions}\\ \hline \text{Jan. 1} & \text{1. Purchased grooming equipment for $\$ 12,700,$ Check 283 .}\\ \text{10} & \text{2. Wrote Check 284 for advertising, $\$ 125$ .}\\ \text{12} & \text{3. Received $\$ 1,850$ cash for dog boarding services.}\\ \text{15} & \text{4. Paid $\$ 150$ for equipment repair, Check $285 .$}\\ \text{17} & \text{5. Purchased a dog cage on account from Dogs 8 - Cats Inc. for $\$ 75 .$}\\ \text{20} & \text{6. Abe Shultz withdrew $\$ 150$ for personal use, Check 286 .}\\ \text{22} & \text{7. Billed Juan Alvarez for $\$ 775$ covering grooming services for all of the dogs boarded at the kennels he owns. Payment will be received later.}\\ \text{23} & \text{8. Paid the first two weeks' rent by writing Check 287 for $\$ 325 .$}\\ \text{25} & \text{9. Paid the electric bill at a cost of $\$ 115,$ Check 288 .}\\ \end{array} $$

a. State briefly the rules of debit and credit for increasing and decreasing each of the following types of accounts: • assets, • liabilities, • owner’s capital b. State briefly the rules of debit and credit for increasing and decreasing each of the following types of accounts: • revenue, • expenses, • owner’s withdrawals

An industrial park is being planned for a tract of land near the river. To prevent flood damage to the industrial buildings that will be built on this low-lying land, an earthen embankment can be constructed. The height of the embankment will be determined by an economic analysis of the costs and benefits. The following data have been gathered.

$$\begin{matrix} \text{Embankment Height} & \text{ }\\ \text{Above Roadway (m)} & \text{Initial Cost}\\ \text{2.0} & \text{\$100,000}\\ \text{2.5} & \text{165,000}\\ \text{3.0} & \text{300,000}\\ \text{3.5} & \text{400,000}\\ \text{4.0} & \text{550,000}\\ \end{matrix}$$

$$\begin{matrix} \text{Flood Level Above Roadway (m)} & \text{Average Frequency That Flood Level Will Exceed Height in Col. 1}\\ \text{2.0} & \text{Once in 3 years}\\ \text{2.5} & \text{Once in 8 years}\\ \text{3.0} & \text{Once in 25 years}\\ \text{3.5} & \text{Once in 50 years}\\ \text{4.0} & \text{Once in 100 years}\\ \end{matrix}$$

The embankment can be expected to last 50 years and will require no maintenance. Whenever the flood water flows over the embankment, $300,000 of damage occurs. Should the embankment be built? If so, to which of the five heights above the roadway? A 12% rate of return is required.

A 2-year-old injection molding machine was expected to be kept in service for its projected life of 5 years, but a new challenger promises to be more efficient and have lower operating costs. You have been asked to determine if it would be economically attractive to replace the defender now or keep it for 3 more years as originally planned. The defender had a first cost of $300,000, but its market value now is only$100,000. It has chargeable expenses of $120,000 per year and no expected salvage value. To simplify calculations for this problem only, assume that SL depreciation was charged at$60,000 per year, and that it will continue at that rate for the next 3 years. The challenger will cost $420,000, have a 3-year life, and no salvage value. It will have chargeable expenses of$30,000 per year, and it will be depreciated at $140,000 per year (again, using SL depreciation for simplicity for this problem only). Assume a Te of 35%, and an aftertax MARR of 15% per year. Determine (a) through (c) by hand. (a) Determine the CFAT in year 0 for the challenger and defender. (b) Determine the CFAT in years 1 through 3 for the challenger and defender. (c) Conduct an AW-based evaluation to determine if the defender should be kept for 3 more years or replaced now. (d) Use a spreadsheet to perform the AW-based evaluation.

Anasazi Earth Clothing is a retail store specializing in women’s clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January $31$, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under $\$100$. If the item is more than $|$100$, a check is mailed to the customer.\$    $Whenever an item is returned, a store clerk completes a return slip, which the customer signs. The return slip is placed in a special box. The store manager visits the return counter approximately once every two hours to authorize the return slips. Clerks are instructed to place the returned merchandise on the proper rack on the selling floor as soon as possible.\$    $This year, returns at Anasazi Earth Clothing have reached an all-time high. There are a large number of returns under$\$100$ without receipts. Would issuing a store credit in place of a cash refund for all merchandise returned without a receipt reduce the possibility of theft? List some advantages and disadvantages of issuing a store credit in place of a cash refund.

Movie companies need to predict the gross receipts of an individual movie once the movie has debuted. The following results (stored in PotterMovies ) are the first weekend gross, the U.S. gross, and the worldwide gross (in \millions) of the eight Harry Potter movies that debuted from 2001 to 2011 :

$$\begin{array}{lrcc} \text{Title} & \text{First Weekend} & \text{U.S. Gross} & \text{Worldwide Gross} \\ \hline \text{Sorcerer's Stone} & 90.295 & 317.558 & 976.458 \\ \text{Chamber of Secrets} & 88.357 & 261.988 & 878.988 \\ \text{Prisoner of Azkaban} & 93.687 & 249.539 & 795.539 \\ \text{Goblet of Fire} & 102.335 & 290.013 & 896.013 \\ \text{Order of the Phoenix} & 77.108 & 292.005 & 938.469 \\ \text{Half-Blood Prince} & 77.836 & 301.460 & 934.601 \\ \text{Deathly Hallows Part I} & 125.017 & 295.001 & 955.417 \\ \text{Deathly Hallows Part II} & 169.189 & 381.001 & 1,328.11 \end{array}$$

a. Compute the coefficient of correlation between first weekend gross and U.S. gross, first weekend gross and worldwide gross, and U.S. gross and worldwide gross.

b. At the 0.05 level of significance, is there a significant linear relationship between first weekend gross and U.S. gross, first weekend gross and worldwide gross, and U.S. gross and worldwide gross?

Dayton Lighting Company had net income for the first 10 months of the current year of $\$ 200,000$. One hundred thousand units were manufactured during this period (the same as the planned production), and $100,000$ units were sold. Fixed manufacturing overhead was $\$ 2,000,000$ over the $10$-month period (i.e., $\$ 200,000$ per month). There are no selling and administrative expenses for Dayton Lighting Company. Both variable and fixed costs are expected to continue at the same rates for the balance of the year (i.e., fixed costs at $\$ 200,000$ per month and variable costs at the same variable cost per unit). Twenty thousand units are to be produced and $19,000$ units are to be sold in total over the last two months of the current year. Assume the unit variable cost is the same in the current year as in the previous year. (Hint: You cannot calculate revenue or cost of goods sold; you must work directly with contribution margin or gross margin.)

$1.$ If operations proceed as described, will net income be higher under variable or absorption costing for the current year in total? Why?

$2.$ If operations proceed as described, what will net income for the year in total be under $(a)$ variable costing and $(b)$ absorption costing? (Ignore income taxes.)

$3.$ Discuss the advantages and disadvantages of absorption and variable costing.

Movie companies need to predict the gross receipts of individual movies once a movie has debuted. The data, shown below and stored in Potter Movies, are the first weekend gross, the U.S. gross, and the worldwide gross (in $millions) of the eight Harry Potter movies:$

$$\begin{array}{lrcc} \text { Title } & \begin{array}{c} \text { First } \\ \text { Weekend } \end{array} & \begin{array}{c} \text { U.S. } \\ \text { Gross } \end{array} & \begin{array}{c} \text { Worldwide } \\ \text { Gross } \end{array} \\ \hline \text { Sorcerer's Stone } & 90.295 & 317.558 & 976.458 \\ \text { Chamber of Secrets } & 88.357 & 261.988 & 878.988 \\ \text { Prisoner of Azkaban } & 93.687 & 249.539 & 795.539 \\ \text { Goblet of Fire } & 102.335 & 290.013 & 896.013 \\ \text { Order of the Phoenix } & 77.108 & 292.005 & 938.469 \\ \text { Half-Blood Prince } & 77.836 & 301.460 & 934.601 \\ \text { Deathly Hallows Part 1 } & 125.017 & 295.001 & 955.417 \\ \text { Deathly Hallows Part 2 } & 169.189 & 381.011 & 1,328.111 \end{array}$$

$ Calculate the covariance between first weekend gross and U.S. gross, first weekend gross and worldwide gross, and U.S. gross and worldwide gross.