1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
pogonyaev
3 years ago
11

Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketing strategy to c

ompete with Burger King. The contract spans eight months. Burger Boy promises to pay $93,000 at the end of each month. At the end of the contract, Velocity either will give Burger Boy a refund of $31,000 or will be entitled to an additional $31,000 bonus, depending on whether sales at Burger Boy at year-end have increased to a target level. At the inception of the contract, Velocity estimates an 80% chance that it will earn the $31,000 bonus and calculates the contract price based on the expected value of future payments to be received. At the start of the fifth month, circumstances change, and Velocity revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Velocity receives the additional consideration of $31,000. At the end of the contract, Velocity receives the additional consideration of $29,000.
Required:
a. Prepare the journal entry to record revenue each month for the first four months of the contract.
b. Prepare the journal entry that the Velocity Company would record after four months to recognize the change in estimate associated with the reduced likelihood that the bonus will be received.
c. Prepare the journal entry to record the revenue each month for the second four months of the contract.
d. Prepare the journal entry after eight months to record receipt of the cash bonus.
Business
1 answer:
madam [21]3 years ago
5 0

Answer:

a. Accounts Receivable (Dr.) $93,000

Bonus Receivable (Dr.) $2,325

Service Revenue (Cr.) $95,325

b. Service Revenue (Dr.) $9,300

Bonus receivable (Cr.) $9,300

c. Accounts Receivable (Dr.) $93,775

Bonus Receivable (Dr.) $775

Service Revenue (Cr.) $93,000

d. Cash (Dr.) $29,000

Bonus Receivable (Cr.) $29,000

Explanation:

The contract between Burger Boy and Velocity is for eight months.

Expected value of the contract on 1st month is :

80% * [ $93,000 * 8 months + $31,000 ] + 20% [ $93,000 * 8 months - $31,000] = $762,600

The expected value per month is $762,600 / 8 months = $95,325 per month

Expected value of the contract 5th month with revised probability is :

60% * [ $93,000 * 8 months + $31,000 ] + 40% [ $93,000 * 8 months - $31,000] = $750,200

The expected value per month is $750,200 / 8 months = $93,775 per month.

You might be interested in
Outstanding stock of the West Corporation included 40,000 shares of $5 par common stock and 10,000 shares of 5%, $10 par non-cum
emmasim [6.3K]

Answer:

$6,000

Explanation:

The computation of the dividend amount distributed to preferred shareholders is shown below:

= Number of non-cumulative preferred stock shares × par value per share × dividend rate

= 10,000 shares × $10 × 6%

= $6,000

In the case of the non-cumulative preferred stock, if there are dividend arrears, the same is not paid.

Simply we multiplied the preferred stock share by the par value and the dividend rate so that the estimated value can come

4 0
3 years ago
Andrews Corporation uses the weighted-average method of process costing. The following information is available for February in
marissa [1.9K]

Answer:

The cost for conversion as per equivalent unit of production is $5.85

Explanation:

Formula for cost of conversion per equivalent unit of production =

Total cost / Equivalent units of production

Equivalent cost of production for conversion is given = 95,000 UNITS

CALCULATING TOTAL COST =

Cost of beginning work in progress + Cost incurred in February ( conversion )

= $36,000 + $ 520,000

= $556,000

Putting the values of total cost and equivalent units of conversion in formula-

= $ 556,000 / 95,000

= $5.85

4 0
3 years ago
You own a stock which has produced annual returns of 11 percent, 3 percent, 8 percent, and 14 percent over the past four years,
Nana76 [90]

Answer:

C) 9.00; 8.92

Explanation:

The arithmetic rate of return is given by:

R_{A} = \frac{11+3+8+14}{4} \\R_{A} = 9.00

The geometric rate of return is given by:

R_{G} =  (\sqrt[4]{(1.11*1.03*1.08*1.14)} -1) *100 \%\\R_{G} =  (1.0892-1) *100 \%\\R_{G} =  8.92

Therefore, the arithmetic rate of return is 9.00 percent and the geometric rate of return is 8.92 percent

The answer is C) 9.00; 8.92.

6 0
2 years ago
Item 1 Manufacturing overhead was estimated to be $629,300 for the year along with 20,300 direct labor hours. Actual manufacturi
Neporo4naja [7]

Answer:

$31 per hour

Explanation:

The predetermined overhead rate is computed as

= Estimated manufacturing overhead / Estimated direct labor hours

Given that

Estimate manufacturing overhead = $629,300

Estimated direct labor hour = 20,300

Therefore,

Predetermined overhead rate

= $629,300 / 20,300

= $31 per hour

5 0
2 years ago
Comparative balance sheets for Pina Colada Corp. are presented as follows. Pina Colada Corp. Comparative Balance Sheets December
DerKrebs [107]

Answer and Explanation:

The Preparation of cash flows for 2020 using the indirect method is shown below:-

Cash flow from Operating Activities

Net income $134,100

Add: Adjustments to reconcile   net income

Add; Depreciation on property, plant  and equipment $25,000  ($66,250 - $41,250)

Less: Increase in Accounts receivable ($8,300)    ($84,350 - $76,050)

Add: Decrease in Inventory $7,750   ($180,500 - $188,250)

Less: Decrease in Accounts payable ($12,950)    ($33,400 - $46,350)

Net cash provided by  Operating Activities   $145,600

Cash flow from Investing Activities

Add:Sale of Land $24,850

Less: Purchase of equipment ($49,800)    ($249,600 - $199,800)

Net cash used in Investing Activities ($24,950)

Cash flow from Financing Activities

Issue of common stock $48,900

Less: Redemption of bonds ($50,700)

Less: Dividend paid ($68,300)

Net cash used in Financing Activities ($70,100)

Net increase in Cash and Cash Equivalents $50,550

Cash in the beginning of the period $22,400

Ending cash balance for the year $72,950

7 0
3 years ago
Other questions:
  • Making periodic deliveries of products to each zara store is an example of
    11·2 answers
  • Name 3 negative scenarios that could potentially damage your credit score
    8·1 answer
  • If one unit of Product Z2 used $2.50 of direct materials and $3.00 of direct labor, sold for $8.00, and was assigned overhead at
    5·1 answer
  • Which of the following is a type of savings vehicle?
    14·2 answers
  • When Ingrid was selling her house, she contacted Gabe, her real estate agent, to help her with the sale. Gabe's services include
    5·1 answer
  • For a certain good, when price rises from $50 to $55, quantity demanded falls from 8,400 to 7,500. The price elasticity of deman
    11·1 answer
  • Olivia is single, 66 years old, and not blind. She paid all the cost of keeping up her home. She earned $55,000 in wages for 201
    11·1 answer
  • For personal finance course
    12·1 answer
  • how would you describe in three sentences the posible product or service you will propose for need in your community.​
    7·1 answer
  • The salaries of employees who spend all their time working in one department are: ________
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!