
a
Prepare income statement of University O and University D.
a

Explanation of Solution
Income statement:
Income statement is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time.
Given information:
University O pays the instructor $4,600 per course and $230 per student for each enrolment in the class by University D. Both the universities charges $400 as tuition fee per course attended.
The formula to calculate the net income:
Prepare income statement of University K and University D:
Note: Assume that 20 students attend the courses
The cost of University K is fixed at $4,600 and University D is variable at
University | O | D | |
Tuition revenue | $ 8,000 | $ 8,000 | |
Total cost of instruction | ($ 4,600) | ($ 4,600) | |
Net income | $ 3,400 | $ 3,400 |
Table (1)
b
Prepare an income statement for University O, assuming that the university is successful and enrols 40 students in its course.
b

Explanation of Solution
Given information:
The tuition fee is reduced to $220 by University O and enrolled 40 students to the course.
Prepare income statement of University O:
University | O |
Tuition revenue | $8,800 |
Total cost of instruction (fixed) | ($4,600) |
Net income | $4,200 |
Table (2)
c
Prepare an income statement for University D, assuming that the university is successful and enrols 40 students in its course.
c

Explanation of Solution
Given information:
The tuition fee is reduced to $220 by University D and enrolled 40 students to the course.
University | D | |
Tuition revenue | $ 8,800 | |
Total cost of instruction (variable) | ($ 9,200) | |
Net income (loss) | ($ 400) |
Table (3)
d
Explain the reason for profit in part b) and loss in part c)
d

Explanation of Solution
Fixed cost remains constant when volume of activity changes but per unit value will change inversely with change in volume of the activity.
Variable cost will change proportionately or directly with the change in the volume of the activity on the other hand per unit value will remain constant irrespective of the change in volume of activity.
The cost of University O is fixed. So, rise in the number of students did not raise the total cost of instruction.
On the other hand, the University D cost is variable as when the number of students increase will lead to increase in total cost of instruction. Thus, the revenue in University D is insufficient to cover the increase in cost and leads to the loss.
e
Prepare income statement of University O and University D.
e

Explanation of Solution
Given information:
Prepare income statement of University O and University D:
10 Students attend the course on original fee $450.
University | O | D | |
Tuition revenue | 4,000 | 4,000 | |
Total cost of instruction | (4,600) | (2,300) | |
Net income (loss) | (600) | 1,700 |
Table (4)
The cost of University O is fixed at $4,600 and University D is variable at
f
Justify the given statement is false
f

Explanation of Solution
Given statement:
It is better to have a fixed cost rather than the variable cost.
Justification:
Fixed is not better always than the variable cost because the loss of the company can be avoided if cost is variable. That is if the volume is not sufficient to produce the revenue the company will incur loss like part e), simply above the fixed cost level.
Thus, it is not better to have a fixed cost rather than the variable cost.
g
Justify the given statement is false
g

Explanation of Solution
Given statement:
It is better to have a variable cost rather than the fixed cost.
Justification:
When revenue per unit of the company is less than the variable cost per unit of the company, the enterprises will produce extra loss of each unit sold or produced. This is illustrated in Part c). In part b) the lower per unit revenue will be compensated by the increase in sales volume if the cost is fixed.
Thus, it is not better to have a variable cost rather than the fixed cost.
Want to see more full solutions like this?
Chapter 11 Solutions
SURVEY OF ACCOUNTING-ACCESS
- CODE 14 On August 1, 2010, Cheryl Newsome established Titus Realty, which completed the following transactions during the month: a. Cheryl Newsome transferred cash from a personal bank account to an account to be used for the business in exchange for capital stock, $25,000. b. Paid rent on office and equipment for the month, $2,750. c. Purchased supplies on account, $950. d. Paid creditor on account, $400. c. Earned sales commissions, receiving cash, $18,100. f. Paid automobile expenses (including rental charge) for month, $1,000, and miscel- laneous expenses, $600. g. Paid office salaries, $2,150. h. Determined that the cost of supplies used was $575. i. Paid dividends, $2,000. REQUIREMENTS: 1. Determine increase - decrease of each account and new balance 2. Prepare 3 F.S: Income statement; Retained Earnings Statement; Balance Sheet Scanned with CamScannerarrow_forwardAssume that TDW Corporation (calendar-year-end) has 2024 taxable income of $952,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024: (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Machinery Computer equipment Furniture Total Placed in Service September 12 February 10 April 2 Basis $ 2,270,250 263,325 880,425 $ 3,414,000 b. What is the maximum total depreciation, including §179 expense, that TDW may deduct in 2024 on the assets it placed in service in 2024, assuming no bonus depreciation? Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Maximum total depreciation deduction (including §179 expense)arrow_forwardEvergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. b. What is the allowable depreciation on Evergreen's property in the current year if Evergreen does not elect out of bonus depreciation and elects out of §179 expense?arrow_forward
- Lina purchased a new car for use in her business during 2024. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2024 and 2025 (Lina doesn't want to take bonus depreciation for 2024) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) a. The vehicle cost $40,000, and business use is 100 percent (ignore §179 expense). Year Depreciation deduction 2024 2025arrow_forwardEvergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. a. What is the allowable depreciation on Evergreen's property in the current year, assuming Evergreen does not elect §179 expense and elects out of bonus depreciation?arrow_forwardAssume that TDW Corporation (calendar-year-end) has 2024 taxable income of $952,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024: (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Machinery Computer equipment Furniture Total Placed in Service September 12 February 10 April 2 Basis $ 2,270,250 263,325 880,425 $ 3,414,000 a. What is the maximum amount of §179 expense TDW may deduct for 2024? Maximum §179 expense deductiblearrow_forward
- helparrow_forwardIdentify and discuss at least 7 problems with the Jamaican tax system and then provide recommendations to alleviate the problems.arrow_forwardOn 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. d. Assume the building was purchased and placed in service on 17-Feb of year 1 and is residential property. Depreciation Expense Year 1 Year 2 $ 36,632 Year 3 $ 36,632arrow_forward
- On 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. a. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3? Year 1 Depreciation Expense Year 2 Year 3arrow_forwardOn 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. c. Assume the building was purchased and placed in service on 22-Nov instead of 17-Feb. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3? Year 1 Year 2 Year 3 Depreciation Deductionarrow_forward1) Evaluate the progress and challenges in achieving a single set of global accounting standards. 2) Discuss the benefits and drawbacks of globalization in accounting, providing relevant examples.arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





