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1. EXPLICIT AND IMPLICIT COSTS An annual income statement fromQuest Realty, Inc. is shown below: Revenues Revenue from sales ofgoods and services.............................. $80,000,000Operating costs and expenses: Cost of products and services sold.......................................... $30,000,000 Sellingexpenses..........................................................................$3,000,000 Administrativeexpense.............................................................$4,000,000 Total operating costs and expenses.................................. $37,000,000 Income fromoperations....................................................................$43,000,000 Interest expense (corporate bonds &loans)................................... $300,000 Non-recurringexpense (Legal expenses/fines in settling a federal antitrustsuit.................................................. $200,000Incometaxes.......................................................................................$700,000 Net income.........................................................................................$41,800,000 During this year of operation, Quest Realty owned andoccupied an office building in downtown Indianapolis. For thisyear, the building could have been leased to other businesses for$2,000,000 in lease income. Quest Realty also owned undevelopedland valued at $15,000,000. Owners of Quest Realty can earn a 14%rate of return annually on funds invested elsewhere.

Detail each of the items that make up the explicit costs forQuest Realty. Why are they explicit?

Detail each of the items that make up the implicit costs forQuest Realty for this year. Why are they implicit?

Over the next three years, a firm is expected to earn theeconomic profit of $50,000 in the first year, $60,000 in the secondyear, and $90,000 in the third year. After the end of the thirdyear, the firm goes out of business.

What would happen to the value of the firm if the adjusteddiscount rate went from 8 to 12 percent?

What does the discount rate increase mean?

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Jamar Ferry
Jamar FerryLv2
28 Sep 2019

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Please Can you dojournal entries for each event. 2. Prepareadjusting entries, and Closing entries

The 2014 balance sheet of the Captain Jet Inc. is attached.During 2015, the following events occurred.
1. On January 10, sell merchandise on account to Rayms $9,800 andFischer $8,600. Terms 1/10, n/30. Freight $100 for each sale,F.O.B. shipping point.
2. On January 12, purchase merchandise on account from Zapfel$3,000 and Liotta $2,400. Terms 2/10, n/30. Freight $120 for eachsale, F.O.B. destination.
3. On January 13, receive checks, $4,000 from Longhini and $2,000from Hall, for sales on account after discount period haslapsed.
4. On January 15, send checks to Joosten for 9,000 less 2% cashdiscount, and to Maida for $11,000 less 1% cash discount.
5. On January 16, issue credit of $100 to Fieber for merchandisereturned.
6. On January 18, summary daily cash sales total $17,520.
7. On January 21, pay off the balances to Zapfel and Liotta for thepurchases on January 12.
8. On Feburary 9, receive payment in full from Rayms andFischer.
9. On March 1, pay rent of $6,000 for a two-year term.
10. On April 1, sell merchandise on account to Dunlap $1,600, term2/10, n/30. Freight $100, F.O.B. shipping point.
11. Pay $500 cash for office supplies on May 1.
12. Cash dividends totaling $900 are declared on June 13 and paidto stockholders on June 23.
13. Issue a note of $120,000 to bank (one year, annual interestrate 2%) for cash on July 1.
14. On July 5, purchase merchandise from Maida $33,000, terms 2/10,n/30.
15. On July 7, issue common stock 1000 shares, $10 par, in exchangeof a land with a fair market value of $15,000.
16. On July 8, return $200 of merchandise to Maida and receivecredit.
17. On August 1, sell merchandise to Lachey on account $80,000,term 1/10, n/30. Freight $1,500, F.O.B. shipping point.
18. On August 4, pay off the balance to Maida.
19. On August 10, receive half of the payment from Lachey.
20. On August 14, write off $1,300 bad debt for one account,Tooket.
21. On August 21, pay utilities expense, $10,092.
22. On August 31, Lachey pays off its balance.
23. On September 1, pay cash $7,500 to Farmington for merchandisepurchased last year.
24. On October 1, pay off notes payable $110,000 and associatedaccrued interest $6,000, of which $1,500 was shown on the balancesheet.
25. Over the year, sales and office employees earned $45,500 insalaries and wages, of which $1,500 was still payable at the end ofyear.
26. An unpaid utilities bill (December, $1,250) is due on January10 next year.

Additional Information at the end of the year:

1. Depreciation expense for the year was $13,250.
2. The company estimated that it has to pay federal income tax,$3,250.
3. After physically counting, the company decided that the endinginventories worth $40,146.
4. Based on its historical data, the company estimated that the baddebts were about 1% of net credit

1

sales.
5. Unearned revenue is decreased by $12,000.

6. The company expenses all of the supplies purchased during theyear.
7. No insurance policy is effective during the year.
8. The company used the gross method to record its purchases andsales on credit. 9. The company adopts the periodic inventorysystem.

Instructions:

Prepare journal entries for each event. 2. Prepare adjustingentries. Closing entries

CAPTAIN JET INC. BALANCE SHEETDECEMBER 31, 2014

Current Assets

Cash 42,500
Notes Receivable 16,000
Accounts Receivable 41,800
Less: Allowance for Doubtful Accounts I (3,000)

Nventories 38,000
Prepaid Insurance 540
Prepaid Rent 600

Total Current Assets 136,440

Non-Current Assets

Long-term Investments
Investments in held-for-maturity securities 52,000

Land held for future development 45,500

Property, Plant, and Equipment

Land 85,000

Buildings 675,000

Less: Accumulated Depreciation (187,500)

Intangible Assets

Capitalized Development Costs 8,000

Goodwill 76,700
Other Identifiable Intangible Assets 48,000

Total Non-Current Assets 802,700

Total Assets 939,140

Current Liabilities

Notes Payable 110,000

Accounts Payable 33,500

Unearned Revenues 12,000

Income Taxes Payable 8,440

Property Taxes Payable 6,600

Interest Payable 1,500

Total Current Liabilities 172,040

Non-Current Liabilities

Provisions Related to Pensions 84,100

Bonds Payable 300,000

Total Non-Current Liabilities 384,100

Total Liabilities 556,140

Stockholders' Equity

Common Stock 100,000
Preferred Stock 100,000
Paid-in-capital - Common Stock 27,500

Paid-in-capital - Preferred Stock 10,000
Retained Earnings 153,250
Accumulated Other Comprehensive Income 5,000

Less: Treasury Stock (12,750)

Total Stockholders' Equity 383,000

Total Liabilities and Stockholders' Equity393,140

Use the following check figures

Adjusted Trial Balance: Total $1,276,055

Income Statement:
Earning after income tax: $9,827

Retained Earnings Statement:

Retained Earnings: $162,177

Balance Sheet:

Inventory: $40,146

Total assets: $939,267

Statement of Cash Flows
Net cash flows from this year: ($1,274)

Cash (ending): $41,226

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