ACC 497 – Week 2 Knowledge Check

Questions 1 – 4

Advanced Pharmaceuticals, Inc., is a wholesale distributor of prescription drugs to independent retail and hospital-based pharmacies. Management believes that top-notch customer representatives are the key factor in determining whether the company will be successful in the future. Customer representatives serve as the company’s liaison with customers—helping pharmacies monitor their stocks, delivering drugs when customer stocks run low, and providing up-to-date information on drugs from many different companies. Customer representatives must be ultra-reliable and are highly trained. Good customer representatives are hard to come by and are not easily replaced.

Customer representatives routinely record the amount of time they spend serving each pharmacy. This time includes travel time to and from the company’s central warehouse as well as time spent replenishing stocks, dealing with complaints, answering questions about drugs, informing pharmacists of the latest developments and newest products, reviewing bills, explaining procedures, and so on. Some pharmacies require more hand-holding and attention than others and consequently they consume more of the representatives’ time.

Recently, customer representatives have made more frequent complaints that it is impossible to do their jobs without working well beyond normal working hours. This has led to an alarming increase in the number of customer representatives quitting for jobs in other organizations. As a consequence, management is considering dropping some customers to reduce the workload on customer representatives. Data concerning a representative sample of the company’s customers appears below:

  Leafcrest
Pharmacy
Providence
Hospital
Pharmacy
Madison
Clinic
Pharmacy
Jenkins
Pharmacy
Total revenues $377,500 $2,928,580 $1,517,730 $229,200
Cost of drugs sold $256,470 $2,264,480 $1,149,440 $145,920
Customer service costs $10,790 $78,900 $49,500 $11,980
Customer representative time 265 1,540 710 230
 

Customer service costs include all of the costs—other than the costs of the drugs themselves—that could be avoided by dropping the customer. These costs include the hourly wages of the customer representatives, their sales commissions, the mileage-related costs of the customer representatives’ company-provided vehicles, and so on.


Required:

1. Rank the four customers in terms of their profitability.

2. Customer representatives are currently paid $40 per hour plus a commission of 1% of sales revenues. If these four pharmacies are indeed representative of the company’s customers, could the company afford to pay its customer representatives more in order to retain them?

Carlsville Company, which began operations in 2015, invests its idle cash in trading securities. The following transactions are from its short-term investments in trading securities.

2015  
Jan. 20   Purchased 800 shares of Ford Motor Co. at $26 per share plus a $125 commission.
Feb. 9   Purchased 2,200 shares of Lucent at $44.25 per share plus a $578 commission.
Oct. 12   Purchased 750 shares of Z-Seven at $7.50 per share plus a $200 commission.
Dec. 31   Fair value of the short-term investments in trading securities is $130,000.
2016  
Apr. 15   Sold 800 shares of Ford Motor Co. at $29 per share less a $285 commission.
July 5   Sold 750 shares of Z-Seven at $10.25 per share less a $102.50 commission.
July 22   Purchased 1,600 shares of Hunt Corp. at $30 per share plus a $444 commission.
Aug. 19   Purchased 1,800 shares of Donna Karan at $18.25 per share plus a $290 commission.
Dec. 31   Fair value of the short-term investments in trading securities is $160,000.
2017  
Feb. 27   Purchased 3,400 shares of HCA at $34 per share plus a $420 commission.
Mar. 3   Sold 1,600 shares of Hunt at $25 per share less a $250 commission.
June 21   Sold 2,200 shares of Lucent at $42 per share less a $420 commission.
June 30   Purchased 1,200 shares of Black & Decker at $47.50 per share plus a $595 commission.
Nov. 1   Sold 1,800 shares of Donna Karan at $18.25 per share less a $309 commission.
Dec. 31   Fair value of the short-term investments in trading securities is $180,000.
Required:
1. Prepare journal entries to record these short-term investment activities for the years shown. On December 31 of each year, prepare the adjusting entry to record any necessary fair value adjustment for the portfolio of trading securities.(If no entry is required select No journal entry required in the first entry field. Do not round your intermediate calculations.)

Doering Company, a U.S. corporation with customers in several foreign countries, had the following selected transactions for 2015 and 2016.
2015
  Apr. 8   Sold merchandise to Salinas & Sons of Mexico for $5,938 cash. The exchange rate for pesos is $0.1043 on this day.
  July 21   Sold merchandise on credit to Sumito Corp. in Japan. The price of 1.5 million yen is to be paid 120 days from the date of sale. The exchange rate for yen is $0.0094 on this day.
  Oct. 14   Sold merchandise for 19,000 pounds to Smithers Ltd. of Great Britain, payment in full to be received in 90 days. The exchange rate for pounds is $1.4566 on this day.
  Nov. 18   Received Sumito’s payment in yen for its July 21 purchase and immediately exchanged the yen for dollars. The exchange rate for yen is $0.0092 on this day.
  Dec. 20   Sold merchandise for 17,000 ringgits to Hamid Albar of Malaysia, payment in full to be received in 30 days. On this day, the exchange rate for ringgits is $0.4501.
  Dec. 31   Recorded adjusting entries to recognize exchange gains or losses on Doering’s annual financial statements. Rates for exchanging foreign currencies on this day follow.
     
  Pesos (Mexico) $ 0.1055  
  Yen (Japan)   0.0093  
  Pounds (Britain)   1.4620  
  Ringgits (Malaysia)   0.4456  
2016
  Jan. 12   Received full payment in pounds from Smithers for the October 14 sale and immediately exchanged the pounds for dollars. The exchange rate for pounds is $1.4699 on this day.
  Jan. 19   Received Hamid Albar’s full payment in ringgits for the December 20 sale and immediately exchanged the ringgits for dollars. The exchange rate for ringgits is $0.4420 on this day.

 Show correct answer

Required:
1. Prepare journal entries for the Doering transactions and adjusting entries. (Do not round your intermediate calculations. Enter your answers in whole dollars.)

2. Compute the foreign exchange gain or loss to be reported on Doering’s 2015 income statement. (Do not round your intermediate calculations. Round your final answers to the nearest whole dollar. Losses should be indicated by a minus sign.)

P.S. We also provide custom writing help such as week-wise homework, Mid Term, Final Exam and assignment help for ACCT 497. Please feel free to reach out to us on ekmtutor@gmail.com. Top quality paper/Grades are assured.

Please click on the “PURCHASE” link below to get “ACC 497 Week 2 Knowledge Check 5-8 Answer”.

For instant digital download of the above solution or tutorial, please click on the below link and make an instant purchase. You will be guided to the PAYPAL Standard payment page wherein you can pay and you will receive an email immediately with a download link.

In case you find any problem in getting the download link or downloading the tutorial, please send us an email on ekmtutor@gmail.com.

Leave a Comment