Question
On November 15, 2021, ARA Skin Care, Inc. engaged the services of LDA, Inc. for its wellness seminar for its employees to be held on
On November 15, 2021, ARA Skin Care, Inc. engaged the services of LDA, Inc. for its wellness seminar for its employees to be held on December 15, 2021. LDA, Inc. is a domestic corporation that offers, among others, business seminars. These seminars help update the knowledge of corporate officers and employees. LDA caters participants who are sponsored by their employees. This is one big event, since this is the companys first seminar where the resource speaker is Dr. Claire Browne, a Manila-based Dermatologist. As of today, LDA, Inc. has received confirmation from 200 participants. Deadline for payment of the seminar fee is on the first day of the seminar month. The seminar will be held for two days. The seminar fee is P10,000 per participant. Seminar-related expenses are estimated as follows: Guest speakers fee per day P30,000 Accommodations guest speaker and his accompanying staff 25,000 Plane ticket and other transportation costs guest speaker and party Other fixed costs for the seminar 40,000 Expenses for each participant: Seminar kit 2,500 Hotel accommodations for the duration of the seminar, including meals and snacks 5,000 Other variable costs 3,000 Dr. Browne said the LDA, Inc. will earn a big amount of profit if all confirmed participants will pay and attend the seminar. He also said that even if some of the 200 confirmed participants would back out, the company will not incur a loss. This, according to him, is based on the break-even analysis prepared by the companys accountant. All fees and expenses will be shouldered by ARA Skin Care, Inc. Scenarios: If only 80% of the 200 participants actually attend, how much is LDAs profit from the said event? How will ARA Skin Care, Inc. record this transaction in its books? If only 60% of the 200 participants actually attend, how much is LDAs profit from the said event? How will ARA Skin Care, Inc. record this transaction in its books?
Prepare a Comparative Income Statement of the LDA, Inc. as of December 31, 2021 for both scenarios.
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