PART A $(17$ marks$)$Question $3(20$ marks$)$

:$\text{'},$ Currently, Starbucks coffee is negotiating with NTU to open a new branch. NTU has offered

two options to Starbucks as the profit sharing plans to NTU:

Option $1$: $40\%$ of total revenue of the financial year

Option $2$: a constant payment of $$120,000$ of the financial year

At this moment, there are only four full$-$time staff working as either a morning or afternoon shift.

Starbucks coffee has its new policy, for the first$-$time purchase, they will give a $30\%$ discount in

order to attract more potential students in the future. For the existing students, the discount will be

lower, namely $15\%.$ Starbucks purchases its coffee bean from overseas; the average purchased

price for each cup is $$8.$ Due to the beginning of the new semester, Starbuck intends to attract

more students by offering $$15$ each cup for both new students and existing students.

Required:

a$.$ Assuming you are the branch manager of Starbucks coffee in NTU, at what level of

revenues will Starbucks earn the same operating income under Option $1$ and Option $2?$

How much is this same operating income?

$(7$ marks$)$

b$.$ Compute operational leverage at the targeted sales of $20,000$ cups under the two options

mentioned above.

$(4$ marks$)$

c$.$ Please comment on the different operational leverages resulting from the two options

calculated in part $b$ and explain the differences.

$(3$ marks$)$

d$.$ If Starbucks coffee has a target of $25,000$ cups how would this target affect its decisions by

considering the above mentioned two options? Explain why.

Aruba is a global enterprise with core competencies in investing, developing, producing and marketing a broad range of products in different parts of the world. On October $1,2023,$ the company launched business operation called Yomi Ltd$.$ in South Africa.

Yomi adopted the calendar year for financial reporting purposes and expected to prepare the company's first set of financial statements on December $31,2023.$ The company conducted transactions during the year as following.

a$.$ On Oct $1,$ the company purchased an office building by paying $$600,000$ for cash and signing an $8\%5-$year note payable for $$900,000,$ interest payable semi$-$annually on March $31$ and September $30$ each year. The principal is payable on maturity.

b$.$ On Oct $2,$ the company acquired new equipment for $$270,000$ by issuing $25,000$ ordinary shares with par at $$5$ each.

c$.$ On Oct $15,$ the company purchased $$6,500$ office supplies on credit and recorded as an expense.

d$.$ On Nov $1,$ the company paid $$7,200$ cash for three years' premium on a fire insurance policy and debited the whole amount to Prepaid Insurance account.

e$.$ On Dec $5,$ a long$-$term investment in bonds, originally purchased for $$500,000,$ was sold for $$458,000$ cash.

f$.$ On Dec $18,$ the company paid a cash dividend of $$64,000.$

$-$g$.$ On Dec $30,$ the company sold goods for $$120,000$ to customers under credit term of $2/30,\frac{n}{75}.$ The goods sold with a $90-$day warranty and the company estimated $4\%$ of the sales to need warranty repairs.

h$.$ On Dec $31,$ the company received cash $$9,200$ from a customer for goods to be delivered in January next year.

Additional information

Six employees, each of whom earned wages of $$400$ per day, worked for $21$ days in December to be paid in January next year.

A physical count of office supplies at Dec $31$ showed $$2,340$ of supplies avalable.

The building has a useful life of $30$ years and no residual value. Straight$-$line depreciation method is used.

The equipment has a useful life of $6$ years and a residual value of $$25,000,$ Doubledeclining$-$balance method is used.

Reguired $($Explanation is not necessary$)$

Prepare journal entries to record all of the above transactions, including all necessary adjusting entries accompanying detailed calculation processes as of year$-$end, based on the information given. $($Write the answers in the table provided below$)$