For Each Independent Situation

question 12

Essay

For each independent situation:
1. Moosehead Pool and Skeet Com.'s debt to equity ratio is 1.6: 1 based on its draft financial statements for the year ended December 31,2016. This leverage ratio exceeds the 1.5:1 maximum stipulated in Moosehead's loan agreement pertaining to a $5,000,000 loan maturing on March 15,2019. The loan agreement stipulates that the loan becomes payable on demand upon breach of any of the loan covenants. Moosehead's creditors agreed on December 15,2016 to waive their right to demand payment until December 31,2017 for reason only that the firm's leverage ratio exceeds the stipulated maximum.
2. Guelph Piano Storage Inc. issued a $30,000,30-day,non-interest bearing note to Roland's Crating for storage bins. The market rate of interest for similar transactions is 2.5%.
3. On November 30,2014,Port Meadow Fertilizer Ltd. entered into a non-cancellable agreement to buy 10 tonnes of phosphorus for $1,600 per tonne for delivery on February 28,2015. Phosphorus is a key component of the custom fertilizer that Port Meadow produces. The market price of phosphorus is extremely volatile,as evident by the $1,175 per tonne that it could be acquired for on December 31,2014. Notwithstanding the premium price paid for the phosphorus,the company expects that fertilizer sales will remain profitable. Port Meadow's year-end is December 31,2014.
Requirement:
For each of the situations described above,prepare the required journal entry for the underlined entity. If a journal entry is not required,explain why.

Distinguish between cannibalization and other marketing phenomena, understanding its causes and effects.

Identify the factors that lead to the adoption of a Tiffany/Walmart strategy and its impact on market positioning.

Understand the relationship between product differentiation, market segmentation, and the risk of cannibalization.

Grasp the principles behind build-to-order and how it contributes to customized customer experiences.

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Definitions:

User Cost

Refers to the cost associated with the consumption of a good which decreases its remaining value for future use.

Opportunity Cost

The expense incurred by not choosing the second-best option available during decision-making.

Marginal Product

The additional output produced as a result of employing one more unit of a particular input, assuming all other inputs remain constant.

Total Cost

The complete cost of production, including both fixed and variable costs, incurred by a business in the production of goods or services.