The Head of Operations for a Movie Studio Wants to Determine

question 60

Multiple Choice

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production.She feels that script #1 has a 70% chance of earning $100 million over the long run,but a 30% chance of losing $20 million.If this movie is successful,then a sequel could also be produced,with an 80% chance of earning $50 million,but a 20% chance of losing $10 million.On the other hand,she feels that script #2 has a 60 % chance of earning $120 million,but a 40% chance of losing $30 million.If successful,its sequel would have a 50% chance of earning $80 million and a 50% chance of losing $40 million.As with the first script,if the original movie is a "flop",then no sequel would be produced.
-What is the probability that script #1 will be a success,but its sequel will not?

• A)0 8
• B)0 7
• C)0 56
• D)0 2
• E)0 14

Recognize the differences between cash and accrual basis of accounting.

Identify and record adjustments for prepaid expenses and unearned revenues.

Understand and calculate accrued expenses.

Recognize the effect of adjusting entries on financial statement accounts.

---

Definitions:

Recorded When Incurred

An accounting principle that stipulates expenses should be recognized in the financial statements in the period they are incurred, regardless of when the cash payments are made.

Adjusting Entries

Journal entries made at the end of an accounting period to update account balances before financial statements are prepared.

Account Balances

The total amount of money in a financial account, calculated by adding all credits and subtracting all debits.

Expense Recognition Principle

An accounting principle that expenses should be recognized in the period in which they are incurred to produce revenues, aligning expenses with corresponding revenues.