Safe Homes Ltd. was founded on January 1 by five homebuilders. -Safe Homes offers warranty protection to customers purchasing new homes. -Each of the five owners owns 20% of Safe Homes. -Safe Homes offers 10 year warranties, including protection from problems caused by poor construction. -Safe Homes does not cover general declines in market value. -Shareholders believe Safe Homes will increase house sales and reduce individual risk. Because Safe Homes works out of an office within TYBuilders, TYBuilders will receive royalty payments equal to 5% of its income before taxes. The owners of Safe Homes receive a 10% commission from the total warranty revenue they sign to a client. A $250,000 brick house built by a good builder would have a $2,000 initial fee and $250 in annual maintenance fees. Safe Homes is doing well due to the boom in residential construction and the extension of the warranty to homes that were not built by Safe Homes. The majority of Safe Homes warranties have been signed with homes that were not built by Safe Homes. Safe Homes pays rent to TYBuilders. Safe Home gets their revenue from an These homes always have an initial fee of at least $1,500; Safe Homes' business is doing well. They are purchasing a construction firm. 

-Determine whether Safe Homes is appropriately pricing its services and controlling its expenses. -Recommend accounting practices for Safe Homes that are in accordance with ASPE. Calculate whenever necessary.

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Accounts Receivable 200,000 200,000 Homes Under Construction 1,300,000 1,500,000 Undeveloped Land 1,000,000 2,700,000 Net Equipment 700,000 650,000 Other Assets 70,000 70,000 $3,370,000 5,220,000 Liabilities $2,470,000 2,470,000 Common Shares 100,000 Retained Earnings 800,000 $3,370,000

Warranty Revenue (000s) $120 $165 $395 $90 $160 $705 $1,635 Repair Costs Incurred (000s) $6 $9 $21 $42 $39 $107 $224 Oakwood Estates VIP Homes Home Star Eagle Road TYBuilders Other Builders Total Number of Warranties Sold 50 85 190 250 175 465 1,215

Answer rating: 100% (QA)

Answer To assess whether Safe Homes is appropriately pricing its services and controlling expenses lets analyze the provided information and perform s... View the full answer