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Thursday, 5 September 2013
Question 2 In the month of June, Barbara's Beauty Salon gave 2,700 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $18,000 and variable costs were 70% of sales. Determine the contribution margin in dollars, per unit, and as a ratio. Contribution margin (in dollars) $ Contribution margin per unit $ Contribution margin ratio % Using the contribution margin technique, compute the break-even point in dollars and in units. Break-even point (in dollars) $ Break-even point (in units) units Compute the margin of safety in dollars and as a ratio. (Round answers to 0 decimal places, e.g. 125.) Margin of safety (in dollars) $ Margin of safety (ratio) %
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Black Brothers Furniture Corporation incurred the following costs. Instructions Identify the costs above as variable, fixed, or mixed.
Black Brothers Furniture Corporation incurred the following costs.
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Instructions
Identify the costs above as variable, fixed, or mixed.
| 1. | Wood used in the production of furniture. | |
| 2. | Fuel used in delivery trucks. | |
| 3. | Straight-line depreciation on factory building. | |
| 4. | Screws used in the production of furniture. | |
| 5. | Sales staff salaries. | |
| 6. | Sales commissions. | |
| 7. | Property taxes. | |
| 8. | Insurance on buildings. | |
| 9. | Hourly wages of furniture craftsmen. | |
| 10. | Salaries of factory supervisors. | |
| 11. | Utilities expense. | |
| 12. | Telephone bill. | |
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Tuesday, 6 August 2013
Santo Birch opens a Web consulting business called Show-Me-the-Money and completes the following transactions in its first month of operations.
Problem 2-4A Preparing and posting journal entries; preparing a trial balance L.O. C3, C4, A1, P1, P2
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Santo Birch opens a Web consulting business called Show-Me-the-Money and completes the following transactions in its first month of operations. |
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March 1 |
Birch invests $95,000 cash along with office equipment valued at $22,800 in the company in exchange for common stock. |
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2 |
The company prepaid $7,200 cash for twelve months' rent for office space. (Hint: Debit Prepaid Rent for $7,200.) |
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3 |
The company made credit purchases for $11,400 in office equipment and $2,280 in office supplies. Payment is due within 10 days. |
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6 |
The company completed services for a client and immediately received $2,000 cash. |
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9 |
The company completed a $7,600 project for a client, who must pay within 30 days. |
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13 |
The company paid $13,680 cash to settle the account payable created on March 3. |
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19 |
The company paid $6,000 cash for the premium on a 12-month insurance policy. (Hint: Debit Prepaid Insurance for $6,000.) |
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22 |
The company received $6,080 cash as partial payment for the work completed on March 9. |
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25 |
The company completed work for another client for $2,640 on credit. |
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29 |
The company paid $6,200 cash for dividends. |
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30 |
The company purchased $760 of additional office supplies on credit. |
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31 |
The company paid $700 cash for this month's utility bill. |
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Required: |
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1. |
Record these transactions using the following titles: Cash, Accounts Receivable, Office Supplies, Prepaid Insurance, Prepaid Rent, Office Equipment, Accounts Payable, Common stock, Dividends, Services Revenue, and Utilities Expense. (Omit the "$" sign in your response.) |
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Friday, 12 April 2013
Page 1 of 9
MONTGOMERY COLLEGE
Department of Business and Economics
Rockville Campus
AC 201 REVIEW 2 (CHAPTERS 5-8)
Spring 2013
I. True/False
T
F
1.
Under a perpetual inventory system, cost of goods sold is determined
each time a sale occurs.
2.
The operating cycle involves the purchase and sale of merchandise as well as the subsequent collection of cash from credit sales.
3.
Operating expenses are subtracted from revenue for a service enterprise and
from gross profit for a merchandising enterprise.
4.
Net sales minus cost of goods sold is called gross profit.
5.
Under the perpetual inventory system, purchases of merchandise for sale are
recorded in the Merchandise Inventory account.
6.
The terms 2/10, net/30 mean that a 2 percent discount is allowed on
payments made within the 10 days discount period.
7.
If merchandise costing $2,500, with terms 2/10, n/30, is paid within
10 days, the amount of the purchase discount is $50.
8.
The Sales Returns and Allowances account and the Sales Discount account are
both classified as expense accounts.
9.
The revenue recognition principle applies to merchandising companies by
recognizing sales revenues when they are earned.
10.
When the terms of sale include a sales discount, it usually is advisable
for the buyer to pay within the discount period.
11.
The multiple-step income statement is considered more useful than the
single-step income statement because it highlights the components of net
income.
12.
Advertising Expense appears as a selling expense on the Income Statement.
13.
Non-operating activities include revenues and expenses that are related to
the company's main line of operations.
14.
Sales revenue, cost of goods sold, and gross profit are amounts on a
merchandising company's Income Statement not commonly found on the Income
Statement of a service company.
15.
If net sales are $1,000,000 and cost of goods sold is $800,000, the gross
profit rate is 20%.
16.
Under a periodic inventory system, the merchandise on hand at the end of
the period is determined by a physical count of the inventory.
17.
Goods held on consignment should be included in the consignor's ending
inventory.
18.
If prices never changed there would be no need for alternative inventory
methods.
19.
The specific identification method of costing inventories tracks the actual
physical flow of the goods available for sale.
20.
Management may choose any inventory costing method it desires as long as
the cost flow assumption chosen is consistent with the physical movement of
goods in the company.
21.
The First-In, First-Out (FIFO) inventory method results in an ending
inventory valued at the most recent cost.
22.
The matching principle requires that cost of goods sold be matched
against the ending Merchandise Inventory in order to determine income.
23.
The specific identification method of inventory valuation is desirable when
a company sells a large number of low-unit cost items.
24.
If a company has no beginning inventory and the unit cost of inventory
items does not change during the year, the value assigned to the ending
inventory will be the same under LIFO and average cost flow assumptions.
25.
If the unit price of inventory is increasing during a period, a company
using the LIFO inventory method will show less gross profit for the period,
than if it had used the FIFO inventory method.
26.
If a company changes its inventory valuation method, the effect of the
change on net income should be disclosed in the financial statements.
Page 2 of 9
T
F
27.
In periods of falling prices, LIFO will result in a higher ending inventory
valuation than FIFO.
28.
When the market value of inventory is lower than its cost, the inventory is
written down to its market value.
29.
The inventory turnover ratio is calculated as cost of goods sold divided by
ending inventory.
30.
An inventory turnover ratio that is too high may indicate that the company
is losing sales opportunities because of inventory shortages.
31.
The LIFO reserve is the difference between ending inventory using LIFO and
ending inventory if FIFO were used instead.
32.
The safeguarding of assets is an objective of a company's system of
internal control.
33.
An effective system of internal control centralizes functions in a single
capable individual.
34.
Requiring employees to take vacations is a weakness in the system of
internal controls because it does not promote operational efficiency.
35.
Bonding means insuring a company against theft by employees.
36.
An effective system of internal control requires that at least two
individuals be assigned to one cash drawer so that each can serve as a check on the other.
37.
The responsibility for ordering, receiving, and paying for merchandise
should be assigned to different individuals.
38.
Control over cash disbursements is improved if major expenditures are paid
by check.
39.
An example of segregation of duties is having a check signer recording cash
disbursements.
40.
To obtain maximum benefit from a bank reconciliation, the reconciliation
should be prepared by the employee authorized to sign checks.
41.
Cash equivalents include money market accounts, commercial paper, and U.S.
treasury bills held for ninety days or less.
42.
A basic principle of cash management is to increase the speed of paying
liabilities.
43.
A cash budget contributes to more effective cash management.
44.
The petty cash fund eliminates the need for a bank checking account.
45.
Trade Receivables can be an Account Receivable or a Note Receivable.
46.
Advances to employees are referred to as Trade Accounts Receivable.
47.
Accounts Receivable are one of a company's least liquid assets.
48.
An aging of Accounts Receivable is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.
49.
The allowance method of accounting for bad debts violates the matching
principle.
50.
If a company uses the allowance method to account for uncollectible
accounts, the entry to write off an uncollectible account only involves
balance sheet accounts.
51.
When the allowance method is used, the write-off of an account receivable
results in an expense at the time of write-off.
52.
When using the direct write-off method, year-end adjustments for Bad Debt
Expense must be made.
53.
Under the allowance method, the cash realizable value of receivables is the
same both before and after an account has been written off.
54.
In computing the maturity date of a note, the date the note is issued is
included but the due date is omitted.
55.
Interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 x 0.10 x 6/12.
56.
When a note is written to settle an open account, no entry is necessary.
57.
If a promissory note is dishonored, the payee should not record interest
income.
58.
The holder of a note adjusts for accrued interest by debiting Interest
Receivable and crediting Interest Revenue.
Page 3 of 9
T
F
59.
A concentration of credit risk is a threat of nonpayment from a single
customer or class of customers that could adversely affect the financial
health of the company.
60.
The receivables turnover ratio is calculated by dividing average receivables into cost of goods sold.
61.
The average collection period is frequently used to assess the effectiveness of a company's credit and collection policies.
62.
A factor buys receivables from businesses for a fee and collects the payment directly from customers.
63.
A major advantage of national credit cards to retailers is that there is no
charge to the retailer by the credit card companies for their services.
Page 4 of 9
II. Inventory Costing
Assume the following data for Vincent Vega Company for 2005:
January 1
Beginning Inventory
10 Units at $ 7.00 per Unit
March 18
Purchase
15 Units at $ 8.00 per Unit
March 22
Sale
20 Units at $10.00 per Unit
June 10
Purchase
20 Units at $ 8.50 per Unit
June 16
Sale
22 Units at $10.00 per Unit
October 30
Purchase
12 Units at $ 9.00 per Unit
a. Compute the inventory on hand on December 31 under the FIFO Periodic Method.
b. Compute the Cost of Goods Sold under the FIFO Periodic Method.
c. Compute the inventory on hand on December 31 under the LIFO Periodic Method.
d. Compute the Cost of Goods Sold under the LIFO Periodic Method.
e. Compute the inventory on hand on December 31 under the Average Cost Periodic
Method.
f. Compute the Cost of Goods Sold under the Average Cost Periodic Method.
Page 5 of 9
III. Matching
1.
The excess of sales revenue over Cost of Goods Sold
A.
Gross Profit
2.
Expenses, other than Cost of Goods Sold, that are
incurred in a business’ major line of business
B.
Sales Returns and Allowances
3.
Gross profit minus operating expenses
C.
Single-step Income Statement
4.
Gross profit divided by net Sales Revenue
D.
Operating Expenses
5.
Ratio of cost of goods sold to average inventory
E.
Operating Income
6.
The largest single expense of most merchandising businesses
F.
Inventory Turnover
7.
A contra account to Sales Revenue
G.
Cost of Goods Sold
8.
A format that groups all revenues together and
then lists and deducts all expenses together without drawing any subtotals
H.
Other Revenue
9.
Revenue that originates outside the main operations of a business
I.
Gross Profit Percentage
10.
Purchases minus Purchase Discounts and minus Purchase Returns and Allowances
J.
Net Purchases
IV. Matching
1.
A concept by which the least favorable figures are
presented in the financial statements
A.
LIFO
2.
A principle requiring the use of the same accounting methods and procedures from period to period
B.
Lower-of-cost-or-market Rule
3.
A principle requiring the financial statements to report enough information for outsiders to make knowledgeable decisions about the business
C.
Conservatism
4.
Requires that an asset be reported in the
financial statements at whichever is lower, its historical cost or its current replacement cost
D.
FIFO
5.
Inventory costing method in which ending inventory
is based on the costs of the most recent purchases
E.
Consistency Principle
6.
Inventory costing method in which ending inventory
is based on the oldest costs
F.
Full Disclosure Principle
7.
Inventory system maintaining a continual count of inventory
G.
Perpetual Inventory System
8.
Cost to the merchant for accepting a credit card
H.
Allowance for Doubtful Accounts
9.
A contra account to accounts receivable that holds the estimated amount of collection losses
J.
Direct Write-off Method
10.
The sum of the principal and interest due on the due date of a note
K.
Maturity Value
11.
A method of accounting for uncollectible accounts by which the company waits until the credit department decides that a customer's account is uncollectible, and then writes it off directly to Bad Debt Expense
L.
Allowance Method
12.
A method of recording collection losses based on estimates made before identification of specific uncollectible accounts
M.
Service Charge Expense
Page 6 of 9
V. Bank Reconciliation
The following information is available to prepare the Jules Winnfield Company’s
December 31 bank reconciliation.
1. Check No. 453, written for $250, was outstanding on November 30 and was not
returned with the December bank statement.
2. Check No. 478, written on December 26 for $400, was not returned with the
canceled checks.
3. Check No. 480, correctly written for $96 was incorrectly entered in the
Cash Disbursements Journal and posted as though it were for $69.
4. A deposit of $2,000, placed in the bank’s night depository after banking hours
on November 30, appeared on the December bank statement.
5. A deposit of $1,500, placed in the bank’s night depository after banking hours
on December 31, did not appear on the December bank statement.
6. Enclosed with the December bank statement was a debit memorandum for the monthly
bank service charge of $25.
7. Enclosed with the December bank statement was a memorandum that a $738 check received from Zed and deposited on December 27 was returned by the bank marked “Non-Sufficient Funds.”
8. The Cash balance on the December bank statement was $10,000.
9. Winnfield Company’s Cash ledger balance on December 31 is $11,640.
a. Prepare the appropriate bank reconciliation, in good form, in the space
provided on page 7.
b. Certain of the above items require entries on Jules Winnfield Company’s books. Prepare the necessary adjusting journal entries in the space provided on page 7.
Page 7 of 9
General Journal
Date
Description
Debit
Credit
Page 8 of 9
VI. Recording Transactions
Journalize the following transactions for M. Wallace Company using the perpetual
inventory method.
January 4 Purchased $5,300 merchandise from Marvin Company on account,
terms 3/10, n/30.
January 7 Paid $700 freight on January 4 transaction.
January 12 Received $300 credit from Marvin Company for merchandise returned.
January 13 Paid Marvin Company for merchandise in full, less discounts.
January 20 Made sales of $10,000 to customers on account, terms 2/10, n/30.
The merchandise cost $8,000.
January 22 Gave credit of $1,500 to customers for merchandise returns.
The merchandise cost $1,200.
January 29 Received payment in full, less discounts, from customers.
General Journal
Date
Description
Debit
Credit
Page 9 of 9
VII. Maturity Values
Calculate the maturity value for each of the following notes.
TERM
INTEREST RATE
PRINCIPAL
MATURITY VALUE
60 Days
10%
$ 8,000
3 Months
12%
$60,000
90 Days
5%
$ 4,000
VIII. Allowance Method
Butch Coolidge Company has accounts receivable of $340,000 and a normal balance in
allowance for doubtful accounts of $7,180.
a. Assuming that the aging of accounts receivable method is used, create the
journal entry needed to record bad debt expense if 4% of receivables will
become uncollectible.
b. Assume the same facts as above, but now assume a debit balance in allowance for
doubtful accounts of $2,000.
c. What is the difference between the direct write-off method versus the allowance
method for bad debts?
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CLICK HERE TO GET THE ANSWER !!!! Page 1 of 9 MONTGOMERY COLLEGE Department of Business and Economics Rockville Campus AC 201 REVIEW 2 (CHAPTERS 5-8) Spring 2013 I. True/False T F 1. Under a perpetual inventory system, cost of goods sold is determined each time a sale occurs. 2. The operating cycle involves the purchase and sale of merchandise as well as the subsequent collection of cash from credit sales. 3. Operating expenses are subtracted from revenue for a service enterprise and from gross profit for a merchandising enterprise. 4. Net sales minus cost of goods sold is called gross profit. 5. Under the perpetual inventory system, purchases of merchandise for sale are recorded in the Merchandise Inventory account. 6. The terms 2/10, net/30 mean that a 2 percent discount is allowed on payments made within the 10 days discount period. 7. If merchandise costing $2,500, with terms 2/10, n/30, is paid within 10 days, the amount of the purchase discount is $50. 8. The Sales Returns and Allowances account and the Sales Discount account are both classified as expense accounts. 9. The revenue recognition principle applies to merchandising companies by recognizing sales revenues when they are earned. 10. When the terms of sale include a sales discount, it usually is advisable for the buyer to pay within the discount period. 11. The multiple-step income statement is considered more useful than the single-step income statement because it highlights the components of net income. 12. Advertising Expense appears as a selling expense on the Income Statement. 13. Non-operating activities include revenues and expenses that are related to the company's main line of operations. 14. Sales revenue, cost of goods sold, and gross profit are amounts on a merchandising company's Income Statement not commonly found on the Income Statement of a service company. 15. If net sales are $1,000,000 and cost of goods sold is $800,000, the gross profit rate is 20%. 16. Under a periodic inventory system, the merchandise on hand at the end of the period is determined by a physical count of the inventory. 17. Goods held on consignment should be included in the consignor's ending inventory. 18. If prices never changed there would be no need for alternative inventory methods. 19. The specific identification method of costing inventories tracks the actual physical flow of the goods available for sale. 20. Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company. 21. The First-In, First-Out (FIFO) inventory method results in an ending inventory valued at the most recent cost. 22. The matching principle requires that cost of goods sold be matched against the ending Merchandise Inventory in order to determine income. 23. The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items. 24. If a company has no beginning inventory and the unit cost of inventory items does not change during the year, the value assigned to the ending inventory will be the same under LIFO and average cost flow assumptions. 25. If the unit price of inventory is increasing during a period, a company using the LIFO inventory method will show less gross profit for the period, than if it had used the FIFO inventory method. 26. If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements. Page 2 of 9 T F 27. In periods of falling prices, LIFO will result in a higher ending inventory valuation than FIFO. 28. When the market value of inventory is lower than its cost, the inventory is written down to its market value. 29. The inventory turnover ratio is calculated as cost of goods sold divided by ending inventory. 30. An inventory turnover ratio that is too high may indicate that the company is losing sales opportunities because of inventory shortages. 31. The LIFO reserve is the difference between ending inventory using LIFO and ending inventory if FIFO were used instead. 32. The safeguarding of assets is an objective of a company's system of internal control. 33. An effective system of internal control centralizes functions in a single capable individual. 34. Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency. 35. Bonding means insuring a company against theft by employees. 36. An effective system of internal control requires that at least two individuals be assigned to one cash drawer so that each can serve as a check on the other. 37. The responsibility for ordering, receiving, and paying for merchandise should be assigned to different individuals. 38. Control over cash disbursements is improved if major expenditures are paid by check. 39. An example of segregation of duties is having a check signer recording cash disbursements. 40. To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the employee authorized to sign checks. 41. Cash equivalents include money market accounts, commercial paper, and U.S. treasury bills held for ninety days or less. 42. A basic principle of cash management is to increase the speed of paying liabilities. 43. A cash budget contributes to more effective cash management. 44. The petty cash fund eliminates the need for a bank checking account. 45. Trade Receivables can be an Account Receivable or a Note Receivable. 46. Advances to employees are referred to as Trade Accounts Receivable. 47. Accounts Receivable are one of a company's least liquid assets. 48. An aging of Accounts Receivable is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected. 49. The allowance method of accounting for bad debts violates the matching principle. 50. If a company uses the allowance method to account for uncollectible accounts, the entry to write off an uncollectible account only involves balance sheet accounts. 51. When the allowance method is used, the write-off of an account receivable results in an expense at the time of write-off. 52. When using the direct write-off method, year-end adjustments for Bad Debt Expense must be made. 53. Under the allowance method, the cash realizable value of receivables is the same both before and after an account has been written off. 54. In computing the maturity date of a note, the date the note is issued is included but the due date is omitted. 55. Interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 x 0.10 x 6/12. 56. When a note is written to settle an open account, no entry is necessary. 57. If a promissory note is dishonored, the payee should not record interest income. 58. The holder of a note adjusts for accrued interest by debiting Interest Receivable and crediting Interest Revenue. Page 3 of 9 T F 59. A concentration of credit risk is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of the company. 60. The receivables turnover ratio is calculated by dividing average receivables into cost of goods sold. 61. The average collection period is frequently used to assess the effectiveness of a company's credit and collection policies. 62. A factor buys receivables from businesses for a fee and collects the payment directly from customers. 63. A major advantage of national credit cards to retailers is that there is no charge to the retailer by the credit card companies for their services. Page 4 of 9 II. Inventory Costing Assume the following data for Vincent Vega Company for 2005: January 1 Beginning Inventory 10 Units at $ 7.00 per Unit March 18 Purchase 15 Units at $ 8.00 per Unit March 22 Sale 20 Units at $10.00 per Unit June 10 Purchase 20 Units at $ 8.50 per Unit June 16 Sale 22 Units at $10.00 per Unit October 30 Purchase 12 Units at $ 9.00 per Unit a. Compute the inventory on hand on December 31 under the FIFO Periodic Method. b. Compute the Cost of Goods Sold under the FIFO Periodic Method. c. Compute the inventory on hand on December 31 under the LIFO Periodic Method. d. Compute the Cost of Goods Sold under the LIFO Periodic Method. e. Compute the inventory on hand on December 31 under the Average Cost Periodic Method. f. Compute the Cost of Goods Sold under the Average Cost Periodic Method. Page 5 of 9 III. Matching 1. The excess of sales revenue over Cost of Goods Sold A. Gross Profit 2. Expenses, other than Cost of Goods Sold, that are incurred in a business’ major line of business B. Sales Returns and Allowances 3. Gross profit minus operating expenses C. Single-step Income Statement 4. Gross profit divided by net Sales Revenue D. Operating Expenses 5. Ratio of cost of goods sold to average inventory E. Operating Income 6. The largest single expense of most merchandising businesses F. Inventory Turnover 7. A contra account to Sales Revenue G. Cost of Goods Sold 8. A format that groups all revenues together and then lists and deducts all expenses together without drawing any subtotals H. Other Revenue 9. Revenue that originates outside the main operations of a business I. Gross Profit Percentage 10. Purchases minus Purchase Discounts and minus Purchase Returns and Allowances J. Net Purchases IV. Matching 1. A concept by which the least favorable figures are presented in the financial statements A. LIFO 2. A principle requiring the use of the same accounting methods and procedures from period to period B. Lower-of-cost-or-market Rule 3. A principle requiring the financial statements to report enough information for outsiders to make knowledgeable decisions about the business C. Conservatism 4. Requires that an asset be reported in the financial statements at whichever is lower, its historical cost or its current replacement cost D. FIFO 5. Inventory costing method in which ending inventory is based on the costs of the most recent purchases E. Consistency Principle 6. Inventory costing method in which ending inventory is based on the oldest costs F. Full Disclosure Principle 7. Inventory system maintaining a continual count of inventory G. Perpetual Inventory System 8. Cost to the merchant for accepting a credit card H. Allowance for Doubtful Accounts 9. A contra account to accounts receivable that holds the estimated amount of collection losses J. Direct Write-off Method 10. The sum of the principal and interest due on the due date of a note K. Maturity Value 11. A method of accounting for uncollectible accounts by which the company waits until the credit department decides that a customer's account is uncollectible, and then writes it off directly to Bad Debt Expense L. Allowance Method 12. A method of recording collection losses based on estimates made before identification of specific uncollectible accounts M. Service Charge Expense Page 6 of 9 V. Bank Reconciliation The following information is available to prepare the Jules Winnfield Company’s December 31 bank reconciliation. 1. Check No. 453, written for $250, was outstanding on November 30 and was not returned with the December bank statement. 2. Check No. 478, written on December 26 for $400, was not returned with the canceled checks. 3. Check No. 480, correctly written for $96 was incorrectly entered in the Cash Disbursements Journal and posted as though it were for $69. 4. A deposit of $2,000, placed in the bank’s night depository after banking hours on November 30, appeared on the December bank statement. 5. A deposit of $1,500, placed in the bank’s night depository after banking hours on December 31, did not appear on the December bank statement. 6. Enclosed with the December bank statement was a debit memorandum for the monthly bank service charge of $25. 7. Enclosed with the December bank statement was a memorandum that a $738 check received from Zed and deposited on December 27 was returned by the bank marked “Non-Sufficient Funds.” 8. The Cash balance on the December bank statement was $10,000. 9. Winnfield Company’s Cash ledger balance on December 31 is $11,640. a. Prepare the appropriate bank reconciliation, in good form, in the space provided on page 7. b. Certain of the above items require entries on Jules Winnfield Company’s books. Prepare the necessary adjusting journal entries in the space provided on page 7. Page 7 of 9 General Journal Date Description Debit Credit Page 8 of 9 VI. Recording Transactions Journalize the following transactions for M. Wallace Company using the perpetual inventory method. January 4 Purchased $5,300 merchandise from Marvin Company on account, terms 3/10, n/30. January 7 Paid $700 freight on January 4 transaction. January 12 Received $300 credit from Marvin Company for merchandise returned. January 13 Paid Marvin Company for merchandise in full, less discounts. January 20 Made sales of $10,000 to customers on account, terms 2/10, n/30. The merchandise cost $8,000. January 22 Gave credit of $1,500 to customers for merchandise returns. The merchandise cost $1,200. January 29 Received payment in full, less discounts, from customers. General Journal Date Description Debit Credit Page 9 of 9 VII. Maturity Values Calculate the maturity value for each of the following notes. TERM INTEREST RATE PRINCIPAL MATURITY VALUE 60 Days 10% $ 8,000 3 Months 12% $60,000 90 Days 5% $ 4,000 VIII. Allowance Method Butch Coolidge Company has accounts receivable of $340,000 and a normal balance in allowance for doubtful accounts of $7,180. a. Assuming that the aging of accounts receivable method is used, create the journal entry needed to record bad debt expense if 4% of receivables will become uncollectible. b. Assume the same facts as above, but now assume a debit balance in allowance for doubtful accounts of $2,000. c. What is the difference between the direct write-off method versus the allowance method for bad debts? Here is link for file (http://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CDEQFjAA&url=http%3A%2F%2Fcms.montgomerycollege.edu%2FWorkArea%2Flinkit.aspx%3FLinkIdentifier%3Did%26ItemID%3D49843&ei=G-hnUbexI82OrgfPxIDgBw&usg=AFQjCNG3PRGSRAqJ_ha4hHbBlkYepvzneg&sig2=361Ye9BKstwdwODke2DtXQ&bvm=bv.45175338,d.bmk) CLICK HERE TO GET THE ANSWER !!!!
Page 1 of 9
MONTGOMERY COLLEGE
Department of Business and Economics
Rockville Campus
AC 201 REVIEW 2 (CHAPTERS 5-8)
Spring 2013
I. True/False
T
F
1.
Under a perpetual inventory system, cost of goods sold is determined
each time a sale occurs.
2.
The operating cycle involves the purchase and sale of merchandise as well as the subsequent collection of cash from credit sales.
3.
Operating expenses are subtracted from revenue for a service enterprise and
from gross profit for a merchandising enterprise.
4.
Net sales minus cost of goods sold is called gross profit.
5.
Under the perpetual inventory system, purchases of merchandise for sale are
recorded in the Merchandise Inventory account.
6.
The terms 2/10, net/30 mean that a 2 percent discount is allowed on
payments made within the 10 days discount period.
7.
If merchandise costing $2,500, with terms 2/10, n/30, is paid within
10 days, the amount of the purchase discount is $50.
8.
The Sales Returns and Allowances account and the Sales Discount account are
both classified as expense accounts.
9.
The revenue recognition principle applies to merchandising companies by
recognizing sales revenues when they are earned.
10.
When the terms of sale include a sales discount, it usually is advisable
for the buyer to pay within the discount period.
11.
The multiple-step income statement is considered more useful than the
single-step income statement because it highlights the components of net
income.
12.
Advertising Expense appears as a selling expense on the Income Statement.
13.
Non-operating activities include revenues and expenses that are related to
the company's main line of operations.
14.
Sales revenue, cost of goods sold, and gross profit are amounts on a
merchandising company's Income Statement not commonly found on the Income
Statement of a service company.
15.
If net sales are $1,000,000 and cost of goods sold is $800,000, the gross
profit rate is 20%.
16.
Under a periodic inventory system, the merchandise on hand at the end of
the period is determined by a physical count of the inventory.
17.
Goods held on consignment should be included in the consignor's ending
inventory.
18.
If prices never changed there would be no need for alternative inventory
methods.
19.
The specific identification method of costing inventories tracks the actual
physical flow of the goods available for sale.
20.
Management may choose any inventory costing method it desires as long as
the cost flow assumption chosen is consistent with the physical movement of
goods in the company.
21.
The First-In, First-Out (FIFO) inventory method results in an ending
inventory valued at the most recent cost.
22.
The matching principle requires that cost of goods sold be matched
against the ending Merchandise Inventory in order to determine income.
23.
The specific identification method of inventory valuation is desirable when
a company sells a large number of low-unit cost items.
24.
If a company has no beginning inventory and the unit cost of inventory
items does not change during the year, the value assigned to the ending
inventory will be the same under LIFO and average cost flow assumptions.
25.
If the unit price of inventory is increasing during a period, a company
using the LIFO inventory method will show less gross profit for the period,
than if it had used the FIFO inventory method.
26.
If a company changes its inventory valuation method, the effect of the
change on net income should be disclosed in the financial statements.
Page 2 of 9
T
F
27.
In periods of falling prices, LIFO will result in a higher ending inventory
valuation than FIFO.
28.
When the market value of inventory is lower than its cost, the inventory is
written down to its market value.
29.
The inventory turnover ratio is calculated as cost of goods sold divided by
ending inventory.
30.
An inventory turnover ratio that is too high may indicate that the company
is losing sales opportunities because of inventory shortages.
31.
The LIFO reserve is the difference between ending inventory using LIFO and
ending inventory if FIFO were used instead.
32.
The safeguarding of assets is an objective of a company's system of
internal control.
33.
An effective system of internal control centralizes functions in a single
capable individual.
34.
Requiring employees to take vacations is a weakness in the system of
internal controls because it does not promote operational efficiency.
35.
Bonding means insuring a company against theft by employees.
36.
An effective system of internal control requires that at least two
individuals be assigned to one cash drawer so that each can serve as a check on the other.
37.
The responsibility for ordering, receiving, and paying for merchandise
should be assigned to different individuals.
38.
Control over cash disbursements is improved if major expenditures are paid
by check.
39.
An example of segregation of duties is having a check signer recording cash
disbursements.
40.
To obtain maximum benefit from a bank reconciliation, the reconciliation
should be prepared by the employee authorized to sign checks.
41.
Cash equivalents include money market accounts, commercial paper, and U.S.
treasury bills held for ninety days or less.
42.
A basic principle of cash management is to increase the speed of paying
liabilities.
43.
A cash budget contributes to more effective cash management.
44.
The petty cash fund eliminates the need for a bank checking account.
45.
Trade Receivables can be an Account Receivable or a Note Receivable.
46.
Advances to employees are referred to as Trade Accounts Receivable.
47.
Accounts Receivable are one of a company's least liquid assets.
48.
An aging of Accounts Receivable is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.
49.
The allowance method of accounting for bad debts violates the matching
principle.
50.
If a company uses the allowance method to account for uncollectible
accounts, the entry to write off an uncollectible account only involves
balance sheet accounts.
51.
When the allowance method is used, the write-off of an account receivable
results in an expense at the time of write-off.
52.
When using the direct write-off method, year-end adjustments for Bad Debt
Expense must be made.
53.
Under the allowance method, the cash realizable value of receivables is the
same both before and after an account has been written off.
54.
In computing the maturity date of a note, the date the note is issued is
included but the due date is omitted.
55.
Interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 x 0.10 x 6/12.
56.
When a note is written to settle an open account, no entry is necessary.
57.
If a promissory note is dishonored, the payee should not record interest
income.
58.
The holder of a note adjusts for accrued interest by debiting Interest
Receivable and crediting Interest Revenue.
Page 3 of 9
T
F
59.
A concentration of credit risk is a threat of nonpayment from a single
customer or class of customers that could adversely affect the financial
health of the company.
60.
The receivables turnover ratio is calculated by dividing average receivables into cost of goods sold.
61.
The average collection period is frequently used to assess the effectiveness of a company's credit and collection policies.
62.
A factor buys receivables from businesses for a fee and collects the payment directly from customers.
63.
A major advantage of national credit cards to retailers is that there is no
charge to the retailer by the credit card companies for their services.
Page 4 of 9
II. Inventory Costing
Assume the following data for Vincent Vega Company for 2005:
January 1
Beginning Inventory
10 Units at $ 7.00 per Unit
March 18
Purchase
15 Units at $ 8.00 per Unit
March 22
Sale
20 Units at $10.00 per Unit
June 10
Purchase
20 Units at $ 8.50 per Unit
June 16
Sale
22 Units at $10.00 per Unit
October 30
Purchase
12 Units at $ 9.00 per Unit
a. Compute the inventory on hand on December 31 under the FIFO Periodic Method.
b. Compute the Cost of Goods Sold under the FIFO Periodic Method.
c. Compute the inventory on hand on December 31 under the LIFO Periodic Method.
d. Compute the Cost of Goods Sold under the LIFO Periodic Method.
e. Compute the inventory on hand on December 31 under the Average Cost Periodic
Method.
f. Compute the Cost of Goods Sold under the Average Cost Periodic Method.
Page 5 of 9
III. Matching
1.
The excess of sales revenue over Cost of Goods Sold
A.
Gross Profit
2.
Expenses, other than Cost of Goods Sold, that are
incurred in a business’ major line of business
B.
Sales Returns and Allowances
3.
Gross profit minus operating expenses
C.
Single-step Income Statement
4.
Gross profit divided by net Sales Revenue
D.
Operating Expenses
5.
Ratio of cost of goods sold to average inventory
E.
Operating Income
6.
The largest single expense of most merchandising businesses
F.
Inventory Turnover
7.
A contra account to Sales Revenue
G.
Cost of Goods Sold
8.
A format that groups all revenues together and
then lists and deducts all expenses together without drawing any subtotals
H.
Other Revenue
9.
Revenue that originates outside the main operations of a business
I.
Gross Profit Percentage
10.
Purchases minus Purchase Discounts and minus Purchase Returns and Allowances
J.
Net Purchases
IV. Matching
1.
A concept by which the least favorable figures are
presented in the financial statements
A.
LIFO
2.
A principle requiring the use of the same accounting methods and procedures from period to period
B.
Lower-of-cost-or-market Rule
3.
A principle requiring the financial statements to report enough information for outsiders to make knowledgeable decisions about the business
C.
Conservatism
4.
Requires that an asset be reported in the
financial statements at whichever is lower, its historical cost or its current replacement cost
D.
FIFO
5.
Inventory costing method in which ending inventory
is based on the costs of the most recent purchases
E.
Consistency Principle
6.
Inventory costing method in which ending inventory
is based on the oldest costs
F.
Full Disclosure Principle
7.
Inventory system maintaining a continual count of inventory
G.
Perpetual Inventory System
8.
Cost to the merchant for accepting a credit card
H.
Allowance for Doubtful Accounts
9.
A contra account to accounts receivable that holds the estimated amount of collection losses
J.
Direct Write-off Method
10.
The sum of the principal and interest due on the due date of a note
K.
Maturity Value
11.
A method of accounting for uncollectible accounts by which the company waits until the credit department decides that a customer's account is uncollectible, and then writes it off directly to Bad Debt Expense
L.
Allowance Method
12.
A method of recording collection losses based on estimates made before identification of specific uncollectible accounts
M.
Service Charge Expense
Page 6 of 9
V. Bank Reconciliation
The following information is available to prepare the Jules Winnfield Company’s
December 31 bank reconciliation.
1. Check No. 453, written for $250, was outstanding on November 30 and was not
returned with the December bank statement.
2. Check No. 478, written on December 26 for $400, was not returned with the
canceled checks.
3. Check No. 480, correctly written for $96 was incorrectly entered in the
Cash Disbursements Journal and posted as though it were for $69.
4. A deposit of $2,000, placed in the bank’s night depository after banking hours
on November 30, appeared on the December bank statement.
5. A deposit of $1,500, placed in the bank’s night depository after banking hours
on December 31, did not appear on the December bank statement.
6. Enclosed with the December bank statement was a debit memorandum for the monthly
bank service charge of $25.
7. Enclosed with the December bank statement was a memorandum that a $738 check received from Zed and deposited on December 27 was returned by the bank marked “Non-Sufficient Funds.”
8. The Cash balance on the December bank statement was $10,000.
9. Winnfield Company’s Cash ledger balance on December 31 is $11,640.
a. Prepare the appropriate bank reconciliation, in good form, in the space
provided on page 7.
b. Certain of the above items require entries on Jules Winnfield Company’s books. Prepare the necessary adjusting journal entries in the space provided on page 7.
Page 7 of 9
General Journal
Date
Description
Debit
Credit
Page 8 of 9
VI. Recording Transactions
Journalize the following transactions for M. Wallace Company using the perpetual
inventory method.
January 4 Purchased $5,300 merchandise from Marvin Company on account,
terms 3/10, n/30.
January 7 Paid $700 freight on January 4 transaction.
January 12 Received $300 credit from Marvin Company for merchandise returned.
January 13 Paid Marvin Company for merchandise in full, less discounts.
January 20 Made sales of $10,000 to customers on account, terms 2/10, n/30.
The merchandise cost $8,000.
January 22 Gave credit of $1,500 to customers for merchandise returns.
The merchandise cost $1,200.
January 29 Received payment in full, less discounts, from customers.
General Journal
Date
Description
Debit
Credit
Page 9 of 9
VII. Maturity Values
Calculate the maturity value for each of the following notes.
TERM
INTEREST RATE
PRINCIPAL
MATURITY VALUE
60 Days
10%
$ 8,000
3 Months
12%
$60,000
90 Days
5%
$ 4,000
VIII. Allowance Method
Butch Coolidge Company has accounts receivable of $340,000 and a normal balance in
allowance for doubtful accounts of $7,180.
a. Assuming that the aging of accounts receivable method is used, create the
journal entry needed to record bad debt expense if 4% of receivables will
become uncollectible.
b. Assume the same facts as above, but now assume a debit balance in allowance for
doubtful accounts of $2,000.
c. What is the difference between the direct write-off method versus the allowance
method for bad debts?
Here is link for file (http://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CDEQFjAA&url=http%3A%2F%2Fcms.montgomerycollege.edu%2FWorkArea%2Flinkit.aspx%3FLinkIdentifier%3Did%26ItemID%3D49843&ei=G-hnUbexI82OrgfPxIDgBw&usg=AFQjCNG3PRGSRAqJ_ha4hHbBlkYepvzneg&sig2=361Ye9BKstwdwODke2DtXQ&bvm=bv.45175338,d.bmk)
CLICK HERE TO GET THE ANSWER !!!!
MONTGOMERY COLLEGE
Department of Business and Economics
Rockville Campus
AC 201 REVIEW 2 (CHAPTERS 5-8)
Spring 2013
I. True/False
T
F
1.
Under a perpetual inventory system, cost of goods sold is determined
each time a sale occurs.
2.
The operating cycle involves the purchase and sale of merchandise as well as the subsequent collection of cash from credit sales.
3.
Operating expenses are subtracted from revenue for a service enterprise and
from gross profit for a merchandising enterprise.
4.
Net sales minus cost of goods sold is called gross profit.
5.
Under the perpetual inventory system, purchases of merchandise for sale are
recorded in the Merchandise Inventory account.
6.
The terms 2/10, net/30 mean that a 2 percent discount is allowed on
payments made within the 10 days discount period.
7.
If merchandise costing $2,500, with terms 2/10, n/30, is paid within
10 days, the amount of the purchase discount is $50.
8.
The Sales Returns and Allowances account and the Sales Discount account are
both classified as expense accounts.
9.
The revenue recognition principle applies to merchandising companies by
recognizing sales revenues when they are earned.
10.
When the terms of sale include a sales discount, it usually is advisable
for the buyer to pay within the discount period.
11.
The multiple-step income statement is considered more useful than the
single-step income statement because it highlights the components of net
income.
12.
Advertising Expense appears as a selling expense on the Income Statement.
13.
Non-operating activities include revenues and expenses that are related to
the company's main line of operations.
14.
Sales revenue, cost of goods sold, and gross profit are amounts on a
merchandising company's Income Statement not commonly found on the Income
Statement of a service company.
15.
If net sales are $1,000,000 and cost of goods sold is $800,000, the gross
profit rate is 20%.
16.
Under a periodic inventory system, the merchandise on hand at the end of
the period is determined by a physical count of the inventory.
17.
Goods held on consignment should be included in the consignor's ending
inventory.
18.
If prices never changed there would be no need for alternative inventory
methods.
19.
The specific identification method of costing inventories tracks the actual
physical flow of the goods available for sale.
20.
Management may choose any inventory costing method it desires as long as
the cost flow assumption chosen is consistent with the physical movement of
goods in the company.
21.
The First-In, First-Out (FIFO) inventory method results in an ending
inventory valued at the most recent cost.
22.
The matching principle requires that cost of goods sold be matched
against the ending Merchandise Inventory in order to determine income.
23.
The specific identification method of inventory valuation is desirable when
a company sells a large number of low-unit cost items.
24.
If a company has no beginning inventory and the unit cost of inventory
items does not change during the year, the value assigned to the ending
inventory will be the same under LIFO and average cost flow assumptions.
25.
If the unit price of inventory is increasing during a period, a company
using the LIFO inventory method will show less gross profit for the period,
than if it had used the FIFO inventory method.
26.
If a company changes its inventory valuation method, the effect of the
change on net income should be disclosed in the financial statements.
Page 2 of 9
T
F
27.
In periods of falling prices, LIFO will result in a higher ending inventory
valuation than FIFO.
28.
When the market value of inventory is lower than its cost, the inventory is
written down to its market value.
29.
The inventory turnover ratio is calculated as cost of goods sold divided by
ending inventory.
30.
An inventory turnover ratio that is too high may indicate that the company
is losing sales opportunities because of inventory shortages.
31.
The LIFO reserve is the difference between ending inventory using LIFO and
ending inventory if FIFO were used instead.
32.
The safeguarding of assets is an objective of a company's system of
internal control.
33.
An effective system of internal control centralizes functions in a single
capable individual.
34.
Requiring employees to take vacations is a weakness in the system of
internal controls because it does not promote operational efficiency.
35.
Bonding means insuring a company against theft by employees.
36.
An effective system of internal control requires that at least two
individuals be assigned to one cash drawer so that each can serve as a check on the other.
37.
The responsibility for ordering, receiving, and paying for merchandise
should be assigned to different individuals.
38.
Control over cash disbursements is improved if major expenditures are paid
by check.
39.
An example of segregation of duties is having a check signer recording cash
disbursements.
40.
To obtain maximum benefit from a bank reconciliation, the reconciliation
should be prepared by the employee authorized to sign checks.
41.
Cash equivalents include money market accounts, commercial paper, and U.S.
treasury bills held for ninety days or less.
42.
A basic principle of cash management is to increase the speed of paying
liabilities.
43.
A cash budget contributes to more effective cash management.
44.
The petty cash fund eliminates the need for a bank checking account.
45.
Trade Receivables can be an Account Receivable or a Note Receivable.
46.
Advances to employees are referred to as Trade Accounts Receivable.
47.
Accounts Receivable are one of a company's least liquid assets.
48.
An aging of Accounts Receivable is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.
49.
The allowance method of accounting for bad debts violates the matching
principle.
50.
If a company uses the allowance method to account for uncollectible
accounts, the entry to write off an uncollectible account only involves
balance sheet accounts.
51.
When the allowance method is used, the write-off of an account receivable
results in an expense at the time of write-off.
52.
When using the direct write-off method, year-end adjustments for Bad Debt
Expense must be made.
53.
Under the allowance method, the cash realizable value of receivables is the
same both before and after an account has been written off.
54.
In computing the maturity date of a note, the date the note is issued is
included but the due date is omitted.
55.
Interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 x 0.10 x 6/12.
56.
When a note is written to settle an open account, no entry is necessary.
57.
If a promissory note is dishonored, the payee should not record interest
income.
58.
The holder of a note adjusts for accrued interest by debiting Interest
Receivable and crediting Interest Revenue.
Page 3 of 9
T
F
59.
A concentration of credit risk is a threat of nonpayment from a single
customer or class of customers that could adversely affect the financial
health of the company.
60.
The receivables turnover ratio is calculated by dividing average receivables into cost of goods sold.
61.
The average collection period is frequently used to assess the effectiveness of a company's credit and collection policies.
62.
A factor buys receivables from businesses for a fee and collects the payment directly from customers.
63.
A major advantage of national credit cards to retailers is that there is no
charge to the retailer by the credit card companies for their services.
Page 4 of 9
II. Inventory Costing
Assume the following data for Vincent Vega Company for 2005:
January 1
Beginning Inventory
10 Units at $ 7.00 per Unit
March 18
Purchase
15 Units at $ 8.00 per Unit
March 22
Sale
20 Units at $10.00 per Unit
June 10
Purchase
20 Units at $ 8.50 per Unit
June 16
Sale
22 Units at $10.00 per Unit
October 30
Purchase
12 Units at $ 9.00 per Unit
a. Compute the inventory on hand on December 31 under the FIFO Periodic Method.
b. Compute the Cost of Goods Sold under the FIFO Periodic Method.
c. Compute the inventory on hand on December 31 under the LIFO Periodic Method.
d. Compute the Cost of Goods Sold under the LIFO Periodic Method.
e. Compute the inventory on hand on December 31 under the Average Cost Periodic
Method.
f. Compute the Cost of Goods Sold under the Average Cost Periodic Method.
Page 5 of 9
III. Matching
1.
The excess of sales revenue over Cost of Goods Sold
A.
Gross Profit
2.
Expenses, other than Cost of Goods Sold, that are
incurred in a business’ major line of business
B.
Sales Returns and Allowances
3.
Gross profit minus operating expenses
C.
Single-step Income Statement
4.
Gross profit divided by net Sales Revenue
D.
Operating Expenses
5.
Ratio of cost of goods sold to average inventory
E.
Operating Income
6.
The largest single expense of most merchandising businesses
F.
Inventory Turnover
7.
A contra account to Sales Revenue
G.
Cost of Goods Sold
8.
A format that groups all revenues together and
then lists and deducts all expenses together without drawing any subtotals
H.
Other Revenue
9.
Revenue that originates outside the main operations of a business
I.
Gross Profit Percentage
10.
Purchases minus Purchase Discounts and minus Purchase Returns and Allowances
J.
Net Purchases
IV. Matching
1.
A concept by which the least favorable figures are
presented in the financial statements
A.
LIFO
2.
A principle requiring the use of the same accounting methods and procedures from period to period
B.
Lower-of-cost-or-market Rule
3.
A principle requiring the financial statements to report enough information for outsiders to make knowledgeable decisions about the business
C.
Conservatism
4.
Requires that an asset be reported in the
financial statements at whichever is lower, its historical cost or its current replacement cost
D.
FIFO
5.
Inventory costing method in which ending inventory
is based on the costs of the most recent purchases
E.
Consistency Principle
6.
Inventory costing method in which ending inventory
is based on the oldest costs
F.
Full Disclosure Principle
7.
Inventory system maintaining a continual count of inventory
G.
Perpetual Inventory System
8.
Cost to the merchant for accepting a credit card
H.
Allowance for Doubtful Accounts
9.
A contra account to accounts receivable that holds the estimated amount of collection losses
J.
Direct Write-off Method
10.
The sum of the principal and interest due on the due date of a note
K.
Maturity Value
11.
A method of accounting for uncollectible accounts by which the company waits until the credit department decides that a customer's account is uncollectible, and then writes it off directly to Bad Debt Expense
L.
Allowance Method
12.
A method of recording collection losses based on estimates made before identification of specific uncollectible accounts
M.
Service Charge Expense
Page 6 of 9
V. Bank Reconciliation
The following information is available to prepare the Jules Winnfield Company’s
December 31 bank reconciliation.
1. Check No. 453, written for $250, was outstanding on November 30 and was not
returned with the December bank statement.
2. Check No. 478, written on December 26 for $400, was not returned with the
canceled checks.
3. Check No. 480, correctly written for $96 was incorrectly entered in the
Cash Disbursements Journal and posted as though it were for $69.
4. A deposit of $2,000, placed in the bank’s night depository after banking hours
on November 30, appeared on the December bank statement.
5. A deposit of $1,500, placed in the bank’s night depository after banking hours
on December 31, did not appear on the December bank statement.
6. Enclosed with the December bank statement was a debit memorandum for the monthly
bank service charge of $25.
7. Enclosed with the December bank statement was a memorandum that a $738 check received from Zed and deposited on December 27 was returned by the bank marked “Non-Sufficient Funds.”
8. The Cash balance on the December bank statement was $10,000.
9. Winnfield Company’s Cash ledger balance on December 31 is $11,640.
a. Prepare the appropriate bank reconciliation, in good form, in the space
provided on page 7.
b. Certain of the above items require entries on Jules Winnfield Company’s books. Prepare the necessary adjusting journal entries in the space provided on page 7.
Page 7 of 9
General Journal
Date
Description
Debit
Credit
Page 8 of 9
VI. Recording Transactions
Journalize the following transactions for M. Wallace Company using the perpetual
inventory method.
January 4 Purchased $5,300 merchandise from Marvin Company on account,
terms 3/10, n/30.
January 7 Paid $700 freight on January 4 transaction.
January 12 Received $300 credit from Marvin Company for merchandise returned.
January 13 Paid Marvin Company for merchandise in full, less discounts.
January 20 Made sales of $10,000 to customers on account, terms 2/10, n/30.
The merchandise cost $8,000.
January 22 Gave credit of $1,500 to customers for merchandise returns.
The merchandise cost $1,200.
January 29 Received payment in full, less discounts, from customers.
General Journal
Date
Description
Debit
Credit
Page 9 of 9
VII. Maturity Values
Calculate the maturity value for each of the following notes.
TERM
INTEREST RATE
PRINCIPAL
MATURITY VALUE
60 Days
10%
$ 8,000
3 Months
12%
$60,000
90 Days
5%
$ 4,000
VIII. Allowance Method
Butch Coolidge Company has accounts receivable of $340,000 and a normal balance in
allowance for doubtful accounts of $7,180.
a. Assuming that the aging of accounts receivable method is used, create the
journal entry needed to record bad debt expense if 4% of receivables will
become uncollectible.
b. Assume the same facts as above, but now assume a debit balance in allowance for
doubtful accounts of $2,000.
c. What is the difference between the direct write-off method versus the allowance
method for bad debts?
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Sunday, 7 April 2013
Randall Company is a merchandising company that sells a single product. The company's inventories, production, and sales in units for the next three months have been forecasted as follows:
Randall
Company is a merchandising company that sells a single product. The company's
inventories, production, and sales in units for the next three months have been
forecasted as follows:
Units are sold for $12 each. One fourth of all sales are paid for in the month
of sale and the balance are paid for in the following month. Accounts
receivable at September 30 totaled $450,000.
Merchandise is purchased for $7 per unit. Half of the purchases are paid for in
the month of the purchase and the remainder are paid for in the month following
purchase. Selling and administrative expenses are expected to total $120,000
each month. One half of these expenses will be paid in the month in which they are
incurred and the balance will be paid in the following month. There is no
depreciation. Accounts payable at September 30 totaled $290,000.
Cash at September 30 totaled $80,000. A payment of $300,000 for purchase of
equipment is scheduled for November, and a dividend of $200,000 is to be paid
in December.
Required:
a. Prepare a schedule of expected cash collections for each of the months of
October, November, and December.
b. Prepare a schedule showing expected cash disbursements for merchandise
purchases and selling and administrative expenses for each of the months
October, November, and December.
c. Prepare a cash budget for each of the months October, November, and
December. There is no minimum required ending cash balance.
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1. The production budget is typically prepared prior to the sales budget. (Points : 3)
True
False
2. One benefit of budgeting is that it coordinates the activities of the entire organization. (Points : 3)
True
False
3. One difficulty with self-imposed budgets is that they are not subject to any type of review. (Points : 3)
True
False
4. The master budget is a network consisting of many separate budgets that are interdependent. (Points : 3)
True
False
5. Planning and control are essentially the same thing. (Points : 3)
True
False
6. Sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing known. (Points : 3)
True
False
7. In the selling and administrative budget, the non-cash charges (such as depreciation) are added to the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses. (Points : 3)
True
False
8. Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared? (Points : 3)
Sales budget, cash budget, direct materials budget, direct labor budget
Production budget, sales budget, direct materials budget, direct labor budget
Sales budget, cash budget, production budget, direct materials budget
Selling and administrative expense budget, budgeted income statement, budgeted balance sheet
9. National Telephone company has been forced by competition to put much more emphasis on planning and controlling its costs. Accordingly, the company's controller has suggested initiating a formal budgeting process. Which of the follow steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system? (Points : 3)
Implementing the change quickly.
Including in department resonsibility reports only those items that are under the department manager's control.
Demonstrating top management support for the budgeting program.
Ensuring that favorable deviations of actual results from the budget, as well as unfavorable deviations, are discussed with the responsible managers.
10. Which of the following statements is not correct? (Points : 3)
The sales budget is the starting point in preparing the master budget.
The sales budget is constructed by multiplying the expected sales in units by the sales price.
The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period.
The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.
11. Budgeted production needs are determined by: (Points : 3)
adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.
adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total.
adding budgeted sales in units to the desired ending inventory in units.
deducting the beginning inventory in units from budgeted sales in units.
12. The budgeted amount of raw materials to be purchased is determined by: (Points : 3)
adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule.
subtracting the beginning inventory of raw materials to the raw materials needed to meet the production schedule.
adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials.
adding the beginning inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the desired ending inventory of raw materials.
13. Which of the following is not correct regarding the manufacturing overhead budget? (Points : 3)
Total budgeted cash disbursements for manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead.
Manufacturing overhead costs should be broken down by cost behavior.
The manufacturuing overhead budget should provide a schedule of all costs of production other than direct materials and direct labor.
A schedule showing budgeted cash disbursements for manufacturing overhead should be prepared for use in developing the cash budget.
14. Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000 units in June. The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this information, Walsh Company's production of Product W for the month of April should be: (Points : 3)
60,000 units
65,000 units
75,000 units
66,000 units
15. Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months? (Points : 3)
$15,792
$15,002.40
$16,584.60
$31,584
16. Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,100 direct labor-hours will be required in May. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: (Points : 3)
$102,870
$11,340
$91,530
$11,780
17. The selling and administrative expense budget of Breckinridge Corporation is based on budgeted unit sales, which are 5,500 units for June. The variable selling and administrative expense is $1.00 per unit. The budget fixed selling and administrative expense is $101,200 per month, which includes depreciation of $6,050 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the June selling and administrative expense budget should be: (Points : 3)
$100,650
$106,700
$5,500
$95,150
18. Avril Company makes collections on sales according to the following schedule:
30% in the month of sale
60% in the month following sale
8% in the second month following sale
The following sales are expected:
Expected Sales
January.........$100,000
February........$120,000
March.............$110,000
Cash collections in March should be budgeted to be: (Points : 3)
$110,000
$110,800
$105,000
$113,000
CLICK HERE TO GET THE ANSWER !!!! 1. The production budget is typically prepared prior to the sales budget. (Points : 3) True False 2. One benefit of budgeting is that it coordinates the activities of the entire organization. (Points : 3) True False 3. One difficulty with self-imposed budgets is that they are not subject to any type of review. (Points : 3) True False 4. The master budget is a network consisting of many separate budgets that are interdependent. (Points : 3) True False 5. Planning and control are essentially the same thing. (Points : 3) True False 6. Sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing known. (Points : 3) True False 7. In the selling and administrative budget, the non-cash charges (such as depreciation) are added to the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses. (Points : 3) True False 8. Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared? (Points : 3) Sales budget, cash budget, direct materials budget, direct labor budget Production budget, sales budget, direct materials budget, direct labor budget Sales budget, cash budget, production budget, direct materials budget Selling and administrative expense budget, budgeted income statement, budgeted balance sheet 9. National Telephone company has been forced by competition to put much more emphasis on planning and controlling its costs. Accordingly, the company's controller has suggested initiating a formal budgeting process. Which of the follow steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system? (Points : 3) Implementing the change quickly. Including in department resonsibility reports only those items that are under the department manager's control. Demonstrating top management support for the budgeting program. Ensuring that favorable deviations of actual results from the budget, as well as unfavorable deviations, are discussed with the responsible managers. 10. Which of the following statements is not correct? (Points : 3) The sales budget is the starting point in preparing the master budget. The sales budget is constructed by multiplying the expected sales in units by the sales price. The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period. The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period. 11. Budgeted production needs are determined by: (Points : 3) adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total. adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total. adding budgeted sales in units to the desired ending inventory in units. deducting the beginning inventory in units from budgeted sales in units. 12. The budgeted amount of raw materials to be purchased is determined by: (Points : 3) adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule. subtracting the beginning inventory of raw materials to the raw materials needed to meet the production schedule. adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials. adding the beginning inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the desired ending inventory of raw materials. 13. Which of the following is not correct regarding the manufacturing overhead budget? (Points : 3) Total budgeted cash disbursements for manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead. Manufacturing overhead costs should be broken down by cost behavior. The manufacturuing overhead budget should provide a schedule of all costs of production other than direct materials and direct labor. A schedule showing budgeted cash disbursements for manufacturing overhead should be prepared for use in developing the cash budget. 14. Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000 units in June. The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this information, Walsh Company's production of Product W for the month of April should be: (Points : 3) 60,000 units 65,000 units 75,000 units 66,000 units 15. Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months? (Points : 3) $15,792 $15,002.40 $16,584.60 $31,584 16. Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,100 direct labor-hours will be required in May. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: (Points : 3) $102,870 $11,340 $91,530 $11,780 17. The selling and administrative expense budget of Breckinridge Corporation is based on budgeted unit sales, which are 5,500 units for June. The variable selling and administrative expense is $1.00 per unit. The budget fixed selling and administrative expense is $101,200 per month, which includes depreciation of $6,050 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the June selling and administrative expense budget should be: (Points : 3) $100,650 $106,700 $5,500 $95,150 18. Avril Company makes collections on sales according to the following schedule: 30% in the month of sale 60% in the month following sale 8% in the second month following sale The following sales are expected: Expected Sales January.........$100,000 February........$120,000 March.............$110,000 Cash collections in March should be budgeted to be: (Points : 3) $110,000 $110,800 $105,000 $113,000 CLICK HERE TO GET THE ANSWER !!!!
1. The production budget is typically prepared prior to the sales budget. (Points : 3)
True
False
2. One benefit of budgeting is that it coordinates the activities of the entire organization. (Points : 3)
True
False
3. One difficulty with self-imposed budgets is that they are not subject to any type of review. (Points : 3)
True
False
4. The master budget is a network consisting of many separate budgets that are interdependent. (Points : 3)
True
False
5. Planning and control are essentially the same thing. (Points : 3)
True
False
6. Sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing known. (Points : 3)
True
False
7. In the selling and administrative budget, the non-cash charges (such as depreciation) are added to the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses. (Points : 3)
True
False
8. Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared? (Points : 3)
Sales budget, cash budget, direct materials budget, direct labor budget
Production budget, sales budget, direct materials budget, direct labor budget
Sales budget, cash budget, production budget, direct materials budget
Selling and administrative expense budget, budgeted income statement, budgeted balance sheet
9. National Telephone company has been forced by competition to put much more emphasis on planning and controlling its costs. Accordingly, the company's controller has suggested initiating a formal budgeting process. Which of the follow steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system? (Points : 3)
Implementing the change quickly.
Including in department resonsibility reports only those items that are under the department manager's control.
Demonstrating top management support for the budgeting program.
Ensuring that favorable deviations of actual results from the budget, as well as unfavorable deviations, are discussed with the responsible managers.
10. Which of the following statements is not correct? (Points : 3)
The sales budget is the starting point in preparing the master budget.
The sales budget is constructed by multiplying the expected sales in units by the sales price.
The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period.
The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.
11. Budgeted production needs are determined by: (Points : 3)
adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.
adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total.
adding budgeted sales in units to the desired ending inventory in units.
deducting the beginning inventory in units from budgeted sales in units.
12. The budgeted amount of raw materials to be purchased is determined by: (Points : 3)
adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule.
subtracting the beginning inventory of raw materials to the raw materials needed to meet the production schedule.
adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials.
adding the beginning inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the desired ending inventory of raw materials.
13. Which of the following is not correct regarding the manufacturing overhead budget? (Points : 3)
Total budgeted cash disbursements for manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead.
Manufacturing overhead costs should be broken down by cost behavior.
The manufacturuing overhead budget should provide a schedule of all costs of production other than direct materials and direct labor.
A schedule showing budgeted cash disbursements for manufacturing overhead should be prepared for use in developing the cash budget.
14. Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000 units in June. The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this information, Walsh Company's production of Product W for the month of April should be: (Points : 3)
60,000 units
65,000 units
75,000 units
66,000 units
15. Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months? (Points : 3)
$15,792
$15,002.40
$16,584.60
$31,584
16. Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,100 direct labor-hours will be required in May. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: (Points : 3)
$102,870
$11,340
$91,530
$11,780
17. The selling and administrative expense budget of Breckinridge Corporation is based on budgeted unit sales, which are 5,500 units for June. The variable selling and administrative expense is $1.00 per unit. The budget fixed selling and administrative expense is $101,200 per month, which includes depreciation of $6,050 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the June selling and administrative expense budget should be: (Points : 3)
$100,650
$106,700
$5,500
$95,150
18. Avril Company makes collections on sales according to the following schedule:
30% in the month of sale
60% in the month following sale
8% in the second month following sale
The following sales are expected:
Expected Sales
January.........$100,000
February........$120,000
March.............$110,000
Cash collections in March should be budgeted to be: (Points : 3)
$110,000
$110,800
$105,000
$113,000
CLICK HERE TO GET THE ANSWER !!!!
True
False
2. One benefit of budgeting is that it coordinates the activities of the entire organization. (Points : 3)
True
False
3. One difficulty with self-imposed budgets is that they are not subject to any type of review. (Points : 3)
True
False
4. The master budget is a network consisting of many separate budgets that are interdependent. (Points : 3)
True
False
5. Planning and control are essentially the same thing. (Points : 3)
True
False
6. Sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing known. (Points : 3)
True
False
7. In the selling and administrative budget, the non-cash charges (such as depreciation) are added to the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses. (Points : 3)
True
False
8. Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared? (Points : 3)
Sales budget, cash budget, direct materials budget, direct labor budget
Production budget, sales budget, direct materials budget, direct labor budget
Sales budget, cash budget, production budget, direct materials budget
Selling and administrative expense budget, budgeted income statement, budgeted balance sheet
9. National Telephone company has been forced by competition to put much more emphasis on planning and controlling its costs. Accordingly, the company's controller has suggested initiating a formal budgeting process. Which of the follow steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system? (Points : 3)
Implementing the change quickly.
Including in department resonsibility reports only those items that are under the department manager's control.
Demonstrating top management support for the budgeting program.
Ensuring that favorable deviations of actual results from the budget, as well as unfavorable deviations, are discussed with the responsible managers.
10. Which of the following statements is not correct? (Points : 3)
The sales budget is the starting point in preparing the master budget.
The sales budget is constructed by multiplying the expected sales in units by the sales price.
The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period.
The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.
11. Budgeted production needs are determined by: (Points : 3)
adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.
adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total.
adding budgeted sales in units to the desired ending inventory in units.
deducting the beginning inventory in units from budgeted sales in units.
12. The budgeted amount of raw materials to be purchased is determined by: (Points : 3)
adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule.
subtracting the beginning inventory of raw materials to the raw materials needed to meet the production schedule.
adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials.
adding the beginning inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the desired ending inventory of raw materials.
13. Which of the following is not correct regarding the manufacturing overhead budget? (Points : 3)
Total budgeted cash disbursements for manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead.
Manufacturing overhead costs should be broken down by cost behavior.
The manufacturuing overhead budget should provide a schedule of all costs of production other than direct materials and direct labor.
A schedule showing budgeted cash disbursements for manufacturing overhead should be prepared for use in developing the cash budget.
14. Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000 units in June. The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this information, Walsh Company's production of Product W for the month of April should be: (Points : 3)
60,000 units
65,000 units
75,000 units
66,000 units
15. Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months? (Points : 3)
$15,792
$15,002.40
$16,584.60
$31,584
16. Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,100 direct labor-hours will be required in May. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: (Points : 3)
$102,870
$11,340
$91,530
$11,780
17. The selling and administrative expense budget of Breckinridge Corporation is based on budgeted unit sales, which are 5,500 units for June. The variable selling and administrative expense is $1.00 per unit. The budget fixed selling and administrative expense is $101,200 per month, which includes depreciation of $6,050 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the June selling and administrative expense budget should be: (Points : 3)
$100,650
$106,700
$5,500
$95,150
18. Avril Company makes collections on sales according to the following schedule:
30% in the month of sale
60% in the month following sale
8% in the second month following sale
The following sales are expected:
Expected Sales
January.........$100,000
February........$120,000
March.............$110,000
Cash collections in March should be budgeted to be: (Points : 3)
$110,000
$110,800
$105,000
$113,000
CLICK HERE TO GET THE ANSWER !!!!
Tuesday, 26 March 2013
For accounting purposes, the use of the cost method or the equity method used to account for long-term investments in common stock is determined by
A. the amount paid for the stock by the investor.
B. the extent of an investor's influence on the operating and financial affairs of the investee.
C. whether the stock has paid dividends in past years.
D. whether the market price of the stock changed during the year.
The balance in the Unrealized Loss-Available for Sale account will
A. appear on the balance sheet as a contra asset.
B. appear on the income statement under Other Expenses and Losses.
C. appear as a deduction in the stock/bIders' equity section.
D. not be shown on the financial statements until the securities are sold.
A company projects an increase in net income of $45,000 each year (or the next five years if it invests $300,000 in new equipment. The equipment has a five-year life and an estimated salvage value of $100,000. What is the annual (accounting) rate of return on this investment?
A. 17%. (rounded)
8. 25%.
C. 20%.
D. 33%. (rounded)
E. Some other rate of return.
Prior period adjustments are reported
A. in the footnotes of the current year's financial statements.
B. on the current year's balance sheet.
C. on the current year's income statement.
D. on the current year's retained earnings statement.
Which one of the following would be classified as an extraordinary item?
A. Expropriation of property by a foreign government.
B. Losses attributed to a labor strike.
C. Write-down of inventories.
D. Gains or losses from sales of equipment.
Which of the following capital budgeting techniques explicitly takes the time value of money into consideration?
A. Annual rate of return
B. Cash payback
C. Net present value
D. Incremental analysis
Information that is generally reported for each class of stock on the balance sheet is
A. the market value.
B. the par value_
C. shares authorized.
D. shares issued.
The call price of callable preferred stock
A. usually sets a floor for the market price of the shares.
B. tends to set a ceiling on the market price of the shares.
C. is usually slightly below the par or stated value of the shares.
D. does not affect the market price of the shares.
On the balance sheet, Organization Costs
A. appears immediately below Retained Earnings in the stockholder's equity section.
B. appears as part of paid-in capital in the stockholder's equity section.
C. appears in the asset section.
D. appears in the liabilities section.
Which one of the following would not be considered an advantage of the corporate form of organization?
A. Limited liability of owners.
B Separate legal existence.
C Continuous life.
On December 31, 1996, the Dorsey Company reports the following amounts in its stockholders' equity section:
Preferred stock $1,000,000
Common stock 2,000,000
Paid-in capital in excess of par value - preferred 100,000
Paid-in capital in excess of stated value - common 1,900,000
Retained earnings 1,780,000
Treasury stock - common 180,000
The preferred stock is 7%, $50 par value, and cumulative. The common stock has a stated value of $10 per share. One million shares of common stock are authorized and 40,000 shares are held in the treasury.
Compute the following:
---------------------------------1. Total stockholders' equity
----------------------shares 2. Number of common shares issued.
_____________________ 3. Total legal capital for common stock.
_____________________ 4 Assuming that all the preferred stock was issued at the same time, what was the
issue price per share of the preferred stock.
_____________________ 5. Annual dividend for preferred stock.
6. Assume preferred dividends are two years in arrears (1995 and 1996). Book value per share would be
computed by dividing_________________ by___________________ (use numbers not words).
During 1996, the Quest Corporation had the following transactions and events:
1. Completed a 2 for 1 stock split in which the $10 par value common stock was changed to $5 par value stock.
2. Declared a cash dividend.
3. Made a prior period adjustment for understatement of net income
4. Declared a 10% stock dividend when the market price is $23.
Indicate the effects) of each of the foregoing items on the subdivisions of stockholders' equity. Present your answers in tabular form with the following columns. Use (I) for increase, (D) for decrease, and (NE) for no effect.
Paid-in Capital
Capital Additional Retained
Item Stock Paid-in Capital Earnings
1
2
3
4
The McGee Company had a net loss of $100,000 in 1996 when the selling price per unit was $20, the variable costs per unit were $10, and the fixed costs were $500,000. Management expects per unit data and total fixed costs to be the same in 199 6 Management has set a goal of earning net income of $150,000 in 1997.
units I. Compute the units sold in 1996.
units 2. Compute the number of units that would have to be sold in 1997 to reach management's desired net income level.
$------------------------------- 3. Assume that McGee actually sells 50,000 units in 1997. What would the unit selling
price have to be in order to reach the target net income?
For each item given, identify the two budgets in which it will appear. (12 points)
S Sales Budget
P Production Budget
DM Direct Materials Budget
DL Direct Labor Budget
MOH Manufacturing Overhead Budget
SA Selling and Administrative Expense Budget
C Cash Budget
BIS Budgeted Income Statement
BBS Budgeted Balance Sheet
I. Ending cash balance.
2. Total selling and administrative expenses
3. 
Total sales (in dollars)
4. 
Interest expense
5. 
Ending raw materials inventory (in dollars)
6. 
Ending finished goods inventory (in dollars)
Selected accounts of the Justice Manufacturing Company at year-end appear below. This is their first year of operations.
Raw Materials Inventory Work in Process Inventory
50,000 35,000 35.000 130,000
85,000
80,000
Finished Goods Inventory Cost of Goods Sold
130,000 100,000 100,000
Factory Labor Manufacturing Overhead
110,000 110,000 75,000 80,000
25,000
Answer the following questions based on the most probable explanation of the transactions above.
Example: $50,000 Ex. Cost of raw materials purchased.
$__________________ 1. Actual manufacturing overhead costs incurred.
$__________________ 2. Direct materials requisitioned for production.
$__________________ 3. Manufacturing overhead applied to production.
$__________________ 4. Direct Labor applied to production.
$____________________ 5. Indirect labor.
$__________________ 6. Cost of goods completed during the year.
The corporate charter of Hunter Corporation allows the issuance of a maximum of 2,000,000 shares of $1 par value common stock. During its first three years of operation, Hunter issued 1,200,000 shares at $15 per share. It later acquired 25,000 of these shares as treasury stock for $25 per share. Based on the above information, answer the following questions: (5 points)
shares 1. How many shares are outstanding?
$ ------------------------------ 2. What is the balance of the Common Stock account?
___________________ 3. What is the balance of the Treasury Stock account?
Use the categories (A-I) to correctly classify the following items (1-9) on the financial statements. Categories may be used more than once, or not at all.
A. Current Assets F. Long-term liabilities
B. Investments G. Stockholders Equity
C. Property, Plant, and Equipment H. Income Statement
D. Intangibles
E. Current Liabilities I.Amount will appear in either the Income Statement or the balance sheet
I. Bond Interest Receivable
2. Bond Interest Payable
3. 
Unrealized Loss on Investments - Income
4. 
Loss on Sale of Debt Investment
5. 
Bond sinking fund
6. 
An investment in stock of a 20-50% owned company, at equity
7. 
Federal Income Taxes Payable
8. 
Temporary investments
9. 
Discount on Bonds Payable
Put a "yes" in the blank if the category of investments require a year-end adjusting journal entry to revalue the investment to market value. Put a -no" if no year-end adjustment is required.
------------------------------1 Debt held to maturity.
------------------------------2 Available-for-sale portfolio.
------------------------------3 Trading portfolio.
-----------------------------4 Stock ownership representing 20-50% of shares outstanding.
If bonds can be converted into common stock,
a. they will sell at a lower price than comparable bonds without a conversion feature.
b. they will carry a higher interest rate than comparable bonds without the conversion feature.
c. they will be converted only if the issuer calls them in for conversion.
d. the bondholder may benefit if the market price of the common stock increases substantially.
Stockholders of a company may be reluctant to finance expansion through issuing more equity because
Under which of the following cases may a percentage change be computed?
a. The trend of the balances is decreasing but all balances are positive.
b. There is no balance in the base year.
c. There is a positive balance in the base year and a negative balance in the subsequent year.
d. There is a negative balance in the base year and a positive balance in the subsequent year.
2.
To determine the net cash provided (used) by operating activities, it is necessary to analyze
a. the current year's income statement.
b. a comparative balance sheet.
c. additional information.
d. all of these.
3. The acquisition of land by issuing common stock is
a. a noncash transaction which is not reported in the body of a statement of cash flows.
b. a cash transaction and would be reported in the body of a statement of cash flows.
c. a noncash transaction and would be reported in the body of a statement of cash flows.
d. only reported if the statement of cash flows is prepared using the direct method.
4. In preparing a statement of cash flows, a conversion of bonds into common stock will be reported in
a. the financing section.
b. the "extraordinary" section.
c. a separate schedule or note to the financial statements.
d. the stockholders' equity section.
5. Under which of the following cases may a percentage change be computed?
a. The trend of the balances is decreasing but all balances are positive.
b. There is no balance in the base year.
c. There is a positive balance in the base year and a negative balance in the subsequent year.
d. There is a negative balance in the base year and a positive balance in the subsequent year.
6. Evers, Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $160,000 loss in the year of disposal. The loss on disposal of the segment was $80,000. If the tax rate is 30%, and income before income taxes was $1,000,000,
a. the income tax expense on the income before discontinued operations is $228,000.
b. the income from continuing operations is $700,000.
c. net income is $760,000.
d. the losses from discontinued operations are reported net of income taxes at $120,000.
7. A weakness of the current ratio is
a. the difficulty of the calculation.
b. that it doesn't take into account the composition of the current assets.
c. that it is rarely used by sophisticated analysts.
d. that it can be expressed as a percentage, as a rate, or as a proportion.
8. For the work of factory employees to be considered as direct labor, the work must be conveniently and
a. materially associated with raw materials conversion.
b. periodically associated with raw materials conversion.
c. physically associated with raw materials conversion.
d. promptly associated with raw materials conversion.
9. Tyler Manufacturing Company reported the following year-end information: beginning work in process inventory, $270,000; cost of goods manufactured, $774,000; beginning finished goods inventory, $378,000; ending work in process inventory, $330,000; and ending finished goods inventory, $396,000. Tyler Manufacturing Company's cost of goods sold for the year is
a. $756,000.
b. $792,000.
c. $714,000.
d. $378,000.
10. The labor costs that have been identified as indirect labor should be charged to
a. manufacturing overhead.
b. direct labor.
c. the individual jobs worked on.
d. salary expense.
11. An important assumption in using ABC is that
a. production must take place on a continuous basis.
b. all costs in an activity should respond proportionately to changes in the activity level of the cost driver.
c. production must take place on a just-in-time basis.
d. all costs are pushed through each process when customer orders are received.
12. Equivalent units are calculated by
a. multiplying the percentage of work done by the equivalent units of output.
b. dividing physical units by the percentage of work done.
c. multiplying the percentage of work done by the physical units.
d. dividing equivalent units by the percentage of work done.
13. Which is the true statement?
a. In a CVP income statement, costs and expenses are classified only by function.
b. The CVP income statement is prepared for both internal and external use.
c. The CVP income statement shows contribution margin instead of gross profit.
d. In a traditional income statement, costs and expenses are classified as either variable or fixed.
14. Which of the following statements about budget acceptance in an organization is true?
a. The most widely accepted budget by the organization is the one prepared by top management.
b. The most widely accepted budget by the organization is the one prepared by the department heads.
c. Budgets are hardly ever accepted by anyone except top management.
d. Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process.
15. Which is true of budgets?
a. They are voted on and approved by stockholders.
b. They are used in the planning, but not in the control, process.
c. There is a standard form and structure for budgets.
d. They are used in performance evaluation.
16. If an investment center has generated a controllable margin of $90,000 and sales of $450,000, what is the return on investment for the investment center if average operating assets were $750,000 during the period?
a. 12%
b. 20%
c. 48%
d. 60%
17. The best measure of the performance of the manager of a profit center is the
a. rate of return on investment.
b. success in meeting budgeted goals for controllable costs.
c. amount of controllable margin generated by the profit center.
d. amount of contribution margin generated by the profit center.
18. A measure frequently used to evaluate the performance of the manager of an investment center is
a. the amount of profit generated.
b. the rate of return on funds invested in the center.
c. the percentage increase in profit over the previous year.
d. departmental gross profit.
19. The linens department of a large department store is
a. not a responsibility center.
b. a profit center.
c. a cost center.
d. an investment center.
20. A profit center is
a. a responsibility center that always reports a profit.
b. a responsibility center that incurs costs and generates revenues.
c. evaluated by the rate of return earned on the investment allocated to the center.
d. referred to as a loss center when operations do not meet the company's objectives.
21. The costing of inventories at standard cost for external financial statement reporting purposes is
a. not permitted.
b. preferable to reporting at actual costs.
c. in accordance with generally accepted accounting principles if significant differences exist between actual and standard costs.
d. in accordance with generally accepted accounting principles if significant differences do not exist between actual and standard costs.
22. A company uses 16,000 pounds of materials for which it paid $3.60 a pound. What is the materials price variance?
a. $.50.
b. $1.00.
c. $2.50.
d. Cannot be determined from the data provided.
CLICK HERE TO GET THE ANSWER !!!! For accounting purposes, the use of the cost method or the equity method used to account for long-term investments in common stock is determined by A. the amount paid for the stock by the investor. B. the extent of an investor's influence on the operating and financial affairs of the investee. C. whether the stock has paid dividends in past years. D. whether the market price of the stock changed during the year. The balance in the Unrealized Loss-Available for Sale account will A. appear on the balance sheet as a contra asset. B. appear on the income statement under Other Expenses and Losses. C. appear as a deduction in the stock/bIders' equity section. D. not be shown on the financial statements until the securities are sold. A company projects an increase in net income of $45,000 each year (or the next five years if it invests $300,000 in new equipment. The equipment has a five-year life and an estimated salvage value of $100,000. What is the annual (accounting) rate of return on this investment? A. 17%. (rounded) 8. 25%. C. 20%. D. 33%. (rounded) E. Some other rate of return. Prior period adjustments are reported A. in the footnotes of the current year's financial statements. B. on the current year's balance sheet. C. on the current year's income statement. D. on the current year's retained earnings statement. Which one of the following would be classified as an extraordinary item? A. Expropriation of property by a foreign government. B. Losses attributed to a labor strike. C. Write-down of inventories. D. Gains or losses from sales of equipment. Which of the following capital budgeting techniques explicitly takes the time value of money into consideration? A. Annual rate of return B. Cash payback C. Net present value D. Incremental analysis Information that is generally reported for each class of stock on the balance sheet is A. the market value. B. the par value_ C. shares authorized. D. shares issued. The call price of callable preferred stock A. usually sets a floor for the market price of the shares. B. tends to set a ceiling on the market price of the shares. C. is usually slightly below the par or stated value of the shares. D. does not affect the market price of the shares. On the balance sheet, Organization Costs A. appears immediately below Retained Earnings in the stockholder's equity section. B. appears as part of paid-in capital in the stockholder's equity section. C. appears in the asset section. D. appears in the liabilities section. Which one of the following would not be considered an advantage of the corporate form of organization? A. Limited liability of owners. B Separate legal existence. C Continuous life. D Government regulation. Text Box: 6On December 31, 1996, the Dorsey Company reports the following amounts in its stockholders' equity section: Preferred stock $1,000,000 Common stock 2,000,000 Paid-in capital in excess of par value - preferred 100,000 Paid-in capital in excess of stated value - common 1,900,000 Retained earnings 1,780,000 Treasury stock - common 180,000 The preferred stock is 7%, $50 par value, and cumulative. The common stock has a stated value of $10 per share. One million shares of common stock are authorized and 40,000 shares are held in the treasury. Compute the following: ---------------------------------1. Total stockholders' equity ----------------------shares 2. Number of common shares issued. _____________________ 3. Total legal capital for common stock. _____________________ 4 Assuming that all the preferred stock was issued at the same time, what was the issue price per share of the preferred stock. _____________________ 5. Annual dividend for preferred stock. 6. Assume preferred dividends are two years in arrears (1995 and 1996). Book value per share would be computed by dividing_________________ by___________________ (use numbers not words). During 1996, the Quest Corporation had the following transactions and events: 1. Completed a 2 for 1 stock split in which the $10 par value common stock was changed to $5 par value stock. 2. Declared a cash dividend. 3. Made a prior period adjustment for understatement of net income 4. Declared a 10% stock dividend when the market price is $23. Indicate the effects) of each of the foregoing items on the subdivisions of stockholders' equity. Present your answers in tabular form with the following columns. Use (I) for increase, (D) for decrease, and (NE) for no effect. Paid-in Capital Capital Additional Retained Item Stock Paid-in Capital Earnings 1 2 3 4 Text Box: 7The McGee Company had a net loss of $100,000 in 1996 when the selling price per unit was $20, the variable costs per unit were $10, and the fixed costs were $500,000. Management expects per unit data and total fixed costs to be the same in 199 6 Management has set a goal of earning net income of $150,000 in 1997. units I. Compute the units sold in 1996. units 2. Compute the number of units that would have to be sold in 1997 to reach management's desired net income level. $------------------------------- 3. Assume that McGee actually sells 50,000 units in 1997. What would the unit selling price have to be in order to reach the target net income? For each item given, identify the two budgets in which it will appear. (12 points) S Sales Budget P Production Budget DM Direct Materials Budget DL Direct Labor Budget MOH Manufacturing Overhead Budget SA Selling and Administrative Expense Budget C Cash Budget BIS Budgeted Income Statement BBS Budgeted Balance Sheet I. Ending cash balance. 2. Total selling and administrative expenses 3. Total sales (in dollars) 4. Interest expense 5. Ending raw materials inventory (in dollars) 6. Ending finished goods inventory (in dollars) Text Box: 8Selected accounts of the Justice Manufacturing Company at year-end appear below. This is their first year of operations. Raw Materials Inventory Work in Process Inventory 50,000 35,000 35.000 130,000 85,000 80,000 Finished Goods Inventory Cost of Goods Sold 130,000 100,000 100,000 Factory Labor Manufacturing Overhead 110,000 110,000 75,000 80,000 25,000 Answer the following questions based on the most probable explanation of the transactions above. Example: $50,000 Ex. Cost of raw materials purchased. $__________________ 1. Actual manufacturing overhead costs incurred. $__________________ 2. Direct materials requisitioned for production. $__________________ 3. Manufacturing overhead applied to production. $__________________ 4. Direct Labor applied to production. $____________________ 5. Indirect labor. $__________________ 6. Cost of goods completed during the year. The corporate charter of Hunter Corporation allows the issuance of a maximum of 2,000,000 shares of $1 par value common stock. During its first three years of operation, Hunter issued 1,200,000 shares at $15 per share. It later acquired 25,000 of these shares as treasury stock for $25 per share. Based on the above information, answer the following questions: (5 points) shares 1. How many shares are outstanding? $ ------------------------------ 2. What is the balance of the Common Stock account? ___________________ 3. What is the balance of the Treasury Stock account? Use the categories (A-I) to correctly classify the following items (1-9) on the financial statements. Categories may be used more than once, or not at all. A. Current Assets F. Long-term liabilities B. Investments G. Stockholders Equity C. Property, Plant, and Equipment H. Income Statement D. Intangibles E. Current Liabilities I.Amount will appear in either the Income Statement or the balance sheet I. Bond Interest Receivable 2. Bond Interest Payable 3. Unrealized Loss on Investments - Income 4. Loss on Sale of Debt Investment 5. Bond sinking fund 6. An investment in stock of a 20-50% owned company, at equity 7. Federal Income Taxes Payable 8. Temporary investments 9. Discount on Bonds Payable Put a "yes" in the blank if the category of investments require a year-end adjusting journal entry to revalue the investment to market value. Put a -no" if no year-end adjustment is required. ------------------------------1 Debt held to maturity. ------------------------------2 Available-for-sale portfolio. ------------------------------3 Trading portfolio. -----------------------------4 Stock ownership representing 20-50% of shares outstanding. If bonds can be converted into common stock, a. they will sell at a lower price than comparable bonds without a conversion feature. b. they will carry a higher interest rate than comparable bonds without the conversion feature. c. they will be converted only if the issuer calls them in for conversion. d. the bondholder may benefit if the market price of the common stock increases substantially. Stockholders of a company may be reluctant to finance expansion through issuing more equity because Under which of the following cases may a percentage change be computed? a. The trend of the balances is decreasing but all balances are positive. b. There is no balance in the base year. c. There is a positive balance in the base year and a negative balance in the subsequent year. d. There is a negative balance in the base year and a positive balance in the subsequent year. 2. To determine the net cash provided (used) by operating activities, it is necessary to analyze a. the current year's income statement. b. a comparative balance sheet. c. additional information. d. all of these. 3. The acquisition of land by issuing common stock is a. a noncash transaction which is not reported in the body of a statement of cash flows. b. a cash transaction and would be reported in the body of a statement of cash flows. c. a noncash transaction and would be reported in the body of a statement of cash flows. d. only reported if the statement of cash flows is prepared using the direct method. 4. In preparing a statement of cash flows, a conversion of bonds into common stock will be reported in a. the financing section. b. the "extraordinary" section. c. a separate schedule or note to the financial statements. d. the stockholders' equity section. 5. Under which of the following cases may a percentage change be computed? a. The trend of the balances is decreasing but all balances are positive. b. There is no balance in the base year. c. There is a positive balance in the base year and a negative balance in the subsequent year. d. There is a negative balance in the base year and a positive balance in the subsequent year. 6. Evers, Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $160,000 loss in the year of disposal. The loss on disposal of the segment was $80,000. If the tax rate is 30%, and income before income taxes was $1,000,000, a. the income tax expense on the income before discontinued operations is $228,000. b. the income from continuing operations is $700,000. c. net income is $760,000. d. the losses from discontinued operations are reported net of income taxes at $120,000. 7. A weakness of the current ratio is a. the difficulty of the calculation. b. that it doesn't take into account the composition of the current assets. c. that it is rarely used by sophisticated analysts. d. that it can be expressed as a percentage, as a rate, or as a proportion. 8. For the work of factory employees to be considered as direct labor, the work must be conveniently and a. materially associated with raw materials conversion. b. periodically associated with raw materials conversion. c. physically associated with raw materials conversion. d. promptly associated with raw materials conversion. 9. Tyler Manufacturing Company reported the following year-end information: beginning work in process inventory, $270,000; cost of goods manufactured, $774,000; beginning finished goods inventory, $378,000; ending work in process inventory, $330,000; and ending finished goods inventory, $396,000. Tyler Manufacturing Company's cost of goods sold for the year is a. $756,000. b. $792,000. c. $714,000. d. $378,000. 10. The labor costs that have been identified as indirect labor should be charged to a. manufacturing overhead. b. direct labor. c. the individual jobs worked on. d. salary expense. 11. An important assumption in using ABC is that a. production must take place on a continuous basis. b. all costs in an activity should respond proportionately to changes in the activity level of the cost driver. c. production must take place on a just-in-time basis. d. all costs are pushed through each process when customer orders are received. 12. Equivalent units are calculated by a. multiplying the percentage of work done by the equivalent units of output. b. dividing physical units by the percentage of work done. c. multiplying the percentage of work done by the physical units. d. dividing equivalent units by the percentage of work done. 13. Which is the true statement? a. In a CVP income statement, costs and expenses are classified only by function. b. The CVP income statement is prepared for both internal and external use. c. The CVP income statement shows contribution margin instead of gross profit. d. In a traditional income statement, costs and expenses are classified as either variable or fixed. 14. Which of the following statements about budget acceptance in an organization is true? a. The most widely accepted budget by the organization is the one prepared by top management. b. The most widely accepted budget by the organization is the one prepared by the department heads. c. Budgets are hardly ever accepted by anyone except top management. d. Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process. 15. Which is true of budgets? a. They are voted on and approved by stockholders. b. They are used in the planning, but not in the control, process. c. There is a standard form and structure for budgets. d. They are used in performance evaluation. 16. If an investment center has generated a controllable margin of $90,000 and sales of $450,000, what is the return on investment for the investment center if average operating assets were $750,000 during the period? a. 12% b. 20% c. 48% d. 60% 17. The best measure of the performance of the manager of a profit center is the a. rate of return on investment. b. success in meeting budgeted goals for controllable costs. c. amount of controllable margin generated by the profit center. d. amount of contribution margin generated by the profit center. 18. A measure frequently used to evaluate the performance of the manager of an investment center is a. the amount of profit generated. b. the rate of return on funds invested in the center. c. the percentage increase in profit over the previous year. d. departmental gross profit. 19. The linens department of a large department store is a. not a responsibility center. b. a profit center. c. a cost center. d. an investment center. 20. A profit center is a. a responsibility center that always reports a profit. b. a responsibility center that incurs costs and generates revenues. c. evaluated by the rate of return earned on the investment allocated to the center. d. referred to as a loss center when operations do not meet the company's objectives. 21. The costing of inventories at standard cost for external financial statement reporting purposes is a. not permitted. b. preferable to reporting at actual costs. c. in accordance with generally accepted accounting principles if significant differences exist between actual and standard costs. d. in accordance with generally accepted accounting principles if significant differences do not exist between actual and standard costs. 22. A company uses 16,000 pounds of materials for which it paid $3.60 a pound. What is the materials price variance? a. $.50. b. $1.00. c. $2.50. d. Cannot be determined from the data provided. CLICK HERE TO GET THE ANSWER !!!!
For accounting purposes, the use of the cost method or the equity method used to account for long-term investments in common stock is determined by
A. the amount paid for the stock by the investor.
B. the extent of an investor's influence on the operating and financial affairs of the investee.
C. whether the stock has paid dividends in past years.
D. whether the market price of the stock changed during the year.
The balance in the Unrealized Loss-Available for Sale account will
A. appear on the balance sheet as a contra asset.
B. appear on the income statement under Other Expenses and Losses.
C. appear as a deduction in the stock/bIders' equity section.
D. not be shown on the financial statements until the securities are sold.
A company projects an increase in net income of $45,000 each year (or the next five years if it invests $300,000 in new equipment. The equipment has a five-year life and an estimated salvage value of $100,000. What is the annual (accounting) rate of return on this investment?
A. 17%. (rounded)
8. 25%.
C. 20%.
D. 33%. (rounded)
E. Some other rate of return.
Prior period adjustments are reported
A. in the footnotes of the current year's financial statements.
B. on the current year's balance sheet.
C. on the current year's income statement.
D. on the current year's retained earnings statement.
Which one of the following would be classified as an extraordinary item?
A. Expropriation of property by a foreign government.
B. Losses attributed to a labor strike.
C. Write-down of inventories.
D. Gains or losses from sales of equipment.
Which of the following capital budgeting techniques explicitly takes the time value of money into consideration?
A. Annual rate of return
B. Cash payback
C. Net present value
D. Incremental analysis
Information that is generally reported for each class of stock on the balance sheet is
A. the market value.
B. the par value_
C. shares authorized.
D. shares issued.
The call price of callable preferred stock
A. usually sets a floor for the market price of the shares.
B. tends to set a ceiling on the market price of the shares.
C. is usually slightly below the par or stated value of the shares.
D. does not affect the market price of the shares.
On the balance sheet, Organization Costs
A. appears immediately below Retained Earnings in the stockholder's equity section.
B. appears as part of paid-in capital in the stockholder's equity section.
C. appears in the asset section.
D. appears in the liabilities section.
Which one of the following would not be considered an advantage of the corporate form of organization?
A. Limited liability of owners.
B Separate legal existence.
C Continuous life.
On December 31, 1996, the Dorsey Company reports the following amounts in its stockholders' equity section:
Preferred stock $1,000,000
Common stock 2,000,000
Paid-in capital in excess of par value - preferred 100,000
Paid-in capital in excess of stated value - common 1,900,000
Retained earnings 1,780,000
Treasury stock - common 180,000
The preferred stock is 7%, $50 par value, and cumulative. The common stock has a stated value of $10 per share. One million shares of common stock are authorized and 40,000 shares are held in the treasury.
Compute the following:
---------------------------------1. Total stockholders' equity
----------------------shares 2. Number of common shares issued.
_____________________ 3. Total legal capital for common stock.
_____________________ 4 Assuming that all the preferred stock was issued at the same time, what was the
issue price per share of the preferred stock.
_____________________ 5. Annual dividend for preferred stock.
6. Assume preferred dividends are two years in arrears (1995 and 1996). Book value per share would be
computed by dividing_________________ by___________________ (use numbers not words).
During 1996, the Quest Corporation had the following transactions and events:
1. Completed a 2 for 1 stock split in which the $10 par value common stock was changed to $5 par value stock.
2. Declared a cash dividend.
3. Made a prior period adjustment for understatement of net income
4. Declared a 10% stock dividend when the market price is $23.
Indicate the effects) of each of the foregoing items on the subdivisions of stockholders' equity. Present your answers in tabular form with the following columns. Use (I) for increase, (D) for decrease, and (NE) for no effect.
Paid-in Capital
Capital Additional Retained
Item Stock Paid-in Capital Earnings
1
2
3
4
The McGee Company had a net loss of $100,000 in 1996 when the selling price per unit was $20, the variable costs per unit were $10, and the fixed costs were $500,000. Management expects per unit data and total fixed costs to be the same in 199 6 Management has set a goal of earning net income of $150,000 in 1997.
units I. Compute the units sold in 1996.
units 2. Compute the number of units that would have to be sold in 1997 to reach management's desired net income level.
$------------------------------- 3. Assume that McGee actually sells 50,000 units in 1997. What would the unit selling
price have to be in order to reach the target net income?
For each item given, identify the two budgets in which it will appear. (12 points)
S Sales Budget
P Production Budget
DM Direct Materials Budget
DL Direct Labor Budget
MOH Manufacturing Overhead Budget
SA Selling and Administrative Expense Budget
C Cash Budget
BIS Budgeted Income Statement
BBS Budgeted Balance Sheet
I. Ending cash balance.
2. Total selling and administrative expenses
3. Total sales (in dollars)
4. Interest expense
5. Ending raw materials inventory (in dollars)
6. Ending finished goods inventory (in dollars)
Selected accounts of the Justice Manufacturing Company at year-end appear below. This is their first year of operations.
Raw Materials Inventory Work in Process Inventory
50,000 35,000 35.000 130,000
85,000
80,000
Finished Goods Inventory Cost of Goods Sold
130,000 100,000 100,000
Factory Labor Manufacturing Overhead
110,000 110,000 75,000 80,000
25,000
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|
|
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|
Answer the following questions based on the most probable explanation of the transactions above.
Example: $50,000 Ex. Cost of raw materials purchased.
$__________________ 1. Actual manufacturing overhead costs incurred.
$__________________ 2. Direct materials requisitioned for production.
$__________________ 3. Manufacturing overhead applied to production.
$__________________ 4. Direct Labor applied to production.
$____________________ 5. Indirect labor.
$__________________ 6. Cost of goods completed during the year.
The corporate charter of Hunter Corporation allows the issuance of a maximum of 2,000,000 shares of $1 par value common stock. During its first three years of operation, Hunter issued 1,200,000 shares at $15 per share. It later acquired 25,000 of these shares as treasury stock for $25 per share. Based on the above information, answer the following questions: (5 points)
shares 1. How many shares are outstanding?
$ ------------------------------ 2. What is the balance of the Common Stock account?
___________________ 3. What is the balance of the Treasury Stock account?
Unrealized Loss on Investments - IncomeLoss on Sale of Debt InvestmentBond sinking fundAn investment in stock of a 20-50% owned company, at equityFederal Income Taxes PayableTemporary investmentsDiscount on Bonds Payable
For accounting purposes, the use of the cost method or the equity method used to account for long-term investments in common stock is determined by
A. the amount paid for the stock by the investor.
B. the extent of an investor's influence on the operating and financial affairs of the investee.
C. whether the stock has paid dividends in past years.
D. whether the market price of the stock changed during the year.
The balance in the Unrealized Loss-Available for Sale account will
A. appear on the balance sheet as a contra asset.
B. appear on the income statement under Other Expenses and Losses.
C. appear as a deduction in the stock/bIders' equity section.
D. not be shown on the financial statements until the securities are sold.
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