All accounting questions

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Question
1

Question
1

The treasurer of Unisyms Company has accumulated
the following budget information for the first two months of the coming year:

March

April

Sales.

$450,000

$520,000

Manufacturing costs

290,000

350,000

Selling and administrative

expenses

41,400

46,400

Capital additions

250,000

The company expects to sell about 35% of its merchandise for cash. Of sales on
account, 80% are expected to be collected in full in the month of the sale and
the remainder in the month following the sale. One-fourth of the manufacturing
costs are expected to be paid in the month in which they are incurred and the
other three-fourths in the following month. Depreciation, insurance, and
property taxes represent $6,400 of the probable monthly selling and
administrative expenses. Insurance is paid in February and a $40,000
installment on income taxes is expected to be paid in April. Of the remainder
of the selling and administrative expenses, one-half are expected to be paid in
the month in which they are incurred and the balance in the following month.
Capital additions of $250,000 are expected to be paid in March.

Current assets as of March 1 are composed of cash of $45,000 and accounts
receivable of $51,000. Current liabilities as of March 1 are composed of
accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for
operating expenses). Management desires to maintain a minimum cash balance of
$20,000.

Prepare a monthly cash budget for
March and April.

Question
2

Trapp Co. was organized
on August 1 of the current year. Projected sales for the next three months are
as follows:

August

$100,000

September

185,000

October

225,000

The company expects to sell 40% of its merchandise for cash. Of the sales on
account, one third are expected to be collected in the month of the sale and
the remainder in the following month.

Prepare a schedule indicating cash
collections of accounts receivable for August, September, and October.

Question 3

Diamond Company produces a chair that requires 5 yds. of material
per unit. The standard price of one yard of material is $7.50. During the
month, 8,500 chairs were manufactured, using 43,700 yards at a cost of $7.60.

Determine the (a) price
variance, (b) quantity variance, and (c) cost variance.

Question
4

The Finishing Department of Paragon
Manufacturing Co. prepared the following factory overhead cost budget for
October of the current year, during which it expected to operate at a 100%
capacity of 10,000 machine hours:

Variable cost:

Indirect factory wages

$18,000

Power and light

12,000

Indirect materials

4,000

Total variable cost

$34,000

Fixed cost:

Supervisory salaries

$12,000

Depreciation of plant and

equipment

8,800

Insurance and property taxes

3,200

Total fixed cost

24,000

Total factory overhead

$58,000

During October, the plant was operated for 9,000 machine hours and the factory
overhead costs incurred were as follows: indirect factory wages, $16,400; power
and light, $10,000; indirect materials, $3,000; supervisory salaries, $12,000;
depreciation of plant and equipment, $8,800; insurance and property taxes,
$3,200.

Prepare a factory overhead cost
variance report for October. (The budgeted amounts for actual amount produced
should be based on 9,000 machine hours.)

Question 5 (EX 24-5)

In
divisional income statements prepared for franklin Electrical Company, the
Payroll Department costs are charged back to user divisions on the basis of the
number of payroll checks, and the Purchasing Department costs are charged back
on the basis of the number of purchase requisitions. The Payroll Department had expenses of 44010,
and the Purchasing Department had expenses of 18720 for the year. The following annual data for Residential,
Commercial, and Government Contract Divisions were obtained from corporate
records:

Residential
Commercial Government Contract

Sales 420000 500000 1800000

Number
of employees:

Weekly payroll (52 weeks per
year) 144 72 108

Monthly payroll 25 20 18

Number of purchase requisition per
year 1800 1530 1350

a.
Determine the total amount
of payroll checks and purchase requisitions processed per year by each
division.

b.
Using the activity base
information in (a), determine the annual amount of payroll and purchasing costs
charged back to the Residential, Commercial, and Government Contract Divisions
from payroll and purchasing services.

c.
Why does the Residential
Division have a larger service department charge than the other two divisions,
even though its sales are lower?

(Question 6) EX24-9

Outdoor
Athletic Equipment Co. operates two divisions—the Winter Sports Division and
the Summer Sports Division. The following income and expense accounts were
provided from the trail balance as of June 30, 2008, the end of the current
fiscal year, after all adjustments, including those for inventories, were
recorded and posted:

Sales—Winter
Sports (WS)Division………………………………………………….950000

Sales—Summer
Sorts (SS) Division……………………………………………………1437500

Cost
of Goods Sold—Winter Sports (WS) Division—————————512500

Cost
of Goods Sold—Summer Sports (SS)Division………………………………..687500

Sales
Expense—Winter Sports (WS)Division……………………………………….150000

Sales
Expense—Summer Sports (SS) Division……………………………………..205000

Administrative
Expense—Winter Sports (WS) Division………………………97000

Administrative
Expense—Summer Sport (SS) Division…………………………128000

Advertising
Expense………………………………………………………………………….64500

Transportation
Expense…………………………………………………………………..100700

Accounts
Receivable Collection Expense…………………………………………58100

Warehouse
Expense………………………………………………………………………..120000

The
bases to be used in allocating expenses, together with other essential
information, are as follows:

a.
Advertising expense-incurred at headquarters, charged back to
divisions on the basis of usage: Winter Sports Division, 28000; Summer Sports
Division, 36500.

b. Transportation
expense-charged back to divisions at a transfer price of 7.60 per bill of
lading: Winter Sports Division, 6000 bills of lading; Summer Sports Division,
7250 bills of lading.

c.
Accounts receivable collection expense—incurred at
headquarters, charged back to divisions at a transfer price of 5.60 per
invoice: Winter Sports Diviosn, 4500 sales invoices; Summer Sports Division,
5875 sales invoices.

d. Warehouse expense—charged
back to divisions on the basis of floor space used in storing division
products: Winter Sports Division, 25000 square feet; Summer Sports Division,
12500 square feet.

Prepare a
divisional income statement with two column headings: Winter Sports Division
and Summer Sports Division. Provide supporting schedules for determining service
department charges.

Question 7 (EX24-20

Materials
used by the Industrial Division of Crow Manufacturing are currently purchased
from outside suppliers at a cost of 120 per unit. However, the same materials are available
from the Materials Division. The
Materials Division has unused capacity and can produce the materials needed by
the Industrial Division at a variable cost of 95 per unit.

a.
If a transfer price of 105
per unit is established and 40000 units of materials are transferred, with no
reduction in the Materials Division’s current sales, how much would Crow
Manufacturing’s total income from operations increase?

b.
How much would the
Industrial Division’s income from operations increase?

c.
How much would the
Materials Division’s income from operations increase?

Question 8 (PR24-5A)

The
vice president of operations of I4 computer Inc. is evaluating the performance
of two divisions organized as investment centers. Invested assets and condensed
income statement data for the past year for each division are as follows:

Personal
Computing Division Business Computing
Division

Sales 800000 1200000

Cost
of goods sold 460000 780000

Operating
Expenses 180000 156000

Invested
assets 500000 2000000

Instructions:

1.
Prepare condensed
divisional income statements for the year ended Dec. 31 assuming that there
were no service department charges.

2.
Using the DuPont formula
for rate of return on investment, determine the profit margin, investment
turnover, and rate of return on investment for each division.

3.
If management’s minimum acceptable
rate or return is 15%, determine the residual the residual income for each
division.

4.
Discuss the evaluation of
the two divisions, using the performance measures determined in parts (1), (2),
and (3).

information for the first two months of the coming year:

March

April

Sales.

$450,000

$520,000

Manufacturing costs

290,000

350,000

Selling and administrative

expenses

41,400

46,400

Capital additions

250,000

The company expects to sell about 35% of its merchandise for cash. Of sales on
account, 80% are expected to be collected in full in the month of the sale and
the remainder in the month following the sale. One-fourth of the manufacturing
costs are expected to be paid in the month in which they are incurred and the
other three-fourths in the following month. Depreciation, insurance, and
property taxes represent $6,400 of the probable monthly selling and
administrative expenses. Insurance is paid in February and a $40,000
installment on income taxes is expected to be paid in April. Of the remainder
of the selling and administrative expenses, one-half are expected to be paid in
the month in which they are incurred and the balance in the following month.
Capital additions of $250,000 are expected to be paid in March.

Current assets as of March 1 are composed of cash of $45,000 and accounts
receivable of $51,000. Current liabilities as of March 1 are composed of
accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for
operating expenses). Management desires to maintain a minimum cash balance of
$20,000.

Prepare a monthly cash budget for
March and April.

Question
2

Trapp Co. was organized
on August 1 of the current year. Projected sales for the next three months are
as follows:

August

$100,000

September

185,000

October

225,000

The company expects to sell 40% of its merchandise for cash. Of the sales on
account, one third are expected to be collected in the month of the sale and
the remainder in the following month.

Prepare a schedule indicating cash
collections of accounts receivable for August, September, and October.

Question 3

Diamond Company produces a chair that requires 5 yds. of material
per unit. The standard price of one yard of material is $7.50. During the
month, 8,500 chairs were manufactured, using 43,700 yards at a cost of $7.60.

Determine the (a) price
variance, (b) quantity variance, and (c) cost variance.

Question
4

The Finishing Department of Paragon
Manufacturing Co. prepared the following factory overhead cost budget for
October of the current year, during which it expected to operate at a 100%
capacity of 10,000 machine hours:

Variable cost:

Indirect factory wages

$18,000

Power and light

12,000

Indirect materials

4,000

Total variable cost

$34,000

Fixed cost:

Supervisory salaries

$12,000

Depreciation of plant and

equipment

8,800

Insurance and property taxes

3,200

Total fixed cost

24,000

Total factory overhead

$58,000

During October, the plant was operated for 9,000 machine hours and the factory
overhead costs incurred were as follows: indirect factory wages, $16,400; power
and light, $10,000; indirect materials, $3,000; supervisory salaries, $12,000;
depreciation of plant and equipment, $8,800; insurance and property taxes,
$3,200.

Prepare a factory overhead cost
variance report for October. (The budgeted amounts for actual amount produced
should be based on 9,000 machine hours.)

Question 5 (EX 24-5)

In
divisional income statements prepared for franklin Electrical Company, the
Payroll Department costs are charged back to user divisions on the basis of the
number of payroll checks, and the Purchasing Department costs are charged back
on the basis of the number of purchase requisitions. The Payroll Department had expenses of 44010,
and the Purchasing Department had expenses of 18720 for the year. The following annual data for Residential,
Commercial, and Government Contract Divisions were obtained from corporate
records:

Residential
Commercial Government Contract

Sales 420000 500000 1800000

Number
of employees:

Weekly payroll (52 weeks per
year) 144 72 108

Monthly payroll 25 20 18

Number of purchase requisition per
year 1800 1530 1350

a.
Determine the total amount
of payroll checks and purchase requisitions processed per year by each
division.

b.
Using the activity base
information in (a), determine the annual amount of payroll and purchasing costs
charged back to the Residential, Commercial, and Government Contract Divisions
from payroll and purchasing services.

c.
Why does the Residential
Division have a larger service department charge than the other two divisions,
even though its sales are lower?

(Question 6) EX24-9

Outdoor
Athletic Equipment Co. operates two divisions—the Winter Sports Division and
the Summer Sports Division. The following income and expense accounts were
provided from the trail balance as of June 30, 2008, the end of the current
fiscal year, after all adjustments, including those for inventories, were
recorded and posted:

Sales—Winter
Sports (WS)Division………………………………………………….950000

Sales—Summer
Sorts (SS) Division……………………………………………………1437500

Cost
of Goods Sold—Winter Sports (WS) Division—————————512500

Cost
of Goods Sold—Summer Sports (SS)Division………………………………..687500

Sales
Expense—Winter Sports (WS)Division……………………………………….150000

Sales
Expense—Summer Sports (SS) Division……………………………………..205000

Administrative
Expense—Winter Sports (WS) Division………………………97000

Administrative
Expense—Summer Sport (SS) Division…………………………128000

Advertising
Expense………………………………………………………………………….64500

Transportation
Expense…………………………………………………………………..100700

Accounts
Receivable Collection Expense…………………………………………58100

Warehouse
Expense………………………………………………………………………..120000

The
bases to be used in allocating expenses, together with other essential
information, are as follows:

a.
Advertising expense-incurred at headquarters, charged back to
divisions on the basis of usage: Winter Sports Division, 28000; Summer Sports
Division, 36500.

b. Transportation
expense-charged back to divisions at a transfer price of 7.60 per bill of
lading: Winter Sports Division, 6000 bills of lading; Summer Sports Division,
7250 bills of lading.

c.
Accounts receivable collection expense—incurred at
headquarters, charged back to divisions at a transfer price of 5.60 per
invoice: Winter Sports Diviosn, 4500 sales invoices; Summer Sports Division,
5875 sales invoices.

d. Warehouse expense—charged
back to divisions on the basis of floor space used in storing division
products: Winter Sports Division, 25000 square feet; Summer Sports Division,
12500 square feet.

Prepare a
divisional income statement with two column headings: Winter Sports Division
and Summer Sports Division. Provide supporting schedules for determining service
department charges.

Question 7 (EX24-20

Materials
used by the Industrial Division of Crow Manufacturing are currently purchased
from outside suppliers at a cost of 120 per unit. However, the same materials are available
from the Materials Division. The
Materials Division has unused capacity and can produce the materials needed by
the Industrial Division at a variable cost of 95 per unit.

a.
If a transfer price of 105
per unit is established and 40000 units of materials are transferred, with no
reduction in the Materials Division’s current sales, how much would Crow
Manufacturing’s total income from operations increase?

b.
How much would the
Industrial Division’s income from operations increase?

c.
How much would the
Materials Division’s income from operations increase?

Question 8 (PR24-5A)

The
vice president of operations of I4 computer Inc. is evaluating the performance
of two divisions organized as investment centers. Invested assets and condensed
income statement data for the past year for each division are as follows:

Personal
Computing Division Business Computing
Division

Sales 800000 1200000

Cost
of goods sold 460000 780000

Operating
Expenses 180000 156000

Invested
assets 500000 2000000

Instructions:

1.
Prepare condensed
divisional income statements for the year ended Dec. 31 assuming that there
were no service department charges.

2.
Using the DuPont formula
for rate of return on investment, determine the profit margin, investment
turnover, and rate of return on investment for each division.

3.
If management’s minimum acceptable
rate or return is 15%, determine the residual the residual income for each
division.

4.
Discuss the evaluation of
the two divisions, using the performance measures determined in parts (1), (2),
and (3).

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All accounting questions

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1–3. Would a perpetual inventory system normally be practical for the following types of businesses without a computerized system? (answer yes or no)
1. Retail jewelry store 1. ____
2. Wholesale clothing store 2. ____
3. Retail candy store 3. ____
4. If the cost of an item of inventory is $75, the current replacement cost is $64, and the selling price is $95, the amount included in inventory
according to the lower of cost or market concept is

4. ____
5. Merchandise in transit should not be included in the seller’s inventory if the terms are FOB

6. The inventory method where the last units purchased are assumed to be sold and the ending inventory is made up of the first units purchased.

7. A method that is useful for estimating the cost of inventory that has been destroyed that uses the relationship between cost and retail value is

8. During a period of consistently falling prices, the method (FIFO or LIFO) that will result in reporting the greater cost of merchandise sold is

9–11. Inventory at the end of the current fiscal year was understated. State
whether each of the following will be overstated, understated, or not affected:
9. Cost of merchandise sold reported on the income statement for the
current year

10. Net income reported on the income statement for the current year
11. Retained earnings reported on the balance sheet at the end of the current year

12. Damaged merchandise that can only be sold at below cost should be
valued at

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All accounting questions

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Question 1

A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 4% stock dividend on a date when the market price was $12 a share. What is the amount transferred from the Retained Earnings account to Paid-in Capital accounts as a result of the stock dividend?
Answer

$12,800

$19,200

$32,000

$48,800
2 points
Question 2

A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $150. If the corporation issues a 5-for-1 stock split, the market value of the stock after the split will be approximately:
Answer

$25

$150

$5

$30
2 points
Question 3

A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the stock after the split will be:
Answer

$5

$60

$25

$24
2 points
Question 4

A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for
Answer

$15,000

$32,000

$17,000

$2,000
2 points
Question 5

A corporation purchased 1,000 shares of its $5 par common stock at $10 and subsequently sold 500 of the shares at $20. What is the amount of revenue realized from the sale?
Answer

$0

$5,000

$2,500

$10,000
2 points
Question 6

A disadvantage of the corporate form of business entity is
Answer

mutual agency for stockholders

unlimited liability for stockholders

corporations are subject to more governmental regulations

the ease of transfer of ownership
2 points
Question 7

A restriction/appropriation of retained earnings
Answer

decreases total assets

increases total retained earnings

decreases total retained earnings

has no effect on total retained earnings
2 points
Question 8

Characteristics of a corporation include
Answer

shareholders who are mutual agents

direct management by the shareholders (owners)

its inability to own property

shareholders who have limited liability
2 points
Question 9

Earnings per share
Answer

is the net income per common share

must be reported by publicly traded companies

helps compare companies of different sizes

all of the above
2 points
Question 10

How is treasury stock shown on the balance sheet?
Answer

as an asset

as a decrease in stockholders’ equity

as an increase in stockholders’ equity

treasury stock is not shown on the balance sheet
2 points
Question 11

If common stock is issued for an amount greater than par value, the excess should be credited to
Answer

Retained Earnings.

Cash.

Legal Capital.

Paid-in Capital in Excess of Par Value.
2 points
Question 12

Miriah Inc. has 6,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2012. What is the annual dividend on the preferred stock?
Answer

$50 per share

$30,000 in total

$300 in total

$0.50 per share
2 points
Question 13

One of the main disadvantages of the corporate form is the
Answer

professional management

double taxation of dividends

charter

corporation must issue stock
2 points
Question 14

Samuels, Inc. reported net income for 2011 is $105,000. During 2011 the company had 5,000 shares of $100 par, 5% preferred stock and 20,000 of $5 par common stock outstanding. Samuels’ earnings per share for 2011 is
Answer

$4.00

$5.25

$6.50

$5.00
2 points
Question 15

Stockholders’ equity
Answer

is usually equal to cash on hand

includes paid-in capital and liabilities

includes retained earnings and paid-in capital

is shown on the income statement
2 points
Question 16

The authorized stock of a corporation
Answer

must be recorded in a formal accounting entry.

only reflects the initial capital needs of the company.

is indicated in its by-laws.

is indicated in its charter.
2 points
Question 17

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding?
Answer

5,000

45,000

40,000

50,000
2 points
Question 18

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?
Answer

$60,000

$5,000

$100,000

$55,000
2 points
Question 19

The date on which a cash dividend becomes a binding legal obligation is on the
Answer

declaration date.

date of record.

payment date.

last day of the fiscal year end.
2 points
Question 20

The excess of issue price over par of common stock is termed a(n)
Answer

discount

income

deficit

premium
2 points
Question 21

The liability for a dividend is recorded on which of the following dates?
Answer

the date of record

the date of payment

the date of announcement

the date of declaration
2 points
Question 22

The par value per share of common stock represents
Answer

the minimum selling price of the stock established by the articles of incorporation.

the minimum amount the stockholder will receive when the corporation is liquidated

an arbitrary amount established in the articles of incorporation

the amount of dividends per share to be received each year
2 points
Question 23

Which of the following is not a right possessed by common stockholders of a corporation?
Answer

the right to vote in the election of the board of directors

the right to receive a minimum amount of dividends

the right to sell their stock to anyone they choose

the right to share in assets upon liquidation
2 points
Question 24

What is the total stockholders’ equity based on the following account balances?
Common Stock
$450,000
Paid-In Capital in Excess of Par
90,000
Retained Earnings
190,000
Treasury Stock
10,000
Answer

$740,000

$730,000

$720,000

$640,000
2 points
Question 25

Those most responsible for the major policy decisions of a corporation are the
Answer

management.

board of directors.

employees.

stockholders.

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