accounting questions

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Description

The following summary transactions occurred during 2011 for Bluebonnet Bakers:
Cash Received from:
Customers $380,000
Interest on note receivable 6,000
Principal on note receivable 30,000
Sale of investments 50,000
Proceeds from note payable 100,000
Cash Paid for:
Purchase of inventory 160,000
Interest on note payable 5,000
Purchase of equipment 85,000
Salaries to employees 90,000
Principal on notes payable 25,000
Payment of dividends to shareholders 20,000

The balance of cash and cash equivalents at the beginning of 2011 was $17,000.

Required:
Prepare a statement of cash flows for 2011for Bluebonnet Bakers. Use the direct method for reporting operating activities.

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accounting questions

$11.00

Description

Comparative
Balance Sheets

December
31

Assets
2010 2009

Cash $80,800 $
48,400

Accounts
receivable 87,800 33,000

Inventories
112,500 102,850

Prepaid expenses
28,400 26,000

Investments
138,000 114,000

Plant assets
285,000 242,500

Accumulated
depreciation (50,000) (52,000)

Total $682,500
$514,750

Liabilities
and Stockholders’ Equity

Accounts payable
$102,000 $ 67,300

Accrued expenses
payable 16,500 17,000

Bonds payable
110,000 150,000

Common stock
220,000 175,000

Retained earnings
234,000 105,450

Total $682,500
$514,750

Income
Statement Data

For
the Year Ended December 31,
2010

Sales $392,780

Less:

Cost of goods sold
$135,460

Operating
expenses, excluding

depreciation
12,410

Depreciation
expense 46,500

Income taxes
27,280

Interest expense
4,730

Loss on sale of plant
assets 7,500 233,880

Net income
$158,900

Additional
information:

1. New plant
assets costing $100,000 were purchased for cash during the year.

2. Old plant
assets having an original cost of $57,500 were sold for $1,500 cash.

3. Bonds matured
and were paid off at face value for cash.

4. A cash dividend
of $30,350 was declared and paid during the year.

Prepare a
statement of cash flows using the direct method.

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accounting questions

$79.00

Description

1.Which of the following is/are true?
I. When the times interest earned ratio falls below 1.0, the viability
of the firm is threatened because the firm does not generate
sufficient earnings to make interest payments when due.
II. If a firm’s quick ratio is 3.0, it is possible for its current ratio to
be larger than 3.0.
III. Positive earnings always indicate positive EVA (economic value added).
IV. If a firm’s total asset turnover ratio is 1.0, its annual sales are less
than
its total assets. (Points : 3.5)

III & IV
II
II and III
I and II

2.Which of the following is/are false?
I. The EBITDA multiple is useful in determining an acquisition price when a
firm is considering buying another firm.
II. The bid quote on a security from a dealer is always greater
than
the ask quote on a security.
III. Trading on the NYSE is conducted by members of the exchange. The
members that execute orders and act as agents on behalf of their clients
are floor brokers
.
IV. The difference between the bid price and the ask price on a security is
the asset factor. (Points : 3.5)

All of the above
II and IV
II, III and IV
None of the above

Question
3. 3.Which of the following is/are false?
I. A common-size balance sheet shows the firm’s assets and liabilities as a
percentage of total assets.
II. The average collection period is the average number of days an accounts
receivable remains outstanding.
III. If a firm wishes to retain the same return on equity when its net
profit margin and total asset turnover has declined, it must increase its
equity multiplier.
IV. An average collection period substantially below the industry
norm
may indicate that the firm’s credit policy is hurting sales by
restricting credit to the very best customer. (Points : 3.5)

I, II and IV
II
II and III
None of the above

4.Which of the following is/are true?
I. In an efficient capital market, all security investments will have a positive
NPV
.
II. In an efficient capital market, corporate diversification is inexpensive
and necessary
.
III. The fact that no investor can expect to earn excess returns based on
an investment strategy using only historical stock price or return
information
is an example of weak-form market efficiency.
(Points : 3.5)

I and II
I and III
III
II and III
All of the above

Question
5. 5.Which of the following is/are false?
I. The shareholder wealth maximization goal states that management should
seek to maximize the compound value of the expected future returns
to the owners of the firm.
II. The primary reason for the agency problem between the stockholders
and managers
is because of the separation of ownership and
management
.
III. Protective covenants in a company’s bond
indentures
are used in agency relationships involving creditors and
managers
.
IV. Altman’s bankruptcy prediction model identifies five financial ratios
to predict bankruptcy of firms.
(Points : 3.5)

I, III and IV
I and II
II and IV
I and III

6.Which of the following is/are true?
I. Liquidity ratios indicate the firm’s capacity to meet its short-term
financial obligations and long-term financial obligations.
II. Financial leverage ratios indicate the firm’s capacity to meet its
short-term financial obligations, but not its long-term financial
obligations.
III. Asset management ratios indicate how efficiently a firm is using its
assets to generate sales.
IV. Profitability ratio indicates how effectively a firm generates profits
on sales, assets and stockholder’s equity. (Points : 3.5)

II, III and IV
I, II and III
III and IV
I and II

Question
7. 7.Which of the following is true? (Points : 3.5)

If you’re a financial manager of a MNC (U.S. based) and you anticipate that
your company will receive C$3 million 3 months later, to hedge
your currency risk, you’d probably BUY 3-month forward/futures
contracts for C$3 million or BUY call options for C$3 million
expired 3 months later.
If the present value of a given sum is
equal to its future value, then the discount rate must be equal to one.
The nominal annual rate of interest is
always equal to or less than the effective annual rate of
interest.
An exchange rate quoted as USD 0.99 per
Japanese Yen in Japan is known as a direct
quote.

Question
8. 8.Which of the following is true? (Points : 3.5)

When a loan is amortized over a ten-year term, the amount of interest
paid increases
each year.
In preparing a statement of cash flows,
the indirect method involves adjusting net income to reconcile
it to net cash flows from operating activities.
An ordinary annuity is the
annuity in which the payments or receipts occur at the beginning
of each period.
All of the above

9.After-tax cash flow equals:
(Points : 3.5)

earnings after taxes plus non-cash charges
net earnings plus deferred
expenses
net earnings plus depreciation
earnings after taxes

Question
10. 10.Which of the following is defined as the systematic
allocation of the cost of an asset over a specified period of time? (Points
: 3.5)

Expensing
Depreciation
Optimizing
Deferred Taxes

11.Mac Inc. is considering issuing
additional long-term debt to finance an investment opportunity. Currently,
Mac has $180 million in 14% debt outstanding. Its after-tax net income is
$63 million, and the company is in 30 percent tax bracket. What is Mac’s
current times interest earned ratio? (Points : 3.5)

5.18 times
3.92 times
4.57 times
3.33 times

Question
12. 12.Continued from Q11, Mac Inc. is required by debt holders to
maintain its times earned interest ratio at 3.2 or greater. How much
additional 14% debt can Mac issue now to maintain its time interest earned
ratio at 3.2?
Assume for this calculation that earnings before
interest and taxes remains at its present level. (Points : 3.5)

$47.62 million
$77.14 million
$19.05 million
$24.63 million

Question
13. 13.Mr. Moore wants to purchase a new car. He knows that he can
afford to pay $4,720 per year and that his bank will charge him 8% interest
on the car loan. He intends to pay off the car in 8 years. Interest will be
compounded annually. Of the following, which is the most
expensive vehicle
in his price range that he could consider?
(Points : 3.5)

A Mercedes-Benz for $29,900
A Regal selling for $29,015
Prius selling for $26,750
A Malibu selling for $22,140

14.Andy just won an $80,000,000
lottery in Washington. Instead of receiving a lump sum, he found that he
would receive $3,200,000 annually (end of year) for 25 years. Andy is 65
years old and wants his money now. He has been offered $25,778,500 to sell
his ticket. What rate of return is the buyer expecting to make if
Andy accepts the offer
? (Points : 3.5)

less than 10%
13.64%
15.43%
11.62%

Question
15. 15.German Motors exports cars to the U.S. Market. On January
20, 2008, its most popular model was selling (wholesale) to U.S. dealers
for $45,500 (US dollars). What price must German Motors charge for
the same model on January 29, 2013 to realize the same amount of euro (€)
as it did in 2008.
($0.9150/€ on 1/20/08 and $0.9950/€ on 1/29/2013)
(Points : 3.5)

$43,111.11
$53,443.30
$41,841.71
$49,478.14

16.You are given the information of
firm A and B for their performance evaluation.
Firm A
B
Sales 25
22
EAT 6 6
Total Assets 50
40
Stockholder’s Equity 25 25
Suppose the industry average of net profit margin ratio, total asset
turnover and equity multiplier is around 20%, 0.53 times and 1.6
respectively.
Which of the following is true? (Points : 3.5)

Firm A shall restructure its capital structure to achieve a higher financial
leverage since it appears to be lower than the industry average.
Firm B shall improve its total asset
turnover ratio since it is higher than the industry average and thus
indicates an inefficient utilization of assets.
Firm A shall improve its total asset
turnover ratio since it is lower than the industry average and thus indicates
an inefficient utilization of assets.

Question
17. 17.A firm with an equity multiplier of 2.5, will have a debt
ratio of (Points : 3.5)

2.5
0.6
0.75
4.0

Question
18. 18.If the spot rate for the Japanese yen is $0.0092 per
Japanese yen and the 2-month forward rate is $0.0093 per Japanese yen, what
is the annualized premium (discount) for the 2-month forward quote on the
Japanese Yen, i.e., the annualized Japanese Yen forward premium (discount)
relative to dollars? (Points : 3.5)

discount of 6.52%
discount of 4.35%
premium of 6.52%
premium of 4.35%

19.Three years ago you bought 100
shares of Pike Company’s convertible preferred stock at $40 per share. The
preferred stock had an annual dividend of $3.50 per share, and a total of
$8.25 in dividends per share have been paid so far. Today the company
announced that the stock is redeemable for $45.25 plus accrued and unpaid
dividends, for a total of $47.50. Alternatively, holders may convert their
shares of preferred stock at a conversion rate of 1.03 shares of Pike
Company’s common stock for each share of preferred stock. If the closing
price of Pike Company’s common stock is $47.00, what is your holding
period return based on your optimal decision?
(Points : 3.5)

39.375%
41.650%
21.025%
18.750%

Question
20. 20.You would like to endow a chair at Indiana University for
$178,500 per year. At 12% interest, how much do you need to donate? (Points
: 3.5)

$1,785,000
$1,487,500
$1,599,750
$14,875,000

Question
21. 21.What is the return on stockholders’ equityfor
a firm with a net profit margin of 3.2 percent, sales of $525,000, an
equity multiplier of 3.0, and total assets of $375,000? (Points : 3.5)

9.93%
12.75%
13.44%
6.86%

22.Sees Inc. has an agreement with
it banks that allow Sees to borrow money on a short term basis to finance
its inventories and accounts receivable. The agreement requires Sees to
maintain a current ratio of 4.0 or higher and a debt ratio of 60% or lower.
From the balance sheet, Sees has total assets of $1,375,000, current assets
of $875,000, and total debts of $800,000 (consist of current liabilities of
$198,750 and long-term debt of $601,250). Determine how much Sees
could borrow this time to invest in inventory and accounts receivable
without violating the terms of its borrowing agreement
. (Points :
3.5)

$62,500.00
$26,666.67
$23,000.00
$41,666.67

Question
23. 23.Your monthly statement from your bank credit card shows that
the monthly rate of interest is 4.8%. What is the annual effective rate of
interest you are being charged on your credit card if it’s compounded
monthly? (Points : 3.5)

14.40%
75.52%
15.39%
8.09%

24.Over the past 10 years, your
$15,000 in gold coins has increased value by 280 percent. You plan to sell
these coins today. You have paid annual storage and insurance costs of
$1520 per year. Assay expenses at the time of sales are expected to total
$1450. What is your 10-year holding period return to this investment?
(Points : 3.5)

230.20%
139.00%
160.20%
169.00%

Question
25. 25.In 2012, the JCrew Company’s sales were $15.0 million. Its
balance sheet at year end 2012 is shown below. JCrew’s 2013 sales are
expected to be $21 million. Earnings after tax is expected to be 10.0% of
sales, and annual dividends of $800,000 are expected to be paid in 2013.
The company presently has excess plant and equipment capacity. As a result,
assume that the net fixed asset figure on the balance sheet will remain
constant for 2013. Assuming that the ratios of assets (except fixed assets,
net) to sales and accounts payable to sales in 2012 remain the same in
2013, calculate the total amount, i.e., one number, of external
financing required for 2013, using the percentage of sales method.

JCrew Co. Balance Sheet
(December 31, 2012)($ millions)
Current assets:
Current
liabilities:
Cash $0.5 Accts.
payable $0.7
Accts. Rec. 1.5 Notes payable

0.8
Inventory
2.5
Long-term
debt
2.3
Fixed assets, net 1.5 Stockholders’
equity
2.2
Total Assets
$6.0 Total Liabilities and Equity
$6.0 (Points : 3.5)

$750,000
$220,000
$835,000
None of the above

26.Tim borrowed $3,000 to purchase
a computer. The loan is to be repaid in 3 equal annual end of year
installments. The interest on loan is 10%, compounded annually. What is the
loan payment per year? (Points : 3.5)

$1000.00
$1,206.34
$1,987.10
None of the above

Question
27. 27.The Podrasky Corporation is considering an $80 million
expansion (capital expenditure) program next year. The company wants
to determine approximately how much additional financing will be needed if
the expansion program is undertaken.
Next year the company expects
to earn $55 million after interest and taxes. The company also plans to
increase its dividends from $10 million to $15 million. If the expansion
program is accepted, the company expects its current assets needs to
increase by approximately $25 million next year. Long-term debt retirement
obligations total $2 million next year and depreciation is expected to be
$20 million. No fixed assets are expected to be sold next year. (Points :
3.5)

$28 million
$33 million
$47 million
$38 million

Question
28. 28.Neiman Company has revenues of $120,000, general &
administrative expenses of $37,500, interest expense of $54,500 and
depreciation expense of $25,500. The company also purchased a new equipment
for $35,000 –This belongs to investment in fixed assets. The firm is in the
40% tax bracket. What would be the firm’s cash flow from operations?
(Points : 3.5)

$1,500
$27,000
$2,500
None of the above

29.TTT Inc has current sales of $40
million. Sales are expected to grow to $65 million next year. TTT currently
has accounts receivable of $25 million, inventories of $10 million, and the
net fixed assets of $30 million. These assets are expected to grow at the
same rate as sales over the next year. Accounts payable are expected to
increase from their current level of $15 million to a new level of $22
million next year. TTT wants to increase its cash balance at the end of
next year by $5 million. Earnings after taxes next year are forecasted to
be $12 million. Next year, TTT plans to pay dividends of $1.5 million.
How much external financing is required by TTT next yea
r?
(Points : 3.5)

$28.125 million
$18.125 million
$16.375 million
$8.375 million

Question
30. 30.Chase Bank has granted you a ten year loan for $210,000. If
your ten annual end of the year payments are $35,500, what is the rate of
interest Chase Bank is charging (the interest is compounded annually)?
(Points : 3.5)

10.89%
6.90%
8.25%
None of the above

31.The stock of UCD has just been
sold in an initial public offering at a price of $165 per share. One week
after this offering, the stock has risen to $195. You believe the stock will
rise to $245 over the coming year. You expect UCD to pay a $15 dividend
during the coming year. If you require a rate of return of 30%, do you
believe this is a good investment at the current price of $195? (Points :
3.5)

Yes, the holding period return is 33.33% greater than 30%.
No, the holding period return is 25.64%
less than 30%.
No, the holding period return is 23.08%
less than 30%.
No, the holding period return is 15.38%
less than 30%.

32.
You are preparing a cash
budget for A&M Inc. for the first quarter of 2012. You have
summarized the following information.
A&M Inc.
Cash Budget Worksheet
First Quarter, 2012
December January
Estimated Sales

$825,000 $610,000
Estimated Credit
Sales
750,000 550,000
Estimated Receipts:
Cash sales

60,000
Collections of Accounts Receivable
75% of last month’s credit
sales
562,500
25% of current month credit
sales

137,500
Total Accounts Receivable collections
700,000
Estimated purchases
$538,000 304,210
Estimated payments of accounts payable
538,000
304,210

Other
estimated disbursements for January 2012, include
____________________________
Wages and Salaries $187,500
Rent
37,000
Other Expenses
25,000
Tax
Payments 108,000

A&M’s projected cash balance at the beginning of January is
$85,000 and the company desires to maintain a balance of $75,000 at the
end of each month. What is the amount of short-term loan required
to meet the desired level of cash balance at the end of January?

(Points
: 3.5)

$75,000.
$125,500.
$24,500
None of the above

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accounting questions

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accounting questions

accounting questions

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Accounting questions

$46.00

Description

Question 1

During its first year of operations, Collin
Raye Corporation had the following transactions pertaining to its common stock.

Jan. 10 Issued
80,000 shares for cash at $6 per share.

Mar. 1 Issued
5,000 shares to attorneys in payment of a bill for $35,000 for services
rendered in helping the company to incorporate.

July 1 Issued
30,000 shares for cash at $8 per share.

Sept. 1 Issued
60,000 shares for cash at $10 per share.

(a) Prepare
the journal entries for these transactions, assuming that the common stock has
a par value of $5 per share.

(b) Prepare
the journal entries for these transactions, assuming that the common stock is
no-par with a stated value of $3 per share.

Question 2

Lindsey Hunter Corporation is authorized to
issue 50,000 shares of $5 par value common stock. During 2014, Lindsey Hunter
took part in the following selected transactions.

1. Issued
5,000 shares of stock at $45 per share, less costs related to the issuance of
the stock totaling $7,000.

2. Issued
1,000 shares of stock for land appraised at $50,000. The stock was actively
traded on a national stock exchange at approximately $46 per share on the date
of issuance.

3. Purchased
500 shares of treasury stock at $43 per share. The treasury shares purchased
were issued in 2010 at $40 per share.

(a) Prepare
the journal entry to record item 1.

(b) Prepare
the journal entry to record item 2.

(c) Prepare
the journal entry to record item 3 using the cost method.

Question 3

The stockholders’ equity accounts of G.K.
Chesterton Company have the following balances on December 31, 2014.

Common stock, $10 par, 300,000 shares
issued and outstanding $3,000,000

Paid-in capital in excess of par—common
stock 1,200,000

Retained earnings 5,600,000

Shares of G.K. Chesterton Company stock are
currently selling on the Midwest Stock Exchange at $37.

(a) A
stock dividend of 5% is (1) declared and (2) issued.

(b) A
stock dividend of 100% is (1) declared and (2) issued.

(c) A
2-for-1 stock split is (1) declared and (2) issued.

Question 4

Anne Cleves Company reported the following
amounts in the stockholders’ equity section of its December 31, 2013, balance
sheet.

Preferred stock, 10%, $100 par (10,000
shares authorized, 2,000 shares issued) $200,000

Common stock, $5 par (100,000 shares
authorized, 20,000 shares issued) 100,000

Additional paid-in capital 125,000

Retained earnings 450,000

Total $875,000

During 2014, Cleves took part in the
following transactions concerning stockholders’ equity.

1. Paid
the annual 2013 $10 per share dividend on preferred stock and a $2 per share
dividend on common stock. These dividends had been declared on December 31,
2013.

2. Purchased
1,700 shares of its own outstanding common stock for $40 per share. Cleves uses
the cost method.

3. Reissued
700 treasury shares for land valued at $30,000.

4. Issued
500 shares of preferred stock at $105 per share.

5. Declared
a 10% stock dividend on the outstanding common stock when the stock is selling
for $45 per share.

6. Issued
the stock dividend.

7. Declared
the annual 2014 $10 per share dividend on preferred stock and the $2 per share
dividend on common stock. These dividends are payable in 2015.

(a) Prepare journal entries to record the transactions described above.

Question 5

Aubrey Inc. issued $4,000,000 of 10%,
10-year convertible bonds on June 1, 2014, at 98 plus accrued interest. The
bonds were dated April 1, 2014, with interest payable April 1 and October 1.
Bond discount is amortized semiannually on a straight-line basis.

On April 1, 2015, $1,500,000 of these bonds
were converted into 30,000 shares of $20 par value common stock. Accrued
interest was paid in cash at the time of conversion.

(a) Prepare the entry to record the
interest expense at October 1, 2014. Assume that accrued interest payable was
credited when the bonds were issued.

(b) Prepare the entry to record the
conversion on April 1, 2015. (Book value method is used.) Assume that the entry
to record amortization of the bond discount and interest payment has been made.

Question 6

Illiad Inc. has decided to raise additional
capital by issuing $170,000 face value of bonds with a coupon rate of 10%. In
discussions with investment bankers, it was determined that to help the sale of
the bonds, detachable stock warrants should be issued at the rate of one
warrant for each $100 bond sold. The value of the bonds without the warrants is
considered to be $136,000, and the value of the warrants in the market is
$24,000. The bonds sold in the market at issuance for $152,000.

(a) What entry should be made at the time of the issuance of the bonds
and warrants?

Question 7

Illiad Inc. has decided to raise additional
capital by issuing $170,000 face value of bonds with a coupon rate of 10%. In
discussions with investment bankers, it was determined that to help the sale of
the bonds, detachable stock warrants should be issued at the rate of one
warrant for each $100 bond sold. The value of the bonds without the warrants is
considered to be $136,000, and the value of the warrants in the market is
$24,000. The bonds sold in the market at issuance for $152,000.

If the warrants were nondetachable, would
the entries be different? Discuss.

Question 8

On January 1, 2013, Dagwood Company
purchased at par 12% bonds having a maturity value of $300,000. They are dated
January 1, 2013, and mature January 1, 2018, with interest receivable December
31 of each year. The bonds are classified in the held-to-maturity category.

(a) Prepare the journal entry at the date
of the bond purchase.

(b) Prepare the journal entry to record the
interest received for 2013.

(c) Prepare the journal entry to record the
interest received for 2014.

On January 1, 2013, Hi and Lois Company
purchased 12% bonds, having a maturity value of $300,000, for $322,744.44. The bonds
provide the bondholders with a 10.00% yield. They are dated January 1, 2013,
and mature January 1, 2018, with interest receivable December 31 of each year.
Hi and Lois Company uses the effective-interest method to allocate unamortized
discount or premium. The bonds are classified as available-for-sale category.
The fair value of the bonds at December 31 of each year-end is as follows.

2013 $320,500 2016 $310,000

2014 $309,000 2017 $300,000

2015 $308,000

(a) Prepare the journal entry at the date
of the bond purchase.

(b) Prepare the journal entries to record
the interest received and recognition of fair value for 2013.

(c) Prepare the journal entry to record the
recognition of fair value for 2014.

Question 10

On December 21, 2013, Bucky Katt Company
provided you with the following information regarding its trading securities.

December 31, 2013

Investments (Trading) Cost Fair
Value Unrealized Gain (Loss)

Clemson Corp. stock $20,000 $19,000 $(1,000)

Colorado Co. stock 10,000 9,000 (1,000)

Buffaloes Co. stock 20,000 20,600 600

Total of portfolio $50,000 $48,600 (1,400)

Previous fair value adjustment balance 0

Fair value adjustment—Cr. $(1,400)

During 2014, Colorado Company stock was
sold for $9,400. The fair value of the stock on December 31, 2014, was Clemson
Corp. stock—$19,100; Buffaloes Co. stock—$20,500.

(a) Prepare the adjusting journal entry
needed on December 31, 2013.

(b) Prepare the journal entry to record the
sale of the Colorado Company stock during 2014.

(c) Prepare the adjusting journal entry
needed on December 31, 2014.

Question 11

Parent Co. invested $1,000,000 in Sub Co.
for 25% of its outstanding stock. Sub Co. pays out 40% of net income in
dividends each year.

Use the information in the following
T-account for the investment in Sub to answer the following questions.

Question 12

Jaycie Phelps Inc. acquired 20% of the
outstanding common stock of Theresa Kulikowski Inc. on December 31, 2013. The
purchase price was $1,200,000 for 50,000 shares. Kulikowski Inc. declared and
paid an $0.85 per share cash dividend on June 30 and on December 31, 2014.
Kulikowski reported net income of $730,000 for 2014. The fair value of
Kulikowski’s stock was $27 per share at December 31, 2014.

(a) Prepare the journal entries for Jaycie
Phelps Inc. for 2013 and 2014, assuming that Phelps cannot exercise significant
influence over Kulikowski. The securities should be classified as
available-for-sale.

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accounting questions

$16.00

Description

Keith Company is a two-division firm and has the following information available for this year:

Common fixed costs $ 800,000
Direct fixed costs of Division A 200,000
Direct fixed costs of Division B 400,000
Sales revenue of Division A 800,000
Sales revenue ofDivision B 1,200,000
Variable costs of Division A 240,000
Variable costs of Division B 360,000

What is Division A’s contribution margin?
A) $840,000
B) $440,000
C) $560,000
D) $(240,000)

Exhibit 1: The Testa Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of$100,000, they can be sold for a total of$160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000.

I. Refer to Exhibit 1. The sunk cost in this situation is:

2. Refer to Exhibit 1: What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?

3. Refer to Exhibit 1. Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?

Exhibit 2: The Wright Company has established standard cost for its single product as follows:

Direct material ………………………….. 2 gallons at $3 per gallon Direct labor ……………………………… 0.5 hours at $8 per hour Variable overhead ……………………….. 0.5 hours at $2 per hour
During May, the company made 4,000 units and incurred the following costs: Direct materials purchased: 8,100 gallons at $3.I 0 per gallon
Direct material used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual Variable overhead cost:$4,175

4. Refer to Exhibit 2. The materials price variance is:

5. Refer to Exhibit 2. The materials quantity variance is:

6. Refer to Exhibit 2. The labor rate variance is:

on, showing your calculation, and overall company’s net operating income or loss, before and after eliminating Northern Division.

6. United Corporation manufactures laser printers. United currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums are as follows:

Cost of drum

Total cost

Variable manufacturing cost …………… $23 $736,000
Fixed manufacturing cost ……………….. $2.080.000
Total cost $88 $2.816.000

Hardware Solutions Inc. has offered to provide United with all of its imaging drum needs for $72 per drum. If United accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, United will be able to use the freed up space to generate $240,000 of income each year in the production of alternative products.

Based on the information presented, would United be better off to make the drums or buy the drums and by bow much?

7. Apex Company had the following data for the current fiscal period:

Units in process at the beginning of the month 6,000
Units in process at the end of the month 4,000
Units started during the month 20,000

Materials are added at the beginning of the process. Beginning work-in-process was 40 percent complete as to conversion. Ending work-in-process was 70 percent complete as to conversion.
Calculate the number of units completed and transferred out during the period?

a. Weighted Average method:
b. FIFO method:

8. Speedy Delivery Services has the collected the following information about operating expenditures for its delivery truck
fleet for the past five years:

Year Miles Ooerating Costs
2007 110,000 $390,000
2008 140,000 $420,000
2009 100,000 $360,000
2010 130,000 $410,000
2011 150,000 $440,000

a. Using the high-low method, what is the cost estimate for variable costs for 2012?

b. Using the high-low method, what is the cost estimate forfzxed costs for 2012?

c. What is the best estimate of total operating expenses for 2012 using the high-low method based on total expected miles of 120,000?

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Accounting Questions

$5.00

Description

Lombardi Company manufactures a single product by a continuous process, involving threee production departments. The records indicate that direct materials, direct labor, and factory overhead for Department 1 were $100,000, $125,000 and $150,000,respectively. Work in process at the beginning of the period for Department 1 was $75,000, and work in process at the end of the period totaled $60,000.The record indicate that direct materials, direct labor and applied factory overhead for Department 2 were $50,000, $60,000 and $70,000 respectively. In addition, work in process at the beginning of the period for Department 2 totaled $75,000 and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 3 during the period is:

a. Work in Process–Dept. 3 (D) 585,00

Work in Process–Dept. 2 (C) 585,000

b. Work in Process–Dept. 3 (D) 570,000

Work in Process–Dept. 2 (C) 570,000

c. Work in Process–Dept. 3 (D) 555,000

Work in Process–Dept. 2 (C) 555,000

d. Work in Process–Dept. 3 (D) 165,000

Work in Process–Dept. 2 (C) 165,000

What numbers do I use to figure this out?

Work in Process, Beginning $10,000

Work in Process, Ending $15,000

Direct Labor Costs Incurred $ 4,000

Cost of Goods Manufactured $ 8,000

Factory Overhead $ 8,000

What is the amount of direct materials used?

a. $1,000

b. $4,000

c. $7,000

d. $3,000

What numbers do I use to figure this out?

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Accounting questions

$32.00

Description

1. During the month of September, direct labor cost totaled $13,400 and direct labor cost was 40% of prime cost. If total manufacturing costs during September were $73,000, the manufacturing overhead was:

$39,500

$33,500

$50,000

$10,500
2.
A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $4,410 and is paid at the beginning of the first year. Seventy percent of the premium applies to manufacturing operations and thirty percent applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage?

Product Period
$4,410 $0

$3,087 $1,323

$2,058 $882

$1,029 $441

3.
Carbaugh Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.

Production volume 7,000 units 8,000 units
Direct materials $82.90 per unit $82.90 per unit
Direct labor $58.20 per unit $58.20 per unit
Manufacturing overhead $74.20 per unit $69.20 per unit

The best estimate of the total cost to manufacture 7,400 units is closest to: (Do not round intermediate calculations.)

$1,545,930

$1,577,220

$1,595,100

$1,583,925

4.
A soft drink bottler incurred the following factory utility cost: $3,736 for 1,200 cases bottled and $3,812 for 1,700 cases bottled. Factory utility cost is a mixed cost containing both fixed and variable components. The variable factory utility cost per case bottled is closest to:

$3.11

$0.15

$2.24

$2.20

5.
Supply costs at Lattea Corporation’s chain of gyms are listed below:

Client-Visits Supply Cost
March 11,670 $28,584
April 11,466 $28,418
May 11,998 $28,842
June 14,300 $28,938
July 11,730 $28,645
August 11,216 $28,244
September 12,010 $28,843
October 11,701 $28,601
November 11,849 $28,726

Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low method to estimate the variable and fixed components of this cost, Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates would be closest to: (Round your Variable cost per unit to 2 decimal places.)

$1.92 per client-visit; $28,646 per month

$.81 per client-visit; $18,591 per month

$0.27 per client-visit; $25,144 per month

$0.23 per client-visit; $25,649 per month

6.
The following cost data pertain to the operations of Swestka Department Stores, Inc., for the month of July.

Corporate headquarters building lease $82,400
Cosmetics Department sales commissions–Northridge Store $5,860
Corporate legal office salaries $64,200
Store manager’s salary-Northridge Store $19,900
Heating-Northridge Store $18,500
Cosmetics Department cost of sales–Northridge Store $34,500
Central warehouse lease cost $8,000
Store security-Northridge Store $19,700
Cosmetics Department manager’s salary–Northridge Store $4,490

The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics Department is one of many departments at the Northridge Store. The central warehouse serves all of the company’s stores.

What is the total amount of the costs listed above that are direct costs of the Cosmetics Department?
$40,360
$95,540
$44,850
$34,500

7.
At a sales volume of 44,500 units, Thoma Corporation’s sales commissions (a cost that is variable with respect to sales volume) total $640,800.

To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 45,500 units? (Assume that this sales volume is within the relevant range.)

$14.09

$15.09

$14.40

$13.77

8.
Erkkila Inc. reports that at an activity level of 7,000 machine-hours in a month, its total variable inspection cost is $424,580 and its total fixed inspection cost is $179,142.

What would be the average fixed inspection cost per unit at an activity level of 7,300 machine-hours in a month? Assume that this level of activity is within the relevant range.

$24.54

$86.25

$25.59

$35.06

9.
Inspection costs at one of Iuliano Corporation’s factories are listed below:

Units produced Inspection cost
February 913 $ 17,012
March 965 $ 17,400
April 919 $ 17,065
May 903 $ 16,910
June 925 $ 17,094
July 910 $ 16,980
August 927 $ 17,132
September 867 $ 16,480
October 906 $ 16,938

Management believes that inspection cost is a mixed cost that depends on units produced.

Using the high-low method, the estimate of the fixed component of inspection cost per unit produced is closest to: (Round the intermediate calculations to two decimal places.)

$16,920.00
$16,481.00
$16,911.00
$8,338.65

10.
Nikkel Corporation, a merchandising company, reported the following results for July:

Sales $490,000
Cost of goods sold (all variable) $169,700
Total variable selling expense $24,200
Total fixed selling expense $21,700
Total variable administrative expense $13,200
Total fixed administrative expense $33,600

The gross margin for July is:

$227,600

$434,700

$282,900

$320,300

11.
Salvadore Inc., a local retailer, has provided the following data for the month of September:

Merchandise inventory, beginning balance $49,500
Merchandise inventory, ending balance $42,900
Sales $268,500
Purchases of merchandise inventory $138,700
Selling expense $18,800
Administrative expense $53,800

The cost of goods sold for September was:

$138,700

$145,300

$132,100

$211,300

12.
Salvadore Inc., a local retailer, has provided the following data for the month of September:

Merchandise inventory, beginning balance $ 42,700
Merchandise inventory, ending balance $ 42,100
Sales $268,300
Purchases of merchandise inventory $134,800
Selling expense $ 16,800
Administrative expense $ 57,600

The net operating income for September was:
$58,500
$134,500
$61,300
$133,500

13.
Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $525,000 or a new model 240 machine costing $423,000 to replace a machine that was purchased 8 years ago for $488,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired.

Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A.

Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $423,000 in the new machine, the money could be invested in a project that would return a total of $450,000.

In making the decision to buy the model 240 machine rather than the model 370 machine, the differential cost was:
$37,000
$65,000
$-38,000
$102,000
14.
Sawyer Manufacturing Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the Corporation worked 30,000 actual direct labor-hours and incurred $319,000 of actual manufacturing overhead cost. The Corporation had estimated that it would work 29,000 direct labor-hours during the year and incur $290,000 of manufacturing overhead cost. The Corporation’s manufacturing overhead cost for the year was:

underapplied by $10,000

underapplied by $19,000

overapplied by $10,000

overapplied by $19,000

15. Cribb Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,400 hours and the total estimated manufacturing overhead was $255,360. At the end of the year, actual direct labor-hours for the year were 11,100 hours and the actual manufacturing overhead for the year was $244,840. Overhead at the end of the year was: (Round your intermediate calculations to 2 decimal places.)

$8,800 underapplied
$8,800 overapplied
$3,800 underapplied
$3,800 overapplied

16.
The following data have been recorded for recently completed Job 323 on its job cost sheet. Direct materials cost was $2,127. A total of 32 direct labor-hours and 256 machine-hours were worked on the job. The direct labor wage rate is $20 per labor-hour. The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $27 per machine-hour. The total cost for the job on its job cost sheet would be:

$6,635

$9,679

$7,054

$11,824

17.
During October, Dorinirl Corporation incurred $71,300 of direct labor costs and $5,900 of indirect labor costs. The journal entry to record the accrual of these wages would include a:

credit to Work in Process of $77,200

debit to Work in Process of $71,300

debit to Work in Process of $77,200

credit to Work in Process of $71,300

18.
During October, Beidleman Inc. transferred $60,900 from Work in Process to Finished Goods and recorded a Cost of Goods Sold of $65,930. The journal entries to record these transactions would include a:

credit to Cost of Goods Sold of $65,930

debit to Finished Goods of $65,930

credit to Work in Process of $60,900

credit to Finished Goods of $60,900

19.
Compute the amount of raw materials used during August if $11,000 of raw materials were purchased during the month and the inventories were as follows:

Inventories Balance August 1 Balance August 31
Raw materials $1,500 $1,300
Work in process $15,000 $16,000
Finished goods $37,000 $31,000

$16,000

$17,300

$13,800

$11,200

20.
Cerrone Inc. has provided the following data for the month of July. The balance in the Finished Goods inventory account at the beginning of the month was $57,800 and at the end of the month was $49,400. The cost of goods manufactured for the month was $281,000. The actual manufacturing overhead cost incurred was $86,200 and the manufacturing overhead cost applied to Work in Process was $76,000. The adjusted cost of goods sold that would appear on the income statement for July is:

$272,600

$279,200

$299,600

$289,400

21.
Baker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $77,280 and 2,400 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $79,530 and actual direct labor-hours were 2,200.

The applied manufacturing overhead for the year was closest to: (Round your intermediate calculations to 2 decimal places.)

$75,688

$67,864

$70,840

$72,520

22.
Baker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $110,250 and 3,500 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $112,200 and actual direct labor-hours were 3,250.

The overhead for the year was: (Round your intermediate calculations to 2 decimal places.)

$7,875 overapplied

$9,825 underapplied

$9,825 overapplied

$7,875 underapplied

. The following information applies to the questions displayed below.]

Meyers Corporation had the following inventory balances at the beginning and end of November:
November 1 November 30
Raw Materials $ 80,000 $ 28,000
Finished Goods $ 220,000 $ 150,000
Work in Process $ 46,000 $ 50,000
________________________________________

During November, $170,000 in raw materials (all direct materials) were drawn from inventory and used in production. The company’s predetermined overhead rate was $9 per direct labor-hour, and it paid its direct labor workers $14 per hour. A total of 1,000 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained $20,000 of direct materials cost. The Corporation incurred $120,000 of actual manufacturing overhead cost during the month and applied $110,000 in manufacturing overhead cost.

23.

The direct materials cost in the November 1 Work in Process inventory account totaled:

$32,000

$37,000

$23,000

$14,000

24.

The actual direct labor-hours worked during November totaled: (Round your answers to the nearest dollar.)

7,857 hours

8,571 hours

12,222 hours

13,333 hours

25.
During February, Irving Corporation incurred $77,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $75,000.

The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a:

debit to Work in Process of $75,000

credit to Work in Process of $75,000

debit to Manufacturing Overhead of $77,000

credit to Manufacturing Overhead of $77,000

Additional Requirements

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Accounting Questions

$47.00

Description

QUESTION 1

1. ABC, Inc., has a market-to-book
ratio of 3, net income of $87,660, a book value per share of $17.2,
and 44,871 shares of stock outstanding. What is the price-earnings ratio?

Enter your answer rounded off
to two decimal points.

1 points

QUESTION 2

1.
ABC has total sales of
$208, assets of $102, return on equity of 26%, and net profit margin of 8%.
What is the debt ratio?

Enter you
answer in percentages rounded off to two decimal points. Do not enter % in the
answer box.

1 points

QUESTION 3

1. A firm
has sales of $350,000, a profit margin of 6 percent, a total asset turnover
rate of 1.25, and an equity multiplier of 1.4. What is the return on equity?

10.50
percent

7.50
percent

7.75
percent

11.11
percent

5.36
percent

1 points

QUESTION 4

1. Toast and
Butter, Inc., has total assets of $712,000 and an equity multiplier of 1.6.
What is the debt-equity ratio?

0.60

0.67

0.63

1.60

1.67

1 points

QUESTION 5

1.
XYZ earned a net profit
margin of 5.9% last year and had an equity multiplier of 2.8. If its total
assets are $112 million and its sales are 143 million, what is the firm’s
debt ratio?

Enter
your answer in percentages rounded off to two decimal points. Do not enter % in
the answer box.

1 points

QUESTION 6

1. ABC’s
Balance Sheet lists Current Assets of $300, Current Liabilities of $200, Fixed
Assets of $700, Long-Term Debt of $400. ABC has 200 shares outstanding. What is
the market-to-book ratio (MTB) if the market price per share is $8?

4
times

400
times

2
times

8
times

0.25
times

1 points

QUESTION 7

1. ABC
Corporation has the following ratios: Total Asset Turnover= 1.6 Total debt to
total assets= 0.5 Current Ratio= 1.7 Current Liabilities= $2,000,000 Sales =
$16,000,000 What is the amount of current assets?

2,000,000

3,200,000

3,400,000

1,000,000

1 points

QUESTION 8

1. The
Jamestown Group has equity of $421,000, sales of $792,000, and a profit margin
of 6 percent. What is the return on equity?

8.87
percent

6.19
percent

11.29
percent

10.27
percent

9.37
percent

1 points

QUESTION 9

1. If the
Debt/Equity Ratio is 0.80. What is the Debt Ratio?

0.40

0.375

0.60

1

o.4444

1 points

QUESTION 10

1. If the
debt ratio is 0.20, the Equity Multiplier is:

1.25

0.25

1.20

0.20

0.80

1.5

1 points

QUESTION 11

1. If the
debt ratio is 0.75, the Debt/Equity Ratio is:

0.75

0.25

1

5

1.75

3

1 points

QUESTION 12

1. Top
Sound, Inc., has total assets of $212,000, a debt-equity ratio of .6, and net
income of $9,500. What is the return on equity?

6.87
percent

7.17
percent

7.34
percent

7.50
percent

7.67
percent

1 points

QUESTION 13

1. Blackstone, Inc., has net income of $8,171, a tax rate of 27%, and
interest expense of $531. What is the times interest earned ratio?

Enter your answer rounded off
to two decimal points.

1 points

QUESTION 14

1. If Roten,
Inc., has a equity multiplier of 1.75, total asset turnover of 1.30, and profit
margin of 8.5 percent, what is the return on equity (ROE)?

19.34%

2.275%

1.75%

14.875%

1 points

QUESTION 15

1. If the
Debt/Equity Ratio is 0.50. What is the Debt Ratio?

0.50

0.375

0.60

1

o.3333

1 points

QUESTION 16

1. If the
Debt/Equity Ratio is 0.60. What is the Debt Ratio?

0.40

0.375

0.60

1

o.4444

1 points

QUESTION 17

1. If the
debt ratio is 0.60, the Debt/Equity Ratio is:

1.25

0.25

1.20

0.20

0.80

1.5

1 points

QUESTION 18

1. If the
debt ratio is 0.80, the Equity Multiplier is:

0.8

0.2

1

5

1.8

4

1 points

QUESTION 19

1. A firm
has total assets of $682,000 and total equity of $424,000. What is the
debt-equity ratio?

1.61

0.61

1.64

0.62

1 points

QUESTION 20

1.
XYZ has total sales of
$210, assets of $104, return on equity of 21%, and net profit margin of 6%.
What is the amount of equity?

Enter you
answer rounded off to two decimal points. Do not enter $ in the answer
box.

1 points

QUESTION 21

1.
ABC’s balance sheet
indicates a book value of shareholders’ equity of $895,135. The firm’s earning
per share are $3.6 and the price-earnings ratio is 10.87. If there are 55,391
shares outstanding, what is the book value per share?

Enter
your answer rounded off to two decimal points. Do not enter $ in the answer
box.

Hint:
Market value per share is same as market price per share

1 points

QUESTION 22

1.
ABC earned a net profit
margin of 6.6% last year and had an equity multiplier of 3. If its total assets
are $118 million and its sales are 138 million, what is the firm’s return
on equity?

Enter
your answer in percentages rounded off to two decimal points. Do not enter % in
the answer box.

1 points

QUESTION 23

1.
XYZ earned a net profit
margin of 4.2% last year and had an equity multiplier of 2.3. If its total
assets are $99 million and its sales are 182 million, what is the firm’s
return on assets?

Enter
your answer in percentages rounded off to two decimal points. Do not enter % in
the answer box.

1 points

QUESTION 24

1.
ABC’s balance sheet
indicates a book value of shareholders’ equity of $858,655. The firm’s earning
per share are $3.5 and the price-earnings ratio is 9.41. If there are 49,308
shares outstanding, what is the market-to-book ratio?

Enter
your answer rounded off to two decimal points.

Hint:
Market value per share is same as market price per share

1 points

QUESTION 25

1. A firm
has net working capital of $1,100 and current liabilities of $2,800. What is
the current ratio?

.98

2.56

.39

.72

1.39

1 points

QUESTION 26

1.
ABC’s balance sheet
indicates a book value of shareholders’ equity of $781,785. The firm’s earning
per share are $3.2 and the price-earnings ratio is 12.36. If there are 45,263
shares outstanding, what is the market value per share?

Enter
your answer rounded off to two decimal points. Do not enter $ in the answer
box.

Hint:
Market value per share is same as market price per share.

1 points

QUESTION 27

1. Wexford
Hotels has sales of $289,600, depreciation of $21,400, interest of $1,300,
Operating Income of $23,269.70, and a tax rate of 34 percent. What is the times
interest earned ratio?

20

17.9

18.5

16

19.8

1 points

QUESTION 28

1. The
ability of the firm to pay off short-term obligations as they come due is
indicated by:

My
Grade Point Average

Turnover
Ratios

Liquidity
Ratios

Profitability
Ratios

1 points

QUESTION 29

1. A firm
has total equity of $70,312.50, a profit margin of 8 percent, an equity
multiplier of 1.6, and a total asset turnover of 1.3. What is the amount of the
firm s sales?

$91,406

$112,500

$121,500

$137,500

$146,250

1 points

QUESTION 30

1. Smith
Corporation has current assets of $11,400, inventories of $4,000, and a current
ratio of 2.6. What is Smith s acid test ratio? Assume pre-paid expenses is
zero.

1.69

0.54

0.74

1.35

1 points

QUESTION 31

1. The Baker
s Dozen has current liabilities of $5,600, net working capital of $2,100,
inventory of $3,900, and sales of $13,500. What is the quick ratio? Assume
pre-paid expenses are zero.

0.68

0.70

1.38

1.47

2.08

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Accounting questions

$131.00

Description

1. A stock is expected
to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate
of 5% a year forever (g = -5%). If the
company’s expected and required rate of return is 15%, which of the following
statements is CORRECT?

a. The company’s
current stock price is $20.

b. The company’s
dividend yield 5 years from now is expected to be 10%.

c. The constant growth
model cannot be used because the growth rate is negative.

d. The company’s
expected capital gains yield is 5%.

e. The company’s stock
price next year is expected to be $9.50.

2. A share of common
stock has just paid a dividend of $2.00.
If the expected long-run growth rate for this stock is 6.0%, and if
investors’ required rate of return is 10.5%, what is the stock’s intrinsic
value?

3. E. M. Roussakis
Inc.’s stock currently sells for $55 per share.
The stock’s dividend is projected to increase at a constant rate of 4%
per year. The required rate of return on
the stock, rs, is 15.50%. What is Roussakis’
expected price 5 years from now?

4. Carter’s preferred
stock pays a dividend of $1.40 per quarter.
If the price of the stock is $60.00, what is its nominal (not effective)
annual expected rate of return?

5. Schnusenberg
Corporation just paid a dividend of $1.25 per share, and that dividend is
expected to grow at a constant rate of 7.00% per year in the future. The company’s beta is 1.15, the required
return on the market is 10.50%, and the risk-free rate is 4.00%. What is the intrinsic value for
Schnusenberg’s stock?

6. Rentz RVs Inc. (RRV)
is presently enjoying relatively high growth because of a surge in the demand
for recreational vehicles. Management
expects earnings and dividends to grow at a rate of 30% for the next 4 years,
after which high gas prices will probably reduce the growth rate in earnings
and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.25.
RRV’s beta is 1.20, the market risk premium is 5.75%, and the risk-free rate is
3.00%. What is the intrinsic value of RRV’s common stock?

7. Using the
information on Rentz RVs Inc. from problem 6, what is the dividend yield
expected for the next year?

8. The Wei Company’s
last paid dividend was $2.75. The
dividend growth rate is expected to be constant at 2.50% for 2 years, after
which dividends are expected to grow at a rate of 8.00% forever. Wei’s required return (rs) is 16.00%. What is the intrinsic value of Wei’s stock?

9. Using the
information on Wei Company from problem 8, what should be the price of Wei’s
stock at the end of Year 5?

10. You are an analyst
studying Beranek Technologies, which was founded 10 years ago. It has been profitable for the last 5 years,
but it has needed all of its earnings to support growth and thus has never paid
a dividend. Management has indicated
that it plans to pay a $0.50 dividend 3 years from today, then to increase it
at a relatively rapid rate for 2 years with 50% dividend growth in year 4 and
25% dividend growth in year 5, and then to increase its dividend at a constant growth
rate of 6.00% per year thereafter.
Assuming a required return of 15.00%, what is your estimate of the intrinsic
value of Beranek’s stock?

11. Schalheim Sisters
Inc. has always paid out all of its earnings as dividends, and hence has no
retained earnings. This same situation is expected to persist in the
future. The company uses the CAPM to
calculate its cost of equity. Its target
capital structure consists of common stock, preferred stock, and debt. Which of the following events would reduce its
WACC?

a. The market risk premium declines.

b. The flotation costs associated with
issuing new common stock increase.

c. The company’s beta increases.

d. Expected inflation increases.

e. The flotation costs associated with
issuing preferred stock increase.

12. Hettenhouse Company’s
(HC) perpetual preferred stock sells for $105.50 per share, and it pays a $9.50
annual dividend. If the company were to
sell a new preferred issue, it would incur a flotation cost of 6.00% of the price
paid by investors. HC’s marginal tax
rate is 30%. What is the company’s cost
of preferred stock for use in calculating the WACC?

13. Scanlon Inc.’s CFO
hired you as a consultant to help her estimate the cost of capital. You have been provided with the following
data: the risk–free rate of return is 4.00%;
the market risk premium is 6.00%; and Scanlon’s beta is 1.25. Based on the CAPM approach, what is the cost
of equity from retained earnings?

14. Assume that you are a
consultant to Broske Inc., and you have been provided with the following
data: D1 = $2.10; P0 = $45.50; and g =
7.00% (constant). What is the cost of
equity from retained earnings based on the DCF approach?

15. P. Lange Inc. hired your
consulting firm to help them estimate the cost of equity. The yield on Lange’s bonds is 7.25%, and your
firm’s economists believe that the cost of equity can be estimated using a risk
premium of 4.00% over a firm’s own cost of debt. What is an estimate of Lange’s cost of equity
from retained earnings?

16. In their most recent
fiscal year, XYZ, Inc. had net income of $18 million and total common equity of
$200 million. Also, XYZ, Inc. pays out
40% of its earnings as dividends. Using
the Retention Growth Model, what is your best estimate of XYZ’s expected growth
rate?

17. Several years ago the
Pettijohn Company sold a $1,000 par value, noncallable bond that now has 15
years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $950, and the
company’s tax rate is 25%. To issue new
bonds, Pettijohn would incur 3% flotation costs. What is the component cost of debt for use in
the WACC calculation?

18. LePage Co. expects to
earn $2.50 per share during the current year, its expected dividend payout
ratio is 65%, its expected constant dividend growth rate is 6.0%, and its
common stock currently sells for $22.50 per share. New stock can be sold to the public at the
current price, but a flotation cost of 10% would be incurred. What would be the cost of equity from new
common stock?

19. You were hired as a
consultant to Quigley Company, whose target capital structure is 40% debt, 10%
preferred, and 50% common equity. The
interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost
of retained earnings is 16.25%, and the tax rate is 34%. The firm will not be issuing any new
stock. What is Quigley’s WACC?

20. Roxie Epoxy’s balance
sheet shows a total of $50 million long-term debt with a coupon rate of 8.00%
and a yield to maturity of 7.00%. This
debt currently has a market value of $55 million. The balance sheet also shows that that the
company has 20 million shares of common stock, and the book value of the common
equity (common stock plus retained earnings) is $65 million. The current stock price is $8.50 per share;
stockholders’ required return, rs, is 16.00%; and the firm’s tax rate is 35%. Based on market value weights, and assuming
the firm is currently at its target capital structure, what WACC should Roxie
use to evaluate capital budgeting projects?

21. Projects C and D are
mutually exclusive and have normal cash flows with an initial outflow followed
by a series of positive cash inflows. Project C has a higher NPV if the WACC is
less than 12%, whereas Project D has a higher NPV if the WACC exceeds 12%. Which of the following statements is CORRECT?

a. Project D has a higher IRR.

b. Project D is probably larger in scale
than Project C.

c. Project C probably has a faster
payback.

d. Project C has a higher IRR.

e. The crossover rate between the two
projects is below 12%.

22. Frye Foods is considering a project
that has the following cash flow data.
What is the

project’s IRR?

Year:

0

1

2

3

4

5

Cash
flows:

-$1,400

$325

$325

$325

$325

$325

23. Van Auken Inc. is considering a project
that has the following cash flows:

Year

Cash Flow

0

-$1,000

1

400

2

300

3

500

4

400

The company’s WACC is 10%. What is the project’s ordinary payback?

24. Babcock Inc. is considering a project
that has the following cash flow and WACC data.

What is the project’s NPV?

WACC:

10.00%

Year:

0

1

2

3

Cash
flows:

-$950

$500

$300

$400

25. Garvin
Enterprises is considering a project that has the following cash flow and
WACC

data.
What is the project’s discounted payback?

WACC:

12.00%

Year:

0

1

2

3

Cash
flows:

-$1,000

$500

$500

$500

26. Hindelang Inc. is considering a project
that has the following cash flow and WACC data.

What is the project’s MIRR?

WACC:

11.00%

Year:

0

1

2

3

4

Cash
flows:

-$900

$300

$320

$340

$360

27. Hogwarts
Inc. is considering a project with the following cash flows:

Initial
cash outlay = $2,500,000

After–tax
net operating cash flows for years 1 to 4 = $750,000 per year

Additional
after–tax terminal cash flow at the end of year 4 = $600,000

Compute
the profitability index of this project if Hogwarts’ WACC is 12%.

28.
Anderson Associates is considering two mutually exclusive projects that
have the following cash

flows:

Project A Project B

Year Cash Flow Cash Flow

0 -$10,000 -$8,000

1 5,000 7,000

2 2,000 3,000

3 6,000 1,000

4 8,000 1,000

At what cost of capital do the two projects
have the same net present value? (That is, what is the crossover rate?)

29. Walker & Campsey
wants to invest in a new computer system, and management has narrowed the
choice to Systems A and B.

System A requires an up-front cost of $100,000, after which it
generates positive after-tax cash flows of $60,000 at the end of each of the
next 2 years. The system could be
replaced every 2 years, and the cash inflows and outflows would remain the
same.

System B also requires an up-front cost of $100,000, after which it
would generate positive after-tax cash flows of $48,000 at the end of each of
the next 3 years. System B can be
replaced every 3 years, but each time the system is replaced, both the cash
outflows and cash inflows would increase by 10%.

The company needs a computer system for 6 years, after which the
current owners plan to retire and liquidate the firm. The company’s cost of capital is 14%. What is the NPV (on a 6-year extended basis)
of the system that adds the most value?

30. Using the information
from problem 29 on Walker & Campsey, what is the equivalent annual annuity
(EAA) for System A?

Chapter 11:

31. When evaluating a new project, firms should
include in the projected cash flows all of the

following
EXCEPT:

a.

Changes in net operating working capital attributable
to the project.

b.

Previous
expenditures associated with a market test to determine the feasibility of
the project provided those costs have been expensed for tax purposes.

c.

The
value of a building owned by the firm that will be used for this project.

d.

A
decline in the sales of an existing product provided that decline is directly
attributable to this project.

e.

The
salvage value of assets used for the project at the end of the project’s
life.

32. Taussig Technologies is considering two
potential projects, X and Y. In
assessing the projects’ risks, the company estimated the beta of each project
versus both the company’s other assets and the stock market, and it also
conducted thorough scenario and simulation analyses. This research produced the following
numbers:

Project X

Project Y

Expected NPV

$350,000

$350,000

Standard deviation (sNPV)

$100,000

$150,000

Project beta (vs. market)

1.4

0.8

Correlation of the project cash flows with cash flows
from currently existing projects.

Cash flows are not correlated with the cash
flows from existing projects.

Cash flows are highlycorrelated with the cash
flows from existing projects.

Which
of the following statements is CORRECT?

a.

Project
X has more stand-alone risk than Project Y.

b.

Project
X has more corporate (or within-firm) risk than Project Y.

c.

Project
X has more market risk than Project Y.

d.

Project
X has the same level of corporate risk as Project Y.

e.

Project
X has less market risk than Project Y.

33. Langston Labs has an overall (composite)
WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and
Langston evaluates low-risk projects with a WACC of 8%, average projects at
10%, and high-risk projects at 12%.
The company is considering the following projects:

Project

Risk

Expected
Return

A

High

15%

B

Average

12

C

High

11

D

Low

9

E

Low

6

Which
set of projects would maximize shareholder wealth?

a.

A
and B.

b.

A,
B, and C.

c.

A,
B, and D.

d.

A,
B, C, and D.

e.

A,
B, C, D, and E.

34. Which of the following statements is
CORRECT?

a.

Since depreciation is a cash expense, the faster an
asset is depreciated, the lower the projected NPV from investing in the
asset.

b.

Under
current laws and regulations, corporations must use straight-line
depreciation for all assets whose lives are 5 years or longer.

c.

Corporations
must use MACRS depreciation for both stockholder reporting and tax purposes.

d.

Using
MACRS depreciation rather than straight line normally has the effect of
speeding up cash flows and thus increasing a project’s forecasted NPV.

e.

Using
MACRS depreciation rather than straight line normally has the effect of
slowing down cash flows and thus reducing a project’s forecasted NPV.

35. Which of the following does NOT
have incremental cash flow effects and thus should NOT be
considered in capital budgeting decisions?

a.

A
firm has a parcel of land that can be used for a new plant site, be sold, or
be used for agricultural purposes.

b.

A
new product will generate new sales, but some of those new sales will be from
customers who switch from one of the firm’s current products.

c.

A firm must obtain new equipment for the project, and
$1 million of costs for shipping and installing the new machinery will be
required.

d.

A
firm has spent $2 million on R&D associated with a new product. These costs have been expensed for tax
purposes, and they cannot be recovered if the new project is rejected.

e.

A
firm can produce a new product, and the existence of that product will
stimulate sales of some of the firm’s other products.

36. You work for Athens Inc., and you must
estimate the Year 1 operating cash flow for a project with the following
data. What is the Year 1 after-tax net
operating cash flow?

Sales
revenues

$15,000

Depreciation

$4,000

Cash
operating costs

$6,000

Tax
rate

35.0%

37. Fool Proof Software is considering a new
project whose data are shown below.
The equipment that will be used has a 3-year class life, and will be
depreciated by the MACRS depreciation system.
Revenues and Cash operating costs are expected to be constant over the
project’s 10-year life. What is the
Year 1 after-tax net operating cash flow?

Equipment
cost (depreciable basis)

$75,000

Sales
revenues, each year

$65,000

Cash
operating costs

$25,000

Tax
rate

35.0%

38. Bing
Services is now in the final year of a project.
The equipment originally cost $20,000, of which 75% has been
depreciated. Bing can sell the used
equipment today for $7,500, and its tax rate is 35%. What is the equipment’s net after-tax salvage
value for use in a capital budgeting analysis?

39. Thomson Media is considering investing in
some new equipment whose data are shown below. The equipment has a 3-year class life and will
be depreciated by the MACRS depreciation system, and it will have a positive
pre-tax salvage value at the end of Year 3, when the project will be closed
down. Also, some new working capital will
be required, but it will be recovered at the end of the project’s life. Revenues and cash operating costs are
expected to be constant over the project’s 3-year life. What is the project’s NPV?

WACC

12.0%

Net
investment in fixed assets (depreciable basis)

$60,000

Required
new working capital

$10,000

Sales
revenues, each year

$75,000

Operating
costs excl. depr’n, each year

$30,000

Expected
pretax salvage value

$7,000

Tax
rate

35.0%

40. A project’s base case or
most likely NPV is $50,000, and assume its probability of occurrence is

60%. Assume the best case scenario NPV is 80% higher than the base
case and assume the worst

scenario NPV is 30% lower than the base case. Both the best case scenario and the worst
case scenario

have a 20% probability of occurrence. Find the project’s coefficient of variation.

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accounting questions

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Question 1:

Low company
produces four types of products using the same production process. Each product
can be process further. The common costs of these four product, up to the split
of point are, $200,000, and these costs are allocated based on the quantity
produced. Following its information regarding production, prices, and costs for
each product:

products

number of units produced

selling price at split off point

Selling price after further processing

Additional costs for further processing

A

500,000

$1.99

$2.95

$350,000

B

250,000

3.99

5.25

300,000

C

125,000

3.50

4.99

200,000

D

50,000

2.99

4.50

100,000

Required:

1. if only one product can be processed further, which product should
Low process?

2. If common costs up to the split off point were allocated on the basis
of the market would your decision in part (1) be different? briefly explain why
or why not.

Question 2: You work as an analyst for a bulletproof glass manufacturer
. one of your duty is to study the
quality costs of the company. The following is the information for the year
ended December 31, 2012:

2012

Disposal
of defective products

$110,000

Warranty
replacement

256,000

Warranty
repairs

825,000

Training

521,000

Cost
incurred to test production equipment

590,000

Amortization
of testing equipment

89,000

Inspection

485,000

Statistical
process control

59,000

Supplies
used in testing

87,000

Product
testing

283,000

Systems
development

68,000

Quality
engineering

145,000

Rework
labour

522,000

Total

$
4,090,000

Sales

$25,300,000

1. Repair the quality cost report with the information collected by the
accounting.

Question 3:

GR is the manufacturer of umbrellas.
After three years of research and development. The company recently
developed a new umbrella for golfers. The unit production costs of that
umbrella are as follow:

Raw
material $8.50

Direct labour 6.00

Overhead costs—variable 2.00

Overhead costs—fixed 1.00

Selling and administrative expenses—variable 0.50

Selling and administrative expenses—fixed 1.00

All costs are based on an expected level of
production and sales of 1,000,000 umbrellas.

Required:

Answer the following independent questions:

1. Calculate the break even price of the new
umbrella. Show all your calculations.

2. If GR requires a minimum contribution margin
of 25% for all its products, calculate the minimum selling price for the new
umbrella. Show all your calculations.

3. If the selling price of the new umbrella is
set at $30, calculate the number of umbrellas that must be sold to generate an
income of $8,000,000. Show all your calculation, rounding to the nearest whole
unit.

4. If
the selling price of the new umbrella is set at $25, calculate the number of
umbrellas that must be sold to generate an income of 20% on sales. Show all
your calculation, rounding to the nearest whole unit.

Question
4:

A
company plans to market a new product. It has received a order of 5,000 units
from a client. The client is willing to pay $75 per unit. The estimated costs
of producing each unit of the new product are:

Direct
materials $24

Direct
labour 14

Variable
overhead 12

Fixed overhead 10

Total $60

The company usually has rate of return on sales of 15%.

Required:

1. In this situation, calculate the target cost for this product.

2. Calculate the target profit.

3. Based on the current cost structure, calculate the total profit.

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accounting questions

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1. Wayne and Maria file a joint tax return on which they itemize their deductions and report AGI of $50,000. During the year they incurred $1,500 of medical expenses when Maria broke her leg. Furthermore, their dentist informed them that their daughter, Alicia, needs $3,000 of orthodontic work to correct her overbite. Wayne also needs a new pair of eye glasses that will cost $300. What tax issues should Wayne and Maria consider?

2. This year, Chuck took out a loan to purchase some raw land for investment. He paid $40,000 for the land, and he expects that within 5 years the land will be worth at least $75,000. Chuck is married, and his AGI for the year is $240,000. Chuck paid $4,300 in interest on the loan this year. Chuck has $2,600 in interest income and 1,300 in dividend income for the year. He plans to itemize his deductions so he can use the interest expense to offset his investment income. What tax issues should Chuck consider?

3. Chad is divorced and has custody of Brett, his 14-year-old-son. Chad’s ex wife has custody of their daughter, Sara. During the year, Chad incurs $3,000 for orthodontic work for Sara to correct a severe overbite and $2,000 in unreimbursed medical expenses associated with Brett’s broken leg. Chad also pays $900 in health insurance premiums, which is withheld from his paycheck on a pre-tax basis. Both Brett and Sara are covered under Chad’s medical insurance plan. In addition, Chad incurs $400 for prescription drugs and $1,000 in doctor bills for himself. Chad’s AGI is $40,000. What is Chad’s medical expense deduction for the year assuming that his other itemized deductions exceed the standard deduction?

4. Joyce is a single, cash-method taxpayer. On April 11, 2012, Joyce paid $120 state income taxes with her 2011 state income tax return. During 2012, Joyce had $1,600 in state income taxes withheld. On April 13, 2013, Joyce paid $200 with her 2012 state tax return. During 2013, she had $2,100 in state income taxes withheld from her paycheck. Upon filing her 2013 tax return on April 15, 2014, she received a refund of $450 for excess state income taxes withheld. Joyce had a total AGI in 2013 and 2014 of $51,000 and $53,500, respectively. In 2013, Joyce also paid $5,500 in qualified residence interest.

a. What is the amount of state income taxes Joyce may include as an itemized deduction for 2012?
b. What is the allowed itemized deduction for state income taxes for 2013?
c. What is her taxable income for 2013?
d. What is her AGI for 2014?

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Accounting questions

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Resolved Question:

1. The convention of consistency refers to consistent use of accounting principles:

among firms

within industries

among accounting periods

throughout the accounting period

2. Jayadev Athreya has started his first job. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years?

$2,667,904

$3,594,524

$1,745,600

$5,233,442

3. Variance reports are:

SEC financial reports

internal reports for management

external financial reports

all of these

4. Horizontal analysis is also known as:

linear analysis

vertical analysis

common size analysis

trend analysis

5. Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.

What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.

$1,787 million

$1,344 million

$1,315 million

$453.6 million

6. Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company’s bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)

$1,066

$923

$1014

$972

7. How firms estimate their cost of capital: The WACC for a firm is 13.00 percent. You know that the firm’s cost of debt capital is 10 percent and the cost of equity capital is 20% What proportion of the firm is financed with debt?

33%

50%

70%

30%

8. The cash conversion cycle?

estimates how long it takes on average for the firm to collect its outstanding accounts receivables balance.

begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.

begins when the firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures.

shows how long the firm keeps its inventory before selling it.

9. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called:

responsibility accounting

flexible accounting

master budgeting

static reporting

10. Which of the following financial statements is concerned with the company at a point in time?

balance sheet

statement of cash flows

income statement

retained earnings statement

11. The major element in budgetary control is:

the approval of the budget by the stockholders

the comparison of actual results with planned objectives.

the preparation of long-term plans

the valuation of inventories

12. The group of users of accounting information charged with achieving the goals of the business is its:

creditors

investors

managers

auditors

13. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

most common form of organization

reduced legal liability for investors

lower taxes

harder to transfer ownership

14. Teakap, Inc. has current assets of $1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000 and retained earnings of $1,468,347. How much long-term debt does the firm have?

$1,844,022

$803,010

$2,303,010

$2,123,612

15. Gateway, Corp. has an inventory turnover of 5.6. What is the firm’s days’s sales in inventory?

65.2

57.9

61.7

64.3

16. An activity that has a direct cause-effect relationship with the resources consumed is a(n):

product activity

cost driver

cost pool

overhead rate

17. The process of evaluating financial data that change under alternative courses of action is called:

cost-benefit analysis

double entry analysis

contribution margin analysis

incremental analysis

18. An unrealistic budget is more likely to result when it:

is developed with performance appraisal usages in mind.

has been developed in a top down fashion.

has been developed by all levels of management.

has been developed in a bottom up fashion.

19. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)

12%

40%

32%

16%

20. Which of the following is considered a hybrid organizational form?

partnership

sole proprietorship

limited liability partnership

corporation

21. A cost which remains constant per unit at various levels of activity is a:

manufacturing cost

mixed cost

fixed cost

variable cost

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Accounting questions

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Question 1 A company established a direct material standard of 2 pounds of material at a cost of $6 per pound for unit produced. During August the company produced 6,000 units of product. 10,000 pounds of direct material which cost $6.50 per pound were used in the production process. Compute the direct material quantity variance for August.
Answers: a. $5,000 unfavorable. b. $12,000 unfavorable. c. $5,000 favorable. d. $12,000 favorable. e. $7,000 favorable.
 Question 2 Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?
Selected Answer: d.$30,000Answers: a.$12,500 b.$25,000 c. $20,000 d.$30,000 e.$35,000
Question 3 Bartels Corp. produces woodcarvings. It takes 2 hours of direct labor to produce a carving. Bartels’ standard labor cost is $12 per hour. During August, Bartels produced 10,000 carvings and used 21,040 hours of direct labor at a total cost of $250,376. What is Bartels’ total labor variance for August?
Answers: a. $10,376 unfavorable. b. $2,104 unfavorable. c. $2,104 favorable. d. $12,480 unfavorable. e. $12,480 favorable.
Question 4 Bartels Corp. produces woodcarvings. It takes 2 hours of direct labor to produce a carving. Bartels’ standard labor cost is $12 per hour. During August, Bartels produced 10,000 carvings and used 21,040 hours of direct labor at a total cost of $250,376. What is Bartels’ labor rate variance for August?
 Question 5 Actual fixed overhead for Kapok Company during March was $92,780. The flexible budget for fixed overhead this period is $89,000 based on a production level of 5,000 units. If the company actually produced 4,200 units what is the fixed overhead volume variance for March?
 Answers: a. $3,780 favorable. b. $18,020 unfavorable. c. $14,240 unfavorable. d. $3,780 unfavorable. e. $14,240 favorable. •
 Question 6 A company’s flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is:
 Answers: a. $2,667 b. $14,000 c. $18,667 d. $24,000 e. $35,000

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Accounting questions

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Problem 1:

TheQEC Company owns and operates an amusement park. The following are selected accounts from theQEC Company’s trial balance as of December 31:

Debit

Credit

Equipment

$973,400

Accumulated Depreciation – Equipment

$304,200

Notes Payables

456,300

Admissions Revenue

1,926,600

Advertising Expense

69,400

Salaries Expense

292,000

Interest Expense

7,100

The following information is also available:

1. The equipment is depreciated using the straight-line method over its estimated life of17years. The equipment has an estimated salvage value of$202,800

2. The note payable carries a8% interest rate. It was given to the First National Bank onSeptember17and is due to be repaid in270days after that date. (Note: Assume a 365 day year in any computations.)

3. During the Christmas holiday season,QEC Company ran a promotion for park admission tickets valid during the next year. In total, they sold4,980tickets at a price of$15each. The sales amount was credited to Admissions Revenue.

4. Included in the Advertising Expense account balance is a$5,580prepayment of advertising that will be aired on local radio stations during the first quarter of the next year.

5. As of December 31, there was$23,830in salaries that had been earned but not recorded.

6. QEC Company ends its accounting year on December 31.

Instructions:

1. Prepare the annual adjusting journal entries necessary as of December 31.

2. Compute the amount of the following account balances that should be shown on the income statement for the year:

a. Interest Expense

b. Admissions Revenue

c. Advertising Expense

d. Salaries Expense

Problem 2:

The following is the trial balance of theRRV Company as of December 31:

RRV Company

Trial Balance

December 31

Debit

Credit

Cash

$121,600

Accounts Receivable

276,000

Allowance for Doubtful Accounts

$4,600

Inventory, December 31

525,700

Prepaid Insurance

33,500

Equipment

552,000

Accumulated Depreciation – Equipment

230,000

Notes Payable

184,000

Common Stock

529,600

Retained Earnings

65,700

Sales

3,942,600

Cost of Goods Sold

2,615,300

Sales Salaries Expense

328,600

Advertising Expense

44,000

Administrative Salaries Expense

427,100

Office Expense

32,700

$4,956,500

$4,956,500

Additional Information:

1. Estimated bad debt expense for the year is$9,200.

2. Equipment is depreciated using the straight-line method over the estimated life of12 years with zero estimated salvage value.

3. During the year,$16,750 of the prepaid insurance expired.

4. During the year,$22,080 of interest on the notes payable accrued.

5. $15,770 of sales salaries were earned towards the end of the year but not recorded.

6. The company paid$4,600 for advertising in advance which will be used during the next year.

7. At the end of the year,$9,810 of office supplies was on hand. All purchases of office supplies are charged to Office Expense when purchased.

8. The company ends its accounting year on December 31.

Instructions:

1. Prepare the annual adjusting journal entries necessary as of December 31.

2. Prepare the annual closing journal entries necessary to close the books for the year.

E4-6

(Multiple-Step and Single-Step) The accountant of Weatherspoon Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2012.

Rent revenue $29,000

Interest expense 18,000

18,000

Market appreciation on land above cost 31,000

31,000

Salaries and wages expense (sales) 114,000

114,800

Supplies (sales) 17,600

17,600

Income tax 30,600

30,600

Salaries and wages expense (administrative)

$135,900

135,900

Other administrative expenses 51,700

51,700

Cost of goods sold 516,000

516,000

Net sales 980,000

980,000

Depreciation on plant assets (70% selling, 30% administrative) $65,000

65,000

Cash dividends declared 16,000

16,000

There were 20,000 shares of common stock outstanding during the year.

Instructions

1. Prepare a multiple-step income statement.

2. Prepare a single-step income statement.

3. Which format do you prefer? Discuss. (As a short essay.)

E4-16

(Various Reporting Formats) The following information was taken from the records of Gibson Inc. for the year 2012: income tax applicable to income from continuing operations $119,000; income tax applicable to loss on discontinued operations $25,500; income tax applicable to extraordinary gain $32,300; income tax applicable to extraordinary loss $20,400; and unrealized holding gain on available-for-sale securities $15,000.

Extraordinary gain

$

95,000

Cash dividends declared

$ 150,000

Loss on discontinued operations

75,000

Retained earnings January 1, 2012

600,000

Administrative expenses

240,000

Cost of goods sold

850,000

Rent revenue

40,000

Selling expenses

300,000

Extraordinary loss

60,000

Sales revenue

1,700,000

Shares outstanding during 2012 were 100,000.

Instructions

4. Prepare a single-step income statement for 2012.

5. Prepare a retained earnings statement for 2012.

6. Show how comprehensive income is reported using the second income statement format.

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Accounting questions

$11.00

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Ladanza Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $135.00 per unit.

Sales volume (units) 11,000 12,120
Cost of sales $935,000 $1,030,200
Selling and administrative costs $627,000 $644,920

The best estimate of the total contribution margin when 11,410 units are sold is:
$387,940
$501,970
$244,250
$167,570

11:00
Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $496,000 or a new model 240 machine costing $481,000 to replace a machine that was purchased 6 years ago for $486,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired.

Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A.

Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $481,000 in the new machine, the money could be invested in a project that would return a total of $483,000.

In making the decision to buy the model 240 machine rather than the model 370 machine, the differential cost was:
$5,000
$10,000
$15,000
$-3,000

11:01
At a sales volume of 43,000 units, Thoma Corporation’s sales commissions (a cost that is variable with respect to sales volume) total $580,500.

To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 40,400 units? (Assume that this sales volume is within the relevant range.)
$13.50
$14.19
$13.19
$12.87

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Accounting Questions

$28.00

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The Stanley Company produces and markets two product lines: Racquets and Gloves. The following
data were gathered on activities during the third quarter:

Racquets Gloves
Sales in units 1,000 5,000
Sales price per unit $100 $40
Variable production costs per unit $20 $8
Traceable fixed production costs $20,000 $37,000
Variable selling expenses per unit $11 $2
Traceable fixed selling expenses $10,000 $23,000
Allocated portion of corporate expenses $6,000 $120,000
Required (10 points):
a. Prepare a segmented income statement for last quarter, showing both “Amount” and “Percent”
columns for the division as a whole and for each product line.
b. Discuss the differences between traceable costs and common costs. 2
6. Mikell supplies acetylene and other compressed gases to industry. Data regarding the store’s operations
follow:
Sales are budgeted at $360,000 for November, $380,000 for December, and $350,000 for January.
Collections are expected to be 75% in the month of sale and 25% in the month following the sale. The
cost of goods sold is 65% of sales. The company maintains a targeted ending inventory of 60% of the
following month’s sales. Payment for merchandise is made in the month following the purchase. Other
monthly expenses to be paid in cash are $21,900. Monthly depreciation is $20,000.
Required (20 points):
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare a Budgeted Income Statement for the two month period of November and December.
3

7. The Charlotte Company produces a single product. The company had the following results for its first
two years of operation:
Year 1 Year 2
Sales
$1,200,0
00
$1,200,0
00
Cost of goods sold 800,000 680,000
Gross margin 400,000 520,000
Selling and administrative
expenses 300,000 300,000
Net operating income (loss) $100,000 $220,000
Additional information about the company is as follows:
In Year 1, the company produced and sold 40,000 units of its only product. In Year 2, the company
again sold 40,000 units, but increased production to 50,000 units. The company’ variable production
cost is $5 per unit and its fixed manufacturing overhead cost is $600,000 per year. Fixed manufacturing
overhead costs are applied to the product on the basis of each year’s unit production (i.e. a new fixed
overhead rate is computed each year). Variable selling and administrative expenses are $2 per units
sold.
Required (15 points):
a. Compute the unit product cost for each year under absorption costing and under variable costing.
b. Prepare an income statement for each year, using the contribution approach with variable costing.
c. Reconcile the variable costing and absorption costing income figures for each year.
d. Explain why the net operating income for Year 2 under absorption costing was higher than the net
operating income for Year 1, although the same number of units were sold in each year.

8. Vaughn Corporation had net operating income of $380,000 and average operating assets of $2,000,000.
The corporation requires a return on investment of 18%. Show all calculations supporting your
responses!
Required (10 points):
a. Calculate the company’s return on investment (ROI) and residual income (RI).
b. Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual
net operating income of $12,950. Would it be in the best interests of the company to make this
investment? 4
c. Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual
net operating income of $12,950. If the division planning to make the investment currently has a
return on investment of 20% and its manager is evaluated based on the division’s ROI, will the
division manager be inclined to request funds to make this investment?
d. Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual
net operating income of $12,950. If the division planning to make the investment currently has a
residual income of $50,000 and its manager is evaluated based on the division’s residual income,
will the division manager be inclined to request funds to make this investment?

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Accounting Questions

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0. Assuming the CAPM or one-factor model holds, what is the cost of equity for a firm if the firm’s equity has a beta of 1.2, the risk-free rate of return is 2%, the expected return on the market is 9%, and the return to the company’s debt is 7%? A. 10.4%B. 10.8%C. 12.8%D. 14.4%E. None of the above.

7. Which one of the following is an example of unsystematic risk? A. The federal government lowers income taxes.B. The inflation rate increases unexpectedly.C. The GDP rises by 2% more than anticipated.D. Interest rates decline by one-half of one percent.E. An oil tanker runs aground and spills its cargo.

One year ago, you purchased a stock at a price of $32.50. The stock pays quarterly dividends of $.40 per share. Today, the stock is worth $34.60 per share. What is the total amount of your dividend income to date from this investment? A. $.40B. $1.60C. $2.10D. $2.50E. $3.70

Additional Requirements

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Exercise 16-25

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On January 1, 2012, Lindsey Company
issued 10-year, $3,081,000 face value, 6% bonds, at par. Each $1,000 bond is
convertible into 25 shares of Lindsey common stock. Lindsey’s net income in
2012 was $282,000, and its tax rate was 45%. The company had 101,000 shares of
common stock outstanding throughout 2012. None of the bonds were converted in
2012.

(a) Compute diluted earnings per share for
2012. (Round answer to 2 decimal places, e.g. $2.55.)

Diluted earnings per share

$_____________

(b) Compute diluted earnings per share for
2012, assuming the same facts as above, except that $1,010,000 of 6%
convertible preferred stock was issued instead of the bonds. Each $100
preferred share is convertible into 10 shares of Lindsey common stock. (Round answer to 2 decimal places, e.g. $2.55.)

Diluted earnings per share

$____________

———————————————————————————————————————-

Exercise 16-19

.gif”>

A portion of the statement of income and
retained earnings of Pierson Inc. for the current year follows.

Income before extraordinary item

$19,840,000

Extraordinary loss, net of applicable
income tax (Note 1)

1,383,000

Net income

18,457,000

Retained earnings at the beginning of
the year

83,310,000

101,767,000

Dividends declared:

On preferred stock—$6.00 per share

$306,000

On common stock—$1.75 per share

14,180,000

14,486,000

Retained earnings at the end of the
year

$87,281,000

Note 1. During the year, Pierson Inc. suffered a
major casualty loss of $1,383,000 after applicable income tax reduction of
$1,210,000.

At the end of the current year, Pierson
Inc. has outstanding 8,273,000 shares of $11 par common stock and 51,000 shares
of 6% preferred.

On April 1 of the current year, Pierson
Inc. issued 1,071,000 shares of common stock for $33 per share to help finance
the casualty.

SOLVE FOR:

Pierson Inc.

Income Statement

For the year ended
December 31, 2012

______________________________ $______________________

______________________________ $______________________

______________________________ $______________________

———————————————————————————————————————-

Exercise 16-8

.gif”>

On September 1, 2012, Jacob Company sold
at 104 (plus accrued interest) 4,200 of its 9%, 10-year, $1,000 face value,
nonconvertible bonds with detachable stock warrants. Each bond carried two
detachable warrants. Each warrant was for one share of common stock at a
specified option price of $16 per share. Shortly after issuance, the warrants
were quoted on the market for $3 each. No fair value can be determined for the
Jacob Company bonds. Interest is payable on December 1 and June 1. Bond issue
costs of $35,400 were incurred.

Prepare in general journal format the
entry to record the issuance of the bonds. (Credit account
titles are automatically indented when amount is entered. Do not indent
manually. If no entry is required, select “No entry” for the account
titles and enter 0 for the amounts.)

Account Titles and Explanation Debit Credit

_________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

Exercise 16-6

On January 1, 2011, Trillini Corporation
issued $4,450,000 of 10-year, 8% convertible debentures at 104. Interest is to
be paid semiannually on June 30 and December 31. Each $1,000 debenture can be
converted into 9 shares of Trillini Corporation $102 par value common stock
after December 31, 2012.

On January 1, 2013, $890,000 of
debentures are converted into common stock, which is then selling at $114. An
additional $890,000 of debentures are converted on March 31, 2013. The market
price of the common stock is then $120. Accrued interest at March 31 will be
paid on the next interest date.

Bond premium is amortized on a
straight-line basis.

Make the necessary journal entries for:

(a)

December 31, 2012.

(c)

March 31, 2013.

(b)

January 1, 2013.

(d)

June 30, 2013.

No Account Titles and Explanations Debit Credit

(a) _________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

(b) _________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

(c) _________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

(to record
interest expense)

_________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

(to record conversion)

(d _________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

_________________________ $______________ $______________

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accounting questions

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Description

. Define “Retailing”: _____________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

2. Define “Retail Merchandising”: ___________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

3. List the 5 “Rights” that describe the challenge of effective retail buying:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________

4. Describe what is meant when we say that fashion retailing has moved from a “Push”
to a “Pull” industry: _________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________

5. List the 6 key functions that are the basis of the structure of modern retail organizations:
_________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

6. Describe the Omni-Channel Challenge for Retail Executives: ______________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________

7. Calculate the inventory turnover for the following retail business: _____________________

BOM Stocks
48,000
55,000
65,000
65,000
60,000
50,000
45,000

February
March
April
May
June
July
EOM Stock

Net Sales
15,000
20,000
25,000
25,000
22,000
13,000

8. Define Gross Margin Profit and how it is calculated: ________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________

9. Calculate the amount of profit or loss made by a retail store posting the following
financial results: ______________________________________________
Net Sales
$565,000.00
Cost of Goods Sold
$295,000.00
Expenses
$170,000.00

10. Define “Markup” and how we calculate Retail Markup %: ___________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
___________________________________________________________________________

11. Which of the following steps is the most critical for preparing an effective
6 Month Buying Plan? _________________________________________________
A. Planning inventory turnover
B. Preparing the sales forecast
C. Planning the monthly flow of receipts
D. Planning retail reductions

12. List and briefly describe the 4 critical functions of the merchandising organization:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

13. Describe how the buying team and the design team work together when doing
private label product development: _________________________________________
____________
___________________________________________________________
_______________________________________________________________________
14. You are a buyer for a department that has seen its sales grow to last year by
12% for the past 90 days, by 14% for the past 6 months, and by 13% for the past year.
Select from the following the sales increase to last year you would plan for the coming
selling season: ________________________________________________________________
A. a 20% increase to last year
B. a 5% increase to last year
C. a 13% increase to last year
D. I would not plan an increase to last year.

15. The following represents the monthly distribution of sales that has transpired for a
department for the past two spring selling seasons. How would you plan the
distribution of sales by month for Spring 2014? ______________________________________

August
September
October
November
December
January

Fall 2012
11%
17%
14%
20%
26%
12%

Fall 2013
10%
17%
13%
21%
26%
13%

Fall 2014
?
?
?
?
?
?

16. List and briefly describe the 3 dimensions on which a retail buyer’s performance
is evaluated: __________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________

17. Calculate the Cumulative Markup % achieved for the following retail department:
__________________________________
Cost $
Retail $
Opening Inventory
325,000
675,000
Purchase 1
55,000
125,000
Purchase 2
30,000
65,000
Purchase 3
47,000
100,000

18. You are made retail buyer of a department that is new to the store. The department
will feature new, cutting-edge designers of women’s ready to wear and is meant to
establish an advanced fashion image for the store. Select from the following how
you would plan the markdown % to net sales in your 6 Month Buying Plan: ________________
A. 5% markdowns
B. 10% markdowns
C. 25% markdowns
D. I would not plan markdowns because they erode gross margin profit.

19. True or False. Markdowns are bad and should be avoided at all costs. _________________

20. Which of the following activities might a retail buyer be held responsible for? ___________
A. Identifying sales opportunities that are consistent with the identity of the brand and the
lifestyle of the customer
B. Developing a buying plan that invests assets to maximize productivity and return on
investment
C. Managing inventories on an ongoing basis to react to current trends and maximize the
potential for building sales and profits
D. Answers A & B only
E. All of the Above

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Accounting questions

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I. Write a paper of no more than 350 words after completing Exercise 19-17 in WileyPLUS in which you respond to the following questions:
• In this case, would it be better to use the variable or absorption costing method, and why?
• What are the benefits of the two methods?
• Which method would lead to the best decision when a competitor is submitting a lower bid for your product?
• Compute product cost and prepare an income statement under variable and absorption costing.

• Polk Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2012, the company incurred the following costs.
Variable Cost per Unit
Direct materials ???$7.50
Direct labor ???$2.45
Variable manufacturing overhead ???$5.75
Variable selling and administrative expenses ???$3.90
Fixed Costs per Year
Fixed manufacturing overhead $234,650
Fixed selling and administrative expenses $240,100

• Polk Company sells the fishing lures for $25. During 2012, the company sold 80,000 lures and produced 95,000 lures.
• Instructions
(a) Assuming the company uses variable costing, calculate Polk’s manufacturing cost per unit for 2012.
(b) Prepare a variable costing income statement for 2012.
(c) Assuming the company uses absorption costing, calculate Polk’s manufacturing cost per unit for 2012.
(d) Prepare an absorption costing income statement for 2012.

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Accounting questions

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1. What are some of the constraints on the strategic management of non-profits and how can they be addressed?

2. Are not-for-profit organizations less efficient than profit-making organizations? Why or why not?

3. How does the lack of a clear-cut performance measure, such as profits, affect the strategic management of a not for-profit organization?

4. What are the pros and cons of strategic piggybacking? In what way is it “unfair competition” for not-for-profits to engage in revenue generating activity?

5. What are the pros and cons of mergers and strategic alliances? Should not-for-profits engage in alliances with business firms?

6. A number of not-for-profit organizations in the United States have been converting to profit making. Why would a not-for-profit organization want to change its status to profit making? What are the pros and cons of doing so?

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Accounting Questions

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Question1 – Incremental
Analysis

Willow Company is considering purchasing a car or
leasing it. The Company is asking you
for an analysis of what you think they should do and give them a
recommendation.

Include in your answer the present value of the lease
payments. HINT: All lease payments are made at the beginning of each year. It is not necessary to include the present
value of all other payments. The
purchase price of the car is at the beginning of the period. This problem requires that you use incremental
analysis to answer the question.

Given Information:

Lease:

Lease
Payment per Year

8,000

Lease
Term in Years

5

Lease
Interest Rate

10%

Mandatory
Leased Car Maintenance Cost per Year

1,200

Car
Insurance per Year

1,000

Initial
Lease Payment (Down Payment)

3,000

Car Purchase:

Car
Purchase Price

40,000

Estimated
Maintenance on Purchased Car per Year

800

Car
Insurance

1,000

Useful
Life

5

Car
Salvage Value at the end of 5 years

0

Depreciation
is on the Straight Line Basis

Question 2 – Essays

Please provide your concise
thoughts on the following issues:

    1. Explain why the use of flexible budgets in evaluating actual
      performance is superior to using a static budget.
    2. In variance analysis, the Company has a direct material price
      variance and a direct material usage variance. What do unfavorable variances for each
      of these mean.

Question 3 – Essay

Please provide your concise
thoughts on the following issues:

  1. Explain the value of Cost-Volume-Profit analysis. Include in your answer a reason for the
    importance of the Unit Contribution Margin.
  2. In Job-Order and Activity-Based Costing systems we need to “apply”
    manufacturing overhead to different products. Explain why we need to apply
    manufacturing overhead.

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Accounting Questions

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The following information is from the materials requisitions and time tickets for Job 9-1005 completed by Wright Boats. The requisitions are identified by code numbers starting with the letter Q and the time tickets start with W. At the start of the year, management estimated that overhead cost would equal 140% of direct labor cost for each job.

Date Document Amount
7/1/2011 Q-4698 $ 1,350
7/1/2011 W-3393 700
7/5/2011 Q-4725 1,100
7/5/2011 W-3479 550
7/10/2011 W-3559 400

Determine the total cost on the job cost sheet for Job 9-1005. (Omit the “$” sign in your response.)

Total cost $
In December 2010, Kent Computer’s management establishes the year 2011 predetermined overhead rate based on direct labor cost. The information used in setting this rate includes estimates that the company will incur $797,500 of overhead costs and $550,000 of direct labor cost in year 2011. During March 2011, Kent began and completed Job No. 13-56.

1. What is the predetermined overhead rate for year 2011? (Omit the “%” sign in your response.)
Predetermined overhead rate %

2. Use the information on the following job cost sheet.

JOB COST SHEET
Customer’s Name Keiser Co. Job No. 13-56
Job Description 5 color monitors—21 inch
Direct Materials Direct Labor Overhead
Costs Applied

Date Requisition No. Amount Time-Ticket No. Amount Rate Amount
Mar. 8 4-129 $ 4,000 T-306 $ 660
Mar. 11 4-142 6,600 T-432 1,340
Mar. 18 4-167 3,350 T-456 1,300

Totals
Determine the total cost of the job. (Round your answer to the nearest whole number. Omit the “$” sign in your response.)

Total cost of the job $
Lopez Company uses a job order cost accounting system that charges overhead to jobs on the basis of direct material cost. At year-end, the Goods in Process Inventory account shows the following.

Date Explanation Debit Credit Balance
2011
Dec. 31 Direct materials cost 1,300,000 1,300,000
31 Direct labor cost 210,000 1,510,000
31 Overhead costs 598,000 2,108,000
31 To finished goods 2,020,000 88,000

1. Determine the overhead rate used (based on direct material cost). (Omit the “%” sign in your response.)
Overhead rate %

2. Only one job remained in the goods in process inventory at December 31, 2011. Its direct materials cost is $22,000. How much direct labor cost and overhead cost are assigned to it? (Round your answers to the nearest dollar amount. Omit the “$” sign in your response.)
Direct labor cost $
Overhead cost $

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Accounting questions

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19-30
Each of the following situations involves a possible violation by a member in industry of the AICPA’s Code of Professional Conduct. For each situation, indicate whether it violates the Code. If it violates the Code, indicate which rule is violated and explain why.
LO 19-4, 19-5, 19-6, 19-7

a.
Jack Jackson is a CPA and controller of Acme Trucking Company. Acme’s external auditors have asked Jackson to sign the management representation letter. Jackson has signed the management representation letter, even though he knows that full disclosures have not been made to Acme’s external auditors.
b.
Mary McDermott, CPA, is employed in the internal audit department of the United Fund of America. The United Fund raises money from individuals and distributes it to other organizations. McDermott has audited Children’s Charities, an organization that receives funds from United Fund.
c.
Janet Jett, CPA, formerly worked for Delta Disk Drive, Inc. She is currently interviewing for a new position with Maxiscribe, Inc., another manufacturer of disk drives. Jett has agreed to provide confidential information about Delta’s trade secrets if she is hired by Maxiscribe.
d.
Brian Thorough, CPA, is currently employed as controller of TransLouisiana Oil Company. He has discovered that TransLouisiana has been illegally paying state environmental employees so that they will not charge TransLouisiana with dumping highly toxic chemicals into the bayous. Thorough discloses this information to the state attorney general.
e.
Jill Burnett, CPA, was hired by Cooper Corporation to supervise its accounting department in preparing financial statements and presenting them to senior management. Due to considerable time incurred on other financial activities, Burnett was unable to supervise the accounting staff adequately. It is later discovered that Cooper’s financial statements contain false and misleading information

Additional Requirements

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Accounting questions

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1.
Crypton
Electronics has a capital structure consisting of 36% common stock and 64%
debt. A debt issue of $1,000 par value, 6.4% bonds that mature in 15 years and
pay annual interest will sell for $975. Common stock of the firm is currently
selling for $30.23 per share and the firm expects to pay a $2.21 dividend next
year. Dividends have grown at the rate of 4.7% per year and are expected to
continue to do so for the foreseeable future. What is Crypton’s cost of capital
where the firm’s tax rate is 30%.
Cryptons
Cost of Capital is ______ %

2.
(weighted average cost of capital) The target capital structure for Jower’s
manufacturing is 46% common stock, 13% preferred stock , and 41% debt. If the
cost of common equity for the firm is 19.7%, the cost of preferred stock is
12.5%, and the before tax cost of debt is 9.8%, what is Jower’s cost of
capital? The firm’s tax rate is 34%. (Round to the nearest three decimal places)
Jowers
WACC is ____%
3. As
a member of the Finance Department of Ranch Manufacturing, your supervisor has
asked you to compute the appropriate discount rate of use when evaluating the
purchase of new packing equipment for the plant. Under the assumption that the
firm’s present capital structure reflects the appropriate mix of capital
sources for the firm, You have determined the market value of the firm’s
capital structure as follows:
Source
of Capital Market Values
Bonds
$3,500,000
Preferred
Stock $2,400,000
Common
Stock $6,300,000
3. To
finance the purchase, Ranch Manufacturing will sell 10-year bonds paying 7.1%
per year at the market price of $1071. Preferred Stock paying $1.94 dividend
can be sold $25.58; Common Stock for Ranch Manufacturing is currently selling
for $54.89 per share. The firm paid a $3.08 dividend last year and expects
dividends to continue growing at a rate of 4.8% per year. The firm’s tax rate
is 30 percent. What discount rate should you use to evaluate the equipment
purchase?
Ranch
Manufacturing’s WACC is __% (round to three decimal places)
4. Abe
Forrester and three of his friends from college have interested a group of
venure capitalists in backing their busines idea. The proposed operation would
consist of a series of retail outlets to distribute and service a full line ot
vacuum cleaners and accessories. These stores would be located in Dallas,
Houston, and San Antonio. To finance the new venture two plans have been
propsed:
– Plan
A is an all-common-equity structure which $2.2million dollars would be raised
by selling 86,000 shares of common stock.

2.
-Plan B
would involve issuing $1.2 million dollars in long-term bonds with efective
interest rate of 11.8% plus 1.0 milion would be raised by selling 43,000 shares
of common stock. The debt funds raised under Plan B have no fixed maturity
date, in that this amount of financial leverage is considered a permanent part
of the firms capital sructure.
Abe
and his partners plan to use a 35% tax rate in their analysis and they have
hired you on a consulting basis to do the following:
A:
Find the EBIT indifference level associated with the two financing plans.
The EBIT
indifference level is associated with the two financing plans is $ ______
B:
Prepare a pro forma income statement for the EBIT level SOLVED for in Part A.
that shows that EPS will be the same regardless whether Plan A or B is chosen.

5. –
three recent graduates of the computer science program at the university of
Tennessee are forming a company that will write and distribute new application
software for the iPhone. Initially the corporation will operate in the southern
region of Tennessee, Georgia, north Carolina, and South Carolina. A small group
of private investors in the Atlanta, Georgia area is interested in financing
the startup company and two financing plans have been put forth for
consideration:

The
first plan (plan A) is an all-common-equity capital structure. 2.3 million
dollars would be raised by selling common stock at $10 per common share
– Plan
B would involve the use of financial leverage. 1.1 million dollars would be
raised by selling bonds with an effective interest rate of 10.8% (per annum)
and the remaining 1.2 million would be raised by selling common stock at the
$10 price per share. The use of financial leverage is considered to be a
permanent part of the firms capitalization, so no fixed maturity date is needed
for the analysis. A 34% tax rate is deemed appropriate for the analysis.
A.
Find the EBIT indifference level associated with the two financial plans. $
________
– B. A
detailed financial analysis of the firms prospects suggests that the long term
EBIT will be above $318,000 annually. Taking this into consideration, which
plan will generate the higher EPS?

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Accounting questions

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I. Write a paper of no more than 350 words after completing Exercise 19-17 in WileyPLUS in which you respond to the following questions:
• In this case, would it be better to use the variable or absorption costing method, and why?
• What are the benefits of the two methods?
• Which method would lead to the best decision when a competitor is submitting a lower bid for your product?
• Compute product cost and prepare an income statement under variable and absorption costing.

• Polk Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2012, the company incurred the following costs.
Variable Cost per Unit
Direct materials ???$7.50
Direct labor ???$2.45
Variable manufacturing overhead ???$5.75
Variable selling and administrative expenses ???$3.90
Fixed Costs per Year
Fixed manufacturing overhead $234,650
Fixed selling and administrative expenses $240,100

• Polk Company sells the fishing lures for $25. During 2012, the company sold 80,000 lures and produced 95,000 lures.
• Instructions
(a) Assuming the company uses variable costing, calculate Polk’s manufacturing cost per unit for 2012.
(b) Prepare a variable costing income statement for 2012.
(c) Assuming the company uses absorption costing, calculate Polk’s manufacturing cost per unit for 2012.
(d) Prepare an absorption costing income statement for 2012.

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Accounting Questions

$21.00

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Profitability Index versus NPV Hanmi Group, a consumer
electronics conglomerate, is reviewing
its annual budget in wireless technology. It is considering investments in three different technologies to develop
wireless communication devices. Consider the following cash flows of the three
independent projects for Hanmi. Assume the discount rate for Hanmi is 10
percent. Further, Hanmi Group has only $20 million to invest in new projects
this year

Cash Flows (in $ millions)

Year

CDMA

G4

Wi-Fi

0

-8

-12

-20

1

11

10

18

2

7.5

25

32

3

2.5

20

20

a. Based on the profitability index decision
rule, rank these investments.

b. Based on the NPV, rank these investments.

c. Based on your
findings in (a) and (b), what would you recommend to the CEO of Hanmi Group and
why?

16. Comparing Investment Criteria Consider the following
cash flows of two mutually exclusive
projects for AZ-Motorcars. Assume the discount rate for AZ-Motorcars is 10 percent.

Year

AZM Mini-SUV

AZF Full-SUVG4

0

-450000

-800000

1

320000

350000

2

180000

420000

3

150000

290000

a. Based
on the payback period, which project should be accepted?

b. Based on the NPV,
which project should be accepted?

c. Based on the IRR,
which project should be accepted?

d. Based on this
analysis, is incremental IRR analysis necessary?

16.
Comparing Investment Criteria Consider the following cash flows of two mutually

exclusive projects for AZ-Motorcars. Assume the discount rate for
AZ-Motorcars is
10 percent.

Year

AZM Mini-SUV

AZF Full-SUVG4

0

-450000

-800000

1

320000

350000

2

180000

420000

3

150000

290000

a. Based
on the payback period, which project should be accepted?

b. Based on the NPV, which project should be
accepted?

c. Based on the IRR, which project should be
accepted?

d. Based on this analysis, is incremental IRR
analysis necessary? If yes, please conduct the analysis.

Question

Project Analysis and Inflation Sanders Enterprises, Inc.,
has been considering the purchase of a
new manufacturing facility for $270,000. The facility is to be fully depreciated on a straight-line basis over
seven years. It is expected to have no resale value after the seven years.
Operating revenues from the facility are expected to be $105,000, in nominal
terms, at the end of the first year. The revenues are expected to increase at
the inflation rate of 5 percent. Production costs at the end of the first year will
be $30,000, in nominal terms, and they are expected to increase at 6 percent
per year. The real discount rate is 8 percent. The corporate tax rate is 34
percent. Sanders has other ongoing profitable operations. Should the company
accept the project?

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Accounting questions

$29.00

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AThe following data are the actual results for Marvelous Marshmallow Company for October.
Actual output ………………………………………………………………………………………………………………… 9,000 cases
Actual variable overhead …………………………………………………………………………………………………. $405,000
Actual fixed overhead ……………………………………………………………………………………………………… $122,000
Actual machine time ………………………………………………………………………………………………………. 40,500 machine hours
Standard cost and budget information for Marvelous Marshmallow Company follows:
Standard variable-overhead rate ………………………………………………………………………… $9.00 per machine hour
Standard quantity of machine hours ……………………………………………………………………. 4 hours per case of marshmallows
Budgeted fixed overhead ………………………………………………………………………………….. $120,000 per month
Budgeted output …………………………………………………………………………………………….. 10,000 cases per month
Required:
1. Use any of the methods explained in the chapter to compute the following variances. Indicate
whether each variance is favorable or unfavorable, where appropriate.
a. Variable-overhead spending variance.
b. Variable-overhead efficiency variance.
c. Fixed-overhead budget variance.
d. Fixed-overhead volume variance.
2. Build a spreadsheet: Construct an Excel spreadsheet to solve the preceding requirement. Show
how the solution will change if the following information changes: actual output was 9,100 cases,
and actual variable overhead was $395,000.

PROBLEM 9-43

FreshPak Corporation manufactures two types of cardboard boxes used in shipping canned food, fruit,

and vegetables. The canned food box (type C) and the perishable food box (type P) have the following

material and labor requirements.

Type of Box

C P

Direct material required per 100 boxes:

Paperboard ($.20 per pound) …………………………………………………………………………….. 30 pounds 70 pounds

Corrugating medium ($.10 per pound) ………………………………………………………………… 20 pounds 30 pounds

Direct labor required per 100 boxes ($12.00 per hour) ……………………………………………….. .25 hour .50 hour

The following manufacturing-overhead costs are anticipated for the next year. The predetermined

overhead rate is based on a production volume of 495,000 units for each type of box. Manufacturing

overhead is applied on the basis of direct-labor hours.

Indirect material ………………………………………………………………………………………………………………………….. $ 10,500

Indirect labor ……………………………………………………………………………………………………………………………… 50,000

Utilities ……………………………………………………………………………………………………………………………………… 25,000

Property taxes …………………………………………………………………………………………………………………………….. 18,000

Insurance ………………………………………………………………………………………………………………………………….. 16,000

Depreciation ………………………………………………………………………………………………………………………………. 29,000

Total …………………………………………………………………………………………………………………………………………. $148,500

The following selling and administrative expenses are anticipated for the next year.

Salaries and fringe benefits of sales personnel ……………………………………………………………………………………… $ 75,000

Advertising …………………………………………………………………………………………………………………………………… 15,000

Management salaries and fringe benefits ……………………………………………………………………………………………. 90,000

Clerical wages and fringe benefits ……………………………………………………………………………………………………… 26,000

Miscellaneous administrative expenses ………………………………………………………………………………………………. 4,000

Total ……………………………………………………………………………………………………………………………………………. $210,000

The sales forecast for the next year is as follows:

Sales Volume Sales Price

Box type C …………………………………………………………………………….. 500,000 boxes $ 90.00 per hundred boxes

Box type P …………………………………………………………………………….. 500,000 boxes 130.00 per hundred boxes

The following inventory information is available for the next year. The unit production costs for

each product are expected to be the same this year and next year.

Expected Inventory

January 1

Desired Ending Inventory

December 31

Finished goods:

Box type C …………………………………………………………………….. 10,000 boxes 5,000 boxes

Box type P …………………………………………………………………….. 20,000 boxes 15,000 boxes

Raw material:

Paperboard …………………………………………………………………… 15,000 pounds 5,000 pounds

Corrugating medium ……………………………………………………….. 5,000 pounds 10,000 pounds

Required:Prepare a master budget for FreshPak Corporation for the next year. Assume an income tax rate of 40 percent. Include the following schedules.

1.Sales budget.

2.Production budget.

3.Direct-material budget.

4.Direct-labor budget.

5.Manufacturing-overhead budget.

6.Selling and administrative expense budget.

7.Budgeted income statement. ( Hint:To determine cost of goods sold, first compute the manufacturing cost per unit for each type of box. Include applied manufacturing overhead in the cost.)

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Accounting questions

$29.00

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1. The constraint at Mcglathery Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:

UE BI CR
Selling price per unit $335.20 $228.48 $199.23
Variable cost per unit $259.22 $173.04 $159.57
Minutes on the constraint 7.70 4.50 5.70

Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource? (Round your intermediate calculations and final answer to 2 decimal places.)

$39.66 per unit

$75.98 per unit

$6.96 per minute

$12.32 per minute

2. Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn. Current cost and revenue data for the spindles of yarn and for the afghans are as follows:

Data for one spindle of yarn:
Selling price $17
Variable production cost $13
Fixed production cost (based on 3,200 spindles of yarn produced) $7

Data for one afghan:
Selling price $35
Production cost per spindle of yarn $20
Variable production cost to process the yarn into an afghan $19
Avoidable fixed production cost to process the yarn into an afghan
(based on 3,200 afghans produced) $15

Each month 3,200 spindles of yarn are produced that can either be sold outright or processed into afghans.

If Austin chooses to produce 3,200 afghans each month, the change in the monthly net operating income as compared to selling 3,200 spindles of yarn is:

$12,800 increase

$-51,200 increase

$-51,200 decrease

$12,800 decrease

3. The Tingey Company has 400 obsolete microcomputers that are carried in inventory at a total cost of $576,000. If these microcomputers are upgraded at a total cost of $130,000, they can be sold for a total of $190,000. As an alternative, the microcomputers can be sold in their present condition for $40,000.

Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?

$65

$308

$425

$140

4. Talboe Company makes wheels which it uses in the production of children’s wagons. Talboe’s costs to produce 130,000 wheels annually are as follows:

Direct material $ 26,000
Direct labor 39,000
Variable manufacturing overhead 19,500
Fixed manufacturing overhead 61,000
Total $145,500

An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $16,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to another company for $42,500 per year.

If Talboe chooses to buy the wheel from the outside supplier, then the change in annual net operating income is a:

$39,000 increase

$3,500 decrease

$26,000 increase

$38,500 increase

5. The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom at that activity level are:

Direct materials $29
Direct labor $19
Variable manufacturing overhead $14
Fixed manufacturing overhead $16
Variable selling expense $10
Fixed selling expense $9

The regular selling price for one Hom is $90. A special order has been received at Varone from the Fairview Company to purchase 7,700 Homs next year at 20% off the regular selling price. If this special order were accepted, the variable selling expense would be reduced by 30%. However, Varone would have to purchase a specialized machine to engrave the Fairview name on each Hom in the special order. This machine would cost $11,700 and it would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.

If Varone can expect to sell 32,000 Homs next year through regular channels and the special order is accepted at 20% off the regular selling price, the effect on net operating income next year due to accepting this order would be a:

$11,400 increase

$51,700 increase

$77,000 increase

$24,300 decrease

6. The constraint at Dalbey Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:

FE MB WP
Selling price per unit $256.00 $361.80 $177.40
Variable cost per unit $190.00 $273.88 $131.44
Minutes on the constraint 4.80 6.60 3.60

Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of this constrained resource? (Round your intermediate calculations and final answer to 2 decimal places.)

$13.75 per minute

$12.77 per minute

$87.92 per unit

$45.96 per unit

7. An automated turning machine is the current constraint at Naik Corporation. Three products use this constrained resource. Data concerning those products appear below:

KU OP YY
Selling price per unit $104.78 $527.98 $557.92
Variable cost per unit $ 81.88 $429.55 $419.85
Minutes on the constraint 2.50 11.60 11.80

Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. (Round your intermediate calculations to 2 decimal places.)

OP, KU, YY

YY, KU, OP

YY, OP, KU

KU, YY, OP

8. The management of Freshwater Corporation is considering dropping product C11B. Data from the company’s accounting system appear below:

Sales $919,000
Variable expenses $403,500
Fixed manufacturing expenses $333,000
Fixed selling and administrative expenses $240,000

All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $205,500 of the fixed manufacturing expenses and $116,500 of the fixed selling and administrative expenses are avoidable if product C11B is discontinued.

What would be the effect on the company’s overall net operating income if product C11B were dropped?

Overall net operating income would increase by $193,500.

Overall net operating income would increase by $57,500.

Overall net operating income would decrease by $57,500.

Overall net operating income would decrease by $193,500.

9. Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $41 to buy from farmers and $12 to crush in the company’s plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $17 or processed further for $16 to make the end product industrial fiber that is sold for $51. The beet juice can be sold as is for $34 or processed further for $20 to make the end product refined sugar that is sold for $51.

How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is?

$(33)

$(3)

$(61)

$(20

10. Sibble Corporation is considering the purchase of a machine that would cost $300,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $40,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $70,000. The company requires a minimum pretax return of 12% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

The net present value of the proposed project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

?$24,970

?$70,330

?$7,650

?$47,650

11. Charley has a typing service. He estimates that a new computer will result in increased cash inflow $2,800 in Year 1, $3,200 in Year 2 and $3,900 in Year 3. (Ignore income taxes.)

Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using tables.

If Charley’s required rate of return is 11%, the most that Charley would be willing to pay for the new computer would be: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

$8,102

$7,972

$5,398

$7,921

12. The Valentine Company has decided to buy a machine costing $27,872. Estimated cash savings from using the new machine amount to $6,500 per year. The machine will have no salvage value at the end of its useful life of seven years. (Ignore income taxes.)

Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

If Valentine’s required rate of return is 11%, the machine’s internal rate of return is closest to: (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate.)

8%

12%

14%

10%

13. Deibel Corporation is considering a project that would require an investment of $71,000. No other cash outflows would be involved. The present value of the cash inflows would be $95,140. The profitability index of the project is closest to: (Ignore income taxes.) (Round your answer to 2 decimal places.)

0.25

0.34

0.66

1.34

14. The Higgins Company has just purchased a piece of equipment at a cost of $310,000. This equipment will reduce operating costs by $50,000 each year for the next twelve years. This equipment replaces old equipment which was sold for $10,000 cash. The new equipment has a payback period of: (Ignore income taxes.) (Round your answer to 1 decimal place.)

6.0 years

6.2 years

18.0 years

12.0 years

15. Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.)

Investment required in equipment $440,000
Annual cash inflows $77,000
Salvage value $0
Life of the investment 20 years
Discount rate 13%

The payback period for the investment is closest to: (Round your answer to 1 decimal place.)

0.2 years

3.7 years

5.7 years

1.0 years

16.
Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.)

Investment required in equipment $630,000
Annual cash inflows $64,000
Salvage value $0
Life of the investment 15 years
Discount rate 6%

The simple rate of return on the investment is closest to: (Round your answer to the closest interest rate.)

8%

5%

3%

4%

17. Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.)

Investment required in equipment $470,000
Annual cash inflows $77,000
Salvage value $0
Life of the investment 20 years
Discount rate 14%

Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

The net present value on this investment is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

$77,000

$39,971

$73,750

$470,000

18. Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.)

Investment required in equipment $640,000
Annual cash inflows $86,000
Salvage value $0
Life of the investment 20 years
Discount rate 9%

Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

The internal rate of return on the investment is closest to: (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate.)

8%

10%

12%

14%

19. Gull Inc. is considering the acquisition of equipment that costs $500,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are: (Ignore income taxes.)

Incremental net
cash flows
Year 1 $133,000
Year 2 $160,000
Year 3 $144,000
Year 4 $153,000
Year 5 $143,000
Year 6 $123,000

The payback period of this investment is closest to: (Round your intermediate and final answers to 1 decimal place.)

5.3 years

3.8 years

3.2 years

3.4 years

20. The management of Melchiori Corporation is considering the purchase of a machine that would cost $310,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $111,000 per year. The company requires a minimum pretax return of 14% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

The present value of the annual cost savings of $111,000 is closest to: (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)

$170,448

$431,679

$666,000

$1,011,462

21 The Finney Company is reviewing the possibility of remodeling one of its showrooms and buying some new equipment to improve sales operations. The remodeling would cost $250,000 now and the useful life of the project is 13 years. Additional working capital needed immediately for this project would be $65,000; the working capital would be released for use elsewhere at the end of the 13-year period. The equipment and other materials used in the project would have a salvage value of $45,000 in 13 years. Finney’s discount rate is 17%. (Ignore income taxes.)

The immediate cash outflow required for this project would be: (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)

$(315,000)

$(250,000)

$(295,000)

$(185,000)

22. Blaine Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $240,000 and would have a fifteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $38,000 per year to operate and maintain, but would save $77,000 per year in labor and other costs. The old machine can be sold now for scrap for $24,000. What is the simple rate of return on the new machine? (Ignore income taxes.) (Round your answer to 2 decimal places.)

9.58%

32.08%

10.65%

21.30%

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Accounting Questions

$21.00

Description

1.The director of cost management for Odessa Company uses a statistical control chart to help management determine when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor efficiency variances during the first six months of the current year.

January
Februar

$

y
March
April
May
June

500 F
1,600 U
1,400 U
1,800 U
2,100 U
2,400 U

The standard direct-labor cost during each of these months was $38,000. The controller has estimated that the firm’s monthly direct-labor variances have a standard deviation of $1,900.
Required:
a.

b.

Determine the cutoff value for investigation if the controller’s rule of thumb is to investigate all variances equal to or greater than 6 percent of standard cost.
Based on the cutoff value, which of the month(s) will have their direct-labor efficiency variance investigated? (Select all that apply.)

January variance
February variance
March variance
April variance
May variance
June variance

2. The following data pertain to Colgate Palmolive’s liquid filling line during the first 10 months of a particular year. The standard ratio of direct-labor hours to machine hours is 4:1. The standard direct-labor rate is $15.98. Colgate Palmolive: Direct-Labor Efficiency Variance Data*
Uni Ma Sta Act
ts chin nda ual
Pro e rd Dir
duc Hou Dir ected rs ect- Lab
Lab or
or Hou
Hou rs

Direct-Labor
Efficiency
Variance

*Source of data: Alan S. Levitan and Sidney J. Baxendale, “Analyzing the Labor Efficiency
Variance to Signal Process Engineering Problems,” Journal of Cost Management 6, no. 2 (Summer 1992), p. 70.
Required:
1-a. Which of the following amounts did Colgate Palmolive use in calculating its standard
direct labor hours for the month of January? (Select all that apply.)
Units produced
Machine hours
Actual direct-labor hours
Standard ratio of direct-labor hours to machine hours
1-b. Which of the following amounts did Colgate Palmolive use in calculating its directlabor efficiency variance for the month of January? (Select all that apply.)
Units produced
Standard direct-labor hours
Actual direct-labor hours
Standard direct-labor rate

2.Calculate the following amounts.

a.The standard direct-labor cost for each of the 10 months. (Round intermediate calculation to 2 decimal places and final answers to nearest whole dollar amount.)

b. For each month, (expression error) percent of the standard direct-labor cost. (Round your final answers to the nearest whole dollar amount.)

20% of the
Standard
Direct-Labor
Cost
January
February
March
April
May
June
July
August
September
October

3.Suppose management investigates all variances in excess of (expression error) percent of standard cost. Which months contain a variance that would be
investigated? (Select all that apply.)

January
February
March
April
May
June
July
August
September
October
6.Which of the following could be a reason why the direct-labor efficiency variances for March, April and June are larger than in the other months?
Production volume was significantly higher.
The standard direct-labor rate was significantly higher.
The actual direct-labor rate was significantly higher.

3. McKeag Corporation manufactures agricultural machinery. At a recent staff meeting, the following direct-labor variance report for the year just ended was presented by the controller.

MCKEAG CORPORATION
Direct-labor Variance Report
DirectLabor
Rate
Varianc
e

Direct-Labor Efficiency Variance

McKeag’s controller uses the following rule of thumb: Investigate all variances equal to or greater than $60,000, which is 6 percent of standard cost.
Required:
1.
Which variances would have been investigated during the year? (Indicate month and type of variance.) (Indicate the effect of each variance by selecting
“Favorable” or “Unfavorable”. Select “None” and enter “0” for no effect (i.e., zero variance). Round “Percentage of Standard Cost” to 2 decimal places.)
Percentag
Variance
e of
Month
Amount
Type
Standard
Cost
%
%
%
%
%
2.

What characteristics of the variance pattern shown in the report should draw the controller’s attention, regardless of the usual investigation rule? (Select all that apply.)

The company’s direct-labor efficiency variances exhibit a consistent unfavorable trend through the year.
The company’s direct-labor rate variances exhibit a favorable trend through most of the year.
The unfavorable trend of the direct-labor efficiency is on the increase through most of the year.
The favorable trend of the direct-labor rate is on the increase through the year.
The unfavorable trend of the direct-labor efficiency is under control till July with regard to the limits of the investigation rule.
None of the above.

3. Which of the following is the best reason to also follow up on favorable variances?
Bias in investigation targets and subsequent reports is reduced.

Production efficiencies may be able to be replicated elsewhere in the Favorable variances occur more often as activity levels rise

4. Starlight Glassware Company has the following standards and flexible-budget data.

Standard
variableoverhead rate
Standard
quantity of

$

7.00 per directlabor hour
2 hours per unit
of output

direct labor
Budgeted
fixed overhead
Budgeted
output

$

96,000
24,000 units

Actual results for February are as follows:

Actual output
Actual variable overhead
Actual fixed overhead
Actual direct labor

19,000 units
$ 342,000
$

93,000
45,000 hours

Required:
Use the variance formulas to compute the following variances. (Indicate the effect of each variance by selecting “Favorable” or “Unfavorable”. Select “None” and enter “0” for no effect (i.e., zero variance).)
1.
2.
3.
4.

Variable-overhead
spending variance
Variable-overhead
efficiency variance
Fixed-overhead budget variance
Fixed-overhead volume variance

5.Starlight Glassware Company has the following standards and flexible-budget data.

Standard variableoverhead rate
Standard quantity of direct labor
Budgeted
fixed overhead

$

per directlabor hour

16

hours per unit
of output

2.5
$

370,000

Budgeted
output

28,500 units

Actual results for February are as follows:

Actual
output
Actual
variable
overhead
Actual
fixed
overhead
Actual
direct
labor

19,600 units
$ 855,950
$ 326,000
50,350 hours

Required:
Use the following diagrams below (similar to Exhibit 11-6 and Exhibit 11-8 to compute (1) the variable-overhead spending and efficiency variances, and (2) the fixed-overhead budget and volume variances. (Round your “per hour” answers to 2 decimal places. Indicate the effect of each variance by selecting “Favorable” or “Unfavorable”. Select “None” and enter “0” for no effect (i.e., zero variance).)
Variable overhead variances:

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accounting questions

$21.00

Description

“Faldo Corp sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were $435,000, and its year-end receivables were $60,000. If its DSO is less than the 45-day credit period, then customers are paying on time. Otherwise, they are paying late. By how much are customers paying early or late? Base your answer on this equation: DSO – Credit Period = Days early or late, and use a 365-day year when calculating the DSO. A positive answer indicates late payments, while a negative answer indicates early payments.
5.18
4.86
5.29
5.34
5.40

——————————————————————————–
2. Stewart Inc.’s latest EPS was $3.50, its book value per share was $22.75, it had 215,000 shares outstanding, and its debt ratio was 46%. How much debt was outstanding?
$3,393,738
$3,572,356
$3,760,375
$3,958,289
$4,166,620

——————————————————————————–
3. Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm’s total-debt-to-total-assets ratio was 37.5%. Based on the DuPont equation, what was the ROE?
14.71%
12.16%
11.92%
11.43%
13.74%

——————————————————————————–
4. Last year Ann Arbor Corp had $160,000 of assets, $305,000 of sales, $20,000 of net income, and a debt-to-total-assets ratio of 37.5%. The new CFO believes a new computer program will enable it to reduce costs and thus raise net income to $33,000. Assets, sales, and the debt ratio would not be affected. By how much would the cost reduction improve the ROE?
13.00%
14.17%
11.31%
10.14%
15.73%

——————————————————————————–
5. What’s the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $2,950 at the end of Year 4 if the interest rate is 5%?
$11,133.74
$8,740.50
$10,405.36
$8,532.40
$12,590.49

——————————————————————————–
6. Last year Kruse Corp had $275,000 of assets, $403,000 of sales, $28,250 of net income, and a debt-to-total-assets ratio of 39%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets to $252,500. Sales, costs, and net income would not be affected, and the firm would maintain the same debt ratio (but with less total debt). By how much would the reduction in assets improve the ROE?
1.50%
1.23%
1.85%
1.13%
1.19%

——————————————————————————–
7. Wie Corp’s sales last year were $365,000, and its year-end total assets were $355,000. The average firm in the industry has a total assets turnover ratio (TATO) of 2.4. The firm’s new CFO believes the firm has excess assets that can be sold so as to bring the TATO down to the industry average without affecting sales. By how much must the assets be reduced to bring the TATO to the industry average, holding sales constant?
$202,917
$221,179
$213,063
$160,304
$184,654

——————————————————————————–
8. Assume that you own an annuity that will pay you $15,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $80,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment?
23.15%
16.17%
20.96%
19.96%
22.16%

——————————————————————————–
9. Last year Tiemann Technologies reported $10,500 of sales, $6,250 of operating costs other than depreciation, and $1,300 of depreciation. The company had no amortization charges, it had $5,000 of bonds that carry a 6.5% interest rate, and its federal-plus-state income tax rate was 35%. This year’s data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $750. By how much will net after-tax income change as a result of the change in depreciation? The company uses the same depreciation calculations for tax and stockholder reporting purposes.
-463.13
-487.50
-511.88
-537.47
-564.34

——————————————————————————–
10. Pace Corp.’s assets are $625,000, and its total debt outstanding is $185,000. The new CFO wants to employ a debt ratio of 55%. How much debt must the company add or subtract to achieve the target debt ratio?
$158,750
$166,688
$175,022
$183,773
$192,962

——————————————————————————–
11. Last year Hamdi Corp. had sales of $500,000, operating costs of $450,000, and year-end assets of $350,000. The debt-to-total-assets ratio was 17%, the interest rate on the debt was 7.5%, and the firm’s tax rate was 35%. The new CFO wants to see how the ROE would have been affected if the firm had used a 50% debt ratio. Assume that sales, operating costs, total assets, and the tax rate would not be affected, but the interest rate would rise to 8.0%. By how much would the ROE change in response to the change in the capital structure?
3.79%
3.69%
3.18%
3.53%
2.48%

——————————————————————————–
12. Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $520,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15.0%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant?
10.71%
9.41%
10.82%
8.11%
12.66%

——————————————————————————–
13. Last year Rennie Industries had sales of $240,000, assets of $175,000, a profit margin of 5.3%, and an equity multiplier of 1.2. The CFO believes that the company could reduce its assets by $51,000 without affecting either sales or costs. Had it reduced its assets by this amount, and had the debt ratio, sales, and costs remained constant, how much would the ROE have changed?
3.55%
3.19%
3.66%
3.01%
3.59%

——————————————————————————–
14. Last year Kruse Corp had $355,000 of assets, $403,000 of sales, $28,250 of net income, and a debt-to-total-assets ratio of 39%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets to $252,500. Sales, costs, and net income would not be affected, and the firm would maintain the same debt ratio (but with less total debt). By how much would the reduction in assets improve the ROE?
5.67%
5.30%
4.40%
4.18%
5.98%

——————————————————————————–
15. Last year Ann Arbor Corp had $300,000 of assets, $305,000 of sales, $20,000 of net income, and a debt-to-total-assets ratio of 37.5%. The new CFO believes a new computer program will enable it to reduce costs and thus raise net income to $33,000. Assets, sales, and the debt ratio would not be affected. By how much would the cost reduction improve the ROE?
5.34%
5.82%
6.59%
8.67%
6.93%

——————————————————————————–
16. Last year Hamdi Corp. had sales of $500,000, operating costs of $450,000, and year-end assets of $355,000. The debt-to-total-assets ratio was 17%, the interest rate on the debt was 7.5%, and the firm’s tax rate was 35%. The new CFO wants to see how the ROE would have been affected if the firm had used a 50% debt ratio. Assume that sales, operating costs, total assets, and the tax rate would not be affected, but the interest rate would rise to 8.0%. By how much would the ROE change in response to the change in the capital structure?
3.17%
3.42%
3.48%
3.08%
2.99%

——————————————————————————–
17. Edwards Electronics recently reported $11,250 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges, it had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 35%. How much was its net cash flow?
$3,284.75
$3,457.63
$3,639.61
$3,831.17
$4,032.81

——————————————————————————–
18. What annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of $2,500?
$162.50
$164.13
$123.50
$185.25
$128.38

——————————————————————————–
19. Your father paid $10,000 (CF at t = 0) for an investment that promises to pay $750 at the end of each of the next 5 years, then an additional lump sum payment of $13,500 at the end of the 5th year. What is the expected rate of return on this investment?
12.91%
10.46%
11.49%
15.23%
12.39%

——————————————————————————–
20. You have a chance to buy an annuity that pays $2,350 at the beginning of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?
$6,688.85
$7,090.18
$7,825.96
$6,822.63
$6,956.41

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Accounting questions

$17.00

Description

Steven Clark and two of his colleagues are considering opening a law office in a large metropolitan area that would make inexpensive legal services available to those who could not otherwise afford services. The intent is to provide easy access for their clients by having the office open 360 days per year, 16 hours each day from7:00 a.m. to 11:00 p.m.The office would be staffed by a lawyer, paralegal, legal secretary, and clerk-receptionist for each of the two eight-hour shifts.
In order to determine the feasibility of the project, Clark hired a marketing consultant to assist with market projections. The results of this study show that if the firm spends $1,035,000 on advertising the first year, the number of new clients expected each day will be 61. Clark and his associates believe this number is reasonable and are prepared to spend the $1,035,000 on advertising. Other pertinent information about the operation of the office follows:

• The only charge to each new client would be $71 for the initial consultation. All cases that warrant further legal work will be accepted on a contingency basis with the firm earning 30 percent of any favorable settlements or judgments. Clark estimates that 20 percent of new client consultations will result in favorable settlements or judgments averaging $5,100 each. It is not expected that there will be repeat clients during the first year of operations.
• The hourly wages of the staff are projected to be $61 for the lawyer, $51 for the paralegal, $41 for the legal secretary, and $31 for the clerk-receptionist. Fringe benefit expense will be 40 percent of the wages paid. A total of 620 hours of overtime is expected for the year; this will be divided equally between the legal secretary and the clerk-receptionist positions. Overtime will be paid at one and one-half times the regular wage, and the fringe benefit expense will apply to the full wage.
• Clark has located 6,000 square feet of suitable office space which rents for $67 per square foot annually. Associated expenses will be $59,500 for property insurance and $82,800 for utilities.
• It will be necessary for the group to purchase malpractice insurance, which is expected to cost $371,000 annually.
• The initial investment in the office equipment will be $131,000. This equipment has an estimated useful life of four years.
• The cost of office supplies has been estimated to be $12 per expected new client consultation.

Required:
1. Determine how many new clients must visit the law office being considered by Steven Clark and his colleagues in order for the venture to break even during its first year of operations. (Do not round intermediate calculations and round your final answer up to nearest whole number.)

2. Compute the law firm’s safety margin. (Round final answer to the nearest whole dollar amount.)

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Accounting questions

$21.00

Description

1.McCarty Pointers Corporation expects to begin operations on January 1, 2012; it will operate as a specialty sales company that sells laser pointers over the Internet. McCarty expects sales in January 2012 to total $200,000 and to increase 10 percent per month in February and March. All sales are on account. McCarty expects to collect 70 percent of accounts receivable in the month of sale, 20 percent in the month following the sale, and 10 percent in the second month following the sale.

Required:

a. Prepare a sales budget for the first quarter of 2012.

b. Determine the amount of sales revenue McCarty will report on the first 2012 quarterly pro forma income statement.

c. Prepare a cash receipts schedule for the first quarter of 2012.

d. Determine the amount of accounts receivable as of March 31, 2012.

2. Preparing pro form income statements with different assumptions. Top executive officers of Zottoli Company, a merchandising firm, are preparing the next year’s budget. The controller has provided everyone with the current year’s projected income statement. Sales revenue $2,000.000 Cost of goods sold 1,400,000 Gross profit 600,000 Net income 340,000 Cost of goods sold is usually 70 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $60,000. The president has announced that the company’s goal is to increase net income by 15 percent. Required a. What percentage increase in sales would enable the company to reach its goal? Support your answer with a pro forma income statement. b. The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 2 percent. What else can the company do to reach its goal? Prepare a pro forma income statement illustrating your proposal. c. The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $340,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Can the company reach its goal?

3. P14-20 Kinnion Medical Clinic has budgeted the following cash flows. January February March Cash receipts$ 100,000 $106,000 $126,000 Cash payments For inventory purchases 90,000 72,000 85,000 For S&A expenses 31,000 32,000 27,000 Kinnion Medical had a cash balance of $8,000 on January 1. The company desires to maintain a cash cushion of $5,000. Funds are assumed to be borrowed, in increments of $1,000, and repaid on the last day of each month; the interest rate is 1 percent per month. Kinnion pays its vendor on the last day of the month also. The company had a monthly $40,000 beginning balance in its line of credit liability account from this year’s quarterly results. Required Prepare a cash budget. (Round all computations to the nearest whole dollar.)

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Accounting questions

$23.00

Description

5-7
The Village of Harris issued $5,000,000 in 6 percent general obligation, tax-supported bonds on July 1, 2008, at 101. A fiscal agent is not used. Resources for principal and interest payments are to come from the General Fund. Interest payment dates are December 31 and June 30. The first of 20 annual principal payments is to be made June 30, 2009. Harris has a calendar fiscal year.
1. A capital projects fund transferred the premium ($50,000) to the debt service fund.
2. On December 31, 2008, funds in the amount of $150,000 were received from the General Fund and the first interest payment was made.
3. The books were closed for 2008.
4. On June 30, 2009, funds in the amount of $350,000 were received from the General Fund, and the second interest payment was made along with the first principal payment ($250,000).
5. On December 31, 2009, funds in the amount of $142,500 were received from the General Fund and the first interest payment was made.
6. The books were closed for 2009.
a. Prepare journal entries to record the events above in the debt service fund.
b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31, 2008.

5-10
On July 1, 2008, a five-year agreement is signed between the City of Genoa and the Computer Leasing Corporation for the use of computer equipment not associated with proprietary funds activity. The cost of the lease, excluding executory costs, is $15,000 per year. The first payment is to be made by a capital projects fund at the inception of the lease. Subsequent payments, beginning July 1, 2009, are to be made by a debt service fund. The present value of the lease payments, including the first payment, is $68,189. The interest rate implicit in the lease is 5 percent.
a. Assuming the agreement meets the criteria for a capital lease under the provisions of SFAS No. 13, make the entries required in (1) the capital projects fund and (2) the debt service fund on July 1, 2008, and July 1, 2009.
b. Comment on where the fixed asset and long-term liability associated with this capital lease would be recorded and the impact of the journal entries recorded for a.

6-3
Why might it be desirable to operate enterprise funds at a profit?
6-10
The Village of Parry reported the following for its Print Shop Fund for the year ended April 30, 2009.
VILLAGE OF PARRY—PRINT SHOP FUNDStatement of Revenues, Expenses, and Changes in Net Assets For the Year Ended April 30, 2009
Operating revenues: Â Â
 Charges for services  $1,000,000
Operating expenses: Â Â
 Salaries and benefits $500,000 Â
 Depreciation 200,000 Â
 Supplies used 200,000 Â
 Utilities 70,000 970,000
Income from operations  30,000
Nonoperating income (expenses): Â Â
 Interest revenue 30,000 Â
 Interest expense (50,000) (20,000)
Net income before transfers  10,000
Transfers in  180,000
 Changes in net assets  190,000
 Net assets—beginning  1,120,000
 Net assets—ending  $1,310,000

The Print Shop Fund records also revealed the following:
1. Contribution from Water Utility Fund for working capital needs  $ 80,000
2. Contribution from General Fund for purchase of equipment  100,000
3. Loan from Water Utility Fund for purchase of equipment  300,000
4. Purchase of equipment  (450,000)
5. Purchase of one-year investments  (100,000)
6. Paid off a bank loan outstanding at May 1, 2008 Â $50,000
 Paid interest  $1,000
 The loan was for short-term operating purposes.  Â
7. Signed a capital lease on April 30, 2009 Â $42,180
The following balances were observed in current asset and current liability accounts. ( ) denote credit balances:
 5/1/08 4/30/09
Cash $151,000 $233,000
Accrued interest receivable 5,000 10,000
Due from other funds 40,000 50,000
Accrued salaries and benefits (20,000) (30,000)
Utility bills payable (4,000) (5,000)
Accounts payable (30,000) (25,000)
Accrued interest payable (5,000) (7,000)
Prepare a Statement of Cash Flows for the Village of Parry Print Shop Fund for the Year Ended April 30, 2009. Include the reconciliation of operating income to net cash provided by operating activities.

7-6
On July 1, 2008, the City of Belvedere accepted a gift of cash in the amount of $3,000,000 from a number of individuals and foundations and signed an agreement to establish a private-purpose trust. The $3,000,000 and any additional gifts are to be invested and retained as principal. Income from the trust is to be distributed to community nonprofit groups as directed by a Board consisting of city officials and other community leaders. The agreement provides that any increases in the market value of the principal investments are to be held in trust; if the investments fall below the gift amounts, then earnings are to be withheld until the principal amount is reestablished.
a. The following events and transactions occurred during the fiscal year ended June 30, 2009. Record them in the Belvedere Community Trust Fund.
a. On July 1, the original gift of cash was received.
b. On July 1, $2,000,000 in XYZ Company bonds were purchased at par plus accrued interest. The bonds pay an annual rate of 6 percent interest semiannually on April 1 and October 1.
c. On July 2, $950,000 in ABC Company common stock was purchased. ABC normally declares and pays dividends semiannually, on January 31 and July 31.
d. On October 1, the first semiannual interest payment was received from XYZ Company. Note that part of this is for accrued interest due at the time of purchase; the remaining part is an addition that may be used for distribution.
e. On January 31, 2009, a cash dividend was received from ABC Company in the amount of $19,000.
f. On March 1, the ABC stock was sold for $960,000. On the same day, DEF Company stock was purchased for $965,000.
g. On April 1, the second semiannual interest payment was received from XYZ Company.
h. During the month of June, distributions were approved by the Board and paid in cash in the amount of $95,000.
i. Administrative expenses were recorded and paid in the amount of $12,000.
j. An accrual for interest on the XYZ bonds was made as of June 30, 2009.
k. As of June 30, 2009, the fair value of the XYZ bonds, exclusive of accrued interest, was determined to be $2,002,000. The fair value of the DEF stock was determined to be $960,000.
l. Closing entries were prepared.
b. Prepare, in good form, (1) a Statement of Fiduciary Net Assets and (2) a Statement of Changes in Fiduciary Net Assets for the Belvedere Community Trust Fund.

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Accounting questions

$32.00

Description

Instructions:

Answer both Q1 and Q2

Question 1

Toni had worked as an apprentice baker in a large bakery
that supplied different types of bread – from the standard white loaf to the
speciality bread such as rye, gluten-free and organic. At the end of her training, she decided to
start a small business specialising in producing cakes – in particular, cakes
with ornate decorations made from icing sugar – and Danish pastries because she
did not want to compete with the large bakeries for the “bread
market”. As she was close to office
buildings, she decided to try and increase her daily cash-flow by selling
“fresh-cut” sandwiches.

Having spent most of her savings on purchasing equipment and
supplies, renovating shop premises, and employing two shop assistants, she did not
want to spend

money for an accountant to set up an accounting system. She wondered whether she should base her
cost-management system on the system adopted in the large bakery.

As an apprentice, she had not been involved in the
management aspects of operating a bakery, and she did not know what sort of
information she would need to ensure that she did not lose her investment in
her business. She was certain that there
was a ready and reasonably large market for her bakery products. She felt

that all she needed was a cash-statement each week to show
her what her receipts and payments were, and an annual set of accounts to make
sure that she was operating at a profit. To ensure that she recovered her
costs, she intended to follow the product costing strategy used by the large
bakery that she was an apprentice in.

The large bakery produced a variety of bread using highly
automated processes. In ascertaining the
cost of its different types of bread, the large bakery treated flour as a
direct cost. All other costs were treated as indirect costs, and were
allocated. It was a simple system that
Toni thought she could emulate. However,
the large bakery did not produce cakes and pastries. Cakes and pastries require highly specialised

labour skills because the processes may not be easily
standardised and automated.

Required:

Toni is relying on weekly cash flow and annual financial
accounts to ensure that she remains in business in the long-term. She is also attempting to ensure that her
pricing and cost-management strategies are appropriate by adopting the cost
management system used in the large bakery.
Do you agree with Toni’s approach? Support your opinion by addressing
the following issues:

a) How does one ensure that a cost-management system
provides relevant and useful information?

(5 marks).

b) Toni is relying on financial feedback, and the product
costing method adopted by the large bakery. What are the strengths and
weaknesses of these approaches?

(10 marks).

c) Outline any changes you would recommend that would help
Toni to manage her business. Explain how
your changes would address the weaknesses that you have identified in Toni’s
proposed system.

(5 marks).

When answering Question 1, please maintain the 3 parts (a to
c above). The word length: the answer to
each part should address the question for the marks awarded to each part.

[Total: 20 marks]

Question 2

Zubick Corporation produces and supplies 2 types of
component parts to industrial equipment manufacturers. These parts are known as X123 and R907.

There are 2 departments in the factory: the machining and
assembly departments. The machining department has highly automated operations,
while assembly has labour-intensive operations.

Table 1: Annual production data by product

Product X123

Product R907

Units produced

1,000

2,000

Total directlabour
hours

(DLH) consumedper
unit

5DLH

15DLH

Totalmachinehours(MH)

consumedper
unit

15MH

5MH

The overhead cost incurred in the Machining department was
$1,300,000, while the overhead cost in the Assembly department was $350,000.

Table 2: Annual overhead costs and production activity by
department

Machining dept

Assemblydept

Total

Overheadcost

$1,300,000

$350,000

$1,650,000

Directlabourhours

(DLH) consumed per dept

5,000DLH

30,000DLH

35,000DLH

Machinehours

(MH) consumed
per dept

23,000MH

2,000MH

25,000MH

The manager, Rex, decided to allocate costs to the 2
products in the following manner: he divided the total overhead costs of
$1,650,000 by the total number of labour hours utilised in the factory (ie
(1000 x5) plus (2000 x 15) = 35,000 DLH).

Therefore his overhead rate was $1,650,000/35,000 = $47.14
per DLH.

The overhead allocated to each product using Rex’s rate was
as follows:

Product X123 = 5 DLH x$47.14 = $235.70

Product R907 = 15 DLH x $47.14 = $707.10

But Rex was losing sales of product R907 to his competitor
who was able to sell a similar product at a lower price, and recover all costs
of production.

Additional information:

Tables 3 and 4 show how much direct labour and machine time
is consumed by each product in each production department.

Table 3: Machine hours (MH) consumed by each product in
production departments.

Machining dept

Assemblydept

Totalperunit
of

product

Per unit of product

X123

14.5 MH

0.5MH

15MH perunit of

X123

Per unit of product

R907

4.25 MH

0.75 MH

5MH
per unitof

R907

Table 4: Direct labour hours (DLH) consumed by each product
in production departments.

Machining dept

Assemblydept

Totalperunit of product

Per unit of product

X123

2DLH

3DLH

5DLH per unit of

productX123

Per unit of product

R907

1.5DLH

13.5DLH

15DLHper unitof

productR907

Required:

i) Do you agree or disagree with Rex’s overhead allocation
method? Explain. You should draw on
information provided in Tables 1 to 4 to help explain and support your answer.

(5 marks).

ii) How would you improve it? Calculate alternative rates that you would
use and explain why you think it would help Rex. You should draw on information provided in
Tables 1 to 4 to support your recommendation.

(15 marks). [Total: 20 marks]

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accounting questions

$11.00

Description

1. Watts and Zimmerman’s Positive Accounting Theory is:
A. One of several normative theories of accounting
B. One of several positive theories of accounting
C. One of several critical theories of accounting
D. None of the given options is correct

2. The key theory that underpins Positive Accounting Theory is:
A. The Efficient Markets Hypothesis
B. Agency theory
C. Normative ethical theory
D. None of the given options is correct

3. The principal’s expectation of opportunistic behaviour by his or her agent results
in lower payments to:
A. The agent
B. The principal
C. The principal and the agent
D. Neither the principal nor the agent

4. The ‘political cost hypothesis’ of Positive Accounting Theory suggests that:
A. Large firms are more likely to use accounting choices that reduce reported profits
B. Small firms are more likely to use accounting choices that reduce reported profits
C. Neither large nor small firms are more likely to use accounting choices that reduce
reported profits
D. Both large and small firms are more likely to use accounting choices that reduce
reported profits
5. The ‘bonus plan hypothesis’ of Positive Accounting Theory suggests managers of
firms with bonus plans tied to reported income are more likely to use accounting
methods that:
A. Increase prior period reported income
B. Increase current period reported income
C. Increase future period reported income
D. None of the given options is correct

6. The ‘debt/equity hypothesis’ of Positive Accounting Theory predicts that:
A. The higher the firm’s debt/equity ratio, the more likely managers are to use
accounting methods that lower income
B. The lower the firm’s debt/equity ratio, the more likely managers are to use
accounting methods that increase income
C. The higher the firm’s debt/equity ratio, the more likely managers are to use
accounting methods that increase income
D. None of the given options is correct

7. Critical researchers accuse financial accounting of:
A. Being open to manipulation by self-interested managers
B. Reinforcing unequal distributions of wealth and power
C. Being irrelevant to management decision-making

D. Poorly predicting stock prices

8. ‘Social Praxis’ in the context of critical theory means that
A. Theory influences practice
B. Practice influences theory
C. Theory influences practice, while practice influences theory
D. Theory does not influence practice, and practice does not influence theory

9. Critical accounting researchers have criticised other social and
environmental accounting researchers for:
A. Lacking objectivity
B. Being too radical and unrealistic
C. Leaving existing social structures unchallenged
D. Ignoring the findings of empirical accounting research

10. Which theoretical perspectives have been utilised by critical researchers?
A. Marxism
B. Deep ecology
C. Radical feminism
D. All of the given options are correct

11. Broadly speaking, critical researchers have been:
A. Successful in identifying problems in accounting practices, but unsuccessful in
changing practices
B. Successful in exposing problems in accounting practices, and successful in
changing practices
C. Unsuccessful in exposing problems in accounting practices, but successful in
changing practices
D. Unsuccessful in exposing problems in accounting practices, and unsuccessful in
changing practices

12. Critical researchers interpret the Australian accounting bodies’ opposition to
mandatory corporate social and environmental reporting as evidence that the
accounting profession:
A. Is legitimately concerned with introducing unnecessary regulation
B. Does not believe mandatory reporting would enhance corporate accountability
C. Does not believe shareholders and the public support mandatory reporting
D. Promotes the interests of business above the interests of other stakeholders

13. Critical researchers believe that accountants are:
A. Complicit in the exploitation of citizens
B. Resistant to the exploitation of citizens
C. Irrelevant to the exploitation of citizens
D. Exploited by citizens

14. Critical researchers believe that regulation of corporations is ineffective
because the government:
A. Is weak and powerless
B. Is deceived by corporations
C. Favours the rich
D. Does not believe that more effective social and environmental legislation is
required

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Accounting Questions

$21.00

Description

PROBLEMS

The Hobbit Company made the following merchandise purchases and
sales during the July:

.png” alt=”Text box:

“>July. 1 purchased
380 units at $15 each

July
5 purchased 270 units at $20
each

July
9 sold
500 units at $55each

July
14 purchased 300 units at $24
each

July
30 sold
250 units at$55 each

Required: SHOW ALL CALCULATIONS.

There is no beginning inventory. If the company uses the last-in,
first-out (LIFO) perpetual inventory system:

1)
What is the value of ending
inventory at July 30? $__________

2) What is the value of cost of
goods sold at July 30? $_________

On September 30, Emerson Co. has $540,250 of accounts
receivable. Emerson uses the allowance method of accounting for bad debts and
has an existing credit balance in the allowance for doubtful accounts of
$13,750.

Required: Prepare journal entries to record the
following selected October transactions. The company uses the perpetual
inventory system.

October 1 – Sold $325,000 of merchandise (that cost
$178,500) to customers on credit.
October 10 – Received $425,100 cash in payment of accounts receivable.
October 23 – Wrote off $16,700 of uncollectible accounts receivable.
October 31 – In adjusting the accounts on October 31, its fiscal year-end, the
company estimated that 3.0% of accounts receivable will be uncollectible.

Mahoney Company had the
following transactions involving plant assets during year. Unless otherwise indicated, all transactions
were for cash.

January 2 Purchased a truck for $50,000 plus
sales taxes of $3,000. The truck is
expected to have a $4,000 salvage value
and a 4 year life.

January 3 Paid $1,500 to have the company’s logo
painted on the truck. This did not
change the truck’s salvage value.

December 31 Recorded straight-line depreciation on the
truck.

Required: Prepare the general journal entries to record
these transactions.

On April 1, Year 5 a
company discarded a machine that had cost $10,000 and had accumulated
depreciation of $8,000 as of December 31, Year 4. The asset had a 5-year life
and $0 salvage value.

Required: Prepare the journal entries to 1) record the updating of the
depreciation expense and2)
discarding of this asset in Year 5.

On January 1, a machine
costing $260,000 with a 4-year life and an estimated $5,000 salvage value was
purchased. It was also estimated that the machine would produce 500,000 units
during its life. The actual units produced during its first year of operation
were 110,000.

Required: Determine the amount of depreciation expense
for the first year under each of the following assumptions:

1.
The company uses the units-of-production method
of depreciation $__________

2.
The company uses the double-declining-balance
method of depreciation $_______

On November 1,
Bob’s Skateboards signed a $12,000, 90-day, 5% note payable to cover a past due
account payable.

Required:

    1. What amount of interest expense on this note
      should Bob’s Skateboards report on year-end December 31? _____________
      b. Prepare Bob’s journal entry to record the issuance of the note
      payable.
      c. Prepare Bob’s journal entry to record the payment of the note on
      February 1 of the following year.

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accounting questions

$16.00

Description

1. Chapman Inc. has several outdated computers that cost a total of $8,600 and could be sold as scrap for $4,600. They could be updated for an additional $2,400 and sold. If Chapman updates the computers and sells them, net income will increase by $5,400. What amount would be considered sunk costs?
A) $5,400
B) $11,000
C) $8,600
D) $1,200

2. It costs Chapman Company $18.40 of variable and $3.75 of fixed costs to produce one bathroom scale, which normally sells for $47.00. A foreign wholesaler offers to purchase 4,000 scales at $26.90 each. Chapman would incur special shipping costs of $2.75 per scale if the order were accepted. Chapman has sufficient unused capacity to produce the 4,000 scales. If the special order is accepted, what will be the effect on net income?
A) $107,600 increase
B) $23,000 increase
C) $8,000 increase
D) $23,000 decrease

6. Mesh Merchandising Company expects to purchase $86,000 of materials in July and $118,000 of materials in August. 21ree-quarters of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase. How much will August’s cash disbursements for materials purchases be?
A) $118,000
B) $64,500
C) $88,500
D) $110,000

8. The following information is taken from the production budget for the first quarter:
Beginning inventory in units 883
Sales budgeted for the quarter 338,000
Capacity in units of production facility 350,000
How many finished goods units should be produced during the quarter if the company desires 2,100 units available to start the next quarter?
A) 339,217
B) 340,100
C) 351,217
D) 336,783

9. Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered:
Old Machine New Machine
Price $300,000 $600,000
Accumulated Depreciation 90,000 -O-
Remaining useful life 10 years -O-
Useful life -0- 10 years
Animal operating costs $240,000 $180,600

If the old machine is replaced, it can be sold for $24,000.
The net advantage (disadvantage) of replacing the old machine is
A) $18,000
B) $(6,000)
C) $24,000
D) $(60,000)

10. Astor Manufacturing has the following budgeted sales: January $120,000, February $180,000, and March $150,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during March are:
A) $159,000.
B) $168,000.
C) $157,500.
D) $150,000.

12. Comma Co. makes and sells widgets. The company is in the process of preparing its selling and administrative expense budget for the month. The following budget data are available:
Item Variable Cost Per Unit Sold Monthly Fixed Cost
Sales commissions $1 $10,000
Shipping $3
Advertising $4
Executive salaries $120,000
Deprecíation on office equipment $4,000
Other $2 $6,000
Expenses are paid in the month incurred. If the company has budgeted to sell 80,000 widgets in October, how much is the total budgeted selling and administrative expenses for October?
A) $930,000
B) $940,000
C) $800,000
D) $140,000

13. The cost to produce Part A was $82 per unit in 2012. During 2013, it has increased to $89 per unit. In 2013, Supplier Company has offered to supply Part A for $75 per unit. For the make-or-buy decision,
A) incremental revenues are $14 per unit.
B) incremental costs are $7 per unit.
C) net relevant costs are $7 per unit.
D) differential costs are $14 per unit.

15. At January 1, 2013, Farley, Inc. has beginning inventory of 2,000 surfboards. Farley estimates it will seli 5,000 units during the first quarter of 2013 with a 12% increase in sales each quarter. Farley’s policy is to maintain an ending inventory equal to 25% of the next quarter’s sales. Each surfboard costs $100 and is sold for $150. How much is budgeted sales revenue for the third quarter of 2013?
A) $975,000
B) $6,272
C) $225,000
D) $940,800

16. If there were 68,000 pounds of raw materials on hand on January 1, 135,000 pounds are desired for inventory at January 31, and 400,000 pounds are required for January production, how many pounds of raw materials should be purchased in January?
A) 332,000 pounds
B) 197,000 pounds —
C) 535,000 pounds
D) 467,000 pounds

18. On January 1, Stranbrough Company has a beginning cash balance of $21,000. During the year, the company expects cash disbursements of $169,400 and cash receipts of $154,000. If Stranbrough requires an ending cash balance of $20,000, the company must borrow
A) $36,400.
B) $25,600.
C) $20,000.
D) $14,400.

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Accounting questions

$16.00

Description

1.On the trial balance, which of the
following should have the balances listed in the debit column?

A.Assets, dividends, and expenses

B.Liabilities, revenues, and common stock

C.Liabilities, revenues, and dividends

D.Assets, revenues, and dividends

2.The unadjusted trial balance for
depreciation expense shows a $780 balance. The expense was adjusted

by $235. The adjusted trial balance figure
for depreciation expense is now a

A.$545 debit.

B.$1,015 debit.

C.$1,015 credit.

D.$545 credit.

3.The balance sheet is used to report

A.the financial position on a specific date.

B.results of operations for a specific
period.

C.results of operations for a specific date.

D.the financial position for a specific
period.

4.Which business form is similar to a
corporation in regard to owner liability?

A.Sole proprietorship

B.Limited liability company

C.Partnership

D.Limited liability corporation

5.A T-account has a $509 debit balance. This
account is most likely not

A.advertising expense.

B.land.

C.common stock.

D.dividends.

6.A T-account has which major parts?

A.A title, a debit side, and a credit side

B.A debit side, a credit side, and a balance

C.A debit side, a credit side, and a total
column

D.A title, a current date, and a balance

7.By definition, which type of organization
has stockholders?

A.Sole proprietorships

B.Corporations

C.Limited liability companies

D.Partnerships

8.Supplies on hand were $900 at the start of
the year. At the end of the year, it was determined that $350 of supplies had
been used. What is the adjusting entry for supplies?

A.Debit supplies, $350;
credit supplies expense, $350.

B.Debit supplies expense, $550; credit
supplies, $550.

C.Debit supplies, $550; credit supplies
expense, $550.

D.Debit supplies expense, $350; credit
supplies, $350.

9.Beginning retained earnings are $31,000;
sales are $46,800; expenses are $43,500; and dividends paid are $2,800. How
much is the net income or loss for the company?

A.($3,300)

B.$3,300

C.$500

D.$34,300

10.The closing entries show a debit to
retained earnings of $350 and a credit to retained earnings of $750. There was
also a credit to dividends payable of $100. This company had a

A.net income of $400.

B.net loss of $400.

C.net income of $500.

D.net loss of $500

11.The account “Cash” had the
following changes: increase of $250, decrease of $75, increase of $113,

and decrease of $35. The final balance is a

A.debit balance of $363.

B.debit balance of $253.

C.credit balance of $110.

D.credit balance of $253.

12.The matching principle in accounting
requires the matching of revenue earned with the

A.expenses incurred to produce the revenue.

B.liabilities used to produce the revenue.

C.assets used less the liabilities incurred.

D.assets used to produce the revenue.

13.Which financial statement illustrates the
accounting equation?

A.Statement of cash flows

B.Balance sheet

C.Income statement

D.Statement of retained earnings

14.Beginning retained earnings are $65,000;
sales are $29,500; expenses are $33,000; and dividends paid are $3,500. How
much is the net income or loss for the company?

A.($3,500)

B.($7,000)

C.$26,000

D.$0

15.Rick owns a sporting goods store. In his
initial accounting records, he included his personal computer and all of his
personal sporting gear. Rick is violating which principle of accounting?

A.Reliability

B.Entity

C.Going concern

D.Cost

16.Which of the following is a disadvantage of
the corporate form of business?

A.Ease of raising capital

B.Double taxation

C.Limited liability

D.Limited resources

17.Dividends are paid with cash to
shareholders. Dividends are in which category of the chart of accounts?

A.Liabilities

B.Stockholders’ equity

C.Assets

D.Revenue

18.Collecting rent from a client three months
in advance would be an example of a/an

A.accrued revenue.

B.accrued expense.

C.deferred expense.

D.deferred revenue.

19.The income statement is used to report

A.the financial position on a specific date.

B.results of operations for a specific
period.

C.results of operations for a specific date.

D.the financial position for a specific
period.

20.Office equipment was purchased for $2,400
on account to Business Furniture Company. The journal entry would include a

A.debit to Office Equipment and a credit to
Accounts Payable.

B.credit to Cash and a debit to Office
Equipment Expense.

C.debit to Office Equipment and a credit to
Cash.

D.debit to Accounts
Payable and a credit to Cash.

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accounting questions

$16.00

Description

Keith Company is a two-division firm and has the following information available for this year:

Common fixed costs $ 800,000
Direct fixed costs of Division A 200,000
Direct fixed costs of Division B 400,000
Sales revenue of Division A 800,000
Sales revenue ofDivision B 1,200,000
Variable costs of Division A 240,000
Variable costs of Division B 360,000

What is Division A’s contribution margin?
A) $840,000
B) $440,000
C) $560,000
D) $(240,000)

Exhibit 1: The Testa Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of$100,000, they can be sold for a total of$160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000.

I. Refer to Exhibit 1. The sunk cost in this situation is:

2. Refer to Exhibit 1: What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?

3. Refer to Exhibit 1. Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?

Exhibit 2: The Wright Company has established standard cost for its single product as follows:

Direct material ………………………….. 2 gallons at $3 per gallon Direct labor ……………………………… 0.5 hours at $8 per hour Variable overhead ……………………….. 0.5 hours at $2 per hour
During May, the company made 4,000 units and incurred the following costs: Direct materials purchased: 8,100 gallons at $3.I 0 per gallon
Direct material used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual Variable overhead cost:$4,175

4. Refer to Exhibit 2. The materials price variance is:

5. Refer to Exhibit 2. The materials quantity variance is:

6. Refer to Exhibit 2. The labor rate variance is:

on, showing your calculation, and overall company’s net operating income or loss, before and after eliminating Northern Division.

6. United Corporation manufactures laser printers. United currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums are as follows:

Cost of drum

Total cost

Variable manufacturing cost …………… $23 $736,000
Fixed manufacturing cost ……………….. $2.080.000
Total cost $88 $2.816.000

Hardware Solutions Inc. has offered to provide United with all of its imaging drum needs for $72 per drum. If United accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, United will be able to use the freed up space to generate $240,000 of income each year in the production of alternative products.

Based on the information presented, would United be better off to make the drums or buy the drums and by bow much?

7. Apex Company had the following data for the current fiscal period:

Units in process at the beginning of the month 6,000
Units in process at the end of the month 4,000
Units started during the month 20,000

Materials are added at the beginning of the process. Beginning work-in-process was 40 percent complete as to conversion. Ending work-in-process was 70 percent complete as to conversion.
Calculate the number of units completed and transferred out during the period?

a. Weighted Average method:
b. FIFO method:

8. Speedy Delivery Services has the collected the following information about operating expenditures for its delivery truck
fleet for the past five years:

Year Miles Ooerating Costs
2007 110,000 $390,000
2008 140,000 $420,000
2009 100,000 $360,000
2010 130,000 $410,000
2011 150,000 $440,000

a. Using the high-low method, what is the cost estimate for variable costs for 2012?

b. Using the high-low method, what is the cost estimate forfzxed costs for 2012?

c. What is the best estimate of total operating expenses for 2012 using the high-low method based on total expected miles of 120,000?

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Accounting Questions

$5.00

Description

Lombardi Company manufactures a single product by a continuous process, involving threee production departments. The records indicate that direct materials, direct labor, and factory overhead for Department 1 were $100,000, $125,000 and $150,000,respectively. Work in process at the beginning of the period for Department 1 was $75,000, and work in process at the end of the period totaled $60,000.The record indicate that direct materials, direct labor and applied factory overhead for Department 2 were $50,000, $60,000 and $70,000 respectively. In addition, work in process at the beginning of the period for Department 2 totaled $75,000 and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 3 during the period is:

a. Work in Process–Dept. 3 (D) 585,00

Work in Process–Dept. 2 (C) 585,000

b. Work in Process–Dept. 3 (D) 570,000

Work in Process–Dept. 2 (C) 570,000

c. Work in Process–Dept. 3 (D) 555,000

Work in Process–Dept. 2 (C) 555,000

d. Work in Process–Dept. 3 (D) 165,000

Work in Process–Dept. 2 (C) 165,000

What numbers do I use to figure this out?

Work in Process, Beginning $10,000

Work in Process, Ending $15,000

Direct Labor Costs Incurred $ 4,000

Cost of Goods Manufactured $ 8,000

Factory Overhead $ 8,000

What is the amount of direct materials used?

a. $1,000

b. $4,000

c. $7,000

d. $3,000

What numbers do I use to figure this out?

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accounting questions

$16.00

Description

Keith Company is a two-division firm and has the following information available for this year:

Common fixed costs $ 800,000
Direct fixed costs of Division A 200,000
Direct fixed costs of Division B 400,000
Sales revenue of Division A 800,000
Sales revenue ofDivision B 1,200,000
Variable costs of Division A 240,000
Variable costs of Division B 360,000

What is Division A’s contribution margin?
A) $840,000
B) $440,000
C) $560,000
D) $(240,000)

Exhibit 1: The Testa Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of$100,000, they can be sold for a total of$160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000.

I. Refer to Exhibit 1. The sunk cost in this situation is:

2. Refer to Exhibit 1: What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?

3. Refer to Exhibit 1. Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?

Exhibit 2: The Wright Company has established standard cost for its single product as follows:

Direct material ………………………….. 2 gallons at $3 per gallon Direct labor ……………………………… 0.5 hours at $8 per hour Variable overhead ……………………….. 0.5 hours at $2 per hour
During May, the company made 4,000 units and incurred the following costs: Direct materials purchased: 8,100 gallons at $3.I 0 per gallon
Direct material used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual Variable overhead cost:$4,175

4. Refer to Exhibit 2. The materials price variance is:

5. Refer to Exhibit 2. The materials quantity variance is:

6. Refer to Exhibit 2. The labor rate variance is:

on, showing your calculation, and overall company’s net operating income or loss, before and after eliminating Northern Division.

6. United Corporation manufactures laser printers. United currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums are as follows:

Cost of drum

Total cost

Variable manufacturing cost …………… $23 $736,000
Fixed manufacturing cost ……………….. $2.080.000
Total cost $88 $2.816.000

Hardware Solutions Inc. has offered to provide United with all of its imaging drum needs for $72 per drum. If United accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, United will be able to use the freed up space to generate $240,000 of income each year in the production of alternative products.

Based on the information presented, would United be better off to make the drums or buy the drums and by bow much?

7. Apex Company had the following data for the current fiscal period:

Units in process at the beginning of the month 6,000
Units in process at the end of the month 4,000
Units started during the month 20,000

Materials are added at the beginning of the process. Beginning work-in-process was 40 percent complete as to conversion. Ending work-in-process was 70 percent complete as to conversion.
Calculate the number of units completed and transferred out during the period?

a. Weighted Average method:
b. FIFO method:

8. Speedy Delivery Services has the collected the following information about operating expenditures for its delivery truck
fleet for the past five years:

Year Miles Ooerating Costs
2007 110,000 $390,000
2008 140,000 $420,000
2009 100,000 $360,000
2010 130,000 $410,000
2011 150,000 $440,000

a. Using the high-low method, what is the cost estimate for variable costs for 2012?

b. Using the high-low method, what is the cost estimate forfzxed costs for 2012?

c. What is the best estimate of total operating expenses for 2012 using the high-low method based on total expected miles of 120,000?

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Accounting Questions

$5.00

Description

Lombardi Company manufactures a single product by a continuous process, involving threee production departments. The records indicate that direct materials, direct labor, and factory overhead for Department 1 were $100,000, $125,000 and $150,000,respectively. Work in process at the beginning of the period for Department 1 was $75,000, and work in process at the end of the period totaled $60,000.The record indicate that direct materials, direct labor and applied factory overhead for Department 2 were $50,000, $60,000 and $70,000 respectively. In addition, work in process at the beginning of the period for Department 2 totaled $75,000 and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 3 during the period is:

a. Work in Process–Dept. 3 (D) 585,00

Work in Process–Dept. 2 (C) 585,000

b. Work in Process–Dept. 3 (D) 570,000

Work in Process–Dept. 2 (C) 570,000

c. Work in Process–Dept. 3 (D) 555,000

Work in Process–Dept. 2 (C) 555,000

d. Work in Process–Dept. 3 (D) 165,000

Work in Process–Dept. 2 (C) 165,000

What numbers do I use to figure this out?

Work in Process, Beginning $10,000

Work in Process, Ending $15,000

Direct Labor Costs Incurred $ 4,000

Cost of Goods Manufactured $ 8,000

Factory Overhead $ 8,000

What is the amount of direct materials used?

a. $1,000

b. $4,000

c. $7,000

d. $3,000

What numbers do I use to figure this out?

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accounting questions

$21.00

Description

Question
Which of the following is not a step needed to maximize the profits from joint products?
1.Forecasting the sales price of each final product
2.Identifying alternative sets and quantities of final products possible from the joint
process
3.Determining how to allocate joint costs to the final products
4.Estimating the costs required to further process joint products into salable products
Question
A product's net realizable value is calculated by:
1.Deducting the cost of goods sold from the sales revenue
2.Deducting the allocated joint costs and processing costs after split-off from the sales revenue
3.Deducting unit-level costs from the sales revenue
4.Deducting processing costs after split-off from the sales revenue
Question
Great Sweets Candy Company produces various types of candies. Several candies could be
sold at the
split-off point or processed further and sold in a different form after further processing.
The candies are produced in a joint processing operation with $500,000 of joint processing
costs
monthly, which are allocated based on pounds produced. Information concerning this process
for a
recent month appears below:
Candy type - Sweet Meats- # of pounds 50,000, Price per pound a split off $ 8.00 Further processing Cost 75,000, price after processing $10.00
Candy type - Sweet Meats- # of pounds 100,000, Price per pound a split off $ 10.00 Further processing Cost 30,000, price after processing $10.50
Candy type - Sweet Meats- # of pounds 25,000, Price per pound a split off $ 5.00 Further processing Cost 20,000, price after processing $5.50
The joint processing costs in this operation:
1.Should be allocated to products to determine whether they are sold at split-off or
processed further
2.Should be ignored in determining whether to sell at split-off or process further
3.Should be ignored in making all product decisions
4.Are never included in product cost, as they are misleading to all management decisions

Question
Gardner Company processes products in a joint processing operation that produces products A
and B in a
joint process. The company incurs $1,200,000 of joint processing costs monthly. Currently,
3,600 of A and
2,800 of B are being produced each month. Management plans to decrease B's production by
600 units in order
to increase the production of A by 1,000 units. Additionally, this change will require minor
modifications
which will add $40,000 to the production costs. This cost is entirely attributable to product B
What is the amount of the joint costs allocable to A before the changes are made to the existing
production process, assuming Gardner allocates its joint costs according to the proportion of
A and B produced?
1.$675,000
2.$547,058
3.$529,412
4.$525,000
[$1,200,000 x 3600/6400 = $675,000/-]
Question
Which of the following is not a method of allocating joint costs?
1.Sales value at split-off
2.Net realizable value
3.By-product method
4.Physical-measures method

Question
Which of the following would not be a physical measure used to allocate joint costs?
1.Number of pounds produced
2.Cubic feet of gas produced
3.Sales value at split off
4.Energy content (BTUs)
Question
In joint-process costing and analysis, which of the following costs is relevant when deciding the
point at which a product should be sold to maximize profits?
1.The cost of the machinery used to produce the three products
2.The salaries of production personnel making the product
3.The cost of the materials required for the joint products
4.The selling price if the products are processed further

Question
Which of the following would not be a joint-product cost?
1.Cost of picking apples to be processed into cider and applesauce in a cider factory
2.Cost of cinnamon used in applesauce
3.Cost of maintaining oil rigs for an oil manufacturer
4.Costs of running a fishing boat that sells haddock, cod, and lobsters to wholesalers
Question
Allocation of factory service department costs to the production departments is necessary to:
1.Measure use of plant capacity
2.Make sure that machines are operating efficiently
3.Calculate cost per unit for purposes of external financial reporting
4.Control costs
Question
Which of the following would be an appropriate cost-allocation base for allocating the
cost of the company cafeteria?
1.Square footage occupied by departments
2.Number of hours of use
3.Number of meals served
4.Salaries of personnel purchasing meals

Question
Which of the following would not be an appropriate cost-allocation base for the Personnel
department costs?
1.Space occupied
2.Number of employees
3.Total payroll dollars in department using the equipment
4.Labor hours

Question
Which of the following would not be an appropriate cost-allocation base for allocating the
cost of the corporate library in a consulting company with multiple divisions?
1.Number of employees employed in each division
2.Square footage occupied by each division
3.Cost of periodicals ordered by each division
4.Number of consultants employed in each division

Question
Mansfield River Corporation maintains computer equipment and provides services in all 50
states and in 20 countries. The Corporation has a fleet of 3 Corporate Jets and 2 Helicopters

and employs 6 full time pilots who receive salary and benefits. The most appropriate way to
allocate the total cost of the corporate jets, helicopters and pilots to individual user
departments would be:
1.Number of trips taken by each department
2.Sales revenue generated by each department
3.Number of miles flown by each department
4.Number of employees in each department

Question
Which of the following is not a recognized method of allocating costs of service departments
to user departments?
1.The direct method
2.The reciprocal method
3.The labor hours method
4.The step method
Question
There was an error in the text of this question, so everyone gets this one correct... but I had
already
activated the quiz when the error was discovered (thanks, Scott!) so Blackboard will not allow
me to
remove the question. To have this automatically scored as correct, select the letter for the
answer of
$187,000.
1.$187,000
2.$165,000
3.$171,583
4.$136,334

Question
Which of the following statements regarding traditional cost accounting systems is False?
1.Products are often over or under costed in traditional cost accounting systems
2.Most traditional cost accounting systems do not trace individual costs to products
3.The advantage of traditional cost accounting systems is their simplicity
4.Traditional cost accounting systems can be sufficient to meet managers' cost information
needs as long as the level of indirect costs is relatively high compared to the level of
direct costs
Question
Costs associated with a special machine which sands the edges of all finished products would
be an example of:

1.Unit-level activity
2.Batch-level activity
3.Customer-level activity
4.Product-level activity
Question
The review of each tax return by H & R Block would be an example of:
1.Unit-level activity
2.Facility-level activity
3.Product-level activity
4.Batch-level activity

Question
Ferguson Molding Company produces custom bottle caps and jar covers for large cosmetic
companies.
Each customer owns the custom-made molds that are used for the caps and jar covers, so caps
are
produced only to customer order. Each order requires the setting of molds in molding
machines.
Two full time mechanics, whose combined total annual salary and benefits are $160,000 per
year,
are employed setting up and breaking down the molding machines. An order consists of
anywhere
from 50,000 to 500,000 units. 80 orders were received during the year 2008 for individual
custom production runs. The total number of units produced was 8 million.
The cost of setting up the molding machines is an example of
1.Facility-level activity
2.Product-level activity
3.Batch-level activity
4.Customer-level activity

Question
Ferguson Molding Company produces custom bottle caps and jar covers for large cosmetic
companies.
Each customer owns the custom-made molds that are used for the caps and jar covers, so caps
are
produced only to customer order. Each order requires the setting of molds in molding
machines.
Two full time mechanics, whose combined total annual salary and benefits are $160,000 per
year,
are employed setting up and breaking down the molding machines. An order consists of

anywhere
from 50,000 to 500,000 units. 80 orders were received during the year 2008 for individual
custom production runs. The total number of units produced was 8 million.
The most appropriate cost driver base to allocate the salaries of the two mechanics under
Activity-Based Costing would be:
1.The number of bottle caps and jar covers produced
2.The number of setups
3.The number of hours spent on each setup
4.The number of setup mechanics

Question
Salaries of the human resource staff responsible for hiring production personnel at Dell
Computer would be an example of:
1.Unit-level activity
2.Facility-level activity
3.Batch-level activity
4.Product-level activity
Question
The purchase of chemicals to make a special batch of synthetic fiber would be an example of:
1.Customer-level resource
2.Facility-level resource
3.Product-level resource
4.Batch-level resource

Question
Richardson Motors uses ten units of part Number T305 each month in the production of large
Diesel engines.
The cost to manufacture one unit of T305 is presented below:
Direct Material: $2000
Material Handling
20% of direct material cost: 400
Direct Labor: 16000
Manufacturing Overhead
150% of direct labor cost: 24000
Material handling, which is not included in manufacturing overhead, represents the direct
variable
costs of the receiving department that are applied to direct materials and purchased
components on the

basis of their costs. Richardson's annual manufacturing overhead budget is
one-third variable and two-thirds fixed) Simpson Castings, one of Richardson's reliable
vendors,
has offered to supply T305 at a unit price of $30,000.
Assume Richardson Motors is able to rent all idle capacity for $50,000 per month. If Richardson
decides to purchase the ten units from Simpson Castings, Richardson's monthly
Cost for T305 would:
1.Decrease $14,000
2.Increase $46,000
3.Decrease $34,000
4.Decrease $64,000
Cost of manufacturing 10 units = ($2,000+$16,000) x 10 +$24,000 =$204,000
Cost of buying 10 units = $30,000 x 10 =$300,000
Increase in cost = $300,000 - $204,000 = $96,000/Rental Income of $50,000 would reduce the cost by $50,000.
Thus, Net Increase in the cost = $96,000 -$50,000 = $46,000/Question
In differential analysis, changes in the cost of direct materials among alternatives is an example
of
1.Price discrimination
2.Relevant data
3.Batch-level costs
4.None of the above
Question
TwoWheels (TW) manufactures hi-tech bicycles that sell for $600 each. They sell 1,000
bicycles
per year. Fixed higher-level costs amount to $100,000. Break-even for TW is 300 bicycles.
TW's margin safety is
1.$50,000
2.$180,000
3.$360,000
4.$420,000
[($600 x 1000) ($600 x 300) = $420,000/-]
Question
Faulk Industries (FI) produces low cost digital cameras that sell for $100. FI requires

a 25% return on sales. Currently feasible costs are $5,160,000 and a cost reduction of
$660,000 is required to meet their target. FI assumes they will sell ____ cameras.
1.60,000
2.75,000
3.85,000
4.None of the above
[($5,160,000 - $660,000) x 100/75 =$6,000,000, $6,000,000/100 =60,000/-]
Question
Juarez Healthcare Center receives reimbursement from C.H.E.A.T.E.M. insurance company.
Juarez receives $20 per physical therapy session. Each session lasts 15 minutes. Because
of a shortage of physical therapists, Juarez often finds it necessary to use a temporary
service to provide therapists. Assume collections and other variable cost amount to $5
per visit and all other facility costs are fixed.
What other qualitative factors should Juarez consider before using a temporary service?
1.What is the training of the employees?
2.Will Juarez builds relationships with the employees and has a potential source of new
therapists?
3.Can Juarez uses the temporary service as a means to screen employees for a good match
with the company?
4.All of the above
Question
Relevant costs exclude
1.Fixed costs
2.Costs that change from year to year
3.Costs that do not change based upon the alternative choices
4.All of the above

Question
When deciding on special order pricing, it is important to consider
1.Alternative capacity uses
2.The reaction of other customers
3.The potential for future sales
4.All of the above
Question
Abrams Corporation sells a product for $75 per unit. Its market share is 20 percent. The market
share can be increased to 30 percent with a reduction in price to $63. The product is currently
earning a profit of $12 per unit. The president of Abrams feels that the $12 profit per unit
must be maintained.

What is the target price per unit?
1.$53
2.$63
3.$65
4.$75

Question
Use of negotiation to arrive at a transfer price can lead to divisiveness and competition between
participating division managers.
1.True
2.False
Question
A particular manufacturing job is subject to an estimated 90% learning curve. The first unit
required
40 labor hours to complete. What is the cumulative average time per unit after four units are
completed?
1.32.0 hours
2.32.4 hours
3.36.0 hours
4.40.0 hours
[Y4 = 40(4)log0.9/log2 = 32.4 hours]

Question
In which cost estimation method would costs most likely be broken into unit-level, batch-level,
product-level and facility-level costs?
1.Scattergraph method
2.Account analysis method
3.Regression method
4.Engineering estimates method

Question
An amusement park estimates average costs per day. Which of the following is true?
1.Average cost per day considers the relationship between labor costs and other variables
such as temperature
2.Average cost per day can be useful in estimating labor costs
3.Average cost per day would include a component of variable labor costs but not fixed
labor cost
4.All of the above

Question
Which method of cost estimation does not use the company records as its primary source of
cost-activity data?
1.Engineering estimates
2.Regression analysis
3.Account analysis
4.High-low method
Question
Which of the following companies would most likely use operation costing?
1.A piano manufacturer
2.A potato chip company
3.An oil company
4.A pocketbook manufacturer

Question
Oak Bluff Company incorrectly assigns a $50,000 overhead item to selling expense. Borden
has
more inventory at the end of the year than at the beginning of the year. The result of this error
will be to:
1.Understate inventory and profit for the year
2.Have no effect on inventory and profit for the year
3.Overstate inventory and profit for the year
4.Understate inventory but have no effect on profit for the year

Question ]
Before prorating overhead, the current period overhead component of Cost of Goods Sold for
Wilmington Company was $230,000, while the current period overhead component of the
ending
inventory was $80,000. Manufacturing overhead of $310,000 was applied during the period,
whereas
$296,000 was actually incurred. Wilmington has no Work-in-Process inventory at the end of
the period.
If the manufacturing overhead-variance is prorated between inventory and cost of goods sold,
how much will be allocated to the ending inventory? (round to the nearest whole dollar)
1.$14,000

2.$ 0
3.$3,613
4.$2,868
[under applied overhead is $310,000 - $296,000 =$14,000]
Cost of goods sold..Dr.

$14,000

Manufacturing overheadsCr.

$14,000

WIP Inventory..Zero
Cost of goods sold2.3K
0/2.3K x $14,000 = $0
Question
Which of the following statements about activity-based flexible budgeting are true?
1.It uses several cost drivers
2.Costs that may appear fixed with respect to a single volume-based cost driver may be
variable with respect to other appropriate cost drivers
3.It can also be used as the basis for a flexible budget for planning and cost management
purposes
4.All of the above
Question
Which of the following is not important to managers when analyzing revenue sales-volume
variance information?
1.The combination of the individual revenue sales-volume variances
2.The comparison of budgeted and actual total costs
3.The picture of the product-line portrayed by aggregate dollars
4.The production for the period

Question
XYZ Corp. produced 26,000 units of its only product. Machine hours per unit are 2.8. The
budget planned for
23,000 units. What are the budgeted machine hours and the flexible-budget machine hours,
respectively?
1.64,400 machine hours; 72,800 machine hours
2.72,800 machine hours; 64,400 machine hours
3.68,000 machine hours; 75,000 machine hours
4.75,000 machine hours; 68,000 machine hours

Question
Rhone Corporation produces a product called Sharone, which gives rise to a by-product
called Erone. The only costs associated with Erone are additional processing costs of $2
for each unit. Rhone accounts for Erone's sales first by deducting its separable costs
from its sales and then by deducting this net amount from the cost of goods sold of Sharone.
This year, 4,800 units of Erone were produced. They were all sold for $10 each. Company
operating expenses were $120,000 for the year. Sales revenue and cost of goods sold for
Sharone were $800,000 and $400,000, respectively, for the year. (CPA adapted)
If Rhone changes its method of accounting for Erone's sales, assuming that all of Erone's
production is sold in the period that it is produced, what would be the effect on Rhone's overall
profits?
1.Overall profit would increase
2.Overall profit would decrease
3.Overall profit would remain the same
4.Additional information is needed to determine the effect on overall profit

Question
The Stanford Corporation produces three outputs: A, B and C from one input.
The net-realizable-value of A at the split-off point is $200,000.
The net-realizable-value of B at the split-off point is $400,000 and
the net-realizable- value of C at the split-off is $50,000. Final sales
values are $400,000, $600,000 and $50,000 for A, B and C respectively. However,
these prices are subject to erratic change. The additional processing costs
for A, B and C are $100,000, $150,000 and $0 respectively. Stanford
produces 120,000 units of A, 120,000 units of B and 60,000 units of C.
The total costs incurred up to the split-off point are $300,000
What is the expected gross margin for Stanford Corporation?
1.$350,000
2.$450,000
3.$500,000
4.The expected gross margin cannot be determining without knowing how joint-costs will be allocated
Gross Profit =[Revenues Joint cost at split-off point additional processing costs]
Gross Profit Margin =$400,000 + $600,000 + $50,000 - $300,000 - $100,000 - $150,000
=$500,000/-

Question
Which of the following statements regarding the physical-measures method of allocating
joint-product costs is false?
1.Joint product costs are allocated proportional to economic values
2.It is based on the relative volume, weight, or other physical measure of each
joint product at the split-off point
3.It is preferred when prices of output products are highly volatile or unpredictable
4.The total profit of the company will be the same regardless of which physical
measure is used to allocated joint-product costs

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Accounting Questions

$12.00

Description

1. (TCO B) Adjusting Entries: Prepaid rent at 1/1/10 was $9,000. During 2010 rent payments of $110,000 were made and charged to “rent expense.” The 2010 income statement shows as a general expense the item “rent expense” in the amount of $111,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr. for debit and Cr. for credit. (Points: 10)

Question 2. 2. (TCO B) Adjusting Entries: Retained Earnings at 1/1/10 was $0 and at 12/31/10 was $400,000. During 2010, cash dividends of $50,000 were paid and a stock dividend of $100,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry. For each journal entry write Dr for debit and Cr for credit. (Points : 10)

Question 3. 3. (TCO C) Presented below is information related to Big Blast Company.

Retained earnings, December 31, 2010 $ 2,350,000
Sales 2,600,000
Selling and administrative expenses 240,000
Earthquake loss (pre-tax) on plant (extraordinary item) 250,000
Cash dividends declared on common stock 53,600
Cost of good sold 1,000,000
Gain resulting from computation error on
depreciation charge in 2009 (pre-tax) 520,000
Other revenue 80,000
Other expenses 50,000

Instructions: Prepare in good form a multiple-step income statement for the year 2011. Assume a 30% tax rate and that 100,000 shares of common stock were outstanding during the year. (Points: 40)

Question 4. 4. (TCO D) The following balance sheet was prepared by the bookkeeper for Blue Company as of December 31, 2011 Blue Company.
Balance Sheet as of December 31, 2011 is as follows.

Cash $90,000
Accounts payable $75,000
Accounts receivable (net) 42,200
Long-term liabilities 100,000
Inventories 57,000
Stockholders’ equity 218,500
Investments 76,300
Equipment (net) 96,000
Patents 32,000
$393,500 $393,500
The following additional information is provided:
(1) Cash includes the cash surrender value of a life insurance policy $5,000 and a bank overdraft of $4,000 has been deducted.
(2)The net accounts receivable balance includes:
(a) accounts receivable debit balances $50,000;
(b) accounts receivable credit balances $0; and
(c) allowance for doubtful accounts $3,800.
(3) Inventories do not include goods costing $3,000 shipped out on consignment. Receivables of $3,000 were recorded on these goods.
(4) Investments include investments in common stock, trading $13,000, available-for-sale $46,300, and franchises $17,000.
(5) Equipment costing $5,000 with accumulated depreciation $4,000 is no longer used and is held for sale. Accumulated depreciation on the other equipment is $40,000.
Instructions:
Prepare a balance sheet in good form (stockholders’ equity details can be omitted).
Do not worry about balancing the statement but rather use your time to compute the account balances properly for presentation purposes. (Points : 40)

Question 5. 5. (TCO E) Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $3,500 at the end of each year and provides the leaser (John) with an 8% return on its investment. You may use the following 8% interest factors.

9 Periods 10 Periods 11 Periods
Future Value of 1 1.99900 2.15892 2.33164
Present Value of 1 .50025 .46319 .42888
Future Value of 12.48756 14.48656 16.64549
Ordinary Annuity of 1
Present Value of 6.24689 6.71008 7.13896
Ordinary Annuity of 1
Present Value of 6.74664 7.24689 7.71008
Annuity Due of 1
Instructions
(a) Assuming the computer has an 11-year life and will have no salvage value at the expiration of the lease, what was the original cost of the copier to John?
(b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period? (Points: 25)

?
Question 6. 6. (TCO F) Daniels Company deposits all receipts and makes all payments by check. The following information is available from the cash records.
MARCH 31
BANK RECONCILIATION
Balance per bank $26,746
Add: Deposits in transit 2,100
Deduct: Outstanding checks (3,800)
Balance per books $25,046

Month of April Results
Per Bank Per Books
Balance April 30 $27,995 $24,355
April deposits 8,864 13,889
April checks 13,100 14,080
April note collected 3,000 -0-
(not included in April deposits)
April bank service charge 35 -0-
April NSF check of a customer returned by the bank
(recorded by bank as a charge) 900 -0-

Instructions
Calculate the amount of the April 30
(1) deposits in transit; and
(2) outstanding checks.
Show all your work for potential partial credit. (Points: 25)

Question 7. 7. (TCO G) Rye Company was formed on December 1, 2010. The following information is available from Rye’s inventory record for Product Bread.

Units Unit Cost
January 1, 2011
(beginning inventory) 1,700 $17.00

Purchases:
January 5, 2011 2,600 $20.00
January 25, 2011 2,400 $21.00
February 16, 2011 1,000 $22.00
March 15, 2011 2,100 $25.00

A physical inventory on March 31, 2011, shows 3,000 units on hand.
Instructions:
Prepare schedules to compute the ending inventory at March 31, 2011, under each of the following inventory methods.
(a) FIFO
(b) LIFO
(c) Weighted-average
Show supporting computations in good form. (Points : 40)

Question 8. 8. (TCO H) A machine cost $500,000 on April 1, 2010. Its estimated salvage value is $50,000 and its expected life is 8 years.
Instructions:
Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used.
(a) Straig