Published:
8 months ago
Accounting Discussion Posts Help
categories:
Online course help
Accounting Questions Set 841. Abbey Park was organized on April 1, 2016, by Trudy Crawford. Trudy is a good manager but a poor...
Abbey Park was organized on April 1, 2016, by Trudy Crawford. Trudy is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Trudy prepared the following income statement for the quarter that ended March 31, 2017.
Trudy knew that something was wrong with the statement because net income had never exceeded $20,000 in any one quarter. Knowing that you are an experienced accountant, she asks you to review the income statement and other data. You first look at the trial balance. In addition to the account balances reported in the income statement, the ledger contains these selected balances at March 31, 2017.
You then make inquiries and discover the following.
1. Rent revenue includes advanced rentals for summer-month occupancy, $21,000.
2. There were $600 of supplies on hand at March 31.
3. Prepaid insurance resulted from the payment of a 1-year policy on January 1, 2017.
4. The mail on April 1, 2017, brought the following bills: advertising for week of March 24, $110; repairs made March 10, $1,040; and utilities $240.
5. Wage expense totals $290 per day. At March 31, 3 days’ wages have been incurred but not paid.
6. The note payable is a 3-month, 7% note dated January 1, 2017. Instructions With the class divided into groups, answer the following.
(a) Prepare a correct income statement for the quarter ended March 31, 2017.
(b) Explain to Trudy the generally accepted accounting principles that she did not follow in preparing her income statement and their effect on her results.
2. On September 1, Moreau Office Supply SA had an inventory of 30 calculators at a cost of €22 each....
On September 1, Moreau Office Supply SA had an inventory of 30 calculators at a cost of €22 each. The company uses a perpetual inventory system. During September, the following transactions occurred. Sept. 6 Purchased with cash 90 calculators at €20 each from Roux Co. SA, terms 2/10, n/30. 9 Paid freight of €180 on calculators purchased from Roux Co. 10 Returned 3 calculators to Roux Co. for €66 credit (including freight) because they did not meet specifications. 12 Sold 28 calculators costing €22 (including freight) for €33 each to Village Book Store, terms n/30. 14 Granted credit of €33 to Village Book Store for the return of one calculator that was not ordered. 20 Sold 40 calculators costing €22 for €35 each to Holiday Card Shop, terms n/30. Instructions Journalize the September transactions.
3. 1 Which of the following is not an asset? (A) Buildings (B) Cash balance (C) Debtors (D) Loan from K
1 Which of the following is not an asset?
(A) Buildings
(B) Cash balance
(C) Debtors
(D) Loan from K Harris
2 Which of the following is a liability?
(A) Machinery
(B) Creditors for goods
(C) Motor Vehicles
(D) Cash at Bank
4. Which of the following types of entities would be most likely to use a process costing system?
Which of the following types of entities would be most likely to use a process costing system?
A) a shipbuilder
B) a furniture manufacturer
C) a law firm
D) a utility producing natural gas
5. 1. Son Corporation is an 80 percent-owned subsidiary of Pin
1. Son Corporation is an 80 percent-owned subsidiary of Pin Corporation. In 2011, Son sold land that cost $15,000 to Pin for $25,000. Pin held the land for eight years before reselling it in 2019 to Roy Company, an unrelated entity, for $55,000. The 2019 consolidated income statement for Pin and its subsidiary, Son, will show a gain on the sale of land of:
a. $40,000
b. $32,000
c. $30,000
d. $24,000
2. On January 3, 2011, Pal Corporation sells equipment with a book value of $90,000 to its 100 percent-owned subsidiary, Sat Corporation, for $120,000. The equipment has a remaining useful life of three years with no salvage at the time of transfer. Sat uses the straight-line method of depreciation. As a result of this intercompany transaction, Pal’s Investment in Sat account balance at December 31, 2011, will be:
a. $20,000 greater than its underlying equity interest
b. $20,000 less than its underlying equity interest
c. $30,000 less than its underlying equity interest
d. $10,000 greater than its underlying equity interest
3. Pen Corporation sells equipment with a book value of $80,000 to Sir Company, its 75 percent-owned subsidiary, for $100,000 on January 1, 2011. Sir determines that the remaining useful life of the equipment is four years and that straight-line depreciation is appropriate. The December 31, 2011, separate financial statements of Pen and Sir show equipment—net of $500,000 and $300,000, respectively. Consolidated equipment—net will be:
a. $800,000
b. $785,000
c. $780,000
d. $650,000
4. Par Corporation sold equipment with a remaining three-year useful life and a book value of $14,500 to its 80 percent-owned subsidiary, Sad Corporation, for $16,000 on January 2, 2011. A consolidated workpaper entry on December 31, 2011, to eliminate the unrealized profits from the intercompany sale of equipment will include:
a. A debit to gain on sale of equipment for $1,000
b. A debit to gain on sale of equipment for $1,500
c. A credit to depreciation expense for $1,500
d. A debit to machinery for $1,500
5. A subsidiary sells equipment with a four-year remaining useful life to its parent at a $12,000 gain on January 1, 2011. The effect of this intercompany transaction on the parent’s investment income from its subsidiary for 2011 will be:
a. An increase of $12,000 if the subsidiary is 100% owned
b. An increase of $9,000 if the subsidiary is 100% owned
c. A decrease of $9,000 if the subsidiary is 100% owned
d. A decrease of $3,600 if the subsidiary is 60% owned
6. On January 1, 2011, Sin Corporation, a 60 percent-owned subsidiary of Pot Company, sells a building with a book value of $300,000 to its parent for $350,000. At the time of sale, the building has an estimated remaining life of 10 years with no salvage value. Pot uses straight-line depreciation. If Sin reports net income of $1,000,000 for 2011, noncontrolling interest share will be:
a. $450,000
b. $400,000
c. $382,000
d. $355,000
6. Journalize the admission of Tovar to the partnership.
Gamma Co. capital balances are: Barr $30,000, Croy $25,000, and Eubank $22,000. The partners share income equally. Tovar is admitted to the firm by purchasing one-half of Eubank"s interest for $13,000. Journalize the admission of Tovar to the partnership.
7. Which statement correctly describes the reporting of cash?
Which statement correctly describes the reporting of cash?
(a) Cash cannot be combined with cash equivalents.
(b) Restricted cash funds may be combined with Cash.
(c) Cash is listed first in the current assets section.
(d) Restricted cash funds cannot be reported as a current asset.
8. World Company expects to operate at 80% of its productive capacity of 56,250 units per month. At thi
World Company expects to operate at 80% of its productive capacity of 56,250 units per month. At this planned level, the company expects to use 27,900 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate based on direct labor hours. At the 80% capacity level, the total budgeted cost includes $69,750 fixed overhead cost and $320,850 variable overhead cost. In the current month, the company incurred $361,000 actual overhead and 24,900 actual labor hours while producing 40,000 units.
Compute the overhead volume variance
Fixed OH per DL hr?
Standard DHL hours?
Fixed overhead applied?
total budgeted fixed OH?
fixed overhead volume variance?
Compute the overhead controllable variance.
Overhead controllable variance
Total overhead variance
Volume variance
Overhead controllable variance
9. Which of the following will be the same amount regardless of the cost flow assumption adopted? n...
Which of the following will be the same amount regardless of the cost flow assumption adopted? number of items ordered gross profit cost of goods sold ending merchandise inventory The records of Penny Co. indicated that $415,000 of merchandise should be on hand on December 31. The physical inventory indicates that $370,000 of merchandise is actually on hand. Journalize the adjusting entry for the inventory shrinkage for the year ended December 31.
10. Crane Co., organized in 2016, has set up a single account for all intangible assets. The followin...
Crane Co., organized in 2016, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2017 and 2018.
Intangible Assets
7/1/17 8-year franchise; expiration date 6/30/25 $72,000
10/1/17 Advance payment on laboratory space (2-year lease) 26,400
12/31/17 Net loss for 2017 including state incorporation fee, $2,500,
and related legal fees of organizing, $6,500 (all fees incurred in 2017) 14,600
1/2/18 Patent purchased (10-year life) 84,800
3/1/18 Cost of developing a secret formula (indefinite life) 89,000
4/1/18 Goodwill purchased (indefinite life) 278,200
6/1/18 Legal fee for successful defense of patent purchased above 13,570
9/1/18 Research and development costs 145,000
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2018, recording any necessary amortization.
Account Titles and Explanation Debit Credit
(To clear the Intangible Assets)
(To record current amount for Franchises)
(To record current amount for Rents)
(To record current amount for Patents)
Reflecting all balances accurately as of that date. (Ignore income tax effects.)
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2018, recording any necessary amortization. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round all answers to decimalplaces, e.g. 8,564. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Franchises 72,000 t 26,400 Prepaid Rent Retained Earnings 98550 T Patents Research and Developmen 234000 278,200 IT Goodwi T Intangible Assets 723750 (To clear the Intangible Assets) 005 Amortization Expense 4500 IT Retained Earnings EL 13500 Franchises Rent Expense Retained Earnings Prepaid Rent To record current amount for Rents) IT Amortization Expense Patents (To record current amount for Patents
11. RECESSION SPARKS NEW BUSINESS IDEAS Disney, McDonald’s, Burger King, Procter & Gamble, Johnson...
RECESSION SPARKS NEW BUSINESS IDEAS
Disney, McDonald’s, Burger King, Procter & Gamble, Johnson & Johnson, Microsoft – what do they all have in common? They all started during a recession or depression. The message, delivered to around 40 would-be entrepreneurs at a workshop in Stratford, East London, is clear: don’t let bad economic headlines put you off. Most of the people at this session are not aiming to create new multinational corporations. But during the coffee break, they seem pretty confident that their ideas can prosper even in the current climate. ‘I’m here to find out about starting up a business providing CVs to school leavers,’ says Jessica Lyons, wearing a lapel badge with My First CV, the name of the future business, written on it. ‘For my particular business idea I think this is the ideal time, because there are more people than ever out there looking for work.’ The recession is causing a spike in interest in setting up small businesses. Another interesting example was from a gym instructor who wants to take his equipment to companies around London, giving people a lunchtime workout without their having to leave their offices. Most of the would-be entrepreneurs in Stratford are looking at potential opportunities in the tertiary sector which don’t require large amounts of start-up finance to purchase capital equipment and which rely more on their own skills and interests.
20 marks, 40 minutes
1. Define the term ‘tertiary sector’. [2]
2. Outline the factors of production needed to set up the business providing CVs to school leavers. [4]
3. Explain two reasons why new businesses might start up in the tertiary sector. [4]
4. Discuss the advantages and disadvantages of setting up a business in a recession. [10]
Key concept question 20 marks, 40 minutes
With reference to one or two organization(s) that you have studied, evaluate the importance of innovation in starting a new business. [20]
12. The marketing manager of a large truck manufacturer was surprised to learn that the price lists...
The marketing manager of a large truck manufacturer was surprised to learn that the price lists generated by his department had little relation to the prices that were actually charged to customers. The company’s finance department often changed the prices to conform to profit goals before the prices reached the company’s sales force. The salespeople often gave customers discounts to increase their sales volume. The operations manager made price adjustments to accommodate delays in promised shipping times.
a. Why is this situation undesirable for the company?
b. What can be done about this situation?
13. 51.The cost of a major overhaul of a machine that extends its total useful life by four years would.
51.The cost of a major overhaul of a machine that extends its total useful life by four years would be:
a.treated as an expense.
b.added to the carrying amount of the asset causing future depreciation to be increased.
c.charged to a separate asset account and depreciated over four years.
d.cause an adjustment to prior years depreciation on the machine.
52.Under IAS 16/AASB 116The cost of the annual service of a motor vehicle should be:
a.written off as repairs and maintenance.
b.capitalised and added to the carrying amount of the vehicle.
c.can be either written off as repairs and maintenance or added to the carrying amount of the vehicle.
d.added to the original cost of the vehicle.
53.If the cost of replacing the engine on a motor vehicle, which increased the vehicles’ useful life by five years, was charged as an expense rather than being capitalised and added to the carrying amount of the vehicle, profit would be:
a.overstated, fixed assets would be understated and equity would be understated.
b.understated, fixed assets would be understated and equity would be understated.
c.understated, fixed assets would be understated and equity would be overstated.
d.overstated, fixed assets would be overstated and equity would be overstated.
54.The correct statement concerning subsequent costs incurred in relation to a depreciable asset after its original acquisition is which of the following?
a.If the subsequent cost of replacing part of an item of equipment is added to the carrying amount of that asset then the carrying amount of the part that is replaced must be decommissioned.
b.The painting of a building would normally be considered an improvement and capitalised.
c.The replacement of the tyres on a motor would add to the expected life of the vehicle.
d.Subsequent costs should nearly always be capitalised rather than charged to an expense account.
55.If the cost of a major service on a motor vehicle, which did not increased the vehicles’ useful life was incorrectly capitalised and added to the carrying amount of the vehicle rather than being expensed, expenses would be:
a.overstated, fixed assets would be overstated and equity would be understated.
b.understated, fixed assets would be understated and equity would be overstated.
c.understated, fixed assets would be overstated and equity would be understated.
d.understated, fixed assets would be overstated and equity would be overstated.
56.How many of these are advantages of maintaining a subsidiary ledger for depreciable assets?
• It provides information for the preparation of income tax returns.
• It provides information to support insurance claims in the event of loss from theft or accident.
• It provides information concerning servicing of the assets.
• It provides information for internal control over assets.
a.1
b.2
c.3
d.4
57.A separate record that contains detailed information concerning individual assets is known as a(n):
a.asset control account.
b.stock card.
c.fixed asset register.
d.special journal.
58.Which of these should not to be recorded in the ‘office equipment’ ledger account?
a.Fax machine
b.Photocopier
c.Computer
d.Office curtains and carpets
59.For a clothing manufacturer which assets would be likely to be grouped together in a ledger account titled ‘factory plant and equipment’?
i Sewing machines
ii Cutting tables
iii Motor vehicles
iv Office equipment
v Buttonholer
a.i, ii, iii
b.i, ii, v
c.iii, iv, v
d.ii, iii, iv
60.The information to be disclosed about office equipment in the financial statements prepared for external reporting includes how many of the following?
• The total number of assets held in the office equipment grouping
• Aggregate cost of office equipment
• Aggregate Accumulated Depreciation of office equipment
• Depreciation rates used or useful lives of office equipment
•Depreciation method used
a.2
b.3
c.4
d.5
61.When examining an external financial report a ratio that can be useful in determining the approximate age of the assets is:
a.accumulated depreciation/average recorded property, plant and equipment at cost.
b.net sales/average total assets.
c.average total assets/net sales.
d.net sales/ average property, plant and equipment.
62.The statement concerning fixed assets that is not true is:
a.knowledge of the approximate average age of fixed assets can be useful in assessing the efficiency of the assets.
b.knowledge of the approximate average age of fixed assets can be useful in deciding whether the asset register is up-to-date.
c.knowledge of the approximate average age of fixed assets can be useful in deciding whether the assets may need to be replaced in the near future.
d.knowledge of the approximate average age of fixed assets can be calculated by the formula accumulated depreciation divided by average recorded cost of fixed assets.
63.The asset turnover ratio is calculated as:
a.average total assets/net sales.
b.average cost of assets/depreciation expense.
c.net sales/average total assets.
d.depreciation expense/average cost of assets.
64.A decline in the ratio net sales/average property, plant and equipment over time could mean:
a.the price of plant and equipment is falling.
b.there is a high level of inflation.
c.the firm may be heading for a liquidity crisis.
d.there is an over-investment in plant and equipment.
65.The planning and financing of capital investment is a function of management known as:
a.differential analysis.
b.analysis and interpretation.
c.net present value analysis.
d.capital budgeting.
