Master Your Accounting Assignments with Expert Support for Exam Success

Master Your Accounting Assignments with Expert Support for Exam Success
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Published: 11 months ago

Master Your Accounting Assignments with Expert Support for Exam Success

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44. Last year Rain Repel Corporation had an ROA of 5 percent and a dividend payout ratio of 90...



Last year Rain Repel Corporation had an ROA of 5 percent and a dividend payout ratio of 90 percent. What is the internal growth rate?



45. Dr. Cravati, DMD., opened a dental clinic on August 1, 2011. The business transactions for August...



Dr. Cravati, DMD., opened a dental clinic on August 1, 2011. The business transactions for August are shown below:



Aug.   1    Dr. Cravati invested $280,000 cash in the business in exchange for 1,000 shares of capital stock.



Aug.   4    Land and a building were purchased for $400,000. Of this amount, $60,000 applied to the land and $340,000 to the building. A cash payment of $80,000 was made at the time of the purchase, and a note payable was issued for the remaining balance.



Aug.   9    Medical instruments were purchased for $75,000 cash.



Aug. 16    Office fixtures and equipment were purchased for $25,000. Dr. Cravati paid $10,000 at the time of purchase and agreed to pay the entire remaining balance in 15 days.



Aug. 21    Office supplies expected to last several months were purchased for $4,200 cash.



Aug. 24    Dr. Cravati billed patients $13,000 for services rendered. Of this amount, $1,000 was received in cash, and $12,000 was billed on account (due in 30 days).



Aug. 27    A $450 invoice was received for several newspaper advertisements placed in August.



The entire amount is due on September 8.



Aug. 28    Received a $500 payment on the $12,000 account receivable recorded August 24.



Aug. 31    Paid employees $2,200 for salaries earned in August. A partial list of account titles used by Dr. Cravati includes:



Cash                               Office Fixtures and Equipment



Accounts Receivable  Land Office Supplies      Building



Notes Payable              Service Revenue Accounts Payable            Advertising Expense Capital Stock               Salary Expense Medical Instruments





 



 



Instructions



a.       Analyze the effects that each of these transactions will have on the following six components of the company’s financial statements for the month of August. Organize your answer in tabu- lar form, using the column headings shown below. Use for increase, for decrease, and NE for no effect. The August 1 transaction is provided for you:



 



















 



Income Statement



 



Balance Sheet



Transaction Aug. 1



Revenue - Expenses = Net Income



NE                NE                  NE



 



Assets = Liabilities + Owners’ Equity



I               NE                       I




 



b.       Prepare journal entries (including explanations) for each transaction.



c.       Post each transaction to the appropriate ledger accounts (use the T account format as illus- trated in Exhibit 3–8 on page 108).



d.       Prepare a trial balance dated August 31, 2011.



e.       Using figures from the trial balance prepared in part d, compute total assets, total liabilities, and owners’ equity. Did August appear to be a profitable month?



46. For each of the following, give an example of a physical control the client can use to protect..



For each of the following, give an example of a physical control the client can use to protect the asset or record:



1. Petty cash



2. Cash received by retail clerks



3. Accounts receivable records



4. Raw material inventory



5. Perishable tools



6. Manufacturing equipment



7. Marketable securities



 



47. If Stacy Tanner, Capital has instead decreased $30,000 after the closing entries were posted, and...



If Stacy Tanner, Capital has instead decreased $30,000 after the closing entries were posted, and the withdrawals remained the same, what would have been the amount of net income or net loss? 



48. 25) Orange Corporation has budgeted sales of 16,000 units, targeted ending finished goods inventory.



25) Orange Corporation has budgeted sales of 16,000 units, targeted ending finished goods inventory of 4,000 units, and beginning finished goods inventory of 2,000 units. How many units should be produced next year?



A) 22,000 units



B) 20,000 units



C) 18,000 units



D) 16,000 units



 



26) For next year, Roberto, Inc., has budgeted sales of 15,000 units, targeted ending finished goods inventory of 750 units, and beginning finished goods inventory of 450 units. All other inventories are zero. How many units should be produced next year?



A) 14,700 units



B) 15,000 units



C) 15,300 units



D) 16,200 units



27) Antique Brass Company has budgeted sales volume of 120,000 units and budgeted production of 108,000 units, while 20,000 units are in beginning finished goods inventory. How many units are targeted for ending finished goods inventory?



A) 20,000 units



B) 32,000 units



C) 12,000 units



D) 8,000 units



 



Answer the following questions using the information below:



 



Kason, Inc., expects to sell 20,000 pool cues for $12.00 each. Direct materials costs are $2.00, direct manufacturing labor is $4.00, and manufacturing overhead is $0.80 per pool cue. The following inventory levels apply to 2016:



 



Beginning inventoryEnding inventory



Direct materials24,000 units24,000 units



Work-in-process inventory0 units0 units



Finished goods inventory2,000 units2,500 units



 



28) On the 2016 budgeted income statement, what amount will be reported for sales?



A) $246,000



B) $240,000



C) $312,000



D) $318,000



 



29) How many pool cues need to be produced in 2016?



A) 22,500 cues



B) 22,000 cues



C) 20,500 cues



D) 19,500 cues



30) On the 2016 budgeted income statement, what amount will be reported for cost of goods sold?



A) $139,800



B) $136,000



C) $132,600



D) $153,000



 



31) What are the 2016 budgeted costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively?



A) $48,000; $96,000; $19,200



B) $44,000; $88,000; $17,600



C) $41,000; $82,000; $16,400



D) $40,000; $80,000; $16,000



 



Answer the following questions using the information below:



 



Elton, Inc., expects to sell 6,000 ceramic vases for $20 each. Direct materials costs are $2, direct manufacturing labor is $10, and manufacturing overhead is $3 per vase. The following inventory levels apply to 2016:



 



Beginning inventoryEnding inventory



Direct materials1,000 units1,000 units



Work-in-process inventory0 units0 units



Finished goods inventory400 units500 units



 



32) On the 2016 budgeted income statement, what amount will be reported for sales?



A) $122,000



B) $118,000



C) $140,000



D) $120,000



33) How many ceramic vases should be produced in 2016?



A) 5,900 vases



B) 6,100 vases



C) 7,000 vases



D) 6,000 vases



 



34) On the 2016 budgeted income statement, what amount will be reported for cost of goods sold?



A) $105,000



B) $91,500



C) $90,000



D) $88,500



49. 151.Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A...



151.Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows:



Wood  AluminumHard Rubber   Total



Sales$500,000$200,000$65,000$765,000



Variable expenses  325,000  140,000  58,000  523,000



Contribution margin175,00060,0007,000242,000



Fixed expenses    75,000    35,000  22,000  132,000



Net income (loss)$100,000$  25,000$(15,000)$110,000



 



Assume all of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?



a.$125,000



b.$103,000



c.$105,000



d.$140,000



152.What will most likely occur if a company eliminates an unprofitable segment when a portion of fixed costs are unavoidable?



a.All expenses of the eliminated segment will be eliminated.



b.Net income will decrease.



c.Net income will increase.



d.The company’s variable costs will increase.



153.A company has three product lines, one of which reflects the following results:



Sales$215,000



Variable expenses  125,000



Contribution margin90,000



Fixed expenses  130,000



Net loss$ (40,000)



If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company’s net income will



a.increase by $40,000.



b.decrease by $90,000.



c.decrease by $12,000.



d.increase by $12,000.



154.A company is considering eliminating a product line. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. If the product line is discontinued,



a.total net income will increase by the amount of the product line’s fixed costs.



b.total net income will decrease by the amount of the product line’s fixed costs.



c.the contribution margin of the product line will indicate the net income increase or decrease.



d.the company’s total fixed costs will decrease.



155.A segment has the following data:



Sales$700,000



Variable expenses300,000



Fixed expenses550,000



What will be the incremental effect on net income if this segment is eliminated, assuming the fixed expenses will be allocated to profitable segments?



a.$400,000 increase



b.$400,000 decrease



c.$5,000 decrease



d.Cannot be determined from the data provided.



156.Corn Crunchers has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2013:



Sales$1,400,000



Variable expenses  920,000



Fixed expenses  600,000



Net loss$ (120,000)



If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line?



a.$180,000



b.$1,520,000



c.$1,340,000



d.$1,100,000



157.North Division has the following information:



Sales$1,200,000



Variable expenses640,000



Fixed expenses620,000



If this division is eliminated, the fixed expenses will be allocated to the company’s other divisions. What is the incremental effect on net income if the division is dropped?



a.$60,000 increase



b.$620,000 decrease



c.$560,000 decrease



d.$580,000 increase



158.The potential effects of the decision to eliminate a line of business on existing employees and the community are



a.ignored in incremental analysis.



b.quantitative factors.



c.qualitative factors.



d.opportunity costs.



159.When will the elimination of a product line have no effect on the company’s overall profit?



a.When the avoidable fixed costs equal the product line’s contribution margin



b.When the unavoidable fixed costs equal the product line’s contribution margin



c.When there are no fixed costs incurred by the product line



d.When the product line contribution margin is negative



160.Accounting’s contribution to the decision-making process occurs in all of the following steps except to



a.identify the problem and assign responsibility.



b.determine possible courses of action.



c.review results of the decision.



d.make a decision.



 



50. Horizon Corporation manufactures personal computers. The company began operations in 2002 and report



Horizon Corporation manufactures personal computers. The company began operations in 2002 and reported profits for the years 2004 through 2009. Due primarily to increased competition and price slashing in the industry, 2010's income statement reported a loss of $20 million. Just before the end of the 2011 fiscal year, a memo from the company's chief financial officer to Jim Fielding, the company controller, included the following comments:



If we don't do something about the large amount of unsold computers already manufactured, our auditors will require us to write them off. The resulting loss for 2011 will cause a violation of our debt covenants and force the company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company's president and he will accept the merchandise and acknowledge the shipment as a purchase. We can record the sale in 2011 which will boost profits to an acceptable level. Then J.B. Sales will simply return the merchandise in 2012 after the financial statements have been issued.



Discuss the ethical dilemma faced by Jim Fielding.



What main ethical issues face Jim Fielding? Choose at least two issues, select an approach, and explain your justification using accounting principles learned in this module.


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