Fall Semester Accounting Quiz: Ace Your Assignments
31. E18-16 (LO3) EXCEL (Sales with Returns) On March 10, 2017, Steele Company sold to Barr Hardware 2...
E18-16 (LO3) EXCEL (Sales with Returns) On March 10, 2017, Steele Company sold to Barr Hardware 200 tool sets at a price of $50 each (cost $30 per set) with terms of n/60, f.o.b. shipping point. Steele allows Barr to return any unused tool sets within 60 days of purchase. Steele estimates that (1) 10 sets will be returned, (2) the cost of recovering the products will be immaterial, and (3) the returned tools sets can be resold at a profit. On March 25, 2017, Barr returned six tool sets and received a credit to its account.
(a) Prepare journal entries for Steele to record (1) the sale on March 10, 2017, (2) the return on March 25, 2017, and (c) any adjusting entries required on March 31, 2017 (when Steele prepares financial statements). Steele believes the original estimate of returns is correct.
(b) Indicate the income statement and balance sheet reporting by Steele at March 31, 2017, of the information related to the Barr sales transaction.
32. Jeyaseeli is a sole proprietor having a provisions store. Following are the transactions during...
Jeyaseeli is a sole proprietor having a provisions store. Following are the transactions during the month of January, 2018. Journalise them.
Jan. Rs.
1 Commenced business with cash 80,000
2 Deposited cash with bank 40,000
3 Purchased goods by paying cash 5,000
4 Purchased goods from Lipton & Co. on credit 10,000
5 Sold goods to Joy and received cash 11,000
6 Paid salaries by cash 5,000
7 Paid Lipton & Co. by cheque for the purchases made on 4th Jan.
8 Bought furniture by cash 4,000
9 Paid electricity charges by cash 1,000
10 Bank paid insurance premium on furniture as per standing instructions 300
33. 1. Variance analysis would be appropriate to measure performance in a. profit centers. b. investment
1. Variance analysis would be appropriate to measure performance in
a. profit centers.
b. investment centers.
c. cost centers.
d. all of the above.
2. Which of the following responsibility centers may be evaluated on the basis of residual income?
a. investment center
b. revenue center
c. profit center
d. cost center
3. Net cash flow could be used to measure performance in
a. cost centers and investment centers.
b. revenue centers and profit centers.
c. revenue centers and investment centers.
d. profit and investment centers.
4. Using a single performance evaluation criterion for an investment center
a. is most effective because a manager can concentrate on a single goal.
b. can result in manipulation of the performance measure.
c. allows multinational investment centers' performances to be equitably compared.
d. is only appropriate if the criterion is non-monetary.
5. A company has set a target rate of return of 16% for its investment center. An investment center manager in this company would
a. acquire assets that would increase divisional income by more than 16%.
b. sell all assets that do not generate divisional income of more than 16%.
c. acquire assets that would increase sales by more than 16%.
d. acquire any technologically advanced assets that would cause costs to be reduced by 16% or more.
6. In evaluating the performance of a profit center manager, the manager
a. and the sub-unit should be evaluated on the basis of the same costs and revenues.
b. should only be evaluated on the basis of variable costs and revenues of the sub-unit.
c. should be evaluated on all costs and revenues that are controllable by the manager
d. should be evaluated on all costs and revenues that can be directly traced to the sub-unit.
7. The Statement of Cash Flows may be superior to the cash budget as a performance evaluation measure because
a. cash flows are shown on the accrual basis on the cash budget.
b. the cash budget does not include capital investments.
c. cash flows are arranged by activity.
d. of all the above reasons.
8. The Statement of Cash Flows indicates the cash inflows and outflows from
a. investing, financing, and borrowing activities.
b. operating, investing, and sending activities.
c. merchandising, financing, and investing activities.
d. operating, investing, and financing activities.
9. Division A's investment in a new project will raise the overall organization's return on investment if
a. the return on investment on the new project exceeds the target return of the overall organization.
b. the return on investment on the new project exceeds the return on investment of Division A.
c. the return on investment on the new project exceeds the overall organization's return on investment.
d. Division A's return on investment exceeds the return on investment of the overall organization.
10. If sales and expenses both rise by $100,000
a. residual income will increase.
b. return on investment will increase.
c. return on investment will be unchanged.
d. asset turnover will decrease
34. Company is evaluating two projects, Project A and Project B. The initial investment on both the proj
Company is evaluating two projects, Project A and Project B. The initial investment on both the projects are $25,000. Both have equal lives. The Project A will generate cash flows of $20,000 and $35,000 in year 2 and year 3. The Project B will generate $15,000 in yea-1, $22,000 year-2, and $25,000 in year-3. Compute the incremental (B-A) IRR. -21.38% a. b. 56.80% 21.38% C. d. -24.75%
35. . How can tying employee compensation to a firm’s performance resolve some conflicts of interest?...
. How can tying employee compensation to a firm’s performance resolve some conflicts of interest? How can tying employee compensation to a firm’s performance create other conflicts of interest?
36. Prepare the bank reconciliation and record cash adjustments (LO4–5) P4–3A The cash records and...
Prepare the bank reconciliation and record cash adjustments (LO4–5)
P4–3A The cash records and bank statement for the month of May for Diaz Entertainment are shown
below.
Additional information:
a. The difference in the beginning balances in the company’s records and the bank statement relates to
checks #469 and #470, which are outstanding as of April 30, 2018 (prior month).
b. The bank made the EFT on May 20 in error. The bank accidentally charged Diaz for payment that
should have been made on another account.
Required:
1. Prepare a bank reconciliation for Diaz’s checking account on May 31, 2018.
2. Record the necessary cash adjustments.
37. DECISION TREE IN-CLASS EXERCISE: SAILBOAT COMPANY1Monica Britt has enjoyed sailing small boats since
DECISION TREE IN-CLASS EXERCISE: SAILBOAT COMPANY1Monica Britt has enjoyed sailing small boats since she was 7 years old, when her mother startedsailing with her. Today, Monica is considering the possibility of starting a company to producesmall sailboats for the recreational market. Unlike other mass produced sailboats, however, theseboats will be made specifically for children between the ages of 10 and 15. The boats will be of thehighest quality and extremely stable, and the sail size will be reduced to prevent problems ofcapsizing.Because of the expense involved in developing the initial molds and acquiring the necessaryequipment to produce fiberglass sailboats for young children, Monica is considering conducting apilot study to make sure that the market for sailboats will be adequate. She estimates that the pilotstudy will cost her $10,000. Furthermore, the pilot study can either indicate a favorable market oran unfavorable market. Her basic decision is whether to build a large manufacturing facility, asmall manufacturing facility, or no facility at all. With a favorable market, Monica can expect tomake $90,000 from the large facility or $60,000 from the small facility. If the market is unfavorable,however, Monica estimates that she would lose $30,000 with the large facility and $20,000 with thesmall facility. If Monica conducts the pilot study, she estimates that the probability of a favorablemarket will be .80 if the study suggests a favorable market. If the study is not successful, suggestingan unfavorable market, she estimates the probability of an unfavorable market to be .90. Monicafeels that there’s a 50-50 chance that the pilot study will be successful. (There’s a 50% chance thatthe study will suggest an favorable market. ) Monica could choose not the conduct the study andsimply make the decision to build a large plant, small plant, or none at all. Without doing any study,she estimates the probability of a favorable market to be 0.60.Construct a decision tree that captures the nature of her decision options. Solve using Treeplan andmake a recommendation. 1 This case is from Decision Analysis, 10th edition. by Render, Stair and Hanna. Pearson Prentice Hall.
38. Answer question as well: What total debits were posted to the general ledger to complete all closing
question as well:
What total debits were posted to the general ledger to complete all closing entries for the month of December?
Income Statement Debit Credit Account Name Cash Accounts receivable Supplies Prepaid advertising Equipment Accumulated depreciation Equipment Accounts payable Shara Johns, Capital Shara Johns, Drawing Fees income Salaries expense Utilities expense Supplies expense Advertising expense Depreciation expense-Equipment Totals Net income At Home Pet Grooming Service Worksheet Month Ended December 31, 2019 Trial Balance Adjustments Adjusted Trail Balance Debit Credit Debit Credit Debit Credit $ 64,100 $ 64,100 10,900 10,900 12,000 4,200 7,800 8,000 3,800 3,800 4,200 42,000 42,000 1,160 1,160 12,000 12,000 91,000 91,000 6,000 6,000 53,200 53,200 11,600 11,600 1,600 1,600 4,200 4,200 3,800 3,800 1,160 1,160 $ 156,200 $ 156,200 $ 9,160 $ 9,160 $ 157,360 $ 157,360 Balance Sheet Debit Credit $ 64,100 10,900 7,800 4,200 42,000 1,160 12,000 91,000 6,000 53,200 11,600 1,600 4,200 3,800 1,160 $ 22,360 30,840 $ 53,200 $ 53,200 $ 135,000 $ 104,160 30,840 $ 135,000 $ 53,200 $ 135,000 Post the adjusting entries and the closing entries to the general ledger accounts. Hint: Be sure to enter beginning balances. Account No. 121 Credit Balance Account No. 131 Credit Balance Debit Supplies Date Dec 31, 2019 Dec 31, 2019 Prepaid Advertising Date Debit Dec 31, 2019 Dec 31, 2019 Accumulated Depreciation- Equipment Date Debit Dec 31, 2019 Account No. 142 Credit Balance Account No. 301 Credit Balance Shara Johns, Capital Date Debit Dec 31, 2019 Dec 31, 2019 Dec 31, 2019 Account No. 302 Credit Balance Account No. 309 Credit Balance Shara Johns, Drawing Date Debit Dec 31, 2019 Dec 31, 2019 Income Summary Date Debit Dec 31, 2019 Dec 31, 2019 Dec 31, 2019 Account No. 401 Credit Balance Account No. 511 Credit Balance Fees Income Date Debit Dec 31, 2019 Dec 31, 2019 Salaries Expense Date Debit Dec 31, 2019 Dec 31, 2019 Account No. 514 Credit Balance Account No. 517 Credit Balance Utilities Expense Date Debit Dec 31, 2019 Dec 31, 2019 Supplies Expense Date Debit Dec 31, 2019 Dec 31, 2019 Account No. 523 Account No. 526 Depreciation Expense- Equipment Date Debit Dec 31, 2019 Dec 31, 2019 Credit Balance Credit Balance Advertising Expense Date Debit Dec 31, 2019 Dec 31, 2019
39. As the manager of a Papa Sam’s Corporation restaurant, you
As the manager of a Papa Sam’s Corporation restaurant, you must deal with a variety of business transactions.
Requirement
1. Give an example of a transaction that has each of the following effects on the accounting equation:
a. Increase one asset and decrease another asset.
b. Decrease an asset and decrease stockholders’ equity.
c. Decrease an asset and decrease a liability.
d. Increase an asset and increase stockholders’ equity.
e. Increase an asset and increase a liability.
40. Janet Taylor is the new division controller of the snack-foods division of Gourmet Foods. Gourmet...
Janet Taylor is the new division controller of the snack-foods division of Gourmet Foods. Gourmet Foods has reported a minimum 15% growth in annual earnings for each of the past five years. The snack-foods division has reported annual earnings frowth of more than 20% each year in this same period. During the current year, the economy went into a recession. The corporate controller estimates a 10% annual earnings growth rate for Gourmet Foods this year. One month before the December 31 fiscal year-end of the current year, Taylor estimates the snack-foods division president is less than happy, but he says with a wry smile, "Let the end-of-year games begin." Taylor makes some inquiries and is able to compile the following list of end-of-year games that were more or less accepted by the revious division controller: i. Deferring December's routine maintenance on packing equipment by an independent contractor until January of next year. ii. Extending the close of the current fiscal year beyond December 31 so that some sales of next year are included in the current year. iii. Altering dates of shipping documents of next January's sales to record them as sales in December of the current year. iv. Deferring the current period's advertising by reducing the number of television spots run in December and running more than planned in January of next year. v. Deferring the current period's reported advertising costs by having Gourmet Foods' outside advertising agency delay billing December advertisements until January of next year or having the agency alter invoices to conceal the December date. A. Why might the snack-foods division president want to play the end-of-year games? B. The division controller is deeply troubled and reads the "Standards of Ethical Conduct for Management Accountants." Discuss each of the end-of-year games in light of the standards. Classify each of the end-of-year games as acceptable or unacceptable according to that document. C. What should Taylor do if Ryan suggest that end-of-year games are played in every division of Gourmet Foods and that she would greatly harm the snack-foods division if she does not play along and pain the rosiest picture possible of the division's results?
41. On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from IC Leasing Corporation....
On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $414,921 over a five-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic’s incremental borrowing rate is 8%, the same rate IC used to calculate lease payment amounts. IC purchased the warehouse from Builders, Inc.. at a cost of $3.5 million. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
42. Problem 16.31 Break-Even in Units Don Masters and two of his colleagues are considering opening a..
Problem 16.31
Break-Even in Units
Don Masters 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 these services. The intent is to provide easy access for their clients by having the office open 360 days per year, 16 hours each day from 7:00 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 8-hour shifts.
In order to determine the feasibility of the project, Don hired a marketing consultant to assist with market projections. The results of this study show that if the firm spends $500,000 on advertising the first year, the number of new clients expected each day would have the following probability distribution:
Don and his associates believe these numbers are reasonable and are prepared to spend the $500,000 on advertising. Other pertinent information about the operation of the office is as follows.
The only charge to each new client would be $30 for the initial consultation. All cases that warranted further legal work would be accepted on a contingency basis with the firm earning 30 percent of any favorable settlements or judgments. Don estimates that 20 percent of new client consultations will result in favorable settlements or judgments averaging $2,000 each. Repeat clients are not expected during the first year of operations.
The hourly wages of the staff are projected to be $25 for the lawyer, $20 for the paralegal, $15 for the legal secretary, and $10 for the clerk-receptionist. Fringe benefit expenses will be 40 percent of the wages paid. A total of 400 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 wages.
Don has located 6,000 square feet of suitable office space, which rents for $28 per square foot annually. Associated expenses will be $22,000 for property insurance and $32,000 for utilities.
It will be necessary for the group to purchase malpractice insurance, which is expected to cost $180,000 annually. The initial investment in office equipment will be $60,000; this equipment has an estimated useful life of four years. The cost of office supplies has been estimated to be $4 per expected new client consultation.
Required:
1. Determine how many new clients must visit the law office being considered by Don Masters and his colleagues in order for the venture to break even during its first year of operations. Round your answer to the nearest whole number of clients.
clients
Number of New Clients per Day 55 85 Probability 0.10 0.30 0.40 0.20
43. P17-9A Condensed financial data of Cheng Inc. follow. CHENG INC. Comparative Balance Sheets Decem...
P17-9A Condensed financial data of Cheng Inc. follow. CHENG INC. Comparative Balance Sheets December 31 Assets 2017 Cash 80,800 Accounts receivable 92,800 Inventory 117,500 Prepaid expenses 28,400 Investments 143,000 Equipment 270,000 Accumulated depreciation-equipment (50,000) Total $682,500 Liabilities and Stockholders' Equity Accounts payable $112,000 Accrued expenses payable 16,500 Bonds payable Common stock. 110,000 Retained earnings 220,000 224,000 Total $682,500 2016 48,400 33,000 102,850 26,000 114,000 242,500 (52,000) $514,750 67,300 17,000 150,000 175,000 105,450 $514,750
