Financial Accounting - ACCT3000
44. purchase-related transactions Warwick’s Co., a women’s clothing store, purchased $75,000 of...
purchase-related transactions
Warwick’s Co., a women’s clothing store, purchased $75,000 of merchandise from a sup- plier on account, terms FOB destination, 2/10, n/30. Warwick’s returned $9,000 of the merchandise, receiving a credit memo, and then paid the amount due within the discount period. Journalize Warwick’s entries to record (a) the purchase, (b) the merchandise re- turn, and (c) the payment.
45. During 2005, Patnode announced and paid dividends of $1,000, the only
16.During 2005, Patnode announced and paid dividends of $1,000, the only dividend-related activity during the year. What was its 2005 net income?
$5,600
$3,600
$4,600
Cannot be estimated
17.During 2005, Patnode had a cash outflow of $15,000 for investing activities and a cash inflow of $7,000 from financing activities. Its 2005 cash flow from operations was:
Outflow of $15,000
Inflow of $15,000
Outflow of $8,000
Inflow of $8,000
18.Patnode's 2005 statement of cash flows contains four items in the financing section. Three of them are: Short-term debt issued, $15,000; Short-term debt paid, ($10,000) and Dividends paid, ($1,000). What is the fourth item in the financing section?
Retained earnings, $4,600
Common stock issued, $3,000
Long-term debt paid, ($3,000)
Cash from financing, $3,000
19.How much total depreciation and amortization expense did Patnode record during 2005?
$10,000
$6,000
$3,000
$5,000
20.During 2005, Patnode recorded sales of $17,000. How much cash did it collect from its customers?
$17,000
$14,000
$3,000
Cannot be estimated
21.Which one of the following items will not appear in the operating section of Patnode's 2005 indirect method cash flow statement?
Deduct: increase in accounts receivable $3,000
Add: decrease in accounts payable $1,000
Add: increase in taxes payable $2,400
Add: decrease inventories $6,000
22.What is Patnode's current ratio at the end of 2004?
2.46
0.41
1.12
0.89
23.What is Patnode's total debt to equity ratio at the end of 2004 (rounded to two decimal places)?
5.30
0.19
0.25
4.04
24.Patnode recorded a 2005 tax expense of $3,000. What amount did it pay to the tax authorities during 2005?
$2,400
$7,000
$600
$5,400
25.Kirby, Inc. records a sale with a gross margin of $1,400. Which one of the following statements correctly describes the effect of such a sale on its balance sheet?
Common stock increases by $1,400
The sales revenue account increases by $1,400
The gross margin account increases by $1,400
The retained earnings account increases by $1,400
26.Sandy Robbins is the sole owner of a hair salon. He often takes small amounts of "lunch money" from the cash register, figuring that "it is my business anyway." His accountant, however, insists that Sandy make a note of the cash he takes, and at the end of the each accounting period, she debits owners' equity and credits the cash account for the total amount that Sandy has taken during the period.
In recording the cash withdrawals even though Sandy is sole proprietor, the accountant is correctly applying the:
Matching concept
Entity concept
Materiality concept
Conservatism concept
27.Anderson Electronics' 2005 return on sales percentage is 20%. Its 2005 net income is $40,000. What is its 2005 sales?
$400,000
$80,000
$200,000
$100,000
28.During 2005, Sunrise Foods, Inc. records an interest expense of $5,000, and pays $2,000 of it in cash. How should this accounting transaction be recorded?
Debit interest expense $5,000; credit cash $2,000; credit taxes payable $3,000
Debit interest expense $5,000; credit cash $2,000; credit interest payable $3,000
Debit various debt accounts $5,000; credit cash $2,000; credit interest payable $3,000
Debit interest expense $5,000; credit cash $2,000; credit various debt accounts $3,000
29.During June 2005, Bextra Inc. recorded sales of $55,000 but only $20,000 was collected in cash from customers. Cost of goods sold of $38,000. What was the effect of these sales on Bextra's current ratio?
Current ratio increases
Current ratio decreases
Current ratio remains unchanged
Insufficient information provided to judge effect on current ratio
30.Which one of the following statements is not true about statements of cash flows prepared according to U.S. GAAP?
The operating section of the indirect method starts with the net income of the period
In the indirect method statement, the period's depreciation is added to net income because it is a source of cash
Interest payments are included in the operating section of the direct method statement
The investing section of the direct method statement for a period is identical to the investing section of the indirect method statement for the same period
46. Ontario Inc
Ontario, Inc. manufactures two products, Standard and Enhanced, and applies overhead on the basis of direct-labor hours. Anticipated overhead and direct-labor time for the upcoming accounting period are $800,000 and 25,000 hours, respectively. Information about the company’s products follows. |
Standard: |
Estimated production volume, 3,000 units |
Direct-material cost, $25 per unit |
Direct labor per unit, 3 hours at $12 per hour |
Enhanced: |
Estimated production volume, 4,000 units |
Direct-material cost, $40 per unit |
Direct labor per unit, 4 hours at $12 per hour |
Ontario’s overhead of $800,000 can be identified with three major activities: order processing ($150,000), machine processing ($560,000), and product inspection ($90,000). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. |
OrdersProcessed | Machine HoursWorked | InspectionHours | |||||||
Standard | 300 | 18,000 | 2,000 | ||||||
Enhanced | 200 | 22,000 | 8,000 | ||||||
Total | 500 | 40,000 | 10,000 | ||||||
Top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installed—machinery that was expected to produce significant operating efficiencies. |
Required: |
1. | Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained.(Omit the "$" sign in your response.) |
Standard | Enhanced | |
Manufacturing costs | $ | $ |
2. | Assuming use of activity-based costing, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained.(Omit the "$" sign in your response.) |
Standard | Enhanced | |
Manufacturing costs | $ | $ |
3. | Ontario’s selling prices are based heavily on cost. |
a. | By using direct-labor hours as an application base, which product is overcosted and which product is undercosted? Calculate the amount of the cost distortion for each product.(Input all amounts as positive values. Omit the "$" sign in your response.) |
Standard | $ | (Click to select)UndercostedOvercosted |
Enhanced | $ | (Click to select)OvercostedUndercosted |
b. | Is it possible that overcosting and undercosting (i.e., cost distortion) and the subsequent determination of selling prices are contributing to the company’s profit woes? | ||||
|
47. If you want to earn an annualized discount rate of 3.5%, what is the most you can pay for a 91-day...
1. What would be your annualized discount rate % and your annualized investment rate % on the purchase of a 182-day Treasury bill for $4,925 that pays $5,000 at maturity?
2. What is the annualized discount rate % and your annualized investment rate % on a Treasury bill that you purchase for $9,940 that will mature in 91 days for $10,000?
3. If you want to earn an annualized discount rate of 3.5%, what is the most you can pay for a 91-day Treasury bill that pays $5,000 at maturity?
48. BA225-Santana Rey receives the March bank statement for Business Solutions on April 11, 2012.
Santana Rey receives the March bank statement for Business Solutions on April 11, 2012. The March 31 bank statement shows an ending cash balance of $67,566. A comparison of the bank statement with the general ledger Cash account, No. 101, reveals the following.
a. S. Rey notices that the bank erroneously cleared a $500 check against her account in March that she did not issue. The check documentation included with the bank statement shows that this check was actually issued by a company named Business Systems.
b. On March 25, the bank issued a $50 debit memorandum for the safety deposit box that Business Solutions agreed to rent from the bank beginning March 25.
c. On March 26, the bank issued a $102 debit memorandum for printed checks that Business Solutions ordered from the bank.
d. On March 31, the bank issued a credit memorandum for $33 interest earned on Business Solutions’ checking account for the month of March.
e. S. Rey notices that the check she issued for $128 on March 31, 2012, has not yet cleared the bank.
f. S. Rey verifies that all deposits made in March do appear on the March bank statement.
g. The general ledger Cash account, No. 101, shows an ending cash balance per books of $68,057 as of March 31 (prior to any reconciliation).
Required
1. Prepare a bank reconciliation for Business Solutions for the month ended March 31, 2012.
2. Prepare any necessary adjusting entries. Use Miscellaneous Expenses, No. 677, for any bank charges. Use Interest Revenue, No. 404, for any interest earned on the checking account for the month of March.
49. b. An analysis of the company's insurance policies provided the following facts. Po
b. An analysis of the company's insurance policies provided the following facts. Policy Date of Purchase Months of Coverage Cost A April 1, 2010 24 $ 15,840 B April 1, 2011 36 13,068 C August 1, 2011 12 2,700 The total premium for each policy was paid in full (for all months) at the purchase date, and the Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid Insurance were properly recorded in all prior years.) [Required: Use the information to prepare adjusting entries as of December 31, 2011. (Omit the "$" sign in your response.) Adjusting entries (all dated December 31, 2011]
50. For the past 11 years, Elaine Wright has been an employee of the Star-Bright Electrical Supply...
For the past 11 years, Elaine Wright has been an employee of the Star-Bright Electrical Supply store. Elaine is a very diligent employee who rarely calls in sick and staggers her vacation days throughout the year so that no one else gets bogged down with her tasks for more than one day. Star-Bright is a small store that employs only four people other than the owner. The owner and one of the employees help customers with their electrical needs. One of the employees handles all receiving, stocking, and shipping of merchandise. Another employee handles the purchasing, payroll, general ledger, inventory, and AP functions. Elaine handles all of the point-of-sale cash receipts and prepares the daily deposits for the business. Furthermore, Elaine opens the mail and deposits all cash receipts (about 30 percent of the total daily cash receipts). Elaine also keeps the AR records and bills the customers who purchase on credit.
Required
Point out any control weaknesses you see in the scenario. List some recommendations to remedy any weaknesses you have found working under the constraint that no additional employees can be hired.