ACCT-2302 Principles of Accounting II - Managerial
21. Joan Robinson opens her own law office on July 1, 2010. During the first month of operations, the...
Joan Robinson opens her own law office on July 1, 2010. During the first month of operations, the following transactions occurred.
1. Joan invested $11,000 in cash in the law practice.
2. Paid $800 for July rent on office space.
3. Purchased office equipment on account $3,000.
4. Provided legal services to clients for cash $1,500.
5. Borrowed $700 cash from a bank on a note payable.
6. Performed legal services for client on account $2,000.
7. Paid monthly expenses: salaries $500, utilities $300, and telephone $100.
8. Joan withdraws $1,000 cash for personal use.
Instructions
(a) Prepare a tabular summary of the transactions.
(b) Prepare the income statement, owner’s equity statement, and balance sheet at July 31 for Joan Robinson, Attorney.
22. It is January 2nd and senior management of Chester meets to determine their investment plan for the.
It is January 2nd and senior management of Chester meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing 75,000 shares of stock plus a new bond issue. Assume the stock can be issued at yesterday’s stock price ($33.11) and leverage changes to 2.7. Which of the following statements are true? Select all that apply.
Select: 3
Total liabilities will be $118,980,550
The total investment for Chester will be $202,899,448
Chester will issue stock totaling $2,483,250
Working capital will remain the same at $14,738,380
Total Assets will rise to $213,171,473
Equity will be $81,435,647
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Additional Requirements
Level of Detail: Show all work
23. Nona Curry started her own consulting firm, Curry Consulting Inc., on May 1, 2017. The following...
Nona Curry started her own consulting firm, Curry Consulting Inc., on May 1, 2017. The following transactions occurred during the month of May. May 1 Stockholders invested $15,000 cash in the business in exchange for common stock.
2 Paid $600 for office rent for the month.
3 Purchased $500 of supplies on account.
5 Paid $150 to advertise in the County News.
9 Received $1,400 cash for services performed.
12 Paid $200 cash dividend.
15 Performed $4,200 of services on account.
17 Paid $2,500 for employee salaries.
20 Paid for the supplies purchased on account on May 3.
23 Received a cash payment of $1,200 for services performed on account on May 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased office equipment for $2,000 paying $200 in cash and the balance on account.
30 Paid $180 for utilities.
(a) Show the effects of the previous transactions on the accounting equation using the following format. Assume the note payable is to be repaid within the year.
Include margin explanations for any changes in Retained Earnings.
(b) Prepare an income statement for the month of May 2017.
(c) Prepare a classified balance sheet at May 31, 2017.
24. P2-4A Agassi Company uses a job order cost system in each of its three manufacturing departments....
P2-4A Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K.
In establishing the predetermined overhead rates for 2014, the following estimates were made for the year.
Department
| D |
| E |
| K |
Manufacturing overhead | $1,200,000 |
| $1,500,000 |
| $900,000 |
Direct labor costs | $1,500,000 |
| $1,250,000 |
| $450,000 |
Direct labor hours | 100,000 |
| 125,000 |
| 40,000 |
Machine hours | 400,000 |
| 500,000 |
| 120,000 |
During January, the job cost sheets showed the following costs and production data.
Department
| D |
| E |
| K |
Direct materials used | $140,000 |
| $126,000 |
| $78,000 |
Direct labor costs | $120,000 |
| $110,000 |
| $37,500 |
Manufacturing overhead incurred | $ 99,000 |
| $124,000 |
| $79,000 |
Direct labor hours | 8,000 |
| 11,000 |
| 3,500 |
Machine hours | 34,000 |
| 45,000 |
| 10,400 |
Instructions
(a) Compute the predetermined overhead rate for each department.
(b) Compute the total manufacturing costs assigned to jobs in January in each department.
(c) Compute the under- or overapplied overhead for each department at January 31.
25. Almo Company manufactures and sells adjustable canopies that att
Almo Company manufactures and sells adjustable canopies that attach to motor homes and trailers. The market covers both new unit purchases as well as replacement canopies. Almo developed its 2010 business plan based on the assumption that canopies would sell at a price of $400 each. The variable costs for each canopy were projected at $200, and the annual fixed costs were budgeted at $100,000. Almo’s after-tax profit objective was $240,000; the company’s effective tax rate is 40 percent.
While Almo’s sales usually rise during the second quarter, the May financial statements reported that sales were not meeting expectations. For the first five months of the year, only 350 units had been sold at the established price, with variable costs as planned, and it was clear that the 2010 after-tax profit projection would not be reached unless some actions were taken. Almo’s president assigned a management committee to analyze the situation and develop several alternative courses of action. The following mutually exclusive alternatives, labeled A, B, and C, were presented to the president.
A. Reduce the sales price by $40. The sales organization forecasts that with the significantly reduced sales price, 2,700 units can be sold during the remainder of the year.
Total fixed and variable unit costs will stay as budgeted.
B. Lower the variable costs per unit by $25 through the use of less expensive materials and slightly modified manufacturing techniques. The sales price will also be reduced by $30, and sales of 2,200 units for the remainder of the year are forecast.
C. Cut fixed costs by $10,000, and lower the sales price by 5 percent. Variable costs per unit will be unchanged. Sales of 2,000 units are expected for the remainder of the year.
Required:
1. Determine the number of units that Almo Company must sell in order to break even assuming no changes are made to the selling price and cost structure.
2. Determine the number of units that Almo Company must sell in order to achieve its after-tax profit objective.
3. Determine which one of the alternatives Almo Company should select to achieve its annual after-tax profit objective. Be sure to support your selection with appropriate calculations.
4. The precision and reliability of CVP analysis are limited by several underlying assumptions. Identify at least four of these assumptions. (CMA adapted)
26. The nature of an asset is best described as A. something with physical form that's valued at cos...
The nature of an asset is best described as A. something with physical form that's valued at cost in the accounting records. B. something owned by a business that has a ready market value. C. an economic resource that's expected to benefit future operations. D. an economic resource representing cash or the right to receive cash in the future.
27. Give four examples of firms you believe would be significant users of cost management information
- Give four examples of firms you believe would be significant users of cost management information and explain why.
- Give three examples of firms you believe would not be significant users of cost management informa- tion and explain why.
- What does the term cost management mean? Who in the typical firm or organization is responsible for cost management?
- Name three professional cost management organizations and explain their roles and objectives.
- What type of professional certification is most relevant for the management accountant and why?
Q5
- List the four functions of management. Explain what type of cost management information is appro- priate for each.
- Which is the most important function of management? Explain why.
- Identify the different types of business firms and other organizations that use cost management infor- mation, and explain how the information is used.
- Name a firm or organization you know of that you are reasonably sure uses cost management and explain why it does so. Does it use cost leadership or differentiation, and why?
- As firms move to the Internet for sales and customer service, how do you expect their competitive strategies will change?
28. 41.Which is not a key element of internal control over cash receipts? a.daily recording of all cash.
41.Which is not a key element of internal control over cash receipts?
a.daily recording of all cash receipts in the accounting records
b.daily entry in a voucher register
c.immediate counting by the person opening the mail or using the cash register
d.daily bank deposits
42.Some companies use automated payment processing technology in which paper checks that may arrive at a lockbox are converted into electronic payments then the check itself is destroyed. This process is referred to as
a.internal control over payments.
b.Check 21.
c.accounts receivable conversion.
d.electronic funds transfer.
43.All of the following are important elements of internal control over cash except
a.a petty cash system.
b.a cash reserve.
c.a bank reconciliation.
d.the daily deposit of all receipts.
44.Current accounts receivables are receivables that are expected to be collected within
a.one year or the current financing cycle, whichever is longer.
b.one year or the current financing cycle, whichever is shorter.
c.one year or the current operating cycle, whichever is longer.
d.one year or the current operating cycle, whichever is shorter.
45.All of the following are nontrade receivables except
a.declared dividend from an investment.
b.advances to executives and employees.
c.promissory note from a customer.
d.deposit paid to utility companies.
46.Nontrade receivables, such as deposits with utility companies or advances to subsidiary companies, should be
a.recorded in separate accounts and reported as noncurrent assets on the balance sheet.
b.recorded along with trade receivables in one account and included as part of the total receivables balance on the balance sheet.
c.recorded in separate accounts and separately reported on the balance sheet.
d.recorded in separate accounts and reported as an offset to retained earnings on the balance sheet.
47.Most trade receivables are initially recorded at their
a.maturity values.
b.discounted values.
c.present values.
d.net realizable values.
48.Which of the following types of discounts are offered to induce prompt payment by customers?
a.Quantity discounts
b.Nontrade discounts
c.Trade discounts
d.Sales discounts
49.Which of the following statements about accounting for discounts is true?
a.The net price method highlights sales discounts not taken and the gross price method highlights sales discounts taken.
b.The net price method highlights sales discounts taken and the gross price method highlights sales discounts not taken.
c.The net price method highlights trade discounts not taken and the gross price method highlights trade discounts taken.
d.The net price method highlights trade discounts taken and the gross price method highlights trade discounts
not taken.
50.Which of the following would not be reported on the financial statements?
a.sales discount taken
b.trade receivables
c.trade discounts
d.sales discounts not taken
29. Tami Tyler opened Tami’s Creations, Inc., a small manufacturing
Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.
Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company would probably have reported at least some profit for the quarter.
At this point, Ms. Tyler is manufacturing only one product, a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:
Required:
1. Complete the following:
a. Compute the unit product cost under absorption costing.
b. Redo the company’s income statement for the quarter using absorption costing.
c. Reconcile the variable and absorption costing net operating income (loss) figures.
2. Was the CPA correct in suggesting that the company really earned a ?oprofit?? for the quarter? Explain.
3. During the second quarter of operations, the company again produced 30,000 units but sold 32,000 units. (Assume no change in total fixed costs.)
a. Prepare a contribution format income statement for the quarter using variable costing.
b. Prepare an income statement for the quarter using absorption costing.
c. Reconcile the variable costing and absorption costing net operatingincomes.
30. The following data relate to the operations of Shilow Company,
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
(a)The gross margin in 25% of sales
(b)Actual and budgeted sales data:
(c)Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.
(d)Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.
(e) One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.
(f)Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets).
(g)Equipment costing $1,500 will be purchased for cash in April.
(h) Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Required:
Using the preceding data:
1. Complete the following schedule:
2. Complete the following:
3.Complete the following:
4. Complete the following cash budget:
5. Prepare an absorption costing income statement, similar to the one shown in Schedule 9 in the chapter, for the quarter ended June 30.
6. Prepare a balance sheet as of June30.
31. Identify four specific items relating to vacation leave and vacation pay that will have to be...
Your organization is an organic food supplier with employees in the following jurisdictions:
- Manitoba
- Prince Edward Island
- Yukon
The organization is planning to implement a company-wide policy with respect to vacation leave and vacation pay that provides the same benefits to all employees, regardless of their province of employment. As the Payroll Supervisor, provide Susan Fraser, the Human Resources Manager, with the following information:
- Identify four specific items relating to vacation leave and vacation pay that will have to be addressed in the policy to ensure compliance with the employment/labour standards in each jurisdiction.
Research the details for each of the items you have identified using the course material and the employment/labour standards website for each jurisdiction.
- Using the results of your research, provide your recommendations to Ms. Fraser on how to address each of these items in the policy to provide the employees with the best benefit, while keeping the cost to the organization at a minimum. Explain your reasoning.
32. 53.Detailed records of goods held for resale are not maintained under a a.perpetual inventory...
53.Detailed records of goods held for resale are not maintained under a
a.perpetual inventory system.
b.periodic inventory system.
c.double entry accounting system.
d.single entry accounting system.
54.A perpetual inventory system would likely be used by a(n)
a.automobile dealership.
b.hardware store.
c.drugstore.
d.convenience store.
55.Which of the following is a true statement about inventory systems?
a.Periodic inventory systems require more detailed inventory records.
b.Perpetual inventory systems require more detailed inventory records.
c.A periodic system requires cost of goods sold be determined after each sale.
d.A perpetual system determines cost of goods sold only at the end of the accounting period.
56.In a perpetual inventory system, cost of goods sold is recorded
a.on a daily basis.
b.on a monthly basis.
c.on an annual basis.
d.with each sale.
57.If a company determines cost of goods sold each time a sale occurs, it
a.must have a computer accounting system.
b.uses a combination of the perpetual and periodic inventory systems.
c.uses a periodic inventory system.
d.uses a perpetual inventory system.
58.Under a perpetual inventory system, acquisition of merchandise for resale is debited to the
a.Inventory account.
b.Purchases account.
c.Supplies account.
d.Cost of Goods Sold account.
59.The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit
a.Accounts Payable.
b.Purchase Returns and Allowances.
c.Sales Revenue.
d.Inventory.
60.The Inventory account is used in each of the following except the entry to record
a.goods purchased on account.
b.the return of goods purchased.
c.payment of freight on goods sold.
d.payment within the discount period.
61.A buyer would record a payment within the discount period under a perpetual inventory system by crediting
a.Accounts Payable.
b.Inventory.
c.Purchase Discounts.
d.Sales Discounts.
62.If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the
a.Inventory account will be increased.
b.Inventory account will not be affected.
c.seller will bear the freight cost.
d.carrier will bear the freight cost.