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Winter Accounting Quiz: Get Good Grades with Professionals
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18. 1. What are some possible reasons for the back-of-the house employees’ carelessness? 2. How should..1. What are some possible reasons for the back-of-the house employees’ carelessness? 2. How should Tom assess the current situation? 3. If you were Tom’s supervisor, what advice would you have given him before he started his new position? One month ago, Tom was promoted from line cook to kitchen manager. It was a significant step up in his life. He felt that his promotion was well deserved, as he had always been a hard worker. Tom never had a second thought about going the extra mile for his employer. He felt that since he had seniority in the kitchen and was friendly with everyone in the back of the house, he would be sure to get the respect he deserved from everyone for whom he had responsibility. About three weeks into his new position, Tom found that this was not the case. Several back- of- the house employees had become careless about their responsibilities after Tom were promoted. They were coming to work late, wearing unlaundered uniforms, and becoming more and more sloppy with their plate presentations. Every day at work, Tom was becoming more frustrated and upset. He knew that the employees were never careless about these matters with their previous supervisor.
19. (a) What is an accounting information system? (b) An accounting
(a) What is an accounting information system?
(b) An accounting information system applies only to a manual system. Do you agree? Explain.
20. The following items were taken from the balance sheet of Nike, Inc
The following items were taken from the balance sheet of Nike, Inc.
1. Cash $828.0
2. Accounts receivable 2,120.2
3. Common stock 890.6
4. Notes payable 146.0
5. Other assets 1,722.9
6. Other liabilities 2,081 .9
7. Inventories 1,633.6
8. Income taxes payable 118.2
9. Property, plant, and equipment 1,586.9
10. Retained earnings 3,891.1
11. Accounts payable 763.8
Instruction
a. Classify each of these items as an asset, liability, or stockholder equity.
b. Determine Nike's accounting equation by calculating the value of total assets, total liabilities, and total stockholders equity.
c. To what extent does Nike rely on debt versus equity financing?
21. 21-1 In Pargo Company's flexible budget graph, the fixed cost line and
In Pargo Company's flexible budget graph, the fixed cost line and the total budgeted cost line intersect the vertical axis at $90,000. The total budgeted cost line is $330,000 at an activity level of 60,000 direct labor hours. Compute total budgeted costs at 70,000 direct labor hours.
22. Sale of Inventory to Subsidiary Nordway Corporation acquired 90 percent of Olman Company’s
Sale of Inventory to Subsidiary
Nordway Corporation acquired 90 percent of Olman Company’s voting shares of stock in 20X1. During 20X4, Nordway purchased 40,000 Playday doghouses for $24 each and sold 25,000 of them to Olman for $30 each. Olman sold 18,000 of the doghouses to retail establishments prior to December 31, 20X4, for $45 each. Both companies use perpetual inventory systems.
Required
a. Give all journal entries Nordway recorded for the purchase of inventory and resale to Olman Company in 20X4.
b. Give the journal entries Olman recorded for the purchase of inventory and resale to retail establishments in 20X4.
c. Give the worksheet elimination entry(ies) needed in preparing consolidated financial statements for 20X4 to remove the effects of the intercompany sale.
23. Gomez Service Company paid its first installment on a note payable for an amount of $2,000
Gomez Service Company paid its first installment on a note payable for an amount of $2,000. How will this transaction affect the accounting equation?
a. Increase Liabilities (Notes Payable) and decrease Assets (Cash)
b. Decrease Assets (Cash) and decrease Liabilities (Notes Payable)
c. Decrease Assets (Cash) and decrease Assets (Notes Receivable)
d. Decrease Assets (Cash) and decrease Stockholders' Equity (Note Payable Expense
24. Multiple choice
1. All else held equal, socially responsible firms:
A. are viewed more favorably by consumers.
B. enjoy significantly higher profits.
C. often experience customer loyalty problems.
D. fail to earn sufficient profits for their owners.
2. We describe charitable donations by corporations to nonprofit organizations as __________.
A. corporate philanthropy
B. corporate responsibility
C. corporate strategy
D. structural commitment
3. The position a firm takes on issues that affect the corporation as well as society is known as its:
A. political philanthropy.
B. corporate policy.
C. target posturing.
D. structural positioning.
4. In recent years, progressive firms have embarked upon ____________, where they will commit company resources and expertise toward helping-out in emergency type situations.
A. corporate philanthropy
B. corporate social activism
C. social civility
D. corporate social initiatives
25. An engineering firm operates a job costing system. Production overhead is absorbed at the rateof...
An engineering firm operates a job costing system. Production overhead is absorbed at the rateof $8.50 per machine hour. In order to allow for non-production overhead costs and profit, amark up of 60% of prime cost is added to the production cost when preparing price estimates.The estimated requirements of job number 808 are as follows:Direct materials $10,650Direct labour $3,260Machine hours 140The estimated price notified to the customer for job number 808 will beA. $22,256B. $22,851C. $23,446D. $24,160C01-Fundamentals of management accountingUpdated: October 2013 4Question 12The diagram represents the behaviour of a cost item as the level of output changes.Which ONE of the following situations is described by the graph?A. Discounts are received on additional purchases of material when certain quantities arepurchased.B. Employees are paid a guaranteed weekly wage, together with bonuses for higher levelsof production.C. A licence is purchased from the government which allows unlimited production.D. Additional space is rented to cope with the need to increase production.
26. 1. AGENCY PROBLEMS Who owns a corporation? Describe the process whereby the owners control the...
1. AGENCY PROBLEMS
Who owns a corporation? Describe the process whereby the owners control the firm’s management. Describe the main reason why an agency relationship exists in the corporate form of organization. In this context, describe the types of problems that can arise.
2. ENTERPRISE VALUE
A firm’s enterprise value is equal to the market value of its debt and equity, less the firm’s holdings of cash and cash equivalents. This figure is particularly of interest to potential purchasers of the firm. Why?
3. CURRENT RATIO
Explain what it means for a firm to have a current ratio of .50. Would the firm be better off with a current ratio of 1.50? What if it were 15.0? Explain your answers.
4. SALES FORECASTS
Why do you think most long term financial planning begins with sales forecasts? Stated differently, why are future sales the key input?
27. A deposit made by a company will appear on the bank statement as a credit debit memorandum cre...
A deposit made by a company will appear on the bank statement as a credit debit memorandum credit memorandum debit
28. Sorocaba Co. had the following transactions during the current period.
Sorocaba Co. had the following transactions during the current period.
Mar. 2 Issued 5,000 shares of $1 par value ordinary shares to attorneys in payment of a bill for $30,000
for services provided in helping the company to incorporate.
June 12 Issued 60,000 shares of $1 par value ordinary shares for cash of $375,000.
July 11 Issued 1,000 shares of $100 par value preference shares for cash at $110 per share.
Nov. 28 Purchased 2,000 treasury shares for $80,000.
Instructions
Journalize the above transactions.
29. McBride Company has the following opening account balances in its general and subsidiary ledgers on...
McBride Company has the following opening account balances in its general and subsidiary ledgers on January 1 and uses the periodic inventory system. All accounts have normal debit and credit balances.
GENERAL LEDGER
Account Number Account Title January 1 Opening Balance
101 Cash $33,750
112 Accounts Receivable 13,000
115 Notes Receivable 39,000
120 Inventory 20,000
126 Supplies 1,000
130 Prepaid Insurance 2,000
157 Equipment 6,450
158 Accumulated Depreciation—Equip. 1,500
201 Accounts Payable 35,000
301 Owner"s Capital 78,700
Accounts Receivable Subsidiary Ledger Accounts Payable Subsidiary Ledger
Customer January 1 Opening Balance Creditor January 1 Opening Balance
R.Kotsay $1,500 S. Otero $9,000
B. Boxberger 7,500 R. Rasmus 15,000
S.Andrus 4,000 D. Baroni 11,000
In addition, the following transactions have not been journalized for January 2014.
3 Sell merchandise on account to B. Berg $3,600, invoice no. 510, and J. Lutz $1,800, invoice no. 511.
5 Purchase merchandise on account from S. Colt $5,000 and D. Kahn $2,700.
7 Receive checks for $4,000 from S. Andrus and $2,000 from B. Boxberger.
8 Pay freight on merchandise purchased $180.
9 Send checks to S. Otero for $9,000 and D. Baroni for $11,000.
9 Issue credit of $300 to J. Lutz for merchandise returned.
10 Summary cash sales total $15,500.
11 Sell merchandise on account to R. Kotsay for $2,900, invoice no. 512, and to S. Andrus $900, invoice no. 513.
Post all entries to the subsidiary ledgers.
12 Pay rent of $1,000 for January.
13 Receive payment in full from B. Berg and J. Lutz.
15 Withdraw $800 cash by I. McBride for personal use.
16 Purchase merchandise on account from D. Baroni for $12,000, from S. Otero for $13,900, and from S. Colt for $1,500.
17 Pay $400 cash for supplies.
18 Return $200 of merchandise to S. Otero and receive credit.
20 Summary cash sales total $17,500.
21 Issue $15,000 note to R. Rasmus in payment of balance due.
21 Receive payment in full from S. Andrus.
Post all entries to the subsidiary ledgers.
22 Sell merchandise on account to B. Berg for $3,700, invoice no. 514, and to R. Kotsay for $800, invoice no. 515.
23 Send checks to D. Baroni and S. Otero in full payment.
25 Sell merchandise on account to B. Boxberger for $3,500, invoice no. 516, and to J. Lutz for $6,100, invoice no. 517.
27 Purchase merchandise on account from D. Baroni for $12,500, from D. Kahn for $1,200, and from S. Colt for $2,800.
28 Pay $200 cash for office supplies.
31 Summary cash sales total $22,920.
31 Pay sales salaries of $4,300 and office salaries of $3,600.
Instructions
(a)Record the January transactions in the appropriate journal—sales, purchases, cash receipts, cash payments, and general.
(b)Post the journals to the general and subsidiary ledgers. Add and number new accounts in an orderly fashion as needed.
(c)Prepare a trial balance at January 31, 2014, using a worksheet. Complete the work-sheet using the following additional information.
(1)Supplies at January 31 total $700.
(2)Insurance coverage expires on October 31, 2014.
(3)Annual depreciation on the equipment is $1,500.
(4)Interest of $30 has accrued on the note payable.
(5)Inventory at January 31 is $15,000.
(d)Prepare a multiple-step income statement and an owner"s equity statement for January and a classified balance sheet at the end of January.
(e)Prepare and post the adjusting and closing entries.
(f)Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger.
30. Incomplete Data Following Purchase On January 1, 20X1, Alpha Corporation acquired all of Bravo
Incomplete Data Following Purchase
On January 1, 20X1, Alpha Corporation acquired all of Bravo Company’s assets and liabilities by issuing shares of its $3 par value stock to the owners of Bravo Company in a business combination. Alpha also made a cash payment to Banker Corporation for stock issue costs. Partial balance sheet data for Alpha and Bravo, before the cash payment and issuance of shares, and a combined balance sheet following the business combination are as follows:
Alpha
Corporation Bravo
Company
Book Value Book Value Fair Value Combined Entity
Cash $ 65,000 $ 15,000 $ 15,000 $ 56,000
Accounts Receivable 105,000 30,000 30,000 135,000
Inventory 210,000 90,000 ? 320,000
Buildings & Equipment (net) 400,000 210,000 293,000 693,000
Goodwill ?
Total Assets $780,000 $345,000 $448,000 $ ?
Accounts Payable $ 56,000 $ 22,000 $ 22,000 $ 78,000
Bonds Payable 200,000 120,000 120,000 320,000
Common Stock 96,000 70,000 117,000
Additional Paid-In Capital 234,000 42,000 553,000
Retained Earnings 194,000 91,000 ?
Total Liabilities & Equities $780,000 $345,000 $142,000 $ ?
Required
a. What number of its $5 par value shares did Bravo have outstanding at January 1, 20X1?
b. Assuming that all of Bravo’s shares were issued when the company was started, what was the price per share received at the time of issue?
c. How many shares of Alpha were issued at the date of combination?
d. What amount of cash did Alpha pay as stock issue costs?
e. What was the total market value of Alpha’s shares issued at the date of combination?
f. What was the fair value of Bravo’s inventory at the date of combination?
g. What was the fair value of Bravo’s net assets at the date of combination?
h. What amount of goodwill, if any, will be reported in the combined balance sheet following the combination?
31. Coca-Cola and PepsiCo both produce and market beverages that are direct competitors.
Coca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financial figures (in $ millions) for these businesses over the past year follow.
Key Figures ($ millions) Coca-Cola PepsiCo
Sales $30,990 $43,232
Net income 6,906 5,979
Average assets 44,595 37,921
Required:
1. Compu...
32. Adams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on...
Adams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on December 31, 2013. Adams paid a total of $603,000 in cash for these shares. The 10 percent noncontrolling interest shares traded on a daily basis at fair value of $67,000 both before and after Adams’s acquisition. On December 31, 2013, Barstow had the following account balances:
At year-end, there were no intra-entity receivables or payables.
a. Prepare schedules for acquisition-date fair-value allocations and amortizations for Adams’s investment in Barstow.
b. Determine Adams’s method of accounting for its investment in Barstow. Support your answer with a numerical explanation.
c. Without using a worksheet or consolidation entries, determine the balances to be reported as of December 31, 2015, for this business combination.
d. To verify the figures determined in requirement ( c ) , prepare a consolidation worksheet for Adams Corporation and Barstow, Inc., as of December 31, 2015.
33. Max Weber taught his students that they should employ which of the following in their intellectual..
Max Weber taught his students that they should employ which of the following in their intellectual work?
a. anomie
b. verstehen
c. the sociological imagination
d. microsociology
34. Differentiate between a petty cashbook and a three-column cashbook. (5 marks)(b) Briefly explain why
Differentiate between a petty cashbook and a three-column cashbook. (5 marks)(b) Briefly explain why it is important for a business entity to prepare a bank reconciliation statement. (3 marks)(c) You have recently been employed in a medium size company and deployed in the accounts department. Your head of section has given you the following extract from the cashbook for the month of April 2003:Sh.Sh.Receipts during the month2,938,000Balance brought forward (1.4.2003)1,522,000Balance carried forward (30.4.2003)1,108,000Payments during the month2,524,0004,046,0004,046,000The head of section further informs you that all receipts are banked intact and all payments are made by cheque. On investigation, you discover the following:1. Bank charges and commissions amounting to Sh. 272,000 entered on the bank statement had not been entered in the cashbook.2. Cheques drawn amounting to Sh. 534,000 had not been presented to the bank for payment.3. Cheques received totaling Sh. 1,524,000 had been entered in the cashbook and paid into the bank, but had not been credited by the bank until May 2003.4. A cheque for Sh. 44,000 had been entered as a receipt in the cashbook instead of a payment.5. A cheque for Sh. 50,000 had been debited by the bank by mistake.6. A cheque received for Sh. 160,000 had been returned unpaid. No adjustment had been made in the cashbook.7. All dividends receivable are credited direct to the bank account. During the month of April 2003. Dividends totaling Sh. 124,000 were credited by the bank and no entries had been made in the cashbook.8. A cheque drawn for Sh. 12,000 had been incorrectly entered in the cash book as Sh. 132,000.9. The balance brought forward should have been Sh. 1,422,000.10. The bank statement as at 30 April 2003 showed on overdraft of Sh. 2,324,000.Required:(i) The adjusted cashbook as at 30 April 2003. (6 marks)(ii) Bank reconciliation statement as at 30 April 2003. (6 marks) (Total: 20 marks)
35. PROBLEM 4–32 Changes in Cost Structure; Break-Even Analysis; Target Profit [LO5, LO6, LO8]...
PROBLEM 4–32 Changes in Cost Structure; Break-Even Analysis; Target Profit [LO5, LO6, LO8]
Alliance Enterprises is considering extensively modifying their manufacturing equipment. The modifications will result in less wastage of materials, which will reduce variable manufactur- ing costs and introduce changes to the production process that will improve product quality. This will allow Alliance to increase the selling price of the product. Annual fixed costs are expected to increase to $750,000 if the modifications are made. Expected fixed and variable costs as well as the selling prices are shown below:
Cost Item Existing Equipment Modified Equipment
Selling price per unit . . . . . . . . . . . . $36 $40
Variable cost per unit . . . . . . . . . . . $28 $25
Fixed costs . . . . . . . . . . . . . . . . . . . . . $330,000 $750,000
www.tex-cetera.com
Required
1. Determine Alliance Enterprises’ break-even point in units with the existing equipment and with the modified equipment.
2. Determine the sales level in units at which the modified equipment will achieve a 25% target profit-to-sales ratio (ignore taxes).
3. Determine the sales level in units at which the modified equipment will achieve $63,000 in after-tax operating income. Assume a tax rate of 30%.
4. Determine the sales level at which profits will be the same for either the existing or modified equipment.
36. E13-10 (Warranties) Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece...
E13-10 (Warranties) Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty. Maintenance on each machine during the warranty period averages $330.
a.) Prepare entries to record the sale of the machines and the related warranty costs, assuming that the accrual method is used. Actual warranty costs incurred in 2008 were $17,000.
b.) Prepare 2008 entries for Crow assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $150,000 relates to sales warranty contracts. Crow estimates the total cost of servicing the warranties will be $120,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs.
37. Which of the following indicates how revenue is usually recognized?
A. Which of the following indicates how revenue is usually recognized?
1. Point of sale
2. End of production
3. Receipt of cash
4. During production
5. Cost recovery
B. Statement of Financial Accounting Concepts No. 1, ‘‘Objectives of Financial Reporting by Business Enterprises,’’ includes all of the following objectives, except one. Which objective does it not include?
1. Financial accounting is designed to measure directly the value of a business enterprise.
2. Investors, creditors, and others may use reported earnings and information about the elements of financial statements in various ways to assess the prospects for cash flows.
3. The primary focus of financial reporting is information about earnings and its components.
4. Financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions.
5. The objectives are those of general-purpose external financial reporting by business enterprises.
