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cost accounting

Questions and Answers of Cost Accounting

The following procedures were recently installed by The Louver Shop:a. Each cashier is assigned a separate cash register drawer to which no other cashier has access.b. At the end of a shift, each
Hallihan Company completed the following selected transactions during June 2010:June 1. Established a petty cash fund of $500.12. The cash sales for the day, according to the cash register records,
Rocky Mountain Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of July 31 have been
The following procedures were recently installed by C&G Hydraulics Company:a. The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer.b. All mail is
Padilla’s Restoration Company completed the following selected transactions during March 2010:Mar. 1. Established a petty cash fund of $800.10. The cash sales for the day, according to the cash
Why would the average rate of return differ from the internal rate of return on the same project?
What information does the cash payback period ignore that is included by the net present value method?
Your boss has suggested that a one-year payback period is the same as a 100% average rate of return. Do you agree?
Why would the use of the cash payback period for analyzing the financial performance of theatrical releases from a motion picture production studio be supported over the net present value method?
Two projects have an identical net present value of $9,000. Are both projects equal in desirability?
What are the major disadvantages of the use of the net present value method of analyzing capital investment proposals?
What are the major disadvantages of the use of the internal rate of return method of analyzing capital investment proposals?
Determine the average rate of return for a project that is estimated to yield total income of $36,000 over three years, has a cost of $65,000, and has a $15,000 residual value. Round to one decimal
Determine the average rate of return for a project that is estimated to yield total income of $136,000 over five years, has a cost of $380,000, and has a $20,000 residual value. Round to one decimal
A project has estimated annual net cash flows of $8,400. It is estimated to cost $37,800. Determine the cash payback period. Round to one decimal place.
A project has estimated annual net cash flows of $114,000. It is estimated to cost $706,800. Determine the cash payback period. Round to one decimal place.
A project has estimated annual net cash flows of $9,000 for four years and is estimated to cost $30,050. Assume a minimum acceptable rate of return of 10%. Using Exhibit 2, determine(1) The net
A project has estimated annual net cash flows of $82,000 for five years and is estimated to cost $259,000. Assume a minimum acceptable rate of return of 12%. Using Exhibit 2, determine(1) The net
Project 1 requires an original investment of $10,000. The project will yield cash flows of $3,000 per year for seven years. Project 2 has a calculated net present value of $2,500 over a four-year
Project A requires an original investment of $125,000. The project will yield cash flows of $24,000 per year for nine years. Project B has a calculated net present value of $2,400 over a six-year
The following data are accumulated by Eco-Labs, Inc. in evaluating two competing capital investment proposals: Determine the expected average rate of return for each proposal. Round to one
Master Fab Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $115,000 with a $10,000 residual value and a 10-year life. The equipment will
Pocket Pilot Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications device. The device is expected to generate additional annual sales of 6,000
Out of Eden, Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 9,000 units at $42 each. The
Primera Banco is evaluating two capital investment proposals for a drive-up ATM kiosk, each requiring an investment of $360,000 and each with an 8-year life and expected total net cash flows of
Gentle Care Products Company is considering an investment in one of two new product lines. The investment required for either product line is $500,000. The net cash flows associated with each product
The following data are accumulated by Reynolds Company in evaluating the purchase of $104,000 of equipment, having a four-year useful life:a. Assuming that the desired rate of return is 15%,
Rapid Delivery, Inc. is considering the purchase of an additional delivery vehicle for $38,000 on January 1, 2010. The truck is expected to have a five-year life with an expected residual value of
Hideaway Hotels is considering the construction of a new hotel for $150 million. The expected life of the hotel is 30 years with no residual value. The hotel is expected to earn revenues of $44
E & T Excavation Company is planning an investment of $245,000 for a bulldozer. The bulldozer is expected to operate for 1,500 hours per year for five years. Customers will be charged $130 per hour
Carnival Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Dream, can hold up to 3,600 passengers and cost $750 million to
Hot on the Spot Doughnuts has computed the net present value for capital expenditure locations A and B, using the net present value method. Relevant data related to the computation are as
MVP Sports Equipment Company is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 150 baseballs per hour to sewing 270 per hour. The
Great Plains Transportation Inc. is considering acquiring equipment at a cost of $246,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net
The plant manager of Shannon Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $2,400,000. The manager believes that the new investment
The internal rate of return method is used by Carlisle Construction Co. in analyzing a capital expenditure proposal that involves an investment of $49,890 and annual net cash flows of $15,000 for
The Canyons Resort, a Utah ski resort, recently announced a $400 million expansion to lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $95.42 million in
Cousin’s Salted Snack Company is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $39,287 and could be used to deliver an additional 48,200
Buckeye Healthcare Corp. is proposing to spend $109,296 on an eight-year project that has estimated net cash flows of $22,000 for each of the eight years.a. Compute the net present value, using a
Horizon Solutions Inc. is considering the purchase of automated machinery that is expected to have a useful life of five years and no residual value. The average rate of return on the average
Lordsland Development Company has two competing projects: an apartment complex and an office building. Both projects have an initial investment of $720,000. The net cash flows estimated for the two
The capital investment committee of Cross Continent Trucking Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as
At Home Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows: Each product requires an investment of $270,000. A rate of 10% has
United Bankshores, Inc. wishes to evaluate three capital investment projects by using the net present value method. Relevant data related to the projects are summarized as follows: Instructions1.
The management of Quest Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The radio station requires an investment of
The investment committee of Grid Iron Restaurants Inc. is evaluating two restaurant sites. The sites have different useful lives, but each requires an investment of $565,000. The estimated net cash
Grant Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net
The capital investment committee of Windsor Landscaping Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as
Be You Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Each project requires an investment of $480,000. A rate of 15% has been
Atlantic Coast Railroad Company wishes to evaluate three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as
The management of Mid South Utilities Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The generating unit requires an investment
The investment committee of Reliant Insurance Co. is evaluating two projects. The projects have different useful lives, but each requires an investment of $300,000. The estimated net cash flows from
Empire Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash
A local bank reported that it lost $150,000 as the result of an employee fraud. Randal Smith is not clear on what is meant by an employee fraud. Explain the meaning of fraud to Randal and give an
Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify the three factors and explain what is meant by each.
Identify and describe the five components of a good internal control system.
What principles of internal control apply to most organizations?
Meg Lucas is reviewing the principle of segregation of duties. What are the two common applications of this principle?
How do documentation procedures contribute to good internal control?
What internal control objectives are met by physical controls?
(a) Explain the control principle of independent internal verification. (b) What practices are important in applying this principle?
The management of Sewell Company asks you, as the company accountant, to explain (a) The concept of reasonable assurance in internal control and (b) The importance of the human factor in internal
What principle(s) of internal control is (are) involved in making daily cash counts of over-the-counter receipts?
Jacobs Department Stores has just installed new electronic cash registers in its stores. How do cash registers improve internal control over cash receipts?
Joe Griswold Company’s internal controls over cash disbursements provide for the treasurer to sign checks imprinted by a check writing machine in indelible ink after comparing the check with the
How do the principles of (a) Physical controls and (b) Documentation controls apply to cash disbursements?
(a) What is a voucher system? (b) What principles of internal control apply to a voucher system?
(a) Identify the three activities that pertain to a petty cash fund, and indicate an internal control principle that is applicable to each activity. (b) When are journal entries required in the
The use of a bank contributes significantly to good internal control over cash. Is this true? Why or why not?
Lori Figgs is confused about the lack of agreement between the cash balance per books and the balance per the bank. Explain the causes for the lack of agreement to Lori, and give an example of each
What are the four steps involved in finding differences between the balance per books and balance per bank?
Kristen Hope asks your help concerning an NSF check.Explain to Kristen (a) What an NSF check is,(b) How it is treated in a bank reconciliation, and (c) Whether it will require an adjusting entry.
(a) Cash equivalents are the same as cash. Do you agree? Explain. (b) How should restricted cash funds be reported on the balance sheet?
Match each situation with the fraud triangle factor—opportunity, financial pressure, or rationalization—that best describes it.1. An employee’s monthly credit card payments are nearly 75% of
Jim Gaffigan has prepared the following list of statements about internal control.1. One of the objectives of internal control is to safeguard assets from employee theft, robbery, and unauthorized
Heather Bailiff is the new owner of Ready Parking. She has heard about internal control but is not clear about its importance for her business. Explain to Heather the four purposes of internal
The internal control procedures in Weiser Company provide that:1. Employees who have physical custody of assets do not have access to the accounting records.2. Each month the assets on hand are
Knobloch Company has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure.1. All over-the-counter receipts are
The cash register tape for Leprechaun Industries reported sales of $6,891.56. Record the journal entry that would be necessary for each of the following situations:(1) Cash to be accounted for
While examining cash receipts information, the accounting department determined the following information: opening cash balance $150, cash on hand $1,125.74, and cash sales per register tape $990.83.
Mingenback Company has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure.1. Company checks are
On March 20, Terrell’s petty cash fund of $100 is replenished when the fund contains $7 in cash and receipts for postage $52, freight-out $26, and travel expense $10. Prepare the journal entry to
Gary Cunningham is uncertain about the control features of a bank account. Explain the control benefits of(1) A check(2) A bank statement.
The following reconciling items are applicable to the bank reconciliation for Stormont Company: (1) Outstanding checks, (2) Bank debit memorandum for service charge, (3) Bank credit memorandum for
Using the data in BE8-11, indicate(1) The items that will result in an adjustment to the depositor’s records and(2) Why the other items do not require adjustment.
At July 31, Kuhlmann Company has the following bank information: cash balance per bank $7,420, outstanding checks $762, deposits in transit $1,120, and a bank service charge $20. Determine the
At August 31, Felipe Company has a cash balance per books of $8,500 and the following additional data from the bank statement: charge for printing Felipe Company checks $35, interest earned on
Quirk Company has the following cash balances: Cash in Bank $15,742, Payroll Bank Account $6,000, and Plant Expansion Fund Cash $25,000. Explain how each balance should be reported on the balance
Identify which control activity is violated in each of the following situations, and explain how the situation creates an opportunity for fraud or inappropriate accounting practices.1. Once a month
Javier Vasquez is concerned with control over mail receipts at Javy’s Sporting Goods. All mail receipts are opened by Nick Swisher. Nick sends the checks to the accounting department, where they
Mengke Company established a $100 petty cash fund on August 1. On August 30, the fund had $9 cash remaining and petty cash receipts for postage $31, office supplies $42, and miscellaneous expense
Linus Hugt owns Linus Blankets. Linus asks you to explain how he should treat the following reconciling items when reconciling the company’s bank account.1. Outstanding checks2. A deposit in
Sue Merando is the owner of Merando’s Pizza. Merando’s is operated strictly on a carryout basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. While at
The following control procedures are used at Gonzales Company for over-the-counter cash receipts.1. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attaché case in
The following control procedures are used in Benton’s Boutique Shoppe for cash disbursements.1. The company accountant prepares the bank reconciliation and reports any discrepancies to the owner.2.
At Hutchingson Company, checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked
Listed below are five procedures followed by The Beat Company.1. Several individuals operate the cash register using the same register drawer.2. A monthly bank reconciliation is prepared by someone
Listed below are five procedures followed by Collins Company.1. Employees are required to take vacations.2. Any member of the sales department can approve credit sales.3. Jethro Bodine ships goods to
James Hughes Company established a petty cash fund on May 1, cashing a check for $100.The company reimbursed the fund on June 1 and July 1 with the following results. June 1: Cash in fund $2.75.
Lincolnville Company uses an imprest petty cash system. The fund was established on March 1 with a balance of $100. During March the following petty cash receipts were found in the petty cash

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