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managerial accounting

Cornerstones of Managerial Accounting 3rd Edition Mowen, Hansen, Heitger - Solutions

At the beginning of the year, Badger Company estimated the following:Badger has decided to use a plantwide overhead rate based on direct labor hours.Actual data for the month of June are as follows:Required:1. Calculate the predetermined plantwide overhead rate.2. Calculate the overhead applied to
At the beginning of June, Donegal Company had two jobs in process, Job 44 and Job 45, with the following accumulated cost information:During June, two more jobs (46 and 47) were started. The following direct materials and direct labor costs were added to the four jobs during the month of June:At
Vanderber Company manufactures a product in a factory that has two producing departments, Cutting and Sewing, and two support departments, S1 and S2. The activity driver for S1 is number of employees, and the activity driver for S2 is number of maintenance hours. The following data pertain to
Lanoka Company manufactures pottery in two producing departments: Shaping and Firing. Three support departments support the following production departments:Power, General Factory, and Human Resources. Budgeted data on the five departments are as follows:Power is allocated on the basis of
Job-order costing versus process costinga. Paint manufacturingb. Auto manufacturingc. Toy manufacturingd. Custom cabinet makinge. Airplane manufacturing (e.g., 767s)f. Personal computer assemblyg. Furniture makingh. Custom furniture makingi. Dental servicesj. Hospital servicesk. Paper
Job-order costing versus process costinga. Auto manufacturingb. Dental servicesc. Auto repaird. Costume makingRequired:For each of the given types of industries, give an example of a firm that would use job-order costing. Then, give an example of a firm that would use process costing.
At the beginning of the year, Natrina Company estimated the following:Overhead ........$570,000Direct labor hours .....95,000Natrina uses normal costing and applies overhead on the basis of direct labor hours.For the month of March, direct labor hours were 7,400.Required:1. Calculate the
At the beginning of the year, Olivar Company estimated the following:Overhead .......$216,000Direct labor hours ......80,000Olivar uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 7,950. By the end of the year, Olivar
At the beginning of the year, Videosym Company estimated the following:Videosym uses departmental overhead rates. In the assembly department, overhead is applied on the basis of direct labor hours. In the testing department, overhead is applied on the basis of machine hours. Actual data for the
On June 1, Job 24 had a beginning balance of $330. During June, direct materials of $475 and direct labor of $280 were added to the job. Overhead is applied to production at the rate of 75 percent of direct labor cost.Required:1. Set up a simple job-order cost sheet for Job 24. What is the total
For each of the following independent situations, give the source document that would be referred to for the necessary information.Required:1. Direct materials costing $460 are requisitioned for use on a job.2. Greiner’s Garage uses a job-order costing system. Overhead is applied to jobs based on
Herron Company designs and builds retaining walls for individual customers. On August 1, there were two jobs in process: Job 730 with a beginning balance of $10,400, and Job 731 with a beginning balance of $8,600. Herron applies overhead at the rate of $11 per direct labor hour. Direct labor wages
Perrine Company builds internal conveyor equipment to client specifications. On October 1, Job 877 was in process with a cost of $20,520 to date.During October, Jobs 878, 879, and 880 were started. Data on costs added duringOctober for all jobs are as follows:Overhead is applied to production at
Voeltr Company uses job-order costing. At the end of the month, the following information was gathered:The beginning balance of Finished Goods was zero.Required:1. Calculate the balance inWork in Process at the end of the month.2. Calculate the balance in Finished Goods at the end of the month.3.
Berne Company, a job-order costing firm, worked on three jobs in July. Data are as follows:Overhead is applied to jobs at the rate of $20 per machine hour. By July 31, Jobs 73 and 75 were completed. Jobs 70 and 73 were sold. Job 74 remained in process. On July 1, the balance in Finished Goods was
Consider the following independent jobs. Overhead is applied in Department 1 at the rate of $6 per direct labor hour. Overhead is applied in Department 2 at the rate of $8 per machine hour. Direct labor wages average $10 per hour in each department.Required:Fill in the missing data for eachjob.
Ionia Company uses a normal job-order costing system. The company has two departments through which most jobs pass. Overhead is applied using a plantwide overhead rate of $12 per direct labor hour. During the year, several jobs were completed. Data pertaining to one such job, Job 9-601,
Greenthumb Landscape Design designs landscape plans and plants the material for clients. On April 1, there were three jobs in process, Jobs 68, 69, and 70. During April, two more jobs were started, Jobs 71 and 72. By April 30, Jobs 69, 70, and 72 were completed and sold. The following data were
Garrity, Inc. uses a job-order costing system. During the month of May, the following transactions occurred:a. Purchased materials on account for $27,800.b. Requisitioned materials totaling $21,000 for use in production. Of the total,$9,300 was for Job 58, $6,900 for Job 59, and the remainder for
Dexter Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and human resources costs to each operating division using the direct method. Power costs are allocated on the basis of the number of machine hours and human resources costs on the basis of
Refer to Exercise 5-44 for data. Now assume that Dexter Company uses the sequential method to allocate support department costs to the producing departments. Human Resources is allocated first in the sequential method for Dexter.Required:1. Calculate the allocation ratios for Power and Human
Julian Company is a job-order costing firm that uses a plantwide overhead rate based on direct labor hours. Estimated information for the year is as follows:Overhead ......$665,000Direct labor hours ....100,000Julian worked on five jobs in July. Data are as follows:By July 31, Jobs 210 and 212 were
Spade Millhone Detective Agency performs investigative work for a variety of clients. Recently, Alban Insurance Company asked Spade Millhone to investigate a series of suspicious claims for whiplash. In each case, the claimant was driving on a freeway and was suddenly rear-ended by an Alban-insured
Uehler Prosthetics Company produces artificial limbs for individuals. Each prosthetic is unique. On January 1, three jobs, identified by the name of the person being fitted with the prosthetic, were in process with the following costs:During the month of January, two more jobs were started, Johns
Watson Products Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate based on machine hours is used. Marlon Burke, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Watson has
Xanning Company manufactures specialty tools to customer order. There are three producing departments. Departmental information on budgeted overhead and various activity measures for the coming year is as follows:Currently, overhead is applied on the basis of machine hours using a plantwide rate.
Suppose that back in the 1970s, Steve was asked to build speakers for two friends. The first friend, Jan, needed a speaker for her band. The second friend, Ed, needed a speaker built into the back of his hatchback automobile. Steve figured the following costs for each:Steve knew that
During August, Pamell Inc. worked on two jobs. Data relating to these two jobs follow:Overhead is assigned on the basis of direct labor hours at a rate of $12. During August, Job 64 was completed and transferred to Finished Goods. Job 65 was the only unfinished job at the end of the
The following transactions occurred during the month of April for Kearney Company:a. Purchased materials costing $3,000 on account.b. Requisitioned materials totaling $1,700 for use in production, $500 for Job 443 and the remainder for Job 444.c. Recorded 50 hours of direct labor on Job 443 and 100
Barrymore Costume Company, located in New York City, sews costumes for plays and musicals. Barrymore considers itself primarily a service firm, as it never produces costumes without a pre-existing order and only purchases materials to the specifications of the particular job. Any finished goods
At the beginning of the year, Paxton Company budgeted overhead of $180,000 as well as 15,000 direct labor hours. During the year, Job K456 was completed with the following information: direct materials cost, $2,340; direct labor cost, $3,600. The average wage for Paxton Company employees is $10 per
Lowder Inc. builds custom conveyor systems for warehouses and distribution centers.During the month of July, the following occurred:a. Purchased materials on account for $42,630.b. Requisitioned materials totaling $27,000 for use in production: $12,500 for Job 703 and the remainder for Job 704.c.
MedServices Inc. is divided into two operating departments: Laboratory and Tissue Pathology.The company allocates delivery and accounting costs to each operating department. Delivery costs include the costs of a fleet of vans and drivers that drive throughout the state each day to clinics and
Bender Automotive Works Inc. manufactures a variety of front-end assemblies for automobiles. A front-end assembly is the unified front of an automobile that includes the headlamps, fender, and surrounding metal/plastic. Bender has two producing departments: Drilling and Assembly. Usually, the
Reynolds Printing Company specializes in wedding announcements. Reynolds uses an actual job-order costing system. An actual overhead rate is calculated at the end of each month using actual direct labor hours and overhead for the month. Once the actual cost of a job is determined, the customer is
Tonya Martin, CMA and controller of the Parts Division of Gunderson Inc., was meeting with Doug Adams, manager of the division. The topic of discussion was the assignment of overhead costs to jobs and their impact on the division’s pricing decisions. Their conversation was as follows:Tonya: Doug,
The activity format calls for three categories on the statement of cash flows. Define each category.
Of the three categories on the statement of cash flows, which do you think provides the most useful information? Explain.
Explain what is meant by the all-financial-resources approach to reporting financing and investing activities.
Why is it better to report the noncash investing and financing activities in a supplemental schedule rather than to include these activities on the body of the statement of cash flows?
What are the five steps for preparing the statement of cash flows? What is the purpose of each step?
What are cash equivalents? How are cash equivalents treated in preparing a statement of cash flows?
What are the advantages in using worksheets when preparing a statement of cash flows?
Explain how a company can report a positive net income and yet still have a negative net operating cash flow.
Explain how a company can report a loss and still have a positive net operating cash flow.
In computing the period’s net operating cash flows, why are increases in current liabilities and decreases in current assets added back to net income?
In computing the period’s net operating cash flows, why are decreases in liabilities and increases in current assets deducted from net income?
In computing the period’s net cash operating flows, why are noncash expenses added back to net income?
Explain the reasoning for including the payment of dividends in the financing section of the statement of cash flows.
Explain how the statement of cash flows can be prepared by using the worksheet approach.
1. Cash inflows from operating activities come froma. Payment for raw materials.b. Collection of sales revenues.c. Gains on the sale of operating equipment.d. Issuing capital stock.e. Issuing bonds.2. Cash outflows from operating activities come froma. Payment for raw materials.b. Collection of
1. A decrease in accounts receivable is added to net income to obtain operating cash flows becausea. Cash collections from customers were greater than the revenues reported.b. Cash collections from customers were less than the revenues reported.c. Cash collections decreased due to declining
During the last two years of operations, Barnes Company had the following transactions:a. Purchased a new plant for $5,000,000.b. Issued bonds with a six-year maturity date for $2,000,0000.c. Reported profits of $7,000,000 for the most recent year.d. Sold equipment for $500,000.e. Paid cash
The following information is obtained from the comparative balance sheets for Murray Company:Required:1. Calculate the change in cash flow.2. Explain the role of the change in cash flow in the statement of cashflows.
Murray Company has provided the following partial comparative balance sheets and the income statement for 2010.Required:Compute operating cash flows by using the indirectmethod.
Murray Company provided the following information:a. During the year, equipment with a book value of $125,000 was sold for $175,000 (original purchase cost of $225,000). New equipment was purchased.b. Information from the comparative balance sheets of Murray Company:Required:Calculate the investing
Murray Company provided the following information:a. Net income of $450,000 was earned in 2010.b. Information taken from comparative balance sheets:Required:Compute the financing cash flows for the currentyear.
Refer to the information provided in Cornerstone Exercises 15-19, 15-20, and 15-21.Required:1. Prepare a statement of cash flows for Murray Company for 2010.2. What is the relationship between the statement of cash flows and the change in cash flows calculated in Cornerstone 15-18?
Murray Company has provided the following partial comparative balance sheets and the income statement for 2010.Required:Compute operating cash flows by using the directmethod.
During 2010, Kimball Company had the following transactions:a. Cash dividends of $7,000 were paid.b. Equipment was sold for $4,800. It had an original cost of $18,000 and a book value of $9,000. The loss is included in operating expenses.c. Land with a fair market value of $25,000 was acquired by
Stillwater Designs is a private company and outsources production of its Kicker speaker lines. Suppose that Stillwater Designs provided you the following transactions.a. Sold a warehouse for $750,000.b. Reported a profit of $100,000.c. Retired long-term bonds.d. Paid cash dividends of $350,000.e.
Consider the following independent events:a. Amortization of a patentb. Increase in accounts receivablec. Decrease in prepaid insuranced. Depreciation expensee. Increase in accounts payablef. Uncollectible accounts expenseg. Decrease in wages payableh. Increase in inventoryi. Gain on sale of an
Bartman Company showed $42,000 in prepaid rent on December 31, 2009. On December 31, 2010, the balance in the prepaid rent account was $50,400. Rent expense for 2010 was $105,000.Required:1. What amount of cash was paid for rent in 2010?2. What adjustment in prepaid expenses is needed if the
During the year, Makenzie Company earned a net income of $36,150. Beginning and ending balances for the year for selected accounts are as follows:There were no financing or investing activities for the year. The above balances reflect all of the adjustments needed to adjust net income to operating
During 2009, Mecham Company had the following transactions:a. Purchased $75,000 of 10-year bonds issued by Stewart Inc.b. Acquired land valued at $21,000 in exchange for machinery.c. Sold equipment with original cost of $180,000 for $110,000; accumulated depreciation taken on the equipment to the
Lavern Company experienced the following during 2009:a. Sold preferred stock for $392,000.b. Declared dividends of $100,000 payable on March 1, 2010.c. Borrowed $480,000 from bank on a two-year note.d. Purchased $50,000 of its own common stock to hold as treasury stock.e. Repaid five-year bonds
Shaw Company revealed the following information for the years 2009 and 2010:Shaw CompanyIncome StatementFor the Year Ended December 31, 2010Sales ..........$ 55,000Cost of goods sold .......(20,000)Depreciation expense .....(2,000)Other expenses .......(13,000)Net income ........$ 20,000Required:1.
Refer to the data for Shaw Company in Exercise 15-31.Required:Prepare a schedule that provides operating cash flows for the year 2010 by using the direct method.
Consider the following independent activities.a. Payment of a cash dividendb. Amortization of intangible assetc. Gain on disposal of equipmentd. Exchange of common stock for lande. Increase in accrued wagesf. Retirement of preferred stockg. Purchase of a new planth. Depreciation expensei. Decrease
The income statement for Arequipa Merchandising Corporation is as follows:Other information is as follows:a. Accounts payable decreased by $10,000 during the year.b. Accounts receivable increased by $10,000.c. All wages were paid at the beginning of the year; at the end of the year, wages payable
Refer to the data given in Exercise 15-34.Required:Prepare a schedule of operating cash flows by using the direct method.Exercise 15-34
Richmoon Corporation has the following comparative financial statements:Richmoon CorporationIncome StatementFor the Year Ended December 31, 2010Sales ...........$ 33,000Less: Cost of goods sold .....(19,500)Gross margin .......$ 13,500Less: Operating expenses ...(6,500)Net income .........$
Refer to the financial statements and other data in Problem 15-36.Required:Prepare a statement of cash flows by using the direct method.Problem 15-36
The following financial statements were furnished by Betten Company:At the end of 2010, Betten purchased some additional equipment for $10,000.Required:Prepare a statement of cash flows by using the indirectmethod.
Refer to the data for the Betten Company in Problem15-38.Required:Prepare a statement of cash flows by using the direct method.Problem15-38
Booth Manufacturing has provided the following financial statements. Other information includes:a. Equipment with a book value of $125,000 was sold for $175,000 (original cost was $225,000).b. Dividends of $225,000 were declared and paid.Booth ManufacturingIncome StatementFor the Year Ended
Refer to the information in Problem 15-40. Assume that all data are the same except that during 2010, common stock was exchanged for land with a fair market value of $60,000. This transaction changes the balance sheet for 2010 by increasing the land account by $60,000 and the common stock accounts
The following balance sheets and income statement were taken from the records of Rosie-Lee Company:Rosie-Lee CompanyIncome StatementFor the Year Ended June 30, 2010Sales ............$ 920,000Less: Cost of goods sold ......(620,000)Gross margin ........$ 300,000Less: Operating expenses
The following balance sheets and income statement were taken from the records of Rosie-Lee Company:Rosie-Lee CompanyIncome StatementFor the Year Ended June 30, 2010Sales ...........$ 920,000Less: Cost of goods sold ..(620,000)Gross margin .......$ 300,000Less: Operating expenses ..(177,600)Net
Balance sheets for Brierwold Corporation follow:Additional transactions were as follows:a. Purchased equipment costing $50,000.b. Sold equipment costing $60,000 with a book value of $25,000 for $40,000.c. Retired preferred stock at a cost of $110,000 (the premium is debited to retained earnings).d.
Refer to the information in Problem 15-44.Required:Prepare a statement of cash flows by using the worksheet approach.Problem 15-44
The income statement for the Mendelin Corporation is as follows:Additional information is as follows:a. Interest expense includes $1,800 of discount amortization.b. The prepaid insurance expense account decreased by $2,000 during the year.c. Accrued wages decreased by $3,000 during the year.d.
The following balance sheets are taken from the records of Golding Company (numbers are expressed in thousands):Additional information is as follows:a. Equipment costing $10,000,000 was purchased at year-end. No equipment was sold.b. Net income for the year was $25,000,000; $10,000,000 in dividends
The following balance sheets were taken from the records of Blalock Company:Additional transactions were as follows:a. Sold equipment costing $12,000 with accumulated depreciation of $9,000 for $2,000.b. Retired bonds at a price of $60,000 on December 31.c. Earned net income for the year of
Refer to the information in Problem 15-48.Required:Prepare a statement of cash flows by using the worksheet approach.Problem 15-48
The comparative balance sheets and income statement of Piura Manufacturing follow. Additional transactions for 2010 were as follows:a. Cash dividends of $8,000 were paid.b. Equipment was acquired by issuing common stock with a par value of $6,000.The fair market value of the equipment is
Fred Jackson, president of Bailey Company, is concerned about the company’s ability to obtain a loan from a major bank. The loan is a key factor in the firm’s plan to expand its operations. Demand for the firm’s product is high—too high for the current production capacity to handle. Fred is
Explain the difference between independent projects and mutually exclusive projects.
Explain why the timing and quantity of cash flows are important in capital investment decisions.
The time value of money is ignored by the payback period and the ARR. Explain why this is a major deficiency in these two models.
What is the payback period? Compute the payback period for an investment requiring an initial outlay of $80,000 with expected annual cash inflows of $30,000.
Name and discuss three possible reasons that the payback period is used to help make capital investment decisions.
What is the accounting rate of return? Compute the ARR for an investment that requires an initial outlay of $300,000 and promises an average net income of $100,000.
The net present value is the same as the profit of a project expressed in present dollars. Do you agree? Explain.
Explain the relationship between NPV and a firm’s value.
What is the cost of capital? What role does it play in capital investment decisions?
What is the role that the required rate of return plays in the NPV model? In the IRR model?
Explain how the NPV is used to determine whether a project should be accepted or rejected.
The IRR is the true or actual rate of return being earned by the project. Do you agree or disagree? Discuss.
Explain what a postaudit is and how it can provide useful input for future capital investment decisions, especially those involving advanced technology.

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