Accounting 20th Edition Carl S. Warren, James M. Reeve, Philip E. Fess - Solutions

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=+Close the books of the partnership and also draft the Balance Sheet of the Company as at 1st January, 1962.
=+6. *Conway and Bangor Ltd. has an authorised capital of £30,000 divided into 20,000 ordmary shares of £1 each and 10,000 6 per cent preference shares of £1 each.The following were the balances on the books as at 31st March, 1962:£ £Amounts received on:20,000 Ordinary shares fully called
=+Provision for Bad Debts 498 Bad Debts 502 Salaries 4,766 Balance at Bank 4,939 Preference Dividend paid to 31.3.62 570 Sales 97,012 Rates 366 Discounts received 1,989 5 per cent Debentures 10,000 Sales Returns 802 Debenture Interest to 30.9.61 250 Creditors 6,003 Directors' Salaries 5,200
=+The following matters are to be taken into account:(a) The stock on hand at 31st March, 1962, was valued at £9,898.(b) Salaries accrued at 31st March, 1962 amounted to £260.(c) Insurance paid in advance at 31st March, 1962 amounted to £49.(d) The provision for bad debts is to be made up to
=+7. A. Juby Ltd. is a company with an authorised capital of £20,000 divided into:10,000 6 % Preference Shares of £1 each.20,000 Ordinary Shares of 10/- each.All the shares have been issued and are fully paid with the exception of 1,000 Preference Shares on which the final call of 7/6 per share
=+The Net Trading Profit for the Year to 30th June, 1961, is £6,000 and the Balance on Profit & Loss Account brought forward from the previous year is £1,200. It is proposed to pay the following dividends:6% on the fully paid Preference Shares and 20% on the Ordinary Shares.£2,000 is to be
=+Prepare the Appropriation Account and the Balance Sheet as at 30th June, 1961.
Mario Company is considering discontinuing a product.The costs of the product consist of $20,000 fixed costs and SI 5,000 variable costs. The variable operating expenses related to the product total $4,000. What is the differential cost? LO4 A. $19,000 C. $35,000 B. $15,000 D. $39,000
Victor Company is considering disposing of equipment that was originally purchased for $200,000 and has$150,000 of accumulated depreciation to date. The same equipment would cost 5310,000 to replace. What is the sunk cost? LO4 A. $50,000 C. $200,000 B. $150,000 D. $310,000
For which cost concept used in applying the cost-plus approach to product pricing are fixed manufacturing costs, fixed selling and administrative expenses, and desired profit allowed for in determining the markup? LO4 Total cost C. Variable cost A. B. Product cost D. Standard cost
Mendosa Company produces three products. All the products use a furnace operation, which is a produc- tion bottleneck. The following information is available:From a profitability perspective, which product should be emphasized in April's advertising campaign? LO4 A. Product 1 C. Product 3 B.
Explain the meaning of (a) differential revenue, (b) differential cost, and (c) differential income. LO4
It was recently reported that Exabyte, a fast growing (100-fold in four years) Colorado marketer of tape drives, has decided to purchase key components of its product from others. For example, Sony provides Exabyte with mechanical decks, and Solectron provides circuit boards. Exabyte's chief
In the long run. the normal selling price must be set high enough to cover what factors? LO4
What are the two primary methods of setting prices? LO4
What are three cost concepts commonly used in applying the cost-plus approach to product pricing? LO4
In using the product cost concept of applying the cost-plus approach to product pricing, what factors are included in the markup? LO4
The variable cost concept used in applying the cost-plus approach to product pricing includes what costs in the cost amount to which the markup is added? LO4
In determining the markup percentage for the product cost concept of applying the cost-plus approach, what is included in -the denominator? LO4
Why might the use of ideal standards in applying the cost-plus approach to product pricing lead to setting product prices that are too low? LO4
What method of determining product cost may be appropriate in settings where the manufacturing process is complex? LO4
How does the target cost concept differ from cost-plus approaches? LO4
What is a production bottleneck? LO4
What is the appropriate measure of a product's value when a firm is operating under production bottlenecks? LO4
Management is considering a $100,000 investment in a project with a 5-year life and no residual value. If the total income from the project is expected to be$60,000 and recognition is given to the effect of straight-line depreciation on the investment, the average rate of return is: LO6 A. 12% C.
The expected period of time that will elapse between the date of a capital investment and the complete recovery of t he amount of cash invested is called: LO6 A. the average rate of return period B. the cash payback period C. the net present value period D. the internal rate of return period
A project that will cost $120,000 is estimated to generate cash, flows of $25,000 per year for eight years.What is the net present value of the project, assuming an 11% required rate of return? (Use the present value tables in Appendix A.) LO6 A. ($38,214) C. $55,180 B. $8,653 D. $75,000
A project is estimated to generate cash flows of $40,000 per year for 10 years. The cost of the project is$226,009. What is the internal rate of return for this project? LO6 A. 8% C. 12%B. 10% 1). 14%
Which two methods of capital investment analysis ignore present value? LO6
Which two methods of capital investment analysis can be described as present value methods:' LO6
How is the average rate of return computed for capital investment analysis, assum- ing that the effect of straight-line depreciation on the amount of the investment is considered? LO6
What are the principal objections to the use of the average rate of return method in evaluating capital investment proposals? LO6
Discuss the principal limitations of the cash payback method for evaluating capital investment proposals. LO6
How is the present value index for a proposal determined? LO6
What are the major disadvantages of the use of the net present value method of analyzing capital investment proposals? LO6
What are the major disadvantages of the use of the internal rate of return method of analyzing capital investment proposals? LO6
What provision of the Internal Revenue Code is especially important to consider in analyzing capital investment proposals? LO6
What method can be used to place two capital investment proposals with unequal useful lives on a comparable basis? LO6
What are the major advantages of leasing a fixed asset rather than purchasing it? LO6
Give an example of a qualitative factor that should be considered in a capital invest- ment analysis related to acquiring automated factory equipment. LO6
Monsanto, a large chemical and fibers company, invested $37 million in state-of- the-art systems to improve process control, laboratory automation, and local area network (LAN) communications. The investment was not justified merely on cost savings but was also justified on the basis of qualitative
A tight budget may create: LO3 A. budgetary slack B. discouragement C. a flexible budget D. a "spend it or lose it" mentality
The first step of the budget process is: LO3 A. plan C. control B. direct D. feedback
Static budgets are often used by: LO3 A. production departments B. administrative departments C. responsibility centers D. capital projects
The total estimated sales for the coming year is 250,000 units. The estimated inventory at the beginning of the year is 22,500 units, and the desired inventory at the end of the year is 30,000 units. The total production indicated in the production budget is: LO3 A. 242,500 units C. 280,000 units
Dixon Company expects $650,000 of credit sales in March and $800,000 of credit sales in April. DLxon historically collects 70% of its sales in the month of sale and 30% in the following month. How much cash does Dixon expect to collect in April? LO3 A. $800,000 C. $755,000 B. $560,000 D. $1,015,000
What are the three major objectives of budgeting. LO3
What is the manager's role in a responsibility center? LO3
Briefly describe the type of human behavior problems that might arise if budget goals are set too tightly. LO3
Why should all levels of management and all departments participate in preparing and submitting budget estimates? LO3
Give an example of budgetary slack. LO3
What behavioral problems are associated with setting a budget too loosely? LO3
What behavioral problems are associated with establishing conflicting goals within the budget? LO3
When would a company use zero-based budgeting? LO3
Under what circumstances would a static budget be appropriate? LO3
How do computerized budgeting systems aid firms in the budgeting process? LO3
What is the first step in preparing a master budget? LO3
Why should the production requirements set forth in the production budget be care- fully coordinated with the sales budget? LO3
Why should the timing of direct materials purchases be closely coordinated with the production budget? LO3
How does a schedule of collections from sales assist in preparing the cash budget? LO3
Give an example of how the capital expenditures budget affects other operating budgets. LO3
The actual and standard direct materials costs for producing a s pecified quantity of product are as follows: LO5 Actual: ^1.000 pounds at S5.05 $257,550 Standard: 50. 000 pounds at S5.00 S250.000 The direct materials price variance is:A. S50 unfavorable C. S2.550 unfavorable B. 52. ^0(1
Bower Company produced 4,000 units of product. Each unit requires 0. 5 standard hour. The standard la- bor rate is $12 per hour. Actual direct labor for the period was $22.000 (2.200 hours x $10 per hour). The direct labor time variance is: $4.000 favorable LO5 A. 200 hours unfavorable C. B. $2,000
The actual and standard factory overhead costs for pro- ducing a specified quantity of product are as follows: Variable factory overhead $72,500 Fixed factory overhead Actual: Standard: 19,000 hours at $6 40,000 $112.500 114,000 (S4 variable and $2 fixed) If 1. 000 hours were unused, the fixed
Applegate Company has a normal budgeted capacity of 200 machine hours. Applegate produced 600 units. Each unit requires a standard 0. 2 machine hour to complete. The standard fixed factory overhead is $12.00 per hour, determined at normal capacity. The fixed factory overhead volume variance is:
What are the basic objectives in the use of standard costs? LO5
How can standards be used by management to help control costs? LO5
What is meant by reporting by the "principle of exceptions," as the term is used in reference to cost control? LO5
How often should standards be revised? LO5
How are standards used in budgetary performance evaluation? LO5
a. What are the two variances between the actual cost and the standard cost for direct materials?b. Discuss some possible causes of these variances. LO5
a. What are the two variances between the actual cost and the standard cost for direct labor?b. Who generally has control over the direct labor cost? LO5
a. Describe the two variances between the actual costs and the standard costs for factory overhead.b. What is a factory overhead cost variance report? LO5
What are budgeted fixed costs at normal volume? LO5
If variances are recorded in the accounts at the time the manufacturing costs are incurred, what does a debit balance in Direct Materials Price Variance represent? LO5
If variances are recorded in the accounts at the time the manufacturing costs are incurred, what does a credit balance in Direct Materials Quantity Variance represent? LO5
Are variances from standard costs usually reported in financial statements issued to stockholders and others outside the firm? LO5
Assuming that the variances from standards are not significant at the end of the period, to what account are they transferred? LO5
Would the use of standards be appropriate in a nonmanufacturing setting, such as a fast food restaurant? LO5
Briefly explain why firms might use nonfinancial performance measures. LO5
When the manager has the responsibility and authorit)-to make decisions that affect costs and revenues but no responsibility for or authority over assets invested in the department, the department is called: LO1 A. a cost center C. an investment center B. a profit center D. a service department
The Accounts Payable Department has expenses of$600,000 and makes 150,000 payments to the various vendors who provide products and services to the divisions.Division A has income from operations of$900,000, before service department charges, and requires 60,000 payments to vendors. If the Accounts
Division A of Kern Co. has sales of $350,000, cost of goods sold of $200,000. operating expenses of $30,000, and invested assets of $600,000. What is the rate of return on investment for Division A? LO1 A. 20% C. 33%B. 25% D. 40%
Division L of Liddy Co. has a rate of return on investment of 2 4% and an investment turnover of 1.6.What is the profit margin? LO1 A. 6% C. 24%B. 15% D. 38%
Name three common types of responsibility centers for decentralized operations. LO1
Differentiate between a cost center and a profit center. LO1
Differentiate between a profit center and an investment center. LO1
In what major respect would budget performance reports prepared for the use of plant managers of a manufacturing business with cost centers differ from those prepared tor the use of the various department supervisors who report to the plant managers? LO1
For what decisions is the manager of a cost center not responsible? LO1
How are service department costs charged to responsibility centers? LO1
How is a service department charge rate determined? LO1
Name two performance measures useful in evaluating investment centers. LO1
What is the major shortcoming of using income from operations as a performance measure for investment centers? LO1
Why should the factors under the control of the investment center manager (revenues, expenses, and invested assets) be considered in computing the rate of return on investment? LO1
What are two ways of expressing the rate of return on investment? LO1
In evaluating investment centers, what does multiplying the profit margin by the investment turnover equal? LO1
How does using the rate of return on investment facilitate comparability between divisions of decentralized companies? LO1
How is the residual income computed? LO1
Why would a firm use a balanced scorecard in evaluating divisional performance? LO1
What is the objective of transfer pricing? LO1

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Accounting 20th Edition Carl S. Warren, James M. Reeve, Philip E. Fess - Solutions

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