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business
accounting principles
Accounting 20th Edition Carl S. Warren, James M. Reeve, Philip E. Fess - Solutions
When is the negotiated price approach preferred over the market price approach in setting transfer prices? LO1
If division managers cannot agree among themselves on a transfer price when using the negotiated price approach, how is the transfer price established? LO1
When using the negotiated price approach to transfer pricing, within what range should the transfer price be established? LO1
If the bonds payable account has a balance of $500,000 and the discount on bonds payable account has a balance of $ 40,000, what is the earning amount of the bonds? LO3 A. $460,000 C. $540,000 B. $500,000 D. $580,000
The cash and securities that make up the sinking fund established for the payment of bonds at maturity are classified on the balance sheet as: LO3 A.B.current assets investments C. long-term liabilities D. current liabilities
If a firm purchases $100,000 of bonds of X Companv at 101 plus accrued interest of $2,000 and pays broker's commissions of $50, the amount debited to Investment in X Company Bonds would be: LO3 A. $100,000 C. $103,000 B. $101,050 D. S103.050
The balance in the discount on bonds payable account would usually be reported in the balance sheet in the: LO3 A. Current Assets section B. Current Liabilities section C. Long-Term Liabilities section D. Investments section
What is meant by the time value of money"? LO3
What has the higher present value: (a > $ 5,000 to be received at the end of two vears.or (b) $2,500 to be received at the ^-n^l of each of the next two years? LO3
If you asked your broker to purchase for you a 6% bond when the market interest rate for such bonds was 7%, would you expect to pay more or less than the face amount for the bond? Explain. LO3
The following data relate to a $1,000,000, 6% bond issue for a selected semiannual interest period: LO3(a) Were the bonds issued at a discount or at a premium? (b) What is the unamortized amount of the discount or premium account at the beginning of the period?(c) What account was debited to
Assume that Abacus Co. amortizes premiums and discounts on bonds payable at the end of the year rather than when interest is paid. What accounts would be debited and credited to record (a) the amortization of a discount on bonds payable and (b)the amortization of a premium on bonds payable? LO3
Would a zero-coupon bond ever sell for its face amount? LO3
What is the purpose of a bond sinking fund? LO3
How are earnings from investments in a sinking fund reported on the income state- ment? LO3
How are cash and securities comprising a sinking fund classified on the balance sheet? LO3
Assume that two 15-year, 7% bond issues are identical, except that one bond issue is callable at its face amount at the end of 10 years. Which of the two bond issues do you think will sell for a lower value? LO3
How are gains or losses on bond redemptions reported on the income statement.'' LO3
Assume that a company purchases bonds between interest dates. What accounts would normally be debited? LO3
Indicate how the following accounts should be reported on the balance sheet: (a)Premium on Bonds Payable and (b) Discount on Bonds Payable. LO3
The net income reported on the income statement for the year was $55,000, and depreciation of fixed assets for the year was $22,000. The balances of the current asset and current liability accounts at the beginning and end of the year are as follows: LO5The total amount reported for cash flows from
What is the principal disadvantage of the direct method of reporting cash flows from operating activities? LO5
What are the major advantages of the indirect method of reporting cash flows from operating activities? LO5
A corporation issued $200,000 of common stock in exchange for $200,000 of fixed assets. Where would this transaction be reported on the statement of cash flows? LO5
a. What is the effect on cash flows of declaring and issuing a stock dividend?b. Is the stock dividend reported on the statement of cash flows? LO5
A retail business, using the accrual method of accounting, owed merchandise creditors(accounts payable) $290,000 at the beginning of the year and $315,000 at the end of die year. How would the S2S.000 increase be used to adjust net income in determining the amount of cash flows from operating
A corporation issued $5,000,000 of 20-year bonds for cash at 105. How would the transaction be reported on the statement of cash flows? LO5
Fully depreciated equipment costing $55,000 was discarded. What was the effect of the transaction on cash flows if (a) $5,000 cash is received, (b) no cash is received? LO5
In a recent annual report, PepsiCo, Inc., reported that during the year it issued stock of $438 million for acquisitions. How would this be reported on the statement of cash flows? LO5
What type of analysis is indicated by the following? LO4A. Vertical analysis B. Horizontal analysis C. Profitability analysis D. Contribution margin Amount Percent Current assets $100,000 20% Property, plant, and equipment 400,000 80 Total assets $500,000 100%
analysis Which of the following measures indicates the ability of a firm to pay its current liabilities? LO4 A. Working capital B. Current ratio C. Acid-test ratio All of the above
The ratio determined by dividing total current assets by total current liabilities is: LO4 A. current ratio C. bankers' ratio B. working capital ratio D. all of the above
The ratio of the quick assets to current liabilities, which indicates the "instant" debt-paying ability of a firm, is: LO4 A. current ratio C. acid-test ratio B. working capital ratio D. bankers' ratio
A measure useful in evaluating the efficiency in the management of inventories is: LO4 A. working capital ratio B. acid-test ratio C. number of days' sales in inventory D. ratio of fixed assets to long-term liabilities
What is the difference between horizontal and vertical analysis of financial statements? LO4
What is the advantage of using comparative statements for financial analysis rather than statements for a single date or period? LO4
The current year's amount of net income (after income tax) is 15% larger than that of the preceding year. Does this indicate an improved operating performance? Discuss. LO4
How would you respond to a horizontal analysis that showed an expense increasing by over 100%? LO4
a. Name the major ratios useful in assessing solvency and profitability.b. Why is it important not to rely on only one ratio or measure in assessing the solvency or profitability of a business? LO4
How would the current and acid-test ratios of a service business compare? LO4
For Lindsay Corporation, the working capital at the end of the current year is $5,000 greater than the working capital at the end of the preceding year, reported as follows: LO4 Current assets: Cash, marketable securities, and receivables. Inventories... Total current assets Current liabilities
A company that grants terms of n/30 on all sales has a yearly accounts receivable turnover, based on monthly averages, of 6. Is this a satisfactory turnover? Discuss. LO4
What does an increase in the number of days' sales in receivables ordinarily indicate about the credit and collection policy of the firm? LO4
LO4 What do the following data taken from a comparative balance sheet indicate about the company's ability to borrow additional funds on a long-term basis in the current year as compared to the preceding year? LO4 Current Year Preceding Year Fixed assets (net) $175,000 $170,000 Total long-term
In computing the ratio of net sales to assets, why are long-term investments excluded in determining the amount of the total assets? LO4
In determining the number of times interest charges are earned, why are interest charges added to income before income tax? LO4
In determining the rate earned on total assets, why is interest expense added to net income before dividing by total assets? LO4
The net income (after income tax) of A. L. Gibson Inc. was $25 per common share in the latest year and $40 per common share for the preceding year. At the beginning of the latest year, the number of shares outstanding was doubled by a stock split. There were no other changes in the amount of stock
The price-earnings ratio for the common stock of Essian Company was 10 at Decem- ber 31, the end of the current fiscal year. What does the ratio indicate about the sell- ing price of the common stock in relation to current earnings? LO4
Why would the dividend yield differ significantly from the rate earned on common stockholders' equity? LO4
a. What are the major components of an annual report?b. Indicate the purpose of the Financial Highlights section and the Management Dis- cussion and Analysis. LO4
Which of the following is not considered a cost of manufacturing a product? LO3A. Direct materials cost C. Sales salaries B. Factory overhead cost D. Direct labor cost
Which of the following costs would be included as part of the factory overhead costs of a microcomputer manufacturer? LO3A. The cost of memory chips B. Depreciation of testing equipment C. Wages of computer assemblers D. The cost of disk drives
For which of the following would the job order cost system be appropriate? LO3A. Antique furniture repair shop B. Rubber manufacturer C. Coal mining D. All of the above
If the factory overhead account has a credit balance, factory overhead is said to be: LO3A. underapplied B. overapplied C. underabsorbed D. in error
What are the major differences between managerial accounting and financial account- ing? LO3
a. What is the role of the controller in a business organization?b. Does the controller have a line or staff responsibility? LO3
For a company that produces microcomputers, would memory chips be considered a direct or an indirect materials cost of each microcomputer produced? LO3
What three costs make up the cost of manufacturing a product? LO3
Name the three inventory accounts for a manufacturing business and describe what each balance represents at the end of an accounting period. LO3
For a manuchfandaisec sotld?u rer, what is comparable to a merchandising business's cost of mer- LO3
How is product cost information used by managers? LO3
a. Name two principal types of cost accounting systems.b. Which system provides for a separate record of each particular quantity of product that passes through the factory?c. fWahcitcorhy ? system accumulates the costs for each department or process within the LO3
What kind of firm would use a job order cost system? LO3
Hewlett-Packard Company assembles printed circuit boards in which a high volume of standardized units are assembled and tested. Is the job order cost system appropriate in t his situation? LO3
Which account is used in a job order cost system to accumulate direct materials, direct labor, and factory overhead applied to production costs for individual jobs? LO3
What is a job cost sheet? LO3
How does the use of the materials requisition help control the issuance of materials from the storeroom? LO3
What document serves as the basis for posting to (a) the direct materials section of the job cost sheet and (b) the direct labor section of the job cost sheet? LO3
Describe the source of the data for debiting Work in Process for (a) direct materials, (b) direct labor, and (c) factory overhead. LO3
Discuss how the predetermined factory overhead rate can be used in job order cost accounting to assist management in pricing jobs. LO3
a. How is a predetermined factory overhead rate calculated?b. Name three common bases used in calculating the rate. LO3
At the end of the fiscal year, there was a relatively minor balance in the factory overhead account. What procedure can be used for disposing of the balance in the account? LO3
What account is the controlling account for (a) the materials ledger. (b) the job cost sheets, and (c) the finished goods ledger or stock ledger? LO3
What is the difference between a product cost and a period cost? LO3
How can job cost information be used to identify cost improvement opportunities? LO3
What account is debited for completed service jobs? LO3
There were 2,000 pounds in process at the beginning of the period in the Packing Department. Packing received 24,000 pounds from the Blending Department during the month, of which 3,000 pounds were in process at the end of the month. How many pounds were completed and transferred to finished goods
Information relating to production in Department A for May is as follows: LO3If 500 units were one-fourth completed at May 31.5,500 units were completed during May. and inventories are costed by the first-in, first-out method, what was the number of equivalent units of production with respect to
Based on the data presented in Question 3. what is the conversion cost per equivalent unit? LO3 A. $10 C. $25 B. $15 D. $32
Ifonlfloorwmiantgi:o n from the accounting system revealed theWhich of the following statements best interprets this information? LO3 A. The total costs are out of control.B. The product costs have steadily increased because of higher electricity costs C. Electricity costs have steadily increased
Which type of cost system, process or job order, would be best suited for each of the following: LO3(a) custom jewelry manufacturer, (b) paper manufacturer, (c) automobile repair shop, (d) building contractor, (e) TV assembler? Give reasons for your answers.
Are perpetual inventory accounts for materials, work in process, and finished goods generally used for (a) job order and (b) process cost systems? LO3
In a job order cost system, direct labor and factory overhead applied are debited to individual jobs. How are these items treated in a process cost system and why? LO3
What two groups of manufacturing costs are referred to as conversion costs? LO3
What are transferred-out materials? LO3
What account for a production department receives the debit for "transferred-in materials"? LO3
What are die four steps for detennining the cost of goods completed and the ending inventory? LO3
What is meant by the term equivalent units? LO3
Why is the cost per equivalent unit often determined separately for direct materials and conversion costs? LO3
What is the purpose for determining the cost per equivalent unit? LO3
How is actual factor," overhead accounted for in a process manufacturer? LO3
What data are summarized in the two principal sections of the cost of production report? LO3
What is the most important purpose of the cost of production report? LO3
How are cost of production reports used for controlling and improving operations? LO3
How is "yield" determined for a process manufacturer? LO3
What is just-in-time processing? LO3
How does just-in-time processing differ from the conventional manufacturing process? LO3
Which of the following statements describes variable costs? LO2 A. Costs that vary on a per-unit basis as the level of activity changes. B. Costs that vary in total in direct proportion to changes in the level of activity. C. Costs that remain the same in total dollar amount as the level of
If sales are $500.000, variable costs are $200,000, and fixed costs are $240,000, what is the contribution mar- gin ratio? LO2A. 40% B. 48% C: 52% D. 60%
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