Questions and Answers of Financial And Managerial Accounting The Basis For Business Decisions

It may be easier to think about setting standards to help manage manufacturing businesses, like the lumber business of Brice Mills, Inc., discussed in this chapter, than to help manage retail
Proctor Corporation has multiple facilities across the United States. Management evaluates each facility based on the capital turnover ratio using the DuPont system. The following information
Spotty Corporation applied $12,600 of manufacturing overhead to production during the month. Its actual overhead costs for the month were $14,700. The cost accountant reports that Spotty’s
Mastrolia’s overhead spending variance is unfavorable by $900. The company’s cost accountant credited the Cost of Goods Sold account for $6,300 to close out any over- or underapplied overhead at
The manager of the Fleet division of Potlatch Automotive is evaluated on her division’s return on investment and residual income. The company requires that all divisions generate a minimum return
The manager of Princeton Therapeutic’s Hospital division is evaluated on her division’s return on investment and residual income. The company requires that all divisions generate a minimum return
Assume that a recent survey revealed that 60 percent of Taylor Company employees spend time on social media and other online activities while at work. What performance evaluation incentives might
Bailey uses ROI to measure the performance of its operating divisions and to reward its division managers. A summary of the annual reports from two of Bailey’s divisions is shown provided below.
Jan Franks is the manager of one location of the Save Some Inc. chain. Franks’s location is currently earning an ROI of 15 percent on existing average capital of $800,000. The minimum required
Hinkley Corporation recently filed the following information with the SEC regarding its executive compensation. Base Salaries: We provide competitive base salaries that allow us to attract and retain
Hendersonville Meats has two divisions. The company’s Outlets division sells smoked hams, sausages, steaks, and other delicacies through its traditional suburban stores. Its Online division was
Use Home Depot’s financial information in Appendix A to compute the ROI and EVA for the two most recent years reported. Use Net Earnings as a measure of earnings or returns, and Net Property and
Easton’s Fabric Division has assets of $980,000, current liabilities of $130,000, and net operating income of $196,000.a. What is the Fabric Division’s ROI?b. If the weighted-average cost of
In discussing stock dividends and stock splits in an investments class you are taking, one of the students says, “The definition of stock splits and stock dividends is exactly the same—
You are the controller for Foxboro Technologies. Your staff has prepared an income statement for the current year and has developed the following additional information by analyzing changes in the
Satellite World was founded in 2020 to apply a new technology for efficiently transmitting closed-circuit (cable) television signals without the need for an in-ground cable. The company earned a
Statements of cash flow for Home Depot, Inc., for fiscal years 2018, 2017, and 2016 are included in Appendix A of this text. a. Focus on the information for 2018 (year ending February 3, 2019).
In the Home Depot 2018 annual report, the following statement is included in explaining the primary risks facing the company. (This statement is an excerpt from a section of the annual report that is
Road King manufactures fiberglass travel trailers. The manufacturing costs incurred during its first year of operations are as follows.During the year, 150 completed trailers were manufactured, of
During the year, Newark Boat Yard has incurred manufacturing costs of $250,000 in building three large sailboats. At year-end, each boat is about 60 percent complete. How much of these manufacturing
Kent Corporation manufactures filtration systems. The manufacturing costs incurred during its first year of operations are as follows.During the year, 220 completed units were manufactured, of which
Sky Tracker Corporation manufactures a telecommunications device. During its first year of operations, the company started and completed 45 devices at a cost of $66,000 per unit. Of these, 43 were
Easy Living Corporation manufactures houseboats. During its first year of operations, the company started and completed 40 boats at a cost of $96,000 per unit. Of these, 30 were sold for 156,000 each
A company that assembles trucks produces 60 trucks during the current year and incurs $4.5 million of material, labor, and overhead costs. Fifty-three trucks were sold during the year and each is
The flow of manufacturing costs through the ledger accounts of ISP, Inc., in the current year is illustrated as follows in summarized form.Instructions.Indicate the following amounts requested. Some
Hefty-Lift, Inc., is a company that manufactures forklifts. During the year, Hefty purchased $1,250,000 of direct materials and placed $1,600,000 worth of direct materials into production. Hefty’s
The following information was taken from the accounting records of Light Tool Corporation.Overhead assigned to production was $500,000. Compute the amount of the work in process inventory on hand at
Freddy’s Furnaces, Inc., assigned $550,000 of direct labor costs to production during the current period but paid its employees only $500,000. What are the two journal entries used to record these
The following are data regarding last year’s production of Old Joe, one of the major products of Columbus Toy Company.During the year, 50,000 units of this product were manufactured and 51,500
The accounting records of the Cedar Company include the following information relating to the current year.The company manufactures a single product; during the current year, 60,000 units were
The Sebeka Company reports the following information pertaining to the month of January.During January, the company purchased $60,000 of direct materials and incurred $80,000 of direct labor costs.
Go to the following website that features the bottling process at the Coca-Cola Company: Coca- Cola bottling process. After viewing the video, answer the following questions: a. Identify at
C. Erickson and Sons, Inc., is a Philadelphia-based construction company. Visit its home page at the following address: www.cerickson.com.Instructions a. Identify at least three construction
Viking Beer is a microbrewery that produces one type of beer. The production level is 18,000 gallons per month, which is bottled in 192,000 twelve-ounce bottles. The beer is brewed in batches of
A popular product manufactured by Party-On! is a festively decorated punch bowl. The company’s standard cost system calls for 0.10 hours of direct labor per bowl, at a standard wage rate of $16.
See Brief Exercise 24.6. Provide the journal entry for direct labor usage for the month of September for Party-On!.Data from Brief Exercise 24.6.A popular product manufactured by Party-On! is a
See Brief Exercise 24.8. Provide the journal entry for direct materials usage in the month of November for Hearts & Flowers.Data from Brief Exercise 24.8One of the products of Hearts &
The Walt Disney Company’s annual report for the year ended September 29, 2018, includes income statements for the years ending in 2016, 2017, and 2018. Net income for these three years is as
The following information was reported in a recent balance sheet issued by Microsoft Corporation. 1. The book value of property and equipment is listed at $23.8 billion (net of depreciation). Related
The unadjusted and adjusted trial balances for Tinker Corporation on December 31, current year are shown as follows.Journalize the nine adjusting entries that the company made on December 31, current
Four types of adjusting entries were identified in this chapter. Type I Converting Assets to Expenses Type II Converting Liabilities to Revenue Type III Accruing Unpaid Expenses Type IV Accruing
Party Wagon, Inc., provides musical entertainment at weddings, dances, and various other functions. The company performs adjusting entries monthly, but prepares closing entries annually on December
On November 1 of the current year, Sunbury Corporation invested 90,000 in a new delivery truck. The truck is being depreciated at a monthly rate of $625. During the year, the company issued
Guardian Insurance Agency adjusts its accounts monthly but closes them only at the end of the calendar year. The following are the adjusted balances of the revenue and expense accounts at September
The following account balances were taken from Hendersonville Corporation’s year-end adjusted trial balance (assume these are the company’s only temporary accounts).Prepare the company’s
The following account balances were taken from Long Tail Consulting’s year-end adjusted trial balance (assume these are the company’s only temporary accounts).Prepare the company’s necessary
The following information was taken directly from the footnotes to the financial statements of Best Buy. 1. “A gift card liability is initially established for the value of gift cards when they are
Accountants at Warner Co. use worksheets similar to the one shown in Exhibit 5–13. In the company’s most current year-end worksheet, the amounts transferred from the adjusted trial balance
PC Connection is a leading mail-order retailer of personal computers. A recent financial report issued by the company revealed the following information. a. Compute the company’s cost of goods
Redstone Mill is a manufacturer that makes all sales on 30-day credit terms. Annual sales are approximately $40 million. At the end of year 1, accounts receivable were presented in the company’s
At December 31, year 1, Charter Holding Co. owned the following marketable securities in capital stock of publicly traded companies.In year 2, Charter engaged in the following two transactions. Apr.
Explain the fair value adjustment procedure for marketable equity securities.
Tyson Furniture has $100,000 in excess cash that it wants to invest in one or more cash equivalents. The treasurer has researched two money market accounts and two certificates of deposit (CDs)
The Ski Factory provided the following information at December 31, year 1.Marketable Securities The company invested $52,000 in a portfolio of marketable securities on December 22, year 1. The
Jackson Specialties has been in business for more than 50 years. The company maintains a perpetual inventory system, uses a LIFO flow assumption, and ends its fiscal year at December 31. At year-end,
Mason Company purchased items of inventory as follows.Dec. 2 50 units @ $20Dec. 12 12 units @ $21Mason sold 15 units on December 20. Determine the cost of goods sold for the month under the LIFO
Millennium Frozen Foods owes the bank $50,000 on a line of credit. Terms of the agreement specify that Millennium must maintain a minimum current ratio of 1.2 to 1, or the entire outstanding balance
A company’s inventory turnover is one measure of its potential to convert inventory into cash. But what is considered a good inventory turnover? The answer to that question depends on a variety of
The owners of City Software are offering the business for sale. The income statements of the business for the three years of its existence are summarized as follows.In negotiations with prospective
The owners of Health Foods are offering the business for sale. The partial income statements of the business for the three years of its existence are summarized as follows.In negotiations with
Song Meister is a popular music store. During the current year, the company’s cost of goods available for sale amounted to $330,000. The retail sales value of this merchandise amounted to $600,000.
Pixy, Inc., overlooked $125,000 of inventory at the end of the current year because it was stored temporarily in a warehouse owned by another company. Before discovering this error, the company’s
J.C. Penney Company, Inc., uses LIFO in applying the lower-of-cost-or-market. Recent financial statements were used to compile the following information (dollar figures in millions).Instructionsa.
Branson Electric prepared the following condensed income statements for two successive years.At the end of 2020 (right-hand column), the inventory was understated by $40,000, but the error was not
Walmart uses LIFO to account for its inventories. Recent financial statements were used to compile the following information (dollar figures are in millions) .Instructions:a. Using the information
Rouse Incorporated reported sales, cost of sales, and inventory figures for last year and the current year as follows (all dollars in thousands).What is the amount of inventory turnover for each
When Mary Potts arrived at her store on the morning of January 29, she found empty shelves and display racks; thieves had broken in during the night and stolen the entire inventory. Accounting
Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $108,000. The machine’s estimated useful life at the time of the purchase was five years, and its
Davidson, DDS, purchased new furniture for its dental office on May 1, 2021. The furniture is expected to have a 10-year life and no residual value. The following expenditures were associated with
Hills Hardware purchased new shelving for its store on April 1, 2021. The shelving is expected to have a 20-year life and no residual value. The following expenditures were associated with the
Ford Motor Company uses FIFO and LIFO to account for different segments of its inventories. A note to the company’s recent financial statements indicated that if FIFO had been used for the entire
R&R, Inc., purchased a new machine on September 1 of the current year at a cost of $180,000. The machine’s estimated useful life at the time of the purchase was five years, and its expected
Twin-Cities, Inc., purchased a building for $600,000. Straight-line depreciation was used for each of the first two years using the following assumptions: 25-year estimated useful life, with a
Equipment costing $86,000 was purchased by Spence, Inc., at the beginning of the current year. The company will depreciate the equipment by the declining-balance method, but it has not determined
Briefly describe the rationale for using a cost flow assumption, rather than the specific identification method, to value an inventory
Our Little Secret is a small manufacturer of swimsuits and other beach apparel. The company is closely held and has no external reporting obligations, other than payroll reports and income tax
What does the account Unrealized Holding Gain (or Loss) on Investment represent? How is this account presented in the financial statements for short-term marketable equity securities?
The following information was taken from annual reports of Goodyear Tire & Rubber and PPL Corp., a public utility:a. Compute for each company the accounts receivable turnover rate for the
John Marshall is employed as a bank loan officer for First State Bank. He is comparing two companies that have applied for loans, and he requests your help in evaluating those companies. The two
Prepare a revised income statement in accordance with generally accepted accounting principles. On the basis of the information for Prestwick Company in Exercise 2.13, prepare a statement of cash
During the month of October, current year, Weller Company had the following transactions.a. Revenues of $14,400 were earned and received in cash.b. Bank loans of $3,600 were paid off.c. Equipment of
Repeat Brief Exercise 2.8, except assume that rather than being a sole proprietorship or a partnership, Solway Company is organized as a corporation with capital stock of $48,000. How would the
Toole Corporation uses a job order costing system and allocates manufacturing overhead at a rate of $45 per machine hour. During the period, the company used 1,200 machine-hours and actually incurred
What is a cost accounting system?
Winona Enterprises uses job order costing. Manufacturing overhead is charged to individual jobs through the use of a predetermined overhead rate based on direct labor costs. The following information
Nicholes Corporation finished job no. 600 on June 1. On June 10, the company sold job no. 600 for $25,000 on account to a credit customer. Total manufacturing costs allocated to this job at the time
The information below was taken from the job cost sheets of Igmund Manufacturing.During July, jobs no. 103 and 104 were completed, and jobs no. 101, 102, and 104 were delivered to customers. Jobs no.
The following information relates to the manufacturing operations of Morrhead Manufacturing during the month of July. The company uses job order costing.a. Purchases of direct materials during the
Fox Manufacturing applies manufacturing overhead at a rate of $32 per machine hour.a. When during the year was this rate computed?b. Describe briefly how this rate was computed.c. Identify the
Lincoln Estates manufactures log homes to customers’ specifications and uses job order costing. A predetermined overhead rate is used in applying manufacturing overhead to individual jobs. In the
Hendersonville Roofing uses job order costing and applies manufacturing overhead to individual projects using predetermined overhead rates. In the Installation Division, overhead is applied on the
Indicate whether job order costing is appropriate for each of the following businesses. Explain why. a. Let Them Eat Cake (a small bakery that makes wedding cakes unique to each
Schmeltz Industries organized in January and recorded the following transactions during its first month of operations. Jan. 5 Purchased materials on account for $800,000. Jan. 9 Used
Lewis & Company applies manufacturing overhead to production using an activity-based costing system. The company’s utilities cost pool has accumulated $450,000, its maintenance cost pool has
Marshall uses a job order costing system to account for projects. It applies manufacturing overhead to jobs on the basis of direct labor hours and pays its direct labor workers $30 per hour. The
What is an activity cost pool?
Rachel’s Costume Creations has two product lines: machine-made costumes and hand-made costumes. The company assigns $96,000 in manufacturing overhead costs to two cost pools: power costs and
Why are direct labor hours likely to be an inappropriate activity base in a highly mechanized production facility?
Match the business with the appropriate cost system(s) for that business using the number of the cost system where 1 = job order costing, 2 = process costing, and 3 = activity-based costing. a.
One of Turf Smart’s products is a small lawnmower. Two processing departments are involved in the mower’s production. The deck is assembled in one department, and a second department assembles

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