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fundamental accounting
Fundamental Accounting Principles Volume 2 21st Edition John Wild, Ken Shaw, Barbara Chiappetta - Solutions
Polaris reports in notes to its financial statements that, in addition to its products sold, it in¬ cludes the following costs (among others) in cost of sales: customer shipping and handling expenses, warranty expenses, and depreciation expense on assets used in manufacturing.Required 1. Why do
Many companies acquire software to help them monitor and control their costs and as an aid to their accounting systems. One company that supplies such software is proDacapo (prodacapo.com). There are many other such vendors. Access proDacapo’s Website, click on “Prodacapo Process Manage¬
Describe a merchandiser's cost of goods sold.
How do we compute gross profit for a merchandising company?
Identify which items are subtracted from the list amount and not recorded when computing purchase price: (a) freight-in; {b) trade discount; (c) purchase discount; (d) purchase return.
Use the following adjusted trial balance and additional information to complete the requirements.KC Antiques’ supplementary records for 2013 reveal the following itemized costs for merchandising activities:Required 1. Use the supplementary records to compute the total cost of merchandise
Identify and explain the inventory asset and cost flows of a merchandising company
Prepare adjustments and close accounts for a merchandising company
Refer to Exercise 5-4 and prepare the appropriate journal entries for Baker Co. to record the May 5 pur¬ chase and each of the three separate transactions a throughc. Baker is a retailer that uses a perpetual inventory system and purchases these units for resale.
Valley Company’s adjusted trial balance on August 31, 2013, its fiscal year-end, follows.On August 31, 2012, merchandise inventory was $25,400. Supplementary records of merchandising ac¬ tivities for the year ended August 31, 2013, reveal the following itemized costs.Required 1. Compute the
Preparing closing entries and interpreting information about discounts and returns C2 P3: Use the data for Valley Company in Problem 5-4A to complete the following requirements.Required 1. Prepare closing entries as of August 31, 2013 (the perpetual inventory system is used).Analysis Component 2.
Preparing a work sheet for a merchandiser P3: Refer to the data and information in Problem 5-3A.Required Prepare and complete the entire 10-coliimn work sheet for Nelson Company. Follow the structure of Exhibit 5B.1 in Appendix 5B.
Preparing journal entries for merchandising activities— perpetual system PI P2: Prepare journal entries to record the following merchandising transactions ofYarvelle Company, which applies the perpetual inventory system. {Hint: It will help to identify each receivable and payable; for example,
Prepare journal entries to record the following merchandising transactions of Mason Company, which applies the perpetual inventory system. {Hint: It will help to identify each receivable and payable; for example, record the purchase on July 3 in Accounts Payable—OFB.)July 3 Purchased merchandise
Use the data for Barkley Company in Problem 5-4B to complete the following requirements.Required 1. Prepare closing entries as of March 31, 2013 (the perpetual inventory system is used).Analysis Component 2. The company makes all purchases on credit, and its suppliers uniformly offer a 3% sales
Refer to the data and information in Problem 5-3B.Required Prepare and complete the entire 10-column work sheet for Foster Products Company. Follow the structure of Exhibit 5B.1 in Appendix 5B.
Refer to Polaris’ financial statements in Appendix A to answer the following Required 1. Assume that the amounts reported for inventories and cost of sales reflect items purchased in a form ready for resale. Compute the net cost of goods purchased for the year ended December 31, 2011.2. Compute
Access the SEC’s EDGAR database (www.SEC.gov) and obtain the March 19, 2012, filing of its fiscal 2012 10-K report (for year ended January 28, 2012) for J. Crew Group, Inc. (ticker: JCG).Required Prepare a table that reports the gross margin ratios for J. Crew using the revenues and cost of goods
Official Brands’ general ledger and supplementary records at the end of its current period re¬ veal the followingRequired 1. Each member of the team is to assume responsibility for computing one of the following items. You are not to duplicate your teammates’ work. Get any necessary amounts to
Refer to the opening feature about Faithful Fish. Assume that Chelsea Eubank reports current annual sales at approximately $1 million and discloses the following income statementChelsea Eubank sells to various individuals and retailers, ranging from small shops to large chains. Assume that she
KTM (www.KTM.com). Polaris, and Arctic Cat are competitors in the global marketplace. Key comparative figures for each company follow.Required 1. Rank the three companies (highest to lowest) based on the gross margin ratio.2. Which of the companies uses a multiple-step income statement format?
If two investments have the same payback period, are they equally desirable? Explain
Under what conditions is a sunk cost relevant to decision making?
What is the difference between avoidable and unavoidable expenses?
A segment is a candidate for elimination if (a) its revenues are less than its avoidable expenses, (b) it has a net loss, (c) its unavoidable expenses are higher than its revenues
Determine the appropriate action in each of the following managerial decision situations.1. Packer Company is operating at 80% of its manufacturing capacity of 100,000 product units per year. A chain store has offered to buy an additional 10,000 units at $22 each and sell them to customers so as
Describe the importance of relevant costs for short-term decisions.
A company inadvertently produced 3,000 defective MP3 play¬ ers. The players cost $12 each to produce. A recycler offers to purchase the defective players as they are for $8 each. The pro¬ duction manager reports that the defects can be corrected for $10 each, enabling them to be sold at their
A company’s productive capacity is limited to 480,000 ma¬ chine hours. Product X requires 10 machine hours to produce; and ProductY requires 2 machine hours to produce. Product X sells for $32 per unit and has variable costs of $12 per unit; Product Y sells for $24 per unit and has variable
A company receives a special one-time order for 3,000 units of its product at $15 per unit. The company has excess capacity and it currently produces and sells the units at $20 each to its regular customers. Production costs are $13.50 per unit, which includes $9 of variable costs. To produce the
Park Company is considering two alternative investments. The payback period is 3.5 years for investment A and 4 years for investment B. (1) If management relies on the payback period, which investment is preferred? (2) Why might Park’s analysis of these two alternatives lead to the selection of B
Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a net present value of cash flows of $1,100,000. Project 2 requires an initial investment of $3,500,000 and has a net present value of cash flows of $2,500,000. Compute the
Label each of the following statements as either true (“T”) or false (“E”).1. Relevant costs are also known as unavoidable costs.2. Incremental costs are also known as differential costs.3. An out-of-pocket cost requires a eurrent and/or future outlay of cash.4. An opportunity cost is the
Holmes Company produces a product that can either be sold as is or processed further. Holmes has already spent $50,000 to produce 1,250 units that can be sold now for $67,500 to another manufacturer. Alternatively, Holmes can process the units further at an incremental cost of $250 per unit. If
A machine costs $700,000 and is expected to yield an after-tax net income of $52,000 each year. Management predicts this machine has a 10-year service life and a $100,000 salvage value, and it uses straight-line depreciation. Compute this machine’s accounting rate of return.
A company must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be sold as is for $2.50 each, or they can be reworked for $4.50 each and then sold for the full price of $8.50 each. If
Suresh Co. expects its five departments to yield the following income for next year.Re compute and prepare the departmental income statements (including a combined total column) for the company under each of the following separate scenarios: Management (1) does not eliminate any department, (2)
This chapter explained two methods to evaluate investments using recovery time, the payback period and break-even time (BET). Refer to QS 25-15 and (1) compute the recovery time for both the payback period and break-even time, (2) discuss the advantage(s) of break-even time over the payback period,
Cortino Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $300,000 cost with an expected four-year life and a $20,000 salvage value. All sales are for cash and all costs are out of pocket, except for depreciation on the
Aikman Company has an opportunity to invest in one of two projects. Project A requires a $240,000 , investment for new machinery with a four-year life and no salvage value. Project B also requires a$240,000 investment for new machinery with a three-year life and no salvage value. The two projects
Windmire Company manufactures and sells to local wholesalers approximately 300,000 units per month at a sales price of $4 per unit. Monthly costs for the production and sale of this quantity followA new out-of-state distributor has offered to buy 50,000 units next month for $3.44 each. These units
Sung Company is able to produce two products, R and T, with the same machine in its factory. The following information is available.The company presently operates the machine for a single eight-hour shift for 22 working days each month.Management is thinking about operating the machine for two
Esme Company’s management is trying to decide whether to eliminate Department Z, which has pro¬ duced low profits or losses for several years. The company’s 2013 departmental income statement shows the following.In analyzing whether to eliminate Department Z, management considers the following
Many companies must determine whether to internally produce their component parts or to outsource them. Further, some companies now outsource key components or business processes to international providers. Access the Website BizBrim.com and review the available information on business process
Break into teams and identify four reasons that an international airline such as Southwest or Delta would invest in a project when its direct analysis using both payback period and net present value indicate it to be a poor investment. {Hint: Think about qualitative factors.) Provide an example of
Read ihe chapter opener about Charlie Fyffe and his company, Charlie’s Brownies. Suppose Charlie’s business grows and he considers building a new, massive bakery and warehousing center to make his business more elTicient and reduce costs.O 0 Required 1. What arc some of the management tools
Visit or call a local auto dealership and inquire about leasing a car. Ask about the down pay¬ ment and the required monthly payments. You will likely find the salesperson does not discuss the cost to purchase this car but focuses on the affordability of the monthly payments. This chapter gives
Access KTM’s 2011 annual report dated December 31, 2011, from its Website www.KTM.com. Identify and read the section in the Group Status Report—2011, section 12, regarding Sustainability.Required KTM reports that they developed a special KTM motorcycle logistics system on reusable metal plates.
Service departments (a) manufacture products, {b) make sales directly to customers,(c) produce revenues, id) assist operating departments.
Explain the difference between a cost center and a profit center. Cite an example of each.
Performance reports to evaluate managers should [selecta, b or cl (a) include data about controllable expenses, ib) compare actual results with budgeted levels, or (c) both (a) and (b).
If a company has two operating (selling) departments (shoes and hats) and two service departments (payroll and advertising), which of the following statements is correct? (a) Wages incurred in the payroll department are direct expenses of the shoe department, (b) Wages incurred in the payroll
Which of the following bases can be used to allocate supervisors' salaries across operating departments? (a) Hours spent in each department, (b) number of employees in each department, (c) sales achieved in each department, or (d) any of the above, depending on which information is most relevant
What three steps are used to allocate expenses to operating departments?
An income statement showing departmental contribution to overhead, (a) subtracts indirect expenses from each department's revenues, (b) subtracts only direct expenses from each department's revenues, or (c) shows net income for each department.
A division reports sales of $50,000, income of $2,000, and average invested assets of $10,000. Compute the division's (a) profit margin, (b) investment turnover, and (c) return on investment
Management requests departmental income statements for Hacker’s Haven, a computer store that has five departments. Three are operating departments (hardware, software, and repairs) and two are service departments (general office and purchasing).The departments incur several indirect expenses. To
A company produces three products, B1, B2, and B3.The joint cost incurred for the current month for these products is $180,000. The following data relate to this month's production:The amount of joint cost allocated to product B3 using the value basis allocation is (a) $30,000, (b) $54,000, or (c)
Explain transfer pricing and methods to set transfer prices.
Describe allocation of joint costs across products.
Define cycle time and cycle efficiency, and explain their importance to production management
A retailer has three departments-housewares, appliances, and clothing-and buys advertising that benefits all departments. Ad- vertising expense is $150,000 for the year, and departmental sales for the year follow: housewares, $356,250; appliances, $641,250; clothing, $427,500. How much advertising
Indirect expensesa. Cannot be readily traced to one department.b. Are allocated to departments based on the relative benefit each department receives.c. Are the same as uncontrollable expenses.d.a, b, and c above are all true.e. a and b above are true.
A division reports the information below. What is the division’s investment (asset) turnover?a. 37.5%b. 15c. 2.5d. 2.67e. 4 Sales... $500,000 Income... 75,000 Average assets. 200,000
A company operates three retail departments as profit centers, and the following information is available for each. Which department has the largest dollar amount of departmental contribution to overhead and what is the dollar amount contributed?a. Department Y, $ 55,000b. Department Z, $125,000c.
Using the data in question 4, Department X’s contribution to overhead as a percentage of sales isa. 20%b. 30%c. 12%d. 48%e. 32%
In each blank next to the following terms, place the identifying letter of its best description -23 1. 2. 3. Cost center Investment center Departmental accounting system Operating department 4. 451 5. Profit center 6. system 7. Responsibility accounting Service department A. Incurs costs without
In each blank next to the following terms, place the identifying letter of its best description Indirect expenses Controllable costs Direct expenses Uncontrollable costs A. Costs not within a manager's control or influence B. Costs that can be readily traced to a department C. Cost that a manager
Refer to information in QS 24-5. Assume a target income of 12% of average invested assets. Compute residual income for each division
Classify each of the performance measures below into the most likely balanced scorecard perspective it relates to. Label your answers using C (customer), P (internal process), I (innovation and growth), or F (financial).1. Customer wait time -2. Number of days of employee absences -3. Profit margin
Walt Disney reports the following information for its two Parks and Resorts divisions.Assume Walt Disney uses a balanced scorecard and sets a target of 90% occupancy in its resorts. Using Exhibit 24.22 as a guide, show how the company’s performance on hotel occupancy would appear on a balanced
Refer to information in QS 24-11. If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions? Explain.
Car Mart pays $130,000 rent each year for its two-story building. The space in this building is occupied by five departments as specified here.The company allocates 65% of total rent expense to the first floor and 35% to the second floor, and then allocates rent expense for each floor to the
Compute and interpret (a) manufacturing cycle time and (b) manufacturing cycle efficiency using the following information from a manufacturing company. Process time Inspection time Move time Wait time 15 minutes 2 minutes 6.4 minutes 36.6 minutes
Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them followDepartmental data for the company’s recent
(1) Use this information to allocate each of the three indirect expenses across the four departments.(2) Prepare a summary table that reports the indirect expenses assigned to each of the four departments,
Below are departmental income statements for a guitar manufacturer. The manufacturer is considering dropping its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect. (1) Prepare a departmental contribution report that
The following is a partially completed lower section of a depmtmental expense allocation spreadsheet for ’Cozy Bookstore. It reports the total amounts of direct and indirect expenses allocated to its five departments. Complete the spreadsheet by allocating the expenses of the two service
Jessica Porter works in both the jewelry department and the hosiery department of a retail store. Porter assists customers in both departments and arranges and stocks merchandise in both departments. The store allocates Porter’s $30,000 annual wages between the two departments based on a sample
You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $1,000,000 investment and is expected to yield annual net income of $160,000. The
Refer to information in Exercise 24-8. Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most efficient at generating sales from average invested assets?
USA Airlines uses the following performance measures. Classify each of the performance measures be¬ low into the most likely balanced scorecard perspective it relates to. Label your answers using C (cus¬ tomer), P (internal process), I (innovation and growth), or F (financial).1. Cash flow from
The Trailer department of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturing costs. The Trailer department has capacity for 40,000 trailers per year, and incurs
Heart & Home Properties is developing a subdivision that includes 600 home lots. The 460 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 150 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon
Pirate Seafood Company purchases lobsters and processes them into tails and Bakes. It sells the lobster tails for $21 per pound and the Bakes for $ 14 per pound. On average, 100 pounds of lobster tue processed into 52 pounds of tails and 22 pounds of Bakes, with 26 pounds of waste. Assume that the
National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account. Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow.The building has
Oakwood Company produces maple bookcases to customer order. It received an order from a customer to produce 5,000 bookcases. The following information is available for the production of the bookcases.Required 1. Compute the company’s manufacturing cycle time.2. Compute the company’s
Harmon’s has several departments that occupy all floors of a two-story building that includes a basement I floor. Harmon rented this building under a long-term lease negotiated when rental rates were low. The ^ departmental accounting system has a single account. Building Occupancy Cost, in its
Bonanza Entertainment began operations in January 2013 with two operating (selling) departments and one service (office) department. Its departmental income statements follow.The company plans to open a third department in January 2014 that will sell compact discs. Management predicts that the new
Best Ink produces ink-jet printers for personal computers. It received an order for 500 printers from a customer. The following information is available for this orderRequired 1. Compute the company’s manufacturing cycle time.2. Compute the company’s manufacturing cycle efficiency. Interpret
Review Polaris’ income statement in Appendix A and identify its revenues for the years ended December 31, 2011, December 31, 2010, and December 31, 2009. For the year ended December 31, 2011, Polaris reports the following product revenue mix. (Assume that its product revenue mix is the same for
Improvement Station is a national home improvement chain with more than 100 stores throughout the country. The manager of each store receives a salary plus a bonus equal to a percent of the store’s net income for the reporting period. The following net income calculation is on the Denver store
This chapter described and used spreadsheets to prepare various managerial reports (see Exhibit 24-6). You can download from Websites various tutorials showing how spreadsheets are used in managerial accounting and other business applications.Required 1. Link to the Website Lacher.com. Select
What is the main responsibility of the budget committee?
What is the usual time period covered by a budget?
What are rolling budgets?.
A master budget (a) always includes a manufacturing budget specifying the units to be produced: (b) is prepared with a process starting with the operating budgets and continues with the capital expenditures budget and then financial budgets; or (c) is prepared with a process ending with the sales
What are the three primary categories of budgets in the master budget?
In preparing monthly budgets for the third quarter, a company budgeted sales of 120 units for July and 140 units for August. Management wants each month's ending inventory to be 60% of next month's sales. The June 30 inventory consists of 50 units. How many units of product for July acquisition
How do the operating budgets for merchandisers and manufacturers differ?
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