Accounting And Finance An Introduction 10th Edition Eddie McLaney, Peter Atrill - Solutions

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➢ What is a dishonored note receivable and how is it reported in the balance sheet?
➢ How is the maturity value of a note calculated?
➢ In what instances might a company acquire notes receivable?
➢ Describe the differences between clearly determinable, estimated, and contingent liabilities. Give one or more examples of each type.
➢ What is an operating cycle? Which type of company is likely to have the shortest operating cycle, and which is likely to have the longest operating cycle? Why?
➢ Define liabilities, current liabilities, and long-term liabilities.
➢ Why might a retailer agree to sell by credit card when such a substantial discount is taken by the credit card agency in paying the retailer?
➢ For a company using the allowance method of accounting for uncollectible accounts, which of the following directly affects its reported net income: (1) the establishment of the allowance, (2) the writing off of a specific account, or (3) the recovery of an account previously written off as
➢ How might information in an aging schedule prove useful to management for purposes other than estimating the size of the required allowance for uncollectible accounts?
➢ What must be considered before adjusting the allowance for uncollectible accounts under the percentage-of-receivables method?
➢ In view of the fact that it is impossible to estimate the exact amount of uncollectible accounts receivable for any one year in advance, what exactly does the Allowance for Uncollectible Accounts account contain after a number of years?
➢ What are the two major purposes of establishing an allowance for uncollectible accounts?
➢ The credit manager of a company has established a policy of seeking to completely eliminate all losses from uncollectible accounts. Is this policy a desirable objective for a company? Explain.
➢ In view of the difficulty in estimating future events, would you recommend that accountants wait until collections are made from customers before recording sales revenue? Should they wait until known accounts prove to be uncollectible before charging an expense account?
Keats Company issued its own USD 10,000, 90-day, non interest-bearing note to a bank. If the note is discounted at 10 percent, the proceeds to Keats are:a. USD 10,000.b. USD 9,000.c. USD 9,750.d. USD 10,250.e. None of the above.
To compute interest on a promissory note, all of the following elements must be known except:a. The face value of the note.b. The stated interest rate.c. The name of the payee.d. The life of the note.e. None of the above.
Dawson Company sells fax machines. During 2010, the company sold 2,000 fax machines. The company estimates that 5 percent of the machines require repairs under warranty. To date, 30 machines have been repaired. The estimated average cost of warranty repairs per defective fax machine is USD 200. The
Maxwell Company records its sales taxes in the same account as sales revenues. The sales tax rate is 6 percent. At the end of the current period, the Sales account has a balance of USD 265,000. The amount of sales tax payable is:a. USD 12,000.b. USD 15,000.c. USD 15,900.d. USD 18,000.
Which type of company typically has the longest operating cycle?a. Service company.b. Merchandising company.c. Manufacturing company.d. All equal.
Hunt Company estimates uncollectible accounts using the percentage-of-receivables method and expects that 5 percent of outstanding receivables will be uncollectible for 2010. The balance in Accounts Receivable is USD 200,000, and the allowance account has a USD 3,000 credit balance before
Which of the following statements is false?a. Any existing balance in the Allowance for Uncollectible Accounts is ignored in calculating the uncollectible accounts expense under the percentage-of-sales method except that the allowance account must have a credit balance after adjustment.b. The
When an interest-bearing note is given to a bank when taking out a loan, the difference between the cash proceeds and the maturity amount is debited to Discount on Notes Payable.true or false.
Current liabilities are classified as clearly determinable, estimated, and contingent.A dishonored note is removed from Notes Receivable, and the total amount due is recorded in Accounts Receivable.true or false.
Bank credit card sales are treated as cash sales because the receipt of cash is certain.Liabilities result from some future transaction.true or false.
Under the allowance method, uncollectible accounts expense is recognized when a specific customer's account is written off.true or false.
The percentage-of-sales method estimates the uncollectible accounts from the ending balance in Accounts Receivable. true or false.
Define the following terms:a. Stockholders who “vote with their feet” versus “active” stockholdersb. Proxy fight; takeoverc. The “wealth effect” of rising (or falling) stock pricesd. Agent; principal; agency relationshipe. Agency costf. Basic types of agency conflictsg. Executive
Suppose the exchange rate between U.S. dollars and the Swiss franc was SFr1.6 = $1, and the exchange rate between the dollar and the British pound was £1 = $1.50. What was the exchange rate between francs and pounds?
Calculate the after-tax cost of debt under each of the following conditions:a. Interest rate, 13 percent; tax rate, 0 percent.b. Interest rate, 13 percent; tax rate, 20 percent.c. Interest rate, 13 percent; tax rate, 35 percent.
As a manager, do you care more about your company’s market value, intrinsic value, or fundamental value? What about as an investor?
The president of International Microchips Inc. (IMI) made this statement in the company’s annual report: “IMI’s primary goal is to increase the value of the common stockholders’ equity over time.” Later in the report, the following announcements were made. Discuss how IMI’s
A bus company is concerned about one of its routes, which serves a rural community. The management has decided to undertake a cost–benefit analysis to see whether it is worthwhile continuing with the route. Apart from the quantifiable costs, are there other costs, which may prove impossible to
The statement of financial position is sometimes seen as the least important of the three major financial statements discussed in this chapter. Can you see why this might be the case?
Singh enterprises, which started business on 1 January 2016, has a reporting period to 31 December and uses the straight-line method of depreciation. on 1 January 2016, the business bought a machine for £10,000. The machine had an expected useful life of four years and an estimated residual value
You and a friend have decided to set up in business offering a bicycle delivery service in your local area. you feel that you can raise enough funds from your own resources to get the business going. you have calculated that you can finance your planned future expansion from profits. you intend to
The London stock exchange has the power to suspend dealing in shares of businesses that have failed to comply with particular regulations. Why is this seen as a sanction for the business concerned?
Is limited liability a wholly good idea? Can you think of any arguments against it?
An established company listed on the London stock exchange has decided to raise further funds through an issue of shares. The board of directors has decided to issue preference shares rather than ordinary shares in order to raise the funds required. What factors may have lead them to make such a
There is a risk that managers will be inhibited from providing meaningful management commentaries. Instead, commentaries may be uninformative and written in a bland form. Can you think why managers may feel inhibited? What might be done to overcome any concerns they may have?
Why are accounting rules needed when preparing financial statements? Can you see any difficulties arising from harmonising accounting rules between different countries?
What are the main methods of creative accounting? how might the problem of creative accounting in developing countries be mitigated by harmonising accounting rules across national boundaries?
‘Profit should more or less equal the net cash inflow for a period?’ do you agree? explain your reasoning.
How are opportunity costs different from other costs mentioned in the chapter? Can you see a problem with using opportunity costs when making management decisions?
Shown below is an extract from next year’s plans for a business manufacturing three products, A, B and C, in three product cost centres.The skilled operatives employed in the cutting department are paid £16 an hour and the unskilled operatives are paid £10 an hour. All the operatives in the
Historic costs should never be used when deciding what costs are relevant to a decision. despite this, historic costs are the principal inputs for preparing the main financial accounting statements (income statements and statements of financial position). Why is this?
Is it always reasonable to assume linear relationships between volume and sales revenue/variable cost, even where the activity is within a fairly narrow range?
Modern businesses tend to have higher levels of operating gearing than businesses had, say, 50 years ago. Why would this be the case?
One approach to break-even analysis can produce more than one break-even point. Why is this?
Consider the following businesses:● A pharmaceutical manufacturer;● A sugar refiner;● A picture framer;● A private hospital;● A coal-mining business;● An architect’s office;● A cement manufacturer; and● An antique furniture restorer.Try to identify, for each business, which form
At the beginning of the chapter, one of the uses to which managers might put full-cost information was identified as in setting selling prices. does this mean that businesses can add a profit margin to full cost and set selling prices in that way? Explain your response. Would your answer differ
Will increasing the number of (overhead) cost pools in an existing activity based costing system ever be beneficial?
What potential problems should managers look out for in introducing a balanced scorecard approach to managing the business?
Most businesses seem to have a budget setting period towards the end of each year where the following year’s budgets are prepared (periodic budgeting). other businesses, however, have a ‘continual budgeting’ approach where, each month, a new month’s budget is prepared to replace the month
What do budgets have to do with control?
In the chapter it was mentioned that investment projects tend to involve additional amounts of working capital. It was also mentioned that at the end of such projects there is an inflow of funds as working capital is released.Why does this inflow of funds occur? Where does the cash come from?
Evidence shows that the london stock exchange is an efficient market. Does this mean that the current price of a share in a listed business is the correct price?
Why are many businesses less effective than the best in their industry in controlling their working capital?
If a high level of financial gearing is capable of producing higher earnings per share outcomes for the equity holders, why do most businesses not take on very large proportions of borrowing?

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Accounting And Finance An Introduction 10th Edition Eddie McLaney, Peter Atrill - Solutions

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