Questions and Answers of Introduction To Accounting

Define the following terms:(a) Bonus,(b) Bonus rate,(c) Bonus base.
What is the purpose of budgeting?
You have recently been hired by a large firm and after a major promotion have just completed your first sales budget by yourself. You and your best friend set a date to go out and celebrate on
Describe the benefits of budgeting.
Many of the issues involved in budgetary slack, and so on, are caused because performance is measured against the budget. Given what you have learned about the balanced scorecard, discuss the
Describe the costs of budgeting.
Refer to E6.2. Assume that each unit of Dynamo costs O’Connell $4 while each unit of Craylon cost $2. Further assume that O’Connell wants and ending inventory equal to 5 percent of next month’s
Describe budgetary slack.
Refer to E6.10. Prepare a marketing and distribution budget by month for the quarter for McKown.Data from E6.10McKown plans to sell 5,000 units of Herbal Wash in the first month, 4,500 units in the
What is the relationship between the accounts receivable schedule and the sales budget?
Refer to PepsiCo, Inc. (www.pepsico.com). Based on your knowledge of this company, answer the following.A. What budgeting strategy do you think it uses?B. What budgeting approach do you think it
What is the relationship between the cash receipts schedule and the accounts receivable schedule?
Refer to E6.8. Prepare an accounts receivable schedule for January through March.Data from E6.8Amadio, Inc., has a beginning accounts receivable balance of $20,000. It expects the following sales for
What is the relationship between the sales budget and the cash receipts schedule?
Appendix Shumway Enterprises has the following production planned for the first six months of next year:January ................... 50,000.February ................
Refer to E6.6. What is the expected ending balance of accounts receivable?Data from E6.6Soderlund Company has a balance in its accounts receivable of $35,000 at the beginning of the year. Credit
What is the difference between an ideal and a normal standard?
Craven Company plans to sell 20,000; 22,000; 30,000; and 34,000, respectively, units per month for the next four months. The desired ending finished goods inventory is 5 percent of the expected sales
To aid in preparing its budget for March 2018, Gotfredson Company has provided the following information: Amount owed by customers, March 1, 2018 $ 400,000 Estimated sales for March 2018 1,400,000
Refer to Walt Disney Company (www.disney.com). Based on your knowledge of this company, answer the following:A. What budgeting strategy do you think it uses?B. What budgeting approach do you think it
What is the relationship between the marketing and distribution budget and the sales budget?
Refer to E6.10 and E6.11. Assume that all costs are paid in the month incurred. Prepare the cash disbursements schedule by month for the quarter for McKown.Data from E6.10McKown plans to sell 5,000
How can balanced scorecard measures be used for revenue process planning?
Develop a set of nonfinancial balanced scorecard measures for the revenue process.
Refer to E6.13. Assume Barcenilla sells its product for $100 each. Prepare a sales budget, by month, for next quarter.Data from E6.13Barcenilla has a beginning accounts receivable balance of
Refer to E6.13 and E6.14. Assume each unit will cost $20 and Barcenilla desires an ending inventory equal to 10 percent of next month’s anticipated sales. Prepare the purchases budget for the first
What information is needed to prepare a cash disbursements schedule and where is this information found?
How is the accounts payable schedule related to the cash disbursements schedule?
How can balanced scorecard measures be used for expenditure process planning?
Refer to E6.17. If Kallsen gives customers that pay within the month of sale a 2 percent discount, does this change your answer? Why?Data from E6.17Kallsen Enterprises, in its first year of
Develop a set of nonfinancial balanced scorecard measures for the expenditure process.
Refer to P6.8. Each unit requires three hours of direct labor time at $12 per hour. Unit-related overhead is $10 per machine hour and each unit requires one-half machine hour. Batch- related overhead
What is the difference between a quantity discount and a purchase discount?
Schuh, Inc., plans to produce 6,000 units in Month 1 and 7,000 units in Month 2. Each unit requires 3 pounds of direct materials that can be purchased for $2 per pound. At the beginning of Month 1
Frausto, Inc., plans to produce 22,000; 24,000; 26,000; 28,000; 30,000; and 32,000 units for the first six months, respectively, of the coming year. Each unit requires 2 liters of direct materials
What is the purpose of the direct materials budget.
What is the purpose of the direct labor and manufacturing overhead budget?
Refer to E6.20. What is the expected ending balance of accounts payable?Data from E6.20Mathison Enterprises has a balance in accounts payable of $34,500 at the beginning of the budgeting period.
How is the production budget related to the sales budget?
Refer to E6.17. Assume that Kallsen pays its sales personnel a commission of 4 percent of sales and that other marketing costs are estimated at $20,000 per month. What is the expected marketing cost
Refer to Dell Computer (www.dell.com). Based on your knowledge of this company, answer the following:A. What budgeting strategy do you think it uses?B. What budgeting approach do you think it uses?C.
Refer to E3.13. These data were entered into a regression program, resulting in the following output. Determine the cost equation and evaluate its strength.Data from E3.13The engineering costs and
Refer to E3.11. These data were entered into a regression program, resulting in the following output. Use this output to determine the expected cost if 12,000 miles are logged in one month.Data from
What is an activity driver?
Explain the importance of the relevant range concept.
Refer to P3.9. The following linear regression results were obtained using these data:Required:A. Determine the revenue formula using the linear regression output.B. What is the estimated revenue if
Refer to the information in P3.4. The following regression results were obtained using these data:Required:A. What is the estimated amount of overhead if 2,200 direct labor hours are worked next
Leasure Locks is a hair styling salon. The following is a list of costs connected with the salon. Identify each of the costs as variable, fixed, or mixed. Assume that activity is measured as the
Refer to P3.7. The following linear regression results were obtained using these data:Required:A. Determine the revenue formula using the linear regression output.B. What is the estimated revenue if
Target accepts Visa, MasterCard, Discover, and American Express as well as its own Target charge cards. Assume that Visa and MasterCard charge a 1.8 percent processing fee while Discover and American
Refer to P3.2. The following is the output of a regression analysis applied to these data.Required:A. What is the dependent variable in the regression application?B. What is the independent variable
Give an example of a cost that might vary with each of the following cost drivers:(a) Number of orders placed,(b) Number of units produced,(c) Number of tests performed,(d) Number of square feet.
Examine each of the graphs below and determine whether the revenue is fixed, mixed, or variable. KEK
Why is activity analysis important?
How has automation affected the conversion process?
Refer to E3.3. What is the available sales/purchase discount? When is it available?Data from E3.3On December 30, 2019, Parker Company ships $250,000 of merchandise by common carrier to Jackson, Inc.
On December 30, 2019, Parker Company ships $250,000 of merchandise by common carrier to Jackson, Inc. The terms of the sale are 2/10, n/60, FOB shipping point. It takes four days for the merchandise
Many companies have moved operations overseas in an attempt to reduce costs. For example, order fulfillment and customer service call centers are often located in nondomestic locations. Discuss this
Refer to E3.1. What is the available sales/purchase discount? When is it available?Data from in E3.1On December 29, 2019, Wolfe Company ships $100,000 of merchandise by common carrier to the Audio
On December 29, 2019, Wolfe Company ships $100,000 of merchandise by common carrier to the Audio Midwest Company. The terms of the sale are 2/15, n/30, FOB destination. It takes five days for the
Hongmei Company has planned for annual cost of goods sold of $1,500,000 with an average inventory balance of $80,000. Assuming Hongmei meets its goals, calculate its inventory turnover and days in
Katelyn Company has planned for annual sales of $1,800,000 with an average accounts receivable balance of $120,000. Assuming Katelyn meets its goals, calculate its accounts receivable turnover and
What is an NSF check? Why do banks typically charge fees for NSF checks?
Wallace Company experienced the following operating times during the last month: Order response time 0.8 day Storing time 3.5 days Shipping time 2.0 days Processing time 6.8 days Queue time 4.5 days
Explain the importance of internal controls.
These are the condensed financial statements of Pedersen Company for 2019 and 2018.Required:Calculate the appropriate ratios for the financial and internal perspectives of the balanced scorecard.
What is a bank reconciliation?
Describe some measurements used in the learning and growth perspective.
The financial statements for Faulkender Company are as follows:Required:Calculate the appropriate ratios for the financial and internal perspectives of the balanced scorecard. FAULKENDER
Describe some measurements used in the internal perspective.
Describe the internal control lapse in the following situation. An office manager, who is authorized to sign checks in the absence of the owner, has been stealing money from the company.
Loveland Company had the following bank reconciliation at March 31, 2019.Information found on the bank statement on April 30, 2019:All reconciliation items at March 31, 2019, cleared through the bank
Describe the internal control issue in the following situation. All employees share a cash register and no passwords are required.
Describe the internal control issue in the following situation. A company allows a cashier to make small payments for various miscellaneous items with cash from the cash register. The cashier is
Describe the internal control issue in the following situation. The mail clerk opens the mail, records the receipts, and turns this record and the receipts over to the bookkeeper, who deposits the
Describe the balanced scorecard approach.
The following information was obtained from the books of Burghduff Products for the month of March:1. The reconciliation on February 28 included the following two items: Outstanding check number 412
Discuss the pros and cons associated with companies being required to disclose balanced scorecard data in their annual reports.
Develop balanced scorecard measures for the customer, internal process, learning and growth, and financial perspective and show how they are linked. That is, discuss how an improvement in one could
You are currently the only bookkeeper at a small business. You are going on vacation, so the company will hire a temporary person to replace you while you are away. Unfortunately, you are leaving
What is the distinction between strategic and operating planning?
Since many companies profess that “employees are our most valuable asset,” some people feel that employees should be given information contained within the balanced scorecard so that the
Information related to the cash account of Stubbs Limited for July follows:A. The balance per books is $12,732.36.B. The bank statement balance on July 31 is $11,920.91.C. The following checks are
Explain the purpose of the FASB concepts statements.
Classify each of the following items as affecting assets or liabilities and revenues or expenses for Madsen Company. State which financial statement (balance sheet or income statement) each item
What is a business and why does it exist?
Select a company you are interested in and obtain a copy of its most recent annual report. Keep this report for use throughout this book. Based on the information in this report, answer the following
Critically evaluate these statements: “The business of business is to do business. Businesses should not be involved in social issues. It is the role of government to control pollution and
In 2008, Congress voted to bail out many financial institutions that faced bankruptcy due to bad loans. During the same year, it refused to bail out the “Big 3” automakers, which also faced
Classify each of the following businesses by type (service, merchandising, and/or manufacturing):A. MasterCardB. KPMG, LLP (accounting firm)C. Frontier AirlinesD. International Business Machines
Refer to P1.1. If these were the only items affecting the company during the period, what would Madsen’s net income be?Data from P1.1Classify each of the following items as affecting assets or
What is accounting and why does it exist?
Consider the businesses in the town where your college is located. Select one that interests you and prepare written responses to the following questions:A. What type of business is this company
The JIT philosophy stipulates that products (inventory) should arrive just as needed. Discuss the risks for a business that adopts this philosophy.
A student was interviewing for a full-time position with a firm. The on-campus interview went very well, and the student was invited to visit the offices, which were located some distance away. The
Although employees are usually considered to be, and are often referred to as, a company’s most valued asset, they do not appear as assets on the balance sheet. Prepare an argument supporting or
Describe companies from your hometown that have the following ownership structures:(1) Sole proprietorship,(2) Partnership,(3) Corporation.
What is JIT?
Compare and contrast the stock market crash of 1929 to the market crash of 2008.
List four well-known companies that have the following ownership structures:(1) Partnership(2) Corporation.

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