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business
principles financial accounting
Financial Accounting 9th Edition Dr Carl S. Warren, Dr James M. Reeve, Philip E. Fess - Solutions
Describe the stockholders’ liability to creditors of a corporation.AppendixLO1
Why are most large businesses organized as corporations?AppendixLO1
Of two corporations organized at approximately the same time and engaged in competing businesses, one issued $75 par common stock, and the other issued $1 par common stock. Do the par designations provide any indication as to which stock is preferable as an investment? Explain.AppendixLO1
A stockbroker advises a client to “buy cumulative preferred stock. . . . With that type of stock, . . . [you] will never have to worry about losing the dividends.” Is the broker right?AppendixLO1
What are some of the factors that influence the market price of a corporation’s stock?AppendixLO1
When a corporation issues stock at a premium, is the premium income? Explain.AppendixLO1
a. In what respect does treasuiy stock differ from unissued stock?b. How should treasuiy stock be presented on the balance sheet?AppendixLO1
A corporation reacquires 10,000 shares of its own $25 par common stock for $420,000, recording it at cost, (a) What effect does this transaction have on rev¬ enue or expense of the period? (b) What effect does it have on stockholders’ equity?AppendixLO1
The treasuiy stock in Question 8 is resold for $500,000. (a) What is the effect on the corporation’s revenue of the period? (b) What is the effect on stock¬ holders’ equity?AppendixLO1
What is the primary purpose of a stock split?AppendixLO1
(a) What are the three conditions for the declaration and the payment of a cash dividend? (b) The dates in connection with the declaration of a cash dividend are July 1, August 15, and September 1. Identify each date.AppendixLO1
A corporation with both cumulative preferred stock and common stock out¬ standing has a substantial credit balance in its retained earnings account at the beginning of the current fiscal year. Although net income for the current year is sufficient to pay the preferred dividend of $250,000 each
An owner of 150 shares of Morse Company common stock receives a stock divi¬ dend of 3 shares, (a) What is the effect of the stock dividend on the stockholder’s proportionate interest (equity) in the corporation? (b) How does the total equity of 153 shares compare with the total equity of 150
a. Where should a declared but unpaid cash dividend be reported on the bal¬ance sheet?b. Where should a declared but unissued stock dividend be reported on the bal¬ ance sheet?AppendixLO1
What is the primary advantage of combining the retained earnings statement with the income statement?AppendixLO1
What are the three classifications of appropriations and how are appropriations normally reported in the financial statements?AppendixLO1
Indicate how prior period adjustments would be reported on the financial state¬ ments presented only for the current period.AppendixLO1
List basic financial statement analytical procedures.AppendixLO1
Apply financial statement analysis to assess the solvency of a business.AppendixLO1
Apply financial statement analysis to assess the profitability of a business.AppendixLO1
Summarize the uses and limitations of analytical measures.AppendixLO1
Describe the contents of corporate annual reports.AppendixLO1
what type of analysis is indicated by the following?Amount Percent Current assets $100,000 20%Property, plant, and equipment 400,000 80 Total assets $500,000 100%A. Vertical analysis C. Profitability analysis B. Horizontal analysis D. Contribution margin analysis.AppendixLO1
Which of the following measures indicates the abil¬ ity of a firm to pay its current liabilities?A. Working capital C. Quick ratio B. Current ratio D. All of the above AppendixLO1
The ratio determined by dividing total current as¬ sets by total current liabilities is:A. current ratio C. bankers’ ratio B. working capital ratio D. all of the above.AppendixLO1
The ratio of the quick assets to current liabilities, which indicates the “instant” debt-paying ability of a firm, is:A. current ratio C. quick ratio B. working capital ratio D. bankers’ ratio AppendixLO1
A measure useful in evaluating the efficiency in the management of inventories is:A. working capital ratio B. quick ratio C. number of days’ sales in inventory D. ratio of fixed assets to long-term liabilities.AppendixLO1
What is the difference between horizonta and vertical analysis of financial state¬ ments?AppendixLO1
What is the advantage of using comparative statements for financial analysis rather than statements for a single date or period?AppendixLO1
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 perfor¬ mance? Discuss.AppendixLO1
How would you respond to a horizontal analysis that showed an expense in¬ creasing by over 100%?AppendixLO1
How would the current and quick ratios of a service business compare?AppendixLO1
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, re¬ ported as follows:Preceding Current Year Year Current assets:Cash, marketable securities, and receivables. $34,000 $30,000 Inventories.\. . .
Why would the accounts receivable turnover ratio be different between Wal- Mart Stores, Inc. and Procter & Gamble Company?AppendixLO1
A company that grants terms of n/30 on all sales has a yearly accounts receiv¬ able turnover, based on monthly averages, of 6. Is this a satisfactory turnover? Discuss.AppendixLO1
a. Why is it advantageous to have a high inventory turnover?b. Is it possible for the inventory turnover to be too high? Discuss.c. Is it possible to have a high inventory turnover and a high number of days’ sales in inventory? Discuss.AppendixLO1
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?Current Year Preceding Year Fixed assets (net) $175,000 $170,000 Total long-term liabilities
a. Why is the rate earned on stockholders’ equity by a thriving business ordi¬narily higher than the rate earned on total assets?b. Should the rate earned on common stockholders’ equity normally be higher or lower than the rate earned on total stockholders’ equity? Explain.AppendixLO1
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 December 31, the end of the current fiscal year. What does the ratio indicate about the selling price of the common stock in relation to current earnings?AppendixLO1
Why would the dividend yield differ significantly from the rate earned on com¬ mon stockholders’ equity?AppendixLO1
Eavorable business conditions may bring about certain seemingly unfavorable ratios, and unfavorable business operations may result in apparently favorable ratios. For example, Sanchez Company increased its sales and net income sub¬ stantially for the current year, yet the current ratio at the end
Describe the differences between managerial and financial accounting.AppendixLO1
Evaluate the organizational role of management accountants.AppendixLO1
Define and illustrate materials, factory labor, and factory overhead costs.AppendixLO1
Describe accounting systems used by manufacturing businesses.AppendixLO1
Describe and prepare summary journal entries for a job order cost accounting system.AppendixLO1
Use job order cost information for decision making.AppendixLO1
Diagram the flow of costs for a service business that uses a job order cost accounting system.AppendixLO1
which of the following best describes the differ¬ ence between financial and managerial accounting?A. Managerial accounting provides information to support decisions, while financial accounting does not.B. Managerial accounting is not restricted to gen¬ erally accepted accounting principles
Which of the following is not considered a cost of manufacturing a product?A. Direct materials cost C. Sales salaries B. Factory overhead cost D. Direct labor cost AppendixLO1
Which of the following costs would be included as part of the factory overhead costs of a computer manufacturer?A. The cost of memory chips B. Depreciation of testing equipment C. Wages of computer assemblers D. The cost of disk drives AppendixLO1
A company estimated $420,000 of factory overhead cost and 16,000 direct labor hours for the period. During the period, a job was completed with $4,500 of direct materials and $3,000 of direct labor. The direct labor rate was $15 per hour. What is the fac¬ tory overhead applied to this job?A.
If the factory overhead account has a credit bal¬ ance, factory overhead is said to be:A. underapplied C. underabsorbed B. overapplied D. in error AppendixLO1
What are the major differences between managerial accounting and financial accounting?AppendixLO1
a. Differentiate between a department with line responsibility and a department with staff responsibility.b. In an organization that has a Sales Department and a Personnel Department, among others, which of the two departments has (1) line responsibility and (2) staff responsibility?AppendixLO1
a. What is the role of the controller in a business organization?b. Does the controller have a line or staff responsibility?REAL WORLD Chapter 16 • Introduction to Managerial Accounting and Job Order Cost Systems 681 AppendixLO1
For a company that produces desktop computers, would memory chips be con¬ sidered a direct or an indirect materials cost of each computer produced?AppendixLO1
How is product cost infonuation used by managers?AppendixLO1
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. Which system accumulates the costs for each department or process within the factory?AppendixLO1
What kind of firm would use a job order cost system?AppendixLO1
Hewlett-Packard Company assembles ink jet printers in which a high volume of standardized units are assembled and tested. Is the job order cost system ap¬ propriate in this situation?AppendixLO1
How does the use of the materials requisition help control the issuance of ma¬ terials from the storeroom?AppendixLO1
a. Differentiate between the clock card and the time ticket.b. Why should the total time reported on an employee’s time tickets for a pay¬ roll period be compared with the time reported on the employee’s clock cards for the same period?AppendixLO1
Discuss how the predetemiined factory overhead rate can be used in job order cost accounting to assist management in pricing jobs.AppendixLO1
a. How is a predetermined factory overhead rate calculated?b. Name three common bases used in calculating the rate.AppendixLO1
a. What is (1) overapplied factory overhead and (2) underapplied factory over¬head?b. If the factoiy overhead account has a debit balance, was factory overhead underapplied or overapplied?c. If the factoiy overhead account has a credit balance at the end of the first month of the fiscal year,
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?AppendixLO1
How can job cost information be used to identify cost improvement opportu¬ nities?AppendixLO1
Describe how a job order cost system can be used for professional service busi¬ nesses.AppendixLO1
Distinguish between job order costing and process costing systems.AppendixLO1
Explain and illustrate the physical flows and cost flows for a process manufacturer.AppendixLO1
Calculate and interpret the accounting for completed and partially completed units under the fifo method.AppendixLO1
Prepare a cost of production report.AppendixLO1
Prepare journal entries for transactions of a process manufacturer.AppendixLO1
Use cost of production reports for decision making.AppendixLO1
Contrast just-in-time processing with conventional manufacturing practices.AppendixLO1
For which of the following businesses would the process cost system be most appropriate?A. Custom furniture manufacturer B. Commercial building contractor C. Crude oil refineiy D. Automobile repair shop AppendixLO1
There were 2,000 pounds in process at the begin¬ ning of the period in the Packing Department. Pack¬ ing 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
Information relating to production in Department A for May is as follows:May 1 Balance, 1,000 units, % completed$22,150 31 Direct materials, 5,000 units 75,000 31 Direct labor 32,500 31 Factory overhead 16,250 If 500 units were one-fourth completed at May 31, 5,500 units were completed during May,
Information from the accounting system revealed the following:Day 1 Day 2 Day 3 Day 4 Day 5 Materials$ 20,000$18,000$ 22,000$ 20,000$ 20,000 Electricity 2,500 3,000 3,500 4,000 4,700 Maintenance 4,000 3,750 3,400 3,000 2,800 Total costs Pounds$ 26,500$24,750$ 28,900$ 27,000$ 27,500
which type of cost system, process or job order, would be best suited for each of the following: (a) custom jewelry manufacturer, (b) paper manufacturer, (c) automobile repair shop, (d) building contractor, (e) TV assembler? Give reasons for your answers.AppendixLO1
In job order cost accounting, the three elements of manufacturing cost are charged directly to job orders. Why is it not necessary to charge manufacturing costs in process cost accounting to job orders?AppendixLO1
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?AppendixLO1
What are transferred-out materials?AppendixLO1
What are the four steps for determining the cost of goods completed and the ending inventory?AppendixLO1
What is meant by the term equivalent unitsl AppendixLO1
Why is the cost per equivalent unit often determined separately for direct ma¬ terials and conversion costs?AppendixLO1
What is the purpose for determining the cost per equivalent unit?AppendixLO1
Domingo Company is a process manufacturer with two production departments. Departments A and B. All direct materials are introduced in Department A from the materials store area. What is included in the cost transferred to Department B?AppendixLO1
How is actual factory overhead accounted for in a process manufacturer?AppendixLO1
What is the most important purpose of the cost of production report?AppendixLO1
How is “yield” determined for a process manufacturer?AppendixLO1
What is just-in-time processing?AppendixLO1
How does just-in-time processing differ from the conventional manufacturing process?AppendixLO1
Classify costs by their behavior as variable costs, fixed costs, or mixed costs.AppendixLO1
Compute the contribution margin, the contribution margin ratio, and the unit contribution margin, and explain how they may be useful to managers.AppendixLO1
Using the unit contribution margin, determine the break-even point and the volume necessary to achieve a target profit.AppendixLO1
Using a cost-volume-profit chart and a profit-volume chart, determine the break-even point and the volume necessary to achieve a target profit.AppendixLO1
Calculate the break-even point for a business selling more than one product.AppendixLO1
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