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BYP6-2 PepsiCo’s financial statements

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BYP6-2 PepsiCo’s financial statements are presented in Appendix A. Coca-Cola’s financial
statements are presented in Appendix B.

Instructions

(a) Based on the information contained in these financial statements, compute the following
2005 ratios for each company.

(1) Inventory turnover ratio

(2) Days in inventory

(b) What conclusions concerning the management of the inventory can you draw from these data?

BYP6-1 The notes that accompany a company’s financial statements

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BYP6-1 The notes that accompany a company’s financial statements provide informative details
that would clutter the amounts and descriptions presented in the statements. Refer to the financial
statements of PepsiCo and the Notes to Consolidated Financial Statements in Appendix A.

Instructions
Answer the following questions. Complete the requirements in millions of dollars, as shown in
PepsiCo’s annual report.
(a) What did PepsiCo report for the amount of inventories in its consolidated balance sheet at
December 31, 2005? At December 25, 2004?
(b) Compute the dollar amount of change and the percentage change in inventories between
2004 and 2005. Compute inventory as a percentage of current assets at December 31, 2005.
(c) How does PepsiCo value its inventories? Which inventory cost flow method does PepsiCo
use? (See Notes to the Financial Statements.)
(d) What is the cost of sales (cost of goods sold) reported by PepsiCo for 2005, 2004, and 2003?
Compute the percentage of cost of sales to net sales in 2005

Determine cash withdrawals for the period if net income is

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1. If owner's equity is $150,000 and total liabilities are $90,000, then total assets would be:
a) $60,000
b) $225,000
c) $240,000
d) $135,000

2. Which of the following transactions would have no affect total assets, total liabilities, or owner's equity:
a. payment of a liability
b. payment of an expense
c. purchasing supplies on account
d. purchasing supplies for cash

3. Owner’s equity and total assets were $32,000 and $79,000 at the beginning of the period. Assets increased 50% and liabilities decreased 60% during the period. What is owner’s equity at the end of the period?
a) $43,300
b) $47,000
c) $99,700
d) $105,700

4.Performing a service on account would:
a) increase liabilities and decrease total assets
b) decrease liabilities and increase total assets
c) increase total assets and increase owner's equity
d) increase owner's equity and decrease liabilities

5. Determine cash withdrawals for the period if net income is $34,000, beginning owner's equity is $29,000 and ending owner's equity is $55,000
a) $5,000
b) $8,000
c) $50,000
d) $60,000

6. A chronological record of an entity's transaction is called a(n):
a) balanced sheet
b) ledger
c) trial balance
d) journal

7. A business purchases equipment for cash of $85,000. This transaction will cause:
a) cash to be debited for $85,000
b) equipment to be credited for $85,000
c) capital to be credited for $85,000
d) cash to be credited for $85,000

8. Receiving a check for $1,200 from a customer with an account balance of $2,000 would include a:
a) debit to cash and a credit to accounts receivable for $1,200
b) debit to cash and a credit to accounts receivable for $800
c) debit to accounts payable and a credit to cash for $1,200
d) debit to account receivable and a credit to service revenues for $1,200

9. A $250 payment on account was recorded as a debit to accounts receivable and and a credit to accounts payable. This error will cause:
a) owner's equity to be overstated
b) accounts payable to be understated
c) cash to be understated
d) accounts receivable to be overstated

10. An accountant recognizes the impact of a business expense when it is incurred under which basis of accounting?
a) financial
b) managerial
c) cash
d) accrual

11. Under the accrual basis of accounting, the receipt of cash from a customer in advance of performing the service would be credited to a(n):
a) accrued revenues account
b) prepaid asset account
c) deferred revenue account
d) deferred asset account

12. On October 1, 2006, Five Brothers Company paid $72,000 cash for eight months rent. The amount of the adjusting entry on December 31, 2006, would be:
a) $18,000
b) $24,000
c) $27,000
d) $36,000

13. The supplies account shows a beginning balance of $3,000. Assume the supplies account shows a debit for $5,500 representing supplies purchased during the period and the supplies inventory at year-end is $1,700. The adjusting entry involves a:
a) debit to supplies for $6,800 (3000-1700)+5500
b) debit to supplies expense for $1,700
c) debit to supplies expense for $6,800
d) debit to supplies for $1,700

14. Which of the following are all temporary accounts?
a) liabilities, revenues, and expenses
b) revenues, expenses, and withdrawals
c) revenues, expenses, and capital
d) assets, revenues, and capital

15. Which of the following accounts will have a remaining balance after the closing process is completed?
a) service revenues
b) depreciation expense
c) inventory
d) both a and b

16. Supplies would appear on a classified balance sheet as a(n):
a) long-term asset
b) other asset
c) current liability
d) current asset

17. Selected accounting data for the Phoenix Company follows:
Current assets $76,000
Current liabilities 30,000
Long-term assets 70,000
Long-term liabilities 37,000
Total revenues 25,000
Total expenses 22,000

The current ratio is:
a) 1.13
b) 2.53
c) 2.95
d) 0.34

18. Selected accounting data for the Phoenix Company follows:
Current assets $76,000
Current liabilities 30,000
Long-term assets 70,000
Long-term liabilities 37,000
Total revenues 25,000
Total expenses 22,000
The debt ratio is:
a) 0.44
b) 0.46
c) 0.97
d) 1.04

19. Sales revenues $460,000
Cost of goods sold 300,000
Interest expenses 5,000
Sales discounts 20,000
Sales returns and allowances 15,000
Operating expenses 85,000

What is net sales revenues?
a) $125,000
b) $340,000
c) $420,000
d) $425,000

20. Sales revenues $460,000
Cost of goods sold 300,000
Interest expenses 5,000
Sales discounts 20,000
Sales returns and allowances 15,000
Operating expenses 85,000

What is gross profit?
a) 35,000
b) 120,000
c) $125,000
d) $140,000

21. Inventory turnover indicates how:
a) quickly inventory is received from supplier after the order is placed
b) many days it takes the inventory to travel between the seller's warehouse and the buyer's warehouse
c) rapidly inventory is sold
d) many days it takes from the time an order is received to the day it is shipped.

22. The gross profit percentage is calculated as:
a) gross profit minus net sales revenue
b) gross profit divided by net sales revenue
c) gross profit times net sales revenue
d) gross profit plus net sales revenue

23. A perpetual system:
a) keeps a running record of all goods
b) may be used for all types of goods
c) is used only for inexpensive goods
d) both A and B are correct

24. Internal control does not:
a) help safeguard the assets a business uses in its operations
b) guarantee a company will not go bankrupt
c) encourage adherence to company policies
d) promote operational efficiency

25. Persons who authorize transactions should not handle the related asset is an example of which characteristic of internal control:
a) separation of duties
b) assignment of responsibilities
c) proper authorization
d) competent, reliable and ethical personnel

26. A bank reconciliation:
a) should not be prepared by an employee who handles cash transactions
b) is part of a sound internal control system
c) is a formal financial statement
d) both a and b are correct

27. In a bank reconciliation, a $400 NSF check is:
a) deducted from the book balance
b) added to the book balance
c) deducted from the bank balance
d) added to the bank balance

28. Designating a corporate controller is an example of which characteristic of internal control:
a) assignment of responsibilities
b) competent, reliable, and ethical personnel
c) proper authorization
d) separation of duties

29. The entry to record the sales of merchandise for cash includes a:
a) debit to accounts receivable
b) credit to sales discounts
c) debit to sales revenue
d) credit to sales revenue

30. During a period of rising prices and using a perpetual inventory costing system, LIFO will yield:
a) less net income than would FIFO
b) higher net income than would FIFO
c) higher gross profit than would FIFO
d) less operating expenses than would FIFO


Settlement of federal tax case

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E24-2 (Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events,
indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at
year-end.
______ 2. Introduction of a new product line.
______ 3. Loss of assembly plant due to fire.
______ 4. Sale of a significant portion of the company’s assets.
______ 5. Retirement of the company president.
______ 6. Issuance of a significant number of shares of common stock.
______ 7. Loss of a significant customer.
______ 8. Prolonged employee strike.
______ 9. Material loss on a year-end receivable because of a customer’s bankruptcy.
______ 10. Hiring of a new president.
______ 11. Settlement of prior year’s litigation against the company.
______ 12. Merger with another company of comparable size.

Vivaldi Corporation

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Exercise 5-12 Presented below is the trial balance of Vivaldi Corporation at December 31, 2012.


   Debit   Credit 
Cash   197,000
Sales   7,900,000
Trading Securities (at cost, $145,000)   153,000
Cost of Goods Sold   4,800,000
Long-term Investments in Bonds   299,000
Long-term Investments in Stocks   277,000
Short-term Notes Payable   90,000
Accounts Payable   455,000
Selling Expenses   2,000,000
Investment Revenue   63,000
Land   260,000
Buildings   1,040,000
Dividends Payable   136,000
Accrued Liabilities   96,000
Accounts Receivable   435,000
Accumulated DepreciationÑBuildings   352,000
Allowance for Doubtful Accounts   25,000
Administrative Expenses   900,000
Interest Expense   211,000
Inventories   597,000
Extraordinary Gain   80,000
Long-term Notes Payable   900,000
Equipment   600,000
Bonds Payable   1,000,000
Accumulated Depreciation's Equipment   60,000
Franchise   160,000
Common Stock ($5 par)   1,000,000
Treasury Stock   191,000
Patent   195,000
Retained Earnings   78,000
Paid-in Capital in Excess of Par Totals   80,000
       12,315,000  12,315,000

Calculate ending retained earnings and prepare a balance sheet at December 31, 2012, for Vivaldi Corporation. Ignore income taxes.

E5-5 Bruno Company has decided to

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E5-5 (Preparation of a Corrected Balance Sheet) Bruno Company has decided to expand its operations.
The bookkeeper recently completed the balance sheet presented on the next page in order to obtain
additional funds for expansion

BRUNO COMPANY
BALANCE SHEET
DECEMBER 31, 2010
Current assets
Cash $260,000
Accounts receivable (net) 340,000
Inventories at lower of average cost or market 401,000
Trading securities—at cost (fair value $120,000) 140,000
Property, plant, and equipment
Building (net) 570,000
Office equipment (net) 160,000
Land held for future use 175,000

and so on ....

Instructions
Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation
balance for the buildings is $160,000 and for the office equipment, $105,000. The allowance for doubtful
accounts has a balance of $17,000. The pension obligation is considered a long-term liability.

CP6-2 Ocean Atlantic Co. is a merchandising business

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Check figures: Net income: $710,760

Ocean Atlantic Co. is a merchandising business. The account balances for Ocean Atlantic
Co. as of July 1, 2012 (unless otherwise indicated), are as follows:

110 Cash $ 63,600
112 Accounts Receivable 153,900
115 Merchandise Inventory 602,400
116 Prepaid Insurance 16,800
117 Store Supplies 11,400
123 Store Equipment 469,500
124 Accumulated Depreciation—Store Equipment 56,700
210 Accounts Payable 96,600
211 Salaries Payable —
310 Kevin Gilmour, Capital, August 1, 2011 555,300
311 Kevin Gilmour, Drawing 135,000
312 Income Summary —
410 Sales 3,221,100
411 Sales Returns and Allowances 92,700
412 Sales Discounts 59,400
510 Cost of Merchandise Sold 1,623,000
520 Sales Salaries Expense 334,800
521 Advertising Expense 81,000
522 Depreciation Expense —
523 Store Supplies Expense —
529 Miscellaneous Selling Expense 12,600
530 Offi ce Salaries Expense 182,100
531 Rent Expense 83,700
532 Insurance Expense

During July, the last month of the fiscal year, the following transactions were completed:
July 1. Paid rent for July, $4,000.
3. Purchased merchandise on account from Lingard Co., terms 2/10, n/30, FOB
shipping point, $25,000.
4. Paid freight on purchase of July 3, $1,000.
6. Sold merchandise on account to Holt Co., terms 2/10, n/30, FOB shipping
point, $40,000. The cost of the merchandise sold was $24,000.
7. Received $18,000 cash from Flatt Co. on account, no discount.
10. Sold merchandise for cash, $90,000. The cost of the merchandise sold was
$50,000.

and so on ....

Instructions

1. Enter the balances of each of the accounts in the appropriate balance column of a
four-column account. Write Balance in the item section, and place a check mark (��)
in the Posting Reference column. Journalize the transactions for July starting on Page 20
of the journal.
2. Post the journal to the general ledger, extending the month-end balances to the
appropriate balance columns after all posting is completed. In this problem, you
are not required to update or post to the accounts receivable and accounts payable
subsidiary ledgers.
3. Prepare an unadjusted trial balance.
4. At the end of July, the following adjustment data were assembled. Analyze and use
these data to complete (5) and (6).
a. Merchandise inventory on July 31 $565,000
b. Insurance expired during the year 13,400
c. Store supplies on hand on July 31 3,900
d. Depreciation for the current year 11,500
e. Accrued salaries on July 31:
Sales salaries $3,200
Offi ce salaries 1,300 4,500
5. Optional: Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet
(work sheet), and complete the spreadsheet.
6. Journalize and post the adjusting entries. Record the adjusting entries on Page 22 of
the journal.
7. Prepare an adjusted trial balance.
8. Prepare an income statement, a statement of owner’s equity, and a balance sheet.
9. Prepare and post the closing entries. Record the closing entries on Page 23 of the
journal. Indicate closed accounts by inserting a line in both the Balance columns
opposite the closing entry. Insert the new balance in the owner’s capital account.
10. Prepare a post-closing trial balance.

Oxygen Co. is incorporated at the beginning of this

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Problem 13-1A Oxygen Co. is incorporated at the beginning of this year and engages in a number of transactions. The following journal entries impacted its stockholders’ equity during its first year of operations.

a. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Common Stock, $ 25 Par Value . . . . . . . . ................................... . . . . . . . 125,000
Paid- In Capital in Excess of
Par Value, Common Stock . . . . . . . ....................................... . . . . . . . . . . 25,000

b. Organization Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000
Common Stock, $ 25 Par Value . . . . . . ............................... . . . . . . . . . 62,500
Paid- In Capital in Excess of
Par Value, Common Stock . . . . . . . . . .................................. . . . . . . . . 12,500

c. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,500
Accounts Receivable . . . . . . . . . . . . . . . .. . . . . . . . 7,500
Building . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 30,000
Notes Payable . . . . . . . ..................... . . . . . . . . . . . . . . . . . ...... . ........ . 19,000
Common Stock, $ 25 Par Value . . . . ................ ........................ . . . . . . . . 25,000
Paid- In Capital in Excess of
Par Value, Common Stock . . . . . . . . . ......................... . . . .............. . . . . 15,000

d. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Common Stock, $ 25 Par Value . . . .................... . . .............. . . . . . . . . . 37,500
Paid- In Capital in Excess of
Par Value, Common Stock . . . . . . . . . . ................. .................... . . . . . . 22,500

Required
1. Explain the transaction( s) underlying each journal entry ( a) through ( d).
2. How many shares of common stock are outstanding at year- end?
3. What is the amount of minimum legal capital ( based on par value) at year- end?
4. What is the total paid- in capital at year- end?
5. What is the book value per share of the common stock at year- end if total paid- in capital plus retained earnings equals $ 347,500?

Kenney Company uses activity-based costing

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1. Kenney Company uses activity-based costing to account for its manufacturing process. Kenney Company produces tires, and each tire has $.50 of direct materials, includes 20 parts and requires 2 hours of machine time.

There is no direct labor. Additional information follows:
Activity Allocation Base Cost Allocation Rate
Materials handling Number of parts $.16
Machining Machine hours $14.40
Assembling Number of parts $.70
Packaging Number of finished units $5.40
What is the cost of machining per tire?
A) $28.80
B) $26.40
C) $25.80
D) $29.50

2. Which of the following is not a criticism of traditional costing systems?
A. They tend to be more expensive
B. They can distort product costs
C. They tend to use too few cost pools
D. They are designed to allocate only manufacturing costs

3. Which of the following are period costs?
A) Current assets on the balance sheet
B) Costs incurred and expensed during the accounting period
C) Costs related to the manufacture of products
D) Current liabilities on the balance sheet

4. A traditional cost allocation system tends to misallocate manufacturing costs because
a) Direct labor costs are misallocated

b) Direct material costs are misallocated
c) Indirect manufacturing costs are misallocated
d) Period costs are misallocated

5. Morley Manufacturing is considering the manufacture of a new product. Morley was hoping to sell the
product for $168 per unit and estimated the total cost per unit to be $120. Morley conducted market research and found out that the market is only willing to pay $154 for the new product. Using the target costing approach, what does the total per unit cost of the new product have to be if Morley wants to achieve the same amount of profit as originally planned?
A) $110
B) $106
C) $109
D) $100

6. Lisbon Manufacturing is considering the manufacture of a new product. Lisbon was hoping to sell the product for $588 per unit and estimated the total cost per unit to be $420. Lisbon conducted market research and found out that the market is only willing to pay $539 for the new product. Using the target costing approach, what does the total per unit cost of the new product have to be if Lisbon wants to achieve a 40% markup on total cost?
A) $215.60
B) $385.00
C) $257.60
D) $420.00

7. A standard costing system that starts with output completed and works backward to apply manufacturing costs to units sold and to inventories is called what?
A) Just-in-time costing
B) Traditional costing
C) Backflush costing
D) Value-added costing

8. In a just-in-time costing system, any remaining balance in the conversion costs account at the end of an
accounting period is usually charged to which account?
A) Raw and in process inventory
B) Cost of goods sold
C) Work in process inventory
D) Finished goods inventory

9. which of the following companies would be most likely to use a just-in-time system?
a) A steel mill
b) A delivery company
c) a custom computer manufacturer
d) a paper mill

10. What do you call the costs incurred to avoid production of poor quality goods or services?
A) External failure costs
B) Internal failure costs
C) Appraisal costs
D) Prevention costs

11. The cost of warranty work within the total quality management philosophy is a(n):
A) External failure costs
B) Internal failure costs
C) Appraisal costs
D) Prevention costs

12. Which of the following costs change in direct proportion to a change in volume?
A) total Fixed cost
B) total Variable cost
C) Average mixed cost
D) Average variable cost

13. Which of the following is NOT a fixed cost?
A) Property taxes
B) Salary of plant manager
C) Indirect materials
D) Straight-line depreciation

14. Which of the following costs do NOT go directly into the work in process account?
A) Factory overhead
B) Indirect labor
C) Factory janitorial costs
D) The purchase of raw materials

15. Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $3,000, occurred in July when she washed 2,000 dogs and her lowest bill, $2,000, occurred in November when she washed 1,000 dogs.
What was the variable cost per dog associated with Jenny's water bill?
A) $0.67
B) $1.00
C) $0.50
D) $2.00

16. Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $3,000, occurred in July when she washed 2,000 dogs and her lowest bill, $2,000, occurred in November when she washed 1,000 dogs.
What was the fixed cost associated with Jenny's water bill?
a) 2,000
b) 1,000
c) 1,500
d) 3,000

17. Dakota Company provides the following information about its single product:
Targeted operating income $40,000
Selling price per unit $3.50
Variable cost per unit $1.05
Total fixed costs $90,000
What is the contribution margin ratio?
A) 0.70
B) 0.44
C) 0.56
D) 0.30

18. f the sale price per unit is $7, the unit contribution margin is $3, and total fixed expenses are $19,500, what are the breakeven sales in units?
a) 6,500 (19500/3)
b) 4,874
c) 2,786
d) 5,850

19. Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in sale price for the next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. What is the breakeven point in units at the current sales price?
a. 6,667 units
b. 7,143 units
c. 8,571 units
d. 16,667 units

20. On a CVP graph, what does the horizontal line intersecting the dollar axis at the level of total cost represent?
a) total fixed costs
b) total variable costs
c) breakeven point
d) total costs

21. Which of the following is an underlying assumption of the cost-volume-profit graph?
a) total fixed expenses will change during the accounting
b) inventory levels are constantly changing
c) volume is the only cost driver
d) the sales mix of products is constantly changing

22. Dakota Company provides the following information about its single product:
Targeted operating income $40,000
Selling price per unit $3.50
Variable cost per unit $1.05
Total fixed costs $90,000

How many units must be sold to earn the targeted operating income
a. 37,143
b. 53,061
c. 123,810
d. 36,735

23. Which of the following changes would normally increase the contribution margin per unit the most
a) a 25% increase in thes sales price per unit
b) a 25% increase in the variable cost per unit
c) a 25% increase in the variable cost per unit
d) a 20% decrease in fixed costs

24. McDaniel, Inc. sells two products-J and B. McDaniel predicts that it will sell 7,200 units of J and 5,600 units of B in the next period. The unit contribution margins are $2.85 and $6.30, respectively. What is the weighted-average unit contribution margin?
A) $5.15
B) $4.58
C) $4.99
D) $4.36

25. A merchandiser’s purchases are equivalent to what for a manufacturer?
a) materials inventory
b) cost of goods manufactured
c) work in process inventory
d) cost of goods sold

26. The racquet store has provided the following information for a recent month regarding the three styles of racquest that it sells:
sales 300,000 150,000 120,000
variable expenses 150,000 111,000 36,000
Fixed expenses: 360,000

If sales were to increase 200,000 next month, how much would operating income increase assuming that the sales mix remains the same?
a) 100,000
b) 80,000
c) 120,000
d) 200,000

27. The following information pertains to Bright Toy Company's operating activities for 2009. The company sells light box toys and sold 10,000 units in 2009.
Purchases $126,000
Selling and Administrative Expenses 90,000
Merchandise inventory, 1/1/2012 14,000
Merchandise inventory, 12/31/2012 10,000
Sales Revenue 250,000

What is the cost per light box sold in 2009
A) $13.00
B) $12.40
C) $14.00
D) $10.40

28. Which of the following equals of goods manufactured?
a) Total manufacturing costs plus ending materials inventory less beginning materials inventory
b) Total manufacturing costs plus beginning work in process inventory less ending work in process inventory
c) Total manufacturing costs plus ending work in process inventory less beginning work in process inventory
d) Cost of goods sold plus beginning work in process inventory less ending in process inventory.

Potts Company uses a job costing system

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1. Which of the following is NOT an objective of management accounting?
A) To provide information to business managers to assist them in planning for their business
B) To provide information to business managers to assist them in controlling their business
C) To provide information to shareholders to assist them with their investment decisions
D) To assist business managers with respect to providing a return to the owners of the business

2. A company used $35,000 of direct materials, incurred $73,000 in direct labor cost, and $114,000 in manufacturing overhead costs during the period. If beginning and ending work in process inventories were $28,000 and $21,000 respectively. What is the cost of goods manufactured?
A) $250,000
B) $229,000
C) $215,000
D) $222,000

3. Which costing system would better account for a unique individual product?
A) Product costing system
b) Job order costing system
c) Process costing system
d) variable costing system

4 Savard corporation reported the following:
- Raw material purchases totaling 100,000
- Raw material inventory increased 5,000
- Direct labor costs incurred totaled 150,000
- Total factory overhead was 225,000
- Work in process increased 20,000
- Indirect labor was 7,000
- Finished goods increased 40,000
- Sales salaries were 75,000

How much was Savard’s cost of goods manufactured?

a) 497,000
b) 490,000
c) 450,000
d) 457,000

5. The following information was obtained from Sizzler Company:
• Advertising costs: $7,900
• Indirect labor: $9,000
• Direct Labor: $31,000
• Indirect materials: $7,200
• Direct materials: $47,000
• Factory utilities: $3,000
• Factory repair and maintenance : $700
• Factory janitorial costs: $1,900
• Manufacturing equipment depreciation: $1,600
• Delivery vehicle depreciation: $790
• Administrative wages and salaries: $19,000
How much were Sizzler's period costs?

A) $27,690
B) $7,900
C) $19,790
D) $19,000

6. Based on the information on #5, How much was Sizzler's factory overhead?
A) $24,190
B) $1,600
C) $23,400
D) $3,600

7. Your company sends you to a conference on a new accounting rule, and you skip the afternoon session to go sightseeing. Which IMA guideline has been violated?
a. Competence
b. Confidentiality
c. Objectivity
d. Integrity

8. Which of the following would be debited to record direct labor costs actually incurred?
a) work in process
b) b) Finished goods inventory
c) manufacturing wages
d) manufacturing overhead

9. The entry to transfer direct labor and indirect labor costs from manufacturing wages into production includes a debit to which of the following?
A) manufacturing overhead and work in process inventory
B) finished goods inventory
C) manufacturing overhead
D) finished goods inventory and work in process inventory

10. The Hemingway Company uses a job order costing system. In April, material
requisitions of $44,000 were issued (direct materials, $40,000) and materials purchases of both direct and indirect materials totaled $56,600. The ending balance in materials inventory was $18,400. What was the beginning raw materials balance?

$5,800
$31,000
$25,600
$22,400

11. Potts Company uses a job costing system and had the following data available for 2009.
Materials purchased on account $75,000
Materials requisitioned (includes $2,000 of indirect materials) $43,000
Direct labor incurred $75,000
Manufacturing overhead incurred $95,000
Cost of goods completed $226,750
Cost of goods sold $138,000
Beginning materials inventory $15,000
Beginning work in process inventory $32,000
Beginning finished goods inventory $31,000
Predetermined manufacturing overhead rate
(as a percent of direct labor cost) 125%

The journal entry to record the total materials placed into production would include which of the following?
A) Debit to work in process for $41,000
B) Debit to work in process for $43,000
C) Credit to manufacturing overhead for $2,000
D) Debit to manufacturing overhead for $41,000

12. Based on the information on Question 11, what is the balance in work in process inventory at December 31, 2009 for Potts Company?

A) $15,000
B) $17,000
C) $16,500
D) $15,500

13. What is total quality management?
A) A philosophy of supplying customers with superior products and services
B) An exchange of information with suppliers and customers to create efficient and effective processes
C) A software system that integrates a company's functions, departments and data into a single system
D) A system which speeds the transformation of raw materials into finished products.

14. Opague Corporation uses a job costing system. The work in process inventory balance on December 31, 2009, consists of Job No. 120, which has a balance of $19,000. Job No. 120 has been charged with manufacturing overhead of $5,100. Opaque allocates manufacturing overhead at a predetermined rate of 85% of direct labor cost. What was the amount of direct materials charged to Job No. 120?
A) $5,900
B) $7,565
C) $7,900
D) $7,000

15. how is the predetermined manufacturing overhead rate used to allocate manufacturing overhead calculated?
a) by multiplying the total estimated manufacturing overhead costs by the total estimated quantity of allocation base
b) by dividing the total estimated manufacturing overhead costs by the total actual quantity of the allocation base
c) by dividing the total estimated quantity of allocation base by the total estimated manufacturing overhead costs
d) by dividing the total estimated manufacturing overhead costs by the total estimated quantity of allocation base

16. Daniel Company's manufacturing overhead account showed a $4,500 overallocated balance at the end of 2005. Actual overhead incurred was $95,000. Other accounts showed the following balances:

Materials inventory $10,000
Work in process inventory $30,000
Finished goods inventory $45,000
Cost of goods sold $275,000

What will be the ending balance in cost of goods sold after allocating the proper amount of the manufacturing overhead?
A) $270,500
B) $279,500
C) $266,000
D) $284,000

17. Door company estimated manufacturing overhead costs for 20X6 at $378,000. The predetermined manufacturing overhead rate was based on 105,000 estimated direct labor hours. Actual direct labor hours for 20X6 totaled 110,000. The manufacturing overhead showed debit entries totaling $394,000. For the year, was overhead over allocated or under allocated and by how much?

a) 2,000 under allocated
b) 16,000 under allocated
c) 16,000 over allocated
d) 2,000 over allocated

18. Lakeside Company estimated manufacturing overhead costs for 2012 at $378,000, based on 180,000 estimated direct labor hours. Actual direct labor hours for 2012 totaled 195,000. The manufacturing overhead account
contains debit entries totaling $391,500. The manufacturing overhead for 2012 was:
A) $31,500 underallocated.
B) $31,500 overallocated.
C) $18,000 underallocated.
D) $18,000 overallocated

19. JC Manufacturing produces products that use a variety of components. Which of the following cost drivers would be the MOST applicable for assigning material handling costs to the finished products?
A) Direct labor hours
B) Direct labor cost
C) Number of units produced
D) Number of components used

20. Which of the following is MOST likely to be the cost driver for the packaging and shipping activity?
A) Number of components
B) Number of orders
C) Hours of testing
D) Number of setups

CCC6 Natalie is busy establishing both divisions

Price: $3.99


CCC6 Natalie is busy establishing both divisions of her business (cookie classes and mixer sales)
and completing her business degree. Her goals for the next 11 months are to sell one mixer per
month and to give two to three classes per week.

The cost of the fine European mixers is expected to increase. Natalie has just negotiated new
terms with Kzinski that include shipping costs in the negotiated purchase price (mixers will be
shipped FOB destination). Assume that Natalie has decided to use a periodic inventory system and
now must choose a cost flow assumption for her mixer inventory.

The following transactions occur in February to May 2008.
Feb. 2 Natalie buys two deluxe mixers on account from Kzinski Supply Co. for
$1,100 ($550 each), FOB destination, terms n/30.
16 She sells one deluxe mixer for $1,050 cash.
25 She pays the amount owed to Kzinski.
Mar. 2 She buys one deluxe mixer on account from Kzinski Supply Co. for $567,
FOB destination, terms n/30.
30 Natalie sells two deluxe mixers for a total of $2,100 cash.
31 She pays the amount owed to Kzinski.
Apr. 1 She buys two deluxe mixers on account from Kzinski Supply Co. for
$1,122 ($561 each), FOB destination, terms n/30.
13 She sells three deluxe mixers for a total of $3,150 cash.
30 Natalie pays the amounts owed to Kzinski.
May 4 She buys three deluxe mixers on account from Kzinski Supply Co. for
$1,720 ($573.33 each), FOB destination, terms n/30.
27 She sells one deluxe mixer for $1,050 cash.

Instructions

(a) Determine the cost of goods available for sale. Recall from Chapter 5 that at the end of
January, Cookie Creations had three mixers on hand at a cost of $545 each.

(b) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit
rate under each of the following methods: LIFO, FIFO, and average cost.

Julia's Candy Co. reports the following

Price: $5.99


1. Julia's Candy Co. reports the following information from its sales account and sales budget:

Sales May $105,000
June 93,000
Expected Sales July $90,000
August 110,000
September 120,000

Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:

$ 30,000
$ 82,500
$ 112,500
$ 120,000
$ 202,500

2. Which of the following budgets must be completed before a cash budget can be prepared?
Capital expenditures budget
Sales budget
Merchandise purchases budget
General and administrative expense budget
All of the above

3. The master budget includes:

Operating budgets
A capital expenditures budget
A budgeted income statement
A cash budget
All of the above

4. Bentels Co. desires a December 31 ending inventory of 2,840 units. Budgeted sales for December are 4,000 units. The November 30 inventory was 1,800 units. Budgeted purchases are:
Answer
5,040 units
1,240 units
6,840 units
4,000 units
5,800 units
6 points

5. The standard materials cost to produce 1 unit of Product M is 6 pounds of material at a standard price of $50 per pound. In manufacturing 8,000 units, 47,000 pounds of material were used at a cost of $51 per pound. What is the total direct material cost variance?
Answer
$48,000 unfavorable
$51,000 favorable
$51,000 unfavorable
$ 3,000 favorable
$ 3,000 unfavorable

6. Actual fixed overhead for Kapok Company during March was $92,780. The flexible budget for fixed overhead this period is $89,000 based on a production level of 5,000 units. If the company actually produced 4,200 units what is the fixed overhead spending variance for March?

$3,780 favorable
$800 unfavorable
$14,240 unfavorable
$3,780 unfavorable
$14,240 favorable

7. Kabuki Company's policy is to have 16% of the next month's sales as desired ending inventory. Estimated sales are shown in the table below. Given this data, what is Kabuki's estimated purchases for April?
March April May
Expected Sales Units 9,400 8,900 7,300

8,584
9,176
8,644
9,256
9,000

8. The usual starting point for preparing a master budget is forecasting or estimating:
Expenditures
Sales
Production
Income
Cash payments

9. The sum of the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance is the:
Production variance
Quantity variance
Volume variance
Price variance
Controllable variance

10. A department store has budgeted sales of 12,000 men's suits in September. Management wants to have 6,000 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 suits. What is the dollar amount of purchase of suits? Each suit has a cost of $75.
Answer
$ 750,000
$ 900,000
$ 1,050,000
$ 1,200,000
$ 1,350,000

Denny Corporation is considering replacing

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Managerial Accounting Final Part 1

1. Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $600,000 and would have a 10-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $20,000 per year to operate and maintain, but would save $125,000 per year in labor and other costs. The old machine can be sold now for scrap for $50,000. What percentage is the simple rate of return on the new machine rounded to the nearest tenth of a percent? (Ignore income taxes in this problem.)

2. Lounsberry Inc. regularly uses material O55P and currently has in stock 375 liters of the material, for which it paid $2,700 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $6.35 per liter. New stocks of the material can be purchased on the open market for $7.20 per liter, but it must be purchased in lots of 1,000 liters. You’ve been asked to determine the relevant cost of 900 liters of the material to be used in a job for a customer. What is the relevant cost of the 900 liters of material O55P?

3. Harwichport Company has a current ratio of 3.0 and an acid-test ratio of 2.8. Current assets equal $210,000, of which $5,000 consists of prepaid expenses. The remainder of current assets consists of cash, accounts receivable, marketable securities, and inventory. What is the amount of Harwichport Company’s inventory?

4. Tolla Company is estimating the following sales for the first six months of next year:
January $350,000
February $300,000
March $320,000
April $410,000
May $450,000
June $470,000
Sales at Tolla are normally collected as 70 percent in the month of sale, 25 percent in the month following the sale, and the remaining 5 percent being uncollectible. Also, customers paying in the month of sale are given a 2 percent discount. Based on this information, how much cash should Tolla expect to collect during the month of April?

5. Trauscht Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool ……. Total Cost ………..Total Activity
Assembly ………………698,720……………44,000 machine-hours
Processing Orders ……..90,764……………..1,900 orders
Inspection ……………..119,535 ……………1,950 inspection hours
The company makes 360 units of product P23F a year, requiring a total of 725 machine-hours, 85 orders, and 45 inspection-hours per year. The product’s direct materials cost is $42.30 per unit and its direct labor cost is $14.55 per unit. The product sells for $132.10 per unit. According to the activity-based costing system, what is the product margin for product P23F?

6. Williams Company’s direct labor cost is 30 percent of its conversion cost. If the manufacturing overhead for the last period was $59,500 and the direct materials cost was $37,000, what is the direct labor cost?

7. In a recent period, 13,000 units were produced, and there was a favorable labor efficiency variance of $23,000. If 40,000 labor-hours were worked and the standard wage rate was $13 per labor-hour, what would be the standard hours allowed per unit of output?

8. The balance in White Company’s work-in-process inventory account was $15,000 on August 1 and $18,000 on August 31. The company incurred $30,000 in direct labor cost during August and requisitioned $25,000 in raw materials (all direct material). If the sum of the debits to the manufacturing overhead account total $28,000 for the month, and if the sum of the credits totaled $30,000, then was Finished Goods debited or credited? By how much?

9. A company has provided the following data:
Sales 4,000 units
Sales price $80 per unit
Variable cost $50 per unit
Fixed cost $30,000
If the dollar contribution margin per unit is increased by 10 percent, total fixed cost is decreased by 15 percent, and all other factors remain the same, will net operating income increase or decrease? By how much?

10. For the current year, Paxman Company incurred $175,000 in actual manufacturing overhead cost. The manufacturing overhead account showed that overhead was overapplied in the amount of $9,000 for the year. If the predetermined overhead rate was $8.00 per direct labor-hour, how many hours were worked during the year?

ACC561 Wiley Week 6 E23-1 E23-2

Price: $2.99


E23-1 Pender has prepared the following list of statements about decision making and incremental analysis.

1. The first step in management’s decision-making process is, “Determine and evaluate possible
courses of action.”
2. The final step in management’s decision-making process is to actually make the decision.
3. Accounting’s contribution to management’s decision-making process occurs primarily in
evaluating possible courses of action and in reviewing the results.
4. In making business decisions, management ordinarily considers only financial information
because it is objectively determined.
5. Decisions involve a choice among alternative courses of action.
6. The process used to identify the financial data that change under alternative courses of action
is called incremental analysis.
7. Costs that are the same under all alternative courses of action sometimes affect the decision.
8. When using incremental analysis, some costs will always change under alternative courses of
action, but revenues will not.
9. Variable costs will change under alternative courses of action, but fixed costs will not.

Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.

E23-2 Wyco Company manufactures toasters. For the first 8 months of 2011, the company reported
the following operating results while operating at 75% of plant capacity.

Sales (400,000) units  4,000,000
Cost of goods sold  2,400,000
Gross profit  1,600,000
Operating expenses  900,000
Net income  700,000

Cost of goods sold was 70% variable and 30% fixed. Operating expenses were 60% variable and
40% fixed.
In September,Wyco Company receives a special order for 40,000 toasters at $6.00 each from
Salono Company of Mexico City. Acceptance of the order would result in $8,000 of shipping
costs but no increase in fixed operating expenses.

Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Wyco Company accept the special order? Why or why not?

ACC561 Week 5 E20-2 E20-5 BE21-4 E22-5

Price: $5.99


E20-2 Zeller Electronics Inc. produces and sells two models of pocket calculators, XQ-103 and XQ-104. The calculators sell for $12 and $25, respectively. Because of the intense competition Zeller faces, management budgets sales semiannually. Its projections for the first 2 quarters of 2010 are as follows.

Product Quarter 1 Quarter 2
XQ-103  20,000 25,000
XQ-104  12,000 15,000

No changes in selling prices are anticipated.
Complete the sales budget for the 2 quarters ending June 30, 2010. List the products and show for each quarter and for the 6 months, units, selling price, and total sales by product and in total.

E20-5 Moreno Industries has adopted the following production budget for the first 4 months of 2011.

Month  Units  Month  Units 
January  10,000 March  5,000
February  8,000 April  4,000

Each unit requires 3 pounds of raw materials costing $2 per pound. On December 31, 2010, the ending raw materials inventory was 9,000 pounds. Management wants to have a raw materials inventory at the end of the month equal to 30% of next month's production requirements.

Instructions
Complete the direct materials purchases budget by month for the first quarter.

BE21-4 Hannon Company expects to produce 1,200,000 units of Product XX in 2010. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are: direct materials $4, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for depreciation are $2 and for supervision are $1. Complete the flexible manufacturing budget for the relevant range value using 20,000 unit increments.

E22-5 The standard cost of Product B manufactured by Mateo Company includes three units
of direct materials at $5.00 per unit. During June, 28,000 units of direct materials are purchased
at a cost of $4.70 per unit, and 28,000 units of direct materials are used to produce 9,000 units of
Product B.

Instructions
(a) Compute the total materials variance and the price and quantity variances.
(b) Repeat (a), assuming the purchase price is $5.20 and the quantity purchased and used is
26,200 units.

ACC561 Week4 Wiley BE18-1 BE18-7 BE18-11 E19-2

Price: $5.99


Question 1
Monthly production costs in Pesavento Company for two levels of production are as
follows.

Cost 3,000 Units 6,000 Units
Indirect labor 10000 20000
Supervisory salaries 5000 5000
Maintenance 4000 7000

Indicate which costs are variable, fixed, and mixed, and give the reason for each answer.

Question 2
Bruno Manufacturing Inc. had sales of $2,200,000 for the first quarter of 2010.
In making the sales, the company incurred the following costs and expenses.

 Variable   Fixed 
Cost of goods sold   920,000  440,000
Selling expenses   70,000  45,000
Administrative expenses   86,000  98,000
Complete the CVP income statement for the quarter ended March 31, 2010.

Question 3
For Dousmann Company actual sales are $1,200,000 and break-even sales
are $840,000. Compute (a) the margin of safety in dollars and (b) the margin of safety ratio.

Question 4
In the month of June, Angela’s Beauty Salon gave 3,500 haircuts, shampoos, and
permanents at an average price of $30. During the month, fixed costs were $16,800 and
variable costs were 80% of sales.

Instructions
(a) Determine the contribution margin in dollars, per unit, and as a ratio.
(b) Using the contribution margin technique, compute the break-even point in dollars
and in units.

(c) Compute the margin of safety in dollars and as a ratio.

ACC561 Wiley Week 3 BE15-5 E16-1 E17-9

Price: $3.50


Question 1
In January, Reyes Tool & Die requisitions raw materials for production as follows:
Job 1 $900, Job 2 $1,200, Job 3 $700, and general factory use $600.

During January, time tickets show that the factory labor of $5,000 was used as follows: Job 1 $1,200,
Job 2 $1,600 Job 3 $1,400, and general factory use $800

Prepare the job cost sheets for each of the three jobs. (If answer is zero, please enter 0, do not leave any fields blank.)

Question 2
Doc Gibbs has prepared the following list of statements about process cost
accounting.

1. Process cost systems are used to apply costs to similar products that are mass produced
in a continuous fashion.
2. A process cost system is used when each finished unit is indistinguishable from another.
3. Companies that produce soft drinks, motion pictures, and computer chips would all
use process cost accounting.
4. In a process cost system, costs are tracked by individual jobs.
5. Job order costing and process costing track different manufacturing cost elements.
6. Both job order costing and process costing account for direct materials, direct labor,
and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for both job order costing
and process costing.
8. In a process cost system, only one work in process account is used.
9. In a process cost system, costs are summarized in a job cost sheet.
10. In a process cost system, the unit cost is total manufacturing costs for the period divided
by the units produced during the period.

Question 3
Peter Catalano’s Verde Vineyards in Oakville, California produces three varieties
of wine: Merlot, Viognier, and Pinot Noir. His winemaster, Kyle Ward, has identified the
following activities as cost pools for accumulating overhead and assigning it to products.
1. Culling and replanting. Dead or overcrowded vines are culled, and new vines are
planted or relocated. (Separate vineyards by variety.)
2. Tying. The posts and wires are reset, and vines are tied to the wires for the dormant
season.
3. Trimming. At the end of the harvest the vines are cut and trimmed back in preparation
for the next season.
4. Spraying. The vines are sprayed with chemicals for protection against insects and fungi.
5. Harvesting. The grapes are hand-picked, placed in carts, and transported to the crushers.
6. Stemming and crushing. Cartfuls of bunches of grapes of each variety are separately
loaded into machines which remove stems and gently crush the grapes.
7. Pressing and filtering. The crushed grapes are transferred to presses which mechanically
remove the juices and filter out bulk and impurities.
8. Fermentation. The grape juice, by variety, is fermented in either stainless-steel tanks
or oak barrels.
9. Aging. The wines are aged in either stainless-steel tanks or oak barrels for one to
three years depending on variety.
10. Bottling and corking. Bottles are machine-filled and corked.
11. Labeling and boxing. Each bottle is labeled, as is each nine-bottle case, with the name
of the vintner, vintage, and variety.
12. Storing. Packaged and boxed bottles are stored awaiting shipment.
13. Shipping. The wine is shipped to distributors and private retailers.
14. Heating and air-conditioning of plant and offices.
15. Maintenance of buildings and equipment. Printing, repairs, replacements, and general
maintenance are performed in the off-season.

Instructions
For each of Verde’s fifteen activity cost pools, identify a probable cost driver that might
be used to assign overhead costs to its three wine varieties.

Grading Company’s cash and cash equivalents consist

Price: $12.99


Managerial Accounting Final Part 1

1. The work-in-process inventory account of a manufacturing company shows a balance of $3,000 at the end of an accounting period. The job-cost sheets of the two incomplete jobs show charges of $500 and $300 for direct materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead rate as a percentage of direct labor costs. What percentage is the rate?

2. The break-even point in dollar sales for Rice Company is $480,000 and the company’s contribution margin ratio is 40 percent. If Rice Company desires a profit of $84,000, how much would sales have to total?

3. Williams Company’s direct labor cost is 25 percent of its conversion cost. If the manufacturing overhead for the last period was $45,000 and the direct material cost was $25,000, how much is the direct labor cost?

4. Grading Company’s cash and cash equivalents consist of cash and marketable securities. Last year the company’s cash account decreased by $16,000 and its marketable securities account increased by $22,000. Cash provided by operating activities was $24,000. Net cash used for financing activities was $20,000. Based on this information, was the net cash flow from investing activities on the statement of cash flows a net increase or decrease? By how much?

5. Gladstone Footwear Corporation’s flexible budget cost formula for supplies, a variable cost, is $2.82 per unit of output. The company’s flexible budget performance report for last month showed an $8,140 unfavorable spending variance for supplies. During that month, 21,250 units were produced. Budgeted activity for the month had been 20,900 units. What is the actual cost per unit for indirect materials?

6. Lyons Company consists of two divisions, A and B. Lyons Company reported a contribution margin of $60,000 for Division A, and had a contribution margin ratio of 30 percent in Division B, when sales in Division B were $240,000. Net operating income for the company was $22,000 and traceable fixed expenses were $45,000. How much were Lyons Company’s common fixed expenses?

7. Atlantic Company produces a single product. For the most recent year, the company’s net operating income computed by the absorption costing method was $7,800, and its net operating income computed by the variable costing method was $10,500. The company’s unit product cost was $15 under variable costing and $24 under absorption costing. If the ending inventory consisted of 1,460 units, how many units must have been in the beginning inventory?

8. Black Company uses the weighted-average method in its process costing system. The company’s ending work-inprocess inventory consists of 6,000 units, 75 percent complete with respect to materials and 50 percent complete with respect to labor and overhead. If the total dollar value of the inventory is $80,000 and the cost per equivalent unit for labor and overhead is $6.00, what is the cost per equivalent unit for materials?

9. At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine-hours. The performance report for July showed that actual maintenance costs totaled $11,315 and that the associated rate variance was $146 unfavorable. If 7,300 machine-hours were actually worked during July, what is the budgeted maintenance cost per machine-hour?

10. The cost of goods sold in a retail store totaled $650,000. Fixed selling and administrative expenses totaled $115,000 and variable selling and administrative expenses were $420,000. If the store’s contribution margin totaled $590,000, how much were the sales?

ACC561 Week 2 Wiley E13-5 E13-6 E13-9

Price: $9.99


E13-5 The comparative balance sheets of Nike, Inc. are presented here.


NIKE, INC.
Comparative Balance Sheets
May 31
($ in millions)
Assets 2007 2006
Current assets $ 8,076 $7,346
Property, plant, and equipment (net) 1,678 1,658
Other assets 934 866
Total assets $10,688 $9,870
Liabilities and Stockholders’ Equity
Current liabilities $ 2,584 $2,612
Long-term liabilities 1,079 973
Stockholders’ equity 7,025 6,285
Total liabilities and stockholders’ equity $10,688 $9,870
Instructions
(a) Prepare a horizontal analysis of the balance sheet data for Nike using 2006 as a base.
(Show the amount of increase or decrease as well.)
(b) Prepare a vertical analysis of the balance sheet data for Nike for 2007.

E13-6 Here are the comparative income statements of Winfrey Corporation.


WINFREY CORPORATION
Comparative Income Statements
For the Years Ended December 31
2010 2009
Net sales $598,000 $520,000
Cost of goods sold 477,000 450,000
Gross profit $121,000 $ 70,000
Operating expenses 80,000 45,000
Net income $ 41,000 $ 25,000
Instructions
(a) Prepare a horizontal analysis of the income statement data for Winfrey Corporation
using 2009 as a base. (Show the amounts of increase or decrease.)
(b) Prepare a vertical analysis of the income statement data for Winfrey Corporation for
both years

E13-9 Armada Company has these comparative balance sheet data:


ARMADA COMPANY
Balance Sheets
December 31
2010 2009
Cash $ 25,000 $ 30,000
Receivables (net) 65,000 60,000
Inventories 60,000 50,000
Plant assets (net) 200,000 180,000
$350,000 $320,000
Accounts payable $ 50,000 $ 60,000
Mortgage payable (15%) 100,000 100,000
Common stock, $10 par 140,000 120,000
Retained earnings 60,000 40,000
$350,000 $320,000
Additional information for 2010:
1. Net income was $25,000.
2. Sales on account were $375,000. Sales returns and allowances amounted to $25,000.
3. Cost of goods sold was $198,000.
4. Net cash provided by operating activities was $48,000.
5. Capital expenditures were $25,000, and cash dividends were $18,000.
Instructions
Compute the following ratios at December 31, 2010.
(a) Current. (e) Days in inventory.
(b) Receivables turnover. (f ) Cash debt coverage.
(c) Average collection period. (g) Current cash debt coverage.
(d) Inventory turnover. (h) Free cash flow.

BYP5-2 PepsiCo’s financial statements

Price: $3.99


BYP5-2 PepsiCo’s financial statements are presented in Appendix A. Coca-Cola’s financial
statements are presented in Appendix B.

Instructions

(a) Based on the information contained in these financial statements, determine each of the following
for each company.

(1) Gross profit for 2005.

(2) Gross profit rate for 2005.

(3) Operating income for 2005.

(4) Percent change in operating income from 2004 to 2005.

(b) What conclusions concerning the relative profitability of the two companies can you draw
from these data?

BYP5-1 The financial statements of PepsiCo

Price: $3.99 


BYP5-1 The financial statements of PepsiCo are presented in Appendix A at the end of this textbook

Instructions

Answer the following questions using the Consolidated Statement of Income.

(a) What was the percentage change in (1) sales and in (2) net income from 2003 to 2004 and
from 2004 to 2005?

(b) What was the company’s gross profit rate in 2003, 2004, and 2005?

(c) What was the company’s percentage of net income to net sales in 2003, 2004, and 2005?
Comment on any trend in this percentage.

ACC201 Week 4 P7-26 P7-27 P7-28 P8-18 P8-23

Price: $7.99


Problems: 7-26, 7-27, 7-28.
Problems: 8-18, 8-23.

ACC201 Week 4 P7-26 P7-27 P7-28 P8-18 P8-23

Problem 7- 26 Accounting for short- term debt and sales tax— two accounting cycles.


The following transactions apply to Artesia Co. for 2012, its first year of operations.
1. Received $40,000 cash from the issue of a short-term note with a 5 percent interest rate and
a one-year maturity. The note was issued on April 1, 2012
2. Received $120,000 cash plus applicable sales tax from performing services. The services are
subject to a sales tax rate of 6 percent.
3. Paid $72,000 cash for other operating expenses during the year.
4. Paid the sales tax due on $100,000 of the service revenue for the year. Sales tax on the
balance of the revenue is not due until 2013.
5. Recognized the accrued interest at December 31, 2012.
The following transactions apply to Artesia Co. for 2013.
1. Paid the balance of the sales tax due for 2012.
2. Received $145,000 cash plus applicable sales tax from performing services. The services are
subject to a sales tax rate of 6 percent.
3. Repaid the principal of the note and applicable interest on April 1, 2013.
4. Paid $85,000 of other operating expenses during the year.
5. Paid the sales tax due on $120,000 of the service revenue. The sales tax on the balance of the
revenue is not due until 2014.

Required
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare an income statement, a statement of changes in stockholders’ equity, a balance
sheet, and a statement of cash fl ow for 2012 and 2013.

Problem 7- 27 Effect of accrued interest on financial statements

Norman Co. borrowed $15,000 from the local bank on April 1, 2012, when the company was
started. The note had an 8 percent annual interest rate and a one-year term to maturity. Norman
Co. recognized $42,000 of revenue on account in 2012 and $56,000 of revenue on account in
2013. Cash collections from accounts receivable were $38,000 in 2012 and $58,000 in 2013.
Norman Co. paid $26,000 of salaries expense in 2012 and $32,000 of salaries expense in 2013.
Norman Co. paid the loan and interest at the maturity date.

Required
a. Organize the information in accounts under an accounting equation.
b. What amount of net cash fl ow from operating activities would be reported on the 2012 cash
fl ow statement?
c. What amount of interest expense would be reported on the 2012 income statement?
d. What amount of total liabilities would be reported on the December 31, 2012, balance sheet?
e. What amount of retained earnings would be reported on the December 31, 2012, balance
sheet?
f. What amount of cash flow from financing activities would be reported on the 2012 statement
of cash flows?
g. What amount of interest expense would be reported on the 2013 income statement?
h. What amount of cash flows from operating activities would be reported on the 2013 cash
fl ow statement?
i. What amount of assets would be reported on the December 31, 2013, balance sheet?

Problem 7- 28 Current liabilities

The following selected transactions were taken from the books of Caledonia Company for 2012.

The following selected transactions were taken from the books of Caledonia Company for 2012.
1. On March 1, 2012, borrowed $50,000 cash from the local bank. The note had a 6 percent
interest rate and was due on September 1, 2012.
2. Cash sales for the year amounted to $225,000 plus sales tax at the rate of 7 percent.
3. Caledonia provides a 90-day warranty on the merchandise sold. The warranty expense is
estimated to be 2 percent of sales.
4. Paid the sales tax to the state sales tax agency on $190,000 of the sales.
5. Paid the note due on September 1 and the related interest.
6. On October 1, 2012, borrowed $40,000 cash from the local bank. The note had a 7 percent
interest rate and a one-year term to maturity.
7. Paid $3,600 in warranty repairs.
8. A customer has filed a lawsuit against Caledonia for $100,000 for breach of contract. The
company attorney does not believe the suit has merit.

Required
a. Answer the following questions:
(1) What amount of cash did Caledonia pay for interest during the year?
(2) What amount of interest expense is reported on Caledonia’s income statement for the year?
(3) What is the amount of warranty expense for the year?
b. Prepare the current liabilities section of the balance sheet at December 31, 2012.
c. Show the effect of these transactions on the financial statements using a horizontal statements
model like the one shown here. Use a 1 to indicate increase, a 2 for decrease, and NA
for not affected. In the Cash Flow column, indicate whether the item is an operating activity
(OA), investing activity (IA), or financing activity (FA). The first transaction is recorded as
an example.

Problem 8-18 Recording and reporting stock transactions and cash dividends across two accounting cycles


Davis Corporation was authorized to issue 100,000 shares of $10 par common stock and 50,000
shares of $50 par, 6 percent, cumulative preferred stock. Davis Corporation completed the following
transactions during its first two years of operation.

2012
Jan. 2 Issued 5,000 shares of $10 par common stock for $28 per share.
15 Issued 1,000 shares of $50 par preferred stock for $70 per share
Feb. 14 Issued 15,000 shares of $10 par common stock for $30 per share.
Dec. 31 During the year, earned $170,000 of cash service revenue and paid $110,000 of cash
operating expenses.
31 Declared the cash dividend on outstanding shares of preferred stock for 2012. The
dividend will be paid on January 31 to stockholders of record on January 15, 2013.

2013
Jan. 31 Paid the cash dividend declared on December 31, 2012.
Mar. 1 Issued 2,000 shares of $50 par preferred stock for $58 per share.
June 1 Purchased 500 shares of common stock as treasury stock at $43 per share.
Dec. 31 During the year, earned $210,000 of cash service revenue and paid $175,000 of cash
operating expenses.
31 Declared the dividend on the preferred stock and a $0.60 per share dividend on the
common stock.

Required
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare the stockholders’ equity section of the balance sheet at December 31, 2012.
c. Prepare the balance sheet at December 31, 2013.

Problem 8-23 Different forms of business organization

Shawn Bates was working to establish a business enterprise with four of his wealthy friends. Each
of the five individuals would receive a 20 percent ownership interest in the company. A primary
goal of establishing the enterprise was to minimize the amount of income taxes paid. Assume
that the five investors are taxed at the rate of 15% on dividend income and 30% on all other income
and that the corporate tax rate is 30 percent. Also assume that the new company is expected
to earn $400,000 of cash income before taxes during its first year of operation. All
earnings are expected to be immediately distributed to the owners.

Required
Calculate the amount of after-tax cash flow available to each investor if the business is established
as a partnership versus a corporation. Write a memo explaining the advantages and disadvantages
of these two forms of business organization. Explain why a limited liability company
may be a better choice than either a partnership or a corporation.

Chapter 7 
Complete the following problems from Chapter 7 and submit to your instructor. These problems will be graded for accuracy. Problems: 7-26, 7-27, 7-28.

Chapters 8
Complete the following problems from Chapter 8 and submit to your instructor. These problems will be graded for accuracy. Problems: 8-18, 8-23.

Determine whether the following items included in Yang Company

Price: $1.99


Problem 4-21 Adjustments to the cash account based on the bank reconciliation

Determine whether the following items included in Yang Company’s bank reconciliation will
require adjustments or corrections on Yang’s books.

a. An $877 deposit was recorded by the bank as $778.
b. Four checks totaling $450 written during the month of January were not included with the
January bank statement.
c. A $54 check written to Office Max for office supplies was recorded in the general journal
as $45.
d. The bank statement indicated that the bank had collected a $330 note for Yang.
e. Yang recorded $500 of receipts on January 31, which were deposited in the night depository
of the bank. These deposits were not included in the bank statement.
f. Service charges of $22 for the month of January were listed on the bank statement.
g. The bank charged a $297 check drawn on Cave Restaurant to Yang’s account. The check was
included in Yang’s bank statement.
h. A check of $31 was returned by the bank because of insufficient funds and was noted on the
bank statement. Yang received the check from a customer and thought that it was good when
it was deposited into the account

The following data apply to Superior Auto Supply

Price: $2.50


Problem 4-20 Missing information in a bank reconciliation

The following data apply to Superior Auto Supply Inc. for May 2012.
1. Balance per the bank on May 31, $8,000.
2. Deposits in transit not recorded by the bank, $975.
3. Bank error; check written by Allen Auto Supply was charged to Superior Auto Supply’s
account, $650.
4. The following checks written and recorded by Superior Auto Supply were not included in the
bank statement:

3013 $385
3054 $735
3056 $1,900

5. Note collected by the bank, $500.
6. Service charge for collection of note, $10.
7. The bookkeeper recorded a check written for $188 to pay for the May utilities expense as
$888 in the cash disbursements journal.
8. Bank service charge in addition to the note collection fee, $25.
9. Customer checks returned by the bank as NSF, $125.

Required
Determine the amount of the unadjusted cash balance per Superior Auto Supply’s books

ACC201 Week 2 P3-22 P3-25 P4-20 P4-21

Price: $5.99


Problems: 3-22, 3-25
Problems: 4-20, 4-21
Survey of Accounting 3e

Problem 3-22 Identifying product and period costs

Required
Indicate whether each of the following costs is a product cost or a period (selling and administrative)
cost.
a. Advertising expense.
b. Insurance on vans used to deliver goods to customers.
c. Salaries of sales supervisors.
d. Monthly maintenance expense for a copier.
e. Goods purchased for resale.
f. Cleaning supplies for the office.
g. Freight on goods purchased for resale.
h. Salary of the marketing director.
i. Freight on goods sold to customer with terms FOB destination.
j. Utilities expense incurred for office building

Problem 3-25 Comprehensive cycle problem: Perpetual system
At the beginning of 2012, the Jeater Company had the following balances in its accounts:


Cash4300
Inventory9000
Common stock10000
Retained earnings3,300

During 2012, the company experienced the following events.
1. Purchased inventory that cost $2,200 on account from Blue Company under terms 1y10, ny30.
The merchandise was delivered FOB shipping point. Freight costs of $110 were paid in cash.
2. Returned $200 of the inventory that it had purchased because the inventory was damaged in
transit. The freight company agreed to pay the return freight cost.
3. Paid the amount due on its account payable to Blue Company within the cash discount period.
4. Sold inventory that had cost $3,000 for $5,500 on account, under terms 2y10, ny45.
5. Received merchandise returned from a customer. The merchandise originally cost $400 and
was sold to the customer for $710 cash during the previous accounting period. The customer
was paid $710 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $60 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Took a physical count indicating that $7,970 of inventory was on hand at the end of the
accounting period.

Required
a. Identify these events as asset source (AS), asset use (AU), asset exchange (AE), or claims
exchange (CE).
b. Record each event in a statements model like the following one.
c. Prepare an income statement, a statement of changes in stockholders’ equity, a balance
sheet, and a statement of cash flows

Problem 4-20 Missing information in a bank reconciliation
The following data apply to Superior Auto Supply Inc. for May 2012.
1. Balance per the bank on May 31, $8,000.
2. Deposits in transit not recorded by the bank, $975.
3. Bank error; check written by Allen Auto Supply was charged to Superior Auto Supply’s
account, $650.
4. The following checks written and recorded by Superior Auto Supply were not included in the
bank statement:

3013$385
3054$735
3056$1,900

5. Note collected by the bank, $500.
6. Service charge for collection of note, $10.
7. The bookkeeper recorded a check written for $188 to pay for the May utilities expense as
$888 in the cash disbursements journal.
8. Bank service charge in addition to the note collection fee, $25.
9. Customer checks returned by the bank as NSF, $125.

Required
Determine the amount of the unadjusted cash balance per Superior Auto Supply’s books

Problem 4-21 Adjustments to the cash account based on the bank reconciliation

Determine whether the following items included in Yang Company’s bank reconciliation will
require adjustments or corrections on Yang’s books.

a. An $877 deposit was recorded by the bank as $778.
b. Four checks totaling $450 written during the month of January were not included with the
January bank statement.
c. A $54 check written to Office Max for office supplies was recorded in the general journal
as $45.
d. The bank statement indicated that the bank had collected a $330 note for Yang.
e. Yang recorded $500 of receipts on January 31, which were deposited in the night depository
of the bank. These deposits were not included in the bank statement.
f. Service charges of $22 for the month of January were listed on the bank statement.
g. The bank charged a $297 check drawn on Cave Restaurant to Yang’s account. The check was
included in Yang’s bank statement.
h. A check of $31 was returned by the bank because of insufficient funds and was noted on the
bank statement. Yang received the check from a customer and thought that it was good when
it was deposited into the account