Presented below is selected information from the Greenville Company's current period accounting records (in $000s):
Sales $10,000
Raw Materials Used 2,500
Direct Labor Costs 1,000
Period Costs (Selling and Administrative) 2,500
Beginning Raw Material Inventory 300
Ending Raw Material Inventory 1,000
Net Income 200
Beginning Work-in-Process Inventory 0
Ending Work-in-Process Inventory 300
Beginning Finished Goods Inventory 700
Ending Finished Goods Inventory 400
* NOTE: All raw materials used were direct materials.
Question:
Determine the following (in dollars):
a. Raw Material Purchases
b. Gross Profit
c. Cost of Goods Manufactured
d. Manufacturing Overhead
Click here for the solution: Presented below is selected information from the Greenville Company's current period accounting records (in $000s)
Showing posts with label accounting. Show all posts
Showing posts with label accounting. Show all posts
Friday, April 15, 2016
Wednesday, April 13, 2016
1. In comparing financial and management accounting, which of the following more accurately describes management accounting information? (Points : 1)
MULTIPLE CHOICE
1. In comparing financial and management accounting, which of the following more accurately describes management accounting information? (Points : 1)
2. One major difference between financial and management accounting is that _______. (Points : 1)
3. Which of the following is not a valid method for determining product cost? (Points : 1)
4. Cost accounting is directed toward the needs of _______. (Points : 1)
5. Financial accounting _______. (Points : 1)
6. Which of the following statements is true? (Points : 1)
7. Which of the following statements is false? (Points : 1)
8. The set of processes that convert inputs into services and products that consumers use is called _______. (Points : 1)
9. The balanced scorecard perspective that focuses on using a firm's intellectual capital to adapt to customer needs through product or service innovations is the ________. (Points : 1)
10. The world has essentially become smaller because of _______. (Points : 1)
11. The term "relevant range" as used in cost accounting means the range over which ______. (Points : 1)
12. When cost relationships are linear, total variable prime costs will vary in proportion to changes in ______. (Points : 1)
13. An example of a fixed cost is _______. (Points : 1)
14. A(n) ____ cost increases or decreases in intervals as activity changes. (Points : 1)
15. When the number of units manufactured increases, the most significant change in unit cost will be reflected as a(n) ________. (Points : 1)
16. A cost driver _______. (Points : 1)
17. Product costs are deducted from revenue _______. (Points : 1)
18. Which of the following is not a product cost component? (Points : 1)
19. Davis Company manufacturers desks. The beginning balance of Raw Material Inventory was $4,500; raw material purchases of $29,600 were made during the month. At month end, $7,700 of raw material was on hand. Raw material used during the month was _______. (Points : 1)
20. Urban Company manufacturers tables. If raw material used was $80,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $17,000 and $21,000, what was amount of raw material was purchased? (Points : 1)
Click here for the solution: 1. In comparing financial and management accounting, which of the following more accurately describes management accounting information? (Points : 1)
1. In comparing financial and management accounting, which of the following more accurately describes management accounting information? (Points : 1)
2. One major difference between financial and management accounting is that _______. (Points : 1)
3. Which of the following is not a valid method for determining product cost? (Points : 1)
4. Cost accounting is directed toward the needs of _______. (Points : 1)
5. Financial accounting _______. (Points : 1)
6. Which of the following statements is true? (Points : 1)
7. Which of the following statements is false? (Points : 1)
8. The set of processes that convert inputs into services and products that consumers use is called _______. (Points : 1)
9. The balanced scorecard perspective that focuses on using a firm's intellectual capital to adapt to customer needs through product or service innovations is the ________. (Points : 1)
10. The world has essentially become smaller because of _______. (Points : 1)
11. The term "relevant range" as used in cost accounting means the range over which ______. (Points : 1)
12. When cost relationships are linear, total variable prime costs will vary in proportion to changes in ______. (Points : 1)
13. An example of a fixed cost is _______. (Points : 1)
14. A(n) ____ cost increases or decreases in intervals as activity changes. (Points : 1)
15. When the number of units manufactured increases, the most significant change in unit cost will be reflected as a(n) ________. (Points : 1)
16. A cost driver _______. (Points : 1)
17. Product costs are deducted from revenue _______. (Points : 1)
18. Which of the following is not a product cost component? (Points : 1)
19. Davis Company manufacturers desks. The beginning balance of Raw Material Inventory was $4,500; raw material purchases of $29,600 were made during the month. At month end, $7,700 of raw material was on hand. Raw material used during the month was _______. (Points : 1)
20. Urban Company manufacturers tables. If raw material used was $80,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $17,000 and $21,000, what was amount of raw material was purchased? (Points : 1)
Click here for the solution: 1. In comparing financial and management accounting, which of the following more accurately describes management accounting information? (Points : 1)
Allen Labinski has prepared the following list of statements about process cost accounting
E3-1 Allen Labinski has prepared the following list of statements about process cost accounting. Identify each statement as true or false. If false, indicate how to correct the statement.
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 computers 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 costs 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.
NOTE: Fill in the table below with your responses; write correction for false statements below the table:
Click here for the solution: Allen Labinski 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 computers 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 costs 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.
NOTE: Fill in the table below with your responses; write correction for false statements below the table:
Click here for the solution: Allen Labinski has prepared the following list of statements about process cost accounting
Tuesday, April 12, 2016
Ethics Case: It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements
Ethics Case 1-8 The auditors’ responsibility
It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements. Another group, auditors, serves as an independent intermediary to help ensure that management has in fact appropriately applied GAAP in preparing the company's financial statements. Auditors examine (audit) financial statements to express a professional, independent opinion. The opinion reflects the auditors' assessment of the statements' fairness, which is determined by the extent to which they are prepared in compliance with GAAP.
Some feel that it is impossible for an auditor to give an independent opinion on a company's financial statement because the auditors' fees for performing the audit are paid for by the company. In addition to the audit fee, quite often the auditor performs other services for the company such as preparing the company's income tax returns.
How might an auditor's ethics be challenged while performing an audit?
Click here for the solution: Ethics Case: It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements
It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements. Another group, auditors, serves as an independent intermediary to help ensure that management has in fact appropriately applied GAAP in preparing the company's financial statements. Auditors examine (audit) financial statements to express a professional, independent opinion. The opinion reflects the auditors' assessment of the statements' fairness, which is determined by the extent to which they are prepared in compliance with GAAP.
Some feel that it is impossible for an auditor to give an independent opinion on a company's financial statement because the auditors' fees for performing the audit are paid for by the company. In addition to the audit fee, quite often the auditor performs other services for the company such as preparing the company's income tax returns.
How might an auditor's ethics be challenged while performing an audit?
Click here for the solution: Ethics Case: It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements
Advance Accounting Exam: 1. When the parent company sells a portion of its investment in a subsidiary
Advance Accounting Exam
1. When the parent company sells a portion of its investment in a subsidiary, the workpaper entry to adjust for the current year’s income sold to noncontrolling stockholders includes a (Points : 10)
2. The purchase by a subsidiary of some of its shares from noncontrolling stockholders results in the parent company’s share of the subsidiary’s net assets (Points : 10)
3. The purchase by a subsidiary of some of its shares from the noncontrolling stockholders results in an increase in the parent’s percentage interest in the subsidiary. The parent company’s share of the subsidiary’s net assets will increase if the shares are purchased: (Points : 10)
4. Which statement with respect to gains and losses on troubled debt restructuring is correct? (Points : 10)
5. A composition agreement is an agreement between the debtor and its creditors whereby the creditors agree to: (Points : 10)
6. Assets transferred by the debtor to a creditor to settle a debt are transferred at: (Points : 10)
7. In a troubled debt restructuring involving a modification of terms, the debtor’s gain on restructuring: (Points : 10)
8. The major difference between IFRS and US GAAP in accounting for inventories is that (Points : 10)
9. Accounting under IFRS and US GAAP is similar for all of the following topics except (Points : 10)
10. One difference between IFRS and GAAP in valuing inventories is that (Points : 10)
11. Accounting terminology that differs between IFRS and US GAAP include all of the following except (Points : 10)
12. A discount or premium on a forward contract is deferred and included in the measurement of the related foreign currency transaction if the contract is classified as a: (Points : 10)
13. The forward exchange rate quoted for the remaining term of a forward contract is used to account for the contract when the forward contract: (Points : 10)
14. A transaction gain or loss is reported currently in the determination of income if the purpose of the forward contract is to: (Points : 10)
15. An indirect exchange rate quotation is one in which the exchange rate is quoted: (Points : 10)
16. If the functional currency is determined to be the U.S. dollar and its financial statements are prepared in the local currency, SFAS 52, requires which of the following procedures to be followed? (Points : 10)
17. When the functional currency is identified as the U.S. dollar, land purchased by a foreign subsidiary after the controlling interest was acquired by the parent company should be translated using the: (Points : 10)
18. The process of translating the accounts of a foreign entity into its functional currency when they are stated in another currency is called: (Points : 10)
19. In considering interim financial reporting, how did the Accounting Principles Board conclude that each reporting should be viewed? (Points : 10)
20. Current authoritative pronouncements require the disclosure of segment information when certain criteria are met. Which of the following reflects the type of firm and type of financial statement for which this disclosure is required? (Points : 10)
21. If annual major repairs made in the first quarter and paid for in the second quarter clearly benefit the entire year, when should they be expensed? (Points : 10)
22. During the second quarter of 2011, Dodge Company sold a piece of equipment at a gain of $90,000. What portion of the gain should Dodge report in its income statement for the second quarter of 2011? (Points : 10)
23. Pete, Joe, and Ron are partners with capital balances of $135,000, $90,000, and $60,000, respectively. The partners share profits and losses equally. For an investment of $120,000 cash, Jerry is to be admitted as a partner with a one-fourth interest in capital and profits. Based on this information, the amount of Jerry’s investment can best be justified by which of the following? (Points : 10)
24. Bob and Fred form a partnership and agree to share profits in a 2 to 1 ratio. During the first year of operation, the partnership incurs a $20,000 loss. The partners should share the losses (Points : 10)
25. In a partnership, interest on capital investment is accounted for as a(n) (Points : 10)
26. The profit and loss sharing ratio should be (Points : 10)
27. During the liquidation of the partnership of Karr, Rice, and Long. Karr accepts, in partial settlement of his interest, a machine with a cost to the partnership of $150,000, accumulated depreciation of $70,000, and a current fair value of $110,000. The partners share net income and loss equally. The net debit to Karr's account (including any gain or loss on disposal of the machine) is (Points : 10)
28. A schedule prepared each time cash is to be distributed is called a(n) (Points : 10)
29. Offsetting a partner's loan balance against his debit capital balance is referred to as the (Points : 10)
30. If a partner with a debit capital balance during liquidation is personally solvent, the (Points : 10)
Click here for the solution: Advance Accounting Exam
1. When the parent company sells a portion of its investment in a subsidiary, the workpaper entry to adjust for the current year’s income sold to noncontrolling stockholders includes a (Points : 10)
2. The purchase by a subsidiary of some of its shares from noncontrolling stockholders results in the parent company’s share of the subsidiary’s net assets (Points : 10)
3. The purchase by a subsidiary of some of its shares from the noncontrolling stockholders results in an increase in the parent’s percentage interest in the subsidiary. The parent company’s share of the subsidiary’s net assets will increase if the shares are purchased: (Points : 10)
4. Which statement with respect to gains and losses on troubled debt restructuring is correct? (Points : 10)
5. A composition agreement is an agreement between the debtor and its creditors whereby the creditors agree to: (Points : 10)
6. Assets transferred by the debtor to a creditor to settle a debt are transferred at: (Points : 10)
7. In a troubled debt restructuring involving a modification of terms, the debtor’s gain on restructuring: (Points : 10)
8. The major difference between IFRS and US GAAP in accounting for inventories is that (Points : 10)
9. Accounting under IFRS and US GAAP is similar for all of the following topics except (Points : 10)
10. One difference between IFRS and GAAP in valuing inventories is that (Points : 10)
11. Accounting terminology that differs between IFRS and US GAAP include all of the following except (Points : 10)
12. A discount or premium on a forward contract is deferred and included in the measurement of the related foreign currency transaction if the contract is classified as a: (Points : 10)
13. The forward exchange rate quoted for the remaining term of a forward contract is used to account for the contract when the forward contract: (Points : 10)
14. A transaction gain or loss is reported currently in the determination of income if the purpose of the forward contract is to: (Points : 10)
15. An indirect exchange rate quotation is one in which the exchange rate is quoted: (Points : 10)
16. If the functional currency is determined to be the U.S. dollar and its financial statements are prepared in the local currency, SFAS 52, requires which of the following procedures to be followed? (Points : 10)
17. When the functional currency is identified as the U.S. dollar, land purchased by a foreign subsidiary after the controlling interest was acquired by the parent company should be translated using the: (Points : 10)
18. The process of translating the accounts of a foreign entity into its functional currency when they are stated in another currency is called: (Points : 10)
19. In considering interim financial reporting, how did the Accounting Principles Board conclude that each reporting should be viewed? (Points : 10)
20. Current authoritative pronouncements require the disclosure of segment information when certain criteria are met. Which of the following reflects the type of firm and type of financial statement for which this disclosure is required? (Points : 10)
21. If annual major repairs made in the first quarter and paid for in the second quarter clearly benefit the entire year, when should they be expensed? (Points : 10)
22. During the second quarter of 2011, Dodge Company sold a piece of equipment at a gain of $90,000. What portion of the gain should Dodge report in its income statement for the second quarter of 2011? (Points : 10)
23. Pete, Joe, and Ron are partners with capital balances of $135,000, $90,000, and $60,000, respectively. The partners share profits and losses equally. For an investment of $120,000 cash, Jerry is to be admitted as a partner with a one-fourth interest in capital and profits. Based on this information, the amount of Jerry’s investment can best be justified by which of the following? (Points : 10)
24. Bob and Fred form a partnership and agree to share profits in a 2 to 1 ratio. During the first year of operation, the partnership incurs a $20,000 loss. The partners should share the losses (Points : 10)
25. In a partnership, interest on capital investment is accounted for as a(n) (Points : 10)
26. The profit and loss sharing ratio should be (Points : 10)
27. During the liquidation of the partnership of Karr, Rice, and Long. Karr accepts, in partial settlement of his interest, a machine with a cost to the partnership of $150,000, accumulated depreciation of $70,000, and a current fair value of $110,000. The partners share net income and loss equally. The net debit to Karr's account (including any gain or loss on disposal of the machine) is (Points : 10)
28. A schedule prepared each time cash is to be distributed is called a(n) (Points : 10)
29. Offsetting a partner's loan balance against his debit capital balance is referred to as the (Points : 10)
30. If a partner with a debit capital balance during liquidation is personally solvent, the (Points : 10)
Click here for the solution: Advance Accounting Exam
Thursday, January 14, 2016
Sherrod, Inc., reported pretax accounting income of $76 million for 2011
P16-7 Multiple differences; calculate taxable income; balance sheet classification
Sherrod, Inc., reported pretax accounting income of $76 million for 2011. The following information relates to differences between pretax accounting income and taxable income:
Income from installment sales of properties included in pretax accounting income in 2011 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end had a balance of $4 million (representing portions of 2010 and 2011 installment sales), expected to be collected equally in 2012 and 2013.
Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2011. The fine is to be paid in equal amounts in 2011 and 2012. Sherrod rents its operating facilities but owns one asset acquired in 2010 at a cost of $80 million. Depreciation is reported by the straight-line method assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):
Income Statement Tax Return Difference
2010 $20 $26 ($6)
2011 20 35 (15)
2012 20 12 8
2013 20 7 13
$80 $80 $0
4. Bad debt expense of $3 million is reported using the allowance method in 2011. For tax purposes, the expense is deducted when accounts prove uncollectible (the direct write-off method): $2 million in 2011. At December 31, 2011, the allowance for uncollectible accounts was $2 million (after adjusting entries). The balance was $1 million at the end of 2010.
5. In 2011, Sherrod accrued and expense and related liability for estimated paid future absences of $7 million relating to the company’s new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($4 million 2012; $3 million in 2013).
6. During 2010, accounting income included as estimated loss of $2 million from having accrued a loss contingency. The lost is paid in 2011 at which time it is tax deductible. Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2011, were $1.2 million and $2.8 million, respectively. The enacted tax rate is 40% each year.
Required:
1. Determine the amounts necessary to record income taxes for 2011 and prepare the appropriate journal entry.
2. What is the 2011 net income?
3. Show how deferred tax amounts should be classified and reported in the 2011 balance sheet.
Click here for the solution: Sherrod, Inc., reported pretax accounting income of $76 million for 2011
Sherrod, Inc., reported pretax accounting income of $76 million for 2011. The following information relates to differences between pretax accounting income and taxable income:
Income from installment sales of properties included in pretax accounting income in 2011 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end had a balance of $4 million (representing portions of 2010 and 2011 installment sales), expected to be collected equally in 2012 and 2013.
Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2011. The fine is to be paid in equal amounts in 2011 and 2012. Sherrod rents its operating facilities but owns one asset acquired in 2010 at a cost of $80 million. Depreciation is reported by the straight-line method assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):
Income Statement Tax Return Difference
2010 $20 $26 ($6)
2011 20 35 (15)
2012 20 12 8
2013 20 7 13
$80 $80 $0
4. Bad debt expense of $3 million is reported using the allowance method in 2011. For tax purposes, the expense is deducted when accounts prove uncollectible (the direct write-off method): $2 million in 2011. At December 31, 2011, the allowance for uncollectible accounts was $2 million (after adjusting entries). The balance was $1 million at the end of 2010.
5. In 2011, Sherrod accrued and expense and related liability for estimated paid future absences of $7 million relating to the company’s new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($4 million 2012; $3 million in 2013).
6. During 2010, accounting income included as estimated loss of $2 million from having accrued a loss contingency. The lost is paid in 2011 at which time it is tax deductible. Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2011, were $1.2 million and $2.8 million, respectively. The enacted tax rate is 40% each year.
Required:
1. Determine the amounts necessary to record income taxes for 2011 and prepare the appropriate journal entry.
2. What is the 2011 net income?
3. Show how deferred tax amounts should be classified and reported in the 2011 balance sheet.
Click here for the solution: Sherrod, Inc., reported pretax accounting income of $76 million for 2011
Thursday, November 26, 2015
Listed below are several information characteristics and accounting principles and assumptions
1. (TCO A) Listed below are several information characteristics and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application. (Points: 30)
1: Stable dollar assumption
2: Notes as part of necessary information to a fair presentation.
3: Earnings process completed and realized or realizable.
4: Valuing assets at amounts originally paid for them.
5: the impact of an item on the overall financial operations of a company.
6: Accruals and deferrals in adjusting and closing process (Do not use going concern).
7: Affairs of the business distinguished from those of its owners.
8: Presentation of error-free information with representational faithfulness
9: Business enterprise assumed to have a long life.
10: Cost of providing financial information versus the benefits derived from its use.
: Historical cost principle
: Going concern principle
: Matching principle
: Monetary unit
: Revenue recognition principle
: Full disclosure principle
: Reliability characteristic
: Cost-benefit relationship
: Materiality constraint
: Economic entity assumption
Click here for the solution: Listed below are several information characteristics and accounting principles and assumptions
1: Stable dollar assumption
2: Notes as part of necessary information to a fair presentation.
3: Earnings process completed and realized or realizable.
4: Valuing assets at amounts originally paid for them.
5: the impact of an item on the overall financial operations of a company.
6: Accruals and deferrals in adjusting and closing process (Do not use going concern).
7: Affairs of the business distinguished from those of its owners.
8: Presentation of error-free information with representational faithfulness
9: Business enterprise assumed to have a long life.
10: Cost of providing financial information versus the benefits derived from its use.
: Historical cost principle
: Going concern principle
: Matching principle
: Monetary unit
: Revenue recognition principle
: Full disclosure principle
: Reliability characteristic
: Cost-benefit relationship
: Materiality constraint
: Economic entity assumption
Click here for the solution: Listed below are several information characteristics and accounting principles and assumptions
Wednesday, November 11, 2015
Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs
13-52 Choice of Cost-Allocation Bases in Accounting Firm
Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs to jobs than just direct labor. In this way, the firm will be able to justify billings to clients.
Last year’s costs were
Direct-professional labor $ 5,000,000
Overhead 10,000,000
Total costs $15,000,000
The following costs were included in overhead:
Computer time $ 750,000
Secretarial cost 700,000
Photocopying 250,000
Fringe benefits to direct labor 800,000
Phone call time with clients (estimated but not tabulated) 500,000
Total $3,000,000
The firm’s data processing techniques now make it feasible to document and trace these costs to individual jobs. As an experiment, in December Brenda McCoy arranged to trace these costs to six audit engagements.
Two job records showed the following:
Engagement
Eagledale Company First Valley Bank
Direct-professional labor $15,000 $15,000
Fringe benefits to direct labor 3,000 3,000
Phone call time with clients 1,500 500
Computer time 3,000 700
Secretarial costs 2,000 1,500
Photocopying 500 300
Total direct costs $25,000 $21,000
1. Compute the overhead application rate based on last year’s costs.
2. Suppose last year’s costs were reclassified so that $3 million would be regarded as direct costs instead of overhead. Compute the overhead application rate as a percentage of direct labor and as a percentage of total direct costs.
3. Using the three rates computed in numbers 1 and 2, compute the total costs of engagements for Eagledale Company and First Valley Bank.
4. Suppose that client billing was based on a 30% markup of total job costs. Compute the billings that would be forthcoming in number 3.
5. Which method of costing and overhead application do you favor? Explain.
Click here for the solution: Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs
Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs to jobs than just direct labor. In this way, the firm will be able to justify billings to clients.
Last year’s costs were
Direct-professional labor $ 5,000,000
Overhead 10,000,000
Total costs $15,000,000
The following costs were included in overhead:
Computer time $ 750,000
Secretarial cost 700,000
Photocopying 250,000
Fringe benefits to direct labor 800,000
Phone call time with clients (estimated but not tabulated) 500,000
Total $3,000,000
The firm’s data processing techniques now make it feasible to document and trace these costs to individual jobs. As an experiment, in December Brenda McCoy arranged to trace these costs to six audit engagements.
Two job records showed the following:
Engagement
Eagledale Company First Valley Bank
Direct-professional labor $15,000 $15,000
Fringe benefits to direct labor 3,000 3,000
Phone call time with clients 1,500 500
Computer time 3,000 700
Secretarial costs 2,000 1,500
Photocopying 500 300
Total direct costs $25,000 $21,000
1. Compute the overhead application rate based on last year’s costs.
2. Suppose last year’s costs were reclassified so that $3 million would be regarded as direct costs instead of overhead. Compute the overhead application rate as a percentage of direct labor and as a percentage of total direct costs.
3. Using the three rates computed in numbers 1 and 2, compute the total costs of engagements for Eagledale Company and First Valley Bank.
4. Suppose that client billing was based on a 30% markup of total job costs. Compute the billings that would be forthcoming in number 3.
5. Which method of costing and overhead application do you favor? Explain.
Click here for the solution: Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs
Monday, October 26, 2015
The following situations involve accounting principles and assumptions
ACC 557 Week 1 Assignment
E1-4 The following situations involve accounting principles and assumptions.
1. Grossman Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Grossman reports the buildings at market value in its accounting reports.
2. Jones Company includes in its accounting records only transaction data that can be expressed in terms of money.
3. Caleb Borke, president of Caleb’s Cantina, records his personal living costs as expenses of the Cantina.
Instructions
For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated.
Click here for the solution: The following situations involve accounting principles and assumptions
E1-4 The following situations involve accounting principles and assumptions.
1. Grossman Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Grossman reports the buildings at market value in its accounting reports.
2. Jones Company includes in its accounting records only transaction data that can be expressed in terms of money.
3. Caleb Borke, president of Caleb’s Cantina, records his personal living costs as expenses of the Cantina.
Instructions
For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated.
Click here for the solution: The following situations involve accounting principles and assumptions
An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below
ACC 557 Week 1 Assignment
E1-8 An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below. Each increase and decrease in stockholders’ equity is explained.
Cash Accounts Office Accounts Stockholders’ _ Receivable _ Supplies _ Equipment _ Payable _ Equity
1. _$15,000 _$15,000 Investment
2. _2,000 _$5,000 _$3,000
3. _750 _$750
4. _4,600 _$3,700 _8,300 Service Revenue
5. _1,500 _1,500
6. _2,000 _2,000 Dividends
7. _650 −650 Rent Expense
8. _450 _450
9. _4,900 _4,900 Salaries Expense
10. _500 −500 Utilities Expense
Instructions
(a) Describe each transaction that occurred for the month.
(b) Determine how much stockholders’ equity increased for the month.
(c) Compute the amount of net income for the month.
Click here for the solution: An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below
E1-8 An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below. Each increase and decrease in stockholders’ equity is explained.
Cash Accounts Office Accounts Stockholders’ _ Receivable _ Supplies _ Equipment _ Payable _ Equity
1. _$15,000 _$15,000 Investment
2. _2,000 _$5,000 _$3,000
3. _750 _$750
4. _4,600 _$3,700 _8,300 Service Revenue
5. _1,500 _1,500
6. _2,000 _2,000 Dividends
7. _650 −650 Rent Expense
8. _450 _450
9. _4,900 _4,900 Salaries Expense
10. _500 −500 Utilities Expense
Instructions
(a) Describe each transaction that occurred for the month.
(b) Determine how much stockholders’ equity increased for the month.
(c) Compute the amount of net income for the month.
Click here for the solution: An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below
Friday, October 9, 2015
Commercial accounting and generally accepted accounting principles, generally prescribe the accrual basis
Commercial accounting and generally accepted accounting principles, generally prescribe the accrual basis of accounting over the cash basis. Describe both bases of accounting and explain the differences.
Click here for the solution: Commercial accounting and generally accepted accounting principles, generally prescribe the accrual basis
Click here for the solution: Commercial accounting and generally accepted accounting principles, generally prescribe the accrual basis
While examining cash receipts information, the accounting department determined the following information
ACC 290 Week 5 Assignment
BE7-5 While examining cash receipts information, the accounting department determined the following information: opening cash balance $150, cash on hand $1,125.74, and cash sales per register tape $988.62. Prepare the required journal entry based upon the cash count sheet.
Click here for the solution: While examining cash receipts information, the accounting department determined the following information
BE7-5 While examining cash receipts information, the accounting department determined the following information: opening cash balance $150, cash on hand $1,125.74, and cash sales per register tape $988.62. Prepare the required journal entry based upon the cash count sheet.
Click here for the solution: While examining cash receipts information, the accounting department determined the following information
Friday, September 25, 2015
Listed Below are six technical accounting terms introduced or emphasized in this chapter
Problem 18.1 Listed Below are six technical accounting terms introduced or emphasized in this chapter.
Job order costing
Process Costing
Conversion Costs
Equivalent Units
Cost of Finished Goods Manufactured
Production Cost Report
Each of the following statements may (or may not) describe these technical terms. For each statement, indicate the term described, or answer "none" if the statement does not correctly describe any of the terms.
a. The type of cost accounting method likely to be used in a Coca-Cola bottling plant.
b. Direct Labor and overhead consumed in a production process
c. A measure of the quantity of production work done during a time period, including work on partially completed units.
d. Process cost information for the period, including physical flow and total cost to account for.
e. The type of cost accounting method likely to be used by a construction company.
Click here for the solution: Listed Below are six technical accounting terms introduced or emphasized in this chapter
Job order costing
Process Costing
Conversion Costs
Equivalent Units
Cost of Finished Goods Manufactured
Production Cost Report
Each of the following statements may (or may not) describe these technical terms. For each statement, indicate the term described, or answer "none" if the statement does not correctly describe any of the terms.
a. The type of cost accounting method likely to be used in a Coca-Cola bottling plant.
b. Direct Labor and overhead consumed in a production process
c. A measure of the quantity of production work done during a time period, including work on partially completed units.
d. Process cost information for the period, including physical flow and total cost to account for.
e. The type of cost accounting method likely to be used by a construction company.
Click here for the solution: Listed Below are six technical accounting terms introduced or emphasized in this chapter
Thursday, September 24, 2015
Tony Siebers is an accounting major at a midwestern state university located approximately 60 miles from a major city
ACC 560 Week 8 Assignment
P12-2A Tony Siebers is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Tony, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Tony has gathered the following investment information.
1. Five used vans would cost a total of $75,000 to purchase and would have a 3-year useful life with negligible salvage value. Tony plans to use straight-line depreciation.
2. Ten drivers would have to be employed at a total payroll expense of $48,000.
3. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,000, Maintenance $4,300, Repairs $5,000, Insurance $5,200, Advertising $2,500.
4. Tony has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 8%. Use this rate for cost of capital.
5. Tony expects each van to make 10 round trips weekly and carry an average of 6 students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12.00 for a round-trip ticket.
Instructions
(a) Determine the annual (1) net income and (2) net annual cash flows for the commuter service.
(b) Compute (1) the cash payback period and (2) the annual rate of return. (Round to two decimals.)
(c) Compute the net present value of the commuter service. (Round to the nearest dollar.)
(d) What should Tony conclude from these computations? Is the commuter service a wise investment?
Click here for the solution: Tony Siebers is an accounting major at a midwestern state university located approximately 60 miles from a major city
P12-2A Tony Siebers is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Tony, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Tony has gathered the following investment information.
1. Five used vans would cost a total of $75,000 to purchase and would have a 3-year useful life with negligible salvage value. Tony plans to use straight-line depreciation.
2. Ten drivers would have to be employed at a total payroll expense of $48,000.
3. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,000, Maintenance $4,300, Repairs $5,000, Insurance $5,200, Advertising $2,500.
4. Tony has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 8%. Use this rate for cost of capital.
5. Tony expects each van to make 10 round trips weekly and carry an average of 6 students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12.00 for a round-trip ticket.
Instructions
(a) Determine the annual (1) net income and (2) net annual cash flows for the commuter service.
(b) Compute (1) the cash payback period and (2) the annual rate of return. (Round to two decimals.)
(c) Compute the net present value of the commuter service. (Round to the nearest dollar.)
(d) What should Tony conclude from these computations? Is the commuter service a wise investment?
Click here for the solution: Tony Siebers is an accounting major at a midwestern state university located approximately 60 miles from a major city
Sunday, September 20, 2015
The board of trustees of a local church is concerned about the internal accounting controls pertaining
The board of trustees of a local church is concerned about the internal
accounting controls pertaining to the offering collections made at
weekly services. They ask you to serve on a three-person audit team with
the internal auditor of the university and a CPA who has just joined
the church. At a meeting of the audit team and the board of trustees you
learn the following.
1. The church’s board of trustees has delegated responsibility for the financial management and audit of the financial records to the finance committee. This group prepares the annual budget and approves major disbursements but is not involved in collections or recordkeeping. No audit has been made in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years. The church does not carry any fidelity insurance.
2. The collection at the weekly service is taken by a team of ushers who volunteer to serve for 1 month. The ushers take the collection plates to a basement office at the rear of the church. They hand their plates to the head usher and return to the church service. After all plates have been turned in, the head usher counts the cash received. The head usher then places the cash in the church safe along with a notation of the amount counted. The head usher volunteers to serve for 3 months.
3. The next morning the financial secretary opens the safe and recounts the collection. The secretary withholds $150 – $200 in cash, depending on the cash expenditures expected for the week, and deposits the remainder of the collections in the bank. To facilitate the deposit, church members who contribute by check are asked to make their checks payable to “Cash.”
4. Each month the financial secretary reconciles the bank statement and submits a copy of the reconciliation to the board of trustees. The reconciliations have rarely contained any bank errors and have never shown any errors per books.
Instructions
(a) Indicate the weaknesses in internal accounting control in the handling of collections.
(b) List the improvements in internal control procedures that you plan to make at the next meeting of the audit team for (1) the ushers, (2) the head usher, (3) the financial secretary, and (4) the finance committee.
(c) What church policies should be changed to improve internal control?
Click here for the solution: The board of trustees of a local church is concerned about the internal accounting controls pertaining
1. The church’s board of trustees has delegated responsibility for the financial management and audit of the financial records to the finance committee. This group prepares the annual budget and approves major disbursements but is not involved in collections or recordkeeping. No audit has been made in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years. The church does not carry any fidelity insurance.
2. The collection at the weekly service is taken by a team of ushers who volunteer to serve for 1 month. The ushers take the collection plates to a basement office at the rear of the church. They hand their plates to the head usher and return to the church service. After all plates have been turned in, the head usher counts the cash received. The head usher then places the cash in the church safe along with a notation of the amount counted. The head usher volunteers to serve for 3 months.
3. The next morning the financial secretary opens the safe and recounts the collection. The secretary withholds $150 – $200 in cash, depending on the cash expenditures expected for the week, and deposits the remainder of the collections in the bank. To facilitate the deposit, church members who contribute by check are asked to make their checks payable to “Cash.”
4. Each month the financial secretary reconciles the bank statement and submits a copy of the reconciliation to the board of trustees. The reconciliations have rarely contained any bank errors and have never shown any errors per books.
Instructions
(a) Indicate the weaknesses in internal accounting control in the handling of collections.
(b) List the improvements in internal control procedures that you plan to make at the next meeting of the audit team for (1) the ushers, (2) the head usher, (3) the financial secretary, and (4) the finance committee.
(c) What church policies should be changed to improve internal control?
Click here for the solution: The board of trustees of a local church is concerned about the internal accounting controls pertaining
Listed below are some information characteristics and accounting principles and assumptions
Listed below are some information characteristics and accounting
principles and assumptions. Match the letter of each with the
appropriate phrase that states its application
Answer Potential Matches
_______________ Consistency characteristic 1. Presentation of error-free information with representational faithfulness.
_______________ Historical cost principle 2. Money in the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis.
_______________ Going concern principle 3. Business enterprise assumed to have a long life
_______________ Periodicity assumption 4. Application of the same accounting principles as in the preceding year
_______________ Reliability characteristic 5. Valuing assets at amounts originally paid for them
_______________ Economic entity assumption 6. Implies that a company can divide its economic activities into artificial time periods.
_______________ Monetary unit assumption 7. Notes as part of necessary information to a fair presentation
_______________ Revenue recognition principle 8. Affairs of the business distinguished from those of its owners
_______________ Full disclosure principle 9. Economic activity can be identified with a particular unit of accountability
________________ Economic entity assumption 10. Earnings process completed and realized or realizable
Click here for the solution: Listed below are some information characteristics and accounting principles and assumptions
Answer Potential Matches
_______________ Consistency characteristic 1. Presentation of error-free information with representational faithfulness.
_______________ Historical cost principle 2. Money in the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis.
_______________ Going concern principle 3. Business enterprise assumed to have a long life
_______________ Periodicity assumption 4. Application of the same accounting principles as in the preceding year
_______________ Reliability characteristic 5. Valuing assets at amounts originally paid for them
_______________ Economic entity assumption 6. Implies that a company can divide its economic activities into artificial time periods.
_______________ Monetary unit assumption 7. Notes as part of necessary information to a fair presentation
_______________ Revenue recognition principle 8. Affairs of the business distinguished from those of its owners
_______________ Full disclosure principle 9. Economic activity can be identified with a particular unit of accountability
________________ Economic entity assumption 10. Earnings process completed and realized or realizable
Click here for the solution: Listed below are some information characteristics and accounting principles and assumptions
Friday, September 18, 2015
Max Weinberg is studying for an accounting test and has developed the following questions about investments
ACC 291 Week 4 Assignment
E12-1 Max Weinberg is studying for an accounting test and has developed the following questions about investments.
1. What are three reasons why companies purchase investments in debt or stock securities?
2. Why would a corporation have excess cash that it does not need for operations?
3. What is the typical investment when investing cash for short periods of time?
4. What are the typical investments when investing cash to generate earnings?
5. Why would a company invest in securities that provide no current cash flows?
6. What is the typical stock investment when investing cash for strategic reasons?
Instructions
Provide answers for Max.
Click here for the solution: Max Weinberg is studying for an accounting test and has developed the following questions about investments
E12-1 Max Weinberg is studying for an accounting test and has developed the following questions about investments.
1. What are three reasons why companies purchase investments in debt or stock securities?
2. Why would a corporation have excess cash that it does not need for operations?
3. What is the typical investment when investing cash for short periods of time?
4. What are the typical investments when investing cash to generate earnings?
5. Why would a company invest in securities that provide no current cash flows?
6. What is the typical stock investment when investing cash for strategic reasons?
Instructions
Provide answers for Max.
Click here for the solution: Max Weinberg is studying for an accounting test and has developed the following questions about investments
Comprehensive Problem: Chapter 12 to 16, pg 724-725, from Weygandt, Accounting Principles, 9e (9th Edition)
Comprehensive Problem: Chapter 12 to 16, pg 724-725, from Weygandt, Accounting Principles, 9e (9th Edition)
AND SO ON
All Parts 1 to 5
Click here for the solution: Comprehensive Problem: Chapter 12 to 16, pg 724-725, from Weygandt, Accounting Principles, 9e (9th Edition)
Tuesday, September 15, 2015
Below is a list of treatments of accounting topics
9. Below is a list of treatments of accounting topics. Place GAAP on the line if the treatment is GAAP-based and place IFRS on the line if the treatment is IFRS-based.
A. Interest and dividend income are reported in the investing section of the cash flow statement.__________
B. Interest expense is reported in the financing section of the cash flow statement. ___________
C. The use of LIFO is prohibited. ___________
Click here for the solution: Below is a list of treatments of accounting topics
A. Interest and dividend income are reported in the investing section of the cash flow statement.__________
B. Interest expense is reported in the financing section of the cash flow statement. ___________
C. The use of LIFO is prohibited. ___________
Click here for the solution: Below is a list of treatments of accounting topics
Crede Manufacturing Company uses a standard cost accounting system
P11-4A Crede Manufacturing Company uses a standard cost accounting
system. In 2005, 33,000 units were produced. Each unit took several
pounds of direct materials and 11/3 standard hours of direct labor at a
standard hourly rate of $12.00. Normal capacity was 42,000 direct labor
hours. During the year, 132,000 pounds of raw materials were purchased
at $0.90 per pound. All pounds purchased were used during the year.
Instructions
(a) If the materials price variance was $3,960 unfavorable, what was the standard materials price per pound?
(b) If the materials quantity variance was $2,871 favorable, what was the standard materials quantity per unit?
(c) What were the standard hours allowed for the units produced?
(d) If the labor quantity variance was $8,400 unfavorable, what were the actual direct labor hours worked?
(e) If the labor price variance was $4,470 favorable, what was the actual rate per hour?
(f) If total budgeted manufacturing overhead was $327,600 at normal capacity, what was the predetermined overhead rate per direct labor hour?
(g) What was the standard cost per unit of product?
(h) How much overhead was applied to production during the year?
(i) If the standard fixed overhead rate was $2.50, what was the overhead volume variance?
(j) If the overhead controllable variance was $3,000 favorable, what were the total variable overhead costs incurred? (Assume that the overhead controllable variance relates only to variable costs.)
(k) Using selected answers above, what were the total costs assigned to work in process?
Click here for the solution: Crede Manufacturing Company uses a standard cost accounting system
Instructions
(a) If the materials price variance was $3,960 unfavorable, what was the standard materials price per pound?
(b) If the materials quantity variance was $2,871 favorable, what was the standard materials quantity per unit?
(c) What were the standard hours allowed for the units produced?
(d) If the labor quantity variance was $8,400 unfavorable, what were the actual direct labor hours worked?
(e) If the labor price variance was $4,470 favorable, what was the actual rate per hour?
(f) If total budgeted manufacturing overhead was $327,600 at normal capacity, what was the predetermined overhead rate per direct labor hour?
(g) What was the standard cost per unit of product?
(h) How much overhead was applied to production during the year?
(i) If the standard fixed overhead rate was $2.50, what was the overhead volume variance?
(j) If the overhead controllable variance was $3,000 favorable, what were the total variable overhead costs incurred? (Assume that the overhead controllable variance relates only to variable costs.)
(k) Using selected answers above, what were the total costs assigned to work in process?
Click here for the solution: Crede Manufacturing Company uses a standard cost accounting system
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