Explain what is meant by an accelerated depreciation method. Are accelerated methods more widely used in financial statements or in income tax returns? Explain.
> Pizza Pies Limited has the following value chain for its pizzas. Boxes are designed by Shula Designers Inc. and printed and delivered by Redoes Printing Co. for $0.95 per box. The pizzas are made in the stores with fresh ingredients and baked in the oven
> The following information is related to manufacturing office furniture at Outreach, Inc. a. Accept and arrange raw materials in inventory—1 day. b. Store raw materials in inventory—6 days. c. Issue raw materials to various points in the production proces
> As a fundraiser, the pep band at Melrose University sells T-shirts fans can wear when attending the school’s 12 home basketball games. As the band’s business manager, you must choose among several options for ordering and selling the T-shirts. 1. Place
> Dust Buster’s Inc. manufactures two types of small hand-operated vacuum cleaners. Dust Busters is concerned about quality issues and has compiled the following information for the past year associated with the two vacuums. Find the qua
> The following are eight technical accounting terms introduced or emphasized in this chapter. Each of the following statements may (or may not) describe one of these terms. For each statement, indicate the accounting term described, or answer â
> Comparative balance sheets report average total assets for the year of $2,575,000 and average total equity of $1,917,000 (dollar amounts in thousands, except earnings per share). a. Prepare an income statement for the year in a multiple-step format. b. C
> A condensed balance sheet for Bradford Corporation prepared at the end of the year appears as follows. During the year the company earned a gross profit of $1,116,000 on sales of $2,950,000. Accounts receivable, inventory, and plant assets remained almo
> a. Determine the amount of total liabilities reported in Coca-Cola’s balance sheet at the beginning of the year. b. Determine the amount of total owners’ equity reported in Coca-Cola’s balance sheet at the end of the year. c. Retained earnings was repo
> What important relationships are shown on a cost volume-profit (break-even) graph?
> Carnival Corporation & PLC is one of the world’s largest cruise line companies. Its printing costs for brochures are initially recorded as Prepaid Advertising and are later charged to Advertising Expense when they are mailed. Passenger deposits for upcom
> The Rockford Rollers, a professional roller derby team, prepares financial statements on a monthly basis. The roller derby season begins in February, but in January, the team engaged in the following transactions: 1. Paid $33,000 to the Sunbury Skating
> Springfield Company’s master budget includes estimated costs and expenses of $500,000 for its third quarter of operations. Of this amount, $300,000 is expected to be financed with current payables. Depreciation expense for the quarter is budgeted at $60,
> Selected financial data for Quick Sell, Inc., a retail store, appear as follows. a. Compute the following for both years: 1. Gross profit percentage. 2. Inventory turnover. 3. Accounts receivable turnover. b. Comment on favorable and unfavorable trends
> Lock Tight, Inc., produces outside doors for installation on homes. The following information was gathered to prepare budgets for the upcoming year beginning January 1. The manufacture of each door requires 20 pounds of steel and 6 square feet of glass.
> Naylor Manufacturing produces floor tiles. The managers at Naylor are trying to develop budgets for the upcoming quarter. The following data have been gathered for a particular tile design. a. Using this information, develop Naylor’s s
> Deep Valley Foods manufactures a product that is first smoked and then packed for shipment to customers. During a normal month the product’s direct labor cost per pound is budgeted using the following information The budget for March c
> The following information is from the manufacturing budget and the budgeted financial statements of Scheck Development Partners. Compute the budgeted amounts for a. Purchases of direct materials during the year. b. Cash payments during the year to suppl
> William George is the marketing manager at Crunchy Cookie Company. Each quarter, he is responsible for submitting a sales forecast to be used in the formulation of the company’s master budget. George consistently understates the sales forecast because, a
> Hills Hardware purchased new shelving for its store on April 1, 2021. The shelving is expected to have a 20-year life and no residual value. The following expenditures were associated with the purchase. Instructions: a. Compute depreciation expense for
> The cost accountant for Upload Games Company prepared the following monthly performance Report relating to the packaging department. Prepare a revised performance report in which the variances are computed by comparing the actual costs incurred with est
> Outdoor Outfitters has created a flexible budget for the 70,000-unit and the 80,000-unit levels of activity shown as follows. Complete Outdoor Outfitters’ flexible budget at the 90,000-unit level of activity. Assume that the cost of go
> Why is target costing most effectively applied at the research and development and production process design stage of the value chain?
> On March 1 of the current year, Spicer Corporation compiled information to prepare a cash budget for March, April, and May. All of the company’s sales are made on account. The following information has been provided by Spicerâ
> Assume that you will soon graduate from college and that you have job offers with two pharmaceutical firms. The first offer is with Alpha Research, a relatively new and aggressive company. The second is with Omega Scientific, a very well established, mat
> Sales on account for the first two months of the current year are budgeted as follows. All sales are made on terms of 2/10, n/30 (2 percent discount if paid in 10 days, full amount by 30 days); collections on accounts receivable are typically made as fo
> Ramón’s Jewelers has accumulated the following budgeted overhead information (dollar amounts may include both fixed and variable costs). Use this information to create the overhead budget for 2,800 direct labor employee ho
> On February 1, Willmar Corporation borrowed $100,000 from its bank by signing a 12 percent, 15-year note payable. The note calls for 180 monthly payments of $1,200. Each payment includes an interest and a principal component. a. Compute the interest expe
> Messer Company purchased equipment for $24,000. The company is considering whether to determine annual depreciation using the straight-line method or the declining-balance method at 150 percent of the straight-line rate. Messer expects to use the equipme
> Twin-Cities, Inc., purchased a building for $600,000. Straight-line depreciation was used for each of the first two years using the following assumptions: 25-year estimated useful life, with a residual value of $100,000. a. Calculate the annual depreciat
> Amigos, Inc., purchased a used piece of heavy equipment for $30,000. Delivery of the equipment to Amigos’ business site cost $750. Expenditures to recondition the equipment and prepare it for use totaled $2,230. The maintenance for the first year Amigos
> Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $108,000. The machine’s estimated useful life at the time of the purchase was five years, and its residual value was $8,000. The company reports on a calendar
> M. C. Jones purchased a truck for $30,500 to be used in his business. He is considering depreciating the truck by two methods: units-of-output (assuming total miles to be driven of 80,000) and double-declining-balance (assuming a 5-year useful life). The
> Miller Mining acquired rights to a tract of land with the intent of extracting from the land a valuable mineral. The cost of the rights was $2,500,000 and an estimated 10,000 tons of the mineral are expected to be extracted. Assuming that 1,600 tons of t
> Taylor Company purchased equipment for $27,500. It depreciated the equipment over a 5-year life by the double-declining-balance method until the end of the second year, at which time the asset was sold for $8,300. Calculate the gain or loss on the sale a
> Frequently, the disadvantages of budgeting are not discussed in textbooks. Go to the website www.strategiccontrol.24xls.com/en211. What dysfunctional aspects of budgeting are highlighted by the authors?
> Define (a) contribution margin, (b) contribution margin ratio, and (c) average contribution margin ratio.
> Should depreciation continue to be recorded on a building when ample evidence exists that the current market value is greater than original cost and that the rising trend of market Values are continuing? Explain.
> Alexander Company purchased a piece of equipment for $14,000 and depreciated it for three years over a 5-year estimated life with an expected residual value at the end of 5 years of $2,000. At the end of the third year, Alexander decided to upgrade to eq
> Fin, Inc., purchased a truck for $40,000. The truck is expected to be driven 15,000 miles per year over a 5-year period and then sold for approximately $5,000. Determine depreciation for the first year of the truck’s useful life by the straight-line and
> Equipment costing $86,000 was purchased by Spence, Inc., at the beginning of the current year. The company will depreciate the equipment by the declining-balance method, but it has not determined whether the rate will be at 150 percent or 200 percent of
> The following expenditures were incurred in connection with a new machine acquired by a metals manufacturing company. Identify those that should be included in the cost of the asset. (a) Freight charges, (b) sales tax on the machine, (c) payment to a pas
> Identify the basic “accountable events” in the life of a depreciable plant asset. Which of these events directly affect the net income of the current period? Which directly affect cash flows (other than income tax payments)?
> Notes to the financial statements of two clothing manufacturers follow: Inventories: The inventories are stated at the lower of cost, determined principally by the LIFO method, or market. Inventories: Inventories are stated at the lower of cost (first-in
> Coca-Cola’s distinctive trademark is more valuable to the company than its bottling plants. But the company’s bottling plants are listed in the balance sheet, and the famous Trademark is not. Explain
> Explain two approaches to computing depreciation for fractional period in the year in which an asset is purchased.(Neither of your approaches should require the computation of depreciation to the nearest day or week.)
> Dorsal Ranch raises fish for sale in the restaurant industry. The company can obtain batches of two million eggs from its supplier. Management is trying to decide whether to raise cod or salmon. Cod eggs cost $14,000 per batch, while salmon eggs cost $18
> Evaluate the following quotation: “We shall have no difficulty in paying for new plant assets needed during the coming year because our estimated outlays for new equipment amount to only $80,000, and we have more than twice that amount in our Accumulated
> One accelerated depreciation method is called fixed percentage-of-declining-balance. Explain what is meant by the terms fixed-percentage and declining-balance. For what purpose is this method most widely used?
> Assume you are the manager of the finished goods warehouse of a stereo manufacturer. What costs are being incurred as stereos are stored while awaiting shipment to retail stores?
> Should depreciation continue to be recorded on a building when ample evidence exists that the current market value is greater than original cost and that the rising trend of market values is continuing? Explain.
> Shoppers’ Market purchased a site on which it planned to build a new store for $265,000. The site consisted of three acres of land and included an old house and two barns. County property tax records showed the following appraised values for this propert
> If a capital expenditure is erroneously treated as revenue expenditure, will the net income of the current year be overstated or understated? Will this error have any effect on the net income reported in future years? Explain.
> What is the distinction between a capital expenditure and a revenue expenditure?
> Hamlet College recently purchased new computing equipment for its library. The following information refers to the purchase and installation of this equipment. 1. The list price of the equipment was $285,000; however, Hamlet College qualified for an “edu
> A friend offers you a ticket to a Chicago Cubs baseball game for $40. You know you can sell the ticket to another friend for $50. What is the opportunity cost of buying the ticket but thenchoosingto go to the game?
> Selected information taken from the financial statements of Wiley Company for two successive years follows. Compute the percentage change from year 1 to year 2 whenever possible. Round all calculations to the nearest whole percentage.
> It’s Alarming! produces alarm systems for cars and trucks. The company is trying to decide whether to outsource its Installation Department to A-One Technicians for $50 per installation. Although the company estimates that its current costs are only $40
> Vermont Treats makes blueberry jam and blueberry syrup. Both products come out of a joint process costing $60,000 per year. The sales value of the blueberry jam is $20,000 per year. The sales value of the blueberry syrup is $80,000 per year. Use the rela
> Yi Corporation produces a large number of fishing products. The costs per unit of a particular fishing reel are as follows. The company recently decided to buy 8,000 fishing reels from another manufacturer for $28 per unit because “it
> A company regularly sells 100,000 washing machines at an average price of $250. The average cost of producing these machines is $180. Under what circumstances might the company accept especial order for 20,000 washing machines at $175 per machine?
> Explain how the high-low method determines a. The variable portion of a semi variable cost. b. The fixed portion of a semi variable cost.
> Vickery Machining Company is nearly finished constructing a specially designed piece of machining equipment when the customer declares bankruptcy and cannot pay for the equipment. Vickeryestimates that the cost associated with making the uncompleted equi
> A variety of products—chicken wings, drumsticks, thighs, and so on—are the result of a joint production process of butchering a chicken that costs $0.25 per pound. The wings can be sold at the split-off point for $0.35 per pound, or they can be processed
> Match the following decisions in column 1 (a through e) to all relevant costs or revenue in column 2 (1 through 5):
> A local gym has 20 stationary bicycles that are available for classes a combined total of 840 hours per week. The bicycles are used in two different exercise programs. A cycling class lasts one hour and earns a contribution margin of $18 per customer. A
> During the current year, Rothschild, Inc., purchased two assets that are described as follows. Rothschild depreciates heavy equipment by the declining-balance method at 150 percent of the straight-line rate. It amortizes intangible assets by the straigh
> An analysis of the annual financial statements of O’Connell Corporation reveals the following. a. The company had a $5 million loss from a fire that destroyed an uninsured factory building. b. Depreciation for the year amounted to $9 million. c. During t
> Which of the following are sunk, out-of-pocket, or opportunity costs? a. The amount you will pay to go to the movies next week. b. The insurance payment on your car last year. c. The amount of rent you could receive if you were to sublet your apartment a
> Patterson Company reported net income for the current year of $722,000. During the year the company’s accounts receivable increased by $50,000, inventory decreased by $23,000, accounts payable decreased by $55,000, and accrued expenses payable increased
> Mississippi Products Co. had the following positive cash flows during the current year: received cash from customers of $750,000; received bank loans of $35,000; and received cash from the sale of common stock of $145,000. During the same year, cash was
> Garagiola Company had net income in the current year of $470,000. Depreciation expense for the year totaled $67,000. During the year the company experienced an increase in accounts receivable (all from sales to customers) of $35,000 and an increase in ac
> Presley, Inc., had the following positive and negative cash flows during the current year. Determine the amount of cash provided by or used for operating activities by the direct method.
> Many managers complain about the budgeting process. They claim it takes too long, requires too much management time, encourages managers to “pad the budget” because of uncertainties, and creates unnecessary tension among managers. As a result of these ch
> Distinguish between value-added and non–value-added activities and provide an example of each.
> Does a statement of cash flows or an income statement best measure the profitability of a financially sound business? Explain.
> Last month, Hildebrand Corporation generated sales of $800,000 and incurred selling and administrative expenses of $320,000, of which half were variable. This month, the company estimates that it will generate sales of $900,000. Management does not antic
> Flag stags Brewery’s flexible budget estimates are $74,000, $77,000, and $80,000 to manufacture04,000, 4,500, and 5,000 gallons of beer, respectively, next quarter. What are the variable and fixed manufacturing costs in the flexible budget for Flag stags
> Indicate how you would expect the following strategies to affect the company’s net cash flows from operating activities (1) in the near future and (2) in later periods (after the strategy’s long-term effects have “taken hold”). Explain your reasoning. a.
> Haxtun, Inc., purchased a truck to use for deliveries and is attempting to determine how much depreciation expense would be recognized under three different methods. The truck cost $20,000and is expected to have a value of $4,000 at the end of its 5-year
> Identify the budgets in Column B from which dollar amounts are transferred directly in constructing the budgets listed in Column A.
> Cheri Standish, the controller at Harmonics International, overheard the following conversation among two of her product line department heads, Bob, manager of Pianos and Keyboards, and Fran, manager of Horns and Stringed Instruments. What comments shou
> On January 1, Howard Corporation determined that its direct materials inventory needs to contain 4,000 pounds of materials by March 31. To achieve this goal, Howard will have to use three pounds of direct materials for every pound that it purchases durin
> Expected quarterly unit sales of cured hams at Rod’s Meat World are 1,200, 2,000, 1,400, and 1,000 for the next 2 years. At the start of the current year, cured ham inventory on hand is 120 units. Rod’s has a desired ending inventory of 15 percent of the
> Body Builders Corporation is opening a chain of five health clubs in the Minneapolis area. Body Builders’ marketing manager has suggested a marketing plan designed to generate new memberships. The plan would allow new members to delay payment for the fir
> Harry Blackmun, manager of the Dry Goods Department at Good right’s Grocery, has a budget of $6,000 per month for the current year. This budget includes the allocation of $500 of storewide Common costs based on the square feet occupied by Dry Goods. Rece
> Renaldo’s Boutiques, Inc., has 14 stores located in a Midwestern part of the United States. Renaldo, the president of the company, has set budgets for each store that do not allow for lost, stolen, or misplaced merchandise (inventory shrinkage). Research
> You have been hired as a consultant to assist the following companies with cost-volume-profit analysis. Freeman’s Retail Floral Shop Susquehanna Trails Bus Service Wilson Pump Manufacturers McCauley & Pratt, Attorneys-at-Law suggest an appropriate activ
> Define the relevant range of activity.
> The accounting staff of Wyoming Outfitters, Inc., has assembled the following information for the current year ended December 31. Using this information, prepare a statement of cash flows. Include a proper heading for the financial statement, and classi
> Chaps & Saddles, a retailer of tack and Western apparel, earns an average contribution margin of 30 percent on its sales volume. Recently, the advertising manager of a local country radio station offered to run numerous radio advertisements for Chaps & S
> Kiwi Service Stations is considering expanding its operations to include the greater Dubuque area. Rather than build new service stations in the Dubuque area, management plans to acquire existing service stations and convert them into Kiwi outlets. Kiwi
> Ferrule Furriers has a contribution margin ratio of 80 percent and must sell 12,000 stoles at a unit price of $400 to break even. a. Compute total fixed costs. b. Compute variable cost per unit. c. Develop the company’s cost formula.
> Dominic’s Deli recently calculated its annual break-even sales revenue to be $210,000. For each dollar of sales revenue, $0.30 goes to cover variable costs. Compute the following. a. The contribution margin ratio. b. Total fixed costs. c. The sales reven
> New Berlin Corporation has annual fixed costs of $800,000, variable costs of $48 per unit, and a contribution margin ratio of 40 percent. Compute the following. a. Unit sales price and unit contribution margin for the given product. b. The sales volume
> Applying the high-low method, Bemidji Wilderness Resort estimates the total costs of providing guide services to be $9,000 per month, plus 25 percent of guide service revenue. a. What is the contribution margin ratio of the resort’s guide service operati
> Wadena Search and Rescue estimates the monthly cost of responding to emergency calls to be $90,000, plus $450 per call. a. In a month in which the company responds to 90 emergency calls, determine the estimated 1. Total cost of responding to emergency ca
> Explain whether you regard each of the following costs or categories of costs as fixed, variable, or semi variable with respect to net sales. Briefly explain your reasoning. If you do not believe that a cost fits into any of these classifications, explai
> Glow Worm Corporation makes flashlights and batteries. Its monthly fixed costs average $1,690,000. The company has provided the following information about its two product lines. a. Determine the company’s monthly break-even point in s
> Explain the effects of an increase in the volume of activity on the following costs. (Assume volume remains within the relevant range.) a. Total variable costs. b. Variable cost per unit. c. Total fixed cost. d. Fixed cost per unit. e. Total semi variabl
> During the current year, Maine Salvage Company took out new loans of $17 million. In addition, the company repaid $2 million of prior loans and paid $1.5 million of interest expense. Explain how these cash flows will appear in the company’s statement of
