All Related Questions of General Accounting

Q: Tierney Company begins operations on April 1. Information from job cost

Tierney Company begins operations on April 1. Information from job cost sheets shows the following. Job 12 was completed in April. Job 10 was completed in May. Jobs 11 and 13 were completed in June....

Q: Shown below are the job cost related accounts for the law firm

Shown below are the job cost related accounts for the law firm of Jack, Bob, and Will and their manufacturing equivalents: Law Firm Accounts …………………………………… Manufacturing Firm Accounts Supplies ………………...

Q: Mary Willis is the advertising manager for Bargain Shoe Store. She

Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased displ...

Q: Don Lieberman and Associates, a CPA firm, uses job order

Don Lieberman and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concern...

Q: The Welding Department of Thorpe Company has the following production and manufacturing

The Welding Department of Thorpe Company has the following production and manufacturing cost data for February 2014. All materials are added at the beginning of the process. Instructions: Prepare a...

Q: Remington Shipping, Inc. is contemplating the use of process costing

Remington Shipping, Inc. is contemplating the use of process costing to track the costs of its operations. The operation consists of three segments (departments): receiving, shipping, and delivery. Co...

Q: Royale Mortgage Company uses a process cost system to accumulate costs in

Royale Mortgage Company uses a process cost system to accumulate costs in its loan application department. When an application is completed, it is forwarded to the loan department for final processing...

Q: Using the data in E16-15, assume Royale Mortgage Company

Using the data in E16-15, assume Royale Mortgage Company uses the FIFO method. Also assume that the applications in process on September 1 were 100% complete as to materials (forms) and 40% complete a...

Q: The Cutting Department of Keigi Company has the following production and\

The Cutting Department of Keigi Company has the following production and\ cost data for August. Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during...

Q: The Smelting Department of Polzin Company has the following production and cost

The Smelting Department of Polzin Company has the following production and cost data for September. Production: Beginning work in process 2,000 units that are 100% complete as to materials and 20% com...

Q: The ledger of Hannon Company has the following work in process account

The ledger of Hannon Company has the following work in process account. Production records show that there were 800 units in the beginning inventory, 30% complete, 1,200 units started, and 1,500 uni...

Q: The Welding Department of Majestic Company has the following production and manufacturing

The Welding Department of Majestic Company has the following production and manufacturing cost data for February 2014. All materials are added at the beginning of the process. Majestic uses the FIFO m...

Q: Overton Company has gathered the following information. Units in

Overton Company has gathered the following information. Units in beginning work in process ……………………………………20,000 Units started into production …………………………………………..164,000 Units in ending work in process...

Q: Weber Company purchases $45,000 of raw materials on account

Weber Company purchases $45,000 of raw materials on account, and it incurs $60,000 of factory labor costs. Journalize the two transactions on March 31 assuming the labor costs are not paid until April...

Q: Larissa Company has a unit selling price of $250, variable

Larissa Company has a unit selling price of $250, variable costs per unit of $170, and fixed costs of $140,000. Compute the break-even point in units using (a) the mathematical equation and (b) cont...

Q: At Ely Company, overhead is assigned to production departments at the

At Ely Company, overhead is assigned to production departments at the rate of $5 per machine hour. In July, machine hours were 3,000 in the Machining Department and 2,400 in the Assembly Department. P...

Q: Sanchez Co. has zero units of beginning work in process.

Sanchez Co. has zero units of beginning work in process. During the period, 12,000 units were completed, and there were 500 units of ending work in process one-fifth complete as to conversion cost and...

Q: Hindi Co. started 3,000 units during the period.

Hindi Co. started 3,000 units during the period. Its beginning inventory is 500 units one-fourth complete as to conversion costs and 100% complete as to materials costs. Its ending inventory is 300 un...

Q: Data for Weber Company are given in BE16-1. Supporting

Data for Weber Company are given in BE16-1. Supporting records show that (a) the Assembly Department used $24,000 of raw materials and $35,000 of the factory labor, and (b) the Finishing Department...

Q: Factory labor data for Weber Company are given in BE16-2

Factory labor data for Weber Company are given in BE16-2. Manufacturing overhead is assigned to departments on the basis of 200% of labor costs. Journalize the assignment of overhead to the Assembly a...

Q: Goode Company has the following production data for selected months.

Goode Company has the following production data for selected months. Compute equivalent units of production for materials and conversion costs, assuming materials are entered at the beginning of the...

Q: Westerville Company accumulates the following data concerning a mixed cost, using

Westerville Company accumulates the following data concerning a mixed cost, using units produced as the activity level. (a) Compute the variable- and fixed-cost elements using the high-low method. (...

Q: Trek Company has the following production data for April: units transferred

Trek Company has the following production data for April: units transferred out 40,000, and ending work in process 5,000 units that are 100% complete for materials and 40% complete for conversion cost...

Q: Production costs chargeable to the Finishing Department in June in Cascio Company

Production costs chargeable to the Finishing Department in June in Cascio Company are materials $16,000, labor $29,500, overhead $18,000. Equivalent units of production are materials 20,000 and conver...

Q: Data for Cascio Company are given in BE16-7. Production

Data for Cascio Company are given in BE16-7. Production records indicate that 18,000 units were transferred out, and 2,000 units in ending work in process were 50% complete as to conversion cost and 1...

Q: The Smelting Department of Mathews Company has the following production and cost

The Smelting Department of Mathews Company has the following production and cost data for November. Production: Beginning work in process 2,000 units that are 100% complete as to materials and 20% com...

Q: (a) “Standard costs are the expected total cost of

(a) “Standard costs are the expected total cost of completing a job.” Is this correct? Explain. (b) “A standard imposed by a governmental agency is known as a regulation.” Do you agree? Explain.

Q: Each day, Adama Corporation processes 1 ton of a secret raw

Each day, Adama Corporation processes 1 ton of a secret raw material into two resulting products, AB1 and XY1. When it processes 1 ton of the raw material, the company incurs joint processing costs of...

Q: Danner Company expects to have a cash balance of $45,

Danner Company expects to have a cash balance of $45,000 on January 1, 2014. Relevant monthly budget data for the first 2 months of 2014 are as follows. Collections from customers: January $85,000, Fe...

Q: The controller of Trenshaw Company wants to improve the company’s control system

The controller of Trenshaw Company wants to improve the company’s control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2014. June 30, 2...

Q: LRF Company’s budgeted sales and direct materials purchases are as follows.

LRF Company’s budgeted sales and direct materials purchases are as follows. LRF’s sales are 30% cash and 70% credit. Credit sales are collected 10% in the month o...

Q: Green Landscaping Inc. is preparing its budget for the first quarter

Green Landscaping Inc. is preparing its budget for the first quarter of 2014. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end th...

Q: Garza and Neely, CPAs, are preparing their service revenue (

Garza and Neely, CPAs, are preparing their service revenue (sales) budget for the coming year (2014). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for...

Q: Chandler Ltd. estimates sales for the second quarter of 2014 will

Chandler Ltd. estimates sales for the second quarter of 2014 will be as follows. Month Units April ………………………………………………………. 2,550 May …………………………………………………………2,475 June ………………………………………...

Q: Donnegal Company makes and sells artistic frames for pictures. The controller

Donnegal Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2014. Donnegal has a la...

Q: Mike Trusler has prepared the following list of statements about budgetary control

Mike Trusler has prepared the following list of statements about budgetary control. 1. Budget reports compare actual results with planned objectives. 2. All budget reports are prepared on a weekly bas...

Q: As sales manager, Joe Batista was given the following static budget

As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October. As a result of this budget repor...

Q: Kirkland Plumbing Company is a newly formed company specializing in plumbing services

Kirkland Plumbing Company is a newly formed company specializing in plumbing services for home and business. The owner, Lenny Kirkland, had divided the company into two segments: Home Plumbing Service...

Q: Sales budget data for Palermo Company are given in BE21-2

Sales budget data for Palermo Company are given in BE21-2. Management desires to have an ending finished goods inventory equal to 25% of the next quarter’s expected unit sales. Prepare a production bu...

Q: Venetian Company has two production departments, Fabricating and Assembling. At

Venetian Company has two production departments, Fabricating and Assembling. At a department managers’ meeting, the controller uses flexible budget graphs to explain total budgeted costs. Separate gra...

Q: Fultz Company’s organization chart includes the president; the vice president of

Fultz Company’s organization chart includes the president; the vice president of production; three assembly plants—Dallas, Atlanta, and Tucson; and two departments within each plant—Machining and Fini...

Q: The Mixing Department manager of Malone Company is able to control all

The Mixing Department manager of Malone Company is able to control all overhead costs except rent, property taxes, and salaries. Budgeted monthly overhead costs for the Mixing Department, in alphabeti...

Q: Deitz Inc. has three divisions which are operated as profit centers

Deitz Inc. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows. Instructions: (a) Compute the missing amounts. Show...

Q: The Sports Equipment Division of Harrington Company is operated as a profit

The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2014 at $900,000. The only variable costs budgeted for the division were co...

Q: The West Division of Nieto Company reported the following data for the

The West Division of Nieto Company reported the following data for the current year. Sales …………………………………..$3,000,000 Variable costs ………………………..1,980,000 Controllable fixed costs ……………600,000 Average...

Q: The Dinkle and Frizell Dental Clinic provides both preventive and orthodontic dental

The Dinkle and Frizell Dental Clinic provides both preventive and orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two separate investment centers: Pr...

Q: The Pletcher Transportation Company uses a responsibility reporting system to measure the

The Pletcher Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured using a...

Q: Crede Company budgeted selling expenses of $30,000 in January

Crede Company budgeted selling expenses of $30,000 in January, $35,000 in February, and $40,000 in March. Actual selling expenses were $31,200 in January, $34,525 in February, and $46,000 in March. I...

Q: Presented below is selected information for three regional divisions of Medina Company

Presented below is selected information for three regional divisions of Medina Company. Instructions: (a) Compute the return on investment for each division. (b) Compute the residual income for each...

Q: Lisah, Inc., manufactures golf clubs in three models. For

Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $10,000 from sales $200,000, variable costs $180,000, and fixed costs $30,000. If the Big Bart l...

Q: Presented below is selected financial information for two divisions of Yono Brewing

Presented below is selected financial information for two divisions of Yono Brewing. Instructions: Supply the missing information for the lettered items.

Q: The actual selling expenses incurred in March 2014 by DeWitt Company are

The actual selling expenses incurred in March 2014 by DeWitt Company are as follows. Instructions: (a) Prepare a flexible budget performance report for March using the budget data in E22-5, assuming...

Q: Kitchen Help Inc. (KHI) is a manufacturer of toaster

Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control over operations, the president of KHI wants to begin using a flexible budgeting system, rather than use only the current...

Q: Rensing Groomers is in the dog-grooming business. Its operating

Rensing Groomers is in the dog-grooming business. Its operating costs are described by the following formulas: Grooming supplies (variable)………………………… y = $0 1 $5x Direct labor (variable) ………………………………...

Q: Lowell Company’s manufacturing overhead budget for the first quarter of 2014 contained

Lowell Company’s manufacturing overhead budget for the first quarter of 2014 contained the following data. Actual variable costs were indirect materials $13,900, indirect labor $9,...

Q: Shannon Company is planning to produce 2,000 units of product

Shannon Company is planning to produce 2,000 units of product in 2014. Each unit requires 3 pounds of materials at $5 per pound and a half-hour of labor at $15 per hour. The overhead rate is 70% of di...

Q: During March 2014, Toby Tool & Die Company worked on four

During March 2014, Toby Tool & Die Company worked on four jobs. A review of direct labor costs reveals the following summary data. Analysis reveals that Job A257 was a repeat job. Job A258 was a...

Q: Byrd Company produces one product, a putter called GO-Putter

Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal producti...

Q: Wales Company purchased (at a cost of $10,800

Wales Company purchased (at a cost of $10,800) and used 2,400 pounds of materials during May. Wales’s standard cost of materials per unit produced is based on 2 pounds per unit at a cost $5 per pound....

Q: Picard Landscaping plants grass seed as the basic landscaping for business campuses

Picard Landscaping plants grass seed as the basic landscaping for business campuses. During a recent month, the company worked on three projects (Remington, Chang, and Wyco). The company is interested...

Q: For Mize Company, units to be produced are 5,000

For Mize Company, units to be produced are 5,000 in quarter 1 and 6,000 in quarter 2. It takes 1.6 hours to make a finished unit, and the expected hourly wage rate is $15 per hour. Prepare a direct la...

Q: Burte Corporation prepared the following variance report. /

Burte Corporation prepared the following variance report. Instructions: Fill in the appropriate amounts or letters for the question marks in the report.

Q: Fisk Company uses a standard cost accounting system. During January,

Fisk Company uses a standard cost accounting system. During January, the company reported the following manufacturing variances. In addition, 8,000 units of product were sold at $8 per unit. Each un...

Q: Current Designs faces a number of important decisions that require incremental analysis

Current Designs faces a number of important decisions that require incremental analysis. Consider each of the following situations independently. Situation 1 Recently, Mike Cichanowski, owner and CEO...

Q: Aurora Company is considering the purchase of a new machine. The

Aurora Company is considering the purchase of a new machine. The invoice price of the machine is $140,000, freight charges are estimated to be $4,000, and installation costs are expected to be $6,000....

Q: MiniTek manufactures private-label small electronic products, such as alarm

MiniTek manufactures private-label small electronic products, such as alarm clocks, calculators, kitchen timers, stopwatches, and automatic pencil sharpeners. Some of the products are sold as sets, an...

Q: Founded in 1983, Beverly Hills Fan Company is located in Woodland

Founded in 1983, Beverly Hills Fan Company is located in Woodland Hills, California. With 23 employees and sales of less than $10 million, the company is relatively small. Management feels that there...

Q: Outsourcing by both manufacturers and service companies is becoming increasingly common.

Outsourcing by both manufacturers and service companies is becoming increasingly common. There are now many firms that specialize in outsourcing consulting. Address: www.alsbridge.com, or go to www.wi...

Q: Diane Buswell is preparing the 2013 budget for one of Current Designs’

Diane Buswell is preparing the 2013 budget for one of Current Designs’ rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit...

Q: Palmer Corporation operates on a calendar-year basis. It begins

Palmer Corporation operates on a calendar-year basis. It begins the annual budgeting process in late August when the president establishes targets for the total dollar sales and net income before taxe...

Q: Elliot & Hesse Inc. manufactures ergonomic devices for computer users.

Elliot & Hesse Inc. manufactures ergonomic devices for computer users. Some of its more popular products include glare screens (for computer monitors), keyboard stands with wrist rests, and carousels...

Q: North Company has completed all of its operating budgets. The sales

North Company has completed all of its operating budgets. The sales budget for the year shows 50,000 units and total sales of $2,250,000. The total unit cost of making one unit of sales is $25. Sellin...

Q: Network Computing Devices, Inc. was founded in 1988 in Mountain

Network Computing Devices, Inc. was founded in 1988 in Mountain View, California. The company develops software products such as X-terminals, Z-mail, PC X-ware, and related hardware products. The foll...

Q: Information regarding many approaches to budgeting can be found on the Web

Information regarding many approaches to budgeting can be found on the Web. The following activity investigates the merits of “zero-based” budgeting, as discussed by Michael LaFaive, Director of Finan...

Q: The Current Designs staff has prepared the annual manufacturing budget for the

The Current Designs staff has prepared the annual manufacturing budget for the rotomolded line based on an estimated annual production of 4,000 kayaks during 2013. Each kayak will require 54 pounds of...

Q: Green Pastures is a 400-acre farm on the outskirts of

Green Pastures is a 400-acre farm on the outskirts of the Kentucky Bluegrass, specializing in the boarding of broodmares and their foals. A recent economic downturn in the thoroughbred industry has le...

Q: Lanier Company manufactures expensive watch cases sold as souvenirs. Three of

Lanier Company manufactures expensive watch cases sold as souvenirs. Three of its sales departments are Retail Sales, Wholesale Sales, and Outlet Sales. The Retail Sales Department is a profit center....

Q: Computer Associates International, Inc., the world’s leading business software company

Computer Associates International, Inc., the world’s leading business software company, delivers the end-to-end infrastructure to enable e-business through innovative technology, services, and educati...

Q: There are many useful resources regarding budgeting available on websites. The

There are many useful resources regarding budgeting available on websites. The following activity investigates the results of a comprehensive budgeting study. Address: http://www.accountingweb.com/whi...

Q: Milton Professionals, a management consulting firm, specializes in strategic planning

Milton Professionals, a management consulting firm, specializes in strategic planning for financial institutions. James Hahn and Sara Norton, partners in the firm, are assembling a new strategic plann...

Q: Ana Carillo and Associates is a medium-sized company located near

Ana Carillo and Associates is a medium-sized company located near a large metropolitan area in the Midwest. The company manufactures cabinets of mahogany, oak, and other fine woods for use in expensiv...

Q: Glassmaster Company is organized as two divisions and one subsidiary. One

Glassmaster Company is organized as two divisions and one subsidiary. One division focuses on the manufacture of filaments such as fishing line and sewing thread; the other division manufactures anten...

Q: Data for the investment centers for Kaspar Company are given in BE22

Data for the investment centers for Kaspar Company are given in BE22-9. The centers expect the following changes in the next year: (I) increase sales 15%; (II) decrease costs $400,000; (III) decrea...

Q: The Balanced Scorecard Institute (www.balancedscorecard.org) is

The Balanced Scorecard Institute (www.balancedscorecard.org) is a great resource for information about implementing the balanced scorecard. One item of interest provided at its website is an example o...

Q: The December 22, 2009, edition of the Wall Street Journal

The December 22, 2009, edition of the Wall Street Journal has an article by Kevin Kelliker entitled “In Risky Move, GM to Run Plants Around Clock.” Instructions: Read the article and answer the follo...

Q: A company that manufactures recreational pedal boats has approached Mike Cichanowski to

A company that manufactures recreational pedal boats has approached Mike Cichanowski to ask if he would be interested in using Current Designs’ rotomold expertise and equipment to pr...

Q: Luang Company is considering the purchase of a new machine. Its

Luang Company is considering the purchase of a new machine. Its invoice price is $122,000, freight charges are estimated to be $3,000, and installation costs are expected to be $5,000. Salvage value o...

Q: Hawke Skateboards is considering building a new plant. Bob Skerritt,

Hawke Skateboards is considering building a new plant. Bob Skerritt, the company’s marketing manager, is an enthusiastic supporter of the new plant. Lucy Liu, the companyâ€...

Q: Tecumseh Products Company has its headquarters in Tecumseh, Michigan. It

Tecumseh Products Company has its headquarters in Tecumseh, Michigan. It describes itself as “a global multinational corporation producing mechanical and electrical components essential to industries...

Q: Campbell Soup Company is an international provider of soup products. Management

Campbell Soup Company is an international provider of soup products. Management is very interested in continuing to grow the company in its core business, while “spinning off” those businesses that ar...

Q: ShurShot Sports Inc. manufactures basketballs for the National Basketball Association (

ShurShot Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while operating at 80%...

Q: The management of Shatner Manufacturing Company is trying to decide whether to

The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the compan...

Q: Marsh Industries had sales in 2013 of $6,400,

Marsh Industries had sales in 2013 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2014. Plan A would increase the...

Q: Presented below is information related to the Southern Division of Lumber,

Presented below is information related to the Southern Division of Lumber, Inc. Contribution margin …………………………………………. $1,200,000 Controllable margin ……………………………………………$ 800,000 Average operating asset...

Q: Last year (2013), Richter Condos installed a mechanized elevator for

Last year (2013), Richter Condos installed a mechanized elevator for its tenants. The owner of the company, Ron Richter, recently returned from an industry equipment exhibition where he watched a comp...

Q: The budget committee of Litwin Company collects the following data for its

The budget committee of Litwin Company collects the following data for its San Miguel Store in preparing budgeted income statements for May and June 2014. 1. Sales for May are expected to be $800,000....

Q: Krause Industries’ balance sheet at December 31, 2013, is presented

Krause Industries’ balance sheet at December 31, 2013, is presented below. Additional information accumulated for the budgeting process is as follows. Budgeted data for the year 20...

Q: Glendo Farm Supply Company manufactures and sells a pesticide called Snare.

Glendo Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the first 2 quarters of 2014. 1. Sales: quarter 1, 30,0...

Q: Deleon Inc. is preparing its annual budgets for the year ending

Deleon Inc. is preparing its annual budgets for the year ending December 31, 2014. Accounting assistants furnish the data shown below. An accounting assistant has prepared the detailed manufacturing...

Q: Colter Company prepares monthly cash budgets. Relevant data from operating budgets

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are: All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first m...

Q: Zelmer Company manufactures tablecloths. Sales have grown rapidly over the past

Zelmer Company manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed a budgetary control system for 2014. The following data were used in d...

Q: Clarke Inc. operates the Patio Furniture Division as a profit center

Clarke Inc. operates the Patio Furniture Division as a profit center. Operating data for this division for the year ended December 31, 2014, are as shown below. In addition, Clarke incurs $180,000 o...

Q: Suppan Company manufactures a variety of tools and industrial equipment. The

Suppan Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for t...

Q: Durham Company uses a responsibility reporting system. It has divisions in

Durham Company uses a responsibility reporting system. It has divisions in Denver, Seattle, and San Diego. Each division has three production departments: Cutting, Shaping, and Finishing. The responsi...

Q: In Paige Company, direct labor is $20 per hour.

In Paige Company, direct labor is $20 per hour. The company expects to operate at 10,000 direct labor hours each month. In January 2014, direct labor totaling $204,000 is incurred in working 10,400 ho...

Q: Delby Industries has manufactured prefabricated houses for over 20 years. The

Delby Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers’ lots. Delby expanded into the precut housing market when...

Q: Costello Corporation manufactures a single product. The standard cost per unit

Costello Corporation manufactures a single product. The standard cost per unit of product is shown below. Direct materials—1 pound plastic at $7.00 per pound …………………..$ 7.00 Direct labor—1.6 hours at...

Q: Hopkins Clothiers is a small company that manufactures tall-men’s suits

Hopkins Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost accounting system. In May 2014, 11,200 suits were produced. The followin...

Q: Kansas Company uses a standard cost accounting system. In 2014,

Kansas Company uses a standard cost accounting system. In 2014, the company produced 28,000 units. Each unit took several pounds of direct materials and 1.6 standard hours of direct labor at a standar...

Q: Pace Labs, Inc. provides mad cow disease testing for both

Pace Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company’s customers are governmental agencies, prices are strictly regulated...

Q: Lon Timur is an accounting major at a midwestern state university located

Lon Timur 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 vis...

Q: Goltra Clinic is considering investing in new heart-monitoring equipment.

Goltra Clinic is considering investing in new heart-monitoring equipment. It has two options: Option A would have an initial lower cost but would require a significant expenditure for rebuilding after...

Q: Goldbloom Corp. is thinking about opening a soccer camp in southern

Goldbloom Corp. is thinking about opening a soccer camp in southern California. To start the camp, Goldbloom would need to purchase land and build four soccer fields and a sleeping and dining facility...

Q: Morello Inc. manufactures basketballs for the National Basketball Association (NBA

Morello Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while operating at 90% of plan...

Q: The management of Gill Corporation is trying to decide whether to continue

The management of Gill Corporation is trying to decide whether to continue\ manufacturing a part or to buy it from an outside supplier. The part, called FIZBE, is a component of the companyâ...

Q: Gundy Company expects to produce 1,200,000 units of

Gundy Company expects to produce 1,200,000 units of Product XX in 2014. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are direct...

Q: Ohio Household Products Co. (OHPC) is a diversified household

Ohio Household Products Co. (OHPC) is a diversified household-cleaner processing company. The company’s Mishawaka plant produces two products: an appliance cleaner and a general-purp...

Q: Last year (2013), Simmons Company installed new factory equipment.

Last year (2013), Simmons Company installed new factory equipment. The owner of the company, Gene Simmons, recently returned from an industry equipment exhibition where he watched computerized equipme...

Q: Panda Corporation has four operating divisions. During the first quarter of

Panda Corporation has four operating divisions. During the first quarter of 2014, the company reported aggregate income from operations of $129,000 and the divisional results shown below. Analysis r...

Q: Urbina Inc. is preparing its annual budgets for the year ending

Urbina Inc. is preparing its annual budgets for the year ending December 31, 2014. Accounting assistants furnish the following data. An accounting assistant has prepared the detailed manufacturing o...

Q: Ogleby Industries has sales in 2013 of $5,600,

Ogleby Industries has sales in 2013 of $5,600,000 (800,000 units) and gross profit of $1,344,000. Management is considering two alternative budget plans to increase its gross profit in 2014. Plan A wo...

Q: Derby Company prepares monthly cash budgets. Relevant data from operating budgets

Derby Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are: All sales are on account. Collections are expected to be 60% in the month of sale, 25% in the first mo...

Q: The budget committee of Widner Company collects the following data for its

The budget committee of Widner Company collects the following data for its Westwood Store in preparing budgeted income statements for July and August 2014. 1. Expected sales: July $400,000, August $45...

Q: The manufacturing overhead budget for Fleming Company contains the following items.

The manufacturing overhead budget for Fleming Company contains the following items. The budget was based on an estimated 2,000 units being produced. During the past month, 1,500 units were produced,...

Q: American Products Corporation participates in a highly competitive industry. In order

American Products Corporation participates in a highly competitive industry. In order to meet this competition and achieve profit goals, the company has chosen the decentralized form of organization....

Q: It is one thing to prepare a personal budget; it is

It is one thing to prepare a personal budget; it is another thing to stick to it. Financial planners have suggested various mechanisms to provide support for enforcing personal budgets. One approach i...

Q: Data for Gundy Company are given in BE22-4. In

Data for Gundy Company are given in BE22-4. In March 2014, the company incurs the following costs in producing 100,000 units: direct materials $525,000, direct labor $596,000, and variable overhead $8...

Q: Preparing a personal budget is a great first step toward control over

Preparing a personal budget is a great first step toward control over your personal finances. It is especially useful to prepare a budget when you face a big decision. For most people, the biggest dec...

Q: Buil Corporation manufactures a single product. The standard cost per unit

Buil Corporation manufactures a single product. The standard cost per unit of product is as follows. Direct materials—2 pounds of plastic at ………………………$6 per pound $12 Direct labor—2 hours at ……………………...

Q: Zimmerman Clothiers manufactures women’s business suits. The company uses a standard

Zimmerman Clothiers manufactures women’s business suits. The company uses a standard cost accounting system. In March 2014, 15,700 suits were made. The following standard and actual...

Q: Beta Company uses a standard cost accounting system. In 2014,

Beta Company uses a standard cost accounting system. In 2014, 45,000 units were produced. Each unit took several pounds of direct materials and 2 standard hours of direct labor at a standard hourly ra...

Q: Bonita Labs performs steroid testing services to high schools, colleges,

Bonita Labs performs steroid testing services to high schools, colleges, and universities. Because the company deals solely with educational institutions, the price of each test is strictly regulated....

Q: Ben Paul is an accounting major at a western university located approximately

Ben Paul is an accounting major at a western university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their h...

Q: Platteville Eye Clinic is considering investing in new optical-scanning equipment

Platteville Eye Clinic is considering investing in new optical-scanning equipment. It has two options: Option A would have an initial lower cost but would require a significant expenditure for rebuild...

Q: Lewis Corp. is thinking about opening a basketball camp in Texas

Lewis Corp. is thinking about opening a basketball camp in Texas. In order to start the camp, the company would need to purchase land and build eight basketball courts and a dormitory-type sleeping an...

Q: (a) What is a budget? (b)

(a) What is a budget? (b) How does a budget contribute to good management?

Q: Kate Cey and Joe Coulter are discussing the benefits of budgeting.

Kate Cey and Joe Coulter are discussing the benefits of budgeting. They ask you to identify the primary advantages of budgeting. Comply with their request.

Q: Perez Company uses both standards and budgets. For the year,

Perez Company uses both standards and budgets. For the year, estimated production of Product X is 500,000 units. Total estimated cost for materials and labor are $1,300,000 and $1,700,000. Compute the...

Q: In the Assembly Department of Hannon Company, budgeted and actual manufacturing

In the Assembly Department of Hannon Company, budgeted and actual manufacturing overhead costs for the month of April 2014 were as follows All costs are controllable by the department manager. Prepa...

Q: Standard costs facilitate management planning. What are the other advantages of

Standard costs facilitate management planning. What are the other advantages of standard costs?

Q: (a) “Accounting plays a relatively unimportant role in budgeting

(a) “Accounting plays a relatively unimportant role in budgeting.” Do you agree? Explain. (b) What responsibilities does management have in budgeting?

Q: (a) Explain the similarities and differences between standards and budgets

(a) Explain the similarities and differences between standards and budgets. (b) Contrast the accounting for standards and budgets.

Q: What factors should be considered in setting (a) the

What factors should be considered in setting (a) the direct materials price standard and (b) the direct materials quantity standard?

Q: What is participative budgeting? What are its potential benefits? What

What is participative budgeting? What are its potential benefits? What are its potential disadvantages?

Q: What is budgetary slack? What incentive do managers have to create

What is budgetary slack? What incentive do managers have to create budgetary slack?

Q: Megan Pedigo is confused about how a flexible budget is prepared.

Megan Pedigo is confused about how a flexible budget is prepared. Identify the steps for Megan.

Q: What is the difference between a favorable cost variance and an unfavorable

What is the difference between a favorable cost variance and an unfavorable cost variance?

Q: What is a post-audit? What are the potential benefits

What is a post-audit? What are the potential benefits of a post-audit?

Q: Identify the steps required in using the internal rate of return method

Identify the steps required in using the internal rate of return method when the net annual cash flows are equal.

Q: Elbert Company accumulates the following summary data for the year ending December

Elbert Company accumulates the following summary data for the year ending December 31, 2014, for its Water Division, which it operates as a profit center: sales— $2,000,000 budget, $2,080,000 actual;...

Q: What is responsibility accounting? Explain the purpose of responsibility accounting.

What is responsibility accounting? Explain the purpose of responsibility accounting.

Q: Eve Rooney is studying for an accounting examination. Describe for Eve

Eve Rooney is studying for an accounting examination. Describe for Eve what conditions are necessary for responsibility accounting to be used effectively.

Q: What are the four perspectives used in the balanced scorecard? Discuss

What are the four perspectives used in the balanced scorecard? Discuss the nature of each, and how the perspectives are linked.

Q: What circumstances may cause the purchasing department to be responsible for both

What circumstances may cause the purchasing department to be responsible for both an unfavorable materials price variance and an unfavorable materials quantity variance?

Q: What are some examples of nonfinancial measures used by companies to evaluate

What are some examples of nonfinancial measures used by companies to evaluate performance?

Q: Distinguish among the three types of responsibility centers.

Distinguish among the three types of responsibility centers.

Q: (a) Explain the basic features of a standard cost accounting

(a) Explain the basic features of a standard cost accounting system. (b) What type of balance will exist in the variance account when (1) the materials price variance is unfavorable and (2) the lab...

Q: How do direct fixed costs differ from indirect fixed costs? Are

How do direct fixed costs differ from indirect fixed costs? Are both types of fixed costs controllable?

Q: (a) How are variances reported in income statements prepared for

(a) How are variances reported in income statements prepared for management? (b) May standard costs be used in preparing financial statements for stockholders? Explain.

Q: Describe the process a company may use in screening and approving the

Describe the process a company may use in screening and approving the capital expenditure budget

Q: For the year ending December 31, 2014, Cobb Company accumulates

For the year ending December 31, 2014, Cobb Company accumulates the following data for the Plastics Division which it operates as an investment center: contribution margin—$700,000 budget, $710,000 ac...

Q: John Hsu is attempting to outline the important points about overhead variances

John Hsu is attempting to outline the important points about overhead variances on a class examination. List four points that John should include in his outline.

Q: El Cajon Company uses the internal rate of return method. What

El Cajon Company uses the internal rate of return method. What is the decision rule for this method?

Q: What are the strengths of the annual rate of return approach?

What are the strengths of the annual rate of return approach? What are its weaknesses?

Q: What is residual income, and what is one of its major

What is residual income, and what is one of its major weaknesses?

Q: Sveta Pace is trying to understand the term “cost of capital

Sveta Pace is trying to understand the term “cost of capital.” Define the term and indicate its relevance to the decision rule under the internal rate of return technique.

Q: Two types of present value tables may be used with the discounted

Two types of present value tables may be used with the discounted cash flow techniques. Identify the tables and the circumstance(s) when each table should be used

Q: Discuss the factors that determine the appropriate discount rate to use when

Discuss the factors that determine the appropriate discount rate to use when calculating the net present value.

Q: What are some examples of potential intangible benefits of investment proposals?

What are some examples of potential intangible benefits of investment proposals? Why do these intangible benefits complicate the capital budgeting evaluation process? What might happen if intangible b...

Q: What steps can be taken to incorporate intangible benefits into the capital

What steps can be taken to incorporate intangible benefits into the capital budget evaluation process?

Q: The steps in management’s decision-making process are listed in random

The steps in management’s decision-making process are listed in random order below. Indicate the order in which the steps should be executed. ________ Make a decision. ________ Review results of the...

Q: Magic Corporation, an amusement park, is considering a capital investment

Magic Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $136,000 and have an estimated useful life of 5 years. It will be sold for $65,000 at...

Q: Bogart Company is considering two alternatives. Alternative A will have revenues

Bogart Company is considering two alternatives. Alternative A will have revenues of $160,000 and costs of $100,000. Alternative B will have revenues of $180,000 and costs of $125,000. Compare Alternat...

Q: For the quarter ended March 31, 2014, Maris Company accumulates

For the quarter ended March 31, 2014, Maris Company accumulates the following sales data for its product, Garden-Tools: $310,000 budget; $305,000 actual. Prepare a static budget report for the quarter...

Q: Manson Industries incurs unit costs of $8 ($5 variable and

Manson Industries incurs unit costs of $8 ($5 variable and $3 fixed) in making a subassembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $6 per unit. If the...

Q: Data for Maris Company are given in BE22-1. In

Data for Maris Company are given in BE22-1. In the second quarter, budgeted sales were $380,000, and actual sales were $384,000. Prepare a static budget report for the second quarter and for the year...

Q: In October, Roby Company reports 21,000 actual direct labor

In October, Roby Company reports 21,000 actual direct labor hours, and it incurs $118,000 of manufacturing overhead costs. Standard hours allowed for the work done is 20,400 hours. The predetermined o...

Q: Kobe Company has a factory machine with a book value of $

Kobe Company has a factory machine with a book value of $90,000 and a remaining useful life of 5 years. It can be sold for $30,000. A new machine is available at a cost of $300,000. This machine will...

Q: Journalize the following transactions for Combs Company. (a)

Journalize the following transactions for Combs Company. (a) Purchased 6,000 units of raw materials on account for $11,500. The standard cost was $12,000. (b) Issued 5,600 units of raw materials for p...

Q: For its three investment centers, Kaspar Company accumulates the following data

For its three investment centers, Kaspar Company accumulates the following data Compute the return on investment (ROI) for each center.

Q: Some overhead data for Roby Company are given in BE23-6

Some overhead data for Roby Company are given in BE23-6. In addition, the flexible manufacturing overhead budget shows that budgeted costs are $4 variable per direct labor hour and $50,000 fixed. Comp...

Q: Using the data in BE23-6 and BE23-10,

Using the data in BE23-6 and BE23-10, compute the overhead volume variance. Normal capacity was 25,000 direct labor hours Data in BE23-6 and BE23-10: In October, Roby Company reports 21,000 actual di...

Q: Caine Bottling Corporation is considering the purchase of a new bottling machine

Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $200,000 and has an estimated useful life of 8 years with zero salvage value. Management estima...

Q: Tang Company accumulates the following data concerning raw materials in making one

Tang Company accumulates the following data concerning raw materials in making one gallon of finished product: (1) Price—net purchase price $2.30, freight-in$0.20, and receiving and handling $0.10....

Q: Labor data for making one gallon of finished product in Tang Company

Labor data for making one gallon of finished product in Tang Company are as follows: (1) Price—hourly wage rate $13.00, payroll taxes $0.80, and fringe benefits $1.20. (2) Quantity—actual production t...

Q: Simba Company’s standard materials cost per unit of output is $10

Simba Company’s standard materials cost per unit of output is $10 (2 pounds 3 $5). During July, the company purchases and uses 3,200 pounds of materials costing $16,192 in making 1,500 units of finish...

Q: Hartley Company’s standard labor cost per unit of output is $22

Hartley Company’s standard labor cost per unit of output is $22 (2 hours 3 $11 per hour). During August, the company incurs 2,100 hours of direct labor at an hourly cost of $10.80 per hour in making 1...

Q: The four perspectives in the balanced scorecard are (1)

The four perspectives in the balanced scorecard are (1) financial, (2) customer, (3) internal process, and (4) learning and growth. Match each of the following objectives with the perspective it i...

Q: Journalize the following transactions for Dewey, Inc. (a

Journalize the following transactions for Dewey, Inc. (a) Incurred direct labor costs of $24,000 for 3,000 hours. The standard labor cost was $25,500. (b) Assigned 3,000 direct labor hours costing $24...

Q: Bella Company is considering purchasing new equipment for $450,000

Bella Company is considering purchasing new equipment for $450,000. It is expected that the equipment will produce net annual cash flows of $50,000 over its 10-year useful life. Annual depreciation wi...

Q: Hsung Company accumulates the following data concerning a proposed capital investment:

Hsung Company accumulates the following data concerning a proposed capital investment: cash cost $215,000, net annual cash flows $40,000, present value factor of cash inflows for 10 years 5.65 (rounde...

Q: Mecha Oil Company is considering investing in a new oil well.

Mecha Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by $130,000 and will increase annual expenses by $70,000 including deprecia...

Q: Numerous articles have been written that identify early warning signs that you

Numerous articles have been written that identify early warning signs that you might be getting into trouble with your personal debt load. You can find many good articles on this topic on the Web. In...

Q: Beacon Company is considering two different, mutually exclusive capital expenditure proposals

Beacon Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $400,000, has an expected useful life of 10 years, a salvage value of zero, and is ex...

Q: Maize Company incurs a cost of $35 per unit, of

Maize Company incurs a cost of $35 per unit, of which $20 is variable, to make a product that normally sells for $58. A foreign wholesaler offers to buy 6,000 units at $30 each. Maize will incur addit...

Q: Use this list of terms to complete the sentences that follow.

Use this list of terms to complete the sentences that follow. Long-range plans Participative budgeting Sales forecast Operating budgets...

Q: In Pargo Company’s flexible budget graph, the fixed cost line and

In Pargo Company’s flexible budget graph, the fixed cost line and the total budgeted cost line intersect the vertical axis at $90,000. The total budgeted cost line is $330,000 at an activity level of...

Q: Indicate which of the four perspectives in the balanced scorecard is most

Indicate which of the four perspectives in the balanced scorecard is most likely associated with the objectives that follow. 1. Ethics violations. 2. Credit rating. 3. Customer retention. 4. Stockouts...

Q: Wallowa Company is considering a long-term investment project called ZIP

Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows wo...

Q: Manufacturing overhead data for the production of Product H by Smart Company

Manufacturing overhead data for the production of Product H by Smart Company are as follows. Overhead incurred for 52,000 actual direct labor hours worked ……………$263,000 Overhead rate (variabl...

Q: Using the information in P23-5A, compute the overhead controllable

Using the information in P23-5A, compute the overhead controllable variance and the overhead volume variance. Information in P23-5A: Pace Labs, Inc. provides mad cow disease testing for both state an...

Q: Using the information in P23-1A, compute the overhead controllable

Using the information in P23-1A, compute the overhead controllable variance and the overhead volume variance. Information in P23-1A: Costello Corporation manufactures a single product. The standard c...

Q: Using the information in P23-2A, compute the overhead controllable

Using the information in P23-2A, compute the overhead controllable variance and the overhead volume variance. Information in P23-2A: Ayala Corporation accumulates the following data relative to jobs...

Q: Using the information in P23-3A, compute the overhead controllable

Using the information in P23-3A, compute the overhead controllable variance and the overhead volume variance. Information in P23-5A: Hopkins Clothiers is a small company that manufactures tall-men&ac...

Q: Quillen Company is performing a post-audit of a project completed

Quillen Company is performing a post-audit of a project completed one year ago. The initial estimates were that the project would cost $250,000, would have a useful life of 9 years, zero salvage value...

Q: Using the information in P23-5B, compute the overhead controllable

Using the information in P23-5B, compute the overhead controllable variance and the overhead volume variance. Information in P23-5B: Bonita Labs performs steroid testing services to high schools, col...

Q: Using the information in P23-1B, compute the overhead controllable

Using the information in P23-1B, compute the overhead controllable variance and the overhead volume variance. Information in P23-1B: Buil Corporation manufactures a single product. The standard cost...

Q: Using the information in P23-2B, compute the overhead controllable

Using the information in P23-2B, compute the overhead controllable variance and the overhead volume variance. Information in P23-2B: Huang Company uses a standard cost accounting system to account fo...

Q: Using the information in P23-3B, compute the overhead controllable

Using the information in P23-3B, compute the overhead controllable variance and the overhead volume variance. Information in P23-3B: Zimmerman Clothiers manufactures women’s busines...

Q: What is the relationship, if any, between a responsibility reporting

What is the relationship, if any, between a responsibility reporting system and a company’s organization chart?

Q: (a) What costs are included in a performance report for

(a) What costs are included in a performance report for a cost center? (b) In the report, are variable and fixed costs identified?

Q: The following purposes are part of a budgetary reporting system:

The following purposes are part of a budgetary reporting system: (a) Determine efficient use of materials. (b) Control overhead costs. (c) Determine whether income objectives are being met. For eac...

Q: Jane Nott is confused about controllable margin reported in an income statement

Jane Nott is confused about controllable margin reported in an income statement for a profit center. How is this margin computed, and what is its primary purpose?

Q: What is the primary basis for evaluating the performance of the manager

What is the primary basis for evaluating the performance of the manager of an investment center? Indicate the formula for this basis.

Q: Explain the ways that ROI can be improved.

Explain the ways that ROI can be improved.

Q: Horowitz Company is evaluating the purchase of a rebuilt spot-welding

Horowitz Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $176,000, has an estimated useful life of 7 years, a...

Q: Indicate two behavioral principles that pertain to (a) the

Indicate two behavioral principles that pertain to (a) the manager being evaluated and (b) top management.

Q: What is a major disadvantage of using ROI to evaluate investment and

What is a major disadvantage of using ROI to evaluate investment and company performance?

Q: How may a budget report for the second quarter differ from a

How may a budget report for the second quarter differ from a budget report for the first quarter?

Q: Ken Bay questions the usefulness of a master sales budget in evaluating

Ken Bay questions the usefulness of a master sales budget in evaluating sales performance. Is there justification for Ken’s concern? Explain.

Q: Under what circumstances may a static budget be an appropriate basis for

Under what circumstances may a static budget be an appropriate basis for evaluating a manager’s effectiveness in controlling costs?

Q: “A flexible budget is really a series of static budgets.”

“A flexible budget is really a series of static budgets.” Is this true? Why?

Q: The static manufacturing overhead budget based on 40,000 direct labor

The static manufacturing overhead budget based on 40,000 direct labor hours shows budgeted indirect labor costs of $54,000. During March, the department incurs $64,000 of indirect labor while working...

Q: A static overhead budget based on 40,000 direct labor hours

A static overhead budget based on 40,000 direct labor hours shows Factory Insurance $6,500 as a fixed cost. At the 50,000 direct labor hours worked in March, factory insurance costs were $6,300. Is th...

Q: In each of the following formulas, supply the words that should

In each of the following formulas, supply the words that should be inserted for each number in parentheses. (a) (Actual quantity x (1)) - (Standard quantity x (2)) = Total materials variance (b) ((3)...

Q: In the direct labor variance matrix, there are three factors:

In the direct labor variance matrix, there are three factors: (1) Actual hours x Actual rate, (2) Actual hours x Standard rate, and (3) Standard hours x Standard rate. Using the numbers, indicate t...

Q: Viera Corporation is considering investing in a new facility. The estimated

Viera Corporation is considering investing in a new facility. The estimated cost of the facility is $2,045,000. It will be used for 12 years, then sold for $716,000. The facility will generate annual...

Q: Mikan Company’s standard predetermined overhead rate is $9 per direct labor

Mikan Company’s standard predetermined overhead rate is $9 per direct labor hour. For the month of June, 26,000 actual hours were worked, and 27,000 standard hours were allowed. How much overhead was...

Q: How often should variances be reported to management? What principle may

How often should variances be reported to management? What principle may be used with variance reports?

Q: Kerry James says that the balanced scorecard was created to replace financial

Kerry James says that the balanced scorecard was created to replace financial measures as the primary mechanism for performance evaluation. He says that it uses only nonfinancial measures. Is this tru...

Q: If the $9 per hour overhead rate in Question 12 includes

If the $9 per hour overhead rate in Question 12 includes $5 variable, and actual overhead costs were $248,000, what is the overhead controllable variance for June? The normal capacity hours were 28,00...

Q: What is the purpose of computing the overhead volume variance? What

What is the purpose of computing the overhead volume variance? What is the basic formula for this variance?

Q: Alma Ortiz does not understand why the overhead volume variance indicates that

Alma Ortiz does not understand why the overhead volume variance indicates that fixed overhead costs are under- or over applied. Clarify this matter for Alma.

Q: Contrast the roles of the management accountant and management in setting standard

Contrast the roles of the management accountant and management in setting standard costs.

Q: Distinguish between an ideal standard and a normal standard.

Distinguish between an ideal standard and a normal standard.

Q: “The objective in setting the direct labor quantity standard is to

“The objective in setting the direct labor quantity standard is to determine the aggregate time required to make one unit of product.” Do you agree? What allowances should be made in setting this stan...

Q: How is the predetermined overhead rate determined when standard costs are used

How is the predetermined overhead rate determined when standard costs are used?

Q: Hank Jewell is a production manager at a metal fabricating plant.

Hank Jewell is a production manager at a metal fabricating plant. Last night, he read an article about a new piece of equipment that would dramatically reduce his division’s costs. Hank was very excit...

Q: What advantages does the profitability index provide over direct comparison of net

What advantages does the profitability index provide over direct comparison of net present value when comparing two projects?

Q: Your classmate, Mike Dawson, is confused about the factors that

Your classmate, Mike Dawson, is confused about the factors that are included in the annual rate of return technique. What is the formula for this technique?

Q: What are the advantages and disadvantages of the cash payback technique?

What are the advantages and disadvantages of the cash payback technique?

Q: Tom Wells claims the formula for the cash payback technique is the

Tom Wells claims the formula for the cash payback technique is the same as the formula for the annual rate of return technique. Is Tom correct? What is the formula for the cash payback technique?

Q: What is the decision rule under the net present value method?

What is the decision rule under the net present value method?

Q: What simplifying assumptions were made in the chapter regarding calculation of net

What simplifying assumptions were made in the chapter regarding calculation of net present value?

Q: What steps are frequently involved in management’s decision-making process?

What steps are frequently involved in management’s decision-making process?

Q: How are allocated joint costs treated when making a sell-or

How are allocated joint costs treated when making a sell-or-process-further decision?

Q: Your roommate, Gale Dunham, is confused about sunk costs.

Your roommate, Gale Dunham, is confused about sunk costs. Explain to your roommate the meaning of sunk costs and their relevance to a decision to retain or replace equipment.

Q: Huang Inc. has one product line that is unprofitable. What

Huang Inc. has one product line that is unprofitable. What circumstances may cause overall company net income to be lower if the unprofitable product line is eliminated?

Q: The executive team at Current Designs has gathered to evaluate the company’s

The executive team at Current Designs has gathered to evaluate the company’s operations for the last month. One of the topics on the agenda is the special order from Huegel Hollow, which was presented...

Q: Managerial accounting techniques can be used in a wide variety of settings

Managerial accounting techniques can be used in a wide variety of settings. As we have frequently pointed out, you can use them in many personal situations. They also can be useful in trying to find s...

Q: In preparing the direct materials budget for Quan Company, management concludes

In preparing the direct materials budget for Quan Company, management concludes that required purchases are 64,000 units. If 52,000 direct materials units are required in production and there are 9,00...

Q: The production budget of Justus Company calls for 80,000 units

The production budget of Justus Company calls for 80,000 units to be produced. If it takes 45 minutes to make one unit and the direct labor rate is $16 per hour, what is the total budgeted direct labo...

Q: Ortiz Company’s manufacturing overhead budget shows total variable costs of $198

Ortiz Company’s manufacturing overhead budget shows total variable costs of $198,000 and total fixed costs of $162,000. Total production in units is expected to be 150,000. It takes 20 minutes to make...

Q: Everly Company’s variable selling and administrative expenses are 12% of net

Everly Company’s variable selling and administrative expenses are 12% of net sales. Fixed expenses are $50,000 per quarter. The sales budget shows expected sales of $200,000 and $240,000 in the first...

Q: For Goody Company, the budgeted cost for one unit of product

For Goody Company, the budgeted cost for one unit of product is direct materials $10, direct labor $20, and manufacturing overhead 80% of direct labor cost. If 25,000 units are expected to be sold at...

Q: Indicate the supporting schedules used in preparing a budgeted income statement through

Indicate the supporting schedules used in preparing a budgeted income statement through gross profit for a manufacturer.

Q: Identify the three sections of a cash budget. What balances are

Identify the three sections of a cash budget. What balances are also shown in this budget?

Q: Your roommate, Anna Polis, contends that accounting contributes to most

Your roommate, Anna Polis, contends that accounting contributes to most of the steps in management’s decision-making process. Is your roommate correct? Explain.

Q: Noterman Company has credit sales of $600,000 in January

Noterman Company has credit sales of $600,000 in January. Past experience suggests that 40% is collected in the month of sale, 50% in the month following the sale, and 10% in the second month followin...

Q: What is the formula for determining required merchandise purchases for a merchandiser

What is the formula for determining required merchandise purchases for a merchandiser?

Q: School costs money. Is this an expenditure that you should have

School costs money. Is this an expenditure that you should have avoided? A year of tuition at a public four-year college costs about $8,655, and a year of tuition at a public two-year college costs ab...

Q: How may expected revenues in a service company be computed?

How may expected revenues in a service company be computed?

Q: What budget is the starting point in preparing the master budget?

What budget is the starting point in preparing the master budget? What may result if this budget is inaccurate?

Q: “The production budget shows both unit production data and unit cost

“The production budget shows both unit production data and unit cost data.” Is this true? Explain.

Q: Alou Company has 20,000 beginning finished goods units. Budgeted

Alou Company has 20,000 beginning finished goods units. Budgeted sales units are 160,000. If management desires 15,000 ending finished goods units, what are the required units of production?

Q: Jane Gilligan asks your help in understanding the essentials of effective budgeting

Jane Gilligan asks your help in understanding the essentials of effective budgeting. Identify the essentials for Jane.

Q: What criteria are helpful in determining the length of the budget period

What criteria are helpful in determining the length of the budget period? What is the most common budget period?

Q: Lori Wilkins maintains that the only difference between budgeting and long-

Lori Wilkins maintains that the only difference between budgeting and long-range planning is time. Do you agree? Why or why not?

Q: Distinguish between a master budget and a sales forecast.

Distinguish between a master budget and a sales forecast.

Q: “Incremental analysis involves the accumulation of information concerning a single course

“Incremental analysis involves the accumulation of information concerning a single course of action.” Do you agree? Why?

Q: (a) What is budgetary control? (b)

(a) What is budgetary control? (b) Fred Barone is describing budgetary control. What steps should be included in Fred’s description?

Q: In order to better serve their rural patients, Drs. Joe

In order to better serve their rural patients, Drs. Joe and Rick Parcells (brothers) began giving safety seminars. Especially popular were their “emergency-preparedness” talks given to f...

Q: Cali Company has prepared a graph of flexible budget data. At

Cali Company has prepared a graph of flexible budget data. At zero direct labor hours, the total budgeted cost line intersects the vertical axis at $20,000. At 10,000 direct labor hours, the line draw...

Q: The flexible budget formula is fixed costs $50,000 plus

The flexible budget formula is fixed costs $50,000 plus variable costs of $4 per direct labor hour. What is the total budgeted cost at (a) 9,000 hours and (b) 12,345 hours?

Q: What is management by exception? What criteria may be used in

What is management by exception? What criteria may be used in identifying exceptions?

Q: Distinguish between controllable and non-controllable costs.

Distinguish between controllable and non-controllable costs.

Q: How do responsibility reports differ from budget reports?

How do responsibility reports differ from budget reports?

Q: Sydney Greene asks for your help concerning the relevance of variable and

Sydney Greene asks for your help concerning the relevance of variable and fixed costs in incremental analysis. Help Sydney with her problem.

Q: What data are relevant in deciding whether to accept an order at

What data are relevant in deciding whether to accept an order at a special price?

Q: Emil Corporation has an opportunity to buy parts at $9 each

Emil Corporation has an opportunity to buy parts at $9 each that currently cost $12 to make. What manufacturing costs are relevant to this make-or-buy decision?

Q: Define the term “opportunity cost.” How may this cost be

Define the term “opportunity cost.” How may this cost be relevant in a make-or-buy decision?

Q: What is the decision rule in deciding whether to sell a product

What is the decision rule in deciding whether to sell a product or process it further?

Q: You are an accountant in the budgetary, projections, and special

You are an accountant in the budgetary, projections, and special projects department of Fernetti Conductor, Inc., a large manufacturing company. The president, Richard Brown, asks you on very short no...

Q: What are joint products? What accounting issue results from the production

What are joint products? What accounting issue results from the production process that creates joint products?

Q: In order to get your personal finances under control, you need

In order to get your personal finances under control, you need to prepare a personal budget. Assume that you have compiled the following information regarding your expected cash flows for a typical mo...

Q: You might hear people say that they “need to learn to

You might hear people say that they “need to learn to live within a budget.” The funny thing is that most people who say this haven’t actually prepared a personal budget, nor do they intend to. Instea...

Q: In order to better serve their rural patients, Drs. Joe

In order to better serve their rural patients, Drs. Joe and Rick Parcells (brothers) began giving safety seminars. Especially popular were their “emergency-preparedness” talks given to f...

Q: You are an accountant in the budgetary, projections, and special

You are an accountant in the budgetary, projections, and special projects department of Fernetti Conductor, Inc., a large manufacturing company. The president, Richard Brown, asks you on very short no...

Q: In order to get your personal finances under control, you need

In order to get your personal finances under control, you need to prepare a personal budget. Assume that you have compiled the following information regarding your expected cash flows for a typical mo...

Q: You might hear people say that they “need to learn to

You might hear people say that they “need to learn to live within a budget.” The funny thing is that most people who say this haven’t actually prepared a personal budget, nor do they intend to. Instea...

Q: Chicksaw Company uses the following budgets: Balance Sheet, Capital Expenditure

Chicksaw Company uses the following budgets: Balance Sheet, Capital Expenditure, Cash, Direct Labor, Direct Materials, Income Statement, Manufacturing Overhead, Production, Sales, and Selling and Admi...

Q: The setting of standards is critical to the effective use of standards

The setting of standards is critical to the effective use of standards in evaluating performance. Instructions: Explain the following in a memo to your instructor. (a) The comparative advantages and...

Q: At Symond Company, production workers in the Painting Department are paid

At Symond Company, production workers in the Painting Department are paid on the basis of productivity. The labor time standard for a unit of production is established through periodic time studies co...

Q: From the time you first entered school many years ago, instructors

From the time you first entered school many years ago, instructors have been measuring and evaluating you by imposing standards. In addition, many of you will pursue professions that administer profes...

Q: Do you think that standard costs are used only in making products

Do you think that standard costs are used only in making products like wheel bearings and hamburgers? Think again. Standards influence virtually every aspect of our lives. For example, the next time y...

Q: Refer back to E24-9 to address the following.

Refer back to E24-9 to address the following. Data in E24-9: Brady Service Center just purchased an automobile hoist for $35,000. The hoist has an 8-year life and an estimated salvage value of $3,000...

Q: The March 31, 2011, edition of the Wall Street Journal

The March 31, 2011, edition of the Wall Street Journal includes an article by Russell Gold entitled “Solar Gains Traction—Thanks to Subsidies.” Instructions: Read the article and answer the following...

Q: Rubble Company must decide whether to make or buy some of its

Rubble Company must decide whether to make or buy some of its components. The costs of producing 60,000 switches for its generators are as follows. Instead of making the switches at an average cost...

Q: Mesa Verde manufactures unpainted furniture for the do-it-yourself

Mesa Verde manufactures unpainted furniture for the do-it-yourself (DIY) market. It currently sells a table for $75. Production costs are $40 variable and $10 fixed. Mesa Verde is considering staining...

Q: Gator Corporation manufactures several types of accessories. For the year,

Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $500,000, variable expenses of $370,000, and fixed expenses of $150,000. Therefore,...

Q: Batista Company management wants to maintain a minimum monthly cash balance of

Batista Company management wants to maintain a minimum monthly cash balance of $20,000. At the beginning of April, the cash balance is $25,000, expected cash receipts for April are $245,000, and cash...

Q: Blake Romney became Chief Executive Officer of Peters Inc. two years

Blake Romney became Chief Executive Officer of Peters Inc. two years ago. At the time, the company was reporting lagging profits, and Blake was brought in to “stir things up.” The company has three di...

Q: Zeller Company estimates that 2014 unit sales will be 20,000

Zeller Company estimates that 2014 unit sales will be 20,000 in quarter 1, 24,000 in quarter 2, and 29,000 in quarter 3, at a unit selling price of $20. Management desires to have ending finished good...

Q: Ash Creek Company is preparing its master budget for 2014. Relevant

Ash Creek Company is preparing its master budget for 2014. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to tot...

Q: Ash Creek Company is preparing its budgeted income statement for 2014.

Ash Creek Company is preparing its budgeted income statement for 2014. Relevant data pertaining to its sales, production, and direct materials budgets can be found in Do it! 21-3. In addition, Ash Cr...

Q: Mussatto Company expects to produce 50,000 units of product IOA

Mussatto Company expects to produce 50,000 units of product IOA during the current year. Budgeted variable manufacturing costs per unit are direct materials $7, direct labor $13, and overhead $18. Ann...

Q: The service division of Raney Industries reported the following results for 2013

The service division of Raney Industries reported the following results for 2013. Sales ………………………………………………………$500,000 Variable costs ……………………………………………300,000 Controllable fixed costs ………………………………. 75...

Q: The standard cost of product 5252 includes 1.9 hours of

The standard cost of product 5252 includes 1.9 hours of direct labor at $14.00 per hour. The predetermined overhead rate is $22.00 per direct labor hour. During July, the company incurred 4,100 hours...

Q: Wallowa Company is considering a long-term investment project called ZIP

Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows wo...

Q: Wallowa Company is considering a long-term investment project called ZIP

Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows wo...

Q: Wallowa Company is considering a long-term investment project called ZIP

Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual revenues would...

Q: The following is a list of terms related to performance evaluation.

The following is a list of terms related to performance evaluation. 1. Balanced scorecard 5. Customer perspective 2. Variance 6. Internal process perspective 3. Learning and growth perspec...

Q: At Jaymes Company, it costs $30 per unit ($20

At Jaymes Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product at full capacity that normally sells for $45. A foreign wholesaler offers to buy 3,000 units at $25 each. Jaymes...

Q: Vista Company installed a standard cost system on January 1. Selected

Vista Company installed a standard cost system on January 1. Selected transactions for the month of January are as follows. 1. Purchased 18,000 units of raw materials on account at a cost of $4.50 per...

Q: Stiller Company uses a standard cost accounting system. Some of the

Stiller Company uses a standard cost accounting system. Some of the ledger accounts have been destroyed in a fire. The controller asks your help in reconstructing some missing entries and balances. I...

Q: Data for Nona Inc. are given in E23-7.

Data for Nona Inc. are given in E23-7. Data given in E23-7: Nona Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (...

Q: The information shown below was taken from the annual manufacturing overhead cost

The information shown below was taken from the annual manufacturing overhead cost budget of Samantha Company. Variable manufacturing overhead costs ………………………………..$34,650 Fixed manufacturing overhead...

Q: The loan department of Calgary Bank uses standard costs to determine the

The loan department of Calgary Bank uses standard costs to determine the overhead cost of processing loan applications. During the current month, a fire occurred, and the accounting records for the de...

Q: Alona Company’s overhead rate was based on estimates of $200,

Alona Company’s overhead rate was based on estimates of $200,000 for overhead costs and 20,000 direct labor hours. Alona’s standards allow 2 hours of direct labor per unit produced. Production in May...

Q: Kimm Company has gathered the following information about its product.

Kimm Company has gathered the following information about its product. Direct materials. Each unit of product contains 4.5 pounds of materials. The average waste and spoilage per unit produced under n...

Q: Monte Services, Inc. is trying to establish the standard labor

Monte Services, Inc. is trying to establish the standard labor cost of a typical oil change. The following data have been collected from time and motion studies conducted over the past month. Actual...

Q: Lewis Company’s standard labor cost of producing one unit of Product DD

Lewis Company’s standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour. During August, 40,600 hours of labor are incurred at a cost of $12.15 per hour to pro...

Q: The following direct materials and direct labor data pertain to the operations

The following direct materials and direct labor data pertain to the operations of Laurel Company for the month of August. Instructions: (a) Compute the total, price, and quantity variances for mater...

Q: Perine Company has 2,000 pounds of raw materials in its

Perine Company has 2,000 pounds of raw materials in its December 31, 2013, ending inventory. Required production for January and February of 2014 are 4,000 and 5,000 units, respectively. Two pounds of...

Q: You have been given the following information about the production of Horatio

You have been given the following information about the production of Horatio Co., and are asked to provide the plant manager with information for a meeting with the vice president of operations. Sta...

Q: Palo Alto Corporation is considering purchasing a new delivery truck. The

Palo Alto Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company’s current truck (not the least of which is that it runs). The new truck would cost...

Q: BAP Corporation is reviewing an investment proposal. The initial cost and

BAP Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income fo...

Q: Hiland Inc. manufactures snowsuits. Hiland is considering purchasing a new

Hiland Inc. manufactures snowsuits. Hiland is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million; six...

Q: Eisler Corporation is involved in the business of injection molding of plastics

Eisler Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $430,000. The company belie...

Q: BSU Inc. wants to purchase a new machine for $29

BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage va...

Q: Ueker Company is considering three capital expenditure projects. Relevant data for

Ueker Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Annual income is constant over the life of the project. Each project is expected to ha...

Q: Brady Service Center just purchased an automobile hoist for $35,

Brady Service Center just purchased an automobile hoist for $35,000. The hoist has an 8-year life and an estimated salvage value of $3,000. Installation costs and freight charges were $3,300 and $700,...

Q: Ortega has prepared the following list of statements about decision-making

Ortega 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 cour...

Q: Gruden Company produces golf discs which it normally sells to retailers for

Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is: Materials ……………………………………$ 10,000 Labor ……………………………………………30,000 Var...

Q: Chudrick Inc. makes unfinished bookcases that it sells for $62

Chudrick Inc. makes unfinished bookcases that it sells for $62. Production costs are $36 variable and $10 fixed. Because it has unused capacity, Chudrick is considering finishing the bookcases and sel...

Q: Leno Company manufactures toasters. For the first 8 months of 2014

Leno Company manufactures toasters. For the first 8 months of 2014, the company reported the following operating results while operating at 75% of plant capacity: Sales (350,000 units) ……………………………………...

Q: Klean Fiber Company is the creator of Y-Go, a

Klean Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular as an undergarment...

Q: Dallas Industries has adopted the following production budget for the first 4

Dallas Industries has adopted the following production budget for the first 4 months of 2014. Each unit requires 2 pounds of raw materials costing $2 per pound. On December 31, 2013, the ending raw...

Q: On January 1, 2014, the Hardin Company budget committee has

On January 1, 2014, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2014. Sales units: First quarter 5,000; second quarter 6,000; third...

Q: Gibbs Company purchases sails and produces sailboats. It currently produces 1

Gibbs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Gibbs purchases sails at $250 e...

Q: Rodriguez, Inc., is preparing its direct labor budget for 2014

Rodriguez, Inc., is preparing its direct labor budget for 2014 from the following production budget based on a calendar year. Each unit requires 1.5 hours of direct labor. Instructions: Prepare a d...

Q: Rachel Rey recently opened her own basketweaving studio. She sells finished

Rachel Rey recently opened her own basketweaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Rachel has put together a variet...

Q: Adler Company has always done some planning for the future, but

Adler Company has always done some planning for the future, but the company has never prepared a formal budget. Now that the company is growing larger, it is considering preparing a budget. Instructi...

Q: Duncan Company combines its operating expenses for budget purposes in a selling

Duncan Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first 6 months of 2014, the following dataare available. 1. Sales: 20,000 uni...

Q: A company manufactures three products using the same production process. The

A company manufactures three products using the same production process. The costs incurred up to the split-off point are $200,000. These costs are allocated to the products on the basis of their sale...

Q: Jobs, Inc. has recently started the manufacture of Tri-

Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a mobile phone. The cost structure...

Q: On January 2, 2013, Benson Hospital purchased a $100

On January 2, 2013, Benson Hospital purchased a $100,000 special radiology scanner from Picard Inc. The scanner had a useful life of 4 years and was estimated to have no disposal value at the end of i...

Q: Johnson Enterprises uses a computer to handle its sales invoices. Lately

Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of...

Q: Aaron Corporation is projecting a cash balance of $30,000

Aaron Corporation is projecting a cash balance of $30,000 in its December 31, 2013, balance sheet. Aaron’s schedule of expected collections from customers for the first quarter of 2014 shows total col...

Q: Cawley Company makes three models of tasers. Information on the three

Cawley Company makes three models of tasers. Information on the three products is given below. Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative sa...

Q: Twyla Company operates a small factory in which it manufactures two products

Twyla Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows. For purposes of simplicity, the firm averages total...

Q: The costs listed below relate to a variety of different decision situations

The costs listed below relate to a variety of different decision situations. Cost Decision 1. Unavoidable fixed overhead Eliminate an unprofitable segment 2. Di...

Q: Lager Dental Clinic is a medium-sized dental service specializing in

Lager Dental Clinic is a medium-sized dental service specializing in family dental care. The clinic is currently preparing the master budget for the first 2 quarters of 2014. All that remains in this...

Q: In May 2014, the budget committee of Grand Stores assembles the

In May 2014, the budget committee of Grand Stores assembles the following data in preparation of budgeted merchandise purchases for the month of June. 1. Expected sales: June $500,000, July $600,000....

Q: Fuqua Company’s sales budget projects unit sales of part 198Z of 10

Fuqua Company’s sales budget projects unit sales of part 198Z of 10,000 units in January, 12,000 units in February, and 13,000 units in March. Each unit of part 198Z requires 4 pounds of materials, wh...

Q: Dalby Company has accumulated the following budget data for the year 2014

Dalby Company has accumulated the following budget data for the year 2014. 1. Sales: 30,000 units, unit selling price $85. 2. Cost of one unit of finished goods: direct materials 2 pounds at $5 per po...

Q: Jacque Company accumulated the following standard cost data concerning product I-

Jacque Company accumulated the following standard cost data concerning product I-Tal. Direct materials per unit: 2 pounds at $5 per pound Direct labor per unit: 0.2 hours at $15 per hour Manufacturing...

Q: Vilas Company is considering a capital investment of $190,000

Vilas Company is considering a capital investment of $190,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is...

Q: Voorhees, Inc. reports the following financial information.

Voorhees, Inc. reports the following financial information. Average operating assets …………………………………. $3,000,000 Controllable margin ……………………………………………$ 660,000 Minimum rate of return ………………………………………………...

Q: Palermo Company estimates that unit sales will be 10,000 in

Palermo Company estimates that unit sales will be 10,000 in quarter 1; 12,000 in quarter 2; 15,000 in quarter 3; and 18,000 in quarter 4. Using a sales price of $70 per unit, prepare the sales budget...

Q: The Wellstone Division operates as a profit center. It reports the

The Wellstone Division operates as a profit center. It reports the following for the year. Prepare a responsibility report for the Wellstone Division at December 31, 2014.

Q: The standard cost of product 777 includes 2 units of direct materials

The standard cost of product 777 includes 2 units of direct materials at $6.00 per unit. During August, the company bought 29,000 units of materials at $6.30 and used those materials to produce 16,000...

Q: For Roche Inc., variable manufacturing overhead costs are expected to be

For Roche Inc., variable manufacturing overhead costs are expected to be $20,000 in the first quarter of 2014, with $5,000 increments in each of the remaining three quarters. Fixed overhead costs are...

Q: Noble Company classifies its selling and administrative expense budget into variable and

Noble Company classifies its selling and administrative expense budget into variable and fixed components. Variable expenses are expected to be $22,000 in the first quarter, and $4,000 increments are...

Q: Pierre’s Hair Salon is considering opening a new location in French Lick

Pierre’s Hair Salon is considering opening a new location in French Lick, California. The cost of building a new salon is $300,000. A new salon will normally generate annual revenues of $70,000, with...

Q: Bruno Industries expects credit sales for January, February, and March

Bruno Industries expects credit sales for January, February, and March to be $200,000, $260,000, and $300,000, respectively. It is expected that 75% of the sales will be collected in the month of sale...

Q: Moore Wholesalers is preparing its merchandise purchases budget. Budgeted sales are

Moore Wholesalers is preparing its merchandise purchases budget. Budgeted sales are $400,000 for April and $480,000 for May. Cost of goods sold is expected to be 65% of sales. The company’s desired en...

Q: The following data have been collected by capital budgeting analysts

The following data have been collected by capital budgeting analysts at Sunrise Beach, Inc., concerning an investment in an expansion of the company’s product line. Analysts estimate that an investmen...

Q: The following information was obtained from the records of Shae,

The following information was obtained from the records of Shae, Inc.:Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . . $264,000Notes payable (long-term) . . . . . . . . . . . ....

Q: Following are the budgeted income statements for the second quarter

Following are the budgeted income statements for the second quarter of 2010 for Marine Tech, Inc.:The company expects about 40% of sales to be cash transactions. Of sales on account, 65% are expected...

Q: Charlie’s Furniture Store has been in business for several years.

Charlie’s Furniture Store has been in business for several years. The firm’s owners have described the store as a “high-price, high service” operation that provides lots of assistance to its customers...

Q: Presented here are the original overhead budget and the actual

Presented here are the original overhead budget and the actual costs incurred during July for Rembrant, Inc. Rembrant’s managers relate overhead to direct labor hours for planning, c...

Q: Rolen, Inc. is in the process of preparing the fourth

Rolen, Inc. is in the process of preparing the fourth quarter budget for 2010, and the following data have been assembled:• The company sells a single product at a price of $25 per unit. The estimated...

Q: On April 8, 2010, a flood destroyed the warehouse of

On April 8, 2010, a flood destroyed the warehouse of Stuco Distributing Co. From the waterlogged records of the company, management was able to determine that the firm’s gross profit ratio had average...

Q: Gravois, Inc. incurred the following costs during June:

Gravois, Inc. incurred the following costs during June:Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $158,375Direct labor . . . . . . . . . . . . . . . . . ....

Q: Branson Co. received its bank statement for the month ending

Branson Co. received its bank statement for the month ending May 31, 2010, and reconciled the statement balance to the May 31, 2010, balance in the Cash account. The reconciled balance was determined...

Q: Big Thunder Co. incurred the following costs during April:

Big Thunder Co. incurred the following costs during April:Raw materials purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99,225Direct labor ($15 per hour) . . . . . . . . . . . . . ....

Q: The financial statements of Pouchie Co. included the following information

The financial statements of Pouchie Co. included the following information for the year endedDecember 31, 2010 (amounts in millions):Depreciation and amortization expense . . . . . . . . . . . . . . ....

Q: You have accumulated $8,000 and are looking for the best

You have accumulated $8,000 and are looking for the best rate of return that can be earned over the next year. A bank savings account will pay 6%. A one-year bank certificate of deposit will pay 8%, b...

Q: Big Blue Rental Corp. provides rental agent services to apartment

Big Blue Rental Corp. provides rental agent services to apartment building owners. Big Blue Rental Corp.’s preliminary income statement for August 2010, and its August 31, 2010, prel...

Q: Following is a partially completed balance sheet for Hoe man,

Following is a partially completed balance sheet for Hoe man, Inc., at December 31, 2011, together with comparative data for the year ended December 31, 2010. From the statement of cash flows for the...

Q: Top Cap Co. is evaluating the purchase of another sewing

Top Cap Co. is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $208,000. In addition, delivery and installation costs...

Q: Using a present value table, your calculator, or a computer

Using a present value table, your calculator, or a computer program present value function, answer the following questions:Required:a. What is the present value of nine annual cash payments of $4,000,...

Q: Bacon, Inc., has the following owners’ equity section in its

Bacon, Inc., has the following owners’ equity section in its May 31, 2010, comparative balance sheets:Required:a. Calculate the amount that should be shown on the balance sheet for c...

Q: Following are comparative balance sheets for Millco, Inc., at January

Following are comparative balance sheets for Millco, Inc., at January 31 and February 28, 2011:Required:Prepare a statement of cash flows that explains the change that occurred in cash during the mont...

Q: The inventory records of Cushing, Inc., reflected the following information

The inventory records of Cushing, Inc., reflected the following information for the year ended December 31, 2010:Required:a. Assume that Cushing, Inc., uses a periodic inventory system. Calculate cost...

Q: Following are condensed income statements for Uncle Bill’s Home Improvement

Following are condensed income statements for Uncle Bill’s Home Improvement Center for the years ended December 31, 2011, and 2010:Uncle Bill was concerned about the operating result...

Q: During the year ended December 31, 2011, Gluco, Inc., split

During the year ended December 31, 2011, Gluco, Inc., split its stock on a 3-for-1 basis. In its annual report for 2010, the firm reported net income of $3,703,920 for 2010, with an average 268,400 sh...

Q: Enter the following column headings across the top of a

Enter the following column headings across the top of a sheet of paper:Enter the transaction / situation letter in the first column and show the effect, if any, of the transaction entry or adjustment...

Q: For several years Orbon, Inc. has followed a policy of

For several years Orbon, Inc. has followed a policy of paying a cash dividend of $1.20 per share and having a 10% stock dividend. In the 2011 annual report, Orbon reported restated earnings per share...

Q: The following data have been extracted from the records of

The following data have been extracted from the records of Riddle Co.:Required:a. Calculate the missing costs.b. Calculate the cost formula for mixed cost using the high–low method.c...

Q: Presented here are the comparative balance sheets of Hames, Inc.,

Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2011 and 2010. Sales for the year ended December 31, 2011, totaled $580,000.Required:a. Calculate ROI for 2011. Round...

Q: Shown here is an income statement in the traditional format

Shown here is an income statement in the traditional format for a firm with a sales volume of 20,000 units:Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....

Q: The standards for one case of liquid weed killer are:

The standards for one case of liquid weed killer are:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 lbs. @ $ 6.00/lb.Direct labor . . . . . . . . . . . ....

Q: Hank Itzek manufactures and sells homemade wine, and he wants

Hank Itzek manufactures and sells homemade wine, and he wants to develop a standard cost per gallon. The following are required for production of a 50-gallon batch.3,000 ounces of grape concentrate at...

Q: The Green Acres Inn is trying to determine its break-even

The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows.Salaries ……………………………….6200 per monthUtilities …………………...

Q: Stahl Inc. produces three separate products from a common process

Stahl Inc. produces three separate products from a common process costing $100,000. Each of the products can be sold at the split-off point or can be processed further and then sold for a higher price...

Q: The Polishing Department of Harbin Company has the following production

The Polishing Department of Harbin Company has the following production and manufacturing cost data for September. Materials are entered at the beginning of the process.Production: Beginning inventory...

Q: Major Instrument, Inc. manufactures two products: missile range instruments and

Major Instrument, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were produced, and overhead costs of $...

Q: The standard cost of Product B manufactured by MIT Company

The standard cost of Product B manufactured by MIT Company includes three units of direct materials at $5.00 per unit. During June, 29,000 units of direct materials are purchased at a cost of $4.70 pe...

Q: Nona Inc., which produces a single product, has prepared the

Nona Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product.Direct materials (8 pounds at $2.50 per pound) ……………………..20Direct labor (3 hours...

Q: Judy Jean, a recent graduate of Rolling’s accounting program, evaluated

Judy Jean, a recent graduate of Rolling’s accounting program, evaluated the operating performance of Artie Company’s six divisions. Judy made the following presenta...

Q: Doug’s Custom Construction Company is considering three new projects, each

Doug’s Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following net annual cash fl...

Q: Felde Company builds custom fishing lures for sporting goods stores.

Felde Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2014, the company incurred the following costs.Variable Costs per UnitDirect materials ………………………7....

Q: Ayala Corporation accumulates the following data relative to jobs started

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014.Overhead is applied on the basis of standard machine hours. Three hours of machine...

Q: Wilkins Inc. has two types of handbags: standard and custom.

Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing...

Q: Sutton Industrial Products Inc. (SIPI) is a diversified industrial-cleaner processing

Sutton Industrial Products Inc. (SIPI) is a diversified industrial-cleaner processing company. The company’s Verde plant produces two products: a table cleaner and a floor cleaner fr...

Q: Hill Company uses budgets in controlling costs. The August 2014

Hill Company uses budgets in controlling costs. The August 2014 budget report for the company’s Assembling Department is as follows.The monthly budget amounts in the report were base...

Q: Gutierrez Company has four operating divisions. During the first quarter

Gutierrez Company has four operating divisions. During the first quarter of 2014, the company reported aggregate income from operations of $213,000 and the following divisional results.Discontinuance...

Q: Jorgensen Corporation uses standard costs with its job order cost

Jorgensen Corporation uses standard costs with its job order cost accounting system. In January, an order (Job No. 12) for 1,900 units of Product B was received. The standard cost of one unit of Produ...

Q: Henkel Company is considering three long-term capital investment proposals. Each

Henkel Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.Depreciation is computed by the s...

Q: Jane’s Auto Care is considering the purchase of a new

Jane’s Auto Care is considering the purchase of a new tow truck. The garage doesn’t currently have a tow truck, and the $60,000 price tag for a new truck would represent a major expenditure. Jane Aust...

Q: Mercer Farm Supply Company manufactures and sells a fertilizer called

Mercer Farm Supply Company manufactures and sells a fertilizer called Basic II. The following data are available for preparing budgets for Basic II for the first 2 quarters of 2014.1. Sales: quarter 1...

Q: Huang Company uses a standard cost accounting system to account

Huang Company uses a standard cost accounting system to account for the manufacture of exhaust fans. In July 2014, it accumulates the following data relative to 1,800 units started and finished.Manufa...

Q: The Borders and Noble partnership is considering three long-term capital

The Borders and Noble partnership is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.Depreciation i...

Q: Isaac’s Auto Repair is considering the purchase of a new

Isaac’s Auto Repair is considering the purchase of a new tow truck. The garage doesn’t currently have a tow truck, and the $65,000 price tag for a new truck would represent a major expenditure for the...

Q: The Bonita Inn is trying to determine its break-even point.

The Bonita Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $60 a night. Operating costs are as follows.Salaries………………………………………………….8800Utilities………………………………………...

Q: Frio Company uses standard costs with its job order cost

Frio Company uses standard costs with its job order cost accounting system. In January, an order (Job No. 84) was received for 5,500 units of Product D. The standard cost of 1 unit of Product D is as...

Q: Cook Company estimates that 300,000 direct labor hours will be

Cook Company estimates that 300,000 direct labor hours will be worked during the coming year, 2014, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data, shown bel...

Q: Chen Minerals processes materials extracted from mines. The most common

Chen Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Larco, Marco, and Narco. Each of these products can be sold as i...

Q: Atlanta Company is preparing its manufacturing overhead budget for 2014.

Atlanta Company is preparing its manufacturing overhead budget for 2014. Relevant data consist of the following.Units to be produced (by quarters): 10,000, 12,000, 14,000, 16,000.Direct labor: time is...

Q: BAK Corp. is considering purchasing one of two new diagnostic

BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn’t equipped to do. E...

Q: Edington Electronics Inc. produces and sells two models of pocket

Edington Electronics Inc. produces and sells two models of pocket calculators, XQ-103 and XQ-104. The calculators sell for $15 and $25, respectively. Because of the intense competition Edington faces,...

Q: Thome Company uses a flexible budget for manufacturing overhead based

Thome Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.Indirect labor …………………1Indirect...

Q: Turney Company produces and sells automobile batteries, the heavy-duty HD-240.

Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2014 sales forecast is as follows.Quarter HD-240……………….HD-2401……………….50002…………………….70003…………………80004…………………..10000The...

Q: Schopp Inc. has been manufacturing its own shades for its

Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate...

Q: Using the information in E22-3, assume that in July 2014,

Using the information in E22-3, assume that in July 2014, Thome Company incurs the following manufacturing overhead costs.Instructions:(a) Prepare a flexible budget performance report, assuming that t...

Q: Norton Company reports the following operating results for the month

Norton Company reports the following operating results for the month of August: sales $310,000 (units 5,000); variable costs $210,000; and fixed costs $75,000. Management is considering the following...

Q: DeWitt Company uses flexible budgets to control its selling expenses.

DeWitt Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are sales...

Q: Innova uses 1,000 units of the component IMC2 every month

Innova uses 1,000 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows.Direct materials ………………….65Direct labo...

Q: Altex Inc. manufactures two products: car wheels and truck wheels.

Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following infor...

Q: FireOut, Inc. manufactures steel cylinders and nozzles for two models

FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,00...

Q: Schultz Electronics manufactures two large-screen television models: the Royale which

Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,600, and a new model, the Majestic, which sells for $1,300. The production cost computed per unit und...

Q: Jorge Company bottles and distributes B-Lite, a diet soft drink.

Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2014, manage...

Q: All Frute Company bottles and distributes Frute Ade, a fruit

All Frute Company bottles and distributes Frute Ade, a fruit drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 70 cents per bottle. For the year 2014, man...

Q: What does the term “social reality” mean and why are

What does the term “social reality” mean and why are accounting and accounting theory important examples of it?

Q: Distinguish among the terms realized, realizable, and realization.

Distinguish among the terms realized, realizable, and realization.

Q: Is capital maintenance oriented toward proprietary theory or entity theory?

Is capital maintenance oriented toward proprietary theory or entity theory?

Q: If Watts and Zimmerman are correct that managers of very large firms

If Watts and Zimmerman are correct that managers of very large firms oppose accounting standards that would raise their income and favor those that would lower it, what policy implications would this...

Q: Would a regular quarterly announcement of earnings-per-share which

Would a regular quarterly announcement of earnings-per-share which is “good” be an example of signaling? What about early adoption of a new accounting standard that would reduce income?

Q: What is the relationship between the economic consequences of accounting standards and

What is the relationship between the economic consequences of accounting standards and the quality of neutrality presented in SFAC No. 8?

Q: Stewardship is absent from SFAC No. 8; why?

Stewardship is absent from SFAC No. 8; why?

Q: Under financial statement insurance why would the relation between the firm and

Under financial statement insurance why would the relation between the firm and its auditor and investors bear a slight resemblance to the relationship between Saddam Hussein and the weapons inspector...

Q: At present time, the U.S. federal income tax

At present time, the U.S. federal income tax code allows corporations to deduct interest expense but not cash dividends paid to stockholders. Does the tax code tie in with any of the equity theories?...

Q: Why do companies, even those with “bad news,” have

Why do companies, even those with “bad news,” have an incentive to disclose financial reporting information?

Q: What similarities are there between materiality and disclosure?

What similarities are there between materiality and disclosure?

Q: Discuss how the concept of conservatism may be changing as viewed by

Discuss how the concept of conservatism may be changing as viewed by Watts.

Q: Several years ago an author stated that corporate income could be scientifically

Several years ago an author stated that corporate income could be scientifically ascertained, but any type of adjustment for inflation would be pure folly because measurements would tend to become ver...

Q: Of the four disciplines in the following list, which do you

Of the four disciplines in the following list, which do you think qualify as sciences and which do not? State your reasons very carefully. Law Medicine Cosmetology Accountancy

Q: Several occupations within two of the aforementioned disciplines are listed here.

Several occupations within two of the aforementioned disciplines are listed here. Which do you think come closest to being scientific? Accounting researcher Chief accountant for an industrial firm Med...

Q: Why must objectives be at the topmost level of a conceptual framework

Why must objectives be at the topmost level of a conceptual framework of accounting?

Q: What are some of the pitfalls of empirical research?

What are some of the pitfalls of empirical research?

Q: Do you think that the work of a policy-making organization

Do you think that the work of a policy-making organization such as the FASB or the SEC is normative (value-judgment oriented) or positive (oriented toward value-free rules)? Discuss.

Q: Can any overall trend be detected in FASB pronouncements? Explain and

Can any overall trend be detected in FASB pronouncements? Explain and cite examples to substantiate your opinion.

Q: How has Sarbanes-Oxley of 2002 affected FASB’s jurisdiction and independence

How has Sarbanes-Oxley of 2002 affected FASB’s jurisdiction and independence?

Q: What is the major difference in orientation between positive accounting theory and

What is the major difference in orientation between positive accounting theory and more overtly normative theories, such as the valuation approaches discussed in Chapter 1?

Q: In what ways does the FASB differ most markedly from its two

In what ways does the FASB differ most markedly from its two predecessors?

Q: Why does the decision-model orientation to research accord more closely

Why does the decision-model orientation to research accord more closely with the standard-setting function than any of the other research directions?

Q: If there has been a paradigm shift (scientific revolution) in

If there has been a paradigm shift (scientific revolution) in accounting research, but not in accounting practice, what may this signifiy?

Q: For a discipline to become a science, the results of experiments

For a discipline to become a science, the results of experiments and research must be exact. Do you agree with this statement? Discuss.

Q: What are the two principal underlying assumptions of agency theory (positive

What are the two principal underlying assumptions of agency theory (positive accounting research)? Critique their role in constructing a theory of accounting.

Q: Do you think that the nonbinding status of the FASB’s statements of

Do you think that the nonbinding status of the FASB’s statements of financial accounting concepts (like that of APB Statement 4) is a good idea or not?

Q: Discuss the significance of the SEC’s ASR 150.

Discuss the significance of the SEC’s ASR 150.

Q: What has been the SEC’s role in the evolution of the rule

What has been the SEC’s role in the evolution of the rule-making process? How has that role changed since the passage of SOX?

Q: “The FASB’s standard-setting procedure is a fairly narrow,

“The FASB’s standard-setting procedure is a fairly narrow, cut-and-dried approach to developing accounting standards.” Evaluate this statement.

Q: Should constituents have input into the FASB decisions, or should the

Should constituents have input into the FASB decisions, or should the FASB neutrally and independently set standards?

Q: Do you think that the so-called equity theories of accounting

Do you think that the so-called equity theories of accounting are really theories in the scientific sense? If so, how would you classify them?

Q: What is comprehensive income?

What is comprehensive income?

Q: SFAC No. 6 is largely a repetition of SFAC No.

SFAC No. 6 is largely a repetition of SFAC No. 3. Discuss two possible reasons why this repetition occurred.

Q: Very carefully explain why conflicts can exist between prediction of cash flows

Very carefully explain why conflicts can exist between prediction of cash flows and accountability. Can these conflicts be resolved?

Q: How is accounting data useful to investors? To creditors?

How is accounting data useful to investors? To creditors?

Q: Comment on the following. “Maximizing residual income is the same

Comment on the following. “Maximizing residual income is the same as maximizing earnings. Managers should be rewarded for maximizing either one.”

Q: Why do managers of Berkshire Hathaway have an incentive to send cash

Why do managers of Berkshire Hathaway have an incentive to send cash to Omaha?

Q: Conservatism is discussed in paragraphs 91–97 of SFAC No.

Conservatism is discussed in paragraphs 91–97 of SFAC No. 2. Why is its role in SFAC No. 2 rather ambiguous? Why is conservatism absent from SFAC No. 8?

Q: Is it fair to categorize ARS 1 and ARS 3 as failures

Is it fair to categorize ARS 1 and ARS 3 as failures?

Q: Samuelson would use a property rights definition of assets (discussed in

Samuelson would use a property rights definition of assets (discussed in the chapter). Do you think that SFAS No. 2 requiring immediate expensing of research and development costs is an example of Sam...

Q: Why is the efficient-market hypothesis being challenged?

Why is the efficient-market hypothesis being challenged?

Q: What is the advantage of being well diversified? Is there a

What is the advantage of being well diversified? Is there a downside? Why or why not?

Q: If investors are well diversified (e.g., own several

If investors are well diversified (e.g., own several hundred stocks), will they have a greater or lesser need for accounting information? What does this say about diversification?

Q: In what ways do you think information useful for investors (in

In what ways do you think information useful for investors (in assessing future cash flows) differs from that useful for creditors (in assessing default risk)?

Q: What are some limitations of capital market research?

What are some limitations of capital market research?

Q: What are abnormal returns (AR) and cumulative abnormal returns (

What are abnormal returns (AR) and cumulative abnormal returns (CARs)? What do they have to do with research in accounting? What do they have to do with accounting standards?

Q: Besides the primary investor-creditor group, what other user groups

Besides the primary investor-creditor group, what other user groups could claim to be stakeholders in the firm? How might their information needs be the same as the primary investor-creditor group? Ho...

Q: Why do we sometimes say that the dividend discount model is actually

Why do we sometimes say that the dividend discount model is actually an earnings model? How does Lintner’s findings relate dividends and earnings?

Q: What are some advantages and disadvantages of using residual income (including

What are some advantages and disadvantages of using residual income (including economic profit and EVA) for performance measurement?

Q: Comment on the following statement. “The residual income model is

Comment on the following statement. “The residual income model is no different from the dividend discount model. Therefore, it has no value to investors and analysts.”

Q: If uniformity means eliminating alternative accounting treatments, then surely comparability of

If uniformity means eliminating alternative accounting treatments, then surely comparability of financial statements of different enterprises would be improved. Do you agree with this statement? Comme...

Q: Is the choice of LIFO a relevant circumstance compared to FIFO?

Is the choice of LIFO a relevant circumstance compared to FIFO?

Q: Should firm’s capitalize research and development expenditures? Why or why not

Should firm’s capitalize research and development expenditures? Why or why not?

Q: SFAC No. 6 defines circumstances as follows: Circumstances are

SFAC No. 6 defines circumstances as follows: Circumstances are a condition or set of conditions that develop from an event or series of events, which may occur almost imperceptibly and may converge in...

Q: SFAS No. 13 in effect regards a lease period of 75

SFAS No. 13 in effect regards a lease period of 75 percent or more as a relevant circumstance in distinguishing between capital and operating leases. What economic factors (cash flow differentials) li...

Q: An argument against additional disclosure is that financial analysts aggressively seek this

An argument against additional disclosure is that financial analysts aggressively seek this information, which is then sold to their customers, resulting in an adequate market solution to the problem...

Q: What are the possible benefits of a disclosure process that is integrated

What are the possible benefits of a disclosure process that is integrated with major policies in marketing, production, and finance? Do you think only “good news” items should be disclosed?

Q: What is meant by “information content” and how does capital

What is meant by “information content” and how does capital market research determine the information content of accounting numbers?

Q: Do you think management policies should be acceptable as potential relevant circumstances

Do you think management policies should be acceptable as potential relevant circumstances? Why or why not?

Q: How do present magnitudes differ from future contingencies?

How do present magnitudes differ from future contingencies?

Q: Using different studies at different times it still appears to be the

Using different studies at different times it still appears to be the case that financial executives have a higher threshold for materiality than either Certified Public Accountants or financial analy...

Q: Finite and rigid uniformity would result in different information being received by

Finite and rigid uniformity would result in different information being received by users of financial statements. What difference would this make in terms of resource allocation when viewed from a ma...

Q: What is residual income? Abnormal earnings? Economic profit? EVA

What is residual income? Abnormal earnings? Economic profit? EVA?

Q: Is neutrality consistent with the external user primary orientation of SFAC No

Is neutrality consistent with the external user primary orientation of SFAC No. 1 and the pervasive constraint (benefits > costs) of SFAC No. 8?

Q: Under previous disclosure requirements of the SEC, dividends paid during the

Under previous disclosure requirements of the SEC, dividends paid during the past two years to shareholders must be stated in the annual report. This requirement has been broadened: There must be disc...

Q: ASR 242 of the SEC states that relative to payments made to

ASR 242 of the SEC states that relative to payments made to foreign governmental and political officials, “. . . registrants have a continuing obligation to disclose all material information and all i...

Q: Is Cadenhead’s conception of circumstantial variables as the only permissible departure from

Is Cadenhead’s conception of circumstantial variables as the only permissible departure from prescribed accounting methods closer to finite or rigid uniformity?

Q: What are the possible implications if accountants outsource the balance sheet to

What are the possible implications if accountants outsource the balance sheet to external appraisers (applying fair value accounting) for period-end financial statement reporting?

Q: For years the FASB had little interest in pursuing international harmonization projects

For years the FASB had little interest in pursuing international harmonization projects. What prompted its seemingly new interest in 2002 to work with the IASB in such a cooperative manner?

Q: How will the role of national standard-setting bodies be affected

How will the role of national standard-setting bodies be affected by adoption of IASB standards?

Q: How do de facto harmonization and de jure harmonization differ from each

How do de facto harmonization and de jure harmonization differ from each other?

Q: What are the advantages of convergence-harmonization of accounting standards?

What are the advantages of convergence-harmonization of accounting standards?

Q: What is meant by the term “degrees of representational faithfulness?”

What is meant by the term “degrees of representational faithfulness?”

Q: Firm A and B are exactly the same size as are Firm

Firm A and B are exactly the same size as are Firm C and Firm D. Firm A acquires for cash 100 percent of the common stock of Firm C. Firm B acquires 100 percent of Firm D by exchanging one share of it...

Q: What is convergence and how does it differ from harmonization?

What is convergence and how does it differ from harmonization?

Q: Evaluate Ronen’s financial statement insurance proposal.

Evaluate Ronen’s financial statement insurance proposal.

Q: What evidence supports the statement that SFAS No. 131 is an

What evidence supports the statement that SFAS No. 131 is an improvement over SFAS No. 14?

Q: Explain Lee’s (2001) view of market efficiency.

Explain Lee’s (2001) view of market efficiency.

Q: For event studies, the post event window is typically short (

For event studies, the post event window is typically short (days or months). What are some issues associated with examining longer event windows (e.g., years)?

Q: What do we mean when we say that capital market research involves

What do we mean when we say that capital market research involves a joint test of both market efficiency and the model used to estimate abnormal returns?

Q: The EU opted to use exclusively IASB standards for consolidated financial statements

The EU opted to use exclusively IASB standards for consolidated financial statements beginning in 2005. What drove this decision?

Q: Compare the true and fair view of the United Kingdom, the

Compare the true and fair view of the United Kingdom, the “present fairly” outlook of the United States, and the legalistic view of the Continental model.

Q: What is the relationship between the IFAC and IASB?

What is the relationship between the IFAC and IASB?

Q: What are the main distinctions between the Anglo-Saxon and the

What are the main distinctions between the Anglo-Saxon and the continental models?

Q: How does the role of government differ in the United Kingdom and

How does the role of government differ in the United Kingdom and the United States relative to financial reporting?

Q: Evaluate the IASB’s approach to convergence.

Evaluate the IASB’s approach to convergence.

Q: As Schipper seets it, why do the rules based and principles

As Schipper seets it, why do the rules based and principles based approaches to standard setting tend to converge?

Q: Is the “available for sale” category for debt and equity

Is the “available for sale” category for debt and equity securities used in SFAS No. 115 a homogeneous category?

Q: Based on your reading of this chapter, plus your general knowledge

Based on your reading of this chapter, plus your general knowledge of accounting standards, identify five examples of measurement flexibility in the statement of financial position.

Q: Why is it difficult to define the basic accounting elements?

Why is it difficult to define the basic accounting elements?

Q: What are the characteristics of assets, liabilities, and owners’ equity

What are the characteristics of assets, liabilities, and owners’ equity, and how have they evolved over time?

Q: How do Lev’s views on disclosure differ from the views of Brownlee

How do Lev’s views on disclosure differ from the views of Brownlee and Young?

Q: What is a securitization and why do firm’s use this technique?

What is a securitization and why do firm’s use this technique?

Q: Lee (2001) rejects the “naive view” of market

Lee (2001) rejects the “naive view” of market efficiency. Explain. If Lee is correct, what are the implications for capital markets research in accounting?

Q: Traditional measures of net assets do not capture the value of human

Traditional measures of net assets do not capture the value of human capital in an organization. Which trends, if any, suggest that intellectual capital may eventually be a candidate for inclusion as...

Q: Why are asset and liability definitions important to the theoretical structure of

Why are asset and liability definitions important to the theoretical structure of accounting? Why are definitions important to policy setting bodies?

Q: Why has no Continental model country developed a conceptual framework?

Why has no Continental model country developed a conceptual framework?

Q: What is the meaning of “owners’ equity” in the balance

What is the meaning of “owners’ equity” in the balance sheet? Why are certain unrealized gai or losses included in owners’ equity?

Q: What are deferred charges and deferred credits, how do they come

What are deferred charges and deferred credits, how do they come about, and do they conform to asset and liability definitions?

Q: What is the relationship between earnings management and income smoothing?

What is the relationship between earnings management and income smoothing?

Q: SFAS No. 133 (213 pages), 149 (78 pages

SFAS No. 133 (213 pages), 149 (78 pages), and 155 (27 pages) define standards for derivatives in 318 pages. How would a principles-based approach to setting standards affect their length…or would it h...

Q: Four points in the revenue cycle, from production through to cash

Four points in the revenue cycle, from production through to cash collection, are possible events for revenue recognition. What relevant circumstances would justify finite uniformity rather than rigid...

Q: Is the revenue-expense orientation consistent with fair value measurement?

Is the revenue-expense orientation consistent with fair value measurement?

Q: Why is there an implicit recognition of fair value in the 1984

Why is there an implicit recognition of fair value in the 1984 Revised Model Business Corporation Act?

Q: How does the asset impairment measurement approach of SFAS No. 121

How does the asset impairment measurement approach of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, compare to deprival value?

Q: From the standpoint of management, are there any differences between attempting

From the standpoint of management, are there any differences between attempting to control bad debt expense percentages and research and development expenses?

Q: What is the matching concept and why is there an implied hierarchy

What is the matching concept and why is there an implied hierarchy for expense recognition?

Q: What are the different conceptions of the true and fair view?

What are the different conceptions of the true and fair view?

Q: How did the all-inclusive or all-resources approach to

How did the all-inclusive or all-resources approach to the SCFP with funds defined as working capital differ from the older funds flow statement?

Q: SFAS No. 95 allows a choice between the direct and the

SFAS No. 95 allows a choice between the direct and the indirect method for calculating the operations section of the SCF. Do you think this is a case of flexibility? Explain.

Q: Why is it that postulates stemming from the economic and political climates

Why is it that postulates stemming from the economic and political climates as well as the customs and viewpoints of the business community would not serve as a good foundation for deducing a set of a...

Q: Does the “fineness” issue arise relative to the handling of

Does the “fineness” issue arise relative to the handling of capitalized interest costs (SFAS No. 34) relative to the treatment of this item in SFAS No. 95? Explain.

Q: What is the “fineness” issue raised by Nurnberg and Largay

What is the “fineness” issue raised by Nurnberg and Largay relative to accounting for hedging transactions in SFAS No. 104?

Q: What types of costs present matching problems, how are they dealt

What types of costs present matching problems, how are they dealt with, and what are some examples of such costs?

Q: Explain how cash flow data complement the income statement and balance sheet

Explain how cash flow data complement the income statement and balance sheet.

Q: What is the “quality of income” concept, and how

What is the “quality of income” concept, and how does cash flow reporting relate to it?

Q: What attribute is being measured in the SCF and how well is

What attribute is being measured in the SCF and how well is representational faithfulness achieved? Compare this to when funds are defined as working capital.

Q: Why is the three-way classification system in the SCF more

Why is the three-way classification system in the SCF more informative than the two way source/use classification?

Q: How does the source/use classification reflect the structure of double

How does the source/use classification reflect the structure of double-entry accounting?

Q: What is the purpose of reporting noncash items in the SCF?

What is the purpose of reporting noncash items in the SCF?

Q: Why is the SCF called a derivative statement?

Why is the SCF called a derivative statement?

Q: What do research findings indicate concerning the relevance of cash and funds

What do research findings indicate concerning the relevance of cash and funds flow data?

Q: What does it mean to classify a cash flow according to the

What does it mean to classify a cash flow according to the basic nature or function of the event as opposed to the ultimate purpose of the transaction? Which method do you prefer?

Q: Numerous attributes are measured in the balance sheet. What are the

Numerous attributes are measured in the balance sheet. What are the different attributes? Why is this practice criticized?

Q: Why does the concept of market efficiency (with respect to information

Why does the concept of market efficiency (with respect to information) have no necessary relation to the quality of accounting information? Why is this distinction important with respect to accountin...

Q: Is earnings per share an example of finite or rigid uniformity

Is earnings per share an example of finite or rigid uniformity?

Q: Why is the handling of troubled debt restructuring under SFAS No.

Why is the handling of troubled debt restructuring under SFAS No. 114 illogical?

Q: Why are future events so important to the issue of revenue and

Why are future events so important to the issue of revenue and expense measurement?

Q: Which factor discussed under future events is the most important and why

Which factor discussed under future events is the most important and why?

Q: Why are interest rate swaps a zero sum game?

Why are interest rate swaps a zero sum game?

Q: Distinguish between the discrete and integral views of quarterly information disclosure.

Distinguish between the discrete and integral views of quarterly information disclosure.

Q: Evaluate the attempt by the FASB to separate stock options from stock

Evaluate the attempt by the FASB to separate stock options from stock appreciation rights that are payable in cash?

Q: Should incentive and nonqualified stock options be treated the same on the

Should incentive and nonqualified stock options be treated the same on the financials?

Q: Why are convertible bonds and convertible preferred stock not examples of embedded

Why are convertible bonds and convertible preferred stock not examples of embedded derivatives?

Q: What advantages do you see for classifying interest expense as an investing

What advantages do you see for classifying interest expense as an investing cash flow rather than an operating cash flow? What is the advantage of classifying it as an operating cash flow? What is the...

Q: In SFAS No. 154, changes in accounting principle result in

In SFAS No. 154, changes in accounting principle result in a restatement, whereas under APB Opinion No. 20, a change in accounting principle is handled in a pro forma manner. How does a restatement di...

Q: Why, in practical terms, is it impossible to separate deductive

Why, in practical terms, is it impossible to separate deductive and inductive approaches to theoretical reasoning?

Q: What is the relationship among scientific method, accounting research, and

What is the relationship among scientific method, accounting research, and accounting policy making?

Q: Why does codification presume a democratic setting?

Why does codification presume a democratic setting?

Q: The social goals underlying accounting regulation are information symmetry and comparability.

The social goals underlying accounting regulation are information symmetry and comparability. Why are these goals complementary?

Q: What is the difference between joint and severable liability and proportionate liability

What is the difference between joint and severable liability and proportionate liability?

Q: What is the difference between “accounting theory” and “accounting

What is the difference between “accounting theory” and “accounting research?

Q: Why is it argued that capital market research cannot determine the optimality

Why is it argued that capital market research cannot determine the optimality of accounting policies even for the limited investor-creditor group?

Q: How do market-level and individual decision-maker analyses complement

How do market-level and individual decision-maker analyses complement one another in studying the usefulness of accounting information to investors and creditors?

Q: What is the relationship between public goods and free riders? Is

What is the relationship between public goods and free riders? Is accounting a public good?

Q: There has been a trend toward rigid uniformity in the format of

There has been a trend toward rigid uniformity in the format of the income statement. Explain how and why this has occurred.

Q: The “uncertainty principle” of the famous physicist, Werner Heisenberg

The “uncertainty principle” of the famous physicist, Werner Heisenberg, states that physical phenomena cannot be precisely measured because the very act of measuring affects the phenomenon being measu...

Q: Why does post-earnings-announcement drift challenge the efficient-

Why does post-earnings-announcement drift challenge the efficient-markets hypothesis?

Q: Why is earnings-per-share calculation an example of the

Why is earnings-per-share calculation an example of the residual equity of a firm being broader than merely its current common shareholders?

Q: Postulates are supposed to be tight enough to prevent conflicting conclusions being

Postulates are supposed to be tight enough to prevent conflicting conclusions being deduced from them. Is this the case with ARS 1?

Q: A study (discussed in the chapter) found a heavier emphasis

A study (discussed in the chapter) found a heavier emphasis placed on relevance rather than reliability in disclosure standards by the FASB. Why do you think this is the case?

Q: How do the imperative postulates (group C) differ from the

How do the imperative postulates (group C) differ from the other two categories of postulates?

Q: Why do you think that security prices are impacted more by “

Why do you think that security prices are impacted more by “bad news” than “good news”?

Q: Why do you think the term “deprival value” was used

Why do you think the term “deprival value” was used to name a specific type of replacement cost?

Q: What is the relationship between the National Commission on Fraudulent Financial Reporting

What is the relationship between the National Commission on Fraudulent Financial Reporting and Private Securities Litigation Reform Act of 1995?

Q: What inconsistencies does Merino see in the proprietary theory at the turn

What inconsistencies does Merino see in the proprietary theory at the turn of the twentieth century before the advent of entity theory?

Q: Why might the distinction between revenues and gains, and between expenses

Why might the distinction between revenues and gains, and between expenses and losses, be important to report yet unimportant as to how they are reported?

Q: Verifiability is part of reliability in SFAC No. 2, but

Verifiability is part of reliability in SFAC No. 2, but is now an enhancing qualitative characteristic in SFAC No. 8. What effect does this reclassification have on the importance of verifiability in...

Q: Accounting earnings are useful in predicting one-year ahead cash flows

Accounting earnings are useful in predicting one-year ahead cash flows. Is this sufficient? Why or why not?

Q: How does conventional retained earnings differ from entity equity under the Anthony

How does conventional retained earnings differ from entity equity under the Anthony conception of the entity theory?

Q: What is an event study?

What is an event study?

Q: Who are creditors?

Who are creditors?

Q: What is the weakness of Grady’s approach in arriving at principles in

What is the weakness of Grady’s approach in arriving at principles in ARS 7?

Q: How does EVA differ from economic profit?

How does EVA differ from economic profit?

Q: How did the APB pave the way for the FASB?

How did the APB pave the way for the FASB?

Q: Do you agree that it is not necessary to provide information for

Do you agree that it is not necessary to provide information for undiversified investors? Discuss.

Q: What is clean surplus accounting? What is its role in linking

What is clean surplus accounting? What is its role in linking dividends and abnormal earnings?

Q: Research, while inconclusive, has shown that earnings are manipulated downward

Research, while inconclusive, has shown that earnings are manipulated downward prior to a management buyout. What is the logic of this and why do management buyouts present a difficult agency theory p...

Q: Do you think that disclosures of smaller firms have more information content

Do you think that disclosures of smaller firms have more information content than disclosures for larger firms?

Q: Of the following decision-model advocates discussed in the chapter (

Of the following decision-model advocates discussed in the chapter (Chambers Sterling, Solomons, Bell, and Ijiri), which one stands out as most unlike the others?

Q: Why does it make sense to define materiality from the user’s perspective

Why does it make sense to define materiality from the user’s perspective?

Q: Why does segment disclosure in SFAS No. 131 represent a potential

Why does segment disclosure in SFAS No. 131 represent a potential improvement over segment disclosure in SFAS No. 14?

Q: What does harmonization of accounting standards mean?

What does harmonization of accounting standards mean?

Q: Horngren (1973) argues that accounting policies are a social decision

Horngren (1973) argues that accounting policies are a social decision and a matter of public interest. Evaluate this statement.

Q: Four postulates (going concern, time period, accounting entity,

Four postulates (going concern, time period, accounting entity, and monetary unit) were discussed as part of the basic concepts underlying historical costing. Can any of the principles discussed under...

Q: Would changing the asset definition in the conceptual framework to one concerned

Would changing the asset definition in the conceptual framework to one concerned with property rights have any other ramifications? Discuss.

Q: Discuss the bright line that does or does not distinguish debt and

Discuss the bright line that does or does not distinguish debt and equity classifications.

Q: Do you see any inconsistency in SFAC No. 1, which

Do you see any inconsistency in SFAC No. 1, which sees financial statements as general purpose but geared primarily toward investors and creditors?

Q: Why have mutually unperformed executory contracts traditionally been excluded from financial statements

Why have mutually unperformed executory contracts traditionally been excluded from financial statements? Can this practice be justified in terms of asset and liability definitions? How relevant is thi...

Q: Do you see any inconsistency between the present value of assets and

Do you see any inconsistency between the present value of assets and liabilities in SFAC No. 7 since the latter is based on a firm-specific discount rate and the former does not use a firm-specific ra...

Q: Why do you think that operating ratios (return-on-

Why do you think that operating ratios (return-on-assets) are more sensitive to the combined effect of immateriality items than would be the case with solvency ratios (debt-to-equity and current ratio...

Q: What is due process in financial accounting standard-setting?

What is due process in financial accounting standard-setting?

Q: Does the ability to swiftly-and at no cost-download

Does the ability to swiftly-and at no cost-download music files convert this music from a private good to a public good?

Q: Are simple transactions really examples of rigid uniformity? Why or why

Are simple transactions really examples of rigid uniformity? Why or why not?

Q: How does earnings as discussed in SFAC No. 5 differ from

How does earnings as discussed in SFAC No. 5 differ from net income?

Q: How does the freedom from bias mentioned in ASOBAT compare to the

How does the freedom from bias mentioned in ASOBAT compare to the quality of neutrality mentioned in SFAC No. 8?

Q: Describe how definitions of income, revenues, and expenses have changed

Describe how definitions of income, revenues, and expenses have changed in statements issued by successive standard-setting bodies.

Q: If a separate statement of comprehensive income is presented, do all

If a separate statement of comprehensive income is presented, do all elements of comprehensive income appear in this statement?

Q: When dealing with earnings per share, why is less really more

When dealing with earnings per share, why is less really more with SFAS No. 128?

Q: What is the purpose of balance sheet classification? How useful is

What is the purpose of balance sheet classification? How useful is the information produced from a classified balance sheet? What are some alternative classification systems that could be used?

Q: Why is it difficult to determine the historical acquisition cost of self

Why is it difficult to determine the historical acquisition cost of self constructed assets? Do definitions of accounting elements and general principles of recognition and measurement resolve the con...

Q: The limitation of the accounting classification system depicted in Exhibit 11-

The limitation of the accounting classification system depicted in Exhibit 11-1 was referred to throughout the chapter. What is meant by this? Give some examples. Why is the accounting classification...

Q: What is the efficient-markets hypothesis?

What is the efficient-markets hypothesis?

Q: An individual who was appraising accounting education had the following premises (

An individual who was appraising accounting education had the following premises (assumptions): • Accounting professors used to do more consulting with accounting practitioners than they do today. • A...

Q: Why is there no matching problem for periodic costs, and what

Why is there no matching problem for periodic costs, and what are some examples?

Q: Multiple approaches have been advocated concerning the definition of accounting elements and

Multiple approaches have been advocated concerning the definition of accounting elements and the relationship between the balance sheet and income statement. What are these approaches and how do they...

Q: How do protective and informative disclosures differ?

How do protective and informative disclosures differ?

Q: Why is it difficult to evaluate the regulation question?

Why is it difficult to evaluate the regulation question?

Q: Why is comprehensive income an application of proprietary theory?

Why is comprehensive income an application of proprietary theory?

Q: Why would “fairness” in financial reporting be difficult to implement

Why would “fairness” in financial reporting be difficult to implement?

Q: As a potential investor, what do you feel would be the

As a potential investor, what do you feel would be the most useful attribute of measurement for each of the following: inventories held for sale, inventories held for production, and long term debt? W...

Q: What is the relationship between “stewardship” and “accountability”?

What is the relationship between “stewardship” and “accountability”? Discuss.

Q: If a division manager of a firm were fired due to poor

If a division manager of a firm were fired due to poor operating results, would this be an example of stewardship?

Q: The statement of Herbert Miller (footnote 33) is closest to

The statement of Herbert Miller (footnote 33) is closest to which theoretical approach delineated in SATTA?

Q: How has the definition of accounting been modified in recent years?

How has the definition of accounting been modified in recent years?

Q: The Trueblood Committee Report advocated the use of financial forecasts. Why

The Trueblood Committee Report advocated the use of financial forecasts. Why do you think that adoption of this suggestion has been very unenthusiastically received by preparers and auditors?

Q: Why do the value choices (entry value, exit value,

Why do the value choices (entry value, exit value, and historical cost) fall within the domain of accounting theory?

Q: What type of measurement is the measurement of objectivity in Equation (

What type of measurement is the measurement of objectivity in Equation (1.1): nominal, ordinal, interval, or ratio scale?

Q: Do you think that changes brought about in accounting standards by failures

Do you think that changes brought about in accounting standards by failures of publicly traded companies such as Enron should be classified under political factors or economic decisions? Support your...

Q: Since the FASB makes the standards that are used by business and

Since the FASB makes the standards that are used by business and industry, they make accounting theory. Comment on this statement.

Q: The comingling of legal and contingent liabilities exists under current GAAP accounting

The comingling of legal and contingent liabilities exists under current GAAP accounting. Discuss potential problems this creates and propose alternatives to address them.

Q: Describe the incentives that might motivate income smoothing, and the ways

Describe the incentives that might motivate income smoothing, and the ways it could be done.

Q: In 2003, South Africa was the first country to adopt IFRS

In 2003, South Africa was the first country to adopt IFRS with fair value accounting. The country does not allow for differential accounting treatment depending on the size of enterprise. What type of...

Q: 1. Discuss as many of the potential trade-offs among

1. Discuss as many of the potential trade-offs among the qualities mentioned in SFAC No. 8 as you can and give either a general or a concrete example of each one. 2. Analyze three accounting standards...

Q: 1. Presented in the exhibit for Case 1 (see text

1. Presented in the exhibit for Case 1 (see text) is a graph of accounting income, cash flows from operations, and working capital flows from operations for W. T. Grant Company, a retailer that filed...

Q: 1. Agency theory takes the view that the corporation is the

1. Agency theory takes the view that the corporation is the locus or nexus of many competing and conflicting interests. List as many of these conflicting groups as you can and discuss in detail the na...

Q: How do objectives differ from postulates?

How do objectives differ from postulates?

Q: Do you think that the funds flow statement is more “factual

Do you think that the funds flow statement is more “factual” and less “interpretative” than the income statement and balance sheet?

Q: Do you think that the standards mentioned in ASOBAT are really standards

Do you think that the standards mentioned in ASOBAT are really standards? Why or why not?

Q: Why is the problem of heterogeneous users so critical in the development

Why is the problem of heterogeneous users so critical in the development of accounting theory?

Q: APB Statement 4 defines assets in the following terms: “Assets

APB Statement 4 defines assets in the following terms: “Assets are economic resources of an enterprise that are recognized and measured in conformity with generally accepted accounting principles. Ass...

Q: How do the research orientations of accounting in Chapter 2 compare with

How do the research orientations of accounting in Chapter 2 compare with SATTA’s organization of research?

Q: Why is income smoothing difficult to research, and what are the

Why is income smoothing difficult to research, and what are the research findings to date?

Q: What potential conflicts are present in terms of different user needs?

What potential conflicts are present in terms of different user needs?

Q: Why has Ijiri advocated the need for a conceptual framework to implement

Why has Ijiri advocated the need for a conceptual framework to implement accountability?

Q: Under an accountability orientation, Ijiri makes a strong case for the

Under an accountability orientation, Ijiri makes a strong case for the use of historical costing including the possibility of general price-level adjustments. Why do you think he has made this choice?...

Q: Past viewpoints expressed that financial statement preparers are also the largest class

Past viewpoints expressed that financial statement preparers are also the largest class of users of financial statements. Hence, the preparer has a “unique ability” to recognize user needs that the FA...

Q: Do you think that the income tax return mandated by the federal

Do you think that the income tax return mandated by the federal government is an example of user heterogeneity? Why or why not?

Q: 1. Assume that three accountants have been selected to measure the

1. Assume that three accountants have been selected to measure the income of a firm under two different income measurement systems. The results for the first income system (M1) were incomes of $3,000,...

Q: 1. During its long tenure, the CAP produced a total

1. During its long tenure, the CAP produced a total of 51 ARBs. While the CAP was in existence, another committee, the Committee on Terminology of the American Institute of Accountants (the previous n...

Q: 1. What is the relationship among agency theory, economic consequences

1. What is the relationship among agency theory, economic consequences, and signalling? Explain in depth 2. Benston (1982, p. 102), in an analysis of corporate social accounting and reporting (CSAR),...

Q: What is the relationship between uniformity (both finite and rigid)

What is the relationship between uniformity (both finite and rigid) and disclosure?

Q: Morunga and Bradbury (2012) find that IFRS adoption may lead

Morunga and Bradbury (2012) find that IFRS adoption may lead to some adverse disclosure results. Discuss their findings.

Q: Why may interindustry income uniformity be more difficult to achieve than intraindustry

Why may interindustry income uniformity be more difficult to achieve than intraindustry uniformity, and what are the implications of this in terms of a conceptual framework project, specific accountin...

Q: 1. Critique A Statement of Basic Accounting Postulates and Principles by

1. Critique A Statement of Basic Accounting Postulates and Principles by a study group at the University of Illinois (it should be on reserve or otherwise made available to you). Your critique should...

Q: 1. A crucial question brought up in this chapter concerns the

1. A crucial question brought up in this chapter concerns the issue of whether the admittedly heterogeneous users of financial statements have highly diverse information needs in terms of their underl...

Q: 1. The usefulness of accounting data to investors and creditors for

1. The usefulness of accounting data to investors and creditors for predictive purposes is necessarily forward looking. However, under generally accepted accounting principles, financial statements ar...

Q: Do you think that the indirect method of reporting cash flows from

Do you think that the indirect method of reporting cash flows from operations should be eliminated, allowing only the direct method in the SCFs? Discuss.

Q: What is cash flow? In your answer, be sure to

What is cash flow? In your answer, be sure to reference the use to which it is put.

Q: Why is the use of free cash flows increasing?

Why is the use of free cash flows increasing?

Q: Broome (2004) recommends that the FASB should provide more guidance

Broome (2004) recommends that the FASB should provide more guidance on classification of cash flows for the three sections. What guidance would you suggest?

Q: Monsen (2001) proposes using cameral accounting to reduce the difficulties

Monsen (2001) proposes using cameral accounting to reduce the difficulties in preparing the Statement of Cash Flows using the direct method. Evaluate Monsen’s proposal from an implementation perspecti...

Q: How do you think the efficient-markets hypothesis impacts the drafting

How do you think the efficient-markets hypothesis impacts the drafting of accounting standards? Bear in mind that many questions have been raised about the efficient markets hypothesis itself.

Q: To what extent should the liquidity measures revisions be considered if LIFO

To what extent should the liquidity measures revisions be considered if LIFO were to be eliminated from U.S. GAAP? Provide examples of those likely measures that would be affected. . As an interesting...

Q: Reexamine Exhibit 13.11. Explain the purpose of each performance

Reexamine Exhibit 13.11. Explain the purpose of each performance measure. As a manager, which performance measure would you want to use. Which measure would you want used to evaluate you? Why? How wou...

Q: Why do we need international accounting standards? Why not simply let

Why do we need international accounting standards? Why not simply let each country develop and use its own standards and let it go at that?

Q: The IASB and FASB are pursuing a single, converged conceptual framework

The IASB and FASB are pursuing a single, converged conceptual framework. The United States has a good start with SFAC No. 8. What additional changes should FASB make to further improve its conceptual...

Q: It might be said that we are slowly moving toward an asset

It might be said that we are slowly moving toward an asset-liability approach in the balance sheet. Which event situations support this statement?

Q: In July 2003, the SEC submitted to Congress its Study Pursuant

In July 2003, the SEC submitted to Congress its Study Pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002 on the Adoption by the United States Financial Reporting System of a Principles-Based...

Q: Ball (2009) evokes the question of responsibility for the rash

Ball (2009) evokes the question of responsibility for the rash of accounting scandals in the 2000s. What actions do you propose to address the problem, if you agree that one exists?

Q: The question of the usefulness of cost allocations (discretionary accruals and

The question of the usefulness of cost allocations (discretionary accruals and management compensation plans) has been introduced in this and previous chapters. What, if anything, would you do about (...

Q: Moehrle et al. (2010) respond to the FASB regarding

Moehrle et al. (2010) respond to the FASB regarding possible financial statement presentation changes. Evaluate their response.

Q: Liu and Espahbodi (2014) suggest that a firm’s dividend policy

Liu and Espahbodi (2014) suggest that a firm’s dividend policy affects its propensity to smooth earnings. How might this finding affect financial statement analysis?

Q: Evaluate the costs and benefits of the accounting standard-setting process

Evaluate the costs and benefits of the accounting standard-setting process (versus an unregulated environment).

Q: How might the “capture” of auditors by auditees be mitigated

How might the “capture” of auditors by auditees be mitigated?

Q: Should a CEO be evaluated based on one year's cash flows?

Should a CEO be evaluated based on one year's cash flows? Why or why not? (Your answer might be affected by your definition of cash flow.)

Q: 1. What are the main distinctions between the Anglo-Saxon

1. What are the main distinctions between the Anglo-Saxon and the Continental models relative to accounting and financial reporting? Within the Anglo-Saxon group, how does the United States differ fro...

Q: 1. Assume that an asset is being examined and it is

1. Assume that an asset is being examined and it is determined that its cash flows would be $10,000 per year for four years (assume that all cash flows are received at the end of the year). The carryi...

Q: 1.Revenue recognition, when the right of return exists,

1.Revenue recognition, when the right of return exists, was standardized in 1981 by SFAS No. 48. Prior to this, SOP 75-1 provided guidance but was not mandatory (which is why the FASB has brought vari...

Q: Murphy, et al (2013) argue “living law”

Murphy, et al (2013) argue “living law” applies to conceptual frameworks. How does this perspective affect current frameworks?

Q: If different user groups do have different objectives, how might the

If different user groups do have different objectives, how might the situation be handled?

Q: Bradbury and Harrison (2015) study dissenting opinions in Financial Accounting

Bradbury and Harrison (2015) study dissenting opinions in Financial Accounting Standards Board (FASB) standards. What changes, if any, do these opinions suggest need to be made in the conceptual frame...

Q: What are the implications of Young (2006) on the standards

What are the implications of Young (2006) on the standards promulgated by standards setting bodies?

Q: Every fall U.S. News and World Report comes out

Every fall U.S. News and World Report comes out with a much awaited ranking of American colleges and universities (you may have even used it yourself). While there has been much criticism of the metho...

Q: Is accounting theory really necessary for the making of accounting rules?

Is accounting theory really necessary for the making of accounting rules? Discuss.

Q: Why have management consulting operations created problems for the public accounting industry

Why have management consulting operations created problems for the public accounting industry? How has SOX affected these problems?

Q: The value of the firm is equal to the discounted value of

The value of the firm is equal to the discounted value of the firm's free cash flows. Is it possible to forecast distant free cash flows? If not, what is the alternative?

Q: The FASB and AICPA are considering the addition of “baby GAAP

The FASB and AICPA are considering the addition of “baby GAAP” for private companies. Take a position and argue why two GAAPs should or should not exist?

Q: How permanent do you think the postulates and principles underlying historical costing

How permanent do you think the postulates and principles underlying historical costing will be?

Q: If you could relate materiality, disclosure, and conservatism to types

If you could relate materiality, disclosure, and conservatism to types of measurements (nominal, ordinal, interval, and ratio scale), how would you do so?

Q: What role should the AICPA assume in the possible development of “

What role should the AICPA assume in the possible development of “baby GAAP” standards?

Q: How can accounting move more toward becoming a science rather than an

How can accounting move more toward becoming a science rather than an art? Discuss.

Q: Do you see an evolutionary process involving the documents and reports presented

Do you see an evolutionary process involving the documents and reports presented in this chapter? Explain.

Q: Williams and Ravenscroft (2015) question decision usefulness as the basis

Williams and Ravenscroft (2015) question decision usefulness as the basis for accounting standards. Take a position and argue its merits.

Q: 1.Refer to either a current intermediate accounting text or a

1.Refer to either a current intermediate accounting text or a guide to current “generally accepted accounting principles.” Give at least one example for each of the four cells of Exhibit 9-1 (your ins...

Q: Of the three inputs to the accounting policy-making function,

Of the three inputs to the accounting policy-making function, which do you think is the most important?

Q: How can political factors be an input into accounting policy-making

How can political factors be an input into accounting policy-making if the latter is concerned with governing and making the rules for financial accounting?

Q: Comment on the following statement: Cash flow from operating activities is

Comment on the following statement: Cash flow from operating activities is the most important section of the SCF. Hence, analysis should be focused on this section.

Q: Is accounting theory, as the term is defined in this text

Is accounting theory, as the term is defined in this text, exclusively developed and refined through the research process?

Q: The measurement process itself is quite ordinary and routine in virtually all

The measurement process itself is quite ordinary and routine in virtually all situations. Comment on this statement.

Q: Can assessment measures be used for predictive purposes?

Can assessment measures be used for predictive purposes?

Q: A great deal of interest is generated each week during the college

A great deal of interest is generated each week during the college football and college basketball seasons by the ratings of the teams by the Associated Press and United Press International. Sports wr...

Q: Accounting practitioners have criticized some proposed accounting standards on the grounds that

Accounting practitioners have criticized some proposed accounting standards on the grounds that they would be difficult to implement because of measurement problems. They therefore conclude that the u...

Q: Some individuals believe that valuation methods proposed by a standard-setting

Some individuals believe that valuation methods proposed by a standard-setting body such as FASB should be based on those measurement procedures having the highest degree of objectivity as defined by...

Q: What type of measurement scale (nominal, ordinal, interval,

What type of measurement scale (nominal, ordinal, interval, or ratio scale) is being used in the following situations? a. Musical scales b. Insurance risk classes for automobile insurance c. Numbering...

Q: If general price-level adjustment is concerned with the change over

If general price-level adjustment is concerned with the change over time of the purchasing power of the monetary unit, why is it not considered to be a current value approach?

Q: How do entry- and exit-value approaches differ?

How do entry- and exit-value approaches differ?

Q: Why is discounted cash flow extremely difficult to implement in the accounts

Why is discounted cash flow extremely difficult to implement in the accounts?

Q: Does the statement of cash flows obviate the possible need for exit

Does the statement of cash flows obviate the possible need for exit price financial statements?

Q: How do measurement and calculation in accounting differ from each other?

How do measurement and calculation in accounting differ from each other? Give three examples of each.

Q: Are issues of costliness and timeliness as they pertain to accounting standards

Are issues of costliness and timeliness as they pertain to accounting standards part of accounting theory?

Q: Political factors are an adverse influence on the accounting standard-setting

Political factors are an adverse influence on the accounting standard-setting function. Discuss this statement.

Q: Did the 21st century begin on January 1, 2000?

Did the 21st century begin on January 1, 2000?

Q: Do you think that the color-coded terrorist threat system instituted

Do you think that the color-coded terrorist threat system instituted by the Department of Homeland Security involves a measurement system? Explain.

Q: What are the benefits of evaluating a CEO based on the sum

What are the benefits of evaluating a CEO based on the sum of earnings and cash flow divided by two? What is the downside to this metric? Make sure you clearly identify which cash flow and earnings yo...

Q: Why do you think earnings is managed when it appears that actual

Why do you think earnings is managed when it appears that actual income might be less than management’s voluntary forecasts of earnings?

Q: Of the various reasons that a firm might deal in its treasury

Of the various reasons that a firm might deal in its treasury stock, are there any that you might think are questionable? Discuss.

Q: Are disclosures of hedging effectiveness effective?

Are disclosures of hedging effectiveness effective?

Q: In what two different senses is the term pro forma used?

In what two different senses is the term pro forma used?

Q: How does the term “embedded derivatives” compare with the term

How does the term “embedded derivatives” compare with the term “embedded journalists” (from the Iraqi War)?

Q: What is classification shifting?

What is classification shifting?

Q: Describe the general findings from capital market research concerning the information content

Describe the general findings from capital market research concerning the information content of accounting numbers and the effects of alternative accounting policies.

Q: Why is the choice between the FIFO-LIFO inventory methods an

Why is the choice between the FIFO-LIFO inventory methods an interesting issue in capital market research?

Q: As an investor, how would you react to a company changing

As an investor, how would you react to a company changing is inventory accounting from FIFO to LIFO? Why?

Q: Over the years, the research findings regarding changing from FIFO to

Over the years, the research findings regarding changing from FIFO to LIFO have varied? Why do you suppose this is the case?

Q: Why may accounting policies with no direct cash flow consequences indirectly affect

Why may accounting policies with no direct cash flow consequences indirectly affect investors or creditors?

Q: What is the importance of the FAF and FASAC to the success

What is the importance of the FAF and FASAC to the success of the FASB?

Q: The three attempts at standard setting in the private sector (CAP

The three attempts at standard setting in the private sector (CAP, APB, and FASB) have all dealt with the need for a theoretical foundation. Why were the CAP and the APB unsuccessful at this endeavor?...

Q: Lev talks about the low correlation between earnings and stock returns.

Lev talks about the low correlation between earnings and stock returns. Ou and Penman paper discuss the possibility of making abnormal returns based upon published financial data. Are these papers in...

Q: What is post-earnings announcement drift (PEAD)?

What is post-earnings announcement drift (PEAD)?

Q: In late 1990s, the “Wyden Amendment” was stricken from

In late 1990s, the “Wyden Amendment” was stricken from the Crime Bill passed by Congress. The amendment would have required reporting by auditors on internal controls. Letters sent by FEI members oppo...

Q: Why does post-earnings announcement drift appear to be more pronounced

Why does post-earnings announcement drift appear to be more pronounced with smaller firms? What could be done from a company perspective to rectify this situation? What could be done from a standard s...

Q: What is the incomplete revelation hypothesis?

What is the incomplete revelation hypothesis?

Q: Suppose an accounting event occurs and there is no market reaction

Suppose an accounting event occurs and there is no market reaction. What should we conclude?

Q: Give some examples in which accounting information is not the most timely

Give some examples in which accounting information is not the most timely source of information affecting security prices.

Q: Instead of employing capital markets research techniques (e.g.,

Instead of employing capital markets research techniques (e.g., event studies) why don’t we just ask investors how they would react to a hypothetical event? Why don’t we ask managers why they make spe...

Q: Why is it important to improve the quality of accounting standards?

Why is it important to improve the quality of accounting standards?

Q: What do pensions have to do with a company’s operating performance?

What do pensions have to do with a company’s operating performance? What do pensions have to do with the firm’s financing and investment decisions?

Q: There is evidence that investors do not fully recognize the valuation effects

There is evidence that investors do not fully recognize the valuation effects of severe pension underfunding. (See for example Franzoni, Francesco and José M. Marín (2006). Why do you suppose this is...

Q: Why are accounting ratios valuable for predicting bankruptcy? What cautions do

Why are accounting ratios valuable for predicting bankruptcy? What cautions do we need in evaluating accounting ratios?

Q: What were the politics that led to the demise of both the

What were the politics that led to the demise of both the CAP and the APB?

Q: Why do high levels of accruals appear to be mispriced?

Why do high levels of accruals appear to be mispriced?

Q: Evaluate Stewart’s (2009) discovery of a single overarching ratio,

Evaluate Stewart’s (2009) discovery of a single overarching ratio, EVA Momentum, which is “superior to all other ratios.”

Q: What are the arguments favoring regulation of financial reporting?

What are the arguments favoring regulation of financial reporting?

Q: Explain how the role and form of research used by the APB

Explain how the role and form of research used by the APB and FASB differ.

Q: Horngren (1973) believes that accounting standards must be marketed by

Horngren (1973) believes that accounting standards must be marketed by regulatory bodies. By this he means that affected parties need to be sold on the benefits of standards. How is this concept consi...

Q: It was suggested many years ago that a court should be created

It was suggested many years ago that a court should be created to resolve disputes in accounting. In what ways does the FASB function as an accounting court? In what ways is it different?

Q: In terms of financial reporting in the future, do you expect

In terms of financial reporting in the future, do you expect greater refinement of measurements appearing in the body of the financial statements or increasing disclosure with less effort directed tow...

Q: How do agency theory and the codificational viewpoint differ in assumptions about

How do agency theory and the codificational viewpoint differ in assumptions about the behavior of individuals?

Q: What are the arguments against regulation of financial reporting?

What are the arguments against regulation of financial reporting?

Q: If accounting were not regulated, we would not be facing the

If accounting were not regulated, we would not be facing the difficult problems that have arisen as a result of Enron and other corporate auditing failures. Do you agree with this statement? Explain....

Q: Why do you think that ethnographic research (footnote 65) would

Why do you think that ethnographic research (footnote 65) would be difficult to apply to organizations such as the SEC and FASB?

Q: In accounting, deductive approaches are generally normative. Why do you

In accounting, deductive approaches are generally normative. Why do you think this is the case?

Q: A frequent argument is that inductive reasoning is value-free because

A frequent argument is that inductive reasoning is value-free because it simply investigates empirical evidence. Yet some charge that it is not value-free. What do you think is the basis for this char...

Q: Why does accounting information have some features of a public good?

Why does accounting information have some features of a public good? What are the implications for information production in both unregulated and regulated markets?

Q: Why can’t optimal regulation be determined? If optimal accounting regulation cannot

Why can’t optimal regulation be determined? If optimal accounting regulation cannot be determined, how can a regulatory body such as the SEC or FASB make good decisions?

Q: A distinction was made in the chapter between two types of regulation

A distinction was made in the chapter between two types of regulation: (a) the refinement and standardization of financial statements and (b) expanded disclosure. Why is the distinction important in...

Q: Can accounting standards and policy making be neutral? In what sense

Can accounting standards and policy making be neutral? In what sense is neutrality really important?

Q: Arrow (1963) warns that public participation and a consensual approach

Arrow (1963) warns that public participation and a consensual approach to social issues can lead to democratic paralysis; that is, to a failure to act due to an inability to agree on goals or objectiv...

Q: Do you think the “broad principles” of ARS 3 are

Do you think the “broad principles” of ARS 3 are really principles as that term is used in science?

Q: Why has the entity theory fragmented into two separate conceptions?

Why has the entity theory fragmented into two separate conceptions?

Q: Of the nine so-called principles shown in Exhibit 5-

Of the nine so-called principles shown in Exhibit 5-1, which do you think are the most important in terms of establishing a historical costing system?

Q: What benefit is the conceptual framework project to the FASB if

What benefit is the conceptual framework project to the FASB if (a) there is no way of determining optimal accounting regulation and (b) regulatory decision making is a political process?

Q: What is Pareto optimality? Why would adherence to it minimize accounting

What is Pareto optimality? Why would adherence to it minimize accounting standard setting?

Q: “Since the FASB is independent from the AICPA, the latter

“Since the FASB is independent from the AICPA, the latter is no longer concerned with standard setting and related issues.” Evaluate this statement.

Q: “Assuming all other things equal, it is possible that the

“Assuming all other things equal, it is possible that the lower-of-cost-or-market method can result in any given year in higher income than would be the case under the same inventory costing method wi...

Q: Why is the residual equity theory more in line with recent research

Why is the residual equity theory more in line with recent research in finance than entity and proprietary theory?

Q: In 1936 the United States was still suffering from the Great Depression

In 1936 the United States was still suffering from the Great Depression. During the presidential election campaign, an extensive survey of voter attitudes was undertaken to find out whether the public...

Q: Why do you think the equity theories are less important today than

Why do you think the equity theories are less important today than they were, say, 50 years ago?

Q: Who pays for accounting regulation and who benefits?

Who pays for accounting regulation and who benefits?

Q: How does agency theory (Chapters 2 and 4) differ from

How does agency theory (Chapters 2 and 4) differ from the equity theories discussed in this chapter?

Q: Does the entity theory or the proprietary theory provide a better description

Does the entity theory or the proprietary theory provide a better description of the relationship existing between the large modern corporation and its owners?

Q: Of what importance in a conceptual framework or metatheory are definitions of

Of what importance in a conceptual framework or metatheory are definitions of such basic terms as assets, liabilities, revenues, and expenses?

Q: How does feedback value relate to predictive ability and accountability?

How does feedback value relate to predictive ability and accountability?

Q: Is there a similarity between the codificational approach (Gaa) to

Is there a similarity between the codificational approach (Gaa) to standard setting and the jurisprudential approach?

Q: What is the difference between owners’ equity accounts representing shareholders’ claims as

What is the difference between owners’ equity accounts representing shareholders’ claims as equity holders versus shareholders’ interests as owners?

Q: What is the argument for finite uniformity in accounting for leases?

What is the argument for finite uniformity in accounting for leases? Why is finite uniformity difficult to achieve? Explain what the relevant circumstances are in accounting for different types of lea...

Q: Discuss the limitations of consolidated financial statements and why dual reporting (

Discuss the limitations of consolidated financial statements and why dual reporting (consolidated and separate entity statements) as well as other forms of disaggregated reporting, such as SFAS No. 13...

Q: Why does the FASB’s reporting entity project logically precede any conclusion regarding

Why does the FASB’s reporting entity project logically precede any conclusion regarding consolidated financial reporting?

Q: Does the reporting of capital leases appear to have value to users

Does the reporting of capital leases appear to have value to users of financial statements? Why are there costs of reporting capital leases?

Q: What is push-down accounting? What problems would arise in

What is push-down accounting? What problems would arise in connection with the implementation?

Q: Voluntary pension plan terminations have been increasing [see Stone (1987

Voluntary pension plan terminations have been increasing [see Stone (1987)] in which surplus plan assets are recaptured by sponsoring companies after deferred annuities (of equivalent value to accrued...

Q: If actuarial gains and losses and prior service costs, in line

If actuarial gains and losses and prior service costs, in line with SFAS No. 158, are to be recognized in the period when incurred, is there a double counting effect when these elements are recognized...

Q: Distinguish among sell-offs, spin-offs, split-

Distinguish among sell-offs, spin-offs, split-offs, and split-ups.

Q: According to The Wall Street Journal article on February 1, 1996

According to The Wall Street Journal article on February 1, 1996 (“Intrinsic Value” by Roger Lowenstein, p. C1), pension fund assets in the United States grew dramatically—by approximately 29 percent—...

Q: Current discussions by the Boards point to a possibility that a converged

Current discussions by the Boards point to a possibility that a converged standard on leases will not be achieved. How will lack of converged standard on leases affect the Boards’ Joint Project?

Q: What are the main issues surrounding the special purpose entity and its

What are the main issues surrounding the special purpose entity and its successor, the variable interest entity.

Q: What do the following actuarial terms mean: accumulated benefits, actuarial

What do the following actuarial terms mean: accumulated benefits, actuarial liability, vested benefits, service cost, and unfunded accumulated benefits? How are they measured? How are projected benefi...

Q: What are the differences between a foreign currency orientation and a U

What are the differences between a foreign currency orientation and a U.S. dollar orientation regarding the translation of foreign currency operations?

Q: How do accounting exposure and economic exposure differ?

How do accounting exposure and economic exposure differ?

Q: Why would balance sheets prepared under SFAS No. 8 lack additivity

Why would balance sheets prepared under SFAS No. 8 lack additivity?

Q: Why does SFAS No. 52 provide an example of finite uniformity

Why does SFAS No. 52 provide an example of finite uniformity in terms of the use of remeasurement?

Q: What is the disappearing asset problem?

What is the disappearing asset problem?

Q: Evaluate the manner in which initial direct lease costs are accounted for

Evaluate the manner in which initial direct lease costs are accounted for under SFAS No. 13.

Q: Research has shown that discount rates used by firms are generally above

Research has shown that discount rates used by firms are generally above rates suggested by the FASB. Will this make the interest cost portion of pension expense higher or lower than if discount rates...

Q: What considerations may have motivated the FASB to grant a four-

What considerations may have motivated the FASB to grant a four-year transitional period in capitalizing pre-1977 leases meeting the capitalization tests of SFAS No. 13? What other political behavior...

Q: What types of economic consequences may arise from accrual accounting for OPEBs

What types of economic consequences may arise from accrual accounting for OPEBs in SFAS No. 106?

Q: How did the “give-and-take” differ between

How did the “give-and-take” differ between the FASB and its constituents in the drafting of SFAS No. 87 on pensions versus SFAS No. 106?

Q: Why may companies not be indifferent to purchase and pooling accounting,

Why may companies not be indifferent to purchase and pooling accounting, and what do we know about this issue from research studies?

Q: What differences exist, relative to the use of future costs and

What differences exist, relative to the use of future costs and future salaries, in the case of OPEBs (SFAS No. 106) and pensions (SFAS No. 87)?

Q: Is it inconsistent to use future salaries for service cost calculations and

Is it inconsistent to use future salaries for service cost calculations and current salaries for minimum liability calculation purposes?

Q: Explain how previous pension accounting standards were based on a revenue-

Explain how previous pension accounting standards were based on a revenue-expense approach to the financial statements.

Q: Why is there a “double counting” problem if the accumulated

Why is there a “double counting” problem if the accumulated benefit obligation is used to measure the pension liability and what can be done about it?

Q: How has ERISA affected pension accounting?

How has ERISA affected pension accounting?

Q: What are the similarities and differences between leases and other means of

What are the similarities and differences between leases and other means of property acquisition? How can these similarities and differences be reported in the financial statements?

Q: Does symmetry exist between lessors and lessees under SFAS No. 13

Does symmetry exist between lessors and lessees under SFAS No. 13? Should symmetry be a goal of lease accounting?

Q: How is representational faithfulness achieved in the capitalization requirements of SFAS No

How is representational faithfulness achieved in the capitalization requirements of SFAS No. 13?

Q: Is there a measurement reliability (verifiability) problem with lease capitalization

Is there a measurement reliability (verifiability) problem with lease capitalization?

Q: 1. Examine the 2001 and 2002 annual reports for a corporation

1. Examine the 2001 and 2002 annual reports for a corporation having a financial subsidiary. (Your instructor may suggest a corporation on the EDGAR Website. http://www.sec.gov/edgarhp.htm). Determine...

Q: Is the executory nature of lease contracts important in assessing lease accounting

Is the executory nature of lease contracts important in assessing lease accounting? How have leases been interpreted? Why might noncancellability override the executory nature?

Q: 1. Refer to Appendix 15-A. Assume that the

1. Refer to Appendix 15-A. Assume that the firm is using projected accrued benefit cost funding. Suppose that a plan amendment was introduced during 2002 granting one year of prior service (for the ye...

Q: 1. Human Genome Sciences, Inc., a biopharmaceutical company,

1. Human Genome Sciences, Inc., a biopharmaceutical company, discovers, develops, and markets new gene and protein-based drugs. Its 1998 annual report showed property, plant, and equipment net of accu...

Q: If you had to choose among the current method of consolidation for

If you had to choose among the current method of consolidation for combinees where the combinor owns at least 50 percent, the new entity approach, or proportionate consolidation, which would you choos...

Q: Biggs (2010) presents a bleak picture for future generations attempting

Biggs (2010) presents a bleak picture for future generations attempting to meet the obligations related to public pension plans (e.g., State of New York; Jefferson County, Alabama)). How does his logi...

Q: Zechman (2010) studies firms using synthetic leases. How might

Zechman (2010) studies firms using synthetic leases. How might her findings influence the setting of lease accounting standards?

Q: Novy-Marx and Rauh (2011) estimate state employee pension

Novy-Marx and Rauh (2011) estimate state employee pension liabilities in the United States. What thoughts do you have on their findings?

Q: To qualify as a liability, a past transaction must exist.

To qualify as a liability, a past transaction must exist. Is this the case with pensions and OPEBs? How does the use of financial statements for predicting future cash flows as opposed to evaluating m...

Q: How might standards setters address the concerns that Gordon and Gallery (

How might standards setters address the concerns that Gordon and Gallery (2012) highlight related to pension accounting comparability?

Q: ”All leases beyond a year be capitalized!” Evaluate this position

”All leases beyond a year be capitalized!” Evaluate this position.

Q: Are there relevant circumstance differences between purchase and pooling of interests?

Are there relevant circumstance differences between purchase and pooling of interests? Explain

Q: Review the evolution of capitalization criteria in lease accounting standards. Why

Review the evolution of capitalization criteria in lease accounting standards. Why did APB Opinion No. 5 have little impact? What impact has SFAS No. 13 had? Has there been an underlying theme in the...

Q: The logic of pooling rests heavily on the assumption that no substantive

The logic of pooling rests heavily on the assumption that no substantive economic transaction occurs between the combinor and stockholders of the combinee. Evaluate this assumption.

Q: Why is there a pension accounting problem with defined benefit pension plans

Why is there a pension accounting problem with defined benefit pension plans, but not with defined contribution plans?

Q: Why would proportionate consolidation result in rigid uniformity for intercorporate equity investment

Why would proportionate consolidation result in rigid uniformity for intercorporate equity investment accounting?

Q: Compare proportionate consolidation with capitalizing of all leases extending beyond a year

Compare proportionate consolidation with capitalizing of all leases extending beyond a year, another example of rigid uniformity.

Q: The equity method reports neither the investor’s cost nor the market value

The equity method reports neither the investor’s cost nor the market value of the investment. Do you believe the equity method provides useful information? Why or why not?

Q: Why is the aspect of conveyance of leases emphasized in capital leases

Why is the aspect of conveyance of leases emphasized in capital leases and the contractual element emphasized in operating leases?

Q: Given the evidence from the research in the stock market, does

Given the evidence from the research in the stock market, does it matter whether pension information is disclosed in the formal financial statements or as supplemental disclosure?

Q: What economic consequences of SFAS No. 87 were suggested in the

What economic consequences of SFAS No. 87 were suggested in the chapter?

Q: Why did APB Opinion No. 8 only minimally improve uniformity between

Why did APB Opinion No. 8 only minimally improve uniformity between companies?

Q: Why was there reason to expect some negative economic consequences arising from

Why was there reason to expect some negative economic consequences arising from lease capitalization? What is the role of neutrality in such a situation? What is the response based on research finding...

Q: Does it matter if capital leases are reported in a footnote or

Does it matter if capital leases are reported in a footnote or in the body of the balance sheet? What research evidence exists to help evaluate this question?

Q: Describe the implicit assumption made in SFAS No. 94 about the

Describe the implicit assumption made in SFAS No. 94 about the reporting entity.

Q: Is SFAS No. 87’s argument favoring recognition of a pension liability

Is SFAS No. 87’s argument favoring recognition of a pension liability for accumulated benefits consistent with the conceptual framework project?

Q: How are minority interests handled in consolidations?

How are minority interests handled in consolidations?

Q: What is an equity carve-out?

What is an equity carve-out?

Q: Why is the IASB standard (IAS 7) substantially shorter than

Why is the IASB standard (IAS 7) substantially shorter than the FASB’s standard (SFAS No. 13)?

Q: Why does the elimination of poolings (SFAS No. 141)

Why does the elimination of poolings (SFAS No. 141) and the indefinite life of goodwill subject to impairment (SFAS No. 142) represent a possible “quid pro quo?”

Q: Why does the elimination of poolings improve representational faithfulness and comparability.

Why does the elimination of poolings improve representational faithfulness and comparability.

Q: What is the danger, particularly to older employees of restructuring pension

What is the danger, particularly to older employees of restructuring pension plans into “cash benefit plans?”

Q: What issues of qualitative characteristics of accounting information (SFAC No.

What issues of qualitative characteristics of accounting information (SFAC No. 2) are important relative to accrual accounting for OPEBs?

Q: Should valuable lease options of lessees be capitalized?

Should valuable lease options of lessees be capitalized?

Q: Compare the present system involving consolidation, equity method, and fair

Compare the present system involving consolidation, equity method, and fair value accounting for intercorporate equity investments with finite uniformity as it exists in lease accounting.

Q: Why is the G4+1 like the Big Ten (a

Why is the G4+1 like the Big Ten (a.k.a. Western Athletic Conference)?

Q: Current discussions by the Boards leave room open for two Accounting for

Current discussions by the Boards leave room open for two Accounting for Leases Standards; one for lessee and another one for lessor. Should two Accounting for Leases Standards be issued? Support your...

Q: While ERISA has been helpful, how well are employees protected in

While ERISA has been helpful, how well are employees protected in situations where overfunded pension plans exist?

Q: What does the term functional currency mean?

What does the term functional currency mean?

Q: What prompted FASB Accounting Standards Update 2009-09?

What prompted FASB Accounting Standards Update 2009-09?

Q: Is the treatment of unrecognized prior service cost and actuarial gains/

Is the treatment of unrecognized prior service cost and actuarial gains/ losses in SFAS No. 87 an example of the asset-liability or revenue-expense orientation?

Q: What is meant by the term one-line consolidation? What

What is meant by the term one-line consolidation? What differences occur in financial statements when a one-line consolidation rather than full consolidation is used?

Q: What are some reasons why consolidated reports are thought to be relevant

What are some reasons why consolidated reports are thought to be relevant?

Q: (a) Discuss the difference in the role of the journal

(a) Discuss the difference in the role of the journal and the ledger in capturing accounting information efficiently and effectively. (b) Outline the entity concept and how it impacts on the recording...

Q: (a) Explain the advantages and disadvantages of the sole trader

(a) Explain the advantages and disadvantages of the sole trader form of business structure compared to the partnership form of business structure. (b) Summarise the differences between a service and a...

Q: Jackie Smith is considering purchasing a sushi bar in the inner Melbourne

Jackie Smith is considering purchasing a sushi bar in the inner Melbourne suburb of Albert Park. Outline the importance of a business plan for Jackie and the type of accounting information she will re...

Q: What is stakeholder theory and how is it related to corporate governance

What is stakeholder theory and how is it related to corporate governance?

Q: What are the challenges associated with digital disruption for accountants?

What are the challenges associated with digital disruption for accountants?

Q: What is the difference between the revised Conceptual Framework’s fundamental qualitative characteristics

What is the difference between the revised Conceptual Framework’s fundamental qualitative characteristics of relevance and faithful representation? Can you think of any trade-offs between relevance an...

Q: Imagine that you are a manager in a large entity and need

Imagine that you are a manager in a large entity and need to make a recommendation to the CEO on which tender to accept. The job being put out to tender by the entity is worth millions of dollars and...

Q: How can the professional accounting bodies assist in standard setting?

How can the professional accounting bodies assist in standard setting?

Q: Describe the major purpose of the ASX. What types of information

Describe the major purpose of the ASX. What types of information does it provide for a novice investor?

Q: What are the four key responsibilities of business? Do you think

What are the four key responsibilities of business? Do you think an entity should consider discretionary responsibilities? Why or why not?

Q: What is the impact of the qualitative characteristic of ‘materiality’ on

What is the impact of the qualitative characteristic of ‘materiality’ on the preparation of the financial statements?

Q: In your own words, explain the advantage of comparability and transparency

In your own words, explain the advantage of comparability and transparency of financial information due to the adoption of IFRS.

Q: Ping and Juno decide to form a partnership on 30 June 2020

Ping and Juno decide to form a partnership on 30 June 2020. They secure the services of Timothy Legal to draw up their partnership agreement as follows. 1. Ping is to contribute: • His car, the fair v...

Q: Give some examples of each of Carroll’s four key responsibilities of business

Give some examples of each of Carroll’s four key responsibilities of business. Have any of these changed from one responsibility grouping to another over the last decade?

Q: Explain: (a) Triple bottom line reporting (

Explain: (a) Triple bottom line reporting (b) Corporate governance (c) The relationship of stakeholders to corporate governance.

Q: Outline the corporate governance principles and recommendations.

Outline the corporate governance principles and recommendations.

Q: Outline the legal duties that directors have to their company.

Outline the legal duties that directors have to their company.

Q: Compare and contrast the professional code of ethics for individuals and the

Compare and contrast the professional code of ethics for individuals and the guidelines for corporations.

Q: What is the difference between business ethics and social and environmental responsibility

What is the difference between business ethics and social and environmental responsibility?

Q: There are at least 60 Australian Accounting Standards. Go to the

There are at least 60 Australian Accounting Standards. Go to the AASB website at www.aasb.gov.au and choose one. (Hint: Go to ‘Quick Links’ and select ‘Table of Standards’.) One of the recent accounti...

Q: The AASB, as part of its work program, offers comment

The AASB, as part of its work program, offers comment on documents such as proposed agenda decisions, exposure drafts, draft exposure drafts, invitations to comment and discussion papers. Go to the ‘W...

Q: A survey conducted by PricewaterhouseCoopers in 2018 shows that 45 per cent

A survey conducted by PricewaterhouseCoopers in 2018 shows that 45 per cent of organisations experienced customer fraud in the last two years. Likewise 43 per cent suffered a cyber-attack. The most co...

Q: CPA Australia and CAANZ have designated areas on their websites for technical

CPA Australia and CAANZ have designated areas on their websites for technical resources and updates. Go to each of the respective bodies’ websites (www.cpaaustralia.com.au and www.charteredaccountants...

Q: The directors of Carlos Ltd provide you with the following financial information

The directors of Carlos Ltd provide you with the following financial information for the period ended 30 September 2019: selling expenses $96 000; occupancy expenses $12 000; finance expenses $26 400;...

Q: Describe the relationship between the revised Conceptual Framework and the accounting standard

Describe the relationship between the revised Conceptual Framework and the accounting standard AASB 116 Property, Plant and Equipment.

Q: I put it to you that the directors are responsible to the

I put it to you that the directors are responsible to the shareholders for profit in perpetuity; and that this general expression of a principle permits, indeed requires, directors to pay full regard...

Q: Outline some of the legal constraints in legislating for the consideration of

Outline some of the legal constraints in legislating for the consideration of stakeholder interests.

Q: Members of the two accounting professional bodies, CPA Australia and the

Members of the two accounting professional bodies, CPA Australia and the Chartered Accountants of Australia and New Zealand (CAANZ), have to comply with the APES 110 Code of Ethics for Professional Ac...

Q: Your client MJM Ltd consults with you in relation to the new

Your client MJM Ltd consults with you in relation to the new financial information system that it wishes to have installed. You are technically competent in this area, and so accept the engagement. Yo...

Q: Comment on the following situations in relation to the ASX CGC Corporate

Comment on the following situations in relation to the ASX CGC Corporate Governance Principles and Recommendations. (a) A member of a board of directors insists on being involved in the employment of...

Q: As the director of a company, you need to make a

As the director of a company, you need to make a decision regarding whether to shift the manufacturing operations offshore. Over recent years, the influx of cheap imports has made it harder to compete...

Q: Every time there is a spate of corporate collapses, the accounting

Every time there is a spate of corporate collapses, the accounting profession has been closely scrutinised and many members of the professional bodies have appeared before disciplinary hearings. The p...

Q: You are faced with the following situations. Use the Langenderfer and

You are faced with the following situations. Use the Langenderfer and Rockness model to help determine the course of action you would take. (a) You are a manager within a large entity and need to make...

Q: You are an accountant with XYZ Ltd and are confronted with the

You are an accountant with XYZ Ltd and are confronted with the situations described below. State in each case whether there has been a breach of the APES 110 Code of Ethics for Professional Accountant...

Q: What is a business transaction and how does it relate to the

What is a business transaction and how does it relate to the accounting process? Illustrate the concept of a business transaction with five examples relating to an SME such as a provider of Chinese th...

Q: Give an example of the role accounting information plays in the investment

Give an example of the role accounting information plays in the investment planning for a retired footballer and a retired schoolteacher.

Q: Compare and contrast teleological theories and deontological theories. Discuss whether you

Compare and contrast teleological theories and deontological theories. Discuss whether you think these theories have a place in modern business society.

Q: What is the relationship between the AASB and international standard-setting

What is the relationship between the AASB and international standard-setting bodies such as the IASB?

Q: Outline the major maxims of Kantianism and describe what they mean.

Outline the major maxims of Kantianism and describe what they mean.

Q: One of the limitations of accounting information is the historical nature of

One of the limitations of accounting information is the historical nature of the financial reports. Provide an example of an asset from the statement of financial position of Qantas Group where the as...

Q: What are the benefits of professional association membership for accounting graduates?

What are the benefits of professional association membership for accounting graduates?

Q: Discuss whether an accountant should take on an appointment outside their area

Discuss whether an accountant should take on an appointment outside their area of expertise.

Q: Compare and contrast the roles of the Financial Reporting Council (FRC

Compare and contrast the roles of the Financial Reporting Council (FRC) and the Australian Securities Exchange (ASX).

Q: Illustrate with an example how sole traders and partners are taxed in

Illustrate with an example how sole traders and partners are taxed in Australia. What are the advantages and disadvantages compared to paying company tax?

Q: It is important that partners draw up a partnership agreement. What

It is important that partners draw up a partnership agreement. What details should be specified in this agreement?

Q: Differentiate between financial and management accounting. Give an example of how

Differentiate between financial and management accounting. Give an example of how a management accounting report would be incorporated into financial accounting reports.

Q: Go to the ATO website (www.ato.gov.

Go to the ATO website (www.ato.gov.au) and provide a definition for each of the following. (a) Pay as you go (PAYG) (b) Capital gains tax (CGT) (c) Goods and services tax (GST) (d) Tax file number (TF...

Q: Differential reporting is applicable to which entities? Name four areas where

Differential reporting is applicable to which entities? Name four areas where the reduced disclosure requirements apply.

Q: What are the major differences in equity funding between a partnership and

What are the major differences in equity funding between a partnership and a public company?

Q: What do the following terms mean? (a) Unlimited

What do the following terms mean? (a) Unlimited liability (b) Mutual agency (c) Dividend (d) Preference shares (e) Unit trust

Q: 1. A business organised as a separate legal entity that is

1. A business organised as a separate legal entity that is owned by shareholders is a: (a) Family trust. (b) Company. (c) Sole trader. (d) Legal partnership. 2. The shareholders’ equity section of th...

Q: ‘Complying with the law will always mean that you are acting

‘Complying with the law will always mean that you are acting ethically.’ Discuss this statement.

Q: Are ethics and corporate governance important topics in the study of accounting

Are ethics and corporate governance important topics in the study of accounting and the business environment? Why or why not?

Q: Explain the relationship between the Australian Accounting Standards Board (AASB)

Explain the relationship between the Australian Accounting Standards Board (AASB) and the International Accounting Standards Board (IASB).

Q: Briefly describe how the AASB develops accounting standards.

Briefly describe how the AASB develops accounting standards.

Q: Comment on the approach put forward by The Ethics Centre in deliberations

Comment on the approach put forward by The Ethics Centre in deliberations of an ethical issue.

Q: Describe the structure of corporate governance as put forward by Farrar.

Describe the structure of corporate governance as put forward by Farrar.

Q: How do accounting standards assist large companies?

How do accounting standards assist large companies?

Q: What is an IFRS and how does it impact on standard setting

What is an IFRS and how does it impact on standard setting in Australia?

Q: Identify and discuss five fundamental principles of the Code of Professional Conduct

Identify and discuss five fundamental principles of the Code of Professional Conduct.

Q: What is risk management and why is it included in the ASXCGC

What is risk management and why is it included in the ASXCGC Corporate Governance Principles and Recommendations?

Q: Didi, a sole trader operating a small landscaping business, asks

Didi, a sole trader operating a small landscaping business, asks you to prepare her statement of financial position (showing her equity) for the year ended 30 June 2020: contributed capital $26 440; p...

Q: From the six scenarios described below, indicate (giving your reasons

From the six scenarios described below, indicate (giving your reasons) the business form each one is likely to take — sole trader, partnership, company or trust. (a) Conor and Ella wish to start an in...

Q: Produce the shareholders’ equity section of the statement of financial position for

Produce the shareholders’ equity section of the statement of financial position for Geelong Davis Ltd, a public company. Use the following information: share capital (200 000 $1 ordinary shares and 30...

Q: Jenny and Margaret agree to form a partnership on 16 September 2020

Jenny and Margaret agree to form a partnership on 16 September 2020 to supply first-aid kits to motor vehicle dealers. They agree on the following market values given to them by an independent valuer....

Q: Presented below are financial statement items for Jupiter Planet (a sole

Presented below are financial statement items for Jupiter Planet (a sole trader) for the period ended 30 September 2020. Determine which items should appear in the statement of profit or loss and whic...

Q: Using the information shown in exercise 3.30, produce a

Using the information shown in exercise 3.30, produce a statement of profit or loss for the period ended 30 September 2020. In exercise 3.30 Presented below are financial statement items for Jupiter...

Q: Explain what a transposition error is and identify how you can detect

Explain what a transposition error is and identify how you can detect that one has occurred.

Q: Refer to the JB Hi-Fi Ltd statement of profit or

Refer to the JB Hi-Fi Ltd statement of profit or loss in figure 3.2 to answer the following questions. Figure 3.2 (a) What is the major difference between the format of this statement and that of a s...

Q: Refer to the JB Hi-Fi Ltd consolidated statement of financial

Refer to the JB Hi-Fi Ltd consolidated statement of financial position in figure 3.3 to answer the following questions. Figure 3.3 (a) What is the major difference between the format of this statemen...

Q: Lou and Stu are sole traders who run their own separate businesses

Lou and Stu are sole traders who run their own separate businesses providing accounting and bookkeeping services. On 31 December 2019, their individual statements of financial position show the follow...

Q: Go to the ASX website (www.asx.com.

Go to the ASX website (www.asx.com.au). In the search window, type ‘listing with ASX’. What are the key benefits of listing according to the ASX?

Q: Go to the Business Queensland website (www.business.qld

Go to the Business Queensland website (www.business.qld.gov.au) and select ‘Starting a business’, then ‘Business types and legal structures’. Next select ‘Setting up a legal business’ under the headin...

Q: From the following information for sole trader J Pfahlert, software designer

From the following information for sole trader J Pfahlert, software designer, draw up a statement of financial position as at the end of the financial year (30 June 2020). You are also required to det...

Q: Teddy Thomas, a real estate agent, requires you to prepare

Teddy Thomas, a real estate agent, requires you to prepare a statement of profit or loss for the period ended 31 December 2020: donations $120; office wages $8400; sales salaries $30 000; sales commis...

Q: The following account balances, dated 30 September 2020, are of

The following account balances, dated 30 September 2020, are of sole trader Victoria Stone (Stone Bike Hire): capital (V Stone) $108 125; hire revenue $45 000; bike maintenance $10 000; administrative...

Q: Compare and contrast the views of Hobbes with those of Smith and

Compare and contrast the views of Hobbes with those of Smith and Friedman.

Q: You are a friend of Penny Williams, who is thinking about

You are a friend of Penny Williams, who is thinking about starting a business to sell her personalized embroidered towels. Advise Penny on the four factors that should be considered before deciding wh...

Q: Distinguish between personal transactions and business transactions. Illustrate with five examples

Distinguish between personal transactions and business transactions. Illustrate with five examples of each.

Q: Explain with examples the major differences between a company limited by shares

Explain with examples the major differences between a company limited by shares (such as JB Hi-Fi Ltd) and a proprietary company (such as Coconut Plantations Pty Ltd).

Q: What are two major advantages and disadvantages of a company structure?

What are two major advantages and disadvantages of a company structure? Provide an illustration with a company listed on the ASX (such as JB Hi-Fi Ltd, CSL Ltd, BHP Billiton Ltd).

Q: Illustrate with an example the difference in the format of the equity

Illustrate with an example the difference in the format of the equity section of the statement of financial position between a sole trader, partnership and company.

Q: Another relatively widespread business structure is a trust. What are the

Another relatively widespread business structure is a trust. What are the two main forms of trusts in Australia? What are the tax issues associated with family trusts?

Q: Explain what is meant by an ‘arm’s length business transaction’ when

Explain what is meant by an ‘arm’s length business transaction’ when a business buys accounting software on credit.

Q: What is the purpose of a statement of profit or loss for

What is the purpose of a statement of profit or loss for an entity? List typical items that you would see in the statement of profit or loss for a computer service technician.

Q: The following business transactions relate to Colin Clark (financial planner)

The following business transactions relate to Colin Clark (financial planner) for his first month of business operations in August 2020. 2020 August 1 Commenced business operations with a $300 000 cas...

Q: Describe how an accounting worksheet assists in the preparation of the statement

Describe how an accounting worksheet assists in the preparation of the statement of profit or loss and the statement of financial position.

Q: What is meant by the concept of duality? Provide an illustration

What is meant by the concept of duality? Provide an illustration involving a business transaction where the business purchases a motor vehicle on credit.

Q: Both the journal and the ledger can be used to record a

Both the journal and the ledger can be used to record a large number of transactions. Differentiate between financial recordkeeping in the journal and the ledger.

Q: Discuss the purpose of a double-entry bookkeeping system.

Discuss the purpose of a double-entry bookkeeping system.

Q: Summarise the procedures you would undertake if an accounting worksheet does not

Summarise the procedures you would undertake if an accounting worksheet does not balance.

Q: Illustrate three scenarios of incorrect recordings that may cause a trial balance

Illustrate three scenarios of incorrect recordings that may cause a trial balance to not balance.

Q: Can errors still exist in the trial balance if the sum of

Can errors still exist in the trial balance if the sum of the debit and credit columns equals the same amount? If so, provide an example.

Q: You are the bookkeeper for Chic Styles and, on review of

You are the bookkeeper for Chic Styles and, on review of the business’s records and reports, you realise the trial balance does not balance. Your supervisor asks you to investigate why this occurred....

Q: Classify each of the following according to whether it is an asset

Classify each of the following according to whether it is an asset, liability or equity account. Apply your learning from the definitions in the introduction to accounting and business decision making...

Q: Using your knowledge of the accounting equation, solve the missing values

Using your knowledge of the accounting equation, solve the missing values in the following table.

Q: (a) Using the business transactions in part B, record

(a) Using the business transactions in part B, record the transactions in the ledger of Colin Clark. (b) Prepare a trial balance for Colin Clark as at 31 August 2020. (c) Prepare a statement of profit...

Q: Determine the missing entries. /

Determine the missing entries.

Q: From the following descriptions of business transactions, choose two appropriate column

From the following descriptions of business transactions, choose two appropriate column headings for the worksheet. Justify for each description your choice of heading. (a) The owner contributes capit...

Q: State the effect of each of the following business transactions for Trevor’s

State the effect of each of the following business transactions for Trevor’s Trampolines. For example, in (a) we increase cash and increase capital. (a) P Trevor commenced business by injecting cash i...

Q: Complete the following table. (Note: Each row should be

Complete the following table. (Note: Each row should be treated independently.)

Q: Cash sales of $2079 have caused the worksheet to be out

Cash sales of $2079 have caused the worksheet to be out of balance because a mistake was made when the figures were put into the worksheet. The bookkeeper accidentally increased the cash account by $2...

Q: Choose two appropriate account names for each of the following business transactions

Choose two appropriate account names for each of the following business transactions. State whether you would debit or credit each of the accounts. (a) D Dango commenced business DD by contributing ca...

Q: For each of the following transaction outcomes, describe an example of

For each of the following transaction outcomes, describe an example of a transaction that would result in that outcome. (a) Both asset and equity accounts decreased. (b) Both asset and equity accounts...

Q: For each of the following independent scenarios, explain why each transaction

For each of the following independent scenarios, explain why each transaction is or is not a business transaction. (a) Maggie, a sole trader, meets with her bank and negotiates a loan to provide addit...

Q: Enter the following transactions for the month of March 2020 in a

Enter the following transactions for the month of March 2020 in a worksheet and calculate the profit or loss for the period. Explain how the worksheet assists in the calculation of profit or loss. 202...

Q: The closing statement of financial position items are given below for Jason

The closing statement of financial position items are given below for Jason Woodstock in accounting equation form as at 30 June 2021. Transactions for the following month of July are also given. 2021...

Q: Integrated reporting is a type of reporting that has been adopted in

Integrated reporting is a type of reporting that has been adopted in countries such as South Africa. What do you think are the advantages and disadvantages to the company of providing such disclosures...

Q: Using the information in problem 4.27, prepare a:

Using the information in problem 4.27, prepare a: (a) Statement of profit or loss for the period ending 31 July 2021 (b) Statement of financial position as at 31 July 2021. In problem 4.27 The closin...

Q: Choose appropriate account names and demonstrate the dual effect that occurs when

Choose appropriate account names and demonstrate the dual effect that occurs when the following business transactions for Brett Little take place. For example, in (a) we increase cash $14 000 and incr...

Q: The following transactions were taken from the records of Anthony Reader,

The following transactions were taken from the records of Anthony Reader, an interior designer, for the month ending 31 May 2020. You are required to design a suitable accounting worksheet for the per...

Q: Using the data in problem 4.30: (a

Using the data in problem 4.30: (a) Record the transactions in the ledger for Anthony Reader for the month of May 2020. (b) Prepare a trial balance at 31 May 2020. (c) What is the purpose of the trial...

Q: Using the data from the trial balance in problem 4.31

Using the data from the trial balance in problem 4.31, prepare a statement of profit or loss for the period ending 31 May 2020 and a statement of financial position as at 31 May 2020. In problem 4.31...

Q: From the following business transactions of Kristy Jones, landscape consultant:

From the following business transactions of Kristy Jones, landscape consultant: (a) State the impact on the accounting equation for each transaction. For example: (b) Prepare a worksheet and a statem...

Q: (a) Using the business transactions in problem 4.33

(a) Using the business transactions in problem 4.33, record the transactions in the ledger of Kristy Jones. (b) What is the advantage of recording in the ledger compared to the journal? (c) Prepare a...

Q: Rotterdam Financial Services Pty Ltd, managed by Saphira Browne, provides

Rotterdam Financial Services Pty Ltd, managed by Saphira Browne, provides accounting, taxation and financial planning services to clients residing in the inner Melbourne area. The statement of financi...

Q: The following business transactions and business events relate to Andrew’s Business Services

The following business transactions and business events relate to Andrew’s Business Services Pty Ltd. 2020 June 1 Andrew commenced business with $15 000 given to him by his Aunt Kate. 4 Purchased new...

Q: Go to www.jbhifi.com.au and find the

Go to www.jbhifi.com.au and find the consolidated statement of profit or loss and the consolidated statement of financial position for JB Hi-Fi Ltd in the latest annual report. Required Use these sta...

Q: What are the three elements of a business plan? Consider the

What are the three elements of a business plan? Consider the situation of two sisters contemplating a new business hiring surfboards and providing surf lessons on the Sunshine Coast. Explain how the b...

Q: Go to the Westpac website (www.westpac.com.

Go to the Westpac website (www.westpac.com.au) and download the latest annual report. Required Use these statements to answer the following questions. (a) What is the total value of each of the follo...

Q: Go to the Australian Taxation Office website (www.ato.

Go to the Australian Taxation Office website (www.ato.gov.au) and select the ‘Business’ tab, then select ‘Businesses’ under the ‘Online Services’ heading. Next, select ‘Standard Business Reporting’ an...

Q: Julia and Evie, owners of competing businesses, agree to form

Julia and Evie, owners of competing businesses, agree to form a partnership on 1 July 2020. Their individual assets and liabilities are independently valued and on this basis the following values are...

Q: The directors of Pumpkin Ltd provide you with the following financial information

The directors of Pumpkin Ltd provide you with the following financial information for the period ended 31 December 2020: selling expense $76 050; interest expense $29 250; legal fees $4875; administra...

Q: Samuel and Vinnie decide to form a partnership on 1 January 2020

Samuel and Vinnie decide to form a partnership on 1 January 2020. They secure the services of a solicitor to draw up their partnership agreement as follows. (a) Samuel is to contribute: • His vehicle...

Q: P Nightingale commenced business on 1 October 2020 as a beautician operating

P Nightingale commenced business on 1 October 2020 as a beautician operating as Nightingale Beauty Salon. Transactions for the month of October were as follows. 2020 October 1 Started business by cont...

Q: Access the latest update on the Australian Financial Reporting Framework from the

Access the latest update on the Australian Financial Reporting Framework from the AASB website www.aasb.gov.au/admin/file/content102/c3/AASB_Financial_Reporting_Framework_Project_Summary.pdf) and summ...

Q: Refer to the statements of financial position for Advantage Tennis Coaching and

Refer to the statements of financial position for Advantage Tennis Coaching and Coconut Plantations Pty Ltd. Required (a) Summarise the differences in the ownership structure of the two business enti...

Q: The introduction of differential reporting has resulted in many significant changes for

The introduction of differential reporting has resulted in many significant changes for Australian companies. Access a summary of the Differential Reporting Project update at the AASB website (www.aas...

Q: Kiki has just been offered a retirement package from her work as

Kiki has just been offered a retirement package from her work as a sales representative with Makeup Magic. Her long-term goal has been to start up a day-spa resort on the Sunshine Coast in Queensland...

Q: Provide an example of the different types of activities that would be

Provide an example of the different types of activities that would be performed by a management accountant and a financial accountant for a large public company listed on the ASX.

Q: From humble beginnings, Phil expanded his backyard business in Melbourne to

From humble beginnings, Phil expanded his backyard business in Melbourne to produce and sell sports drink bottles for AFL, cricket, rugby league and rugby union football teams in 2019. Due to the succ...

Q: Why has the globalisation of accounting become so important for accountants?

Why has the globalisation of accounting become so important for accountants?

Q: Corporate governance relates only to large public enterprises and is therefore irrelevant

Corporate governance relates only to large public enterprises and is therefore irrelevant for small business. Discuss this statement.

Q: The notes to the 2018 consolidated financial statements of JB Hi-

The notes to the 2018 consolidated financial statements of JB Hi-Fi Ltd appear in the appendix to this text. Examine these notes together with other information from the website (http://investors.jbhi...

Q: Erle Smith is a financial controller with Accounting Success Ltd, an

Erle Smith is a financial controller with Accounting Success Ltd, an entity that sells software products to accounting firms and small businesses. At present, Erle is analysing a number of software pa...

Q: Search the Johnson & Johnson website for its famous credo (www

Search the Johnson & Johnson website for its famous credo (www.jnj.com.au). (Hint: Access the credo from the drop-down menu called ‘Our Company’.) Given that the credo was written nearly 60 years ago,...

Q: The downturn in the economy during 2008 revealed one of the biggest

The downturn in the economy during 2008 revealed one of the biggest cases of fraud in history. The fraud was masterminded by Bernie Madoff, a well-known American finance executive. The $65 billion Pon...

Q: The Royal Commission into Misconduct in the Banking, Superannuation and Financial

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was established in 2017. There were 10 140 public submissions, mainly in the areas of personal finan...

Q: Go to the Royal Commission website at https://financialservices.

Go to the Royal Commission website at https://financialservices.royalcommission.gov.au/Pages/default.aspx. 1. Select ‘Submissions’. 2. Select ‘Submissions in response to original request’. 3. Choose...

Q: The IASB has published its revised Conceptual Framework for Financial Reporting.

The IASB has published its revised Conceptual Framework for Financial Reporting. Required Go to the IFRS website and select the ‘Project Summary’ for the Conceptual Framework at www.ifrs.org/projects...

Q: Financial acumen may not be every director’s strength but ignorance is no

Financial acumen may not be every director’s strength but ignorance is no excuse when it comes to understanding company accounts. The former directors of property group Centro found this out the hard...

Q: How does data analytics help accountants make decisions?

How does data analytics help accountants make decisions?

Q: Explain the role of the blockchain in cryptocurrencies.

Explain the role of the blockchain in cryptocurrencies.

Q: What are the six capitals that an integrated report is focused on

What are the six capitals that an integrated report is focused on?

Q: What is the role of the International Integrated Reporting Council? What

What is the role of the International Integrated Reporting Council? What is its strategy?

Q: What is meant by business sustainability?

What is meant by business sustainability?

Q: Suggest ways in which suppliers and customers could work together to reduce

Suggest ways in which suppliers and customers could work together to reduce their overall impact on the environment.

Q: What are the three pillars of sustainability?

What are the three pillars of sustainability?

Q: Growth areas for accountants in the future include sustainability reporting and,

Growth areas for accountants in the future include sustainability reporting and, more specifically, carbon accounting. What are the costs and the benefits for entities in reporting their carbon greenh...

Q: Outline the nine principles of business sustainability performance as put forward by

Outline the nine principles of business sustainability performance as put forward by Epstein and Roy (2003).

Q: Outline some ways that accountants could contribute to the sustainability efforts of

Outline some ways that accountants could contribute to the sustainability efforts of organisations.

Q: What are some of the advantages of business planning?

What are some of the advantages of business planning?

Q: Suggest what the most important driver of sustainability would be and explain

Suggest what the most important driver of sustainability would be and explain your rationale for its selection.

Q: List the qualities needed in providing external audit and assurance services to

List the qualities needed in providing external audit and assurance services to organisations in relation to CSR reports.

Q: Compare the principles underlying the GRI sustainability reporting Standards with the principles

Compare the principles underlying the GRI sustainability reporting Standards with the principles underlying the preparation of GPFS.

Q: Read the article on environmental auditing at www.epa.vic

Read the article on environmental auditing at www.epa.vic.gov.au/our-work/environmental-auditing. What is environmental auditing? What is a 53V audit? What is the role of the auditor in the 53V proces...

Q: You are a CFO in an organisation that is considering reporting on

You are a CFO in an organisation that is considering reporting on CSR using the GRI Standards. The CEO has asked you to prepare a report for the board supporting such a proposal. In this report you sh...

Q: Critique the role that regulation plays in encouraging business sustainability. In

Critique the role that regulation plays in encouraging business sustainability. In other words, assess whether you feel the government should regulate to protect the environment’s and society’s needs...

Q: ‘Human rights are rights inherent to all human beings, whatever

‘Human rights are rights inherent to all human beings, whatever our nationality, place of residence, sex, national or ethnic origin, colour, religion, language, or any other status. We are all equally...

Q: It is argued that the convergence of our accounting standards with international

It is argued that the convergence of our accounting standards with international standards and their subsequent adoption have brought great benefits to the Australian economy. What are the benefits in...

Q: Describe how accounting information helps shareholders and lenders to make decisions concerning

Describe how accounting information helps shareholders and lenders to make decisions concerning the operations and performance of an entity.

Q: Go to the IFRS Foundation website, www.ifrs.org

Go to the IFRS Foundation website, www.ifrs.org. Select ‘Around the world’ then ‘Use of IFRS standards by jurisdiction’. Comment on the jurisdictions that have adopted IFRS. Which countries are yet to...

Q: Sustainability accounting is a very important and huge growth area of accounting

Sustainability accounting is a very important and huge growth area of accounting. Discuss the different stakeholders (and their information needs) that would be interested in sustainability reports.

Q: BHP Group Ltd includes a sustainability report in its annual report.

BHP Group Ltd includes a sustainability report in its annual report. What key performance indicators (KPIs) are included in this report? Explain the different stakeholders that would be interested in...

Q: Download the report Triple bottom line reporting in Australia at www.

Download the report Triple bottom line reporting in Australia at www.environment.gov.au/archive/settlements/industry/finance/publications/indicators/pubs/indicators.pdf. This guide puts forward a meth...

Q: After successfully running her SME recruitment agency for a number of years

After successfully running her SME recruitment agency for a number of years, Angelica feels it is now time to expand. Her friends in business have told her to ‘get big or get out’. One of the options...

Q: Go to the CSR Ltd website (www.csr.com

Go to the CSR Ltd website (www.csr.com.au) and locate the segment report in the company’s latest financial statements. (a) What do you think is the purpose of the segment report? (b) What operating se...

Q: Refer to the latest financial statements for JB Hi-Fi Ltd

Refer to the latest financial statements for JB Hi-Fi Ltd. (The notes to the 2018 consolidated financial statements of JB Hi-Fi Ltd appear in the appendix to this text and the statements are available...

Q: In Amcor’s 2017 GRI Report, CEO Ron Delia stated that ‘

In Amcor’s 2017 GRI Report, CEO Ron Delia stated that ‘with our global scale, strong relationships and collaborative approach, Amcor is making improvements and breakthroughs that are raising the envir...

Q: Go to the Tableau website (www.tableau.com).

Go to the Tableau website (www.tableau.com). Select ‘Products’ and ‘Tableau Desktop’. Summarise the main features of ‘Tableau Desktop’ and how it can assist accountants in their daily tasks.

Q: Provide an example each of a company that would produce a GPFS

Provide an example each of a company that would produce a GPFS and a company that would produce a special purpose financial statement. Who are the likely stakeholders of both types of entities?

Q: One of the new opportunities for accounting graduates is forensic accounting.

One of the new opportunities for accounting graduates is forensic accounting. What does forensic accounting entail? Provide an example of a position as a forensic accountant.

Q: List five stakeholders of accounting information. Describe the information requirements for

List five stakeholders of accounting information. Describe the information requirements for each one; for example, lenders would need information regarding the business's ability to repay debt and ser...

Q: JB Hi-Fi Ltd has a legal obligation to prepare and

JB Hi-Fi Ltd has a legal obligation to prepare and lodge financial statements. Access the notes to JB Hi-Fi Ltd’s most recent financial statements and identify the rules and regulations that govern th...

Q: From the following account balances of Frosty Pty Ltd as at 30

From the following account balances of Frosty Pty Ltd as at 30 June 2019, prepare a statement of financial position in both the T-format and the narrative classified format. Cash at bank …………………………………...

Q: From the following account balances of Graceview as at 31 December 2019

From the following account balances of Graceview as at 31 December 2019, prepare a statement of financial position in both the T-format and the narrative classified format. Note: You will need to dete...

Q: Solve for the missing financial numbers as they would appear in the

Solve for the missing financial numbers as they would appear in the statement of financial position.

Q: Identify whether the following assets would be classified as current or non

Identify whether the following assets would be classified as current or non-current as at the end of the reporting period, justifying your classification decision. (a) Prepaid expenses (b) Intangible...

Q: Identify whether the following liabilities would be classified as current or non

Identify whether the following liabilities would be classified as current or non-current as at the end of the reporting period, justifying your classification decision. (a) Provision for employee annu...

Q: Qantas Group has been ranked amongst the top six airlines of global

Qantas Group has been ranked amongst the top six airlines of global carriers when it comes to the availability of frequent flyer reward seats based on the ninth annual CarTrawler Reward Seat Availabil...

Q: Typical classifications of liabilities in the statement of financial position include:

Typical classifications of liabilities in the statement of financial position include: payables; borrowings; deferred revenue; deferred tax liabilities; provisions and other liabilities. The equity cl...

Q: Entities spend millions of dollars on marketing and advertising intended to promote

Entities spend millions of dollars on marketing and advertising intended to promote and build brands, develop customers and sell services or products. Consider a new hotel being launched. Extensive ma...

Q: One of Google’s largest acquisitions was Motorola Mobility for $12.

One of Google’s largest acquisitions was Motorola Mobility for $12.5 billion in 2011. Google subsequently sold Motorola to Chinese giant PC producer Lenovo for $2.9 billion. Required Explain how the...

Q: Chic Frames Ltd was acquired by Specsavers for $8 million.

Chic Frames Ltd was acquired by Specsavers for $8 million. The fair value of the net assets acquired by Specsavers was assessed at $5 million. Prepare the double-entry transaction that would keep the...

Q: Knowing that you have some accounting experience, a friend has sought

Knowing that you have some accounting experience, a friend has sought your advice regarding a business that she intends purchasing. The statement of financial position for the business shows total ass...

Q: For each of the transactions identified, analyse how the asset,

For each of the transactions identified, analyse how the asset, liability and/or equity accounts increase, decrease or remain unchanged. (Remember the accounting equation.)

Q: A friend who owns a small entity trading as Fairies Galore knows

A friend who owns a small entity trading as Fairies Galore knows that you are studying accounting and asks you to prepare the entity’s classified statement of financial position in narrative format as...

Q: Using the revised Conceptual Framework definition and recognition criteria, discuss whether

Using the revised Conceptual Framework definition and recognition criteria, discuss whether each of the following items can be recorded as assets. (a) Trade receivables (b) Investments in shares (c) I...

Q: The accountant of a private secondary college, St Lucia, is

The accountant of a private secondary college, St Lucia, is preparing the school’s financial statements. Discuss the justification for the school preparing SPFS rather than GPFS.

Q: On 8 November 2011, the Australian Senate passed the ‘carbon

On 8 November 2011, the Australian Senate passed the ‘carbon tax legislation’ in relation to the government’s clean energy proposal, including a mechanism for pricing carbon. The legislation was effec...

Q: Find the University of NSW (UNSW) asset revaluation policy on

Find the University of NSW (UNSW) asset revaluation policy on the internet. Summarise the measurement of UNSW’s various asset classes. Discuss the advantages and disadvantages of the revaluation and c...

Q: You have a friend who is considering purchasing shares in Meridian Ltd

You have a friend who is considering purchasing shares in Meridian Ltd. The shares are currently trading on the securities exchange at $3.58 each. The entity’s financial statements suggest that its ne...

Q: In calculating the provision for employee benefits, JB Hi-Fi

In calculating the provision for employee benefits, JB Hi-Fi Ltd includes the value attributable to employee long service leave entitlements. Explain how these entitlements differ from annual leave an...

Q: Seek Ltd discloses areas involving critical accounting estimates and assumptions in the

Seek Ltd discloses areas involving critical accounting estimates and assumptions in the relevant notes to its financial statements. Locate the most recent annual report for Seek Ltd and identify the a...

Q: Golden Pineapples Pty Ltd had the following assets and liabilities at financial

Golden Pineapples Pty Ltd had the following assets and liabilities at financial year end in 2019 and 2020. Required (a) What is the balance of retained earnings as at the end of the two financial yea...

Q: As an investor in the share market, you use the financial

As an investor in the share market, you use the financial statements to assess the financial condition of entities. Discuss whether you would find it more useful to have items of PPE valued at histori...

Q: Select an Australian Securities Exchange (ASX) listed company and visit

Select an Australian Securities Exchange (ASX) listed company and visit its website to access the latest annual report. From the company’s statement of financial position, identify the: (a) Company’s...

Q: The following table shows the balance of an entity’s trade receivables for

The following table shows the balance of an entity’s trade receivables for each of the past four years. As the table indicates, the trade receivables have increased in absolute valu...

Q: Flight Centre Ltd’s 2017 financial report notes that PPE is carried at

Flight Centre Ltd’s 2017 financial report notes that PPE is carried at cost less accumulated depreciation and any impairment charges. The notes to the accounts (pp. 48 and 81) note a gain on the sale...

Q: Using the company that you selected in question 5.38,

Using the company that you selected in question 5.38, read the independent auditor’s report. Given the estimations and assumptions involved in preparing financial statements, discuss what the auditor’...

Q: Australian Agricultural Company Ltd was formed with a grant of one million

Australian Agricultural Company Ltd was formed with a grant of one million acres and the stated aim of cultivating and improving the wastelands of the colony of New South Wales. Today the company is a...

Q: The Commonwealth Bank of Australia measures its property assets (land and

The Commonwealth Bank of Australia measures its property assets (land and buildings) on a fair value measurement basis using independent market valuations. As at 30 June 2018, the land and buildings w...

Q: Simply Better Pty Ltd has just acquired the Cutie Pie business.

Simply Better Pty Ltd has just acquired the Cutie Pie business. The fair value of Cutie Pie’s net assets as at the date of acquisition is $1 855 000. Simply Better Pty Ltd has agreed to pay the owners...

Q: When Microsoft acquired Skype, it agreed to pay US$8

When Microsoft acquired Skype, it agreed to pay US$8.5 billion. This was the most expensive acquisition Microsoft had made at that point, but was viewed as an important acquisition to compete with key...

Q: EY’s analysis of the accounts of 16 European utilities reveals that almost

EY’s analysis of the accounts of 16 European utilities reveals that almost €17.7 billion (US$23.4 billion) was written off statements of financial position between 2010 and 2011. A large proportion (5...

Q: Samsung considers innovation to be crucial to its business. It values

Samsung considers innovation to be crucial to its business. It values speed and exploration of new markets in order to remain competitive in a market with a constant influx of new technologies. Samsun...

Q: Steam Kleen Ltd, a carpet steam-cleaning business, needs

Steam Kleen Ltd, a carpet steam-cleaning business, needs to acquire new machinery. The accountant has suggested that the entity should lease the machinery rather than take out a loan to purchase it. W...

Q: When corporations found their traditional funding revenues drying up during the global

When corporations found their traditional funding revenues drying up during the global financial crisis, one solution adopted by banks was to issue convertible bonds. Convertible bonds are often refer...

Q: Access the latest financial report for Maybank Banking Corporation on its corporate

Access the latest financial report for Maybank Banking Corporation on its corporate website and answer the following questions. (a) The financial institution is not following the current/non-current a...

Q: Koala Furniture Ltd, an office furniture retailer and wholesaler, carries

Koala Furniture Ltd, an office furniture retailer and wholesaler, carries a particular brand of office chair. During the year ended 30 June, the following purchases occurred. August ……………………………………………...

Q: As a trainee accountant, you have been asked to determine the

As a trainee accountant, you have been asked to determine the monetary value that should be assigned to the inventory of sporting equipment on hand as at the end of the financial year for Outdoor Adve...

Q: There is an IFRS on fair value measurement. The objective of

There is an IFRS on fair value measurement. The objective of this standard is to define fair value and specify the framework for measuring fair value. Identify the characteristics of assets and liabil...

Q: During the global financial crisis in July 2008, National Australia Bank

During the global financial crisis in July 2008, National Australia Bank (NAB) was exposed to collateralised debt obligations (CDO). Consequently, NAB wrote down $1 billion associated with these risky...

Q: In a significant accounting-related court case, the Australian Securities

In a significant accounting-related court case, the Australian Securities and Investments Commission (ASIC) took the directors of Centro to court over the misclassification of liabilities. On 27 June...

Q: The following article extract refers to the ‘goodwill glob’ and implies

The following article extract refers to the ‘goodwill glob’ and implies that it produces data that lack serviceability. Clarke and Dean (2011, p. 63) outline that there will come a time when challenge...

Q: The most recent financial statements for the Brisbane City Council are available

The most recent financial statements for the Brisbane City Council are available at www.brisbane.qld.gov.au. Referring to these statements, address the following questions. (a) Discuss why the Council...

Q: Despite Australia adopting IFRS issued by the IASB, the AASB has

Despite Australia adopting IFRS issued by the IASB, the AASB has not adopted the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). Instead, the AASB has i...

Q: Kookaburra Ltd is always running short of cash, despite growing sales

Kookaburra Ltd is always running short of cash, despite growing sales volumes and its current assets exceeding its current liabilities. A review of its operations by a consultant finds that a consider...

Q: Following the collapse of the Toys“R”Us franchise in

Following the collapse of the Toys“R”Us franchise in the United States, Toys“R”Us Australia went into administration on 21 May 2018, leaving 700 staff and 44 stores nationwide with an uncertain future...

Q: Discuss whether the following statements are true or false. (

Discuss whether the following statements are true or false. (a) The terms ‘accounts payable and ‘creditors’ mean the same thing. (b) The statement of financial position is a financial statement that s...

Q: The statement of financial position for Daffodil Pty Ltd reveals cash on

The statement of financial position for Daffodil Pty Ltd reveals cash on hand of $8000, accounts receivable of $48 000, inventory measured at $50 000 and plant and equipment measured at $116 000. The...

Q: An entity has total assets measured at $220 000 in the

An entity has total assets measured at $220 000 in the statement of financial position. The entity’s liabilities total $100 000, of which $60 000 is a bank loan. Calculate the entity’s net assets. Dis...

Q: List three essential characteristics necessary to consider an item either as an

List three essential characteristics necessary to consider an item either as an asset or a liability.

Q: The High Cloud Software Company wants to increase its asset base by

The High Cloud Software Company wants to increase its asset base by recognising its customer list as an asset. Discuss whether this is permissible under accounting standards.

Q: You are reviewing a statement of financial position and notice that goodwill

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Financial statements of Food and Wine Ltd are presented below.

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Acquire a statement of cash flows for a company you are interested in evaluating. Normally, the financial statements are available on the company website. If you have trouble locating the financial st...

Q: The global financial crisis (GFC) was brought about by a

The global financial crisis (GFC) was brought about by a bank induced liquidity squeeze in August 2007. Globally banks realised that their statement of financial positions contained highly toxic sub-p...

Q: Explain how you would determine if an income or expense item is

Explain how you would determine if an income or expense item is material.

Q: What is the purpose of a statement of cash flows?

What is the purpose of a statement of cash flows?

Q: Which of the following are not disclosed in a statement of cash

Which of the following are not disclosed in a statement of cash flows? (a) Net cash flows from financing activities (b) The cash on hand at the end of the reporting period (c) The amount of depreciati...

Q: Outline the format of a statement of cash flows, identifying each

Outline the format of a statement of cash flows, identifying each of the activity classifications.

Q: Valley Company had a positive net cash flow for the year,

Valley Company had a positive net cash flow for the year, but its statement of profit or loss reported a loss for the period. Explain.

Q: Outline some cash-flow warning signals.

Outline some cash-flow warning signals.

Q: The statement of financial position for Works Ltd reveals total assets of

The statement of financial position for Works Ltd reveals total assets of $420 000, total liabilities of $230 000 and equity of $190 000 as at the end of the reporting period. Using these data, calcul...

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When calculating days inventory, the average inventory level is compared with the cost of sales. When calculating days debtors, the average accounts receivable balance is compared with the sales reven...

Q: Visit the ASX website and graph the trend in JB Hi-

Visit the ASX website and graph the trend in JB Hi-Fi Ltd’s (JBH) monthly share price over the past two years.

Q: Discuss three limitations of ratio analysis as a fundamental analysis tool.

Discuss three limitations of ratio analysis as a fundamental analysis tool.

Q: In their 2018 annual report, JB Hi-Fi Ltd refers

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Q: Juices R Us sells bottles of freshly squeezed juice to small convenience

Juices R Us sells bottles of freshly squeezed juice to small convenience stores throughout Melbourne. Its latest statement of profit or loss for the last 12 months is as follows. Required (a) Calcula...

Q: Under what circumstances can calculating the contribution margin ratio to perform break

Under what circumstances can calculating the contribution margin ratio to perform break-even analysis be useful?

Q: Soft Pearl Company incurs the following costs to produce 50 000 light

Soft Pearl Company incurs the following costs to produce 50 000 light switches for floor lamps in 2020. Direct materials ………………………………………….. $200 000 Direct labour ………………………………………………… 300 000 Variable...

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The management of York Company have asked for your assistance in deciding whether to continue manufacturing a part or buy it from an outside supplier. The part, called Beta B, is a component of York’s...

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Wynham Stereos produces and sells speakers and CD players. The following information about the costs related to the systems has been collected. Wynham Stereos normally produces 25 000 of these system...

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Tropical Processing is a single-product entity and provides the following summary data relating to its product for 2020. Selling price per unit ……â€&...

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The statement of profit or loss for Nambour Industries for 2019 is as follows. Cost behaviour seems to follow this pattern: all of the cost of sales is considered variable; 50 per cent of the total m...

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McDonald Services offers three core accounting and bookkeeping services. After a cost behavior study, the following profitability analysis has been prepared. The management of McDonald Services estim...

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Katy Davis has had a passion for cycling for years. She has decided to explore turning her passion into a business. She has spent the last few months exploring the industry and collecting information...

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Q: Barloo Company is a software producer and sales company. Currently,

Barloo Company is a software producer and sales company. Currently, it pays all sales staff on a fixed base salary. Recently, management have been considering switching sales staff across to an incent...

Q: How may an opportunity cost be relevant in an outsourcing decision?

How may an opportunity cost be relevant in an outsourcing decision?

Q: You are the adviser to a junior achievement group in a local

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Briefly outline four pricing practices that are illegal in Australia.

Q: Discuss the allocation process for indirect costs.

Discuss the allocation process for indirect costs.

Q: Identify two factors that influence pricing decisions.

Identify two factors that influence pricing decisions.

Q: Assess the benefits to an entity of using a costing system.

Assess the benefits to an entity of using a costing system.

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Michelle’s Tax Services has two departments, tax and audit. The tax department has two product lines, business returns and individual returns. A list of costs and three cost objects...

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Hartford Company manufactures five products in a single production facility. The company uses activity cost pools to allocate indirect costs. The following activities have been identified following an...

Q: Refer to exercise 11.15. For each activity, name

Refer to exercise 11.15. For each activity, name a cost driver that might be used to assign activity costs to products. In exercise 11.15 Hartford Company manufactures five products in a single produ...

Q: The Skin Care Company has one product line that is unprofitable.

The Skin Care Company has one product line that is unprofitable. What circumstances might cause the entity’s overall profit to be lower if the unprofitable product line was eliminated?

Q: What are avoidable costs and why are they important in decision making

What are avoidable costs and why are they important in decision making?

Q: Fruits on High Ltd uses three activity cost pools to assign costs

Fruits on High Ltd uses three activity cost pools to assign costs to customers in order to assess customer profitability. Each activity cost pool has a unique cost driver to apply indirect costs to cu...

Q: Megan Mitchell has recently graduated from a business school and joined the

Megan Mitchell has recently graduated from a business school and joined the family business as an accountant. At the first management meeting with production, marketing and sales, a great deal of time...

Q: Benson Manufacturing estimates the following activity for the coming year.

Benson Manufacturing estimates the following activity for the coming year. • Expected production 23 000 units • Expected direct labour hours 1750 hours • Expected manufacturing overhead $92 000. Manuf...

Q: Refer to exercise 11.20. Benson Manufacturing’s total direct labour

Refer to exercise 11.20. Benson Manufacturing’s total direct labour cost was $470 000 (2350 hours × $100 per hour). There was no direct labour cost variance. In exercise 11.20 Benson Manufacturing es...

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During 2022, Lavender Plantations Pty Ltd continued to grow. The manager decided to add detergents to its existing range of soap and candles. The management accountant, Nick Gee, expressed concern reg...

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A housekeeping support department budgets its costs at $20 000 per month plus $18 per hour. The estimated and actual hours for November provided by the housekeeping support department to three operati...

Q: Mercy Hospital uses a costing system to determine the cost of patients

Mercy Hospital uses a costing system to determine the cost of patients who have surgery. The hospital uses a budgeted indirect cost rate for allocating indirect costs to patient stays. In March, the o...

Q: Richards Manufacturing estimates the following activity for the coming year.

Richards Manufacturing estimates the following activity for the coming year. • Expected production 20 000 units • Expected direct labour hours 20 000 hours • Expected manufacturing overhead $200 000....

Q: Winton Produce package and distribute three grades of animal feed. The

Winton Produce package and distribute three grades of animal feed. The material cost per tonne and estimated annual sales for each of the products are as follows. The indirect cost of operating the m...

Q: Just Windows manufactures two product ranges: the standard range and the

Just Windows manufactures two product ranges: the standard range and the special range. During July, 300 standard windows and 50 special windows were manufactured and indirect production costs of $73...

Q: ‘Fixed costs are always irrelevant in decision making.’ Discuss

‘Fixed costs are always irrelevant in decision making.’ Discuss.

Q: Transrapid is a magnetically levitated train that connects Shanghai to its Pudong

Transrapid is a magnetically levitated train that connects Shanghai to its Pudong International Airport at a speed of 268 miles per hour. Engineers developed a system with trains departing every 15 to...

Q: Aluminium Industries manufactures two products: Delta and Gamma. Both products

Aluminium Industries manufactures two products: Delta and Gamma. Both products are produced on the same assembly lines and packaged with 20 units of product per package. The predicted sales are 320 00...

Q: What is a cost object? Give three examples.

What is a cost object? Give three examples.

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Regional Animal Services is located in rural Queensland and treats farm animals and domestic pets. Providing veterinary care to farm animals requires travel to the individual farms in the area, while...

Q: Explain the difference between a direct cost and an indirect cost.

Explain the difference between a direct cost and an indirect cost.

Q: Explain the difference between a full product cost and an inventoriable product

Explain the difference between a full product cost and an inventoriable product cost.

Q: Discuss the importance of selecting an appropriate cost driver in the cost

Discuss the importance of selecting an appropriate cost driver in the cost allocation process.

Q: Explain cost-based pricing and give an example that shows how

Explain cost-based pricing and give an example that shows how prices would be determined using this method.

Q: Explain market-based pricing and give an example that shows how

Explain market-based pricing and give an example that shows how prices would be determined using this method.

Q: Cost drivers can be based on either volume or activity. Provide

Cost drivers can be based on either volume or activity. Provide an example of each.

Q: When is it necessary to calculate the contribution margin per limiting factor

When is it necessary to calculate the contribution margin per limiting factor?

Q: An organisation is currently operating at full capacity. Should it accept

An organisation is currently operating at full capacity. Should it accept a request for a special order based on variable costs plus 40 per cent? Explain.

Q: Explain the similarities and differences between the cash budget and the statement

Explain the similarities and differences between the cash budget and the statement of cash flows discussed in the statement of cash flows chapter.

Q: Explain the difference between planning and control.

Explain the difference between planning and control.

Q: Discuss the typical role of the accountant in the budget process.

Discuss the typical role of the accountant in the budget process.

Q: Explain the meaning of the term ‘budgetary slack’.

Explain the meaning of the term ‘budgetary slack’.

Q: The financial controller of Seats R Us has established indirect cost pools

The financial controller of Seats R Us has established indirect cost pools and cost drivers for the coming year as follows. The sales team has received an order for 1500 seats and produced them. The...

Q: Arthur Thomson Lawyers operates in the local neighbourhood and has six solicitors

Arthur Thomson Lawyers operates in the local neighbourhood and has six solicitors who work on client briefs. For the coming year, each solicitor is budgeted to work 2400 billable hours. The main areas...

Q: From the following data for Fantastic Sales, calculate the receipts from

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Q: From the following data for Starlight Enterprises, calculate the receipts from

From the following data for Starlight Enterprises, calculate the receipts from accounts receivable for June, July and August of 2021. Credit sales are normally settled according to the following patt...

Q: Ski Lifters is a business that provides a chairlift for tourists in

Ski Lifters is a business that provides a chairlift for tourists in the Alpine region. The peak season is in winter, with the low season during the summer months. Sales are high during the ski season...

Q: During late 2019, Ski Lifters commenced a new business in the

During late 2019, Ski Lifters commenced a new business in the Alpine region to rent ski gear to tourists. A budget has been prepared for the coming financial year. Prepare a brief report to management...

Q: One of the downsides of using a participative style of budgeting is

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Watson Company makes specially designed coffee mugs. The entity has developed a website and is trying to switch customer behaviour to this medium. Sales for each quarter of 2020 are as follows. Quarte...

Q: Twilight Enterprises has provided the following estimates relating to the first quarter

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Q: Budget Travel plans to commence operations on 1 July 2021. The

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Q: Lavender Plantations Pty Limited produces and sells two types of lavender-

Lavender Plantations Pty Limited produces and sells two types of lavender-based products: soaps and candles. Peta Mitchell, the manager, is implementing a new marketing strategy in 2022. Actual sales...

Q: Explain the difference between mixed and variable costs. Provide examples of

Explain the difference between mixed and variable costs. Provide examples of each.

Q: Garden Sculptures presents the following data relating to the expected operations for

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Q: Hobby Gardens is a garden design and landscaping business. At 30

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Q: Glenvale Furniture has projected sales of its product for the next six

Glenvale Furniture has projected sales of its product for the next six months as follows. January ……………………………….. 80 units February ……………………………... 180 units March …………………………………. 200 units April …………………...

Q: Golden Arbours intends to start business on the first day of January

Golden Arbours intends to start business on the first day of January. Production plans for its first four months of operations are as follows. January ………………………………… 10 000 units February ………………………………....

Q: Discuss the potential issues arising for an entity if it takes a

Discuss the potential issues arising for an entity if it takes a budgetary approach in which budgetary data are imposed on business unit managers by the CEO. Contrast this with an approach whereby the...

Q: Middleton Services is preparing a master budget for the coming year.

Middleton Services is preparing a master budget for the coming year. At present senior management are reviewing the inventory policies. Which budgets would be affected by policies concerning the level...

Q: Brodie Ltd has undertaken its budget planning for the coming accounting period

Brodie Ltd has undertaken its budget planning for the coming accounting period. Budget item …………….................................………….Budget data Sales …………………………………………………. 60 000 units; selling pric...

Q: Lavender Plantations Pty Limited produces and sells two types of lavender-

Lavender Plantations Pty Limited produces and sells two types of lavender-based products: soaps and candles. The 2022 sales budget for the two products is as follows. The beginning inventory on 1 Jan...

Q: Chalkboard was commenced by Louis Turner. Chalkboard is an innovative technology

Chalkboard was commenced by Louis Turner. Chalkboard is an innovative technology company that provides a platform for the posting of best-practice teaching videos and commentary. Its strategy is focus...

Q: Amy Turner is the newly appointed chief accountant at Satellite Data Components

Amy Turner is the newly appointed chief accountant at Satellite Data Components (SDC), which designs and manufactures data components for the satellite and car industries. One of Amy’s early tasks is...

Q: Using examples, distinguish between fixed and variable costs.

Using examples, distinguish between fixed and variable costs.

Q: Michael Wallis is the marketing manager for a chain of stores specialising

Michael Wallis is the marketing manager for a chain of stores specialising in electric tools for home renovators. Michael’s department is preparing a sales budget for the coming year and he has issued...

Q: Johnny Castles is the operational manager for Tru Blue Tours. Johnny’s

Johnny Castles is the operational manager for Tru Blue Tours. Johnny’s bonus is dependent upon the reduction of his department’s operating expense budget by 10 per cent in the coming year. One initiat...

Q: Dairy Australia Ltd’s annual operating plan for 2017–2018 outlines its

Dairy Australia Ltd’s annual operating plan for 2017–2018 outlines its three-year plan following revision of its strategic direction. Access the plan (available at www.dairyaustralia.com.au) and outli...

Q: Mona Little, the accountant for Trailers 4 Hire, is currently

Mona Little, the accountant for Trailers 4 Hire, is currently preparing the budget for the coming year. One of the agenda items for next week’s finance meeting is consideration of whether an outstandi...

Q: Database Service’s management expressed surprise that the budgeted profit was achieved despite

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Q: Holiday Manor has twenty rooms available for rent. During the month

Holiday Manor has twenty rooms available for rent. During the month of December, its average room rate is expected to be $180 and its room occupancy 80 per cent. Due to the holiday season, the room ra...

Q: Holiday Manor has a dining room with the capacity to seat 100

Holiday Manor has a dining room with the capacity to seat 100 guests. It is open for breakfast and lunch seven days a week. During January 2019, management forecast the seat turnover for breakfast to...

Q: As a consequence of the global financial crisis, many airlines have

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Q: Veronica Shan owns and operates the Quality First printing company. Veronica

Veronica Shan owns and operates the Quality First printing company. Veronica and her staff do not engage in planning or budgeting, as they consider the business too small to warrant their attention to...

Q: Betty Wu is the manager of a large retail store specialising in

Betty Wu is the manager of a large retail store specialising in children’s clothing and accessories. As Betty is the longest serving employee, she believes that she knows what is best for the store. S...

Q: Discuss the circumstances in which CVP analysis might be useful.

Discuss the circumstances in which CVP analysis might be useful.

Q: ‘Nobody ever seems to be able to hit our sales targets

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Q: M20 Company has presented the following estimates relating to 2021 activities.

M20 Company has presented the following estimates relating to 2021 activities. Sales in the December quarter of 2020 are $345 000. All sales are on credit, of which 55 per cent are collected in the q...

Q: Realty Company prepares monthly cash budgets. Provided next is a set

Realty Company prepares monthly cash budgets. Provided next is a set of relevant data extracted from existing reports and the sub-budgets for the two months of September and October 2021. All sales a...

Q: At a recent finance committee meeting, the Chief Operating Officer advised

At a recent finance committee meeting, the Chief Operating Officer advised the marketing department that a 10 per cent increase in sales is expected for the coming year. The increase is to apply to al...

Q: Glenn Stone, manager of Jarrett Car Repairers, has requested that

Glenn Stone, manager of Jarrett Car Repairers, has requested that you prepare a cash budget for the months of December and January. He has provided the following information to assist in this task. &a...

Q: Willow Health provides a range of healthcare services to the local community

Willow Health provides a range of healthcare services to the local community, including home visits by nurses to elderly patients. An allied health worker, who performs a range of tasks such as housew...

Q: Bullen & Company makes and sells upmarket carrybags for laptop computers.

Bullen & Company makes and sells upmarket carrybags for laptop computers. John Crane is responsible for preparing Bullen & Company’s master budget and has assembled the data...

Q: Quality Goods Company operates antique and second-hand goods stores throughout

Quality Goods Company operates antique and second-hand goods stores throughout Victoria. Such stores are currently very popular and sales are increasing each month. It has budgeted the following sales...

Q: John Wilson is the owner/manager of Overnight Courier Solutions,

John Wilson is the owner/manager of Overnight Courier Solutions, a small transport and courier company that provides logistic services to business. John is about to start the budget process for 2021....

Q: Go to the website for JB Hi-Fi Ltd and examine

Go to the website for JB Hi-Fi Ltd and examine its latest annual report. Write a report to the finance manager explaining how you would prepare the sales budget.

Q: How can the margin of safety be used to assess risk associated

How can the margin of safety be used to assess risk associated with sales?

Q: Best Beef Burgers operates a store in Melbourne and the following is

Best Beef Burgers operates a store in Melbourne and the following is its average monthly statement of profit or loss. The owner is currently preparing the budget for next year and is considering the...

Q: According to Telstra’s 2018 Remuneration report, 40 per cent of the

According to Telstra’s 2018 Remuneration report, 40 per cent of the executive variable remuneration plan (EVP) was based on customer performance measures. Discuss the reasons why the board has linked...

Q: Swinton Industries operates in the IT industry, producing and selling computer

Swinton Industries operates in the IT industry, producing and selling computer and IT equipment. It is structured along functional lines (research and design, production, marketing and so on) and, for...

Q: A university student, Barry Ward, plans to sell atomic alarm

A university student, Barry Ward, plans to sell atomic alarm clocks with a music function over the internet and in person during the semester to help pay his study expenses. He buys the clocks for $35...

Q: If an entity has a mixed cost function, a 10 per

If an entity has a mixed cost function, a 10 per cent increase in sales volume should increase income by more than 10 per cent. Explain why.

Q: CVP analysis and break-even analysis are underpinned by a range

CVP analysis and break-even analysis are underpinned by a range of important assumptions. Briefly discuss four such assumptions.

Q: Discuss how knowledge of the break-even point and the margin

Discuss how knowledge of the break-even point and the margin of safety will assist management in its risk assessment of business operations.

Q: Explain the importance of the relevant range in relation to cost behaviour

Explain the importance of the relevant range in relation to cost behaviour when considering the costs of expanding business activities.

Q: Find the missing figures for each of the independent cases shown below

Find the missing figures for each of the independent cases shown below. (Reconstruct the statement of profit or loss for each scenario.)

Q: Find the missing figure for each of the following independent cases.

Find the missing figure for each of the following independent cases. (Reconstruct the statement of profit or loss for each scenario.)

Q: Discuss the concept of operating leverage.

Discuss the concept of operating leverage.

Q: For each of the following independent situations, calculate the break-

For each of the following independent situations, calculate the break-even point in units. (a) Variable cost per unit of $3, annual fixed costs of $42 750 and selling price per unit of $9. (b) Variabl...

Q: Yen Rippon is about to commence operations as a beauty technician.

Yen Rippon is about to commence operations as a beauty technician. She believes her costs can be classified as fixed or variable. (a) Distinguish between fixed and variable costs. (b) Outline how Yen...

Q: Discuss some possible options when the break-even unit target appears

Discuss some possible options when the break-even unit target appears too difficult to achieve.

Q: Emy Fong has been operating a single-product firm for three

Emy Fong has been operating a single-product firm for three years. As this product is now well established in the market, Fong is thinking about adding two new products to her range. Outline the impac...

Q: In the Whine Company, it costs $30 per unit ($

In the Whine Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product that normally sells for $55. A foreign wholesaler offers to buy 3000 units at $35 each. The Whine Company wil...

Q: Lavender Plantations Pty Ltd advertises weekly specials and makes sure that the

Lavender Plantations Pty Ltd advertises weekly specials and makes sure that the shelf space (9 metres) at the entrance to the store showcases these specials. For the current week, its three products a...

Q: Gotrack Company produces compasses for cross-country skiing. The production

Gotrack Company produces compasses for cross-country skiing. The production capacity is 45 000 compasses and the company is currently operating at 85 per cent capacity. Variable manufacturing costs ar...

Q: Nicholas Cash of Advantage Tennis Coaching (ATC) has received an

Nicholas Cash of Advantage Tennis Coaching (ATC) has received an offer from a top-ranked Australian player, Serena Novac, who wishes to spend two months in the beautiful Queensland weather and have 50...

Q: IT Equip sells IT equipment, specialising in printers and projectors.

IT Equip sells IT equipment, specialising in printers and projectors. The following statement reflects the contribution margin of each activity and overall profit levels. Required (a) Calculate the c...

Q: Information for Harbour Industries is provided below. Average selling price

Information for Harbour Industries is provided below. Average selling price per unit ……………………………. $ 10.00 Average variable costs per unit: Cost per unit ………………………………………………………… 5.00 Selling costs ……………...

Q: How does the calculation of break-even differ between single product

How does the calculation of break-even differ between single product and multi-product entities?

Q: Mermaid Enterprises operates a single-product entity. Data relating to

Mermaid Enterprises operates a single-product entity. Data relating to the product for 2019 are as follows. Annual volume ……………………………………………………………….. 64 000 units Selling price per unit ………………………………………...

Q: Lavender Plantations Pty Ltd management plan to introduce detergents to its product

Lavender Plantations Pty Ltd management plan to introduce detergents to its product range in 2022. They have provided the following information relating to the planned activities. Required (a) Calcul...

Q: Terrace Company currently manufactures a sub-assembly for its main product

Terrace Company currently manufactures a sub-assembly for its main product. The costs per unit are as follows. Direct materials …………………………………. $ 4.00 Direct labour ………………………………………. 30.00 Variable over...

Q: Blitz Nails has provided the following financial data for the last two

Blitz Nails has provided the following financial data for the last two financial periods. The manager, Jonie Matte, is beginning her planning for next year and requires the following information. Re...

Q: Flash Pty Ltd manufactures handheld egg-beaters. For the first

Flash Pty Ltd manufactures handheld egg-beaters. For the first eight months of 2020, the company reports the following operating results while operating at 80 per cent capacity. Sales (400 000 units)...

Q: Elm Ltd has been manufacturing its own shades for its camping chairs

Elm Ltd has been manufacturing its own shades for its camping chairs. The company is currently operating at 100 per cent capacity. Variable manufacturing overhead is charged to production at the rate...

Q: Mansfield Ltd has recently expanded its production facility to satisfy a new

Mansfield Ltd has recently expanded its production facility to satisfy a new customer order that will start in six months. As a consequence, it has the opportunity to make use of the spare capacity fo...

Q: Advantage Tennis Coaching (ATC) has been engaged to provide tennis

Advantage Tennis Coaching (ATC) has been engaged to provide tennis coaching services to students at a local private girls’ college. ATC has put forward a proposal to the University o...

Q: The following information has been extracted from the financial statements of Vivid

The following information has been extracted from the financial statements of Vivid, a social media company. Revenue is generated through advertising on the social media platform, where the number of...

Q: ‘If an entity has the objective of profit maximisation, break

‘If an entity has the objective of profit maximisation, break-even analysis is not necessary.’ Discuss this assertion.

Q: Explain the meaning of the term ‘fixed cost’ and give five

Explain the meaning of the term ‘fixed cost’ and give five examples of fixed costs.

Q: Briefly outline some of the key qualitative risk considerations with respect to

Briefly outline some of the key qualitative risk considerations with respect to outsourcing decisions.

Q: Lavender Plantations Pty Ltd manufactures and sells candles, soaps and detergents

Lavender Plantations Pty Ltd manufactures and sells candles, soaps and detergents, and distributes them to stores located in Australia and New Zealand. The normal selling price per carton of candles i...

Q: Waffle House sells ice-cream cones in a variety of flavours

Waffle House sells ice-cream cones in a variety of flavours. Financial data for a recent week are shown below. Revenue (2000 cones @ $2.00) …………………. $4 000 Cost of ingredients ………………………………………. 1 200 R...

Q: Coffee House sells specialist coffee drinks from a rented cart on the

Coffee House sells specialist coffee drinks from a rented cart on the beachside on the Sunshine Coast. Provided below is a summarised version of its statement of profit or loss for July 2019. The cos...

Q: Lavender Plantations Pty Ltd manufactures three lavender-based products, candles

Lavender Plantations Pty Ltd manufactures three lavender-based products, candles, soaps and detergents. On average 75 000 candles, 50 000 soaps and 125 000 detergents are sold. Next year, the company...

Q: Magic Dusters is considering a special order from Stay Clean Ltd for

Magic Dusters is considering a special order from Stay Clean Ltd for a special cleaning product for windows. One ingredient required for the product is Alpha A, which Magic Dusters has in its inventor...

Q: Magic Dusters has also identified that another ingredient, Delta D (

Magic Dusters has also identified that another ingredient, Delta D (500 litres required), will also be used in the special order for Stay Clean Ltd (see problem 10.47). Unlike Alpha A, Delta D is curr...

Q: Tartan Company is a single-product entity and provides the summary

Tartan Company is a single-product entity and provides the summary data shown below relating to its product for 2020. Selling price per unit……………………………………………………………….. $ 50 Variable manufacturing costs...

Q: The management of Kayla Industries have been aggressive in trying to build

The management of Kayla Industries have been aggressive in trying to build market share. The price was set at $5 per unit, well below the existing market price. Variable costs were $4.50 per unit and...

Q: Soft Mats produces exercise mats for use in fitness centres. Production

Soft Mats produces exercise mats for use in fitness centres. Production capacity is 40 000 mats per year. Due to a chain of fitness centres closing, Soft Mats now has spare capacity of 4000 mats per y...

Q: What is the main criticism of the balanced scorecard framework?

What is the main criticism of the balanced scorecard framework?

Q: List the principles espoused by the United Nations Division for Sustainable Development

List the principles espoused by the United Nations Division for Sustainable Development when designing an environmental performance system.

Q: The following table illustrates key figures from Robertson Ltd’s statement of profit

The following table illustrates key figures from Robertson Ltd’s statement of profit or loss and statement of financial position for the five-year period ending 30 June 2020. Calcul...

Q: Which of the following entities do you think would have the greatest

Which of the following entities do you think would have the greatest proportion of working capital held as inventory? Why? (a) Local butcher (b) Hardware store (c) Stallholder at a weekend market sell...

Q: As production manager for a hoodie manufacturing company, how would you

As production manager for a hoodie manufacturing company, how would you react regarding your inventory levels in the following circumstances? (a) Continual breakdowns in the machine used to weave the...

Q: As inventory manager in a retail-chain warehouse, how would

As inventory manager in a retail-chain warehouse, how would you react regarding your inventory levels in the following circumstances? (a) Sudden volatility in sales. (b) Continual short deliveries by...

Q: If you had just started a business and were in the early

If you had just started a business and were in the early development phase, which forms of short-term credit would you try to maximise? Why?

Q: What is a novated lease? How is it markedly different from

What is a novated lease? How is it markedly different from other leases?

Q: Summarise the advantages and disadvantages of owning ordinary shares in a company

Summarise the advantages and disadvantages of owning ordinary shares in a company compared with financing the company through a loan.

Q: Distinguish between rights and options.

Distinguish between rights and options.

Q: Mike and Andy is a clothing store for teenagers. It is

Mike and Andy is a clothing store for teenagers. It is chronically short of cash, so arranges a 120-day commercial bill (BAB). According to the theory of management of assets, what use should it put t...

Q: How can a profitable, fast-growing entity such as Mike

How can a profitable, fast-growing entity such as Mike and Andy be chronically short of cash?

Q: Explain the concept of eco-efficiency.

Explain the concept of eco-efficiency.

Q: Mike and Andy has on average $150 000 of employees’ pay

Mike and Andy has on average $150 000 of employees’ pay, tax withheld and superannuation contributions in its hands at all times. What use should it make of these funds?

Q: Pineapple Plantations Pty Ltd manufactures sustainable, Pineapple-based products for

Pineapple Plantations Pty Ltd manufactures sustainable, Pineapple-based products for sale to wholesalers and retailers around Australia and New Zealand. Dave Geitz, the manager, has a goal of increasi...

Q: ‘Entities must juggle the costs of holding cash with the costs

‘Entities must juggle the costs of holding cash with the costs of not having enough.’ Explain the issues involved.

Q: Explain, with numerical examples, four aspects of an entity’s credit

Explain, with numerical examples, four aspects of an entity’s credit policies and how decisions regarding each impact on the value of accounts receivable at any time.

Q: After thinking about how this could be done, explain the processes

After thinking about how this could be done, explain the processes an entity might use to collect its debts.

Q: Give examples of inventories of retail products that would incur high costs

Give examples of inventories of retail products that would incur high costs for each of the following. (a) Storage and display (b) Insurance (c) Deterioration or obsolescence (d) Theft

Q: Before reforms were put in place during the 1980s, many entities

Before reforms were put in place during the 1980s, many entities allowed their overdraft accounts to remain continually overdrawn. Banks reformed the situation by advising these clients to contract fo...

Q: Explain the advantages to all parties of a novated lease.

Explain the advantages to all parties of a novated lease.

Q: Explain the trend in crowdfunding over the past five years. What

Explain the trend in crowdfunding over the past five years. What types of businesses are commonly financed by crowdfunding?

Q: Explain what is meant by an ICO. Differentiate between IPOs and

Explain what is meant by an ICO. Differentiate between IPOs and ICOs.

Q: Outline a typical executive performance compensation package.

Outline a typical executive performance compensation package.

Q: A friend is thinking about starting a company manufacturing small robots for

A friend is thinking about starting a company manufacturing small robots for household chores. Explain to your friend the different types of finance that would be available to him.

Q: Coconut Plantations Pty Ltd manufactures sustainable, coconut-based products for

Coconut Plantations Pty Ltd manufactures sustainable, coconut-based products for sale to wholesalers and retailers around Australia and New Zealand. Jo Geter, the manager, has a goal of increasing the...

Q: CuteIT makes smartphone covers. The employee payroll averages $600 000

CuteIT makes smartphone covers. The employee payroll averages $600 000 per week. CuteIT would like to extend the pay cycle to fortnightly. The manufacturing workers union argues that the company is sa...

Q: Volley Ltd has $1 million spare cash from commissions earned during

Volley Ltd has $1 million spare cash from commissions earned during the busy pre-Christmas season. Staff are paid a retainer, as well as part of the commissions earned through sales. Volley Ltd is awa...

Q: Baxter Ltd reported $200 million in credit sales in 2017–

Baxter Ltd reported $200 million in credit sales in 2017–18 and 2018–19. Average accounts receivable dropped from $25 million to $20 million over the two periods. Required (a) Assuming 220 trading da...

Q: Lavender Plantations Pty Ltd manufactures Lavender-based products and commenced operations

Lavender Plantations Pty Ltd manufactures Lavender-based products and commenced operations in 2019. Production and sales have grown consistently. Here are data for the last four years (in $ thousand)....

Q: Toowong Ltd has been growing relatively slowly in a mature industry.

Toowong Ltd has been growing relatively slowly in a mature industry. Its trade creditor and credit sales data for the last five years (in $ million) are shown below. Required (a) Compute the creditor...

Q: Advantage Tennis Coaching (ATC) in Brisbane offers coaching for junior

Advantage Tennis Coaching (ATC) in Brisbane offers coaching for junior, elite and mature tennis players. Nicholas Cash, the sole proprietor, has identified that the business cycle will be seasonal, wi...

Q: Rosedale Ltd is a listed company with 30 million shares issued.

Rosedale Ltd is a listed company with 30 million shares issued. It wants to raise more capital by means of a rights issue. The current market price is $6 and the subscription price is $5. The rights w...

Q: JB Hi-Fi Ltd’s 2018 statement of financial position provides the

JB Hi-Fi Ltd’s 2018 statement of financial position provides the following data. In 2018, JB Hi Fi Ltd earned record revenue (increased by 35.3 per cent) and the EPS (earnings per s...

Q: Outline the reason for implementing a team-based reward structure and

Outline the reason for implementing a team-based reward structure and the disadvantages in doing so.

Q: Katelyn Ltd arranges a 91-day commercial bill: 91 days

Katelyn Ltd arranges a 91-day commercial bill: 91 days because the 90th day was a Sunday. The face value is $200 000 and Katelyn receives $197 010. What is the yield?

Q: Base Company buys in sand, gravel, cement powder and steel

Base Company buys in sand, gravel, cement powder and steel reinforcement. These raw materials cost about $15 million most years. Base Company has recently enjoyed a surge in sales after it liberalised...

Q: Plush Cruiser Ltd builds luxury houseboats. The entity needs funds for

Plush Cruiser Ltd builds luxury houseboats. The entity needs funds for expansion. It could take out a fixed-rate or variable-rate business loan over, say, 25 years. An alternative is issuing new share...

Q: Pozible is a crowdfunding site for creative, community and passion projects

Pozible is a crowdfunding site for creative, community and passion projects. Go to the website at www.pozible.com. Required (a) What are the benefits of joining a crowdfunding community like Pozible?...

Q: Differentiate between working capital and net working capital. Provide examples of

Differentiate between working capital and net working capital. Provide examples of both current asset and current liability accounts that would be taken into consideration to determine net working cap...

Q: Which of the following entities do you think would have the greatest

Which of the following entities do you think would have the greatest proportion of working capital held as cash? Why? (a) Local butcher (b) Hardware store (c) Stallholder at a weekend market selling h...

Q: Which of the following entities do you think would have the greatest

Which of the following entities do you think would have the greatest proportion of working capital held as accounts receivable? Why? (a) Local butcher (b) Hardware store (c) Stallholder at a weekend m...

Q: JB Hi-Fi Ltd’s focus is on creating shareholder value.

JB Hi-Fi Ltd’s focus is on creating shareholder value. In its 2018 preliminary final report, the company states that the cornerstone of its success is its ability to consistently off...

Q: Outline the advantages and disadvantages in using non-financial performance indicators

Outline the advantages and disadvantages in using non-financial performance indicators.

Q: Discuss the basic principles in choosing non-financial performance indicators.

Discuss the basic principles in choosing non-financial performance indicators.

Q: A division of a global multinational company reports sales of $1

A division of a global multinational company reports sales of $1 075 000, variable costs of $500 000, traceable fixed costs of $387 500, allocated regional common costs of $75 000 and allocated corpor...

Q: Feather Pillows Ltd has three divisions: Hard, Medium and Soft

Feather Pillows Ltd has three divisions: Hard, Medium and Soft. Corporate expenses of $72 000 are allocated to divisions based on sales. Data for the current quarter are as follows. Required Prepare...

Q: You have been presented with a proposal to invest $200 000

You have been presented with a proposal to invest $200 000 into a company (using $100 000 of borrowed funds). In the first year of operations, the net operating profit after tax is expected to be appr...

Q: The following data relate to the Chinese Division of Hangzhou Incorporated.

The following data relate to the Chinese Division of Hangzhou Incorporated. Sales …………………………………………………… $360 000 Direct variable costs ……………………………... $120 000 Direct fixed costs …………………………………… $80 000...

Q: Discuss the four types of responsibility centres.

Discuss the four types of responsibility centres.

Q: For each of the following stakeholder groups, give an example of

For each of the following stakeholder groups, give an example of an eco-efficiency indicator. (a) Shareholders (b) Government (c) Top management (d) Site management (e) Project management (f) Division...

Q: A division reports divisional margin/profit of $180 000,

A division reports divisional margin/profit of $180 000, residual income of $36 000 and investment for the period of $1 440 000. What is the minimum return being required by management?

Q: A division has profit of $20 250, sales of $

A division has profit of $20 250, sales of $247 500 and an investment base of $112 500. If the required charge for capital is 20 per cent, determine the: (a) Profit margin (b) Asset turnover (c) Retur...

Q: A segment of Canine Holdings reports sales of $280 000 and

A segment of Canine Holdings reports sales of $280 000 and a profit of $60 000. The data below also relate to this segment of Canine Holdings. Total assets ………………….………………………… $650 000 Accumulated depr...

Q: For each of the five perspectives of the balanced scorecard, list

For each of the five perspectives of the balanced scorecard, list two possible objectives, a measure and a driver. Arrange your answer as follows.

Q: One common objective is quality. Listed below are businesses that regard

One common objective is quality. Listed below are businesses that regard quality as a strategic objective. For each business, list two performance measures that could help capture the strategic object...

Q: A family business has built a chain of coffee shops. The

A family business has built a chain of coffee shops. The basic underlying principles of the chain, which has helped it to grow, are cost effectiveness, quality of service and product innovation. Deter...

Q: The data below have missing values. Determine the missing values indicated

The data below have missing values. Determine the missing values indicated by the letters (a) to (i).

Q: Select a company in your region and search its website for its

Select a company in your region and search its website for its mission statement. Investigate the information on the website to discover what factors drive the company’s success and any related inform...

Q: Refer to the company you selected in exercise 14.33 and

Refer to the company you selected in exercise 14.33 and investigate the environmental and social information it provides. This may be in its annual report, in its CSR report or on its website. What ar...

Q: What are the terms used interchangeably for a business unit? What

What are the terms used interchangeably for a business unit? What is the responsibility of the manager of the business unit?

Q: Critique the two approaches to incorporating environmental and social performance in the

Critique the two approaches to incorporating environmental and social performance in the balanced scorecard.

Q: Information for the three divisions of the Hampton Corporation follows.

Information for the three divisions of the Hampton Corporation follows. Required Assuming that the tax rate is 30 per cent, calculate the EVA for each division.

Q: The four perspectives of the balanced scorecard are internal operations, innovation

The four perspectives of the balanced scorecard are internal operations, innovation and improvement, financial and customer. A list of goals and measures is presented below. Match each goal with one o...

Q: The statement of financial position and the statement of profit or loss

The statement of financial position and the statement of profit or loss for Lavender Plantations Pty Ltd are presented below. LAVENDER PLANTATIONS PTY LTD Statement of financial position as at 31 Dece...

Q: You work for a fruit and vegetable manufacturer that has three divisions

You work for a fruit and vegetable manufacturer that has three divisions: juice, canned and fresh. Rewarding performance has been on the agenda for the last few management meetings and it has been pro...

Q: You have been assigned a consulting job with a medium-sized

You have been assigned a consulting job with a medium-sized agricultural company that specializes in supplying seedlings to nurseries. The entity is divided into divisions based on geographical locati...

Q: Pineapple Plantations Pty Ltd is located on the Sunshine Coast in Queensland

Pineapple Plantations Pty Ltd is located on the Sunshine Coast in Queensland and manufactures sustainable, pineapple-based products for three different markets. The business has grown from a backyard...

Q: Global Enterprises is a division of an international conglomerate. The following

Global Enterprises is a division of an international conglomerate. The following information relates to its performance. Target profit margin …………………………………………….. 12% Target asset turnover ………………………………...

Q: Susan is a divisional manager with the Generator Company. Her performance

Susan is a divisional manager with the Generator Company. Her performance report shows a positive divisional margin, but a loss for the year. Susan has complained to the CEO about the common costs tha...

Q: Suggest indicators that could be used to assess an improvement in efficiency

Suggest indicators that could be used to assess an improvement in efficiency in each of the following areas. (a) Reducing the amount of energy used in production of goods and services. (b) Reducing th...

Q: What are the three purposes of preparing divisional performance reports?

What are the three purposes of preparing divisional performance reports?

Q: Refer to the information supplied in problem 14.41. The

Refer to the information supplied in problem 14.41. The management of Pineapple Plantations Pty Ltd have come across a further investment opportunity. They do not want to develop a separate division,...

Q: For each of the scenarios below, indicate the effect (increase

For each of the scenarios below, indicate the effect (increase, decrease or no effect) it would have on ROI, RI, profit margin and asset turnover. (a) Equipment is sold for $20 000. It is currently va...

Q: ‘Information management is an essential component of an environmental and social

‘Information management is an essential component of an environmental and social performance measurement system.’ Discuss whether you agree with this statement.

Q: Enviro Solutions Pty Ltd operates three divisions that supply products and services

Enviro Solutions Pty Ltd operates three divisions that supply products and services relating to water. The two older divisions produce and supply water hardware such as pumps, pipes and tanks. The new...

Q: Fit Solutions is a provider of personal exercise equipment. One division

Fit Solutions is a provider of personal exercise equipment. One division of Fit Solutions produces a product called Fab Abs, a specialised piece of equipment that exercises the abdominal region. Most...

Q: Beginning with the June 28, 2007 issue, Rolling Stone magazine

Beginning with the June 28, 2007 issue, Rolling Stone magazine became the first mass-marketed magazine to print on carbon-neutral paper. The special June issue of the magazine included a series of fea...

Q: CEO remuneration packages have courted much controversy. These packages are normally

CEO remuneration packages have courted much controversy. These packages are normally divided into a base salary and incentive payments. The incentive payments are usually aligned with the financial pe...

Q: Why measure organisational performance?

Why measure organisational performance?

Q: What is the balanced scorecard framework?

What is the balanced scorecard framework?

Q: (a) Discuss the advantages and disadvantages of both the ARR

(a) Discuss the advantages and disadvantages of both the ARR and the PP. (b) Examine the practical issues in making capital investment decisions. (c) Distinguish between the net present value (NPV) of...

Q: List some typical goals and performance measures for a balanced scorecard.

List some typical goals and performance measures for a balanced scorecard.

Q: Chang De Silva Ltd, an Australian entity, is offered three

Chang De Silva Ltd, an Australian entity, is offered three projects for which the cash flows are as follows in thousands of dollars. The directors work on 14 per cent as their required rate of return...

Q: Eloise Tan, a student, recently received a digital SLR camera

Eloise Tan, a student, recently received a digital SLR camera for her 18th birthday. Over the summer months she has been busy experimenting with the lenses and taking photos of Brisbane attractions su...

Q: What is the difference between risk and return in finance?

What is the difference between risk and return in finance?

Q: What factors must be taken into consideration in determining the discount rate

What factors must be taken into consideration in determining the discount rate used in investment decisions?

Q: Define the ARR. What are the two components of the investment

Define the ARR. What are the two components of the investment that must be known in order to perform this calculation?

Q: What factors are taken into consideration in determining an appropriate ARR?

What factors are taken into consideration in determining an appropriate ARR?

Q: Discuss the factors that would lead to an investment being selected with

Discuss the factors that would lead to an investment being selected with a shorter PP.

Q: Define the term ‘discount rate’ and explain how entities set their

Define the term ‘discount rate’ and explain how entities set their rates.

Q: How does inflation impact on the setting of discount rates?

How does inflation impact on the setting of discount rates?

Q: Compare the calculation of the ARR with the NPV. What advantages

Compare the calculation of the ARR with the NPV. What advantages does the NPV have compared with the ARR?

Q: List the formulas for the three basic financial performance indicators to measure

List the formulas for the three basic financial performance indicators to measure divisional performance.

Q: What impact does taxation have on investment decisions?

What impact does taxation have on investment decisions?

Q: Acacia Constructions is offered two contracts on the same day for building

Acacia Constructions is offered two contracts on the same day for building a new retirement village and a new library complex, respectively. The contracts promise total profits of $6 million and $9 mi...

Q: Acacia Constructions (from exercise 12.13) recovers its project

Acacia Constructions (from exercise 12.13) recovers its project investment by straight-line methods so that the $5 million is recovered by the end of each project. Assuming profits are also booked in...

Q: Given the analyses you have completed in exercises 12.13 and

Given the analyses you have completed in exercises 12.13 and 12.14, which of the two contracts would you recommend? Why? In exercise 12.13 Acacia Constructions is offered two contracts on the same da...

Q: Lavender Plantations Pty Ltd is contemplating acquiring a new machine to be

Lavender Plantations Pty Ltd is contemplating acquiring a new machine to be used for a relatively short period until its new factory is built with computerised equipment installed. Two machines are be...

Q: What are the PPs for each of the machines in the Lavender

What are the PPs for each of the machines in the Lavender Plantations exercise 12.16? What are the risks associated with these investment analyses? In exercise 12.16 Lavender Plantations Pty Ltd is c...

Q: What are the NPVs for the two machines in exercise 12.

What are the NPVs for the two machines in exercise 12.16 if Lavender Plantations has an RRR of 10 per cent? Demonstrate your answer using the discount table in appendix 12A at the end of this chapter....

Q: Explain what is meant by positive and negative NPV.

Explain what is meant by positive and negative NPV.

Q: If a six-year project has an NPV of $400

If a six-year project has an NPV of $400 000 with a 8 per cent discount rate, will the NPV be higher or lower with a 12 per cent discount rate?

Q: List and describe three factors that must be considered with an investment

List and describe three factors that must be considered with an investment in an overseas airline.

Q: Describe economic value added (EVA).

Describe economic value added (EVA).

Q: Discuss three environmental concerns that could impact on a business manufacturing custom

Discuss three environmental concerns that could impact on a business manufacturing custom-made dining tables.

Q: What is the difference between return and capital growth on an investment

What is the difference between return and capital growth on an investment? Illustrate with an example of an investment in a new warehouse.

Q: What is the difference between the profitability and liquidity of an investment

What is the difference between the profitability and liquidity of an investment?

Q: The Flametree Company has two independent projects it could invest in.

The Flametree Company has two independent projects it could invest in. The financial operations manager has completed some analysis and presented the information to the board. The board has asked you...

Q: An inner city amateur theatre company, Theatre Empire, is planning

An inner city amateur theatre company, Theatre Empire, is planning on performing a new take on two Shakespearean plays, Hamlet and Macbeth, at an old Brisbane theatre in the inner-city suburb of South...

Q: Higgins Ltd is considering the purchase of one out of two acceptable

Higgins Ltd is considering the purchase of one out of two acceptable pieces of equipment. Each design is expected to have individual advantages. Required (a) What additional financial information doe...

Q: A small industrial machine costs $136 000 and is expected to

A small industrial machine costs $136 000 and is expected to earn annual net cash inflows of $58 200, $52 600, $49 500 and $42 100, before it wears out sufficiently to be unreliable and must be sold f...

Q: Emerald Ltd is considering a new machine which will reduce net cash

Emerald Ltd is considering a new machine which will reduce net cash inflow by $38 000 in the current year, but increase net cash inflow by $9000, $14 000, $18 000, $22 000, $26 000 and $26 000 in the...

Q: An improvement to the process in a children’s shirt factory will cost

An improvement to the process in a children’s shirt factory will cost $1.2 million, but will result in net cost savings of $380 000 annually for the next ten years. Required (a) If funds are worth 12...

Q: The accountants at French Scents decide to increase the price of a

The accountants at French Scents decide to increase the price of a scent called Summer by 10 per cent, from $6 per bottle to $6.60. The accountants for French Scents expect the 10 per cent price incre...

Q: List the advantages and disadvantages of ROI, RI and EVA.

List the advantages and disadvantages of ROI, RI and EVA.

Q: The Top Taste Cheesecake Company supplies cheesecakes to three large supermarket chains

The Top Taste Cheesecake Company supplies cheesecakes to three large supermarket chains throughout Australia. Management have become concerned about the rising costs associated with the processing and...

Q: Suppose that Willow Daycare provides two different services — full-time

Suppose that Willow Daycare provides two different services — full-time childcare for preschoolers and after-school care for older children. The director would like to estimate an annual cost per chil...

Q: Zigbee & Associates is a local legal entity employing six solicitors,

Zigbee & Associates is a local legal entity employing six solicitors, four paralegals and six administrative staff. The entity has a costing system that assigns costs to clients. There are two dep...

Q: Overseas Adventures is a travel agency with 20 offices located throughout Australia

Overseas Adventures is a travel agency with 20 offices located throughout Australia. Caleb Thomas, the managing director, recently attended an accounting seminar on cost allocation. During a coffee br...

Q: Willow and Glen is a public accounting entity that offers auditing and

Willow and Glen is a public accounting entity that offers auditing and tax services to local small entities. The partners are in dispute over who contributes the greater amount to the entityâ
...

Q: Talk2Me Communications manufactures headsets to make phones hands free. In 2020

Talk2Me Communications manufactures headsets to make phones hands free. In 2020, the entity produced 30 000 units, of which 24 000 were sold. The following costs were recorded for 2020. Direct materia...

Q: Blue Hills Hospital is a major hospital that serves 11 small rural

Blue Hills Hospital is a major hospital that serves 11 small rural communities within a 40-kilometre radius. The hospital offers all the medical and surgical services of a typical small hospital. It h...

Q: In recent years, slow response times and frequent repairs have plagued

In recent years, slow response times and frequent repairs have plagued Jetson Engineering’s computer system. The cause was a substantial increase in computer-aided design work that pushed the system b...

Q: Watson University offers an MBA program that is widely respected around the

Watson University offers an MBA program that is widely respected around the world. The tuition fee for the program always covered the costs of the program until a recent recession increased the sensit...

Q: Your friends have decided to organise a number of functions to raise

Your friends have decided to organise a number of functions to raise funds for a trek to a Himalayan base camp. The functions planned are: a cinema night; a disco at the local hotel; and a trivia nigh...

Q: Identify the three categories of environmental indicators as outlined by ISO 14031

Identify the three categories of environmental indicators as outlined by ISO 14031.

Q: James Denning wants to buy a caravan rental business in the inner

James Denning wants to buy a caravan rental business in the inner Melbourne suburb of Richmond. James spends $1 500 000 on the purchase of the business including caravans and further advertising and s...

Q: Tracey has just started a new IT business and is thinking of

Tracey has just started a new IT business and is thinking of leasing a new luxury car. She has her sights on a BMW coupe. A lease company offers her a deal which comprises a $35 200 payment on deliver...

Q: The directors of Summer and Rayne, a partnership of investors,

The directors of Summer and Rayne, a partnership of investors, have three independent investment projects before them for consideration. Each will cost $600 000 in the first instance. The net cash inf...

Q: A company owned exclusively by residents in the New South Wales coastal

A company owned exclusively by residents in the New South Wales coastal community of Yamba is offered three projects for which the cash flows are as follows in thousands of dollars. The directors work...

Q: Chrystina and Diana own and manage Warm and Cosy, a roadside

Chrystina and Diana own and manage Warm and Cosy, a roadside cafe located on a main highway on the way to the snowfields in the Victorian Alps. Warm and Cosy services the tourist traffic each year and...

Q: Charlie Williams is a geologist working for a mining company. She

Charlie Williams is a geologist working for a mining company. She spends a great deal of her time on field trips studying rocks and ground-truthing maps which have been developed from aerial and satel...

Q: In the 12 months to June 2018, IBM recorded $18

In the 12 months to June 2018, IBM recorded $18.5 billion in cloud revenue, up 23 per cent. Ginni Rometty, IBM’s CEO, claimed ‘more clients are engaging IBM on their journey to the cloud . . . This de...

Q: Discuss potential investment opportunities for each of the following. (

Discuss potential investment opportunities for each of the following. (a) A computer hardware manufacturer (b) A car dealership (c) A clothing retailer (d) An accounting firm

Q: Investment decisions are made by managers in all types of business entities

Investment decisions are made by managers in all types of business entities. Describe the common features of investments that must be taken into consideration for any investment decision-making activi...

Q: Explain the advantages and disadvantages of using factoring or discounting.

Explain the advantages and disadvantages of using factoring or discounting. (b) Discuss what type of businesses would benefit from floor-plan finance. (c) Graham Ltd is a profitable manufacturing comp...

Q: Accountants stifle managerial initiative and enterprise.’ Discuss.

Accountants stifle managerial initiative and enterprise.’ Discuss.

Q: Do you think it is important for a CEO of a big

Do you think it is important for a CEO of a big business to have a sound understanding of finance and accounting?

Q: Sales variance calculations are just another example of accountants playing around with

Sales variance calculations are just another example of accountants playing around with numbers.’ Discuss.

Q: The following information relates to Malcolm Limited: Budgeted production:

The following information relates to Malcolm Limited: Budgeted production: 100 units. Unit specification (direct materials): 50 kilograms * £5 per kilogram = £250. Actual production: 120 units. Dir...

Q: You are presented with the following information for Duncan Limited:

You are presented with the following information for Duncan Limited: Budgeted production: 1000 units. Actual production: 1200 units. Standard specification for one unit: 10 hours at £8 per direct labo...

Q: The following information relates to Osprey Limited: Budgeted production:

The following information relates to Osprey Limited: Budgeted production: 500 units. Standard hours per unit: 10. Actual production: 600 units. Budgeted fixed overhead: £125,000. Actual fixed overhead...

Q: Using the data from the previous question, calculate the following performance

Using the data from the previous question, calculate the following performance measures: (a) Efficiency ratio (b) Capacity ratio (c) Production volume ratio.

Q: You are presented with the following budgeted information for Doe Limited:

You are presented with the following budgeted information for Doe Limited: Required: Calculate the sales variances.

Q: The budgeted selling price and standard cost of a unit manufactured by

The budgeted selling price and standard cost of a unit manufactured by Smillie Limited is as follows: Total budgeted sales: 400 units During the period to 31 December 2021, the actual sales and produc...

Q: Mean Limited manufactures a single product, and the following information relates

Mean Limited manufactures a single product, and the following information relates to the actual selling price and actual cost of the product for the four weeks to 31 March 2020: The budgeted selling p...

Q: It has been suggested that although contribution analysis is fine in theory

It has been suggested that although contribution analysis is fine in theory, fixed costs cannot be ignored in practice.’ Discuss this statement.

Q: Contribution analysis described in textbooks is too simplistic and is of little

Contribution analysis described in textbooks is too simplistic and is of little relevance to management.’ How far do you agree with this statement?

Q: What are the limitations of regulation?

What are the limitations of regulation?

Q: Do break-even charts and profit graphs help management to make

Do break-even charts and profit graphs help management to make more meaningful decisions?

Q: The following information applies to Ayre Limited for the two years to

The following information applies to Ayre Limited for the two years to 31 March 2021 and 2022 respectively: Required: Assuming that the cost relationships had remained as given in the question, calcu...

Q: The following information relates to Carter Limited for the year to 30

The following information relates to Carter Limited for the year to 30 April 2021: During 2022 the company would like to increase its sales substantially, but to do so it would have to reduce the sell...

Q: Puzzled Limited would like to increase its sales during the year to

Puzzled Limited would like to increase its sales during the year to 3l May 2021. To do so, it has several mutually exclusive options open to it: ● reduce the selling price per unit b...

Q: The following information relates to Mere’s budget for the year to 31

The following information relates to Mere’s budget for the year to 31 December 2021: Note: Fixed overheads are apportioned on the basis of direct labour hours. The directors are wor...

Q: This chapter has emphasized that it is managers that make decisions and

This chapter has emphasized that it is managers that make decisions and not management accountants. How far do you agree with this assertion? Answer: 1. Management accountants are employed to pro...

Q: Many of the solutions to the problems posed in this chapter depend

Many of the solutions to the problems posed in this chapter depend on being able to isolate the variable cost associated with a particular decision. In practice, is it realistic to expect that such co...

Q: Assume that you were an IT manager in a large entity and

Assume that you were an IT manager in a large entity and that the services that you provide are made available to both internal and external parties. Specify how you would go about negotiating an appr...

Q: Agra Limited has been asked to quote a price for a special

Agra Limited has been asked to quote a price for a special contract. The details are as follows: 1 The specification required a quotation for 100,000 units. 2 The direct costs per unit for the order w...

Q: Foo Limited has been asked to quote for a special order.

Foo Limited has been asked to quote for a special order. The details are as follows: 1 Prices are to be quoted at order levels of 50,000, 100,000 and 150,000 units respectively. Foo has some surplus c...

Q: The law should lay down precise formats, contents and methods for

The law should lay down precise formats, contents and methods for the preparation of limited liability company accounts.’ Discuss.

Q: Bamboo Limited is a highly specialist firm of central heating suppliers operating

Bamboo Limited is a highly specialist firm of central heating suppliers operating exclusively in the textiles industry. It has recently been asked to tender for a contract for a prospective customer....

Q: Dynasty Limited has been involved in a research project (code named

Dynasty Limited has been involved in a research project (code named DNY) for a number of months. There is some doubt as to whether the project should be completed. If it is, then it is expected that D...

Q: In capital expenditure appraisal, management cannot cope with any technique that

In capital expenditure appraisal, management cannot cope with any technique that is more advanced than payback.’ How far do you think that this assertion is likely to be true? Answer: 1. The tech...

Q: All capital expenditure techniques are irrelevant because: (a

All capital expenditure techniques are irrelevant because: (a) They cannot estimate accurately future cash flows; (b) It is difficult to select an appropriate discount rate.’ Discuss. Answer: 1...

Q: Do any of the traditional capital investment appraisal techniques help in determining

Do any of the traditional capital investment appraisal techniques help in determining social and welfare capital expenditure proposals? Answer: 1. Most of the traditional techniques do depend on...

Q: We can all dream up new capital expenditure proposals’, asserted the

We can all dream up new capital expenditure proposals’, asserted the Managing Director, ‘but where is the money coming from?’ How might the proposals be financed?

Q: Moffat District Council has calculated the following net cash flows for a

Moffat District Council has calculated the following net cash flows for a proposed project costing £1,450,000: Required: Calculate the internal rate of return generated by the project. A...

Q: Prospect Limited is considering investing in some new plant. The plant

Prospect Limited is considering investing in some new plant. The plant would cost £1,000,000 to implement. It would last five years and it would then be sold for £50,000. The...

Q: Nicole Limited is considering investing in a new machine. The machine

Nicole Limited is considering investing in a new machine. The machine would cost £500,000. It would have a life of five years and a nil residual value. The company uses the straight-line...

Q: Hewie Limited has some capital available for investment and is considering two

Hewie Limited has some capital available for investment and is considering two projects, only one of which can be financed. The details are as follows: Required: Advise management on which project to...

Q: How independent do you think is the independent regulator (the Financial

How independent do you think is the independent regulator (the Financial Reporting Council)? How will its proposed successor (the Audit, Reporting and Governance Authority (ARGA)) be more independent?...

Q: Marsh Limited has investigated the possibility of investing in a new machine

Marsh Limited has investigated the possibility of investing in a new machine. The following data have been extracted from the report relating to the project: Cost of machine on 1 January Year 6: &Acir...

Q: Ugh!’ snorted the chair when confronting the chief accountant.

Ugh!’ snorted the chair when confronting the chief accountant. ‘Strategic management accounting is another of those techniques dreamed up by you and your mates to keep you all in a job.’ Could the cha...

Q: Activity-based management is fine in theory but impossible in practice

Activity-based management is fine in theory but impossible in practice.’ Discuss. Answer: 1. An outline of ABM should be given including a summary of its benefits and an outline of the difficulti...

Q: How far do you think that short budget forecasts would be more

How far do you think that short budget forecasts would be more useful than budgets tied in with the traditional annual financial reporting system? Answer: 1. This question requires a discussion o...

Q: Do you think that environmental management accounting is of any benefit to

Do you think that environmental management accounting is of any benefit to a company? Answer: 1. Environmental accounting and reporting is at an early stage of development. So there is no consens...

Q: Do you think that target costing serves any useful purpose in a

Do you think that target costing serves any useful purpose in a service entity? Answer: 1. Target costing involves: (a) determining the likely price that a product can be sold at; (b) deducting t...

Q: Compare and contrast each of these management accounting techniques and then,

Compare and contrast each of these management accounting techniques and then, giving your reasons, select the one that in your opinion is most likely to be useful to a non-accounting manager: product...

Q: The following is a list of problems which an accountant may well

The following is a list of problems which an accountant may well meet in practice. Which accounting rule would the accountant most probably adopt in dealing with each of the problems? State the reason...

Q: The adoption of the realization and matching rules in preparing financial accounts

The adoption of the realization and matching rules in preparing financial accounts requires a great deal of subjective judgment. Write an essay examining whether it would be fairer, Easier and more me...

Q: Consider the Principles of Good Regulation – for both the regulator and

Consider the Principles of Good Regulation – for both the regulator and business as explained by the Financial Conduct Authority (the regulator of financial institutions in the Unite...

Q: Do you think that non-accounting managers need to know anything

Do you think that non-accounting managers need to know anything about double-entry bookkeeping?

Q: Is Freda right? ‘My accountant has got it all wrong’

Is Freda right? ‘My accountant has got it all wrong’, argued Freda. ‘She’s totally mixed up all her debits and credits. ’‘But what makes you say that?’ queried Dora. ‘Oh! I’ve only to look at my bank...

Q: Double-entry bookkeeping is a waste of time and money because

Double-entry bookkeeping is a waste of time and money because everything has to be recorded twice.’ Discuss.

Q: Do you think that auditors should be responsible for detecting fraud?

Do you think that auditors should be responsible for detecting fraud?

Q: Harry started a new business on 1 January 2020. The following

Harry started a new business on 1 January 2020. The following transactions cover his first three months in business: (a) Harry contributed an amount in cash to start the business. (b) He transferred s...

Q: Donald’s transactions for the month of March 2021 are as follows:

Donald’s transactions for the month of March 2021 are as follows: Required (a) Enter the above transactions in appropriate ledger accounts. (b) Balance each account as at 31 March...

Q: Explain why an increase in cash during a particular accounting period does

Explain why an increase in cash during a particular accounting period does not necessarily mean that an entity has made a profit. Answer: Accounting profit is not normally the difference between c...

Q: The differentiation between the so-called capital and revenue expenditure is

The differentiation between the so-called capital and revenue expenditure is quite arbitrary and unnecessary.’ Discuss. Answer: 1. It is true that the classification of transactions into capital...

Q: How far does a statement of financial position tell users how much

How far does a statement of financial position tell users how much an entity is worth? Answer: 1. Very little. The statement of financial position total is a combination of transactions entered a...

Q: Depreciation methods and rates should be prescribed by law.’ Discuss

Depreciation methods and rates should be prescribed by law.’ Discuss.

Q: Explain why it is quite easy to manipulate the level of gross

Explain why it is quite easy to manipulate the level of gross profit when preparing a trading account. Answer: 1. Primarily because of difficulties in the timing of recognising transactions involv...

Q: How far is it possible for an entity to build up hidden

How far is it possible for an entity to build up hidden amounts of profit (known as secret reserves) by making some adjustments in the statement of profit or loss for doubtful debts? Answer: 1. Q...

Q: The following trial balance has been extracted from Jody’s books of account

The following trial balance has been extracted from Jody’s books of account as at 30 April 2020: Required: Prepare Jody’s statement of profit or loss and statement...

Q: The following trial balance has been extracted from the books of Garswood

The following trial balance has been extracted from the books of Garswood as at 31 March 2021: Required: Prepare Garwood’s statement of profit or loss and statement of retained earni...

Q: The following statement was made by a student: ‘I cannot

The following statement was made by a student: ‘I cannot understand why accountants have such a high status and why they have so much influence.’ How would you respond to such assertions?

Q: Pete has extracted the following trial balance from his books of account

Pete has extracted the following trial balance from his books of account as at 31 May 2020: Required: Prepare Pete’s statement of profit or loss and statement of retained earnings f...

Q: Radford presents you with the following information for the year to 31

Radford presents you with the following information for the year to 31 March 2021 He is not sure how to value the inventory as at 31 March 2021. Three methods have been suggested. They all result in d...

Q: Wotton commenced business on 1 July 2019. The following trial balance

Wotton commenced business on 1 July 2019. The following trial balance was extracted fromhis books of account as at 30 June 2020: Additional information: Inventory at 30 June 2020: £2000....

Q: The following is an extract from Barrow’s statement of financial position at

The following is an extract from Barrow’s statement of financial position at 31 August2020: / Barrow’s depreciation policy is as follows: (a) A full year’s depreciation is charged in the year of acqui...

Q: Dale has been in business for some years. The following is

Dale has been in business for some years. The following is his trial balance at 31 October 2020: Additional information (not taken into account when compiling the above trial balance): 1 Inventory at...

Q: The following information relates to Astley for the year to 30 November

The following information relates to Astley for the year to 30 November 2020: Required: (a) Calculate the charge to the statement of profit or loss for the year to 30 November 2020 for each of the abo...

Q: Duxbury started in business on 1 January 2021. The following is

Duxbury started in business on 1 January 2021. The following is his trial balance as at 31 December 2021: Additional information: 1 Inventory at 31 December 2021 was valued at £10 000....

Q: The following is Ash’s trial balance as at 31 March 2021:

The following is Ash’s trial balance as at 31 March 2021: Additional information: 1 Inventory at 31 March 2021: £15 000. 2 At 31 March 2021 there was a specific bad de...