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business
management accounting

Questions and Answers of Management Accounting

Identify the three sections of the statement of cash flows and explain the nature of the types of transactions.LO1
Explain the effect that changes in current asset and current liability accounts have on the adjustment of accrual net income or net loss to cashbased net income or net loss.LO1
Explain how depreciation expense, amortization expense, and gains or losses on the disposal of noncurrent assets apply in increasing or decreasing the adjustment to net income.LO1
Define working capital.LO1
List and briefly explain some of the sources and uses that change working capital.LO1
Prepare a change to working capital accounts and identify the net change to working capital.LO1
Explain why cash does not always increase by an amount equal to net income.LO1
Explain the common uses of major elements in both the statement of cash flows and the various statements used to analyze working capital.LO1
Explain whether the hospitality industry can operate on a relatively low current ratio.LO1
What is the purpose of the SCF?LO1
What are the major operating accounts by category analyzed in the SCF, indirect method?LO1
If a current asset account increases, how is the increase treated in the statement of cash flows?LO1
What is the typical noncash item, by name, that is automatically added back in the operating activities section of the SCF?LO1
The financing section of an SCF analyzes three different items by category.What are they?LO1
What are the primary items by category analyzed in the SCF, investing section?LO1
What is working capital?LO1
Of what use is the statement of source inflows and use outflows of working capital?LO1
List the three major common source inflows and the three major common use outflows of working capital.LO1
Explain why depreciation expense is treated as a source inflow of working capital.LO1
What is a statement of source inflows and use outflows of working capital?LO1
If a business operation has a current ratio of 1.25:1, what does this mean relative to working capital?LO1
The following lists current asset and current liability accounts. Identify each account as a current asset (CA) or a current liability (CL) account.After classifying each account, determine how the
A monthly income statement reported net income of $180,000. Inventory for resale increased by $12,000. Accounts payable increased by$9,000. Using only these three items, determine the net cash flow
Net income is $280,000; Depreciation expense is $38,000; Accounts receivable decreased $2,400; Credit card receivables decreased $2,600; Prepaid insurance increased $2,880; Inventory decreased
Identify how each of the following items would be treated in an analysis of changes to working capital. Answer with the word Inflow to show an increase or Outflow to show a decrease in working
A hotel provided the following information for Year 0008: The cash flow from operating activities was $178,200, average current liabilities were $58,800, average total liabilities were $666,500, and
Given the following information regarding investing and financing activities of an SCF, evaluate each of the given transactions and identify to which section, investing or financing, the transaction
Assume working capital was $87,500 for a given year. During this year, accounts receivable increased by $4,600, inventory decreased by$7,754, and accounts payable increased by $3,737. Determine the
Assume a business enterprise reports its total current assets as $42,600 and its total current liabilities as $18,640. Answer the following:a. What is the amount of working capital?b. What is the
A review of a balance sheet indicated the beginning and ending totals of current assets and current liabilities for a one-year operating period.Determine the working capital at the beginning and the
Assume the book value of an item of equipment shows $60,000 in Year 1 and $49,400 in Year 2. Would the $10,600 difference be treated as an inflow source, or a outflow use, or not shown at all with
A restaurant purchased new kitchen equipment for $44,480. Old kitchen equipment was sold for $1,200. A long-term investment was sold for$50,000. Equity stock was bought back (repurchased) for
The following are operating transactions that occurred during the current year. Analyze each transaction and explain if the transaction will increase, decrease, or have no effect on working
The following is provided to complete the operating activities section of a statement of cash flows, indirect method.a. Net income for the year is $43,900.b. Accounts receivable increased by
Balance sheet information for a resort hotel reflects the changes to current accounts that occurred over the annual operating period ended December 31, 0008. Cash account balance at December 31,
You have the following comparative balance sheets for a restaurant for the years ending December 31, 0007, and December 31, 0008. Calculate the change in working capital and prepare the
Refer to information provided in the preceding P10.3 and complete, in good form, an SCF using the indirect method.LO1
A motel has the following comparative balance sheets for 2 years:From this information, prepare a statement of changes to individual working capital accounts.LO1 Assets 12-31-07 12-31-08 Current
With the balance sheet information from P10.5, and the additional information from the income statement and statement of retained earnings, prepare the motel’s statement of changes to working
Referring to the preceding P10.5 and P10.6 that presented a comparative balance sheet, income statement, and a statement of retained earnings, complete a statement of cash flows in good form using
A catering company reported the following financial statements and information for two successive years:Additional financial information:1. In Year 0007, the building that was previously rented was
A motel has the following balance sheets at the end of each of its most recent two years of operation.The owner cannot understand why he has $64,000 of retained earnings and a net income of $16,800
Explain why cash planning is necessary, and state the two main purposes of cash budgeting.LO1
Explain why net income on an income statement is not necessarily indicative of the amount of cash on hand.LO1
List items that would appear under cash receipts and cash disbursements on a cash budget, and with appropriate information prepare a cash budget.LO1
Define bank float and discuss the concept of concentration banking.LO1
Explain some of the procedures that can be used to minimize outstanding accounts receivable at any given time, including the use of a lockbox.LO1
Prepare a schedule of aging of accounts receivable.LO1
Discuss the importance of marketable securities with reference to surplus cash funds.LO1
Explain long-term cash flow budgeting, and use CVP to calculate the sales revenue required to provide a desired cash flow amount.LO1
What is the meaning of cash management or cash planning?LO1
What two main purposes are served by preparing a cash budget?LO1
Why is net income shown on an income statement not necessarily the same as cash?LO1
List two items that could appear on a cash budget under the receipts section.LO1
List three items that could appear on a cash budget under the disbursements section.LO1
List three items that could appear in the financing section of a cash budget.LO1
Define the term bank float and explain how it can be used.LO1
Explain concentration banking and give the equation for funds transfer frequency when concentration banking is used.LO1
What two procedures will help ensure that the total accounts receivable amount is kept to a minimum?LO1
Differentiate between city ledger accounts receivable and house accounts receivable in a hotel.LO1
What two procedures can be instituted in a hotel to minimize the dollar amount of house accounts?LO1
Explain the procedure of aging accounts receivable.LO1
Explain how a lockbox is used to minimize funds outstanding in accounts receivable.LO1
Discuss the use of marketable securities with reference to temporary surplus cash.LO1
Explain why it is important to manage food or beverage inventory turnover.LO1
Differentiate between an operating cash budget and a long-term cash flow budget.LO1
A restaurant purchased $7,500 of food inventory on credit with terms of 3/5, net 30. Calculate the cash discount and determine if the discount should or should not be taken and discuss your
The following information is available regarding sales revenue for March and April, Year 0007: What is the vertical common-sized analysis (percentages)of all items based on sales revenue? Discuss any
A restaurant provides the following regarding food inventories for the month of March.a. Calculate the food inventory turnover for the month.b. Calculate the days of inventory available for the month
A small hotel provided you with the following information for a threemonth period showing, at each month-end, the length of time its accounts receivable were outstanding at that time:During this
A motel chain uses a system of concentration banking. Calculate the transfer frequency for each of the following individual motels: Average Bank Balance Average Daily Deposit Motel A $3,200 $1,600
For each of the following alternatives, calculate the minimum account receivable payment (to the closest dollar) that would make a lockbox system profitable:LO1 Bank Charge per Item Opportunity
The following information is available regarding sales revenue for March, April, and May, Year 0008: Credit card sales revenue is collected on the average of every three days and the amount remaining
A restaurant reported the following information for the months of August, September, and October, Year 0008. Of the cost of sales, 75% is paid in the current month and the remainder is paid in the
The following is income statement information of a restaurant for the first two months of operation. Of the sales revenue, 86% is collected in cash with the remainder collected in the following
You have the following information about a restaurant in Year 0007:■ Actual sales revenue in November was $80,000.■ Actual purchases (cost of sales) in November was $30,000.Sales revenue will be
On December 31, 0007, a small motel has a bank balance of $7,100. On that same date its balance sheet showed that it had a bank loan payable of $73,900. The motel’s budgeted income statement is as
You have the following information about a restaurant:Collections on credit revenue average 90% in the month following the sales and the remaining 10% in the month following. Cost of sales
You own a new restaurant that is due to open on June 1, 0008. The restaurant expects to take in $1,500 a day in sales revenue and is open seven days a week. Sales revenue is estimated to be 40% cash
A small motel with a small dining room has the following estimates for Year 0007:In July of 0007, the owner plans to buy $30,000 of new equipment (for cash), less a $5,400 trade-in of used equipment.
From the information following for Cato’s Catering, prepare a cash budget for 6 months commencing April 1:■ Assume that all sales are cash sales.■ The annual interest of $1,600 on the
A new restaurant was incorporated on January 1, 0008. Forty thousand shares of stock were issued for $6.00 cash per share. The cash received from the sale of shares was used, in part, as follows:The
Stew and Brew have decided to lease a new restaurant. Rent for the building will be $3,000 a month to be paid on the first day of each month.They initially invested $225,000 of their own money, which
Fritz, the owner of the Ritz Cafe, needs an after-tax cash flow of $27,000 next year. Principal payments on loans are $42,000 a year, and depreciation is $21,000. Tax rate for the Ritz Cafe is 25%.
Cece Saw, a carpenter who has saved some money, has decided to build and operate, with his wife, a 10-unit highway budget motel. Cece invests$50,000 of his own money in the company ($10,000 by way of
Discuss the ways in which long-term asset management differs from dayto-day budgeting.LO1
Explain how the accounting rate of return is calculated, use the equation, and explain the major disadvantage of this method.LO1
Give the equation for the payback period, use the equation, and state the pros and cons of this method.LO1
Discuss the concept of the time value of money and explain the term discounted cash flows.LO1
Use discounted cash flow tables in conjunction with the net present value method to make investment decisions.LO1
Use discounted cash flow tables in conjunction with the internal rate of return method to make investment decisions.LO1
Contrast the net present value and internal rate of return methods and explain how they can give conflicting rankings of investment proposals.LO1
Solve problems relating to the purchase versus the leasing of fixed assets.LO1
Discuss the ways in which long-term asset management differs from dayto-day budgeting.LO1
How is the accounting rate of return calculated? What is the major disadvantage of using this method?LO1
What is the equation for calculating the payback period? What are the pros and cons of this method?LO1
Under what conditions might a hotel consider buying an item of equipment with a rapid payback rather than one with a high accounting rate of return?LO1
Discuss the concept that money is worth more now than that same amount of money a year from now.LO1
How would you explain discounted cash flow to someone who had not heard the term before?LO1
In Exhibit 12.4, in the 11% column opposite Year 5, is the number 0.5935.Explain in your own words what this number or factor means.LO1

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