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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

Kersee Company on June 15 sells merchandise on account to Soo Eng Co. for $1,000, terms 2/10, n/30.On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is
Accounts and notes receivable are reported in the current assets section of the balance sheet at:(a) cash (net) realizable value(b) net book value.(c) lower-of-cost-or-market value.(d) invoice
Net credit sales for the month are $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage-of-receivables basis. If
In 2014, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2014, Allowance for Doubtful Accounts had a credit balance of $18,000.During 2014, $30,000 of uncollectible
An analysis and aging of the accounts receivable of Raja Company at December 31 reveal these data:Accounts receivable $800,000 Allowance for doubtful accounts per books before adjustment (credit)
Which of these statements about promissory notes is incorrect?(a) The party making the promise to pay is called the maker.(b) The party to whom payment is to be made is called the payee.(c) A
Michael Co. accepts a $1,000, 3-month, 12% promissory note in settlement of an account with Tani Co.The entry to record this transaction is:(a) Notes Receivable 1,030 Accounts Receivable 1,030(b)
Schleis Co. holds Murphy Inc.’s $10,000, 120-day, 9%note. The entry made by Schleis Co. when the note is collected, assuming no interest has previously been accrued, is:(a) Cash 10,300 Notes
If a company is concerned about extending credit to a risky customer, it could do any of the following except:(a) require the customer to pay cash in advance.(b) require the customer to provide a
Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000.The balance in receivables at the beginning of the year was $100,000 and at the end of the year
Prall Corporation sells its goods on terms of 2/10, n/30. It has an accounts receivable turnover of 7.What is its average collection period (days)?(a) 2,555 (c) 52(b) 30 (d) 210 AppendixLO1
Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Good
A company can accelerate its cash receipts by all of the following except:(a) offering discounts for early payment.(b) accepting national credit cards for customer purchases.(c) selling receivables
Mitch Lang cannot understand why the cash realizable value does not decrease when an uncollectible account is written off under the allowance method.Clarify this point for Mitch.AppendixLO1
Mendosa Company has a credit balance of $2,200 in Allowance for Doubtful Accounts before adjustment.The estimated uncollectibles under the percentage-ofreceivables basis is $5,100. Prepare the
What types of receivables does Tootsie Roll report on its balance sheet? Does it use the allowance method or the direct write-off method to account for uncollectibles?AppendixLO1
Debbie Trevino, the vice president of sales for Tropical Pools and Spas, wants the company’s credit department to be less restrictive in granting credit.“How can we sell anything when you guys
Compute the missing amounts for each of the following notes.Annual Total Principal Interest Rate Time Interest(a) 6% 60 days $ 270$30,000 8% 3 years (d)$60,000 (b) 5 months $2,500$50,000 11% (c)
Carrera Company dishonors a note at maturity. What are the options available to the lender?AppendixLO1
The president of Dickerson Inc. proudly announces her company’s improved liquidity since its current ratio has increased substantially from one year to the next. Does an increase in the current
Since hiring a new sales director, Hilson Inc. has enjoyed a 50% increase in sales. The CEO has also noticed, however, that the company’s average collection period has increased from 17 days to 38
The Coca-Cola Company’s accounts receivable turnover was 9.05 in 2011, and its average amount of net receivables during the period was$3,424 million. What is the amount of its net credit sales for
Calico Corners decides to sell $400,000 of its accounts receivable to Quick Central Factors Inc. Quick Central Factors assesses a service charge of 3% of the amount of receivables sold. Prepare the
Pine Corp. has experienced tremendous sales growth this year, but it is always short of cash. What is one explanation for this occurrence?AppendixLO1
How can the amount of collections from customers be determined?AppendixLO1
Presented below are three receivables transactions. Indicate whether these receivables are reported as accounts receivable, notes receivable, or other receivables on a balance sheet.(a) Advanced
Record the following transactions on the books of Cohen Co. (Omit cost of goods sold entries.)(a) On July 1, Cohen Co. sold merchandise on account to Tracy Inc. for $23,000, terms 2/10, n/30.(b) On
At the end of 2013, Morley Co. has accounts receivable of $700,000 and an allowance for doubtful accounts of $25,000. On January 24, 2014, it is learned that the company’s receivable from Spears
Assume the same information as BE8-3 and that on March 4, 2014, Morley Co.receives payment of $4,300 in full from Spears Inc. Prepare the journal entries to record this transaction.AppendixLO1
Hirdt Co. uses the percentage-of-receivables basis to record bad debt expense and concludes that 2% of accounts receivable will become uncollectible. Accounts receivable are $400,000 at the end of
Compute interest and find the maturity date for the following notes.Date of Interest Note Principal Rate (%) Terms(a) June 10 $80,000 6% 60 days(b) July 14 $50,000 7% 90 days(c) April 27 $12,000 8%
Presented below are data on three promissory notes. Determine the missing amounts.Date of Maturity Annual Total Note Terms Date Principal Interest Rate Interest(a) April 1 60 days ? $600,000 9% ?(b)
On January 10, 2014, Tolleson Co. sold merchandise on account to Simmons for$8,000, terms n/30. On February 9, Simmons gave Tolleson Co. a 7% promissory note in settlement of this account. Prepare
Suppose the 2014 financial statements of 3M Company report net sales of $23.1 billion. Accounts receivable (net) are $3.2 billion at the beginning of the year and $3.25 billion at the end of the
Consider these transactions:(a) Draber Restaurant accepted a Visa card in payment of a $200 lunch bill. The bank charges a 3% fee. What entry should Draber make?(b) Marin Company sold its accounts
Richman Corp. had a beginning balance in accounts receivable of $70,000 and an ending balance of $91,000. Credit sales during the period were $598,000. Determine cash collections.AppendixLO1
Ruth Company has been in business several years. At the end of the current year, the unadjusted trial balance shows:Accounts Receivable $ 310,000 Dr.Sales Revenue 2,200,000 Cr.Allowance for Doubtful
Berkman Wholesalers accepts from Almonte Stores a $6,200, 4-month, 9%note dated May 31 in settlement of Almonte’s overdue account. The maturity date of the note is September 30. What entry does
In 2014, Grossfeld Company has net credit sales of $1,600,000 for the year.It had a beginning accounts receivable (net) balance of $108,000 and an ending accounts receivable (net) balance of
On January 6, Aaron Co. sells merchandise on account to Foley Inc. for $9,200, terms 1/10, n/30. On January 16, Foley pays the amount due.Instructions Prepare the entries on Aaron Co.’s books to
On January 10, Allison Milo uses her Crawford Co. credit card to purchase merchandise from Crawford Co. for $1,700. On February 10, Milo is billed for the amount due of $1,700. On February 12, Milo
Stine Company has accounts receivable of $95,400 at March 31, 2014. An analysis of the accounts shows these amounts.Balance, March 31 Month of Sale 2014 2013 March $65,000 $75,000 February 12,900
On December 31, 2013, when its Allowance for Doubtful Accounts had a debit balance of $1,400, Hunt Co. estimates that 9% of its accounts receivable balance of $90,000 will become uncollectible and
Malone Supply Co. has the following transactions related to notes receivable during the last 2 months of the year. The company does not make entries to accrue interest except at December 31.Nov. 1
These transactions took place for Glavine Co.2013 May 1 Received a $5,000, 12-month, 6% note in exchange for an outstanding account receivable from S. Rooney.Dec. 31 Accrued interest revenue on the
Shannon Corp. had the following balances in receivable accounts at October 31, 2014 (in thousands): Allowance for Doubtful Accounts $52; Accounts Receivable $2,910;Other Receivables $189; Notes
Suppose the following information was taken from the 2014 financial statements of FedEx Corporation, a major global transportation/delivery company.(in millions) 2014 2013 Accounts receivable (gross)
The following ratios are available for Lin Inc.2014 2013 Current ratio 1.3:1 1.5:1 Accounts receivable turnover 12 times 10 times Inventory turnover 11 times 9 times Instructions (a) Is Lin’s
On March 3, Beachy Appliances sells $710,000 of its receivables to National Factors Inc. National Factors Inc. assesses a service charge of 4% of the amount of receivables sold.Instructions Prepare
In a recent annual report, Office Depot, Inc. notes that the company entered into an agreement to sell all of its credit card program receivables to financial service companies.Instructions Explain
On May 10, Renn Company sold merchandise for $4,000 and accepted the customer’s First Business Bank MasterCard. At the end of the day, the First Business Bank MasterCard receipts were deposited in
On July 4, Susie’s Restaurant accepts a Visa card for a $250 dinner bill. Visa charges a 4% service fee.Instructions Prepare the entry on Susie’s books related to the transaction.AppendixLO1
Kimbrel Corp. significantly reduced its requirements for credit sales. As a result, sales during the current year increased dramatically. It had receivables at the beginning of the year of $38,000
Reynolds.com uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end.Number of Days Outstanding Total 0–30 31–60
Presented below is an aging schedule for Bosworth Company.Not Yet Number of Days Past Due Customer Total Due 1–30 31–60 61–90 Over 90 Aneesh $ 24,000 $ 9,000 $15,000 Bird 30,000 $ 30,000 Cope
At December 31, 2014, the trial balance of Sloane Company contained the following amounts before adjustment.Debit Credit Accounts Receivable $180,000 Allowance for Doubtful Accounts $ 1,500 Sales
The president of Giraldi Enterprises asks if you could indicate the impact certain transactions have on the following ratios.Accounts Average Current Receivable Collection Ratio Turnover Period
Kolton Company closes its books on its July 31 year-end. The company does not make entries to accrue for interest except at its year-end. On June 30, the Notes Receivable account balance is $23,800.
Suppose the amounts presented here are basic financial information (in millions)from the 2014 annual reports of Nike and adidas.Nike adidas Sales revenue $19,176.1 $10,381 Allowance for doubtful
The following represents selected information taken from a company’s aging schedule to estimate uncollectible accounts receivable at year-end.Number of Days Outstanding Total 0–30 31–60 61–90
Presented below is an aging schedule for Harper Company.Not Yet Number of Days Past Due Customer Total Due 1–30 31–60 61–90 Over 90 Allen $ 18,000 $12,000 $ 6,000 Brian 24,000 $24,000 Charles
At December 31, 2014, the trial balance of Valcik Company contained the following amounts before adjustment.Debit Credit Accounts Receivable $120,000 Allowance for Doubtful Accounts $ 2,800 Sales
The president of Thompson Enterprises asks if you could indicate the impact certain transactions have on the following ratios.Accounts Average Current Receivable Collection Ratio Turnover Period
Durhan Company closes its books on its October 31 year-end. The company does not make entries to accrue for interest except at its year-end. On September 30, the Notes Receivable account balance is
Suppose the following financial information (in millions) is from the 2014 annual reports of Redbird Sportswear and The Carwright Company.Redbird Carwright Sales revenue $1,200.0 $1,350.0 Allowance
Describe how the historical cost principle applies to plant assets.AppendixLO1
Explain the concept of depreciation.AppendixLO1
Indicate how long-lived assets are reported in the fi nancial statements.AppendixLO1
Corrieten Company purchased equipment and incurred these costs:Cash price $24,000 Sales taxes 1,200 Insurance during transit 200 Installation and testing 400 Total costs $25,800 What amount should be
Depreciation is a process of:(a) valuation. (c) cash accumulation.(b) cost allocation. (d) appraisal.AppendixLO1
Cuso Company purchased equipment on January 1, 2013, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the
Able Towing Company purchased a tow truck for$60,000 on January 1, 2014. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $12,000. On December 31,
Additions to plant assets:(a) decrease liabilities.(b) increase a repair expense account.(c) increase a purchases account.(d) are capital expenditures.AppendixLO1
Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2014. The machine was purchased for $80,000 on January 1, 2010, and was depreciated on a straight-line basis
Which of the following measures provides an indication of how efficient a company is in employing its assets?(a) Current ratio.(b) Profi t margin.(c) Debt to assets ratio.(d) Asset
Lake Coffee Company reported net sales of $180,000, net income of $54,000, beginning total assets of$200,000, and ending total assets of $300,000. What was the company’s asset turnover?(a) 0.90 (c)
Indicate which one of these statements is true.(a) Since intangible assets lack physical substance, they need to be disclosed only in the notes to the fi nancial statements.(b) Goodwill should be
Which of the following statements is false?(a) If an intangible asset has a fi nite life, it should be amortized.(b) The amortization period of an intangible asset can exceed 20 years.(c) Goodwill is
Kant Enterprises purchased a truck for $11,000 on January 1, 2013. The truck will have an estimated salvage value of $1,000 at the end of 5 years. If you use the units-of-activity method, the balance
Mrs. Betancourt is uncertain about how the historical cost principle applies to plant assets. Explain the principle to Mrs. Betancourt.AppendixLO1
Carington Company acquires the land and building owned by Ankiel Company. What types of costs may be incurred to make the asset ready for its intended use if Carington Company wants to use only the
Malor Inc. needs to upgrade its diagnostic equipment.At the time of purchase, Malor had expected the equipment to last 8 years. Unfortunately, it was obsolete after only 4 years. Ronald Nolan, CFO of
In a recent newspaper release, the president of Ferguson Company asserted that something has to be done about depreciation. The president said, “Depreciation does not come close to accumulating the
Adriana is studying for the next accounting examination.She asks your help on two questions: (a) What is salvage value? (b) How is salvage value used in determining depreciable cost under the
Distinguish between ordinary repairs and capital expenditures during an asset’s useful life.AppendixLO1
Lakeland Corporation owns a machine that is fully depreciated but is still being used. How should Lakeland account for this asset and report it in the financial statements?AppendixLO1
What does Tootsie Roll use as the estimated useful life on its buildings? On its machinery and equipment?AppendixLO1
What are the similarities and differences between depreciation and amortization?AppendixLO1
During a recent management meeting, David Bryce, director of marketing, proposed that the company begin capitalizing its marketing expenditures as goodwill. In his words, “Marketing expenditures
Berwik Company hires an accounting intern who says that intangible assets should always be amortized over their legal lives. Is the intern correct? Explain.AppendixLO1
Megan Keen, a business major, is working on a case problem for one of her classes. In this case problem, the company needs to raise cash to market a new product it developed. Jeff Denton, an
Suppose in 2014, Campbell Soup Company reported average total assets of $6,265 million, net sales of $7,586 million, and net income of $736 million.What was Campbell Soup’s return on
Diane Carey, a marketing executive for Fresh Views Inc., has proposed expanding its product line of framed graphic art by producing a line of lowerquality products. These would require less
Give an example of an industry that would be characterized by (a) a high asset turnover and a low profit margin, and (b) a low asset turnover and a high profit margin.AppendixLO1
Gooden Corporation and Perron Corporation operate in the same industry. Gooden uses the straight-line method to account for depreciation, whereas Perron uses an accelerated method. Explain what
Garcia Corporation uses straight-line depreciation for financial reporting purposes but an accelerated method for tax purposes. Is it acceptable to use different methods for the two purposes? What is
You are comparing two companies in the same industry. You have determined that Leslie Corp.depreciates its plant assets over a 40-year life, whereas Camby Corp. depreciates its plant assets over a
Explain how transactions related to plant assets and intangibles are reported in the statement of cash flows.AppendixLO1
These expenditures were incurred by Dunston Company in purchasing land: cash price $60,000; accrued taxes $5,000; attorney’s fees $2,100; real estate broker’s commission$3,300; and clearing and
Tolbert Company incurs these expenditures in purchasing a truck: cash price$24,000; accident insurance (during use) $2,000; sales taxes $1,080; motor vehicle license$300; and painting and lettering

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