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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

What was the total cost of Tootsie Roll’s treasury stock at December 31, 2011? What was the amount of the 2011 cash dividend? What was the total charge to Retained Earnings for the 2011 stock
The board of directors is considering a stock split or a stock dividend. They understand that total stockholders’equity will remain the same under either action.However, they are not sure of the
Deane Corporation has 10,000 shares of $15 par value common stock outstanding when it announces a 3-for-1 split. Before the split, the stock had a market price of $120 per share. After the split, how
Angie Diltz asks, “Since stock dividends don’t change anything, why declare them?” What is your answer to Angie?AppendixLO1
Contrast the effects of a cash dividend and a stock dividend on a corporation’s balance sheet.AppendixLO1
Discuss the significance of each date and give the entry at each date.AppendixLO1
Three dates associated with Goff Company’s cash dividend are May 1, May 15, and May AppendixLO1
What three conditions must be met before a cash dividend is paid?AppendixLO1
Identify the events that result in credits and debits to retained earnings.AppendixLO1
Diaz, Inc. purchases 1,000 shares of its own previously issued $5 par common stock for $11,000.Assuming the shares are held in the treasury, what effect does this transaction have on (a) net
Which is the better investment—common stock with a par value of $5 per share or common stock with a par value of $20 per share?AppendixLO1
The corporate charter of Gagne Corporation allows the issuance of a maximum of 100,000 shares of common stock. During its first 2 years of operation, Gagne sold 70,000 shares to shareholders and
What are the two principal components of stockholders’equity?AppendixLO1
Janie Null believes a corporation must be incorporated in the state in which its headquarters office is located. Is Janie correct? Explain.AppendixLO1
(a) Your friend C. J. Gibson cannot understand how the characteristic of corporate management is both an advantage and a disadvantage. Clarify this problem for C. J.(b) Identify and explain two other
Rob, a student, asks your help in understanding some characteristics of a corporation. Explain each of these to Rob.(a) Separate legal existence.(b) Limited liability of stockholders.(c) Transferable
If everything else is held constant, earnings per share is increased by:(a) the payment of a cash dividend to common shareholders.(b) the payment of a cash dividend to preferred shareholders.(c) the
Jackson Inc. reported net income of $186,000 during 2014 and paid dividends of $26,000 on common stock. It also paid dividends on its 10,000 shares of 6%, $100 par value, noncumulative preferred
Thomas is nearing retirement and would like to invest in a stock that will provide a good steady income. Thomas should choose a stock with a:(a) high current ratio.(b) high dividend payout.(c) high
The return on common stockholders’ equity is usually increased by all of the following, except:(a) an increase in the return on assets ratio.(b) an increase in the use of debt fi nancing.(c) an
In the stockholders’ equity section, the cost of treasury stock is deducted from:(a) total paid-in capital and retained earnings.(b) retained earnings.(c) total stockholders’ equity.(d) common
In the stockholders’ equity section of the balance sheet, common stock:(a) is listed before preferred stock.(b) is listed after retained earnings.(c) is part of paid-in capital.(d) is subtracted
Zealot Inc. has retained earnings of $500,000 and total stockholders’ equity of $2,000,000. It has 100,000 shares of $8 par value common stock outstanding, which is currently selling for $30 per
Entries for cash dividends are required on the:(a) declaration date and the record date.(b) record date and the payment date.(c) declaration date, record date, and payment date.(d) declaration date
U-Bet Corporation has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2014. No dividends were declared in 2012 or 2013. If U-Bet wants to pay $375,000 of
Preferred stock may have which of the following features?(a) Dividend preference.(b) Preference to assets in the event of liquidation.(c) Cumulative dividends.(d) All of the above.AppendixLO1
Treasury stock may be repurchased:(a) to reissue the shares to offi cers and employees under bonus and stock compensation plans.(b) to signal to the stock market that management believes the stock is
ABC Corp. issues 1,000 shares of $10 par value common stock at $12 per share. When the transaction is recorded, credits are made to:(a) Common Stock $10,000 and Paid-in Capital in Excess of Stated
Which of these statements is false?(a) Ownership of common stock gives the owner a voting right.(b) The stockholders’ equity section begins with paid-in capital.(c) The authorization of capital
Evaluate a corporation’s dividend and earnings performance from a stockholder’s perspective.AppendixLO1
Prepare a comprehensive stockholders’ equity section.AppendixLO1
Identify the different types of receivables.AppendixLO1
A receivable that is evidenced by a formal instrument and that normally requires the payment of interest is:(a) an account receivable.(b) a trade receivable.(c) a note receivable.(d) a classified
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

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