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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

Howe Chemicals Company acquires a delivery truck at a cost of $31,000 on January 1, 2014. The truck is expected to have a salvage value of $4,000 at the end of its 4-year useful life. Compute annual
Iris Company purchased land and a building on January 1, 2014. Management’s best estimate of the value of the land was $100,000 and of the building $250,000. However, management told the accounting
On January 1, 2014, the Ferman Company ledger shows Equipment $36,000 and Accumulated Depreciation $13,600. The depreciation resulted from using the straightline method with a useful life of 10 years
Harmon Company had the following two transactions related to its delivery truck.1 Paid $38 for an oil change.2 Paid $400 to install special shelving units, which increase the operating efficiency of
Prepare journal entries to record these transactions: (a) Rangel Company retires its delivery equipment, which cost $41,000. Accumulated depreciation is also $41,000 on this delivery equipment. No
Quinn Company sells office equipment on July 31, 2014, for $21,000 cash. The office equipment originally cost $72,000 and as of January 1, 2014, had accumulated depreciation of $42,000. Depreciation
Suppose in its 2014 annual report, McDonald’s Corporation reports beginning total assets of $28.46 billion; ending total assets of $30.22 billion; net sales of $22.74 billion;and net income of
Downs Company purchases a patent for $156,000 on January 2, 2014. Its estimated useful life is 6 years.(a) Prepare the journal entry to record amortization expense for the first year.(b) Show how
Suppose Nike, Inc. reported the following plant assets and intangible assets for the year ended May 31, 2014 (in millions): other plant assets $965.8; land $221.6; patents and trademarks (at cost)
Gant Company reported net income of $157,000. It reported depreciation expense of $12,000 and accumulated depreciation of $47,000. Amortization expense was$8,000. Gant purchased new equipment during
Depreciation information for Howe Chemicals Company is given in BE9-3.Assuming the declining-balance depreciation rate is double the straight-line rate, compute annual depreciation for the first and
Speedy Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 150,000 miles. Taxi 10 cost $27,500 and is expected to have a
Shellhammer Company purchased a delivery truck. The total cash payment was $30,020, including the following items.Negotiated purchase price $24,000 Installation of special shelving 1,100 Painting and
On January 1, 2014, Wolf Creek Country Club purchased a new riding mower for $15,000. The mower is expected to have a 10-year life with a $1,000 salvage value.What journal entry would Wolf Creek make
Relaford Corporation purchased a piece of equipment for $50,000. It estimated an 8-year life and $2,000 salvage value. At the end of year four (before the depreciation adjustment), it estimated the
Thornton Company has an old factory machine that cost $50,000. The machine has accumulated depreciation of $28,000. Thornton has decided to sell the machine.(a) What entry would Thornton make to
Petrino Company incurred the following costs.1 Sales tax on factory machinery purchased $ 5,000 2 Painting of and lettering on truck immediately upon purchase 700 3 Installation and testing of
On March 1, 2014, Zobrist Company acquired real estate, on which it planned to construct a small office building, by paying $80,000 in cash. An old warehouse on the property was demolished at a cost
Hinshaw Company purchased a new machine on October 1, 2014, at a cost of$90,000. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 70,000
Danny Venable, the new controller of Seratelli Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2014. Here are his
Wang Co. has delivery equipment that cost $50,000 and has been depreciated $24,000.Instructions Record entries for the disposal under the following assumptions.(a) It was scrapped as having no
Suppose during 2014 that Federal Express reported the following information(in millions): net sales of $35,497 and net income of $98. Its balance sheet also showed total assets at the beginning of
Shonrock International is considering a significant expansion to its product line.The sales force is excited about the opportunities that the new products will bring. The new products are a
These are selected 2014 transactions for Amarista Corporation:Jan. 1 Purchased a copyright for $120,000. The copyright has a useful life of 6 years and a remaining legal life of 30 years.Mar. 1
Haley Company, organized in 2014, has these transactions related to intangible assets in that year:Jan. 2 Purchased a patent (5-year life) $280,000.Apr. 1 Goodwill acquired as a result of purchased
Alliance Atlantis Communications Inc. changed its accounting policy to amortize broadcast rights over the contracted exhibition period, which is based on the estimated useful life of the program.
The questions listed below are independent of one another.Instructions Provide a brief answer to each question.(a) Why should a company depreciate its buildings?(b) How can a company have a building
Jayhawk Bus Lines uses the units-of-activity method in depreciating its buses.One bus was purchased on January 1, 2014, at a cost of $100,000. Over its 4-year useful life, the bus is expected to be
Basic information relating to a new machine purchased by Hinshaw Company is presented in E9-5.Instructions Using the facts presented in E9-5, compute depreciation using the following methods in the
At December 31, 2014, Navaro Corporation reported the following plant assets.Land $ 3,000,000 Buildings $26,500,000 Less: Accumulated depreciation—buildings 11,925,000 14,575,000 Equipment
Due to rapid employee turnover in the accounting department, the following transactions involving intangible assets were improperly recorded by Eveland Corporation in 2014. 1. Eveland developed a new
Danner Corporation and London Corporation, two companies of roughly the same size, are both involved in the manufacture of shoe-tracing devices. Each company depreciates its plant assets using the
In recent years, Farr Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation
At December 31, 2013, Tong Corporation reported these plant assets.Land $ 4,000,000 Buildings $28,800,000 Less: Accumulated depreciation—buildings 11,520,000 17,280,000 Equipment 48,000,000 Less:
Lyle Company maintains a petty cash fund for small expenditures. These transactions occurred during the month of August.Aug. 1 Established the petty cash fund by writing a check on Westown Bank
During October, Wichita Light Company experiences the following transactions in establishing a petty cash fund.Oct. 1 A petty cash fund is established with a check for $150 issued to the petty cash
Enright Company expects to have a cash balance of $46,000 on January 1, 2014.These are the relevant monthly budget data for the first two months of 2014.1 Collections from customers: January $71,000,
Canzer, Morel, and Wang, three law students who have joined together to open a law practice, are struggling to manage their cash flow. They haven’t yet built up sufficient clientele and revenues to
A new accountant at Leftwich Inc. is trying to identify which of the amounts shown below should be reported as the current asset “Cash and cash equivalents” in the year-end balance sheet, as of
Werth Inc.’s bank statement from Hometown Bank at August 31, 2014, gives the following information.Balance, August 1 $18,400 Bank debit memorandum:August deposits 71,000 Safety deposit box fee $ 25
The cash records of Downs Company show the following.For July:1 The June 30 bank reconciliation indicated that deposits in transit total $580.During July, the general ledger account Cash shows
This information relates to the Cash account in the ledger of Treanor Company.Balance September 1—$16,400; Cash deposited—$64,000 Balance September 30—$17,600; Checks written—$62,800 The
The following information pertains to Joyce Company. 1. Cash balance per bank, July 31, $7,328. 2. July bank service charge not recorded by the depositor $38. 3. Cash balance per books, July 31,
At April 30, the bank reconciliation of Longacre Company shows three outstanding checks: No. 254 $650, No. 255 $700, and No. 257 $410. The May bank statement and the May cash payments journal are
Sally Rice is unable to reconcile the bank balance at January 31. Sally’s reconciliation is shown here.Cash balance per bank $3,677.20 Add: NSF check 450.00 Less: Bank service charge 28.00 Adjusted
At Nunez Company, checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked file
The following control procedures are used in Penny’s Boutique Shoppe for cash disbursements.1 Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register.2
The following control procedures are used in Kelton Company for over-the-counter cash receipts.1 Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they
Rosa’s Pizza operates strictly on a carryout basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. While at the counter, the customer can see other
Bank employees use a system known as the “maker-checker” system. An employee will record an entry in the appropriate journal, and then a supervisor will verify and approve the entry. These days,
Hull Corporation’s management wants to maintain a minimum monthly cash balance of $8,000. At the beginning of September, the cash balance is $12,270;expected cash receipts for September are
Doug Nicklas owns Doug Blankets. Doug asks you to explain how he should treat the following reconciling items when reconciling the company’s bank account.1 Outstanding checks 2 A deposit in transit
Jack Woodling is concerned with control over mail receipts at Yount Sporting Goods. All mail receipts are opened by Bill Morten. Bill sends the checks to the accounting department, where they are
Identify which control activity is violated in each of the following situations, and explain how the situation creates an opportunity for fraud or inappropriate accounting practices.1 Once a month,
On March 20, Garber’s petty cash fund of $100 is replenished when the fund contains $19 in cash and receipts for postage $40, supplies $26, and travel expense $15.Prepare the journal entry to
The following information is available for Conger Company for the month of January: expected cash receipts $59,000; expected cash disbursements $67,000; and cash balance on January 1, $12,000.
Span Company has these cash balances: cash in bank $12,742; payroll bank account $6,000; and plant expansion fund cash $25,000. Explain how each balance should be reported on the balance
In the month of November, Halladay Company Inc. wrote checks in the amount of $9,750. In December, checks in the amount of $11,762 were written. In November,$8,800 of these checks were presented to
At July 31, Farmer Company has this bank information: cash balance per bank$7,291; outstanding checks $762; deposits in transit $1,350; and a bank service charge $40.Determine the adjusted cash
Using the data in BE7-8, indicate (a) the items that will result in an adjustment to the depositor’s records and (b) why the other items do not require adjustment.AppendixLO1
The following reconciling items are applicable to the bank reconciliation for Nuessen Co. Indicate how each item should be shown on a bank reconciliation.(a) Outstanding checks.(b) Bank debit
Roy Luber is uncertain about the control features of a bank account. Explain the control benefits of (a) a checking account and (b) a bank statement.AppendixLO1
Catt Company has the following internal control procedures over cash disbursements.Identify the internal control principle that is applicable to each procedure.(a) Company checks are prenumbered.(b)
While examining cash receipts information, the accounting department determined the following information: opening cash balance $150, cash on hand $1,125.74, and cash sales per register tape $988.62.
Halleran Company has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure.(a) All over-the-counter receipts are
The internal control procedures in Edmiston Company make the following provisions.Identify the principles of internal control that are being followed in each case.(a) Employees who have physical
Beth Pitchford is the new owner of Brigham Co. She has heard about internal control but is not clear about its importance for her business. Explain to Beth the four purposes of internal control, and
Match each situation with the fraud triangle factor (opportunity, financial pressure, or rationalization) that best describes it.(a) An employee’s monthly credit card payments are nearly 75% of
What was Tootsie Roll’s balance in cash and cash equivalents at December 31, 2011? Did it report any restricted cash? How did Tootsie Roll define cash equivalents?AppendixLO1
(a) Describe cash equivalents and explain how they are reported.(b) How should restricted cash funds be reported on the balance sheet?AppendixLO1
Marcia Tague asks your help concerning an NSF check. Explain to Marcia (a) what an NSF check is,(b) how it is treated in a bank reconciliation, and(c) whether it will require an adjusting entry on
Identify the basic principles of cash management.AppendixLO1
Chris Hite is confused about the lack of agreement between the cash balance per books and the balance per bank. Explain the causes for the lack of agreement to Chris and give an example of each
How do these principles apply to cash disbursements?(a) Physical controls.(b) Human resource controls.AppendixLO1
Napoli Company’s internal controls over cash disbursements provide for the treasurer to sign checks imprinted by a checkwriter after comparing the check with the approved invoice. Identify the
At Solis Wholesale Company, two mail clerks open all mail receipts. How does this strengthen internal control?AppendixLO1
Assume that Kohl’s Department Stores installed new cash registers in its stores. How do cash registers improve internal control over cash receipts?AppendixLO1
Hoskins Inc. owns the following assets at the balance sheet date.Cash in bank—savings account $ 8,000 Cash on hand 1,100 Cash refund due from the IRS 1,000 Checking account balance 12,000 Postdated
As the company accountant, explain the following ideas to the management of Jurgens Company.(a) The concept of reasonable assurance in internal control.(b) The importance of the human factor in
What internal control objectives are met by physical controls?AppendixLO1
Donald Bowen is reviewing the principle of segregation of duties. What are the two common applications of this principle?AppendixLO1
What principles of internal control apply to most businesses?AppendixLO1
Discuss how the Sarbanes-Oxley Act has increased the importance of internal control to top managers of a company.AppendixLO1
Identify the five components of a good internal control system.AppendixLO1
Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify the three factors and explain what is meant by each.AppendixLO1
A local bank reported that it lost $150,000 as the result of employee fraud. Fred Raburn is not clear on what is meant by “employee fraud.” Explain the meaning of fraud to Fred and give an
A check is written to replenish a $100 petty cash fund when the fund contains receipts of $94 and $2 in cash. In recording the check:(a) Cash Over and Short should be debited for $4.(b) Petty Cash
Which of the following is not one of the sections of a cash budget?(a) Cash receipts section.(b) Cash disbursements section.(c) Financing section.(d) Cash from operations section.AppendixLO1
Which of the following would not be an example of good cash management?(a) Provide discounts to customers to encourage early payment.(b) Invest temporary excess cash in stock of a small company.(c)
Which of the following control activities is not relevant when a company uses a computerized (rather than manual) accounting system?(a) Establishment of responsibility.(b) Segregation of duties.(c)
The use of prenumbered checks in disbursing cash is an application of the principle of:(a) establishment of responsibility.(b) segregation of duties.(c) physical controls.(d) documentation
Which of the following was not a result of the Sarbanes-Oxley Act?(a) Companies must file financial statements with the Internal Revenue Service.(b) All publicly traded companies must maintain
The principles of internal control do not include:(a) establishment of responsibility.(b) documentation procedures.(c) financial performance measures.(d) independent internal verification.AppendixLO1
Internal control is used in a business to enhance the accuracy and reliability of its accounting records and to:(a) safeguard its assets.(b) create fraud.(c) analyze financial statements.(d)
Which of the following is not an element of the fraud triangle?(a) Rationalization.(b) Financial pressure.(c) Segregation of duties.(d) Opportunity.AppendixLO1
Prepare a bank reconciliation.AppendixLO1
Explain the applications of internal control principles to cash disbursements.AppendixLO1
Explain the applications of internal control principles to cash receipts.AppendixLO1
Identify the principles of internal control activities.AppendixLO1
Defi ne fraud and internal control.AppendixLO1

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