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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

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
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

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