Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month. The following information is available for the year ending December 31. 1. A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to $1,500. No interest expense has yet been recorded. 2. Depreciation of the firm’s office building is based on an estimated life of 30 years. The building was purchased four years ago for $450,000. 3. Accrued, but unbilled, revenue during December amounts to $75,000. 4. On March 1, the firm paid $2,400 to renew a 12-month insurance policy. The entire amount was recorded as Prepaid Insurance. 5. The firm received $15,000 from King Biscuit Company in advance of developing a six-month marketing campaign. The entire amount was initially recorded as Unearned Revenue. At December 31, $9,000 had actually been earned by the firm. 6. The company’s policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to $1,900. a. Record the necessary adjusting journal entries on December 31 b. By how much did Sweeney & Allen’s net income increase or decrease as a result of the adjusting entries performed in part a? (Ignore income taxes.)
> Refer to the information from Problem 18.2A. Instructions: Complete the March production cost report for the Motor Department of Spa Magic. Data from Problem 18.2A: One of Spa Magic’s products is a whirlpool spa. Two processing depart
> Partner John French has a choice to make. He has been offered by his partners a choice between no salary allowance and a one-third share in the partnership income or a salary of $36,000 per year and a one-quarter share of residual profits. Write a brief
> Criticize the following statement: “In our business, we maximize profits by closing any department that does not show a responsibility margin ratio of at least 15 percent.”
> Shown as follows is information from the financial reports of Pete’s Auto Parts for the past few years. Instructions: a. Calculate the following statistics for Pete’s Auto Parts (round all computations to one decimal
> The following information was taken directly from the footnotes to the financial statements of Best Buy. 1. “A gift card liability is initially established for the value of gift cards when they are sold. We recognize revenue from gift cards when the car
> What is a cost accounting system?
> The Triple Creek Golf Complex is a three-course complex where each course has its own restaurant and pro shop. Thus, the complex is organized into three departments that are treated as investment centers. Budget information for the coming year for these
> Identify the two factors that determine the difference between the present value and the future amount of an investment.
> Under which circumstances is a fixed salary preferable to a pure bonus compensation system?
> Identify three ways that accounting systems help align the goals of employees and the goals of the organization
> Ferris, Inc., sells heavy machinery with a base unit price of $10,000. Ferris offers an optional service agreement for an initial three-year period for $1,500. a. Explain how Ferris should recognize revenue for its contract with a customer that chooses t
> Under what circumstances might a company write down its inventory to carrying value below cost?
> The Empire Hotel is a full-service hotel in a large city. Empire is organized into three departments that are treated as investment centers. Budget information for the coming year for these three departments is shown as follows. The managers of each of t
> A recent annual report issued by Best Buy revealed the following data. The company’s income statement reported total annual revenue of $42,151 million and net income for the year of $1,000 million. Instructions: a. Evaluate Best Buy&
> Why noncumulative preferred stock is often considered an unattractive form of investment?
> Salter Mining Company purchased the Northern Tier Mine for $21 million cash. The mine was estimated to contain 2.5 million tons of ore and to have a residual value of $1 million. During the first year of mining operations at the Northern Tier Mine, 50,00
> Shown are selected data from the financial statements of Hamilton Stores, a retail lighting store. Instructions: a. Explain how the interest expense shown in the income statement could be $80,000, when the interest payment appearing in the statement of
> Muscle Bound Co. sells home exercise equipment. The company has two sales territories, Eastern and Western. Two products are sold in each territory: FasTrak (a Nordic ski simulator) and RowMaster (a stationary rowing machine). During January, the followi
> Outdoor World, Inc., manufactures camping equipment. Shown for the current year are the income statement for the company and a common size summary for the industry in which the company operates. Instructions: a. Prepare a two-column common size income s
> How can operating at 100 percent of capacity create unfavorable variances?
> DeskTop, Inc., operates a national sales organization. The income statements prepared for each sales territory are created by product line. In these income statements, the sales territory manager’s salary is treated as a common fixed cost. Will this sala
> Tyson Furniture has $100,000 in excess cash that it wants to invest in one or more cash equivalents. The treasurer has researched two money market accounts and two certificates of deposit (CDs) offered by four major banks. The following is the informatio
> “Peak pricing is unfair. It makes goods and services available only to the wealthy and prices the average person out of the market.” Instructions: a. Comment on the extent to which you agree or disagree with the preceding statement. b. What is the alter
> What are some of the uses that management may make of accounting information about individual responsibility centers of the business?
> Lamberton Industries uses process costing. All of the company’s manufacturing activities take place in a single processing department. The following information was available for the month of July Partially completed units in July&acir
> Decor, Inc., manufactures bathroom fixtures. Shown for the current year are the income statements for the company and a common size summary for the industry in which the company operates. Instructions: a. Prepare a two-column common size income statemen
> Banner Publications was organized early in 2018 with authorization to issue 10,000 shares of $100 par value preferred stock and 1 million shares of $1 par value common stock. All of the preferred stock was issued at par, and 400,000 shares of common stoc
> Melilla Corporation issued $5 million of 20-year, 9.5 percent bonds on July 1, 2021, at 98. Interest is due on June 30 and December 31 of each year, and all of the bonds in the issue mature on June 30, 2041. Melilla’s fiscal year ends on December 31. Pre
> How do direct materials variances and direct labor cost variances differ from overhead cost variances?
> Once standard costs are established, what conditions would require that standards be revised?
> Why is the output of a JIT system likely to contain fewer defective units than the output of a traditional manufacturing system?
> Define standard costs and briefly indicate how they may be used by management in planning and control.
> The Adams family decided early in 2020 to incorporate their family-owned farm under the name Adams Corporation. The corporation was authorized to issue 100,000 shares of a single class of $1 par value capital stock. Presented as follows is the informatio
> Refer to the information from Problem 18.2B. Instructions: Complete the May production cost report for the Engine Department of Turf Smart. Data from Problem 18.2B: One of Turf Smart’s products is a small lawnmower. Two processing dep
> Claypool Hardware is the only hardware store in a remote area of northern Minnesota. Some of Claypool’s transactions during the current year are as follows. Instructions: a. Prepare journal entries to record these transactions and even
> Why do overtime hours usually result in unfavorable direct labor rate variances?
> Would a production manager be equally responsible for an unfavorable materials price variance and an unfavorable materials quantity variance? Explain.
> Traditional accounting systems record only actual transactions. As a result, how can opportunity costs be important in incremental decisions?
> Interview the owners of two local small businesses. One business should be organized as a corporation and the other as either a sole proprietorship or a partnership. Inquire as to Why this form of entity was selected. Have there been any unforeseen comp
> The Home Depot, Inc., financial statements appear in Appendix A at the end of this text. Use these statements to answer the following questions. a. What is the total dollar value of the company’s current assets for the most current year reported? Has th
> Biltmore Company manufactures two products: BIT, which sells for $120; and MORE, which sells for $180. Estimated cost and production data for the current year are as follows. In addition, fixed manufacturing overhead is estimated to be $2,500,000 and va
> Consider the Triple Creek Golf Complex discussed in Problem 25.1B. The manager of the restaurants department complains that sales and resulting earnings for the restaurants are not higher due to the poor reputation of the pro shops. Because the pro shops
> C. Erickson and Sons, Inc., is a Philadelphia-based construction company. Visit its home page at the following address: www.cerickson.com. Instructions: a. Identify at least three construction projects engaged in by the company. b. For each project id
> During the current year, Sports +, Inc., operated two business segments: a chain of surf and dive shops and a small chain of tennis shops. The tennis shops were not profitable and were sold near year-end to another corporation. Sports + operations for th
> Why is an unfavorable overhead volume variance usually not considered in evaluating the performance of the production department manager?
> Spirit Corporation reported the following payroll-related costs for the month of February. Spirit’s insurance premiums for workers’ compensation and group health and life insurance were paid for in a prior period and
> The following table summarizes the facts of five independent cases (labeled a through e) of U.S. companies engaging in credit transactions with foreign corporations while the foreign exchange rate is fluctuating. You are to fill in each blank space afte
> Explain how each of the following items is reported in a complete set of financial statements, including the accompanying notes. (In one or more cases, the item may not appear in the financial statements.) The answer to the first item is provided as an e
> Classic Cabinets has one factory in which it produces two product lines. Walter manages the Wood Division, which produces wood cabinets, and Mary manages the Metal Division, which produces metal cabinets. Estimated unit production costs for the two types
> A real estate development business is managed by two experienced developers and is financed by 50 investors from throughout the state. To allow maximum income tax benefits to the investors, the business is organized as a partnership. Explain why this typ
>
> What factors should be taken into account in deciding whether to use job order costing or process costing in any given production situation?
> What is the characteristic common to all current assets? Many retail stores regularly sell merchandise on installment plans, calling for payments over a period of 24 or 36 months. Do such receivables qualify as current assets? Explain.
> What are responsibility budgets? What responsibility centers would serve as the basis for preparing responsibility sales budgets in a large retail store, such as Target or Nordstrom?
> Assume that when you were in high school you saved $1,000 to invest for your college education. You purchased 200 shares of Smiley Incorporated, a small but growing company. Over the three years that you have owned the stock, the corporation’s board of d
> Crackle Cookie Company is a relatively new company and so far has sold its products only in its home country, Denmark. In December, Crackle determined that it had excess capacity to produce more of its special Christmas cookies. It is trying to decide wh
> Assume that the following information relates to your most recent bank statement dated September 30. Interest amounting to $4 was credited to your account by the bank in September. The bank’s service charge for the month was $5. In add
> Messer Company had retained earnings at the beginning of the current year of $590,000. During the year, the following activities occurred. Prepare a statement of retained earnings for the year.
> AgriChem Industries manufactures fertilizer concentrate and uses cost standards. The fertilizer is produced in 500-pound batches; the normal level of production is 250 batches of fertilizer per month. The standard costs per batch are as follows. During
> Assume that you are an intern working for the California Public Employees’ Retirement System (CalPERS) in its investments office and you have been asked to evaluate a number of companies for possible investment by CalPERS. You prepare an analysis of each
> Silent Sentry manufactures gas leak detectors that are sold to homeowners throughout the United States at $25 apiece. Each detector is equipped with a sensory cell that is guaranteed to last two full years before needing to be replaced. The company curre
> Ripley Corporation has supplied the following information obtained from its standard cost system in June. Instructions: a. Determine the actual quantity of materials purchased and used in production during June. b. Determine the standard quantity of mat
> Assume that on January 31 the Finishing Department of Corner Suites had 5,000 partially trimmed and assembled executive desks in ending inventory. These units were, of course, 100 percent complete with respect to components transferred in from the Cuttin
> Blue Plate Construction organized in December and recorded the following transactions during its first month of operations. a. Record each of these transactions as illustrated in the Job Order Costing section. b. Compute the amount at which Cost of Goo
> The National Association of Foreign Trade Zones (FTZs) maintains an Internet site containing information on U.S. foreign trade zones. Locate the site by searching under “foreign trade zone,” or go to: www.naftz.org. Instructions: a. Explain the key char
> Comas Corporation manufactures metal roofing in two departments: Pressing and Painting. Sheets of metal material are formed in the Pressing Department before being transferred to the Painting Department. The following information was taken from the compa
> Explain how efficiency and price or rate variances for direct labor can be closely related.
> Form a group of students and research the ASEAN Free Trade Agreement (AFTA). A government website, www.ustr.gov, provides information on various trade agreements for the United States. Prepare a short presentation or a paper that explains how the North A
> The following income statement was prepared by a new and inexperienced employee in theaccounting department of Phoenix, Inc., a business organized as a corporation. Instructions:a. Prepare a corrected income statement for the year ended December 31, 202
> The following is a summary of the transactions affecting the stockholders’ equity of Dry Wall, Inc.,during the current year Instructions:a. Prepare a statement of stockholders’ equity for the year. Use the column head
> What is meant by the term overhead cost driver? How does a cost driver enter into the computation of an overhead application rate?
> What is the basic purpose of classifications in financial statements? Identify the classifications widely used in a balance sheet, a multiple-step income statement, and a statement of cash flows.
> Differentiate between horizontal and vertical analysis
> What amounts are debited to the Materials Inventory account? What amounts are credited to this account? What type of balance (debit or credit) is this account likely to have at year-end? Explain.
> What is meant by the term overhead application rate?
> What factors should be taken into account in deciding whether to use job order costing in any given situation?
> Rizzo’s has been in business since January of the current year. The company buys frozen pizza Crusts and resells them to large supermarket chains in five states. The following information pertains to Rizzo’s first four
> Selected data from the financial statements of Italian Marble Co. and Brazil Stone Products for the year just ended follow. Assume that for both companies dividends declared were equal in amount to net earnings during the year and therefore stockholders&
> The international business community has been calling for stronger corporate governance for companies around the globe. As a result, in 1999 the Organization for Economic Cooperation and Development (OECD) issued some principles that deal with the ethica
> Into which of the three elements of manufacturing cost would each of the following be classified? a. Tubing used in manufacturing bicycles. b. Wages paid by an automobile manufacturer to employees who test-drive completed automobiles. c. Property taxes o
> At the beginning of the year, Sunstone, Inc., has total stockholders’ equity of $1,200,000 and20,000 outstanding shares of a single class of capital stock. During the year, the corporation completes the following transactions affecting
> Ionic Charge is a newly organized manufacturing business that plans to manufacture and sell 60,000 units per year of a new product. The following estimates have been made of the company’s costs and expenses (other than income taxes). I
> Some of the accounts appearing in the year-end financial statements of Rogand Grocery, Inc., appear as follows. This list includes all of the company’s current assets and current liabilities. Instructions: a. Prepare a schedule of the
> Define financial instruments. Explain the valuation concept used in initially recording financial instruments in financial statements.
> Locate an annual report in your library (or some other source) that includes a large gain or loss on the disposal of plant assets. Report to the class the amount of the gain or loss and where in the company income statement it is reported is. Describe ho
> Are normal accounts receivable and accounts payable financial instruments? Are these items shown in the balance sheet at their present values? Explain
> The following are 10 technical accounting terms introduced or emphasized in Chapters 11 and 12. Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the term described, or answer â&#
> Use the information from Exercise 18.3 to complete a production cost report for Lamberton Industries for the month of July. Data from exercise 18.3: Lamberton Industries uses process costing. All of the company’s manufacturing activiti
> When are the costs of postretirement benefits recognized as an expense? When are the related cash payments made?
> Blaster Corporation manufactures hiking boots. For the coming year, the company has budgeted the following costs for the production and sale of 30,000 pairs of boots. Instructions: a. Compute the sales price per unit that would result in a budgeted ope
> Myer’s Treats makes institutional cakes. Finished cakes must pass through two departments: Mixing and Baking. Vats of cake batter are processed in the Mixing Department and then transferred to the Baking Department, where individual cakes are baked, cool
> Some expenses that appear in the income statement do not require a direct cash payment during the period. List at least two such expenses.
> Explain the relationship between the management functions of planning and controlling costs.
> What are the major objectives of a cost accounting system?
> Redstone Mill is a manufacturer that makes all sales on 30-day credit terms. Annual sales are approximately $40 million. At the end of year 1, accounts receivable were presented in the company’s balance sheet as follows. During year 2,
> Salt & Pepper, Inc., had retained earnings at the beginning of the current year of $460,000. During the year the company earned net income of $250,000 and declared dividends as follows. / In addition, the company discovered an overstatement in the prio
> Winona Enterprises uses job order costing. Manufacturing overhead is charged to individual jobs through the use of a predetermined overhead rate based on direct labor costs. The following information appears in the company’s Work in Pro
> How might the required financial reports differ between countries that are individualistic and countries that are collectivist?
> Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains 12 quarts of synthetic oil. To achieve this level of production, Slick purchased and used 16,500 gallons of direct
> Former Corporation sells office supplies to government agencies. At the beginning of the current quarter, the company reports the following selected account balances. Former’s management has made the following budget estimates regardin
