Question: The financial statements for Daniels’ Custom

> Thomas Kinnaman, an economist at Bucknell University, has analyzed the pricing of garbage collection: Setting the appropriate fee for garbage collection can be tricky when there are both fixed and marginal costs of garbage collection…. A curbside price s

> What is a monopsony?

> An article in the New Yorker states, “the main burden of trade-related job losses and wage declines has fallen on middle- and lower-income Americans. But … the very people who suffer most from free trade are often, paradoxically, among its biggest benefi

> Jay Ritter, a professor at the University of Florida, was quoted in the Wall Street Journal as saying about Facebook: “It’s entirely possible for a company to have solid growth prospects while its stock is overvalued.” a. What does it mean to say that a

> Briefly explain whether you agree with the following statement: “The reluctance of healthy young adults to buy health insurance creates a moral hazard problem for insurance companies.”

> According to a company news release, during the third quarter of 2014, the Coca-Cola Company sold 1 percent less soda in North America while earning more revenue. a. Did Coke increase or decrease its soda prices during this period? Briefly explain. b. Ba

> Eric Finklestein, an economist at Duke University, has argued that the external costs from being obese are larger than the external costs from smoking because “the mortality effect for obesity is much smaller than it is for smoking and the costs start mu

> According to a New York Times article, the Venezuelan government “imposes strict price controls that are intended to make a range of foods and other goods more affordable for the poor. They are often the very products that are the hardest to find.” a. Wh

> A news story from 2015 about the oil market stated, “The global glut of crude that has hit [oil] prices is starting to shrink.” a. What does the article mean by a “glut”? What does a glut imply about the quantity demanded of oil relative to the quantity

> What is the difference between productive efficiency and allocative efficiency?

> According to the U.S. Energy Information Administration, the average price of heating oil fell to under $3.00 a gallon during the winter of 2014–2015, the lowest price in more than four years. About 6.2 million U.S. households in the Northeast rely on th

> Briefly explain whether you agree with the following statement: “The total value of the shares of Microsoft stock traded on the NASDAQ last week was $250 million, so the firm actually received more revenue from stock sales than from selling software.”

> An article in the Economist discussing the struggle among airline passengers over reclining seats offered the following observation: “Given that airlines are unlikely to increase the [distance between] their seats any time soon, better that all planes co

> The Food and Drug Administration (FDA) is part of the federal government’s Department of Health and Human Services. Among its other functions, the FDA evaluates the safety and effectiveness of drugs and medical devices. FDA approval had to be granted bef

> What is cost-plus pricing? Is using cost-plus pricing consistent with a firm maximizing profit? How does the elasticity of demand affect the percentage price markup that firms use?

> In an article in the Wall Street Journal, Edward Lazear of Stanford University was quoted as saying, “There is some good news… . Most of the inequality reflects an increase in returns to ‘investing in skills.’” Why would it be good news if it were true t

> What account titles would you suggest for the chart of accounts for a city touring company owned by W. Sanders? List the accounts by account category and include an appropriate account number for each.

> Label each of the following accounts as asset (A), liability (L), owner’s equity (OE), revenue (R), or expense (E). a. Supplies b. Professional Fees c. Prepaid Insurance d. M. Jones, Drawing e. Accounts Payable f. Service Income g. M. Jones, Capital h. O

> During February of this year, H. Rose established Rose Shoe Hospital. The following asset, liability, and owner’s equity accounts are included in the chart of accounts: Cash Shop Equipment Store Equipment Office Equipment Accounts Payable H. Rose, Capita

> During December of this year, G. Elden established Ginny’s Gym. The following asset, liability, and owner’s equity accounts are included in the chart of accounts: Cash Exercise Equipment Store Equipment Office Equipment Accounts Payable G. Elden, Capital

> Dr. L. M. Patton is an ophthalmologist. As of December 31, Dr. Patton owned the following property that related to his professional practice, Patton Eye Clinic: Cash, $2,995 Professional Equipment, $63,000 Office Equipment, $8,450 On the same date, he ow

> Determine the following amounts: a. The amount of the liabilities of a business that has $60,800 in assets and in which the owner has $34,500 equity. b. The equity of the owner of a tour bus that cost $57,000 and on which is owed $21,800 on an installmen

> Complete the following equations: a. Assets of $40,000 = Liabilities of $17,200 + Owner’s Equity of $_____ b. Assets of $_____ – Liabilities of $18,000 = Owner’s Equity of $22,000 c. Assets of $27,000 – Owner’s Equity of $15,000 = Liabilities of $_____

> Assume that the number of units transferred out of a department is unknown. What is the formula to solve for units transferred out using the basic cost flow model?

> Refer to the data in Exercise 14-25. The division manager learns that he has the option to lease the asset on a year-to-year lease for $148,000 per year. All depreciation and other tax benefits would accrue to the lessor. What is the divisional ROI if th

> TL Division of Giant Bank has assets of $14.4 billion. During the past year, the division had profits of $1.8 billion. Giant Bank has a cost of capital of 6 percent. Ignore taxes. Required a. Compute the divisional ROI. b. Compute the divisional RI.

> Describe a business transaction that will do the following: a. Increase an asset and increase a liability b. Decrease an asset and decrease a liability c. Decrease an asset and increase an expense d. Increase an asset and increase owner’s equity e. Incre

> Describe the transactions that are recorded in the following equation: Assets = Liabilities + Owner's Equity J. Onyx, + Receivable + Equipment = Payable + Capital J. Onyx, - Drawing + Revenue Accounts Асcounts Cash Еxpenses (а) +25,000 +4,500 +29,50

> Define chart of accounts and identify the categories of accounts.

> When an owner withdraws cash or goods from the business, why is this considered an increase to the Drawing account and not an increase to the Wages Expense account?

> What is the effect on the fundamental accounting equation if supplies are purchased on account? How will the fundamental accounting equation change if supplies are purchased with cash? Explain how this purchase will or will not change the owner’s equity.

> Determine the effect of the following errors on a company’s total revenue, total expenses, and net income. Indicate the effect by writing O for Overstated (too much), U for Understated (too little), or NA for Not Affected. Total To

> The bookkeeper for Nevado Company has prepared the following trial balance: The bookkeeper has asked for your help. In examining the company’s journal and ledger, you discover the following errors. Use this information to construct a

> Arrange the following steps in the posting process in correct order: a. The amount of the balance of the ledger account is recorded in the Debit Balance or Credit Balance column. b. The amount of the transaction is recorded in the Debit or Credit column

> The following February journal entries all involved cash. Post the amounts to the ledger account for Cash, Account No. 111. Assume that all transactions appeared on page 1 of the general journal. Increases to Cash-Debits Decreases to Cash-Credits 2

> Montoya Tutoring Service completed the following transactions. Journalize the transactions in general journal form, including brief explanations. Mar. 1 Bought equipment for $5,798 from Teaching Suppliers, paying $3,798 in cash and placing the balance on

> Describe two ways to increase owner’s equity and two ways to decrease owner’s equity.

> Decor Services completed the following transactions. Journalize the transactions in general journal form, including brief explanations. Oct. 7 Received cash on account from Randy Hill, a customer, Inv. No. 312, $970. 15 Paid on account to Miller Ideas, a

> Journalize correcting entries for each of the following errors and include a brief explanation. a. A cash purchase of office equipment for $680 was journalized as a cash purchase of store equipment for $680. (Use the ruling method; assume that the entry

> In the following two-column journal, the capital letters represent where parts of a journal entry appear. Write the numbers 1 through 8 on a sheet of paper. After each number, match the capital letter where these items appear with the number of the item.

> Arrange the following steps in the posting process in correct order: a. Write the ledger account number in the Post. Ref. column of the journal. b. Write the amount of the transaction. c. Write the date of the transaction. d. Write the page number of the

> What does cross-referencing mean in the posting process?

> Why is a source document important? List some examples of source documents.

> List by account classification the order of the accounts in the general ledger.

> What is the purpose of providing a ledger account for each account?

> How does the journal differ from the ledger?

> Why is the journal called a book of original entry?

> How do Accounts Payable and Accounts Receivable differ?

> The financial statements for Baker Custom Catering fr the month of April are presented below. Required Solve for the missing information. Baker Custom Catering Income Statement (a) Revenue: Professional Fees $12,000 Expenses: Salary Expense $ 800 R

> Would the following errors cause the trial balance to have equal or unequal totals? As a result of the errors, which accounts are overstated (by how much) or understated (by how much)? a. A purchase of office equipment for $380 was recorded as a debit to

> The following errors were made in journalizing transactions. In each case, calculate the amount of the error and indicate whether the debit or the credit column of the trial balance will be understated or overstated. Amount of Difference Debit or Cr

> During the first month of operations, Landish Modeling Agency recorded transactions in T account form. Foot and balance the accounts. Then prepare a trial balance, an income statement, a statement of owner’s equity, and a balance sheet

> Speedy Sewing Services, owned by T. Nguyen, hired a new bookkeeper who is not entirely familiar with the process of preparing a trial balance. All of the accounts have normal balances. Find the errors and prepare a corrected trial balance for December 31

> During the first month of operation, Graham Expeditions recorded the following transactions. Describe what has happened in each of the transactions (a) through (k). LD. Rakes, Drawing J. D. Rakes, Capital (a) 5,000 () 750 () 4,000 Income from Accoun

> R. Dalberg operates Dalberg’s Tours. The company has the following chart of accounts: Using the chart of accounts, record the following transactions in pairs of T accounts. Give the T account to be debited first and the account to be

> List the classification of each of the following accounts as A (asset), L (liability), OE (owner’s equity), R (revenue), or E (expense). Write Debit or Credit to indicate the increase side, the decrease side, and the normal balance side

> On a sheet of paper, draw the fundamental accounting equation with T accounts under each of the account classifications, with plus and minus signs and debit and credit on the appropriate side of each account. Under each of the classifications, draw T acc

> Explain the separate entity concept.

> Give an example of a slide and an example of a transposition. Explain how you might decide whether an error is a slide or a transposition.

> Explain why the term debit doesn’t always mean “increase” and why the term credit doesn’t always mean “decrease.”

> Explain how a trial balance and a balance sheet differ.

> What do we mean when we say that capital, drawing, revenue, and expense accounts are under the umbrella of owner’s equity?

> List two reasons why the debits and credits in the trial balance might not balance.

> What is a compound entry?

> How are the three financial statements shown in this chapter connected?

> What are footings in accounting?

> Describe a transaction that resulted in the following changes in accounts: a. Rent Expense is increased by $1,050, and Cash is decreased by $1,050. b. Advertising Expense is increased by $835, and Accounts Payable is increased by $835. c. Accounts Receiv

> Describe a transaction that resulted in each of the following entries affecting the accounting equation. Assets Liabilities + Owner's Equity Office Professional Ассounts Cash + Equipment + Equipment Payable + B. Lake, Capital (a) +18,200 +18,200 (b)

> Define assets, liabilities, owner’s equity, revenues, and expenses.

> California Circuits Company (3C) manufactures a variety of components. Its Valley plant specializes in two electronic components used in circuit boards. These components serve the same function and perform equally well. The difference in the two products

> ACE Industries is a manufacturer of machined parts located in the midwestern United States. Its primary customers are suppliers to the automobile industry, although it has diversified its customer base in recent years to reduce its dependence on any one

> Cawker Products has two manufacturing facilities—Lucas plant and Russell plant—that produce the same product. Until recently, the production process in both plants has been the same. Last year, the Russell production supervisor, Ann Tyler, determined tha

> Refer to Problem 9-45. The intern decides to look more closely at the manufacturing activity and determines that it can be broken down into two activities: production and engineering. Production covers the costs of on-going manufacturing while engineerin

> Cain Components manufactures and distributes various plumbing products used in homes and other buildings. Over time, the production staff has noticed that products they considered easy to make were difficult to sell at margins considered reasonable while

> Utica Manufacturing (UM) was recently acquired by MegaMachines, Inc. (MM), and organized as a separate division within the company. Most manufacturing plants at MM use an ABC system, but UM has always used a traditional product costing system. Bob Miller

> College Supply Company (CSC) makes three types of drinking glasses: short, medium, and tall. It presently applies overhead using a predetermined rate based on direct labor-hours. A group of company employees recommended that CSC switch to activity-based

> Refer to Problem 9-38. Assume that you have prepared financial statements that show the operating profit for each of the two baskets manufactured by Bob’s Baskets. Further assume that under the activity-based costing approach (requireme

> Bob’s Baskets, Inc., manufactures and sells two types of baskets, deluxe and standard. Last year, Bob’s Baskets had the following costs and revenues: Bob’s Baskets currently uses labor costs to allo

> EZ-Seat, Inc., manufactures two types of reclining chairs, Standard and Ergo. Ergo provides support for the body through a complex set of sensors and requires great care in manufacturing to avoid damage to the material and frame. Standard is a convention

> The management of a liquid cleaning product company is trying to decide whether to install a job or process costing system. The manufacturing vice president has stated that job costing gives the best control because it is possible to assign costs to spec

> John’s Custom Computer Shop (JCCS) assembles computers for both individual and corporate customers. The company is organized into two divisions: Personal and Business. Once a computer is built, it is shipped to the customer. Billing for

> The Personnel Department at LastCall Enterprises handles many administrative tasks for the two divisions that make up LastCall: LaidBack and StressedOut. LaidBack division manages the company’s traditional business line. This business,

> Carolina Fashions, a shirt manufacturer, recently switched to activity-based costing from the department product costing method. The manager of Building S, which manufactures the shirts, has identified the following cost drivers and rates for overhead:

> Delta Parts, Inc., recently switched to activity-based costing from the department allocation method. The Fabrication Department manager has estimated the following cost drivers and rates: Direct materials costs were $300,000 and direct labor costs wer

> Wendy Chen established Windy City Coaching (WCC) to provide teen counseling and executive coaching services to its clients. WCC charges a $300 fee per hour for each service. The revenues and costs for the year are shown in the following income statement:

> Isadore’s Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended an activity-based costing system using the fo

> We-Clean, Inc., is a home-cleaning service. It originally specialized in serving small residential clients but recently started contracting for work in large apartment and office buildings. Julie Lodge, the owner, believes that the commercial sector has

> Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company’s two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new a

> Rodent Corporation produces two types of computer mice, wired and wireless. The wired mice are designed as low-cost, reliable input devices. The company only recently began producing the higher-quality wireless model. Since the introduction of the new pr

> Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires four people to serve and clean up. Cathy offers two types of parties,

> Give examples of cost drivers commonly used to allocate overhead costs to products and services.

> After reviewing the new activity-based costing system that Janis McGee has implemented at Joplin Industries’s Port Arthur manufacturing facility, Kris Kristoff, the production supervisor, believes that he can reduce production costs by

> Refer to exercise 9-24. Kurt, the manager of the Ohio unit, is unhappy with the results of the controller’s study. He asks the controller to develop separate rates for fixed and variable costs in the Personnel Department. The controller

> The Personnel Department at Drumm Corporation is centralized and provides services to the two operating units: Illinois and Ohio. The Illinois unit is the original unit of Drumm and is well established. The Ohio unit is new, much like a start-up company.

> Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $3 per labor-hour. Strawberry and vanilla flavors are produced in Department SV. Chocolate is produced in Department C. Sven ma

> Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labo

> A manager tells you that her company’s cost accounting system divides overhead into two pools: (1) Inspect material and (2) Assemble product. The inspect material pool is allocated on the basis of direct material dollars and the assemble product pool is

> Select an administrative function commonly found in a fi rm. Examples include personnel, accounts payable, purchasing, and so on. Outline an activity-based costing system for the function, including major activities, potential cost drivers, and relevant

> “We all know that cost allocation can distort decision making. We should stop doing this and just report direct costs.” Do you agree? Explain.

> Jim, the vice president of marketing, says the company should not adopt activity-based costing because it will result in the costs of some of the products going up but the market will not allow for raising prices. How would you respond?