Question: Wendell’s Donut Shoppe is investigating the

> If a product is generating a loss, then it should be discontinued.” Do you agree? Explain.

> Why is the form of activity-based costing described in this chapter unacceptable for external financial reports?

> How is it possible for a fixed cost that is traceable to a segment to become a common fixed cost if the segment is divided into further segments?

> Why aren’t common fixed costs allocated to segments under the contribution approach?

> Explain how the contribution margin differs from the segment margin.

> Distinguish between a traceable fixed cost and a common fixed cost. Give several examples of each.

> If the units produced exceed the units sold, which method would you expect to show the higher net operating income, variable costing or absorption costing? Why?

> Swain Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. The company’s beginning balance in Retained Earnings is $70,000.It sells one product for $165 per uni

> What assumption is implicitly made about cost behavior when actual results are directly compared to a static planning budget? Why is this assumption questionable?

> Refer to the financial statements and other data in Problem 15–18. Assume Paul Sabin has asked you to assess his company’s profitability and stock market performance. Financial statements and other data in Problem 15&

> Pecunious Products, Inc.’s financial results for the past three years are summarized below: Your boss has asked you to review these results and then answer the following questions: a. Is it becoming easier for the company to pay its bi

> A comparative balance sheet for Lomax Company containing data for the last two years is as Follows: The following additional information is available about the company’s activities during this year: a. The company declared and paid a c

> Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $8,000 in cash was available at the end of this year. Since the company reported a large

> A comparative balance sheet and an income statement for Burgess Company are given below: Burgess Company Income Statement (dollars in millions) Sales .....................................................................$3,600 Cost of goods sold ........

> Yoric Company listed the net changes in its balance sheet accounts for the past year as follows: The following additional information is available about last year’s activities: a. Net income for the year was $?. b. The company sold equ

> Joyner Company’s income statement for Year 2 follows: Sales ......................................................................$900,000 Cost of goods sold ...................................................500,000 Gross margin .....

> Brock.Company.is.a.merchandiser.that.prepared.the.statement.of.cash.flows.and.income.statement.provided.below: Brock. Company Income .Statement Sales................................................................................................$5,200 C

> Saxon Products, Inc., is investigating the purchase of a robot for use on the company’s assembly line. Selected data relating to the robot are provided below: Cost of the robot ………………………….…………………………………………………. $1,600,000 Installation and software . ……………

> Forsyth Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. During the year, the company produced and sold 10,000 units at a price of $135 per unit Its standard cost per unit p

> In five years, Kent Duncan will retire. He is exploring the possibility of opening a self-service car wash. The car wash could be managed in the free time he has available from his regular occupation, and it could be closed easily when he retires. After

> The Elberta Fruit Farm of Ontario always has hired transient workers to pick its annual cherry crop. Janessa Wright, the farm manager, just received information on a cherry picking machine that is being purchased by many fruit farms. The machine is a mot

> Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has e

> I’m not sure we should lay out $250,000 for that automated welding machine,” said Jim Alder, president of the Superior Equipment Company. “That’s a lot of money, and it would cost us $80,000 for software and installation, and another $36,000 per year jus

> Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed ……

> Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Casey is considering a capital bu

> Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Residential. The company’s accounting intern was asked to prepare segmented income statements that the companyâ€

> During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows The company’s $18 unit product cost is computed as follows: Direct materials ......................

> You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get

> Morton Company’s budgeted variable manufacturing overhead is $4 50 per direct labor-hour and its budgeted fixed manufacturing overhead is $270,000 per year. The company manufactures a single product whose standard direct labor-hours per

> Ray Company provided the following excerpts from its Production Department’s flexible budget performance report: Required: Complete the Production Department’s Flexible Budget Performance Report by filling in all the

> Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30.The following information is available: Deacon Company Balance Sheet March 31 Assets Cash......................................................

> Refer to the data for Garden Sales, Inc., in Problem 8–24. The company’s president is interested in knowing how reducing inventory levels and collecting accounts receivable sooner will impact the cash budget. He revise

> Springfield Corporation operates on a calendar-year basis. It begins the annual budgeting process in late August, when the president establishes targets for total sales dollars and net operating income before taxes for the next year. The sales target is

> Refer to the data for Minden Company. The company is considering making the following changes to the assumptions underlying its master budget: 1.Sales are budgeted for $220,000 for May. 2.Each month’s credit sales are collected 60% in the month of sale a

> Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales ……&hel

> Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Residential. The company’s accounting intern was asked to prepare segmented income statements that the companyâ€

> During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows The company’s $18 unit product cost is computed as follows: Direct materials ......................

> Haas Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable costs per unit: Manufacturing: Direct materials ......................................................

> Refer to the financial statements for Castile Products, Inc., in Exercise 15–8. Assets at the beginning of the year totaled $280,000, and the stockholders’ equity totaled $161,600. Data given in Exercise 15–8: The financial statements for Castile Produc

> Lasser Company plans to produce 10,000 units next period at a denominator activity of 30,000 direct labor-hours. The direct labor wage rate is $12 per hour. The company’s standards allow 2.5 yards of direct materials for each unit of pr

> Below are several transactions that took place in Seneca Company last year: a. Paid suppliers for inventory purchases. b. Bought equipment for cash. c. Paid cash to repurchase its own stock. d. Collected cash from customers. e. Paid wages to employees. f

> The following changes took place last year in Pavolik Company’s balance sheet accounts: Long-term investments that cost the company $6 were sold during the year for $16 and land that cost $15 was sold for $9. In addition, the company

> Below are certain events that took place at Hazzard, Inc., last year: a. Collected cash from customers. b. Paid cash to repurchase its own stock. c. Borrowed money from a creditor. d. Paid suppliers for inventory purchases. e. Repaid the principal amount

> Henrie’s Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie’s estimated the new machine would increase the company’s cash inflows, n

> A piece of labor-saving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: Purchase cost of the equipment…………………………………….. $432,00

> The Cambro Foundation, a nonprofit organization, is planning to invest $104,950 in a project that will last for three years. The project will produce net cash inflows as follows: Year 1 …………………………………………………………….$30,000 Year 2……………………………………………………………..$40,

> Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capi

> Lukow Products is investigating the purchase of a piece of automated equipment that will save $400,000 each year in direct labor and inventory carrying costs. This equipment costs $2,500,000 and is expected to have a 15-year useful life with no salvage v

> The management of Kunkel Company is considering the purchase of a $27,000 machine that would reduce operating costs by $7,000 per year. At the end of the machine’s five-year useful life, it will have zero salvage value. The company’s required rate of ret

> Phoenix Company manufactures only one product and uses a standard cost system. The company uses a plantwide predetermined overhead rate that relies on direct labor-hours as the allocation base The predetermined overhead rate is based on a cost formula th

> Zola Company manufactures and sells one product. The following information pertains to the company’s first year of operations: Variable cost per unit: Direct materials ....................................................................$18 Fixed costs p

> Assume Shoes-R-Us Corporation completed the following transactions: a. Sold a store building for $610,000. The building had cost Shoes-R-Us $1,300,000, and at the time of the sale its accumulated depreciation totaled $690,000. b. Lost a store building

> Lavallee Self Storage purchased land, paying $155,000 cash as a down payment and signing a $195,000 note payable for the balance. Lavallee also had to pay delinquent property tax of $4,000, title insurance costing $3,500, and $5,000 to level the land and

> Assume Shoe Warehouse Corporation completed the following transactions: a. Sold a store building for $650,000. The building had cost Shoe Warehouse $1,700,000, and at the time of the sale its accumulated depreciation totaled $1,050,000. b. Lost a store

> Ayer Self Storage purchased land, paying $175,000 cash as a down payment and signing a $190,000 note payable for the balance. Ayer also had to pay delinquent property tax of $3,500, title insurance costing $3,000, and $9,000 to level the land and remove

> Crescent Artichoke Growers (CAG) is a major food cooperative. Suppose CAG begins 2010 with cash of $11 million. CAG estimates cash receipts during 2010 will total $104 million. Planned payments will total $93 million. To meet daily cash needs next year,

> Northend Bank & Trust Company lent $130,000 to Sylvia Peters on a six-month, 9% note. Record the following for bank (explanations are not required): a. Lending the money on May 6. b. Collecting the principal and interest at maturity. Specify the date.

> Gray and Dumham, a law firm, started 2010 with accounts receivable of $31,000 and an allowance for uncollectible accounts of $4,000. The 2010 service revenues on account totaled $175,000, and cash collections on account totaled $128,000. During 2010, Gra

> After preparing Randell Corp.s bank reconciliation in Short Exercise 4-8, make the companys journal entries for transactions that arise from the bank reconciliation. Date each transaction October 31, and include an explanation with each entry

> Suppose Diamond, Inc., reported net receivables of $2,586 million and $2,268 million at January 31, 2011, and 2010, after subtracting allowances of $70 million and $64 million at these respective dates. Diamond earned total revenue of $53,333 million (al

> Newsome Corp. holds a portfolio of trading securities. Suppose that on November 1, Newsome paid $87,000 for an investment in Quark shares to add to its portfolio. At December 31, the market value of Quark shares is $98,000. For this situation, show every

> Refer to Amazon.com, Inc. s Consolidated Balance Sheets as well as Note 1 Description of Business and Accounting Policies, in Appendix A at the end of this book. 1. The fourth account listed on Amazon.coms Consolidated Balance Sheet is called accounts r

> Amazon.com, Inc. like all other businesses adjusts accounts prior to year end to get correct amounts for the financial statements. Examine Amazon.com, Inc.s Consolidated Balance Sheets in Appendix A, and pay particular attention to accrued expenses and o

> Foot Locker, Inc.s consolidated financial statements in Appendix B at the end of this book report a number of liabilities. Show amounts in thousands. 1. The current liability section of Foot Locker, Inc.s Consolidated Balance Sheet as of February 2, 200

> Refer to the Foot Locker, Inc., Consolidated Financial Statements in Appendix B at the end of this book. This case leads you through a comprehensive analysis of Foot Locker, Inc.s long-term assets. Its purpose is to show you how to account for plant asse

> Refer to the Foot Locker, Inc., consolidated financial statements in Appendix B at the end of this book. Show amounts in millions and round to the nearest $1 million. 1. Three important pieces of inventory information are (a) the cost of inventory on h

> Use the data for Kens in Exercise 6-16A to answer the following: Requirements 1. Compute cost of goods sold and ending inventory, using each of the following methods: a. Specific unit cost, with three $150 units and six $160 units still on hand at th

> Refer to Exercise 5-34B. From 34: On April 30, Hilltop Party Planners had a $33,000 balance in Accounts Receivable and a $4,000 credit balance in Allowance for Uncollectible Accounts. During May, the store made credit sales of $156,000. May collections

> On April 30, Hilltop Party Planners had a $33,000 balance in Accounts Receivable and a $4,000 credit balance in Allowance for Uncollectible Accounts. During May, the store made credit sales of $156,000. May collections on account were $132,000, and write

> At December 31, 2010, Whites Travel has an accounts receivable balance of $92,000. Allowance for Doubtful Accounts has a credit balance of $820 before the year-end adjustment. Service revenue for 2010 was $500,000. Whites Travel estimates that doubtful-a

> Eastern Corporation reports short-term investments on its balance sheet. Suppose a division of Eastern completed the following short-term investment transactions during 2010: Requirement 1. Prepare T-accounts for Cash, Short-Term Investment, Dividend R

> The net income of Solas Photography Company decreased sharply during 2010. Lisa Almond, owner of the company, anticipates the need for a bank loan in 2011. Late in 2010, Almond instructed Brad Lail, the accountant and a personal friend of yours, to recor

> Modern Co., Inc., the electronics and appliance chain, reported these figures in millions of dollars: Requirements 1. Compute Moderns average collection period during 2011. 2. Is Moderns collection period long or short? Viflex Networks takes 40 days

> Cherokee, Inc., reported the following items at December 31, 2010 and 2009: Requirement 1. Compute Cherokees (a) acid-test ratio and (b) days sales in average receivables for 2010. Evaluate each ratio value as strong or weak. Cherokee sells on terms

> Assume Tradesmen Credit Union completed these transactions: Show what the company would report for these transactions on its 2010 and 2011 balance sheets and income statements. 2010 Apr 1 Loaned $50,000 to Leanne Harold on a one-year, 7% note. Dec 3

> Record the following note receivable transactions in the journal of Celtic Realty. How much interest revenue did Celtic earn this year? Use a 365-day year for interest computations, and round interest amounts to the nearest dollar. Apr 1 Jun 6 Loaned

> Assume Kaledan paid $18 million to purchase Southwest.com. Assume further that Southwest had the following summarized data at the time of the Kaledan acquisition (amounts in millions): Southwests long-term assets had a current market value of only $17 m

> 1. Miracle Printers purchased for $700,000 a patent for a new laser printer. Although the patent gives legal protection for 20 years, it is expected to provide Miracle Printers with a competitive advantage for only eight years. Assuming the straight-line

> Mighty Mines paid $432,000 for the right to extract ore from a 425,000-ton mineral deposit. In addition to the purchase price, Mighty Mines also paid a $150 filing fee, a $2,700 license fee to the state of Colorado, and $92,150 for a geologic survey of t

> Trusty Truck Company is a large trucking company that operates throughout the United States. Trusty Truck Company uses the units-of-production (UOP) method to depreciate its trucks. Trusty Truck Company trades in trucks often to keep driver morale high a

> Assume that on January 2, 2010, McKnight of Wyoming purchased fixtures for $8,300 cash, expecting the fixtures to remain in service for five years. McKnight has depreciated the fixtures on a double-declining-balance basis, with $1,700 estimated residua

> Assume B 1 Accounting Consultants purchased a building for $435,000 and depreciated it on a straightline basis over 40 years. The estimated residual value was $73,000. After using the building for 20 years, B 1 realized that the building will remain usef

> For each of the following situations, answer the following questions: 1. What is the ethical issue in this situation? 2. What are the alternatives? 3. Who are the stakeholders? What are the possible consequences to each? Analyze from the following sta

> On June 30, 2010, Roy Corp. paid $200,000 for equipment that is expected to have an eight-year life. In this industry, the residual value is approximately 10% of the assets cost. Roys cash revenues for the year are $140,000 and cash expenses total $100

> Assume that in January 2010, an International Eatery restaurant purchased a building, paying $52,000 cash and signing a $106,000 note payable. The restaurant paid another $62,000 to remodel the building. Furniture and fixtures cost $57,000, and dishes an

> During 2010, Tao Book Store paid $488,000 for land and built a store in Detroit. Prior to construction, the city of Detroit charged Tao $1,800 for a building permit, which Tao paid. Tao also paid $15,800 for architect’s fees. The construction cost of $71

> Assume Delicious Desserts, Inc., purchased conveyor-belt machinery. Classify each of the following expenditures as a capital expenditure or an immediate expense related to machinery: a. Sales tax paid on the purchase price b. Transportation and insuranc

> Eastwood Manufacturing bought three used machines in a $216,000 lump-sum purchase. An independent appraiser valued the machines as shown in the table. What is each machines individual cost? Immediately after making this purchase, Eastwood sold machine 2

> Assume Haledan paid $16 million to purchase Northshore.com. Assume further that Northshore had the following summarized data at the time of the Haledan acquisition (amounts in millions): Northshores long-term assets had a current market value of only $1

> 1. Morris Printers purchased for $900,000 a patent for a new laser printer. Although the patent gives legal protection for 20 years, it is expected to provide Morris Printers with a competitive advantage for only 10 years. Assuming the straight-line meth

> Rocky Mines paid $426,000 for the right to extract ore from a 275,000-ton mineral deposit. In addition to the purchase price, Rocky Mines also paid a $120 filing fee, a $2,100 license fee to the state of Colorado, and $64,030 for a geologic survey of the

> Honest Truck Company is a large trucking company that operates throughout the United States. Honest Truck Company uses the units-of-production (UOP) method to depreciate its trucks. Honest Truck Company trades in trucks often to keep driver morale high a

> Assume that on January 2, 2010, Maxwell of Michigan purchased fixtures for $8,800 cash, expecting the fixtures to remain in service for five years. Maxwell has depreciated the fixtures on a double-declining-balance basis, with $1,300 estimated residual v

> United Jersey Bank of Princeton purchased land and a building for the lump sum of $6.0 million. To get the maximum tax deduction, the banks managers allocated 80% of the purchase price to the building and only 20% to the land. A more realistic allocation

> Assume G-1 Designing Consultants purchased a building for $400,000 and depreciated it on a straight-line basis over 40 years. The estimated residual value was $55,000. After using the building for 20 years, G-1 realized that the building will remain us

> On June 30, 2010, Rockwell Corp. paid $220,000 for equipment that is expected to have an eight-year life. In this industry, the residual value of equipment is approximately 10% of the assets cost. Rockwells cash revenues for the year are $115,000 and cas

> Assume that in January 2010, an Oatmeal House restaurant purchased a building, paying $56,000 cash and signing a $107,000 note payable. The restaurant paid another $61,000 to remodel the building. Furniture and fixtures cost $53,000, and dishes and suppl

> During 2010, Chun Book Store paid $487,000 for land and built a store in Akron. Prior to construction, the city of Akron charged Chun $1,400 for a building permit, which Chun paid. Chun also paid $15,320 for architect’s fees. The construction cost of $69

> Deadwood Manufacturing bought three used machines in a $167,000 lump-sum purchase. An independent appraiser valued the machines as shown in the table. What is each machines individual cost? Immediately after making this purchase, Deadwood sold machine 2

> Harbour Master Marine Supply reported the following comparative income statement for the years ended September 30, 2010, and 2009: Harbour Masters president and shareholders are thrilled by the company’s boost in sales and net income