What are semivariable costs?
> Why is the modern system of accounting usually called the double-entry system?
> What are accounts?
> What are expenses?
> What is revenue?
> Why does the third line of the headings differ on the balance sheet and the income statement?
> What information is shown in the heading of a financial statement?
> What information does the statement of owner’s equity contain?
> What information does the income statement contain?
> Certain information about the statement of cost of goods manufactured and the income statement for the year ended December 31, 20X1, for Paul’s Production, Inc., is given below: Beginning inventory of finished goods, 105 percent of ending inventory Work
> 1. A building owned by Hopewell Company was recently valued at $850,000 by a real estate expert. The president of the company is questioning the accuracy of the firm’s latest balance sheet because it shows a book value of $550,000 for the building. How w
> What information does the balance sheet contain?
> What are assets, liabilities, and owner’s equity?
> Describe the effects of each of the following business transactions on assets, liabilities, and owner’s equity. a. Bought equipment on credit. b. Paid salaries to employees. c. Sold services for cash. d. Paid cash to a creditor. e. Bought furniture for c
> How does net income affect owner’s equity?
> How is net income or net loss determined?
> What is the fundamental accounting equation?
> Employees sometimes make mistakes and errors in recording accounting transactions. Is this considered fraud?
> Name two common internal control and fraud prevention procedures. Answer: Two common internal control and fraud prevention procedures are policies and procedures that require written proof that transactions and payments are authorized and separating du
> What is the goal of internal control?
> Define fraud.
> In January 20X1, Kate Kasal started Warmers, a business manufacturing ladies’ scarves. Kasal was so busy with the manufacturing side of the business that she did not take time to set up detailed accounting records; the business checkbook was her only rec
> Define internal control.
> What is a limited liability company (LLC)?
> How does one become a Certified Bookkeeper (CB)?
> What does the Certified Bookkeeper (CB) designation imply?
> What is the purpose of the Public Company Accounting Oversight Board?
> Explain opportunity costs.
> What is a differential cost?
> What are sunk costs?
> Explain the meaning of marginal income on sales.
> What is the manufacturing margin?
> At the last staff meeting of the Beach Shop, the question of how expenses are allocated to each department was raised. Because year-end bonuses are awarded to the managers on the basis of departmental net income from operations, the discussion was lively
> Is absorption costing or direct costing more useful in making decisions? Why?
> What is the fundamental difference between direct costing and absorption costing?
> Briefly describe absorption costing.
> Why do the analyses presented in this chapter focus on future costs rather than on past costs? Explain.
> Why might employee morale be a factor in deciding whether to replace existing equipment with new equipment?
> Why might management be reluctant to accept a special order for its products at less than the normal price even though such an order would be legal and profitable?
> Suppose that a company is considering the purchase of new equipment. The old equipment will be sold when the new equipment is acquired. How should the proceeds from the sale of the old equipment be considered in the analysis of the effects of the purchas
> Suggest some non-measurable data that might be considered in deciding to replace existing equipment with new equipment.
> Which of the following items are subtracted from net sales to arrive at contribution margin? a. fixed administrative expenses b. variable administrative expenses c. fixed manufacturing costs d. variable cost of goods sold e. fixed selling expenses f. var
> What is the advantage of using a flexible budget?
> Home Gifts has three sales departments: dishes, clothing, and paper products. The store’s condensed income statement for the year ended December 31, 20X1, is shown below: The proprietor asked the auditor if the Clothing and/or Paper Products departments
> What is a flexible budget?
> What is included in a budget performance report?
> What is a budget?
> What is the relevant range of activity as used in budgeting?
> Briefly explain the high-low point method for analyzing semivariable costs.
> Explain how variable costs per unit change as the level of activity changes.
> What are the possible causes of overhead variances?
> What are the possible causes of labor variances?
> What two variances make up the total labor variance?
> Knotting Company was formed and began business on January 1, 2022, when J. T. Wood transferred merchandise inventory with a value of $60,000, cash of $55,000, accounts receivable of $60,000, and accounts payable of $35,000. Common stock with a par value
> Who provides information about wage rates in setting labor standards?
> What are the possible causes of unfavorable materials variances?
> Which manager would more likely be responsible for materials quantity variances?
> What does the price variance for materials show?
> Explain how to compute the quantity variance for materials.
> How are standards set for materials?
> What are standard costs?
> Define the term “fixed cost.”
> How does accounting for the raw materials inventory and the finished goods inventory differ under the process cost accounting system and the job order cost accounting system?
> Why might the process cost accounting system be unsatisfactory when several different products are being manufactured in the same department?
> Charles Alan, the bookkeeper for Roswell Company, asks for your help in identifying whether the following transactions should be reported on the corporation’s statement of cash flows. Prepare a list for Alan indicating whether or not each transaction sho
> Why is it not necessary to use an overhead application rate when the process cost accounting system is employed?
> Will the amount shown as a department’s ending inventory of work in process on the cost of production report agree with the work in process for the department in the general ledger after adjusting and closing entries have been posted? Explain.
> Will the same equivalent units always be used for materials, labor, and overhead? Explain.
> How is the ending work in process inventory computed in a process cost accounting system?
> In a cost of production report, what items are found in the Costs to Be Accounted For section?
> What are equivalent units of production?
> Explain how to compute the equivalent production for labor when there is a beginning work in process inventory for the period, assuming that the average cost method is used.
> Explain what is meant by “the average method” of accounting for beginning work in process inventories in a process cost system.
> Why are job order cost sheets not used in the process cost accounting system?
> What account is debited and what account is credited when manufacturing overhead is applied?
> Charles Allen, the accountant for Sue Bee Inc., was asked to make a presentation to the board of directors concerning the corporation’s year-end financial position. While flying to the meeting on Saturday morning, Allen checked the papers in his briefcas
> Name the sources of postings to the job order cost sheet.
> What is idle time? How is the cost of idle time usually accounted for?
> What entry is made for indirect materials issued from the storeroom?
> What does the Raw Materials Inventory account show?
> What is a materials requisition?
> When direct materials are issued from the storeroom, what entries are made in the subsidiary records?
> What information does a job order cost sheet contain?
> Describe a just-in-time inventory system, including its advantages and disadvantages, if any.
> Discuss how costs flow through the Raw Materials Inventory, Work in Process Inventory, and Finished Goods Inventory accounts to cost of goods sold.
> Name three types of businesses that would use a job order cost accounting system.
> Doors, Inc.’s condensed income statement and balance sheet for the years 2022 and 2021 follow. INSTRUCTIONS Using the following additional information, fill in the missing values: 1. Accounts Receivable increased 50 percent from 2021 to
> What is a time ticket? What is its relationship to an order cost sheet?
> What account is debited and what account is credited when completed goods are transferred from the factory floor to the finished goods storeroom?
> Why is an overhead application rate used?
> Name five common manufacturing overhead costs.
> What is a perpetual inventory?
> Why does the figure for total manufacturing cost not equal the cost of goods manufactured?
> What is manufacturing overhead?
> How would the wages of the employee who issues materials from the factory storeroom be classified?
> It is possible that one company might consider an item, such as glue, as one of its direct materials, while another company with identical manufacturing processes might classify the item as one of its indirect materials. Why?
> What is indirect labor?
> On December 31, 2022, Express, Inc., has $1,000,000 of 6 percent, 10-year bonds outstanding. These bonds were issued on January 1, 2016, at par value. Interest rates have dropped to 5 percent, and the president of the company is considering buying back t
> What procedure is used on the statement of cost of goods manufactured to arrive at the cost of raw materials used?
> What is the relationship between the cost of goods manufactured and the income statement?
> Name the three inventory accounts found in the chart of accounts of a manufacturing business and explain each one.
