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TRUE/FALSE 1.The selling price of products is determined by market forces but can also be dependent on the cost of the product, particularly where there is little or no competition. 2.The basic difference between management and financial accounting is that the financial accounting system relies on accounting information whereas management accounting does.
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MULTIPLE CHOICE 1.Knowledge of unit costs is necessary to companies for many reasons. Which of the following are uses of unit cost information? I.Valuation of inventories II.Controlling costs III.Setting selling prices A. I only B. I and II only C. I and III only D. I, II, and III 2.Management requires information about the cost of products for all of the following reasons.
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11.Planning and control decisions are similar in that both: A. tend to have a short-run focus. B. focus on achieving the organisation’s goals. C. increase the risk to owners and creditors. D. involve the setting of goals. 12.Decisions that require managers to evaluate the accomplishments of their organisation, and to make changes if the organisation is not meeting its.
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MULTIPLE CHOICE 1.Which of the following is an example of a performance measure that is appropriate for an investment centre but not a profit centre or cost centre? A. Quality of service B. Income from operations C. Rate of return on investment D. Gross profit margin 2.In assessing the performance of a manager of a profit centre, which of the.
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PROBLEM 1.The following transactions relate to Murali Traders for the year ended 30 June – the first year of operation. a. The owner invested $10 000 into a business bank account. b. Purchased equipment for $6000 cash. d. Purchased inventory for $45 000 on credit, of which $39 000 had been paid for at year end. d. Sold goods.
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3.Manufacturing costs flow through an accounting system as products physically move through a factory. (a) Describe the movement of costs from raw materials to costs of goods sold in relation to the physical movement through the factors. (b) Explain how manufacturing costs can sometimes be classified as assets rather than expenses. 4.Your friend, Bumble Beasley,.
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CASE 1.Ordinary Office Products, Inc., a retail office supply company, has a single outlet in a large metropolitan area. The company has a policy of delivering any size order, even a bottle of Liquid Paper, to any customer, regardless of the distance. Management believes that without this delivery policy the company.
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2.Prepare general journal entries for the following independent events. (i) Issued 50 000 ordinary shares at a $1.20 issue price in exchange for land whose fair value was equal to value of the shares. (ii) Issued $10 000 000 5% debentures at par and for cash. (iii) Paid a $120 000 cash dividend on ordinary shares. (iv) Sold.
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2.Hardware Products manufactures a wide variety of products in its plant located in Boston, Massachusetts. Listed below are some of the manufacturing and administrative activities identified by management. 1. Employees who will be working on a particular product line go through a week-long training program either when they are first hired or.
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TRUE/FALSE 1.An increase in assets and an increase in liabilities is the same as saying assets have been debited and liabilities have been credited. 2.The worksheet approach and the T account approach to recording transactions are not really comparable, as the worksheet approach uses increases and decreases whereas the T account approach.
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21.The overhead absorption rate is determined by using: A. estimated costs. B. marginal costs. C. average costs. D. historical costs. 22.The application of overhead costs to products involves the use of: A. exact figures. B. fixed costs only. C. variable costs only. D. estimates. 23.If the allocated overhead using a predetermined overhead rate is less than the actual overhead costs, the difference is: A. expensed to the statement of comprehensive.
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PROBLEM 1.For each responsibility centre described below, indicate the type of responsibility level that is the most appropriate. Select one (or more) of the following levels. If you select more than one level, explain your reasoning. Responsibility levels are: CC = Cost centrePC = Profit centreIC = Investment centre 1. A manufacturing plant that.
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TRUE/FALSE 1.A manager is responsible for all costs of producing product X but does not set the selling price. This means the manager is responsible for a cost centre. 2.Agricola Ltd is a diversified entity that has several central departments to service its various operating divisions. These include payroll, accounting and finance,.
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MULTIPLE CHOICE 1.Which of the following statements about double-entry bookkeeping is true? A. The double-entry principle is referred to as accrual accounting. B. For each transaction or economic event the total amount debited must equal the total amount credited. C. If one account is increased, then another account must be decreased. D. The total number of accounts debited must.
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ESSAY 1.People constantly use information to evaluate their environment and help them make important decisions. One such evaluation method used by corporations is called the ‘Balanced Scorecard’. (a) Explain the philosophy behind the ‘Balanced Scorecard’ approach to a firm’s evaluation of its corporate strategy. (b) Name each of the four performance categories of key performance.
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SHORT ANSWER 1.Why do entities budget? 2.What are the typical types of budgets of a manufacturing company? 3.What is a sales budget, and how is it generated? 4.What is the manufacturing company’s production budget, and how is it generated? 5.What is ‘responsibility accounting’ and how does it contribute to positive budgeting culture? .
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2.Southern Mills is a textile manufacturing company in eastern Tennessee. Every year the company prepares a complete set of budgets. The budgeting process begins with information supplied by the Sales and Marketing department. The balance in inventory at the beginning of the year was 500 000 square yards of fabric. The company.
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11.Which of the following people are not involved in preparing a budget? A.The board of directors B.Shareholders C.Sales directors D.Production managers 12.Responsibility accounting reports are used: A.to determine which manager should be blamed if actual results do not comply with budgeted expectations. B.to evaluate a department manager’s effectiveness in generating revenues or controlling expenses. C.to determine if the.
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TRUE/FALSE 1.A major requirement of managers is to have detailed and timely information that enables them to monitor results and compare with plans and budgets, in order to take appropriate action for the future direction of the company. 2.A company’s results are judged against some expectations, which may be rough plans or.
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PROBLEM 1.The following financial data relate to Bandara Pty Ltd for the years ended 30 June Year 3 and 30 June Year 2. Financial item 30 June Year 3 Year 2 Net credit sales Cost of goods sold Cash Accounts receivable Inventory Current liabilities $630 000 290 000 18 000 70 000 130 000 105 000 $490 000 250 000 12 000 60 000 150 000 81 000 Additional information The debtors.
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21.Strategic planning differs from operational planning in that strategic planning: A. involves day-to-day activities. B. is done by middle management. C. often involves large investments. D. would be involved in determining production levels for the next week. 22.Operating decisions are undertaken to: A. optimise the use of resources available to the firm in the long term. B. compare actual versus predetermined performance. C. result in.
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11.A desired outcome of setting objectives in the planning process is to create criteria for assessing alternative business options. 12.A major difference between strategic and operating decisions is that the former focus on the long-term policies of the firm, whereas operating decisions focus on the short-term use of resources. 13.Strategic decisions are.
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SHORT ANSWER 1.For what purpose is horizontal analysis used by management? Is this information provided to shareholders? If so, in what form? If not, why? ANS: Horizontal analysis is used to track the relative behaviour in changes of percentages of financial statement items from one period to the next. It can flag increases.
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21.All credit customers paid the amounts owing by the due date. How much credit sales did RTU Ltd have for July? A.$2050 B.$5000 C.$2950 D.$6540 22.How much total cash did RTU receive in August? A.$5450 B.$2600 C.$2050 D.$5290 23.All customers took the maximum allowed time to pay. All credit customers paid the amounts owing by the due date. How much.
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PROBLEM 1.Southern Mills is a textile manufacturing company in eastern Tennessee. Every year the company prepares a complete set of budgets. The budgeting process begins with information supplied by the Sales and Marketing department. The balance in Accounts Receivable at the beginning of the year was $900 000. The marketing department has predicted.
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SHORT ANSWER 1.In a manufacturing operation, costs can be divided into product costs and period expenses. (a) Explain the difference between product costs and period expenses. (b) Give two examples of costs classified as product costs. (c) Give two examples of costs classified as period expenses. 2.How is the variable cost approach used in managerial.
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11.The use of debt to increase a company’s return on equity is: A. financial leverage. B. financial lift. C. measured by the debt to equity ratio. D. liquidity. 12.As the proportion of debt increases in a firm’s capital structure, what can we say with certainty about the firm’s risk and financial leverage? A. Both remain the same B. Both decrease C. Both increase D. Leverage increases and.
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              CASE 1.In the US in the 1970s Lockheed Aircraft Corporation paid USD $12.5 million in ‘fees’ to All Nippon Airways (ANA) to secure the sale of 21 Tristar aircraft. Carl Kochian, the president of Lockheed at that time, defended his actions with reference to the following: ? That the figure involved was.
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41.Return on equity for Delta company is 7%. This means that: A. Delta will pay a dividend of $0.07 on each ordinary share. B. The market value of Delta’s ordinary shares will increase. C. Delta earned $0.07 for each dollar of equity. D. The book value of Delta’s ordinary shares will increase by 7%. 42.The conclusion that a company.
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11.Period costs are: A. costs that are unlikely to represent future benefits. B. costs that are recognised in the accounting period in which they are incurred. C. costs for which the future benefits cannot be reliably measured. D. all of the above are period costs. 12.Which of the following are not production costs? A. Direct materials B. Indirect labour C. Selling expenses D. Indirect materials 13.Costs directly associated.
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21.The finance director of AKP Ltd has observed that outstanding debtors have significantly increased in the past two months. An examination of possible causes has determined that part of the problem may be the new computerised invoicing system, which, due to input errors, has sent a number of accounts to.
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11.In asking the question ‘What do we need to do within the core processes of our business in order to develop our employees?’ an entity is looking at which main perspective of a balanced scorecard system? A. Learning and growth perspective B. Internal business process perspective C. Customer perspective D. Financial perspective 12.The Friendly Bank has been offering online.
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21.The conclusion that a company was able to generate 79.5c of net profit for every dollar of sales reflects which of the following? A. Operating leverage B. Return on assets C. Net profit margin D. Asset turnover 22.The ratio of cost of goods sold to inventory is known as: A. inventory turnover. B. asset turnover. C. accounts receivable turnover. D. return on sales. 23.Given a high value, which.
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TRUE/FALSE 1.‘Budgetary slack’ can be referred to as dysfunctional behaviour where managers deliberately understate or overstate elements of a budget such as sales or costs in order to achieve budget. 2.Formulating guidelines for overall activity levels and policies on performance criteria, and communicating this information to the preparers of budgets, are all.
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31.Return on equity is a measure of: A. financial leverage. B. firm value. C. company performance. D. liquidity. 32.If an investor (shareholder) discovers by analysing financial statements that she ‘lost 5 cents for each dollar invested in the company’, which ratio did she examine? A. Debt to equity B. Debt to assets C. Return on equity D. Financial leverage 33.A company has the following accounts: IPaid up capital IIReserves IIIRetained profits IVDividends.
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SHORT ANSWER 1.Levels within an organisation are often categorised according to the types of responsibilities placed on managers. When a responsibility centre is considered a cost centre, (a) over which aspects of the statement of comprehensive income does the manager have control? (b) over which aspects of the statement of comprehensive income does the manager.
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11.An internal business process perspective of a balanced scorecard system addresses the question ‘What do we need to do to develop our employees?’ 12.The economic value added (EVA) is a method of measuring how effectively a company achieves the objective of creating shareholder value. 13.Non-financial measures of performance assess items such as.
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3.Name three ways that accounting information can assist managers who make marketing decisions. 4.Name three ways that accounting information can assist managers who make production decisions. 5.Describe the four major stages involved in planning and controlling an organisation. 6.What is meant by responsibility accounting? .
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SHORT ANSWER 1.Distinguish managerial accounting from financial accounting. Your answer should include a brief discussion of differences in the types of information provided to users as well as differences in the identity of users of financial and managerial accounting information. 2.One important use of managerial accounting information is performance evaluation. List and.
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31.Hamilton has budgeted total manufacturing overhead costs for the year as $125 000, based on 20 000 direct labour hours. The ratio of variable manufacturing overhead costs to fixed manufacturing overhead costs is 2:1. In a given month, 2000 direct labour hours are budgeted for production. How much overhead is.
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3.Kaplan and Norton’s Balanced Scorecard has principally been applied to for-profit organisations. In such applications, the scorecard’s four perspectives (financial, customer, learning and growth, and internal business) are highly appropriate. However, Kaplan and Norton also acknowledge the applicability of the Balanced Scorecard to not-for-profit organisations; they state, though, that the.
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MULTIPLE CHOICE 1.Which of the following is not an external user of financial information? A. Shareholders B. Management C. Suppliers of goods and services D. Government 2.The purpose of financial accounting is to provide information for decision making. What is the primary purpose of management accounting? A. To enable managers to ask for higher salaries B. To maximise a company’s profits C. To provide information for.
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MULTIPLE CHOICE 1.Which of the following is not a reason for implementing a budget? A.For planning purposes B.As a form of communication C.To assist in preparing a balance sheet D.For coordinating functions 2.A detailed plan that describes the use of financial and operating resources over a specific period of time in the future is a(n): A.business plan. B.budget. C.statement.
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11.Product costs are held as assets until sold, whereas period costs are expensed in the period in which they are incurred. 12.Absorption costing is a method of allocating direct and indirect costs of production to a cost object. 13.The overhead costs for product Y are estimated to be $160 000 and the.
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31.Which of the following statements is not true of absorption costing? A. When sales equal production, absorption costing yields the same profit as variable costing. B. When production exceeds sales, absorption costing shows a lower profit than variable costing does. C. When sales exceed production, absorption costing shows a lower profit than variable costing does. D. Absorption costing.
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