15) Strykerz Corp expects to spend $800,000 in 2015 in appraisal costs if it does not change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $60,000 in fixed appraisal costs and variable costs of $0.50 per unit of finished product. The new method involves $140,000 in training costs and an additional $150,000 in annual equipment […]
151. Use the following information for questions 64-70.The following information pertains to Carlton Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.Assets Cash and short-term investments $ 40,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets $295,000 Liabilities […]
51.All of the following are examples of current liabilities except: A.Accounts payable. B.Pledged assets. C.Unearned revenue. D.Income taxes payable. 52.The two basic characteristics of estimated liabilities are: A.Probable and reasonably estimated. B.Known to exist and amount unable to be determined until a later date. C.Probable and non-interest bearing. D.Known to exist and interest […]
Essay Questions 98. Accounting terminology Listed below are seven technical accounting terms introduced or emphasized in this chapter: Each of the following statements may (or may not) describe one of these technical terms. In the space provided beside each statement, indicate the accounting term described, or answer “None” if the statement does not correctly describe any of the terms. ______ (a) A materials […]
81.Gainsharing plans differ from profit-sharing plans in that: A.gainsharing plans use organization-wide performance parameters. B.gainsharing plans distribute payouts more frequently. C.gainsharing plans make lump sum payments. D.gainsharing plans can be attached to all types of jobs in the organization. E.gainsharing plans discourage pursuit of broader goals of the group. 82.The Scanlon plan is an example of a(n) […]
7) In markets that are not perfectly competitive, ________. A) the selling division will not have any unused capacity B) companies can increase their capacity utilization only by decreasing their prices C) minimum transfer price will equal the incremental cost per unit incurred up to the point of transfer D) the opportunity cost will equal the minimum contribution margin 8) In analyzing transfer prices, […]
85.A large stock dividend and a stock split are similar in that they both cause a: A. Reduction in total stockholders’ equity. B. Reduction in retained earnings. C. Reduction in the par value per share. D. Reduction in the market price per share. 86.Supervox Corporation declared a 3-for-2 common stock split, but this transaction was erroneously recorded as a 50% […]
5) Traditional cost systems distort product costs because: A) they do not know how to identify the appropriate units B) competitive pricing is ignored C) they emphasize financial accounting requirements D) they apply average support costs to each unit of product 6) Which of the following statements about activity-based costing is NOT true? A) Activity-based costing is useful for allocating marketing and distribution […]
90.Giorgio had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals: A.0.21. B.4.51. C.4.79. D.76.1 days. E.80.9 days. Inventory Turnover = Cost of Goods Sold/Average InventoryInventory Turnover = $9,421/$1,965 = 4.79 times 91.Perfection Company had cost of goods sold of $853,000, ending […]
141. The Buy-It-For-Yourself Company had the following assets and liabilities as of December 31, 2006: ASSETS Cash$25,000 Accounts receivable15,000 Inventory30,000 Equipment50,000 LIABILITIES Current portion of long-term debt10,000 Accounts payable2,000 Long-term debt25,000 Determine the quick ration for the end of the year (rounded to one decimal point). A. 5.8 B. 3.2 C. 3.3 D. 2.4 142. Elgor Company sells merchandise with a one year warranty. In 2007, sales consisted of […]
141. The Buy-It-For-Yourself Company had the following assets and liabilities as of December 31, 2006:
ASSETS
Cash$25,000
Accounts receivable15,000
Inventory30,000
Equipment50,000
LIABILITIES
Current portion of long-term debt10,000
Accounts payable2,000
Long-term debt25,000
Determine the quick ration for the end of the year (rounded to one decimal point).
A. 5.8
B. 3.2
C. 3.3
D. 2.4
142. Elgor Company sells merchandise with a one year warranty. In 2007, sales consisted of 2,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2007 and 70% in 2008. In the 2007 income statement, Elgor should show warranty expense of
A. $7,500
B. $17,500
C. $25,000
D. $0
143. Elgor Company sells merchandise with a one year warranty. In 2007, sales consisted of 2,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2007 and 70% in 2008. In the 2008 income statement, Elgor should show warranty expense of
A. $7,500
B. $17,500
C. $25,000
D. $0
144. The cost of a product warranty should be included as an expense in the
A. period the cash is collected for a product sold on account
B. future period when the cost of repairing the product is paid
C. period of the sale of the product
D. future period when the product is repaired or replaced
145. Pilgrim Company sells merchandise with a one year warranty. In 2007, sales consisted of 1,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2007 and 70% in 2008. In the 2007 income statement, Pilgrim should show warranty expense of
A. $4,500
B. $10,500
C. $15,000
D. $0
146. During May, CircuitSound sold 500 portable CD players for $50 each. Each CD player cost CircuitSound $25 to purchase and carried a one-year warranty. If 10 percent typically need to be replaced over the warranty period, what amount should CircuitSound debit Product Warranty Expense for in June?
A. $2,500
B. $1,250
C. $250
D. $1,000
147. During June, CircuitSound sold 800 portable CD players for $50 each. Each CD player cost CircuitSound $25 to purchase and carried a one-year warranty. If 10 percent typically need to be replaced over the warranty period, what amount should CircuitSound debit Product Warranty Expense for in June?
A. $4,000
B. $400
C. $2,000
D. $1,000
148. Estimating and recording product warranty expense in the period of the sale best follows which of the following accounting concepts?
A. Cost concept
B. Business entity concept
C. Matching Concept
D. Materiality concept
149. The Buy-It-For-Yourself Company had the following assets and liabilities as of December 31, 2007:
ASSETS
Cash$28,000
Accounts receivable15,000
Inventory20,000
Equipment50,000
LIABILITIES
Current portion of long-term debt10,000
Accounts payable2,000
Long-term debt25,000
Determine the quick ration for the end of the year (rounded to one decimal point).
A. 5.3
B. 3.6
C. 3.3
D. 2.3
150. The journal entry a company uses to record the estimated accrued product warranty liability is
A. debit Product Warranty Expense; credit Product Warranty Payable
B. debit Product Warranty Payable; credit Cash
C. debit Product Warranty Expense; credit Cash
D. debit Product Warranty Payable; credit Product Warranty Expense
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