1) If the liabilities of a company increased $92,000 during a period of time and equity
in the business decreased $30,000 during the same period, did the assets of the
company increase or decrease? By what amount?
2) Keegan Co. has four departments: purchasing, human resources, manufacturing, and
assembly. In a recent month the four departments incurred two shared indirect expenses.
The amounts of the indirect expenses and the bases used to allocate them follow. (1)
Use this information to allocate each of the two indirect across the four departments
using the tables provided below.
Departmental data for the company’s recent reporting period follow.
3) For each of the following (1) identify the type of account as an asset, liability, equity,
revenue, or expense, and (2) identify the normal balance of the account.
4) Explain how investors report investments in equity securities when the investor has a
controlling influence over an investee.
5) A _____________________ income statement format shows detailed computations
of net sales and other costs and expenses, and reports subtotals for various classes of
items.
6) In using the internal rate of return method, management must consider a hurdle rate
in making its decisions. What is a hurdle rate? What factors does management have to
consider in selecting a hurdle rate?
7) If the _______________ is responsible for paying the freight, ownership of
merchandise inventory passes when the goods arrive at their destination.
8) In the two-stage cost allocation, ______________________ costs are allocated to
operating departments, and the operating department costs are allocated to
______________.