1) The Ainlay Corporation accepted a credit card for a sale of $2,000 on December 16,
2012 . The credit card company charges a fee of 4%. On January 5, 2013, Ainlay
received payment from the credit card company. Indicate whether each of the following
statements is true or false.
1>Ainlay should record the $2,000 revenue in 2013 when the cash is received
2>The entry on December 16, 2012 increases total expenses on the 2012 income
statement
3>The collection of cash in 2013 has no effect on 2013 net income
4>Ainlay should record an account receivable of $2,000 on December 16, 2012
5>The collection of cash does not affect total assets in 2013
2) Indicate whether each of the following statements is true or false.
1>Managers who want to know the rate of return to expect from a capital investment
project should calculate the internal rate of return
2>For a capital investment project to be acceptable, the internal rate of return should be
lower than the hurdle rate
3>The internal rate of return for a capital investment is the rate that would produce a
net present value of zero
4>A capital investment project that has a positive net present value has an internal rate
of return that is lower than the hurdle or required rate of return
5>The net present value method provides a direct measure of the rate of return to be
expected from a capital investment project
3) What are indirect costs, and how are the indirect costs incurred to make products
accounted for?
4) On April 16, 2012, Tuxedo Company purchased $75,000 of merchandise inventory.
Terms of the purchase included a discount of 3/10, n/30 . Also, the freight terms were
FOB destination. Freight costs amounted to $2,300. Tuxedo Company paid the account
payable on April 24 . Tuxedo Company sold all inventory for $93,750.
Required:
Determine the amount of gross margin Tuxedo Company would report on the income
statement.
5) Indicate whether each of the following statements is true or false.
1>Personnel administration and insurance are examples of product-level costs
2>Product-level costs are incurred to support specific products or services
3>Some inventory management costs and engineering design costs are product-level
costs
4>Increasing the number of units in a batch increases unit-level costs but not
batch-level costs
5>Eliminating a batch of work eliminates both batch-level and product-level costs
6) Describe the process that may be used to allocate indirect costs to cost objects.