1) Indicate how the event affects the elements of the financial statements. Use the
following letters to record your answer in the box shown below each element:
You do not need to enter amounts.
Wade Corporation paid its monthly utility bill of $850.
2) Indicate how each event affects the elements of financial statements. Use the
following letters to record your answer in the box shown below each element. You do
not need to enter amounts.
Quimby Co. sells goods to customers with a three-year warranty. During 2012, Quimby
sold $600,000 of goods. On December 31, 2012, Quimby made the appropriate
year-end adjustment to record the warranty expense related to the goods sold during the
year. Show the effects of the December 31, 2012 adjustment.
3) What characteristics should managerial accounting information have?
4) Longoria Company’s sales budget shows the following expected total sales:
The company expects 80% of its sales to be on account (credit sales). Credit sales are
collected as follows: 30% in the month of sale, 68% in the month following the sale
with the remainder being uncollectible and written off in the month following the sale.
Required:
1) Calculate budgeted accounts receivable at the end of each month from February
through April.
2) Calculate budgeted cash inflows from collection of receivables for each month from
February through April.
5) Give an example of a decision in which unit-level costs are relevant.
6) Assume that you are doing trend (horizontal) analysis using information from a
company’s income statements. You have income statement information for three years
(sales, gross margin, etc.) What basic approaches could you use in doing the analysis?
7) For a product made by Parker Company, last year’s standards for labor were 2 hours
at $12 per hour. What should Parker take into account in setting the standards for this
year?
8) What is the matching concept, and how does it affect a business’s financial
statements?
9) Indicate whether each of the following statements is true or false.
1>When unequal cash inflows are expected from a capital investment, the payback
period can be calculated by accumulating incremental cash inflows or by using average
annual cash inflows
2>The unadjusted rate of return does not take the time value of money into account
3>The unadjusted rate of return often is calculated using the average invested capital,
rather than the initial cost of the investment
4>The unadjusted rate of return can be calculated as the average increase in cash
inflows divided by net cost of the original investment
5>The unadjusted rate of return is also called the simple rate of return
10) Indicate whether each of the following statements about sales tax is true or false:
1>Remitting to the state the amount of sales tax collected on sales is a claims exchange
transaction
2>Collecting sales tax from a customer is an asset source transaction
3>If a company records a $100 sale that is subject to a sale tax rate of 6%, it should
record Sales Revenue in the amount of $94
4>The amount a company owes to the state for sales tax it has collected is a current
liability
5>When a company records sales tax it has collected from a customer, it records Sales
Tax Expense and Sales Tax Payable