1) The ledger accounts given below, with an identification number for each, are used by
Sun Cleaning.
Instructions: Prepare appropriate adjusting entries for the year ended December 31,
2014, by replacing the appropriate identification number(s) in the debit and credit
columns provided and the dollar amount in the adjoining column. Item 0 is given as an
example.
2) Haley Company uses flexible budgets to control its selling expenses. Monthly sales
are expected to be from $400,000 to $480,000. Variable costs and their percentage
relationships to sales are:
Sales commissions6%
Advertising4%
Traveling5%
Delivery2%
Fixed selling expenses consist of sales salaries $80,000 and depreciation on delivery
equipment $20,000.
Instructions
Prepare a flexible budget for increments of $40,000 of sales within the relevant range.
3) The balance of a control account in the general ledger
must equal the composite balance of individual accounts in a related subsidiary ledger
must always be zero
c.must equal the amount of total assets
d.is always greater than the composite balance of individual accounts in a related
subsidiary ledger
4) At the beginning of 2014, Hold Steady Company had total assets of $520,000 and
total liabilities of $250,000. Answer each of the following questions.
1>If total assets increased $60,000 and owner’s equity decreased $90,000 during the
year, determine the amount of total liabilities at the end of the year.
2>During the year, total liabilities decreased $75,000 and owner’s equity increased
$50,000. Compute the amount of total assets at the end of the year.
3>If total assets decreased $100,000 and total liabilities increased $55,000 during the
year, determine the amount of owner’s equity at the end of the year.
5) A large stock dividend and stock split can frequently have the same effect on the
market price of a corporation’s stock. Explain how stock dividends and stock splits
affect the market price of a corporation’s stock.
6) A debit memorandum issued by the bank ______________ the cash balance in the
depositor’s account.
7) Instructions
State the missing items identified by ?.
1>Gross profit Operating expenses = ?
2>Cost of goods sold + Gross profit on sales = ?
3>Sales Revenue (? + ?) = Net sales
4>Income from operations + ? ? = Net income
5>Net sales Cost of goods sold = ?
8) Great Sound3, a producer of audio equipment for large computer systems, is
reviewing its policies as part of a biannual self-examination of the company. As part of
this process, all managers have been asked to carefully examine costs and determine as
closely as possible which costs are direct and which are indirect.
Betty Lynde and Hark Stanton, managers of different manufacturing departments in the
same building, have been working together. They found the following four costs that
could be economically traced to the products, but have historically been a part of
overhead:
Cost of setting up the machinery for a different production run.
Cost of minor assembly components such as knobs and switches.
Cost of packaging, which is quite different for each model.
Cost of inspecting and testing each model.
None of the costs is significant by itself, but together these four costs make up between
10 and 15% of the total cost of the product. Betty favors “leaving well enough alone,”
as she puts it, and leaving these costs in overhead. She is afraid that her volunteering to
trace these costs will result in her having to trace many more costs in the future. Hark,
on the other hand, prefers to have the product cost as accurate as possible. He points out
that these costs are already known, and the process would require little extra work.
Required:
You have been called on in your function as accounting manager to resolve the dispute.
Write a memo to Betty and Hark, supporting one or the other position. Be sure to
adequately defend your position, but be brief.