1) 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.
On January 1, 2012, Pedroia Co. issued $100,000 of bonds. Interest is paid in cash on
December 31 of each year. Indicate the effects of payment of interest on December 31,
2012 .
2) The Furniture Division of Waverly Company reports the following results for 2012:
Waverly Company has set a target return on investment (ROI) of 12% for the Furniture
Division.
Assume that 60% of the Furniture Division’s operating expenses are variable. To what
level would revenues have to increase to achieve the desired 12% ROI? Assume that the
amount of operating assets will continue to be $500,000.
3) When are revenues and expenses recognized under accrual accounting?
4) Discuss the major differences between a perpetual inventory system and a periodic
inventory system.
5) What is the purpose of the statement of cash flows?
6) 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.
The bank statement of Stein Company included an NSF check that had been given to
the company by a customer in payment of its account with Stein.
7) Indicate whether each of the following statements is true or false.
1>Cost accumulation is not useful or necessary in a service-type business
2>Cost accumulation refers to identifying whether a particular cost is fixed or variable
3>Cost objects may be departments, sales territories, or individual products
4>A cost driver has a cause-and-effect relationship with a cost object
5>Accuracy of managerial accounting information is more important than its timeliness
8) Describe what is meant by the time value of money.
9) Najimi Enterprises recently began selling on the internet. Internet sales for the fourth
quarter of 2012 totaled $300,000. The company’s internet sales are expected to grow at
a rate of 20% per quarter. All sales are made on account. The company’s collection
experience is that 70% of accounts receivable will be collected in the quarter of sale and
25% in the next quarter. Five percent of receivables will prove uncollectible. The
balance in accounts receivable at the end of December 2012 was $90,000.
Required:
1) Prepare a sales budget for internet sales for the four quarters of 2013; include a total
column that shows total budgeted internet sales for the year.
2) Prepare a cash receipts schedule for all four quarters of 2013 and the year as a whole.
10) 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.
Lynn Corporation paid $40,000 to purchase equipment.