1) Give two examples of natural resources.
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.
On January 1, 2012, Jordan Co. issued $100,000 of bonds. Indicate the effects of
issuing these bonds.
3) 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. Assume use of a perpetual inventory system.
Ransom Co. purchased $10,000 of merchandise inventory on account from a supplier.
Show how the transaction would affect Ransom’s financial statements.
4) Explain how a company would calculate the amount of uncollectible accounts
expense using the percentage of revenue method.
5) The Lester Company has requested a performance report that reports both sales
activity variances and flexible budget variances. The following table of information is
provided:
Required:
1) Compute and enter variances in columns 3 and 6 . In column 3, enter the variance
(difference) between column 2 and column 5; in column 4, label the variance as
favorable (F) or unfavorable (U). In column 6, enter the variance between columns 5
and 8, and in column 7 indicate whether this variance is favorable or unfavorable.
2) Which column contains sales volume variances and which column contains flexible
budget variances?
3) Comment on this company’s performance.
6) The Enhanced Products Division of Evergreen Industries makes ceramic pots that are
used to hold large decorative plants. During 2012, the division produced 10,000 pots
and incurred the following costs:
*The equipment was purchased for $150,000 and has a current book value of $120,000,
remaining useful life of four years, and a zero salvage value. If the company does not
use the equipment, it can be sold for $30,000
Required:
The division is considering replacing the equipment used to manufacture its ceramic
pots. Replacement equipment can be purchased at a price of $200,000. The new
equipment, which is expected to last 4 years and have a salvage value of $20,000, will
reduce unit-level costs by $5 per pot. Assuming the division desires to maintain its
production and sales at 10,000 ceramic pots per year, prepare a schedule that shows the
relevant cost of operating the existing equipment versus the cost of operating the new
equipment. Should the existing equipment be replaced? Why or why not?
7) How does a schedule of cash payments for selling and administrative expenses differ
from projected selling and administrative expense?
8) As of December 31, 2012, Walton Corporation had a current ratio of 1.84, quick ratio
of 1.45, and working capital of $18,000. The company uses a perpetual inventory
system and sells merchandise for more than it cost. Indicate how the given transaction,
if it occurred in January 2013, would affect Walton’s current ratio, quick ratio, and
working capital. Use a + for an increase, a – for a decrease, and 0 for no effect.
Walton recorded cost of goods sold of $4,100
9) Indicate whether each of the following statements is true or false:
1>Return on investment for a division should be calculated based on factors the
division manager can control
2>Many businesses use the return on investment of departments and other segments in
deciding how to allocate resources within the company
3>A responsibility accounting system is useful for controlling operations but not for
evaluating the performance of managers
4>The use of return on investment in allocating resources within an organization may
motivate segment managers to improve performance
5>Return on investment is usually calculated, Contribution Margin/Operating Assets