Archives: Solution Manual

Chapter 1 Accounting as a Form of Communication After studying this chapter, students should be able to: ◼ Explain what business is about (Module 1–LO1). ◼ Distinguish among the forms of organization (Module 1–LO2). ◼ Describe the various types of […]

P26-38, cont. Requirement 1. cont. Server A Server B Total net cash inflows during operating life of server $ 78,000 $ 44,000 Less: Total depreciation during operating life of server 44,000 39,000 Total operating income during operating life 34,000 5,000 […]

P26-35B Using payback, ARR, NPV, IRR, and profitability index to make capital investment decisions Learning Objectives 2, 4 1. Plan A 1.10 profitability index; Plan B $(955,800) NPV Lolas operates a chain of sandwich shops. The company is considering two […]

24-21 E24-17 Using ROI and RI to evaluate investment centers Learning Objective 4 1. Residential’s ROI 32.50% Zoes, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information […]

Chapter 24 Responsibility Accounting and Performance Evaluation Review Questions 1. Explain the difference between a centralized company and a decentralized company. In a small company, the owner or top manager often makes all planning and controlling decisions. Small companies are […]

E23-24 Preparing a standard cost income statement Learning Objective 6 GP $1,002,990 All-Star Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2016. The 2016 revenue and cost information for All-Star follows: Assume each fender produced was […]

Exercises E23-15 Preparing a flexible budget Learning Objective 1 $203,500 Op. Inc. for 55,000 units Safe Now sells its main product, ergonomic mouse pads, for $13 each. Its variable cost is $5.30 per pad. Fixed costs are $220,000 per month […]

Chapter 23 Flexible Budgets and Standard Cost Systems Review Questions 1. What is a variance? A variance is the difference between an actual amount and the budgeted amount. 2. Explain the difference between a favorable and an unfavorable variance. A […]

SOLUTION Requirement 1 ROOT RECLINERS Flexible Budget Budget Amounts per Unit Actual Units (Recliners) 980 Sales $ 505.00 $ 494,900(d) Variable Manufacturing Costs: Direct Materials 52.20(a) 51,156(e) Direct Labor 90.00(b) 88,200(f) Variable Overhead 30.00(c) 29,400(g) Fixed Manufacturing Costs: Fixed Overhead […]

Exercises E22-21 Budgeting benefits Learning Objective 1 This year Op. Inc. $1,880,000 David Rodriguez owns a chain of travel goods stores, Rodriguez Travel Goods. Last year, his sales staff sold 25,000 suitcases at an average sales price of $150. Variable […]

Chapter 22 Master Budgets Review Questions 1. List the four budgeting objectives. The four budgeting objectives are: • Develop strategies—overall, long-term business goals • Plan—budget for specific actions to achieve goals • Act—carry out the plans • Control—feedback to identify […]

As True Printing’s controller, you have assembled the following additional information: a. April dividends of $3,500 were declared and paid. b. April capital expenditures of $16,900 budgeted for cash purchase of equipment. c. April depreciation expense, $200. d. Cost of […]

P22-52B Using sensitivity analysis Learning Objective 5 1. Option 2 Feb. NI $1,531 Shaner Company prepared the following budgeted income statement for the first quarter of 2016: Shaner Company is considering two options. Option 1 is to increase advertising by […]

P22-48B, cont. Requirement 5 HANEY BATTING COMPANY Selling and Administrative Expense Budget For the Quarter Ended March 31, 2017 Salaries Expense $ 14,000 Rent Expense 2,500 Insurance Expense 1,900 Depreciation Expense 100 Supplies Expense (1% of $216,000 total sales) 2,160 […]

P22A-45A Preparing a financial budget—schedule of cash receipts, schedule cash payments, cash budget Learning Objective 7 Appendix 22A 1. Jan. total cash recpts. $68,000 3. Feb. total pmts. for S&A exp. $13,056 Knobbles Company’s budget committee provides the following information: […]

SOLUTION Requirement 1 COOKE COMPANY Budgeted Income Statement For the Quarter Ended March 31, 2017 Sales Revenue $ 308,500 Cost of Goods Sold 71,960 Gross Profit 236,540 Selling and Administrative Expenses 25,240 Income before Income Taxes 211,300 Income Tax Expense […]

E22A-34 Preparing an operating budget—selling and administrative expense budget Learning Objective 6 Appendix 22A Qtr. ended Mar. 31 total S&A exp. $21,700 Consider the sales budget presented in Exercise E22A-33. Stewart’s selling and administrative expenses include the following: Prepare a […]

SOLUTION Requirement 1 Business Segment Contribution margin / Net sales revenue Contribution margin ratio Borden $1,500 / $5,000 30% Morrissey $3,600 / $9,000 40% Flounder $6,000 / $10,000 60% Requirement 2 Business Segment Borden Service Revenue per Customer $5,000 / […]

21–21 SOLUTION Requirement 1 REFRESHADE Income Statement For the Month Ending April 30, 2016 Sales Revenue ($30/case × 12,000 cases) $ 360,000 Cost of Goods Sold: Variable ($10/case × 12,000 cases) $ 120,000 Fixed ($45,000 × 12,000/15,000*) 36,000 156,000 Gross […]

21-1 Chapter 21 Variable Costing Review Questions 1. What is absorption costing? Absorption costing is a costing method that considers direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead as product costs. Absorption costing is required by GAAP […]

Chapter 20 Cost-Volume-Profit Analysis Review Questions 1. What is a variable cost? Give an example. Variable costs are costs that increase or decrease in total in direct proportion to increases or decreases in the volume of activity. An example of […]

SOLUTION Requirement 1 Variable Cost Percent of Revenue Financial planner 8% Advertising 13% Supplies and postage 3% Usage fees 6% Total 30% If variable costs are 30% of revenues, then the contribution margin ratio is 70% of revenues. Fixed costs […]

Problems (Group A) P20-33A Calculating cost-volume-profit elements Learning Objectives 1, 2 The budgets of four companies yield the following information: Requirements 1. Fill in the blanks for each missing value. (Round the contribution margin per unit to the nearest cent.) […]

E20-18 Determining cost behavior Learning Objective 1 Identify each cost below as variable (V), fixed (F), or mixed (M), relative to units sold. Explain your reason. SOLUTION a. Mixed Total phone cost has the characteristics of both a fixed cost […]

P19-40B, cont. Requirement 2 bookcases bookcases Pre-manufacturing costs per unit $ 6 $ 2 Manufacturing product costs per unit (a) 75 48 Post-manufacturing costs per unit 20 15 Full product costs per unit $ 101 $ 65 (a) Calculated in […]

P19-34A Computing product costs in an ABC system Learning Objectives 2, 3 1. Standard $70 per unit Owen, Inc. manufactures bookcases and uses an activity-based costing system. Owen’s activity areas and related data follow: Owen produced two styles of bookcases […]

E19-22, cont. Requirement 3 Predetermined Overhead Allocation Rate × Actual Quantity of the Allocation Base Used = Allocated Manufacturing Overhead Cost $9.20 per DLHr × 14,000 DLHr = $128,800 Total direct materials cost $ 200,000 (b) Total direct labor cost […]

Note: Short Exercise S19-10 must be completed before attempting Short Exercise S19-11. S19-11 Using ABM in a service company Learning Objective 4 Refer to Short Exercise S19-10. Western desires a 20% target operating income after covering all costs. Considering the […]

Chapter 19 Management Systems: Activity-Based, Just-In-Time, and Quality Management Systems Review Questions 1. What is the formula to compute the predetermined overhead allocation rate? The formula to compute the predetermined overhead allocation rate is: Total estimated overhead costs / Total […]

P18-37B, cont. Requirement 2 Date Accounts and Explanation Debit Credit Sep. 30 Work-in–Process Inventory―Mixing 5,675 Raw Materials Inventory 5,675 Materials used, direct materials assigned to WIP. Work-in–Process Inventory―Mixing 570 Wages Payable 570 Labor incurred, direct labor assigned to WIP. Work-in–Process […]

P18-29A, cont. Requirement 2 Work-in–Process―Assembly Balance, Nov. 1 0 516,768 Transferred to Programming Direct Materials 375,720 Direct Labor 157,500 Manufacturing Overhead 98,505 Balance, Nov. 30 114,957 P18-30A Preparing a production cost report, no beginning WIP or costs transferred in; journal […]

Requirements 1. Compute the Blending Department’s equivalent units of production for direct ma– terials and for conversion costs. 2. Compute the total costs of the units (gallons) a. completed and transferred out to the Packaging Department. b. in the Blending […]

Chapter 18 Process Costing Review Questions 1. What types of companies use job order costing systems? Companies that manufacture batches of unique products or provide specialized services use job order costing systems. Some examples would be accounting firms, lawyers, building […]

SOLUTION Requirement 1 Overhead Allocation Rate = Total estimated overhead costs Total estimated quantity of the overhead allocation base = $217,200* = $7.50 per MHr 28,960 MHrs *$14,000 + $45,000 + $25,000 + $46,000 + $87,200 = $217,200 Predetermined Requirement […]

June transactions are summarized as follows: a. Collections on account, $150,000. b. Selling and administrative expenses incurred and paid, $33,000. c. Payments on account, $40,000. d. Materials purchases on account: Paper, $20,000; indirect materials, $5,000. e. Materials requisitioned and used […]

E17-21 Allocating and adjusting manufacturing overhead Learning Objectives 3, 5 2. Underallocated by $15,500 The manufacturing records for Bob’s Boats at the end of the 2016 fiscal year show the following information about manufacturing overhead: Requirements 1. How many machine […]

Chapter 17 Job Order Costing Review Questions 1. Why do managers need to know the cost of their products? If the manager knows the cost to produce each unit of product, then the manager can plan and control the cost […]

Chapter 16 Introduction to Managerial Accounting Review Questions 1. What is the primary purpose of managerial accounting? The primary purpose of managerial accounting is to provide information to help managers plan and control operations. 2. Explain the difference between planning […]

E16-21 Computing cost of goods manufactured Learning Objective 4 Consider the following partially completed schedules of cost of goods manufactured. Compute the miss- ing amounts. SOLUTION (a) Total Manufacturing Costs to Account For $ 55,300 Total Manufacturing Costs Incurred during […]

SOLUTION CHILI MANUFACTURING COMPANY Schedule of Cost of Goods Manufactured Month Ended June 30, 2016 Beginning Work-in-Process Inventory $ 21,000 Direct Materials Used: Beginning Raw Materials Inventory $ 26,000 Purchases of Raw Materials 58,000 Raw Materials Available for Use 84,000 […]

P16-39B, cont. Requirement 2 ORGANIC BONES Income Statement Year Ended December 31, 2016 Revenues: Sales Revenue $ 114,000 Cost of Goods Sold: Beginning Finished Goods Inventory $ 0 Cost of Goods Manufactured* 68,700 Cost of Goods Available for Sale 68,700 […]

Requirements 1. Compute the following ratios for 2016 and 2015: a. Current ratio b. Cash ratio c. Times-interest-earned ratio d. Inventory turnover e. Gross profit percentage f. Debt to equity ratio g. Rate of return on common stockholders’ equity h. […]

SOLUTION Requirement 1 ROOST DEPARTMENT STORES, INC. Common-Size Income Statement Year Ended December 31, 2016 Roost Average Industry Average Net Sales 100.0% 100.0% Cost of Goods Sold 67.6 65.8 Gross Profit 32.4 34.2 Operating Expenses 21.0 19.7 Operating Income 11.4 […]

E15-17 Performing vertical analysis of a balance sheet Learning Objective 3 2016 Current Assets: 15.7% Tri Designs, Inc. has the following data: Perform a vertical analysis of Tri Designs’s balance sheet for each year. © 2016 Pearson Education, Inc. 15-21 […]

Chapter 15 Financial Statement Analysis Review Questions 1. What are the three main ways to analyze financial statements? The three main ways to analyze financial statements are horizontal analysis, vertical analysis, and ratio analysis. 2. What is an annual report? […]

P14B-38A, cont. Panel B – Statement of Cash Flows: Cash Flows from Operating Activities: Net Income (a) 62,500 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense—Plant Assets (b) 15,600 Decrease in Accounts Receivable (c) […]

E14-19 Computing operating activities cash flow—indirect method Learning Objective 2 Net Cash Prov. by Op. Act. $17,000 The records of Paramount Color Engraving reveal the following: Compute cash flows from operating activities by the indirect method for year ended December […]

SOLUTION Requirement 1 The purpose of the statement of cash flow is to report on the cash receipts and cash payments for a specific period. It will help users do the following: • Predict future cash flows. • Evaluate management […]

Chapter 14 Statement of Cash Flows Review Questions 1. What does the statement of cash flows report? The statement of cash flows reports on a business’s cash receipts and cash payments for a specific period. 2. How does the statement […]

P14A-43B, cont. Requirement 2 OFFICIAL RESERVE RARE COINS Balance Sheet December 31, 2016 Assets Current Assets: Cash $ 279,000 Accounts Receivable ($580,000 × 20%) 116,000 Merchandise Inventory 178,000 Total current assets $ 573,000 Plant Assets: Store Fixtures 49,000 Accumulated Depreciation […]