Archives: Solution Manual

Quick Study 3-18 (10 minutes) a. Under IFRS, financial statements normally present assets from least liquid to most liquid. Quick Study 3-19 (10 minutes) Profit margin = $48,025 / $425,000 = 11.3% Interpretation: For each dollar that the company records […]

Chapter 03 – Adjusting Accounts and Preparing Financial Statements Chapter 3 Adjusting Accounts and Preparing Financial Statements QUESTIONS 1. The cash basis of accounting reports revenues when cash is received while the 2. The accrual basis of accounting generally provides […]

VISUAL #3-1 ACCRUAL BASIS ACCOUNTING (Follows GAAP) requires that the 3-1 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Income Statement (for a period) report ALL REVENUES EARNED […]

Chapter 03 – Adjusting Accounts and Preparing Financial Statements CHAPTER 3 ADJUSTING ACCOUNTS AND PREPARING FINANCIAL STATEMENTS Related Assignment Materials Student Learning Objectives Questions Quick Studies* Exercises* Problems* Beyond the Numbers Conceptual objectives: C1. Explain the importance of periodic reporting […]

Chapter 25 – Capital Budgeting and Managerial Decisions Problem 25-6B (Continued) Part 2 ESME COMPANY Forecasted Annual Income Statement Under Plan to Eliminate Department Z Sales………………………………………………………………….…….…….…….….. $700,000 Cost of goods sold…………………………………………………….…….….……. 461,300 Gross profit from sales……………………………………………….….…….…… 238,700 Operating expenses Advertising……………………………………………………………………………… […]

Chapter 25 – Capital Budgeting and Managerial Decisions Problem 25-2B (Continued) Part 4 PROJECT A Present Value of Net Cash Flows Present Present Value of Value of Net Cash Flows 1 at 8% Annuity Net Cash Flows Years 1-4……………………………………….…….… $99,900 […]

Chapter 25 – Capital Budgeting and Managerial Decisions Problem 25-5A (Continued) Part 4 Sales Mix Recommendation. By incurring additional marketing cost, the company can relax the market constraint for sales of Product G up to the point where 700 units […]

Chapter 25 – Capital Budgeting and Managerial Decisions PROBLEM SET A Problem 25-1A (50 minutes) Part 1 Annual straight-line depreciation = = $115,000 Part 2 Net Net Cash Income Flow Expected annual sales of new product……………….$1,840,000 $1,840,000 Expected costs of […]

Chapter 25 – Capital Budgeting and Managerial Decisions Exercise 25-14 (continued) PROJECT C2 Net Cash Flows Present Value of 1 at 12% Present Value of Net Cash Flows Year 1……………………………………………………………$ 96,000 0.8929 $ 85,718 Year 2……………………………………………………………96,000 0.7972 76,531 Year 3…………………………………………………………… […]

Chapter 25 – Capital Budgeting and Managerial Decisions EXERCISES Exercise 25-1 (20 minutes) Annual Net Cumulative Cash Flows Cash Flows Year 1…………………………………………………………… $ 60,000 $ 60,000 Year 2…………………………………………………………… 40,000 100,000 Cost of investment………………………………………………………….….……$180,000 Paid back in years 1-3……………………………………………………………… 170,000 Paid […]

Chapter 25 – Capital Budgeting and Managerial Decisions Chapter 25 Capital Budgeting and Managerial Decisions QUESTIONS 1. Capital budgeting decisions require careful analysis because they are generally the most difficult and risky decisions that management faces. 2. Capital budgeting is […]

Solution: Alternate Demo Problem Twenty-Five 1. First, calculate annual net cash flow: Determine increase in after-tax net income: Labor savings: 10,000 hours @ $5.50 per hour $55,000 Other operating savings 4,000 2. The rate of return on average investment equals […]

Chapter 25 – Capital Budgeting and Managerial Decisions CHAPTER 25 CAPITAL BUDGETING AND MANAGERIAL DECISIONS Related Assignment Materials Conceptual objectives: C1. Describe the importance of relevant costs for short-term decisions. 25-15 25-16 25-9 Analytical objectives: A1. Evaluate short-term managerial decisions […]

Problem 24-5BB (60 minutes) Part 1 Allocations of joint cost on the basis of sales values Land preparation, seeding, and cultivating: $700,000 Grade Sales Value Percent of Total Allocated Cost No. 1……………………….…$ 900,000 62.5% $437,500 Harvesting, sorting, and grading: $40,000 […]

Chapter 24 – Performance Measurement and Responsibility Accounting Problem 24-5AB (60 minutes) Part 1 Allocations of joint costs on the basis of sales values Tree pruning and care: $405,000 Grade Sales Value Percent of Total Allocated Cost No. 1……………………….…$450,000 48.0% […]

Chapter 24 – Performance Measurement and Responsibility Accounting Exercise 24-21 (20 minutes) (1) Profit margin = Income/Sales Investment center Income* Sales* Profit margin Professional products..…….. € 552 €2,717 20.32% Consumer products………….. 1,765 9,530 18.52% *In € millions The professional products […]

Chapter 24 – Performance Measurement and Responsibility Accounting Exercise 24-8 (15 minutes) 1. Return on Location A…………………..$160,000 $1,000,000 16% Location B…………………..$108,000 $ 600,000 18% 2. The recommendation is to pursue Location B because its return on investment (assets) is 18%, […]

Chapter 24 – Performance Measurement and Responsibility Accounting Quick Study 24-15 (10 minutes) a . Process time……………………………………………………..……….……15.0 minutes Inspection time………………………………………………….………….…2.0 minutes b. Manufacturing cycle efficiency (15.0 min./ 60.0 min.)………… 0.25 Quick Study 24-16A (10 minutes) Without excess capacity, a market-based […]

Chapter 24 – Performance Measurement and Responsibility Accounting Chapter 24 Performance Measurement and Responsibility Accounting QUESTIONS 1. Many companies are divided into departments when they become too large to be effectively managed as single units. This division into departments is […]

Alternate Demo Problem Chapter Twenty-Four Jack and Susan Roberts own a farm that produces potatoes. Based on a review of the income statement shown below, Jack remarked that they should have fed the No. 3 potatoes to the pigs; then […]

Chapter 24 – Performance Measurement and Responsibility Accounting CHAPTER 24 PERFORMANCE MEASUREMENT AND RESPONSIBILITY ACCOUNTING Related Assignment Materials Student Learning Objectives Discussion Questions Quick Studies* Exercises* Problems* Beyond the Numbers Conceptual objectives: C1. Distinguish between direct and indirect expenses and […]

Chapter 23 – Flexible Budgets and Standard Costs Problem 23-4B (50 minutes) Part 1 Direct Materials Variances Direct materials cost variances Actual units at actual cost [1,000,000 lbs. @ $4.25]…………………………..……..….$4,250,000 Standard units at standard cost [1,050,000 lbs. @ $4.00]………………..…..……… 4,200,000 […]

Chapter 23 – Flexible Budgets and Standard Costs Problem 23-1B (Continued) Part 2 TOHONO COMPANY Flexible Budgets For Year Ended December 31, 2015 Flexible Budget Flexible Flexible Variable Amount per Unit Total Fixed Cost Budget for Unit Sales of 18,000 […]

Chapter 23 – Flexible Budgets and Standard Costs Problem 23-3A (Continued) Part 3 Direct Materials Variances Preliminary computations Actual material used: 91,000 lbs. (given) Standard quantity of materials: 15,000 units x 6 lb./unit = 90,000 lb. Direct Materials Price and […]

Chapter 23 – Flexible Budgets and Standard Costs Exercise 23-21 (continued) Part 3 JAMES CORP. Overhead Variance Report For Month Ended May 31 Volume Variance Expected production level…………………………………………….80% of capacity Production level achieved………………………………….….……..90% of capacity Volume variance……………………………………………..…….….….$5,550 (favorable) Flexible Actual […]

Chapter 23 – Flexible Budgets and Standard Costs Exercise 23-14A (25 minutes) 1. Work in Process Inventory…………………………………….…….….288,000 Direct Materials Price Variance*……………………………………….2,200 2. Direct Materials Quantity Variance…………………….…….………24,000 Direct Materials Price Variance……………………….…….… 2,200 Cost of Goods Sold………………………………………………… 21,800 To close the materials […]

Chapter 23 – Flexible Budgets and Standard Costs EXERCISES Exercise 23-1 (20 minutes) Item Cost a. Bike frames Variable b. Screws for assembly Variable g. Incoming shipping expenses* Variable h. Taxes on property Fixed i. Office supplies (This item can […]

Chapter 23 – Flexible Budgets and Standard Costs Chapter 23 Flexible Budgets and Standard Costs QUESTIONS 1. Fixed budget performance reports have limited usefulness because they do not reflect 2. The primary purpose of a flexible budget is to help […]

Alternate Demo Problems Twenty-Three Problem #1 XYZ Company manufactures tables. A standard cost card for the manufacture of one table shows the following: Standard Cost per Table: Direct material: 4 sq. ft. @ $3/sq. ft. $12 Direct labor: 2 hours […]

Chapter 23 – Flexible Budgets and Standard Costs CHAPTER 23 FLEXIBLE BUDGETS AND STANDARD COSTS Related Assignment Materials Student Learning Objectives Discussion Questions Quick Studies* Exercises* Problems* Beyond the Numbers 23-1 Copyright © 2015 McGraw-Hill Education. All rights reserved. No […]

Problem 22-8A (Continued) Part 4 DIMSDALE SPORTS CO. General and Administrative Expense Budgets January, February, and March 2016 January February March Total Salaries……………………..…….….…….….…….$12,000 $12,000 $12,000 $36,000 Maintenance………………….….…….….…….…2,000 2,000 2,000 6,000 * Depreciation expense calculations Annual Amount January February March Total […]

Problem 22-4A (Concluded) Supporting Footnotes Note C Beginning receivables…………………………………………..….. $ 342,248 Credit sales…………………………………………………..…..…….. 1,001,701 Ending raw materials inventory*….……………………………. $ 80,000 *Also equals 4,000 units @ $20 = $80,000 **30,000 units x $20 per unit Note E Beginning finished goods inventory….…..………………….. […]

Problem 22-2A (30 minutes) (1) BUILT-TIGHT Cash Receipts Budget For July, August, and September July August Sept. Sales…………………………………….…….…….….. $64,000 $80,000 $48,000 Less ending accts. receivable (80%)………. 51,200 64,000 38,400 Cash receipts from Problem 22-2A (continued) (2) BUILT-TIGHT Cash Budget For […]

Exercise 22-29 (10 minutes) HECTOR COMPANY Budgeted Cash Disbursements For August and September August Sept. **Equals prior month’s purchases. Note that depreciation expense is excluded since it is a non-cash expense. Exercise 22-30 (25 minutes) CASTOR, INC. Cash Budget For […]

Exercise 20-21 (15 minutes) PTO MANUFACTURING COMPANY Cash Budget For Month Ended September 30 Beginning cash balance……………………………..…….……$ 40,000 Other expenses…………………………………………….…….. 60,000 Accrued taxes…………………………………….…….…….….. 10,000 Interest on bank loan……………………………………….….. 1,000 Total cash disbursements………………………..….…….….. 210,500 Ending cash balance…………………….…….…….…….……. $ 84,500 *($80,000 x […]

Exercise 22-9 (15 minutes) 1. RAD CO. Direct Labor Budget For April, May, and June April May June Budgeted production (units)..…….…….……. 442 570 544 Direct labor hours per unit……….……………. x 0.50 x 0.50 x 0.50 2. RAD CO. Factory Overhead […]

Quick Study 22-19 (10 minutes) GUITAR SHOPPE Cash Receipts Budget For Month Ended September 30 Cash receipts from September cash sales (40% x $170,000)………… $ 68,000 Quick Study 22-20 (10 minutes) MUSIC WORLD Cash Receipts Budget For Month Ended September […]

Chapter 22 – Master Budgets and Planning Chapter 22 Master Budgets and Planning QUESTIONS 1. A budget helps managers control and monitor a business by 1) communicating plans to employees, 2) coordinating the activities of different parts of the 2. […]

Serial Problem — SP 22 Serial Problem, Business Solutions (50 minutes) Part 1 BUSINESS SOLUTIONS Budgeted Income Statements For Months of April, May, and June April May June Sales*……………………………………………..…. $69,600 $75,550 $81,500 Cost of goods sold**……………..…………… 54,000 57,750 61,500 Gross […]

Problem 22-6B (50 minutes) SONY STEREO Cash Budgets For April, May, and June April May June Cash disbursements Payments on accounts payable**…………… 80,000 188,000 186,000 Payroll………………………………….….….…….….. 16,000 17,000 18,000 Rent……………………………………..….…….….….. 6,000 6,000 6,000 Other expenses………………………….…….….… 64,000 8,000 7,000 Repayment on […]

Problem 22-3B (50 minutes) Part 1 HCS MFG. Budgeted Income Statement For Months of July, August, and September, 2015 Sales commissions (10%)…………………. 126,500 139,150 153,065 Advertising ($200,000 x 1.25)……………. 250,000 250,000 250,000 Store rent…………………………………………. 24,000 24,000 24,000 Administrative salaries…………………….. 40,000 […]

Alternate Demo Problem Twenty-Two ABC Company started business on January 1, 20xx. The company estimated that sales for the first six months would be as follows: Month Units Dollars January 10,000 $ 50,000 February 8,000 40,000 March 15,000 75,000 April […]

Chapter 22 – Master Budgets and Planning CHAPTER 22 MASTER BUDGETS AND PLANNING Related Assignment Materials Student Learning Objectives Discussion Questions Quick Studies* Exercises* Problems* Beyond the Numbers Conceptual objectives: C1. Describe the importance and 1, 2, 3, 4, 5, […]

Chapter 21 – Cost-Volume-Profit Analysis Problem 21-6B (45 minutes) Part 1 Instructor note: Use the equation in Exhibit 21.12 Break-even in dollar sales = Fixed costs / Contribution margin ratio *To compute contribution margin ratio Sales price per unit Existing […]

Chapter 21 – Cost-Volume-Profit Analysis Problem 21-7A (50 minutes) Part 1 BREAK–EVEN ANALYSIS ASSUMING USE OF SAME MATERIALS Step 1: Compute break-even in composite units—Use equation in Exhibit 21.29 Break-even in composite units = Fixed costs/Contribution margin per composite unit […]

Chapter 21 – Cost-Volume-Profit Analysis Exercise 21-25 (10 minutes) 1. Degree of operating leverage = Total contribution margin Pretax income = $432,000/$108,000 = 4.0 3. If sales decrease by 5%, a total of 9,120 (computed as 9,600 x 95%) units […]

Chapter 21 – Cost-Volume-Profit Analysis Exercise 21-6 (20 minutes) The scatter diagram and line of estimated cost behavior appear below. Selecting 0 and 2,400 units sold as the activity levels yields $2,500 as the estimate of fixed costs and the […]

Chapter 21 – Cost-Volume-Profit Analysis Chapter 21 Cost-Volume-Profit Analysis QUESTIONS 1. A variable cost is one that varies proportionately with the volume of activity. For 2. Variable costs per unit stay the same (remain constant) when output volume changes. This […]

Solution: Alternate Demo Problem Twenty-One Problem #1 (a) Break-even point (in units) = Fixed costs/CM per unit (or) Break-even point (in dollars) = Fixed costs/CM ratio $32,000/[($40 per unit –$16 per unit)/$40 per unit] = $80,000 $80,000 dollars/$40 per unit […]

Chapter 21 – Cost-Volume-Profit Analysis CHAPTER 21 COST-VOLUME-PROFIT ANALYSIS Related Assignment Materials Student Learning Objectives Discussion Questions Quick Studies* Exercises* Problems* Beyond the Numbers Conceptual objectives: C1. Describe different types of cost behavior in relation to production and sales volume. […]