55 the saskatchewan division of a canadian farm machinery company uses a standard co 4315075

55) The Saskatchewan division of a Canadian farm machinery company uses a standard cost system for its machine-based production of grain drying equipment. Data regarding production for April are as follows:

Variable manufacturing overhead costs incurred$ 549,600

Variable manufacturing overhead costs allocation rate$750 per machine hour

Fixed manufacturing overhead costs incurred$86,500

Fixed manufacturing overhead budgeted$90,000

Denominator level machine hours800hours  

Standard machine hours allowed per unit of output40hours  

Units produced22units   

Actual machine-hours used820hours  

Ending work-in-process inventorynil

Required:

1.Prepare the necessary journal entries to account for the fixed manufacturing overhead incurred and allocated to production.

2.Prepare the journal entry to close the fixed overhead variance accounts assuming that the fluctuation in denominator level is considered to be normal.

56) Mostly Miniatures has just implemented a new cost accounting system that provides two variances for fixed manufacturing overhead. While the company's managers are familiar with the concept of static-budget variance, they are unclear as to how to interpret the production-volume overhead variances. Currently the company has a production capacity of 54,000 miniatures a month although it generally produces only 46,000 cases. However, in any given month the actual production is probably something other than 46,000.

Required:

a.Does the production-volume overhead variance measure the difference between the 54,000 and 46,000, or the difference between the 46,000 and the actual monthly production? Explain.

b.What advice can you provide the managers that will help them interpret the production-volume overhead variances?

a.It is the difference between the 46,000 and the actual production level for the period. The difference between the 54,000 and the 46,000 is the unused capacity that was planned for the period. The difference between the 46,000 and the actual level was not planned.

b.When actual outputs are less than the denominator level, the production-volume variance is unfavourable. This is opposite the label given other variances that have a favourable label when costs are less than the budgeted amount; therefore, caution is needed.

57) What are the arguments for prorating a production-volume variance that has been deemed to be material among work-in-process, finished goods, and cost of goods sold, as opposed to writing it all off to cost of goods sold?

58) Explain two concerns when interpreting the production-volume variance as a measure of the economic cost of unused capacity.

15 disk company was very profitable for the first ten years of its existence but the 4315087

15) Disk Company was very profitable for the first ten years of its existence, but the company has fallen on hard times with the growth of compact disks. In 2007 Jean Adams was appointed head of the Product Research Department. She began a number of product development projects. Although the department has developed several good ideas that led to the introduction of several promising products, Ms. Adams was criticized for poor cost control. The financial performance reports of the department under Ms. Adams leadership were consistently unfavourable. Management was quite concerned about cost control because profits for the company were low and the cash budget indicated that additional borrowing would be required during the next year.

Because of her inability to control costs, Ms. Adams was relieved of her responsibilities in 2008 and Fran Jones became head of the department. Ms. Jones promised to improve performance of Product Research and scaled back the developmental activities to obtain favourable financial performance. By the end of 2008 Ms. Jones was showing a favourable financial variance.

Required:

If the Product Research Department is classified as a responsibility centre, what unique problems are associated with evaluating its financial performance?

16) Rick Christensen is the new division manager of Fastfood Sales. His division is considered a responsibility centre, and he has control over all costs and revenue of the division. His predecessor had been dismissed from the company because he could not keep the revenues and costs with acceptable variances on a quarterly basis. However, the former manager had relatively good annual reports. Christensen is very concerned about the situation because Fastfood has a somewhat seasonal business and it is very difficult to keep sales up during the winter months. He is considering changing jobs after only a few months but wants some advice as to the likelihood that he will be able to keep revenue and costs under control throughout the year.

Required:

Distinguish between controllable and uncontrollable aspects of revenue and costs. Can a manager totally control all revenue and costs? Why or why not?

17) Describe some of the drawbacks of using the operating budget as a control device.

6 a favorable variance occurs on a performance report when a the actual cost is grea 4308738

6) A favorable variance occurs on a performance report when ________.

A) the actual cost is greater than the budgeted cost

B) the actual revenue is less than the budgeted revenue

C) the actual profit is less than the budgeted profit

D) the actual profit is greater than the budgeted profit

7) Who is the primary user of performance reports used to plan and control operations?

A) management accountants

B) CPAs

C) operating managers

D) chartered accountants

8) When designing an accounting information system for management, which governmental regulations are NOT important?

A) Sarbanes-Oxley Act

B) Foreign Corrupt Practices Act

C) Tax rules promulgated by Internal Revenue Service

D) Six Sigma Act

9) What types of variances should be investigated when looking at performance reports?

A) all variances

B) only favorable and unfavorable variances that are large in size

C) only unfavorable variances that are large in size

D) only favorable variances that are large in size

10) A budget ________.

A) is a quantitative expression of a plan of action

B) provides feedback by comparing actual results with planned results

C) includes deviations from planned results

D) ignores areas that are presumed to be running smoothly

11) Management-by-exception means that managers should ________.

A) concentrate on areas that deviate from the plan

B) in the absence of other evidence, presume that areas that conform with plans are running smoothly

C) A and B

D) none of the above

12) The Helium Company held a Christmas party. The company expected attendance of 100 people and prepared the following budget:

Hotel room rental$500

Food500

Entertainment800

Decorations300

Total Costs$2,100

Hotel room rental$575

Food640

Entertainment750

Decorations350

Total Costs$2,315

What is the variance for total costs?

A) $215 Unfavorable

B) $215 Favorable

C) $25 Favorable

D) $140 Unfavorable

13) The Hermanski Company held a Christmas party. The company expected attendance of 100 people and prepared the following budget:

Hotel room rental$600

Food500

Entertainment800

Decorations300

Total Costs$2,200

One hundred people attended the party. The costs incurred were:

Hotel room rental$575

Food640

Entertainment750

Decorations350

Total Costs$2,315

What is the primary reason for the variance in total costs?

A) Hotel room rent cost more than expected.

B) Food cost more than expected.

C) Entertainment cost more than expected.

D) Decorations cost less than expected.

14) USA Bank held a party. USA Bank expected attendance of 100 people and prepared the following budget:

Hotel room rental$600

Food500

Entertainment800

Decorations300

Total Costs$2,200

One hundred people attended the party. The following costs were incurred:

Hotel room rental$575

Food640

Entertainment750

Decorations350

Total Costs$2,315

What is the variance for the cost of food?

A) $115 Unfavorable

B) $140 Favorable

C) $115 Favorable

D) $140 Unfavorable

15) A fraternity held a party. The fraternity prepared the following budget for 25 expected attendees:

Room rental$150

Food250

Entertainment150

Decorations75

Total Costs$625

Twenty-five people attended the party. The following costs were incurred:

Room rental$240

Food320

Entertainment125

Decorations75

Total Costs$760

What is the variance for total costs?

A) $90 Unfavorable

B) $135 Unfavorable

C) $135 Favorable

D) $70 Unfavorable

32 describe management accounting and financial accounting 33 generally companies fo 4315232

32) Describe management accounting and financial accounting.

33) Generally, companies follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition. Assume you are opening a small food outlet across the street from your campus. How might that business be operated under each of the two broad strategies? Consider the following specific operational areas:

a.target customers

b.products offered

c.product pricing

d.location choice

e.advertising content

f.advertising media

51 train corporation is an s corporation that is owned equally by carlos and diane a 4315405

51) Train Corporation is an S corporation that is owned equally by Carlos and Diane at the beginning of the year. On April 21 (the 111th day of Train's tax year) of the current year, Carlos sells all of his Train Corporation stock to Andre. How many days will be used when computing Carlos's share of S corporation income for this year (a non-leap year), assuming that a special income allocation election is not made?

A) 110

B) 111

C) 254

D) 255

52) Cactus Corporation, an S Corporation, had accumulated earnings and profits of $100,000 at the beginning of 2008. Tex and Shirley each own 50% of the stock. Cactus does not make any distributions during 2008, but had $200,000 of ordinary income. In 2009, ordinary income was $100,000 and distributions were $100,000. What is Tex's ordinary income for 2008?

A) $0

B) $50,000

C) $100,000

D) $200,000

53) Cactus Corporation, an S Corporation, had accumulated earnings and profits of $100,000 at the beginning of 2011. Tex and Shirley each own 50% of the stock. Cactus does not make any distributions during 2011, but had $200,000 of ordinary income. In 2012, ordinary income was $100,000 and distributions were $100,000. What is Tex's ordinary income for 2012?

A) $0

B) $50,000

C) $100,000

D) $200,000

54) Cactus Corporation, an S Corporation, had accumulated earnings and profits of $100,000 at the beginning of 2009. Tex and Shirley each own 50% of the stock and have a basis in their stock of $50,000 on January 1, 2009. Cactus does not make any distributions during 2009, but had $200,000 of ordinary income. In 2010, ordinary income was $100,000 and distributions were $100,000. What is Tex's basis at January 1, 2011?

A) $100,000

B) $150,000

C) $200,000

D) $250,000

55) Identify which of the following statements is true.

A) The overall S corporation loss limitation equals the shareholder's adjusted basis for his/her S corporation stock plus his/her ratable share of all S corporation liabilities.

B) The loss pass-throughs from an S corporation may produce a net operating loss for the shareholder.

C) An S corporation shareholder can increase the adjusted basis of his/her stock by any indebtedness owed the shareholder by the S corporation.

D) All of the above are false.

56) An electing S corporation has a $30,000 ordinary loss for the nonleap year. On January 1, Beverly and Sonya own equally all of the S corporation stock. On the 146th day of the year, Beverly gives her one-half of the S corporation stock to her daughter Becky. How much of the $30,000 ordinary loss is allocated to Beverly?

A) $25,000

B) $15,000

C) $6,000

D) $5,959

57) An electing S corporation has a $30,000 ordinary loss for the non-leap year. On January 1, Beverly and Sonya own equally all of the S corporation stock. On the 146th day of the year, Beverly gives her one-half of the S corporation stock to her daughter Becky. How much of the $30,000 ordinary loss is allocated to Sonya?

A) $25,000

B) $15,000

C) $10,000

D) $6,000

58) Which one of the following special loss limitations apply to an S corporation?

A) at-risk rules

B) passive activity limitation rules

C) hobby loss rules

D) All of the above apply.

59) Dilley Corporation is an electing S corporation that uses a calendar year as its tax year. On October 31, Dilley's S election is terminated because of the acquisition of stock by an ineligible stockholder. Dilley Corporation shareholder Alan is allocated an S corporation loss for the year, which cannot be used because of the basis limitation. Alan will lose the unused loss if not used by

A) December 31 of this year.

B) March 15 of next year.

C) October 31 of next year.

D) December 31 of next year.

60) Identify which of the following statements is false.

A) Randy is a shareholder in an S corporation. His stock basis is $10,000 and his basis in a loan he made to the corporation is $3,000. Randy's share of the corporation's ordinary loss for the current year is $11,000. Ignoring the at-risk and passive activity limitations, Randy can deduct the loss in full.

B) A shareholder's S corporation stock basis will increase when the shareholder acts as guarantor on a corporate indebtedness.

C) A shareholder's ratable share of the S corporation's ordinary loss reduces the adjusted basis of his/her S corporation stock. Once the basis of the stock is reduced to zero, any loss-passthrough that remains reduces the basis of S corporation debts that are owed to the shareholder.

D) Debt basis is restored before stock basis.

31 marvin holds 10 of the common shares of pink limited for the 2017 fiscal year end 4315648

31. Marvin holds 10% of the common shares of Pink Limited. For the 2017 fiscal year end, all shareholders received a cash payment to represent their share in the net income of Pink Limited. How would this cash payment be reported in the equity section of Pink Limited’s financial statements?

a) as a reduction in the Owner’s Equity account

b) as an owner withdrawal, reducing Shareholder’s Equity of Pink Limited

c) as a dividend, reducing Shareholder’s Equity of Pink Limited

32.An unearned revenue can best be described as an amount

a) collected and currently matched with expenses.

b) collected and not currently matched with expenses.

c) not collected and currently matched with expenses.

d) not collected and not currently matched with expenses.

33.Which type of account is always debited during the closing process?

a) dividends

b) expense

c) revenue

d) retained earnings

34.Which of the following statements is INCORRECT regarding fair value adjustments for investments?

a) Both FV–NI investments and FV–OCI investments could include equity investments orinvestments in debt securities.

b) FV–OCI investments exclude debt securities.

c) At each period end, an estimate is made of the fair value of both FV–NI and FV–OCI investments.

d) An adjusting entry is required to record a holding gain or loss on FV–NI investments.

35.In the closing process, all the revenue and expense accounts are transferred to a clearing or suspense account called

a) Other Comprehensive Income.

b) Common Shares.

c) Retained Earnings.

d) Income Summary.

36.A corporation’s net income or loss is closed at year end to

a) Accumulated Other Comprehensive Income.

b) Common Shares.

c) Retained Earnings.

d) Other Comprehensive Income.

37.A post-closing trial balance

a) includes temporary accounts only.

b) includes permanent accounts only.

c) includes both temporary and permanent accounts.

d) may include expense accounts.

38.Which of the following statements about the trial balanceis correct?

a) The debits and credits must balance.

b) The equality of credits and debits ensures that no errors were made.

c) The post-closing trial balance includes temporary accounts only.

d) The post-closing trial balance is used to prepare the financial statements.

39.If the inventory account at the end of the year is understated, the effect will be to

a) overstate the cost of goods sold.

b) understate the net purchases.

c) overstate the gross profit on sales.

d) overstate the goods available for sale.

40. Which of the following is true regarding the traditional discounted cash flow approach?

a) The discount rate is adjusted to accommodate the riskiness of the cash flows.

b) The cash flows have been adjustment to accommodate their riskiness.

c) This model is best used where cash flows are fairly uncertain.

d) Both a) and c) are correct.

41. A fair value measure under IFRS 13 is based on which view of fair value?

a) market participant view

b) shareholder view

c) fair value view

d) unbiased view

42. In order to measure fair value under IFRS13, an entity must determine

a) the item being measured, and how the item could or would be used.

b) the market the item would be (or is) bought and sold in.

c) which fair value model is being used to value the item.

d) all of the above

43. Under ASPE, Other Comprehensive Income (OCI) and Accumulated Other Comprehensive Income (AOCI) accounts

a) appear as separate line items, the same as under IFRS.

b) are part of accounts such as Fair Value–OCI Investments.

c) are not included in financial statements.

d) are measured differently than under IFRS.

44. The main difference in the accounting for measurement issues between IFRS and ASPE is that

a) IFRS has a well-developed framework for measuring fair values (IFRS13), whereas ASPE does not.

b) there is no difference between accounting for measurement issues between these standards.

c) guidance under ASPE is concentrated in a single area of the ASPE body of knowledge.

d) IFRS requires explicit disclosure of fair value amounts, whereas these disclosures under ASPE are optional.

25 when undertaking a capital budgeting problem with taxes the total cash effect of 4308565

25) When undertaking a capital budgeting problem with taxes, the total cash effect of depreciation expense on a long-term asset is equal to ________.

A) $0

B) depreciation expense times the tax rate

C) depreciation expense times (1 minus the tax rate)

D) depreciation expense divided by the tax rate

26) Levine Company will purchase a van for $40,000. It will have a depreciable life of 5 years and a terminal salvage value of $10,000. Assume a tax rate of 30% and a required rate of return of 12%. The company uses the straight-line method of depreciation for tax purposes. The annual cash operating savings at the end of each year, exclusive of depreciation, are $10,000 for five years. The present value of an ordinary annuity factor of one for 5 periods at 12% is 3.6048. The present value of one for 5 periods at 12% is 0.5674. What is the net present value of the van?

A) $(441)

B) $(2,604)

C) $1,722

D) $5,420

27) Christina Company will purchase a van for $40,000. It will have a depreciable life of 5 years and a terminal salvage value of $10,000. Assume a tax rate of 20% and a required after-tax rate of return of 12%. The company uses straight-line depreciation for tax purposes. The annual cash operating savings at the end of each year, exclusive of depreciation, are $10,000 for five years. The present value of one for five periods at 12% is 0.5674. The present value of an ordinary annuity of one for five periods at 12% is 3.6048. What is the net present value of the van?

A) $(5,394)

B) $(1,162)

C) $11,909

D) $17,583

28) U.S. corporations are required to use the same method of calculating depreciation on both their income tax return and their annual financial statements.

29) The marginal income tax rate is the tax rate paid on additional amounts of pretax income.

30) When making capital budgeting decisions, the manager should utilize the marginal tax rate for the company instead of the average tax rate.

31) When using accelerated depreciation methods, most of the depreciation taken on an asset occurs at the end of its life.

32) A deduction for depreciation expense lowers a company's tax liability.

33) The present value of tax savings from depreciation is greater for straight-line depreciation than an accelerated depreciation method.

34) Lorenzo Company is considering the purchase of equipment with an eight year life that requires a $1,600,000 investment. At the end of eight years, the equipment will have no salvage value. For eight years, the equipment will provide net income at the end of each year as follows:

Sales$3,000,000

Less: Variable Expenses1,800,000

Contribution margin1,200,000

Less: Fixed Expenses:

Advertising700,000

Depreciation on equipment200,000

Net income$300,000

Other information follows:

Required rate of return18%

Tax rate30%

Depreciation method for tax purposesStraight-line

Present value of ordinary annuity of one

at 18% for 8 periods4.0776

Present value of one at 18% for 8 periods0.266

Required:

1. Compute the after tax annual cash flows generated by the equipment.

2. Compute the equipment's net present value.

3.

56 sales orders are calculated based on current selling prices of the items sold the 4315894

56.Sales orders are calculated based on current selling prices of the items sold.  The source of these prices, which would include the entire set of preestablished and approved prices for each product, is referred to as a(n):

A.Price list

B.Purchase order

C.Packing slip

D.Pick list

57.The maximum dollar amount that a customer is allowed to carry as an accounts receivable balance:

A.Maximum Limit

B.Credit Balance

C.Maximum Balance

D.Credit Limit

58.This item documents the quantities and descriptions of items ordered.  Items from this document should be pulled from the warehouse shelves and packaged for the customer.

A.Packing Slip

B.Price List

C.Pick List

D.Purchase Order

59.The terms of agreement between the company and the common carrier are documented in a(n):

A.Pick List

B.Bill of Lading

C.Invoice

D.Packing Slip

60.A chronological listing of shipments that allows management to track the status of sales and to answer customer inquiries regarding order status is called a(n):

A.Invoice

B.Bill of Lading

C.Pick List

D.Shipping Log

61.This document is prepared and sent to the customer once the shipment has occurred.  The document provides the details of the sale and requests payment.

A.Sales Invoice

B.Accounts Receivable Statement

C.Bill of Lading

D.Sales Order

62.A special journal that is used to record sales transactions and is periodically posted to the general ledger.

A.General Journal

B.Subsidiary Journal

C.Sales Journal

D.Accounts Receivable Journal

63.This document is prepared on a regular basis to accumulated and summarize all the transactions that have taken place between the customer and the company within the period.

A.Accounts Receivable Journal

B.Sales Invoice

C.Subsidiary Journal

D.Customer Account Statements

64.Which of the following relationships does not violate the rules of segregation of duties?

A.Credit authorization and preparation of the sales order.

B.Preparation of the sales order and sales invoice.

C.Preparing goods for shipment and accounting for inventory.

D.Entering sales in the sales journal and handling the inventory.

65.The internal control activity related to the adequate records and documents, related to sales, includes which of the following?

A.Those responsible for recording sales should ensure that the supporting documentation is retained and organized.

B.Information systems duties included in the revenue process includes the preparation of sales orders and shipping logs.

C.All records are to be prepared by someone other than the person who has custody of the assets.

D.The authorization process is to remain separate from the recording process.

ex 94 calculation of goodwill great corporation is interested in purchasing big worl 4315340

Ex. 94Calculation of goodwill

Great Corporation is interested in purchasing Big World Company Ltd.The total of Big World’s net income amounts over the last five years is $745,000.During one of those years, Big World reported a gain on discontinued operations of $93,000.The fair value of Big World’s net identifiable assets is $684,000.A normal rate of return is 14%, and Great Corporation wants to capitalize excess earnings at 19%.

Instructions

Calculate the estimated value of goodwill.

Ex. 95 Calculation of goodwill

Saje Corporation’s pre-tax accounting income of $726,000 for the year 2017 included the following items:

Amortization of identifiable intangibles

$140,000

Depreciation of building

119,000

Loss from discontinued operations

46,000

Unusual, non-recurring gains

157,000

Profit-sharing payments to employees

69,300

Lush Industries Ltd. would like to purchase Saje Corporation. In trying to measure Saje’s normalized earnings for 2017, Lush determines that the building’s fair value is triple the book value and that its remaining economic life is double the life that Saje is using. Lush would continue the profit-sharing payments to employees, with the payments being based on income from continuing operations before amortization and depreciation.

Instructions

Calculate the 2017 normalized earnings amount of Saje Corporation that Lush would use to calculate goodwill.

51 identify which of the following statements is true a an individual cannot be both 4315216

51) Identify which of the following statements is true.

A) An individual cannot be both a tier-1 and tier-2 beneficiary in the same year.

B) Tier-2 beneficiaries potentially can receive more favorable tax treatment than tier-1 beneficiaries.

C) Bequests of specific sums of money when distributed out of an estate result in the recognition of gross income by the beneficiary receiving the bequest.

D) All of the above are false.

52) A trust has net accounting income of $30,000, but distributable net income (DNI) of only $25,000 because certain expenses are charged to principal. The trust is required to distribute $10,000 to Alice and it makes a discretionary distribution of $20,000 to Ben. The trust has no tax-exempt income. The amount that Ben reports as gross income is

A) $20,000.

B) $16,667.

C) $15,000.

D) none of the above

53) A trust has net accounting income and distributable net income (DNI) of $60,000, all from taxable sources. The trustee is required to distribute $40,000 of current income to Harry. In addition, the trustee makes a discretionary distribution to Harry of $10,000 and a discretionary distribution to Susan of $30,000. $20,000 of the $40,000 total discretionary distributions is from corpus. Gross income reportable by Harry is

A) $50,000.

B) $45,000.

C) $37,500.

D) $30,000.

54) Martha died and by her will, specifically bequeathed, and the executor distributed, $20,000 cash and a $70,000 house to Harold. The distributions were made in a year in which the estate had $65,000 of DNI, all from taxable sources. The maximum Harold will be required to report as gross income as a result of these distributions is

A) $0.

B) $20,000.

C) $65,000.

D) $70,000.

55) An estate made a distribution to its sole beneficiary of $15,000 for the year. This distribution was not the result of a specific bequest. The estate had $40,000 of taxable interest and $34,000 of expenses attributable to earning that interest. What amount of the distribution is taxable to the beneficiary?

A) $40,000

B) $15,000

C) $6,000

D) $0

56) Fred, a cash-basis taxpayer, died on January 15, 2012. In 2013, the estate made a $9,000 distribution from estate income to Fred's sole heir. The estate had $20,000 of taxable interest and a $10,000 net long-term capital gain allocable to corpus. The estate incurred $5,000 in expenses attributable to the estate income. What is the estate's distributable net income (DNI)?

A) $15,000

B) $20,000

C) $25,000

D) $30,000

57) Apple Trust reports net accounting income of $40,000, all from taxable sources. The trustee is required to distribute $15,000 annually to Megan. The trustee also makes discretionary distributions of $30,000, $7,500 to Megan and $22,500 to Caroline. The trust pays $5,000 of the discretionary distributions from corpus. What is the amount of the distribution deduction?

A) $40,000

B) $45,000

C) $15,000

D) $30,000

58) An example of income in respect to a decedent (IRD) for a cash method of accounting taxpayer is

A) interest earned but not received prior to death.

B) salary earned but not received prior to death.

C) gain from an installment sale entered into before death.

D) All of the above are examples.

59) Joyce passed away on January 3 while on an extended holiday cruise celebrating a very successful, and most profitable previous year. Joyce was the chief executive officer of the Quillip Corporation. After the independent audit of Quillip's last year's financial statements was completed in February of this year, Joyce's estate received a $1,000,000 bonus check resulting from last year's corporate profits. Joyce's estate also sold Quillip stock for $500,000 in February of this year. Joyce originally purchased this stock eight years ago for $10,000. The stock was valued at $495,000 on her date of death. Solely based on the above facts, how much income in respect of a decedent should Joyce's estate report in the current year?

A) $1,485,000

B) $1,000,000

C) $485,000

D) $5,000

60) Identify which of the following statements is true.

A) Income in respect of a decedent (IRD) is the gross income the decedent earned before death but had not collected before death.

B) An estate may deduct up to $5,000 of capital losses against the ordinary income taxable in the estate.

C) An example of income in respect of a decedent (IRD) is the gain recognized on property sold by the estate after the decedent's death.

D