Accounting Final

Manufacturing overhead was estimated to be $606,000 for the year along with 20,200 direct labor hours. Actual manufacturing overhead was $586,810, actual labor hours were 21,800. The predetermined manufacturing overhead rate per direct labor hour would be:

$30.00 $606,000 / 20,200 = $30.00.

Chino Company reported net income of $30,000 for the current year. During the year, Inventory decreased by $8,900, Accounts Payable decreased by $8,950, Depreciation Expense was $11,900, and Accounts Receivable increased by $8,400. If the indirect method is used, what is the net cash provided by operating activities?

$33,450. Net income $ 30,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 11,900 Changes in current assets and current liabilities: Accounts Receivable (8,400 ) Inventory 8,900 Accounts Payable (8,950 ) Net cash provided by operating activities $ 33,450

Manufacturing overhead was estimated to be $451,000 for the year along with 20,500 direct labor hours. Actual manufacturing overhead was $421,900, and actual labor hours were 21,300. The amount debited to the Manufacturing Overhead account would be:

$421,900 Actual manufacturing overhead costs are debited to the Manufacturing Overhead account.

If you invest $15,000 today in a savings account that earns 12% interest, compounded annually, how much would be in the account at the end of 10 years? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.)

$46,587 Using the future value table, the multiplier for a 10-year period at 12% interest compounded annually is 3.1058. [$15,000 × 3.1058 = $46,587] Alternatively, multiply the present value (15,000) by the interest rate (1.12) raised to the tenth power.

Georgia uses the high-low method of estimating costs. Georgia had total costs of $16,460 at its lowest level of activity, when 5,200 units were sold. When, at its highest level of activity, sales equaled 17,000 units, total costs were $84,900. Georgia would estimate variable cost per unit as:

$5.80 Use the slope formula to estimate variable cost per unit. Divide the difference in total cost by the difference in activity. ($84,900 - $16,460) / (17,000 - 5,200) = $5.80/unit.

A piece of equipment with a cost of $138,000 and accumulated depreciation of $101,000 is sold for $51,200 cash. The amount that should be reported as a cash inflow from investing activities is:

$51,200 The cash inflow from investing activities is the $51,200 cash received from the sale of the equipment.

Robin Company has the following balances for the current month: Direct materials used $ 19,000 Direct labor $ 21,750 Sales salaries $ 11,250 Indirect labor $ 1,900 Production manager's salary $ 6,050 Marketing costs $ 8,350 Factory lease $ 4,020 What is Robin's total manufacturing cost?

$52,720 Manufacturing costs include the cost of direct materials, direct labor, indirect labor, the production manager's salary, and the factory lease, which total $52,720.

Exeter has a material standard of 1 pound per unit of output. Each pound has a standard price of $27 per pound. During July, Exeter paid $139,000 for 4,980 pounds, which they used to produce 4,720 units. What is the direct materials quantity variance?

$7,020 unfavorable $27 × [(4,720 × 1) − 4,980] = $7,020 unfavorable

A corporation prepared its statement of cash flows for the year. The following information is taken from that statement: Net cash provided by operating activities $ 30,500 Net cash provided by investing activities 5,800 Cash balance, beginning of year 7,400 Cash balance, end of year 12,300 What is the amount of net cash provided by (used in) financing activities?

($31,400) Ending cash − Beginning cash = Change in cash = $12,300 − $7,400 = $4,900 Change in cash = Net cash provided by (used in) operating activities + Net cash provided by (used in) investing activities + Net cash provided by (used in) financing activities Net cash provided by (used in) financing activities = Change in cash − Net cash provided by (used in) operating activities − Net cash provided by (used in) investing activities = $4,900 - $30,500 - 5,800 = ($31,400)

Company X has net sales revenue of $810,000, cost of goods sold of $343,800, and all other expenses of $327,900. The net profit margin is closest to:

0.17 Sales - Cost of goods sold - Operating expenses = Net income = $810,000 - $343,800 - $327,900 = $138,300 Net profit margin = (Net income ÷ Revenues) × 100 = $138,300 ÷ $810,000 = 17%

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,800 units, August 7,000, September 7,800, October 8,100. Each handbag requires 1.5 hours of unskilled labor (paid $18 per hour) and 2.5 hours of skilled labor (paid $25 per hour). How many unskilled labor hours will be budgeted for August?

10,500 Production units multiplied by unskilled labor hours per unit: 7,000 × 1.5 = 10,500 hours.

Nelson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $102,000. The equipment will have an initial cost of $204,000 and have a 3 year life. If the salvage value of the equipment is estimated to be $77,000, what is the payback period? Ignore income taxes.

2.00 years Initial investment divided by the annual increase in cash flow equals the payback period. [$204,000 / $102,000 = 2.00 years.] (Ignore depreciation in the computation because it is a non-cash expense.)

Avocado Company has an operating income of $118,360 on revenues of $1,001,000. Average invested assets are $538,000, and Avocado Company has an 8% cost of capital. What is the return on investment?

22% ROI is operating income / average assets computed as $118,360 / $538,000 = 22%

A company's comparative balance sheet show total assets of $1,310,000 and $1,035,000, for the current and prior years, respectively. The percentage change to be reported in the horizontal analysis is an increase of:

27%. Year-to-year change (%) = [(Current year's total - Prior year's total) ÷ Prior year's total] × 100 = [($1,310,000 − $ 1,035,000) ÷ $1,035,000] × 100 = 27%

A company has earnings per share of $1.80, it paid a dividend of $1.10 per share, and the market price of the company's stock is $51 per share. The price/earnings ratio is closest to:

28.33. Price/Earnings ratio = Stock price ÷ EPS = 51/$1.80 = 28.33

Palmer Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $164,800. The equipment will have an initial cost of $515,000 and have a 7 year life. If the salvage value of the equipment is estimated to be $11,000, what is the accounting rate of return?

32.00% Accounting rate of return equals net income divided by initial investment. (The life of the equipment and its salvage value is irrelevant.) $164,800 / $515,000 = 32.00%.

A company's sales are $315,000 and $230,000 during the current and prior years, respectively. The percentage change is:

37.0%.

Mustang Corp. has a selling price of $24, variable costs of $14 per unit, and fixed costs of $51,100. How many units must be sold to break-even?

5,110 Calculate the break-even point in units by dividing fixed costs by the contribution margin per unit. $51,100 / ($24 − $14) = 5,110.

Ross has received a special order for 12,000 units of its product at a special price of $25. The product normally sells for $35 and has the following manufacturing costs: Per unit Direct materials $ 7 Direct labor 6 Variable manufacturing overhead 3 Fixed manufacturing overhead 11 Unit cost $ 27 Assume that Ross has sufficient capacity to fill the order. If Ross accepts the order, what effect will the order have on the company's short-term profit?

$108,000 increase ($25 - $7 - $6 - $3) × 12,000 = $108,000 increase. Fixed manufacturing overhead is not relevant to this decision, so it is excluded from the analysis.

The net cash flow provided by operating activities is an inflow of $54,042, the net cash flow used in investing activities is $25,331, and the net cash flow used in financing activities is $29,797. If the beginning cash account balance is $12,983, what is the ending cash account balance?

$11,897 Ending Cash Balance = Beginning Cash Balance + Cash Inflows (Outflows) from Operating Activities + Cash Inflows (Outflows) from Investing Activities + Cash Inflows (Outflows) from Financing Activities = $12,983 + $54,042 + ($25,331) + ($29,797) = $11,897

How much would you need to deposit in a savings account that earns 8%, compounded annually, to withdraw $23,000 eight years from now? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.)

$12,427 Use the present value table to find the appropriate multiplier (0.5403) to earn 8% for an eight-year period, compounded annually. $23,000 × 0.5403 = $12,427

The retained earnings account has a beginning balance of $330,975 and an ending balance of $358,113. Net income is $41,101. Which of the following statements is correct?

$13,963 would be subtracted when determining cash flows from financing activities. Cash dividends paid in the amount of $5,813 (see calculation below) would be reported as cash outflows from financing activities. Ending Retained Earnings = Beginning Retained Earnings + Net income − Cash dividends paid Cash dividends paid = Beginning Retained Earnings + Net income − Beginning Retained Earnings = $330,975 + $41,101 − $358,113 = $13,963

How much will you have in a savings account in ten years, if you deposit $1,100 in the account at the end of each year and the account earns 10% interest, compounded annually? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.)

$17,531 Use the future value annuity table to identify the multiplier (15.9374) to earn 10% over a ten-year period. $1,100 × 15.9374 = $17,531

Newport Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $200,000. The equipment will have an initial cost of $900,000 and have a 6 year life. There is no salvage value for the equipment. If the hurdle rate is 10%, what is the approximate net present value? Ignore income taxes. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.)

Negative $28,940 ($200,000 × 4.3553) − $900,000 = ($28,940)

During the current accounting period, revenue from credit sales is $801,000. The accounts receivable balance is $52,780 at the beginning of the period and $65,200 at the end of the period. Which of the following statements is correct?

The receivables turnover ratio is 13.6. Receivables turnover ratio = Net sales revenue ÷ Average net receivables = $801,000 ÷ [($52,780 + $65,200) ÷ 2] = 13.6 Days to collect = 365 ÷ 26.9 = 13.6

Lawrence Corp. is considering the purchase of a new piece of equipment. When discounted at a hurdle rate of 12%, the project has a net present value of $24,600. When discounted at a hurdle rate of 15%, the project has a net present value of ($29,000). The internal rate of return of the project is:

between 12% and 15%. The internal rate of return is the rate of return that yields a zero net present value, which would occur between 12% and 15% in this case.

Net income was $578,600 in the current year and $372,000 in the prior year. The year-to-year percentage change in net income is closest to:

56%. Year-to-year change (%) = [(Current year's total - Prior year's total) ÷ Prior year's total] × 100 = [($578,600 − $372,000) ÷ $372,000] × 100 = 56%

Lincoln, Inc., which uses a volume-based cost system, produces cat condos that sell for $140 each. Direct materials cost $18 per unit, and direct labor costs $12 per unit. Manufacturing overhead is applied at a rate of 230% of direct labor cost. Nonmanufacturing costs are $34 per unit. What is the gross profit margin for the cat condos?

58.6% Total manufacturing cost per unit = $18 + $12 + 230% × $12 = $58 per unit. Gross margin = $140 - $58 = $82; as a percentage of sales, this is $82 / $140 = 58.6%.

Company X has net sales revenue of $840,000, cost of goods sold of $344,400, and all other expenses of $328,200. The gross profit percentage is closest to:

59% Gross profit percentage = [(Net Sales - Cost of Goods Sold) ÷ Net Sales] × 100 = [($840,000 - $344,400) ÷ $840,000] × 100 = 59%

Company X paid Company Y $2.05 million for a new plant. During the same accounting period, Company X experienced the following changes in its balance sheet: Cash decreased by $354,000, Accounts Receivable increased by $322,000, Inventory increased by $276,500, Property, Plant, and Equipment increased by $753,600, and Bonds Payable increased by $2 million. The net cash flow provided by financing activities is:

An inflow of $2 million. The only cash flow from financing activities is the inflow of $2 million from the issuance of bonds. Transactions involving plant, property and equipment are investing activities and changes in current assets are used to determine cash flows from operating activities.

Your grandmother has told you she can either give you $4,300 now or $5,000 when you graduate from college in three years. Your savings account earns 4% interest, compounded annually. Which option would be worth more to you now, and how much more

The $5,000 in the future is worth $145.00 more than the $4,300 now. The present value of the future amount is $5,000 × 0.8890 = $4,445.00, which is $145.00 more than $4,300.

Two years ago, your company bought $45,000 in bonds from another company. This month, it sold half of those bonds for $21,540 and purchased the common stock of another company for $1,450. On the statement of cash flows for this accounting period, your company would report a net cash:

inflow of $20,090 from investing activities. Net cash inflow from investing activities during current period = Proceeds from sale of bonds − Cash paid to purchase common stock = $21,540 - $1,450 = $20,090