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Busn 278 Budgeting and Forecasting Final Exam_Answer

Devry Busn 278 Budgeting and Forecasting Final Exam_Answer

Devry Busn 278 Budgeting and Forecasting Final Exam_Answer

GM5Devry Busn 278 Budgeting and Forecasting Final Exam_Answer

Devry Busn 278 Budgeting and Forecasting Final Exam_Answer

Devry Busn 278 Budgeting and Forecasting Final Exam_Answer

Devry Busn 278 Budgeting and Forecasting Final Exam.

1. (TCO 1) Which one of the following is not a benefit of budgeting? (Points : 5)

It facilitates the coordination of activities.
It provides definite objectives for evaluating performance.
It provides assurance that the company will achieve its objectives.
It provides early warning signs of potential threats.

2. (TCO 2) Which of the following is not a qualitative forecasting method? (Points : 5)

Executive opinions
Sales force polling
Delphi method
Classical decomposition

3. (TCO 3) Which of the following statements regarding the t-statistic is true? (Points : 5)

The t-statistic cannot be negative.
The t-statistic measures how many standard errors the coefficient is away from the independent variable.
The higher the t-value, the more confidence we have in the coefficient.
Low t-values indicate high reliability.

4. (TCO 4) Which of the following statements regarding the risk associated with R&D activities is incorrect? (Points : 5)

The amount of time between the R&D activity and the cash flows from the project does not affect risk.
Greater risk is associated with creating new products than improving existing products.
Risk increases as the time between the R&D activity and the cash flows from the project increases.
Assessing risk is a vital part of research and development.

5. (TCO 5) Program budgeting does not include: (Points : 5)

Controlling
Programming
Budgeting
Planning

6. (TCO 6) The payback period technique ___________ (Points : 5)

should be used as a final screening tool.
can be the only basis for the capital budgeting decision.
is relatively easy to compute and understand.
considers the expected profitability of a project.

7. (TCO 6) The profitability index is computed by dividing the ___________ (Points : 5)

total cash flows by the initial investment.
present value of cash inflows by the present value of each outflow.
initial investment by the total cash flows.
initial investment by the present value of cash flows.

8. (TCO 6) A company projects annual cash inflows of $85,000 each year for the next five years if it invests $300,000 in new equipment. The equipment has a five-year life and an estimated salvage value of

$75,000. What is the accounting rate of return on this investment? (Points : 5)

28.3%
13.3%
15%
43.3%

9. (TCO 6) If an asset costs $210,000 and is expected to have a $30,000 salvage value at the end of its ten-year life, and generates annual net cash inflows of $30,000 each year, the payback period is _____.

(Points : 5)

5 years
6 years
7 years
8 years

10. (TCO 6) Hyde Inc. is comparing several alternative capital budgeting projects as shown below:

Projects A B C

Initial Investment $110,000 $90,000 $50,000

Present value of cash inflows $100,000 $100,000 $60,000

Using the profitability index, rank the projects, starting with the most attractive. (Points : 5)

A, C, B.
A, B, C.
C, A, B.
C, B, A.

11. (TCO 6) Cleaners, Inc. is considering purchasing equipment costing $30,000 with a six-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over its

useful life with no salvage value. Cleaners requires a 10% rate of return. What is the approximate net present value of this investment? (Points : 5)

$13,800
$1,794
$886
$2,748

12. (TCO 7) Which of the following would not appear as a fixed expense on a selling and administrative expense budget? (Points : 5)

Freight-out
Office salaries
Property taxes
Depreciation

13. (TCO 7) A company budgeted unit sales of 102,000 units for January, 2008 and 120,000 units for February, 2008. The company has a policy of having an inventory of units on hand at the end of each

month equal to 30% of next month’s budgeted unit sales. If there were 30,600 units of inventory on hand on December 31, 2007, how many units should be produced in January, 2008 in order for the company

to meet its goals? (Points : 5)

107,400 units
102,000 units
96,600 units
138,000 units

14. (TCO 8) Standards that are based on efficient activity with allowances for unavoidable losses are called _______ (Points : 5)

basic standards.
maximum efficiency standards.
currently attainable standards.
expected standards.

15. (TCO 9) A static budget is appropriate for __________ (Points : 5)

variable overhead costs.
direct materials costs.
fixed overhead costs.
none of these.

16. (TCO 9) If the activity level increases 10%, total variable costs will ___________. (Points : 5)

remain the same
increase by more than 10%
decrease by less than 10%
increase 10%

17. (TCO 9) At the high level of activity in November, 7,000 machine hours were run and power costs were $12,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted

to $6,000. Using the high-low method, what is the estimated fixed cost element of power costs? (Points : 5)

$12,000
$6,000
$3,600
$8,400

18. (TCO 10) Which of the following statements regarding budget reports is incorrect? (Points : 5)

The cost of budget reports should not outweigh the benefits.
Budget reports are used for planning, control, and information.
Reports prepared for upper management typically have fewer details than reports prepared for lower-level managers.
Reports are prepared more frequently for upper management than for lower-level managers.

Page 2

1. (TCO 7) The first step in creating the master budget is the sales budget. Describe this budget and the information it includes. Why is the accuracy of the sales budget important? (Points : 20)

2. (TCO 9) Understanding how costs behave can help managers plan operations and choose between various courses of action.

Part (a) Identify and describe the three types of cost behavior, including examples of each Part.

Part (b) As a manager, which cost behavior would you prefer and why? (Points : 20)

3. (TCO 6) Yappy Company is considering a capital investment of $320,000 in additional equipment. The new equipment is expected to have a useful life of 8 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $25,000 and $65,000, respectively. Yappy requires a 10% return on all new investments.

Part (a) Compute each of the following:
1: Payback period.
2: Net present value.
3: Profitability index.
4: Internal rate of return.
5: Accounting rate of return.

(b) Indicate whether the investment should be accepted or rejected. (Points : 30)

4. (TCO 7) Roswell Company has budgeted sales revenue as follows for the next 4 months as follows:

February

$150,000

March

$120,000

April

$105,000

May

$165,000

Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in the second month following the sale. The other 2% is uncollectible.

Prepare a schedule which shows expected cash receipts from sales for the month of May.

5. (TCO 8) Eastern Company’s budgeted and actual sales for 2009 were:

Product

Budgeted Sales

Actual Sales

A

35,300 units at $2.00 per unit

32,700 units at $2.60 per unit

B

27,900 units at $5.00 per unit

29,200 units at $4.70 per unit

Part (a) Calculate the sales volume variance.
Part (b) Calculate the sales price variance.
Part (c) Calculate the total sales variance.

6. (TCO 9) The Mays Clinic has the following monthly telephone records and costs:
Calls

Costs

2,000

$2,400

1,500

2,000

2,200

2,600

2,500

2,900

2,300

2,700

1,700

2,200

Identify the fixed and variable cost elements using the high-low method.

2. (TCO 9) Understanding how costs behave can help managers plan operations and choose between various courses of action.

Part (a) Identify and describe the three types of cost behavior, including examples of each.
Part (b) As a manager, which cost behavior would you prefer and why? (Points : 20)

3. (TCO 6) Yappy Company is considering a capital investment of $320,000 in additional equipment. The new equipment is expected to have a useful life of 8 years with no salvage value. Depreciation is

computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $25,000 and $65,000, respectively. Yappy requires a 10% return on all new

investments.

Part (a) Compute each of the following:
1: Payback period.
2: Net present value.
3: Profitability index.
4: Internal rate of return.
5: Accounting rate of return.
(b) Indicate whether the investment should be accepted or rejected. (Points : 30)

4. (TCO 7) Roswell Company has budgeted sales revenue as follows for the next 4 months as follows:

February

$150,000

March

$120,000

April

$105,000

May

$165,000

Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in the second

month following the sale. The other 2% is uncollectible.

Prepare a schedule which shows expected cash receipts from sales for the month of May.

5. (TCO 8) Eastern Company’s budgeted and actual sales for 2009 were:

Product

Budgeted Sales

Actual Sales

A 35,300 units at $2.00 per unit

32,700 units at $2.60 per unit

B 27,900 units at $5.00 per unit

29,200 units at $4.70 per unit

Part (a) Calculate the sales volume variance.
Part (b) Calculate the sales price variance.
Part (c) Calculate the total sales variance.

6. (TCO 9) The Mays Clinic has the following monthly telephone records and costs:

Calls Costs

2,000 $2,400

1,500 2,000

2,200 2,600

2,500 2,900

2,300 2,700

1,700 2,200

Identify the fixed and variable cost elements using the high-low method.

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Posted on

AC 550 Final Exam Answer Set 1 and 2_Complete_Perfect Answer

AC 550 Final Exam Answer Set 1 and 2_Complete_Perfect Answer

AC 550 Final Exam Answer Set 1 and 2_Complete_Perfect Answer

AC 550 Final Exam Answer Set 1 and 2_Complete_Perfect Answer

AC 550 Final Exam Answer Set 1 and 2_Complete_Perfect Answer

SET 1:

1. (TCO A) Listed below are several information, characteristics, and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application.
(Points : 30)
Potential Matches:

1 : Earnings process completed and realized or realizable

2 : Cost of providing financial information versus the benefits derived from its use

3 : Accruals and deferrals in adjusting and closing process

4 : Business enterprise assumed to have a long life

5 : Stable dollar assumption

6 : Notes as part of necessary information to a fair presentation

7 : Valuing assets at amount originally paid for them

8 : The impact of an item on the overall financial operations of a company

9 : Presentation of error-free information with representational faithfulness

Answer

: Historical cost principle

: Going concern principle

: Matching principle

: Monetary unit

: Revenue recognition principle

: Full disclosure principle

: Reliability characteristic

: Cost-benefit relationship

: Materiality constraint

2. (TCO B) Adjusting Entries: Unearned rent at 1/1/12 was $28,300 and at 12/31/12 was $48,200. The records indicate cash receipts from rental sources during 2010 amounted to $145,200, all of which was credited to the Unearned Rent Account. You are to supply the missing adjusting entry.

3. (TCO B) Adjusting Entries: Information relating to the balances of various accounts affected by adjusting or closing entries appear below. You are asked to supply the missing journal entries which would account for the changes in the account balances. Interest receivable at 1/1/12 was $8,000. During 2010 cash received from debtors for interest on outstanding notes receivable amounted to $11,000. The 2010 income statement showed interest revenue in the amount of $8,900. You are to provide the missing adjusting entry that must have been made, assuming reversing entries are not made.

4. (TCO B) Adjusting Entries: Accumulated depreciation-machinery at 1/1/10 was $150,000. At 12/31/10, the balance of the account was $300,000. During 2010, one piece of equipment was sold. The equipment had an original cost of $100,000 and was 1/2 depreciated when sold. You are to prepare the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit.

5. (TCO B) Adjusting Entries: Allowance for Doubtful accounts made on 1/1/10 was $40,000. The balance in the allowance account on 12/31/10 after making the annual adjusting entry was $60,000 and during 2010 bad debts written off amounted to $30,000. You are to provide the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit.

Second Part

1. (TCO B) Adjusting Entries: Prepaid rent at 1/1/10 was $9,000. During 2010 rent payments of $110,000 were made and charged to “rent expense.” The 2010 income statement shows as a general expense the item “rent expense” in the amount of $111,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr. for debit and Cr. for credit.

2. (TCO B) Adjusting Entries: Retained earnings at 1/1/10 were $100,000 and at 12/31/10 it was $300,000. During 2010, cash dividends of $40,000 were paid and a stock dividend of $40,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry. For each journal entry write Dr. for debit and Cr. for credit.

3. (TCO C) Here is information related to the DRF Corporation.
Retained earnings, December 31, 2012
$ 3,890,000
Sales
4,500,000
Selling and administrative expenses
387,000
Extraordinary Item(Loss)(Net of Tax)
178,000
Cash dividends declared on common stock
82,600
Cost of good sold
1,780,000
Other revenue
142,500
Other expenses
77,800

Instructions: Prepare a multiple step income statement.

4. (TCO D) This is a balance sheet for the ABC corporation as of 12/31/12.
Cash
$ 60,000
Accounts payable
$ 55,000
Accounts receivable (net)
42,200
Long-term liabilities
60,000
Inventories
47,000
Stockholders’ equity
208,500
Investments
66,300
Equipment (net)
86,000
Patents
22,000
Total $323500
Total $323500

The following additional information is provided:
(1) Cash includes the cash surrender value of a life insurance policy $7,400 and a bank overdraft of $1,500 has been deducted.
(2) The net accounts receivable balance includes:
(a) accounts receivable debit balances $56,000;
(b) accounts receivable credit balances $6,000; and
(c) allowance for doubtful accounts $7,800.
(3) Inventories do not include goods costing $6,000 shipped out on consignment. Receivables of $2,000 were recorded on these goods.
(4) Investments include investments in common stock, trading $14,000, available-for-sale $48,300, and franchises $4,000.
(5) Equipment costing $5,000 with accumulated depreciation $4,000 is no longer used and is held for sale. Accumulated depreciation on the other equipment is $40,000.
Instructions:
Prepare a balance sheet in good form (stockholders’ equity details can be omitted).
Do not worry about balancing the statement but rather use your time to compute the account balances properly for presentation purposes.

5. (TCO E) Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $3,500 at the end of each year and provides the leaser (John) with an 8% return on its investment. You may use the following 8% interest factors.

9 Periods
10 Periods
11 Periods
Future Value of 1
1.99900
2.15892
2.33164

Present Value of 1
.50025
.46319
.42888
Future Value of
12.48756
14.48656
16.64549
Ordinary Annuity of 1
Present Value of
6.24689
6.71008
7.13896
Ordinary Annuity of 1
Present Value of
6.74664
7.24689
7.71008
Annuity Due of 1
Instructions
(a) Assuming the computer has an 11-year life and will have no salvage value at the expiration of the lease, what was the original cost of the copier to John?
(b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period?

6. (TCO F) Daniels Company deposits all receipts and makes all payments by check. The following information is available from the cash records.
MARCH 31
BANK RECONCILIATION
Balance per bank
$26,746
Add: Deposits in transit
2,100
Deduct: Outstanding checks
(3,800)
Balance per books
$25,046
Month of April Results
Per Bank
Per Books
Balance April 30
$27,995
$24,355
April deposits
8,864
13,889
April checks
13,100
14,080
April note collected
3,000
-0-
(not included in April deposits)

April bank service charge
35
-0-
April NSF check of a customer returned by the bank
(recorded by bank as a charge)
900
-0-
Instructions
Calculate the amount of the April 30
(1) deposits in transit; and
(2) outstanding checks.
Show all your work for potential partial credit.

7. Steve Company was formed on December 1, 2010. The following information is available from Steve’s inventory record for Product X.

Units Unit Cost

January 1, 2012 (beginning inventory) 2800 $17.00

Purchases:

05-Jan-12 3600 $25.00

25-Jan-12 2800 $27.00

16-Feb-12 2400 $32.00

15-Mar-12 3300 $34.00

A physical inventory on March 31, 2012, shows 4800 units on hand.
Instructions:
Prepare schedules to compute the ending inventory at March 31, 2012, under each of the following inventory methods.
(a) FIFO
(b) LIFO
(c) Weighted-average
Show supporting computations in good form. (Points : 40)

8. (TCO H) A machine cost $300,000 on April 1, 2012. Its estimated salvage value is $60,000 and its expected life is 8 years.
Instructions:
Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used.
(a) Straight-line for 2012
(b) Double-declining balance for 2013
(c) Sum-of-the-years’-digits for 2013.

SET 2:

1. Question : (TCO A) Listed below are several information, characteristics, and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application.

2. Question : (TCO B) Adjusting Entries: Unearned rent at 1/1/10 was $5,300 and at 12/31/10 was $6,000. The records indicate cash receipts from rental sources during 2010 amounted to $60,000, all of which was credited to the Unearned Rent Account.

You are to prepare the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit.

3. Question : (TCO B) Adjusting Entries: Data relating to the balances of various accounts affected by adjusting or closing entries appear below. (The entries which caused the changes in the balances are not given.) You are asked to supply the missing journal entries which would logically account for the changes in the account balances. Interest receivable at 1/1/10 was $1,000. During 2010 cash received from debtors for interest on outstanding notes receivable amounted to $1,000. The 2010 income statement showed interest revenue in the amount of $2,900. You are to provide the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr. for debit and Cr. for credit.

4. Question : (TCO B) Adjusting Entries: Accumulated depreciation-machinery at 1/1/10 was $150,000. At 12/31/10, the balance of the account was $300,000. During 2010,

one piece of equipment was sold. The equipment had an original cost of $100,000 and was 1/2 depreciated when sold. You are to prepare the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit.

5. Question : (TCO B) Adjusting Entries: Allowance for doubtful accounts on 1/1/10 was $70,000. The balance in the allowance account on 12/31/10 after making the annual adjusting entry was $70,000 and during 2010 bad debts written off amounted to $40,000. You are to provide the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit.

Page: 1 2

1. Question : (TCO B) Adjusting Entries: Prepaid rent at 1/1/10 was $30,000. During 2010 rent payments of $100,000 were made and charged to “rent expense.” The 2010 income statement shows as a general expense the item “rent expense” in the amount of $130,000. You are to prepare the missing

adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr. for debit and Cr. for credit.

2. Question : (TCO B) Adjusting Entries: Retained earnings at 1/1/10 were $100,000 and at 12/31/10 it was $300,000. During 2010, cash dividends of $40,000 were paid and a stock dividend of $40,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry. For each journal entry write Dr. for debit and Cr. for credit.

3. Question : (TCO C) Presented below is information related to Bruce Van Company. Retained earnings, December 31, 2010 $650,000
Sales 1,400,000
Selling and administrative expenses 240,000
Hurricane loss (pre-tax) on plant (extraordinary item) 290,000
Cash dividends declared on common stock 33,600
Cost of goods sold 780,000
Gain resulting from computation error on depreciation charge in 2009(pre-tax) 520,000
Other revenue 120,000

Other expenses 100,000

Instructions: Prepare in good form a multiple-step income statement for the year 2011. Assume a 30% tax rate and that 80,000 shares of common stock were outstanding during the year. Show EPS computations as well.

4. Question : (TCO D) The following balance sheet was prepared by the bookkeeper for Purple Company as of December 31, 2011 Purple Company Balance Sheet as of December 31, 2011 Cash $ 80,000 Accounts payable $ 75,000
Accounts receivable (net) 52,200 Long-term liabilities 100,000
Inventories 57,000 Stockholders’ equity 218,500
Investments 76,300
Equipment (net) 96,000
Patents
$393,500 $393,500
The following additional information is provided:
(1) Cash includes the cash surrender value of a life insurance policy $12,000, and a bank overdraft of $2,500 has been deducted.
(2) The net accounts receivable balance includes:
(a) accounts receivable debit balances $60,000;
(b) accounts receivable 0;
(c) allowance for doubtful accounts $3,800.
(3) Inventories do not include goods costing $3,000 shipped out on consignment. Receivables of $3,000 were recorded on these goods.
(4) Investments include investments in common stock, trading $13,000, available-for-sale $48,300, and franchises $15,000.
(5) Equipment costing $5,000 with accumulated depreciation

$4,000 is no longer used and is held for sale. Accumulated depreciation on the other equipment is $40,000.
(6) An unrecorded liability was not recorded on the balance sheet of $2000.
Instructions
Prepare a balance sheet in good form (stockholders’ equity details can be omitted.)

5. Question : (TCO E) Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $2,500 at the end of each year and provides the leaser (John) with an 8% return on its investment. You may use the following 8% interest factors:

9 Periods 10 Periods 11 Periods
Future Value of 1 1.99900 2.15892 2.33164
Present Value of 1 .50025 .46319 .42888
Future Value of 12.48756 14.48656
Ordinary Annuity of 1
Present Value of 6.24689 6.71008 7.13896
Ordinary Annuity of 1
Present Value of 6.74664 7.24689 7.71008
Annuity Due of 1
(a) Assuming the computer has an eleven-year life and will have no salvage value at the expiration of the lease, what was the original cost of the copier to John?
(b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period?

6. Question : (TCO F) Daniels Company deposits all receipts and makes all payments by check. The following information is available from the cash records:
MARCH 31
BANK RECONCILIATION

Balance per bank $26,746
Add: Deposits in transit 2,100
Deduct: Outstanding checks (3,800)
Balance per books $25,046
Month of April Results Per Bank Per Books
Balance April 30 $27,995 $24,355
April deposits 8,864 13,889
April checks 13,100 14,080
April note collected 3,000 -0-
(not included in April deposits)
April bank service charge 35 -0-
April NSF check of
a customer returned by the bank
(recorded by bank as a charge) 900 -0-
Instructions
Calculate the amount of the April 30:
(1) Deposits in transit
(2) Outstanding checks
Show all your work for potential partial credit.

7. Question : (TCO G) Rye Company was formed on December 1, 2010. The following information is available from Rye’s inventory record for Product Bread. Units Unit Cost
January 1, 2011 (beginning inventory) 1,700 $17.00
Purchases:
January 5, 2011 2,600 $20.00
January 25, 2011 2,400 $21.00
February

16, 2011 1,000 $22.00
March 15, 2011 2,100 $25.00

A physical inventory on March 31, 2011, shows 3,000 units on hand.
Instructions
Prepare schedules to compute the ending inventory at March 31, 2011, under each of the following inventory methods:
(a) FIFO.
(b) LIFO.
(c) Weighted-average.
Show supporting computations in good form.

8. Question : (TCO H) A machine cost $500,000 on April 1, 2010. Its estimated salvage value is $50,000 and its expected life is eight years.
Instructions
Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used.
(a) Straight-line for 2010
(b) Double-declining balance for 2011
(c) Sum-of-the-years’-digits for 2011

For getting the instant download solution, Please click on the “PURCHASE” link below to get AC 550 Final Exam Answer Set 1 and 2_Complete_Perfect Answer

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In case you find any problem in getting the download link or downloading the tutorial, please send us an email on mail@genietutorial.com

AC 550 Final Exam Answer Set 1 Part 1_Complete_Perfect Answer