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                   (BACHELOR DEGREE 05)

                       SCHOOL OF ACCOUNTING
   Date:                Class:                Name                     Marks:

I. Matching (10 marks):
Listed below are technical terms in accounting.
a. Earnings per share                       f. Activity-based costing
b. Materials price variance                 g. Tax credit
c. cash flows                               h. Relevant range
d. Retained earnings                        i. Deferred income taxes
e. out-of-pocket cost                       j. Traceable fixed costs
  Each of the following statements may describe one of these technical terms.
  For each statement, indicate the term described.
1. An element of stockholders’ equity which is reduced by dividends.
2. An amount subtracted from the gross tax liability.
3. The costs deducted from contribution margin to determine segment margin.
4. Income taxes applicable to earnings which have already been included in the
    income statement but which appear in the income tax returns of a future
5. The span over which output is likely to vary and assumptions about cost
    behavior generally remain valid.
6. Net income applicable to the common stock divided by the weighted-average
    number of common shares outstanding during the year.
7. A method of allocating manufacturing overhead to products using multiple
    application rates and a wide variety of cost drivers.
8. A term describing both cash receipts (inflows) and cash payments (outflows).
9. A cost yet to be incurred that will require future payment and may vary
    among alternative courses of action.
10. The portion of the total materials variance for which a company’s purchasing
    agent is often responsible.
II. True and False (10 Marks)
1. The production schedule is not an element of master budget.
2. An investment center has annual sales of $500,000,a contribution margin
    ratio of 40%, and traceable fixed costs of $80,000.Average assets invested in
    the center are $600,000,and the minimum expected ROA is 15%. Then, if
    $10,000in additional advertising would result in $60,000in additional sales,
    segment margin would increase by $14,000.
3. When a corporation needs to raise large amounts of long-term capital it
    generally sells additional shares of capital stock or issues bonds receivable.
4. If Marlow’s headquarters were destroyed by a tornado, it would be presented
    in a separated section of the current year’s income statement of Marlow
5. The cost of disposing of hazardous waste materials resulting from factory
    operations is a product cost.
6. Perhaps the most important financial consideration in capital budgeting is
    the expected effects upon current cash flows and current profitability.
7. The type of cost accounting system likely to be used by a construction
    company is process cost system.
8. In the course of using incremental analysis, not all variable costs are
    incremental and that some fixed costs may be incremental in a given
9. JIT is a philosophy of eliminating non-value-adding activities and increasing
    product quality throughout the manufacturing process.
10. The labor rate variance is determined by multiplying the difference between
    the actual labor rate and the standard labor rate by the standard labor hours
    allowed for a given level of output.

III. Translate the following sentence into Chinese (30 marks)
1. The owners’ equity in a corporation, as in other types of business
    organizations, is equal to the assets of the business minus the liabilities.
    However, states laws require that the stockholders’ equity section of a
    corporate balance sheet clearly indicate the source of the owners’ equity. The
    two basic sources of owners’ equity are (1) investment by the stockholders
    (paid-in capital), and (2) earnings from profitable operation of the business
    (retained earnings).
2. One of the most important analytical tools used by many managers is
    cost-volume-profit analysis. CVP analysis is a means of learning how costs
    and profits behave in response to change in the level of business activity. An
    understanding of these relationships is essential in developing plans and
    budgets for future business operations. The concepts of cost-volume-profit
    analysis may be applied to the business as a whole; to individual segments of
    the business such as a branch, or a department; or to a particular product

IV. Transactions (50 marks)
1. Rodgers Mfg. Co. is completing its master budget for the first two quarters of
the current year. the following financial budget estimates (labeled B1 to B5) have
been prepared:
                           Estimated Receipts from customers (B1)
                                                         First quarter   Second quarter
Balance of receivables at beginning of year                  $150,000
Collections on first quarter sales of $400,000
--60% in first quarter and 40% in the second                       (1)              (2)
Collections on second quarter sales of $600,000
--60% in the second quarter and 40% in the                                             (3)
Cash receipts from customers                                          (4)              (5)

                            Payments on current payables (B2)
                                                      First quarter         Second quarter
Balance at beginning of quarter                            $244,000                $80,000
Budgeted increase in payables during the                    300,000                320,000
  Total payables during quarter                            $544,000               $400,000
Less: Estimated balance at end of quarter                     80,000                90,000
Payments on current payables during quarter                $464,000               $310,000

                                Prepayments budget (B3)
                                                     First quarter          Second quarter
Balance at beginning of quarter                             $5,000                  $7,000
Estimated cash expenditure during quarter                    8,000                   9,000
  Total prepayments                                        $13,000                 $16,000
Less: Expiration of prepayments                              6,000                   8,000
Prepayments at end of quarter                               $7,000                  $8,000

                                  Debt service budget (B4)
                                                         First    quarter   Second quarter
Notes payable at the beginning of the quarter                     $50,000          $49,000
Interest expense for the quarter                                    1,500            1,470
  Total principal plus accrued interest                           $51,500          $50,470
Less: Dash payments (principal & interest)                          2,500            2,500
Notes payable at the end of the quarter                           $49,000          $47,970

                                 Budgeted income taxes (B5)
                                                        First     quarter   Second quarter
Income tax liability at beginning of quarter                      $25,000          $30,000
Estimated income taxes for the quarter                             30,000           40,000
  Total accrued income tax liability                              $55,000          $70,000
Cash payment of amount owed at beginning of                        25,000           30,000
Income tax liability at end of quarter                            $30,000          $40,000
a. Calculate (1) to (5)
b. Prepare a cash budget for Rodgers Mfg. Co. for the first two quarters of the
   current year. Assume that the company’s cash balance at the end of last year
   was $50,000.
                                     Rodgers Mfg. Co.
                                        Cash budget
                             First two quarters of current year
                                                   First quarter   Second quarter
Cash balance at beginning of quarter
Cash receipts:
Cash received form customers
  Total cash available
Cash payments:
  Payment of current payables
  Debt service, including interest
  Income tax payments
    Total disbursements
Cash balance at end of the quarter

2. The following summary amounts reflect the operations of Dunleer
   Corporation for the year 1997.
   Net sales………………………………………….$2120000
   Cost of goods sold…………………………………1165000
   Selling expenses…………………………………….100000
   Administrative expenses……………………………..50000
         In addition to the selling expenses shown above, Dunleer Corporation
    made an advance payment of $310000 in December of 1997 for a sales
    promotion campaign for a new line of products. The sales campaign consisted
    of a series of television commercials to air in January and February of the
    following year, when the new product was to be released. The $310000 cost of
    this sales campaign was to be deducted in computing taxable income for 1997,
    but the company recognized this expense for accounting purposes in 1998,
    when sales of the new product line would be reflected in revenue. The
    company followed interperiod income tax allocation procedures in reporting
    income taxed in the income statements for 1997 and 1998.
a. Prepare an income statement for Dunleer Corporation for 1997. Show your
   computations of the provision for federal income taxes and the income taxes
   expense for 1997. In computing the tax, use the shortcut method of multiplying
   the entire taxable income by 34%.
b. Prepare the journal entry which should be made to record Dunleer’s current
   income taxes expense, the current income tax liability, and the deferred income
   tax liability at the end of 1997.
c. Prepare the journal entry needed at December 31, 1998, to record the
   company’s current income taxes expense for 1998. (Again, use the shortcut
   method to compute income tax expense.)
3. On July 1, City Hospital leased equipment from Medtech Instruments for a
     period of five years. The lease calls for monthly payments of $2,000, payable
     in advance on the first day of each month ,beginning July 1.
     Prepare the journal entry needed to record this lease in the accounting
   records of City Hospital on July 1 under each of the following independent
a.The lease represents a simple rental arrangement (an operating lease).
b.At the end of five years, title to this equipment will be transferred to City
Hospital at no additional cost. The present value of the 60 monthly lease
payments is $90,809, of which $2,000 is paid in cash on July 1.

4. The accounting staff of Educators’Outlet,Inc., has assembled the following
information for the year ended December 31, 1999.
        Cash sales                                                       800,000
        Credit sales                                                    2,500,000
        Collections on accounts receivable                              2,200,000
        Cash transferred from the money
        market fund to the general bank account                          250,000
        Interest and dividends received                                   100,000
        Purchases (all on account)                                      1,800,000
        Payments on accounts payable to
        merchandise suppliers                                           1,500,000
        Cash payments for
        operating expenses                                               1,050,000
        Interest paid                                                       180,000
        Income taxes paid                                                   95,000
        Loans made to borrowers                                           500,000
        Collections on loans (excluding receipts of interest)             260,000
        Cash paid to acquire plant assets                                3,100,000
        Book value of plant assets payable                                660,000
        Loss on sales of plant assets                                       80,000
        Proceeds from issuing bonds payable                              2,500,000
        Dividends paid                                                    120,000
        Cash and cash equivalents, beginning of year                      446,000
        Cash and cash equivalents, end of year                               -?-
Prepare a formal statement of cash flows. Place brackets around amounts
representing cash outflows.
5. B produces two models. Information for each model is shown below:
                                                             Model 100   Model 101
   Sales price per unit -----------------------------------------$250    $150
   Costs and expenses per unit :
    Direct materials -- -----------------------------------------$60       $40
    Direct labor----------------------------------------------------$40   $30
    Manufacturing overhead (applied at the rate of $24
     per machine-hour, 1/3 of which is fixed and
      2/3 variable )-----------------------------------------------$48     $24
    Variable selling expenses-----------------------------------$40        $20
    Total costs and expenses per unit-------------------------$188         $114
   Profit per unit -------------------------------------------------$62 $36
  Machine-hours required to produce one unit--------------2                1
    Total manufacturing overhead amounts to $180,000 per month, one-third of
which is fixed. The demand for either product is sufficient to keep the plant
operating at full capacity of 10,000 machine-hours per month. Assume that only
one product is to be produced in the future.
a. Prepare a schedule showing the contribution margin per machine-hour for
each product.
b. Explain your recommendation as to which of the two products should be
                       Answers for exam from chapter 14-26 (05)

I.       (10 marks)
1            2         3          4         5         6          7         8       9       10
d            g         j          I         h         a          f         c       e       b

II. (10 marks)
1            2         3          4         5         6          7         8       9       10
F            T         F          T         T         F          F         T       T       F

III. (30 marks)

1. (15 marks)
法律要求公司资产负债表的股东权益部分应列明所有者权益的来源。 所有者权益的两个基本
来源是:             ;              。

2. (15 marks)

IV. (50 marks)
1. a. (1) 400,000 × 60% = 240,000 (2) 400,000 × 40% = 160,000
      (3) 600,000 × 60% = 360,000 (4) 150,000 + 240,000 = 390,000
      (5) 160,000 + 360,000 = 520,000
                                            Rodgers Mfg. Co.
                                               Cash budget
                                    First two quarters of current year
                                                                   First quarter   Second quarter
    Cash balance at beginning of quarter                                 50,000          -59,500
    Cash receipts:
    Cash received form customers                                       390,000           520,000
      Total cash available                                             440,000           460,500
    Cash payments:
      Payment of current payables                                      464,000           310,000
      Prepayments                                                         8,000            9,000
      Debt service, including interest                                    2,500            2,500
   Income tax payments                                            25,000            30,000
     Total disbursements                                         499,500           351,500
 Cash balance at end of the quarter                              -59,500           109,000
                                      Dunleer Corporation
                                       Income Statement
                             For the Year Ended December 31.1997
     Net sales…………………………………………………………………..$2120000
          Cost of goods sold…………………………………….$1165000
          Selling expenses…………………………………………100000
          Administrative expenses…………………………………..50000            1315000
     Income before income taxes………………………………………………..$805000
     Income taxes expense………………………………………………………..273700
     Net income………………………………………………………………….$531300

Income tax liability: (805000-310000)*34%=168300
Income taxes expense: 805000*34%=273700
b. 1997:
   Income Taxes Expense        273700
      Income Taxes Payable             168300
      Deferred Income Taxes            105400
c. Dec 31.1998:
Income taxes expense: (1900000-1000000)*34%=900000*34%=306000
Income tax liability: (1900000-1000000+310000)*34%=1210000*34%=411400
   Income Taxes Expense        306000
   Deferred Income Taxes        105400
         Income Taxes Payable          411400
3. a. Dr. Rental expense     2000
                   Cr. Cash    2000
b. Dr. Interest expense       486.52
        Lease payable to obligation     1513.48
                    Cr. Cash       2000
4.                               Educators’ Outlet. Inc
                                Statement of cash flows
                          for the year ended December 31, 1999
        Cash flows from operating activities:
              Cash received from customers                         3,300,000
              Interest and dividends required                         100,000
                  Cash provided by operating activities                           3,400,000
              Cash paid to suppliers and employees                 (2,550,000)
              Interest paid                                           (180,000)
              Income taxes paid                                    (95,000)
                  Cash disbursed for operating activities                       (2,825,000)
        Net cash provided by operating activities                                   575,000

        Cash flows from investing activities:
              Loans made to borrowers                          (500,000)
              Collections on loans                               260,000
              Purchase of plant assets                        (3,100,000)
              Proceeds from sales of plant assets                 580,000
        Net cash used in investing activities                                 (2,760,000)

        Cash flows from financing activities:
              Proceeds from issuing bonds payable              2,500,000
              Dividends paid                                   (120,000)
        Net cash provided by financing activities                             2,380,000
        Net increase in cash                                                     195,000
        Cash and cash equivalents, beginning of year                             446,000
        Cash and cash equivalents, end of year                                   641,000

5. a.                                    Model 100              Model 101
Unit selling price                         250                     150
Unit variable costs                        172                     106
Unit contribute margin                      78                       44
Direct labor hours required per unit          2                        1
Contribution margin per hour                 39                       44
Total capacity (hours)                    10,000                   10,000
Total contribution margin if only
one product is created                      390,000                   440,000

b. Model 100 should be discontinued. Because Model 101 can maximize its total contribution

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