Cost Management
8th Edition
ISBN: 9781259917028
Author: BLOCHER, Edward
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 3Q
To determine
Explain the rationale for the statement on
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Question 22 (18 points)
Problem 2 – Accounting Changes (18 marks)
During the audit of Hoppy Ending Brewery for the fiscal year ended June 30, 2027, the auditors identified the following issues:
a. The company sells beer for $1 each plus $0.10 deposit on each bottle. The deposit collected is payable to the provincial recycling agency. During 2026, the company had recorded $12,000 of deposits as revenue. The auditors believe this amount should have been recorded as a liability.
b. The company had been using the first-in, first-out cost flow assumption for its inventories. In fiscal 2027, management decided to switch to the weighted-average method. This change reduced inventory by $25,000 at June 30, 2026, and $40,000 at June 30, 2027.
c. The company has equipment costing $6,000,000 that it has been depreciating over 10 years on a straight-line basis. The depreciation for fiscal 2026 was $600,000 and accumulated depreciation on June 30,…
Les Mills Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section. Les Mills activities for the year ended December 31, 2026, included the following:
• Income tax expense for the year was $30,000.
• Sold an investment at FVOCI for $45,000. The original cost of the investment was $52,000.
• Depreciation expense for the year was $19,000.
• Sales for the year were $1,030,000.
• Selling and administration expenses for the year totaled $240,000.
• Les Mills cost of goods sold in 2026 was $315,000.
• Interest expense for the period was $12,000. The interest payable account increased $5,000.
• Accounts payable increased $20,000 in 2026.
• Accounts receivable decreased $36,000 in 2026.
• Les Mills inventory increased $13,000 during the year.
• Dividends were not declared during the year; however, the dividends payable account decreased $5,000.
Required
Prepare the cash flows from operating activities…
The following is an excerpt from a company's financial records at year-end.
Balance in CAD
US dollars chequing account.
$10,000
Cash in sinking fund account for a future repurchase of common shares.
50,000
Term deposit maturing 100 days after the year-end.
78,000
Bank loan
(60,000)
Cash restricted for plant expansion.
45,000
Cash on hand.
7,800
Bank overdraft - part of cash management system
(9,000)
The "cash and cash equivalents" in the cash flow statement will be:
Question 20 options:
($51,200)
$8,800
($1,200)
$17,800
Chapter 10 Solutions
Cost Management
Ch. 10 - Prob. 1QCh. 10 - Differentiate among master, operating, and...Ch. 10 - Many accountants believe that the most important...Ch. 10 - Some critics of budgeting believe that budgets are...Ch. 10 - Prob. 5QCh. 10 - Prob. 6QCh. 10 - Prob. 7QCh. 10 - Prob. 8QCh. 10 - Prob. 9QCh. 10 - Prob. 10Q
Ch. 10 - Prob. 11QCh. 10 - Prob. 12QCh. 10 - Prob. 13QCh. 10 - Prob. 14BECh. 10 - Prob. 15BECh. 10 - Prob. 16BECh. 10 - Prob. 17BECh. 10 - Easy Clean operates a chain of dry cleaners. It is...Ch. 10 - Prob. 19BECh. 10 - Prob. 20BECh. 10 - Prob. 21BECh. 10 - Prob. 22BECh. 10 - Prob. 23BECh. 10 - Purchase Discounts It is typically beneficial for...Ch. 10 - Production and Materials Purchases Budgets White...Ch. 10 - Prob. 26ECh. 10 - Prob. 27ECh. 10 - Cash Budget—Financing Effects You are a relatively...Ch. 10 - Cash Budget Marsha Inc. has the following budgeted...Ch. 10 - Budgeted Cash Receipts: Cash Discounts Allowed on...Ch. 10 - Cash Receipts and Payments Information pertaining...Ch. 10 - Retailer Budget D. Tomlinson Retail seeks your...Ch. 10 - Accounts Receivable Collections and Sensitivity...Ch. 10 - Prob. 34ECh. 10 - What-If Analysis As the management accountant for...Ch. 10 - Profit Planning and Sensitivity Analysis You are...Ch. 10 - Scenario Analysis As part of the process of...Ch. 10 - Prob. 40ECh. 10 - Activity-Based Budgeting (ABB) OFC Company of...Ch. 10 - Prob. 42ECh. 10 - Prob. 43ECh. 10 - Prob. 44ECh. 10 - Prob. 45ECh. 10 - Prob. 46ECh. 10 - Prob. 47ECh. 10 - Prob. 48ECh. 10 - Budgeting for a Merchandising Firm Goldberg...Ch. 10 - Prob. 50PCh. 10 - Prob. 51PCh. 10 - Prob. 52PCh. 10 - Prob. 53PCh. 10 - Prob. 57PCh. 10 - Prob. 59PCh. 10 - Prob. 60P
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- What are investing activities? Question 19 options: Activities involving the acquisition and disposal of long-term assets and other investments. Activities involving the principal revenue-producing activities of the entity. Activities involving changes in the size and composition of the equity's borrowings. Activities that do not involve cash.arrow_forwardWhat are financing activities? Question 18 options: Activities that result in changes in the size and composition of the contributed equity and borrowings of the entity. Activities involving the principal revenue-producing activities of the entity. Activities involving the acquisition and disposal of long-term assets.arrow_forwardIf a company has gaps between the change in cash and the net income for the year: Question 17 options: the financial statement notes provide explanation for the sources of these changes. the statement of cash flow and balance sheet provide explanation for these changes. the statement of cash flow provides explanation of the sources of these changes. the income statement provides sufficient explanation for the sources of these changes.arrow_forward
- If a company has gaps between the change in cash and the net income for the year: Question 17 options: the financial statement notes provide explanation for the sources of these changes. the statement of cash flow and balance sheet provide explanation for these changes. the statement of cash flow provides explanation of the sources of these changes. the income statement provides sufficient explanation for the sources of these changes.arrow_forwardA company had taxable income of $2 million in fiscal 2026 and paid taxes of 0.7 million; the company incurred a loss of $8 million in fiscal 2027 when the tax rate is 50%. How much refund is the company entitled to? Question 16 options: $3.85 million $4 million Nil $0.7 millionarrow_forwardWhen will there be recapture and a capital gain? Question 15 options: When proceeds of disposal are between undepreciated capital cost and original cost. When proceeds of disposal are less than undepreciated capital cost. When proceeds of disposal are more than original cost. When proceeds of disposal are more than undepreciated capital cost.arrow_forward
- A company has income before tax of $350,000, which includes a permanent difference of $65,000 relating to non-taxable dividend income. There are no other permanent or temporary differences. The income tax rate is 45%. The taxes payable are: Question 14 options: $128,250 $157,500 $186,750 $285,000arrow_forwardWhich accurately describes the purpose of the taxes payable method? Question 13 options: It represents the amount of income recognized for accounting purposes. It calculates tax expense based on the accounting income before tax. It calculates tax expense based on the amount payable to tax authorities. It represents the amount of income recognized for tax purposes.arrow_forwardWhich of the following statements is true? Question 12 options: A change in accounting policy is an accounting change made at the discretion of management. Over time, the number of areas where management has a free choice over accounting policies has increased. The last-in, first-out (LIFO) cost flow assumption is an acceptable method for costing inventories in Canada. Changes in accounting policy occur more frequently than changes in estimates.arrow_forward
- For a company using the straight-line method of depreciation that changes the estimated useful life from 20 years to 15 years remaining as at the beginning of the year, the accountant should do the following: Question 11 options: Adjust the amount of accumulated depreciation as at the beginning of the year. Adjust prior year's depreciation. Compute current year depreciation as (carrying amount) x 15/20. Compute current year depreciation as (carrying amount - residual value) divided by 15 years.arrow_forwardWhich of the following statements is true? Question 10 options: A change in estimate is not due to management choice and not due to information known in a prior period. A correction of an error is due to management choice. A correction of an error is the result of information that was unknown at the time of the error. A change is accounting policy is the result of new information.arrow_forwardWhich of the following is a change in policy? Question 9 options: Development costs were capitalized when only five of six criteria for capitalization had been satisfied. Inventory was sold below carrying amount even though the inventory had been previously written down to lower of cost and net realizable value. The company miscalculated the weighted average number of ordinary shares outstanding because it used the wrong date for a share issuance. A company changes from the cost model to the revaluation model of measuring the value of land.arrow_forward
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