ACCESS Test Bank for Fundamental Managerial Accounting Concepts 10th Editi
r r r r r r r r r
on Edmonds r
Chapterr01r-rManagementrAccountingrandrCorporaterGovernance
Teaching Notes for Chapter 1
r r r r
Managerialraccountingrrequiresrteachingrmethodsrdifferentrfromrthoserusedrinrfinancialracc
ounting.rInrtherintroductoryrfinancialraccountingrcourse,rinstructorsrteachrstudentsraboutrac
countingrstandards.rArprimaryrgoalrinrteachingrmanagerialraccountingrisrtordeveloprstudent
s’rconditionalrassessmentrskillsr(critical-
thinkingrskills).rForrexample,rinrarlaterrchapter,rstudentsrarerfrequentlyrconfusedrbyrtherfactrt
hat,rinrdifferentrsituations,rargivenrcostrcanrberclassifiedrasrfixedrorrvariable,rdirectrorrindirect,r
relevantrorrnotrrelevant.rThersalaryrcostrofrstorermanagersrmayrberfixedrwithrrespectrtorthernu
mberrofrcustomersrthatrenterrtheirrstores.rHowever,rmanagers’rsalaryrcostrisrvariablerrelative
rtorthernumberrofrstoresrarcompanyroperates.rArmanager’srsalaryrcostrisrdirectlyrtraceablertorar
particularrstorerbutrnotrtraceablertorarsaleroccurringrinrtherstore.rStudentsrmustrlearnrtorassess
rtherconditionsrthatrdeterminercostrclassification.rChapterr1roffersrtherfirstropportunityrtorde
veloprtherstudents’rconditionalrassessmentrskills.rHere,rstudentsrlearnrthatrdepreciationrcanrb
erclassifiedrasranrassetrorranrexpense,rdependingronrcertainrconditions.rIfrardepreciablerassetri
srusedrtorproducerinventory,rtherdepreciationrcostrwillrfirstrberclassifiedrasranrassetr(inventory)
randrlaterrasranrexpenser(costrofrgoodsrsold).rIfrtherdepreciablerassetrisrusedrtorsupportrsellingra
ndradministrativeractivities,rdepreciationrwillrberreportedrdirectlyronrtherincomerstatementra
srdepreciationrexpense.
Studentsrtypicallyrenterrmanagerialraccountingrwithrrigidrideasraboutrexpenserrecogniti
on.rInrfinancialraccountingrtheyrlearnedrthatrdepreciationrandremployeercompensationrcostsr
arerexpensedrdirectlyronrtherincomerstatement.rTheridearthatrdepreciationrrelatedrtormanufac
turingrequipmentrandrwagesrofrproductionrworkersrwillrpassrthroughranrinventoryraccountrb
eforerbeingrexpensedrasrcostrofrgoodsrsoldrisrcontraryrtortheirrexistingrknowledgerbase.rExpa
ndingrthatrknowledgerbaserrequiresrarsignificantrcommitmentrofrteachingrtime.rYourrstuden
tsrarerdevelopingrtheirranalyticalrskills.rTheyrarerlearningrhowrtorassessrtherconditionsrthatri
nfluencercostrclassification.r Thisrtyperofrlearningrrequiresrmorertimerthanrmerelyrmemorizi
ngrdefinitions.rIfryoursometimesrfeelrthatrprogressrisrtoorslow,rrememberrthatryourarerbuildin
grarfoundationruponrwhichrsubsequentrlearningrwillrrest.rThererisrnormorerimportantrteachin
grtaskrthanrhelpingrstudentsrformrarsoundrconceptualrframework.rWerrecommendrusingrappr
oximatelyrthreerhoursrofrclassrtimerforrChapterr1.
1-1
©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorrm
e ynursytest.store herpriorrwrittenrconsentrofrMcGrawrHillrLLC.
,ACCESS Test Bank for Fundamental Managerial Accounting Concepts 10th Editi
r r r r r r r r r
on Edmonds r
Chapterr01r-rManagementrAccountingrandrCorporaterGovernance
Detailed Outline of a Lesson Plan for Chapter 1
r r r r r r r r
ArcomprehensiverlessonrplanrforrtherfirstrdayrofrclassrbeginsrinrtherIntroductionrtorthisrmanual.rPleaserrea
dritrbeforerimplementingrstepsrII–VIIIrofrtherfollowingrlessonrplan.
I. Distinguishrbetweenrmanagerialrandrfinancialraccounting.rTherbestrwayrtordiffe
rentiaterbetweenrmanagerialrandrfinancialraccountingrisrtorhighlightrdifferencesrwh
erertheyroccurrinrthersubjectrmatterrthroughoutrthercourse.rForrexample,rwhenrusingr
estimatedrdatarinrardecision-
makingrcontext,rpointroutrthatrmanagerialraccountingrisrfuture-
orientedrratherrthanrhistoricallyrbased.rArlongrmonologueraboutrtherdifferencesrbet
weenrfinancialrandrmanagerialraccountingrwillronlyrboreryourrstudents.rInrarbriefrintr
oductionrtorthisrtopic,ryourmightrdiscussrtherinformationrneedsrforrinternalrusersr(ma
nagers)rtorplan,rdirect,randrcontrol.rTherinformationrneededrbyrarmanagerrdependsro
nrhis/herrpositionrinrtherorganizationrandrtherparticularrdecisionrfacingrthermanager.r
Ifryourwantrtorspendrmorertimeronrthertopic,rExerciser1-1Arfromrtherend-of-
chapterrmaterialsrinrthertextrmightrberanrappropriaterin-classractivityratrthisrpoint.
II. UserDemonstrationrProblemr1-1rasrarproblem-
basedrlearningrexercise.r(Seertherintroductionrtorthisrmanualrforrdetailsraboutrproble
m-basedrlearning.)
III. Afterrgivingrtherstudentsrarfewrminutesrtordigestrtherproblemrandrformulaterso
lutions,rengagerthemrinrsomerformrofrcollaborativerlearningrexperience.
IV. Introducer ther conceptr ofr productr costingr byr providingr ther solutionr to
requirementrarofrDemonstrationrProblemr1-1.
V. ContinuingrDemonstrationrProblemr1-
1,rdeterminerthercostrperrunitrandrthersalesrpricerusingrarcost-
plusrpricingrstrategy.
VI. Showrhowrproductrcostsrarerexpensedrthroughrcostrofrgoodsrsold.
VII. Introducerthercostrcategoryrofrselling,rgeneral,randradministrativercostsr(SG&
Arcosts).
VIII. UserProblemr1-19Arasranrin-classrreinforcementrexercise.
IX. CopyrandrdistributerDemonstrationrProblemr1-2.rDemonstrationrProblemr1-
2rexpandsrtherclassificationrconceptsrintroducedrinrDemonstrationrProblemr1-
1rtorincluderaccountingrforrtherdepreciationrofrmanufacturingrequipment.rExplainrth
atrdepreciationronrmanufacturingrfacilitiesrandrequipmentrisrarproductrcost.rPointroutrt
hatrtherentryrtorrecordrdepreciationronrmanufacturingrequipmentrrepresentsranrassetr
exchangertransaction.rTherbookrvaluerofrmanufacturingrequipmentrdecreases,randrt
herbalancerinrtherInventoryraccountrincreases.rStudentsrarersoraccustomedrtortheridea
rthatrdepreciationrisranrexpense,rtheyrarernotrlikelyrtorgrasprtherproductrcostrconceptru
ntilrtheyrworkrarproblem.rAfterryourrexplanation,rassign
1-2
©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorrm
e ynursytest.store herpriorrwrittenrconsentrofrMcGrawrHillrLLC.
,ACCESS Test Bank for Fundamental Managerial Accounting Concepts 10th Editi
r r r r r r r r r
on Edmonds r
Chapterr01r-rManagementrAccountingrandrCorporaterGovernance
DemonstrationrProblemr1-
2rtorstudentsrandrhaverthemrattemptrtorworkrtherproblem.rStudentsrshouldrberablertor
workrtherproblemrwithrminimalrhelp.rWalkraroundrtherroom;rifryourfindrthatrstudent
srarerhavingrtrouble,rhelprasrneeded.
IfryourdesirerfurtherrreinforcementrofrproductrversusrSG&Arcostrclassifications,rseer
Problemr1-20Arorr1-
20B.rStudentsrmayrneedrhelprgettingrstartedrwithrtheserproblems.
X. Discussrtherimportancerofrproductrandrperiodrcostingrinrfinancialrstatements.rS
tudentsrarerinterestedrinrhowrproductrcostingraffectsrreal-
worldrdecisionrmaking.rAfterrshowingrthemrhowrtherclassificationrofrcostsrasrproduc
trversusrselling,rgeneral,randradministrativercanraffectrtheramountsrreportedrinrarcom
pany’srbalancersheetrandrincomerstatement,rwerdiscussrhowrtheramountsrreportedrinr
therfinancialrstatementsrcanraffectrbusinessrdecisions.rSpecifically,rwerdiscussrtheri
mplicationsrforracquiringrcapitalrorrdebt,rtherpotentialreffectronrexecutivercompensa
tion,randrtherimpactronrincomertaxes.rToraddressrtheserissues,rwersuggestryouruserPr
oblemr1-21Arasrardemonstrationrproblem.rThen,ryourmayrwishrtoruserProblemr1-
21Brasrarhomeworkrproblem.
XI. Discussrmanagerialrversusrfinancialrtreatmentrofrupstream,rmidstream,randrd
ownstreamrcostsrinrmanufacturingrcompanies.rThisrcanreliminatertherneedrforrsep
araterreportsrforrinternalrandrexternalrfinancialrreporting.rManagersrmayrfailrtoruserup
streamrorrdownstreamrcostsrwhenrcalculatingrsalesrpricerorrproductrprofitability.rUs
erDemonstrationrProblemr1-3rtorintroducerthisrconcept.
XII. Therchapterrprovidesrarbriefrintroductionrtortotalrqualityrmanagementr(TQM
),ractivity-
basedrmanagementr(ABM),randrvaluerchainranalysis.rEachrofrthesertopicsrisrcover
edrinrmorerdepthrinrlaterrchaptersrofrthertext.rIfryourarerrunningrshortrofrtime,ryourmayr
minimizerthertimeryourallocatertorthesersubjects.rIfryourwishrtorcoverrthesertopics,rw
ersuggestrthatryouruserarproblemrfromrtherArSetrofrtherend-of-
chapterrmaterials,rlikerProblemr1-
29Aronrvaluerchainranalysis,rinrthertextrasrardemonstrationrproblem.rThenryourmayr
wishrtoruserProblemr1-29Brasrarhomeworkrproblem.
1-3
©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorrm
e ynursytest.store herpriorrwrittenrconsentrofrMcGrawrHillrLLC.
, ACCESS Test Bank for Fundamental Managerial Accounting Concepts 10th Editi
r r r r r r r r r
on Edmonds r
Chapterr01r-rManagementrAccountingrandrCorporaterGovernance
Demonstration Problems for Chapter 1 r r r r
Demonstration Problem 1-1 Identifying Product Costs
r r r r r r
EiffelrManufacturingrCompanyrmakesrsmallrreplicasrofrmajorrlandmarksrthatritrsellsrtorsouv
enirrshops.rThercompanyrwasrstartedronrJanuaryr1,rYearr1,rwhenritracquiredr$60,000rcashrfro
mrtherissuerofrcommonrstock.rDuringrYearr1,rthercompanyrpurchasedrandrusedrrawrmaterial
srthatrcostr$16,000rcash.rItrpaidrwagesrofr$22,000rcashrtortherworkersrwhormadertherreplicas.
rFinally,rmanufacturingroverheadrcosts,rincludingrrentalrfeesrpaidrforrfacilitiesrandrequipme
nt,ramountedrtor$12,000rcash.rThercompanyrstartedrandrcompletedrtherproductionrofr1,000rr
eplicasrduringrYearr1.
Required
a. DeterminertheramountrofrexpenserEiffelrincurredrinrYearr1,rassumingrnonerofrtherreplica
srwerersoldrinrYearr1.
b. Recordrtheraccountingreventsrassociatedrwithrmakingrther1,000rreplicasrinrarfinancialrstat
ementsrmodelrlikertheronershownrbelow.rThereventrpertainingrtortherissuerofrcommonrst
ockrisrrecordedrinrthermodelrasranrexample.
Assets = Stk.rEquity
C. Ret.
+ = Stk. +r Earn. Rev.r –r Exp.r =r NetrInc.
Events Cash Inv.
1 60,000r + = 60,000r+ – =
c. Determinerthercostrperrunitrofrther1,000rreplicas.rDeterminerthersalesrpricerperrunit,rassu
mingrtherproductsrarersoldrforrcostrplusr40%rofrcost.
d. Recordrthersalerofr800rreplicas.
e. Recordrtherpaymentrofrar$4,000rsalesrcommissionrtorthersalespersonrwhorsoldrther replic
as.
1-4
©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorrm
e ynursytest.store herpriorrwrittenrconsentrofrMcGrawrHillrLLC.
r r r r r r r r r
on Edmonds r
Chapterr01r-rManagementrAccountingrandrCorporaterGovernance
Teaching Notes for Chapter 1
r r r r
Managerialraccountingrrequiresrteachingrmethodsrdifferentrfromrthoserusedrinrfinancialracc
ounting.rInrtherintroductoryrfinancialraccountingrcourse,rinstructorsrteachrstudentsraboutrac
countingrstandards.rArprimaryrgoalrinrteachingrmanagerialraccountingrisrtordeveloprstudent
s’rconditionalrassessmentrskillsr(critical-
thinkingrskills).rForrexample,rinrarlaterrchapter,rstudentsrarerfrequentlyrconfusedrbyrtherfactrt
hat,rinrdifferentrsituations,rargivenrcostrcanrberclassifiedrasrfixedrorrvariable,rdirectrorrindirect,r
relevantrorrnotrrelevant.rThersalaryrcostrofrstorermanagersrmayrberfixedrwithrrespectrtorthernu
mberrofrcustomersrthatrenterrtheirrstores.rHowever,rmanagers’rsalaryrcostrisrvariablerrelative
rtorthernumberrofrstoresrarcompanyroperates.rArmanager’srsalaryrcostrisrdirectlyrtraceablertorar
particularrstorerbutrnotrtraceablertorarsaleroccurringrinrtherstore.rStudentsrmustrlearnrtorassess
rtherconditionsrthatrdeterminercostrclassification.rChapterr1roffersrtherfirstropportunityrtorde
veloprtherstudents’rconditionalrassessmentrskills.rHere,rstudentsrlearnrthatrdepreciationrcanrb
erclassifiedrasranrassetrorranrexpense,rdependingronrcertainrconditions.rIfrardepreciablerassetri
srusedrtorproducerinventory,rtherdepreciationrcostrwillrfirstrberclassifiedrasranrassetr(inventory)
randrlaterrasranrexpenser(costrofrgoodsrsold).rIfrtherdepreciablerassetrisrusedrtorsupportrsellingra
ndradministrativeractivities,rdepreciationrwillrberreportedrdirectlyronrtherincomerstatementra
srdepreciationrexpense.
Studentsrtypicallyrenterrmanagerialraccountingrwithrrigidrideasraboutrexpenserrecogniti
on.rInrfinancialraccountingrtheyrlearnedrthatrdepreciationrandremployeercompensationrcostsr
arerexpensedrdirectlyronrtherincomerstatement.rTheridearthatrdepreciationrrelatedrtormanufac
turingrequipmentrandrwagesrofrproductionrworkersrwillrpassrthroughranrinventoryraccountrb
eforerbeingrexpensedrasrcostrofrgoodsrsoldrisrcontraryrtortheirrexistingrknowledgerbase.rExpa
ndingrthatrknowledgerbaserrequiresrarsignificantrcommitmentrofrteachingrtime.rYourrstuden
tsrarerdevelopingrtheirranalyticalrskills.rTheyrarerlearningrhowrtorassessrtherconditionsrthatri
nfluencercostrclassification.r Thisrtyperofrlearningrrequiresrmorertimerthanrmerelyrmemorizi
ngrdefinitions.rIfryoursometimesrfeelrthatrprogressrisrtoorslow,rrememberrthatryourarerbuildin
grarfoundationruponrwhichrsubsequentrlearningrwillrrest.rThererisrnormorerimportantrteachin
grtaskrthanrhelpingrstudentsrformrarsoundrconceptualrframework.rWerrecommendrusingrappr
oximatelyrthreerhoursrofrclassrtimerforrChapterr1.
1-1
©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorrm
e ynursytest.store herpriorrwrittenrconsentrofrMcGrawrHillrLLC.
,ACCESS Test Bank for Fundamental Managerial Accounting Concepts 10th Editi
r r r r r r r r r
on Edmonds r
Chapterr01r-rManagementrAccountingrandrCorporaterGovernance
Detailed Outline of a Lesson Plan for Chapter 1
r r r r r r r r
ArcomprehensiverlessonrplanrforrtherfirstrdayrofrclassrbeginsrinrtherIntroductionrtorthisrmanual.rPleaserrea
dritrbeforerimplementingrstepsrII–VIIIrofrtherfollowingrlessonrplan.
I. Distinguishrbetweenrmanagerialrandrfinancialraccounting.rTherbestrwayrtordiffe
rentiaterbetweenrmanagerialrandrfinancialraccountingrisrtorhighlightrdifferencesrwh
erertheyroccurrinrthersubjectrmatterrthroughoutrthercourse.rForrexample,rwhenrusingr
estimatedrdatarinrardecision-
makingrcontext,rpointroutrthatrmanagerialraccountingrisrfuture-
orientedrratherrthanrhistoricallyrbased.rArlongrmonologueraboutrtherdifferencesrbet
weenrfinancialrandrmanagerialraccountingrwillronlyrboreryourrstudents.rInrarbriefrintr
oductionrtorthisrtopic,ryourmightrdiscussrtherinformationrneedsrforrinternalrusersr(ma
nagers)rtorplan,rdirect,randrcontrol.rTherinformationrneededrbyrarmanagerrdependsro
nrhis/herrpositionrinrtherorganizationrandrtherparticularrdecisionrfacingrthermanager.r
Ifryourwantrtorspendrmorertimeronrthertopic,rExerciser1-1Arfromrtherend-of-
chapterrmaterialsrinrthertextrmightrberanrappropriaterin-classractivityratrthisrpoint.
II. UserDemonstrationrProblemr1-1rasrarproblem-
basedrlearningrexercise.r(Seertherintroductionrtorthisrmanualrforrdetailsraboutrproble
m-basedrlearning.)
III. Afterrgivingrtherstudentsrarfewrminutesrtordigestrtherproblemrandrformulaterso
lutions,rengagerthemrinrsomerformrofrcollaborativerlearningrexperience.
IV. Introducer ther conceptr ofr productr costingr byr providingr ther solutionr to
requirementrarofrDemonstrationrProblemr1-1.
V. ContinuingrDemonstrationrProblemr1-
1,rdeterminerthercostrperrunitrandrthersalesrpricerusingrarcost-
plusrpricingrstrategy.
VI. Showrhowrproductrcostsrarerexpensedrthroughrcostrofrgoodsrsold.
VII. Introducerthercostrcategoryrofrselling,rgeneral,randradministrativercostsr(SG&
Arcosts).
VIII. UserProblemr1-19Arasranrin-classrreinforcementrexercise.
IX. CopyrandrdistributerDemonstrationrProblemr1-2.rDemonstrationrProblemr1-
2rexpandsrtherclassificationrconceptsrintroducedrinrDemonstrationrProblemr1-
1rtorincluderaccountingrforrtherdepreciationrofrmanufacturingrequipment.rExplainrth
atrdepreciationronrmanufacturingrfacilitiesrandrequipmentrisrarproductrcost.rPointroutrt
hatrtherentryrtorrecordrdepreciationronrmanufacturingrequipmentrrepresentsranrassetr
exchangertransaction.rTherbookrvaluerofrmanufacturingrequipmentrdecreases,randrt
herbalancerinrtherInventoryraccountrincreases.rStudentsrarersoraccustomedrtortheridea
rthatrdepreciationrisranrexpense,rtheyrarernotrlikelyrtorgrasprtherproductrcostrconceptru
ntilrtheyrworkrarproblem.rAfterryourrexplanation,rassign
1-2
©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorrm
e ynursytest.store herpriorrwrittenrconsentrofrMcGrawrHillrLLC.
,ACCESS Test Bank for Fundamental Managerial Accounting Concepts 10th Editi
r r r r r r r r r
on Edmonds r
Chapterr01r-rManagementrAccountingrandrCorporaterGovernance
DemonstrationrProblemr1-
2rtorstudentsrandrhaverthemrattemptrtorworkrtherproblem.rStudentsrshouldrberablertor
workrtherproblemrwithrminimalrhelp.rWalkraroundrtherroom;rifryourfindrthatrstudent
srarerhavingrtrouble,rhelprasrneeded.
IfryourdesirerfurtherrreinforcementrofrproductrversusrSG&Arcostrclassifications,rseer
Problemr1-20Arorr1-
20B.rStudentsrmayrneedrhelprgettingrstartedrwithrtheserproblems.
X. Discussrtherimportancerofrproductrandrperiodrcostingrinrfinancialrstatements.rS
tudentsrarerinterestedrinrhowrproductrcostingraffectsrreal-
worldrdecisionrmaking.rAfterrshowingrthemrhowrtherclassificationrofrcostsrasrproduc
trversusrselling,rgeneral,randradministrativercanraffectrtheramountsrreportedrinrarcom
pany’srbalancersheetrandrincomerstatement,rwerdiscussrhowrtheramountsrreportedrinr
therfinancialrstatementsrcanraffectrbusinessrdecisions.rSpecifically,rwerdiscussrtheri
mplicationsrforracquiringrcapitalrorrdebt,rtherpotentialreffectronrexecutivercompensa
tion,randrtherimpactronrincomertaxes.rToraddressrtheserissues,rwersuggestryouruserPr
oblemr1-21Arasrardemonstrationrproblem.rThen,ryourmayrwishrtoruserProblemr1-
21Brasrarhomeworkrproblem.
XI. Discussrmanagerialrversusrfinancialrtreatmentrofrupstream,rmidstream,randrd
ownstreamrcostsrinrmanufacturingrcompanies.rThisrcanreliminatertherneedrforrsep
araterreportsrforrinternalrandrexternalrfinancialrreporting.rManagersrmayrfailrtoruserup
streamrorrdownstreamrcostsrwhenrcalculatingrsalesrpricerorrproductrprofitability.rUs
erDemonstrationrProblemr1-3rtorintroducerthisrconcept.
XII. Therchapterrprovidesrarbriefrintroductionrtortotalrqualityrmanagementr(TQM
),ractivity-
basedrmanagementr(ABM),randrvaluerchainranalysis.rEachrofrthesertopicsrisrcover
edrinrmorerdepthrinrlaterrchaptersrofrthertext.rIfryourarerrunningrshortrofrtime,ryourmayr
minimizerthertimeryourallocatertorthesersubjects.rIfryourwishrtorcoverrthesertopics,rw
ersuggestrthatryouruserarproblemrfromrtherArSetrofrtherend-of-
chapterrmaterials,rlikerProblemr1-
29Aronrvaluerchainranalysis,rinrthertextrasrardemonstrationrproblem.rThenryourmayr
wishrtoruserProblemr1-29Brasrarhomeworkrproblem.
1-3
©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorrm
e ynursytest.store herpriorrwrittenrconsentrofrMcGrawrHillrLLC.
, ACCESS Test Bank for Fundamental Managerial Accounting Concepts 10th Editi
r r r r r r r r r
on Edmonds r
Chapterr01r-rManagementrAccountingrandrCorporaterGovernance
Demonstration Problems for Chapter 1 r r r r
Demonstration Problem 1-1 Identifying Product Costs
r r r r r r
EiffelrManufacturingrCompanyrmakesrsmallrreplicasrofrmajorrlandmarksrthatritrsellsrtorsouv
enirrshops.rThercompanyrwasrstartedronrJanuaryr1,rYearr1,rwhenritracquiredr$60,000rcashrfro
mrtherissuerofrcommonrstock.rDuringrYearr1,rthercompanyrpurchasedrandrusedrrawrmaterial
srthatrcostr$16,000rcash.rItrpaidrwagesrofr$22,000rcashrtortherworkersrwhormadertherreplicas.
rFinally,rmanufacturingroverheadrcosts,rincludingrrentalrfeesrpaidrforrfacilitiesrandrequipme
nt,ramountedrtor$12,000rcash.rThercompanyrstartedrandrcompletedrtherproductionrofr1,000rr
eplicasrduringrYearr1.
Required
a. DeterminertheramountrofrexpenserEiffelrincurredrinrYearr1,rassumingrnonerofrtherreplica
srwerersoldrinrYearr1.
b. Recordrtheraccountingreventsrassociatedrwithrmakingrther1,000rreplicasrinrarfinancialrstat
ementsrmodelrlikertheronershownrbelow.rThereventrpertainingrtortherissuerofrcommonrst
ockrisrrecordedrinrthermodelrasranrexample.
Assets = Stk.rEquity
C. Ret.
+ = Stk. +r Earn. Rev.r –r Exp.r =r NetrInc.
Events Cash Inv.
1 60,000r + = 60,000r+ – =
c. Determinerthercostrperrunitrofrther1,000rreplicas.rDeterminerthersalesrpricerperrunit,rassu
mingrtherproductsrarersoldrforrcostrplusr40%rofrcost.
d. Recordrthersalerofr800rreplicas.
e. Recordrtherpaymentrofrar$4,000rsalesrcommissionrtorthersalespersonrwhorsoldrther replic
as.
1-4
©rMcGrawrHillrLLC.rAllrrightsrreserved.rNorrm
e ynursytest.store herpriorrwrittenrconsentrofrMcGrawrHillrLLC.
