In Each of the Following Situations, Identify Whether the Setting

question 18

Essay

In each of the following situations, identify whether the setting is primarily financial accounting or managerial accounting.
a.Abba Company purchased a new telephone system costing $132,000 for its sales division.The new phone system will be depreciated using the straight-line method over a period of five years and has an estimated salvage value of $5,000.
b.Bandex Company has had several customers who are experiencing negative effects of the downturn in the economy.As a result, the company believes its allowance for doubtful accounts should be increased from 1% of credit sales to 1.5% of credit sales.
c.Cortez, Inc.has experienced a decline in net income over the past three years.The engineering department is considering redesigning a product to eliminate waste and inefficiency in the production process.
d.The sales manager of Decca Corporation believes one salesman is creating fictitious sales to inflate his commission.The sales manager has asked the controller for a detailed report of sales by salesman.
e.Essex, Inc.executives are meeting to analyze the company's actual results compared to budgeted amounts.

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Definitions:

Present Value

The present value of a future amount of money or series of cash flows, using a given rate of return.

Market Rate

The prevailing price or cost of products, services, or labor in a competitive marketplace as determined by supply and demand.

Interest

The cost of borrowing money, typically expressed as a percentage rate over a period of time, or the return on investment for savings.

ITQs

Individual Transferable Quotas, a common tool in fisheries management allowing holders to catch a specific percentage of the total allowable catch.