The Following Is Summary of Information Presented on the Financial

question 35

Multiple Choice

The following is summary of information presented on the financial statements of a company on December 31, 2015. $$\begin{array} { | l | r | r | } \hline \text { Account } & { \mathbf { 1 0 1 5 } } & \ { \mathbf { 2 0 1 4 } } \\\hline \text { Current Assets } & \$ 65,000 & \$ 50,000 \\\hline \text { Accounts Receivable } & 80,000 & 75,000 \\\hline \text { Merchandise Inventory } & 50,000 & 40,000 \\\hline \text { Current Liabilities } & 75,000 & 50,000 \\\hline \text { Long-term Liabilities } & 30,000 & 50,000 \\\hline \text { Common Stock } & 50,000 & 40,000 \\\hline \text { Retained Earnings } & 40,000 & 25,000 \\\hline & & \\\hline \text { Net Sales Revenue } & \$ 525,000 & \$ 500,000 \\\hline \text { Cost of Goods Sold } & \underline { 400,000 } & \underline { 395,000 } \\\hline \text { Gross Profit } & \$ 125,000 & \$ 105,000 \\\hline \text { Selling Expenses } & \underline { 45,000 } & \underline { 50,000 } \\\hline \text { Net income before income taxexpense } & \$ 80,000 & \$ 55,000 \\\hline \text { Income taxexpense } & 24,000 & \underline { 16,500 } \\\hline \text { Net Income } & \underline { \$ 56,000 } & \$ 38,500 \\\hline\end{array}$$ What would a horizontal analysis report show with respect to current liabilities?

• A) current liabilities are 38.46% of total capital
• B) a 50.00% increase in current liabilities
• C) a current ratio of .87
• D) a 33.33% increase in current liabilities

Understand the application of the step-down method for allocating service department costs.

Determine the total department cost after service department allocations.

Calculate the total cost transferred from one processing department to the next.

Analyze how material and conversion costs are calculated and used in process costing.

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Definitions:

Kilowatt Hours

A unit of energy equivalent to one kilowatt of power expended for one hour, commonly used to measure electricity consumption.

Hourly Fee

A billing method where a service provider charges based on the number of hours worked.

Flat Fee

A charged price for a service that does not vary with usage or time.

Overhead

All manufacturing costs that cannot be directly traced to a product. Overhead includes indirect labor and materials, plant depreciation, insurance and property taxes, plant management salaries, and so forth. See Indirect Cost Pool.