In Each of the Following Situations,identify Whether the Setting Is

question 31

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 the 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:

Sinking Funds

A method for a company to pay off debt by setting aside money over time, ensuring funds are available to repay the debt or replace an asset.

Current Liability

A company's debts or obligations that are due within one year or within the normal operating cycle, necessitating the use of current assets or the creation of new current liabilities.

Operating Cycle

The period it takes for a company to purchase inventory, sell it, and convert the sale into cash.

Bonds Payable

Long-term liabilities representing borrowed money that a company must repay to bondholders, typically with periodic interest payments.