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Chapter 16: Q1SE_b (page 885)

Comparing managerial accounting and financial accounting For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):

b. Provides detailed reports on parts of the company.

Short Answer

Expert verified

A company is a legal entity that carries out the business and the correct answer to this question is managerial accounting.

Step by step solution

01

Definition of Company

A company is defined as a business organization that is a legal entity that is formed by a group of people and operates a business enterprise.

02

Identification of accounting

The detailed reports on the parts of the company are prepared for the internal users or the business managers to make better decisions for the company. So, the correct answer to this question is managerial accounting.

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Most popular questions from this chapter

Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.

Company A Company B Company C

Cash \( 6 Wages Expense \) 12 Administrative Expenses $ 4

Net Sales Revenue 48 Equipment 32 Cash 25

Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75

Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8

Selling Expenses 4 Cash 34 Merchandise Inventory 12

Equipment 67 Rent Expense 12 Equipment 55

Work-in-Process Inventory 9 Accounts Receivable 19

Accounts Receivable 14 Cost of Goods Sold 25

Cost of Goods Manufactured 23

Administrative Expenses 7

Raw Materials Inventory 6

Identifying differences between service, merchandising, and manufacturing companies

Using the above data, determine the company type. Identify each company as a service company, merchandising company, or manufacturing company

Question:Applying ethical standards

Natalia Wallace is the new controller for Smart Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, James Cauvet, the company president, asks Wallace how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 13% for the first time in the company鈥檚 five-year history. Cauvet explains that financial analysts have again predicted a 13% earnings growth for the company and that he does not intend to disappoint them. He suggests that Wallace talk to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies:

a. Persuade suppliers to postpone billing \(13,000 in invoices until January 1.

b. Record as sales \)115,000 in certain software awaiting sale that is held in a public warehouse.

c. Delay the year-end closing a few days into January of the next year so that some of the next year鈥檚 sales are included in this year鈥檚 sales.

d. Reduce the estimated Bad Debts Expense from 5% of Sales Revenue to 3%, given the company鈥檚 continued strong performance.

e. Postpone routine monthly maintenance expenditures from December to January.

Requirements

1. Which of these suggested strategies are inconsistent with IMA standards?

2. How might these inconsistencies affect the company鈥檚 creditors and stockholders?

3. What should Wallace do if Cauvet insists that she follow all of these suggestions?

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

3. Is not required to follow GAAP.

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

g. Depreciation on the manufacturing plant.

Becky Knauer recently resigned from her position as controller for Shamalay Automotive, a small, struggling foreign car dealer in Upper Saddle River, New Jersey. Becky has just started a new job as controller for Mueller Imports, a much larger dealer for the same car manufacturer. Demand for this particular make of car is exploding, and the manufacturer cannot produce enough to satisfy demand. The manufacturer鈥檚 regional sales managers are each given a certain number of cars. Each sales manager then decides how to divide the cars among the independently owned dealerships in the region. Because of high demand for these cars, dealerships all want to receive as many cars as they can from the regional sales manager.

Becky鈥檚 former employer, Shamalay Automotive, receives only about 25 cars each month. Consequently, Shamalay is not very profitable.

Becky is surprised to learn that her new employer, Mueller Imports, receives more than 200 cars each month. Becky soon gets another surprise. Every couple of months, a local jeweler bills the dealer $5,000 for 鈥渕iscellaneous services.鈥� Franz Mueller, the owner of the dealership, personally approves payment of these invoices, noting that each invoice is a 鈥渟elling expense.鈥� From casual conversations with a salesperson, Becky learns that Mueller frequently gives Rolex watches to the manufacturer鈥檚 regional sales manager and other sales executives. Before talking to anyone about this, Becky decides to work through her ethical dilemma. Put yourself in Becky鈥檚 place.

Requirements

1. What is the ethical issue?

2. What are your options?

3. What are the possible consequences?

4. What should you do?
See all solutions

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