Accounting Skill Assessment Question and Answers

Question1: (10 Marks)

What is accounting? Discuss its Advantages and Disadvantages in a detailed manner?

Question 2: (20 Marks)

Yankee Hotel Foxtrot initiated operations on July 1, 2014. To manage the company officers and managers have requested monthly financial statements starting July 31, 2014. The adjusted trial balance amounts at July 31 are shown below.

	Debit		Credit
Cash	$ 7,680	Accumulated Depreciation-
		Equipment	$ 840
Accounts Receivable	810	Notes Payable	6,000
Prepaid Rent	1,965	Accounts Payable	2,140
Supplies	1,160	Salaries and Wages Payable	360
Equipment	11,400	Interest Payable	40
Owner's Drawings	800	Unearned Service Revenue	580
Salaries and Wages Expense	7,145	Owner's Capital	10,640
Rent Expense	2,740	Service Revenue	14,390
Depreciation Expense	665
Supplies Expense	580
Interest Expense	45
Total debits	$ 34990	Total Credits	$34990

Instructions
(A)    Determine the net income for the month of July
(B)    Determine the amount for Owner’s, Capital at July 31,2014
(C)    Determine the Balance Sheet at July 31, 2014for

Question3:                                                                                                                             (20 Marks)
Polk Company developed the following information for its product:

	Per unit
Sales price	$90
Variable cost	63
Contribution margin	$27
Total fixed costs	$1,080,000

Instructions

Answer the following independent questions and show computations using the contribution margin technique to support your answers.

1. How many units must be sold to break even?
2. What are the  total  sales  that  must  be  generated  for  the  company to  earn  a  profit of $60,000?
3. If the company is presently selling 45,000 units but plans to spend an additional
4. $108,000 on an advertising program, how many additional units must the company sell to earn the same net income it is now making?
5. Using the original data in the problem, compute a new break-even point in units if the unit sales price is increased 20%, 10% increases the unit variable cost, and total fixed costs are increased by$210,000.

Question 4: (20 Marks)
Rodie Company has budgeted sales revenues as follows:

Particulars	June	July	August
Credit sales	$135,000	$145,000	$ 90,000
Cash sales	90,000	255,000	195,000
Total sales	$225,000	$400,000	$285,000

Past Experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit, and 50% is paid in the month of purchase and 50% in the month following purchase.

June	$300,000
July	250,000
August	105,000

Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash.

The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 8% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money, in this case, is for one month.

Instructions
Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.

Question 5: (20 Marks)

“Business decision making requires identification of decision alternatives, logging relevant costs/benefits of each choice, evaluating qualitative issues, and selecting the most desirable option based on a judgmental balancing of quantitative and qualitative factors.” Explain the analytics for managerial decision making.