Module 1: Exercise

IMA standard exercise

Ex 1. Evaluate the following independent situation according to the four ethical standards:
confidentiality, credibility, competence and integrity.

1) Maram is in charge of recording information about cash receipt of ABC Company. While
closing the book at the end of the month, Maram noticed take several receipts having an
extremely large amount has not been recorded in the book. Maram notified her boss
who then told her to ignore the amount. If Maram follow her boss order, Maram will
violate the IMA's ethical standard of ____________________________.

2) Hanan is recently hired to work in the treasury department. Her job includes preparing
the budget for the company. On her second day of work, her boss asked her to prepare
cost budget to purchase multi billion dollars of factory. Afraid of losing her job, Hanan
copied the information from competitor website. Hanan violates the IMA's ethical
standard of ____________________.

3) Eman works at the financial division of Aramco. She was recently involved in the
discussion about the new oil plant in the northern part of Yanbu. During the family
gathering last night, Eman’s uncle asked her about potential investment in Aramco.
Discussing the situation with his uncle will violates the IMA’s ethical standard of
_______________________________.

4) As a human resource manager of Rajhi Company, Ala’a is responsible for personnel of

the company. During the recent interview for the post of marketing officer, Ala’s brother
Mahmod was selected for the job. Ala’a persuades the marketing manager to give a
higher salary for his brother. Ala’a action will violate the IMA’s ethical standard of
_______________________.

5) You are in charge of recording information about cash receipt of Bodoor Company.
While closing the book at the end of the month, you noticed take several receipts having
an extremely large amount. You immediately notified your boss. He smiled at you and
asked you to ignore the amount because that is what the upper management wants to
see. If you follow your boss order, you will violate the IMA's ethical standard of
____________________________.

6) You are recently hired to work in the controller department. Your job includes preparing
the manufacturing cost schedule for the company. On your second day of work, your
boss asked you to prepare cost information sheet for the new products. Afraid of losing
your job, you copied the information from last year that was listed in the company
website. Copying the information from the website violates the IMA's ethical standard of
____________________________.

7) Ahmad works at the financial division of Aramco. He was recently involved in the
discussion about the new oil plant in the northern part of Yanbu. During the family
gathering last night, Ahmad’s uncle asked him about potential investment in Aramco.
Discussing the situation with his uncle will violates the IMA’s ethical standard of
_______________________________.

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 8) As a financial manager of Sultan Company, Nabil is responsible for division expansion
cost allocation. During the recent interview for the post of marketing officer, Nabil’s
brother Mahmod was selected for the job. Nabil persuades the marketing manager to
give a higher salary for his brother. Nabil action will violate the IMA’s ethical standard of
_______________________.

Ex 2. Evaluate the following independent situation according to the four ethical

standards.

1. You are the management accountant in Company XYZ. Your close friend, Ted, is a
shareholder in Company XYZ. Ted asks you for information about Company XYZ that is
typically available only to executive officers in Company XYZ. Sharing this information
with Ted violates the IMA's ethical standard of

2. You are the management accountant in Company ZZ. A supplier to Company ZZ offers
to let stay rent-free at the supplier's condominium in Florida for your upcoming vacation.
Accepting the supplier's offer violates the IMA's ethical standard of

3. Paul Satorius is the controller at ANEW Corporation. As the moment ANEW Corporation
is experiencing financial difficulties and is on the verge of defaulting on a note held by
the bank. At the end of the most recent fiscal year, the company's president instructed
Paul to ignore recording some invoices. If Paul follows the president order, he will
violates the IMA’s ethical standard of

4. Today is your second day as assistant financial personnel. Since yesterday was the first
day of New Year, nobody explain to you about your job requirement. Suddenly, your
boss asks you to prepare end of the year advertising campaign for the launch of the new
products. Preparing the advertising campaign will violates the IMA’s ethical standard of

5. Your company sends you to Barbados to talk to a potential Marketing manager. You like
him so much because he spent two days sightseeing with you. You hired him on the
spot for the job. Which IMA guideline has been violated?

Manufacturing cost exercise

Ex 1. The following costs are incurred in a typical manufacturing company. For each item, insert
the type of cost in Column 1. Insert whether the cost is recorded in manufacturing statement or
income statement in Column 2. Use these abbreviations

Column 1: Column 2:
DM = Direct material 1 = Manufacturing statement
DL = Direct labor 2 = Income Statement
MO = Manufacturing overhead
PC = Period Cost

_______ _______ 1. Lubricants paid for factory machinery

_______ _______ 2. Leather used in making shoes
_______ _______ 3. Transport cost on direct materials purchased
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_______ _______ 4. Factory manager’s salary
_______ _______ 5. Salary for workers painting the dining table
_______ _______ 6. Hazard insurance on factory
_______ _______ 7. Production supervisor’s salary
_______ _______ 8. Factory supplies used
_______ _______ 9. Telephone cost for human resources department
_______ _______ 10. Transport cost to ship goods to customers

Ex 2. The following items represent costs incurred by Ebtisam Company which produce
chocolate.
Column 1: Column 2:
DM = Direct material 1 = Manufacturing statement
DL = Direct labor 2 = Income Statement
MO = Manufacturing overhead
PC = period cost

Column Column
1 2
_______ _______ 1. Depreciation on the factory building
_______ _______ 2. Salary of the workers who pack the chocolate.
_______ _______ 3. Nuts, raisins and almond use in chocolate
_______ _______ 4. Rent on the sales office
_______ _______ 5. Salary of factory supervisor
_______ _______ 6. Insurance on factory building
_______ _______ 7. Company president’s salary
_______ _______ 8. Sugar use in making the chocolate.
_______ _______ 9. Depreciation on delivery truck.
_______ _______ 10. Utility bills on administration building

Ex 3

The following items represent costs incurred by ABC Computers that produces computers and
other computer related products. Identify the cost and the statement to record the cost for each
of the following information.

Column 1: Column 2:

DM = Direct material 1 = Manufacturing statement

DL = Direct labor 2 = Income Statement
MO = Manufacturing overhead
PC = period cost

Column Column
1 2
______ ______ 1. Motherboard used in computer production
_______ _______ 2. Delivery expenses to distribute computers.
_______ _______ 3. Depreciation on the company’s factory.
_______ _______ 4. Salary of the workers assemble the computers.
_______ _______ 5. Utilities expenses incurred in the office building.
_______ _______ 6. Screw and nails use in computer production
_______ _______ 7. Factory maintenance salary
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_______ _______ 3. Depreciation on the company’s building.
_______ _______ 4. Advertising expenses to advertise company’s products.
_______ _______ 5. Factory supervisor’s salary

Ex 4

The following items represent costs incurred by a company which sells chicken broast and
sandwiches. Identify the cost and the statement to record the cost for each of the following
information.

Column 1: Column 2:
DM = Direct material 1 = Manufacturing statement
DL = Direct labor 2 = Income Statement
MO = Manufacturing overhead
PC = period cost

Column Column
1 2
_______ _______ 1. Wet tissue and ketchup
_______ _______ 2. Salary of the workers cutting and baking the chicken.
_______ _______ 3. Depreciation expenses on factory machine.
_______ _______ 4. Salary of production supervisor.
_______ _______ 5. Chicken and flour.
_______ _______ 6. Rent on the restaurants.
_______ _______ 7. Factory maintenance salary
_______ _______ 8. Insurance on factory building.
_______ _______ 9. Delivery expenses.
_______ _______ 10. Utilities expenses for the restaurants.

Manufacturing statement exercise

Ex 1 ABC manufacturing company income statement is shown below. The income statement
was prepared by Christopher, hired part time by the company to prepare income statement.

ABC Manufacturing
Income Statement
For the year ended June 30, 2016

Sales $480,000
Less: operating expenses
Direct labor cost 23,000
Rent expenses, showroom 20,000
Indirect material 16,000
Raw material purchased 62,000
Factory depreciation 7,000
Office salary expenses 12,000
Indirect labor 14,000

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 Insurance expenses 25,000
Factory cleaner salary 3,000
Factory maintenance 2,000
Sales personnel salary 12,000
Utilities expenses 14,000
Advertising expenses 6,000
Office depreciation expenses 4,000
Delivery expense 14,000
Supplies expenses 9,000
Factory misc. expenses 20,000
Office misc. expenses 13,000
Other operating expenses 50,000
Total operating expenses (326,000)
Operating Income $154,000

You conduct an investigation and reveal the following:-

1. Physical inventory count is as follows:
June 1 June 30
Raw material $15,000 $18,500
Work in process 35,000 25,000
Required:-
a. Prepare a schedule cost of goods manufactured and income statement
Ex 2

The Swift Company has just completed operation for March 2015. The company’s chief
accountant resigned two weeks ago; accordingly, the company’s assistant accountant (who is
very inexperienced) has prepared the following income statement for the month’s activities:

SWIFT COMPANY
Income Statement
For the month ended March 31, 2015

Sales $750,000
Less Operating Expenses:
Indirect labor cost $12,000
Utilities $15,000
Direct labor cost $90,000
Depreciation, factory equipment $21,000
Raw materials purchased $159,000
Depreciation, sales equipment $18,000
Insurance expired during the month $4,000
Rent on facilities $50,000
Selling and administrative salaries $32,000

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Advertising $75,000
Factory supervision $40,000
Property taxes, factory building $3,000
Sales commission $80,000
Lease cost, factory equipment $12,000
Indirect materials, factory $6,000
General office supplies (billing) $3,000
General office salary $60,000 ($680,000)
Net loss ($70,000)

Since up until March, the company has been earning a profit every month, the company’s
president is concerned as to the accuracy of the income statement above. You have been
asked to “check over” the statement and make corrections as needed. You have determined the
following additional information

1. The Swift Company is a manufacturing firm

2. 60 percent of the utilities cost and 75 percent of the expired insurance is used for the
factory operations; the remaining amounts are used for selling and administrative activities.
3. Inventory balances at the beginning and end of the month were:
4.
March 1 March 31
Raw Materials $8,000 $27,000
Work in Progress 16,000 21,000
Finished Goods 40,000 60,000

4. Only 80 percent of the rent on facilities applies to factory operations; the remainder
applies to selling and administrative activities.

Required:

1. Prepare a schedule of cost of goods manufactured in good form for March 2015.
2. Prepare an income statement for the month.

Ex 3

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Salma Sweet manufactures ice cream to be distributed around the restaurants in Yanbu. Some
of its costs from the current year include:

Sugar and milk use in manufacturing of ice cream $120,000

Depreciation on ice cream machine $13,000
Factory supervisor salary 15,000
Ice cream flavors of strawberry, chocolate and
vanilla $34,000
Salary of the worker mixing the ice cream $89,000
Sales Revenue $525,000
Insurance expenses $36,000
Advertising expenses $12,000
Rent on the factory building $24,000
Utilities expenses $12,000
Factory maintenance salary $8,000
Electricity bill for factory $7,000
Delivery expenses $6,000
Salary of factory cleaners $5,000
Factory supplies $5,000
Boxes and ice cream containers $6,000
Depreciation expenses for office building $4,000
Petrol/ gasoline expenses $15,000

In addition the following information is available at the end of the year

1. January 1 December 31
Raw material $12,000 $8,000
Work In Process $18,000 $10,500
Finished Goods $23,000 $15,000

2. 40% of the insurance expenses is for factory building and the remaining for office
building
3. Out of the total utilities expenses, 55% is allocated for factory building and the
remaining for office building.
4. 60% of petrol/gasoline expenses is used in office building and the remaining amount
is used in factory building.

Required:-
Prepare a schedule of cost of goods manufactured for the company and income statement

Ex 4
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Hala Company manufactures baby dolls and teddy bear to be distributed around shops in
Yanbu. Some of its costs from the current year of 2015 include:

Depreciation expenses for the factory machine $10,000

Depreciation expenses for delivery van $23,000
Depreciation expenses for office equipment $15,000
Cotton and fabric use in making the doll and bear $64,000
Thread, fur, eyes accessories in making the doll and
bears $34,000
Salary of assembly line workers $45,000
Salary of factory supervisor $12,000
Salary of delivery workers $10,000
Salary of general manager $24,000
Salary of factory cleaners $3,000
Maintenance expenses $12,000
Utilities expenses $20,000
Supplies expenses $6,000
Sales Revenue $300,000
Boxes and plastic to store dolls and bear $13,000
Delivery expenses $5,000
Paint and color for doll and bears $8,000
Administrative expenses $4,000
Sales return and allowances $4,000

In addition the following information is available at the end of the year

1. January 1 December 31
Raw material $8,000 $12,000
Work In Process $12,000 $9,000
Finished Goods $13,000 $15,000

3. 60% of the maintenance expenses is for factory building and the remaining for office
building
4. Out of the total utilities expenses, 20% is allocated for administration building and the
remaining for factory.
5. 70% of supplies is used in office building and the remaining amount is used in factory
building.

Required:-
Prepared a schedule of cost of goods manufactured and income statement for the company for
2015