School of Post Graduate Studies

Department of Accounting and Finance

Financial and Managerial Accounting For MBA students
Individuals and Group assignments questions
Course instructor: Abdella Hussen ( PhD in Finance Candidate) ,December 2022.
General Instructions:

 Discuss and solve the work out of the following all Questions accordingly related requirements.
 Show all the necessary steps clearly and neatly.
 You can use your open course Text books or reference that is the necessary to solve the questions.
 Due date for all assignments (group and individuals) submission is a week before completion of current
course semester based on QC schedule.

Part I. individual assignment 20%

1. What is IFRS and explain Benefits of adopting IFRS

2. Explain Conceptual Framework for Financial Reporting
3. “The terms debit and credit mean increase and decrease, respectively.” Do you agree? Explain
4. Distinguish between the two categories of adjusting entries, and identify the types of adjustments
applicable to each category
5. What is the primary objective of financial reporting?
6. Identify the characteristics of useful accounting information
7. Explain and discuss what a statement of income or loss and statement of financial positions tells you as
managers (i.e what information’s you get from these accounting reports for Decision making purpose)
8. What data are relevant in deciding whether to accept an order at a special price?
9. What is the decision rule in deciding whether to sell a product or process it further?
10. What are joint products? What accounting issue results from the production process that creates joint
products?
11. How are allocated joint costs treated when making a sell-or-process-further decision?
12. How does a budget contribute to good management?
13. Mr. Mohammed asks your help in understanding the essentials of effective budgeting. Identify the essentials for
to help Mr. Mohammed.
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14. “Accounting plays a relatively unimportant role in budgeting.” Do you agree? Explain.
15. Given the characteristics of useful accounting information, complete each of the following statements.
(a) For information to be _____, it should have predictive value, confirmatory value, and be material.
(b) _____ is the quality of information that gives assurance that the information accurately depicts what
really happened.
(c) _____ means using the same accounting principles and methods from year to year within a company.
16. Here are some qualitative characteristics of useful accounting information:
1. Predictive value 3. Verifiable
2. Neutral 4. Timely
Match each qualitative characteristic to one of the following statements.
———— (a) Accounting information should help provide accurate expectations about future events.
———— (b) Accounting information cannot be selected, prepared, or presented to favor one set of
interested users over another.
———— (c) The quality of information that occurs when independent measures, using the same
methods, obtain similar results.
———— (d) Accounting information must be available to decision-makers before it loses its capacity
to influence their decisions.
17. What responsibilities does management have in budgeting?
18. Indicate whether the following items would appear on the income statement (IS),
19. Statement of financial position (FP), or retained earnings statement (RE).
_______ (a) Notes payable _______ (d) Cash
_______ (b) Advertising expense _______ (e) Service revenue
_______ (c) Share capital—ordinary _______ (f) Dividend.
20. Selected transactions for Spring Green Lawn Care Company are listed below.
1. Sold ordinary shares for cash to start business.
2. Paid monthly rent.
3. Purchased equipment on account.
4. Billed customers for services performed.
5. Paid dividends.
6. Received cash from customers billed in (4).
7. Incurred advertising expense on account.
8. Purchased additional equipment for cash.
9. Received cash from customers when service was performed.

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 Instructions
List the numbers of the above transactions and describe the effect of each transaction on assets,
liabilities, and equity. For example, the first answer is (1) Increase in assets and increase in equity

Case 1. ABY is the accounting expert for a firm that has many small clients that need monthly accounting
services. ABY has been asked by the partner in charge to analyze the asset section of firms’ statements of
financial positions which follow below:

2017 2018

Cash $2,500 $3,900

Accounts receivable, net 35,000 40,000

Inventory 85,000 122,000

Other current assets 3,400 4,110

Total current assets 125,900 170,010

Property, plant & equipment, net 180,000 230,000

Other assets 15,000 26,000

Total assets $320,900 $426,010

Required:
Prepare a Horizontal analysis of the assets section of the project statement of financial position for 2017 &
2018.and interpret any significant change in assets values. Round all percentage answers to one decimal place.
Case 2. Fufa Company is a leading manufacturer of sunglasses. One of Fufa 's products protects the eyes from
ultraviolet rays. An upscale sporting goods store has contacted Fufa about purchasing 12,000 pairs of these
sunglasses. Fufa s unit manufacturing cost, based on a full capacity of 100,000 units, is as follows:
Direct materials $6
Direct labor 4
Manufacturing overhead (60% fixed) 20
Total manufacturing costs $ 30

Fufa also incurs selling and administrative expenses of $75,000 plus $2 per pair for sales commissions. The
company has plenty of excess manufacturing capacity to use in manufacturing the sunglasses. Fufa’s normal
price for these sunglasses is $45 per pair. The sporting goods store has offered to pay $40 per pair. Since the
special order was initiated by the sporting goods store, no sales commission will be paid.
Required: What would be the effect on Fufa’s incremental income if the special order were accepted?

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Case 3. The following items were taken from the financial statements of Fozan Company. (All amounts are in
thousands.)

Long-term debt £ 1,000 Accumulated depreciation—equip. £ 4,125

Prepaid insurance 680 Accounts payable 1,444
Equipment 11,500 Notes payable (due after 2015) 800
Long-term investments 1,200 Share capital—ordinary 10,000
Short-term investments 3,619 Retained earnings 4,750
Notes payable (due in 2015) 500 Accounts receivable 1,696
Cash 2,668 Inventory 1,256
Instructions
Prepare a classified statement of financial position in good form as of December 31, 2024.
Case 4. These financial statement items are for Emerad Company at year-end, July 31, 2024.
Salaries and wages payable $ 2,080 Notes payable (long-term) $ 1,800
Salaries and wages expense 50,700 Cash 14,200
Utilities expense 22,600 Accounts receivable 9,180
Equipment 30,000 Accumulated depreciation—equip. 6,000
Accounts payable 4,100 Dividends 3,000
Service revenue 62,000 Depreciation expense 2,500
Rent revenue 8,500 Retained earnings (beginning of the year) 22,700
Share capital—ordinary 25,000
Instructions
(a) Prepare an income statement and a retained earnings statement for the year.
(b) Prepare a classified statement of financial position at July 31.

Case 5. Arare Company produces small gasoline-powered engines for model airplanes. Mr.Aman , Arareo's
CFO, has presented you with the following cost information:
Direct Materials Inventory, beginning $ 80,000
Direct Materials Inventory, ending $125,000
Work in Process Inventory, beginning $130,000
Work in Process Inventory, ending $ 90,000
Direct labor $770,000
Direct materials purchases $940,000
Insurance, factory $ 50,000
Depreciation, factory $ 20,000
Depreciation, executive offices $ 15,000
Indirect labor $220,000
Utilities, factory $ 15,000
Utilities, executive offices $ 8,000
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Property taxes, factory $ 18,000
Property taxes, executive offices $ 14,000

Required
Using this cost information, prepare a cost of goods manufactured schedule
Q6. Bogart Company is considering two alternatives. Alternative A will have revenues of $160,000 and costs of
$100,000. Alternative B will have revenues of $180,000 and costs of $125,000. Compare Alternative A to
Alternative B showing incremental revenues, costs, and net income.

Group assignments questions (only maximum of eight students in one Group: No More)

Q1. Explain similarity and difference between Financial and Managerial accounting.

Q2. List and explain five type IFRS based a complete set of GPFS (general purpose financial statements)

Q3. Linda Haile opened Fresh Step Carpet Cleaners on March 1. During March 2023, the following
transactions were completed.

March. 1 Shareholders invested $14,000 cash in the business in exchange for ordinary shares.
1 Purchased used truck for $8,000, paying $3,000 cash and the balance on account.
3 Purchased cleaning supplies for $1,200 on account.
5 Paid $1,800 cash on one-year insurance policy effective March 1.
14 Billed customers $4,800 for cleaning services.
18 Paid $1,500 cash on amount owed on truck and $500 on amount owed on cleaning supplies.
Mar. 20 Paid $1,800 cash for employee salaries.
21 Collected $1,600 cash from customers billed on March 14.
28 Billed customers $2,500 for cleaning services.
31 Paid $320 for the monthly gasoline bill for the truck.
31 Declared and paid $800 cash dividends.
Use the following chart of accounts for Fresh Step Carpet Cleaners contains the accounts:
No. 101 Cash, No. 112 Accounts Receivable, No. 126 Supplies, No. 130 Prepaid Insurance, No. 157
Equipment, No. 158 Accumulated Depreciation—Equipment, No. 201 Accounts Payable, No. 212
Salaries and Wages Payable, No. 311 Share Capital—Ordinary, No. 320 Retained Earnings, No. 332
Dividends, No. 350 Income Summary, No. 400 Service Revenue, No. 633 Gasoline Expense, No. 631
Supplies Expense, No. 711 Depreciation Expense, No. 722 Insurance Expense, and No. 726 Salaries and
Wages Expense.
Instructions

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(a) Journalize and post the March transactions. Use page J1 for the journal and the three column form of
account.

(b) Prepare a trial balance at March 31 on a worksheet.

(c) Enter the following adjustments on the worksheet and complete the worksheet.

(1) Unbilled revenue for services performed at March 31 was $750.

(2) Depreciation on equipment for the month was $300.
(3) One-twelfth of the insurance expired.
(4) An inventory count shows $250 of cleaning supplies on hand at March 31.
(5) Accrued but unpaid employee salaries were $720.

(d) Prepare the income statement and a retained earnings statement for March and a classified statement of
financial position at March 31.

(e) Journalize and post adjusting entries. Use page J2 for the journal.

(f) Journalize and post closing entries and complete the closing process. Use page J3 for the journal.

(g) Prepare a post-closing trial balance at March 31

Q4. For United Africa Company the following projected reports the following operating results for the month of
June 30, 2023 availed for analysis. Round all percentage answers to one decimal place.

United Africa Company

CVP projected income statement
For the Month Ended June 30, 2023

Total Per unit

Sales (5000 units ) $600,000 $120

Variable cost 360,000 72

Contribution margin 240,000 48

Total Fixed cost 200,000

Net income 40,000

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Instructions:
To increase net income, project management team is considering reducing the selling price by 10%, with no
changes to unit variable costs or fixed costs. Project Management team is confident that this change will
increase unit sales by 25%. Using the contribution margin technique, compute the break-even point in
units and dollars and margin of safety in dollars.

A. Assuming no changes to sales price or costs,

B. Assuming changes to sales price and volume as described above.
C. Assuming change (B) approved, Calculate the number of units that the company must sell to earn
operating income of $80,000.
D. Comment on your findings.

Q5. An analysis of the accounts of Roberts Company reveals the following manufacturing cost data for the
month ended June 30, 2024.

Inventories Beginning Ending

Raw materials $9,000 $13,100
Work in process 5,000 7,000
Finished goods 9,000 8,000
Costs incurred: raw materials purchases $54,000, direct labor $47,000, manufacturing overhead
$19,900. The specific overhead costs were: indirect labor $5,500, factory insurance $4,000, machinery
depreciation $4,000, machinery repairs $1,800, factory utilities $3,100, miscellaneous factory costs
$1,500.
Assume that all raw materials used were direct materials.
Instructions
(a) Prepare the cost of goods manufactured schedule for the month ended June 30, 2024.
(b) Show the presentation of the ending inventories on the June 30, 2024, balance sheet.

Q6. Andinet Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product at full capacity
that normally sells for $45. A foreign wholesaler offers to buy 3,000 units at $25 each. Jaymes will incur special
shipping costs of $2 per unit.

Assuming that Andinet has excess operating capacity, indicate the net income (loss) Andinet would
realize by accepting the special order.

Q7. Manson Industries incurs unit costs of $8 ($5 variable and $3 fixed) in making a subassembly part for its
finished product. A supplier offers to make 10,000 of the assembly part at $6 per unit. If the offer is accepted,

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Manson will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any,
Manson will realize by buying the part.

Q8. The following trial balance was taken from the books of Fisk Corporation on December 31, 2010.
Account Debit Credit
Cash $ 12,000
Accounts Receivable 40,000
Note Receivable 7,000
Allowance for Doubtful Accounts $ 1,800
Merchandise Inventory 44,000
Prepaid Insurance 4,800
Furniture and Equipment 125,000
Accumulated Depreciation--F. & E. 15,000
Accounts Payable 10,800
Common Stock 44,000
Retained Earnings 55,000
Sales 280,000
Cost of Goods Sold 111,000
Salaries Expense 50,000
Rent Expense 12,800
Totals $406,600 $406,600
At year end, the following items have not yet been recorded.
a. Insurance expired during the year, $2,000.
b. Estimated bad debts, 1% of gross sales.
c. Depreciation on furniture and equipment, 10% per year.
d. Interest at 6% is receivable on the note for one full year.
e. Rent paid in advance at December 31, $5,400 (originally charged to expense).
f. Accrued salaries at December 31, $5,800.

Instructions
(a) Prepare the necessary adjusting entries.

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(b) Prepare the necessary closing entries.
Q9. WE Company has completed all operating budgets other than the income statement for 2024. Selected data from these
budgets follow.

Sales: $350,000

Purchases of raw materials: $145,000

Ending inventory of raw materials: $15,000

Direct labor: $40,000; Manufacturing overhead: $73,000, including $3,000 of depreciation expense

Selling and administrative expenses: $36,000 including depreciation expense of $1,000; Interest expense: $1,000

Principal payment on note: $2,000; Dividends declared: $2,000 and Income tax rate: 30%

Other information:

Assume that the number of units produced equals the number sold.

Year-end accounts receivable: 4% of 2024 sales.

Year-end accounts payable: 50% of ending inventory of raw materials.

Interest, direct labor, manufacturing overhead, and selling and administrative expenses other than depreciation are paid
as incurred.

Dividends declared and income taxes for 2014 will not be paid until 2015.

Instructions

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(a) Calculate budgeted cost of goods sold.

(b) Prepare a budgeted income statement for the year ending December 31, 2014.

(c) Prepare a budgeted balance sheet as of December 31, 2014.

Q10. North Company has completed all of its operating budgets. The sales budget for the year shows 50,000 units and
total sales of $2,250,000. The total unit cost of making one unit of sales is $25. Selling and administrative expenses are
expected to be $300,000. Income taxes are estimated to be $210,000. Prepare a budgeted income statement for the year
ending December 31, 2014.

Q11.Ash Creek Company is preparing its master budget for 2014. Relevant data pertaining to its sales, production, and
direct materials budgets are as follows.

Sales. Sales for the year are expected to total 2,000,000 units. Quarterly sales are 20%, 20%, 30%, and 30%, respectively.
The sales price is expected to be $45 per unit for the First three quarters and $50 per unit beginning in the fourth quarter.
Sales in the first quarter of 2015 are expected to be 20% higher than the budgeted sales for the first quarter of 2014.

Production. Management desires to maintain the ending finished goods inventories at 25% of the next quarter’s
budgeted sales volume.

Direct materials. Each unit requires 2 pounds of raw materials at a cost of $12 per pound. Management desires to
maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production
requirements for first quarter of 2015 are 450,000 pounds.

Required :

Prepare the sales, production, and direct materials budgets by quarters for 2014.

Q12. Turney Company produces and sells automobile batteries, the heavy-duty HD-240.

The 2014 sales forecast is as follows.

Quarter HD-240

1 5,000

2 7,000

3 8,000

4 10,000

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The January 1, 2014, inventory of HD-240 is 2,000 units. Management desires an ending inventory each quarter equal to
40% of the next quarter’s sales. Sales in the first quarter of 2015 are expected to be 25% higher than sales in the same
quarter in 2014.

Instructions: Prepare quarterly production budgets for each quarter and in total for 2014.

Q13. Fuqua Company’s sales budget projects unit sales of part 198 Z of 10,000 units in January, 12,000 units in February,
and 13,000 units in March. Each unit of part 198Z requires 4 pounds of materials, which cost $2 per pound. Fuqua
Company desires its ending raw materials inventory to equal 40% of the next month’s production requirements, and its
ending finished goods inventory to equal 20% of the next month’s expected unit sales. These goals were met at December
31, 2013.

Instructions

(a) Prepare a production budget for January and February 2014.

(b) Prepare a direct materials budget for January 2014.

Q14. Dady Company has accumulated the following budget data for the year 2014.

1. Sales: 30,000 units, unit selling price $85.

2. Cost of one unit of finished goods: direct materials 2 pounds at $5 per pound, direct labor 3 hours at $15 per hour, and
manufacturing overhead $5 per direct labor hour.

3. Inventories (raw materials only): beginning, 10,000 pounds; ending, 15,000 pounds.

4. Selling and administrative expenses: $200,000.

5. Income taxes: 30% of income before income taxes.

Instructions

(a) Prepare a schedule showing the computation of cost of goods sold for 2014.

(b) Prepare a budgeted income statement for 2014.

Q15. Ogleby Industries has sales in 2013 of $5,600,000 (800,000 units) and gross profit of $1,344,000. Management is
considering two alternative budget plans to increase its gross profit in 2014.

Plan A would increase the selling price per unit from $7.00 to $7.60. Sales volume would decrease by 5% from its 2013
level. Plan B would decrease the selling price per unit by 5%. The marketing department expects that the sales volume
would increase by 150,000 units.

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At the end of 2013, Ogleby has 70,000 units on hand. If Plan A is accepted, the 2014 ending inventory should be equal to
90,000 units. If Plan B is accepted, the ending inventory should be equal to 100,000 units. Each unit produced will cost
$2.00 in direct materials, $1.50 in direct labor, and $0.50 in variable overhead. The fixed overhead for 2014 should be
$980,000.

Instructions

(a) Prepare a sales budget for 2014 under (1) Plan A and (2) Plan B.

(b) Prepare a production budget for 2014 under (1) Plan A and (2) Plan B.

(c) Compute the cost per unit under (1) Plan A and (2) Plan B. Explain why the cost per unit is different for each of the
two plans. (Round to two decimals.)

(d) Which plan should be accepted? (Hint: Compute the gross profit under each plan.)

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