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Question 1

Compare and contrast Financial Accounting and Managerial Accounting (5 marks)

Answer:

Financial AccountingManagerial Accounting

Prepared for externals users such as

stockholders, creditors, and

regulators.

Primary Users ofReports

Prepared for internal users such as

company officers and manager.

Financial statements

Prepared quarterly and annuallyTypes and Frequency

of Reports

Internal reports

Prepared as frequently as needed

For general purpose Purpose of Reports For special-purpose for specific

decisions

Related to the business as a whole

Highly condensed

Limited to double-entry

accounting and cost data

Generally accepted accounting

principles

Content of Reports Related to subunits of the business Highly detailed

Includes any relevant data besides

double-entry accounting

Standard is relevance to decisions

Audited by CPA Verification Process Does not require audits or noindependent audits

Question 2

Briefly explain three broad functions of Management. (3 marks)

Answer:

The three broad functions of management are Planning, Directing and Controlling.

Planning involves managers in long term planning and establishing objectives for the

company. Directing requires managers to coordinate a companys many activities and

human resources to ensure a smooth operation. Controlling is making sure companys

activities are on track with its planned goals.

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Question 3

The following are the cost and expense data extracted from Hitech Manufacturing

Cooperation for the year ended December 31, 2010

$ $

Raw Materials 1/1/2010 30,000 Factory Insurance 14,000

Raw Materials 12/31//2010 20,000 Property Taxes, Factory Building 6,000

Raw Material purchases 205,000 Sales (Net) 1,500,000

Indirect Materials 15,000 Delivery Expenses 100,000

Work-in-Process 1/1/2010 80,000 Sales Commissions 150,000

Work-in-Process 12/31/10 50,000 Indirect Labor 90,000

Finished Goods, 1/1/10 110,000 Factory Machinery Rent 40,000

Finished Goods, 12/31/10 120,000 Factory Utilities 65,000

Direct Labor 350,000 Depreciation, Factory Building 24,000

Factory Manager's salary 35,000 Administration Expenses 300,000

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(a) Prepare a cost of goods manufactured schedule for Hitech Manufacturing

Cooperation for the year ended 31/12/2010

Answer:

Hitech Manufacturing CooperationCosts of Goods Manufactured ScheduleFor the Year Ended December 31, 2010

Work in process, 1/1 $ 80,000

Direct materials

Raw materials, 1/1 $ 30,000

Raw materials purchases 205,000

Total raw materials available for use 235,000

Less: Raw materials, 12/31 20,000

Direct materials used $ 215,000

Direct labor 305,000

Manufacturing overhead

Indirect labor $ 90,000

Factory utilities 65,000

Factory machinery rent 40,000

Factory managers salary 35,000

Depreciation on building 24,000

Indirect materials 15,000Factory insurance 14,000

Property taxes 6,000

Total manufacturing overhead 289,000

Total manufacturing costs 854,000

Total cost of work in process 934,000

Less: Work in process, 12/31 50,000

Cost of goods manufactured. $ 884,000

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(b) Prepare an income statement for Hitech Manufacturing Cooperation for the

year ended 31/12/2010

Answer:

Hitech Manufacturing CooperationIncome Statement

For the Year Ended December 31, 2010

Sales (Net) $ 1,500,000Costs of goods soldFinished goods inventory, January 1 $ 110,000Costs of goods manufactured 884,000Costs of goods available for sale 994,000Less: Finished goods inventory, December 31 120,000

Costs of goods sold 874,000Gross profit 626,000Operating Expenses

Administrative expenses 300,000

Sales commissions 150,000

Delivery expenses 100,000

Total operating expenses 550,000

Net income

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(c) Assume that Hitech Manufacturing Cooperations ledgers show the following

balances as at 31/12/2010

$

(i) Cash 17,000

(ii) Accounts Receivable (Net) 120,000

(iii) Prepaid Expenses 13,000

(iv) Short-Term Investments 26,000

Prepare Hitechs balance sheet (extract) as at 31/12/2010, showing the Current

Assets section

Answer:

Hitech Manufacturing CooperationBalance Sheet (partial)

For the Year Ended December 31, 2010

Current Assets $ 17,000

Cash 26,000

Short-term investments 120,000

Accounts receivable (net)Inventories

Finished goods $ 120,000

Work in process 50,000

Raw materials 20,000 190,000

Prepaid expenses 13,000

Total current assets $ 366,000