Under equity theory, all of the following would be considered a possible input, EXCEPT ______.
a. status
b. seniority
c. pay
d. intelligence
c. pay
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On December 1, Orenthal Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year. The cash receipt was recorded as unearned fees. The adjusting entry for the year ended December 31 would include:
A. a credit to Earned Fees for $3,600. B. a debit to Earned Fees for $1,800. C. a debit to Earned Fees for $3,600. D. a debit to Unearned Fees for $1,800. E. a credit to Unearned Fees for $1,800.
A project is accepted under the net present value method when
a. the percentage return is greater than a predetermined minimum percentage. b. total net cash inflows exceed the purchase price of the asset. c. the purchase price of the asset is less than the present value of net cash inflows. d. the present value of net cash inflows exceeds a predetermined minimum amount.
McGraw Inc manufactures 12,000 units of a part used in its production to manufacture guitars. The annual production activities related to this part are as follows: Direct materials $24,000 Direct labor 60,000 Variable overhead 54,000 Fixed overhead 84,000 Hill Inc has offered to sell 12,000 units of the same part to McGraw for $22 per unit. If McGraw were to accept the offer, some of the
facilities presently used to manufacture the part could be rented to a third party at an annual rental of $18,000. Moreover, $4 per unit of the fixed overhead applied to the part would be totally eliminated. What should McGraw's decision be, and what is the total cost savings that would result? A) Make, $60,000 B) Buy, $60,000 C) Make, $78,000 D) Buy, $78,000
One of the five techniques of earnings management identified by the Securities and Exchange Commission relates to materiality. Independent auditors have traditionally used arbitrary quantitative benchmarks to define how large an amount must be to be
considered material. During the course of auditing the financial statements of a company, an auditor finds some misstatements in the client's financial statements. When combined, the misstatements, result in a 4% overstatement of net income and a $.02 (4%) overstatement of earnings per share. The auditor's materiality threshold is 5%, that is, an item in the financial statements must be misstated by more than 5% to be considered a material deviation from generally accepted accounting principles. On the basis of the established materiality threshold, the auditor concludes that the deviation from GAAP is immaterial and the accounting is permissible. Define the term "materiality" and explain whether the auditor is justified in the conclusion that the accounting proposed by the client is permissible.