Identifying ethical standards
The Institute of Management Accountants’ Statement of Ethical Professional Practice requires managerial accountants to meet standards regarding competence, confidentiality, integrity, and credibility. Consider the following situations. Which standard(s) is(are) violated in each situation?
b. You see others take home office supplies for personal use. As an intern, you do the same thing, assuming that this is a “perk.”
The ethical standard violated, in this case, is integrity.
The perks are defined as an advantage or something extra in the form of money or some goods.
The correct option is integrity standards.
In this case, if the intern takes home office supplies for personal use, which means that the employee is stealing from the employer of the business.
Stealing from the employer is a violation of integrity standards.
Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.
Company A Company B Company C
Cash $ 6 Wages Expense $ 12 Administrative Expenses $ 4
Net Sales Revenue 48 Equipment 32 Cash 25
Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75
Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8
Selling Expenses 4 Cash 34 Merchandise Inventory 12
Equipment 67 Rent Expense 12 Equipment 55
Work-in-Process Inventory 9 Accounts Receivable 19
Accounts Receivable 14 Cost of Goods Sold 25
Cost of Goods Manufactured 23
Administrative Expenses 7
Raw Materials Inventory 6
Identifying differences between service, merchandising, and manufacturing companies
Using the above data, determine the company type. Identify each company as a service company, merchandising company, or manufacturing company
Determining the flow of costs through a manufacturer’s inventory accounts
True Fit Shoe Company makes loafers. During the most recent year, True Fit incurred total manufacturing costs of $21,900,000. Of this amount, $2,600,000 was direct materials used and $14,800,000 was direct labor. Beginning balances for the year were Direct Materials, $700,000; Work-in-Process Inventory, $1,500,000; and Finished Goods Inventory, $1,100,000. At the end of the year, balances were Direct Materials, $800,000; Work-in-Process Inventory, $2,000,000; and Finished Goods Inventory, $1,080,000.
Requirements Analyze the inventory accounts to determine:
1. Cost of direct materials purchased during the year.
2. Cost of goods manufactured for the year.
3. Cost of goods sold for the year.
Power Switch, Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout North Carolina affected Power Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed.
Before the disaster recovery specialists clean the buildings, Stephen Plum, the company controller, is anxious to salvage whatever records he can to support an insurance claim for the destroyed inventory. He is standing in what is left of the accounting department with Paul Lopez, the cost accountant.
“I didn’t know mud could smell so bad,” Paul says. “What should I be looking for?”
“Don’t worry about beginning inventory numbers,” responds Stephen, “we’ll get them from last year’s annual report. We need first-quarter cost data.”
“I was working on the first-quarter results just before the storm hit,” Paul says. “Look, my report is still in my desk drawer. All I can make out is that for the first quarter, direct material purchases were $476,000 and direct labor, manufacturing overhead, and total manufacturing costs to account for were $505,000, $245,000, and $1,425,000, respectively. Wait! Cost of goods available for sale was $1,340,000.”
“Great,” says Stephen. “I remember that sales for the period were approximately $1,700,000. Given our gross profit of 30%, that’s all you should need.”
Paul is not sure about that but decides to see what he can do with this information. The beginning inventory numbers were:
• Direct Materials, $113,000
• Work-in-Process, $229,000
• Finished Goods, $154,000
1. Prepare a schedule showing each inventory account and the increases and decreases to each account. Use it to determine the ending inventories of Direct Materials, Work-in-Process, and Finished Goods.
2. Itemize a list of the cost of inventory lost.
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