Question 1 Compare and contrast Financial Accounting and Managerial Accounting (5 marks) Answer:

Financial Accounting
Prepared for externals users such as stockholders, creditors, and regulators. Financial statements Prepared quarterly and annually For general purpose Related to the business as a whole Highly condensed Limited to double-entry accounting and cost data Generally accepted accounting principles Audited by CPA

Managerial Accounting
Primary Users of Reports
Prepared for internal users such as company officers and manager.

Internal reports Types and Frequency Prepared as frequently as needed of Reports Purpose of Reports For special-purpose for specific

Content of Reports

decisions Related to subunits of the business Highly detailed Includes any relevant data besides double-entry accounting Standard is relevance to decisions Does not require audits or no independent audits

Verification Process

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.

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 Raw Materials 12/31//2010 Raw Material purchases Indirect Materials Work-in-Process 1/1/2010 Work-in-Process 12/31/10 Finished Goods, 1/1/10 Finished Goods, 12/31/10 Direct Labor Factory Manager's salary 30,000 Factory Insurance 20,000 Property Taxes, Factory Building 205,000 Sales (Net) 15,000 Delivery Expenses 80,000 Sales Commissions 50,000 Indirect Labor 110,000 Factory Machinery Rent 120,000 Factory Utilities 350,000 Depreciation, Factory Building 35,000 Administration Expenses $ 14,000 6,000 1,500,000 100,000 150,000 90,000 40,000 65,000 24,000 300,000

(a) Prepare a cost of goods manufactured schedule for Hitech Manufacturing Cooperation for the year ended 31/12/2010

Answer:

Hitech Manufacturing Cooperation

Costs of Goods Manufactured Schedule For the Year Ended December 31, 2010 Work in process, 1/1 Direct materials Raw materials, 1/1 Raw materials purchases Total raw materials available for use Less: Raw materials, 12/31 Direct materials used Direct labor Manufacturing overhead Indirect labor Factory utilities Factory machinery rent Factory managers salary Depreciation on building Indirect materials Factory insurance Property taxes Total manufacturing overhead Total manufacturing costs Total cost of work in process Less: Work in process, 12/31 Cost of goods manufactured. $ 80,000 $ 30,000 205,000 235,000 20,000 $ 215,000 305,000 $ 90,000 65,000 40,000 35,000 24,000 15,000 14,000 6,000 289,000 854,000 934,000 50,000 $ 884,000

(b) Prepare an income statement for Hitech Manufacturing Cooperation for the year ended 31/12/2010 Answer:

Hitech Manufacturing Cooperation

Income Statement For the Year Ended December 31, 2010 Sales (Net) Costs of goods sold Finished goods inventory, January 1 Costs of goods manufactured Costs of goods available for sale Less: Finished goods inventory, December 31 Costs of goods sold Gross profit Operating Expenses Administrative expenses Sales commissions Delivery expenses Total operating expenses Net income $ 1,500,000 $ 110,000 884,000 994,000 120,000 874,000 626,000 300,000 150,000 100,000 550,000 $ 76,000

(c) Assume that Hitech Manufacturing Cooperations ledgers show the following balances as at 31/12/2010 $ (i) (ii) (iii) (iv) Cash Accounts Receivable (Net) Prepaid Expenses Short-Term Investments 17,000 120,000 13,000 26,000

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

Hitech Manufacturing Cooperation

Balance Sheet (partial) For the Year Ended December 31, 2010 Current Assets Cash Short-term investments Accounts receivable (net) Inventories Finished goods Work in process Raw materials Prepaid expenses Total current assets $ 17,000 26,000 120,000

$ 120,000 50,000 20,000

190,000 13,000 $ 366,000