Posted: May 5th, 2016
A company buys an automobile it expects to use for 60,000 miles. The company knows that it will have to perform repairs and maintenance during that time. Each routine repair maintains the ability of the car to last for 60,000 miles, but does not extend its life beyond the 60,000 miles. In addition, the company might decide to buy a new engine for the car at 50,000 miles so that the car can be used for another 30,000 miles.
Is the purchase price, repairs, and replacement engine for the automobile recorded as capital expenditures or as expenses? Please explain.
– How is managerial accounting different from financial accounting?
– Comment on the different needs and use of financial information for internal purposes.
– The managerial accounting profession and its role in today’s business environment. How has it changed over time?
– Comment on the Certified Management Accountant (CMA) designation. How is it different from the CPA certification?
– Explain the main differences between the absorption and contribution (Behavioral, variable) income statements. Will net income always be the same under the two approaches? If not, explain the difference.
– Comment specifically on why companies feel the need to create yet another income statement in a different format. What information can the company gleam from this approach which is helpful as a tool in the decision making process?
– Explain situations in which break-even analysis can be a useful tool. Explain the break-even formula and provide a specific example using numbers for a product with which you are familiar. Reasonable estimates.
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