In each of the following situations, identify whether the setting is primarily financial accounting or managerial accounting.
| a. | Abba Company purchased a new telephone system costing $132,000 for its sales |
division. The new phone system will be depreciated using the straight-line method over a period of five years and has an estimated salvage value of $5,000.
| b. | Bandex Company has had several customers who are experiencing negative effects of |
the downturn in the economy. As a result, the company believes its allowance for doubtful accounts should be increased from 1% of credit sales to 1.5% of credit sales.
| c. | Cortez, Inc. has experienced a decline in net income over the past three years. The |
engineering department is considering redesigning a product to eliminate waste and inefficiency in the production process.
| d. | The sales manager of Decca Corporation believes one salesman is creating fictitious |
sales to inflate his commission. The sales manager has asked the controller for a detailed report of sales by salesman.
| e. | Essex, Inc. executives are meeting to analyze the company's actual results compared |
to budgeted amounts.
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Example of simplified note for a nonmedical setting.