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1) If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when goods are loaded on the transport vehicle. 2) A _____________________ shows the pay period dates, hours worked, gross pay, deductions, and net pay of […]

1) In process cost accounting, materials are always classified as indirect if they are not physically incorporated into the final product. 2) The Merchandise Inventory account balance at the end of the current period is equal to the amount of […]

1) Vouchers should be used only for purchases. Other expenditures do not need to go through the voucher system. 2) Common shareholders always share equally with all other shareholders in all dividends. Answer: FALSE 3) Since the process cost summary […]

1) An ordinary annuity refers to a series of equal payments made or received at the end of each period. 2) When the contract rate on a bond issue is less than the market rate, the bonds will generally sell […]

1) Clic, Inc., provides the following data for the next four months: Desired Ending Inventory: Raw Materials = 30% of next month’s production needs Finished Goods = 20% of next month’s sales Pounds of raw material required for each finished […]

1) If the liabilities of a company increased $92,000 during a period of time and equity in the business decreased $30,000 during the same period, did the assets of the company increase or decrease? By what amount? 2) Keegan Co. […]

1) A company made the following merchandise purchases and sales during the current month: There was no beginning inventory. If the company uses the last-in, first-out perpetual inventory system, what would be the cost of the ending inventory? 2) Erlander […]

1) How is the current ratio calculated? How is it used to evaluate a company? 2) Starling Company sells merchandise for $24,000 cash on March 31 (cost of merchandise is $12,300). The sales tax law requires Starling to collect 8.25% […]

1) A company had a gross profit of $300,000 based on sales of $400,000. Its cost of goods sold equals $700,000. 2) A sunk cost has already been incurred and cannot be avoided or changed, so it is irrelevant to […]

1) When expenses exceed revenues, there is a net loss and the Income Summary account would have a credit balance. 2) Indirect labor refers to the cost of the workers whose efforts are directly traceable to specific units or batches […]

1) Partner return on equity is calculated as ___________________________. 2) The sales mix of Palm Company is 5 units of A, 3 units of B, and 1 unit of C. Per unit sales prices for each product are $30, $40, […]

1) Book value per share reflects the value per share if a company is liquidated at balance sheet amounts. 2) The high-low method of deriving an estimated cost line uses all the data points available. Answer: FALSE 3) The LIFO […]

1) Sanuk purchased on credit £20,000 worth of parts from a British company when the exchange rate was £1.66 per British pound. At the year-end balance sheet date the exchange rate increased to $1.69. Sanuk must record a gain of […]

1) For legal reasons, it is always a good business practice to accept a note receivable in exchange for an overdue account receivable. 2) The usual first step in preparing the statement of cash flows is computing the net increase […]

1) The Weiss Company purchased a truck for $95,000 on January 2. The truck was estimated to have a $3,000 salvage value and a 4 year life. The truck was depreciated using the straight-line method. During the third year, it […]

1) The predetermined overhead allocation rate based on direct labor cost is the ratio of estimated overhead cost for the period to estimated direct labor cost for the period. 2) Credits always increase account balances. Answer: FALSE 3) Partner return […]

1) Closing entries are required at the end of each accounting period to close all ledger accounts. 2) The payment of cash dividends never changes the balance of retained earnings. Answer: FALSE 3) Owner’s investments are increases in equity from […]

1) The decision to accept an additional volume of business should be based on a comparison of the revenue from the additional business with the sunk costs of producing that revenue. 2) A dishonored note receivable is usually reclassified as […]

1) The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls. What are some of the specific requirements? 2) What are estimated liabilities? Cite […]

1) The production budget for Sergei Company revealed the following production volume for the months of July – September. Each unit produced requires 2 hours of direct labor. The direct labor rate is currently $16 per hour but is predicted […]

1) A ____________________ is a part of a company that is separately identified by its products, or services, or by the geographic market it serves. 2) A _______________________________________ is a listing of accounts from the accounts payable ledger with their […]

1) A company paid $770,000 plus $5,000 in closing costs for property that included land appraised at $384,000; land improvements appraised at $128,000; and a building appraised at $288,000. The plan is to use the building as a manufacturing plant. […]

1) Process cost accounting systems are used only by companies that manufacture physical products; meaning that companies and other organizations that provide services to their customers do not use process cost accounting. 2) In a periodic inventory system, cost of […]

1) Explain the use of a spreadsheet in the preparation of the statement of cash flows. 2) Thomas Co. provides the following fixed budget data for the year: Required: Prepare a flexible budget performance report for the year using the […]

1) Why is the sales budget usually prepared first? 2) Vaughn Co. operates three separate departments (A, B, C). The data below is provided for the current year: Required: Prepare an income statement showing the departmental contributions to overhead for […]

1) The costs of goods purchased will vary under the different inventory methods of specific identification, FIFO, LIFO, and weighted average. 2) Long-term investments include investments in land or other assets not used in a company’s operations. Answer: TRUE 3) […]

1) A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100. 2) An unclassified balance sheet provides more information to users than a classified balance […]

1) On January 1, a company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual interest each June 30 and December 31. On the issue date, the market rate of interest […]

1) The standards for comparisons in financial statement analysis include (1) _____________, (2) ______________, (3) _______________, and (4) _____________. 2) A machine costing $450,000 with a four-year life and an estimated $30,000 salvage value is installed by Lux Company on […]

1) The three major types of business activities are operating, financing, and investing. 2) A stock dividend reduces a corporation’s assets and its stockholders’ equity. Answer: FALSE 3) Process cost accounting systems are commonly used by companies that produce a […]

1) Since it is an important financial statement, the trial balance must be prepared according to specified accounting procedures. 2) The cost method of accounting is used for long-term investments in equity securities with significant influence. Answer: FALSE 3) The […]

1) The high-low method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels. 2) On October 15, a company received $15,000 cash as a […]

1) Cost-volume-profit analysis can be used to predict the effects of reduced selling prices, increased fixed costs, and reduced variable costs on break-even points. 2) When the current value of a partnership is greater than the recorded amounts of equity, […]

1) A single basis for allocating service department costs to production departments should be used for all service departments. 2) Callable preferred stock gives its holders the option of exchanging their preferred shares into common shares at a specified rate. […]

1) A company manufactures coats in a large facility. One area in the production facility is an underused storage space. The company has twice turned down offers to lease out this facility. This situation is an example of what costing […]

1) Departmental contribution to overhead is the same as gross profit generated by that department. 2) Treasury stock is stock that has been authorized, issued, and is outstanding. Answer: FALSE 3) The contract rate on previously issued bonds changes as […]

1) A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart. 2) Callable bonds reduce the bondholder’s risk by requiring the issuer to create a sinking fund of assets set aside at specified amounts and dates […]

1) Describe the flow of labor costs in a job order costing system, and identify the documents used in the system. 2) Describe how materials flow through a job order cost accounting system, and identify the key documents in the […]

1) Josephine’s Bakery had the following assets and liabilities at the beginning and end of the current year: If Josephine made no investments in the business but withdrew $5,000 during the year, what was the amount of net income earned […]

1) A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy. 2) Overapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period. Answer: […]

1) A capital deficiency exists when all partners have a credit balance in their capital accounts. 2) If the predetermined overhead allocation rate is 225% of direct labor cost, and the Mixing Department’s direct labor cost for the reporting period […]

1) Direct materials are not usually easily traced to a product. 2) Opportunities in accounting include auditing, consulting, market research, and tax planning. Answer: TRUE 3) If an asset is sold above its book value, the selling company records a […]

1) For each of the following transactions, identify the effects as reflected in the accounting equation. Use “+” to indicate an increase and “-” to indicate a decrease. Use “A”, “L”, and “E” to indicate assets, liabilities, and equity, respectively. […]

1) A corporation had stockholders’ equity on January 1 as follows: Common Stock, $5 par value, 1,000,000 shares authorized, 500,000 shares issued; Paid-in Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $3,000,000. Prepare journal entries to record […]

1) Accounting information systems are so accurate that decision makers in practice do not need a basic knowledge of how the systems work. 2) Revenue and expense balances are transferred from the adjusted trial balance to the income statement. Answer: […]

1) Based on the following information provided about a company’s operations, calculate its cost of goods purchased and its cash paid for merchandise. 2) Explain the role of accounting in the information age. Answer: Accounting is an information and measurement […]

1) To check for accuracy after posting: first a trial balance is completed, then, the subsidiary ledgers are tested by preparing a schedule of the controlling account. 2) One of the usual differences between financial and managerial accounting is the […]

1) Fixed budgets are also known as flexible budgets. 2) Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities. Answer: TRUE 3) Accounting standards require companies to […]

1) The internal rate of return equals the rate that yields a net present value of zero for an investment. 2) Equivalent units of production need to be determined only if a processing department adds materials and labor to its […]

1) The accounts receivable turnover is calculated by dividing net sales by average accounts receivable. 2) Sandra has a savings account that has accumulated to $50,000. She started with $28,225, and earned interest at 10% compounded annually. It took her […]

1) Explain the recording and posting processes. 2) No-par stock to which the directors assign a value per share is called _____________________. Answer: Stated value stock 3) Community Technical College allocates administrative costs to its teaching departments based on the […]

1) The tax rate for FICA-social security is 6.2% and the tax rate for FICA-Medicare is 1.45%. Calculate the total amount of FICA withholding for an employee whose pay is $2,400 and is entirely subject to these FICA taxes. 2) […]

1) Sarbanes Oxley (SOX) demands that companies safeguard inventory and properly report it. List methods that companies should use to safeguard inventory and accounting procedures that should be used to properly report inventory. 2) Congress passed the ______________________ to help […]

1) ____________ is a method of analysis used to evaluate individual financial statement items or groups of items in terms of a specific base amount. 2) _________________ identify and describe transactions and events and provide objective evidence and amounts for […]

1) Under a just-in-time manufacturing system, large quantities of inventory are accumulated throughout the factory to be certain that needed components are available each time that they are needed. 2) Standard costs provide a basis for assessing the reasonableness of […]

1) Adjusting entries are made after the preparation of financial statements. 2) The management concept of customer orientation causes a company to spend large amounts on advertising to convince customers to buy the company’s standard products. Answer: FALSE 3) After […]

1) The term restricted retained earnings refers to both statutory and contractual restrictions. 2) If the internal rate of return (IRR) of an investment is below the hurdle rate, the project should be accepted. Answer: FALSE 3) The Petty Cash […]

1) Harbor Manufacturing Company uses a process cost accounting system. Materials are added at the beginning of the process. Direct labor and overhead are added evenly throughout the process. The company uses monthly reporting periods for its weighted-average process cost […]

1) At the end of the current period, a company reported $475,000 in net credit sales and $75,000 in ending accounts receivable. Calculate this company’s days’ sales uncollected at the end of the current period. 2) Discuss the relation between […]

1) Payments on an installment note normally include the accrued interest expense plus a portion of the amount borrowed. 2) A visual line fit to points in a scatter diagram may be used to identify the approximate relation between past […]

1) Job order production systems would be appropriate for companies that produce compact disks or disposable cameras. 2) Horizontal analysis is used to reveal changes in the relative importance of each financial statement item. Answer: FALSE 3) Uncertainties from the […]

1) The ____________________ of a note is the day the principle plus interest of a note must be repaid. 2) List the steps in processing transactions. Answer: Business transactions and events are the starting point. Source documents are analyzed for […]

1) A _______________________ is a contractual agreement between an employer and its employees for the employer to provide benefits (payments) to employees after they retire. 2) The assumption that requires that a business be accounted for separately from its owners […]

1) What is the purpose of a departmental accounting system? 2) Falcon Company’s output for a period was assigned the standard direct labor cost of $17,160. If the company had a favorable direct labor rate variance of $1,000 and an […]

1) A loss on disposal of a plant asset occurs if the cash proceeds received from the asset sale is less than the asset’s book value. 2) A company reports basic earnings per share of $3.50, cash dividends per share […]

1) Using the information presented below, prepare a statement of owner’s equity and balance sheet from the adjusted trial balance of Hanson Storage. Ms. Hanson’s capital account balance of $40,340 consists of a $30,340 beginning-year balance plus a $10,000 investment […]

1) A multiple-step income statement format shows detailed computations of net sales and other costs and expenses, and reports subtotals for various classes of items. 2) Liquidity refers to a company’s ability to pay its near-term obligations. Answer: TRUE 3) […]

1) Net profit margin reflects the percent of net income in each dollar of net sales. 2) A master budget refers to a company’s sales budget that includes all of its segments or departments. Answer: FALSE 3) Both U.S. GAAP […]

1) Par value per share is the price at which a share of stock is bought or sold. 2) Depreciation measures the decline in market value of an asset. Answer: FALSE 3) Depreciation expense for a period is the portion […]

1) Describe the use of the Factory Payroll account in a job order cost accounting system. 2) Helix Co. entered into the following transactions involving short-term notes payable. On May 14, Helix purchased $40,000 merchandise from Advent Co., terms are […]

1) The flexibility principle prescribes that an accounting information system conform with a company’s activities, personnel, and structure and adapt to a company’s unique characteristics. 2) Newly completed units are combined with beginning finished goods inventory to make up total […]

1) An advantage of common-size statements is that they reflect the dollar magnitude (size) of the different companies under analysis. 2) A company that finances a relatively large portion of its assets with liabilities is said to have a high […]

1) The debt ratio helps to assess the risk a company has of failing to pay its debts and is helpful to both its owners and creditors. 2) An advantage of the weighted average inventory method is that it tends […]

1) Using the information given below for a company that uses a perpetual inventory system, calculate the ending inventory using weighted average. 2) For each of the independent cases below, identify the principle of internal control that is violated, and […]

1) A company has $2,400,000 in stockholders’ equity that includes 500 shares of $50 par value noncallable preferred stock outstanding and 250,000 shares of common stock outstanding. Calculate the book value per (1) preferred share, and (2) common share. 2) […]

1) Identify and explain the primary differences between fixed and flexible budgets. 2) The process of identifying costs as direct or indirect is referred to as classifying costs by ____________. Answer: Traceability 3) What are known current liabilities? Cite at […]

1) Manning, Co. collected 6-months’ rent in advance from a tenant on November 1 of the current year. When it collected the cash, it recorded the following entry: Prepare the required adjusting entry at December 31 of the current year. […]

1) An ________________________ requires a future outlay of cash and is relevant for current and future decision making. 2) Explain the composition of retained earnings and identify the special items that are reported in it. Answer: Retained earnings generally consists […]

1) An investor presumed to have significant influence owns as least 20% but not more than 50% of another company’s voting stock. 2) The lower of cost or market rule for inventory valuation must be applied to each individual unit […]

1) Cheshire, Inc. allocates fixed overhead at a rate of $18 per direct labor hour. This amount is based on 90% of capacity or 3,600 direct labor hours for 6,000 units. During May, Cheshire produced 5,500 units. Budgeted fixed overhead […]

1) The equal total payments pattern for installment notes consists of changing amounts of interest but constant amounts of principal over the life of the note. 2) Receivables can be used to obtain cash by either selling them or using […]

1) Purchase discounts are the same as trade discounts. 2) A purchase of land in exchange for a long-term note payable is reported in the investing section of the statement of cash flows. Answer: FALSE 3) Cash paid for merchandise […]

1) Airtex Company budgeted the following credit sales during the current year: September, $90,000; October, $123,000; November, $105,000; December, $111,000. Experience has shown that cash from credit sales is received as follows: 10% in the month of sale, 50% in […]

1) Four main accounting issues for plant assets are: ________________________, ____________________________, ________________________, ____________________________. 2) Use the following information about the calendar-year cash flows of MacArthur Company to prepare a statement of cash flows (direct method) and a schedule of noncash […]

1) The purchase of stock in another company is classified as a financing activity. 2) Long-term investments are usually held as an investment of cash for use in current operations. Answer: FALSE 3) A payee of a note usually honors […]

1) Both the direct and indirect methods yield the identical net cash flow amount provided or used by operating activities. 2) Technologically advanced accounting systems do not need monitoring for errors because computers always process transactions correctly. Answer: FALSE 3) […]

1) A sole proprietorship is a business owned by one or more persons. 2) Companies are allowed to use FIFO for financial reporting and LIFO for tax reporting, according to IRS requirements. Answer: FALSE 3) A reverse stock split reduces […]

1) Manatee Corp. has developed standard costs based on a predicted operating level of 352,000 units of production, which is 80% of capacity. Variable overhead is $281,600 at this level of activity, or $0.80 per unit. Fixed overhead is $440,000. […]

1) A company purchased a machine on January 1 of the current year for $750,000. Calculate the annual depreciation expense for each year of the machine’s life (estimated at 5 years or 20,000 hours, with a salvage value of $75,000). […]

1) The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and recording adjusting entries. 2) A corporation can issue two kinds of stock – common and preferred. Answer: TRUE 3) Paid-in […]

1) Fraud does not include collusion, which is necessary to thwart separation of duties. 2) Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount, and have maturities of one year. Answer: FALSE […]

1) 2) The ____________________ describes a company’s revenues and expenses over a period of time due to earnings activities. Answer: Income Statement 3) What is meant by equivalent units of production, and why are they important when a process cost […]

1) __________ allowances are items that reduce the amount of federal income taxes owed by the individual. 2) A flexible budget is also called a _______________ budget. Answer: Variable[/cpmembership] 3) Renton Co. has two operating (production) departments supported by a […]

1) The ____________________ ratio reflects how much inventory is available in terms of days’ sales. 2) A company had net sales of $230,000 for 2010 and $288,000 for 2011. The company’s average total assets for 2010 were $150,000 and $180,000 […]

1) Briefly describe the time value of money. Why is the time value of money important in capital budgeting? 2) The minimum acceptable rate of return on an investment is called the ________________. Answer: Hurdle rate 3) _________________________ securities reflect […]

1) Identify whether each of the following items 1 through 10 would on appear on the bank side or the book side of a bank reconciliation. 2) Briefly explain the conditions under which job order cost accounting systems and process […]

1) On April 1, 2010, a company disposed of equipment for $14,200 cash that had cost $35,000 on January 1, 2006. The equipment had a salvage value of $5,000, and a useful life 10 years. The double-declining-balance depreciation method was […]

1) A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be received at the […]

1) A company has total fixed costs of $360,000. Its product sells for $40 per unit and variable costs amount to $25 per unit. What is the break-even point in dollar sales? 2) An employee is __________ when a company […]

1) The original cost of a machine was $60,000. After $45,000 of depreciation was recorded, the machine was traded in on a new machine priced at $75,000. A $10,500 trade-in allowance was received on the old machine and the balance […]

1) Explain the accounting procedures when a bond’s interest period does not coincide with the issuer’s accounting period. 2) The BlueFin Partnership agrees to dissolve. The remaining cash balance after liquidating partnership assets and liabilities is $60,000. The final capital […]

1) The following data is available for Osman Corp. for the current year: Calculate the equivalent units of production for the year using the weighted average method. 2) A company enters into an agreement to make 5 annual year-end payments […]

1) The _______________ assumption requires that financial information is supported by independent, unbiased evidence. 2) Materials and labor costs that are clearly associated with a specific process are known as _________________. Those costs that are not clearly associated with a […]

1) What is the purpose of a responsibility accounting system? 2) Shock Company purchased merchandise from Mee Company with an invoice price of $300,000 and credit terms of 2/10, n/30. The merchandise had cost Mee Company $200,000. Shock Company paid […]

1) A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment. 2) […]

1) A company’s ability to issue unsecured debt depends on its credit standing. 2) A merchandising company’s operating cycle begins with the sale of merchandise and ends with the collection of cash from the sale. Answer: FALSE 3) If a […]

1) Sales Discounts and Sales Returns and Allowances are credited to close the accounts during the closing process. 2) Profit margin can also be called return on sales. Answer: TRUE 3) The percent of accounts receivable method for bad debts […]

1) A materials requisition is a source document used by materials managers of a manufacturing company to order raw materials from suppliers; it serves the same purpose as a purchase order in a merchandising company. 2) A company performs 20 […]

1) Stockholders’ equity consists of paid-in capital and retained earnings. 2) The series of activities that add value to a company’s products or services is called a value chain. Answer: TRUE 3) When partners invest in a partnership, their capital […]

1) A company is considering a 5-year project. It plans to invest $60,000 now and it forecasts cash flows for each year of $16,200. The company requires a hurdle rate of 12%. Calculate the internal rate of return to determine […]

1) The concept of incremental cost is the same as the concept of differential cost. 2) An external transaction is an exchange of value within an organization. Answer: FALSE 3) Since income tax expense is created by earning income, a […]

1) Each adjusting entry affects only one or more income statements account and never cash. 2) Process manufacturing usually reflects a manufacturer that produces large quantities of identical products. Answer: TRUE 3) After adjustment, the balance in the Allowance for […]

1) What is the maturity date of a 6-month note receivable dated February 5? 2) What are the types of adjusting entries used for accrued expenses and accrued revenues? Answer: Accrued expenses are expenses that have been incurred but not […]

1) On February 5, Textron Stores purchased a van that cost $35,000. The firm made a down payment of $5,000 cash and signed a long-term note payable for the balance. Show the general journal entry to record this transaction. 2) […]

1) The margin of safety is the amount that sales can drop before the company incurs a loss. 2) Whether a cost is controllable or not controllable by an employee depends on the employee’s level of responsibility. Answer: TRUE 3) […]

1) An unfavorable variance is recorded with a debit. 2) An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded. Answer: TRUE 3) If Department A uses $10,000 of direct materials and Department B […]

1) ______________ bonds are bonds that are scheduled for maturity on one specified date. 2) Calais Company’s fixed budget for the first quarter of the calendar year appears below. Prepare flexible budgets that show variable costs per unit, fixed costs […]

1) General accounting principles arise from long-used accounting practices. 2) The accrual basis of accounting reflects the principle that revenue is recorded when it is earned, not when cash is received. Answer: TRUE 3) Another name for relevant cost is […]

1) A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful […]

1) Discuss how accrual accounting enhances the usefulness of financial statements. 2) A ______________________ incurs costs without directly generating revenues. Answer: Cost center 3) When a partner invests in a partnership, his/her capital account is __________ for the invested amount. […]

1) When applying the lower of cost or market method of inventory valuation, market is defined as the _____________________. 2) What is the purpose of the petty cash account? Answer: The petty cash account is used to serve as a […]

1) Rich Company’s experience shows that 20% of its sales are for cash and 80% are on credit. An analysis of credit sales shows that 50% are collected in the month following the sale, 45% are collected in the second […]

1) A partnership cannot use salary allowances or interest allowances to allocate income and losses to the partners because these items are not reported on the partnership income statement. 2) Ben had total assets of $149,501,000, net income of $6,242,000, […]

1) Cost of goods sold is also called cost of sales. 2) Unearned revenues are liabilities. Answer: TRUE 3) When posting from special journals each debit and credit entry is entered as a separate amount in the general ledger. Answer: […]

1) Identify and describe the two main components of stockholders’ equity. 2) Eclectic Furniture Company allocates its indirect salaries of $12,500 on the basis of sales. Determine the indirect salaries allocated to Departments 1 and 2 using the following information. […]

1) Purchase returns refer to merchandise a buyer acquires but then returns to the seller. 2) The times interest earned ratio is calculated by dividing income before interest expense and income taxes by interest expense. Answer: TRUE 3) The price-earnings […]

1) On August 17, at the end of the day, the cash register’s record shows $957, but the count of cash in the register is $965. Prepare the general journal entry to record the day’s cash sales. 2) At the […]

1) Partners in a partnership are taxed on the amounts they withdraw from the partnership, not the partnership income. 2) When a job is finished, its job cost sheet is completed and moved from the file of jobs in process […]

1) On December 31, of the current year, a company’s unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance). Prepare the adjusting […]

1) _________________________ has special rights that give it priority or senior status over common stock in one or more areas such as receiving dividends or for the distribution of assets if the corporation is liquidated. 2) A company issued 9.2%, […]

1) A ______________________ accounting system records production activities using a periodic inventory system. A ____________________ accounting system records production activities using a perpetual inventory system. 2) Detalo Co. held bonds of Schooner Corp. with a cost of $125,000 and a […]

1) A company has just received a special, one-time order for 1,000 units. Producing the order will have no effect on the production and sales of other units. The buyer’s name will be stamped on each unit, at a total […]

1) The accounting rate of return uses cash flows in its calculation. 2) Reversing entries are optional. Answer: TRUE 3) Efficiency refers to how productive a company is in using its assets, and is usually measured relative to how much […]

1) Asset accounts normally have credit balances and revenue accounts normally have debit balances. 2) On a bank statement, deposits are listed as debits because the bank increases its cash account when the deposit is made. Answer: FALSE 3) Service […]

1) Companies experiencing seasonal variations in sales often choose a fiscal year corresponding to their ________________________ year. 2) Match each of the following terms with the appropriate formulas. Answer: A-5, B-4, C-3, D-10, E-1, F-8, G-9, H-7, I-2, J-6 3) […]

1) The return on common stockholder’s equity measures a company’s success in reaching the goal of earning net income for its owners. 2) Joint costs are a group of several costs incurred in producing or purchasing a single product. Answer: […]

1) The City Store reported the following amounts on their financial statements for Year 1, Year 2, and Year 3: It was discovered early in Year 4 that the ending inventory on December 31, Year 1 was overstated by $6,000, […]

1) A company reported the following year-end information: 2) Explain the purpose of reversing entries. Answer: Reversing entries are an optional step in the accounting cycle. They apply to accrued assets and accrued liabilities that were created by adjusting entries […]

1) Predetermined overhead rates are necessary because cost accountants use periodic inventory systems. 2) The use of process costing is of little benefit to a service type of operation. Answer: FALSE 3) Changes in accounting estimates are accounted for in […]

1) An example of a service department is the human resources department. 2) Operating leases are long-term or noncancelable leases in which the lessor transfers substantially all the risks and rewards of ownership to the lessee. Answer: FALSE 3) A […]

1) What is the usual order in which financial statements are prepared from the adjusted trial balance? Why are they prepared in that order? 2) ______________ users of accounting information are not directly involved in running the organization. Answer: External […]

1) Accounting information systems are designed to capture information about a company’s transactions and events and to provide output including financial, managerial, and tax reports. 2) Generally, it does not matter how cost allocations are designed and explained, because most […]

1) Gain or loss on the disposal of assets is determined by comparing the disposed asset’s book value to the value of any assets received. 2) Internal control devices for banking activities include signature cards, deposit tickets, checks, and bank […]

1) Permanent accounts carry their balances into the next accounting period. Moreover, asset, liability and revenue accounts are not closed as long as a company continues in business. 2) An understatement of the ending inventory balance will understate cost of […]

1) When preparing the operating activities section of the statement of cash flows using the indirect method, a decrease in accounts receivable is subtracted from net income. 2) The FIFO inventory method assumes that costs for the earliest units purchased […]

1) If a U.S. company makes a credit sale to a foreign company, the sales price must be translated into dollars as of the date of ____________ 2) ________________ activities are the means organizations use to pay for resources such […]

1) A company has $50,000 today to invest in a fund that will earn 7%. How much will the fund contain at the end of 8 years? 2) _________________ is net income divided by average total assets. Answer: Return on […]

1) Paul and Peggy’s company is organized as a partnership. At the prior year-end, Paul’s equity balance was $352,000 and Peggy’s was $256,000. For the current year, partnership net income is $137,000 ($77,000 allocated to Paul and $60,000 allocated to […]

1) Two main accounting principles used in accrual accounting are matching and full closure. 2) Equivalent units of production are always the same as the total number of physical units finished during the period. Answer: FALSE[/cpmembership] 3) Companies can report […]

1) ______________________________________ is the stockholders’ equity applicable to common shares divided by the number of common shares outstanding. 2) A company purchased a machine for $75,000 that was expected to last 6 years and to have a salvage value of […]

1) Unrealized gains and losses on trading securities are reported on the income statement. 2) The idea that a business will continue to operate instead of being closed or sold underlies the going-concern assumption. Answer: TRUE 3) Traditional two-stage cost […]

1) Explain the debt ratio and its use in analyzing a company’s financial condition. 2) A company’s payroll information for the month of May follows: On May 31 the company issued Check No. 335 payable to the Payroll Bank Account […]

1) A process cost summary involves computations and analysis at four sequential steps. These are (1) _________ (2) ___________, (3) _____________, and (4) ____________. 2) The interest rate is also called the __________________ rate. Answer: Discount 3) What is a […]

1) Following are selected accounts and their balances for a company after the adjustments as of May 31, the end of its fiscal year. (All accounts have normal balances.) Prepare all the necessary closing entries for this company. 2) Under […]

1) A bond’s par value is not necessarily the same as its market value. 2) Operating activities include long-term borrowing and repaying cash from lenders, and cash investments or withdrawals by the owner. Answer: FALSE 3) Managerial accounting assists in […]

1) A company that uses a job order cost accounting system incurred $10,000 of factory payroll during May. Present the May 31 entry assuming $8,000 is direct labor and $2,000 is indirect labor. 2) What is purpose of footing and […]

1) Using the information given below, prepare general journal entries to record the March 16 sale assuming a cash sale and the FIFO method is used. 2) Describe source documents and their purpose. Answer: Source documents are the sources of […]

1) Investment center managers are evaluated on their use of center assets to generate income. 2) The last step in the four-step accounting procedure for process costing is the calculation of equivalent units of production. Answer: FALSE 3) To prepare […]

1) The clerk who has access to the cash in the cash register should not have access to the cash register tape or file. 2) A budget can be an effective means of communicating management’s plans to the employees of […]

1) A good financial statement analysis report usually includes the following six sections: (1) ______________________, (2) ____________________, (3) _______________, (4) __________________ (5) __________________, and (6) ____________________. 2) The following information is available for Trico and its two main competitors in […]

1) If a company is highly leveraged, this means that it has relatively low risk of not being able to repay its debt. 2) One purpose of financial statement analysis for internal users is to provide information helpful in improving […]

1) Cash withdrawn by the owner of a proprietorship should be treated as an expense of the business. 2) A leasehold refers to the rights the lessor grants to the lessee under the terms of the lease. Answer: TRUE 3) […]

1) It is acceptable to record cash received in advance of providing products or services to revenue accounts. 2) Retained earnings are not part of the stockholders’ claims on the company’s net assets. Answer: FALSE 3) Under the cash basis […]

1) A company’s January 1 goods in process inventory contained 30,000 units that were 25% complete with respect to direct labor. The beginning inventory was completed this year and another 120,000 units were started. Of those started, 80,000 were finished […]

1) Expenditures directly associated with the manufacture of finished goods that include direct materials and direct labor are _____________________ costs. 2) What are the four steps in the effective management of variance analysis? Answer: The four steps are: (1) prepare […]

1) In the retail inventory method of inventory valuation, the retail amount of inventory refers to its dollar amount measured using selling prices of inventory items. 2) The Income Summary account is a permanent account that will be carried forward […]

1) Hess Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Hess can buy a newer production machine that will increase total fixed costs by $22,800 but […]

1) A transfer agent keeps stockholder records and prepares official lists of stockholders and dividend payments. 2) The materiality constraint permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in […]

1) Lipinski Company completed and transferred 90,000 units during the current period. Based on the following information, determine the cost of the goods completed during the current reporting period and journalize the transfer. 2) Blake Company pays its employees for […]

1) Significant sunk costs are relevant to decisions about the future. 2) A measure used to evaluate the manager of an investment center is return on total costs for the investment center. Answer: FALSE 3) Total depreciation expense over an […]

1) A company paid cash dividends on its preferred stock of $40,000 in the current year when its net income was $120,000 and its average common stockholders’ equity was $640,000. What is the company’s return on common stockholders’ equity? 2) […]

1) The cash flow on total assets ratio is computed by dividing average total assets by operating income. 2) Inadequacy refers to the insufficient capacity of a company’s plant assets to meet the company’s growing productive demands. Answer: TRUE 3) […]

1) The accounting cycle refers to the sequence of steps in preparing the work sheet. 2) One difference between financial and managerial accounting is that the external users that use financial information must plan a company’s future, but the internal […]

1) Refer to the following information about the Painting Department in the Richardson Factory for the month of June. Richardson Factory uses the FIFO method of inventory costing. Compute the equivalent cost per unit for direct materials, direct labor and […]

1) On January 1, 2011, Freder Corporation purchased 7,500 shares of SportTech as a long-term investment for a total of $235,000. The 7,500 shares represent 30% of the outstanding (25,000) shares of SportTech. Prepare the journal entries for Freder to […]

1) The Connecting Company uses the percent of sales method of accounting for uncollectible accounts receivable. During the current year, the following transactions occurred: 1> Prepare the general journal entries to record these transactions. 2> If the balance of the […]

1) Management’s intent determines whether an available-for-sale security is classified as long-term or short-term. 2) A cost variance is the difference between actual cost and standard cost. Answer: TRUE 3) A good financial statement analysis report often includes the following […]

1) If a partner is unable to cover a deficiency and the other partners absorb the deficiency, then the partner with the deficiency is thus relieved of all liability. 2) Controllable costs are the same as direct costs. Answer: FALSE […]

1) Variable costs per unit increase proportionately with increases in output activity. 2) The number of equivalent units of production assigned to ending goods in process inventory should be equal to or less than the number of physical units in […]

1) A salary owed to employees is an example of an accrued expense. 2) When an investor company owns more than 25% of the voting stock of an investee company, it has a controlling influence. Answer: FALSE 3) A stock […]

1) What is interest? 2) A company’s ending inventory of finished goods has a cost of $35,000 and consists of 750 units. If the overhead applicable to these goods is $8,400, and overhead is applied at the rate of 60% […]

1) On a work sheet, a loss is indicated if the total of the Income Statement Debit column exceeds the total of the Income Statement Credit column. 2) Cost of goods sold represents the cost of buying and preparing merchandise […]

1) Working capital is computed as current liabilities minus current assets. 2) The Perk’s earnings per share is $3.11. Its common dividend is $0.36 per share and its stock price is $40 per share. Its dividend yield equals 0.9%. Answer: […]