A performance report should contain cost or revenue items that the manager receiving
the report can control.
Cost of capital information is necessary to establish the minimum rate of return on
investments.
Costs can also be classified as value-adding or non-value-adding costs.
The Sarbanes-Oxley Act requires a company to guarantee that its financial statements
are 100 percent accurate.
Dividends received on investments are accounted for in the same way under the
cost-adjusted-to-market and the equity methods.
The actual physical flow of production will depend on the cost allocation method, such
as the FIFO costing method or the average costing method, chosen by the company.
Breakeven is when total fixed costs equal total revenues.
Zero-based budgeting requires the preparation of budget from scratch.
Capital investment analysis is also known as capital budgeting.
Deferred income taxes are a type of long-term liability that result from using different
accounting methods to calculate income taxes on the income statement and income tax
liability on the income tax return.
If the partnership agreement does not describe the method of income and loss
distribution, the partners must share income and losses equally.
In a trial balance, all debits are listed before all credits.
Two major goals of business are to achieve profitability and to achieve liquidity.
All sales transactions generate immediate cash.
One of the limitation of the direct materials purchases budget is that it reflects only the
quality of direct materials purchases.
The entities forming joint ventures usually involve companies, but can sometimes
involve governments.
The perpetual inventory system relies on a physical count of merchandise for its
balance sheet amount.
Lee Carter Inc. forecast of sales is as follows: July, $50,000; August, $80,000;
September, $150,000. Sales are normally 75 percent cash and 25 percent credit. Credit
sales are collected in full in the following month. Merchandise cost averages 70 percent
of sales price. The company desires an inventory as of September 30 of $50,000. The
inventory as of June 30 was $30,000. The accounts receivable had zero balance on June
30.
The July 31 balance of accounts receivable of Lee Carter will be
A.$12,500.
B.$20,000.
C.$27,500.
D.$42,500.
The interest coverage ratio equals
A.income before income taxes minus interest expense divided by income before income
taxes.
B.income before income taxes minus interest expense divided by interest expense.
C.income before income taxes plus interest expense divided by interest expense.
D.income before income taxes plus interest expense divided by total assets.
A reversing entry
A.is made on the last day of the fiscal year after closing entries have been posted.
B.is made on the last day of the fiscal year before closing entries have been posted.
C.is made on the first day of an accounting period.
D.replicates the adjusting entry that was made in the previous period because the
adjusting entry was closed to retained earnings during the closing process.
Discuss reversing entries by addressing each of the following questions:
a. Are reversing entries required?
b. When are reversing entries prepared?
c. Are reversing entries posted to the ledger?
d. What is the purpose of reversing entries?
e. Can all adjusting entries be reversed? If not, which adjusting entries can be reversed?
Accelerated depreciation assumes all of the following except that
A.asset benefit increases with each year of use.
B.the asset provides more benefit in the early years.
C.obsolescence makes an asset less valuable in its later years.
D.repair expense is less in the early years than in the later years.
When an adjusting entry is made debiting an expense account, the credit can be made to
any of the following accounts except
A.a liability.
B.a contra-asset account.
C.an asset.
D.a revenue.
Information for the current month for Process 5 is shown below.
Direct materials are added at the beginning of the process. Beginning work in process is
40 percent complete as to conversion costs; ending work in process inventory is 60
percent complete. The cost of ending work in process inventory totaled
A.$7,750.
B.$4,650.
C.$5,500.
D.$6,250.
Which of the following is correct regarding accrual accounting?
A.Adjusting the accounts is a technique used to accomplish accural accounting.
B.Revenues are recorded when received.
C.Expenses are recorded when earned.
D.Net income is the difference between cash receipts from customers and cash
payments for expenses.
Privately owned companies
A.are required to have an independent CPA audit their financial statements.
B.are required to have their internal control systems audited.
C.are required to have both the financial statements and internal control systems
audited.
D.are not required to do any of these.
In which category would office salaries expense be included?
A.Net sales.
B.Cost of goods sold.
C.Selling expenses.
D.General and administrative expenses.
The Work in Process Inventory account in a job order costing system consists of
A.time conversion cards.
B.job conversion cards.
C.job order cost cards.
D.product cost cards.
Publicly held corporations must file annual reports with the SEC. All such reports are
available
A.only to the SEC, the company’s owners and management, and the company’s
auditors.
B.only to other SEC companies and the issuing company’s owners and management.
C.only to the SEC, the company’s management, and the company’s auditors.
D.to the general public.
A __________ is an association of two or more entities for the purpose of achieving a
specific goal, such as the manufacture of a product in a new market.
A.Limited partnership.
B.Limited liability company.
C.S corporation.
D.Joint venture.
A machine was purchased for $50,000. It has a current carrying value of $32,500 and
had a depreciable cost of $45,000. Its estimated residual value must have been
A.$5,000.
B.$12,500.
C.$17,500.
D.impossible to determine from the facts given.
The beginning finished goods inventory of Ronald Co. was $480,125. Goods completed
during the year cost $963,250. The ending finished goods inventory was dangerously
low, having been reduced to $135,850. The cost of goods sold for the year for Ronald
Co. was
A.$618,975.
B.$1,307,525.
C.$1,579,225.
D.$1,171,675.
The cost of a natural resource is expensed in the year during which the resource is
A.purchased.
B.extracted.
C.paid for.
D.sold.
Use this information to answer the following question.
The total amount of working capital is
A.$150,000.
B.$370,000.
C.$100,000.
D.$60,000.
A truck that cost $12,000 and on which $9,000 of accumulated depreciation has been
recorded was disposed of on January 1. Assume that the truck was traded for a similar
truck having a price of $13,000, that an $1,800 trade-in was allowed, and that the
balance was paid in cash. The amount of the gain or loss recognized on this transaction
would be
A.a $1,200 loss.
B.a $1,200 gain.
C.a $2,400 loss.
D.no gain or loss recognized.
Trunkey Products Inc. uses a process costing system and has just completed production
for the month of November 2014. The following production data were obtained from
the accounting records:
a. Units in beginning inventory totaled 6,800 and were 30 percent complete as of
November 1 (all direct materials were added to these products in the preceding month).
b. During the period, 156,200 units were started.
c. 19,200 units were partially completed as of November 30, 2014.
d. Ending work in process inventory was 40 percent complete at month end.
From the data given, compute the equivalent units of production for direct materials and
conversion costs for the month ended November 30, 2014, assuming the company
follows average costing method.
Which of the following is not considered a long-term obligation?
A.Contributed capital.
B.Deferred income taxes.
C.Capital lease.
D.Pension liabilities.
For available-for-sale equity securities, the Allowance to Adjust Long-Term
Investments to Market account should be reported as a(n)
A)realized loss item on the income statement.
B)prior period adjustment.
C)contra-asset on the balance sheet.
D)other comprehensive income (loss)
The purpose of incremental analysis is to find the alternative
A.with a few relevant costs.
B.that brings in the highest revenue.
C.that contributes the most to profits.
D.with the lowest fixed costs.
When computing the cost per equivalent unit, the FIFO costing method considers
A.current costs only.
B.current costs plus ending work in process inventory costs.
C.current costs less ending work in process inventory costs.
D.current costs plus beginning work in process inventory costs.
Which of the following performance measures focus on short-term financial
performance?
A.Economic value added
B.Residual income
C.ROI
D.All of these choices
Prepare in proper form the stockholders’ equity section of the balance sheet from the
following selected accounts and balances taken from the adjusted trial balance of
Cooper Corporation as of December 31, 20×5.
When stock is issued for noncash assets or services, how does one place a valuation
(dollar amount) on the transaction?
On December 31, 20×5, the R & J Partnership had the following assets, liabilities, and
partners’ equity:
When the partners agreed to liquidate the business, the assets were sold for $180,000
and the liabilities were paid. R and J share profits and losses in a ratio of 2:1,
respectively. What is the final cash distribution to each partner after liquidation?
On December 31, Ferndale Enterprises has an $800 debit balance in Allowance for
Uncollectible Accounts. If an accounts receivable aging method analysis indicated that
an estimated $6,400 of December 31 receivables are uncollectible, for what amount
would the adjusting entry for uncollectible accounts be recorded? (Show your work.)
Suffolk Corporation issued $92,000 of 20-year, 6 percent bonds at 98 on one of its
semiannual interest dates. The straight-line method of amortization is to be used. The
entry to record the bond interest expense on the next interest payment date is: .
Using the following data, prepare a classified balance sheet for Blanchard Company as
of December 31, 20×5.
