1) Debits will increase Unearned Revenues and Revenues.
2) The par value of common stock must always be equal to its market value on the date
the stock is issued.
3) The process by which management plans, evaluates, and controls long-term
investment decisions involving fixed assets is called cost-volume-profit analysis.
4) If a promissory note is dishonored, the payee should still record interest revenue.
5) The costs of materials and labor that do not enter directly into the finished product
are classified as cost of goods sold.
6) The statement of cash flows consists of three sections: cash flows from operating
activities, cash flows from income activities, and cash flows from equity activities.
7) Using vertical analysis of the income statement, a company’s net income as a
percentage of net sales is 15%; therefore, the cost of goods sold as a percentage of sales
must be 85%.
8) A qualitative characteristic that may impact upon capital investment analysis is
manufacturing control.
9) A backflush accounting system uses work in process inventories as control points
between each process step.
10) Double taxation is a disadvantage of a corporation because the same party has to
pay taxes twice on the income.
11) In determining the cash flows from operating activities for the statement of cash
flows by the indirect method, the depreciation expense for the period is added to the net
income for the period.
12) Under the periodic inventory system, a physical inventory is taken to determine the
cost of the inventory on hand and the cost of the merchandise sold.
13) If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the profit margin is 20%.
14) The document that serves as the basis for recording direct labor on a job cost sheet
is the time card.
15) The expected period of time that will elapse between the date of a capital
investment and the complete recovery in cash of the amount invested is called the
discount period.
16) Freight-in is considered a cost of purchasing inventory.
17) The systematic examination of differences between planned and actual contribution
margins is termed contribution margin analysis.
18) The variance from standard for factory overhead resulting from incurring a total
amount of factory overhead cost that is greater or less than the amount budgeted for the
level of operations achieved is termed controllable variance.
19) Accrued revenues are ordinarily listed on the balance sheet as current liabilities.
20) Sales reported on the income statement were $690,000. The accounts receivable
balance declined $39,000 over the year. Determine the amount of cash received from
customers.
21) Mangrill, Inc. reported net income for the year ending December 31, 2012 of
$483,500. Dividends paid during the year totaled $42,900. The company holds
available-for-sale securities with an original cost of $162,000 and a fair value of
$171,000 at the end of the year. They also hold trading securities with an original cost
of $150,000 and a fair value of $147,000. Retained Earnings on January 1, 2012 was
$736,400 and Accumulated Other Comprehensive Income on January 1, 2012 was
$16,200.
Required:
Calculate the following balances to be reported in the financial statements dated
December 31, 2012.
(1) Valuation Allowance for Available-for-Sale securities
(2) Comprehensive Income
(3) Retained Earnings
(4) Accumulated Other Comprehensive Income
22) What is the major difference between the objective of financial accounting and the
objective of managerial accounting?
23) The following adjusted trial balance is the result of the adjustments made at the end
of the month of July for Ladonna Douglas Company. Utilize these adjusted values to
prepare the closing entries for Ladonna Douglas Company.
24) Journalize the following transactions for Armour Inc. using both the periodic
inventory system and the perpetual inventory system, presented in a side-by-side format
shown at the end of this exercise.
Oct.7 Sold merchandise on credit to Rondo Distributors, terms n/30, FOB destination,
$1,200; the cost of the merchandise was $720.
Oct. 8 Purchased merchandise, $10,000, terms FOB shipping point, 2/15, n/30, with
prepaid freight charges of $525 added to the invoice.
