Valuation of inventory on the balance sheet impacts cost of goods sold on the income
statement.
All organizations use same performance measures in their day-to-day business
operations.
Receipt of stock dividends, depreciation, and amortization expense will not be recorded
in the cash budget prepared by an organization.
The changes in the balance of Work in Process Inventory and the total manufacturing
costs for a period are used to compute cost of goods manufactured.
If a U.S. company sells goods for a fixed number of British pounds, and the exchange
rate has risen from $1.60 per pound to $1.65 per pound by the time collection is made,
the U.S. company would record an exchange loss.
When an account receivable that was previously written off is collected, it is necessary
to reverse the entry for the write-off before recording the collection.
Since it impacts Retained Earnings, the net income for the period would appear in the
cash flows from financing activities section of a statement of cash flows prepared using
the indirect method.
Despite the many uses of laptop computers, they cannot be used to prepare work sheets.
Management accounting is a subordinate activity to financial accounting.
The Public Company Accounting Oversight Board (PCAOB) was created to determine
the standards that auditors must follow.
An advantage of the single-step income statement is that it is less complex than the
multistep form.
Goodwill reflects all the factors that allow a company to earn a higher-than-market rate
of return on its assets.
Profit-sharing plan is a common type of incentive compensation.
Owner’s equity equals assets minus liabilities.
If fixed costs are increased, then a breakeven analysis with an adjustment for profit will
yield an increase in targeted sales units.
A contract limiting the rights of others to go into business in a specific industry or line
of business for a specified period is called a
A.noncompete covenant.
B.patent.
C.copyright.
D.trademark.
Given the following information about purchases and sales during the year, compute the
cost to be assigned to ending inventory under each of three methods: (a) average-cost,
(b) FIFO, and (c) LIFO. (Show your work.)
Assuming that a periodic inventory system is used
At the breakeven point, the total contribution margin
A.is at the maximum.
B.minus total fixed costs equals a negative number.
C.equals fixed costs.
D.is at the minimum.
The following selected amounts were extracted from the financial statements of Alfonso
Corporation.
a. Prepare a trend analysis for net sales, gross margin, and net income using Year 1 as
the base year.
b. For net sales, gross margin, and net income:
1> Calculate the percentage change from Year 1 to Year 2.
2> Calculate the percentage change from Year 2 to Year 3.
c. For each of the four years, compute the percentage relationship of gross margin to net
sales and the relationship of net income to net sales.
d. Identify which requirement(s) above involve(s):
1> Horizontal analysis
2> Vertical analysis
Round all answers to the nearest tenth of 1 percent.
Irrelevant costs
A.do not differ among alternatives.
B.can be avoided by a business.
C.are the same as opportunity costs.
D.are costs that will incur in future.
Which pair of accounts follows the rules of debit and credit in the opposite manner?
A.Prepaid Insurance and Withdrawals
B.Advertising Expense and Land
C.Withdrawals and Service Revenue
D.Interest Payable and Owner’s Capital
Which of the following statements is not TRUE about a 2-for-1 stock split?
A.Total contributed capital increases.
B.Par value per share is reduced to half of what it was before the split.
C.A stockholder with ten shares before the split owns twenty shares after the split.
D.The market price probably will decrease.
An advantage of the perpetual inventory system is that
A.clerical work is reduced.
B.the need to take a physical inventory is eliminated.
C.the balance of the Merchandise Inventory account is only accurate on the balance
sheet date.
D.detailed data is available to respond to customers’ inquiries about product availability.
April and Cammy are partners who have agreed to admit Elena, who will invest
$30,000 for a 20 percent interest. The previous capital balances were $30,000 and
$60,000 for April and Cammy, respectively. April and Cammy had shared profits and
losses equally. What amount will be recorded in Elena’s Capital account?
A.$12,000 credit
B.$24,000 credit
C.$30,000 credit
D.$18,000 credit
Use this inventory information for the month of March to answer the following
question.
Assuming that a periodic inventory system is used, what is ending inventory (rounded)
under the average-cost method?
A.$2,079
B.$2,685
C.$3,861
D.$5,940
Goods held on consignment are
A.kept for sale on the premises of the consignee.
B.included as part of no one’s ending inventory.
C.owned by the consignee.
D.included in the consignee’s ending inventory.
If the amount of uncollectible accounts expense is overstated at year end,
A.Allowance for Uncollectible Accounts will be understated.
B.net income will be overstated.
C.net Accounts Receivable will be understated.
D.total liabilities and stockholders’ equity will be overstated.
Use this information to answer the following question.
The trial balance for Nowwick Company appears as follows:
If on December 31, 2014, the insurance still unexpired amounted to $20, the adjusting
entry would contain a
A.debit to Prepaid Insurance for $80.
B.credit to Prepaid Insurance for $80
C.debit to Insurance Expense for $20.
D.credit to Prepaid Insurance for $20.
In a proposal to increase the production of clock radios, the sales managers of Rinaldo
Electronics reported the total additional cost required to meet the increased production
level. The increase in total cost is known as the
A.opportunity cost.
B.sunk cost.
C.uncontrollable cost.
D.differential cost.
Compute the book values per share for (a) preferred and (b) common stock for Electra
Corporation, whose stockholders’ equity as of December 31, 20×5, was as follows.
Which of the following is not a product cost?
A.Indirect materials costs
B.Packaging costs
C.Direct labor costs
D.Overhead costs
The manager of Center A of Harry International is responsible for generating cash
inflows and incurring costs with the goal of generating returns for the company. The
manager has no responsibility for assets. What type of responsibility center is Center A?
A.Cost center
B.Discretionary cost center
C.Profit center
D.Revenue center
On January 1, a machine with a useful life of five years and a residual value of $4,500
is purchased for $22,500. What is the depreciation expense in year 2 using the
double-declining-balance method?
A.$5,400
B.$7,200
C.$6,120
D.$13,500
The management of public companies must establish systems that
A.safeguard the firm’s assets.
B.ensure reliability of its accounting records.
C.see that employees comply with legal requirements
D.do all of these.
Under a job order costing system, the dollar amount of the entry to record the transfer
of goods from Work in Process Inventory to Finished Goods Inventory is the total of the
costs charged to all jobs
A.started during the period.
B.completed and sold during the period.
C.completed during the period.
D.started and completed during the period.
The term incremental cost refers to
A.the difference in total costs between alternatives.
B.a cost that does not entail any dollar outlay but that is relevant to the decision-making
process.
C.the profit forgone by selecting one choice instead of another.
D.a cost that constitutes expenses to be incurred even though there is no activity.
A combined set of operational budgets and a set of financial budgets for the entire
organization is known as a
A.master budget.
B.flexible budget.
C.month-to-month budget.
D.constant budget.
You purchased Company B for $220,000 on January 1, 2014. Company B’s assets were
valued as follows:
In addition, you opened a company bank account and deposited $30,000 cash. All
liabilities were paid prior to the transfer of ownership. Create the balance sheet for
Company B under your ownership.
The activity from the Long-Term Investments account for Fisk Corporation appears
below. In addition, the income statement shows a loss on the sale of investments of
$32,000.
Based on the information given, compute the amounts to be shown and indicate how
they would appear on the statement of cash flows. Assume that the indirect method is
being used and that the investments were purchased for cash.
Assume that part of accounts and other receivables on Trejada’s Toys’ February 2, 2014,
balance sheet is comprised of $43,225,000 of notes receivable. Two notes make up the
amount. The first note has a face value of $30,000,000 and bears interest at 7 percent
for 90 days. The second note has a face value of $13,225,000 and bears interest at 9
percent for 120 days. Record the journal entry for the collection of the 7 percent note on
May 3 and the dishonor of the 9 percent note on June 2. (Omit explanations; assume no
interest had been accrued; amounts rounded to nearest dollar.)
Provide explanations for the following related journal entries:
Contrast the accounting problems presented by definitely determinable liabilities and
those associated with estimated liabilities.
Avery and Bert are partners who share profits and losses in a ratio of 2:1 and have
capital balances of $75,000 and $150,000, respectively. The partners agree to admit
Carmen to the partnership. Carmen invests $75,000 for a 35 percent interest in the
partnership. The new total capital balance after admitting Carmen is $300,000. The
entry to record the admission of Carmen to the partnership is:
Using the income statement below, develop a common-size statement by filling in the
blanks provided. Show your work. Round to one decimal place.
