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Payroll is usually paid with a check or with the use of an electronic funds transfer.
Answer:
Purchase discounts are the same as trade discounts.
Answer:
Trade accounts payable are amounts owed to suppliers for products or services
purchased on credit.
Answer:
Profit margin is calculated by dividing net sales by net income.
Answer:
If a company is highly leveraged, this means that it has relatively low risk of not being
able to repay its debt.
Answer:
Separation of duties divides responsibility for a transaction or a series of transactions
between two or more individuals or departments. Separation of duties reduces the risk
of error and fraud.
Answer:
The debt to equity ratio is calculated by dividing total liabilities by total assets.
Answer:
The direct write-off method of accounting for bad debts records the loss from an
uncollectible account receivable when the company determines it to be uncollectible.
Answer:
A step-wise variable cost can be separated into a fixed component and a variable
component.
Answer:
Departments are the cost objects when the plantwide overhead rate method is used.
Answer:
A clock card is a source document used by an employee to record the total number of
hours worked during the pay period.
Answer:
A perpetual inventory system requires updating of the inventory account only at the
beginning of an accounting period.
Answer:
It is acceptable to record prepayment of expenses as debits to expense accounts.
Answer:
Required employee payroll deductions include income taxes, Social Security taxes,
pension and health contributions, union dues, and charitable giving.
Answer:
According to IRS requirements, companies are allowed to use FIFO for financial
reporting and LIFO for tax reporting.
Answer:
Reference: 16_02
Refer to the following table of cost information:
The following journal entry would be made to record the transfer of completed goods
from Shoving to the finished goods inventory for this period:
Answer:
The accounts payable ledger is used for storing transactions data regarding individual
customers.
Answer:
Partners in a partnership are taxed on the amounts they withdraw from the partnership,
not the partnership income.
Answer:
Bonding does not discourage employees from stealing from the company as employees
know that bonding is an insurance policy against loss from theft.
Answer:
Which of the following is an example of a performance measure of the customer
perspective that would be found in a balanced scorecard?
A. Product defect rates.
B. Number of new customers.
C. Employee satisfaction.
D. Return on investment.
E. Sales growth.
Answer:
On December 31, a company needed to estimate its ending inventory to prepare its
fourth quarter financial statements. The following information is currently available:
Inventory as of October 1: $12,500
Net sales for fourth quarter: $40,000
Net purchases for fourth quarter: $27,500
The company typically achieves a gross profit ratio of 15%. Ending Inventory under the
gross profit method would be:
A. $4,000
B. $6,000
C. $10,000
D. $16,000
E. $34,000
Answer:
Use the following information to estimate the third quarter ending inventory under the
gross profit method. This company's gross profit ratio is 20%.
Third quarter beginning inventory: $54,000
Net sales for third quarter: $85,000
Net purchases for third quarter: $21,000
A. $101,000
B. $58,000
C. $35,000
D. $7,000
E. $14,000
Answer:
Compute cost of goods manufactured for this period given the following amounts.
A. $72,000
B. $48,000
C. $60,000
D. $66,000
E. $180,000.
Answer:
Decreases in retained earnings that represent costs of assets or services that are used to
earn revenues are called:
A. Liabilities
B. Equity
C. Withdrawals
D. Expenses
E. Contributed capital
Answer:
A source document that production managers use to request materials for manufacturing
and that is used to assign materials costs to specific jobs or to overhead is a:
A. Job cost sheet.
B. Production order.
C. Materials requisition.
D. Materials purchase order.
E. Receiving report.
Answer:
Sea Company reports the following information regarding its production cost:
Compute production cost per unit under absorption costing.
A. $28.00
B. $82.50
C. $80.00
D. $63.00
E. $35.00
Answer:
Compute profit margin ratio given the following information.
Cost of goods sold: $28,000
Net income: $21,400
Gross profit: $400,000
A. 5%
B. 7%
C. 1.65%
D. 6.64%
E. 76.42%
Answer:
If beginning retained earnings was $184,300, net income for the period was $200,000
and ending retained earnings was $322,000, what was the total amount of dividend
distributed for the period?
A. $62,300
B. $306,300
C. $337,700
D. $706,300
E. $137,700
Answer:
Bonds with a par value of less than $1,000 are known as:
A. Junk bonds
B. Baby bonds
C. Callable bonds
D. Unsecured bonds
E. Convertible bonds
Answer:
The calendar year-end adjusted trial balance for Acosta Co. follows:
Required:
a. Prepare a classified year-end balance sheet. (Note: A $7,000 installment on the
long-term note payable is due within one year.)
b. Calculate the current ratio.
Answer:
Identifying business activities requires selecting transactions and events relevant to an
organization. Which of the following events would be recorded in the accounting
records of Acme Car Wash?
A. Acme washes 500 cars.
B. J.B. Smith, a customer, buys lunch at the restaurant next door to Acme while waiting
for her car to be washed.
C. Clean Company, a supplier, sells 50 pounds of soap to ABC Company.
D. Sudsey Company, a supplier, goes out of business.
E. Acme hires Andrea as a receptionist.
Answer:
A company has 3,000 shares of $2 par value common stock and 1,500 shares of 8%,
$150 par, noncumulative preferred stock outstanding. The balance in Retained Earnings
at the beginning of the year was $400,000. The net loss for the current year was
$30,000. If the company paid a dividend of $1 per share on its common stock, what is
the balance in Retained Earnings at the end of the year?
A. $349,000
B. $365,800
C. $451,000
D. $400,000
E. $409,000
Answer:
Use the following information to compute the total manufacturing costs incurred during
the period:
A. $36,650
B. $30,950
C. $30,650
D. $30,350
E. $31,650
Answer:
A companys Pacific division had sales of $15 billion, net income of $3 billion, and
average invested assets of $4 billion. What is this divisions investment turnover?
A. 1.33
B. 0.20
C. 5.00
D. 3.75
E. 0.27
Answer:
A company uses the aging of accounts receivable method to estimate its bad debts
expense. On December 31 of the current year, an aging analysis of accounts receivable
revealed the following:
Required:
a. Calculate the amount of the allowance for doubtful accounts that should be reported
on the current year-end balance sheet.
b. Calculate the amount of the bad debts expense that should be reported on the current
year's income statement, assuming that the balance of the allowance for doubtful
accounts on January 1 of the current year was $44,000 and that accounts receivable
written off during the current year totaled $49,200.
c. Prepare the adjusting journal entry to record bad debts expense on December 31 of
the current year.
d. Show how accounts receivable will appear on the current year-end balance sheet as
of December 31.
Answer:
Harold's expects its September sales to be 20% higher than its August sales of
$150,000. Purchases were $100,000 in August and are expected to be $120,000 in
September. All sales are on credit and are collected as follows: 30% in the month of the
sale and 70% in the following month. Merchandise purchases are paid as follows: 25%
in the month of purchase and 75% in the following month. The beginning cash balance
on September 1 is $7,500. The ending cash balance on September 30 would be:
A. $31,500
B. $67,500
C. $54,000
D. $61,500
E. $136,500
Answer:
Micron owns 3,000 shares of JVT. JVT has 25,000 total shares of stock outstanding.
JVT paid $3 per share in cash dividends to its stockholders. Micron should record a:
A. Debit to Dividends for $75,000.
B. Debit to Dividends for $9,000.
C. Debit to Cash for $9,000.
D. Debit to Long-Term Investments for $9,000.
E. Credit to Long-Term Investments for $9,000.
Answer:
An example of an operating activity is:
A. Paying wages.
B. Purchasing office equipment.
C. Borrowing money from a bank.
D. Selling stock.
E. Paying off a loan.
Answer:
Which budget must be completed after a cash budget is prepared?
A. Capital expenditures budget.
B. Sales budget.
C. Merchandise purchases budget.
D. General and administrative expense budget.
E. Budgeted income statement
Answer:
Cash flows from selling trading securities are reported in the statement of cash flows as
part of:
A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Noncash activities.
E. None of these as this is not reported in the statement of cash flows.
Answer:
Vine Company began operations on January 1, 2013. During its first year, the company
completed a number of transactions involving sales on credit, accounts receivable
collections, and bad debts. These transactions are summarized as follows:
a. Sold $1,348,300 of merchandise (that had cost $983,600) on credit, terms n/30.
b. Wrote off $19,400 of uncollectible accounts receivable.
c. Received $666,100 cash in payment of accounts receivable.
d. In adjusting the accounts on December 31, the company estimated that 2.90% of
accounts receivable will be uncollectible.
What is the amount required for the adjusting journal entry to record bad debt expense?
A. $18,644.90
B. $38,621.20
C. $19,783.80
D. $19,221.20
E. $19,400.20
Answer:
A company's board of directors votes to declare a cash dividend of $0.75 per share. The
company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding.
The total amount of the cash dividend is:
A. $375
B. $4,125
C. $7,125
D. $7,500
E. $11,250
Answer:
An internal report that helps management analyze the difference between actual
performance and budgeted performance based on the actual sales volume (or other level
of activity) and that presents the differences between actual and budgeted amounts as
variances is called a(n):
A. Sales budget performance report.
B. Flexible budget performance report.
C. Master budget performance report.
D. Static budget performance report.
E. Operating budget performance report.
Answer:
The flexibility principle of accounting information systems requires that the:
A. Benefits from an activity outweigh the costs of the activity.
B. System report useful, understandable, timely, and pertinent information for effective
decision making.
C. System aid managers in controlling and monitoring business activities.
D. System adapt to changes in the company, business environment, and needs of
decision makers.
E. System conform with a company's activities, personnel, and structure.
Answer:
Indicate the order in which the following budgets would be completed (1 = first and so
on)
______ (A) Cash budget
______ (B) Budgeted income statement
______ (C) Sales budget
______ (D) Production budget
______ (E) Operating expense budget
Answer:
The total amount of depreciation recorded against an asset or group of assets during the
entire time the asset or assets have been used in the day-to-day operations of the
business:
A. Is referred to as depreciation expense.
B. Is referred to as accumulated depreciation.
C. Is shown on the income statement of the final period.
D. Is only recorded when the asset is disposed of.
E. Is referred to as an accrued asset.
Answer:
Products that are in the process of being manufactured but are not yet complete are
called:
A. Raw materials inventory.
B. Conversion costs.
C. Cost of goods sold.
D. Goods in process inventory.
E. Finished goods inventory.
Answer:
A company paid $150,000, plus a 6% commission, and $4,000 in closing costs for a
property. The property included land appraised at $87,500, land improvements
appraised at $35,000, and a building appraised at $52,500. What should be the
allocation of this property's costs in the company's accounting records?
A. Land $75,000; Land Improvements, $30,000; Building, $45,000
B. Land $75,000; Land Improvements, $30,800; Building, $46,200
C. Land $81,500; Land Improvements, $32,600; Building, $48,900
D. Land $79,500; Land Improvements, $32,600; Building, $47,700
E. Land $87,500; Land Improvements; $35,000; Building; $52,500
Answer:
M-Bot, Incorporated produces automatic car starters. The company used $700,000 of
raw materials in their most recent accounting year. They started the year with $25,000
of raw materials and ended with $40,000.
(a) Compute the companys raw materials inventory turnover.
(b) Compute the companys days sales in raw materials inventory.
Answer:
A company expects to produce and sell a single product. Management desires a 14%
return on assets of $725,000. The following additional company information is
available:
Required:
Compute selling price per unit given that markup percentage equals desired profit
divided by total costs under the following independent assumptions.
a. The company produced and sold 17,600 units
b. The company produced and sold 28,732 units
Answer:
Which of the following procedures would weaken the control over cash receipts that
arrive through the mail?
A. After the mail is opened, a list (in triplicate) of the money received is prepared with
a record of the sender's name, the amount, and an explanation of why the money is sent.
B. The bank reconciliation is prepared by a person who does not handle cash or record
cash receipts.
C. For safety, only one person should open the mail and that person should immediately
deposit the cash received in the bank.
D. The cashier should not also be the record keeper who records the amounts received
in the accounting records.
E. All of the above are good internal control procedures over cash receipts that arrive
through the mail.
Answer:
The following data concerns a proposed equipment purchase:
Assuming that net cash flows are received evenly throughout the year, the accounting
rate of return is:
A. 62.3%
B. 32.0%
C. 0%
D. 7.7%
E. 5.0%
Answer:
The approach to preparing financial statements based on recognizing revenues when
they are earned and matching expenses to those revenues is:
A. Cash basis accounting
B. The matching principle
C. The time period principle
D. Accrual basis accounting
E. Revenue basis accounting
Answer:
_________________________ are investments that are both readily converted to
known amounts of cash and mature within three months.
Answer:
The following accounts appear on either the income statement (IS) or balance sheet
(BS). In the space provided next to each account write the letters IS or BS that identify
the statement on which the account appears.
Answer:
A company had income before interest expense and income taxes of $176,000 and its
interest expense is $55,000. Calculate the company's times interest earned ratio.
Answer:
A business paid a $100 cash dividend. Assume the company had a $2,000 balance in
cash immediately prior to this transaction and that this was the first time dividends had
ever been paid. Set up the necessary T-accounts below and show how this transaction
would be recorded directly in those accounts. Show ending account balances.
Answer:
Explain how to compute book value per share and discuss how it can be used to
analyze the financial condition of a corporation.
Answer:
During the closing process, each partner's withdrawals account is closed to
__________________.
Answer:
The accounts receivable turnover is calculated by dividing _________________ by
_____________________.
Answer:
Identify the differences between accrual accounting and cash basis accounting.
Answer:
On December 31, 2012, a company forgot to record $7,000 of depreciation on office
equipment. What would be the effect on the assets, net income, and equity when it
comes to the 2012 financial statements?
Answer:
Identify the items that are included in merchandise inventory. (In your answer address
the special situations of goods in transit, consigned goods, and damaged goods.)
Answer:
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 investing and financing activities.
Answer:
During the current year ended December 31, clients paid fees in advance for
accounting services amounting to $25,000. These fees were recorded in an account
called Unearned Accounting Fees. If $3,500 of these fees are still unearned on
December 31 of this year, prepare the December 31 adjusting entry .
Answer:
What are some of the steps that Ashley Cook and Danielle Danker took to control
ash&dans.com costs?
Answer:
On August 31, 2013, Gilliam Corporation's common stock is priced at $50 per share
before any stock dividend, and the stockholders' equity section of its balance sheet
appears as follows. Assume that the company declares and immediately distributes a
10% stock dividend.
What is the total amount in the Retained Earning account immediately after the stock
dividend?
Answer:
You have evaluated three projects using the net present value (NPV) method. How
would you decide which one of the projects to select?
Answer:
Outer Limits, Inc. produces fencing units which require two processes, A and B, to
complete. The best-selling type of fence is made of pvc. Information related to the
8,000 units of pvc fencing produced annually is shown below.
Outer Limits total expected overhead costs and related overhead data are shown below.
The company uses departmental overhead rates based on machine hours in department
A and direct labor hours in department B.
Determine the total amount of overhead assigned to each unit of pvc fencing.
Answer:
A company sells its product subject to a warranty that covers the cost of parts for
repairs during the six months after the date of sale. Warranty costs are estimated to be
6% of sales. During the month of June, the company performed warranty work and
used $12,000 worth of parts for the warranty repairs. The total sales for June were equal
to $450,000.
1. Record the warranty expense for the month of June.
2. Record the costs of the warranty work completed in June.
3. If the Estimated Warranty Liability account had a credit balance of $10,000 on May
31, what is the account balance at June 30?
Answer:
A company made the following purchases during the year:
On December 31, there were 28 units in ending inventory. These 28 units consisted of 1
from the January 10 purchase, 2 from the March 15 purchase, 5 from the April 25
purchase, 15 from the July 30 purchase, and 5 from the October 10 purchase. Using
specific identification, calculate the cost of the ending inventory.
Answer:
The following information is from the annual financial statements of Duke Company.
Calculate the accounts receivable turnover ratio for 2013 and 2014.
Answer:
