A qualitative characteristic that influences capital investment analysis is manufacturing
productivity.
a. True
b. False
Rush Corporation borrowed $25,000 from the bank. Which of the following accurately
shows the effects of the transaction?
a. Increase cash $25,000 and decrease notes payable $25,000
b. Increase cash $25,000 and increase notes payable $25,000
c. Decrease cash $25,000 and decrease notes payable $25,000
d. Decrease cash $25,000 and increase notes payable $25,000
Merchandise is ordered on November 12; the merchandise is shipped by the seller and
the invoice is prepared, dated, and mailed by the seller on November 15; the
merchandise is received by the buyer on November 17; the transaction is recorded in
the buyer’s accounts on November 18. The credit period begins with what date?
a. November 12
b. November 15
c. November 17
d. November 18
On the bank’s accounting records, customers’ accounts are normally shown as a(n):
a. revenue.
b. liability.
c. asset.
d. expenses.
When companies sell their receivables to other companies, the transaction is called
factoring.
a. True
b. False
The accrual basis recognizes liabilities at the time the business incurs the obligation to
pay for the services or goods purchased.
a. True
b. False
Which of the following is true of a direct materials cost?
a. A direct materials cost is included in factory overhead.
b. It is sometimes called factory burden.
c. It is not a significant portion of the total product cost.
d. It is the cost of any material that is an integral part of the finished product.
Sales commission is an example of factory overhead cost.
a. True
b. False
Supervisor salaries, maintenance, and indirect factory wages would normally appear in
the factory overhead cost budget.
a. True
b. False
Based on the following information, what would be recorded as purchases discount if
the invoice is paid within the discount period?
1)$5,000 of merchandise inventory was ordered on April 2, 2016.
2)$2,000 of this merchandise was received on April 5, 2016.
3)On April 6, 2016, an invoice dated April 4, 2016, with terms of 2/10, net 30 for
$2,150 which included a $150 prepaid freight cost, was received.
4)On April 10, 2016, $500 of the merchandise was returned to the seller.
a. $100
b. $30
c. $43
d. $33
Determine the due date and amount of interest due at maturity on the following notes
(Assume 360 days in a year):
Origination DateFace
AmountTerm
of NoteInterest
RateMaturity
DateInterest
Amount
(a) March 1$5,00060 days9%______________
(b) May 15$9,000120 days8%______________
567
Determine (a) the average rate of return on investment, giving effect to depreciation on
the investment, and (b) the net present value.
Sales discounts is used in accounting for transactions with customers.
a. True
b. False
The amount of deposits in transit is included on the bank statement as a(n):
a. deduction from the cash balance per books.
b. deduction from the cash balance per bank.
c. addition to the cash balance per bank.
d. addition to the cash balance per books.
A rental cost of $40,000 plus $0.50 per machine hour of use is an example of a mixed
cost.
a. True
b. False
The liabilities that are due to be paid usually within a year or less are called:
a. longterm liabilities.
b. deferred liabilities.
c. current liabilities.
d. contingent liabilities.
If land costing $75,000 was sold for $135,000, the amount reported in the investing
activities section of the statement of cash flows would be $135,000.
a. True
b. False
The master budget of a small manufacturer would normally include all component
budgets that impact the financial statements.
a. True
b. False
For proper matching of revenues and expenses, the estimated cost of fringe benefits
must be recognized as an expense of the period during which the employee earns the
benefits.
a. True
b. False
Paying an invoice within the discount period
_____.HTMLENTITY#8203HTMLENTITY
a. HTMLENTITY#8203HTMLENTITYincreases the profitability metric
b. HTMLENTITY#8203HTMLENTITYhas no effect on the profitability metric
c. HTMLENTITY#8203HTMLENTITYdecreases the liquidity metric
d. HTMLENTITY#8203HTMLENTITYincreases the liquidity metric
The point where the sales line and the total costs line intersect on the costvolumeprofit
graph represents:
a. the maximum possible operating loss.
b. the maximum possible operating income.
c. the total fixed costs.
d. the breakeven point.
Based on the following data for the current year, determine the days’ sales in accounts
receivable.
Net sales on account during the year$1,080,000
Cost of merchandise sold during the year750,000
Accounts receivable, beginning of year46,500
Accounts receivable, end of year36,500
Inventory, beginning of year170,000
Inventory, end of year232,000
a. 14.03
b. 11.3
c. 13.79
d. 12.5
Service department charges are similar to the expenses that would be incurred if the
profit center purchased the services from outside the company.
a. True
b. False
If a business sells four products, it is not possible to estimate the breakeven point.
a. True
b. False
Most employers are required to withhold a portion of the earnings of each employee for
FICA tax.
a. True
b. False
A fixed asset with a cost of $15,000 and accumulated depreciation of $12,500 is sold
for $1,750. What is the amount of gain or loss on disposal of the fixed asset?
a. $750 loss
b. $2,500 loss
c. $2,500 gain
d. $750 gain
Identify the formula used to calculate profit margin.
a. Profit margin = Sales Operating income
b. Profit margin = Operating income Invested assets
c. Profit margin = Invested assets Operating income
d. Profit margin = Operating income Sales
The process by which management plans, evaluates, and controls long term investment
decisions involving fixed assets is called costvolumeprofit analysis.
a. True
b. False
Which of the following formula is used to calculate direct labor rate variance?
a. Actual Costs + (Actual hours × Standard Rate)
b. Actual costs – Standard cost
c. (Actual hours × Standard rate) – Standard costs
d. Actual costs – (Actual hours × Standard rate)
Merchandise purchased on account by a company has no effect on its working capital
because:HTMLENTITY#8203HTMLENTITY
a. HTMLENTITY#8203HTMLENTITYinventory and accounts payable are increased
by the same amount.
b. HTMLENTITY#8203HTMLENTITYinventory and accounts receivable are
increased by the same amount.
c. HTMLENTITY#8203HTMLENTITYcash and inventory are increased by the same
amount.
d. HTMLENTITY#8203HTMLENTITYcash and inventory are decreased by the same
amount.
In a transaction where purchased merchandise has been returned, the buyer will
increase the Customer Refunds Payable account and the seller will increase the
Purchases Returns and Allowances account.
a. True
b. False
The statement of shareholders’ equity is prepared:
a. before the preparation of the income statement.
b. after the preparation of the statement of cash flows.
c. before the preparation of the balance sheet.
d. after the audit of the financial statements.
A centralized business organization is one in which all major planning and operating
decisions are made by top management.
a. True
b. False
Breakeven analysis is a type of costvolumeprofit analysis.
a. True
b. False
All merchandising businesses are organized as corporations.
a. True
b. False