The return on total assets can be calculated as profit margin times total asset turnover.
A contingent liability is a potential obligation that depends on a future event arising
from a future transaction or event.
Job order costing is applicable to manufacturing firms only and not service firms.
Control of cash disbursements is important for companies as most large thefts occur
from payment of fictitious invoices.
A wholesaler is an intermediary that buys products from manufacturers or other
wholesalers and sells them to consumers.
Unrealized gains and losses on trading securities are reported as part of net income.
Selling expenses support a company’s overall operations and include expenses related to
accounting, human resource management, and financial management.
Accumulated depreciation is shown on the balance sheet as a subtraction from the cost
of its related asset.
The accounts payable ledger has a controlling account in the general ledger and a
separate subsidiary account for each creditor in the accounts payable ledger.
While companies strive to achieve ideal standards, reality implies that some loss of
materials usually occurs with any process.
Interest is the payment to the owner of an asset for its use by a borrower.
A journal gives a complete record of each transaction in one place, and shows the debits
and credits for each transaction.
The budgeted balance sheet is prepared with data contained in the previously prepared
components of the master budget.
If a customer owes interest on accounts receivable, Interest Revenue is debited and
Accounts Receivable is credited.
Posting is the transfer of journal entry information to the ledger.
Recording revenues early overstates current-period income; recording revenues late
understates current period income.
Evaluation of company performance does not include analysis of (1) past and current
performance, (2) current financial position, and (3) future performance and risk.
A company paid $2.10 in dividends. Its earnings per share is $5.40, and its stock price
is $120 per share. The dividend yield equals 38.9%.
The going concern assumption supports the reporting of plant assets at book value
rather than market value.
Changes in accounting estimates are treated the same as accounting errors.
Accrued vacation benefits are a form of estimated liability for an employer.
The accrual basis of accounting recognizes revenues when cash is received from
customers.
In a job order cost accounting system, indirect labor costs are debited to the Factory
Overhead account.
The type of bond that provides the greatest security from theft of loss is the debenture.
Total asset turnover reflects a company’s ability to use its assets to generate sales and is
an important indication of operating efficiency.
The purchases budget depends on information provided by the sales budget.
Dividend yield is the percent of annual cash dividends distributed to common
shareholders relative to the stock’s market price.
Each adjusting entry can only affect a balance sheet account.
Bonds and long-term notes are similar in that they are typically transacted with multiple
lenders.
Comparative horizontal analysis is used to reveal patterns in data covering successive
periods.
A stock split increases total stockholders’ equity.
Cash equivalents are short-term highly liquid investment assets that are readily
converted to a know cash amount, and have maturities of one year.
A company had net sales of $340,500, its cost of goods sold was $257,000, and its net
income was $13,750. The company’s gross margin ratio equals 24.5%.
Assume that the S & B partnership agreement gave Steely 60% and Breck 40% of
partnership income and losses. The partnership lost $27,000 in the current period. This
implies that Steely’s share of the loss equals $16,200, and Breck’s share equals $10,800.
Short-term investments are intended to be converted into cash within the longer of one
year or the current operating cycle of the business, and are readily convertible to cash.
Investment center is another name for profit center.
External users include lenders, shareholders, customers, and regulators.
The carrying value of a long-term note is computed as the present value of all
remaining future payments, discounted using the market rate at the time of issuance.
The time expected to pass before the net cash flows from an investment would return its
initial cost is called the:
A.Amortization period.
B.Payback period.
C.Interest period.
D.Budgeting period.
E.Discounted cash flow period.
Costs included in the Merchandise Inventory account can include:
A.Invoice price minus any discount.
B.Transportation-in.
C.Storage.
D.Insurance.
E.All of these.
Allocations of joint product costs can be based on the relative market values of the
products:
A.And never on the relative physical quantities of the products.
B.Plus an adjustment for future excess margins.
C.And not on any other basis.
D.At the time the products are separated.
E.Only if the products contain both direct and indirect costs.
A job order cost accounting system would best fit the needs of a company that makes:
A.Shoes and apparel.
B.Paint.
C.Cement.
D.Custom machinery.
E.Pencils and erasers.
On October 1, Robinson Company sold merchandise in the amount of $5,800 to Rosser,
with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robinson uses the
perpetual inventory system. The journal entry or entries that Robinson will make on
October 1 is:
A.
B.
C.
D.
E.
Which of the following items is reported on the statement of cash flows under financing
activities?
A.Declaration of a cash dividend.
B.Payment of a cash dividend.
C.Declaration of a stock dividend.
D.Payment of a stock dividend.
E.Stock split.
The purpose of reversing entries is to:
A.simplify the recording of certain journal entries in the future.
B.correct an error made in a previous journal entry.
C.ensure that closing entries have been properly posted to the ledger accounts.
D.make certain that only permanent accounts are carried forward into the next
accounting period.
E.complete a required step in the accounting cycle.
A U.S. company makes a sale to a foreign customer payable in 30 days in the
customer’s currency. The sale would be recorded by the U.S. company on the date:
A.Of sale using a projected estimate of the U.S. dollar value at payment date.
B.Of sale using a 30-day average U.S. dollar value.
C.Of sale using the current dollar value.
D.Of sale using the foreign currency value.
E.When payment is received.
If assets are $99,000 and liabilities are $32,000, then equity equals:
A.$32,000.
B.$67,000.
C.$99,000.
D.$131,000.
E.$198,000.
Minchoy Corporation uses a job order cost accounting system. Five jobs were worked
on during the current year. The predetermined overhead rate is 20% of direct labor
costs. The following cost information is available (all materials and time ticket
information applies to direct costs):
Part 1″Complete the job cost sheets for each job.
Part 2″Identify the amounts of each of the following accounts at the end of the period
a. Work in Process____________________
b. Finished Goods____________________
c. Cost of Goods Sold____________________
Match the following terms to the appropriate definition.
A)An accounting system for manufacturing activities based on the periodic inventory
system.
B) A source document that is used to report how much time an employee spent working
on a job or on overhead activities and then to determine the amount of direct labor to
charge to the job or the amount of indirect labor to charge to overhead.
C)A source document that is used to record the number of hours an employee works
and to determine the total labor cost for each pay period.
D) 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.
E) The amount by which overhead incurred in a period exceeds the overhead applied to
jobs with the predetermined overhead allocation rate.
F) The production of products in response to special orders; also called customized
production.
G)The amount by which the overhead applied to jobs in a period with the
predetermined overhead allocation rate exceeds the overhead incurred in a period.
H)A separate record maintained for each job in a job order costing system; it shows
direct materials, direct labor, and overhead for each job.
I) A cost accounting system designed to determine the cost of producing each job or job
lot.
J)The rate established prior to the beginning of a period that relates estimated overhead
to an allocation factor such as estimated direct labor and is used to assign overhead cost
to a job.
K)A perpetual record that is updated each time units of raw material are both purchased
and issued for use in production.
A company using the net method of recording purchases failed to take advantage of a
discount available. When they pay the full (gross) amount of an invoice at the end of
the credit period the journal entry will include a debit to:
A.Merchandise Inventory.
B.Sales Discounts.
C.Discounts Lost.
D.Cash.
E.Accounts Receivable.
The process of restating future cash flows in today’s dollars is known as:
A.Budgeting.
B.Annualization.
C.Discounting.
D.Payback period.
E.Capitalizing.
Next year’s sales forecast shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12, respectively. The desired
ending inventory of Product A is 20% higher than its beginning inventory of 2,000
units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
Budgeted purchases of Product B for the year would be:
A.24,500 units.
B.22,500 units.
C.16,500 units.
D.26,500 units.
E.20,500 units.
For which item does a bank NOT issue a debit memorandum?
A.To notify a depositor of all withdrawals through an ATM.
B.To notify a depositor of a fee assessed to the depositor’s account.
C.To notify a depositor of a uncollectible check.
D.To notify a depositor of periodic payments arranged in advance, by a depositor.
E.To notify a depositor of a deposit to their account.
The account receivable turnover measures:
A.How long it takes to sell accounts receivable to a factor.
B.How often, on average, receivables are received and collected during the period.
C.The relation of cash sales to credit sales.
D.How long it takes to sell merchandise inventory.
E.All of these.
Employers:
A.Pay FICA taxes equal to the amount of FICA taxes withheld from the employees.
B.Withhold employees’ FICA taxes.
C.Pay unemployment taxes to the federal government.
D.Pay unemployment taxes to both the state and federal governments.
E.All of these.
Allocating joint costs to products can be based on their relative:
A.Market values.
B.Direct costs.
C.Gross margins.
D.Total costs.
E.Variable costs.
Good management accounting indicates that projects be evaluated using relevant data.
In choosing among alternatives, what factors (considerations) are relevant?
A source document that production managers use to request materials for production
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.
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.
A formal statement of future plans, usually expressed in monetary terms, is a:
A.Variance report.
B.Position statement.
C.Budget.
D.Prospectus.
E.Variance analysis.
Costs that the manager does not have the power to determine or at least strongly
influence are:
A.Variable costs.
B.Uncontrollable costs.
C.Indirect costs.
D.Direct costs.
E.Joint costs.
On March 31, 2009, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a
3-year subscription for five different magazines. The subscriptions started immediately.
What is the adjusting entry that should be recorded by Melanie Publishing Company on
December 31, 2009 if the credit to record the collection was made to Unearned Fees?
A.debit Unearned Fees, $15,480; credit Fees Earned, $15,480.
B.debit Unearned Fees, $5,160; credit Fees Earned, $5,160.
C.debit Unearned Fees, $11,610; credit Fees Earned, $11,610
D.debit Unearned Fees, $1,290; credit Fees Earned, $1,290
E.debit Unearned Fees, $3,870; credit Fees Earned, $3,870
An approach that enters and processes data as soon as source documents are available is
called:
A.Date storage.
B.Batch processing.
C.Online processing.
D.Computer programming
E.Web communications.
Match the following terms with the appropriate definition.
1)Social responsibility
2)Internal users
3)Operating activities
4)Financing activities
5)Investing activities
6)Accounting
7)Ethics
8)Recordkeeping
9)External users
A)The acquisition and disposing of resources that an organization uses to acquire and
sell products and services.
B)Beliefs that distinguish right from wrong.
C)The part of accounting that involves recording transactions and events, either
electronically or manually.
D)Persons using accounting information who are directly involved in managing the
organization.
E)An information and measurement system that identifies, records and communicates
relevant reliable and comparable information about an organization’s business activities.
F)Provide the means organizations use to pay for resources such as land, buildings, and
equipment to carry out plans.
G)Concern for the impact of actions on society.
H)The use of resources to research, develop, purchase, produce, distribute, and market
products and services.
I)Persons using accounting information who are not directly involved in the running of
the organization.
Flash has beginning equity of $257,000, net income of $51,000, withdrawals of $40,000
and investments by owners of $6,000. Its ending equity is:
A.$223,000.
B.$240,000.
C.$268,000.
D.$274,000.
E.$208,000.
A company that uses the net method of recording invoices made a purchase of $400
with terms of 2/10, n/30. The entry to record the purchase would include:
A.A debit to Merchandise Inventory for $392.
B.A credit to Discounts Lost for $8.
C.A credit to Cash for $392.
D.A debit to Discounts Lost for $8.
E.A debit to Cash for $392.
Viscount Company collected $42,000 cash on its accounts receivable. The effects of
this transaction as reflected in the accounting equation are:
A.Total assets decrease and equity increases.
B.Both total assets and total liabilities decrease.
C.Total assets, total liabilities, and equity are unchanged.
D.Both total assets and equity are unchanged and liabilities increase.
E.Total assets increase and equity decreases.
Net Income:
A.Decreases equity.
B.Represents the amount of assets owners put into a business.
C.Equals assets minus liabilities.
D.Is the excess of revenues over expenses.
E.Represents owners’ claims against assets.
A company that uses a job order cost accounting system would make the following
entry to record the flow of direct materials into production:
A.debit Work in Process, credit Cost of Goods Sold
B.debit Work in Process, credit Materials
C.debit Work in Process, credit Factory Overhead
D.debit Factory Overhead, credit Materials
E.debit Finished Goods, credit Materials
The financial statement that shows the beginning balance of owner’s equity; the changes
in equity that resulted from new investments by the owner, net income (or net loss);
withdrawals; and the ending balance, is the:
A.Statement of financial position.
B.Statement of cash flows.
C.Balance sheet.
D.Income statement.
E.Statement of owner’s equity.
The appropriate section in the statement of cash flows for reporting the purchase of land
in exchange for common stock is:
A.Operating activities.
B.Financing activities.
C.Investing activities.
D.Schedule of noncash investing or financing activity.
E.None of these. This is not reported on the statement of cash flows.
The impact of technology on internal controls includes:
A.Reduced processing errors.
B.Elimination of the need for regular audits.
C.Elimination of the need to bond employees.
D.Elimination of separation of duties.
E.Elimination of fraud.
____________ are the gross increases in equity from a company’s earnings activities
In a process costing accounting system, direct materials used are debited to the
______________________ account, and indirect materials used are debited to the
______________________ account.
Tecom had net sales of $315,000 and average accounts receivable of $75,600. Its
competitor, ZCom, had net sales of $299,000 and average accounts receivables of
$81,350. Calculate the accounts receivable turnover for both companies. Which
company is doing a better job of managing its accounts receivables?
The __________________________ is the rate that yields a net present value of zero
for an investment.
Describe the journal entries required to record the issuance of bonds and the payment of
bond interest.
The following information is for Trico and its competitor Unico.
Required:
1) Calculate the dollar amount of gross margin and the gross margin ratio to the nearest
percent, for each company for both years.
2) Which company had the more favorable ratio for each year?
3) Which company had the more favorable change in the gross margin ratio over this
2-year period?
The collection of job cost sheets for all jobs in process makes up the subsidiary ledger
controlled by the _____________________ inventory.
Community Technical College allocates administrative costs to its teaching departments
based on the number of students enrolled, while maintenance and utilities are allocated
based on square feet of classrooms. Based on the information below, what is the total
amount of expenses allocated to each department (rounded to the nearest dollar) if
administrative costs for the college were $150,000, maintenance expenses were
$70,000, and utilities were $85,000?
Precision Brackets, Co. is considering switching from traditional allocation of overhead
based on direct labor hours to an activity-based costing system. The manager has
accumulated the following information on engineering changes for two of the
company’s major products:
Compute the cost per unit using:
(1) The traditional two-stage allocation of the costs of engineering changes based on
direct labor hours.
(2) The activity-based cost allocation of the costs of engineering changes.
($400 x 5) + ($400 x 25) = $12,000 total cost of engineering changes
(4 x 5,000) + (4 x 2,500) = 30,000 direct labor hours
$12,000/30,000 hours = $0.40 per direct labor hour
Describe the net method of accounting for purchases. Why do companies use the net
method?
Herren, Inc. reported the following data regarding costs and inventories for the current
year: beginning goods-in-process inventory, $4,000; beginning finished goods
inventory, $2,000; cost of goods manufactured, $11,500; operating expenses, $3,000;
ending finished goods inventory, $1,000; ending goods-in-process inventory, $1,500.
Cost of goods sold for Herren, Inc. equals ____________________.
The difference between the amount borrowed and the amount repaid is referred to as
_______________.
Describe the recording process (including costs) for sales of merchandise inventory
using a perpetual inventory system.
_______________________ are links among computers giving different users and
different computers access to common databases and programs.
Josephine’s Bakery had the following assets and liabilities at the beginning and end of
the current year:
If Josephine invested an additional $12,000 in the business during the year, but
withdrew no assets during the year, what was the amount of net income earned by
Josephine’s Bakery?