Capital expenditures are costs of acquiring, constructing, adding, or replacing property,
plant and equipment.
Answer:
A process cost accounting system provides for a separate record of the cost of each
particular quantity of product that passes through the factory.
Answer:
Callable bonds can be redeemed by the issuing corporation at the fair market price of
the bonds.
Answer:
Under the equity method, a stock purchase is recorded at its original cost and is not
adjusted to fair market value each accounting period.
Answer:
The cumulative effects of other comprehensive income items must be reported
separately from retained earnings and paid-in capital, on the balance sheet, as
accumulated other comprehensive income.
Answer:
There are two internal control objectives and they are to ensure accurate financial
reports, and ensure compliance with applicable laws.
Answer:
Accumulated Depreciation is reported on the income statement.
Answer:
If the net income of a partnership is less than the total of the allowances provided by the
partnership agreement, the difference must be divided among the partners in the
income-sharing ratio.
Answer:
Any twelve-month accounting period adopted by a company is known as its fiscal year.
Answer:
If, prior to the last weekly payroll period of the calendar year, the cumulative earnings
for an employee are $98,800, earnings subject to social security tax are $100,000, and
the tax rate is 6.0%, the employer’s social security tax on the $2,000 gross earnings paid
on the last day of the year is $120.
Answer:
If the articles of partnership provide for annual salary allowances of $36,000 and
$18,000 to X and Y respectively and net income is $30,000, X’s share of net income is
$20,000.
Answer:
The process of winding up the affairs of a partnership is referred to as realization.
Answer:
Detailed supplemental schedules based on department responsibility are often prepared
for major items in the operating expenses budget.
Answer:
An example of a nonfinancial measure is the number of customer complaints.
Answer:
In using the variable cost concept of applying the cost-plus approach to product pricing,
fixed manufacturing costs and fixed selling and administrative expenses must be
covered by the markup.
Answer:
Both Accounts Receivable and Notes Receivable represent claims that are expected to
be collected in cash.
Answer:
Job cost sheets can provide information to managers on unit cost trends, the cost impact
of continuous improvement in the manufacturing process, the cost impact of materials
changes, and the cost impact of direct materials price or direct labor rate changes over
time.
Answer:
Sarbanes-Oxley requires companies to maintain strong and effective internal controls
and thus prevent fraud and misleading financial statements.
Answer:
Like many taxes deducted from employee earnings, federal income taxes are subject to
a maximum amount per employee per year.
Answer:
If the total unit cost of manufacturing Product Y is currently $36 and the total unit cost
after modifying the style is estimated to be $48, the differential cost for this situation is
$12.
Answer:
The payroll register is a multicolumn form used to assemble the data related for all
employees.
Answer:
If payment is due by the end of the month in which the sale is made, the invoice terms
are expressed as n/30.
Answer:
Break-even analysis is one type of cost-volume-profit analysis.
Answer:
Flexible budgeting requires all levels of management to start from zero and estimate
sales, production, and other operating data as though operations were being started for
the first time.
Answer:
After the sales budget is prepared, the production budget is normally prepared next.
Answer:
The post-closing trial balance will generally have fewer accounts than the trial balance.
Answer:
The document that serves as the basis for recording direct labor on a job cost sheet is
the time card.
Answer:
If an adjustment for an NSF check is made in a company’s bank reconciliation, then the
company must have written a bad check during the month.
Answer:
Investments in bonds that management intends to hold to maturity are called trading
securities.
Answer:
The issuance of common stock affects both paid-in capital and retained earnings.
Answer:
The dividend yield rate is equal to the dividends per share divided by the par value per
share of common stock.
Answer:
Product costs are not expensed until the product is sold.
Answer:
Process manufacturing usually reflects a manufacturer that produces small quantities of
unique items.
Answer:
The job order costing system is used by service firms to determine revenues, expenses,
and ultimately profit.
Answer:
Standard costs are determined by multiplying expected price by expected quantity.
Answer:
A company is planning to purchase a machine that will cost $24,000, have a six-year
life, and have no salvage value. The company expects to sell the machine’s output of
3,000 units evenly throughout each year. Total income over the life of the machine is
estimated to be $12,000. The machine will generate cash flows per year of $6,000. The
payback period for the machine is 12 years.
Answer:
The accounts receivable turnover measures the length of time in days it takes to collect
a receivable.
Answer:
Which of the following below is an example of a capital expenditure?
A.cleaning the carpet in the front room
B.tune-up for a company truck
C.replacing an engine in a company car
D.replacing all burned-out light bulbs in the factory
Answer:
When goods are shipped FOB destination and the seller pays the freight charges, the
buyer
A.journalizes a reduction for the cost of the merchandise.
B.journalizes a reimbursement to the seller.
C.does not take a discount.
D.makes no journal entry for the freight.
Answer:
The numerator of the rate earned on total assets ratio is equal to
A.net income
B.net income plus tax expense
C.net income plus interest expense
D.net income minus preferred dividends
Answer:
Which of the following is not included in the computation of the quick ratio?
A.inventory
B.marketable securities
C.accounts receivable
D.cash
Answer:
Copy equipment was acquired at the beginning of the year at a cost of $72,000 that has
an estimated residual value of $9,000 and an estimated useful life of 5 years. It is
estimated that the machine has an estimated 1,000,000 copies. This year 315,000 copies
were made. Determine the (a) depreciable cost, (b) depreciation rate, and (c) the
units-of-production depreciation for the year.
Answer:
Accompanying the bank statement was a debit memo for an NSF check received from a
customer. This item would be included on the bank reconciliation as a(n)
A.deduction from the balance per company’s records
B.addition to the balance per bank statement
C.deduction from the balance per bank statement
D.addition to the balance per company’s records
Answer:
Accrued salaries of $600 owed to employees for December 29, 30, and 31 are not taken
into consideration in preparing the financial statements for the year ended December
31. Indicate which items will be erroneously stated, because of the error, on (a) the
income statement for the year and (b) the balance sheet as of December 31. Also
indicate whether the items in error will be overstated or understated.
Answer:
Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are
$600,000, and fixed costs are $130,000. How much will operating income change if
sales increase by $40,000?
A.$8,000 increase
B.$8,000 decrease
C.$30,000 decrease
D.$30,000 increase
Answer:
The entry to adjust for the cost of supplies used during the accounting period is
A.debit Supplies Expense; credit Supplies
B.debit Owner Capital; credit Supplies
C.debit Accounts Payable; credit Supplies
D.debit Supplies; credit Owner Capital
Answer:
Baxter Company reported a net loss of $13,000 for the year ended December 31, 2010.
During the year, accounts receivable decreased by $5,000, merchandise inventory
increased by $8,000, accounts payable increased by $10,000, and depreciation expense
of $4,000 was recorded. During 2010, operating activities
A.provided net cash of $8,000.
B.provided net cash of $2,000.
C.used net cash of $8,000.
D.used net cash of $2,000.
Answer:
For higher levels of management, responsibility accounting reports:
A.are more detailed than for lower levels of management
B.are more summarized than for lower levels of management
C.contain about the same level of detail as reports for lower levels of management
D.are rarely provided or reviewed
Answer:
Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling prices
are: $55; $78; and $32, respectively. The variable costs for each product are: $20; $50;
and $15, respectively. Each product must go through the same processing in a machine
that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales take 7
hours, and Wales take 1 hour.
What is the contribution per machine hour for Wales?
A.$35
B.$28
C.$17
D.$7
Answer:
When shares of stock held as an investment are sold, the difference between the
proceeds and the carrying amount of the investment is recorded as a(n)
A.prior period adjustment
B.operating income and losses
C.paid-in capital addition
D.gain or loss
Answer:
The following data is given for the Zoyza Company:
Overhead is applied on standard labor hours.
The factory overhead volume variance is:
A.$73,250U
B.$73,250F
C.$59,400F
D.$59,400U
Answer:
Penny Company sells 25,000 units at $59 per unit. Variable costs are $29 per unit, and
loss from operations is ($50,000). Determine the (a) unit contribution margin (b)
contribution margin ratio, and (c) fixed costs per unit at production of 25,000 units.
a. $30 per unit = $59 – $29
b. $30 /$59 = 50.8%
c.
Answer:
On June 8, Alton Co. issued an $90,000, 6%, 120-day note payable to Seller Co.
Assuming a 360-day year for your calculations, what is the maturity value of the note?
A.$90,450
B.$90,000
C.$91,800
D.$95,400
Answer:
The worksheet
A.is an integral part of the accounting cycle
B.eliminates the need to rewrite the financial statements
C.is a working paper that is required
D.is used to summarize account balances and adjustments for the financial statements
Answer:
There are three parties to a check. The drawer is
A.a written document signed by the company
B.is the one who signs the check ordering payment by the bank
C.the bank on which the check is drawn
D.the party to whom payment is to be made
Answer:
For January, sales revenue is $700,000; sales commissions are 5% of sales; the sales
manager’s salary is $96,000; advertising expenses are $90,000; shipping expenses total
2% of sales; and miscellaneous selling expenses are $2,100 plus 1/2 of 1% of sales.
Total selling expenses for the month of January are:
A.$157,100
B.$240,600
C.$183,750
D.$182,100
Answer:
Gomez Service Company paid their first installment on their Notes Payable in the
amount of $2,000. How will this transaction affect the accounting equation?
A.Increase Liabilities (Notes Payable) and decrease Assets (Cash)
B.Decrease Assets (Cash) and decrease Owner’s equity (Note Payable Expense)
C.Decrease Assets (Cash) and decrease Assets (Notes Receivable)
D.Decrease Assets (Cash) and decrease Liabilities (Notes Payable)
Answer:
If fixed costs are $600,000 and the unit contribution margin is $40, what is the
break-even point if fixed costs are increased by $90,000?
A.17,250
B.15,000
C.8,333
D.9,667
Answer:
The following information was taken from Slater Company’s balance sheet:
Determine the company’s (a) Ratio of fixed assets to long-term liabilities, and (b) ratio
of liabilities to stockholders’ equity. Round your answer to one decimal place.
Answer:
The initials GAAP stand for
A.General Accounting Procedures
B.Generally Accepted Plans
C.Generally Accepted Accounting Principles
D.Generally Accepted Accounting Practices
Answer:
Based on the above data, what is the amount of quick assets?
A.$168,000
B.$96,000
C.$60,000
D.$61,000
Answer:
Computer equipment was acquired at the beginning of the year at a cost of $63,000 that
has an estimated residual value of $3,000 and an estimated useful life of 5 years.
Determine the (a) depreciable cost (b) double-declining-balance rate, and (c)
double-declining-balance depreciation for the first year.
Answer:
A project has estimated annual cash flows of $95,000 for four years and is estimated to
cost $260,000. Assume a minimum acceptable rate of return of 10%. Using the
following tables determine the (a) net present value of the project and (b) the present
value index, rounded to two decimal places.
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Answer:
Which of the following accounts will only be found in the chart of accounts of a
merchandising company?
A.Sales
B.Accounts Receivable
C.Merchandise Inventory
D.Accounts Payable
Answer:
On December 31, Strike Company has decided to trade-in one of its batting cages for
another one that has a cost of $500,000. The seller of the batting cage is willing to allow
a trade-in amount of $11,000. The initial cost of the old equipment was $215,000 with
an accumulated depreciation of $185,000. Depreciation has been taken up to the end of
the year. The difference will be paid in cash. What is the amount of the gain or loss on
this transaction?
A.Loss of $11,000
B.Gain of $11,000
C.Loss of $19,000
D.No loss or gain will be recorded.
Answer:
Which of the following products probably would be manufactured using a job order
costing system?
A.Number 2 pencils
B.Computer monitors.
C.Wedding invitations.
D.Paper.
Answer:
Which of the following is the correct flow of manufacturing costs?
A.Raw materials, work in process, finished goods, cost of goods sold
B.Raw materials, finished goods, cost of goods sold, work in process.
C.Work in process, finished goods, raw materials, cost of goods sold
D.Cost of goods sold, raw materials, work in process, finished goods.
Answer:
Machinery was purchased on January 1, 2010 for $51,000. The machinery has an
estimated life of 7 years and an estimated salvage value of $9,000. Double-declining
balance depreciation for 2011 would be
A.$10,929
B.$6,000
C.$10,500
D.$10,408
Answer:
Finch Company began its operations on March 31 of the current year. Finch Co. has the
following projected costs:
(1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is
paid in the following month.
(2) Insurance expense is $1,000 a month, however, the insurance is paid four times
yearly in the first month of the quarter, i.e. January, April, July, and October.
(3) Property tax is paid once a year in November.
The cash payments for Finch Company in the month of April are:
A.$122,600
B.$120,600
C.$123,100
D.$121,100
Answer:
The management of Arkansas Corporation is considering the purchase of a new
machine costing $490,000. The company’s desired rate of return is 10%. The present
value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability in this situation:
The net present value for this investment is:
A.positive $36,400
B.positive $55,200
C.Negative $16,170
D.Negative $126,800
Answer:
Which of the following stock investments should be accounted for using the cost
method?
A.investments of less than 20%
B.investments between 20 % and 50%
C.investments of less than 20% and investments between 20% and 50%
D.all stock investments should be accounted for using the cost method
Answer:
A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day period
ending on that day. The last pay day of December is Friday, December 27. Assuming
the next pay period begins on Monday, December 30 and the proper adjusting entry is
journalized at the end of the fiscal period (December 31). Journalize the entry for the
payment of the payroll on Friday, January 10.
Answer:
Newville Corporation reported net income of $50,000 in 2015. They have 10,000 shares
of $100 par, 6% preferred stock and 50,000 shares of $2 common stock outstanding.
During 2012 Newville paid the preferred stockholder’s a $6 per share dividend and also
paid $30,000 to common shareholders. The market value of Newville’s stock is:
Preferred – $105 and Common – $10.
(1) Calculate Newville’s dividend yield.
(2) Why does the dividend yield vary widely across firms?
Answer:
Answer:
Explain the difference between accrual basis accounting and cash basis accounting.
Answer:
1) Explain the effect of the following on the financial statements:
Goods held on consignment were included in the ending inventory count.
Goods purchased FOB shipping point were in transit on the last day of the year. The
goods were not counted as part of ending inventory.
Goods sold FOB shipping point were in transit on the last day of the year. These goods
were not counted as part of ending inventory.
2) What happens if inventory errors are not found and corrected?
Answer:
Journalize the following transactions using the direct write-off method of accounting
for uncollectible receivables:
Feb 20 Received $1,000 from Andrew Warren and wrote off the remainder owed of
$4,000 as uncollectible.
May 10 Reinstated the account of Andrew Warren and received $4,000 cash in full
payment.
Answer:
The Svelte Jeans Company produces two different types of jeans. One is called the
“Simple Life” and the other is called the “Fancy Life”. The company sales budget
estimates that 350,000 of the Simple Life Jeans and 200,000 of the Fancy Life will be
sold during 20xx. The Production Budget requires 353,500 units of Simple Life jeans
and 196,000 Fancy Life jeans be manufactured. The Simple Life jeans require 3 yards
of denim material, a zipper, and 25 yards of thread. The Fancy Life jeans require 4.5
yards of denim material, a zipper, and 40 yards of thread. Each yard of denim material
costs $3.25, the zipper costs $.75 each, and the thread is $.01 per yard. There is enough
material to make 2,000 jeans of each type at the beginning of the year. The desired
amount of materials left in ending inventory is to have enough to manufacture 3,500
jeans of each type. Prepare a Direct Materials Purchases Budget.
Ans:
Answer:
On January 1, 2015, Valuation Allowance for Trading Investment has a zero balance .
On December 31, 2015, the cost of trading securities portfolio was $64,200, and the fair
value was $67,000.
Prepare the December 31, 2015, adjusting journal entry to record the unrealized gain or
loss on trading investments.
Answer:
All nine transactions for Ralston Sports Co. for September 2011, the first month of
operations, are recorded in the following T accounts:
Prepare a trial balance, listing the accounts in their proper order.
Answer:
The actual cash received during the week ended June 7 for cash sales was $18,632.00,
and the amount indicated by the cash register total was $18,628.00. Journalize the entry
to record the cash receipts and cash sales.
Journal
Answer:
Define and describe an accounting system.
Answer:
The treasurer of Systems Company has accumulated the following budget information
for the first two months of the coming year:
The company expects to sell about 35% of its merchandise for cash. Of sales on
account, 80% are expected to be collected in full in the month of the sale and the
remainder in the month following the sale. One-fourth of the manufacturing costs are
expected to be paid in the month in which they are incurred and the other three-fourths
in the following month. Depreciation, insurance, and property taxes represent $6,400 of
the probable monthly selling and administrative expenses. Insurance is paid in February
and a $40,000 installment on income taxes is expected to be paid in April. Of the
remainder of the selling and administrative expenses, one-half are expected to be paid
in the month in which they are incurred and the balance in the following month. Capital
additions of $250,000 are expected to be paid in March.
Current assets as of March 1 are composed of cash of $45,000 and accounts receivable
of $51,000. Current liabilities as of March 1 are composed of accounts payable of
$121,500 ($102,000 for materials purchases and $19,500 for operating expenses).
Management desires to maintain a minimum cash balance of $20,000.
Prepare a monthly cash budget for March and April.
Answer:
A project has estimated annual net cash flows of $50,000. It is estimated to cost
$180,000. Determine the cash payback period.
Answer:
The assets and liabilities of S&P Day Spa at December 31, 2014 and its revenue and
expenses for the year are listed below. The capital of the owner is $68,000 at December
31, 2014. The owner invested an additional $10,000 during the year.
Determine the capital of the owner at January 1, 2014 (Hint: Calculate the
increase/decrease in owner’s equity first.). Prepare a statement of owner’s equity for the
current year ended December 31, 2014.
Answer:
Aqua Construction installs swimming pools. They calculate that warranty obligations
are 5% of gross sales. For the year just ending Aqua’s gross sales were $1,500,000. Due
to previous quarter recognitions, the Warranty Liability account has a credit balance of
$48,700. Determine the year’s total warranty liability and journalize any necessary
value to establish the year’s liability at December 31st.
ans: Due to sales, $1,500,000, warranty liability is $75,000 ($1,500,000 x 5%) . Since
$48,700 has already been recognized, $26,300 ($75,000 – $48,700) must still be
recognized.
Answer:
Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in
the month following the sale. If sales on account are budgeted to be $225,000 for March
and $250,000 for April, what are the budgeted cash receipts from sales on account for
April?
Answer:
Fellows Corporation has determined that the $2,700 accounts receivable due from
Andrew Stevens is uncollectible. Compare the journal entry that is required under the
direct write-off method to the journal entry that is required using the allowance method.
Answer: