The accounting rate-of-return method considers the time value of money.
Net present value analysis is based on a project’s cash flows.
The three techniques used to evaluate capital investment alternatives use the project’s
expected net income.
All of the following statements about partnerships areTRUE except
A.partners must share profits and losses equally.
B.a change in ownership will dissolve the partnership.
C.any partner can enter into a binding agreement with a third party.
D.all partners have unlimited liability.
The lower the inventory turnover, the lower the days’ inventory on hand.
Taxing authorities are considered accounting information users with a direct financial
interest.
All transactions involving receipts of cash are recorded in the cash receipts journal.
A partnership is liquidated when a new partner is admitted to the partnership.
If a company has suffered only net losses since its inception, the owner’s equity account
will always have a negative balance.
The terms ‘2/10, n/30’ mean that a 2 percent discount is allowed on payments made over
10 but before 30 days after the invoice date.
Which of the following statements isTRUE of nonvalue-adding activities?
A.They are unnecessary activities.
B.They are included in the value chain of activities.
C.They are wasteful and targeted for elimination.
D.They add cost to a product or service but does not increase its market value.
In a job order costing system, when indirect materials are used, the Overhead account is
increased.
When the columns of the trial balance equal each other, it is still possible that errors
may have occurred in recording and posting the transactions.
Under the average costing method in a process costing system, the costs in beginning
inventory are combined with current period costs to compute an average product unit
cost.
Bondholders share voting rights with stockholders.
The payback period is based on a net present value of cash flows.
Most long-term bond investments are classified as held-to-maturity securities.
When a company holds U.S. Treasury bills, it debits Interest Income and credits
Short-Term Investments at the end of the accounting period (assuming it is prior to the
T-bills’ maturity).
Which of the following evaluation methods ignores the time value of money?
A.The accounting rate-of-return and discounted cash flow methods
B.The net present value and discounted cash flow methods
C.The payback period and net present value methods
D.The accounting rate-of-return and payback period methods
The delivery trucks of Italiana’s Pizzeria incurred maintenance costs of $2,400 during
its busiest month of 2014, in which 8,000 miles were driven collectively. During its
slowest month, the trucks were driven for only 5,000 miles, for a maintenance cost of
$1,800. Using the high-low method, calculate the expected maintenance cost for a
month in which trucks are driven for 5,350 miles?
A.$1,870
B.$1,770
C.$2,020
D.$1,720
Rodriguez Inc. is considering a project that costs $200,000. The company expects the
annual cash revenues to be $75,000 and annual expenses (including depreciation) to be
$30,000. The project has a ten-year useful life and a residual value of $25,000. Assume
Rodriguez Inc. uses straight line method of depreciation.
Using the above information for Rodriguez, the accounting rate of return for the project
is
(Round your answer to a whole percent)
A.51 percent.
B.22 percent.
C.67 percent.
D.40 percent.
Under the perpetual inventory system, the entry to recognize inventory losses usually
contains a
A.debit to Cost of Goods Sold.
B.debit to Merchandise Inventory.
C.credit to Gross Margin.
D.credit to Cash.
The length of the operating cycle equals the days’ sales uncollected plus the
A.days’ payable.
B.days’ inventory on hand.
C.receivable turnover.
D.payables turnover.
The balance of Accounts Receivable, net of the allowance account, is $25,000 before
the write-off of a $2,000 account. What is the Accounts Receivable balance, net of the
allowance account, after the write-off?
A.$2,000
B.$23,000
C.$25,000
D.$27,000
Which of the following appears in different sections of the income statement when
prepared on a single-step basis and when prepared on a multistep basis?
A.Sales commissions.
B.Office salaries.
C.Interest income.
D.Sales.
The direct materials price variance is best measured and reported to appropriate
management personnel at the time
A.purchased quantities exceed standard order size.
B.quarterly financial statements are prepared.
C.shipments are received and recorded as purchases.
D.direct materials are issued to production areas.
All of the following are considered nonexchange transactions except
A.the day-by-day accumulation of interest.
B.the wear and tear on machinery.
C.the sale of goods and services.
D.losses from fire, flood, and theft.
Which of the following costing methods combines the cost of units in beginning
inventory with the current period costs to determine the unit production cost?
A.LIFO
B.Average cost
C.FIFO
D.Direct
Which of the following accounts would be placed after the debit(s) in a journal entry?
A.Interest Payable, when it has been decreased.
B.Accounts Receivable, when it has been decreased.
C.Unearned Revenue, when it has been decreased.
D.Withdrawals, when it has been increased.
For a company offering services, which of the following is a value-adding activity?
A.Billing the clients
B.Preparing job order forms
C.Ordering, receiving, and inspecting supplies
D.Designing advertisements
The high-low method
A.calculates variable costs per unit by dividing the difference in the high and low
activity levels by the high and low costs.
B.gives accurate results of cost estimation, irrespective of the relevant range.
C.helps in determining the fixed and variable components of a mixed cost.
D.is based on the premise that all data points are necessary to define a linear
cost-volume relationship.
Which of the following would not be included in the cost of land?
A.Cost of clearing unneeded building from land
B.Sewer assessment from local government
C.Cost of paving land for parking
D.Commission to real estate agent
Which of the following transactions will not result in an increase in revenues?
A.Sale of goods on credit.
B.Sale of services for cash.
C.Accumulation of interest in bank account.
D.An investment into the business by the owner.
Stephanie Cape purchased a franchise for dry cleaning services. Stephanie is running
the dry cleaning business as her primary occupation. Where on the balance sheet is the
franchise reported?
A.Property, plant, and equipment
B.Investments
C.Current assets
D.Intangible assets
The debt to equity ratio is expressed in terms of
A.a percentage.
B.dollars.
C.units.
D.times.
Which of the following provides an explanation of why the variable overhead rate is
separated from the fixed overhead rate in standard costing?
A.There is no justifiable reason; their separation is merely to simplify entries.
B.Both calculations divide by the same direct labor hours, but the numerator is different
for each calculation.
C.The variable overhead rate is calculated using actual direct labor hours, whereas the
fixed overhead rate is calculated using normal capacity direct labor hours.
D.The behavior of costs, used for computing variable overhead rate and fixed overhead
rate, differs.
Which of the following is not a measure of profitability?
A.Current ratio
B.Return on assets
C.Return on equity
D.Debt to equity ratio
Use the following performance report for a cost center of the Dry Cat Food Division for
the month ended December 31 to answer the questions below.
Using the information provided for Dry Cat Food division, what is the actual total cost?
A.$521
B.$595
C.$744
D.$1,031
The normal operating cycle helps define which of the following balance sheet sections?
A.Owner’s equity
B.Current liabilities
C.Intangible assets
D.Property, plant, and equipment
The calculation of free cash flow could include all of the following except
A.cash purchases of plant assets.
B.net cash flows from operating activities.
C.net income.
D.dividends paid.
Use the following information to answer the question below.
When Langston Corporation was formed on January 1, 20×5, the corporate charter
provided for 100,000 shares of $10 par value common stock. The following transactions
were among those engaged in by the corporation during its first month of operation:
1) The corporation issued 400 shares of stock to its lawyer in full payment of the
$10,000 bill for assisting the company in drawing up its articles of incorporation and
filing the proper papers with the state agency.
2) The company issued 16,000 shares of stock at a price of $50 per share.
3) The company issued 14,000 shares of stock in exchange for equipment that had a fair
market value of $320,000.
The entry to record transaction 3 is:
Harrisburg Manufacturing produces three products requiring the following inputs of
raw materials:
Unit cost and inventory for each raw material:
Scheduled production:
Prepare a direct materials purchases budget for the year ended December 31, 2014.
1> How is return on equity computed?
2> If a company sells more shares of its stock, what is the impact on the return on
equity?
3> Which ratio is considered a measure of investors’ confidence in a company’s future?
Why?
A company purchases 800 shares of its $50 par value common stock at $55 per share. It
then reissues 120 shares at $58 per share. The entry upon reissue of the stock is :
Prepare a trend analysis of the following data using 20×4 as the base year. Place your
answers in the chart provided. Comment on the trend.
Lassen Corporation issued ten-year term bonds on January 1, 20×5, with a face value of
$800,000. The face interest rate is 6 percent and interest is payable semi-annually on
June 30 and December 31. The bonds were issued for $690,960 to yield an effective
annual rate of 8 percent. The effective interest method of amortization is to be used. The
entry to be recorded on December 31, 20×5, for the payment of interest (rounded to the
nearest dollar) and the amortization of discount is:
Use the following accounts and information to prepare, in good form, an income
statement, statement of owner’s equity, and balance sheet for McCollum Enterprises for
the year ended December 31, 2014.
Use the following information to answer the question below.
When Langston Corporation was formed on January 1, 20×5, the corporate charter
provided for 100,000 shares of $10 par value common stock. The following transactions
were among those engaged in by the corporation during its first month of operation:
1) The corporation issued 400 shares of stock to its lawyer in full payment of the
$10,000 bill for assisting the company in drawing up its articles of incorporation and
filing the proper papers with the state agency.
2) The company issued 16,000 shares of stock at a price of $50 per share.
3) The company issued 14,000 shares of stock in exchange for equipment that had a fair
market value of $320,000.
The entry to record transaction 2 is
