Assets, liabilities, and owner’s capital are real accounts and do not get closed at the end
of the period.
Answer:
The difference between a classified balance sheet and one that is not classified is that
the classified one has subheadings.
Answer:
The accounting cycle begins with preparing an unadjusted trial balance.
Answer:
Under the perpetual inventory system, when a sale is made, both the sale and cost of
merchandise sold are recorded.
Answer:
Methods that ignore present value in capital investment analysis include the average
rate of return method.
Answer:
The master budget of a small manufacturer would normally include all necessary
component budgets except the budgeted balance sheet.
Answer:
One negative effect of carrying too much inventory is risk that customers will change
their buying habits.
Answer:
Companies recognizing the need to simultaneously produce products with high quality,
low cost, and instant availability have adopted a just-in-time processing philosophy.
Answer:
A remittance advice is the notification accompanying the check issued to a creditor that
states the specific invoice being paid.
Answer:
If the totals of the Income Statement debit and credit columns of a work sheet are
$27,000 and $29,000, respectively, after all account balances have been extended, the
amount of the net loss is $2,000.
Answer:
The control environment in an internal control structure is the attitude and awareness of
internal control by all employees.
Answer:
The accounting rate of return is a measure of profitability computed by dividing the
average annual cash flows from an asset by the average amount invested in the asset.
Answer:
Journalizing and posting closing entries must be completed before financial statements
can be prepared.
Answer:
Federal income taxes withheld increase the employer’s payroll tax expense.
Answer:
Held-to-maturity securities are reported on the balance sheet at fair market value.
Answer:
The excess of the cash flowing in from revenues over the cash flowing out for expenses
is termed net cash flow.
Answer:
The financial budgets of a business include the cash budget, the budgeted income
statement, and the budgeted balance sheet.
Answer:
Callable bonds are redeemable by the issuing corporation within the period of time and
at the price stated in the bond indenture.
Answer:
The major advantage of the rate of return on investment over income from operations as
a divisional performance measure is that divisional investment is directly considered
and thus comparability of divisions is facilitated.
Answer:
Employees view budgeting more positively when goals are established for them by
senior management.
Answer:
The cost of computer equipment does not include the consultant’s fee to supervise
installation of the equipment.
Answer:
The maturity value of a 12%, 60-day note for $5,000 is $5,600.
Answer:
An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds
actual cost.
Answer:
If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of
24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted
volume of production for 2012 is 202,000 units.
Answer:
Cash flows from operating activities, as part of the statement of cash flows, include
cash transactions that enter into the determination of net income.
Answer:
One of the more popular defined contribution plans is the 401k plan.
Answer:
After Net Income or Loss is entered on the work sheet, the debit column total must
equal the credit column total for the Balance Sheet pair of columns.
Answer:
If a business sells four products, it is not possible to estimate the break-even point.
Answer:
In a just-in-time system, processing functions are combined into work centers,
sometimes called departments.
Answer:
If 16,000 units of materials enter production during the first year of operations, 12,000
of the units are finished, and 4,000 are 75% completed, the number of equivalent units
of production would be 15,000.
Answer:
Non-financial measures are often lined to the inputs or outputs of an activity or process.
Answer:
Paying an account payable increases liabilities and decreases assets.
Answer:
The sum of the money on hand and petty cash receipts in a petty cash fund will always
be equal to the balance in the Petty Cash account.
Answer:
The cost of production report reports the cost charged to production and the costs
allocated to finished goods and work in process.
Answer:
Standards are performance goals used to evaluate and control operations.
Answer:
A customer’s check received in settlement of an account receivable is considered cash.
Answer:
A physical inventory should be taken at the end of every month.
Answer:
The amortization of a premium on bonds payable decreases bond interest expense.
Answer:
Liabilities are increased with debits and decreased with credits.
Answer:
Miriah Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2014. What
is the annual dividend on the preferred stock?
A.$50 per share
B.$50,000 in total
C.$10,000 in total
D.$0.50 per share
Answer:
On December 31 it was estimated that goodwill of $65,000 was impaired. In addition, a
patent with an estimated useful economic life of 10 years was acquired for $60,000 on
July 1.
Answer:
Prepare adjusting entries for the following transactions:
(a) The beginning balance of the Supplies account was $245. During the month the
company bought additional supplies in the amount of $735. At the end of the month a
physical inventory showed $343 of unused supplies.
(b) The company has a 12% Note Payable in the amount of $17,000 due in 6 months.
The interest expense for the month has not been recorded.
(c) The company has two employees. The manager is paid on the 15th of every month
for work performed during the first half of the month and on the 1st of the following
month for the work performed during the second half of the month. His monthly salary
is $5,500. The other employee is paid $650 for each 5 day work week (Monday –
Friday). The last day of the month fell on Thursday.
(d) The unearned revenue account shows a balance of $46,000. According to the
manager 60% of that amount has been earned.
(e) At the end of the month $5,700 of services had been performed but not yet billed.
Answer:
On May 1, 2014, Stanton Company purchased $60,000 of Harris Company’s 12%
bonds at 100 plus accrued interest of $2,400. On June 30, 2014, Stanton received its
first semiannual interest. On February 1, 2015, Stanton sold $50,000 of the bonds at
103 plus accrued interest.
What are the total proceeds from the February 1, 2015 sale?
A.$52,400
B.$51,500
C.$50,000
D.$52,000
Answer:
An analysis of a proposal by the net present value method indicated that the present
value of future cash inflows exceeded the amount to be invested. Which of the
following statements best describes the results of this analysis?
A.The proposal is desirable and the rate of return expected from the proposal exceeds
the minimum rate used for the analysis.
B.The proposal is desirable and the rate of return expected from the proposal is less
than the minimum rate used for the analysis.
C.The proposal is undesirable and the rate of return expected from the proposal is less
than the minimum rate used for the analysis.
D.The proposal is undesirable and the rate of return expected from the proposal exceeds
the minimum rate used for the analysis.
Answer:
The inventory costing method that reports the earliest costs in ending inventory is
A.FIFO
B.LIFO
C.Average cost
D.Specific identification
Answer:
Several months ago, Jones Company experienced a spill of hazardous materials into the
White River from one of its plants. As a result, the Environmental Protection Agency
(EPA) fined the company $405,000. The company contested the fine. In addition, an
employee is seeking $180,000 damages related to the spill. Finally, a homeowner has
sued the company for $260,000. Although the homeowner lives 30 miles downstream
from the plant, he believes that the spill has reduced his home’s resale value by
$260,000.
Jones’ legal counsel believes the following will happen in relationship to these
incidents:
(a) It is probable that the EPA fine will stand.
(b) An out-of-court-settlement for $165,000 has recently been reached with the
employee, with the final papers to be signed next week.
(c) Counsel believes that the homeowner’s case is much weaker and will be decided in
favor of Jones Company.
(d) Other litigation related to the spill is possible, but the damage amounts are
uncertain.
Answer:
Which of the following is not a certification for accountants?
A.CIA
B.CMA
C.CISA
D.All are certifications.
Answer:
Which one of the following below should be added to net income in calculating net
cash flow from operating activities using the indirect method?
A.a gain on the sale of land
B.a decrease in accounts payable
C.an increase in accrued liabilities
D.dividends paid on common stock
Answer:
Which of the following accounts is an owner’s equity account?
A.Cash
B.Accounts Payable
C.Prepaid Insurance
D.Ross Morris, Capital
Answer:
The following transactions took place for the XYZ Corporation;
a. November 12th – Declared a total cash dividend of $45,000 for stockholders of
record November 20th payable on December 1st. Record the journal entry, if necessary,
for the following events;
Nov. 12 –
Nov. 20 –
Dec. 1 –
b. Briefly describe the significance of November 20th.
Answer:
Based on the following data, what is the acid-test ratio, rounded to one decimal point?
A.3.4
B.3.0
C.2.2
D.1.8
Answer:
The total on the “Cash Receipts” report at January 31 should equal
A.the total revenue earned for the month of January.
B.the total of the purchases journal on January 31.
C.the total of the Cash Debit column of the cash receipts journal.
D.the balance in Accounts Receivable at January 31.
Answer:
Ruby Company produces a chair that requires 5 yds. of material per unit. The standard
price of one yard of material is $7.50. During the month, 8,500 chairs were
manufactured, using 43,600 yards at a cost of $7.55 per yard. Determine the (a) price
variance, (b) quantity variance, and (c) cost variance.
Answer:
Investing activities include
A.collecting cash on loans made.
B.obtaining cash from customers.
C.obtaining capital from owners.
D.repaying money previously borrowed.
Answer:
On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds
for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on
the issue date for the issue price. Present entries to record the following transactions for
the current fiscal year:
Lisbon Co.
(a) Issuance of the bonds.
(b) Second semiannual interest payment.
(c) Amortization of bond premium for the year, using the straight-line method of
amortization.
Orange Inc.
(d) Purchase of the bonds.
(e) Receipt of second semiannual interest payment.
(f) Amortization of bond premium for the year, using the straight-line method of
amortization.
Answer:
Which of the following groups of accounts have a normal debit balance?
A.revenues, liabilities, and capital
B.capital and assets
C.liabilities and expenses
D.assets and expenses
Answer:
Principal components of a master budget include which of the following?
A.Production budget
B.Sales budget
C.Capital expenditures budget
D.All of the above
Answer:
The budgeting process does not involve which of the following activities:
A.Specific goals are established
B.Periodic comparison of actual results to goals
C.Execution of plans to achieve goals
D.Increase in sales by increasing marketing efforts.
Answer:
Assume the following sales data for a company:
What is the percentage increase in sales from 2014 to 2015?
A.100%
B.65%
C.165%
D.60.1%
Answer:
When posting a column total in the purchases journal, a credit should be posted to
A.Merchandise Inventory
B.Accounts Payable
C.Sales Returns and Allowances
D.Cash
Answer:
A summary of selected ledger accounts appear below for Alberto’s Plumbing Services
for the current calendar year end.
Net income for the period is
A.$13,000
B.$33,500
C.$15,000
D.$18,500
Answer:
Accompanying the bank statement was a credit memo for a short-term note collected by
the bank for the company. This item is 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:
Which of the following are present value methods of analyzing capital investment
proposals?
A.Internal rate of return and average rate of return
B.Average rate of return and net present value
C.Net present value and internal rate of return
D.Net present value and payback
Answer:
A purchase of supplies for cash is recorded in the
A.Revenue journal
B.Purchases journal
C.Cash Receipts journal
D.Cash Payments journal
Answer:
Which of the following accounts will be closed to the Capital account at the end of the
fiscal year?
A.Rent Expense
B.Fees Earned
C.Income Summary
D.Depreciation Expense
Answer:
Meredith Company gathered the following reconciling information in preparing its May
bank reconciliation:
A.$4,970
B.$5,120
C.$8,105
D.$3,295
Answer:
A cash payment is recorded on the cash account as a
A.neither a debit or a credit
B.credit
C.debit
D.either a debit or a credit
Answer:
Calculate the fixed factory overhead volume variance using the above information:
A.$1,701 Favorable
B.$4,866.75 Unfavorable
C.$1,701 Unfavorable
D.$4,866.75 Favorable
Answer:
Net income will result when
A.revenues (credits) > expenses (debits)
B.revenues (debits) > expenses (credits)
C.expenses (credits) = revenues (debits)
D.revenues (credits) = expenses (debits)
Answer:
At the beginning of the period, the Molding Department budgeted direct labor of
$33,000 and supervisor salaries of $24,000 for 3,000 hours of production. The
department actually completed 2,500 hours of production. Determine the budget for the
department assuming that it uses flexible budgeting?
Answer:
Morgan Company has the following segment revenues for fiscal 2014 and 2013.
Prepare a horizontal analysis of the segment data using 2013 as the base year.
Answer:
What are the three sections of the Statement of Cash Flows?
Answer:
Discuss the following statement:
“Operating cycles for all merchandising businesses are the same, with similar profit
margins.”
Include an example(s) to illustrate your explanation.
Answer:
A company reports the following:
Determine the ratio of net sales to total assets. Round your answer to one decimal place.
Answer:
Equipment was purchased on January 5, 2011, at a cost of $90,000. The equipment had
an estimated useful life of 8 years and an estimated residual value of $8,000.
After using the equipment for 3 years, the useful life was revised to a total of 10 years
and the residual value was reduced to $2,004.
Determine the straight-line depreciation expense for the year 2014 and following years.
Book value at beginning of 2014:
Cost $90,000
Residual 8,000
Depreciable cost $82,000
Depreciation Expense for first 3 years: 82,000 / 8 = $10,250
$10,250 X 3 = $30,750
Book Value Jan. 1, 2014 $59,250
Revised Depreciation Expense Calculation:
Book Value at beginning of 2014 $59,250
Less revised residual value – 2,004
Remaining depreciable amount 57,246
Divided by remaining life 7
Depreciation Expense for 2014 $8,178
Answer:
Give the major disadvantage of disregarding the cost concept and constantly revaluing
assets based on appraisals and opinions.
Answer:
The following purchases journal headings have been suggested for Tower
Tree-Trimming Service Company. What problems do you see with these headings?
Answer:
Match the following stockholders equity concepts to the most appropriate answer.
Answer:
Journalize the following transactions in the accounts of Simmons Company:
Mar 1 Received a $60,000, 60-day, 6% note dated March 1 from Bynum Company on
account.
Mar 18 Received a $25,000, 60-day, 9% note dated March 18 from Solo Company on
account.
Apr. 30 The note dated March 1 from Bynum Company is dishonored, and the
customer’s account is charged for the note, including interest.
May 17 The note dated March 18 from Solo Company is dishonored, and the customer’s
account is charged for the note, including interest.
July 29 Cash is received for the amount due on the dishonored note dated March 1 plus
interest for 90 days at 8% on the total amount debited to Bynum Company on April 30.
Aug. 23 Wrote off against the allowance account the amount charged to Solo Company
on May 17 for the dishonored note dated March 18.
Answer:
Using the following table, what is the present value of $25,000 to be received 5 years, if
the market rate is 7% compounded annually?
Answer:
Given the following information:
Variable cost per unit = $5.00
July fixed cost per unit = $7.00
Units sold and produced in July 25,000
Answer:
Star Co. was organized on August 1 of the current year. Projected sales for the next
three months are as follows:
The company expects to sell 50% of its merchandise for cash. Of the sales on account,
30% are expected to be collected in the month of the sale and the remainder in the
following month.
Prepare a schedule indicating cash collections for August, September, and October.
Answer:
Williams Company acquired machinery on July 1, 2009, at a cost of $130,000. The
estimated useful life of the machinery was 10 years and the estimated residual value
was $10,000. Williams uses the double-declining-balance method of depreciation. On
October 1, 2012, Williams sold the equipment for $75,000.
1) Record the journal entry for the depreciation on this machinery for
2) Record the journal entry for the sale of the machinery.
Answer:
Crystal Company manufactures two models of microcassette recorders, VCH and MTV.
Based on the following production data for April of the current year, prepare a
production budget for April.
Answer:
Describe at least five benefits of budgeting.
Answer:
Sweet Dreams, Inc. manufactures bedding sets. The budgeted production is for 52,000
comforters in 2012. Each comforter requires 1.5 hours to cut and sew the material. If
cutting and sewing labor costs $11.00 per hour, determine the direct labor budget for
2012.
Answer: