The primary objective of activity-based management is:
A. To develop more accurate product costs.
B. To reduce and eliminate non-value added activities.
C. To increase product quality.
D. To identify instances of internal failure.
Which of the following items on a bank reconciliation may not have been known to the
depositor until the bank statement had arrived?
A. Bank service charges.
B. An NSF check.
C. A credit for interest earned.
D. All three of these.
Division X supplies partially completed units of product to division Y. The divisions’
negotiated price is $30 plus 20% per unit. Assuming Division X completed and
transferred 5,000 units to division Y, the total transfer price on this transaction is:
A. $180,000.
B. $120,000.
C. $150,000.
D. $5,000.
A primary disadvantage of the corporate form of organization is:
A. Unlimited personal liability for business debts.
B. Ownership is difficult to transfer.
C. Corporate earnings are subject to double taxation.
D. Corporation may continue its operations without disruption despite retirement of
individual stockholders.
-Wilson Trucking, Inc. reports these account balances at January 1, 2015 (shown in
alphabetical order):
On January 5, Wilson Trucking collected $175,000 of its accounts receivable, paid
$150,000 on its accounts payable, and paid $11,000 on its note payable.
Refer to the information above. In a trial balance prepared for Wilson Trucking on
January 6, 2015, the total of the debit column is:
A. $1,580,000.
B. $1,399,000.
C. $1,620,000.
D. $3,120,000.
The current balance sheet of Gamma reports total assets of $30 million, total liabilities
of $3 million, and owners’ equity of $27 million. Gamma is considering several
financing possibilities in order to expand operations. Each question based on this data is
independent of any others.
Refer to the information above. Assume Gamma borrows $5 million to finance its
expansion. Gamma’s debt ratio immediately after the borrowing will be (rounded):
A. .11.
B. .23 (rounded).
C. .30 (rounded).
D. .35.
When a corporation declares a dividend:
A. Assets decrease, liabilities increase.
B. Retained earnings increase, liabilities increase.
C. Liabilities increase, retained earnings decrease.
D. Retained earnings decrease, assets increase.
During the year 2015, Torino Corporation suffered a $1,200,000 loss when its factory
was severely damaged in an earthquake. Assuming the corporate income tax rate is
30%, what amount will Torino report as an extraordinary loss on its income statement
for 2015? Assume earthquakes are not common in this area.
A. $1,200,000.
B. $840,000.
C. $360,000.
D. Nothing, since this does not qualify as an extraordinary item.
A liquidating dividend:
A. Occurs when a corporation distributes shares of its own stock as a dividend, rather
than cash.
B. Occurs whenever a corporation distributes non-cash assets as a dividend to its
stockholders.
C. Represents a distribution of a corporation’s profits to the stockholders.
D. Represents a return of invested capital to a corporation’s owners, the stockholders.
Refer to the information above. If Retained Earnings at December 31, 2014, is
$100,000, Equipment is carried in Hercules Manufacturing, Inc. accounting records at:
A. $42,000.
B. $58,000.
C. $43,500.
D. $345,000.
A/P ($12,000) + N/P ($135,000) + Capital Stock ($188,000) + R.E. ($100,000) =
$435,000
Manufacturing costs do not include:
A. Direct labor applicable to production within the period.
B. Selling expenses related to goods manufactured during the period.
C. Direct materials used during the period.
D. Manufacturing overhead charged to work in process during the period.
The entry to record depreciation is an example of an adjusting entry:
A. To apportion a recorded cost.
B. To apportion unearned revenue.
C. To convert a liability to revenue.
D. To record unrecorded revenue.
The Foreign Corrupt Practices Act (FCPA) imposes _____ for managers who engage in
bribes.
A. Fines
B. Deportation
C. Quotas
D. Taxes
In 2012 the SEC issued an extensive report regarding the use of IFRS by U.S. public
companies and listed which of the following as a major obstacle to adopting IASB
standards?
A. IASB standards are generally viewed as low quality.
B. IASB’s dependence on funding from the major accounting firms.
C. Cross-border financing is decreasing in popularity.
D. The IASB is not a governmental agency and therefore is not positioned to develop
accounting standards.
Which of the following statements is true about activity-based costing?
A. Only one activity should be used for a company.
B. Many different activity bases are used in applying overhead.
C. There can only be one cost driver.
D. Direct materials and direct labor are applied to work-in-process based upon cost
drivers.
Of the following, which is not an alternative title for the income statement?
A. Earnings statement.
B. Statement of Operations.
C. Profit and Loss Statement.
D. Statement of Financial Position.
With respect to the valuation of inventory and measurement of the cost of goods sold,
the principle of consistency means that the same method should be applied:
A. In successive accounting periods.
B. By all companies in a given industry.
C. To all products in the inventory.
D. In financial statements and income tax returns.
Which of the following measures the amount of sales dollars generated from each dollar
of capital invested in assets?
A. Return on sales.
B. Return on investment.
C. Accounts receivable turnover.
D. Capital turnover.
A gain is recognized on the disposal of plant assets when:
A. The sales price is greater than the residual value but less than the book value.
B. The sales price is less than both the book value and the residual value.
C. The sales price is greater than the book value and greater than the residual value.
D. The sales price is greater than the book value and less than the residual value.
Below are eight ratios. Match each equation to the correct ratio. If there is no match,
use “None” as your response.
________ (a.) Net income – preferred dividends divided by average number of common
shares outstanding
________ (b.) Net sales divided by average accounts receivable
________ (c.) Operating income divided by average total assets
________ (d.) Current assets divided by current liabilities
________ (e.) Annual dividend divided by current stock price
________ (f.) Current assets minus current liabilities
________ (g.) Total liabilities divided by total assets
________ (h.) Net income divided by average total equity
________ (i.) Common stockholder’s equity divided by shares of common stock
outstanding
________ (j.) Current stock price divided by earnings per share
Which of the following is considered an adjusting entry?
A. The entry to record depreciation.
B. The entry to pay salaries.
C. The entry to pay outstanding bills.
D. The entry to declare a dividend distribution.
Department X of a manufacturing company works on only one product, and all costs
are incurred uniformly as the product goes along the assembly line. The 8,000 units in
process on December 1 were 60% completed. An additional 50,000 units were placed in
production during December. At December 31, the 10,000 units in process were 60%
completed. The equivalent units of production during December amounted to:
A. 49,200.
B. 60,800.
C. 57,200.
D. 58,800.
The responsibility margin is calculated by:
A. Subtracting fixed costs traceable to a center from its contribution margin.
B. Subtracting common fixed costs from the contribution margin.
C. Subtracting variable costs from sales.
D. Subtracting common fixed costs from variable costs.
If the unit sales price is $12, variable costs are $6 per unit and fixed costs are $36,000
what are the sales in dollars necessary to break-even?
A. $90,000.
B. $72,000.
C. $70,000.
D. $60,000.
Which of the following sets of data is sufficient to compute the amount of cash paid for
merchandise?
A. Cost of goods sold, increase or decrease in inventory, increase or decrease in
accounts payable.
B. Increase or decrease in cash, increase or decrease in inventory, increase or decrease
in accounts payable.
C. Cost of goods sold, increase or decrease in accounts payable.
D. Cost of goods sold.
The net assets of a corporation are equal to:
A. Total assets – total liabilities.
B. Total assets – retained earnings.
C. Total assets + total liabilities.
D. Total assets + retained earnings.
After bonds have been issued, their market value can be expected to:
A. Rise as any premium is amortized.
B. Fall if interest rates rise.
C. Fall as any discount is amortized.
D. Rise if interest rates rise.
The December 31, 2014 worksheet for Albertville Grill showed the following amounts
related to the Depreciation Expense account:
(a). In the Trial Balance debit column: $1,745
(b). In the Adjustments debit column: $1,125
(c). In the Adjusted Trial Balance debit column: $1,870
What is the proper balance in the Depreciation Expense account on January 1, 2015,
after all closing entries for 2014 have been posted, but before any 2015 transactions are
recorded?
A. $1,870.
B. $1,745.
C. $0.
D. $1,125.
The journal entry to record a particular business transaction includes a credit to a
liability account. This transaction is most likely also to include:
A. Issuance of new capital stock.
B. The purchase of an asset on account.
C. A cash payment.
D. A credit to Accounts Receivable.