Wages are compensation of employees at a yearly or monthly rate.
Damaged goods that can be sold at a reduced price should be included in a company’s
merchandise inventory.
Payables turnover is measured in number of days.
A contingent liability should be entered into the accounting records if it is both probable
and reasonably estimable.
When the terms of a lease require that the lessee record an asset and a liability, the two
accounts are recorded at the present value of the total lease payments required.
Not-for-profit organizations have no obligation to report their financial performance to
outside parties.
At the end of an accounting period, the balance in the Finished Goods Inventory
account is the sum of costs of products completed and the cost of goods sold as of that
date.
When the FIFO costing method is used in process costing, the number of units in
beginning inventory is multiplied by 100 percent to determine the equivalent units.
Responsibility accounting is of least help to manufacturing companies.
One might see ‘J5’ correctly placed in the Post. Ref. column of the journal.
Purchase discounts are discounts that a buyer takes for the early payment of
merchandise.
Walton reported sales of $640,000, fixed costs of $314,000, and a profit of $92,000. If
the contribution margin is $8 per unit, how many units did Walton sell?
A.11,500 units
B.31,125 units
C.50,750 units
D.70,375 units
A very small company would have the most difficulty in implementing which of the
following internal control activities?
A.Sound personnel procedures
B.Periodic independent verification
C.Limited access to assets
D.Separation of duties
An examination of the Prepaid Insurance account shows a debit balance of $3,960 at the
end of the accounting period before adjustment. Prepare entries in journal form to
record the insurance expense for the period under each of the following independent
assumptions:
a. An examination of insurance policies shows that insurance costing $1,200 has
expired during the period.
b. An examination of insurance policies shows unexpired insurance of $2,640 at the end
of the period.
Which of the following is not an example of egregious financial reporting frauds as
discussed in the text?
A.Keeping the books open for a few days after the end of the reporting period.
B.Transferring assets to an affiliate at more than their actual value.
C.Recording as assets expenditures that should have been classfied as expenses.
D.Recording a liability when title to merchandise passes to the purchaser.
Which of the following will help mangers set reasonable selling prices?
A.Previous year net income of the company
B.Number of employees in the company
C.Unit cost knowledge of the product
D.Previous year’s income tax variance
Which of the following is not one of the conditions for recognition of an expense?
A.A price has been established or can be determined.
B.There is an agreement to purchase goods or services.
C.The goods will be delivered or the services will be provided within the accounting
cycle.
D.The goods or services are used to produce revenue.
The balance in Allowance for Uncollectible Accounts must be considered prior to
end-of-period adjustment when using which of the following methods?
A.Direct charge-off method
B.Both direct charge-off method and percentage of net sales method
C.Percentage of net sales method
D.Accounts receivable aging method
The manager of Center D designs, produces, and sells products to external parties. The
manager makes both long-term and short-term decisions regarding resources. What type
of responsibility center is Center D?
A.Cost center
B.Profit center
C.Revenue center
D.Investment center
Which of the following is not an internal control activity for cash?
A.Unannounced audits of cash on hand should be made occasionally.
B.The number of persons who have access to cash should be limited.
C.The functions of recordkeeping and keeping custody of cash should be combined.
D.All cash receipts should be recorded promptly.
Assume the indirect method is used to compute net cash flows from operating activities.
For this item extracted from the financial statements’”Gain on Sale of
Investment’”indicate the effect on net income in arriving at net cash flows from
operating activities by choosing one of the following:
A.Add to net income to arrive at net cash flows from operating activities.
B.Subtract from net income to arrive at net cash flows from operating activities.
C.Not used to adjust net income to calculate net cash flows from operating activities.
Which of the following is prepared directly after the cash budget?
A.Overhead budget
B.Production budget
C.Budgeted balance sheet
D.Capital expenditures budget
Use the following performance report for a profit center of Portia Corporation for the
month ended December 31 to answer the questions below.
Using the information provided for Portia Corporation, what was the actual profit center
income?
A.$10
B.$6
C.$4
D.$54
Start-up and organization costs
A.are capitalized, but never amortized.
B.are capitalized and amortized, usually over five years.
C.are expensed in the year incurred.
D.appear on the balance sheet as a current asset.
The ability of a partner to enter into a contract on behalf of all partners is called
A.the partnership agreement
B.voluntary association
C.mutual agency
D.unlimited liability
Which of the following products probably would be produced by a company using a
process costing system?
A.A house
B.A customized chocolate
C.Potato chips
D.A movie
An example of vertictal analysis is
A.common-size statements.
B.trend analysis.
C.ratio analysis.
D.profitability analysis.
Richard Inc. expects to sell 28,000 units. Each unit requires 4 pounds of direct materials
at $15 per pound and 3 direct labor hours at $12 per direct labor hour. The overhead rate
is $9 per direct labor hour. The beginning inventories are as follows: direct materials,
2,500 pounds; finished goods, 3,100 units. The planned ending inventories are as
follows: direct materials, 4,000 pounds; finished goods, 3,200 units.
Given a planned production of 5,000 units, what are the planned direct materials
purchases of Richard?
A.$300,000
B.$258,000
C.$240,000
D.$322,500
A corporation has all of the following except
A.government regulations.
B.a limited existence.
C.separation of ownership and control.
D.its own tax liability.
Cloud Nine International uses a process costing system. Assume that direct materials
are added at the beginning of the period and that direct labor and overhead are added
continuously throughout the process. The company uses the average costing method.
The following data are available for one of its accounting periods:
Assume that you have calculated a direct materials cost per unit of $5 and a conversion
cost per unit of $8. Under this assumption, the ending balance for Work in Process
Inventory of Cloud Nine International would be
A.$147,000.
B.$165,000.
C.$123,000.
D.$195,000.
Which costing method will produce the same result under both a perpetual and periodic
system?
A.Specific identification
B.Average-cost
C.FIFO
D.Both FIFO and specific identification
In the space below, state whether each situation is a deferral or an accrual.
______a. Depreciation on machinery is $7,200 for the accounting period.
______b. Interest that has been incurred on a loan but that has not yet been paid or
recorded is $675.
______c. Office supplies of $965 were on hand at the beginning of the period.
Purchases of office supplies during the period totaled $640. At the end of the period,
$120 in office supplies remained.
______d. Commissions amounting to $975 were earned but not yet collected by year
end.
______e. Prepaid Rent had a $2,500 balance prior to adjustment. By year end, 50
percent had expired.