Real accounts are not permanent accounts.
Answer:
When a company establishes an outstanding reputation and has a competitive advantage
because of it, the company should record goodwill on its financial statements.
Answer:
The post reference notation used in the ledger is the account number.
Answer:
Conversion costs include materials, direct labor, and factory overhead.
Answer:
If the perpetual inventory system is used, the account entitled Merchandise Inventory is
debited for purchases of merchandise.
Answer:
The carrying amount of the bonds is defined as the face value of the bonds plus any
unamortized discount or less any unamortized premium.
Answer:
Revenue accounts are increased by credits.
Answer:
The last step in the accounting procedure for process costing is the calculation of
equivalent units of production.
Answer:
Cost of merchandise sold is the amount that the merchandising company pays for the
merchandise it intends to sell.
Answer:
Comparable financial statements are designed to compare the financial statements of
two or more corporations.
Answer:
Using the indirect method, if land costing $85,000 was sold for $145,000, the amount
reported in the financing activities section of the statement of cash flows would be
$85,000.
Answer:
During periods of rapidly rising costs, the use of the LIFO method results in illusory or
inventory profits.
Answer:
If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the investment turnover is 5.
Answer:
Conversion cost is the combination of direct materials cost and factory overhead cost.
Answer:
Direct disposal costs do not include special advertising or sales commissions.
Answer:
Sarbanes-Oxley’s purpose is to improve financial reporting.
Answer:
Discounts taken by the buyer for early payment of an invoice are credited to Sales
Discounts by the buyer.
Answer:
A qualitative characteristic that may impact upon capital investment analysis is
manufacturing productivity.
Answer:
In preparing a bank reconciliation, the amount of deposits in transit is deducted from
the balance per bank statement.
Answer:
The cumulative effects of other comprehensive income items is included in retained
earnings, on the balance sheet.
Answer:
Amortization is the allocation process of writing off bond premiums and discounts to
interest expense over the life of the bond issue.
Answer:
The costs of materials and labor that do not enter directly into the finished product are
classified as factory overhead.
Answer:
The lower-of-cost-or-market method of determining the value of ending inventory can
be applied on an item by item, by major classification of inventory, or by the total
inventory.
Answer:
When a corporation owns less than 20% of the stock of another company, dividends
received are not treated as income.
Answer:
The declaration of a stock dividend decreases a corporation’s stockholders’ equity and
increases its liabilities.
Answer:
A personal withdrawal of cash is recorded in the general journal.
Answer:
Costs other than direct materials cost and direct labor cost incurred in the
manufacturing process are classified as factory overhead cost.
Answer:
In a job order cost accounting system for a service business, materials costs are
normally included as part of overhead.
Answer:
An installment note is a debt that requires the borrower to make equal periodic
payments to the lender for the term of the note.
Answer:
All companies must use a calendar year as their fiscal year.
Answer:
In a multiple-step income statement the dollar amount for income from operations is
always the same as net income.
Answer:
In a process costing system, each process will have a work in process inventory
account.
Answer:
Part of the cash budget is based on information drawn from the capital expenditures
budget.
Answer:
When a corporation issues stock at a premium, it reports the premium as an other
income item on the income statement.
Answer:
One way to report revenue earned by a company is to present it by the different
segments of business.
Answer:
Selected accounts from the ledger of Garrison Company appear below. For each
account, indicate the following:
Answer:
Which of the following activity bases would be the most appropriate for food costs of a
hospital?
A.Number of cooks scheduled to work
B.Number of x-rays taken
C.Number of patients who stay in the hospital
D.Number of scheduled surgeries
Answer:
A corporation has 50,000 shares of $25 par value stock outstanding that has a current
market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the
stock after the split will be:
A.$5
B.$60
C.$25
D.$24
Answer:
Costs on the income statement for both a merchandiser and a manufacturer would
include:
A.operating expenses
B.direct materials
C.direct labor incurred
D.cost of goods manufactured
Answer:
Owner’s Equity is
A.added to assets and the two are equal to liabilities
B.added to liabilities and the two are equal to assets
C.subtracted from liabilities and the net amount is equal to assets
D.equal to the total of assets and liabilities
Answer:
The cash receipts journal will be used for
A.only cash received from customers on account.
B.all cash received.
C.cash received from customers on account and cash sales.
D.only cash received from cash sales.
Answer:
EFT
A.means Efficient Funds Transfer
B.can process certain cash transactions at less cost than by using the mail
C.makes it easier to document purchase and sale transactions
D.means Effective Funds Transfer
Answer:
All of the following are factors contributing to the trend for regulators to adopt
accounting principles using fair value concepts except:
A.a greater percentage of total assets existing as receivables and securities.
B.pressure on regulators to adopt an international set of accounting principles and
standards.
C.hybrid measurement methods within GAAP that conflict with each other.
D.the ease of applying market values to assets and liabilities.
Answer:
Revenue and expense data for Martinez Company are as follows:
Round percentage to one decimal place.
Answer:
Current liabilities are:
A.due and receivable within one year.
B.due and to be paid out of current assets within one year.
C.due, but not payable for more than one year.
D.payable if a possible subsequent event occurs.
Answer:
If fixed costs are $400,000 and the unit contribution margin is $20, what amount of
units must be sold in order to have a zero profit?
A.25,000 units
B.10,000 units
C.400,000 units
D.20,000 units
Answer:
The source of the data for debiting Work-in-Process for direct materials is the:
A.purchase order
B.purchase requisition
C.materials requisition
D.receiving report
Answer:
If the expected sales volume for the current period is 9,000 units, the desired ending
inventory is 200 units, and the beginning inventory is 300 units, the number of units set
forth in the production budget, representing total production for the current period, is:
A.9,000
B.8,900
C.8,700
D.9,100
Answer:
Shiny Kar Company had the following transactions. For each transaction, show the
effect on the accounting equation by putting the amount and direction (plus, minus, or
NC for no change) in each box of the table below.
Assets Liabilities Owner’s Equity
a. Shiny Kar withdrew $500 cash for food.
b. Shiny Kar Company sold 2 cars for a total of $55,000 on account.
c. The cost of the cars sold in (b) above was $40,000.
d. Shiny Kar received $35,000 payment for a car previously sold on account.
e. Shiny Kar paid $450 for advertising.
f. Shiny Kar purchased $150 of cleaning supplies on account.
Answer:
Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo
Company is referred to as the
A.parent
B.minority interest
C.affiliate
D.subsidiary
Answer:
If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are
$22, what is the break-even sales (units) if fixed costs are reduced by $30,000?
A.30,000 units
B.8,710 units
C.12,273 units
D.20,000 units
Answer:
Which of the following is an advantage of a general partnership when compared to a
corporation?
A.A partnership is more likely to have a positive net income.
B.The partnership is relatively inexpensive to organize.
C.Creditors to a partnership cannot attach personal assets of partners.
D.The partnership usually hires professional managers.
Answer:
Income statement information for Lucy Company is provided below:
Using vertical analysis of the income statement for Lucy Company, determine the gross
profit margin.
A.100%
B.70%
C.40%
D.60%
Answer:
Flying Cloud Co. has the following operating data for its manufacturing operations:
The company has decided to increase the wages of hourly workers which will increase
the unit variable cost by 10%. Increases in the salaries of factory supervisors and
property taxes for the factory will increase fixed costs by 4%. If sales prices are held
constant, the next break-even point for Flying Cloud Co. will be:
A.increased by 640 units
B.increased by 400 units
C.decreased by 640 units
D.increased by 800 units
Answer:
A building with an appraisal value of $154,000 is made available at an offer price of
$172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note
payable for $45,000, and a mortgage amounting to $75,000. The cost basis recorded in
the buyer’s accounting records to recognize this purchase is
A.$154,000
B.$172,000
C.$160,000
D.$120,000
Answer:
A bank reconciliation should be prepared periodically because
A.the company’s records and the bank’s records are in agreement
B.the bank has not recorded all of its transactions
C.any differences between the company’s records and the bank’s records should be
determined, and any errors made by either party should be discovered and corrected
D.the bank must make sure that its records are correct
Answer:
Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital
balances are $80,000 and $120,000 respectively. Income Summary has a credit balance
of $30,000. What is Saturn’s capital balance after closing Income Summary to Capital?
A.$102,500
B.$120,000
C.$112,500
D.$127,500
Answer:
Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month,
6% interest note. Harper Company prepares financial statements on March 31. What
adjusting entry should be made before the financial statements can be prepared?
A.Cash 200
Interest Revenue 200
B. Interest Receivable 800
Interest Revenue 800
C.Interest Receivable 200
Interest Revenue 200
D.Note Receivable 40,000
Cash 40,000
Answer:
Zeke Company is a manufacturing company that has worked on several production jobs
during the 1st quarter of the year. Below is a list of all the jobs for the quarter:
Job 356, 357, 358 & 359 were completed. Jobs 356 & 357 were sold at a profit of $500
on each job.
What is Sales for Zeke Company as of the end of the 1st quarter?
A.$1,685
B.$2,685
C.$1,000
D.$685
Answer:
Which of the following is not classified as paid-in capital on the balance sheet?
A.common stock
B.common stock distributable
C.donated capital
D.treasury stock
Answer:
Which of the following entries records the withdrawal of cash by Sue Martin, owner of
a proprietorship, for personal use?
A.debit Sue Martin, Capital; credit Cash
B.debit Sue Martin, Drawing; credit Cash
C.debit Salaries Expense; credit Cash
D.debit Salaries Expense; credit Salaries Payable
Answer:
Journalize each of the following transactions:
(a) A wing costing $2,345,000 was added to the building. A new mortgage was issued
for the cost.
(b) Equipment was upgraded to increase its capacity to produce widgets. The upgrade
cost of $11,500 was paid in cash.
(c) A major overhaul costing $8,000 on a machine increased the useful life by 4 years.
The payment was made in cash.
Answer:
Which of the following is NOT a way in which process and job order cost systems are
similar?
A.Both accumulate product costs–direct materials, direct labor, and factory overhead
B.Both allocate product cost to units produced
C.Both maintain perpetual inventories
D.Both use job order cost cards
Answer:
Which of the following is a noncash investing and financing activity?
A.payment of a cash dividend
B.payment of a six-month note payable
C.purchase of merchandise inventory on account
D.issuance of common stock to acquire land
Answer:
Randomly listed below are the steps for preparing a trial balance:
What is the proper order of these steps?
A.(3), (2), (4), (1)
B.(2), (3), (4), (1)
C.(3), (2), (1), (4)
D.(4), (3), (2), (1)
Answer:
Which of the following is a method of analyzing capital investment proposals that
ignores present value?
A.Internal rate of return
B.Net present value
C.Discounted cash flow
D.Average rate of return
Answer:
Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in
a partnership. The articles of partnership include the following provisions regarding the
division of net income: interest on original investment at 20%, salary allowances of
$34,000 and $26,000 respectively, and the remainder equally. How much of the net
income of $100,000 is allocated to Xavier?
A.$49,000
B.$51,000
C.$50,000
D.$56,000
Answer:
Gilbert’s expects its September sales to be 20% higher than its August sales of
$150,000. Purchases were $100,000 in August and are expected to be $120,000 in
September. All sales are on credit and are collected as follows: 30% in the month of the
sale and 70% in the following month. Merchandise purchases are paid as follows: 25%
in the month of purchase and 75% in the following month. The beginning cash balance
on September 1 is $7,500. The ending balance on September 30 would be:
A.$61,500
B.$75,000
C.$72,300
D.$71,500
Answer:
What is a partnership? List three advantages and three disadvantages of the partnership
form of business organization.
Answer:
Fortune Corporation’s comparative balance sheet for current assets and liabilities was as
follows:
Adjust 2012 net income of $65,000 for changes in operating assets and liabilities to
arrive at cash flows from operating activities using the indirect method.
Answer:
The partnership of Abraham Associates began operations on January 1, 2010, with
contributions from two partners as follows:
The following additional partner transactions took place during the year:
Prepare a statement of partnership equity for the year ended December 31, 2010.
Answer:
Ski Master Company pays weekly salaries of $18,000 on Friday for a five-day week
ending on that day. Journalize the necessary adjusting entry at the end of the accounting
period, assuming that the period ends on Wednesday.
Answer:
Describe a master budget and the sequence in which the individual budgets within the
master budget are prepared.
Answer:
Match each of the following terms with the best definition given.
Answer:
The income statement disclosed the following items for 2011:
Balances of the current assets and current liabilities accounts changed between
December 31, 2010 and December 31, 2011, as follows:
Prepare the Cash Flows for Operating Activities section of the statement of cash flows,
using the indirect method.
Answer:
Jimmy Co. is considering a 12-year project that is estimated to cost $1,050,000 and has
no residual value. Jimmy Co. seeks to earn an average rate of return of 18% on all
capital projects. Determine the necessary average annual income (using straight-line
depreciation) that must be achieved on this project for this project to be acceptable to
Jimmy Co.
Answer:
Determine the amount to be paid in full settlement of each invoice, assuming that credit
for returns and allowances was received prior to payment and that all invoices were
paid within the discount period.
Answer:
For the following, mark a “D” if the following account normally has a debit balance and
mark a “C” if the following account normally has a credit balance.
_____1) Notes Payable
_____2) Mortgage Payable
_____3) Drawing
_____4) Accounts Receivable
_____5) Capital
_____6) Rent Revenue
_____7) Unearned Income
_____8) Utility Expense
_____9) Automobiles
Answer:
Using the following data taken from Hsu’s Imports Inc., prepare the cost of merchandise
sold section of the income statement for the year ended March 31, 2011.
Answer:
Georgia Company has a condensed income statement as shown:
REQUIRED:
Prepare a horizontal analysis of Georgia Company’s income statements. Comment on
the trends, both favorable and unfavorable.
Answer:
On April 10, Maranda Corporation issued for cash 11,000 shares of no-par common
stock at $25. On May 5, Maranda issued at par 1,000 shares of 4%, $50 par preferred
stock for cash. On May 25, Maranda issued for cash 15,000 shares of 4%, $50 par
preferred stock at $55.
Journalize the entries to record the April 10, May 5, and May 25 transactions.
Answer:
The following items are reported on a company’s balance sheet:
Answer:
Prior to liquidating their partnership, Craig and Jenny had capital accounts of $70,000
and $110,000, respectively. The partnership assets were sold for $285,000. The
partnership had $25,000 of liabilities. Craig and Jenny share income and losses equally.
Determine the amount received by Jenny as a final distribution from liquidation of the
partnership.
Answer:
The payroll register of Seaside Architecture Company indicates $970 of Social Security
and $257 of Medicare tax withheld on total salaries of $16,500 for the period. Federal
withholding for the period totaled $4,235. Provide the journal entry for the period’s
payroll.
Answer: