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Limited liability partnerships are designed to protect innocent partners from
malpractice or negligence claims resulting from the acts of another partner.
Answer:
The days' sales uncollected ratio is calculated by dividing accounts receivable by net
sales and multiplying this quotient by
Answer:
To calculate the break-even point in units, one must know unit fixed cost, unit variable
cost, and unit sales price.
Answer:
When expenses exceed revenues, there is a net loss and the Income Summary account
would have a credit balance.
Answer:
Interim statements report a company's business activities for a one-year period.
Answer:
As the level of output activity increases, fixed cost per unit remains constant.
Answer:
In calculating the rate of return on average investment, average investment should be
calculated as (beginning book value + ending book value)/2.
Answer:
Unit contribution ratio is calculated by dividing sales price per unit by the unit
contribution margin.
Answer:
It is never good practice to accept a note receivable in exchange for an overdue account
receivable.
Answer:
The indirect method reports individual operating cash outflows and cash inflows by
activity.
Answer:
When preparing the operating section of the statement of cash flows using the indirect
method, nonoperating gains are added back to net income.
Answer:
When a company bills a customer for $600 for services rendered, the journal entry to
record this transaction will include a $600 debit to Services Revenue.
Answer:
The price-earnings ratio reveals information about the stock market's expectations for a
company's future growth in earnings, dividends, and economic opportunities.
Answer:
A U.S. company's credit sale to an international customer to be paid in a foreign
currency is recorded using the exchange rate on the date of sale.
Answer:
Use of the internal rate of return method cannot be used with uneven cash flows.
Answer:
Selling and administrative expenses are normally product costs.
Answer:
An ore deposit costing $800,000 is expected to produce 1,600,000 tons of ore. A total
of 70,000 tons are mined and sold in the current year. The depletion expense for the
current year is $35,000.
Answer:
Failure to record depreciation expense will overstate the asset and understate the
expense.
Answer:
Depreciation expense is not reported on the statement of cash flows when the direct
method is used.
Answer:
The predetermined overhead allocation rate based on direct labor cost is the ratio of
estimated overhead cost for the period to estimated direct labor cost for the period.
Answer:
Posting debits from the sales journal to Accounts Receivable twiceonce to the general
ledger account Accounts Receivable and once to the customer's subsidiary
accountviolates the accounting equation of debits equal credits.
Answer:
The internal rate of return equals the rate that yields a net present value of zero for an
investment.
Answer:
Reporting contribution margin by market segment is useful in assessing the profitability
of each segment.
Answer:
Cost-volume-profit analysis can be used to predict the effects of reduced selling prices,
increased fixed costs, and reduced variable costs on break-even points.
Answer:
Process cost accounting systems consider direct costs to include those costs that can be
readily identified with a particular process.
Answer:
The dollar amount of sales needed to achieve a targeted after-tax income is computed
by dividing the sum of fixed costs plus the desired after-tax income plus income taxes
by the contribution margin ratio.
Answer:
An account is a record of increases and decreases in a specific asset, liability, equity,
revenue, or expense item.
Answer:
Noncash financing activities are disclosed in a note in the financing section of the
statement of cash flows.
Answer:
The entry to increase the balance in petty cash from $50 to $75 would be to credit the
Petty Cash account in the amount of $25.
Answer:
Extraordinary repairs are expenditures extending the asset's useful life beyond its
original estimate and are capital expenditures because they benefit future periods.
Answer:
An account balance is the difference between the debits and credits for an account
including any beginning balance.
Answer:
The Petty Cash account is a separate checking account used for small amounts.
Answer:
Depreciation expense is an example of an accrued expense.
Answer:
Cost information from both absorption costing and variable costing can aid managers in
pricing.
Answer:
The party who borrows money and signs a promissory note is referred to as the payee.
Answer:
The dividends account is normally closed by debiting it.
Answer:
The internal information users of a business include the managers of: research and
development, distribution, and human resources.
Answer:
Reference: 22_04
Ice House Industries, Inc. has three operating departments: Cooking, Churning, and
Freezing. Indirect factory costs for the current period were Administrative $560,000 and
Maintenance $98,000. Administrative costs are allocated to operating departments
based on the number of workers and maintenance costs are allocated to operating
departments based on square footage occupied.
Based on the above data, determine the maintenance cost allocated to each operating
department of Ice House Industries, Inc.
A. Cooking: $219,333 Churning: $219,333 Freezing: $219,333
B. Cooking: $230,300 Churning: $263,200 Freezing: $164,500
C. Cooking: $ 33,250 Churning: $ 38,000 Freezing: $ 23,750
D. Cooking: $ 32,666 Churning: $ 32,666 Freezing: $ 32,666
E. Cooking: $ 34,300 Churning: $ 39,200 Freezing: $ 24,500
Answer:
A companys outstanding stock consists of (a) 67,000 shares of cumulative 5% preferred
stock with a $20 par value and (b) 95,000 shares of common stock with a $1 par value.
During its first four years of operation, the corporation declared and paid the following
total cash dividends:
What is the amount of dividends that the common stockholders receive for all years
presented?
Answer:
A promissory note received from a customer in exchange for an account receivable:
A. Is a cash equivalent for the recipient.
B. Is an account receivable for the recipient.
C. Is a note receivable for the recipient.
D. Is a short-term investment for the recipient.
E. Is a note payable for the recipient.
Answer:
Beginning assets were $437,600, beginning liabilities were $262,560, common stock
issued during the year totaled $45,000, revenue for the year was $414,250, expenses for
the year were $280,000, dividends declared was $22,700, and ending liabilities is $
$350,000.
What are the ending assets for the year?
A. $ 700,160
B. $ 612,560
C. $ 787,600
D. $ 681,590
E. $1,159,410
Answer:
If a firm's forecasted sales are $250,000 and its break-even sales are $190,000, the
margin of safety (in dollars) is:
A. $60,000
B. $250,000
C. $190,000
D. $440,000
E. $24,000
Answer:
The interest accrued on $3,600 at 7% for 60 days is:
A. $36
B. $42
C. $252
D. $180
E. $420
Answer:
Which of the following pair of journal entries correctly records the current months
activity where the company had $42,060 in total factory labor costs that were paid in
cash with $32,400 of this total for direct labor?
A. Factory Payroll 42,060
Cash
42,060
Wage Expense 32,400
Factory Overhead 9,660
Factory Payroll
42,060
B. Factory Payroll 42,060
Cash
42,060
Goods in Process Inventory 32,400
Wage Expense 9,660
Factory Payroll
42,060
C. Cash 42,060
Factory Payroll
42,060
Goods in Process Inventory 32,400
Factory Overhead 9,660
Factory Payroll
42,060
D. Factory Payroll 42,060
Cash
42,060
Goods in Process Inventory 32,400
Factory Overhead 9,660
Factory Payroll
42,060
E. Cash 42,060
Factory Payroll
42,060
Factory Payroll 42,060
Goods in Process Inventory
42,060
Answer:
Total asset turnover is used to evaluate:
A. The efficiency of management's use of assets to generate sales.
B. The need for asset replacement.
C. The number of times operating assets were sold during the year.
D. The cash flows used to acquire assets.
E. The relation between asset cost and book value.
Answer:
On January 1, 2013, Jacob issues $800,000 of 9%, 13-year bonds at a price of 96½. Six
years later, on January 1, 2019, Jacob retires 20% of these bonds by buying them on the
open market at 105½. All interest is accounted for and paid through December 31,
2018, the day before the purchase. The straight-line method is used to amortize any
bond discount or premium. What is the journal entry to record the issuance of the
bonds on January 1, 2013?
A.
B.
C.
D.
E.
Answer:
On April 30, Holden Company had an Accounts Receivable balance of $18,000.
During the month of May, total credits to Accounts Receivable were $52,000 from
customer payments. The May 31 Accounts Receivable balance was $13,000. What was
the amount of credit sales during May?
A. $5,000
B. $47,000
C. $52,000
D. $57,000
E. $32,000
Answer:
Which of the following is an example of a financial performance measure that would be
found in a balanced scorecard?
A. Percentage of sales from new customers.
B. Money spent on employee training programs.
C. Product costs.
D. Return on investment.
E. Money spent on research and development.
Answer:
Adjusting entries:
A. Affect only income statement accounts.
B. Affect only balance sheet accounts.
C. Affect both income statement and balance sheet accounts.
D. Affect only cash flow statement accounts.
E. Affect only equity accounts.
Answer:
David Roberts is a real estate appraiser. Shown below are (a) several accounts in his
ledger with each account preceded by an identification number and (b) several
transactions completed by Roberts. Indicate the accounts debited and credited when
recording each transaction by placing the proper account identification numbers to the
right of each transaction.
Example Debit Credit
Completed an appraisal for a client who promised to pay at a later date. 2 3
A. Received cash in advance for appraising an office building.
B. Purchased office supplies on credit.
C. Paid a cash dividend.
D. Received the telephone bill of the business and immediately paid it.
E. Paid the salary of the office assistant.
F. Paid for the supplies purchased in transaction B.
G. Completed an appraisal for a client and immediately collected cash for the work
done.
Answer:
Bonds owned by investors whose names and addresses are recorded by the issuing
company and for which interest payments are made with checks to the bondholders, are
called:
A. Callable bonds
B. Serial bonds
C. Registered bonds
D. Coupon bonds
E. Bearer bonds
Answer:
FICA taxes include:
A. Social Security taxes
B. Charitable giving
C. Employee income taxes
D. Unemployment taxes
E. Federal taxes
Answer:
An approach to managing inventories and production operations such that units of
materials and products are obtained and provided only as they are needed is called:
A. Continuous improvement.
B. Customer orientation.
C. Just-in-time manufacturing.
D. Theory of constraints.
E. Total quality management.
Answer:
Beginning assets were $437,600, beginning liabilities were $262,560, common stock
issued during the year totaled $45,000, revenue for the year was $414,250, expenses for
the year were $280,000, dividends declared was $22,700, and ending liabilities is $
$350,000.
What was the beginning equity for the year?
A. $700,160
B. $787,600
C. $187,600
D. $612,560
E. $175,040
Answer:
Long-term liability data for the budgeted balance sheet is derived from:
A. The cash budget and capital expenditures budget.
B. The cash budget and sales budget.
C. The cash budget and budgeted income statement.
D. The sales budget and production budget.
E. The asset budget and debt budget.
Answer:
A job cost sheet shows information about each of the following items except:
A. The direct labor costs assigned to the job.
B. The name of the customer.
C. The costs incurred by the marketing department in selling the job.
D. The overhead costs assigned to the job.
E. The direct materials costs assigned to the job.
Answer:
Freeze Frame, Inc. produces cameras that require three processes, A, B, and C, to
complete. Digital camera model #789 is the best-selling of all the many types of
cameras produced. Information related to the 550,000 units of digital camera model
#789 produced annually is shown below.
Freeze Frames total expected overhead costs and related overhead data are shown
below:
a. Compute a departmental overhead rate for department A based on direct labor hours.
b. How much overhead is associated with model 789 from department A?
c. Compute a departmental overhead rate for department B based on direct labor hours.
d. How much overhead is associated with model 789 from department B?
e. Compute a departmental overhead rate for department C based on direct labor hours.
f. How much overhead is associated with model 789 from department C?
g What is the per unit cost of the 550,000 units of model 789?
Answer:
Holden, Phillips, and Rogers are partners with beginning-year capital balances of
$120,000, $60,000, and $60,000, respectively. Partnership net income for the year is
$84,000. Make the necessary journal entry to close Income Summary to the capital
accounts if:
a. Partners agree to divide income based on their beginning-year capital balances.
b. Partners agree to divide income based on the ratio of 5:3:2 (Holden:Phillips:Rogers),
respectively.
c. Partnership agreement is silent as to division of income and loss.
Answer:
Preferred stock that the issuing corporation at its option may retire by paying a
specified amount to the preferred stockholders plus any dividends in arrears is called:
A. Convertible preferred stock
B. Callable preferred stock
C. Premium stock
D. Cumulative preferred stock
E. Participating preferred stock
Answer:
The maturity date of a note receivable:
A. Is the day of the credit sale.
B. Is the day the note was signed.
C. Is the day the note is due to be paid.
D. Is the date of the first payment.
E. Is the last day of the month.
Answer:
Austin Company uses a job order cost accounting system. The company's executives
estimated that direct labor would be $2,000,000 (200,000 hours at $10/hour) and that
factory overhead would be $1,500,000 for the current period. At the end of the period,
the records show that there had been 180,000 hours of direct labor and $1,200,000 of
actual overhead costs. Using direct labor hours as the allocation base, calculate the
under- or overapplied overhead for the period.
A. $150,000 overapplied.
B. $150,000 underapplied.
C. $300,000 underapplied.
D. $300,000 overapplied.
E. $200,000 underapplied.
Answer:
A company used straight-line depreciation for an item of equipment that cost $12,000,
had a salvage value of $2,000, and had a five-year useful life. After depreciating the
asset for three complete years, the salvage value was reduced to $1,200 and its total
useful life was increased from five years to six years. Determine the amount of
depreciation to be charged against the machine during each of the remaining years of its
useful life:
A. $1,000
B. $1,800
C. $1,467
D. $1,600
E. $2,160
Answer:
A company manufactures and sells a product for $91 per unit. The company's fixed
costs are $859,716 and its variable costs are $25 per unit. The company's break-even
point in units is:
A. 7,412
B. 34,389
C. 9,448
D. 13,026
E. 66
Answer:
A formal statement of future plans, usually expressed in monetary terms, is a:
A. Variance report
B. Position statement
C. Budget
D. Prospectus
E. Variance analysis
Answer:
FastForward has net income of $18,955 and assets at the beginning of the year of
$200,000. Its assets at the end of the year total $246,000. Compute its return on assets.
A. 7.7%
B. 8.5%
C. 9.5%
D. 11.8%
E. 13.0%
Answer:
What is the net method of recording purchases?
A. A purchase is originally recorded at its full amount with any cash discount taken
recorded as a reduction to inventory at a later date.
B. A purchase is originally recorded at its full amount less any available cash discount.
C. A purchase is originally recorded at its full amount plus any available cash discount.
D. A purchase is originally recorded at its full amount with any cash discount taken
recorded as an increase to inventory at a later date.
E. A purchase is originally recorded to a purchase discounts lost account with any cash
discount taken recorded as a reduction to inventory at a later date.
Answer:
Walker Corporation issued 14%, five-year bonds with a par value of $5,000,000 on
January 1, 2013. Interest is to be paid semiannually on each June 30 and December 31.
The bonds were issued at $5,368,035 cash when the market rate for this bond was 12%.
(a) Prepare the general journal entry to record the issuance of the bonds on January 1,
2013.
(b) Show how the bonds would be reported on Walker's balance sheet at January 1,
2013.
(c) Assume that Walker uses the effective interest method for amortizing any discount
or premium on bonds. Prepare the general journal entry to record the first semiannual
interest payment on June 30, 2013.
(d) Assume instead that Walker uses the straight-line method for amortizing any
discount or premium on bonds. Prepare the general journal entry to record the first
semiannual interest payment on June 30,
Answer:
A credit sale of $2,500 to a customer would result in:
A. A debit to the Accounts Receivable account in the general ledger and a debit to the
customer's account in the accounts receivable ledger.
B. A credit to the Accounts Receivable account in the general ledger and a credit to the
customer's account in the accounts receivable ledger.
C. A debit to the Accounts Receivable account in the general ledger and a credit to the
customer's account in the accounts receivable ledger.
D. A credit to the Accounts Receivable account in the general ledger and a debit to the
customer's account in the accounts receivable ledger.
E. A credit to Sales and a credit to the customer's account in the accounts receivable
ledger.
Answer:
Reference: 20_01
Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12, respectively. The desired
ending inventory of Product A is 20% higher than its beginning inventory of 2,000
units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
Budgeted purchases of Product B for the year would be:
A. 24,500 units
B. 22,500 units
C. 16,500 units
D. 26,500 units
E. 20,500 units
Answer:
Which of the following is the correct sequence for the heading for ABC Companys
2013 balance sheet?
A. ABC Company, For the year ended 12/31/13, Balance Sheet
B. For the year ended 12/31/13, Balance Sheet, ABC Company
C. Balance Sheet, 12/31/13, ABC Company
D. 12/31/13, ABC Company, Balance Sheet
E. ABC Company, Balance Sheet, 12/31/13
Answer:
The internal document prepared by a department manager that informs the purchasing
department of its needs is the:
A. Purchase requisition
B. Purchase order
C. Invoice
D. Receiving report
E. Invoice approval
Answer:
Of the following accounts, the one that normally has a credit balance is:
A. Cash
B. Office Equipment
C. Sales Salaries Payable
D. Dividends
E. Sales Salaries Expense
Answer:
How is a classified balance sheet different from an unclassified balance sheet? List the
order of the usual classifications on a classified balance sheet.
Answer:
A traditional product costing approach is referred to as ______________.
Answer:
How does the objectivity principle support ethical behavior?
Answer:
Accounting is a ______________________ that identifies, records, and communicates
relevant, reliable, and comparable information about an organization's economic
activities.
Answer:
On August 1, a corporation issued 15,000 shares of no-par common stock in exchange
for a tract of land with a market value of $215,000. The common stock has a stated
value of $10 per share. Prepare the general journal entry to record this transaction.
Answer:
A ____________________ is useful in preparing interim statements and in showing
the effects of proposed transactions.
Answer:
Quick Computer Service had net income for the year of $30,000. Its assets at the
beginning of the year were $400,000. At the end of the year, assets were worth
$450,000. Calculate its return on assets.
Answer:
When you reach retirement age, you will have one fund of $100,000 from which you
are going to make annual withdrawals of $14,702. The fund will earn 6% per year. For
how many years will you be able to draw an even amount of $14,702?
Answer:
Countdown Inc. sold 17,000 units of its product at a price of $81 per unit. Total variable
cost per unit is $72.09, consisting of $69.05 in variable production cost and $3.04 in
variable selling and administrative cost. Compute the contribution margin for the
company.
Answer:
_________________ identify and describe transactions and events and provide
objective evidence and amounts for recording.
Answer:
Explain how to calculate the price-earnings ratio and describe how it is used in analysis
of a company's financial condition and performance.
Answer:
The BlueFin Partnership agrees to dissolve. The cash balance after selling all assets
and paying all liabilities is $56,000. The final capital account balances are: Smith,
$33,000; Nagy, $27,000; and Russ, ($4,000). Russ agrees to pay $4,000 cash from
personal funds to settle his deficiency. Prepare the journal entries to record the
transactions required to dissolve this partnership.
Answer:
Three important assumptions in cost-volume-profit analysis is that (1)
_______________per unit is constant, (2) _____________ per unit is constant, and (3)
______________ are constant in total.
Answer:
A company inadvertently produced 5,000 defective portable MP3 players. The players
cost $22 each to be manufactured. A salvage company will purchase the defective units
as they are for $18 each. The production manager reports that the defects can be
corrected for $10 per unit, enabling the company to sell them at the regular price of
$33. The repair operations would not affect other production operations. Prepare an
analysis that shows which action should be taken.
Answer:
The records of Skymaster Airplane Rentals show the following information as of
December 31, 2014:
Dividends of $52,000 were paid during 2014.
Using the above information, prepare a statement of retained earnings for 2014.
Answer:
What is an annuity?
Answer:
Highlight Hotel deposits all cash receipts on the day when they are received and it
makes all cash payments by check. At the close of business on December 31, its Cash
account shows a $18,393, debit balance. Highlight Hotel's June 30 bank statement
shows $15,921 on deposit in the bank. Prepare the necessary adjusting journal entries
using the following information:
1) Outstanding checks as of December 31 total $2,261.
2) The December 31 bank statement included a $35 debit memorandum for bank
services.
3) Check No. 2519, listed with the canceled checks, was correctly drawn for $850 in
payment of a utility bill on December 16. Highlight Hotel mistakenly recorded it with a
debit to Utilities Expense and a credit to Cash in the amount of $805.
4) The December 31 cash receipts of $3,425 were placed in the banks night depository
after banking hours and were not recorded on the December 31 bank statement.
5) The bank statement included a check from a customers payment of an account
receivable that had been returned NSF in the amount of $1,228.
Prepare the necessary adjusting journal entries.
Answer:
