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Relevant benefits refer to the additional revenue generated by selecting a particular
course of action over another.
Answer:
The relevant range of operations includes extremely high and low levels of production
that are unlikely to occur.
Answer:
If the borrower fails to pay a mortgage, most mortgage contracts grant the lender the
right to foreclose on the property that is identified as security in the contract.
Answer:
Managers are able to make important decisions correctly using erroneous inventory
balances because inventory errors are self-correcting and, as a result, are less serious.
Answer:
Auditors are banned from direct investments with their clients.
Answer:
If a company provides services to a customer on credit, the service provider company
should credit Accounts Receivable.
Answer:
The FASB requires the reporting of cash flows per share as a measure of earnings
performance.
Answer:
To prepare consolidated financial statements when a company has an international
subsidiary, the international subsidiary's financial statements must be translated into
U.S. dollars.
Answer:
The bottom line of a contribution margin report is net income.
Answer:
A company produces surgical equipment that goes through threes processes, 1A1, 2B2,
and 3C3, before they are complete. Expected costs and activities for the three
departments are shown below. All departments have departmental overhead rates based
on direct labor hours. Therefore, the overhead rate for each department is $5 per direct
labor hour.
Answer:
After adjustment, the allowance for doubtful accounts has the effect of reducing
accounts receivable to its estimated realizable value.
Answer:
The management concept of customer orientation encourages a company to set up its
production system to produce large quantities of the same product for all customers.
Answer:
A company that finances a relatively large portion of its assets with liabilities is said to
have a high degree of financial leverage.
Answer:
The percent of sales method for estimating bad debts assumes that a given percentage
of a company's credit sales for the period are uncollectible.
Answer:
Vertical analysis is a tool to evaluate individual financial statement items or groups of
items in terms of a specific base amount.
Answer:
Under the allowance method of accounting for uncollectible accounts receivable, no
estimate is made to predict bad debts expense.
Answer:
The purchase of supplies on credit should be recorded with a debit to Supplies and a
credit to Accounts Payable.
Answer:
A company had net sales of $340,500, its cost of goods sold was $257,000, and its net
income was $13,750. The company's gross margin ratio equals 24.5%.
Answer:
The first step in the analyzing and recording process is to analyze each transaction and
event from source documents.
Answer:
ABC allocates overhead costs to products based on input measures rather than output
measures .
Answer:
Product design costs are an example of a unit level activity.
Answer:
The days' sales in inventory ratio is computed by dividing ending inventory by cost of
goods sold and multiplying the result by 365.
Answer:
Micron owns 30% of JVT stock. Micron received $6,500 in cash dividends from its
investment in JVT. The entry to record receipt of these dividends would include a debit
to Cash for $6,500 and a credit to Long-Term Investments for $6,500.
Answer:
Expenses decrease retained earnings and are the costs incurred to earn revenues.
Answer:
A company has already incurred a $600 cost in partially producing its two products.
Their selling prices when partially and fully processed are shown in the following table
with the additional costs necessary to finish their processing. Based on this information,
the company should process both products further.
Answer:
Plant assets are assets that are held for sale.
Answer:
With deposits of $5,000 at the end of each year, you will have accumulated $38,578 at
the end of the sixth year if the annual rate of interest is 10%.
Answer:
A company paid $6,000 for a six-month insurance policy. The policy coverage began
on February 1. On February 28, $100 of insurance expense must be recorded.
Answer:
Another name for the balance sheet is the statement of financial position.
Answer:
Break-even analysis cannot be applied in a multiproduct situation.
Answer:
Given the following data, total product cost per unit under absorption costing is $9.14.
Answer:
What interest rate is required to accumulate $6,802.50 in four years from an investment
of $5,000?
A. 5%
B. 8%
C. 10%
D. 12%
E. 15%
Answer:
A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they
purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic
inventory method, what is the cost of the 12 units that were sold?
A. $120
B. $124
C. $128
D. $130
E. $140
Answer:
Which of the following best lists the disadvantages of a partnership:
A. Unlimited life and mutual agency.
B. Mutual agency and limited liability.
C. Unlimited liability and unlimited life.
D. Limited Life and limited liability.
E. Limited life, mutual agency, and unlimited liability are all disadvantages of a
partnership
Answer:
Digby Company manufactured and sold 37,000 units of its product at a price of $93 per
unit. Total variable cost per unit is $60, consisting of $58 in variable production cost
and $2 in variable selling and administrative cost. Fixed costs of manufacturing are
$350,000.
a. Compute the manufacturing margin for the company under variable costing.
b. Compute the contribution margin based on this data.
c. Compute the gross margin under absorption costing.
Answer:
Juliet Corporation has accumulated the following accounting data for the year:
The cost of goods manufactured for the year is:
A. $200
B. $1,000
C. $5,000
D. $6,400
E. $8,200
Answer:
Which of the following statements is true?
A. Variable costing treats fixed overhead as a period cost.
B. Absorption costing treats fixed overhead as a period cost.
C. Absorption costing treats fixed overhead as an expense in the period it is incurred.
D. Variable costing excludes all overhead from product costs.
E. Managers can manipulate earnings more easily under variable costing by varying the
production level.
Answer:
A U.S. company makes a sale to a foreign customer payable in 30 days in the
customer's currency. The sale would be recorded by the U.S. company on the date:
A. Of sale using a projected estimate of the U.S. dollar value at payment date.
B. Of sale using a 30-day average U.S. dollar value.
C. Of sale using the current dollar value.
D. Of sale using the foreign currency value.
E. When payment is received.
Answer:
A company had cash sales during the period. These transactions would be recorded in
which of the following journals?
A. Sales journal
B. Purchases journal
C. Cash disbursements journal
D. Cash receipts journal
E. General journal.
Answer:
On November 1, 2012, Bob's Skateboards Store signed a $12,000, 3-month, 5% note
payable to cover a past due account payable. This company uses a calendar year to
report financial activity and updates the accounting records monthly.
a. What amount of total interest expense will the company pay on this note?
b. Prepare Bob's general journal entry to record the issuance of the note payable.
c. Prepare Bob's general journal entry to record the payment of the note on February 1,
2013.
Answer:
Use the following information to determine the margin of safety in dollars:
A. $88,500
B. $108,500
C. $173,600
D. $326,400
E. $500,000
Answer:
Which of the following is true?
A. Overhead costs are often affected by many issues and are frequently too complex to
be explained by any one factor.
B. The departmental overhead rate is not usually based on measures closely related to
production volume.
C. The departmental overhead rate is most accurate in assigning overhead costs that are
not driven by production volume.
D. Allocated overhead costs will be the same no matter which allocation method is
used.
E. When cost analysts are able to logically trace cost objects to costs, costing accuracy
is improved.
Answer:
Management of a company is evaluating two potential orders. Due to limited capacity
only one of these orders can be accepted. Incremental fixed costs are the same for either
option. Based on the information in the table below, which of the following statements
is true?
A. Option B has the highest contribution margin per unit.
B. Option A has the highest total contribution margin.
C. Option B has the lowest contribution margin ratio.
D. Option B has the highest total contribution margin.
E. Option A has the highest amount per dollar of sales to contribute to contribution
margin and profit.
Answer:
A company has two products: A and B. It uses activity-based costing and has prepared
the following analysis showing budgeted cost and activity for each of its three activity
cost pools:
Annual production and sales level of Product A is 34,300 units, and the annual
production and sales level of Product B is 69,550 units. What is the approximate
overhead cost per unit of Product A under activity-based costing?
A. $3.00
B. $2.00
C. $10.28
D. $15.00
E. $2.33
Answer:
A company uses a process cost accounting system. Its Sewing Department's beginning
inventory consisted of 50,000 units (1/4 complete with respect to direct labor and
overhead). The Sewing Department started and finished 120,000 units this period. Its
ending inventory consists of 40,000 units (1/4 complete with respect to direct labor and
overhead). All direct materials are added at the beginning of the process. Under FIFO
what are the equivalent units of production for the Sewing Department for direct
materials and for direct labor and overhead, respectively?
A. 210,000;120,000
B. 210,000; 180,000
C. 167,500; 167,500
D. 160,000; 162,500
E. 160,000; 167,500
Answer:
The production activities for a customized product represent a(n):
A. Operation.
B. Job.
C. Unit.
D. Pool.
E. Process.
Answer:
On January 1, 2013, Lane issues $700,000 of 7%, 15-year bonds at a price of 106¾.
The interest payments are made on June 30 and December 31. Lane elects a fiscal year
ending September 30. What is the amount that would be recorded as cash paid in the
December 31, 2013, journal entry?
A. $24,500
B. $22,925
C. $12,250
D. $11,462
E. $13,458
Answer:
Reference: 16_03
Medina Corp. had the following information available for the year:
FIFO equivalent units of production for the year are:
A. 3,320 units.
B. 3,200 units.
C. 3,240 units.
D. 3,520 units.
E. 3,420 units.
Answer:
A department had 65 units which were 20% complete in beginning Goods in Process
Inventory. During the current period, 77 units were transferred out. Ending Goods in
Process Inventory was 30 units which were 20% complete. Using the weighted-average
method, what are the equivalent units produced if all direct material and direct labor are
added uniformly throughout the process?
A. 83
B. 70
C. 100
D. 77
E. 107
Answer:
Accounts payable appear on which of the following statements?
A. Balance sheet.
B. Income statement.
C. Statement of retained earnings.
D. Statement of cash flows.
E. Transaction statement.
Answer:
A balance sheet lists:
A. The types and amounts of the revenues and expenses of a business.
B. Only the information about what happened to retained earnings during a time period.
C. The types and amounts of assets, liabilities and equity of a business as of a specific
date.
D. The cash inflows and outflows during the period.
E. The assets and liabilities of a company, but not the equity.
Answer:
Unearned revenues are:
A. Revenues that have been earned and received in cash.
B. Revenues that have been earned but not yet collected in cash.
C. Liabilities created when a customer pays in advance for products or services before
the revenue is earned.
D. Recorded as an asset in the accounting records.
E. Increases to retained earnings.
Answer:
Awn Services paid a dividend of $8,700 during the current year. The entry to close the
dividend account at the end of the year is:
A.
B.
C.
D.
E.
Answer:
Uncertainties such as natural disasters that could happen in the future:
A. Are not contingent liabilities because they are future events not arising out of past
transactions or events.
B. Are contingent liabilities because they are future events arising from past
transactions or events.
C. Should be disclosed because of their usefulness to financial statements.
D. Are estimated liabilities because the amounts are uncertain.
E. Arise out of transactions such as debt guarantees.
Answer:
A company had total assets of $745,000, total cash flows of $230,000, and cash flows
from operations of $50,000. The cash flow on total assets ratio is equal to:
A. 30.87%
B. 21.74%
C. 6.71%
D. 5.13%
E. 37.58%
Answer:
Based on the following information, prepare the general journal entries Avisa must
make at November 30.
The following information is available for the Avisa Company for the month of
November:
a. On November 30, after all transactions have been recorded, the balance in the
company's Cash account has a balance of $27,202.
b. The company's bank statement shows a balance on November 30 of $29,279.
c. Outstanding checks at November 30 include check #3030 in the amount of $1,525
and check #3556 in the amount of $1,459.
d. A credit memo included with the bank statement indicates that the bank collected
$780 on a noninterest-bearing note receivable for Avisa. The bank deducted a $10
collection fee and credited the remainder of $770 to Avisa's account.
e. A debit memo included with the bank statement shows a $67 NSF check from a
customer, J. Brown.
f. A deposit placed in the bank's night depository on November 30 totaled $1,675 and
did not appear on the bank statement.
g. Examination of the checks on the bank statement with the entries in the accounting
records reveals that check #3445 for the payment of an account payable was correctly
written for $2,450, but was recorded in the accounting records as $2,540.
h. Included with the bank statement was a debit memorandum in the amount of $25 for
bank service charges. It has not been recorded on the company's books.
Answer:
Use the financial data shown below to calculate the following ratios for the current
year:
(a) Current ratio
(b) Acid-test ratio
(c) Accounts receivable turnover
(d) Days' sales uncollected
(e) Inventory turnover
(f) Days' sales in inventory
Answer:
After-tax net income divided by the annual average investment is the:
A. Net present value rate.
B. Payback rate.
C. Accounting rate of return.
D. Earnings from investment.
E. Profit rate.
Answer:
The following information is available for the year ended December 31:
The amount of raw materials used in production for the year is:
A. $4,100
B. $5,100
C. $3,500
D. $6,500
E. $4,000
Answer:
The indirect method for the preparation of the operating activities section of the
statement of cash flows:
A. Separately lists each major item of operating cash receipts.
B. Separately lists each major item of operating cash payments.
C. Reports net income and then adjusts it for items necessary to determine net cash
provided or used by operating activities.
D. Is required if the company is a merchandiser.
E. Must not be used in all circumstances.
Answer:
Beard, Tanner, Williams are operating as a partnership. The capital account balances at
December 31, 2013 are $254,000, $195,000 and $286,000 respectively. Record the
entries for the following independent situations.
a. The partners vote to admit Sturges. She is going to invest $150,000 for a 15% interest
in the partnership. Profit and losses are split equally between the existing partners.
b. Sturges agrees to buy 50% of Williams interest by paying him $150,000 directly.
c. The partners need new ideas and agree to give Sturges a 20% interest in exchange for
$150,000. Profits and losses are shared equally between the existing partners.
d. Williams wants to retire and is willing to leave the partnership in exchange for
$281,000. Profits and losses were shared on the ratio of 2:3:5.
Answer:
A company uses a weighted-average perpetual inventory system.
August 2: 10 units were purchased at $12 per unit.
August 18: 15 units were purchased at $15 per unit.
August 29: 20 units were sold.
August 31: 14 units were purchased at $16 per unit.
What is the per-unit value of ending inventory on August 31?
A. $12.00
B. $13.80
C. $15.42
D. $16.00
E. $17.74
Answer:
Derick Pearson and Felecia Hatcher founded Feverish Ice Cream. Why is managing
inventory an important issue for their company?
Answer:
__________ are obligations due within one year or the company's operating cycle,
whichever is longer.
Answer:
___________________ processing enters and processes data as soon as source
documents are available.
Answer:
When a partner invests in a partnership, his/her capital account is __________ for the
invested amount.
Answer:
What is the purpose of the days' sales uncollected ratio?
Answer:
Reebok's net income was $180,000; its total assets were $1,050,000; and its net sales
were $3,500,000. Calculate the company's profit margin ratio.
Answer:
The _______________ amortization method allocates bond interest expense over the
life of the bonds in a way that yields a constant rate of interest.
Answer:
The current ratio and acid-test ratio are used to reflect the ____________ of a
business.
Answer:
Contingent liabilities are recorded if the future event is _______________ and the
amount owed can be _______________.
Answer:
Describe employer responsibilities for reporting payroll taxes. (To the extent possible,
reference the form to be filed for each tax.)
Answer:
A company borrows money from the bank by promising to make eight semiannual
payments of $9,000 each. How much is the company able to borrow if the interest rate
is 10% compounded semiannually?
Answer:
A company reported operating cash flows of $57,000 and average total assets of
$962,000. Calculate the companys cash flow on total assets ratio.
Answer:
A partially completed worksheet is shown below. The unadjusted trial balance columns
are complete. Complete the adjustments, adjusted trial balance, income statement, and
balance sheet columns.
Answer:
Tiger, Inc., has developed the following standard cost data based on 60,000 direct labor
hours, which is 75% of capacity:
During the last period, the company operated at 80% of capacity and produced 128,000
units. Actual costs were:
Determine the direct materials price and quantity variances and the direct labor rate and
efficiency variances. Indicate whether each variance is favorable or unfavorable.
Answer:
Vaughn Co. operates three separate departments (A, B, C). The data below are provided
for the current year:
Required: Prepare an income statement showing the departmental contributions to
overhead for the current year.
Answer:
Armstrong plans to leave the FAP Partnership. The recorded balance in her capital
account is $48,000. The remaining partners, Peters and Floyd, agree to pay Armstrong
$58,000 cash. The partners have agreed to share income and loss equally. Prepare the
journal entry to record the transaction.
Answer:
Della's Donuts has revenues of $83,000 and expenses of $64,000. Calculate its net
income.
Answer:
