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Identify each of the following expenditures as chargeable to (a) Land, (b) Land
Improvements, (c) Buildings, (d) Machinery and Equipment, or (e) Other accounts.
(1)Cost of paving parking area for employees and customers.
(2)Insurance during construction of building.
(3)Interest incurred on money borrowed for construction of building.
(4)Fee paid for installation of equipment.
(5)Special foundation for new equipment acquired.
(6)Transit insurance on new equipment.
(7)Freight charges on new equipment.
(8)Cost of repairing vandalism damage to equipment during installation.
(9)Sales tax on new equipment.
(10)Cost incurred in repairing damage resulting from installation of new equipment.
(11)Cost of landfill for building site.
(12)Cost of lubricating oil purchased for periodic oil changes for equipment.
(13)Parking lot lighting.
(14)Installing a fence around the parking lot.
(15)Repainting the trim on a building.
(16)Special assessment paid to city for extension of water main to the property.
(17)Cost of razing and removing the old building on property acquired for a building
site.
(18)Delinquent real estate taxes assumed by purchaser on property acquired for a
building site.
(19)Attorney's fee for title search.
(20)Architect's fee for building plans and supervision of construction.
The due date of a 60day note dated July 10 is September 9.
a. True
b. False
The standard costs and actual costs for direct labor for the manufacture of 2,500 actual
units of product are as follows:
Standard Costs
Direct labor7,500 hours @ $12
Actual Costs
Direct labor7,400 hours @ $11.40
The amount of the direct labor rate variance is:
a. $4,440 unfavorable.
b. $4,500 favorable.
c. $4,440 favorable.
d. $4,500 unfavorable.
Which of the following businesses use a premiumprice emphasis?
a. Value City Furniture selling furniture at affordable prices
b. Tommy Hilfiger selling products that have a unique image
c. WalMart reselling standardized products
d. Southwest Airlines providing standardized services
From the following data, calculate the amount of working capital.
Accounts payable$ 58,000
Accounts receivable47,000
Accrued liabilities3,000
Cash29,560
Intangible assets57,000
Inventory48,000
Longterm investments127,000
Longterm liabilities41,000
Marketable securities32,000
Notes payable (shortterm)28,000
Property, plant, and equipment784,000
Prepaid expenses7,500
a. $98,060
b. $72,000
c. $75,060
d. $77,060
The fact that workers are unable to meet a properly determined direct labor standard is
sufficient cause to change the standard.
a. True
b. False
If the accounts receivable turnover for the current year has decreased when compared
with the ratio for the preceding year, there has been an acceleration in the collection of
receivables.
a. True
b. False
Which of the following statements is a difference between financial accounting and
managerial accounting?
a. Under financial accounting, reports are prepared using GAAP, whereas under
managerial accounting, information that is useful to management for its decision
making is not recorded using GAAP.
b. Financial accounting focuses on providing information for internal use, whereas
managerial accounting focuses on providing information for external use.
c. Under financial accounting, reports are prepared as and when management needs
them, whereas under managerial accounting, reports are prepared on a monthly basis.
d. Financial accounting has a subjective approach, whereas managerial accounting has
an objective approach.
HTMLENTITY#8203HTMLENTITYWhich of the following is the effect of impaired
goodwill on liquidity and profitability metrics?
a. HTMLENTITY#8203HTMLENTITYBoth profitability and liquidity will remain
unaffected.
b. HTMLENTITY#8203HTMLENTITYBoth profitability and liquidity will decrease.
c. HTMLENTITY#8203HTMLENTITYProfitability will increase, whereas liquidity
will remain unaffected.
d. HTMLENTITY#8203HTMLENTITYLiquidity will decrease, whereas profitability
will increase.
The first budget customarily prepared as part of an entity's master budget is the:
a. production budget.
b. cash budget.
c. sales budget.
d. direct materials purchases.
If divisional operating income is $100,000, invested assets are $850,000, and the
minimum rate of return on invested assets is 8%, the residual income would be $32,000.
a. True
b. False
Merchandise is ordered on November 12; the merchandise is shipped by the seller and
the invoice is prepared, dated, and mailed by the seller on November 15; the
merchandise is received by the buyer on November 17; the transaction is recorded in
the seller's accounts on November 15. If the credit terms are 1/10, n/30, the discount
period begins with what date?
a. November 12
b. November 15
c. November 17
d. November 22
A job order cost system provides for a separate record of the costs for each particular
quantity of product that is manufactured.
a. True
b. False
Under the cash basis of accounting, expenses are recorded when paid.
a. True
b. False
A to Z Corporation purchased a building for $80,000 cash. On the Statement of Cash
Flows, the transaction would be classified as:
a. Cash Flows from Operating Activities.
b. Cash Flows from Investing Activities.
c. Cash Flows from Financing Activities.
d. Noncash transaction.
Which of the following is the formula to calculate gross profit percent?
a. (Sales – Operating Expense) / Gross Profit
b. Sales × Gross Profit
c. (Sales + Sales Discounts) / Cost of Goods Sold
d. (Sales – Cost of Goods Sold) / Sales
On March 15, Silver Co. issued a $80,000, 5%, 90day note payable to Gold Co. How
much will Silver Co. have to pay at maturity? (Assume 360 days in a year)
a. $84,000
b. $79,000
c. $80,000
d. $81,000
The following financial information was summarized from the accounting records of
Globe Corporation for the current year ended December 31:
Northern Southern Corporate
Division
Division
Total
Cost of goods sold$310,000$175,000
Direct operating expenses250,000115,000
Net sales600,000410,000
Interest expense$12,000
General overhead101,000
Income tax26,700
The net income for Globe Corporation is:
a. $59,000.
b. $160,000.
c. $19,400.
d. $47,000.
Diamond Inc.'s sales is $520,000, its operating income is $84,000, average total assets
are $480,000, and average shareholders' equity is $200,000. Determine the company's
return on shareholders' equity.
a. 22.6%
b. 36.5%
c. 42.0%
d. 55.2%
Which of the following is the subsidiary ledger for workinprocess?
a. The finished goods ledger
b. Job cost sheets
c. Materials requisitions
d. The materials ledger
A bank issues credit memos for:
a. payments made by electronic funds transfer.
b. interest earned on the company's account.
c. service charges.
d. customer checks returned for not sufficient funds.
Opportunity cost is the amount of increase or decrease in revenue that would result
from the best available alternative to the proposed use of cash or its equivalent.
a. True
b. False
Which of the following concepts is being considered when a company making a capital
investment decision converts all the dollar cash inflows and outflows over the life of a
project to their present value?
a. The accounting period concept
b. The time value of money concept
c. The realization concept
d. The matching concept
Accompanying the bank statement was a debit memorandum for bank service charges.
What adjustment is required in the depositor's accounts?
a. Increase Miscellaneous Expense; decrease Cash
b. Increase Cash; increase Other Income
c. Increase Cash; increase Accounts Payable
d. Decrease Accounts Payable; decrease Cash
Which of the following is an element of the control environment?
a. Control procedures
b. Managements' operating styles
c. Information and communication activities
d. Risk assessment plans
Available discounts taken by the buyer for early payment of an invoice are termed sales
discounts by the seller.
a. True
b. False
Liabilities due beyond one year are classified as _____.
a. current liabilities
b. longterm liabilities
c. contingent liabilities
d. fixed liabilities
A commonsized income statement is prepared by expressing income statement amounts
as a percent of _____.
a. sales
b. purchases
c. total assets
d. profit
Customer refunds and allowances is a contraasset account.
a. True
b. False
During inflationary periods, the use of the FIFO method of costing inventory will result
in a greater amount of net income than would result from the use of the LIFO method of
costing inventory.
a. True
b. False
Deferred revenue is initially recorded as:
a. revenue but becomes a liability over time.
b. an asset but becomes revenue over time.
c. a liability but becomes revenue over time.
d. revenue but becomes an asset over time.
If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000
is sold for $15,000, the company must:
a. recognize a loss on the income statement under other expenses.
b. recognize a loss on the income statement under operating expenses.
c. recognize a gain on the income statement under other revenues.
d. recognize a gain on the income statement under revenues.
The debt ratio of Jade Co. and Emerald Inc. are 30% and 51% respectively. This
information indicates that:
a. Jade Co. has a higher asset turnover than Emerald Inc.
b. Jade Co.'s operations are financed primarily with debt.
c. Emerald Inc. has a lower financial leverage than Jade Co.
d. Emerald Inc.'s operations are financed primarily with debt.
Merchandise inventory shrinkage will decrease Retained Earnings.
a. True
b. False
Responsibility accounting reports for profit centers are normally in the form of balance
sheets.
a. True
b. False
