If the straight-line method of amortization is used, the amount of unamortized premium
on bonds payable will decrease as the bonds approach maturity.
Answer:
It is not possible for one company to influence the operating policies of another
company unless it owns more than 50% interest in that company.
Answer:
A favorable cost variance occurs when actual cost is less than budgeted cost at actual
volumes.
Answer:
The cost of new equipment is called a revenue expenditure because it will help generate
revenues in the future.
Answer:
Generally accepted accounting principles regulate how and what financial information
is reported by businesses.
Answer:
In addition to the differential costs in an equipment replacement decision, the remaining
useful life of the old equipment and the estimated life of the new equipment are
important considerations.
Answer:
To determine the six month interest payment amount on a bond, you would take
one-half of the market rate times the face value of the bond.
Answer:
If in evaluating a proposal by use of the net present value method there is an excess of
the present value of future cash inflows over the amount to be invested, the rate of
return on the proposal exceeds the rate used in the analysis.
Answer:
Indirect costs can be specifically identified to a cost object.
Answer:
The single-step income statement is easier to prepare, but a criticism of this format is
that gross profit and income from operations are not readily available.
Answer:
A budget performance report compares actual results with the budgeted amounts and
reports differences for possible investigation.
Answer:
An extraordinary loss of $300,000 that results in income tax savings of $90,000 should
be reported as an extraordinary loss (net of tax) of $210,000 on the income statement.
Answer:
The cost of production report summarizes (1) the units for which the department is
accountable and the units to be assigned costs and (2) the costs charged to the
department and the allocation of those costs.
Answer:
A sale of treasury stock may result in a decrease in paid-in-capital. All decreases should
be charged to the Paid-In-Capital from Sale of Treasury account.
Answer:
If 10,000 units which were 40% completed are in process at November 1, 80,000 units
were completed during November, and 12,000 were 20% completed at November 30,
the number of equivalent units of production for November was 75,600. (Assume no
loss of units in production and that inventories are costed by the first-in, first-out
method.)
Answer:
If two companies have the same current ratio, their ability to pay short-term debt is the
same.
Answer:
The three common types of responsibility centers are referred to as cost centers, profit
centers, and investment centers.
Answer:
A sale of $750 on account, subject to a sales tax of 6%, would be recorded as an
account receivable of $750.
Answer:
The standard cost is how much a product should cost to manufacture.
Answer:
The proceeds from discounting a $20,000, 60-day, note payable at 6% is $20,200.
Answer:
When a corporation discontinues a segment of its operations at a loss, the loss should be
reported as a separate item before income from continuing operations on the income
statement.
Answer:
Goods that are partway through the manufacturing process, but not yet complete, are
referred to as materials inventory.
Answer:
Conversion and direct materials are generally both added at the end of the production
process.
Answer:
The total cost concept includes all manufacturing costs plus selling and administrative
expenses in the cost amount to which the markup is added to determine product price.
Answer:
Generally accepted accounting principles require companies to use only one factory
overhead rate for product costing.
Answer:
The systematic allocation of land’s cost to expense is called depreciation.
Answer:
The declaration and issuance of a stock dividend does not affect the total amount of a
corporation’s assets, liabilities, or stockholders’ equity.
Answer:
The sales budget is the starting point for preparation of the direct labor cost budget.
Answer:
The issue price of zero-coupon bonds is the present value of their face amount.
Answer:
A corporation often issues callable bonds to protect itself against significant declines in
future interest rates.
Answer:
If a firm has a current ratio of 2, the subsequent receipt of a 60-day note receivable on
account will cause the ratio to decrease.
Answer:
Notes Receivable and Accounts Receivable can also be called trade receivables.
Answer:
The expected period of time that will elapse between the date of a capital investment
and the complete recovery in cash of the amount invested is called the discount period.
Answer:
Temporary investments are recorded at their cost which would include broker’s
commissions.
Answer:
A series of equal cash flows at fixed intervals is termed an annuity.
Answer:
If direct materials cost per unit decreases, the amount of sales necessary to earn a
desired amount of profit will decrease.
Answer:
A chart of accounts is a listing of accounts that make up the journal.
Answer:
At the end of a period (before adjustment), Allowance for Doubtful Accounts has a
debit balance of $2,000. The Accounts Receivable balance is analyzed by aging the
accounts and the amount estimated to be uncollectible is $15,000. The amount to be
recorded in the adjusting entry for the bad debt expense is $15,000.
Answer:
Receiving payment prior to delivering goods or services causes a current liability to be
incurred.
Answer:
Prime costs are
A.direct materials and factory overhead
B.direct materials and direct labor
C.direct labor and factory overhead
D.period costs and factory overhead
Answer:
A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000,
installation costs of $5,000, and special acquisition fees of $3,000, would have a cost
basis of
A.$93,000
B.$90,000
C.$82,000
D.$85,000
Answer:
Which of the following is not one of the common types of responsibility centers?
A.Cost Center
B.Profit Center
C.Investment Center
D.Revenue Center
Answer:
For the year ended December 31, 2014 Depot Max’s cost of merchandise sold was
$56,900. Inventory at the beginning of the year was $6,540. Ending inventory was
$7,250. Depot Max’s number of days sales in inventory is closest to
A.42
B.46
C.8
D.44
Answer:
The amount of the total cash paid to the seller for merchandise purchased for
consumption would normally include
A.only the list price
B.only the sales tax
C.the list price plus the sales tax
D.the list price less the sales tax
Answer:
A company records their inventory purchases at standard cost but also records purchase
price variances. The company purchased 5,000 widgets $8.00. The standard cost for the
widgets is $7.60. Which of the following would be included in the journal entry?
A.$38,000 Debit to Accounts Payable
B.$ 2,000 Credit to Direct Materials Price Variance
C.$ 2,000 Debit to Accounts Payable
D.$ 2,000 Debit to Direct Materials Price Variance
Answer:
Which of the following describes the behavior of the fixed cost per unit?
A.Decreases with increasing production
B.Decreases with decreasing production
C.Remains constant with changes in production
D.Increases with increasing production
Answer:
Given the following cost data, what type of cost is shown?
A.mixed cost
B.variable cost
C.fixed cost
D.none of the above
Answer:
The accounts in the ledger of Monroe Entertainment Co. are listed in alphabetical order.
All accounts have normal balances.
Prepare a trial balance. The total of the debits is
A.$13,900
B.$11,200
C.$12,700
D.$9,700
Answer:
Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later
sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the
sale of the bonds would be:
A.Debit: Cash $105,000; Credit: Investment in Bonds $104,500 and Interest Revenue
$500
B.Debit: Cash $105,000; Credit: Investment in Bonds $100,000 and Gain on Sale of
Investments $5,000
C.Debit: Cash $104,500 and Interest Receivable $500; Credit: Investment in Bonds
$100,000, Gain on Sale of Investments $4,500 and Interest Revenue $500
D.Debit: Cash $105,000; Credit: Investment in Bonds $100,000; Gain on Sale of
Investments $4,500 and Interest Revenue $500
Answer:
Standard costs are used in companies for a variety of reasons. Which of the following is
not one of the benefits for using standard costs?
A.Used to indicate where changes in technology and machinery need to be made.
B.Used to identify inventory
C.Used to plan direct materials, direct labor, and factory factory overhead.
D.Used to control costs.
Answer:
The Turtle Company has total estimated factory overhead for the year of $1,200,000,
divided into four activities: Fabrication, $600,000; Assembly, $240,000; Setup,
$200,000; and Materials Handling $160,000. Turtle manufactures two products: Boogie
Boards and Surf Boards. The activity-base usage quantities for each product by each
activity are as follows:
Each product is budgeted for 10,000 units of production for the year. Determine (a) the
activity rates for each activity and (b) the factory overhead cost per unit for each
product using activity-based costing.
Answer:
The management of California Corporation is considering the purchase of a new
machine costing $400,000. The company’s desired rate of return is 10%. The present
value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability in this situation:
The present value index for this investment is:
A..88
B.1.45
C.1.14
D..70
Answer:
The general term employed to indicate an expense that has not been paid and has not
yet been recognized in the accounts by a routine entry is
A.capital
B.deferral
C.accrual
D.inventory
Answer:
For each of the following companies, identify whether they are a service,
merchandising, or manufacturing business.
A. Dillards
B. Time Warner Cable
C. General Motors
D. Blockbuster
E. Applebee’s
F. Sony
G. Best Buy
H. Banana Republic
I. H & R Block
Answer:
The budget that summarizes future plans for the acquisition of fixed assets is the:
A.direct materials purchases budget
B.production budget
C.sales budget
D.capital expenditures budget
Answer:
In order to be useful to managers, management accounting reports should possess all of
the following characteristics EXCEPT:
A.provide objective measures of past operations and subjective estimates about future
decisions
B.be prepared in accordance with generally accepted accounting principles
C.be provided at any time management needs information
D.be prepared to report information for any unit of the business to support decision
making
Answer:
The inventory data for an item for November are:
Using a perpetual system, what is the cost of the merchandise sold for November if the
company uses LIFO?
A.$610
B.$600
C.$590
D.$580
Answer:
Which of the following would most likely be a product cost?
A.Salary of VP of sales.
B.Advertising for a particular product.
C.Drill bits for a drill press used in the plant assembly area.
D.Salary of the company receptionist.
Answer:
The period costs of a textbook publisher would include:
A.wages of a press operator
B.factory utility costs
C.advertising expenses
D.paper costs
Answer:
Services performed for cash should be recorded in the
A.Revenue journal
B.Purchases journal
C.Cash Receipts journal
D.Cash Payments journal
Answer:
Which of the following is not a business transaction?
A.make a sales offer
B.sell goods for cash
C.receive cash for services to be rendered later
D.pay for supplies
Answer:
In a job order cost accounting system, the entry to record the flow of direct materials
into production is:
A.debit Work in Process, credit Materials
B.debit Materials, credit Work in Process
C.debit Factory Overhead, credit Materials
D.debit Work in Process, credit Supplies
Answer:
Martin Services Company provides their employees vacation benefits and a defined
contribution pension plan. Employees earned vacation pay of $39,500 for the period.
The pension plan requires a contribution to the plan administrator equal to 9% of
employee salaries. Salaries were $750,000 during the period. Provide the journal entry
for (a.) the vacation pay and (b.) the pension benefit.
a.
b.
Answer:
Using the following information, what is the amount of merchandise available for sale?
A.$35,540
B.$36,580
C.$37,700
D.$34,500
Answer:
Department J had no work in process at the beginning of the period, 18,000 units were
completed during the period, 2,000 units were 30% completed at the end of the period,
and the following manufacturing costs were debited to the departmental work in
process account during the period (Assuming the company uses FIFO and rounds
average cost per unit to two decimal places):
Assuming that all direct materials are placed in process at the beginning of production,
what is the total cost of the 18,000 units completed during the period?
A.$90,000
B.$193,140
C.$16,438
D.$283,140
Answer:
Under a perpetual inventory system
A.accounting records continuously disclose the amount ofinventory
B.increases in inventory resulting from purchases are debitedto Purchases
C.there is no need for a year-end physical count
D.the purchase returns and allowances account is credited when goods are returned to
vendors
Answer:
Mundall Company is considering a project that will require an initial investment of
$600,000 and is expected to generate the following cash flows:
Year 1 $100,000
Year 2 $250,000
Year 3 $250,000
Year 4 $200,000
Year 5 $100,000
A. What is the project’s payback period?
B. If the required rate of return is 20% and taxes are ignored, what is the project’s net
present value? The present value of $1 at compound interest of 20% for 1, 2, 3, 4 and 5
years is .8333, .6944, .5787, .4823 and .4019, respectively.
Answer:
When the allowance method is used to account for uncollectible accounts, Bad Debts
Expense is debited when
A.a customer’s account becomes past due.
B.an account becomes bad and is written off.
C.a sale is made.
D.management estimates the amount of uncollectibles.
Answer:
If the company meets the new target cost number, how much will they have to cut costs
per unit, if any?
A.$1
B.$3
C.$2
D.$0
Answer:
The units of Manganese Plus available for sale during the year were as follows:
There are 15 units of the product in the physical inventory at November The periodic
inventory system is used. Determine the inventory cost by (a) FIFO, (b) LIFO, and (c)
average cost methods.
Answer:
Using the following data taken from Martinez Inc., prepare the cost of merchandise sold
section of the income statement for the year ended May 31, 2011.
Answer:
Donner Company is selling a piece of land adjacent to their business. An appraisal
reported the market value of the land to be $120,000. The Focus Company initially
offered to buy the land for $107,000. The companies settled on a purchase price of
$115,000. On the same day, another piece of land on the same block sold for $122,000.
Under the cost concept, what is the amount that will be used to record this transaction in
the accounting records?
Answer:
On the basis of the following data for Branch Co. for the year ended December 31,
2011 and the preceding year, prepare a statement of cash flows using the indirect
method of reporting cash flows from operating activities.
Assume that equipment costing $125,000 was purchased for cash and the land was sold
for $15,000. The stock was issued for cash and the only entries in the retained earnings
account were net income of $56,000 and cash dividends declared and paid of $18,000.
Answer:
Using the following information, prepare a factory overhead flexible budget for
Andover Company where the total factory overhead cost is $75,500 at normal capacity
(100%). Include capacity at 75%, 90%, 100%, and 110%. Total variable cost is $6.25
per unit and total fixed costs are $38,000. The information is for month ended August
31, 2012. (Hint: Determine units produced at normal capacity.)
Answer:
List three different security measures taken by stores to safeguard inventory.
Answer:
Prepare a monthly flexible selling expense budget for PineTree Company for sales
volumes of $300,000, $350,000, and $400,000, based on the following data:
Answer:
Chasteen Company acquired mineral rights for $9,100,000. The mineral deposit is
estimated at 65,000,000 tons. During the current year, 18,375,000 tons were mined and
sold.
Answer:
The debits and credits from two transactions are presented in the following supplier’s
(creditor’s) account:
NAME: Xample, Inc.
Address: 567 Harrison Blvd.
Describe each transaction and the source of each posting.
Answer:
Clanton Company engaged in the following transactions during 2011. Record each in
the general journal below:
1) On January 3, 2011, Clanton purchased a copyright from Dalton Company with a
cost of $250,000 with a remaining useful life of 25 years.
2) On January 10, 2011, Clanton purchased a trademark from Felton Company with a
cost of $700,000.
3) On July 1, 2011, Clanton purchased a patent from Garrison Company at a cost of
$80,000. The remaining legal life of the patent is 15 years and the expected useful life is
11 years.
4) On July 2, 2011, Clanton paid $30,000 in legal fees to defend the patent protection
purchased on July 1, 2011.
5) Recorded the appropriate amortization for the intangible assets for
6) Clanton Company includes an asset in its ledger recorded when Clanton purchased a
computer service business at a price in excess of the fair value of the assets of the
company in the amount of $400,000. At December 31, 2011, $100,000 of this asset has
become impaired.
Answer:
Explain how net income or loss is determined by using the work sheet.
Answer:
Selected accounts and amounts appear below. Journalize the closing entry, assuming a
perpetual inventory system.
Answer:
On March 1, 2011, Chase Inc. purchases 35% of the outstanding shares of Glory
Corporation stock for $325,000. On December 31, 2011, Glory reports net income of
$162,000. On January 15, 2012, Glory pays total dividends to stockholders of $33,000.
Journalize the three transactions described above.
Answer:
The account balances of Trendsetter Travel Services at December 31, 2014 are listed
below:
Prepare an income statement, statement of owner’s equity, and a balance sheet as of
December 31, 2014.
Answer:
Match the following terms with their definitions.
Answer:
On the basis of the following data taken from the Adjusted Trial Balance columns of the
work sheet for the year ended March 31 for Boles Athletic Company, journalize the four
closing entries.
Answer:
Hadley Industries warrants its products for one year. The estimated product warranty is
4% of sales. Assume that sales were $210,000 for June. In July, a customer received
warranty repairs requiring $205 of parts and $75 of labor.
Answer: