Ben and Jerry’s had total assets of $149,501,000, net income of $6,242,000, and net
sales of $209,203,000. Profit margin was 98%.
Answer:
Input devices include journal entries, keyboards, scanners, and modems.
Answer:
A company has net income of $130,500. Its net sales were $1,740,000 and its average
total assets were $2,750,000. Its total asset turnover is equal to 4.7%.
Answer:
Advertising expense can be reasonably allocated to departments on the basis of sales.
Answer:
Fraud involves the deliberate or accidental misuse of the employers assets.
Answer:
Known liabilities are obligations set by agreements, contracts, or laws and are
measurable and definitely determinable.
Answer:
Managerial accounting is an activity that provides financial and nonfinancial
information to an organization’s managers and other internal decision makers.
Answer:
Three widely used methods of comparing investment alternatives are payback period,
net present value, and rate of return on average investment.
Answer:
Subsidiary ledgers are not needed in perpetual inventory systems because the
accounting system captures sufficient details to support analyses that decision makers
need.
Answer:
A materials consumption report is a source document that summarizes the materials
used during a reporting period.
Answer:
Mutual agency means each partner can commit or bind the partnership to any contract
within the scope of the partnership business.
Answer:
Promissory notes are nonnegotiable, which means they cannot be transferred from
party to party.
Answer:
Using the retail inventory method, if the cost to retail ratio is 60% and ending
inventory at retail is $45,000, then estimated ending inventory at cost is $27,000.
Answer:
Joint costs are a group of several costs incurred in producing or purchasing a single
product.
Answer:
When a company holds a large number of notes receivable, it sometimes sets up a
controlling account and a subsidiary ledger for notes.
Answer:
An employee earnings report is a cumulative record of an employee’s hours worked,
gross earnings, deductions, and net pay.
Answer:
Hybrid costing systems can only be applied to agricultural products.
Answer:
The payment of cash dividends to shareholders is classified as a financing activity.
Answer:
The budgets within the master budget must be prepared in a definite sequence as
dictated by GAAP.
Answer:
A company’s quick assets are $147,000 and its current liabilities are $143,000. This
company’s acid-test ratio is 1.03 (rounded to two decimals).
Answer:
Cost of goods sold is also called cost of sales.
Answer:
Given the following data, total product cost per unit under absorption costing will be
greater than total product cost per unit under variable costing.
Answer:
A liability is a probable future payment of assets or services that a company is
currently obligated to make as a result of past transactions or events.
Answer:
The accounting rate of return uses cash flows in its calculation.
Answer:
Activity-based costing involves four steps: (1) identify activities and the costs they
cause, (2) group similar activities into cost pools, (3) determine an activity rate for each
activity cost pool, and (4) allocate overhead costs to products using those activity rates.
Answer:
A company normally sells a product for $20 per unit. Variable per unit costs for this
product are: $2 direct materials, $4 direct labor, and $1.50 variable overhead. The
company is currently operating at 70% of capacity producing 14,000 units per year.
Total fixed costs are $42,000 per year. The company should not accept a special order
for 2,000 units which would be sold for $10 per unit because there would be an
incremental loss on the order.
Answer:
Incidental costs most commonly added to the costs of inventory include import duties,
freight, storage, and insurance.
Answer:
A partnership is an unincorporated association of two or more people to pursue a
business for profit as co-owners.
Answer:
The high-low method of deriving an estimated cost line uses all the data points
available.
Answer:
A special order of goods or services should always be accepted when the incremental
revenue exceeds the normal revenue.
Answer:
Authorized stock is the total number of shares outstanding.
Answer:
Asset accounts normally have credit balances and expense accounts normally have
debit balances.
Answer:
Raw materials inventory includes only direct materials.
Answer:
When defining direct costs and indirect costs in process costing, the process is the cost
object.
Answer:
Blaser, Lukins, and Franko formed a partnership with Blaser contributing $160,000,
Lukins contributing $520,000, and Franko contributing $240,000. Their partnership
agreement called for the income (loss) division to be based on the ratio of capital
investments. If the partnership had income of $275,000 for its first year of operation,
what amount of income (rounded to the nearest dollar) would be credited to Franko’s
capital account?
A. $50,000
B. $240,000
C. $91,667
D. $71,739
E. $275,000
Answer:
Identify the accounting information system principle below that applies to each of
these situations:
A. Flexibility
B. Compatibility
C. Control
D. Cost-benefit
E. Relevance
Answer:
Which of the following is the most serious limitation of internal controls?
A. Computer error
B. Human fraud or human error
C. Cost-benefit principle
D. Cybercrime
E. Management fraud
Answer:
ABC Co. leased a portion of its store to another company for eight months beginning
on October 1, 2014, at a monthly rate of $800. This other company paid the entire
$6,400 cash on October 1, which ABC Co. recorded as unearned revenue. The journal
entry made by ABC Co. at year-end on December 31, 2014, would include:
A. A debit to Rent Earned for $2,400.
B. A credit to Unearned Rent for $2,400.
C. A debit to Cash for $6,400.
D. A credit to Rent Earned for $2,400.
E. A debit to Unearned Rent for $4,000.
Answer:
On January 1, 2013, a company issued and sold an $850,000, 6%, five-year bond
payable and received proceeds of $825,000. Interest is payable each June 30 and
December 31. The company uses the straight-line method to amortize the discount. The
journal entry to record the first interest payment is:
A.
B.
C.
D.
E.
Answer:
A company has two products: X and Y. 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 X is 161,100 units, and the annual
production and sales level of Product Y is 275,200 units.
a. Compute the approximate overhead cost per unit of Product X under activity-based
costing.
b. Compute the approximate overhead cost per unit of Product Y under activity-based
costing.
Answer:
Which of the following list of events properly reflects the early steps taken in the
accounting process?
A. Record relevant transactions, post journal information to ledger accounts, analyze
each transaction, and prepare and analyze the trial balance.
B. Post journal information to ledger accounts, analyze each transaction, post journal
information to ledger accounts, and prepare and analyze the trial balance.
C. Prepare and analyze the trial balance, analyze each transaction, post journal
information to ledger accounts, record relevant transactions.
D. Analyze each transaction, post journal information to ledger accounts, record
relevant transactions, and prepare and analyze the trial balance.
E. Analyze each transaction, record relevant transactions, post journal information to
ledger accounts, and prepare and analyze the trial balance.
Answer:
A company had the following ending inventory costs:
Instructions:
(a) Calculate the lower of cost or market (LCM) value for the inventory as a whole.
(b) Calculate the lower of cost or market (LCM) value for each individual item.
Answer:
Vital Company had net income on this periods income statement in the amount of
$624,240, expenses other than cost of goods sold in the amount of $381,480, and a
gross profit ratio of 58%. What was the amount of net sales on the income statement?
A. $1,836,000
B. $ 1,076,276
C. $1,734,000
D. Cant be determined with the information given.
E. $1,005,720
Answer:
A corporation prepares its statement of cash flows using the indirect method to report
operating activities. Net income for the 2014 fiscal year was $634,000. Depreciation
and amortization expense of $60,000 and $30,000 respectively were included with
operating expenses in the income statement. The following information describes the
changes in current assets and liabilities other than cash:
Determine the net cash flow provided (used) by operating activities.
A. ($692,500)
B. $692,500
C. $723,700
D. ($536,300)
E. ($723,700)
Answer:
Which of the following statements is true?
A. Partners are employees of the partnership.
B. Salaries to partners are expenses on the partnership income statement.
C. Salary allowances usually reflect the relative value of services provided by partners.
D. Salary allowances are expenses.
E. Interest allowances are expenses.
Answer:
A limited partnership:
A. Includes a general partner with unlimited liability.
B. Is subject to double taxation.
C. Has owners called stockholders.
D. Is the same as a corporation.
E. Must only have two partners.
Answer:
A company has net income of $2,800,000. It also has 400,000 weighted-average
common shares outstanding and a price-earnings ratio of 20. What is the market value
per share of this company’s stock?
A. $2.85
B. $140
C. $20,000
D. $.35
E. $2,857.14
Answer:
Use the following information from the current year financial statements of a company
to calculate the ratios below:
(a) Current ratio.
(b) Accounts receivable turnover. (Assume the prior year’s accounts receivable balance
was $100,000.)
(c) Days’ sales uncollected.
(d) Inventory turnover. (Assume the prior year’s inventory was $50,200.)
(e) Times interest earned ratio.
(f) Return on common stockholders’ equity. (Assume the prior year’s common stock
balance was $480,000 and the retained earnings balance was $128,000.)
(g) Earnings per share (assuming the corporation has a simple capital structure, with
only common stock outstanding).
(h) Price earnings ratio. (Assume the company’s stock is selling for $26 per share.)
(i) Divided yield ratio. (Assume that the company paid $1.25 per share in cash
dividends.)
Answer:
A difficult problem in calculating the total costs and expenses of a department is:
A. Determining the gross profit ratio.
B. Assigning direct costs to the department.
C. Assigning indirect expenses to the department.
D. Determining the amount of sales of the department.
E. Determining the direct expenses of the department.
Answer:
A company’s balance sheet shows: cash $22,000, accounts receivable $16,000, office
equipment $50,000, and accounts payable $17,000. What is the amount of equity?
A. $17,000
B. $29,000
C. $71,000
D. $88,000
E. $105,000
Answer:
Web Services is organized as a limited partnership, with Wren Littlefeather as one of
its partners. Wren’s capital account began the year with a balance of $87,000. During
the year, Wren’s share of the partnership income was $60,000 and she received $25,000
in distributions from the partnership. What is Wren’s partner return on equity?
A. 57.42%
B. 49.18%
C. 68.97%
D. 33.49%
E. 40.23%
Answer:
The special journals of many accounting systems include all the following except:
A. Sales journal
B. General ledger
C. Purchases journal
D. Cash receipts journal
E. Cash disbursements journal
Answer:
Match the following definitions and terms by placing the number that identifies the
best definition in the blank space next to the term.
A) Perpetual inventory system 4
B) Periodic inventory system 8
C) Discount period 9
D) Debit memorandum 5
E) Selling expenses 7
F) Credit memorandum 10
G) Sales discount 6
H) Gross profit 2
I) Credit terms 1
J) Credit period 3
Answer:
During a period, Department A finished and transferred 50,000 units to Department B.
Of the 50,000 units, 20,000 were one-fifth complete with respect to direct labor at the
beginning of the period and 30,000 were started and completed during the period. Also,
during the period, 10,000 units were started but brought only to a stage of being
three-fifths completed. Using the weighted-average inventory valuation method, the
number of equivalent units of labor added by the end of the period was:
A. 46,000 units.
B. 50,000 units.
C. 52,000 units.
D. 54,000 units.
E. 56,000 units.
Answer:
M.A.E. charged the following amounts of overhead to jobs during the year: $20,000 to
jobs still in process; $60,000 to jobs completed but not sold; and $120,000 to jobs
finished and sold. At year-end, M.A.E. Company’s Factory Overhead account has a
credit balance of $5,000, which is not a material amount. What entry should M.A.E.
make at year-end?
A. No entry is needed.
B. Factory Overhead 5,000
Cost of Goods Sold
5,000
C. Cost of Goods Sold 5,000
Factory Overhead
5,000
D. Factory Overhead 5,000
Goods in Process Inventory
5,000
E. Factory Overhead 5,000
Finished Goods
5,000
A. A
B. B
C. C
D. D
E. E
Answer:
A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000.
The accumulated depreciation on it was $60,000. The proceeds from the insurance
company were $90,000. The company should recognize:
A. A loss of $25,000.
B. A gain of $25,000.
C. A loss of $65,000.
D. A gain of $65,000.
E. A gain of $90,000.
Answer:
A company expects its September sales to be 15% higher than its August sales of
$140,000. Purchases were $75,000 in August and are expected to be $85,000 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 $71,500. The ending cash balance on September 30 would be:
A. $121,800
B. $148,700
C. $140,300
D. $143,700
E. $135,300
Answer:
Chad is setting up a retirement fund, and he plans on depositing $5,000 per year in an
investment that will pay 7% annual interest. How long will it take him to reach his
retirement goal of $69,080?
A. 816 years
B. 072 years
C. 10 years
D. 20 years
E. 5 years
Answer:
A unit of a business that not only incurs costs but also generates revenues is called a:
A. Performance center.
B. Profit center.
C. Cost center.
D. Responsibility center.
E. Expense center.
Answer:
A company issued 10%, five-year bonds with a par value of $400,000. The market rate
when the bonds were issued was 8%. The company received $432,458 cash for the
bonds. Using the effective interest method, the amount of interest expense for the first
semiannual interest period is:
A. $16,000.00
B. $20,000.00
C. $4,324.58
D. $17,298.32
E. $16,754.20
Answer:
Total manufacturing costs incurred during the year do not include:
A. Direct materials used.
B. Factory supplies used.
C. Goods in process inventory, beginning balance.
D. Direct labor.
E. Depreciation of factory machinery.
Answer:
Victory Corporation issues 17,000 shares of its $2 par value common stock for
$152,025 cash on February 20. What is the appropriate journal entry to record this
transaction?
A.
B.
C.
D.
E.
Answer:
The most useful budget figures are developed:
A. From the top down.
B. From the bottom up following a participatory process.
C. Solely by the budget committee.
D. By the CEO.
E. After the accounting period has begun.
Answer:
The person who signs a note receivable and promises to pay the principal and interest
is the:
A. Maker
B. Payee
C. Holder
D. Receiver
E. Owner
Answer:
Obligations not expected to be paid within one year (or the company’s operating cycle
if longer than one year) are reported as:
A. Current assets
B. Current liabilities
C. Long-term liabilities
D. Operating cycle liabilities
E. Bills
Answer:
Duxbury Co. reports the following data for the current year:
Required:
a. Calculate the break-even point in units.
b. Calculate Duxbury’s pretax income.
c. Calculate Duxbury’s degree of operating leverage.
d.) Calculate the margin of safety in units.
Answer:
Ace Company purchased a machine valued at $320,000 on August 1. The equipment
has an estimated useful life of five years or 5 million units. The equipment is estimated
to have a salvage value of $8,200. Assuming the double-declining-balance method of
depreciation, what is the amount of depreciation expense that needs to be recorded at
the end of the second year?
A $128,000
B. $62,360
C. $90,880
D. $88,750
E. $106,667
Answer:
How does the going-concern principle affect the reported asset values of a business?
Answer:
A company’s payroll information for the month of May follows:
On May 31 the company issued Check No. 335 payable to the Payroll Bank Account
for the May payroll. It issued payroll checks to the employees after depositing the
check.
(1) Prepare the journal entry to record (accrue) the employer’s payroll for May. (2)
Prepare the journal entry to pay for the May payroll. The federal and state
unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to
each employee. The wages and salaries subject to these taxes were $6,000. (3) Prepare
the journal entry to record the employer’s payroll taxes.
Answer:
What is a stock split? How is a stock split different from a stock dividend?
Answer:
What is the usual order in which financial statements are prepared from the adjusted
trial balance? Why are they prepared in that order?
Answer:
A company reported the following data:
Required:
1) Calculate the company’s merchandise inventory turnover for each year.
2) Comment on the company’s efficiency in managing its inventory.
Answer:
Identify and explain the four control levels associated with activity-based costing.
Answer:
_______________________ costing is the only acceptable basis for both external
reporting and tax reporting.
Answer:
Two limitations of internal control systems are ____________________ and
________________.
Answer:
Identify and explain the key components of income for a merchandising company.
Answer:
Kramer Corporation had the following long-term investment transactions.
Prepare the journal entries Kramer Corporation should record for these transactions and
events.
Answer:
Madera Iron Sculpting is planning to save the money needed to replace one of its
robotic welders in five years by making a one-time deposit of $20,000 today and four
yearly contributions of $5,000 beginning at the end of year 1. The deposits will earn
10% interest. How much money will Sierra have accumulated at the end of five years to
replace the welder?
Answer:
What are the standards for financial analysis comparison? Give examples of each.
Answer:
Discuss how CVP analysis can be useful in planning.
Answer:
Show the December 31 adjusting entry to record $750 of earned but unpaid salaries of
employees at the end of the current accounting period.
Answer: