Which of the following warning signs could mean receipts are being pocketed before
being deposited?
a. Missing documents or gaps in transaction numbers
b. An unusual increase in customer refunds
c. A sudden increase in cash payments
d. A difference between daily bank and cash balance
During the year, Bright Corporation applied factory overhead costs of $330,000 to
production. At the end of the year, total overapplied factory overhead is $13,000. What
was the amount of actual factory overhead cost incurred during the year?
a. $343,000
b. $300,000
c. $330,000
d. $317,000
The depositor reconciles the bank’s statement to the depositor’s records.
a. True
b. False
_____ represent rights of a longterm nature, such as patent rights, copyrights, and
goodwill.
a. Accrued revenues
b. Intangible assets
c. Retained earnings
d. Longterm liabilities
A commonsized balance sheet is prepared by expressing each asset as a percent of:
a. total current assets.
b. total assets.
c. total longterm assets.
d. total liabilities.
The profit margin, a component of the rate of return on investment, focuses on the
profitability by indicating the rate of profit earned on each sales dollar.
a. True
b. False
The electricity expense in a production plant is an example of a:
a. variable cost.
b. margin cost.
c. fixed cost.
d. distribution cost.
At the end of the fiscal year, if the balance in Factory Overhead is small, it would
normally be:
a. transferred to WorkinProcess.
b. transferred to Cost of Goods Sold.
c. transferred to Finished Goods.
d. allocated between WorkinProcess and Finished Goods.
What is the margin of safety (in sales) when a business has sales of $485,000, sales of
$225,000 at breakeven point, and unit selling price of $55?
a. $710,000
b. $280,000
c. $260,000
d. $510,000
Glocal Inc. has retained earnings of $60,000, common stock of $110,000, and liabilities
of $35,000. The total assets of the company are worth:
a. $205,000
b. $145,000
c. $95,000
d. $170,000
From the following information for BlueInks Corporation, compute the rate on return of
assets.
Net income after tax$30,548
Taxes$6,785
Interest expense$3,545
Total assets at beginning of year$150,500
Total assets at end of year$175,684
a. 20.90%
b. 25.06%
c. 22.89%
d. 18.73%
If fixed costs are $750,000 and variable costs are 60% of sales, what is the breakeven
point (in dollars)?
a. $1,875,000
b. $1,250,000
c. $1,666,667
d. $1,350,000
The minimum amount of desired divisional operating income is set by top management
by establishing a minimum rate of return considered acceptable for invested assets.
a. True
b. False
It is usual for the credit period to begin with the date the merchandise is received by the
buyer.
a. True
b. False
The budgeted volume of production is normally computed as the sum of (1) the
expected sales volume and (2) the desired ending inventory.
a. True
b. False
(a)If the interest on a note is $1,500, the interest rate is 5%, and the time is 90 days,
what is the principal? (Assume 360 days in a year)
(b)If the principal of a note is $50,000, the interest is $1,000, and the time is 60 days,
what is the interest rate? (Assume 360 days in a year)
Which of the following expenses incurred by the sporting goods department of a
department store is a direct expense?
a. Depreciation expenseoffice equipment
b. Insurance on inventory of sporting goods
c. Uncollectible accounts expense
d. Office salaries
Which of the following should be shown on a statement of cash flows under the
financing activity section?
a. The purchase of a longterm investment in the common stock of another company
b. The payment of cash to retire a longterm note
c. The proceeds from the sale of a building
d. The issuance of a longterm note to acquire land
For EFG Co., the transaction “payment of dividends” would:
a. increase total assets.
b. decrease total assets.
c. have no effect on total assets.
d. increase stockholders’ equity.
Interest expense is an example of an expense classified under “other expense.”
a. True
b. False
Given the following list of accounts, calculate Total Assets:
Accounts Receivable$ 10,000
Capital Stock20,000
Cash25,300
Equipment16,800
Fees Earned44,400
Miscellaneous Expense17,800
Rent Expense3,250
Retained Earnings7,850
Salaries Expense15,400
Wages Expense15,000
a. $52,100
b. $55,300
c. $54,600
d. $40,050
On July 1, Mark Co. issued $3,000,000 of 10year, 8% bonds at par. Interest on the
bonds is payable semiannually on December 31 and June 30. On payment of interest,
net assets of the company:
a. decrease by $150,000
b. increase by $240,000.
c. decrease by $120,000.
d. remain unaffected.
An analysis in which all the components of an income statement are expressed as a
percentage of net sales is called:
a. liquidity analysis.
b. horizontal analysis.
c. vertical analysis.
d. solvency analysis.
The updating of accrual accounting records before preparing financial statements is
referred to as the:
a. consolidation process.
b. full disclosure process.
c. adjustment process.
d. money measurement process.
Speedy Company’s weekly payroll of $250 is paid on Fridays (fiveday work week).
Assume that the last day of the month falls on Thursday. Which of the following is the
required monthend adjusting entry?
a. Increase Salaries Expense $200 and increase Salaries Payable $200
b. Increase Salaries Expense $50 and increase Salaries Payable $50
c. Increase Salaries Payable $200 and increase Cash $200
d. Increase Salaries Expense $250 and increase Cash $250
Efficient Corporation uses a standard cost system. The following information was
provided for the period that just ended:
Actual price per gallon$11.75
Actual gallons of material used5,000
Actual hourly labor rate$17.00
Actual hours of production24,300
Standard price per gallon$12.00
Standard gallons per completed unit1/2
Standard hourly labor rate$12.00
Standard time per completed unit3 hrs.
Units completed during the period9,000
The total direct labor variance is:
a. $216,000 favorable.
b. $32,400 favorable.
c. $89,100 unfavorable.
d. $121,500 unfavorable.
The budget for Department 5 of Plant M for the current month ending March 31 is as
follows:
Materials$206,000
Factory wages265,000
Supervisory salaries67,800
Depreciation of plant and equipment35,000
Power and light22,500
Insurance and property taxes15,500
Maintenance9,700
During March, the costs incurred in Department 5 of Plant M were materials, $204,000;
factory wages, $285,000; supervisory salaries, $63,600; depreciation of plant and
equipment, $35,000; power and light, $21,360; insurance and property taxes, $14,400;
maintenance, $9,456.
(a)Prepare a budget performance report for the supervisor of Department 5 of Plant M
for the month of March.
(b)Are there any significant variances (greater than 5%) of the budgeted amounts that
should be examined by the supervisor?
State the section(s) of the statement of cash flows prepared by the indirect method
(operating activities, investing activities, financing activities, or not reported) and the
amount that would be reported for each of the following transactions:
(a)Received $145,000 from the sale of land costing $70,000.
(b)Purchased investments for $50,000.
(c)Declared $35,000 cash dividends on stock. $5,000 dividends were payable at the
beginning of the year, and $6,000 were payable at the end of the year.
(d)Acquired equipment for $32,000 cash.
(e)Declared and issued 100 shares of $20 par common stock as a stock dividend, when
the market price of the stock was $32 a share.
(f)Recognized by an adjusting entry depreciation for the year, $48,000.
(g)Issued 85,000 shares of $10 par common stock for $25 a share, receiving cash.
(h)Issued $500,000 of 20year, 10% bonds payable at 99.
(i)Borrowed $43,000 from Busey National Bank, issuing a 5year, 8% note for that
amount.
Methods that ignore present value in capital investment analysis include the cash
payback method.
a. True
b. False
A low operating leverage is normal for highly automated industries.
a. True
b. False
7920.6830.636
a. $27,320
b. $25,440
c. $31,680
d. $30,040
When a job is completed and the client is billed, the costs are transferred to an account
called the _____.
a. work in process account
b. cost of services account
c. expenses account
d. applied overhead account
By keeping a running total of the effects of transactions, the accounting equation
provides a framework for summarizing the effects of a series of transactions.
a. True
b. False
When evaluating a proposal by use of the net present value method, if 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 is less than the rate used in the analysis.
a. True
b. False
HTMLENTITY#8203HTMLENTITYBlue Lights Co. uses the total cost concept of
product pricing. Given below is cost information for the production and sale of 50,000
units of its sole product. Blue Lights desires a profit equal to a 12.6% rate of return on
invested assets of $1,000,000.
Fixed factory overhead cost$90,000
Fixed selling and administrative costs55,000
Variable direct materials cost per unit6.00
Variable direct labor cost per unit9.65
Variable factory overhead cost per unit3.50
Variable selling and administrative cost per unit1.20
HTMLENTITY#8203HTMLENTITY
Based on the information provided, the dollar amount of desired profit from the
production and sale of the company’s product is:
a. HTMLENTITY#8203HTMLENTITY$126,000.
b. $67,200.
c. $237,700.
d. $96,000.