During the closing process, some balance sheet accounts are closed and end the period
with a zero balance.
Answer:
The present value of the periodic bond interest payments is the value today of the
amount of interest to be received at the at the end of each interest period.
Answer:
When long-term investments in bonds are sold before their maturity date, the seller
deducts any accrued interest since the last interest payment date from the selling price.
Answer:
Standards are designed to evaluate price and quantity variances separately.
Answer:
The manner of reporting cash flows from investing and financing activities will be
different under the direct method as compared to the indirect method.
Answer:
The main disadvantage of the direct method of reporting cash flows from operating
activities is that the necessary data are often costly to accumulate.
Answer:
A check for $342 was erroneously charged by the bank as $4 In order for the bank
reconciliation to balance, you must add $90 to the bank statement balance.
Answer:
The relevant range is useful for analyzing cost behavior for management
decision-making purposes.
Answer:
The variance from standard for factory overhead cost resulting from operating at a level
above or below 100% of normal capacity is termed volume variance.
Answer:
If a fixed asset with a book value of $10,000 is traded for a similar fixed asset, and a
trade-in allowance of $15,000 is granted by the seller, if the transaction is deemed to
have commercial substance, the buyer would report a gain on disposal of fixed assets of
$5,000.
Answer:
For a current liability to exist, the following two tests must be met. The liability must be
due usually within a year and must be paid out of current assets.
Answer:
A work sheet heading is dated for a period of time.
Answer:
Repayments of bonds would be shown as a cash outflow in the investing section of the
statement of cash flows.
Answer:
The entry to transfer goods in process from Department X to Department Y includes a
debit to Work in Process-Department X.
Answer:
A bottleneck happens when a key piece of manufacturing machinery can produce 1000
units per hour and demand for the product supports a production rate of 1200 units per
hour.
Answer:
Prepaid expenses are an example of an expense.
Answer:
A company is considering purchasing a machine for $21,000. The machine will
generate income from operations of $2,000; annual cash flows from the machine will be
$3,500. The payback period for the new machine is 6 years.
Answer:
The rate of return on investment may be computed by multiplying investment turnover
by the profit margin.
Answer:
Supervisor salaries, maintenance, and indirect factory wages would normally appear in
the operating expenses budget.
Answer:
Conversion cost is the combination of direct labor cost and factory overhead cost.
Answer:
A report analyzing how many products need to be sold to cover operating costs is not
typically a managerial accounting report.
Answer:
If the adjustment to recognize expired insurance at the end of the period is inadvertently
omitted, the assets at the end of the period will be understated.
Answer:
Depreciation expense on store equipment for a department store is an indirect expense.
Answer:
In applying the first-in, first-out method of costing inventories, if 8,000 units which are
30% completed are in process at June 1, 28,000 units are completed during June, and
4,000 units were 75% completed at June 30, the number of equivalent units of
production for June was 33,400.
Answer:
Goal conflict can be avoided if budget goals are carefully designed for consistency
across all areas of the organization.
Answer:
If the bondholder has the right to exchange a bond for shares of common stock, the
bond is called a convertible bond.
Answer:
There are two alternatives to reporting cash flows from operating activities in the
statement of cash flows: (1) the direct method and (2) the indirect method.
Answer:
The capital expenditures budget is part of the planned investing activities of a company.
Answer:
In admitting a new partner, where the company chooses to use the purchase of an
interest method, the capital interest of the new partner is obtained from the current
partners and both the total assets and total capital are increased.
Answer:
In computing the ratio of net sales to assets, long-term investments are excluded from
average total assets.
Answer:
Goal conflict can be avoided if budget goals are carefully designed for consistency
across all areas of the organization.
Answer:
An owner transfers a personal automobile to the company with a fair market value of
$12,000. The entry will be made in the
A.purchases journal
B.cash payments journal
C.cash receipts journal
D.general journal
Answer:
Inventory costing methods place primary emphasis on assumptions about
A.flow of goods
B.flow of costs
C.flow of goods or flow of costs depending on the method
D.neither flow of goods or flow of costs
Answer:
Journal entries based on the bank reconciliation are required in the company’s accounts
for
A.outstanding checks
B.deposits in transit
C.bank errors
D.book errors
Answer:
Assuming a 360-day year, proceeds of $48,750 were received from discounting a
$50,000, 90-day note at a bank. The discount rate used by the bank in computing the
proceeds was
A.6.25%
B.10.00%
C.10.26%
D.9.75%
Answer:
Which of the following accounts should be closed to Income Summary at the end of the
fiscal year?
A.Supplies Expense
B.Accumulated Depreciation
C.Prepaid Insurance
D.Unearned Rent
Answer:
Proper payroll accounting methods are important for a business for all the reasons
below except
A.good employee morale requires timely and accurate payroll payments.
B.payroll is subject to various federal and state regulations.
C.to help a business with cash flow problems by delayed payments of payroll taxes to
federal and state agencies.
D.payroll and related payroll taxes have a significant effect on the net income of most
businesses.
Answer:
A company is preparing its their Cash Budget. The following data has been provided for
cash receipts and payments.
The company’s cash balance at January 1st is $290,000. This company desires a
minimum cash balance of $340,000.
What is the amount of excess cash or deficiency of cash (after considering the
minimum cash balance required) for March?
A.$214,200 excess
B.$15,800 excess
C.$60,000 deficiency
D.$25,300 excess
Answer:
The cost of production of completed and finished goods during the period amounted to
$450,000, and the finished products shipped to customers had total production costs of
$357,000. From the following, select the entry to record the transfer of costs from
finished goods to cost of goods sold.
A.Finished Goods450,000
Cost of Goods Sold450,000
B.Finished Goods357,000
Cost of Goods Sold 357,000
C.Cost of Goods Sold357,000
Finished Goods357,000
D.Cost of Goods Sold450,000
Finished Goods450,000
Answer:
For February, sales revenue is $700,000; sales commissions are 5% of sales; the sales
manager’s salary is $96,000; advertising expenses are $80,000; shipping expenses total
2% of sales; and miscellaneous selling expenses are $2,500 plus 1/2 of 1% of sales.
Total selling expenses for the month of February are:
A.$151,000
B.$227,500
C.$225,000
D.$231,000
Answer:
If fixed costs are $256,000, the unit selling price is $36, and the unit variable costs are
$20, what is the break-even sales (units)?
A.12,800 units
B. 4,571 units
C.16,000 units
D.7,111 units
Answer:
Managers of what type of decentralized units have authority and responsibility for
revenues, costs, and assets invested in the unit?
A.Profit center
B.Investment center
C.Production center
D.Cost center
Answer:
An asset was purchased for $120,000 on January 1, 2010 and originally estimated to
have a useful life of 10 years with a residual value of $10,000. At the beginning of
2012, it was determined that the remaining useful life of the asset was only 4 years with
a residual value of $2,000. Calculate the 2012 depreciation expense using the revised
amounts and straight line method.
A.$25,000
B.$11,000
C.$24,000
D.$24,500
Answer:
At the end of the current year, Accounts Receivable has a balance of $550,000;
Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the
year total $2,500,000. An analysis of receivables estimates uncollectible receivables as
$25,000.
Determine the net realizable value of accounts receivable after adjustment. (Hint:
Determine the amount of the adjusting entry for bad debt expense and the adjusted
balance Allowance of Doubtful Accounts.)
A.$550,000
B.$544,500
C.$525,000
D.$575,000
Answer:
By matching revenues and expenses in the same period in which they incur
A.net income or loss will always be underestimated.
B.net income or loss will always be overestimated.
C.net income or loss will be properly reported on the income statement
D.net income or loss will not be determined.
Answer:
During 2010, Tempo Inc has monthly cash expenses of $115,000. On December 31,
2010, their cash balance is $1,437,500. The ratio of cash to monthly cash expenses is
A.8.0
B.12.5
C.87.5
D.11.5
Answer:
Which of the following is the most desirable quick ratio?
A.1.20
B.1.00
C.0.95
D.0.50
Answer:
The following lots of a particular commodity were available for sale during the year:
The firm uses the periodic system and there are 20 units of the commodity on hand at
the end of the year. What is the amount of inventory at the end of the year according to
the average cost method?
A.$655
B.$620
C.$690
D.$659
Answer:
A sales invoice included the following information: merchandise price, $10,000;
freight, $900; terms 1/10, n/eom, FOB shipping point. Assuming that a credit for
merchandise returned of $500 is granted prior to payment and that the invoice is paid
within the discount period, what is the amount of cash that should be received by the
seller?
A.$10,305
B.$9,500
C.$9,306
D.$9,900
Answer:
When a company uses the allowance method of accounting for uncollectible
receivables, the entry to reinstate a previously written off account would include:
A.A credit to Bad Debt Expense
B.A debit to Bad Debt Expense
C.A debit to Allowance for Doubtful Accounts
D.A credit to Allowance for Doubtful Accounts
Answer:
The journal entry a company uses to record the issuance of a note for the purpose of
converting an existing account payable would be
A.debit Cash; credit Accounts Payable
B.debit Accounts, Payable; credit Cash
C.debit Cash; credit Notes Payable
D.debit Accounts Payable; credit Notes Payable
Answer:
Anthony Company sold Madison Company merchandise on account FOB shipping
point, 2/10, net 30, for $10,000. Anthonyprepaid the $300 shipping charge. Which of
the following entries does Anthony make to record this sale?
A.Accounts Receivable-Madison, debit $10,000; Sales, credit $10,000
B.Accounts Receivable-Madison, debit $10,000; Sales, credit $10,000, andAccounts
Receivable-Madison, debit $300; Cash, credit $300
C.Accounts Receivable-Madison, debit $10,300; Sales, credit $10,300
D.Accounts Receivable-Madison, debit $10,000; Sales, credit $10,000, andFreight Out,
debit $300; Cash, credit$300
Answer:
The management of Zesty 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 cash payback period for this investment is:
A.5 years
B.4 years
C.2 years
D.3 years
Answer:
Which of the following can be found on the statement of cash flows?
A.cash flows from operating activities
B.total assets
C.total changes in stockholders’ equity
D.changes in retained earnings
Answer:
A corporation issues $100,000, 10%, 5-year bonds on January 1, 2011, for $104,200.
Interest is paid semiannually on January 1 and July 1. If the corporation uses the
straight-line method of amortization of bond premium, the amount of bond interest
expense to be recognized on July 1, 2011, is
A.$10,420.
B.$5,420.
C.$5,000.
D.$4,580.
Answer:
Process cost systems use job order cost cards to accumulate cost data.
Answer:
Work in process inventory on December 31, 2011, is $42,000. Work in process
inventory decreased by 40% during 2011. Total manufacturing costs incurred in 2011
amount to $260,000. What is cost of goods manufactured?
A.$232,000
B.$302,000
C.$288,000
D.$190,000
Answer:
Favorable volume variances may be harmful when:
A.machine repairs cause work stoppages
B.supervisors fail to maintain an even flow of work
C.production in excess of normal capacity cannot be sold
D.all of the above
Answer:
One of the main disadvantages of the corporate form is the
A.professional management
B.double taxation of dividends
C.charter
D.corporation must issue stock
Answer:
The Everest Company has income from operations of $80,000, invested assets of
$500,000, and sales of $1,050,000.
What is the profit margin?
A.47.6%
B.7.6%
C.55.2%
D.4.8%
Answer:
A voucher
A.is received from customers to explain the purpose of a payment
B.is normally prepared in the Accounting Department
C.system is used to control cash receipts
D.system is an internal control procedure to verify that the assets in the ledger are the
ones the company owns
Answer:
Protonix Corp has a payroll of $8,000 for a five-day workweek. Its employees are paid
each Friday for the five-day workweek. The adjusting entry on December 31, 2015
assuming the year ends on Thursday would be:
Answer:
What is capital investment analysis? Why are capital investment analysis decisions
often difficult and risky?
Answer:
On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5 year bond that
pays semi-annual interest of $35,000 ($1,000,000 x 7% x 1/2), receiving cash of
$884,171. Journalize the entry to record the issuance of the bonds.
Answer:
Using the following accounts and their amounts, prepare in good format an Income
Statement for Bright Futures Company, month ended August 31, 2011:
Answer:
Match the following terms with their definitions.
Answer:
The Bottling Department of Mountain Springs Water Company had 4,000 liters in
beginning work in process inventory (40% complete). During the period, 66,000 liters
were completed. The ending work in process inventory was 3,000 liters (70%
complete). What are the equivalent units for conversion costs, using the FIFO method?
Answer:
The Cavy Company accumulated 560 hours of direct labor on Job 345 and 800 hours on
Job 777. The direct labor was incurred at a rate of $20 per direct labor hour for Job 345
and $21 per direct labor for Job 777. Journalize the entry to record the flow of labor
costs into production.
Answer:
Using the data from the Ace Guitar Company, determine the divisional income from
operations for the A and B regions.
Allocate service department expenses proportional to the sales of each region. Round
percentage of sales allocation to one decimal place.
Answer:
An investment of $185,575 is expected to generate returns of $65,000 per year for each
of the next four years. What is the investment’s internal rate of return?
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Answer:
Louis Company sells a single product at a price of $65 per unit. Variable costs per unit
are $45 and total fixed costs are $625,500. Louis is considering the purchase of a new
piece of equipment that would increase the fixed costs to $800,000, but decrease the
variable costs per unit to $42.
If Louis Company expects to sell 44,000 units next year, should they purchase this new
equipment?
Answer:
Using a LIFO perpetual cost flow, calculate the value of the ending inventory and the
cost of goods sold for the month of November of Beamer Company using the data
below.
Nov 1 Purchased 600 units $80 each
Nov 4 Sold 200 units
Nov 11 Purchased 350 units $82 each
Nov 12 Sold 275units
Nov 22 Purchased 175 units $84 each
Nov 23 Sold 155 units
Calculate the following:
1) Inventory valuation at the end of November
2) Calculate the Cost of Goods Sold for November
Answer:
Bob Johnson is the sole owner of Johnson’s Carpet Cleaning Service. Bob purchased a
personal automobile for $10,000 cash plus he took out a loan for $20,000 in his name.
Describe how this transaction is related to the business entity concept.
Answer:
Marcos Company, which had 35,000 shares of common stock outstanding, declared a
4-for-1 stock split.
Answer:
A business had a margin of safety ratio of 20%, variable costs of 75% of sales, fixed
costs of $240,000, a break-even point of $960,000, and operating income of $60,000 for
the current year. Calculate the current year’s sales.
Answer:
Xang Company’s costs were over budget by $46,000. The Xang Company is divided in
two regions. The first region’s costs were over budget by $7,000.
Answer:
The treasurer of Systems Company has accumulated the following budget information
for the first two months of the coming year:
The company expects to sell about 35% of its merchandise for cash. Of sales on
account, 80% are expected to be collected in full in the month of the sale and the
remainder in the month following the sale. One-fourth of the manufacturing costs are
expected to be paid in the month in which they are incurred and the other three-fourths
in the following month. Depreciation, insurance, and property taxes represent $6,400 of
the probable monthly selling and administrative expenses. Insurance is paid in February
and a $40,000 installment on income taxes is expected to be paid in April. Of the
remainder of the selling and administrative expenses, one-half are expected to be paid
in the month in which they are incurred and the balance in the following month. Capital
additions of $250,000 are expected to be paid in March.
Current assets as of March 1 are composed of cash of $45,000 and accounts receivable
of $51,000. Current liabilities as of March 1 are composed of accounts payable of
$121,500 ($102,000 for materials purchases and $19,500 for operating expenses).
Management desires to maintain a minimum cash balance of $20,000.
Prepare a monthly cash budget for March and April.
Answer:
The following cash receipts journal heading have been suggested for Tower
Tree-Trimming Service Company. What problems do you see with these headings?
Answer:
Dickerson Co. is evaluating a project requiring a capital expenditure of $810,000. The
project has an estimated life of four years and no salvage value. The estimated net
income and net cash flow from the project are as follows:
The company’s minimum desired rate of return is 12%. The present value of $1 at
compound interest of 12% for 1, 2, 3, and 4 years is .893, .797, .712, and .636,
respectively.
Determine the average rate of return on investment, including the effect of depreciation
on the investment.
Answer:
The accountant for Franklin Company prepared the following list of account balances
from the company’s records for the year ended December 31, 2011:
Based on this information, is Franklin Company profitable? Explain your answer.
Answer: