Partial-year depreciation may be rounded to the nearest whole month or the half-year
convention may be used.
When preparing a statement of cash flows using the indirect method, an increase in
accounts receivable is added to net income.
As units are completed, their costs are transferred from the Materials Inventory account
to the Finished Goods Inventory account.
Driveways and parking lots are properly included in the Land account because they are
not subject to depreciation.
An estimated liability is not a definite obligation of the firm because the amount cannot
be definitely determined.
Held-to-maturity securities that will mature within one year are classified as short-term
investments and valued on the balance sheet at fair value.
It is possible to allocate income or loss to partners based solely on interest.
When a company uses an accounts receivable subsidiary ledger, it cannot also maintain
an Accounts Receivable account in the general ledger.
Entering into a lease is an example of off-balance-sheet financing.
The breakeven point is the level of activity at which only variable costs are recovered.
Under the equity method of accounting for a stock investment, a proportionate share of
the investee’s income is recorded on the investor’s records.
Freight charges associated with the purchase of inventory normally are not included in
inventory cost.
Direct cause-and-effect relationships between revenues and costs can usually be
demonstrated.
Most public companies issue interim financial statements to the public on a quarterly
basis.
Accounting for a defined contribution pension plan is simpler than accounting for a
defined benefit plan.
Which of the following accounts probably would not appear in a trial balance but
probably would appear in an adjusted trial balance?
A.Accumulated Depreciation’“Equipment
B.Cash
C.Office Supplies Expense
D.Owner’s Withdrawals
A company that is leveraged is one that
A.contains debt financing.
B.contains equity financing.
C.has a high earnings per share.
D.has minimized its risk of loss by acquiring a portfolio of investments.
Which of the following budgets should be prepared before the others listed?
A.Cost of goods manufactured budget
B.Cash budget
C.Production budget
D.Overhead budget
Ad-on International is an advertising company. It estimated the overhead costs for
March, 2014, to be $950,000 and direct labor hours to be 5,000 hours. In March, it
incurred overhead costs of $1,150,000 and 5,100 labor hours.
What is the overapplied or underapplied overhead for Ad-on International for March,
2014?
A.$181,000 underapplied
B.$181,000 overapplied
C.$19,000 underapplied
D.$19,000 overapplied
Which of the following bank reconciliation items would not result in a journal entry?
A.Service charge
B.NSF check of a customer
C.Collection of a note by the bank
D.Deposits in transit
From the four selections below, identify which are necessary to develop the value chain
of a product or service.
1>Processes 3> Nonvalue-adding activities
2>Departments 4>Value-adding activities
A.1 and 3
B.2 and 4
C.1 and 4
D.1 and 2
Compare and contrast the following terms:
a. Trade discount and sales discount.
b. FOB shipping point and FOB destination
Ben Co. manufactures sport shoes that sell for $68 a pair. The company is currently
producing 3,000 pairs annually. Ben has just received a special order from a foreign
distributor for 600 pairs of shoes at $45 a pair. In order to accept this order, the
company will have to give up 600 pairs of its regular sales. However, there would be no
sales commission incurred on the order. Shown below are the current costs of operation:
a. What costs are relevant to this decision?
b. Provide an incremental analysis to be used in determining whether or not the order
should be accepted.
c. Are there any qualitative considerations that need to be addressed? Explain.
The cost of tearing down a building on land just purchased should be
A.debited to the Land account.
B.debited to the Land Improvements account.
C.debited to the Buildings account.
D.expensed immediately.
Which costing method can only be used when it is possible to identify units as coming
from specific purchases?
A.Specific identification
B.FIFO
C.Average-cost
D.LIFO
Use this information to answer the following question.
A periodic inventory system is used; ending inventory is 140 units.
What is cost of goods sold under FIFO?
A.$1,760
B.$3,160
C.$2,160
D.$4,160
Which of the following is involved in assisting a corporation with its initial public
offering (IPO)?
A.Registrar.
B.Underwriter.
C.Transfer agent.
D.Incorporator.
Which of the following methods uses the time value of money for capital investment
analysis?
A.Average investment
B.Net present value method
C.Payback method
D.Accounting rate-of-return method
The allowance for uncollectible accounts is necessary because
A.a liability results when a credit sale is made.
B.when recording uncollectible accounts expense, it is not possible to predict
specifically which accounts will not be collected.
C.management should know how many credit losses have been sustained over the
years.
D.uncollected accounts that are written off must be accumulated in a separate account.
Which of the following accurately describes a difference between job order and process
costing systems?
A.In job order costing systems, overhead costs are treated as product costs, whereas in
process costing systems, overhead costs are treated as period costs.
B.Job order costing systems do not assign costs to production, whereas process costing
systems do.
C.In job order costing systems, costs are traced to a specific job order, whereas in
process costing systems, costs are traced to work cells and then assigned to products
manufactured.
D.In a job order costing system, selling costs are treated as period costs, whereas they
are treated as product costs in a process costing system.
Which of the following is not needed in calculating the value of a bond?
A.Face interest rate
B.Market interest rate
C.Dollar amount periodic interest payments
D.Future value of face (maturity) amount
Portocall Sailboats reports income before income taxes of $160,000 during 2014. If
beginning inventory was overstated by $14,000 and ending inventory was understated
by $16,000, calculate corrected income before income taxes for the year. (Show your
work.)
Caudill Sales Company made most of its sales on credit during its first year of
operation, 2014. At the end of the year, accounts receivable amounted to $100,000. On
December 31, 2014, management reviewed the collectible status of the accounts
receivable. Approximately $6,000 of the $100,000 of accounts receivable were
estimated to be uncollectible. As per the accounts receivable aging method the adjusting
entry that would be made on December 31 of that year is:
Assume that the $11,018 sales made by Advantage Medical Company for the month
ended December 31, 20×5, were made to customers using credit cards. Prepare one
entry in journal form to record these sales assuming that all of the credit card companies
charge Advantage Medical a 2 percent discount fee. (Omit date.) Round to the nearest
whole dollar.
Prepare in proper form the stockholders’ equity section of the balance sheet from the
following selected accounts and balances taken from the adjusted trial balance of
Barger Corporation as of December 31, 20×5.
Cancun Company uses a FIFO process costing system.
The following costs relate to work in process during November:
At the end of the last period, all direct materials had been added, and the units were
40% complete for conversion costs.
At the end of this period, all direct materials for the 1,000 units had been added, and
70% of conversion costs had been incurred.
Prepare a process report for November, and identify the amount to be transferred.
Upshaw Company had a balance of $160,000 in Sue Upshaw, Capital on December 31,
2013. During 2014, the company reported a net income of $84,000 after taxes, and the
owner withdrew $32,000, while making no additional investments. Prepare the
company’s statement of owner’s equity for the year ended December 31, 2014.
Buckhorn Corporation has 200,000 shares of $10 stated value no-par common stock
authorized, and 160,000 shares were outstanding during 20×5. The following
transactions relate to cash dividends of Buckhorn Corporation for the year ended
December 31, 20×5. Prepare entries in journal form without explanations to record the
following transactions:
Prepare entries in journal form without explanations to record the following
transactions involving Wildflower Corporation’s $5 par value common stock:
Lois Kent has owned and managed the operations of a small chain of sporting goods
stores for the past two years. She has asked her administrative assistant to provide her
with some annual reports of other companies that sell sporting goods as well as some
published reports showing norms for the sporting goods industry so that Lois can
compare the financial ratios of her company with those of other companies that sell
sporting goods. Discuss the limitations of using comparisons with other companies and
industry norms, which Lois needs to remember.
The Report of Management in Brighton Company’s annual report states, ‘Management
has established a system of internal controls to provide reasonable assurance that assets
are maintained and accounted for in accordance with its policies and that transactions
are recorded accurately on the company’s books and records.’ Name five control
activities Townsgate could and probably does implement.