In a perpetual inventory system, an inventory cost flow assumption is used primarily for
determining which costs to use in:
A. Recording purchases of inventory.
B. Recording the cost of goods sold.
C. Recording sales revenue.
D. Forecasts of future operating results.
Which of the following is the accounting principle that governs the timing of revenue
recognition?
A. Realization principle
B. Materiality
C. Matching
D. Depreciation
A budget that adds a new month when the current month ends is called a:
A. Capital budget.
B. Master budget.
C. Rolling budget.
D. There is no such budget.
In a multiple-step income statement, interest expense usually is not classified as an
operating expense because interest charges:
A. Do not contribute to the production of revenue.
B. Stem from the manner in which assets are financed, not the manner in which they are
used in business operations.
C. Relate directly to the cost of goods sold.
D. The statement is incorrect. Interest usually is classified as an operating expense.
In Japan, financial reporting requirements are based primarily on the need to provide
information to:
A. Investors.
B. Government agencies.
C. Banks.
D. U.S. subsidiaries of Japanese companies.
Shown below is information relating to the stockholders’ equity of Clydsdale
Corporation at December 31, 2015:
Refer to the information above. If Clydesdale Corporation had reacquired the 8,000
shares of treasury stock early in 2015, what was the purchase price per share?
A. $2.50 per share.
B. $4.00 per share.
C. $24 per share.
D. More information is needed to determine the purchase price.
Financial accounting information is:
A. Designed to assist investors and creditors.
B. Not used by managers and in income tax returns.
C. Called “special-purpose” accounting information.
D. Not applicable to individuals.
An example of an extraordinary gain or loss is:
A. A large loss arising from inability to collect an account receivable from a bankrupt
customer.
B. A large gain from disposal of a segment of the business.
C. A gain or loss from sale of an expensive machine no longer needed in the business.
D. A loss due to the expropriation of assets by a foreign government.
Periodic inventory systems are used primarily by:
A. Small businesses with manual accounting systems.
B. Large manufacturing companies.
C. Small businesses that sell a low volume of high-priced items.
D. Companies that sell a high volume of low-priced items and record sales transactions
on point-of-sale terminals.
Castle TV, Inc. purchased 1,000 monitors on January 5 at a per-unit cost of $185, and
another 1,000 units on January 31 at a per-unit cost of $230. In the period from
February 1 through year-end, the company sold 1,800 units of this product. At year-end,
200 units remained in inventory.
Refer to the information above. Assume that Castle TV, Inc. uses the LIFO flow
assumption. The cost of the 200 units in the year-end inventory is:
A. $37,000.
B. $46,000.
C. $41,500.
D. $83,000.
Which depreciation method is most commonly used among publicly owned
corporations?
A. Straight-line.
B. Double-declining balance.
C. Units-of-output.
D. All of the various depreciation methods are used equally.
It is the function of management accounting to perform the following activities, except:
A. Financial forecasts.
B. Cost accounting.
C. Internal audits.
D. Audited financial statements.
On November 1, Metro Corporation borrowed $55,000 from a bank and signed a 12%,
90-day note payable in the amount of $55,000. The November 30 adjusting entry will
be: (assume 360 days in year)
A. Debit Interest Expense $550 and credit Notes Payable $550.
B. Debit Interest Expense $550 and credit Interest Payable $550.
C. Debit Discount on Notes Payable $1,100 and credit Interest Payable $1,100.
D. Debit Interest Expense $550 and credit Cash $550.
Rockland Corporation has 22 employees and incurs total wages and salaries expense of
$800,000 per year. The following table shows various payroll amounts as a percentage
of this annual wage and salaries expense:
In addition, Rockland provides group health insurance for its entire workforce. The cost
of this insurance is $450 per month for each employee.
Refer to the information above. Employees’ annual “take-home-pay,” totals
approximately:
A. $642.800.
B. $760,000.
C. $681,200.
D. $658,800.
If an asset was purchased on January 1, 2012 for $140,000 with an estimated life of 5
years, what is the accumulated depreciation at December 31, 2015?
A. $28,000.
B. $112,000.
C. $56,000.
D. $84,000.
Machinery is purchased on May 15, 2015 for $50,000 with a $5,000 salvage value and
a five year life. The half year convention is followed. What method of depreciation will
give the highest amount of depreciation expense in year 2?
A. Straight line.
B. Double declining balance.
C. 150% declining balance.
D. Amount cannot be determined.
On November 1, Year 1, Noble Co. borrowed $80,000 from South Bank and signed a
12%, six-month note payable, all due at maturity. The interest on this loan is stated
separately.
Refer to the information above. At December 31, Year 1, Noble Co.’s overall liability
for this loan amounts to:
A. $80,000.
B. $81,600.
C. $83,200.
D. $84,800.
Marketable securities are:
A. Listed immediately after Inventory on the balance sheet.
B. Almost as liquid as cash.
C. Originally recorded at cost less any broker’s commission.
D. Sold for a gain when cash received is less than the cost basis.
Preparation of a budgeted income statement does not require:
A. Estimates of cost of goods sold.
B. Estimates of the timing of cash receipts and payments.
C. Preparation of sales forecast.
D. Anticipation of operating expenses.
Cost-volume-profit analysis
Diana Company, a sole proprietorship, sells only one product. The regular price is $160.
Variable costs are 55% of this selling price, and fixed costs are $8,400 a month.
Management decides to decrease the selling price from $160 to $145 per unit. Assume
that the cost of the product and the fixed operating expenses are not changed by this
pricing decision.
(a) At the original selling price of $160 a unit, what is the contribution margin ratio?
_______________%
(b) At the original selling price of $160 a unit, what dollar volume of sales per month is
required for Diana Company to break-even? (Round your answer to the nearest whole
dollar) $_______________
(c) At the original selling price of $160 a unit, what dollar volume of sales per month is
required for Diana Company to earn a monthly operating income of $6,500? (Round
your answer to the nearest whole dollar) $________________
(d) At the reduced selling price of $145 a unit, what is the contribution margin ratio?
_______________%
(e) At the reduced selling price of $145 a unit, what dollar volume of sales per month is
required to break-even? (Round your intermediate percentage to one decimal place and
final answer to the nearest whole dollar) $_______________
Which of the following is not a measure of long-term credit risk?
A. Quick ratio.
B. Debt ratio.
C. Interest coverage ratio.
D. Yield rate on bonds.
The Parry Company provided the following information regarding its operations:
2014 Total assets $500,000
2015 Total assets $550,000
2014 Net operating income $875,000
2015 Net operating income $925,000
2014 Net sales $2,525,000
2015 Net sales $3,100,000
What is Parry’s ROI for the year ending 2015? (Round your answer to 2 decimal
places.)
A. 1.50%.
B. 2.72%.
C. 1.76%.
D. 1.82%.
Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was
discovered that the entire batch was finished improperly. Fancy can sell the tables as
seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for
$605,000.
The cost of draining sap out of a maple tree to manufacture maple syrup and maple
sugar is an example of:
A. After-split-off costs.
B. Sunk costs.
C. Incremental costs.
D. Joint costs.
If a 15%, two-month note receivable is acquired from a customer in settlement of an
existing account receivable of $5,000, the accounting entry for acquisition of the note
will:
A. Include a debit to Notes Receivable for $5,750.
B. Include a debit to Notes Receivable for $5,062.50.
C. Include a credit to Interest Revenue for $62.50.
D. Include a debit to Notes Receivable for $5,000 and no entry for interest.
Establishing international accounting standards is the responsibility of:
A. Securities and Exchange Commission.
B. International Accounting Standards Board.
C. Financial Accounting Standards Board.
D. Accounting Association of America.
Black Systems sold and delivered modems to White Computers for $330,000 to be paid
by White in three equal installments over the next three months. The journal entry made
by Black Systems to record this transaction will include:
A. A debit to Sales Revenue for $330,000.
B. A debit to Accounts Receivable for $330,000.
C. A debit to Accounts Receivable for $110,000.
D. A debit to Cash for $330,000.
Alton Company produces metal belts. During the current month, the company incurred
the following product costs:
Raw materials $100,000
Direct labor $75,000
Electricity used in the Factory $25,000
Factory foreperson salary $3,750
Maintenance of factory machinery $2,000
Alton Company’s direct product costs totaled:
A. $175,000.
B. $30,750.
C. $75,000.
D. $28,750.
Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was
discovered that the entire batch was finished improperly. Fancy can sell the tables as
seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for
$605,000.
Refer to the information above. In deciding whether to rework the tables or sell them as
is, management should:
A. Compare the $305,000 proceeds from the sale of the tables as is, with the $355,000
cost of the tables.
B. Compare the $605,000 possible revenue from refinished tables with the total cost of
$355,000 plus $315,000 to refinish.
C. Compare the $315,000 cost to refinish the tables with the incremental revenue of
$300,000 if the tables are refinished.
D. Eliminate any alternative that results in a loss on the sale of the product.
Refer to the information above. The unit cost per can of soup transferred to the finished
goods warehouse during March was:
A. $0.05.
B. $0.42.
C. $0.37.
D. $1.71.
In preparing a responsibility income statement that shows contribution margin and
responsibility margin, generally two concepts are involved in allocating costs to the
various centers. These concepts are:
A. Whether the costs are variable or fixed and whether they are material in dollar
amount.
B. Whether the costs are traceable to the responsibility center and whether the
responsibility center is organized as a profit center or an investment center.
C. Whether the costs are variable or fixed and whether they are directly traceable to the
responsibility center.
D. Whether the costs are traceable to the responsibility center and whether they are
material in dollar amount.
Castle TV, Inc. purchased 1,000 monitors on January 5 at a per-unit cost of $185, and
another 1,000 units on January 31 at a per-unit cost of $230. In the period from
February 1 through year-end, the company sold 1,800 units of this product. At year-end,
200 units remained in inventory.
Refer to the information above. Assume that the replacement cost of this monitor at
year-end is $210 per unit. Using LIFO flow assumption and the lower-of-cost-or-market
rule, the ending inventory amounts to:
A. $46,000.
B. $42,000.
C. $37,000.
D. $83,000.