The California Fitness Company completed the flexible budget analysis for the second
quarter, which is given below.
Which of the following statements would be a correct analysis of the flexible budget
variance for variable costs?
A) decrease in sales price per unit
B) increase in variable cost per unit
C) increase in sales volume
D) increase in fixed costs
Which of the following transactions would be shown in the non-cash investing and
financing activities section of the statement of cash flows?
A) sold equipment with book value of $6,500 in exchange for $6,500 cash
B) settled a long-term note payable by issuing common stock
C) issued 20,000 shares of stock at $4 per share
D) purchased land for $30,000 cash
Occidental Produce, Inc. has 49,000 shares of common stock outstanding and 6,000
shares of preferred stock outstanding. The common stock is $0.08 par value; the
preferred stock is 4% noncumulative with a $100.00 par value. On October 15, 2017,
the company declares a total dividend payment of $56,000. How much dividend will be
paid to the preferred stockholders?
A) $56,000
B) $48,000
C) $24,000
D) $3,920
Thirty years ago, Star Grocer Corporation purchased a building for its grocery store for
$30,000. Based on inflation estimates, the amount of the building has been adjusted in
the accounting records. The building is now reported at $75,000 in Star Grocer’s
financial statements. Which of the following concepts or principles of accounting is
being violated?
A) going concern assumption
B) revenue realization concept
C) economic entity assumption
D) cost principle
Crystal, Inc. is a merchandiser of stone ornaments. The company sold 8,000 units
during the year. The company has provided the following information:
What is the operating income for the year? (Round your answer to the nearest cent.)
A) $203,000
B) $322,000
C) $271,000
D) $525,000
A contingency was evaluated at year-end. Management felt it was probable that this
would become an actual liability and the amount could be reasonably estimated. If this
was not reported on the balance sheet or in the notes to the financial statements, what is
the effect on the financial reporting of the company?
A) There would be no effect.
B) The liabilities on the balance sheet would be understated.
C) The information about the transaction would be inadequately disclosed in the notes.
D) The net income of the company would be understated.
A reversing entry is ________.
A) a journal entry used to close the temporary accounts after preparation of financial
statements
B) a special journal entry used to make the adjustments that took place after preparing
the trial balance
C) a special journal entry that eases the burden of accounting for transactions in the
next period
D) a journal entry prepared at the end of an accounting period to match assets with
liabilities
Holmes, Inc. has a division that manufactures a component that sells for $150 and has a
variable cost of $45. Another division of the company wants to purchase the
component. Fixed cost per unit of the component is $20. What is the transfer price if the
division is operating at full capacity?
A) $65
B) $170
C) $150
D) $20
The accounting process of transferring a transaction from the journal to the ledger is
called ________.
A) journalizing
B) posting
C) compounding
D) sourcing
The contribution margin approach helps managers in short-term decision making
because it ________.
A) treats fixed manufacturing overhead as product cost
B) reports only mixed costs
C) reports costs and revenues at present value
D) isolates costs by behavior
When a check is issued, the party being paid the cash is referred to as the ________.
A) payee
B) maker
C) bank signatory
D) depositor
Treasury stock ________.
A) decreases the number of shares issued
B) increases the number of shares issued
C) increases the number of shares outstanding
D) decreases the number of shares outstanding
Financial statements are prepared from the balances in a(n) ________.
A) general journal
B) chart of accounts
C) unadjusted trial balance
D) adjusted trial balance
When a company uses the allowance method to measure bad debts, ________.
A) the Bad Debts Expense account is debited when an account is written off
B) the amount of bad debts expense is estimated at the end of the accounting period
C) the Allowance for Bad Debts account balance is added to the balance of the
Accounts Receivable account to arrive at the net realizable value
D) the Allowance for Bad Debts account is debited when the bad debts expense is
estimated
Which of the following describes the risk assessment component of internal control?
A) Internal auditors monitor company controls to safeguard assets, and external
auditors monitor the controls to ensure that the accounting records are accurate.
B) Risk assessment is the “tone at the top” of the business.
C) A company must identify its risks and take necessary steps to minimize them.
D) Risk assessment is designed to ensure that the business’s goals are achieved.
Aurum Services, Inc. acquired 100,000 shares of Gamma Metals, Inc. on January 1,
2017. Gamma pays a cash dividend of $0.25 per share on March 2, 2017. With the
current investment, Aurum Services, Inc. holds 8% of Gamma. In the journal entry on
March 2, 2017, ________.
A) Long-term Investments—Available-for-Sale is credited
B) Dividend Revenue is credited
C) Long-term Investments—Held-to-Maturity is debited
D) Long-term Investments—Available-for-Sale is debited
Diamond Investments, Inc. purchased 40% of the common stock of Ivory Corporation
on March 1, 2016. Ivory Corporation reports a net income of $675,000 for the year
2017. Which of the following is true of the balance sheet on December 31, 2017?
A) Total assets will remain unchanged.
B) Total liabilities will decrease.
C) Total equity will increase.
D) Cash will increase.
In the graph below, the area between the lines AC and OB to the right of point E
represents ________.
A) fixed costs
B) breakeven point
C) operating loss
D) operating income
Cadmia Services hired a new clerk to keep custody of and maintain all the equipment in
the equipment yard. The clerk has not yet been adequately trained on the maintenance
needs of the equipment.
In the above situation, which internal control procedure needs strengthening?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
The par value of stock is ________.
A) the current selling price of stock
B) the highest price for which a share can sell
C) the price paid if the corporation purchases its own stock back
D) the amount assigned by a company to a share of its stock
At the beginning of the year, Green Street Manufacturing had the following account
balances:
Work-in-Process Inventory
Finished Goods Inventory
Manufacturing Overhead
Cost of Goods Sold
Sales Revenue
The following additional details are provided for the year:
After adjusting the balance in Manufacturing Overhead, the ending balance in the Finished
Goods Inventory account is a ________.
A) credit of $57,000
B) debit of $65,000
C) credit of $433,000
D) debit of $73,000
Under the perpetual inventory system, the journal entry to record cost of goods sold:
A)
B)
C)
D)
On January 1, Standard Manufacturing had a beginning balance in Work-in-Process
Inventory of $82,000 and a beginning balance in Finished Goods Inventory of $20,000.
During the year, Standard incurred manufacturing costs of $353,000.
During the year, the following transactions occurred:
Job A-12 was completed for a total cost of $121,000 and was sold for $125,000.
Job A-13 was completed for a total cost of $201,000 and was sold for $214,000.
Job A-15 was completed for a total cost $64,000 but was not sold as of year-end.
The Manufacturing Overhead account had an unadjusted credit balance of $13,000 and
was adjusted to zero at year-end.
What was the amount of gross profit reported by Standard at the end of the year?
A) $13,000
B) $30,000
C) $4,000
D) $17,000
Under the just-in-time costing system, a credit purchase of raw materials is recorded by
________.
A) debiting the Raw Materials Inventory account
B) crediting the Conversion Costs account
C) debiting the Raw and In-Process Inventory account
D) crediting the Cash account
Edelman, Inc. provides the following information for 2017:
The company has no preferred stock outstanding. Calculate the dividend payout ratio.
(Round any intermediate calculations and your final answer to two decimal places.)
A) 147.06%
B) 0.63%
C) 20.00%
D) 168.07%
Which of the following is a liability account?
A) Accounts Receivable
B) Cash
C) Building
D) Notes Payable
Outstanding stock represents shares of stock that ________.
A) are held by the stockholders
B) are sold for the highest price
C) have been authorized by state law
D) have been issued but may or may not be held by stockholders
North Shore Clothing Company provided the following manufacturing costs for the
month of June.
From the above information, calculate North Shore’s total variable costs.
A) $313,200
B) $71,000
C) $242,200
D) $223,000
The financial statements of Weston Office Supply include the following items:
What is 2017 current ratio? (Round your answer to two decimal places.)
A) 0.84
B) 0.56
C) 1.19
D) 1.70
Jackson Manufacturers has provided the following information regarding the two
products that it sells:
Annual fixed costs are $300,000.
How many units must be sold in order for Jackson to break even, assuming that Jackson
sells five jet boats for every two ski boats sold? (Round any intermediate calculations to
two decimal places, and your final answer to the nearest unit.)
A) 7 jet boats and 8 ski boats
B) 39 jet boats and 16 ski boats
C) 16 jet boats and 39 ski boats
D) 8 jet boats and 7 ski boats
When replacing an old asset with a new one, the original purchase price of the old asset
represents a(n) ________ cost.
A) relevant
B) differential
C) opportunity
D) sunk
Which of the following is true of dividends?
A) Dividends are a distribution of cash, stock, or other property to stockholders.
B) Dividends increase assets and decrease total stockholders’ equity of a corporation.
C) Dividend payments decrease paid-in capital.
D) Dividend payments increase stockholders’ equity.
Rice Corporation manufactures two styles of lamps—a Bedford Lamp and a Lowell
Lamp. The following per unit data are available:
Total fixed costs are $50,000. Machine hour capacity is 25,000 hours per year. Assuming
that the company can sell as many products as it can make, which product mix would
deliver the highest operating income?
A) 5,000 Bedford Lamps and 6,250 Lowell Lamps
B) 0 Bedford Lamps and 5,000 Lowell Lamps
C) 6,250 Bedford Lamps and 0 Lowell Lamps
D) 6,250 Bedford Lamps and 6,250 Lowell Lamps
Tanner’s gross pay for the week is $1,500. His yearly pay is under the limit for OASDI.
Assume that the rate for state and federal unemployment compensation taxes is 6% and
that Tanner’s year-to-date pay has previously exceeded the $7,000 cap. What is the
amount of state and federal unemployment tax that his employer must record as payroll
tax expense and pay to the federal and state governments?
A) $0
B) $21.75
C) $111.75
D) $90