Which of the following statements isTRUE of the just-in-time operating environment?
A.Simplicity and quality are good, but inventories and nonvalue-adding activities are
not.
B.Inventories are necessary to support the production function.
C.Just-in-time is based on push-through production concepts.
D.Just-in-time is based on the scientific management principles established by F.W.
Taylor.
The adjusting entries entered onto a work sheet must still be recorded in the general
journal.
If a performance report contains items that are in a manager’s control, the entire
responsibility accounting system can be called into question.
In a job order costing system, the transfer of overhead costs to the Work in Process
Inventory account must take place before product unit costs can be computed.
Since interest and dividends received are most closely associated with investment
activity and are often called investment income, the FASB classifies the cash received
from these items as investing activities.
Under tax depreciation, estimated useful life and residual value must be strictly adhered
to.
Payment of dividends would be reflected as a cash outflow in the investing activities
section of the statement of cash flows.
Closing entries deal primarily with the balances of real accounts.
A supply chain includes only processes and services that add value to the final product
or service.
It is possible for an asset to be a current asset even though the expected conversion of
that asset into cash is to be longer than one year.
Responsibility for ethical financial reporting rests solely with the accountant.
The main difference between intangible assets and property, plant, and equipment is
physical substance.
A decrease in a liability is recorded by a credit.
The sale of shares in a corporation by one stockholder to another does not affect the
total capital of the corporation.
When a partner invests assets in a partnership, the assets are recorded at their fair
market value on the date they are transferred to the partnership.
A company purchases for $48,000 an asset that has a useful life of six years and no
salvage value. After two years, the company spends $8,000 for a major overhaul that
will extend the machine’s useful life four years beyond the original six. Assuming
straight-line depreciation, how much depreciation should be taken in year 3?
A.$4,000
B.$5,000
C.$5,600
D.$8,000
Which of the following is the proper formula for computing free cash flow?
A.= Net Cash Flows from Investing Activities – Purchases of Plant Assets
B.= Net Cash Flows from Financing Activities + Sales of Plant Assets – Dividends
C.= Net Cash Flows from Investing, Financing, and Operating Activities – Purchases of
Plant Assets + Sales of Plant Assets
D.= Net Cash Flows from Operating Activities – Dividends – Purchases of Plant Assets
+ Sales of Plant Assets
Horshack Mining Company purchases a gravel pit for $5,000,000. It estimates that
10,000,000 tons of gravel can be extracted over the pit’s useful life. If 1,860,000 tons
are extracted and sold during the first year, the entry to record depletion expense will
include
A.debit to Depletion Expense, 930,000; credit to Accumulated Depletion, 930,000.
B.debit to Depletion Expense, 232,500; credit to Accumulated Depletion, 232,500.
C.debit to Accumulated Depletion, 930,000; credit to Depletion Expense, 930,000.
D.debit to Depletion Expense, 465,000; credit to Accumulated Depletion, 465,000.
A discount that buyers take for early payment of merchandise is called a
A.customer discount.
B.purchases discount.
C.sales discount.
D.trade discount.
Campground Inc. is considering the production and sale of propane lamps. Annual fixed
costs associated with the project are expected to total $60,000. In addition, each lamp
would sell for $12 and would require $7 in variable costs. Calculate (a) the breakeven
point in units, (b) the breakeven point in dollars, (c) the number of lamps that must be
sold to earn a profit of $120,000, and (d) the operating income or loss at a sales volume
of 16,000 lamps.
The balanced scorecard is a framework that links the perspectives of an organization’s
stakeholders with its
A.goals and vision, performance goals, strategic plan, and financial resources.
B.mission and overall plan, performance measures, departmental plans, and resources.
C.mission and vision, performance measures, strategic plans, and resources.
D.mission and vision, performance goals, overall plan, and resources.
Miner Corporation issued 2,000 shares of its $20 par value common stock for some
land. The land had a fair market value of $62,000.
Prepare the entries in journal form necessary to record the stock issue for the land under
each of the following conditions:
a. The stock was selling for $28 per share on the day of the transaction.
b. Management attempted to place a market value on the common stock but could not
do so.
Bond issue costs
A.must be expensed when incurred.
B.must be amortized over the life of the bonds.
C.are recorded in an asset account and not amortized.
D.appear on the balance sheet as a liability.
Which of the following is an agency of the U.S. government?
A.IASB
B.SEC
C.FASB
D.AICPA
An advantage of the corporate form of business is
A.separation of ownership and control.
B.tax treatment.
C.lack of mutual agency.
D.government regulation.
If Grant Corporation has 120,000 shares of common stock authorized, 75,000 shares of
common stock issued, and holds 3,000 shares of common stock as treasury stock, the
total number of outstanding shares of Grant Corporation amounts to
A.48,000.
B.117,000.
C.72,000.
D.54,000.
An important purpose of closing entries is to
A.set nominal account balances to zero to begin the next period.
B.adjust the accounts in the ledger.
C.help in preparing financial statements.
D.set real account balances to zero to begin the next period.
Standard costs are not used for
A.determining actual costs.
B.preparing budgets and forecasts.
C.evaluating the performance of workers and management.
D.developing appropriate selling prices.
All of the following would appear on the statement of stockholders’ equity except
A.declaration of cash dividends.
B.an issuance of common stock.
C.net income.
D.declaration of a stock split.
Which of the following is the correct accounting equation?
A.Assets = Liabilities + Owner’s Equity
B.Assets + Owner’s Equity = Liabilities
C.Assets = Liabilities ‘“ Owner’s Equity
D.Assets + Liabilities = Owner’s Equity
A measure of productive output of units for a period of time, expressed in terms of
completed whole units, is the definition of
A.conversion costs..
B.ending work in process inventory.
C.equivalent units
D.units started and completed.
Which of the following taxes is not subject to a maximum amount per employee per
year?
A.State unemployment tax
B.Federal unemployment tax
C.Social security tax
D.Medicare tax
Which of the four levels of the cost hierarchy would be used by a dress manufacturer
using an activity-based management for the routine maintenance of sewing machines?
A.Unit-level activity
B.Batch-level activity
C.Product-level activity
D.Facility-level activity
Which of the following is an example of an operating activity?
A.Obtaining capital from owners
B.Selling goods and services to customers
C.Purchasing equipment
D.Selling land
The owner’s Capital, Withdrawals, and Income Summary accounts for Harmon Repair
Company for the accounting period are presented below in T account form after the
recording and posting of closing entries:
The amount of net income (or net loss) for the period is
A.$300 net income.
B.$900 net income.
C.$600 net income.
D.$300 net loss.
When bonds are converted to common stock, which of the following could be part of
the entry?
A.Debit to Loss on Conversion of Bonds
B.Debit to Unamortized Bond Premium
C.Debit to Unamortized Bond Discount
D.Debit to Common Stock
The following comparative balance sheet and other information relate to Carlson
Company.
Additional information:
Depreciation expense $560
Cash dividends declared and paid 50
a. Compute net income, assuming net income and the cash dividends were the only
items affecting retained earnings. Show your work.
b. Compute net cash flows from operating activities using the indirect method.
On April 12, Vancouver Company returned of $500 of merchandise it purchased on
account from Rupert Co. This transaction will result in
A.a $500 debit to the controlling account, Accounts Payable, and a $500 debit to the
individual account in the subsidiary ledger.
B.the subsidiary ledger total being $500 less than the controlling account total.
C.a $500 debit to the subsidiary ledger and a $500 credit to the controlling account,
Accounts Payable.
D.the subsidiary ledger total being $500 more than the controlling account total.
A just-in-time environment has smaller inventories than the traditional manufacturing
environment. As a result,
A.larger production lot sizes are the rule, in order to realize the cost-effectiveness of
long production runs.
B.the amount of working capital required for inventory typically increases.
C.the just-in-time environment experiences a lower inventory turnover than the
traditional environment.
D.the just-in-time environment typically experiences a higher inventory turnover than
the traditional environment.
Indicate on the blanks below the letter of the type of activity (O = operating activity, F
= financing activity, I = investing activity, N = noncash transaction) each of the
following transactions represents.
_____ 1> Company sold shares of its own stock for cash.
_____ 2>Acquired land and buildings by issuance of long-term mortgage payable.
_____ 3> Declared and paid cash dividends.
_____ 4>Received interest income.
_____ 5> Exchanged shares of stock for 15-year bonds.
_____ 6> Paid the U.S. Treasury for income taxes.
_____ 7> Collected proceeds from the sale of a long-term investment at cost.
_____ 8> Declared stock dividends.
_____ 9> Paid off long-term debt with cash.
_____ 10> Purchased equipment with cash.
Assuming the use of the periodic inventory system, use the data below to calculate the
net cost of purchases and the cost of goods available for sale for the year ended
December 31, 20×5.
Describe how to compute the cost of goods available for sale.
Match the following sentences with their related terminology.
When bonds are converted to common stock, what is the basis for recording (valuing)
the stock issued?
Under a perpetual inventory system, is it necessary to take a physical inventory at the
end of the period? Why or why not?
From the following items in the Income Statement columns of the work sheet of Lydon
Industries at December 31, 20×5, prepare the closing entries without explanations,
assuming that a $75 withdrawal was made by the owner during the period.
Suppose an accounting intern mistakenly calculated depreciation expense on the Land
account. She assigned it a 50-year life and a residual value of $10,000,000. Using the
cost of the land (assume it was $811,000,000) and the straight-line method of
depreciation, discuss the dollar effect of this error on pretax earnings and total assets.