The information needed to record the adjusting entries can be copied from the work
sheet.
Expected obligations arising from programs, such as frequent flyer miles, are usually
recorded as a reduction in sales (in a contra-sales account) with a related liability.
Cash received through the mail need be handled by only one employee to achieve
effective internal control.
Generally accepted accounting principles encompass the conventions, rules, and
procedures necessary to define accepted accounting practice at a particular time.
The only accounts that are closed are income statement accounts.
In a job order costing system, costs are traced to a specific job order.
It is in the best interests of a company to base executive compensation on multiple
performance measures.
Net income provides a good measure of a business’s debt-paying ability.
To find out the breakeven point in dollars, we divide fixed costs by gross margin ratio.
Under the periodic inventory system, Cost of goods sold must be computed because it is
not updated for sales and other transactions during the accounting period.
Cost can only be classified as either variable or fixed.
When preparing a statement of cash flows using the indirect method, depreciation
expense is added to net income to arrive at net cash flows from operating activities.
The repair of machines is an example of a value-adding activity.
The specific identification method and the FIFO method produce the same results under
both the perpetual and periodic inventory systems.
According to generally accepted accounting principles, most expenditures for intangible
assets acquired from others should be treated as revenue expenditures when incurred.
Under the effective interest method of amortizing a bond discount, the bond interest
expense recorded for each period decreases over the life of the bond.
The purchase of land is an example of a(n)
A.investing activity.
B.operating activity.
C.capital activity.
D.financing activity.
Tough and Strong Inc. expects to sell 51,000 units of its product in the coming year.
Each unit sells for $45. Sales brochures and supplies for the year are expected to cost
$7,000. Three sales representatives cover the Northeast region. Each one’s base salary is
$25,000, and each earns a sales commission of 5 percent of the selling price of the units
he or she sells. The sales representatives use their own transportation; they are
reimbursed for travel at a rate of $0.40 per mile. The company estimates that the sales
representatives will drive a total of 75,000 miles next year. From the information
provided, calculate the company’s budgeted selling expenses for the coming year.
A.$226,750
B.$176,750
C.$151,750
D.$114,750
Bonds that contain a provision that allows the issuing corporation to buy back the bonds
prior to the maturity date are called
A.secured bonds.
B.callable bonds.
C.convertible bonds.
D.debenture bonds.
Use this inventory information for the month of August to answer the following
question.
Assuming that a perpetual inventory system is used, what is ending inventory (rounded)
under the average-cost method?
A.$3,764
B.$3,826
C.$3,968
D.$3,986
A common measure of profitability is the
A.asset turnover.
B.debt to equity ratio.
C.current ratio.
D.receivable turnover.
Use the following information to obtain the ratios requested below. Where necessary,
carry answers to one decimal place.
Dividends per share: $1.14
Market price per share: $54
Net income: $118,000
Stockholders’ equity, beginning of year: $500,000
Stockholders’ equity, end of year: $530,000
Earnings per share: $1.75
a. Dividends yield = _____________%
b. Return on equity = _____________%
c. Price/earnings (P/E) ratio = __________ times
Which of the following is a drawback of using standard costing system?
A.It can be expensive and time-consuming to implement.
B.It distorts actual cost information.
C.It is often inaccurate.
D.It is applicable only to manufacturing businesses, not service businesses.
When a company makes payment for goods or services, the check is prepared by the
company’s
A.requesting department.
B.treasurer.
C.accounting department.
D.receiving department.
Annual net cash flows are defined as
A.annual cash inflows minus annual cash outflows.
B.annual cash inflows minus annual cash outflows minus depreciation expense.
C.annual revenues plus cash expenses.
D.annual cash inflows minus depreciation expense.
Backflush costing aims at reducing waste in the
A.accounting system.
B.cost of goods sold.
C.storage of raw materials.
D.production process.
Which of the following activities would be part of the supply chain of a manufacturer?
A.Shipping
B.Customer service
C.Parts manufacturing
D.Research and development
The preparation of adjusting entries
A.is easy because they are simply copied from the work sheet.
B.is difficult, and therefore they must first be entered into the journal in pencil.
C.typically precedes preparation of the work sheet.
D.typically succeeds the preparation of the financial statements.
The document prepared by a department requesting the company to buy something is
called a(n)
A.purchase order.
B.invoice.
C.receiving report.
D.purchase requisition.
Sinoyianis Realty Company had the following balance sheet accounts and balances:
What is the total of liabilities and owner’s equity?
A.$26,000
B.$32,000
C.$36,000
D.$52,000
The trial balance for Parker Company is as follows:
If the trial balance showed a balance of $16,000 in the Wages Expense account and a
balance of $86,000 in the Advertising Fees Earned account, what would be the amount
of A?
A.$126,000
B.$106,000
C.$136,000
D.$116,000
Which of the following is the appropriate entry to record the declaration of cash
dividends?
A.Dividends Payable – Debit
Cash – Credit
B.Additional Paid-in Capital – Debit
Dividends Payable – Credit
C.Dividends – Debit
Dividends Payable – Credit
D.Retained Earnings – Debit
Cash – Credit
Why will the Income Summary account never appear on any financial statement?
Jack’s Department Store had net retail sales of $620,000 during the current year. The
following additional information was obtained from the accounting records.
Estimate the company’s ending inventory at cost using the retail method. (Show your
work.)
Match each of the following terms with its appropriate description.
A $200,000 bond issue with a carrying value of $194,000 is called at 101 and retired.
The entry to record the retirement of bonds is:
Match each description with the document it is describing.
Provide three examples of something that an organization might want to measure and a
performance measurement that could be utilized in each example.
Sondari Corporation estimates the following for 2014:
Ending cash balance for 2013 was $150,000.
Prepare a cash budget to determine the ending cash balance for 2014.
Wolf Equipment uses a perpetual inventory method. Discuss how Wolf Equipment
accounts for freight-in and freight-out.