To analyze a capital investment using the accounting rate-of-return method, one can use
an estimated amount for the annual net income.
One of the drawbacks of full product cost is that it is relevant only for companies
providing services.
Both direct labor and indirect labor are recorded in the Work in Process Inventory
account as the product is being manufactured.
The admission of a partner does not change the composition of partners’ equity if the
new partner purchases the old partner’s interest by paying the old partner directly.
Both the employee and the employer must bear the tax burden for unemployment
benefits.
The product costs that appear in the financial statements are estimated product costs.
The Sarbanes-Oxley Act orders the SEC to hold chief executives and CFOs responsible
for the accuracy of their company’s financial statements.
Cost-volume-profit analysis assumes a constant sales mix.
The receivable turnover is useful in assessing the effectiveness of credit policies.
Recording cost of goods manufactured increases the Work in Process Inventory
account.
A debt to equity ratio of 1.0 means that half of the company’s assets are financed by
creditors.
If a U.S. company purchases goods from a British supplier for a fixed number of U.S.
dollars, an exchange gain or loss would not arise for the U.S. company, even if the
exchange rate has changed between the time of purchase and the time of payment.
Predetermined overhead rate is calculated by dividing actual overhead costs by actual
cost driver activity.
Unit costs are determined by dividing the total costs of the period by the equivalent
units.
The most complete financial newspaper in the United States is The Wall Street Journal.
The operating cycle is equal to days’ sales uncollected plus days’ inventory on hand
minus days’ payable.
Issuing bonds between interest payment dates will have the effect of decreasing a bond
issuance discount or increasing a bond issuance premium.
Product warranties are an expense of the period in which the product is sold.
A debit has an unfavorable effect on an account.
Which of the following budgets is a financial budget?
A.Sales budget
B.Cash budget
C.Overhead budget
D.Cost of goods manufactured budget
Green Garden Inc. bills and pays selling and administrative expenses the month after
they occur. Selling and administrative expenses have both a fixed and a variable
component. The fixed component is a constant $47,000 a month. The variable
component equals 15 percent of revenues. Given revenues of $800,000 for March,
$950,000 for April, and $925,000 for May, what would be the budgeted selling and
administrative expenses that would be paid in April?
A.$167,000
B.$142,500
C.$189,500
D.$185,750
Great Lake Corporation wishes to prepare a cash budget for November 2014. Sales,
purchases, and expenses for October (actual) and November and December (estimated)
are as follows:
Sales: All sales are on credit, and the company’s experience shows that, on an average,
80 percent of sales are collected in the month of sale and the balance in the following
month. A 2 percent discount is allowed on all collections in the month of sale.
Purchases: The company pays 60 percent of purchases in the month of purchase and the
balance in the following month. The company is allowed an average discount of 1
percent on payments made in the month of purchase.
Expenses: The monthly expenses for November include charges for depreciation
amounting to $1,000 and $100 of prepaid expenses, which will expire. All other
expenses are paid as incurred.
Other: On September 1, 2014, a new machine was purchased for $5,000. A down
payment of $500 was made, and it was agreed that the balance would be paid in equal
installments in the following three months.
The cash payments in November for expenses of Great Lake are expected to be
A.$12,500.
B.$9,900.
C.$10,000.
D.$11,000.
The following information pertains to Patterson Corporation. Assume that all balance
sheet amounts represent both average and ending figures.
Patterson Corporation had 6,000 shares of common stock issued and outstanding. The
market price of Patterson common stock on December 31, 20×5, was $23. Patterson
paid dividends of $0.90 per share during 20×5.
What is the price/earnings (P/E) ratio for this corporation? Round your answer to two
decimal places.
A.5.47 times
B.7.13 times
C.4.80 times
D.6.13 times
Which of the following is a characteristic of a job order costing system?
A.Uses several Work in Process Inventory accounts
B.Uses job cost cards to keep track of each job in process
C.Assigns costs to specific processes
D.Recognizes cost of materials when products are sold
Using the following transactions, calculate the ending balance of (A) total assets, (B)
total liabilities, (C) Cash, and (D) Owner’s Equity. Indicate whether each balance is
debit or credit.
a. Opened business by investing $72,000 in cash.
b. Paid one year’s insurance in advance, $4,800.
c. Billed customers for services rendered, $12,000.
d. Received utility bill, to be paid next month, $800.
e. Received $1,600 in advance of performing a service.
f. Received $8,800 from customers billed in c.
g. Paid $600 on the utility bill of d.
h. Withdrawals of $4,000 were made by the owner.
Peter Co. makes and uses 5,000 components each year in its manufacturing operations.
An outside supplier has offered to supply the components to Peter at $66 per unit.
Peter’s production costs are as follows:
If Peter accepts the order, $8 of fixed overhead per unit will be eliminated.
What is the per unit relevant cost of producing the product in this decision?
A.$86
B.$52
C.$78
D.$60
Financial statement time periods should be of equal length
A.and should end during the peak season.
B.to make comparison easier.
C.and should correspond to the calendar year.
D.to comply with income tax regulations.
United Insurance Company specializes in term life insurance contracts. Cash collection
experience shows that 30 percent of billed premiums are collected in the month before
they are due, 60 percent are collected in the month they are due, and 6 percent are
collected in the month following their due date. Four percent of the billed premiums are
collected late (in the second month following their due date). Total billing notices in
January were $50,000; in February, $60,000; in March, $66,000; in April, $65,000; in
May, $60,000; and in June, $70,000. How much cash does the company expect to
collect in May?
A.$63,540
B.$66,750
C.$60,000
D.$56,000
Use this information to answer the following question.
The trial balance for Nowwick Company appears as follows:
If as of December 31, 2014, the rent of $100 for December had not been recorded or
paid, the adjusting entry would include a
A.debit to Rent Expense for $100.
B.debit to Rent Payable for $100.
C.credit to Cash for $100.
D.credit to Accumulated Rent for $100.
The breakeven point is the point at which
A.fixed costs equal variable costs.
B.total revenues equal total costs.
C.sales equal variable costs.
D.fixed costs equal sales.
Information for the current month for Process B is shown below.
Units completed’”60,000
Units in ending work in process’”6,000
Direct materials are added at the beginning of the process. Beginning work in process is
30 percent complete as to conversion costs; ending work in process inventory is 50
percent complete. The cost of ending work in process inventory totaled
A.$7,740.
B.$4,224.
C.$5,400.
D.$8,700.
The stockholders’ equity of Crest Corporation as of December 31, 20×5, is as follows:
The preferred stock has one year’s dividends in arrears.
a. Compute the book value per share of preferred stock and the book value per share of
common stock. (Round to the nearest cent.)
b. Assume the preferred stock has two years’ dividends in arrears. Compute the book
value per share of preferred stock and the book value per share of common stock.
(Round to the nearest cent.)
The Supplies account had a $720 debit balance at the end of the accounting period
before adjustment for supplies used, and an inventory of $160 of unused supplies was
on hand. Which of the following is the required adjusting entry?
A.Debit Supplies Expense $160 and credit Supplies $160.
B.Debit Supplies Expense $560 and credit Supplies $560.
C.Debit Supplies $160 and credit Supplies Expense $160.
D.Debit Supplies $560 and credit Supplies Expense $560.
Overhead costs are
A.not allocated to the Work in Process Inventory account.
B.not charged directly to the Finished Goods Inventory account.
C.expensed in the period in which they are incurred.
D.not considered product costs.
Use this information to answer the following question.
In addition, beginning merchandise inventory was $11,000 and ending merchandise
inventory was $7,000.
Net cost of purchases for the period were
A.$37,000.
B.$21,000.
C.$27,000.
D.$33,000.
A company’s merchandise inventory includes all of the following, except
A.goods in warehouses.
B.goods sold, but not yet delivered.
C.goods in transit from suppliers, if title has passed to the merchandiser.
D.goods in trucks between the warehouse and the store.
Any unamortized bond discount should be reported on the balance sheet of the issuing
corporation as a(n)
A.asset.
B.direct deduction from retained earnings in the stockholders’ equity section.
C.addition to the face amount of the bonds in the liability section.
D.direct deduction from the face amount of the bonds in the liability section.
If the cash budget of a company shows a cash shortage, the company would most likely
A.arrange to take out a short-term loan.
B.cut salaries of employees.
C.sign up for fewer orders so that it could control costs.
D.lay off employees for that period.
Each of the following is a feature of internal control except
A.management planning.
B.periodic independent verification.
C.limited access to assets.
D.authorization of transactions.
The manager of Center E provides administrative activities for the other centers in the
company. What type of responsibility center is Center E?
A.Cost center
B.Discretionary cost center
C.Revenue center
D.Investment center
A company has cost of goods available for sale of $250,000, sales of $305,000, and a
gross profit percentage of 30 percent. Using the gross profit method, what is the ending
inventory?
A.$95,000
B.$50,000
C.$36,500
D.$158,500
One of the major goals of the Sweetcake Restaurant is customer satisfaction. In the light
of this goal, match the internal business processes perspective with the appropriate
target.
A. Increase the continuous training to chefs
B. Serve the food within 10 minutes of placing an order
C. Make sure the customer appreciation program is successful
D. Increase the profits of the restaurant
Sara invests $120,000 for a 30 percent interest in a partnership in which the other
partners have capital totaling $200,000 before admitting Sara. After distribution of the
bonus, what is Sara’s capital balance?
A.$60,000
B.$96,000
C.$120,000
D.$144,000
Which of the following statements is incorrect in comparing activity-based
management (ABM) and lean operations?
A.Both identify value-adding and nonvalue-adding activities
B.ABM uses a simpler accounting system
C.Both are activity-based systems
D.Lean manufacturing reorganizes production activities into workcells