The cash flow on total assets ratio:
A. Is the same as return on assets.
B. Is the same as profit margin.
C. Can be an indicator of earnings quality.
D. Is highly affected by accounting principles of income recognition and measurement.
E. Is average net assets divided by cash flows from operations.
Answer:
Inside Out, Company designs custom showroom spaces in interior design marts across
the country. The following data pertain to a recent reporting period.
Required
a. Use ABC to compute overhead rates for each activity.
b. Assign costs to a 3,000 square-foot job that requires 70 contact hours, 20 design
hours, and 14 days to complete.
Answer:
A firm provides the following sales data:
Required:
a. Calculate the break-even point in dollar sales.
b. Calculate the margin of safety in dollar sales.
Answer:
There are two basic steps in calculating the internal rate of return. Which of the
following represents those two steps?
A. (1) Compute the PV factor for the project and (2) compare it to the hurdle rate.
B. (1) Compute the PV factor for the project and (2) identify the discount rate.
C. (1) Identify the discount rate and (2) compare the IRR to the hurdle rate.
D. (1) Compare IRR to the hurdle rate and (2) accept or reject the project.
E. (1) Select the hurdle rate and (2) compute the PV factor for the project.
Answer:
A sawmill bought a shipment of logs for $40,000. When cut, the logs produced 1
million board feet of lumber in the following grades:
Type 1 – 400,000 bd. ft. priced to sell at $0.12 per bd. ft.
Type 2 – 400,000 bd. ft. priced to sell at $0.06 per bd. ft.
Type 3 – 200,000 bd. ft. priced to sell at $0.04 per bd. ft.
How much cost should be allocated to Type 1 and Type 2, respectively?
Type 1 Type 2
A. $16,000 $16,000
B. $13,333 $ 4,444
C. $40,000 $24,000
D. $24,000 $12,000
E. $24,000 $ 8,000
Answer:
Under IFRS, cash outflows for interest expense are classified as
A. Operating.
B. Investing.
C. Financing.
D. Operating or investing, assuming that the classification is applied consistently across
all periods.
E. Investing or financing, depending upon who is the recipient of the interest paid.
Answer:
In reimbursing the petty cash fund:
A. Cash is debited.
B. Petty Cash is credited.
C. Petty Cash is debited.
D. Appropriate expense accounts are debited.
E. No expenses are recorded.
Answer:
The accounting principle that requires significant noncash financing and investing
activities be reported on the statement of cash flows is the:
A. Historical cost principle
B. Materiality principle
C. Full disclosure principle
D. Going concern principle
E. Business entity principle
Answer:
Endor Fishing Company exchanged an old boat for a new one. The old boat had a cost
of $260,000 and accumulated depreciation of $200,000. The new boat had an invoice
price of $400,000. Endor received a trade in allowance of $100,000 on the old boat,
which meant they paid $300,000 in addition to the old boat to acquire the new boat.
What amount of gain or loss should be recorded on this exchange? (The exchange lacks
commercial substance.)
A. $0 gain or loss
B. $40,000 gain
C. $40,000 loss
D. $60,000 loss
E. $100,000 loss
Answer:
What would be the appropriate entry for the following transaction?
Bill Co. performed $5,200 in consulting services on account.
A. Credit to Cash, debit to Accounts Receivable.
B. Debit to Service Revenue, debit to Cash.
C. Debit to Accounts Receivable, credit to Cash.
D. Debit to Service Revenue, credit to Cash.
E. Debit to Accounts Receivable, credit to Service Revenue.
Answer:
A customer who had purchased $75,000 worth of merchandise on account returns 5%
of this order to the seller because he is not satisfied with the quality of the goods. This
transaction would be recorded in which journal if historically the seller has had very
few returns of this nature?
A. Sales journal
B. Purchases journal
C. Cash disbursements journal
D. Cash receipts journal
E. General journal
Answer:
A plan that lists the types and amounts of selling expenses expected during the budget
period is called a(n):
A. Sales budget
B. Operating budget
C. Capital expenditures budget
D. Selling expense budget
E. Purchases budget
Answer:
A company purchased property for $100,000. The property included a building, a
parking lot and land. The building was appraised at $62,000; the land at $45,000 and
the parking lot at $18,000. The value of the land that will be included in the accounting
record is:
A. $0
B. $36,000
C. $42,000
D. $45,000
E. $100,000
Answer:
Key Manufacturing Co. applies factory overhead to production on the basis of direct
labor costs. Assume that at the beginning of the current year the company estimated that
direct material costs would be $178,800, direct labor costs would be $154,000, and
factory overhead costs would be $231,000.
A. If the $28,000 cost of Key’s goods in process inventory included $5,200 of direct
labor cost, what amount of direct materials cost was included?
B. If $8,100 of the company’s $34,300 finished goods inventory was direct materials
cost, determine the direct labor cost and factory overhead cost of the finished goods
inventory.
Answer:
On January 1, 2013, Jacob issues $600,000 of 11%, 15-year bonds at a price of 102½.
What is the journal entry to record the issuance of these bonds?
A.
B.
C.
D.
E.
Answer:
A balance column account is:
A. An account entered on the balance sheet.
B. An account with debit and credit columns for posting entries and another column for
showing the balance of the account after each entry is posted.
C. An alternate name for the retained earnings account.
D. An account used to record the transfers of assets from a business to its stockholders.
E. A simple form of account that is widely used in accounting to illustrate the debits and
credits required in recording a transaction.
Answer:
Groh and Jackson are partners. Groh’s capital balance in the partnership is $64,000 and
Jackson’s capital balance is $61,000. Groh and Jackson have agreed to share equally in
income or loss. Groh and Jackson agree to accept Block with a 25% interest. Block will
invest $35,000 in the partnership. The capital account balances after admission of Block
are:
A. Block $35,000, Groh $64,000, and Jackson $61,000.
B. Block $35,000, Groh $66,500, and Jackson $63,500.
C. Block $40,000, Groh $64,000, and Jackson $61,000.
D. Block $40,000, Groh $61,500, and Jackson $58,500.
E. Block $40,000, Groh $66,500, and Jackson $63,500.
Answer:
An example of an investing activity is:
A. Paying wages of employees.
B. Paying dividends.
C. Purchasing land.
D. Selling inventory.
E. Contribution from owner.
Answer:
Wessen Company reports net income of $180,000 for the year ended December 31,
2013. It also reports $45,800 depreciation expense, $21,410 amortization expense, and
a $15,000 gain on the sale of machinery. Its comparative balance sheets reveal a
$28,300 increase in accounts receivable, $20,400 decrease in accounts payable, $10,470
increase in prepaid expenses, and $33,140 decrease in wages payable. What net cash
flows are provided (used) by operating activities using the indirect method?
A. ($140,200)
B. $133,490
C. $139,900
D. ($133,490)
E. $78,300
Answer:
An overstatement of ending inventory will cause
A. An overstatement of assets and equity on the balance sheet.
B. An understatement of assets and equity on the balance sheet.
C. An overstatement of assets and an understatement of equity on the balance sheet.
D. An understatement of assets and an overstatement of equity on the balance sheet.
E. No effect on the balance sheet.
Answer:
Information processors:
A. Include information storage.
B. Interpret, transform, and summarize information for use in analysis and reporting.
C. Are components of an accounting system that keep data in accessible form.
D. Are the means to take information out of an accounting system and make it available
to users.
E. Include scanners.
Answer:
Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed
costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable
costs for 10,000 units are:
A. $125,000 fixed and $102,500 variable.
B. $125,000 fixed and $123,000 variable.
C. $102,500 fixed and $150,000 variable.
D. $150,000 fixed and $123,000 variable.
E. $150,000 fixed and $102,500 variable.
Answer:
When originally purchased, a vehicle had an estimated useful life of eight years. The
vehicle cost $23,000 and its estimated salvage value is $1,500. After four years of
straight-line depreciation, the asset’s total estimated useful life was revised from eight
years to six years and there was no change in the estimated salvage value. The
depreciation expense in year 5 equals:
A. $5,375.00
B. $2,687.50
C. $5,543.75
D. $10,750.00
E. $2,856.25
Answer:
During the month of February, Hoffer Company had cash receipts of $7,500 and cash
disbursements of $8,600. The February 28 cash balance was $1,800. What was the
January 31 beginning cash balance?
A. $700
B. $1,100
C. $2,900
D. $0
E. $4,300
Answer:
A company uses the perpetual inventory system and recorded the following entry:
This entry reflects a:
A. Purchase,
B. Return,
C. Sale,
D. Payment of the account payable and recognition of a cash discount taken,
E. Purchase and recognition of a cash discount taken,
Answer:
Ending liabilities are 67,000, beginning equity was $87,000, common stock issued
during year totaled $31,000, expenses for the year were $22,000, dividends declared
totaled $13,000, ending equity for the year is $181,000, and beginning assets for the
year were $222,000.
What are the ending assets for the year?
A. $154,000
B. $134,000
C. $212,000
D. $248,000
E. $155,000
Answer:
Ending liabilities are 67,000, beginning equity was $87,000, common stock issued
during year totaled $31,000, expenses for the year were $22,000, dividends declared
totaled $13,000, ending equity for the year is $181,000, and beginning assets for the
year were $222,000.
What was revenue for the year?
A. $154,000
B. $155,000
C. $ 53,000
D. $ 98,000
E. $135,000
Answer:
If a company had net income of $2,379,600, interest expense of 234,000, a tax rate of
40%, and operating income of $4,200,000, what is the times interest earned ratio?
A.10.17
B. 17.95
C. 7.78
D. 7.18
E. 4.07
Answer:
A company had inventory of 5 units at a cost of $20 each on November 1. On
November 2, they purchased 10 units at $22 each. On November 6, they purchased 6
units at $25 each. On November 8, they sold 18 units for $54 each. Using the LIFO
perpetual inventory method, what was the cost of the 18 units sold?
A. $395
B. $410
C. $450
D. $510
E. $520
Answer:
Which of the following is never included in direct materials costs?
A) Invoice costs of direct materials.
B) Outgoing delivery charges.
C) Materials storage costs.
D) Materials handling costs.
E) Insurance on stored material.
Answer:
A company is considering the purchase of new equipment for $39,000. The projected
after-tax net income is $6,000 after deducting $13,000 of depreciation. The machine has
a useful life of three years and no salvage value. Management of the company requires
a 12% return on investment. The present value of an annuity of 1 for various periods
follows:
Required:
a. What is the net present value of this machine assuming all cash flows occur at
year-end?
b. What is the profitability index for this equipment?
Answer:
A copyright:
A. Gives its owner the exclusive right to publish and sell a musical or literary work
during the life of the creator plus 70 years.
B. Is an exclusive right granted to its owner to manufacture and sell a device or to use a
process for 17 years.
C. Is an exclusive right granted to its owner to manufacture and sell a device or to use a
process for 50 years.
D. Is the amount by which the value of a company exceeds the fair market value of a
company’s net assets if purchased separately.
E. Gives its owner the exclusive right to publish and sell a musical or literary work
during the life of the creator plus 17 years.
Answer:
If the _______________ is responsible for paying the freight, ownership of
merchandise inventory passes when the goods arrive at their destination.
Answer:
Given the table below, indicate the impact of the following errors made during the
adjusting entry process. Use a “+” followed by the amount for overstatements, a “-”
followed by the amount for understatements and a “0” for no effect. The first one is
done as an example.
Ex. Failed to recognize that $600 of unearned revenues, previously recorded as
liabilities; had been earned by year-end.
1) Failed to accrue salaries expense of $1,200.
2) Forgot to record $2,700 of depreciation on office equipment.
3) Failed to accrue $300 of interest on a note receivable.
Answer:
Individual transactions in the sales journal are posted regularly to customers’ accounts
in the ________________________________________.
Answer:
Neutron uses a periodic inventory system. Prepare general journal entries to record the
following transactions for Neutron:
Answer:
What is a contribution margin report?
Answer:
As a long-term investment, Elmer’s Equipment Enterprise purchased 20% of Sticky
Supplies Inc.’s 300,000 shares for $350,000 at the beginning of the fiscal year of both
companies. On the purchase date, the fair value and book value of Stickys net assets
were equal. During the year, Stickys earned net income of $430,000 and distributed
cash dividends of 0.42 cents per share. The fair value of Stickys assets at the end of the
year totaled $349,450. What is Elmers balance for this investment at the end of the year,
assuming there is no significant control?
Answer:
A _______________________________________ is a listing of accounts from the
accounts payable ledger with their balances and the sum of all balances.
Answer:
If a U.S. company makes a credit sale to a foreign company, the sales price must be
translated into dollars as of the date of _____________.
Answer:
What is a corporation? Identify the key advantages and disadvantages of corporations.
Answer:
A _______________________ incurs costs and generates revenues.
Answer:
What is the purpose of closing entries? Describe the closing process.
Answer:
The following information is available for Trico and its two main competitors in the
industry (Duco and Unico):
The industry standard for the current ratio is 1.8 and the industry standard for the
acid-test ratio is 1.
Required:
1. Calculate the current ratio and acid-test ratio for each firm.
2. Rank the firms in decreasing order of liquidity.
3. Comment on Trico’s relative liquidity position.
Answer:
A manufacturing company’s finished goods inventory on January 1 was $68,000; cost of
goods manufactured was $147,000; and the December 31 finished goods inventory was
$77,000. What is the cost of goods sold for that year?
Answer:
If a company paid $820,000 in bonuses, and net income before bonus was $3,850,000,
what was the bonus percentage offered to the employees during this year?
Answer:
Calculate the current ratio in each of the following separate cases.
Answer:
List the five basic principles of accounting information systems.
Answer:
On April 1 of the current year, a company paid $150,000 cash to purchase 7%, 10-year
bonds that had a par value of $150,000 and paid interest semiannually each April 1 and
October 1. The company intends to hold these bonds until they mature. Prepare the
journal entry to record the purchase of the bond.
Answer:
When a constrained resource exists, how does a company determine the sales mix that
will maximize profits? Would sales demand affect this calculation?
Answer:
What are the five basic components of accounting information systems?
Answer: