A company with a low debt to equity ratio is in a more vulnerable position during poor
economic times than a company with a high debt to equity ratio.
A manufacturing chain is a path that leads from the suppliers of the materials from
which a product is made to the final customer.
The effects on individual contributed capital accounts of a conversion of preferred stock
to common stock during the period are disclosed on the statement of stockholders’
equity.
Flexible budgeting is utilized to evaluate a cost center’s performance.
A flexible budget is a summary of expected costs for a range of activity levels and is
geared to changes in the level of productive output.
Under the perpetual inventory system, cost of goods sold is not recorded until the end
of the accounting period.
Profit margin and gross margin are the same thing.
In a process costing system, newest units in the production process are the first to be
transferred to the next department.
Business transactions are economic events that should be recorded in the accounting
records.
The most commonly used methods in the evaluation of capital investment proposals are
net present value method, payback period method, and the accounting rate-of-return
method.
The allowance for uncollectible accounts is similar to accumulated depreciation in that
it represents the total of all accounts written off over the years.
In a deferred payment arrangement, interest is charged only if it is stated.
The cash budget is derived exclusively from the sales and production budgets.
The Income Summary account is credited in the entry that closes
A.the Withdrawals account.
B.expense accounts.
C.net income.
D.revenue accounts.
Which of the following is TRUE of segment profitability analysis?
A.It suggests eliminating all segments having positive margins.
B.It includes the preparation of a segmented income statement.
C.It traces common fixed costs to individual segments.
D.It treats common fixed costs as avoidable costs.
If a corporation has issued common stock at various prices that exceed par value, legal
capital will be made up of the
A.par value of the shares issued.
B.total stockholders’ equity plus total liabilities.
C.total amount of contributed capital.
D.total amount of contributed capital plus retained earnings.
Use this information to answer the following question.
Panadora Company has the following information for the pay period of January 1-15,
2014. Payment occurs on January 20.
The entry on January 20 would be a debit to
A.Salaries Payable and a credit to Cash.
B.Salaries Payable and a credit to Salaries Expense.
C.Salaries Expense and a credit to Cash.
D.Salaries Expense and a credit to Salaries Payable.
Which of the following statements is descriptive of common stock?
A.Stockholders are considered creditors of a corporation.
B.The payment of dividends is required.
C.Dividends paid are an expense for the issuing corporation.
D.Issuing stock is less financially risky than issuing bonds.
On which of the following dates involving stock dividends does a liability arise?
A.Date of distribution
B.Date of declaration
C.Date of record
D.On no date
Which of the following would be considered a capital expenditure?
A.Business vehicle tune-up
B.Equipment maintenance
C.Installation of an air-conditioning system
D.Professional deep cleaning of display room carpet
The following information pertains to the bank transactions of Rawlins Company:
a. Cash on the books as of April 30 was $499. Cash as shown on the bank statement for
the same date was $1,330.
b. A deposit of $160, representing cash receipts as of April 30, did not apppear on the
bank statement.
c. Outstanding checks totaled $240.
d. Bank service charges for April amounted to $9
e. The bank collected for Rawlins Company $840 (which includes $40 interest) on a
note left for collection.
f. An NSF check for $80 from a customer, Joe Beck, was returned with the statement.
Required:
1> Prepare a bank reconciliation for Rawlins Company as of April 30.
2> State the amount of cash that would appear on the balance sheet as of April 30.
Intangible assets could include all except
A.Trademark
B.Land held for future use
C.Patent
D.Goodwill
In a period of declining prices, which of the following inventory methods generally
results in the lowest balance sheet figure for inventory?
A.LIFO
B.Cannot tell without more information
C.FIFO
D.Average-cost
Which of the following is not a concern when managing inventory in a just-in-time
environment?
A.Reduction of space needed to store inventory
B.Inventory turnover
C.Labor cost
D.Inventory size reduction
A corporation’s residual equity is its
A.preferred stock.
B.retained earnings.
C.common stock.
D.cash.
The withdrawal of cash by the owner will
A.decrease net income.
B.increase liabilities.
C.not affect total assets.
D.decrease owner’s equity.
The lower-of-cost-or-market method of accounting for inventories follows the
convention of
A.full disclosure.
B.materiality.
C.conservatism.
D.cost-benefit.
Start-up and organization costs include all of the following except
A.goodwill.
B.cost of printing stock certificates.
C.attorney’s fees.
D.state incorporation fees.
Using the following transactions, calculate (A) the ending balance of Cash, (B) the
ending balance of Accounts Receivable, (C) total liabilities, and (D) Owner’s Equity at
the end of the period. For parts a, b, and d, indicate whether each balance is debit or
credit.
a. Opened business by investing $50,000 in cash.
b. Billed customers for services rendered, $10,000.
c. Paid for six months’ subscription in advance, $2,500.
d. Received advertising bill, to be paid next week, $500.
e. Withdrawals of $4,000 were made by the owner.
f. Received $7,500 from customers billed in b.
g. Paid half of advertising bill.
h. Received $1,000 in advance of performing a service.
Which of the following is not a commitment?
A.Lease
B.Construction of long-term asset
C.Purchase agreement
D.Guarantee of debt
A purchase order is sent from a company’s
A.purchasing department to the supplier.
B.requesting department to the supplier.
C.requesting department to its accounting department.
D.treasurer to the supplier.
Powell’s inventory turnover is 4.8. What is Powell’s day’s inventory on hand?
A.6 days
B.13 days
C.34 days
D.76 days
Candy Stores Inc. gives you the following information:
The standard material cost is $7 per pound for a 15 pound bag of chocolate. The
following is the actual cost and usage data:
Using the above information provided for Candy Stores, compute the direct materials
variance for Candy Stores.
A.$186,000 (U)
B.$144,000 (F)
C.$186,000 (F)
D.$42,000 (U)
In the journal provided, prepare year-end adjustments for the following situations. Omit
explanations.
a. Accrued interest on notes receivable is $560.
b. Of the $7,200 received in advance of earning a service, two-thirds was still unearned
by year end.
c. Two years of rent, totaling $24,000, was paid in advance. By year end, six months’
worth had expired.
d. Services totaling $685 had been performed, but not yet billed.
e. Depreciation on trucks totaled $1,700 for the year.
f. Supplies available for use during the year amounted to $3,400. However, by year end,
only $200 in supplies remained.
g. Payroll for the five-day work week, to be paid on Friday, is $6,000. Year end falls on
a Tuesday.
Interest on a 180-day, 10 percent, $10,000 note receivable is
A.$5,001.54.
B.$576.76.
C.$493.15.
D.$2001.26.
An expression of the hourly labor pay cost per function or job classification that is
expected to exist during the next accounting period is the definition of a
A.direct labor time standard.
B.direct materials quantity standard.
C.direct labor rate standard.
D.variable overhead rate.
Which of the following items would not be included in a statement of cash flows
prepared using the indirect method?
A.Net income
B.Cash paid for dividends
C.Sale of a plant asset
D.Cash paid for wages
Why are the amounts determined for ending inventory and cost of goods sold the same
under both the periodic and perpetual inventory systems when FIFO is used but not
when LIFO is used?
Use this information pertaining to Tucson Company to answer the following question.
1) The corporation’s Supplies account showed a beginning debit balance of $400 and
supplies purchased of $1,600. There were $600 of supplies on hand at year end.
2)Depreciation on a building is estimated to be $10,000.
3)A one-year insurance policy was purchased for $4,800. Five months have passed
since the purchase.
4)Accrued interest on a note receivable amounted to $200.
5)The company received a $3,600 advance payment during the year on services to be
performed. By the end of the year, one-third of the services had been performed.
The adjusting entry for Supplies is
Financial statements for Crane Corporation are presented below.
Note: Dividends of $0.60 per share were declared and paid during 20×5. The market
price of the stock on December 31, 20×5 was $18.00 per share.
Compute the following for 20×5 and place your answers in the spaces provided. Round
answers to two decimal places. Show your work.
Oswald purchased land for $48,000 and paid an additional $2,000 to install parking
space. The entry to record the payment for the parking space is:
A ten-year bond has a face value of $10,000, a face interest rate of 11 percent, an
unamortized bond premium of $400, and an effective interest rate of 10 percent. The
bonds were issued on one of its semi-annual interest payment dates. The entry to record
the bond interest expense on the first semi-annual interest payment date is : (assuming
the effective interest method of amortization),
A company enters into a contract to purchase a certain quantity of goods from another
company during the following month. At this point, would a liability exist? Explain
why or why not.
Delta and Chen form a partnership and invest the following assets and liabilities
In the journal provided prepare the entry to record the formation of the partnership.
(Omit explanation.)