The purpose of establishing a petty cash fund is to:
A. Achieve internal control over small cash disbursements not made by check.
B. Keep track of expenditures paid out of cash receipts from customers prior to deposit.
C. Ensure that the amount of cash in the bank does not become excessive.
D. Keep enough cash on hand in the office to cover all normal operating expenses of
the business for a period of time.
If a product sells for $8, variable costs are $6 and fixed costs are $150,000, what would
total sales have to be in order to break-even?
A. $390,000.
B. $399,999.
C. $600,000.
D. $699,999.
On March 1, Hugh Corporation plans to borrow $550,000 from the Scotland State Bank
by signing a 12%, 15-year note payable. The note calls for 180 monthly payments of
$6,000, which includes both interest and principal components.
Refer to the information above. Of Hugh’s budgeted debt service cost of $6,000 in
March, the amount applied to the principal of the note totals:
A. $500.
B. $4,000.
C. $4,500.
D. $5,000.
Merchandising companies:
A. Include both wholesalers and retailers.
B. Do not sell directly to the public.
C. Manufacture their own products and then sell them to the public.
D. Include companies such as General Motors, IBM, and Boeing Aircraft.
Which of the following is not a characteristic of the total quality approach to setting
budgetary targets?
A. Absolute efficiency.
B. A perception that the budget is fair.
C. Budgetary targets that are unattainable.
D. Budgeted performance expectations that cannot be exceeded.
Earnings per share-basic and diluted
Stainless Corporation had net income of $7,800,000 in 2015. The company had 500,000
shares of $4 par value common stock and 70,000 shares of 8%, $100 par, preferred
stock outstanding throughout the year. Each share of preferred stock is both cumulative
and convertible. Each share of preferred stock is convertible into two shares of common
stock. Compute the following for 2015:
(a) The number of shares to be used in computing basic earnings per share.
(b) The number of shares to be used in computing diluted EPS.
(c) Basic earnings per share.
Which of the following is not considered an acceptable inventory cost method
according to GAAP?
A. First-in, first-out.
B. First-in, last-out.
C. Last-in, first-out.
D. Average cost.
Hoffman, Inc. adjusts its books each month but closes its books at the end of the year.
The trial balance at March 31 before adjustments is as follows:
Refer to the information above. At March 31, the amount of supplies on hand is $520.
What amount is reported in the March income statement for supplies expense?
A. $1,300.
B. $0.
C. $520.
D. $780.
Sultan Company produces a single product. The selling price is $50 per unit, and
variable costs amount to $20 per unit. Sultan’s fixed costs per month total $80,000.
Refer to the information above. How many units must be sold each month to earn a
monthly operating income of $25,000?
A. 833 units.
B. 2,300 units.
C. 3,500 units.
D. Some other amount.
The December 31, 2014 worksheet for Fran’s Fine Dining showed the following
amounts related to the Supplies Expense account:
(a). In the Trial Balance debit column: $745
(b). In the Adjustments debit column: $125
(c). In the Adjusted Trial Balance debit column: $870
What is the proper balance in the Supplies Expense account on January 1, 2015, after
all closing entries for 2014 have been posted, but before any 2015 transactions are
recorded?
A. $870.
B. $745.
C. $0.
D. $125.
Gains and losses from fluctuations in exchange rates should be shown on the:
A. Balance sheet.
B. Income statement.
C. Statement of changes to owners’ equity.
D. Statement of cash flows.
The change in owners’ equity due to only revenue and expense transactions is explained
by the:
A. Statement of cash flows.
B. Statement of financial position.
C. Income statement.
D. Tax return.
A journal entry which records revenue must include:
A. A debit to Cash.
B. A credit to a revenue account.
C. A credit to the owners’ equity account.
D. A debit to the owners’ equity account.
If the monthly sales volume required to break even is $190,000 and monthly fixed costs
are $55,900, the contribution margin ratio is closest to:
A. 29%.
B. 71%.
C. 23%.
D. 340%.
Alexander Company reported an increase of $185,000 in its accounts receivable during
the year. The company’s statement of cash flows reported $500,000 of cash received
from customers. What amount of net sales must Alexander have recorded?
A. $315,000.
B. $685,000.
C. $500,000.
D. $185,000.
Amelia Corporation has the following information in its financial statement:
Refer to the information above. If Amelia paid a total of $75,000 in dividends, how
much would each common stockholder receive for each share of stock owned?
(Assume there are no dividends in arrears)
A. $0.23 per share.
B. $0.13 per share.
C. $0.18 per share.
D. $0.08 per share.
An annual report
A. Must be audited by the IRS.
B. Is delivered to stockholders and the public on the last day of the fiscal year.
C. Includes comparative financial statements for several years.
D. Must be filed with the SEC by all companies in the United States.
A bank reconciliation explains the differences between:
A. Cash receipts and cash disbursements for the period.
B. The balance of cash in the bank and the budgeted expenditures for the upcoming
accounting period.
C. The balance per bank statement and the cash balance per the accounting records of
the depositor.
D. The balance per bank statement and cash expected to be on hand according to the
cash forecast.
The body created by the Sarbanes Oxley Act and charged with oversight of the
accounting profession is the:
A. Public Company Accounting Oversight Board.
B. Auditing Standards Board.
C. International Accounting Standards Board.
D. Securities and Exchange Commission.
Which one of the following is not considered as one of the three primary financial
statements?
A. Balance sheet.
B. Income statement.
C. Statement of cash flows.
D. Statement of budgeting activities.
The stockholders’ equity section of the balance sheet of Caesar Corporation at
December 31, 2015, appears as follows: (The company engaged in no treasury stock
transactions prior to 2015)
Refer to the information above. How many shares of common stock are outstanding?
A. 100,000.
B. 95,000.
C. 75,000.
D. 70,000.
The accountant for the Grassroots Company failed to make an adjusting entry to record
revenue earned but not yet billed to customers. The effect of this error is:
A. An overstatement of assets and of net income offset by an understatement of owners’
equity.
B. An overstatement of net income and an understatement of assets.
C. An understatement of assets, net income, and owners’ equity.
D. An overstatement of liabilities offset by an understatement of owners’ equity.
Allocating activity cost pools to products
Laughton Corporation makes two styles of cases for compact disks, the standard case
and the deluxe case. The company has assigned $210,000 in monthly manufacturing
overhead to three cost pools as follows: $90,000 to machining costs, $60,000 to
production set-up costs, and $60,000 to inspection costs.
Additional monthly data are provided below:
The first and last unit in each production run is inspected for quality control purposes.
Inspection costs are allocated to the products based on the number of inspections
required. Machining costs are allocated to products using machine hours as an activity
base. Set-up costs are allocated to products based on the number of production runs
each product line requires.
(a) Allocate manufacturing overhead from the activity cost pools to each product line.
(b) Compare the total per-unit cost of manufacturing standard cases and deluxe cases.
(c) On a per-unit basis, which product appears to be more profitable?
Refer to the information above. For the month of October, net cash flows from
operating activities for Waldorf were:
A. $18,500.
B. $22,500.
C. $78,000.
D. $100,500.
Which of the following statistics is of more significance to a long-term creditor than to
a short-term creditor?
A. Interest coverage ratio.
B. Receivables turnover rate.
C. Working capital.
D. Quick ratio.
The following entry appears in Galloway Paints general journal on April 23, 2015:
Refer to the information above. This transaction involves:
A. Galloway’s collection of $20,000 on an account payable.
B. Payment of $6,000 cash by Galloway.
C. A $26,000 overall increase in Galloway’s assets.
D. Sale of inventory by Galloway for $26,000.
Hines Cannery issued capital stock in 2015 for $700,000. During 2015 the company
paid dividends of $250,000. What is the effect of these events in Hines’ statement of
cash flows for 2015?
A. $700,000 cash provided by investing activities, and $250,000 cash disbursed for
financing activities.
B. $700,000 cash provided by financing activities, and $250,000 cash disbursed for
investing activities.
C. $700,000 cash provided by financing activities, and $250,000 cash disbursed for
operating activities.
D. $450,000 net cash provided by financing activities.
In computing earnings per share, the number of shares used is:
A. The year-end number of shares outstanding.
B. The beginning of the year number of shares outstanding.
C. The average of the beginning and the year-end number of shares outstanding.
D. The weighted average of shares outstanding for the year.
Which of the following best describes retained earnings?
A. Cash available for dividends.
B. The amount initially invested in the business by stockholders.
C. Cash available for expansion and growth.
D. Income that has been reinvested in the business rather than distributed as dividends
to stockholders.
Amelia Corporation has the following information in its financial statement:
Refer to the information above. If Amelia decided to purchase 20,000 shares of its
common stock to be used for future stock option plans at $11.40 per share, what journal
entry would they make?
A. Option A
B. Option B
C. Option C
D. Option D
The Allowance for Doubtful Accounts will appear on the:
A. Income statement.
B. Balance sheet.
C. Cash flow statement.
D. Owners’ equity statement.
Selecting an activity base
Listed below are six activity cost pools used by the Keaton Corporation:
Listed below are six activity bases used by Keaton to allocate manufacturing overhead
costs to products. In the space provided next to each activity base, indicate for which of
the above cost pools it is a cost driver.
_____ (a) Number of equipment work orders related to each product line.
_____ (b) Number of direct material purchase orders related to each product line.
_____ (c) Number of production runs related to each product line.
_____ (d) Square feet of direct materials warehouse space occupied by each product
line.
_____ (e) Number of machine hours required to produce each product line.
_____ (f) Square feet of production space occupied by each product line.
Assets are considered current assets if they are cash or will usually be converted into
cash:
A. Within a month or less.
B. Within 3 months.
C. Within a year or less.
D. Within 6 months or less.