A schedule of accounts receivable is a listing of all creditor accounts and account
balances.
Answer:
An inventory error is sometimes said to be self-correcting because it causes an
offsetting error in the next period.
Answer:
A lawsuit is an example of a contingent liability for the defendant.
Answer:
A bond’s par value is not necessarily the same as its market value.
Answer:
In activity-based costing, an activity can involve several related tasks.
Answer:
Indirect materials are accounted for as factory overhead because they are not easily
traced to specific units or batches of production.
Answer:
In process costing there is never a balance remaining in Factory Overhead that needs to
be closed at period end.
Answer:
A service department is usually evaluated as a profit center.
Answer:
One difference between financial and managerial accounting is that the external users
that use financial information must plan a company’s future, but the internal users of
managerial accounting information generally must decide whether to invest in or lend
to a company.
Answer:
The Packing Department transferred out completed units with a cost of $74,000. This
transfer should be recorded with the following entry:
Answer:
Cash includes currency, coins, and the deposits in most checking accounts.
Answer:
The FASB requires a reconciliation of net income to net cash provided or used by
operating activities when the direct method is used.
Answer:
The margin of safety can be expressed in units of product, in dollars, or as a percentage
of sales.
Answer:
Most companies use batch processing instead of online processing because batch
processing requires continual updating of databases.
Answer:
Raw materials inventory turnover equals raw materials used divided by average raw
materials inventory.
Answer:
The manufacturing statement is also known as the schedule of manufacturing activities
or the schedule of cost of goods manufactured.
Answer:
The higher the accounts receivable turnover, the slower the accounts receivable are
collected.
Answer:
Joint costs can be allocated either using a physical basis or a value basis.
Answer:
Direct expenses must be allocated across departments.
Answer:
Merchandise inventory consists of products that a company acquires to resell to
customers.
Answer:
Turtle Company produces t-shirts that go through two operations, cutting and sewing,
before they are complete. Expected costs and activities for the two departments are
shown below. Given this information, the departmental overhead rate for the cutting
department based on direct labor hours is $2.69 per direct labor hour (rounded to two
decimals).
Answer:
The four methods of inventory valuation are SIFO, FIFO, LIFO, and average cost.
Answer:
The cash basis of accounting is an accounting system in which revenues are reported
when cash is received and expenses are reported when cash is paid.
Answer:
Direct materials are not usually easily traced to a product.
Answer:
Overapplied overhead is the amount by which actual overhead cost exceeds the
overhead applied to products during the period.
Answer:
Internal users of accounting information include lenders, shareholders, brokers, and
managers.
Answer:
Information presented in a variable costing format can assist management when making
short-term pricing decisions.
Answer:
A high value for the times interest earned ratio means that a company is of high risk to
the borrower.
Answer:
Enterprise resource planning software packages include the programs that manage a
company’s vital operations.
Answer:
Any material amount of under- or overapplied factory overhead must always be closed
to Cost of Goods Sold at the end of an accounting period.
Answer:
A variable or flexible budget is so named because it only focuses on variable costs.
Answer:
Transactions are first recorded in the ledger.
Answer:
Receiving and paying for merchandise should be performed by one individual or
department to streamline a voucher system and simplify the procedures for purchasing.
Answer:
The traditional income statement format used for financial reporting is called the
contribution margin format.
Answer:
Contribution margin lost from a decline in sales is an opportunity cost.
Answer:
A contingent liability is a potential obligation that depends on a future event arising
from a future transaction or event.
Answer:
Manufacturers usually have three inventories: raw materials, goods in process, and
finished goods.
Answer:
The dollar value assigned to goods purchased will differ under the different inventory
valuation methods of specific identification, FIFO, LIFO, and weighted average.
Answer:
The periodic expense created by allocating the cost of plant and equipment to the
periods in which they are used, representing the expense of using the assets, is called:
A. Accumulated depreciation
B. A contra account
C. The matching principle
D. Depreciation
E. An accrued account
Answer:
Reference: 19_05
Red and White Company reported the following monthly data:
What is Red and Whites net income under absorption costing if 980 units are sold and
operating expenses are $12,000?
A. $(1,380)
B. $(2,000)
C. $ 2,700
D. $ 6,620
E. $ 10,620
Answer:
If the liabilities of a business increased $75,000 during a period of time and the equity
in the business decreased $30,000 during the same period, the assets of the business
must have:
A. Decreased $105,000
B. Decreased $45,000
C. Increased $30,000
D. Increased $45,000
E. Increased $105,000
Answer:
Factory overhead costs normally include all of the following except:
A. Indirect labor costs
B. Indirect material costs
C. Selling costs
D. Factory machinery oil
E. Factory rent
Answer:
A company purchased $4,000 worth of merchandise. Transportation costs were an
additional $350. The company later returned $275 worth of merchandise and paid the
invoice within the 2% cash discount period. The total amount paid for this merchandise
is:
A. $3,725.00
B. $3,925.00
C. $3,995.00
D. $4,000.50
E. $4,075.00
Answer:
A company has total assets of $5,600,482, common stock of $2,111,111, retained
earnings of $1,058,473. What is the companys debt ratio?
A. 43.41%
B. 65.00%
C. 41.57%
D. 50.00%
E. 42.81%
Answer:
Current assets divided by current liabilities is equal to the:
A. Current ratio
B. Quick ratio
C. Debt ratio
D. Liquidity ratio
E. Solvency ratio
Answer:
An error is indicated if the following account has a balance appearing on the
post-closing trial balance:
A. Office Equipment
B. Accumulated Depreciation-Office Equipment
C. Depreciation Expense-Office Equipment
D. Common Stock
E. Salaries Payable
Answer:
The beginning and ending finished goods inventories of the Prize Ring manufacturing
company were $75,000 and $73,000 respectively. If cost of goods sold equaled
$66,000, what is the amount of cost of goods manufactured for this period?
A. $2,000
B. $64,000
C. $68,000
D. $82,000
E. $214,000
Answer:
The set of periodic budgets that are prepared and periodically revised in the practice of
continuous budgeting is called:
A. Production budgets
B. Sales budgets
C. Cash budgets
D. Rolling budgets
E. Capital expenditures budgets
Answer:
Use the following information about the current year’s operations of a company to
calculate the cash paid for merchandise.
A. $522,800
B. $533,600
C. $528,200
D. $536,000
E. $543,800
Answer:
A company has two products: A and B. It uses a plantwide overhead allocation method
based on activity 2 and has prepared the following analysis showing budgeted costs and
activities. Use this information to compute (a) the companys plantwide overhead rate
and (b) the amount of overhead allocated to Product A.
Answer:
Prior to recording adjusting entries, the Office Supplies account had a $359 debit
balance. A physical count of the supplies showed $105 of unused supplies available.
The required adjusting entry is:
A. Debit Office Supplies $105 and credit Office Supplies Expense $105.
B. Debit Office Supplies Expense $105 and credit Office Supplies $105.
C. Debit Office Supplies Expense $254 and credit Office Supplies $254.
D. Debit Office Supplies $254 and credit Office Supplies Expense $254.
E. Debit Office Supplies $105 and credit Supplies Expense $254.
Answer:
Spirit Company, a merchandiser, recently completed the 2013 calendar year. For the
year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash
receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to
Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid
in advance and are initially debited to Prepaid Expenses. The company’s balance sheet
and income statement follow:
Additional information on year 2013 transactions:
a. The loss on the cash sale of equipment was $5,875 (details in b).
b. Sold equipment costing $46,500, for a loss of $5,875.
c. Purchased equipment costing $99,000 by paying $35,000 cash and signing a
long-term note payable for the balance.
d. Borrowed $2,000 cash by signing a non-sales related short-term note payable.
e. Paid $47,500 cash to reduce the long-term notes payable.
f. Issued 2,400 shares of common stock for $20 cash per share.
g. Net income and dividends were the only items that affected retained earnings.
Required: Determine the cash received by Spirit for the equipment sold in item B
above.
A. $5,875
B. $11,625
C. $46,500
D. $17,500
E. $20,000
Answer:
For each of the following independent transactions (a) through (d), prepare the
necessary journal entry:
(a) Declared a $0.40 per share cash dividend on 200,000 shares of preferred stock
outstanding.
(b) Declared and distributed a 12% stock dividend on 800,000 shares of $5 par value
common stock outstanding. Market price per common share on this date was $25.
(c) Declared and distributed a 2-for-1 stock split on 500,000 shares of $10 par value
common stock outstanding.
(d) Declared and distributed a 30% stock dividend on 400,000 common shares of $5 par
value common stock outstanding. Market price per common share on this date was
$20.
Answer:
If the assets of a business increased $89,000 during a period of time and its liabilities
increased $67,000 during the same period, equity in the business must have:
A. Increased $22,000
B. Decreased $22,000
C. Increased $89,000
D. Decreased $156,000
E. Increased $156,000
Answer:
A quantity of merchandise or materials over the minimum needed reduce the risk of
running short is called:
A. Just-in-time inventory.
B. Budgeted stock.
C. Continuous inventory.
D. Capital stock.
E. Safety stock.
Answer:
A company has net sales of $1,500,000, sales commissions in the amount of $194,000,
net income of $366,400, and the gross profit ratio of 60%. What amount is listed as
gross profit on the income statement for the period?
A. $ 563,760
B. $ 600,000
C. $ 783,600
D. $ 900,000
E. $1,119,840
Answer:
Mattel had net sales of $4,235 million and ending accounts receivable of $775 million.
Days’ sales uncollected is equal to:
A. 298 days
B. 66.8 days
C. 19.4 days
D. 81.8 days
E. 65.2 days
Answer:
A company is considering a proposal to invest $30,000 in a project that would provide
the following net cash flows:
a. Compute the project’s payback period.
b. Compute the net present value of the project assuming a 10% discount rate with the
following factors: PV factors for $1(yr. 1: 0.9091; yr. 2: 0.8264; yr. 3:0 .7513; yr. 4:
0.6830)
c. Should the company invest in the machine? Why or why not?
Answer:
Job order manufacturing is also known as:
A. Mass production manufacturing.
B. Process manufacturing.
C. Unit manufacturing.
D. Customized production.
E. Standard costing.
Answer:
Which of the following statements about the Cash account are true?
A. Because most companies earn their fees in cash, the Cash account is categorized as
revenue.
B. For any given transaction, Accounts Receivable and Cash can be used
interchangeably because both accounts are measured in terms of cash.
C. The Cash account includes the value of any medium of exchange that a bank accepts
for deposit.
D. Cash is the same thing as Retained Earnings.
E. Cash is a liability account.
Answer:
A company issued five-year, 7% bonds with a par value of $100,000. The market rate
when the bonds were issued was 6.5%. The company received $101,137 cash for the
bonds. Using the straight-line method, the amount of recorded interest expense for the
first semiannual interest period is:
A. $3,386.30
B. $3,500.00
C. $3,613.70
D. $6,633.70
E. $7,000.00
Answer:
Which methods of evaluating a capital investment project use cash flows as a
measurement basis?
A. Net present value, accounting rate of return, and internal rate of return.
B. Internal rate of return, payback period, and accounting rate of return.
C. Accounting rate of return, net present value, and payback period.
D. Payback period, internal rate of return, and net present value.
E. Net present value, payback period, accounting rate of return, and internal rate of
return.
Answer:
Tanner, Schmidt, and Hayes are partners with capital account balances of $100,000,
$120,000, and $96,000 respectively. They share profits and losses in a 3:4:3 ratio.
Schmidt wishes to leave the partnership and will be paid $125,000. What are the
remaining capital account balances after Schmidt withdraws?
A. Tanner $95,500; Hayes $95,500.
B. Tanner $102,500; Hayes $98,500.
C. Tanner $100,000; Hayes $96,000.
D. Tanner $97,500; Hayes $93,500.
E. Tanner $100,000; Hayes $91,000.
Answer:
A company issued five-year, 7% bonds with a par value of $100,000. The company
received $97,947 for the bonds. Using the straight-line method, the amount of interest
expense for the first semiannual interest period is:
A. $3,294.70
B. $3,500.00
C. $3,705.30
D. $7,000.00
E. $7,410.60
Answer:
A given project requires a $30,000 investment and is expected to generate end-of-period
annual cash inflows as follows:
Assuming a discount rate of 10%, what is the net present value of this investment?
Selected present value factors for a single sum are shown in the table below:
A. $0.00
B. $21,000.00
C. ($7,461.00)
D. $25,033.32
E. ($4,966.68)
Answer:
Quick assets are defined as:
A. Cash, short-term investments, and inventory.
B. Cash, short-term investments, and current receivables.
C. Cash, inventory, and current receivables.
D. Cash, noncurrent receivables, and prepaid expenses.
E. Accounts receivable, inventory, and prepaid expenses.
Answer:
Capital budgeting decisions are generally based on:
A. Tentative predictions of future outcomes.
B. Perfect predictions of future outcomes.
C. Results from past outcomes only.
D. Results from current outcomes only.
E. Speculation of interest rates and economic performance only.
Answer:
Merchandise inventory:
A. Is a long-term asset.
B. Is a current asset.
C. Includes supplies.
D. Is classified with investments on the balance sheet.
E. Must be sold within one month.
Answer:
Which types of overhead allocation methods result in the use of more than one
overhead rate during the same time period?
A. Plantwide overhead rate method and departmental overhead rate method.
B. Cost pool overhead rate method and plantwide overhead rate method.
C. Departmental overhead rate method and activity-based costing.
D. Activity-based costing and plantwide overhead rate method.
E. Departmental overhead rate method and cost pool overhead rate method.
Answer:
For which item does a bank NOT issue a debit memorandum?
A. To notify a depositor of all withdrawals through an ATM.
B. To notify a depositor of a deduction to a depositor’s account.
C. To notify a depositor of a bounced check.
D. To notify a depositor of periodic payments arranged in advance, by a depositor.
E. To notify a depositor of a deposit to their account.
Answer:
In the absence of a partnership agreement, the law says that income and loss should be
allocated based on:
A. A fractional basis.
B. The ratio of capital investments.
C. Salary allowances.
D. Equal shares.
E. Interest allowances.
Answer:
Which of the following statements is true regarding the closing process of a
merchandiser?
A. Sales Discounts, Sales Returns and Allowances, and Cost of Goods sold should all
be credited during closing.
B. Sales Discounts, Sales Returns and Allowances, and Cost of Goods sold should all
be debited during closing.
C. Sales Discounts and Sales Returns and Allowances should be debited; Cost of Goods
Sold should be credited during closing.
D. Sales Discounts and Sales Returns and Allowances should be credited; Cost of
Goods Sold should be debited during closing.
E. Sales Discounts and Sales Returns and Allowances are not closed. Cost of Goods
Sold should be credited during closing.
Answer:
Apple Company has three employees:
What is the amount that Apple Company will record as total payroll taxes for August?
Answer:
Dataport Company reports the following annual cost data for its single product:
This product is normally sold for $230 per unit. If Dataport increases its production to
100,000 units, while sales remain at the current 89,000 unit level, by how much would
the companys gross margin increase or decrease under absorption costing? Assume the
company has idle capacity to double current production.
Answer:
A company’s budget for 60,000 units of production showed sales of $96,000, variable
costs of $36,000, and fixed costs of $26,000. What operating income would be expected
if the company produces and sells 70,000 units?
Answer:
What is the balanced scorecard and how is it used?
Answer:
The stockholders’ equity section of a corporation’s balance sheet follows:
(1) Assuming that the preferred stock is not callable and no dividends are in arrears,
compute the book values per preferred share and per common share.
(2) Assuming that the preferred stock has a call price of $30 per share and there is one
year of cumulative preferred dividends is in arrears, compute the book values per
preferred share and per common share.
Answer:
The records of Skymaster Airplane Rentals show the following information as of
December 31, 2014:
Dividends of $52,000 were paid during 2014.
Using the above information, prepare an income statement.
Answer:
____________________ bonds reduce a bondholder’s risk by requiring the issuer to
create a fund of assets set aside as specified amounts and dates to repay the bonds at
maturity.
Answer:
The BlueFin Partnership agreed to dissolve. The remaining cash balance after
liquidating partnership assets and liabilities is $60,000. The final capital account
balances are: Smith, $30,000; Nagy, $20,000; and Russ, $10,000. Prepare the journal
entry to distribute the remaining cash to the partners.
Answer:
__________________ processing accumulates source documents for a period of time
and then processes them all at once such as daily, weekly, or monthly.
Answer:
Reference: 16_05
Refer to the following incomplete table of cost information:
What was the cost of the direct labor used in the Bagging Department?
Answer:
The balances for the accounts of Lances Consulting Firm, Inc. for the year ended
December 31 are shown below. Each account shown had a normal balance.
Calculate the debt ratio.
Answer:
The following current year information is available from a manufacturing company:
Calculate the company’s accounts receivable turnover and its days’ sales uncollected.
Answer:
Arthur, Barnett and Cummings form a partnership. Arthur contributes $250,000 cash
and Barnett contributes $230,000 in cash. Cummings contributes equipment worth
$255,000. Prepare the single journal entry to record the formation of this partnership.
Answer:
The _____________________ is a measure of how quickly a merchandiser sells its
merchandise inventory.
Answer:
A ___________ inventory system updates the accounting record for inventory only at
the end of a period.
Answer:
Some companies use the _________________ constraint or the __________________
constraint to avoid assigning incidental costs of acquiring merchandise to inventory.
Answer:
A company had net income of $76,000 in 2012 and $88,000 in Its net sales were
$640,000 in 2012 and $611,000 in 2013. Its average total assets in 2012 were $670,000
and $712,000 in 2013. Calculate the profit margin, total asset turnover, and return on
total assets for both years. Comment on the results.
Answer: