A stock split results in a transfer at market value from retained earnings to paid-in
capital.
Answer:
Journalizing and posting the adjustments and closing entries updates the ledger for the
new accounting period.
Answer:
When the allowance method for accounting for uncollectible receivables is used, net
income is reduced when a specific receivable is written off.
Answer:
Factors which reflect the ability of a business to pay its debts and earn a reasonable
amount of income are referred to as solvency and profitability.
Answer:
Accounting is an information system that provides essential data about the economic
activities of an entity to various users to aid them in making informed judgments and
decisions.
Answer:
Amounts withheld from each employee for Social Security and Medicare varies by
state.
Answer:
The process of transferring the debits and credits from the journal entries to the
accounts is known as “updating the accounts”.
Answer:
The bank reconciles its statement to the company’s records.
Answer:
After the sales budget is prepared, the production budget is normally prepared next.
Answer:
During construction of a building, the cost of interest on a construction loan should be
charged to an expense account.
Answer:
By ignoring and not posting the adjusting journal entries to the appropriate accounts,
net income will always be overstated.
Answer:
If the standard to produce a given amount of product is 600 direct labor hours at $17
and the actual was 500 hours at $15, the time variance was $1,500 unfavorable.
Answer:
Since the adjustments are entered on the work sheet, it is not necessary to record them
in the journal or post them to the ledger.
Answer:
In a process costing system, a separate work in process inventory account is maintained
for each customer’s job.
Answer:
Gains and losses on the redemption of bonds are reported as other income or other
expense on the income statement.
Answer:
Direct costs can be specifically traced to a cost object.
Answer:
The reliability of cost-volume-profit analysis does NOT depend on the assumption that
costs can be accurately divided into fixed and variable components.
Answer:
A fiscal year that ends when business activities have reached their lowest point is called
the natural business year.
Answer:
If the adjustment for accrued salaries at the end of the period is inadvertently omitted,
both liabilities and owner’s equity will be understated for the period.
Answer:
Form W-4 is a form authorizing employers to withhold a portion of employee earnings
for payment of an employee’s federal income taxes.
Answer:
The amount of depreciation expense for the first full year of use of a fixed asset costing
$95,000, with an estimated residual value of $5,000 and a useful life of 5 years, is
$19,000 by the straight-line method.
Answer:
Purchase journals will have an Other Accounts Cr. column.
Answer:
Depreciation expense on factory equipment is part of factory overhead cost.
Answer:
The accumulated depreciation account is closed to the income summary account.
Answer:
The face value of a term bond is payable at a single specific date in the future.
Answer:
A capitalized asset will appear on the balance sheet as a long term asset.
Answer:
The process by which management allocates available investment funds among
competing capital investment proposals is termed present value analysis.
Answer:
If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of
24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted
volume of production for 2012 is 198,000 units.
Answer:
The book value of a fixed asset reported on the balance sheet represents its market
value on that date.
Answer:
The income statement is prepared from the adjusted trial balance or the income
statement columns on the work sheet.
Answer:
If Division Q’s income from operations was $30,000 on invested assets of $200,000, the
rate of return on investment is 15%.
Answer:
The manager of a profit center does not make decisions concerning the fixed assets
invested in the center.
Answer:
Managerial accounting reports are prepared according to generally accepted accounting
principles.
Answer:
Which of the following statements is not true about a 2-for-1 split?
A.Par value per share is reduced to half of what it was before the split.
B.Total contributed capital increases.
C.The market price will probably decrease.
D.A stockholder with ten shares before the split owns twenty shares after the split.
Answer:
Which of the following are two methods of analyzing capital investment proposals that
both ignore present value?
A.Internal rate of return and average rate of return
B.Net present value and average rate of return
C.Internal rate of return and net present value
D.Average rate of return and cash payback method
Answer:
The present value factor for an annuity of $1 is determined using which of the
following formulas?
A.Amount to be invested/Annual average net income
B.Annual net cash flow/Amount to be invested
C.Annual average net income/Amount to be invested
D.Amount to be invested/Equal annual net cash flows
Answer:
The following items were taken from the financial statements of Stanton, Inc., over a
three-year period:
Compute the following for each of the above time periods.
Round percentage to one decimal place.
Answer:
Calculate the Total Direct Labor Variance using the above information
A.$2,051.25 Favorable
B.$2,051.25 Unfavorable
C.$2,362.50 Unfavorable
D.$2,362.50 Favorable
Answer:
The following data relate to direct labor costs for the current period:
What is the direct labor rate variance?
A.$2,250.00 unfavorable
B.$2,125.00 unfavorable
C.$2,250.00 favorable
D.$2,125.00 favorable
Answer:
Bank reconciliation information for Cole Co. for May 31, 2011 is as follows:
(a) The bank statement balance is $2,936.
(b) The cash account balance is $3,194.
(c) Outstanding checks amounted to $465.
(d) Deposits in transit are $655.
(e) The bank service charge is $50.
(f) A check for $97 for supplies was recorded as $79 in the ledger.
Record the appropriate journal entry for Cole Co.
Answer:
The following information pertains to Auburn Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
Assets
Liabilities and Stockholders’ Equity
Income Statement
What is the rate earned on stockholders’ equity? Round answer to a single decimal
point.
A.9.3%
B.15.9%
C.24.0%
D.40.9%
Answer:
The production department is proposing the purchase of an automatic insertion
machine. They have identified 3 machines, each with an estimated life of 10 years.
Which machine offers the best internal rate of return?
A.Machine B
B.Machine C
C.Machine A and B
D.Machine A
Answer:
Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling prices
are: $55; $78; and $32, respectively. The variable costs for each product are: $20; $50;
and $15, respectively. Each product must go through the same processing in a machine
that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales take 7
hours, and Wales take 1 hour.
What is the contribution margin per machine hour for Tales?
A.$4
B.$7
C.$28
D.$35
Answer:
Production estimates for July are as follows:
For each unit produced, the direct materials requirements are as follows:
The total direct materials purchases of materials A and B (assuming no beginning or
ending material inventory) required for July production is:
A.$1,080,000 for A; $648,000 for B
B.$1,080,000 for A; $1,296,000 for B
C.$1,170,000 for A; $702,000 for B
D.$1,125,000 for A; $675,000 for B
Answer:
Chang Co. issued a $50,000, 120-day, discounted note to Guarantee Bank. The discount
rate is 6%. Assuming a 360-day year, the cash proceeds to Chang Co. are
A.$49,750
B.$47,000
C.$49,000
D.$51,000
Answer:
One potential advantage of financing corporations through the use of bonds rather than
common stock is
A.the interest on bonds must be paid when due
B.the corporation must pay the bonds at maturity
C.the interest expense is deductible for tax purposes by the corporation
D.a higher earnings per share is guaranteed for existing common shareholders
Answer:
At the beginning of the period, the Assembly Department budgeted direct labor of
$110,000, direct material of $170,000 and fixed factory overhead of $28,000 for 8,000
hours of production. The department actually completed 10,000 hours of production.
What is the appropriate total budget for the department, assuming it uses flexible
budgeting.
A.$288,000
B.$305,000
C.$350,000
D.$378,000
Answer:
Most businesses in the United States are
A.proprietorships
B.partnerships
C.corporations
D.co-operatives
Answer:
Current liabilities are
A.due, but not receivable for more than one year
B.due, but not payable for more than one year
C.due and receivable within one year
D.due and payable within one year
Answer:
Department A had 1,000 units in Work in Process that were 60% completed at the
beginning of the period at a cost of $7,000. 4,000 units of direct materials were added
during the period at a cost of $8,200. 4,500 units were completed during the period, and
500 units were 40% completed at the end of the period. All materials are added at the
beginning of the process. Direct labor was $28,700 and factory overhead was $4,510.
The cost of the 500 units in process at the end of the period if the first-in, first-out
method is used to cost inventories was:
A.$3,240
B.$5,175
C.$2,569
D.$2,645
Answer:
When callable bonds are redeemed below carrying value
A.Gain on Redemption of Bonds is credited
B.Loss on Redemption of Bonds is debited
C.Retained Earnings is credited
D.Retained Earnings is debited
Answer:
The present value of $40,000 to be received in one year, at 6% compounded annually, is
(rounded to nearest dollar)
A.$37,736
B.$42,400
C.$40,000
D.$2,400
Answer:
A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day period
ending on that day. The adjusting entry necessary at the end of the fiscal period ending
on the second Wednesday of the pay period includes a:
A.debit to Salary Expense of $8,000.
B.debit to Salary Payable of $8,000
C.credit to Salary Expense of $16,000
D.credit to Salary Payable of $16,000
Answer:
The state charter allows a corporation to issue only a certain number of shares of each
class of stock. This amount of stock is called
A.treasury stock
B.issued stock
C.outstanding stock
D.authorized stock
Answer:
ABC Corporation has three service departments with the following costs and activity
base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
What is the service department charge rate for Graphics Production?
A.$2.00
B.$10.00
C.$6.66
D.$.50
Answer:
The order of presentation of activities on the statement of cash flows is
A.operating, investing, and financing.
B.operating, financing, and investing.
C.financing, operating, and investing.
D.financing, investing, and operating.
Answer:
The Clydesdale Company has sales of $4,500,000. It also has invested assets of
$2,000,000 and operating expenses of $3,600,000. The company has established a
minimum rate of return of 7%.
What is Clydesdale Company’s rate of return on investment?
A.56%
B.20%
C.45%
D.25%
Answer:
Payroll taxes levied against employees become liabilities
A.the first of the following month
B.when salary is accrued
C.when data is entered in a payroll register
D.at the end of an accounting period
Answer:
After discontinuing the ordinary business operations and closing the accounts on May
7, the ledger of the partnership of Anna, Brian, and Cole indicated the following:
The partners share net income and losses in the ratio of 3:2:1. Between May 7-30, the
noncash assets were sold for $150,000, the liabilities were paid, and the remaining cash
was distributed to the partners.
Answer:
A corporation has 50,000 shares of $25 par value stock outstanding that has a current
market value of $150. If the corporation issues a 5-for-1 stock split, the market value of
the stock after the split will be approximately:
A.$25
B.$150
C.$5
D.$30
Answer:
Which of the graphs in Figure 20-1 illustrates the behavior of a total fixed cost?
A.Graph 2
B.Graph 3
C.Graph 4
D.Graph 1
Answer:
Which of the following would most likely be classified as a current liability?
A.Two-year Notes Payable
B.Bonds Payable
C.Mortgage Payable
D.Unearned Rent
Answer:
Which of the following budgets is not directly associated with the production budget?
A.Direct materials purchases budget
B.Factory overhead cost budget
C.Capital Expenditures budget
D.Direct labor cost budget
Answer:
Which of the following will have no effect on an employee’s take-home pay?
A.Social security tax
B.Unemployment tax
C.Marital status
D.Number of exemptions claimed
Answer:
When a buyer returns merchandise purchased for cash, the buyer may record the
transaction using the following entry
A.debit Merchandise Inventory; credit Cash
B.debit Cash; credit Merchandise Inventory
C.debit Cash; credit Sales Returns and Allowances
D.debit Sales Returns and Allowances; credit Cash
Answer:
The Calvin-Dogwood Partnership owns inventory that was purchased for $90,000, has a
current replacement cost of $85,900, and is priced to sell for $125,000. At what amount
should the inventory be recorded in the accounts of the new partnership if Alexis is to
be admitted?
A.$129,100
B.$85,900
C.$90,000
D.$125,000
Answer:
According to a summary of the payroll of Sinclair Company, $505,000 was subject to
the 6.0% social security tax and $545,000 was subject to the 1.5% Medicare tax. Also,
$10,000 was subject to state and federal unemployment taxes.
Answer:
You have just accepted your first job out of college, which requires you to evaluate loan
requests at Beach Front National Bank. The first loan request you receive is from Surfer
Dude Enterprises, a small proprietorship. Marty Monroe, the owner, is requesting
$75,000 and brings you the following trial balance (or Statement of Accounts) for his
first year of operations ended December 31, 2010.
What three accounts do you think should be relabeled for greater clarity?
Answer:
Olsen Company produces two products. Product A has a contribution margin of $30 and
requires 10 machine hours. Product B has a contribution margin of $24 and requires 4
machine hours. Determine the most profitable product assuming the machine hours are
the constraint.
Answer:
On August 30th JumpStart pays numerous bills which include:
Payment to the landlord for August rent – $2,300
Payment to the Gas & Electric Company for August’s bill – $525
Payment of employee wages for the last half of August – $1,750
Payment of shopping center’s parking lot cleaning fee – $275
Journalize these payments as one compound journal entry.
Answer:
The following selected data were taken from the financial statements of the Berrol
Group for December 31, 2012, 2011, and 2010:
The 2012 net income was $242,000 and the 2011 net income was $308,000. No
dividends on common stock were declared between 2010 and(1) Determine the rate
earned on total assets, the rate earned on stockholders’ equity, and the rate earned on
common stockholders’ equity for the years 2012 and 2011. Round to one decimal place.
(2) What conclusion can be drawn from these data as to the company’s profitability?
Answer:
What is a major advantage of using percentages rather than dollar changes in doing
horizontal and vertical analysis?
Answer:
On October 17th Nikle Company purchased a building and a plot of land for $750,000.
The building was valued at $500,000 while the land carried a value of $250,000. Nikle
paid $300,000 down in cash and signed a notes payable for the balance. In the space
below write the journal entry.
Answer:
Eric Wood, CPA, was organized on January 1, 2011, as a proprietorship. List the errors
that you find in the following financial statements and prepare the corrected statements
for the three months ended March 31, 2011.
Answer:
Prior to liquidating their partnership, Porter and Robert had capital accounts of
$160,000 and $100,000 respectively. Prior to liquidation, the partnership had no cash
assets other than what was realized from the sale of the partnership assets. These
partnership assets were sold for $250,000. The partnership had $10,000 of liabilities.
Porter and Robert share income and losses equally.
Determine the amount received by Porter as a final distribution from liquidation of the
partnership.
Answer:
You have just accepted your first job out of college, which requires you to evaluate loan
requests at Beach Front National Bank. The first loan request you receive is from Surfer
Dude Enterprises, a small proprietorship. Marty Monroe, the owner, is requesting
$75,000 and brings you the following trial balance (or Statement of Accounts) for his
first year of operations ended December 31, 2010.
Which of the following accounts do you think might need to be adjusted before an
accurate set of financial statements could be prepared?
Answer:
What information does the Income Statement give to business users?
Answer:
The sales, income from operations, and invested assets for each division of Marcus
Company are as follows:
Determine the minimum rate of return for invested assets.
Answer:
What is a cash budget? How does management use a cash budget?
Answer:
Allen Company used $71,000 of direct materials and incurred $37,000 of direct labor
costs during 2011. Indirect labor amounted to $2,700 while indirect materials used
totaled $1,600. Other operating costs pertaining to the factory included utilities of
$3,100; maintenance of $4,500; supplies of $1,800; depreciation of $7,900; and
property taxes of $2,600. There was no beginning or ending finished goods inventory,
but work in process inventory began the year with a $5,500 balance and ended the year
with a $7,500 balance.
Prepare a statement of cost of goods manufactured.
Answer:
Journalize the following transactions (Assume a 360-day year when calculating
interest.):
Answer:
Easy Sailing, LLC provides repair services for commercially-owned boats and yachts.
The firm has 5 members in the LLC, which did not change between 2011 and 2012.
During 2012, the business expanded into three new regions of the country. The
following revenue and employee information is provided:
a. For 2011 and 2012, determine the revenue per employee (excluding members).
b. Interpret the trend between the two years.
Answer:
Complete the following data taken from the condensed income statements for
merchandising Companies X, Y, & Z.
Answer:
Match the following cost flow assumption to their inventory costing method:
Answer:
The balances for the accounts listed below appear in the Adjusted Trial balance columns
of the end-of-period spreadsheet (work sheet). Indicate whether each balance should be
extended to an Income Statement column or (b) a Balance Sheet column.
1) Dobson, Capital
2) Dobson, Drawing
3) Depreciation Expense
4) Accumulated Depreciation
5) Fees earned
6) Unearned Fees
7) Supplies
8) Supplies Expense
Answer:
Lamar Industries warrants its products for one year. The estimated product warranty is
3% of sales. Assume that sales were $190,000 for June. In July, a customer received
warranty repairs requiring $185 of parts and $50 of labor.
Answer: