Which of the following credit terms is the most advantageous to the purchaser of
merchandise?
A. 1/10, n/30.
B. 5/10, n/60.
C. 2/10, n/30.
D. 5/10, n/20.
All of the following are financing activities except:
A. Borrowing money.
B. Lending money.
C. Selling capital stock.
D. Paying dividends.
Which of the following companies would be more likely to use a periodic inventory
system?
A. IBM.
B. 1st Bank of New York.
C. Sears.
D. A newspaper stand.
The Work in Process – Assembly account would be credited and the Work in Process –
Packaging account would be debited when:
A. Goods are transferred from Assembly to Packaging.
B. Goods are transferred from Packaging to Assembly.
C. The units are complete and ready for sale.
D. The number of units started during the period is greater than the number of units in
process at the end of the period.
Refer to the above data. The number of pounds equal to $50,000 on this date is:
A. 31,250.
B. 80,000.
C. 32,500.
D. Depends upon whether the item is a receivable or a payable.
Washington Warehouse is a small retail business that specializes in the sale of
top-of-the-line televisions. This year, the store has begun to carry the Flat TV
manufactured by Bass Co. Thus far, Washington has recorded the following transactions
involving the Flat TV:
Jan. 5 Purchased 8 Flat TVs at a unit cost of $1,400
Jan. 18 Purchased 5 additional Flat TVs at $1,400 each
Feb. 12 Sold 9 Flat TVs to the Duke Hotel for $15,300
Refer to the information above. Washington maintains a subsidiary ledger account for
each type of TV carried in the store. An examination of the account for the Flat TV
model at the end of February would show:
A. 4 units on hand with a total value of $1,400.
B. 4 units on hand with a total value of $5,600.
C. 13 units on hand with a total value of $18,200.
D. The amount that Washington owes to Bass.
When a bank reconciliation has been satisfactorily completed, the only related entries to
be made in the depositor’s records are:
A. To correct errors made by the bank in recording the dollar amounts of cash
transactions during the period.
B. To reconcile items that explain the difference between the balance per the books and
the balance per the bank statement.
C. To record outstanding checks and bank service charges.
D. To record items that explain the difference between the balance per the accounting
records and the adjusted cash balance.
Shop supplies are expensed when:
A. Consumed.
B. Purchased.
C. Paid for.
D. Ordered.
Creative Star Corporation produces three lines of desks from wood: Classic, Royal, and
Standard. Cost and revenue data pertaining to each product are shown below:
Classic desks require five square yards of wood, Royal requires ten square yards, and
Standard requires three square yards. High demand for each product line far exceeds the
company’s production capacity.
Refer to the information above. If Creative Star Corporation has only 250,000 square
yards of wood available, what is the highest total amount of fixed cost the company can
incur and still break-even?
A. $2,500,000.
B. $4,000,000.
C. $5,000,000.
D. $6,000,000.
In the fixed-percentage-of-declining-balance depreciation method, the book value of the
asset is multiplied by:
A. An increasing depreciation rate.
B. A constant depreciation rate.
C. A decreasing depreciation rate.
D. A rate that changes each year but is determined from a table.
The Abrams Corporation incurred the following quality costs for the year ending
December 31, 2015:
Refer to the information above. As a percentage of total costs, which quality cost
category is the highest?
A. Prevention.
B. Internal failure.
C. Appraisal.
D. External failure.
Division managers at Colonial Company are paid a bonus based on the responsibility
margin of their respective responsibility centers. Division A sells goods to Division B
and to outside customers. The manager of Division B would most likely prefer that
transfer prices be based on:
A. The market value of the goods purchased from Division A.
B. The market value of the goods purchased from Division A plus a fixed percentage.
C. The cost of the goods purchased from Division A.
D. The cost of the goods purchased from Division A plus a fixed percentage.
Wateredge Corporation has budgeted a total of $361,800 in costs and expenses for the
upcoming quarter. Of this amount, $45,000 represents depreciation expense and $7,300
represents the expiration of prepayments. Wateredge’s current payables balance is
$265,000 at the beginning of the quarter. Budgeted payments on current payables for
the quarter amount to $370,000. The company’s estimated current payables balance at
the end of the quarter is:
A. $179,500.
B. $204,500.
C. $203,500.
D. $310,000.
The _______________ department ensures that the goods shipped match those ordered
by the customer.
A. Customer Order
B. Billing
C. Accounting
D. Shipping
Harding Company expected sales to be 50,000 units in February, 45,000 in March, and
55,000 units in April. Each unit sells for $18.00 each. The following costs pertain to
each unit:
Harding is considering an advertising campaign which will cost $15,000 per month
from January to March and is expected to increase sales by 8% a month. At the same
time Harding will reduce sales prices to $17.00 per unit while keeping costs steady.
Required:
(A.) What will operating income be in each of the three months before the advertising
campaign?
(B.) If Harding goes ahead with the advertising campaign, how much would operating
income increase or decrease each month? Would you advise them to go ahead with the
campaign?
The total liabilities of Hogan’s Company on the balance sheet are $270,000; this amount
is equal to three-fourths of the total assets. What is the amount of owners’ equity?
A. $202,500.
B. $90,000.
C. $360,000.
D. $630,000.
In a perpetual inventory system:
A. Merchandising transactions are recorded as they occur.
B. No effort is made to record the Cost of Goods Sold until year-end.
C. Entries are made in the Cost of Goods Sold account whenever merchandise is
purchased or sold.
D. The need for ever taking physical inventory is eliminated.
The basic purpose of offering customers cash discounts such as 2/10, n/30 is to:
A. Increase sales.
B. Reduce net sales.
C. Speed up the collection of accounts receivable.
D. Focus management’s attention upon customers that fail to take advantage of all
available cash discounts.
When comparing the current ratio to the quick ratio:
A. The current ratio will be greater or equal.
B. The quick ratio will always be greater.
C. The quick ratio is sometimes greater and sometimes less than the current ratio.
D. They always will be the same.
The financial statements of New World, Inc., provide the following information for the
current year:
Refer to the information above. Compute the amount of New World’s cash payments for
purchases of merchandise during the current year.
A. $1,627,500.
B. $1,622,250.
C. $1,638,000.
D. $2,157,750.
On September 1, 2015, Able Company purchased a building from Regal Corporation by
paying $200,000 cash and issuing a one-year note payable for the balance of the
purchase price. Interest on the note is stated at an annual rate of 9% and is paid at
maturity. In its December 31, 2015, balance sheet, Able correctly presented the note and
interest payable as follows:
Refer to the information above. The adjusting entry at December 31, 2015, with respect
to this note included:
A. A debit to Interest Expense for $18,000.
B. A credit to Cash for $18,000.
C. A credit to Notes Payable for $18,000.
D. A credit to Interest Expense for $18,000.
Which of the following is not one of the components of the DuPont system for
measuring and evaluating business performance?
A. Return on sales.
B. Return on investment.
C. Inventory turnover.
D. Capital turnover.
The following information has been taken from the perpetual inventory system of
Imperial Mfg. Co. for the month ended September 30:
Refer to the above data. The cost of finished goods manufactured in September is:
A. $190,000.
B. $180,000.
C. $213,000.
D. Some other amount.
On January 1, 2015, Ole Corporation had 75,000 shares of $8 par value common stock
outstanding. On July 31, 2015, Ole issued an additional 10,000 shares in exchange for a
building. What number of shares will be used in the computation of earnings per share
for the year 2015?
A. 75,000.
B. 80,000.
C. 79,167.
D. 85,000.
Unfavorable standard cost variances are normally closed at the end of the period by:
A. Debiting the variance account and crediting Cost of Goods Sold.
B. Crediting the variance account and debiting Cost of Goods Sold.
C. Debiting the variance account and crediting Work in Process.
D. Crediting the variance account and debiting Work in Process.
Refer to the information above. For the month of August, net cash flows from operating
activities for Astoria were:
A. $33,500.
B. $7,500.
C. $20,000.
D. $26,000.
In comparing a perpetual inventory system with a periodic inventory system, which of
the following statements is not correct?
A. Most large companies use perpetual inventory systems.
B. A periodic system does not include an inventory subsidiary ledger.
C. The perpetual method is easier to apply in a manual accounting system.
D. Regardless of the system in use, most businesses take a physical inventory at least
once a year.
Refer to the information above. What amount of net income will be reported on an
income statement for the month of August?
A. $20,000.
B. $7,500.
C. $0.
D. $33,500.
Which is an example of joint products?
A. Sugar and beef.
B. Pens and erasers.
C. Granulated charcoal and methyl alcohol.
D. Iron and plastic.
Vision Corporation has the following information on its financial statement:
Refer to the information above. If Vision did not pay a dividend for the last two years,
but declared a dividend this year, how much will they have to declare in order for the
common stockholders to receive $.45 per share?
A. $189,000.
B. $306,000.
C. $108,000.
D. $162,000.
Return on equity measures:
A. Solvency.
B. Profitability.
C. Leverage.
D. Both solvency and leverage.
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. Hugh’s budgeted interest expense for March is:
A. $500.
B. $2,444.
C. $5,500.
D. $6,000.
How will a company’s contribution margin be affected by an investment in equipment
that increases fixed costs in order to achieve a reduction in direct labor cost?
A. Contribution margin will increase.
B. Contribution margin will fall.
C. Contribution margin will either increase or decrease depending on the relative
magnitudes of the changes in fixed and variable costs.
D. Contribution margin will remain the same.