The use of salaries in the allocation of income or loss allows for the differences in the
services that partners provide the business.
Under the perpetual inventory system, inventory losses can be identified more easily
than under the periodic inventory system.
Responsibility accounting authorizes managers to take control of and be held
accountable for the revenues and expenses in their budgets.
Managers use managerial accounting principles to guide their actions and decisions in
the management process.
One way a company can manage its expenditures is to rely on its creditors to give it
time to pay for purchases.
A corporation’s board of directors may influence dividend policies, but the company’s
senior management has sole authority to declare dividends.
Normally, the value of an asset remains at its initial fair value or cost until the asset is
sold, expires, or is consumed.
The term cost flow refers to the association of costs with their assumed flow in the
operation of a business.
Austin invests $80,000 for a 20 percent interest in a partnership that has capital totaling
$300,000 after admitting Austin. Which of the following is TRUE?
A.The original partners received a bonus of $20,000.
B.Austin received a bonus of $20,000.
C.Austin’s capital is $80,000.
D.The original partners’ capital in the business was $240,000 before admitting Austin.
The fee for factoring without recourse is normally higher than it would be with
recourse.
Managers rely strictly on financial information when faced with decisions.
Terms of ‘n/10 eom’ mean that payment is due 10 days after the end of the month.
When the cost of inventory is written down due to a market decline, a loss must be
recorded.
General and administrative expenses are a category of operating expense.
Which of the following statements isFALSE about a journal entry?
A.All debits are always listed before any credits.
B.It may have more than one debit or credit entry.
C.Credits are always indented.
D.Accounts that are increased are always listed first.
In a service company, standard unit cost related of a service will typically include direct
materials, direct labor, and overhead standard costs.
A product line’s contribution margin represents its contribution to paying off variable
costs and to generating a profit.
When a note is dishonored, the payee’s journal entry includes a
A.debit to Accounts Receivable.
B.debit to Interest Expense.
C.debit to Notes Receivable.
D.debit to Interest Income.
Kolber Corporation is authorized to issue 200,000 shares of no-par stock. The company
recently sold 80,000 shares for $13 per share.
a. Prepare the entry in journal form to record the sale of the stock assuming there is no
stated value.
b. Prepare the entry in journal form if a $10 stated value is authorized by the company’s
board of directors.
Which of the following describes a special-purpose entity?
A.Entities with limited lives that a company creates to achieve a specific objective.
B.An association of two or more entities for the purpose of achieving a specific goal.
C.Corporations that U.S. tax laws treat as partnerships, and they do not pay income
taxes.
D.A special type of partnership that confines the limited partner’s potential loss to the
amount of his or her investment.
Given the following cost and activity observations for Levo Enterprises’ utilities, use
the high-low method to calculate Levo’s variable utilities cost per machine hour. Round
your answer to two decimal places.
A.$0.09
B.$4.32
C.$0.25
D.$12.50
Use the following unadjusted trial balance to prepare adjusting entries, given the
additional information below it. Assume financial statements are prepared quarterly.
Omit explanations.
a.Of the revenue received in advance, 40 percent remained unearned on September 30.
b.The office furniture has an estimated five-year useful life and zero value at the end of
that time. Record depreciation for the quarter.
c.Salaries earned, but unpaid, totaled $1,520.
d.The Prepaid Rent applies to the six months beginning August 1, 20×5.
e.Office supplies on hand totaled $400 at the end of the quarter.
f.Services performed but not yet billed or recorded amount to $1,800.
A liability would not include an obligation to
A.transfer assets.
B.hire an employee.
C.pay cash.
D.provide services.
Lincoln Company engaged in this transaction:
Converted loans payable to stock.
Indicate which section, if any, the above transaction would appear in, or relate to, on a
statement of cash flows.
A.Financing activities section.
B.Schedule of noncash investing and financing transactions.
C.Investing activities section.
D.Does not represent a cash flow.
An understatement of year 1’s ending inventory will
A.cause year 2’s cost of goods sold to be overstated.
B.result in an understatement of year 2’s beginning inventory.
C.not affect year 2’s ending owner’s equity.
D.have no effect on year 2’s gross margin.
A bond with a face value of $1,000 has a current price quote of 89.00. This bond is
selling for
A.$1090.00.
B.$1040.00.
C.$990.00.
D.$890.00.
A responsibility accounting system ensures that
A.generally accepted accounting principles reporting requirements are met.
B.managers will not be held responsible for items they cannot change.
C.99 percent of businesses utilizing such a system will be profitable.
D.easy correlations between revenues and costs can be drawn.
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
price variance for Candy Stores.
A.$186,000 (F)
B.$186,000 (U)
C.$42,000 (F)
D.$42,000 (F)
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 to record the payroll taxes expense would include a credit to
A.Salaries Payable.
B.Federal Income Taxes Payable.
C.Social Security Tax Payable.
D.Cash.
The matching rule
A.results in the recording of a known amount for bad-debt losses.
B.necessitates the recording of an estimated amount for bad debts.
C.requires that all bad-debt losses be recorded when an individual customer defaults.
D.is violated when the allowance method is employed.
Sinoyianis Realty Company had the following balance sheet accounts and balances:
If, $6,000 of Accounts Payable were paid in cash, what would be the balance of the
Flora Sinoyianis, Capital account?
A.$8,000
B.$28,000
C.$36,000
D.$40,000
The following 20×5 information relates to Taylor, Inc.:
a. Calculate the net cash flows from operating activities. Show your work.
b. Calculate the net cash flows from investing activities. Show your work.
c. Calculate the net cash flows from financing activities. Show your work.
d. Calculate the net change in cash. Show your work.
Service organizations do not develop standard rates for which of the following?
A.Any service costs
B.Overhead
C.Direct materials
D.Labor
All of the following are needed for the computation of depreciation except
A.residual value.
B.estimated useful life.
C.cost.
D.current market value.
The purchase of treasury stock will result in
A.no net changes in assets, liabilities, or stockholders’ equity.
B.a decrease in assets and a decrease in stockholders’ equity.
C.a decrease in one asset account and an increase in a different asset account.
D.a decrease in assets and a decrease in liabilities.
Under the perpetual inventory system, which of the following accounts would not be
used?
A.Cost of Goods Sold
B.Merchandise Inventory
C.Sales
D.Purchases
Which of the following is correct regarding the present value calculations associated
with bonds?
A.The amount of interest a bond pays is fixed over its life.
B.The market interest rate varies from day to day and is the rate used to determine the
bond’s present value.
C.The amount investors are willing to pay for a bond varies because the bond’s present
value changes as the market interest rate changes.
D.All of these choices.
Eddie and Lauren are partners in a business. Eddie’s original capital contribution was
$80,000, and Lauren’s was $120,000. They agreed to share profits and losses as follows:
Calculate each partner’s share of profits and losses, assuming (a) the profit was
$200,000, (b) the profit was $140,000, and (c) the loss was $16,000.
Which of the following is an example of a deferral?
A.Debit Salaries Expense, credit Salaries Payable
B.Debit Accounts Receivable, credit Service Revenue
C.Debit Property Taxes Expense, credit Property Taxes Payable
D.Debit Insurance Expense, credit Prepaid Insurance
The graph below depicts two different types of costs. Questions related to the graph
should be answered in the spaces provided.
a. The line H-B represents what type of cost? ______________________
b. Total variable costs for production at point J would be ___________ than at point L.
c. Fixed costs per unit at point J would be _________ than at point L.
d. What is a possible reason that line G-A increases at point A to a new horizontal line?
e. What kind of cost is depicted by the line from point G to point A?
Which of the following would not require the use of cost behavior analysis?
A.Recording the transfer of production costs from one department to another
B.Projecting anticipated costs of a new project
C.Buying an existing business
D.Changing an existing product or service
Demmler Company entered into the transactions listed below. In the journal provided,
prepare Demmler’s journal entries, assuming use of the periodic inventory system. Omit
explanations.
What are the two steps in the analysis of a sales mix decision?
Marianna Corporation is authorized to issue 100,000 shares of $5 stated value common
stock and 2,000 shares of $100 par value, 6 percent preferred stock. Prepare entries in
journal form without explanations to record the following transactions:
Allan International is in the construction business. In 2014, it is expected that 30
percent of a month’s sales will be received in cash, with the balance being received the
following month. Of the purchases, 60 percent are paid the following month, 30 percent
are paid in two months, and the remaining 10 percent are paid during the month of
purchase.
The sales force receives $2,000 a month base pay plus a 4 percent commission. Labor
expenses are expected to be $6,000 a month. Other operating expenses are expected to
run about $5,000 a month, including $1,000 for depreciation.
The ending cash balance for 2013 was $28,000.
Prepare a cash budget and determine the projected ending cash balances for the first
three months of 2014.
Copper, Inc. purchased merchandise worth $1,800 on credit, terms n/30 and returned
merchandise worth $200 on next day. What is the required journal entry to record the
merchandise returns under the periodic inventory system?
On January 1, 20×5, Becky Bishop Fashion Company issued ten-year, 8 percent bonds
with a face value of $500,000. The semiannual interest dates are June 30 and December
31. The bonds were issued for $437,740 to yield an effective annual rate of 10 percent.
The accounting year ends on December 31. Prepare entries in journal form without
explanations to record the bond issue on January 1, 20×5, and the payments of interest
and amortization of discount on June 30 and December 31, 20×5. Use the effective
interest method of amortization. Round answers to the nearest dollar.
Match the following key terms with their meaning:
The CEO of Star Coffee is interested in reviewing the May 2014 performance report for
Cost Center 7-11. Prepare a brief performance report for the CEO utilizing the
following information for Cost Center 7-11. Line items should be broken out between
direct materials, direct labor, variable overhead, and fixed overhead.