An exchange is said to have commercial substance if future cash flows remain the same
as a result of the exchange.
Answer:
When a partner withdraws from the partnership, the partnership dissolves.
Answer:
The process of measuring and reporting operating data by areas of responsibility is
termed responsibility accounting.
Answer:
The amortization of discounts or premiums are recorded as part of interest income on
the income statement.
Answer:
When the petty cash fund is replenished, the petty cash account is credited for the total
of all expenditures made since the fund was last replenished.
Answer:
Accumulated Depreciation is a permanent account.
Answer:
If paid-in-capital in excess of par/preferred stock is $30,000, preferred stock is
$200,000, paid-in-capital in excess of par/common stock is $20,000, common stock is
$525,000, and retained earnings is $105,000 (deficit), the total stockholders’ equity is
$880,000.
Answer:
Purchases of merchandise are typically credited to the merchandise inventory account
under the perpetual inventory system.
Answer:
Managerial information is for external as well as internal stakeholders.
Answer:
An extraordinary item must be either unusual in nature or infrequent in occurrence.
Answer:
Cost accounting systems are used to supply cost data information on costs incurred by a
manufacturing process or department.
Answer:
Closing entries are entered directly on to the work sheet.
Answer:
Job order cost accounting systems may be used for planning and controlling a service
business.
Answer:
When a new partner is admitted by making an investment in the partnership, the old
partners’ capital accounts are always credited.
Answer:
On the income statement in the single-step form, the total of all expenses is deducted
from the total of all revenues.
Answer:
A company pays $360 for a yearly trade magazine on August 1. The adjusting entry on
December 31 is debit Unearned Subscription Revenue, $150 and credit Subscription
Revenue, $150.
Answer:
Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.
Answer:
The principal ledger that contains all the balance sheet and income statement accounts
is the general ledger.
Answer:
When using the estimate based on sales method, the entry to record uncollectible
accounts expense includes a credit to the Accounts Receivable account.
Answer:
Variable costs are costs that remain constant in total dollar amount as the level of
activity changes.
Answer:
When the rate of return on total assets ratio is greater than the rate of return on common
stockholders’ equity ratio, the management of the company has effectively used
leverage.
Answer:
A cash refund paid to a customer who overpaid an account receivable is recorded in the
cash payments journal.
Answer:
After analyzing transactions, the next step would be to post the transactions in the
ledger.
Answer:
A cost that will not be affected by later decisions is termed a sunk cost.
Answer:
During the first year of operations, employees earned vacation pay of $35,000. The
vacations will be taken during the second year. The vacation pay expense should be
recorded in the second year as the vacations are taken by the employees.
Answer:
The prices of bonds are quoted as a percentage of the bonds’ market value.
Answer:
Equivalent units of production are the number of units that could have been
manufactured from start to finish during an accounting period.
Answer:
If employees are given bonuses for exceeding normal standards, the standards may be
very effective in motivating employees.
Answer:
If total assets decreased by $30,000 during a specific period and owner’s equity
decreased by $35,000 during the same period, the period’s change in total liabilities was
an $65,000 increase.
Answer:
Owner’s capital will be reduced by the amount in the drawing account.
Answer:
Accounts payable are accounts that you expect will be paid to you.
Answer:
Cash equivalents are short -term investments that will be converted to cash within 120
days.
Answer:
Using the Internet to perform business transactions is called e-commerce.
Answer:
Which of the following is not a characteristic of a general partnership?
A.the partnership is created by a contract
B.mutual agency
C.partners share equally in net income or net losses unless an agreement states
differently
D.dissolution occurs only when all partners agree
Answer:
Which of the following amounts should be disclosed in the stockholders’ equity section
of the balance sheet?
A.the number of shares of common stock outstanding
B.the number of shares of common stock issued
C.the number of shares of common stock authorized
D.all of the above
Answer:
When the market rate of interest was 12%, Halprin Corporation issued $1,000,000,
11%, 10-year bonds that pay interest annually. The selling price of this bond issue was
A.$ 321,970
B.$1,000,000
C.$ 943,494
D.$621,524
Answer:
Based on the following data for the current year, what is the accounts receivable
turnover?
A.17.5
B.2.6
C.20.0
D.15.5
Answer:
The following data relate to direct materials costs for November:
What is the direct materials quantity variance?
A.$3,600 favorable
B.$1,240 favorable
C.$3,600 favorable
D.$1,240 unfavorable
Answer:
The following totals for the month of June were taken from the payroll register of
Young Company:
The entry to record the accrual of employer’s payroll taxes would include a
A.debit to Payroll Taxes Expense for $2,498
B.debit to Social Security and Medicare Tax Payable for $2,250
C.debit to Payroll Taxes Expense for $1,373
D.Debit to Payroll Tax Expense for $1,125
Answer:
Temporary investments
A.are reported as current assets
B.include cash equivalents
C.do not include equity securities
D.all of the above
Answer:
The par value per share of common stock represents
A.the minimum selling price of the stock established by the articles of incorporation.
B.the minimum amount the stockholder will receive when the corporation is liquidated
C.an arbitrary amount established in the articles of incorporation
D.the amount of dividends per share to be received each year
Answer:
Bonds with a face amount $1,000,000, are sold at 96. The entry to record the issuance is
A.Cash 1,000,000
Premium on Bonds Payable 40,000
Bonds Payable 960,000
B.Cash 960,000
Premium on Bonds Payable 40,000
Bonds Payable 1,000,000
C.Cash 960,000
Discount on Bonds Payable 40,000
Bonds Payable 1,000,000
D.Cash 960,000
Bonds Payable 960,000
Answer:
The following information pertains to Newman 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 total assets for this company?
A.8.1%
B.6.8%
C.10.5%
D.16.1%
Answer:
Free cash flow is cash from operations, less cash for
A.dividends and cash for fixed assets needed to maintain productivity
B.dividends and cash to redeem bonds payable
C.fixed assets needed to maintain productivity
D.fixed assets needed to maintain productivity, and cash to redeem bonds payable
Answer:
Production and sales estimates for April are as follows:
The budgeted total sales for April is:
A.$200,000
B.$230,000
C.$270,000
D.$250,000
Answer:
Which of the following measures the relationship between cost of merchandise sold and
the amount of inventory carried during the period?
A.inventory turnover
B.Fixed asset turnover
C.retail method of inventory costing
D.gross profit method of inventory costing
Answer:
What is the total stockholders’ equity based on the following account balances?
A.$670,000
B.$655,000
C.$640,000
D.$565,000
Answer:
Which of the following is important when evaluating long-term investments?
A.Investments must earn a reasonable rate of return
B.The useful life of the asset
C.Proposals should match long term goals.
D.All of the above.
Answer:
Determine the missing amount for each of the following:
Assets Liabilities Owner’s Equity
(a) $38,000 $45,000
$30,000 (b) $22,000
$53,000 $32,000 (c)
Answer:
Production estimates for August are as follows:
For each unit produced, the direct materials requirements are as follows:
The total direct materials purchases (assuming no beginning or ending inventory of
material) of materials A and B required for August production is:
A.$1,080,000 for A; $1,296,000 for B
B.$1,080,000 for A; $648,000 for B
C.$1,125,000 for A; $675,000 for B
D.$1,170,000 for A; $702,000 for B
Answer:
In calculating cash flows from operating activities using the indirect method, a gain on
the sale of equipment is
A.added to net income.
B.deducted from net income.
C.ignored because it does not affect cash.
D.reported supplementally as a non-cash investing and financing activity
Answer:
For each of the following, journalize the necessary adjusting entry:
(a) A business pays weekly salaries of $22,000 on Friday for a five-day week ending on
that day. Journalize the necessary adjusting entry at the end of the fiscal period,
assuming that the fiscal period ends (1) on Tuesday, (2) on Wednesday.
(b) The balance in the prepaid insurance account before adjustment at the end of the
year is $18,000. Journalize the adjusting entry required under each of the following
alternatives: (1) the amount of insurance expired during the year is $5,300, (2) the
amount of unexpired insurance applicable to a future period is $2,700.
(c) On July 1 of the current year, a business pays $54,000 to the city for license taxes
for the coming fiscal year. The same business is also required to pay an annual property
tax at the end of the year. The estimated amount of the current year’s property tax
allocable to July is $4,800. (1) Journalize the two adjusting entries required to bring the
accounts affected by the taxes up to date as of July 31. (2) What is the amount of tax
expense for July?
(d) The estimated depreciation on equipment for the year is $32,000.
Answer:
The budget process involves doing all the following except:
A.establishing specific goals
B.executing plans to achieve the goals
C.periodically comparing actual results with the goals
D.dismissing all managers who fail to achieve operational goals specified in the budget
Answer:
The journal entry a company uses to record fully funded pension rights for its salaried
employees at the end of the year is
A.debit Salary Expense; credit Cash
B.debit Pension Expense; credit Unfunded Pension Liability
C.debit Pension Expense; credit Unfunded Pension Liability and Cash
D.debit Pension Expense; credit Cash
Answer:
Which transfer price approach is used when the transfer price is set at the amount sold
to outside buyers?
A.Market Price
B.Cost Price
C.Negotiated Price
D.Variable Price
Answer:
Identify the following costs as (a) direct materials, (b) direct labor, or (c) factory
overhead for a cake manufacturer.
1_____ Frosting
2 _____ Depreciation on oven
3 _____ Wages of bakers
4 _____ Sprinkles for topping
Answer:
Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a
balance of $15,500. If the issuing corporation redeems the bonds at 98.5, what is the
amount of gain or loss on redemption?
A.$500 loss
B.$15,500 loss
C.$15,500 gain
D.$500 gain
Answer:
Kim Hsu is the owner of Hsu’s Financial Services. At the end of its accounting period,
December 31, 2011, Hsu’s has assets of $575,000 and owner’s equity of $335,000.
Using the accounting equation and considering each case independently, determine the
following amounts.
a. Hsu’s liabilities as of December 31, 2011.
b. Hsu’s liabilities as of December 31, 2012, assuming that assets increased by $56,000
and owner’s equity decreased by $32,000.
c. Net income or net loss during 2012, assuming that as of December 31, 2012, assets
were $592,000, liabilities were $450,000, and there were no additional investments or
withdrawals.
Answer:
For which of the following businesses would a process cost system be appropriate?
A.Auto repair service
B.Paint manufacturer
C.Specialty printer
D.Custom furniture manufacturer
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.
Which product has the highest contribution margin per machine hour?
A.Bales
B.Tales
C.Wales
D.Bales and Tales have the same
Answer:
Which of the following costs would be included in merchandise inventory?
(a) Purchase price
(b) Insurance in transit FOB shipping point
(c) Freight for delivery FOB shipping point
(d) Repair due to negligence of receiving clerk
(e) Receiving Department employee salary
(f) Cost of processing purchase orders
Answer:
Which one of the following is not a difference between a retail business and a service
business?
A.in what is sold
B.the inclusion of gross profit in the income statement
C.accounting equation
D.merchandise inventory included in the balance sheet
Answer:
The net income reported on the income statement for the current year was $250,000.
Depreciation recorded on fixed assets and amortization of patents for the year were
$40,000 and $9,000, respectively. Balances of current asset and current liability
accounts at the end and at the beginning of the year are as follows:
What is the amount of cash flows from operating activities reported on the statement of
cash flows prepared by the indirect method?
A.$271,000
B.$279,000
C.$327,000
D.$256,000
Answer:
Unearned Fees appear on the
A.balance sheet in the current assets section
B.balance sheet as a current liability
C.balance sheet in the owner’s equity section
D.income statement as revenue
Answer: