A just-in-time costing system does not use the Finished Goods Inventory account;
instead, it combines the Finished Goods Inventory account with the Work-in-Process
Inventory account.
If an investment’s internal rate of return is higher than the required rate of return, the
company should reject the investment.
The asset turnover ratio is a way to evaluate how well a company can pay its short-term
liabilities.
Traditional costing provides more detailed information on costs of activities and the
drivers of these costs than activity-based costing.
The cost per equivalent unit for transferred in units is calculated by dividing total
transferred in costs by the equivalent units of production for transferred in units.
The sales volume variance is a result of the difference between the actual sales price
and the budgeted sales price.
Grace Paper Company has a debt ratio of 25%, which means that 75% of the assets are
financed by creditors.
Australia Company manufactures sonars for fishing boats. Model 70 sells for $260.
Australia produces and sells 5,600 of them per year. Cost data are as follows:
A potential deal has come up for a one-time sale of 32 units at a special price of $115 per
unit. The marketing manager states that the sale will not negatively impact the company’s
regular sales activities and will require the normal variable manufacturing costs and selling
and administrative costs. The production manager states that there is plenty of excess
capacity and the deal will not impact fixed costs. The controller points out, however, that
because the expected increase in revenues are equal to the expected increase in costs to fill
the order, the deal will not have any impact on the bottom line. The controller is correct in
his statement.
The net cash flow from operating activities is calculated in the same way, whether the
company uses the direct or the indirect method of preparing the statement of cash flow.
For good controls over cash payments, the person who orders goods from a supplier
should always be different from the person who approves the payment.
The matching principle requires businesses to record Warranty Expense when the
warranty costs are incurred.
The balance in the Bonds Payable account is a credit of $92,000. The balance in the
Premium on Bonds Payable account is a credit of $1,990. The bond’s carrying amount
is $93,990.
Because contribution margin is based on sales price and variable costs, the ratio can be
calculated using either the total amounts or the unit amounts.
The breakeven point represents the sales level at which the company’s operating income
is zero.
The IMA Standards of Ethical Practice include confidentiality, competence, credibility,
and integrity.
Absorption costing is used to analyze contribution margin.
When a company co-signs a note payable for another entity, a current liability must be
recorded.
The payback method is used only when the net cash inflows from a capital investment
are the same for each period.
On January 1, Ogden, Inc. had $1,500 of supplies on hand. During January, Ogden
purchased $5,500 worth of new supplies. At the end of the month, a count revealed
$700 worth of supplies remaining on the shelves. The adjusting entry needed will
include a debit to Supplies Expense of $6,300. The supplies were initially recorded as
an asset.
If the volume of activity doubles in the relevant range, total variable costs will also
double.
The debt ratio is the ratio of total debt divided by total equity.
The financing activities section of the statement of cash flows includes activities that
affect current assets and current liabilities.
In a limited-liability company (LLC), the members are personally liable for the debts of
the business.
A law firm provides legal services for clients who do not pay immediately. There is no
effect on the counting equation until the client pay for the services.
The steps of an activity-based costing system for a service firm are significantly
different from that used for a manufacturing firm.
Horizontal analysis is the study of percentage changes in comparative financial
statements.
A transaction is any event that affects the financial position of the business and can be
easily estimated.
A static budget presents financial data at multiple levels of sales volume.
Quality costs are easy to measure.
There is no need for managers to have employees participate in developing the budget
because the budget is a management tool.
All of the information that is needed to prepare the budgeted statement of cash flows
comes from the budgeted income statement.
Managerial accountants can design performance evaluation systems that encourage goal
congruence.
The last step in the preparation of the master budget is the budgeted balance sheet.
A trademark represents distinctive identifications of products or services.
The statement of stockholders’ equity does not show the changes to the Retained
Earnings account because that information is provided in the statement of retained
earnings.
Which of the following is the correct accounting treatment for a patent?
A) A patent must be shown as a current asset on the balance sheet.
B) A patent must be depreciated or impaired, but not amortized.
C) A patent must be capitalized and amortized over 20 years or less.
D) A patent must be expensed, not capitalized, in the period in which it is purchased.
The cost of goods sold for Frye Manufacturing in the year was $297,000. The January 1
Finished Goods Inventory balance was $31,600, and the December 31 Finished Goods
Inventory balance was $25,600. Calculate the cost of goods manufactured during the
year.
A) $322,600
B) $57,200
C) $291,000
D) $6,000
The Quadrangle Fabrication Plant suffered a fire incident at the beginning of the year,
which resulted in the loss of property including the accounting records. Some data for
the year were retrieved, and extracts from it are shown below:
The company’s manufacturing overhead allocation is based on direct labor hours. How
much manufacturing overhead was allocated to production during the year? (Round any
intermediate calculations to two decimal places, and your final answer to the nearest
dollar.)
A) $104,560
B) $66,528
C) $164,309
D) $186,000
O’Reilly, Inc. has prepared its third quarter budget and provided the following data:
The cash balance on June 30 is projected to be $4,500. The company has to maintain a
minimum cash balance of $5,000 and is authorized to borrow at the end of each month to
make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest
every month at an annual rate of 4%. All financing transactions are assumed to take place
at the end of the month. The loan balance should be repaid in increments of $5,000
whenever there is surplus cash. Calculate the amount of principal repayment at the end of
September.
A) $5,000
B) $10,000
C) $15,000
D) $20,000
The following transactions for the month of March have been journalized and posted to
the proper accounts.
Mar. 1 The business received $7,000 cash and issued common stock to stockholders.
Mar. 2 Paid the first month’s rent of $500.
Mar. 3 Purchased equipment by paying $2,000 cash and executing a note payable for
$6,000.
Mar. 4 Purchased office supplies for $700 cash.
Mar. 5 Billed a client for $12,000 of design services completed.
Mar. 6 Received $9,000 on account for the services previously recorded.
What is the balance in Accounts Receivable?
A) $9,000
B) $3,000
C) $6,000
D) $12,000
Douban Corporation provided the following information for the year:
What was the total manufacturing costs incurred during the year?
A) $698,000
B) $314,000
C) $853,000
D) $1,167,000
Rica Company is a price-taker and uses a target-pricing approach. Refer to the
following information:
What is the desired profit for the year?
A) $102,000
B) $18,000,000
C) $4,100,000
D) $2,363,000
On June 30, 2017, Martin Brothers, Inc. showed the following data on the equity
section of their balance sheet:
On July 1, 2017, the company declared and distributed a 8% stock dividend. The market
value of the stock at that time was $17 per share. Following this transaction, what is the
balance of Paid-In Capital in Excess of Par—Common?
A) $227,640
B) $523,160
C) $271,000
D) $457,880
Evaluated Receipts Settlement is ________.
A) a streamlined process that bypasses paper documents altogether
B) a process that eliminates the need for separation of duties
C) a procedure that compresses the payment approval process into a single step by
comparing the receiving report to the purchase order
D) an organizational plan and all the related measures adopted by an entity to safeguard
assets, encourage employees to follow company policies, promote operational
efficiency, and ensure accurate and reliable accounting records
Dell Productions is a price-taker. The company produces large spools of electrical wire
in a highly competitive market; thus, it uses target pricing. The current market price is
$825 per unit. The company has $3,100,000 in average assets, and the desired profit is a
return of 6% on assets. Assume all products produced are sold. The company provides
the following information:
Currently the cost structure is such that the company cannot achieve its profit objective
and must cut costs. If fixed costs cannot be reduced, how much reduction in variable cost
per unit will be needed to achieve the desired target? (Round your answer to the nearest
cent.)
A) reduction in variable cost per unit by $700.00
B) reduction in variable cost per unit by $125.00
C) reduction in variable cost per unit by $5.00
D) reduction in variable cost per unit by $6.86
The auditor’s report ________.
A) attests that the financial statements are error-free
B) is prepared by the internal auditors
C) states whether the financial statements are presented in accordance with GAAP
D) does not include an assessment of the effectiveness of the company’s internal
controls
Bingo Corporation has acquired a property that included both land and a building for
$500,000. The corporation hired an appraiser who has determined that the market value
of the land is $360,000 and that of the building is $420,000. At what amount should the
corporation record the cost of the building? (Round any intermediate calculations to
two decimal places, and your final answer to the nearest dollar.)
A) $226,800
B) $270,000
C) $250,000
D) $320,000
Which of the following inventory valuation methods should be used for unique items?
A) first-in, first-out
B) last-in, first-out
C) weighted-average
D) specific identification
Variable costing considers only ________ costs when determining product costs.
A) fixed manufacturing
B) variable manufacturing
C) variable selling and administrative
D) fixed selling and administrative
A liability created when a business collects cash from customers in advance of
providing services or delivering goods is called a(n) ________.
A) notes receivable
B) unearned revenue
C) accrued liability
D) service revenue
Neutral Paints Company uses the direct method for preparing its statement of cash flow.
Neutral reports the following information regarding 2017:
From the income statement:
Sales Revenues, $266,000
Cost of Goods Sold, $215,000
Operating Expenses, $37,000
From the balance sheet:
What amount will be shown for payments to suppliers for operating expenses? (Accounts
Payable are for purchases of merchandise inventory only, and Accrued Liabilities relate to
operating expenses.)
A) $39,900
B) $37,000
C) $35,500
D) $41,400
Which of the following managers is likely to have the least amount of responsibilities?
A) the manager of a cost center
B) the manager of a profit center
C) the manager of an investment center
D) the manager of a transfer pricing center
The Sarbanes-Oxley Act (SOX) ________.
A) requires independent accountants to take responsibility for the accuracy and
completeness of the financial reports
B) created the SEC
C) ensures that financial scandals will no longer occur
D) requires companies to take responsibility for the accuracy and completeness of their
financial reports
Bentley Manufacturing, Inc. provided the following information for the year:
The inventory account balances as of January 1 are given below.
What is the ending balance in the Work-in-Process Inventory account?
A) $15,960
B) $1,000
C) $50,000
D) $45,000
Which of the following amounts could differ if a company, using the LIFO inventory
costing method, shifts from a periodic inventory system to a perpetual inventory
system?
A) ending merchandise inventory
B) sales revenue
C) purchases
D) purchase returns
Malmo Avionics makes aircraft instrumentation. Its basic navigation radio requires $70
in variable costs and $2,000 per month in fixed costs. Further processing the radio, to
enhance its functionality, will require an additional $25 per unit of variable costs, plus
an increase in fixed costs of $800 per month. The marketing manager believes that they
would be able to increase the sales price of the radio from $260 to $300. Malmo sells
30 radios per month. If Malmo decides to further process the radio, monthly operating
income would ________.
A) increase by $1,200
B) increase by $3,650
C) decrease by $350
D) decrease by $3,650
Carlson Fashions uses standard costs for its manufacturing division. From the following
data, calculate the fixed overhead volume variance.
A) $16,800 F
B) $46,200 U
C) $46,200 F
D) $16,800 U
Which of the following statements is true of the Sarbanes-Oxley Act?
A) Accounting firms are allowed to provide both auditing services and a full range of
consulting services to their public company clients.
B) Those who commit securities fraud must be sentenced to 10 years in prison.
C) All private and foreign companies must issue an internal control report evaluated by
an outside auditor.
D) The Public Company Accounting Oversight Board oversees the work of auditors of
public companies.
Delaware, Inc. purchased raw materials worth $800 for cash. The journal entry to
record this transaction will include ________.
A) a debit to Cash for $800 and a credit to Raw Materials Inventory for $800
B) a debit to Accounts Payable for $800 and a credit to Raw Materials Inventory for
$800
C) a debit to Raw Materials Inventory for $800 and a credit to Accounts Payable for
$800
D) a debit to Raw Materials Inventory for $800 and a credit to Cash for $800
On March 1, 2016, Hughes Services issued a 6% long-term notes payable for $18,000.
It is payable over a 3-year term in $6,000 principal installments on March 1 of each
year, beginning March 1, 2017. Which of the following entries needs to be made on
March 1, 2016?
A)
B)
C)
D)
Which of the following accounts would appear in the balance sheet credit column?
A) Prepaid Insurance
B) Buildings
C) Unearned Revenue
D) Service Revenue
Which of the following accounts will be closed by debiting the Income Summary
account?
A) Depreciation Expense
B) Accounts Payable
C) Service Revenue
D) Accumulated Depreciation
A company purchased 110 units for $40 each on January 31. It purchased 200 units for
$25 each on February 28. It sold 200 units for $50 each from March 1 through
December 31. If the company uses the weighted-average inventory costing method,
calculate the amount of Cost of Goods Sold on the income statement for the year ending
December 31. (Assume the company uses the perpetual inventory system. Round any
intermediate calculations two decimal places, and your final answer to the nearest
dollar.)
A) $9,400
B) $6,064
C) $4,400
D) $5,000
Lakeside Manufacturing provided the following information for the month ended
March 31:
Compute cost of goods available for sale.
A) $15,600
B) $29,100
C) $23,600
D) $10,100
Burns Corp. has provided a part of its budget for the second quarter:
The cash balance on April 1 is $12,000. Assume that there will be no financing
transactions or costs during the quarter. Calculate the projected cash balance at the end of
June.
A) $115,300
B) $37,800
C) $81,300
D) $65,300
Long-term investments are made by the investment center manager for the purpose of
________.
A) increasing profits
B) decreasing profits
C) increasing interest expense
D) decreasing plant assets
Reversing entries are ________.
A) the exact opposite of a prior adjusting entry
B) dated the last day of the new period
C) required according to GAAP
D) expensive to record and time consuming
A business renders services to its customer for $50,000 on account. Record the
transaction in the journal.
Journalize the following transactions for a merchandiser that uses the perpetual
inventory system.
On January 8, inventory was sold for $6,000 on account. Credit terms were 3/15, n/30
(cost $4,500). On January 17, cash was received in full settlement of the January 8 sale.
Emery Products is deciding whether to outsource the production of a certain component
that is included in all of its products. It currently costs Emery Products $1.20 to make
each component in-house. If Emery Products outsources, it can buy the component
ready-made for $0.90 each and can shut down the production facilities it is currently
using to manufacture the component and save $20,000 a year in fixed costs. Annual
requirement for the component is 12,000 units. What is the effect of outsourcing?
What does inventory turnover measure? What does a high rate of inventory turnover
indicate?
James Service Company earned revenues of $100,000 and incurred expenses of
$107,000. Prepare the entry to close the Income Summary account.
Kalliste, Inc. completed Job C50. Job C50 required $3,000 of direct materials cost,
$2,000 of direct labor cost, and $600 of allocated manufacturing overhead. Provide the
journal entry needed to record completion and transfer of the job.
List and briefly discuss the three basic components of an accounting information
system.
The following information relates to Welty Manufacturing’s overhead costs for the
month:
Welty allocates manufacturing overhead to production based on standard direct labor
hours.
Welty reported the following actual results for last month: actual variable overhead, $
14,500; actual fixed overhead, $ $5,400; actual production of 4,700 units at 0.22 direct
labor hours per unit. The standard direct labor time is 0.20 direct labor hours per unit.
Compute the fixed overhead volume variance.
For each of the following responsibility centers, state the typical focus of the
responsibility report and briefly discuss the focus.
Complete the following statement:
When a company invests in equity securities with 20% to 50% ownership in the
investee’s _______ stock, the investor can ________ ________ the investee’s decisions.
These types of investments must be accounted for using the ________ method.
Prepare the journal entries for the following petty cash transactions of Allen Coffee
Shop.
Blair Corporation has adopted a JIT management system and has the following
transactions in March:
Mar 5 Incurred labor and overhead costs, $95,000
Mar 31 Completed 650 units with standard costs of $94 for direct materials and $128
for conversion costs
Open a T-account for Conversion Costs. Post appropriate entries to determine the
amount of underallocated or overallocated overhead. Record the adjusting entry.
Complete the statement, using the following terms: increase, decrease, or have no
effect on.
Increases in variable cost per unit ________ contribution margin per unit and ________
the breakeven point.
Metro Arcade sells tickets at $25 per person as a one-day entrance fee. Variable costs
are $11 per person, and fixed costs are $52,500 per month.
Assume that Metro increases variable costs from $11 to $14 per person. Compute the
new breakeven point in tickets and in sales dollars.
Donald Corp. reported the following on its comparative income statement (in millions):
2017 2016 2015
Revenue $728 $675 $500
Cost of goods sold 312 258 220
Prepare a horizontal analysis of revenues and cost of goods sold, both in dollar amounts
and in percentages, for 2016 and 2017. (Round your percentage answers to two decimal
places.)