The price/earnings (P/E) ratio is a measure of investors’ confidence in a company’s
future.
Under the successful efforts method, the costs of both successful and unsuccessful
exploration for oil and gas are recorded as assets.
An organization chart assists in management control.
The work sheet is prepared after the formal adjusting and closing entries.
If a promissory note is dishonored, the payee should record interest income.
The declaration of dividends is solely the decision of the corporation’s board of
directors.
There are products or services that can be either sold in a basic form or be processed
further.
When treasury stock is sold at a price below its cost, the entry to record the sale has the
effect of reducing total stockholders’ equity.
Adjusting entries are useful in apportioning costs among two or more accounting
periods.
In a manufacturing company, an accountant’s salary is a value-adding cost.
Even when no errors have been made, accounting is never 100 percent accurate because
of the extensive use of estimates.
Last year, RC Rancho’s revenue was $120,000,000, variable costs were $90,000,000
and fixed costs were $15,000,000. RC Rancho’s contribution margin ratio was 25
percent.
A major criticism of the FIFO method is that it magnifies the effects of the business
cycle on business income.
A write-down of assets which results in a decrease in earnings may indicate that
earnings will be poor in the future.
Term bonds are of shorter duration than serial bonds.
Another name for the ledger is the book of original entry.
A 60-day note dated December 10 is due on February 10.
Accounting methods may be a source of incomparability among companies.
The best definition of assets is the:
A.cash owned by the company.
B.resources belonging to a company having future benefit to the company.
C.collection of resources belonging to the company and the claims on these resources.
D.owner’s investment in the business.
Use this information to answer the following question.
Assuming that the specific identification method is used and that ending inventory
consists of 15 units from each of the three purchases and five units from the January 1
inventory, cost of goods sold is
A.$221.
B.$418.
C.$338.
D.$445.
Lincoln Company engaged in this transaction:
Abandoned fully depreciated equipment.
Indicate which section, if any, the above transaction would appear in, or relate to, on a
statement of cash flows.
A.Investing activities section.
B.Operating activities section.
C.Does not represent a cash flow.
D.Financing activities section.
Which costing method will produce different results under perpetual and periodic
systems?
A.Specific identification
B.Average-cost
C.FIFO
D.Both FIFO and specific identification
The normal account balances for owner’s Capital and Withdrawals are
A.credit and debit, respectively.
B.debits.
C.credits.
D.debit and credit, respectively.
Which of the following is a contingent liability?
A.Note payable with interest included in face amount
B.Excise tax payable
C.Property tax liability
D.Disputed additional tax assessment
On a bank reconciliation, $75 interest earned on a checking account would
A.appear as a deduction of $75 from the balance per books.
B.appear as an addition of $75 to the balance per bank.
C.appear as an addition of $75 to the balance per books.
D.not appear as an adjustment on the bank reconciliation
For 20×5, Devers Enterprises had average total assets of $1,040,000, sales of $900,000,
net income of $100,000, net cash flows from operating activities of $150,000, dividend
payments of $50,000, purchases of plant assets of $120,000, and sales of plant assets of
$110,000. Using this information, compute (a) cash flow yield, (b) cash flows to sales,
(c) cash flows to assets, and (d) free cash flow. Round amounts to one decimal place.
Which of the following is the final step in the accounting cycle?
A.Prepare financial statements.
B.Close the accounts.
C.Prepare and adjusted trial balance.
D.Post the journal entries to the ledger.
The group of users of accounting information charged with achieving the goals of the
business is its
A.auditors.
B.creditors.
C.managers.
D.investors.
Which of the following most likely is an estimated liability?
A.Liability for vacation pay
B.Payroll liabilities
C.Unearned revenues
D.Current portion of long-term debt
Rodriguez Inc. is considering a project that costs $200,000. The company expects the
annual cash revenues to be $75,000 and annual expenses (including depreciation) to be
$30,000. The project has a ten-year useful life and a residual value of $25,000. Assume
Rodriguez Inc. uses straight line method of depreciation.
Using the above information for Rodriguez, the project’s payback period is
(Round your final answer to two decimal places.)
A.2.31 years.
B.3.20 years.
C.2.14 years.
D.2.50 years.
Contribution margin information is not relevant for
A.the elimination of unprofitable segment decisions.
B.pricing decisions for special orders.
C.sales mix with resource constraint decisions.
D.estimating the sales revenue for next period.
Under a capital lease, the lessee does all of the following except:
A.debits Capital Lease Equipment.
B.debits Rent Expense.
C.records depreciation on the leased asset.
D.credits Capital Lease Obligations.
Retailers often end their fiscal years .
A.during the slack season.
B.during the peak of the busy season.
C.at different times each year, depending on the tax consequences.
D.on June 30.
Which of the following companies would be most likely to use the retail method?
A.An auto dealer
B.A computer service company
C.A clothing store
D.A restaurant supply company
An advantage of the single-step income statement over the multistep form is
A.the amount of information it provides.
B.its simplicity.
C.its comprehensiveness.
D.its use in computing ratios.
To evaluate the amount of dividends they receive, investors use the ratio called
A.Price Earning ratio
B.Return on Equity
C.Dividend yield ratio
D.Current ratio
Which of the following accounts probably would have a smaller balance in the Adjusted
Trial Balance columns of a work sheet than in the Trial Balance columns?
A.Accumulated Depreciation’“Equipment
B.Wages Payable
C.Wages Expense
D.Prepaid Advertising
Outdoors Inc. manufactures steel hitches for camping trailers. The company’s direct
labor rates have been set by the terms of the current labor contract. Direct labor rate
standards have been assigned for each job classification. In May 2014, a young
apprentice was being trained during regular working hours to become a machine
operator on one of the turret lathes. A timekeeper determined that the apprentice had
spent a total of 48 hours as a novice machine operator in May. Standard time for the
same work output is 32 hours. The apprentice earned $6.25 per hour in May. The
standard direct labor rate for machine operators working on turret lathes is $10 per hour.
a. From the data provided, determine the direct labor efficiency variance and the direct
labor rate variance that resulted from the temporary substitution of the apprentice for
the regular machine operator. (Note that, according to the labor contract, the apprentice
is not entitled to the same rate as a regular machine operator during the training period.)
b. Did the company benefit financially from the situation? Why or why not? (Show
calculations.)
Underfoot Products uses standard costing. The following information about overhead
was generated during May:
Using the above information provided for Underfoot Products, compute the fixed
overhead variance.
A.$5,000 (F)
B.$5,000 (U)
C.$10,000 (U)
D.$10,000 (F)
Given the following information, prepare in good form the cost of goods sold section of
an income statement for 20×5.
Assume that part of accounts and other receivables on Trejada’s Toys’ balance sheet is
$8 million and that Thompson estimates its uncollectible accounts as 1 percent of
accounts receivable not yet due, 2 percent of accounts receivable between 1 and 60 days
past due, and 10 percent of accounts receivable over 60 days past due. Determine the
amount of Trejada’s adjusting entry to recognize uncollectible accounts using the
accounts receivable aging method, based on the following information:
Accounts receivable not yet due $300,000
Accounts receivable 1 – 60 days past due 100,000
Accounts receivable over 60 days past due 50,000
Why are cost flow assumptions made when accounting for merchandise inventory?
Match each of the following terms with its correct description.
Briefly explain the use of statistical methods to separate mixed cost components.
From the following alphabetical list of account balances, all of which are normal, for
Cannon Company on September 30, 2014, prepare a trial balance in proper form (the
amount of Tina Cannon, Withdrawals must be computed) .
April and Cammy are partners who have agreed to admit Elena, who will invest
$30,000 for a 20 percent interest. The previous capital balances were $30,000 and
$60,000 for April and Cammy, respectively. April and Cammy had shared profits and
losses equally. The entry that records Elena’s admission to the partnership is:
Assume that part of accounts and other receivables on Trejada Toys’ balance sheet is $8
million as of February 2, 2014. Also assume that Allowance for Uncollectible Accounts
has a credit balance of $275,000, that Trejada estimates its uncollectible accounts as 0.1
percent of net sales, and the amount of sales is $5,509,500,000. Record the adjusting
entry to recognize uncollectible accounts using the percentage of net sales method.
Fill in the blanks.
1> The cash budget serves two purposes. First, it shows the ending _________, which
is needed to complete the __________. Second, it highlights period’s excess cash
reserves or cash shortages.
2> A projection of cash receipts and cash payments for a future period of time is called
a(n) ______________.
3> Since the __________ is a summary of all expected transactions for a future time
period, it also must be the key to all expected cash transactions.
4> The _________________________ oversees each stage in the preparation of the
_______________ budget, decides any departmental disputes that may rise in the
process, and gives final approval to the budget.