A patent has a legal life of 20 years.
The direct materials quantity variance is the difference between the actual quantity used
and the standard quantity times the actual price.
Buying and selling goods and services are examples of operating activities.
The statement of cash flows discloses significant events related to the operating,
investing, and financing activities of a business.
The primary purpose of the statement of cash flows is to provide information about a
company’s investing and financing activities during an accounting period.
After a job is completed, the product’s unit cost can be determined from the job order
cost card.
Almost every revenue or expense account on the income statement has one or more
related accounts on the balance sheet.
The general ledger is used to record the details of each transaction. The general journal
is used to update each account.
The LIFO method tends to create peaks and valleys in the business cycle.
The operating cycle involves the purchase and sale of merchandise inventory as well as
the subsequent collection of cash from credit sales.
An adjusting entry would not include which of the following accounts?
A.Salaries Payable
B.Unearned Revenue
C.Interest Receivable
D.Cash
Edward Cheezer’s Inc. makes and sells frozen four-cheese pizzas, New York-style. The
expected selling price is $10 per pizza. The projected variable cost per pizza is $6. The
estimated fixed costs per month are $10,000.
If 6,000 pizzas are sold in a given month and fixed costs increase by $5,000, the overall
profit is
A.$15,000.
B.$19,000.
C.$20,000.
D.$9,000.
A common measure of long-term solvency is the
A.receivable turnover.
B.asset turnover.
C.debt to equity ratio.
D.current ratio.
Which of the following items is not shown on a single-step income statement?
A.Cost of goods sold.
B.Interest expense.
C.Selling expenses.
D.Gross margin.
In a common-size balance sheet for a retail store, the 100 percent amount is for
A.total liabilities.
B.total property, plant, and equipment.
C.total assets.
D.total current assets.
Lincoln Company engaged in this transaction:
Purchased treasury stock with cash.
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.Investing activities section.
C.Does not represent a cash flow.
D.Operating activities section.
Which of the following is not expressed in terms of a percentage?
A.Return on equity
B.Debt to equity ratio
C.Current ratio
D.Profit margin
A partnership agreement should include
A.the method of allocating profits and losses.
B.investments of each partner.
C.procedures for admitting partners.
D.All of these choices.
Which of the following methods ignores residual value initially but eventually
considers it in the calculation of depreciation?
A.Straight-line
B.Double-declining-balance
C.Group
D.Production
Which of the following describes a limited liability company?
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.
The future value of an ordinary annuity table would not include the factor
A.0.909.
B.2.010.
C.20.300.
D.1.000.
Which of the following does not include net income in its computation?
A.Debt to equity ratio
B.Return on assets
C.Return on equity
D.Profit margin
Marta Company has the following bank items:
The adjusted book balance should be
A.$49,250
B.$50,000
C.$50,050
D.$50,850
Using the following amounts taken from the balance sheet and income statement of a
business, compute the measures listed below. After each answer, write ‘L’ if it is a
measure of liquidity or ‘P’ if it is a measure of profitability. Round to two decimal
places.
a. Current ratio
b. Return on equity
c. Return on assets
d. Working capital
Under the perpetual inventory system, in addition to making the entry to record a sales
return, a company would
A.increase Merchandise Inventory and decrease Cost of Goods Sold.
B.increase Cost of Goods Sold and decrease Purchases.
C.increase Cost of Goods Sold and decrease Merchandise Inventory.
D.make no additional entry until the end of the period.
The owner’s Capital, Withdrawals, and Income Summary accounts for Laurel Repair
Company for the accounting period are presented below in T account form after the
recording and posting of closing entries:
The amount of net income (or net loss) for the period is
A.$400 net loss.
B.$500 net income.
C.$900 net income.
D.$400 net income.
Use this information to answer the following question.
A periodic inventory system is used.
Ending inventory under LIFO is
A.$452.
B.$429.
C.$214.
D.$237.
Which of the following accounts decreases when cost of goods manufactured is
recorded?
A.Work in Process Inventory
B.Finished Goods Inventory
C.Overhead
D.Cost of Goods Sold
Adobe Corporation had net income of $120,000 in 20×4 and $164,000 in 20×5. Total
stockholders’ equity at the end of 20×4 was $760,000 and total stockholders’ equity at
the end of 20×5 was $820,000. Adobe’s total assets at the end of 20×4 were $1,320,000
and its total assets at the end of 20×5 were $1,410,000. Based on this information, what
is Adobe’s return on equity for 20×5?
A.20.76%
B.17.97%
C.20.00%
D.12.01%
Wheels and More Company purchased equipment for $108,000. The equipment has an
estimated useful life of eight years and will be worthless at the end of that time. In the
partial balance sheet below, show exactly how the equipment should be disclosed after
it has been used for five years. Also calculate total assets.
Seymore Company manufactures three products, Ace, Deuce, and Trey, requiring the
following inputs of raw materials:
Unit cost and inventory for each raw material:
Prepare a direct materials purchases budget for the year ended December 31, 2014.
Liberty Industries purchased merchandise worth $1,800 on credit, terms n/30. What is
the required journal entry to record the transaction under the perpetual inventory
system?
Joan Miller owns an advertising agency. One of the adjustments her accountant made at
the end of July was $360 for unpaid wages of the secretary. Joan Miller might ask,
‘Why go to the trouble of making this adjustment? Why worry about it? Doesn’t
everything come out in the end, when the secretary is paid in August? Because wages
expense in total is the same for the two months, isn’t the net income in total
unchanged?’ Give three reasons why adjusting entries can help Joan Miller assess the
performance of her business. (Net income was $1,600.)
Complete the following chart by placing an ‘X’ under the applicable column heading.
Classify each cost as a fixed cost or variable cost and as either a direct or indirect
product cost or a period cost.
Golf Pro Inc. makes wood drivers for the professional golfer. Because of the clientele of
users, only the finest materials can be used, and the quality of craftsmanship must be
high. The following cost, quantity, and time standards have been set for 2014:
Direct materials: 2 board-feet of wood @ $20 per board-foot and 2 feet of leather strip
@ $5 per foot
Direct labor: Cutting Department, 0.6 hour per driver at $10 per hour;
Shaping/Finishing Department, 1.4 hours per driver at $15 per hour
Overhead: variable, $5 per direct labor hour; fixed, $8 per direct labor hour
The wood is added at the beginning of the cutting process and the leather strip at the
beginning of the shaping/finishing process.
Compute the standard cost per driver.
Describe at least three reasons why a corporation would want to buy back its own stock.