A company reported the following information regarding its inventory.
Beginning inventory: cost is $70,000; retail is $130,000.
Net purchases: cost is $65,000; retail is $120,000.
Sales at retail: $145,000.
The year-end inventory showed $105,000 worth of merchandise available at retail
prices. What is the cost of the ending inventory?
A. $48,300
B. $56,700
C. $56,441
D. $78,300
E. $105,000
Answer:
Which of the following is an example of a financial performance measure that would be
found in a balanced scorecard?
A. Percentage of on-time delivery.
B. Residual income.
C. Customer satisfaction.
D. Cycle time.
E. Employee turnover.
Answer:
A promissory note:
A. Is a short-term investment for the maker.
B. Is a written promise to pay a specified amount of money at a certain date.
C. Is a liability to the payee.
D. Is another name for an installment receivable.
E. Cannot be used in payment of an account receivable.
Answer:
Adams Co. uses the following standard to produce a single unit of its product:
Variable overhead (2 hrs. @ $3/hr.) = $ 6
Actual data for the month show variable overhead costs of $150,000 based on 24,000
units of production. The total variable overhead variance is:
A. $6,000F
B. $6,000U
C. $78,000U
D. $78,000F
E. $0
Answer:
A company purchased $7,500 worth of merchandise. Transportation costs were an
additional $80. The company later returned $900 worth of merchandise and paid the
invoice within the 3% cash discount period. The total amount paid for this merchandise
is:
A. $6,479.60
B. $6,482.00
C. $7,275.00
D. $7,355.00
E. $6,680.00
Answer:
The materiality constraint:
A. States that an amount can be ignored if its effect on financial statements is
unimportant to the user’s business decisions.
B. Requires use of the allowance method for bad debts.
C. Requires use of the direct write-off method.
D. States that bad debts not be written off.
E. Requires that expenses be reported in the same period as the sales they helped
produce.
Answer:
A manufacturing company has a beginning finished goods inventory of $14,600, raw
material purchases of $18,000, cost of goods manufactured of $32,500, and an ending
finished goods inventory of $17,800. The cost of goods sold for this company is:
A. $21,200
B. $29,300
C. $32,500
D. $47,100
E. $27,600
Answer:
Kamper Company sells two products Big Z and Little Z. Current direct material and
direct labor costs are detailed below. Next year, the company wishes to use a plantwide
overhead rate with direct labor hours as its allocation base. Next years overhead is
estimated to be $475,000. The direct labor and direct materials costs are estimated to be
consistent with the current year. Direct labor costs $20 per hour and the company
expects to manufacture 32,000 units of Big Z and 9,000 units of Little Z next year.
What are total estimated direct labor hours for this next year?
A. 30,800 total DLH.
B. 616,000 total DLH.
C. 300,000 total DLH.
D. 1,025,000 total DLH.
E. 916,000 total DLH.
Answer:
Assume BizChair.com sold a used conveyor belt for $172,000 cash. If accumulated
depreciation on the sale date was $58,311 and a gain of $6,721 was recognized on the
sale, what was the original cost of the asset?
A. $223,590
B. $216,869
C. $165,279
D. $65,032
E. $113,689
Answer:
Our company has three times as many assets as it does liabilities. If total liabilities are
$55,000, what is the amount of owners’ equity?
A. $55,000
B. $110,000
C. $165,000
D. $220,000
E. Owners equity cannot be determined from the given information.
Answer:
Chiller Company has credit sales of $5.60 million for year 2013. Chiller estimates that
1.32% of the credit sales will not be collected. Historically, 4% of outstanding accounts
receivable is uncollectible. On December 31, 2013, the companys Allowance for
Doubtful Accounts has an unadjusted credit balance of $3,561. Chiller prepared a
schedule of its December 31, 2013, accounts receivable by age. Based on past
experience, it estimates the percent of receivables in each age category that will become
uncollectible. This information is summarized here:
Assuming the company uses the aging of accounts receivable method, what is the
amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting
journal entry?
A. $59,045.80
B. $51,878.41
C. $48,317.41
D. $70,359.00
E. $66,167.80
Answer:
A company purchases merchandise on November 2 at a $2,400 invoice price (terms
3/10, n/30) and then pays all amounts owed on November 12. Using perpetual
inventory and net purchases methods, what are the proper entries to record these two
transactions?
A.
nventoryDiscounts Lostecord these two transactions.thod, what are the proper entries to
record the pury purchases
B.
C.
D.
E.
Answer:
What is the correct amount of direct materials used?
A. $141,000.
B. $125,000.
C. $137,000.
D. $129,000.
E. $138,000.
Answer:
Ivan Company has a goal of earning $70,000 after-tax income. Ivan would need to pay
$20,000 of income taxes at the target level of income. The contribution margin ratio is
30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are
$36,000?
A. $23,333
B. $36,000
C. $300,000
D. $353,333
E. $420,000
Answer:
An adjusting entry was made on December 31, 2014 to accrue a salary expense of
$1,200. Which of the following entries would be prepared to record the next payment of
salaries on January, 2015 in the amount of $3,000?
A.
B.
C.
D.
E.
Answer:
A corporation declared and issued a 15% stock dividend on November 1. The
following up-to-date information was available immediately prior to the dividend:
The amount that total stockholders’ equity will increase (decrease) as a result of
recording this stock dividend is:
A. $45,000
B. $135,000
C. $(90,000)
D. $(135,000)
E. $0
Answer:
A financial statement providing information that helps users understand a company’s
financial status and lists the types and amounts of assets, liabilities, and equity as of a
specific date is called a(n):
A. Balance sheet.
B. Income statement.
C. Statement of cash flows.
D. Statement of retained earnings.
E. Financial status statement.
Answer:
At the end of the day, the cash register’s record shows $1,000 but the count of cash in
the register is $1,035. The proper entry to record this excess includes a:
A. Credit to Cash for $35.
B. Debit to Cash for $35.
C. Credit to Cash Over and Short for $35.
D. Debit to Cash Over and Short for $35.
E. Debit to Petty Cash for $35.
Answer:
Chance, Inc. sold 3,000 units of its product at a price of $72 per unit. Total variable cost
per unit is $51, consisting of $32 in variable production cost and $19 in variable selling
and administrative cost. Compute the manufacturing margin for the company under
variable costing.
A. $96,000
B. $63,000
C. $120,000
D. $216,000
E. ($90,000)
Answer:
A company manufactures and sells a product for $120 per unit. The company’s fixed
costs are $68,760, and its variable costs are $90 per unit. The company’s break-even
point in units is:
A. 2,292
B. 573
C. 764
D. 327
E. 840
Answer:
Apatha Company has assets of $600,000, liabilities of $250,000, and equity of
$350,000. It buys office equipment on credit for $75,000. The effects of this transaction
include:
A. Assets increase by $75,000 and expenses increase by $75,000.
B. Assets increase by $75,000 and expenses decrease by $75,000.
C. Liabilities increase by $75,000 and expenses decrease by $75,000.
D. Assets decrease by $75,000 and expenses decrease by $75,000.
E. Assets increase by $75,000 and liabilities increase by $75,000.
Answer:
Recording the items on the financial statements in dollars is done because of the:
A. Objectivity principle
B. Monetary unit principle
C. Revenue recognition principle
D. Going-concern principle
E. Cost principle
Answer:
A company issued 18-year, 6% bonds with a par value of $750,000. The company
received $761,736 cash for the bonds. Using the straight-line method, the amount of
interest expense for the first semiannual interest period is:
A. $22,174
B. $22,826
C. $22,500
D. $23,152
E. $21,848
Answer:
Management anticipates fixed costs of $72,500 and variable costs equal to 40% of
sales. What will pretax income equal if sales are $325,000?
A. $57,500
B. $122,500
C. $130,000
D. $181,250
E. $252,500
Answer:
Which of the following statements is incorrect?
A. Prepaid expenses, depreciation, and unearned revenues involve previously recorded
assets and liabilities.
B. Accrued expenses and accrued revenues involve assets and liabilities that were not
previously been recorded.
C. Adjusting entries can be used to record both accrued expenses and accrued revenues.
D. Prepaid expenses, depreciation, and unearned revenues often require adjusting
entries to record the effects of the passage of time.
E. Adjusting entries affect the cash account.
Answer:
Within an organizational structure, the person most likely to be evaluated in terms of
controllable costs would be:
A. A payroll clerk.
B. A cost center manager.
C. A production line worker.
D. A maintenance worker.
E. A graphic designer.
Answer:
Match the following terms with the appropriate definition:
A) Accounting
B) Recordkeeping
C) External users
D) Internal users
E) Operating activities
F) Investing activities
G) Financing activities
H) Ethics
I) Social responsibility
J) Cost principle
Answer:
A department had 600 units which were 40% complete in beginning Goods in Process
Inventory. During the current period, 7,000 units were transferred out. Ending Goods in
Process Inventory was 800 units which were 40% complete. Using the
weighted-average method, what are the equivalent units produced if all direct material
and direct labor are added uniformly throughout the process?
A. 7,080
B. 6,960
C. 7,320
D. 7,680
E. 7,800
Answer:
A company’s outstanding stock consists of (a) 17,000 shares of noncumulative 7.50%
preferred stock with a $10 par value and (b) 42,500 shares of common stock with a $1
par value. During its first four years of operation, the corporation declared and paid the
following total cash dividends:
What amount of dividends will common stockholders receive in 2014?
A. $26,725
B. $15,250
C. $2,500
D. $0
E. $28,000
Answer:
Product costs:
A. Are expenditures necessary and integral to finished products.
B. Are expenditures identified more with a time period rather than with finished
products.
C. Include selling and administrative expenses.
D. Are only costs that vary with the volume of activity.
E. Are only costs that do not vary with the volume of activity.
Answer:
A company has a decision to make between two investment alternatives. The company
requires a 10% return on investment. Predicted data is provided below:
The present value of an annuity for six years at 10% is 4.3553. This company uses
straight-line depreciation.
Required:
a. Calculate the net present value for each investment.
b. Calculate the profitability index for each investment.
c. Which investment should this company select? Explain.
Answer:
A company rents a small building with 10,000 square feet of space for $100,000 per
year. The rent is allocated to the company’s three departments on the basis of the value
of the space occupied by each. Department 1 occupies 1,500 square feet of ground-floor
space, Department 2 occupies 3,500 square feet of ground-floor space, and Department
3 occupies 5,000 square feet of second-floor space. If rent for comparable floor space in
the neighborhood averages $15.00 per sq. ft. for ground-floor space and $10 per sq. ft.
for second-floor space, what annual rent expense should be charged to each
department?
Answer:
Answer:
A company made the following merchandise purchases and sales during the current
month:
There was no beginning inventory. If the company uses the last-in, first-out perpetual
inventory system, what would be the cost of the ending inventory?
Answer:
Using the following table indicate the impact of the following errors made during the
adjusting entry process. Use a “+” for overstatements, a “-” for understatements and a
“0” for no effect. The first one is provided as an example:
Answer:
From the adjusted trial balance, prepare an income statement for Martin Sky Taxi
Services.
Answer:
FastForward purchased $25,000 of equipment for cash. The Equipment asset account is
_______________ for $25,000 and the cash account is _______________ for $25,000.
Answer:
Explain the concept of the present value of an annuity.
Answer:
A company reported net income of $275,000, net sales of $2,500,000, and average total
assets of $2,100,000 for the current year. Calculate this company’s profit margin, total
asset turnover, and return on total assets.
Answer:
How can management evaluate the risk of an investment?
Answer:
Eclectic Furniture Company allocates its indirect salaries of $12,500 on the basis of
sales. Determine the indirect salaries allocated to Departments 1 and 2 using the
following information:
Salaries allocated Dept. 1 _______________
Salaries allocated to Dept. 2 _______________
Answer:
There are at least three different methods to estimate costs. These methods are the
_______________, _______________, and _______________methods.
Answer:
The ____________________ ratio reflects how much inventory is available in terms of
days’ sales.
Answer:
On January 1, 2013, Timley issues $2,200,000 of 6%, 12-year bonds at a price of 105½
that pay interest semiannually. The straight-line method is used to amortize any bond
premium or discount. What is the journal entry to record the issuance of the bonds on
January 1, 2013?
Answer:
Active Sports LP is organized as a limited partnership consisting of two partners:
Basketball Products LP and Hockey Products LP. Each of the partners sell sporting
equipment for their respective sports. Compute the partner return on equity for each
limited partnership and for the total limited partnership for the year ended September
30, 2013, using the following data:
Answer:
_______________________, or customized production, produces products in response
to customer orders.
Answer:
Discuss some of the financial and nonfinancial performance measures that are
important to United By Blue founder Brian Linton.
Answer:
What is gross margin ratio? How is it used as an indicator of profitability?
Answer: