Anthony Driver wants to buy a new car in 4 years. He knows that he can earn 6%
interest compounded semi-annually. How much must he deposit now in order to have
$26,000 at the end of 4 years?
A. $21,390.20.
B. $20,524.66.
C. $38,413.96.
D. $31.603.26.
A contract giving the right to receive a specified quantity of foreign currency at a future
date is known as a:
A. Hedging contract.
B. Specified contract.
C. Foreign contract.
D. Future contract.
A statement of stockholders’ equity discloses each of the following except:
A. The market value of the stockholders’ equity at the end of the year.
B. The cost of treasury stock owned at the end of the year.
C. Net income for the current year.
D. The amount of cash dividends declared during the current year.
A bank statement shows a balance of $8,445 at June 30. The bank reconciliation is
prepared and includes outstanding checks of $2,790, deposits in transit of $1,350, and a
bank service charge of $30. Among the paid checks returned by the bank was check no.
900 in the amount of $600, which the company had erroneously recorded in the
accounting records as $60. The “adjusted cash balance” at June 30 is:
A. $6,975.
B. $6,465.
C. $7,005.
D. $7,575.
Green Leaf Company had the following information available on December 31:
Management applies the LCM rule on the basis of individual inventory items. What is
the write-down required?
A. $864.
B. $556.
C. $576.
D. $710.
Sunk costs:
A. Have already been incurred as a result of past actions.
B. Vary among the alternative courses of action being considered.
C. Are benefits that could have been obtained by following another course of action.
D. Result from unfavorable cost variances.
On June 1, 2015, Jensen Company acquired an 8%, ten-month note receivable from a
customer in settlement of an existing account receivable of $130,000. Interest and
principal are due at maturity.
Refer to the information above. The proper adjusting entry at December 31, 2015, with
regard to this note receivable includes a:
A. Debit to Cash of $6,067.
B. Debit to Notes Receivable of $10,400.
C. Credit to Interest Revenue of $10,400.
D. Debit to Interest Receivable of $6,067.
Alton Company produces metal belts. During the current month, the company incurred
the following product costs:
Raw materials $100,000
Direct labor $75,000
Electricity used in the Factory $25,000
Factory foreperson salary $3,750
Maintenance of factory machinery $2,000
Alton Company’s indirect product costs totaled:
A. $175,000.
B. $30,750.
C. $75,000.
D. $28,750.
Controlling the materials quantity variance is usually the responsibility of:
A. The cost accountant.
B. The purchasing agent.
C. The marketing director.
D. The production supervisor.
The stockholders’ equity section of the balance sheet of Crammond Corporation at
December 31, appears as follows:
Refer to the information above. What was the average issue price per share of preferred
stock?
A. $100.00.
B. $125.71.
C. $175.50.
D. $300.00.
When straight-line depreciation is in use, the depreciation rate of an asset is equal to:
A. 1 divided by the life of the asset.
B. 1 divided by the cost of the asset.
C. The cost of the asset divided by the life of the asset.
D. The cost of the asset less its salvage value divided by the life of the asset.
If the inventory at the end of the current year is understated and the error is never
caught, the effect is to:
A. Understate income this year and overstate income next year.
B. Overstate income this year and understate income next year.
C. Understate income this year with no effect on income next year.
D. Overstate the cost of goods sold, but have no effect on net income.
Thurman Corporation issued 450,000 shares of $.50 par value capital stock at its date of
incorporation for cash at a price of $4 per share. During the first year of operations, the
company earned $100,000 and declared a dividend of $40,000. At the end of this first
year of operations, the balance of the Common Stock account is:
A. $1,800,000.
B. $1,860,000.
C. $225,000.
D. $1,820,000.
On January 31, Village Bank had 500,000 shares of $3 par value common stock
outstanding. On that date, the company declared a 10% stock dividend when the market
price of the stock was $62 per share. The immediate effect of this dividend upon Village
Bank was:
A. A reduction in cash of $3,794,500.
B. A reduction in retained earnings of $3,100,000.
C. A reduction in retained earnings of $150,000.
D. A liability to the stockholders of $150,000.
Responsibility income statement-cost classification
Milton’s, a large department store, prepares income statements by sales department.
These statements follow the contribution margin approach, showing contribution
margin and responsibility margin for each profit center as well as monthly income from
operations for the store. Indicate the classification of each of the costs listed below by
inserting the appropriate code letters in the space provided.
Costs
____ (a) The cost of merchandise sold in the Women’s Sportswear Department.
____ (b) Advertising a sale in the Housewares Department (classify as a fixed cost).
____ (c) Depreciation on equipment used in the Automotive Service Department.
____ (d) Depreciation on the store’s heating and air conditioning system.
____ (e) Monthly salary of the manager of the Toy Department.
____ (f) Sales taxes collected from customers and paid to local tax authorities.
____ (g) Monthly salaries of store security guards.
The term responsibility center reflects the idea that the “centers” of a business usually
are defined in a manner such that each center is:
A. Responsible for earning a specified amount of profit.
B. Responsible for all business operations in a specific region.
C. Under the control of a specified center manager.
D. Approximately the same size.
Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The
company has developed the following budget for the coming year based on a sales
forecast of 80,000 T-shirts:
Cost of goods sold and variable operating expenses vary directly with sales, and the
income tax rate is 30% at all levels of operating income.
If the concert season is slow due to poor weather, Baskin estimates that sales could fall
to as low as 60,000 T-shirts.
Refer to the information above. What unit cost did Baskin use in budgeting the cost of
goods sold for the year?
A. $6 per unit.
B. $10.25 per unit.
C. $17.50 per unit.
D. Some other amount.
Shown below are selected data from the financial statements of Supreme Co. Dollar
amounts are in millions (except for the per share data).
Supreme reported earnings per share for the year of $4 and paid cash dividends of $1
per share. At year-end, the Wall Street Journal listed Supreme’s capital stock as trading
at $88 per share.
Refer to the information above. Supreme’s return on equity was:
A. 11%.
B. 25%.
C. 7.5%.
D. 16.3%.
Accents Associates sells only one product, with a current selling price of $70 per unit.
Variable costs are 40% of this selling price, and fixed costs are $12,000 per month.
Management has decided to reduce the selling price to $65 per unit in an effort to
increase sales. Assume that the cost of the product and fixed operating expenses are not
changed by this reduction in selling price.
Refer to the information above. At the current selling price of $70 per unit, what dollar
volume of sales per month is required for Accents to earn a monthly operating income
of $15,000?
A. $25,000.
B. $30,000.
C. $45,000.
D. Some other amount.
According to the Sarbanes-Oxley Act, CEOs and CFOs must certify to the accuracy of
their company’s financial statements:
A. Monthly and Quarterly.
B. Quarterly and Annually.
C. Monthly and Annually.
D. CEOs and CFOs are not required to certify to the company’s financial statement;
only CPA’s do.
Refer to the information above. If Cash at December 31, 2014, is $86,000, Capital
Stock is:
A. $260,000.
B. $300,000.
C. $620,000.
D. $168,000.
Cash ($86,000) + A/R ($40,000) + Land ($240,000) + Building ($180,000) +
Equipment ($120,000) = $666,000
A/P ($16,000) + N/P ($190,000) + Capital Stock (?) + R.E. ($160,000) = $666,000
Which of the following accounts normally contain a debit balance?
A. Asset.
B. Liability.
C. Owners’ equity.
D. Revenue.
After preparing the financial statements for the current year, the accountant for
Exquisite Gems closed the Dividends account at year-end by debiting Income Summary
and crediting the Dividends account. What is the effect of this entry on current-year net
income and the balance in the Retained Earnings account at year-end?
A. Net income is overstated and the balance in the Retained Earnings account is correct.
B. Net income is correct and the balance in the Retained Earnings account is overstated.
C. Net income is understated and the balance in the Retained Earnings account is
correct.
D. Net income is understated and the balance in the Retained Earnings account is
overstated.
BT&T Corporation manufactures telephones. Recently, the company produced a batch
of 600 defective telephones at a cost of $9,000. BT&T can sell these telephones as
scrap for $9 each. It can also rework the entire batch at a cost of $6,500, after which the
telephones could be sold for $20 per unit.
Refer to the information above. Which of the following statements is false regarding the
defective units?
A. BT&T will not recover its costs if it sells the defective units as scrap.
B. BT&T will recover total costs incurred if it reworks the defective units.
C. BT&T will not recover its costs if it reworks the defective units.
D. BT&T will recover more of its additional costs if it decides to rework the defective
units.
Empire Company uses the indirect method to prepare its statement of cash flows. The
following information has been gathered for the current period:
Solely on the basis of the above information, Empire’s net cash flow from operating
activities is:
A. $338,000.
B. $428,000.
C. $343,000.
D. $358,000.
Joe Notsosmart invested $10,000 at 8% simple interest for 5 years. How much more
would he have received if he had received compound interest annually at the same rate?
A. $4,000.
B. $4,693.
C. $693.
D. $400.
Refer to the information above. Roman’s labor efficiency variance for July is:
A. $1,250 favorable.
B. $1,190 favorable.
C. $1,213 unfavorable.
D. $37 unfavorable.
Refer to the information above. If Capital Stock is $260,000, what is the December 31,
2014 cash balance?
A. $86,000.
B. $94,000.
C. $46,000.
D. $686,000.
A/P ($16,000) + N/P ($190,000) + Capital Stock ($260,000) + R.E. ($160,000) =
$626,000
Seville Corporation has net assets of $2,072,000 and paid-in capital of $700,000. The
only stock issue consists of 74,000 outstanding shares of common stock. From this
information, it can be deduced that the company has:
A. Retained earnings of $2,072,000.
B. A deficit of $2,072,000.
C. A book value of $9.46 per share of common stock.
D. A book value of $28 per share of common stock.