Electrodo Co. purchased land for $55,000 with $20,000 paid in cash and $35,000 in
notes payable. What effect does this transaction have on the accounts under the accrual
basis of accounting?
a. Net increase in assets and liabilities of $55,000
b. Net increase in assets of $35,000 and a net increase in liabilities of $35,000
c. Net increase in assets of $55,000 and a net decrease in liabilities of $35,000
d. Net increase in assets of $75,000 and a net decrease in liabilities of $30,000
Identify the item that should be treated as a deferred expense by a company.
a. Prepaid advertising
b. Unpaid wages
c. Unearned rent
d. Notes receivable
The SarbanesOxley Act requires companies and their independent accountants to report
on the effectiveness of the company’s internal controls.
a. True
b. False
Under the indirect method for preparing the statement of cash flows, _____.
a. each transaction and its effect on cash flows are analyzed
b. net income is reconciled with net cash flows from operating activities
c. current liabilities are subtracted from the total cash flows from operating activities
d. depreciation expense is deducted from net income to calculate the cash flows from
operating activities
Using the following data for the current year, determine the accounts receivable
turnover.
Net sales on account during the year$ 457,065
Cost of merchandise sold during the year461,280
Accounts receivable, beginning of year75,290
Accounts receivable, end of year26,280
Inventory, beginning of year185,000
Inventory, end of year169,570
a. 7
b. 8
c. 10
d. 9
A company sold 200 shares of common stock with a par value of $5 at a price of $13
per share. What is the effect on the accounts of this transaction?
a. Increase cash $2,600; increase retained earnings $2,600
b. Increase cash $1,000; increase common stock $1,000
c. Increase cash $2,600; increase common stock $1,000 and increase paidin capital
$1,600
d. Increase cash $2,600; increase common stock $1,600 and increase paidin capital
$1,000
The quick ratio is computed as _____.
a. quick assets divided by current liabilities
b. quick assets divided by current assets
c. current assets divided by stockholders’ equity
d. current liabilities divided by current assets
Receiving cash in advance of performing a service creates a liability for the company.
a. True
b. False
Scada Co’s beginning inventory for the year was $52,500, purchases during the year
were $135,750, and ending inventory for the year was $175,000. What is Scada’s cost
of goods sold for the year?
a. $17,500
b. $52,500
c. $91,750
d. $13,250
The bank reconciles its statement to the depositor’s records.
a. True
b. False
Current liabilities are:
a. due but not receivable for more than one year.
b. due but not payable for more than one year.
c. due and receivable within one year.
d. due and payable within one year.
If 20,000 shares are authorized, 14,000 shares are issued, and 500 shares are held as
treasury stock, a cash dividend of $1 per share would amount to $13,500.
a. True
b. False
Jonas Company’s inventory has the following values:
Cost $1,000
Estimated selling price 1,500
Selling expenses 600
Under the lowerofcostormarket method, Jonas Company’s inventory will be valued at:
a. $500.
b. $900.
c. $1,500.
d. $1,000.
Ratios and various other analytical measures are not a substitute for sound judgment,
nor do they provide definitive guides for action.
a. True
b. False
An unfavorable volume variance may be due to a failure of supervisors to maintain an
even flow of work.
a. True
b. False
A note payable requires payment of the amount borrowed plus:
a. interest.
b. tax.
c. overhead.
d. dividend.
An adjusting entry would adjust revenue so that it is reported when earned and not
when cash is received.
a. True
b. False
The finished goods account is a controlling account for the subsidiary:
a. sales ledger.
b. materials ledger.
c. workinprocess ledger.
d. stock ledger.
The difference between a fixed asset’s initial cost and its current market value is called
the asset’s depreciable cost.
a. True
b. False
On the statement of cash flows, the cash flows from operating activities section would
include:
a. receipts from the issuance of common stock.
b. receipts from the sale of investments.
c. payments for the acquisition of investments.
d. cash receipts from sales activities.
From the given data for the current year, determine the inventory turnover.
Net sales on account during the year$ 316,780
Cost of merchandise sold during the year688,500
Accounts receivable, beginning of year47,000
Accounts receivable, end of year62,000
Inventory, beginning of year157,000
Inventory, end of year149,000
a. 3.8
b. 5.1
c. 4.5
d. 2.7
_____ is an example of internal stakeholders.
a. Managers
b. Creditors
c. Stockholders
d. Suppliers
Internal rate of return is often called the payback rate of return.
a. True
b. False
Rental charges of $60,000 per year plus $2 for each machine hour over 15,000 hours is
an example of a fixed cost.
a. True
b. False
A common balanced scorecard measures performance in all of the following areas
except:
a. education.
b. internal process.
c. financial.
d. innovation and learning.
The amount of the estimated average income for a proposed investment of $60,000 in a
fixed asset, giving effect to depreciation (straightline method), with a useful life of four
years, no residual value, and an expected total income yield of $22,300, is:
a. $10,800.
b. $5,575.
c. $5,400.
d. $15,000.
Using the following information, list the items that will require adjustments to the
accounts of Salem Co. Also, indicate which accounts will increase or decrease due to
the adjustment.
(a)The bank statement balance is $2,597.
(b)The cash account balance is $2,680.
(c)Outstanding checks amounted to $703.
(d)Deposits in transit are $732.
(e)The bank service charge is $25.
(f)Interest added to the checking account by the bank is $7.
(g)A check drawn for $59 was incorrectly charged by the bank as $95.
Accrued expenses are ordinarily reported on the balance sheet as:
a. assets.
b. liabilities.
c. fixed assets.
d. prepaid expenses.
The total cost concept includes all manufacturing costs minus selling and administrative
expenses in the total cost amount to which the markup is added to determine the
product price.
a. True
b. False
When choosing whether or not to replace an equipment, the analysis normally focuses
on the costs of continuing to use the old equipment versus replacing the equipment.
a. True
b. False
Assets are acquired through investing activities when resources are purchased.
a. True
b. False
Operating income for Division M is $150,000, and operating income before service
department charges is $975,000. Therefore,:
a. total operating expenses are $825,000.
b. total manufacturing expenses are $825,000.
c. direct materials, direct labor, and factory overhead total $825,000.
d. total service department charges are $825,000.
Finished goods inventory includes _____.
a. telephone charges
b. advertising expenses
c. factory overhead
d. director’s fees
Benjamin Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $250,000, $300,000, and
$420,000, respectively, for September, October, and November. The company expects
to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be
collected in the month of the sale, 25% in the month following the sale, and the
remainder in the following month.
The cash collections from accounts receivable in October are:
a. $270,000.
b. $272,500.
c. $210,000.
d. $218,000.