If applied overhead exceeds actual overhead, cost of goods sold must be increased by
the amount of the overapplied overhead in a job order costing system.
The amount of property tax payable is usually an estimated liability for a portion of the
year.
The accounting rate of return is calculated by dividing the project’s investment by its
net income.
Merchandisers usually take a physical inventory when the volume of goods is at its
lowest levels.
A different set of financial statements usually is prepared for each user.
Job estimates must be compared with actuals for evaluating performance.
A noninfluential and noncontrolling investment is defined as ownership of less than 25
percent of the stock of another company.
Evaluating the value chain and capacity issues are not part of the budgeting process.
Managerial accounting focuses on internal decision making.
An increase in expenses will have the effect of reducing owner’s equity.
The key to the preparation of an income statement for a manufacturing company is
proper determination of the cost of goods manufactured.
Minor materials and other production supplies that cannot be conveniently traced to
specific products are accounted for as indirect materials.
An ownership interest of greater than 50 percent is required for an investor to have
accounting control over an investee.
The cost of equipment would include the cost of test runs to see that the equipment is
operating properly.
Decisions to install new equipment, replace old equipment, and purchase or construct a
new building are examples of
A.capital investment decisions.
B.qualitative decisions.
C.sales mix decisions.
D.direct costing decisions.
Which of the following transactions does not result in an increase in expenses?
A.Payment of accounts payable.
B.Usage of utlities.
C.Allocation of the cost of a building.
D.Expiration of prepaid insurance.
In the journal provided, prepare adjusting entries for the following items. Omit
explanations.
a. Unrecorded interest on savings bonds is $680.
b. Property taxes incurred but not paid or recorded amount to $540.
c. Legal fees of $5,000 were collected in advance. By year end, 60 percent were still
unearned.
d. Prepaid Insurance had a $1,600 debit balance prior to adjustment. By year end, 40
percent was still unexpired.
e. Salaries incurred by year end but not yet paid or recorded amounted to $1,375.
f. Services totaling $900 have been performed but not yet recorded or billed.
According to the FASB, the usefulness of accounting is judged by which of the
following two qualitative characteristics of accounting information?
A.Comparability and neutrality
B.Understandability and comparability
C.Verifiability and timeliness
D.Relevance and faithful representation
Using the above information provided for Good Sleep, the total variable overhead
variance is
A.$4,500 (U).
B.$500 (F).
C.$79,500 (U).
D.$30,000 (F).
The following data have been gathered for a capital investment decision.
Minimum rate of return for this investment is 14 percent. The present value factors for
14 percent discount rate are given below.
a. Compute the present value of each of the cash inflows of the investment.
b. What would have been the present value of the cash flows if they were received in
equal installments over the five-year period at the same discount rate? (Assume the total
cash inflows remain same.)
c. If the answers to parts (a) and (b) differ, explain the reason(s) why.
Cash flow yield is a
A.liquidity ratio.
B.profitability ratio.
C.long-term solvency ratio.
D.market strength ratio.
Use the following information to answer the question below.
The following accounts appear in the ledger of Pepper Corporation on December 31,
20×5
A balance sheet prepared on December 31, 20×5 , would report total stockholders’
equity of
A.$164,000.
B.$178,000.
C.$214,000.
D.$294,000.
Use the following information to obtain the ratios requested below. Where necessary,
carry answers to one decimal place.
Dividends per share: $2.16
Market price per share: $48
Net income: $88,000
Average stockholders’ equity: $625,000
Earnings per share: $1.56
a. Dividends yield = _____________%
b. Return on equity = _____________%
c. Price/earnings (P/E) ratio = __________times
The point at which products are separated in a joint production process is the
A.split-off point.
B.joint product point.
C.separation point.
D.breakeven point.
Lee Carter Inc. forecast of sales is as follows: July, $50,000; August, $80,000;
September, $150,000. Sales are normally 75 percent cash and 25 percent credit. Credit
sales are collected in full in the following month. Merchandise cost averages 70 percent
of sales price. The company desires an inventory as of September 30 of $50,000. The
inventory as of June 30 was $30,000. The accounts receivable had zero balance on June
30.
Total cash receipts for August of Lee Carter will be
A.$12,500.
B.$60,000.
C.$47,500.
D.$72,500.
Company A’s current assets = $10,000, total assets = $26,000, current liabilities =
$7,000 and total liabilities = $47,000. What is Company A’s working capital?
A.$3,000
B.$21,000
C.1.43
D.0.55
When an extraordinary repair has been made to equipment, which of the following
accounts is debited?
A.Extraordinary Repairs
B.Equipment
C.Accumulated Depreciation
D.Cash
Robert Inc. uses the standard costing method. The company’s main product is a
fine-quality headphones that normally takes 0.5 hour to produce. Normal annual
capacity is 5,000 direct labor hours, and budgeted fixed overhead costs for the year
were $8,750. During the year, the company produced and sold 5,800 units. Actual fixed
overhead costs were $6,000.
Using the information provided for Robert Inc, compute the fixed overhead volume
variance.
A.$2,750 (F)
B.$925 (U)
C.$5,800 (U)
D.$3,675 (U)
On October 1, 2012, Biff’s Auto Repair purchased diagnostic equipment for $13,600.
The equipment had an estimated residual value of $4,000 and an eight-year life and was
sold on April 1, 2014. Assuming that the company depreciates the asset on a
straight-line basis and reports on a calendar-year basis, journalize the following
independent transactions in the journal provided. (Omit explanations.)
a. The entry to update depreciation to April 1, 2014
b. The entry to record the sale for $12,000
c. The entry to record the sale instead for $8,600
d. The entry to record the sale instead for $11,800
Interest on a note receivable may be calculated without knowledge of the
A.principal amount.
B.rate of interest.
C.note’s maturity date.
D.note’s duration.
The trial balance for Parker Company is as follows:
If the balance of the Mike Parker, Withdrawals account were $100,000 and the balance
of the Wages Expense account were $10,000, what would be the amount of B?
A.$124,000
B.$150,000
C.$192,000
D.$152,000
A contingent liability is recorded in the accounting records
A.if the contingency has not been described already in the notes to the financial
statements.
B.if it possibly will become an actual liability and the exact amount is known.
C.under no circumstances.
D.if it probably will become an actual liability and the amount can be reasonably
estimated.
Dapper Hat Makers is in the business of designing and producing specialty hats. The
material used for derbies costs $4.50 per unit, and Dapper pays each of its two full-time
employees $250 per week. If the company makes 30 derbies in a week, what is the
variable cost per derby?
A.$4.50
B.$15.00
C.$16.67
D.$21.17
On May 1, 20×5, Ironwood Corporation had 200,000 shares of $10 par value common
stock outstanding with a market value of $16 per share. On May 2, 20×5, Ironwood
announced a 4-for-1 stock split. After the split, the par value of the stock
A.remained the same as before the split.
B.was reduced to $2.50 per share.
C.was reduced by $4 per share.
D.was reduced by $2.50 per share.
In the United States, insider trading is considered
A)unethical, but not illegal.
B)neither unethical nor illegal.
C)both unethical and illegal.
D)illegal, but not unethical.
Use the following information to calculate at or for the year ended December 31, 2014:
(a) net income, (b) owner’s capital, (c) total assets, and (d) cash.
Which of the following is a tax borne by the employer but not the employee?
A.State income tax
B.FUTA tax
C.Medicare tax
D.Social security tax
Under the direct charge-off method of dealing with uncollectible accounts,
A.revenues and expenses are properly matched.
B.Accounts Receivable is shown on the balance sheet at net realizable value.
C.Uncollectible Accounts Expense is recorded in the period of the sale.
D.no Allowance for Uncollectible Accounts exists.