Internal controls for cash payments also apply to payrolls.
Answer:
The primary disadvantage of decentralized operations is that decisions made by one
manager may affect other managers in such a way that the profitability of the entire
company may suffer.
Answer:
The equity method causes the investment account to mirror the proportional changes in
book value of the investee.
Answer:
Sarno has a capital balance of $42,000 after adjusting the assets to fair market value.
Minton contributes $22,000 to receive a 30% interest in the new partnership. The bonus
paid by Minton is $2,800.
Answer:
Even if a business sells six products, it is possible to estimate the break-even point.
Answer:
The two main sources of stockholders’ equity are investments contributed by
stockholders and net income retained in the business.
Answer:
Average inventory is computed by adding the inventory at the beginning of the period
to the inventory at the end of the period and dividing by two.
Answer:
The total of the accounts receivable subsidiary accounts and the account receivable
controlling account should balance to each other at the end of the period.
Answer:
A manufacturing business reports just two types of inventory on its balance sheet: work
in process inventory and finished goods inventory.
Answer:
When a partner withdraws from the partnership by selling his or her interest back to the
partnership, the remaining partners must pay the withdrawing partner a specified
amount from their personal assets.
Answer:
Medicare taxes are withheld from an employee’s pay only until the employee has earned
a specific amount each year.
Answer:
Bank customers are considered creditors of the bank so the bank shows their accounts
with credit balances on the bank’s records.
Answer:
If $500,000 of 10-year bonds, with interest payable semiannually, are sold for $494,040
based on (1) the present value of $500,000 due in 20 periods at 5% plus (2) the present
value of twenty, $25,000 payments at 5%, the nominal or contract rate and the market
rate of interest for the bonds are both 10%.
Answer:
An adjusting entry would adjust revenue so it is reported when earned and not when
cash is received.
Answer:
The due date of a 60-day note dated July 10 is September 10.
Answer:
Differential revenue is the amount of income that would result from the best available
alternative proposed use of cash.
Answer:
Prepaid Insurance is an example of a current asset.
Answer:
Proper ethical conduct implies that you only consider what’s in your best interest.
Answer:
The corporation owning all or a majority of the voting stock of another corporation is
known as the parent company.
Answer:
The recording of cash payments from the cash account is done by entering the amount
as a credit.
Answer:
The manager of the furniture department of a leading retailer does not control the
salaries of departmental personnel.
Answer:
The process of transferring the data from the journal to the ledger accounts is posting.
Answer:
The entry to record the disposal of fixed assets will include a credit to accumulated
depreciation.
Answer:
If the ownership of merchandise passes to the buyer when the seller delivers the
merchandise for shipment, the terms are stated as FOB destination.
Answer:
The most effective means of presenting standard factory overhead cost variance data is
through a factory overhead cost variance report.
Answer:
The statement of cash flows consists of three sections: cash flows from operating
activities, cash flows from income activities, and cash flows from equity activities.
Answer:
Unearned Revenues account is an example of a liability.
Answer:
Variable costs are costs that vary in total in direct proportion to changes in the activity
level.
Answer:
The method of analyzing capital investment proposals in which the estimated average
annual income is divided by the average investment is the average rate of return
method.
Answer:
Expenses are assets that are used up during the process of earning revenue.
Answer:
Safeguarding inventory and proper reporting of the inventory in the books are the
reasons for controlling the inventory.
Answer:
In a common-sized income statement, each item is expressed as a percentage of net
income.
Answer:
The amount of money a borrower receives from the lender is called discount rate.
Answer:
The income summary account is closed to the owner’s capital account.
Answer:
Use the following worksheet to answer the following questions.
Based on the preceding trial balance, the ending balance in C. Finley, Capital is:
A.$33,000
B.$80,000
C.$30,000
D.$83,000
Answer:
Motorcycle Manufacturers, Inc. projected sales of 78,000 machines for 2012. The
estimated January 1, 2012, inventory is 6,500 units, and the desired December 31, 2012,
inventory is 7,000 units. What is the budgeted production (in units) for 2012?
A.77,500
B.71,000
C.78,500
D.71,500
Answer:
Computerized accounting systems
A.is a tedious form of recordkeeping process.
B.improve the timeliness of reporting.
C.prevent all journalizing errors.
D.are only used in medium and large businesses.
Answer:
The difference between the current sales revenue and the sales at the break-even point is
called the:
A.contribution margin
B.margin of safety
C.price factor
D.operating leverage
Answer:
Under the allowance method, when a year-end adjustment is made for estimated
uncollectible accounts
A.Liabilities decrease.
B.Net Income is unchanged.
C.Total Assets are unchanged.
D.Total Assets decrease.
Answer:
If the expected sales volume for the current period is 8,000 units, the desired ending
inventory is 1,400 units, and the beginning inventory is 1,200 units, the number of units
set forth in the production budget, representing total production for the current period,
is:
A.10,600
B. 8,200
C. 66,000
D. 6,800
Answer:
Which of the following accounts has a normal debit balance?
A.Accounts Payable
B.Sales Returns and Allowances
C.Sales
D.Interest Revenue
Answer:
Equipment with an original cost of $75,000 and accumulated depreciation of $20,000
was sold at a loss of $7,000. As a result of this transaction, cash would
A.increase by $48,000
B.decrease by $7,000
C.increase by $55,000
D.decrease by $27,000
Answer:
The balance of the account is determined by
A.adding all of the debits to all of the credits.
B.always subtracting the debits from the credits.
C.always subtracting the credits from the debits.
D.adding all of the debits, adding all of the credits, and then subtracting the smaller sum
from the larger sum.
Answer:
Payroll entries are made with data from the
A.wage and tax statement
B.employee’s earning record
C.employer’s quarterly federal tax return
D.payroll register
Answer:
Division X of O’Blarney Company has sales of $300,000, cost of goods sold of
$120,000, operating expenses of $58,000, and invested assets of $150,000.
What is the rate of return on investment for Division X?
A.9.15%
B.81.3%
C.40.7%
D.200%
Answer:
The following production data were taken from the records of the Finishing Department
for June:
Determine the number of material equivalent units of production in the June 30
Finishing Department inventory, assuming that the first-in, first-out method is used to
cost inventories and materials were added at the beginning of the process.
A.7,000 units
B.68,000 units
C.72,000 units
D.76,000 units
Answer:
A $140 petty cash fund has cash of $20 and receipts of $117. The journal entry to
replenish the account would include a credit to
A.Cash for $20.
B.Cash Over and Short for $3.
C.Petty Cash for $120.
D.Cash for $120.
Answer:
Machinery acquired at a cost of $80,000 and on which there is accumulated
depreciation of $55,000 (including depreciation for the current year to date) is
exchanged for similar machinery. For financial reporting purposes, present entries to
record the disposition of the old machinery and the acquisition of new machinery under
each of the following assumptions:
Answer:
Retained earnings
A.is the same as contributed capital
B.cannot have a debit balance
C.changes are summarized in the retained earnings statement
D.is equal to cash on hand
Answer:
Accumulated Depreciation appears on the
A.balance sheet in the current assets section
B.balance sheet in the property, plant and equipment section
C.balance sheet in the long-term liabilities section
D.income statement as an operating expense
Answer:
The following is a list of various costs of producing sweatshirts. Classify each cost as
either a variable, fixed, or mixed cost for units produced and sold.
(a) Leather used to make a handbag.
(b) Warehouse rent of $8,000 per month plus $.50 per square foot of storage used.
(c) Thread.
(d) Electricity costs of $.038 per kilowatt-hour.
(e) Janitorial costs of $4,000 per month.
(f) Advertising costs of $12,000 per month.
(g) Accounting salaries.
(h) Color dyes for producing different colors of sweatshirts.
(i) Salary of the production supervisor.
(j) Straight-line depreciation on sewing machines.
(k) Patterns for different designs. Patterns typically last many years before being
replaced.
(l) Hourly wages of sewing machine operators.
(m) Property taxes on factory, building, and equipment.
(n) Cotton and polyester cloth.
(o) Maintenance costs with sewing machine company. The cost is $2,000 per year plus
$.001 for each machine hour of use.
Answer:
Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks
and 56,000 units of Bins. Related data are:
What was Carter Co.’s weighted average variable cost?
A.$140
B.$ 70
C.$ 64
D.$ 60
Answer:
Incurring actual indirect factory wages in excess of budgeted amounts for actual
production resultsina:
A.quantity variance
B.controllable variance
C.volume variance
D.rate variance
Answer:
ABC Corporation has three service departments with the following costs and activity
base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
How much service department cost would be allocated to the Super Division?
A.$350,000
B.$100,000
C.$125,000
D.$550,000
Answer:
Held-to-Maturity securities
A.are reported at their fair market value on the balance sheet date
B.include both stocks and bonds
C.are primarily purchased to earn interest revenue
D.all of the above
Answer:
If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000,
what is the contribution margin ratio?
A.38%
B.26.8%
C.11.8%
D.62%
Answer:
The operating budgets of a company include:
A.the cash budget
B.the capital expenditures budget
C.the financing budget
D.the production budget
Answer:
Which types of inventories does a manufacturing business report on the balance sheet?
A.Finished goods inventory and work in process inventory
B.Direct materials inventory and work in process inventory
C.Direct materials inventory, work in process inventory, and finished goods inventory
D.Direct materials inventory and finished goods inventory
Answer:
Which one of the following will not be found on the balance sheet of a manufacturing
company?
A.cost of goods sold
B.materials
C.work in process
D.finished goods
Answer:
Which of the following items appear on the corporate income statement before income
from continuing operations?
A.cumulative effect of a change in accounting principle
B.income tax expense
C.extraordinary gain
D.loss on discontinued operations
Answer:
Which one of the following below would not be classified as an operating activity?
A.interest expense
B.income taxes
C.payment of dividends
D.selling expenses
Answer:
The payment for the monthly rent will require the following entry
A.Debit Cash and Debit Rent Expense
B.Credit Cash and Credit Rent Expense
C.Debit Rent Expense and Credit Cash
D.Credit Rent Expense and Debit Cash
Answer:
The interest rate specified in the bond indenture is called the
A.discount rate
B.contract rate
C.market rate
D.effective rate
Answer:
Below is budgeted production and sales information for Bluebird Company for the
month of December:
The unit selling price for product XXX is $5 and for product ZZZ is $14.
Budgeted production for product XXX during the month is:
A.522,000 units
B.552,000 units
C.518,000 units
D.520,000 units
Answer:
Fashion Jeans, Inc. sells two lines of jeans; Simple Life and Fancy Life. Simple Life
sells for $85.00 a pair and Fancy Life sells for $100.00 a pair. The company sells all of
its jeans on credit and estimates that 60% is collected in the month of the sale, 35% is
collected in the following month, and the rest is considered to be uncollectible. The
estimated sales for Simple are as follows: January 20,000 jeans, February 27,500 jeans,
and March 25,000 jeans. The estimated sales for Fancy are as follows: January 18,000
jeans, February 19,000, and March 20,500 jeans. What are the expected cash receipts
for the month of March?
A.$3,988,125
B.$2,505,000
C.$2,125,000
D.$4,175,000
Answer:
Jonathan Martin is the owner and operator of Martin Consultants. At December 31,
2011, Martin Consultants has assets of $430,000 and liabilities of $205,000. Using the
accounting equation and considering each case independently, determine the following:
a. Jonathan Martin, capital, as of December 31, 2011.
b. Jonathan Martin, capital, as of December 31, 2012, assuming that assets increased by
$12,000 and liabilities increased by $15,000 in
c. Jonathan Martin, capital, as of December 31, 2012, assuming that assets decreased by
$8,000 and liabilities increased by $14,000 during 2012.
Answer:
The income statement should be prepared
A.before the statement of owner’s equity and balance sheet
B.after the statement of owner’s equity and before the balance sheet
C.after the statement of owner’s equity and balance sheet
D.after the balance sheet and before the statement of owner’s equity
Answer:
Prepare a journal entry on October 12 for the fees earned on account, $14,600.
Answer:
Kennedy, Inc. reported the following data:
Prepare the cash flows for operating activities under the indirect method as it would
appear on the statement of cash flows.
Answer:
To meet projected annual sales, Greenleaf Manufacturers, Inc. needs to produce 75,000
machines for 2012. The estimated January 1, 2012, inventory is 7,000 units, and the
desired December 31, 2012, inventory is 12,000 units. What are projected sales units
for 2012?
Answer:
Use the following tables to calculate the present value of a $25,000 7%, 5 year bond
that pays $1,750 ($25,000 x 7%) interest annually, if the market rate of interest is 7%
Present Value of $1 at Compound Interest
Present Value of Annuity of $1 at Compound Interest
Answer:
The Mountain Springs Water Company has two departments. Purifying and Bottling.
The Bottling Department received 67,000 liters from the Purifying Department. During
the period, the Bottling Department completed 65,000 liters, including 3,000 liters of
work in process at the beginning of the period. The ending work in process was 5,000
liters. How many liters were started and completed during the period?
Answer:
Given the following data, determine the times interest earned ratio.
Answer:
Keeton Company had the following data:
Cost of Materials Used $60,000
Direct Labor costs $58,000
Factory Overhead $33,000
Work in Process, beg. $29,000
Work in Process, end. $18,000
Finished Goods,beg. $32,000
Finished Goods, end. $18,000
Show your calculations to determine the Cost of Goods Sold.
Answer:
Jamison Company produces and sells Product X at a total cost of $25 per unit, of which
$15 is product cost and $10 is selling and administrative expenses. In addition, the total
cost of $25 is made up of $14 variable cost and $11 fixed cost. The desired profit is $5
per unit. Determine the mark up percentage on total cost.
Answer:
On May 1, 10,000 shares of $10 par common stock were issued at $30, and on May 7,
5,000 shares of $50 par preferred stock were issued at $111. Journalize the entries for
May 1 and May 7.
Answer:
Carmen Flores’ weekly gross earnings for the week ending Dec. 7th were $2,500, and
her federal income tax withholding was $525. Prior to this week Flores had earned
$98,000 for the year. Assuming the social security rate is 6% on the first $100,000 of
annual earnings and Medicare is 1.5% of all earnings, what is Flores’ net pay?
Answer:
Amos Company’s molding department opened on October 1, 2012. During October,
35,000 units were completed and transferred out to the next department. On October 31,
2012, the 9,000 units which remained in inventory were 40% complete with respect to
conversion costs and 100% complete with respect to materials.How many equivalent
units of work did the molding department complete during October for materials and
conversion costs?
Answer:
Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in
the month following the sale. If sales on account are budgeted to be $150,000 for March
and receipts from sales on account total $162,500 in April, what are budgeted sales on
account for April?
Answer:
Answer:
Using the data from the Terrace Industries, determine the divisional income from
operations for Districts 1 & 2.
Allocate service department expenses proportional to the sales of each district.
Answer:
You began your new job as the accountant at Bolivar Industries during the month of
December. During your first month, you found several interesting issues.
1) While looking through the invoices, you found Invoices 213-242, 245-271, and
275-290. It appears that invoices 243, 244, 272, 273, and 274 are missing.
2) During the month, Clerk # 3 issued $250 in refunds as compared to Clerks #1, #2,
and #4 who issued less than $50 each.
3) The daily cash receipts and bank deposits reconcile, except on Tuesdays during the
month.
4) Business is generally brisk during the holiday season, but two weeks before
Christmas there was a sudden increase in slow payments.
REQUIRED:
Part A: What kind of warning signs could be associated with these issues?
Part B: What control could you put in place regarding cash refunds mentioned in Part A
(2)?
Answer:
On the basis of the following data for Barker Industries as of December 31, 2011,
determine the value of the inventory at the lower of cost or market. Also, show how the
merchandise inventory would appear on the balance sheet (assume that the cost was
determined by the FIFO method). Apply lower of cost or market to each inventory item.
Answer:
Describe the features of a voucher system and list typical supporting documents for a
voucher.
Answer:
MZE Manufacturing Company has a normal plant capacity of 37,500 units per month.
Because of an extra large quantity of inventory on hand, it expects to produce only
30,000 units in May. Monthly fixed costs and expenses are $112,500 ($3 per unit at
normal plant capacity) and variable costs and expenses are $8.25 per unit. The present
selling price is $13.50 per unit. The company has an opportunity to sell 7,500 additional
units at $9.90 per unit to an exporter who plans to market the product under its own
brand name in a foreign market. The additional business is therefore not expected to
affect the regular selling price or quantity of sales of MZE Manufacturing Company.
Prepare a differential analysis report, dated April 21 of the current year, on the proposal
to sell at the special price.
Answer:
Blackwell Industries received a 120-day, 9% note for $180,000, dated August 10 from a
customer on account.
Answer: