Sales commissions expense for a department store is an example of a direct expense.
a. True
b. False
The budgeted direct materials purchases are based on the sum of (1) the materials
needed for production and (2) the desired ending materials inventory, less (3) the
estimated beginning materials inventory.
a. True
b. False
Calculate the breakeven sales when a business has sales of $824,000 and a margin of
safety of 21%.
a. $584,000
b. $650,960
c. $672,100
d. $710,000
Based on the following data for the current year, determine the accounts receivable
turnover.
Net sales on account during the year$ 550,000
Cost of merchandise sold during the year350,000
Accounts receivable, beginning of year35,000
Accounts receivable, end of year25,000
Inventory, beginning of year80,000
Inventory, end of year125,000
a. 9.2
b. 11.7
c. 18.3
d. 7.5
Under the direct writeoff method, an attempt is made to match Bad Debt Expense to
sales revenues in the same accounting period.
a. True
b. False
Inventories of finished products are reported as current assets on a manufacturer’s
balance sheet.
a. True
b. False
The balance in the office supplies account on May 1 was $6,380, supplies purchased
during June were $4,740, and the supplies on hand at May 31 were $2,360. The amount
to be used for the appropriate adjusting entry is:
a. $8,740.
b. $4,740.
c. $8,760.
d. $13,480.
Which of the following accounts is reported in the noncurrent liabilities section of the
corporate balance sheet?
a. Bonds Payable
b. Common Stock
c. Dividends Payable
d. Cash
The reduction in the par or stated value of common stock, accompanied by the issuance
of a proportionate number of additional shares, is called a stock split.
a. True
b. False
The par value per share of common stock represents:
a. the minimum selling price of the stock established by the articles of incorporation.
b. the minimum amount the stockholder will receive when the corporation is liquidated.
c. the monetary amount assigned to each share of stock in the articles of incorporation.
d. the amount of dividends per share to be received each year.
Tops Company sells Products D and E and has made the following estimates for the
coming year:
ProductUnit Selling PriceUnit Variable CostSales Mix
D$30$24 60%
E 70 5640
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Fixed costs are estimated at $202,400. Determine (a) the estimated sales in units of the
overall product necessary to reach the breakeven point for the coming year, (b) the
estimated number of units of each product necessary to be sold to reach the breakeven
point for the coming year, and (c) the estimated sales in units of the overall product
necessary to realize an operating income of $119,600 for the coming year.
Revenues received from providing services are referred to as:
a. fees earned.
b. net income.
c. gross income.
d. retained earnings.
If the standard to produce a given amount of product is 600 direct labor hours at $17
and the actual was 500 hours at $15, the direct labor time variance was $1,700
favorable.
a. True
b. False
The days’ sales in inventory is one means of expressing the relationship between net
sales and accounts receivable.
a. True
b. False
If the seller is to pay the delivery expense of delivering merchandise, the delivery terms
are stated as:
a. FOB shipping point.
b. FOB destination.
c. FOB n/30.
d. FOB seller.
For efficiency of operations and better control over cash, a company should maintain
only one bank account.
a. True
b. False
An adjusting entry would adjust an expense account so that the expense is reported
when incurred.
a. True
b. False
MMC Inc. recorded the receipt from cash sales of $2,600 as $6,200. This error is
adjusted on the bank reconciliation as a(n):
a. $2,600 addition to the cash balance per books.
b. $8,800 addition to the cash balance per bank.
c. $6,200 deduction from the cash balance per bank.
d. $3,600 deduction from the cash balance per books.
An employee receives an hourly rate of $30, with time and a half for all hours worked
in excess of 40 during a week. Payroll data for the current week are as follows: hours
worked, 46; federal income tax withheld, $300; cumulative earnings for year prior to
current week, $90,700; social security tax rate, 6.0% on maximum of $106,800; and
Medicare tax rate, 1.5% on all earnings. What is the net pay for the employee?
a. $1,147.95
b. $1,059.75
c. $1,470.00
d. $1,359.75
Budgetary slack can be avoided if lower and midlevel managers are requested to
support all of their spending requirements with specific operational plans.
a. True
b. False
The excess of issue price over par of common stock is termed as:
a. discount.
b. income.
c. deficit.
d. premium.
In preparing a bank reconciliation, the amount indicated by a debit memorandum for
bank service charges is deducted from the cash balance per bank.
a. True
b. False
Kohlman Company began its operations on March 31 of the current year. Projected
manufacturing costs for the first three months of business are $156,800, $195,200, and
$217,600, respectively, for April, May, and June. Depreciation, insurance, and property
taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was
paid on March 31, and property taxes will be paid in November. Threefourths of the
remainder of the manufacturing costs are expected to be paid in the month in which
they are incurred with the balance to be paid in the following month.
The cash payments for manufacturing in the month of April are:
a. $128,000.
b. $117,600.
c. $156,800.
d. $96,000.
Standard and actual costs for direct labor for the manufacture of 1,500 units of product
were as follows:
Actual costs450 hours @ $17.00
Standard costs455 hours @ $16.50
Determine the (a) time variance, (b) rate variance, and (c) total direct labor cost
variance.
A note receivable due in five years is listed on the balance sheet under the caption:
a. investments.
b. current assets.
c. fixed assets.
d. stockholders’ equity.
Which of the following is true of liquidity?
a. Liquidity metrics include assets turnover, priceearnings ratio, and dividend yield.
b. Liquidity is the ability to convert assets to cash.
c. Liquidity is the ability of a company to generate net income related to its invested
assets.
d. Liquidity metrics include debt ratio, times interest earned, and ratio of liabilities to
stockholders’ equity.
The bank statement for Exible Co. indicates a balance of $10,252.50 on June 30, 2016.
The cash account for the company had a balance of $4,787.10. Prepare a bank
reconciliation on the basis of the following reconciling items:
(a)Cash sales of $351 had been erroneously recorded as $315.
(b)Deposits in transit not recorded by bank, $500.
(c)Bank debit memorandum for service charges, $45.
(d)Bank credit memorandum for note collected by bank, $2,782, including $63 interest.
(e)Bank debit memorandum for $223.40 NSF (not sufficient funds) check from Alice
Martin, a customer.
(f)Checks outstanding, $3,415.80.
The inventory costing method that assigns the most recent costs to cost of good sold is:
a. FIFO.
b. LIFO.
c. average cost.
d. specific identification.
Money market funds, commercial paper, and U.S. Treasury Bills are examples of cash
equivalents.
a. True
b. False
On the income statement, sales discounts are normally deducted from sales to yield the
cost of merchandise sold.
a. True
b. False
The difference between sales and cost of goods sold for a retail business is:
a. sales.
b. net sales.
c. gross sales.
d. gross profit.
Assume that Bisque Co. sold 12,000 units of Product A and 18,000 units of Product B
in the last year. The unit contribution margins for Products A and B are $10 and $20
respectively. Bisque has fixed costs of $420,000. The breakeven point in units is:
a. 26,250 units.
b. 25,000 units.
c. 18,500 units.
d. 16,750 units.
If the wage rate paid per hour differs from the standard wage rate per hour for direct
labor, the variance is termed:
a. variable variance.
b. rate variance.
c. quantity variance.
d. volume variance.
The presentation of net accounts receivable on the balance sheet will be most accurate
under the:
a. direct writeoff method.
b. cash basis accounting.
c. estimate based on analysis of receivables.
d. allowance method.
The revenue recognition concept states that revenue should be recorded in the same
period as the cash is received.
a. True
b. False