The journal entry when a dividend is declared for $150,000 would be:
A. A Above.
B. B Above.
C. C Above.
D. D Above.
San Francisco’s famous St. Francis Hotel is owned by Westin Hotel and Resort Group.
Westin should evaluate the St. Francis as:
A. A cost center.
B. A historical landmark.
C. An investment center.
D. A profit center (other than an investment center).
Raymond & Sons generates an average contribution margin ratio of 45% on its sales.
Management estimates that by spending $3,500 more per month to rent additional
facilities, the business will be able to increase operating income by $10,000 per month.
Management must feel that the additional facilities will increase monthly sales volume
(in dollars) by:
A. $4,725.
B. $8,775.
C. $13,500.
D. $30,000.
Profitability may be defined as:
A. The ability to pay the debts of the company as they become due.
B. The ability to increase retained earnings.
C. Distributing dividends out of retained earnings.
D. Having excess cash.
Helicopter Gear is planning to expand its product line, which requires investment of
$475,200 in special-purpose machinery. The machinery has a useful life of six years
and no salvage value. The estimated annual results of offering the new products are as
follows:
All revenue from the new products and all expenses (except depreciation) will be
received or paid in cash in the same period as recognized for accounting purposes.
Refer to the information above. The return on average investment for this proposed
investment is closest to:
A. 8 1/3%.
B. 50%.
C. 25%.
D. 11.1%.
When treasury stock is reissued at a price above cost:
A. The corporation recognizes a gain to be recorded on the income statement.
B. Total paid-in capital is increased.
C. The re-issuance is treated as an extraordinary item in the corporation’s income
statement.
D. Retained earnings is increased.
How much must I invest today in order to have $25,000 in 5 years assuming 12%
interest compounded annually?
A. $14,185.75.
B. $15,888.00.
C. $18,681.50.
D. $17.624.00.
Employers are required to pay all of the following on the wages paid to each employee
except:
A. Social security taxes.
B. Worker’s compensation insurance.
C. Medicare taxes.
D. Health insurance benefits.
The inclusion of the intangible asset goodwill in the financial statements of a company
indicates:
A. That the company has a favorable reputation with its customers.
B. A monopoly position in the industry or superior management.
C. An unbroken record of annual earnings and dividends.
D. That the company has purchased a going business at a price in excess of the fair
market value of the net identifiable assets.
During the years 2013 through 2015, Powers, Inc., reported the following amounts of
net income (dollars in thousands):
Relative to the prior year, the percentage change in net income:
A. Was the same in 2014 and 2015.
B. Was larger in 2015 than in 2014.
C. Was smaller in 2015 than in 2014.
D. Cannot be determined without knowing how many shares of stock were outstanding.
Classification of cash flows
Indicate how each of the following events should be classified in a statement of cash
flows for the current calendar year. Use the following code: O = operating activities, I =
investing activities, and F = financing activities
Assume use of the direct method. If the event does not involve a cash flow that should
be included in the statement of cash flows, use an X.
____ (a) Paid an account payable for inventory purchased in a prior accounting period.
____ (b) On December 28, made a large credit sale; terms, 2/10, n/30.
____ (c) Received a dividend from an investment in IBM common stock.
____ (d) Paid a dividend to stockholders.
____ (e) Paid the interest on a note payable to First Bank.
____ (f) Paid the principal amount due on the note payable to First Bank.
____ (g) Transferred cash from a checking account into a money market fund.
____ (h) Made an adjusting entry to record accrued wages payable at the end of the
period.
____ (i) Recorded depreciation expense for the current year.
____ (j) Purchased plant assets for cash.
Free cash flow arises out of:
A. Operating activities.
B. Investing activities.
C. Financing activities.
D. All three types of activities.
Refer to the information above. This transaction involves:
A. Martin’s collection of $30,000 on an account receivable.
B. Payment of $21,000 cash by Martin.
C. A $21,000 overall increase in Martin’s assets.
D. Sale of equipment by Martin for $51,000.
If an error in valuing inventory occurs in one year:
A. It has no effect upon income in the following year.
B. It has no effect upon the income statement, only on the balance sheet.
C. It is self-correcting after two years.
D. Retained earnings will be adversely affected until corrected.
Public corporations are required by law or regulation to perform all of the following
except:
A. Submit much of their financial information to the SEC for review.
B. Make regularly scheduled dividend payments to all stockholders.
C. Have their annual financial statements audited by an independent CPA.
D. Disclose their financial information to the public.
Process costing does not:
A. Trace direct costs to a specific production process.
B. Provide information about cost of goods manufactured on a per-unit basis.
C. Average direct and indirect costs across mass-produced identical units.
D. Apply overhead using an activity base.
Standard cost system-materials and labor variances
The Hemlock Corporation produces a single product. The company has developed the
following standards for labor and materials:
During the past month, the company purchased 3,500 pounds of direct materials at a
total cost of $4,550. All of this material was used in the production of 1,300 units of
output. Direct labor cost totaled $40,300 for the month. The following variances have
been computed:
Compute the following. If the result is a variance indicate whether it is favorable or
unfavorable. If necessary, round your answers.
(a) The standard price of materials ________________.
(b) The standard quantity of materials allowed per unit of output _________.
(c) The actual direct labor cost per hour for the month _____________.
(d) The labor rate variance _____________________.
Brett Tarek, a manager at D&J Landscaping, Inc. needs information regarding the
amount of accounts payable currently owed by the company. This information would
most easily be found in the:
A. General ledger.
B. General journal.
C. Income statement.
D. Notes to the financial statements.
Perry’s Cycle Company manufactures annually 20,000 units of TushSeat, a bicycle seat
used on many of the company’s products, and also sold directly to retailers for $38 per
unit. At the current level of production, the cost per unit to produce TushSeat consists
of:
It has come to the attention of management that a seat of similar quality can be
purchased from outside suppliers.
Refer to the information above. Assume that Perry’s fixed costs remain unchanged if the
seats are purchased from an outside supplier. In order to operate more profitably by
buying the seats rather than manufacturing them, Perry must negotiate a price per unit
from the outside supplier that is less than:
A. $27.
B. $25.
C. $22.
D. $23.
When products are completed:
A. Finished Goods Inventory is credited.
B. Work in Process Inventory is credited.
C. Cost of Goods Sold is debited.
D. Work in Process Inventory is debited.
During the closing process:
A. All income statement accounts are credited to income summary.
B. All income statement accounts are debited to income summary.
C. All revenue accounts are credited and expense accounts are debited.
D. All revenue accounts are debited and expense accounts are credited.
Which of the following is an example of a fixed cost for an airline?
A. Depreciation on the corporate headquarters.
B. Fuel costs.
C. Income taxes expense.
D. Passengers’ meals.
Refer to the information above. A statement of cash flows for February, would report
net cash flows from investing activities of:
A. ($4,000).
B. $47,000.
C. $53,600.
D. $76,000.
Which of the following errors would not be disclosed by preparation of a trial balance?
A. An error was made in computing the balance of the Cash account.
B. A journal entry included a debit to the Equipment account for $3,200, but this
amount was erroneously posted as $2,300.
C. During the posting process, a $1,700 debit to Cash was accidentally entered in the
credit side of the Cash account.
D. The journal entries recorded on the last day of the year have never been posted to the
ledger.
Refer to the information above. If Cash at December 31, 2014, is $66,000, total assets
amounts to:
A. $606,000.
B. $806,000.
C. $662,000.
D. $646,000.
Glouchester Associates sold office equipment for cash of $142,000. The accumulated
depreciation at date of sale amounted to $138,000, and a gain of $18,000 was
recognized on the sale. The original cost of the asset must have been:
A. $260,000.
B. $262,000.
C. $280,000.
D. $156,000.
For the purpose of delaying income taxes, during an inflationary period, which method
would be best?
A. LIFO.
B. FIFO.
C. Average cost.
D. Taxes would be the same under each assumption.
Hicksville’s Department Store uses a perpetual inventory system. At year-end, the
balance in the Inventory control account is $1,200,000. Assuming that the inventory
records have been maintained properly, a year-end physical inventory:
A. Is unnecessary.
B. Is needed to establish the ending inventory, as the $1,200,000 balance in the
Inventory control account represents the beginning inventory.
C. Probably will indicate more than $1,200,000 in merchandise on hand.
D. Probably will indicate less than $1,200,000 in merchandise on hand.