If employees accept a wage contract that increases the unit contribution margin, the
break-even point will decrease.
Answer:
When a partnership dissolves, a new partnership is formed and a new partnership
agreement should be prepared.
Answer:
Debiting the cash account will increase the account.
Answer:
Industries that typically use process cost systems include chemicals, oil, metals, food,
paper, and pharmaceuticals.
Answer:
When specialized journals are used, the general journal is not necessary.
Answer:
The matching concept requires expenses be recorded in the same period that the related
revenue is recorded.
Answer:
Inventory turnover measures the length of time is takes to acquire, sell and replace the
inventory.
Answer:
Both process and job order cost systems maintain perpetual inventory accounts with
subsidiary ledgers.
Answer:
The transfer to expense of the cost of intangible assets attributed to the passage of time
or decline in usefulness is called amortization.
Answer:
In the distribution of income, the net income is less than the salary and interest
allowances granted; the remaining balance will be a negative amount that must be
divided among the partners as though it were a loss.
Answer:
Cash flows from investing activities, as part of the statement of cash flows, include
payments for the purchase of treasury stock.
Answer:
To arrive at cash flows from operations, it is necessary to convert the income statement
from an accrual basis to the cash basis of accounting.
Answer:
Purchases of store equipment on account are recorded in the general journal.
Answer:
Costs are transferred, along with the units, from one work in process inventory account
to the next in a process costing system.
Answer:
A staff department or unit is one that provides services, assistance, and advice to the
departments with line or other staff responsibilities.
Answer:
Each partner may withdraw the assets he or she contributed to the partnership at any
time.
Answer:
Standards are more widely used for nonmanufacturing expenses than for manufacturing
costs.
Answer:
The percentage analysis of increases and decreases in corresponding items in
comparative financial statements is referred to as horizontal analysis.
Answer:
If the trial balance is in balance, it can be assumed that all journal entries were posted
correctly and no errors were made.
Answer:
The product cost concept includes all manufacturing costs in the cost amount to which
the markup is added to determine product price.
Answer:
X sells to A one-half of a partnership capital interest that totals $70,000 for $40,000. A’s
capital account in the partnership should be credited for $40,000.
Answer:
Total variable costs change as the level of activity changes.
Answer:
At the end of a period (before adjustment), Allowance for Doubtful Accounts has a
credit balance of $5,000. The Accounts Receivable balance is analyzed by aging the
accounts and the amount estimated to be uncollectible is $50,000. The amount to be
recorded in the adjusting entry for the Bad Debt Expense is $45,000.
Answer:
Under the periodic inventory system, the cost of merchandise sold is equal to the
beginning merchandise inventory plus the cost of merchandise purchased plus the
ending merchandise inventory.
Answer:
When companies use a perpetual inventory system, the recording of the purchase of
inventory will include a debit to purchases.
Answer:
The amount of capital paid in by the stockholders of the corporation is called legal
capital.
Answer:
In preparing flexible budgets, the first step is to identify the fixed and variable
components of the various costs and expenses being budgeted.
Answer:
If a fire destroys the merchandise inventory, the gross profit method can be used to
estimate the cost of merchandise destroyed.
Answer:
Differential revenue is the amount of increase or decrease in revenue expected from a
particular course of action as compared with an alternative.
Answer:
Before a stock dividend can be declared or paid, there must be sufficient cash.
Answer:
Both callable and non-callable bonds can be purchased by the issuing corporation in the
open market.
Answer:
Generally accepted accounting principles (GAAP) require the use of fair value
accounting for all assets and liabilities.
Answer:
A process cost accounting system is best used by manufacturers of like units of product
that are not distinguishable from each other during a continuous production process.
Answer:
Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential revenue of producing Product P is $82 per pound.
Answer:
Operating expenses are product costs and are expensed when the product is sold.
Answer:
If $475,000 of bonds payable are sold at 101, $475,000 would be reported in the cash
flows from financing activities section of the statement of cash flows.
Answer:
For purposes of analysis, mixed costs can generally be separated into their variable and
fixed components.
Answer:
A secured bond is called a debenture bond and is backed only by the general
creditworthiness of the corporation.
Answer:
When computing the rate earned on total common stockholders’ equity, preferred stock
dividends are subtracted from net income.
Answer:
On January 1, 2010, Cary Parsons established a catering service. Listed below are
accounts to use for transactions (a) through (e), each identified by a number. Following
this list are the transactions that occurred in Parsons’ first month of operation. You are to
indicate for each transaction the accounts that should be debited and credited by placing
the account number(s) in the appropriate box.
Transactions Account(s) Debited Account(s) Credited
a. Purchased supplies for cash.
b. Paid the annual premiums on property and casualty insurance.
c. Received cash for a job previously recorded on account.
d. Paid a creditor a portion of the amount owed for equipment previously purchased on
account.
e. Received cash for a completed job.
Answer:
A formal written statement of management’s plans for the future, expressed in financial
terms, is a:
A.gross profit report
B.responsibility report
C.budget
D.performance report
Answer:
An aging of a company’s accounts receivable indicates that estimate of the uncollectible
accounts totals $4,000. If Allowance for Doubtful Accounts has a $800 credit balance,
the adjustment to record the bad debt expense for the period will require a
A.debit to Allowance for Doubtful Accounts for $3,200.
B.debit to Bad Debt Expense for $3,200.
C.debit to Allowance for Doubtful Accounts for $4,000.
D.credit to Allowance for Doubtful Accounts for $4,000.
Answer:
Partnership income and losses are usually divided on the basis of interest, salaries, and
stated ratios because
A.partners seldom contribute time and resources equally
B.this method reflects the amount of time devoted to the partnership by the partners
C.it is simpler than following the legal rules
D.it prevents arguments among the partners
Answer:
Thompson Company developed the following reconciling information in preparing its
October bank reconciliation:
Using the above information, determine the cash balance per books (before
adjustments) for the Thompson Company.
A.$11,050
B.$19,450
C.$15,950
D.$11,150
Answer:
Magpie Corporation uses the total cost concept of product pricing. Below is cost
information for the production and sale of 60,000 units of its sole product. Magpie
desires a profit equal to a 25% rate of return on invested assets of $700,000.
The unit selling price for the company’s product is:
A.$15.00
B.$13.82
C.$15.80
D.$14.76
Answer:
When a partner dies, the capital account balances of the remaining partners
A.will increase
B.will decrease
C.will remain the same
D.may increase, decrease, or remain the same
Answer:
A retailer purchases merchandise with a catalog list price of $30,000. The retailer
receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be
needed to pay this invoice within the discount period?
A.$30,000
B.$24,900
C.$29,400
D.$24,990
Answer:
A form prepared periodically for each processing department summarizing (1) the units
for which the department is accountable and the units to be assigned costs and (2) the
costs charged to the department and the allocation of these costs is termed a:
A.factory overhead production report
B.manufacturing cost report
C.process cost report
D.cost of production report
Answer:
All of the following qualitative considerations may impact upon capital investment
analysis except:
A.manufacturing productivity
B.manufacturing sunk cost
C.manufacturing flexibility
D.market opportunities
Answer:
Beginning inventory, purchases, and sales for Product – Weld TM are as follows:
Assuming a perpetual inventory system and the last-in, first-out method, determine (a)
the cost of the merchandise sold for the September 30 sale and (b) the inventory on
September 30.
Answer:
Based on the information below, journalize the entries for the Seller and the Buyer.
Both use a perpetual inventory system.
(a) Seller sold merchandise on account to the buyer, $4,750, terms 2/10, net 30, FOB
shipping point. The cost of the merchandise is $2,850. The seller prepays the freight of
$75.
(b) Buyer returns $ 700 of merchandise as defective. The cost of the merchandise is
$420.
(c) Buyer pays within the discount period.
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:
Which of the following entries records the payment of rent for the current month?
A.Cash, debit; Rent Expense, credit
B.Rent Expense, debit; Cash, credit
C.Rent Expense, debit; Accounts Receivable, credit
D.Accounts Payable, debit; Rent Expense, credit
Answer:
In horizontal analysis, each item is expressed as a percentage of the
A.base year figure.
B.retained earnings figure.
C.total assets figure.
D.net income figure.
Answer:
The primary difference between a static budget and a flexible budget is that a static
budget
A.is suitable in volatile demand situation while flexible budget is suitable in a stable
demand situation.
B.is concerned only with future acquisitions of fixed assets, whereas a flexible budget is
concerned with expenses that vary with sales.
C.includes only fixed costs, whereas a flexible budget includes only variable costs.
D.is a plan for a single level of production, whereas a flexible budget can be converted
to any level of production.
Answer:
The Warbler Jeans Company produces two different types of jeans. One is called the
“Simple Life” and the other is called the “Fancy Life” The company’s Production
Budget requires 353,500 units of Simple jeans and 196,000 Fancy jeans to be
manufactured. It is estimated that 2.5 direct labor hours will be needed to manufacture
one pair of Simple Life jeans and 3.75 hours of direct labor hours for each pair of Fancy
Life jeans.
What is the total number of direct labor hours needed for both lines of jeans?
A.883,750 direct labor hours
B.1,618,750 direct labor hours
C.735,000 direct labor hours
D.353,500 direct labor hours
Answer:
The cost of office supplies to be used in future periods is ordinarily shown on the
balance sheet as a(n)
A.capital
B.asset
C.contra asset
D.liability
Answer:
Which of the following would be least likely to be considered a managerial accounting
report?
A.a report to analyze potential efficiencies and savings for the purchase of new
production equipment.
B.a schedule of total manufacturing costs incurred
C.a statement of cost of goods manufactured
D.a statement of stockholders’ equity
Answer:
How is treasury stock shown on the balance sheet?
A.as an asset
B.as a decrease in stockholders’ equity
C.as an increase in stockholders’ equity
D.treasury stock is not shown on the balance sheet
Answer:
Sharp and Townson had capital balances of $60,000 and $90,000 respectively at the
beginning of the current fiscal year. The articles of partnership provide for salary
allowances of $25,000 and $30,000 respectively, an allowance of interest at 12% on the
capital balances at the beginning of the year, with the remaining net income divided
equally. Net income for the current year was $110,000.
Answer:
Once the adjusting entries are posted, the Adjusted Trial Balance is prepared to
A.verify that the debits and credits are in balance.
B.verify that the net income correctly flows into the statement of owner’s equity from
the income statement
C.verify that the net income (loss) is correct for the period.
D.verify the correct flow of accounts into the financial statements.
Answer:
The budgetary unit of an organization which is led by a manager who has both the
authority over and responsibility for the unit’s performance is known as a:
A.control center
B.budgetary area
C.responsibility center
D.managerial department
Answer:
The following balance sheet contains errors.
(a) List the errors in the balance sheet above and (b) prepare a corrected balance sheet.
Answer:
The post reference columns are used to trace transactions from the journal to the
accounts. What will be posted on the post reference column of (a) the journal and (b) on
the account?
A.(a) the amount of the debit or credit (b) the journal page number
B.(a) the journal page number (b) the date of the transaction
C.(a) the journal page number, (b) the account number
D.(a) the account number, (b) the journal page number
Answer:
A $100 petty cash fund contains $91 in petty cash receipts, and $4.75 in currency and
coins. The journal entry to record the replenishment of the fund would include a
A.credit to Petty Cash for $95.75.
B.credit to Cash for $90.
C.debit to Cash Short and Over for $4.25.
D.credit to Cash Short and Over for $4.25.
Answer:
On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that has a
depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours.
Using straight line depreciation, calculate depreciation expense for the last year.
A.$17,500
B.$30,000
C.$12,500
D.$40,000
Answer:
Penny, Inc. employs a process costing system. Direct materials are added at the
beginning of the process. Here is information about July’s activities:
Using the FIFO method, the number of equivalent units of conversion costs was
A.14,400
B.14,380
C.14,550
D.15,850
Answer:
The controlling account for the cost ledger is:
A.Finished Goods
B.Materials
C.Work in Process
D.Cost of Goods Sold
Answer:
For the past year, Pedi Company had fixed costs of $70,000, unit variable costs of $32,
and a unit selling price of $40. For the coming year, no changes are expected in
revenues and costs, except that property taxes are expected to increase by $10,000.
Determine the break-even sales (units) for (a) the past year and (b) the coming year.
Answer:
Horizontal analysis is a technique for evaluating financial statement data
A.for one period of time.
B.over a period of time.
C.on a certain date.
D.as it may appear in the future.
Answer:
On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common
stock issued and outstanding. All 40,000 shares had been issued in a prior period at
$20.00 per share. On February 1, 20xx, Swenson purchased 4,000 shares of treasury
stock for $24 per share and later sold the treasury shares for $21 per share on March 1,
20xx.
The journal entry to record the purchase of the treasury shares on February 1, 20xx,
would include a
A.credit to Treasury Stock for $96,000.
B.debit to Treasury Stock for $96,000.
C.debit to a loss account for $120,000
D.credit to a gain account for $120,000.
Answer:
On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable on an overdue
account payable to Seller Co. Assume that the fiscal year of Alton Co. ends June 30.
Which of the following relationships is true?
A.Alton is the creditor and credits Accounts Receivable
B.Seller is the creditor and debits Accounts Receivable
C.Seller is the borrower and credits Accounts Payable
D.Alton is the borrower and debits Accounts Payable
Answer:
Explain the concept of equivalent units. Give an example to validate your explanation.
Answer:
Journalize the six entries to adjust the accounts at December 31. (Hint: One of the
accounts was affected by two different adjusting entries).
Answer:
Beginning inventory, purchases and sales data for tennis rackets are as follows:
Complete the inventory cost card assuming the business maintains a perpetual
inventory system and calculates the cost of merchandise sold and ending inventory
using FIFO.
Answer:
Malcolm has a capital balance of $90,000 after adjusting to fair market value. Celeste
contributes $45,000 to receive a 25% interest in a new partnership with Malcolm.
Determine the amount and recipient of the partner bonus.
Answer:
Dickerson Co. is evaluating a project requiring a capital expenditure of $810,000. The
project has an estimated life of four years and no salvage value. The estimated net
income and net cash flow from the project are as follows:
The company’s minimum desired rate of return is 12%. The present value of $1 at
compound interest of 12% for 1, 2, 3, and 4 years is .893, .797, .712, and .636,
respectively.Determine the net present value.
Answer:
Given the following:
Variable cost as a percentage of sales = 60%
Unit Variable cost = $30
Fixed costs = $200,000
What is the break-even point in units?
Answer:
Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45.
The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for
$3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the
invoice within the discount period. What is the amount of gross profit earned by Abbey
Co. on the above transactions?
Answer:
Selected data from the Carmen Company at year end are presented below:
Instructions
Calculate the profitability ratios that can be computed from the above
information.Assume the company had no preferred stock or interest expense. Round
percentage value to one decimal place and dollar value to zero decimal place.
Answer:
What is the cost of the land, based upon the following data?
Answer:
Fill in the blanks related to the characteristics of a promissory note:
Answer:
Prepare a flexible budget for Cedar Jeans Company using production levels of 16,000,
18,000, and 20,000 units produced. The following is additional information necessary
to complete the budget:
Variable costs:
Fixed costs:
Answer:
Briefly describe the time value of money. Why is the time value of money important in
capital investment analysis?
Answer:
Answer:
Determine the total value of the merchandise using Net Realizable Value:
Answer:
Oak Company produces a chair that requires 6 yds. of material per unit. The standard
price of one yard of material is $7.50. During the month, 8,500 chairs were
manufactured, using 48,875 yards. Journalize the entry to record the standard direct
materials used in production.
Answer:
Below is the unadjusted trial balance for Dawson Designs.
REQUIRED:
(1) Identify the errors in the following trial balance. All accounts have normal balances.
(2) Prepare a corrected trial balance.
Answer:
Define the meaning of B2C and B2B.
Answer:
Following is data for the available-for-sale securities held by AdBrand Company as of
December 31, 2012.
(1) Complete the table above to find the total cost and fair value for the company’s
available-for-sale securities portfolio.
(2) Calculate and record the required December 31, 2012 adjustment.
(3) Explain how the adjustment from step (2) is reported on AdBrand’s 2012 financial
statements.
Answer:
The actual cash received during the week ended October 31 for cash sales was
$23,447.00 and the amount indicated by the cash register total was $23,457.00.
Journalize the entry to record the cash receipts and cash sales.
Journal
Answer:
The following items may appear on a bank statement:
Indicate whether the item would appear as debit or credit memo on the bank statement
and whether the item would increase or decrease the balance of your account. Use the
following format:
Answer: