In a small business, active involvement by the owner can be a practical substitute for
the separation of some duties.
Information that is the same for all alternatives is considered relevant to the decision
process.
Purchase requests and purchase orders are economic events, and as such they affect a
company’s financial position, and are recognized in the accounting records.
Activity-based management and lean operations can be used either together or
separately to eliminate waste and manage activities.
The FIFO process costing method assumes that the items in ending work in process
inventory were started and completed during the current period.
When there are material differences between the results of using the straight-line
method and using the effective interest method of amortization, the effective interest
method should be used.
Inventory turnover is a measure of liquidity that focuses on the relative size of
inventory.
For a T account, an account balance is the difference in total dollars between total debit
footings and total credit footings.
Contribution margin income statement helps managers to view revenue and cost
relationships on a per unit basis or as a percentage of sales.
The LIFO method is rarely used because most companies do not sell the last goods they
purchase first.
Service businesses do not have any overhead costs.
Nominal account balances are reduced to zero by closing entries.
Asset impairment occurs when the fair value of a long-term asset exceeds its carrying
value.
Shifting to a just-in-time approach in a manufacturing environment usually will not
require a new approach in evaluating costs.
The purchasing department prepares a purchase requisition addressed to the vendor
(seller) containing instructions related to the items ordered.
Budgets facilitate congruence between organizational and personal goals.
Cortney invests $80,000 for a 10 percent interest in a partnership that has total capital
of $600,000 after admitting Cortney. Which of the following isTRUE?
A.Cortney’s capital is $52,000
B.The original partners’ capital in the business was $540,000 before admitting Cortney
C.Cortney received a bonus of $20,000
D.The original partners received a bonus of $20,000
Use this information to answer the following question.
If $200 is invested at 7 percent APR, which of the following formulas would be used to
determine to how much the deposit would grow at the end of three years?
A.$200 x 0.935 x 3
B.$200 ¸ 0.816
C.$200 ¸ 2.624 x 3
D.$200 x 2.624
The following information relates to Royale Enterprises for the year ended December
31, 20×5:
a. Calculate the net cash flows from operating activities. Show your work.
b. Calculate the net cash flows from investing activities. Show your work.
c. Calculate the net cash flows from financing activities. Show your work.
d. Calculate the net change in cash. Show your work.
The purchased right to reproduce and sell a computer program is covered by which
intangible?
A.copyright.
B.franchise.
C.patent.
D.trademark.
The entry to record a purchase of $12,000 in merchandise assuming terms of 2/10, n/30
and a periodic inventory system would include a(n)
A.increase to Accounts Payable for $12,000.
B.increase to Purchases Discounts for $240.
C.decrease to Purchases for $12,000.
D.decrease to Accounts Payable for $11,760.
In a just-in-time environment, managing the production process focuses on
A.total processing time per unit.
B.allocating overhead more accurately.
C.reducing inventories.
D.units produced per direct labor hour.
The following unit data were assembled for the heating process of Morgan Processing
Inc. for the month of August. Direct materials are added at the beginning of the process.
Conversion costs are added uniformly over the production process. The company uses
the FIFO process costing method.
The number of equivalent units produced by Morgan Processing with respect to
conversion costs is
A.43,700.
B.45,700.
C.48,200.
D.50,200.
Dividends Payable is an example of a(n)
A.contingent liability.
B.definitely determinable liability.
C.estimated liability.
D.long-term liability.
Operating budgets for the DiP Company reveal the following information: net sales,
$400,000; beginning materials inventory, $23,000; materials purchased, $185,000;
beginning work in process inventory, $64,700; beginning finished goods inventory,
$21,600; direct labor costs, $34,000; overhead applied, $67,000; ending work in
process inventory, $61,200; ending materials inventory, $18,700; and ending finished
goods inventory, $16,300. Compute DiP Company’s budgeted gross margin.
A.$299,800
B.$293,800
C.$150,900
D.$100,900
Which of the following is not a goal of a system of internal control over merchandising
transactions?
A.Keep credit losses as low as possible.
B.Prevent the theft of cash and inventory.
C.Keep the maximum amount of inventory on hand at all times.
D.Keep enough cash on hand to take advantage of purchase discounts.
Which of the following items will not be disclosed on a statement of stockholders’
equity?
A.Conversion of preferred stock into common stock
B.Results of discontinued operations
C.Purchase of treasury stock
D.Declaration of a stock dividend
Which costing method is used based on the reasoning that the fairest determination of
income occurs if the current costs are matched against current sales prices?
A.Specific identification
B.FIFO
C.Average-cost
D.LIFO
All of the following are relevant in a sell or process-further decision except
A.sales value at the split-off point.
B.sales value after further processing.
C.additional processing costs.
D.joint costs.
Which of the following is not classified as a selling expense on the income statement?
A.Sales salaries expense.
B.Interest expense.
C.Freight-out expense.
D.Advertising expense.
Which of the following describes a joint venture?
A.Entities with limited lives that a company creates to achieve a specific objective.
B.An association of two or more entities for the purpose of achieving a specific goal.
C.Corporations that U.S. tax laws treat as partnerships, and they do not pay income
taxes.
D.A special type of partnership that confines the limited partner’s potential loss to the
amount of his or her investment.
Use this balance sheet and income statement to answer the following question. Use
ending balances whenever average balances are required for computing ratios.
The return on assets for National Textile is
A.30 percent.
B.150 percent.
C.33-1/3 percent.
D.24 percent.
A good example of a profit center would be
A.a car manufacturer’s assembly line.
B.a local Home Depot store.
C.Avis Car Rental’s national reservation center.
D.a manufacturer’s human resources department.
Which of the following is an appropriate internal control activity for cash?
A.Recordkeeping and custodianship over cash should be performed by the same person.
B.The amount of cash on hand should be kept to a minimum.
C.Banking facilities should be used as little as possible.
D.All payments should be made with currency, not checks.
A company purchases an asset on a deferred payment plan, ultimately paying $15,000.
On the payment date, the company would
A.credit Cash for less than $15,000.
B.debit Interest Expense for the imputed amount.
C.debit the asset account for $15,000.
D.debit Accounts Payable for $15,000.
The following data have been gathered for a capital investment decision. The amounts
relate to a 14 percent discount factor.
a. Compute the present value of the following cash flows. Use a discount rate of 14
percent.
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?
c. If the answers to parts (a) and (b) differ, explain the reason(s) why.
Useful information, including details about a company’s financial history, industry data,
and credit ratings is available from
A.the SEC.
B.Standard & Poor’s.
C.The Wall Street Journal.
D.a company’s website.
Which of the following is not an application of accrual accounting?
A.Recognizing revenues when earned and expenses when incurred.
B.Applying the matching rule.
C.Adjusting the accounts.
D.Recording on the basis of actual receipt and payment of cash.
Which of the following should be classified as a current asset?
A.Supplies
B.Trademark
C.Equipment
D.Land held for future use
The use of quantitative tools to gauge an organization’s performance in relation to a
specific goal or an expected outcome is known as
A.responsibility accounting.
B.an asset turnover.
C.a performance center.
D.a performance measurement.
Lassen Corporation issued ten-year term bonds on January 1, 20×5, with a face value of
$800,000. The face interest rate is 6 percent and interest is payable semiannually on
June 30 and December 31. The bonds were issued for $690,960 to yield an effective
annual rate of 8 percent. The effective interest method of amortization is to be used. The
entry to record the bond interest expense on the first interest payment date is: (Round
answer to the nearest dollar.)
Below are the adjusted accounts of Carter Harper Co. for the month ended July 31,
20×5, listed in alphabetical order:
Indicate in the spaces below whether or not each of the following adjustments may be
reversed.
The following facts pertain to the stockholders’ equity section of the balance sheet of
Charlotte Corporation:
During 20×5, Charlotte declared and distributed a stock dividend. Also during 20×5,
Charlotte declared and paid cash dividends of $26,000. There were no changes in the
number of shares of stock issued and outstanding during the period except for the
change caused by the stock dividend. Calculate the amount of net income reported by
Charlotte for 20×5.
At year end, MWE Graphics has a $700 debit balance in Allowance for Uncollectible
Accounts. It estimates that 5 percent of the $40,000 in sales are uncollectible. Give the
amount that should be used in the adjusting entry to record uncollectible accounts using
the percentage of net sales method. (Show your calculations.)
For each listed document, indicate the letter of the department/person that would
prepare it.
Adele Connor is the manager of Midland Standard Equipment Company. Adele does
not have an accounting degree nor a strong background in accounting. Describe to
Adele how the work sheet and closing entries assist her in managing Midland Standard
Equipment Company.
Preparation of the work sheet and recording closing entries is not just an accounting
task. These steps are important ways to help the company save money and prevent
mistakes. They will also help Adele in understanding Midland Standard’s business by
providing the mechanism for dividing its financial life into accounting periods; thus,
applying the concept of periodicity.
Explain how a just-in-time operating philosophy reduces the time it takes to complete
the production of a product. Include in your answer the classifications of time that are
affected. How does such a change help to reduce product costs?