The purchase of treasury stock ________.
A) decreases assets and stockholders’ equity
B) increases assets and stockholders’ equity
C) increases assets and decreases stockholders’ equity
D) decreases assets and increases stockholders’ equity
Which of the following is true when the estimate of an asset’s useful life is changed?
A) The new estimate is ignored until the last year of the asset’s life.
B) The depreciation expense in the prior year is restated.
C) Prior years’ financial statements must be restated.
D) The asset’s remaining depreciable book value will be spread over the asset’s
remaining life.
Which of the following is an asset account?
A) Cash
B) Notes Payable
C) Dividends
D) Unearned Revenue
A company has net credit sales of $1,400,000, beginning net accounts receivable of
$260,000, and ending net accounts receivable of $203,000. What is the days’ sales in
accounts receivable? (Round any intermediate calculations to two decimal places, and
your final answer to the nearest whole day.)
A) 60 days
B) 121 days
C) 53 days
D) 68 days
Going Places Adventure Travel signed a 14%, 10-year note for $152,000. The company
paid an installment of $2,200 for the first month. After the first payment, what is the
principal balance? (Round your answer to the nearest whole number.)
A) $149,800
B) $150,227
C) $151,573
D) $154,200
A company’s accountant capitalized a payment that should have been recorded as a
revenue expenditure. How will this error affect the company’s financial statements?
A) Net income will be overstated.
B) Revenues will be understated.
C) Assets will be understated.
D) Liabilities will be understated.
Which of the following statements about management by exception is incorrect?
A) Managers concentrate on results that are outside the accepted parameters.
B) There is no need to investigate variances that are less than 10%.
C) Exceptions can be expressed as a percentage of a budgeted amount or a dollar
amount.
D) Many companies use a combination of percentages and dollar amounts.
Fasetech, Inc. has collected the following data. (There are no beginning inventories.)
What is the operating income using absorption costing if 500 units are sold? (Round any
intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
A) $27,500
B) $26,315
C) $31,641
D) $38,315
Which of the following is a measure for discouraging theft for a retail store that accepts
cash receipts over the counter?
A) A receipt is issued for each transaction to ensure that each sale is recorded.
B) At the end of the day, the sales clerk proves the cash by comparing the cash in the
drawer against the machine’s record of cash sales.
C) The sales clerk uses the machine tape to record the journal entry for cash receipts
and sales revenue.
D) The store clerk deposits the cash in the bank.
When performing vertical analysis of a balance sheet, the base amount is ________.
A) total assets
B) total cash and cash equivalents
C) net income
D) gross profit
The employees of Leicester Services, Inc. worked the last two weeks of December,
2016. They received their paychecks on January 2, 2017. Which of the following
accounts should appear on the income statement for the year ended December 31,
2016?
A) Salaries Expense
B) Prepaid Expense
C) Salaries Payable
D) Unearned Revenue
Which of the following is a responsibility that is common to the managers of cost,
profit, and investment centers?
A) generating revenues
B) generating profits
C) managing the invested capital
D) controlling costs
At the beginning of the year, Berkshire Manufacturing had the following account
balances:
Work-in-Process Inventory
Finished Goods Inventory
Manufacturing Overhead
Cost of Goods Sold
Sales Revenue
The following additional details are provided for the year:
Calculate the gross profit Berkshire will report for the year.
A) $250,000
B) $297,000
C) $304,000
D) $455,000
Huston Company, a manufacturer of office supplies, provides the following financial
information:
Calculate the return on investment for the Pen Division. (Round your answer to two
decimal places.)
A) 16.81%
B) 12.31%
C) 17.24%
D) 16.39%
Capital budgeting involves ________.
A) budgeting for yearly operational expenses
B) preparing the sales budget for the coming year
C) deciding among various long-term investments
D) analyzing various alternatives of financing available to a company
Which of the following situations suggests the acceptance of an investment proposal?
A) The present value of the net cash inflows exceeds the initial investment.
B) The IRR is lower than the hurdle rate.
C) The cash inflows are less than the initial investment.
D) The investment will have a residual value.
Pluto, Inc. sells tickets in advance for its weekly productions and records the proceeds
as Unearned Revenue. At the end of each month, the company makes an adjusting entry
to account for the tickets used during the month (ticket revenue.) On March 1, the
Unearned Revenue account had a credit balance of $5,000. During March, it sold 600
tickets at $40 each, and 550 tickets were used during the month. What is the balance in
Unearned Revenue at the end of March?
A) credit balance of $7,000
B) debit balance of $5,000
C) credit balance of $5,000
D) debit balance of $7,000
The Maryland Cheese Company completed the flexible budget analysis for the second
quarter, which is given below.
Which of the following statements would be a correct analysis of the flexible budget
variance for fixed expenses?
A) decrease in sales price per unit
B) increase in variable cost per unit
C) increase in sales volume
D) increase in fixed costs
A photocopier cost $102,000 when new and has accumulated depreciation of $90,000.
If the business discards this plant asset, the result is ________.
A) a loss of $12,000
B) a loss of $11,250
C) a gain of $12,000
D) no gain or no loss
The limitations of financial performance measures ________.
A) lead management to use a time horizon of more than five years
B) make it difficult for companies to create goal congruence
C) lead management to use the gross book value of assets
D) can be overcome by taking a broader view of performance
The accounting records for Patricia Event Planning Services include the following
select unadjusted balances on December 31, 2016: Salaries Expense, $6,000; Service
Revenue: $19,000; Unearned Revenue, $400; Supplies Expense, $600; Rent Expense,
$300; Depreciation Expense—Equipment, $200.
During December, the company worked with a new client and provided event planning
services for an upcoming event. It will receive the full amount of $2,400 when the event
is completed in January 2017. As of the end of December 2016, it performed one-third
of the services covered by the contract. The company made the accrual adjustments.
The balance of Service Revenue, as shown on the adjusted trial balance, should be a
________.
A) debit balance of $21,400
B) credit balance of $19,000
C) debit balance of $2,400
D) credit balance of $19,800
Partial income statements of Company A and Company B are provided below:
Company A
Company B
Which of the following statements is true?
A) Company A is a merchandising company.
B) Company B is a manufacturing company.
C) Company A is a manufacturing company.
D) Company A is a service company.
The discount rate used in a net present value analysis is the ________.
A) rate of inflation
B) rate of interest earned on a savings account
C) required rate of return or the hurdle rate
D) rate of interest charged for debt financing of an investment
Homeward Supply Services received $1,000 cash from a customer; the amount was
owed to the business from the previous month. Which of the following accounts will
decrease as a result of this transaction?
A) Cash
B) Revenue
C) Accounts Payable
D) Accounts Receivable
The following information is available for Jack’s, Inc. for the current month.
What is the adjusted book balance on the bank reconciliation?
A) $10,205
B) $7,635
C) $6,880
D) $6,960
Adelphia Manufacturing issued $70,000 of direct materials and $10,000 of indirect
materials for production. Which of the following journal entries would correctly record
the transaction?
A)
B)
C)
D)
Cedar Designs Company, a custom cabinet manufacturing company, is setting standard
costs for one of its products. The main material is cedar wood, sold by the square foot.
The current cost of cedar wood is $4.00 per square foot from the supplier. Delivery
costs are $0.20 per square foot. Carpenters’ wages are $20.00 per hour. Payroll costs are
$3.00 per hour, and benefits are $6.00 per hour. How much is the direct labor standard
cost per hour?
A) $20.00
B) $9.00
C) $23.00
D) $29.00
Fogelin Promotional Services uses a job order system for costing and billing
promotional services for dance and ballet performances. Fogelin has four public
relations specialists and office staff. At the beginning of the year, Fogelin estimated the
total cost of salaries and benefits for the public relations specialists at $403,900 and a
total of 7,200 billable hours for the year. The office and administrative costs were
estimated at $679,000. What direct labor rate would Fogelin use for the cost of its
specialists? (Round your answer to the nearest cent.)
A) $94.31 per hour
B) $150.40 per hour
C) $38.21 per hour
D) $56.10 per hour
Which of the following statements best defines financial statements?
A) Financial statements are the information systems that record monetary and
nonmonetary business transactions.
B) Financial statements are the verbal statements made to business news organizations
by chief financial officers.
C) Financial statements are documents that report on a business in monetary terms,
providing information to help people make informed business decisions.
D) Financial statements are plans and forecasts for future time periods based on
information from past financial periods.
MultiMet Corporation sold merchandise for $4,450 to Simpsons, Inc. on account. The
cost of goods sold was $1,185. MultiMet uses a perpetual inventory system and special
journals. The $4,450 is recorded as ________.
A) an entry in the general journal
B) Accounts Receivable DR, Sales Revenue CR column of the sales journal
C) Merchandise Inventory DR column of the purchases journal
D) Accounts Receivable CR column of cash receipts journal