Flyer Co. billed a client for flying lessons given in January. The payment was received
in February. Under the accrual basis of accounting, when should Flyer Co. record the
revenue?
a. January
b. February
c. Some in January and some in February
d. Flyer Co. should not record any revenue
As of January 1 of the current year, the Butner Company had accounts receivables of
$50,000. Sales for January, February, and March were as follows: $120,000, $140,000,
and $150,000. 20% of each month’s sales are for cash. Of the remaining 80% (the credit
sales), 60% are collected in the month of sale, with the remaining 40% collected in the
following month. What is the total cash collected (both from accounts receivable and
for cash sales) in the month of February?
a. $132,000
b. $105,600
c. $133,600
d. $95,200
QRT Co. received $1,560 advance from Zync Inc. as rent for the use of a building
owned by QRT Co. How does this transaction affect QRT’s accounts if QRT recognizes
a liability on receipt of the rent?
a. Cash is increased, and sales revenue is increased.
b. Cash is increased, and rent income is decreased.
c. Cash is increased, and unearned rent is increased.
d. Cash is increased, and prepaid rent is increased.
The bank statement of Jade Co. shows a balance of $4,555 as of December 31. The
following reconciling items were identified:
i) Deposit not recorded on bank statement, $50
ii) Total outstanding checks, $105
iii) Check of $100 returned because of not sufficient funds (NSF)
What is the adjusted balance according to the bank statement?
a. $4,400
b. $4,605
c. $4,500
d. $4,810
The amount of the promissory note plus the interest earned on the due date is called the:
a. market value.
b. maturity value.
c. face value.
d. discounted value.
When several alternative investment proposals of the same amount are being
considered, the one with the largest net present value is the most desirable. If the
alternative proposals involve different amounts of investment, it is useful to prepare a
relative ranking of the proposals by using a(n):
a. average rate of return.
b. cash payback period.
c. present value index.
d. pricelevel index.
If the standard to produce a given amount of product is 1,000 units of direct materials at
$11 and the actual was 800 units at $12, the direct materials quantity variance was
$2,200 favorable.
a. True
b. False
The _____ is estimated as the difference between the expected selling price and the
desired profit.
a. target cost
b. product cost
c. sunk cost
d. opportunity cost
A company purchased a photocopy machine for $16,000. It has a useful life of 4 years
and a residual value of $1,000. Compute depreciation for the second year under each of
the following methods: (a) straightline and (b) doubledecliningbalance.
The graph of a variable cost per unit when plotted against its related activity base
appears as a:
a. circle.
b. rectangle.
c. straight line.
d. curved line.
Which of the following is true of a variable cost?
a. Total variable cost remains constant with changes in the number of goods sold.
b. Unit variable cost decreases with an increase in production.
c. Unit variable cost remains constant with changes in production.
d. Total variable cost decreases with an increase in the number of goods sold.
The total earnings of an employee for a payroll period is referred to as the net pay.
a. True
b. False
On November 21 of the current year, Maroon Inc. reacquired 50,000 shares of its
common stock at $4 per share. As a result of this transaction, net assets of the company:
a. increase by $200,000.
b. decrease by $200,000.
c. remain unchanged.
d. increase by $50,000.
Which of the following accounting concepts requires that the financial statements,
including related notes, contain all relevant data a stakeholder would need to understand
the financial condition and performance of the company?
a. The adequate disclosure concept
b. The cost concept
c. The objectivity concept
d. The matching concept
Which of the following is the effect of depreciation being recorded by a company?
a. Its cash flow decreases.
b. Its net income decreases.
c. Its quick assets decrease.
d. Its common stock increases.
Shares of ownership are evidenced by issuing:
a. shares payable.
b. commercial paper.
c. shares of stock.
d. notes payable.
On the income statement, customer refunds and allowances and customer discounts are
added to gross sales to yield net sales.
a. True
b. False
In capital rationing, an initial screening of alternative proposals is usually performed by
establishing minimum standards. Which of the following evaluation methods are
normally used?
a. Cash payback method and average rate of return method
b. Average rate of return method and net present value method
c. Net present value method and cash payback method
d. Internal rate of return and net present value methods
The direct labor and overhead costs of providing services to clients are accumulated in
a WorkinProcess account.
a. True
b. False
A disadvantage of the average rate of return method of capital investment analysis is
that:
a. it is very complex to compute.
b. it does not include the entire amount of income earned over the life of a project.
c. it does not emphasize accounting income, which is often used by investors and
creditors in
evaluating management performance.
d. it does not directly consider the timing of the expected cash flows.
Emerald Co. has 50,000 shares at $12 par common stock outstanding. If the company
decides to buy 20% of its shares for $15 per share, the total stockholders’ equity will:
a. increase by $600,000.
b. increase by $750,000.
c. decrease by $150,000.
d. decrease by $120,000.
Assume the November transactions for Camindo Co. are as follows:
a.Received cash of $60,000 from investors in exchange for common stock.
b.Provided services of $16,300 on account.
c.Purchased supplies on account $750.
d.Received cash of $11,800 from clients for services previously billed.
e.Received $6,250 for services provided from clients who paid cash.
f.Paid $600 on account for supplies that had been purchased.
g.Paid $3,380 for a oneyear insurance policy.
h.Paid the following expenses: wages, $7,800; utilities, $1,000; rent, $3,750.
i.Paid dividends of $2,300 to stockholders.
Record the transactions, using the integrated financial statement framework that
follows:
Assets =Liabilities + Stockholders’ Equity
CashAccounts ReceivableSuppliesPrepaid InsuranceAccounts PayableCommon
StockRetained Earnings
a.
b.
c.
d.
e.
f.
g.
h.
i.
Bal.
Calculate the November 30 cash balance and the amount of net income for November
for Hoover Co.
A company reports the following:
Net sales$750,000
Average accounts receivable (net)$ 50,000
Determine the (a) accounts receivable turnover and (b) days’ sales in receivables. Round
your answers to one decimal place.
Information and communication are essential elements of an organization’s internal
control.
a. True
b. False
Cape Corporation sells a single product. Budgeted sales for the year are anticipated to
be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending
inventory is 80,000 units. The quantities of direct materials expected to be used for each
unit of finished product are given below.
Material A.50 lb. per unit@ $0.60 per pound
Material B1.00 lb. per unit@ $1.70 per pound
Material C1.20 lb. per unit@ $1.00 per pound
The amount of direct material A purchased during the year is:
a. $216,000.
b. $186,600.
c. $192,000.
d. $245,400.
Silver Co. sold merchandise to Copper Co. on account, $75,000, terms 2/10, net 30. The
cost of the merchandise sold is $55,000. Silver Co. issued a credit memorandum for
$10,000 for merchandise returned that originally cost $9,000. Copper Co. paid the
invoice within the discount period. What is amount of net sales from the transactions?
a. $65,000
b. $63,500
c. $64,680
d. $63,700
Under which method of inventory costing is the cost flow assumed to be in the reverse
order in which the expenditures were made?
a. Average cost
b. Lastin, firstout
c. Firstin, firstout
d. Specific identification method
The unit contribution margin is the dollars available from each unit of sales to cover
fixed cost and provide operating income.
a. True
b. False
Heedy Company had the following account balances in 2016 and 2017, respectively.
Assuming dividends of $20,000 were paid in 2017, how much was net income?
20172016
Capital Stock$ 42,000$ 40,000
Retained Earningsx210,000
Total Stockholders’ Equity$ 314,000$ 250,000
a. $62,000
b. $82,000
c. $272,000
d. $252,000
Rights that are shortterm in nature are called intangible assets.
a. True
b. False
Under the accrual basis of accounting, the accounting records are normally updated
after the preparation of the financial statements.
a. True
b. False
KCT Printing Company uses a job order cost system.
(a) Indicate the source of the data for increasing Work in Process for each of the
following:
(1)Direct materials requisitioned
(2)Direct labor used
(b) Indicate the source of the data for decreasing Work in Process for jobs completed.
(c) Present a list of the three controlling accounts used in the general ledger to record
the inventories and, in each case, indicate the related subsidiary ledger.
Under the cash basis of accounting, a business records only transactions involving
increases or decreases of its cash.
a. True
b. False
The standard fixed factory overhead rate is based on 100% capacity of 50,000 direct
labor hours. The standard costs and the actual costs for factory overhead for the
production of 8,000 units during the current month were as follows:
Standard:40,000 hours at $3$120,000
Actual:Factory overhead
(41,000 direct labor hours)131,200
If there was a $9,000 unfavorable volume variance for December, what is the standard
fixed factory overhead cost rate?
a. $1.00
b. $0.90
c. $2.40
d. $0.80
The _____ estimates the expected receipts and payments of cash for a period of time.
a. capital expenditures budget
b. cash sales budget
c. cash budget
d. production budget