When a withdrawing partner withdraws assets less than his or her capital balance, the
excess is treated as a bonus to the remaining partners.
Interim financial statements report data for a period of less than one year.
Operating income is determined by deducting all fixed costs related to production,
selling, and administration from contribution margin.
When the existing partners pay a bonus to a newly admitted partner, the existing
partners’ accounts are debited.
A building not currently used because economic conditions have limited a company’s
expansion is classified as an investment.
The holder of a note adjusts for accrued interest by debiting Interest Receivable and
crediting Interest Income.
A standard unit cost can be determined after developing standard costs for direct
materials, direct labor, and variable and fixed overhead.
Good internal control dictates that one employee should oversee all related parts of a
transaction.
Depreciation should not be recorded for an asset that is increasing in value.
Financial position may be assessed by referring to a balance sheet.
Management accounting formats are identical for all companies.
The entry to record the issuance of bonds at a premium includes a credit to the
Unamortized Bond Premium account.
A purchase requisition is a document sent by a company to a vendor.
Under the perpetual inventory system, the purchase of merchandise is recorded with a
debit to Purchases.
The annual interest earned on an amount deposited into a bank account will increase
each year when simple interest is used.
Par value
A.is established for a share of stock after it is issued.
B.is the legal capital established for a share of stock.
C.represents what a share of stock is worth.
D.represents the original selling price for a share of stock.
Use the following performance report for a cost center of the Dry Cat Food Division for
the month ended December 31 to answer the questions below.
Using the information provided for Dry Cat Food division, the flexible budget is based
on how many units produced?
A.0 units
B.30 units
C.70 units
D.100 units
Faithful representation is comprised of all of the following except
A.Verifiability
B.Completeness
C.Neutrality
D.Free from error
Morgan & Morgan is a small firm that assists clients in the preparation of their tax
returns. The firm has five accountants and five researchers, and it uses job order costing
to determine the cost of each client’s return. The firm is divided into two departments:
(1) Preparation and (2) Research & Planning. Each department has its own overhead
application rate. The Preparation Department’s rate is based on accountant labor costs
and Research & Planning is based on the number of research hours. The following is
the company’s estimates for the current year’s operations.
Client No. 2006-713 was completed during April of the current year and incurred the
following costs and hours:
a. Compute the overhead rates to be used by both departments.
b. Determine the cost of Client No. 2006-713, by department and in total.
Which of the following is not a characteristic of a process costing system?
A.A specific time period is used
B.Several Work in Process Inventory accounts are used
C.Product costs are grouped by processes, departments, or work cells
D.More suitable when customized products are manufactured
Use this balance sheet and income statement for the first year of operations for Cane
Construction to answer the following question. Use ending balances whenever average
balances are required for computing ratios.
The total amount of working capital for Cane Construction is
A.$4,000.
B.$14,000.
C.$6,000.
D.$2,000.
Using the following information and the trial balance accounts and balances in the work
sheet provided, complete the work sheet.
a. Expired insurance totals $8.
b. Of the unearned revenue, all has been earned by the balance sheet date.
c. Estimated depreciation of equipment is $6.
d. Accrued wages equal $6.
e. Unused supplies on hand are $4.
Which of the following accounts could decrease as a result of adjusting entries?
A.Prepaid Insurance.
B.Accumulated Depreciation’“Buildings.
C.Rent Expense.
D.Service Revenue.
a. What is the formula for breakeven units?
b. How is knowledge of the contribution margin of a product helpful?
In your answer, explain two possible benefits of computing the contribution margin of a
product.
If a capital expenditure is incorrectly recorded on a company’s books as a revenue
expenditure, which of the following statements will be TRUE?
A.Net income will be understated for the year.
B.Stockholders’ equity will be overstated at year end.
C.Total assets will be overstated at year end.
D.Net income in the following year will be understated.
Kingston Company settled a long-term note payable it owed to Creative Company by
issuing capital stock. Kingston would report this
A.only as a cash outflow from financing activity for the payment of the debt.
B.only as a cash inflow from financing activity for the issuance of the capital stock.
C.in the schedule of noncash investing and financing transactions.
D.as both a cash flow from investing activity and a cash flow from financing activity.
Which of the following decreases with increase in number of units sold?
A.Total variable costs
B.Total fixed costs
C.Unit variable cost
D.Unit fixed cost
Management accounting reports are
A.prepared using the double-entry system of accounting.
B.prepared periodically.
C.based on generally accepted accounting principles.
D.driven by user’s needs.
Proper __________ depends on correctly analyzing the effect of each transaction and
on maintaining a system of accounts that reflects that effect.
A.classification
B.valuation
C.recognition
D.realization
a. Indicate the effect of a purchase of merchandise on account (on credit) on each of the
following items. Use ‘Increase,’ ‘Decrease,’ or ‘No effect’ to express your answer for
each, and place your answers in the spaces provided. Assume that the first two ratios
exceeded 1.0 before the transaction.
b. Indicate the effect of a payment of an account payable on each of the following
items. Assume that the first two ratios exceeded 1.0 before the transaction. Use
‘Increase,’ ‘Decrease,’ or ‘No effect’ to express your answer for each, and place your
answers in the spaces provided.
The income statement for a manufacturing company usually contains a detailed
computation of the
A.total manufacturing cost.
B.cost of goods sold.
C.total cost of materials used.
D.total overhead.
When a credit sale takes place,
A.a revenue account will increase.
B.liabilities will increase.
C.one asset account will increase and another will decrease.
D.assets will be unaffected.
Closing entries are made
A.to clear revenue and expense accounts of their balances.
B.to clear withdrawals of its balance.
C.to summarize a period’s revenues and expenses.
D.All of these choices.
In 2014, a small publishing company sold 60,000 copies of Super Travel paperbacks (its
only product) at $5 per book; total fixed costs were $15,000; and total variable costs
were $3 per book. What is this company’s breakeven point in units?
A.10,500 units
B.7,500 units
C.30,000 units
D.15,000 units
Which work sheet columns should contain ‘key letters’?
A.Balance Sheet
B.Adjusted Trial Balance
C.Trial Balance
D.Adjustments
Technically, what is meant by the amortization of a bond discount, and why is it
necessary?
The Trial Balance and Adjusted Trial Balance columns of Kathy’s Cleaning Company’s
work sheet are shown below (the adjustments column has been omitted). In the journal
provided, prepare the six adjusting entries and the four closing entries for the month
ended June 30, 20×5. No explanations are needed.
Using the following information, prepare a traditional income statement and a variable
costing income statement:
Match the following terms with their respective formulas.
The following machines were purchased during 2014:
Machine A for $6,000 on April 5
Machine B for $4,000 on August 24
Machine C for $5,000 on November 10
Assuming that each machine has an estimated useful life of six years and a 10 percent
residual value, calculate total depreciation expense for 2014 (assume straight-line
depreciation and round to the nearest month and the company reports on a
calendar-year basis).