One possible explanation for direct labor rate and efficiency variances is the use of
workers with different skill levels.
Answer:
The present value of 1 formula is often useful when a borrowed asset must be repaid in
full at a later date and the borrower wants to know its worth at the future date.
Answer:
The Form W-2 must be given to employees before January 31 following the year
covered by this report.
Answer:
Financial reporting includes not only general purpose financial statements, but also
information from SEC filings, press releases, shareholders’ meetings, forecasts,
management letters, auditor’s reports, and Webcasts.
Answer:
Held-to-maturity securities are equity securities a company intends and is able to hold
until maturity.
Answer:
The departmental overhead rate method allows each department to have its own
overhead rate and its own allocation base.
Answer:
In process cost accounting, the classification of materials as direct or indirect depends
on whether they are clearly linked with a specific process.
Answer:
The inventory turnover ratio is computed by dividing average merchandise inventory
by cost of goods sold.
Answer:
A discount on bonds payable occurs when a company issues bonds at a price less than
par value.
Answer:
An understatement of the ending inventory balance will understate cost of goods sold
and overstate net income.
Answer:
The balance sheet shows whether or not the firm achieved its primary objective of
earning a profit.
Answer:
An unfavorable variance is recorded with a debit.
Answer:
A post-closing trial balance is a list of permanent accounts and their balances from the
ledger after all closing entries are journalized and posted.
Answer:
The main difference between the income statement of a manufacturer and a
merchandiser is that the merchandiser includes cost of goods manufactured rather than
cost of goods purchased.
Answer:
Purchase allowances refer to merchandise a buyer acquires but then returns to the
seller.
Answer:
A company had net sales of $545,000 and cost of goods sold of $345,000, which means
its gross margin is equal to $200,000.
Answer:
If a department that applies process costing starts the reporting period with 100,000
physical units that were 20% complete with respect to direct labor, it must add 80,000
equivalent units of labor to complete them.
Answer:
TechCom’s customer RDA paid off an $8,300 balance on its account receivable.
TechCom should record the transaction as a debit to Accounts Receivable-RDA and a
credit to Cash.
Answer:
The retail inventory method estimates the cost of ending inventory by applying the
gross profit ratio to net sales.
Answer:
In a present value or future value table, the length of one time period may be one year,
one month, or any other length of time depending on the situation.
Answer:
A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a
credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash
discount for early payment.
Answer:
A classified balance sheet organizes assets and liabilities into important subgroups that
are not found on an unclassified balance sheet.
Answer:
A company that uses a process cost accounting system maintains separate Goods in
Process Inventory accounts for each of its manufacturing departments.
Answer:
Underapplied overhead is the amount by which overhead applied to jobs using the
predetermined overhead allocation rate exceeds the overhead incurred during a period.
Answer:
A company that has a high accounts receivable turnover in comparison with
competitors should tighten its credit policy.
Answer:
As long as a company accurately records total credit sales information, it is not
necessary to have separate accounts for specific customers.
Answer:
Employee morale, timeliness of delivery, and the reactions of customers are examples
of nonfinancial factors that should be considered when making a managerial decision.
Answer:
The dividends account normally has a credit balance since it is an equity account.
Answer:
Internal control policies and procedures are the same for all companies.
Answer:
If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2
Canadian dollars will buy 1.48 worth of U.S. dollars.
Answer:
The contribution margin ratio is the percentage by which the margin of safety exceeds
the break-even point.
Answer:
Additional power for operating machines, extra supplies, and added cleanup costs are
examples of incremental overhead costs.
Answer:
Reference: 17_01
Kudzu Company sells two products Big X and Little X. Current direct material and
direct labor costs are detailed below. Next year, the company wishes to use a plantwide
overhead rate with direct labor hours as its allocation base. Next years overhead is
estimated to be $525,000. The direct labor and direct materials costs are estimated to be
consistent with the current year. Direct labor costs $20 per hour and the company
expects to manufacture 16,000 units of Big X and 18,000 units of Little X next year.
If the direct labor time estimates are met, Kudzu will allocate $10.50 of overhead cost
to each unit of Little X.
Answer:
Machine setup costs are an example of a batch level activity.
Answer:
The payment of cash dividends never changes the balance of retained earnings.
Answer:
Variable costing is the only acceptable basis for both external reporting and tax
reporting.
Answer:
A cost pool is a collection of costs that are related to the same or similar activity.
Answer:
A wholesaler is an intermediary that buys products from manufacturers or other
wholesalers and sells them to consumers.
Answer:
A process cost summary includes the amounts of equivalent finished units of production
for the period.
Answer:
Quick assets include cash, inventory, and current receivables.
Answer:
For each of the following errors, indicate on the table below the amount by which the
trial balance will be out of balance and which trial balance column (debit or credit) will
have the larger total as a result of the error.
a. $100 debit to Cash was debited to the Cash account twice.
b. $1,900 credit to Sales was posted as a $190 credit.
c. $5,000 debit to Office Equipment was debited to Office Supplies.
d. $625 debit to Prepaid Insurance was posted as a $62.50 debit.
e. $520 credit to Accounts Payable was not posted.
Answer:
When a credit sale is denominated in a foreign currency, the foreign exchange rate used
to record the sale is the current exchange rate:
A. Thirty days from the date of sale.
B. At the end of the seller’s fiscal year.
C. At the end of the buyer’s fiscal year.
D. On the date final payment is made.
E. On the date of the sale.
Answer:
Operating leases differ from capital leases in that
A. For a capital lease, the lessee records the lease payments as rent expense, but for an
operating lease, the lessee reports the lease payments as depreciation expense.
B. For an operating lease, the lessee depreciates the asset acquired under lease, but for
the capital lease, the lessee does not.
C. Operating leases create a long-term liability on the balance sheet, but capital leases
do not.
D. Operating leases do not transfer ownership of the asset under the lease, but capital
leases often do.
E. Operating lease payments are generally greater than capital lease payments.
Answer:
On September 1, a corporation had 50,000 shares of $5 par value common stock and
$1,000,000 of retained earnings. On that date, when the market price of the stock is $15
per share, the corporation issues a 2-for-1 stock split. The general journal entry to
record this transaction is:
A.
B.
C.
D.
E. No entry is made for this transaction.
Answer:
A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the
product sells for $75 per unit. What is the company’s break-even point in dollar sales?
A. $ 60,000
B. $128,571
C. $180,000
D. $210,000
E. $300,000
Answer:
The master budget includes:
A. Only operating budgets and financial budgets.
B. Only a capital expenditures budget and a cash budget.
C. Only a budgeted income statement and a budgeted balance sheet.
D. Only a cash budget and operating budgets.
E. Operating budgets, a capital expenditure budget, and financial budgets.
Answer:
A company’s annual accounting period ends on December 31. During the current year,
a depreciable asset that cost $24,000 was purchased on October 1. The asset has a
$1,000 estimated salvage value. The company uses straight-line depreciation and
expects the asset to have a six-year life. What is the total depreciation expense for the
current year?
A. $3,833.33
B. $958.33
C. $4,000.00
D. $1,000.00
E. $1,041.67
Answer:
The difference between the total budgeted overhead cost and the overhead applied to
production using the predetermined overhead rate is the:
A. Production variance
B. Volume variance
C. Overhead cost variance
D. Quantity variance
E. Controllable variance
Answer:
Alpha Company had cash sales of $94,275, credit sales of $83,450, sales returns and
allowances of $1,700, and sales discounts of $3,475. Alpha’s net sales for this period
equal:
A. $94,275
B. $172,550
C. $174,250
D. $176,025
E. $177,725
Answer:
The amount of federal income taxes withheld from an employee’s paycheck is
determined by:
A. The employee’s annual earnings rate and number of withholding allowances.
B. The employer’s merit rating.
C. The employees annual earnings rate and merit rating.
D. Multiplying gross pay by 2%.
E. The employees credit rating.
Answer:
On October 10, 2013, Printfast Company sells a commercial printer for $2,350 with a
one-year warranty that covers parts. Warranty expense is projected to be 4% of sales.
On February 28, 2014, the printer requires repairs. The cost of the parts for the repair is
$80 and Printfast pays their technician $150 to perform the repair. What warranty
expense is recorded for this printer during 2014?
A. $14.00.
B. $84.80.
C. $94.00.
D. $0, there is no expense in 2014.
E. $230.00.
Answer:
A company had $43 missing from petty cash which was not accounted for by petty
cash receipts. The correct procedure is to:
A. Debit Cash Over and Short for $43.
B. Credit Cash Over and Short for $43.
C. Debit Petty Cash for $43.
D. Credit Petty Cash for $43.
E. Credit Cash for $43.
Answer:
Miller Company has a times interest earned ratio of 5. Sales and variable expenses
were $57,290 and $40,105 respectively. Compute the company’s fixed interest expense.
A. $17,185
B. $3,437
C. $11,458
D. $8,021
E. $85,925
Answer:
Indicate whether a debit or credit entry would be made to record the following changes
in each account:
a. To decrease Cash.
b. To increase Common Stock.
c. To decrease Accounts Payable.
d. To increase Salaries Expense.
e. To decrease Supplies.
f. To increase Revenue.
g. To decrease Accounts Receivable.
h. To increase Retained Earnings.
Answer:
Unearned revenue is reported on the financial statements as:
A. A revenue on the balance sheet.
B. A liability on the balance sheet.
C. An unearned revenue on the income statement.
D. An asset on the balance sheet.
E. An operating activity on the statement of cash flows.
Answer:
The statement of cash flows reports information on:
A. Revenue activities
B. Expense activities
C. Financing activities
D. Equity activities
E. Asset activities
Answer:
An error in the period-end inventory causes an offsetting error in the next period and
therefore:
A. Managers can ignore the error.
B. It is sometimes said to be self-correcting.
C. It affects only income statement accounts.
D. If affects only balance sheet accounts.
E. Is immaterial for managerial decision making.
Answer:
A company sells computers with a six-month warranty. In January, the company sold
100,000 computers at $1,750 each and 1,500 computers were turned in for repairs
during that same month. The total repairs amounted to $185,000 costs from the
computer parts inventory. It is estimated that 2% of all units sold will need repairs under
warranty at an estimated cost of $200 per unit. Prepare the journal entries to record (a)
estimated warranty expense for January and (b) warranty repair costs for January.
Answer:
Lara Company has budgeted the following credit sales during the current year:
September, $25,000; October, $36,000; November, $30,000; December, $32,000.
Experience has shown that payment for the credit sales is received as follows: 20% in
the month of sale, 60% in the first month after sale, and 20% in the second month after
sale. What will be the balance in Accounts Receivable at the end of November
assuming the payment patterns have been as described?
A. $26,600
B. $31,200
C. $33,800
D. $39,600
E. $25,200
Answer:
Total asset turnover is calculated by dividing:
A. Gross profit by average total assets.
B. Average total assets by gross profit.
C. Net sales by average total assets.
D. Average total assets by net sales.
E. Net assets by total assets.
Answer:
Multiple-step income statements:
A. Are required by the FASB.
B. Contain more detail than a simple listing of revenues and expenses.
C. Are required for the perpetual inventory system.
D. List cost of goods sold as an operating expense.
E. Can only be used in perpetual inventory systems.
Answer:
A company expects its three departments to yield the following income for next year:
Required: Compute the following independent calculations:
a. The effect on total company income if Dept. X is eliminated.
b. The effect on total company income if Dept. Y is eliminated.
c. The effect on total company income if Dept. Z is eliminated.
d. Should any of these departments be eliminated? Why of why not?
Answer:
A company wishes to buy new equipment for $9,000. The equipment is expected to
generate an additional $2,800 in cash inflows for six years. All cash flows occur at
year-end. A bank will make an $9,000 loan to the company at a 10% interest rate so that
the company can purchase the equipment. Use the table below to determine break-even
time for this equipment:
A. Break-even time is between two and three years.
B. Break-even time is between three and four years.
C. Break-even time is between four and five years.
D. Break-even time is between five and six years.
E. This project will never break-even.
Answer:
Reference: 20_04
Kyoto, Inc. predicts the following sales in units for the coming four months:
Although each month’s ending inventory of finished units should be 60% of the next
month’s sales, the March 31 finished goods inventory is only 100 units. A finished unit
requires five pounds of raw material B. The March 31 raw materials inventory has 200
pounds of B. Each month’s ending inventory of raw materials should be 30% of the
following month’s production needs.
If each unit of Kyotos product takes two hours to produce and the labor rate is expected
to be $10 per hour, what is the budgeted labor cost for the second quarter?
A. $16,400
B. $17,280
C. $9,840
D. $8,960
E. $17,560
Answer:
The formula for computing annual straight-line depreciation is:
A. Depreciable cost divided by useful life in units.
B. Cost plus salvage value divided by the useful life in years
C. Cost less salvage value divided by the useful life in years.
D. Cost divided by useful life in years.
E. Cost divided by useful life in units.
Answer:
A company that has operated with a 30% average gross profit ratio for a number of
years had $100,000 in sales during the first quarter of this year. If it began the quarter
with $18,000 of inventory at cost and purchased $72,000 of inventory during the
quarter, its estimated ending inventory using the gross profit method is:
A. $30,000
B. $21,000
C. $20,000
D. $18,000
E. $27,000
Answer:
The predetermined overhead allocation rate for Forsythe, Inc. is based on estimated
direct labor costs of $400,000 and estimated factory overhead of $500,000. Actual costs
incurred were:
(A. Calculate the predetermined overhead rate and calculate the overhead applied
during the year.
(B. Determine the amount of over- or underapplied overhead and prepare the journal
entry to eliminate the over- or underapplied overhead assuming that it is not material in
amount.
Answer:
Trend analysis is also called:
A. Financial analysis
B. Ratio analysis
C. Index number trend analysis
D. Industry analysis
E. Output analysis
Answer:
A job order manufacturing system would be appropriate for a company that produces
which one of the following items?
A. A landscaping design for a new hospital.
B. Seedlings for sale in a nursery.
C. Sacks of yard fertilizer.
D. Packets of flower seeds.
E. Small gardening tools, including rakes, shovels, and hoes.
Answer:
A company’s annual accounting period ends on September 30. During the current year,
a depreciable asset that cost $16,000 was purchased on January 1. The asset has a
$2,000 estimated salvage value. The company uses straight-line depreciation and
expects the asset to have a four-year life. What is the total depreciation expense for the
current year?
A. $4,000
B. $3,000
C. $3,500
D. $2,625
E. $875
Answer:
Return on assets is:
A. Also called rate of return.
B. Computed by dividing net income by average total assets.
C. Computed by multiplying net income by average total assets.
D. Used in helping evaluate expenses.
E. Found on the balance sheet.
Answer:
Vicki Lake is a computer consultant. Shown below are (a) several accounts in her
ledger with each account preceded by an identification number and (b) several
transactions completed by Lake. Indicate the accounts debited and credited when
recording each transaction by placing the proper account identification numbers to the
right of each transaction.
Answer:
A company issues bonds at par on June 1. These 7% bonds have a par value of
$500,000 and pay interest annually. June 1 is five months after the most recent interest
payment date. How much total cash interest is received on June 1 by the bond issuer?
A. $0
B. $2,916.66
C. $100,000.00
D. $14,583.33
E. $35,000.00
Answer:
Cost accounting systems used by manufacturing companies are based on the:
A. Periodic inventory system.
B. Perpetual inventory system.
C. Finished goods inventories.
D. Weighted average inventories.
E. LIFO inventory system
Answer:
Which of the following statements is true? For the issuer:
A. Interest paid on bonds is tax deductible.
B. Interest paid on bonds is not tax deductible.
C. Dividends paid to stockholders are tax deductible.
D. Bonds are assets.
E. Bonds always decrease return on equity.
Answer:
________________________focuses on activities and the cost of carrying out
activities.
Answer:
A company’s only treasury stock transactions for the current year are as follows: (1)
1,000 shares of its common stock were purchased on June 1 for $40,000; (2) On July 1
it reissued 500 of these shares at $45 per share; (3) On August 1 it reissued the 500
remaining treasury shares at $38 per share.
(1) Prepare the journal entries required to record these transactions.
(2) Calculate the balance in Paid-in Capital, Treasury Stock, on September 1 assuming
its beginning-year balance is zero.
Answer:
What are known current liabilities? Provide at least two examples of known current
liabilities.
Answer:
A company has a current ratio of 1.92, total liabilities of $193,849, long-term notes
payable of $85,791, and a quick ratio of .96. What are total quick assets for the
company?
Answer:
The _______________ stage of ABC is to compute an activity rate for each cost pool
and then use this rate to allocate overhead costs to products.
Answer:
A company manufactures and sells spotlights. Each spotlight sells for $145. The
variable cost per unit is $98, and the company’s total fixed costs are $235,000. Predicted
sales are 15,000 units. What is the contribution margin per unit?
Answer:
A company borrowed $60,000 on a 60-day, 10% note payable from its bank. Compute
the total cash payment at the note’s maturity.
Answer:
A company reports the following stockholders’ equity:
Contributed capital:
Compute the (1) number of common shares outstanding and (2) book value per
common share.
Answer:
Explain the accounting procedures that employers must follow for employee payroll
deductions.
Answer:
Discuss the purpose of a bank reconciliation.
Answer:
Identify several opportunities in accounting and its related fields.
Answer:
What are prime costs? What are conversion costs?
Answer:
The current year-end balance sheet data for a company are shown below:
Calculate this company’s:
(1) Working capital
(2) Acid-test ratio
Answer:
Slosh, Inc. produces washing machines that require two processes, assembling and
finishing, to complete. The companys bestselling machine is the commercial washer.
Information related to the 500 commercial washers produced annually is shown below.
Sloshs total expected overhead costs and related overhead data are shown below. The
company uses departmental overhead rates based on direct labor hours in the
Assembling Department and machine hours in the Finishing Department.
Determine the total product cost of this product line and each individual commercial
washer.
Answer:
A customer’s check is deposited by a company. The check is uncollectible because the
balance in the customer’s account is not large enough to cover the check. This check is
referred to as a __________ check.
Answer: