On a statement of cash flows prepared using the direct method, if certain expenses do
not require a current outlay of cash, those expenses must be subtracted from operating
expense to arrive at cash payments for operating expenses.
A temporary account is also known as a nominal account.
Financial leverage refers to the issuance of stock to raise cash.
An advertising company would probably use a process costing system.
Make-or-buy decisions, such as whether to make a part internally or buy it from an
external supplier, may lead to outsourcing.
The copyright granting the exclusive rights to sell artistic materials and computer
programs ends with the author’s life.
The expenses incurred by an accounting firm would appear on its balance sheet.
Under a defined benefit pension plan, retirement benefits are based entirely on the
annual contribution to the fund plus earnings thereon.
Under the average costing method in a process costing system, the costs in beginning
inventory are combined with current period costs to compute an average product unit
cost.
Declining profitability and liquidity ratios are indications that a company may not
survive.
The objective of segment profitability decisions is to identify the segments that have a
negative segment margin so that managers can drop them or take corrective actions.
Use the following data provided by Star Inc. to answer the questions below. The
company uses a process costing system.
The FIFO costing method is used by the company.
Equivalent units for direct materials of Star Inc. during the month totaled
A.6,400.
B.8,600.
C.6,600.
D.7,600.
The post-closing trial balance differs from the adjusted trial balance in that it does not
A.take into account owner investments and withdrawals.
B.take into account adjusting entries.
C.include income statement accounts.
D.include balance sheet accounts.
Which of the following types of product costs appear in the financial statements?
A.Predetermined overhead costs
B.Estimated costs
C.Standard costs
D.Actual costs
Which of the following budgets is prepared before the preparation of production
budget?
A.Sales budget
B.Cash budget
C.Direct labor budget
D.Capital expenditure budget
Campbell Inc. earned sales revenue of $150,000 in 2014. Campbell sells each unit of its
product for $6.00 and has a 32 percent contribution margin. Campbell has fixed costs of
$36,000.
What is Cambell’s breakeven point in sales dollars?
A.$205,714
B.$112,500
C.$150,000
D.$69,120
Taylor Inc. manufactures 12,000 units of a part used in its production to manufacture
guitars. The annual production activities related to this part are as follows:
Best Guitars Inc. has offered to sell 12,000 units of the same part to Taylor for $22 per
unit. If Taylor were to accept the offer, some of the facilities presently used to
manufacture the part could be rented to a third party at an annual rental of $18,000.
Moreover, $4 per unit of the fixed overhead applied to the part would be totally
eliminated.
What should Taylor’s decision be, and what is the total cost savings that would result?
A.Make, $60,000
B.Buy, $60,000
C.Make, $78,000
D.Buy, $78,000
For work done during June, Prints Company incurred direct materials costs of $150,000
and conversion costs of $225,000. The company employs a traditional operating
philosophy. At the end of August, it was determined that the Work in Process Inventory
account had been assigned $2,000 of costs, and the ending balance of the Finished
Goods Inventory account was $5,000. There were no beginning inventory balances.
Using the information provided for Prints Company, how much was charged to the Cost
of Goods Sold account during June?
A.$378,000
B.$380,000
C.$375,000
D.$368,000
Underfoot Products uses standard costing. The following information about overhead
was generated during May:
Using the above information provided for Underfoot Products, compute the fixed
overhead budget variance.
A.$5,000 (F)
B.$5,000 (U)
C.$10,000 (F)
D.$15,000 (F)
Cloud Nine International uses a process costing system. Assume that direct materials
are added at the beginning of the period and that direct labor and overhead are added
continuously throughout the process. The company uses the average costing method.
The following data are available for one of its accounting periods:
Equivalent units for conversion costs of Cloud Nine International are
A.207,800.
B.192,200.
C.181,800.
D.200,000.
If only common stock is outstanding, total stockholders’ equity divided by the number
of shares of common stock outstanding is called the
A.par or stated value per share.
B.call value per share.
C.book value per share.
D.market value per share.
In the journal provided, prepare journal entries without explanations for the following
transactions. Write ‘no entry’ if none is needed.
a. Received a $1,000 invoice for this month’s electricity. Payment will be made in 2
weeks.
b. Paid $1,200 for insurance premiums to cover the next six months.
c. The owner, Heidi Shop, withdrew $700.
d. The utility bill from part ‘a’ is paid.
e. Purchased land for $50,000. The company paid half in cash and issued a promissory
note for the other half.
Which of the following is not a product cost?
A.Depreciation on office furniture
B.Manufacturing overhead
C.Direct labor
D.Direct materials
Days’ sales uncollected equals 365 days divided by
A.net sales.
B.average net accounts receivable.
C.net income.
D.the receivable turnover.
Which of the following is not subject to depletion?
A.Timber tract
B.Noncompete covenant
C.Mine
D.Oil field
a. Indicate on the blanks below the effect (I = increase, D = decrease, NE = no effect) of
the entry to record the declaration of a common stock dividend on each of the items
listed.
b. Indicate on the blanks below the effect (I = increase, D = decrease, NE = no effect) of
the entry to record the distribution of a (previously declared and recorded) common
stock dividend on each of the items listed.
Use this information to answer the following question.
The following totals for the month of September were taken from the payroll register of
Meadors Company:
The entry to record the payment of net payroll would include a
A.debit to Salaries Payable for $24,000.
B.debit to Salaries Payable for $15,900.
C.debit to Salaries Payable for $17,000.
D.credit to Cash for $18,100.
Suppose a management accountant becomes aware of a confidential but illegal act that
has occurred within her company. The management accountant must consider what she
is ethically bound to do about this situation. Three alternative responses to this situation
are given below. State whether you agree or disagree with each, and briefly detail your
reasons.
a. The accountant must remain loyal to the company at all times and should report the
occurrence only to appropriate officials within the company.
b. The accountant is bound to inform officials only if she stands to personally gain
(make money) from knowledge of the illegal act.
c. The accountant must exercise personal judgment; a clear-cut answer does not exist
given the limited information provided.
Use the following adjusted trial balance to answer the question below.
The amount of net income (or net loss) during the period is
A.$182,000 net income.
B.$122,000 net loss.
C.$92,000 net income.
D.$52,000 net income.
Equipment was purchased for $117,000. It had an estimated residual value of $18,000
and has a current carrying value of $75,000. Its depreciable cost must have been
A.$42,000.
B.$99,000.
C.$124,000
D.impossible to determine from the facts given.
Compute the average assets invested for the Omega International’s investment center as
shown below.
A.$14,350
B.$14,400
C.$14,300
D.$14,250
An audit is an examination of a company’s
A.financial statements.
B.accounting systems.
C.accounting controls.
D.all of these.
Depreciation expense influences cash flows because it directly affects
A.the amount of income taxes paid by the company.
B.cash received from revenues during the current period.
C.the carrying value of the asset.
D.revenues earned by the equipment.
Determine the interest on the following notes payable:
a. $6,000 at 10 percent for 60 days
b. $600 at 16 percent for 4 months
c. $10,000 at 12 percent for 45 days
d. $900 at 14 percent for 30 days
Leah, Cameron, and Ryan each receive a $20,000 salary, as well as 10 percent interest
on their respective average investments of $120,000, $200,000, and $40,000. If they
share remaining income and losses in a 2:1:3 ratio, respectively, by how much would
Cameron’s account increase or decrease (indicate a decrease by placing parentheses
around the amount), assuming (a) net income of $144,000, (b) net income of $72,000,
and (c) net loss of $72,000.
Which of the following is not a component of free cash flow?
A.Purchases of plant assets
B.Net income
C.Dividends
D.Net cash flows from operating activities
From the following information, compute the ratios indicated and place the proper
numbers in the spaces provided. Assume the average for the year is the same as the
ending balances for the balance sheet accounts. Round answers to one decimal place,
and show your work.
Anders had 4,000 shares of common stock issued and outstanding. The market price of
common stock at year end was $15.00 per share. Dividends paid in 20×5 were $0.60 per
share.
The C.M. Landscaping Co. uses chicken manure to fortify the soil around trees bearing
rare fruit. The price standard used is $3.50 per 10 pound sack of chicken manure.
During the current year, the actual purchase price averaged $3.65 per sack, according to
the company’s purchasing agent. The company purchased and used 1,560 sacks of
chicken manure during the year. Compute the direct materials price variance. Be sure to
indicate whether it is favorable or unfavorable.
What two criteria must be met for information to be considered relevant to decision
making?
Below are the adjusted accounts of Sterling Company for the month ended May 31,
20×5, listed in alphabetical order:
In the journal provided, prepare Sterling’s closing entries. Omit explanations
Jackson, CPA, entered into a cost-plus contract with Ivory Computer Services for
software installation and Internet interfacing in her accounting practice. The following
is Ivory Computer Services’ job cost card for this job. Ivory’s profit factor is 25 percent
of total costs. Complete the following card, as indicated:
On January 1, 20×5, Dove Valley Corporation had 100,000 shares of $10 par value
common stock issued and outstanding. All 100,000 shares had been issued in a prior
period at $30 per share. On February 1, 20×5, Dove Valley purchased 4,000 shares of
treasury stock for $36 per share and later sold the treasury shares for $40 per share on
March 2, 20×5. The entry to record the sale of the treasury shares on March 2, 20×5, is :
Describe at least 3 ways the sales journal saves time.
Lawler Corporation had both the following transactions occur on the same day:
1. Issued 60,000 shares of its $5 par value common stock for $720,000 cash.
2. Issued 20,000 shares of its $5 par value common stock in exchange for land and a
building. The building is estimated to have a market value of $180,000.
Prepare the entries in journal form to record the above transactions. Omit explanations,
but show computations.
Below are the adjusted accounts of Carlson Co. for the month ended May 31, 20×5,
listed in alphabetical order:
Kyle Biehl, an attorney, bills his clients at a rate of $100 per hour. At the beginning of
July, clients owed him $8,000, of which he collected $5,600 during the month. In July,
Kyle billed clients for 160 hours of work. By the end of July, 60 of these hours were
unpaid.
Kyle has one employee, Marcia Medvid, who is paid $20 per hour. During July, Marcia
worked 170 hours, of which 16 hours will be paid in August. The rest were paid in July
along with wages for 8 hours worked the last day of June.
Show calculations as you determine the following for the month of July:
a> Amount of revenue earned
b> Wages expense incurred
c> Cash received from clients
d> Cash paid to Marcia Medvid
