The existence of uncollectible accounts is evidence of poor credit policies.
Bill Pierce owns several ice cream shops all within 50 miles of his home. He has plans
to expand the number of shops he owns. This planned expansion will require a large
bank loan. Bill has always done his own accounting work and has prepared a set of
financial statements for each of the past five years of operations to present to the bank.
Because some periods were more profitable than others, Bill attempted to streamline his
earnings by switching depreciation and inventory valuation methods frequently. This
created the appearance that his company earnings were very consistent over the years.
Discuss the merits of Bill’s financial statements with regard to his streamlining
decisions.
The convention of consistency pertains to the use of the same accounting principles by
firms in the same industry.
The weighted-average breakeven point is the breakeven point for the entire company.
Qualitative factors are also considered in the evaluation of capital investment proposals.
For purposes of preparing the statement of cash flows, cash is defined as including both
cash and cash equivalents.
When a company receives a product previously ordered, a recordable transaction has
occurred.
The fee paid by a retailer to a credit card company is considered a contra-revenue
account by the retailer.
The unit contribution margin of a product cannot be more than its selling price.
A partner in a landscaping business can bind the partnership to a contract for purchasing
furniture and clothing.
The use of the lower-of-cost-or-market method for inventory is an application of the
convention of conservatism.
The main difference in the master budget process for manufacturing, retail, and service
organizations is found in the kinds of operating budgets prepared by the organization.
All operating budgets should contain revenue and expense components.
Detailed information about a company’s investments is never disclosed in the notes to
the financial statements.
With few exceptions, all subsidiaries in which the parent company owns a controlling
interest (more than 50 percent) must be consolidated with the parent company for
financial reporting purposes.
In a process costing system, each department’s production costs are transferred to the
next department and ultimately to the Finished Goods Inventory account.
The amount placed opposite the owner’s Capital account in the Balance Sheet columns
of the work sheet is the amount to be reflected for owner’s Capital on the balance sheet.
The use of electronic funds transfers makes check writing unnecessary.
Service organizations incur little or no cost for
A.services.
B.overhead.
C.materials.
D.labor.
Which of the following account balances is not reported on the balance sheet?
A.Materials Inventory
B.Manufacturing Patents
C.Cost of Goods Sold
D.Work in Process Inventory
Blue Bull Inc. uses direct labor hours to allocate variable and fixed overhead costs.
Under which of the following circumstances would the base used to calculate the
variable overhead rate be the same as that used for the fixed overhead rate?
A.When actual labor hours are the same as budgeted labor hours
B.When standard indirect labor hours agree with standard direct labor hours
C.In all circumstances the base used for each calculation is the same
D.When the number of labor hours expected to be incurred for the period is the same as
normal capacity direct labor hours
In preparing adjustments on the work sheet, which of the following accounts most
likely would be added to the Account Name column?
A.Telephone Expense
B.Owner’s Capital
C.Property Taxes Payable
D.Accumulated Depreciation’“Buildings
On January 2, 20×5, McGowan Corporation issued 20-year bonds payable with a face
value of $300,000 and a face interest rate of 8 percent. The bonds were issued to yield a
market interest rate of 9 percent. Interest is payable annually on January 2. In
calculating the present value of the bond issue of January 2, 20×5, the
A.9 percent rate will be used to calculate the present value of the face amount and the 8
percent rate will be used to calculate the present value of the periodic interest payments.
B.9 percent rate will be used to calculate the present value of the face amount and the
present value of the periodic interest payments.
C.8 percent rate will be used to calculate the present value of the face amount and the
present value of the periodic interest payments.
D.8 percent rate will be used to calculate the present value of the face amount and the 9
percent rate will be used to calculate the present value of the periodic interest payments.
Copper Company engaged in the following transactions during April
If the balance in cash after these transactions is $115,000, how much cash was collected
on account?
A.$67,000
B.$62,000
C.$15,000
D.$29,000
The Public Company Accounting Oversight Board was created by the
A.Sarbanes-Oxley Act.
B.GASB.
C.IRS.
D.IASB.
Joint ventures
A.have become outmoded
B.are a form of partnership
C.are used only in the United States
D.have unlimited life
Anderson Co. makes and uses 5,000 components each year in its manufacturing
operations. An outside supplier has offered to supply the components to Anderson at
$66 per unit. Anderson’s production costs are as follows:
If Anderson accepts the order, $8 of fixed overhead per unit will be eliminated.
If the offer is accepted, operating income will
A.increase by $100,000.
B.decrease by $70,000.
C.decrease by $30,000.
D.increase by $60,000.
Conan Company has the following bank items:
The adjusted bank balance should be
A.$25,000
B.$25,025
C.$25,400
D.$25,425
The Land account would include all of the following costs except
A.grading the land.
B.lawyers’ fees
C.the cost of adding a parking lot.
D.the cost of tearing down a building.
When stock is issued for noncash assets or services, the dollar amount to be recorded
for this exchange is determined by the
A.treasurer of the corporation.
B.par value of the stock.
C.market value of the stock or the market value of the consideration received,
whichever is greater.
D.market value of the stock or the market value of the consideration received when the
market value of the stock cannot be determined.
Which of the following is not an internal control activity for cash?
A.The amount of cash on hand should be kept to a minimum.
B.Banking facilities should be used as much as possible.
C.Employees who have access to cash should be bonded.
D.All payments should be made with currency, not checks.
Which of the following is the most appropriate definition of accounting?
A.Electronic collection, organization, and communication of vast amounts of
information
B.The interconnected network of subsystems necessary to operate a business
C.A means of recording transactions and keeping records
D.The measurement, processing, and communication of financial information about an
identifiable economic entity
The following information pertains to Patterson Corporation. Assume that all balance
sheet amounts represent both average and ending figures.
Patterson Corporation had 6,000 shares of common stock issued and outstanding. The
market price of Patterson common stock on December 31, 20×5, was $20. Patterson
paid dividends of $0.90 per share during 20×5.
What is the return on assets for this corporation? Round your answer to 1 decimal
place.
A.5.0 percent
B.10.0 percent
C.11.7 percent
D.26.7 percent
Delaware Inc. incurred the following costs in October, 2014, for producing 5,000 good
units of personalized photo frames.
The company sold 4,500 units. Determine the product unit cost of photo frames.
A.$8.56
B.$7.70
C.$5.00
D.$5.56
For a company that takes an average of 50 days to sell inventory, takes an average of
110 days to collect for its sales, and has payment terms of 45 days on its purchases,
what is the financing period? Show calculations.
Explain why a creditor would be concerned if your company had a current ratio of less
than 1.0?
Use the information from the following multistep income statement to prepare a
single-step income statement in proper form.
As the staff accountant for NYC Investment Center #1, compute the center’s EVA,
using the following information:
Use this information pertaining to Tucson Company to answer the following question.
1)The corporation’s Supplies account showed a beginning debit balance of $400 and
supplies purchased of $1,600. There were $600 of supplies on hand at year end.
2)Depreciation on a building is estimated to be $10,000.
3)A one-year insurance policy was purchased for $4,000. Six months have passed since
the purchase.
4)Accrued interest on a note receivable amounted to $200.
5)The company received a $3,600 advance payment during the year on services to be
performed. By the end of the year, one-third of the services had been performed.
The adjusting entry to record the amount of service revenue earned during the
accounting period is
Describe how the current ratio is calculated. If a company has a very low current ratio,
what might this mean? If a company has a very high current ratio, what might this
mean?