In periods of rising inventory prices, the LIFO method will result in a higher inventory
valuation than will the average-cost method.
A proper heading for the income statement could include ‘For the Year Ended December
31, 20–.’
One of the assumptions of CVP analysis assumes production and sales to be
approximately equal.
Product unit cost is the sum of direct materials, direct labor, and overhead divided by
the total number of units produced.
The purpose of reversing entries is to simplify the bookkeeping process.
For reporting purposes, the personal assets and debts of a business owner should be
combined with the assets and debts of the business.
Paying taxes to the government is an example of an operating activity.
The entry that includes a debit to Payroll Taxes and Benefits Expense also includes
credits to Federal Unemployment Tax Payable and State Unemployment Tax Payable.
In the financial statements, the balance of the Petty Cash account and the balance of the
Cash account are shown separately.
For service organizations, customer relations are part of the supply chain and customers
are part of the value chain.
If a company is expected to survive, it is considered a going concern.
Contributed capital is shown on a corporate balance sheet as two amounts: the par value
of the issued stock and retained earnings.
The product is the cost object when assigning indirect product costs.
All short-run decisions made by managers will affect an organization in both short run
and long run.
Holman Company pays each of its three salespeople a base salary of $1,000 per month
plus a commission of 10 percent of their sales. The base salary is paid each month as
incurred; the 10 percent commission is paid the month following the month of sale. The
total sales for the past four months are as follows:
Total salary and commission cash payments for September total
A.$1,400.
B.$3,900.
C.$4,400.
D.$2,900.
A company has goods available for sale of $500,000 at retail and $350,000 at cost. It
also had sales of $420,000 for the period. What is the estimated cost of ending
inventory, using the retail method?
A.$56,000
B.$76,000
C.$80,000
D.$126,000
The Sarbanes-Oxley Act of 2002 came, in part, as a result of
A.the Enron scandal
B.the WorldCom scandal
C.the Target scandal
D.the Enron and WorldCom scandals
Internal control is weakened by all of the following except
A.collusion.
B.separation of duties.
C.human error.
D.effects of changing conditions.
On November 25, 2014, Marquez Golf Co. received a special order for 5,000
three-wood golf club sets. These golf clubs will be marketed in Japan. Ito Imports Inc.,
the purchasing company, wants the clubs bulk packaged and is willing to pay $55 per
set for the clubs. The president of Marquez Golf Co. has gathered the following product
costing information about the set of woods being discussed:
– Direct materials (wood), $600 per 100 sets
– Direct materials (metal shafts), $1,000 per 100 sets
– Direct materials (grips), $150 per 100 sets
– Direct labor is $20 per set
– Variable manufacturing costs are $12 per set
– Fixed manufacturing costs are 20 percent of direct labor dollars
– Variable selling expenses are $10 per set
– Variable shipping costs are $7 per set
– Fixed general and administrative costs are 30 percent of direct labor dollars
Bulk shipping costs will total $11,000, thus eliminating both variable selling and
variable shipping costs from consideration. The company did not expect this order and
will reach planned production capacity for the year. However, there is enough plant
capacity for the special order. Round answers to two decimal places.
a. Prepare an analysis for the president to use in deciding whether to accept or reject the
offer by Ito Imports Inc. What decision should be made?
b. What is the lowest possible price Marquez Golf Co. could charge per set of woods
and still make a $9,000 profit on this order?
Which costing method tends to level out the effects of cost increases or decreases?
A.Specific identification
B.FIFO
C.Average-cost
D.LIFO
In a just-in-time setting, the time spent reworking defective units is called __________
time.
A.storage
B.inspection
C.queue
D.throughput
Which of the following is a source document for purchase of materials?
A.Vendor’s invoice
B.Purchase request
C.Receiving report
D.All of these
The owner’s Capital, Withdrawals, and Income Summary accounts for Laurel Repair
Company for the accounting period are presented below in T account form after the
recording and posting of closing entries:
The total amount of revenue earned for the period is
A.$900.
B.$500.
C.$400.
D.$200.
Cash flows to assets is computed as
A.Net cash flows from operating activities/Average total assets
B.Average total assets/Net cash flows from operating activities
C.Net cash flows from operating activities/Sales
D.Net income/Net cash flows from operating activities
A disadvantage of the corporate form of business is
A.lack of mutual agency.
B.professional management.
C.ease of transfer of ownership.
D.tax treatment.
A customer is injured using a company’s product. The potential liability that may result
is called a(n)
A.contingent liability.
B.estimated liability.
C.definitely determinable liability.
D.estimated warranty liability.
Which of the following is the least useful in evaluating a relationship as either
favorable or unfavorable?
A.Past and current performances of the company
B.Industry averages
C.Past performance of the company
D.Rule-of-thumb measures
Variance analysis includes all of the following except
A.taking corrective action.
B.investigating all significant and insignificant variances.
C.developing performance measures to track activities causing the variance.
D.computing variances.
Contribution margin equals fixed costs plus
A.cost of goods sold.
B.sales.
C.variable costs.
D.operating income.
The primary difference between a fixed (static) budget and a flexible budget is that a
fixed budget
A.cannot be changed after the period begins, whereas a flexible budget can be changed
after the period begins.
B.is concerned only with future acquisitions of fixed assets, whereas a flexible budget is
concerned with expenses that vary with sales.
C.is a plan for a single level of production, whereas a flexible budget is several plans
(one for each of several production levels).
D.includes only fixed costs, whereas a flexible budget includes only variable costs.
For every unit that a company produces and sells above the breakeven point, its
profitability is improved (ignoring taxes) by the unit’s
A.gross margin.
B.selling price minus fixed cost.
C.variable cost.
D.contribution margin.
Under the periodic inventory system
A.the cost of each item is recorded in the Merchandise Inventory account when it is
purchased.
B.when an inventory item is sold, its cost is transaferred to the Cost of Goods Sold
account.
C.the balance of the Merchandise Inventory account equals the cost of goods on hand.
D.the balance of the Merchandise Inventory account is only accurate on the balance
sheet date.
Briyanna and Greg form a partnership and invest the following assets and liabilities.
Greg’s building is subject to a $40,000 mortgage that is not assumed by the partnership.
In the journal provided prepare the entry to record the formation of the partnership.
(Omit explanation.)
Anne, Barb, and Cathy are partners who share profits and losses in a ratio of 3:1:2,
respectively. Cathy’s Capital account has a $100,000 balance. Anne and Barb have
agreed to let Cathy take $124,000 of the company’s cash when she retires. Prepare an
entry in journal form without explanation to record Cathy’s exit, including the
recognition of a bonus to Cathy.
Bailey Corp. sold investments for $204,000 cash that cost $180,000. The journal entry
to record the transaction which correctly shows the increase in cash flow is:
A bond issue of $50,000 with a carrying value of $49,000 is converted into $10 par
value common stock at the rate of fifty shares for each $1,000 bond. The entry to be
recorded on the conversion of bonds is:
Rachel and Dillon divide partnership income and losses solely on the basis of their
average capital balances. Rachel had $55,000 invested during all of 20×5; Dillon had
$40,000 invested from January 1 to August 31, and he invested another $15,000 on
September 1. If income was $160,000 during 20×5, how much should each partner
receive?