1) A company has $90,000 in outstanding accounts receivable and it uses the allowance
method to account for uncollectible accounts. Experience suggests that 6% of
outstanding receivables are uncollectible. The current credit balance (before
adjustments) in the allowance for doubtful accounts is $800. The journal entry to record
the adjustment to the allowance account includes a debit to Bad Debts Expense for
$7,000.
2) Deposits in transit are deposits made and recorded by the depositor but not yet
recorded on the bank statement.
3) Mortgage contracts grant the lender the right to be paid from the cash proceeds of the
sale of a borrower’s assets identified in the mortgage.
4) In a double-entry accounting system, the total amount debited must always equal the
total amount credited.
5) Callable bonds have an option exercisable by the issuer to retire them at a stated
dollar amount prior to maturity.
6) Revenues are increases in equity from a company’s earning activities.
7) Earnings per share are calculated only on income from continuing operations.
8) Assume that the S & B partnership agreement gave Steely 60% and Breck 40% of
partnership income and losses. The partnership lost $27,000 in the current period. This
implies that Steely’s share of the loss equals $16,200, and Breck’s share equals $10,800.
9) Earnings per share is the amount of income earned per share of a company’s
outstanding (weighted-average) common stock.
10) Investing activities involve the buying and selling of assets such as land and
equipment that are held for long-term use in the business.
11) If the factory labor cost for a month was $123,000 (paid in cash), the following
journal entry would be recorded by the process cost accounting system:
12) When using a spreadsheet to prepare the statement of cash flows, a decrease in
accounts payable is entered in the Analysis of Changes columns with a debit in the
statement of cash flows section and a credit in the balance sheet section.
13) Comparative financial statements are reports that show financial amounts placed
side by side in columns on a single statement for analysis purposes.
14) A company has assets of $350,000 and total liabilities of $200,000. Its
debt-to-equity ratio is 0.6.
15) The Packing Department transferred out completed units with a cost of $74,000.
This transfer should be recorded with the following entry:
16) The seller is responsible for paying shipping charges and bears the risk of damage
or loss in transit if goods are shipped FOB destination.
17) Revenue and expense accounts are permanent (real) accounts and should not be
closed at the end of the accounting period.
18) Financing activities include receiving cash dividends from investments in other
companies’ stocks.
19) Revenue accounts should begin each accounting period with zero balances.
20) Explain the purposes, types, and uses of special journals
21) Given the following information about a corporation’s current year activities,
compute the retained earnings for the current year.
22) Key Manufacturing Co. applies factory overhead to production on the basis of
direct labor costs. Assume that at the beginning of the current year the company
estimated that direct material costs would be $178,800, direct labor costs would be
$154,000, and factory overhead costs would be $231,000.
(1) If the $28,000 cost of Key’s goods in process inventory included $5,200 of direct
labor cost, what amount of direct materials cost was included?
(2) If $8,100 of the company’s $34,300 finished goods inventory was direct materials
cost, determine the direct labor cost and factory overhead cost of the finished goods
inventory.
23) Marbel had $2,816 million in sales and $555 million in ending accounts receivable
for the current period. For the same period, Maxtel reported $4,885 million in sales and
$491 million in ending accounts receivable. Calculate the days’ sales uncollected for
both companies as of the end of the current period. Which company is doing a better
job in managing the collection of its receivables?
24) Probably the most important section of the statement of cash flows in analyzing the
financial performance of a company’s ongoing business is the ____________ section.
25) What are sales variances? How are they used?
26) The following data are taken from the comparative balance sheets of Gayle
Company. Compute and interpret its accounts receivable turnover for Year 2.
Competitors average a turnover of 7.5. How is the company doing in relation to its
competitors?
27) Job #305 was budgeted to require 3.5 hours of labor at $11.00 per hour. However, it
was completed in 3 hours by a person who worked for $14.00 per hour. What is the
total labor cost variance for Job #305?
28) Companies with many employees often use a special ____________________
account to pay employees.