Assets are something of value that the business owns or has control of.
Nurix, Inc. sold goods on credit terms n/20 to Jelly Harper, Inc. This means no
discounts are offered, and the amount of the invoice is due 20 days after the invoice
date.
An investment today of $8,424 at 6% will yield total payments of $10,000 over five
years. The reason for this increase is that the interest is being earned on principal that is
left invested each year.
The direct write-off method is only acceptable for companies that have very few
uncollectible receivables.
Employer FICA is paid by the employer and recorded as a payroll tax expense.
The trial balance reports the balances of assets, liabilities, and equity.
The Public Company Accounting Oversight Board oversees the work of auditors of
public companies.
For manufacturing companies, the primary source of cash is from its customers.
A vertical analysis would be used if an analyst wants to see how gross profit of a
company has changed from one year to the next.
In an accounting cycle, an analysis of transactions is performed at the end of each
accounting period.
Steve is an employee of Panache, Inc. Panache pays a portion of his health insurance
premium and also contributes to a retirement plan in his name. The company’s share of
the health insurance premium is $600, and the company’s contribution to the retirement
plan is $860. The journal entry to record the employee benefits to be paid by the
company should include a debit to Employee Health Insurance Payable for $1,460.
The internal rate of return (IRR) is the rate of return, based on discounted cash flows, of
a capital investment.
When a customer returns goods to the seller, the seller debits the Purchase Returns
account.
If a plant asset is sold for more than its book value, a loss is recorded.
Sensitivity analysis allows managers to see how various business strategies will affect
profit levels.
A corporation’s income statement includes some unique items that do not often apply to
smaller businesses.
In manufacturing, the cost objects are often units of product.
The process of allocating the cost of a plant asset over its useful life is known as cost
reduction.
A company that sells multiple products will always set sales prices such that all
products have the same contribution margin.
The total cost spent on inventory that was available to be sold during a period is called
the cost of goods sold.
Current liabilities must be paid either in cash or with goods and services within one
year or within the entity’s operating cycle, if the cycle is longer than a year.
The cost of indirect materials is transferred out of the Manufacturing Overhead account
and accumulated in the Raw Materials Inventory account.
The degree of operating leverage for Williams Company is 2. The actual operating
income is $14,000. If the company expects a 25% increase in sales, operating income
should increase by $3,500.
Journal entries that are necessitated by reconciling items on the book side of the
reconciliation include either a debit to Cash or a credit to Cash.
The most important part of a budgeting system is getting managers and employees to
accept the budget.
When computing the present value, the interest rate will vary depending on the amount
of risk. Safer investments, such as FDIC-insured bank deposits, yield lower interest
rates.
For a service company, such as an accounting firm, each client is considered a job.
The Sarbanes-Oxley Act requires all private companies in the United States to maintain
an internal control system.
When preparing the statement of cash flows using the indirect method, a loss on the
sale of plant assets must be shown as a subtraction from the investing activities section.
Activity-based management (ABM) uses activity-based costs to make decisions that
increase profits while meeting customer needs.
Gordon Corporation reported the following equity section on its current balance sheet.
The common stock is currently selling for $12.00 per share.
What would be the total stockholders’ equity after a 15% common stock dividend?
A) $1,073,700
B) $705,000
C) $1,007,000
D) $604,200
Eleanor’s Mittens, Inc., a merchandising company, wants to prepare the budgeted
balance sheet for the next budget period. For this purpose, the amount of ending cash
balance can be retrieved from the ________.
A) capital expenditures budget
B) budgeted funds flow statement
C) cash budget
D) sales budget
Accurate Tax Returns budgets two direct labor hours for every tax return that it
prepares, at a standard cost of $34 an hour. During the most recent year, 520 returns
were completed with the labor cost totaling $18,000. The actual labor cost was $34.62
per hour during that period. The actual number of labor hours was 1,200. What is the
direct labor cost variance?
A) $320 F
B) $40,800 U
C) $744 U
D) $40,800 F
Fox, Inc. manufactures and sells pens for $5 each. Walton Corp. has offered Fox, Inc.
$4 per pen for a one-time order of 3,600 pens. The total manufacturing cost per pen,
using absorption costing, is $1 per unit and consists of variable costs of $0.80 per pen
and fixed overhead costs of $0.20 per pen. Assume that Fox, Inc. has excess capacity
and that the special pricing order would not adversely affect regular sales. What is the
change in operating income that would result from accepting the special pricing order?
A) increase of $3,600
B) decrease of $3,600
C) increase of $11,520
D) decrease of $11,520
The ________ account is credited to adjust for overallocated overhead costs.
A) Cost of Goods Sold
B) Sales Revenue
C) Manufacturing Overhead
D) Finished Goods Inventory
Which of the following is included in the numerator of the acid-test ratio?
A) cash including cash equivalents, inventory, short-term investments, net current
receivables
B) accounts receivable and inventory
C) cash including cash equivalents, short-term investments, net current receivables
D) total current assets
Which of the following is not a way in which managers use the production cost reports
to make decisions for their companies?
A) evaluating performance
B) identifying the most profitable products
C) controlling period costs
D) preparing the financial statements
Canada Sailboats Company manufactures 10 luxury yachts per month. A compact
media center is included in each yacht. Canada Sailboats manufactures the media center
in-house but is considering the possibility of outsourcing this function. At present, the
variable cost per unit is $270, and the fixed costs are $40,000 per month. Justin Blake,
the CEO, wishes to increase operating income by $3,000. He has an offer from a
foreign producer to provide the media centers at a contract cost of $325 per unit. The
required saving in fixed cost in order to achieve his objective would be ________.
A) $3,000
B) $550
C) $3,550
D) $2,700
Treasury stock is ________.
A) a contra equity account
B) a contra asset account
C) a liability account
D) an asset account
The two basic sources of stockholders’ equity are ________.
A) common stock and bonds
B) common stock and preferred stock
C) paid-in capital and retained earnings
D) no-par and stated value stock
________ are costs incurred to avoid poor-quality goods or services.
A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs
A company is evaluating three possible investments. Each uses the straight-line method
of depreciation. The following information is provided by the company:
What is the accounting rate of return for Project C? (Round your answer to two decimal
places.)
A) 12.50%
B) 12.68%
C) 44.44%
D) 15.00%
Two or more people working together to circumvent internal controls and defraud a
company is known as ________.
A) encryption
B) firewall
C) collusion
D) separation of duties
Which of the following is the order of steps to journalize an entry?
A) Identify the accounts and the account type → Decide whether each account
increases or decreases, then apply the rules of debits and credits → Record the
transaction
B) Identify the accounts and the account type → Record the transaction → Decide
whether each account increases or decreases, then apply the rules of debits and credits
C) Record the transaction → Identify the accounts and the account type → Decide
whether each account increases or decreases, then apply the rules of debits and credits
D) Decide whether each account increases or decreases, then apply the rules of debits
and credits → Identify the accounts and the account type → Record the transaction
Saran Digital, Inc. starts the year with $3,500 in its Estimated Warranty Payable
account. During the year, there were $213,000 in sales and $4,900 in warranty repair
payments. Saran Digital estimates warranty expense at 4% of sales. The Warranty
Expense for the year is ________.
A) $8,520
B) $4,900
C) $3,500
D) $7,120
Federal income taxes are ________.
A) deducted to arrive at an employee’s gross pay
B) added to arrive at an employee’s net pay
C) deducted to arrive at an employee’s net pay
D) not borne by the employee
Which of the following is not an assumption of cost-volume-profit (CVP) analysis?
A) The only factor that affects total costs is a change in volume, which increases or
decreases variable and mixed costs.
B) The price per unit does not change as volume changes.
C) Fixed costs do not change.
D) The price per unit changes as volume changes.
Which of the following will be recorded in the Other Accounts CR column of the cash
receipts journal?
A) cash sales
B) receipt of interest revenue
C) receipt of accounts receivable
D) sales discounts
Which of the following represents a privilege granted by a government to use public
property in performing services?
A) goodwill
B) license
C) franchise
D) trademark
Blanchard, Inc. provided the following for 2017:
Calculate the company’s inventory turnover ratio for the year. (Round your answer to two
decimal places.)
A) 3.94 times per year
B) 3.82 times per year
C) 3.71 times per year
D) 1.91 times per year
City Golf Center reported actual operating income for the current year as $65,000. The
flexible budget operating income for actual volume is $58,000, while the static budget
operating income is $59,000. What is the flexible budget variance for operating
income?
A) $7,000 favorable
B) $7,000 unfavorable
C) $1,000 unfavorable
D) $1,000 favorable
A balance sheet that lists the assets above the liabilities and stockholders’ equity
sections is a(n) ________ balance sheet.
A) report form
B) unclassified form
C) account form
D) audited form
Which of the following statements is true of managerial accounting?
A) The external stakeholders of a company are the primary users of managerial
accounting.
B) Managerial accounting information is used to help managers plan and control their
operations.
C) An external audit by an independent CPA is required for managerial accounting
information.
D) Managerial accounting information must comply with Generally Accepted
Accounting Principles.
Which of the following entries would be made because of the matching principle?
A)
B)
C)
D)
The amount of income taxes ________.
A) required by the federal government for a corporation is calculated on a Form 1120
B) paid by the corporation, when it files the Form 1120, is recorded as a debit to the
Income Tax Expense account and a credit to the Cash account
C) the corporation owes, but has not yet paid, is recorded as a debit to the Income Tax
Payable account
D) the corporation owes, but has not yet paid, is reported as a long-term liability on the
balance sheet
Variable costing is more appropriate than absorption costing when the decision
________.
A) relates to production planning within the capacity limits in the short run
B) involves reducing fixed costs that are controllable by the upper management
C) does not involve analysis of profitability based on sales mix
D) does not involve analysis of contribution margin
The following information is from the 2017 records of Robin Antique Shop:
Bad debts expense is estimated by the percent-of-sales method. Management estimates that
5% of net credit sales will be uncollectible. The ending balance of the Allowance for Bad
Debts account after adjustment will be ________.
A) $9,900
B) $9,050
C) $11,250
D) $7,700
The fixed costs per unit will ________.
A) increase as production decreases
B) decrease as production decreases
C) remain the same as production levels change
D) increase as production increases
Waterfall Manufacturing produces a chemical pesticide and uses process costing. There
are three processing departments—Mixing, Refining, and Packaging. On January 1, the
first department—Mixing—had a zero beginning balance. During January, 44,000
gallons of chemicals were started into production. During the month, 35,000 gallons
were completed, and 9,000 remained in process, partially completed. In the Mixing
Department, all direct materials are added at the beginning of the production process,
and conversion costs are applied evenly through the process.
During January, the Mixing Department incurred $52,000 in direct materials costs and
$211,000 in conversion costs. At the end of the month, the ending inventory in the
Mixing Department was 60% complete with respect to conversion costs. The
weighted-average method is used.
The total cost of product in ending inventory was ________. (Round any intermediate
calculations two decimal places, and your final answer to the nearest dollar.)
A) $211,000
B) $52,000
C) $38,808
D) $263,000
Which of the following values is considered the market value when valuing inventory at
lower-of-cost-or-market?
A) sales price less the company’s normal mark-up percentage
B) current replacement cost
C) cost plus the company’s normal mark-up percentage
D) historic cost
McGrath’s produces and sells two types of t-shirts—Fancy and Plain. The company
provides the following data:
Budget Actual
Unit sales price—Fancy $24 $25
Unit sales price—Plain $18 $17
Unit sales—Fancy 1,300 1,250
Unit sales—Plain 900 875
Compute the flexible budget variance for Fancy t-shirts for sales revenue.
What is the cornerstone of the master budget for a merchandising company? Why?
A petty cash fund was established with a $250 balance. It currently has cash of $38 and
petty cash tickets totaling $212 for travel expense. Provide the journal entry to record
the replenishment of the fund.
Skyler’s Wine Company uses the direct method to prepare its statement of cash flows.
Refer to the following financial statement information for the year ending December
31, 2017:
Skyler’s Wine Company
Comparative Balance Sheet
December 31, 2017 and 2016
Skyler’s Wine Company
Income Statement
Year Ended December 31, 2017
Additional information provided by the company includes the following:
Equipment costing $60,000 was purchased for cash.
Equipment with a net asset value of $10,000 was sold for $16,000.
During 2017, the company repaid $43,000 of long-term notes payable.
During 2017, the company borrowed $34,000 on a new note payable.
There were no stock retirements during the year.
There were no sales of Treasury Stock during the year.
Prepare a complete statement of cash flows using the direct method.
Accrued Liabilities relate to other operating expenses.
For each account listed, identify the category in which it would appear on a classified
balance sheet.
The following information is provided by Westwind Systems:
Calculate the profitability index for Project C. Show your calculations and round to two
decimal places.
The following selected transactions occurred during 2016 for Mitchell Movers. The
company ends it accounting year on December 31.
Prepare the journal entries to record these transactions.
Simons, Inc. sells plasticware. The following information summarizes Simons’
operating activities for the year:
Prepare an income statement for Simons, Inc., a merchandiser, for the year ended
December 31 using the format below:
General, Inc. purchased a van on May 1, 2016, for $800,000. Estimated life of the van
was five years, and its estimated residual value was $80,000. General uses the
straight-line method of depreciation. Prepare the journal entry to record the depreciation
expense for 2016 on the van.
William Smith is a sole proprietor of a successful business. He is interested in
incorporating to protect his personal assets. What are some disadvantages of organizing
as a corporate entity?
A company spent $750,000 to produce 225,000 gallons of a chemical free product that
can be sold for $6.00 per gallon. This product can be further processed into a household
cleaning solution that can be sold for $8.50 per gallon. It will cost $360,000 to process
the chemical free product into the household cleaning solution.
Prepare a differential analysis to determine if the product should be processed further.
Discuss the results.
On January 1, 2017, Diagem Services issued $140,000 of four-year, 9% bonds when the
market rate was 8%. The bonds were issued at $144,713. Diagem uses the
effective-interest method to amortize the bond premium. Semiannual interest payments
are made on June 30 and December 31 of each year. Prepare the amortization table for
the first four interest payments. (Round your answers to the nearest dollar number.)
An adjusted trial balance for a merchandiser is given below.
Give journal entry to close the expense accounts and contra revenue accounts with a debit
balance.
On December 15, Duncan Services, Inc. collected revenue of $3,000 in advance from a
new client, and agreed to provide services to the client for the period of December 15
through January 15 of the following year. Assume that the company records deferred
revenues using the alternative treatment, and journalize the adjusting entry recorded on
December 31.
Specialty Wood Products, Inc. had the following manufacturing labor costs last month:
Provide the journal entry to record the labor costs incurred, which will be paid at a later
date.
Use the following sales journal to record the preceding transactions.
When computing the present value of a bond, which interest rate is used? Why?
Equipment was purchased for $24,000 on January 1, 2016. The equipment’s estimated
useful life was five years, and its residual value was $4,000. The straight-line method of
depreciation was used. Prepare the journal entry to record the sale of the equipment for
$25,000 on January 3, 2017. The company has a calendar year accounting period.