Benchmarking is the practice of comparing a company with other leading companies.
A security is a share or interest representing financial value.
Under absorption costing, the more fixed manufacturing overhead in ending Finished
Goods Inventory, the larger the Cost of Goods Sold.
Under accrual basis accounting, revenue is recorded only when cash is received.
Management’s minimum desired rate of return on a capital investment is known as the
return on investment.
Retired shares of treasury stock may later be reissued.
The total amount of assets a business possesses may or may not be equal to the total of
liabilities and equity of the business.
Under absorption costing, the more units added to ending Finished Goods Inventory,
the less fixed manufacturing overhead is ‘”hidden” in ending Finished Goods Inventory
at the end of the accounting period.
A patent is an exclusive right to reproduce and sell a book, musical composition, film,
other work of art, or intellectual property.
When using the periodic inventory system, there is no need to record an adjusting entry
for inventory shrinkage.
The ending balances in the Common Stock and Dividend accounts are shown on the
income statement columns of the worksheet.
Budgeted purchases of direct materials is determined by adding direct materials needed
for production to the desired direct materials in ending inventory.
At the beginning of the year, the total stockholders’ equity of Alpha Technologies, Inc.
was $80,000. The revenues and expenses were $70,000 and $40,000, respectively. The
company did not declare dividends. No common stock was issued during the year. The
total stockholders’ equity at the end of the year will amount to $100,000.
A contingency was evaluated at year-end and considered to have a remote possibility of
becoming an actual liability. If this is not reported on the balance sheet or in the notes to
the financial statements, it could be considered a violation of generally accepted
accounting principles.
The Sarbanes-Oxley Act (SOX) requires companies to review internal control and take
responsibility for the accuracy and completeness of their financial reports.
Memorandum entry is an entry in the journal that notes a significant event but has no
debit or credit amount.
Unlike a manufacturing company, the sales budget is the cornerstone for the master
budget of a merchandising company.
Separating the custody of assets from accounting implies that the accountants must not
handle cash and the cashier must not have access to the accounting records.
The total production cost flexible budget variance is obtained by adding direct labor
efficiency variance and fixed overhead volume variance.
Companies evaluate investment centers using the same measures as the profit centers.
Residual value is also known as depreciable cost.
All organizations use one standardized budgeting process.
Overallocated manufacturing overhead is adjusted by debiting the Cost of Goods Sold
account.
A balance sheet prepared in the account form lists the assets at the top and the liabilities
and stockholders’ equity below.
A machine that was purchased for $120,000 has accumulated depreciation of $90,000.
The business exchanges the machine for a new one. The new machine has a market
value of $130,000, and the business pays $120,000 cash. Assume the exchange has
commercial substance. This exchange results in a ________.
A) gain of $20,000
B) gain of $10,000
C) loss of $20,000
D) loss of $30,000
When bonds are retired at maturity ________.
A) the bondholders are paid the the face value plus the unamortized premium or less the
unamortized discount
B) the carrying value equals the face value plus the unamortized premium or less the
unamortized discount
C) the carrying value always equals the face value
D) the entry to retire the bonds may include a gain or loss on retirement of bonds
The net income of Harriet, Inc. for the year is $35,000. The dividends declared during
the year were $43,000. Which of the following statements is true?
A) Retained Earnings account decreases by $35,000.
B) Retained Earnings account decreases by $8,000.
C) Retained Earnings account increases by $43,000.
D) Retained Earnings will remain the same.
Leslie’s Sunglass Company’s western territory’s forecasted income statement for the
upcoming year is as follows:
The company’s management is considering dropping the western territory and has
determined that $310,000 of the fixed expenses is avoidable. What is the change in Leslie’s
Sunglass Company’s forecasted operating for the upcoming year if the western territory is
dropped? Assume the company predicts an operating loss across the entire company.
A) Operating loss will increase by $20,000.
B) Operating profit will increase by $330,000.
C) Operating loss will decrease by $20,000.
D) Operating profit will decrease by $330,000.
Which of the following is true of the comparison between a manual and a computerized
accounting information system?
A) In both manual and computerized systems, reports and financial statements must be
created using Word documents, Excel spreadsheets, or PowerPoint.
B) In a computerized system, the software can generate financial reports
instantaneously that can never be manipulated.
C) In a manual system, data are contained in paper documents, which are often stored in
filing cabinets and off-site document warehouses; whereas in a computerized system,
data are stored on a main computer called a server.
D) In both manual and computerized systems, processing data includes manually
journalizing transactions and posting to the accounts.
Global Engineering’s actual operating income for the current year is $56,000. The
flexible budget operating income for actual sales volume is $51,000, while the static
budget operating income is $54,000. What is the sales volume variance for operating
income?
A) $3,000 favorable
B) $2,000 unfavorable
C) $3,000 unfavorable
D) $2,000 favorable
A corporation used $34,000 of direct materials and incurred $74,000 in direct labor
cost, and $112,500 in manufacturing overhead costs during the period. What is the cost
of goods manufactured if the beginning and ending Work-in-Process Inventories were
$27,500 and $20,500, respectively?
A) $248,000
B) $227,500
C) $213,500
D) $220,500
Which of the following assets must be reported at the lower-of-cost-or-market value?
A) Accounts Receivable
B) Merchandise Inventory
C) Prepaid Insurance
D) Notes Receivable
On August 14, Main Street Bank lent $200,000 to City Cafe on a 75 day, 6% note. What
is the maturity date of the note?
A) Oct. 27
B) Oct. 28
C) Oct. 29
D) Oct. 30
A posting reference column is used ________.
A) while preparing the trial balance using the ledger
B) when the information is transferred from the journal to the ledger
C) when the information is transferred from the ledger to the post-closing trial balance
D) while preparing the balance sheet using the trial balance
Which is the following is the most appropriate reason that sales mix decisions should be
made using variable costing?
A) All costs, including fixed costs, are controllable by upper management in the long
run.
B) To increase profits, businesses should emphasize the products with the highest
contribution margin.
C) Sales mix decisions primarily focus on fixed costs.
D) Fixed costs do not affect the operating income in the long run.
Merrimack Tire Company makes a special kind of racing tire. Variable costs are $210
per unit, and fixed costs are $35,000 per month. Merrimack sells 400 units per month at
a sales price of $310. If the quality of the tire is upgraded, the company believes it can
increase the price to $330. If so, the variable cost will increase to $220 per unit, and the
fixed costs will rise by 20%. If Merrimack decides to upgrade, how will operating
income be affected?
A) Operating income will decrease by $8,000.
B) Operating income will decrease by $3,000.
C) Operating income will increase by $8,000.
D) Operating income will increase by $20.
Tom’s gross pay for the month is $2,700. Tom’s deduction for federal income tax is
based on a rate of 21%. Tom has no voluntary deductions. Tom’s yearly pay is under the
limit for OASDI. What is the amount of FICA tax withheld from Tom’s pay? (Assume a
FICA—OASDI Tax of 6.2% and FICA—Medicare Tax of
1.45%.)
A) $773.55
B) $206.55
C) $567.00
D) $387.45
Which of the following statements is correct?
A) A bank statement is a document from the bank that reports the activity in the
customer’s account.
B) A bank statement must be mailed to customers each month.
C) The bank statement does not include an ending balance of the customer’s account
because the bank cannot determine which checks have been cashed during the
statement period.
D) Physical copies of canceled checks must be included in the monthly bank statement.
On June 30, 2017, Roger, Inc. showed the following data on the equity section of their
balance sheet:
On July 1, 2017, the company declared and distributed a 9% stock dividend. The market
value of the stock at that time was $20 per share. Following this transaction, what is the
balance of Common Stock?
A) $163,500
B) $57,180
C) $285,540
D) $357,180
Your Best Advisors, a service company, uses reversing entries. On March 31, 2016,
they journalized and posted the following adjusting entry to accrue Utilities Expense:
Which of the following entries is the correct reversing entry to be prepared on April 1,
2016?
A)
B)
C)
D)
A company has prepared the operating budget and the cash budget and is now preparing
the budgeted balance sheet. While doing so, the Cash balance can be taken from the
________.
A) operational budget
B) budgeted income statement
C) cash budget
D) sales budget
Hilltop Golf Course is planning for the coming golfing season. Investors would like to
earn a 10% return on the company’s $50,000,000 of assets. The company primarily
incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be
$32,000,000 for the season. About 500,000 rounds of golf are expected to be played
each year. Variable costs are about $17 per round of golf. Hilltop golf course has a
favorable reputation in the area and, therefore, has some control over the sales price of a
round of golf. Using a cost-plus pricing approach, what sales price should Hilltop
charge for a round of golf to achieve the desired profit?
A) $64
B) $81
C) $47
D) $91
Anthony Products manufactures a line of desk chairs. Anthony’s production operations
are divided into two departments — Department 1 and Department 2. The company
uses a process costing system. Anthony incurred the following costs during the year to
produce 25,700 chairs:
If Anthony sells 22,600 chairs during the year, what will be the cost per chair produced?
(Round your answer to two decimal places.)
A) $33.60
B) $38.21
C) $44.77
D) $50.91
Becker Technologies invests $50,000 to acquire $50,000 face value, 8%, five-year
corporate bonds on January 2, 2012. The bonds will mature on January 2, 2017. The
bonds pay interest semiannually on January 2 and July 2 each year until maturity. When
Becker Technologies receives interest payments, how is the accounting equation
affected?
A) assets will decrease
B) total assets will remain unchanged
C) liabilities will decrease
D) equity will increase
An electronic funds transfer system ________.
A) does not include debit card transactions
B) is seldom used by businesses
C) transfers cash by electronic communication rather than by paper documents
D) uses forms such as checks and deposit tickets to transfer cash
When a stockholder contributes cash to a corporation in exchange for stock, ________.
A) liabilities and stockholders’ equity are increased
B) assets and stockholders’ equity are increased
C) one asset is increased and another asset is decreased
D) assets and liabilities are increased
Bill Jones has just won the state lottery and has the following three payout options for
after-tax prize money:
1. $170,000 per year at the end of each of the next six years
2. $312,000 (lump sum) now
3. $508,000 (lump sum) six years from now
The annual discount rate is 9%. Compute the present value of the first option. (Round
your answer to the nearest whole dollar.)
Present value of an ordinary annuity of $1:
Present value of $1:
A) $850,000
B) $762,620
C) $482,000
D) $457,251
Appraisal costs are costs incurred ________.
A) to avoid poor-quality goods or services
B) to detect poor-quality materials, goods, or services
C) when the company corrects poor-quality goods or services before delivery to
customers
D) after the company delivers poor-quality goods or services to customers and then has
to make things right with the customer
Which of the following is an issue that must be addressed in the internal controls for
e-commerce?
A) burglar alarms
B) tone at the top
C) phishing expeditions
D) need for outside auditors
The accountant of Skyscrapers Architectural Services failed to make an adjusting entry
to record $7,000 of depreciation expense. Which of the following statements is true?
A) The total liabilities will be overstated.
B) The equity will be understated.
C) The total assets will be overstated.
D) The total assets will be understated.
Which of the following statements is true if a bond is issued for an amount higher than
face value?
A) The bond’s stated interest rate is less than the prevailing market interest rate at time
of sale.
B) The bond’s stated interest rate is the same as the prevailing market interest rate at
time of sale.
C) The bond’s stated interest rate is more than the prevailing market interest rate at time
of sale.
D) The bond is not secured by specific assets of the issuer.
Grand Products is a price-setter that uses the cost-plus pricing approach for pricing its
products. These products are unique, artistically designed architectural decorations.
Grand produces and sells 6,200 units per year, which represent maximum capacity.
Variable costs are $300 per unit. Total fixed costs are $910,000 per year. The CEO has a
target of $60,000 in operating income, which he wants to achieve by year-end. Using
the cost-plus pricing method, what sales price should Grand use? (Round your answer
to the nearest cent.)
A) $309.68 per unit
B) $446.77 per unit
C) $456.45 per unit
D) $156.45 per unit
The bank statement reveals an EFT payment made to one of the company’s suppliers
that has not yet been recorded in the ledger. How would this information be included on
the bank reconciliation?
A) an addition on the bank side
B) a deduction on the bank side
C) a deduction on the book side
D) an addition on the book side
A business renders services to a client and issues a sales invoice. The amount will be
collected from the customer at a later time. Which of the following is true at the time
the invoice is issued?
A) Equity will decrease.
B) Total liabilities will increase.
C) Total assets will decrease.
D) Net income will increase.
McDaniel, Inc. uses the direct method to prepare its statement of cash flows. Refer to
the following financial statement information for the year ended December 31, 2017:
McDaniel, Inc.
Comparative Balance Sheet
December 31, 2017 and 2016
McDaniel, Inc.
Income Statement
December 31, 2017 and 2016
Use the direct method to compute the payments made to employees. (Accrued Liabilities
relate to other operating expense.)
A) $72,200
B) $43,500
C) $24,700
D) $47,500
A company with significant amounts of accounts receivable experiences uncollectible
accounts from time to time. If the company uses the direct write-off method, the effect
of writing off an uncollectible receivable will be ________.
A) a reduction in net income
B) negligible on net income
C) an increase in total assets
D) a generation of positive cash flow
Zebra, Inc. cost of goods sold for the year is $2,300,000, and the average merchandise
inventory for the year is $139,000. Calculate the inventory turnover ratio of the
company. (Round your answer to two decimal places.)
A) 6.04 times
B) 16.55 times
C) 8.27 times
D) 93.96 times