The contribution margin equals zero at the breakeven point.
Preparing the work sheet and recording closing entries are important steps that save
money and prevent mistakes.
Management accounting complements each stage of the management process.
Only quantitative data are used in the capital investment decision-making process.
The economic resources invested in a business by the owner are represented by owner’s
equity.
In computing book value per share of common stock, common stock distributable is
included in the divisor.
In addition to keeping the records of a purchase transaction, the accounting department
should prepare and mail checks in payment of invoices.
Supplies Expense is a temporary account.
Preparing the worksheet and closing entries provide a mechanism for applying the
concept of periodicity.
The direct labor budget is needed to prepare the production budget.
As an asset’s depreciation is recorded, its carrying value decreases.
All increases to owner’s equity are from revenues.
The salary allocation to partners also appears as Salaries Expense on the partnership
income statement.
When M purchases N’s $10,000 capital interest for $10,000, the ensuing entry on the
books of the partnership would contain a debit to Cash for $10,000.
A $155 credit item is posted as a debit. The trial balance column totals therefore will
differ by
A.$310
B.$620
C.$155
D.$0
Elizabeth Pharmaceutical produces several medicines. Each compound can be sold at
the split-off point or processed further. The following results apply to March:
After determining which products should be sold at the split-off point and which should
be processed further, the total revenue provided by these three products would be
A.$84,000.
B.$58,500.
C.$77,000.
D.$65,500.
The following information was reported in a cash budget:
How much cash will the company have to borrow in order to meet its required needs?
A.$90,000
B.$104,000
C.$76,000
D.$14,000
On March 1, 20×5, King Corp. sold 102 of its 9 percent, $1,000 bonds for a price of 102
plus accrued interest. The accrued interest amounted to $800. If a balance sheet were to
be prepared at the end of the day, March 1, 20×5, the carrying value reported for the
bonds payable would be
A.$102,000.
B.$104,040.
C.$104,840.
D.$103,240.
Which of the following statements most accurately explains the behavior of costs?
A.Costs can be fixed, variable, or a combination of both.
B.The majority of costs are variable per unit of production.
C.The majority of costs are fixed per unit of production.
D.Mixed costs are treated as variable costs.
A purchase is recognized in the accounting records when
A.payment is made for the item purchased.
B.the purchase requisition is sent to the purchasing department.
C.title transfers from the seller to the buyer.
D.the buyer receives the seller’s bill.
Assuming that the current ratio was 1.6 times and the quick ratio was 1.4 times before
this transaction, the entry to record the payment of a previously declared and recorded
cash dividend will
A.increase the current ratio and the quick ratio.
B.decrease the current ratio and the quick ratio.
C.increase the current ratio but have no effect on the quick ratio.
D.have no effect on the current ratio or the quick ratio.
The costs incurred beyond the split-off point are
A.split-off point costs.
B.incremental costs.
C.joint product costs.
D.period costs.
Jacob and Megan are partners who share profits and losses in a ratio of 2:3,
respectively, and have the following capital balances on September 30, 20×5:
The partners agree to admit Mitchell to the partnership. Calculate the capital balances
of each partner after the admission of Mitchell, assuming that bonuses are recorded
when appropriate for each of the following assumptions:
a. Mitchell pays Jacob $100,000 for 40 percent of his interest
b. Mitchell invests $100,000 for a one-sixth interest in the partnership
c. Mitchell invests $100,000 for a 25 percent interest in the partnership
d. Mitchell invests $100,000 for a 15 percent interest in the partnership
Which of the following is not an advantage of issuing long-term debt?
A.The stockholders do not relinquish any control.
B.The interest is tax-deductible.
C.The risk of becoming bankrupt is reduced.
D.Increased earnings accrue to the stockholders.
Listed below are selected costs of a sports car manufacturer at a production level of
4,000 cars. (a) Identify three fixed costs. (b) Support your answer by illustrating the
cost behavior pattern per unit and in total as the annual volume of cars produced
increases from 4,000 cars to 8,000 cars, for one fixed cost. (Note: The production
increase is within the relevant range.)
a. The student may select any three of the following four fixed costs: monthly machine
rental charge ($8,000), monthly insurance premiums on the plant ($800), salaried
employees’ weekly payroll cost ($51,000), and depreciation on the equipment for the
month ($6,000).
b. The student may select any one of the four fixed costs listed in part (a) and illustrate
the decreasing cost per unit and constant cost in total as production increases.
If bonds are issued at a premium, the face interest rate is
A.lower than the market rate of interest.
B.higher than the market rate of interest.
C.too low to attract investors.
D.adjusted to a higher effective rate of interest.
Lincoln Company engaged in this transaction:
Declared and issued the required dividend on preferred stock.
Indicate which section, if any, the above transaction would appear in, or relate to, on a
statement of cash flows.
A.Financing activities section.
B.Operating activities section.
C.Does not represent a cash flow.
D.Investing activities section.
The principal difference between depreciation expense and most other types of
expenses is that
A.depreciation expense can be avoided if the asset is worth at least what the company
paid for it.
B.depreciation expense requires an annual outlay of cash.
C.the total amount of depreciation expense for the asset is reported on the balance
sheet.
D.depreciation expense is subject to more precise measurement than most other
expenses.
Capital investment analysis involves all of the following except
A.preparing reports for management.
B.analyzing the sales mix.
C.selecting the best alternative.
D.dividing available capital investment funds.
Which of the following methods of distributing income and losses cannot be
accomplished (cannot stand alone)?
A.Capital balance ratio alone
B.Interest and stated ratio alone
C.Stated ratio alone
D.Salary alone
Which of the following describes the profit margin ratio?
A.Average total assets divided by net income
B.Net income plus income tax expense divided by average total assets
C.Average total assets divided by net revenue
D.Net income divided by net revenue
Choco Sweet Inc. gives you the following information:
The standard labor time of 0.75 labor hour is required to produce one unit. The standard
labor cost for a 10 pound bag of chocolate is $8 per labor hour. The following is data
relating to the actual cost and usage data.
Using the above information provided for Choco Sweet, compute the direct labor
variance for Choco Sweet Inc.
A.$11,688 (U)
B.$8,500 (F)
C.$2,500 (F)
D.$11,688 (F)
Both traditional and backflush costing have an account for __________ Inventory.
A.Materials
B.Raw in Process
C.Finished Goods
D.Conversion Costs
The net effects on a corporation of the declaration and payment of a cash dividend are
to
A.increase assets and increase stockholders’ equity.
B.decrease liabilities and decrease stockholders’ equity.
C.decrease assets and decrease stockholders’ equity.
D.increase stockholders’ equity and decrease liabilities.
An investment is classified as short term or long term based on
A.whether the investment can be sold immediately.
B.the length of time the investor expects to hold it.
C.the purpose for which it is held.
D.the dollar amount of the investment.
Merckle Corporation owns 40 percent of the voting stock of Grant Corporation and
accounts for the investment using the equity method; Grant Corporation reports a net
loss of $30,000. Merckle Corporation’s entry to record the share of loss is:
Feldman Company had a balance of $360,000 in Saul Feldman, Capital on December
31, 2013. During 2014, the company reported a net income of $48,000, and the owner
withdrew $36,000 during the year, while making no additional investments. Prepare the
company’s statement of owner’s equity for the year ended December 31, 2014.
Using the following transactions for 2014, show how the T account below would appear
after all appropriate postings have been made. Assume an opening balance of $900.
A company purchases 300 shares of its $100 par value common stock at $110 per share.
It then reissues 50 shares at $114 per share. The entry upon reissue of the stock is:
Chelsea, Jack, and Connor have a partnership. Chelsea wishes to withdraw from the
partnership by removing assets that are greater than her current capital balance. Discuss
how this transaction is accounted for on the partnership books.
Complete the following calculations for the three investment centers shown (round to
two decimal places): (Note: The performance indicator for each investment center uses
the missing value)
2) For each Investment Center, identify which performance indicator is used.
Marla Co. sells equipment with a carrying value of $90,000 for $70,000. Where, and for
what amounts, would this transaction appear on a statement of cash flows using the
indirect method?