If a company has an accounts receivable turnover ratio of 15, the company:
a. is converting its accounts receivable to cash 15 times per year.
b. is selling its inventory on 15 days credit terms.
c. is converting its inventory to accounts receivable in 15 days of production.
d. collects it receivables 15 times per year.
The condensed income statement for a business for the past year is as follows:
Product
A B
Sales $800,000$550,000
Less variable costs 720,000 430,000
Contribution margin $ 80,000$120,000
Less fixed costs 125,000 45,000
Income (loss) from operations $(45,000)$ 75,000
Management is considering the discontinuance of the manufacture and sale of Product
A at the beginning of the current year. The discontinuance would have no effect on the
total fixed costs and expenses or on the sales of Product B. What is the amount of
change in net income for the current year that will result from the discontinuance of
Product A?
a. $80,000 increase
b. $45,000 increase
c. $45,000 decrease
d. $80,000 decrease
Which of the following information is provided by job cost sheets?
a. Cost of depreciation on office computers
b. Managerial salary
c. Cost of utilities
d. Cost impact of materials changes
The budgeted direct materials purchases are normally computed as the sum of (1) the
materials for production and (2) the desired beginning inventory.
a. True
b. False
The periodic interest to be paid on bonds is identified in the bond indenture and is
expressed as a percentage of the face amount of the bond. This percentage or rate of
interest is called the:
a. accrued rate.
b. contract rate.
c. internal rate.
d. effective rate.
Which of the following is true of the perpetual inventory system?
a. The amount of merchandise available for sale is continuously updated in the
inventory records.
b. Physical inventory is used to determine the cost of inventory on hand at the end of
the period.
c. The inventory does not show the amount of merchandise sold.
d. The inventory account is updated for each purchase and sale, and related items in the
subsidiary ledger are updated on a monthly basis.
Yuan Corporation purchased office equipment on account. What is the effect of this
transaction?
a. Cash will decrease and office equipment will increase.
b. Total assets will increase and shareholders’ equity will decrease.
c. Total assets and total liabilities will increase.
d. Cash flow from financing activities will decrease.
Based on the following production and sales data of Jackson Co. for March of the
current year, prepare (a) a sales budget and (b) a production budget.
Product TProduct X
Estimated inventory, March 126,000 units18,000 units
Desired inventory, March 3132,000 units15,000 units
Expected sales volume:
Area I
320,000 units
260,000 units
Area II190,000 units130,000 units
Unit sales price$4$12
Inventory is less liquid than:
a. accounts receivable.
b. land.
c. plant and equipment.
d. patents.
“Working capital” is another term for the current ratio.
a. True
b. False
Cost behavior refers to the manner in which a cost changes as a related activity
changes.
a. True
b. False
_____ is the process that begins with analyzing transactions and ends with preparing
financial statements.
a. Liquidity reporting
b. The accounting cycle
c. Amortization of accounts
d. Cost reporting
Accrued expenses are expenses that have been incurred and paid.
a. True
b. False
The sales, operating income, and invested assets for each division of Salem Company
are as follows:
Operating Invested
Sales Income Assets
Division C$4,000,000 $410,000$3,500,000
Division D3,500,000 600,0004,000,000
Division E2,250,000 780,0007,000,000
Management has established a minimum rate of return for invested assets of 11%.
(a)Determine the residual income for each division.
(b)Based on residual income, which division is the most profitable?
A _____ summarizes actual costs, standard costs, and the differences for the units
produced.
a. zerobase report
b. budget performance report
c. budgeted balance sheet
d. budgeted income statement
The process of measuring and reporting operating data by areas of responsibility is
termed responsibility accounting.
a. True
b. False
The standard fixed factory overhead rate is based on 100% capacity of 135,000
machine hours for Interile Inc. The standard costs and the actual costs of factory
overhead for the production of 32,000 units during March were as follows:
Actual: Factory overhead$860,000
Standard: 100,000 hours at $8.00800,000
If there was a $70,000 unfavorable volume variance for March, what is the standard
fixed factory overhead cost rate?
a. $2.00
b. $2.50
c. $3.00
d. $3.50
The following information is available for the first month of operations for Brandt, Inc.:
Sales$570,000
Gross profit210,000
Indirect labor20,000
Indirect materials5,000
Other factory overhead37,000
Direct materials cost390,000
Total manufacturing costs658,000
Calculate direct labor cost for Brandt, Inc.
a. $226,000
b. $206,000
c. $231,000
d. $218,000
Which of the following expenses incurred by a department store is an indirect expense?
a. Insurance on merchandise inventory
b. Sales salaries
c. Depreciation on store equipment
d. Salary of vicepresident of finance
Which of the following graphs illustrates the behavior of a total variable cost?
a. Graph 2
b. Graph 3
c. Graph 4
d. Graph 1
A deferred expense is initially recorded as:
a. an asset but becomes an expense over time.
b. an expense but becomes an asset over time.
c. a liability but becomes an expense over time.
d. an expense but becomes a liability over time.
In reference to a promissory note, the person who is to receive payment is called the:
a. maker.
b. payee.
c. seller.
d. payer.
Perill Co. has a fiveday workweek (Monday through Friday). Employees earn $650 per
day. If the month ends on Wednesday, and wages will not be paid until Friday, how
much wage expense should be accrued on Wednesday?
a. $650
b. $1,950
c. $3,250
d. $1,300
A corporation has 10,000 shares outstanding of $25 par value and a current market
value of $100 per share. If the corporation issues a 5for1 stock split, the market value of
the stock will fall to approximately $20.
a. True
b. False
A company sold a delivery truck for $22,000 cash. The truck costs $45,800 and had
accumulated depreciation of $32,000 as of the date of sale. The entry to record the sale
would include:
a. an increase in accumulated depreciation for $32,000.
b. a total decrease in delivery truck for $13,800.
c. a gain for $8,200.
d. a loss for $10,000.
If the expected sales volume for the current period is 25,000 units, the desired ending
inventory is 700 units, and the beginning inventory is 450 units, the number of units set
forth in the production budget, representing total production for the current period, is:
a. 25,250 units.
b. 21,500 units.
c. 22,300 units.
d. 22,800 units.
“Brand name” recognition is an example of goodwill.
a. True
b. False
Benjamin Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $250,000, $300,000, and
$420,000, respectively, for September, October, and November. The company expects
to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be
collected in the month of the sale, 25% in the month following the sale, and the
remainder in the following month.
The cash collections from accounts receivable in September are:
a. $175,000.
b. $140,000.
c. $190,000.
d. $168,000.
There are only two internal control objectives: to ensure accurate financial reports, and
to ensure compliance with applicable laws.
a. True
b. False
Managerial accounting reports information primarily for stakeholders that are external
to the company.
a. True
b. False
If a company’s net cash flows from operating activities is $1,500,000 for a year and its
end of the year cash and cash equivalents balance is $750,000, determine the company’s
ratio of cash to monthly cash expenses.
a. 6 months
b. 2 months
c. 5 months
d. 9 months
The condensed income statement for a business for the past year is as follows:
Product
White Black
Sales$ 750,000 $ 550,000
Less variable costs 400,000 380,000
Contribution margin$ 350,000 $ 170,000
Less fixed costs 240,000 100,000
Income (loss) from operations$ 110,000 $ 70,000
Management is considering the discontinuance of the manufacture and sale of Black at
the beginning of the current year. The discontinuance would have no effect on the total
fixed costs and expenses or on the sales of White. What is the amount of change in net
income for the current year that will result from the discontinuance of Black?
a. $40,000 decrease
b. $180,000 decrease
c. $70,000 decrease
d. $170,000 decrease