The heading for a balance sheet might include the line ‘For the Month Ended December
31, 20–.’
Materials costs flow from the Materials Inventory account to the Work in Process
Inventory account to the Finished Goods Inventory account.
When the buyer bears the transportation charge, it is called freight-out.
Inventory is an example of a long-term asset.
Under the indirect method, gains or losses from the sale of equipment used in
operations would appear as adjustments in the cash flows from operating activities
section of the statement of cash flows.
The continuity assumption states that the business will continue to operate indefinitely.
The cost of repairing a machine damaged during installation should be charged as an
operating expense.
Payment to a creditor is an example of a nonexchange business transaction.
The costs associated with coupons and rebates are usually reflected in contra-revenue
accounts.
In order to manage a company’s liquidity, managers and other users of financial
information must understand the difference between transactions that generate
immediate cash and those that do not.
The costs of materials used in production are transferred from the Materials Inventory
account directly to the Cost of Goods Sold account.
An adjusting entry includes at least one balance sheet account and at least one income
statement account.
Just-in-time operating environments encourage continuous improvement of the work
environment.
A continuous budget is prepared
A.annually.
B.semi-annually.
C.monthly.
D.quarterly.
Liabilities have which of the following two major categories?
A.Accounts payable and notes payable
B.Contributed capital and retained earnings
C.Current and long term
D.Unearned revenues and other payables
For purposes of computing EVA, the minimum desired rate or return on an investment
is known as
A.ROI.
B.cost of capital.
C.residual income.
D.profit margin.
If net sales total $50,000, beginning accounts receivable was $10,000, and ending
accounts receivable is 16,000, what is the receivables turnover?
A.1.9 times
B.3.1 times
C.3.8 times
D.5 times
Variable costing allows a manager to classify controllable costs as
A.variable and fixed costs.
B.avoidable and unavoidable costs.
C.necessary and unnecessary costs.
D.short-term and long-term variable costs.
In a common-size income statement for a retail store, the 100 percent amount is for
A.net revenues.
B.cost of goods sold.
C.gross profit.
D.net income.
J. J. Johnson has decided to supplement his income by selling beehives. He expects to
sell 25,000 hives in 2014. He ended 2013 with 2,500 completed hives in inventory and
would like to complete operations in 2014 with at least 2,800 completed hives in
inventory. There is no ending work in process inventory. One beehive holds about 250
bees. The bees are purchased for $4.00 per 1,000 bees. The hives sell for $15.00 each.
How many beehives would the 2014 production budget, of Johnson, identify as needing
to be produced?
A.25,300
B.25,000
C.30,300
D.24,700
The topic of foreign exchange rates relates most closely to the concept of
A.separate entity.
B.money measure.
C.nonexchange transactions.
D.business transactions.
Salvage value is not the same as
A.carrying value.
B.residual value.
C.disposal value.
D.scrap value.
A truck is purchased for $70,000. It has a five-year life and a $10,000 residual value.
Under the straight-line method, what is the asset’s carrying value after three years?
A.$24,000
B.$34,000
C.$36,000
D.$46,000
Using the following information and the trial balance accounts and balances in the work
sheet provided, complete the work sheet.
a. Expired insurance totals $260.
b. Of the unearned revenue, all has been earned by the balance sheet date.
c. Estimated depreciation of equipment is $120.
d. Accrued wages equal $400.
e. Unused supplies on hand are $90.
Which of the following best describes the typical relationship between variable costs
and volume?
A.Total variable costs increase in an erratic, unpredictable fashion with changes in
volume.
B.Total variable costs stay constant with changes in volume.
C.Unit variable costs increase with changes in volume up to a certain point and then
remain constant.
D.Total variable costs increase in direct proportion to increases in volume.
Management of Moore City Trust is in the process of evaluating the purchase of a new
check sorting machine. The model under review will cost $44,000 and will require
installation costs of $5,000. Similar machines have a ten-year life, and management has
estimated that this sorter will have a residual value of $2,500 at the end of its life.
Annual cost savings to be generated by the sorter will average $9,500 over the ten-year
period. Management’s minimum desired before-tax rate of return is 14 percent.
Present value multipliers:
a. Using before-tax information and the net present value method to evaluate this
capital investment, determine whether the company should purchase the check sorting
machine. Support your answer.
b. If management had decided on a minimum desired before-tax rate of return of 16
percent, should the check sorting machine be purchased? Show all computations to
support your answer. Round answers to nearest dollar.
Use the following information to calculate ending inventory on (a) a LIFO basis, (b) a
FIFO basis, and (c) an average-cost basis. Assume a perpetual inventory system.
Which of the following is a stakeholder of an organization?
A.The accounts receivable clerk of the organization
B.A vice president of the organization
C.A line supervisor of the organization
D.All of these choices
Which of the following accounts is a real account?
A.Building
B.Depreciation Expense’“Buildings
C.Interest Expense
D.Service Revenue
Products Green, Red, and White have unit contribution margins of $6.50, $12, and $10,
respectively, and require 2, 4, and 3 direct labor hours per unit, respectively. If demand
currently is far exceeding supply, on which product should the company concentrate its
efforts?
A.Green
B.Red
C.White
D.Either Green or Red
Cardsheet Company
The following partially completed T accounts summarize the transactions of Cardsheet
Company for last year:
The cost of goods sold (after adjusting for under- or overapplied overhead) is
A.$92,300.
B.$60,300.
C.$34,300.
D.$66,300.
The salary of a retail organization’s sales personnel consist of a base amount plus a
commission of 5 percent on each sale. Which of the following would properly classify
the cost of sales salaries?
A.Fixed and product
B.Mixed and period
C.Mixed and product
D.Fixed and product
Following are the income statement and other information for American Horse
Corporation.
Accounts receivable (net) increased by $1,500 during the year. Inventory decreased by
$1,900, and Accounts Payable increased by $1,200 during the year. Income Taxes
Payable decreased by $300 during the year.
Prepare a schedule of cash flows from operating activities using the indirect method.
What is the purpose of adjusting entries?
Distinguish between profitability and liquidity.
Marta Company had cash sales of $120,000 for the month of November. Sales are
subject to a 4.5 percent sales tax and a 6 percent excise tax. In the journal provided,
prepare a compound entry to record Marta’s sales and related sales and excise taxes for
the month.
On June 3, Addison Company purchased merchandise worth $1,600 on credit, terms
2/10, n/30. The amount paid on June 15. What is the required journal entry to record the
payment under the periodic inventory system?
Indicate on the blanks below the effect (I = increase, D = decrease, NE = no effect) of a
stock split on each of the items listed.
_____ 1> Assets
_____ 2> Balance of Common Stock account
_____ 3> Total contributed capital
_____ 4> Total retained earnings
_____ 5> Total stockholders’ equity
_____ 6> Par value per share
_____ 7> Total number of shares outstanding
Using the following information from an annual report, prepare a vertical analysis of
the consolidated balance sheet at June 30, 20×5. (Round percentage answers to one
decimal place.)
Brendan Company sold merchandise worth $1,600 on credit, terms n/15 and on the next
day the customer returned merchandise worth $100, which cost $60 for Brendan
Company. What is the required journal entry to record the merchandise returns under
the perpetual inventory system?
