1) Cost of Merchandise Sold is often the largest expense on a merchandising company
income statement.
2) Gains and losses on the redemption of bonds are reported as other income or other
expense on the income statement.
3) Period costs are operating costs that are expensed in the period in which the goods
are sold.
4) When the board of director’s declares a cash or stock dividend, this action decreases
retained earnings.
5) A bottleneck begins when demand for the companys product exceeds the ability to
produce the product.
6) Using the job order cost system, service organizations are able to bill customers on a
weekly or monthly basis, even when the job has not been completed.
7) Cash and other assets that may reasonably be expected to be realized in cash, sold, or
consumed through the normal operations of a business, usually longer than one year,
are called current assets.
8) If the profit margin for a division is 8% and the investment turnover is 1.20, the rate
of return on investment is 9.6%.
9) Journalizing eliminates fraud.
10) The balance in Retained Earnings should be interpreted as representing surplus cash
left over for dividends.
11) The main objective of a not-for-profit business is not to make a profit.
12) If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is
$12,928, the semiannual straight-line amortization of the premium is $1,416.
13) The assets and liabilities of Amos Moving Services at March 31, 2014, the end of
the current year, and its revenue and expenses for the year are listed below. The capital
of the owner was $180,000 at April 1, 2013, the beginning of the current year. Mr.
Amos invested an additional $25,000 in the business during the year.
Prepare a balance sheet for the current year ended March 31, 2014.
14) The following items are reported on a companys balance sheet:
Required:
Determine (1) the current ratio and (2) the quick ratio. Round to one decimal place.
15) MZE Manufacturing Company has a normal plant capacity of 37,500 units per
month. Because of an extra large quantity of inventory on hand, it expects to produce
only 30,000 units in May. Monthly fixed costs and expenses are $112,500 ($3 per unit
at normal plant capacity) and variable costs and expenses are $8.25 per unit. The
present selling price is $13.50 per unit. The company has an opportunity to sell 7,500
additional units at $9.90 per unit to an exporter who plans to market the product under
its own brand name in a foreign market. The additional business is therefore not
expected to affect the regular selling price or quantity of sales of MZE Manufacturing
Company.
Prepare a differential analysis report, dated April 21 of the current year, on the proposal
to sell at the special price.
16) The last custodian of the petty cash fund was hospitalized and you have been asked
to take stock of the fund and replenish it. When you receive the fund, it has $299 in
cash and receipts as follows:
The petty cash fund was established to have $800 in it.
Based on what you have found, what journal entry should be recorded to replenish the
fund?
17) What is the present value of $8,000 to be received at the end of six years, if the
required rate of return is 15%?
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
18) Lark Art Company sells unfinished wooden decorations at a price of $15.00. The
current profit margin is $5.00 per decoration. The company is considering taking
individual orders and customizing them for sale. To finish the decoration the company
would have to pay additional labor of $3.00, additional materials costing an average of
$4.00 per unit and fixed costs would increase by $1,500. If the company estimates that
it can sell 600 units for $25.00 each month, should they start taking the orders?
19) The estimated amount of depreciation on equipment for the current year is $5,300.
Journalize the adjusting entry to record the depreciation.