A cash flow yield of 2.5 times is considered better than one of 3.0 times.
When a business hires a new employee, a recordable transaction has occurred.
Generally accepted accounting principles state that all business transactions should be
valued at fair value both when they occur and at all subsequent reporting dates.
The amount in the petty cash fund plus the sum of the petty cash vouchers should at all
times equal the amount shown in the Petty Cash account.
When a company pays an employee for work performed, it is considered an economic
event that is not recorded as a transaction.
An advantage of using the perpetual inventory system is that it requires less
recordkeeping than the periodic inventory system.
Equivalent production is a measure of productive output of units for a period of time,
expressed in terms of fully completed or equivalent whole units produced.
When taking a physical inventory under the retail method, it is necessary to know only
the quantity of items on hand.
Purchasing office supplies on account is an example of one way a company can take
advantage of deferring a cash payment.
The overriding goal of a business is to increase the value of the stakeholders’ interest in
the business.
Using cash to expand by purchasing land and a building is an example of an operating
activity.
In a manufacturing company, the cost of direct materials, direct labor, and overhead will
most likely become a part of the Cost of Goods Sold account balance.
If the incremental costs of processing further are greater than the incremental revenue,
the decision of selling the product at the split-off point is justified.
A major function of financial accounting is to provide the investor with relevant and
useful information.
For work done during June, Prints Company incurred direct materials costs of $150,000
and conversion costs of $225,000. The company employs a traditional operating
philosophy. At the end of August, it was determined that the Work in Process Inventory
account had been assigned $2,000 of costs, and the ending balance of the Finished
Goods Inventory account was $5,000. There were no beginning inventory balances.
Using the information provided for Prints Company, how much was cost of goods
manufactured during June?
A.$375,000
B.$373,000
C.$370,000
D.$377,000
Assume that on November 1, a note which has a face value of $9,000, bears interest at 9
percent for 120 days, received from a customer as an extension of her past-due account
is dishonored. The entry that would be made to record the dishonor include all except
A.a debit to Accounts Receivable for $9,000
B.a credit to Interest Income for $266
C.a credit to Notes Receivable for $9,000
D.a debit to Accounts Receivable for $9,266
The following selected amounts were extracted from the financial statements of Luca
Corporation.
Compute the following for net sales, cost of goods sold, and gross margin. (Round
answers to the nearest tenth of 1 percent.)
a. The percentage change from Year 1 to Year 2
b. The percentage change from Year 2 to Year 3
c. The percentage change from Year 3 to Year 4
Lincoln Company engaged in this transaction:
Purchased 60-day commercial paper.
Indicate which section, if any, the above transaction would appear in, or relate to, on a
statement of cash flows.
A.Does not represent a cash flow.
B.Operating activities section.
C.Financing activities section.
D.Investing activities section.
Which of the following accounts should be debited in a journal entry?
A.Accounts Receivable, when it has been decreased.
B.Withdrawals, when it has been increased.
C.Wages Payable, when it has been increased.
D.All of these choices.
On the balance sheet, treasury stock owned by the company is classified properly as
A.contra-stockholders’ equity.
B.current assets.
C.investments.
D.a note to the financial statements.
Use this information to answer the following question.
Here is the balance sheet for Costello Container Company:
If the equipment were sold for $13,000, then the Jose Costello, Capital account would
A.increase by $37,000.
B.increase by $13,000.
C.decrease by $13,000.
D.stay the same.
The three elements of product costs are
A.direct materials, work in process, and overhead.
B.direct materials, work in process, and finished goods.
C.direct materials, direct labor, and overhead.
D.direct materials, direct labor, and period costs.
Steve, the management accountant of a company, is not familiar with the concept of
prudence in financial reporting. Which of the following IMA standards is Steve
violating?
A.Confidentiality
B.Materiality
C.Disclosure
D.Competence
Davida’s Delivery Service purchased a delivery van for $30,000. The van had an
estimated useful life of six years and an estimated residual value of $6,000. After four
years of use, the total estimated useful life is revised to seven years. Assuming
straight-line depreciation, depreciation expense in year 5 would be (amounts rounded)
A.$2,667.
B.$4,667.
C.$2,000.
D.$1,143.
Ad-on International is an advertising company. It estimated the overhead costs for
March, 2014, to be $950,000 and direct labor hours to be 5,000 hours. In March, it
incurred overhead costs of $1,150,000 and 5,100 labor hours.
What is the predetermined overhead rate for March, 2014?
A.$186 per direct labor hour
B.$190 per direct labor hour
C.$225 per direct labor hour
D.$230 per direct labor hour
A partnership agreement most likely will stipulate that assets be reappraised when
A.a new partner is admitted to the partnership
B.a partner leaves the partnership
C.profits and losses are being distributed
D.the partnership is liquidated
If dividends declared per share during 20×4 (the base year), 20×5, and 20×6 are $4.80,
$3.60, and $4.32, respectively, the index numbers assigned to 20×5 and 20×6,
respectively, are
A.75 and 90.
B.60 and 95.
C.180 and 80.
D.133.3 and 110.
A leasehold is a payment
A.for the right to use certain property.
B.for the right to sublease certain property.
C.to give up or to get out of a lease.
D.to improve leased property.
Strathern Corporation issued ten-year term bonds dated January 1, 20×5, with a face
value of $800,000. The face interest rate is 10 percent, and interest is payable
semi-annually on June 30 and December 31. The bonds were issued for $708,400 to
yield an effective annual rate of 12 percent. Use the effective interest method of
amortization. Round answers to the nearest dollar.
a. Prepare entries in journal form without explanations to record the bond issue on
January 1, 20×5, and the payments of interest and amortization on June 30 and
December 31, 20×5.
b. Calculate the total amount to be reported as Bond Interest Expense on the income
statement for the year ended 20×6.
c. Calculate the carrying value of the bonds on December 31, 20×6.
How is it possible for a corporation to have more shares issued than it has outstanding?
A machine that cost $13,000 and on which $9,300 of accumulated depreciation had
been recorded was disposed of for $3,700. The entry to record the disposal of the
machine is:
The balance of the Wages Expense account of Ryan Company, prior to adjustment, was
$95,000. On December 31, the end of the fiscal year, an adjustment for $7,900 of
accrued wages needed to be made. On January 12, wages of $56,400 were paid. Prepare
the adjusting entry for wages, the entry to close the Wages Expense account, the
corresponding reversing entry, and the entry to pay the wages on January 12. Omit
explanations.
Why is the residual value of equipment relevant when considering the replacement of
equipment?
Why might someone prefer to invest in a company by purchasing preferred stock rather
than common stock?
Assume you are the president of the business club at your school. You are thinking
about creating a fundraising project to generate money for next year’s operations.
Develop an outline of your ideas using the various stages of the management process.
Mandisa Sounds, Inc., a specialty retailer of customized audio systems for automobiles,
installed a perpetual inventory system in the second quarter of 2011. The new system
allowed the firm to adjust its merchandise inventories to sales patterns more effectively
and to prepare monthly financial statements. Although the system led to an
improvement in sales and income, the gross margin on the monthly income statements
was falling below both management’s expectations and the industry average. At the end
of 2014, a physical inventory revealed that actual merchandise inventory was
considerably lower than the perpetual inventory records indicated. The merchandise
inventories of some stores were off more than others, but all had deficiencies. What
probably caused these losses and what steps could be taken to prevent them in the
future?
Does the existence of conglomerates make financial performance evaluation easier or
more difficult? Why?