Which of the following is true of internal control?
A) A company’s outside auditor is responsible for the company’s internal control
system.
B) One of the major purposes of internal control is to ensure that the assets are
safeguarded.
C) Internal control procedures tend to diminish the importance of operational efficiency.
D) Internal controls are only necessary for public companies.
Greg’s Grocery, Inc. has 45,000 shares of common stock outstanding and 8,000 shares
of preferred stock outstanding. The common stock is $0.10 par value; the preferred
stock is 7% noncumulative with a $100.00 par value. On October 15, 2017, the
company declares a total dividend payment of $51,000. What is the amount of dividend
that will be paid for each share of common stock? (Round your answer to the nearest
cent.)
A) $(0.11)
B) $4,500.00
C) $45.00
D) $0.88
Which of the following adjusted balances would appear in the balance sheet credit
column of a worksheet?
A) Rent Revenue
B) Insurance Expense
C) Salaries Payable
D) Equipment
Ewan Logistics provides the following information:
What is the company’s residual income?
A) $(450,000)
B) $390,000
C) $1,650,000
D) $1,110,000
Corporations pay their own income tax on corporate income. Stockholders pay personal
income tax on the dividends received from corporations. This is an example of
________.
A) double taxation
B) continuous life
C) no mutual agency
D) a limited liability company
Lawrence Sales Corporation offers warranties on all their electronic goods. Warranty
expense is estimated at 3% of sales revenue. In 2017, the company had $603,000 in
sales. In the same year, Lawrence Sales replaced defective goods with a cost of
$16,500. Which of the following is the entry needed to record the replacement of the
defective goods?
A)
B)
C)
D)
Which of the following formulas is used to calculate the cost per equivalent unit of
production (EUP) for direct materials? The weighted-average method is used.
A) Cost per EUP for direct materials = Total conversion costs / Equivalent units of
production for direct materials
B) Cost per EUP for direct materials = Total direct materials costs / Equivalent units of
production for direct materials
C) Cost per EUP for direct materials = Total transferred in costs / Equivalent units for
transferred in
D) Cost per EUP for direct materials = Total direct materials costs / Equivalent units of
production for conversion costs
Which of the following describes the cost of goods manufactured?
A) the cost of the goods that were sold during the period
B) the total cost of all goods that were completed, or partially completed during the
period
C) the cost of those goods that were completed during the period
D) the total costs in inventory at the end of the period
In absorption costing, fixed manufacturing overhead is expensed ________.
A) when all the other non-manufacturing fixed costs are expensed
B) when the product is sold
C) at the end of the period in which it is paid
D) when the units are produced
Blair Stationery Company is a price-taker and uses target pricing. The company has just
done an analysis of its revenues, costs, and desired profits and has calculated its target
full product cost. Assume all products produced are sold. Refer to the following
information:
Actual costs are currently higher than target full product cost. Assuming that fixed costs
cannot be reduced, what are the target total variable costs?
A) $260,000
B) $456,000
C) $250,000
D) $510,000
Iver Roller Skates has three product lines—D, E, and F. The following information is
available:
The company is deciding whether to drop product line F because it has an operating loss.
Assuming fixed costs are unavoidable, if Iver drops product line F and rents the space
formerly used to produce product F for $19,000 per year, total income will be ________.
A) $11,000
B) $65,000
C) $19,000
D) $24,000
The Allowance for Bad Debts account has a credit balance of $5,000 before the
adjusting entry for bad debts expense. The company’s management estimates that 5% of
net credit sales will be uncollectible for the year 2017. Net credit sales for the year
amounted to $280,000. What is the amount of Bad Debts Expense reported on the
income statement for 2017?
A) $14,000
B) $19,000
C) $7,000
D) $9,000
The accounts payable subsidiary ledger ________.
A) does not indicate the amount owed to each vendor
B) shows only a single total for the amount owed on account
C) lists vendors in alphabetical order, along with amounts paid to the vendors and the
remaining amounts owed to them
D) has a format that is entirely different from an accounts receivable subsidiary ledger
On April 1, a hardware retailer purchases inventory on account for $1,500. Which of the
following correctly describes the effect of this transaction? Assume a perpetual
inventory system is used.
A) Merchandise Inventory decreases by $1,500 and Accounts Receivable decreases by
$1,500.
B) Merchandise Inventory decreases by $1,500 and Accounts Receivable increases by
$1,500.
C) Merchandise Inventory increases by $1,500 and Accounts Payable decreases by
$1,500.
D) Merchandise Inventory increases by $1,500 and Accounts Payable increases by
$1,500.
Nobells Corp. has acquired land and paid $500 as brokerage to acquire the land.
However, the company’s accountant has recorded the $500 as a revenue expenditure.
What is the effect of this error?
A) Net income is understated by $500.
B) Liabilities are overstated by $500.
C) Revenue is overstated by $500.
D) Assets are overstated by $500.
Which of the following statements describes a scenario when management should
consider dropping a business division?
A) The division has been consistently reporting an operating loss.
B) The division’s avoidable fixed costs are less than its contribution margin.
C) The division’s avoidable fixed costs are greater than its contribution margin.
D) The division’s unavoidable fixed costs are greater than its operating loss.
A company using the perpetual inventory system purchased inventory worth $20,000 on
account with terms of 2/10, n/30. Defective inventory of $3,000 was returned two days
later, and the accounts were appropriately adjusted. If the invoice is paid within 10
days, the amount of the purchase discount that would be available to the company is
________.
A) $340
B) $460
C) $400
D) $390
Which of the following is an example of a source document in a computerized
accounting information system?
A) purchase invoices
B) balance sheet
C) cash payments journal
D) income statement
Raedy Corporation reported the following equity section on its current balance sheet.
The common stock is currently selling for $20.25 per share.
After a 2-for-1 stock split, what is the number of issued shares?
A) 280,000
B) 314,000
C) 297,000
D) 140,000
Which of the following statements is true of costing systems?
A) Many traditional costing systems can distort product costs and profitability.
B) Traditional costing systems tend to be more costly than activity-based costing
systems.
C) Activity-based costing systems tend to combine various costs into a single cost pool.
D) Activity-based costing systems tend to use fewer cost pools than does a traditional
costing system.
Which of the following accounting elements does the matching principle help to match?
A) revenues and liabilities
B) expenses and assets
C) expenses and revenues
D) expenses and liabilities
A corporation originally issued $8 par value common stock for $10 per share. It
purchased the stock for $13 per share. Which of the following is included in the entry to
record the sale of 70 shares of treasury stock for $14 per share?
A) Paid-In Capital From Treasury Stock Transactions is credited for $980.
B) Treasury Stock—Common is credited for $910.
C) Treasury Stock—Common is credited for $980.
D) Paid-In Capital From Treasury Stock Transactions is debited for $70.
Which of the following is the last step in developing an activity-based costing system?
A) estimating the total quantity of the cost driver
B) estimating the total indirect costs of each activity
C) identifying the activities
D) allocating indirect costs to the cost object
Which of the following is used to determine how the sales revenue of a company has
changed from one year to the next?
A) vertical analysis of the balance sheet
B) horizontal analysis of the income statement
C) horizontal analysis of the balance sheet
D) vertical analysis of the income statement
A production cost report aids in preparing an income statement by providing data for
________.
A) period costs incurred during the period
B) various inventory accounts
C) cost of goods sold during the period
D) revenues generated during the period
A special journal is ________.
A) an accounting journal designed to record a specific type of transaction
B) an accounting journal that holds individual accounts that support a specific general
ledger account
C) a record of accounts that provides supporting details on individual balances, the total
of which appears in a general ledger account
D) a created list of the accounts used by a business entity to define each class of items
for which cash is spent or received
After initially recording a transaction, the data is then transferred to the ________.
A) chart of accounts
B) ledger
C) trial balance
D) journal
Barricades Corporation provided the following information for the year:
What was the amount of direct materials used in production during the year?
A) $66,000
B) $360,000
C) $383,000
D) $831,000
Forsyth, Inc. uses estimated direct labor hours of 245,000 and estimated manufacturing
overhead costs of $1,200,000 in establishing its predetermined overhead allocation rate
for the year. Actual results showed the following:
The number of direct labor hours worked during the period was ________. (Round any
intermediate calculations to two decimal places, and your final answer to the nearest whole
number.)
A) 245,000 hours
B) 168,367 hours
C) 163,265 hours
D) 237,575 hours
Gould Enterprises sells computer disks for $3.16 per disk. Unit variable cost is $0.06.
The breakeven point in units is 3,600, and expected sales in units are 4,300. What is the
margin of safety in dollars?
A) $2,170
B) $2,212
C) $42
D) $11,376
Sun, Inc. has average total assets of $300,000. The annual operating income of the
company is $125,000. The target rate of return for the company is 15%. Calculate the
residual income.
A) $45,000
B) $175,000
C) $18,750
D) $80,000