Nuthatch Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $260,000, $375,000, and
$400,000, respectively, for September, October, and November. The company expects
to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be
collected in the month of the sale and 20% in the month following the sale.
The cash collections in November from accounts receivable are:
A.$280,000
B.$316,400
C.$295,200
D.$276,500
Answer:
The following data relate to direct labor costs for February:
What is the direct labor time variance?
A.$7,700 favorable
B.$7,700 unfavorable
C.$11,200 unfavorable
D.$11,200 favorable
Answer:
The date on which a cash dividend becomes a binding legal obligation is on the
A.declaration date.
B.date of record.
C.payment date.
D.last day of the fiscal year.
Answer:
Jackson and Campbell have capital balances of $100,000 and $300,000 respectively.
Jackson devotes full time and Campbell one-half time to the business. Determine the
division of $150,000 of net income in ratio of capital balances.
A.$75,000 and $75,000
B.$37,500 and $112,500
C.$100,000 and $50,000
D.$50,000 and $100,000
Answer:
The Canine Company has total estimated factory overhead for the year of $2,400,000,
divided into four activities: Fabrication, $1,200,000; Assembly, $480,000; Setup,
$400,000; and Materials Handling $320,000. Canine manufactures two products:
Standard Crates and Deluxe Crates. The activity-base usage quantities for each product
by each activity are as follows:
Each product is budgeted for 20,000 units of production for the year. Determine (a) the
activity rates for each activity and (b) the factory overhead cost per unit for each
product using activity-based costing.
Answer:
Vacation pay payable is reported on the balance sheet as a(n)
A.current liability or long-term liability, depending upon when the vacations will be
taken by employees
B.current liability
C.expense
D.long-term liability
Answer:
A company with a break-even point at $900,000 in sales revenue had fixed costs of
$225,000. When actual sales were $1,000,000 variable costs were $750,000. Determine
(a) the margin of safety expressed in dollars, (b) the margin of safety expressed as a
percentage of sales, (c) the contribution margin ratio, and (d) the operating income.
Answer:
For a business that uses the allowance method of accounting for uncollectible
receivables:
Answer:
The following information pertains to Carlton Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
Assets
Liabilities and Stockholders’ Equity
Income Statement
What is the dividend yield for this company? Round your answer to one decimal point.
A.4.5%
B.9.0%
C.16.6%
D.22.2%
Answer:
At the end of the fiscal year, the usual adjusting entry to Prepaid Insurance to record
expired insurance was omitted. Which of the following statements is true?
A.Total assets at the end of the year will be understated.
B.Owner’s equity at the end of the year will be understated.
C.Net income for the year will be overstated.
D.Insurance Expense will be overstated.
Answer:
Which of the graphs in Figure 20-1 illustrates the behavior of a total variable cost?
A.Graph 2
B.Graph 3
C.Graph 4
D.Graph 1
Answer:
Which of the following is NOT a disadvantage of decentralized operation?
A.Competition among managers decreases profits
B.Duplication of operations
C.Price cutting by departments that are competing in the same product market
D.Top management freed from everyday tasks to do strategic planning
Answer:
Production estimates for August are as follows:
For each unit produced, the direct materials requirements are as follows:
The total direct materials purchases (assuming no beginning or ending inventory of
material) of materials A and B required for August production is:
A.$1,080,000 for A; $1,296,000 for B
B.$1,080,000 for A; $648,000 for B
C.$1,125,000 for A; $675,000 for B
D.$1,170,000 for A; $702,000 for B
Answer:
The Atlantic Company sells a product with a break-even point of 3,000 sales units. The
variable cost is $60 per unit, and fixed costs are $270,000. Determine the (a) unit sales
price, and (b) break-even points in sales units if the company desires a target profit of
$36,000.
Answer:
During the taking of its physical inventory on December 31, 2014, Barry’s Bike Shop
incorrectly counted its inventory as $350,000 instead of the correct amount of
$280,000. The effect on the balance sheet and income statement would be as follows:
A.assets overstated by $70,000;retained earnings understated by $70,000; net income
statement understated by $70,000.
B.assets overstated by $70,000;retained earnings understated by $70,000; no effect on
the income statement.
C.assets and retained earnings overstated by $70,000; net income overstated by
$70,000.
D.assets and retained earnings overstated by $70,000; net income understated by
$70,000.
Answer:
Williams Company reports production costs for 2015 as follows:
Williams Company’s product costs for 2015 amount to:
A.$995,000
B.$920,000
C.$825,000
D.$770,000
Answer:
The term “receivables” includes all
A.money claims against other entities.
B.merchandise to be collected from individuals or companies.
C.cash to be paid to creditors.
D.cash to be paid to debtors.
Answer:
Which of the following transactions is recorded in the purchases journal?
A.purchase of store supplies on account
B.return of damaged office equipment
C.purchase of store supplies for cash
D.purchase of office equipment for cash
Answer:
What information is generally included in the Management Discussion and Analysis
(MD&A) section of a corporate annual report?
Answer:
Select the type of business that is most likely to obtain large amounts of resources by
issuing stock.
A.Partnership
B.Corporation
C.Proprietorship
D.None are correct.
Answer:
Division A of Mocha Company has sales of $155,000, cost of goods sold of $83,000,
operating expenses of $43,000, and invested assets of $150,000.
What is the investment turnover for Division A?
A.1.03
B.1.0
C.5.17
D.5.34
Answer:
The method of computing inventory that uses records of the selling prices of the
merchandise is called
A.retail method
B.last-in, first-out
C.first-in, first-out
D.average cost
Answer:
Which method of evaluating capital investment proposals uses present value concepts
to compute the rate of return from the net cash flows expected from capital investment
proposals?
A.Internal rate of return
B.Cash payback
C.Net present value
D.Average rate of return
Answer:
Given the following cost and activity observations for Bounty Company’s utilities, use
the high-low method to calculate Bounty’ variable utilities costs per machine hour.
A.$10.00
B.$.67
C.$.63
D.$.11
Answer:
The detailed record indicating the data for each employee for each payroll period and
the cumulative total earnings for each employee is called the
A.payroll register
B.payroll check
C.employee’s earnings record
D.employer’s earnings record
Answer:
Aaron and Kim form a partnership by combining the assets of their separate businesses.
Aaron contributes accounts receivable with a face amount of $50,000 and equipment
with a cost of $180,000 and accumulated depreciation of $100,000. The partners agree
that the equipment is to be priced at $68,000, that $3,500 of the accounts receivable are
completely worthless and are not to be accepted by the partnership, and that $2,000 is a
reasonable allowance for the uncollectibility of the remaining accounts receivable. Kim
contributes cash of $21,000 and merchandise inventory of $44,500. The partners agree
that the merchandise inventory is to be priced at $48,000. Journalize the entries to
record in the partnership accounts (a) Aaron’s investment and (b) Kim’s investment.
Answer:
The budget process involves doing all the following except:
A.establishing specific goals
B.executing plans to achieve the goals
C.periodically comparing actual results with the goals
D.dismissing all managers who fail to achieve operational goals specified in the budget
Answer:
The following information is available for Taylor Company:
Which of the following statements is correct?
A.The price-earnings ratio is 20 and a share of common stock was selling for 20 times
the amount of earnings per share at the end of 2012.
B.The price-earnings ratio is 5.0% and a share of common stock was selling for 5.0%
more than the amount of earnings per share at the end of 2012.
C.The price-earnings ratio is 10 and a share of common stock was selling for 125 times
the amount of earnings per share at the end of 2012.
D.The market price per share and the earnings per share are not statistically related to
each other.
Answer:
If merchandise inventory is being valued at cost and the purchase price is steadily
falling, which method of costing will yield the largest net income?
A.average cost
B.LIFO
C.FIFO
D.weighted average
Answer:
Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks
and 56,000 units of Bins. Related data are:
What was Carter Co.’s weighted average unit contribution margin?
A.$24
B.$60
C.$92
D.$20
Answer: