Gross earnings minus deductions equal take-home pay.
With the periodic inventory system, cost of goods available for sale must be calculated
after cost of goods sold.
When presenting decreases in long-term investments in the investing activities section
of the statement of cash flows, the amount reflected equals the amount of the gain(s) or
loss(es) from the transaction(s).
The amount placed opposite the Land account in the Balance Sheet columns of the
work sheet is the amount to be reflected for Land on the balance sheet.
When a petty cash fund is replenished, the entry requires a debit to Petty Cash.
Under a periodic inventory system, cost of goods sold is not recorded until the end of
the accounting period.
The entry to record the purchase of treasury stock will cause total stockholders’ equity
to decrease by the amount of the cost of the treasury shares.
Like a job order costing system, a process costing system is restricted to one Work in
Process Inventory account.
The calculation of cost of goods available for sale during the year is not affected by the
previous year’s ending merchandise inventory.
An overstatement of beginning inventory in a period will result in an overstatement of
gross margin in the next period.
Financial statements may be prepared from an adjusted trial balance.
A credit to an asset account means that asset account has been increased.
Each period’s ending cash balance becomes the beginning cash balance for the next
period.
If a company is facing negative free cash flow, it may issue stock in order to continue
operating at its planned level.
Accrued liabilities often arise as a result of the passage of time.
Corporations are subject to more government control and regulation than are other
forms of business.
In a traditional manufacturing environment, both push-through and pull-through
methods trigger scheduling of production.
Which of the following statements isTRUE about factoring without recourse?
A.The seller of the receivables is liable upon default of the debtor.
B.The factor’s risk is lower than if the factoring were with recourse.
C.An example is the use of major credit cards.
D.The fee will be lower than if the factoring were with recourse.
Consistency in accounting means that a company uses the same generally accepted
accounting principles from one accounting period to the next accounting period.
Cost behavior analysis is not useful to a service business.
Which of the following statements is TRUE?
A.The direct materials purchases budget is determined from the direct labor budget.
B.The sales budget is the only budget based on an estimate of customer demand.
C.The capital expenditures budget are prepared from the production budget.
D.The selling and administrative expense budget is input into the forecasted cost of
goods sold.
Cardsheet Company
The following partially completed T accounts summarize the transactions of Cardsheet
Company for last year:
The cost of direct materials used in production is
A.$15,000.
B.$11,000.
C.$29,000.
D.$62,300.
Materials and supplies that cannot be traced conveniently to specific products are called
A.indirect materials.
B.raw materials.
C.waste materials.
D.direct materials.
Most business enterprises in the United States are
A.government units.
B.partnerships.
C.sole proprietorships.
D.corporations.
To determine whether a company’s operations are covering its dividend payments, it is
best to focus on which of the following sections of the statement of cash flows?
A.Operating activities
B.Financing activities
C.Investing activities and financing activities
D.Operating activities and investing activities
Which of the following is not a characteristic of all long-term assets?
A.Possess physical substance
B.Not for resale
C.Used in operations of business
D.Useful life of more than a year
Use the following information to perform the calculations requested below, assuming
that the average costing approach to a process costing system is being used.
Beginning work in process inventory: 16,000 units, 100 percent complete as to direct
materials, 85 percent complete as to conversion costs
Ending work in process inventory: 36,000 units, 100 percent complete as to direct
materials, 70 percent complete as to conversion costs
Units started during the month: 59,000
a. Calculate units to be accounted for during the month.
b. Calculate units completed and transferred out during the month.
c. Calculate equivalent units for direct materials.
d. Calculate equivalent units for conversion costs.
The fundamental way in which a company will achieve its goal is described in its
A.balance sheet and income statement.
B.cash flow statement.
C.budget.
D.mission statement.
During 2014, America Inc. produced, among other products, 9,500 cameras, incurring
the following unit costs: $5 in direct materials, $3 in direct labor, $2 in variable
overhead, $4 in fixed overhead, $0.50 in variable selling and administrative expenses,
and $1 in fixed selling and administrative expenses. An outsider had offered to produce
the cameras for $12 each. Assuming that the factory space would have been idle
otherwise, acceptance of the outside offer would have
A.lost the company $9,500.
B.saved the company $34,250.
C.saved the company $19,250.
D.lost the company $14,250.
Which is the only type of investment that is always classified as short-term?
A)Trading securities
B)Held-to-maturity securities
C)Available-for-sale securities
D)Equity securities
Velocity Ltd. is a sports car manufacturer. Which of the following is a value-adding cost
for Velocity?
A.Salary of the payroll department
B.Cost of tires used in cars
C.Cost of office supplies
D.Salary of operations manager
In the rare instance when a par value stock is issued at a cash price below par, the
excess of the par value over the amount of cash received should be
A.credited to a liability account.
B.debited to the Retained Earnings account.
C.debited to an account titled Discount on Capital Stock.
D.credited to the Retained Earnings account.
In a period of rising prices, the liquidation of base-layer inventory will result in an
unusually high income tax liability under which of the following methods?
A.Specific identification
B.Average-cost
C.LIFO
D.FIFO
Use this information to answer the following question.
Northbrook Corporation is preparing a statement of cash flows. The following
transactions occurred during the year:
1> Sold machinery for $9,000 cash.
2> Purchased a building for $80,000 cash.
3> Issued $70,000 worth of stock to acquire an airplane.
4> Converted long-term bonds by issuing $100,000 worth of stock.
5> Declared and paid a $10,000 cash dividend.
Transaction 1 would be found on the statement of cash flows in the
A.cash flows from operating activities section.
B.cash flows from financing activities section.
C.noncash investing and financing transactions section.
D.cash flows from investing activities section.
Use this information to answer the following question.
The general ledger account for Accounts Receivable shows a debit balance of $50,000.
Allowance for Uncollectible Accounts has a debit balance of $1,000. Net sales for the
year were $500,000. In the past, 2 percent of sales have proved uncollectible, and an
aging of accounts receivable accounts results in an estimate of $13,500 of uncollectible
accounts.
Using the accounts receivable aging method, the Allowance for Uncollectible Accounts
balance (after adjustment) would be
A.$14,500.
B.$14,000.
C.$13,500.
D.$12,500.
The amount of depletion of a coal mine in a year may differ from the depletion expense
in the same year because
A.depletion expense includes other costs in addition to depletion.
B.depletion is based on the passage of time, whereas depletion expense is not.
C.the mine is not in operation all year.
D.some coal is unsold at the end of the year.
On a statement of cash flows prepared using the direct method, the amount representing
cash paid for interest would
A.be shown in the net cash flows from financing activities section.
B.not be shown.
C.be shown in the net cash flows from investing activities section.
D.be shown in the net cash flows from operating activities section.
If a revenue expenditure is incorrectly recorded on a company’s books as a capital
expenditure, which of the following statements will be TRUE?
A.Stockholders’ equity will be overstated at year end.
B.Net income in the following year will be unaffected.
C.Total assets will be understated at year end.
D.Net income will be understated for the year.
The projections of direct materials purchases that follow are for the Sombo
Corporation.
The company pays for 60 percent of purchases on account in the month of purchase and
40 percent in the month following the purchase.
What is the expected cash payment for direct materials for the month of February of
Sombo?
A.$52,000
B.$72,000
C.$89,000
D.$95,000
On December 31, 20×5, the balance sheet of Gamma Corporation reported bonds
outstanding with a face value of $2,000,000 and a related unamortized premium of
$60,000. Interest is payable semiannually on January 1 and July 1.
a. Prepare an entry in journal form without explanations to record the retirement of
bonds with a face value of $1,200,000 on January 1, 20×6, assuming the bonds were
redeemed at a call price of 104.
b. Prepare an entry in journal form without explanation on January 1, 20×6, to record
the conversion of bonds with a face value of $800,000 into common stock. Each $1,000
bond is convertible into 30 shares of $20 par value common stock.
Use this balance sheet and income statement to answer the following question. Use
ending balances whenever average balances are required for computing ratios.
The total amount of working capital for National Textile is
A.$2,000.
B.$6,000.
C.$4,000.
D.$30,000.
Calculate answers to the following scenarios using present value tables:
a. If $100 is deposited into an account paying 8 percent simple interest, what will be the
value of the account in 5 years?
b. If an accumulation of $8,000 is desired at the end of 4 years, what amount must be
deposited now to accomplish that goal, assuming 12 percent interest compounded
annually?
c. What is the present value of $300 received at the end of each year for 4 years,
assuming 9 percent interest compounded annually?
d. What amount must be deposited at the bank today to grow to $10,000 in 5 years,
assuming 14 percent interest compounded semiannually?
A company issued $300,000 of 20-year, 8 percent bonds at 96. If interest is paid
semiannually, the entry to record the amount of bond interest expense recorded
(assuming the straight-line method of amortization) on any interest date is:
Logan Company uses a job order costing system. A predetermined overhead rate of $7
per machine hour in Department A and 220 percent per direct labor dollar in
Department B has been established based upon the following information at the
beginning of the year:
Job 19 for 100 units is started in Department A and completed in Department B.
Determine the total cost of Job 19 and complete the job cost card based on the
following information:
Briefly explain a ‘big bath’ including when it occurs and why it occurs.
The following information pertains to Constance Corporation:
Calculate the asset turnover ratio for 20×5. Round your answer to two decimal places.
Partners S, T, and U share income and losses in a 5:3:2 ratio, respectively. S wishes to
leave the partnership, so the assets are revalued and are found to be overvalued by
$6,000. If each partner had a capital balance of $20,000 prior to S’s notification of
withdrawal, the entry to record the withdrawal of S’s interest from the partnership is:
