A company sold 200 shares of common stock with a par value of $5 at a price of $12
per share. Which section of the statement of cash flows will contain this transaction?
a. Operating activities
b. Investing activities
c. Financing activities
d. Sale of stock will not appear on the statement of cash flows.
Managers plan _____ in a budget in order to provide a cushion for unexpected events or
improve the appearance of operations.
a. budgetary slack
b. favorable variance
c. budgetary margin
d. opportunity gap
A business has a capacity of $4,000,000 of sales, actual sales of $1,500,000, breakeven
sales of $900,000, fixed costs of $540,000, and variable costs that are 40% of sales.
What is the margin of safety expressed as a percentage of sales?
a. 40%
b. 42%
c. 33%
d. 35%
Sales amount to $774,000, variable costs are 59% of sales, and fixed cost is $120,000.
What is the contribution margin ratio?
a. 37%
b. 44%
c. 39%
d. 41%
Pelican, Inc. had revenues of $395,000, expenses of $155,000, and dividends of
$54,000 during the current year. HTMLENTITY#8203HTMLENTITYBased on the
given information, which of the following statements is true?
a. Net income for the current year totaled $240,000.
b. Net income for the current year totaled $186,000.
c. Total retained earnings increased by $240,000 during the current year.
d. Total retained earnings decreased by $186,000 during the current year.
A corporation has 10,000 shares of $100 par value stock outstanding that has a current
market value of $160. If the corporation issues a 4for1 stock split, the market value of
the stock will fall to approximately $32.
a. True
b. False
Differential analysis can aid management in making decisions on a variety of
alternatives, including whether to discontinue an unprofitable segment and whether to
replace fixed assets.
a. True
b. False
Which of the following is a product cost?
a. Administrative cost
b. Direct labor cost
c. Selling cost
d. Opportunity cost
Using the job order cost system, service business are able to bill clients on a weekly or
monthly basis, even when the job has not been completed.
a. True
b. False
Goodwill is:
a. amortized in a manner similar to other intangibles.
b. written down only if an impairment in value occurs.
c. charged to expense immediately.
d. amortized over 40 years or its economic life, whichever is shorter.
Blue Lights Co. uses the total cost concept of applying the costplus approach to product
pricing. The costs of producing and selling 5,000 units are as follows:
Fixed factory overhead cost$60,000
Fixed selling and administrative costs120,000
Variable direct materials cost per unit80
Variable direct labor cost per unit150
Variable factory overhead cost per unit50
Variable selling and administrative cost per unit30
If the total cost markup percentage per unit is 5.5%, determine the selling price per unit
of the company’s product.
a. $346
b. $692
c. $365
d. $677
Inventory costing methods place primary emphasis on assumptions about:
a. flow of goods.
b. flow of costs.
c. flow of goods or costs depending on the method.
d. flow of values.
The following data is available for an item of JNC Inc. for the month of March:
March 1 Inventory 15 units at $10 each
15Purchase30 units at $18 each
31Purchase24 units at $15 each
Sale30 units
Using the firstin, firstout method, what is JNC Inc.’s cost of ending inventory for
March?
a. $630
b. $510
c. $420
d. $360
Orange Co. sells merchandise on credit to Zea Co. in the amount of $9,000. The invoice
is dated on September 15 with terms of 1/15, net 45. What is the amount of the
discount, and up to what date must the invoice be paid in order for the buyer to take
advantage of the discount?
a. $180, September 30
b. $180, September 25
c. $90, September 30
d. $90, September 25
If fixed costs are $450,000 and the unit contribution margin is $50, the sales necessary
to earn an operating income of $30,000 are 14,000 units.
a. True
b. False
The budgeted volume of production is based on the sum of (1) the expected sales
volume and (2) the desired ending inventory, less (3) the estimated beginning inventory.
a. True
b. False
The SarbanesOxley Act of 2002 applies to all publicly held companies.
a. True
b. False
The direct labor and overhead costs of providing services to clients are accumulated in:
a. finished services expense.
b. work in process.
c. administrative salaries expense.
d. overhead.
Depreciation expense on store equipment for a department store is a direct expense.
a. True
b. False
Which of the following transactions will have no effect on the liquidity metric of a
company? HTMLENTITY#8203HTMLENTITY
a. HTMLENTITY#8203HTMLENTITYPurchasing an asset
b. HTMLENTITY#8203HTMLENTITYSelling an asset for no loss and no gain
c. HTMLENTITY#8203HTMLENTITYSelling an asset for loss
d. HTMLENTITY#8203HTMLENTITYDiscarding a fully depreciated asset
The following information is for employee William Heedy for the week ended March
15.
Total hours worked: 48
Rate: $16 per hour, with double time for all hours in excess of 40
Federal income tax withheld: $200
United Fund deduction: $50
Cumulative earnings prior to current week: $6,400
Tax rates:
Social security: 6% on maximum earnings of $106,800
Medicare tax: 1.5% on all earnings; on both employer and employee
State unemployment: 4.2% on maximum earnings of $7,000; on employer
Federal unemployment: 0.8% on maximum earnings of $7,000; on employer
(a)Determine (1) total earnings, (2) total deductions, and (3) cash paid.
(b)Determine each of the employer’s payroll taxes related to the earnings of William
Heedy for the week ended March 15.
When the petty cash fund is replenished, the petty cash account is adjusted for the total
of all expenditures made since the fund was last replenished.
a. True
b. False
If direct materials cost per unit increases, the breakeven point will increase.
a. True
b. False
Which of the following is a business stakeholder?
a. A bank
b. An employee
c. A federal government
d. All of these
A corporation has 50,000 shares of $100 par value stock outstanding that has a current
market value of $180. If the corporation issues a 4for1 stock split, the market value of
the stock will fall to approximately:
a. $30.
b. $36.
c. $45.
d. $50.
A voucher system is an example of an internal control procedure over cash receipts.
a. True
b. False
As interest is recorded on an interestbearing note, the Interest Expense account is:
a. decreased; the Interest Payable account is increased.
b. increased; the Interest Payable account is increased.
c. increased; the Notes Payable account is decreased.
d. increased; the Notes Payable account is increased.
The branch of accounting related to the management’s financial decisions is known as
financial accounting.
a. True
b. False
The balance sheet represents the accounting equation.
a. True
b. False
Blue Lights Co. uses the total cost concept of applying the costplus approach to product
pricing. The costs of producing and selling 7,700 units are as follows:
Fixed factory overhead cost$60,000
Fixed selling and administrative costs120,000
Variable direct materials cost per unit80
Variable direct labor cost per unit150
Variable factory overhead cost per unit50
Variable selling and administrative cost per unit30
If the amount of desired profit is $285,000, calculate the total cost markup percentage
per unit. (Round answer to two decimal places)
a. 9.30%
b. 11.10%
c. 15.70%
d. 12.86%