Financing a business means obtaining funds so the business can begin and continue
operating.
If a 20-year bond pays interest of 8 percent semiannually, the present value of the bond
is calculated based upon (1) 4 percent and 40 periods for the interest, and (2) 8 percent
and 20 periods for the face amount of the bond.
To be useful for decision making, financial reporting must enable the user to assess cash
flow prospects and assess management’s stewardship.
In a job order costing system, a separate job order cost card is used for each individual
job.
Which of the following statements is TRUE regarding the time value of money?
A.Compound interest will produce equal amounts of interest each period on a fixed
deposit.
B.Earning simple interest is more beneficial than earning compound interest.
C.When making a purchase, it is better to make payment as soon as possible.
D.It is better to receive $1 now than a year from now.
Property Taxes Expense is recorded only in the month it is paid.
The cost of assets acquired for a lump sum should be allocated equally among the
acquired assets.
Net assets equal owner’s equity.
In accounting, $1,000 is generally considered the dividing line between material and
immaterial amounts.
The use of major credit cards does not require sellers to establish the customer’s credit.
Treasury stock is considered a reduction in stockholders’ equity, not a purchase of assets
.
Fixed costs remain constant in a relevant range of activity.
There is no limit to the amount of income subject to the Medicare tax.
Contribution margin is calculated by deducting variable costs from sales.
One of the general rules of the double-entry system is that total debits must always be
equal to total credits.
Expenses that have been paid for and recorded are called accrued expenses.
When a bond has been issued at a discount, the carrying value at the end of one period
is equal to the carrying value at the beginning of the period minus the amount of
discount that was amortized during the period.
On a multistep income statement, other revenues and expenses are a component of
income from operations.
Depreciation refers to the periodic allocation of the cost of a tangible long-lived asset
over its estimated useful life.
Gain on Sale of Machinery is recorded as a debit.
Use the following performance report for a profit center of Portia Corporation for the
month ended December 31 to answer the questions below.
Using the information provided for Portia Corporation, what were the actual sales?
A.$185
B.$35
C.$190
D.$40
Houston Shoe Co. is preparing a statement of cash flows using the indirect method.
Indicate on the blanks below whether each item is an operating activity (O), an
investing activity (I), a financing activity (F), a noncash transaction (N), or an item that
would not appear on or with Houston’s statement (NA).
_____ 1> The change in Accounts Payable during the period
_____ 2> Depreciation expense
_____ 3> Exchange of stock for a building
_____ 4> Purchase of equipment
_____ 5> Purchases of treasury stock
_____ 6> Borrowing by issuing bonds
_____ 7> A gain on the sale of equipment
_____ 8> Collections from customers
_____ 9> Dividends paid
_____ 10> Income taxes paid
_____ 11> Proceeds from sale of long-term investments at a loss
_____ 12> The change in Inventory for the period
When bonds have been issued at a discount the periodic amortization of the discount
will
A.increase the carrying value of the bonds.
B.have no effect on the carrying value of the bonds.
C.decrease the carrying value of the bonds.
D.cause the carrying value always to equal the face value of the bonds.
Fergus Company is considering the purchase of a machine that will save the company
$4,000 per year in operating costs for a period of seven years. The most it should pay
for the machine is equal to
A.$4,000 times the present value of an ordinary annuity for 7 periods.
B.$28,000.
C.$4,000 divided by the future value of a single sum at the end of 7 periods.
D.$4,000 times the future value of an ordinary annuity for 7 periods.
Using the high-low method and the information below, compute the variable cost per
telephone hour for PSA Corporation.
A.$10.00
B.$40.00
C.$26.91
D.$45.00
Which of the following is a variable cost?
A.Raw materials
B.Rent
C.Insurance expense
D.Salaries
Which of the following is an inventory costing method?
A.Perpetual
B.Lower-of-cost-or-market
C.Specific identification
D.Periodic
A company’s merchandise inventory includes all of the following, except
A.goods in possession, but which cannot be sold.
B.goods on shelves.
C.damaged goods that can be sold at a reduced price.
D.goods in storerooms.
Magic Wizard Inc. uses the FIFO costing method in its process costing system.
Beginning inventory in the mixing processing center consisted of 4,000 units, 70
percent complete with respect to conversion costs. Ending work in process inventory
consisted of 2,000 units, 60 percent complete with respect to conversion costs. If 10,000
units were transferred to the next processing center during the period, the equivalent
units for conversion costs would be
A.6,000 units.
B.8,400 units.
C.10,400 units.
D.2,400 units.
The process of transferring journal entry information from the journal to the ledger is
called
A.journalizing.
B.posting.
C.footing.
D.analzying.
Accounting information should make a difference to the outcome of a decision,
according to the qualitative characteristic of
A.faithful representation.
B.relevance.
C.consistency.
D.understandability.
Start-up and organization costs for a corporation that is to operate a retail store would
include the costs of
A.promoters’ fees and printing stock certificates.
B.advertising for a grand opening sale.
C.the initial purchase of inventory.
D.counters and racks to display merchandise.
The preparation of a statement of stockholders’ equity makes which other financial
statement unnecessary?
A.Income statement
B.Statement of cash flows
C.Statement of retained earnings
D.Balance sheet
Relevance is comprised of all of the following except
A.Neutrality
B.Materiality
C.Predictive value
D.Confirmative value
Discuss how each of the following would be recorded in the partner’s capital account
and why:
a. Trevor invests into the partnership land that he paid $40,000 for 3 years ago. Today,
the fair market value of the land is $65,000.
b. Marcela invests into the partnership a building that she paid $24,000 for 2 years ago.
The building has a $10,000 mortgage and its fair market value is $18,000. The
partnership assumes the mortgage.
c. Courtney invests into the partnership equipment she paid $12,000 for earlier in the
year by signing a note payable that the partnership is not assuming. The equipment has
a fair market value of $15,000.
A good system of internal control is designed to achieve all of the following except
A.efficiency of operations.
B.reliability of financial reporting.
C.compliance with relevant laws and regulations.
D.attainment of target sales.
Which of the following statements best describes the behavior over time of the
components of equal mortgage payments?
A.The proportion of interest expense to payment of principal remains the same.
B.Payment of principal increases and interest expense decreases.
C.Both payment of principal and interest expense decrease.
D.Interest expense increases and payment of principal decreases.
Nader Inc. has the following information available:
At the beginning of the period, there were 500 units in process that were 40 percent
complete as to conversion costs and 100 percent complete as to direct materials costs.
During the current period, 4,300 units were started and completed. Ending inventory
contained 320 units that were 80 percent complete as to conversion costs and 100
percent complete as to direct materials costs. (Assume that the company uses the FIFO
costing method.)
The total costs that will be transferred into the Finished Goods Inventory account of
Nader Inc. during the current period are
A.$153,080.
B.$170,880.
C.$171,788.
D.$189,600.
Fredman Company has a standard costing system and keeps all its costs up to date. The
company’s main product is cotton bed spreads, which are made in a single department.
The standard variable costs for one unit of product are as follows:
The company’s normal capacity is 10,000 direct labor hours. Its budgeted fixed
overhead costs for the year were $44,000. During the year, it produced and sold 4,900
units and it purchased 15,000 yards of direct materials; the purchase cost was $12.40
per yard. The average labor rate was $9.10 per hour, and 10,050 direct labor hours were
worked. The company’s actual variable overhead costs for the year were $48,900, and
its fixed costs were $45,000.
Using the data given, compute the following using formulas or diagram form:
1> Direct materials cost variances:
a. Direct materials price variance
b. Direct materials quantity variance
c. Total direct materials cost variance
2> Direct labor cost variances:
a. Direct labor rate variance
b. Direct labor efficiency variance
c. Total direct labor cost variance
3>Variable overhead variances:
a. Variable overhead spending variance
b. Variable overhead efficiency variance
c. Total variable overhead variance
4>Fixed overhead variances:
a. Fixed overhead budget variance
b. Fixed overhead volume variance
c. Total fixed overhead variance
The Sarbanes-Oxley Act of 2002 does not apply to
A.public companies with assets over $300 million.
B.public companies with assets under $1 million.
C.privately owned companies.
D.companies established after 2002.
Sand Canyon Enterprises is analyzing its sales mix to find out if it is maximizing its
profits. The company produces three similar items: X, Y, and Z. All three of these
products are made with the same equipment, but the machine hours available to make
these products are limited. Product line statistics are as follows:
Determine whether the existing sales mix is the most profitable one possible. If your
answer is no, offer your suggestion to improve the sales mix. Round answers to two
decimal places.
The following lettered items represent a classification scheme for a multistep income
statement. In the blank next to each account, write the letter indicating to which
category it belongs.
If the purchase of machinery is treated incorrectly as a revenue expenditure, what will
be the effect on net income and total assets in the year of purchase and in the following
year, and why?
How do managers measure an activity’s performance?
What is goodwill and when may it be recorded?