A stock split normally increases total stockholders’ equity.
One way of stating the accounting equation is: Assets – Liabilities = Owner’s Equity.
The two primary types of cost behavior are fixed and variable.
Net income results when expenses exceed revenues.
Both the allowance method and the direct charge-off method are acceptable for tax
purposes.
The amount recorded for Payroll Taxes and Benefits Expense is borne entirely by the
employee.
The lower-of-cost-or-market rule implies that it is a violation of the conservatism
concept to carry inventory at a cost that is in excess of its market value.
Liabilities are established with credits and eliminated with debits.
The sales mix is the proportion of each product’s unit sales relative to the company’s
total unit sales.
The single-step and multistep income statements result in different net income amounts.
When the trade-in allowance exceeds the carrying value of an asset exchanged, a gain is
realized.
The value chain is also called the supply chain.
Taking a physical inventory is not necessary under a perpetual inventory system.
Purchasing receivables with recourse is riskier than purchasing them without recourse.
In the journal provided, prepare year-end adjustments for the following situations. Omit
explanations.
a. Accrued interest on notes receivable is $105.
b. Of the $12,000 received in advance of earning a service, two-thirds was still
unearned by year end.
c. Two years’ rent, totaling $36,000, was paid in advance at the beginning of the year.
d. Services totaling $5,300 had been performed, but not yet billed.
e. Depreciation on trucks totaled $3,400 for the year.
f. Supplies available for use totaled $690. However, by year end, only $140 in supplies
remained.
g. Payroll for the five-day work week, to be paid on Friday, is $30,000. Year end falls
on a Monday.
Special-purpose journals
A.can be an important part of establishing good internal control.
B.require posting each debit and each credit for each transaction.
C.can be used to record over 99% of most business transactions.
D.include the sales journal and the adjusting entries journal.
In terms of cost behavior, telephone expenses are often classified as
A.sunk costs.
B.variable costs.
C.fixed costs.
D.mixed costs.
If the actual amount of direct materials used equals the standard amount of direct
materials that should have been used, the difference between the standard cost and
actual cost of direct materials is called the
A.price variance.
B.rate variance.
C.quantity variance.
D.efficiency variance.
Use the following information to calculate the liquidity and profitability ratios listed
below. Round to two decimal places.
a. Current ratio
b. Working capital
c. Return on equity
d. Profit margin
e. Debt to equity ratio
f. Return on assets
g. Asset turnover
The price/earnings (P/E) ratio is measured in terms of
A.dollars.
B.a percentage.
C.times.
D.days.
Assume the indirect method is used to compute net cash flows from operating activities.
For this item extracted from the financial statements’”Depletion Expense’”indicate the
effect on net income in arriving at net cash flows from operating activities by choosing
one of the following:
A.Add to net income to arrive at net cash flows from operating activities.
B.Subtract from net income to arrive at net cash flows from operating activities.
C.Not used to adjust net income to calculate net cash flows from operating activities.
Inventory costing methods place primary reliance on assumptions about the flow of
A.costs.
B.goods.
C.resale prices.
D.values.
In a small business, because it is often cost-prohibitive to hire extra employees, the lack
of certain separations of duties can best be overcome by
A.bonding the employees.
B.getting the owner actively involved.
C.hiring only honest employees.
D.holding one person responsible for a given set of transactions.
Use this information to answer the following question.
You have the opportunity to purchase a machine for $10,000. After careful study of
expected costs and revenues, you estimate that the machine will produce a net cash flow
of $3,200 annually and will last 5 years. Based on an interest rate of 7 percent,
determine the present value of the machine and if the machine should be purchased.
A.$13,120, the machine should not be purchased
B.$13,120, the machine should be purchased
C.$2,282, the machine should not be purchased
D.$7,130, the machine should not be purchased
Which of the following is most likely done by managers, when actual costs of a product
exceed expected costs?
A.Increase the selling price of the product
B.Adjust planning and decision-making strategies
C.Increase the sales of the product
D.Change the product costing system used
Avoidable costs are important for
A.sales mix decisions.
B.pricing decisions for special orders.
C.sell or process-further decisions.
D.decisions to eliminate unprofitable segments.
On June 1, 20×5, Jomax Corporation had 60,000 shares of $10 par value common stock
outstanding. On June 2, 20×5, Jomax declared a 40 percent stock dividend to be
distributed on July 5, 20×5, to shareholders of record on June 15, 20×5. What amount of
retained earnings should be transferred to contributed capital because of this dividend?
A.None
B.Par value per share multiplied by the number of dividend shares
C.Market value of the stock at the date of distribution multiplied by the number of
dividend shares
D.Market value of the stock at the date of declaration multiplied by the number of
dividend shares
A retailer accepted Visa charge sales totaling $1,000 and deposited the charge slips in
the bank. Assuming a credit card discount expense of 4 percent, what would be the
increase to Cash and the increase to Sales, respectively?
A.$1,000 and $960
B.$960 and $1,000
C.$960 and $960
D.$1,000 and $1,000
If average accounts receivable is $35,000 and net sales total $100,000, what is the
receivables turnover?
A.0.3 times
B.0.4 times
C.2.9 times
D.126 times
Which of the following accounts is increased with a credit?
A.Office Supplies
B.Unearned Revenue
C.Land
D.Prepaid Insurance
Cristy Lake Inc. sold goods worth $144,000 in 2014. It sells each unit for $5.50 and has
a 30 percent contribution margin. The company’s fixed costs amount to $33,000.
Calculate Cristy’s breakeven point in units.
A.43,200 units
B.9,900 units
C.26,182 units
D.20,000 units
Receiving cash from a customer for settlement of an Accounts Receivable will
A.decrease Owner’s Equity.
B.increase net income.
C.increase total assets.
D.not affect total assets.
What is the adjusting entry for that portion of revenue received in advance which has
now been earned?
A.Unearned Revenue ‘“ Debit; Cash ‘“ Credit
B.Unearned Revenue ‘“ Debit; Service Revenue ‘“ Credit
C.Service Revenue ‘“ Debit; Unearned Revenue ‘“ Credit
D.Cash ‘“ Debit; Unearned Revenue ‘“ Credit
What criteria must be met for accepting any capital expenditure proposal with respect to
minimum rate of return on investment?
Discuss the difference between business events that are transactions and those that are
not. Why is the distinction important?
At December 31, 20×5, the book value per share of common stock of Camino
Corporation amounted to $21 per share. Determine the effect of each of the following
items on the book value per share of common stock computation assuming each item
occurs after December 31, 20×5. Consider each item independently of the other items
listed. Indicate your answer for each (I = increase, D = decrease, or NE = no effect) in
the appropriate blank.
_____ 1> Sale of newly issued shares of common stock at $23 per share
_____ 2> Purchase of treasury stock for $16 per share
_____ 3> Declaration of current cash dividends on preferred stock
_____ 4> Declaration and distribution of stock dividends on common stock
_____ 5> Sale of treasury stock (purchased at $16 per share) for $19 per share
_____ 6> Entry to close net income for the period to the Retained Earnings account
_____ 7> Dividends in arrears on preferred stock
_____ 8> Purchase of a truck with cash
_____ 9> Payment of a previously declared and recorded cash dividend on common
stock
Explain why the cost of employing someone is more than just the wage or salary paid to
the employee.
What is horizontal analysis, and why is it useful in performing financial performance
measurement?
Jack Stephan, a house painter, has entered into a $2,400 contract to do a paint job that
will begin in 20×5 and end in 20×6. Assuming a calendar-year accounting period,
prepare Jack’s entries in the following journal, using the dates and explanations
provided.
Given the following information, prepare in good form the cost of goods sold section of
an income statement for 20×5.
Use the following information to answer the question below.
When Langston Corporation was formed on January 1, 20×5, the corporate charter
provided for 50,000 shares of $20 par value common stock. The following transactions
were among those engaged in by the corporation during its first month of operation:
1. The corporation issued 200 shares of stock to its lawyer in full payment of the $5,000
bill for assisting the company in drawing up its articles of incorporation and filing the
proper papers with the state agency.
2. The company issued 8,000 shares of stock at a price of $25 per share.
3. The company issued 8,000 shares of stock in exchange for equipment that had a fair
market value of $160,000.
The entry to record transaction 3 is:
Grannis Corporation purchased land adjacent to its plant to improve access for trucks
making deliveries. Expenditures incurred by the company were as follows: purchase
price, $40,000; broker’s fees, $7,000; title search and other fees, $6,000; demolition of
an old building on the property, $3,700; grading, $1,200; digging foundation for the
road, $3,000; laying and paving driveway, $25,000; lighting, $7,500; signs, $1,500. List
the items and the amounts that should be included in the cost of the land and recorded
in the Land account.