Equipment was acquired for $210,000 and has accumulated depreciation of$93,000.
The business exchanges this equipment for new equipment. The new equipment has a
market value of $304,000 and the business pays $52,000 cash. Assume the exchange
has commercial substance. The exchange results in ________.
A) loss $135,000
B) gain $187,000
C) gain $135,000
D) loss $187,000
A company received $5,000 for 100 one-year subscriptions on July 1. The journal entry
to record this cash receipt would include a ________. The company uses a liability
account for revenue received in advance.
A) credit to Accounts Payable for $5,000
B) debit to Prepaid Expenses for $5,000
C) credit to Unearned Revenue for $5,000
D) debit to Note Payable for $5,000
Which of the following is provided in a typical chart of accounts?
A) Account balance
B) Account number
C) Dates of transactions
D) Transaction amounts
Which of the following accounts is credited by the seller when tax is collected on retail
sales?
A) Accounts Payable
B) Payroll Tax
C) Sales Tax Payable
D) Unearned Revenue
Which of the following should be considered when analyzing manufacturing overhead
variances?
A) whether costs incurred are product costs or period costs
B) whether direct materials costs are higher than standard costs
C) whether certain manufacturing overhead costs are controllable
D) whether direct labor costs can be reduced
On June 1, 2017, Zander Services issued $39,000 of 15% bonds that mature in five
years for $64,000. The bonds pay semiannual interest payments on June 30 and
December 31 of each year. On December 31, 2017, what is the total amount paid to
bondholders?
A) $2,925
B) $5,850
C) $4,800
D) $9,600
Meson Productions is a price-taker. Meson produces large spools of electrical wire in a
highly competitive market; thus, the company uses target pricing. The current market
price of the electric wire is $770 per unit. The company has $3,100,000 in average
assets, and the desired profit is a return of 4% on assets. Assume all products produced
are sold. The company provides the following information:
If variable costs cannot be reduced, how much reduction in fixed costs will be needed to
achieve the profit target?
A) $4,224,000
B) $14,000,000
C) $4,100,000
D) $14,124,000
Which of the following is a true statement?
A) Stockholders are guaranteed annual dividends.
B) Stockholders receive their proportionate share of any assets remaining after the
corporation pays its debts and liquidates.
C) Stockholders may authorize a business contract on behalf of the corporation.
D) Stockholders may determine the issue price of common stock.
Which of the following is true of the general journal?
A) All transactions recorded in one of the special journals also are recorded in the
general journal.
B) Manual accounting information systems do not need the general journal.
C) The adjusting entries and the closing entries are recorded in the general journal.
D) Non-routine transactions are generally not recorded in the general journal.
If goods are sold on terms FOB shipping point, the ________.
A) seller normally pays the transportation costs
B) buyer normally pays the transportation costs
C) buyer and the seller split the transportation costs
D) shipping company bears the transportation cost
A lower days’ sales in inventory for Moonshine, Inc., when compared to other
companies, indicates that it is ________.
A) selling its inventory more quickly
B) spending more on inventory storage
C) incurring higher insurance costs
D) holding excess obsolete inventory
Alpine Productions uses a standard cost system for recording transactions. Alpine
reported the following data for the year ended December 31:
Sales revenues: $800,000
Cost of goods sold (standard costing): $382,000
Selling & admin expenses: $105,000
Variances:
What is the standard net operating income?
A) $312,665
B) $316,765
C) $421,765
D) $313,000
Camile Plastics Company had the following total assets, liabilities, and equity as of
December 31.
What is the company’s debt ratio as of December 31? (Round your percentage answer to
two decimal places.)
A) 30.70%
B) 69.30%
C) 100.00%
D) 44.30%
The Merchandise Inventory account of a company shows a balance of $70,000 but a
physical count of inventory shows $67,000 Which of the following entries is required to
record the shrinkage? (Assume a perpetual inventory system.)
A)
B)
C)
D)
The Gain on Disposal from trading securities is a(n) ________.
A) current asset account
B) fixed asset account
C) liability account
D) equity account
A(n) ________ represents stock ownership in another company and sometimes pays
dividends.
A) debt security
B) forward contracts
C) futures contract
D) equity security
A company’s accountant capitalized a payment that should have been recorded as a
revenue expenditure. How will this error affect the company’s financial statements?
A) Net income will be understated.
B) Expenses will be overstated.
C) Assets will be overstated.
D) Liabilities will be overstated.
Murphy Corporation had originally purchased land for $38,000. It later sold it for
$38,000 in cash. Which of the following is true of the effect of the sale of land on the
accounting equation?
A) assets increase and liabilities decrease by $38,000
B) assets and equity increase by $76,000
C) assets increase by $38,000; equity increases by $38,000
D) the amount of total assets remains the same
A business purchases $500 of office supplies on account. Which of the following
accounts is debited?
A) Cash
B) Accounts Payable
C) Office Supplies
D) Utilities Expense
An internal document that helps summarize data for the preparation of financial
statements is called a ________.
A) journal
B) ledger
C) worksheet
D) chart of accounts
An activity-based costing system is developed in four steps:
a. Compute the predetermined overhead allocation rate for each activity.
b. Identify activities and estimate their total costs.
c. Identify the cost driver for each activity and then estimate the quantity of each
driver’s allocation base.
d. Allocate the indirect costs to the cost object.
Which of the following is the correct order for performing these steps?
A) a, b, c, d
B) c, a, b, d
C) b, c, a, d
D) b, a, c, d
If a business is considering the option of processing its product further, it ignores the
________.
A) additional costs necessary to process further
B) additional revenue that can be earned if processed further
C) cost that is required to produce the basic product before processing further
D) fact that additional processing will produce any environmental toxins
At the beginning of the year, Springfield Manufacturing had the following account
balances:
Work-in-Process Inventory
Finished Goods Inventory
Manufacturing Overhead
Cost of Goods Sold
Sales Revenue
The following additional details are provided for the year:
After recording all these transactions and adjusting for the over/underallocated overhead,
the ending balance in the Cost of Goods Sold account is a ________.
A) debit of $437,300
B) debit of $447,300
C) credit of $447,300
D) debit of $442,300
Magnolia, Inc. has budgeted sales for the first quarter of the next year to be 45,000
units. The inventory on hand at the beginning of quarter is 5,000 units. The desired
ending inventory is 3,000 units. Calculate the budgeted production for the first quarter.
A) 3,000 units
B) 43,000 units
C) 40,000 units
D) 48,000 units
Which of the following would most likely be evaluated using residual income?
A) cost center
B) profit center
C) revenue center
D) investment center
Avatar Auto Parts Company uses the indirect method to prepare the statement of cash
flows. Refer to the following section of the comparative balance sheet:
Avatar Company
Comparative Balance Sheet
December 31, 2017 and 2016
How will the change in Accounts Payable be shown on the statement of cash flows?
A) as an addition to Net Income
B) as a deduction from Net Income
C) as a deduction from investing cash flows
D) as an addition to operating cash flows
Alexander Consumer Products has a small car division that operates as a profit center.
Below is a partially completed responsibility report for the first quarter.
Responsibility Report
Compute the percentage variance for the flexible budget variance for traceable fixed
expenses. (Round your answer to two decimal places.)
A) 0.82% F
B) 0.82% U
C) 1.04% U
D) 1.04% F
Which of the following statements is true of the debt to equity ratio?
A) The higher the debt to equity ratio, the lower the company’s financial risk.
B) The higher the debt to equity ratio, the greater the company’s financial risk.
C) If the debt to equity ratio is greater than 1, the company is financing more assets
with equity than with debt.
D) If the debt to equity ratio is less than 1, the company is financing more assets with
debt than with equity.
Software Hub is deciding whether to purchase new accounting software. The cost of the
software package is $59,000, and its expected life is ten years. The payback for this
investment is four years. Assuming equal yearly cash flows, what are the expected
annual net cash savings from the new software? (Assume the investment has no residual
value.)
A) $5,900
B) $44,250
C) $14,750
D) $236,000
In preparing a statement of cash flows using the indirect method, the Depreciation
Expense ________.
A) is added back as an adjustment to Net Income in the operating activities section
B) is shown as a negative cash flow in the investing activities section
C) is added back to Purchases of Plant Assets under investing activities
D) is shown as a negative cash flow under operating activities
Poolside Manufacturing provided the following information for the month ended March
31:
Compute cost of goods sold.
A) $16,600
B) $11,100
C) $22,100
D) $28,100
Ten years ago a corporation purchased a building for $160,000. At that time, the
corporation felt that the business was worth $185,000. The current market value of the
business is $460,000. The building has been assessed at $435,000 for property tax
purposes. At which amount should the corporation record the building in its accounting
records?
A) $160,000
B) $185,000
C) $435,000
D) $460,000