Intangible assets differ from property, plant and equipment assets in that they lack
physical substance.
Answer:
An account has three parts to it; a title, an increase side, and a decrease side.
Answer:
Federal unemployment compensation taxes that are collected by the federal government
are not paid directly to the unemployed but are allocated among the states for use in
state programs.
Answer:
A decrease in the ratio of liabilities stockholders’ equity indicates an improvement in the
margin of safety for creditors.
Answer:
In determining the cash flows from operating activities for the statement of cash flows
by the indirect method, the depreciation expense for the period is added to the net
income for the period.
Answer:
A company depreciates its equipment $500 a year. The adjusting entry for December 31
is debit Depreciation Expense, $500 and credit Equipment, $500.
Answer:
The process by which management plans, evaluates, and controls long-term investment
decisions involving fixed assets is called capital investment analysis.
Answer:
The number of shares of outstanding stock is equal to the number of shares authorized
minus the number of shares issued.
Answer:
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.
Answer:
When an account receivable is collected in cash, the total assets of the business
increase.
Answer:
When budget goals are set too tight, the budget becomes less effective as a tool for
planning and controlling operations.
Answer:
Liabilities that will be due within one year or less and that are to be paid out of current
assets are called current liabilities.
Answer:
Proper reporting of revenues and expenses in a period is due to the accounting period
concept.
Answer:
Cost behavior refers to the methods used to estimate costs for use in managerial
decision making.
Answer:
If the buyer bears the freight costs related to a purchase, the terms are said to be FOB
destination.
Answer:
Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential revenue of producing Product P is $22 per pound.
Answer:
When a clerk enters a sale and the customer can see the amount displayed and is given a
cash receipt, this is an example of a preventive control.
Answer:
A company is planning to purchase a machine that will cost $24,000, have a six-year
life, and have no salvage value. The company expects to sell the machine’s output of
3,000 units evenly throughout each year. Total income over the life of the machine is
estimated to be $12,000. The machine will generate cash flows per year of $6,000. The
accounting rate of return for the machine is 50%.
Answer:
Once equivalent units are calculated for materials, this number will also be used for
direct labor and factory overhead.
Answer:
After the sales budget is prepared, the capital expenditures budget is normally prepared
next.
Answer:
Expenditures from a petty cash fund are documented by a petty cash receipt.
Answer:
The costs of initially producing an intermediate product should be considered in
deciding whether to further process a product, even though the costs will not change,
regardless of the decision.
Answer:
The primary accounting tool for controlling and reporting for cost centers is a budget.
Answer:
The par value of stock is an arbitrary per share amount defined in many states as legal
capital.
Answer:
The accounting equation can be expressed as Assets – Liabilities = Owner’s Equity.
Answer:
In a perpetual inventory system, merchandise returned to vendors reduces the
merchandise inventory account.
Answer:
Budgets are prepared in the Accounting Department and monitored by various
department managers.
Answer:
A process cost accounting system records all actual factory overhead costs directly in
the Work in Process account.
Answer:
The right hand side of a T account is known as a debit and the left hand side is known
as a credit.
Answer:
The present value of $5,000 to be received in 4 years at a market rate of interest of 6%
compounded annually is $3,636.30.
Answer:
Because many companies use computerized accounting systems, periodic inventory is
widely used.
Answer:
A devotes full time and B devotes one-half time to their partnership. If the partnership
agreement is silent concerning the division of net income, A will receive a $20,000
share of a net income of $30,000.
Answer:
A sporting goods store purchased $7,000 of ski boots in October. The store had $3,000
of ski boots in inventory at the beginning of October, and expects to have $2,000 of ski
boots in inventory at the end of October to cover part of anticipated November sales.
What is the budgeted cost of goods sold for October?
A.$10,000
B.$5,700
C.$8,000
D.$9,500
Answer:
All of the following statements regarding vertical analysis are true except:
A.Vertical analysis may be prepared for several periods to analyze changes in
relationships over time.
B.In a vertical analysis of a balance sheet, each asset item is stated as a percent of total
assets.
C.In a vertical analysis of an income statement, each item is stated as a percent of total
expenses.
D.Major differences between a company’s vertical analysis and industry averages
should be investigated.
Answer:
Dove Corporation began its operations on September 1 of the current year. Budgeted
sales for the first three months of business are $250,000, $320,000, and $410,000,
respectively, for September, October, and November. The company expects to sell 25%
of its merchandise for cash. Of sales on account, 70% are expected to be collected in
the month of the sale, 30% in the month following the sale.
The cash collections in October are:
A.$320,000
B.$248,000
C.$304,250
D.$382,500
Answer:
Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the
assets for cash, dividing losses on realization, and paying liabilities, the balances in the
capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona,
$30,000 Cr. How much cash is available for distribution to the partners?
A.$120,000
B.$30,000
C.$40,000
D.$90,000
Answer:
Which of the following is not an asset?
A.Investments
B.Cash
C.Inventory
D.Owner’s Equity
Answer:
The chart of account for the Corning Company includes some of the following
accounts:
On the journal page 3, the following transaction was found:
What is the post reference that will be found on the Prepaid Insurance account?
A.11
B.15
C.3
D.None
Answer:
An employee receives an hourly rate of $27, with time and a half for all hours worked
in excess of 40 during a week. Payroll data for the current week are as follows: hours
worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to
current week, $99,700; social security tax rate, 6.0% on maximum of $100,000; and
Medicare tax rate, 1.5% on all earnings. What is the net amount to be paid to the
employee?
A.$713.75
B.$935.15
C.$764.75
D.$873.77
Answer:
Subsidiary ledgers
A.are used only for Accounts Payable and Accounts Receivable
B.may be used for various ledger accounts
C.may be used for only for the Cash account
D.are never used for more than four accounts
Answer:
The subsidiary ledger that includes customer account activity is called the
A.asset ledger
B.accounts payable ledger
C.expense ledger
D.accounts receivable ledger
Answer:
Below is budgeted production and sales information for Bluebird Company for the
month of December:
The unit selling price for product XXX is $5 and for product ZZZ is $14.
Budgeted production for product ZZZ during the month is:
A.460,000 units
B.475,000 units
C.457,000 units
D.463,000 units
Answer:
Merchandise is sold for cash. The selling price of the merchandise is $5,000 and the
sale is subject to a 7% state sales tax. The journal entry to record the sale would include
A.A credit to Cash for $5,000.
B.A credit to Sales for $5,350.
C.A credit to Sales Tax Payable for $350.
D.None of these answers are correct.
Answer:
Discontinuing a product or segment is a huge decision that must be carefully analyzed.
Which of the following would be a valid reason not to discontinue an operation?
A.The losses are minimal.
B.The variable costs are less than revenues.
C.The variable costs are more than revenues.
D.The allocated fixed costs are more than revenues.
Answer:
On July 1st, Harding Construction purchases a bulldozer for $228,000. The equipment
has a 8 year life with a residual value of $16,000. Harding uses straight-line
depreciation.
(a) Calculate the depreciation expense and provide the journal entry for the first year
ending December 31st.
(b) Calculate the third year’s depreciation expense and provide the journal entry for the
third year ending December 31st.
(c) Calculate the last year’s depreciation expense and provide the journal entry for the
last year.
Annual depreciation is:
Answer:
Listed below are accounts to use for transactions (a) through (j), each identified by a
number. Following this list are the transactions. You are to indicate for each transaction
the accounts that should be debited and credited by placing the account number(s) in
the appropriate box.
Transactions Account(s) Debited Account(s) Credited
a. Utility bill is received; payment will be made in 10 days.
b. Paid the utility bill previously recorded in transaction (a).
c. Bought a three year insurance policy and paid in full.
d. Made an entry to adjust for the expired portion of the insurance premium (for the
policy mentioned in transaction (c).
e. Received $7,000 from a contract to perform accounting services over the next two
years.
f. Made an entry to adjust for half of the services performed in (e).
g. Purchased office supplies, paying part cash and charging the balance on account.
h. Borrowed money from a bank and signed a note payable due in six months.
i. Recorded one-month’s accrued interest on the note payable in (h).
j. Depreciation is recorded on office equipment.
Answer:
Which of the following is an example of direct materials cost for an automobile
manufacturer?
A.Cost of oil lubricants for factory machinery
B.Cost of wages of assembly worker
C.Salary of production supervisor
D.Cost of interior upholstery
Answer:
Cleary Company had total Sales of $550,000; Sales Discounts of $10,000; Sales
Returns of $40,000 and Cost of Merchandise Sold of $200,000 during 2010. The total
asset balance at the beginning of the year was $175,000 and at the end of the year was
$167,000. Calculate the ratio of net sales to total assets (Round answer to 2 decimal
points).
A.1.75
B.2.92
C..34
D..57
Answer:
The following are steps in the accounting cycle. Of the following, which would be
prepared last?
A.An adjusted trial balance is prepared.
B.Transactions are posted to the ledger.
C.An unadjusted trial balance is prepared.
D.Adjusting entries are journalized and posted to the ledger.
Answer:
Under a perpetual inventory system, the amount of each type of merchandise on hand is
available in the
A.customer’s ledger
B.creditor’s ledger
C.inventory ledger
D.purchase ledger
Answer:
The Brass Works is in the process of determining manufacturing overhead. Journalize
events (a) – (d) to Factory Overhead, Miscellaneous Expense, or allocated between the
two as appropriate. All items were paid in cash at the time of acquisition. Next calculate
the overhead application rate and apply overhead to Work-in-Process.
(a) Brass Works purchases an insurance policy for $4,000. It is computed that 80% of
the value of the policy protects production, the balance protects the administrative
offices.
(b) The electric bill is received showing an amount due of $1,200. This meter is utilized
only by production as the office spaces have their own meter.
(c) Payroll reports that the sales manager’s salary for the period is $3,500 and that
production supervisors wages for the period are $5,500.
(d) The stockroom reports that $2,575 in materials were purchased for the production
maintenance department.
(e) If the driver for the application of overhead is drop-forge strokes and there are
expected to be 1,000 strokes in this period, what is the rate per stroke? Do not round
your answer.
(f) Assuming that there are 1,150 drop-forge strokes in this period, apply factory
overhead to Work In Process. Round your answers to nearest dollar.
Round overhead rate to four decimal places and total cost to nearest dollar.
Answer:
Which of the following would be used to compute the federal income taxes to be
withheld from an employee’s earnings?
A.FICA tax rate
B.wage and tax statement
C.FUTA tax rate
D.wage bracket and withholding table
Answer:
Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year
(before adjustment), and bad debt expense is estimated at 4% of net credit sales. If net
credit sales are $800,000, the amount of the adjusting entry to record the estimate of the
uncollectible accounts is
A.$29,500
B.$34,500
C.$32,000
D.cannot be determined
Answer:
The following lots of a particular commodity were available for sale during the year:
The firm uses the periodic system and there are 20 units of the commodity on hand at
the end of the year.
What is the amount of cost of good sold for the year according to the average cost
method?
A.$1,380
B.$1,375
C.$1,510
D.$1,250
Answer:
Office salaries, depreciation of office equipment, and office supplies are examples of
what type of expense?
A.selling expense
B.miscellaneous expense
C.administrative expense
D.other expense
Answer:
Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company
in settlement of an open accounts receivable. What entry will Paper Company make
upon receiving the note?
A.Notes Receivable 6,000
Accounts ReceivableDame Company 6,000
B.Notes Receivable 6,090
Accounts ReceivableDame Company 6,090
C.Notes Receivable 6,090
Accounts ReceivableDame Company 6,000
Interest Revenue 90
D.Notes Receivable 6,000
Interest Revenue 90
Accounts ReceivableDame Company 6,000
Interest Receivable 90
Answer:
Which of the following is not a characteristic of a job order costing system?
A.It accumulates cost for each department within the factory.
B.It provides a separate record for the cost of each quantity of product that passes
through the factory.
C.It is best suited for industries that manufactures custom goods.
D.Uses only one work in process account.
Answer:
The principle of exceptions allows managers to
A.focus on correcting variances between standard costs and actual costs.
B.focus on correcting variances between variable costs and actual costs.
C.focus on correcting variances between competitor’s costs and actual costs.
D.focus on correcting variances between competitor’s costs and standard costs.
Answer:
A company is contemplating investing in a new piece of manufacturing machinery. The
amount to be invested is $100,000. The present value of the future cash flows at the
company’s desired rate of return is $105,000. The IRR on the project is 12%. Which of
the following statements is true?
A.The project should not be accepted because the net present value is negative.
B.The desired rate of return used to calculate the present value of the future cash flows
is less than 12%.
C.The desired rate of return used to calculate the present value of the future cash flows
is more than 12%.
D.The desired rate of return used to calculate the present value of the future cash flows
is equal to 12%.
Answer:
The following accounts appear in an adjusted trial balance of Brock Pool Service
Company. Indicate whether each account would be reported in the (a) current assets, (b)
property, plant, and equipment, (c) current liabilities, (d) long-term liabilities, or (e)
owner’s equity section of the December 31, 2010, balance sheet of Brock Pool Service
Company.
Answer:
The budget that needs to be completed first when preparing the master budget is the:
A.Production Budget
B.Sales Budget
C.Cash Budget
D.Capital Expenditures Budget
Answer:
Which of the following would record the labor costs to an individual job?
A.Clock card
B.In-and-out cards
C.Time tickets
D.Payroll register
Answer:
Solare Company acquired mineral rights for $60,000,000. The diamond deposit is
estimated at 6,000,000 tons. During the current year, 2,300,000 tons were mined and
sold.
a. Determine the depletion rate.
b. Determine the amount of depletion expense for the current year.
c. Journalize the adjusting entry to recognize the depletion expense.
Answer:
Below are two independent sets of transactions for Welcott Company:
(1) Welcott provides its employees with varying amounts of vacation per year,
depending on the length of employment. The estimated amount of the current year’s
vacation pay is $78,000. Journalize the adjusting entry required on January 31, the end
of the first month of 2010, to record the accrued vacation pay.
(2) Welcott maintains a defined contribution pension plan for its employees. The plan
requires quarterly installments to be paid to the funding agent, Northern Trust, by the
fifteenth of the month following the end of each quarter. Assuming that the pension cost
is $119,600 for the quarter ended December 31, journalize entries to record (a) the
accrued pension liability on December 31 and (b) the payment to the funding agent on
January 15.
Answer:
On October 1, Sebastian Company acquired new equipment with a fair market value of
$458,000. Sebastian received a trade-in allowance of $92,000 on the old equipment of a
similar type and paid cash of $366,000. The following information about the old
equipment is obtained from the account in the equipment ledger: Cost, $336,000;
accumulated depreciation on December 31, the end of the preceding fiscal year,
$220,000; annual depreciation, $20,000. Assuming the exchange has commercial
substance, journalize the entries to record: (a) the current depreciation of the old
equipment to the date of trade-in and (b) the exchange transaction on October
Answer:
The production department is proposing the purchase of an automatic insertion
machine. They have identified 3 machines and have asked the accountant to analyze
them to determine the best cash payback.
A.Machine A
B.Machine C
C.Machine B
D.All are equal.
Answer:
The capital accounts of Hogan and Moss have balances of $90,000 and $65,000,
respectively on January 1, 2011, the beginning of the current fiscal year. On April 10,
Hogan invested an additional $8,000. During the year, Hogan and Moss withdrew
$40,000 and $32,000, respectively, and net income for the year was $98,000. The
articles of partnership make no reference to the division of net income.
Answer:
The Creative Division of the Barry Company reported the following results for
December 2012:
Invested Assets $1,200,000
Profit Margin 25%
Return on Investment 30%
Based on this information, what were the sales?
Answer:
The inventory at April 1, 2012, and the costs charged to Work in Process–Department
B during April for Zarley Company are as follows:
During April, all direct materials are transferred from Department A, the units in
process at April 1 were completed, and of the 26,000 units entering the department, all
were completed except 1,000 units which were 70% completed as to conversion costs.
Inventories are costed by the first-in, first-out method.
Prepare a cost of production report for April.
Answer:
The Internet creates opportunities for improving the speed and efficiency of
transactions. Name and describe three key areas besides e-commerce where the Internet
is being used for business purposes.
Answer:
What is the present value of $8,000 to be received at the end of six years, if the required
rate of return is 15%?
Answer:
Match the following stockholders equity concepts to the appropriate answer.
Answer:
Using the following information, prepare the Stockholders’ Equity section of the
balance sheet. Seventy thousand shares of common stock are authorized and 7,000
shares have been reacquired.
Answer:
The end-of-period spreadsheet (work sheet) for the current year for Jamal Company
shows Balance Sheet columns with a debit total of $614,210 and a credit total of
$630,430. This is before the amount for net income or net loss has been included. In
preparing the income statement from work sheet, what is the amount of net income or
net loss?
Answer:
Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect
a company’s total assets, liabilities, and stockholders’ equity.
Answer:
Sales reported on the income statement were $690,000. The accounts receivable
balance declined $39,000 over the year. Determine the amount of cash received from
customers.
Answer:
Emerson and Dakota formed a partnership dividing income as follows:
1) Annual salary allowance to Emerson of $48,000
2) Interest of 8% on each partner’s capital balance on January 1
3) Any remaining net income divided equally.
Emerson and Dakota had $25,000 and $140,000 respectively in their January 1 capital
balances. Net income for the year was $220,000.
How much net income should be distributed to Emerson?
Answer:
On the basis of the following information taken from the Adjusted Trial Balance
columns of the work sheet for the month ended September 30th, journalize the closing
entries for Perez Roofing Company.
Answer:
Prepare a flexible budget for Cedar Jeans Company using production levels of 16,000,
18,000, and 20,000 units produced. The following is additional information necessary
to complete the budget:
Variable costs:
Fixed costs:
Answer:
For each of the following fixed assets, determine the depreciation expense and the book
value for the dates requested:
Disposal date is N/A if asset is still in use.
Method: SL = Straight Line; DDB = Double Declining Balance
Assume the estimated life was 5 years for each asset.
Answer:
Income statement information for Sharif Corporation is provided below:
Answer:
Why would you or why wouldn’t you compare an organization like Ford Motor
Company to the local car dealer “Johnson City Ford/Lincoln/Mercury” in vertical and
horizontal analysis?
Answer:
Trail Bikes, Inc. sells three Deluxe bikes for every seven Standard bikes. The Deluxe
bike sells for $1,800 and has variable costs of $1,200. The Standard bike sells for $600
and has variable costs of $200.
A. If Trail Bikes has fixed costs that total $1,702,000, how many bikes must be sold in
order for the company to break even?
B. How many of these bikes will be Deluxe bikes and how many will be the Standard
bikes?
Answer:
Assume that three identical units of merchandise are purchased during October, as
follows:
Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold,
Gross Profit, and Ending Inventory under the Average Cost method.
Answer: