Freight paid on goods shipped to customers is classified as a selling expense.
Terms of ‘2/10, n/30’ are an example of a sales discount.
The value chain is the sequence of business activities in which usefulness is added to
the products or the services within an organization.
Neville Co. issued 20-year term bonds at a discount in 20×5. Interest is payable
semiannually. Which of the following statements isTRUE, assuming that the effective
interest method of amortization is used for the bond discount?
A.Interest expense decreases each six-month interest period.
B.Interest expense as a percentage of the bond’s book value changes from period to
period.
C.Interest expense increases each six-month interest period.
D.Interest expense remains constant in amount for each interest period.
A debit to Accumulated Depreciation will increase the carrying value of an asset.
The income statement indicates a business’s success or failure in earning an income
from its operating activities, but it does not reflect the inflow and outflow of cash from
operating activities.
The cost-adjusted-to-market method of accounting for investments allows for a
departure from cost when the market value of the investment falls below or rises above
cost.
A dividend that represents a return to the stockholders of a part of their paid-in capital
rather than a distribution out of retained earnings is called a liquidating dividend.
The accounting rate-of-return method is difficult to comprehend and apply.
When bonds are sold between the interest payment dates, the issuing corporation pays
to investors the interest that has accrued since the last interest payment date.
A company with a profit margin of 6 percent earns sixty cents profit for every dollar of
net sales.
The amount of a depreciable asset’s annual depreciation expense can typically be
obtained by referring to the balance sheet.
Less than 20 percent of the U.S. economy is generated by governmental and
not-for-profit organizations.
Unsecured bonds are also known as debentures.
Which of the following is a performance measure?
A.Quality of raw materials used in production
B.Number of orders shipped in a day
C.Level of customer satisfaction
D.All of these choices
An asset was purchased for $100,000. It had an estimated residual value of $20,000 and
an estimated useful life of ten years. After four years of use, the estimated residual
value is revised to $14,000. Assuming straight-line depreciation, depreciation expense
in year 5 of use would be
A.$7,667.
B.$8,572.
C.$9,000.
D.$14,334.
One might infer from a debit balance in Allowance for Uncollectible Accounts that
A.a posting error has been made.
B.Uncollectible Accounts Expense has been overestimated.
C.the accounts receivable aging method apparently is being used.
D.more has been written off than had been estimated.
The advantages of financial leverage accrue primarily to
A.management.
B.stockholders.
C.the government.
D.creditors.
To find the most comprehensive information about a company’s performance during the
year, one would look to
A.interim financial statements.
B.the annual report sent to the SEC.
C.The Wall Street Journal.
D.the annual report sent to stockholders.
Which of the following statements about controlling accounts and subsidiary ledgers is
incorrect?
A.A subsidiary ledger is a ledger separate from the general ledger.
B.A controlling account is an account in the subsidiary ledger.
C.A controlling account maintains the total of the individual account balances in a
subsidiary ledger.
D.A subsidiary ledger contains a group of related accounts, such as a list of customers.
When a business erroneously records expenses as assets, it has violated the
measurement issue of
A.communication.
B.classification.
C.valuation.
D.realization.
Which of the following activities is not a component of the operating cycle?
A.Payment of employees’ wages
B.Sale of merchandise
C.Purchase of merchandise
D.Collection of cash from merchandise sales
Plum Corporation issues $400,000 of 7 percent, five-year bonds on January 1, 20×5,
and sells them on the same date for their face value. The bond indenture states that
interest is to be paid on January 1 and July 1 of each year. The entry to record the first
interest payment includes
A.a credit to Cash for $28,000.
B.a debit to Interest Expense for $14,000.
C.a debit to Unamortized Discount on Bonds Payable for $14,000.
D.All of these choices.
Robert Inc. uses the standard costing method. The company’s main product is a
fine-quality headphones that normally takes 0.5 hour to produce. Normal annual
capacity is 5,000 direct labor hours, and budgeted fixed overhead costs for the year
were $8,750. During the year, the company produced and sold 5,800 units. Actual fixed
overhead costs were $6,000.
Using the information provided for Robert Inc, compute the fixed overhead cost
variance.
A.$2,750 (F)
B.$925 (U)
C.$3,675 (U)
D.$5,800 (U)
Income from operations is arrived at after considering all except
A.administrative salaries.
B.interest income.
C.the cost of sales.
D.sales returns and allowances.
A company purchases land and a building on the land. The land is appraised at $96,000
and the building at $384,000. If the Land account is debited for $124,800, then the total
purchase price for the land and building must have been
A.$480,000.
B.$500,000.
C.$508,800.
D.$624,000.
On January 2, 20×5, Barham Corporation issued ten-year bonds payable with a face
value of $400,000 and a face interest rate of 9 percent. The bonds were issued to yield a
market interest rate of 10 percent. Interest is payable semiannually on January 2 and
July 1. In calculating the present value of the bond issue on January 2, 20×5,
A.the 9 percent rate will be used to calculate the present value of the face amount and
the present value of the periodic interest payments.
B.a 5 percent rate will be used to calculate the present value of the face amount and the
present value of the periodic interest payments.
C.the 10 percent rate will be used to calculate the present value of the face amount and
the present value of the periodic interest payments.
D.the 10 percent rate will be used to calculate the present value of the face amount and
a 5 percent rate will be used to calculate the present value of the periodic interest
payments.
Blackwell Corporation uses a process costing system and has just completed production
for the month of December 2014. The following production data were obtained from
the accounting records:
a. Units in beginning inventory totaled 9,000 and were 80 percent complete as of
December 1 (all direct materials were added to these products in the preceding month).
b. During the period, 216,000 units were started.
c. 17,400 units were partially completed as of December 31, 2014.
d. Ending work in process inventory was 100 percent complete with respect to direct
materials and 70 percent complete with respect to conversion costs at month end.
Using the information provided, compute the equivalent units of production for direct
materials and conversion costs for the month ended December 31, 2014, assuming a
FIFO costing flow.
Using the following amounts taken from the balance sheet and income statement of a
business, compute the measures listed below. After each answer, write ‘L’ if it is a
measure of liquidity or ‘P’ if it is a measure of profitability. Round to two decimal
places.
a. Return on assets
b. Working capital
c. Return on equity
d. Current ratio
Greco Co. issued ten-year term bonds on January 1, 20×5, with a face value of
$1,600,000. The face interest rate is 6 percent and interest is payable semi-annually on
June 30 and December 31. The bonds were issued for $1,381,920 to yield an effective
annual rate of 8 percent. The effective interest method of amortization is to be used.
How much bond interest expense (rounded to the nearest dollar) should be reported on
the income statement for the year ended December 31, 20×5?
A.$96,000
B.$110,844
C.$110,262
D.$110,552
Standard costs for company products are typically used for all except
A.variance analysis and cost control.
B.computing production costs in operating budgets.
C.determining the actual cost of direct materials and direct labor used in production.
D.comparing the production costs for performance measurement purposes.
Rose Corporation provides you the following budgeted cost information for July, 2014.
The company has a normal capacity of producing 9,000 units. However, in July, the
company produced 9,500 units by incurring the following costs.
Prepare a performance report for July, 2014, to compare the data from Rose’s flexible
budget with the actual costs incurred. Also find if costs are under or over budgeted.
Each of the following statements is justified by a concept or convention of accounting.
Write the letter in the blank next to each statement corresponding to the concept or
convention involved.
_____ 1> This convention best enhances comparability of financial statements between
years.
_____ 2> A merger agreed on just after the balance sheet date nevertheless is reported
in the notes to the financial statements.
_____ 3>A company forgoes hiring another full-time accountant, which would add only
slightly to the financial statements’ accuracy.
_____ 4>A company uses lower-of-cost-or-market to value inventory.
_____ 5>A large company rounds its financial statement figures to the nearest $10,000.
Briefly distinguish between adjusting and closing entries.
Information from the Income Statement columns of the work sheet of Landry Laundry
Service is provided below:
The entry to close Income Summary is
Indicate in the spaces below whether each of the following entries appears to be an
adjusting entry (AE), a closing entry (CE), or a reversing entry (RE).
For each of the following economic events determine whether the event is a business
transaction on the date it occurs and whether it’s recognized in the accounts on that date.
Support your answer.
a On July 15, the controller of Kona Corporation orders a custom display case for the
company’s store.
b. On July 31, a new administrative assistant is hired at a monthly salary of $3,500.
c. On July 31, the controller of Kona Corporation receives a bill for electricity for the
month of July. The bill is due on August 18 and will be paid on that date.