A company borrowed $300,000 cash from the bank by signing a five-year, 8%
installment note. The present value factor for an annuity at 8% for five years is 3.9927.
Each annuity payment equals $75,137. How much cash did the company receive from
the bank on the day they borrowed this money?
A. $75,137
B. $94,013
C. $300,000
D. $375,685
E. $1,197,810
Answer:
The adjusted trial balance of E. Pace, Consultant, is entered on the partial work sheet
below. Complete the worksheet using the following information:
a. Salaries earned by employees that are Unpaid and unrecorded, $500.
b. An inventory of supplies showed $800 of Unused supplies still on hand.
c. Depreciation on equipment, $1,300.
Answer:
A discount on bonds payable:
A. Occurs when a company issues bonds with a contract rate less than the market rate.
B. Occurs when a company issues bonds with a contract rate more than the market rate.
C. Increases the Bond Payable account.
D. Decreases the total bond interest expense.
E. Is not allowed in many states to protect creditors.
Answer:
An analysis that explains any differences between the checking account balance
according to the depositor’s records and the balance reported on the bank statement is a
(n):
A. Internal audit.
B. Bank reconciliation.
C. Bank audit.
D. Trial reconciliation.
E. Analysis of debits and credits.
Answer:
Micron owns 35% of Martok. Martok pays a total of $47,000 in cash dividends for the
period. Micron’s entry to record the dividend transaction would include a:
A. Credit to Long-Term Investments for $16,450.
B. Debit to Long-Term Investments for $16,450.
C. Debit to Cash for $47,000.
D. Credit to Cash for $16,450.
E. Credit to Investment Revenue for $47,000.
Answer:
Classify each of the following items as a current liability, long-term liability, or not a
liability:
A) Current liability
B) Current liability
C) Current liability
D) Not a liability
E) Current liability
F) Current liability
G) Current liability
H) Long-term liability
I) Not a liability
J) Current liability
Answer:
The statement of retained earnings:
A. Reports how retained earnings changes at a point in time.
B. Reports how retained earnings changes over a period of time.
C. Reports on cash flows for operating, financing and investing activities over a period
of time.
D. Reports on cash flows for operating, financing and investing activities at a point in
time
E. Reports on amounts for assets, liabilities and equity at a point in time.
Answer:
The current period’s ending inventory is:
A. The next period’s beginning inventory.
B. The current period’s cost of goods sold.
C. The prior period’s beginning inventory.
D. The current period’s net purchases.
E. The current period’s beginning inventory.
Answer:
External users of financial information:
A. Are those individuals involved in managing and operating the company.
B. Include internal auditors and consultants.
C. Are not directly involved in operating the company.
D. Make strategic decisions for a company.
E. Make operating decisions for a company.
Answer:
The statement of cash flows is:
A. The only financial statement that reports the cash balance of a company.
B. A financial statement that presents information about changes in equity during a
period.
C. A financial statement that reports the cash inflows and outflows for an accounting
period and that classifies those cash flows as operating activities, investing activities, or
financing activities.
D. A financial statement that lists the types and amounts of assets, liabilities, and equity
of a business on a specific date.
E. A financial statement that lists the types and amounts of the revenues and expenses
of a business for an accounting period.
Answer:
A credit is used to record:
A. An increase in an expense account.
B. An increase in an asset account.
C. An increase in an unearned revenue account.
D. A decrease in a revenue account.
E. A decrease to retained earnings.
Answer:
When a partnership is liquidated, which of the following is not true?
A. Noncash assets are converted to cash.
B. Any gain or loss on liquidation is allocated to the partners’ capital accounts using the
income and loss sharing ratio.
C. Liabilities are paid or settled.
D. Any remaining cash is distributed to the partners based on their capital balances.
E. Any remaining cash is distributed to partners in accordance with the income- and
loss-sharing ratio.
Answer:
When analyzing the changes on a spreadsheet used to prepare a statement of cash
flows, the cash flows from operating activities generally affect:
A. Net income, current assets, and current liabilities.
B. Noncurrent assets.
C. Noncurrent liability and the equity accounts.
D. Both noncurrent assets and noncurrent liabilities.
E. Equity accounts only.
Answer:
The Terrapin Manufacturing Company has the following job cost sheets on file. They
represent jobs that have been worked on during June of the current year. This table
summarizes information provided on each sheet:
a. What is the cost of the goods in process inventory on June 30?
b. What is the cost of the finished goods inventory on June 30?
c. What is the cost of goods sold for the month of June?
Answer:
Mission Company has three employees:
What are Mission Companys total August payroll taxes for Cain?
A. $ 1,705.95
B. $1,973.70
C. $2,241.45
D. $267.75
E. $484.75
Answer:
Match each of the following terms (a) through (j) with the appropriate definitions 1
through 10.
(a) Absorption costing
(b) Variable costing
(c) Contribution margin
(d) Contribution format
(e) Manufacturing margin
(f) Contribution margin ratio
(g) Break-even point
(h) Product costs
(i) Period costs
(j) Gross margin
_____ (1) Sales less cost of goods sold.
_____ (2) A specific number of units sold that produces total income equal to zero.
_____ (3) Sales less variable production costs.
_____ (4) A costing method that includes all manufacturing costs.
_____ (5) Costs that are expensed in the period they are incurred.
_____ (6) Sales less variable expenses.
_____ (7) A costing method that includes only variable manufacturing costs.
_____ (8) Direct labor, direct materials, and manufacturing overhead.
_____ (9) An income statement format that focuses on cost behavior.
_____(10) Contribution margin divided by sales.
Answer:
Use the following information to prepare the adjusted trial balance for Bella’s Beauty
Salon. Bellas Beauty Salon’s unadjusted trial balance for the current year follows:
Additional information:
a. An insurance policy examination showed $1,240 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments and this $200 of accrued revenue
was unrecorded at the time the trial balance was prepared..
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The
employee was paid last week but has worked four days this week for which she has not
been paid.
h. Three months’ property taxes, totaling $450, have accrued. This additional amount of
property taxes expense has not been recorded.
i. One month’s interest on the note payable, $600, has accrued but is unrecorded.
Answer:
A cost that can be separated into fixed and variable components is called a:
A. Mixed cost
B. Step-variable cost
C. Composite cost
D. Curvilinear cost
E. Differential cost
Answer:
Financial statements with data for two or more successive accounting periods placed in
columns side by side, sometimes with changes shown in dollar amounts and percents,
are referred to as:
A. Period-to-period statements.
B. Controlling statements.
C. Successive statements.
D. Comparative statements.
E. Serial statements.
Answer:
The following information describes a product expected to be produced and sold by
Pepin Corporation:
Required:
a. Calculate the contribution margin per unit.
b. Calculate the break-even point in units.
Answer:
The following information is for Trico and its competitor Unico:
Required:
A. Calculate the dollar amount of gross margin and the gross margin ratio to the nearest
percent for each company for both years.
B. Which company had the more favorable ratio for each year?
C. Which company had the more favorable change in the gross margin ratio over this
two-year period?
Answer:
A company discarded a display case that it had originally purchased for $8,000. The
case had $7,200 worth of accumulated depreciation. The company should recognize
a(n):
A. $0 gain or loss
B. $800 loss
C. $800 gain
D. $8,000 loss
E. $7,200 loss
Answer:
The following data relate to a product sold by Nelson Company:
(a) Calculate the number of units expected to be sold.
(b) Calculate the expected total dollar sales.
Answer:
Sales returns:
A. Refer to merchandise that customers return to the seller after the sale.
B. Refer to reductions in the selling price of merchandise sold to customers.
C. Represent cash discounts.
D. Represent trade discounts.
E. Are not recorded under the perpetual inventory system until the end of each
accounting period.
Answer:
Huffington Company traded in an old delivery truck for a new one. The old truck had a
cost of $75,000 and accumulated depreciation of $60,000. The new truck had an invoice
price of $125,000. Huffington was given a $12,000 trade-in allowance on the old truck,
which meant they paid $113,000 in addition to the old truck to acquire the new truck.
What is the recorded value of the new truck?
A. $15,000
B. $75,000
C. $113,000
D. $125,000
E. $128,000
Answer:
A company bought a new display case for $42,000 and was given a trade-in of $2,000
on an old display case, so the company paid $40,000 cash with the trade-in. The old
case had an original cost of $37,000 and accumulated depreciation of $34,000. The
company should record the value of new display case at:
A. $2,000
B. $3,000
C. $40,000
D. $42,000
E. $43,000
Answer:
The carrying value of a long-term note payable:
A. Is computed as the future value of all remaining future payments, using the market
rate as interest.
B. Is the face value of the long-term note less the total of all future interest payments.
C. Is computed as the present value of all remaining future payments, discounted using
the market rate of interest at the time of issuance.
D. Is computed as the present value of all remaining interest payments, discounted
using the note’s rate of interest.
E. Decreases each time period the discount on the note is amortized.
Answer:
Match each of the following terms with the most appropriate definition:
A) Risk
B) Managerial accounting
C) Return on assets
D) Liabilities
E) Expenses
F) Planning
G) Financial accounting
H) Net income
I) Events
J) Revenues
Answer:
A check that was outstanding on last period’s bank reconciliation was not included with
the canceled checks returned by the bank this period. As a result, in preparing this
period’s reconciliation, the amount of this check should be:
A. Added to the book balance of cash.
B. Deducted from the book balance of cash.
C. Added to the bank balance of cash.
D. Deducted from the bank balance of cash.
E. Ignored in preparing the period’s bank reconciliation.
Answer:
The price of one currency stated in terms of another currency is called a(n):
A. Foreign exchange rate
B. Currency transaction
C. Historical exchange rate
D. International conversion rate
E. Currency rate
Answer:
The Lamb Company budgeted sales for January, February, and March of $96,000,
$88,000, and $72,000, respectively. Seventy percent of sales are on credit. The
company collects 60% of its credit sales in the month following sale, 35% in the second
month following sale, and 5% is not collected. What are Lamb’s expected cash receipts
for March related to all current and past sales?
Answer:
On December 14 Bench Company received $3,700 cash for consulting services that
will be performed in January. Bench records all such prepayments in a liability account.
Prepare a general journal entry to record the $3,700 cash receipt.
Answer:
What are the general accounting procedures for recording asset disposals?
Answer:
A company’s January 1 goods in process inventory contained 30,000 units that were
one-fourth complete with respect to direct labor. The beginning inventory was
completed this year and another 120,000 units were started. Of those started, 80,000
were finished and the remaining 40,000 were left one-fifth complete. Using weighted
average, calculate the equivalent units of production for the year.
Answer:
What are the major advantages of using a plantwide overhead rate?
Answer:
What is treasury stock? How is the purchase and sale of treasury stock recorded?
Answer:
Identify and explain the four building blocks of financial statement analysis.
Answer:
Describe the key attributes of inventory for a merchandising company.
Answer:
Baldwin and Tanner formed a partnership. Baldwins initial capital account balance was
$125,000 and Tanners was $105,000. They agreed to share income and loss as follows:
Baldwin 40%, Tanner 60%. Income was $102,000 in year 1 and $150,000 in year 2.
Assume they each withdrew $10,000 per year. Calculate the capital balances for
Baldwin and Tanner at the end of year 2.
Answer:
From the perspective of a depositor, a savings account is a liability with interest.
Answer:
The acid-test ratio reflects the ___________ of a company.
Answer:
Describe the flow of labor costs in a job order costing system and identify the
documents used in the system.
Answer:
On April 1 of the current year, a company paid $150,000 to purchase 7%, 10-year
bonds that had a par value of $150,000 and paid interest semiannually on October 1 and
April 1. The company intends to hold the bonds until they mature. Prepare the journal
entry to record the receipt of the semiannual interest payment on April 1 of the
following year.
Answer:
Describe the recording process (including costs) for sales of merchandise inventory
using a perpetual inventory system.
Answer:
___________________ activities generally include those transactions and events that
affect long-term assets.
Answer:
A company has $100,000 of 10% noncumulative, nonparticipating, preferred stock
outstanding and $150,000 of common stock outstanding. In the company’s first year of
operation, it paid no dividends, but during the second year, it paid cash dividends of
$25,000. Compute the dividends to be distributed to (1) preferred shares and (2)
common shares.
Answer:
___________________________ are investments in securities that management
intends to convert to cash within one year or the operating cycle, whichever is longer,
and are readily convertible to cash.
Answer:
Partner return on equity is calculated as ______________________________.
Answer: