The budgeted balance sheet is prepared with data contained in the previously prepared
components of the master budget.
Answer:
The matching principle requires that revenue not be assigned to the accounting period
in which it is earned.
Answer:
A flexible budget expresses all costs on a per unit basis.
Answer:
The managers of process manufacturing systems focus on the series of processes
needed to complete the production of products.
Answer:
Cost concepts such as variable, fixed, mixed, direct, and indirect apply only to
manufacturers and not to service companies.
Answer:
Accumulated depreciation is shown on the balance sheet as a subtraction from the cost
of an asset.
Answer:
Given the following data, total product cost per unit under variable costing is $7.05.
Answer:
When using the equity method, receipt of cash dividends increases the carrying value
of an investment in equity securities.
Answer:
The master budget is a small component of the comprehensive budget.
Answer:
Credit terms include the specifics regarding the amount owed and timing of payments
from a buyer to a seller.
Answer:
Sellers always offer a discount to buyers for prompt payment toward purchases made
on credit.
Answer:
When the usefulness of plant assets used to extract natural resources is directly related
to the depletion of a natural resource, their costs are depreciated using the
units-of-production method of depreciation, as long as the assets will not be moved to
and used at another site when extraction of the natural resources is complete.
Answer:
A company holds $40,000 of 7% bonds as a held-to-maturity security. The
bondholder’s journal entry to record receipt of the semiannual interest payment includes
a debit to Cash for $2,800 and a credit to Interest Revenue for $2,800.
Answer:
Trade discounts are recorded in a Trade Discounts account in the accounting system.
Answer:
A company should report its portfolio of trading securities at its market value.
Answer:
Costs already incurred in manufacturing the units of a product that do not meet quality
standards are relevant costs in a scrap or rework decision.
Answer:
The debt ratio is calculated by dividing total assets by total liabilities.
Answer:
The debt to equity ratio helps assess the risks of a company’s financing structure.
Answer:
The reliability of the gross profit method depends on a good estimate of the gross profit
ratio.
Answer:
Sales discounts on credit sales can benefit a seller by decreasing the delay in receiving
cash and reducing future collection efforts.
Answer:
When taking a physical count of inventory, the use of prenumbered inventory tickets
assists in the control process.
Answer:
A voucher system establishes procedures for verifying, approving, and recording
obligations for eventual cash disbursement.
Answer:
When an equity security is sold, the sale proceeds are compared with the cost and if the
cost is greater than the proceeds, a gain on the sale of the security is recorded.
Answer:
Ordinary repairs are expenditures that keep assets in normal, good operating condition.
Answer:
Trading securities, held-to-maturity debt securities, and equity securities giving an
investor significant influence over an investee are always considered short-term
investments.
Answer:
The contribution margin per unit is equal to the sales price per unit minus the variable
costs per unit.
Answer:
Maintaining adequate business records is an important internal control principle.
Answer:
The merchandise purchases budget is the starting point for preparing the master budget.
Answer:
The matching principle requires that interest expense not be accrued on a note payable
until the note is paid, even if the end of an accounting period occurs between the
signing of a note payable and its maturity date.
Answer:
A process cost summary shows the cost of a particular job manufactured in the
reporting period.
Answer:
A company pays each of its two office employees each Friday at the rate of $100 per
day each for a five-day week that begins on Monday. If the monthly accounting period
ends on Tuesday and the employees worked on both Monday and Tuesday, the
month-end adjusting entry to record the salaries earned but unpaid is:
A. Debit Unpaid Salaries $600 and credit Salaries Payable $600
B. Debit Salaries Expense $400 and credit Salaries Payable $400
C. Debit Salaries Expense $600 and credit Salaries Payable $600
D. Debit Salaries Payable $400 and credit Salaries Expense $400
E. Debit Salaries Expense $400 and credit Cash $400
Answer:
Match each of the following terms with the appropriate definitions 1 through 10.
A) Installment note
B) Bearer bonds
C) Unsecured bonds
D) Term bonds
E) Bond indenture
F) Effective interest method
G) Coupon bonds
H) Market rate
I) Convertible bonds
J) Serial bonds
Answer:
Determine the net income of a company for which the following information is
available:
A. $190,000
B. $210,000
C. $230,000
D. $400,000
E. $610,000
Answer:
Reference: 22_08
Based on the Quarry Company information, what is residual income for Smith and
Barney?
A. Smith: $4,000; Barney: $(3,000)
B. Smith: $(3,000); Barney: $4,000
C. Smith: $28,000; Barney: $42,000
D. Smith: $8% ; Barney: 6.5%
E. Smith: $0; Barney: $0
Answer:
When factory payroll costs are recorded in a job cost accounting system:
A. Factory Payroll is debited and Goods in Process is credited.
B. Goods in Process Inventory and Factory Overhead are debited and Factory Payroll is
credited.
C. Cost of Goods Manufactured is debited and Direct Labor is credited.
D. Direct Labor and Indirect Labor are debited and Factory Payroll is credited.
E. Goods in Process is debited and factory payroll is credited.
Answer:
Which of the following is true of accrued revenues?
A. Accrued revenues at the end of one accounting period often result in cash receipts
from customers in the next period.
B. Accrued revenues at the end of one accounting period often result in cash payments
in the next period.
C. Accrued revenues are also called unearned revenues.
D. Accrued revenues are listed on the balance sheet as liabilities.
E. Accrued revenues are recorded at the end of an accounting period because cash has
already been received for revenues earned.
Answer:
Dell had net sales of $35,404 million. Its average total assets for the period were
$14,502 million. Dell’s total asset turnover is equal to:
A. 0.40
B. 0.35
C. 1.45
D. 2.44
E. 3.50
Answer:
In comparison to a general accounting system for a manufacturing company, a cost
accounting system places an emphasis on:
A. Periodic inventory counts.
B. Total costs.
C. Unit costs and cost control.
D. Products and average costs.
E. Large volume operations involving standardized products.
Answer:
The conservatism constraint:
A. Requires that when more than one equally likely estimate of amounts is expected to
be received or paid in the future, then the less optimistic amount should be used.
B. Requires that a company use the same accounting methods period after period.
C. Requires that revenues and expenses be reported in the period in which they are
earned or incurred.
D. Requires that all items of a material nature be included in financial statements.
E. Requires that all inventory items be reported at full cost.
Answer:
Ace Credit Card Company agrees to transfer cash to Seller Company immediately
upon deposit of that company’s credit card sales receipts. Ace charges a 2% fee for all
credit card sales. If Seller Company deposits $57,300 credit card sales receipts, which
of the following statements are true?
A. Ace will receive $56,154 cash from Seller Company.
B. Seller Company will receive cash $56,154 from Ace.
C. Ace will receive $57,300 cash from Seller Company.
D. Seller Company will receive $57,300 cash from Ace.
E. Ace will pay Seller Company a $1,146 credit card fee.
Answer:
Mueller Corp. manufactures compact discs that sell for $5. Fixed costs are $28,000 and
variable costs are $3.60 per unit. Mueller can buy a newer production machine that will
increase fixed costs by $8,000 per year but will decrease variable costs by $0.40 per
unit. What effect would the purchase of the new machine have on Mueller’s break-even
point in units?
A. 4,444 unit increase.
B. 9,850 unit decrease.
C. 5,714 unit increase.
D. 4,444 unit decrease.
E. No effect on the break-even point in units.
Answer:
Accumulated depreciation, accounts receivable, and service fees earned would be
sorted to which respective columns in completing a work sheet?
A. Balance Sheet-Credit; Balance Sheet Debit; and Income Statement-Credit.
B. Balance Sheet-Debit; Balance Sheet; and Income Statement-Credit.
C. Income Statement-Debit; Balance Sheet-Debit; and Income Statement-Credit.
D. Income Statement-Debit; Income Statement-Debit; and Balance Sheet-Credit.
E. Balance Sheet-Credit; Income Statement-Debit; and Income Statement-Credit.
Answer:
A corporation sold 14,000 shares of its $10 par value common stock at a cash price of
$13 per share. The entry to record this transaction would include:
A. A debit to Contributed Capital in Excess of Par Value, Common Stock, for $42,000.
B. A debit to Cash for $140,000.
C. A credit to Common Stock for $182,000.
D. A credit to Common Stock for $140,000.
E. A credit to Contributed Capital in Excess of Par Value, Common Stock, for
$182,000.
Answer:
Which of the following is a disadvantage of the departmental overhead rate method?
A. The departmental overhead rate method assigns overhead on the basis of
volume-related measures.
B. The departmental overhead rate method is more refined than the plantwide overhead
rate method.
C. The departmental overhead rate method does not assign overhead on the basis of
volume-related measures.
D. The departmental overhead rate method is simpler and less costly to implement than
the plantwide rate method.
E. There are no disadvantages of the departmental overhead rate method.
Answer:
The payroll records of a company provided the following data for the currently weekly
pay period ended March 7: Employees Earnings to End of Previous Week
Gross Pay
Federal Income Taxes
Health Insurance Deduction
Union Dues
United Way
A. Poe $ 5,800 $800 $120 $25 $10 $10
B. Rye 6,850 1,100 180 30 10 15
C. Sims 12,900 1,440 404 40 0 40 Assume that the Social Security portion of the FICA
taxes is 6.2% on the first $106,800 and the Medicare portion is 1.45% of all wages paid
to each employee for this pay period. The federal and state unemployment tax rates are
0.8% and 5.4%, respectively, on the first $7,000 paid to each employee.
Calculate the net pay for each employee.
Answer:
Oakley Corporation has the following comparative income statements. Which of the
following statements is false with regard to this comparative data?
A. The common-size sales percent for 2014 equals 100%.
B. The common-size net income percent for 2013 equals 04%.
C. The common-size gross profit percent for 2014 equals (3.87)%.
D. The common-size cost of goods sold for 2013 equals 52.4%.
E. The common-size operating expenses for 2014 equals.
Answer:
Bower Co. is reviewing a capital investment of $50,000. This project’s projected cash
flows over a five-year period are estimated at $20,000 each year.
Required:
a. Calculate the payback period.
b. Calculate the break-even time. Assume a 12% hurdle rate and use the table below:
c. Using the results in (a) and (b) make a recommendation for the project.
Answer:
Cardco Inc. has an annual accounting period that ends on December 31. During the
current year a depreciable asset that cost $42,000 was purchased on September 2. The
asset has a $4,000 estimated salvage value. The company uses straight-line depreciation
and expects the asset to have a five-year life. What is the total depreciation expense for
the current year?
A. $1,900.00
B. $7,600.00
C. $2,533.33
D. $2,800.00
E. $3,166.67
Answer:
Reference: 19_05
Red and White Company reported the following monthly data:
What is the Red and Whites contribution margin for this month if 980 units were sold?
A. $38,000
B. $18,620
C. $24,500
D. $50,000
E. $21,560
Answer:
The accounting principle that requires financial statements (including notes) to report
all relevant information about the operations and financial condition of a company is
called:
A. Relevance
B. Full disclosure
C. Evaluation
D. Materiality
E. Matching
Answer:
Toys “R” Us had cost of goods sold of $9,421 million, ending inventory of $2,089
million, and average inventory of $1,965 million. The inventory turnover equals:
A. 0.21
B. 4.51
C. 4.79
D. 76.1 days
E. 80.9 days
Answer:
If a company forgot to record depreciation on office equipment at the end of an
accounting period, the financial statements prepared at that time would show:
A. Assets overstated and equity understated.
B. Assets and equity both understated.
C. Assets overstated, net income understated, and equity overstated.
D. Assets, net income, and equity understated.
E. Assets, net income, and equity overstated.
Answer:
A merchandising company:
A. Earns net income by buying and selling merchandise.
B. Receives fees only in exchange for services.
C. Earns profit from commissions only.
D. Earns profit from fares only.
E. Buys products from consumers.
Answer:
During last period, a company’s direct labor cost was double the cost of its direct
material used. In addition, factory overhead was $5,000 underapplied. Use the
following incomplete accounts to determine the cost of direct labor:
A. $15,000
B. $88,000
C. $45,000
D. $70,000
E. $30,000
Answer:
Job order costing systems normally use:
A. Periodic inventory systems.
B. Perpetual inventory systems.
C. Real inventory systems.
D. General inventory systems.
E. All of the above.
Answer:
On January 1, 2013, a company issued and sold a $400,000, 7%, 10-year bond payable
and received proceeds of $396,000. Interest is payable each June 30 and December 31.
The company uses the straight-line method to amortize the discount. The journal entry
to record the first interest payment is:
A.
B.
C.
D.
E.
Answer:
Use the following data to find the direct labor efficiency variance.
A. $6,125 unfavorable
B. $7,000 unfavorable
C. $7,000 favorable
D. $12,250 favorable
E. $6,125 favorable
Answer:
Reference: 18_02
Tanner Inc. has incurred the following overhead costs over a six-week period:
Using the high-low method, calculate the variable cost component of these overhead
costs (round to the nearest two decimal places).
A. $14.90/hr.
B. $10.00/hr.
C. $11.25/hr.
D. $ 7.65/hr.
E. $ 6.56/hr.
Answer:
The comparison of a company’s financial condition and performance to a base amount
is known as:
A. Financial reporting
B. Horizontal ratios
C. Investment analysis
D. Risk analysis
E. Vertical analysis
Answer:
Given the following information, determine the cost of ending inventory at June 30
using the LIFO perpetual inventory method. Assume this is the first month of the
company’s operations.
June 1: 15 units were purchased at $20 per unit.
June 15: 12 units were sold.
June 29: 8 units were purchased for $25 per unit.
A. $200
B. $220
C. $260
D. $275
E. $300
Answer:
The following data regarding its common stock were reported by a corporation:
The number of outstanding shares is:
A. 12,000
B. 15,000
C. 17,000
D. 20,000
E. 23,000
Answer:
A managerial accounting report that presents predicted amounts of the company’s
revenues and expenses for the budget period is called a:
A. Budgeted income statement.
B. Budgeted balance sheet.
C. Master plan.
D. Rolling income statement.
E. Continuous income statement.
Answer:
Reference: 17_05
Assume that a pet food manufacturer is considering adding two types of pet food to its
existing product line. Research had determined that good demand exists for dog food in
40-pound bags and cat food in 1/2pound cans.
The company identified the following partial list of activities, costs, and activity drivers
expected for the next year:
Refer to the data in the preceding tables. How much overhead cost will be assigned to
each product line using activity-based costing (ABC)?
A. Dog food: $462,500; cat food: $462,500.
B. Dog food: $860,000; cat food: $65,000.
C. Dog food: $60,000; cat food: $45,000.
D. Dog food: $800,000; cat food: $20,000.
E. Dog food: $320; cat food: $320.
Answer:
The process of restating future cash flows in terms of their present values is called:
A. Discounting.
B. Capital budgeting.
C. Payback period.
D. Risk uncertainty.
E. Accounting rate of return.
Answer:
Match each of the following terms with the appropriate formulas.
Answer:
Prepare a balance sheet from the adjusted trial balance of Hanson Storage.
Answer:
Reference: 21_06
Jacques Company planned to use 18,000 pounds of material costing $2.50 per pound to
make 4,000 units of its product. In actually making 4,000 units, the company used
18,800 pounds that cost $2.54 per pound.
Calculate the direct materials quantity variance.
Answer:
A company had net sales of $741,800. Its cost of goods sold must have been
_________ to yield a gross profit of $282,884.
Answer:
Reference: 21_06
Jacques Company planned to use 18,000 pounds of material costing $2.50 per pound to
make 4,000 units of its product. In actually making 4,000 units, the company used
18,800 pounds that cost $2.54 per pound.
Calculate the direct materials price variance.
Answer:
Explain what is meant by the “lean business model” and why many businesses have
adopted it.
Answer:
A _______________ is a list of all the accounts used by a company and their
identification codes.
Answer:
Explain the steps involved in the liquidation of a partnership.
Answer:
January 2010, Giant Green Company pays $3,000,000 for a tract of land with two
buildings on it. It plans to demolish Building 1 and build a new store in its place.
Building 2 will be a company office; it is appraised at $742,000, with a useful life of 25
years and a $75,000 salvage value. A lighted parking lot near Building 1 has
improvements (Land Improvements 1) valued at $400,500 that are expected to last
another 18 years with no salvage value. Without the buildings and improvements, the
tract of land is valued at $2,020,600. Giant Green also incurs the following additional
costs:
What is the amount that should be recorded for Building #1?
A $600,200
B. $742,000
C. $667,000
D. $703,800
E. $487,921
Answer:
A good financial statement analysis report usually includes the following six sections:
(1) ________________________, (2) ______________________, (3)
_________________, (4) __________________ (5) ____________________ and (6)
______________________.
Answer:
A _____________________ shows the pay period dates, hours worked, gross pay,
deductions, and net pay of each employee for every pay period.
Answer:
In a job order cost accounting system, raw materials requisitioned as direct materials
are debited to ______________________; indirect materials are debited to
___________________.
Answer:
What is the accounts receivable turnover ratio? How is it calculated? How is it used to
assess financial condition?
Answer:
A company is authorized to issue 50,000 shares of $50 par value, 8%, cumulative, fully
participating preferred stock and 750,000 shares of $5 par value common stock. Prepare
journal entries to record the following selected transactions that occurred during the
company’s first year of operations:
May 5 Exchanged 2,000 shares of preferred stock for a building with a market value of
$135,000.
July 20 Sold 1,550 shares of preferred stock for $50 cash per share.
Dec. 20 Sold 1,000 shares of preferred stock at $55 cash per share.
Answer:
Comparative statements for Kool Corporation are shown below:
Calculate trend percentages for all income statement amounts shown and comment on
the results. Use 2012 as the base year.
Answer:
Tanner, Inc. uses a process cost accounting system with weighted-average valuation
method. The following operating and cost data occurred during October:
Materials are added at the beginning of the process. Direct labor and overhead are
incurred evenly throughout the process. Prepare the October process cost summary.
Answer:
In preparing flexible budgets, the costs that remain constant in total are
_______________ costs. Those costs that change in total are _______________ costs.
Answer:
A corporation has $1,750,000 in stockholders’ equity and 350,000 shares of common
stock outstanding. Calculate the book value per common share.
Answer: