Goods held on consignment should be included in the consignee’s ending inventory.
Adding freight-out expenses to net purchases gives net cost of purchases.
The FIFO inventory method does not produce the most up-to-date figure for ending
inventory.
In a process costing system, the amount of total costs to be accounted for is made up of
direct materials and conversion costs incurred during the current period plus those costs
included in the beginning Work in Process Inventory account.
A production cost is classified as an overhead cost if it is not directly traceable to an end
product or a cost object.
Uncollectible accounts should not be estimated because it is impossible to know which
accounts will not be collected.
Effective internal control requires a department to purchase supplies on its own.
The treasurer should prepare and sign a check only after a proper check authorization
has been provided.
At the time a company signs a contract to pay an employee a certain salary in the
future, it records a liability.
A remittance advice accompanies a check sent to a vendor or the vendor’s bank.
Using the full-costing method, the cost of dry wells is capitalized with the cost of
producing wells.
Standard costs are realistically predetermined costs of direct materials, direct labor, and
overhead that usually are expressed as a cost per unit.
The sales journal is used to handle all cash and credit sales.
When two or more capital investment proposals are being evaluated using the
accounting rate-of-return method, the proposal that yields the lowest ratio of net income
to average cost of investment is selected.
A liability is recognized when
A.the exact due date is known.
B.it is paid for.
C.an obligation has arisen.
D.the exact amount of the liability is known.
How are cash equivalents treated on a statement of cash flows?
A.They are disclosed in the operating activities section.
B.They are combined with the Cash account.
C.They are disclosed in the investing activities section.
D.They are disclosed in the financing activities section.
Term bonds are
A.bonds that have a single maturity date.
B.bonds secured by specific assets of the issuing corporation.
C.issued only by the federal government.
D.issued on the general credit of the corporation and do not pledge certain assets as
collateral.
Which of the following would be considered a revenue expenditure?
A.Cleaning the ink from a printing press
B.Addition of a storeroom
C.Purchase of office furniture
D.Installation of audiovisual equipment in a classroom
Which of the following situations results in a contingent liability?
A.Making a credit card sale
B.Dishonoring a note
C.Estimating uncollectible accounts expense
D.Discounting a note
The board of directors of Meadow Corporation declared a cash dividend on January 18,
20×5 , to be paid on February 18, 20×5 , to shareholders holding the stock on February
2, 20×5 . Given these facts, the date February 2, 20×5 , is referred to as the
A.date of declaration.
B.date of payment.
C.ex-dividend date.
D.date of record.
Courtney Sinclaire is trying to rent a new bicycle. She has narrowed her choices to two
lease arrangements, each with unique characteristics. Bike Superior would rent for $220
per year, and Bike Deluxe’s annual rent would be $250. Bike Superior would need a
new seat costing $35 and new racing tires costing $95. The old seat and tires could be
sold for $30. Bike Deluxe is fully equipped but would need to be painted at a cost of
$110. Maintenance and upkeep on both bikes would average $60 per year.
a. Identify the relevant data in this problem.
b. Prepare an incremental analysis for Courtney to aid her in this decision.
c. What decision should Courtney make?
A company should use process costing rather than job order costing if
A.production is only partially completed during the accounting period.
B.the product is produced in batches only as orders are received.
C.the product is composed of mass-produced homogeneous units.
D.the product goes through a single stage of production.
Which of the following is a profitability ratio?
A.Return on equity
B.Days’ inventory on hand
C.Price/Earnings ratio
D.Quick ratio
Which of the following actions can distort company records and result in fraudulent
financial reporting?
A.Prepaying an expense and recording it as an asset.
B.Collecting revenue in advance of earning it.
C.Recording revenue that has not yet been earned.
D.Recording an expense that has been incurred but has not yet been paid.
Which of the following groups uses accounting information primarily to help protect
the public?
A.Management
B.Regulatory agencies
C.Taxing authorities
D.Economic planners
Use this information to answer the following question.
The following totals for the month of September were taken from the payroll register of
Meadors Company:
Salaries expense $24,000
Social security and Medicare taxes withheld 1,100
Income taxes withheld 5,000
Medical insurance deductions 500
Life insurance deductions 400
Salaries subject to federal and state unemployment taxes of 6.2 percent 8,000
The entry to record the accrual of federal unemployment tax (assume FUTA tax of 0.8
percent) would include a
A.credit to Federal Unemployment Tax Payable for $64.
B.debit to Federal Unemployment Tax Payable for $64.
C.debit to FUTA Tax Expense for $64.
D.credit to Payroll Taxes and Benefits Expense for $64.
Cash equivalents do not include
A.U.S. Treasury bills.
B.money market accounts.
C.marketable securities.
D.commercial paper.
Which of the following accounts most likely would be found on both a trial balance and
an adjusted trial balance?
A.Utilities Expense
B.Insurance Expense
C.Supplies Expense
D.Depreciation Expense’“Equipment
Under new methods of management, attempts to continuously improve the work
environment come from
A.top management.
B.each department manager.
C.the board of directors
D.everyone in the company.
The Taylor Company uses a process costing system. Assume that direct materials are
added at the beginning of the period and that direct labor and overhead are added
continuously throughout the process. The company uses the FIFO costing method. The
following data are available for one of its accounting periods
Equivalent units for conversion costs of Taylor Company are
A.207,800.
B.192,200.
C.181,800.
D.200,000.
The term used to describe the allocation of the cost of an intangible asset to the periods
it benefits is
A.depletion.
B.apportionment.
C.amortization.
D.depreciation.
The unexpired cost of a plant asset is referred to as its
A.depreciable cost.
B.carrying value.
C.accumulated depreciation.
D.original cost.
Lincoln Company engaged in this transaction:
Accrued interest expense on long-term bonds payable.
Indicate which section, if any, the above transaction would appear in, or relate to, on a
statement of cash flows.
A.Does not represent a cash flow.
B.Investing activities section.
C.Operating activities section.
D.Financing activities section.
Use this information to answer the following question.
The trial balance for Nowwick Company appears as follows:
If on December 31, 2014, supplies on hand were $120, the adjusting entry would
contain a
A.credit to Supplies for $120.
B.credit to Supplies Expense for $180.
C.debit to Supplies Expense for $180.
D.debit to Supplies for $120.
The Bakersfield Company has the following information available:
At the beginning of the period, there were 800 units in process that were 60 percent
complete as to conversion costs and 100 percent complete as to direct materials costs.
During the current period, 5,800 units were started and completed. Ending inventory
contained 400 units that were 60 percent complete as to conversion costs and 100
percent complete as to direct materials costs. (Assume that the company uses the FIFO
process costing method.)
The equivalent units of production for direct materials and conversion costs,
respectively, of Bakersfield were
A.6,200 for direct materials and 6,360 for conversion costs.
B.5,400 for direct materials and 6,520 for conversion costs.
C.6,200 for direct materials and 5,960 for conversion costs.
D.7,000 for direct materials and 6,520 for conversion costs.
Each of the following is a characteristic of a promissory note except a(n)
A.maturity date that can be determined on the date the note is signed.
B.payee who has an unconditional right to receive a definite amount on a definite date.
C.maker who agrees to pay a definite sum subject to certain conditions.
D.amount to be paid that can be determined on the date the note is signed.
Which of the following is measured by the payback period method?
A.The period for which an investment is expected to be useful
B.The expected cash inflows and outflows of an investment
C.The estimated length of time to recover the cost of an investment
D.The economic life of an investment
How is it possible for a company to show a net loss for a given year, yet produce
positive net cash flows from operating activities?
Partners A and B receive a salary of $16,000 and $14,000, respectively. They agree to
share income and losses equally. If the partnership has income of $280,000 in 20×5, the
entry to close the income into their capital accounts is:
Why should a dishonored note receivable be transferred to an individual account
receivable for the debtor?
Joe Quizenberry owns Quizenberry Gravel Company. On January 3, 2014, Joe
purchased a piece of property with gravel deposits for $3,155,000. He estimated that the
gravel deposits contained 4,700,000 cubic yards of gravel. The gravel is used for
making roads. After the gravel is gone, the land, which is in the desert, will be worth
only about $100,000.
The equipment required to extract the gravel cost $726,000. In addition, Joe had to
build a small frame building to house the mine office and a small dining hall for the
workers. The building cost $76,000 and will have no residual value after its estimated
useful life of ten years. It cannot be moved from the mine site. The equipment has an
estimated useful life of six years (with no residual value) and also cannot be moved
from the mine site.
Trucks for the project cost $154,000 (estimated life, six years; residual value, $10,000).
The trucks can later be used at a different site.
Joe estimates that in five years all the gravel will be mined and the mine will be shut
down. During 2014, 1,175,000 cubic yards of gravel were mined and sold.
Required:
Prepare entries to record depletion and depreciation for 2014. Unless the asset is
movable, assume that the depreciation rate is equal to the percentage of the total gravel
mined during the year. For movable assets, use the straight-line method. (Omit
explanations.)
On December 1, Stefania’s Pizza borrowed $80,000 from the bank, issuing a 90-day, 15
percent promissory note. Interest is in addition to the face value. In the journal
provided, prepare Stefania’s December 1 entry, December 31 adjusting entry without
explanations for accrued interest, and March 1 entry at maturity. Round to the nearest
whole dollar.
How are costs recognized, matched, and measured in a process costing system?