U.S. Treasury bills are considered equity securities.
Ordinary repairs usually result in a debit to the appropriate Accumulated Depreciation
account.
Job order cost cards and cost flows through the inventory accounts form the core of a
job order costing system.
One argument in favor of accelerated depreciation is that repair expense is likely to be
greater in later years.
In general, when prices are rising, use of the FIFO method will result in a lower tax
liability than the other methods.
When preparing a statement of cash flows using the indirect method, amortization
expense is added to net income in the cash flows from operating activities section of the
statement of cash flows.
Accrual accounting is an application of the matching rule.
When a new partner invests less than the proportionate share he or she receives in the
partnership, a bonus is recorded to his or her account.
For a manufacturer, materials storage is a value-adding activity.
A bond sells at the face value when the face interest rate of the bond is identical to the
market interest rate for similar bonds on the date of the issue.
If the market interest rate at the date of issuance of a bond exceeds the face interest rate,
the present value of the face value plus the present value of all the future interest
payments will equal an amount less than the face value of the bond.
Process costing information can inform managers about the specific units of products
ordered by customers.
In general, the greater the investment risk taken, the higher the return required as
compensation.
It is necessary for managers to fully understand the causal relationship between their
actions and the organization’s overall performance to get results.
Common-size statements are useful in assessing the changes in the composition of
statements over time.
A purpose of standard costing is to
A.control costs.
B.allocate costs more accurately.
C.replace subjective decision making.
D.compute the breakeven point.
The double-entry system
A.requires that each transaction be recorded with at least one debit and one credit.
B.requires that the total amount of the debits must always equal the total amount of the
credits.
C.is based on the principle of duality.
D.All of these choices.
If the contribution margin on a new product line is $15, fixed costs are $165,000, and
the total market for the product is 22,000 units, then the breakeven analysis would
recommend that the company
A.abandon the new product line.
B.decrease the sales price per unit.
C.increase fixed costs (such as advertising) to lower the breakeven units.
D.adopt the new product line.
Which of the following could be described as both an advantage and a disadvantage of
incorporation?
A.Continuous existence
B.Limited liability
C.Double taxation
D.Lack of mutual agency
The cost-adjusted-to-market method of accounting for investments is used when the
investment is
A)controlling.
B)influential and noncontrolling.
C)noninfluential and controlling.
D)noninfluential and noncontrolling.
Process costing is a system of
A.inventory management.
B.manufacturing.
C.product costing.
D.product placement.
All of the following items are associated with a purpose of the work sheet except
A.Recording adjusting entries.
B.Preparing financial statements.
C.Preparing budgets.
D.Recording closing entries.
The collection of a $2,000 account beyond the 2 percent discount period would result in
a(n)
A.increase to Cash for $1,960.
B.decrease to Accounts Receivable for $2,000.
C.decrease to Cash for $2,000.
D.increase to Sales Discounts for $40.
Lopez Company uses the FIFO process costing method to determine the product unit
cost. The company began the period with 1,800 units in beginning inventory. During the
period, 32,000 units were started and completed. There were 4,000 units in ending
inventory at the end of the period. If all direct materials are added at the beginning of
the process, the number of equivalent units for direct materials for the period is
A.29,800.
B.28,000.
C.32,000.
D.36,000.
Carrying out professional responsibilities with competence and diligence is called
A.integrity.
B.independence.
C.objectivity.
D.due care.
Use the following performance report for a cost center of the Dry Cat Food Division for
the month ended December 31 to answer the questions below.
Using the information provided for Dry Cat Food division, what is the direct materials
variance between the actual results and the flexible budget?
A.$14 (U)
B.$14 (F)
C.$30 (U)
D.$30 (F)
When common stock is issued by a corporation for a cash price above par value, the
excess of the cash proceeds over the par value should be reported in the financial
statements as a component of
A.retained earnings on the balance sheet.
B.total liabilities on the balance sheet.
C.operating income on the income statement.
D.total contributed capital on the balance sheet.
Use this journal entry to answer the following question.
Explain how the above journal entry relates to the measurement issues of (a)
recognition, (b) valuation, and (c) classification.
Variable costing is utilized to evaluate the performance of
A.investment centers.
B.revenue centers.
C.cost centers.
D.profit centers.
Singletary Corporation owns a 40 percent interest in the stock of Fleming Corporation.
During 2014, Fleming pays $50,000 in dividends to Singletary and reports $214,000 in
net income. Singletary Corporation’s investment in Fleming will increase Singletary’s
income before income taxes by
A)$35,600.
B)$65,600.
C)$85,600.
D)$105,600.
When an asset is sold, a gain is calculated as the difference between
A.sale price and the depreciable cost of the asset sold.
B.sale price and the carrying value of the asset sold.
C.carrying value and the residual value of the asset sold.
D.sale price and the original cost of the asset sold.
Assume a company uses the periodic inventory system and has a beginning
merchandise inventory balance of $10,000, purchases of $150,000, and sales of
$250,000. The company closes its records once a year on December 31. In the
accounting records, the merchandise inventory account would be expected to have a
balance on December 31 prior to adjusting and closing entries that was
A.indeterminate.
B.less than $5,000.
C.more than $5,000.
D.equal to $5,000.
Alex, Clinton, and Evan are in a partnership. Evan decides to withdraw from the
partnership by selling his interest to Linsey. Alex and Clinton agree to this. Alex’s
Capital account and Clinton’s Capital account
A.will not be affected when Linsey is admitted
B.will decrease when Linsey is admitted
C.will increase when Linsey is admitted
D.cannot be determined from the information given
_____________ are liabilities that arise from a contract that requires a company to
make payments to its employees after they retire.
A.Deferred income taxes.
B.Other post-retirement benefits.
C.Capital leases.
D.Pensions.
Which of the following would be deducted from the balance per books on a bank
reconciliation?
A.Notes collected by the bank
B.Deposits in transit
C.Service charges
D.Outstanding checks
Accounts Receivable was $1,500 at the end of November and $1,050 at the end of
December. Revenue totaled $8,400 for December. How much cash was received from
revenues during December?
A.$10,950
B.$8,850
C.$7,950
D.$5,950
Draw two distinctions between accounting for a stock split and accounting for a stock
dividend.
Condensed income statements for Marlin Company are shown below for two years.
Compute the corrected income before income taxes for 2013 and 2014, assuming that
the inventory as of the end of 2013 was mistakenly understated by $26,000.
Present two arguments in favor of the use of accelerated depreciation.
Given the adjusted trial balance below, prepare (in good form) an income statement,
statement of owner’s equity, and balance sheet. To do so you will need to determine the
missing amounts for A, B, C, and D. The name of the business is Oak Manufacturing
and the accounting period coincides with the calendar year. The balance in the Tina Oak
capital account as of December 31, 20X5 is $6,600.
Mercado Photography purchased photographic equipment for $75,000. The equipment
was to be used for ten years and had a $5,000 estimated residual value. After the
company took three years of straight-line depreciation, it decided that the equipment
would instead have a $2,000 residual value and a total useful life of eleven years.
Calculate depreciation expense that should be recorded in year 4. (Show your work.)