Use the balance sheets of Sando shown below to calculate the following ratios for 2013
(round to the hundredths):
(a) Current ratio
(b) Acid-test ratio
(c) Debt ratio
(d) Equity ratio
Answer:
A company purchased a rope-braiding machine for $190,000. The machine has a useful
life of eight years and a residual value of $10,000. It is estimated that the machine could
produce 750,000 units of climbing rope over its useful life. In the first year, 105,000
units were produced. In the second year, production increased to 109,000 units. Using
the units-of-production method, what is the amount of depreciation that should be
recorded for the second year?
A. $25,200
B. $26,160
C. $26,660
D. $27,613
E. $53,160
Answer:
Double-entry accounting is an accounting system:
A. That records each transaction twice.
B. That records the effects of transactions and other events in at least two accounts with
equal debits and credits.
C. In which the impact of each transaction is checked twice to ensure there are no
errors.
D. That may only be used if T-accounts are used.
E. That records the effects of transactions on at least two financial statements.
Answer:
Partnership accounting:
A. Is the same as accounting for a sole proprietorship.
B. Is the same as accounting for a corporation.
C. Is the same as accounting for a sole proprietorship, except that separate capital and
withdrawal accounts are kept for each partner.
D. Is the same as accounting for an S corporation.
E. Is the same as accounting for a corporation, except that retained earnings is used to
keep track of partners’ withdrawals.
Answer:
Use the following information to calculate cash paid for wages and salaries:
A. $157,400
B. $163,800
C. $168,000
D. $172,200
E. $174,400
Answer:
Rocko Inc. has a machine with a book value of $50,000 and a five-year remaining life.
A new machine is available at a cost of $85,000 and Rocko can also receive $38,000 for
trading in the old machine. The new machine will reduce variable manufacturing costs
by $14,000 per year over its five-year life. Should the machine be replaced?
A. Yes, because income will increase by $14,000 per year.
B. Yes, because income will increase by $23,000 in total.
C. No, because the company will be $23,000 worse off in total.
D. No, because the income will decrease by $14,000 per year.
E. Rocko will be not be better or worse off by replacing the machine.
Answer:
Premiers outstanding stock consists of (a) 57,000 shares of cumulative 4.25% preferred
stock with an $18 par value and (b) 75,000 shares of common stock with a $1 par value.
During its first four years of operation, the corporation declared and paid the following
total cash dividends:
What is the amount of dividends that the Common Stockholders receive for all years
presented?
A. $177,000
B. $188,580
C. $214,250
D. $326,000
E. $363,000
Answer:
Given the following information, determine the amount of cash flows from investing
and financing activities.
A.
B.
C.
D.
E.
Answer:
The 12-month period that ends when a company’s activities are at their lowest point is
called the:
A. Fiscal year
B. Calendar year
C. Natural business year
D. Accounting period
E. Interim period
Answer:
Given the following data, calculate product cost per unit under variable costing.
A. $8 per unit
B. $8.50 per unit
C. $10.25 per unit
D. $10.75 per unit
E. $12 per unit
Answer:
A company reports the following information from its sales account and sales budget:
Cash sales are normally 30% of total sales and all credit sales are expected to be
collected in the month following the date of sale. The total amount of cash expected to
be received from customers in September is:
A. $58,500
B. $56,500
C. $60,000
D. $80,500
E. $55,000
Answer:
Revenues are:
A. The same as net income.
B. The excess of expenses over assets.
C. Resources owned or controlled by a company.
D. Increases in retained earnings from a company’s earning activities.
E. The costs of assets or services used.
Answer:
Extraordinary repairs:
A. Are revenue expenditures.
B. Extend an asset’s useful life beyond its original estimate.
C. Are credited to accumulated depreciation.
D. Are additional costs of plant assets that do not materially increase the asset’s life.
E. Are expensed as incurred.
Answer:
A profit center:
A. Incurs costs but does not directly generate revenues.
B. Incurs costs and directly generates revenues.
C. Has a manager who is evaluated solely on efficiency in controlling costs.
D. Incurs only indirect costs and directly generates revenues.
E. Incurs only indirect costs and generates revenues.
Answer:
A fixed cost:
A. Requires the future outlay of cash and is relevant for future decision making.
B. Does not change with changes in the volume of activity within the relevant range.
C. Is directly traceable to a cost object.
D. Changes with changes in the volume of activity within the relevant range.
E. Has already been incurred and cannot be avoided so it is irrelevant for decision
making.
Answer:
Corona Company’s balance sheet accounts follow:
What is Corona Companys days sales in inventory ratio for 2014, assuming net sales
and gross profit for the period were $1,236,783, $927,587 respectively?
A. 86.75
B. 112.29
C. 105.41
D. 75.35
E. 107.11
Answer:
Compute return on assets given net income of $13,764, beginning assets of $120,000,
and ending assets of $176,000.
A. 4.65%
B. 7.82%
C. 9.3%
D. 11.47%
E. 21.51%
Answer:
Force and Zabala are partners. Force’s capital balance in the partnership is $98,000 and
Zabala ‘s capital balance is $53,000. Force and Zabala have agreed to share equally in
income or loss. Force and Zabala agree to accept Burns with a 25% interest. Burns will
invest $56,000 in the partnership. The total bonus that is granted to the existing partners
equals:
A. $6,500.
B. $9,125.
C. $2,125.
D. $4,250.
E. $0, because Force and Zabala actually grant a bonus to Burns.
Answer:
A managerial accounting report that presents predicted amounts of the company’s
assets, liabilities, and equity as of the end of the budget period is called a(n):
A. Rolling balance sheet.
B. Continuous balance sheet.
C. Budgeted balance sheet.
D. Cash balance sheet.
E. Operating balance sheet.
Answer:
Selected information from Jet Companys 2013 financial statements is shown below
(in millions):
Inventory decreased $6.0 Accounts payable increased by $7.0
Cost of goods sold $36.50 Salaries expense $24.0
Salaries payable decreased $6.0 Accounts receivable increased by $10.0
Sales $56.4
What is the amount of cash paid for salaries by Jet during 2013?
A. $4.0
B. $6.0
C. $24.0
D. $30.0
E. $18.0
Answer:
The margin of safety is the excess of:
A. Break-even sales over expected sales.
B. Expected sales over variable costs.
C. Expected sales over fixed costs.
D. Fixed costs over expected sales.
E. Expected sales over break-even sales.
Answer:
A company established a direct material standard of 2 pounds of material at a cost of $6
per pound for unit produced. During August the company produced 6,000 units of
product. 10,000 pounds of direct material which cost $6.50 per pound were used in the
production process. Compute the direct material quantity variance for August.
A. $5,000 unfavorable
B. $12,000 unfavorable
C. $5,000 favorable
D. $12,000 favorable
E. $7,000 favorable
Answer:
A company had a $56,000 unfavorable direct material quantity variance during a time
period when the standard price per pound of direct material was $7 and the actual price
per pound of direct material was $7.50. If the standard quantity of direct material
allowed for production was 52,000 pounds, how many pounds of direct material were
actually used during this period?
A. 60,000 pounds
B. 44,000 pounds
C. 56,000 pounds
D. 364,000 pounds
E. 420,000 pounds
Answer:
A company has net sales of $870,000 and average accounts receivable of $174,000.
What is its accounts receivable turnover for the period?
A. 0.20
B. 5.00
C. 20.0
D. 73.0
E. 1,825
Answer:
A firm sells two different products, A and B. For each unit of B, the firm sells two units
of A. Total fixed costs for this firm are $1,260,000. Additional selling prices and cost
information for both products follow:
Required:
a. Calculate the contribution margin per composite unit.
b. Calculate the break-even point in units of each individual product.
c. If pretax income before taxes of $294,000 is desired, how many units of A and B
must be sold?
Answer:
A company had expenses other than cost of goods sold of $250,000. Determine sales
and gross profit given cost of goods sold was $100,000 and net income was $150,000.
A. Sales: $350,000; gross profit: $150,000
B. Sales: $350,000; gross profit: $50,000
C. Sales: $500,000; gross profit: $400,000
D. Sales: $500,000; gross profit: $50,000
E. Sales: $400,000; gross profit: $500,000
Answer:
Big Company manufactures keyboards. Management wishes to develop budgets for the
upcoming quarter based on the following data:
Compute the budgeted quantity of plastic that needs to be purchased for the next
quarter.
A. 850 ounces
B. 3,348 ounces
C. 3,452 ounces
D. 798 ounces
E. 902 ounces
Answer:
Duke Corporation reports the following components of stockholders equity on
December 31, 2013:
What is the amount of the dividend declared?
A. $177,000
B. $135,000
C. $121,500
D. $326,000
E. $338,500
Answer:
Jet Companys break-even point is 5,000 units. The companys fixed costs are $240,000,
and its total variable costs are $85,000. The unit sales price is:
A. $20
B. $40
C. $60
D. $65
E. $100
Answer:
On September 15, Sports World borrowed $75,000 cash from First Bank on a 12%,
60-day note payable.
a. Prepare Sports World’s general journal entry to record the issuance of the note
payable.
b. Prepare Sports World’s general journal entry to record the payment of the note at
maturity assuming no adjusting entries have been made since the note was first issued.
Answer:
Match the appropriate definition (a) through (h) with the following terms:
(a) A department whose manager is judged on the ability to generate revenues in excess
of the department’s costs.
(b) Costs that are incurred for the joint benefit of more than one department.
(c) A factor that causes the cost of an activity to go up and down.
(d) A center whose manager is responsible for using the center’s assets to generate
income for the center.
(e) Provides information that management can use to evaluate the performance of a
department’s managers.
(f) Compares actual and budgeted costs and expenses under the control of a manager.
(g) A department whose manager is judged on the ability to control costs by keeping
them within a satisfactory range.
(h) Departmental sales in excess of its direct costs and expenses.
__________ (1) Investment center
__________ (2) Performance report
__________ (3) Cost center
__________ (4) Departmental contribution to overhead
__________ (5) Cost driver
__________ (6) Profit center
__________ (7) Indirect expenses
__________ (8) Responsibility accounting system
Answer:
Partners in a partnership are taxed on _______________________, not on their
withdrawals.
Answer:
On January 1, 2012, Frederich Corporation purchased 7,500 shares of Sport Tech, Inc.
as a long-term investment for a total of $235,000. The 7,500 shares represent 30% of
the outstanding (25,000) shares of Sport Tech. Prepare the journal entries for Frederich
to record the following transactions and events:
Answer:
Describe how materials flow through a job order cost accounting system and identify
the key documents in the system.
Answer:
An _______________________ is a department whose manager is responsible for
using the center’s assets to generate income for the center.
Answer:
The balances for the accounts of Lances Consulting Firm, Inc. for the year ended
December 31 are shown below. Each account shown had a normal balance.
Calculate total assets.
Answer:
Manning, Co. collected six-months’ rent in advance from a tenant on November 1 of
the current year. When cash was collected, the following entry was made:
Prepare the required adjusting entry at December 31 of the current year.
Answer:
Stride Rite had total liabilities of $130 million and total assets of $375 million. Its debt
ratio was _______________.
Answer:
How does fraud affect managerial accounting?
Answer:
A _____________________ is a collection of costs that are related to the same or
similar activity.
Answer:
Compute the missing amounts:
(1) The Prepaid Insurance account had a $455 debit balance at the beginning of the
current year; $650 of insurance premiums were paid during the year; and the year-end
balance sheet showed $420 of prepaid insurance; consequently, the income statement
for the year must have shown $______________ of insurance expense.
(2) The Office Supplies account began the current year with a $235 debit balance; the
income statement for the year showed $475 of office supplies expense; and the year-end
balance sheet showed the current asset, office supplies, at $225; consequently, if all
supplies were accounted for, $____________ of office supplies must have been
purchased during the year.
Answer:
A company issued 9.2%, 10-year bonds with a par value of $100,000. Interest is paid
semiannually. The market interest rate on the issue date was 10% and the issuer
received $95,016 cash for the bonds. On the first semiannual interest date, what amount
of cash should be paid to the holders of these bonds for interest?
Answer:
A main purpose of the statement of cash flows is to report all the major cash ________
and cash _______________.
Answer:
A company is considering purchasing a machine for $75,000. The machine is expected
to generate a net after-tax income of $11,250 per year. Depreciation expense would be
$7,500. What is the payback period for this machine?
Answer:
Jorgensen Department Store has three departments: Clothing, Toys, and Hardware. The
most recent income statement, showing the total operating profit and departmental
results is shown below:
Based on this income statement, management is planning on eliminating the hardware
department, as it is generating a net loss. If the hardware department is eliminated, the
toy department will expand to fill the space, but sales will not change in total, nor will
direct expenses. None of the allocated expenses will be avoided, but they will be
reallocated. Clothing will be allocated $200,000 of these expenses, and Toys will be
allocated $150,000 of these expenses.
Prepare a new income statement for Jorgensen Department Store, showing the results if
the Hardware Department is eliminated. Should the Hardware Department be
eliminated?
Answer:
A company is considering purchasing a machine for $123,000. The machine is expected
to generate a net after-tax income of $8,200 per year. Depreciation expense would be
$12,300. What is the payback period for this machine?
Answer:
The interest rate is also called the __________________ rate.
Answer: