Georgia Inc. reported operating income of $156,000 and sales of $1,300,000 for the
current year end. Determine the company’s return on sales.
a. 10%
b. 8%
c. 15%
d. 12%
Credit purchase is taken into account while calculating accounts receivable turnover
ratio.
a. True
b. False
During a period of consistently rising prices, the method of inventory costing that will
result in reporting the greatest cost of merchandise sold is:
a. FIFO.
b. average cost.
c. LIFO.
d. All methods will generate the same cost of merchandise sold.
HTMLENTITY#8203HTMLENTITYA hotel has 50 suites in total, and the number of
booked suites for the month of April is 20. Calculate the occupancy rate of suites of the
hotel.
a. HTMLENTITY#8203HTMLENTITY40%
b. HTMLENTITY#8203HTMLENTITY250%
c. HTMLENTITY#8203HTMLENTITY60%
d. HTMLENTITY#8203HTMLENTITY45%
The manager of the furniture department of a leading retailer does not have control on
salaries of the department personnel.
a. True
b. False
Which of the following focuses on the ability of a company to earn profits?
a. The return on total assets
b. The inventory turnover
c. The quick ratio
d. The fixed charge coverage ratio
Which of the following is a period cost?
a. Power
b. Depreciation on factory equipment
c. Sales commissions
d. Wages of an assembly worker
When natural resources are used, the _____ expense account is increased for a portion
of the cost of resources removed.
a. depletion.
b. deferral.
c. prepaid
d. amortization.
It is easy to objectively determine the physical decline in the ability of fixed assets to
provide service.
a. True
b. False
The relationship of $320,000 to $200,000, expressed as a ratio, is:
a. 3.8 to 2.
b. 3.2 to 2.
c. 3.5 to 2.
d. 3.0 to 2.
The ratio of current assets to current liabilities is referred to as the acidtest ratio.
a. True
b. False
When a retailing business is making estimatesHTMLENTITY#8203HTMLENTITY for
the expected customer refunds and allowances, it decreases the customer refunds
payable account:
a. HTMLENTITY#8203HTMLENTITYand the sales account.
b. HTMLENTITY#8203HTMLENTITYand the purchases account.
c. HTMLENTITY#8203HTMLENTITYand the accounts receivable account.
d. HTMLENTITY#8203HTMLENTITYand the operating expenses.
The following information is available for the first month of operations of Diacox Inc.,
a manufacturer of sports apparel:
Sales$2,050,000
Gross profit490,000
Indirect labor152,000
Indirect materials45,000
Other factory overhead515,000
Materials purchased801,000
Total manufacturing costs for the period1,710,000
Materials inventory, end of period36,800
Using the given information, determine the following:
a. Cost of goods sold
b. Direct materials cost
c. Direct labor cost
Galaxy, Inc. had the following merchandise transactions in October:
Purchases$80,000
Purchase returns 8,000
Purchase discounts7,200
Transportation in 3,000
What is the total cost of merchandise purchased for Galaxy, Inc.?
a. $80,000
b. $67,800
c. $83,000
d. $77,000
Which of the following costs appear on a balance sheet?
a. Selling expenses
b. Product Costs
c. Period Costs
d. Opportunity costs
Frogue Corporation uses a standard cost system. The following information was
provided for the period that just ended:
Actual price per kilogram$2.50
Actual kilograms of material used31,000
Actual hourly labor rate$18.10
Actual hours of production4,900 labor hrs.
Standard price per kilogram$2.80
Standard kilograms per completed unit6 kilograms
Standard hourly labor rate$18.00
Standard time per completed unit1 hr.
Actual total factory overhead$34,900
Actual fixed factory overhead$18,000
Standard fixed factory overhead rate$1.20 per labor hour
Standard variable factory overhead rate$3.80 per labor hour
Maximum plant capacity15,000 hours
Units completed during the period5,000
The total factory overhead cost variance is:
a. $3,900 favorable.
b. $10,400 favorable.
c. $10,400 unfavorable.
d. $9,900 unfavorable.
ABC Co.’s petty cash receipts indicate the following expenditures for the end of
October:
Office supplies $490
Miscellaneous selling expense$300
Miscellaneous administrative expense $120
What is the cumulative effect of these transactions on the statement of cash flows?
a. $420 decrease in financing activities
b. $490 increase in operating activities
c. $910 decrease in operating activities
d. No effect on the statement of cash flows
Assume that divisional operating income amounts to $325,000 and top management has
established 10% as the minimum rate of return on divisional assets totaling $1,250,000.
The residual income for the division is:
a. $200,000.
b. $292,500.
c. $125,000.
d. $0.
The cost of a product warranty should be included as an expense in the:
a. period the cash is collected for a product sold on account.
b. future period when the cost of repairing the product is paid.
c. period of the sale of the product.
d. future period when the product is repaired or replaced.
A summary of the cash receipts and cash payments for a specific period of time is a(n):
a. income statement.
b. balance sheet.
c. statement of cash flows.
d. retained earnings statement.
Bonds payable due in 2020 are reported on the balance sheet as longterm liabilities.
a. True
b. False
ABC Company deposited $20,000 in a bank account in return for issuing shares in the
corporation. This transaction would affect which two financial statement elements?
a. Assets and stockholders’ equity
b. Assets and liabilities
c. Liabilities and stockholders’ equity
d. None of these
Capital expenditure is reported on the:
a. income statement under operating expenses.
b. balance sheet under fixed assets.
c. statement of retained earnings under contributed capital.
d. cash flow statement under cash flow from financing activities.
Which of the following graphs illustrates the behavior of a total fixed cost within the
specified relevant range?
a. Graph 2
b. Graph 3
c. Graph 4
d. Graph 1
Based on the given information, calculate the net cash flow from operating activities
using the indirect method. During the previous year, Skyrim Co. reported a net income
of $136,500. Its depreciation expense was $38,000 and its accounts payable balance
decreased by $29,250.
a. $98,500
b. $174,500
c. $203,750
d. $145,250
The estimated amount that an asset can be sold for at the end of its useful life is called
its book value.
a. True
b. False
A check for $456 was erroneously charged by the bank as $654. In order for the bank
reconciliation to balance, you must subtract $198 from the bank statement balance.
a. True
b. False
A&M Co. provided services of $1,000,000 to clients on account. How does this
transaction affect A&M’s accounts?
a. Increase accounts receivable and cash by $1,000,000 each
b. Increase accounts receivable and revenues by $1,000,000 each
c. Increase accounts receivable and unearned revenues by $1,000,000 each
d. Increase cash and decrease accounts receivable by $1,000,000 each
During the previous year, Nightwork Co’s.net sales was$135,000, cost of goods sold
was $60,750, operating expenses were $81,000, and other revenues were $13,550. What
was Nightwork’s gross profit?
a. $74,250
b. $60,700
c. $(6,750)
d. $6800
Only a single line, which represents the difference between total sales revenues and
total costs, is plotted on the costvolumeprofit graph.
a. True
b. False