A trade discount is the same as a sales discount.
Income and losses are divided equally among the partners unless the partnership
agreement specifies otherwise.
Which of the following isTRUE of the net present value method?
A.It measures a project’s time-adjusted rate of return.
B.It discounts cash flows at the minimum desired rate of return.
C.It ignores cash flows beyond the payback period.
D.It applies only to mutually exclusive investment proposals.
Investors could use the statement of cash flows to determine whether the company will
be able to pay dividends and interest.
Liquidity means not having enough funds on hand to pay debts when they fall due.
The conservatism convention should not be used when the accountant is certain of a
particular measure.
A controlling investment is defined as ownership of more than 50 percent of the stock
of another company.
A company’s fiscal year need not correspond to the calendar year.
In a breakeven scatter diagram, the loss area continues till the total costs line is below
total revenues line.
Although the purpose of the confidentiality standard is to encourage management
accountants to remain loyal to their company, failure to disclose knowledge of internal
illegal acts to outside authorities can result in the accountants being charged as an
accessory to the crime.
The Adjusted Trial Balance columns of the work sheet are prepared by combining the
Trial Balance and Adjustments columns of the work sheet.
A purchase requisition is prepared after a purchase order.
Projected cost information for a new product to be produced by Kolier Manufacturing is
as follows:
The product is to be sold for $49.
a. Compute the number of units that must be sold to earn a profit of $80,000.
b. Compute the number of units that must be sold if advertising costs rise by $12,000
and a targeted profit of $120,000 is to be obtained.
c. Use the original information and sales of 10,000 units to compute the new selling
price that the company must use to obtain a profit of $200,000.
d. The most in annual sales that could be projected is 20,000 units. Determine the added
amount that could be spent on fixed advertising costs if the highest possible selling
price that management believes can be charged is $50 and if there is a targeted profit of
$225,000.
Edward Cheezer’s Inc. makes and sells frozen four-cheese pizzas, New York-style. The
expected selling price is $10 per pizza. The projected variable cost per pizza is $6. The
estimated fixed costs per month are $10,000.
The number of pizzas that must be sold to obtain a monthly profit of $20,000 is
A.2,000 pizzas.
B.5,000 pizzas.
C.2,500 pizzas.
D.7,500 pizzas.
Which of the four levels of the cost hierarchy would be used by a dress manufacturer
using an activity-based management for sewing seams on a garment?
A.Unit-level activity
B.Batch-level activity
C.Product-level activity
D.Facility-level activity
A summary of expected costs for a range of activity levels that is geared to changes in
the level of productive output is the definition of a
A.continuous budget.
B.flexible budget.
C.master budget.
D.period budget.
In a process costing system, unit cost is computed
A.on the basis of productive output for a period of time.
B.for each job worked on.
C.for direct materials costs only.
D.only for the last production process.
The recording of an expense could result in a corresponding increase in
A.owner’s equity.
B.revenue.
C.a liability.
D.an asset.
The linking of employee compensation to the achievement of measurable business
targets is called
A.compensation goal.
B.performance-based compensation.
C.performance target.
D.performance linkage.
Products Square, Rect, Tri, and Quatro have contribution margins of $5, $8, $6, and $4,
respectively, and require 3.5, 2.5, 2, and 3 machine hours per unit, respectively.
Assuming that all units produced could be sold and that total machine hours per month
are limited, on which product should the company concentrate its efforts?
A.Square
B.Rect
C.Tri
D.Quatro
The following information pertains to Patterson Corporation. Assume that all balance
sheet amounts represent both average and ending figures.
Patterson Corporation had 6,000 shares of common stock issued and outstanding. The
market price of Patterson common stock on December 31, 20×5, was $20. Patterson
paid dividends of $0.90 per share during 20×5.
What is the debt to equity ratio for this corporation? Round your answer to 1 decimal
place.
A.0.4 times
B.0.6 times
C.1.0 times
D.2.5 times
Which of the following is a difference between managerial and financial accounting?
A.Managerial accounting reports non-monetary information whereas financial
accounting reports both monetary and non-monetary information.
B.Managerial accounting is used by government authorities whereas financial
accounting is used by stockholders.
C.Managerial accounting prepares reports monthly whereas financial accounting
prepares reports annually.
D.Managerial information is confidential whereas financial accounting information is
publicly available.
Determine the April 2014 residual income for an investment center with the following
information:
A.$655,650
B.$688,000
C.$198,500
D.$704,750
The following is a quote found in a company’s annual report:
In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting. . .
This statement would have been made by
A.the company’s independent auditors.
B.the chief financial officer.
C.the chief executive officer.
D.the board of directors.
Which of the following items is not used in preparing the statement of owner’s equity?
A.Withdrawals.
B.Net income.
C.Additional investments.
D.Adjusting entries.
The breakeven point is
A.where fixed and variable costs reach the upper level of the relevant range.
B.the level of activity where all fixed costs are recovered.
C.the level of activity where total revenue are the same as total fixed costs.
D.the level of activity where the operating profits equal the variable costs.
Fantastic Lips Inc. specializes in manufacturing lipstick. Racy Red, one of more than 75
shades produced by the company, is made from castor oil, beeswax, aloe vera, and a
base compound. For the next 12 months, the company’s purchasing agent believes that
the cost of ingredients will be as follows:
The direct labor time standard is 4 hours per case at a standard direct labor rate of
$11.00 per hour. The standard overhead rates are $15.00 per direct labor hour for the
standard variable overhead rate and $13.00 per direct labor hour for the standard fixed
overhead rate.
a. Using these production standards, compute the standard unit cost of direct materials
per case of Racy Red if it takes 0.2 gallon of castor oil, 0.5 pound of beeswax, 0.3
gallon of aloe vera, and 1 gallon of base compound to produce one case.
b. Using the standard unit cost of direct materials per case determined in (a) and the
production standards given for direct labor and overhead, compute the standard unit
cost of one case of Racy Red lipstick.
Which accounting convention requires a note to the financial statements explaining the
company’s method of revenue recognition?
A.Comparability and consistency
B.Materiality
C.Conservatism
D.Full disclosure
If net sales total $50,000, beginning accounts receivable was $10,000, and ending
accounts receivable is 16,000, what is the days’ sales collected?
A.73 days
B.96 days
C.118 days
D.192 days
Mariposa Corporation had a Retained Earnings balance on January 1, 20×4, of
$936,000; declared cash dividends during 20×4 in the amount of $159,900, of which
$39,000 were not paid until 20×5; and reported an ending balance of Retained Earnings
of $1,326,000. Based on these facts alone, net income for 20×4 for Mariposa
Corporation must have been
A.$211,900.
B.$419,900.
C.$510,900.
D.$549,900.
If the indirect method is used, which of the following would be subtracted from net
income to arrive at net cash flows from operating activities?
A.Increase in Notes Payable.
B.Decrease in Inventory.
C.Decrease in Accounts Payable.
D.Depreciation Expense.
Which of the following errors will not cause the debit and credit columns of the trial
balance to be unequal?
A.A debit entry was recorded in the wrong account.
B.A debit was entered in an account as a credit.
C.The account balance was carried to the wrong column of the trial balance.
D.The balance of an account was incorrectly computed.
The equity method generally should be used to account for an investment in stock when
the level of ownership is
A)between 20 and 50 percent.
B)10 percent or more.
C)less than 20 percent.
D)between 10 and 40 percent.
Which of the following is not considered in computing net cost of purchases?
A.Freight-out expenses
B.Purchases
C.Freight paid on purchased goods
D.Purchases returns and allowances
The following selected amounts were extracted from the financial statements of Alma
Corporation.
Prepare a trend analysis for net sales, cost of goods sold, and gross margin. (Round
answers to the nearest tenth of 1 percent.) Use Year 1 as the base year.
The Silent Door Company manufactures soundproof doors. Each door requires two
pieces of 16-gauge sheet steel measuring 94 inches by 50 inches. The standard cost of
each piece of steel is $150. During the month of July, 2,040 doors were started and
completed, and there were no beginning or ending work in process inventories.
Accounting records revealed that 4,200 pieces of sheet steel were purchased during July
at a cost of $623,700. All 4,200 pieces were used during the month. Compute the direct
materials price and direct materials quantity variances for July production, assuming the
price variance is isolated at the time of purchase. Note whether the variances are
favorable or unfavorable. Round to the nearest dollar.
Highland, Inc. entered into the transactions listed below. In the journal provided,
prepare Highland’s entries, assuming use of the perpetual inventory system. Omit
explanations.
Match the following terms with their meanings.
A company receives $200, of which $8 is for sales tax and $12 is for excise tax. The
journal entry to record the sale is:
On its December 31, 20×4, balance sheet, Mesquite Corporation reported its
stockholders’ equity as follows:
During 20×5, the following transactions occurred:
Reacquired 2,500 shares at $7 per share.
Sold 1,200 shares of treasury stock at $8 per share.
Sold 500 shares of treasury stock at $6 per share.
Net income for 20×5 amounted to $80,000. No dividends were declared.
Prepare the stockholders’ equity section of the balance sheet as it should appear on
December 31, 20×5.
Yamishi Production had the following inventories for the first quarter of 2014:
Purchases of materials during the quarter were $427,800. Total direct labor costs were
incurred in the amount of $1,482,000. Actual overhead costs were incurred as follows:
operating supplies used, $17,100; janitorial and maintenance, $87,300; employee
benefits, $26,400; utilities, $162,000; depreciation of factory, $43,200; property taxes,
$24,000; factory insurance, $29,000. Net sales for the quarter were $3,562,200. Selling
and administrative expenses were $508,000. Income taxes should be computed at 40
percent.
Prepare a statement of cost of goods manufactured for the first quarter of 2014.
The general ledger account for Accounts Receivable shows a debit balance of $50,000.
Allowance for Uncollectible Accounts has a credit balance of $3,000. Net sales for the
year were $500,000. In the past, 3 percent of sales have proved uncollectible, and an
aging of accounts receivable resulted in an estimate of $20,000 of uncollectible
accounts receivable.
Using the percentage of net sales method, the entry to record the Uncollectible
Accounts Expense would be
Explain how the unit cost information is used by managers in the management process.