Normally, depreciation calculations are based on the exact number of days the asset is
held during the period.
Reporting format of managerial accounting is flexible and driven by user’s needs.
Depreciation Expense’“Equipment is an example of a contra account.
In a breakeven graph, the slope the total cost line is dependent on the variable costs per
unit.
An intangible asset with a determinable useful life should be amortized over that useful
life.
In cost-plus contracts, a predetermined amount of profit is added to the cost of the
contract.
Inventory turnover is a measure expressed in terms of a percentage.
Whether exchanging similar or dissimilar assets, accounting for the transaction is the
same.
Interest on bonds usually is paid monthly.
The term salaries refers to the compensation of employees who are paid at an hourly
rate.
Managers must be careful while making capital budgeting decisions so that the selected
alternative will contribute the most to future profits.
Linear approximation is a method of converting nonlinear variable costs into linear
fixed costs.
Under a capital lease, the lessee records both an asset and a liability.
In a common-size balance sheet, total liabilities are represented by 100 percent.
Receiving dividends is the only way in which stockholders can earn a return on their
investment in a corporation.
Period costs flow through three types of inventory accounts before becoming part of the
cost of goods sold amount.
The amount of cash received on issuance of a 9 percent, $10,000 bond dated February 1
and issued June 1 at 102 1/2 is
A.$10,300.
B.$11,100.
C.$10,200.
D.$10,550.
Cielo Corporation had net income of $740,000 in 20×4 and $830,000 in 20×5. Total
stockholders’ equity at the end of 20×4 was $1,250,000 and total stockholders’ equity at
the end of 20×5 was $1,500,000. Cielo’s total assets at the end of 20×4 were $2,210,000
and its total assets at the end of 20×5 were $2,860,000. Based on this information, what
is Cielo’s return on equity for 20×5?
A.32.74%
B.55.33%
C.57.09%
D.60.36%
Calculate answers to the following using future value and/or present value tables:
a. What is the present value of receiving $1,000 at the end of each year for 6 years,
assuming 7 percent interest compounded annually?
b. What amount must be deposited at the bank today to grow to $300 in five years,
assuming 14 percent interest compounded semiannually?
The amount of cash received on issuance of a 9 percent, $10,000 bond dated February 1
and issued June 1 at 96 is
A.$9,300.
B.$9,975.
C.$9,600.
D.$9,900.
Which of the following accounts would not appear as an asset on a manufacturer’s
balance sheet?
A.Finished Goods
B.Work in Process
C.Factory Overhead
D.Raw Materials
On January 2, 20×5, Fresh Inc. issued 20-year bonds payable with a face value of
$1,000,000 and a face interest rate of 10 percent. The bonds were issued to yield a
market interest rate of 9 percent. Interest is payable semi-annually on January 1 and
July 1. In calculating the present value of the bond issue of January 2, 20×5, the factor
used to calculate the present value of the $1,000,000 is
A.10%, 20 periods
B.5%, 40 periods
C.9%, 20 periods
D.4.5%, 40 periods
In 2014, Barnes Enterprises purchased an oil well for $12,000,000. It is estimated that
80,000,000 barrels can be extracted from the well. Depletion expense during 2015,
when 2,000,000 barrels were extracted and sold, totaled
A.$30,000.
B.$300,000.
C.$33,333.
D.$3,333,333.
Theoretical capacity refers to
A.the actual activity level at which a business is operating.
B.the maximum productive output possible for a business.
C.an output level that allows for normal work stoppages.
D.the operating capacity that will meet expected sales demand.
A check for $236 is incorrectly recorded by the company as $263. On the bank
reconciliation, the error would
A.appear as a deduction of $27 from the balance per books.
B.appear as an addition of $27 to the balance per bank.
C.appear as a deduction of $263 from the balance per books and an addition of $236 to
the balance per bank.
D.appear as an addition of $27 to the balance per books.
In a trend analysis, an index number of 139 for 20×5 sales indicates that
A.sales for 20×5 were 139 percent higher than sales for the same company in the base
year.
B.sales for 20×5 for this company were 139 percent of the sales figure of another
company being used in the comparison.
C.sales for 20×5 were 139 percent of the sales for the same company in the base year.
D.actual sales for 20×5 exceeded budgeted sales for 20×5 by 39 percent.
Interest coverage ratio is a measure of
A.financial leverage.
B.income after taxes and interest divided by interest expense.
C.stockholders’ control.
D.protection from default on interest.
A. From the simplified balance sheet and income statement of the business below,
compute the following ratios. Assume that the June 30 amounts for total assets and
owner’s equity also represent their average amounts for the period. Round percentages
to the nearest whole percent.
a. Working capital
b. Current ratio
c. Profit margin
d. Return on assets
e. Debt to equity ratio
f. Return on equity
g. Asset turnover
B. Discuss the liquidity and profitability of Keene Industries.
Which of the following could not possibly be a closing entry?
A.Debit Income Summary and credit owner’s Capital
B.Debit Income Summary and credit Withdrawals
C.Debit owner’s Capital and credit Withdrawals
D.Debit owner’s Capital and credit Income Summary
Which of the following contains period costs?
A.Work in Process Inventory
B.Finished Goods Inventory
C.Cost of Goods Sold
D.Selling and administrative expenses
Use this information to answer the following question.
If the income statement were prepared in a multistep form, gross margin from sales
would be
A.$75,750.
B.$72,000.
C.$67,000.
D.$82,000.
An employee has gross earnings of $1,200 and withholdings of $91.80 for Social
Security and Medicare taxes and $120 for income taxes. The employer pays $91.80 for
Social Security and Medicare taxes, $9.60 for FUTA, and $64.80 for SUTA. The total
cost of this employee to the employer is
A.$1,301.40
B.$1,200.00
C.$1,366.20
D.$1,578.00
The adjustment dated 12/31/20×1 to accrue interest to be paid most likely would be
reversed by which of the following entries?
A.Debit Interest Payable and credit Interest Expense dated 1/1/20×2
B.Debit Interest Expense and credit Interest Payable dated 12/31/20×1
C.Debit Interest Payable and credit Interest Expense dated 12/31/20×1
D.Debit Interest Expense and credit Interest Payable dated 1/1/20×2
Which of the following documents is prepared by a company’s accounting department?
A.Bank statement
B.Receiving report
C.Check authorization
D.Invoice
Legal capital is a descriptive phrase for
A.stockholders’ equity.
B.residual equity.
C.market value.
D.par value.
Goodwill would appear in which balance sheet section?
A.Investments
B.Property, plant, and equipment
C.Current assets
D.Intangible assets
Why will an understated beginning inventory produce an overstated income before
income taxes for the same period? Will the understatement have a favorable or
unfavorable effect on current year income taxes?
Discuss and define financial risk, financial leverage, and negative financial leverage.
Under what circumstances will a loss be recorded on the sale of equipment, and what
effect will the loss have on stockholders’ equity?
Which accounts are analyzed to determine cash flows from financing activities?
Use the following data for Jenkins Co. to prepare a statement of cash flows using the
indirect method for the year ended June 30, 20×6.
Additional information:
Use the following adjusted trial balance to answer the question below.
The entry to close the John Clair, Withdrawals account is:
Tomkin Company had current liabilities of $400,000, current assets of $650,000, total
liabilities of $1,300,000 and total assets of $2,200,000. What is Tomkin’s debt to equity
ratio, rounded to one decimal place?