The relevant range of operations excludes extremely high and low levels of production
that are not likely to occur.
Answer:
If the partners agree on a formula to share income and say nothing about losses, then
the losses are shared equally.
Answer:
Investments in trading securities are always short-term investments.
Answer:
Accounting and reporting for merchandise purchases and sales are treated identically
under both GAAP and IFRS.
Answer:
The current ratio is calculated as current liabilities divided by current assets.
Answer:
Gross profit is the same as gross margin.
Answer:
Both the direct and indirect methods yield the identical net cash flow amount provided
or used by operating activities.
Answer:
Individual transactions in the sales journal are regularly posted to customer accounts in
the accounts payable ledger.
Answer:
Traditional budgeting is generally better than activity-based budgeting when attempting
to reduce costs by eliminating nonvalue-added activities.
Answer:
A purchase of land in exchange for a long-term note payable is reported in the
investing section of the statement of cash flows.
Answer:
Predetermined overhead rates are necessary because cost accountants use periodic
inventory systems.
Answer:
Much of managerial accounting is directed at gathering useful information about costs
for planning and control decisions.
Answer:
The task of preparing a budget should be the sole task of the most important department
in an organization.
Answer:
A noncash investing transaction should be disclosed as either a footnote or small
schedule attached to the statement of cash flows.
Answer:
A company’s cost of inventory was $317,500. Due to phenomenal demand for this
product, the market value of its inventory increased to $323,000. According to the
consistency principle, this company should write up the value of its inventory.
Answer:
The master budget consists of three major groups of budget components: the operating
budgets, the capital expenditures budgets, and the financial budgets.
Answer:
A company’s income before interest expense and taxes is $250,000 and its interest
expense is $100,000. Its times interest earned ratio is equal to .4.
Answer:
Salary allowances are reported as salaries expense on a partnership income statement.
Answer:
An advantage of bonds is that interest does not have to be paid.
Answer:
Under the perpetual inventory system, the cost of merchandise purchased is
accumulated in the Merchandise Inventory account.
Answer:
All capital investment evaluation methods use the time value of money concept.
Answer:
A copyright gives its owner the exclusive right to publish and sell a musical, literary, or
artistic work during the life of the creator plus 17 years.
Answer:
Cash flow information can assist internal users in planning day-to-day operating
activities.
Answer:
A plant asset’s useful life might not be the same as its productive life.
Answer:
The main principle of the lean business model is the elimination of waste of every kind
while satisfying the customer and providing a positive return to the company.
Answer:
Net profit margin reflects the percent of net income in each dollar of net sales.
Answer:
External users of financial statements are generally uninterested in segment
information to understand a company’s business activities.
Answer:
A payroll register usually shows the pay period dates, hours worked, gross pay,
deductions, and net pay of each employee for every pay period.
Answer:
Neither the net present value nor the internal rate of return methods of evaluating
investments consider the time value of money.
Answer:
The budget process is a continuous activity of planning, revising, and evaluating
business activities.
Answer:
Both cash dividends received and interest received are considered to be investing
inflows.
Answer:
After preparing a bank reconciliation, adjustments must be made for items reconciling
the bank balance and items reconciling the book balance.
Answer:
A company has already incurred a $100 cost in partially producing its two products.
Their selling prices when partially and fully processed are shown in the table below
with the additional costs necessary to finish their processing. Based on this information,
the company should process only product A further.
Answer:
General standards or guidelines of comparisons include the 2 to 1 level for the current
ratio and 1 to 1 level for the acid-test ratio.
Answer:
When using the equity method of accounting for investments in equity securities, the
receipt of cash dividends is recorded as revenue.
Answer:
Working capital is computed as current liabilities minus current assets.
Answer:
Given the following data, total product cost per unit under variable costing is $10.75.
Answer:
In order to streamline the purchasing process, department managers should place
orders directly with suppliers.
Answer:
Which of the following best describes costs assigned to the product under the variable
costing method?
Direct labor (DL)
Direct materials (DM)
Variable selling and administrative
Variable manufacturing overhead
Fixed selling and administrative
Fixed manufacturing overhead
A. DL, DM, variable selling and administrative costs, and variable manufacturing
overhead.
B. DL, DM, and variable manufacturing overhead.
C. DL, DM, variable manufacturing overhead, and fixed manufacturing overhead.
D. DL and DM.
E. DL, DM, fixed selling and administrative, and fixed manufacturing overhead.
Answer:
The times interest earned ratio is a measure of:
A. A company’s ability to pay its operating expenses on time.
B. A company’s ability to pay interest incurred even if sales decline.
C. A company’s profitability.
D. The relation between income and debt.
E. The relation between assets and liabilities.
Answer:
Match the following definitions and terms by placing the number that identifies the
best definition in the blank space next to the term.
A) Acid-test ratio
B) Single-step income statement
C) FOB
D) Merchandise inventory
E) General and administrative expenses
F) EOM
G) Inventory shrinkage
H) Multiple-step income statement
I) List price
J) Selling expenses
Answer:
A company had revenue of $550,000, rent expense of $100,000, utility expense of
$10,000, salary expense of $125,500, depreciation expense of $39,000, advertising
expense of $40,200, dividends in the amount of $183,000, and an ending balance in
retained earnings of $402,300. What is the appropriate journal entry to close income
summary?
A. Income Summary.$235,300
Retained Earnings..$235,300
B. Retained Earnings$235,300
Income Summary..$235,300
C. Income Summary.$52,300
Retained Earnings..$52,300.
D. Retained Earnings.$52,300
Income Summary…$52,300
E. Income Summary…$314,700
Retained Earnings$314,700
Answer:
A leasehold:
A. Is a short-term rental agreement.
B. Is the same as a patent.
C. Are the rights granted to the lessee by the lessor of a lease.
D. Is recorded as rent expense.
E. Is an investment asset.
Answer:
Good management accounting indicates that projects be evaluated using relevant data.
In choosing among alternatives, what factors (considerations) are relevant?
Answer:
The break-even time (BET) method is a variation of the:
A. Payback method.
B. Internal rate of return method.
C. Accounting rate of return method.
D. Net present value method.
E. Present value method.
Answer:
Tecom accepts the NOVA credit card for credit card sales. Tecom sends credit card
receipts to NOVA on a weekly basis. NOVA charges Tecom a 2% fee. Tecom usually
receives payment from NOVA within a week. Prepare entries in general journal form to
record the following transactions of Tecom involving the NOVA credit card.
Answer:
The following is an account for a production department, showing its costs for one
month:
Assume that materials are added at the beginning of the production process and that
direct labor and overhead are applied uniformly. If the units in ending goods in process
inventory cost $4,590, and the started and completed units cost $41,850, what was the
cost of completing the units in the beginning goods in process inventory?
A. $12,150
B. $2,160
C. $7,560
D. $54,000
E. $37,260
Answer:
Bath Company has a limited amount of direct material available for products 111 and
222. Each unit of 111 has a contribution margin of $5 and each unit of 222 has a
contribution margin of $25. A unit of 222 uses four times as much direct material as a
unit of 111. What is Baths most profitable sales mix, assuming there is unlimited
demand for either product?
A. Make all 222.
B. Make all
C. Make equal number of units of 111 and 222.
D. Make four times as many 111 as 222.
E. Make four times as many 222 as
Answer:
Reference: 17_04
Wall Nuts, Inc. produces paneling that requires two processes, A and B, to complete.
Oak is the best-selling of all the many types of paneling produced. Information related
to the 40,000 units of oak paneling produced annually is shown in the following table:
Wall Nuts total expected overhead costs and related overhead data are shown below.
Use the above data for Wall Nuts, Inc. to compute the total manufacturing cost per unit
of oak paneling assuming the company uses departmental overhead rates based on
machine hours in Department A and machine hours in Department B.
A. $8.70
B. $18.20
C. $21.95
D. $27.30
E. $36.00
Answer:
On July 22, a company purchased merchandise inventory at a cost of $5,250 with
credit terms 2/10, net 30. If the company pays for the purchase on August 7, what
would be the appropriate journal entry?
A.
B.
C.
D.
E.
Answer:
A company had average total assets of $897,000. Its gross sales were $1,090,000 and
its net sales were $1,000,000. The company’s total asset turnover is equal to:
A. 0.82
B. 0.90
C. 1.09
D. 1.11
E. 1.26
Answer:
On October 31, a company’s Cash account had a normal balance of $7,000. During
October, the account was debited for a total of $4,250 and credited for a total of $5,340.
What was the balance in the Cash account at the beginning of October?
A. $0 balance
B. $1,090 debit balance
C. $2,590 credit balance
D. $8,090 debit balance
E. $9,590 credit balance
Answer:
The Federal Insurance Contributions Act (FICA) requires that each employer file a:
A. W-4
B. Form 941
C. Form 1040
D. Form 1099
E. Form 521B
Answer:
Corona Company’s balance sheet accounts follow:
What is Corona Companys days sales uncollected ratio for 2014 assuming net sales and
gross profit for the period were $1,236,783, $927,587 respectively?
A. 25.20
B. 23.03
C. 20.99
D. 24.58
E. 22.17
Answer:
Iolaus Company provides the following data for the current year:
Required:
(a) Calculate the predetermined overhead allocation rate based on direct labor.
(b) Determine the amount of overhead applied to production.
(c) Prepare the journal entry to apply factory overhead to goods in process.
Answer:
A company had net income of $250,000. On January 1, there were 12,000 shares of
common stock outstanding. On May 1, the company issued an additional 9,000 shares
of common stock. The company declared a $7,900 dividend on its noncumulative,
nonparticipating preferred stock. There were no other stock transactions. The company
had earnings per share of:
A. $13.45
B. $13.89
C. $11.53
D. $26.90
E. Amount cannot be determined as problem does not state if there are any dividends in
arrears.
Answer:
Reference: 20_04
Kyoto, Inc. predicts the following sales in units for the coming four months:
Although each month’s ending inventory of finished units should be 60% of the next
month’s sales, the March 31 finished goods inventory is only 100 units. A finished unit
requires five pounds of raw material B. The March 31 raw materials inventory has 200
pounds of B. Each month’s ending inventory of raw materials should be 30% of the
following month’s production needs.
If each unit of Kyotos product takes two hours to produce and the labor rate is expected
to be $10 per hour, what is the budgeted labor cost for May?
A. $4,000
B. $4,240
C. $5,360
D. $5,600
E. $5,840
Answer:
Cash flows from interest received are reported in the statement of cash flows as part
of:
A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Noncash activities.
E. None of these as this is not reported in the statement of cash flows.
Answer:
A company is considering purchasing a machine for $21,000. The machine will
generate an after-tax net income of $2,000 per year. Annual depreciation expense would
be $1,500. What is the approximate accounting rate of return?
A. 19%
B. 33%
C. 17%
D. 10%
E. 25%
Answer:
Castaway Company reports the following first year production cost information:
a. Compute production cost per unit under variable costing.
b. Compute production cost per unit under absorption costing.
c. Determine the cost of ending inventory using variable costing.
d. Determine the cost of ending inventory using absorption costing.
Answer:
The control principle for accounting information systems requires that the:
A. Benefits from an activity outweigh the costs of the activity.
B. System report useful, understandable, timely, and pertinent information for effective
decision making.
C. System aid managers in controlling and monitoring business activities.
D. System adapt to changes in the company, business environment, and needs of
decision makers.
E. System conform with a company’s activities, personnel, and structure.
Answer:
The following data are available for a company’s manufacturing activities:
Assume the company uses the weighted-average inventory method. If materials are
added when the production process begins and direct labor is applied uniformly
throughout the process, what are the equivalent units for direct materials and for direct
labor, respectively?
A. 21,000; 23,000
B. 26,000; 19,250
C. 21,000; 19,250
D. 26,000; 23,000
E. 19,250;19,250
Answer:
Given the following data, calculate the total product cost per unit under variable
costing.
A. $4.75 per unit
B. $7.05 per unit
C. $15.38 per unit
D. $13.08 per unit
E. $16 per unit
Answer:
Reference: 20_03
Berkley Co.’s sales are 10% for cash and 90% on credit. Credit sales are collected as
follows: 30% in the month of sale, 50% in the next month, and 20% in the following
month. On December 31, the accounts receivable balance includes $12,000 from
November sales and $42,000 from December sales.
Assume that total sales for January and February are budgeted to be $50,000 and
$100,000, respectively. What are the expected cash receipts for February from current
and past sales? Round all calculations to full dollar amounts.
A. $80,500
B. $71,500
C. $34,500
D. $61,500
E. $59,500
Answer:
Effective budgeting requires all of the following except:
A. Attainable goals.
B. Determination of budgets by top levels of management.
C. Evaluation processes that provide opportunities to explain any failures.
D. Clear communication of all budgets.
E. Adequate supporting documentation for the budget.
Answer:
The process of analyzing alternative investments and deciding which assets to acquire
or sell is known as:
A. Planning and control.
B. Capital budgeting.
C. Variance analysis.
D. Master budgeting.
E. Managerial accounting.
Answer:
Reference: 17_02
Aztec Industries produces bread which goes through two operations, mixing and
baking, before it is ready to be packaged. Next years expected costs and activities are
shown below.
Compute Aztecs departmental overhead rate for the baking department based on direct
labor hours.
A. $1.50 per DLH
B. $5.00 per DLH
C. $0.75 per DLH
D. $0.50 per DLH
E. $2.08 per DLH
Answer:
Reference: 22_05
Bookman Company has three operating departments: Department A, Department B, and
Department C. Administrative costs are allocated to operating departments based on the
number of workers and maintenance costs are allocated to operating departments based
on square footage occupied.
Assume that Bookman allocated $11,250 administrative costs to Department A. Based
on the above data, determine the companys total administrative costs.
A. $32,143
B. $1,687
C. $22,500
D. $75,000
E. $5,625
Answer:
Reference: 19_02
Star Services, Inc., a manufacturer of telescopes, began operations on October 1 of the
current year. During this time, the company produced 50,000 units and sold 35,000
units at a sales price of $500 per unit. Cost information for this year is shown in the
following table:
Given the Star Services Inc. data, what is net income using variable costing?
A. $18,670,000
B. $18,774,000
C. $16,360,000
D. $11,274,000
E. $11,170,000
Answer:
Match the following accounting system components with the appropriate item(s):
A. Input devices
B. Information storage
C. Information processor
D. Output devices
E. Source document
Answer:
At December 31 of the current year, a company reported the following:
Total sales for the current year: $780,000, includes $160,000 in cash sales.
Accounts receivable balance at Dec. 31, current year: $190,000.
Bad debts written off during the current year: $6,800.
Balance of allowance for doubtful accounts at January 1, current year: $8,300 credit.
Prepare the necessary adjusting entries to record bad debts expense assuming this
company’s bad debts are estimated to equal:
a. 1.5% of credit sales
b. 5% of accounts receivable
Answer:
A company records the fees for legal services paid in advance by its clients in an
account called Unearned Legal Fees. If the company fails to make the end-of-period
adjusting entry to record the portion of these fees that has been earned, one effect will
be:
A. An overstatement of equity.
B. An understatement of equity.
C. An understatement of assets.
D. An understatement of liabilities.
E. An overstatement of assets.
Answer:
What are sales variances? How are they used?
Answer:
_____________________ preferred stock gives the issuing corporation the right to
purchase or retire the stock from its holders at specified future prices and dates.
Answer:
The major advantages of using a single plantwide overhead rate are
____________________ and ____________________.
Answer:
Identify and describe the four inventory valuation methods.
Answer:
A company has $2,400,000 in stockholders’ equity, that includes 500 shares of $50 par
value noncallable preferred stock outstanding and 250,000 shares of common stock
outstanding. Calculate the book value per (1) preferred share and (2) common share.
Answer:
There are many differences between financial and managerial accounting. Identify and
explain at least three of these.
Answer:
On August 17, at the end of the day, the cash register’s record shows $957, but the
count of cash in the register is $965. Prepare the general journal entry to record the
day’s cash sales.
Answer:
During the current year, Quark Company earned $90,000 in income and paid cash
dividends of $10,000 to preferred shareholders. Quark had 12,500 weighted-average
shares of common stock outstanding for the year. Calculate the company’s earnings per
share.
Answer:
FOB _________________ means the buyer accepts ownership when the goods depart
the seller’s place of business. The buyer is responsible for paying shipping costs and
bears the risk of damage or loss when goods are in transit.
Answer:
What is managerial accounting and how is it used to aid decision makers?
Answer:
What are the four steps in the effective management of variance analysis?
Answer:
The _____________________ method of assigning costs to inventory and cost of
goods sold assumes that the inventory items are sold in the order acquired.
Answer:
Explain the difference between a large stock dividend and a small stock dividend. In
addition, explain how to record these two types of stock dividends.
Answer:
Identify and discuss the key characteristics of partnerships. Also, identify
nonpartnership organizations that possess the positive aspects of both partnerships and
corporations.
Answer:
The difference between the amount borrowed and the amount repaid is referred to as
_______________.
Answer:
A company purchased equipment valued at $200,000 on January The equipment has an
estimated useful life of six years or 5 million units. The equipment is estimated to have
a salvage value of $13,400. Assuming the double declining balance method of
depreciation, what is the book value at the end of the second year?
A $166,667.00
B. $88,897.78
C. $96,416.25
D. $168,900.00
E. $137,800.00
Answer:
If Falcon Company’s actual overhead incurred during a period was $32,700 and the
company reported a favorable overhead controllable variance of $1,200 and an
unfavorable overhead volume variance of $900, how much standard overhead cost was
assigned to the products produced during the period?
Answer:
A company has a current ratio of 1.92, total liabilities of $193,849, long-term notes
payable of $85,791, and a quick ratio of .96. What are total current assets for the
company?
Answer:
What distinguishes liabilities from equity?
Answer:
Laurel and Hardy are managers of two product lines for Keaton Company. One of them
is a candidate for promotion based on performance. Using the data below, determine
who had the better performance. Detail your calculations and support your answer.
Answer: