The terms total manufacturing costs and total cost of goods manufactured are
synonymous.
When the present value of a bond issue is calculated, both the present value of a single
sum and the present value of an annuity must be calculated.
If targeted sales are 12,000 units, the sales price per unit is $70, fixed costs are
$130,000, and variable costs are $40 per unit, then planned profit must be $360,000.
The journal is a chronological record of all transactions.
The average-cost method under a periodic inventory system relies on a simple average
calculation as total cost of goods available for sale divided by the total units availabler
for sale.
Overhead costs can be directly traced to products once the products are completed.
Period cost and product cost are synonymous terms.
A manager can improve the economic value of an investment center by increasing sales.
It is not necessary to provide an area on the performance report for a manager’s reasons
for variances.
The balanced scorecard links the perspectives of an organization’s stakeholders with the
organization’s mission and vision, performance measures, strategic plan, and resources.
Determining net cash flows from operating activities using the indirect method reveals
cash collected from customers.
Management would not use the statement of cash flows to
A.assess the liquidity of the business.
B.determine dividend policy.
C.evaluate the effects of major policy decisions involving investments and financing.
D.determine the financial position of the company.
After initially recording an asset at cost, fair value is
A.the price at which an asset could be sold in a current transaction between independent
parties.
B.the actual, or historical, price at which the asset was acquired.
C.the easiest value used to measure and record assets.
D.verifiable at all future dates by referring to the invoice price paid for the asset.
A flexible budget is most useful
A.when company has only fixed costs.
B.when actual output equals budgeted output.
C.as a cost control tool to help evaluate performance.
D.when a product’s cost structure includes variable costs only.
Lopez Co. is interested in purchasing equipment that would improve its operational
efficiency. The cost of the equipment is $400,000 with an estimated residual value of
$30,000 and a useful life of ten years. The equipment is expected to fetch cash inflows
of $60,000 a year. The company’s minimum rate of return is 8 percent. The present
value of $1 for ten years at 8 percent is 0.463, and the present value of an annuity of $1
at 8 percent and ten years is 6.710.
Using the above information for Lopez, the actual rate of return that the project earns is
A.negative.
B.greater than 8 percent.
C.less than 8 percent.
D.equal to 8 percent.
In a graph of cost-volume-profit analysis, the
A.total revenue line typically begins at a required minimum level.
B.slope of the total cost line is dependent on the variable cost per unit.
C.total cost line normally begins at zero.
D.sales level at which total cost and total revenue lines intersect is also equal to fixed
costs.
The last step in the operating cycle is the
A.sale of merchandise inventory for cash or on credit.
B.payment for purchases made on credit.
C.collection of cash from credit sales.
D.purchase of merchandise inventory for cash or on credit.
Use the following data from Dusk International, a company using a process costing
system, to answer the questions below.
The company uses average process costing method.
Units completed and transferred out of the department during the month totaled
A.12,000.
B.12,500.
C.11,250.
D.9,500.
Special purpose journals promote
A.economy and control.
B.faithful representation and relevance.
C.relevance and timeliness.
D.going concern and periodicity.
When the equity method is used to account for a long-term investment in the stock of
another company, the carrying value of the investment is affected by
A)declines in the market value of the stock.
B)the earnings and dividends of the investee.
C)an excess of market price over cost.
D)neither the earnings nor the dividends of the investee.
When the effective interest method of amortization is used for a bond premium, the
amount of interest expense for an interest period is calculated by multiplying the
A.carrying value of the bonds at the beginning of the period by the face interest rate.
B.face value of the bonds at the beginning of the period by the effective interest rate.
C.carrying value of the bonds at the beginning of the period by the effective interest
rate.
D.face value of the bonds at the beginning of the period by the face interest rate.
Which of the following most likely would be classified as a current liability?
A.Mortgage payable
B.Dividends payable
C.Five-year notes payable
D.Bonds payable
Trunkey Products Inc. uses a process costing system and has just completed production
for the month of November 2014. The following production data were obtained from
the accounting records:
a. Units in beginning inventory totaled 6,800 and were 30 percent complete as of
November 1 (all direct materials were added to these products in the preceding month).
b. During the period, 156,200 units were started.
c. 19,200 units were partially completed as of November 30, 2014.
d. Ending work in process inventory was 40 percent complete at month end.
From the data given, compute the equivalent units of production for direct materials and
conversion costs for the month ended November 30, 2014, assuming a FIFO flow of
costs.
Which of the following terms best describes the assumption made in applying the four
inventory methods?
A.Cost flow
B.Goods flow
C.Asset flow
D.Physical flow
Which of the following statements is not TRUE when FLK Company discounts a note
receivable to the bank?
A.FLK may ultimately have to pay the bank when the note is due.
B.If the maker of the note pays the bank on time, no liability will result to FLK.
C.FLK will receive the maturity value from the bank.
D.A contingent liability arises for FLK.
The following totals for the month of May were taken from the payroll register of the
Hillview Company:
Prepare journal entries to record the following, omitting explanations and rounding
amounts to the nearest dollar:
a. Monthly payroll (assuming a Medicare tax rate of 1.45 percent and Social Security
tax rate of 6.2 percent)
b. Accrual of employer’s payroll taxes (assuming the Social Security and Medicare
taxes to be equal to the amount for employees, a FUTA tax of 0.8 percent, and a state
unemployment tax of 5.4 percent)
The following users of accounting information have a direct financial interest in a
business except
A.a creditor.
B.a financial adviser.
C.management.
D.an investor.
The owner of an amusement park is considering installing a new ride. The ride would
cost $10,000, produce an estimated net cash flow of $1,575 annually, and last for nine
years.
a. Assuming an interest rate of 10 percent, what is the present value of the net cash
flows expected from the ride? Use future value and/or present value tables in
calculating your answer.
b. Should the ride be purchased?
An auditor maintains no direct financial interest in the company he or she is auditing.
The principle being followed is
A.independence.
B.integrity.
C.objectivity.
D.due care.
The development of international accounting standards is the primary function of the
A.IRS.
B.AICPA.
C.IASB.
D.PCAOB.
The calculation of free cash flow contains a deduction for
A.interest expense.
B.depreciation.
C.net capital expenditures.
D.net cash flows from operating activities.
Parson Company issues $500,000 of 30-year, 8 percent bonds at 106. Interest is paid
semiannually, and the effective interest method is used for amortization. Assume that
the market interest rate for similar investments is 7 percent and that the bonds are issued
on an interest date.
a. What amount was received for the bonds?
b. How much interest is paid each interest period?
c. How much bond interest expense is recorded on the first interest date (after the issue
date)?
d. What is the carrying value of the bonds after the first interest date (after the issue
date)?
The going concern assumption helps solve the
A.matching issue.
B.accounting period issue.
C.revenue recognition issue.
D.continuity issue.
Assume that on February 25, a customer who owes Berry Sales Company $2,000 is
declared bankrupt by a federal court. The entry that would be made to write off this
account is:
Whalen Mining, a U.S company, purchases products from a British company for
£1,000,000. Between the dates of purchase and payment, the exchange value of the
pound decreased from $2.00 to $1.90. Compute Whalen Mining’s exchange gain or
loss. Where would the gain or loss be reported?
Under what circumstances is a contingent liability reflected in the accounting records as
though an actual liability exists?
On November 1, 20×5, Scarlett Company issued $400,000 worth of ten-year, 9 percent
bonds. The semiannual interest dates are November 1 and May 1. Because the market
interest rate of similar investments was 8.5 percent, the bonds were issued at a price of
103. Ignoring year-end accruals, prepare entries in journal form without explanations to
record the bond issue on November 1, 20×5, and the payments of interest and
amortization of premium on May 1 and November 1, 20×6. Use the effective interest
method of amortization. Round answers to the nearest dollar.
Brady Systems entered into the transactions listed below. In the journal provided,
prepare Brady’s journal entries, assuming use of the periodic inventory system. Omit
explanations.
A $50,000 bond issue with a carrying value of $47,000 is called at 102 and retired. The
entry to record the retirement of bonds is:
Match each item with the correct statement below.
Kangjon Company allows each employee two weeks’ paid vacation after the employee
has worked at the company for one year (50 weeks work). On the basis of past
experience, management estimates that 80 percent of employees will qualify for
vacation pay this year. Assume that the March payroll is $400,000. Compute the
vacation pay expense for the month. Show your computation.