The salary, interest, and stated ratio method of allocation can still be applied when a net
loss has occurred.
A manufacturer’s inventory consists of raw materials, work in process, and finished
goods.
Bond certificates are issued to creditors of the issuing corporation.
Corrective action is necessary even if a variance is insignificant.
If it takes 45 days to sell inventory, 30 days to collect for the sale, and creditors’
payment terms are 60 days, the financing period is 135 days.
Ratio analysis is useful only if the ratio states a meaningful relationship between two
numbers.
Which of the following statements is notTRUE about depreciation for tax purposes?
A.The straight-line method is used for most assets.
B.The same methods are not acceptable for financial reporting.
C.Plant assets are written off rapidly.
D.There is a bonus first-year deduction.
Promises to pay employees pensions after they retire are difficult to identify and value
and therefore need not be recognized in the financial statements until cash payment is
made.
When the allowance method is used, the write-off of an account receivable results in an
expense at the time of write-off.
The standard overhead cost is the sum of the estimates of variable and fixed overhead
costs in the next accounting period.
When a withdrawal is made, the Cash account is debited and the Withdrawals account
is credited.
Management’s regular assessment of its internal controls is part of monitoring.
Accounts Receivable is closed to Income Summary as part of the closing process.
Job order costing is used by companies that make unique or special-order products.
Managers do not need to know why a budget is being prepared, as these are prepared by
higher authorities.
In a service organization using a job order costing system, actual overhead will be the
same as applied overhead.
The obligation to provide services to another entity is a type of liability.
During periods of consistently falling prices, the FIFO inventory method will produce
the highest possible amount of net income.
Leasehold improvements become the property of the lessor at the end of the lease.
Use this information to answer the following question.
A periodic inventory system is used.
Using LIFO, cost of goods sold is
A.$3,480.
B.$8,928.
C.$2,664.
D.$8,112.
The reason for combining direct labor and overhead costs together and calling them
‘conversion costs’ is that
A.they both are direct costs of production.
B.the equivalent unit amount for direct materials will be the same as that for direct
labor and overhead costs.
C.both these types of costs usually are incurred uniformly throughout the production
process.
D.the costs for direct labor and overhead are not accounted for separately.
When using the net present value method to compare keeping an old building or
disposing it and acquiring a new building, the current cash residual value of the old
building should be
A.deducted from the price paid for the new building.
B.viewed as a cash outflow.
C.added to the price of the new building.
D.irrelevant to the decision.
The debt to equity ratio equals
A.owner’s equity divided by total liabilities.
B.owner’s equity divided by long-term liabilities.
C.total liabilities divided by owner’s equity.
D.current liabilities divided by average owner’s equity.
The owner’s Capital, Withdrawals, and Income Summary accounts for Harmon Repair
Company for the accounting period are presented below in T account form after the
recording and posting of closing entries:
The Bill Harmon, Capital balance on 1/1 was
A.$300.
B.$800.
C.$700.
D.$1,500.
Which of the following documents would be sent to the treasurer?
A.Purchase order
B.Invoice
C.Check authorization
D.Bank statement
The asset turnover ratio equals
A.revenues divided by average total assets.
B.average total assets divided by net income.
C.average total assets divided by total liabilities.
D.net income divided by average total assets.
The total variable overhead variance is comprised of the
A.variable overhead efficiency and fixed variances.
B.fixed overhead budget and volume variances.
C.variable overhead spending and efficiency variances.
D.labor efficiency and rate variances.
On January 2, 2014, Lionel Company issued $40,000 of notes payable, of which
$10,000 is due on January 2 for each of the next four years. The proper balance sheet
presentation on December 31, 2014, is
A.Current Liabilities, $40,000.
B.Current Liabilities, $10,000; Long-Term Liabilities, $30,000.
C.Long-Term Liabilities, $40,000.
D.Current Liabilities, $30,000; Long-Term Liabilities, $10,000.
The Sarbanes-Oxley Act has succeeded in
A.heightening awareness and diligence with respect to internal control.
B.increasing transparency in privately owned companies.
C.stopping fraud from occurring.
D.all of these.
Days’ inventory on hand is used to analyze
A.cash flow adequacy.
B.operating asset management.
C.profitability.
D.long-term solvency.
Use this information to answer the following question.
Here is the balance sheet for Costello Container Company:
If the balance in the Cash account were used to buy more equipment, then the total
assets would
A.remain unchanged.
B.increase by $8,000.
C.decrease by $8,000.
D.increase by $21,000.
Use the following information regarding Larson Company to answer the question
below.
1> Established a petty cash fund in the amount of $250.
2> Reimbursed the petty cash fund given the following petty cash fund disbursements:
a. Payment for postage, $20.
b. Payment for supplies, $70.
3> Increased the petty cash fund to $300.
4> Cash over at the end of the first period was $5.
The entry to record the reimbursement of the petty cash fund would include a
A.credit to Postage Expense for $20.
B.debit to Petty Cash for $90.
C.credit to Cash for $85.
D.debit to cash for $5.
Use the following information to answer the question below.
The following accounts appear in the ledger of Pepper Corporation on December 31,
20×5
A balance sheet prepared on December 31, 20×5 , would report total contributed capital
of
A.$176,000.
B.$190,000.
C.$226,000.
D.$306,000.
Period cost is also called
A.variable cost.
B.direct cost.
C.value-adding cost.
D.noninventoriable cost.
The following are monthly totals taken from the log of laser printer used by the
Hardcopy Printing International. Cost was based on a flat fee plus a declining cost per
copy made after a minimum number of copies had been made each month.
To differentiate the variable and fixed costs in the use of this machine for future
planning, use the high-low method to (a) determine the variable cost per copy (round
your answers to two decimal places) and (b) compute the fixed and variable costs for
the months of August and December (round your answers to nearest whole number).
How will the declaration and distribution of a 10 percent stock dividend affect the
issuing corporation’s balance of retained earnings and total stockholders’ equity,
respectively?
A.Decrease and no effect
B.No effect and no effect
C.Decrease and decrease
D.No effect and decrease
A company should classify land held for a planned manufacturing facility as
A.an intangible asset.
B.an investment.
C.a current asset.
D.property, plant, and equipment.
A company establishes a $150 petty cash fund. The fund is replenished in the amount of
$136, after petty cash vouchers of $66 for transportation, $44 for supplies, and $22 for
postage had accumulated. Was there a cash shortage, overage, or neither? (State amount
if overage or shortage.)
On August 26, 20×5, Via Linda Corporation’s board of directors declared a 2 percent
stock dividend applicable to the outstanding shares of its $5 par value common stock, of
which 150,000 shares are authorized, 130,000 are issued, and 10,000 are held in the
treasury. The stock dividend was distributable on September 25 to stockholders of
record on September 10. On August 26, the market value of the common stock was $12
per share. On November 26, the board of directors declared a $0.20 per share cash
dividend. No other stock transactions have occurred. Record the transactions on August
26, September 10, September 25, and November 26. Make the December 31 entry to
close Dividends and Stock Dividends to Retained Earnings.
On January 1, 20×5, Ed Bradley Co.issued five-year term bonds with a face value of
$700,000. Interest is payable annually on December 31. The bonds were issued for
$727,300. The effective interest method of amortization is used. Ed Bradley reported
Bond Interest Expense of $65,457 on its income statement for the year ended December
31, 20×5. Calculate the effective interest rate for these bonds.
A company receives $360 for a sale, of which $20 is for sales tax. The journal entry to
record the sale is:
What is independence, and why is it important for a CPA to maintain it when
conducting an audit?
Copper, Inc. purchased merchandise worth $1,800 on credit, terms n/30. What is the
required journal entry to record the transaction under the periodic inventory system?
What is a LIFO liquidation, and what is its effect on income before income taxes?