The employees of Royal Clothes achieved all of the sales goals for 2017. Royal decides
to reward the employees with a bonus of 20% on annual net income, after deducting the
bonus. The net income before the calculation of the bonus is $312,000. What is the
amount of the bonus?
A) $62,400
B) $52,000
C) $55,059
D) $12,480
The cash basis of accounting ignores ________.
A) payables
B) revenue
C) cash
D) expenses
Sybil, Inc. uses a predetermined overhead allocation rate to allocate manufacturing
overhead costs to jobs. The company recently completed Job 300X. This job used 11
machine hours and 5 direct labor hours. The predetermined overhead allocation rate is
calculated to be $43 per machine hour. What is the amount of manufacturing overhead
allocated to Job 300X using machine hours as the allocation base?
A) $473
B) $215
C) $688
D) $258
Sheehan, Inc. provides the following income statement for 2017:
Calculate the times-interest-earned ratio. (Round your answer to two decimal places.)
A) 73.00 times
B) 45.00 times
C) 39.70 times
D) 46.00 times
Melville Company makes special equipment used in cell towers. Each unit sells for
$410. Melville produces and sells 12,700 units per year. They have provided the
following income statement data:
A foreign company has offered to buy 85 units for a reduced sales price of $320 per unit.
The marketing manager says the sale will not affect the company’s regular sales. The sales
manager says that this sale will require incremental selling and administrative costs, as it is
a one-time deal. The production manager reports that it would require an additional
$20,000 of fixed manufacturing costs to accommodate the specifications of the buyer. If
Melville accepts the deal, how will this impact operating income? (Round any intermediate
calculations to the nearest cent, and your final answer to the nearest dollar.)
A) Operating income will increase by $1,501.
B) Operating income will decrease by $1,501.
C) Operating income will increase by $27,200.
D) Operating income will decrease by $18,499.
The Accounts Receivable account of Rosewood, Inc. has the following postings:
Calculate the ending balance of the account.
A) $25,000 debit
B) $23,000 debit
C) $2,000 credit
D) $21,000 debit
The production manager of a company, in an effort to gain a promotion, negotiated a
new labor contract with the factory employees that required them to bear a greater
percentage of benefit costs than before, thus bringing down the cost of direct labor to
the company. Shortly afterward, several experienced and highly skilled workers
resigned, and were replaced by new employees whose work was very slow during their
training period. At the end of the quarter, the company’s profits fell 10%. This would
produce a(n) ________.
A) unfavorable direct materials cost variance
B) favorable direct labor cost variance
C) favorable direct labor efficiency variance
D) unfavorable direct materials efficiency variance
Malloy Company, a manufacturer of small appliances, had the following activities,
allocated costs, and allocation bases:
The above activities are carried out at two of its regional offices.
How much of the account inquiry cost will be assigned to the Midwest Office? (Round any
intermediate calculations to two decimal places and your final answer to the nearest
dollar.)
A) $16,500
B) $77,000
C) $27,500
D) $8,250
The Equinox Fabrication Plant suffered a fire incident in August, and most of the
records for the year were destroyed. The following accounting data for the year were
recovered:
The company bases its manufacturing overhead allocation on the number of direct labor
hours. What was the predetermined overhead allocation rate for the year? (Round your
answer to the nearest cent.)
A) $35.09
B) $1.86
C) $29.58
D) $62.71
On October 1, 2017, Nurix, Inc. purchased a patent for $205,000 cash. Although the
patent gives legal protection for 20 years, the patent is expected to be used for only 10
years. What will be the balance in the patent account on September 30, 2018?
A) $184,500
B) $205,000
C) $194,750
D) $102,500
Which of the following is the most liquid asset?
A) Building
B) Prepaid Expenses
C) Accounts Receivable
D) Cash
Leeds Services provides event management services. The company has three
employees, each assigned to specific customers. The company considers each
employee’s territory as a business segment. The following data relate to its three
segments for the month of June:
The business segments had the following number of customers: Matt, 26 ; Andrea, 29; and
Doug, 35. The total fixed costs for the month of June amounts to $3,400. Which business
segment was the most profitable?
A) Matt
B) Andrea
C) Doug
D) Both Matt and Andrea are equally profitable
Which of the following asset categories would include the cost of clearing land and
removing unwanted buildings?
A) land
B) buildings
C) land improvements
D) machinery and equipment
An expense that has been incurred but not yet paid is called a(n) ________.
A) accrued revenue
B) deferred expense
C) deferred revenue
D) accrued expense
Which of the following accounts will be included in a post-closing trial balance?
A) Accumulated Depreciation—Building
B) Rent Expense
C) Interest Expense
D) Service Revenue
Landess Corporation currently has 129,000 shares outstanding of $3 par value common
stock. The stock was originally issued for $14 per share. On March 15, the board of
directors declares a 13% stock dividend when the stock is selling for $22 per share.
Which of the following is the correct journal entry to record this transaction? (Do not
round intermediate calculations.)
A) debit Common Stock Dividend Distributable $50,310, debit Paid-In Capital in
Excess of Par—Common for $318,630 and credit Retained Earnings $368,940
B) debit Stock Dividends $368,940 and credit Common Stock Dividend Distributable
$368,940
C) debit Stock Dividends $368,940, credit Common Stock Dividend Distributable
$50,310 and credit Paid-In Capital in Excess of Par—Common $318,630
D) debit Paid-In Capital in Excess of Par—Common $368,940 and credit Retained
Earnings $368,940
At the beginning of 2017, Yummy Cupcakes, Inc. has the following ledger balances:
Accounts Receivable $40,000 (Debit)
Allowance for Bad Debts $7,000 (Credit)
During the year, credit sales amounted to $810,000. Cash collected on credit sales
amounted to $760,000, and $16,000 has been written off. Yummy Cupcakes uses the
aging-of-receivables method to record bad debts expense. The estimate of uncollectible
accounts was $26,000. The ending balance in the Allowance for Bad Debts is
________.
A) $35,000
B) $16,000
C) $26,000
D) $19,000
Which of the following will be classified as a held-to-maturity investment?
A) machinery
B) land
C) bond
D) equity investment
A cost center responsibility report ________.
A) includes depreciation expense
B) typically focuses on the flexible budget variance
C) is the same as a performance report
D) shows all costs incurred by the department
The management technique whereby managers concentrate on results that are outside
the accepted parameters is called management by ________.
A) variance
B) standard
C) exception
D) budget
Zale, Inc. has provided the following extracts from their budget for the first quarter of
the forthcoming year:
The company collects 70% of credit sales in the same month and the balance in the next
month. Calculate the collections from the customers for the month of February.
A) $570,000
B) $540,000
C) $690,000
D) $750,000
The beginning inventory costs and the product costs of the current period are combined
to determine the average cost of equivalent units of production under the ________.
A) equivalent units method
B) conversion costs method
C) first-in, first-out method
D) weighted-average method
A business purchases equipment by paying $9,087 in cash and issuing a note payable of
$13,264. Which of the following occurs?
A) Cash is credited for $9,087, Equipment is credited for $22,351, and Notes Payable is
debited for $13,264.
B) Cash is credited for $9,087, Equipment is debited for $22,351, and Notes Payable is
credited for $13,264.
C) Cash is debited for $9,087, Equipment is debited for $13,264,and Notes Payable is
credited for $22,351.
D) Cash is debited for $9,087, Equipment is credited for $13,264, and Notes Payable is
debited for $4,177.
Tampa Corporation is considering an investment proposal that will require an initial
outlay of $804,000 and would yield yearly cash inflows of $200,000 for nine years. The
company uses a discount rate of 10%. What is the NPV of the investment?
Present value of an ordinary annuity of $1:
A) $350,000
B) $402,000
C) $347,800
D) $251,667
Which of the following is representative of safeguarding assets?
A) attaching electronic sensors to merchandise inventory
B) reducing expense to increase operating profit
C) increasing operating profit to increase net income
D) allowing company accountants to handle cash
The direct labor costs and manufacturing overhead costs required to produce finished
goods from raw materials are called ________.
A) transferred in costs
B) cost of sales
C) finished goods costs
D) conversion costs
Compute the present value of an ordinary annuity that pays $13,000 per year for 15
years at 10%.
Present value of annuity of $1:
A) $98,878
B) $99,745
C) $97,578
D) $100,178
From the graph given below, identify the fixed costs line.
A) OB
B) AC
C) AD
D) AE
When the credit card processor deposits the gross proceeds from credit and debit card
sales ________.
A) there will be no fee charged for the transaction
B) the deposit is made on the last day of the month
C) the total sales less the processing fee assessed equals the net amount of cash
deposited
D) the processing fees are deducted from the company’s bank account by the processor
Which of the following is the correct formula for the asset turnover ratio?
A) Net sales / Average total assets
B) Net sales / Cost of goods sold
C) Net sales / Net assets
D) Net profit / Net sales
On September 1, 2016, Joy, Inc. paid $8,000 in advance for an eight-month rental space
covering the period of September, 2016 through April 2017. The deferred expense was
initially recorded as an asset. Joy, Inc. makes adjusting entries once a year at year-end.
The adjusting entry on December 31, 2016 would include a ________.
A) debit of $8,000 to Cash
B) credit of $8,000 to Prepaid Rent
C) debit of $4,000 to Rent Expense
D) credit of $4,000 to Rent Expense