Financing activities include the purchase and sale of long-term assets.
Answer:
Fixed budgets are also known as flexible budgets.
Answer:
FUTA requires employers to pay a federal unemployment tax on the first $7,000 in
salary or wages paid to each employee.
Answer:
Capital budgeting is the process of analyzing alternative long-term investments and
deciding which assets to acquire or sell.
Answer:
Electronic funds transfer (EFT) is the use of electronic communication transfer of cash
from one party to another.
Answer:
Departmental contribution to overhead is the amount of revenues for that department
less its direct expenses.
Answer:
The high-low method is used to derive an estimated line of cost behavior by graphically
connecting the two cost amounts identified with the highest and lowest volume levels.
Answer:
If the predetermined overhead allocation rate is 85% of direct labor cost and the
Polishing Department’s direct labor cost for the reporting period is $20,000, the
following entry would be made to record the allocation of overhead to the products
processed in this department:
Answer:
A company has inventory with a market value of $217,000 and a cost of $241,000.
According to the lower of cost or market, the inventory should be written down to
$217,000.
Answer:
If the internal rate of return (IRR) of an investment is below the hurdle rate, the project
should be accepted.
Answer:
Collusion is when a person embezzles money from a company and tries to hide the
evidence.
Answer:
The FIFO method of process costing assigns costs to units assuming a first-in, first-out
flow of product.
Answer:
Goods on consignment are goods shipped by their owner, called the consignee, to
another party called the consignor.
Answer:
A subsidiary ledger is a listing of individual accounts with a common characteristic.
Answer:
Least-squares regression is a statistical method for deriving an estimated line of cost
behavior.
Answer:
There is only one method of evaluating capital budgeting decisions.
Answer:
The accrual basis of accounting is an accounting system in which revenues are reported
as earned when cash is received.
Answer:
The premise of ABC is that it takes activities to make products and provide services and
these activities drive costs.
Answer:
A good voucher system includes a set of procedures and approvals designed to control
cash disbursements and the acceptance of obligations.
Answer:
The use of horizontal and vertical analysis eliminates many differences between GAAP
and IFRS, but the user must exercise some caution when drawing conclusions from
these reports.
Answer:
A company borrowed $1,000 by signing a six-month promissory note at 5% interest.
The total amount of interest on this promissory note is $25.
Answer:
Once a good system of internal control is in place, it rarely needs review.
Answer:
If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and
cost of goods sold is expected to be $10,260, then budgeted purchases should be
$9,160.
Answer:
Neither GAAP nor IFRS allow inventory to be adjusted upward beyond the original
cost.
Answer:
In a job order cost accounting system, any immaterial underapplied overhead at the end
of the period can be charged entirely to Cost of Goods Sold.
Answer:
The evaluation of company performance and financial condition includes evaluation of
(1) past and current performance, (2) current financial position, and (3) future
performance and risk.
Answer:
Another name for a static budget is a variable budget.
Answer:
All expected future payments are liabilities.
Answer:
A useful measure used to evaluate the manager of an investment center is return on total
costs for the investment center.
Answer:
A company’s file of job cost sheets for finished but unsold jobs equals the balance in the
Finished Goods Inventory account.
Answer:
Reference: 17_01
Kudzu Company sells two products Big X and Little X. Current direct material and
direct labor costs are detailed below. Next year, the company wishes to use a plantwide
overhead rate with direct labor hours as its allocation base. Next years overhead is
estimated to be $525,000. The direct labor and direct materials costs are estimated to be
consistent with the current year. Direct labor costs $20 per hour and the company
expects to manufacture 16,000 units of Big X and 18,000 units of Little X next year.
Kudzus plantwide overhead rate will be $21 per direct labor hour next year.
Answer:
The balance sheet is based on the accounting equation.
Answer:
The cost principle requires that an asset be recorded at the cash or cash equivalent
amount that was given in exchange for it.
Answer:
The journal is known as a book of original entry.
Answer:
Accounting information systems are designed to capture information about a
company’s transactions and events and to provide output including financial,
managerial, and tax reports.
Answer:
A perpetual inventory system is able to directly measure and monitor inventory
shrinkage.
Answer:
Rising, Inc., uses the following standard to produce a single unit of its product:
Overhead (2 hrs. @ $3/hr.) = $6
The flexible budget for overhead is $100,000 plus $1 per direct labor hour. Actual data
for the month show overhead costs of $150,000 based on 24,000 units of production.
The overhead volume variance is:
A. $10,000 favorable
B. $12,000 favorable
C. $4,000 unfavorable
D. $16,000 unfavorable
E. $36,000 unfavorable
Answer:
DT Co. produces picture frames. It takes 3 hours of direct labor to produce a frame.
DT’s standard labor cost is $11 per hour. During March, DT produced 4,000 frames and
used 12,400 hours at a total cost of $133,920.
a. What is DT’s labor rate variance for March?
b. What is DTs direct labor efficiency variance for March?
c. Record the labor costs and the variances for DT.
Answer:
The Sun Company completed the following sales and cash receipts transactions during
the first week of December. The Sun Company uses the periodic inventory system.
a. Use the sales journal and the cash receipts journal to record these transactions
b. Prepare a schedule of accounts receivable. There were no accounts receivable at
December 1.
Answer:
The area of accounting aimed at serving the decision-making needs of internal users
is:
A. Financial accounting
B. Managerial accounting
C. External auditing
D. SEC reporting
E. Governmental accounting
Answer:
An estimated liability:
A. Is an unknown liability of a certain amount.
B. Is a known obligation of an uncertain amount that can be reasonably estimated.
C. Is a liability that may occur if a future event occurs.
D. Can be the result of a lawsuit.
E. Is not recorded until the amount is known for certain.
Answer:
Nguyen invested $100,000 and Hansen invested $200,000 in a partnership. They
agreed to share income and loss by allowing a $60,000 per year salary allowance to
Nguyen and a $40,000 per year salary allowance to Hansen, plus an interest allowance
on the partners’ beginning-year capital investments at 10%, with the balance to be
shared equally. Under this agreement, the shares of the partners when the partnership
earns a $105,000 in income are:
A. $52,500 to Nguyen; $52,500 to Hansen.
B. $35,000 to Nguyen; $70,000 to Hansen.
C. $57,500 to Nguyen; $47,500 to Hansen.
D. $42,500 to Nguyen; $62,500 to Hansen.
E. $70,000 to Nguyen; $60,000 to Hansen.
Answer:
Which of the following transactions or events should be reported as a source of cash
from operating activities when using the direct method?
A. Credit sales.
B. Cash collections from customers.
C. Depreciation expense.
D. Cash received from the sale of a building.
E. Cash received from the sale of treasury stock.
Answer:
A publishing company records the subscriptions paid in advance by its customers in an
account called Unearned Subscription Revenue. If the company fails to make the
end-of-period adjusting entry to record the portion of the subscriptions that have been
earned, one effect will be:
A. An overstatement of equity.
B. An overstatement of liabilities.
C. An understatement of assets.
D. An understatement of liabilities.
E. An overstatement of assets.
Answer:
A company issues bonds at par on April 1. These 9% bonds have a par value of
$100,000 and pay interest annually. April 1,is four months after the most recent interest
payment date. How much total cash interest is received on April 1 by the bond issuer?
A. $750
B. $5,250
C. $1,500
D. $3,000
E. $6,000
Answer:
A company has already incurred a $12,000 cost in partially producing its two products.
Their selling prices when partially and fully processed are shown in the following table
with the additional costs necessary to finish their processing. Based on this information,
should any products be processed further?
A. Both product A and product B should be processed further.
B. Neither product A nor product B should be processed further.
C. Only product B should be processed further.
D. Only product A should be processed further.
E. A processing further decision cannot be made from the available data.
Answer:
Listed below are two pieces of information. Where is the best place to locate this
information, in the journal or the ledger?
1. Details of a transaction that took place on October 3.
2. All of the sales activity that took place during the current month.
A. 1. Journal 2. Journal
B. 1. Journal Ledger
C. 1. Ledger 2. Ledger
D. 1. Ledger 2. Journal
E. This information is only available on the financial statements.
Answer:
A customer who had purchased $60,000 worth of merchandise on account returns 10%
of this order to the seller because she is not satisfied with the quality of the goods. How
would this entry be recorded on the books of the seller if historically the seller has had
very few returns of this nature?
A.
B.
C.
D.
E.
Answer:
Acme Company had equity of $55,000 at the end of the current year. During the year
the company had a $2,000 net loss and investments by owners in exchange for stock of
$7,000. Compute equity as of the beginning of the year.
A. $5,000
B. $46,000
C. $50,000
D. $52,000
E. $64,000
Answer:
Given the following data, calculate product cost per unit under absorption costing.
A. $8 per unit
B. $8.50 per unit
C. $10.25 per unit
D. $10.75 per unit
E. $12 per unit
Answer:
The management of Pasama Inc. is evaluating the three segments of the company.
Given the data below, which of the following statements is true regarding segment
return on assets?
A. Segment Africa has the highest operating income and the highest return on assets.
B. Segment Belgium has the highest operating income and the highest return on assets.
C. Segment Canada has the highest operating income and the highest return on assets.
D. Segment Canada has the highest return on assets and Segment Africa has the lowest
return on assets.
E. Segment Belgium has a higher return on assets than Segment Canada.
Answer:
A company buys a machine for $60,000 that has an expected life of nine years and no
salvage value. The company anticipates a yearly net income of $2,850 after taxes of
30%, with the cash flows to be received evenly throughout of each year. What is the
accounting rate of return?
A. 2.85%
B. 4.75%
C. 6.65%
D. 9.50%
E. 75%
Answer:
Match the following terms 1 to 7 with the definitions (a) through (g).
__________ (1) Equivalent units of production.
__________ (2) Job order cost accounting system.
__________ (3) Hybrid manufacturing system.
__________ (4) Process manufacturing system.
__________ (5) Process cost accounting system.
__________ (6) Materials consumption report.
__________ (7) Process cost summary.
(a) Costing system to determine the cost of producing each job or job lot.
(b) Document that summarizes the materials a department uses during a reporting
period; replaces materials requisition.
(c) Report of costs charged to a department, its equivalent units of production achieved,
even the costs assigned to its output.
(d) A manufacturing system that contains features of both process and job order
systems.
(e) Number of units that would be completed if all effort during a period had been
applied to units that were started and finished.
(f) System of assigning direct materials, direct labor, and overhead to specific
processes; total costs associated with each process are then divided by the number of
units passing through that process to determine cost per equivalent unit.
(g) Process of products in a continuous flow of steps.
Answer:
The following information is available for the Millennium Corporation for the current
year:
Millennium Corporation uses a predetermined overhead rate of 150% of direct labor
cost. Prepare journal entries for the following transactions/ and events:
(a) Purchase of raw materials on account.
(b) Assignment of materials costs to Goods in Process Inventory and Factory Overhead
(c) Payment of Factory Payroll in cash
(d) Assignment of Factory Payroll to Goods in Process Inventory and Factory Overhead
(e) Recording of other factory overhead. Assume that all items other than depreciation
are paid in cash.
(f) Assignment of Factory Overhead to Goods in Process Inventory
(g) Transfer of goods completed to Finished Goods Inventory
(h) Recording cost of goods sold
(i) Assignment of over- or underapplied overhead to Cost of Goods Sold
Answer:
Comparative financial statements in which each amount is expressed as a percentage of
a base amount and in which the base amount is expressed as 100% are called:
A. Comparative statements.
B. Common-size comparative statements.
C. General-purpose financial statements.
D. Base line statements.
E. Index statements.
Answer:
A company uses activity-based costing to determine the costs of its three products: A,
B, and C. The budgeted cost and activity for each of the companys three activity cost
pools are shown in the following table:
What are the activity rates for the three activities under activity based costing?
A. (1) $2.00; (2) $3.00; (3) $3.50.
B. (1) $3.50; (2) $1.50; (3) $32,80.
C. (1) $3.50; (2) $3.00; (3) $16.00.
D. (1) $2.00; (2) $1.50; (3) $16.00.
E. (1) $2.00; (2) $1.50; (3) $32.80.
Answer:
A company has the following unadjusted account balances at December 31, of the
current year: Accounts Receivable of $185,700 and Allowance for Doubtful Accounts
of $1,600 (credit balance). This company uses the aging of accounts receivable to
estimate its bad debts. The following aging schedule reflects its accounts receivable at
the current year-end:
a. Calculate the amount of the allowance for doubtful accounts that should appear on
the December 31 of the current year balance sheet.
b Prepare the adjusting journal entry to record bad debts expense for the current year.
Answer:
The ending inventory of finished goods has a total cost of $10,000 and consists of 500
units. If the overhead applied to these goods is $2,000, and the overhead rate is 50% of
direct labor, how much direct materials cost was incurred in producing these units?
A. $4,000
B. $6,000
C. $3,000
D. $7,000
E. $10,000
Answer:
Bonds that give the issuer an option of retiring them prior to the date of maturity are:
A. Debentures
B. Serial bonds
C. Sinking fund bonds
D. Registered bonds
E. Callable bonds
Answer:
A product sells for $200 per unit, and its variable costs per unit are $130. The fixed
costs are $420,000. What is the break-even point in dollar sales?
A. $2,100
B. $6,000
C. $420,000
D. $646,154
E. $1,200,000
Answer:
The inventory turnover ratio:
A. Is used to analyze profitability.
B. Is used to measure solvency.
C. Measures how quickly a company turns over its merchandise inventory.
D. Validates the acid-test ratio.
E. Calculation depends on the company’s inventory valuation method.
Answer:
A department had 12,500 units that were 20% complete in beginning Goods in Process
Inventory. During the current period 60,000 units were transferred in. Ending Goods in
Process Inventory was 15,000 units that were 70% complete. Assume this company
uses the FIFO method of process costing and direct material is added uniformly
throughout the process. What are the equivalent units produced with respect to direct
material?
A. 65,500
B. 57,500
C. 37,000
D. 47,500
E. 68,000
Answer:
A perpetual record of a raw materials item that records data on the quantity and cost of
units purchased, units issued for use in production, and units that remain in the raw
materials inventory is called a(n):
A. Materials ledger card.
B. Materials requisition.
C. Purchase order.
D. Materials voucher.
E. Purchase ledger.
Answer:
Beginning inventory plus net cost of purchases is:
A. Cost of goods sold.
B. Merchandise available for sale.
C. Ending inventory.
D. Sales.
E. Shown on the balance sheet.
Answer:
A company manufactures two products, X and Y, from a single raw material called ZZ.
ZZ is purchased in 55-gallon drums, and the contents of one drum are sufficient to
produce 30 gallons of X and 15 gallons of Y. X sells for $10 per gallon and Y sells for
$30 per gallon. During the current period, the company used 400 drums of ZZ to
manufacture X and Y. The cost of ZZ was $90 per drum.
Required:
a. If the cost of ZZ is allocated to the X and Y products on the basis of the number of
gallons produced, how much of the total cost of the 400 drums should be charged to
each product?
b. If the cost of ZZ is allocated to the X and Y products in proportion to their market
values, how much of the total cost of the 400 drums should be charged to each product?
c. Which basis of allocating the cost is most likely to be used by the company?
Check one and briefly explain.
_______ The relative number of gallons of each product produced.
_______ The relative market values of each product at the point of separation.
Answer:
On August 31, 2013, Victory Corporation’s common stock is priced at $30 per share
before any stock dividend or split, and the stockholders’ equity section of its balance
sheet appears as follows. Assume that the company declares and immediately
distributes a 15% stock dividend.
What is the total amount in the Retained Earnings account immediately after the stock
dividend?
A. $537,000
B. $195,000
C. $366,000
D. $100,000
E. $0
Answer:
A company’s cost of goods sold was $4,000. Determine net purchases and ending
inventory given goods available for sale were $11,000 and beginning inventory was
$5,000.
A. Net Purchases: $15,000; ending inventory: $7,000
B. Net Purchases: $10,000; ending inventory: $15,000
C. Net Purchases: $9,000; ending inventory: $6,000
D. Net Purchases: $6,000; ending inventory: $7,000
E. Net Purchases: $16,000; ending inventory: $20,000
Answer:
A company purchased merchandise inventory at a cost of $8,500 with credit terms
2/10, net 60. If the company borrows $8,330 to pay for the purchase on the last day of
the discount period and pays the loan plus interest in the amount of $8,466.93 on the
last day of the credit period, what is the net savings?
A. $170.00
B. $-33.07
C. $136.93
D. $33.07
E. There is no savings to the company
Answer:
On June 1, a company issued $200,000 of 12% bonds at their par value plus accrued
interest. The interest on these bonds is payable semiannually on January 1 and July 1.
Prepare the issuer’s journal entry to record the bond issuance of June 1.
Answer:
What are the four steps in accounting for production activity in a period?
Answer:
The ________________________ overhead rate method uses a single rate for
allocating overhead costs to products.
Answer:
Explain how both a stock split and a stock dividend affect the computation of the
weighted-average number of shares outstanding.
Answer:
From the adjusted trial balance for the Worker Products Company, prepare a
multiple-step income statement in good form.
Answer:
How is the retirement of stock recorded?
Answer:
The debt ratio, the equity ratio, pledged assets to secured liabilities, and times interest
earned are all ___________________ ratios.
Answer:
Briefly describe a master budget and the sequence in which the individual budgets
within the master budget are prepared.
Answer:
On December 31, Connelly Company had performed $5,000 of management services
for clients that had not yet been billed. Prepare Connelly’s adjusting entry to record
these fees earned.
Answer:
Investments that are readily convertible to a known amount of cash and are sufficiently
close to their maturity so that the market value is unaffected by interest rate changes are
______________________________.
Answer:
Bonds payable to whoever holds them are called _________________ bonds.
Answer:
Identify and explain the different types and payment patterns of notes payable.
Answer:
Match each of the following items with the appropriate definitions:
Answer:
A corporation reports the following year-end balance sheet data:
Calculate the corporation’s current ratio and its acid-test ratio.
Answer:
Lorton’s Web Services has assets of $265,000 and liabilities of $130,000. Calculate the
amount of equity.
Answer:
Explain how to determine cash flows from investing and financing activities.
Answer:
Given the following information, determine the cost of goods sold for November 30
using the FIFO perpetual inventory method.
November 3: 15 units were purchased at $8 per unit.
November 11: 18 units were purchased at $9.50 per unit.
November 15: 15 units were sold at $45 per unit.
November 18: 30 units were purchased at $10.75 per unit.
November 30: 20 units were sold at $55 per unit.
Answer:
Answer:
The following information is available from the financial statements of Cosmotropolis:
What is Cosmotropolis return on total assets for 2014?
Answer: