Accounting records are also referred to as the books.
Answer:
In a limited partnership the general partner has unlimited liability.
Answer:
All companies desire a low return on total assets.
Answer:
An investor with significant influence owns as least 20%, but not more than 50%, of
another company’s voting stock.
Answer:
Vacation benefits are a form of estimated liabilities for an employer.
Answer:
The petty cash fund should be reimbursed when it is nearing zero and at the end of the
accounting period when financial statements are prepared.
Answer:
An NSF check for $17.50 would be recorded as a debit to Cash and a credit to
Accounts Receivable.
Answer:
Short-term investments are readily convertible to cash and are intended to be converted
into cash within one year or the operating cycle, whichever is longer.
Answer:
Variable costs per unit increase proportionately with increases in output activity.
Answer:
When the actual cost of direct materials used exceeds the standard cost, the company
must have experienced an unfavorable direct materials price variance.
Answer:
Standards for comparison are necessary when making judgments about a company’s
financial performance.
Answer:
Absorption costing is not permitted under GAAP.
Answer:
If a customer owes interest on accounts receivable, the company should debit Interest
Revenue and credit Accounts Receivable.
Answer:
Companies can report a credit card expense as a discount deducted from sales or as a
selling expense.
Answer:
Horizontal analysis is the comparison of a company’s financial condition and
performance to a base amount.
Answer:
The time value of money concept works on the principle that a dollar today is worth
more than a dollar tomorrow.
Answer:
Assume that the S & B partnership agreement gave Steely 60% and Breck 40% of
partnership income and losses. The partnership recorded a loss of $27,000 in the current
period. Steely’s share of the loss equals $16,200 and Breck’s share equals $10,800.
Answer:
One of the usual differences between financial and managerial accounting is the time
dimension of the information reported.
Answer:
Both financial and managerial accounting report monetary information; managerial
accounting also reports considerable nonmonetary information.
Answer:
The lower of cost or market rule for inventory valuation must be applied to each
individual unit separately and not to major categories of inventory or to the entire
inventory.
Answer:
The return on total assets ratio is a profitability measure.
Answer:
Although a fixed budget is only useful over the relevant range of operations, a flexible
budget is useful over all possible production levels.
Answer:
Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss
of $10,000. This implies that $90,000 cash was received from the sale.
Answer:
The primary objective of financial accounting is to provide general-purpose financial
statements to help external users analyze and interpret an organization’s activities.
Answer:
When a process cost accounting system assigns the cost of materials to a production
department, the journal entry debits the Raw Materials Inventory account and credits
the Goods in Process Inventory account for that department.
Answer:
The net present value decision rule is: When an asset’s expected cash flows are
discounted at the required rate and yield a positive net present value, the asset should be
acquired.
Answer:
Generally accepted accounting principles are the concepts and rules for preparing
financial statements.
Answer:
A purchase of land in exchange for shares of stock is disclosed on the statement of cash
flows or in a note to the statement.
Answer:
To maximize profit when a constrained resource exists, management should produce the
sales mix that has the highest contribution margin per unit of scarce resource.
Answer:
Accounting procedures for all items are the same for both C corporations and S
corporations in all aspects.
Answer:
The debt ratio reflects the risk of a company to both its owners and creditors.
Answer:
The use of absorption costing can result in misleading product cost information.
Answer:
Investments in trading securities are accounted for using the equity method with
consolidation.
Answer:
The master budget process usually ends with:
A. The production budget.
B. The sales budget.
C. The selling expense budget.
D. The budgeted balance sheet.
E. The overhead budget.
Answer:
Achieving an increased return on common stock by paying dividends on preferred
stock at a rate that is less than the rate of return earned with the assets invested from the
preferred stock issuance is called:
A. Financial leverage
B. Discount on stock
C. Premium on stock
D. Preemptive right
E. Capital gain
Answer:
Costs that the manager has the power to determine or at least strongly influence are
called:
A. Uncontrollable costs
B. Controllable costs
C. Joint costs
D. Direct costs
E. Indirect costs
Answer:
Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency
plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash
fund will include:
A. A debit to Cash for $377.50.
B. A credit to Cash Over and Short for $5.00.
C. A debit to Petty Cash for $382.50.
D. A credit to Cash for $387.50.
E. A debit to Cash for $387.50.
Answer:
Standard costs are used to measure:
A. Price and quantity variances.
B. Price variances only.
C. Quantity variances only.
D. Price, quantity, and sales variances.
E. Quantity and sales variances.
Answer:
Camden Corporation sells three products (M, N, and O) in the following mix: 3:1:2.
Unit price and cost data are:
Total fixed costs are $340,000. The break-even point in sales dollars for the current
sales mix is:
A. $20,000
B. $289,000
C. $400,000
D. $629,000
E. $740,000
Answer:
Bevo Beef Company uses the relative market value method of allocating joint costs in
their production of beef products. Relevant information for the current period follows:
The total joint cost for the current period was $43,000. How much of this cost should
Bevo Beef allocate to sirloin?
A. $0
B. $5,909
C. $8,600
D. $10,750
E. $43,000
Answer:
Front Company had net income of $72,500 based on variable costing. Beginning and
ending inventories were 800 units and 1,200 units, respectively. Assume the fixed
overhead per unit was $7.90 for both the beginning and ending inventory. What is net
income under absorption costing?
A. $69,340
B. $75,660
C. $88,300
D. $56,700
E. $72,900
Answer:
Use the following information as of December 31 to determine equity.
A. $57,000
B. $141,000
C. $297,000
D. $438,000
E. $579,000
Answer:
A decrease in the fair market value of a security that has not yet been realized through
an actual sale of the security is called a(n):
A. Contingent loss
B. Realizable loss
C. Unrealized loss
D. Capitalized loss
E. Market loss
Answer:
When analyzing the changes on a spreadsheet used to prepare a statement of cash
flows, the cash flows from investing activities generally affect:
A. Net income, current assets, and current liabilities.
B. Noncurrent assets.
C. Noncurrent liability and the equity accounts.
D. Both noncurrent assets and noncurrent liabilities.
E. Equity accounts only.
Answer:
Short-term investments:
A. Are securities that management intends to convert to cash within one year or an
operating cycle, whichever is longer.
B. Include funds earmarked for a special purpose such as bond sinking funds.
C. Include stocks not intended to be converted into cash.
D. Include bonds not intended to be converted into cash.
E. Include sinking funds not intended to be converted into cash.
Answer:
Planning activities:
A. Are the means organizations must use to pay for resources.
B. Involve the acquiring and disposing of resources that an organization uses to acquire
and sell its products or services.
C. Involve defining the ideas, goals, and actions of an organization.
D. Are the carrying out of an organization’s plans.
E. Involve using resources to research, develop, purchase, produce, and market
products and services.
Answer:
A material amount of overapplied or underapplied overhead should be disposed of by
allocating it to:
A. Cost of goods sold and finished goods.
B. Finished goods and goods in process.
C. Goods in process, finished goods, and cost of goods sold.
D. Goods in process.
E. Raw materials, goods in process, and finished goods.
Answer:
The usual budget period is:
A. An annual period of 250 working days.
B. A monthly period separated into daily budgets.
C. A quarterly period separated into weekly budgets.
D. An annual period separated into weekly budgets.
E. An annual period separated into quarterly and monthly budgets.
Answer:
Revenue is properly recognized:
A. When the customer’s order is received.
B. Only if the transaction creates an account receivable.
C. At the end of the accounting period.
D. Upon completion of the sale or when services have been performed and the business
obtains the right to collect the sale price.
E. When cash from a sale is received.
Answer:
During a period of steadily rising costs, the inventory valuation method that yields the
lowest reported net income is:
A. Specific identification method
B. Average cost method
C. Weighted-average method
D. FIFO method
E. LIFO method
Answer:
At the end of the accounting period, the owners of debt securities:
A. Must report the dividend income accrued on the debt securities.
B. Must retire the debt.
C. Must record a gain or loss on the interest income earned.
D. Must record a gain or loss on the dividend income earned.
E. Must accrue interest earned on the debt securities.
Answer:
The right side of a T-account is a(n):
A. Debit
B. Increase
C. Credit
D. Decrease
E. Account balance
Answer:
The gross margin ratio:
A. Is also called the net profit ratio.
B. Measures a merchandising firm’s ability to earn a profit from the sale of inventory.
C. Is also called the profit margin.
D. Is a measure of liquidity.
E. Should be greater than 1.
Answer:
A companys total expected overhead costs and related overhead data are shown below.
a. Compute estimated manufacturing overhead costs for Department A.
b. Compute estimated manufacturing overhead costs for Department B.
Answer:
Ringle Company is a manufacturer of compact disks (CDs). Place each of the following
costs in the appropriate column.
Product Cost
Period Cost Direct Materials Direct Labor Factory Overhead
Cost Item
a. Factory maintenance salary, $40,000
b. Salary of factory supervisor, $70,000
c. Salary of production worker, $42,000
d. Salary of the companys president, $100,000
e. Television advertising, $25,000
f. Property tax on factory, $15,000
g. Sales commissions, $65,000
h. Depreciation on factory equipment, $17,000
i. Plastic used in the manufacture of the CDs, $14,000
Answer:
Reference: 19_01
Advanced Company reports the following information for the current year. All
beginning inventory amounts equaled $0 this year.
Given Advanced Companys data, compute cost per unit of finished goods under
variable costing.
A. $20.00
B. $25.00
C. $21.88
D. $23.00
E. $28.50
Answer:
Actual fixed overhead for Kapok Company during March was $92,780. The flexible
budget for fixed overhead this period is $89,000 based on a production level of 5,000
units. If the company actually produced 4,200 units, what is the fixed overhead
spending variance for March?
A. $3,780 favorable
B. $800 unfavorable
C. $14,240 unfavorable
D. $3,780 unfavorable
E. $14,240 favorable
Answer:
Reference: 19_01
Advanced Company reports the following information for the current year. All
beginning inventory amounts equaled $0 this year.
Given Advanced Companys data, compute cost of finished goods in inventory under
variable costing.
A. $285,000
B. $712,500
C. $427,500
D. $230,000
E. $345,000
Answer:
A corporation borrowed $125,000 cash by signing a five-year, 9% installment note
requiring annual payments each December 31 of accrued interest plus equal amounts of
principal. What journal entry would the issuer record for the first payment?
A.
B.
C.
D.
E.
Answer:
Morgan Company purchased 2,000 shares of Asta’s common stock for $143,000 as a
long-term investment and is considered available-for-sale. The par value of the stock
was $1 per share. Morgan paid $375 in commissions on the transaction. The entry to
record the transaction would include a:
A. Credit to Common Stock for $2,000.
B. Credit to Common Stock for $143,000.
C. Credit to Common Stock for $143,375.
D. Debit to Long-Term Investments for $143,000.
E. Debit to Long-Term Investments for $143,375.
Answer:
Process time is the time:
A. Spent producing the product.
B. Spent inspecting raw materials received, goods in process while in production, and
finished goods prior to shipment.
C. Spent moving raw materials from storage to production and goods in process from
one factory location to another factory location.
D. That an order or job sits with no production applied to it.
E. That is considered non-value-added time.
Answer:
BVD Company uses a job order cost accounting system and last period incurred
$80,000 of overhead and $100,000 of direct labor. BVD estimates that its overhead next
period will be $75,000. It also expects to incur $100,000 of direct labor. If BVD bases
applied overhead on direct labor cost, their overhead application rate for the next period
should be:
A. 75%
B. 80%
C. 107%
D. 125%
E. 133%
Answer:
Reference: 23_01
Marsden manufactures a cat food product called Special Export. Marsden currently has
10,000 bags of Special Export on hand. The variable production costs per bag are $1.80
and total fixed costs are $10,000. The cat food can be sold as it is for $9 per bag or be
processed further into Prime Cat Food and Feline Surprise at an additional $2,000 cost.
The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of
Feline Surprise, which can be sold for $8 and $6 per bag, respectively.
If Special Export is processed further into Prime Cat Food and Feline Surprise, the total
gross profit would be:
A. $68,000
B. $78,000
C. $96,000
D. $98,000
E. $100,000
Answer:
For what reason do most sellers require customers to have their receipts in order to
exchange or return purchased items?
A. The receipt contains coded information that the seller needs to prepare and analyze
the trial balance.
B. Sellers wish to ensure that the sale in question was rung up on the register in the first
place.
C. This is a legal requirement mandated by a federal law.
D. The receipt is serving as a promissory note.
E. To create an environment in which customers do not want to return items.
Answer:
A given project requires a $28,000 investment and is expected to generate end-of-period
annual cash inflows as follows:
Assuming a discount rate of 10%, what is the net present value of this investment?
Selected present value factors for a single sum are shown in the table below.
A. $0.00
B. $2,668.00
C. ($7,461.00)
D. $30,668.00
E. ($4,966.68)
Answer:
On October 10, 2013, Printfast Company sells a commercial printer for $2,350 with a
one-year warranty that covers parts. Warranty expense is projected to be 4% of sales.
On February 28, 2014, the printer requires repairs. The cost of the parts for the repair is
$80 and Printfast pays their technician $150 to perform the repair. What is the warranty
liability for this printer at the at the end of 2014?
A. $14.00.
B. $84.80.
C. $94.00.
D. $0, there is no liability at the end of 2014.
E. $230.00.
Answer:
Goods a company acquires to use in making products are called:
A. Cost of goods sold.
B. Raw materials inventory.
C. Finished goods inventory.
D. Goods in process inventory.
E. Conversion costs.
Answer:
Identify the five steps involved in managerial decision making.
Answer:
What is the high-low method? Briefly describe how it is applied.
Answer:
Explain the difference between revenue expenditures and capital expenditures and how
they are recorded in the accounting system.
Answer:
The accountant of Magic Video Games prepared a balance sheet immediately after
each transaction was recorded. During September, the first month of operation, the
following balance sheets were prepared:
Required: Describe the nature of each of these five transactions for the month of
September.
Answer:
Calculate the percent increase or decrease for each of the following financial statement
items:
Answer:
If a company had net income of $3,003,000; interest expense of $400,000; a tax rate of
40%; and operating income of $5,405,000, what would the times interest earned ratio
be for the year?
Answer:
Define an internal control system and describe the purpose that it serves.
Answer:
What are estimated liabilities? Provide at least two examples and explain why they are
classified as estimated liabilities.
Answer:
The following information is available for the Arthur Corporation:
Additional information:
(1) There was no gain or loss on the sales of the long-term investments, nor on the
bonds retired.
(2) Old equipment with an original cost of $37,550 was sold for $2,100 cash.
(3) New equipment was purchased for $67,550 cash.
(4) Cash dividends of $33,600 were paid.
(5) Additional shares of stock were issued for cash.
Required: Prepare a complete statement of cash flows for the 2013 calendar year using
the direct method.
Answer:
A company uses activity-based costing to determine the costs of its three products: A, B
and C. The activity rates and activity levels for each of the companys three activity cost
pools are shown in the following table:
Compute the companys budgeted overhead cost for each of the three products under
activity-based costing.
Answer:
In using the internal rate of return method, management must consider a hurdle rate in
making its decisions. What is a hurdle rate? What factors does management have to
consider in selecting a hurdle rate?
Answer:
The City Store reported the following amounts on their financial statements for 2012,
2013, and 2014:
It was discovered early in 2015 that the ending inventory on December 31, 2012, was
overstated by $6,000 and the ending inventory on December 31, 2013, was understated
by $2,500. The ending inventory on December 31, 2014, was correct. Ignoring income
taxes, determine the correct amounts of cost of goods sold, net income, total current
assets, and equity for each of the years 2012, 2013, and 2014.
Answer:
An ______________________________ is the potential benefit lost by taking a
specific action when two or more alternative choices are available.
Answer:
The gross margin ratio equals net sales less ___________ divided by net sales.
Answer:
Explain the difference between the single-step and multiple-step income statements.
Answer:
A company established a petty cash fund of $100 on September 1. On September 10,
the petty cash fund was replenished when there was $16 remaining and there were petty
cash receipts for: office supplies, $27; courier, $32; and postage, $22. On September 15,
the petty cash fund was increased to $125 in total. Record the above transactions in
general journal form.
Answer: