When bonds are converted to stock, any excess carrying value of the bonds over the par
value of the stock is to be recorded as Additional Paid-in Capital.
Breakeven sales in dollars can be obtained without knowing the dollar value of
contribution margin per unit.
The liability of a stockholder is usually limited to the stockholder’s investment in the
corporation.
The board of directors carries out the day-to-day operations of the business.
The number of equivalent units of production will always be lesser than the number of
completed units during the period.
The market interest rate is the rate that an issuer of bonds actually will have to bear and
that an investor (purchaser) actually will earn over the bond’s life.
Under the allowance method, Uncollectible Accounts Expense is not recorded when an
individual customer defaults.
Intangible assets are subject to a process called depreciation.
A discounted note represents a contingent liability to the original holder.
In a process costing system, regardless of the cost approach used, cost of beginning
inventory is ignored while computing the cost per equivalent unit.
When Company A discounts without recourse a note to Company B, Company A has a
contingent liability until the note is paid.
Nonvalue-adding activity costs do not increase a product’s cost because they do not add
value to the product.
Goodwill represents the excess paid for a business over the fair value of its net assets.
The Retained Earnings portion of a corporation represents the initial contribution of
capital to the business.
In periods of rising prices, the LIFO method will result in a larger gross margin than the
FIFO method.
The entry to record a $1,500 sale with terms of 2/10, n/30 would include a(n)
A.decrease to Accounts Receivable for $1,500.
B.increase to Sales for $1,500.
C.increase to Sales Discounts for $30.
D.decrease to Sales for $1,470.
When the straight-line method of amortization is used for a bond premium, the amount
of interest expense for an interest period is calculated by
A.adding the amount of premium amortization for the period to the amount of cash paid
for interest during the period.
B.deducting the amount of premium amortization for the period from the amount of
cash paid for interest during the period.
C.multiplying the carrying value of the bonds by the effective interest rate.
D.multiplying the face value of the bonds by the face interest rate.
Use the following information to answer the question below.
On January 1, 20×5, Falcon Corporation had 40,000 shares of $10 par value common
stock issued and outstanding. All 40,000 shares had been issued in a prior period at $17
per share. On February 1, 20×5, Falcon purchased 3,100 shares of treasury stock for
$19 per share and later sold the treasury shares for $26 per share on March 2, 20×5.
What amount of gain due to these treasury stock transactions should be reported on the
income statement for the year ended December 31, 20×5 ?
A.$0
B.$21,700
C.$3,100
D.$2,170
The costs of completed jobs in a service organization is transferred to the
A.Work in Process Inventory account.
B.Finished Goods Inventory account.
C.Cost of Goods Sold account.
D.Cost of Services account.
Following are the financial statements for Flynn Corporation for the year ended
December 31, 20×5. Assume that all balance sheet amounts represent both average and
ending figures.
What is the inventory turnover for this corporation? Round your answer to one decimal
place.
A.1.2 times
B.1.6 times
C.2.4 times
D.4.0 times
A reversing entry is acceptable for which of the following?
A.Depreciation of building
B.Allocation of prepaid rent to the current period
C.Correction of an error
D.Accrual of interest expense
Consistency requires
A.that the company use the same accounting procedures from period to period.
B.that the company use the same accounting procedures as other companies in the same
industry.
C.that the company explain, in a note to the financial statements, the significant
accounting policies used.
D.All of these choices.
In a liquidation, the liabilities of the partnership should be paid
A.after a revaluation of assets
B.before any sales of assets
C.before the distribution of cash to partners
D.before the distribution of gains and losses on the disposal of assets
A company performs the aging of accounts receivable calculation and arrives at an
estimate for uncollectible accounts of $900. If Allowance for Uncollectible Accounts
has a debit balance of $200 prior to the year-end adjustment, for how much should the
adjustment be journalized?
A.$200
B.$700
C.$900
D.$1,100
The use of realistic predetermined unit costs to facilitate product costing, cost control,
cost flow, and inventory valuation is a description of the
A.flexible budget concept.
B.budgetary control concept.
C.capacity level concept.
D.standard cost accounting concept.
Use the following information to perform the calculations requested below, assuming
that the FIFO costing approach to a process costing system is being used.
Beginning work in process inventory: 16,000 units, 100 percent complete as to direct
materials, 85 percent complete as to conversion costs
Ending work in process inventory: 36,000 units, 100 percent complete as to direct
materials, 70 percent complete as to conversion costs
Units started during the month: 59,000
a. Calculate units to be accounted for during the month.
b. Calculate units started and completed during the month.
c. Calculate equivalent units for direct materials.
d. Calculate equivalent units for conversion costs.
An American company makes a credit sale of goods to a company in London for 20,000
British pounds. On the date of sale, the exchange rate was $1.60 per pound. However,
on the date payment was received, the exchange rate had risen to $1.70 per pound. As a
result, the American company would record
A.an exchange gain of $2,000.
B.an exchange loss of $200.
C.an exchange loss of $2,000.
D.no exchange gain or loss.
Examples of one-time items include
A.nonoperating items.
B.uncollectible accounts receivable.
C.warranty claims.
D.environmental cleanup costs.
Lee Carter Inc. forecast of sales is as follows: July, $50,000; August, $80,000;
September, $150,000. Sales are normally 75 percent cash and 25 percent credit. Credit
sales are collected in full in the following month. Merchandise cost averages 70 percent
of sales price. The company desires an inventory as of September 30 of $50,000. The
inventory as of June 30 was $30,000. The accounts receivable had zero balance on June
30.
Total purchases that must be made in order to meet sales and inventory requirements of
Lee Carter for the quarter amount to
A.$216,000.
B.$176,000.
C.$246,000.
D.$226,000.
Use this information to answer the following question.
Northbrook Corporation is preparing a statement of cash flows. The following
transactions occurred during the year:
1> Sold machinery for $9,000 cash.
2> Purchased a building for $80,000 cash.
3> Issued $70,000 worth of stock to acquire an airplane.
4> Converted long-term bonds by issuing $100,000 worth of stock.
5> Declared and paid a $10,000 cash dividend.
Transaction 2 would be found on the statement of cash flows in the
A.cash flows from operating activities section.
B.cash flows from financing activities section.
C.cash flows from investing activities section.
D.noncash investing and financing transactions section.
The general ledger account for Accounts Receivable shows a debit balance of $50,000.
Allowance for Uncollectible Accounts has a credit balance of $3,000. Net sales for the
year were $500,000. In the past, 3 percent of sales have proved uncollectible, and an
aging of accounts receivable resulted in an estimate of $20,000 of uncollectible
accounts receivable.
Using the accounts receivable aging method, the Allowance for Uncollectible Accounts
balance (after adjustment) would be
A.$17,000.
B.$20,000.
C.$21,500.
D.$23,000.
A company expects to begin the coming year with 6,000 ceramic pots in finished goods
inventory. It expects to sell 85,000 ceramic pots and end the year with 8,000 pots in the
finished goods inventory. Four pounds of clay go into each ceramic pot. The company
expects to have 4,000 pounds of clay on hand at the beginning of the coming year and
wishes to end the year with 6,000 pounds in inventory.
a. Prepare a production budget showing the number ceramic pots that the company
must manufacture to carry out these plans.
b. Prepare a direct materials purchases budget showing the number of pounds of clay
that the company must purchase during the year.
Choco Sweet Inc. gives you the following information:
The standard labor time of 0.75 labor hour is required to produce one unit. The standard
labor cost for a 10 pound bag of chocolate is $8 per labor hour. The following is data
relating to the actual cost and usage data.
Using the above information provided for Choco Sweet, compute the direct labor rate
variance for Choco Sweet Inc.
A.$8,500 (F)
B.$11,688 (U)
C.$6,000 (F)
D.$2,500 (U)
Harrison Inc. has computed direct labor standards for the manufacture of its product to
be 4 hours of labor per product at a cost of $15 per hour. During March, Harrison
produced 45 products in 190 hours and incurred direct labor costs of $2,720. Harrison’s
direct labor efficiency variance was
A.$150 (F).
B.$130 (U).
C.$150 (U).
D.$130 (F).
Jasmine Company has established a petty cash fund for small expenditures. Prepare
journal entries for the following transactions (omit explanations).
Elise, Farrah, and Gina are liquidating their business. They share income and losses in a
2:3:1 ratio, respectively, and currently have capital balances of $60,000, $42,000, and
$78,000, respectively. In addition, the partnership has $30,000 in cash, $50,000 in
accounts payable, and $200,000 in noncash assets. Elise and Gina are personally
solvent, but Farrah is not. Assuming that the noncash assets are sold for $92,000,
prepare all liquidation entries in the journal provided. (Omit explanations.)
Calculate ROI, residual income, and EVA for each of the investment centers listed.
(Round to two decimal places.)
From the following alphabetical list of account balances, all of which are normal, for
Ivy Maxx Company on July 31, 2014, prepare a trial balance in proper form (the
amount of Ivy Maxx, Withdrawals must be computed) .
Differentiate between the variable overhead spending variance and the variance
overhead efficiency variance.
Identify and explain the important questions a manager must address before preparing a
managerial report. (Hint: Think “w’s.”)
Assuming the use of the periodic inventory system, use the data below to calculate the
net cost of purchases and the cost of goods available for sale for the year ended
December 31, 20×5.
Copperhead Corporation has 30,000 shares of $100 stated value no-par common stock
authorized, and 20,000 shares were outstanding during 20×5. The following
transactions relate to cash dividends of Copperhead Corporation for the year ended
December 31, 20×5. Prepare entries in journal form without explanations to record the
following transactions:
On June 3, Lakeland Company sold merchandise worth $1,600 on credit, terms 2/10,
n/30. The merchandise sold had cost $1,100. The customer paid the amount on June 15.
What is the required journal entry to record the payment received under the periodic
inventory system?