A company had gross profit of $134,200 on net sales of $205,000. If ending inventory
was $8,000 and average inventory was $7,080, what is the company’s inventory
turnover?
A. 10.0
B. 8.85
C. 16.77
D. 18.95
E. 28.95
Answer:
A minimum acceptable rate of return for an investment decision is called the:
A. Internal rate of return.
B. Average rate of return.
C. Hurdle rate of return.
D. Maximum rate of return.
E. Payback rate of return.
Answer:
The Palos Company expects sales for June, July, and August of $48,000, $54,000, and
$44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are
on credit. The company collects 50% of its credit sales in the month following sale,
45% in the second month following sale, and 5% are not collected. What are the
company’s expected cash receipts for August from its current and past sales?
A. $29,160
B. $46,760
C. $61,160
D. $66,200
E. $78,800
Answer:
Given the following information, determine the cost of goods sold at December 31
using the LIFO perpetual inventory method.
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.
A. $282.15
B. $332.10
C. $281.25
D. $290.70
E. $210.30
Answer:
Following are seven items (a) through (g) that would cause Xavier Company’s book
balance of cash to differ from its bank statement balance of cash.
a. A service charge imposed by the bank.
b. A check listed as outstanding on the previous period’s reconciliation and still
outstanding at the end of this month.
c. A customer’s check returned by the bank is marked “Not Sufficient Funds. (NSF)”
d. A deposit that was mailed to the bank on the last day of the current month and is
unrecorded on this month’s bank statement.
e. A check paid by the bank at its correct $190 amount was recorded in error in the
company’s Check Register at $109.
f. An unrecorded credit memorandum indicated that bank had collected a note
receivable for Xavier Company and deposited the proceeds in the company’s account.
g. A check was written in the current period that is not yet paid or returned by the bank.
Indicate where each item (a) through (g) would appear on Xavier Company’s bank
reconciliation by placing its identifying letter in the parentheses in the proper section of
the form below.
Answer:
Reference: 18_04
A firm sells two products, A and B. For every unit of A the firm sells, two units of B are
sold. The firm’s total fixed costs are $1,612,000. Selling prices and cost information for
both products follow:
What is the firm’s break-even point in units of A and B?
A. 31,000 of A and 31,000 of B.
B. 31,000 of A and 62,000 of B.
C. 10,333 of A and 20,667 of B.
D. 36,167 of A and 72,333 of B.
E. 62,000 of A and 31,000 of B.
Answer:
Vision Tester, Inc., a manufacturer of optical glass, began operations on February 1 of
the current year. During this time, the company produced 900,000 units and sold
800,000 units at a sales price of $12 per unit. Cost information for this year is shown in
the following table:
Given this information, which of the following is true?
A. Net income under variable costing will exceed net income under absorption costing
by $50,000.
B) Net income under absorption costing will exceed net income under variable costing
by $50,000.
C. Net income will be the same under both absorption and variable costing.
D. Net income under variable costing will exceed net income under absorption costing
by $60,000.
E. Net income under absorption costing will exceed net income under variable costing
by $60,000.
Answer:
A company purchased a POS cash register on January 1 for $5,400. This register has a
useful life of 10 years and a salvage value of $400. What would be the depreciation
expense for the second-year of its useful life using the double-declining-balance
method?
A. $500
B. $800
C. $864
D. $1,000
E. $1,080
Answer:
Marcus processes four different products that can either be sold as is or processed
further.
Listed below are sales and additional cost data:
Which product(s) should not be processed further?
A. Acta.
B. Corda.
C. Fando.
D. Limo.
E. None of the products should be processed further.
Answer:
How long will it take an investment of $25,000 at 6% compounded annually to
accumulate to a total of $35,462.50?
A) 4 years
B) 5 years
C) 6 years
D) 2 years
E) 10 years
Answer:
A company purchased a delivery van for $23,000 with a salvage value of $3,000 on
September 1, 2010. It has an estimated useful life of five years. Using the straight-line
method, how much depreciation expense should the company recognize on December
31, 2010?
A. $1,000
B. $1,333
C. $1,533
D. $4,000
E. $4,600
Answer:
A company reported that its bonds with a par value of $50,000 and a carrying value of
$57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be
reported under cash flows from financing activities is:
A. $3,000 outflow.
B. $60,000 outflow.
C. $57,000 outflow.
D. Zero. This is an operating activity.
E. Zero. This is an investing activity.
Answer:
Match the following terms to the appropriate definition:
(a) General accounting system
(b) Time ticket
(c) Clock card
(d) Materials requisition
(e) Underapplied overhead
(f) Job order manufacturing
(g) Overapplied overhead
(h) Job cost sheet
(i) Job order cost accounting system
(j) Predetermined overhead allocation rate
(k) Materials ledger card
_______ (1)The production of products in response to special orders; also called
customized production.
_______ (2)A source document that is used to record the number of hours an employee
works and to determine the total labor cost for each pay period.
_______ (3)The amount by which the overhead applied to jobs in a period with the
predetermined overhead allocation rate exceeds the overhead incurred in a period.
_______ (4)An accounting system for manufacturing activities based on the periodic
inventory system.
_______ (5)The rate established prior to the beginning of a period that relates estimated
overhead to an allocation factor such as estimated direct labor and is used to assign
overhead cost to a job.
_______ (6)A cost accounting system designed to determine the cost of producing each
job or job lot.
_______ (7)A source document that production managers use to request materials for
manufacturing and that is used to assign materials costs to specific jobs or to overhead.
_______ (8)A perpetual record that is updated each time units of raw material are both
purchased and issued for use in production.
_______ (9)A source document that is used to report how much time an employee spent
working on a job or on overhead activities and then to determine the amount of direct
labor to charge to the job or the amount of indirect labor to charge to overhead.
_______(10)The amount by which overhead incurred in a period exceeds the overhead
applied to jobs with the predetermined overhead allocation rate.
_______(11) A separate record maintained for each job in a job order costing system; it
shows direct materials, direct labor, and overhead for each job.
Answer:
Fluffy Pet Grooming deposits all cash receipts on the day when they are received and
all cash payments are made by check. At the close of business on June 30, its Cash
account shows a $14,811 debit balance. Fluffy Pet Grooming’s June 30 bank statement
shows $14,472 on deposit in the bank. Prepare a bank reconciliation for Fluffy Pet
Grooming using the following information:
a. Outstanding checks as of June 30 total $2,261.
b. The June 30 bank statement included a $75 debit memorandum for bank services.
c. Check No. 919, listed with the canceled checks, was correctly drawn for $789 in
payment of a utility bill on June 15. Fluffy Pet Grooming mistakenly recorded it with a
debit to Utilities Expense and a credit to Cash in the amount of $798.
d. The June 30 cash receipts of $2,534 were placed in the banks night depository after
banking hours and were not recorded on the June 30 bank statement.
What is the adjusted bank balance?
A. $14,265
B. $14,745
C. $14,677
D. $14,538
E. $14,877
Answer:
A company’s return on total assets equals 28%. If total assets and net sales are
$4,500,000 and $10,000,000 respectively, how much is net income?
A. $2,800,000
B. $4,060,000
C. $1,260,000
D. $14,500,000
E. $2,030,000
Answer:
Selected current year company information follows:
Calculate the following company ratios:
(a) Profit margin.
(b) Total asset turnover.
(c) Return on total assets.
(d) Return on common stockholders’ equity (assume the company has no preferred
stock).
Answer:
The difference between sales price per unit and variable cost per unit is the:
A. Gross profit from sales.
B. Gross margin per unit.
C. Fixed cost per unit.
D. Margin of safety per unit.
E. Contribution margin per unit.
Answer:
Reference: 21_01
Five Rings, Inc, has collected the following data on one of its products:
The direct materials price variance is:
A. $13,750 unfavorable
B. $16,250 unfavorable
C. $16,250 favorable
D. $30,000 unfavorable
E. $33,000 favorable
Answer:
At the beginning of the recent period, there were 900 units of product in a department,
one-third completed. These units were finished and an additional 5,000 units were
started and completed during the period. 800 units were still in process at the end of the
period, one-fourth completed. Using the weighted-average valuation method, the
equivalent units produced by the department were:
A. 6,700 units.
B. 5,900 units.
C. 5,800 units.
D. 6,100 units.
E. 8,500 units.
Answer:
Of the following errors, which one will cause the trial balance to be out of balance?
A. A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to
Salaries Expense.
B. A $100 cash receipt from a customer in payment of his account posted as a $100
debit to Cash and a $10 credit to Accounts Receivable.
C. A $75 cash receipt from a customer in payment of his account posted as a $75 debit
to Cash and a $75 credit to Cash.
D. A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment
and a $50 credit to Cash.
E. An $800 prepayment from a customer for services to be rendered in the future was
posted as an $800 debit to Unearned Revenue and an $800 credit to Cash.
Answer:
Net income divided by average total assets is equal to the:
A. Profit margin
B. Total asset turnover
C. Return on total assets
D. Days’ income in assets
E. Current ratio
Answer:
A company markets a climbing kit and uses the perpetual inventory system to account
for its merchandise. The beginning balance of the inventory and its transactions during
January were as follows:
If the ending inventory is reported at $276, which inventory method was used?
A. LIFO method
B. FIFO method
C. Weighted-average method
D. Specific identification method
E. Retail inventory method
Answer:
Case Company allocates $5.00 overhead to each unit produced. The company uses a
plantwide overhead rate with machine hours as the allocation base. Given the amounts
below, how many machine hours does the company expect in department 2?
A. 25,000 MH
B. 137,500 MH
C. 82,500 MH
D. 88,000 MH
E. 33,000 MH
Answer:
Social responsibility:
A. Is a concern for the impact of one’s actions on society as a whole.
B. Is a code that helps in dealing with confidential information.
C. Is required by the SEC.
D. Requires that all businesses conduct social audits.
E. Is mandated by the federal government.
Answer:
In a process costing operation, the direct labor of a production department includes:
A. All labor used exclusively by that department, even if the labor is not applied to the
product itself.
B. All labor used exclusively by that department, but only if the labor is applied to the
product itself.
C. All labor for that department, including labor for services that help more than one
production department, such as clerical, repair, and computer technicians.
D Only labor that helps more than one production department, such as clerical, repair,
and computer technicians.
E Only that labor that is recorded in the Factory Payroll account.
Answer:
One of several ratios that reflects solvency includes the:
A. Acid-test ratio
B. Current ratio
C. Times interest earned ratio
D. Total asset turnover
E. Days’ sales in inventory
Answer:
On July 1 of the current year, a company purchased and placed in service a machine
with a cost of $240,000. The company estimated the machine’s useful life to be four
years or 60,000 units of output with an estimated salvage value of $60,000. During the
current year, 15,000 units were produced.
Prepare the necessary December 31 adjusting journal entry to record depreciation for
the current year assuming the company uses:
a. The straight-line method of depreciation.
b. The units-of-production method of depreciation.
c. The double-declining balance method of depreciation.
Answer:
A sales invoice:
A. Is a type of use document.
B. Is a source document.
C. Is not needed by buyers.
D. Gives rise to an entry in the accounting process.
E. Is not necessary in accounting.
Answer:
Which of the following is the primary purpose of accounting?
A. To establish a business.
B. To identify, record, and communicate business transactions.
C. To earn a large profit.
D. To reduce taxes owed for the business.
E. To establish credit for a company.
Answer:
A company receives a 6.2%, 60-day note for $9,650. The total amount of cash due on
the maturity date is:
A. $598.30
B. $99.72
C. $9,650.00
D. $10,248.30
E. $9,749.72
Answer:
A company owns $400,000 of 7% bonds that pay interest on October 1 and April 1.
The amount of interest accrued on December 31 (the company’s year-end) would be:
A. $4,667
B. $7,000
C. $28,000
D. $14,000
E. $9,333
Answer:
Presented below are terms preceded by letters (a) through (h) and followed by a list of
definitions (1) through (8). Enter the letter of the term with the definition, using the
space preceding the definition.
(a) Unfavorable variance
(b) Fixed budget performance report
(c) Overhead cost variance
(d) Budgetary control
(e) Spending variance
(f) Flexible budget performance report
(g) Efficiency variance
(h) Favorable variance
__________(1) Difference in sales or costs, when the actual value is compared to the
budgeted value, that contributes to a lower income.
__________(2) A report that compares results with fixed budgeted amounts and
identifies the differences as favorable or unfavorable variances.
__________(3) The difference between the actual price of an item and its standard
price.
__________(4) Difference in sales or costs, when the actual value is compared to the
budgeted value, that contributes to a higher income.
__________(5) Use of budgets by management to monitor and control the operations of
a company.
__________(6) Difference between actual quantity of an input and the standard
quantity of the input.
__________(7) Difference between the total overhead cost applied to products and the
total overhead cost actually incurred.
__________(8) A report that compares actual revenues and costs with their variable
budgeted amounts based on actual sales volume (or other level of activity) and
identifies the differences as variances.
Answer:
The net present value decision rule requires that when an asset’s expected cash flows
are discounted at the required rate and yield a positive net present value, the project
should be ____________________.
Answer:
During January, a company that uses a perpetual inventory system had beginning
inventory, purchases, and sales as follows. What was the LIFO cost of the company’s
January 31 inventory?
Answer:
An ________________________________ is an obligation requiring a series of
payments to the lender.
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:
Compute the companys activity rates under activity-based costing for each of the three
activities.
Answer:
A company is creating a fund by depositing $65,763 today. The fund will grow to
$90,000 after eight years. What annual interest rate is the company earning on the fund?
Answer:
How do the consistency concept and the full disclosure principle affect inventory
valuation?
Answer:
_______________________ is the amount remaining from sales revenues after all
variable production costs have been deducted.
Answer:
How does the calculation of break-even time (BET) differ from the calculation of
payback period (PBP)?
Answer:
If the liabilities of a company increased $92,000 during a period of time and equity in
the business decreased $30,000 during the same period, did the assets of the company
increase or decrease and by what amount?
Answer:
On January 2, Froxel Company purchased 10,000 shares of Sandia Corp. common
stock at $19 per share plus a $3,000 commission. This represents 30% of Sandia Corp.’s
outstanding stock. On August 6, Sandia Corp. declared and paid cash dividends of
$1.75 per share and on December 31 it reported net income of $150,000. Prepare the
necessary entries Froxel Company must make to account for these transactions and
events.
Answer:
Describe the two alternate methods used to account for prepaid expenses.
Answer:
Cobb Corn Company purchases a large lot on which a building is located. The
negotiated purchase price is $2,500,000 for the lot and the building. The company pays
$71,500 in commissions and taxes. The appraisal values of each item is as follows: land
$650,000, building $1,750,000, land improvements $120,000. What is the appropriate
amount to be recorded in the general journal for the building?
A $1,750,000
B. $1,785,650
C. $1,735,000
D. $1,685,379
E. $1,730,000
Answer:
Explain the purposes, types, and uses of special journals.
Answer:
A company has net sales of $1,909,000, sales commissions in the amount of $250,000,
net income of $866,400, and gross profit ratio of 60%. What is the amount of cost of
goods sold?
Answer:
The use of a spreadsheet for analysis is especially useful when preparing the statement
of cash flows using the _____________ method.
Answer:
An ordinary annuity refers to a series of equal payments made or received at the end of
equal intervals.
Answer:
Explain the components of the statement retained earnings and identify the special
items that are reported in it.
Answer:
Apply the retail method to the following company information to calculate the cost of
the ending inventory for the current period:
Answer:
After preparing an (unadjusted) trial balance at year-end, G. Chu of Chu Design
Company discovered the following errors:
1. Cash payment of the $225 telephone bill for December was recorded twice.
2. Cash payment of a note payable was recorded as a debit to Cash and a debit to Notes
Payable for $1,000.
3. A $900 cash dividend was recorded to the correct accounts as $90.
4. An additional investment of $5,000 cash by the owner was recorded as a debit to
Common
Stock and a credit to Cash.
5. A credit purchase of office equipment for $1,800 was recorded as a debit to the
Office
Equipment account with no offsetting credit entry.
Using the form below, indicate whether the error would cause the trial balance to be out
of balance by placing an X in either the yes or no column.
Answer:
Explain how held-to-maturity debt securities are accounted for at and after acquisition
and how they are reported in the financial statements.
Answer: