The sales revenue of a merchandiser amounted to $25,000, sales returns and allowances
amounted to $2,400, and sales discounts amounted to $600. The merchandiser uses a
perpetual inventory system. The first entry in the closing process would include
________.
A) a credit to Income Summary for $25,000
B) a credit to Income Summary for $22,600
C) a debit to Income Summary for $2,400
D) a debit to Income Summary for $24,400
Management’s accountability to its suppliers and vendors is to ________.
A) provide products to customers that are safe and free of defects
B) obey laws and pay taxes timely
C) provide a return on shareholders’ investment
D) make timely payments and comply with contract terms
Which of the following is the correct formula to calculate the debt ratio?
A) Debt ratio = Total liabilities × Total assets
B) Debt ratio = Total liabilities + Total assets
C) Debt ratio = Total liabilities – Total assets
D) Debt ratio = Total liabilities / Total assets
Which of the following statements is true if the income statement debit column exceeds
the income statement credit column of a worksheet?
A) The company incurred a net loss.
B) The retained earnings account increased during the period.
C) The company made a net profit.
D) An error was made.
Liberty Corporation sells a product for $500 cash to Sarah Lewis. This transaction will
be recorded in the ________.
A) cash payments journal
B) sales journal
C) cash receipts journal
D) purchase journal
________ is a philosophy of continuous improvement of products and processes.
A) Just-in-Time (JIT) Management
B) Enterprise Resource Planning (ERP)
C) Supply Chain Management (SCM)
D) Total Quality Management (TQM)
In a process costing system, production costs are ________.
A) adjusted and allocated by jobs
B) not inventoried
C) directly shown on the income statement
D) accumulated by process
Calculate the cost of goods sold for a merchandiser using the periodic inventory system
from the following details.
A) $510,000
B) $481,000
C) $499,000
D) $801,000
The entries that transfer the revenue, expense, and dividends balances to the Retained
Earnings account to prepare the company’s books for the next period are called
________.
A) closing entries
B) opening entries
C) adjusting entries
D) temporary accounts
On January 1, 2016, Martini, Inc. acquired a machine for $1,050,000. The estimated
useful life of the asset is five years. Residual value at the end of five years is estimated
to be $100,000. What is the book value of the machine at the end of 2017 if the
company uses the straight-line method of depreciation?
A) $630,000
B) $670,000
C) $570,000
D) $629,996
Regarding the statement of stockholders’ equity, which of the following statements is
incorrect?
A) The statement of stockholders’ equity has more information than the statement of
retained earnings because it reports the changes in all stockholders’ equity accounts.
B) The statement of stockholders’ equity does not show the changes to the Retained
Earnings account because that information is provided in the statement of retained
earnings.
C) The statement of stockholders’ equity is an option for reporting the changes in
stockholders’ equity of a corporation.
D) The statement of stockholders’ equity reports the number of shares and any changes
during the year in preferred, common, and treasury stock.
Winter Wonderland sells hand-knit scarves. Each scarf sells for $50. The company pays
$30 to rent a vending space for one day. The variable costs are $10 per scarf. What total
revenue amount does the company need to earn to break even? (Round any percentages
to two decimal places and your final answer to the nearest cent.)
A) $66.67
B) $37.50
C) $12.50
D) $50.00
The issuance of common stock for cash is shown as a ________.
A) negative cash flow in the investing activities section of the statement of cash flows
B) positive cash flow in the investing activities section of the statement of cash flows
C) negative cash flow in the financing activities section of the statement of cash flows
D) positive cash flow in the financing activities section of the statement of cash flows
Peter Smith has just won the state lottery and has the following three payout options for
after-tax prize money:
1. $64,000 per year at the end of each of the next six years
2. $304,000 (lump sum) now
3. $502,000 (lump sum) six years from now
The annual discount rate is 9%. Compute the present value of the third option. (Round
to nearest whole dollar.)
Present value of $1:
A) $240,000
B) $98,133
C) $101,717
D) $299,192
The maturity date for a six-month note issued on January 15 would be ________.
A) July 15
B) July 14
C) July 16
D) July 10
An entity that buys goods and sells them to customers at a markup is a ________.
A) merchandiser
B) service provider
C) manufacturer
D) producer
On August 14, First Avenue Bank lent $240,000 to City Cafe on a 75 day, 6% note.
What is the maturity value of the note? (Use a 360-day year and round answers to the
nearest dollar.)
A) $242,959
B) $243,000
C) $240,000
D) $254,400
Net present value represents the difference between the ________.
A) total net income of the project and the initial investment
B) initial investment and the residual value
C) future value of the cash flows and the present value of the cash flows
D) present value of the investment’s net cash inflows and the investment’s initial cost
The Assembly Department of ZigZag, Inc., manufacturer of computers, incurred
$280,000 in direct material costs and $70,000 in conversion costs. The equivalent units
of production for direct materials and conversion costs are 1,000 and 900, respectively.
The cost per equivalent unit of production for direct materials is ________. (Round
your answer to the nearest cent.)
A) $77.78
B) $70.00
C) $311.11
D) $280.00
Dividends in arrears are ________.
A) a liability on the balance sheet
B) passed dividends on noncumulative preferred stock
C) passed dividends on cumulative preferred stock
D) passed dividends on common stock
Which of the following accounts will be included in a post-closing trial balance?
A) Dividends
B) Salaries Expense
C) Common Stock
D) Supplies Expense
Which of the following should be included in the cost of land?
A) cost to build sidewalks on the land
B) cost to clear the land of old buildings
C) cost of installing signage
D) cost of installing fences
Which of the following managers is likely to have the most diverse responsibilities?
A) the manager of a cost center
B) the manager of a profit center
C) the manager of an investment center
D) the manager of a revenue center
Which of the following financial statements shows the dividends distributed to
stockholders?
A) Income statement
B) Statement of retained earnings
C) Budgeted balance sheet
D) Balance sheet
Smart Art is a new business. During its first year of operations, credit sales were
$44,000 and collections from credit sales were $32,000. One account for $625 was
written off. Management uses the percent-of-sales method to account for bad debts
expense and estimates 2% of credit sales to be uncollectible. What is the balance of
Accounts Receivable at the end of the first year?
A) $12,000
B) $10,495
C) $11,375
D) $11,120
Which of the following is a benefit of using a computerized accounting information
system?
A) The software can accurately measure the intrinsic value of the firm using the built-in
simulation techniques.
B) There is no need to review the financial statements for accuracy.
C) The software is easy to use, thus no training or review is necessary.
D) The software automatically transfers the amounts from the general ledger to the
financial statements.
Which of the following is a liability account?
A) Service Revenue
B) Building
C) Accounts Receivable
D) Unearned Revenue
Zane Set Designs Company has received an award which entitles it to receive annual
payments of $10,000 at the end of each year for the next ten years. Which of the
following is used to calculate today’s value of this award?
A) Present Value of $1
B) Present Value of an Ordinary Annuity of $1
C) Future Value of $1
D) Future Value of an Ordinary Annuity of $1
The following is a summary of information presented on the financial statements of a
company on December 31, 2017.
With respect to net sales revenue, a horizontal analysis reveals ________.
A) a 19.84% increase in net sales revenue
B) a 238.48% decrease in net sales revenue
C) a decrease of $53,000 in net sales revenue
D) a $53,000 increase in net sales revenue
In regards to extraordinary items, which of the following statements is not correct?
A) Losses due to lawsuits do not qualify as extraordinary.
B) An extraordinary gain is reported the same as a loss – net of the income tax effect.
C) Taking of a company assets by a foreign government are generally considered to be
extraordinary items.
D) Extraordinary items are reported separately from continuing operations because of
their infrequent and unusual nature.
A company is a price-taker when ________.
A) it operates in a highly competitive market
B) its product is unique
C) it has considerable flexibility in setting prices of its products
D) it has very high fixed costs
Jones Retail. had the following balances and transactions during 2017:
The company maintains its records of inventory on a perpetual basis using the first-in,
first-out inventory costing method. Calculate the amount of ending Merchandise Inventory
on December 31, 2017 using the lower-of-cost-or-market rule.
A) $2,240
B) $1,600
C) $1,850
D) $1,480
Which of the following accounts would appear in the income statement credit column?
A) Service Revenue
B) Prepaid Insurance
C) Unearned Revenue
D) Depreciation Expense
