For each of the following, indicate whether the statement relates to managerial
accounting (MA) or financial accounting (FA):
The management of Vert Lawnmowers has calculated the following variances:
When determining the total production cost flexible budget variance, what is the total
manufacturing overhead variance of the company?
A) $5,000 F
B) $8,500 F
C) $3,000 F
D) $11,500 F
Interest revenue earned on held-to-maturity investments is reported on the income
statement in the ________ section.
A) other revenues and expenses
B) current assets
C) operating income
D) minority interest
On June 1, 2017, Smith & Beecham Services issued $33,000 of 10% bonds that mature
in five years. They were issued at par. The bonds pay semiannual interest payments on
June 30 and December 31 of each year. On December 31, 2017, what is the total
amount paid to bondholders?
A) $1,650
B) $3,300
C) $825
D) $1,100
Which of the following is an expense that results from the usage of a natural resource?
A) depletion
B) amortization
C) depreciation
D) obsolescence
e-Shop, Inc. has net sales on account of $1,500,000. The average net accounts
receivable are $610,000. Calculate the days’ sales in receivables. (Round your answer to
two decimal places.)
A) 897.90 days
B) 365.00 days
C) 148.37 days
D) 2.46 days
Hexagon Corporation sold a product on credit for $2,235 to Merin Lynch. The cost of
goods sold was $1,324. Assuming the firm is following a perpetual inventory system
and using a sales journal, it will record $2,235 in the ________.
A) Accounts Receivable CR, Sales Revenue DR column
B) Cost of Goods Sold DR, Merchandise Inventory CR column
C) Merchandise Inventory DR, Cost of Goods Sold CR column
D) Accounts Receivable DR, Sales Revenue CR column
Kevin Woodworking Company is preparing its statement of cash flows using the
indirect method. During the year, Kevin sold equipment for $5,990 cash. The net book
value of the asset was $4,970. Which of the following statements is true?
A) The gain on sale of $1,020 is added back to net income in the operating activities
section.
B) The book value of the assets sold is shown as a negative cash flow in the investing
activities section.
C) The cash receipt of $5,990 is shown as a positive cash flow in the investing activities
section.
D) The gain on sale of $1,020 is shown as a positive cash flow in the financing
activities section.
Harrison Recyclers Company uses the indirect method to prepare its statement of cash
flows. Refer to the following information for 2017:
1. Retained Earnings, beginning balance, $138,000
2. Retained Earnings, ending balance, $122,000
3. There is a net loss of $15,000 for the year.
What is the amount of dividends declared during the year?
A) $31,000
B) $2,000
C) $1,000
D) $16,000
Leroy, an employee of Double Time, Inc., has gross salary for March of $4,000. The
entire amount is under the OASDI limit of $117,000 and thus subject to FICA. He is
also subject to federal income tax at a rate of 18%. Provide the journal entry to record
salaries expense and payroll withholdings. (Assume a FICA—OASDI Tax of 6.2% and
FICA—Medicare Tax of 1.45%.)
In the budgeted statement of cash flows, all cash receipts and payments are categorized
into operating, financing, and ________ activities.
A) investing
B) merchandising
C) budgeting
D) controlling
Calculate the interest on a 270-day, 11% note for $36,000. (Use a 360-day year to
compute interest. Round your answer to the nearest dollar.)
A) $5,940
B) $2,970
C) $3,960
D) $330
Revenue that has been earned but not yet collected in cash is called a(n) ________.
A) accrued revenue
B) deferred expense
C) deferred revenue
D) accrued expense
The following information is from the 2017 records of Albert Book Shop:
Bad debts expense is estimated by the aging-of-receivables method. Management
estimates that $5,500 of accounts receivable will be uncollectible. Calculate the amount of
bad debts expense for 2017.
A) $5,500
B) $7,400
C) $3,600
D) $5,750
The bank recorded a $3,000 deposit as $300. How would this information be included
on the bank reconciliation?
A) a deduction on the bank side
B) a deduction on the book side
C) an addition on the book side
D) an addition on the bank side
Companies that manufacture identical items through a series of uniform production
steps use ________ to determine cost per unit sold.
A) a process costing system
B) a job order costing system
C) the weighted-average method
D) the first-in, first-out method
The flexible budget variance is the difference between the ________.
A) actual results and the expected results in the flexible budget for the actual units sold
B) expected results in the flexible budget for the units expected to be sold and the static
budget
C) flexible budget and actual amounts due to differences in volumes
D) flexible budget and static budget due to differences in fixed costs
A company’s Cash account shows an ending balance of $4,600. Reconciling items
included a bookkeeper error of $105 (a $525 check recorded as $630), two outstanding
checks totaling $830, a service charge of $20, a deposit in transit of $260, and interest
revenue of $33. What is the adjusted book balance?
A) $4,482
B) $4,030
C) $4,718
D) $5,170
Message Company uses the indirect method to prepare its statement of cash flows.
Refer to the following portion of the comparative balance sheet:
Message Company
Comparative Balance Sheet
December 31, 2017 and 2016
Note:
1. There was no retirement of stock during the year.
2. There were no sales of treasury stock during the year.
Which of the following statements is correct?
A) There was zero net cash flow from transactions involving Common Stock.
B) There was a negative cash flow of $5,600 from the issuance of Common Stock.
C) There was a positive cash flow of $5,600 from the issuance of Common Stock.
D) There was positive cash flow of $18,000 from issuance of Common Stock.
A favorable flexible budget variance in sales revenue suggests a(n) ________.
A) increase in sales price
B) increase in volume
C) decrease in variable cost per unit
D) decrease in fixed costs
A 15% increase in production volume will result in a ________.
A) 15% increase in the variable cost per unit
B) 15% increase in total mixed costs
C) 15% increase in total administration costs
D) 15% increase in total variable costs
Purchases of direct material for May were $105,000, while expected purchases for June
and July are $120,000 and $134,000, respectively. All purchases are paid 75% in the
month of purchase and 25% the following month. Calculate the budgeted payments for
the month of June.
A) $116,250
B) $108,750
C) $120,000
D) $30,000
In target pricing, the target sales price is the ________.
A) total product cost incurred in producing a product
B) net profit desired by the company
C) amount customers are willing to pay for a product or service
D) price calculated by deducting the desired profit from the total production cost
Alpha Company manufactures breadboxes and uses an activity-based costing system.
The following information is provided for the month of May:
Each breadbox consists of four parts, and the direct materials cost per breadbox is $7.80.
There is no direct labor. What is the total manufacturing cost per breadbox? (Round any
intermediate calculations and your final answer to the nearest cent.)
A) $15.32
B) $23.12
C) $4.93
D) $18.73
In regards to benchmarking, which of the following statements is correct?
A) The two main types of benchmarks in financial statement analysis include
benchmarking against prior year of the same company and benchmarking against a key
competitor.
B) Benchmarking is the practice of comparing a company with information provided by
the Financial Standards Accounting Board.
C) Risk Management Association provides common-size statements for most industries.
D) It is not helpful to provide common-size percentages in a graphical manner.
Which of the following statements is true of just-in-time management systems?
A) It involves ordering raw materials in large quantities to obtain volume discounts.
B) It triggers production after the customer places an order.
C) Its successful implementation is independent of vendor relationships.
D) It contracts with suppliers to deliver large quantities of goods once a year.
Aventis Company distributes cash dividends. How does this transaction affect the
accounting equation?
A) The assets, liabilities, and equity remain the same.
B) The assets decrease and equity decreases.
C) The assets increase and liabilities decrease.
D) The assets decrease and equity increases.
Which of the following occurs when a 2-for-1 stock split is declared?
A) The balance in Common Stock remains the same.
B) The balance in Common Stock is reduced to half the original amount.
C) The balance in Common Stock doubles.
D) The balance in Paid-in Capital in Excess of Par—Common doubles.
Journalize the following transactions for Malone Custom Furniture Manufacturing:
a. Incurred and paid advertising expenses, $3,500.
b. Incurred manufacturing wages of $30,000, 60% of which was direct labor and 40%
of which was indirect labor.
c. Purchased raw materials on account, $27,000.
d. Used in production: direct materials, $12,000; indirect materials,$5,500
e. Recorded manufacturing overhead: depreciation on plant, $14,000; plant insurance
(previously paid), $1,800; plant property tax, $4,500 (credit Property Tax Payable).
f. Allocated manufacturing overhead to jobs, 150% of direct labor costs.
g. Completed production on jobs with costs of $55,000.
h. Sold inventory on account, $64,000; cost of goods sold, $35,000.
i. Adjusted for overallocated or underallocated overhead.
Nuptial, Inc. paid the rent for the current month in cash. Which of the following
accounts will be used to record the transaction?
A) Prepaid Rent
B) Rent Payable
C) Rent Revenue
D) Rent Expense
Which of the following statements is true of revenues?
A) Revenues decrease equity, so a revenue account’s normal balance is a credit balance.
B) Revenues decrease equity, so a revenue account’s normal balance is a debit balance.
C) Revenues increase equity, so a revenue account’s normal balance is a debit balance.
D) Revenues increase equity, so a revenue account’s normal balance is a credit balance.