Which of the following items should be amortized?
A) natural resources
B) goodwill
C) patents, copyrights, trademarks
D) tangible property, plant, and equipment, other than land
Which of the following taxes has a ceiling on the amount of annual earnings subject to
tax?
A) FICA—OASDI taxes
B) sales tax
C) federal income tax
D) FICA—Medicare taxes
Under U.S. GAAP, which of the following is not an acceptable way to report plant
assets?
A) at fair market value
B) at book value
C) as a single amount, with a note to the financial statements that provides detailed
information
D) with detailed information on the face of the balance sheet
Kevin Couriers Company prepared the following static budget for the year:
If a flexible budget is prepared at a volume of 7,800, calculate the amount of operating
income. The production level is within the relevant range.
A) $43,800
B) $27,000
C) $7,800
D) $3,000
________ are the expenses that occur in an entity’s major line of business.
A) Interest expense
B) Interest revenue
C) Operating expenses
D) Loss on sale of plant asset
Which of the following is the correct order of the four steps of tracking product costs?
A) assign → accumulate → allocate → adjust
B) accumulate → assign → allocate → adjust
C) adjust → allocate → accumulate → assign
D) allocate → adjust → accumulate → assign
To accurately determine the financial performance of a company, it is necessary to
compare performance ________.
A) with a competing company
B) to the budget
C) with companies in different industries
D) only with profitable companies
Which of the following is true of a corporation?
A) A corporation cannot be privately held.
B) The earnings of a corporation may be subject to double taxation.
C) A corporation has a limited life.
D) The stockholders of a corporation have unlimited liability for the corporation’s debt.
Archangel Manufacturing calculated a predetermined overhead allocation rate at the
beginning of the year based on a percentage of direct labor costs. The production details
for the year are given below:
Calculate the manufacturing overhead allocation rate for the year based on the above data.
(Round your final answer to two decimal places.)
A) 42.42%
B) 257.14%
C) 235.71%
D) 1,206.90%
The ultimate control of the corporation rests with the ________.
A) board of directors
B) stockholders
C) chairperson
D) chief operating officer
Stockett, Inc. has prepared its third quarter budget and provided the following data:
The cash balance on June 30 is projected to be $4,500. The company has to maintain a
minimum cash balance of $5,000 and is authorized to borrow at the end of each month to
make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest
every month at an annual rate of 4%. All financing transactions are assumed to take place
at the end of the month. The loan balance should be repaid in increments of $5,000
whenever there is surplus cash. How much will the company have to borrow at the end of
August?
A) $15,000
B) $5,000
C) $10,000
D) $20,000
Preferred stockholders ________.
A) receive a dividend preference over common stockholders
B) are guaranteed that they will not have a loss on their investment
C) generally have voting rights
D) have more investment risk compared to common stockholders
Gizmo Manufacturer, a widgets manufacturing company, divides its production
operations into three processes—Department 1, Department 2, and Department 3. The
company uses a process costing system. Gizmo incurred the following costs during the
year to produce 4,200 units:
If Gizmo could sell only 3,600 units in during the year, what will be the cost per unit of
widget produced? (Round your answer to the nearest cent.)
A) $6.43
B) $4.29
C) $9.72
D) $8.33
Which of the following formulae is used to calculate average total assets for the return
on assets ratio?
A) Average total assets = (Beginning total assets + Ending total assets) × 2
B) Average total assets = (Beginning total assets – Ending total assets) × 2
C) Average total assets = (Beginning total assets – Ending total assets) / 2
D) Average total assets = (Beginning total assets + Ending total assets) / 2
Porterhouse Company incurs both fixed and variable production costs. Assuming that
production is within the relevant range, if volume goes up by 28%, then the total
variable costs would ________.
A) increase by 28%
B) remain the same
C) increase by an amount less than 28%
D) decrease by 28%
Which of the following best describes the term equivalent units?
A) partially completed units expressed in terms of fully completed units
B) partially completed units of output that will be sold as is
C) substitute of units that are partially completed
D) different types of units that have same selling price
The distribution of a stock dividend ________.
A) decreases both assets and liabilities
B) decreases assets and increase liabilities
C) effects only stockholder’s equity accounts
D) increases both dividends payable and cash
The interest rate on which cash payments to bondholders are based is the ________.
A) market rate
B) discount rate
C) stated rate
D) amortization rate
On January 1, 2017, Toland Sales issued $30,000 in bonds for $22,300. These are
eight-year bonds with a stated interest rate of 12% pay semiannual interest. Toland
Sales uses the straight-line method to amortize the bond discount. What is the bond
carrying amount after the first interest payment on June 30, 2017? (Round your
intermediate answers to the nearest dollar.)
A) $30,000
B) $18,931
C) $22,781
D) $26,631
A parent company is a company that ________.
A) is controlled by another corporation
B) owns a controlling interest in another company
C) is the first to begin operations in an industry
D) has a trading investment in another company
Lehigh Roller Skates has three product lines—D, E, and F. The following information is
available:
The company is deciding whether to drop product line F because it has an operating loss.
Assume that $15,000 of total fixed costs could be eliminated by dropping F. What effect
would this decision have on operating income?
A) Operating income will increase by $34,000.
B) Operating income will increase by $19,000.
C) Operating income will decrease by $4,000.
D) Operating income will decrease by $15,000.
A company produces 200 microwave ovens per month, each of which includes one
electrical circuit. The company currently manufactures the circuits in-house but is
considering outsourcing the circuits at a contract cost of $30 each. Currently, the cost of
producing circuits in-house includes variable costs of $24 per circuit and fixed costs of
$12,000 per month. Assume the company could cut fixed costs in half by outsourcing
and that there is no alternative use for the facilities presently being used to make
circuits. If the company outsources, operating income will ________.
A) increase by $4,800
B) decrease by $4,800
C) decrease by $1,200
D) stay the same
Accounts Payable is a(n) ________ account and has a normal ________ balance.
A) liability; debit
B) asset; debit
C) liability; credit
D) asset; credit
Niagara Art is a new business. During its first year of operations, credit sales were
$41,000 and collections of credit sales were $37,000. One account, $700, 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. Bad debts expense for the first year of
operations is ________.
A) $120
B) $820
C) $700
D) $1,560
Paragon Products sells a special type of navigation equipment for $1,400. Variable costs
are $800 per unit. When a special order arrived from a foreign contractor to buy 44
units at a reduced sales price of $1,000 per unit, there was a discussion among the
managers. The controller said that as long as the special price was greater than the
variable costs, the sale would contribute to the company’s profits and should be
accepted as offered. The vice president, however, decided to decline the order. Which of
the following statements supports the decision of the vice president?
A) The order is not likely to affect the regular sales.
B) The company is operating at 70% of its production capacity.
C) The variable costs of $800 includes variable costs of packing the product.
D) The company will need to hire additional staff to execute this order.
The primary objective in setting transfer prices is to ________.
A) establish a system that determines the best transfer prices for the company as a
whole
B) evaluate the managers of the responsibility centers involved
C) achieve goal congruence by selecting a price that will maximize overall company
profits
D) make it easy for managers to select prices that maximize division profits
Prepare a comparative common-size income statement for Marion, Inc. for 2017 and
2016 data. (Round percentages to one decimal place.)
Marion, Inc.
Comparative Income Statement
Years Ended December 31, 2017 and 2016
2017 2016
Net Sales $ 6,355 $ 4,920
Cost of Goods Sold 3,370 2,200
Gross Profit 2,985 2,720
Operating Expenses:
Selling Expenses 675 580
Administrative Expenses 410 425
Total Operating Expenses 1,085 1,005
Operating Income 1,900 1,715
Other Revenues and (Expenses):
Interest Revenue 0 0
Interest Expense (400) (695)
Total Other Revenues and (Expenses) (400) (695)
Income Before Income Taxes 1,500 1,020
Income Tax Expense 230 210
Net Income $ 1,270 $ 810
Which of the following is an asset account?
A) Salaries Expense
B) Accounts Payable
C) Service Revenue
D) Prepaid Expense
DM Corporation has provided you with the following budgeted income statement for
one of its products:
DM has just encountered environmental problems with the product and will be forced to
drop the product line altogether. DM will be able to eliminate 70% of the fixed costs. What
will be the impact on operating income of the company?
A) Operating income will decrease by $224,000.
B) Operating income will decrease by $46,000.
C) Operating income will increase by $224,000.
D) Operating income will increase by $46,000.
A corporation has 20,000 shares of 17%, $50 par cumulative preferred stock
outstanding and 25,000 shares of no-par common stock outstanding. Dividends of
$36,000 are in arrears. At the end of the current year, the corporation declares a
dividend of $208,000. How is the dividend allocated between preferred and common
stockholders?
A) The dividend is allocated $2,000 to preferred stockholders and $206,000 to common
stockholders.
B) The dividend is allocated $206,000 to preferred stockholders and $2,000 to common
stockholders.
C) The dividend is allocated $208,000 to preferred stockholders and no dividend is paid
to common stockholders.
D) The dividend is allocated $170,000 to preferred stockholders and $38,000 to
common stockholders.
An oil well cost $2,020,000 and is calculated to hold 260,000 barrels of oil. There is no
residual value. Which journal entry is needed to record the expense for the extraction of
45,000 barrels of oil during the year? All 45,000 barrels were sold ding the year.
(Round any intermediate calculations to the nearest cent, and your final answer to the
nearest dollar.)
A)
B)
C)
D)
During August, the Filtering Department of Olive, Inc. had beginning Work-in-Process
inventory of 120 units with costs of $50,000. 525 units were transferred in during the
month. It had 60 units in ending Work-in-Process Inventory. Under the first-in, first-out
(FIFO) method, current period equivalent units of production for transferred in units in
beginning Work-in-Process Inventory of the Filtering Department is ________.
A) 0 units
B) 525 units
C) 120 units
D) 60 units
Which of the following will most likely be considered an indirect material cost for a
bakery?
A) spices
B) flour
C) milk
D) eggs
From the following details, calculate net sales revenue.
A) $392,000
B) $398,000
C) $414,000
D) $434,000
