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Accounts Receivable are generally reported at the gross amount on the balance sheet.
An increase in sales price per unit increases the number of units required to break even.
The guidelines for accounting information are called Generally Accepted Accounting
Principles (GAAP).
In the cash receipts journal, the Other Accounts CR column is used when a transaction
involves a credit entry that is not listed in the headings (columns) of the cash receipts
journal.
Companies may choose to report plant assets as a single amount, with a note to the
financial statements that provides detailed information, or companies may provide
detailed information on the face of the statement.
Investors use the times-interest-earned ratio to evaluate a company's ability to pay
interest expense.
A corporation issues 16,000 shares of its $3 stated value common shares. The issue
price is $9 per share. The credit to the Common Stock account is $144,000.
Grantham Company sells two products, X and Y. For the coming year, Grantham
predicts sales of 5,000 units of X and 10,000 units of Y. The contribution margins of the
two products are $5 and $4, respectively. The weighted-average contribution margin is
$6.50.
Extraordinary items are both unusual and infrequent in nature.
The journal entry to record indirect labor costs incurred includes a debit to
Manufacturing Overhead and credit to Wages Payable.
Consolidated statements combine the balance sheets, income statements, and statements
of cash flow of the parent company with those of its controlling interest affiliates.
Direct material costs and direct labor costs cannot be easily traced to products.
Therefore, they are allocated to products.
The stockholders' claim to the assets of a business is called equity or stockholders'
equity.
Net present value is defined as the difference between the present value of the
investment's net cash inflows and the investment's initial cost.
A key to strong control over petty cash is to ensure that several persons serve as
custodian at one time.
The issue price of a bond—whether it is issued at par, premium, or discount—has an
effect on the principal repayment at maturity.
When a company uses idle cash to invest in equity securities with less than 20%
ownership, its total equity will increase.
Under variable costing, the units in the beginning Finished Goods Inventory contain
fixed manufacturing overhead costs.
If purchase allowances are granted, the buyer need not return the goods to the seller.
When there are no units in the beginning Finished Goods Inventory and the units
produced are more than the units sold, the operating income will be higher under
variable costing than absorption costing.
Johnson Company purchased land for $30,000. The president of Johnson Company
believes that the land is actually worth $35,000. The land can be recorded at $35,000.
A high rate of inventory turnover indicates ease in selling inventory.
Developing a budget reduces coordination and communication at different levels in an
organization.
The manager of a profit center is responsible for generating revenues and managing the
center's invested capital.
Cash dividends cause a decrease in both assets and stockholders' equity of the
corporation.
Centralized companies split their operations into segments and top management
delegates decision making to the segment managers.
Assuming there are no other significant considerations, a product line with a negative
contribution margin should be dropped.
The last two columns generally found on the right side of the worksheet are the income
statement columns.
Cost of goods available for sale represents beginning merchandise inventory plus net
purchases less freight in.
Generally, all transactions are recorded in a special journal as well as the general
journal.
The net present value method of evaluating capital investments suggests that an
investment with net cash inflows which exceed the initial cost of the investment is
desirable.
Under the perpetual inventory system, when a purchaser makes payment within the
discount period, the amount of discount will be credited to the Merchandise Inventory
account.
Under the terms FOB destination, title to the merchandise will pass to the purchaser
when the goods are received by the purchaser.
For strong controls over cash receipts, the checks to be deposited should be sent to the
treasurer, and the remittance advices should be sent to the accounting department.
The financial budget of a merchandising company is similar to that of a manufacturing
company.
A contribution margin income statement classifies costs by function; that is, costs are
classified as either product costs or period costs.
Reed Productions has provided the following information for the year:
During the year, Reed produced 71,220 units of product. Calculate the unit product cost.
(Round your answer to the nearest cent.)
A) $7.92
B) $6.77
C) $7.78
D) $8.66
During 2017, Sanchez Corp. had net sales of $16,400,000. The beginning total assets
were $8,900,000. The asset turnover ratio was 1.7 times. Calculate the ending total
assets of Sanchez.
A) $10,394,118
B) $8,900,000
C) $15,652,941
D) $6,752,941
Ron Moss, a manager of Waterworks, Inc., was reviewing the water bills of a dog
daycare and spa. He determined that its highest and lowest bills of $3,600 and $2,800
were incurred in the months of May and November, respectively. If 500 dogs were
washed in May and 200 dogs were washed in November, what was the variable cost per
dog associated with the company's water bill? (Round your answer to the nearest cent.)
A) $4.00
B) $14.00
C) $7.20
D) $2.67
Which of the following line items would appear on the income statement of a company
that uses the periodic inventory system, but not on that of a company that uses the
perpetual inventory system?
A) Net Sales Revenue
B) Cost of Goods Sold
C) Cost of Goods Available for Sale
D) Operating expenses
Tonix Corporation produces two products, P and Q. P sells for $7.00 per unit; Q sells
for $6.00 per unit. Variable costs for P and Q are $3.00 and $5.00, respectively. There
are 3,300 direct labor hours per month available for producing the two products.
Product P requires 2.00 direct labor hours per unit, and product Q requires 2.00 direct
labor hours per unit. The company can sell up to 300 units of each kind per month.
What is the maximum monthly contribution margin that Todd can generate under the
circumstances? (Round to nearest whole dollar.)
A) $1,200
B) $1,350
C) $2,550
D) $17,850
Under process costing, the number of units to account for must always be ________ the
number of units accounted for.
A) greater than
B) lesser than
C) equal to
D) twice
McPherson Company is facing a $2 increase in the variable costs of producing one of
its products for the upcoming year. As a result, the sales manager has made a proposal
to increase the sales price of the product while increasing the advertising budget at the
same time. The sales price increase will lower sales volume, but the other changes may
help the company maintain its profit margin. McPherson has provided the following
information regarding the current year results and the proposal made by the sales
manager:
Relative to the current year, the sales manager's proposal will ________.
A) decrease operating income by $8,000
B) increase contribution margin by $14,000
C) decrease the unit breakeven point
D) decrease operating income by $14,000
The taxable income of a sole proprietorship is ________.
A) combined with the personal income of the proprietor
B) not combined with the proprietor's personal income
C) not taxable
D) handled similarly to that of a corporation
Which of the following is true of Just-in-Time (JIT) Management?
A) It results in more storage and insurance costs.
B) It is a system in which the company produces products only after receiving an order.
C) It promotes surplus inventory to prevent production shut-down in case of supply
interruptions.
D) It requires a surplus inventory of finished goods to ensure timely, or just-in-time,
delivery to customers.
Mulcahey Automobiles Company fabricates automobiles. Each vehicle includes one
wiring harness, which is currently made in-house. Details of the harness fabrication are
as follows:
An Indonesian factory has offered to supply Mulcahey with ready-made units for a cost of
$15 per wiring harness. Assume that Mulcahey's fixed costs could be reduced by $4,000 if
it outsources and that Mulcahey will not be able to use the excess capacity in any
profitable manner. If Mulcahey decides to outsource, monthly operating income will
________.
A) increase by $12,000
B) decrease by $12,000
C) increase by $5,600
D) decrease by $2,400
All assets that will not be converted to cash or used up within the business's operating
cycle or one year, whichever is greater, are called ________.
A) long-term assets
B) fully depreciated assets
C) current assets
D) current liabilities
Stock dividends are declared by the ________.
A) chief financial officer of the company
B) board of directors of the company
C) chief executive officer of the company
D) stockholders of the company
The static budget, at the beginning of the month, for Singleton Company follows:
Static budget:
Sales volume: 1,000 units; Sales price: $70.00 per unit
Variable costs: $32.00 per unit; Fixed costs: $35,500 per month
Operating income: $2,500
Actual results, at the end of the month, follows:
Actual results:
Sales volume: 980 units; Sales price: $74.00 per unit
Variable costs: $35.00 per unit; Fixed costs: $33,300 per month
Operating income: $4,920
Calculate the flexible budget variance for fixed costs.
A) $2,200 U
B) $2,200 F
C) $0
D) $3,180 F
Dellarte Corporation has two major divisions—Agricultural Products and Industrial
Products. It provides the following information for the year.
Calculate the residual income for the Agriculture Division.
A) $27,500
B) $9,300
C) $103,000
D) $47,000
Which of the following is a key performance indicator of the internal business
perspective of the balanced scorecard?
A) number of units produced per hour
B) employee turnover
C) cash flow
D) number of cross-trained employees
Which of the following is a period cost for a manufacturing company?
A) office rent
B) wages of factory janitor
C) insurance cost of production equipment
D) raw materials
The Amazing Widget Company issues $539,000 of 7%, 10-year bonds at 104 on March
31, 2017. The bonds pay interest on March 31 and September 30. Assume that the
company uses the straight-line method for amortization. The journal entry to record the
issuance includes a ________.
A) debit to Cash for $539,000
B) credit to Bonds Payable for $560,560
C) debit to Premium on Bonds Payable for $21,560
D) debit to Cash for $560,560
Within the relevant range, which of the following costs remains the same irrespective of
the changes in production?
A) total mixed costs
B) total operating costs
C) total variable costs
D) total fixed costs
On November 1, 2017, McEwing, Inc. declared a dividend of $5.00 per share.
McEwing, Inc. has 20,000 shares of common stock outstanding and no preferred stock.
The date of record is November 15, and the payment date is November 30, 2017. Which
of the following is the journal entry needed on November 30, 2017?
A) Debit Cash Dividends $100,000, and credit Dividends Payable—Common
$100,000.
B) Debit Dividends Payable—Common $100,000, and credit Cash $100,000.
C) Debit Cash $100,000, and credit Dividends Payable—Common $100,000.
D) Debit Cash Dividends $100,000, and credit Cash $100,000.
The following information is from the records of Armadillo Camera Shop:
The company uses the direct write-off method for bad debts. What is the amount of bad
debts expense?
A) $81,000
B) $45,000
C) $66,000
D) $16,000
Webster, Inc. has received a bid for 14,000 units. The costing estimates show that the
average cost per unit for this bid will be $500. The company uses cost-based pricing
and adds 20% markup to total costs. What total price will Webster ask for the entire
order?
A) $8,400,000
B) $7,000,000
C) $1,400,000
D) $5,600,000
Smith Industries is considering replacing a machine that is presently used in its
production process.
Which of the following is irrelevant to the replacement decision?
Which of the information provided in the table is irrelevant to the replacement decision?
A) the sales price of the new machine
B) the original cost of the old machine
C) the current disposal value of the old machine
D) the annual cash operating costs
Which of the following sections of the statement of cash flows includes activities that
affect net income on the income statement?
A) the financing activities section
B) the operating activities section
C) the investing activities section
D) the non-cash investing and financing section
On March 31, 2017, Park Place, Inc. shows the following data on its balance sheet:
Assume that Park Place sells 1,500 shares of treasury stock at $33 per share. What is total
stockholders' equity after this transaction?
A) $6,940,500
B) $7,039,500
C) $6,979,500
D) $7,000,500
In its first year of business, Greenlam, Inc. produced 600 units and sold 400 units. If
Greenlam uses variable costing, ________.
A) its operating income for the period will be higher than under absorption costing
B) its operating income for the period will be lower than under absorption costing
C) its value of ending Finished Goods Inventory reported in the balance sheet will be
higher than under absorption costing
D) its operating income will be the same as under absorption costing
Mason Painting Services has a weekly payroll of $24,000. December 31 falls on
Wednesday and Mason will pay its employees the following Monday (January 5) for
the previous full week. Assume that Mason has a five-day workweek and has an
unadjusted balance in Salaries Expense of $770,000. What amount should be debited to
Salaries Expense on December 31?
A) $770,000
B) $9,600
C) $24,000
D) $14,400
David has decided to open an auto-detailing business. He will pick up an automobile
from the client, take it to his parents' garage, detail it, and return it to the client. If he
does all of the work himself and takes no legal steps to form a special organization,
which type of business organization, in effect, has he chosen?
A) A limited-liability company
B) A partnership
C) A corporation
D) A sole proprietorship
Becky's Bakery sells three large muffins for every two small ones. A small muffin sells
for $3.50 with a variable cost of $2.00. A large muffin sells for $6.00 with a variable
cost of $3.00. What is the weighted-average contribution margin? (Round any
intermediate calculations and your final answer to the nearest cent.)
A) $4.75 per muffin
B) $2.25 per muffin
C) $4.50 per muffin
D) $2.40 per muffin
The bank statement reveals an EFT received from a customer that has not yet been
recorded in the ledger. How would this information be included on the bank
reconciliation?
A) an addition on the bank side
B) a deduction on the bank side
C) a deduction on the book side
D) an addition on the book side
Which of the following perspectives of the balanced scorecard focuses on the increase
of company profits through increasing revenue growth and productivity?
A) financial
B) customer
C) internal business
D) learning and growth
Equipment was purchased for $24,000 on January 1, 2016. The equipment's estimated
useful life was five years, and its residual value was $4,000. The straight-line method of
depreciation was used. Calculate the gain or loss on sale if the equipment is sold for
$18,000 on December 31, 2016, the end of the accounting period. Prepare the journal
entry to record the sale of equipment.
On July 1, 2017, Collins Jewelers accepted a 3-month, 15% note for $6,000 in
settlement of an overdue account receivable. Prepare the journal entry to record the
acceptance of the note.
On November 1, 2017, Roosevelt, Inc. declared a dividend of $3.00 per share.
Roosevelt, Inc. has 20,000 shares of common stock outstanding and no preferred stock.
Prepare the journal entry to record this transaction.
List the budgets that are affected by the budgeted number of units to be produced.
List the three ways to analyze financial statements. State what each of these ways
provides to investors and creditors.
On March 1, 2016, Nortons, Inc. paid $60,000 as office rent covering the three-month
period ending May 31, 2016. Journalize the entry on March 1 by using the alternative
treatment of deferred expenses.
List the direct materials variances, and briefly describe each.
Refer to the following bank reconciliation:
Bank Book
Balance, June 30, 2017 $11,240 Balance, June 30, 2017 $10,200
Add: Add:
Deposit in transit 3,110 Note collected by bank 2,100
Interest revenue 55
Less: Less:
Outstanding checks #506 1,200 NSF check 85
Outstanding checks #510 900 Bank service charge 20
________ ________
Adjusted balance, Adjusted balance,
June 30, 2017 $12,250 June 30, 2017 $12,250
Journalize the adjusting entry for the first reconciling item: Note collected by bank.
Adriano Corp. sold 2,500 cell phones on account for $700 each. The standard direct
materials and conversion costs of each unit are $173.85 and $57.95, respectively.
Record the journal entries for this transaction under the just-in-time costing system.
A company is considering spending the following on a new quality improvement
program:
Inspect raw materials $123,000
Reengineer to improve product quality 760,000
Inspect finished goods 150,000
Preventive maintenance of equipment 140,000
The company expects this quality program to reduce costs by the following amounts:
Avoid lost profits due to unhappy customers $910,000
Fewer sales returns 65,000
Decrease the cost of rework 155,000
Lower warranty costs 54,000
Group each cost under the four categories of quality management systems. Comment
whether the company should undertake the quality improvement program.
List the three sections of the cash budget.
Blake, Inc. purchased a van on January 1, 2015, for $800,000. Estimated life of the van
was five years, and its estimated residual value was $90,000. Blake uses the
straight-line method of depreciation. Give the journal entry to record the purchase of
van for cash.
Jeffery Company has just completed operations for the year ended December 31, 2016.
This is the second year of operations for the company. The following data have been
assembled for the business.
Prepare the income statement. Use a proper heading.
William Baker works for Jones Restaurant Supply all year and earns a monthly salary
of $8,000. There is no overtime pay and Jones withholds income taxes at 12% of gross
pay. Jones deducts $200 monthly fo the co-payment of the health insurance premium.
Employees are paid on the fifth day of each month. As of October, 31, William had
$80,000 of cumulative earnings. Journalize the accrual of salaries expense on October
31. Omit explanations.
In process costing, production costs are accumulated by process. At the end of the
period, the total production costs incurred must be split into two components. What are
these two components?
State the strategy for each of the perspectives of the balanced scorecard.
