Archives: Quiz

Merchandise with a sales price of $6,000 is sold on account with term 2/10, n/30. The journal entry to record the sale would include a A.debit to Cash for $6,000 B.Debit to Sales Discounts for $120 C.Credit to Sales for […]

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true? A.Salary Expense for the year was understated. B.The total of the liabilities at the […]

Based on the following data for the current year, what is the number of days’ sales in inventory? A.51.2 B.44.4 C.6.5 D.7.5 Answer: What is the term used to describe expenses that are incurred for the benefit of a specific […]

The natural business year A.is a fiscal year that ends when business activities are at its lowest point. B.is a calendar year that ends when business activities are at its lowest point. C.is a fiscal year that ends when business […]

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97.5, what is the amount of gain or loss on redemption? A.$10,000 loss B.$25,000 loss […]

The following account appears in the ledger after only part of the postings have been completed for July, the first month of the current fiscal year: Factory overhead is applied to jobs at the rate of 60% of direct labor […]

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis? A.ratio of fixed […]

As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March of 2012 were as follows: $120,000, $140,000 and $150,000. 20% of each month’s sales are for cash. […]

Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the period at a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of $28,700. 15,000 […]

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is A.debit Bonds Payable, credit Cash B.debit Cash and Discount on Bonds Payable, credit Bonds Payable C.debit Cash, […]

The management of Dakota Corporation is considering the purchase of a new machine costing $420,000. The company’s desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are […]

The Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine […]

The cash budget presents the expected inflow and outflow of cash for a specified period of time. Answer: An estimate of the amount which an asset can be sold at the end of its useful life is called residual value. […]

An exchange is said to have commercial substance if future cash flows remain the same as a result of the exchange. Answer: When a partner withdraws from the partnership, the partnership dissolves. Answer: TRUE The process of measuring and reporting […]

If in evaluating a proposal by use of the net present value method there is a deficiency of the present value of future cash inflows over the amount to be invested, the proposal should be rejected. Answer: When no-par stock […]

A cost object indicates how costs are related or identified. Answer: During the first year of operations, a company granted warranties on its products. The estimated cost of the product warranty liability at the end of the year is $8,500. […]

Services provided on account is recorded in the revenue journal. Answer: For years one through five, a proposed expenditure of $500,000 for a fixed asset with a 5-year life has expected net income of $40,000, $35,000, $25,000, $25,000, and $25,000, […]

During the closing process, some balance sheet accounts are closed and end the period with a zero balance. Answer: The present value of the periodic bond interest payments is the value today of the amount of interest to be received […]

Budgets are normally used only by profit-making businesses. Answer: The budgeted direct materials purchases is based on the sum of (1) the materials needed for production and (2) the desired ending materials inventory, less (3) the estimated beginning materials inventory. […]

If 50,000 shares are authorized, 41,000 shares are issued, and 2,000 shares are reacquired, the number of outstanding shares is 43,000. Answer: A large public corporation normally uses registrars and transfer agents to maintain records of the stockholders. Answer: TRUE […]

Internal controls for cash payments also apply to payrolls. Answer: The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer. […]

In a partnership liquidation, gains and losses on the sale of partnership assets are divided among the partners’ capital accounts on the basis of their capital balances. Answer: The customers subsidiary ledger is controlled by the general ledger account entitled […]

All property, plant, and equipment assets are depreciated over time. Answer: The master budget of a small manufacturer would normally include all component budgets that impact on the financial statements. Answer: TRUE Once an account has been closed for the […]

If the straight-line method of amortization is used, the amount of unamortized premium on bonds payable will decrease as the bonds approach maturity. Answer: It is not possible for one company to influence the operating policies of another company unless […]

Materials are transferred from the storeroom to the factory in response to materials requisitions. Answer: In the liquidating process, any uncollected cash becomes a loss to the partnership and is divided among the remaining partners’ capital balances based on their […]

If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as direct materials cost. Answer: Receivables that are expected to be collected in cash in eighteen months or less are […]

A variable cost system is an accounting system where standards are set for each manufacturing cost element. Answer: The three inventory costing methods will normally each yield different amounts of net income. Answer: TRUE A firm selling food should have […]

When no-par common stock with a stated value is issued for cash, the common stock account is credited for an amount equal to the cash proceeds. Answer: If a promissory note is dishonored, the payee should still record interest revenue. […]

Net income was $51,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from […]

When a process cost accounting system records the purchase of materials, the Materials account is credited. Answer: One of the two internal control procedures over inventory is to properly report inventory on the financial statements. Answer: TRUE Cost behavior refers […]

If employees accept a wage contract that increases the unit contribution margin, the break-even point will decrease. Answer: When a partnership dissolves, a new partnership is formed and a new partnership agreement should be prepared. Answer: TRUE Debiting the cash […]

An unfavorable volume variance may be due to a failure of supervisors to maintain an even flow of work. Answer: In a process costing system, indirect materials are charged to Work in Process. Answer: FALSE Managers use managerial information to […]

The balance in a bond discount account should be reported on the balance sheet as a deduction from the related bonds payable. Answer: The profit margin component of rate of return on investment analysis focuses on profitability by indicating the […]

The usual presentation of the statement of owner’s equity is (1) Beginning capital, (2) Net income or loss, (3) Drawing, (4) Owner’s contributions, (5) Ending capital. Answer: Managerial accounting information is used by external and internal users equally. Answer: FALSE […]

Real accounts are not permanent accounts. Answer: When a company establishes an outstanding reputation and has a competitive advantage because of it, the company should record goodwill on its financial statements. Answer: FALSE The post reference notation used in the […]

The closing process is sometimes referred to as closing the books. Answer: Accrued revenues are ordinarily listed on the balance sheet as current liabilities. Answer: FALSE Receivables not currently collectible are reported in the investments section of the balance sheet. […]

Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section. Answer: A statement of owner’s equity reports the changes in the owner’s equity for a period of time. Answer: […]

Intangible assets differ from property, plant and equipment assets in that they lack physical substance. Answer: An account has three parts to it; a title, an increase side, and a decrease side. Answer: TRUE Federal unemployment compensation taxes that are […]

Discontinuing a segment or product may not be the best choice when the segment is contributing to fixed expenses. Answer: Of the two methods of accounting for uncollectible receivables, the allowance method provides in advance for uncollectible receivables. Answer: TRUE […]

Assets, liabilities, and owner’s capital are real accounts and do not get closed at the end of the period. Answer: The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings. […]

Cost plus methods determine the normal selling price by estimating a cost amount per unit and adding a markup. Answer: Variable costs as a percentage of sales are equal to 100% minus the contribution margin ratio. Answer: TRUE The total […]

Capital expenditures are costs of acquiring, constructing, adding, or replacing property, plant and equipment. Answer: A process cost accounting system provides for a separate record of the cost of each particular quantity of product that passes through the factory. Answer: […]

The difference between the balance of a fixed asset account and the balance of its related accumulated depreciation account is termed the book value of the asset. Answer: Average rate of return equals average investment divided by estimated average annual […]

A stock split results in a transfer at market value from retained earnings to paid-in capital. Answer: Journalizing and posting the adjustments and closing entries updates the ledger for the new accounting period. Answer: TRUE When the allowance method for […]

The budgeted balance sheet assumes that all operating and financing plans are met. Answer: The financial statements are prepared from the unadjusted trial balance. Answer: FALSE Capital expenditures are costs that are charged to Stockholders’ Equity accounts. Answer: FALSE A […]

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $300,000 for the 5 years. The expected average rate of return is […]

If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even point amount to $2,500,000, and the maximum possible sales are $3,300,000, the margin of safety is 14,500 units. Answer: The format and number […]

Title to merchandise shipped FOB shipping point passes to the buyer upon delivery of the merchandise to the buyer’s place of business. Answer: The relationship of each asset item as a percent of total assets is an example of vertical […]

If the underapplied factory overhead amount is immaterial, it is transferred to Cost of Goods Sold at the end of the fiscal year. Answer: The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry after the […]

A manufacturer may employ a job order cost system for some of its products and a process cost system for others. Answer: Changes in technology, machinery, or production methods may make past cost data irrelevant when setting standards. Answer: TRUE […]