Archives: Quiz

Pittman Corporation, a merchandising company, reported the following results for September: Required: a. Prepare a traditional format income statement for September. b. Prepare a contribution format income statement for September. Answer: A partial listing of costs incurred at Starr Corporation […]

FastForward reported net income of $17,500 for the past year. At the beginning of the year the company had $200,000 in assets. By the end of the year, assets had increased to $300,000. Calculate the return on assets. Answer: Probably […]

What is discounting? Answer: A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $240,000 in after-tax income. Taxes are $80,000 at a 25% tax rate. […]

Companies promoting continuous improvement strive to achieve _____________ standards by eliminating inefficiencies and waste. Answer: A _______________________ is a document the buyer issues to inform the seller of a debit made to the seller’s account in the buyer’s records. Answer: […]

A company issues bonds with a par value of $900,000 on their stated issue date. The bonds mature in 10 years and pays 10% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds […]

Raisen, Inc.s budget included the following overhead costs for the current year assuming operations at 80% of capacity, or 40,000 units: The standard cost per unit when operating at this same 80% capacity level is: The actual production achieved in […]

In evaluating capital budgeting alternatives, there are two primary methods that do not consider the time value of money. These methods are _______________ and __________________. There are also two primary methods that consider the time value of money; these are […]

The stockholders’ equity section of a company’s year-end balance sheet follows: The preferred stock has a call price of $103 per share plus dividends in arrears. One entire year’s dividends are in arrears. Calculate the book value per (1) preferred […]

A _____________________ is an unincorporated association of two or more people to pursue a business for profit as co-owners. Answer: What is activity-based budgeting? Answer: Activity-based budgeting is a budget system based on expected activities. Knowledge of expected activities and […]

A company’s employees had the following earnings records at the close of the current payroll period: The company’s payroll taxes expense on each employee’s earnings includes: FICA Social Security taxes of 6.2% on the first $87,000 plus 1.45% FICA Medicare […]

Identify and explain the advantages and disadvantages of bond financing. Answer: Montgomery Marketing Co. had assets of $475,000; liabilities of $275,500; and equity of $199,500. Calculate its debt ratio. Answer: $275,500/$475,000 = 58% A company reported net sales for Year […]

Given the following information, determine the cost of goods sold for December 31 using the FIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December […]

Which of the following is not a benefit of following a well-designed budgeting process? A. Improved decision-making processes. B. Improved performance evaluations. C. Improved coordination of business activities. D. Assurance of future profits. E. Improved commitment to meet expected performance […]

Which of the following is true when computing cost per equivalent unit in a FIFO process costing system? A. Prior period costs are combined with costs incurred in the current period and then divided by the equivalent units of production. […]

A company had net sales of $82,000, cost of goods sold of $70,000, and other expenses of $2,000. Its gross margin ratio equals: A. 37% B. 2.44% C. 14.63% D. 16.67% E. 683.33% Answer: C Feedback: ($82,000 – $70,000)/$82,000 = […]

Canberra Company uses a job order cost accounting system. During the current month, the factory payroll of $180,000 was paid in cash. The amount of labor classified as direct labor was three times greater than the amount classified as indirect […]

A single cost incurred in producing or purchasing two or more essentially different products is a(n): A. Product cost B. Incremental cost C. Differential cost D. Joint cost E. Fixed cost Answer: Classify each of the following items as a […]

Dividing accounts receivable by net sales and multiplying the result by 365 is equal to the: A. Profit margin B. Days’ sales uncollected C. Accounts receivable turnover ratio D. Average accounts receivable ratio E. Current ratio Answer: Responsibility accounting performance […]

Assume that the following information was available for Guy Brown Company. How would Maria Teresa Vazquez and the other owners evaluate this information based on contribution margin ratio? A. Recycled toner cartridges has the lowest contribution margin ratio. B. Furniture […]

Which of the following accounts would appear on a manufacturing statement? A. Raw materials, factory insurance expired, indirect labor. B. Raw materials, goods in process, finished goods. C. Factory buildings, delivery equipment, and depreciation on factory equipment. D. Direct labor, […]

Prepare the required general journal entry to record the following transactions for the Flaherty Company. (a.) Incurred $95,000 of factory labor cost which is paid in cash. (b.) Used $42,000 of direct labor in the grinding department, and $36,000 of […]

A process of examining the differences between actual and budgeted costs and describing them in terms of the amounts that resulted from price and quantity differences is called: A. Cost analysis. B. Flexible budgeting. C. Variable analysis. D. Cost variable […]

Given the following information, determine the cost of ending inventory at December 31 using the LIFO perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December […]

A company owns $100,000 of 9% bonds that pay interest on October 1 and April 1. The amount of interest accrued on December 31 (the company’s year-end) would be: A. $750 B. $1,500 C. $2,250 D. $4,500 E. $9,000 Answer: […]

A company returned merchandise to a supplier because it did not meet their specifications. This transaction would be recorded in which of the following journals? A. Sales journal B. Purchases journal C. Cash disbursements journal D. Cash receipts journal E. […]

Reference: 18_04 A firm sells two products, A and B. For every unit of A the firm sells, two units of B are sold. The firm’s total fixed costs are $1,612,000. Selling prices and cost information for both products follow: […]

A company had gross profit of $134,200 on net sales of $205,000. If ending inventory was $8,000 and average inventory was $7,080, what is the company’s inventory turnover? A. 10.0 B. 8.85 C. 16.77 D. 18.95 E. 28.95 Answer: A […]

Match the appropriate definition (a) through (h) with the following terms: (a) A department or unit that incurs costs without directly generating revenues. (b) A center in which a manager is responsible for using the center’s assets to generate income […]

The recurring steps performed each accounting period, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, are referred to as the: A. Accounting period B. Operating cycle C. Accounting cycle D. Closing cycle […]

A corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record […]

A company paid $200,000 10 years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will […]

The cash flow on total assets ratio: A. Is the same as return on assets. B. Is the same as profit margin. C. Can be an indicator of earnings quality. D. Is highly affected by accounting principles of income recognition […]

What would be the account balance in Accounts Receivable after the following transactions, assuming a zero beginning balance? A. $17,400 B. $10,900 C. $14,400 D. $ 4,500 E. $ 2,000 Answer: On August 31, 2013, Victory Corporation’s common stock is […]

Use the balance sheets of Sando shown below to calculate the following ratios for 2013 (round to the hundredths): (a) Current ratio (b) Acid-test ratio (c) Debt ratio (d) Equity ratio Answer: (a) ($43,000 + $38,000 + $61,000 + $6,000)/$62,000 […]

A company borrowed $300,000 cash from the bank by signing a five-year, 8% installment note. The present value factor for an annuity at 8% for five years is 3.9927. Each annuity payment equals $75,137. How much cash did the company […]

Parris Corporation purchased 40% of Samitz Corporation for $100,000 on January 1. On November 17 of the same year, Samitz Corporation declared total cash dividends of $12,000. At year-end, Samitz Corporation reported net income of $60,000. The balance in the […]

A company reported the following information regarding its inventory. Beginning inventory: cost is $70,000; retail is $130,000. Net purchases: cost is $65,000; retail is $120,000. Sales at retail: $145,000. The year-end inventory showed $105,000 worth of merchandise available at retail […]

Payroll is usually paid with a check or with the use of an electronic funds transfer. Answer: Purchase discounts are the same as trade discounts. Answer: FALSE Trade accounts payable are amounts owed to suppliers for products or services purchased […]

The process of evaluating performance can be improved by using budgets. Answer: Three key variables determine the dollar value of inventory: (1) inventory quantity, (2) costs of inventory, and (3) cost flow assumption. Answer: TRUE The International Accounting Standards Board […]

A revenue account normally has a debit balance. Answer: A service company earns net income by buying and selling merchandise. Answer: FALSE Partners can invest both assets and liabilities into a partnership. Answer: True A business segment is a part […]

Facility level costs vary with the number of units or batches produced. Answer: An increase in the price of the U.S. dollar against other currencies puts U.S. companies in a stronger competitive position internationally. Answer: FALSE A markup percentage equals […]

The relevant range of operations excludes extremely high and low levels of production that are not likely to occur. Answer: If the partners agree on a formula to share income and say nothing about losses, then the losses are shared […]

Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner. Answer: The days’ sales uncollected ratio is calculated by dividing accounts receivable by net sales and multiplying this quotient […]

Ben and Jerry’s had total assets of $149,501,000, net income of $6,242,000, and net sales of $209,203,000. Profit margin was 98%. Answer: Input devices include journal entries, keyboards, scanners, and modems. Answer: TRUE A company has net income of $130,500. […]

Accounting records are also referred to as the books. Answer: In a limited partnership the general partner has unlimited liability. Answer: True All companies desire a low return on total assets. Answer: FALSE An investor with significant influence owns as […]

A schedule of accounts receivable is a listing of all creditor accounts and account balances. Answer: An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period. Answer: TRUE A lawsuit is […]

Merchandise inventory is reported in the long-term assets section of the balance sheet. Answer: Accounting is an information and measurement system that identifies, records, and communicates financial information to users. Answer: TRUE In applying the lower of cost or market […]

A company received a $1,000, 90-day, 10% note receivable. The journal entry to record receipt of the note would include a debit to Notes Receivable. Answer: The days’ sales uncollected ratio reflects the liquidity of accounts receivable. Answer: TRUE If […]

If net present values are used to evaluate two investments that have equal costs and equal total cash flows, the one with more cash flows in the early years has the higher net present value. Answer: In a job order […]

Admitting a partner into a partnership by accepting assets is a personal transaction between one or more current partners and the new partner. Answer: Fixed costs change in the short run depending upon managements decision to accept or reject special […]