Archives: Quiz

1) ______________________________________ is the stockholders’ equity applicable to common shares divided by the number of common shares outstanding. 2) A company purchased a machine for $75,000 that was expected to last 6 years and to have a salvage value of […]

1) A company purchased a machine on January 1 of the current year for $750,000. Calculate the annual depreciation expense for each year of the machine’s life (estimated at 5 years or 20,000 hours, with a salvage value of $75,000). […]

1) A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be received at the […]

1) The City Store reported the following amounts on their financial statements for Year 1, Year 2, and Year 3: It was discovered early in Year 4 that the ending inventory on December 31, Year 1 was overstated by $6,000, […]

1) On August 17, at the end of the day, the cash register’s record shows $957, but the count of cash in the register is $965. Prepare the general journal entry to record the day’s cash sales. 2) At the […]

1) ______________ bonds are bonds that are scheduled for maturity on one specified date. 2) Calais Company’s fixed budget for the first quarter of the calendar year appears below. Prepare flexible budgets that show variable costs per unit, fixed costs […]

1) A company made the following merchandise purchases and sales during the current month: There was no beginning inventory. If the company uses the last-in, first-out perpetual inventory system, what would be the cost of the ending inventory? 2) Erlander […]

1) A company has $2,400,000 in stockholders’ equity that includes 500 shares of $50 par value noncallable preferred stock outstanding and 250,000 shares of common stock outstanding. Calculate the book value per (1) preferred share, and (2) common share. 2) […]

1) A company paid cash dividends on its preferred stock of $40,000 in the current year when its net income was $120,000 and its average common stockholders’ equity was $640,000. What is the company’s return on common stockholders’ equity? 2) […]

1) Explain the recording and posting processes. 2) No-par stock to which the directors assign a value per share is called _____________________. Answer: Stated value stock 3) Community Technical College allocates administrative costs to its teaching departments based on the […]

1) Briefly describe the time value of money. Why is the time value of money important in capital budgeting? 2) The minimum acceptable rate of return on an investment is called the ________________. Answer: Hurdle rate 3) _________________________ securities reflect […]

1) Discuss how accrual accounting enhances the usefulness of financial statements. 2) A ______________________ incurs costs without directly generating revenues. Answer: Cost center 3) When a partner invests in a partnership, his/her capital account is __________ for the invested amount. […]

1) If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when goods are loaded on the transport vehicle. 2) A _____________________ shows the pay period dates, hours worked, gross pay, deductions, and net pay of […]

1) What is the usual order in which financial statements are prepared from the adjusted trial balance? Why are they prepared in that order? 2) ______________ users of accounting information are not directly involved in running the organization. Answer: External […]

1) Based on the following information provided about a company’s operations, calculate its cost of goods purchased and its cash paid for merchandise. 2) Explain the role of accounting in the information age. Answer: Accounting is an information and measurement […]

1) The Weiss Company purchased a truck for $95,000 on January 2. The truck was estimated to have a $3,000 salvage value and a 4 year life. The truck was depreciated using the straight-line method. During the third year, it […]

1) For each of the following transactions, identify the effects as reflected in the accounting equation. Use “+” to indicate an increase and “-” to indicate a decrease. Use “A”, “L”, and “E” to indicate assets, liabilities, and equity, respectively. […]

1) The Connecting Company uses the percent of sales method of accounting for uncollectible accounts receivable. During the current year, the following transactions occurred: 1> Prepare the general journal entries to record these transactions. 2> If the balance of the […]

1) What is the purpose of a responsibility accounting system? 2) Shock Company purchased merchandise from Mee Company with an invoice price of $300,000 and credit terms of 2/10, n/30. The merchandise had cost Mee Company $200,000. Shock Company paid […]

1) A company’s January 1 goods in process inventory contained 30,000 units that were 25% complete with respect to direct labor. The beginning inventory was completed this year and another 120,000 units were started. Of those started, 80,000 were finished […]

1) A process cost summary involves computations and analysis at four sequential steps. These are (1) _________ (2) ___________, (3) _____________, and (4) ____________. 2) The interest rate is also called the __________________ rate. Answer: Discount 3) What is a […]

1) A company that uses a job order cost accounting system incurred $10,000 of factory payroll during May. Present the May 31 entry assuming $8,000 is direct labor and $2,000 is indirect labor. 2) What is purpose of footing and […]

1) A company paid $770,000 plus $5,000 in closing costs for property that included land appraised at $384,000; land improvements appraised at $128,000; and a building appraised at $288,000. The plan is to use the building as a manufacturing plant. […]

1) Four main accounting issues for plant assets are: ________________________, ____________________________, ________________________, ____________________________. 2) Use the following information about the calendar-year cash flows of MacArthur Company to prepare a statement of cash flows (direct method) and a schedule of noncash […]

1) Fixed budgets are also known as flexible budgets. 2) Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities. Answer: TRUE 3) Accounting standards require companies to […]

1) The clerk who has access to the cash in the cash register should not have access to the cash register tape or file. 2) A budget can be an effective means of communicating management’s plans to the employees of […]

1) A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful […]

1) Each adjusting entry affects only one or more income statements account and never cash. 2) Process manufacturing usually reflects a manufacturer that produces large quantities of identical products. Answer: TRUE 3) After adjustment, the balance in the Allowance for […]

1) The concept of incremental cost is the same as the concept of differential cost. 2) An external transaction is an exchange of value within an organization. Answer: FALSE 3) Since income tax expense is created by earning income, a […]

1) Both the direct and indirect methods yield the identical net cash flow amount provided or used by operating activities. 2) Technologically advanced accounting systems do not need monitoring for errors because computers always process transactions correctly. Answer: FALSE 3) […]

1) The return on common stockholder’s equity measures a company’s success in reaching the goal of earning net income for its owners. 2) Joint costs are a group of several costs incurred in producing or purchasing a single product. Answer: […]

1) If a company is highly leveraged, this means that it has relatively low risk of not being able to repay its debt. 2) One purpose of financial statement analysis for internal users is to provide information helpful in improving […]

1) Partners in a partnership are taxed on the amounts they withdraw from the partnership, not the partnership income. 2) When a job is finished, its job cost sheet is completed and moved from the file of jobs in process […]

1) A single basis for allocating service department costs to production departments should be used for all service departments. 2) Callable preferred stock gives its holders the option of exchanging their preferred shares into common shares at a specified rate. […]

1) A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy. 2) Overapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period. Answer: […]

1) Fraud does not include collusion, which is necessary to thwart separation of duties. 2) Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount, and have maturities of one year. Answer: FALSE […]

1) The high-low method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels. 2) On October 15, a company received $15,000 cash as a […]

1) A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100. 2) An unclassified balance sheet provides more information to users than a classified balance […]

1) A company’s ability to issue unsecured debt depends on its credit standing. 2) A merchandising company’s operating cycle begins with the sale of merchandise and ends with the collection of cash from the sale. Answer: FALSE 3) If a […]

1) For legal reasons, it is always a good business practice to accept a note receivable in exchange for an overdue account receivable. 2) The usual first step in preparing the statement of cash flows is computing the net increase […]

1) Sanuk purchased on credit £20,000 worth of parts from a British company when the exchange rate was £1.66 per British pound. At the year-end balance sheet date the exchange rate increased to $1.69. Sanuk must record a gain of […]

1) In process cost accounting, materials are always classified as indirect if they are not physically incorporated into the final product. 2) The Merchandise Inventory account balance at the end of the current period is equal to the amount of […]

1) General accounting principles arise from long-used accounting practices. 2) The accrual basis of accounting reflects the principle that revenue is recorded when it is earned, not when cash is received. Answer: TRUE 3) Another name for relevant cost is […]

1) When expenses exceed revenues, there is a net loss and the Income Summary account would have a credit balance. 2) Indirect labor refers to the cost of the workers whose efforts are directly traceable to specific units or batches […]

1) An unfavorable variance is recorded with a debit. 2) An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded. Answer: TRUE 3) If Department A uses $10,000 of direct materials and Department B […]

1) Vouchers should be used only for purchases. Other expenditures do not need to go through the voucher system. 2) Common shareholders always share equally with all other shareholders in all dividends. Answer: FALSE 3) Since the process cost summary […]

1) Book value per share reflects the value per share if a company is liquidated at balance sheet amounts. 2) The high-low method of deriving an estimated cost line uses all the data points available. Answer: FALSE 3) The LIFO […]

1) A salary owed to employees is an example of an accrued expense. 2) When an investor company owns more than 25% of the voting stock of an investee company, it has a controlling influence. Answer: FALSE 3) A stock […]

1) Variable costs per unit increase proportionately with increases in output activity. 2) The number of equivalent units of production assigned to ending goods in process inventory should be equal to or less than the number of physical units in […]

1) A company had a gross profit of $300,000 based on sales of $400,000. Its cost of goods sold equals $700,000. 2) A sunk cost has already been incurred and cannot be avoided or changed, so it is irrelevant to […]