Archives: Quiz

In a corporation’s organization chart, who has/have the highest position? A. Stockholders. B. Board of directors. C. CEO. D. President. On the adjusted trial balance, retained earnings is: A. Stated at the period-end amount. B. Stated at the period-beginning amount. […]

The normal order in which the financial statements are prepared is: A. Balance sheet, income statement, statement of retained earnings. B. Income statement, statement of retained earnings, balance sheet. C. Income tax return, income statement, balance sheet. D. Income statement, […]

Given below are comparative balance sheets and an income statement for Namekagon Corporation. Refer to the information above. Namekagon Corporation’s interest coverage ratio for 2015 is: A. 1.45. B. 1.69. C. 2.45. D. 4.92. Vision Corporation has the following information […]

Which of the following has the least impact upon the integrity of financial statements issued by publicly owned corporations? A. Federal securities laws. B. Professional judgment of the accountants who prepare the financial statements. C. Audits of the financial statements […]

For the financial statements of publicly traded companies, MACRS: A. Is recommended. B. Is required. C. Is optional. D. Is not considered to be in conformity with GAAP. Which account listed below is classified as a contra-revenue account? A. Cost […]

A responsibility accounting system measures the performance of each of the following centers except: A. Profit center. B. Investment center. C. Control center. D. Cost center. A large favorable variance from standard costs at the end of the year should […]

Which of the following credit terms is the most advantageous to the purchaser of merchandise? A. 1/10, n/30. B. 5/10, n/60. C. 2/10, n/30. D. 5/10, n/20. All of the following are financing activities except: A. Borrowing money. B. Lending […]

Regal Real Estate which maintains its accounts on the basis of a fiscal year ending June 30, began the management of an office building on June 15 for an agreed annual fee of $4,800. The first payment is due on […]

Write-off of uncollectible account receivable On January 10, Winston, Inc.’s trial balance included the following accounts: On January 11, Len Palmer, a major customer, declares bankruptcy and thus, Winston determines that a receivable from Palmer in the amount of $3,400 […]

Bonds payable issued between interest dates – early retirement Deegan Imports received authorization on December 31, Year 1, to issue $4,500,000 face value of 8%, 20-year bonds. The interest payment dates are June 30 and December 31. All the bonds […]

Burns Industries currently manufactures and sells 20,000 power saws per month, although it has the capacity to produce 35,000 units per month. At the 20,000-unit-per-month level of production, the per-unit cost is $65, consisting of $40 in variable costs and […]

Shown below is information relating to the stockholders’ equity of Grant Corporation at December 31, 2015: Dividends have been declared and paid for 2015. Refer to the information above. The book value per share of common stock is: A. $7.90. […]

Newman Labs is considering buying equipment which would enable the company to obtain a five-year research contract. The specialized equipment costs $650,000 and will have no salvage value when the five-year contract period is over. The estimated annual operating results […]

Cycle time includes: A. Processing time, storage and waiting time, movement time, and inspection time. B. Processing time, inspection time, and inventory time. C. Processing time, storage and waiting time, finishing time, and selling time. D. Processing time, storage and […]

Before any month-end adjustments are made, the net income of Bennett Company is $76,000. The following adjustments are necessary: office supplies used, $3,160; services performed for clients but not yet recorded or collected, $3,640; interest accrued on note payable to […]

In a perpetual inventory system, an inventory cost flow assumption is used primarily for determining which costs to use in: A. Recording purchases of inventory. B. Recording the cost of goods sold. C. Recording sales revenue. D. Forecasts of future […]

Just-in-time manufacturing systems are also known as: A. Supply push systems. B. Supply pull systems. C. Demand push systems. D. Demand pull systems. As of January 31, Princess Company owes $500 to Butler Co. for equipment rented during January. If […]

National Corporation was organized on January 1 and issued 600,000 shares of common stock on that date. On July 1, an additional 200,000 shares were issued for cash. Net income for the year was $3,675,000. Net earnings per share amounted […]

The purpose of establishing a petty cash fund is to: A. Achieve internal control over small cash disbursements not made by check. B. Keep track of expenditures paid out of cash receipts from customers prior to deposit. C. Ensure that […]

During 2015, the cash flows related to Global Data, Inc.’s lending and borrowing activities are summarized as follows: Refer to the information above. If interest receivable was $6,300 at December 31, 2014, and is $10,500 at the end of 2015, […]

Which of the following best describes the relationship between revenue and retained earnings? A. Revenue increases net income, which in turn increases retained earnings. B. Revenue represents a cash receipt; retained earnings is an element of stockholders’ equity. C. Revenue […]

All of the following statements regarding management accounting’s role in assigning decision-making authority are true except: A. Since management accounting information is used for decision making purposes, historical information is unnecessary. B. Information from the management accounting system supports decision […]

If a company uses a percentage of net sales in computing the amount of uncollectible accounts expense: A. No valuation allowance will be required. B. The relationship between revenue and expenses is being stressed more than the valuation of receivables […]

Internal users of financial accounting information include all of the following except: A. Investors. B. Managers. C. Chief Financial Officer. D. Chief Executive Officer. Assuming there is no preferred stock, book value per share of common stock is derived by […]

On April 1, year 1, Cricket Corporation issues $60 million of 12%, 10-year bonds payable at par. Interest on the bonds is payable semiannually each April 1 and October 1. Refer to the information above. The adjustment necessary at December […]

Webster Company issues $1,000,000 face value, 6%, 5-year bonds payable on December 31, 2015. Interest is paid semiannually each June 30 and December 31. The bonds sell at a price of 97; Webster uses the straight-line method of amortizing bond […]

On January 1, 2015, Edward Corporation had 10,000 shares of $6 par value common stock and 10,000 shares of 8%, $100 par value convertible preferred stock outstanding. The preferred shares carried a 3 for 1 conversion privilege. On October 1, […]

Sum-of-the-years’ digits is a popular depreciation method for small businesses due to its simplicity. All internal control systems need to be monitored. TRUE Incremental analysis rarely requires the decision maker to exercise judgment. FALSE Assuming that the MR Corporation has […]

Discounting a future amount of a cash receipt will determine the present value of that receipt. Having a liability that is fixed in terms of a foreign currency results in a loss for the debtor if the exchange rate falls […]

When closing Income Summary, assuming the corporation had net income for the accounting period, the account Retained Earnings is credited. Accounts payable are often subdivided into the categories of trade accounts payable and notes payable. FALSE Diluted earnings per share […]

The journal entry to record depreciation expense consists of a debit to the asset being depreciated and a credit to Accumulated Depreciation. Compounding interest assumes the interest on an investment is reinvested. TRUE In a standard cost system actual costs […]

Working capital is the excess of current assets over current liabilities. Gross profit margin is the dollar amount of gross profit expressed as a percentage of gross sales. FALSE The market price of a bond is equal to its present […]

A labor efficiency variance relates to the number of hours actually worked, compared to the standard hours. Land improvements are not subject to depreciation. FALSE Natural resources such as oil or minerals are categorized as intangible assets. FALSE Although cultural […]

The higher a company’s accounts receivable turnover rate, the more liquid the company’s receivables. A corporation is a legal entity that may enter into contracts, may sue or be sued, and is responsible for its own debts. TRUE Every transaction […]

The payback period can be determined by multiplying the amount invested by net cash flows received annually. The acid test ratio includes marketable securities but does not include accounts receivable. FALSE Non-financial factors are relevant in capital budgeting. TRUE In […]

The purchase of treasury stock creates an asset for the corporation and is recorded at the cost of the shares purchased. The future amount of an annuity is calculated by multiplying the present value of the annuity by its applicable […]

Management accounting refers to the preparation and use of accounting information designed to meet the needs of decision makers outside the business organization. The FASB has not compiled a comprehensive list of what is considered to be an extraordinary item, […]

Just-in-time inventory systems are characterized by extremely large inventories of materials, work in process, and finished goods. As the discount rate required by an investor increases, the present value of an investment decreases. TRUE Annuities may provide equal amounts to […]

A company cannot be increasing its market share if its net sales are declining. It is not unusual for an entity to report a significant increase in cash from operating activities, but a decrease in the total amount of cash. […]

The failure to record an adjusting entry for depreciation would cause assets to be overstated and net income to be understated. Contribution margin ratio is equal to contribution margin per unit divided by unit sales price. TRUE An opportunity cost […]

Regardless of the number of special journals used, every business needs a general journal. The range over which output may be expected to vary is called the relevant range. TRUE An increase in an activity base must cause an increase […]

Omission of the adjusting entry needed to accrue an expense at the end of the period would cause liabilities to be understated. Results of capital budgeting processes may have serious implications for employees. TRUE The period of time over which […]

Physical deterioration refers to the process of an asset becoming outdated as a result of the availability of improved, more efficient assets. The company’s CEO is the only person who analyzes costs variances. FALSE A business entity is regarded as […]

A stock dividend provides a stockholder with more shares of stock, but his or her percentage of ownership in the company is no larger than before. In preparing a master budget, budgeted levels for production, manufacturing costs, and operating expenses […]

The account Discount on Bonds Payable has a debit balance and should appear on the balance sheet as an asset; the account Premium on Bonds Payable has a credit balance and should be classified as a liability. The present value […]

If a company purchases equipment by issuing a note payable, its total assets will not change. If a long-term debt is to be paid off in monthly installments over a 5-year period, the entire principal should be classified as a […]

To “write-off” an account receivable is to reduce the balance of the customer’s account to zero. Stockholders in a corporation elect the board of directors, pass the bylaws of the corporation, and hire top corporate officers and managers. FALSE Most […]

Manufacturing overhead is a term used to describe all manufacturing costs other than direct materials and direct labor. Differences in accounting practices among countries reflect the different sources of capital in those countries. TRUE Most organizations try to achieve their […]

A favorable variance would be credited to a cost variance account. The statement of cash flows provides a link between two balance sheets by showing how net income (or loss) has changed owners’ equity from one balance sheet date to […]

The costs of storing and delivering finished goods are allocated to the finished goods account. Material gains and losses from the disposal of plant and equipment are shown on the income statement as part of income from operations. FALSE Convertible […]