A perpetual inventory system is an effective means of control over inventory.
Answer:
Service department charges are similar to the expenses of a profit center that purchased
services from a source outside the company.
Answer:
At the end of the fiscal year, the variances from standard are usually transferred to the
finished goods account.
Answer:
If income from operations for a division is $120,000, sales are $975,000, and invested
assets are $750,000, the investment turnover is 1.3.
Answer:
On a common-sized income statement, all items are stated as a percent of total assets or
equities at year-end.
Answer:
The effect of a sales return and allowance is a reduction in sales revenue and a decrease
in cash or accounts receivable.
Answer:
Property tax expense for a department store’s store equipment is an example of a direct
expense.
Answer:
The double-entry accounting system records each transaction twice.
Answer:
The budget procedures used by a large manufacturer of automobiles would probably not
differ from those used by a small manufacturer of paper products.
Answer:
Absorption costing is required for financial reporting under generally accepted
accounting principles.
Answer:
The balance in the Allowance for Doubtful Accounts account at the end of the year
includes the total of all accounts written-off since the beginning year.
Answer:
In a factory with several processing departments, a single factory overhead rate may not
provide accurate product costs and effective cost control.
Answer:
There is no difference between the recording of cash sales and the recording of
MasterCard or VISA sales.
Answer:
The equation for computing interest on an interest-bearing note is as follows: interest
equals maturity value times interest rate times time.
Answer:
The day on which the board of directors of the corporation distributes a dividend is
called the declaration date.
Answer:
In computing the maturity date of a note, the date the note is issued is included but the
due date is omitted.
Answer:
Perpetual inventory controlling accounts and subsidiary ledgers are maintained for
materials, work in process, and finished goods in cost accounting systems.
Answer:
Once journal entries are posted to accounts, each account will show a new balance after
each entry.
Answer:
Investment in Bonds is listed on the balance sheet after Bonds Payable.
Answer:
Unearned revenue is a liability.
Answer:
On the income statement, miscellaneous expenses are usually presented as the last item
without regard to the dollar amount.
Answer:
Current position analysis indicates a company’s ability to liquidate current liabilities.
Answer:
Generally, subsidiary ledgers are used for accounts that consist of a large number of
individual items.
Answer:
Twenty percent of all businesses in the United States are corporations and they account
for 80% of the total business dollars generated.
Answer:
Sales to customers who use bank credit cards, such as MasterCard and VISA, are
generally treated as credit sales.
Answer:
Merchandise Inventory normally has a debit balance.
Answer:
A bond is simply a form of an interest bearing note.
Answer:
The effective-interest method of amortizing a bond discount or premium is the preferred
method.
Answer:
An example of a general-purpose financial statement would be a report about projected
price increases related to transportation costs.
Answer:
An adjusting entry would adjust an expense account so the expense is reported when
incurred.
Answer:
The amount of the depreciation expense for the second full year of use of a fixed asset
costing $100,000, with an estimated residual value of $5,000 and a useful life of 4
years, is $25,000 by the declining-balance method at twice the straight-line rate.
Answer:
Standard costs can be used with both the process cost and job order cost systems.
Answer:
Accounting information users need reports about the economic activities and condition
of businesses.
Answer:
Flexible budgeting builds the effect of changes in level of activity into the budget
system.
Answer:
The normal balance of a capital account is a debit.
Answer:
In using the total cost concept of applying the cost-plus approach to product pricing,
selling expenses, administrative expenses, and profit are covered in the markup.
Answer:
A mixed cost has characteristics of both a variable and a fixed cost.
Answer:
The relevant activity base for a cost depends upon which base is most closely
associated with the cost and the decision-making needs of management.
Answer:
When compared to a corporation, one of the major disadvantages of the partnership is
its limited life.
Answer:
Which one of the following items below would not affect the investor’s income for the
period?
A.interest received on a temporary investment in bonds
B.dividends received on a long-term investment in stock where the investor owns 10%
of the investee’s stock
C.dividends received on a long-term investment in stock where the investor owns 30%
of the investee’s stock
D.interest received on a long-term investment in bonds
Answer:
Scooby Company has applied $567,988 of overhead into production on Jobs in the
Work in Process account. Actual overhead at the end of the year is $575,000. What is
the adjustment for over or underapplied overhead?
A.$7012 Overapplied, increase Cost of Goods Sold
B.$7012 Underapplied, increase Cost of Goods Sold
C.$7012 Overapplied, decrease Cost of Goods Sold
D.$7012 Underapplied, decrease Cost of Goods Sold
Answer:
As of January 1 of the current year, the Grackle Company had accounts receivables of
$50,000. The sales for January, February, and March were as follows: $120,000,
$140,000 and $150,000. 20% of each month’s sales are for cash. Of the remaining 80%
(the credit sales), 60% are collected in the month of sale, with remaining 40% collected
in the following month. What is the total cash collected (both from accounts receivable
and for cash sales) in the month of March?
A.$74,800
B.$146,800
C.$102,000
D.$116,800
Answer:
Which of the following is not a correct rule of debits and credits?
A.assets, expenses and withdrawals are increased by debits
B.assets are decreased by credits and have a normal debit balance
C.liabilities, revenues and owner’s equity are increased by credits
D.the normal balance for revenues and expenses is a credit
Answer:
The aspects of the management process are listed below. Match each phase to the
appropriate description.
_____ Planning
_____ Directing
_____ Controlling
_____ Improving
_____ Decision making
a) Used by managers for continuous improvement
b) Managers must decide how to respond to unfavorable performances
c) Used by management to develop the organization’s objectives and goals
d) Monitoring the operating results of implemented plans and comparing actual results
e) Managers run their day to day activities
Answer:
Most employers are levied a tax on payrolls for
A.sales tax
B.medical insurance premiums
C.federal unemployment compensation tax
D.union dues
Answer:
On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co.
Assume that the fiscal year of Seller Co. ends June 30. Using the 360-day year in your
calculations, what is the amount of interest revenue recognized by Seller in the
following year?
A.$1,200.00
B.$1,208.89
C.$1,306.67
D.$1,600.00
Answer:
Which one of the fixed asset accounts listed below will not have a related contra asset
account?
A.Office Equipment
B.Land
C.Delivery Equipment
D.Building
Answer:
Dotterel Corporation uses the variable cost concept of product pricing. Below is cost
information for the production and sale of 35,000 units of its sole product. Dotterel
desires a profit equal to a 11.2% rate of return on invested assets of $350,000.
The dollar amount of desired profit from the production and sale of the company’s
product is:
A.$89,600
B.$39,200
C.$70,000
D.$84,000
Answer:
Compton and Danson form a partnership in which Compton contributes $70,000 in
assets and agrees to devote half time to the partnership. Danson contributed $50,000 in
assets and agrees to devote full time to the partnership. If no additional information is
available, how will Compton and Danson share in the division of income?
A.5:7
B.1:2
C.1:1
D.5:2
Answer:
Nighthawk Inc. is considering disposing of a machine with a book value of $22,500 and
an estimated remaining life of three years. The old machine can be sold for $6,250. A
new machine with a purchase price of $68,750 is being considered as a replacement. It
will have a useful life of three years and no residual value. It is estimated that the
annual variable manufacturing costs will be reduced from $43,750 to $20,000 if the
new machine is purchased. The net differential increase or decrease in cost for the entire
three years for the new equipment is:
A.$8,750 increase
B.$31,250 decrease
C.$8,750 decrease
D.$2,925 decrease
Answer:
When using the product cost concept of applying the cost-plus approach to product
pricing, what is included in the markup?
A.Desired profit
B.Total fixed manufacturing costs, total fixed selling and administrative expenses, and
desired profit
C.Total costs plus desired profit
D.Total selling and administrative expenses plus desired profit
Answer:
Gleason invested $90,000 in the James and Kirk partnership for ownership equity of
$90,000. Prior to the investment land was revalued to a market value of $425,000 from
a book value of $200,000. James and Kirk share net income in a 1:2 ratio.
a. Provide the journal entry for the revaluation of land.
b. Provide the journal entry to admit Gleason.
Answer:
ABC Corporation has three service departments with the following costs and activity
base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
What is the service department charge rate for the Personnel Department?
A.$2,758
B.$3,200
C.$3,077
D.$1,000
Answer:
Which of the following is not true about why a service firm will use the job order
costing system?
A.to help control costs
B.to determine client billing
C.to determine department costs within the firm
D.to determine profit
Answer:
Put the following in the order of the flow of manufacturing costs for a company
a. Closing under/over applied factory overhead to cost of goods sold
b. Materials purchased
c. Factory labor used and factory overhead incurred in production
d. Completed jobs moved to finished goods
e. Factory overhead applied to jobs according to the predetermined overhead rate
f. Materials requisitioned to jobs
g. Selling of finished product
h. Preparation of financial statements to determine gross profit
Answer:
All of the following occur with a double-entry accounting system except:
A.The accounting equation remains in balance.
B.The sum of all debits is always equal to the sum of all credits in each journal entry.
C.Each business transaction will have only two entries.
D.Every transaction affects at least two accounts.
Answer:
Abby and Bailey are partners who share income in the ratio of 2:1 and have capital
balances of $60,000 and $30,000 respectively. With the consent of Bailey, Sandra buys
one half of Abby’s interest for $35,000. For what amount will Abby’s capital account be
debited to record admission of Sandra to the partnership?
A.$40,000
B.$15,000
C.$35,000
D.$30,000
Answer:
In a cost center, the manager has responsibility and authority for making decisions that
affect:
A.revenues
B.assets
C.both costs and revenues
D.costs
Answer:
Consider the following budget information: materials to be used totals $64,750; direct
labor totals $198,400; factory overhead totals $394,800; work in process inventory
January 1, 2012, was expected to be $189,100; and work in progress inventory on
December 31, 2012, is expected to be $197,600. What is the budgeted cost of goods
manufactured?
A.$649,450
B.$657,950
C.$197,600
D.$1,044,650
Answer:
The accounting cycle requires three trial balances be done. In what order should they be
prepared?
A.Post-closing, unadjusted, adjusted
B.Unadjusted, post-closing, adjusted
C.Unadjusted, adjusted, post-closing
D.Post-closing, adjusted, unadjusted
Answer:
Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income
from operations amounting to $302,500, and a desired minimum rate of return of 15%.
The profit margin for Chicks is:
A.25%
B.22%
C.15%
D.27.5%
Answer:
When there are a large number of individual accounts with a common characteristic, it
is common to place them in a separate ledger called a(n)
A.General ledger
B.Income Statement Ledger
C.Group Ledger
D.Subsidiary Ledger
Answer:
Assume the following sales data for a company:
What is the percentage increase in sales from 2014 to 2015?
A.75%
B.66.7%
C.25%
D.150%
Answer:
Generally accepted accounting principles requires that companies use the ____ of
accounting.
A.cash basis
B.deferral basis
C.accrual basis
D.account basis
Answer:
Which of the following would be considered a sunk cost?
A.Purchase price of new equipment
B.Equipment rental for the production area
C.Net book value of equipment that has no market value
D.Warehouse lease expense
Answer:
Assume that Penguin Co. is considering disposing of equipment that cost $50,000 and
has $40,000 of accumulated depreciation to date. Penguin Co. can sell the equipment
through a broker for $25,000 less 5% commission. Alternatively, Teal Co. has offered to
lease the equipment for five years for a total of $48,750. Penguin will incur repair,
insurance, and property tax expenses estimated at $10,000. At lease-end, the equipment
is expected to have no residual value. The net differential income from the lease
alternative is:
A.$15,000
B.$ 5,000
C.$25,000
D.$12,500
Answer:
Determine the due date and amount of interest due at maturity on the following notes:
Answer:
The following units of an inventory item were available for sale during the year:
The firm uses the periodic inventory system. During the year, 60 units of the item were
sold.
The value of ending inventory using FIFO is:
A.$1,250
B.$1,350
C.$1,375
D.$1,150
Answer:
Selected accounts with a credit amount omitted are presented as follows:
What was the balance of Work in Process as of April 30?
A.$8,100
B.$35,000
C.$29,900
D.$22,900
Answer:
Liabilities are reported on the
A.income statement
B.statement of owner’s equity
C.statement of cash flows
D.balance sheet
Answer:
A department store apportions payroll costs on the basis of the number of payroll
checks issued. Accounting costs are apportioned on the basis of the number of reports.
The payroll costs for the year were $231,000 and the accounting costs for the year
totaled $75,500. The departments and the number of payroll checks and accounting
reports for each are as follows:
Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to
each department.
Answer:
The current period statement of cash flows includes the flowing:
The cash balance at the end of the period is
A.$45,000
B.$635,000
C.$355,000
D.$125,000
Answer:
Johnson Corporation provided revenue disclosures for 2009 by its major product
segments in the notes to its financial statements as follows:
Prepare a vertical analysis.
Answer:
Explain what subsidiary ledgers are and give examples of three types of subsidiary
ledgers that a business might use.
Answer:
Robin Company purchased and used 520 pounds of direct materials to produce a
product with a 510 pound standard direct materials requirement. The standard materials
price is $2.10 per pound. The actual materials price was $2.00 per pound. Prepare the
journal entries to record (1) the purchase of the materials and (2) the material entering
production. Robin records standards and variances in the general ledger.
Answer:
Piano Company’s costs were over budget by $47,000. The Piano Company is divided in
two regions. The first region’s costs were over budget by $5,000. Determine the amount
that the second region’s cost was over or under budget.
$42,000 over budget
Answer:
On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5 year bond that
pays semi-annual interest of $35,000 ($1,000,000 x 7% x 1/2), receiving cash of
$884,171. Journalize the first interest payment and the amortization of the related bond
discount using the straight-line method. Round answer to the nearest dollar.
Answer:
The following data were extracted from the income statement of Maine Solutions, Inc.
Answer:
The Tulsa Company allocates overhead based on a predetermined overhead rate of
$9.00 per direct labor hour. Job S35 required 8 tons of direct material at a cost of
$600.00 per ton and took employees who earn $21.00 per hour a total of 80 hours to
complete. What is the total cost of Job S35?
Answer:
Complete the following table using the perpetual FIFO method of inventory flow.
Answer:
Cordell, Inc. has an operating leverage of 3. Sales are expected to increase by 9% next
year. What is the expected change in operating income next year?
Answer:
On the basis of the following data for Breach Co. for the year ended December 31, 2011
and the preceding year, prepare a statement of cash flows using the indirect method of
reporting cash flows from operating activities.
Assume that equipment costing $25,000 was purchased for cash and no long term assets
were sold during the period.
Stock was issued for cash – 3,200 shares at par.
Net income for 2010 was $76,000.
Cash dividends declared and paid were $13,000.
Answer:
On the basis of the following data related to assets due within one year for Webb Co.,
prepare a partial balance sheet in good form at December 31, 2014. Show total current
assets.
Answer:
Morocco Inc. reported the following results for the year ending April 30, 2014:
Prepare a retained earnings statement for the fiscal year ended April 30,
Answer:
Selected data from the ledger of Morrison Co. after adjustment at September 30, 2011
the end of the fiscal year, are listed as follows:
Prepare an income statement, using the single-step form, and a statement of owner’s
equity.
Answer:
The debits and credits from two transactions are presented in the following supplier’s
(creditor’s) account:
NAME: Banner Computer Services, Inc.
Address: 890 Novice Lane
Describe each transaction and the source of each posting.
Answer:
Maxim Technologies projected sales of 35,000 computers for 2012. The estimated
January 1, 2012, inventory is 3,000 units, and the desired December 31, 2012, inventory
is 9,000 units. What is the budgeted production (in units) for 2012?
Answer: