Which of the following will lower the breakeven point?
A) a decrease in the sales price per unit
B) an increase in total fixed costs
C) an increase in the variable cost per unit
D) an increase in the sales price per unit
Off Road Concepts, Inc. produces a special kind of light-weight, recreational vehicle
that has a unique design. It allows the company to follow a cost-plus pricing strategy. It
has $9,000,000 of average assets, and the desired profit is a 7% return on assets.
Assume all products produced are sold. Additional data are as follows:
Using the cost-plus pricing approach, what should be the sales price per unit?
A) $3,065
B) $8,000
C) $1,070
D) $1,000
Which of the following is the last step in the daily control over cash receipts by mail?
A) A mailroom employee sends all customer checks to the treasurer who has the cashier
make the bank deposit.
B) The controller opens the mail and sends the remittance advices to the accounting
department.
C) The controller compares the records of the day’s bank deposit amount from the
treasurer and the debit to cash from the accounting department.
D) The accounting department prepares journal entries to cash and the customers’
accounts.
Journalizing a transaction involves ________.
A) calculating the balance in an account using journal entries
B) posting the account balances in the chart of accounts
C) preparing a summary of account balances
D) recording the data only in the journal
Rees Manufacturing uses a standard cost system. Standards for direct materials are as
follows:
Actual purchases of direct materials for the current month are 10,000 pounds for $48,600.
Planned and actual production for the month is 3,100 units. Rees has issued 10,000 pounds
of direct materials to production. The journal entry to record this transaction is ________.
A) a debit to Work-in-Process Inventory for $45,198, a credit to Raw Materials Inventory
for $55,800, and a debit to Direct Materials Efficiency Variance for $10,602
B) a debit to Work-in-Process Inventory for $45,198, a credit to Raw Materials Inventory
for $60,000, and a debit to Direct Materials Efficiency Variance for $14,802
C) a debit to Work-in-Process Inventory for $55,800, a credit to Raw Materials Inventory
for $60,000, and a debit to Direct Materials Efficiency Variance for $4,200
D) a debit to Work-in-Process Inventory for $60,000, a credit to Raw Materials Inventory
for $48,600, and a credit to Direct Materials Efficiency Variance for $60,000
Which of the following is true of the comparison between equity securities and debt
securities?
A) Debt securities represent stock ownership in a company whereas equity securities
represent a credit relationship with the company.
B) Equity securities earn dividend revenue whereas debt securities earn interest
revenue.
C) Neither debt securities nor equity securities mature at a stated date.
D) Both debt securities and equity securities pay interest.
Which of the following is true of service companies?
A) All costs of service companies are product costs.
B) Service companies modify and resell products they buy from manufacturers.
C) Revenues of service companies are only recorded on cash receipt.
D) Service companies carry no inventories of products for sale.
Lindsey Chocolate, Inc. has prepared its third quarter budget and provided the
following data:
The cash balance on June 30 is projected to be $4,000. The company has to maintain a
minimum cash balance of $5,000 and is authorized to borrow at the end of each month to
make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest
every month at an annual rate of 4%. All financing transactions are assumed to take place
at the end of the month. The loan balance should be repaid in increments of $5,000
whenever there is surplus cash. Calculate the ending projected cash balance before
financing for August.
A) $7,167
B) $5,000
C) $46,700
D) $(7,833)
Elsie Moving Company is considering purchasing new equipment that costs $726,000.
Its management estimates that the equipment will generate cash flows as follows:
The company’s required rate of return is 10%. Using the factors in the table below,
calculate the present value of the cash inflows. (Round all calculations to the nearest whole
dollar.)
Present value of $1:
A) $793,414
B) $797,481
C) $828,406
D) $808,971
Which of the following is a prime cost and a conversion cost?
A) manufacturing overhead
B) direct materials
C) direct labor
D) selling expenses
Both job order costing and process costing ________.
A) maintain a single Work-in-Process Inventory account
B) treat all period costs as product costs
C) follow last-in, first-out method for inventory valuation
D) have the same type of product costs
Bliss Corporation settles a liability by making a payment in cash. How does paying this
liability affect the accounting equation of the business?
A) assets and liabilities decrease
B) liabilities decrease and equity increases
C) assets and liabilities increase
D) assets increase and equity decreases
The owners’ claims to the assets of the business are called ________.
A) return on assets
B) expenses
C) equity
D) debt
On December 1, 2017, Parsons, Inc. sold machinery to a customer for $23,000. The
customer could not pay at the time of sale, but agreed to pay 9 months later, and signed
an 9-month note at 12% interest. How much interest revenue was earned during 2017?
(Round your answer to the nearest dollar.)
A) $260
B) $230
C) $1,840
D) $2,070
Harrison, an employee of Saft Associates, Inc., has gross salary for March of $4,000.
The entire amount is under the OASDI limit of $117,000 and thus subject to FICA. He
is also subject to federal income tax at a rate of 18%. Harrison has a deduction of $320
for health insurance and $80 for United Way. Which of the following is included in the
entry to record the disbursement of his net pay?
A) credit to Salaries and Wages Payable
B) debit to United Way Payable
C) debit to FICA Taxes Payable
D) credit to Cash
Which of the following is an attribute of the internal control procedure—assignment of
responsibilities?
A) To validate their accounting records, a company should have an audit by an external
accountant.
B) The company should separate the custody of assets from accounting.
C) The external auditors will monitor internal controls.
D) Each position has clearly assigned responsibilities.
At the beginning of 2017, Elixir, Inc. has the following account balances:
Accounts Receivable $40,000 (debit balance)
Allowance for Bad Debts $5,000 (credit balance)
Bad Debts Expense $0
During the year, credit sales amounted to $850,000. Cash collected on credit sales
amounted to $760,000, and $18,000 has been written off. At the end of the year, the
company adjusted for bad debts expense using the percent-of-sales method and applied
a rate, based on past history, of 2.5%. The ending balance in the Allowance for Bad
Debts is ________.
A) $5,000
B) $3,250
C) $6,000
D) $8,250
Which of the following items is a measure of a company’s ability to collect receivables?
A) inventory turnover ratio
B) current ratio
C) days’ sales in receivables
D) account receivable balance
Garcia’s, a company that sells fishing nets, provides the following information about its
product:
What is the contribution margin ratio? (Round any intermediate calculations and your final
answer to two decimal places.)
A) 85.00%
B) 100%
C) 75.00%
D) 15.00%
From its inception through the year of 2016, Quicksales, Inc. was profitable and made
strong dividend payments each year. In the year 2017, Quicksales had major losses and
paid no dividends. In 2018, the company started making large profits again, and they
were able to pay dividends to all shareholders—both common and preferred. There are
2,000 shares of cumulative, 10% preferred stock outstanding. The preferred stock has a
par value of $100. What is the total amount of dividends that should be paid to the
preferred stockholders in December, 2018?
A) $60,000
B) $90
C) $20,000
D) $40,000
An unfavorable sales volume variance in operating income suggests a(n) ________.
A) increase in number of actual units sold when compared to the expected number of
units sold
B) decrease in number of actual units sold when compared to the expected number of
units sold
C) increase in variable cost per unit
D) decrease in fixed costs
Which of the following will be categorized as a financing activity on the statement of
cash flows?
A) Cash received by selling old equipment
B) Cash paid for purchase of new machinery
C) Cash paid for purchase of office supplies
D) Cash received from issuance of shares of common stock
Pavone Corp. has prepared a preliminary cash budget for the third quarter as shown
below:
Subsequently, the marketing department revised its figures for cash collections. New data
are as follows: $57,000 in July, $56,000 in August, and $44,000 in September. Based on
the new data, calculate the new projected cash balance at the end of September.
A) $27,500
B) $13,000
C) $19,000
D) $22,800
The expense for warranty costs is recorded in the period ________.
A) when the product is sold
B) when the product is repaired or replaced
C) when cash is paid to repair or replace the product
D) when cash is collected from the sale of the product
Which of the following sections of the statement of cash flows is presented differently
between the direct method and indirect method?
A) investing activities
B) financing activities
C) operating activities
D) non-cash activities
On March 1, 2016, Emerson Services issued a 4% long-term notes payable for $16,000.
It is payable over a 4-year term in $4,000 annual principal payments on March 1 of
each year plus interest, beginning March 1, 2017. Each yearly installment will include
both principal repayment of $4,000 and interest payment for the preceding one-year
period. On March 1, 2017, ________. The accounting period ends on December 31.
A) Emerson must accrue $4,000 of Interest Expense
B) Emerson must accrue the coming $4,000 as the current portion of principal payment
C) Emerson must pay $640 of interest to the note holder
D) Emerson will receive $4,000 as an installment payment
The asset turnover ratio measures ________.
A) how efficiently a business uses its sales to finance the assets
B) how efficiently a business uses its average total assets to generate sales
C) how efficiently a business uses its net profit to finance the assets
D) how the ending inventory helps increase the value of assets
The petty cash fund had an initial imprest balance of $200. It currently has $17 in cash,
$5 in miscellaneous cash receipts, and an additional $173 in specific cash receipts. The
debit to Cash Short & Over would be ________.
A) $5
B) $17
C) $173
D) $178
Which of the following is an example of a security?
A) dividends
B) municipal bond
C) interest expense
D) depreciation
The entry to record the payment of a previously declared dividend of $0.25 per share on
18,500 shares of common stock includes a ________.
A) debit to Cash Dividends for $4,625
B) debit to Cash $4,625
C) credit to Cash Dividends for $4,625
D) debit to Dividends Payable for $4,625