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A drilling company purchased a mining site for $450,000 on July 1, 2016. The company
expects to mine ore for the next 10 years and anticipates that a total of 80,000 tons will
be recovered. During 2016, the company extracted 5,800 tons of ore. The depletion
expense for the year 2016 is:
a. $45,000.
b. $50,800.
c. $5,860.
d. $32,625.
Which of the following statement is true about intangible assets?
a. They are usually presented in the balance sheet as fixed assets.
b. They are shortlived assets.
c. They are not held for resale.
d. They have physical existence.
The declaration of a stock dividend decreases a corporation's stockholders' equity and
decreases its liabilities.
a. True
b. False
Sales to customers who use bank credit cards such as MasterCard and Visa are usually
recorded by a(n):
a. decrease in Bank Credit Card Sales, increase in Credit Card Expense, and increase in
Sales.
b. increase in Cash, increase in Credit Card Expense, and increase in Sales.
c. increase in Cash, decrease in Credit Card Expense, and increase in Sales.
d. decrease in Sales, increase in Credit Card Expense, and decrease in Cash.
The following data relate to direct labor costs for the current period of Executive Inc.:
Standard costs6,000 hours at $12.00
Actual costs7,500 hours at $11.60
What is the direct labor time variance?
a. $17,400 favorable
b. $17,400 unfavorable
c. $18,000 favorable
d. $18,000 unfavorable
Determine the cost of the land, based on the following data.
Land purchase price$90,000
Broker's commission7,500
Payment for the demolition and removal of existing building2,500
Cash received from the sale of materials salvaged from the demolished building500
Which of the following activity bases would be the most appropriate for gasoline costs
of a delivery service such as UPS?
a. Number of trucks employed
b. Number of miles driven
c. Number of trucks in service
d. Number of packages delivered
Supervisor salaries, maintenance, and indirect factory wages would normally appear in
the selling and administrative expenses budget.
a. True
b. False
The income statement for August indicates net income of $100,000. The corporation
also paid $25,000 in dividends during the same period. If the company is in operation
for only one month and has no beginning balance in retained earnings, what is the
ending balance in retained earnings?
a. $75,000
b. $100,000
c. $20,000
d. $125,000
Tucker Co. manufactures office furniture. During the most productive month of the
year, 3,600 desks were manufactured at a total cost of $192,000. In its slowest month,
the company made 1,200 desks at a cost of $72,000. Using the highlow method of cost
estimation, total fixed costs per month are:
a. $120,000.
b. $12,000.
c. $72,000.
d. $11,600.
Which of the following is an appropriate representation of the accounting equation?
a. Assets + Liabilities = Stockholders' equity
b. Assets = Liabilities + Stockholders' equity
c. Assets = Liabilities
d. Assets = Liabilities + Retained earnings
Working capital is calculated as:
a. cost of goods sold minus total assets.
b. average daily sales plus quick assets.
c. net sales minus current assets.
d. current assets minus current liabilities.
The excess of net revenue from sales over the cost of goods sold is called _____.
a. accounts receivable
b. operating income
c. accounts payable
d. gross profit
Monthly rent on a factory building is an example of a fixed cost.
a. True
b. False
Under a _____, a business designs products that possess unique attributes or
characteristics for which customers are willing to pay more.
a. premiumprice emphasis
b. outreach emphasis
c. lowcost emphasis
d. customer emphasis
Physical assets of a longterm nature are referred to as fixed assets.
a. True
b. False
The management of Retz Corporation is considering the purchase of a new machine
costing $500,000. The company's desired rate of return is 10%. The present value
factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability in this situation:
YearIncome from OperationsNet Cash Flow
1$100,000$200,000
2 80,000 170,000
3 50,000 130,000
4 10,000 80,000
5 10,000 80,000
The present value index for this investment is:
a. 1.30.
b. 0.95.
c. 1.05.
d. 0.70.
Which of the following techniques is used by justintime manufacturing?
a. It provides specialized training so that employees only do one task and work
individually to improve efficiencies in the department.
b. It organizes the plant in such a way as to reduce product movement from station to
station.
c. It encourages management to make all operating decisions regarding the
manufacturing process rather than the line employees in order to streamline the process.
d. It emphasizes push manufacturing.
ABC Co. has a gross payroll of $18,000. The FICA tax rate is 7.65% of the gross
payroll, and the federal and state withholding are $1,600 and $963 respectively. On
recording the payroll tax liability, net assets of the company:
a. increase by $13,940.
b. decrease by $14,060.
c. increase by $21,940.
d. decrease by $5,485.
Wiles Inc.'s unit selling price is $40, the unit variable costs is $30, fixed costs are
$135,000, and current sales are 10,000 units. How much would operating income
change if sales increase by 5,000 units?
a. $50,000 increase
b. $65,000 decrease
c. $100,000 increase
d. $50,000 decrease
Which of the following costs is an example of a fixed cost?
a. Direct labor cost
b. Insurance cost
c. Commission paid
d. Capital stock
The balanced scorecard attempts to evaluate the underlying financial drivers of
nonfinancial performance.
a. True
b. False
Interpreting financial analysis should be considered in light of conditions peculiar to the
industry and the general economic conditions.
a. True
b. False
The most effective means of presenting standard factory overhead cost variance data is
through a factory overhead cost variance report.
a. True
b. False
Which of the following statements is true of managerial accounting?
a. Reporting under managerial accounting is constrained by rules such as generally
accepted accounting principles.
b. Managerial accounting is required to be reported annually, also may be reported
monthly or quarterly.
c. Managerial accounting provides information to the external stakeholders of the
company.
d. Managerial accounting is primarily concerned with generating information for use by
managers.
A 10% stock dividend will increase the book value per share.
a. True
b. False
A company's ability to pay its current liabilities is called:
a. trend analysis.
b. global analysis.
c. current position analysis.
d. inventory analysis.
The ownership of a proprietorship is divided into shares of stock owned by its
stockholders.
a. True
b. False
John Deere is a leading manufacturer of agricultural machinery in the world producing
products that serve unique market needs. Therefore, John Deere is an example of a
company that uses a premiumprice emphasis to attract customers.
a. True
b. False
Identify a disadvantage of decentralization of operations.
a. Managers do not have the scope to become experts in their area of operation.
b. Managerial creativity and customer relations are hampered.
c. Managers closest to the operations are not allowed to make decisions.
d. Decisions made by one manager may negatively affect the profits of the company.
Which of the following factors affects the accounting for contingent liabilities?
a. Financial and economic conditions
b. The coupon rate and market rate of interest
c. Investor's expectations
d. The likelihood of occurring and measurement
Which of the following should be included in the acquisition cost of a piece of
equipment?
a. Uninsured theft
b. Mistakes in installation
c. Vandalism
d. Installation costs
Which of the following statements is true regarding fixed and variable costs?
a. Both costs are constant when considered on a perunit basis.
b. Both costs are constant when considered on a total basis.
c. Fixed costs are fixed in total, and variable costs are fixed per unit.
d. Variable costs are fixed in total, and fixed costs vary in total.
The units of Product YY2 available for sale during the year were as follows:
Apr 1Inventory16 unitsat$30 each
Jun 16Purchase30 unitsat$33 each
Sep 28Purchase45 unitsat$37 each
There are 15 units of the product in the physical inventory at March 31. The periodic
inventory system is used. Determine the difference in gross profit between the LIFO
and FIFO inventory cost systems.
Selected data from the ledger of Jones Co. after adjustment at June 30, the end of the
fiscal year, are listed as follows:
Accounts Receivable$25,000Prepaid Insurance$ 2,250
Accumulated Depreciation35,200Notes Payable60,150
Administrative Expenses80,000Retained Earnings55,000
Capital Stock40,000Salaries Payable3,000
Cost of Merchandise Sold320,000Sales (net)550,000
Dividends22,000Selling Expenses65,000
Interest Revenue3,000Supplies2,750
Office Equipment70,500
Prepare a singlestep income statement for the year ended June 30, 2016.
Identify the type of adjustment necessary (the type of item involved) and record the
transaction for the event. Make sure to include the ending balances after adjustment.
Assume Mover Lights Corp. pays salaries on the 28th of each month. Light stuffers
earn $280/day with a 7day work week. June 30th is the end of the accounting period.
Light stuffers have worked on the 28th, 29th, and 30th but have not yet been paid for
those days. The June 30 adjustment is:
Assets =Liabilities + Stockholders' Equity
CashOffice
EquipmentAccumulated
DepreciationSalaries
PayableCommon
StockRetained
Earnings
Adjustment
End. Bal.
June Co. is considering the following alternative plans for financing the company:
Plan IPlan II
Issue 10% Bonds (at face)$3,000,000
Issue $10 Common Stock$4,000,000$1,000,000
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing
plans, assuming income before bond interest and income tax is $1,000,000.
Identify the type of adjustment necessary (the type of item involved) and record the
transaction for the event. Make sure to include the ending balances after adjustment.
Assume that on June 1, 2016, Carter Lights Corp. had paid $1,800 in advance for a
6month insurance policy. The June 30 adjustment is:
Assets =Liabilities + Stockholders' Equity
CashPrepaid
InsuranceOffice
EquipmentAccounts
PayableCommon
StockRetained
Earnings
Beg. Bal.−1,8001,800
Adjustment
End. Bal.
What are the basic elements of a financial accounting system?
The net present value for Proposals X and Y has been calculated on the basis of the data
given below.
Proposal XProposal Y
Amount to be invested$145,000$280,000
Total present value of net cash flow172,000320,000
Net present value27,00040,000
Determine the present value index for each proposal.
Following are the financial statement data for Degen Temporary Services at December
31, 2016. Prepare Degen's income statement.
Accounts Payable$ 850
Accounts Receivable780
Cash425
Common Stock600
Dividends200
Insurance Expense75
Office Equipment1,500
Retained Earnings, January 1, 2016370
Salaries Expense525
Notes Payable40
Service Revenue1,750
Inventory35
Supplies Expense50
Degen Temporary Services
Income Statement
For the Year Ended December 31, 2016
Prepare a monthly flexible selling expense budget for Podism Company for sales
volumes of $270,000, $350,000, and $480,000, based on the following data:
Sales commissions7% of sales
Sales manager's salary$62,000 per month
Advertising expense$70,000 per month
Shipping expense2% of sales
Miscellaneous selling expense$2,500 per month plus 1/2% of sales
BlueInk Corporation's accumulated depreciation increased by $14,000, while patents
decreased by $3,875 between consecutive balance sheet dates. There were no purchases
or sales of depreciable or intangible assets during the year. In addition, the income
statement showed a loss on sale of land of $1,950. Accounts receivable increased
$6,320, inventory decreased $3,125, prepaid expenses decreased $720, and account
payable increased $2,760. Reconcile a net income of $55,000 to net cash flow from
operating activities.
List the advantages of Electronic Funds Transfers.
Project A as well as project B require an initial investment of $1,050,000, have a 6year
life, and have expected total cash inflows of $1,680,000. Proposal A is expected to
provide an annual net cash inflow of $280,000, while the annual net cash inflows for
Proposal B are as follows:
Year 1)$350,000
Year 2)$315,000
Year 3)$280,000
Year 4)$280,000
Year 5)$245,000
Year 6)$210,000
Determine the cash payback period for each proposal.
Microfix Company manufactures two models of Television, AR30 and AR33. Based on
the following production data for April of the current year, prepare a production budget
for April.
AR30AR33
Estimated inventory (units), April 12,5003,700
Desired inventory (units), April 303,7003,700
Expected sales volume (units):
Eastern zone8,20011,500
Midwest zone13,00017,500
Western zone7,3009,100
On April 1, 10,000 shares of $20 par common stock were issued at $24. Illustrate the
effects on the accounts and the financial statements.
FDE Manufacturing Company has a normal plant capacity of 75,000 units per month.
Because of an extra large quantity of inventory on hand, it expects to produce only
60,000 units in May. Monthly fixed costs and expenses are $150,000 ($2 per unit at
normal plant capacity), and variable costs and expenses are $13 per unit. The present
selling price is $25 per unit. The company has an opportunity to sell 5,000 additional
units at $14.30 per unit to an exporter who plans to market the product under its own
brand name in a foreign market. The additional business is therefore not expected to
affect the regular selling price or quantity of sales of FDE Manufacturing Company.
Prepare a differential analysis report, dated April 21 of the current year, on the proposal
to sell at the special price.
When are sales recognized under the cash basis of accounting? When are expenses
recognized?
The following data for the current year ended December 31, 2016, was extracted from
the accounting records of Xender Co.:
Cost of merchandise sold$937,200
Operating expenses307,500
Sales1,230,250
Prepare a multiplestep income statement for the year ended December 31, 2016.
If the rate of earnings is 12% and the cash to be received in two years is $20,000,
determine the present value amount, using the following partial table of present value of
$1 at compound interest.
If the desired rate of return on a project is 10%, determine the present value of $40,000
to be received in four years using the following partial table of present value of $1 at
compound interest.
