1) Both the direct and indirect methods yield the identical net cash flow amount
provided or used by operating activities.
2) Planning involves defining an organization’s ideas, goals, and actions.
3) Direct expenses require allocation across departments because they cannot be readily
traced to one department.
4) A buyer using a perpetual inventory system records the costs of shipping
merchandise it purchases in a Delivery Expense account.
5) A plantwide overhead rate method is adequate when a company produces only one
product or has multiple products that use about the same amount of indirect resources.
6) The notes receivable account of a business should include both the notes that haven’t
matured and the dishonored notes.
7) The return on total assets can be calculated as profit margin times total asset
turnover.
8) Collateral from unsecured loans may be sold to offset the loan obligation if the loan
is in default.
9) Financial reporting includes not only general purpose financial statements, but also
information from SEC filings, press releases, shareholders’ meetings, forecasts,
management letters, auditor’s reports, and Webcasts.
10) The purchasing department is usually responsible for the price paid for materials.
11) Elliot Company can sell all of its products A and Z that it can produce, but it has
limited production capacity. It can produce 8 units of A per hour or 10 units of Z per
hour, and it has 20,000 production hours available. Contribution margin per unit is $12
for A and $10 for Z. What is the most profitable sales mix for Elliot Company?
A.84,000 units of A and 60,000 units of Z.
B.48,000 units of A and 80,000 units of Z.
C.60,000 units of A and 100,000 units of Z.
D.120,000 units of A and 0 units of Z.
E.0 units of A and 200,000 units of Z.
12) Juniper Company uses a perpetual inventory system. The company purchased
$9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned
$1,500 worth of merchandise. On August 16, it paid the full amount due. The correct
journal entry to record the payment on August 16 is:
A.Debit Merchandise Inventory $8,250; credit Cash $8,250.
B.Debit Cash $8,250; credit Accounts Payable $8,250.
C.Debit Accounts Payable $8,250; credit Merchandise Inventory $82.50; credit Cash
$8,167.50.
D.Debit Accounts Payable $9,750; credit Merchandise Inventory $97.50; credit Cash
$9,652.50.
E.Debit Accounts Payable $8,167.50; credit Cash $8,167.50.
13) Great Falls Co.’s bank reconciliation as of February 28 is shown below.
The adjusting journal entries that Great Falls must record as a result of the bank
reconciliation include:
A.Debit Note Payable $745; credit Cash $745.
B.Debit Cash $745; credit Note Receivable $745.
C.Debit Cash $2,950; credit Sales $2,950.
D.Debit Cash $2,950; credit Accounts Receivable $2,950.
E.Debit Miscellaneous Expense $35; credit Accounts Payable $35.
14) A company’s December 31 work sheet for the current period appears below. Based
on the information provided, what is net income for the current period?
A.$3,305.
B.$4,180.
C.$2,350.
D.$2,540.
E.$3,225.
15) A company uses the following standard costs to produce a single unit of output.
During the latest month, the company purchased and used 58,000 pounds of direct
materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor
costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable
manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing
overhead incurred was $10,400. Based on this information, the direct labor rate
variance for the month was:
A.$1,200 favorable
B.$3,650 favorable
C.$2,450 favorable
D.$3,650 unfavorable
E.$1,200 unfavorable
16) Total asset turnover is used to evaluate:
A.The efficient use of assets to generate sales.
B.The necessity for asset replacement.
C.The number of times operating assets were sold during the year.
D.The cash flows used to acquire assets.
E.The relation between asset cost and book value.
17) When preparing the cash budget, all of the following should be considered except:
A.Cash receipts from customers.
B.Cash payments for merchandise.
C.Depreciation expense.
D.Cash payments for income taxes.
E.Cash payments for capital expenditures.
18) All of the following are employer payroll taxes except:
A.Social Security tax equal to that withheld from employees.
B.Medicare tax equal to that withheld from employees.
C.State unemployment tax.
D.Federal unemployment tax.
E.Federal income tax equal to that withheld from employees.
19) Good management accounting indicates that projects be evaluated using relevant
data. In choosing among alternatives, what factors (considerations) are relevant?
20) Cash flows from selling trading securities are usually reported in the statement of
cash flows as part of:
A.Operating activities.
B.Financing activities.
C.Investing activities.
D.Noncash activities.
E.This is not reported in the statement of cash flows.
21) A company’s history indicates that 20% of its sales are for cash and the rest are on
credit. Collections on credit sales are 30% in the month of the sale, 50% in the next
month, and 15% the following month. Projected sales for January, February, and March
are $60,000, $85,000 and $95,000, respectively. The March expected cash receipts from
all current and prior credit sales is:
A.$57,000
B.$63,080
C.$64,000
D.$80,750
E.$90,250
22) An attitude of constantly seeking ways to improve company operations, including
customer service, product quality, product features, the production process, and
employee interactions, is called:
A.Continuous improvement.
B.Customer orientation.
C.Just-in-time.
D.Theory of constraints.
E.Total quality measurement.
23) A company’s flexible budget for 12,000 units of production showed total
contribution margin of $24,000 and fixed costs, $16,000. The operating income
expected if the company produces and sells 15,000 units is:
A.$34,000.
B.$10,000.
C.$18,667.
D.$8,000.
E.$14,000.
24) Mutual agency means
A.Creditors can apply their claims to partners’ personal assets.
B.Partners are taxed on partnership withdrawals.
C.All partners must agree before the partnership can act.
D.The partnership has a limited life.
E.A partner can commit or bind the partnership in any contract within the scope of the
partnership business.
25) Martinez owns machinery that cost $87,000 with accumulated depreciation of
$40,000. The company sells the machinery for cash of $42,000. The journal entry to
record the sale would include:
A.A credit to Accumulated Depreciation of $40,000.
B.A credit to Gain on Sale of $2,000.
C.A credit to Machinery of $47,000.
D.A debit to Cash of $42,000.
E.A debit to Accumulated Depreciation of $47,000.
26) Describe the journal entries required to record the issuance of bonds at a premium
and the payment of bond interest, including any applicable amortization.
27) A company issues 6%, 5 year bonds with a par value of $800,000 and semiannual
interest payments. On the issue date, the annual market rate of interest is 8%. Compute
the issue (selling) price of the bonds.. The following information is taken from present
value tables:
28) Each December 31, Kimura Company ages its accounts receivable to determine the
amount of its adjustment for bad debts. At the end of the current year, management
estimated that $16,900 of the accounts receivable balances would be uncollectible. The
Allowance for Doubtful Accounts account had a debit balance of $1,200 before any
year-end adjustment for bad debts. Prepare the adjusting journal entry that Kimura
Company should make on December 31, of the current year, to estimate bad debts
expense.
29) A corporation reported average total assets in Year 1 of $397,350 and $440,800 in
Year 2. Its net operating cash flow for Year 1 was $35,667 and $35,790 for Year 2.
Calculate the cash flow on total assets ratio for both years. Comment on the results.
30) A machine had an original cost of $60,000. After $45,000 of depreciation was
recorded, the machine was traded in on a new machine priced at $75,000. A $10,500
trade-in allowance was received on the old machine and the balance of $64,500 was
paid in cash. This transaction has commercial substance. Prepare the general journal
entry to record this trade-in.