Which of the following is necessary for a corporation to pay cash dividends?
a. Market value in excess of par value per share
b. Order by the court of law
c. Sufficient retained earnings
d. Prior declaration of stock dividends
A to Z Corporation paid a $10,000 cash dividend. On the Statement of Cash Flows, the
transaction would be classified as:
a. Cash Flows from Operating Activities.
b. Cash Flows from Investing Activities.
c. Cash Flows from Financing Activities.
d. Noncash transaction.
The master budget of a small manufacturer would normally include all necessary
component budgets except the capital expenditures budget.
a. True
b. False
Blue Lilly Co. paid $50,000 to stockholders as dividends. As a result of this transaction,
_____.
a. the liquidity of Blue Lilly Co. increases
b. the profitability of Blue Lilly Co. remains unchanged
c. the profitability of Blue Lilly Co. decreases
d. the liquidity of Blue Lilly Co. remains unchanged
When budget goals are set too tight, the budget becomes less effective for planning and
controlling operations.
a. True
b. False
The rate earned on total common stockholders’ equity for most thriving businesses will
be less than the return on total assets.
a. True
b. False
Lazer Company paid a utility bill of $12,000 and paid rent of $20,000. As a result of
these transactions, the stockholders’ equity:
a. increases by $8,000.
b. decreases by $32,000.
c. increases by $20,000.
d. decreases by $12,000.
If the volume of sales is $6,000,000 and sales at the breakeven point amount to
$4,800,000, the margin of safety will be 25%.
a. True
b. False
The following information is available for Amanda Co. for the current year.
Common shares outstanding150,000
Preferred stock dividend declared and paid$90,000
Net income$300,000
Calculate the company’s earnings per share.
a. $1.10
b. $2.60
c. $2.00
d. $1.40
Medicare taxes are withheld from an employee’s pay only till the employee has earned a
specific amount each year.
a. True
b. False
The ratio of cash to monthly cash expenses is computed as _____.
a. monthly cash expenses divided by cash
b. current assets divided by monthly cash expenses
c. cash divided by cash equivalents
d. cash and cash equivalents divided by monthly cash expenses
Granger Co. can further process Product B to produce Product C. Product B is currently
selling for $55 per pound and costs $42 per pound to produce. Product C would sell for
$82 per pound and would require an additional cost of $13 per pound to produce. What
is the differential revenue of producing and selling Product C?
a. $15 per pound
b. $42 per pound
c. $45 per pound
d. $27 per pound
In using the variable cost concept of applying the costplus approach to product pricing,
fixed manufacturing costs and fixed selling and administrative expenses must be
covered by the markup.
a. True
b. False
The relevant range is useful for analyzing cost behavior for management
decisionmaking purposes.
a. True
b. False
Topaz Company is considering replacing an old machine that originally cost $95,000. A
new machine will cost $900,000, and the old machine can be sold for $25,000. What is
the sunk cost in this situation?
a. $25,000
b. $95,000
c. $995,000
d. $120,000
At the end of the current year, Jackson Inc. has an Accounts Receivable balance of
$200,000 and Allowance for Doubtful Accounts has a negative balance of $(60,000).
What is the net realizable value of the receivables?
a. $60,000
b. $260,000
c. $200,000
d. $140,000
Which of the following expressions is termed the investment turnover factor as used in
determining the rate of return on investment?
a. Invested Assets/Sales
b. Operating Income/Invested Assets
c. Operating Income/Sales
d. Sales/Invested Assets
Brite Inc. had the following assets and liabilities at the end of the year:
Assets$54,800
Liabilities$32,000
What is the yearend stockholders’ equity of Brite Inc.?
a. $32,000
b. $22,800
c. $86,800
d. Cannot be determined with this information
Differential revenue is the amount of income that would result from the best available
alternative for the proposed use of cash.
a. True
b. False
The difference between the actual amount of variable factory overhead cost incurred
and the amount of variable factory overhead budgeted for the standard product is
termed as variable factory overhead controllable variance.
a. True
b. False
Investment turnover (as used in determining the rate of return on investment) focuses
on the rate of profit earned on each sales dollar.
a. True
b. False
Frogue Corporation uses a standard cost system. The following information was
provided for the period that just ended:
Actual price per kilogram$2.50
Actual kilograms of material used31,000
Actual hourly labor rate$18.10
Actual hours of production4,900 labor hrs.
Standard price per kilogram$2.80
Standard kilograms per completed unit6 kilograms
Standard hourly labor rate$18.00
Standard time per completed unit1 hr.
Actual total factory overhead$34,900
Actual fixed factory overhead$18,000
Standard fixed factory overhead rate$1.20 per labor hour
Standard variable factory overhead rate$3.80 per labor hour
Maximum plant capacity15,000 hours
Units completed during the period5,000
The variable factory overhead controllable variance is:
a. $6,000 favorable.
b. $2,100 favorable.
c. $2,100 unfavorable.
d. $6,000 unfavorable.
For EFG Co., the transaction “receipt of a utility bill” would:
a. increase total assets.
b. decrease total assets.
c. have no effect on total assets.
d. decrease total liabilities.
Which of the following is the formula to calculate current ratio?
a. Cost of goods sold / Average inventory
b. Quick assets / Current liabilities
c. Sales / Average accounts receivable
d. Current assets / Current liabilities
All bank memorandums reported on the bank reconciliation require entries in the
depositor’s accounts.
a. True
b. False
In most businesses, cost standards are established principally by accountants.
a. True
b. False
Johnson, Inc. paid rent expense of $3,500 for the month of October. How are the
accounts affected due to this transaction?
a. Increase in cash $3,500 and increase in retained earnings $3,500
b. Increase in cash $3,500 and decrease in retained earnings $3,500
c. Decrease in cash $3,500 and decrease in retained earnings $3,500
d. Decrease in cash $3,500 and increase in retained earnings $3,500
When merchandise sold is assumed to be in the order in which the expenditures were
made, the inventory costing method is called:
a. firstin, lastout.
b. lastin, firstout.
c. firstin, firstout.
d. average cost.
In a computerized system, paid vouchers are transferred to a paid voucher file.
a. True
b. False
The analysis of receivables method of costing inventory is based on the assumption
that:
a. the uncollectible accounts can be estimated as a percentage of credit sales.
b. the bad debt expense is recorded by estimating uncollectible accounts at the end of
the accounting period.
c. the bad debt expense is recorded only when an account is determined to be worthless.
d. the longer an account receivable is outstanding, the less likely that it will be
collected.
A return on assets of 5.15% means that a company is earning:
a. a $5.15 return on every $100 of total assets.
b. a $5.15 return on every $100 of assets minus liabilities.
c. a $5.15 return on every $100 of current assets.
d. a $5.15 return on every $100 invested in longterm assets.
A corporation has 10,000 shares of $100 par value stock outstanding. If the corporation
issues a 5for1 stock split, the number of shares outstanding after the split will be 2,000.
a. True
b. False
Dana Inc. showed the following data for the year end:
Cash sales$4,100,000
Credit sales5,900,000
Accounts receivable, beginning of the year600,000
Accounts receivable, end of the year400,000
Calculate Dana Inc.’s days’ sales in receivables. (Round the answer to the nearest whole
number.)
a. 30 days
b. 61 days
c. 12 days
d. 44 days
An employee receives an hourly rate of $27, with time and a half for all hours worked
in excess of 40 during a week. Payroll data for the current week are as follows: hours
worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to
current week, $99,700; social security tax rate, 6.0% on maximum of $106,800; and
Medicare tax rate, 1.5% on all earnings. What is the gross pay for the employee?
a. $798.85
b. $873.77
c. $1,242.00
d. $1,323.00
Alia Co. can further process Product X to produce Product Y. Product X is currently
selling for $20 per pound and costs $15 per pound to produce. Product Y would sell for
$30 per pound and would require an additional cost of $8 per pound to produce. What is
the differential cost of producing Product Y?
a. $15 per pound
b. $23 per pound
c. $8 per pound
d. $5per pound
How can a company earn a large net income and have a small balance in retained
earnings?
Review COCACOLA’S financial statements and answer the following questions:
(1)What is Coke’s percent of current assets to total assets on its December 31, 2008
balance sheet?
(2)What is Coke’s percentage of current liabilities to total stockholders’ equity on its
December 31, 2008 balance sheet?
(3)What is the percentage increase in cash and cash equivalents from 2007 to 2008?
(4)What percentage did total assets decrease from 2007 to 2008?
Describe business stakeholders. State the classification of business stakeholders.
On the basis of the following data related to current assets for Mission Co. at December
2016, prepare a partial balance sheet in good form.
Cash and cash equivalents$100,000
Notes receivable50,000
Accounts receivable290,000
Allowance for doubtful accounts20,000
Interest receivable750
Merchandise inventory at lowerofcost(firstin, firstout method) ormarket120,000
On May 1, the cash account balance was $72,600. During May, cash receipts totaled
$345,600 and the May 31 balance was $95,230. Determine the cash payments made
during May.
Describe the features of a voucher system and list typical supporting documents for a
voucher.
The following accounts and their balances appear in the ledger on December 31 of the
current year:
Common Stock, $20 par$400,000
PaidIn Capital in Excess of Par44,000
Retained Earnings265,000
Treasury Stock20,000
Prepare the Stockholders’ Equity section of the balance sheet as of December 31.
Twenty five thousand shares of common stock are authorized, and 1,000 shares have
been reacquired.
Other than accounts receivable and notes receivable, name other receivables that might
be included on the balance sheet.
Describe the differences between the cash and accrual bases of accounting.
Name the three different types of businesses that operate for profit and their respective
characteristics.
Classify the following as an asset, liability, revenue, or expense.
(1)Unearned revenue
(2)Office equipment
(3)Wages payable
(4)Salary expense
(5)Dividends payable
(6)Art fees earned
(7)Prepaid rent
(8)Accounts receivable
(9)Income tax expense
(10)Office supplies
Why is a physical count of supplies necessary at the end of the accounting period?
A $350,000 capital investment proposal has an estimated life of four years and no
residual value. The estimated net cash flows are as follows:
YearNet Cash FlowYearNet Cash Flow
1)$150,0003 $104,000
2) 130,0004 90,000
The minimum desired rate of return for net present value analysis is 12%. The present
value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712,
and 0.636, respectively. Determine the net present value.
Trapp Co. was organized on August 1 of the current year. Projected sales for the next
three months are as follows:
August$100,000
September185,000
October225,000
The company expects to sell 40% of its merchandise for cash. Of the sales on account,
one third are expected to be collected in the month of the sale and the remainder in the
following month.
Prepare a schedule indicating cash collections of accounts receivable for August,
September, and October.
Compute the standard cost for one hat, based on the following standards for each hat:
Standard Material Quantity:3/4 yard of fabric at $4.00 per yard
Standard Labor:1 hour at $5.75 per hour
Factory Overhead:$2.90 per direct labor hour