The normal order in which the financial statements are prepared is:
A. Balance sheet, income statement, statement of retained earnings.
B. Income statement, statement of retained earnings, balance sheet.
C. Income tax return, income statement, balance sheet.
D. Income statement, statement of cash flows, balance sheet.
If during the current year, liabilities of Corbett’s Store increased by $220,000 and
owners’ equity increased by $160,000, then:
A. Assets at the end of the year total $380,000.
B. Assets at the end of the year total $60,000.
C. Assets increased during the year by $380,000.
D. Assets decreased during the year by $60,000.
In deciding whether or not to accept a special order, what is the opportunity cost of
using machinery for which the firm has sufficient excess capacity to accept the order?
A. The historical cost of the machinery.
B. The undepreciated cost of the machinery.
C. The same machinery cost allocated to regular production orders.
D. Zero.
A scholarship fund has $75,000 to invest now to provide scholarships to high school
students. They want to have at least $150,000 in 8 years. What rate of interest must they
invest this money at to reach their goal?
A. 8%.
B. 9%.
C. 10%.
D. 11%.
The lower-of-cost-or-market rule:
A. Is used in conjunction with any inventory cost flow assumptions.
B. Cannot be used if LIFO or FIFO is also used.
C. Can be used in conjunction with LIFO but not FIFO.
D. Can only be used with the specific identification.
If a business closes its accounts only at year-end:
A. Financial statements are prepared only at year-end.
B. Adjusting entries are made only at year-end.
C. Revenue and expense accounts reflect year-to-date amounts throughout the year.
D. Monthly and quarterly financial statements cannot be prepared.
Equivalent units of production represent units of:
A. Finished goods inventory.
B. Units of work-in-process inventory.
C. Work performed during the period.
D. Sales generated during the period.
If I invest $100 at the end of each year for four years at 6% how much will I have at the
end of the fourth year?
A. $421.24.
B. $437.46.
C. $563.71.
D. $432.95.
Refer to the information above. If total assets of Hercules Manufacturing, Inc. are
$556,000, Equipment is carried in Hercules Manufacturing accounting records at:
A. $377,000.
B. $179,000.
C. $150,000.
D. $90,000.
During the current year, the assets of Wheatley’s increased by $362,000, and the
liabilities increased by $260,000. The owners’ equity in the business must have:
A. Decreased by $102,000.
B. Decreased by $622,000.
C. Increased by $102,000.
D. Increased by $622,000.
At the end of March, the unadjusted trial balance of Tutor, Inc. included the following
accounts:
Refer to the information above. Tutor uses the balance sheet approach in estimating
uncollectible accounts expense, and aging the accounts receivable indicates the
estimated uncollectible portion to be $7,400. The net realizable value of Tutor’s
accounts receivable in the March 31 balance sheet is:
A. $247,400.
B. $240,000.
C. $232,600.
D. $352,600.
To qualify as an extraordinary item, a gain or loss must:
A. Affect the income of a prior period.
B. Be larger in amount than any other item in the income statement.
C. Be material in amount, unusual in nature, and not expected to recur.
D. Be associated with a segment of the business that has been discontinued during the
current period.
When a manufacturing company purchases raw materials or component parts to be used
in manufacturing finished goods, these costs are initially debited to:
A. Expense accounts.
B. Raw Materials Inventory.
C. Finished Goods Inventory.
D. Manufacturing Overhead.
Salem Co. has outstanding $100 million of 7% bonds, due in 7 years, and callable at
104. The bonds were issued at par and are selling today at a market price of 94.
Refer to the information above. If Salem Co. calls $10 million of these bonds it will
report:
A. A $700,000 gain.
B. A $400,000 loss.
C. A $600,000 gain.
D. Neither gains nor losses are recognized on early retirements of debt.
The present value of an amount is:
A. Always greater than the future value.
B. Always less than the future value.
C. Always equal to the future value.
D. Greater than, less than, or equal to the future value depending upon interest rates and
the time period involved.
Off balance sheet financing may involve:
A. An operating lease.
B. A pension plan.
C. Deferred income taxes.
D. A capital lease.
Swordfish Co. earned $75,000 in 2013 and expects to receive 2/3 of the amount in 2014
and the remainder in 2015. How much revenue should Swordfish Co. report in 2013?
A. $0.
B. $25,000.
C. $50,000.
D. $75,000.
A semi-variable cost:
A. Increases and decreases directly and proportionately with changes in volume.
B. Changes in response to a change in volume, but not proportionately.
C. Increases if volume increases, but remains constant if volume decreases.
D. Changes inversely in response to a change in volume.
An analysis of changes in selected balance sheet accounts of Johnson Corporation
shows the following for the current year:
Johnson’s income statement for the current year includes a $14,000 loss on disposal of
plant assets. All payments and proceeds relating to purchase or sale of plant assets were
in cash.
Refer to the information above. The amount of cash paid by Johnson to acquire plant
assets during the current year was:
A. $53,000.
B. $267,000.
C. $42,000.
D. $160,000.
The levels of production and of manufacturing overhead for the first five months of
2015 for Duke & Duchess Products are shown below:
Refer to the information above. In June, Duke & Duchess expects to manufacture
18,000 units. Using the high-low method, compute the total estimated manufacturing
overhead for June. (Round your intermediate computations to two decimal places.)
A. $65,278.
B. $61,668.
C. $63,948.
D. $18,360.
On April 1, year 1, Cricket Corporation issues $60 million of 12%, 10-year bonds
payable at par. Interest on the bonds is payable semiannually each April 1 and October
1.
Refer to the information above. The amount of cash paid to bondholders for interest
during Year 1, is:
A. $6,600,000.
B. $5,400,000.
C. $3,600,000.
D. $1,800,000.
Sally Smythe enters into a partnership by contributing the following:
Cash $15,000; Accounts Receivable $4,500; Machinery which cost $3,000 and has a
fair market value of $2,125; and accounts payable of $1,200. What amount will be
recorded in her capital account?
A. $21,625.
B. $20,425.
C. $22,500.
D. $21,300.
Financial assets:
A. Consist of cash and cash equivalents.
B. Are reported at cost in the balance sheet.
C. Include short-term investments in marketable securities and receivables, as well as
cash.
D. Are not very productive assets and should be kept to a minimum in a well-managed
company.
The amortization of a bond discount:
A. Decreases the carrying value of a bond and increases interest expense.
B. Decreases the carrying value of a bond and decreases interest expense.
C. Increases the carrying value of a bond and increases interest expense.
D. Increases the carrying value of a bond and decreases interest expense.
Financial reporting of and retained earnings
The 2015 annual report of Kirtland Products disclosed net income of approximately $87
million for the fiscal year ending March 31, 2015, and retained earnings of
approximately $485 million as of March 31, 2015.
(a) Which financial statement shows computation of net income?
(b) Which financial statement includes the retained earnings figure of $485 million?
(c) Explain why Kirtland reports $87 million as net income, but a much larger amount,
$485 million, as retained earnings.
Refer to the information above. The unit cost per gallon of soup transferred to the
Canning Department during March was:
A. $1.50.
B. $1.62.
C. $1.71.
D. $1.83.
Shown below are selected data from the financial statements of Noble Computers.
(Dollar amounts are in millions, except for the per share data.)
Noble reported earnings per share for the year of $6 and paid cash dividends of $2.00
per share. At year-end, the Wall Street Journal listed Noble’s capital stock as trading at
$81 per share.
Refer to the information above. Noble’s return on equity was:
A. 10%.
B. 13%.
C. 21%.
D. 1.73.
When budgeted amounts are set at reasonable and achievable levels:
A. They reflect a “total quality management” philosophy of management.
B. A highly efficient department should fall slightly short of budget standards.
C. Meeting the budgeted amounts ensures a maximum level of profitability.
D. Failure to stay within the budget is viewed as an unacceptable level of performance.
Mentha Company currently has the following statistics:
Days in inventory – 80
Days in accounts receivable – 68
What is Mentha’s operating cycle?
A. 80 days.
B. 68 days.
C. 148 days.
D. Cannot be determined from the information given.
Refer to the information above. If Retained Earnings at December 31, 2014, is
$140,000, total assets amounts to:
A. $98,000.
B. $377,000.
C. $475,000.
D. $188,000.
A/P ($12,000) + N/P ($135,000) + Capital Stock ($188,000) + R.E. ($140,000) =
$475,000
Designs, Inc. had 4,000 shares of $7, $100 par preferred stock and 50,000 shares of
common stock outstanding throughout 2015. During 2015, Designs declared a dividend
of $7 per share on its common stock. Compute earnings per share for 2015 if Designs’
income statement showed net income of $630,000.
A. $7.00 per share.
B. $6.00 per share.
C. $12.04 per share.
D. $12.60 per share.
If a company purchases equipment for cash:
A. Assets will increase and owners’ equity will also increase.
B. Assets will increase and owners’ equity will decrease.
C. Assets will increase and owners’ equity will remain unchanged.
D. Total assets and owners’ equity will remain unchanged.
The accounting cycle begins with the
A. Posting of journal entries to ledger accounts.
B. Formation of a business.
C. Initial recording of business transactions.
D. Preparation of a trial balance.
