A worksheet consists of all of the following except:
A. A trial balance.
B. Adjusting entries.
C. An adjusted trial balance.
D. Transaction entries.
If unit sales prices are $7 and variable costs are $5 per unit, how many units would have
to be sold to break-even if fixed costs equal $8,000?
A. 2,000 units.
B. 3,000 units.
C. 4,000 units.
D. 3,800 units.
On December 1, Year 1, Bradley Corporation incurs a 15-year $200,000 mortgage
liability in conjunction with the acquisition of an office building. This mortgage is
payable in monthly installments of $2,400, which include interest computed at the rate
of 12% per year. The first monthly payment is made on December 31, Year 1.
Refer to the information above. The portion of the second monthly payment made on
January 31, Year 2, which represents repayment of principal is:
A. $400.
B. $404.
C. $2,400.
D. $1,996.
In a periodic inventory system, which of the following accounts may be closed by
debiting Cost of Goods Sold?
A. Sales, Inventory (beginning), and Gross Profit.
B. Inventory (beginning) and Purchases.
C. Purchases and Inventory (ending).
D. Sales, Inventory (beginning), and Cost of Goods Available for Sale.
Refer to the information above. With respect to materials costs, the supervisor of the
Production Department should be held responsible for:
A. A favorable cost variance of $520.
B. A favorable cost variance of $990.
C. An unfavorable cost variance of $550.
D. An unfavorable cost variance of $490.
The term “junk bonds” describes bonds with:
A. Low interest rates.
B. Indefinite maturity dates.
C. Low maturity values.
D. High risk.
On October 12, 2014, Neptune Corporation invested $700,000 in short-term
available-for-sale marketable securities. The market value of this investment was
$730,000 at December 31, 2014, but had slipped to $725,000 by December 31, 2015.
Refer to the information above. In financial statements prepared on December 31, 2014,
Neptune Corporation reports:
A. The asset Investments in Marketable Securities at $700,000 with footnote disclosure
of the market value of $730,000.
B. The asset Investments in Marketable Securities at $730,000, and a $30,000
Unrealized Holding Gain included in total stockholders’ equity.
C. The asset Investments in Marketable Securities at $730,000, and a $30,000 gain
recognized in the income statement.
D. The asset Investments in Marketable Securities at $700,000, and a $30,000
Unrealized Holding Gain included in total stockholders’ equity.
The basic purpose of bookkeeping is to:
A. Provide financial information about an economic entity.
B. Develop the types of information best-suited to specific managerial decisions.
C. Record the financial transactions of an economic entity.
D. Determine the taxable income of individuals and business entities.
Ceramic Products, Inc. reports these account balances at January 1, 2015 (shown in
alphabetical order):
On January 5, Ceramic Products collected $12,000 of its accounts receivable and paid
$11,000 on its note payable.
Refer to the information above. In a trial balance prepared on January 6, 2015, the total
of the credit column is:
A. $275,000.
B. $286,000.
C. $287,000.
D. $297,000.
Retained earnings is:
A. The positive cash flows of a company.
B. The net worth of a company.
C. The owners’ equity that has accumulated as a result of profitable operations.
D. Equal to the total assets of a company.
An effective cost accounting system should match processes that consume resources
with the associated _____ in order to maintain competitive advantage. Select the best
answer to complete the sentence.
A. Sales
B. Shareholders
C. Costs
D. Activities
An asset purchased on January 1, 2012 for $60,000 that has an estimated life of 10
years will have a book value on December 31, 2015 of:
A. $60,000.
B. $24,000.
C. $36,000.
D. $42,000.
In a periodic inventory system, the formula used in computing the cost of goods sold
may be summarized as follows:
A. Beginning inventory + purchases – ending inventory.
B. Beginning inventory + purchases – net sales.
C. Ending inventory + purchases – net sales.
D. Balance in the Cost of Goods Sold account, less the balance in the Inventory
Shrinkage account.
Products for which sales of one contribute to the sales of another are called:
A. Complementary products.
B. Competing products.
C. Contributory products.
D. Codependent products.
The following information is available regarding the total manufacturing overhead of
Olsen Company for a recent four-month period.
Refer to the information above. Using the high-low method, compute the fixed element
of Olsen’s monthly overhead cost.
A. $33,000.
B. $35,000.
C. $37,500.
D. $40,000.
Which of the following is not a purpose of adjusting entries?
A. To prepare the revenue and expense accounts for recording transactions of the
following period.
B. To apportion the proper amounts of revenue and expense to the current accounting
period.
C. To establish the proper amounts of assets and liabilities in the balance sheet.
D. To accomplish the objective of offsetting the revenue of the period with all the
expenses incurred in generating that revenue.
At the end of last year, Games-2-Use had merchandise costing $140,000 in inventory.
During January of the current year, the company purchased merchandise costing
$102,000, and sold merchandise that it had purchased at a total cost of $84,000.
Games-2-Use uses a perpetual inventory system.
Refer to the information above. The amount of goods transferred from the Inventory
account to the Cost of Goods Sold account during January was:
A. $0.
B. $84,000.
C. $102,000.
D. $56,000.
If Hot Bagel Co. estimates depreciation on an automobile to be $578 for the year, the
company should make the following adjusting entry:
A. Debit Accumulated Depreciation $578 and credit Depreciation Expense $578.
B. Debit Depreciation Expense $578 and credit Automobile $578.
C. Debit Depreciation Expense $578 and credit Accumulated Depreciation $578.
D. Debit Automobile $578 and credit Depreciation Expense $578.
Millar Company produces a single product which it sells for $89 a unit. If the fixed
costs of manufacturing and selling the product are $68,400 a month and the variable
costs are $57 a unit, which of the below is correct?
A. The fixed costs amount to $32 per unit at any level of output within a relevant
volume range.
B. The company will break even with a sales volume of $68,400 a month.
C. An increase in sales volume above $68,400 a month will cause an increase in fixed
costs.
D. The contribution margin per unit of product is $32.
All of the following are true of operating expenses except:
A. Operating expenses are incurred for the purpose of producing revenue.
B. Operating expenses are subdivided into the classifications of component and trend.
C. The administrative expenses portion of operating expenses tends to remain constant
from period to period.
D. Subdividing operating expenses into different classifications helps managers and
investors evaluate different aspects of the company’s operations.
Adjusting entries
A. Are generally made daily.
B. Assign revenues to the period in which they are received.
C. Generally fall into one of two categories.
D. Are needed whenever revenue transactions affect more than one period.
An analysis of changes in selected balance sheet accounts of Hierarchy Corporation
shows the following for the current year:
Hierarchy’s income statement for the current year includes a $9,600 gain 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. Based solely on the data provided above, Hierarchy’s
net cash flow from investing activities for the current year is:
A. $264,000 net cash provided by investing activities.
B. $264,000 net cash used by investing activities.
C. $201,600 net cash provided by investing activities.
D. $1,200,000 net cash provided by investing activities.
Which of the following is not an example of internal control over cash?
A. Preparation of a cash budget.
B. Daily deposits of cash receipts at the bank.
C. Combining the functions of signing checks with the approval of expenditures.
D. Preparation of bank reconciliation.
Product X sells for $35 per unit and has related variable costs of $25 per unit. The fixed
costs of producing product X are $65,000 per month. How many units of product X
must be sold each month to earn a monthly operating income of $85,000?
A. 2,833 units.
B. 6,000 units.
C. 15,000 units.
D. 10,000 units.
Green Systems sold and delivered modems to Blue Computers for $660,000 to be paid
by Blue in three equal installments over the next three months. The journal entry made
by Blue Computers to record the last of the three installment payments will include:
A. A debit of $220,000 to Modem Expense.
B. A debit of $220,000 to Accounts Receivable.
C. A debit of $220,000 to Cash.
D. A debit of $220,000 to Accounts Payable.
Which of the following is not characteristic of financial accounting?
A. Information used in financial statements is prepared in conformity with generally
accepted accounting principles.
B. The information is confidential and is intended for use only by company
management.
C. The information is used in a wide variety of business decisions.
D. The information is developed primarily by “private accountants” that is, accountants
employed by business organizations.
Which of the following does not decrease the cash flow from operating activities?
A. The prepayment of an expense.
B. The purchase of operating equipment.
C. The payment of interest.
D. The prepayment of an expense, the purchase of operating equipment, and the
payment of interest all decrease cash from operating activities.
The Lastrom Company provided the following information regarding its operations:
2014 Total assets $750,000
2015 Total assets $800,000
2014 Net operating income $1,875,000
2015 Net operating income $1,925,000
2014 Net sales $4,525,000
2015 Net sales $5,100,000
What is Lastrom’s ROI for the year ending 2015?
A. 2.48%.
B. 2.72%.
C. 2.40%.
D. 2.50%.
The accounts receivable turnover rate:
A. Indicates how many times the receivables were converted into cash during the year.
B. Is computed by dividing average receivables by sales.
C. Indicates the average number of days a business waits to make collection on a credit
sale.
D. Indicates the proportion of a company’s accounts receivable that the independent
auditors were unable to confirm.
Refer to the information above. Which of the following is the most likely explanation
for the types of labor variances resulting from Roman’s July operations?
A. Management used workers who received a higher wage and worked more efficiently.
B. Management reduced the wage rates in July, which caused the workers to
deliberately slow down productivity.
C. Management used less experienced workers whose lower wage rate more than offset
their lower productivity.
D. Management paid workers more than standard hourly rates, but the excess pay did
not result in increased productivity.
Jericho Corporation is considering the purchase of new equipment costing initially
$96,000. The equipment has an estimated life of 6 years with no salvage value.
Straight-line depreciation is to be used. Net annual after tax cash flow is estimated to be
$31,200 for 6 years. The payback period is:
A. 1.2300 years.
B. 3.0769 years.
C. 5.0799 years.
D. 6.0000 years.