The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and
no residual value, is expected to yield total net income of $300,000 for the 5 years. The
expected average rate of return is 30%.
Answer:
In a periodic inventory system, the cost of merchandise purchased includes the cost of
freight-in.
Answer:
Entries required to close the balances of the temporary accounts at the end of the period
are called final entries.
Answer:
Responsibility accounting reports that are given to lower level managers are usually
very detailed, in turn, higher level managers will be given a summary report.
Answer:
The revenue journal is to make it more efficient to record sales transactions made for
cash.
Answer:
Consulting the persons affected by a budget when it is prepared can provide an effective
means of motivation and cooperation.
Answer:
Only a single line, which represents the difference between total sales revenues and
total costs, is plotted on the profit-volume chart.
Answer:
A restriction/appropriation of retained earnings establishes cash assets that are set aside
for a specific purpose.
Answer:
Computerized accounting systems prevent all journalizing errors.
Answer:
Companies that use the average costing method for process costing have unit costs that
include costs from more that one accounting period.
Answer:
When a new partner is admitted by making an investment of assets in the partnership
and the new partner has to pay a premium for admission, a bonus is divided among the
old partners’ capital accounts.
Answer:
Period costs are operating costs that are expensed in the period in which the goods are
sold.
Answer:
Patents are exclusive rights to manufacture, use, or sell a particular product or process.
Answer:
Capital and Drawing are reported in the owner’s equity section of the balance sheet.
Answer:
Assets may be grouped according to common traits and depreciated by using a single
composite rate.
Answer:
When budget goals are set too tight, the budget becomes less effective as a tool for
planning and controlling operations.
Answer:
Interim financial statements for a manufacturing business would report overapplied
factory overhead as a deferred item on the balance sheet.
Answer:
When a portion of a bond issue is redeemed, a related proportion of the unamortized
premium or discount must be written off.
Answer:
A Limited Liability Company is a business entity form designed to overcome some of
the disadvantages of the partnership form.
Answer:
In a perpetual inventory system, the Merchandise Inventory account is only used to
reflect the beginning inventory.
Answer:
The accounting rate of return method of analyzing capital budgeting decisions measures
the average rate of return from using the asset over its entire life.
Answer:
A company must choice either a standard system or nonfinancial performance measures
to evaluate the performance of a company.
Answer:
Garmo Co. has an operating leverage of 5. Next year’s sales are expected to increase by
10%. The company’s operating income will increase by 50%.
Answer:
Ratios and various other analytical measures are not a substitute for sound judgment,
nor do they provide definitive guides for action.
Answer:
The payment of dividends is an example of a cost.
Answer:
The cost method of accounting for the purchase and sale of treasury stock is a
commonly used method.
Answer:
Cash and other assets that may reasonably be expected to be realized in cash, sold, or
consumed through the normal operations of a business, usually longer than one year,
are called current assets.
Answer:
The FIFO method of process costing is simpler than the Average cost method.
Answer:
The cost of wages paid to employees directly involved in converting materials to
finished product is classified as direct labor cost.
Answer:
As a company records depreciation expense for a period of time a corresponding cash
inflow from investing activities is reported on the statement of cash flows.
Answer:
Using measures to assess a business’s ability to pay its current liabilities is called
current position analysis.
Answer:
Services provided for cash is recorded in the revenue journal.
Answer:
For each of the following, calculate the cost of inventory reported on the balance sheet.
(a) The total merchandise on hand at the end of the year as determined by taking a
physical inventory is $62,000. Of the $62,000, $8,000 has been sold FOB destination
and is awaiting pickup by the carrier.
(b) The total merchandise inventory counted at the end of the year was $63,000.
Purchases for $6,000 are in transit under FOB shipping point terms.
(c) The total merchandise inventory counted at the end of the year was $75,000.
Purchases for $5,000 are in transit under FOB destination terms.
Answer:
Ofelia and Teresa share income and losses in a 2:1 ratio after allowing for salaries to
Ofelia of $48,000 and $60,000 to Teresa. Net income for the partnership is $132,000.
Income should be divided as follows:
A.Ofelia, $56,000; Teresa, $76,000
B.Ofelia, $60,000; Teresa, $72,000
C.Ofelia, $72,000; Teresa, $60,000
D.Ofelia, $64,000; Teresa, $68,000
Answer:
When preparing the cash budget, all the following should be considered except:
A.Cash receipts from customers.
B.Depreciation expense.
C.Cash payments to suppliers.
D.Cash payments for equipment.
Answer:
The chart of accounts classify the accounts to make identification of the accounts easier.
This is done by way of assigning a number to each account. The first number identifies
the classification of the type of account. Which of the following indicates the use of this
classification?
A.1-Assets, 2-Liabilities, 3-Owner’s Equity, 4-Expenses, 5-Revenues
B.1-Assets, 2-Liabilities, 3-Owner’s Equity, 4-Revenues, 5-Expenses
C.1-Assets, 2-Owner’s Equity, 3-Revenues, 4-Expenses, 5-Drawing
D.1-Owner’s Equity, 2-Drawing, 3-Revenues, 4-Expenses
Answer:
Accrued expenses are ordinarily reported on the balance sheet as
A.assets
B.liabilities
C.fixed assets
D.prepaid expenses
Answer:
The chart of account for the Miguel Company includes some of the following accounts:
On the journal page 5, the following transaction was found:
What is the post reference that will be found on the Salaries Expense account?
A.5
B.11
C.54
D.None
Answer:
On July 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co.
Assume that the fiscal year of Alton Co. ends July 31. Using the 360-day year in your
calculations, what is the amount of interest expense recognized by Alton in the current
fiscal year?
A.$1,200.00
B.$106.67
C.$306.67
D.$400.00
Answer:
Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital
balances are $40,000 and $60,000 respectively. Income Summary has a credit balance
of $20,000. What is Saturn’s capital balance after closing Income Summary to Capital?
A.$55,000
B.$75,000
C.$45,000
D.$65,000
Answer:
The matching concept
A.addresses the relationship between the journal and the balance sheet
B.determines whether the normal balance of an account is a debit or credit
C.requires that the dollar amount of debits equal the dollar amount of credits on a trial
balance
D.states that the revenues and related expenses should be reported in the same period
Answer:
Which of the following is not a reason to invest excess cash in temporary investments?
A.earn interest revenue
B.influence the operations of another company
C.receive dividends
D.realize gains from the increase in market value of the securities
Answer:
The following information pertains to Carlton Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
Assets
Liabilities and Stockholders’ Equity
Income Statement
What are the dividends per common share for this company?
A.$20.00
B.$3.33
C.$1.11
D.$0.90
Answer:
On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that has a
depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours.
Using straight line depreciation, calculate depreciation expense for the first year.
A.$17,500
B.$30,000
C.$12,500
D.$40,000
Answer:
As of January 1 of the current year, the Grackle Company had accounts receivables of
$50,000. The sales for January, February, and March were as follows: $120,000,
$140,000 and $150,000. 20% of each month’s sales are for cash. Of the remaining 80%
(the credit sales), 60% are collected in the month of sale, with remaining 40% collected
in the following month. What is the total cash collected (both from accounts receivable
and for cash sales) in the month of February?
A.$129,600
B.$62,400
C.$133,600
D.$91,200
Answer:
Use the following information to answer the following questions.
Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment
with a book value of $7,500 and a fair market value of $20,000. Marta will invest a
building with a book value of $40,000 and a fair market value of $58,000.
What amount will be recorded to the building account?
A.$28,000
B.$18,000
C.$40,000
D.$58,000
Answer:
Which of the following accounts will not be closed to Income Summary at the end of
the fiscal year?
A.Salaries Expense
B.Fees Earned
C.Unearned Rent
D.Depreciation Expense
Answer:
Which of the following taxes would be deducted in determining an employee’s net pay?
A.FUTA taxes
B.SUTA taxes
C.FICA taxes
D.all of the above
Answer:
Allen Marks is the sole owner and operator of Great Marks Company. As of the end of
its accounting period, December 31, 2013, Great Marks Company has assets of
$940,000 and liabilities of $300,000. During 2014, Allen Marks invested an additional
$73,000 and withdrew $33,000 from the business. What is the amount of net income
during 2014, assuming that as of December 31, 2014, assets were $995,000, and
liabilities were $270,000?
A.$ 45,000
B.$ 50,000
C.$106,000
D.$370,000
Answer:
Manicotti Corporation sells a single product. Budgeted sales for the year are anticipated
to be 640,000 units, estimated beginning inventory is 108,000 units, and desired ending
inventory is 90,000 units. The quantities of direct materials expected to be used for each
unit of finished product are given below.
Material A .50 lb. per unit @ $ .60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound
The dollar amount of direct material A used in production during the year is:
A.$186,600
B.$181,200
C.$240,000
D.$210,600
Answer:
The budgeted finished goods inventory and cost of goods sold for a manufacturing
company for the year 2012 are as follows: January 1 finished goods, $765,000;
December 31 finished goods, $640,000; cost of goods sold for the year, $2,560,000.
The budgeted costs of goods manufactured for the year is?
A.$1,405,000
B.$2,560,000
C.$2,435,000
D.$3,965,000
Answer:
Zeke Company is a manufacturing company that has worked on several production jobs
during the 1st quarter of the year. Below is a list of all the jobs for the quarter:
Job 356, 357, 358 & 359 were completed. Jobs 356 & 357 were sold at a profit of $500
on each job.
What is the ending balance of Finished Goods for Zeke Company as of the end of the
1st quarter?
A.$456
B.$1,067
C.$1,685
D.$2,752
Answer:
The method of accounting for investments in equity securities in which the investor
records its share of periodic net income of the investee is the
A.cost method
B.market method
C.income method
D.equity method
Answer:
The following information is available from the current period financial statements:
The net cash flow from operating activities using the indirect method is
A.$166,000
B.$184,000
C.$110,000
D.$240,000
Answer:
The following lots of a particular commodity were available for sale during the year:
The firm uses the periodic system and there are 20 units of the commodity on hand at
the end of the year. What is the amount of inventory at the end of the year according to
the FIFO method?
A.$655
B.$620
C.$690
D.$659
Answer:
The balances for the accounts listed below appeared in the Adjusted Trial Balance
columns of the work sheet. Indicate whether each balance should be extended to (a) the
Income Statement columns or (b) the Balance Sheet columns.
Answer:
Accumulated Depreciation
A.is used to show the amount of cost expiration of intangibles
B.is the same as Depreciation Expense
C.is a contra asset account
D.is used to show the amount of cost expiration of natural resources
Answer:
The following data is given for the Bahia Company:
Overhead is applied on standard labor hours.
The factory overhead volume variance is:
A.$65U
B.$65F
C.$540U
D.$540F
Answer:
Using the following information, prepare a bank reconciliation for Cole Co. for May
31, 2011:
(a) The bank statement balance is $2,936.
(b) The cash account balance is $3,194.
(c) Outstanding checks amounted to $465.
(d) Deposits in transit are $655.
(e) The bank service charge is $50.
(f) A check for $97 for supplies was recorded as $79 in the ledger.
Answer:
Which of the following budgets provides the starting point for the preparation of the
direct labor cost budget?
A.Direct materials purchases budget
B.Cash budget
C.Production budget
D.Sales budget
Answer:
Use the following information to answer the following questions.
Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment
with a book value of $7,500 and a fair market value of $20,000. Marta will invest a
building with a book value of $40,000 and a fair market value of $58,000.
What amount will be recorded to Izabelle’s capital account?
A.$20,000
B.$7,500
C.$27,500
D.$12,500
Answer:
Short-term creditors are typically most interested in assessing
A.marketability.
B.profitability.
C.operating results.
D.solvency.
Answer:
If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are
$24, what is the break-even sales (units)?
A.2,400
B.1,950
C.1,114
D.2,600
Answer:
The Ukulele Company’s radio division currently is purchasing transistors from the
Xiang Co. for $3.50 each. The total number of transistors needed is 8,000 per month.
Ukulele Company’s electronics division can produce the transistors for a cost of $4.00
each and they have plenty of capacity to manufacture the units. The $4 is made up of
$3.25 in variable costs, and $0.75 in allocated fixed costs.
What should be the range of a possible transfer price?
A.No transfer should take place.
B.$3.51 to $3.99
C.$3.26 to $3.99
D.$3.26 to $3.49
Answer:
Which of the following items should not be included in the cost of ending merchandise
inventory?
A.purchased units in transit, shipped FOB shipping point
B.purchased units in transit, shipped FOB destination
C.units on hand in the warehouse
D.sold units in transit, not invoiced and shipped FOB destination
Answer:
Bob and Sons’ static budget for 10,000 units of production includes $50,000 for direct
materials, $44,000 for direct labor, variable utilities of $5,000, and supervisor salaries
of $25,000. A flexible budget for 12,000 units of production would show:
A.the same cost structure in total
B.direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor
salaries of $30,000
C.total variable costs of $148,000
D.direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and
supervisor salaries of $25,000
Answer:
Discount Mart utilizes the allowance method of accounting for uncollectible
receivables. On December 12th the company receives a $550 check from Chad Thomas
in settlement of Thomas’ $1,100 outstanding accounts receivable. Due to Thomas’
failing health he is closing his company and is expecting to make no further payments
to Discount Mart. Journalize this declaration.
Answer:
Hamir, Darci, and Pete are partners sharing income 3:2:1, respectively. After the firm’s
loss from liquidation is distributed, the capital account balances were: Hamir, $45,000
Dr.; Darci, $90,000 Cr., and Pete, $64,000 Cr. If Hamir is personally bankrupt and
unable to pay any of the $45,000, what will be the amount of cash received by Darci
and Pete upon liquidation? Show your work.
Answer:
Benson contributed land, inventory, and $22,000 cash to a partnership. The land had a
book value of $65,000 and a market value of $111,000. The inventory had a book value
of $60,000 and a market value of $58,000. The partnership also assumed a $52,000 note
payable owned by Benson that was used originally to purchase the land.
Provide the journal entry for Benson’s contribution to the partnership.
Answer:
On June 30th (the end of the period) Brown Company has a credit balance of $2,275 in
Allowance for Doubtful Accounts. An evaluation of accounts receivable indicates that
the proper balance should be $30,025. Journalize the appropriate adjusting entry.
Answer:
The following purchase transactions occurred during August for Backcountry Kayak
Company.
Record these transactions in a purchase journal.
Answer:
Match each of the following investment terms with the appropriate definition below.
Answer:
A $500,000 bond issue on which there is an unamortized discount of $20,000 is
redeemed for $475,000. Journalize the redemption of the bonds.
Answer:
Skyline, Inc. purchased a portfolio of available-for-sale securities during The cost and
fair value of this portfolio on December 31, 2012, was as follows:
Provide the journal entry to record the adjustment of the available-for-sale security
portfolio to fair value on December 31, 2012.
Where will the information from the journal entry be reported on the financial
statements?
Answer:
Discuss the two methods for recording bad-debt expense. What type of company uses
each method?
Answer:
Determine the due date and the amount of interest due at maturity on the following
notes:
Answer:
A copy machine acquired on March 1, 2011 with a cost of $705 has an estimated useful
life of 4 years. Assuming that it will have a residual value of $125, determine the
depreciation for the first year by the double-declining-balance method.
Answer:
On January 1, 2011 a company had the following data:
– issued 10,000 shares of $2.00 par value common stock for $12.00 per share
– issued 3,000 shares of $50 par value 6% cumulative preferred stock for $70 per share
– purchased 1,000 shares of previously issued common stock for $15.00 per share
The company had the following dividend information available:
2011 – No dividend paid
2012 – Paid a $2,000 total dividend
2013 – Paid a $17,000 total dividend
2014 – paid a $32,000 total dividend
Using the following format, fill in the correct values for each year;
2011 2012 2013 2014
Common stock dividend
Preferred stock dividend
Dividends in arrears
Answer:
Hsu Company produces a part with a standard of 5 yds. of material per unit. The
standard price of one yard of material is $8.50. During the month, 8,800 parts were
manufactured, using 45,700 yards of material at a cost of $8.30.
Determine the (a) price variance, (b) quantity variance, and (c) cost variance.
Answer:
Given the following account balances for Garry’s Tree Service, prepare a trial balance.
Answer:
The following two situations are independent of each other.
1) On June 1, the cash account balance was $45,750. During June, cash payments
totaled $243,910 and the June 30 balance was $53,200. Determine the cash receipts
during June and show your calculation.
2) On March 1, the supplies account balance was $1,800. During March, supplies of
$2,450 were purchased and $630 of supplies were on hand as of March 31. Determine
the supplies expense for March and show your calculation.
Answer: