A worksheet is an external document that forms a part of the financial statements.
When a corporation issues no-par stock, it debits the asset received and credits the stock
account.
The net present value of future cash inflows received in earlier years is higher than
future cash inflows received in later years.
Debit refers to the right side of the T-account, and credit refers to the left side.
Within the relevant range, the total fixed costs and the variable cost per unit remain the
same.
The payback method considers cash flows that occur both during and after the payback
period.
Repair work that generates a capital expenditure because it extends a plant asset’s useful
life past the normal expected life is known as an extraordinary repair.
The issuance of a note is recorded, on the books of the borrower, by crediting Cash and
debiting Notes Receivable.
Management by exception directs the management’s attention to important differences
between the actual and the budgeted amounts.
In addition to considering both the division’s operating income and its average total
assets, residual income incorporates top management’s target rate of return.
The margin of safety can be used to evaluate a company’s plans for the future.
An accounting firm collected cash on account. As a result of this transaction, total
assets, liabilities, and equity are all unchanged.
The current ratio shows the profitability of a firm.
The payback method is a screening device and is rarely used as the sole method for
deciding whether to invest in an asset.
Target profit can be determined by using the contribution margin, contribution margin
ratio, or break even approach.
If a merchandising company determines that the unit cost to purchase a product is less
than the unit cost to manufacture the product, the company should make a decision to
begin manufacturing the product
Selling and administrative expenses are subtracted from gross profit to obtain operating
income.
An expenditure that increases the capacity or efficiency of a plant asset that extends the
asset’s life is known as a revenue expenditure.
An annual report provides information about a company’s financial condition.
Equity increases when revenues are earned.
When a job is completed, the total cost of the job is recorded with a debit to Finished
Goods Inventory and a credit to Work-in-Process Inventory.
A process costing system is most suitable for businesses that manufacture batches of
unique products or provide specialized services.
Money earns income over time, a fact called the time value of money.
Unlike merchandising companies, income statements of service companies include cost
of goods sold as a line item.
On January 1, 2016, Prepaid Insurance of Maywood, Inc. had a beginning balance of
$1,400. Three months of insurance premiums remain in the beginning balance. On
February 1, 2016, the company paid an annual insurance premium in the amount of
$3,700 for the period beginning April 1. On February 28, 2016, the balance in Prepaid
Insurance is $934. The deferred expense was initially recorded as an asset.
When a business sells a plant asset for book value, a gain or loss should be recorded.
The acid-test ratio is a more stringent measure of liquidity than the cash ratio.
An operational asset used for a long period of time is known as a capital asset.
The total fixed overhead variance is the total of the variable overhead cost variance and
fixed overhead volume variance.
A process is one of a series of steps in manufacturing production, usually associated
with making large quantities of similar items.
A method of accounting for uncollectible receivables in which the company estimates
bad debts expense instead of waiting to see from which customers the company will not
be able to collect is known as the allowance method.
Cardoza Construction Materials Company has a sales office that sells concrete culvert
pipes to property developers. The sales office is a revenue center and prepares a
monthly responsibility report. The following information is provided.
Revenue Center Responsibility Report
What is the sales volume variance for the 36-inch long pipe?
A) $1,950 U
B) $9,100 F
C) $9,850 U
D) $750 F
Knapp Roofing Company has estimated the following amounts for its next fiscal year:
If the company spends an additional $35,000 on advertising, sales volume would increase
by2,500 units. What effect will this decision have on the operating income of Evans?
A) Operating income will decrease by $90,000.
B) Operating income will increase by $90,000.
C) Operating income will increase by $200,000.
D) Operating income will increase by $125,000.
Parker, Inc. has a cash balance of $20,000 on April 1. The company is now preparing
the cash budget for the second quarter. Budgeted cash collections and payments are as
follows:
There are no budgeted capital expenditures or financing transactions during the quarter.
Based on the above data, calculate the projected cash balance at the end of April.
A) $44,000
B) $34,500
C) $24,000
D) $38,000
Which of the following is true of posting from a sales journal to the general ledger?
A) Entries in the sales journal are posted to either the accounts receivable subsidiary
ledger or the general ledger.
B) Individual accounts receivable are posted daily from the sales journal to the accounts
receivable subsidiary ledger.
C) Even though the sales journal is posted monthly to the subsidiary ledger, it is a
reliable record of the amount received from each customer.
D) Under a perpetual inventory system, the sales journal will not have the Cost of
Goods Sold DR and Merchandise Inventory CR column.
The petty cash fund has a current balance of $100. Based on activity in the fund, it is
determined that the balance needs to be changed to $700. Which journal entry is needed
to make this change?
A) Debit the Petty Cash account and credit the Cash account for $700.
B) No journal entry is needed because this change only involves cash.
C) Debit the Petty Cash account and credit the Cash account for $600.
D) Debit the Cash account and credit the Petty Cash account for $600.
Which of the following is the correct formula for the profit margin ratio?
A) Net profit / Sales
B) Net sales / Average total assets
C) Net profit × Capital invested
D) Operating income / Net sales
Under which of the following categories would bonds held as an investment for more
than a year appear?
A) Current assets
B) Long-term liabilities
C) Long-term assets
D) Current liabilities
Rosewood, Inc. earned revenues of $19,000 and incurred expenses of $4,000. The
company declared and paid cash dividends of $1,500. What is the balance in the Income
Summary account after closing net income or loss to the Retained Earnings account?
A) debit balance of $19,000
B) credit balance of $4,000
C) credit balance of $15,000
D) balance of $0
Which of the following statements is true of the Common Stock account?
A) It is an equity account that has a normal credit balance.
B) It is a liability account that has a normal credit balance.
C) It is a liability account that has a normal debit balance.
D) It is an equity account that has a normal debit balance.
The following are the current month’s balances for Global Enterprises.
What is the total amount of debits for the trial balance?
A) $26,000
B) $27,300
C) $31,000
D) $32,300
The Refining Department of Ingber Sugar, Inc. had 56,000 tons of sugar to account for
in December. Of the 56,000 tons, 40,000 tons were completed and transferred to the
Boiling Department, and the remaining 16,000 tons were 60% complete. The materials
required for production are added at the beginning of the process. Conversion costs are
added equally throughout the refining process. Calculate the total equivalent units of
production for conversion costs.
A) 9,600 units
B) 40,000 units
C) 49,600 units
D) 56,000 units
An adjusted trial balance is given below.
What will be the final balance in the corporation’s Retained Earnings account after
recording the closing entries?
A) $30,300
B) $32,300
C) $17,500
D) $1,800
When there is no beginning Finished Goods Inventory and all the goods that are
produced are sold, the operating income ________.
A) will be higher under absorption costing than variable costing
B) will be lower under absorption costing than variable costing
C) will be higher than the gross profit under variable costing
D) will be the same for both absorption costing and variable costing
Which of the following states that a company must perform strictly proper accounting
only for items that are significant to the business’s financial statements?
A) conservatism
B) materiality concept
C) disclosure principle
D) consistency principle
Which of the following statements describes a receiving report?
A) It is an order to purchase goods from a supplier.
B) It is a statement from the supplier showing the goods purchased and the amount due.
C) It is a report showing that the goods have been received in good condition, as
ordered.
D) It is a document authorizing a payment to a supplier.
In which of the columns of the worksheet would Net Income be found?
A) the unadjusted trial balance credit column, the adjusted trial balance credit column,
and the balance sheet credit column
B) the unadjusted trial balance debit column, the adjusted trial balance debit column,
and the balance sheet debit column
C) the balance sheet debit column and the income statement credit column
D) the balance sheet credit column and the income statement debit column
The general ledger shows a balance of $66,400 in the Merchandise Inventory account at
the end of the period. The physical inventory count shows inventory of $63,000. The
adjusting entry includes a ________.
A) debit to Cost of Goods Sold and a credit to Merchandise Inventory for $3,400
B) debit to Cost of Goods Sold and a credit to Cash for $3,400
C) debit to Merchandise Inventory and a credit to Cost of Goods Sold for $3,400
D) debit to Merchandise Inventory and a credit to Cash for $3,400
The financial statement that reports assets, liabilities, and stockholders’ equity as of the
last day of the period is called the ________.
A) income statement
B) statement of retained earnings
C) balance sheet
D) unadjusted trial balance
A list of the accounts and their balances at the end of the period, after journalizing and
posting the closing entries, is called ________.
A) chart of accounts
B) adjusted trial balance
C) post-closing trial balance
D) pre-closing balance sheet
An automobile parts retailer purchases merchandise inventory for cash. When using a
manual accounting information system, this transaction is recorded in the ________.
A) purchases journal
B) general journal
C) cash payments journal
D) sales journal
An investment should be accepted if ________.
A) it has positive total cash inflows
B) it has a payback period in less than 10 years
C) the investment’s rate of return is lower than the company’s current year required rate
of return
D) the net present value is positive
Iglesias, Inc. completed Job 12 on November 30. The details of Job 12 are given below:
What is the total cost of Job 12?
A) $2,470
B) $1,990
C) $1,370
D) $1,580
Which of the following describes the time value of money?
A) The time value of money has no effect on the timing of capital investments.
B) Money loses its purchasing power over time through inflation.
C) The fact that invested cash may not earn interest over time is called the time value of
money.
D) A dollar received today is worth more than a dollar to be received in the future.
An opportunity cost is ________.
A) the cost incurred to gain the opportunity to make a sale
B) the benefit gained by choosing a certain course of action
C) the benefit given up by choosing an alternative course of action
D) costs that have been incurred in the past
Which of the following users would rely on managerial accounting information for
decision-making purposes?
A) potential investors
B) creditors
C) customers
D) company managers
The following information is provided by Westwind Systems:
Calculate the profitability index for Project A. Show your calculations and round to two
decimal places.
Silver Rex, Inc. has provided the following data for the year:
Requirements:
a) Compute Silver Rex’s unit product cost under absorption costing and variable costing.
b) Prepare income statements for Silver Rex using absorption costing and variable costing.
c) Calculate the balance in Finished Goods Inventory using absorption costing and variable
costing.
Assume that the production level, costs, and sales prices were the same in the previous
year.
Which of the following statements about the times-interest-earned ratio is true?
A) A lower ratio indicates a higher debt paying ability.
B) Debt reduction leads to an increase in interest expense.
C) The times-interest-earned ratio is also called the interest-coverage ratio.
D) The times-interest-earned ratio is calculated by dividing gross income by interest
expense.
Glasgow, Inc. uses the periodic inventory system. On February 1, the corporation
purchased inventory on account for $14,000. The terms were 4/10, n/30. On February 2,
it returned damaged goods worth $700 to the supplier and was granted an allowance.
Give the journal entry for the payment if the invoice is paid after the discount period.
(Round your answers to the nearest dollar.)
A)
B)
C)
D)
Which of the following most accurately describes an annuity?
A) an investment which produces increasing cash flows over time
B) a series of unequal cash payments made at equal time intervals
C) a stream of equal cash payments made at equal time intervals
D) a term that does not apply to mortgage payable or bond payable
Home-Plus, Inc. has two business segments: Commercial and Residential. The
following data have been provided for the year.
Commercial Residential
Service Revenue $5,900 $8,500
Variable costs 3,500 5,400
The company incurred $1,500 as fixed costs.
Requirements:
a) Prepare the income statement of Home-Plus showing the contribution margin of each
segment.
b) Calculate the contribution margin ratio of each segment. Which segment is more
profitable and why?
Young Manufacturing uses a process costing system and manufactures its product in
three departments. Which of the following is not a way in which Young can use the cost
per unit of each process?
A) Young can look for ways to cut the costs when actual process costs are more than
planned process costs.
B) Young needs to set the selling price to cover the costs of making the product and
provide a profit.
C) Young can only use the cost per unit of each process if all units are fully completed
at the end of the accounting period.
D) Young needs to know the ending balances in the following accounts:
Work-In-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.
Which of the following describes the production budget?
A) It aids in planning to ensure the company has adequate inventory and cash on hand.
B) It provides the quantity of finished goods to be produced during a budget period.
C) It depicts the breakdown of sales on the basis of terms and conditions of collection
of sales revenue.
D) It helps in planning to ensure the business has adequate cash.
Refer to the following bank reconciliation:
Bank Book
Balance, June 30, 2017 $11,240 Balance, June 30, 2017 $10,200
Add: Add:
Deposit in transit 3,110 Note collected by bank 2,100
Interest revenue 55
Less: Less:
Outstanding checks #506 1,200 NSF check 85
Outstanding checks #510 900 Bank service charge 20
________ ________
Adjusted balance, Adjusted balance,
June 30, 2017 $12,250 June 30, 2017 $12,250
Journalize the adjusting entry for the third reconciling item: NSF check.
What does the concept of equivalent units of production allow businesses to measure?
State the effects of inventory errors on cost of goods sold and net income for periods 1
and 2. The response should be overstated or understated.
Period 1 Ending Merchandise Inventory is overstated
For the following situation, state whether it represents a strength or weakness in internal
control and give the reason for your answer.
The mailroom employee opens all incoming mail. Customers’ checks are sent to the
treasurer, and remittance advices are sent to the accounting department. The controller
compares the daily bank deposit amount from the treasurer and the daily debit to cash
from the accounting department.
For each of the following variances, state which manager is most likely to be
responsible for the variance.
Andres Napkin Company sells a product for $80 per unit. Variable costs are $25 per
unit, and fixed costs are $4,000 per month. Andres sold 2,000 units in October. Prepare
an income statement for October using the contribution margin format.
Westwood Clothing Store reported the following selected items at June 30, 2017 (last
year – 2016 – amounts are also given as needed):
Compute Westwood’s acid-test ratio for 2017. Show your computations. (Round the
answer to 2 decimal places.)
William Smith is a sole proprietor of a successful business. He is interested in
incorporating to protect his personal assets. Which advantage of incorporation is most
applicable? What are other advantages of organizing as a corporate entity?
Flowers, Inc. had beginning retained earnings of $125,000 on January 1, 2017. During
the year, Flowers declared and paid $40,000 of cash dividends and earned $55,000 of
net income. Prepare a statement of retained earnings for Flowers, Inc. for the year
ending December 31, 2017.
Journalize the following transaction for a merchandiser that uses the perpetual
inventory system.
Sold goods for cash, $1,200 (cost $750).
Journalize the following sales transactions for Smith Printing Equipment using the
periodic inventory system. Explanations are not required.
On January 1, 2016, Belden, Inc. issued long-term notes payable for $50,000. The note
will be paid over 10 years with payments of $5,000 plus 12% interest due each January
1, beginning January 1, 2017. Prepare the amortization schedule for the first three
payments.
At the beginning of the year, Barrington Manufacturing had the following account
balances:
Work-in-Process Inventory
Finished Goods Inventory
Manufacturing Overhead
Cost of Goods Sold
Sales Revenue
The following additional details are provided for the year:
Record these transactions in the T-accounts and calculate the ending balances for
Work-in-Process Inventory, Finished Goods Inventory, and Manufacturing Overhead
accounts (unadjusted).
What does the variable overhead cost variance measure?
Charlie Corp sold a truck for $15,000 cash. It was originally purchased for $50,000 and
had accumulated depreciation of $30,000 at the time of sale. Prepare the journal entry
for the sale of truck.
Fly GenX, Inc. has the following budgeted sales for the next quarter.
Inventory of finished goods on hand at the beginning of the quarter is 4,000 units. The
company desires to maintain ending inventory equal to beginning inventory plus 1,000
units every month.
Calculate the quantity to be produced during the quarter.