Accounting test 2
logan corporation has 150 employees 70 in A line and 80 in B line, Logan incured $300000 in fringe benefits costs last year. how much in fringe benefit costs should be allocated to A line
$140000 cost to be allocated/ allocation base= allocation rate allocation rate * weight of base= amount of allocate
Barton Company has a line of credit with Sea View Bank. Barton can borrow up to $200,000 at any time over the course of Year 2. The following table shows the interest rate expressed as an annual percentage along with the amounts borrowed and repaid during the first three months of Year 2. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. which of the following shows how the 5000 payment on the line of credit liability would affect bartons finiancial statements
(5000) assests (5000) liability (5000) FA statement of cash flows nothing of income statement
On October 1, Allison Corporation declared a $70,000 cash dividend to be paid on December 15 to shareholders of record on November 1. Which of the following shows how allisons financial statements will be affected on december 15
(70000) assest (70000) dividends payable (70000) FA statement of cash flows
depreciation expense per year equation
(cost of the assest- salvage value) / useful life
which of the following shows the effects of purchasing inventory on account
+ assets + liability inventory and accounts payable to increase does not affect revenue
Edwards Shoe Store sold shoes that cost the company $5700 for $8200. Which of the following shows how the recognition of the cost of goods sold will affect the companys fininanical statement
- assest - equity + expense - net income statement of cash flows not affected
Escrows companys multistep income statement shows cost of goods sold of $60000, a gross margin of $42000, operating income of $12000 and a $20000 loss on the sale of land. based on this information the net income or net loss amounts to
-8000 dont care about COGS or gross margin
a flexible budget is prepared using
-the same sales price per unit that was used to prepare the static budget. -a different amount of expected sales volume than was used to prepare the static budget. -the same variable cost per unit that was used to prepare the master budget (only volume changes in a flexible budget)
On janurary 1 year 1 marino moving company paid 48000 cash to purchase a truck. the truck was expected to have a four year useful life and an 8000 salvage value. if marino uses the straight line method the amount of depreciaition expense recognized on the year 2 income statement is
10000 (straight line recognizes the same amount of expense for each year of useful life)
the beginning inventory is expected to be 2600 cases. expected sales are 11800 cases and the company wishes to begin the next period with an inventory of 1600 cases. the number of cases the company must purchase during the month is
10800
Barton Company has a line of credit with Sea View Bank. Barton can borrow up to $200,000 at any time over the course of Year 2. The following table shows the interest rate expressed as an annual percentage along with the amounts borrowed and repaid during the first three months of Year 2. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. based on this information the amount of interest expense barton would recognize in janurary is
125 (0.06/ 12)
On janurary 1 year 1 marino moving company paid 48000 cash to purchase a truck. the truck was expected to have a four year useful life and a 8000 salvage life. if marino uses the straing line method the amount of accumulated depreciation shown on the year 2 balance sheet is
20000 (accumulated depreciation is a permanent contra assest account, balance accumulates each year)
revenues 89000 variable cost (58500) contribution margin 30500 fixed costs (20500) net income 10000 if carlos actually produced 2700 units the flexible budget would show fixed costs amounting to
20500 (fixed costs remain fixed)
Wilson Company earned $2,000 of cash sales. Sales tax is 6%. Which of the following shows how this event would affect the company's financial statements (ignore the effects of cost of goods sold)?
2120 assest 120 liability 2000 equity 2000 revenue 2000 net income 2120 OA (statement of cash flows)
Barton Company has a line of credit with Sea View Bank. Barton can borrow up to $200,000 at any time over the course of Year 2. The following table shows the interest rate expressed as an annual percentage along with the amounts borrowed and repaid during the first three months of Year 2. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. which of the following shows how borrowing the 25000 on January 1 year 2 would affect bartons financial statements
25000 assest 25000 liability 25000 FA (statement of cash flows) nothing on income statement
at the beginning of year 2 donald company had 5000 of inventory on hand. during the accounting period donald purchased inventory costing 25000 and sold inventory for 32000. Operating expenses were 2000 during the accounting period. a physical count of inventory on December 31 year 2 revealed 4000 of inventory on hand. based on this information cost of goods sold is
26000
Clayton Company borrowed $6,000 from the State Bank on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest expense that Clayton would report in Year 1 and Year 2, respectively would be
270 and 90
at the beginning of year 2 Donald company had $5000 of inventory on hand. during the accounting period Donald purcahsed inventory costing 25000 and sold inventory for 32000. operating expenses were 2000 during the accounting period. a physical count of inventory on December 31 year 2 revealed 4000 of inventory on hand. Based on this information cost of goods available for sale is
30000
The following info was drawn from the inventory records beginning inventory 200 units @ $5 each purchases made in year 2 800 units @ $8 each units sold 900 units @ $12 each which of the following is the amount of the gross margin assuming alpha uses a FIFO cost flow method
4200
budgeted actual sales 13000 17200 COGS (6200) (8400) gross margin 6800 8800 variable cost (2600) (3600) fixed cost (3700) (2800) net income 500 2400 based on this information ashton company has a
4200 favorable sales variance
revenue from BBQ division sales 518000 salaries for BBQ divison workers (118000) direct material (327000) sunk costs (79500) allocated company wide costs (59000) net loss (65500) if the BBQ division is eliminated what is the total amount of avoidable cost
445000 (salaries + materials)
beginning inventory 100 units @ $10 each first purchase made in year 2 400 units @ $12 each second purchase made in year 2 500 units @ $14 each units sold 950 units @ $15 each based on this information which of the following represents the amount of ending inventory appearing on the balance sheet assuming a LIFO cost flow
500
a sales budget has been prepared for april. maangement wants the amount of ending inventory each month to be equal to 10% of that months cost of goods sold. cost of goods sold for april is projected at 61500. ending inventory at the end of march is expected to be 12300. based on this infomration what would the amount of purcahses be for april
55350
On September 1, Year 1 Western Company loaned $36,000 cash to Eastern Company. The one-year note carried a 5% rate of interest. The amount of interest revenue on the income statement and the amount of cash flow from operating activities shown on Western's December 31, Year 1 financial statements would be
600 interest expense and zero cash outflow from operating activities
Beachwood Clothing Company operates a chain of high end men's clothing stores. Recently the Company closed one of its stores and sold the equipment that was used in the store. The equipment had cost $5,000 and was sold for $6,000. Which of the following shows how the recognition of this event would affect the Company's financial statements?
6000 cash -5000 equipment 1000 equity 1000 gain (income statement) 1000 net income 6000 IA (statement of cash flows) on balance sheet, income statement and statement of cash flows
Jason Company is considering replacing equipment which originally cost $660,000. New equipment costs $560,000 and the old equipment can be sold for $430,000. What is the sunk cost in this situation?
66000 cannot change what is originally cost
on November 1 year 1 cove company borrowed 7000 cash from shelter company. the one year note carried a 7% rate in interest. which of the following shows how the loan will affect coves finincial statements on Novemeber 1 year 1
7000 assest 7000 liability (notes payable) 7000 FA (statement of cash flows) nothing on income statement
On October 1, Allison Corporation declared a $70,000 cash dividend to be paid on December 15 to shareholders of record on November 1. Which of the following shows how allisons financial statements will be affected on october 1
70000 dividends payable (70000) retained earnings
Sable Co. paid $400,000 for a purchase that included land, a building, and equipment. An appraiser estimated the market value of the land to be $100,000, the building to be $350,000, and the equipment to be $50,000. Based on this information the cost that would be allocated to each of the assets is
80000 land 280000 building 40000 equipment
direct material cost 70000 75000 80000 direct labor cost 120000 130000 140000 direct labor hours 3000hr 3600 3800 factory overhead is estimated to be $273000 and is applied on a basis of direct labor dollars. this overhead cost is not traceable to any particular product. factory overhead allocated to product 2 is
91000 allocation base --> total direct labor cost allocation rate--> per direct labor dollar allocation amount--> allocated to product 2
Weiss company purchased two identical inventory items. the first purchase cost $30 and the second cost $32. when the company sold one of the items for $40 it expensed $30 to its cost of goods sold account. based on this information which of the following cost flow methods is the company using
FIFO
On October 1, Allison Corporation declared a $70,000 cash dividend to be paid on December 15 to shareholders of record on November 1. Which of the following shows how allisons financial statements will be affected on november 1
NA (november is the date of record, just determines the party entitled to receive the dividend)
AmRon Company sold land that had cost $25,000 for $26,500. Based on this information, the company's year-end financial statements would show
a cash flow from investing activities of 26500 on the statement of cash flows
a company should accept a special order if
additional revenue is greater than relevant costs.
which of the following is a intangible assest - patent - copyright - trademark -all of the above
all of the above (cannot be seen or touched)
which of the following statements is true regarding potential qualititative issues affecting outsourcing decisions - outsourcing reduces a manufacturers vertical integration - low balling refers to the practice of offering lower prices initally and then raising prices when the buyer becomes dependent - outsourcing can cause morale issues for the employees who are not directly affected by the practice
all of the answers
the process of dividing a total cost into parts and assigning the parts among revelant cost objects is called
allocation
inventory is
an assest account that appears on the balance sheet
a segment elimination decision involves a comparision between revenue that will be lost through the eliminaiton and the
avoidable cost of operating the segment (only the costs that can be avoided or saved by the decision to eliminate are relevant)
which of the following statement will be affected by a sales return. assume the origninal sale and the sales return are both cash transactions
balance sheet, income statement, statement of cash flows (cash and sales revenue to decrease) (increases inventory and decreases cost of goods sold)
which of the following would not liekly appear in the current liabiliities section of a classified balance sheet - taxes payable - accounts payable - salaries payable - bonds payable
bonds payable (bond liabiliiteis are obligations that normallly extend for many years)
the amount of interest expense shown of the pro forma income statement is typically drawn from the
cash budget
which of the following is not a tangible assest - building -copyright - land - gold
copyright (tangible assests are things that can be perceived by the sensory system) (can see or touch)
the process of assigning costs to two or more cost objects requires
cost tracing, cost allocation, cost/benefit anaylsis
which of the following would not likely appear on a classified balance sheet - current assests - long term liabilities - current retained earnings - long term assests
current retained earnings (retained earnings are not seperated into current vs long term categories)
which of the following is not a date associated with the declaration and payment of dividends - date of declaration - date of record - date of purchase - date of payment
date of purchase (whoever owns the stock on the date of record is entitled to the dividend regardless of when the associated stock was purchased)
Revenue from BBQ division sales 532000 salaries for BBQ division workers (132000) direct material (348000) sunk costs (83000) allocated company wide costs (66000) net loss (97000) if BBQ division is eleminated profitability would
decrease 52000 (revenue- salaries and - direct material)
Based on normal market reaction, the market price of stock will
decrease if actual earnings are less than expected earnings
to be relevant information must
differ among the alternative and affect present or future conditions
costs that can be traced to objects in a cost effective manner are called
direct costs
which of the following formulas is used to determine the amount of inventory that must be purchased in order to satisfy a companys budgeted sales
ending inventory+ cost of goods sold= amount of inventory needed- beginning inventory
pro froma statements are based on
estimated information
The amount of net income shown on a multi step income statement will differ from the amount of net income shown on a single step income statement
false
a current assest is an assest that is cash or an assest that will be converted into cash within one year or one operating cycle whichever is shorter
false (a current assest is an assest that is cash or an assest that will be converted into cash within one year or one operating cycle whichever is longer)
When the total estimated market value of assets acquired in a basket purchase is greater than the cost of the purchase, the company making the purchase must recognize a gain.
false (no gains or losses are rocognized as a result of purchasing assests) (assests are recorded at their cost regardless of their estimated market values)
the central concept in decentralization is that the people at the top of the organization should have the primary decision making role because they know what is best for the organiziation as a whole. this statement is
false (people closest to the work being done are better informed and have more revelant experience than those who are further removed from the immediate work environment)
The number of shares a corporation has outstanding may exceed the number of shares authorized. This statement is
false (the number of shares authorized is the maximum number of shares a corporation can issue)
cost variances are always unfavorable. this statement is
false (when actual cost is less than budgeted= favorable when actual cost is more than budgeted= unfavorable)
recognizing a sales discount will cause the amount of net sales to increase. this statement is
false accounts receivable and sales revenue will decrease reduces the amount of the previously recorded sales event
direct costs and variable costs are synonymous terms. this statement is
false direct costs can be either fixed or variable costs
McDonalds will recognize a gain if it generates an amount of revenue that is higher than its operating expenses. this statement is
false gains are benefits that are generated from nonoperating activities
differences betweent the flexible budget and the actual results are called
flexible budget variances
in general common stockholders experience
greater risk and greater potential rewards than preferred stockholders.
sales 40000 40000 COGS (25000) (25000) gross margin 15000 15000 operating expenses (7000) (9000) operating income 8000 6000 gain on the sale of land 0 5000 net income 8000 11000 if the trends continue investors can expect the companys net income for year 3 to
increase operating income increase so net income should also increase
Yang Company sold merchandise for $2,000 cash. The event is subject to a state sales tax of 9%. Recognizing the sale will require Yang to
increase assests increase liabiliites increase revenue
of the following statements which is not true concerning indirect costs - indirect costs may also be called overhead costs - an indirect cost is a cost that cannot easily be traced to a cost object - a cost that could be directly traced may be still treated as an indirect cost - an indirect cost may be fixed but cannot be variable
indirect costs can be fixed or variable last one is wrong
When the actual amount of sales is greater than the budgeted amount of sales, the variance
is classified as favorable
chi company has budgeted sales of 243000. actual sales amounted to 262000. which of the following items could have caused this result -chi lowered per unit sales price of its products - chi decreases the variable cost pre unit of its products - chi increased its fied costs - chi increased the number of units of product sold
last one # of units sold will increase the total amount of sales when everything else is equal
Normally companies sell stock for an amount that is
more than the par value
the gross margin appears on a
multistep income statement
the allocation process requires answers to which of the following questions - what is the amount of the cost to be allocated - where is the cost going to be allocated - how will the allocation be made - allocation requires all three questions
needs all three indirect costs, cost objects, cost drivers not possible without all three
Guac Co. paid $350,000 for a purchase that included land, a building, and equipment. An appraiser estimated the market value of the land to be $80,000, the building to be $300,000, and the equipment to be $20,000. Based on this information recording the basket purchase in the accounting records would cause
no effect on total assest or total equity (basket purchase is an assest exchange transaction)
Harbor Co. made a basket purchase. Specifically, the Company paid cash to purchase land, a building and equipment. The appraised market value of the individual items was greater that the purchase price. Which of the following shows how this purchase will affect a company's financial statements?
only affect the statement of cash flows as - IA
Hector, Inc. currently makes and sells approximately 5,000 shovels per year. Hector has an offer to buy the shovels it currently makes at a price that is below its cost of making them. Based on this information Hector is faced with a(n)
outsourcing decision
Tangier Company paid cash to purchase a long-term operational asset. The cost of the asset will be expensed (depreciated)
over the useful life of the assest
when a merchandising company sells inventory it will
recognize revenue and expense (sales revenue & cost of goods sold)
which of the folllowing is not a potential benefit from owning common stock - dividends - increases in the market price of stock - risk minimization - influeence on company policy
risk minimization (exposed to high risk, last group to be paid in a business liquidiation)
the amount of accounts receivable shown on the pro forma balance sheet is typically drawn from the
sales budget
static budget flexible budget actual results sales 11500 15000 16300 COGS (6300) (7800) (7050) gross margin 5200 7200 9250 variable cost (2300) (2850) (3350) fixed cost (1300) (1300) (1600) net income 1600 3050 4300 based on this information the
sales price flexible budget variarance is a 1300 favorable variance
Interrelated sales transactions (sales of one product affects the sales of another product) is a qualitative characteristic most commonly examined in a
segment elimination decision (eliminating kids clothing might affect sales of women clothing since women might not shop there when they cant also shop for their kid in the same place)
the lamp company currently makes and sells approximately 5000 lamps per year. TLC recently received an offer from a new customer to purchase 500 lamps. TLC has the capacity to make the additional lamps but is relucant to accept the offer because the price offered is significantly below the normal selling price. based on this information TLC if faced with a
special order decision
which of the following are not revelant to decision making - replacement cost - incremental cost -oppurtunity cost - sunk cost
sunk cost ( sunk costs are based on historical events that cannot be changed by current or future events)
Capilla Company experienced a favorable sales volume variance and an unfavorable sales price flexible budget variance. Which of the following is a logical explanation for these variances?
the company reduced its sales price and therefore sold more items than it expected to sell
Electro has offered to sell the electric engines to URIDE at a price of 305 each. unit level material and labor 250 facility level depreciation 6500/month product level engine production 3500/month annual facility level utilities 22500 buying the engines will free up manufacturing capacity that could be used to make a new economy line golf cart that would produce an additional 168000 profit per year. URIDE is currently operating profitiably producing and selling 3500 engines annually. based on this information which of the following is true - the 168000 is not relevant becuase it is an estimate - buying the units would increase URIDE cost by 43 per unit - URIDE has avoidable costs of less than 305 per unit and should therefor buy engines - the cost of buying engines is $5 per unit less than the relavent cost of making the units
the last one unit level material cost 250 product level cost (3500*12)/3500 12 oppurtunity cost (168000/3500) 48 total 310
Welton company prepared its master budget for the first quarter (January, February and March) of the year. The amount of sales shown on the March 31 pro forma income statement is equal
to the total amount of sales for January, February, and March that are shown in the sales budget
Zack's, Inc. sold land that cost $85,000 for $70,000 cash. As a result of this event
total assests decreased
The par value or stated value of stock represents the amount of legal capital that a corporation must maintain for the protection of the creditors. This statement is
true
a classified balance sheet seperates assests and liabliities into categories that distinguish between accounts that are identified as current from those that are identifiied as long term. this statement is
true
indirect costs are frequently called overhead costs. this statement is
true
the difference between budgeted data and actual results is called a variance. this statement is
true
the ending cash balance in the pro forma statement of cash flows is equal to the cash balance shown of ;hte pro forma balance sheet. this statement is
true
the market price of common stock is based on investors' expectations about future earnings. this statement is
true
land is different from other tangible assests in that its utility is not diminished by its use. this statement is
true (a building may be torn down but you always want land)
a static budget is a different term for the master budget. this statement is
true (budget stays the same throughout the accounting period)
favorable and unfavorable variances are not neccesarily indicators of good or bad performance. this statement is
true (in general variances signal the need for investigation rather than evidence)
a cost that is relevant to one decision may be irrevelant to a different decision. this statement is
true store managers salary wont make a difference to eliminating the kids department but salary would be revelant to whole store being eleiminated
which of the following would be classified as an indirect cost when assigning costs to a particular department of a large retail sales store - sales commisions - cost of goods sold - utility costs - depreciation on cash registers
utility costs (usually treated as indirect since you cant put up meters to see which department consumed the bigger amount of electricity)
a difference between a static budget and the flexible budget is called the
volume variance
which of the following is not a common characteristic associated with preferred stock - prioirty in business liquidations - cumulative dividends - voting rights - limitied dividends
voting rights ( normally limiited to common stockholders)
HM has the capacity to produce 10000 fax machines per year. HM currently produces and sells 7000 units per year. the fax machines normally sell for 100 each. Modem Products has offered to buy 2000 fax machines from HM for 60 each. unit level costs associated with manufacturing the fax machines are 15 each for direct labor and 40 each for direct materials. product level and facilitiy sustaining costs are 50000 and 65000 respectively. should HM accept the special order
yes but only if qualiative factors are favorable (will increase profitiability)
