Accounting Exam 2

Direct materials and direct labor are the only product costs.

False

In calculating gross profit for a manufacturing company, the cost of goods manufactured is deducted from net sales.

False

Raw materials inventory shows the cost of completed goods available for sale to customers.

False

In incremental analysis, Select one: a. costs are not relevant if they change between alternatives. b. all costs are relevant if they change between alternatives. c. only fixed costs are relevant. d. only variable costs are relevant.

all costs are relevant if they change between alternatives.

Crimson Company paid $8,000 cash to its employees for salaries expense during the current accounting period. Which of the following best describes this transaction type? a. Asset source transaction b. Asset use transaction c. Asset exchange transaction d. Claims exchange transaction

asset use transaction

Relevant costs are always

avoidable costs

Who are the two primary groups of financial resource providers for a corporation?

investors and creditors

A contra asset account is subtracted from a related account in the balance sheet.

True

An adjustment always involves a balance sheet account and an income statement account.

True

Both direct labor cost and indirect labor cost are product costs.

True

Expense recognition is tied to revenue recognition.

True

Which of the following is an irrelevant cost? a. An avoidable cost b. An incremental cost c. A sunk cost d. An opportunity cost

a sunk cost

Identifies the activity which causes changes in the behavior of costs.

activity index

State the accounting equation.

Assets = Liabilities + Equity

An adjustment would be made to the revenue account only when cash is received.

False

The product cost that is most difficult to associate with a product is a. direct materials. b. direct labor. c. manufacturing overhead. d. advertising.

manufacturing overhead

Accounts often need to be adjusted because: A. there are never enough accounts to record all the transactions. B. many transactions affect more than one time period. C. there are always errors made in recording transactions. D. management can't decide what they want to report.

many transactions affect more than one time period

The difference between actual or expected sales and sales at the break-even point.

margin of safety

Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: direct materials 55,000 direct labor 160,000 variable overhead 75,000 fixed overhead 175,000 If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable. If the outside supplier offers a unit price of $68, net income will increase (decrease) by

(10,000)

Anthony, Inc. buys land for $50,000 cash. The net effect on assets is:

0

If there was no beginning retained earnings, net income of $20,000, and ending retained earnings of $6,000, how much were dividends?

14,000

A company desires to sell a sufficient quantity of products to earn a profit of $400,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $800,000, how many units must be sold to earn net income of $400,000?

150,000 units

Barton Company has beginning work in process inventory of $144,000 and total manufacturing costs of $686,000. If cost of goods manufactured is $660,000, what is the cost of the ending work in process inventory?

170,000 144,000 + 686,000 - x = 660,000 X= 170,000

Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert's net income for the month of September? Accounts Payable $ 5,000 Capital Stock 10,000 Cash 14,300 Equipment 15,400 Fees Earned 54,400 Miscellaneous Expense 18,200 Rent Expense 4,150 Retained Earnings 6,550 Wages Expense 13,900

18,150

April Industries sells a product with a contribution margin of $12 per unit, fixed costs of $223,200, and sales for the current year of $300,000. How much is April's break-even point?

18,600 units

Mitchell Corporation has current assets of $1,600,000 million and current liabilities of $750,000. If they pay $350,000 of their accounts payable what will their new current ratio be?

3.1:1

For 2017 Fielder Corporation reported net income of $32,000; net sales $400,000; and average share outstanding 16,000. There were no preferred dividends. What was the 2017 earnings per share?

2.00

Using the following balance sheet and income statement data, what is the earnings per share? Current assets $ 32,000 Net income $ 42,000 Current liabilities 16,000 Stockholders' equity 78,000 Average assets 160,000 Total liabilities 42,000 Total assets 120,000 Average common shares outstanding was 15,000.

2.80

Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. How many MP3 players must Cunningham sell to earn net income of $280,000?

20,000

A company requires $1,700,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $300,000. What is the target net income?

210,000

Use the following data to determine the total amount of working capital. Carne Auto Supplies Balance Sheet December 31, 2017 Cash $ 70,000 Accounts payable $130,000 Accounts receivable 100,000 Salaries and wages payable 20,000 Inventory 140,000 Mortgage payable 180,000 Prepaid insurance 80,000 Total liabilities $330,000 Stock investments 180,000 Land 190,000 Buildings $230,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (60,000) 170,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,070,000 stockholders' equity $1,070,000

240,000

Based on the following data, what is the amount of working capital? Accounts payable $64,000 Accounts receivable 114,000 Cash 70,000 Intangible assets 100,000 Inventory 138,000 Long-term investments 160,000 Long-term liabilities 200,000 Short-term investments 80,000 Notes payable (short-term) 56,000 Property, plant, and equipment 1,340,000 Prepaid insurance 2,000

284,000

A company has a unit contribution margin of $120 and a contribution margin ratio of 40%. What is the unit selling price?

300

Given the following list of accounts, calculate Total Assets: Accounts Receivable $ 5,000 Capital Stock 20,000 Cash 19,300 Equipment 15,400 Fees Earned 44,400 Miscellaneous Expense 18,200 Rent Expense 4,150 Retained Earnings 6,550 Wages Expense 13,900

39,700

Based on the following data, what is the amount of current assets? Accounts payable $62,000 Accounts receivable 100,000 Cash 70,000 Intangible assets 100,000 Inventory 138,000 Long-term investments 160,000 Long-term liabilities 200,000 Short-term investments 80,000 Notes payable 56,000 Property, plant, and equipment 1,340,000 Prepaid insurance 2,000

390,000

Boswell Company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $360,000. What is Boswell's contribution margin ratio?

45%

Greg's Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

5,000 increase

At the high level of activity in November, 7,000 machine hours were run and power costs were $18,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $9,000. Using the high-low method, the estimated fixed cost element of power costs is

5,400

Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Koonce Office Supplies Balance Sheet December 31, 2017 Cash $ 195,000 Accounts payable $ 210,000 Accounts receivable 150,000 Salaries and wages payable 30,000 Inventory 165,000 Mortgage payable 240,000 Prepaid insurance 90,000 Total liabilities $480,000 Stock investments 255,000 Land 270,000 Buildings $315,000 Common stock $360,000 Less: Accumulated Retained earnings 750,000 depreciation (60,000) 255,000 Total stockholders' equity $1,100,000 Trademarks 210,000 Total liabilities and Total assets $1,590,000 stockholders' equity $1,590,000

525,000

Gibbs Company has $16,000 in Retained Earnings, $27,000 in Assets, and $5,000 in Liabilities. How much is in Common Stock?

6,000

A division sold 200,000 calculators during 2017: sales 2,000,000 variable costs: materials 380,000 order processing 150,000 billing labor 110,000 selling expenses 60,000 total variable costs 700,000 fixed costs 1,000,000 How much is the unit contribution margin?

6.50

Use the following data to determine the total dollar amount of assets to be classified as current assets. Koonce Office Supplies Balance Sheet December 31, 2017 Cash $195,000 Accounts payable $ 210,000 Accounts receivable 150,000 Salaries and wages payable 30,000 Inventory 165,000 Mortgage payable 240,000 Prepaid insurance 90,000 Total liabilities $480,000 Stock investments 255,000 Land 270,000 Buildings $315,000 Common stock $360,000 Less: Accumulated Retained earnings 750,000 depreciation (60,000) 255,000 Total stockholders' equity $1,100,000 Trademarks 210,000 Total liabilities and Total assets $1,590,000 stockholders' equity $1,590,000

600,000

White Company had an $8,000 beginning balance in Retained Earnings and a $20,000 beginning balance in Common Stock. During the accounting period, White Company earned $45,000, borrowed $10,000 from the bank, and paid $6,000 in cash dividends. What is the ending balance for the statement of changes in stockholders' equity (i.e., the ending amount of stockholders' equity)?

67,000

If Liabilities have a balance of $10,000 and Stockholders' Equity has a balance of $60,000, then Assets must have a balance of:

70,000

Adjustments are made to ensure that: A. expenses are recognized in the period in which they are incurred. B. revenues are recorded in the period in which the performance obligation is satisfied. C. balance sheet and income statement accounts have correct balances at the end of an accounting period. D. All of these answer choices are correct.

All correct

Accrued revenues are revenues that have been received but not yet recognized.

False

Accumulated Depreciation is a liability account.

False

Adjustments are not necessary if the basic accounting equation balances.

False

Which of the following is not a qualitative factor to be considered in a make-or-buy decision? a. Possible lost jobs from buying outside b. Supplier's ability to satisfy quality standards c. Incremental benefit from buying outside d. Supplier's ability to meet production schedule

Incremental benefit from buying outside

In a make-or-buy decision, which costs can be considered relevant? a. Unavoidable variable costs, incremental fixed costs, and sunk costs b. Incremental variable costs, unavoidable fixed costs, and opportunity costs c. Incremental variable costs, incremental fixed costs, and sunk costs d. Incremental variable costs, incremental fixed costs, and opportunity costs

Incremental variable costs, incremental fixed costs, and opportunity costs

Browning, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $30,000 during 2012. Which of the following statements is correct?

Net income for 2012 totaled $59,000

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized?

November 30

A liability-revenue relationship exists with: A. asset accounts. B. revenue accounts. C. unearned revenue adjustments. D. accrued expense adjustments.

Unearned Revenue adjustments

A revenue-asset relationship exists with: A. prepaid expense adjustments. B. accrued expense adjustments. C. unearned revenue adjustments. D. accrued revenue adjustments.

accrued revenue adjustments

Adjustments can be classified as: A. postponements and advances. B. accruals and deferrals. C. deferrals and postponements. D. accruals and advances.

accruals and deferrals

Cost of goods sold a. only appears on merchandising companies' income statements. b. only appears on manufacturing companies' income statements. c. appears on both manufacturing and merchandising companies' income statements. d. is calculated exactly the same for merchandising and manufacturing companies.

appears on both manufacturing and merchandising companies income statements

An investment by the stockholders in a business increases A. assets and stockholders' equity. B. assets and liabilities. C. liabilities and stockholders' equity. D. assets only.

assets and stockholder equity

Cash receipts from cash sales affects which financial statement elements? a. Assets only b. Stockholders' equity only c. Assets and stockholders' equity d. Assets and liabilities

assets and stockholder equity

If services are rendered for cash, then

assets will increase

The opportunity cost of an alternate course of action that is relevant to a make-or-buy decision is Select one: a. subtracted from the "Make" costs. b. added to the "Make" costs c. added to the "Buy" costs. d. None of these answers are correct.

b

On which of the following financial statements would you expect to find assets, liabilities, and stockholders' equity?

balance sheet

If a company buys a $700 machine on credit, this transaction will affect the A. income statement and retained earnings statement only. B. income statement only. C. income statement, retained earnings statement, and balance sheet. D. balance sheet only.

balance sheet only

In incremental analysis a. only costs are analyzed. b. only revenues are analyzed. c. both costs and revenues may be analyzed. d. both costs and revenues that stay the same between alternate courses of action will be analyzed.

both costs and revenues may be analyzed.

The level of activity at which total revenues equal total costs.

break-even point

Which is the first step in the management decision-making process? Select one: a. Determine and evaluate possible courses of action. b. Review results of the decision. c. Identify the problem and assign responsibility. d. Make a decision.

c

Accumulated Depreciation is a(n): A. expense account. B. stockholders' equity account. C. liability account. D. contra asset account.

contra asset account

The amount of revenue remaining after deducting variable costs.

contribution margin

At the break-even point,

contribution margin equals total fixed costs.

The percentage of sales dollars available to cover fixed costs and produce income.

contribution margin ratio

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a:

corporation

Cost of goods manufactured in a manufacturing company is analogous to a. ending inventory in a merchandising company. b. beginning inventory in a merchandising company. c. cost of goods available for sale in a merchandising company. d. cost of goods purchased in a merchandising company.

cost of goods purchased in a merchandising company

The current ratio is

current assets divided by current liabilities.

In a classified balance sheet, assets are usually classified as

current assets; long-term investments; property, plant, and equipment; and intangible assets.

A current asset is

expected to be converted to cash or used in the business within a relatively short period of time.

an expense

decreases stockholders' equity.

The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is a. manufacturing overhead. b. indirect materials. c. indirect labor. d. direct labor.

direct labor

Stockholders' Equity will be increased by all of the following accounts except: a. dividends b. revenues c. owners' investments d. all of the above increase Stockholders' Equity.

dividends

A measure of profitability is the

earnings per share

contribution margin a. is always the same as gross profit margin. b. excludes variable selling costs from its calculation. c. is calculated by subtracting total manufacturing costs per unit from sales revenue per unit. d. equals sales revenue minus variable costs.

equals sales revenue minus variable costs.

Determining the unit cost of manufacturing a product is an output of financial accounting.

false

Direct materials become a cost of the finished goods manufactured when they are acquired, not when they are used.

false

If prepaid costs are initially recorded as an asset, no adjustment will be required in the future.

false

The ownership of a proprietorship is divided into shares of stock owned by its stockholders.

false

Maroon Company borrowed $100,000 from the First State Bank. How should this transaction be classified on the statement of cash flows?

financing activity

CVP analysis does not consider

fixed cost per unit

Costs that remain the same in total regardless of changes in the activity level.

fixed costs

A method that uses the total costs incurred at the high and low levels of activity.

high-low method

Incremental analysis is most useful Select one: a. in developing relevant information for management decisions. b. in choosing between capital budgeting methods. c. in evaluating the master budget. d. as a replacement technique for variance analysis.

in developing relevant information for management decisions.

On a classified balance sheet, companies usually list current assets

in the order in which they are expected to be converted into cash

On which financial statements would you expect to find revenues and expenses?

income statement

If the activity level increases 10%, total variable costs will

increase 10%

A gift shop signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $50,000 with annual interest of 6%. What is the adjustment to be made on December 31 for the interest expense accrued to that date, if no adjustments have been made previously for the interest? A. increase Interest Expense $500 increase Interest Payable $500 B. increase Interest Expense $750 increase Interest Payable $750 C. increase Interest Expense $500 decrease Cash $500 D. increase Interest Expense $750 increase Note Payable $750

increase interest expense $500 increase interest payable $500

A company purchased some office supplies costing $5,000 and increased Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $900 still on hand. The appropriate adjustment to be made at the end of the period would be: A. increase Supplies Expense, $5,900; reduce Supplies, $5,900. B. increase Supplies, $900; increase Supplies Expense, $900. C. increase Supplies Expense, $4,100; reduce Supplies, $4,100. D. increase Supplies, $4,100; increase Supplies Expense, $4,100.

increase supplies expense $4,100 reduce supplies $4,100

A revenue generally A. increases assets and liabilities. B. increases assets and stockholders' equity. C. increases assets and decreases stockholders' equity. D. leaves total assets unchanged.

increases assets and stockholders' equity

The process of identifying the financial data that change under alternative courses of action.

incremental analysis

Accrued expenses are: A. paid and recorded in an asset account before they are used or consumed. B. paid and recorded in an asset account after they are used or consumed. C. incurred but not yet paid or recorded. D. incurred and already paid or recorded.

incurred but not yet paid or recorded

Costs that contain both a variable and a fixed element.

mixed costs

During 2012, Smith Corporation had an increase in total assets of $70,000 and an increase in total liabilities of $90,000. Assuming that capital stock increased by $5,000 and no dividends were paid, calculate Smith's net income or net loss for 2012.

net loss of 25,000

The potential benefit that may be lost from following an alternative course of action.

opportunity cost

Sales commissions are classified as a. overhead costs b. period costs. c. product costs. d. indirect labor.

period costs

Earnings per share is a

profitability ratio

Accrued revenues are: A. received and recorded as liabilities before they are recognized. B. recognized and recorded as liabilities before they are received. C. recognized but not yet received or recorded. D. recognized and already received and recorded.

recognized but not yet received or recorded

The range over which the company expects to operate during the year.

relevant range

A fixed cost is a cost which

remains constant in total with changes in the level of activity.

A liquidity ratio measures the

short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.

The debt to assets ratio is a

solvency ratio

On which of the following financial statements would you expect to find operating, investing, and financing activities? a. Balance sheet b. Income statement c. Statement of cash flows d. Statement of changes in equity

statement and cash flows

If services are rendered on account, then A. assets will decrease. B. liabilities will increase. C. stockholders' equity will increase. D. liabilities will decrease.

stockholders' equity will increase.

A cost that cannot be changed by any present or future decision.

sunk cost

A company usually determines the amount of supplies used during a period by: A. adding the supplies on hand to the balance of the Supplies account. B. summing the amount of supplies purchased during the period. C. taking the difference between the supplies purchased and the supplies paid for during the period. D. taking the difference between the balance of the Supplies account and the cost of supplies on hand.

taking the difference between the balance of the supplies account and the cost of supplies on hand

The basic financial statements do not include the: a. income statement. b. tax return. c. balance sheet. d. statement of cash flows.

tax return

A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.

true

A partnership is owned by two or more individuals.

true

Controlling is the process of determining whether planned goals are being met.

true

Decision-making is an integral part of the planning, directing, and controlling functions

true

Finished goods inventory does not appear on a cost of goods manufactured schedule.

true

Managerial accounting applies to all forms of business organizations.

true

Period costs are not inventoriable costs.

true

Period costs include selling and administrative expenses.

true

Product costs are also called inventoriable costs.

true

An example of a mixed cost is a. direct materials. b. supervisory salaries. c. utility costs. d. property taxes.

utility costs

A cost which remains constant per unit at various levels of activity is a

variable cost

Costs that vary in total directly and proportionately with changes in the activity level.

variable costs

A variable cost is a cost that

varies in total in proportion to changes in the level of activity.

A distinguishing feature of managerial accounting is a. external users. b. general-purpose reports. c. very detailed reports. d. quarterly and annual reports.

very detailed reports