ACCT 5315 Accounting Topics and Managerial Accounting Quizzes Mix

A tenant rented space in your company's office building on October 1 at $1,800 per month, paying seven months' rent in advance. The bookkeeper recognized a current liability of $12,600. How much of this amount remains unearned as of December 31? A) $12,600. B) $5,400. C) $7,200. D) $0. E) $1,800.

C) $7,200.

For the current period, a company's revenues and expenses are $480,000 and $420,000, respectively. What is the company's profit margin for the current period? A) 25.0%. B) 87.5%. C) 12.5%. D) $60,000. E) 60.0%.

C) 12.5%.

Amelia Company received its telephone bill on February 15, 2013 in the amount of $325. This bill covered the period from January 1, 2013 through January 31, 2013. Amelia paid this bill immediately. The company uses a calendar year accounting period and prepares its financial statements only once a year at the end of the year. The general journal entry to record this transaction includes: A) A debit to the Cash account for $325. B) A credit to the Telephone Expense account for $325. C) A debit to the Telephone Expense account for $325. D) A credit to Accounts Payable for $325. E) A debit to Accounts Payable for $325.

C) A debit to the Telephone Expense account for $325.

Olivia, the proprietor, deposited $40,000 in the company's bank account. She received the money as the result of a settlement of a class action lawsuit and decided to invest it in her business to help with expansion. Recording the transaction on the company books will require which of the following? A) An asset to be debited, a liability to be credited. B) A liability to be debited, an asset to be credited. C) An asset to be debited, capital to be credited. D) Withdrawals to be debited, an asset to be credited. E) One asset to be debited, another asset to be credited.

C) An asset to be debited, capital to be credited.

Which one of the following users of accounting information is considered to be an external user of accounting information rather than an internal user of accounting information? A) Internal auditors. B) Company managers. C) Company customers. D) Officers and directors. E) Budget officers.

C) Company customers.

The three basic business entities discussed in this chapter include sole proprietorship, partnership, and corporation. Which of these entities is considered a legal entity and is also subject to federal income taxation at the entity level? A) Sole proprietorship. B) Partnership. C) Corporation. D) All three entities satisfy both requirements. E) None of these entities satisfy both requirements.

C) Corporation.

Purchasing equipment on account (payment to be made in the future) will have what effect on the elements of the accounting equation? A) Increase in equipment (assets) and a decrease in equity. B) Increase in equipment (assets) and an increase in equity. C) Increase in equipment (assets) and an increase in liabilities. D) Increase in equipment (assets) and a decrease in liabilities. E) Decrease in cash (asset) and an increase in liabilities.

C) Increase in equipment (assets) and an increase in liabilities.

If at the end of the accounting period, the company's liabilities total $29,000 and its equity totals $50,000, then what must be the total of assets? A) $11,000. B) $40,000. C) $21,000. D) $79,000. E) $85,000.

D) $79,000.

At the end of the accounting period, the business had $5,000 of office supplies on hand. At the beginning of the period, the amount of supplies on hand was $2,000. If the business purchased $12,000 of office supplies during the year, what amount of office supplies were used during the year? A) $7,000. B) $14,000. C) $10,500. D) $9,000. E) $12,000.

D) $9,000.

A proprietorship has total assets of $1,000,000, total liabilities of $300,000, and total owner's equity of $700,000. What is the debt ratio (rounded to the nearest percent)? A) 33%. B) 40%. C) 70%. D) 30%. E) 10%.

D) 30%.

One of your company's business checks clears the bank at its correct amount of $500. The transaction that underlies this check was the cash purchase of office supplies. The entry was recorded as a debit to Insurance Expense for $50 and a credit to Cash for $50. The correcting entry should include which of the following? A) A debit to Accounts Receivable for $450. B) A credit to Supplies Expense for $500. C) A credit to Cash for $50. D) A credit to Cash for $450. E) A credit to Cash for $540.

D) A credit to Cash for $450.

A statement of cash flows will report cash flows from which of the following activities? A) Operating activities. B) Investing activities. C) Financing activities. D) All of the above. E) Only A and C are correct.

D) All of the above.

A company which sells and services medical insurance policies received one payment of $14,000 cash from a customer for insurance coverage for the next two years. Recording the receipt of this cash when it is received will require which of the following? A) Withdrawals to be debited, an asset to be credited. B) A liability to be debited, an asset to be credited. C) An asset to be debited, capital to be credited. D) An asset to be debited, a liability to be credited. E) One asset to be debited, another asset to be credited.

D) An asset to be debited, a liability to be credited.

Which of the following financial statements refers to a specific date (point in time)? A) Income statement. B) Statement of owner's equity. C) Statement of cash flows. D) Balance sheet. E) Answers A, B & C are all correct.

D) Balance sheet.

A CPA owns a large home and she has divided the second floor into two separate units: one used as her personal residence and the other rented out to local college students as an apartment. On the first floor, she has her own CPA firm where she meets with and provides accounting services to clients. If she wishes to keep separate records for each of these three activities, the accounting principle or assumption to which she is adhering is? A) Going-concern assumption. B) Monetary unit assumption. C) Cost principle. D) Business entity assumption. E) Full disclosure principle.

D) Business entity assumption.

the SEC is the rulemaking body of the GAAP T/F

False

RI borrows 10000 from bank.- terms are 90 days at 10% interest rate. RI debits: a- cash b-notes payable c-interest payable d-RE e- none of the above

Lside entry CASH (increases)

ratio that indicates overall efficiency of the investment and the use of assets is a-ROA b-ROE c-price to earnings d-none of the above

ROA

accrual based accounting

Recognizing revenues when earned through the company's operations and recognizing expenses as the assets used and obligations incurred in carrying out those operations.

conservatism

better to understate than overstate economic well being

flexible (variable) budgets

budget that shows expected costs for a particular activity level. A before-the-fact flexible budget gives expected costs for a range of activity levels. An after-the-fact flexible budget gives expected costs for the actual level of activity.

ending finished goods inventory budget

budget that shows the cost of units budgeted to be in ending finished goods inventory

operating budgets

budgets that describe the income-generating activities of a firm, sales, production, and finished goods inventories, ending with the budgeted income statement.

financial budgets

budgets that detail the inflows and outflows of cash and the overall financial position of the firm

5. Tortoise Sales' LIFO cost of ending inventory would be a. $120. b. $360. c. $96. d. $430.

c [(25 + 39 + 12 − 60) × $6]

6. Tortoise Sales' cost of ending inventory using the average cost method is a. $540. b. $140. c. $120. d. $150.

c [16 × ($150

7. When applying the lower-of-cost-or-market rule to inventory, "market" generally means a. resale value. b. original cost, less physical deterioration. c. current replacement cost. d. original cost.

c. current replacement cost.

if RE T account has a balance of 10000 at end of acocunting period: a-had net income b- sustained a loss c-can't determine lack of data d-none of the above

cant determine not enough data

discounting models

capital investment models that explicitly consider the time value of money in identifying criteria for accepting and rejecting proposed projects

non discounting models

capital investment models that identify criteria for accepting or rejecting projects without considering the time value of money

major sections of cash flow

cash from operating activities, financing activities, investing activities

strategy

choosing the market and customer segments the business unit intends to serve, and identifying the critical internal and business processes that the unit must excel at to deliver the value propositions to customers in the targeted market segments

cash flow is adding non cash expenses to net income/ which co will have more $ co A has 10000 co B 10000 depr 6000 (30000/5) depr 3000 (30000/10) total 106000 total 103000

company A

Income Statement

company's score card-reports results of operations

vertical analysis

compares components of balance sheet with a base item

if a company bought and manufactured more that the cost of goods shipped, the effect on cash is a- increase b-decrease c-stay the same d-none of the above

decrease

learning and growth (infrastructure) perspective

defines the capabilities that an organization needs to create long-term growth and improvement, including employee capabilities, information systems capabilities, and employee attitudes

customer perspective

defines the customer and market segments in which the business segments compete

financial perspective

describes the economic consequences of actions taken in the other three balanced scorecard perspectives

internal business process perspective

describes the internal business processes needed to provide value for customers and owners

statement of stockholder's equity

details sources/uses of cash

short term liabilities

due within year or w/i one operatting cycle

3. How is inventory classified in the financial statements? a. As an expense b. As a contra account to Cost of Goods Sold c. As a revenue d. As a liability e. As an asset

e. As an asset

operating income

earning before income and taxes

IOSCO Intl. Org. Securities Commisions & similar organizations

ease requirements for multinational securities offerings achieve just & efficient market exchange info. unite to establish standards provide assistance

which is not functional area of accouonting a- managerial b-tax c-economic d-financial

economic

EJ owns a proprietorship - she keeps her personal and business checking account separate. example of: a-matching b-conservatism c-monetary concept d-economic entity

economic entity

accounting principles

economic entity, going concern, monetary concept, accounting period, matching, conservatism, understandability, relevance, reliability, comparability, consistency, materiality, cost effectiveness

monetary concept

economic events must be measured in a common denominator to be useful- stable unit of measure

IFAC Intnl federation of Accountants

encourage consistency and professionalism. Management acctg, auditing, ethics, education

matching

expenses incurred to generate revenues should be recognized during the same period as those revenues ex: cogs and revenues

financial accounting is designed for the ___________type of user

external

financial accounting involves reporting financial information to a-external users b-internal users c-taxing authorities d-b&c

external users

accounting process is only concerned with external transactions representing economic events T/F

false

company's annual report is generally used buy tax accounting T/F

false

credit entries to cash account increase the cash account similar to your bank statement T/F

false

dividends are largest expense of corportation T/f

false

dividends represent an expense to the firm T/F

false

if a RE account has a credit (Rhand balance), then 1st then firm must have generated a profit

false

if taxes payable increases from the beginning to the end of the accounting cycle, this is a use of cash T/F

false

increasing long term debt is a use of cash T/F

false

l-t investments are recorded on the balance sheet at original cost unless the market value has increased significantly, then they are recorded at market value T/F

false

managerial accounting must follow strict rules which govern internal accounting procedures T/F

false

prepaid items already converted to cash are most liquid on portion of balance sheet T/F

false

tax and financial accounting basically the same T/F

false

the 10-k is required by fasb T/F

false

the annual report is a good example of tax accounting T/F

false

to obtain a copy of a corporation's financial reports, you must be a stockholder or leader of the team T/F

false

vertical analysis compares how the balance sheet or income statement items change form year to year T/F

false

a. corp. had a net of $18000 and paid out 10000 in dividends this left 8000 in RE T/F

false (could b inventory AR, and PP&E)

financial accounting has no formal guidelines T/F

false - follow a GAAP framework- specific enough for comparison among different corporations

changing tax laws are fairly easy to predict T/F

false - many new tax laws each year difficult to keep a current knowledge of all changes

current assets are properly listed in order on the balance sheet as:cash, AR, prepaid insurance,inventory T/F

false( the correct order is cash, marketable securities, AR, inventories)

A non-profit organization such as a school does not prepare reports for external users T/F

fase

3 types of accounting

financial - managerial - tax

Elvon inc. is a large multinational corporation located in the US. Elvon presents its financial statements in US dollars. This is an example of (a) managerial accounting (b) tax accounting, (c) financial accounting , (d) none of the above

financial accounting

presenting an asset in the balance sheet at its historical cost less accumulated depreciation is an example of (a) managerial accounting, (b) tax accounting, c) financial accounting

financial accounting

accounting entity

financial accounting revolves around this; ex: non profits, individuals, and businesses

understandability

financial conditions and results should be communicated so that they are understandable by an educated user of financial info

relevance

financial data must be relevant to a user to be of value, extraneous information need not appear

budgets

financial plans for the future

monetary unit

financial transactions are denominated in a stable unit of measure

going concern

firm has a value beyond liquidation of assets

Direct Fixed Expenses

fixed costs that are directly traceable to a given segment and consequently, disappear if the segment is eliminated

Common Fixed Expenses

fixed expenses that cannot be traced to individual segments or products. They will continue to exist even if one segment or product is eliminated.

discounted cash flows

future cash flows expressed in present value terms

Relevant Costs

future costs that change across alternatives

which of the items would you subtract from net income to arrive at cash provided (used) by operating activities a-depreciation of a delivery truck b-amortization of a patent c- the gain arising from the sale of a forklift which was carried of books as 21000 and sold for 26000 d-all of the above

gain arising - simply a paper event - difference between selling price and book value

tax accounting is designed for the ____________

government

UN and OECD

international political organizations involved in financial disclosure - political only

a 20000 merchandise sale L hand entry COGs Rhand entry to

inventory ( decreased by 20000)

which account should be debited for cash used to purchase merchandise for resale? a-cash b-AR c-inventory d-p&e e-AP f-RE

inventory left side / cash would be credited(decreased) Rside

annuity

a series of future cash flows

testable strategy

a set of linked objectives aimed at an overall goal

Decision Model

a specific set of procedures that, when followed, produces a decision

balanced scorecard

a strategic management system that translates an organization's mission and strategy into operational objectives and performance measures

Segment

a subunit of a company of sufficient importance to warrant the production of performance reports

9. Which statement is true? a. Application of the lower-of-cost-or-market rule often results in a lower inventory value. b. An error overstating ending inventory in 2016 will understate 2016 net income. c. When prices are rising, the inventory method that results in the lowest ending inventory value is FIFO. d. The inventory method that best matches current expense with current revenue is FIFO.

a. Application of the lower-of-cost-or-market rule often results in a lower inventory value.

Which statement is true? 1. Which statement is true? a. Gross profit is the excess of sales revenue over cost of goods sold. b. Purchase returns and allowances increase the net amount of purchases. c. The Sales account is used to record only sales on account. d. A service company purchases products from suppliers and then sells them.

a. Gross profit is the excess of sales revenue over cost of goods sold.

Debt to Equity Ratio

total liabilities/total stockholders equity

recording of an economic event a- record b-transaction c-balance

transaction

A partnership is the same as a proprietorship except that it is owned by two or more individuals T/F

true

Owners in corporations are liable only for the amount they have invested T/F

true

ROE shows how much income was earned for every dollar invested by owners T/F

true

accounting entity is considered to be any organization for which separate accounting data gathered and processed T/f

true

congress authorized SEC to govern the financial reporting of public corporations t/f

true

depreciation is added back to net income b/c depreciation is a non cash expense T/F

true

managerial accounting is used for comparing budgeted and forecasted costs with actual performance T/F

true

net income includes gains from the sale of equipment T/F

true

revenue and expense accounts are temporary accounts T/F

true

total debits = total credits T/F

true

vertical analysis compares the components of a balance sheet with a base item T/F

true

when owner of a proprietorship- or 1 of partners in partnership dies, the business ceases to exist T/f

true (corporations can continue- however)

participative budgeting

type of budgeting that allows subordinate managers considerable say in how the budgets are established

budget director

typically the controller, this is the person responsible for directing and coordinating the organization's overall budgeting process

proprietership

unincorporated bus org. with 1 owner. no distinction between the business and owner but there is financial distinction between them

MCE (manufacturing cycle efficency)

value-added time divided by total time

favorable (F) variances

variances produced whenever the actual amounts are less than the budgeted or standard allowances

unfavorable (U) variances

variances produced whenever the actual input amounts are greater than the budgeted or standard allowances

The increase in equity after subtracting expenses from Revenue. (Uses the Net Income Equation)

what is net income

OECD Org. for Economic Cooperation & Development

issued code of conduct for MNE's w guidelines and exposures

most users of financial acctng. are external to a firm

lenders, investors, anay

a cash settlement on AP will effect a company: a- liabilities & assets decrease b-OE & assets decrease c-liabilities & assets increase d-liabilities & assets decrease

liabilities & assets decrease

which is not accounting entity a-coca cola co. b-limited partnership c-unincorporated beauty parlor d-loan dept. of a bank

loan dept of a bank

Stapling inc. projects sales revenues will exceed $100M next year. This is an example of (a) managerial accounting, (b) tax accounting, (c) financial accounting (d) none of the above

managerial accounting

preparing a production plan would be an example of : a-tax acc. b- managerial acc. c- financial acc d-none of these

managerial accounting

a. inc. estimated the useful life of a patent and amoritized it over it's useful life. this is an example: a-money concept b-matching c-economic entity d-going concern e-none of the above

matching

Constraints

mathematical expressions that express resource limitations

In periods of rising prices, which of the following generally accepted accounting principles is violated (a) matching, (b) conservatism, (c) going concern , (d) monetary concept

monetary concept

monetary incentives

monetary rewards to control a manager's tendency to shirk and waste resources by tying budgetary performance to salary increases, bonuses, and promotions

IASC International Accounting Standards Committie

most imrnt pro acctng org. in world - develop and issue reporting standard 1 promulgate standards 2 persuade countries 3 work w those countries

Revenue - Cost of Goods Sold ----------------------------- Gross Profit - Other Expenses including income tax ----------------------------- NET INCOME (or Loss)

net income statement layout

ROE return on equity ratio

net income/avg. stockholders equity

net income equation

net income= revenue - expenses

cash provided (used)

net plus or minus operating expenses that do not require an inflow or outflow of cash ( net + deprec. 750)

E company purchases office supply on credit, this has what effect on cash? a- no effect b-increases cash c-decreases cash d- none of the above

no effect

whats the impact on cash of purchasing inventory on a 60 day credit a-increase b-decrease c-no effect d-none of the above

no effect

a company paid for an addition to their plant by signing a 30 yr mortgage. this had what effect on cash? a-no effiect b- increase c-decrease e none of these

none

info that can make a difference to the decision at hand: a-reliable b- comparative c- conservatism d-understandibility e- none of these

none of the above

ratios that show how investors value stock is: a-pauout b-earnings per share c- return on equity d- return on assets e-none of the above

none of the above

which is an asset? a-salararies payable b-accounts ayable c-tax payable d-none of the above

none of the above

what statement represents cash flow? a-balance sheet b-statement of RE c-inventory statement d- none of the above

none of the above (cash flow statement)

quality that assumes that info. is reasonably free from error" a- relevant b-conservatism c-understandibility d-consistency e-none of these

none of these (it is reliability)

Economic Entity

one firm,one set of books. do not have to correspond to legal entities; however a degree of ownership must exist before claiming financial results of another enterprise as its own

capital stock

original investment of shareholders

budgetary slack

padding the budget, which occurs when a manager deliberately underestimates revenue or overestimates costs in order to make budgeted expectations more easily achievable in the future

revenue center

par of an organization in which the manager is responsible only for sales

profit center

part of an organization in which the manager is responsible for both sales and costs

investment center

part of an organization in which the manager is responsible for sales, costs, and investment

cost center

part of an organization in which the manager is responsible only for costs

compounding of interest

paying interest on interest

transfer price

price charged for a component or service by the selling division to the buying division of the same company

GAAP Generally Accepted

principles set and overseen by the FASB and SEC

operations process

produces and delivers existing products and services to customers

Joint Products

products that are inseparable prior to a split-off point. All manufacturing costs up to the split-off point are joint costs.

independent projects

projects that, if accepted or rejected, will not affect the cash flows of another project

mutually exclusive projects

projects that, if accepted, preclude the acceptance of competing projects

post-sales service process

provides services to customers after the product is produced and delivered

accounting assists corporations in making major decisions by: a-providing relevant economic information on costs and expected profits b- predicting economic environment in c- mathematically integrating various economic and political models

providing relevant economic info. on costs and expected profits

two ratios that help define the operating cycle are: a- recievables and inventory turnover b-recievables and accounts payable turnover c-inventory and accounts payable turnover d- none of the above

receivables and inventory turnover

accounting

recording,classifying,and communicating financial info concerning the economic activity of an enterprise

debt to equity ratio

relates company debt to company equity

Keep-or-Drop Decisions

relevant costing analyses that focus on keeping or dropping a segment of a business

Make-or-Buy Decisions

relevant costing analyses that focus on whether a component should be made internally or purchased externally

Special-Order Decisions

relevant costing analyses that focus on whether a specially priced order should be accepted or rejected

Sell-or-Process-Further Decision

relevant costing analysis that focuses on whether a product should be processed beyond the split-off point

accounting periods

results of operations for an entity must be reported on a periodic basis (yearly)

BI had 10000 in credit sales. the credit entry is to: a-retained earnings b-accounts receivable c-accounts payable d- cash e-none of the above

retained earnings

non-monetary incentives

rewards that include job enrichment, increased responsibility and autonomy, and recognition programs.

which of the following companies publishes financial ratios of industry groups? a-gladstone b-evergreen c-robert morris associtates c-sterling whitworth

robert morris associates

turnover

sales divided by average operating assets

partnership

same as proprietership but with 2 or more owners. not a legal entity but is recognized as such for acctng. purposes

responsibility center

segment of a business in which a manager is accountable for a specific set of activities

goal congruence

the alignment of managerial and organizational goals

quantity standards

the amount of input that should be used per unit of output

price standards

the amount that should be paid per unit of the input to be used

Opportunity Cost

the benefit given up or sacrificed when one alternative is chose over another

direct labor budget

the budget showing the expected number of direct labor hours to be worked and the total cost of direct labor for the budget period

master budget

the comprehensive financial plan for the organization as a whole. It covers a fiscal year.

Segment margin

the contribution a segment makes to cover common fixed costs and provide for profit after direct fixed costs and variable costs are deducted from the segment's sales revenue

cost of capital

the cost of investment funds, usually viewed as a weighted average of the costs of funds from all sources

present value

the current value of a future cash flow. it represents the amount that must be invested now if the future cash flow is to be received, assuming compounding at a given rate of interest

residual income

the difference between income and the minimum dollar return required on a company's operating assets

customer value

the difference between realization (what the customer receives) and sacrifice (what is given up in return)

usage (efficiency) variance

the difference between standard quantities and actual quantities multiplied by standard price

price (rate) variance

the difference between the actual and standard unit price of an input multiplied by the number of input used

total budget variance

the difference between the actual cost of an input and its planned cost

labor efficiency variance (LEV)

the difference between the actual direct labor hours used and the standard direct labor hours allowed multiplied by the standard hourly wage rate

variable overhead efficiency variance

the difference between the actual direct labor hours used and the standard hours allowed multiplied by the standard variable overhead rate

fixed overhead spending variance

the difference between the actual fixed overhead (AFOH) and the budgeted fixed overhead (BFOH)

labor rate variance (LRV)

the difference between the actual hourly rate paid and the standard hourly rate multiplied by the actual hours worked

materials price variance (MPV)

the difference between the actual price paid per unit of materials and the standard price allowed per unit multiplied by the actual quantity of materials purchased

variable overhead spending variance

the difference between the actual variable overhead and the budgeted variable overhead based on actual hours used to produce the actual output

flexible budget variance

the difference between the budgeted costs and actual costs for the chosen level of activity

fixed overhead volume variance

the difference between the budgeted fixed overhead (BFOH) and applied fixed overhead

materials usage variance (MUV)

the difference between the direct materials actually used and the direct materials allowed for the actual output multiplied by the standard price

net present value (NPV)

the difference between the present value of a project's cash inflows and the present value of its cash outflows

Target Cost

the difference between the sales price needed to achieve a projected market share and the desired per-unit profit

target cost

the difference between the sales price needed to achieve a projected market share and the desired per-unit profit

Differential Cost

the difference in total cost between the alternatives in a decision

standard hours allowed (SH)

the direct labor hours that should have been used to produce the actual output (unit labor standard x actual output)

discount factor

the factor used to convert a future cash flow to its present value

budget committee

the group that review the budget, provides policy guidelines and policy goals, resolves differences that arise as the budget is prepared, approves the final budget, and monitors the actual performance of the organization as they year unfolds

fiscal year and and calander year don't always coincide because:

to favorably represent the results of operations of seasonable enterprises

myopic behavior

when a manager takes actions that improve budgetary performance in the short run but bring long-run harm to the firm

pseudoparticipation

when top management has total control of the budgeting process, allowing only superficial participation from lower-level managers

analysts take a shortcut sometimes in estimating cash from operations, the shortcoming to this is: a- depreciation is not relevant to cash flow analysis b- expidentures for PP&E are not considered in cash flow from operations c-changes in working capital elements are disregarded in this approach d-companies do not report their depreciation expenses

working capital - can have effect on cash position of company

retained earnings account at end of a period from day the company begins/ if losses total $60,000 the RE at the end would be

-$60000

10. The ending inventory of Cape Harbor Co. is $46,000. If beginning inventory was $64,000 and goods available (cost of goods available for sale) totaled $117,000, the cost of goods sold is a. $135,000. b. $64,000. c. $71,000. d. $53,000.

10. c($117,000 − $46,000)

11. Chime Company had cost of goods sold of $150,000. The beginning and ending inventories were $13,000 and $28,000, respectively. Purchases for the period must have been a. $178,000. b. $165,000. c. $163,000. d. $135,000.

11. b($150,000 + $28,000 − $13,000)

Use the following information for questions 12-14. Wedge Company had a $26,000 beginning inventory and a $29,000 ending inventory. Net sales were $160,000; purchases, $80,000; purchase returns and allowances, $8,000; and freight in, $3,000. 12. Cost of goods sold for the period is a. $78,000. b. $88,000. c. $72,000. d. $69,000.

12. c($26,000 + $80,000 + $3,000 − $8,000 − $29,000)

13. What is Wedge's gross profit percentage (rounded to the nearest percentage)? a. 55% b. 18% c. 45% d. 16%

13. a($160,000 − $72,000)/$160,000

14. What is Wedge's rate of inventory turnover? a. 2.9 times b. 5.5 times c. 2.6 times d. 2.5 times

14. c [$72,000 ÷ ([$26,000 + $29,000]/2)]

15. Beginning inventory is $110,000, purchases are $220,000, and sales total $500,000. The normal gross profit percentage is 35%. Using the gross profit method, how much is ending inventory? a. $175,000 b. $215,000 c. $5,000 d. $280,000

15. c[$110,000 + $220,000 − [$500,000 × (1 − 0.35)]]

16. An overstatement of ending inventory in one period results in a. an understatement of the beginning inventory of the next period. b. no effect on net income of the next period. c. an overstatement of net income of the next period. d. an understatement of net income of the next period.

16. d

which of the following decreases cash a-increase AR b- increase inventories c-increase accounts payable d-increase in taxes payable e- both a & B

A&B increase AR and increase inventories

The ledger is a collection of all of a business' accounts and their balances. The accounts in a ledger are each assigned an identification number. In a typical chart of accounts, what is the typical account number range for the Equipment account? A) 101-199. B) 201-299. C) 301-399. D) 401-499. E) 501-699.

A) 101-199.

Although it is possible to find an exception to the following statement, the vast majority of adjusting entries follow which pattern described below? A) One of the accounts debited or credited is an income statement account while the second account debited or credited is a balance sheet account. B) Both of the accounts debited or credited are income statement accounts. C) Both of the accounts debited or credited are balance sheet accounts. D) Both of the accounts debited or credited are part of the statement of owner's equity. E) The number of debit entries must equal the number of credit entries.

A) One of the accounts debited or credited is an income statement account while the second account debited or credited is a balance sheet account.

Accounting Equation

An equation showing the relationship among assets, liabilities, and owner's equity. This equation is --> Assets = Liabilities + Owner's Equity (A = L + OE)

A company purchased a two-year fire insurance policy on May 1, 2012. It paid the $2,400 premium in cash on the same date and recorded the entry with a debit to Prepaid Insurance for $2,400. The company has adopted a 12-month accounting period ending on January 31 of each year. If the company uses the accrual basis of accounting, how much insurance expense will be recorded for the periods ended January 31, 2013, and January 31, 2014, respectively? A) $1,800 and $2,400. B) $900 and $1,200. C) $2,400 and $0. D) $0 and $2,400. E) $2,400 and $0.

B) $900 and $1,200.

The owner's investment of cash in the company will result in which of the following? A) An increase in cash and a decrease in equity. B) An increase in cash and an increase in equity. C) A decrease in cash and a decrease in liabilities. D) An increase in fees earned and an increase in equity. E) An increase in cash and an increase in liabilities.

B) An increase in cash and an increase in equity.

A business rented space in an office building on October 1, at $600 per month, paying 9 months of rent in advance. The bookkeeper recognized a prepaid asset of $5,400 when the payment was made. No year-end adjustment was recorded. As a consequence of not recording the required adjustment, which of following occurred? A) Expenses were overstated and assets were understated. B) Expenses were understated and assets were overstated. C) Expenses were overstated and assets were overstated. D) Expenses were understated and assets were understated. E) Both expenses and assets would be properly stated since no adjustment was required under GAAP.

B) Expenses were understated and assets were overstated.

When cash is received from a customer in payment of an account receivable, how are the elements of the accounting equation affected? A) Decrease assets (cash) and increase assets (accounts receivable). B) Increase assets (cash) and decrease assets (accounts receivable). C) Increase assets and increase liabilities. D) Increase assets and increase equity. E) Increase in assets (cash) and an increase in equity (retained earnings).

B) Increase assets (cash) and decrease assets (accounts receivable).

MNE multinationsal enterprise

internal standards on reports

Examples of CURRENT LIABILITIES

1) Accounts Payable 2) Accrued Liabilitities 3) Short-Term Borrowing 4) Deferred Revenues 5) Current Maturities of Long Term debt

Order of Liquidity

1) Cash or Cash Equivalent 2) Marketable Securities 3) Accounts Receivable 4) Inventory 5) Prepaid Expenses

Types of Adjustments

1) Deferred (Unearned) Revenue 2) Deferred (Prepaid) Expenses 3) Accrued Revenues 4) Accrued Expenses

On its 2016 income statement, Abbott Laboratories reported research and development expense of $1,422,000,000. Which of the following statements must be true?

A. Abbott Laboratories spent $1,422,000,000 in cash to develop new products and improve old products. B. Research and development expense reduced Abbott Laboratories 2016 net income by $1,422,000,000. C. Abbott Laboratories capitalized at least $1,422,000,000 of research and development costs in 2016. D. The $1,422,000,000 included amortized research and development costs from prior years that were not previously expensed, because Abbott Laboratories incurs such expenses each year. E. None of the above Abbott Laboratories included in research and development expense certain non-cash expenses such as depreciation on related assets, thus (A) is not correct. Abbott Laboratories recorded deferred tax expense on the product development expense, thus net income was affected on an after-tax basis and (B) is therefore not correct. Under US GAAP, firms may not capitalize R&D costs, thus (C) is not correct. All R&D expenses must be included in the income statement in the period, thus (D) is wrong. The correct answer is: None of the above

Which of the following items creates complications related to revenue recognition?

A. Bonuses tied to sales goals B. Long-term construction contracts C. Multiple element sales contracts D. Consignment goods E. All of the above Each of these types of revenue or business conditions creates risk associated with revenue recognition. Each requires good internal controls to prevent and detect inappropriate revenue recognition, as well as extra management vigilance and auditor care. The correct answer is: All of the above

Academic accountants are members of which of the following? a- FASB b-AAA C-CASB d-none of above

AAA

collecting 5000 from credit sale would be R side entry

AR 5000

The basic accounting equation is Assets = Liabilities + Equity. The Equity term of the equation can be further broken down into several other terms. Assume that the entity is a sole proprietorship. Which of the following statements is correct? A) Additional investments by the business owner will increase equity; and revenues will decrease equity. B) Additional investments by the business owner will decrease equity; and revenues will increase equity. C) Increases in expenses will decrease equity; and owner withdrawals will decrease equity. D) Revenues will increase equity; and owner withdrawals will increase equity. E) Revenues will decrease equity; and owner withdrawals will increase equity.

C) Increases in expenses will decrease equity; and owner withdrawals will decrease equity.

On March 1, 2013, a company collects a $500 deposit from a customer for the installation of a home-theater system. The installation is scheduled for May 5, 2013. How should the company record this entry on March 1, 2013? A) The Cash account is credited for $500. B) The Sales Revenue account is credited for $500. C) The Unearned Sales Revenue account is credited for $500. D) The Unearned Sales Revenue account is debited for $500.

C) The Unearned Sales Revenue account is credited for $500.

A company adopts the accounting practice whereby all external transactions involving prepaid expenses, such as prepaid insurance, prepaid rent, and office supplies are initially debited to the asset account when acquired. If the company fails to adjust any one of these accounts for the current year, what will be the effect on (1) the current year's total expenses, (2) total revenues, (3) net income, and (4) ending owner's equity? A) Understated, understated, understated, and understated. B) Understated, overstated, overstated, and overstated. C) Understated, no effect, overstated, and overstated. D) Overstated, overstated, no effect, and no effect. E) Understated, no effect, overstated, and understated.

C) Understated, no effect, overstated, and overstated.

Costco Wholesale Corporation collects annual non-refundable membership fees from customers. When should Costco recognize revenue for these membership fees?

Costco should record membership fees evenly over the year even if the fee is nonrefundable because Sam's has an obligation to stay open for business for a year to honor the customer's membership. The correct answer is: Evenly over the membership year

The Baker sole proprietorship started operations on January 1, 2013 and uses a calendar-year accounting period. On February 7, 2013, the company purchases an automobile with an invoice cost of $10,000. To settle this transaction, the company immediately pays $3,000 cash to the automobile dealership and signs a three-month note payable for the $7,000 purchase price balance. A partial general journal entry is given below. Which item accurately describes the partial entry from Baker's viewpoint? A) Cash is debited for $3,000 and Notes Payable is credited for $7,000. B) The asset account Vehicles is debited for $7,000 and Cash is credited for $3,000. C) The asset account Vehicles is credited for $10,000 and Cash is credited for $3,000. D) Cash is credited for $3,000 and Notes Payable is credited for $7,000. E) Notes Payable is credited for $7,000 and the asset Vehicles is credited for $3,000.

D) Cash is credited for $3,000 and Notes Payable is credited for $7,000.

At the end of the fiscal year, an adjusting entry was made for accrued salaries of $2,000. The salaries for one week, $4,250, were paid on the first Friday of the new fiscal period. When the weekly salaries are paid on the first Friday of the new accounting period, what will be the general journal entry? A) Salaries Expense, debit, $4,250; Cash, credit, $4,250. B) Salary Expense, debit, $2,000; Cash, credit, $2,000. C) Salaries Expense, debit, $4,250; Salaries Payable, credit, $4,250. D) Salary Expense, debit, $2,250; Salaries Payable, debit, $2,000; Cash, credit, $4,250. E) Salary Expense, debit, $2,000; Cash, credit, $2,250.

D) Salary Expense, debit, $2,250; Salaries Payable, debit, $2,000; Cash, credit, $4,250.

This principle presumes that an organization's activities can be divided into specific time periods such as a month, a three-month quarter, a six-month interval, or a year. A) Continuing-concern principle. B) Monetary unit principle. C) Revenue recognition principle. D) Time-period principle. E) Business entity principle.

D) Time-period principle.

1. A proprietorship employs one full-time accountant. This person is considered an employee. On the desk in front of her are five different business documents. Which one of the following would not be considered an original source document from the proprietorship's point of view? A) A bank receipt for $10,000 evidencing yesterday's cash receipts deposited in the bank. B) The original copy of the insurance policy taken out by the proprietorship to insure the vehicle it purchased during its first month of operations. The annual insurance premium of $500 was printed within the contract. C) The invoice received by the proprietorship from Samsung Electronics when the proprietorship purchased its first lot of inventory to be sold to its customers. D) A cancelled check for $500 representing payment in full for the annual insurance premium mentioned in item B above. E) A copy of the Balance Sheet at the end of the company's first year of existence.

E) A copy of the Balance Sheet at the end of the company's first year of existence.

Double-entry accounting requires which of the following? A) All journal entries must be posted twice. B) At least two accounts are involved, with at least one debit and one credit. C) The total amount debited must equal the total amount credited. D) Both A and C are correct. E) Both B and C are correct.

E) Both B and C are correct.

The theoretical reason for recording periodic depreciation expense rather than immediately expensing the cost of a plant asset in the period it is acquired is to adhere to the: A) Cost principle. B) Monetary unit principle. C) Going-concern principle. D) Materiality principle. E) Matching principle.

E) Matching principle.

recognized as authoritative voice of accounting principles a- SEC b-AICPA c-FASB d-AAA

FASB

Apple Inc. and Microsoft Corporation are competitors in the computer industry. Following is a table of Total revenue and R&D expenses for both companies. Apple Inc. Total revenue 2016 = $215,639 2015 = $233,715 2014 = $182,795 R&D expenses 2016 = $10,045 2015 = $8,067 2014 = $6,041 Microsoft Corporation (in millions) Total revenue 2016 = $85,320 2015 = $93,580 2014 = $86,833 R&D expenses 2016 = $11,988 2015 = $12,046 2014 = $11,381 Which of the following is true?

Microsoft Corporation is more R&D intensive in 2016 than in 2015. take the r&d expense and divide by total revenue to get the Common size R&D ex...10,045/215,639 = 4.66%

liabilities

Obligations for borrowed funds from lenders, bond investors, pay suppliers, employees, tax authorities

The 2016 financial statements of Leggett & Platt include the accounts receivable footnote: Total accounts and other receivables at December 31 consisted of the following: Total accounts and other receivables 2016 =$493.8 2015 = $529.5 Allowance for doubtful accounts 2016 = (7.2) 2015 = (9.3) Total accounts and other receivables, net 2016 = $486.6 2015 = $520.2 The balance sheet reports total assets of $2,984.1 million at December 31, 2016. The common-size amount for gross accounts and other receivables are:

Rationale: $493.8 / $2,984.1 = 16.5% The correct answer is: 16.5%

The 2017 Form 10-K of Oracle Corporation, for the May 31, 2017 year-end, included the following information relating to their allowance for doubtful accounts: Balance in allowance at the beginning of the year $327 million, accounts written off during the year of $137 million, balance in allowance at the end of the year $319 million. What did Oracle Corporation report as bad debt expense for the year?

Rationale: Balance in allowance at the beginning of the year + bad debt expense - accounts written off during the year = balance in allowance at the end of the year. Bad debt expense = $319 million - $327 million + $137 million = $129 million. The correct answer is: $129 million

McKinnon Enterprises owns a professional ice hockey team, the Rockford Penguins. The company sells season tickets for its upcoming season and receives $960,000 cash. The season starts January 1, 2018, with five home games occurring monthly over the next six months. How much revenue will McKinnon Enterprises recognize from its season ticket sales through the end of April 2018?

Rationale: Deferred revenue recognized: ($960,000 / 6 months) x 4 months = $640,000 The correct answer is: $640,000

The 2016 financial statements of BNSF Railway Company report total revenues of $19,829 million, accounts receivable of $1,272 million for 2016 and $1,198 million for 2015. The company's accounts receivable turnover for the year is:

Rationale: Receivables turnover = Sales / Average AR = $19,829 / [($1,272 + $1,198) / 2] = 16.1 times per year. The correct answer is: 16.1 times

Gross Profit RATIO

Revenues - COGS = Gross Profit

Apple, Inc. reported research and development expense of $10,045 million on its 2016 income statement. This expense included many types of costs. Which of the following types of costs would not be included in the $10,045 million?

The correct answer is: Supplies and inventory related to R&D activities and new-product sales

Retained Earnings

The cumulative Net Income (and losses) retained by a company. (Not paid out to shareholders as dividends)

Ticketmaster contracts with the producer of Blue Man Group to sell tickets online. Ticketmaster charges each customer a fee of $9 per ticket and receives $22 per ticket from the producer. Ticketmaster does not take control of the ticket inventory. Average ticket price for the event is $105. How much revenue should Ticketmaster recognize for each Blue Man Group ticket sold?

Ticketmaster should record $31 revenue each time it sells a ticket. Of that, $9 will be received in cash and $22 will be recorded as receivable from the Blue Man Group producers. The correct answer is: $31 because both the fee from the customer and the Blue Man Group producer are earned

In a proprietorship (a) there is no legal distinction between the business and its owner, (b) there is a distinction between the business and its owner for accounting purposes, (c) there is a legal distinction between the business and its owner, (d) A & B

a & b

static budget

a budget created in advance for a particular level of activity

sales budget

a budget that describes expected sales in units and dollars for every product or service sold

production budget

a budget that details the number of units of each product to be produced in the coming year, in order to satisfy sales and desired ending inventory needs

cash budget

a budget that shows budgeted cash inflows and outflows for the time period so that managers can determine any expected cash excess or deficiency

direct materials purchases budget

a budget that shows the amount and cost of every type of raw material to be purchased in each time period

overhead budget

a budget that shows the expected cost of all production costs other than direct materials and direct labor

selling and administrative expenses budget

a budget that shows the expected costs for non-manufacturing costs of selling and administration

cost of goods sold budget

a budget that shows the expected production cost of the units budgeted to be sold during the period

postaudit

a follow-up analysis of an investment decision, comparing actual benefits and costs with expected benefits and costs

performance report

a form that compares actual costs with budgeted costs

standard cost sheet

a listing of the standard costs and standard quantities of direct materials, direct labor, and overhead that should apply to a single product

Target Costing

a method of determining the cost of a product or service based on the price (target price) that customers are willing to pay

continuous budget

a moving 12-month budget. As one month expires, another month in the future is added.

strategic plan

a plan that plots a direction for an organization's future activities and operations; it generally covers at least 5 years. The overall strategy is then translated into the long- and short-term objectives that form the basis of the budget

current assets expected to be converted to cash w/i a year is the idea of

accounting convention

revenue-expense matching

accounting entities should aspire to recognize expenses in same accounting periods as revenues they generate

e. purchased store equip for 3000 on credit Lside entry is store equip. Rside is

accounts payable 3000.

5000 in merchandise returned during an accounting period would be Rside entry to

accounts receivable 5000

consistency

acctng. entities must consistently apply elections available to them so that results from different periods can be compared

economic value added (EVA)

after-tax operating income minus the dollar cost of capital employed

operating assets

all assets acquired to generate income

BT buys 3yr insurance policy for 3000.at end of year BT adjusts insurance expense by crediting a- asset account b-RE account c-liability account d- b&c e- none of the above

assent account

SI buys 2yr insurance policy for 8000cash. SI debits: a-asset account b-liability account c- OE d-b&c e-none of the above

asset account

which is not a liquidity ratio? a-recievables turnover b-inventory turnover c-accounts payable turnover d-asset turnover

asset turnover - falls under operating performance

accounting equation

assets = liabilities + equity

USA FASB Financial Acctng Standards Board

authoritative body - info needs of external users. must be clear and understandable to those with reasonable competance

Questions 4-6 use the following data of Tortoise Sales, Inc.: Unit Units Cost Total Cost Units Sold Beginning inventory 25 $6 $150 Purchase on Apr 25 39 8 312 Purchase on Nov 16 12 9 108 Sales 60 ? ? 4. Tortoise Sales uses a FIFO inventory system. Cost of goods sold for the period is a. $450. b. $430. c. $420. d. $540.

b[(25 × $6) + (35 × $8)]

A list of a Company's investments and sources of Financing using the ACCOUNTING EQUATION

balance sheet

financial position at the end of a period is on : a-income statement b-balance sheet c-statement of re d-none oftheabove

balance sheet

e. borrows 10000from bank at 10%interest for 1 year. the L hand entry to cash and the R hand entry to

bank loan payable 10000 R side

which of the following separates the individual from the entity both legally and with respect to accounting: a-proprietor b-partnership c-corporation d-none of these

corporation

materiality

cost/benefit aspect to financial reporting; insignificant data need not be reported

Sunk Cost

costs for which the outlay has already been made and that cannot be affected by a future decision

post-purchase costs

costs incurred by the customer after purchase

controllable costs

costs whose level a manager can influence or control

innovation process

creates new products and services to satisfy emerging and potential customer needs

a commercial banker uses ratios extensively to analyze customers, which ratio if of most interest? a-payout' b-return on equity c-price earnings d-current

current

investments representing short term holding of securities would appear on the balance sheet as: a- lt liabilities b- lt assets c-current assets d-current liabilities e-none

current assets

8. During a period of rising prices, the inventory method that will yield the highest net income and asset value is a. LIFO. b. average cost. c. specific identification. d. FIFO.

d. FIFO.

2. Cost of goods sold will appear on which financial statement? a. statement of retained earnings b. balance sheet c. statement of cash flows d. income statement

d. income statement

a 2yr insurance policy on July 20xxwould be insurance expense Lhand debit 800 Rhand cash 800. on dec 31 she should make an adjusting entry to a- debit insurance - credit cash b-debit prepaid insurance expense - credit prepaid insurance c-debit cash-credit insurance e- no adjustment necessary

debit prepaid insurance expense - credit prepaid insurance ( 3/4 of policy not used and is an asset)prep

prepaid rent Lhand debit prepaid rent 800 / Rhandcredit (decrease)cash 800. at end of year make an adjusting entry to a-debit prepaid rent expense - credit rent b- debit prepaid rent expense - credit cash c-debit rent expense - credit cash d-debit rent expense - credit prepaid rent e-no entry necessary

debit rent expense - credit prepaid rent (over time the asset converts to an expense)

materialality

deciding what does and doesn't hold merit in income statement. a $20 tip expense is inmaterial when compared to a million dollar deal

analysts discovered inventory increases 15% from 1 year to the next, this is a-horizontal analysis b-vertical analysis c-qualitative analysis d-none of the above

horizontalanalysis

bookeeping

identifying measuring recording

reliability

implies info is reasonably free from error and represents what its supposed to

purchasing machinery for $5000 with a bank note would

increase liabilities and increase assets

if a company bought and manufactured more than cost of goods shipped, inventories would: a-increase b-decrease c-remain the same e-none of the above

increaseincreasing long

debiting accounts receivable: a- increases cash b-decrease cash c-increase AR d-decreases AR

increases AR

dysfunctional behavior

individual behavior that is in basic conflict with the goals of the organization

managerial accounting is for the ____________ type of user

internal

InstituteofManagementAccountants

internal reporting process of managerial accounting as applied to financial accounting

Managerial accounting is involved in

internal reports

which statement shows dividends paid during the accounting period: a- statement of RE b-statement of financial position c-income statement d-b&c

statement of RE

using accelerated depreciation method for tax purposed would be an example of a-managerial b-financial c-tax d-none of these

tax accounting

discounting

the act of finding the present value of future cash flows

process value chain

the innovation, operations, and post-sales service processes

cycle time

the length of time required to product one unit of a product

control limits

the maximum allowable deviation from a standard

hurdle rate

the minimum ROI required to accept an investment

required rate of return

the minimum rate of return that a project must earn in order to be acceptable. usually corresponds to the cost of capital.

velocity

the number of units that can be produced in a given period of time (e.g., output per hour)

standard cost per unit

the per-unit cost that should be achieved, given materials, labor, and overhead standards

Markup

the percentage applied to a base cost; it includes desired profit and any costs not included in the base cost

Split-Off Point

the point at which products become distinguishable after passing through a common process

decentralization

the practice of delegating decision-making authority to lower levels of management

capital budgeting

the process of making capital investment decisions

capital investment decisions

the process of planning, setting goals and priorities, arranging financing, and identifying criteria for making long-term investments

return on investment (ROI)

the profit (earnings) per dollar of investment

standard quantity of materials allowed (SQ)

the quantity of materials that should have been used to produce the actual output (unit materials standard x actual output)

accounting rate of return (ARR)

the rate of return obtained by dividing the average accounting net income by the original investment

internal rate of return (IRR)

the rate of return that equates the present value of a project's cash inflows with the present value of its cash outflows (i.e., it sets the NPV equal to zero). also, the rate of return being earned on funds that remain internally invested in a project

discount rate

the rate of return used to compute the present value of future cash flows

margin

the ratio of operating income to sales

payback period

the time required for a project to return its investment

future value

the value that will accumulate by the end of an investment's life if the investment earns a specified compounded return