Accounting Final Review
Sunk do not influence value because we cannot change the past.(T/F)
True
The benefits and costs that arise from the decision-maker's choice of a particular option are controllable.(T/F)
True
When there are no sales, revenues are zero and total costs equal fixed costs (T/F)
True
Redbird Corporation provides the following data: Cash inflows $50,000 Cash outflows $43,000 Net income $35,000 Depreciation deduction $5,000 Accumulated depreciation $10,000 Tax rate 30% What is Redbird's tax shield?
$1,500
Karen has cloth that originally cost $550. Karen can sell the cloth for $300 as is, or she can further process the cloth and make 8 dresses out of the cloth and sell them for $45 each. The cost of making each dress is $20. What would be the incremental effect on Karen's profit if she further processes the cloth and sells all of the dresses?
$100 decrease
Variable costs per unit are as follows: Raw materials$2.15 Direct labor$1.45 Fixed costs are $5,000 per month. If the company produces 4,000 units in the month of March their total costs will be:
$19,400
GRZ Inc. purchased a customized delivery truck in January 2018 for $70,000. They plan to use this truck for 7 years, and the company estimates the truck's salvage value will be $14,000 at the end of its useful life. (The company uses the straight-line method when recording depreciation.) In 2018, GRZ Inc.'s net income was $575,000, and their tax rate was 35%. What is the value of the depreciation tax shield?
$2,800
Jean's Vegetable Market had the following transactions during 2014: 1. Issued $50,000 of par value common stock for cash. 2. Repaid a 6 year note payable in the amount of $22,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $7,000. 5. Sold a long-term investment (cost $3,000) for cash of $6,000. 6. Acquired an investment in IBM stock for cash of $10,000. What is the net cash provided by financing activities?
$21,000
Bush Company reported net income of $60,000 for the year. During the year, accounts receivable decreased by $8,000, accounts payable increased by $4,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is
$77,000.
A company budgeted unit sales of 204,000 units for January 2013 and 240,000 units for February 2013. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 61,200 units of inventory on hand on December 31, 2012, how many units should be produced in January 2013 in order for the company to meet its goals?
214,800 units
The Sacramento Company reported the following for their most recent year Beginning Assets = 1,000 Beginning Liabilities = 700 Beginning Owners' Equity = 300 Beginning Retained Earnings = 150 Revenue = 500 Expense = 425 Net Income = 75 Return on Equity is
25.0%
The direct materials budget shows: Units to be produced 3,000 Total pounds needed for production 9,000 Total materials required 9,900 What are the direct materials per unit?
3.0 pounds
The following information is taken from the production budget for the first quarter: Beginning inventory in units 1,200 Sales budgeted for the quarter 456,000 Production capacity in units 472,000 How many finished goods units should be produced during the quarter if the company desires 3,200 units available to start the next quarter?
458,000
The production budget shows expected unit sales of 32,000. Beginning finished goods units are 3,600. Required production units are 33,600. What are the desired ending finished goods units?
5,200
On January 1, 2018, H.B. Cat Corp. signs a 25-year mortgage note payable. The loan principal is $750,000, interest is 9%, and the annual cash payments are $70,050. On December 31, 2018, H.B. Cat Corp. records its first annual cash payment. The journal entry to record this payment includes:
A debit to Interest Expense for $67,500
Which of the following statement is false? A) Interest payment on bonds payable is a cash outflow from financing activities. B) Financing activities include the obtaining of cash from issuing debt and repaying the amounts borrowed. C) Statement of cash flows help investors assess the entity's ability to generate future cash flows. D) Non-cash investing and financing activities should not be included in the body of the statement of cash flows.
A) because Interest payment on bonds payable is a cash outflow from operating activities.
A company has an opportunity cost of capital of 9.5%. Which of the following is the most acceptable investment for this company?
An investment with an NPV of $5.
How long is a Budget Period
Any period of time
Sunk costs influence value because they have already occurred.(T/F)
False
Fred's Construction Co. has an opportunity cost of capital of 5.5%. Which of the following is the most acceptable investment for Fred's Construction Co.? A. An investment with an NPV of ($2) B. An investment with an NPV of $0 C. An investment with an NPV of $7
C.
The annual depreciation tax shield is computed as
Depreciation deduction for the year x tax rate.
In calculating depreciation, both plant asset cost and useful life are based on estimates.(T/F)
False
Interest payment on bonds payable is a cash outflow from financing activities (T/F)
False
A decision maker's control over costs and benefits decreases as the time horizon increases.(T/F)
False
Even when there are no sales, total costs include only variable costs.(T/F)
False
If budgeted cost is greater than actual cost, the result is an unfavorable variance.(T/F)
False
Quantifying the longer-term implications of short-term actions is difficult. Consequently:
Frequently, only qualitative assessments are possible.
Which of the following transactions are considered investing activities? I. Bonds payable are issued for cash at a discount II. Land is sold for cash at book value III. 100 shares of another entity's common stock are purchased for cash
II and III
Variance analysis is an important tool because
It helps management determine why actual profits varied from budgeted profits
Which of the following statements is true? 1. Budgeting and long-range planning is the same. 2. Budget period is always one year in length.
Neither
Statement of cash flows help investors assess the entity's ability to generate future cash flows (T/F)
True
Shickman Company makes the widgets it uses in one of its products at a cost of $8 per unit. This cost includes $2 of fixed overhead. The company needs 10,000 of these plugs annually, and Orlando Company has offered to sell them at $5 per unit. If Shickman Company purchases the plugs, the company would:
Increase profits by $10,000
The controller of Simpson Enterprises estimates that the installation and training for a new computer system will cost around $125,000. In which element of the project cash flow elements will this cost be included?
Initial outlay.
Buffalo Tom Cruises purchased a five-year insurance policy for its ships on April 1, 2015 for $60,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2015 is
Insurance Expense 9,000 Prepaid Insurance 9,000
Which one of the following is not a benefit of budgeting?
It provides assurance that the company will achieve its objectives.
The primary role of accounting is to:
Measure the costs and benefits of decision options.
Mumford and Sons Corp. paid a dividend of $5,000 to its shareholders. How would this transaction affect net income?
No effect
Bright Company produces light bulbs. Last year's income statement is given below: Sales (40,000 units) $400,000 Less: Variable Costs $240,000 Contribution Margin $160,000 Less: Fixed Costs $100,000 Profit before Tax $60,000 If Bright Company decreases its price by 10% per unit, the sales volume will increase by 15%. Should Bright Company adopt this strategy?
No, because profit before tax decreases by $22,000
Gecko Company is deciding between using a supplier and making the wheels for its skateboards internally. Currently, the manufactured wheels have a variable unit cost of $2. The monthly fixed cost is $16,000, but 25% of it can be eliminated if wheels are no longer produced. A supplier has offered to produce the wheel at $3 per wheel and can produce 3,200 wheels for the 800 skateboards needed monthly. Should Gecko outsource wheels production or make them internally?
Outsource because the incremental cost savings is $800.
A practical shortcut for the denominator in the Return on Equity ratio is
Owners' Equity at the beginning of the period
The Total Liabilities to Tangible Net Worth ratio helps lenders such as a bank to monitor a loan to prevent the borrower from
Paying themselves a large dividend from the cash reserves of the company
Contribution margin is:
Sales revenue less variable expenses.
Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?
The appointment of a new CPA firm to perform an audit.
A payment of $500 to a vendor was recorded with a debit to Accounts Payable of $50 and a credit to Cash of $500. Which of the following statements is true?
The credit column will be $450 larger than the debit column.
When there is a production constraint, the company should first produce the product with:
The highest contribution margin per unit of the constrained resource
The minimum expected rate of return of the management from any project is referred to as the:
The hurdle rate.
The Liabilities to Tangible Net Worth ratio is
Total Liabilities divided by (Tangible Assets minus Total Liabilities)
A decision maker's control over costs and benefits increases as the time horizon increases.(T/F)
True
Financing activities include the obtaining of cash from issuing debt and repaying the amounts borrowed (T/F)
True
If actual cost is greater than budgeted cost, the result is an unfavorable variance.(T/F)
True
If actual cost is less than budgeted cost, the result is a favorable variance(T/F)
True
A company can achieve an increase in contribution margin (given no other changes) if:
Variable costs decrease.
A trial balance is a listing of
general ledger accounts and their balances
On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include
a debit to Supplies and a credit to Accounts Payable
If a plant asset is retired before it is fully depreciated and no salvage value is received
a loss on disposal occurs
BK Co. is deciding whether to replace its old manufacturing machine with a new one. Which of the following is not a relevant cost when making this decision?
cost of old machine
Liabilities of a company are owed to
creditors
The balance in the Prepaid Rent account before adjustment at the end of the year is $21,000, which represents three months' rent paid on December 1. The adjusting entry required on December 31 is to
debit Rent Expense, $7,000; credit Prepaid Rent, $7,000.
Deerhoof Company purchases equipment of $2,700 and supplies of $400 from Milkman Co. for $3,100 cash. The entry for this transaction will include a
debit to Equipment $2,700 and a debit to Supplies $400 for Deerhoof.
Husker Du Supplies Inc. purchased a 12-month insurance policy on March 1, 2015 for $1,800. At March 31, 2015, the adjusting journal entry to record expiration of this asset will include a
debit to Insurance Expense and a credit to Prepaid Insurance for $150.
Pare Company reported a net loss of $30,000 for the year ended December 31, 2014. During the year, accounts receivable decreased $15,000, merchandise inventory increased $25,000, accounts payable increased by $30,000, and depreciation expense of $20,000 was recorded. During 2014, operating activities
provided net cash of $10,000
The Pleasantville Company makes 20,000 units per year of a part used in production. The unit product cost is as follows: Direct materials $6.20 Direct labor 2.30 Variable Manufacturing Overhead 1.20 Fixed Manufacturing Overhead .80 Unit product cost $10.50 An outside supplier has offered to sell the company the same part at a cost of $9.00 per unit. If the company purchases the part only half of the fixed overhead would be avoided. How much of the unit product cost is relevant in making this decision?
$10.10
Grand Rapids Rafting Company recorded the following data for the month of October: Cost of beginning inventory $46,000 Cost of ending inventory $32,000 Cost of goods sold$122,000 Inventory purchases for the month of October total:
$108,000
The Wingo Company sells a single product for $21 per unit. If variable expenses are 70% of sales and fixed costs are $4,200, the break-even point in dollars will be:
$14,000
A machine with a cost of $480,000 has an estimated salvage value of $30,000 and an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?
$150,000
Centro-matic Company began the year with stockholders' equity of $30,000. During the year, Centro-matic issued additional shares of stock in exchange for cash of $42,000, recorded expenses of $120,000, and paid dividends of $8,000. If Centro-matic's ending stockholders' equity was $112,000, what was the company's revenue for the year?
$168,000.
If unearned revenues are initially recorded in revenue accounts and not all the related services been performed at the end of the accounting period, the failure to make "correcting and adjusting entries will cause
revenues to be overstated.
A law firm received $3,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause
revenues to be understated.
An error has occurred in the closing entry process if
the balance sheet accounts have zero balances.
What is the first step in the decision-making process?
Specify the problem and goals.
Interest payment on bonds payable is a cash outflow from operating activities (T/F)
True
During 2015, Zuma Company had $150,000 in cash sales and $1,240,000 in credit sales. The accounts receivable balances were $180,000 and $215,000 at December 31, 2014 and 2015, respectively. Using the direct method of reporting cash flows from operating activities, what was the total cash collected from all customers during 2015?
$1,355,000
Soundgarden Company collected $18,200 in May of 2015 for 5 months of service which would take place from October of 2015 through February of 2016. The revenue reported from this transaction during 2015 would be
$10,920.
Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000. During the year, the business recorded $48,000 in catering revenues and $30,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during the year. The stockholders' equity at the end of the year was
$57,000.
The income statement for the year 2015 of Fugazi Co. contains the following information: Revenues. $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 10,000 Supplies Expense 6,000 Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 77,500 Net income (loss). $(7,500) The entry to close the revenue account includes a
debit to Revenues for $70,000.
If a company fails to make an adjusting entry to record supplies expense, then
expense will be understated.
Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally
expensed when incurred
During the year, Salaries Payable decreased by $5,000. If Salary Expense amounted to $174,000 for the year, the cash paid to employees (including deductions from gross pay) is
$179,000
Cordet's Café has a potential investment of $900,000, which generated a depreciation tax shield of $60,000 and a tax rate of 25% for 2009. How much depreciation expense did Cordet's Café record during 2009?
$240,000
On September 1, 2017, ABC Inc. had an accounts payable balance of $15,000. During the month, the company purchased equipment for $35,000 on account and paid the payable in the amount of $17,000. What is the balance of accounts payable on September 30, 2017?
$33,000
The net income reported on the income statement for the current year was $245,000. Depreciation was $40,000. Account receivable and inventories decreased by $12,000 and $35,000, respectively. Prepaid expenses and accounts payable increased, respectively, by $1,000 and $8,000. How much cash was provided by operating activities?
$339,000
The following credit sales are budgeted by Terra Co.: January $204,000 February 300,000 March 420,000 April 360,000 The company's past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of April is
$360,000.
The following data are available for Two-off Company. Increase in accounts payable $120,000 Increase in bonds payable (Borrowing Cash) 300,000 Sale of investments 150,000 Issuance of common stock 160,000 Payment of cash dividends 90,000 Net cash provided by financing activities is:
$370,000.
LRRP Company had credit sales of $650,000. The beginning accounts receivable balance was $15,000 and the ending accounts receivable balance was $140,000. What were the cash collections from customers during the period?
$525,000
Chik Chik Company showed the following balances at the end of its first year: Cash $6,000 Prepaid insurance 9,400 Accounts receivable 7,000 Accounts payable 5,600 Notes payable 8,400 Common stock 2,800 Dividends 1,400 Revenues 44,000 Expenses 35,000 What did Chik Chik Company show as total credits on its trial balance?
$60,800
Rubble Company reported net income of $70,000 for the year. During the year, accounts receivable increased by $6,000, accounts payable decreased by $5,000 and depreciation expense of $8,000 was recorded. Net cash provided by operating activities for the year is
$67,000.
A company has budgeted direct materials purchases of $300,000 in July and $480,000 in August. Past experience indicates that the company pays for 70% of its purchases in the month of purchase and the remaining 30% in the next month. During August, the following items were budgeted: Wages Expense $150,000 Purchase of office equipment 72,000 Selling and Administrative Expenses 48,000. Depreciation Expense 36,000 The budgeted cash disbursements for August are
$696,000.
If selling price is $25, unit contribution margin is $10, sales volume is 1,000 units, and fixed costs are $8,000, the profit is:
$7,000
Off-Line Co. has 9,000 units in beginning finished goods. The sales budget shows expected sales to be 36,000 units. If the production budget shows that 42,000 units are required for production, what was the desired ending finished goods?
15,000
Harold Company reported the following for their most recent year: Beginning Assets = 5,000 Beginning Liabilities = 3,500 Revenue = 4,850 Expense = 4,600 Return on Equity is:
16.67%
The direct materials budget details 1. the number of direct materials to be purchased. 2. the cost of direct materials to be purchased A) neither B) Both C) 2 D) 1
B)
Difference between budgeting and long-range planning
time period
An accountant has debited an asset account for $1,300 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction? A)Credit a Stockholders' account for $800. B)Credit an asset account for $800. C)Credit another liability account for $800. D)Debit a Stockholders' account for $800.
D $1,300 (debit) = $500 (credit) + X; X = $800 Credit, not Debit
Which of the following statements is true? A) Operating budgets are long-term plans that aim for the maximum possible contribution from available capacity resources. B) A capital budget links strategic and financial budgets. C) Strategic plans span a few years and flesh out how the firm's overall mission and core competencies will influence operations. D) None of them is correct
D)
Zen Arcade paid the weekly payroll on January 2 by debiting Salaries and Wages Expense for $47,000. The accountant preparing the payroll entry overlooked the fact that Salaries and Wages Expense of $27,000 had been accrued at year end on December 31. The correcting entry is
Salaries and Wages Payable 27,000 Salaries and Wages Expense 27,000
Which of the following is not a part of the initial outlay for a capital expenditure?
Salvage value.
If the discount rate increases:
The present value of future cash flows will decrease, if other things remain unchanged
Billings Company's plant manager is trying to better understand his plant's inventory workflow. He determined that $10 million was spent on purchasing raw materials, $2 million on direct labor and $3 million on manufacturing overhead. If raw materials beginning and ending inventories are $2 million and $1 million, respectively, and work-in-process beginning and ending inventories are $6 million and $4 million respectively, how much is cost of goods manufactured?
$18 million.
If total liabilities decreased by $50,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?
$20,000 decrease
Smith & Sons Company provided the following information for the month of May: Beginning raw materials $5,000 Ending raw materials $3,000 Purchases of raw materials $2,000 Beginning work-in-process $10,000 Ending work-in-process $6,000 Direct labor $8,000 Manufacturing overhead $5,000 The company's cost of goods manufactured for May is:
$21,000
On May 1, 2015, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2008. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. What depreciation expense should be recorded on this asset in 2015?
$22,500
Harms Shoe Company applies manufacturing overhead based on direct labor hours as the allocation volume. Information concerning manufacturing overhead and labor for July follows: Estimated direct labor 6,100 hours at $14.20 per hour Estimated manufacturing overhead $277,184 How much overhead will be allocated during July to products with a direct labor of 5 hours?
$227.20
Crue Company had the following transactions during 2015: -Sales of $4,800 on account -Collected $2,000 for services to be performed in 2016 -Paid $1,625 cash in salaries -Purchased airline tickets for $250 in December for a trip to take place in 2016 What is Crue's 2015 net income using accrual accounting?
$3,175.
Leslie's Company applies manufacturing overhead based on the labor hours. Total labor hours are 800, and total manufacturing overhead cost is $8,000 for this month. Below is the information for job A in this month: - The direct labor: 200 hours and $20 per hour - Direct materials cost: $10,000 -Total units produced: 500 What is the unit product cost for Job A?
$32
During the year 2015, Dilego Company earned revenues of $90,000, had expenses of $56,000, purchased assets with a cost of $10,000 and paid dividends of $6,000. Net income for the year is
$34,000.
Black Keys Company began the year with stockholders' equity of $280,000. During the year, the company recorded revenues of $375,000, expenses of $285,000, and paid dividends of $30,000. What was Black Keys' stockholders' equity at the end of the year?
$340,000.
Spikes Company manufactures 5,000 high-end racing bicycles each period. Spikes has been making all the components for the bikes, but a supplier has approached Spikes with an offer to sell her bicycle seats at a price of $40. The cost to make one bicycle seat is computed as follows: Direct Materials $10 Direct Labor $18 Manufacturing overhead (100% fixed) $10 If the bicycle seats are purchased from the outside supplier, $1 per unit of the fixed manufacturing overhead costs can be avoided. If Spikes purchases the seats, the facility used to manufacture the seats would be rented for $20,000 per period. If Spikes chooses to purchase the bicycle seats, the change in annual net operating income is a:
$35,000 decrease.
All revenue and expense accounts have been closed at the end of the calendar year for Wang Company. The income summary account has total debits of $490,000 and total credits of $720,000. As of the same date, Retained Earnings has a balance of $175,000 and the Dividends account has a balance of $32,000. What is the new balance of Retained Earnings?
$373,000
Jason is going to play golf this afternoon and has to choose between two different golf courses. The greens fees to play each are both $18, the cart fees at each course is $9. One course, however, is located 20 miles further than the other. Therefore it would cost approximately an additional $4 in gas to play the course that is further away. Relevant costs total:
$4
The Worxs Company wants to achieve a profit of $126,000. They currently sell 5,000 units at a price of $72 per unit with variable costs of $32 per unit. Fixed costs total $84,000. In order to achieve their target profit without increasing the selling price, the company will need to:
Increase sales by 250 units
The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2015: Accounts payable $18,000 Accounts receivable 11,000 Accumulated depreciation - equipment 28,000 Advertising expense 21,000 Cash 15,000 Common stock 42,000 Dividends14,000 Depreciation expense 12,000 Insurance expense 3,000 Note payable, due 6/30/16 70,000 Prepaid insurance (12-month policy)6,000 Rent expense 17,000 Retained earnings (1/1/15)60,000 Salaries and wages expense 32,000 Service revenue 133,000 Supplies 4,000 Supplies expense 6,000 Equipment 210,000 What is the company's net income for the year ending December 31, 2015?
$42,000
Electrelane Company showed the following balances at the end of its first year: Cash $ 4,000 Prepaid insurance 7,000 Accounts receivable 5,000 Accounts payable 4,000 Notes payable 6,000 Common stock 2,000 Dividends 1,000 Revenues 32,000 Expenses 25,000 What did Electrelene Company show as total credits on its trial balance?
$44,000
Barsuk Company began the year with stockholders' equity of $108,000. During the year, Barsuk issued stock for $147,000, recorded expenses of $420,000, and paid dividends of $28,000. If Barsuk's ending stockholders' equity was $290,000, what was the company's revenue for the year?
$483,000.
Sargent Corporation bought equipment on January 1, 2015. The equipment cost $360,000 and had an expected salvage value of $60,000. The life of the equipment was estimated to be 6 years. The annual depreciation expense using the straight-line method of depreciation is
$50,000.
Sharon Foods, Inc. reported the following transactions for September 2016. 1. The business received $22,000 cash and issued common stock. It was credited to Common Stock. 2. The business purchased office equipment for $9,000 for which $2,500 cash was paid and the balance was put on a note payable. 3. Paid insurance expense of $1,500 cash. 4. Paid the September utility bill for $900 cash. 5. Paid $1,500 cash for September rent. 6. The business had sales of $11,000 in September. Of these sales, 60% were cash sales, and the balance was credit sales. 7. The business paid $8,000 cash for office furniture. What are the total liabilities at the end of September, 2016?
$6,500
If fixed costs are $15,000, profit before income taxes is $55,000, revenues are $160,000, variable costs are $90,000, contribution margin is:
$70,000
Presto Company purchased equipment and these costs were incurred: Cash price $65,000 Sales taxes 3,600 Insurance during transit. 640 Installation and testing 860 Total costs $70,100 Presto will record the acquisition cost of the equipment as
$70,100
What is the cost of goods sold given the following information? Beginning Work in Process 125,000 Beginning Finished Goods 78,000 Ending Work in Process 139,500 Ending Finished Goods 102,000 Direct Labor Cost 15,000 Cost of Goods Manufactured 145,000
121,000
A plant asset was purchased on January 1 for $60,000 with an estimated salvage value of $12,000 at the end of its useful life. The current year's Depreciation Expense is $6,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $30,000. The remaining useful life of the plant asset is
3 years
In a make-or-buy decision relevant costs would include all of the following except: A)Depreciation expense on the plant equipment currently used to make the part B)Direct labor costs of the employees in that department which makes the part C)Direct material costs of the part D)The cost of buying the part from an outside company
A The depreciation expenses are fixed costs for the plant and are not relevant in the decision making process.
Regression analysis is:
A statistical method for estimating fixed and variable costs.
Relevant range is defined as:
A statistical method that uses the normal range of operations to estimate fixed and variable costs.
Which of the following would not result in unearned revenue? A)Services performed on account B)Sale of two-year magazine subscriptions C)Rent collected in advance from tenants D)Sale of season tickets to football games
A)
Which of the following statements is not correct? A)Double-declining-balance depreciation method is most frequently used depreciation method in businesses today B)Units-of-activity is an appropriate depreciation method to use when the productivity of the asset varies significantly from one period to another. C)The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is straight-line. D)The calculation of depreciation using the declining balance method ignores salvage value in determining the amount to which a constant rate is applied.
A) Straight line depreciation is the most commonly used method.
The basic accounting equation may be expressed as
All of these answers are correct.
The management of Samson Manufacturing has determined that production workers have been consistently using more and more labor hours while producing the same number of units, despite new technology implementation. Management suspects that lack of training on the new technology has caused productivity to decline. Administrative costs are currently split equally among the product lines. Which of the following is the most effective cost driver to allocate administrative costs to encourage production supervisors to increase productivity?
Allocate administrative costs based on direct labor used in manufacturing.
Roger Company's Year 1 Balance Sheet has $150,000 in total assets and $100,000 in total liabilities. During the year, it paid off its $15,000 accounts payable using cash, and its accounts receivable increased by $4,000. It also bought $10,000 equipment using cash. If those are the only changes that occurred to Roger Company in Year 2, what are Roger Company's total assets and liabilities at the end of Year 2?
Assets = $139,000; Liabilities = $85,000
The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salaries and Wages Expense $3,000 Rent Expense 1,500 Advertising Expense 800 Supplies Expense 100 Insurance Expense Total expenses 5,700 Net income $1,300 The entry to close the expense accounts includes a
Credit to Rent Expense for $1,500.
On July 1, Runner's Sports Store paid $14,000 to Corona Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner's Sports Store is
Debit Rent Expense, $3,500; Credit Prepaid Rent, $3,500.
REM Real Estate received a check for $27,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $27,000. Financial statements will be prepared on July 31. REM Real Estate should make the following adjusting entry on July 31:
Debit Unearned Rent Revenue, $4,500; Credit Rent Revenue, $4,500.
Which of the expenditures below should be classified as land? -Parking lots -Electricity used by a machine -Excavation cost -Interest on building construction loan -Cost of trial runs for machinery -Drainage costs -Costs to install a machine -Fences -Unpaid (past) property taxes assumed -Cost of tearing down a building when land and a building on it are purchased
Drainage costs Unpaid property taxes assumed Cost of tearing down
On June 1, Oxford Company purchased $8,000 of office equipment from Comma Company. Oxford Company paid $2,000 in cash, and it signed a 6-month, 10% note payable for the remaining balance. How would Oxford Company record this transaction on June 1?
Equipment 8,000 Cash 2,000 Notes Payable 6,000
Land improvements are generally charged to the Land account.(T/F)
False
Amy is deciding how many courses to take this semester. If she enrolls in 6 - 8 credits, she will pay $4,500 in tuition. If she enrolls in 9 - 15 credits, she will pay $7,500 in tuition. If she enrolls in 16 - 18 credits, her tuition will be $8,750. This type of cost structure is best described as:
Step Costs
Recording depreciation on plant assets affects the balance sheet and the income statement.(T/F)
True
Wang Company manufactures 8,000 pairs of tennis shoes each year. The price of a pair of shoes is $30. The cost of making one pair of shoes is: Direct materials $ 11 Variable manufacturing overhead 5 Direct labor 4 Fixed manufacturing overhead 7 The fixed overhead costs are unavoidable. A local Austin company recently offered to buy 3,000 pairs of shoes at $21 per pair. If Wang Company can accept the special order without disrupting its current business (Wang Company has excess capacity), should it accept the order? No other costs will be incurred if Wang Company decides to accept the order.
Yes, because net income will increase by $3,000.
ABC Inc. manufactures motorcycles. Currently, the company buys 120,000 mufflers per year for $100 each. In addition to the cost of the mufflers themselves, they spend $10,000 per year transporting the mufflers from the supplier to their factory. ABC Inc. is considering using its idle capacity to produce mufflers in house. If they make their own mufflers, it will cost $55 in direct materials, $25 in direct labor, and $15 in machine hours for each muffler (it requires one machine hour per muffler). ABC would also allocate some of its fixed overhead costs to each muffler. Should ABC Inc. start manufacturing mufflers in house?
Yes, they will save $610,000
