MBUS 300 Final

Middleton Company uses the perpetual inventory system. The company purchased an item of inventory for $130 and sold the item to a customer for $200. How will the sale affect the company's Inventory account?

The inventory account will decrease by $130

Which accounting concept can be used by some companies to justify the use of the direct write-off method?

The materiality concept

Select the incorrect statement regarding cost structures.

The more variable cost, the higher the fluctuation in income as sales fluctuate

Which of the following is a true statement about a company that uses the allowance method?

The net realizable value of its accounts receivable is shown on the balance sheet

Which of the following statements about financial statement analysis is not true?

The reason behind a financial statement ratio or percentage analysis result is usually self-evident and does not require further study or analysis

Which of the following is not an advantage of accepting credit cards from retail customers?

There are fees charged for the privilege of accepting credit cards

Select the correct statement regarding fixed costs.

The fixed cost per unit decreases when volume increases

Revenue on account amounted to $5,000. Cash collections of accounts receivable amounted to $2,300. Expenses for the period were $2,100. The company paid dividends of $450. What was net income for the period?

$2,900

The April 30 bank statement for Trimble Corporation shows an ending balance of $34,351. The unadjusted cash account balance was $28,250. The accountant for Trimble gathered the following information: There was a deposit in transit for $4,240. The bank statement reports a service charge of $39. A credit memo included in the bank statement shows interest earned of $95. Outstanding checks totaled $10,935. The bank statement included a $650 NSF check deposited in April. What is the true cash balance as of April 30?

$27,656

Joseph Company purchased a delivery van on January 1, Year 1 for $35,000. The van is estimated to have a 5-year useful life and a $5,000 salvage value. How much expense should Joseph recognize in Year 1 related to the use of the van?

$6,000

Short-term creditors are usually most interested in assessing:

Liquidity

Rhodes Company reports the following information for the Year 1 fiscal year: Sales on account $650,000 Accounts receivable $70,000 Allowance for doubtful accounts $4,000 Determine the average number of days it takes Rhodes to collect its accounts receivable. (Round intermediate calculations to 2 decimal places.)

37

Montana Company was authorized to issue 200,000 shares of common stock. The company had issued 50,000 shares of stock when it purchased 10,000 shares of treasury stock. After the purchase of treasury stock, the number of outstanding shares of common stock was which of the following?

40,000

Flagler Corporation shows a total of $660,000 in its Common Stock account and $1,600,000 in its Paid-in Capital Excess account. The par value of Flagler's common stock is $8. How many shares of Flagler stock have been issued?

82,500

Which of the following statements is generally not true from an investor's perspective?

A 1:1 current ratio is generally preferred over a 1.5:1 current ratio

The research and development department of Apple Computers would likely be organized as:

A cost center

Assuming the entries used to record the disbursements and to replenish the fund are combined, which of the following is included in the entry to replenish a petty cash fund?

A credit to cash

Which of the following describes an activity that reduces a company's bank account balance?

A debit memo

Which one of the following would not be included in a closing entry?

A debit to Unearned Revnue

Which of the following statements regarding horizontal analysis is not true

A horizontal analysis of cost of goods sold on the income statement includes dividing net income by total revenue

Which of the following accounts is decreased with a debit?

Accounts payable

In the reconciliation of the June bank statement, a deposit made on June 30 did not appear on the June bank statement. How is this deposit in transit shown on the bank reconciliation?

Added to the un-adjusted bank balance

Which of the following statements best describes the term "par value?"

An amount used in determining a corporation's logal capital

Recognition of revenue may be accompanied by which of the following?

An increase in an asset or a decrease in a liability

Borrowing cash from the bank is an example of which type of transaction?

Asset source

What is the effect on the balance sheet of making cash sales of inventory to customers for profit?

Assets and stockholders' equity increase

Liabilities are reported on which of the following financial statement(s)?

Balance Sheet

Robertson Company paid $1,850 cash for rent expense. What happened as a result of this business event?

Both total equity and net cash flow for operating activities decreased

When performing sensitivity analysis, which of the following is an example of a variable that management may consider changing to answer "what if" questions?

Both variable cost per unit and sales price per units are correct

Assume that the company sells two products, X and Y, with contribution margins per unit of $12 and $10, respectively. What happens to the break-even point if the sales mix shifts to favor product X? (In other words, sales of product X will make up a higher percentage of the sales mix.)

Break-even point decreases

What happens to the break-even point in sales dollars when the contribution margin ratio increases?

Break-even point decreases

Bruce Company recently reduced its advertising budget. All other costs and revenues were unchanged. Select the response that indicates the impact of the advertising cuts on the company's break-even point and margin of safety.

Break-even point decreases Margin of safety increases

Which of the following appears in the investing activities section of the statement of cash flows?

Cash outflow for the purchase of land

As a Certified Management Accountant, Suzanne is bound by the standards of ethical conduct issued by the Institute of Management Accountants. During the course of business, Suzanne learned that her company has decided to discontinue a major product line. If she mentions this fact to her brother, who is a stockbroker, Suzanne could be in violation of the:

Confidentiality standard

Which of the following entities would report income tax expense on its income statement?

Corporation

Vanessa Grant is responsible for controlling expenses, but is not responsible for generating revenues. Vanessa Grant is a manager of a(n):

Cost center

Which of the following statements regarding credit entries is true?

Credits increase the common stock account

If the company purchased a $60,000 piece of equipment by paying $30,000 and having the rest financed with a short-term note from the bank, then immediately after this transaction what is the expected impact on the components of the current ratio?

Current assets decrease and current liabilities increase by the same amount

Abbott Company purchased $6,500 of merchandise inventory on account. Abbott uses the perpetual inventory system. Which of the following entries would be required to record this transaction?

Debit of $6,500 to Inventory, Credit of $6,500 to Accounts Payable

What is the term used to describe the left side of a T-account?

Debit side

On August 1, Year 1, Bellisa Company issued a $10,000 6%, 1-year note to Citizens Bank. Which of the following entries reflects the adjustment required as of December 31, Year 1?

Debit to Interest Expense, Credit to Interest Payable

Which of the following general journal entries would be used to recognize $7,500 of uncollectible accounts expense under the direct write-off method?

Debit to uncollectible accounts expenses by $7,500, Credit to accounts receivable by $7,500

Llewelyn Company purchased 1,000 shares of its own $10 par value common stock when the market price of the stock was $36 per share. Which of the following journal entries would be used to record the purchase of treasury stock?

Debit treasury stock by 36,000, credit cash by 36,000

Which of the following statements about debits is false?

Debits increase liabilities

Delegating authority and responsibility throughout an organization is known as:

Decentralization

Knell Company paid its sales employees $15,000 in sales commissions. What impact will this transaction have on the firm's working capital?

Decrease it

Why do accountants normally calculate cost per unit as an average?

Determining the exact cost of a product is virtually impossible Some manufacturing-related costs cannot be accurately traced to specific units of product Even when producing multiple units of the same product, normal variations occur in the amount of materials and labor used

Which of the following types of accounts is closed at the end of an accounting cycle?

Dividends

Select the incorrect statement concerning the application of the controllability concept to responsibility accounting.

Each manager should be evaluated on the costs but no the revenues that are under his or her control

On December 1, Year 1, Jack's Snow Removal Company received $6,000 of cash in advance from a customer and promised to provide services for that customer during the months of December, January, and February. How will the Year 1 year-end adjustment to recognize the partial expiration of the contract impact the elements of the financial statements model?

Equity will increase by $2,000

Which of the following are "matched" under the matching concept

Expenses and revenues

Mug Shots operates a chain of coffee shops. The company pays rent of $15,000 per year for each shop. Supplies (napkins, bags, and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis. The cost of rent relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost, respectively?

Fixed cost and fixed cost

Select the incorrect statement regarding cost-volume-profit relationships for multiple products.

For a multi-product company, cost-value-profit analysis can be done using the contribution margin ratio of the most profitable product

Which of the following statements is true regarding accrual accounting?

Revenue is recorded in the period when it is earned and expenses are recorded when they are incurred

Which of the following items would not be found on a contribution format income statement?

Gross margin

Hoff Company uses the allowance method. An account that had been previously written-off as uncollectible was recovered. How do the two parts of the recovery (reinstate receivable and collect the receivable) affect the elements of the financial statements when the two parts are considered together?

Has no effect on total assets, total liabilities or stockholders' equity

Bloom Company has variable cost per unit of $20 and a sales price of $35 per unit. Its total fixed costs are $240,000. Which of the following is a correct statement?

If Company D's variable cost per unit increases and nothing else changes, the margin of safety will decrease

The activity director for City Recreation is planning an activity. She is considering alternative ways to set up the activity's cost structure. Select the incorrect statement from the following.

If the director expects a low turnout, she should use a fixed cost structure

Select the incorrect statement regarding the relationship between cost behavior and profits.

In a pure fixed cost structure, the unit selling price and unit contribution margin are equal

Expenses are reported on which of the following financial statement(s)?

Income statement

Ogilvie Corp. issued 12,000 shares of no-par stock for $40 per share. Ogilvie was authorized to issue 35,000 shares. What effect will this event have on the elements of the company's financial statements?

Increase assets and increase stockholders' equity by $480,000

Which of the following practices is not considered an effective means of reengineering business systems?

Increasing non-value added activities

Common methods of financial statement analysis include all of the following except:

Incremental analysis

Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?

Independence

All of the following are features of managerial accounting except:

Information is characterized by objectivity, reliability, consistency, and accuracy

What is the term used to describe the policies and procedures that are designed to reduce the opportunities for fraud?

Internal controls

Which of the following statements is false regarding managerial accounting information?

It is often used by investors

How does transportation out affect the income statement

It is reported as an operating expense

How would the declaration of a cash dividend affect the calculation of a company's price-earnings ratio? (Hint: Do not consider any change in the market price of the stock that might occur because of the declaration of the dividend.)

It will have no effect on the price-earnings ratio

Stephanie's responsibility report includes the salary and benefits of her secretary. Although Stephanie prepares a performance evaluation for the secretary each year, Stephanie's superior determines how much the secretary will be paid. This example is an illustration of the fact that:

Managers sometimes are held responsible for items over which they have only limited control Responsibility reporting systems are not perfect Control may be shared

Which of the following would be considered as primarily a merchandising business?

Martin's Supermarket

Identify the false statement regarding how product costs in a manufacturing company differ from product costs in a service or merchandising company.

Most labor costs for merchandising companies are treated as product costs

What is the effect of establishing a petty cash fund on the financial statements

No effect

If the allowance method is used, how do the two entries recorded in connection with the recovery of an uncollectible account affect the elements of the financial statements? (Hint: Consider the effect of both entries taken together.)

No effect on total assets or stockholders' equity

Which of the following describes, in part, how the declaration of a stock dividend affects the elements of the financial statements?

No effect on total stockholders' equity

Helena Corporation declared a 2-for-1 stock split on 8,000 shares of $6 par value common stock. If the market price of the stock had been $25 a share before the split, the par value, number of shares, and approximate market value after the split would be:

Par value $3.00, No. of shares, 16,000, Market value $12.50

Which of the following is an administrative control?

Performance evaluation

Which of the following is frequently used to describe the expenses that are matched in the same accounting period in which they are incurred?

Period costs

Which of the following statements is true with regard to product costs versus general, selling, and administrative costs?

Product costs associated with units sold appear on the income statement as cost of goods sold

An organizational unit of a business that incurs costs and generates revenues is known as a(n):

Profit center

Which of the following statements regarding ratio analysis is not true?

Ratio analysis is a specific form of horizontal analysis

Which of the following is not a characteristic of an effective responsibility accounting system?

Reports that set goals for long-term strategic performance

The Sarbanes Oxley Act of 2002:

Requires management to establish a whistle blower policy

The process of evaluating the performance of individual managers is known as:

Responsibility accounting

How is the accounts receivable turnover ratio computed?

Sales divided by net accounts receivable

Which account is increased by a credit?

Service revenue

Lilly's Corporation has working capital of $620,000, and Harmon Corporation has working capital of $840,000. Which of the following statements is not true?

Since Harmon's working capital exceeds Lilly's working capital, it is safe to conclude that Harmon is more liquid than Lilly

Dividends paid by a company are reported on which of the following financial statement(s)?

Statement of changes in stockholders' equity and statement of cash flows

The term that describes what occurs when a manager does what is in his/her best interests and not what is in the best interests of the company as a whole is known as:

Suboptimization

Which of the following statements regarding the Securities and Exchange Commission (SEC) is not true?

The SEC is a private professional organization

Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?

The account is a temporary account

Which of the following statements about the entry to record depreciation is true?

The entry involves a credit to a contra-asset acocunt

Which of the following statements is true regarding a trial balance that balances?

The equality of debits and credits has been proven

Blake Company established a petty cash fund in the amount of $400. At the end of the accounting period, the petty cash box contained receipts for expenditures amounting to $180 and $215 in cash. If the entries to record the disbursements and to replenish the fund are combined, what effect will the entries to replenish the fund have on total assets and expenses?

Total assets decrease by $185, Expenses increase by $185

In vertical analysis, each item is expressed as a percentage of:

Total assets on the balance sheet

Which of the following is a cost of extending credit to customers?

Uncollectable accounts expense

Taste of the Town, Inc. operates a gourmet sandwich shop. The company orders bread, cold cuts, and produce several times a week. If the cost of these items remains constant per customer served, the cost is said to be:

Variable

Java Joe operates a chain of coffee shops. The company pays rent of $20,000 per year for each shop. Supplies (napkins, bags, and condiments) are purchased as needed. The manager of each shop is paid a salary of $3,000 per month, and all other employees are paid on an hourly basis. Relative to the number of customers for a shop, the cost of supplies is which kind of cost?

Variable cost

For a manufacturing company, product costs include all of the following except:

Warehousing costs of finished goods

When are product costs matched directly with sales revenue?

When the merchandise is sold