Reference no: EM131244784

Part A -

Question 1: The stockholders' equity at the beginning of the period was $200,000; at the end of the period, assets were $255,000 and liabilities were $40,000.

If the owner made no additional investments or paid no dividends during the period, did the business incur a net income or a net loss for the period and how much?

$15,000 net income

$15,000 net loss

$95,000 net income

None of the above

Question 2: The proper journal entry to record Ransom Company's billing of clients for $500 of services rendered but not yet paid is:

Debit Cash 500 Credit Sales revenue 500

Debit Accounts Receivable 500 Credit Sales revenue 500

Debit Cash 500 Credit Accounts receivbale 500

None of the above

Question 3: Blankenship Company pays its employees every Friday for work rendered that week. The payroll is typically $10,000 per week. What journal entry would be recorded (on Wednesday) if the end of the accounting period occurred on a Wednesday?

Debit Salary expense 10000 Credit Cash 10000

Debit Salary expense 10000 Credit Salaries payable 10000

Debit Salary expense 6000 Credit Salaries payable 6000

None of the above

Question 4: The accounting equation provides that assets = liabilities less equity

True

False

Question 5: If the balance in the supplies account on February 1 is $12,300, supplies purchased during February were $11,800, and the supplies on hand on February 28 were $2,550, the amount of supplies expense that would appear on the income statement for February is

Question 6: The normal balance of an expense account is a credit.

True

False

Question 7: Certified Public Accountants:

Must meet education and experience requirements and pass an examination.

Are required to exhibit ethical character.

Receive a certificate that denotes their professional standing.

All of the above

Question 8: Which form of ownership provides all owners with the least amount of risk to their personal assets?

Sole proprietorship

Partnership

Corporation

All provide the same amount of risk

Question 9: If assets increased by $5,000 and equity increased by $1,000 during the accounting period, then how did liabilities change?

Increased by $6,000

Increased by $4,000

Decreased by $6,000

None of the above

Question 10: The owner of a computer services business was able to acquire a new computer, valued at $5,000, by establishing an account with the computer vendor, Com Pewters Unlimited. There was no down payment. How does this transaction impact the accounting equation?

Increase an asset, increase a liability

Decrease an asset, decrease a liability

Increase an asset, increase equity

None of the above

Question 11: Which of the following financial statements does not cover a period of time?

Income Statement

Balance Sheet

Statement of Cash Flows

Statement of Retained Earnings

Question 12: Which of the following is not a liability account?

unearned revenue

accounts payable

accounts receivable

notes payable

Question 13: Which of the following accounts would not appear on the income statement?

Salaries expense

Consulting revenue

Income tax expense

Dividends

Part B -

Question 1: Which of the following would NOT be a characteristic of reports prepared under managerial accounting?

may contain subjective estimates

is constrained by the rules of GAAP

Prepared for business segments

includes budgets and forecasts

Question 2: Conversion costs are made up of: direct materials and factory overhead.

True

False

Question 3: Work-in-process inventory appears on the balance sheet for manufacturers.

True

False

Question 4: Managerial accounting helps a company evaluate the performance of company decisions

True

False

Question 5: There are three integral parts to the accumulation of total product cost. They are:

direct materials, indirect materials and direct labor

direct materials, direct labor, and factory overhead

direct labor, indirect materials and factory overhead

None of the above

Question 6: Selling and administrative expenses incurred in generating revenues during the current period are often referred to as

Product costs

Period costs

Manufacturing costs

None of the above

Question 7: Manufacturing overhead consists of:

all manufacturing costs other than direct materials and direct labor

indirect materials but not indirect labor

all manufacturing costs including direct materials and direct labor

None of the above

Question 8: When the level of activity increases, total fixed costs will increase.

True

False

Part C -

Question 1: Which of the following ratios would be of the most interest to the long-term creditor of the business?

Times interest earned

Accounts Receivable Turnover

Inventory Turnover

None of the above

Question 2: If a company has sales of $500,000, cost of goods sold of $100,000, operating expenses of $100,000, average inventory of $8,000, average accounts receivable of $10,000, and average total assets of $35,000, what is its total asset turnover:

Question 3: The balance of the Common Stock ($10 par) account was $400,000 for the entire fiscal year. The company had no preferred stock outstanding during the year. Net income for the year was $40,000; 25% of that amount was distributed to stockholders as a cash dividend. The market price of the stock on the last day of the year was $12 per share. The par value of the stock is $10 per share. What was the price-earnings ratio?

Question 4: Which of the following statements is correct concerning the accrual basis of accounting?

The accrual basis must follow the revenue recognition principle but not the expense recognition principle.

The accrual basis is the same as the cash basis of accounting.

The accrual basis uses the adjusting process to recognize revenues when earned and to match expenses with revenues.

The accrual basis recognizes revenues when earned and records expenses when cash is paid.

Question 5: The steps in the accounting cycle includes the following: adjusting the accounts; preparing a post-closing trial balance; preparing an unadjusted trial balance; analyzing the transactions; journalizing; posting; closing temporary accounts; and preparing the financial statements. What is the proper order of the first five steps?

Analyzing transactions; journalizing; posting; preparing a post-closing trial balance; and adjusting the accounts.

Analyzing transactions; journalizing; posting; preparing an unadjusted trial balance; and adjusting the accounts.

Analyzing transactions; journalizing; posting; preparing a post-closing trial balance; and preparing the financial statements.

None of the above

Question 6: Current assets total $30,000, plant and equipment assets, net, total $40,000, current liabilities total $10,000, and long-term liabilities total $20,000. What is the current ratio?

1.5:1

2.5:1

3.0:1

None of the above

Question 7: Which of the following is not a temporary account?

Common Stock

Sales revenue

Salaries expense

interest expense

Question 8: Gerald had beginning total stockholders' equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Gerald's net income was $180,000. No additional investments were made; however, dividends did occur during the year. How much were the dividends?

Question 9: Closing entries are made after adjusting entries

True

False

Question 10: The objective of financial accounting is to provide relevant and timely information to decision makers external to the organization.

True

False

Question 11: The income statement reports the changes in the retained earnings for a period of time.

True

False

Question 12: The accrual basis of accounting method is generally regarded as being inferior to the cash basis of accounting

True

False

Question 13: On March 15, Armstrong Corporation performed consulting services on account for a customer. Armstrong collected $5,000 on account from that customer on April 22. Which of the following general journal entries would be used to record the transaction that took place on April 22?

debit cash for $5,000, credit consulting service revenue for $5,000

debit cash for $5,000, credit accounts receivable for $5,000

Debit accounts receivable for $5,000, credit cash for $5,000.

None of the above

Question 14: The purchase of land in exchange for cash is recorded with a debit to cash and a credit to land

True

False

Question 15: Compute return on assets given net income of $13,764, beginning assets of $120,000 and ending assets of $176,000.

4.65%

9.3%

12.0%

None of the above

Question 16: Which of the following type(s) of accounts affect equity?

Common stock

Dividends

Retained earnings

All of the above

Question 17: Which of the following would be used in the entry to record a transaction in which the customer pays in advance for products or services before they are earned?

Dividends

Prepaid Rent

Unearned revenue

None of the above

Question 18: The cash basis of accounting recognizes expenses when the cash is paid.

True

False

Question 19: The Prepaid Insurance account had a $455 debit balance at the beginning of the current year; $650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently, the income statement for the year must have shown $______________ of insurance expense.

Question 20: Identify the three basic legal forms of business organizations and some of the characteristics of each form.

Question 21: The stockholders' equity at the beginning of the period was $200,000; at the end of the period, assets were $255,000 and liabilities were $40,000.

If the owner made no additional investments or paid no dividends during the period, did the business incur a net income or a net loss for the period and how much?

Question 22: If the balance in the supplies account on February 1 is $10,000, supplies purchased during February were $11,800, and the supplies on hand on February 28 were $2,500, the amount of supplies expense that would appear on the income statement for February is

Question 23: The normal balance in an asset account is a credit

True

False

Part D -

Question 1: An increase in fixed costs will cause the break-even point to decrease

True

False

Question 2: Rental of equipment at $5,000 per month plus $6 for each machine hour used over 9,000 hours is a type of mixed cost.

True

False

Question 3: Conversion costs are made up of direct labor and factory overhead

True

False

Question 4: Which of the following would be classified as a variable cost?

Straight-line depreciation on production equipment

Copy lease payment of $500 per month plus $0.01 per copy

Fabric for use in quilts to be produced.

None of the above

Question 5: Mixed costs:

have both the characteristics of fixed costs and variable costs.

change in relation to the passage of time.

cannot be accurately plotted on a graph.

None of the above

Question 6: What is the correct formula to calculate the contribution margin ratio?

Fixed Costs / Unit Contribution Margin

(Sales - Variable Costs) / Sales

(Fixed Costs + Target Profit) / Unit Contribution Margin

None of the above

Question 7: The budget process begins with which of the following?

Production budget

Sales budget

Cash Budget

Budgeted Income Statement

Question 8: If the cost of materials purchased in the period is $200,000, and $185,000 is used in the manufacturing process, then:

the unused $15,000 is a period cost.

the unused $15,000 is part of work-in-process inventory in the period.

the unused $15,000 is classified as materials inventory

the unused $15,000 is part of finished goods inventory on the balance sheet.

Question 9: Which statement(s) is True about the uses of managerial accounting?

Managerial accounting is used to support long-term planning decisions.

Managerial accounting helps a company evaluate the performance of company decisions.

Managerial accounting helps users run the day-to-day operations of the business.

All of the above

Question 10: A budgeting system that requires managers to estimate sales and other operating expenses as though operations are being started for the first time is:

static budgeting.

flexible budgeting

zero based budgeting

None of the above

Question 11: Fixed costs for Flag Stamp Co. are $250,000. The selling price per unit is $20.00, and variable costs are $15.00.

The contribution margin ratio is ? (state whole number only - no decimals).

Question 12: Fixed costs for Flag Stamp Co. are $250,000. The selling price per unit is $20.00, and variable costs are $15.00. The break-even sales (in units) are ?

Question 13: Assume sales are $750,000, variable costs are 70% of sales, and income from operations is $100,000. What is the contribution margin ratio and fixed cost, respectively?

Question 14: The following costs were incurred in August:

Direct Materials $20,000

Direct Labor $18,000

Manufacturing (Factory) Overhead $21,000

Selling and Administrative Expenses $37,000

(1) What is the amount of the prime costs?

(2) What is the amount of the period costs?

(3) What is the amount of the conversion costs?

(4) What is the amount of the product costs?

Question 15: If Ragged Edge Arts sells quilts and paintings, and it has estimated selling 50 quilts at $250 each and 42 paintings at $500 each, what are the estimated sales for next year?