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The four main accounting issues for plant assets are:
(1) _________________________,
(2) _____________________________,
(3) _________________________,
(4) _____________________________.
 
(1)    Computing of the costs of plant assets,
(2)    Allocating the costs of plant assets against revenues for the periods they benefit,
(3)    Accounting for repairs and expenditures,
(4)    Recording the disposal of plant assets
   
The formula for calculating total asset turnover is _______________________________________.
 
Net sales divided by average total assets
   
______________________ are costs that increase the usefulness of land, but have limited useful lives and are thus depreciated.
 
Land improvements
   
A contingent liability is a potential obligation that depends on a future event arising from a future transaction or event.
 
FALSE
   
When the times interest earned ratio declines, the likelihood of default on liabilities increases.
 
TRUE
   
Obligations due to be paid within one year or within the company's operating cycle, whichever is longer, are:
 
A.   Current assets
B.   Current liabilities
C.   Earned revenues
D.   Operating cycle liabilities
E.   Bills
   
If the times interest ratio:
 
A.   Increases, then risk increases
B.   Increases, then risk decreases
C.   Is greater than 1.5, then the company is in default
D.   Is less than 1.5, the company is carrying too little debt
E.   Is greater than 1.5, the company is likely carrying too much debt
   
The amount of federal income taxes withheld from an employee's paycheck is determined by:
 
A.   The employee's annual earnings rate and number of withholding allowances
B.   The employer's merit rating
C.   The amount of social security taxes
D.   Multiplying the gross pay by 6.2%
E.   The employee's credit rating
   
The Wage and Tax Statement is:
 
A.   Form 940
B.   Form 941
C.   Form 1040
D.   Form W-2
E.   Form W-4
   
If a company had net income of $2,379,600, interest expense of 234,000, a tax rate of 40%,
and operating income of 4,200,000, what would the times interest earned ratio be for the company?
 
A.   10.17
B.   17.95
C.   7.78
D.   7.18
E.   4.07
 
4,200,000/234,000 = 17.95
   
Identify and discuss the factors involved in computing federal income taxes for employees.
The amount of federal income tax withheld for each employee depends on
 
(1) an employee's earnings level and
(2) the number of withholding allowances claimed by the employee. This amount can be determined by using a wage bracket withholding table.
   
A company borrowed $60,000 on a 60-day, 10% note payable from its bank. Compute the total cash payment at the note's maturity.
 
At maturity: $60,000 + $(60,000 x .1 x 60/360) = $61,000
   
The difference between the amount borrowed and the amount repaid is referred to as _______________.
 
Interest
   
The carrying value of a long-term note is computed as the present value of all remaining future payments,
discounted using the market rate at the time of issuance.
 
TRUE
   
A basic present value concept is that cash received in the future is worth more value than the same amount of cash received today.
 
FALSE
   
A bond's par value is not necessarily the same as its market value.
 
TRUE
   
The effective interest method yields increasing amounts of bond interest expense and decreasing amount of
premium amortization over the life of the bond.
 
FALSE
   
The contract between the bond issuer and the bondholders, which identifies the rights and obligations of the parties is called a(n):
 
A.   Debenture
B.   Bond indenture
C.   Mortgage
D.   Installment note
E.   Mortgage contract
   
Amortizing a bond discount:
 
A.   Allocates a part of the total discount to each interest period
B.   Increases the market value of the Bonds Payable
C.   Decreases the Bonds Payable account
D.   Decreases interest expense each period
E.   Increases cash flows from the bond 
   
On January 1, 2010, Merrill Company borrowed $100,000 on a 10-year, 7% installment note payable. The terms of the note require
Merrill to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general journal entry to record the first payment
on the note on December 31, 2010 is: 
     
On June 1, a company issued $200,000 of 12% bonds at their par value plus accrued interest. The interest on these bonds is
payable semiannually on January 1 and July 1. Prepare the issuer's journal entry to record the bond issuance of June 1. 
 

 
$10,000
 
Interest payable: $200,000 x 12% x 5/12 year = $10,000
   
A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%.
The company received $484,087 in cash proceeds. Using the straight-line method, prepare the issuer'
 journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium. 
 

Cash payment: $500,000 x 9% x ½ year = $22,500
Discount amortized: ($500,000 - $484,087)/20 semiannual periods = $795.65
Interest expense: $22,500 + $795.65 = $23,295.65

    
On January 1, 2010, Silver issues $300,000 of 12%, 20-year bonds at a price of 96½.
What is the total bond interest expense that will be recognized over the life of the bond?
 
730,500
 
Feedback: Cash Interest Payments: 300,000*.12*20 = 720,000 plus discount 10,500 = $730,500
   
A stock option is also called a stock dividend.
 
FALSE
   
The total amount of cash and other assets received by a corporation from its stockholders in exchange for common stock is:
 
A.   Always equal to its par value
B.   Always equal to its stated value
C.   Referred to as contributed capital
D.   Referred to as retained earnings
E.   Always below its stated value
   
A corporation's minimum legal capital is often defined to be the total par value of the shares:
 
A.   Issued
B.   Authorized
C.   Subscribed
D.   Outstanding
E.   In treasury 
   
A company has 200,000 shares of $1 par value common stock and 20,000 shares of 7%, $100 par, cumulative preferred stock outstanding.
The balance in Retained Earnings account at the beginning of the year was $1,500,000 and one year's dividends were in arrears.
Net income for the current year was $2,000,000. If the company paid a dividend of $3 per share on its common stock,
what is the balance in Retained Earnings account at the end of the year?
 
A.   $3,500,000
B.   $2,900,000
C.   $2,760,000
D.   $2,620,000
E.   $620,000
 
 
What is an extraordinary gain or loss? How is it presented on a complete income statement?
Be sure to include examples of extraordinary items.
 
An extraordinary gain or loss is one that is both unusual and infrequent. It is presented on a complete income statement
in a separate category after income from continuing operations. Some examples of extraordinary items are: expropriation
of property by a foreign government, condemning of property by a domestic government body, prohibition against using
an asset by a newly enacted law and losses and gains from an unusual and infrequent calamity ("act of God").
   
During the current year, Quark Company earned $90,000 in income and paid cash dividends of $10,000 to preferred shareholders.
Quark had 12,500 weighted-average shares of common stock outstanding for the year. Calculate the company's earnings per share.
 
($90,000 - $10,000)/12,500 shares = $6.40
   
A company reported net income of $850,000 for the current year. The year-end market price per common share was $12
and there were 425,000 weighted-average shares of common stock outstanding. Calculate the company's price-earnings ratio.
 
$12/($850,000/425,000 shares) = 6
   
A company reported $990,000 in net income for the current year. Total weighted-average number of common shares
outstanding is equal to 150,000 shares and the year-end market price is $79.20 per common share.
Calculate the company's price earnings ratio.
 
$79.20/($990,000/150,000 shares) = 12.0
 

A corporation had stockholders' equity on January 1 as follows: Common Stock, $5 par value, 1,000,000 shares authorized, 500,000 shares issued; Contributed Capital in Excess of Par Value, Common Stock, $1,000,000; Retained Earnings, $3,000,000. Prepare journal entries to record the following transactions:

   
A company had the following stockholders' equity on January 1:
 

 
On January 10, the company declared a 40% stock dividend to holders of record on January 25, to be distributed January 31.
The market value of the stock on January 10 prior to the dividend was $20 per share.
What is the book value per common share on February 1?
 
Total stockholders' equity does not change; however,
the number of shares outstanding is now 400,000 shares + (400,000 shares x .40) = 560,000 shares.
Book value per share = $1,064,000/560,000 shares = $1.90 per common share  
To be classified as a cash equivalent, an investment must be readily convertible to an unknown amount of cash,
because the market value may be affected by interest rate changes.
 
FALSE
   
Accounting standards require that the statement of cash flows be included in a complete set of financial statements.
 
TRUE
   
An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date
so that its market value is relatively insensitive to interest rate changes is a(n):
 
A.   Short-term marketable equity security
B.   Operating activity
C.   Common stock
D.   Cash equivalent
E.   Financing activity
   
Cash flows from selling trading securities are reported in the statement of cash flows as part of:
 
A.   Operating activities
B.   Financing activities
C.   Investing activities
D.   Noncash activities
E.   None of these as this is not reported in the statement of cash flows
   
If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):
 
A.   Operating activity.
B.   Investing activity.
C.   Financing activity.
D.   Noncash investing and financing activity.
 
E.   None of these. This is not reported in the statement of cash flows.
   
Assume the following information was available for the current year's operations of Jungle Jim's International Market.
          Use these data to calculate the cash paid for merchandise.
 

 
A.   $218,000
B.   $223,200
C.   $220,000
D.   $228,800
E.   $234,000
 
Increase in inventory: $57,400 - $54,800 = $2,600
Increase in Accounts Payable: $59,800 - $54,400 = $5,400
Cash paid for merchandise: $226,000 + $2,600 - $5,400 = $223,200   
Accounting standards require that the statement of cash flows be included in a complete set of financial statements.
 
TRUE  
A cash based measure that is used to help business decision makers estimate the amount and timing of cash flows
is the cash flow on total assets ratio.
 
TRUE  
When preparing the operating section of the statement of cash flows using the indirect method, non-operating gains
are added back to net income.
 
FALSE  
Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.
This implies that $40,000 cash was received from the sale.
 
FALSE
   
A company had total assets of $1,760,000, total cash flows of $1,320,000 and cash flows from operations of $205,000.
The cash flow on total assets ratio is equal to:
 
A.   1.33%
B.   8.58%
C.   11.65%
D.   15.5%
E.   75%
 
$205,000 / $1,760,000 = 11.65%
   
A company's cash flow on total assets ratio equals 16%. If average total assets equal $2,937,500 and total cash flows equal $600,000,
what is the amount of cash flows from operations?
 
A.   $18,359,375
B.   $600,000
C.   $470,000
D.   $96,000
E.   $566,000
 
$2,937,500 x .16 = $470,000  
If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):
 
A.   Operating activity.
B.   Investing activity.
C.   Financing activity.
D.   Noncash investing and financing activity.
E.   None of these. This is not reported in the statement of cash flows.
   
Use the following information to calculate cash paid for wages and salaries:
 

 
A.   $157,400
B.   $163,800
C.   $168,000
D.   $172,200
E.   $174,400
 
Increase in Salaries Payable: $10,600 - $6,400 = $4,200
Cash paid for salaries: $168,000 - $4,200 = $163,800
   
Kodak reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year.
Kodak's net cash flows from operations was $2,204 million.
Calculate Kodak's cash flow on total assets ratio.
 
$2,204/[($13,362 + $13,369)/2] = 16.5%
   
_____________ activities include the cash effects of transactions and events that determine net income.
 
Operating 
   
An employee earns $5,750 per month working for an employer. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The current FUTA tax rate is 0.8%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $192 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $160 and contributes $80 to a retirement plan each month. What is the amount the employer should record as payroll taxes expense for the employee for the month of January? (Round your intermediate calculations to two decimal places.)
 
$796.38


5,750 × 0.062 = 356.50
5,750 × 0.0145 = 83.38
5,750 × 0.008 = 46.00
5,750 × 0.054 = 310.50
356.50 + 83.38 + 46.00 + 310.50 = 796.38
   
A corporation declared and issued a 20% stock dividend on November 1. The following information was available immediately prior to the dividend:

Retained earnings $740,000
Shares issued and outstanding 59,000
Market value per share $16
Par value per share $5

The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:
 
$188,800.

59,000 × 0.20 × 16 = $188,800
   
Hampton Industries began December with $17.5 million in accounts receivables. During the month it collected $3.5 million from customers who had previously purchased on credit and it sold $5 million in merchandise on credit. What is Hampton’s accounts receivables balance at the end of the month?
$9 million
$16 million
$19 million
$26 million
 
17.5 + 5 – 3.5 = 19
   
Accounting practices in the United States are governed by a set of accounting rules referred to as:
 
The International Financial Reporting Standards (IFRS)
The Financial Accounting Standards
The Accounting Principles
Generally Accepted Accounting Principles (GAAP)
   
Choose the option to correctly complete the following sentence. Costs that are not associated with products and services or with future period revenues but are recognized in the period in which they are incurred is known as the
 
realization concept
conservatism concept.
matching concept.
materiality concept. Operating income or EBIT is calculated _________
 
before cost of goods sold is deducted
before operating expenses are deducted
before interest and taxes are deducted
before depreciation expenses are deducted
   
On January 1, 2019, Cumberland Electric’s retained earnings balance was $63,000. In 2019, Cumberland produced net income of $55,000 and their ending retained earnings balance on December 31 was $85,000. How much did Cumberland pay in dividends in 2019?
 
$22,000
$30,000
$33,000
$77,000
 
63,000 + 55,000 = 118,000
118,000 - 85,000 = 33,000
   
In 2016, Gates Industries purchased William Industries for $1 billion. The book value of William Industries at the time was $200 million. Where should the excess amount of $800,000 that Gates is paying be recorded in the financial statements?
 
Tangible asset – excess value of company purchased
Intangible asset – goodwill
Tangible asset – patents and copyrights
Intangible asset – excess value of company purchased
   
Joe’s Pizza reported net income of $60,000 for 2019. However, the company’s income tax return excluded a revenue item of $4,000 (reported on the income statement) because under the tax laws the $4,000 would not be reported for tax purposes until 2020. Assuming a 20% income tax rate, this situation would cause a 2019 deferred tax amount of
 
$4000 liability
$4000 asset
$800 liability
$800 asset
 
4,000 x .20 = 800
   
Quogue Sporting Goods purchased a new screen-printing machine for $50,000. It cost $1,000 to deliver the machine and $5,000 to install it. The machine has a useful life of 8 years and an estimated salvage value of $8,000. What would the depreciation be for the first year using the double declining method?
 
$6,000
$7,000
$12,000
$14,000
 
50,000 + 1,000 + $5,000 = 56,000
56,000 x .25 = 1,400 Bellingham’s Restaurant sells $3,000 in gift certificates during the holiday season. How should the sale of the gift certificates be treated in the financial statements?
 
Debit cash, credit sales
Debit cash; credit accounts payable
Debit cash, credit deferred revenue
Debit cash; credit prepaid expenses
   
During 2019, Southampton Corp. had a net financing cash outflow of $12 million; a net operating cash inflow of $20 million; and a net decrease in the cash balance of $5 million. What was their net cash flow from investing?
 
A net inflow of $3 million
A net inflow of $8 million
A net outflow of $13 million
Anet outflow of $25 million
 
20 million  - 5 million -  12 million = 3 million
   
Assume that a customer of Ruthie’s Radios has the option to pay her invoice early.
If she pays early, she will receive a 3% discount. The initial invoice amount is $300.
Assume that Ruthie’s Radios expects the customer to take advantage of this offer and has already set up an Allowance for Cash Discounts account.
The journal entry to record the customer’s early payment is:
 
debit cash $291; debit allowance for cash discounts $9; credit accounts receivable $300
debit cash $300; debit allowance for cash discounts $9; credit accounts receivable $309
debit cash $291; debit allowance for cash discounts $9; debit accounts receivable $300
debit cash $300; credit allowance for cash discounts $9; debit accounts receivable $291
   
Unearned revenue is classified as
 
a liability account.
   
A flower shop makes a large sale for $1,200 on November 30. The customer is sent a statement on December 5 and a check is received on
December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,200 considered to be recognized?
 
November 30.
   
Ruthie’s Radios spent $50,000 in cash in 2019 developing a new type of radio knob.
The wages allocated to this project were $20,000 and the raw materials for the prototype were $14,000.
The remaining $16,000 was the cost of legal and other fees related to obtaining the patent.
The journal entry to record the patent is:
 
Debit patent asset for $50,000; credit cash for $50,000
Debit research and development expense for $20,000; debit patent asset for $30,000; credit cash for $50,000.
Debit research and development expense for $14,000; debit patent asset for $36,000; credit cash for $50,000.
Debit research and development expense for $34,000; debit patent asset for $16,000; credit cash for $50,000.
   
The realized or realizable criterion is satisfied if the seller has received payment or reasonably expects to be paid.
 
True
False
   
Ruthie’s Radios had a Retained Earnings balance of $50,000 at the end of 2018. The firm paid a dividend of $10,000 during 2019. The balance in Retained Earnings at the end of 2019 was $35,000.
Assuming no other changes to the Retained Earnings account during 2019, Ruthie’s Radios had _________ during 2019.
 
net income of $5,000
net income of $25,000
net loss of $5,000
net loss of $25,000
 
35,000 + 10,000 = 45,000
45,000 – 50,000 = -5,000
   
The conservatism concept dictates that gain contingencies ____________.
 
may not be recognized until they are realized
may be recognized before they are realized in most cases
may be recognized before they are realized if the probability of being collected is high
may never be recognized, even if realized
   
Assume that Stephen’s Suitcases purchases a new piece of factory equipment for $300,000. The salvage value is $60,000 and the useful life is 6 years.
What is the Year 2 depreciation expense under the double-declining balance method?
 
$53,333
$66,667
$80,000
$100,000
 
100% / 6% x 2% = 33.33333333% = 0.3333333333
300,000 x 0.3333333333 = 99,999.9999
300,000 - 99,999.9999 = 200,000.001
200,000.001 x 0.3333333333 = 66,666.66033 (round to 66,667)
   
Assume that Melissa’s Magic Markers purchases a new piece of factory equipment for $150,000. The salvage value is $30,000 and the useful life is 6 years.
What is the annual depreciation expense under the straight-line method?
 
$5,000
$20,000
$25,000
$30,000
 
150,000 – 30,000 / 6 = 20,000
   
Zack’s Zippers uses the accelerated depreciation method for tax purposes and the straight-line depreciation method for
financial accounting (book) purposes.
The use of accelerated depreciation for tax purposes causes a ____________ difference in timing of financial and tax reporting.
As a result, Zack’s Zippers will have ___________ net income during the early years of depreciation
and _____________ net income during later years of depreciation.
 
permanent; lower; higher
permanent; higher; lower
temporary; lower; higher
temporary; higher; lower
   
Stephen’s Suitcases acquired Tara’s Totes on 1/1/2018. Stephen’s Suitcases paid $400,000 for Tara’s Totes. Tara’s Totes had the following balance sheet items on 1/1/2018.
 

 
What is the amount of Goodwill that Stephen’s Suitcases should record at the time it purchases Tara’s Totes?
 
$0
$110,000
$250,000
$400,000
 
100,000 + 40,000 + 200,000 + 50,000 – 60,000 - 40,000 = 290,000
400,000 – 290,000 = 110,000
   
In March, Ruthie’s Radios learn that a sale of $75 made in February will never be paid by the customer. What is the journal entry that Ruthie’s Radios should record?
 
Debit cash for $75; credit allowance for bad debts for $75
Debit accounts receivable for $75; credit cash for $75
Debit accounts receivable for $75; credit allowance for bad debts for $75
Debit allowance for bad debts for $75; credit account receivable for $75
   
In most cases, revenue is earned when a sale has taken place. This is when:
 
I. the customer has agreed to buy the goods or services.
II. the goods or services have been delivered.
III. the seller has performed substantially all of its obligations to the buyer.
I only
II only
III only
I, II and III
   
If the purchase price is _________ the __________ value of the net assets acquired, the excess purchase price is recorded as _________ called Goodwill.
 
greater than; book; an asset
greater than; market; an asset
less than; book; a liability
less than; market; a liability
   
TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm:
 
debited the Equipment account
credited Cash and credited a liability account for $2,100.
 
2500 – 400 = 2100
   
Shows actual cash receipts and cash payments.
 
Direct Method
   
The first section on the statement of cash flows
 
Operating activities
   
Reports on a business's cash receipts and cash payments for a specific period
 
statement of cashflows
   
This section reports cash receipts and cash payments that increase or
decrease long-term assets.
 
Investing Activities
   
This method starts with accrual income and adjusts to net cash.
 
Indirect Method
   
Expenditures that maintain the operating efficiency and expected
 
productive life of a plant asset is generally expensed when incurred
   
Which of the following statements is correct?
 
A gain or loss on disposal of a plant asset is determined by comparing the book value of the asset with the proceeds
received from its sale
   
The balance in the Accumulated Depreciation account represents the
 
amount charged to expense since the acquisition of the plant asset.
   
If accounts receivable has increased during the period,
 
revenues on an accrual basis are greater than revenues on a cash basis.
   
The main categories of cash flow activities on the statement of cash flows are
 
operating, investing, and financing.
   
If accrued liabilities increased during the year, which of the following is correct when using a spreadsheet
to complete the statement of cash flows (indirect method)?
 
Increase in Accrued Liabilities would be debited
   
The purposes of the statement of cash flows are to predict future cash flows determine the ability to pay debts and dividends
 
evaluate management decisions
   
Which item does not appear on a statement of cash flows prepared by the indirect method?
 
Collections from customers
   
Operating activities are most closely related to
 
current assets and current liabilities.
   
Which of the following is not an appropriate use of the statement of cash flows?
 
Analyze profitability and liquidity
   
A dividend is
 
a distribution of the company's earnings to its stockholders.
   
Sources of increases to stockholder's equity are
 
additional investments by owners.
   
The main types of cash flow activities are
 
investing, operating, and financing.
   
If a corporation distributes cash to its stockholders, then
 
stockholders' equity will decrease.
   
Liabilities of a company are owed to
 
Creditors
   
If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the
services are performed will be:
 
debit Unearned Service Revenue
credit Service Revenue.
   
Events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received:
 
Under accrual-basis accounting
   
Which of the following statements is correct?
 
Stockholders' equity can be described as ownership claim on total assets
   
An income statement
 
presents the revenues and expenses for a specific period of time.
   
Cash flows from interest received are reported in the statement of cash flows in the
 
operating activities section
   
The purchase of equipment by issuing a long-term note payable for the entire amount is reported on the statement of cash flows in the
 
schedule of non-cash investing and financing activities.
   
Which of the following transactions is not a financing activity of ABC Company?
 
Purchased 500 shares of stock of XYZ Corporation
   
If expenses are paid in cash, then
 
assets will decrease.
   
If total liabilities increased by $8,000, then:
 
assets must have increased by $8,000, or stockholders' equity must have decreased by $8,000.
   
Disposal of Plant Assets are cash flows from investing activities.
 
Disposal = Cost − Accumulated Depreciation
Cash received = Cost - Accumulated Depreciation + Gain – Loss
   
Which of the following statements is correct?
 
In preparing closing entries, each expense account will be credited.
   
Goods that are in the manufacturing process but are not yet complete.
 
Work-in-process Inventory / WIP
   
Provides economic and financial information for managers and other internal users.
 
Managerial Accounting
   
Running the day-to-day operations of a business.
 
Directing
   
Anything for which managers want a separate measurement of cost
 
Cost Object
   
Which is not a characteristic of managerial accounting information?
 
Focuses on past results
   
Which of the following is a software system used to integrate company functions, departments, and data?
 
Enterprise Resource Planning
   
Which of the following characteristics of today's business environment
is most closely associated with the philosophy of continuous improvement?
 
Total Quality Management
   
Which of the following accounts is used by a manufacturing company but not by a service company?
 
Cost of Goods Sold
   
Goods available for sale that are not part of Cost of Goods Sold are
 
included in Finished Goods Inventory ending balance.
   
Which of the following is a direct cost of manufacturing a sport boat?
 
Cost of a boat engine
   
Which of the following is not a product cost?
 
Advertising expense
   
A management accountant who communicates information fairly and
 
objectively is practicing the ethical standard of credibility.
   
How to find cost of direct materials purchased?
 
Direct Materials Available for Use = Direct Materials Used + Ending Direct Materials
   
How to find the cost of goods manufactured?
 
   Direct Materials Used
+ Direct Labor
+ Manufacturing Overhead
+ Beginning Work-in-Process Inventory
- Ending Work-in-Process Inventory
   
Today's business environment is characterized by global competition.
 
time-based competition
a shift towards a service economy.
   
A management accountant who avoids conflicts of interest meets the
 
Ethical standard of integrity.
   
Which of the following accounts does a manufacturing company have that a service company does not have?
 
Cost of Goods Sold
   
Which of the following is a direct cost of manufacturing a sports boat?
 
Cost of boat engine
   
Which of the following statements is true about expenses?
 
Expenses decrease stockholders' equity, so an expense account's normal balance is a debit balance
   
World-class businesses use which of these systems to integrate all of a company's worldwide functions, departments, and data into a single system?
 
Enterprise resource planning
   
The acquisition of land by issuing common stock is a noncash transaction
 
and is not reported in the body of a statement of cash flows
   
When equipment is sold for cash, the amount received is reflected as a
 
cash inflow in the investing section
   
Purchase of a long-term investment in bonds would not be classified as a
 
financing activity
   
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.
   
Which is not a characteristic of management accounting information?
 
Emphasizes the external financial statements
  The depreciation method that applies a constant percentage to
 
depreciable cost in calculating depreciation is straight-line.
   
The calculation of depreciation using the declining balance method ignores salvage value in determining the amount to which a constant rate is applied.
 
Units-of-activity is an appropriate depreciation method to use when the productivity of the asset varies significantly from one period to another.
   
Which of the following is not part of manufacturing overhead for producing a computer?
 
Depreciation on delivery trucks
   
Which of the following statements is correct?
 
The balance in the income summary account before it is closed will be equal to the net income or loss on the income statement.
   
A credit to a liability account
 
indicates an increase in the amount owed to creditors.
   
Using the indirect method, patent amortization expense for the period is
 
added to net income
   
Which of the following statements is correct?
 
If Income Summary has a credit balance after revenues and expenses have been closed into it, the
closing entry for Income Summary will include a credit to the retained earnings account.
   
Each of the following is added to net income in computing net cash provided by operating activities except
 
a gain on sale of equipment.
   
In developing the cash flows from operating activities, most companies
 
in the U.S. use the indirect method
   
Which of the following statements is correct?
 
Issuance of common stock issued for cash is classified as a financing activity on the statement of cash flows
   
In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is
 
deducted from net income
   
Which of the following assets does not decline in service potential over the course of its useful life?
 
Land
   
A truck that cost $72,000 and on which $60,000 of accumulated depreciation has been recorded was disposed of for $18,000 cash.
The entry to record this event would include a
 
Gain of $6,000.
 
18,000 - (72,000 - 60,000) = 6,000
   
As of December 31, 2015, Calexico Company has assets of $42,000 and stockholders' equity of $20,000.
What are the liabilities for Calexico Company as of December 31, 2015?
 
$22,000.
 
$42,000 - $20,000 = $22,000
   
If total liabilities decreased by $30,000 and stockholders' equity increased by $20,000 during a period of time, then total assets
must change by what amount and direction during that same period?
 
$10,000 decrease
 
$20,000 - $30,000 = ($10,000)
   
In the Papyrus Corporation, cash receipts from customers were $136,000, cash payments for operating expenses were $102,000,
and one-third of the company's $9,300 income taxes were paid during the year. Net cash provided by operating activities is:
 
$30,900
 
136,000 - 102,000 - (9,300 / 3) = 30,900
   
The accounting equation for Quattro Enterprises is as follows:
 
Assets Liabilities Stockholders' Equity
$120,000 = $60,000 + $60,000
 
If Quattro purchases office equipment on account for $25,000, the accounting equation will change to Assets Liabilties Stockholders' Equity
a. $120,000 = $60,000 + $60,000
b. $145,000 = $60,000 + $85,000
c. $145,000 = $72,500 + $72,500
d. $145,000 = $85,000 + $60,000
 
$120,000 + $25,000 = $145,000
$60,000 + $25,000 = $85,000
60,000 is given

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