Quiz Facts 9, Business - Accounting And Taxation

Characteristics of a corporation include

On January 1, 2007, $1,000,000, 10-year, 10% bonds, were issued for $970,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is

3

Airfreight Corporation has book income of $370,000. Book income includes a $25,000 gain realized on a like-kind nontaxable exchange of realty. Based only on these items, compute Airfreight's taxable income.

4

Which one of the following is considered one of the six most important categories of internal control procedures?

5

One of the functions of the personnel department is the timekeeping function

6

Excerpts from TPX Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receivable$80,000 $72,000 Inventory 84,000 70,000 Net sales 400,000 372,000 Cost of goods sold 254,000 216,000 Total assets 850,000 810,000 Total stockholders' equity 500,000 450,000 Net income 75,000 56,000TPX Company's 2021 return on equity is: (Round your answer to 1 decimal place.)

7

Kyrsten Haas expects her S corporation to generate a profit of $200,000. What is the effective tax rate on the $200,000 if no cash is distributed? Kyrsten's marginal tax rate on ordinary income is 37%.

8

Balerio Corporation's relevant range of activity is 7,000 units to 11,000 units. When it produces and sells 9,000 units, its average costs per unit are as follows:Average Cost per UnitDirect materials$6.80Direct labor$3.20Variable manufacturing overhead$1.60Fixed manufacturing overhead$13.50Fixed selling expense$2.25Fixed administrative expense$1.80Sales commissions$0.50Variable administrative expense$0.40Required:a. For financial reporting purposes, what is the total amount of product costs incurred to make 9,000 units?b. If 10,000 units are sold, what is the variable cost per unit sold?c. If 10,000 units are sold, what is the total amount of variable costs related to the units sold?d. If the selling price is $18.20 per unit, what is the contribution margin

a.

	Direct materials	$6.80
	Direct labor	3.20
	Variable manufacturing overhead	1.60
	Variable manufacturing cost per unit	$11.60

	Total variable manufacturing cost ($11.60 per unit x 9,000 units produced)	$104,400
	Total fixed manufacturing overhead cost ($13.50 per unit x 9,000 units produced)	121,500
	Total product (manufacturing) cost	$225,900

b.

	Direct materials	$6.80
	Direct labor	3.20
	Variable manufacturing overhead	1.60
	Sales commissions	0.50
	Variable administrative expense	0.40
	Variable cost per unit sold	$12.50

c.

	Variable cost per unit sold (a)	$12.50
	Number of units sold (b)	10,000
	Total variable costs (a) x (b)	$125,000

d.

Selling price per unit		$18.20
Direct materials	$6.80
Direct labor	3.20
Variable manufacturing overhead	1.60
Sales commissions	0.50
Variable administrative expense	0.40
Variable cost per unit sold		12.50
Contribution margin per unit		$5.70

e.

	Direct materials	$6.80
	Direct labor	3.20
	Variable manufacturing overhead	1.60
	Incremental manufacturing cost	$11.60

9

On March 1, Year 1, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, Year 1, Glory reports net income of $162,000. On January 15, Year 2, Glory pays total dividends to stockholders of $33,000. Journalize the three transactions.

10

Under what circumstances might an individual want to establish an annuity contract in retirement?

When a person retires, he or she may be the beneficiary of one or more retirement plans. The plans may be defined-benefit plans, in which the beneficiary knows the amount and timing of plan distributions with certainty. However, the plans may be defined-contribution plans. In these plans, the contributions are known, but the distributions are uncertain as to timing and amount. To reduce uncertainty, it is not unusual that a beneficiary of a defined-contribution plan would seek to take some or all of the pension assets and purchase an annuity contract. In doing so, the beneficiary would, in effect, convert an uncertain stream of payments into a certain stream. The beneficiary would reduce the risk of running out of pension assets prematurely, but at the cost of not being able to participate in higher payments that might occur in the future if the pension assets were invested well.

11

Using direct labor-hours as the only overhead cost driver, what is the amount of overhead costs allocated to the Gergen Job?

12

Which of the following choices correctly depicts the proper classification of direct materials used and management salaries? Direct Materials UsedManagement SalariesA.Batch levelFacility levelB.Batch levelBatch levelC.Unit levelProduct-sustaining levelD.Unit levelFacility levelE.Product-sustaining levelBatch level

13

Condren Inc. reported the following results from last year's operations: Sales$12,000,000Variable expenses 7,680,000Contribution margin 4,320,000Fixed expenses 3,720,000Net operating income$600,000Average operating assets$6,000,000 At the beginning of this year, the company has a $1,000,000 investment opportunity with the following characteristics: Sales$1,100,000 Contribution margin ratio 40% of salesFixed expenses$363,000 If the company pursues the investment opportunity and otherwise performs the same as last year, the combined ROI for the entire company will be closest to:

14

Cost flow is in the order in which costs were incurred when using

15

At the time petty cash funds are disbursed, a journal entry should be made, debiting the appropriate asset or expense account.

16

Goodwill is the value attributable to good employee morale.

17

Which of the following costs incurred by a paper manufacturer would be included in the group of costs referred to as conversion costs?

18

Bondi Corporation makes automotive engines. For the most recent month, budgeted production was 1,500 engines. The standard power cost is $3.10 per machine-hour. The company's standards indicate that each engine requires 9.3 machine-hours. Actual production was 1,800 engines. Actual machine-hours were 15,860 machine-hours. Actual power cost totaled $51,593.Required:Determine the rate and efficiency variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable. Show your work!

19

Because of the locked-in effect, high capital gains tax rates may discourage taxpayer's from selling appreciated capital assets.

20

The employees of Sinclair Services, Inc. worked the last two weeks of December. They received their paychecks on January 2. Which of the following accounts should appear on the balance sheet as of December 31?

21

The following data for November have been provided by Hunn Corporation, a producer of precision drills for oil exploration: Budgeted production 3900drillsStandard machine-hours per drill 9.2machine-hoursStandard indirect labor$9.0per machine-hourStandard power$2.6per machine-hour Actual production 4100drillsActual machine-hours 35,550machine-hoursActual indirect labor$328,695 Actual power$84,980 Required:Compute the variable overhead rate variances for indirect labor and for power for November. Indicate whether each of the variances is favorable (F) or unfavorable (U).(Input all amounts as positive values.)Variable OverheadRate VarianceIndirect laborPower

22

Which inventory cost flow assumption is allowed under U.S. GAAP but not under IFRS?

23

Hykes Corporation's manufacturing overhead includes $4.40 per machine-hour for supplies; $4.40 per machine-hour for indirect labor; $55,800 per period for salaries; and $58,590 per period for depreciation.Required:Determine the predetermined overhead rate if the denominator level of activity is 3,100 machine-hours. Show your work!

24

Committing a fraud because the employee feels "I deserve a pay raise. The company owes this to me" is related to what part of the Fraud Triangle?

25

Earned capital consists of additional paid-in capital and retained earnings

26

Agnes owns a sole proprietorship for which the assets have appreciated in value. If she is going to sell the business to Abner, should she structure the sale as (1) a sale of the individual assets or (2) a sale of the sole proprietorship?

27

On April 5, 2019, Joan contributes business equipment (she had purchased on October 24, 2017) having a $45,000 FMV and a $40,000 adjusted basis to the EJK Partnership in exchange for a 25% interest in the capital and profits. The basis of the property and the date the holding period begins for the partnership is

28

Martha has both long-term and short-term 2016 capital gains and losses. The result of netting these gains and losses is a net long-term capital loss. Martha has no qualified dividend income. Also, Martha's 2016 taxable income puts her in the 28% tax bracket. Which of the following is correct?

29

Explain how the amounts in the subsidiary ledgers are proved (or reviewed) for accuracy.

30

A loss on the disposal of an asset indicates that management likely has not efficiently used the asset over its service life.

31

The chart of accounts for the Miguel Company includes the following: Account Name Account Number Cash11 Accounts Receivable13 Prepaid Insurance15 Accounts Payable21 Unearned Revenue24 Common Stock31 Dividends32 Fees Earned41 Salaries Expense54 Rent Expense56 Page 5 of the journal contains the following transaction: DescriptionPost. Ref. Debit Credit Salaries Expense 525 Cash 525 What is the posting reference that will be found in the salaries expense account?

32

The "similar or related in service or use" requirement for property involuntarily converted is less restrictive than the like-kind exchange requirements.

33

On December 31, Year 1, the West Corporation estimated that $6,000 of its receivables might not be collected. At the end of Year 1, the unadjusted balances of Accounts Receivable and Allowance for Doubtful Accounts were $150,000 and zero. On February 1, Year 2, West wrote-off of a delinquent account from one of its customers. West Corp. uses the allowance method. Indicate whether each of the following statements is true or false.________a) The net realizable value of accounts receivable (after the appropriate adjustment at the end of Year 1) was $144,000.________b) The write-off of the account on February 1 Year 2 did not affect the net realizable value of West's accounts receivable.________c) The adjustment at the end of Year 2 had no effect on West's total assets.________d) The February

34

The Fixed Asset Systems does all of the following except

35

Which of the following is an objective of batch controls?

March 1	Investments-Glory Corp. Stock	325,000
	Cash		325,000

Dec. 31	Investments-Glory Corp. Stock	56,700
	Income of Glory Corp.		56,700

Jan. 15	Cash	11,550
	Investments-Glory Corp. Stock		11,550

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Quiz Facts 9, Business - Accounting And Taxation

Recent Packs

Indirect labor	$8745	U
Power	$7450	F

Basis	Holding Period Begins
$40,000	October 24, 2017

Basis	Holding Period Begins
$40,000	April 5, 2019

Basis	Holding Period Begins
$45,000	April 5, 2019