acct 7-12

Question 1

One company’s practice is to provide bonuses to salespeople who exceed their sales targets. Which of the following advantages of budgeting enables the company to establish its recognition program?

Planning
Coordination
Performance measurement
Corrective action

Answer 1

Performance measurement

Question 2

Oakton Furniture provided the following information relevant to its sales for December Year 1 and the first quarter of Year 2:

December Year 1 (Actual)
January Year 2 (Budgeted)
February Year 2 (Budgeted)
March Year 2 (Budgeted)
Credit sales
$ 120,000
$ 280,000
$ 310,000
$ 220,000
Cash sales
$ 20,000
$ 50,000
$ 60,000
$ 24,000

Based on the company’s collection history, 42% of credit sales are collected in month of sale, and the remainder is collected in the following month. Cash collections in January from December credit sales would be:
$69,600.
$81,200.
$72,000.
$84,000.

Question 3

Fortune Company had beginning raw materials inventory of $8,100. During the period, the company purchased $46,500 of raw materials on account. If the ending balance in raw materials was $5,100, the amount of raw materials transferred to work in process is:
$49,500.
$46,500.
$51,600.
$43,500.

Answer 3

$49,500

Use the formula: Direct raw materials used = Beginning raw materials inventory + Purchases − Ending raw
materials inventory

Question 4

Darden Company has cash of $40,000, accounts receivable of $60,000, inventory of $32,000, and equipment of $100,000. Assuming current liabilities of $48,000, this company’s working capital is:
$12,000.
$52,000.
$144,000.
$84,000.

Answer 4

$84,000

Working capital = Current assets − Current liabilities

Question 5

The following balance sheet information was provided by O’Connor Company:
Assets Yr 2 Yr 1
Cash $2,300 $1,300
Accts receiv. 7,300 5,300
Inventory $23,000 $24,000

Assuming that net credit sales for Year 2 totaled $148,000, what is the company’s most recent accounts receivable turnover?

23.49 times
27.92 times
11.75 times
20.27 times

Answer 5

23.49 times

Accounts receivable turnover = Net credit sales ÷ [(Beginning accounts receivable + ending
accounts receivable) ÷ 2]

Question 6

Pierce Corporation reported a $4,100 balance in accounts receivable on January 1, Year 2. During the year, sales on account in the amount of $35,400 were made. If the ending balance of accounts receivable is $3,300, what is the amount of cash received from customers?

$34,600
$32,900
$39,500
$36,200

Answer 6

$36,200

Use the ending balance formula: Beginning balance + Revenue recognized on account − Cash collections from customers =
Ending balance

Question 7

On January 1, the balance of Fink Corporation’s accounts receivable was $4,000. Sales on account amounted to $70,000 during the year. The ending balance of accounts receivable was $7,000. What is the amount of cash collected from customers?

$63,000
$74,000
$73,000
$67,000

Answer 7

$67,000

Use the ending balance formula

Question 8

All of the following are deducted from net income when preparing the statement of cash flows under the indirect method except:

an increase in accounts payable.
a decrease in accrued liabilities.
an increase in accounts receivable.
an increase in inventory.

Answer 8

an increase in accounts payable.

for more info check Q15