Pearls, Inc. had sales in 2013 of $2.1 million. The common stockholders received $600,000 in cash dividends

Pearls, Inc. had sales in 2013 of $2.1 million. The common stockholders received $600,000 in cash dividends.  Interest totaling $150,000 was paid on outstanding debts. Operating expenses totaled $300,000, and cost of goods sold was $500,000.  What is the tax liability of Pearls, Inc.? 2013 U.S. Corporate tax rates are shown below:

Taxable Income	Marginal Tax Rate
$0-$50,000	15%
$50,001-$75,000	25%
$75,001-$100,000	34%
$100,001-$335,000	39%
$335,001-$10,000,000	34%
$10,000,001-$15,000,000	35%
$15,000,001-$18,333,333	38%
Over $18,333,333	35%

Answer:  Pearls Taxable Income

Sales                                                          $2,100,000

Less:

Cost of goods sold                                    $500,000

Operating expenses                                  300,000

Earnings before interest & taxes       $1,300,000

Interest expense                                          150,000

Taxable income                                       1,150,000

Total taxes owed                                      $391,000

Taxes on operating earnings = (.15)(50,000) + (.25)(25,000) + (.34) 25,000) + (.39)(235,000) +.(34)(735,000)= 7,500 + 6,250 + 8500 + 91,650+277,100 = $391,000 or

                                Because taxable income is over $335,000

                                taxes can be computed 1,150,000 × .34 =

                                $391,000

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $10,115,000

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $10,115,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm's EBIT?

A) $15,552,000

B) $58,000,000

C) $5,110,000

D) $4,630,000

 On the income statement, sales revenue, minus cost of goods sold and operating expenses, equals which of the following?

A) Net profit

B) Retained earnings

C) Net income available to preferred shareholders

D) EBIT

Which of the following streams of income is not affected by how a firm is financed (whether with debt or equity)?

A) Net profit after tax but before dividends

B) Net working capital

C) Operating income

D) Income before tax

Which of the following is not included in computing EBT (earnings before taxes)?

A) Marketing expenses

B) Depreciation expense

C) Cost of goods sold

D) Dividends

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $10,115,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm's gross profit?

A) $18,000,000

B) $15,225,000

C) $5,000,110

D) $6,632,000

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming weighted-average cost would be:

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)

A) $5,087.

B) $5,107.

C) $5,077.

D) $5,005.

Answer: $5,087.

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming FIFO would be:

A) $5,140.

B) $5,080.

C) $5,060.

D) $5,050.

Answer: $5,140.

Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming FIFO would be:

A) $16,800.

B) $16,760.

C) $16,540.

D) $16,660.

Answer: $16,660.

The inventory cost flow assumption that results in a random mixture of goods

The inventory cost flow assumption that results in a random mixture of goods being included in the balance of inventory and cost of goods sold is:

A) FIFO.

B) LIFO.

C) Weighted-average.

D) Lower of cost and net realizable value.

Answer: Weighted-average.

The inventory costing method that matches each unit of inventory with its actual cost is referred to as the ________ method.

A) Weighted-average.

B) Specific identification.

C) Actual cost.

D) Matching unit.

Answer: Specific identification

The inventory cost flow assumption that generally best matches the physical flow of inventory is:

A) FIFO.

B) LIFO.

C) Weighted-average.

D) Lower of cost and net realizable value.

Answer: FIFO.

A company has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000

A company has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit?

A) $76,000.

B) $80,000.

C) $74,000.

D) $72,000.

Answer: $80,000.

What amount will the company report for operating income?

A) $200,000.

B) $210,000.

C) $380,000.

D) $120,000.

Answer: $210,000.

Gross profit is calculated as net sales minus:

A) Nonoperating expenses and income tax expense.

B) Operating expenses.

C) Cost of goods sold.

D) All of the other answers are subtracted from net sales to calculate gross profit.

Answer: Cost of goods sold.

A company has beginning inventory for the year of $12,000. During the year, the company purchases inventory for $150,000

A company has beginning inventory for the year of $12,000. During the year, the company purchases inventory for $150,000 and ends the year with $20,000 of inventory. The company will report cost of goods sold equal to:

A) $150,000.

B) $158,000.

C) $142,000.

D) $170,000.

Answer: $142,000.

Beginning inventory is $30,000. Purchases of inventory during the year are $50,000. Cost of goods sold is $60,000. What is ending inventory?

A) $20,000.

B) $30,000.

C) $10,000.

D) $50,000.

Answer: $20,000.

The type of income statement that classifies items as operating and nonoperating is the ________ income statement.

A) Consolidated.

B) Multiple-step.

C) Classified.

D) Single-step.

Answer: Multiple-step.

The cost of the goods that a company sold during a period is shown in its financial statements as ________ and the cost of the goods that a company still has on hand at the end of the year is shown in the financial statements as ________.

A) Cost of goods sold; inventory

B) Goods on hand; inventory expense

C) Inventory; cost of goods sold

D) Sales revenue; cost of goods sold

Answer: Cost of goods sold; inventory

The largest expense on a retailer's income statement is typically:

A) Salaries.

B) Cost of goods sold.

C) Income tax expense.

D) Depreciation expense.

Answer: Cost of goods sold.

The balance of the Cost of Goods Sold account at the end of the year represents:

A) The cost of inventory not sold in the current year.

B) The total sales revenue to customers.

C) The cost of inventory sold in the current year.

D) Total purchases of inventory for the year.

Answer: The cost of inventory sold in the current year.

For a manufacturing company, the combination of the cost of raw materials, direct labor, and overhead for inventory

For a manufacturing company, the combination of the cost of raw materials, direct labor, and overhead for inventory that has not yet completed production is known as:

A) Work-in-process.

B) Finished goods.

C) Merchandise.

D) Retail goods.

Answer: Work-in-process.

A manufacturer's inventory consists of what type of inventory?

A) Raw materials.

B) Finished goods.

C) Work-in-process.

D) All of the other answers are included in a manufacturer's inventory.

Answer: All of the other answers are included in a manufacturer's inventory.

Cost of Goods Sold is:

A) An asset account.

B) A revenue account.

C) An expense account.

D) A permanent equity account.

Answer: An expense account.

Which of the following is correct with respect to closing out overapplied manufacturing overhead to Cost of Goods Sold versus

Which of the following is correct with respect to closing out overapplied manufacturing overhead to Cost of Goods Sold versus closing it out to Cost of Goods Sold and Finished Goods and Work in Process inventories?

A. The balance in the Work in Process account after allocation will be higher if the overapplied manufacturing overhead is closed out by allocating it to all appropriate accounts.
B. The balance in the Work in Process account after allocation will be the same under either method.
C. Net operating income will be higher if all of the overapplied manufacturing overhead is closed out to Cost of Goods Sold.
D. Cost of Goods Sold will be lower if the overapplied manufacturing overhead is closed out by allocating it to the inventory accounts as well as to Cost of Goods Sold.



Answer: C

The document used to accumulate the costs of a job is called the:

A) manufacturing overhead document.
B) job cost record.
C) labor time ticket.
D) materials inventory requisition form.


Answer: B

Overapplied manufacturing overhead occurs when:

A. applied overhead exceeds actual overhead.
B. applied overhead exceeds estimated overhead.
C. actual overhead exceeds estimated overhead.
D. budgeted overhead exceeds actual overhead.


Answer: A

The auditors assessed risk of material misstatement at 0.50 and said they wanted to achieve a 0.05 risk of failing to express a correct opinion

The auditors assessed risk of material misstatement at 0.50 and said they wanted to achieve a 0.05 risk of failing to express a correct opinion on financial statements that were materially misstated. What detection risk do the auditors plan to use for planning the remainder of the audit work?

a. 0.10
b. 0.00
c. 0.20
d. 0.75


Answer: a. 0.10

When a company that sells its products for a (gross) profit increases its sales by 15 percent and its cost of goods sold by 7 percent, the cost of goods ratio will

a. decrease
b. increase
c. remain unchanged
d. not be able to be determined with the information provided


Answer: a. decrease

Analytical procedures can be used in which of the following ways?

a. as "attention-directing" methods when planning an audit at the beginning
b. as a means of overall review at the end of the audit
c. as substantive audit procedures to obtain evidence during an audit
d. all of the answers are correct


Answer: d. all of the answers are correct