CMA Test 1

Which financial statement is primarily used by a lender to determine if an entity has the liquid assets necessary to satisfy its current obligations on the date of the loan application?

A retailer using a perpetual inventory system reported a merchandise balance of $2,845,600 on December 31 before any year-end adjustments. A review of year-end cut-off transactions revealed the following:

Goods costing $63,200 were shipped to a customer on December 30 under FOB Destination terms and had not yet arrived at the customer’s warehouse as of December 31.

A supplier shipped goods costing $48,500 on December 29 under FOB Shipping Point terms. The goods arrived at the retailer’s warehouse on January 3.

Goods costing $22,300 in the warehouse were identified as obsolete. They cannot be sold and have no scrap value.

Goods costing $31,000 were received from a supplier on December 31 under FOB Destination terms. The invoice has been processed and the goods are recorded in the system.

What is the adjusted inventory balance on December 31?

A distributor had a beginning inventory of 8,000 units at $12.00 per unit. During the year, the following purchases were made:

First purchase: 25,000 units at $14.50 per unit

Second purchase: 30,000 units at $15.80 per unit

At year-end, 9,500 units remain in ending inventory. In accordance with U.S. GAAP, and using LIFO, what is the value of the ending inventory?

A consumer electronics company sold 120,000 units during its first year of operations. The company provides an assurance-type warranty and estimates that 3 percent of units sold will require repair at an average cost of $85 per unit. During the year, the company incurred $142,000 in actual warranty repair costs.

What is the balance of the warranty liability account at the end of the year?

A publicly traded corporation issues 5,000 shares of preferred stock at $120 per share. The preferred stock has a par value of $25 per share. Which of the following correctly describes the impact of this transaction on the balance sheet?

A corporation has 200,000 shares of $5 par value common stock outstanding. The current market price is $22 per share. The board of directors declares a 25 percent stock dividend. The company has retained earnings of $3,500,000 prior to the declaration.

What is the decrease in retained earnings as a result of this stock dividend?

Apex Distribution Co. had the following transactions for the year ended December 31, Year 1:

Goods shipped to wholesale customers FOB Shipping Point on December 28, Year 1, invoiced at $82,000. Customers received the goods on January 3, Year 2.

Goods shipped to wholesale customers FOB Destination on December 27, Year 1, invoiced at $67,500. Customers received the goods on December 31, Year 1.

Goods held on consignment for a retailer, invoiced at $35,000. The retailer has not yet sold any of the goods.

Retail store sales completed during December, Year 1: $94,000.

Gift card sales during December, Year 1: $28,000. Of this amount, $18,500 worth of gift cards were redeemed by December 31.

Goods shipped to a customer FOB Shipping Point on January 2, Year 2, invoiced at $12,000.

How much revenue should Apex recognize for the year ended December 31, Year 1?

The ‘SWOT’ analysis is a tool used during strategic planning. Which of the following is considered an ‘External’ factor in this analysis?

Which of the following is a primary disadvantage of using a ‘top-down’ (authoritative) budgeting approach?

Which of the following budgeting methods is most likely to result in ‘budgetary slack’ being built into the system by mid-level managers?