Problem:
The Cash account in the ledger of Home-Builders Co. shows a balance of $16,526 at September 30. The bank statement, however, shows a balance of $20,900 at the same date. The only reconciling items consist of a bank service charge of $6, a large number of outstanding checks totaling $5,930, and a deposit in transit.
Q1. Refer to the above data. What is the adjusted cash balance in the September 30 bank reconciliation?
a. $10,590
b. $16,520
c. $14,970
d. $14,964
Q2. The book value of an asset in the plant and equipment category is:
a. the undepreciated cost of the asset.
b. the current replacement cost of the asset.
c. the original cost of the asset.
d. the accumulated depreciation on the asset to date.
Q3. Which of the following best describes the relationship between revenue and retained earnings?
a. Revenue increases net income, which in turn increases retained earnings.
b. Revenue represents a cash receipt; retained earnings is an element of stockholders' equity.
c. Revenue represents the price of goods sold or services rendered; retained earnings represents cash available for paying dividends.
d. Retained earnings is equal to revenue minus expenses.
Q4. If the return on total assets is substantially above the cost of borrowing, common stockholders will:
a. benefit from a low debt ratio.
b. benefit from a high debt ratio.
c. benefit from a low current ratio.
d. benefit from a high current ratio.
Q5. The presence of fixed costs in manufacturing overhead causes the actual amount of manufacturing overhead per unit of output to vary depending on the actual production volume attained.
a. True
b. False