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1) Indicate how the event affects the elements of the financial statements. If the transaction affects a given element of the financial statements, enter the dollar amount below that financial statement element with a plus to indicate an increase or […]

1) Harker Company manufactures DVD players and other similar electronic products. Indicate whether the cost is a product cost or period (selling, general, and administrative) cost AND whether its cost behavior is fixed, variable, or mixed by placing X’s in […]

1) What does the acronym “GAAP” stand for? Name the group that has the primary responsibility for establishing US GAAP. 2) Who are the primary users of financial accounting information? Who are the primary users of managerial accounting information? Answer: […]

1) Cooper Tools produces scissors in a two-stage production process. The following production times are provided: Required: 1) Identify the non-value-added activities. 2) What percentage of the total time to complete is actually value-added time? 3) How could this production […]

1) Define the term, “cost driver,” and give an example of a cost driver. 2) For each of the following transactions, indicate the type by entering “AS” for asset source transaction, “AU” for asset use transaction, “AE” for asset exchange […]

1) Gamma Corporation has working capital of $840,000, and Sigma Corporation has working capital of $620,000. Based on this information, is it safe to conclude that Gamma is more liquid than Sigma? 2) Many companies have to monitor some of […]

1) Which financial statement presents a summary of revenues and expenses of a business for a specific period of time, such as a month or year? 2) How should the manager of a cost center be evaluated? Answer: The manager […]

1) What is an aging of accounts receivable, and how might an aging be useful in estimating uncollectible accounts? 2) Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. In 2012, the company expects […]

1) What term is used for liabilities that are uncertain as to amount? 2) What are margin and turnover? If a division can increase turnover with margin constant, how will return on investment be affected? Answer: Margin is operating income/sales. […]

1) What are the types of claims to a business’s assets? 2) What is the lever that results in (causes) operating leverage? Answer: Fixed costs 3) Why do companies try to eliminate non-value-added activities? Answer: Non-value-added activities do not contribute […]

1) Sometimes, volume-based cost drivers are used to allocate fixed indirect costs. 2) Revenue is the economic benefit derived from operating a business. Answer: TRUE 3) A corporation must record a liability for cash dividends on the date of record. […]

1) A company’s outside, independent auditors are responsible for preparing its financial statements. 2) Wiley Corporation issued 5,000 shares of no-par common stock for $32 per share. For this transaction, Common Stock should be credited (increased) for $160,000. Answer: TRUE […]

1) When a credit card sale is recorded, what is the effect on the accounting equation? 2) Indicate whether each of the following statements about internal control and ethics is true or false. 1>The use of safety deposit boxes is […]

1) A single step income statement separates routine operating results from peripheral or non-operating items. 2) When a corporation records a stock dividend, it decreases Retained Earnings for the par value of the stock. Answer: FALSE 3) Preparing a bank […]

1) Present value factors The present value of an annuity of $1 at 8% has a factor for 3 periods of 2.577097; for 5 periods at 8% the factor is 3.992710 . For 10% at 5 periods the factor is […]

1) A company in its first year of operations incurred $1,000 in cost of goods manufactured. Its income statement showed cost of goods sold of $800 and selling costs of $100. Its ending finished goods inventory was $200. 2) Flexible […]

1) Investors and creditors use accounting information to identify the businesses they wish to provide resources to. 2) Suboptimization refers to actions taken by a manager that are in his/her best interest but not in the best interest of the […]

1) Describe how a flexible budget is useful in planning for an organization. 2) Discuss the types of audit opinions that an independent auditor can express on a company’s financial statements. Answer: An unqualified opinion is the most favorable opinion […]

1) Costs that support multiple cost objects are referred to as direct costs. 2) A corporation should recognize losses but not gains related to treasury stock transactions. Answer: FALSE 3) The balance sheet reports a business’s assets and the claims […]

1) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. On December 31, 2012, Stuart Co. estimated […]

1) How does a decrease in variable costs affect the break-even volume of sales? 2) In an inflationary period, which cost flow method, LIFO or FIFO, will result in the larger amount of assets on the balance sheet? Explain. Answer: […]

1) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. An asset purchased for $14,000 that had […]

1) What is stockholders’ equity? 2) Indicate whether each of the following statements is true or false. 1>In decision making, all quantitative information that differs among the alternatives under consideration is relevant 2>Costs that cannot be changed are not relevant […]

1) How would you decide, based on the net present value of the project, whether a capital investment project is an acceptable investment or not? 2) Discuss a few common reasons for decreases in the market price of a corporation’s […]

1) Stephanie must decide between two alternatives for the weekend: babysitting or yard work. If she baby sits, she will receive $40 and will incur $15 in food and snack costs. If she does yard work, she will receive $40 […]

1) Pecos Company is considering the purchase of new equipment that will cost $125,000. The equipment will save the company $42,000 per year in cash operating costs. The equipment has an estimated useful life of five years, annual depreciation expense […]

1) Explain the major difference between a merchandising business and a service business. 2) Discuss three practical implications of misclassifying product and/or period costs. Answer: The temporary effects on the financial statements can have important implications with respect to the […]

1) For 2012, an investment center of Lawson Company reported operating income of $420,000 on total operating assets of $2,600,000. The company has established a target ROI of 14% for the investment center. Last year, the investment center’s ROI was […]

1) Indicate whether each of the following statements is true or false. 1>An aging of accounts receivable classifies accounts receivable by the length of time that a company has had a business relationships with a particular customer 2>An aging of […]

1) How does the number of times interest is earned ratio help in evaluating a company’s financial risk? 2) What type of financial statement matches sales revenue items with related expense items and distinguishes between recurring operating activities and nonoperating […]

1) Indicate whether each of the following statements is true or false. 1>A decision to eliminate a segment of a business is likely to have long-term consequences because re-establishing the segment might be difficult 2>In making a decision to eliminate […]

1) Fair Price, Inc. has two divisions, and their most recent financial statements are shown below: The Tiling Division has incurred losses for the past five years, and management believes that the company will be better off maintaining and growing […]

1) What is the reason for allocating fixed overhead costs to products? 2) Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. In 2012, the company expects to make 2,000 comforters. Indicate whether the […]

1) How is residual income calculated? What potential disadvantage is there in using residual income to evaluate and compare divisions of a company? 2) Indicate whether each of the following statements is true or false. 1>A cost driver causes a […]

1) Indicate whether each of the following statements is true or false. 1>A budget formalizes managerial plans 2>A master budget often provides information about plans and expectations for each month of the coming year 3>A company that uses a perpetual […]

1) If a company determines that the likelihood of a future obligation arising from a contingent liability is possible, the company must record a liability on its balance sheet. 2) The face value of Accounts Receivable less the balance in […]

1) Indicate how the event affects the elements of the financial statements. If the transaction affects a given element of the financial statements, enter the dollar amount below that financial statement element with a plus to indicate an increase or […]

1) The Ainlay Corporation accepted a credit card for a sale of $2,000 on December 16, 2012 . The credit card company charges a fee of 4%. On January 5, 2013, Ainlay received payment from the credit card company. Indicate […]

1) Managers should be praised or punished based on variances. 2) Articles of incorporation, prepared by a business that wishes to incorporate, normally include the corporation’s name and purpose, its location, and provisions for capital stock. Answer: TRUE 3) Costs […]

1) Stockham Valve Company produces a mechanical valve used in water systems. Three years ago the company introduced an electronic version of the valve. Sales of the mechanical model have steadily declined, and the company will report a loss on […]

1) Indicate whether each of the following statements is true or false. 1>The required rate of return on a capital investment is also referred to as the hurdle rate or discount rate 2>The return on investment measures the compensation a […]

1) Indicate how the event affects the elements of the financial statements. Use the following letters to record your answer in the box shown below each element: You do not need to enter amounts. Wade Corporation paid its monthly utility […]

1) Matching. Select the term from the list provided that best matches each of the following descriptions. The first is done for you. 2) Indicate whether each of the following statements about decentralization is true or false. Answer: 1>Investment centers […]

1) Indicate which of the following items is added to or subtracted from a company’s unadjusted book balance to calculate the true cash balance in preparing a bank reconciliation. Place a + by those items that are added to the […]

1) Halley Company has just received a special order for 1,000 deck chairs. Halley has sufficient idle capacity to accept the order. Indicate whether the given cost is a sunk cost, opportunity cost, relevant or not relevant to the decision […]

1) Based on the information given for a variance, indicate whether the variance is favorable or unfavorable. 2) What benefits may result from use of a just-in-time system? Answer: A just-in-time system reduces the amount of inventory that a business […]

1) Assume that wages expense is a variable cost and that the relevant range is 10,000 to 15,000 labor hours. Within that range, the cost is $14 per hour. What can you assume about wages expense outside this range? 2) […]

1) A company can use cost-volume-profit analysis to determine the level of sales required to earn a target profit. 2) A potential danger from outsourcing is that a company may become too dependent on the supplier. Answer: TRUE 3) Product […]

1) Indicate whether each of the following statements is true or false for a company that uses the allowance method to account for uncollectible accounts. 1>The entry to recognize uncollectible accounts expense does not affect the net realizable value of […]

1) The inventory cost flow method a company chooses affects both the income statement and the balance sheet. 2) If Paterno Company’s turnover measure is 2.5 and its margin is 7.5%, its ROI is 10%. Answer: FALSE 3) The choice […]

1) Explain how the equity section of a balance sheet differs among sole proprietorships, partnerships and corporations. 2) Indicate which of the budgets and pro forma financial statements the given item appears on by placing X’s in the appropriate column […]

1) On December 31, 2012, Detroit Co. paid $6,000 cash for insurance coverage for the year 2013 . What is the effect of this transaction on the financial statements for the 2012 reporting period? 2) Temporary accounts are closed prior […]

1) Driscoll Company purchased equipment on January 1, 2010 for $26,000. Driscoll uses straight-line depreciation for the asset, which has a five year estimated useful life and a salvage value estimated at $4,000. The asset was sold on January 1, […]

1) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Assume use of a perpetual inventory system. […]

1) What is a deferral? 2) Indicate whether each of the following statements is true or false. 1>When a company can identify more than one cost driver for a particular cost, it should use the cost driver with the strongest […]

1) Indicate whether each of the following statements about contingent liabilities is true or false. 1>If the likelihood of a future obligation from a contingent liability is remote, a company does not report it on the financial statements or disclose […]

1) What are cost objects? Define and give examples. 2) In October 2012, Simpson Company loaned $20,000 to Warren Corporation, receiving Warren’s 6-month, 6% promissory note. Indicate whether each of the following statements about the note is true or false. […]

1) Thomas Corp. has the following number of shares of stock outstanding: Thomas will distribute $44,000 to the two classes of stockholders this year. Not counting the current year, the preferred stock dividends are two years in arrears. Indicate whether […]

1) What are responsibility centers? What are the three levels of responsibility centers commonly found in organizations? 2) A business should minimize the amount of cash that it keeps on hand Answer: 1>T, 2>F, 3>T, 4>T, 5>T 3) How do […]

1) Classify the following cost as a selling or general and administrative period cost or as a direct or indirect product cost by entering the dollar amount in the appropriate column: Hale Company paid sales commissions of $48,000. 2) List […]

1) Indicate whether each of the following statements about responsibility centers is true or false. 1>A responsibility center controls identifiable revenue or expense items 2> The manager of a profit center is evaluated based primarily on his/her ability to control […]

1) What is the effect on the accounting equation of a cash payment to creditors? 2) What is a balanced scorecard? How is the balanced scorecard used in performance evaluation? Answer: A balanced scorecard includes several different performance measures that […]

1) What are unit-level costs? Give two examples. 2) Distinguish between static and flexible budgets. Give an example of how flexible budgets might be used by a business. Answer: Static budgets are based on a single estimate of volume, whereas […]

1) Indicate whether each of the following statements is true or false. 1>Pro forma financial statements must be prepared near the end of the budgeting process because they are affected by each of a company’s budgets 2>Budgets are not easy […]

1) The following information was gathered for Company W, a manufacturing company with three departments, A, B, and C: Manufacturing supplies cost is expected to be $500,000. Possible cost drivers are direct labor hours, direct materials cost, and number of […]

1) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. On January 1, 2012, Washta Company issued […]

1) Describe the budgeting process and the benefits it provides. 2) Fill in the missing information by identifying dollar amounts a, b, c, and d. All transactions were for cash. Answer: a = $40,800; b = $5,800; c = $5,800; […]

1) What are the key elements of total quality management? 2) Martha Hanson operates a small gift shop that sells various antiques, such as glassware. She employs two clerks who make sales to customers, accept returns when a customer is […]

1) Senior executives focus on financial data when comparing the performance of their companies to that of competitors. 2) The selection of the most appropriate cost driver often requires considerable judgment in the absence of a strong cause-and-effect relationship. Answer: […]

1) What internal control procedures should a business adopt with respect to cash payments? 2) In 2012, Ohio Company sold 50,000 of its only product at a selling price of $30 per unit. Variable costs were $16 per unit, and […]

1) The accounting term “reliability” means that information is consistent from one accounting period to the next. 2) A substantial amount spent to improve the quality or extend the life of a long-term asset is a revenue expenditure. Answer: FALSE […]

1) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. On January 1, 2012, Pedroia Co. issued […]

1) Addison Company is using a hole-punching machine that originally cost $80,000 and has a current market value of $45,000. The $80,000 is a measure of the opportunity cost for continuing to use the machine. 2) A business’s equity is […]

1) Discuss some of the information items normally included in a corporation’s articles of incorporation. 2) As of December 31, 2012, Walton Corporation had a current ratio of 1.84, quick ratio of 1.45, and working capital of $18,000. The company […]

1) Total quality management involves assessing a company’s value chain to eliminate non-value-added activities 2) As of December 31, 2012, Walton Corporation had a current ratio of 1.84, quick ratio of 1.45, and working capital of $18,000. The company uses […]

1) Give two examples of natural resources. 2) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. […]

1) If the master budget prepared at a volume level of 20,000 units includes direct materials of $80,000, a flexible budget based on a volume of 18,000 units would include direct materials of $72,000. 2) The accounting equation may be […]

1) Kogan Company has two divisions whose most recent financial statements are shown below: Required: 1) Compute the impact on profit if the Residential Division is eliminated. 2) Do you recommend that Kogan eliminate the Residential Division? 2) What is […]

1) In 2012, the Human Resources Department at Heather Corporation expects to incur costs of $145,000. The company has two operating departments. Department A has 30 employees and will incur salary costs of $1,350,000 in 2012 . Department B has […]

1) Selected financial information for Rockufeler Company for 2012 follows: Required: How many times did Rockufeler’s merchandise inventory turn over during 2012? 2) Indicate how the event affects the elements of the financial statements. Use the following letters to record […]

1) Why do managers of a company need information about its product costs? 2) How are direct costs different from indirect costs? Answer: Direct costs can easily be traced to a cost object, such as a department or product. Indirect […]

1) In relation to inventory, differentiate between flow of cost and physical flow of goods. 2) Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each […]

1) In 2012, the balance sheet of Worth Company incorrectly reported as long term some liabilities that should have been treated as current liabilities. How would this error affect financial statement users’ analysis and assessment of the company? 2) San […]

1) How would a company estimate the percentage of its sales that will be uncollectible? 2) Anstendig Corp. has 250,000 shares of common stock authorized. It has issued 75,000 shares and has reacquired 12,000 of these shares as treasury stock. […]