Accounting 24th Edition

1) The control environment in an internal control structure is the attitude and awareness of internal control by all employees. Answer: TRUE Answer: TRUE Answer: TRUE 2) When a new partner is admitted to a partnership, bonuses attributable to either the old partnership or to the incoming partner may be recognized in accordance with

1) A business that requires all cash payments be made by check can not use a petty cash system. Answer: TRUE Answer: TRUE Answer: TRUE 2) The materials requisition serves as the source document for debiting the accounts in the materials ledger. Answer: FALSE Answer: FALSE Answer: FALSE 3) Many partnerships provide for the admission of new partners or

1) At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000. The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be uncollectible is $15,000. The amount to be recorded in the adjusting entry for the bad

1) In a process costing system, each process will have a work in process inventory account. Answer: TRUE Answer: TRUE Answer: TRUE 2) The form of the balance sheet in which assets, liabilities, and owner's equity are presented in a downward sequence is called the report form. Answer: TRUE Answer: TRUE Answer: TRUE 3) Conversion costs consist of

1) A controlling account is used to record the details of the individual accounts. Answer: FALSE Answer: FALSE Answer: FALSE 2) Purchasing supplies on account increases liabilities and decreases equity. Answer: FALSE Answer: FALSE Answer: FALSE 3) One reason a dollar today is worth more than a dollar 1 year from today is the time value of money. Answer:

1) To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting. Answer: TRUE Answer: TRUE Answer: TRUE 2) Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedure over cash. Answer: TRUE Answer: TRUE Answer:

1) Liability accounts are increased by debits. Answer: FALSE Answer: FALSE Answer: FALSE 2) The updating of accounts is called the adjusting process. Answer: TRUE Answer: TRUE Answer: TRUE 3) The recording of cash payments from the cash account is done by entering the amount as a credit. Answer: TRUE Answer: TRUE Answer: TRUE 4) The profit margin component of rate of

1) An example of a general-purpose financial statement would be a report about projected price increases related to transportation costs. Answer: FALSE Answer: FALSE Answer: FALSE 2) The presence of a subsidiary ledger requires the presence of a summarizing controlling account. Answer: TRUE Answer: TRUE Answer: TRUE 3) The current year's advertising costs are normally considered period costs. Answer:

1) All costs of the processes in a process costing system ultimately pass through the Cost of Goods Sold account. Answer: TRUE Answer: TRUE Answer: TRUE 2) A chart of accounts is a listing of accounts that make up the journal. Answer: FALSE Answer: FALSE Answer: FALSE 3) After the sales budget is prepared, the capital expenditures budget

1) If a new partner is given a 20% interest in the firm then the new partner will receive a 20% interest in earnings. Answer: FALSE Answer: FALSE Answer: FALSE 2) The amount journalized showing the cost added to finished goods is taken from the cost of production report. Answer: TRUE Answer: TRUE Answer: TRUE 3) Bank customers

1) In horizontal analysis, the current year is the base year. Answer: FALSE Answer: FALSE Answer: FALSE 2) A voucher is a written authorization to make a cash payment. Answer: TRUE Answer: TRUE Answer: TRUE 3) If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment. Answer: TRUE Answer: TRUE Answer: TRUE 4)

1) If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase. Answer: FALSE Answer: FALSE Answer: FALSE 2) The underlying principle of allocating operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of

1) Period costs are costs that are incurred for the production requirements of a certain period. Answer: FALSE Answer: FALSE Answer: FALSE 2) The cash account will always be debited. Answer: FALSE Answer: FALSE Answer: FALSE 3) The effective interest method produces a constant dollar amount of interest expense to be reported each interest period. Answer: FALSE Answer: FALSE Answer: FALSE 4)

1) A deficit in Retained Earnings is reported in the stockholders' equity section of the balance sheet. Answer: TRUE Answer: TRUE Answer: TRUE 2) The process of transferring the debits and credits from the journal entries to the accounts is known as updating the accounts. Answer: FALSE Answer: FALSE Answer: FALSE 3) Under the periodic inventory system, the

1) Indirect labor and indirect materials would be part of factory overhead. Answer: TRUE Answer: TRUE Answer: TRUE 2) Property tax expense for a department store's store equipment is an example of a direct expense. Answer: TRUE Answer: TRUE Answer: TRUE 3) If two companies have the same current ratio, their ability to pay short-term debt is the

1) If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary to earn an operating income of $30,000 are 14,000 units. Answer: FALSE Answer: FALSE Answer: FALSE 2) The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum rate

1) The doomsday ratio includes both cash and cash equivalents in the numerator. Answer: TRUE Answer: TRUE Answer: TRUE 2) The amount of depreciation expense for the first full year of use of a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years, is $19,000

1) Liabilities are increased with debits and decreased with credits. Answer: FALSE Answer: FALSE Answer: FALSE 2) If fixed costs are $450,000 and the unit contribution margin is $50, the sales necessary to earn an operating income of $50,000 are 10,000 units. Answer: TRUE Answer: TRUE Answer: TRUE 3) If in evaluating a proposal by use of the

1) A debit is abbreviated as Db and a credit is abbreviated as Cr. Answer: FALSE Answer: FALSE Answer: FALSE 2) The plant managers salary in a manufacturing business would be considered an indirect cost. Answer: TRUE Answer: TRUE Answer: TRUE 3) The two main sources of stockholders' equity are investments contributed by stockholders and net income retained

1) Transactions must first be recorded into the general journal before they can be entered into specialized journals. Answer: FALSE Answer: FALSE Answer: FALSE 2) Purchases of merchandise are typically credited to the merchandise inventory account under the perpetual inventory system. Answer: FALSE Answer: FALSE Answer: FALSE 3) The present value of an annuity is the sum of

1) An account has three parts to it; a title, an increase side, and a decrease side. Answer: TRUE Answer: TRUE Answer: TRUE 2) The principal ledger that contains all the balance sheet and income statement accounts is the general ledger. Answer: TRUE Answer: TRUE Answer: TRUE 3) The direct materials costs and direct labor costs incurred by

1) The profit center income statement should include only revenues and expenses that are controlled by the manager. Answer: TRUE Answer: TRUE Answer: TRUE 2) Proprietorships are owned by one owner and provide only services to their customers. Answer: FALSE Answer: FALSE Answer: FALSE 3) When accounting for uncollectible receivables and using the percentage of sales method, the

1) The process by which management allocates available investment funds among competing capital investment proposals is termed present value analysis. Answer: FALSE Answer: FALSE Answer: FALSE 2) A company should only use nonfinancial performance measures when financial measures cannot be calculated. Answer: FALSE Answer: FALSE Answer: FALSE 3) The job order costing system is used by service firms

1) Conversion costs are generally added evenly throughout the process. Answer: TRUE Answer: TRUE Answer: TRUE 2) Cash flows from investing activities, as part of the statement of cash flows, include receipts from the issuance of bonds payable. Answer: FALSE Answer: FALSE Answer: FALSE 3) The controller's staff consists of management accountants responsible for systems and procedures, general

1) Journalizing transactions using the double-entry bookkeeping system will eliminate fraud. Answer: FALSE Answer: FALSE Answer: FALSE 2) All companies must use a calendar year as their fiscal year. Answer: FALSE Answer: FALSE Answer: FALSE 3) In computing the ratio of net sales to assets, long-term investments are excluded from average total assets. Answer: TRUE Answer: TRUE Answer: TRUE 4) The cost

1) When the rate of return on total assets ratio is greater than the rate of return on common stockholders' equity ratio, the management of the company has effectively used leverage. Answer: FALSE Answer: FALSE Answer: FALSE 2) The excess of the cash flowing in from revenues over the cash flowing out for expenses

1) When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income. Answer: FALSE Answer: FALSE Answer: FALSE 2) Employees view budgeting more positively when goals are established for them by senior management. Answer: FALSE Answer: FALSE Answer: FALSE 3) Money market accounts, commercial paper, and United States Treasury Notes

1) Comparing dividends per share to earnings per share indicates the extent to which the corporation is retaining its earnings for use in operations. Answer: TRUE Answer: TRUE Answer: TRUE 2) If a fire destroys the merchandise inventory, the gross profit method can be used to estimate the cost of merchandise destroyed. Answer: TRUE Answer: TRUE Answer:

1) A compensating balance occurs when a bank may require a company to maintain a maximum cash balance. Answer: FALSE Answer: FALSE Answer: FALSE 2) During the closing process, some balance sheet accounts are closed and end the period with a zero balance. Answer: FALSE Answer: FALSE Answer: FALSE 3) The direct labor time variance measures the efficiency

1) The FIFO method of process costing is simpler than the Average cost method. Answer: FALSE Answer: FALSE Answer: FALSE 2) If the adjustment for accrued salaries at the end of the period is inadvertently omitted, both liabilities and owner's equity will be understated for the period. Answer: TRUE Answer: TRUE Answer: TRUE 3) Paying an account payable

1) Temporary investments are recorded at their cost which would include brokers commissions. Answer: TRUE Answer: TRUE Answer: TRUE 2) If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 unfavorable. Answer: TRUE Answer: TRUE Answer: TRUE 3)

1) Under the periodic inventory system, the cost of merchandise sold is recorded when sales are made. Answer: FALSE Answer: FALSE Answer: FALSE 2) The contribution margin ratio is the same as the profit-volume ratio. Answer: TRUE Answer: TRUE Answer: TRUE 3) Once an account has been closed for the period, inserting a line in the balance columns

1) Depreciation expense on factory equipment is part of factory overhead cost. Answer: TRUE Answer: TRUE Answer: TRUE 2) The Limited Liability Company may elect to be manager managed rather than member managed which means that only authorized members may legally bind the corporation. Answer: TRUE Answer: TRUE Answer: TRUE 3) Accrued expenses are ordinarily listed on the

1) The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date. Answer: FALSE Answer: FALSE Answer: FALSE 2) Under the perpetual inventory system, a company purchases merchandise on terms 2/10,

1) The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the companys auditors. Answer: FALSE Answer: FALSE Answer: FALSE 2) If ending inventory for the year is overstated, owner's equity reported on the balance sheet at the end of the year is understated. Answer: FALSE Answer:

1) During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method. Answer: TRUE Answer: TRUE Answer: TRUE 2) In a process costing system, costs flow into finished goods inventory only from

1) In order to choose the proper activity base for a cost, managerial accountants must be familiar with the operations of the entity. Answer: TRUE Answer: TRUE Answer: TRUE 2) An employee's take home pay is equal to gross pay less all voluntary deductions. Answer: FALSE Answer: FALSE Answer: FALSE 3) Differential analysis can aid management in making decisions

1) At the end of the fiscal year, the variances from standard are usually transferred to the finished goods account. Answer: FALSE Answer: FALSE Answer: FALSE 2) The price of a bond is equal to the sum of the interest payments and the face amount of the bonds. Answer: FALSE Answer: FALSE Answer: FALSE 3) If 20,000 shares

1) The capital expenditures budget summarizes future plans for acquisition of fixed assets. Answer: TRUE Answer: TRUE Answer: TRUE 2) In preparing a bank reconciliation, the amount indicated by a credit memo for a note receivable collected by the bank is added to the balance per company's records. Answer: TRUE Answer: TRUE Answer: TRUE 3) Both callable and

1) The increase side of all accounts is the normal balance. Answer: TRUE Answer: TRUE Answer: TRUE 2) Manufacturers use labor, plant, and equipment to convert direct materials into finished products. Answer: TRUE Answer: TRUE Answer: TRUE 3) The amortization of a premium on bonds payable decreases bond interest expense. Answer: TRUE Answer: TRUE Answer: TRUE 4) One reason not to depend

1) The normal balance of a capital account is a debit. Answer: FALSE Answer: FALSE Answer: FALSE 2) Budget preparation is best determined in a top-down managerial approach. Answer: FALSE Answer: FALSE Answer: FALSE 3) The methods or procedures used to record and report financial data are called the accounting system. Answer: TRUE Answer: TRUE Answer: TRUE 4) Generally, the lower the

1) The use of subsidiary ledgers is limited to Accounts Payable and Accounts Receivable. Answer: FALSE Answer: FALSE Answer: FALSE 2) An advantage of the current ratio is that it considers the makeup of the current assets. Answer: FALSE Answer: FALSE Answer: FALSE 3) Indirect costs can be specifically identified to a cost object. Answer: FALSE Answer: FALSE Answer: FALSE 4) A

1) The amount of capital paid in by the stockholders of the corporation is called legal capital. Answer: FALSE Answer: FALSE Answer: FALSE 2) The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance. Answer: FALSE Answer: FALSE Answer: FALSE 3) One of the more popular defined contribution plans is

1) The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use. Answer: TRUE Answer: TRUE Answer: TRUE 2) The amount of the net income for a period appears on both the income statement and the balance sheet for

1) A qualitative characteristic that may impact upon capital investment analysis is manufacturing control. Answer: TRUE Answer: TRUE Answer: TRUE 2) Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded. Answer: TRUE Answer: TRUE Answer: TRUE 3) When a seller allows a buyer an amount for old

1) Average rate of return equals average investment divided by estimated average annual income. Answer: FALSE Answer: FALSE Answer: FALSE 2) The declaration and issuance of a stock dividend would be reported on the statement of cash flows. Answer: FALSE Answer: FALSE Answer: FALSE 3) The cost of replacing an engine in a truck is an example of

1) The adjusting entry to record inventory shrinkage would generally include a debit to Cost of Merchandise Sold. Answer: TRUE Answer: TRUE Answer: TRUE 2) If the totals of the Income Statement debit and credit columns of a work sheet are $27,000 and $29,000, respectively, after all account balances have been extended, the amount

1) Cash outflows from financing activities include the payment of cash dividends, the acquisition of treasury stock, and the repayment of amounts borrowed. Answer: TRUE Answer: TRUE Answer: TRUE 2) The average rate of return method of capital investment analysis gives consideration to the present value of future cash flows. Answer: FALSE Answer: FALSE Answer: FALSE 3) Activity-based

1) The cash budget summarizes future plans for acquisition of fixed assets. Answer: FALSE Answer: FALSE Answer: FALSE 2) A company is planning to purchase a machine that will cost $24,000, have a six-year life, and have no salvage value. The company expects to sell the machines output of 3,000 units evenly throughout each

1) The internal rate of return method of analyzing capital investment proposals uses the present value concept to compute an internal rate of return expected from the proposals. Answer: TRUE Answer: TRUE Answer: TRUE 2) Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget. Answer: FALSE Answer: FALSE Answer: FALSE 3) Internal

1) The statement of cost of goods manufactured is an extension of the income statement for a manufacturing company. Answer: TRUE Answer: TRUE Answer: TRUE 2) Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post them to the ledger. Answer: FALSE Answer: FALSE Answer: FALSE 3) Currently

1) If direct materials cost per unit decreases, the amount of sales necessary to earn a desired amount of profit will decrease. Answer: TRUE Answer: TRUE Answer: TRUE 2) A staff department or unit is one that provides services, assistance, and advice to the departments with line or other staff responsibilities. Answer: TRUE Answer: TRUE Answer: TRUE 3)

1) It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company. Answer: FALSE Answer: FALSE Answer: FALSE 2) In many retail businesses, inventory is the largest current asset. Answer: TRUE Answer: TRUE Answer: TRUE 3) The amount of the "adjusted balance" appearing on

1) In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory account. Answer: TRUE Answer: TRUE Answer: TRUE 2) The job order costing system is not used by service organizations. Answer: FALSE Answer: FALSE Answer: FALSE 3) Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned. Answer: TRUE Answer: TRUE Answer:

1) A large public corporation normally uses registrars and transfer agents to maintain records of the stockholders. Answer: TRUE Answer: TRUE Answer: TRUE 2) Most companies who have several bank accounts, petty cash, and cash on hand, would list each separately on the balance sheet. Answer: FALSE Answer: FALSE Answer: FALSE 3) If, prior to the last weekly

1) Sarbanes-Oxleys purpose is to improve financial reporting. Answer: FALSE Answer: FALSE Answer: FALSE 2) Accrued taxes payable are generally reported on the balance sheet as a current liability. Answer: TRUE Answer: TRUE Answer: TRUE 3) Direct costs can be specifically traced to a cost object. Answer: TRUE Answer: TRUE Answer: TRUE 4) The income summary account is also known as the

1) At the end of the fiscal period, prepaid expenses are reported on the income statement as expenses. Answer: FALSE Answer: FALSE Answer: FALSE 2) If a business sells two products, it is not possible to estimate the break-even point. Answer: FALSE Answer: FALSE Answer: FALSE 3) Services provided on account is recorded in the revenue journal. Answer: TRUE Answer:

1) When selling a piece of equipment for cash, a loss will result when the proceeds of the sale are less than the book value of the asset. Answer: TRUE Answer: TRUE Answer: TRUE 2) The process of transferring the data from the journal to the ledger accounts is posting. Answer: TRUE Answer: TRUE Answer: TRUE 3) In

1) The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split. Answer: TRUE Answer: TRUE Answer: TRUE 2) If ending inventory for the year is understated, net income for the year is overstated. Answer: FALSE Answer: FALSE Answer: FALSE 3) Cash

1) Inventory errors, if not discovered, will self-correct in two years. Answer: TRUE Answer: TRUE Answer: TRUE 2) Direct materials cost that varies with the number of units produced is an example of a fixed cost of production. Answer: FALSE Answer: FALSE Answer: FALSE 3) Medicare taxes are withheld from an employee's pay only until the employee has

1) The costs of materials and labor that do not enter directly into the finished product are classified as cost of goods sold. Answer: FALSE Answer: FALSE Answer: FALSE 2) The cost of production report reports the cost charged to production and the costs allocated to finished goods and work in process. Answer: TRUE Answer: TRUE Answer:

1) Hill Co. can further process Product O to produce Product P. Product O is currently selling for $60 per pound and costs $42 per pound to produce. Product P would sell for $82 per pound and would require an additional cost of $13 per pound to produce. The differential revenue

1) Cost of Merchandise Sold is often the largest expense on a merchandising company income statement. Answer: TRUE Answer: TRUE Answer: TRUE 2) Gains and losses on the redemption of bonds are reported as other income or other expense on the income statement. Answer: TRUE Answer: TRUE Answer: TRUE 3) Period costs are operating costs that are expensed

1) The erroneous arrangement of digits, such as writing $45 as $54, is called a slide. Answer: FALSE Answer: FALSE Answer: FALSE 2) If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination. Answer: FALSE Answer: FALSE Answer: FALSE 3) In preparing a bank reconciliation, the amount of deposits in

1) When compared to a corporation, one of the major disadvantages of the partnership is its limited life. Answer: TRUE Answer: TRUE Answer: TRUE 2) The accounting for defined benefit plans is usually very easy and straight forward. Answer: FALSE Answer: FALSE Answer: FALSE 3) Managerial information is for external as well as internal stakeholders. Answer: FALSE Answer: FALSE Answer: FALSE 4)

1) Twenty percent of all businesses in the United States are corporations and they account for 80% of the total business dollars generated. Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] 2) Revenue recognition concept requires that the reporting of revenue be included in the period when cash for the service is received. Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] 3) When

1) If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease. Answer: FALSE Answer: FALSE Answer: FALSE 2) On the work sheet, the capital and drawing account balances are extended to the Balance Sheet columns. Answer: TRUE Answer: TRUE Answer: TRUE 3) A disadvantage of partnerships is the mutual agency of

1) After analyzing transactions, the next step would be to post the transactions in the ledger. Answer: FALSE Answer: FALSE Answer: FALSE 2) The market rate of interest is affected by a variety of factors, including investors' assessment of current economic conditions. Answer: TRUE Answer: TRUE Answer: TRUE 3) It is necessary for a company to use the

1) If 10,000 units which were 40% completed are in process at November 1, 80,000 units were completed during November, and 12,000 were 20% completed at November 30, the number of equivalent units of production for November was 75,600. (Assume no loss of units in production and that inventories are

1) The FIFO method separates work done on beginning inventory in the previous period from work done on it in the current period. Answer: TRUE Answer: TRUE Answer: TRUE 2) When a business receives a bill from the utility company, no entry should be made until the invoice is paid. Answer: FALSE Answer: FALSE Answer: FALSE 3) If the

1) Generally accepted accounting principles require companies to use only one factory overhead rate for product costing. Answer: FALSE Answer: FALSE Answer: FALSE 2) Developing and retaining quality managers is an advantage of decentralization. Answer: TRUE Answer: TRUE Answer: TRUE 3) In preparing the cash flows from operating activities section of the statement of cash flows by the

1) The stock dividends distributable account is listed in the current liability section of the balance sheet. Answer: FALSE Answer: FALSE Answer: FALSE 2) The cost of a patent with a remaining legal life of 10 years and an estimated useful life of 7 years is amortized over 10 years. Answer: FALSE Answer: FALSE Answer: FALSE 3) Job

1) The ratio of net sales to assets measures how effectively a business is using its assets to generate sales. Answer: TRUE Answer: TRUE Answer: TRUE 2) Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid. Answer: FALSE Answer: FALSE Answer: FALSE 3) As product costs are

1) Capital expenditures are costs that are charged to Stockholders' Equity accounts. Answer: FALSE Answer: FALSE Answer: FALSE 2) The seller records the sales tax as part of the sales amount. Answer: FALSE Answer: FALSE Answer: FALSE 3) The closing process is sometimes referred to as closing the books. Answer: TRUE Answer: TRUE Answer: TRUE 4) Other receivables include non trade receivables

1) Planning is the process of developing the companys objectives or goals and translating these objectives into courses of action. Answer: TRUE Answer: TRUE Answer: TRUE 2) A company pays $36,000 for twelve month's rent on October 1. The adjusting entry on December 31 is debit Rent Expense, $9,000 and credit Prepaid Rent, $9,000. Answer:

1) A bond is simply a form of an interest bearing note. Answer: TRUE Answer: TRUE Answer: TRUE 2) At year-end, the balance in the prepaid insurance account, prior to any adjustments, is $6,000. The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance

1) Preferred stockholders must receive their current year dividends before the common stockholders can receive any dividends. Answer: TRUE Answer: TRUE Answer: TRUE 2) If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover is 5. Answer: FALSE Answer: FALSE Answer: FALSE 3) Cost plus methods determine the

1) Hill Co. can further process Product O to produce Product P. Product O is currently selling for $60 per pound and costs $42 per pound to produce. Product P would sell for $82 per pound and would require an additional cost of $13 per pound to produce. The differential revenue

1) The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory. Answer: TRUE Answer: TRUE Answer: TRUE 2) Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand. Answer: FALSE Answer:

1) The desired selling price for a product will be the same under both variable and total cost. Answer: TRUE Answer: TRUE Answer: TRUE 2) The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee. Answer: FALSE Answer: FALSE Answer: FALSE 3) The first step in

1) Under a periodic inventory system, the merchandise on hand at the end of the year is determined by a physical count of the inventory. Answer: TRUE Answer: TRUE Answer: TRUE 2) An adjusting entry to accrue an incurred expense will affect total liabilities. Answer: TRUE Answer: TRUE Answer: TRUE 3) The erroneous moving of an entire number

1) Most large companies will use only one inventory costing methods for all of its different segments. Answer: FALSE Answer: FALSE Answer: FALSE 2) When a new partner is admitted by making an investment in the partnership, the old partners' capital accounts are always credited. Answer: FALSE Answer: FALSE Answer: FALSE 3) By using the rate of return

1) When the effective interest method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bonds carrying value at the beginning of the given period. Answer: FALSE Answer: FALSE Answer: FALSE 2) The ratio of income from operations to

1) The trial balance may be listed on the work sheet instead of being prepared separately. Answer: TRUE Answer: TRUE Answer: TRUE 2) When a partnership dissolves, a new partnership is formed and a new partnership agreement should be prepared. Answer: TRUE Answer: TRUE Answer: TRUE 3) Direct materials and direct labor costs are examples of variable costs

1) Under the cost method, when treasury stock is purchased by the corporation, the par value and the price at which the stock was originally issued are important. Answer: FALSE Answer: FALSE Answer: FALSE 2) The post-closing trial balance will generally have fewer accounts than the trial balance. Answer: TRUE Answer: TRUE Answer: TRUE 3) When no-par common

1) Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity and dividends. Answer: TRUE Answer: TRUE Answer: TRUE 2) An example of deferred revenue is Unearned Rent. Answer: TRUE Answer: TRUE Answer: TRUE 3) If net income for a proprietorship was $50,000, the

1) One way to report revenue earned by a company is to present it by the different segments of business. Answer: TRUE Answer: TRUE Answer: TRUE 2) If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the annual interest expense is $5,500. Answer: FALSE Answer: FALSE Answer: FALSE 3) A restriction/appropriation

1) If Division Q's income from operations was $30,000 on invested assets of $200,000, the rate of return on investment is 15%. Answer: TRUE Answer: TRUE Answer: TRUE 2) The usual presentation of the statement of owner's equity is (1) Beginning capital, (2) Net income or loss, (3) Drawing, (4) Owner's contributions, (5) Ending capital. Answer:

1) The most effective means of presenting standard factory overhead cost variance data is through a factory overhead cost variance report. Answer: TRUE Answer: TRUE Answer: TRUE 2) In a company's annual report, the section called management discussion and analysis provides critical information in interpreting the financial statements and assessing the future of the

1) The cash payback method of capital investment analysis is one of the methods referred to as a present value method. Answer: FALSE Answer: FALSE Answer: FALSE 2) When a corporation issues stock at a premium, it reports the premium as an other income item on the income statement. Answer: FALSE Answer: FALSE Answer: FALSE 3) Journalizing and

1) An accounting system is the methods and procedures used to collect, classify, summarize, and report the businesses financial information Answer: TRUE Answer: TRUE Answer: TRUE 2) On the income statement, miscellaneous expenses are usually presented as the last item without regard to the dollar amount. Answer: TRUE Answer: TRUE Answer: TRUE 3) A process cost accounting system

1) Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section. Answer: FALSE Answer: FALSE Answer: FALSE 2) If the liabilities owed by a business total $300,000 and owners equity is equal to $300,000, then the assets also total $300,000. Answer: FALSE Answer: FALSE Answer: FALSE 3) Equivalent

1) Job order cost accounting systems may be used for planning and controlling a service business. Answer: TRUE Answer: TRUE Answer: TRUE 2) When merchandise inventory is shown on the balance sheet, both the method of determining the cost of the inventory and the method of valuing the inventory should be shown. Answer: TRUE Answer: TRUE Answer: TRUE 3) A

1) Average rate of return equals estimated average annual income divided by average investment. Answer: TRUE Answer: TRUE Answer: TRUE 2) Nonmanufacturing costs are classified into two categories: selling and administrative. Answer: TRUE Answer: TRUE Answer: TRUE 3) A check for $342 was erroneously charged by the bank as $4 In order for the bank reconciliation to balance,

1) Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two. Answer: TRUE Answer: TRUE Answer: TRUE 2) The statement of cash flows reports a firm's major sources of cash receipts and major uses of cash payments for

1) About 90% of the businesses in the United States are organized as corporations. Answer: FALSE Answer: FALSE Answer: FALSE 2) The process of recording a transaction in the journal is called journalizing. Answer: TRUE Answer: TRUE Answer: TRUE 3) A notation in the post reference column of the general journal indicates that the amount has been posted

1) The statement of cash flows is an optional financial statement. Answer: FALSE Answer: FALSE Answer: FALSE 2) The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis. Answer: TRUE Answer: TRUE Answer: TRUE 3) Bonds may be purchased directly from the issuing corporation or through one of

1) When old equipment is traded in for a new equipment, the difference between the list price and the trade in allowance is called boot. Answer: TRUE Answer: TRUE Answer: TRUE 2) In a computerized accounting system, a work sheet may not be necessary because the software program automatically posts entries to the accounts and prepares

1) Gross profit minus selling expenses equals net income. Answer: FALSE Answer: FALSE Answer: FALSE 2) The double-entry accounting system records each transaction twice. Answer: FALSE Answer: FALSE Answer: FALSE 3) Accounting systems evolve through a three-step process: analysis, design and feedback. Answer: FALSE Answer: FALSE Answer: FALSE 4) The master budget of a small manufacturer would normally include all component budgets

1) A cost object indicates how costs are related or identified. Answer: TRUE Answer: TRUE Answer: TRUE 2) Unearned Revenues account is an example of a liability. Answer: TRUE Answer: TRUE Answer: TRUE 3) Form W-2 is called the Wage and Tax Statement. Answer: TRUE Answer: TRUE Answer: TRUE 4) Even when a trial balance is in balance, there may be errors