Financial and Managerial Accounting 9th Edition

47. Flores Realty Corporation had the following balance sheet accounts and balances: Accounts Payable $6,000 Common Stock ? Accounts Receivable 1,000 Equipment $7,000 Building ? Land 7,000 Cash 3,000 Retained Earnings 2,000 If the balance of the Building account were $14,000 and

Chapter 01 - Uses of Accounting Information and the Financial Statements TRUE/FALSE 1. The intentional preparation of misleading financial statements is referred to as fraudulent financial reporting. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: ethics LOC: Learning type: Recall KEY: ethical reporting ANS: T

Chapter 10 - Long-Term Liabilities TRUE/FALSE 1. Financial leverage is also known as trading on the equity. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: return on equity ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC:

Date Description Post. Ref. Debit Credit 2009 Nov. 1 Cash ($800,000 1.03) 824,000 Unamortized Bond Premium ($824,000 $800,000) 24,000 Bonds Payable 800,000 2010 May 1 Bond Interest Expense ($824,000 0.0425) 35,020 Unamortized Bond Premium ($36,000 $35,020) 980 Cash ($800,000 0.09 1/2) 36,000 Nov. 1 Bond Interest Expense [($824,000 $980) 0.0425]

Cash 3,000 ANS: A PTS: 1 OBJ: LO5 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: bonds payable ANS: A PTS: 1 OBJ: LO5 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: bonds payable ANS: A PTS: 1 OBJ: LO5 NAT: AACSB correlation: analytic LOC:

23. Poquito Corporation had both the following transactions occur on the same day: 1. Issued 30,000 shares of its $5 par value common stock for $360,000 cash. 2. Issued 10,000 shares of its $5 par value common stock in exchange for land and a building. The building is estimated

KEY: dividends| preferred stock KEY: dividends| preferred stock KEY: dividends| preferred stock 61. Dividends in arrears cannot exist in conjunction with a. callable preferred stock. b. convertible preferred stock. c. noncumulative preferred stock. d. cumulative preferred stock. ANS: C PTS: 1 OBJ: LO3 NAT: AACSB correlation:

December 31, 2010 Contributed capital Common stock$5 par value, 100,000 shares authorized, 50,000 shares issued, 49,200 shares outstanding $250,000 Additional paid-in capital 125,000 Paid-in capital, treasury stock 700 Total contributed capital $375,700 Retained earnings 480,000 Total contributed capital and retained earnings $855,700 Less treasury stock, common (800 shares at cost)

Chapter 11 - Contributed Capital TRUE/FALSE 1. The price/earnings (P/E) ratio is a measure of investors' confidence in a company's future. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: performance measurement| return on equity ANS: T PTS: 1 OBJ:

Cash 450,000 d. Investment in Luffy Corporation 450,000 Cash 450,000 ANS: B PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: influential but non-controlling interest ANS: B PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: influential

Chapter 12 - Investments TRUE/FALSE 1. Gains and losses on the sale of investments appear as adjustments within the operating activities section of the statement of cash flows. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: statement of cash

PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: balance sheet PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: balance sheet PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: balance sheet

PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: dividends PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: dividends PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: dividends 22. Draw two distinctions between accounting

b. Retained earnings decreases. c. Contributed capital increases. d. Par value per share remains the same. ANS: A PTS: 1 OBJ: LO5 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: dividends ANS: A PTS: 1 OBJ: LO5 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: dividends

Chapter 13 - The Corporate Income Statement and the Statement of Stockholders' Equity TRUE/FALSE 1. The quality of earnings is an indication of the sustainability of earnings into future accounting periods. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY:

c. Not used to adjust net income to calculate net cash flows from operating activities ANS: A PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: statement of cash flows ANS: A PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension

Chapter 14 - The Statement of Cash Flows TRUE/FALSE 1. The purchase of trading securities with cash is considered an investing activity. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: statement of cash flows ANS: F PTS: 1 OBJ:

Chapter 15 - The Changing Business Environment - A Manager's Perspective TRUE/FALSE 1. Management accounting is not a subordinate activity to financial accounting. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: reflective LOC: Learning type: Recall KEY: the role of management accounting ANS: T PTS:

c. the "communicate" stage of the management process. d. all stages of the management cycle. ANS: D PTS: 1 OBJ: LO4 NAT: AACSB correlation: reflective LOC: Learning type: Recall KEY: performance measures ANS: D PTS: 1 OBJ: LO4 NAT: AACSB correlation: reflective LOC: Learning type: Recall KEY: performance

48. Which of the following account balances is not reported on the balance sheet? a. Materials Inventory b. Manufacturing Patents c. Cost of Goods Sold d. Work in Process Inventory ANS: C PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: balance sheet|

Chapter 16 - Cost Concepts and Cost Allocation TRUE/FALSE 1. Product costs for a manufacturing company consist of direct materials, direct labor, and overhead. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: cost concepts ANS: T PTS: 1 OBJ:

17,000 (1) 3,000 (5) Finished Goods Inventory Beg Bal 16,000 (7) 63,600 End Bal 13,000 Payroll Payable 5,000 Beg

Chapter 17 - Costing Systems- Job Order Costing TRUE/FALSE 1. The types of computations for costs to be transferred out of Work in Process Inventory differ if the production process involves multiple departments rather than a single department. ANS: F PTS: 1 OBJ: LO2 NAT: AACSB

Equivalent units based on the FIFO costing method 58,000 56,500 Units completed55,000 Units in ending work in process5,000 Direct materials are added at the beginning of the process. Beginning work in process is 40 percent complete as to conversion costs; ending work in

Chapter 18 - Costing Systems- Process Costing TRUE/FALSE 1. In a process costing system, each product is assigned the same amount of costs. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: reflective LOC: Learning type: Recall KEY: process costing ANS: T PTS: 1 OBJ: LO1

Colombo, Inc. Equivalent Production January 31, 20xx Physical Units Beginning inventory 8,200 Equivalent Units Units started this period 260,000 Direct Materials % Conversion Costs % Units to be accounted for 268,200 Beginning inventory 8,200 0 0 3,280 40 Units started and completed 237,600 237,600 100 237,600 100 Ending inventory 22,400

Chapter 19 - Value-Based Systems- ABM and Lean TRUE/FALSE 1. Nonproduction costs are not included in full product cost. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: cost concepts ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic

KEY: JIT| management information systems KEY: JIT| management information systems KEY: JIT| management information systems 43. In a just-in-time environment, a. production runs are interrupted each day at setup time to perform routine maintenance. b. scheduled and preventive maintenance is extremely important. c. cost savings are realized by

Chapter 21 - The Budgeting Process TRUE/FALSE 1. Budgeting is the process of identifying, gathering, summarizing, and communicating financial and nonfinancial information about an organization's future activities. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: budgeting and the management

Accounts Payable Account No. 212 Date Item Post. Ref. Debit Credit Balance Debit Credit 2010 Dec. 1 J1 8,200 7 J1 2,800 8 J2 600

d. $19,000 ANS: C PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: post entries and prepare trial balance ANS: C PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: post entries and prepare trial balance ANS: C PTS: 1

Chapter 02 - Analyzing Business Transactions TRUE/FALSE 1. When a company receives a product previously ordered, a recordable transaction has occurred. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: measurement issues| recording transactions ANS: T PTS: 1 OBJ: LO1

Chapter 20 - Cost Behavior Analysis TRUE/FALSE 1. Cost behavior is the way prices are adjusted due to changes in costs. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: cost behavior analysis| cost concepts ANS: F PTS: 1 OBJ:

Unit Sales Price Unit Variable Costs Unit Sales Product A $150 $100 8,000 Product B 100 60 2,000 Fixed costs are $480,000. The weighted-average contribution margin is a. $42. b. $45. c. $48. d. $90. ANS: C PTS: 1 OBJ: LO5 NAT: AACSB correlation: analytic

PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: profitability PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: profitability PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: profitability 13. a. What is the

ANS: A PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: financial budgets ANS: A PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: financial budgets ANS: A PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: financial

Chapter 22 - Performance Management and Evaluation TRUE/FALSE 1. The balanced scorecard links the perspectives of an organization's stakeholders with the organization's mission and vision, performance measures, strategic plan, and resources. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY:

c. $30 d. $40 ANS: C PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: performance evaluation of cost centers and profit centers ANS: C PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: performance evaluation of cost centers and

(F) (F) (U) Price variance, sheet aluminum = difference in price actual quantity = $0.05 (F) 241,200 sheets = $12,060 (F) Price variance, coating = $0.03 (F) 148,500 liters = $4,455 (F) Price variance, gas jet assemblies = $0.10 (U) 120,100 assemblies = $12,010 (U) c. Direct materials quantity variances:

b. $300 (U) c. $1,950 (F) d. $1,950 (U) ANS: C PTS: 1 OBJ: LO5 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: budgeting and the management cycle| cost concepts| standard costing and variance analysis ANS: C PTS: 1 OBJ: LO5 NAT: AACSB correlation: analytic LOC: Learning

Chapter 23 - Standard Costing and Variance Analysis TRUE/FALSE 1. Standard costs are based solely on expected future costs and conditions. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: cost concepts| management issues| standard costing and variance analysis ANS:

ANS: A PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: incremental analysis for special order decisions ANS: A PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: incremental analysis for special order decisions ANS: A PTS: 1 OBJ: LO3 NAT: AACSB

Chapter 24 - Short Run Decision Analysis TRUE/FALSE 1. Managers rely strictly on financial information when faced with decisions. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: reflective LOC: Learning type: Recall KEY: management process ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: reflective

Chapter 25 - Capital Investment Analysis TRUE/FALSE 1. Capital investment analysis can be applied in case of expensive and long-term projects. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: reflective LOC: Learning type: Recall KEY: the management process ANS: T PTS: 1 OBJ: LO1 NAT:

d. $22,740. ANS: D PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: net present value method ANS: D PTS: 1 OBJ: LO4 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: net present value method ANS: D PTS: 1 OBJ: LO4 NAT: AACSB

b. ($1,203,000.00 100,000) + [($1,203,000.00 100,000) ($90,000 $1,203,000.00)] c. ($1,203,000.00 100,000) + [($500,000 100,000) 0.1875] d. None of these ANS: D PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: cost-based pricing methods ANS: D PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC:

Chapter 26 - Pricing Decisions, Incl. Target Costing and Transfer Pricing TRUE/FALSE 1. The long-term objectives of a company need not include statements concerning pricing policy. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: objectives of a pricing policy

Chapter 27 - Quality Management and Measurement TRUE/FALSE 1. Many traditional management information systems do not produce meaningful results for today's business environment. ANS: T PTS: 1 NAT: AACSB correlation: analytic; reflective ANS: T PTS: 1 NAT: AACSB correlation: analytic; reflective ANS: T PTS: 1 NAT:

27. United Insurance Agency incurred the following activity costs related to service quality. Total sales $1,000,000 Costs of quality: Prevention 50,000 Appraisal 47,000 Internal failure 36,000 External failure 64,000 Costs of conformance total a. $15,500. b. $55,000. c. $120,000. d. $131,400.

Chapter 28 - Financial Analysis of Performance TRUE/FALSE 1. It is in the best interests of a company to base executive compensation on a single performance measure. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: performance measures ANS: F

Total liabilities and stockholders' equity $300,000 Starman Corporation Income Statement For the Year Ended December 31, 20xx Net sales $400,000 Cost of goods sold 240,000 Gross margin $160,000 Operating expenses 40,000 Income before income taxes $120,000 Income taxes expense 30,000 Net income $ 90,000

ANS: $1,168,000 {365 25 = 14.6 (Receivable turnover) [($82,000 + $78,000) 2]} PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Analysis KEY: ratio analysis ANS: $1,168,000 {365 25 = 14.6 (Receivable turnover) [($82,000 + $78,000) 2]} PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type:

Chapter 03 - Measuring Business Income TRUE/FALSE 1. The intentional preparation of misleading financial statements is referred to as fraudulent financial reporting. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: ethics LOC: Learning type: Recall KEY: ethical reporting ANS: T PTS: 1 OBJ: LO1 NAT:

32. Joan Miller owns an advertising agency. One of the adjustments her accountant made at the end of July was $360 for unpaid wages of the secretary. Joan Miller might ask, Why go to the trouble of making this adjustment? Why worry about it? Doesn't everything come out in

ANS: F PTS: 1 LOC: Learning type: Comprehension ANS: F PTS: 1 LOC: Learning type: Comprehension ANS: F PTS: 1 LOC: Learning type: Comprehension ANS: F PTS: 1 LOC: Learning type: Recall ANS: F PTS: 1 LOC: Learning type: Recall ANS: F PTS: 1 LOC: Learning type: Recall ANS: F

December 31, 2010 Cash $ 200 Accounts Receivable 500 Prepaid Insurance 50 Supplies 150 Office Equipment 400 Accumulated DepreciationOffice Equipment $ 200 Accounts Payable 300 Common Stock 600 Service Revenue Earned 500 Salaries Expense 100 Rent Expense 200 ______

133. Accounts Receivable was $750 at the end of November and $525 at the end of December. Revenue totaled $4,775 for December. How much cash was received from revenues during December? a. $6,050 b. $5,000 c. $4,550 d. $3,550 ANS: B PTS: 1 OBJ: LO6 NAT: AACSB

Assets Cash $ 70,000 Short-term investments 56,000 Accounts receivable 28,000 Notes receivable (due in one year) 42,000 Merchandise inventory 98,000 Land held for future use 112,000 Land 140,000 Building $150,000 Less accumulated depreciation

Chapter 04 - Financial Reporting and Analysis TRUE/FALSE 1. Both investors and creditors have an interest in a company's ability to generate favorable cash flows. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: communication LOC: Learning type: Recall KEY: financial information users ANS: T PTS:

Costs and expenses Costs of goods sold $ 29,000 Selling expenses 10,000 General and administrative expenses 13,750 Interest expense 6,250 Total costs and expenses 59,0000 Income before income taxes $ 49,750 Income taxes 19,500 Net income

Chapter 05 - The Operating Cycle and Merchandising Operations TRUE/FALSE 1. Service businesses can be classified as wholesalers and retailers. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: communication LOC: Learning type: Recall KEY: management issues ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation:

13. Assume that the sales made by Wessling Corporation for the month ended February 28, 20xx, were made to customers using credit cards and totaled $5,666. Prepare one journal entry to record these sales assuming that all of the credit card companies charge Wessling Corporation a 2.5 percent discount

41. On June 3, Maryland Company purchased merchandize worth $800 on credit, terms 2/10, n/30. The amount paid on June 15. What is the required journal entry to record the payment under the periodic inventory system? a. Accounts Payable 784 Purchases Discounts 16 Cash 800 b. Accounts

Chapter 06 - Inventories TRUE/FALSE 1. Supply-chain management works well in a just-in-time operating environment. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic; technology LOC: Learning type: Recall KEY: accounting information and the Internet ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic;

KEY: pricing methods KEY: pricing methods KEY: pricing methods 41. Use this information to answer the following question. Jan. 1 Inventory 15 units @ $4.00 8 Purchase 60 units @ $4.40 17 Purchase 30 units @ $4.20 25

ANS: General Journal Page 1 Date Description Post. Ref. Debit Credit 2010 Feb. 2 Uncollectible Accounts Expense 11,019,000 Allowance for Uncollectible Accounts 11,019,000 PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: accounts receivable ANS: General Journal

Chapter 07 - Cash and Receivables TRUE/FALSE 1. Under securitization, a company sells its receivables in batches at a discount. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: financing receivables ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation:

ANS: B PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: accounts receivable ANS: B PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: accounts receivable ANS: B PTS: 1 OBJ: LO3 NAT: AACSB correlation: analytic LOC: Learning type: Application KEY: accounts

4. Anson's Auto Parts had cash sales of $10,000 for the month of April. Sales are subject to a 6 1/2 percent sales tax and an 8 percent excise tax. In the journal provided, prepare a compound entry without explanation to record Anson's Auto Parts sales and related sales

a. Estimated Liability for Vacation Pay 840 Cash 840 b. Vacation Pay Expense 480 Cash 480 c. Vacation Pay Expense 336 Estimated Liability for Vacation Pay 336 d. Cash 168 Estimated Liability for Vacation Pay 168 ANS: C PTS: 1 OBJ:

Chapter 08 - Current Liabilities and Fair Value Accounting TRUE/FALSE 1. Working capital equals current assets plus current liabilities. ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Recall KEY: ratio analysis ANS: F PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic

Chapter 09 - Long Term Assets TRUE/FALSE 1. Free cash flow is a good measure of a company's ability to finance long-term assets. ANS: T PTS: 1 OBJ: LO1 NAT: AACSB correlation: analytic LOC: Learning type: Comprehension KEY: statement of cash flows ANS: T PTS: 1

16. Speedy Printing purchased a new printing press for $80,000. It depreciates the press over a five-year period, using the double-declining-balance method of depreciation. If the press has an $8,000 estimated residual value, calculate depreciation expense for each of the five years. (Show your work.) ANS: Year 1:

51. A machine was purchased for $40,000. It has a current carrying value of $26,000 and had a depreciable cost of $36,000. Its estimated residual value must have been a. $4,000. b. $10,000. c. $14,000. d. impossible to determine from the facts given. ANS: A PTS: