1) In process cost accounting, materials are always classified as indirect if they are not
physically incorporated into the final product.
2) The Merchandise Inventory account balance at the end of the current period is equal
to the amount of beginning merchandise inventory for the next period.
3) Enterprise resource planning software packages include the programs that manage a
company’s vital operations.
4) The main goal of the lean business model is the elimination of waste while satisfying
the customer and providing a positive return to the company.
5) A perpetual inventory system is able to directly measure and monitor inventory
shrinkage and there is no need for a physical count of inventory.
6) A columnar journal is any journal with only one column.
7) A company had sales and cost of goods sold of $350,000 and $200,000, respectively.
Its gross profit equals $150,000.
8) The return on total assets can be calculated as profit margin times total asset
turnover.
9) Cost of Goods Sold is debited to close the account during the closing process.
10) For a manufacturing firm, cycle time may be computed as process time + inspection
time + move time – wait time.
11) Abers reported average total assets of $10,965 million and net sales of $11,430
million. Its total asset turnover equals .96.
12) The process of evaluating performance can be improved by using budgets.
13) If the predetermined overhead allocation rate is 85% of direct labor cost, and the
Painting Department’s direct labor cost for the reporting period is $20,000, the
following entry would be made to record the allocation of overhead to the products
processed in this department:
14) Interest is the payment to the owner of an asset for its use by a borrower.
15) The accounts payable ledger has a controlling account in the general ledger and a
separate subsidiary account for each creditor in the accounts payable ledger.
16) The statement of cash flows identifies cash flows separated into operating,
investing, and financing activities over a period of time.
17) The sales budget is derived from the production budget.
18) The Financial Accounting Standards Board is the private group that sets both broad
and specific accounting principles.
19) A buyer did not take advantage of a supplier’s credit terms of 2/10, n/30, and instead
paid the invoice in full at the end of 30 days. By not taking the discount the buyer lost
the equivalent of 18% annual interest on the amount of the purchase.
20) Factory overhead is often collected and summarized in a subsidiary factory
overhead ledger.
21) On September 30 of the current year, a company acquired and placed in service a
machine at a cost of $700,000. It has been estimated that the machine has a service life
of five years and a salvage value of $40,000. Using the double-declining-balance
method of depreciation, prepare a schedule showing depreciation amounts for the
current year and the next 4 years (round answers to the nearest dollar). The company
closes its books on December 31 of each year.
22) Explain the basic difference between estimating the amount of uncollectible
accounts using the percent of sales method and the accounts receivable method.
23) Annie’s Attic has the following account balances for the dates given:
Also, its net income, for September 1 through September 30 was $20,000 and there
were no investments or withdrawals by the owner. Determine the equity at both
September 1 and September 30.
24) A company’s income before interest expense and income taxes is $302,400, and its
interest expense is $72,000. Calculate the company’s times interest earned ratio.
25) Martin, Inc.’s, income statement is shown below. Based on this income statement
and the other information provided, calculate the net cash provided by operations using
the indirect method.
Additional information: