If net present values are used to evaluate two investments that have equal costs and
equal total cash flows, the one with more cash flows in the early years has the higher
net present value.
Answer:
In a job order cost accounting system, indirect labor costs are debited to the Factory
Overhead account.
Answer:
Horizontal analysis is used to reveal changes in the relative importance of each
financial statement item.
Answer:
An understatement of ending inventory will cause an understatement of assets and
equity on the balance sheet.
Answer:
Capital budgeting decisions are not affected by return on investment considerations.
Answer:
Activity-based costing eliminates the need for overhead allocation rates.
Answer:
Raw materials purchased plus beginning raw materials inventory equals the ending
balance of raw materials inventory.
Answer:
The selling expenses budget is normally prepared before the sales budget because
selling expenses affect the amount of sales.
Answer:
Managerial accounting information can be forwarded to the managers of a company
quickly since external auditors do not have to review it, and estimates and projections
are acceptable.
Answer:
Off-the-shelf accounting software is not adequate to meet the needs of small
businesses.
Answer:
If Department G uses $53,000 of direct labor and Department H uses $21,000 of direct
labor, the following journal entry would be recorded by the process cost accounting
system:
Answer:
Within the same budget performance report, it is impossible to have both favorable and
unfavorable variances.
Answer:
Financing activities include receiving cash from issuing debt and receiving cash
dividends from investments in other companies’ stocks.
Answer:
When standard costs are used, factory overhead is assigned to products with a
predetermined standard overhead rate.
Answer:
“Equivalent units of production” is an engineering term used to describe the process by
which one company attempts to manufacture units of a product that are equivalent to
the product manufactured by a competitor.
Answer:
On October 15, a company received $15,000 cash as a down payment on a consulting
contract. The amount was credited to Unearned Consulting Revenue. By October 31,
10% of the services required by the contract were completed. The company will record
consulting revenue of $1,500 from this contract for October.
Answer:
During a given year if a company produces and sells the same number of units, then
beginning inventory units equal ending inventory units.
Answer:
To avoid the time-consuming process of taking an inventory each year, the majority of
companies use the gross profit method to estimate ending inventory.
Answer:
A capital expenditures budget is prepared before the operating budgets.
Answer:
When a company declares cash dividends, retained earnings is reduced.
Answer:
Process cost accounting systems are commonly used by companies that produce a large
volume of standardized units on a continuous basis.
Answer:
When a job is finished, its job cost sheet is completed and moved from the file of jobs
in process to the file of finished jobs that are yet to be delivered to customers.
Answer:
The data needed for cost-volume-profit analysis is readily available if the income
statement is prepared using a contribution format.
Answer:
A multiple-step income statement format shows detailed computations of net sales and
other costs and expenses and reports subtotals for various classes of items.
Answer:
Controllable costs are the same as direct expenses.
Answer:
If obsolete or damaged goods can be sold, they will be included in inventory at their
net realizable value.
Answer:
Although direct labor and raw materials costs are treated as manufacturing costs and
therefore make up part of the finished goods inventory cost, factory overhead is charged
to expense as it is incurred because it is a period cost.
Answer:
With advanced technology there is no need to trace to its source information that has
been entered into an accounting information system.
Answer:
Cash dividends should be treated as an expense to the business.
Answer:
The state unemployment tax rates applied to an employer are adjusted according to an
employer’s merit rating.
Answer:
Proper internal control means that the responsibility for a task is clearly established and
assigned to one person.
Answer:
Brown Company sold supplies in the amount of 15,000 euros to a French company
when the exchange rate was $1.15 per euro. At the time of payment, the exchange rate
decreased to $1.12. Brown must record a loss of $450.
Answer:
A trial balance that balances is not proof of complete accuracy in recording
transactions.
Answer:
A partnership cannot use salary allowances or interest allowances if it uses the stated
ratio method to allocate income and losses to the partners.
Answer:
Selwyn’s Service applied overhead on the basis of direct labor costs during the current
year. Overhead applied was $16,500. Actual overhead incurred was $17,200.
A. Prepare a journal entry to remove this difference assuming that it is not material.
B. Instead, assume actual overhead incurred was only $24,000. Describe (without
computations) the alternative procedure that Selwyn might use to record this material
difference.
Answer:
The amount by which a department’s revenues exceed its direct costs and expenses is
the:
A. Net sales.
B. Gross profit.
C. Departmental profit.
D. Contribution margin.
E. Departmental contribution to overhead.
Answer:
Managerial accounting information:
A. Is used mainly by external users.
B. Involves gathering information about costs for planning and control decisions.
C. Is generally the only accounting information available to managers.
D. Can be used for control purposes but not for planning purposes.
E. Has little to do with controlling costs.
Answer:
Triton Industries reports the following information regarding its production cost:
a. Compute production cost per unit under variable costing.
b. Compute production cost per unit under absorption costing.
Answer:
The common-size percent is computed by:
A. Dividing the analysis amount by the base amount.
B. Dividing the base amount by the analysis amount.
C. Dividing the analysis amount by the base amount and multiplying the result by
D. Dividing the base amount by the analysis amount and multiplying the result by
1,000.
E. Subtracting the base amount from the analysis amount and multiplying the result by
100.
Answer:
The amount of income earned per share of a company’s common stock is known as:
A. Restricted retained earnings per share.
B. Earnings per share.
C. Continuing operations per share.
D. Dividends per share.
E. Book value per share.
Answer:
Match the following definitions and terms by placing the number that identifies the
best definition in the blank space next to the term.
A) The sources of accounting information.
B) An increase in an asset, dividend and expense account and decrease in a liability,
common stock, and revenue account; recorded on the left side of a T-account.
C) The process of transferring journal entry information to the ledger.
D) An accounting system where the impact of each transaction is recorded in at least
two accounts; the sum of the debits for each entry must equal its credits.
E) A file containing all accounts of a company and their balances.
F) A company’s record of all transactions in one place that shows debits and credits for
each transaction.
G) A record of the increases and decreases in a specific asset, liability, equity, revenue
or expense account.
H) Decrease in an asset, dividend and expense account and increase in a liability,
common stock and revenue account; recorded on the right side of a T-account.
I) A simple account form used as a helpful tool in showing the effects of transactions
and events on specific accounts.
J) Another name for the accounting books or simply the books.
Answer:
The overhead cost applied to a job during a period is recorded with a credit to Factory
Overhead and a debit to:
A. Jobs Overhead Expense
B. Cost of Goods Sold
C. Finished Goods Inventory
D. Indirect Labor
E. Goods in Process Inventory
Answer:
Assume a company sells a given product for $12 per unit. How many units must be sold
to break even if variable selling costs are $0.50 per unit, variable production costs are
$3.50 per unit, and total fixed costs are $4,500,000?
A. 391,305 units.
B. 562,500 units.
C. 529,412 units.
D. 281,250 units.
E. 375,000 units.
Answer:
Use the following company information to prepare a schedule of significant noncash
investing and financing activities:
(a) Sold a building with a book value of $125,000 for $195,000 cash and land with a
book value of $32,000 for $65,000 cash.
(b) Issued 10,000 shares of $10 par value common stock in exchange for equipment
with a market value of $135,000.
(c) Retired a $100,000, 10% bond by issuing another $100,000, 12% bond issue.
(d) Acquired land by issuing a 10-year, 9%, $44,000 note payable.
Answer:
Products that have been completed and are ready to be sold by the manufacturer are
called:
A. Finished goods inventory.
B. Goods in process inventory.
C. Raw materials inventory.
D. Cost of goods sold.
E. Factory supplies.
Answer:
Accountants at Amalgamated Corporation incorrectly journalized a $50,000 equipment
purchase as a debit to Buildings. This error was not discovered before the journal entry
was posted. What is the correcting entry?
A. Debit Buildings and credit Equipment for $50,000 each.
B. Debit Equipment and credit Buildings for $50,000 each.
C. Debit Buildings and credit Equipment for $100,000 each.
D. Debit Equipment and credit Buildings for $100,000 each.
E. Debit Equipment for $100,000 and credit Buildings for $50,000.
Answer:
On October 1, Robertson Company sold merchandise in the amount of $5,800 to
Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson
uses the perpetual inventory system. The journal entry or entries that Robertson will
make on October 1 is:
A.
B.
C.
D.
E.
Answer:
A bondholder that owns a $1,000, 10%, 10-year bond has:
A. Ownership rights in the company who issued the bond.
B. The right to receive $10 per year until maturity.
C. The right to receive $1,000 at maturity.
D. The right to receive $10,000 at maturity.
E. The right to receive dividends of $1,000 per year.
Answer:
Textel is thinking about having one of its products manufactured by a subcontractor.
Currently, the cost of manufacturing 1,000 units follows:
If Textel can buy 1,000 units from a subcontractor for $100,000, it should:
A. Make the product because current factory overhead is less than $100,000.
B. Make the product because the cost of direct material plus direct labor of
manufacturing is less than $100,000.
C. Buy the product because the total incremental costs of manufacturing are greater
than $100,000.
D. Buy the product because total fixed and variable manufacturing costs are greater
than $100,000
E. Make the product because factory overhead is a sunk cost.
Answer:
Assume that Charlies Brownies expects to produce and sell 5,000 units of a single
product, a gift box containing an assortment of brownies that showcases the companys
many flavors. The following additional company information is available:
Compute Charlies Brownies total cost per unit.
A. $32
B. $50
C. $53
D. $3
E. $21
Answer:
A plan showing the units of goods to be sold and the revenue to be derived from sales,
that is the usual starting point in the budgeting process, is called the:
A. Operating budget
B. Business plan
C. Income statement budget
D. Merchandise purchases budget
E. Sales budget
Answer:
A company manufactures a product and sells it for $120 per unit. The total fixed costs
of manufacturing and selling the product are expected to be $155,250, and the variable
costs are expected to be $75 per unit. What is the company’s break-even point in (a)
units and (b) dollar sales?
Answer:
An important tool in predicting the volume of activity, the costs to be incurred, the sales
to be earned, and the profit to be received is:
A. Target income analysis.
B. Cost-volume-profit analysis.
C. Least-squares regression of costs.
D. Variance analysis.
E. Process costing.
Answer:
Match each of the following terms with the appropriate definition.
A) Conservatism constraint
B) Net realizable value
C) Retail inventory method
D) Days’ sales in inventory
E) Weighted average inventory method
F) Interim statements
G)LIFO method
H) Specific identification method
I) FIFO method
J) Inventory turnover
Answer:
The asset section of a classified balance sheet usually includes:
A. Current assets, investments, plant assets, and intangible assets.
B. Current assets, long-term assets, revenues, and intangible assets.
C. Current assets, investments, plant assets, and equity.
D. Current liabilities, investments, plant assets, and intangible assets.
E. Current assets, liabilities, plant assets, and intangible assets.
Answer:
Reference: 19_03
Scavenger Company, a manufacturer of recycling bins, began operations on January 1
of the current year. During this time, the company produced 60,000 units and sold
55,000 units at a sales price of $15 per unit. Cost information for this year is shown in
the following table:
Given the Scavenger Company data, what is net income using absorption costing?
A. $201,250
B. $181,250
C. $150,000
D. $177,600
E. $276,250
Answer:
A company had investments in long-term available-for-sale securities. At the end of the
current year, the company’s portfolio had a $162,000 cost and $164,000 market value.
What is the current year’s adjustment to market value given the following account
balances at the end of the prior year?
A.
B.
C.
D.
E.
Answer:
A company had a return on common stockholders’ equity of 25%. Net income equaled
$200,000 and average common stockholders’ equity equaled $700,000. Compute the
amount of the preferred dividends declared.
A. $200,000
B. $500,000
C. $50,000
D. $25,000
E. $175,000
Answer:
The basic components of an accounting information system include all but which of
the following?
A. Source documents
B. Input devices
C. Cell phones
D. Information processors
E. Information storage
Answer:
Statements that show the effects of proposed transactions as if the transactions had
already occurred are called:
A. Pro forma statements
B. Professional statements
C. Simplified statements
D. Temporary statements
E. Interim statements
Answer:
A company had net income of $2,785,000, net sales of $250,000,000, average total
assets of $6,000,000, and equity investments of $40,000. Its return on total assets
equals:
A. $3,215,000
B. 41.67%
C. 21.54%
D. 69.63%
E. 46.42%
Answer:
The question of when revenue should be recognized on the income statement
(according to GAAP) is addressed by the:
A. Revenue recognition principle
B. Going-concern principle
C. Objectivity principle
D. Business entity principle
E. Cost principle
Answer:
Cloudy Company reports the following information for the current year:
If the companys cost per unit of finished goods using absorption costing is $18, what is
total fixed overhead?
A. $204,000
B. $212,000
C. $213,690
D. $222,070
E. $459,000
Answer:
A company purchased $60,000 of 5% bonds on May 1. The bonds pay interest on
February 1 and August 1. The amount of interest accrued on December 31 (the
company’s year-end) would be:
A. $250
B. $500
C. $1,250
D. $2,500
E. $3,000
Answer:
A company uses the periodic inventory system and had the following activity during
the
current monthly period:.
Using the weighted-average inventory method, the company’s ending inventory would
be reported at:
A. $2,000
B. $2,200
C. $2,250
D. $2,400
E. $4,400
Answer:
If actual price per unit of materials is greater than the standard price per unit of
materials, the direct materials price variance is _______________________.
Answer:
The difference between the flexible budget sales and the fixed budget sales is called the
__________________________ variance.
Answer:
Period costs for a manufacturing company would flow directly to:
A, The current income statement.
B, Factory overhead.
C, The current balance sheet.
D, Job cost sheet.
E, The current manufacturing statement.
Answer:
A company made the following merchandise purchases and sales during the month of
May:
There was no beginning inventory. If the company uses the FIFO periodic inventory
method, what would be the cost of the ending inventory?
Answer:
The ____________ concept is the idea that cash paid (or received) in the future has
less value now than the same amount of cash paid (or received) today.
Answer:
A_______________ cost is one that remains unchanged in amount when volume of
activity varies from period to period within a relevant range. A ______________ cost is
one that changes in proportion to changes in volume of activity.
Answer:
The ratio of the volumes of the various products sold by a company is called the
______________________________.
Answer:
During the year, Able Co. purchased $39,600 worth of supplies, at the end of the year,
the balance sheet showed a balance of $1,760 in the Supplies account. Prepare the
necessary adjusting entry.
Answer:
In a manufacturing operation with two process departments (1 and 2), the flow of costs
would proceed from Goods in Process, Dept #1 to ________________ to
_______________ to ______________.
Answer:
The __________________ inventory system continually updates accounting records
for merchandise transactions for the amounts of inventory available for sale and
inventory sold.
Answer:
Explain the concept of the present value of a single amount.
Answer:
Reference: 16_05
Refer to the following incomplete table of cost information:
What was the cost of the direct materials used in the Grating Department?
Answer:
Explain the accounting procedures when a bond’s interest period does not coincide with
the issuer’s accounting period.
Answer:
The _________________ account is used to record the effects of cash overages and
shortages from errors in making change.
Answer:
The four categories of equity accounts are _____________________,
__________________, ______________________ and ______________________.
Answer:
____________ is a method of analysis used to evaluate individual financial statement
items or groups of items in terms of a specific base amount.
Answer:
The interest rate specified in the bond indenture that is paid by the issuer of the bond is
called the ___________________ of interest.
Answer:
_______________________________ is the total amount of cash and other assets
received by the corporation from its stockholders in exchange for common stock.
Answer:
What journal entries are recorded for cash dividends on the declaration date, the date of
record, and the payment date?
Answer: