1) A flexible budget expresses variable costs on a per unit basis and fixed costs on a
total basis.
2) If the purchase price of retired stock exceeds the net amount removed from paid-in
capital, the excess is debited to Retained Earnings.
3) Minimum legal capital requirements are intended to protect creditors.
4) When the cost of a short-term held-to-maturity debt security is different from the
maturity value, the difference is amortized over the remaining life of the security.
5) Indirect labor refers to the cost of the workers whose efforts are directly related to
specific units of product.
6) Most large thefts occur from payment of fictitious invoices, which makes control of
cash disbursements especially important for companies.
7) Total quality management and just-in-time manufacturing focus on quality
improvement as well as on time customer deliveries.
8) Any unrealized gain or loss for the portfolio of available-for-sale securities is
reported on the income statement in the other gain or loss section.
9) A unique feature of process costing systems is the use of a single Work in Process
Inventory account regardless of the number of production departments that exist.
10) Although a fixed budget is only useful over the relevant range of operations, a
flexible budget is useful over all possible production levels.
11) Trend analysis is a form of horizontal analysis that can reveal patterns in data across
successive periods.
12) Predetermined overhead rates are necessary because cost accountants use periodic
inventory systems.
13) One of the similarities of bond and equity financing is that both dividends and
equity distribution payments are tax deductible.
14) A company’s total cost of inventory was $329,000 and its current replacement cost
is $307,000. Under the lower cost or market, the amount reported should be $329,000.
15) Once equivalent units are calculated for materials, this number will also be used for
direct labor and factory overhead.
16) A company had average total assets of $887,000. Its gross sales were $1,090,000
and its net sales were $1,000,000. The company’s total asset turnover equals:
A.0.81.
B.0.89.
C.1.09.
D.1.13.
E.1.23.
17) On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8%
installment note requiring equal payments each June 30 of $37,258. What amount of
interest expense will be included in the first annual payment?
A.$20,000
B.$37,258
C.$25,000
D.$17,258
E.$232,742
18) In a process costing system, when manufacturing overhead costs are applied to the
cost of production, they are debited to:
A.the Finished Goods Inventory account.
B.the Cost of Goods Sold account.
C.the Work in Process Inventory account.
D.the Manufacturing Overhead account.
E.the Raw Materials Inventory account.
19) Employer payroll taxes:
A.Are added expenses beyond that for the wages and salaries earned by employees.
B.Represent the federal taxes withheld from employees.
C.Represent the social security taxes withheld from employees.
D.Are paid by the employee.
E.Are payable for up to a maximum $117,000 of employee earnings.
20) The following information relating to a company’s overhead costs is available.
Based on this information, the total overhead variance is:
A.$7,000 favorable.
B.$6,000 favorable.
C.$1,000 unfavorable.
D.$6,000 unfavorable.
E.$1,000 favorable.
21) Doc’s Ribhouse had beginning equity of $52,000; net income of $35,000, and
withdrawals by the owner of $12,000. Calculate the ending equity.
A.$(5,000).
B.$29,000.
C.$5,000.
D.$99,000.
E.$75,000.
22) Large aircraft producers such as the Boeing Company normally use:
A.Job order costing.
B.Process costing.
C.Mixed costing.
D.Full costing.
E.Simple costing.
23) Which of the following is not part of the sales activity in the flow of manufacturing
activities?
A.Beginning Finished Goods Inventory
B.Cost of goods manufactured
C.Total Finished Goods available for sale
D.Ending Work in Process Inventory
E.Ending Finished Goods Inventory
24) Ahngram Corp. has 1,000 defective units of a product that cost $3 per unit in direct
costs and $6.50 per unit in indirect cost when produced last year. The units can be sold
as scrap for $4 per unit or reworked at an additional cost of $2.50 and sold at full price
of $12. The incremental net income (loss) from the choice of reworking the units would
be:
A.$5,500.
B.$0.
C.($2,500).
D.$10,500.
E.$2,500.
25) Which of the following statements is correct concerning the Days’ sales in raw
materials inventory?
A.A measure of how long it takes raw materials to be used in production.
B.The ratio is not useful for a manufacturer.
C.Reveals how many times a company turns over its raw materials inventory in a
period.
D.Most companies generally prefer a higher number of days’ sales in raw materials
inventory.
E.Is calculated by taking the Raw materials used/Average raw materials inventory.
26) A dividend preference for preferred stock means that:
A.Preferred stockholders are allocated their dividends before dividends are allocated to
common shareholders.
B.Preferred shareholders are guaranteed dividends.
C.Dividends are paid quarterly.
D.Preferred stockholders prefer dividends more than common stockholders.
E.Dividends must be declared on preferred stock.
27) A production department’s output for the most recent month consisted of 10,000
units completed and transferred to the next stage of production and 10,000 units in
ending Work in Process inventory. The units in ending Work in Process inventory were
50% complete with respect to both direct materials and conversion costs. There were
1,000 units in beginning Work in Process inventory, and they were 70% complete with
respect to both direct materials and conversion costs. Calculate the equivalent units of
production for the month, assuming the company uses the weighted average method.
A.10,000 units.
B.10,300 units.
C.15,000 units.
D.15,300 units.
E.10,700 units.
28) Hutter Corporation declared a $0.50 per share cash dividend on its common shares.
The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of
common stock outstanding. The journal entry to record the dividend declaration is:
A.Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000.
B.Debit Common Dividends Payable $4,000; credit Cash $4,000.
C.Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500.
D.Debit Common Dividends Payable $4,500; credit Cash $4,500.
E.Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.
29) Explain the amortization of a bond discount. Identify and describe the amortization
methods available.
30) The life of a partnership is ____________________ in duration.
31) The following information is available for Flanders and its two main competitors in
the industry, Sanders and Anders:
The industry standard for the current ratio is 1.8 and the industry standard for the
acid-test ratio is 1.
Required:
1> Calculate the current ratio and acid-test ratio for each firm.
2> Rank the firms in decreasing order of liquidity.
3> Comment on Flanders’ relative liquidity position.
32) The standards for comparisons when interpreting measures from financial statement
analysis include (1) ___________, (2) ____________, (3) _____________, and (4)
_______________.
33) ____________________ leases are long-term or noncancelable leases by which the
lessor transfers substantially all risks and rewards of ownership to the lessee.
35) Some companies use the __________________ constraint to avoid assigning
incidental costs of acquiring merchandise to inventory.