1) What is stockholders’ equity?
2) Indicate whether each of the following statements is true or false.
1>In decision making, all quantitative information that differs among the alternatives
under consideration is relevant
2>Costs that cannot be changed are not relevant to a decision
3>Differential revenues are not relevant in decision making
4>Sunk costs may appropriately be considered in decision making if they are useful for
predicting future costs
5>To be relevant in decision making, information must relate to the future
3) Harker Company manufactures DVD players and other similar electronic products.
Indicate whether the cost is a product cost or period (selling, general, and
administrative) cost AND whether its cost behavior is fixed, variable, or mixed by
placing X’s in the appropriate boxes. As an example, commissions paid to sales staff
would be classified as a period cost and variable.
Plastic used to make cases for DVD players
4) Indicate whether each of the following statements is true or false.
1>Accrued interest revenue is recognized at the time that a company loans money by
accepting a note receivable
2>Notes Receivable is a balance sheet account
3>A company with outstanding notes receivable should accrue interest on the notes at
the end of the accounting period
4>The recognition of accrued interest revenue increases both equity and liabilities
5>Loaning money to another company in exchange for a note receivable is an asset use
transaction
5) Company A has variable costs per unit of $20, fixed costs of $300,000, and a
break-even sales volume of 60,000 units.
How does variable cost per unit behave when volume increases?
6) Anderson Book Company shows the following transactions for the accounting period
ending December 31, 2012:
1) Sold books to customers for $34,000 on account
2) Collected $28,000 from customers
3) Issued common stock for $8,000 cash
4) Prepaid four months rent for $4,400 on October 1, 2012
5) Purchase supplies for $10,500 cash
6) Physical count shows $3,250 of supplies left over on December 31, 2012
7) Recorded adjustment for prepaid rent used up
Show how the above transactions and yearend adjustments affect the financial
statement accounts on the accounting equation. After entering all the transactions and
adjustments, enter column totals.
7) Indicate whether each of the following statements about accounting information is
true or false.
1>The nature of information needed by an employee depends on the level and other
characteristics of his/her job
2>The level of aggregation of accounting information is higher for internal users than
for external users
3>Managerial accounting focuses on the information needs of managers and others who
work inside a business
4>Financial information becomes less important to an employee as he/she moves up the
organizational ladder
5>Senior-level managers use general economic data and non-financial information, as
well as financial information
8) Indicate how each event affects the elements of financial statements. Use the
following letters to record your answer in the box shown below each element. You do
not need to enter amounts.
Calvert Company remitted to the state government $4,581 in sales taxes that it had
collected from its customers.
9) Describe sole proprietorships, partnerships and corporations, indicating advantages
and disadvantages of each form of organization.