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1) Product costing consists of only direct materials and direct labor.
2) Just-in-Time (JIT) manufacturing is also called make-to-stock manufacturing.
3) Trade receivables occur when two companies trade or exchange notes receivables.
4) An intangible asset is one that has a physical existence.
5) The closer a company moves towards Just in Time production, the differences in unit
costs between average costing and FIFO will be reduced.
6) Service companies can effectively use single facility-wide overhead costing to
compute product (service) costs.
7) The balance sheet represents the accounting equation.
8) A deduction allowed to wholesalers and retailers from the price of merchandise listed
in catalogs is called cash discounts.
9) In an investment center, the manager has the responsibility and the authority to make
decisions that affect not only costs and revenues, but also the plant assets invested in the
center.
10) Cash equivalents are short -term investments that will be converted to cash within
120 days.
11) The excess of divisional income from operations over a minimum amount of
desired income from operations is termed the residual income.
12) Accounts payable are accounts that you expect will be paid to you.
13) A corporation is a separate entity for accounting purposes but not for legal purposes.
14) Lead time includes both value-added time and non-value-added time.
15) The internal rate of return method is used to analyze a $946,250 capital investment
proposal with annual net cash flows of $250,000 for each of the six years of its useful
life.
16) The materials used by the Hibiscus Company Division A are currently purchased
from outside supplier at $55 per unit. Division B is able to supply Division A with
20,000 units at a variable cost of $42 per unit. The two divisions have recently
negotiated a transfer price of $48 per unit for the 20,000 units. By how much will each
divisions income increase as a result of this transfer?
17) Gull Corp. is considering selling its old popcorn machine and replacing it with a
newer one. The old machine has a book value of $5,000 and its remaining useful life is
5 years. Annual costs are $4,000. A high school is willing to buy it for $2,000. New
equipment would cost $18,000 and annual operating costs would be $1,500. The new
machine has an estimated useful life of 5 years. Should the machine be replaced?
Support your answer with calculations.
18) The balance of Material Q on May 1 and the receipts and issuances during May are
as follows:
Determine the cost of each of the issuances under a perpetual system, using the first-in,
first-out method.
19) Georgia Company has condensed income statements as follows:
REQUIRED:
Prepare a horizontal analysis of Georgia Companys income statements. Comment on
the trends, both favorable and unfavorable.
Determine the due date and the amount of interest due at maturity on the following
notes:
21) Define (1) debt securities and (2) equity securities. Include their similarities and
differences in your discussion.
22) Using the data from the Ace Guitar Company, determine the divisional income from
operations for the A and B regions.
Allocate service department expenses proportional to the sales of each region. Round
percentage of sales allocation to one decimal place.
23) Sutton Company purchased 10% of the outstanding stock of Roberts Company on
January 1, 2012. Roberts reported net income of $155,000 and declared dividends of
$40,000 during 2012. How would these events be reported by Sutton using the cost
method?
24) Using the following data taken from Martinez Inc., prepare the cost of merchandise
sold section of the income statement for the year ended May 31, 2011.
