1) If merchandise costing $2,500, terms FOB destination, 2/10, n/30, with prepaid
transportation costs of $100, is paid within 10 days, the amount of the purchases
discount is $48.
2) Under the perpetual inventory system, the cost of merchandise sold is recorded when
sales are made.
3) In order to record a contingent liability, the liability must be probable and reasonably
estimated.
4) Responsibility accounting reports for profit centers are normally in the form of
balance sheets.
5) A capital expenditures budget summarizes the decisions made for the acquisition of
fixed assets.
6) Sales Returns and Allowances is a contra-asset account.
7) In preparing flexible budgets, the first step is to identify the fixed and variable
components of the various costs and expenses being budgeted.
8) Cost behavior refers to the manner in which a cost changes as a related activity
changes.
9) The use of the lower-of-cost-or-market method of inventory valuation increases the
gross profit for the period in which the inventory replacement price declined.
10) The total earnings of an employee for a payroll period is referred to as gross pay.
11) A debit memorandum from the bank indicates that the bank has deducted an amount
from the depositor’s account.
12) The revenue recognition concept states that revenue should be recorded in the same
period as the cash is received.
13) A cost that will not be affected by later decisions is termed as sunk cost.
14) Inventories of merchandising and manufacturing businesses are reported as current
assets on the balance sheet.
15) If the accounts receivable turnover for the current year has decreased when
compared with the ratio for the preceding year, there has been an acceleration in the
collection of receivables.
16) In addition to the differential costs in an equipment replacement decision, the
difference between the remaining useful life of the old equipment and the estimated life
of the new equipment is an important consideration.
17) When companies sell their receivables to other companies, the transaction is called
factoring.
18) If the volume of sales is $6,000,000 and sales at the break-even point amount to
$4,800,000, the margin of safety will be 25%.
19) The most effective means of presenting standard factory overhead cost variance
data is through a factory overhead cost variance report.
20) Standards are designed to evaluate price and quantity variances separately.
21) If a $20,000 sale is made on January 1, with terms of 2/10, n/30, how much would
the discount be if payment is made on January 9?
A.$0
B.$200
C.$1,000
D.$400
22) Which of the following measures the liquidity position of a corporation?
A.Earnings per share
B.Inventory turnover
C.Current ratio
D.Number of times interest charges earned
23) In a cost center, the manager has responsibility and authority for making decisions
that affect:
A.only revenues
B.both revenues and assets
C.only costs
D.both costs and revenues
24) An activity-based costing system allocates factory overhead rates to products or
services using:
A.a single plantwide overhead rate
B.the cost of activities based on an activity rate times the number of activity-based
usage quantities
C.an allocation of budgeted revenues produced by a product or service
D.an end-of-year allocation of costs to products or services
25) Which of the following graphs illustrates the behavior of a total fixed cost within
the specified relevant range?
A.Graph 2
B.Graph 3
C.Graph 4
D.Graph 1
26) In attempting to improve profitability when faced with a bottleneck related to hours
that is involved in the production of two or more products, which of the following is
most important for management to consider?
A.Contribution margin per unit for each product
B.Time required for each different product passing through the bottleneck
C.Selling price or sales revenue generated by each product produced through the
bottleneck
D.Contribution margin per bottleneck hour for each product
27) McCabe Manufacturing Co.’s static budget at 8,000 units of production includes
$40,000 for direct labor and $4,000 for electric power. Total fixed costs are $23,000. At
9,000 units of production, a flexible budget would show:
A.variable costs of $49,500 and $25,875 of fixed costs
B.variable costs of $44,000 and $23,000 of fixed costs
C.variable costs of $49,500 and $23,000 of fixed costs
D.variable costs of $44,000 and $25,875 of fixed costs
28) Based on the following data for the current year, determine the number of days’
sales in accounts receivable?
A.12.5
B.14.17
C.25.76
D.15.8
29) Which of the following conditions would cause the break-even point to increase?
A.Increase in total fixed costs
B.Increase in unit selling price
C.Decrease in unit variable cost
D.Decrease in total fixed costs
30) For a corporation, stockholders’ equity consists of:
A.assets plus liabilities
B.current assets plus long-term assets
C.intangible assets
D.capital stock and retained earnings
31) The cost of removal of an old building to make the land ready for its intended use is
charged to:
A.land
B.land improvements
C.buildings
D.operating expenses
32) Cape Corporation sells a single product. Budgeted sales for the year are anticipated
to be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending
inventory is 80,000 units. The quantities of direct materials expected to be used for each
unit of finished product are given below.
Refer to the information provided for Cape Corporation. The amount of direct material
B purchased during the year is:
A.$1,224,000
B.$1,390,600
C.$1,088,000
D.$1,057,400
33) Motel 6, a company that helps customers find budget motels across the nation, is an
example of a business using which of the following?
A.Low-cost emphasis
B.Outreach emphasis
C.Customer emphasis
D.Premium-price emphasis
34) If a corporation issues only one class of stock, it is called:
A.common stock
B.treasury stock
C.no-par stock
D.preferred stock
35) Which of the following techniques is used by just-in-time manufacturing?
A.It provides specialized training so that employees only do one task and work
individually to improve efficiencies in the department
B.It organizes the plant in such a way as to reduce product movement from station to
station
C.It encourages management to make all operating decisions regarding the
manufacturing process rather than the line employees in order to streamline the process
D.It emphasizes push manufacturing
36) The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 75,000 shares were originally issued and 5,000 were subsequently
reacquired. What is the number of shares outstanding?
A.10,000
B.70,000
C.50,000
D.60,000
37) Significant changes in stockholders’ equity are reported in the:
A.statement of stockholders’ equity
B.income statement
C.retained earnings statement
D.statement of cash flows
38) A gain is recorded on the sale of fixed assets when:
A.the asset is sold for a price less than its book value
B.the asset is sold for a price more than its book value
C.accumulated depreciation on asset is less than its selling price
D.accumulated depreciation on asset is more than its selling price
39) On April 1, Smart, Inc. paid $7,200 for an insurance premium on a three-year
insurance policy. How does this transaction affect Smart’s accounts?
A.Increase insurance expense and decrease cash by $7,200 each
B.Increase prepaid insurance and decrease cash by $7,200 each
C.Increase unearned insurance and decrease cash by $7,200 each
D.Increase prepaid insurance and decrease retained earnings by $7,200 each
40) Which of the following is not a cost concept commonly used in applying the
cost-plus approach to product pricing?
A.Total cost concept
B.Product cost concept
C.Variable cost concept
D.Fixed cost concept
41) Which of the following provisions of the Internal Revenue Code can be used to
reduce the amount of the income tax expense arising from capital investment projects?
A.Interest deduction
B.Depreciation deduction
C.Minimum tax provision
D.Charitable contributions
42) The rate of return is 10% and the cash to be received in one year is $10,000.
Determine the present value amount, using the following partial table of present value
of $1 at compound interest:
A.$8,930
B.$9,000
C.$9,430
D.$9,090
43) The _____ is prepared with various sections, subsections, and captions that aid in its
interpretation and analysis.
A.accounting equation
B.retained earnings statement
C.intangible asset section
D.classified balance sheet
44) Assume that Marlow Co. is considering disposing of equipment that cost $200,000
and has $160,000 of accumulated depreciation to date. Marlow Co. can sell the
equipment through a broker for $100,000 less 5% commission. Alternatively, Minton
Co. has offered to lease the equipment for five years for a total of $195,000. Marlow
will incur repair, insurance, and property tax expenses estimated at $40,000. At
lease-end, the equipment is expected to have no residual value. The net differential
income from the lease alternative is:
A.$55,000
B.$20,000
C.$100,000
D.$60,000
45) Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to
a customer for $17,500. The seller issued a credit memorandum for $4,000 prior to
payment. What is the amount of the cash discount allowable?
A.$215
B.$175
C.$135
D.$140
46) Which of the following is not considered to be a liability?
A.Note payable
B.Accounts receivable
C.Unearned revenues
D.Accounts payable
47) It would be most appropriate to develop direct labor time standards for use in
administrative activities when the activity involves:
A.repetitive task that produces common output
B.nonrepetitive task that produces common output
C.top-level management
D.task related to nonmeasurable output
48) Based on the following data, what is the amount of quick assets?
A.$228,000
B.$188,000
C.$116,000
D.$114,000
49) Bythel Corporation uses the product cost concept of product pricing. Below is cost
information for the production and sale of 45,000 units of its sole product. Bythel
desires a profit equal to a 10.8% rate of return on invested assets of $900,000.
Refer to the information provided for Bythel Corporation. The dollar amount of desired
profit from the production and sale of the company’s product is:
A.$97,200
B.$67,200
C.$73,500
D.$96,000
50) Which of the following is not an element of the financial accounting system?
A.Rules for determining what, when and the amount that should be recorded
B.A framework for preparing financial statements
C.A set of rules for the stock exchange
D.Controls to determine whether errors occur during recording
51) Which of the following is not a period cost?
A.CEO salary
B.Depreciation on office equipment
C.Sales commissions
D.Wages of an assembly worker
52) Kennedy Co. sells two products, Arks and Bins. Last year, Kennedy sold 32,000
units of Arks and 18,000 units of Bins. Related data are:
Use the above given data to solve the following questions:
Refer to the information provided for Kennedy Co. What was Kennedys sales mix last
year?
A.40% Arks, 60% Bins
B.43% Arks, 57% Bins
C.54% Arks, 46% Bins
D.64% Arks, 36% Bins