Merchandising companies do not need as good a system of internal control as service
companies.
Cash inflows and outflows are easier to manipulate than earnings.
A check authorization would be prepared after a receiving report.
Permanent accounts are also known as nominal accounts.
A responsibility center whose manager is held accountable for both revenues and costs
and for the resulting operating income is called a revenue center.
The time a product spends waiting to be worked on is called storage time.
The variable overhead efficiency variance is the difference between actual total
overhead costs incurred and the total overhead costs applied using the standard
overhead rates.
To assure an efficient system of internal control, management should authorize all
transactions.
The general rule for determining the cash flow received from any revenue or paid for
any expense (except depreciation, which is a special case) is to determine the potential
cash payments or cash receipts and add the amount not paid or not received.
An advantage of the net present value method is that it considers the time value of
money.
It is usually a good business practice to maintain as large a balance in the Cash account
as possible.
Contribution margin per unit of constrained resources is calculated by dividing
contribution margin per unit by quantity of the constrained resources required per unit.
When planning, managers allocate overhead costs using either the traditional or ABC
approach.
Leases of short-term assets are operating leases, and leases of long-term assets are
capital leases.
Separate equivalent units of production usually are calculated for materials and
conversion costs.
Financial statements have faithful representation when the information has all of the
following except
A.Complete information.
B.Information that is free from error.
C.Neutral information.
D.Material information.
Standard costing would most often require which type of performance evaluation?
A.Flexible budgeting
B.Static budgeting
C.Variable costing
D.None of these choices
Fresno Manufacturing Company specializes in the production of precision tools.
Management is in the process of selecting a new drill press. The press under
consideration will cost $92,000 plus necessary installation charges of $5,000.
Experience indicates that the press will last for five years and should have a residual
value at the end of that period of about $10,000. Expected annual cash revenues from
the press should average $45,000, and related cash operating costs should be around
$20,000. Management has decided on a minimum desired before-tax rate of return of 10
percent.
Present value multipliers:
a. Using before-tax information and the net present value method to evaluate this
capital investment, determine whether the company should purchase the drill press.
Support your answer.
b. If management has decided on a minimum desired before-tax rate of return of 12
percent, should the drill press be purchased? Show all computations to support your
answer.
Using the contribution margin approach, find the breakeven point in units if the selling
price per unit is $10, the variable cost per unit is $6, and the fixed costs are $9,000.
A.643 units
B.1,500 units
C.2,250 units
D.900 units
Which of the following activities is not a part of the “perform” stage in the management
process?
A.Producing products as per customer specifications
B.Manage supply chain relationships
C.Identifying operating activities that minimize waste
D.Calculating variances by comparing estimated and actual costs
Payroll Taxes and Benefits Expense includes all of the following except
A.federal income taxes.
B.Social Security taxes.
C.Medicare taxes.
D.unemployment taxes.
McCaffy Company uses a periodic inventory system. It sold 1,000 units of Product H.
Its beginning inventory and purchases during the month were as follows:
Compute the cost of the ending inventory under each of three methods: (a)
average-cost, (b) LIFO, and (c) FIFO. (Show your work.)
Fraudulent financial reporting at Enron resulted in
A.thousands of people losing their jobs.
B.thousands of people losing their pensions and investment incomes.
C.prison sentences and fines for corporate executives.
D.all of these choices.
A company has net sales of $50,000 during the year. At year end (before an adjustment
is made), Allowance for Uncollectible Accounts has a credit balance of $2,500. If the
company estimates that 3 percent of net sales are uncollectible, what is the balance in
the allowance account after the year-end adjustment has been made using the
percentage of net sales method?
A.$1,500 debit balance
B.$1,500 credit balance
C.$4,000 credit balance
D.$1,000 debit balance
a. Yorkshire Corporation has 9,000 shares of $10 par value common stock and 5,000
shares of $50 par value, 10 percent cumulative preferred stock outstanding. All shares
were issued at par value. In addition, retained earnings total $90,000. If the preferred
stock is callable at $54 per share, and one year’s dividends are in arrears, compute book
value per share of preferred stock.
b. Assume the same facts as in a above. Calculate book value per share of common
stock.
c. Assume the same facts as in a above and that Yorkshire Corporation declares a
5-for-1 stock split on its common stock. After the split, total par value of common stock
equals what amount?
d. Assume the same facts as in a above and that Yorkshire Corporation declares a 12
percent stock dividend on its preferred stock. If the market value on the declaration date
was $70 per share, for what amount will Preferred Stock Distributable be credited?
Pelican Company issued $200,000 of 20-year, 6 percent bonds at 98 on one of its
semiannual interest dates. The straight-line method of amortization is to be used. After
seven years, what is the carrying value of the bonds?
A.$196,700
B.$197,400
C.$198,600
D.$199,300
The authoritative body currently responsible for establishing accounting practice is the
A.Internal Revenue Service.
B.Financial Accounting Standards Board.
C.American Institute of Certified Public Accountants.
D.Federal Reserve Board.
In a limited partnership
A.the general partners have limited liability
B.all partners have limited liability
C.all but the general partners have unlimited liability
D.all but the general partners have limited liability
Applied overhead of a company exceeds actual overhead when the
A.Overhead account has a credit balance.
B.journal entry to account for the difference involves a debit to Cost of Goods Sold.
C.Overhead account has a debit balance.
D.company has overspent in the overhead cost area.
Threshold Inc. has provided the following data:
The sales mix for Products A, B, and C is
A.62.5 percent, 12.5 percent, and 25 percent, respectively.
B.40 percent, 20 percent, and 40 percent, respectively.
C.100 percent, 25 percent, and 50 percent, respectively.
D.44 percent, 33 percent, and 23 percent, respectively.
Which inventory method generally results in the most realistic balance sheet valuation?
A.FIFO
B.Specific identification
C.LIFO
D.Average-cost
Cardsheet Company
The following partially completed T accounts summarize the transactions of Cardsheet
Company for last year:
The indirect labor cost is
A.$7,000.
B.$3,000.
C.$14,000.
D.$30,000.
According to generally accepted accounting principles, the proper accounting treatment
for the cost of a trademark that management feels will retain its value indefinitely is to
A.write the cost off immediately.
B.amortize the cost over a reasonable life.
C.amortize the cost over five years.
D.carry the cost as an asset as long as circumstances continue to support an indefinite
life.
On April 12, Vancouver Company accepted a return of $200 of merchandise purchased
on account. This transaction will result in
A.a $200 credit to the controlling account, Accounts Receivable, and a $200 credit to
the individual account in the subsidiary ledger.
B.the subsidiary ledger total being $200 less than the controlling account total.
C.a $200 debit to the subsidiary ledger and a $200 credit to the controlling account,
Accounts Receivable.
D.the subsidiary ledger total being $200 more than the controlling account total.
The balances on the job cost sheets of uncompleted jobs will be equal to the balance in
the
A.Finished Goods Inventory account.
B.Cost of Goods Sold account.
C.Work in Process Inventory account.
D.Overhead account.
Which of the following will not result in dissolution of a partnership?
A.Incapacitation of a partner
B.Negative capital balance of a partner
C.Bankruptcy of a partner
D.Admission of a new partner