1) Comparative financial statements are reports that show financial amounts in side by
side columns on a single statement for analysis purposes.
2) A cash-based measure to help business decision makers estimate the amount and
timing of cash flows is the cash flow on total assets ratio.
3) Horizontal analysis is the comparison of a company’s financial condition and
performance to a base amount.
4) Profit center managers are evaluated on their ability to generate revenues in excess of
costs.
5) A joint cost of producing two products can be allocated between those products on
the basis of the relative physical quantities of each product produced.
6) The managers of process operations focus on the series of repetitive processes, or
steps, resulting in a noncustomized product or service.
7) Since it is recommended by the FASB, the direct method of preparing the statement
of cash flows is most frequently used.
8) Standards for comparison are not generally necessary when making judgments about
a company’s performance.
9) The F. Mercury, Capital account has a credit balance of $37,000 before closing
entries are made. If total revenues for the period are $55,200, total expenses are
$39,800, and withdrawals are $9,000, what is the ending balance in the F. Mercury,
Capital account after all closing entries are made?
A.$37,000.
B.$35,400.
C.$43,400.
D.$28,000.
E.$52,400.
10) On December 31, 2015 Carmack Company received a $215 utility bill for
December that it will not pay until January 15. The adjusting entry needed on
December 31 to accrue this expense is:
A.Debit Utilities Expense $215; credit Accounts Payable $215.
B.Debit Accounts Payable $215; credit Utilities Expense $215.
C.Debit Prepaid Utilities $215; credit Cash $215.
D.Debit Utilities Expense $215; credit Prepaid Utilities $215.
E.Debit Prepaid Utilities $215; credit Accounts Payable $215.
11) An advantage of bonds is:
A.Bonds do not affect owner control.
B.Bonds require payment of par value at maturity.
C.Bonds can decrease return on equity.
D.Bond payments can be burdensome when income and cash flow are low.
E.Bonds require payment of periodic interest.
12) Another name for a capital expenditure is:
A.Revenue expenditure.
B.Asset expenditure.
C.Long-term expenditure.
D.Contributed capital expenditure.
E. Balance sheet expenditure.
13) A schedule of cost of goods manufactured is also known as a:
A.Raw materials processed schedule.
B.Factory supplies used schedule.
C.Manufacturing statement.
D.Total finished goods statement.
E.Cost of goods sold schedule.
14) The difference between actual quantity of input used and the standard quantity of
input used results in a:
A.Controllable variance.
B.Standard variance.
C.Budget variance.
D.Quantity variance.
E.Price variance.
15) Information processors are systems that:
A.Keep data in an accessible form.
B.Interpret, transform, and summarize information for use in analysis and reporting.
C.Eliminate the need for professional judgment due to their accuracy.
D.Are the means to make information available to users.
E.Capture information from source documents.
16) The calendar year-end adjusted trial balance for Blessinger Co. follows:
Required:
(a) Determine the amounts of current assets and current liabilities. (Note: A $9,000
installment on the long-term note payable is due within one year.)
(b) Calculate the current ratio. Comment on the ability of Blessinger Co. to meets its
short-term debts.
17) A company’s overhead rate is 60% of direct labor cost. Using the following
incomplete accounts, determine the cost of direct materials used.
A.$106,400.
B.$113,120.
C.$30,240.
D.$211,680.
E.$324,800.
18) Fletcher Company collected the following data regarding production of one of its
products. Compute the total direct materials variance.
A.$6,000 favorable.
B.$3,570 unfavorable.
C.$2,430 favorable.
D.$6,000 unfavorable.
E.$3,570 favorable.
19) Based on the following information from Schrute Company’s balance sheet,
calculate the current ratio.
A..44.
B.3.51.
C.3.33.
D.1.06.
E.2.23.
20) The deferred income tax liability:
A.Results from the income tax expense reported on the income statement differing from
the amount of income taxes payable to the government.
B.Is a contingent liability.
C.Can result in a deferred income tax asset.
D.Is never recorded.
E.Is recorded whether or not the difference between taxable income and financial
accounting income is permanent or temporary.
21) The entry to record reimbursement of the petty cash fund for postage expense
should include:
A.A debit to Postage Expense.
B.A debit to Petty Cash.
C.A debit to Cash.
D.A debit to Cash Short and Over.
E.A debit to Supplies.
22) On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds
that pay interest semiannually on January 1 and July 1. The bond issue price is
$3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium
or discount is being amortized at a rate of $10,087 every six months. The company’s
December 31, Year 1 balance sheet should reflect total liabilities associated with the
bond issue in the amount of:
A.$3,220,000.
B.$3,340,063.
C.$3,097,500.
D.$3,780,000.
E.$3,902,500.
23) Craigmont Company’s direct materials costs are $3,000,000, its direct labor costs
total $7,000,000, and its factory overhead costs total $5,000,000. Its prime costs total:
A.$10,000,000.
B.$8,000,000.
C.$12,000,000.
D.$5,000,000.
E.$15,000,000.
24) Products that have been completed and are ready to be sold by the manufacturer are
called:
A.Finished goods inventory.
B.Work in Process inventory.
C.Raw materials inventory.
D.Cost of goods sold.
E.Factory supplies.
25) During the month of July, Clanton Industries issued a check in the amount of $845
to a supplier on account. The check did not clear the bank during July. In preparing the
July 31 bank reconciliation, the company should:
A.Deduct the check amount from the book balance of cash.
B.Add the check amount to the book balance of cash.
C.Deduct the check amount from the bank balance.
D.Add the check amount to the bank balance.
E.Make a journal entry in the company records for an error.
26) Which of the following purposes would financial statements serve for external
users?
A.To find information about projected costs and revenues of proposed products.
B.To assess employee performance and compensation.
C.To assist in monitoring consumer needs and price concerns.
D.To fulfill regulatory requirements for companies whose stock is sold to the public.
E.To determine purchasing needs.
27) When closing entries are made:
A.All ledger accounts are closed to start the new accounting period.
B.All temporary accounts are closed but permanent accounts are not closed.
C.All real accounts are closed but nominal accounts are not closed.
D.All permanent accounts are closed but nominal accounts are not closed.
E.All balance sheet accounts are closed.
28) The following statements regarding merchandise inventory are true except:
A.Merchandise inventory is reported on the balance sheet as a current asset.
B.Merchandise inventory refers to products a company owns and intends to sell.
C.Merchandise inventory may include the costs of freight in and making them ready for
sale.
D.Merchandise inventory appears on the balance sheet of a service company.
E.Purchasing merchandise inventory is part of the operating cycle for a business.
29) Explain what is meant by the “lean business model” and why many businesses have
adopted it.
30) Flexible budgets may be prepared before or after an actual period of activity. Why
would management prepare such budgets at differing time frames?
31) A company uses four special journals: purchases, sales, cash receipts, and cash
disbursements. The following purchase and cash payments transactions were incurred
during August:
Record these transactions in the appropriate special journals below.
32) A company is considering a proposal to invest $40,000 in a project that would
provide the following net cash flows:
Year 1$6,500
Year 212,700
Year 315,000
Year 412,800
Compute the project’s payback period.
33) What is a corporation? Identify the key advantages and disadvantages of
corporations.
34) The comparison of a company’s financial condition and performance to a base
amount is known as _________________.
35) The cumulative net income and loss not distributed as dividends to a corporation’s
shareholders is called ______________________.
36) Marshall Company currently manufactures one of its parts at a cost of $3.25 per
unit. This cost is based on a normal production rate of 50,000 units. Variable costs are
$2.10 per unit, fixed costs related to making this part are $40,000 per year, and
allocated fixed costs are $45,000 per year. Allocated fixed costs are unavoidable
whether the company makes or buys the part. Marshall is considering buying the part
from a supplier for a quoted price of $2.80 per unit guaranteed for a three-year period.
Should the company continue to manufacture the part, or should it buy the part from the
outside supplier? Support your answer with analyses.