Losses on discarding fixed assets are _____.
a. opportunity costs
b. nonoperating items
c. capital expenditures
d. accumulated depreciation
Which of the following statements is true?
a. The revenue activities of a service business involve providing services to customers.
b. The revenue activities of a retail business involve the building of a product.
c. The revenue activities of a service business involve the building of a product.
d. The revenue activities of a retail business involve providing services to customers.
An activitybased 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 activitybased
usage quantities.
c. an allocation of budgeted revenues produced by a product or service.
d. an endofyear allocation of costs to products or services.
At the end of a period before the accounts are adjusted, Allowance for Doubtful
Accounts has a balance of $250, and net sales on account for the period total $500,000.
If uncollectible accounts expense is estimated at 1% of net sales on account, the current
provision to be made for uncollectible accounts expense is $4,997.50.
a. True
b. False
September 5Purchase65 units at $6 each
September 13Purchase55 units at $8 each
September 29Purchase44 units at $10 each
September 30Ending Inventory70 units
Determine ending inventory cost by (a) FIFO method, (b) LIFO method, and (c)
average cost method.
Depreciation expense on factory equipment is part of factory overhead cost.
a. True
b. False
Under the cash basis of accounting, no adjustments are necessary prior to the
preparation of the financial statements.
a. True
b. False
If the average rate of return on an asset exceeds the minimum rate of return for
investments, the asset should be purchased.
a. True
b. False
The amount of the “adjusted balance” appearing on a bank reconciliation as of a given
date is the amount that is shown on the balance sheet for that date after all adjusting
entries have been entered.
a. True
b. False
Following are the summaries of balance sheet of LCF Company:
Total Assets Total Liabilities
Beginning of the year $250,000 $180,000
End of the year $500,000 $370,000
Determine the net income (or loss) for the year, assuming $80,000 of common stock
was issued and no dividends were paid during the year?
a. $140,000
b. ($20,000)
c. $160,000
d. ($60,000)
Financial reporting systems that are guided by the principle of exceptions concept focus
attention on variances from standard costs.
a. True
b. False
If employees accept a wage contract that decreases the unit contribution margin, the
breakeven point will decrease.
a. True
b. False
HTMLENTITY#8203HTMLENTITYWhich of the following formulas is used to
calculate process yield?
a. HTMLENTITY#8203HTMLENTITYActual rate per hour
HTMLENTITY#xD7HTMLENTITY Actual time of a process
b. HTMLENTITY#8203HTMLENTITYService units used / Available service units of a
process
c. HTMLENTITY#8203HTMLENTITYUnits entering process / Units passing
inspection
d. HTMLENTITY#8203HTMLENTITYUnits passing inspection / Units entering
process
If the market rate of interest is 6% and a corporation’s bonds bear interest at 7%, the
bonds will sell at a discount.
a. True
b. False
Blue Jay Inc. reported the following transactions for the month of March:
1Beginning inventory15 units at $6 each
5Purchase29 units at $9 each
13Purchase25 units at $12 each
20Purchase15 units at $14 each
31Ending inventory30 units
Calculate the cost of ending inventory using the FIFO method.
a. $420
b. $390
c. $216
d. $510
If the actual overhead incurred is less than the applied factory overhead, it is called
overapplied factory overhead.
a. True
b. False
Which of the following is the effect of the payment of dividends by a company to its
stockholders?
a. The company’s liquidity decreases, while profitability remains unchanged.
b. The company’s profitability and liquidity remains unchanged.
c. The company’s profitability and liquidity decrease.
d. The company’s profitability increases, while its liquidity decreases.
A department store apportions payroll costs to the various departments on the basis of
the number of payroll checks issued by each department. Accounting costs are
apportioned on the basis of the number of reports generated for each department. The
payroll costs for the year were $150,000, and the accounting costs for the year totaled
$70,000. The number of payroll checks issued and the number of reports generated for
each department are as follows:
Number ofNumber
Payroll Checksof Reports
Department A 396 60
Department B1,278 90
Department C 126150
Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to
each department.
A buyer who acquires merchandise under credit terms of 1/10, n/30 has 10 days after
the invoice date to take advantage of the cash discount.
a. True
b. False
It is beneficial for two related companies to use the cost price approach for transfer
pricing when both the companies operate as cost centers and are not concerned with the
revenue.
a. True
b. False
Financing activities_____ .
a. involve obtaining funds to operate a business
b. involve obtaining assets such as buildings and equipment
c. help to earn revenues and profits
d. help to make wise investments in other companies
During 2016, Banigo Corporation experienced an increase in total assets of $72,600 and
an increase in total liabilities of $40,900. Assuming that capital stock increased by
$5,000 and no dividends were paid, calculate Banigo’s net income or net loss for 2016.
a. Net income of $26,700
b. Net loss of $31,700
c. Net income of $67,600
d. Net loss of $45,900
The first month of operation showed the net cash from operating activities to be $1,850,
the net cash from investing activities to be ($3,000), and the ending cash balance to be
$1,600. The net cash from financing activities must be:
a. $450.
b. $2,750.
c. $3,250.
d. $6,450.
(a)Where are cash equivalents disclosed in the financial statements?
(b)List three examples of cash equivalents.
In using the total cost concept of applying the costplus approach to product pricing,
what is included in the cost amount to which the markup is added?
a. Total selling and administrative expenses plus desired profit
b. Total fixed manufacturing costs, total fixed selling and administrative expenses, and
desired profit
c. Total costs of manufacturing a product plus selling and administrative expenses
d. Total variable manufacturing costs, total variable selling and administrative expenses,
and desired profit
The purpose of the SarbanesOxley Act of 2002 is to:
a. restore public confidence and trust in the financial statements of publicly held
companies.
b. require all companies to prepare financial statements.
c. protect companies from demands of investors, stockholders, and creditors.
d. do all of these.
The manager of a cost center has the responsibility for making decisions affecting:
a. the center’s revenues and investments.
b. the center’s revenues only.
c. the center’s costs only.
d. the center’s costs and revenues.
The major subdivisions of the Stockholders’ Equity section of the balance sheet are:
a. Paidin Capital and Retained Earnings.
b. Common Stock and Preferred Stock.
c. Issued Capital, and Authorized Capital.
d. Expenses and incomes.
The management of London Corporation is considering the purchase of a new machine
costing $750,000. The company’s desired rate of return is 6%. The present value factors
for $1 at compound interest of 6% for 1 through 5 years are 0.943, 0.890, 0.840, 0.792,
and 0.747, respectively. In addition to this information, use the following data in
determining the acceptability in this situation:
YearIncome from OperationsNet Cash Flow
1$37,500$187,500
2 37,500 187,500
3 37,500 187,500
4 37,500 187,500
5 37,500 187,500
The present value index for this investment is:
a. 1.00.
b. 0.95.
c. 1.25.
d. 1.05.
Outstanding checks are checks that have been issued but have not cleared by the bank.
a. True
b. False
By using the rate of return on investment as a divisional performance measure,
divisional managers will always be motivated to invest in proposals that will increase
the overall rate of return for the company.
a. True
b. False
Production estimates for July are as follows:
Estimated inventory (units), July 1725
Desired inventory (units), July 311,200
Expected sales volume (units), July7,500
For each unit produced 4 hours of direct labor is required. The labor rate per hour is
$15. The number of direct labor hours required for July production is:
a. 25,200.
b. 27,100.
c. 31,900.
d. 34,800.