Marketable securities are also known as ________.
A) short-term investments
B) held-to-maturity investments
C) debt investments
D) long-term investments
Deal Corporation sells a product for $500 on account to Liza Masters. This transaction
will be recorded in the ________.
A) cash payments journal
B) sales journal
C) cash receipts journal
D) purchase journal
The entry to record depreciation includes a credit to the ________.
A) Depreciation Payable account
B) Cash account
C) Accumulated Depreciation account
D) Depreciation Expense account
Which of the following is the most appropriate cost driver for allocating the cost of
warranty services?
A) number of employees
B) number of materials purchased
C) number of machine hours
D) number of service calls
Which of the following is true of good internal controls over payroll?
A) Accounting for payroll should be separate from hiring and firing of employees.
B) Disbursement of paychecks should not be separate from the function of maintaining
payroll records.
C) Hiring and firing employees should not be separated from accounting and from
disbursing paychecks.
D) Cash receipts from customers should be separated from the accounting for accounts
receivable.
Logan, Inc. is evaluating two possible investments in depreciable plant assets. The
company uses the straight-line method of depreciation. The following information is
available:
Calculate the payback period for Investment A. (Round your answer to two decimal
places.)
A) 2.22 years
B) 2.89 years
C) 1.00 year
D) 3.61 years
A subsidiary ledger is ________.
A) an accounting journal designed to record a specific type of transaction
B) a created list of accounts used by a business entity to define each class of items for
which cash is spent or received
C) a complete record of business transactions recorded in a ledger over the life of a
company
D) a record of accounts that provide supporting details on individual balances, the total
of which appears in a general ledger account
The process by which companies produce their financial statements for a specific
period is called the ________.
A) operating cycle
B) closing process
C) opening process
D) accounting cycle
Which of the following sections of the statement of cash flows includes activities that
affect current assets and current liabilities on the balance sheet? (Assume the indirect
method is used.)
A) the investing activities section
B) the financing activities section
C) the operating activities section
D) the non-cash investing and financing section
Caltran, Inc. completed manufacturing Job 445. It included $350 of direct materials
cost, $1,240 of direct labor cost, and $500 of allocated manufacturing overhead. Which
of the following is the correct journal entry needed to record the completed job?
A)
B)
C)
D)
Grand Canyon Food Products is famous for its frosted fruit cake. The main ingredient
of the cake is dried fruit, which Grand Canyon purchases by the pound. In addition, the
production requires a certain amount of direct labor. Grand Canyon uses a standard cost
system, and at the end of the first quarter, there was an unfavorable direct materials
efficiency variance. Which of the following is a logical explanation for that variance?
A) The production manager negotiated a lower wage package for production staff,
bringing direct labor costs down.
B) The factory lost two experienced workers at the beginning of the quarter, and their
replacements wasted a large amount of dried fruits during their training period.
C) The purchasing manager was able to secure a volume discount on dried fruit,
purchasing the fruit for less than the amount set by standard.
D) The production staff changed the work flow process so that production required
fewer direct labor hours.
Atom, Inc. has a division that manufactures a component that sells for $150 and has a
variable cost of $30. Another division of the company wants to purchase the
component. Fixed cost per unit of the component is $20. What is the minimum transfer
price if the division is operating at capacity?
A) $150
B) $30
C) $50
D) $20
Available-for-sale (AFS) investments are reported as ________ if the business expects
to sell them within one year.
A) current assets
B) equity
C) long-term assets
D) either current assets or long-term assets
A company is setting its direct materials and direct labor standards for its leading
product. Direct materials cost from the supplier are $9 per square foot, net of purchase
discount. Freight-in amounts to $0.40 per square foot. Basic wages of the assembly line
personnel are $14 per hour. Payroll taxes are approximately 21% of wages. Benefits
amount to $2 per hour. How much is the direct materials cost standard per square foot?
A) $9.40
B) $9.00
C) $16.00
D) $25.00
Which of the following is true of the Discount on Bonds Payable account?
A) It is added to the Bonds Payable balance and shown with long-term liabilities on the
balance sheet.
B) It is subtracted from the Bonds Payable balance and shown with the current
liabilities on the balance sheet.
C) It is added to the Bonds Payable balance and shown with stockholders’ equity on the
balance sheet.
D) It is subtracted from the Bonds Payable balance and shown with long-term liabilities
on the balance sheet.
Analysts look for red flags in financial statements that may signal financial trouble.
Which of the following is a red flag that suggests that a company may be in trouble?
A) a significant increase in net income for several years in a row
B) a consistent movement in sales, merchandise inventory, and accounts receivable
C) a reduction in the debt ratio
D) operating activities as is a major source of cash flows
Costs that have both variable and fixed components are called ________.
A) fixed costs
B) variable costs
C) mixed costs
D) contribution costs
One of the assumptions of cost-volume-profit (CVP) analysis is that there are no
changes in the ________.
A) accounts payable
B) cash balance
C) inventory levels
D) account receivables
Which of the following is true of the gross profit percentage?
A) Gross profit percentage is the same for companies in all industries.
B) Gross profit percentage is used to measure the solvency of a company.
C) The gross profit percentage is one of the most carefully watched measures of
profitability.
D) A service company must show its gross profit percentage in its Income Statement.
The advance cash receipts of future revenues are called ________.
A) accrued revenues
B) deferred expenses
C) deferred revenues
D) accrued expenses
Which of the following items will not appear as deductions on a bank statement?
A) NSF
B) EFT
C) Service Charge
D) Deposits
Miami Fashions uses standard costs for their manufacturing division. From the
following data, calculate the fixed overhead allocated to production based on direct
labor hours (DLHr).
A) $23,000
B) $60,000
C) $40,000
D) $20,000
Shipman, Inc. has 7 units in inventory on December 31. The units were purchased in
November for $190 each. The price lists from suppliers indicate the current replacement
cost of the item to be $186 each. What is the effect on gross profit if Shipman values its
ending merchandise inventory using the lower-of-cost-or-market rule?
A) The gross profit would increase by $4.
B) The gross profit would not be affected.
C) The gross profit would decrease by $28.
D) The gross profit would increase by $28.
When a loss is recorded on the sale of a significant interest investment, ________.
A) total assets will increase
B) equity will increase
C) total assets will decrease
D) equity will remain unchanged
Which of the following statements, regarding the management’s discussion and analysis
(MD&A) part of the annual report is not correct?
A) Investors are not interested in the MD&A because it is written by the company and
could present a biased view of the company’s financial condition and result.
B) It often contains information that is not found in the financial data.
C) It provides forward-looking formation.
D) The MD&A is the company’s attempt to explain its financial statements and to
discuss its performance.
Elite Brands Company uses standard costs for its manufacturing division. Standards
specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static
budget for variable overhead costs included the following data:
At the end of the year, actual data were as follows:
How much is the standard cost per direct labor hour for variable overhead?
A) $22.13 per direct labor hour
B) $32.93 per direct labor hour
C) $26.73 per direct labor hour
D) $24.92 per direct labor hour
Following GAAP, the income statement issued to investors and creditors must
________.
A) be prepared in the traditional format
B) be prepared using variable costing
C) be prepared in the contribution margin format
D) show the value of contribution margin
McDaniel Company sells two products—J and B. McDaniel predicts that it will sell
7,400 units of J and 6,500 units of B in the next period. The unit contribution margins
are $2.90 and $6.30 for products J and B, respectively. What is the weighted-average
unit contribution margin? (Round your answer to the nearest cent.)
A) $4.60
B) $1.54
C) $2.95
D) $4.49
Regarding the use of a spreadsheet for the preparation of the statement pf cash flows,
which of the following statements is true?
A) The T-account approach works well for all companies.
B) The statement of cash flows cannot be prepared directly from the spreadsheet
because additional information is needed.
C) The spreadsheet is needed when companies face complex situations.
D) The spreadsheet can only be used if the indirect method for operating activities is
also used.
There are three main ways to analyze financial statements. Which of the following does
not represent one of these ways of analyzing financial statements?
A) horizontal analysis
B) ratio analysis
C) financial statement analysis
D) vertical analysis
Which of the following would be considered a product cost for a manufacturing
company?
A) salary of the sales manager
B) salary of the CEO
C) salaries of the accounting staff
D) salary of the production manager
Why would a corporation issue bonds payable instead of issuing stock?
A) Debt is a less expensive source of capital than stock.
B) Borrowing by issuing bonds payable carries no risk to the company.
C) Debt affects the percentage of ownership of the corporation by the stockholders.
D) Debt does not have to be shown on the balance sheet.