1) Fraud does not include collusion, which is necessary to thwart separation of duties.
2) Cash equivalents are short-term highly liquid investment assets that are readily
converted to a known cash amount, and have maturities of one year.
3) An accounting information system communicates data to help businesses make better
decisions.
4) Current liabilities are cash and other resources that are expected to be sold, collected
or used within one year or the company’s operating cycle whichever is longer.
5) The FIFO method separates prior period costs from costs incurred during the current
period.
6) In a present value or future value table, the length of one time period may be
interpreted as one year, one month, or any other length of time.
7) The concept of total quality management focuses on continuous improvement.
8) Cost-volume-profit analysis is a precise tool for perfectly predicting the profit
consequences of cost changes, price changes, and volume changes.
9) The matching principle requires that accrued interest on outstanding notes receivable
be recorded at the end of each accounting period.
10) A favorable direct materials price variance might lead to an unfavorable direct
materials quantity variance because the company purchased inferior materials.
11) Liabilities are the owner’s claim on assets.
12) A manufacturer’s cost of goods manufactured is the sum of direct materials, direct
labor, and factory overhead costs incurred in producing products.
13) In ranking choices with the break-even time (BET) method, the investment with the
highest BET measure gets the highest rank.
14) Vertical analysis is a tool to evaluate individual financial statement items or groups
of items in terms of a specific base amount.
15) A company that has days’ sales uncollected of 30 days and days’ sales in inventory
of 18 days implies that inventory will be converted to cash in about 12 days.
16) A company’s board of directors analyzes financial statements to assess future
company prospects for making operating decisions.
17) The balance sheet reports the financial position of a company at a point in time.
18) The income statement shows the financial position of a business on a specific date.
19) Briefly describe both the payback period method and the net present value method
of comparing investment alternatives.
20) A company is considering purchasing a machine for $75,000. The machine is
expected to generate a net after-tax income of $11,250 per year. Depreciation expense
would be $7,500. What is the payback period for this machine?
21) An employee earned $3,450 for the current period. Calculate the total and
individual amounts to be withheld for social security (6.2%), Medicare (1.45%) and
federal income tax (15%) assuming the entire employee’s pay is subject to FICA taxes.
22) What is the accounts receivable turnover ratio? How is it calculated? How is it used
to assess financial condition?
23) Browning Company had 8,700 units in beginning inventory with accumulated costs
for direct materials of $17,900, $16,500 direct labor, and $13,200 of overhead. During
July, the company completed and transferred 50,000 units to finished goods. Costs
incurred in the current period included $45,000 of direct materials, $58,500 of direct
labor, and $46,800 of factory overhead. Ending inventory consisted of 12,000 units
which were 80% complete with respect to materials and 50% complete with respect to
labor and overhead. Compute the value assigned to ending inventory based on the
weighted average method of inventory costing.
24) The _____________________ principle requires that an accounting information
system aid managers in controlling and monitoring business activities.
25) Prior to recording adjusting entries on December 31, a company’s Store Supplies
account had an $880 debit balance. A physical count of the supplies showed $325 of
unused supplies available as of December 31. Prepare the required adjusting entry.
26) When purchase costs regularly rise, the ___________________ method of
inventory valuation yields the lowest gross profit and net income, providing a tax
advantage.
27) Prepaid expense D. Used to record wages owed, but not paid.