1) Average rate of return equals average investment divided by estimated average
annual income.
2) The declaration and issuance of a stock dividend would be reported on the statement
of cash flows.
3) The cost of replacing an engine in a truck is an example of ordinary maintenance.
4) A company pays $6,500 for two season tickets on September 1. If $2,500 is earned
by December 31, the adjusting entry made at that time is debit Cash, $2,500 and credit
Ticket Revenue, $2,500.
5) A production supervisor’s salary that does not vary with the number of units
produced is an example of a fixed cost.
6) Direct labor costs are included in the conversion costs of a product.
7) The budget procedures used by a large manufacturer of automobiles would probably
not differ from those used by a small manufacturer of paper products.
8) In a partnership liquidation, gains and losses on the sale of partnership assets are
divided among the partners’ capital accounts on the basis of their capital balances.
9) If yearly insurance premiums are increased, this change in fixed costs will result in
an increase in the break-even point.
10) When a note is written to settle an open account, no entry is necessary.
11) Land is an example of a plant asset.
12) Sales of office supplies for cash, at cost, to a neighboring business as an
accommodation, are recorded in the revenue journal.
13) In a multiple-step income statement the dollar amount for income from operations
is always the same as net income.
14) If the property tax rates are increased, this change in fixed costs will result in a
decrease in the break-even point.
15) When there are material differences between the results of using the straight-line
method and using the effective interest method of amortization, the effective interest
method should be used.
16) Discounts taken by the buyer for early payment of an invoice are credited to Sales
Discounts by the buyer.
17) The total cost concept includes all manufacturing costs plus selling and
administrative expenses in the cost amount to which the markup is added to determine
product price.
18) On the basis of the following data taken from the Adjusted Trial Balance columns
of the work sheet for the year ended March 31 for Boles Athletic Company, journalize
the four closing entries.
19) Define ideal and currently attainable standards. Which type of standard should be
used and why?
20) Prepare a flexible budget for Cedar Jeans Company using production levels of
16,000, 18,000, and 20,000 units produced. The following is additional information
necessary to complete the budget:
Variable costs:
Fixed costs:
21) Compute the standard cost for one hat, based on the following standards for each
hat:
22) A copy machine acquired on March 1, 2011 with a cost of $1,410 has an estimated
useful life of 3 years. Assuming that it will have a residual value of $150, determine the
depreciation for the first and second year by the straight-line method.