The amount of time spent by each employee and the labor costs incurred for each
individual job or for factory overhead are recorded on the:
a. employees’ earnings records.
b. inandout board.
c. time tickets.
d. receiving order
The form of income statement that emphasizes total revenues and total expenses in
determining net income is called the _____.
a. operating income statement.
b. multiplestep statement.
c. cash flow statement.
d. singlestep statement.
The point where the profit line intersects the horizontal axis on the profitvolume graph
represents:
a. the maximum possible operating loss.
b. the maximum possible operating income.
c. the total fixed costs.
d. the breakeven point.
Responsibility accounting for a profit center focuses on reporting:
a. the controllable revenues only.
b. controllable revenues, controllable expenses, and controllable profits.
c. controllable revenues, controllable expenses, controllable profits, and investment in
assets controlled by the manager of the center.
d. controllable expenses, and controllable profits, but not controllable revenues.
In order to record a contingent liability, the liability must be probable and reasonably
estimated.
a. True
b. False
From the following particulars of Purple New Co., prepare the bank reconciliation
statement as on May 31, 2016.
(a)The bank statement balance is $4,000.
(b)The cash account balance is $3,950.
(c)Outstanding checks amounted to $960.
(d)Deposits in transit are $900.
(e)The bank service charge is $75.
(f)Interest added to the checking account by the bank is $150.
(g)A check drawn for $65 was incorrectly charged by the bank as $150.
If variable costs per unit decreased because of a decrease in utility rates, the breakeven
point would:
a. decrease.
b. increase.
c. remain the same.
d. increase or decrease, depending upon the percentage increase in utility rates.
Sales discounts are granted by the seller to customers for payment at the end of the
month.
a. True
b. False
Average total assets divided by average stockholders’ equity is the formula for financial
leverage.
a. True
b. False
Which of the following conditions would cause the breakeven point to decrease?
a. Increase in total fixed costs
b. Decrease in unit selling price
c. Decrease in unit variable cost
d. Increase in unit variable cost
The percentage analysis of accounts payable to total liabilities is an example of:
a. liquidity analysis.
b. current position analysis.
c. vertical analysis.
d. component analysis.
A liability is a legal obligation to repay the amount borrowed according to the terms of
the borrowing agreement.
a. True
b. False
Fees earned and received in cash will increase cash flows from operating activity as
well as retained earnings.
a. True
b. False
_____ per unit increases or decreases in inverse proportion to its activity level.
a. Variable cost
b. Opportunity cost
c. Contribution cost
d. Fixed cost
Soap Company manufactures Soap X and Soap Y and can sell all it can make of either.
Hours available to produce the products is the constrained resources.Based on the
following data, which statement is true?
XY
Sales Price$20 $25
Variable Cost14 15
Hours needed to process3 5
a. X is more profitable than Y.
b. Y is more profitable than X.
c. Neither X nor Y have a positive contribution margin.
d. X and Y are equally profitable.
A to Z Corporation issued a $30,000 note payable to borrow cash from the bank. On the
Statement of Cash Flows, the transaction would be classified as:
a. Cash Flows from Operating Activities.
b. Cash Flows from Investing Activities.
c. Cash Flows from Financing Activities.
d. Noncash transaction.
Indicate the section of the balance sheet (current assets, fixed assets, investments,
current liabilities, longterm liabilities, stockholders’ equity) in which each of the
following is reported:
(a)Note receivable due in 3 years
(b)Note receivable due in 90 days
(c)Allowance for doubtful accounts
In job order cost accounting system used by a service business, which of the following
items would normally not be included as part of overhead?
a. Materials
b. Direct labor
c. Rent
d. Supplies
Which component of the balanced scorecard evaluates the economic performance of the
responsibility centers?
a. Internal process
b. Financial
c. Innovation and learning
d. Customer
The condensed income statement for a business for the past year is presented as
follows:
Product
FGHTotal
Sales$200,000$180,000$320,000$700,000
Less variable costs 120,000 160,000 200,000 480,000
Contribution margin$ 80,000$ 20,000$120,000$220,00
Less fixed costs 25,000 30,000 40,000 95,000
Income (loss) from operations$ 55,000 $10,000$ 80,000$125,000
Management is considering the discontinuance of the manufacture and sale of Product
G at the beginning of the current year. The discontinuance would have no effect on the
total fixed costs and expenses or on the sales of Products F and H. What is the amount
of change in net income for the current year that will result from the discontinuance of
Product G?
a. $10,000 increase
b. $20,000 increase
c. $10,000 decrease
d. $20,000 decrease
X. Bonds Company
The following is a singlestep income statement for the X. Bonds Company:
X. Bonds Company
Income Statement
For the Year Ended December 31, 2016
Revenues:
Net Sales$300,000
Interest Income20,000
Total Revenues$320,000
Expenses:
Cost of Goods Sold$60,000
Selling Expenses25,000
General and Administrative Expenses30,000
Interest Expense14,000
Income Tax Expense45,000
Total Expenses174,000
Net Income$146,000
Refer to X. Bonds Company. If the income statement were prepared in a multiplestep
format, gross profit would be:
a. $240,000.
b. $126,000.
c. $260,000.
d. $185,000.
What is one criticism of the singlestep income statement?
a. It is too complex.
b. It has too many subsections.
c. Gross profit and income from operations are not available for analysis.
d. Income taxes are given too much weight.
Kohlman Company began its operations on March 31 of the current year. Projected
manufacturing costs for the first three months of business are $156,800, $195,200, and
$217,600, respectively, for April, May, and June. Depreciation, insurance, and property
taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was
paid on March 31, and property taxes will be paid in November. Threefourths of the
remainder of the manufacturing costs are expected to be paid in the month in which
they are incurred with the balance to be paid in the following month.
The cash payments for manufacturing in the month of June are:
a. $294,000.
b. $235,200.
c. $183,200.
d. $381,500.
Variable cost per unit remains the same regardless of activity level.
a. True
b. False
Variable costs are costs that remain constant in total with changes in the activity level.
a. True
b. False
The recording of the jobs completed would decrease:
a. Factory Overhead.
b. Finished Goods.
c. WorkinProcess.
d. Cost of Goods Sold.
Which of the following is an example of a cost that varies in proportion to changes in
the activity base?
a. Depreciation on machinery
b. Packaging cost
c. Factory rent
d. Insurance cost
The objective of transfer pricing is to encourage each division’s manager to transfer
goods and services in such a manner that will increase the overall company income.
a. True
b. False
_____, which constitute one of the most important elements of internal control, include
separating responsibilities for related operations.
a. Control procedures
b. Risk assessment activities
c. Risk monitoring procedures
d. Information and communication activities
Which of the following is a reason for a corporation to buy back its own stock?
a. To increase liquidity
b. To increase solvency
c. To increase the shares outstanding
d. To reissue as bonuses to employees
The negotiated price approach allows the managers of decentralized units to agree
among themselves on a transfer price.
a. True
b. False
On the income statement, the merchandise inventory at the beginning of the period is
added to sales to yield the cost of merchandise sold during the period.
a. True
b. False