1) Managerial accounting reports are prepared according to generally accepted
accounting principles.
2) The materials requisition serves as the source document for debiting the accounts in
the materials ledger.
3) As a company records depreciation expense for a period of time a corresponding
cash inflow from investing activities is reported on the statement of cash flows.
4) For years one through five, a proposed expenditure of $500,000 for a fixed asset with
a 5-year life has expected net income of $40,000, $35,000, $25,000, $25,000, and
$25,000, respectively, and net cash flows of $90,000, $85,000, $75,000, $75,000, and
$75,000, respectively. The cash payback period is 5 years.
5) Cash outflows from financing activities include the payment of cash dividends, the
acquisition of treasury stock, and the repayment of amounts borrowed.
6) On the variable costing income statement, deduction of the variable cost of goods
sold from sales yields manufacturing margin.
7) Fixed factory overhead costs are included as part of the cost of products
manufactured under the absorption costing concept.
8) Managers depend on accurate factory overhead allocation to make decisions
regarding product mix and product price.
9) Cash dividends become a liability to a corporation on the date of record.
10) The budget procedures used by a large manufacturer of automobiles would
probably not differ from those used by a small manufacturer of paper products.
11) In preparing flexible budgets, the first step is to identify the fixed and variable
components of the various costs and expenses being budgeted.
12) If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an
annual expected net cash flow and net income of $32,000 and $12,000, respectively, the
cash payback period is 4 years.
13) Some of the major fraudulent acts by senior executives started as what they
considered to be small ethical lapses which grew out of control.
14) The primary role of accounting is to determine the amount of taxes a business will
be required to pay to taxing entities.
15) There are two methods of amortizing a bond discount or premium: the straight-line
method and the double-declining-balance method.
16) The amount of depreciation expense for a fixed asset costing $95,000, with an
estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating
hours, is $21,375 by the units-of-production method during a period when the asset was
used for 4,500 hours.
17) The process of transferring the data from the journal to the ledger accounts is
posting.
18) If yearly insurance premiums are increased, this change in fixed costs will result in
an increase in the break-even point.
19) An employee receives an hourly rate of $15, with time and a half for all hours
worked in excess of 40 during the week. Payroll data for the current week are as
follows: hours worked, 46; federal income tax withheld, $120; cumulative earnings for
the year prior to this week, $5,500; Social security tax rate, 6% on maximum of
$100,000; and Medicare tax rate, 1.5% on all earnings; state unemployment
compensation tax, 3.4% on the first $7,000; federal unemployment compensation tax, .
8% on the first $7,000. Prepare the journal entries to record the salaries expense and the
employer payroll tax expense.
20) On April 1, 10,000 shares of $5 par common stock were issued at $22, and on April
7, 5,000 shares of $50 par preferred stock were issued at $104. Journalize the entries for
April 1 and 7.
21) Discuss how equivalent units are computed under the average cost method.
22) On April 1, 2015, ValueTime, Inc. had a market price per common share of $24. For
the previous year ValueTime paid a dividend of $1.50 per share. Compute the dividend
yield for ValueTime, Inc.
23) Explain how variable costing net income will be different than absorption costing
net income under the following situations:
(1) A company had no beginning or ending inventory. During the year they produced
and sold 10,000 units.
(2) A company had no beginning inventory. During the year they produced 10,000 units
and sold 8,000 units.
(3) A company had 2,000 units in beginning inventory. During the year they produced
10,000 units and sold 12,000 units.
(1) When there are no inventories (everything that is produced is sold) then variable
costing income = absorption costing income.
(2) When the units produced > units sold, variable costing income < absorption costing
income.
24) A machine costing $85,000 with a 5-year life and $5,000 residual value was
purchased January 2, 2011. Compute depreciation for each of the five years, using the
declining-balance method at twice the straight-line rate.