The amount of details presented in a budget performance report for a cost center
depends upon the level of management to which the report is directed.
a. True
b. False
For EFG Co., the transaction “cash sales to customers at a profit” would:
a. increase total assets.
b. decrease total assets.
c. have no effect on total assets.
d. decrease stockholders’ equity.
Navy Inc. buys land for $500,000 cash in the month of March. In March, it also paid
wages of $100,000. Which of the following statements is true with regards to the above
transactions?
a. Navy Inc.’s profitability decreases by $500,000, and liquidity decreases by $100,000.
b. Navy Inc.’s liquidity decreases by $600,000, and profitability remains unchanged.
c. Navy Inc.’s liquidity and profitability decrease by $600,000.
d. Navy Inc.’s liquidity decreases by $600,000, and profitability decreases by $100,000.
Which element of internal control observes employees’ behavior and the accounting
system for indicators of control problems?
a. Control environment
b. Risk assessment
c. Control procedures
d. Monitoring
On June 1, Unidevo, Inc. purchased $1,700 worth of supplies on account. Prior to the
purchase, the balance in the supplies account was $0. On December 31, the fiscal
yearend for Unidevo, it is determined that $800 of supplies still remain. What is the
balance in the supplies account after adjustment?
a. $800
b. $900
c. $0
d. $1,700
Which of the following statements is used to measure the performance of a profit
center’s manager?
a. A divisional statement of cash flows
b. A divisional bank reconciliation statement
c. A divisional balance sheet
d. A divisional income statement
Currently, fixed costs are $561,000 and the unit contribution margin is $10. What would
be the breakeven point in units if variable cost is decreased by $0.50 per unit?
a. 59,053 units
b. 56,100 units
c. 53,429 units
d. 60,000 units
A favorable cost variance occurs when actual cost is less than budgeted cost at actual
volumes.
a. True
b. False
Which of the following should be shown on a statement of cash flows under the
financing activity section?
a. The purchase of a longterm investment in the common stock of another company
b. The payment of cash to retire a longterm note
c. The proceeds from the sale of a building
d. The issuance of a longterm note to acquire land
If a company has current assets totaling $56,000 and current liabilities totaling $40,500,
then the company’s working capital totals $15,500.
a. True
b. False
The production budget is the starting point for preparation of the direct labor cost
budget.
a. True
b. False
Solvency analysis focuses on the ability of a business to make a profit.
a. True
b. False
Which of the following processes is involved in budgeting?
a. Assessing the utilization rate of assets
b. Identifying the industry standards of stock returns
c. Periodically comparing actual results with the goals
d. Dismissing all managers who fail to achieve operational goals specified in the budget
The main source of paidin capital is from issuing stock.
a. True
b. False
Wyandott Co. produces two products. Both products pass through a firing process that
is operating at full capacity and is a production bottleneck. Product A requires 2 hours
of processing and has a contribution margin per unit of $60. Product B requires 1 hour
of processing and has a contribution margin of $40. Which of the following provides
the most accurate assessment of the situation assuming unlimited demand for each
product?
a. Production of Product B rather than Product A will generate the maximum
profitability for Wyandotte.
b. Production of Product A rather than Product B will generate the maximum
profitability for Wyandotte.
c. Raising the selling price of Product B by $20 will cause management to be indifferent
between producing Product A or Product B.
d. Raising the selling price of Product A by $10 will cause management to be indifferent
between producing Product A or Product B.
If net sales is $550,000, beginning inventory is $110,000, and ending inventory is
$125,000, how much would be the accounts receivables turnover?
a. 4.4
b. 5.0
c. 4.7
d. 4.0
In preparing a bank reconciliation, the amount of a canceled check omitted from the
depositor’s records is deducted from the cash balance per books.
a. True
b. False
The process by which management plans, evaluates, and controls longterm investment
decisions involving fixed assets is called capital investment analysis.
a. True
b. False
Which of the following would not affect the operating activities section of the statement
of cash flows, using the indirect method?
a. Decrease in merchandise inventory
b. Payment on a note payable
c. Decrease in unearned rent
d. Depreciation expense
For the past year, LaPrade Company had fixed costs of $70,000, a unit variable costs of
$32, and a unit selling price of $40. For the coming year, no changes are expected in
revenues and costs except that property taxes are expected to increase by $10,000.
Determine the breakeven sales (in units) for (a) the past year and (b) the coming year.
Frogue Corporation uses a standard cost system. The following information was
provided for the period that just ended:
Actual price per kilogram$2.50
Actual kilograms of material used31,000
Actual hourly labor rate$18.10
Actual hours of production4,900 labor hrs.
Standard price per kilogram$2.80
Standard kilograms per completed unit6 kilograms
Standard hourly labor rate$18.00
Standard time per completed unit1 hr.
Actual total factory overhead$34,900
Actual fixed factory overhead$18,000
Standard fixed factory overhead rate$1.20 per labor hour
Standard variable factory overhead rate$3.80 per labor hour
Maximum plant capacity15,000 hours
Units completed during the period5,000
The direct materials cost variance is:
a. $6,500 unfavorable.
b. $9,000 unfavorable.
c. $9,000 favorable.
d. $6,500 favorable.
Since transfer prices will affect a division’s financial performance, it is used by
decentralized segments of a business.
a. True
b. False
Sometimes a(n) _____ is offered to buyers as a means of encouraging them to pay
before the end of the credit period.
a. accounts receivable
b. credit card
c. sales discount
d. cash sale
Ariel Inc. uses the allowance method of accounting for uncollectible accounts
receivable and estimates that 2% of the credit sales of $1,650,000 for the year ended
will be uncollectible. Allowance for Doubtful Accounts has a negative unadjusted
balance of $(1,600) at the end of the year. Determine the amount of the adjustment to
record the provision for doubtful accounts.
a. $33,000
b. $31,400
c. $34,600
d. $30,000
The process that begins with the analysis of transactions and ends with preparing the
accounting records for the next accounting period is called the accounting cycle.
a. True
b. False
The popularity of the sole proprietorship is due to the ease and low cost of organizing.
a. True
b. False
A remittance advice is the notification accompanying the check issued to a creditor that
states the specific invoice being paid.
a. True
b. False
FICA tax is a payroll tax that is paid by both the employee and the employer.
a. True
b. False
SQC Inc. had sales of $3,000,000, cost of merchandise sold of $2,100,000, and average
inventory of $140,000. What is SQC Inc.’s days’ sales in inventory? (Round the answer
to the nearest whole number.)
a. 24 days
b. 17 days
c. 15 days
d. 30 days
Direct materials cost is an example of a fixed cost of production.
a. True
b. False
A business is considering a cash outlay of $250,000 for the purchase of land, which it
intends to lease for $40,000 per year. If alternative investments are available that yield
an 15% return, the opportunity cost of the purchase of the land is
a. $45,000.
b. $37,800.
c. $47,200.
d. $37,500.
The _____ is determined by transactions between buyers and sellers of similar bonds.
a. stated interest rate
b. effective interest rate
c. internal interest rate
d. straightline rate