A journal:
A. is where transactions are initially recorded.
B. is where transactions are posted to after they are initially recorded.
C. serves as an index to the ledger.
D. is the same as a source document, such as an invoice from a supplier or a copy of a
credit purchase made by a customer.
The notes to the financial statements:
A. are not an integral part of the financial statements.
B. explain the significant accounting policies of the company.
C. usually disclose the amount of the company’s bad debts expense.
D. describe management’s product development plans for the coming year.
Which of the following is not a term that describes part of the accounting for noncurrent
assets?
A. Accumulation.
B. Depletion.
C. Amortization.
D. Depreciation.
A potential creditor’s judgment about granting credit would be most influenced by the
potential customer’s:
A. current ratio at the end of the prior fiscal year.
B. most recent acid-test ratio.
C. trend of acid-test ratio over the past three years.
D. practice with respect to taking cash discounts offered by current suppliers.
Which of the following qualitative factors favors the buy option in the make or buy
decision?
A. production scheduling.
B. utilization of idle capacity.
C. ability to control quality.
D. technical expertise of supplier.
When the present value analysis of a proposed investment results in an indication that
the proposal has a rate of return greater than the cost of capital, the investment might
not be made because:
A. the quantitative analysis indicates that it should not be made.
B. management’s assessment of qualitative factors overrides the quantitative analysis.
C. the timing of the cash flows of the investment will not be as assumed in the present
value calculation.
D. post-audits of prior investments have revealed that cash flow estimates were
consistently less than actual cash flows realized.
Which of the following is not a principal form of business organization?
A. Partnership.
B. Sole proprietorship.
C. Limited unregistered business.
D. Corporation.
E. None of the above.
The production budget uses all of the following except:
A. the sales forecast.
B. the inventory policy.
C. the cash receipts budget.
D. the beginning inventory quantity.
Another term for return on investment is:
A. Return on equity.
B. Return on assets.
C. Return on retained earnings.
D. Return to sender.
Most entities satisfy the accounting criteria for recognizing revenue when:
A. an order is received from a customer.
B. cash is received from a customer.
C. an unearned revenue account is credited.
D. a product is delivered or a service is provided.
The operating expense budget is based on the:
A. sales budget.
B. production budget.
C. manufacturing overhead budget.
D. cash budget.
For 2016, Skresso Co. reported $1.82 of earnings per share of common stock. During
2017, the firm had a 4% common stock dividend. The 2016 earnings per share to be
reported in the annual report for 2017 are:
A. $1.90
B. $1.82
C. $1.75
D. $1.70 $1.82/1.04 = $1.75 per share
An advantage of the net present value method for evaluating investment proposals over
the internal rate of return method is that:
A. only one set of present value calculations using a required discount rate is made.
B. the actual rate of return on the project is calculated.
C. projects can be ranked in order of profitability using the net present value amount.
D. estimates of future cash flows do not have to be made.
________________ is a technique used to filter cost information contained in
performance reports to each manager within the organization at an appropriate level of
detail or summarization.
A. Managerial reporting
B. Responsibility reporting
C. Financial reporting
D. Segment reporting
A ledger:
A. is where transactions are initially recorded.
B. is where transactions are posted to after they are initially recorded.
C. is the same as a chart of accounts, with each account numbered to facilitate frequent
references that are made to it.
D. is the same as a source document, such as an invoice from a supplier or a copy of a
credit purchase made by a customer.
Ariel, Inc., issued $60 million face amount of 9% bonds when market interest rates
were 9.30% for bonds of similar risk and other characteristics.
(a.) How much interest will be paid annually on these bonds?
(b.) Will the bonds be issued at a premium or discount? Explain your answer.
(c.) Will the annual interest expense on these bonds be more than, equal to, or less than,
the amount of interest paid each year? Explain your answer.
(a.) $60,000,000 * .09 = $5,400,000 interest paid annually.
(b.) The bonds were issued at a discount because market interest rates were more than
the coupon rate when the bonds were issued. Investors would not be willing to pay the
full face amount for bonds offering a lower than market rate of interest.
Assume that you own 1,700 shares of $10 par value common stock and the company
has a 2-for-1 stock split when the market price per share is $52.
Required:
(a.) How many shares of common stock will you own after the stock split?
(b.) What will probably happen to the market price per share of the stock?
(c.) What will probably happen to the par value per share of the stock?
Which of the following is the proper paragraph sequence for an independent Auditor’s
Report?
A. Scope, introduction, opinion.
B. Introduction, scope, opinion.
C. Opinion, scope, summary.
D. Introduction, opinion, scope.
PlayCraft Co. manufactures toy boats. During 2016, total costs incurred in making
54,000 toy boats included $189,000 of fixed manufacturing overhead. The total
absorption cost per toy boat was $28.50.
(a.) Calculate the variable cost per toy boat.
(b.) The ending inventory of toy boats was 11,600 units higher at the end of 2016 than
at the beginning of the year. By how much and in what direction (higher or lower)
would cost of goods sold for 2016 be different under direct costing than under variable
costing?
(c.) Express the toy boat cost in a cost formula. What does this formula suggest the total
cost of making an additional 5,800 toy boats would be?
Which of the following is not an example of a decision or informed judgment that a
potential employee could make from accounting information?
A. Personnel turnover statistics (i.e., hiring and terminations).
B. Probability of the company’s ability to make profit sharing plan contributions in the
future.
C. Assessment of the risk that the company may become bankrupt in the near future.
D. The extent of the company’s commitment to a research program.
A. Personnel turnover statistics (i.e., hiring and terminations).
Which of the following is not a strong reason for budgeting?
A. budgets provide a benchmark for judging performance.
B. budgeting requires little effort by non-accounting managers.
C. budgeting requires management to plan.
D. budgeting requires coordination among the functional areas of the firm.
An example of a cost that is likely to have a direct relationship with products being
manufactured is:
A. sales force salaries.
B. depreciation of production equipment.
C. salaries of production supervisors.
D. production labor costs.
The provisions of the Sarbanes-Oxley Act of 2002 had the following components:
A. Enforce auditing.
B. Attestation.
C. Quality control.
D. None of the above are provisions.
E. A, B and C are correct.
ABC Company estimates total overhead costs to be $1,200,000 and will apply overhead
to units produced based on 200,000 estimated machine hours. During the year ABC
Company incurred actual overhead costs of $1,250,000 and achieved 250,000 machine
hours. ABC Company’s predetermined overhead rate is:
A. $4.80 per machine hour.
B. $5.00 per machine hour.
C. $6.00 per machine hour.
D. $6.25 per machine hour. MOH application rate = $1,200,000 estimated
costs/200,000 estimated MH = $6/MH
The liability for product warranty claims is an example of a liability that:
A. has been calculated using estimates.
B. has been recorded in the process of matching revenue and expense.
C. also resulted in a reduction of net income.
D. all of the above.
Capital budgeting techniques using present value techniques are useful in helping
management:
A. decide which costs are most relevant in decision making.
B. identify investment alternatives that will contribute most to future profitability.
C. determine an accounting rate of return.
D. determine an investments payback period.
Pineapple Corp. has annual revenues of $600,000, fixed expenses of $200,000, and an
average contribution margin ratio of 30%.
(a) Management is considering adding a new product to the company’s product line.
The new item will have $14.00 of variable costs per unit. Calculate the selling price that
will be required for this product to maintain the 30% average contribution margin ratio
on current sales
(b) If the new product adds an additional $63,000 to Pineapple’s fixed expenses, how
many units of the new product must be sold at the price calculated in part (a) in order to
break even on the new product?
(c) If 25,000 units of the new product could be sold at a price of $18.00 per unit, and
the company’s other business did not change, calculate Pineapple’s total operating
income and average contribution margin ratio.
If a common stock has no par value:
A. there is no way of determining the market value per share.
B. the stock must have a stated value.
C. there will not be any additional paid-in capital related to it.
D. the stockholders do not have a preemptive right.
A cost that will differ according to the alternative activity being considered is called
a(n):
A. sunk cost.
B. allocated cost.
C. differential cost.
D. opportunity cost.
Standards are most appropriately used to:
A. reward workers and managers who meet them.
B. penalize workers and managers who do not meet them.
C. calculate the unit cost of a product or service.
D. support the planning and control processes of the firm.
If a cost is irrelevant to a decision, the cost could not be a:
A. fixed cost.
B. sunk cost.
C. differential cost.
D. variable cost.
Which of the following variances is not determined during an overhead variance
analysis?
A. Volume variance.
B. Budget variance.
C. Spending variance.
D. Price variance.