1) Managerial information is for external as well as internal stakeholders.
2) The transfer to expense of the cost of intangible assets attributed to the passage of
time or decline in usefulness is called amortization.
3) Form W-4 is a form authorizing employers to withhold a portion of employee
earnings for payment of an employees federal income taxes.
4) In preparing a bank reconciliation, the amount indicated by a debit memo for bank
service charges is added to the balance per company’s records.
5) Bonds are sold at face value when the contract rate is equal to the market rate of
interest.
6) During construction of a building, the cost of interest on a construction loan should
be charged to an expense account.
7) Goal conflict can be avoided if budget goals are carefully designed for consistency
across all areas of the organization.
8) In a defined benefits plan, the employer bears the investment risks in funding a
future retirement income benefit.
9) In most businesses, cost standards are established principally by accountants.
10) The reduction in the par or stated value of common stock, accompanied by the
issuance of a proportionate number of additional shares, is called a stock split.
11) The increase side of all accounts is the normal balance.
12) Cash paid to acquire treasury stock should be shown on the statement of cash flows
from investing activities.
13) The process by which management allocates available investment funds among
competing capital investment proposals is termed present value analysis.
14) The concept of present value is that an amount of cash to be received at some date
in the future is the equivalent of the same amount of cash held at an earlier date.
15) Total fixed costs change as the level of activity changes.
16) Budget performance reports prepared for the vice-president of production would
generally contain less detail than reports prepared for the various plant managers.
17) BAM Co. is evaluating a project requiring a capital expenditure of $806,250. The
project has an estimated life of four years and no salvage value. The estimated net
income and net cash flow from the project are as follows:
18) Comment on the validity of the following statements. “As an asset loses its ability
to provide services, cash needs to be set aside to replace it. Depreciation accomplishes
this goal.”
19) Beginning inventory, purchases and sales data for tennis rackets are as follows:
Complete the inventory cost card assuming the business maintains a perpetual
inventory system and calculates the cost of merchandise sold and ending inventory
using LIFO.
20) The sales, income from operations, and invested assets for each division of Marcus
Company are as follows:
Determine the minimum rate of return for invested assets.
21) The income statement disclosed the following items for 2011:
Balances of the current assets and current liabilities accounts changed between
December 31, 2010 and December 31, 2011, as follows:
Required:
Prepare the Cash Flows for Operating Activities section of the statement of cash flows,
using the indirect method.
22) Using the following data taken from Hsus Imports Inc., determine the gross profit
to be reported on the income statement for the year ended March 31, 2011.
23) The following adjusting journal entry does not include an explanation. Select the
best explanation for the entry.
A. Record payment of fees earned
B. Record fees earned at the end of the month
C. Record fees that have not been earned at the end of the month
D.Record the payment of fees to be earned
24) Brutus Corporation, a newly formed corporation, has the following transactions
during May, 2011, its first month of operation.
Calculate total sales, cost of goods sold, gross profit and ending inventory using each of
the following inventory methods:
1> FIFO Perpetual
2> FIFO Periodic
3> LIFO Perpetual
4> LIFO Periodic
5> Average Cost Periodic (round average to nearest cent)
25) On May 1, 10,000 shares of $10 par common stock were issued at $30, and on May
7, 5,000 shares of $50 par preferred stock were issued at $111. Journalize the entries for
May 1 and May 7.
26) List and define each of the five elements of internal control.