While performing an incremental analysis for outsourcing decision, information such as
depreciation is not relevant.
Fair value is the exchange price of an actual or potential business transaction between
market participants.
Capital investment decisions are decisions about when and how much to spend on
capital facilities and other long-term projects.
Sound internal control activities dictate that extra cash should always be on hand.
Direct labor time standards express the hourly labor cost per function or job
classification that exists during the current accounting period.
A positive free cash flow indicates that the company has met all its planned cash
commitments and has cash available to reduce debt or to expand.
Merchandise inventory is valued on the balance sheet at the expected resale price.
Which of the following statements is not TRUE about trading on the equity?
A.It can become a disadvantage to a corporation.
B.It is another phrase for financial leverage.
C.It will increase the number of shares of stock owned.
D.It will increase the interest a corporation must pay.
Interest received on investments would be included in the operating activities category
on the statement of cash flows.
Noncompete covenants should be amortized over the specified life of the contract.
The ending balance of the Cost of Goods Sold account will differ in traditional and
backflush costing.
The two parts of a corporation’s stockholders’ equity section are contributed capital and
retained earnings.
Management accounting information demands more objectivity than financial
accounting information.
Notes receivable due within 90 days and cash are examples of short-term financial
assets.
Management accounting exists primarily for the benefit of people inside a company.
Outsourcing production help in reducing a company’s investment in physical assets and
human resources.
Using the following information from an annual report, prepare a horizontal analysis of
the consolidated statements of earnings. (Round percentage answers to one decimal
place.)
Resser Corporation manufactures serving trays and utensils for use by airlines for meal
service. Several airlines order these products in large quantities. Resser had adopted an
activity-based management philosophy. Listed below are the principal activities of the
company.
a. Identify activities that are nonvalue-adding.
b. Analyze each of the nonvalue-adding activities and determine which are necessary.
Suggest how each of the activities that you classified as unnecessary could be reduced
or eliminated.
Which of the following is an example of an accrual?
A.The purchase of office supplies.
B.Wages expense incurred but not yet paid.
C.Rent revenue collected in advance.
D.Payment of two years’ insurance in advance.
Which of the following is an advantage of budgeting?
A.Budgets help managers by eliminating risk, as they show actual values of expected
activities.
B.Budgets form a part of the financial statements of a company.
C.Budgets help managers by identifying potential constraints.
D.Budgets contain only dollar values and this helps in analyzing actual performance.
Sinoyianis Realty Company had the following balance sheet accounts and balances:
What is the balance of the Flora Sinoyianis, Capital account?
A.$8,000
B.$12,000
C.$28,000
D.$40,000
Which of the following will not result in dissolution of a partnership?
A.Death of a partner
B.Withdrawal of a partner
C.Admission of a new partner
D.Sale of partnership assets
Ryan’s Landscaping sells a quality brand of hoes, shovels, and rakes in a sales mix of
2:4:2. The company’s fixed costs are $61,600. Product data include the following:
a. Compute the weighted-average contribution margin.
b. Determine the weighted-average breakeven point.
c. Calculate the breakeven point for each product.
d. Determine the breakeven point in sales dollars.
Lexi invests $80,000 for a one-fourth interest in a partnership in which the other
partners have capital totaling $160,000 before admitting Lexi. After distribution of the
bonus, what is Lexi’s capital balance?
A.$20,000
B.$40,000
C.$60,000
D.$80,000
In a period of rising prices, which inventory method is best to use for tax purposes?
A.FIFO
B.Average-cost
C.Specific identification
D.LIFO
An American company makes a credit purchase of goods from a company in London
for 1,000 British pounds. On the date of purchase, the exchange rate was $1.65 per
pound. However, on the date of payment, the rate had declined to $1.60 per pound. As a
result, the American company would record
A.an exchange gain of $50.
B.an exchange loss of $1,600.
C.an exchange loss of $50.
D.no exchange gain or loss.
Which of the following transactions results in the recognition of an expense?
A.Expiration of the usefulness of equipment during the accounting period.
B.Payment on an account payable.
C.Withdrawal of cash by the owner.
D.Payment on the principal portion of a loan.
Which of the following costs is most likely to remain fixed within a relevant range?
A.Indirect labor
B.Property taxes
C.Operating supplies
D.Direct labor
Failure to record a liability probably will
A.result in an overstated net income.
B.result in overstated total liabilities and stockholders’ equity.
C.have no effect on net income.
D.result in overstated total assets.
Pixel Inc. is a manufacturer of video cameras and is preparing production and sales
forecasts for the coming fiscal year. The company needs to determine the point at which
the projected sales revenue will equal the total of all fixed and variable costs. Fixed
costs are estimated to be $259,000, and variable costs are expected to be maintained at
$125 per camera. Each camera will sell for $300.
Compute (a) the breakeven point in sales units and (b) the breakeven point in sales
dollars.
Job #178 consists of 500 units and has total of direct materials, $48,000; direct labor,
$58,000; and overhead, $35,000.
a. What is the unit product cost?
b. What are the prime costs per unit?
c. What are the conversion costs per unit?
The trial balance for Parker Company is as follows:
On the trial balance, total assets equal
A.$108,000
B.$104,000
C.$88,000
D.$68,000
The Taylor Company uses a process costing system. Assume that direct materials are
added at the beginning of the period and that direct labor and overhead are added
continuously throughout the process. The company uses the FIFO costing method. The
following data are available for one of its accounting periods
Equivalent units for direct materials of Taylor Company are
A.180,000.
B.202,000.
C.176,000.
D.191,000.
Piper Company issued ten-year, 8 percent bonds payable in 20×5 at a premium. During
20×5, the company’s accountant failed to amortize any of the bond premium. The
omission of the premium amortization will
A.cause net income for 20×5 to be overstated.
B.not affect net income reported for 20×5.
C.cause net income for 20×5 to be understated.
D.cause retained earnings at the end of 20×5 to be overstated.
All of the following are stockholders’ equity accounts except
A.Treasury Stock.
B.Preferred Stock.
C.Retained Earnings.
D.Dividends Payable.
Which of the following items has no effect on owner’s equity?
A.Receipt of cash owed to the business (accounts receivable)
B.Sale of a service
C.Payment of an expense
D.Withdrawal by the owner
Which of the following accounts is increased with a debit?
A.Jim Webb, Capital
B.Rent Payable
C.Service Revenue
D.Prepaid Insurance
During the first month of the current accounting period, Southern California Company
experienced a devastating loss due to a fire. Many of the accounting records were lost
and the company is now trying to recreate the lost information. Fragments of data found
include the following:
1> A portion of the budget indicates that the overhead rate was $10 per direct labor
hour.
2> Job 74 was in process and had incurred $9,600 of direct materials and $14,000 of
direct labor (1,000 hours). The company has a single hourly wage rate.
3> During the month, 4,500 direct labor hours were worked.
4> Actual overhead costs were $48,000. No indirect materials were used.
5> The Materials Inventory account had a beginning balance of $28,000 and an ending
balance of $18,000.
6> The Finished Goods Inventory account had a beginning balance of $12,000 and an
ending balance of $26,000.
7> The Work in Process Inventory account had a beginning balance of $17,000.
8> The Cost of Goods Sold is $171,000.
Calculate the following amounts:
a. Ending work in process inventory account balance, Job No. 74
b. Cost of goods completed
c. Amount of overhead under- or overapplied.
d. Direct materials used
e. Direct materials purchased
A company recorded office supplies in an asset account when the supplies were
purchased. Failure to take inventory and make an adjusting entry will result in an
A.understatement of liabilities.
B.understatement of owner’s equity.
C.understatement of assets.
D.overstatement of owner’s equity.
Measures of equivalent production are necessary in process costing because
A.job order costing procedures cannot be applied.
B.unit costs are computed by departments or processes at fixed time intervals.
C.perpetual inventories are not employed in process plants.
D.production methods are more complex than in job order costing systems.
Weller Co. issued $600,000 of 30-year, 8 percent bonds at 106 on one of its semiannual
interest dates. The straight-line method of amortization is to be used. What is the total
interest cost of the bonds?
A.$1,439,000
B.$1,404,000
C.$1,440,000
D.$1,476,000
Chow Company sold a car for $18,100. The cost of the car was $37,500 and an
accumulated depreciation of $20,400 had been recorded on the same. The entry to
record the disposal of the car is:
In practice, why is it often difficult to apply the retail method in determining the cost of
ending inventory?
Prepare a horizontal analysis by computing the amounts and percentage changes for the
following balance sheet items; place your answers in the blanks provided.
Use the following accounts and information to prepare, in good form, an income
statement, statement of owner’s equity, and balance sheet for Day Industries for the
month ended July 31, 2014.
Given the adjusted trial balance below, prepare (in good form) an income statement,
statement of owner’s equity, and balance sheet. The name of the business is Palo Verde
Landscaping Services and the accounting period coincides with the calendar year.
Comment on the change in both the carrying value and the balance of the Unamortized
Bond Discount account over the life of a bond issue.
Use the following accounts and balances to prepare a balance sheet for England
Company at December 31, 2014:
What commitments must a company account for in determining its free cash flow?
How is the matching rule applied when accounting for merchandise inventory?