Equity is reduced when owner’s withdrawals exceed net income.
A process costing system first accumulates the costs of direct materials, direct labor,
and overhead for each process and then assigns those costs to the products produced
during a particular period.
When a manufacturing company employs standard costs, all costs affecting the three
inventory accounts and the Cost of Goods Sold account are stated in terms of actual
costs rather than in terms of standard costs incurred.
Goods in transit shipped FOB shipping point should be included in the seller’s ending
inventory.
When the average-cost method is applied to a perpetual inventory system, the sale of
goods will not change the unit cost of the goods that remain in inventory.
The investments category on the balance sheet normally includes investments that are
intended to be held for a long period of time.
Staff accountants express their duty to ensure financial reports are not
A liability must never be classified as current if it is due in more than one year.
The contribution margin income statement divides costs into variable and fixed costs.
Overhauling a company’s cooling system is an example of an extraordinary repair.
Accounting rules applicable to management accounting are the same as those used for
financial accounting.
Lines of credit from the bank need not be disclosed in the financial statements or in the
notes.
The three inventory accounts used in traditional costing are replaced by two inventory
accounts in backflush costing.
Despite its advantages, the just-in-time operating environment produces increased
carrying costs for inventory.
Because process costing is normally associated with a continuous production flow,
products that are in process at the beginning of the period are assumed to be the first
products completed during the current period.
Budgets assign resources and the responsibility to use them wisely to managers who are
held accountable for their results.
Johnson Technology specializes in graphic design and video production. In October
2014, the company incurred the following costs for providing services to one of its
clients.
Johnson Technology’s contract with the client discloses a 20% profit margin on the cost
incurred. Determine the profit earned by the company by providing services.
A.$3,500
B.$700
C.$4,200
D.$360
Which type of investment, if any, could be classified as short- or long-term, as well as
debt or equity?
A)Available-for-sale securities
B)Trading securities
C)Held-to-maturity securities
D)None of these are correct.
Plunda Co. is planning production for the coming year. The information to be used is
based on a projection of cost information for the current year. Projections of the
following costs are as follows:
Plunda Co. sells its product for $90.00 per unit. Compute the following, showing your
calculations:
a. The breakeven point in sales units
b. The breakeven point in sales dollars
c. The sales level in both sales units and dollars if a profit of $122,400 is projected
The most important accounting problem in dealing with merchandise inventory is the
application of which of the following conventions or rules?
A.Materiality
B.Full disclosure
C.Matching
D.Conservatism
Which of the following is not an objective of product costing systems?
A.To provide information for cost planning
B.To assist in the preparation of the income statement
C.To determine the taxable profits
D.To provide information for product pricing
Assume that the balance of accounts payable does not change during a period. When
preparing a statement of cash flows, an increase in ending inventory over beginning
inventory will result in an adjustment to net income under the indirect approach because
A.the amount of cost of goods sold is equal to the amount of cash paid for purchases.
B.consumed inventory is an expense but not a use of funds.
C.the amount of cost of goods sold on an accrual basis is less than the amount of cash
paid for purchases of inventory.
D.the amount of cash paid for purchases of inventory is less than the amount of cost of
goods sold on an accrual basis.
Which of the following is not a measurement issue in accounting?
A.Valuation.
B.Recognition.
C.Evaluation.
D.Classification.
Which of the following descriptions would not fit the definition of a liability?
A.Obligation to deliver services for which payment was received in advance
B.Result of past transaction
C.Future obligation for future salary payments
D.Present obligation for future payment
Which of the following guidelines is correct?
A.Dollar signs ($) are required in all financial statements and other schedules.
B.Account names are capitalized when referenced in text or listed in work documents
like the journal or ledger.
C.In financial statements only the first word of an account name is capitalized.
D.All of these choices.
Bond issue costs have the effect of
A.decreasing a bond discount.
B.increasing a bond premium.
C.decreasing the effective interest rate.
D.decreasing a bond premium.
Under the perpetual inventory system
A.the cost of each item is recorded in the Merchandise Inventory account when it is
purchased.
B.when an inventory item is sold, its cost is transferred to the Sales Revenue account.
C.the balance of the Merchandise Inventory account is only accurate on the balance
sheet date.
D.All of these choices.
The income statement for Catlett Company included the following revenues and
expenses for 20×5:
Listed below are the related balance sheet account balances at year end for this year and
last year:
a. Compute cash received for fees during the year.
b. Compute cash paid for wages during the year.
c. Compute cash paid for insurance during the year.
d. Compute cash paid for interest during the year.
Which of the following costs normally is expensed in the year incurred, regardless of
the extent of future benefit?
A.Technology
B.Customer lists
C.Research and development
D.Leasehold improvements
The detailed records of purchases and sales maintained under the perpetual inventory
system make which costing method more practical than when a periodic system is
used?
A.Specific identification
B.Average-cost
C.LIFO
D.FIFO
Emerald Corporation’s overhead budget for 2013 was as follows:
750,000 units were produced in 2013.
Direct labor cost is $42,000,000.
For both 2013 and 2014, each unit required 4 direct labor hours at $14 per hour.
In 2014, property taxes, insurance, and depreciation are expected to stay at 2013 levels.
Utilities costs vary proportionally with units produced.
Factory supervision increases by increments of $45,000 for every 300,000 increase in
direct labor hours.
The 2014 expected production is 1,200,000 units.
If the expected 2014 expense for factory supervision and for utilities costs is $600,000
and $150,000, respectively, then the total for the 2014 overhead budget of Emerald is
A.$930,000.
B.$880,000.
C.$780,000.
D.$750,000.
A company has $1,606,000 in bonds payable with an unamortized premium of $40,000.
If one-fourth of the bonds are converted to common stock, the carrying value of the
bonds will decrease by
A.$401,500.
B.$441,500.
C.$391,500.
D.$411,500.