To understand accounting information, users must be familiar with the accounting
conventions, or rules of thumb, used in preparing financial statements.
Unlike ROI, residual income is expressed in dollars.
The Sarbanes-Oxley Act of 2002 does not require any certification from a public
company’s chief executive officer about the company’s system of internal control.
In the general journal, the year appears on the first line of the first column, the month
on the next line of the first column, and the day in the second column opposite the
month.
The receivables turnover is expressed as a percentage.
Direct labor cannot be traced to products as it is invisible.
Dividends in arrears must be paid when a corporation calls in its preferred stock.
As the interest coverage ratio declines, the risk for creditors also declines.
The total of the balances in the subsidiary ledger accounts equals the balance in the
corresponding controlling account.
The Balance Sheet columns of the work sheet show one account that needs to be closed.
In general, in times of rising prices, using FIFO has a favorable effect on cash flows.
Cost behavior is defined as the manner in which costs respond to changes in volume or
activity.
The idea behind incremental analysis is to review decision data that differ between
alternatives.
Which of the following goods would not be included in merchandise inventory for a
purchasing company?
A.Goods in transit shipped FOB shipping point
B.Goods on hand in the showroom
C.Goods in transit shipped FOB destination
D.Goods ordered and received from the supplier
Lincoln Company engaged in this transaction:
Acquired long-term investment by issuance of long-term debt.
Indicate which section, if any, the above transaction would appear in, or relate to, on a
statement of cash flows.
A.Investing activities section.
B.Operating activities section.
C.Schedule of noncash investing and financing transactions.
D.Financing activities section.
A goal of the process value analysis (PVA) is to reduce nonvalue-adding activities.
Outline a procedure a company could use to accomplish this goal.
Which account that does not appear on the balance sheet has an amount in the Balance
Sheet columns of a work sheet?
A.Depreciation Expense’“Trucks
B.Withdrawals
C.Accumulated Depreciation’“Trucks
D.Owner’s Capital
Interest costs are included in the cost of an asset in conjunction with
A.long-term assets being purchased.
B.long-term assets acquired for speculative purposes.
C.long-term assets being constructed.
D.natural resources and intangible assets.
Which of the following entities would probably use a process costing system?
A.An oil refinery
B.A yacht builder
C.A custom furniture company
D.A custom jewelry manufacturer
An allocation base used in the process cost allocation is known as
A.cost processor.
B.cost object.
C.cost driver.
D.cost pooler.
Unlimited liability refers to
A.a claim to the partners’ personal assets by creditors if the partnership cannot pay its
debts.
B.the ability of any partner to bind the partnership to a business agreement as long as he
or she acts within the scope of the company’s normal operations.
C.co-ownership of partnership property.
D.the method of income and loss distribution.
Manufacturing overhead would not include which of the following costs?
A.Plant utilities
B.Supervisory salaries
C.Depreciation of plant assets
D.Raw materials
Which of the following is not a reason to classify costs as either product or period
costs?
A.To determine unit manufacturing costs
B.To determine if the costs are fixed or variable
C.To analyze costs for control purposes
D.To report production costs on the income statement
According to generally accepted accounting principles, treasury stock usually should be
recorded at
A.original issue cost.
B.par or stated value.
C.cost.
D.net realizable value.
Which of the following is not classified properly as property, plant, and equipment?
A.Land improvements, such as parking lots and fences
B.Natural resources
C.Land used in ordinary business operations
D.A truck held for resale by an automobile dealership
Under a defined benefit pension plan,
A.the pension expense account must be determined by actuarial calculations.
B.the employer guarantees the employee certain benefits upon retirement.
C.the annual contribution is based on estimated future benefits.
D.All of these choices.
Which of the following is not a guideline for budget preparation?
A.Revise budget to include planning decisions
B.Know the sources of budget information
C.Limit the use of a budget to one user group
D.Establish the format of the budget
The account most recently posted is determined most efficiently by referring to the
A.Post. Ref. column of the ledger.
B.balance column of the ledger.
C.date column of the general journal.
D.Post. Ref. column of the general journal.
How are transfers between cash and cash equivalents treated on a statement of cash
flows?
A.They are disclosed as an investing activity.
B.They are not shown as any type of cash flow.
C.They are disclosed as a financing activity.
D.They are disclosed as an operating activity.
Montell Inc. produces a variety of outdoor equipment products and utilizes a process
costing system. The following information was provided by the accounting department
as of March 31, 2014:
a. Units started during the month of March totaled 314,000.
b. Units partially complete as of March 31 equaled 76,000.
c. Ending work in process inventory as of March 31, 2014, was 80 percent complete.
d. Direct materials are added at the beginning of the process, and conversion costs are
incurred uniformly throughout the process.
e. No units were in process on March 1, 2014.
Using the information provided, compute the equivalent units of production for direct
materials and conversion costs for the month ended March 31, 2014, assuming a FIFO
costing flow.
Lincoln Company engaged in this transaction:
Issued common stock for cash.
Indicate which section, if any, the above transaction would appear in, or relate to, on a
statement of cash flows.
A.Operating activities section.
B.Does not represent a cash flow.
C.Investing activities section.
D.Financing activities section.
Business organizations that mimic the characteristics of partnerships include
A.Special-purpose entities.
B.Limited liability companies.
C.S corporations.
D.All of these choices.
During 20×5, Oates Company had sales of $500,000, net income of $50,000, average
total assets of $700,000, dividend payments of $35,000, net cash flows from operating
activities of $90,000, purchases of plant assets of $75,000, and sales of plant assets of
$90,000. Cash flows to sales equals (Round amounts to one decimal place)
A.12.9 percent.
B.15.0 percent.
C.22.5 percent.
D.18.0 percent.
Teddy’s To Hug, produces Teddy Bears for heart patients. Last month the company
produced 500 bears. Using job order costing, determine the product unit cost for one
bear based on the following costs: production facility utilities, $600; depreciation on
production equipment, $550; indirect materials, $450; direct materials, $1,300; indirect
labor, $900; direct labor, $2,500; sales commissions, $3,000; president’s salary, $5,000;
insurance on production facility, $700; advertising expense, $600; rent on production
facility, $5,000; rent on sales office, $3,000; and legal expense, $300. Round your
answer to two decimal places.
Identify and describe the five different responsibility centers, and provide one example
of each.
Identify the document needed to support each of the following activities in a
manufacturing organization:
Using the direct method, calculate the amount of cash payments for operating expenses.
Show your work
Use the following information to answer the question below.
The following transactions involving Cactus Wren Corporation occurred during the
year:
Apr. 1 Purchased 2,000 shares of its own preferred stock for $20, the current market
price. This is the first transaction involving its own stock engaged in by the company.
May 3 Sold 400 of the shares purchased on April 1 for $25 per share.
June 5 Retired 600 of the shares purchased on April 1. The original issue price was $10.
The par value of the stock is $5.
The entry to record the April 1 transaction is :