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Assume in analyzing alternative proposals that Proposal F has a useful life of six years
and Proposal J has a useful life of nine years. What is one widely used method that
makes the proposals comparable?
a. Adjust the life of Proposal F to a time period that is equal to that of Proposal J and
add its estimated residual value to the cash inflow at the end of year nine.
b. Adjust the life of Proposal J to a time period that is equal to that of Proposal F and
add its estimated residual value to the cash inflow at the end of year six.
c. Adjust the life of Proposal F and Proposal J to a time period equal to the average of
six and nine years (7.5 years) and add its estimated residual value to the cash inflow at
the end of operating life.
d. Adjust the life of Proposal J to a time period that is equal to that of Proposal F and
deduct last three years cash inflow of Proposal J from its total cash inflow.
If sales total $5,000,000, fixed costs total $400,000, and variable costs are 2,750,000,
the contribution margin ratio is 45%.
a. True
b. False
The amount of increase or decrease in revenue that is expected from a particular course
of action as compared with an alternative is termed:
a. manufacturing margin.
b. differential margin.
c. deferred revenue.
d. differential revenue.
Earnings per common share is one factor that influences the decision to use debt
financing or equity financing.
a. True
b. False
For EFG Co., the transaction "purchase of store equipment with a note payable" would:
a. increase total assets.
b. decrease total assets.
c. have no effect on total assets.
d. decrease total liabilities.
If payment is due by the end of the month in which the sale is made, the invoice terms
are expressed as n/eom.
a. True
b. False
The due date of a 90day note dated July 15 is October 13. (Assume 360 days in a year)
a. True
b. False
A limited liability company combines attributes of a partnership and a corporation.
a. True
b. False
_____ liabilities may arise from past transactions if certain events occur in the future.
a. Current
b. Noncurrent
c. Longterm
d. Contingent
Merchandising businesses produce products rather than provide services to customers.
a. True
b. False
The financial statement that presents a summary of the revenues and expenses of a
business for a specific period of time, such as a month or an year, is called a(n):
a. prior period statement.
b. statement of retained earnings.
c. income statement.
d. balance sheet.
The current year's advertising costs are normally considered as product costs.
a. True
b. False
The percentage analysis of increases and decreases in corresponding items in
comparative financial statements is referred to as horizontal analysis.
a. True
b. False
The expected period of time that will elapse between the date of a capital investment
and the complete recovery in cash of the amount invested is called the cash payback
period.
a. True
b. False
Using vertical analysis of the income statement, a company's net income as a
percentage of net sales is 10%; therefore, the income tax expenses as a percentage of
net sales must be 90%.
a. True
b. False
For each of the following companies, identify whether it is a service, merchandising, or
manufacturing business.
A.Dillards
B.Time Warner Cable
C.Kohl's
D.Ford Motor Co.
E.Applebee's
F.Sylvania
G.Best Buy
H.GAP
I.H & R Block
If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the
bonds will sell at a premium.
a. True
b. False
Miscellaneous expenses are expenses that have an undetermined amount to be paid.
a. True
b. False
The stockholders' equity will increase as a result of the:
a. issue of common stock.
b. repayment of longterm debt.
c. buyback of common stock.
d. issue of longterm debt.
If paidin capital in excess of par—preferred stock is $80,000, preferred stock is
$500,000, paidin capital in excess of par—common stock is $50,000, common stock is
$1,000,000, and retained earnings is $230,000, the total stockholders' equity is
$1,860,000.
a. True
b. False
Expenses on the income statement are assets used up or services consumed in the
process of generating revenues.
a. True
b. False
The standard costs and actual costs for direct materials, direct labor, and factory
overhead for the manufacture of 2,500 units of product are as follows:
Standard Costs
Direct materials2,500 kilograms @ $8
Direct labor7,500 hours @ $12
Actual Costs
Direct materials2,600 kilograms @ $8.75
Direct labor7,400 hours @ $11.40
Factory overhead (100% capacity 10,000 hrs.):
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
The amount of the fixed factory overhead volume variance is:
a. $2,000 favorable.
b. $2,500 favorable.
c. $2,500 unfavorable.
d. $2,000 unfavorable.
Assuming that the standard fixed overhead rate is based on full capacity, the cost of
available but unused productive capacity is indicated by the:
a. factory overhead cost volume variance.
b. direct labor cost time variance.
c. direct labor cost rate variance.
d. factory overhead cost controllable variance.
The interest at 6%, on a 60day note for $5,000 is $300. (Assume 360 days in a year)
a. True
b. False
Division X's profit margin is 17%, and its investment turnover is 4.2. What is the rate of
return on investment for Division X?
a. 4.0%
b. 71.4%
c. 26.8%
d. 38.2%
If there was no beginning retained earnings, net income of $30,300, and ending retained
earnings of $8,000, how much were dividends?
a. $38,300
b. $22,300
c. $6,000
d. $8,000
Based on the following data for the current year, what is the days' sales in inventory
(rounded to the next whole day)?
Net sales on account during the year$1,204,000
Cost of merchandise sold during the year630,000
Accounts receivable, beginning of year75,000
Accounts receivable, end of year85,000
Inventory, beginning of year81,600
Inventory, end of year98,600
a. 58
b. 30
c. 48
d. 53
Which of the following of internal control deals with hiring, training, evaluation,
compensation, and promotion of employees?
a. Monitoring
b. Control environment
c. Risk assessment
d. Control procedures
The balance sheets at the end of each of the first two years of operations indicate the
following:
20172016
Total current assets$600,000$560,000
Total investments60,00040,000
Total property, plant, and equipment900,000700,000
Total current liabilities125,00080,000
Total longterm liabilities350,000250,000
Preferred 9% stock, $100 par100,000100,000
Common stock, $10 par600,000600,000
Paidin capital in excess of parcommon stock60,00060,000
Retained earnings325,000210,000
Based on the above information, if net income is $130,000 and interest expense is
$40,000 for 2017, what are the earnings per share on common stock for 2017 (round to
two decimal places)?
a. $2.17
b. $2.32
c. $2.68
d. $2.02
Which of the following should be deducted from net income in calculating net cash
flow from operating activities using the indirect method?
a. A decrease in inventory
b. A decrease in accounts payable
c. Preferred dividends declared and paid
d. A decrease in accounts receivable
