Which of the following is one of the two generally practiced methods for electing
corporate directors?
A. Democratic voting.
B. Representative voting.
C. Cumulative voting.
D. Census voting.
A higher P/E ratio means that:
A. the stock is more reasonably priced.
B. the stock is relatively expensive.
C. investors are wary of the stock.
D. earnings are expected to decrease.
After the results of a present value analysis has been obtained for a capital investment
opportunity, overriding _______________ should also be considered before a final
decision is made.
A. interest rates
B. relevant costs
C. payback calculations
D. qualitative factors
The formula for expressing the total of a fixed, variable, or mixed cost at any level of
activity is:
A. total cost = fixed cost + (variable rate * volume of activity).
B. total cost = fixed cost * volume of activity.
C. total cost = fixed cost * variable rate.
D. total cost = fixed cost – variable cost.
Great Bay Co. manufactures cordless telephones. During 2016, total costs associated
with manufacturing 18,500 of the AB-2000 model (introduced this year) were as
follows:
(a.) Calculate the cost per phone under both direct (or variable) costing and absorption
costing.
(b.) If 2,800 of these phones were in finished goods inventory at the end of 2016, by how
much and in what direction (higher or lower) would 2016 operating income be different
under direct (or variable) costing than under absorption costing?
(c.) Express the phone cost in a cost formula. What does this formula suggest the total cost
of making an additional 1,600 phones would be?
The concept of a standard used for planning and control purposes is most like a:
A. measure of ideal performance.
B. unit budget.
C. measure of maximum efficiency.
D. measure of historical performance.
The inventory turnover calculation:
A. is wrong unless cost of goods sold is used in the numerator.
B. is wrong unless sales is used in the numerator.
C. is an alternative way of expressing the number of days’ sales in inventory.
D. requires knowledge of the inventory cost flow assumption being used.
Business segment information is included in the notes to financial statements because:
A. the amounts shown on the financial statements of most companies are just too large
to comprehend.
B. current and potential investors can make more informed judgments about the
company.
C. net income from various geographic areas can be clearly determined.
D. by combining these amounts for each segment, ROI and cash flows for the company
as a whole can be determined.
The present value of $6,000 to be received every year for 9 years, at 10%, is:
A. $14,147.60
B. $24,546.00
C. $34,554.00
D. $54,000.00
A cost that will differ according to the alternative activity being considered is called
a(n):
A. sunk cost.
B. allocated cost.
C. differential cost.
D. opportunity cost.
Which of the following is the proper paragraph sequence for an independent Auditor’s
Report?
A. Scope, introduction, opinion.
B. Introduction, scope, opinion.
C. Opinion, scope, summary.
D. Introduction, opinion, scope.
Which of the following statements is true about capital investment decisions:
A. the project with the highest net present value will always be selected.
B. the project with the highest internal rate of return will always be selected.
C. the project with the highest net present value may not always be selected.
D. the project with the highest accounting rate of return will always be selected.
Which of the following is not a limitation of financial statements?
A. It is possible that two firms operating in the same industry may follow different
accounting methods for the exact same transaction.
B. Full disclosure requires that the financial statements and notes include all necessary
information to prevent a reasonably astute user of the financial statements from being
misled.
C. Financial statements are not adjusted to show the impact of inflation.
D. Financial statements do not reflect opportunity cost, which is an economic concept
relating to income forgone because an opportunity to earn income was not pursued.
Which of the following is the correct balance sheet presentation for current assets?
A. Cash, inventories, account receivables, prepaid expenses.
B. Cash equivalents, cash, other current assets, accounts receivable.
C. Accounts receivable, inventories, prepaid expenses, other current assets.
D. Marketable securities, cash, notes receivable, prepaid expenses.
Cost accounting is a subset of:
A. financial accounting.
B. process cost accounting.
C. job order cost accounting.
D. managerial accounting.
The principal reason for reconciling the cash balance per books with the balance shown
on the bank statement is to:
A. determine the amount of cash in the account actually available to the entity.
B. satisfy generally accepted accounting principles.
C. verify the amount of petty cash on hand.
D. determine whether or not the entity has issued an NSF check.
Which of the following variances is not determined during an overhead variance
analysis?
A. Volume variance.
B. Budget variance.
C. Spending variance.
D. Price variance.
Goodwill results from the purchase of one firm by another for a price that is greater
than the fair value of the net assets acquired. On January 1, 2017, Blue Grass Co.
purchased Red Grass Co. for $2,400,000 when the net assets were valued at $2,000,000.
Goodwill will be tested annually for impairment. Assume that after the first year there
was an impairment of $30,000.
Required:
(a.) Compute the value of goodwill to be recorded on the books of Blue Grass Company
upon the purchase of the business.
(b.) What is impairment and how is the first year’s impairment recorded in the books?
The following production costs are provided for AudioPro Co., a manufacturer of high
quality headphones.
Manufacturing Costs:
It has been determined that the headphones could be purchased from Integrated Labs at a
cost of $135 plus $8 shipping costs. Considering the offer from Integrated Labs, show
whether AudioPro should make or buy the product.
(a.) Assume 40% of fixed overhead allocated to making headphones relates to a
production manager who would not be retained if the headphones were not produced by
AudioPro.
(b.) How would your analysis change if AudioPro could use capacity resources for
alternative activities that would produce a contribution of $35 per unit?
(c.) What is your understanding of the term outsourcing? Briefly explain.
The total budget variance is caused by two factors:
A. quantity and price.
B. time and materials.
C. direct and indirect relationships.
D. fixed and variable cost behavior.
An example of a cost that is controllable in the short run is:
A. property taxes.
B. machine depreciation.
C. supervisors salaries.
D. building lease.
The Modified Accelerated Cost Recovery System (MACRS) specifies which of the
following depreciation methods for land?
A. 150% declining-balance.
B. Double-declining-balance.
C. Straight line.
D. Land is not a depreciable asset.
The impact of changing price levels on amounts reported in financial statements is:
A. reported as a separate item on the balance sheet.
B. accomplished by reporting assets at their replacement cost.
C. required to be described in the notes to the financial statements.
D. encouraged, but not required to be described in the notes to the financial statements.
A firm’s current products have sales of $100,000 and an average contribution margin
ratio of 40%. If the firm add a new product with sales of $40,000 and variable costs of
$20,000, the firm’s new average contribution margin ration will be:
A. 37.8%.
B. 42.9%.
C. 45.0%.
D. 48.7%.
A newspaper ad submitted and published this week, with the agreement to get paid for
it next week would, in the newspaper’s records:
A. increase assets and increase revenues.
B. increase assets and decrease liabilities.
C. increase assets and increase expenses.
D. have no effect on total assets.
Most entities satisfy the accounting criteria for recognizing revenue when:
A. an order is received from a customer.
B. cash is received from a customer.
C. an unearned revenue account is credited.
D. a product is delivered or a service is provided.
Transactions are summarized in:
A. The notes for the financial statements.
B. The independent auditor’s opinion letter.
C. The entity’s accounts.
D. None of the above.
At December 31, 2016, the end of the first year of operations at Xavion Inc., the firm’s
accountant neglected to accrue payroll taxes of $55,400 that were applicable to payrolls
for the year then ended.
(a.) Write the journal entry or use the horizontal model to show the effect of the accrual
that should have been made as of December 31, 2016.
(b.) Determine the income statement and balance sheet effects of not accruing 2016
payroll taxes at December 31, 2016 (assuming that the payroll taxes were not accrued,
as originally stated).
(c.) Assume that when the payroll taxes were paid in January 2017, the payroll tax
expense account was charged. Assume that at December 31, 2017, the accountant again
neglected to accrue the payroll tax liability, which was $40,800 at that date. Determine
the income statement and balance sheet effects of not accruing 2017 payroll taxes at
December 31, 2017.
Which of the following items would be included in the operating expense budget?
A. sales commissions.
B. raw material purchases.
C. cash receipts.
D. cost of goods sold.
Return on equity:
A. will be the same as return on investment.
B. relates dividends and turnover.
C. relates dividends and stockholders’ equity.
D. relates net income and stockholders’ equity.
Which of the following is not sometimes associated with bonds?
A. Debenture.
B. Callable.
C. Cumulative.
D. Convertible.