1) What is the usual order in which financial statements are prepared from the adjusted
trial balance? Why are they prepared in that order?
2) ______________ users of accounting information are not directly involved in
running the organization.
3) Explain where each of the following items should appear in the financial statements
of a corporation:
(1) The accounting department discovered that an entry was made last year to Prepaid
Insurance instead of to Insurance Expense. The after-tax effect of the charge to Prepaid
Insurance was $11,000.
(2) The company grants five of its employees the option to purchase 100 shares of its $5
par value common stock at its current market price of $20 per share anytime with the
next five years. None of the employees exercised the options in the current year.
4) Expenditures necessary and integral to the manufacture of finished products are
________________ costs.
5) You have evaluated three projects using the net present value (NPV) method. How
would you decide which one of the projects to select?
6) A ___________________________________ is calculated by relating total
estimated factory overhead to an allocation factor such as total estimated direct labor
cost, and is used to allocate factory overhead to specific jobs.
7) Compare the different depreciation methods (straight-line, units-of-production, and
double-declining-balance) with respect to the computation of depreciation per period
and the total depreciation over the life of the asset.
8) A company manufactures two products. Each unit of product X requires 10 machine
hours and each unit of product Y requires 4 machine hours. The company’s productive
capacity is limited to 180,000 machine hours. Each unit of product X sells for $15 and
has variable costs of $7. Each unit of product Y sells for $8 and has variable costs of $3.
If the company can sell all that it produces of both products, what should the sales mix
be?