The acceptable proposals are ranked in order of net present value, payback period, or
rate of return in capital investment decisions.
The valuation issue deals with how the components of a transaction should be
categorized.
Free cash flow is a good measure of a company’s ability to finance long-term assets.
As long as an investment can be sold within a short period of time, it must be classified
as a current asset.
Both the retail method and the gross profit method are useful in estimating the
inventory cost.
The direct labor efficiency variance is the difference between standard hours allowed
and actual hours worked for good units produced, multiplied by the standard labor rate.
The just-in-time operating environment typically is characterized by a large number of
non-value-adding activities.
Creditors’ equities is another term for liabilities.
Capital investment analysis is beneficial only for large corporations.
For details about the financial histories of companies, one could consult publications of
Moody’s and Standard & Poor’s.
An increase or decrease in the fair value of a company’s total trading portfolio is
included in net income in the period in which the increase or decrease occurs.
Both activity-based management (ABM) and just-in-time (JIT) seek to eliminate or
reduce nonvalue-adding activities and to improve the allocation of resources.
If a 20-year bond pays interest of 8 percent semiannually, the present value of the bond
is calculated based upon 4 percent and 20 periods.
The cost of goods manufactured budget is an operating budget.
Liquidity is the ability to earn a satisfactory net income.
The normal balance of an account is the side (debit or credit) used to decrease the
account.
In general, there are ________ types of responsibility centers.
A.two
B.five
C.ten
D.three
Which of the following depreciation methods is the most logical for a machine that
produces discrete (i.e., separate) units?
A.Double-declining-balance
B.Straight-line
C.Group
D.Production
The following users of accounting information have an indirect financial interest in the
business except
A.regulatory agency.
B.creditor.
C.taxing authority.
D.labor union.
The fixed costs that are traceable to the segments are called:
A.common fixed costs.
B.unavoidable fixed costs.
C.direct fixed costs.
D.sunk costs.
The presentation of merchandise inventory on the balance sheet of a merchandising
company most nearly resembles the presentation of __________ inventory on the
balance sheet of a manufacturing company.
A.materials
B.finished goods
C.manufacturing supplies
D.work in process
Which pair of accounts follows the rules of debit and credit in the same manner?
A.Service Revenue and Equipment
B.Land and Withdrawals
C.Notes Payable and Buildings
D.Wages Expense and Service Revenue
Discuss a worksheet by answering the following questions:
a. Why is the preparation of a worksheet not required?
b. When a worksheet is used, does a trial balance have to be prepared? Why or why
not?
c. If the Income Statement and Balance Sheet columns balance, is this proof that the
financial statements are correct? Why or why not?
The process of crossfooting on the work sheet results in the
A.Income Statement columns.
B.Trial Balance columns.
C.Adjusted Trial Balance columns.
D.Adjustments columns.
Clark International produces designer watches. Each watch requires materials worth
$14.50 and three direct labor hours. The company pays its production supervisor a
salary of $500 per week. Hourly wage rate at Clark is $5. If 25 watches are produced in
a week, what is the fixed cost per watch?
A.$14.50
B.$5.00
C.$20.00
D.$34.50
Cash and equivalents can consist of all of the following except
A.deposits in checking accounts
B.IOUs from customers
C.certificates of deposit (CDs)
D.U.S. Treasury notes
Use the following performance report for a cost center of the Dry Cat Food Division for
the month ended December 31 to answer the questions below.
Using the information provided for Dry Cat Food division, what is the direct labor
variance between the actual results and the flexible budget?
A.$10 (U)
B.$10 (F)
C.$60 (U)
D.$60 (F)
Use this information to answer the following question.
Panadora Company has the following information for the pay period of January 1-15,
2014. Payment occurs on January 20.
Payroll Taxes and Benefits Expense would be recorded for
A.$1,984.
B.$2,248.
C.$4,432.
D.$8,032.
Lincoln Company engaged in this transaction:
As required by the landlord, prepaid one year’s rent on its leased warehouse.
Indicate which section, if any, the above transaction would appear in, or relate to, on a
statement of cash flows.
A.Financing activities section.
B.Does not represent a cash flow.
C.Investing activities section.
D.Operating activities section.
The portion of a group purchase of land and building for $1,302,000 allocated to land,
when the land is appraised at $340,000 and the building on the land is appraised at
$1,020,000, is
A.$996,500.
B.$325,500.
C.$345,500.
D.$976,500.
A manufacturing company’s human resource department is most likely a
A.cost center.
B.discretionary cost center.
C.revenue center.
D.profit center.
Which of the following is the formula used to compute product unit cost?
A.(Direct Materials + Direct Labor) / Number of Units Produced
B.(Direct Materials + Direct Labor + Overhead) / Number of Units Produced
C.(Direct Labor + Overhead) / Number of Units Produced
D.(Indirect Materials + Indirect Labor + Overhead) / Number of Units Produced
If an adjusting entry is not made at the end of an accounting period to remove the
earned revenue from the Unearned Revenue account,
A.assets would be understated.
B.owner’s equity would be overstated.
C.liabilities would be understated.
D.liabilities would be overstated.
The owner’s Capital, Withdrawals, and Income Summary accounts for Laurel Repair
Company for the accounting period are presented below in T account form after the
recording and posting of closing entries:
The amount of withdrawals for the period is
A.$50.
B.$200.
C.$400.
D.$500.
An understatement of year 1’s beginning inventory will
A.cause year 2’s gross margin to be overstated.
B.cause year 1’s cost of goods sold to be understated.
C.cause year 2’s gross margin to be understated.
D.have no effect on year 1’s gross margin.
If a company’s free cash flow is $90,000, net cash flows from operating activities total
$220,000, purchases of plant assets total $100,000, and sales of plant assets total zero,
what amount is committed to dividends?
A.$20,000
B.$30,000
C.$60,000
D.Impossible to determine from the facts given.
On December 9, A issues a 60-day promissory note to B. The December 31 adjusting
entry for B is
A.Interest Payable ‘“ Debit; Cash ‘“ Credit
B.Interest Receivable ‘“ Debit; Interest Income ‘“ Credit
C.Interest Expense ‘“ Debit; Cash ‘“ Credit
D.Interest Expense ‘“ Debit; Interest Payable ‘“ Credit
Which of the following represents the proper order of financial statement preparation?
A.Statement of cash flows, balance sheet, income statement, statement of owner’s
equity
B.Statement of owner’s equity, income statement, statement of cash flows, balance sheet
C.Balance sheet, statement of cash flows, statement of owner’s equity, income statement
D.Income statement, statement of owner’s equity, balance sheet, statement of cash flows
Which of the following does not result in the dissolution of a partnership?
A.Death of a partner
B.Admission of a new partner
C.Withdrawal of a partner
D.Sale of partnership assets
When fixed mortgage payments are made, in what way does the interest portion change
each month, and why?
Use the following adjusted trial balance to answer the question below.
The entry to close the expense accounts is
Assume that a company received $1,200 in advance for one year membership fee in the
fitness center. The entry that would be made to record the recognition of revenue at the
end of first month is
What two broad purposes do closing entries serve?
If Johnson Inc. sells 400 widgets at $180 per widget and has variable costs of $80 per
widget and fixed costs of $30,000, what is the projected profit?
What purpose is served by a factoring arrangement? What does it mean to factor
accounts receivable with recourse?