1) Indicate how each event affects the elements of financial statements. Use the
following letters to record your answer in the box shown below each element. You do
not need to enter amounts.
On January 1, 2012, Washta Company issued a long-term note. The note required an
annual payment that included a reduction in the principal balance and the payment of
interest. Show how the issuance of the note affected the financial statements.
2) Indicate whether each of the following statements about a bank statement is true or
false.
1>In the bank’s accounting records, a customer’s checking account is a liability
2>A bank statement generally shows a running balance on the customer’s account, as
well as the balance at the beginning and end of the period
3>The bank statement is prepared from the bank customer’s point of view
4>Bank statement credit memos describe transactions that increase the bank customer’s
account balance
5>A bank statement debit memo increases the customer’s Cash balance
3) For Nohava Manufacturing Company, direct materials are a variable cost, and
insurance on the factory is a fixed cost. Based on this information, indicate whether
each of the following statements is true or false.
1>The direct materials cost per unit decreases as the number of units increases
2>Assume that, for 1,000 units, the total insurance cost is $800. For 2,000 units the
total insurance cost would be $1,600
3>Assume that, for 1,000 units, the total direct materials cost is $5,000. For 2,000 units,
the total direct materials cost would be $10,000
4>The amount of fixed cost per unit is fixed
5>Insurance cost per unit decreases as the number of units increases
4) How can contribution margin per unit be used to find the break-even point?
5) Company A has variable costs per unit of $20, fixed costs of $300,000, and a
break-even sales volume of 60,000 units.
What will be the break-even volume if variable costs increase by $2 per unit and fixed
costs decrease by $100,000?
6) Indicate whether each of the following statements is true or false.
1>Liquidity is the ability of a business to repay liabilities in the long run
2>The current ratio is a useful measure of liquidity
3>If a business does not plan to use any of its current assets to repay a debt, then that
debt is listed as long term even if it is due within a year
4>Operating cycles for most businesses are less than one year
5>The current ratio is computed by dividing current assets by net income for the current
period