A stock option is also called a stock dividend.
A work sheet is a substitute for the set of financial statements.
A buyer records the costs of shipping goods in a Delivery Expense, or
transportation-out account when the buyer is responsible for these costs.
Long-term investments are usually held as an investment of cash for use in current
operations.
From the perspective of a depositor, a savings account is a liability with interest.
Budgeting is an informal plan for future business activities.
The trial balance is a list of all accounts and their balances at a point in time taken from
the ledger.
In some circumstances, a process cost accounting system can classify wages paid to
maintenance workers as direct labor costs instead of factory overhead.
The process of preparing departmental income statements starts with allocating service
departments.
Dividend yield is computed by dividing annual cash dividends per share by the market
value per share.
A U. S. Company’s credit sale to an international customer to be paid in a foreign
currency requires using the same exchange rate for the date of sale and the cash
payment date.
Proper internal control means that responsibility for a task is clearly established and
assigned to one person.
A good financial report does not link interpretations and conclusions of analysis with
the underlying information.
Two investments with exactly the same payback periods are always equally valuable to
an investor.
Liquidity refers to a company’s ability to pay its near-term obligations.
The principles of internal control include: establish responsibilities, maintain adequate
records, insure assets, separate recordkeeping from custody of assets, and perform
regular and independent reviews.
The units-of-production method of depreciation charges a varying amount of expense
for each period of an asset’s useful life depending on its usage.
Under both the periodic and perpetual inventory systems, the temporary account
Purchases Returns and Allowances is used to accumulate the cost of all returns and
allowances for a period.
Managerial accounting is an activity that provides financial and nonfinancial
information to an organization’s managers and other internal decision makers.
Source documents provide evidence of business transactions and are the basis for
accounting entries.
Debt securities are recorded at cost when purchased.
The Orlando Magic received $6 million cash in advance season ticket sales. Prior to the
beginning of the basketball season, these sales are recorded as a credit to unearned
season ticket revenue.
A post-closing trial balance is a list of permanent accounts and their balances from the
ledger after all closing entries are journalized and posted.
Process cost accounting systems are commonly used by companies that produce a large
volume of standardized units on a continuous basis.
Ratios can be expressed as a percent, rate, or proportion.
The voucher register is a journal that is used to record approved vouchers.
A rolling budget is a specific budget application relevant only to a merchandising
company.
If Department G uses $53,000 of direct labor and Department H uses $21,000 of direct
labor, the following journal entry would be recorded by the process cost accounting
system:
Any material amount of under-or overapplied factory overhead must always be closed
to Cost of Goods Sold at the end of an accounting period.
The reasoning behind the retail inventory method is that if we can get a good estimate
of the cost-to-retail ratio, we can multiply ending inventory at retail by this ratio to
estimate ending inventory at cost.
Horizontal analysis is used to reveal changes in the relative importance of each
financial statement item.
Each employee records the number of withholding allowances claimed on form W-4,
which is the withholding allowance certificate that is filed with the employer.
Newly completed units are combined with beginning finished goods inventory to make
up total ending goods in process inventory.
Book value per common share is computed by:
A.Multiplying the number of common shares outstanding times the market price per
common share.
B.Dividing total assets by the number of shares outstanding.
C.Dividing stockholders’ equity applicable to common shares by the number of
common shares outstanding.
D.Multiplying the number of common shares outstanding by par value per share.
E.Dividing the number of common shares outstanding by stockholders’ equity
applicable to common shares.
The Goods in Process Inventory account for the AB Corp. follows:
The cost of units transferred to finished goods is:
A.$ 97,000.
B.$105,900.
C.$ 88,100.
D.$ 95,200.
E.$ 92,500
Employers’ responsibilities for payroll include:
A.Providing each employee with an annual report of his or her wages subject to FICA
and federal income taxes along with the amount of these taxes withheld.
B.Filing Form 941, the Employer’s Quarterly Federal Tax Return.
C.Filing Form 940, the Annual Federal Unemployment Tax Return.
D.Individual earnings records for each employee.
E.All of these.
Bonds that mature at different dates with the result that the entire principal amount is
repaid gradually over a number of periods are known as:
A.Registered bonds.
B.Bearer bonds.
C.Callable bonds.
D.Sinking fund bonds.
E.Serial bonds.
Match the following terms with the appropriate definition.
a) Costs that have already been incurred and cannot be avoided or changed.
b) Costs that are incurred for the benefit of more than one cost object.
c) Expenditures necessary and integral to finished products.
d)Expenditures directly associated with the manufacture of finished products; include
direct materials and direct labor.
e) Costs that do not change in total with changes in the volume of activity.
f)The potential benefit lost by choosing a specific action from two or more alternatives.
g) Costs that flow directly to the current income statement as expenses.
h)Expenditures incurred in the process of converting raw materials to finished products;
include direct labor and factory overhead.
i)Manufacturing expenditures that cannot be separately or readily traced to finished
goods.
j)Costs that change in proportion to changes in volume of activity.
Rules adopted by the accounting profession as guides in measuring, recording, and
reporting the financial condition and activities of a business:
A.Are comprised of both general and specific principles.
B.Are known as generally accepted accounting principles.
C.Are abbreviated as GAAP.
D.Arise from both long-used practices and from rulings of authoritative groups.
E.All of these.
If it is a material amount, overapplied or underapplied overhead should be disposed of
by allocating it to:
A.Cost of goods sold and finished goods.
B.Finished goods and goods in process.
C.Goods in process, finished goods, and cost of goods sold.
D.Goods in process
E.Raw materials, goods in process, and finished goods.
Assume that sales are predicted to be $3,750, the expected contribution margin is
$1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:
A.$1,750.
B.$2,500.
C.$4,000.
D.$4,250.
E.$4,375.
Use the following information to compute the cost of goods manufactured:
A.$36,650.
B.$30,950.
C.$30,650.
D.$30,350.
E.$31,650.
Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed
costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable
costs for 10,000 units are:
A.$125,000 fixed and $102,500 variable.
B.$125,000 fixed and $123,000 variable.
C.$102,500 fixed and $150,000 variable.
D.$150,000 fixed and $123,000 variable.
E.$150,000 fixed and $102,500 variable.
An error in the period-end inventory causes an offsetting error in the next period and
therefore:
A.Managers can ignore the error.
B.It is sometimes said to be self-correcting.
C.It affects only income statement accounts.
D.If affects only balance sheet accounts.
E.Is immaterial for managerial decision making.
On January 1 a company purchased a five-year insurance policy for $1,800 with
coverage starting immediately. If the purchase was recorded in the Prepaid Insurance
account, and the company records adjustments only at year-end, the adjusting entry at
the end of the first year is:
A.Debit Prepaid Insurance, $1,800; credit Cash, $1,800.
B.Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.
C.Debit Prepaid Insurance, $360; credit Insurance Expense, $360.
D.Debit Insurance Expense, $360; credit Prepaid Insurance, $360.
E.Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440.
A company manufactures and sells a product for $120 per unit. The company’s fixed
costs are $68,760, and its variable costs are $90 per unit. The company’s break-even
point in units is:
A.2,292.
B.573.
C.764.
D.327.
E.840.
Baker Corporation has two operating departments, Machining and Assembly, and an
office. The three categories of office expenses are allocated to the two departments
using different allocation bases. The following information is available for the current
period:
The amount of the total office expenses that should be allocated to Assembly for the
current period is:
A.$ 35,750.
B.$ 45,000.
C.$ 54,250.
D.$ 90,000.
E.$600,000.
A company made no adjusting entry for accrued and unpaid employee salaries of
$9,000 on December 31. The entry to record the adjusting entry should have been:
A.debit Salary Expense, $9,000; credit Cash, $9,000
B.debit Salary Expense, $9,000; credit Fees Earned, $9,000
C.debit Salary Expense, $9,000; credit Prepaid Salary, $9,000
D.debit Salary Expense, $9,000; credit Salaries Payable, $9,000
E.debit Salaries Payable, $9,000; credit Salary Expense
Benson Company had cash sales of $94,275, credit sales of $83,450, sales returns and
allowances of $1,700, and sales discounts of $3,475. Benson’s net sales for this period
equal:
A.$94,275.
B.$172,550.
C.$174,250.
D.$176,025.
E.$177,725.
The Sun Company completed the following sales and cash receipts transactions during
the first week of December. The Sun Company uses the periodic inventory system.
a. Use the sales journal and the cash receipts journal to record these transactions.
b. Prepare a schedule of accounts receivable. There were no accounts receivable at
December 1.
If a company paid $38,000 of its accounts payable in cash, what was the effect on the
assets, liabilities, and equity?
A.Assets would decrease $38,000, liabilities would decrease $38,000, and equity would
decrease $38,000.
B.Assets would decrease $38,000, liabilities would decrease $38,000, and equity would
increase $38,000.
C.Assets would decrease $38,000, liabilities would decrease $38,000, and equity would
not change.
D.There would be no effect on the accounts because the accounts are affected by the
same amount.
E.None of these.
A managerial accounting report that presents predicted amounts of the company’s
revenues and expenses for the budget period is called a:
A.Budgeted income statement.
B.Budgeted balance sheet.
C.Master plan.
D.Rolling income statement.
E.Continuous income statement.
The process of analyzing alternative investments and deciding which assets to acquire
or sell is known as:
A.Planning and control.
B.Capital budgeting.
C.Variance analysis.
D.Master budgeting.
E.Managerial accounting.
Under the alternative method for accounting for unearned revenue, which of the
following pairs of journal entry formats is correct?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
A check involves three parties:
A.The writer, the cashier, and the bank.
B.The maker, the payee, and the bank.
C.The maker, the manager, and the payee.
D.The bookkeeper, the payee, and the bank.
E.The signer, the cashier, and the company.
Which of the following characteristics does not usually apply to process manufacturing
systems?
A.Each unit of product is separately identifiable.
B.Partially completed products are transferred between processes.
C.Different managers are responsible for different processes.
D.The output of all processes except the final process is an input to the next process.
E.All of these are characteristics of process manufacturing systems.
The debt ratio is used:
A.To measure the relation of equity to expenses.
B.To reflect the risk associated with a company’s debts.
C.Only by banks when a business applies for a loan.
D.To determine how much debt a firm should pay off.
E.All of these.
Standard costs are:
A.Actual costs incurred to produce a specific product or perform a service.
B.Preset costs for delivering a product or service under normal conditions.
C.Established by the IMA.
D.Rarely achieved.
E.Uniform among companies within an industry.
On June 30, 2009, Apricot Co. paid $7,500 cash for management services to be
performed over a two-year period. Apricot follows a policy of recording all prepaid
expenses to asset accounts at the time of cash payment.
The adjusting entry on December 31, 2009 for Apricot would include:
A.A debit to an expense for $5,625.
B.A debit to a prepaid expense for $5,625.
C.A debit to an expense for $1,875.
D.A debit to a prepaid expense for $1,875.
E.A credit to a liability for $1,875.
During a period of steadily rising costs, the inventory valuation method that yields the
lowest reported net income is:
A.Specific identification method.
B.Average cost method.
C.Weighted-average method.
D.FIFO method.
E.LIFO method.
When a company uses special journals, the general journal is used for selected
transactions and events including:
A.Recording adjusting transactions.
B.Posting transactions to special journals.
C.Accumulating debits and credits.
D.Collecting detailed listings of amounts.
E.Recording cash receipts.
Penn Company uses a job order cost accounting system. In the last month, the system
accumulated labor time tickets totaling $24,600 for direct labor and $4,300 for indirect
labor. These costs were accumulated in Factory Payroll as they were paid. Which entry
should Penn make to assign the Factory Payroll?
A.
B.
C.
D.
E.
What is a lease? Explain the difference between an operating lease and a capital lease.
Identify the two main groups involved in establishing generally accepted accounting
principles.
All cash transactions eventually affect noncash ___________ accounts.
What is a manufacturing budget?
______________________ is the total compensation an employee earns including
wages, salaries, commissions, bonuses, and any compensation earned before deductions
such as taxes.
Explain how equity securities having significant influence are accounted for and
reported in the financial statements. Include a discussion of the criterion for these
securities in terms of an investee’s voting stock.
The principle that requires that a business be accounted for separately from its owners
is the __________________ principle.
Explain how accounts are used in recording information about transactions.
There are many differences between financial and managerial accounting. Identify and
explain at least three of these differences.
What is the purpose of a departmental accounting system?