The production cost of a single unit of a manufactured product is determined by:
A. dividing total direct materials and direct labor for a production run by the number of
units made.
B. dividing total direct materials, direct labor, and manufacturing overhead for a
production run by the number of units made.
C. dividing total direct materials, direct labor, manufacturing overhead and selling
expenses for a production run by the number of units made.
D. dividing the selling price by the gross profit ratio.
The accounting concept or principle applied when the cost of short-term marketable
securities is adjusted to market value is:
A. objectivity.
B. matching revenue and expense.
C. original cost.
D. consistency.
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 is one of the two generally practiced methods for electing
corporate directors?
A. Democratic voting.
B. Representative voting.
C. Cumulative voting.
D. Census voting.
Which of the following lists the components of the master budget in correct
chronological order?
A. cash budget, budgeted income statement, budgeted balance sheet.
B. budgeted balance sheet, cash budget, budgeted income statement.
C. budgeted income statement, cash budget, budgeted balance sheet.
D. it doesn’t matter in which order they are prepared.
When the cost behavior pattern has been identified as fixed at a certain volume of
activity:
A. any change in volume will probably cause the cost to change.
B. it is appropriate to express the cost on a per unit of activity basis.
C. the total cost will not change even if the volume of activity changes substantially.
D. the total cost may change if the volume of activity changes substantially.
A firm has used LIFO for several years during which costs have trended higher. The
effect on 2017 net income using LIFO, relative to FIFO, will be:
A. net income for 2017 will be greater under LIFO than FIFO.
B. net income for 2017 will be less under LIFO than FIFO.
C. net income for 2017 will be the same under LIFO as under FIFO.
D. can’t tell from the information given.
Which of the following is a true statement regarding interest calculation methods?
A. Interest is calculated on either a straight-basis or a delayed-basis.
B. Interest is calculated on either a straight-basis or an undiscounted-basis.
C. If a borrower receives a loan on a discount-basis, the APR will be less than the
simple interest.
D. If a borrower receives a loan on a discount-basis, the APR will be more than the
simple interest rate.
The concept of operating leverage refers to which of the following?
A. Operating income changes proportionately more than revenues for any given change
in activity level.
B. Operating income changes proportionately less than revenues for any given change
in activity level.
C. Operating income changes proportionately more than income for any given change
in activity level.
D. Operating income changes proportionately less than income for any given change in
activity level.
The Defiance College sells season tickets for four home football games at a price of
$60. For the 2017 season, 5,000 season tickets were sold.
(a.) Write the journal entry or use the horizontal model to show the effect of the sale of
the season tickets.
(b.) Write the journal entry or use the horizontal model to show the effect of hosting a
home football game.
(c.) Where on the balance sheet would the account balance representing funds Received
for games not yet played be classified? Assume that The Defiance College follows the
same accounting and financial reporting procedures that are used in business.
___________ budgets are generally more expensive to maintain than single-period
budgets because more time and effort is required in their preparation.
A. Zero-based
B. Continuous
C. Discretionary
D. Production
Total manufacturing costs for the month on the statement of costs of goods
manufactured equals:
A. variable costs + fixed costs + mixed costs.
B. work in process inventory – finished goods inventory.
C. cost of goods sold – cost of goods manufactured.
D. cost of raw material used + direct labor cost incurred + manufacturing overhead
applied.
Which of the following is not usually associated with bonds?
A. Coupon rate.
B. Maturity value.
C. Face amount.
D. Maturity rate.
A budget that is prepared for several periods in the future, then revised several times
prior to the budget period is called a:
The current liability for Wages Payable (or Accrued Payroll) represents the:
A. gross pay earned by employees for which they have not yet been paid.
B. net pay earned by employees for which they have not yet been paid.
C. employer’s federal and state payroll tax obligation.
D. employer’s liability for various withholdings that taken out of the gross pay earned
by employees.
Which of the following statements is true regarding the payback period?
A. the time value of money is considered when calculating the payback.
B. the payback analysis is more accurate than the net present value analysis.
C. the payback period is less accurate than the accounting rate of return.
D. the time value of money is not considered when calculating the payback.
The allowance for uncollectible accounts is a(n):
A. asset.
B. contra current asset.
C. expense.
D. contra revenue.
The balance sheet caption for common stock is:
Common stock, no par value, 15,000,000 shares authorized, 9,200,000 shares issued,
8,900,000 shares outstanding $1,104,000,000
(a.) Calculate the average price at which the shares were issued.
(b.) If these shares had been assigned a stated value of $10 each, show how the above
caption would be different.
(c.) Calculate the total amount of cash that would be paid to stockholders if a cash
dividend of $1.50 per share were declared.
The notes to the financial statements:
A. should be referred to if more than a cursory, and perhaps misleading impression of a
firm’s financial position and its results of operations is to be achieved.
B. are not an integral part of the financial statements.
C. include a great deal of detailed information that is potentially useful only to a
financial analyst making a detailed appraisal of the future prospects of the entity.
D. are used by many entities to hide information from the reader of the financial
statements by including in the notes information that should be shown in detail on the
financial statements themselves.
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?
Under most circumstances, in order to recognize revenue:
A. cash must have been received.
B. the entity must expect to receive cash in the future.
C. the entity must have paid for all expenses incurred in generating the revenue.
D. the revenue must be realized or realizable, and earned.
A sunk cost is a cost that:
A. has been incurred and cannot be eliminated.
B. is never relevant in decision-making.
C. is never a differential cost.
D. all of the above.
Revenue may be recognized:
A. from the sale of a company’s own common stock.
B. if a company trades inventory at its usual selling price for newspaper advertising.
C. if management believes the market value of land held for future development has
increased during the year.
D. in 2016 from the sale of subscriptions of a magazine to be published in 2017.
The balance sheet caption for common stock is:
Common stock, $10 par value, 14,000,000 shares authorized, 11,400,000 shares issued,
11,000,000 shares outstanding.
(a.) Calculate the dollar amount that will be presented opposite of this caption.
(b.) Calculate the total amount of a cash dividend of $1.00 per share.
(c.) What accounts for the difference between issued shares and outstanding shares?
It is not unusual for a company to use different depreciation methods for book and tax
purposes. When this happens, the firm usually:
A. uses an accelerated depreciation method for book purposes.
B. uses an accelerated depreciation method for tax purposes.
C. is trying to maximize its taxable income.
D. is trying to minimize its book income.
Accounts receivable are reported at:
A. net realizable value.
B. historical cost.
C. weighted average cost.
D. market value.
In order to achieve higher quality cost information from the assignment of overhead
costs to products manufactured, the use of a predetermined overhead rate is being
replaced by:
A. absorption costing.
B. job order costing.
C. activity-based costing.
D. process costing.
The key to analyzing a sell as is or process further decision is to determine that:
A. opportunity costs exceed sunk costs.
B. incremental revenues exceed incremental costs.
C. differential costs do not exist.
D. all allocated costs are included in the decision.
A management decision that would have a long term influence on the operating
leverage of a firm would be:
A. increasing the advertising budget.
B. substituting robots for hourly paid production workers.
C. increasing prices in proportion to raw material cost increases.
D. having a season-end sale of seasonal products.
Presented below are the comparative balance sheets of Big Apple, Inc., at December 31,
2017, and 2016. Sales for the year ended December 31, 2017, totaled $1,780,000.
Required:
A) Calculate ROI for 2017.
B) Calculate ROE for 2017.
C) Calculate working capital at December 31, 2017.
D) Calculate the current ratio at December 31, 2017.
E) Calculate the acid-test ratio at December 31, 2017.
Retained earnings represents:
A. cash that is available for dividends.
B. the total net income of the firm since its beginning.
C. cumulative net income of the firm since its beginning that has not been distributed to
its stockholders in the form of dividends.
D. net income plus gains (or minus losses) on treasury stock transactions.
The authoritative financial accounting standards-setting body in the United States is
presently the:
A. Securities and Exchange Commission (SEC)
B. International Accounting Standards Board (IASB)
C. Public Company Accounting Oversights Board (PCAOB)
D. Financial Accounting Standards Board (FASB)
E. Accounting Principles Board (APB)
Which of the following is not a limitation of financial statements?
A. Financial statements report quantitative economic information; they do not reflect
qualitative economic variables.
B. The cost principle requires assets to be recorded at their original cost; thus, the
balance sheet does not generally reflect the fair values of most assets and liabilities.
C. Net income from the income statement is added to the Retained Earnings account
balance in the balance sheet.
D. Estimates are used in many areas of accounting; when the estimate is made, about
the only fact known is that the estimate is probably not equal to the “true” amount.
The earnings per share of common stock calculation:
A. is made by dividing net income by the number of shares of common stock
outstanding at the end of the year.
B. is complicated by the declaration of cash dividends during the year.
C. includes gains or losses from treasury stock transactions.
D. is complicated by the presence of preferred stock in the capital structure.
Significant accounting policies are described in the notes to the financial statements
because:
A. there isn’t enough space for them to be included in the captions of the financial
statements.
B. if the accrual basis of accounting is used, “matching” of revenues and expenses may
not take place.
C. the reader must be aware of which of the alternative generally accepted accounting
practices have been used.
D. none of the above.