1) The clerk who has access to the cash in the cash register should not have access to
the cash register tape or file.
2) A budget can be an effective means of communicating management’s plans to the
employees of a business.
3) A net loss occurs when revenues exceed expenses.
4) The process cost summary presents calculations of the cost of units completed during
the reporting period, but does not present any information about the ending goods in
process inventory.
5) To determine the slope of the variable cost from a scatter diagram, divide the change
in volume by the change in cost.
6) The responsibility for coordinating the preparation of a master budget should be
assigned to the Chief Executive Officer.
7) Closing entries are necessary so that owner’s capital will begin each period with a
zero balance.
8) Obligations not due within one year or the company’s operating cycle, whichever is
longer, are reported as current liabilities.
9) In a process cost accounting system, the purchase of raw materials is debited to the
Raw Materials Inventory.
10) The percent of sales method for estimating bad debts assumes that a given percent
of a company’s credit sales for the period are uncollectible.
11) An income statement reports on investing and financing activities.
12) When a company constructs a building, the cost of the building includes materials
and labor, design fees, building permits, and insurance during construction.
13) Evaluation of the performance of managers of profit centers assumes that the
managers can control or influence both costs and revenue generation.
14) Horizontal analysis is the comparison of a company’s financial condition and
performance to a base amount.
15) The building blocks of financial statement analysis include (1) liquidity, (2)
salability, (3) solvency, and (4) profitability.
16) A 10-year bond issue with a $100,000 par value, 8% annual contract rate, with
interest payable semiannually means that the issuer must repay $100,000 at the end of
10 years and make 20 semiannual interest payments of $4,000 each.
17) A job order cost accounting system would be appropriate for a manufacturer of
automobile tires.
18) Regulators often have legal authority over certain activities of organizations.
19) A purchase of land in exchange for shares of stock is disclosed on the statement of
cash flows or in a note to the statement.
20) A company reported net sales for Year 1 of $285,000 and $575,000 for Year 2. The
year-end balances of accounts receivable were $49,000 for Year 1 and $85,000 for Year
2. Calculate the days’ sales uncollected at the end of each year for this company and
describe any changes in the apparent liquidity of the company’s receivables.
21) ________________________ refers to products that a company owns and intends
to sell.
22) Gates Company reports the following information regarding the production on one
of its products for the month. Compute the direct materials cost variance, the direct
materials price variance, the direct materials quantity variance and identify each as
either favorable or unfavorable.
23) Rockport Company reports the following in millions: net sales of $25,355 for 2011
and $22,340 for 2010; end-of-year total assets of $15,875 for 2011 and $13,860 for
2010. Compute its total asset turnover for 2011 and assess its level if competitors
average a total asset turnover of 2.0 times.
24) A seller usually prepares a ____________________ to confirm a buyer’s return or
allowance, and informs the buyer of the seller’s credit to the buyer’s Account Receivable
on the seller’s books.
25) When using the high-low method for estimating cost behavior, the slope, or variable
cost per sales dollar, is calculated by __________________________________.
26) Revising estimates of the useful life or salvage value of a plant asset is referred to
as a ___________________________________________.
27) ABC Co. sold $80,000 of accounts receivable to First Bank and incurred a 2%
factoring fee. Prepare the journal entry for ABC Co. to record the sale.