Which of the following statements isTRUE about successful efforts accounting?
A.It is a depreciation method
B.All costs are recorded as assets and then depleted over the resource’s useful life.
C.The cost of a dry well would be written off immediately as a loss.
D.The cost of successful exploration is recorded as an asset and is not written off.
Potential vacation pay should be accounted for as a commitment.
Assume revenues are received in cash and expenses, except for depreciation, are paid in
cash. Based on this assumption, which of the following statements isTRUE?
A.Net cash flows for a period are equal to net income minus depreciation expense.
B.Net cash flows for a period are equal to net income.
C.Net cash flows for a period are equal to net income plus depreciation expense.
D.Net cash flows for a period are equal to net income plus income tax expense.
Inventoriable cost is a synonym of product cost.
The value chain analysis allows a company to focus on its core competencies.
The purchase of equipment is an example of an investing activity.
Unearned revenue arises from the acceptance of payment in advance for a service to be
performed.
Property taxes and equipment depreciation are examples of indirect manufacturing
costs.
Dividend yield is the most important ratio associated with stockholders’ equity and is a
common measure of management’s performance.
A partnership is relatively easy to form, but is very complex to dissolve.
Profitability means having enough cash on hand to pay bills when they become due.
Unit fixed costs will be the same regardless of how many units are produced.
In order for revenue to be recognized, the seller’s price to the buyer must be fixed or
determinable.
The Internal Revenue Service is responsible for issuing accounting standards for state
and local governments.
Standard costing combines actual direct costs of materials and labor with estimated
overhead costs to determine a product unit cost.
Sale and purchase of goods should be recorded at their list price, less any trade discount
involved.
The proposals with the highest rank are funded first in the capital investment decisions.
The amount of the Withdrawals account can be found on the work sheet.
Depreciation cost of a controller’s computer calculated using the straight-line method is
an example of a variable cost.
Which of the following statements about incremental analysis is FALSE?
A.It is based on historical information relevant to the decision at hand.
B.It focuses on the differences between alternatives.
C.It reduces the time taken to select the best course of action.
D.It makes the evaluation process easier for the decision maker.
Use this information to answer the following question.
The trial balance for Nowwick Company appears as follows:
If the estimated depreciation for office equipment were $350, the adjusting entry would
contain a
A.debit to Accumulated Depreciation’“Office Equipment for $350.
B.credit to Office Equipment for $350.
C.credit to Accumulated Depreciation’“Office Equipment for $350.
D.credit to Depreciation Expense’“Office Equipment for $350.
Compute the asset turnover (rounded to two decimal places) for Titania Corporation’s
investment center from the information given below.
A.1.78
B.0.56
C.0.11
D.9.00
When the cost-adjusted-to-market method is used to account for a long-term investment
in the stock of another company, the carrying value of the investment is directly
affected by
A)the dividend distributions of the investee.
B)the earnings and dividend distributions of the investee.
C)the earnings of the investee.
D)neither the earnings nor the dividends of the investee.
Assume the direct method is used to compute net cash flows from operating activities.
For this item extracted from the financial statements’”Decrease in Accounts
Payable’”indicate the effect on cash payments for purchases by choosing one of the
following:
A.Add to Cost of Goods Sold to compute cash payments for purchases.
B.Subtract from Cost of Goods Sold to compute cash payments for purchases.
C.Not used to adjust Cost of Goods Sold to compute cash payments for purchases.
In general, a cost incurred in conjunction with a long-term asset is included in the
long-term asset account when the cost
A.is incurred subsequent to asset use.
B.exceeds a certain dollar amount.
C.is incurred prior to asset use.
D.will expire in less than one year.
Relevant costs in a sell or process-further decision include
A.only costs of additional processing.
B.both additional revenues and additional costs.
C.total revenues after additional processing.
D.joint product costs.
Before a check authorization is issued, the following documents must be in agreement,
except for the
A.purchase order.
B.receiving report.
C.remittance advice.
D.invoice.
Use the following data provided by Star Inc. to answer the questions below. The
company uses a process costing system.
The FIFO costing method is used by the company.
Units completed and transferred out of the department of Star Inc. during the month
totaled
A.6,600.
B.6,400.
C.6,200.
D.5,200.
A capital expenditure results in a debit to a(n)
A.expense account.
B.capital account.
C.asset account.
D.liability account.
Which of the following transactions involves an exchange of value?
A.Accumulation of interest
B.Sale of services
C.Fire damage
D.Wear and tear on machinery
Listed below are selected costs of a sports car manufacturer at a production level of
4,000 cars. (a) Identify three variable costs. (b) Support your answer by illustrating the
cost behavior pattern per unit and in total as the annual volume of cars produced
increases from 4,000 cars to 8,000 cars, for one variable cost. (Note: The production
increase is within the relevant range.)
Assume there are 52 weeks in a year and existing workers are working at full capacity.
a. Sports car tire cost (per tire) ($100), manufacturing hourly employees’ weekly payroll
($88,000), and car battery ($70)
b. The student may select any one of the three variable costs listed in part (a) and
illustrate the constant cost per unit and increasing cost in total as production increases.
Fantastic Futons manufactures futons. The estimated number of futon sales for the first
three months of 2014 are as follows:
Finished goods inventory at the end of 2013 was 10,000 units. On average, 25 percent
of the futons to be sold in the next month are produced and kept as ending balance in
finished goods inventory. The planned selling price is $150 per unit.
How many futons are budgeted to be produced in February by Fantastic Futons?
A.37,500
B.65,000
C.52,500
D.55,000
Which of the following tasks succeeds the disposing under- or overapplied overhead?
A.Preparation of financial statements
B.Comparison of actual and allocated overhead amounts
C.Estimation of overhead costs
D.Establishment of predetermined overhead rate
Lopez Co. is interested in purchasing equipment that would improve its operational
efficiency. The cost of the equipment is $400,000 with an estimated residual value of
$30,000 and a useful life of ten years. The equipment is expected to fetch cash inflows
of $60,000 a year. The company’s minimum rate of return is 8 percent. The present
value of $1 for ten years at 8 percent is 0.463, and the present value of an annuity of $1
at 8 percent and ten years is 6.710.
Using the above information for Lopez, the net present value of the project is
A.$402,600.
B.$13,890.
C.$200,000.
D.$16,490.