A scatter diagram helps to determine if a linear relationship exists between a cost item
and its related activity measure.
To assess the quality of a company’s reported earnings, it is necessary to know the
estimates and methods it uses to compute income.
The convention of consistency has led to an increase in the notes to financial
statements.
Practical capacity and engineering capacity are synonymous terms.
Performance reports allow comparisons between actual performance and budget
expectations.
The intentional preparation of misleading financial statements is referred to as
fraudulent financial reporting.
When preparing a statement of cash flows using the indirect method, an increase in
wages payable is subtracted from net income.
Management accounting information is objective and verifiable for decision making.
Which of the following statements isTRUE of performance measurement?
A.It measures only qualitative information.
B.It uses both qualitative and quantitative tools to measure the performance.
C.It helps in understanding a company’s performance related to a specific goal.
D.It cannot be used by service companies.
The average-cost method produces an ending inventory figure that is somewhere
between the figures produced by FIFO and LIFO.
Cash flows to assets is measured in ‘times.’
All decreases in owner’s equity are a result of expenses.
On August 1, Phillips Industries purchased $12,000 of merchandise on credit. Terms of
1/10, n/30 are extended, and Phillips makes payment on August 9.
a. In the journal provided, prepare Phillips’s entries, assuming use of the periodic
inventory system.
b. Prepare the entry that would have been made had payment been made on August 17.
Plant assets used in conjunction with a natural resource typically are depreciated
A.using income tax depreciation.
B.using an accelerated depreciation method.
C.on the same basis as depletion is computed.
D.on a straight-line basis.
Which of the following documents is mailed to the vendor (seller) of goods?
A.Receiving report
B.Invoice
C.Purchase order
D.Purchase requisition
Which accounting term does not mean the same as the others?
A.Retained earnings
B.Net worth
C.Capital
D.Owner’s equity
All of the following are operating leases except a
A.monthly lease on a building that can be canceled with 90 days’ notice.
B.ten-year lease on a new building.
C.two-year lease on a truck with an option to renew for one more year.
D.five-year lease of a computer with an option to buy for a small amount at the end of
the lease.
Assume the indirect method is used to compute net cash flows from operating activities.
For this item extracted from the financial statements’”Increase in Prepaid
Expenses’”indicate the effect on net income in arriving at net cash flows from operating
activities by choosing one of the following:
A.Add to net income to arrive at net cash flows from operating activities.
B.Subtract from net income to arrive at net cash flows from operating activities.
C.Not used to adjust net income to calculate net cash flows from operating activities.
Notes payable
A.are promissory.
B.involve debt to many creditors.
C.are secured by real property.
D.All of these choices.
For work done during August, Footprints Company incurred direct materials costs of
$104,000 and conversion costs of $260,000. The company employs a just-in-time
operating philosophy and backflush costing. At the end of August, it was determined
that the Work in Process Inventory account had been assigned $1,080 of costs, and the
ending balance of the Finished Goods Inventory account was $1,220. There were no
beginning inventory balances.
Using the information provided for Footprints Company, what is the cost of completed
units for August?
A.$104,000
B.$260,000
C.$361,700
D.$362,920
Which of the following firms would most likely use a process costing system?
A.Firm providing legal services
B.Firm manufacturing papers
C.Firm providing advertising services
D.Firm printing wedding invitations
Which of the following cost flow assumptions most closely follows the logical product
flow in a process costing environment?
A.Average
B.LIFO
C.FIFO
D.HIFO
Following are the financial statements for Flynn Corporation for the year ended
December 31, 20×5. Assume that all balance sheet amounts represent both average and
ending figures.
What is the profit margin for this corporation? Round your answer to one decimal
place.
A.22.5 percent
B.30.0 percent
C.40.0 percent
D.53.3 percent
Taylor Inc. manufactures 12,000 units of a part used in its production to manufacture
guitars. The annual production activities related to this part are as follows:
Best Guitars Inc. has offered to sell 12,000 units of the same part to Taylor for $22 per
unit. If Taylor were to accept the offer, some of the facilities presently used to
manufacture the part could be rented to a third party at an annual rental of $18,000.
Moreover, $4 per unit of the fixed overhead applied to the part would be totally
eliminated.
In the decision to make or buy the part, what is the relevant fixed overhead for Taylor
Inc.?
A.$30,000
B.$54,000
C.$84,000
D.$48,000
Natasha Corporation’s Shaping Department had no beginning inventory and completed
and transferred to finished goods 920 units during May. Ending inventory for May
contained 80 units that were 30 percent complete as to conversion costs and 100 percent
complete as to direct materials costs. The charges to the Shaping Department during
May were $3,776 for conversion costs and $2,500 for direct materials costs. Compute
the cost of work transferred out if Natasha Corporation uses the FIFO costing method.
A.$6,180
B.$5,980
C.$5,774
D.$6,118
Slim Co. is ordering a new computer for its corporate office. Which of the following
events would trigger the recognition of the computer and related liability on Slim’s
books?
A.The company generates a purchase order.
B.The purchasing department sends a purchase order to the supplier.
C.The company receives the computer.
D.The company receives the bill from the supplier.
Assume the indirect method is used to compute net cash flows from operating activities.
For this item extracted from the financial statements’”Increase in Accounts
Payable’”indicate the effect on net income in arriving at net cash flows from operating
activities by choosing one of the following:
A.Add to net income to arrive at net cash flows from operating activities.
B.Subtract from net income to arrive at net cash flows from operating activities.
C.Not used to adjust net income to calculate net cash flows from operating activities.
Which of the following items is associated with a purpose of the work sheet?
A.Recording adjusting entries.
B.Financial statements that are up to date for measuring financial progress.
C.Preparing budgets.
D.All of these choices.
Use this balance sheet and income statement for the first year of operations for Cane
Construction to answer the following question. Use ending balances whenever average
balances are required for computing ratios.
The current ratio for Cane Construction is
A.1.75.
B.0.57.
C.1.4.
D.2.0.
The sale or transfer of accounts receivable to raise funds is called
A.discounting.
B.collateralizing.
C.pledging.
D.factoring.
Which of the following statements best describes predictive value?
A.Helps capital providers make decisions about future actions.
B.Provides all information necessary for a reliable decision.
C.Enables users to identify similarities and differences.
D.Enables users to comprehend the meaning of the information.
Which of the following is the realistic measure of what an organization is likely to
produce, not what it can produce?
A.Practical capacity
B.Normal capacity
C.Ideal capacity
D.Excess capacity
Under the perpetual inventory system, in addition to making the entry to record a sale, a
company would
A.record an increase in inventory corresponding to the amount of the sale.
B.record a decrease in inventory and an increase in cost of goods sold for the cost of the
merchandise sold.
C.record an increase in inventory corresponding to the cost of the inventory.
D.make no additional entry until the end of the period.
A retail store has beginning inventory of $30,000, purchases of $220,000, sales of
$200,000, and a normal gross margin of 25 percent. What is estimated inventory based
on these facts and the gross profit method?
A.$50,000
B.$150,000
C.$100,000
D.$200,000
Assume the indirect method is used to compute net cash flows from operating activities.
For this item extracted from the financial statements’”Loss on Disposal of
Equipment’”indicate the effect on net income in arriving at net cash flows from
operating activities by choosing one of the following:
A.Add to net income to arrive at net cash flows from operating activities.
B.Subtract from net income to arrive at net cash flows from operating activities.
C.Not used to adjust net income to calculate net cash flows from operating activities.