Archives: Quiz

Dividends in arrears are disclosed as liabilities of a corporation. The heading of an adjusted trial balance might contain the line ‘For the Month Ended May 31, 20xx.’ Answer: FALSE A tractor held by a farm equipment company for sale […]

A patent has a legal life of 20 years. The direct materials quantity variance is the difference between the actual quantity used and the standard quantity times the actual price. Answer: FALSE Buying and selling goods and services are examples […]

Return on assets is a combination of the profit margin and the asset turnover. To increase their levels of inventory, many merchandisers and manufacturers use supply-chain management in conjunction with a just-in-time operating environment. Answer: FALSE One example of a […]

Freight paid on goods shipped to customers is classified as a selling expense. Terms of ‘2/10, n/30’ are an example of a sales discount. Answer: TRUE The value chain is the sequence of business activities in which usefulness is added […]

A check authorization is a document that permits the issuance of a check to pay an invoice. In a common-size income statement, each item is expressed as a percentage of net income. Answer: FALSE The faster goods are sold and […]

The terms total manufacturing costs and total cost of goods manufactured are synonymous. When the present value of a bond issue is calculated, both the present value of a single sum and the present value of an annuity must be […]

When bonds are converted to stock, any excess carrying value of the bonds over the par value of the stock is to be recorded as Additional Paid-in Capital. Breakeven sales in dollars can be obtained without knowing the dollar value […]

The JIT operating philosophy requires a push-through production system. There is no limit to the amount of income subject to the FUTA tax. Answer: FALSE Corporate earnings are subject to double taxation. Answer: TRUE Budgets identify potential constraints before they […]

When there is no direct connection between revenues and costs, the costs are systematically allocated among the periods benefited. Ending merchandise inventory is not included in the calculation of cost of goods available for sale. Answer: TRUE Once in a […]

One application of accrual accounting is adjusting the accounts. Performance measurement is the use of quantitative tools to gauge an organization’s performance in relation to a specific goal or an expected outcome. Answer: TRUE A report for a responsibility center […]

Gross earnings minus deductions equal take-home pay. With the periodic inventory system, cost of goods available for sale must be calculated after cost of goods sold. Answer: FALSE When presenting decreases in long-term investments in the investing activities section of […]

A performance report should contain cost or revenue items that the manager receiving the report can control. Cost of capital information is necessary to establish the minimum rate of return on investments. Answer: TRUE Costs can also be classified as […]

Misleading financial reports are not considered fraudulent if they are the result of the misapplication of accounting principles. The flexible budget formula is an equation that determines budgeted costs for any level of output. Answer: TRUE Like job order costing […]

Normally, depreciation calculations are based on the exact number of days the asset is held during the period. Reporting format of managerial accounting is flexible and driven by user’s needs. Answer: TRUE Depreciation Expense’“Equipment is an example of a contra […]

A partnership is an accounting entity separate and apart from its owners. Under the partnership form of business, it may be difficult to raise large amounts of capital. Answer: TRUE Profitability is the ability to pay bills when due and […]

A commitment is a legal obligation that meets the technical requirements for recognition as a liability. The interest coverage ratio and the debt to equity ratio are measures of profitability. Answer: FALSE The purpose of establishing a desired rate of […]

Total variable costs remain constant within a defined time period or range of activity. Both public accountants and management accountants are required to adhere to a code of professional conduct. Answer: TRUE Managers prepare financial statements to communicate the company’s […]

The acceptable proposals are ranked in order of net present value, payback period, or rate of return in capital investment decisions. The valuation issue deals with how the components of a transaction should be categorized. Answer: FALSE Free cash flow […]

The use of salaries in the allocation of income or loss allows for the differences in the services that partners provide the business. Under the perpetual inventory system, inventory losses can be identified more easily than under the periodic inventory […]

Managers prepare process cost reports in the evaluating stage of the management process. Dividends declared but unpaid are reflected in the financing activities section of the statement of cash flows. Answer: FALSE Accounting information contains numerous estimates, classifications, summarizations, judgments, […]

Goods held on consignment should be included in the consignee’s ending inventory. Adding freight-out expenses to net purchases gives net cost of purchases. Answer: FALSE The FIFO inventory method does not produce the most up-to-date figure for ending inventory. Answer: […]

Partial-year depreciation may be rounded to the nearest whole month or the half-year convention may be used. When preparing a statement of cash flows using the indirect method, an increase in accounts receivable is added to net income. Answer: FALSE […]

As long as the action is within the scope of the partnership, any partner can bind the partnership. When the balance of a petty cash fund is increased, the entry would contain a credit to Petty Cash. Answer: FALSE Intangible […]

Reports and analyses prepared in traditional management settings will match the requirement of the new manufacturing environment. When an asset lasts longer than its estimated useful life, depreciation no longer should be recorded. Answer: TRUE The average costing method matches […]

A cash flow yield of 2.5 times is considered better than one of 3.0 times. When a business hires a new employee, a recordable transaction has occurred. Answer: FALSE Generally accepted accounting principles state that all business transactions should be […]

Income or loss can be allocated to partners based solely on average capital balances. Neither the amount of detail nor the format of a management accounting report is affected by those to whom the report is sent. Answer: FALSE Standard […]

Unrealized Loss (Gain) on Short-Term Investments is a contra-asset account that will appear on the balance sheet. Assets are converted to revenues as they benefit the company. Answer: FALSE The portion of cost of goods available for sale that is […]

Each partner has a separate Capital, Withdrawals, and Income or Loss account. In a process cost report, accounting for physical units excludes the physical units in beginning inventory to arrive at ‘units to be accounted for.’ Answer: FALSE It is […]

On a bank reconciliation, interest income would be added to the balance per bank. In a process costing system, the equivalent units of production must be computed after determining the value of ending inventory. Answer: FALSE The ending balance in […]

In a small business, active involvement by the owner can be a practical substitute for the separation of some duties. Information that is the same for all alternatives is considered relevant to the decision process. Answer: FALSE Purchase requests and […]

The price/earnings (P/E) ratio is a measure of investors’ confidence in a company’s future. Under the successful efforts method, the costs of both successful and unsuccessful exploration for oil and gas are recorded as assets. Answer: FALSE An organization chart […]

Consistency requires that a company use the same accounting procedures as other companies in the same industry. Cash equivalents include money market accounts, commercial paper, and U.S. Treasury bills. Answer: TRUE Customer lists are classified as intangible assets. Answer: TRUE […]

The practice of off-balance-sheet financing is illegal. A new partner must have the consent of all the partners before being admitted into the partnership. Answer: TRUE The payables turnover is the number of times, on average, that a company pays […]

The cost to defend a patent successfully should be expensed in the period incurred. Margin of safety is the excess of actual sales over break even sales. Answer: TRUE The alignment of an organization’s strategy with all the perspectives of […]

Small expenditures for what ordinarily are considered capital expenditures frequently are treated as revenue expenditures. The acquisition of treasury stock with cash is shown as a financing activity on the statement of cash flows. Answer: TRUE After all closing entries […]

Cash equivalents are usually listed as short-term investments on the balance sheet. The Income Statement columns of the work sheet show all the accounts that need to be closed. Answer: FALSE Avoidable costs are the direct variable costs and direct […]

Specific identification is a very popular inventory method because it is very easy to apply. An organization’s normal capacity is the average annual level of operating capacity needed to meet its expected sales demand. Answer: TRUE The Allowance for Uncollectible […]

Depending on the mixture of sources of capital, a company’s cost of capital will vary. When no-par common stock has a stated value, the stated value of the shares issued normally is considered the legal capital of the corporation. Answer: […]

The customer’s perspective governs whether an activity adds value to a product or service. An adjustment must be made at the end of an accounting period to accrue the interest expense on bonds payable and to amortize any related premium […]

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 […]

When bonds are converted to stock, no gain or loss is recognized. One reason for preparing a process cost report for a particular department is to determine the amount of costs to transfer to the next department or to the […]

Owner’s withdrawals should appear on the statement of owner’s equity. In accounting, depreciation refers to the decline in fair value of a plant asset. Answer: FALSE The interest coverage ratio is expressed as a percentage. Answer: FALSE The evaluation and […]

Managerial accounting’s main emphasis is on full and accurate accounting for and disclosure of a company’s operating results. Computation of a partial year’s depreciation is often required for the proper determination of net income. Answer: TRUE The personal resources of […]

Merchandising companies do not need as good a system of internal control as service companies. Cash inflows and outflows are easier to manipulate than earnings. Answer: FALSE A check authorization would be prepared after a receiving report. Answer: TRUE Permanent […]

If applied overhead exceeds actual overhead, cost of goods sold must be increased by the amount of the overapplied overhead in a job order costing system. The amount of property tax payable is usually an estimated liability for a portion […]

Equity is reduced when owner’s withdrawals exceed net income. A process costing system first accumulates the costs of direct materials, direct labor, and overhead for each process and then assigns those costs to the products produced during a particular period. […]

Write-downs and restructurings increase current operating income and decrease future income by shifting future costs to the future periods. The death of a partner dissolves the partnership. Answer: TRUE Trend analysis requires the establishment of a base year for comparison […]

In a journal entry, the Post. Ref. column is left blank until the entry has been posted. In a job order costing system, when overhead costs are applied, they decrease the Work in Process Inventory account. Answer: FALSE Which of […]

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 analyze a capital investment using the accounting rate-of-return method, one can use an estimated amount for the annual net income. One of the drawbacks of full product cost is that it is relevant only for companies providing services. Answer: […]