Archives: Quiz

1) It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company. 2) In many retail businesses, inventory is the largest current asset. Answer: TRUE 3) […]

1) In a process costing system, each process will have a work in process inventory account. 2) The form of the balance sheet in which assets, liabilities, and owner’s equity are presented in a downward sequence is called the report […]

1) The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory. 2) Under the periodic inventory system, the merchandise inventory account continuously […]

1) The trial balance may be listed on the work sheet instead of being prepared separately. 2) When a partnership dissolves, a new partnership is formed and a new partnership agreement should be prepared. Answer: TRUE 3) Direct materials and […]

1) The control environment in an internal control structure is the attitude and awareness of internal control by all employees. 2) When a new partner is admitted to a partnership, bonuses attributable to either the old partnership or to the […]

1) The internal rate of return method of analyzing capital investment proposals uses the present value concept to compute an internal rate of return expected from the proposals. 2) Supervisor salaries and indirect factory wages would normally appear in the […]

1) A bond is simply a form of an interest bearing note. 2) At year-end, the balance in the prepaid insurance account, prior to any adjustments, is $6,000. The amount of the journal entry required to record insurance expense will […]

1) Journalizing transactions using the double-entry bookkeeping system will eliminate fraud. 2) All companies must use a calendar year as their fiscal year. Answer: FALSE 3) In computing the ratio of net sales to assets, long-term investments are excluded from […]

1) If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary to earn an operating income of $30,000 are 14,000 units. 2) The major advantage of residual income as a performance measure is that it […]

1) Planning is the process of developing the companys objectives or goals and translating these objectives into courses of action. 2) A company pays $36,000 for twelve month’s rent on October 1. The adjusting entry on December 31 is debit […]

1) Generally accepted accounting principles require companies to use only one factory overhead rate for product costing. 2) Developing and retaining quality managers is an advantage of decentralization. Answer: TRUE 3) In preparing the cash flows from operating activities section […]

1) Hill Co. can further process Product O to produce Product P. Product O is currently selling for $60 per pound and costs $42 per pound to produce. Product P would sell for $82 per pound and would require an […]

1) When selling a piece of equipment for cash, a loss will result when the proceeds of the sale are less than the book value of the asset. 2) The process of transferring the data from the journal to the […]

1) Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section. 2) If the liabilities owed by a business total $300,000 and owners equity is equal to $300,000, then […]

1) Hill Co. can further process Product O to produce Product P. Product O is currently selling for $60 per pound and costs $42 per pound to produce. Product P would sell for $82 per pound and would require an […]

1) During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method. 2) In a process costing […]

1) When old equipment is traded in for a new equipment, the difference between the list price and the trade in allowance is called boot. 2) In a computerized accounting system, a work sheet may not be necessary because the […]

1) Under a periodic inventory system, the merchandise on hand at the end of the year is determined by a physical count of the inventory. 2) An adjusting entry to accrue an incurred expense will affect total liabilities. Answer: TRUE […]

1) Indirect labor and indirect materials would be part of factory overhead. 2) Property tax expense for a department store’s store equipment is an example of a direct expense. Answer: TRUE 3) If two companies have the same current ratio, […]

1) In order to choose the proper activity base for a cost, managerial accountants must be familiar with the operations of the entity. 2) An employee’s take home pay is equal to gross pay less all voluntary deductions. Answer: FALSE […]

1) The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use. 2) The amount of the net income for a period appears on both […]

1) To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting. 2) Depositing all cash, checks, etc. in a bank and paying with checks is […]

1) Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two. 2) The statement of cash flows reports a firm’s major sources of […]

1) The most effective means of presenting standard factory overhead cost variance data is through a factory overhead cost variance report. 2) In a company’s annual report, the section called management discussion and analysis provides critical information in interpreting the […]

1) The concept of present value is that an amount of cash to be received at some date in the future is the equivalent of the same amount of cash held at an earlier date. 2) Under the perpetual inventory […]

1) When compared to a corporation, one of the major disadvantages of the partnership is its limited life. 2) The accounting for defined benefit plans is usually very easy and straight forward. Answer: FALSE 3) Managerial information is for external […]

1) Average rate of return equals estimated average annual income divided by average investment. 2) Nonmanufacturing costs are classified into two categories: selling and administrative. Answer: TRUE 3) A check for $342 was erroneously charged by the bank as $4 […]

1) The process by which management allocates available investment funds among competing capital investment proposals is termed present value analysis. 2) A company should only use nonfinancial performance measures when financial measures cannot be calculated. Answer: FALSE 3) The job […]

1) A debit is abbreviated as Db and a credit is abbreviated as Cr. 2) The plant managers salary in a manufacturing business would be considered an indirect cost. Answer: TRUE 3) The two main sources of stockholders’ equity are […]

1) If direct materials cost per unit decreases, the amount of sales necessary to earn a desired amount of profit will decrease. 2) A staff department or unit is one that provides services, assistance, and advice to the departments with […]

1) Sarbanes-Oxleys purpose is to improve financial reporting. 2) Accrued taxes payable are generally reported on the balance sheet as a current liability. Answer: TRUE 3) Direct costs can be specifically traced to a cost object. Answer: TRUE 4) The […]

1) A compensating balance occurs when a bank may require a company to maintain a maximum cash balance. 2) During the closing process, some balance sheet accounts are closed and end the period with a zero balance. Answer: FALSE 3) […]

1) The statement of cash flows is an optional financial statement. 2) The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis. Answer: TRUE 3) Bonds may be purchased directly […]

1) The original cost of a machine was $60,000. After $45,000 of depreciation was recorded, the machine was traded in on a new machine priced at $75,000. A $10,500 trade-in allowance was received on the old machine and the balance […]

1) Airtex Company budgeted the following credit sales during the current year: September, $90,000; October, $123,000; November, $105,000; December, $111,000. Experience has shown that cash from credit sales is received as follows: 10% in the month of sale, 50% in […]

1) __________ allowances are items that reduce the amount of federal income taxes owed by the individual. 2) A flexible budget is also called a _______________ budget. Answer: Variable[/cpmembership] 3) Renton Co. has two operating (production) departments supported by a […]

1) Rich Company’s experience shows that 20% of its sales are for cash and 80% are on credit. An analysis of credit sales shows that 50% are collected in the month following the sale, 45% are collected in the second […]

1) ____________ is a method of analysis used to evaluate individual financial statement items or groups of items in terms of a specific base amount. 2) _________________ identify and describe transactions and events and provide objective evidence and amounts for […]

1) Clic, Inc., provides the following data for the next four months: Desired Ending Inventory: Raw Materials = 30% of next month’s production needs Finished Goods = 20% of next month’s sales Pounds of raw material required for each finished […]

1) Identify and explain the primary differences between fixed and flexible budgets. 2) The process of identifying costs as direct or indirect is referred to as classifying costs by ____________. Answer: Traceability 3) What are known current liabilities? Cite at […]

1) Describe the use of the Factory Payroll account in a job order cost accounting system. 2) Helix Co. entered into the following transactions involving short-term notes payable. On May 14, Helix purchased $40,000 merchandise from Advent Co., terms are […]

1) A good financial statement analysis report usually includes the following six sections: (1) ______________________, (2) ____________________, (3) _______________, (4) __________________ (5) __________________, and (6) ____________________. 2) The following information is available for Trico and its two main competitors in […]

1) Harbor Manufacturing Company uses a process cost accounting system. Materials are added at the beginning of the process. Direct labor and overhead are added evenly throughout the process. The company uses monthly reporting periods for its weighted-average process cost […]

1) Identify and describe the two main components of stockholders’ equity. 2) Eclectic Furniture Company allocates its indirect salaries of $12,500 on the basis of sales. Determine the indirect salaries allocated to Departments 1 and 2 using the following information. […]

1) Explain the accounting procedures when a bond’s interest period does not coincide with the issuer’s accounting period. 2) The BlueFin Partnership agrees to dissolve. The remaining cash balance after liquidating partnership assets and liabilities is $60,000. The final capital […]

1) The production budget for Sergei Company revealed the following production volume for the months of July – September. Each unit produced requires 2 hours of direct labor. The direct labor rate is currently $16 per hour but is predicted […]

1) A company is considering a 5-year project. It plans to invest $60,000 now and it forecasts cash flows for each year of $16,200. The company requires a hurdle rate of 12%. Calculate the internal rate of return to determine […]

1) A company has total fixed costs of $360,000. Its product sells for $40 per unit and variable costs amount to $25 per unit. What is the break-even point in dollar sales? 2) An employee is __________ when a company […]

1) On April 1, 2010, a company disposed of equipment for $14,200 cash that had cost $35,000 on January 1, 2006. The equipment had a salvage value of $5,000, and a useful life 10 years. The double-declining-balance depreciation method was […]

1) Using the information presented below, prepare a statement of owner’s equity and balance sheet from the adjusted trial balance of Hanson Storage. Ms. Hanson’s capital account balance of $40,340 consists of a $30,340 beginning-year balance plus a $10,000 investment […]