Archives: Quiz

1) All reconciling items in determining the adjusted cash balance per books require the depositor to make adjusting journal entries to the Cash account. 2) The complete effect of a transaction on the accounts is disclosed in the journal. Answer: […]

1) Normal standards incorporate normal contingencies of production into the standards. 2) If a company is operating at full capacity, the incremental costs of a special order will likely include fixed manufacturing costs. Answer: T 3) The gross profit method […]

1) If a company has no beginning inventory and the unit price of inventory is increasing during a period, the cost of goods available for sale during the period will be the same under the LIFO and FIFO inventory methods. […]

1) A decline in the fair value of a trading security is recorded by debiting an unrealized loss account and crediting the Fair Value Adjustment account. 2) Requisitions for direct materials are posted daily to the individual job cost sheets. […]

1) A mixed cost has both selling and administrative cost elements. 2) In a process cost system, materials, labor and overhead are only added in the first production department. Answer: F 3) If inventories are valued using the LIFO cost […]

1) Policies regarding when a difference between actual and planned results should be investigated are generally more restrictive for noncontrollable items than for controllable items. 2) Direct materials requisitioned from the storeroom should be charged to the Work In Process […]

1) Accounting time periods that are one year in length are referred to as interim periods. 2) Free cash flow equals cash provided by operations less capital expenditures and cash dividends. Answer: T 3) A corporation can be organized for […]

1) The times interest earned is computed by dividing net income by interest expense. 2) The percentage of sales basis for estimating uncollectible accounts always results in more Bad Debt Expense being recognized than the percentage of receivables basis. Answer: […]

1) The sum of the direct materials costs, direct labor costs, and beginning work in process is the total manufacturing costs for the year. 2) If a retailer accepts a national credit card such as Visa, the retailer must maintain […]

1) A seller may grant a buyer a reduction in selling price and this is called a sales allowance. 2) One of the more popular defined contribution plans is the 401k plan. Answer: TRUE 3) If sinking fund cash is […]

1) For income tax purposes most companies use an accelerated deprecation method called double declining balance. 2) For a period during which the quantity of product manufactured equals the quantity sold, income from operations reported under absorption costing will be […]

1) When a corporation owns less than 20% of the stock of another company, dividends received are not treated as income. 2) When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods […]

1) The debit to factory overhead for the cost of indirect materials is obtained from the summary of the materials requisitions. 2) The negotiated price approach allows the managers of decentralized units to agree among themselves as to the transfer […]

1) A net loss is shown on the work sheet in the credit columns of both the Income Statement columns and the Balance Sheet columns. 2) Managers use managerial information to evaluate performance of a companys operation. Answer: TRUE 3) […]

1) During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits. 2) At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000. The Accounts […]

1) Assuming no other changes, operating income will be the same under both the variable and absorption costing methods when the number of units manufactured equals the number of units sold. 2) A rental cost of $20,000 plus $.70 per […]

1) The unamortized Discount on Bonds Payable account is a contra-liability account. 2) Land acquired as a speculation is reported under Investments on the balance sheet. Answer: TRUE 3) Dividends decrease retained earnings and are listed on the income statement […]

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) The main objective of […]

1) The cost of new equipment is called a revenue expenditure because it will help generate revenues in the future. 2) Earnings per share amounts are only required to be presented for income from continuing operations and net income on […]

1) The Sarbanes-Oxley Act prohibits CPAs from providing nonaudit investment banking services. 2) One inherent risk to using just-in-time philosophy is that companies are at higher risk of inventory shortage during volatile times such as strikes, weather, etc. than the […]

1) Money orders are considered cash. 2) On the variable costing income statement, deduction of the variable cost of goods sold from sales yields gross profit. Answer: FALSE 3) The theory of constraints is a manufacturing strategy that focuses on […]

1) When accounting for uncollectible receivables and using the percentage of sales method, the matching principle is violated. 2) The double declining balance depreciation method calculates depreciation each year by taking twice the straight line rate times the book value […]

1) A company pays an employee $3,000 for a five day work week, Monday – Friday. The adjusting entry on December 31, which is a Wednesday, is debit Wages Expense, $1,800 and credit Wages Payable, $1,800. 2) A firm selling […]

1) The unearned revenues account is an example of a liability. 2) The excess of the cash flowing in from revenues over the cash flowing out for expenses is termed net discounted cash flow. Answer: FALSE 3) The balance in […]

1) Accounting information users need reports about the economic activities and condition of businesses. 2) Methods that ignore present value in capital investment analysis include the internal rate of return method. Answer: FALSE 3) When long-term investments in bonds are […]

1) A secured bond is called a debenture bond and is backed only by the general creditworthiness of the corporation. 2) Product costs include direct labor and advertising expense. Answer: FALSE 3) Cost systems using detailed estimates of each element […]

1) Debits will increase Unearned Revenues and Revenues. 2) The par value of common stock must always be equal to its market value on the date the stock is issued. Answer: FALSE 3) The process by which management plans, evaluates, […]

1) The present value of the periodic bond interest payments is the value today of the amount of interest to be received at the end of each interest period. 2) The budgeting process is used to effectively communicate planned expectations […]

1) Managerial information is for external as well as internal stakeholders. 2) The transfer to expense of the cost of intangible assets attributed to the passage of time or decline in usefulness is called amortization. Answer: TRUE 3) Form W-4 […]

1) Long setups and large batch sizes result in smaller inventories. 2) In calculating the present value of an investment in equipment, the present value of the terminal residual value should be added to the cash inflows. Answer: TRUE 3) […]

1) Product costing consists of only direct materials and direct labor. 2) Just-in-Time (JIT) manufacturing is also called make-to-stock manufacturing. Answer: FALSE 3) Trade receivables occur when two companies trade or exchange notes receivables. Answer: FALSE 4) An intangible asset […]

1) In a process costing system, the cost per equivalent unit is computed before computing equivalent units. 2) The range of activity over which changes in cost are of interest to management is called the relevant range. Answer: TRUE 3) […]

1) The balance in Premium on Bonds Payable should be reported as a deduction from Bonds Payable on the balance sheet. 2) Any difference between the fair market values of the securities and their cost is a realized gain or […]

1) The selection of the factory overhead allocation method is important because the method selected determines the accuracy of the product cost. 2) The revenue recognition concept states that revenue should be recorded in the same period as the cash […]

1) Property taxes on a factory building would be included as part of the cost of products manufactured under the absorption costing concept. 2) Standard costs serve as a device for measuring efficiency. Answer: TRUE 3) If ending inventory for […]

1) The form of the balance sheet in which assets, liabilities, and owner’s equity are presented in a downward sequence is called the report form. 2) The specific identification inventory method should be used when the inventory consists of identical, […]

1) For a current liability to exist, the following two tests must be met. The liability must be due usually within a year and must be paid out of current assets. 2) The number of days’ sales in receivables is […]

1) Managerial accounting reports are prepared according to generally accepted accounting principles. 2) The materials requisition serves as the source document for debiting the accounts in the materials ledger. Answer: FALSE 3) As a company records depreciation expense for a […]

1) If fixed costs are $850,000 and the unit contribution margin is $50, profit is zero when 15,000 units are sold. 2) Service firms can only have one activity base for analyzing changes in costs. Answer: FALSE 3) If a […]

1) Cash, Accounts Payable, and Capital Stock are real accounts and do not get closed at the end of the period. 2) One negative effect of carrying too much inventory is risk that customers will change their buying habits. Answer: […]

1) Cost-volume-profit analysis can be presented in both equation form and graphic form. 2) The average cost method will always yield results between FIFO and LIFO. Answer: TRUE 3) An income statement is a summary of the revenues and expenses […]

1) The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $200,000 for the 5 years. The expected average rate of return […]

1) A physical inventory should be taken at the end of every month. 2) The process by which management allocates available investment funds among competing capital investment proposals is termed capital rationing. Answer: TRUE 3) A voucher system is an […]

1) At the end of a period (before adjustment), Allowance for Doubtful Accounts has a credit balance of $5,000. The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be uncollectible is $50,000. The amount […]

1) The cost of production report reports the cost of the goods sold. 2) Unusual items affecting the current periods income statement consist of changes in accounting principles and discontinued operations. Answer: FALSE 3) A sale of $750 on account, […]

1) Past performance is the best overall basis for evaluating current performance and assessing the need for corrective action. 2) Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget. Answer: FALSE 3) The difference […]

1) Conversion cost is the combination of direct materials cost and factory overhead cost. 2) An equity investment in less than 20% of another companys stock is accounted for using the cost method. Answer: TRUE 3) A report analyzing the […]

1) The direct write-off method records Bad Debt Expense in the year the specific account receivable is determined to be uncollectible. 2) Sales Returns and Allowances is a contra-revenue account. Answer: TRUE 3) Bonds of major corporations are traded on […]

1) An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost. 2) Vertical analysis compares each item in a financial statement with a total amount from the same statement. Answer: TRUE 3) Indirect labor and indirect […]

1) It is necessary for a company to use the same depreciation method for all of its depreciable assets. 2) The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment. […]