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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.
3) Sales mix is generally defined as the relative distribution of sales among the various
products sold.
4) Money market accounts, commercial paper, and United States Treasury Notes are
examples of cash equivalents.
5) The normal balance of revenue accounts is a credit.
6) The ratio of the market price per share of common stock on a specific date to the
annual earnings per share is referred to as the price-earnings ratio.
7) The corporation owning all or a majority of the voting stock of another corporation is
known as the parent company.
8) Although marketable securities may be retained for several years, they continue to be
classified as temporary, provided they are readily marketable and can be sold for cash at
any time.
9) When a bottleneck occurs between two products, the company must determine the
contribution margin for each product and manufacture the product that has the highest
contribution margin per bottleneck hour.
10) In an absorption costing income statement, the manufacturing margin is the excess
of sales over the variable cost of goods sold.
11) The ratio of net sales to assets measures how effectively a business is using its
assets to generate sales.
12) The number of days sales in receivables is an estimate of the length of time the
accounts receivables have been outstanding.
13) Costs associated with normal research and development activities should be treated
as intangible assets.
14) Businesses who have several bank accounts, petty cash, and cash on hand, would
maintain a separate ledger account for each type of cash.
15) An estimate of the amount which an asset can be sold at the end of its useful life is
called residual value.
16) When estimated costs are used in applying the cost-plus approach to product
pricing, the estimates should be based upon ideal levels of performance.
17) Managerial accounting uses only past data in reports to aid management in the
decision making process.
18) The cost of energy consumed in producing good units in the Bottling Department of
Mountain Springs Water Company was $36,850 and $39,060 for June and July,
respectively. The number of equivalent units produced in June and July was 55,000 and
62,000 liters respectively. Evaluate the change in the cost of energy between the two
months.
19) The following totals for the month of February were taken from the payroll register
of Arcon Company:
How much is the total payroll expense for Arcon Company for this payroll?
Assume that the monthly salaries expense remains the same for the entire year and no
employees are hired or fired during that time. Based on what you learned in Chapter 11
about payroll taxes, do you expect the total payroll expense to stay the same every
month? Explain.
20) A one-year insurance policy was purchased on October 1, 2011 for $4,200. The
adjusting entry on December 31, 2011 would be
21) Prepare an amortization schedule for the 1st 2 years (straight line method) using the
following data:
1> On January 1, 2010 XYZ Co. issued $3,000,000, 6%, 10 year bonds, interest
payable on June 30th and December 31st to yield 5%. Use the following format and
round to the nearest dollar (may have small rounding error). The bonds were issued for
$3,233,834.
2> Show how this bond would be reported on the balance sheet on 12/31/11.
22) Cavy Company completed 26,000 units during the year at a cost of $2,139,800. The
beginning finished goods inventory was 5,000 units at $405,000. Determine the cost of
goods sold for 20,000 units, assuming a FIFO cost flow.
23) Given the following: Beginning retained earnings $ 58,000
Ending retained earnings $ 30,000
Dividends declared and paid $ 25,000
Calculate net income or net loss.
24) Indicate with a Yes or No whether or not each of the following accounts would,
under normal circumstances, require an adjusting entry.
1> Cash
2> Prepaid Expenses
3> Depreciation Expense
4> Accounts Payable
5> Accumulated Depreciation
6> Equipment
25) On May 1, 2015, Chase Inc. purchases $60,000 of 10-year, 6% Manus Corporation
bonds dated March 1, 2015 at 100 plus accrued interest. What entry would Chase record
when purchasing the bonds?
26) Ptarmigan Company produces two products. Product A has a contribution margin of
$20 and requires 4 machine hours. Product B has a contribution margin of $18 and
requires 3 machine hours. Determine the most profitable product assuming the machine
hours are the constraint.
