Many service businesses use process yield for assessing performance and the efficient
use of assets.
a. True
b. False
XYZ Co.’s petty cash receipts indicate the following expenditures for the end of
October:
Office supplies $490
Miscellaneous selling expense$300
Miscellaneous administrative expense$120
These transactions would result in a:
a. $910 increase in total assets.
b. $490 decrease in stockholders’ equity.
c. $420 decrease in total assets.
d. $910 increase in stockholders’ equity.
The most effective means of presenting standard factory overhead cost variance data is
through a selling overhead cost budget.
a. True
b. False
Factory overhead is applied to production using a predetermined overhead rate.
a. True
b. False
Companies using a lowcost emphasis provide products and services that compete on
features other than price.
a. True
b. False
JNC Company sells its products for cash, at a profit of 20%. Which of the following
financial statement elements are affected as a result of this transaction?
a. Assets
b. Assets and liabilities
c. Liabilities and stockholders’ equity
d. Assets and stockholders’ equity
A voucher is a form where pertinent data about a liability and the particulars of its
payment are recorded.
a. True
b. False
Which of the following is not a characteristic of a corporation?
a. Corporations are organized as a separate legal taxable entity.
b. Ownership is divided into shares of stock.
c. Corporations experience an ease in obtaining large amounts of resources by issuing
stock.
d. A corporation can elect to be taxed as a partnership.
A company may use a job order cost system for some of its products and a process cost
system for other products.
a. True
b. False
Dividends are an example of an expense.
a. True
b. False
Jack Inc. offers a credit term of n/30. This means that the company:
a. receives money from the customers 30 days after the of sale of the goods.
b. offers a 30day loan to the suppliers.
c. expects to collect receivables every 30 days.
d. pays its creditors within 30 days of the purchase of raw materials.
How do the responsibilities of a manager in an investment center compare to the
responsibilities of managers in a cost or profit center?
a. Investment center managers have more authority and responsibility than managers of
a cost or profit center.
b. Investment center managers have more authority and responsibility than managers of
a cost center but less than managers of a profit center.
c. Investment center managers have about the same authority and responsibility as
managers of a cost or profit center.
d. Investment center managers have more authority and responsibility than managers of
a profit center but less than managers of a cost center.
The bank informs the depositor of bank service charges by including a credit
memorandum with a monthly bank statement.
a. True
b. False
The acquisition costs of property, plant, and equipment should include all costs
necessary to get the asset in place and ready for use.
a. True
b. False
Conversion cost is the combination of direct labor cost and factory overhead cost.
a. True
b. False
The Modified Accelerated Cost Recovery System is used to:
a. compute income for audit reporting.
b. compute depreciation for tax purposes.
c. report liabilities.
d. ascertain breakeven point.
A gain is recorded on the sale of fixed assets when:
a. the asset is sold for a price less than its book value.
b. the asset is sold for a price more than its book value.
c. accumulated depreciation on asset is less than its selling price.
d. accumulated depreciation on asset is more than its selling price.
The performance evaluation of the managers of a company is dependent on the
company’s:
a. common stock.
b. volatility.
c. economic performance.
d. nonrecurring activities.
Red Co. uses the product cost concept of applying the costplus approach to product
pricing. Below is cost information for the production and sale of 40,000 units of its sole
product. Red Co. desires a profit equal to a 15% rate of return on invested assets of
$1,200,000.
Fixed factory overhead cost$80,000.00
Fixed selling and administrative costs140,000.00
Variable direct materials cost per unit7.00
Variable direct labor cost per unit11.00
Variable factory overhead cost per unit3.00
Variable selling and administrative cost per unit2.00
The dollar amount of desired profit from the production and sale of the company’s
product is:
a. $70,000.
b. $60,000.
c. $180,000.
d. $140,000.
During 2016, Lexie, Inc. acquired Lena, Inc. for $10,000,000. The fair market value of
the net assets of Lena, Inc. was $8,500,000 on the date of purchase. During 2019,
Lexie, Inc. determined the goodwill resulting from the Lena acquisition was impaired
and had a value of $1,000,000.
(a)Determine the amount of goodwill implied during 2016.
(b)Illustrate the effects on the accounts and the financial statements of the December
31, 2019, adjustment for the goodwill impairment.
If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are reacquired,
the number of outstanding shares is 19,500.
a. True
b. False
Blair Inc. had $725,000 in invested assets, sales of $1,100,000, operating income
amounting to $72,000, and a minimum acceptable rate of return of 14% on its invested
assets. Blair’s investment turnover is _____.
a. 1.7
b. 1.3
c. 1.1
d. 1.5
Identify each of the following as related to (a) the control environment, (b) risk
assessment, or (c) control procedures.
(1) Mandatory vacations
(2) Personnel policies
(3) Report of outside consultants on future market changes
To measure depreciation, which of the following must be known?
a. market value of asset.
b. fixed asset turnover
c. cost of asset.
d. the amount of cash to replace fixed asset
Buying equipment for cash affects which account/ accounts?
a. Cash only
b. Retained earnings only
c. Equipment and retained earnings
d. Cash and equipment
The use of the lowerofcostormarket method of inventory valuation increases the gross
profit for the period in which the inventory replacement price declined.
a. True
b. False
The maturity value of a 12%, 60day note for $1,000 is $1,020. (Assume 360 days in a
year)
a. True
b. False
If operating income for a division is $6,000, invested assets are $25,000, and sales are
$30,000, the profit margin calculated would be 24%.
a. True
b. False
Once a static budget has been determined, it is changed regularly as the underlying
activity changes.
a. True
b. False
A company operated at 82% of its capacity for the past year. Fixed costs during this
time were $152,000, variable costs were 60% of sales, and sales were $790,000.
Calculate the company’s operating profit.
a. $97,000
b. $185,000
c. $56,000
d. $164,000
For which of the following businesses would the job order cost system be most
appropriate?
a. Custom cabinet manufacturer
b. Automobile manufacturer
c. Lumber mill
d. Meat processor
Johnson, Inc. receives $5,000 cash for fees earned. What is the effect of this
transaction?
a. Total assets remain unchanged.
b. Cash flow from Financing Activities will increase.
c. Net income will increase.
d. Retained earnings will remain unchanged.