1) Cash equivalents are investments that are readily converted to known amounts of
cash and mature within three months.
2) Vertical analysis is the comparison of a company’s financial condition and
performance across time.
3) A rolling budget is a specific budget application relevant only to a merchandising
company.
4) Paid and declared preferred dividends are called dividends in arrears.
5) When partners invest in a partnership, their capital accounts are debited for the
amount invested.
6) Maroon Company sold supplies in the amount of ¬15,000 (euros) to a French
company when the exchange rate was $1.15 per euro. At the time of payment, the
exchange rate decreased to $1.12. Maroon must record a loss of $450.
7) A time ticket is a source document an employee uses to record the number of hours at
work and that is used each pay period to determine the total labor cost.
8) Activity-based costing generally requires less effort to implement and maintain than
a traditional cost system.
9) The evaluation of company performance and financial condition includes evaluation
of (1) past and current performance, (2) current financial position, and (3) future
performance and risk.
10) A time ticket is a source document that an employee uses to report how much direct
and indirect labor was performed for a job and is used to determine the amount of direct
labor to charge to the job and the amount of indirect labor to charge to factory
overhead.
11) A company’s debt-to-equity ratio was 1.0 at the end of Year 1. By the end of Year 2,
it had increased to 1.7. Since the ratio increased from Year 1 to Year 2, the degree of
risk in the firm’s financing structure decreased during Year 2.
12) Cumulative preferred stock carries the right to be paid both current and all prior
periods’ unpaid dividends before any dividends are paid to common shareholders.
13) Direct materials are not usually easily traced to a product.
14) Total asset turnover reflects a company’s ability to use its assets to generate sales
and is an important indication of operating efficiency.
15) Overhead cost variance is:
A.The difference between the overhead costs actually incurred and the overhead
budgeted at the actual operating level.
B.The difference between the actual overhead incurred during a period and the standard
overhead applied.
C.The difference between actual and budgeted cost caused by the difference between
the actual price per unit and the budgeted price per unit.
D.The costs that should be incurred under normal conditions to produce a specific
product (or component) or to perform a specific service.
E.The difference between the total overhead cost that would have been expected if the
actual operating volume had been accurately predicted and the amount of overhead cost
that was allocated to products using the standard overhead rate.
16) All of the following regarding accounting for Treasury Stock under U.S. GAAP and
IRFS is true except:
A.U. S. GAAP applies the principle that companies do not record gains or losses on
transactions involving their own stock.
B.Only gains are recognized on retirements of treasury stock under IFRS.
C.IFRS applies the principle that companies do not record gains or losses on
transactions involving their own stock.
D.Gains are not recognized on retirements of treasury stock under U. S. GAAP.
E.A company’s assets and equity are always reduced by the amount paid for the retiring
stock.
17) A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold
for $50,000 cash. The amount that should be reported as a source of cash under cash
flows from investing activities is:
A.$50,000.
B.$5,000.
C.$45,000.
D.Zero. This is an operating activity.
E.Zero. This is a financing activity.
18) Memphis Company anticipates total sales for April, May, and June of $800,000,
$900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the
credit sales, 30% are collected in the same month as the sale, 65% are collected during
the first month after the sale, and the remaining 5% are not collected. Compute the
amount of cash received from total sales for June.
A.$561,500.
B.$652,500.
C.$817,500.
D.$592,500.
E.$890,000.
19) An employee earns $5,500 per month working for an employer. The FICA tax rate
for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The current
FUTA tax rate is 0.6%, and the SUTA tax rate is 4.4%. Both unemployment taxes are
applied to the first $7,000 of an employee’s pay. The employee has $182 in federal
income taxes withheld. The employee has voluntary deductions for health insurance of
$150 and contributes $75 to a retirement plan each month. What is the amount of net
pay for the employee for the month of January?
A.$4,827.00
B.$4,672.25
C.$4,628.25
D.$4,386.25
E.$4,430.25
20) A company borrows $125,000 from the Northern Bank and receives the loan
proceeds in cash. This represents a(n):
A.Revenue activity.
B.Operating activity.
C.Expense activity.
D.Investing activity.
E.Financing activity.
21) All of the following statements regarding liabilities are true except:
A.A liability is a probable future payment of assets or services.
B.Unearned future wages to be paid to employees should be recorded as liabilities.
C.For a liability to be reported, it must be a present obligation that results from a past
transaction or event, and requires a future payment of assets or services.
D.Information about liabilities is more useful when the balance sheet identifies them as
either current or long term.
E.Liabilities can involve uncertainty in whom to pay.
22) Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a
competitor. The real estate consists of land appraised at $35,000, a building appraised at
$105,000, and paddleboats appraised at $210,000. Compute the cost that should be
allocated to the building.
A.$97,500.
B.$105,000.
C.$89,178.
D.$140,000.
E.$93,000.
23) Managerial accounting information:
A.Is used mainly by external users.
B.Involves gathering information about costs for planning and control decisions.
C.Is generally the only accounting information available to managers.
D.Can be used for control purposes but not for planning purposes.
E.Has little to do with controlling costs.
24) Accounts payable are:
A.Amounts owed to suppliers for products and/or services purchased on credit.
B.Long-term liabilities.
C.Estimated liabilities.
D.Not usually due on specific dates.
E.Always payable within 30 days.
25) Prior to June 30, a company has never had any treasury stock transactions. A
company repurchased 100 shares of its common stock on June 30 for $40 per share. On
July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of
the shares at $38 per share. What is the balance in the Treasury Stock account on
August 2?
A.$5,050.
B.$2,600.
C.$100.
D.$1,200.
E.$0.
26) Standards for comparisons in financial statement analysis do not include:
A.Intra-company standards.
B.Competitors’ standards.
C.Industry standards.
D.Management standards.
E.Guidelines (rules of thumb).
27) Salvage value is:
A.Not a factor relevant to determining depletion.
B.A factor relevant to amortizing an intangible asset with an indefinite life.
C.An estimate of the asset’s value at the end of its benefit period.
D.A factor relevant to determining depreciation under MACRS.
E.A factor relevant to determining depreciation that cannot be revised during an asset’s
useful life.
28) Refer to the following selected financial information from McCormik, LLC.
Compute the company’s days’ sales uncollected for Year 2.
A.43.9.
B.42.3.
C.46.2.
D.80.0.
E.113.3.
29) A change in an accounting estimate is:
A.Reflected in past financial statements.
B.Reflected in future financial statements and also requires modification of past
statements.
C.Reflected in current and future years’ financial statements, not in prior statements.
D.Not allowed under current accounting rules.
E.Considered an error in the financial statements.
30) Kozlov Corporation has provided the following data from its activity-based costing
system:
The company makes 430 units of product A21W a year, requiring a total of 690
machine-hours, 40 orders, and 10 inspection-hours per year. The product€s direct
materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit.According to
the activity-based costing system, the total overhead cost of producing 420 units of
A21W is:
A.$11,121.40
B.$13,338.20
C.$32,370.00
D.$12,440.20
E.$12,215.70
31) Marquis Company uses a weighted-average perpetual inventory system.
What is the amount of the cost of goods sold for this sale?
A.$148.00
B.$150.50
C.$158.40
D.$210.00
E.$330.00
32) Based on a predicted level of production and sales of 30,000 units, a company
anticipates total contribution margin of $105,000, fixed costs of $40,000, and operating
income of $52,000. Based on this information, the budgeted operating income for
28,000 units would be:
A.$52,000.
B.$135,333.
C.$58,000.
D.$72,500.
E.$105,000.
33) Stock that was reacquired and is still held by the issuing corporation is called:
A.Capital stock.
B.Treasury stock.
C.Redeemed stock.
D.Preferred stock.
E.Callable stock.
34) What factors should be considered before establishing a partnership?
35) A company reports the following stockholders’ equity:
Compute the (1) number of common shares outstanding and (2) book value per
common share.
36) Refer to the following information about the Finishing Department in the Davidson
Factory for the month of June. Davidson Factory uses the FIFO method of inventory
costing.
37) Calculate the percent increases for each of the following selected balance sheet
items.
38) Identify and describe the three categories of manufacturing costs.
39) Briefly describe a master budget and the sequence in which the individual budgets
within the master budget are prepared.
40) Define a note receivable and explain how to calculate the interest due on a
short-term note receivable.