Problem 1. Buying stock in a corporation is attractive to investors because:
A. Stockholders are not liable for the corporation's actions and debts.
B. Stock is easily transferred.
C. A corporation has unlimited life.
D. Shareholders are not agents of the corporation.
E. All of the above.
Problem 2. The carrying value of a long-term note payable:
A. Is computed as the future value of all remaining future payments, using the market rate of interest.
B. Is the face value of the long-term note less the total of all future interest payments.
C. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance.
D. Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest.
E. Decreases each time period the discount on the note is amortized.
Problem 3. Current assets divided by current liabilities is the:
A. Current ratio.
B. Quick ratio.
C. Debt ratio.
D. Liquidity ratio.
E. Solvency ratio.
Problem 4. Goods a company acquires to use in making products are called:
A. Cost of goods sold.
B. Raw materials inventory.
C. Finished goods inventory.
D. Goods in process inventory.
E. Conversion costs.
Problem 5. If a company applies overhead to production with a predetermined rate, a credit balance in the Factory Overhead account at the end of the period means that:
A. The bookkeeper has made an error because the debits don't equal the credits.
B. The balance will be carried forward to the next period as an overhead cost.
C. Actual overhead was less than the overhead amount charged to production.
D. The overhead was underapplied for the period.
E. Actual overhead was greater than the overhead amount charged to production.
Problem 6. The contribution margin ratio:
A. Is the percent of each sales dollar that remains after deducting total unit variable cost.
B. Is the percent of each sales dollar that remains after deducting total unit fixed cost.
C. Is the percent of each sales dollar that remains to cover fixed costs and contribute to the managers' incomes.
D. Cannot be used in conjunction with other analytical tools.
E. Is the same as the unit contribution margin.
Problem 7. A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise or materials to be purchased, the expense to be incurred, the long-term assets to be purchased, and the amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet, is called a:
A. Master budget.
B. Cash budget.
C. Capital expenditures budget.
D. Rolling budget.
E. Production budget.
Problem 8. When preparing the cash budget, all the following should be considered except:
A. Cash receipts from customers.
B. Cash payments for merchandise.
C. Depreciation expense.
D. Cash payments for income taxes.
E. Cash payments for capital expenditures.
Problem 9. An internal report that compares actual cost and sales amounts with budgeted amounts and identifies the differences between them as favorable or unfavorable variances is called a:
A. Performance report.
B. Production report.
C. Budget report.
D. Variance report.
E. Standard report.
Problem 10. A flexible budget is prepared:
A. Before the operating period only.
B. After the operating period only.
C. During the operating period only.
D. At any time in the planning period.
E. A flexible budget should never be prepared.