Question 1: Book value is computed as:
A.current market value less residual value.
B.cost less residual value.
C.current market value less accumulated depreciation.
D.cost less accumulated depreciation.
Question 2: The first month of operation showed the net cash from operating activities to be $3,760, the net cash from investing activities to be ($5,415), and the ending cash balance to be $3,425. The net cash from financing activities must be:
A.$1,770.
B.$5,080.
C.$5,750.
D.$12,600.
Question 3: The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred as vertical analysis.
A. True
B. False
Question 4: Merchandise inventory shrinkage will increase Merchandise Inventory.
A. True
B. False
Question 5: If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.
A. True
B. False
Question 6: If the total unit cost of manufacturing Product Y is currently $40 and the total unit cost after modifying the style is estimated to be $48, the differential cost for this situation is $48.
A. True
B. False
Question 7: East, Inc. had beginning inventory of $10,000, purchases of $25,000, and ending inventory of $5,000. What is East's cost of merchandise sold?
A.$10,000
B.$25,000
C.$5,000
D.$30,000
Question 8: The relationship of $225,000 to $100,000, expressed as a ratio, is:
A.2.0 to 1.
B.1.8 to 1.
C.1.5 to 1.
D.2.25 to 1.
Question 9: The accrual basis of accounting requires revenue to be recorded when the service is performed.
A. True
B. False
Question 10: The two methods of accounting for uncollectible receivables are the allowance method and the:
A.equity method.
B.direct write-off method.
C.interest method.
D.cost method.
Question 11: If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is:
A.average cost.
B.LIFO.
C.FIFO.
D.All methods will generate the same net income.
Question 12: Under the cash basis of accounting, expenses are recorded when paid.
A. True
B. False
Question 13: If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point (in dollars)?
A.$1,875,000
B.$1,250,000
C.$1,666,667
D.$1,350,000
Question 14: A practical approach that is frequently used by managers when setting normal selling price is the:
A.cost-plus approach.
B.economic theory approach.
C.price graph approach.
D.market price approach.
Question 15: For the year that just ended, a company reports net income of $1,500,000. There are 500,000 shares authorized, 300,000 shares issued, and 250,000 shares of common stock outstanding. What is the earnings per share?
A.$5.00
B.$2.50
C.$6.00
D.$3.00
Question 16: The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred as vertical analysis.
A. True
B. False
Question 17: Paying expenses affects which financial statement elements?
A.Assets only
B.Stockholders' equity only
C.Assets and stockholders' equity
D.Assets and liabilities
Question 18: An adjusting entry would adjust revenue so that it is reported when earned and not when cash is received.
A. True
B. False
Question 19: Which of the following is a characteristic of the just-in-time philosophy?
A.Increases inventory to protect against process problems
B.Tolerates defects
C.Emphasizes push manufacturing
D.Emphasizes product-oriented layout
Question 20: The accrual basis of accounting recognizes:
A.revenues when cash is received and expenses when cash is paid.
B.revenues when earned and expenses when cash is paid.
C.revenues when cash if received and expenses when incurred.
D.revenues when earned and expenses when incurred.
Question 21: If the cost of an item of inventory is $60 and the current replacement cost is $65, the amount included in inventory according to the lower-of-cost-or-market method is:
A.$5
B.$60
C.$65
D.$125
Question 22: A cost that will not be affected by later decisions is termed:
A.historical cost.
B.differential cost.
C.sunk cost.
D.replacement cost.
Question 23: The branch of accounting related to the management's financial decisions is known as financial accounting.
A. True
B. False
Question 24: The balance sheet represents the accounting equation.
A. True
B. False
Question 25: The stockholders' equity of a company should equal the sum of its total assets and total liabilities.
A. True
B. False
Question 26: Inventories of finished products are reported as current assets on a manufacturer's balance sheet.
A. True
B. False
Question 27: An activity-based costing system allocates factory overhead rates to products or services using:
A.a single plantwide overhead rate.
B.the cost of activities based on an activity rate times the number of activity-based usage quantities.
C.an allocation of budgeted revenues produced by a product or service.
D.an end-of-year allocation of costs to products or services.
Question 28: The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called:
A.depletion.
B.deferral.
C.amortization.
D.depreciation.
Question 29: Inventory refers to the:
A.merchandise held for sale in the normal course of business.
B.materials sold during the year.
C.assets purchased to assist the production process.
D.claims arising from the purchase of raw material.
Question 30: Direct materials, work-in-process, and finished goods inventory are most likely to be reported on the balance sheet of a(n):
A.financial consultant.
B.apparel boutique.
C.automobile company.
D.insurance company.
Question 31: When companies sell their receivables to other companies, the transaction is called factoring.
A. True
B. False
Question 32: Hill Co. can further process Product O to produce Product P. Product O is currently selling for $65 per pound and costs $42 per pound to produce. Product P would sell for $82 per pound and would require an additional cost of $13 per pound to produce. The differential revenue of producing Product P is $17 per pound.
A. True
B. False
Question 33: Which one of the following is not a characteristic generally evaluated in ratio analysis?
A.Liquidity
B.Profitability
C.Solvency
D.Marketability
Question 34: If paid-in capital in excess of par-preferred stock is $80,000, preferred stock is $500,000, paid-in capital in excel of par-common stock is $50,000, common stock is $1,000,000, and retained earnings is $230,000, the total stockholders' equity is $1,860,000.
A. True
B. False
Question 35: Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet?
A.As a revenue
B.As the cost of merchandise sold
C.It does not appear on the balance sheet
D.As a current asset
Question 36: In reference to a promissory note, the person who makes the promise to pay is called the:
A.maker.
B.payee.
C.seller.
D.receiver.
Question 37: Long-lived assets that are intangible in nature, used in the operations of the business and not held for sale in the ordinary course of business are called fixed assets.
A. True
B. False
Question 38: In a transaction where purchased merchandise has been returned, the buyer will increase the Sales Returns and Allowances account and the seller will increase the Purchases Returns and Allowances account.
A. True
B. False
Question 39: The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.
A. True
B. False
Question 40: If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as factory overhead cost.
A. True
B. False