1. The budget procedure that requires all levels of management to start from zero in estimating sales, production, and other operating data is called zero-based budgeting. T or F
2. The cost method of accounting for stock:
A. recognizes dividends as income B. requires the investments be increased by te reported net income of the investee C. is only appropriate as part of a consolidation D. requires the investment be decreased by the reported net income of the investee
3. The flexible budget is, in ffect, a series of static budgets for different levels of activity. T or F
4. The investor carrying an investment by the equity method records cash dividends receieved as an increase in the carrying amount of the investment. T or F
5. On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22 per share plus a$240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee. The journal entry for the sale would include:
A. a debit to cash for $111,840 B. a credit to loss on sale for $23,680 C. a credit to Investments for $112,000 D. a debit to cash for $112,000
6. Most companies invest excess cash in bonds as investments in order to profit long term from the growth of the investment. T or F
7. Nonmanufactoring costs are classified into two categories: selling and administractive. T or F
8. Trading securities are reported on the balance sheet at cost. T or F
9. Employees view budgeting more positively when goals are established for them by senior management T or F
10. For accounting purposed, the method used to account for investments in common stock is determined by:
a- the amount paid for the stock by the investor. b- the extent of an investor's influnce over the operating and financial affais of the investee. c- whether the stock has pai dividends in past years. d- whether the acquisition of the stock by the investor was "friendly" or "hostile"
11. If the proceeds from the sale of bond investments exceeds the carrying amount of the bonds, a gain is realized. T or F
12. Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $20,000 net loss. Zach Company's entry would include a
a. credit to cash for $9,000
b. debit to the investment account for $9,000
c. credit to a loss account for $9,000
d. credit to the investment account for $9,000