Part -1:
Question 1#
Merchandising consists of:
Answers:
a. buying products.
b. providing a service.
c. selling products.
d. both buying and selling products.
Question #2
Merchandise inventory and the cost of goods sold for the current period using periodic inventory is determined:
Answers:
a. once a year.
b. on a quarterly basis.
c. on a weekly basis.
d. when a physical inventory is taken.
e. on a half monthly basis.
Question #3
Which of the following is the correct order of the steps in the accounting cycle for a merchandising company?
I. The company sells inventory to customers. creating Accounts receivable.
II. The company collects cash.
III. The company buys inventory.
answer:
a. III, I, II
b. I, II, III
c. II, I, III
d. III, II, I
e. II, III, I
Question #4
Which of the following assets does a merchandising company-but NOT a service company need?
Answers:
a. Accounts receivable
b. Prepaid insurance
c. Merchandise inventory
d. Equipment
e. A and 8
Question #5
What is the first step in the accounting cycle for a merchandising company?
Answers:
a. The company sells inventory to customers. creating Accounts receivable.
b. The company collects cash.
c. The company buys inventory.
d. None of the above is correct.
e. A and B
Question #6
Under a perpetual inventory system. which of the following would not be required?
Answers:
a. A tracking of the receipt of inventory
b. A tracking of the payment of inventory
c. A tracking of the cost of goods sold
d. A weekly counting of the inventory
e. A and B
Question #7
What is a purchase return?
Answers:
a. A retum of merchandise that is defective or damaged
b. A customer refund from the sale of inventory
c. Both a and b
d. Neither a nor b
e. None of the above
Question #8
In the credit terms of "2/10 n/30'. what does the -2/10" mean?
Answers:
a. The invoice must be paid in 2 clays or a 10% tate charge wel be assessed
b. The invoice was printed 2 days after the sale and Is due in I0 days.
c. The goods shipped took 2 days to arrive and the charge was $10.00.
d. The vendor win give a 2% discount if the invoice is paid in 10 days.
e. The vendor era give a 4% discount if the invoice is paid in 3 days.
Question #9
Which of the following statements concerning the Inventory account is true?
Answers:
a. The Inventory account is used only for goods purchased for resale
b. inventory is an asset until it is sold.
c. The Inventory account is used for goods purchased for resale and for supplies to te used by the business
d. None of the above
e. Both A and B are true.
Question #10
A company that uses the perpetual inventory method purchases inventory of $1.000 on account with terms of 2/10 net/30. Which of the following et made to record payment for the inventory if the payment is made 20 days later?
Answers:
a. The accounting entry would be a $1.000 debit to Accounts payable and a $1,000 credit to Cash.
b. The accounting entry would be a $1.000 debit to Accounts payable. a $20 credit to Inventory and a $980 credit to Cash.
C. The accounting entry would be a $20 debit to Inventory. a $1.000 debit to Accounts payable and a $1020 credit to Cash.
d. The accounting entry would be a $980 debt to Accounts payable. a $20 debt to Inventory and a $1.000 credit to Cash.
e. C and D
Question #11
A company that uses the perpetual inventory method purchases inventory of $1.000 on account with terms of 2/10 net/30. Defective inventory of $200 is returned 2 days later. Which of the following entries would be made to record payment for the inventory if the payment is made within 10 days?
Answers:
a. The accounting entry would be an $800 debit to Accounts payable and an $800 credit to Cash.
b. The accounting entry would be a $784 debit to Accounts payable. a $16 debit to Inventory and an $800 credit to Cash.
c. The accounting entry would be a $16 debit to Inventory, an $800 debit to Accounts payable and an $816 credit to Cash.
O. The accounting entry would be an $800 debit to Accounts payable. a 516 credit to Inventory and a $784 credit to Cash.
e. A and B
Question #12
A company that uses the perpetual inventory method purchases inventory of $1,000 on account with terms of 2/10 net/30. Defective inventory of $200 is returned 2 days later. Which of the following entries would be made to record payment for the inventory if the payment is made 20 days later?
Answers:
a. The accounting entry would be an $800 debit to Accounts payable and an $800 credit to Cash
b. The accounting entry would be a $784 debit toAccounts payable. a $115 debit to Inventory and an $800 credit to Cash.
e. The accounting entry would be a $10 debit to inventory. an $800 debit to Accounts payable and an $810 credit to Cash
d. The accounting entry would be an $800 debit to Accounts payable. a $16 credit to Inventory and a $784 credit to Cash.
e. All of the above
Question #13
FOB Shipping Point' means that
Answers:
a. the Seller normally pays the transportation costs.
b. the buyer normally pays the transportation costs.
c. both A and B are true.
O. neither A nor B we true.
e. Food On Board
Question #14
Which of the following states that the business should use the same accounting methods from period to period?
Answers:
a. Materiality concept
b. Going concern concept
c. Accounting conservatism
d. Disclosure principle
e. Consistency principle
Question #15
Which inventory valuation model does not allow control of inventory by visual inspection?
Answers:
a. First-in. First-out
b. Last-in. First-out
c. Perpetual cash flow method
d. Periodic inventory method
e. Perpetual inventory method
Question #16
Which of the following requires that financial statements should report the least favorable figures?
Answers:
a. Accounting conservatism
b. Materiality concept
c. Disclosure principle
d. Consistency principle
e. all of the above
Question #17
A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the First-in. First-out inventory costing method. what is the amount of inventory on the December 31 balance sheet?
Answers:
a. $1.500
b. $1.250
c. $1.000
d. $2.250
e. $4.000
Question #18
Which of the following states that a company must perform strictly proper accounting ONLY for items that are significant to the business's financial statements?
Answers:
a. Accounting conservatism
b. Materiality concept
c. Disclosure principle
d. Consistency principle
e. All of the above
Question #19
Which of the following appears on the balance sheet for a merchandising company?
Answers:
a. Beginning inventory
b. Ending inventory
c. Cost of goods sold
d. Gross profit
e. None of the above
Question #20
Which of the following appears on the income statement for a merchandising company?
Answers:
a. Ending inventory
b. Cost of goods sold
c. Gross profit
d. Both B and C
e. None of the above
Question #21
Which of the following principles require the application of the lower-of-cost-or-market rule?
Answers:
a. Accounting conservatism
b. Materiality concept
c. Disclosure principle
d. Consistency principle
e. Going concern concepts
Question #22
Which of the following is (are) inventory costing methods allowed by GAAP?
Answers:
a. Last in first out
b. Average cost
c. Specific unit oast
d. A & B
e. All of the above
Question #23
Under which of the following inventory costing methods is ending inventory based on the cost of the oldest purchases?
Answers:
a. Specific unit cost
b. Average oast
c. Last in first out
d. First in first out
e. Weighted average cost
Question #24
Under which of the following inventory costing methods is ending inventory based on the cost of the most recent purchases?
Answers:
a. Specific unit cost
b. Average cost
c. Last in first out
d. First in first out
e. Weighted average cost
Question #25
The following data is available:
| On hand at start of period |
400 units |
$3.00 unit cost |
| Fist purchase |
600 units |
$3.50 unit cost |
| Second purchase |
700 units |
$3.30 unit cost |
| Third purchase |
500 units |
$3.40 unit cost |
| Number of unts available for sale |
2200 total units |
|
| On hand at end Opened |
600 unit cost |
|
| Number of tunes sold during period |
1.600 sold |
|
Of the 1600 units sold. 300 were from the beginning inventory. 500 from the first purchase. 600 from the second purchase and 200 from the third purchase. The cost of goods sold under specific unit cost would be:
Answers:
a. $5.280.
b. $5.410.
e. $5.310.
d. $5.312.
e. $8.758
Part -2:
Question #1
Which of the following is TRUE of internal control?
Answers:
a. A company's outside auditor is responsible for the company's internal control system.
b. One of the major purposes of internal control is to ensure accurate. reliable accounting records.
c. Internal control procedures tend to diminish the importance of operational efficiency.
d. Public companies generally had no internal control systems prior to the enactment of the Sarbanes-Oxley Act
e. all of the above
Question #2
Which of the following are purposes of internal control?
Answers:
a. One of the purposes of internal control is to encourage employees to folow company potty.
b. One of the purposes of internal control is to safeguard the company's assets.
c. One of the purposes of internal control is to ensure accurate. reliable accounting records.
d. A and C
e. All of the statements above are true.
Question #3
Which of the following is NOT one of the shields provided by internal control?
Answers:
a. Internal control shields against waste.
b. Internal control shields against Sarbanes-Oxley requirements.
c. Internal control shields against theft.
d. Internal control shields against inefficiency.
e. A and C
Question #4
By law, the provisions of Sarbanes-Oxley apply to:
Answers:
a. all companies.
b. private companies.
c. public companies.
d. public companies with sales greater than one billion dolars.
e. Private companies with sales greater than one billion dollars
Question #5
Which of the following describes the treasurer of a large company?
Answers:
a. The treasurer is the chief accounting officer.
b. The treasurer reports to the audit committee.
c. The treasurer is responsible for cash management
d. The treasurer reports to the vice-president of production.
e. The treasurer is responsible purchases
Question #6
Which of the following is a benefit of selling on credit?
Answers:
a. Revenues are increased by malting sales to a wide range of customers.
b. Profits are increased by malting sales to a wide range of customers.
c. Some customers do not pay. creating an expense_
d. Both A and B are benefits of selling on credit.
e. non of the above
Question #7
Which of the following is included in "Other receivables?
Answers:
a. Loans to employees
b. Accounts receivables
c. Notes receivables
d. Investments
e. receipts from fixed assets sales
Question #8
The date on which a promissory note comes due is the:
Answers:
a. discount date.
b. maturity date.
c. acaual date.
d. A and C.
e. A and B.
Question #9
GAAP prefers companies to use the:
Answers:
a. direct method to evaluate bad debts.
b. allowance method to evaluate bad debts.
c. both A and B.
d. neither A or B.
e. GAAP does not mention anything about bad debt evaluation
Question #10
Reducing expense to increase operating profit is representative of:
Answers:
a. safeguarding assets.
b. following company policies.
c. promoting operational efficiency.
d. ensuring accurate. reliable accounting records
e. all of the above
Question #11l
Keeping office supplies under lock and key is representative of:
Answers:
a. safeguarding assets.
b. following company policies.
c. promoting operations efficiency.
d. ensuring accurate. reliable accounting records.
e. B and C
Question #12
Which of the following is a requirement of the Sarbanes-Oxley Act?
Answers:
a. The outside auditor must issue an internal control report for each pubic company. and the Public Company Oversight Board evaluates the clients internal controls.
b. The Public Company Oversight Board issues an internal control audit report fcc every publicly held company.
c. Accounting firms may not both audit a public client and also provide certain consulting services for the same client
d. Public companies oversee the work of auditors of other public companies.
e. A and B
Question #13
Which of the following are employees of the business?
Answers:
a. Insurance auditors
b. External auditors
c. IRS auditors
d. Internal auditors
e. All of the above
Question #14
Which of the following is a disadvantage of selling on credit?
Answers:
a. Sales can be made to a more diverse group of customers.
b. Profits are increased by malting sales to a wide range of customers.
c. Some customers do not pay. creating an expense.
d. Both A and B are disadvantages of selling on credit
e. All of the above
Question #15
Which of the following statement are true?
Answers:
a. Accounts are listed as miscellaneous assets
b. Notes receivable rarely charge interest
c. Notes receivable are similar to promissory notes
d. Accounts receivable always charge interest
e. All of the above
Question #16
Which of the following statements is false?
Answers:
a. Accounts receivable are generally less liquid than cash.
b. Accounts receivable are listed as current assets.
c. Notes receivable are less formal than accounts receivable.
d. Accounts receivable are matched to revenues.
e. A and B
Question #17
Which of the following are key issues in controlling and managing receivables?
Answers:
a. Separate cash-handling. credit. and accounting duties to keep employees from stealing cash collected from customers.
b. Extend credit only to customers who are most likely to pay.
c. Pursue collection from customers to maximize cash flow.
d. A and B
e. All of the above
Question #18
Which of the following is a plan of action to be taken in accounting for receivables?
Answers:
a. Run a credit check on prospective customers.
b. Estimate the amount of uncollectible receivables.
c. Keep a close eye on collections from customers.
d. Design the internal control system to separate duties.
e. none of the above
Oueston #19
One benefit of offering credit to customers is:
Answers:
a that it allows for a bigger customer base
b. that it allows for gteater revenues
c. that it allows for gteater profit potential
d. all of the above
e none of the above
Quesbon #20
The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible Net credit sales are $115.000. What will be the amount of uncolkfcbble-account expense reported on the income statement'
Answers:
a. $3275
b. $3.075
c. $2875
d. $2.675
e. $2,854
Question #21
Under what method does the balance in allowance for doubtful accounts have no bearing on the journal adjusting journal entry'
Answers:
a. Percentage of saes
b. Aging of ractinrades
c. Percentage of Accounts receivatte
d. All have to use the balance
e. Non of the above
Question #22
The Allowance for uncollecOble accounts currently has a credit balance of 9900 After analyzing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that uncollecbble accounts will be $15,000. What will be the amount 04 uncollecoble accounts expense reported on the income statements
Answers:
a. $15.000
b. $14.900
c. $14.100
d. $15.0)0
e. $14.200
Quesbon #23
The following information is from the 2009 records of Rawhide Leather Products.
| Accounts receivable. December 31. 2009 |
330,000 (debt) |
| Allowance for Uncollectible accounts. December 31, 2009 prior to adjustment |
4,500 (credit) |
| Net credit sales for 2009 |
1.500.000 |
| Accounts wltten off as Uncollectible during 2009 |
25,500 |
| Cash sales during 2009 |
270,000 |
Uncollectible accounts expense is determined by the direct write-off method. Which of the following will be the amount of Uncollectibk accounts expense?
Answers:
a. $34.6130
b. $25.580
c. $30.500
d. $30.0:0
e. all of the above
Question #24
A company has significant uncohechble receivables. Why is the treed write-off method unacceptable?
Answers:
a. Assets we oversaw; on the balance sheet
b. It violates the matching piece*
C. Both A and 8 are true
d. Nether A nor B are true
e. None of the above
Question #25
The allowance for uncollectiblt accounts currently has a debit balance of $200 The company's management estimates that 2.5% of net credit sales will be uncollectable. Net credit sales are $115,000.
What will be the amount of allowance for incollectaible accounts reported On the balance sheet?
Answers:
a $2.675
b. $3.075
c. $3275
d. $2.875
e. $2.875
Part -3:
Question #1
Which of the following is the definition of horizontal analysis?
Answers:
a. Horizontal analysis is the study of percentage changes in comparative financial statements.
b. Horizontal analysis is the analysis of a financial statement that reveals the relationship of each statement item to a specified base. which is the 100% figure.
c. Horizontal analysis is the practice of comparing a company with other companies that are leaders.
d. None of the above is a definition of horizontal analysis.
e. All of the above
Question #2
Which of the following is the definition of trend percentage analysis?
Answers:
a. Trend percentage analysis is the analysis of a financial statement that reveals the relationship of each statement item to a specified base. which is the 100% figure.
b. Trend percentage analysis is the practice of comparing a company with other companies that are leaders.
c. Trend percentage analysis is the analysis in which percentages are computed by selecting a base year as 100% and expressing amounts for following years as a percentage of the base amount.
d. Trend percentage analysis is the study of percentage changes in comparative financial statements.
e. A and C
Question #3
Which of the following types of analysis would reveal that sales increased by 520.000 from 2005 to 2006?
Answers:
a. Capital analysis
b. Vertical analysis
c. Profitability analysis
d. Horizontal analysis
e. None of the above
Question #4
What type of analysis is illustrated in the following table?
| Account |
2007 |
2005 |
Change Amount |
Change Percent |
| Currert assets |
$130,000 |
$100,000 |
$30,000 |
30.00% |
| Anrts reateatte |
114,000 |
120,000 |
-6,000 |
-5.00% |
Answers:
a. The table illustrates capital analysis.
b. The table illustrates horizontal analysis.
c. The table illustrates ratio analysis.
d. The table illustrates vertical analysis.
e. Aand D
Question #5
What type of analysis is illustrated in the following table?
|
|
Company A
|
Industry
Average
|
|
Account
|
2007 - %
|
2006 -%
|
|
Current assets
|
33.33%
|
30.30%
|
|
Accounts receivable
|
41.03%
|
45.45%
|
|
Merchandise inventory
|
25.64%
|
24.24%
|
|
Total assets
|
100.00%
|
100.00%
|
|
Current lia birdies
|
38.46%
|
30.30%
|
|
Long-term liabilities
|
15.38%
|
30.30%
|
|
Common stock
|
25.64%
|
24.24%
|
|
Retained earnings
|
20.51%
|
15.15%
|
|
Total liabilities and
|
|
|
|
stockholders' equity
|
100.00%
|
100.00%
|
|
|
|
Answers:
a. The table illustrates horizontal analysis.
b. The table illustrates benchmarldng.
c. The table illustrates vertical analysis.
d. The table illustrates ratio analysis.
e. All of the above
Question #6
The following is a summary of information presented on the financial statements of The Cake Company on December 31. 2007.
|
Account
|
2007
|
2006
|
|
Current assets
|
$65,000
|
$50,000
|
|
Accounts receivable
|
80,000
|
75,000
|
|
Merchandise inventory
|
50,000
|
40,000
|
|
Current liabilities
|
75,000
|
50,000
|
|
Long-term liabilities
|
30,000
|
50,000
|
|
Common stock (2007: 5,000
shares; 2006: 4,000 shares)
|
50,000
|
40,000
|
|
Retained earnings
|
40,000
|
25,000
|
|
Net sales revenue
|
$525,000
|
$500,000
|
|
Cost of goods sold
|
400.000
|
395.000
|
|
Gross profit
|
125,000
|
105,000
|
|
Selling and general expenses
|
45.000
|
50.000
|
|
Income from operations
|
80,000
|
55,000
|
|
Income tax expense
|
24,000
|
16,500
|
|
Net income
|
$56,000
|
$38,500
|
What would a horizontal analysis report with respect to merchandise inventory?
Answers:
a. Horizontal analysis would report a current ratio of .87.
b. Horizontal analysis would report merchandise inventory as 25.84% of total assets.
c. Horizontal analysis would report inventory turnover as 8 times.
d. Horizontal analysis would report a 25% increase in merchandise inventory.
e. none of the above
Question #7
Which of the following is the definition of vertical analysis?
Answers:
a. Vertical analysis is the practice of comparing a company with other companies that are leaders.
b. Vertical analysis is the analysis in which percentages are computed by selecting a base year as 100% and expressing amounts for following years as a percentage of the base amount.
c. Vertical analysis is the study of percentage changes in comparative financial statements.
d. Vertical analysis is the analysis of a financial statement that reveals the relationship of each statement kern to a specified base. which is the 100% figure.
e. A and B
Question #8
Which of the following is generally the base amount when performing vertical analysts of a balance sheet?
Answers:
a. Total assets
b. Net assets
c. Total liabilities
d. Stockholders' equity
e. Current liabilities
Question #9
The following is a summary of information presented on the income statement of HR Flowers for December 31. 2007.
|
Account
|
2007
|
|
2006
|
|
Net sales revenue
|
$487,000
|
100.00%
|
$500,000
|
|
Cost of goods sold
|
330.000
|
67.76%
|
395.000
|
|
Gross profit
|
157,000
|
32.24%
|
105,000
|
|
Selling and general expenses
|
70,000
|
14.37%
|
50,000
|
|
N et income before income tax expense
|
87,000
|
17.86%
|
55,000
|
|
Income tax expense
|
24.000
|
4.93%
|
16.500
|
|
N et income
|
$84000
|
12.94%
|
$4R SOQ
|
What would vertical analysis report with respect to 2007 net income before income tax and income tax expense?
Answers:
a Vertical analysis would report net income before income tax as 17.88% and income tax expense as 4.93% of net sales revenue.
b. Vertical analysis would report a 58.18% increase in both net income before income tax and income tax expense.
c. Vertical analysis would report a 832000 increase in both net income before income tax and income tax expense.
d. None of the above is correct.
e. 13 and C
Question #10
Which of the following is an example of an industry that would use a process costing system rather than a job order costing system?
Answers:
a. Custom furniture manufacturer
b. Unique furniture accessories manufacturer
c. Paint manufacturer
d. Aircraft manufacturer
e. A and D
Question #11
Job order costing is most likely used in which of the following industries?
Answers:
a. Pharmaceutical manufacturing
b. Textbook publishing
c. Chemical manufacturing
d. Food and beverage manufacturing
e. all of the above
Question #12
Which of the following companies is most likely to use job order costing?
Answers:
a. Swenson Mobil Oil Refinery
b. Hunter's Custom Furniture Company
c. Oliver Chemical Company
d. Somody Cereal Company
e. non of the above
Question #13
Which costing system would better account for a unique individual product?
Answers:
a. Job order costing system
b. Product costing system
c. Process costing system
d. Variable costing system
e. Production planning
Question #14
The entry to record the purchase of materials on account using a job order costing system would include a:
Answers: a. debit to materials inventory.
b. debit to accounts payable.
c. debit to work in process inventory.
d. credit to materials inventory.
e. credit to fixed assets
Question #15
The entry to transfer direct labor and indirect tabor costs from manufacturing wages into production includes a debit to which of the following?
Answers:
a. Manufacturing overhead and work in process inventory
b. Finished goods inventory and cost of goods sold.
c. Manufacturing overhead and cost of goods sold.
d. Finished goods inventory and work in process inventory.
e. Finished goods inventory
Question #16
The journal entry to issue $500 of direct materials and $30 of indirect materials to production involves a debit to what account(s)?
Answers:
a. Work in process inventory for $500 and manufacturing overhead for $30
b. Work in process inventory for $500 and indirect materials expense for $30
c. Manufacturing overhead for $530
d. Work in process inventory for $530
e. Work in process inventory for $800
Question #17
The journal entry to assign $1,500 of direct labor and $200 of indirect tabor for the current period involves a debit to what account(s)?
Answers:
a. Manufacturing overhead for $1.700
b. Work in process inventory for $1.500 and indirect labor expense for $200
c. Work in process inventory for $1.500 and manufacturing overhead for $200
d. Work in process inventory for $1.700
e. A and D
Question #18
The journal entry to record $200 of depreciation on factory equipment used in production for the current period involves which of the following?
Answers:
a. A debit to accumulated depreciation-factory equipment for $200
b. A credit to manufacturing overhead for $200
c. A debit to depredation expense-factory equipment for $200
d. A debit to manufacturing overhead for $200
e. all of the above
Question #19
The following four steps are necessary in order to use an activity-based costing system:
1. Compute the allocation rate for each activity.
2. Identify activities and estimate their total costs.
3. Identify the cost driver for each activity and then estimate the quantity of each driver's allocation base.
4. Allocate the indirect costs to the cost object
In what order are these steps performed?
Answers:
a. 1.2.3,4
b. 3.1.2.4
c. 4.3.2.1
d. 2.1.3.4
e. 2.3.1.4
Question #20
Which of the following statements is correct?
Answers:
a. Traditional costing systems allocate both manufacturing costs and ncnmanufacturing costs.
b. Activity-based costing systems allocate only manufacturing costs.
c. Activity-based costing systems allocate both manufacturing costs and nonmanufacturing costs.
d. Traditional costing systems tend to be more accurate and less expensive.
e. all of the above
Question #21
Which of the following is most likely to be the cost driver for the packaging and shipping activity?
Answers: a. Number of components
b. Number of orders
c. Hours of testing
d. Number of setups
e. Number of shops
Question #22
A 15% increase in production will result in:
Answers:
a. a 15% increase in the variable cost per unit
b. a 15% increase in total mixed costs.
c. a 15% increase in total manufacturing costs.
d. a 15% decrease in total variable costs.
e. non of the above
Question #23
Which of the following statements is correct with respect to total variable costs. within the relevant range?
Answers:
a. They will decrease as production increases.
b. They will remain the same as production levels change.
c. They will decrease as production decreases.
d. They will increase as production decreases_
e. none of the above
Question #24
Which of the following statements is not correct?
Answers:
a. The total fixed cost is constant throughout the relevant range of activity.
b. The breakeven point increases if variable costs increase.
c. The margin of safety increases if fixed costs decrease.
d. The mbced cost per unit is constant throughout the relevant range of activity.
e. all of the above
Question #25
bony was Month* the Meg bill for her doggy day spa and determined that her highest WO $3.000. occurred in Jury when she washed 2.000 dogs and her lowest oat $2.000. occurred in November when she washed 1,000 dogs. That was the variable cost per dog wash associated with Jenny's water bill?
Answers:
a. $.67
b. $100
c. $0.50
d. $2 CO
e. $30
Part -4:
Question #1
Fixed costs that do not differ between two alternatives are:
Answers:
a. relevant to the decision.
b. considered opportunity costs.
c. irrelevant to the decision.
d. important only if they represent a material dollar amount.
e. Considered sunk Cast
Question #2
Which of the following is a sunk cost
Answers:
a. Depreciation on new vehicle
b. Trade-in value of old vehicle
c. Purchase price of new vehicle
d. Purchase price of vehicle to be traded in
e. A and B
Question #3
All of the following are relevant to the decision to replace equipment except the:
Answers:
a. cost of new equipment
b. selling price of old equipment.
c. future maintenance costs of old equipment.
d. cost of old equipment.
e. all of the above
Question #4
Smith Industries is considering replacing a machine that is presently used in its production process. The following information is available:
|
Old Machine |
Replacement Machine |
| Original cost |
45,000 |
35,000 |
| Remaining useful life in years |
5 |
5 |
| Current age in years |
5 |
0 |
| Book value |
$25,000 |
|
| Current disposal value in cash |
8,000 |
|
| Future disposal value in cash (in 5 years) |
$0 |
$0 |
| Annual cash operating costs |
$7,000 |
4,000 |
Question #5
Fixed costs that may be avoided in the future are referred to as:
Answers:
a. replacement oasts.
b. opportunity costs.
c. relevant costs.
d. sunk costs.
e. variable cost
Question #6
After a company invests in capital assets. which of the following will it perform in order to compare the actual to the projected net cash inflows?
Answers:
a. Cash flow analysis
b. Post-audit
c. Pre and post analysis
d. Post-cash flow
e. Discounted cash flow
Question #7
Which of the following capital budgeting models is most likely to be used if a company's goal is to maximize their operating income?
Answers:
a. Payback
b. Net present value
c. Internal rate of return
d. Accounting rate of retum
e. Net profit
Question #8
Which of the following methods cannot be used if the discount rate has not yet been determined
Answers:
a. Payback period
b. Internal rate of return
c. Accounting rate of retum
d. Net present value
e. Gross profit
Question #9
Which of the following is true regarding capital rationing decisions for capital assets?
Answers:
a. Companies should always choose the investment with the shortest payback period.
b. Companies should always choose the investment with the highest net present value.
c. Companies should always choose the investment with the highest accounting rate of return.
d. There are many factors which influence the method used in capital rationing decisions.
e. A and B
Question #10
All else being equal, a company would choose to invest in a capital asset if which of the following is true?
Answers:
a. lithe payback period equals the amount invested
b. If the expected accounting rate of return is less than the required rate of return
c. If the average amount invested is greater than the net cash inflows
d. If the expected accounting rate of return is greater than the required rate of return
e. A and B
Question #11
Which of the following is not an advantage of the budgeting process?
Answers:
a. The budget process aids in performance evaluation.
b. The budget process helps coordinate the activities of the organization.
c. The budget process forces management to plan ahead.
d. The budget process is costly and time consuming.
e. B and C
Question #12
Which of the following statements about budgeting is incorrect?
Answers:
a. The operating budget should be prepared by top management because they understand the overall objectives of the company better than mid-management perscnnel.
b. Budgeting is an aid to planning and control.
c. Budgets help to coordinate the activities of the entire organization.
d. Budgets promote communication and coordination between departments.
e. non of the above
Question #13
Which of the following statements is incorrect?
Answers:
a. The sales budget feeds into all other budgets.
b. The sales and ending inventory budgets determine the purchases and cost of goods sold budgets.
c. The sales and cash collections budgets determine the budgeted income statement.
d. The budgeting process provides benchmarks that motivate employees.
e. all of the above
Question #14
Spencer Company expects cash sales for July of 512.000. and a 10% monthly increase during August and September. Credit sales of 94.000 in July should be followed by 25% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?
Answers:
a. 313.200 and S6.000
b. $14.520 and $6250
c. $14.520 and $0.000
d. 314.400 and 35,250
e. S 25.000 and S 23.000
Question #15
Desired ending inventory is 80% of beginning inventory. d cost of goods sold is $300.000. which of the following statements is we regarding purchases?
Answers:
a. Purchases well be more than cost of goods sold
b. Purchases via be 80to of cost of goods sold
C. Purchases wi equal cost of goods sold
d. Purchases era be less than cos: of goods sold
e. Purchases will be 510.800
Question #16
Which of the following is correct regarding a static budget?
Answers:
a. A Sent budget is a budge: that stays the same from one perod to the next
b. A Batt budget is ate knows as a fixed budget
C. A 9tax budget a prepared kir mut level Of Meet,
d. A static budget is ackuVed for changes n the level of Worry
t. A statc budget is prepared for Only Oat level Of Jove/
Question #17
Sweet Baby Diaper Company sells disposable diapers for 20 each. Variable costs are 05 per diaper, while fate costs are $75,000 per month for volumes up to 850.000 diapers and $112.500 for volumes above 850.000 diapers. The flexible budget would reflect monthly operating income for 800.000 diapers and 900.000 dopes of what dollar amounts?
Answers
a. $7.500 and $60.000. respectively
b. $80.000 and $45.000. respectively
c. $45.000 and $22.500. respectively
d $22.500 and $7.500. respectively
e. $75.000 and $24.000 respectively
Question #18
A graph of a flexible budget formula reacts Reed costs of $30.000 and total costs of $90.000 at a volume of 6.000 units. Assuming the relevant range is 1.000 to 12.000 units. the graph would reflect total costs at 10.000 units of what dollar amount?
Answers:
a. $100.000
b. $130.000
c. $180.000
d. $100.000
e. $250.000
Question #19
A sales vokorne variance is a function of which of the following?
Answers:
a Actual sales volume and normal sales volume
b. Actual results and amounts in the flexible budget
c. Amounts in the flexible budget and the static budget
d. Number of units actually sold and number of units expected to be sold according to the static budget
e. A and B
Question #20
Global Engineering's actual operating income for the current year is 550.000. The flexible budget operating income for actual volume achieved is 540000. while the static budget operating income is 553.000. What is the sales volume variance for operating income?
Answers:
a. $13.000 favorable
b. $10000 unfavorable
c. $13.000 unfavorable
d. $10.020 favorable
e. $23.000 unfavorable
Question #21
The Frito-Lay division of PepsiCo is most likely bested as a(n):
Answers:
a. cost center
b. revenue Center
c. profit center
d. investment center
e. Trading center
Question #22
Which of the following is a cost center
Answers:
a. A company's legal department
b. A company salle staff
c. A product line of a particular company
d. A company's individual store
e. A company's marketing department
Question #23
Which of the following is not a potenstial advantage of decentralization?
Answers:
a. Top Management can use their time to concentrate on Long-term startagic planning rather than daily operations.
b. Customer relations are generally improved.
c. It improves the motivation and retenstion of devision managers
d. Decentralization pronalas goal congruence and coorditionation
e. all of the above
Ouestwn #24
Assume division 1 of the XYZ Company mud the following results last year (in Mousands) Management's required rate of return is 8% and the weighted average cost of capital is 6%. Its effective tax rate is 30%.
What is the division's return on investment?
Answers:
a. 5%
b. 18%
c. 20%
d. 50%
e. 10%
Question #25
Which of the following perspective from the balanced scorecard approach focuses on continuing to improve and create value?
Answers:
a. Learning and growth perspective
b. Internal business perspective
c. Customer perspective
d. Financial perspective
e. Marketing perspective
Case- MADE IN THE U.S.A. DUMPED IN BRAZIL, AFRICA,...
Questions 1 and 2 are based on the case study above and they are compulsory to attempt.
1. What obligations did the financial managers have to their shareholders to do whatever is possible to avoid major financial losses associated with these products?
2. Was the dumping in this case ethical? Those involved in the dumping might have argued that the people receiving the pajamas would not have otherwise had access to such clothing and were notified of the health and safety hazards. Does this affect your feelings about the case? What do you think about the exportation of the Dalkon Shield? Can it be justified because the rate of dying during childbirth in Third World countries is extremely high, and, as such, any effective birth control device is better than none?
3. (a) Prepare a balance sheet from the adjusted trial balance below.
Deavours Photography, Inc.
Work sheet
For the Year Ending December 31, 2009
Accounts Adjusted Trial Balance
|
|
Debit
|
Credit
|
|
Cash
|
|
2,000
|
|
|
Prepaid insurance
|
|
2,000
|
|
|
Office supplies
|
|
600
|
|
|
Office equipment
|
|
16,000
|
|
|
Accumulated
|
|
|
3,000
|
|
depreciation
|
|
|
|
|
Accounts payable
|
|
|
5,000
|
|
Salaries payable
|
|
|
900
|
|
Unearned
|
service
|
|
2,500
|
|
revenue
|
|
|
|
|
Common stock
|
|
|
5,000
|
|
Retained earnings
|
|
|
2,450
|
|
Dividends paid
|
|
5,600
|
|
|
Service revenue
|
|
|
15,350
|
|
Salaries expense
|
|
4,600
|
|
|
Depreciation expense
|
1,000
|
|
|
Supplies expense
|
400
|
|
|
Insurance expense
|
2,000
|
|
|
Totals
|
34,200
|
34,200
|
3. (b) Which inventory method would best meet the each goal of management stated below? Indicate your answer by placing the proper letter beside each
statement.
S. Specific unit cost
L. Last-in, First-out
F. First-in, First-out Ad. Average cost
i. Management's goal is to properly match the most current cost of goods sold with net sales.
ii. Management's goal is to minimize the company's ending inventory balance during a period of falling prices.
iii. Management's goal is to effectively and efficiently record cost of goods sold and inventory when the company sells rare, antique items.
iv. Management's goal is to reflect the current value of inventory on the balance sheet.
v. Management's goal is to minimize the company's tax liability during a period of rising prices.
4. Compare and contrast job order and process costing. Support your answer with examples relevant academic references.
5. Define the term budget and identify four benefits of budgeting. Should employees participate in the budgeting process or should management prepare the budgets alone? Develop your answer with relevant arguments. You are required to use appropriate examples and academic references to support your arguments.
6. (a) Douglas Corporation reports the following standards for direct materials for 2009:
|
Standard cost per pound
|
$.80
|
|
Standard amount per finished good
|
16 pounds
|
During 2009, 320,000 finished goods were produced. The direct materials price variance was $3,200 unfavorable. The direct materials flexible budget variance was $800 favorable.
Calculate the following items regarding direct materials for Douglas Corporation for 2009:
a) direct materials efficiency variance
b) standard quantity of direct materials for actual production
c) actual pounds of direct materials used
6. (b) Gordon Enterprises gathered the following information for the month of July:
|
Overhead flexible budget:
|
|
|
|
|
Number of units
|
3,000
|
4,000
|
5,000
|
|
Standard machine hours
|
12,000
|
16,000
|
20,000
|
|
Budgeted overhead costs:
|
|
|
|
|
Variable
|
$27,000
|
$36,000
|
$45,000
|
|
Fixed
|
$51,000
|
$51,000
|
$60,000
|
Gordon actually produced 4,000 units in 16,400 machine hours. Total actual overhead cost of $82,000 consisted of $33,000 variable costs and $49,000 fixed costs. The standard variable and fixed overhead rates are based on a master (static) budget of 3,000 units.
A) Compute the total manufacturing overhead cost variance.
B) Compute the overhead flexible budget variance.
C) Compute the production volume variance.
7. (a) The following is a partially completed performance report for one of Dana Company's subunits.
|
Dana Co. - Subunit X Revenue by Product
|
Actual
|
Flexible Budget Variance
|
Flexible Budget
|
Sales Volume Variance
|
Static (Master) Budget
|
|
WD-40
|
$ 630,000
|
|
|
$ 20,000 F
|
$ 600,000
|
|
WD-60
|
520,000
|
|
$ 550,000
|
|
510,000
|
|
WD-80
|
125,000
|
$ 5,000 U
|
130,000
|
|
140,000
|
|
QD-40
|
225,000
|
|
200,000
|
|
240,000
|
|
QD-60
|
425,000
|
5,000 F
|
|
|
400,000
|
|
Total
|
$1,925,000
|
|
|
|
$1,890,000
|
A) Complete the performance evaluation report for this subunit.
B) What type of responsibility center is this subunit?
C) Which items should be investigated if part of management's decision criteria is to investigate all variances exceeding $15,000? What might be the cause of these variances?
7. (b) Topaz Corporation has provided the following information pertaining to the most recent year:
|
Total assets
|
$600,000
|
|
Total liabilities
|
$300,000
|
|
Current liabilities
|
$100,000
|
|
Income tax rate
|
30%
|
|
Weighted average cost of capital
|
10%
|
|
Target rate of return
|
12%
|
|
Economic value added
|
$6,000
|
How much was Topaz's operating income (income before taxes) last year?