Project #50465 - acct

1.   

Cash inflows and outflows are not netted in the investing or financing sections of the statement of cash flows but are separately disclosed to give the reader full information.

  a. true

 b. false

2.   

Which of the following stock investments should be accounted for using the cost method?

 a. investments between 20 % and 50%

b. investments of less than 20% and investments between 20% and 50%

c. investments of less than 20%

d. all stock investments should be accounted for using the cost method

3.   

Comprehensive income does not affect net income or retained earnings.

  a. true

 b. false

4.   

Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of this transaction, cash would

 a. decrease by $7,000

b. increase by $55,000

c. increase by $48,000

d. decrease by $27,000

5.   

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97. The journal entry for the purchase would include:

 a. a debit to Interest Receivable for $4,500

b. a credit to Interest Revenue for $4,500

c. a credit to Interest Receivable for $4,500

d. a debit to Interest Revenue for $4,500

 6.   

Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Sold $250,000 of bonds at 97 plus accrued interest. The journal entry for the sale would include:

 a. a debit to Cash for $244,300

b. a credit to Loss on Sale for $7,500

c. a debit to Cash for $242,500

d. a credit to Gain on Sale for $7,500

7.   

Managerial accounting

 a. is related to the entire business entity only.

b. is prepared according to GAAP.

c. is prepared periodically only.

d. is prepared according to management needs.

8.   

Wendell Company owns 28% of the common stock of Porter Company and accounts for the investment using the equity method. Assuming that Wendell Company purchased the stock several years ago, the balance in the investment account would be equal to the cost of the

 a. investment plus Wendell's share of Porter's net income earned since the investment was purchased

b. investment only

c. investment plus Wendell's share of Porter's net income earned since the investment was purchased minus the total amount of dividends Wendell has received from Porter since the investment was purchased

d. investment plus the total amount of dividends Wendell has received from Porter since the investment was purchased

9.   

Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section.

  a. true

 b. false

10.   

The vice presidents of production and sales and the controller hold line positions in most large organizations.

  a. true

 b. false

 11.   

Temporary investments are recorded at their cost which would include broker's commissions.

  a. true

 b. false

12.   

Which of the following is not a characteristic of useful managerial accounting reports?

 a. historical and estimated data

b. GAAP

c. Accuracy

d. reports prepared as needed

13.   

Accounts receivable from sales transactions were $51,000 at the beginning of the year and $64,000 at the end of the year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is

 a. $169,000

b. $105,000

c. $92,000

d. $118,000

14.   

The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the

 a. Balance sheet as an adjustment to Stockholders' Equity

b. Income statement as Other Revenue (Expenses)

c. Statement of Retained Earnings

d. Balance sheet as an adjustment to the asset account

15.   

Which of the following can be found on the statement of cash flows?

 a. cash flows from operating activities

b. total changes in stockholders' equity

c. changes in retained earnings

d. total assets

16.   

When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price.

  a. true

 b. false

17.   

The acquisition of land in exchange for common stock is an example of noncash investing and financing activity.

  a. true

 b. false

18.   

Using the indirect method, if land costing $85,000 was sold for $145,000, the amount reported in the financing activities section of the statement of cash flows would be $85,000.

  a. true

 b. false

19.   

The objectives of budgeting are (1) establishing specific goals for future operations, (2) executing plans to achieve the goals, and (3) periodically comparing actual results with these goals.

  a. true

 b. false

20.   

To determine cash payments for merchandise for the cash flow statement using the direct method, a decrease in accounts payable is added to the cost of merchandise sold.

  a. true

 b. false

21.   

Budgets are normally used only by profit-making businesses.

  a. true

 b. false

22.   

A diagram of the operating structure of an organization is called an organization chart.

  a. true

 b. false

23.   

All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except:

 a. hybrid measurement methods within GAAP that conflict with each other.

b. the ease of applying market values to assets and liabilities.

c. a greater percentage of total assets existing as receivables and securities.

d. pressure on regulators to adopt an international set of accounting principles and standards.

24.   

A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $0.40 per share. The market value of the stock is $16 per share. The company's dividend yield is:

 a. 40%

b. 16%

c. 2.5%

d. 400%

25.   

Companies may report comprehensive income on each of the statements below except

 a. retained earnings statement

b. income statement

c. statement of cash flows

d. separate statement of comprehensive income

26.   

A formal written statement of management's plans for the future, expressed in financial terms, is called a budget.

  a. true

 b. false

27.   

Cash dividends of $45,000 were declared during the year. Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year. The amount of cash for the payment of dividends during the year is

 a. $50,000

b. $40,000

c. $55,000

d. $35,000

28.   

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is emphasized.

  a. true

 b. false

29.   

Which one of the following below should be added to net income in calculating net cash flow from operating activities using the indirect method?

 a. an increase in accrued liabilities

b. a decrease in accounts payable

c. a gain on the sale of land

d. dividends paid on common stock

30.   

On the statement of cash flows, the cash flows from financing activities section would include

 a. payments for the acquisition of investments

b. receipts from the sale of investments

c. receipts from a note receivable

d. receipts from the issuance of capital stock

31.   

Under the direct method of reporting cash flows from operations, the major source of cash is cash received from customers.

  a. true

 b. false

32.   

On the statement of cash flows, the cash flows from operating activities section would include

 a. payments for cash dividends

b. payment for interest on short-term notes payable

c. payments for the purchase of investments

d. receipts from the issuance of capital stock

33.   

As with other assets, the cost of a bond investment includes all costs related to the purchase.

  a. true

 b. false

34.   

When a bond is purchased for an investment, the purchase price, minus the brokerage commission, plus any accrued interest is recorded.

  a. true

 b. false

35.   

If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be reported in the cash flows from financing activities section of the statement of cash flows.

  a. true

 b. false

36.   

On the statement of cash flows, the cash flows from financing activities section would include all of the following except

 a. payments for dividends

b. receipts from the sale of bonds payable

c. payments of interest on bonds payable

d. payments for purchase of treasury stock

37.   

Baxter Company reported a net loss of $13,000 for the year ended December 31, 2010. During the year, accounts receivable decreased by $5,000, merchandise inventory increased by $8,000, accounts payable increased by $10,000, and depreciation expense of $4,000 was recorded. During 2010, operating activities

 a. provided net cash of $2,000.

b. used net cash of $2,000.

c. used net cash of $8,000.

d. provided net cash of $8,000.

38.   

Managers use managerial information to evaluate performance of a company's operation.

  a. true

 b. false

39.   

Which of the following is most associated with managerial accounting?

 a. May rely on estimates and forecasts

b. Must follow GAAP

c. Always reports on the entire entity

d. Is prepared for users outside the organization.

40.   

Investments in stocks that are expected to be held for the long term are listed in the stockholder's equity section of the balance sheet.

  a. true

 b. false

41.   

Gale Company owns 87% of the outstanding stock of Leonardo Company. Leonardo Company is referred to as the

 a. minority interest

b. subsidiary

c. parent

d. affiliate

42.   

An equity investment in less than 20% of another company's stock is accounted for using the cost method.

  a. true

 b. false

43.   

The statement of cash flows reports a firm's major sources of cash receipts and major uses of cash payments for a period.

  a. true

 b. false

44.   

The net income reported on the income statement for the current year was $250,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

EndBeginning

Cash$  50,000$  60,000

Accounts receivable112,000108,000

Inventories105,00093,000

Prepaid expenses4,5006,500

Accounts payable (merchandise creditors)75,00089,000

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

 a. $279,000

b. $271,000

c. $327,000

d. $256,000

45.   

All of the following are disadvantages of fair value use except:

 a. fair values may not be readily obtainable.

b. fair values may cause more fluctuations as change occurs from period to period.

c. comparability between companies may be impacted by different fair value measurement.

d. fair values can only be used on balance sheet accounts.

46.   

Zenith Corporation sells some of its used store fixtures. The acquisition cost of the fixtures is $12,500, the accumulated depreciation on these fixtures is $9,750 at the time of sale. The fixtures are sold for $5,300. The value of this transaction in the Investing section of the statement of cash flows is:

 a. $12,500

b. $2,550

c. $2,750

d. $5,300

47.   

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

 a. a loss on the sale of equipment

b. depreciation expense

c. dividends declared and paid

d. gain on sale of land

48.   

Product costs are not expensed until the product is sold.

  a. true

 b. false

49.   

On the statement of cash flows, the cash flows from investing activities section would include

 a. payments for retirement of bonds payable

b. receipts from the issuance of capital stock

c. payments for dividends

d. receipts from the sale of investments

50.   

Free cash flow is cash from operations, less cash for

 a. dividends and cash to redeem bonds payable

b. fixed assets needed to maintain productivity

c. fixed assets needed to maintain productivity, and cash to redeem bonds payable

d. dividends and cash for fixed assets needed to maintain productivity

51.   

Available-for-sale securities are securities that management expects to sell in the future, but are not actively traded for profit.

  a. true

 b. false

52.   

The account Unrealized Gain (Loss) on Trading Securities should be included in the

 a. Balance sheet as an adjustment to the asset account

b. Income statement as Other Revenue (Expenses)

c. Balance sheet as an adjustment to Stockholders' Equity

d. Statement of Retained Earnings

53.   

Cash flows from investing activities, as part of the statement of cash flows, include receipts from the issuance of bonds payable.

  a. true

 b. false

54.   

There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1) the direct method and (2) the indirect method.

  a. true

 b. false

55.   

Investment in certificates of deposit and other securities that do not change in value are reported in the balance sheet as:

 a. available-for-sale securities

b. held to maturity securities

c. cash and cash equivalents

d. equity investments

56.   

Blanton Corporation purchased 15% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use to record the dividends it receives?

 a. debit Investment in Worton Corporation; credit Cash

b. debit Cash; credit Investment in Worton Corporation

c. debit Cash; credit Dividend Revenue

d. debit Investment in Worton Corporation; credit Income of Worton Corporation

 57.   

Land costing $140,000 was sold for $173,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

 a. $140,000

b. $33,000

c. $173,000

d. $313,000

58.   

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?

 a. issuance of bonds payable

b. purchase of treasury stock

c. issuance of capital stock

d. purchase of noncurrent assets

59.   

On May 1, 2014, Stanton Company purchased $60,000 of Harris Company's 12% bonds at 100 plus accrued interest of $2,400. On June 30, 2014, Stanton received its first semiannual interest. On February 1, 2015, Stanton sold $50,000 of the bonds at 103 plus accrued interest.

The journal entry Stanton will record on February 1, 2015, will include:

 a. a credit to Cash for $52,500.

b. a credit to Interest Revenue for $1,500.

c. a credit to Interest Receivable for $600.

d. a credit to Gain on Sale of Investments for $1,500.

60.   

The declaration and issuance of a stock dividend would be reported on the statement of cash flows.

  a. true

 b. false

61.   

Flexible budgeting requires all levels of management to start from zero and estimate sales, production, and other operating data as though operations were being started for the first time.

  a. true

 b. false

62.   

If a business issued bonds payable in exchange for land, the transaction would be reported in a separate schedule on the statement of cash flows.

  a. true

 b. false

63.   

Cash receipts from interest and dividends are classified as

 a.

investing activities.

 b. either financing or investing activities.

c. financing activities

d.

operating activities.

64.   

All of the following employees hold line positions in Anthea Electric EXCEPT:

 a. vice president of finance

b. manager of the Valhalla Plant

c. vice president of sales

d. vice president of production

65. When using the worksheet method to analyzing noncash accounts , no order of analysis is required, but it is more efficient to start with Retained Earnings and proceed upward in the account listing. a. true b. false

66.   

To record a bond investment between interest payment periods, Investment in Bonds would be debited and Cash and Interest Revenue would be credited.

  a. true

 b. false

67.   

The master budget of a small manufacturer would normally include all necessary component budgets except the capital expenditures budget.

  a. true

 b. false

68.   

Yankton Company began the year without an investment portfolio. During the year they purchased investments classified as available-for-sale securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. The Yankton Company's financial statements for the current year should show

 a. no loss on the income statement and available-for-sale securities of $13,000 on the balance sheet

b. a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet

c. no loss on the income statement, available-for-sale securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet

d. a loss of $2,000 on the income statement and available-for-sale securities of $13,000 on the balance sheet

69.   

When shares of stock held as an investment are sold, the difference between the proceeds and the carrying amount of the investment is recorded as a(n)

 a. paid-in capital addition

b. prior period adjustment

c. gain or loss

d. operating income and losses

70.   

The first budget to be prepared is usually the production budget.

  a. true

 b. false

71.   

The cost of materials entering directly into the manufacturing process is classified as factory overhead cost.

  a. true

 b. false

72.   

Under the indirect method, expenses that do not affect cash are added to net income in the operating activities section of the statement of cash flows.

  a. true

 b. false

73.   

The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

EndBeginning

Cash$  50,000$  60,000

Accounts receivable112,000108,000

Inventories105,00093,000

Prepaid expenses4,5006,500

Accounts payable (merchandise creditors)75,00089,000

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

 a. $296,000

b. $198,000

c. $352,000

d. $324,000

74.   

A building with a cost of $153,000 and accumulated depreciation of $42,000 was sold for a $11,000 gain. When using the indirect method, the cash generated from this investing activity was $121,000.

  a. true

 b. false

75.   

To determine cash payments for income tax for the cash flow statement using the direct method, an increase in income taxes payable is added to the income tax expense.

  a. true

 b. false

76.   

If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would be added to net income in of the operating activities section of the statement of cash flows (prepared by the indirect method).

  a. true

 b. false

77.   

Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.

  a. true

 b. false

78.   

Which of the following is not a prime cost?

 a. Assembly line wages

b. Direct labor wages

c. Machine operator wages

d. Supervisor's wages

79.   

Fair value accounting is used more under Generally Accepted Accounting Principles (GAAP) than it is under International Financial Reporting Standards (IRFS).

  a. true

 b. false

80.   

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semi-annually. The journal entry to record the receipt of interest on the next interest payment date would be:

 a. Debit: Cash $4,000; Credit: Interest Receivable $4,000

b. Debit: Cash $4,000; Credit: Interest Receivable $1,500 and Interest Revenue $2,500

c. Debit: Cash $2,500; Credit: Interest Revenue $2,500

d. Debit: Cash $4,000; Credit: Interest Revenue $4,000

81.   

Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in

 a. the cash flows from investing activities section

b. the cash flows from financing activities section

c. the cash flows from operating activities section

d. a separate schedule

82.   

Investing activities include

 a.

collecting cash on loans made.

 b.

repaying money previously borrowed.

 c.

obtaining cash from customers.

 d.

obtaining capital from owners.

83.   

Land costing $71,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

 a. $71,000

b. $21,000

c. $50,000

d. $121,000

 84.   

Cash paid to acquire treasury stock should be shown on the statement of cash flows from investing activities.

  a. true

 b. false

85.   

The cost of merchandise sold during the year was $50,000. Merchandise inventories were $12,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable were $6,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

 a. $53,000

b. $49,000

c. $51,000

d. $47,000

86.   

Which of the following is a noncash investing and financing activity?

 a. purchase of merchandise inventory on account

b. payment of a cash dividend

c. payment of a six-month note payable

d. issuance of common stock to acquire land

87.   

Budgets are prepared in the Accounting Department and monitored by various department managers.

  a. true

 b. false

88.   

A process whereby the effect of fluctuations in the level of activity is built into the budgeting system is referred to as flexible budgeting.

  a. true

 b. false

89.   

For a construction contractor, the wages of carpenters would be classified as factory overhead cost.

  a. true

 b. false

90.   

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the

 a. equity method

b. cost method

c. market method

d. cost or market method

91.   

Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be:

 a. Debit: Cash $105,000; Credit: Investment in Bonds $104,500 and Interest Revenue $500

b. Debit: Cash $104,500 and Interest Receivable $500; Credit: Investment in Bonds $100,000, Gain on Sale of Investments $4,500 and Interest Revenue $500

c. Debit: Cash $105,000; Credit: Investment in Bonds $100,000; Gain on Sale of Investments $4,500 and Interest Revenue $500

d. Debit: Cash $105,000; Credit: Investment in Bonds $100,000 and Gain on Sale of Investments $5,000

92.   

Comprehensive income is all changes in stockholders' equity during the period except those resulting from dividends and stockholders' investments.

  a. true

 b. false

93.   

Once a static budget has been determined, it is changed regularly as the underlying activity changes.

  a. true

 b. false

94.   

Which of the following is most associated with financial accounting?

 a. Can be prepared periodically, or as needed

b. Prepared in accordance with GAAP

c. Can have both objective and subjective information

d. Can be prepared for the entity or segment

95.   

Temporary investments such as in trading securities are

 a. recorded at fair market value and reported at fair market value

b. recorded at cost but reported at lower of cost or fair market value

c. recorded at cost and reported at cost

d. recorded at cost but reported at fair market value

96.   

Investments in bonds that management intends to hold to maturity are called trading securities.

  a. true

 b. false

97.   

Flexible budgeting builds the effect of changes in level of activity into the budget system.

  a. true

 b. false

98.   

After the sales budget is prepared, the production budget is normally prepared next.

  a. true

 b. false

99.   

Budgetary slack can be avoided if lower and mid-level managers are requested to support all of their spending requirements with specific operational plans.

  a. true

 b. false

100.   

In order to maintain the original value of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

  a. true

 b. false

101.   

A company had net income of $252,000. Depreciation expense is $26,000. During the year, Accounts Receivable and Inventory increased by $15,000 and $40,000, respectively. Prepaid Expenses and Accounts Payable decreased by $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of $3,000. How much cash was provided by operating activities?

 a. $224,000.

b. $217,000.

c. $305,000.

d. $284,000.

102.   

Under the direct method of preparing a Statement of Cash Flows, the gain on the sale of land is not adjusted or reported as part of cash flows from operating activities.

  a. true

 b. false

103.   

In preparing the statement of cash flows, the correct order of reporting cash activities is Financing, Operating, Investing.

  a. true

 b. false

104.   

There is no difference in the Investing and Financing sections of the statement of cash flows using the indirect and direct method.

  a. true

 b. false

105.   

Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $4 per share on its $20 par common stock. The market value of the common stock is $80 per share. Edison's dividend yield is:

 a. 10%

b. 25%

c. 20%

d. 5%

106.   

Growth firms generally pay regular dividends to stockholders.

  a. true

 b. false

107.   

Cash dividends of $50,000 were declared during the year. Cash dividends payable were $10,000 and $5,000 at the beginning and end of the year, respectively. The amount of cash for the payment of dividends during the year is

 a. $60,000

b. $50,000

c. $65,000

d. $55,000

108.   

The cost of wages paid to employees directly involved in converting materials to finished product is classified as direct labor cost.

  a. true

 b. false

109.   

Any difference between the fair market values of the securities and their cost is a realized gain or loss.

  a. true

 b. false

110.   

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the net decrease in inventories from the beginning to the end of the period is added to net income for the period.

  a. true

 b. false

111.   

The budgeting process is used to effectively communicate planned expectations regarding profits and expenses to the entire organization.

  a. true

 b. false

112.   

Unrealized gains and losses on trading securities are not included in the calculation of net income.

  a. true

 b. false

113.   

The following information is available from the current period financial statements:

Net income$165,000

Depreciation expense28,000

Increase in accounts receivable16,000

Decrease in accounts payable21,000

The net cash flow from operating activities using the indirect method is

 a. $188,000

b. $156,000

c. $230,000

d. $198,000

114.   

The cost method of accounting for stock

 a. requires the investment be increased by the reported net income of the investee

b. requires the investment be decreased by the reported net income of the investee

c. is only appropriate as part of a consolidation

d. recognizes dividends as income

115.   

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

 a. an increase in inventory

b. depreciation expense

c. a gain on the sale of equipment

d. dividends declared and paid

116.   

The investor carrying an investment by the equity method records cash dividends received as an increase in the carrying amount of the investment.

  a. true

 b. false

117.   

Which of the following statements below is not a reason a company may purchase another company's stock?

 a. developing or maintaining business relationships

b. earning a return on excess cash

c. sustain the other company's stock price

d. gaining control of another company's operations

118.   

Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of the investment.

  a. true

 b. false

119.   

When bonds held as long-term investments are purchased at a price other than the face value, the premium or discount should be amortized over the remaining life of the bonds.

  a. true

 b. false

120.   

A business issues 20-year bonds payable in exchange for preferred stock. This transaction would be reported on the statement of cash flows in

 a. the cash flows from operating activities section

b. the cash flows from financing activities section

c. a separate schedule

d. the cash flows from investing activities section

121.   

The following selected account balances appeared on the financial statements of the Washington Company:

Accounts Receivable, Jan. 1$13,000

Accounts Receivable, Dec. 319,000

Accounts Payable, Jan 14,000

Accounts payable Dec. 317,000

Merchandise Inventory, Jan 110,000

Merchandise Inventory, Dec 3115,000

Sales56,000

Cost of Goods Sold31,000

The Washington Company uses the direct method to calculate net cash flow from operating activities.

Cash collections from customers are

 a. $45,000

b. $52,000

c. $56,000

d. $60,000

122.   

Which of the following below increases cash?

 a. depreciation expense

b. acquisition of treasury stock

c. the declaration of a cash dividend

d. borrowing money by issuing a six-month note

123.   

If the proceeds from the sale of bond investments exceeds the carrying amount of the bonds, a gain is realized.

  a. true

 b. false

124.   

Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?

 a. purchase of noncurrent assets

b. payment of cash dividends

c. purchase of treasury stock

d. discarding an asset that had been fully depreciated

125.   

The cumulative effects of other comprehensive income items is included in retained earnings, on the balance sheet.

  a. true

 b. false

126.   

Cash dividends paid on capital stock would be reported in the statement of cash flows in

 a. the cash flows from investing activities section

b. the cash flows from operating activities section

c. a separate schedule

d. the cash flows from financing activities section

127.   

Parker Company owns 83% of the outstanding stock of Tadeo Company. Parker Company is referred to as the

 a. affiliate

b. parent

c. minority interest

d. subsidiary

128.   

Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method.

  a. true

 b. false

129.   

Rarely would the cash flows from operating activities, as reported on the statement of cash flows, be the same as the net income reported on the income statement.

  a. true

 b. false

130.   

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

 a. an increase in inventory

b. a decrease in accounts payable

c. a decrease in accounts receivable

d. preferred dividends declared and paid

131.   

Held to maturity securities

 a. include stocks as well as bonds

b. may be reported as current or noncurrent assets

c. are reported at fair market value

d. all of the above

132.   

Under the equity method, the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to

 a. Dividend Revenue

b. Retained Earnings

c. Dividend Receivables

d. Investment in Vallerio

133.   

Cash flows from investing activities, as part of the statement of cash flows, include payments for the purchase of treasury stock.

  a. true

 b. false

134.   

Cash flows from financing activities, as part of the statement of cash flows, include payments for dividends.

  a. true

 b. false

135.   

Financing activities include

 a.

acquiring long-lived assets.

 b.

lending money.

 c. issuing debt.

d.

acquiring investments.

136.   

A ten-year bond was issued at par for $250,000 cash. This transaction should be shown on a statement of cash flows under

 a. investing activities

b. operating activities

c. noncash investing and financing activities

d. financing activities

137.   

Which of the following concepts of cash is not appropriate to use in preparing the statement of cash flows?

 a. cash and money market funds

b. cash and U.S. treasury bonds

c. cash and cash equivalents

d. cash

138.   

Cash flows from investing activities, as part of the statement of cash flows, include receipts from the sale of land.

  a. true

 b. false

139.   

In preparing flexible budgets, the first step is to identify the fixed and variable components of the various costs and expenses being budgeted.

  a. true

 b. false

140.   

The cost of merchandise sold during the year was $45,000. Merchandise inventories were $13,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable were $7,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

 a. $46,000

b. $50,000

c. $44,000

d. $40,000

141.   

Prime costs are the combination of direct materials and direct labor costs.

  a. true

 b. false

142.   

The first budget to be prepared is usually the sales budget.

  a. true

 b. false

143.   

Accounts receivable from sales to customers amounted to $40,000 and $32,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

 a.

$118,000.

 b. $110,000.

c.

$150,000.

 d. $102,000.

 144.   

To determine cash payments for operating expenses for the cash flow statement using the direct method, a decrease in accrued expenses is added to operating expenses other than depreciation.

  a. true

 b. false

145.   

Goal conflict can be avoided if budget goals are carefully designed for consistency across all areas of the organization.

  a. true

 b. false

146.   

A plant manager's salary may be referred to as:

 a. either a direct cost or an indirect cost since managerial accounting is not restricted by GAAP

b. a period cost

c. a direct cost

d. an indirect cost

147.   

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

  a. true

 b. false

148.   

What term is used to describe the process of monitoring operating results and comparing actual results with the expected results?

 a. Planning

b. Controlling

c. Directing

d. Improving

149.   

If the cost of materials is not a significant portion of the total product cost, the materials may be classified as part of factory overhead cost.

  a. true

 b. false

150.   

Cost of Materials Used $45,000

Direct Labor costs $48,000 Factory Overhead $39,000 Work in Process, beg. $28,000 Work in Process, end. $18,000 Finished Goods,beg. $28,000 Finished Goods, end. $18,000 What is Cost of Goods Sold?

 a. $142,000

b. $128,000

c. $152,000

d. $10,000

151.   

The following are all product costs except:

 a. Sales and administrative expenses

b. Factory overhead

c. Direct materials

d. Direct labor

152.   

The equity method causes the investment account to mirror the proportional changes in book value of the investee.

  a. true

 b. false

153.   

Depreciation on factory plant and equipment is an example of factory overhead cost.

  a. true

 b. false

154.   

Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semi-annually. The journal entry to record the purchase would be:

 a. Debit: Investment in Bonds $100,000; Credit: Interest Revenue $1,500 and Cash $98,500

b. Debit: Investment in Bonds $100,000 and Interest Receivable $1,500; Credit: Cash $101,500

c. Debit: Investment in Bonds $101,500; Credit: Cash $101,500

d. Investment in Bonds $100,000; Credit: Cash $100,000

155.   

Which of the following is not a part of comprehensive income?

 a. cash flows from stock investments

b. unrealized gains and losses

c. pension liability adjustments

d. foreign currency items

156.   

Goods that are partially completed by a manufacturer are referred to as:

 a. materials inventory

b. finished goods inventory

c. work in process inventory

d. merchandise inventory

157.   

The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee.

  a. true

 b. false

158.   

A company sells goods for $150,000 that cost $60,000 to manufacture. Which statement(s) are true?

 a. The company will recognize sales on the balance sheet of $150,000.

b. The company will recognize $90,000 gross profit on the balance sheet.

c. The company will decrease finished goods by $60,000.

d. All of these are true.

159.   

Conversion cost is the combination of direct materials cost and factory overhead cost.

  a. true

 b. false

160.   

Reedy Company reports the following information for 2012:

Cost of goods manufactured$68,250

Direct materials used27,000

Direct labor incurred25,000

Work in process inventory, January 1, 201211,000

Factory overhead is 75% of the cost of direct labor. Work in process inventory on December 31, 2012, is:

 a. $18,750

b. $8,500

c. $16,250

d. $13,500

161.   

Goods that are partway through the manufacturing process, but not yet complete, are referred to as materials inventory.

  a. true

 b. false

162.   

In most business organizations, the chief accountant is called the controller.

  a. true

 b. false

163.   

An example of a period cost is:

 a. advertising expense

b. indirect materials

c. depreciation on factory equipment

d. property taxes on plant facilities

164.   

An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or loss on the sale?

 a. $12,750 gain

b. $600 loss

c. $600 gain

d. $9,250 loss

165.   

Which of the following is an example of direct labor cost for an airplane manufacturer?

 a. Salary of plant supervisor

b. Cost of oil lubricants for factory machinery

c. Cost of jet engines

d. Cost of wages of assembly worker

166.   

A report analyzing how many products need to be sold to cover operating costs is not typically a managerial accounting report.

  a. true

 b. false

167.   

Product costs are also referred to as inventoriable costs.

  a. true

 b. false

168.   

Period costs include:

 a. current assets on the balance sheet

b. operating costs that are shown on the income statement when products are sold

c. operating costs that are shown on the income statement in the period in which they are incurred

d. current liabilities on the balance sheet

169.   

A performance report that identifies the amount of employee downtime is a financial accounting report.

  a. true

 b. false

170.   

Held-to-Maturity securities

 a. include both stocks and bonds

b. are reported at their fair market value on the balance sheet date

c. are primarily purchased to earn interest revenue

d. all of the above

171.   

In general, consolidated financial statements should be prepared

 a. when a corporation owns more than 20% and less than 40% of the common stock of another company

b. when a corporation owns more than 50% of the common stock of another company

c. whenever the market value of the stock investment is significantly lower than its cost

d. only when a corporation owns 100% of the common stock of another company

172.   

The cumulative effects of other comprehensive income items must be reported separately from retained earnings and paid-in capital, on the balance sheet, as accumulated other comprehensive income.

  a. true

 b. false

173.   

Another term often used to refer to factory overhead is:

 a. period cost

b. supervisory cost

c. surplus

d. factory burden

174.   

A company used $35,000 of direct materials, incurred $73,000 in direct labor cost, and $114,000 in factory overhead costs during the period. If beginning and ending work in process inventories were $28,000 and $32,000 respectively, the cost of goods manufactured was:

 a. $222,000

b. $190,000

c. $218,000

d. $226,000

175.   

Factory overhead cost is sometimes referred to as factory burden.

  a. true

 b. false

176.   

It is not possible for one company to influence the operating policies of another company unless it owns more than 50% interest in that company.

  a. true

 b. false

177.   

Sales for the year were $600,000. Accounts receivable were $100,000 and $80,000 at the beginning and end of the year. Cash received from customers to be reported on the cash flow statement using the direct method is

 a. $620,000

b. $600,000

c. $700,000

d. $580,000

178.   

All of the following would be reported on the balance sheet as a current asset except:

 a. finished goods inventory

b. work in process inventory

c. materials inventory

d. factory overhead

179.   

Planning is the process of developing the company's objectives or goals and translating these objectives into courses of action.

  a. true

 b. false

180.   

Cash receipts received from the issuance of a mortgage notes payable would be classified as

 a.

operating activities.

 b.

either financing or investing activities.

 c.

financing activities.

 d. investing activities.

181.   

Work in Process, Beginning$14,000

Work in Process, Ending$20,000

Direct Labor costs incurred$ 4,000

Cost of Goods Manufactured$ 8,000

Factory Overhead$ 8,000

What is the amount of Direct Materials used?

 a. $2,000

b. $4,000

c. $14,000

d. $8,000

182.   

In most business organizations, the chief management accountant is called the:

 a. chief accounting officer

b. controller

c. chief executive officer

d. chairman of the board

183.   

If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as direct materials cost.

  a. true

 b. false

184.   

Managerial accounting reports must be useful to the user of the information.

  a. true

 b. false

185.   

The primary goal of managerial accounting is to provide information to:

 a. creditors

b. management

c. investors

d. external auditors

186.   

Who are the individuals charged with the responsibility for directing the day-to-day operations of a business?

 a. Customers

b. Shareholders

c. Investors

d. Managers

187.   

Jarvis Corporation makes an investment in 100 shares of Saxton Company's common stock. The stock is purchased for $45 a share plus brokerage fees of $280. The entry for the purchase is:

 a. Stock Investments - Saxton Company 4,500 Brokerage Fee Expense 280 Cash 4,780

b. Stock Investments - Saxton Company 4,500 Cash 4,500

c. Stock Investments - Saxton Company 4,780 Cash 4,780

d. Cash 4,500 Stock Investments - Saxton Company 4,500

188.   

Factory overhead includes:

 a. factory rent and direct labor

b. indirect labor and indirect materials

c. direct materials and direct labor

d. indirect materials and direct materials

189.   

Costs on the income statement for both a merchandiser and a manufacturer would include:

 a. operating expenses

b. direct materials

c. cost of goods manufactured

d. direct labor incurred

190.   

Accounting designed to meet the needs of decision-makers inside the business is referred to as:

 a. external accounting

b. general accounting

c. managerial accounting

d. financial accounting

191.   

In order to be useful to managers, management accounting reports should possess all of the following characteristics EXCEPT:

 a. be prepared to report information for any unit of the business to support decision making

b. provide objective measures of past operations and subjective estimates about future decisions

c. be provided at any time management needs information

d. be prepared in accordance with generally accepted accounting principles

192.   

Generally accepted accounting principles (GAAP) require the use of fair value accounting for all assets and liabilities.

  a. true

 b. false

193.   

Which of the following is not a factory overhead cost?

 a. materials used directly in the manufacturing process of the product

b. insurance on factory equipment

c. salaries of production supervisors

d. property tax on factory building

194.   

Rent expense on a factory building would be treated as a(n):

 a. period cost

b. product cost

c. direct cost

d. both A and C are correct

195.   

Beginning work in process is equal to:

 a. manufacturing costs incurred during the current period minus ending work in process

b. cost of goods manufactured minus ending work in process plus manufacturing costs incurred during the current period

c. ending work in process plus manufacturing costs incurred during the current period

d. cost of goods manufactured plus ending work in process minus manufacturing costs incurred during the current period

196.   

Which of the following items would not be classified as part of factory overhead?

 a. Direct labor used

b. Amortization of manufacturing patents

c. Production supervisors' salaries

d. Factory supplies used

197.   

Indirect labor and indirect materials are classified as:

 a. factory overhead and product costs

b. factory overhead and period costs

c. operating costs and product costs

d. operating costs and period costs

198.   

The Sharpe Company reports the following information for 2015:

Sales$76,500

Direct materials used7,300

Depreciation on factory equipment4,700

Indirect labor5,900

Direct labor10,500

Factory rent4,200

Factory utilities1,200

Sales salaries expense15,600

Office salaries expense8,900

Indirect materials1,200

Determine period costs for 2015.

 a. $29,200

b. $35,000

c. $24,500

d. $30,300

199.   

Materials must have which two qualities in order to be classified as direct materials?

 a. They must be an integral part of the finished product and be a significant portion of the total product cost.

b. They must be an integral part of the finished product, but can be an insignificant portion of the total product cost.

c. They must be classified as both prime costs and conversion costs.

d. They must be introduced into the process in both work-in-process inventories and finished goods inventories.

200.   

At the beginning of 2011, the Gilbert Company's work in process inventory account had a balance of $30,000. During 2011, $68,000 of direct materials were used in production, and $66,000 of direct labor costs were incurred. Factory overhead in 2011 amounted to $90,000. Cost of goods manufactured is $230,000 in 2011. The balance in work in process inventory on December 31, 2011, is:

 a. $44,000

b. $36,000

c. $66,000

d. $24,000

201.   

A cost object indicates how costs are related or identified.

  a. true

 b. false

202.   

Which one of the following will not be found on the balance sheet of a manufacturing company?

 a. materials

b. work in process

c. cost of goods sold

d. finished goods

203.   

Work in process inventory on December 31, 2011, is $42,000. Work in process inventory decreased by 40% during 2011. Total manufacturing costs incurred in 2011 amount to $260,000. What is cost of goods manufactured?

 a. $302,000

b. $190,000

c. $232,000

d. $288,000

204.   

A product cost is:

 a. expensed in the period the product is sold

b. expensed in the period in which it is incurred

c. shown on the income statement with the operating expenses

d. shown with current liabilities on the balance sheet

205.   

The cost of wages paid to employees directly involved in the manufacturing process in converting materials into finished product is classified as:

 a. miscellaneous costs

b. direct labor cost

c. direct materials cost

d. factory overhead cost

206.   

Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are classified as factory overhead cost.

  a. true

 b. false

207.   

A staff department has no direct authority over a line department.

  a. true

 b. false

208.   

The controller's staff often consists of several management accountants. All of the following would most likely be on the controller's staff EXCEPT:

 a. investments and shareholder relations managers

b. budgets and budget analysts

c. cost accountants

d. general accountants

209.   

Operating expenses are product costs and are expensed when the product is sold.

  a. true

 b. false

210.   

Trading securities are reported on the balance sheet at cost.

  a. true

 b. false

211.   

The account Valuation Allowance for Trading Securities is found on the:

 a. Income statement as Other Revenue (Expenses)

b. Balance sheet as an adjustment to the asset account

c. Balance sheet as an adjustment to Stockholders' Equity

d. Statement of Retained Earnings

212.   

Williams Company reports production costs for 2015 as follows:

Direct materials used$345,000

Direct labor incurred250,000

Factory overhead incurred400,000

Operating expenses175,000

Williams Company's period costs for 2015 amount to:

 a. $250,000

b. $345,000

c. $175,000

d. $400,000

213.   

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.

  a. true

 b. false

214.   

Which of the following are basic phases of the management process?

 a. Planning and controlling

b. Decision making and supervising

c. Supervising and directing

d. Organizing and directing

215.   

The flexible budget is, in effect, a series of static budgets for different levels of activity.

  a. true

 b. false

216.   

The Sharpe Company reports the following information for 2015:

Sales$76,500

Direct materials used7,300

Depreciation on factory equipment4,700

Indirect labor5,900

Direct labor10,500

Factory rent4,200

Factory utilities1,200

Sales salaries expense15,600

Office salaries expense8,900

Indirect materials1,200

Determine product costs for 2015.

 a. $35,000

b. $29,200

c. $30,300

d. $24,500

217.   

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 credit to Loss on Sale for $23,680

b. a debit to Cash for $111,840

c. a debit to Cash for $112,000

d. a credit to Investments for $112,000

218.   

Period costs can be found in the balance sheet or in the income statement.

  a. true

 b. false

219.   

Nonmanufacturing costs are classified into two categories: selling and administrative.

  a. true

 b. false

220.   

If $475,000 of bonds payable are sold at 101, $475,000 would be reported in the cash flows from financing activities section of the statement of cash flows.

  a. true

 b. false

221.   

Employees view budgeting more positively when goals are established for them by senior management.

  a. true

 b. false

222.   

For accounting purposes, 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 influence over the operating and financial affairs of the investee.

c. whether the stock has paid dividends in past years.

d. whether the acquisition of the stock by the investor was "friendly" or "hostile."

223.   

Any gains or losses on the sale of bonds normally would be reported in the Other Income (Loss) section of the income statement.

  a. true

 b. false

224.   

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. Debit to the investment account for $9,000

b. Credit to the investment account for $9,000

c. Credit to cash for $9,000

d. Credit to a loss account for $9,000

225.   

If one company owns more than 50% of the common stock of another company

 a. the cost method should be used to account for the investment.

b. a parent–subsidiary relationship exists.

c. the company whose stock is owned must be liquidated

d. a partnership exists.

226.   

Period costs include direct materials and direct labor.

  a. true

 b. false

227.   

The following selected account balances appeared on the financial statements of the Washington Company:

Accounts Receivable, Jan. 1$13,000

Accounts Receivable, Dec. 319,000

Accounts Payable, Jan 14,000

Accounts payable Dec. 317,000

Merchandise Inventory, Jan 110,000

Merchandise Inventory, Dec 3115,000

Sales56,000

Cost of Goods Sold31,000

The Washington Company uses the direct method to calculate net cash flow from operating activities.

Cash paid to suppliers is

 a. $39,000

b. $29,000

c. $23,000

d. $33,000

228.   

Yankton Company began the year without an investment portfolio. During the year they purchased investments classified as trading securities at a cost of $13,000. At the end of the year, the market value of the securities was $11,000. The Yankton Company's financial statements for the current year should show

 a. a loss of $2,000 on the income statement and temporary investments of $11,000 on the balance sheet

b. no loss on the income statement and net trading securities of $13,000 on the balance sheet

c. no loss on the income statement, net trading securities of $11,000 and an unrealized loss of $2,000 as a stockholders' equity adjustment on the balance sheet

d. a loss of $2,000 on the income statement and net trading securities of $13,000 on the balance sheet

229.   

On June 1, $40,000 of treasury bonds were purchased between interest dates. The broker commission was $600. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. How much interest revenue will be recorded on July 1?

 a. $400

b. $2,000

c. $2,400

d. $406

230.   

When budget goals are set too tight, the budget becomes less effective as a tool for planning and controlling operations.

  a. true

 b. false

 

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