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A200 Final

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A200 Final, IU Spring 2015
Natalie Rook
Quiz by Natalie Rook, updated more than 1 year ago
Natalie Rook
Created by Natalie Rook over 9 years ago
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Resource summary

Question 1

Question
Which of the following financial statement elements is closed at the end of an accounting cycle?
Answer
  • Liabilities
  • Equity
  • Revenues
  • Assets

Question 2

Question
The recognition of an expense may be accompanied by which of the following?
Answer
  • an increase in assets
  • a decrease in liabilities
  • a decrease in revenue
  • an increase in liabilities

Question 3

Question
Recording accrued salary expense at the end of an accounting period causes an increase in Salaries Expense and
Answer
  • an increase in a liability
  • a decrease in an asset
  • an increase in an equity account
  • none of these

Question 4

Question
Which of the following does not involve a deferral?
Answer
  • receipt of advance fees from clients
  • recording salaries of employees earned but not yet paid
  • payment of six months rent
  • purchase of supplies on account

Question 5

Question
Resources that a business uses to operate the business are called
Answer
  • assets
  • equity
  • revenues
  • liabilities

Question 6

Question
Most assets must be reported on the balance sheet at
Answer
  • their current replacement cost
  • fair market value
  • an amount estimated by the company's management
  • historic cost

Question 7

Question
Paying for a two-year insurance policy in advance will have what impact on a company's account classifications?
Answer
  • increase assets, increase stockholders' equity
  • increase assets, increase liabilities
  • increase assets, decrease liabilities
  • this transaction will have no impact on major classification totals

Question 8

Question
Under accrual basis of accounting
Answer
  • cash must be received before revenue is recognized
  • net income is calculated by matching cash outflows against cash inflows
  • events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid/received
  • the ledger, accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accountant principles

Question 9

Question
Which of the following events involves an accrual?
Answer
  • interest earned but not received
  • supplies purchased with cash but not yet used
  • a cash payment received from a customer before services provided
  • A and C

Question 10

Question
The recognition of an expense may be accompanied by which of the following?
Answer
  • an increase in assets
  • a decrease in liabilities
  • a decrease in revenue
  • an increase in liabilities
  • none of the above

Question 11

Question
Which of the following accounts is a permanent account (an account that is not closed)?
Answer
  • Rent expense
  • Service revenue
  • Dividends
  • Prepaid Insurance

Question 12

Question
Which of the following accounts is a temporary account?
Answer
  • prepaid insurance
  • unearned subscriptions revenue
  • retained earnings
  • subscription revenue

Question 13

Question
The matching concept refers to the "matching" of
Answer
  • expenses and liabilities
  • expenses and revenues
  • assets and equity
  • assets and liabilities

Question 14

Question
Which of the following transactions involve a deferral?
Answer
  • recording the payment of 3 months rent
  • recording the interest earned (but not received) on a certificate of deposit
  • recording interest accepted on a note payable
  • recording salaries of employees earned but not yet paid

Question 15

Question
The accountant for ProTex Painting forgot the following two adjustments at the end of 1997: A) the entry to record depreciation: $750 B) the entry to record the portion of fees received in advance which have now been earned: $750 As a result of these 2 omissions:
Answer
  • net income for ProTex Painting for 1997 is overstated
  • net income for ProTex Painting for 1997 is understated
  • assets of ProTex Painting are understated at December 31, 1997
  • liabilities of ProTex Painting are overstated at December 31, 1997

Question 16

Question
If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?
Answer
  • failure to make an adjustment does not affect the financial statements
  • expenses will be overstated and net income and owner's equity will be understated
  • assets will be overstated and net income and owner's equity will be understated
  • assets will be overstated and net income and owner's equity will be overstated

Question 17

Question
Recognition of revenue may result in which of the following?
Answer
  • a decrease in a liability
  • an increase in a liability
  • an increase in assets
  • A and C

Question 18

Question
Depreciation is the process of
Answer
  • valuing an asset at its fair market value
  • increasing the value of an asset over its useful life in a rational and systematic manner
  • allocating the cost of a productive asset to expense over its useful life in a rational and systematic manner
  • writing down an asset to its real value each accounting period

Question 19

Question
The balance sheet item that represents the portion of stockholders' equity resulting from profitable operation of the business is:
Answer
  • accounts receivable
  • cash
  • capital stock
  • retained earnings

Question 20

Question
The purpose of the accrual basis of accounting is to:
Answer
  • report revenue when received
  • improve the matching of revenue and expense in the proper period
  • report expenses when cash disbursements are made
  • improve the company's earnings per share

Question 21

Question
Perry's Puppies needed additional equipment, which was purchased on credit for $600. Which of the following is not true regarding the accounting for this transaction?
Answer
  • Equipment increased by $600
  • Accounts payable increased by $600
  • Expenses increased by $600
  • All of the above are true

Question 22

Question
At the first of the month Max paid a total of $2,400 for six months rent in advance. When he recorded the payment, he entered $2,400 into the Prepaid Rent account. At the end of the month, what adjustment should Max make?
Answer
  • Increase Prepaid Rent by $400 and increase Rent Expense by $400
  • Decrease Prepaid Rent by $2,400 and decrease Rent Expense by $2,400
  • Decrease Prepaid Rent by $400 and decrease Rent Expense by $400
  • None of the above

Question 23

Question
Which of the following adjustments are necessary if a company has earned 1/3 of a customer's prepayment of insurance premium?
Answer
  • increase unearned revenue
  • increase cash
  • increase insurance revenue
  • increase insurance expense

Question 24

Question
Which of the following transactions changes only the mix of assets and does not affect liabilities or stockholders' equity?
Answer
  • borrowed $40,000 from First National Bank
  • purchased land for cash
  • received $3,800 for fees earned
  • paid $4,000 for office salaries

Question 25

Question
On January 24, 2007, Niche Consulting collected $5,700 it had billed its clients for services rendered on December 31, 2006. How would you record the January 24 transaction, using the accrual basis?
Answer
  • Increase Cash, $5,700; decrease Fees Earned, $5,700
  • Increase Accounts Receivable, $5,700; increase Fees Earned, $5,700
  • Increase Cash, $5,700; decrease Accounts Receivable, $5,700
  • Increase Cash, $5,700; increase Fees Earned, $5,700

Question 26

Question
If a company fails to adjust unearned revenue for services that had been performed, what effect will this have on major accounts classifications?
Answer
  • understate revenues, understate net income, overstate assets, understate stockholders' equity
  • understate revenues, understate net income, overstate liabilities, overstate stockholders' equity
  • understate revenues, understate net income, understate liabilities, understate stockholders' equity
  • understate revenues, understate net income, overstate liabilities understate stockholders' equity

Question 27

Question
One purpose of making closing entries is
Answer
  • to reduce the number of expense accounts
  • to prepare the temporary accounts for the recording of the next period's activities
  • to establish new balances j.n the asset and liability accounts
  • to enable the accountant to prepare financial statements at the end of the accounting period
  • none of the above

Question 28

Question
Guy, Inc., pays its employees on the tenth day of each month. If the adjusting entry for accrued wages on December 31 were not made, which of the following would result?
Answer
  • Assets would be overstated.
  • Stockholders' equity would be understated.
  • Net income for the period would be understated.
  • Liabilities would be understated.
  • Net income for the period would be unaffected.

Question 29

Question
Adjusting entries
Answer
  • assign revenues to the period in which they are earned.
  • help to properly measure the periods net income or net loss.
  • bring asset and liability accounts to correct balances.
  • all of the above.

Question 30

Question
Which of the following statements about owner's equity is NOT correct?
Answer
  • Expenses decrease owner's equity
  • Contributions of owners increase owner's equity
  • Dividends distributed to owners increase owner's equity
  • Revenues increase owner's equity

Question 31

Question
On April 20, Iceland Rink agrees to rent the skating rink to the St. Paul Hockey Club four hours every day during May. The total cost of the ice time is $6,000. The Hockey Club pays $2,000 on April 20 and the remaining $4,000 on June 10. Assuming that Iceland prepares monthly financial statements and uses the accrual basis of accounting, it should recognize this $6,000 revenue.
Answer
  • In April
  • In May
  • $2,000 in April and $4,000 in June
  • In June

Question 32

Question
On April 20, Iceland Rink agrees to rent the skating rink to the St. Paul Hockey Club four hours every day during May. The total cost of the ice time is $6,000. The Hockey Club pays $2,000 on April 20 and the remaining $4,000 on June 10. Assume the same facts as in the preceding question, except that Iceland Rink uses the cash basis of accounting. Iceland should recognize the $6,000 revenue
Answer
  • In April
  • In May
  • $2,000 in April and $4,000 in June
  • In June

Question 33

Question
Examples of accruals are
Answer
  • salaries payable, depreciation of equipment, and prepaid insurance
  • taxes payable, rent received in advance, and office supplies
  • prepaid rent, revenue received in advance, and prepaid salaries
  • salaries payable, interest receivable, and taxes payable

Question 34

Question
Which one of the following direct effects on the fundamental accounting model is NOT possible as a result of transaction analysis?
Answer
  • decrease a liability and decrease an asset
  • increase owner's equity and increase an asset
  • increase an asset and decrease and asset
  • decrease owner's equity and increase an asset

Question 35

Question
The bookkeeping failed to accrue interest expense at year end. This will result in an
Answer
  • understatement of liability, and an overstatement of net income and owner's equity
  • overstatement of liabilities and an understatement of net income and owner's equity
  • overstatement of assets, net income, and owner's equity
  • understatement of assets, net income, and owner's equity

Question 36

Question
The 2 major divisions of stockholder's equity are
Answer
  • revenues and expenses
  • sales and costs of goods sold
  • assets and liabilities
  • contributed capital and retained earnings

Question 37

Question
When expenses exceed revenues in a given period (and there are no gains or losses)
Answer
  • owner's equity will not be impacted
  • owner's equity will be increased
  • owner's equity will be decreased
  • one cannot determine the impact on owner's equity without additional information

Question 38

Question
Prepaid expenses are
Answer
  • paid and recorded in an asset account before they are used or consumed
  • paid and recorded in an asset account after they are used or consumed
  • incurred but not yet paid or recorded
  • incurred and already paid or recorded

Question 39

Question
A statement of retained earnings shows
Answer
  • The changes in the Cash account occunirig during the the accounting period
  • The revenue, expense, and dividends of the accounting period
  • The types of assets which have been purchased with the earnings retained during the accounting period
  • The changed in the retained earnings account occurring during the accounting period

Question 40

Question
The terms "risk" and "retun" are related in that
Answer
  • risky investments always generate low returns
  • when one goes up, the other usually goes up
  • they generally rise and fall somewhat inversely
  • smaller investments usually incur smaller risk but generate higher returns

Question 41

Question
The major accounting difference between interest paid to creditors and dividends paid to owners is
Answer
  • interest paid decreases and dividends paid increases retained earnings
  • interest paid is on the income statement and dividends paid are not
  • interest paid is not on the income statement and dividends paid are
  • Both are treated identically by accountants

Question 42

Question
When should a company report the cost of an insurance policy as an expense?
Answer
  • When the company first signs the policy
  • When the company pays for the policy
  • When the company receives the benefits from the policy over its period of coverage
  • When the company receives payments from the insurance company for its insurance claims

Question 43

Question
The fiscal year of a business is usually determined by
Answer
  • the IRS
  • the lottery
  • the business
  • the SEC

Question 44

Question
If a resource has been consumed but a bill has not been received at the end of the accounting period then
Answer
  • an expense should be recorded when the bill is received
  • an expense should be recorded when the cash is paid out
  • an adjusting entry should be made recognizing the expense
  • it is optional whether to record the expense before the bill is received

Question 45

Question
If expenses are paid in cash then
Answer
  • assets will increase
  • liabilities will increase
  • owner's equity will increase
  • assets will decrease

Question 46

Question
The matching principle means that
Answer
  • expenses are recorded in the same period as the revenues to which they are related
  • debits are matched with credits in each journal entry so that the entry balances
  • the taxable income of a corporation matches the income reported to shareholder
  • manufacturers of matches use accounting principles that are different from those used by retailers of matches

Question 47

Question
The revenue recognition principle means that
Answer
  • some business persons do not realize how much their income their business is earning
  • expenses may not be recorded until the related revenue is earned
  • revenues are recorded when earned, regardless of the time payment is received
  • revenues cannot occur unless an exchange or performance rakes place

Question 48

Question
When a corporation pays a cash dividend it reduces the balance
Answer
  • of its cash account and retained earnings account
  • of its common stock account and its cash account
  • of its retained earnings account and its capital account
  • of its dividends account and its common stock account

Question 49

Question
By examining the income statement of a corporation it is possible to determine the amount of
Answer
  • money available for the payment of dividends
  • dividends actually paid during the period
  • expenses the company incurred on the last day of the accounting period
  • revenues earned during the accounting period

Question 50

Question
Outflows or the using of asset as a result of the major or central operations of a business are termed:
Answer
  • Liabilities
  • Owner's equity
  • Revenues
  • Expenses
  • Net losses

Question 51

Question
Which of the following financial statements presents the financial position of a firm at a particular point in time?
Answer
  • income statement
  • balance sheet
  • statement of cash flows
  • retained earnings statement

Question 52

Question
Income statement accounts are
Answer
  • assets and liabilities
  • revenues and dividends
  • revenues and expenses
  • assets and dividends

Question 53

Question
The total assets of Mr. Brown are greater than the total assets of Mr. Greene. From this one can conclude that
Answer
  • Mr. Brown is wealthier than Mr. Greene.
  • Mr. Brown' s balance sheet is different from Mr. Greene's
  • Mr. Brown's first name is Charlie
  • Mr. Brown owes more money than Mr. Greene

Question 54

Question
The two component of stockholders' equity on a balance sheet for a corporation are
Answer
  • liabilities and capital stock
  • assets and retained earnings
  • assets and liabilities
  • capital stock and retained earnings

Question 55

Question
A transaction was recorded as the purchase of an asset during the period but the adjusting entry required at the end of the period was not made. The most likely result is
Answer
  • the asset is overstated and income is understated
  • the asset is understated and income is overstated
  • both the asset and income are overstated
  • both the asset and income are understated

Question 56

Question
Lida Corporation receives payment of 5200,000 from customers for amounts previously owed to Lida. The recording of this event in Lida's fmancial statement will:
Answer
  • increase total assets
  • decrease total assets
  • have no effect on total assets
  • decrease total liabilities

Question 57

Question
Examples of accruals are
Answer
  • salaries payable, depreciation of equipment, and prepaid insurance
  • taxes payable, rent received in advance, and office supplies
  • prepaid rent, revenue received in advance, and prepaid salaries
  • salaries payable, interest receivable, and taxes payable

Question 58

Question
Which one of the following direct effects on the fundamental accounting model is NOT possible as a result of transaction analysis?
Answer
  • Decrease a liability and decrease an asset
  • Increase owners' equity and increase an asset
  • Increase an asset and decrease an asset
  • Decrease owners' equity and increase an assett

Question 59

Question
Which of the following statements about owners' equity is NOT correct?
Answer
  • expenses decrease owners' equity
  • contributions of owners' equity increase owners' equity
  • dividends distributed to owners increase owners' equity
  • revenues increase owners' equity

Question 60

Question
If the company's volume doubles, the cost per unit will
Answer
  • stay the same
  • double as well
  • increase, but will not double
  • decrease

Question 61

Question
Which of the following appears in the income statement of a merchandising business, but not in the income statement of a business that renders only services?
Answer
  • interest revenue
  • gross profit
  • advertising expenses
  • income taxes expense

Question 62

Question
Product costs are also referred to as
Answer
  • period costs
  • selling and administrative expenses
  • operating expenses
  • inventory costs

Question 63

Question
What is the relationship between gross margin and net income?
Answer
  • gross margin - merchandise inventory at the end of the period = net income
  • gross margin - selling and admin. expenses = net income
  • gross margin + selling and admin. expenses = net income
  • sales revenue * gross margin percentage = net income

Question 64

Question
Which of the following is a TRUE statement regarding product and/or period costs?
Answer
  • period costs never appear in the balance sheet
  • product costs appear on the income statement but never on the balance sheet
  • period costs appear first on the balance sheet and then later on the income statement
  • neither product nor period costs ever appear on the balance sheet
  • neither product nor period costs ever appear on the income statement

Question 65

Question
Which of the following is TRUE of fixed costs?
Answer
  • fixed costs are fixed in total and fixed per unit of the activity base
  • fixed costs are variable in total and fixed per unit of the activity base
  • fixed costs are fixed in total and variable per unit of the activity base
  • fixed costs are variable in the short-run, but are fixed in the long-run

Question 66

Question
Work-in-process inventory is composed of:
Answer
  • direct material and direct labor
  • direct labor and manufacturing overhead
  • direct material only
  • direct material, direct labor, and direct manufacturing overhead

Question 67

Question
If prices are rising, which of the following gives us the highest cost of goods sold?
Answer
  • LIFO
  • FIFO
  • retail method
  • weighted average

Question 68

Question
Which of the following is a product cost?
Answer
  • advertising expenditures
  • insurance on the office buildings
  • depreciation of the salesmen's car
  • depreciation of the production facilities

Question 69

Question
How is the balance sheet of a merchandising firm different from the balance sheet of a service business?
Answer
  • it includes the asset, accounts receivable
  • it reports the cost of goods sold
  • it includes the asset, merchandise inventory
  • it reports various period costs

Question 70

Question
The break-even point is that level of activity where total revenue equals:
Answer
  • total cost
  • fixed cost
  • variable cost
  • product cost

Question 71

Question
Management is interested in utilizing the full capacity of production facilities because it
Answer
  • spreads variable costs over a greater number of units, thereby reducing the variable cost per unit
  • spreads fixed costs over a greater number of units, thereby reducing the fixed cost per unit
  • reduces total variable costs
  • reduces total fixed costs

Question 72

Question
The terms on an invoice are 4/15, n/30. This means that
Answer
  • a discount of 4% will be allowed if payment is made within 15 days from the date of the invoice
  • a discount of 15% will be allowed if payment is made with 4 days grin the date of the invoice
  • a discount of 4% will be allowed if payment is made by the 15th of the month
  • a discount of 15% will be allowed if payment is made by the 4th day after the data of the invoice

Question 73

Question
The primary disadvantage of a just-in-time inventory system is
Answer
  • a reduction in the amount of money tied up in inventory
  • the company must use FIFO inventory method, and forgo the income tax advantages of LIFO
  • smaller inventories may reduce the company's current ratio and working capital
  • the risk is increased of losing sales opportunities or having to shut down manufacturing operations because of inventory shortages

Question 74

Question
What costs should be included in the merchandise inventory account of a merchandising firm?
Answer
  • the purchase price of merchandise only
  • all costs necessary to acquire inventory and prepare it for sale
  • an allocated portion of period costs
  • the purchase price of the merchandise + selling expenses

Question 75

Question
Which inventory method results in the lowest income taxes during periods of increasing prices?
Answer
  • FIFO
  • LIFO
  • weighted average
  • work-in-process

Question 76

Question
The inventory valuation method that results in the recognition of the most recent inventory costs on the balance sheet and income statement is
Answer
  • Balance sheet - FIFO Income statement - LIFO
  • Balance sheet - FIFO Income statement - FIFO
  • Balance sheet - LIFO Income statement - LIFO
  • Balance sheet - LIFO Income statement - FIFO

Question 77

Question
When raw materials enter the production process in a traditional manufacturing setting, their costs are transferred to:
Answer
  • a raw materials account
  • a direct materials account
  • a work in process account
  • a costs of goods sold account

Question 78

Question
Company's goods in transit at December 31 include sales made 1) FOB destination 2) FOB shipping point and purchases made 3) FOB destination 4) FOB shipping point what items should be included in their inventory at December 31?
Answer
  • 2 and 3
  • 1 and 4
  • 1 and 3
  • 2 and 4

Question 79

Question
As an incentive for customers to pay their accounts promptly, a business may offer its customers
Answer
  • a sales discount
  • free delivery
  • a sales allowance
  • a sales return

Question 80

Question
When the cost of a product is matched with its sales price, the result (difference) is
Answer
  • a cost of goods sold
  • gross profit
  • net income
  • contribution margin

Question 81

Question
Two companies report the same costs of goods available for sale but each employ a different inventory costing method. If the price of goods has increased during the period, then the company using
Answer
  • LIFO will have the highest ending inventory
  • FIFO will have the highest cost of goods sold
  • FIFO will have the highest ending inventory
  • LIFO will have the lowers cost of goods sold

Question 82

Question
The LIFO inventory method assumes that the cost of the latest units purchased are
Answer
  • the last to be allocated to cost of goods sold
  • the first to be allocated to ending inventory
  • the first to be allocated to cost of goods sold
  • not allocated to cost of goods sold or ending inventory

Question 83

Question
When the sales price rises, the number of units required to be sold to break even
Answer
  • increases
  • stays the same
  • decreases
  • the answer cannot be determined from the above information

Question 84

Question
Two categories of expenses in merchandising companies are
Answer
  • cost of goods sold and financing expenses
  • operating expenses and financing expenses
  • cost of goods sold and operating expenses
  • sales and cost of goods sold

Question 85

Question
The credit term offered to a customer by a business firm were 2/10, n/30, which means that
Answer
  • the customer must pay the bill within 10 days
  • the customer can deduct a 2% discount if the bill is paid between the 10th and 30th day of the invoice data
  • the customer can deduct a 2% discount if the bill is paid within the 10 days of the invoice date
  • two sales returns can be made within 10 days of the invoice date and no returns thereafter

Question 86

Question
The factor which determines whether or not goods should be included in a physical count of inventory is
Answer
  • physical possession
  • legal title
  • management's judgements
  • whether or not the purchase price has been paid

Question 87

Question
If goods in transit are shipped FOB destination
Answer
  • the seller has legal title to the goods until they are delivered
  • the buyer has legal title to the goods until they are delivered
  • the transportation company has legal title to the goods while the goods are in transit
  • no one has legal title to the goods until they are delivered

Question 88

Question
Tom had 100 thimbles that were completed at the end of the year but not yet been sold. Where would the costs of these items be found?
Answer
  • raw materials
  • finished goods
  • work in process
  • cost of goods sold

Question 89

Question
Which of the following will increase net income?
Answer
  • decrease sales price
  • decrease fixed costs
  • decrease sales volume
  • increase variable costs

Question 90

Question
Which of the following is the difference between the sales revenue per unit and the variable cost per unit?
Answer
  • profit
  • total contribution margin
  • contribution margin per unit
  • none of the above

Question 91

Question
Cost behavior analysis focuses on
Answer
  • how costs respond to changes in profits
  • how costs change over time
  • how costs change as output changes
  • none of the above

Question 92

Question
When the sales volume is above the break-even point, the company's
Answer
  • total costs exceed total revenues
  • marginal costs exceed marginal revenues
  • total revenues exceed total costs
  • it depends on the facts of the situation

Question 93

Question
The excess of a product's selling price over its variable costs is referred to as
Answer
  • gross profit
  • contribution margin
  • gross margin
  • manufacturing margin

Question 94

Question
Which of the following should NOT be recorded as an expense?
Answer
  • paid office salaries
  • paid factory maintenance costs
  • paid product advertising costs
  • paid sales commissions

Question 95

Question
Which of the following statements is INCORRECT with regard to product costs?
Answer
  • product costs flow from the balance sheet to the income statement
  • unlike direct material and direct labor costs, overhead costs must be allocated products
  • product costs are expensed in the period incurred
  • depreciation on manufacturing equipment is an indirect product cost

Question 96

Question
Which of the following statements concerning product costs versus general, selling, and administrative costs is true?
Answer
  • product costs incurred during the period will always appear as inventory on the balance sheet
  • general, selling, and administrative costs are always expensed when cash is paid
  • product costs may be divided between the balance sheet and income statement
  • general, selling, and administrative costs sometimes appear as inventory on the balance sheet

Question 97

Question
Identify the true statement regarding how product costs in a manufacturing company differ from product costs in a service company
Answer
  • manufacturing companies incur costs for supplies but service companies do not
  • manufacturing companies accumulate product costs for supplies but service companies do not
  • service companies generally incur less labor costs than manufacturing companies
  • service companies are less competitive than manufacturing companies

Question 98

Question
Fixed cost per unit
Answer
  • decreases as production volume decreases
  • is not affected by changes in the production volume
  • increases as production volume increases
  • decreases as production volume increases

Question 99

Question
All of the following could help to reduce variable costs except
Answer
  • purchase less expensive direct materials
  • reduce direct labor hours necessary for production
  • reduce sales commission percentage
  • reduce advertising costs

Question 100

Question
Which of the following will increase contribution margin?
Answer
  • decrease sales price
  • decrease fixed costs
  • decrease variable costs
  • increase variable costs

Question 101

Question
Manufacturing companies
Answer
  • provide services
  • buy merchandise inventory and then resell it
  • transform raw materials into finished products
  • do none of the above

Question 102

Question
To determine the inventory count, a business will count all merchandise that
Answer
  • is physically present
  • the business owns
  • is physically presents plus merchandise shipped FOB destination
  • is physically presents plus merchandise shipped FOB shipping point

Question 103

Question
Which of the following accounts maintained by a manufacturer would be the equivalent of a retailer's merchandise inventory?
Answer
  • cost of goods sold
  • finished goods inventory
  • materials inventory
  • work in process inventory

Question 104

Question
As volume increase, average cost per unit
Answer
  • increases
  • decreases
  • remains constant
  • increases in proportion to the change in volume

Question 105

Question
All else constant, if the selling price falls,
Answer
  • total variable costs will be lower than expected
  • contribution margin percentage will be higher than expected
  • total contribution margin will be higher than expected
  • per-unit contribution margin will be lower than expected

Question 106

Question
A firm would
Answer
  • prefer to operate above the breakeven point because costs will be lower
  • prefer to operate above the breakeven point as revenue will be less than costs
  • prefer to operate above the breakeven point as revenue will be more than costs
  • prefer to operate at breakeven point because it provided equilibrium

Question 107

Question
A physical count of inventory must be taken in order to determine the cost of goods sold under which of the following inventory systems?
Answer
  • perpetual inventory system
  • periodic inventory system
  • weighted-average system
  • LIFO inventory system

Question 108

Question
In a period of recession or declining prices, which of the following inventory pricing methods would result in the smallest income tax expense?
Answer
  • wighted-average cost
  • LIFO
  • FIFO
  • all of the above

Question 109

Question
The inventory method that includes the most recent prices in cost of goods sold is
Answer
  • average cost
  • FIFO
  • LIFO
  • specific identification

Question 110

Question
If a company has a positive contribution margin but net income is low or negative, what are some ways of increasing net income?
Answer
  • decrease sales price
  • decrease sales volume
  • increase variable costs
  • increase sales volume

Question 111

Question
At the break even point, total contribution margin is
Answer
  • zero
  • equal to total fixed costs
  • equal to total costs
  • equal to total variable costs

Question 112

Question
When the sales price decreases, the number of units requires to be sold to break even
Answer
  • increases
  • stays the same
  • decreases
  • the answer cannot be determined from the information above

Question 113

Question
The total contribution margin is calculated as the difference between
Answer
  • sales price and variable cost per unit
  • sales price and fixed cost per unit
  • total revenue and total fixed cost
  • total revenue and total cost
  • total revenue and total variable cost

Question 114

Question
The contribution income statement differs from the traditional income statement in which of the following ways?
Answer
  • the traditional income statement separates costs into their fixed and variable components
  • the traditional income statement subtracts all variable expenses from sales to obtain the contribution margin
  • cost-volume-profit relationship can be analyzed from the contribution income statement
  • the effect of sales volume changes on profit is readily apparent on the traditional income statement

Question 115

Question
Firm A and Firm B are competitors within the same industry. Firm A produces its products using large amounts of direct labor. Firm B has replaced direct labor with investment in machinery. Projected sales for both firms are 15% LESS than in the prior year. Which statement regarding projected profits are TRUE?
Answer
  • Firm A will lose more profit than Firm B
  • Firm B will lose more profit than Firm A
  • Firm A and Firm B will lose the same amount of profit
  • Neither Firm A or Firm B will lose profit

Question 116

Question
Costs that are expensed as incurred are
Answer
  • direct costs
  • indirect costs
  • product costs
  • period costs

Question 117

Question
Goods that are ready for sale are classified as
Answer
  • raw materials inventory
  • work in process
  • finished goods inventory
  • cost of goods sold

Question 118

Question
Product costs are expensed when the product is
Answer
  • purchased
  • manufactured
  • inventoried
  • sold

Question 119

Question
Goods that have been started but are not completed are considered
Answer
  • raw material inventory
  • work in process
  • finished goods inventory
  • cost of goods sold

Question 120

Question
If prices are rising, which of the following gives the lowest ending inventory value?
Answer
  • weighted average
  • retail inventory method
  • FIFO
  • LIFO

Question 121

Question
The FIFO inventory cost method differs from the LIFO method in that the
Answer
  • LIFO method more clearly matches current inventory cost with sales revenue
  • FIFO method more clearly matches current inventory cost with sales revenue
  • LIFO method assumes the oldest purchases are stored in the rear of the storage areas
  • FIFO method is more acceptable accounting method

Question 122

Question
Contribution margin can be defined as
Answer
  • the amount of sales revenue necessary to cover variable costs
  • sales revenue minus fixed costs
  • the amount of sales revenue necessary to cover fixed and variable costs
  • sales revenue minus variable costs

Question 123

Question
If prices were declining and you wanted to minimize tax payments, which inventory method would you use?
Answer
  • LIFO
  • FIFO
  • weighted average
  • specific identification

Question 124

Question
Gerrard Company is determining ending merchandise inventory. Which of the following items should be included?
Answer
  • an inventory of office supplies such as pens and paper clips
  • goods purchased FOB destination for resale and not yet arrived yet
  • goods sold to customers FOB destination and now enroute to customers
  • a group of used cash registers no longer used by the store and awaiting sale

Question 125

Question
Which of the following would cause the breakeven point to change?
Answer
  • sales increased
  • total production decreased
  • total variable costs increased as a function of higher production
  • fixed costs increased due to addition to physical plant

Question 126

Question
If all other factors remain the same, a 20% increase in both the selling price and variable expense of a product will
Answer
  • lower the company's breakeven point in units
  • raise the company's breakeven point in units
  • have no effect on the company's breakeven point in units
  • cannot be determined without more information

Question 127

Question
Which of the following effects occur when inventory is sold?
Answer
  • a liability and an asset both increase
  • a revenue and liability both decrease
  • an asset increases and a liability decreases
  • an expense increases and a liability decreases
  • an asset and a revenue both increase

Question 128

Question
Advertising expense is a
Answer
  • product cost - yes period cost - yes
  • product cost - yes period cost - no
  • product cost - no period cost - yes
  • product cost - no period cost - no

Question 129

Question
Product costs
Answer
  • never appear on the income statement
  • include direct costs only
  • can appear on the balance sheet
  • never appear on the balance sheet

Question 130

Question
Which of the following strategies would lower a company's breakeven point?
Answer
  • raise the sale price
  • lower the variable costs
  • lower the fixed costs
  • all of the above
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