A200 Final

Question 1 of 130

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Which of the following financial statement elements is closed at the end of an accounting cycle?

Select one of the following:

  • Liabilities

  • Equity

  • Revenues

  • Assets

Question 2 of 130

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The recognition of an expense may be accompanied by which of the following?

Select one of the following:

  • an increase in assets

  • a decrease in liabilities

  • a decrease in revenue

  • an increase in liabilities

Question 3 of 130

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Recording accrued salary expense at the end of an accounting period causes an increase in Salaries Expense and

Select one of the following:

  • an increase in a liability

  • a decrease in an asset

  • an increase in an equity account

  • none of these

Question 4 of 130

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Which of the following does not involve a deferral?

Select one of the following:

  • 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 of 130

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Resources that a business uses to operate the business are called

Select one of the following:

  • assets

  • equity

  • revenues

  • liabilities

Question 6 of 130

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Most assets must be reported on the balance sheet at

Select one of the following:

  • their current replacement cost

  • fair market value

  • an amount estimated by the company's management

  • historic cost

Question 7 of 130

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Paying for a two-year insurance policy in advance will have what impact on a company's account classifications?

Select one of the following:

  • 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 of 130

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Under accrual basis of accounting

Select one of the following:

  • 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 of 130

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Which of the following events involves an accrual?

Select one of the following:

  • 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 of 130

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The recognition of an expense may be accompanied by which of the following?

Select one of the following:

  • an increase in assets

  • a decrease in liabilities

  • a decrease in revenue

  • an increase in liabilities

  • none of the above

Question 11 of 130

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Which of the following accounts is a permanent account (an account that is not closed)?

Select one of the following:

  • Rent expense

  • Service revenue

  • Dividends

  • Prepaid Insurance

Question 12 of 130

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Which of the following accounts is a temporary account?

Select one of the following:

  • prepaid insurance

  • unearned subscriptions revenue

  • retained earnings

  • subscription revenue

Question 13 of 130

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The matching concept refers to the "matching" of

Select one of the following:

  • expenses and liabilities

  • expenses and revenues

  • assets and equity

  • assets and liabilities

Question 14 of 130

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Which of the following transactions involve a deferral?

Select one of the following:

  • 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 of 130

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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:

Select one of the following:

  • 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 of 130

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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?

Select one of the following:

  • 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 of 130

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Recognition of revenue may result in which of the following?

Select one of the following:

  • a decrease in a liability

  • an increase in a liability

  • an increase in assets

  • A and C

Question 18 of 130

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Depreciation is the process of

Select one of the following:

  • 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 of 130

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The balance sheet item that represents the portion of stockholders' equity resulting from profitable operation of the business is:

Select one of the following:

  • accounts receivable

  • cash

  • capital stock

  • retained earnings

Question 20 of 130

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The purpose of the accrual basis of accounting is to:

Select one of the following:

  • 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 of 130

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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?

Select one of the following:

  • Equipment increased by $600

  • Accounts payable increased by $600

  • Expenses increased by $600

  • All of the above are true

Question 22 of 130

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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?

Select one of the following:

  • 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 of 130

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Which of the following adjustments are necessary if a company has earned 1/3 of a customer's prepayment of insurance premium?

Select one of the following:

  • increase unearned revenue

  • increase cash

  • increase insurance revenue

  • increase insurance expense

Question 24 of 130

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Which of the following transactions changes only the mix of assets and does not affect liabilities or stockholders' equity?

Select one of the following:

  • 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 of 130

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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?

Select one of the following:

  • 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 of 130

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If a company fails to adjust unearned revenue for services that had been performed, what effect will this have on major accounts classifications?

Select one of the following:

  • 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 of 130

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One purpose of making closing entries is

Select one of the following:

  • 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 of 130

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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?

Select one of the following:

  • 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 of 130

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Adjusting entries

Select one of the following:

  • 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 of 130

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Which of the following statements about owner's equity is NOT correct?

Select one of the following:

  • 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 of 130

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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.

Select one of the following:

  • In April

  • In May

  • $2,000 in April and $4,000 in June

  • In June

Question 32 of 130

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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

Select one of the following:

  • In April

  • In May

  • $2,000 in April and $4,000 in June

  • In June

Question 33 of 130

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Examples of accruals are

Select one of the following:

  • 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 of 130

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Which one of the following direct effects on the fundamental accounting model is NOT possible as a result of transaction analysis?

Select one of the following:

  • 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 of 130

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The bookkeeping failed to accrue interest expense at year end. This will result in an

Select one of the following:

  • 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 of 130

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The 2 major divisions of stockholder's equity are

Select one of the following:

  • revenues and expenses

  • sales and costs of goods sold

  • assets and liabilities

  • contributed capital and retained earnings

Question 37 of 130

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When expenses exceed revenues in a given period (and there are no gains or losses)

Select one of the following:

  • 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 of 130

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Prepaid expenses are

Select one of the following:

  • 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 of 130

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A statement of retained earnings shows

Select one of the following:

  • 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 of 130

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The terms "risk" and "retun" are related in that

Select one of the following:

  • 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 of 130

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The major accounting difference between interest paid to creditors and dividends paid to owners is

Select one of the following:

  • 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 of 130

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When should a company report the cost of an insurance policy as an expense?

Select one of the following:

  • 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 of 130

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The fiscal year of a business is usually determined by

Select one of the following:

  • the IRS

  • the lottery

  • the business

  • the SEC

Question 44 of 130

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If a resource has been consumed but a bill has not been received at the end of the accounting period then

Select one of the following:

  • 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 of 130

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If expenses are paid in cash then

Select one of the following:

  • assets will increase

  • liabilities will increase

  • owner's equity will increase

  • assets will decrease

Question 46 of 130

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The matching principle means that

Select one of the following:

  • 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 of 130

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The revenue recognition principle means that

Select one of the following:

  • 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 of 130

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When a corporation pays a cash dividend it reduces the balance

Select one of the following:

  • 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 of 130

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By examining the income statement of a corporation it is possible to determine the amount of

Select one of the following:

  • 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 of 130

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Outflows or the using of asset as a result of the major or central operations of a business are termed:

Select one of the following:

  • Liabilities

  • Owner's equity

  • Revenues

  • Expenses

  • Net losses

Question 51 of 130

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Which of the following financial statements presents the financial position of a firm at a particular point in time?

Select one of the following:

  • income statement

  • balance sheet

  • statement of cash flows

  • retained earnings statement

Question 52 of 130

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Income statement accounts are

Select one of the following:

  • assets and liabilities

  • revenues and dividends

  • revenues and expenses

  • assets and dividends

Question 53 of 130

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The total assets of Mr. Brown are greater than the total assets of Mr. Greene. From this one can conclude that

Select one of the following:

  • 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 of 130

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The two component of stockholders' equity on a balance sheet for a corporation are

Select one of the following:

  • liabilities and capital stock

  • assets and retained earnings

  • assets and liabilities

  • capital stock and retained earnings

Question 55 of 130

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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

Select one of the following:

  • 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 of 130

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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:

Select one of the following:

  • increase total assets

  • decrease total assets

  • have no effect on total assets

  • decrease total liabilities

Question 57 of 130

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Examples of accruals are

Select one of the following:

  • 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 of 130

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Which one of the following direct effects on the fundamental accounting model is NOT possible as a result of transaction analysis?

Select one of the following:

  • 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 of 130

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Which of the following statements about owners' equity is NOT correct?

Select one of the following:

  • expenses decrease owners' equity

  • contributions of owners' equity increase owners' equity

  • dividends distributed to owners increase owners' equity

  • revenues increase owners' equity

Question 60 of 130

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If the company's volume doubles, the cost per unit will

Select one of the following:

  • stay the same

  • double as well

  • increase, but will not double

  • decrease

Question 61 of 130

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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?

Select one of the following:

  • interest revenue

  • gross profit

  • advertising expenses

  • income taxes expense

Question 62 of 130

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Product costs are also referred to as

Select one of the following:

  • period costs

  • selling and administrative expenses

  • operating expenses

  • inventory costs

Question 63 of 130

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What is the relationship between gross margin and net income?

Select one of the following:

  • 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 of 130

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Which of the following is a TRUE statement regarding product and/or period costs?

Select one of the following:

  • 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 of 130

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Which of the following is TRUE of fixed costs?

Select one of the following:

  • 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 of 130

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Work-in-process inventory is composed of:

Select one of the following:

  • direct material and direct labor

  • direct labor and manufacturing overhead

  • direct material only

  • direct material, direct labor, and direct manufacturing overhead

Question 67 of 130

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If prices are rising, which of the following gives us the highest cost of goods sold?

Select one of the following:

  • LIFO

  • FIFO

  • retail method

  • weighted average

Question 68 of 130

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Which of the following is a product cost?

Select one of the following:

  • advertising expenditures

  • insurance on the office buildings

  • depreciation of the salesmen's car

  • depreciation of the production facilities

Question 69 of 130

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How is the balance sheet of a merchandising firm different from the balance sheet of a service business?

Select one of the following:

  • 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 of 130

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The break-even point is that level of activity where total revenue equals:

Select one of the following:

  • total cost

  • fixed cost

  • variable cost

  • product cost

Question 71 of 130

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Management is interested in utilizing the full capacity of production facilities because it

Select one of the following:

  • 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 of 130

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The terms on an invoice are 4/15, n/30. This means that

Select one of the following:

  • 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 of 130

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The primary disadvantage of a just-in-time inventory system is

Select one of the following:

  • 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 of 130

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What costs should be included in the merchandise inventory account of a merchandising firm?

Select one of the following:

  • 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 of 130

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Which inventory method results in the lowest income taxes during periods of increasing prices?

Select one of the following:

  • FIFO

  • LIFO

  • weighted average

  • work-in-process

Question 76 of 130

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The inventory valuation method that results in the recognition of the most recent inventory costs on the balance sheet and income statement is

Select one of the following:

  • 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 of 130

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When raw materials enter the production process in a traditional manufacturing setting, their costs are transferred to:

Select one of the following:

  • a raw materials account

  • a direct materials account

  • a work in process account

  • a costs of goods sold account

Question 78 of 130

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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?

Select one of the following:

  • 2 and 3

  • 1 and 4

  • 1 and 3

  • 2 and 4

Question 79 of 130

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As an incentive for customers to pay their accounts promptly, a business may offer its customers

Select one of the following:

  • a sales discount

  • free delivery

  • a sales allowance

  • a sales return

Question 80 of 130

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When the cost of a product is matched with its sales price, the result (difference) is

Select one of the following:

  • a cost of goods sold

  • gross profit

  • net income

  • contribution margin

Question 81 of 130

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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

Select one of the following:

  • 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 of 130

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The LIFO inventory method assumes that the cost of the latest units purchased are

Select one of the following:

  • 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 of 130

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When the sales price rises, the number of units required to be sold to break even

Select one of the following:

  • increases

  • stays the same

  • decreases

  • the answer cannot be determined from the above information

Question 84 of 130

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Two categories of expenses in merchandising companies are

Select one of the following:

  • 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 of 130

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The credit term offered to a customer by a business firm were 2/10, n/30, which means that

Select one of the following:

  • 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 of 130

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The factor which determines whether or not goods should be included in a physical count of inventory is

Select one of the following:

  • physical possession

  • legal title

  • management's judgements

  • whether or not the purchase price has been paid

Question 87 of 130

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If goods in transit are shipped FOB destination

Select one of the following:

  • 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 of 130

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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?

Select one of the following:

  • raw materials

  • finished goods

  • work in process

  • cost of goods sold

Question 89 of 130

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Which of the following will increase net income?

Select one of the following:

  • decrease sales price

  • decrease fixed costs

  • decrease sales volume

  • increase variable costs

Question 90 of 130

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Which of the following is the difference between the sales revenue per unit and the variable cost per unit?

Select one of the following:

  • profit

  • total contribution margin

  • contribution margin per unit

  • none of the above

Question 91 of 130

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Cost behavior analysis focuses on

Select one of the following:

  • how costs respond to changes in profits

  • how costs change over time

  • how costs change as output changes

  • none of the above

Question 92 of 130

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When the sales volume is above the break-even point, the company's

Select one of the following:

  • 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 of 130

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The excess of a product's selling price over its variable costs is referred to as

Select one of the following:

  • gross profit

  • contribution margin

  • gross margin

  • manufacturing margin

Question 94 of 130

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Which of the following should NOT be recorded as an expense?

Select one of the following:

  • paid office salaries

  • paid factory maintenance costs

  • paid product advertising costs

  • paid sales commissions

Question 95 of 130

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Which of the following statements is INCORRECT with regard to product costs?

Select one of the following:

  • 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 of 130

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Which of the following statements concerning product costs versus general, selling, and administrative costs is true?

Select one of the following:

  • 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 of 130

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Identify the true statement regarding how product costs in a manufacturing company differ from product costs in a service company

Select one of the following:

  • 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 of 130

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Fixed cost per unit

Select one of the following:

  • 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 of 130

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All of the following could help to reduce variable costs except

Select one of the following:

  • purchase less expensive direct materials

  • reduce direct labor hours necessary for production

  • reduce sales commission percentage

  • reduce advertising costs

Question 100 of 130

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Which of the following will increase contribution margin?

Select one of the following:

  • decrease sales price

  • decrease fixed costs

  • decrease variable costs

  • increase variable costs

Question 101 of 130

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Manufacturing companies

Select one of the following:

  • provide services

  • buy merchandise inventory and then resell it

  • transform raw materials into finished products

  • do none of the above

Question 102 of 130

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To determine the inventory count, a business will count all merchandise that

Select one of the following:

  • 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 of 130

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Which of the following accounts maintained by a manufacturer would be the equivalent of a retailer's merchandise inventory?

Select one of the following:

  • cost of goods sold

  • finished goods inventory

  • materials inventory

  • work in process inventory

Question 104 of 130

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As volume increase, average cost per unit

Select one of the following:

  • increases

  • decreases

  • remains constant

  • increases in proportion to the change in volume

Question 105 of 130

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All else constant, if the selling price falls,

Select one of the following:

  • 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 of 130

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A firm would

Select one of the following:

  • 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 of 130

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A physical count of inventory must be taken in order to determine the cost of goods sold under which of the following inventory systems?

Select one of the following:

  • perpetual inventory system

  • periodic inventory system

  • weighted-average system

  • LIFO inventory system

Question 108 of 130

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In a period of recession or declining prices, which of the following inventory pricing methods would result in the smallest income tax expense?

Select one of the following:

  • wighted-average cost

  • LIFO

  • FIFO

  • all of the above

Question 109 of 130

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The inventory method that includes the most recent prices in cost of goods sold is

Select one of the following:

  • average cost

  • FIFO

  • LIFO

  • specific identification

Question 110 of 130

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If a company has a positive contribution margin but net income is low or negative, what are some ways of increasing net income?

Select one of the following:

  • decrease sales price

  • decrease sales volume

  • increase variable costs

  • increase sales volume

Question 111 of 130

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At the break even point, total contribution margin is

Select one of the following:

  • zero

  • equal to total fixed costs

  • equal to total costs

  • equal to total variable costs

Question 112 of 130

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When the sales price decreases, the number of units requires to be sold to break even

Select one of the following:

  • increases

  • stays the same

  • decreases

  • the answer cannot be determined from the information above

Question 113 of 130

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The total contribution margin is calculated as the difference between

Select one of the following:

  • 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 of 130

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The contribution income statement differs from the traditional income statement in which of the following ways?

Select one of the following:

  • 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 of 130

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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?

Select one of the following:

  • 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 of 130

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Costs that are expensed as incurred are

Select one of the following:

  • direct costs

  • indirect costs

  • product costs

  • period costs

Question 117 of 130

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Goods that are ready for sale are classified as

Select one of the following:

  • raw materials inventory

  • work in process

  • finished goods inventory

  • cost of goods sold

Question 118 of 130

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Product costs are expensed when the product is

Select one of the following:

  • purchased

  • manufactured

  • inventoried

  • sold

Question 119 of 130

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Goods that have been started but are not completed are considered

Select one of the following:

  • raw material inventory

  • work in process

  • finished goods inventory

  • cost of goods sold

Question 120 of 130

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If prices are rising, which of the following gives the lowest ending inventory value?

Select one of the following:

  • weighted average

  • retail inventory method

  • FIFO

  • LIFO

Question 121 of 130

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The FIFO inventory cost method differs from the LIFO method in that the

Select one of the following:

  • 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 of 130

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Contribution margin can be defined as

Select one of the following:

  • 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 of 130

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If prices were declining and you wanted to minimize tax payments, which inventory method would you use?

Select one of the following:

  • LIFO

  • FIFO

  • weighted average

  • specific identification

Question 124 of 130

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Gerrard Company is determining ending merchandise inventory. Which of the following items should be included?

Select one of the following:

  • 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 of 130

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Which of the following would cause the breakeven point to change?

Select one of the following:

  • 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 of 130

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If all other factors remain the same, a 20% increase in both the selling price and variable expense of a product will

Select one of the following:

  • 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 of 130

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Which of the following effects occur when inventory is sold?

Select one of the following:

  • 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 of 130

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Advertising expense is a

Select one of the following:

  • 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 of 130

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Product costs

Select one of the following:

  • never appear on the income statement

  • include direct costs only

  • can appear on the balance sheet

  • never appear on the balance sheet

Question 130 of 130

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Which of the following strategies would lower a company's breakeven point?

Select one of the following:

  • raise the sale price

  • lower the variable costs

  • lower the fixed costs

  • all of the above

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A200 Final

Natalie Rook
Quiz by , created over 1 year ago

A200 Final, IU Spring 2015

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Natalie Rook
Created by Natalie Rook over 1 year ago
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