question

When a firm buys land on which there is a building and the building is torn down so that an appropriate new building can be constructed on the land

answer

the total cost of the land and old building are capitalized as land cost.

question

Expenditures capitalized as long-lived assets generally include those expenditures that

answer

are material in amount and that have an economic benefit to the entity that extends beyond the current year.

question

Which of the following statements best describes the process of accounting for depreciation?

answer

A process for recognizing the cost of an asset that should be matched against revenue earned as a result of using the asset.

question

The entry to record depreciation expense

answer

increases a contra asset and decreases net income.

question

The net book value of a depreciable asset is

answer

the difference between the asset's cost and accumulated depreciation

question

When an accelerated depreciation method is used to calculate depreciation expense

answer

the net book value of the asset halfway through its useful life will be less than if straight-line depreciation is used.

question

If there is a loss on the disposal of a depreciable asset

answer

in retrospect, the depreciation expense recognized over the asset's life was too low.

question

Depreciation

answer

in accounting, is a process that results in, spreading the cost of an asset over its useful life to the entity.

question

Leasehold is an example of which of the following types of assets?

answer

intangible asset

question

Noncurrent- intangible assets such as leasehold/ improvements/ patents and copyrights are all subject to

answer

amortization.

question

When a depreciable asset is sold

answer

a gain arises if the sales proceeds exceed the net book value.

question

Goodwill is an asset that arises because the present value of an acquired company's estimated future earnings

answer

discounted at the acquiring firm's ROI, is more than the fair value of the net assets of the acquired company

question

The intangible asset goodwill

answer

may arise when one company purchases another company

question

Many companies use accelerated depreciation for tax purposes because

answer

it results in lower taxable income than straight-line depreciation.

question

When an accelerated depreciation method is used to calculate depreciation expense

answer

the net book value of the asset halfway through its useful life will be less than if straight-line depreciation is used.

question

If there is a loss on the disposal of a depreciable asset

answer

in retrospect, the depreciation expense recognized over the asset's life was too low.

question

Depreciation

answer

in accounting, is a process that results in, spreading the cost of an asset over its useful life to the entity.

question

Leasehold is an example of which of the following types of assets?

answer

intangible asset.

question

When a depreciable asset is sold

answer

a gain arises if the sales proceeds exceed the net book value.

question

Many companies use accelerated depreciation for tax purposes because

answer

it results in lower taxable income than straight-line depreciation.

question

Expenditures capitalized as long-lived assets generally include those expenditures that

answer

are material in amount and that have an economic benefit to the entity that extends beyond the current year

question

The net book value of a depreciable asset is

answer

the difference between the asset's cost and accumulated depreciation.

question

Goodwill is an asset that arises because the present value of an acquired company's estimated future earnings discounted at the acquiring firm's ROI

answer

is more than the fair value of the net assets of the acquired company, is more than the fair value of the net assets of the acquired company.

question

Interest on a Note Payable is most appropriately accrued

answer

as of the end of each accounting period during which the note is a liability.

question

The adjusting entry to accrue Interest Expense results in

answer

an increase in Interest Expense.

question

Which of the following is not usually associated with bonds?

answer

Maturity rate

question

The financial leverage characteristic of long-term debt results in

answer

a magnification of ROE relative to what it would be without long-term debt

question

When a company issues a bond at a premium

answer

the company's interest expense will be less than the interest paid each year

question

If the market price of a bond exceeds its face amount

answer

the coupon rate is more than the market interest rate.

question

Financial leverage refers to which of the following?

answer

The difference between the rate of return earned on assets (ROI) and the rate of return earned on stockholders' equity (ROE).

question

When a company issues a bond at a discount

answer

the company's interest expense will be more than the interest paid each year

question

When bonds are issued at a premium

answer

interest expense on the bonds will be less than the interest paid.

question

Which of the following is(are) a true statement(s) pertaining to bonds?

answer

Bonds can be sold at a discount/ par/ or premium.

question

Which of the following is true regarding bond discounts and/or premiums?

answer

Both bond discount and premium are amortized.

question

The amortization of bond discount

answer

results in bond interest expense being greater than the interest paid to bondholders.

question

Which of the following is not a stockholders' equity account?

answer

Accumulated Depreciation

question

another term frequently used to describe stockholders' equity is

answer

net assets

question

Retained earnings represents

answer

cumulative net income of the firm since its beginning that has not been distributed to its stockholders in the form of dividends.

question

Factors that usually affect retained earnings directly include

answer

net income or loss, and dividends.

question

The declaration of a cash dividend by the directors results in

answer

a decrease in retained earnings and an increase in current liabilities.

question

When a firm purchases its own shares as treasury stock

answer

total stockholders' equity is decreased.

question

Performance analysis in the planning and control cycle relates to the act of

answer

controlling.

question

Which of the following statements does not describe a characteristic of management accounting?

answer

Management accounting must conform to GAAP.

question

Managerial accounting

answer

as compared to financial accounting, uses frequent and prompt control reports.

question

Managerial accounting

answer

as opposed to financial accounting, is primarily concerned with, present and future planning and control.

question

Managerial accounting can best be described as

answer

the preparation and use of accounting information within the organization

question

Which of the following is another term for mixed costs?

answer

Semivariable Costs

question

As the total volume of activity changes

answer

the total of variable costs changes

question

Expressing fixed costs on a per unit basis of activity is misleading because

answer

fixed cost per unit decrease as activity increases.

question

Knowledge about the behavior pattern of a cost is important to understanding the effect on net income of a change in sales volume because as sales volume changes

answer

the effect on net income will depend on the behavior pattern of various costs.

question

As the level of activity increases

answer

fixed cost per unit decreases

question

As the level of activity decreases

answer

fixed cost remains constant in total.

question

An example of a cost that is likely to have a variable behavior pattern is

answer

production labor wages.

question

An example of a cost likely to have a fixed behavior pattern is

answer

advertising cost

question

Which of the following is the correct calculation for the contribution margin ratio?

answer

Contribution margin divided by sales revenue.

question

The concept of operating leverage refers to which of the following?

answer

Operating income changes proportionately more than revenues for any given change in activity level.

question

The scattergram allows cost-volume relationships to be visually scanned for outlier observations that should be

answer

ignored in the calculation of the cost formula of a mixed cost.

question

An income statement organized by cost behavior does not include

answer

gross profit

question

The contribution margin format income statement is organized by

answer

cost behavior classifications.

question

ABU Co. has several products

answer

each with a different contribution margin ratio. If the same number of units were sold in July as in June, but the sales mix changed, total contribution margin in July would be different from that in June.

question

A sunk cost is a cost that

answer

is a differential cost. has been incurred and cannot be estimated. is also never relevant in decision-making

question

which of the following costs will not be relevant?

answer

Fixed manufacturing overhead that cannot be avoided.

question

The Key to analyzing a sell as is or process further is to determine that

answer

incremental revenues exceed incremental costs

question

In a make or buy decision which of the following costs would be considered relevant?

answer

avoidable costs

question

Which of the following qualitative factors favors the buy option in the make or buy decision?

answer

Technical expertise of supplier.

question

An example of a cost that is likely to have a variable behavior pattern is

answer

production labor wages.

question

An example of a cost likely to have a fixed behavior pattern is

answer

advertising cost.

question

An example of a cost likely to have a mixed behavior pattern is

answer

electricity cost for the manufacturing plant.

question

Which of the following terms do not appear on the contribution margin format income statement

answer

gross profit.

question

Each of a company's two product lines has a different contribution margin ratio. If the company's total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio

answer

which of the following is true?, The average contribution margin ratio will increase, Operating income will increase, The break-even point will decrease. (ALL ARE TRUE)

question

The term "cost" means

answer

the price for a raw material. the price charged by an entity for its services and the wages paid

question

Cost accounting is primarily concerned with

answer

income measurement/inventory valuation- accumulation and determination of product or service cost- generally accepted accounting principles

question

Which of the following costs would be classified as a period cost

answer

advertising expense for the product

question

Direct costs pertain to costs that

answer

are traceable to a cost object

question

The overhead component of product cost is

answer

an estimated amount based on labor hours/ machine hours or some other activity

question

Product costs are inventoried and treated as assets until

answer

the period in which the products they relate to are sold.

question

In the T-account cost flow diagram of balance sheet inventory accounts and the income statement cost of goods sold account

answer

cost of goods manufactured is debited to finished goods inventory.

question

Cost of Goods Manufactured can be computed as

answer

beginning balance of work in process + raw materials used + direct labor costs incurred + manufacturing overhead costs applied ─ ending balance of work in process.

question

Cost accounting is a subset of

answer

managerial accounting.

question

An example of a cost that is likely to have a direct relationship with products being manufactured is

answer

production labor costs

question

An example of a cost likely to have an indirect relationship with products being manufactured is

answer

electricity costs for packing equipment

question

Common costs pertain to costs that

answer

are not directly traceable to a cost object

question

The three components of product costs are

answer

direct material, direct labor, manufacturing overhead.

question

Which of the following is NOT an inventory account for a manufacturing company?

answer

costs of goods sold

question

Which of the following is NOT an account that over/under applied overhead is transferred to at the end of an accounting period?

answer

raw materials

question

Which of the following is a true statement regarding absorption and/or direct costing?

answer

Absorption costing includes fixed overhead in product costs whereas direct costing does not

question

A predetermined overhead rate is used to

answer

assign indirect costs to cost objects.

question

Which of the following costs are included in the "for cost accounting purposes" classification?

answer

product cost and period cost

question

Which of the following describes the correct sequence of flow of costs for a manufacturing firm?

answer

Raw materials- work-in-process,-finished goods and cost of goods sold

question

The three sections of a statement of cost of goods manufactured include

answer

raw material, direct labor, manufacturing overhead

question

Which of the following items would not be reported on the statement of cost of goods manufactured?

answer

contribution margin

question

The primary difference between absorption costing and direct costing is the treatment of

answer

fixed manufacturing overhead

question

Direct costing may be used for

answer

internal reporting purposes.

question

In order to achieve higher quality cost information from the assignment of overhead costs to products manufactured

answer

the use of a predetermined overhead rate is being replaced by, activity-based costing.

question

An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a

answer

cost driver

question

The use of activity-based costing information to support the decision-making process is known as

answer

activity-based management

question

A budget that is prepared for several periods in the future

answer

then revised several times prior to the budget period is called a, rolling budget

question

A standard cost or production standard that is achievable under actual operating conditions is called a(n)

answer

attainable standard

question

Standards are most appropriately used to

answer

support the planning and control processes of the firm.

question

Fixed costs classified according to the time frame perspective are known as

answer

committed cost andf discretionary cost

question

Which of the following is NOT an inventory account for a manufacturing company?

answer

cost of goods sold

question

Which of the following is NOT an account that over/under applied overhead is transferred to at the end of an accounting period?

answer

raw material

question

Which of the following costs are included in the "for cost accounting purposes" classification?

answer

product cost cost and period cost

question

An excess of cost of goods manufactured over cost of goods sold for the period represents

answer

an increase in finished goods inventory

question

Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing?

answer

units produced are greater than units sold.

question

An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a

answer

cost driver.

question

hen a firm buys land on which there is a building

answer

and the building is torn down so that an appropriate new building can be constructed on the land, the total cost of the land and old building are capitalized as land cost.

question

Which of the following statements best describes the process of accounting for depreciation?

answer

A process for recognizing the cost of an asset that should be matched against revenue earned as a result of using the asset.

question

The entry to record depreciation expense

answer

increases a contra asset and decreases net income.

question

The net book value of a depreciable asset is

answer

the difference between the asset's cost and accumulated depreciation.

question

If there is a loss on the disposal of a depreciable asset

answer

in retrospect the depreciation expense recognized over the asset's life was too low.

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