Accounting

Question 1

What are cash equivalents?

Answer 1

Cash equivalents are short-term highly liquid investments that are easily convertible to cash and close to maturity (90 days or less).

Question 2

Which ratio is one measure of liquidity?

Answer 2

Quick ratio

Question 3

Does the solvency ratio measure a company’s ability to meet its debt obligations.

Answer 3

Yes

Question 4

All things equal, the higher a company’s inventory turnover rate, the better? True or False

Answer 4

True

Question 5

Why is one dollar now worth more than one dollar in the future?

Answer 5

Funds can be invested in earning assets to yield a positive return.

Question 6

A dollar received today is worth more than a dollar received two years ago. T/F

Answer 6

False

Question 7

When an interest is earned on interest in a savings account in a bank, this is called __________.

Answer 7

Compound interest

Question 8

Managerial Accounting provides information which is primarily useful for:

Answer 8

Helping managers plan, manage, and make strategic decisions regarding the growth and profitability of the company.

Question 9

Which firms normally carry inventory?

Answer 9

Manufacturing firms and Merchandising firms

Question 10

What does Managerial Accounting utilize of a company?

Answer 10

Financial and Non-financial data

Question 11

The accounting equation states that the economic resources of an entity are equal to the claims on those resources T/F

Answer 11

True

Question 12

Cash paid as dividends to stockholders is classified as a cash flow from investing activities in a statement of cash flows.

Answer 12

False
It’s actually from financing activities

Question 13

The operating activities section of the statement of cash flows shows a reconciliation of net income to the net cash provided by operating activities amount under the direct method

Answer 13

False
The indirect method begins with net income and removes noncash amounts to arrive at cash flows provided by operating activities.

Question 14

The operating-cash-flow-capital-expenditures ratio in excess of 1.0 means that the firms’ current operating activities are providing cash in excess of the amount needed to fund its desired investment in plant and intangible assets.

Answer 14

True

Question 15

Changing from straight-line depreciation to double declining-balance depreciation is an example of a change in an accounting principle.

Answer 15

True

Question 16

A dollar received today is worth more than a dollar received two years ago.

Answer 16

False
Since it can be invested and will earn additional interest

Question 17

What is a cash equivalent for purpose of preparing a statement of cash flows?

Answer 17

Investment in a money market fund

Question 18

With reference to the reporting of net cash flow from operating activities, which method do most companies use and why?

Answer 18

Indirect method because it is less expensive to prepare.

Question 19

The loss from the disposal of the segment should be reported in the income statement as:

Answer 19

A separate amount in a discontinued operations section.

Question 20

A single-step income statement for a merchandising firm:

Answer 20

Does not show a gross profit on sales amount

Question 21

Just-in-time ( JIT) inventory systems are designed to reduce :

Answer 21

Costs of carrying inventory

Question 22

A job order costing system does which of the following?

Answer 22

Allocates manufacturing costs to individual jobs to determine unit costs

Question 23

The predetermined manufacturing overhead rate for a company will generally be:

Answer 23

Based on annual budgets

Question 24

When recording depreciation on factory equipment, which of the following accounts would be credited?

Answer 24

Accumulated Depreciation— Equipment

Question 25

What is true about service firms?

Answer 25

Service firms typically do not include the cost of any Direct Materials in their Work in Progress Inventory for services that that perform.

Question 26

Which of the following is not a correct reason for using department overhead rates?

Answer 26

It is more accurate than activity-based costing when jobs are complex and varied

Question 27

Predetermined overhead rates are calculated by dividing estimates of total factory overhead cost in the upcoming accounting period (usually a year) by an estimated usage or capacity of some unit or related activity (such as direct labor hours)

Answer 27

True

Question 28

The entry to record direct labor for a job includes a debit to Work in process Inventory T/F

Answer 28

True

Question 29

In a job order costing system, product costs are recorded and accumulated for specific jobs or products. T/F

Answer 29

True

Question 30

If manufacturing overhead is under-applied at the end of the year, the entry to close the account requires a CREDIT to Manufacturing Overhead. T/F

Answer 30

True

Question 31

Because service departments do not directly contribute to the production of goods, their costs are generally considered period costs rather than assigned to an individual product, department or activity. T/F

Answer 31

False
Thus, service department costs are appropriately considered among the related production department costs and are included in final product costs as part of manufacturing overhead.