Accounting Flashcards
What are cash equivalents?
Cash equivalents are short-term highly liquid investments that are easily convertible to cash and close to maturity (90 days or less).
Which ratio is one measure of liquidity?
Quick ratio
Does the solvency ratio measure a company’s ability to meet its debt obligations.
Yes
All things equal, the higher a company’s inventory turnover rate, the better? True or False
True
Why is one dollar now worth more than one dollar in the future?
Funds can be invested in earning assets to yield a positive return.
A dollar received today is worth more than a dollar received two years ago. T/F
False
When an interest is earned on interest in a savings account in a bank, this is called __________.
Compound interest
Managerial Accounting provides information which is primarily useful for:
Helping managers plan, manage, and make strategic decisions regarding the growth and profitability of the company.
Which firms normally carry inventory?
Manufacturing firms and Merchandising firms
What does Managerial Accounting utilize of a company?
Financial and Non-financial data
The accounting equation states that the economic resources of an entity are equal to the claims on those resources T/F
True
Cash paid as dividends to stockholders is classified as a cash flow from investing activities in a statement of cash flows.
False
It’s actually from financing activities
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
False
The indirect method begins with net income and removes noncash amounts to arrive at cash flows provided by operating activities.
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.
True
Changing from straight-line depreciation to double declining-balance depreciation is an example of a change in an accounting principle.
True
A dollar received today is worth more than a dollar received two years ago.
False
Since it can be invested and will earn additional interest
What is a cash equivalent for purpose of preparing a statement of cash flows?
Investment in a money market fund
With reference to the reporting of net cash flow from operating activities, which method do most companies use and why?
Indirect method because it is less expensive to prepare.
The loss from the disposal of the segment should be reported in the income statement as:
A separate amount in a discontinued operations section.
A single-step income statement for a merchandising firm:
Does not show a gross profit on sales amount
Just-in-time ( JIT) inventory systems are designed to reduce :
Costs of carrying inventory
A job order costing system does which of the following?
Allocates manufacturing costs to individual jobs to determine unit costs
The predetermined manufacturing overhead rate for a company will generally be:
Based on annual budgets
When recording depreciation on factory equipment, which of the following accounts would be credited?
Accumulated Depreciation— Equipment
What is true about service firms?
Service firms typically do not include the cost of any Direct Materials in their Work in Progress Inventory for services that that perform.
Which of the following is not a correct reason for using department overhead rates?
It is more accurate than activity-based costing when jobs are complex and varied
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)
True
The entry to record direct labor for a job includes a debit to Work in process Inventory T/F
True
In a job order costing system, product costs are recorded and accumulated for specific jobs or products. T/F
True
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
True
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
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.
