Final Part I

Question 1

A corporation is a legal entity separate from its owners.

Answer 1

True

Question 2

The price at which a share of stock is bought or sold is known as par value.

Answer 2

False

Question 3

Common stock always carries a preference for receiving dividends over preferred stock.

Answer 3

False

Question 4

Cumulative preferred stock carries the right to be paid both current and all prior periods’ unpaid dividends before any dividends are paid to common shareholders.

Answer 4

True

Question 5

The date of record is the date that directors vote to pay a cash dividend to shareholders.

Answer 5

False

Question 6

A bond’s par value is not necessarily the same as its market value.

Answer 6

True

Question 7

An installment note is an obligation of the issuing company that requires a series of periodic payments to the lender.

Answer 7

True

Question 8

An annuity is a series of equal payments at equal time intervals.

Answer 8

True

Question 9

The contract rate of interest is the rate that borrowers are willing to pay and lenders are willing to accept for a particular bond and its risk level.

Answer 9

False

Question 10

Bond interest paid by a corporation is an expense, whereas dividends paid are not an expense of the corporation.

Answer 10

True

Question 11

Managerial accounting provides financial and nonfinancial information to an organization’s managers and other internal decision makers.

Answer 11

True

Question 12

Straight line depreciation, rent and manager salaries are examples of variable costs.

Answer 12

False

Question 13

Raw materials inventory should not include indirect materials.

Answer 13

False

Question 14

Unrealized gains and losses on trading securities are reported on the income statement.

Answer 14

True

Question 15

Direct materials are not usually easily traced to a product.

Answer 15

False

Question 16

Long-term investments in debt securities not classified as trading or held-to-maturity securities are classified as available-for-sale securities.

Answer 16

True

Question 17

Direct materials are not usually easily traced to a product.

Answer 17

False

Question 18

Product costs are capitalized as inventory on the balance sheet and period costs are expenses on the income statement.

Answer 18

True

Question 19

The cost of all direct materials issued to production is debited to Work in Process Inventory.

Answer 19

True

Question 20

Direct materials and direct labor are examples of costs that are debited to the Factory Overhead account in a job costing system.

Answer 20

False

Question 21

If actual overhead incurred during a period exceeds applied overhead, the difference will be a credit balance in the Factory Overhead account at the end of the period.

Answer 21

False

Question 22

In a process costing system, the purchase of raw materials is credited to the Raw Materials Inventory.

Answer 22

False

Question 23

As the level of volume of activity increases, the variable cost per unit remains constant.

Answer 23

True

Question 24

A budget can be an effective means of communicating management’s plans to the employees of a business.

Answer 24

True

Question 25

Budgets are long term financial plans that generally cover more than a one-year period.

Answer 25

False