Accounting Exam #1

The building bocks if financial statement analysis include (1) liquidity, (2) salability, (3) solvency, and (4) profitability.

False: 2> Market prospects

Newly completed units are combined with beginning finished goods inventory to make up total ending goods in process inventory.

False

Product costs are immediately recorded in expenses accounts when the products are manufactured.

False

Product costs include materials , labor, and selling and administrative costs.

False

Raw materials purchased plus beginning raw materials inventory equals the ending balance of raw materials inventory.

False

A job cost accounting system would be appropriate for a manufacturer of automobile tires

False

Advertising costs are considered product costs for external financial reports because they are incurred in order to promote specific products.

False

Direct materials are not usually easily traced to a product.

False

Job order manufacturing system would be appropriate for companies that produce compact disks or disposable cameras.

False

A materials requisition form is used to authorize the purchase of direct materials.

False: A materials requisition forms is used to control the physical flow of materials out if inventory and into production, and record the cost of raw materials in the accounting system.

The file of job cost sheets for completed but undelivered fobs equals the balance in the Goods in. Process inventory account.

False: Finished Goods INventory

The return on assets ratio is influenced significantly by a company's relative debt and equity financing of its assets.

False: Return on assets is not affected by the way in which the assets were financed.

The profit margin ratio considers the asset base utilized to earn income.

False: The profit margin ratio is net income divided by net sales and does not consider the resources (assets) used to earn income.

Period costs are also known as inventoriable costs.

False: non-factory cost

A process cost system uses just two inventory accounts, raw materials inventory and work in process inventory.

False: plus Finished Goods inventory

Labor that ca be traced to a specific job is recorded directly o the job cost sheet.

True: If the labor can be traced to a specific job, the cost is added to the job cost sheet and the WIP inventory account.

A time ticket is a source document used by an employee to record the number of hours worked on a particular job during the work day.

True

A vertical analysis uses percentages to compare each of the parts of an individual statement to the whole. For Example, on an income statement each item would be shown as a percentage of net sales.

True

Comparative horizontal analysis is used to reveal patterns in data covering Uc Essie periods.

True

Raw materials that become part of a product and are identified with specific units or batches of a product are called direct materials.

True

Standards for comparison are necessary when making judgements about a company's fifnancial performance.

True

The "cumulative effect of a change in accounting principles" is shown below the extraordinary items section on te income statement.

True

The balanced scorecard aids in continuous improvement by augmenting financial measures with drivers or indicators of future financial performance.

True

The formula for computing the predetermined overhead rate is: Predetermined OH rate = Estimated total manufacturing OH cost / Estimated total amount of allocation base

True

The main principle of the lean business model is the elimination of waste of every kind while satisfying the customer and providing a positive return to the company.

True

A high price/earnings ratio usually indicates the market is optimistic about the company's future earnings potential.

True: A high price/earnings ratio occurs when investors are willing to pay a high multiple of the current earnings per share.

When job order costing is used, costs are accumulated on a job cost sheet

True: A job cost sheet is used for each unique job, project, or customer

Many companies use high levels of debt to finance their assets because of financial leverage benefits provided to investors when return on assets exceeds the after tax cost of interest.

True: Debt financing can be advantageous when the return on assets exceeds the cost of debt.

Process costing averages the total cost of the process over the number of units produced.

True: Process costing breaks the production process down into its basic steps, or processes, and then averages the total cost of the process over the number of units produced.