Accounting Questions

Which of the following are reported in the statement of changes in stockholders' equity?

Common stock issued during the year Net income for the year Total stockholders' equity at the end of the year. Year-end balance of retained earnings Dividends for the year

Common stock is an example of what is sometimes referred to as working_____________ (contributed/earned) capital.

Contributed

Identify the relationships that the expanded contribution margin model shows.

Contribution margin must cover fixed expenses before an operating income is earned. Contribution margin divided by revenue is equal to contribution margin ratio. Total contribution margin depends on the volume of activity. Revenue minus variable expenses is equal to contribution margin.

Which production variances are due to the difference between the standard and actual quantities?

Direct labor efficiency variance Variable overhead efficiency variance Raw materials usage variance

Which production variances are due to the difference between the standard and actual costs per unit of input?

Direct labor rate variance Raw materials price variance Variable overhead spending variance

Which statements regarding net income (loss) and retained earnings are correct?

Dividends declared during the period decrease retained earnings. Net loss for the period decreases retained earnings.

Which of these transactions are not included on the income statement?

Dividends to stockholders Prior period adjustments for the correction of errors Transactions involving the corporation's own stock

Retained earnings is sometimes referred to as _______________ (contributed/earned) capital

Earned

Which terms are used to describe the quantity variance for different product cost components (raw materials, direct labor, and manufacturing overhead)?

Efficiency variance Usage variance

Accumulated other comprehensive income (loss) is a stockholders' equity category that may include which of the following components? More than one answer may be correct.

Foreign currency translation adjustments Gains or losses on certain derivative instruments Changes in certain pension or other post retirement benefit items

What questions are answered by the income statement?

How much profit or loss did the firm have? What were the financial results of the firm's operations for the fiscal period? Are sales increasing relative to cost of goods sold and other operating expenses?

Identify the short-run decisions.

How much to spend on advertising How to use production resources effectively

Which are true statements about cost-volume-profit (CVP) analysis?

It is an analytical technique that explains the impact on profit for any changes in revenues, costs, or the volume of activity. It is useful for planning and for evaluating the results of actual operations as it emphasizes the cost behavior pattern of various costs.

Which statements are true regarding the par value per share of common stock?

It is often a nominal amount, such as $1 per share. It is a relic from the past, that for all practical purposes, has lost its significance. It is an arbitrary value assigned when the corporation is organized.

Which of the following statements are true regarding retained earnings?

It is referred to as an accumulated deficit if cumulative losses and dividends exceed cumulative net income. It is reduced by any dividends paid to stockholders. It is increased each year by the entity's net income. It is the cumulative net income of the entity that has been retained for use in the business.

Which statements about stockholders' equity are true?

It is the claim of the entity's stockholders to the assets shown in the balance sheet. It is sometimes referred to as net assets, which is assets minus liabilities. It is also called proprietor's capital or partners' capital.

Which statements regarding a sales or revenue forecast are true?

It is the key to the overall operating budget. It is the forecast of "activity" that is expected during the budget period. It is developed using an estimate of the physical quantity of goods or services to be sold, multiplied by the expected selling price per unit.

Identify a true statement about the raw materials purchase price variance.

It is the variance that is calculated and reported at the time materials are purchased rather than when they are used.

Which of the following is a true statement about the contribution margin ratio?

It shows the portion of each sales dollar that remains after covering the variable costs.

Identify the true statements regarding noncontrolling interest. More than one answer may be correct.

It signifies that a portion of the net assets controlled by the reporting entity are attributable to the ownership interests of outside parties. It is sometimes called a minority interest.

Which of the following statements regarding net income (loss) and retained earnings are correct?

Net income for the period increases retained earnings. Retained earnings represent the cumulative earnings the corporation has retained for use in the business. Retained earnings represent the cumulative earnings the corporation has retained for use in the business.

In the context of determining the ending balance of retained earnings within the statement of changes in retained earnings, which statements are true?

Net income needs to be added (positive amount) to retained earnings. Stock splits have no effect on retained earnings. Treasury stock purchases have no effect on retained earnings.

ABC Company's production budget for April included the following for raw materials: Budgeted production = 35,000 units; Budgeted raw materials unit cost = $16 per unit. ABC Company's actual production for April was the following: Actual production = 36,000 units; Actual raw materials cost = $16.20 per unit. Calculate the following items for ABC's April performance report for raw materials:

Original: 560000 Flexed: 576000 actual: 583200 Variance: 7200 U

ABC Company's production budget for March is 32,000 units. Budgeted fixed overhead is $64,000. ABC's standard fixed overhead application rate is $2 per machine hour, and each unit is allowed a standard of 1 hour of machine time. Actual fixed overhead for March is $67,000. Actual production in March is 36,000 units.

Overhead, Units

Which of the following statements are true regarding owners' equity and ownership rights held in noncorporate entities?

Owners' equity for proprietorships and partnerships is usually referred to as capital. Neither proprietorships nor partnerships issue stock. No distinction is made between invested capital and retained earnings for a proprietorship or a partnership.

Paid-in capital includes which of these?

Preferred stock Additional paid-in capital Common stock

Which terms are used to describe the cost per unit of input variance for different product cost components (raw materials, direct labor, and manufacturing overhead)?

Price variance Rate variance Spending variance

Which type of transaction would not be included on the income statement?

Prior period adjustments

Which of the following statements is not correct regarding retained earnings?

Retained earnings is increased each year by the entity's net income and dividends.

Why does the word income appear in the stockholders' equity section of the balance sheet (as accumulated other comprehensive income or loss)?

Revenue is correctly listed under stockholders' equity. Paid-in capital (stock purchases) is a form of income. Retained earnings are a form of income. All items of income (or loss) ultimately affect stockholders' equity on the balance sheet.

In the context of determining the ending balance of retained earnings within the statement of changes in retained earnings, which statements are true?

Stock dividends need to be subtracted (negative amount). The beginning balance of Retained Earnings account needs to be added (positive amount). Cash dividends for common and preferred stock need to be subtracted (negative amount).

In the context of determining the ending balance of retained earnings within the statement of changes in retained earnings, which statements are true?

Stock dividends need to be subtracted (negative amount). The beginning balance of Retained Earnings account needs to be added (positive amount). Cash dividends for common and preferred stock need to be subtracted (negative amount).

Which of the following best describes the management process?

The process of steering an organization's activities to best support its goals

Identify the true statements regarding sunk costs.

These costs are never relevant in the decision-making process. These costs are never considered differential in nature. These costs have been incurred and cannot be eliminated.

Which statements regarding prior period adjustments are true?

They are direct adjustments to retained earnings for the correction of errors. They may result in either an increase or decrease to retained earnings.

Identify a true statement about standard costs.

They are used in the planning and control processes of service firms that perform repetitive operations in the performance of services.

Not-for-profit organizations prepare a statement of ______, which is similar to a statement of stockholders' equity prepared by corporations.

changes in fund balances

Financial statements that show a column for the current year and the prior year are known as _________ financial statements

comparative

A fixed manufacturing overhead variance caused by the difference between the actual fixed overhead expenditures and the fixed overhead that was budgeted for the period is called:

a budget variance

The four concepts/principles that relate to bookkeeping procedures and the accounting process are:

accounting period, matching, revenue recognition, and accrual

If the Retained Earnings account has a negative balance, it is referred to as an _____________ (appropriated/accumulated/unanticipated) deficit.

accumulated

If the net standard costing variance of a business is significantly relevant to the total production cost, the net variance should be __________

allocated between inventories and cost of goods sold

ABC Company's production budget for October is based on 500 units. Standard unit cost for variable overhead is $25 per unit ($5 per hour x 5 hours per unit). ABC's actual production in October = 525 units. The actual cost of variable overhead = $18,900 ($6 per hour x 6 hours per unit). Calculate the variable overhead efficiency variance for October:

2625 U

ABC Company's production budget for March is 32,000 units. Budgeted fixed overhead is $64,000. ABC's standard fixed overhead application rate is $2 per machine hour, and each unit is allowed a standard of 1 hour of machine time. Actual fixed overhead for March is $67,000. Actual production in March is 36,000 units. Calculate the fixed overhead budget variance for March:

3000 U

ABC Company's production budget for October is based on 500 units. Standard unit cost for variable overhead is $25 per unit ($5 per hour x 5 hours per unit). ABC's actual production in October = 525 units. The actual cost of variable overhead = $18,900 ($6 per hour x 6 hours per unit). Calculate the variable overhead spending variance for October:

3150 U

ACB Company sells Product X for $20 per unit, but if the product is enhanced, it can be sold for $26 per unit. The enhancement process will cost $80,000 for the 10,000 units that are currently sold. If sales of Product X remain the same, identify the following relevant costs to process further:

6, 8, -2, No

The cumulative foreign currency translation adjustment is reported as a component of:

Accumulated Other Comprehensive Income (Loss) within stockholders' equity on the balance sheet. It can swing back and forth from a debit (net cumulative loss) balance to a credit (net cumulative gain) balance within stockholders' equity. It is reported within stockholders' equity rather than on the income statement because these amounts are unrealized.

Which stockholders' equity captions are usually seen in a balance sheet?

Accumulated other comprehensive income (loss) Retained earnings Preferred stock

Which stockholders' equity captions are usually seen in a balance sheet

Additional paid-in capital Treasury stock Common stock

Which of the following variances is determined during both variable overhead and fixed overhead variance analyses?

Budget variance

Which of the following statements are true regarding the statement of cash flows?

Cash paid for the purchase of buildings or equipment is an investing activity, and the activity is a use of cash. Net income from the income statement is the starting point for determining cash provided or used by operating activities. Cash received from the sale of common stock is a financing activity, and the activity is a source of cash. Payment of cash dividends on common stock is a financing activity, and the activity is a use of cash. If a current liability account increases for the year, this will show up as a source of cash in the operating activities section. The net increase in cash for the year is equal to the sum of the net cash provided or used by operating, investing, and financing activities.

If the Retained Earnings account has a negative balance, it is referred to as an accumulated _____________ (depreciation/loss/deficit).

deficit

Ownership interests in subsidiaries held by parties other than the parent must be clearly identified, labeled, and presented in the consolidated balance sheet within ___________ (assets/liabilities/equity), but separate from the parent's ____________ (assets/liabilities/equity).

equity, Equity

Ownership interests in subsidiaries held by parties other than the parent must be clearly identified, labeled, and presented in the consolidated balance sheet within ________ , but separate from the parent's __________.

equity, equity

Relevant costs in short-run decisions are _______

future costs that represent differences between decision alternatives

In a consolidated balance sheet, the caption "Equity" is used to _______.

include both stockholders' equity and noncontrolling interest

In a consolidated balance sheet, the caption "Equity" is used to __________

include both stockholders' equity and noncontrolling interest

The portion of equity in a subsidiary not attributable, directly or indirectly, to the parent company (reporting entity) is referred to as the ______________ (unusual/noncontrolling/extraordinary) interest.

non-controlling

The two main components reported on the statement of changes in stockholders' equity are:

paid-in capital and retained earnings

Dollar Inc. made a mistake in the year-end physical count of its inventory, and the error was discovered in the following year. Upon discovering the error, Dollar Inc. directly made the adjustment to the inventory and retained earnings in the current year. This scenario is an example of a

prior period adjustment

A direct labor budget variance is further analyzed into a direct labor _______________ (price/rate/spending) variance and a direct labor ________________- (usage/efficiency) variance.

rate, efficiency

Stockholders' equity ______.

represents the net assets of the business

Financial statements prepared by not-for-profit organizations focus on ______ rather than owners.

resource providers

In the horizontal model representation of the financial statements, the arrow going from net income to stockholders' equity means that net income affects the ____________ account within stockholders' equity.

retained earnings

The high-low method of analyzing the cost behavior of a mixed cost uses a(n) __________ to illustrate cost and volume data relationships.

scattergram

Decisions that affect the annual operations of an organization are ______________(short-run/long-run), while decisions that affect the competitive strategy of an organization are short-run_____________ (short-run/long-run).

short-run, long-run

A variable overhead budget variance is further analyzed into a variable overhead __________ (price/rate/spending) variance and a variable overhead _________ (usage/efficiency) variance.

spending, efficiency

No-par-value stock can sometimes be assigned a(n) __________ value per share.

stated

All items of income (or loss) ultimately affect ______ on the balance sheet.

stockholders' equity

A cost management technique in which the firm determines the required cost for a product or service to earn a desired profit when the selling price is determined by the marketplace is known as

target costing

Retained earnings represents ______

the entity's cumulative earnings over the life of the entity less any dividends paid

A firm calculates the average contribution margin ratio when ______.

the firm sells more than one product

A firm prepares comparative financial statement so that __________

the users of the data can easily spot changes in the firm's financial position and in its results of operations

Not-for-profit and governmental organizations normally report to resource providers rather than investors because:

these types of organizations do not have owners who have direct financial interests in the entities.

Any salary paid to the proprietor of a firm is ________

treated as reduction to the proprietor's capital