Accounting 210 Final, Ch. 5-8

Which expense recognition system is used to recognize cost of goods sold? A) Direct association B) Immediate recognition C) Systematic allocation D) Reserve association

A) Direct association

Gross Profit is... A. A widely used method of measuring operating effectiveness B. An annoying calculation difficult for management to calculate C. A method to determine solvency D. A method to calculate non-operating income

A. A widely used method of measuring operating effectiveness

If a sale in cash is recorded... A. Assets increase and equity increases B. Liabilities increase and equity increases C. Assets decrease and equity decreases D. Liabilities decrease and equity decreases

A. Assets increase and equity increases

Leaping Deer Company purchased a tractor at a cost of $240,000. The tractor has an estimated residual value of $40,000 and an estimated life of 8 years, or 12,000 hours of operation. The tractor was purchased on January 1, 2015 and was used 2,400 hours in 2015 and 2,200 hours in 2016. What method of depreciation will produce the maximum depreciation expense in 2016? A) Straight-line B) Double-declining-balance C) Units-of-production D) All methods produce the same expense in 2016

B) Double-declining-balance

Which of the following is an inventory account for manufacturing companies? A) Overhead B) Finished goods C) Cost of goods sold D) Direct labor

B) Finished goods

Under which section of a statement of cash flows would the proceeds received from the sale of long-term depreciable assets most likely appear? A) Operating cash flows B) Investing cash flows C) Financing cash flows D) Long-term assets

B) Investing cash flows

Under which method of inventory cost flows is the cost flow assumed to be in the reverse order in which the expenditures were made? A) First-in, first-out B) Last-in, first-out C) Average cost D) Lower of cost or market

B) Last-in, first-out

Which of the following is not necessary in calculating the depreciation expense for the first year for a newly purchased factory forklift? A) Estimated useful life B) Market value of the forklift during its useful life C) Estimated salvage value D) Depreciation rate E) Total cost of the forklift at acquisition

B) Market value of the forklift during its useful life

The first step in forecasting is... A. Cost of Sales B. Sales C. Expenses D. Cash flow

B. Sales

If inventory turnover is high, there may be... A. Too many dollars in inventory, depending upon the industry B. There are frequent sales of inventory

B. There are frequent sales of inventory

The following hammers were available for sale during the year for Felicity Tools: Beginning inventory ................. 10 units at $160 First purchase ........................ 15 units at $220 Second purchase .................... 30 units at $280 Third purchase ........................ 25 units at $260 Felicity has 30 hammers on hand at the end of the year. What is the dollar amount of inventory at the end of the year according to the first-in, first-out method? A) $5,100 B) $5,950 C) $7,900 D) $7,800

C) $7,900

Green Garden Company purchased a tractor at a cost of $240,000. The tractor has an estimated residual value of $40,000 and an estimated life of 8 years, or 10,000 hours of operation. The tractor was purchased on January 1, 2015 and was used 2,400 hours in 2015 and 2,100 hours in 2016. On January 1, 2017, the company decided to sell the tractor for $140,000. Green Garden Co. uses the units-of- production method to account for the depreciation on the tractor. Based on this information, the entry to record the sale of the tractor will show: A) No gain or loss on the sale B) A loss of $15,000 C) A loss of $10,000 D) A gain of $30,000

C) A loss of $10,000

Assuming rising prices, which method will give the highest dollar value for cost of goods sold on the income statement? A) FIFO B) Average Cost C) LIFO D) All of these give equal values for cost of goods sold

C) LIFO

We use Earnings without interest expense because... A. Add the financing costs impact B. It increases our taxable income C. It takes away the affects of the financing costs

C. It takes away the affects of the financing costs

ART is accounts receivable turnover, which... A. Measures Accounts receivable amount B. Identifies the amount of sales C. Measures how many times receivables have been collected during the period

C. Measures how many times receivables have been collected during the period

A company can efficiently manage its working capital by... A. Minimizing payables and maximizing equity B. Increasing notes payable C. Minimizing receivables and improving inventory turn over

C. Minimizing receivables and improving inventory turn over

Financial statements should be reviewed A. Quarterly B. When you feel like it C. Monthly D. When net income is negative

C. Monthly

A vertical analysis of balance sheets compares the various assets to... A. Total Revenue B. Total liabilities C. Total Equity D. Total Assets

D. Total Assets

Companies can easily affect gross profit with selling price increases... True or False

False

Companies should recognize inventory as an expense when purchased... True or False

False

Depreciation is the recognition of the change in market value of a plant asset over time. True or False

False

In the period of rising costs and prices, a reduction in inventory quantities when FIFO is used is known as FIFO liquidation, and it yields an increase in gross profit and income... True or False

False

Vertical analysis examines changes in financial data across time. True or False

False

We can estimate the percent of a company's depreciable assets that are "used up," reflecting the percent of plant assets that are no longer productive, by the following formula: Accumulated depreciation / Cost of depreciable assets. True or False

False

Ratios provide one way to compare companies in the same industry regardless of their size. True or False

True

Solvency ratios measure a company's ability to meet its debt obligations. True or False

True