Multiple choice test 3 accounting

Sheridan Co. purchased 76, 6% Pharoah Company bonds for $76000 cash. Interest is payable annually on January 1. If 38 of the securities are sold on January 1 for $40200, the entry would include a credit to Gain on Sale of Debt Investments for

$2200.

Which of the following is a true statement about cost behaviors in incremental analysis? 1. Fixed costs will not change between alternatives. 2. Fixed costs may change between alternatives.3. Variable costs will always change between alternatives.

2. FIxed costs may change between alternatives.

Cost behavior analysis applies to

All entities

On January 1, 2020, Coronado Company purchased at face value, a $1090, 10% bond that pays interest on January 1. Coronado Company has a calendar year end.The entry for the receipt of interest on January 1, 2021, is

Cash 109 Interest Receivable 109

Vaughn Corporation sells 200 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $26 a share. Vaughn sold the shares for $38 a share. The entry to record the sale is

Cash 7600 Credit Gain on Sale of Stock Investments 2400 Credit Stock Investments 5200

Why is identification of a relevant range important?

Cost behavior outside of the relevant range is not linear, which distorts CVP analysis.

Swifty Company acquires 51, 8%, 5 year, $1000 Community bonds on January 1, 2020 for $51000.The journal entry to record this investment includes a debit to

Debt Investments for $51000.

Which of the following is not a true statement regarding short-term debt investments?

Debt investments are recorded at the price paid less brokerage fees.

Which of the following is not a mixed cost?

Depreciation

Concord Company acquires 53, 8%, 5 year, $1000 Community bonds on January 1, 2020 for $53000.If Concord sells all of its Community bonds for $57100, what gain or loss is recognized?

Gain of $4100

Which of the following is not a true statement?

Incremental analysis is the same as CVP analysis.

A revenue that differs between alternatives and makes a difference in decision-making is called a(n)

Incremental revenue

On January 1, 2020, Crane Company purchased at face value, a $1000, 4% bond that pays interest on January 1. Crane Company has a calendar year end.The adjusting entry on December 31, 2020, is

Interest Receivable 40 Interest Revenue 40

Which of the following is not a cost classification?

Multiple

Which of the following will always be a relevant cost?

Opportunity cost

Which of the following would be the least controllable fixed costs?

Property taxes

Concord Corporation makes a short-term investment in 260 shares of Ivanhoe Company's common stock. The stock is purchased for $50 a share. The entry for the purchase is

Stock Investments 13000 Cash 13000

Which of the following is not a true statement about the accounting for debt investments?

The cost includes any accrued interest.

Frazier Manufacturing Company collected the following production data for the past month: If the high-low method is used, what is the monthly total cost equation?

Total cost = $13,200 + $33/unit

A mixed cost contains

a variable element and a fixed element

Incremental analysis would be appropriate for

all of these answers are correct, including: acceptance of an order at a special price, a retain or replace equipment decision, a sell or process further decision.

The source of data to serve as inputs in incremental analysis is generated by

all of these answers are correct, including: market analysts, engineers, and accountants

In incremental analysis,

both costs and revenues may be analyzed

Fixed costs normally will not include

direct labor

Which of the following is not a fixed cost?

direct materials

When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor

has significant influence on the investee and that the equity method should be used to account for the investment.

Incremental analysis is most useful

in developing relevant information for management decisions

If the activity level increases 10%, total variable costs will

increase 10%

Corporations invest in other companies for all of the following reasons except to

increase trading of the other companies' stock.

The process of evaluating financial data that change under alternative courses of action is called

incremental analysis

The activity that causes changes in the behavior of costs is referred to as the activity

index

Changes in activity have a(n) _________ effect on fixed costs per unit.

inverse

The cost method of accounting for long-term investments in stock should be employed when the

investor's influence on the investee is insignificant.

If an investor owns less than 20% of the common stock of another corporation as a long-term investment,

it is presumed that the investor has relatively little influence on the investee.

The relevant range of activity refers to the

levels of activity over which the company expects to operate.

A typical investment to house excess cash until needed is

low-risk, highly liquid securities.

Cost behavior analysis is a study of how a firm's costs

respond to changes in the level of business activity.

At the time of acquisition of a debt investment,

the historical cost principle applies.