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.
