b. sothat all assets, liabilities, and Stockholders” equity accountswill have zero balanceswhen the next accounting period starts.
You are watching: Cost of goods sold is computed from the following equation
c. inorder to transfer net income (or loss) and dividends to theretained earnings
d. sothat financial statements can be prepared
4. Adjustingentries are required
d. everytime financial statements are prepared
5. For the basic accountingequation to stay in balance, each transaction recorded must
a. affecttwo or less accounts.
b. affecttwo or more accounts.
c. alwaysaffect exactly two accounts.
d. affectthe same number of asset and liability accounts.
6. Sales revenue less costof goods sold is called
a. gross profit.
b. net profit.
c. net income.
7. The basic accountingequation cannot be restated as
a. Assets – Liabilities =Stockholders” Equity.
b. Assets – Stockholders” Equity =Liabilities.
c. Stockholders” Equity + Liabilities= Assets.
d. Assets+ Liabilities = Stockholders” Equity.
8. The best interpretationof the word credit is the
a. offset side of anaccount.
b. increase side of anaccount.
c. right side of an account.
d. decreaseside of an account.
9. The first step in therecording process is to
a. prepare financialstatements.
b. analyze how each transactionaffects the accounting equation
c. post to a journal.
d. preparea trial balance
10. A net loss will result during atime period when
a. assets exceedliabilities.
b. assets exceed stockholders”equity.
c. expenses exceed revenues.
d. revenuesexceed expenses.
11. Select the response that indicates the correct sequenceof movements of product costs in a manufacturingcompany a. Costof goods sold, finished goods, work in process, raw materials b. Workin process, finished goods, cost of goods sold c. Rawmaterials, finished goods, cost of goods sold d. Rawmaterials, work in process, finished goods, cost of goods sold.
12. All of the following are features of managerialaccounting except: a. Informationis historically based and reported annually. b. Informationincludes economic and non-financial data as well as financialdata. c. Informationis provided primarily to insiders such as managers. d. Informationis reported continuously with a present or future orientation.
13. A cost that contains both fixed and variableelements is referred to as a: a. hybrid cost. b. mixed cost. c. relevant cost. d. semi cost.
14. Select from the followingthe incorrect statement regardingcontribution margin. a. Sales – variablemanufacturing costs = contribution margin b. Net income +total fixed costs = contribution margin c. At the breakevenpoint (where the company has neither profit nor loss), total fixedcosts = total contributionmargin d. Total sales revenuetimes the contribution margin ratio = total contribution margin
15. On a cost-volume-profit graph, the area to theright and above the break-even point isreferred to as the a. Lossarea b. Profitarea c. Break-evenarea d. Fixedcost area
16. Which of the following budgets might be preparedby a manufacturing companybut not a retail merchandising business? a. Sellingand administrative expense budget b. Costof goods sold budget c. Rawmaterials budget d. Salesbudget17. Which of the following statements is true withrespect to product costs versus general, selling, and administrativecosts? a. Productcosts associated with unsold units appear on the income statementas general expenses. b. General,selling, and administrative costs appear on the balancesheet. c. Productcosts associated with units sold appear on the income statement ascost of goods sold. d. None ofthese is true
18. All of the following statements describequalities of relevance except: a. Relevant information isfuture oriented. b. Relevant informationdiffers between the alternatives. c. Relevant informationrequires a high degree of precision. d. Relevant informationincludes qualitative as well as quantitative data.
19. Palmer Company has three divisions. The companyshould consider a cost to be a direct cost if: a. It meetsguidelines imposed by generally accepted accountingprinciples. b. It can beallocated to a division. c. It is avariable cost. d. It can betraced to a division in a cost-effective manner.
20. During its first year ofoperations, Oscar Company, using a periodic inventory system,made undiscovered errors in taking its year-end inventorythat overstated Year 1 ending inventory by $200,000.