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| 1 | |
Full-absorption costing and variable costing would produce the same net income if a company had no beginning inventory and sold everything it produced during the year. |
| | A) | True |
| | B) | False |
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| 2 | |
Comprehensive income includes all of the following except: |
| | A) | losses |
| | B) | expenses |
| | C) | contributions by owners |
| | D) | extraordinary items |
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| 3 | |
All of the following are reported on the Income Statement net-of-tax except: |
| | A) | Income from operations |
| | B) | Cumulative effect of an accounting change |
| | C) | Extraordinary items |
| | D) | Discontinued operations. |
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| 4 | |
For the year ended December 31, 2010, SlowFoot Inc. had a pre-tax extraordinary gain of $500,000, while Income Before Extraordinary Items equaled $2,500,000. Assuming SlowFoot Inc. had no other extraordinary items and an effective tax rate of 30%, the Net Income reported by the company was: |
| | A) | $2,850,000 |
| | B) | $2,000,000 |
| | C) | $2,150,000 |
| | D) | $3,000,000 |
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| 5 | |
A gain on the sale of land would be included in which element of comprehensive income? |
| | A) | Income from continuing operations |
| | B) | Prior period adjustments |
| | C) | Other changes in equity |
| | D) | Cumulative accounting adjustments |
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| 6 | |
Which of the following statements is true? Earnings per share: |
| | A) | is not a required disclosure on the face of the income statement |
| | B) | is a common size measure of a company's earnings performance for common stock |
| | C) | is the amount that each stockholder will receive as dividends that period |
| | D) | reflects the amount of a company's earnings belonging to both common and preferred shareholders on a per share basis |
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| 7 | |
Cricket Inc. had 400,000 shares of common stock outstanding on January 1, 2011 and issued 100,000 additional shares on July 1, 2011. There were $600,000 of preferred stock dividends declared and paid during the year. If net income for the year ended December 31, 2011 was $2,724,000, the earnings per share were: |
| | A) | $6.05 |
| | B) | $5.45 |
| | C) | $3.51 |
| | D) | $4.72 |
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| 8 | |
Which of the following is NOT true under full-absorption costing? |
| | A) | companies can increase income by increasing the number of units produced |
| | B) | all product costs are included in the cost of inventory |
| | C) | fixed nonmanufacturing costs are capitalized during the period |
| | D) | fixed manufacturing costs are expensed only when inventory is sold. |
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| 9 | |
Which of the following is NOT true under unit-variable costing? |
| | A) | companies can not increase income by increasing the number of units produced |
| | B) | all variable product costs are included in cost of inventory |
| | C) | all fixed costs are treated as period cost and expensed |
| | D) | only direct material costs are included in inventory |
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| 10 | |
Cote Inc. has the following information for the year ending December 31, 2010: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078136601/794886/Chapter17_q10.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (24.0K)</a>]]>
What is Cote's Income from Continuing Operations Before Taxes for 2010? |
| | A) | $115,000 |
| | B) | $120,000 |
| | C) | $110,000 |
| | D) | $200,000 |
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| 11 | |
Which of the following statements about earnings per share is TRUE? |
| | A) | Diluted earnings per share reflects the minimum possible dilution that could result from turning convertible securities into common stock. |
| | B) | Net income is increased by applicable preferred dividends in determining earnings per share. |
| | C) | Earnings per share will increase if firms issue additional shares. |
| | D) | Firms with convertible securities present only diluted earnings per share. |
| | E) | EPS goes up if firms repurchase some of their own shares in the open market. |
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| 12 | |
Jag and Elk own a plumbing business and were told that they could get a better loan rate if they had a high return on asset ratio. Which of these strategies has the best chance of improving their return on assets? |
| | A) | Trade in their six-year-old truck for a new one. |
| | B) | Sell off their small but profitability residential business to eliminate the need for two trucks. |
| | C) | Offer customers a 2% cash discount if they pay at delivery so accounts receivable goes way down. |
| | D) | Reduce their inventory by finding a local vendor that could deliver parts daily for the same prices they are currently paying. |
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| 13 | |
Your client is evaluating their divisions and is confused. Their eastern division has the highest profit margin but the western division has the highest return on assets. Your client thinks there is an error in the computation of one of these divisions. What would you tell your client? |
| | A) | High margins always result in high return on assets so these computations need to be checked. |
| | B) | Low margins with high asset turnover can lead to high return on assets so these computations could be fine. |
| | C) | Low margins with low asset turnover can lead to high return on assets so these computations could be fine. |
| | D) | Always prefer the highest profit margin without reference to the assets tied up during the period. |
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| 14 | |
For a company that has convertible securities, which EPS amount will be the largest: basic or diluted? |
| | A) | Basic EPS will be larger. |
| | B) | Diluted ELPS will be larger. |
| | C) | Basic and diluted EPS will be the same. |
| | D) | Cannot answer from the information provided. |
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| 15 | |
Yellow Sneakers Inc. has the following costs during their first year of business: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078136601/794886/Chapter17_q15.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (26.0K)</a>]]>
There are 10,000 sneakers made this year (their only product) but only 9,000 sold at $40 each. What is the amount of the ending finished goods inventory if the company uses variable costing? |
| | A) | $8,000 |
| | B) | $14,222 |
| | C) | $7,000 |
| | D) | $40,000 |
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