Principles of Accounting II I answered all questions. I would like to have you review them and see if they are corrected.

Question 1

If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would be added to net income in the operating activities section of the statement of cash flows (prepared by the indirect method).

	True
	False

Question 2

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

	solvency and leverage
	solvency and profitability
	solvency and liquidity
	solvency and equity

Question 3

The percent of fixed assets to total assets is an example of

	vertical analysis
	solvency analysis
	profitability analysis
	horizontal analysis

Question 4

Job order costing and process costing are

	pricing systems
	cost accounting systems
	cost flow systems
	inventory tracking systems

Question 5

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported.

	Purchase of the stock of another company as investment
	Decrease in inventory
	Exchange of land for note payable
	Issuance of bond payable
	Increase in accounts receivable
	Payment of dividends to stockholders
	Sale of machinery held for use by the company
	Loss on sale of equipment
	Dividends received on investment
	Increase in income taxes payable

1.	Operating activities
2.	Financing activities
3.	Investing activities
4.	Schedule of noncash financing and investing

Question 6

In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is

	added to net income
	deducted from net income
	ignored because it does not affect cash
	reported supplementally as a noncash investing and financing activity

Question 7

Reynolds Manufacturers Inc. has estimated total factory overhead costs of $95,000 and expected direct labor hours of 9,500 for the current fiscal year. If job number 117 incurs 2,300 direct labor hours, Work in Process will be debited and Factory Overhead will be credited for

	$21,850
	$2,300
	$95,000
	$23,000

Question 8

The current period statement of cash flows includes the following:

Cash balance at the beginning of the period	$310,000
Net cash flow from operating activities	185,000
Net cash flow used for investing activities	43,000
Net cash flow used for financing activities	97,000

The cash balance at the end of the period is

	$45,000
	$635,000
	$355,000
	$125,000

Question 9

Match each ratio that follows to its use (items a–h). Items may be used more than once.

	rate earned on common stockholders’ equity
	quick ratio
	earnings per share (EPS) on common stock
	dividends per share
	working capital
	price-earnings (P/E) ratio
	ratio of sales to assets
	rate earned on total assets
	current ratio
	ratio of liabilities to stockholders’ equity

1.	assess the profitability of the assets
2.	assess the effectiveness in the use of assets
3.	indicate the ability to meet currently maturing obligations
4.	indicate the margin of safety to creditors
5.	indicate instant debt-paying ability
6.	assess the profitability of the investment by common stockholders
7.	indicate future earnings prospects
8.	indicate the extent to which earnings are being distributed to common stockholders

Question 10

To determine cash payments for operating expenses for the statement of cash flows using the direct method, a decrease in accrued expenses is added to operating expenses payable other than depreciation.

	True
	False

Question 11

Since there are few rules to restrict how an organization chooses to arrange its own internal data for decision making, managerial accounting provides ample opportunity for creativity and change.

	True
	False

Question 12

When using the spreadsheet (work sheet) method to analyzing noncash accounts, no order of analysis is required, but it is more efficient to start with Retained Earnings and proceed upward in the account listing.

	True
	False

Question 13

Match the costs that follow to the type of product cost (a-c) or designate as not a product cost (d).

	salesmen commissions
	plastic parts
	maintenance supplies
	factory depreciation
	president’s salary
	machine operator
	factory supervisor’s salary
	assembler’s wages
	Wood

1.	direct labor
2.	direct materials
3.	factory overhead
4.	not a product cost

Question 14

When using the spreadsheet (work sheet) for the statement of cash flows, indirect method, entries made on the spreadsheet are

	not recorded in the journal or posted to the ledger
	recorded in the journal and posted to the ledger
	recorded in the journal but not posted to the ledger
	not recorded in to the journal but are posted to the ledger

Question 15

Which of the following are basic phases of the management process?

	supervising and directing
	decision making and supervising
	organizing and directing
	planning and controlling

Question 16

On the statement of cash flows, the cash flows from financing activities section would include

	receipts from the sale of investments
	payments for the acquisition of investments
	receipts from a note receivable
	receipts from the issuance of capital stock

Question 17

A job order cost accounting system provides for a separate record of the cost of each particular quantity of product that passes through the factory.

	True
	False

Question 18

A cost object indicates how costs are related or identified.

	True
	False

Question 19

Free cash flow is

	all cash in the bank
	cash from operations
	cash from financing less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
	cash flow from operations less cash used to purchase fixed assets to maintain productive capacity

Question 20

Job order cost accounting systems can be used only for companies that manufacture a product.

	True
	False

Question 21

In horizontal analysis, the current year is the base year.

	True
	False

Question 22

Cash, as the term is used for the statement of cash flows, could indicate either cash or cash equivalents.

	True
	False

Question 23

The following are some of the costs incurred by Cupcake Company. Identify them as either:

	Cupcake mix
	Factory rent
	Depreciation expense—factory
	Depreciation expense—office
	Salesman commissions
	Baker’s wages
	Sprinkles for decoration (indirect material)
	Frosting

1.	Prime costs
2.	Conversion costs
3.	Both prime and conversion costs
4.	Neither prime or conversion costs

Question 24

Managers used managerial information for all of the following except

	to evaluate the company’s stock performance
	to analyze the performance of a company’s operations
	to support long-term planning decisions
	to determine the cost of manufacturing a product

Question 25

Current position analysis measures a company's ability to pay its current liabilities.

	True
	False

Question 26

Managerial accounting uses only past data in reports to aid management in the decision making process.

	True
	False

Question 27

In most business organizations, the chief accountant is called the treasurer.

	True
	False

Question 28

Managerial accounting provides useful information to managers on product costs.

	True
	False

Question 29

Managerial accounting reports are

	prepared according to GAAP
	prepared according to management needs
	prepared periodically only
	related to the entire business entity only

Question 30

What term refers to the cost of changing direct materials into a finished manufactured product?

	factory overhead cost
	period cost
	conversion cost
	direct labor cost

Question 31

In the job order costing system, the finished goods account is the controlling account for the factory overhead ledger.

	True
	False

Question 32

For which of the following businesses would the job order cost system be appropriate?

	canned soup processor
	oil refinery
	lumber mill
	Hospital

Question 33

During the period, labor costs incurred on account amounted to $175,000, including $150,000 for production orders and $25,000 for general factory use. Factory overhead applied to production was $23,000. The entry to record the factory overhead applied to production is.

	Work in Process 25,000 Factory Overhead 25,000
	Factory Overhead 23,000 Work in Process 23,000
	Work in Process 23,000 Factory Overhead 23,000
	Factory Overhead 25,000 Accounts Payable 25,000

Question 34

Sanders Inc. has applied $567,988 of overhead to jobs in the cost ledger. Actual overhead at the end of the year is $575,000. The adjustment for over- or underapplied overhead is

	$7,012 overapplied, increase Cost of Goods Sold
	$7,012 underapplied, increase Cost of Goods Sold
	$7,012 overapplied, decrease Cost of Goods Sold
	$7,012 underapplied, decrease Cost of Goods Sold

Question 35

Match each of the following phrases with the term (a-g) that it most closely describes..

	applied overhead is less than actual overhead incurred
	typically used by companies that make custom products
	a system that uses a different overhead rate for each activity
	applied overhead is more than actual overhead incurred
	typically used by companies whose products are indistinguishable from each other
	the stock ledger
	a subsidiary ledger that maintains a separate account for each type of material

1.	job order cost system
2.	process cost system
3.	activity-based costing
4.	underapplied overhead
5.	overapplied overhead
6.	finished goods ledger
7.	materials ledger