Module 2 Study Guide

Chapter 1 Introduction to Accounting and Business

1. All of the following are general-purpose financial statements except
cash budget
2. The rights of owners in a corporation are referred to as
stockholder's equity
3. Stockholders' equity at the beginning of the year for ATLAS Inc. was $390,000, while its
liabilities totaled $230,000. During the year its assets increased by $75,000; its liabilities
decreased by $50,000. Which of these is stockholders' equity at the end of the year for ATLAS
Inc.?
$515,000
4. If total liabilities decreased by $28,474 during a period of time and stockholders' equity
increased by $32,581 during the same period, the amount and direction (increase or decrease)
of the period's change in total assets is a
$4,107 increase
5. Liabilities are reported on the
balance sheet
6. The assets section of the balance sheet normally presents assets in
the order in which they will be converted into cash or used in operations
7. The financial statement that presents a summary of the revenues and expenses of a business
for a specific period of time, such as a month or year, is called a(n)
income statement
8. The liabilities and stockholder's equity of a company are $132,000 and $244,000,
respectively. Assets should equal
$376,000
9. The assets and stockholder's equity of a company are $159,000 and $95,000, respectively.
Liabilities should equal
$64,000
10. A financial statement user would determine if a company was profitable or not during a
specific period of time by reviewing the
income statement
11. Four financial statements are usually prepared for a business. The statement of cash flows is
usually prepared last. The statement of stockholders' equity (SSE), the balance sheet (B), and
the income statement (I) are prepared in a certain order to obtain information needed for the
next statement. In what order are these three statements prepared?
I, SSE, B
12. If total assets decreased by $88,000 during a period of time and stockholders' equity
increased by $71,000 during the same period, then the amount and direction (increase or
decrease) of the period's change in total liabilities is
$159,000 decrease
13. The accounting equation may be expressed as
Assets - Liabilities = Stockholders' Equity
14. Which of the following financial statements reports information as of a specific date?
balance sheet
15. Assets are
financed by the stockholders and/or creditors
16. Resources owned by a business are known as
assets
17. If total liabilities decreased by $46,000 during a period of time and stockholders' equity
increased by $60,000 during the same period, the amount and direction (increase or decrease)
of the period's change in total assets is a
$14,000 increase
18. Debts owed by a business are referred to as
liabilities
19. If a shareholder wanted to know how money flowed into and out of the company, which
financial statement would the shareholder use?
statement of cash flows
20. The assets and liabilities of a company are $128,000 and $84,000, respectively. Stockholders'
equity should equal
$44,000
21. The assets and liabilities of a company are $86,024 and $44,106, respectively. Stockholders'
equity should equal
$41,918

Chapter 2 Analyzing Transactions

1. Which of the following is true about T accounts?

The left side of a T account is called the debit side.
2. Accounts are records of increases and decreases in individual accounting equation elements.
3. The stockholders' equity will be reduced by all of the following except revenues
4. The increases in stockholders' equity attributable to selling services or products to customers are
called revenues

5. Which statement(s) concerning cash is (are) true? cash is increased with a debit

6. Which of the following accounts is a stockholders' equity account?

Common Stock
7. The balance of an account is determined by
adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger
sum
8. The chart of accounts is designed to meet the information needs of a company's managers and other
users of its financial statements

Chapter 15 Intro to Managerial Accounting

1. A plant manager's salary is and indirect cost.

2. On the income statement of a manufacturing company, which of the following replaces purchases in
the "Cost of goods sold" section of a retail company? cost of good manufactured
3. Which of the following items would not be classified as part of factory overhead? direct labor used
4. Period costs include operating costs that are shown on the income statement in the period in which
they are incurred
5. Given the following data:
Work in process, beginning $14,000
Work in process, ending 20,000
Direct labor costs 4,000
Cost of goods manufactured 8,000
Factory overhead 8,000
Direct materials used is $2,000
6. Which of the following is an example of direct labor cost for a cell phone manufacturer?
cost of wages of assembly worker
7. All of the following are examples of indirect labor except machine operators
8. Which of the following manufacturing costs is an indirect cost of producing a product? oil lubricants
used for factory machinery
9. Prime costs are direct materials and direct labor
10. A product cost is expensed in the period the product is sold
11. The term used to describe the process of monitoring operating results and comparing actual results
with expected results is: controlling
12. Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are
classified as factory overhead cost
13. Which of the following costs are conversion costs? direct labor cost and factory overhead cost
14. The cost of wages paid to employees directly involved in the manufacturing process in converting
materials into finished products is classified as direct labor cost
15. Another term for factory overhead is factory burden
16. Which of the following terms refers to the cost of changing direct materials into a finished
manufactured product? conversion cost
17. Which of the following terms is used to describe the process of developing the organization’s
objectives and translating those into courses of action? planning
18. The primary goal of managerial accounting is to provide information to management
19. All of the following would be reported on the balance sheet as current assets except factory
overhead
20. Which of the following is part of factory overhead cost? depreciation of factory equipment and
machines
21. Which of the following is not a prime cost? plant janitor’s wages
22. Insurance expense incurred on a factory building would be treated as a product cost.
22. Accounting designed to meet the needs of decision makers inside the business is managerial
accounting
23. Compute conversion costs given the following data: direct materials, $347,500; direct labor,
$196,300; factory overhead, $187,900; and selling expenses, $45,290. $384,200
24. Goods that are partially completed by a manufacturer are work in process inventory
25. Jensen Company reports the following:
Direct materials used $345,000
Direct labor incurred 250,000
Factory overhead incurred 400,000
Operating expenses 175,000
Jensen Company’s period costs are $175, 000
26. Which of the following must be true in order for materials to be classified as direct materials? They
must be an integral part of the finished product and be a significant portion of the total product cost.
27. Which of the following are basic phases of the management process? planning and controlling
28. The cost of a manufactured product generally consists of which of the following costs? direct labor
cost, direct materials cost, and factory overhead cost
29. Which of the following individuals are charged with the responsibility for directing the day-to-day
operations of a business? managers
30. Which of the following is the primary criterion for the preparation of managerial accounting reports?
manager needs
31. An example of a period cost is advertising expense
32. Which of the following is an example of direct materials cost for an automobile manufacturer? cost
of interior upholstery
33. Which of the following terms is used to describe the process of monitoring operating results and
comparing actual results with the expected results? controlling
34. Darwin Company reports the following information: $35,000

Chapter 20 C Now

1. Which of the following graphs in Figure 1 illustrates the behavior of a total variable cost?

Graph 3
2. The three most common cost behavior classifications are
fixed costs, variable costs, and mixed costs
3. The graph of a variable cost when plotted against its related activity base appears as
a straight line.
4. Which of the following is not an example of a cost that varies in total as the number of units produced
changes? direct materials cost
5. Cost behavior refers to the manner in which a cost changes as the related activity changes.
6. Which of the following is not an example of a cost that varies in total as the number of units produced
changes? insurance premiums on factory building
7. Which of the following is an example of a mixed cost?
rental costs of $10,000 per month plus $0.30 per machine hour of use
8. Costs that remain constant in total dollar amount as the level of activity changes are called fixed costs.
9. Which of the following is an example of a cost that varies in total as the number of units produced
changes? direct materials cost
10. Which of the following activity bases would be the most appropriate for gasoline costs of a delivery
service? total miles driven
11. Which of the following describes the behavior of a variable cost per unit?
It remains constant with changes in the activity level.
12. Which of the following graphs in Figure 1 illustrates the nature of a mixed cost? Graph 2

13. Which of the following graphs in Figure 1 illustrates the behavior of a total fixed cost? Graph 1
14. Which of the following describes the behavior of the fixed cost per unit?
decreases with increasing production
15. Which of the following activity bases would be the most appropriate for food costs of a hospital?
number of patients who stay in the hospital
16. Which of the following costs is an example of a cost that remains the same in total as the number of
units produced changes? salary of a factory supervisor
17. A cost that has characteristics of both a variable cost and a fixed cost is called a mixed cost
18. For purposes of analysis, mixed costs are separated into their variable and fixed cost components