1.Cost of goods sold is computed from the following equation:

a. beginning inventory cost of goods purchased + ending inventory.

b. sales cost of goods purchased + beginning inventory ending inventory.

c. sales + gross profit ending inventory + beginning inventory.

d. beginning inventory + cost of goods purchased ending inventory

2. If a company determines cost of goods sold each time a sale occurs, it

a. must have a computer accounting system.

b. uses a combination of the perpetual and periodic inventory systems.

c. uses a periodic inventory system.

d. uses a perpetual inventory system.

3. Closing entries are made

a. in order to terminate the business as an operating entity.

b. so that all assets, liabilities, and Stockholders' equity accounts will have zero balances when the next accounting period starts.

c. in order to transfer net income (or loss) and dividends to the retained earnings

account

d. so that financial statements can be prepared

4. Adjusting entries are required

a. yearly.

b. quarterly.

c. monthly

d. every time financial statements are prepared

5. For the basic accounting equation to stay in balance, each transaction recorded must

a. affect two or less accounts.

b. affect two or more accounts.

c. always affect exactly two accounts.

d. affect the same number of asset and liability accounts.

6. Sales revenue less cost of goods sold is called

a. gross profit.

b. net profit.

c. net income.

d. contribution margin

7. The basic accounting equation 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 interpretation of the word credit is the

a. offset side of an account.

b. increase side of an account.

c. right side of an account.

d. decrease side of an account.

9. The first step in the recording process is to

a. prepare financial statements.

b. analyze how each transaction affects the accounting equation

c. post to a journal.

d. prepare a trial balance

10. A net loss will result during a time period when

a. assets exceed liabilities.

b. assets exceed stockholders' equity.

c. expenses exceed revenues.

d. revenues exceed expenses.

11. Select the response that indicates the correct sequence of movements of product costs in a manufacturing company a. Cost of goods sold, finished goods, work in process, raw materials b. Work in process, finished goods, cost of goods sold c. Raw materials, finished goods, cost of goods sold d. Raw materials, work in process, finished goods, cost of goods sold.

12. All of the following are features of managerial accounting except: a. Information is historically based and reported annually. b. Information includes economic and non-financial data as well as financial data. c. Information is provided primarily to insiders such as managers. d. Information is reported continuously with a present or future orientation.

13. A cost that contains both fixed and variable elements is referred to as a: a. hybrid cost. b. mixed cost. c. relevant cost. d. semi cost.

14. Select from the following the incorrect statement regarding contribution margin. a. Sales - variable manufacturing costs = contribution margin b. Net income + total fixed costs = contribution margin c. At the breakeven point (where the company has neither profit nor loss), total fixed costs = total contribution margin d. Total sales revenue times the contribution margin ratio = total contribution margin

15. On a cost-volume-profit graph, the area to the right and above the break-even point is referred to as the a. Loss area b. Profit area c. Break-even area d. Fixed cost area

16. Which of the following budgets might be prepared by a manufacturing company but not a retail merchandising business? a. Selling and administrative expense budget b. Cost of goods sold budget c. Raw materials budget d. Sales budget

17. Which of the following statements is true with respect to product costs versus general, selling, and administrative costs? a. Product costs associated with unsold units appear on the income statement as general expenses. b. General, selling, and administrative costs appear on the balance sheet. c. Product costs associated with units sold appear on the income statement as cost of goods sold. d. None of these is true

18. All of the following statements describe qualities of relevance except: a. Relevant information is future oriented. b. Relevant information differs between the alternatives. c. Relevant information requires a high degree of precision. d. Relevant information includes qualitative as well as quantitative data.

19. Palmer Company has three divisions. The company should consider a cost to be a direct cost if: a. It meets guidelines imposed by generally accepted accounting principles. b. It can be allocated to a division. c. It is a variable cost. d. It can be traced to a division in a cost-effective manner.

20. During its first year of operations, Oscar Company, using a periodic inventory system, made undiscovered errors in taking its year-end inventory that overstated Year 1 ending inventory by $200,000.

The effect of these errors on reported income is:

Year 1 Year 2

a. Understated Understated

$200,000 $200,000

b. Overstated Understated

$200,000 $200,000

c. Overstated Not affected

$200,000 ---

d. Overstated Overstated

$200,000 $200,000