Intermediate Accounting
Chapter Exam Questions
Course Introduction
Intermediate Accounting is a comprehensive course that delves into the principles, standards, and procedures underlying the preparation and interpretation of financial statements. Building on foundational accounting concepts, this course explores topics such as revenue recognition, asset valuation, liability measurement, equity transactions, and financial disclosures. Emphasis is placed on the application of Generally Accepted Accounting Principles (GAAP), the use of judgment in financial reporting, and the analysis of complex transactions. Through case studies, problem-solving exercises, and real-world examples, students develop critical thinking and technical skills necessary for advanced accounting coursework and professional practice.
Recommended Textbook Cornerstones of Cost Accounting 1st Canadian Edition by Don Hansen
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Chapter 1: A: Basic Cost Management Concepts
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Q1) Today's cost managers must assemble cost information and determine how to value things.Which methods would NOT be critical to achieving this?
A)foreign currency translation
B)costing and quality analysis
C)differentiating between value-added and non-value-added activities
D)measuring productivity
Answer: A
Q2) Whose overall supervision are accounting activities within an organization usually under?
A)Certified General Accountant
B)controller
C)Chartered Accountant
D)treasurer
Answer: B
Q3) Which of the following is a staff position?
A)vice president of production
B)vice president of finance
C)vice president of marketing
D)plant foreman
Answer: B
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Chapter 1: B: Basic Cost Management Concepts
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Q1) How has the nature of accounting systems shifted in response to technology?
Answer: ERP,DSS,and OLAP software have allowed firms to create one database that can be used for many purposes.Information is more accessible and can be used to provide much more effective planning,control,feedback,decision making,and continuous improvement.EDI has allowed the emergence of electronic commerce and supply chain management.
Q2) What is the role of the controller in an organization? Describe some of the activities over which he or she has control.
Answer: The controller is responsible for both internal and external accounting.These responsibilities usually include diverse activities such as taxes,provincial securities commission reports,cost accounting,budgeting,internal auditing,financial accounting,and systems accounting.
Q3) Explain the differences between direct tracing,driver tracing,and allocation.
Answer: Direct tracing is the process of identifying and assigning costs to a cost object that are specifically or physically associated with the cost object.Driver tracing is assigning costs using drivers,which are causal factors.The driver approach relies on identification of factors that allegedly capture the causal relationship.Allocation is the assignment of indirect costs to cost objects based on convenience or assumed linkages.
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Chapter 2: Cost Behaviour
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Q1) Greene Enterprises has the following information about its truck fleet miles and operating costs: \[\begin{array} { c c c } \text { Year } & \text { Miles } & \text { Operating Costs } \\ \hline2010 & 400,000 & \$ 256,000 \\ 2011 & 480,000 & 280,000 \\ 2012 & 560,000 & 320,000 \end{array}\] What is the best estimate of total costs using the high-low method if the expected fleet mileage for 2008 is 500,000 miles?
A)$256,000
B)$288,000
C)$296,000
D)$320,000
Answer: C
Q2) What is the hypothesis test of cost parameters?
A)It is not tested by the t-statistic.
B)It indicates whether the parameters are different from zero.
C)It tells the t-value of the significance achieved.
D)It ensures that the cost function is useable.
Answer: B
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Chapter 3: Cost-Volume-Profit Analysis
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Q1) Product 1 has a contribution margin of $6.00 per unit,and Product 2 has a contribution margin of $7.50 per unit.Total fixed costs are $300,000.Sales mix and total volume varies from one period to another.How does this sales mix affect the profit and contribution margin?
A)At a sales volume in excess of 25,000 units of 1 and 25,000 units of 2,operations will be profitable.
B)The ratio of net profit to total sales for 2 will be larger than the ratio of net profit to total sales for 1.
C)The contribution margin per unit of direct materials is lower for 1 than for 2.
D)The ratio of contribution to total sales always will be larger for 1 than for 2.
Q2) What sales dollar level is needed to obtain a before-tax profit of $60,000 when the selling price is $6.00 per unit?
A)$72,000
B)$90,000
C)$120,000
D)$360,000
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Chapter 4: Job-Order Costing Systems
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Q1) For which of the following products would one NOT use job-order costing?
A)houses
B)chemicals
C)ships
D)custom-built furniture
Q2) In regard to services,what does intangibility refer to?
A)the nonphysical nature of services as opposed to products
B)the fact that production and consumption are inseparable for services
C)greater chances for variation in the performance of services than in the production of products
D)the fact that services cannot be inventoried but must be consumed when performed
Q3) What is the term for the average activity that a firm experiences in the long term (more than one year)?
A)expected activity level
B)normal activity level
C)theoretical activity level
D)practical activity level
Q4) Why are firms reluctant to use actual costing? How does normal costing solve the problems?
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Chapter 5: Process Costing
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Q1) Refer to the figure.If materials were added when the units were 80 percent complete,how many equivalent units of production for materials would there be for Irvin using the weighted average costing method?
A)95,000 units
B)105,500 units
C)107,000 units
D)110,000 units
Q2) Refer to the figure.How many equivalent units for materials would there be for Gill Corporation in March using the FIFO method?
A)100,000 units
B)110,000 units
C)119,000 units
D)125,000 units
Q3) Refer to the figure.What is the cost per equivalent unit of production for conversion using the weighted average method?
A)$2.19
B)$2.55
C)$3.06
D)$3.54
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Chapter 6: Activity-Based Costing
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Q1) Ivory Corporation manufactures two products (A and B).The overhead costs have been divided into four cost pools that use the following activity drivers: \(\begin{array}{ccccc}
&\text { Number of } & \text { Number of } &\text { Machine } & \text { Packing }\\
\text { Product } & \text { Setups } & \text { Orders } & \text { Hours } & \text { Orders } \\
\text { A } & 20 & 35 & 1,000 & 75 \\
\text { B } & 5 & 70 & 1,500 & 125 \\\\
\text { Cost per pool } & \$ 15,000 & \$ 8,400 & \$ 120,000 & \$ 40,000 \end{array}\)
a.Compute the allocation rates for each of the activity drivers listed.
b.Allocate the overhead costs to Products A and B using activity-based costing.
c.Compute the overhead rate using machine hours under the functional-based costing system.
d.Allocate the overhead costs to Products A and B using the functional-based costing system overhead rate calculated in part (c).
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Chapter 7: Allocating Costs of Support Departments and Joint Products
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Sample Questions
Q1) What is the term for activities or variables within a producing department that provoke the incurrence of support costs?
A)causal factors
B)common costs
C)cost objectives
D)activity output
Q2) Refer to the figure.Fixed costs are allocated on the basis of monthly peak trips.Using both a fixed and variable rate,what are the respective rates for fixed and variable costs per trip for the West Sales Territory?
A)12.5%; $34
B)18.2%; $34
C)19%; $34
D)19.6%; $34
Q3) What are joint costs?
A)separable
B)allocated on the basis of cause-and-effect relationships.
C)allocated arbitrarily
D)easily traced to individual products
Q4) Compare and contrast the various methods of accounting for joint product costs.
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Chapter 8: Budgeting for Planning and Control
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Q1) What is the planned ending inventory of finished goods for May?
A)3,200 units
B)4,000 units
C)5,000 units
D)5,600 units.
Q2) Refer to the figure.What are the budgeted costs for rent if 5,000 units were produced?
A)$2,000
B)$9,000
C)$45,000
D)$100,000
Q3) Which of the following exists when managers deliberately underestimate revenues or overestimate costs to provide flexibility?
A)realistic standards
B)monetary incentives
C)budgetary slack
D)management by exception
Q4) Define budgeting and control.How are budgets used in planning? How are budgets used to control? What are some of the reasons for budgeting?
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Chapter 9: Standard Costing: a Functional-Based Control Approach
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Q1) What do quantity price standards specify?
A)They specify how much standard price that should be paid for a unit.
B)They specify how much of the quantity of input should be used for the standard price.
C)They specify how much should be paid for the quantity of input to be used.
D)They specify how much of the quantity of input should be used for the actual price.
Q2) Refer to the figure.What is the material price variance for Bender Corporation?
A)$27 (U)
B)$33 (F)
C)$33 (U)
D)$60 (F)
Q3) Refer to the figure.What is the labour efficiency variance?
A)$2,500 (F)
B)$3,750 (F)
C)$3,750 (U)
D)$6,250 (U)
Q4) Compare and contrast mix and yield variances.
Q5) How are standards developed? What is the difference between ideal and currently attainable standards?
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Evaluation,and Transfer Pricing
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Q1) What is the term for the transfer price that would leave the buying division no worse off if an input is purchased from an internal division?
A)the negotiated transfer price
B)the minimum transfer price
C)the maximum transfer price
D)the coordinated transfer price
Q2) The Framing Division provides frames for the Tractor Division of a company.The standard unit costs for the Framing Division are as follows: \(\begin{array}{llr}
\text { Direct materials } &\$800\\
\text { Direct labour } &1,500\\
\text { Variable overhead} &400\\
\text { Fixed overhead } &350\\
\text { Market price per unit } &4,575\\
\end{array}\)
What is the transfer price based on full cost plus a markup of 20 percent?
A)$3,240
B)$3,660
C)$4,575
D)$5,490
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Chapter 11: Tactical Decision Making
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Q1) Refer to the figure.A Calgary wholesaler has proposed to place a special one-time order of 10,000 units at a reduced price of $24 per unit.The wholesaler would pay all distribution costs,but there would be additional fixed selling and administrative costs of $3,000.All other information remains the same as the original data.What is the effect on profits if the special order is accepted?
A)increase of $12,000
B)increase of $57,000
C)increase of $75,000
D)decrease of $168,000
Q2) What are relevant costs? How do they relate to decision making?
Q3) What is tactical decision making?
A)Decision making that consists of choosing among alternatives with a long term view.
B)Decision making that consists of choosing among alternatives using only relevant cost information.
C)Decision making that consists of choosing among alternatives with an immediate end in view.
D)Decision making that consists of choosing among alternatives using only qualitative factors.
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Chapter 12: Pricing and Profitability Analysis
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Q1) Which of the following product life-cycle stages is characterized by rapid increases in sales and production?
A)introduction
B)growth
C)maturity
D)decline
Q2) What is the net income for Nauman Company?
A)$41,000
B)$65,000
C)$300,000
D)$325,000
Q3) Which type of expenses does a monopoly usually incur that are different from the other types of market structures?
A)marketing costs such as advertising,positioning,discounting,and coupons
B)costs of differentiation such as advertising,rebates,coupons
C)administrative expenses
D)legal and lobbying expenditures
Q4) What are some of the pricing practices regulated by law?
Q5) Discuss the limitation of profit measurement.
Q6) Compare and contrast the various pricing policies used by companies.
Page 15
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Chapter 13: Strategic Cost Management
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Q1) Which of the following manufacturing costs is assigned to products in a traditional environment using driver tracing?
A)direct labour
B)direct materials
C)energy
D)indirect labour
Q2) What is considered a direct cost if traditional manufacturing is used?
A)setup costs
B)direct labour
C)maintenance of machinery
D)inspection costs
Q3) What viewpoint describes the general sales pattern of a product as it passes through the introduction,growth,maturity,and decline stages?
A)accounting viewpoint
B)customer viewpoint
C)production viewpoint
D)marketing viewpoint
Q4) Explain the difference between acceptable quality level and total quality control.
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Chapter 14: Activity-Based Management
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Q1) Which of the following is a necessary condition for classification as a value-added activity?
A)The activity produces no change of state.
B)The change of state was not achievable by preceding activities.
C)Activity is the last activity to be performed.
D)Activity is not necessary as part of the production process.
Q2) A firm's warranty costs are $225,000 per year.A competitor's warranty costs are $75,000 per year.What are the non-value-added costs?
A)$50,000
B)$75,000
C)$150,000
D)$225,000
Q3) A company has 20 days of finished goods inventory on hand to avoid stockouts.The carrying costs of the inventory average $5,000 per day.What are the non-value-added costs?
A)$100,000
B)$10,000
C)$5,000
D)$250
Q4) What is process value analysis?
Page 17
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Chapter 15: The Balanced Scorecard: Strategic-Based Control
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Q1) What is the term for outcome measures that are expressed in monetary terms?
A)objective measures
B)external measures
C)financial measures
D)lag measures
Q2) The balanced scorecard becomes a means of communicating the strategy of the organization to its employees and managers.What might be a downside of communicating this information?
A)Employees will need direction about what is to be done.
B)Employees will need to understand where the organization is headed.
C)Employees may allow sensitive information may end up in the hands of competitors.
D)Employees can be informed of objectives using video or newsletters.
Q3) Which type of responsibility accounting addresses directed continuous improvement in environments that consist of competitive conditions and dynamic change?
A)activity-based responsibility accounting
B)strategic-based responsibility accounting
C)process-based responsibility accounting
D)functional-based responsibility accounting
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Chapter 16: Quality and Environmental Cost Management
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Q1) What assumes that the total failure cost is some multiplier of measured failure costs?
A)the multiplier method
B)the market research method
C)the process acceptance sampling
D)the Taguchi quality loss function
Q2) Refer to the figure.If quality costs were reduced to 2.5 percent of sales,by how much would profits increase?
A)$250,000
B)$500,000
C)$850,000
D)$1,000,000
Q3) Which of the following is an example of a decision-making context when using quality cost information?
A)strategic costing analysis
B)flexible budget analysis
C)cost-volume-profit analysis
D)volume production analysis
Q4) What does quality mean and how has improving quality increased firm value?
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Chapter 17: Lean Accounting and Productivity Measurement
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Q1) What does the lean control system use to compare operational,capacity,and financial metrics with prior-week performances and with a future desired state?
A)a Balanced Scorecard
B)a box scorecard
C)a profit analysis worksheet
D)a performance improvement plan
Q2) Information about Ford Corporation is as follows: \(\begin{array}{lrr}
&\text {20X1}&\text {20X2}\\
\text { Output (units) } & 40,000 & 42,000 \\
\text { Selling price per unit } & \$ 25 & \$ 25\\
\\
\text { Change in profits}&\$48,012.50\\
\text { Profit-linked measurements:}\\
\text { Materials}&\$550.00\\
\text { Iahour }&412.50
\end{array}\) What is the price-recovery component?
A)$47,050.00
B)$40,012.50
C)$962.50
D)($962.50)
Page 20
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Chapter 18: Inventory Management: Economic Order
Quantity,jit,and the Theory of Constraints
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Q1) Which of the following is a carrying cost?
A)cost of funds tied up in inventory
B)cost of processing an order
C)cost of preparing equipment for production
D)cost of idled production facilities
Q2) Which of the following are strategic objectives of JIT?
A)increasing inventory
B)improving a firm's competitive position
C)increasing inventory cost
D)improving a firm's non-value-added activities
Q3) What does the JIT approach to inventory management achieve?
A)It allows greater flexibility as to when products can be manufactured.
B)It results in higher inventory levels and reduces ordering and setup costs.
C)It results in lower inventory carrying costs.
D)It allows fewer employees to be included in the production process.
Q4) Refer to the figure.What is the economic order quantity for this item?
A)75 units
B)300 units
C)600 units
D)900,000 units
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