Intermediate Accounting
Exam Answer Key
Course Introduction
Intermediate Accounting delves deeper into the principles and procedures of financial accounting introduced in introductory courses. This course focuses on complex topics such as revenue recognition, inventory valuation, long-term assets, liabilities, shareholder equity, and the preparation of financial statements in accordance with generally accepted accounting principles (GAAP). Students will develop analytical and problem-solving skills through practical exercises and case studies that reflect real-world financial reporting scenarios. The course prepares students for advanced accounting coursework and equips them with the knowledge required for professional examinations and entry-level positions in the accounting field.
Recommended Textbook
Cost Accounting A Managerial Emphasis 7th Canadian Edition by Charles T. Horngren
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Chapter 1: The Accountants Vital Role in Decision Making
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Sample Questions
Q1) Planning is choosing goals,predicting results under various alternative ways of achieving those goals,and then deciding how to attain the desired goals.
A)True
B)False
Answer: True
Q2) Key success factors are geared to improving customer satisfaction.
A)True
B)False
Answer: True
Q3) Management accounting is guided by generally accepted accounting principles.
A)True
B)False
Answer: False
Q4) What aspect of business analysis focuses on the sequence of business functions?
A)customer service
B)value chain
C)quality
D)research and development
E)product design
Answer: B
Page 3
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) Cost assignment is
A)always arbitrary.
B)linking actual costs to cost objects.
C)the same as cost accumulation.
D)finding the difference between budgeted and actual costs.
E)the same as cost conversion.
Answer: B
Q2) Merchandising companies purchase products and sell them to customers without changing their basic form.
A)True
B)False
Answer: True
Q3) What is the unit cost for the plant leasing costs for 2016 assuming plant leasing costs are for the production of 1,014,000 units?
A)$0.119
B)$0.118
C)$0.110
D)$0.900
E)$0.943
Answer: B
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Bonnie and Clyde started the BC Restaurant a few years ago.They rented a building,bought equipment,and hired two employees to work full time at a fixed monthly salary.Utilities and other operating charges remain fairly constant during each month. During the past two years the business has grown with average sales increasing one percent a month.This situation pleases both Bonnie and Clyde,but they do not understand how sales can grow by one percent a month while profits are increasing at an even faster pace.They are afraid that one day they will wake up to increasing sales but decreasing profits.
Required:
Explain why the profits have increased at a faster rate than sales.
Answer: The fixed costs per meal served are decreasing with increased volumes,while the contribution margin per meal served remains constant.Apparently,most of the restaurant's expenses are fixed.Therefore,as sales pass the break-even point the profit will increase even faster because the fixed expenses have already been covered.This allows sales to cover only variable expenses before contributing to the profit margin,thereby causing it to increase at a faster rate.
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Chapter 4: Job Costing
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Sample Questions
Q1) A job costing system assigns costs to a distinct unit or set of units of a product or service.
A)True
B)False
Q2) In normal costing the manufacturing overhead control and manufacturing overhead allocated accounts in the general ledger respectively,refer to
A)the record of actual overhead costs,and the record of overhead allocated to specific jobs using budgeted rates × actual base units.
B)the record of total budgeted overhead costs and the record of actual overhead allocated to date.
C)the record of actual overhead costs,and the record of overhead allocated to specific jobs using actual rates × budgeted base units.
D)the record of total budgeted overhead costs,and the record of overhead allocated to specific jobs using budgeted rates × actual base units.
E)the record of actual overhead costs,and the record of overhead allocated to specific jobs using budgeted rates × budgeted base units.
Q3) What is the difference between an actual cost system and a normal cost system?
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) If a company undercosts one of its products from indirect cost smoothing,then it will overcost at least one of its other products.
A)True
B)False
Q2) Using pages printed as the only overhead cost driver,what is the manufacturing overhead cost estimate for Wealth Managers during 2015?
A)$2,500
B)$21,000
C)$1,500
D)$2,700
E)$2,100
Q3) In a homogeneous cost pool,all costs have a similar cause-and-effect relationship with the cost-allocation base.
A)True
B)False
Q4) Activity-based costing is not adaptable to merchandising organizations. A)True
B)False
Q5) Explain how a top-selling product may actually result in losses for the company.
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) How many kilograms of material will need to be purchased for 2016 production and inventory requirements?
A)11,500 kg
B)10,700 kg
C)10,300 kg
D)10,500 kg
E)10,000 kg
Q2) Explain what is meant by sensitivity analysis in budgeting,and discuss how managers might use sensitivity analysis in practice.
Q3) How much cash will be paid to suppliers in March?
A)$23,200
B)$28,000
C)$44,000
D)$24,800
E)$17,600
Q4) The production budget of a manufacturing company is prepared after the revenue budget.
A)True
B)False
Q5) List and describe the four approaches to budgeting.
Page 8
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Chapter 7: Flexible Budgets,variances,and Management
Control: I
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Sample Questions
Q1) What is the static-budget variance of operating income?
A)$258,000 unfavourable
B)$258,000 favourable
C)$222,000 favourable
D)$222,000 unfavourable
E)$3,000 unfavourable
Q2) Rate variances can be calculated for batch-level costs as well as for output unit-level costs.
A)True
B)False
Q3) For the dry ingredients what are the material mix and yield variances respectively?
A)$270 favourable/$270 unfavourable
B)$360 unfavourable/$360 unfavourable
C)$360 favourable/$360 unfavourable
D)$360 favourable/$360 favourable
E)$270 unfavourable/$270 unfavourable
Q4) What is benchmarking,and how is it useful to a company?
Q5) Describe the purpose of variance analysis.
Page 9
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Chapter 8: Flexible Budgets,variances,and Management
Control: II
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148 Flashcards
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Sample Questions
Q1) The production-volume variance may also be referred to as the A)flexible-budget variance.
B)static-budget variance.
C)rate variance.
D)efficiency variance.
E)denominator-level variance.
Q2) Which decisions are most likely to have been made by the start of the accounting period?
A)decisions affecting value-added costs
B)decisions affecting non-value-added costs
C)decisions affecting variable overhead costs
D)decisions affecting both fixed and variable overhead costs
E)decisions affecting fixed overhead costs
Q3) What is the flexible-budget variance for variable manufacturing overhead?
A)$54,000 unfavourable
B)$19,600 unfavourable
C)$11,000 favourable
D)$11,000 unfavourable
E)$161,500 unfavourable
Q4) Explain the meaning of a favourable production-volume variance.
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) Under variable costing,which of the following expenses is inventoriable?
A)variable manufacturing overhead
B)direct manufacturing labour and fixed manufacturing overhead
C)marketing and direct manufacturing labour
D)variable manufacturing overhead and administrative
E)variable and fixed manufacturing overhead
Q2) Which of the following is TRUE concerning throughput costing?
A)It is also called super-absorption costing.
B)It treats all costs except those related to direct labour as period costs.
C)It provides more incentive to build-up inventories than does absorption costing.
D)It provides more incentive to build-up inventories than does variable costing.
E)Other things being equal,is more conservative than absorption costing.
Q3) What is the variable costing break-even point in units?
A)1,000 units
B)5,556 units
C)4,445 units
D)6,000 units
E)445 units
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Chapter 10: Analysis of Cost Behaviour
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Sample Questions
Q1) List and briefly describe the five steps in estimating a cost function using quantitative analysis.
Q2) A linear cost function is a function in which the graph of total costs versus a single cost driver forms a straight line,within the relevant range.
A)True
B)False
Q3) Internal failure costs include
A)field repairs.
B)rework.
C)liability claims
D)warranty expenses.
E)supplier evaluations.
Q4) Acme Janitor Service has always taken pride in the fact that it had one of the highest customer response times in the home cleaning service industry.However,as the products manufactured for this industry have become more complex,the company's customer response time has declined.
Required:Why do you think that response time declined if all other quality factors have remained the same?
Q5) Describe the two assumptions upon which managers often estimate cost functions.
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Chapter 11: Decision Making and Relevant Information
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174 Flashcards
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Sample Questions
Q1) Unit cost data can mislead decisions by including irrelevant costs or by
A)not computing fixed overhead costs.
B)computing labour and materials costs only.
C)computing administrative costs.
D)not computing unit costs at the relevant output level.
E)including qualitative data.
Q2) The financial measures used to evaluate a manager's performance should be consistent with the decision model.
A)True
B)False
Q3) What is the total production per day if the change is made?
A)6400 units
B)800 units
C)880 units
D)1600 units
E)640 units
Q4) Doggie Dinner,Inc. ,currently manufactures three different types of scientifically balanced dog food.The firm is considering eliminating one of the three products.What factors should be taken into account in making this decision?
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Chapter 12: Pricing Decisions, product Profitability
Decisions, and Cost Management
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Sample Questions
Q1) Life-cycle budgeting is necessary before a company can determine the product life cycle of a given product.
A)True
B)False
Q2) If Ms.Yukki wanted a long-term commitment for supplying this product,what price would most likely be quoted to her?
A)$290
B)$390
C)$260
D)$377
E)$507
Q3) Collusive pricing occurs when
A)a company wants two products to sell for the same,or almost the same,amount.
B)a company wants a product to sell for the same as a competitor's product.
C)two or more companies agree to sell a product at a price higher than should be expected.
D)competitors are part of the same large parent organization.
E)one large company dominates an industry.
Q4) What advice would you give a company to avoid the appearance of predatory pricing?
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Chapter 13: Strategy,balanced Scorecard,and Profitability
Analysis
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Sample Questions
Q1) Which of the following is a major advantage of total factor productivity?
A)It measures the combined productivity of all inputs.
B)The control operations personnel have over inputs.
C)The control operations personnel have over outputs.
D)The marketing mix determined by management.
E)It is easy for operations personnel to understand.
Q2) Referring to Luke Company,which of the following is a measure of the financial perspective?
A)reengineering process
B)market share in the high-end appliance market
C)order delivery time
D)production cycle time
E)operating income growth from changing higher margins
Q3) Which of the following would result in an increase in total factor productivity,assuming all other variables are held constant?
A)The quantity of outputs increases.
B)The company uses more total inputs.
C)The company uses lower quality inputs.
D)Current technology becomes obsolete.
Page 15
E)Quantity of inputs increases and costs of inputs stays the same.
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Chapter 14: Period Cost Allocation
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Sample Questions
Q1) Benefits from using a well-designed cost allocation system are more evident than the costs.
A)True
B)False
Q2) A budgeted rate helps to motivate the manager of a support department.
A)True
B)False
Q3) Allowable cost is the cost that the parties to a contract agree to exclude from reimbursed costs.
A)True
B)False
Q4) Using the step-down method,what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)
A)$64,000
B)$85,333
C)$114,667
D)$128,000
Q5) Should a company allocate its corporate costs to divisions?
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Q1) Using the sales value at splitoff method,the joint costs allocated to Jarlon would be
A)$289,520.
B)$115,808.
C)$405,328.
D)$110,480.
E)$154,672.
Q2) Separable costs are assignable after the splitoff point.
A)True
B)False
Q3) Which of the following is TRUE regarding the costs of toxic waste disposal,reclamation,and remediation that result from joint production processing?
A)Toxic waste costs are treated in the same manner byproduct costs.
B)Disposal costs should be expensed,other costs charged to cost of goods sold.
C)The costs should be valued in inventory at net realizable value.
D)Toxic waste costs are a life-cycle cost that should be added to joint production costs prior to allocation.
E)All toxic waste costs should be expensed as do not form part of the product.
Q4) What are separable costs?
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Chapter 16: Revenue and Customer Profitability Analysis
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Sample Questions
Q1) Costs incurred to handle each unit sold would MOST likely be classified as a
A)customer output unit-level cost.
B)customer batch-level cost.
C)customer-sustaining cost.
D)corporate-sustaining cost.
E)distribution-channel cost.
Q2) The static-budget variance for revenues is the difference between the actual revenues and the budgeted revenues from the static budget.
A)True
B)False
Q3) It is common to find that a small number of customers generate a high percentage of operating income.
A)True
B)False
Q4) Customer-profitability analysis examines how individual customers,or groupings of customers,differ in their profitability.
A)True
B)False
Q5) What actions might be taken with an unprofitable customer?
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Chapter 17: Process Costing
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Sample Questions
Q1) What is the Townsend Company direct materials cost per equivalent unit during April?
A)$1,250.00
B)$1,241.94
C)$575.00
D)$581.25
E)$900.00
Q2) When identical or similar units of products or services are mass produced,job-costing is used to calculate an average production cost for all units produced.
A)True
B)False
Q3) What is the Carnival Furniture equivalent units for materials costs for May using the weighted average method?
A)180,000 cushions
B)160,000 cushions
C)140,000 cushions
D)118,000 cushions
E)123,000 cushions
Q4) List and describe the five steps in process costing.
Page 19
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Chapter 18: Spoilage, rework, and Scrap
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Q1) When calculating normal spoilage rates,the base should be the actual units started in production.
A)True
B)False
Q2) Which of the following can be used in accounting for spoilage?
A)standard costs
B)FIFO
C)Weighted average
D)FIFO and weighted average but not standard costs
E)FIFO and weighted average and standard costs
Q3) There is no cost attached to scrap.
A)True
B)False
Q4) What cost is allocated to abnormal spoilage using the weighted-average process-costing method?
A)$ 0
B)$26,880
C)$53,760
D)$29,000
E)$14,700
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Chapter 19: Inventory Cost Management Strategies
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Sample Questions
Q1) The annual relevant carrying costs of inventory consist of incremental costs plus the opportunity cost of capital.
A)True
B)False
Q2) What is the economic order quantity for Garry's golf ball purchases?
A)200 cartons
B)288 cartons
C)300 cartons
D)883 cartons
E)218 cartons
Q3) Companies implementing just-in-time production systems manage inventories by minimizing or eliminating them.
A)True
B)False
Q4) Companies can achieve significant gains by sharing information and coordinating activities throughout the supply chain.
A)True
B)False
Q5) What are the principles of lean accounting? Are there any limitations? Discuss.
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Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Q1) In capital budgeting decisions,relevant cash flows
A)are actual cash flows that differ between alternatives.
B)are actual cash flows that do not differ between alternatives.
C)are expected future cash flows that differ between alternatives.
D)are expected future cash flows that do not differ between alternatives.
E)are past cash flows lost.
Q2) Jefferson Ltd.is considering the acquisition of new production equipment.If purchased,the new equipment would cost $1,850,000.Installation and testing costs would be $35,000 and $25,000 respectively.Once operational,the equipment will cause an increase in working capital of $120,000.The new equipment is expected to generate increased annual sales of $720,000.Variable costs to operate the machine are estimated at 42% of sales and annual fixed costs would be lowered by $75,000.The equipment has an estimate 6 year life and a salvage value of $90,000.The company requires an 11% return on its investments.Ignore income taxes.
Required:
a.Compute the net present value.
b.Compute the internal rate of return.
c.Determine the payback period of the investment.
Q3) Explain why the term tax shield is used in conjunction with amortization.
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Chapter 21: Transfer Pricing and Multinational Management
Control
Systems
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Sample Questions
Q1) Management control systems reflect only financial data.
A)True
B)False
Q2) What is the market-based transfer price per pair of soles from the Sole Division to the Assembly Division?
A)$9
B)$10
C)$20
D)$16
E)$27
Q3) What is the opportunity cost for Crush Company from continuing to purchase the water from the local supplier if the company's Manitoba shipping division has sufficient idle capacity?
A)$600,000
B)$60,000
C)$105,000
D)$180,000
E)$0
Q4) Discuss the possible problems a corporation might have if its operations are totally decentralized.
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Chapter 22: Multinational Performance Measurement and Compensation
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Q1) Comparing the performance of divisions of a multinational company operating in different countries is difficult because of the differences in economic,legal,political,social and cultural environments.
A)True
B)False
Q2) During the past year Badger Company had a net income of $175,000.What is the ROI if the investment is $25,000?
A)0.142
B)2.500
C)5.140
D)7.000
E)5.450
Q3) The DuPont method of profitability analysis is
A)TA - CL/operating income
B)ROI × WACC
C)[revenue/investment] × [income/revenue]
D)ROI/WACC
E)ROI × RI
Q4) List and describe the steps involved in making decisions on performance measures.
24
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