Intermediate Accounting
Final Test Solutions
Course Introduction
Intermediate Accounting delves deeper into the principles and practices introduced in introductory accounting courses, focusing on the preparation, analysis, and interpretation of financial statements under generally accepted accounting principles (GAAP). This course covers complex topics including revenue recognition, inventories, long-term assets, liabilities, stockholders equity, and financial disclosures. Students develop technical skills to solve accounting problems, examine ethical issues, and apply critical thinking to real-world financial scenarios. Through case studies and problem-solving exercises, the course aims to equip students with the knowledge required for advanced study in accounting and professional certification exams.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis 16th Edition by Srikant M. Datar
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23 Chapters
4116 Verified Questions
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2
Chapter 1: The Manager and Management Accounting
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Sample Questions
Q1) Discuss the behavioral considerations that provide value to strategic decision making.
Answer: Management is primarily a human activity that should focus on encouraging individuals to do their jobs better. Budgets have a behavioral effect by motivating and rewarding employees for achieving an organization's goals. So, when workers underperform, for example, behavioral considerations suggest that managers need to discuss ways to improve their performance with them rather than just sending them a report highlighting their underperformance.
Q2) ________ is an after-sale support provided to customers.
A) Distribution
B) Customer service
C) Production
D) Marketing
Answer: B
Q3) Staff management, such as management accountants and information technology and human-resources management, provides advice, support, and assistance to line management.
A)True
B)False Answer: True
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) All costs incurred by a company (sacrifice of a resource) are recorded in the accounting system.
A)True
B)False
Answer: False
Q2) The most likely cost driver of direct labor costs is the ________.
A) number of machine setups for the product
B) number of miles driven
C) number of production hours
D) number of machine hours
Answer: C
Q3) Marriott International, would be classified as a(n) ________.
A) manufacturing-sector company
B) merchandising-sector company
C) service-sector company
D) financial services firm
Answer: C
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Page 4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) If the sales mix shifts to one unit of Product X and two units of Product Y, then the weighted-average contribution margin will ________.
A) increase per unit
B) stay the same
C) decrease per unit
D) decrease by $0.50 per unit
Answer: A
Q2) Kanga Company is considering two different production plans.
Option one: Fixed costs of $10,000 and a breakeven point of 500 units.
Option two: Fixed costs of $20,000 and a breakeven point of 700 units.
Which option should Kanga choose if it is expecting to produce 600 units?
A) Option one.
B) Option two.
C) Both options are equally good.
D) It isn't possible to determine from the information given.
Answer: A
Q3) Contribution margin and gross margin are terms that can be used interchangeably.
A)True
B)False
Answer: False
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Chapter 4: Job Costing
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Sample Questions
Q1) If indirect-cost rates are calculated monthly, distortions might occur because of
A) rental costs paid monthly
B) property tax payments made in July and December
C) routine monthly preventive-maintenance costs that benefit future months
D) salary hikes at the beginning of the financial year
Q2) The proration approach to allocating overapplied or underapplied overhead adjusts individual job-cost records.
A)True
B)False
Q3) Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs:
A.Identify indirect costs
B.Compute the total cost of the job
C.Select cost-allocation bases
D.Compute the indirect cost rate
A) ACDB
B) CADB
C) BACD
D) DCAB
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Chapter 5: Activity-Based Costing and Activity-Based Management
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176 Verified Questions
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Sample Questions
Q1) As ABC systems get very detailed and more cost pools are created, more allocations are necessary to calculate activity costs for each cost pool, which increases the chances of misidentifying the costs of different activity cost pools.
A)True
B)False
Q2) Activity-based management refers to the use of information derived from ABC analysis to analyze and improve operations.
A)True
B)False
Q3) Which of the following reasons explain why ABC concepts may be of great value to service companies?
A) It allows for more accurate cost accounting for inventory
B) It promotes more accurate cost of goods sold reporting
C) It helps make financial reporting more accurate
D) A significant portion of the cost structure of a service firm is composed of indirect costs
Q4) Quality-inspection costs is an example of batch-level costs.
A)True
B)False
7
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Chapter 6: Master Budget and Responsibility Accounting
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226 Verified Questions
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Sample Questions
Q1) Activity-based-costing analysis makes no distinction between ________.
A) direct-materials inventory and work-in-process inventory
B) short-run variable costs and short-run fixed costs
C) parts of the supply chain
D) components of the value chain
Q2) Operating decisions primarily deal with ________.
A) the best use of scarce resources
B) how to obtain funds to acquire resources
C) acquiring equipment and buildings
D) satisfying stockholders
Q3) Which of the following is true of a budget?
A) Budgets are used to express only the operational plans and not the strategic plans of a company.
B) Budgets do not account for nonfinancial aspects of the upcoming period.
C) Budgets are most useful when they are planned independent of the company's strategic plans.
D) Budgets help managers to revise their plans and strategies.
Q4) A packaging department is most likely a profit center.
A)True
B)False
Page 8
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Chapter 7: Flexible Budgets, Direct-Cost Variances, and Management Control
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Sample Questions
Q1) When benchmarking, management accountants are most valuable when they
A) present differences in the benchmarking data to management
B) highlight differences in the benchmarking data to management
C) provide insight into why costs or revenues differ across companies
D) provide complex mathematical analysis
Q2) Give at least three good reasons why an unfavorable efficiency variance for direct manufacturing labor might be reported.
Q3) Which of the following information is needed to prepare a flexible budget?
A) actual units sold
B) actual variable cost
C) actual selling price per unit
D) actual fixed cost
Q4) When using variance analysis for performance evaluation, managers often focus on effectiveness and efficiency as two of the common attributes used in comparing expected results with actual results.
A)True
B)False
Page 9
Q5) Explain the difference between a static budget and a flexible budget. Explain what is meant by a static budget variance and a flexible budget variance.
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Chapter 8: Flexible Budgets, Overhead Cost Variances, and Management Control
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Sample Questions
Q1) Fixed overhead costs ________.
A) never have any unused capacity
B) have no spending variance
C) have no efficiency variance
D) have no production-volume variance
Q2) Prorated allocation of production-volume variance has the effect of approximating the allocation of fixed costs based on actual costs and actual output.
A)True
B)False
Q3) Favorable overhead variances are always recorded with credits in a standard cost system.
A)True
B)False
Q4) Explain how fixed manufacturing overhead costs are treated under Generally Accepted Accounting Principles?
Q5) Unskilled work force can lead to unfavorable efficiency variance.
A)True
B)False
Q6) List the four steps to develop budgeted variable overhead cost-allocation.
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) What is throughput costing? What advantages does it have over variable and absorption costing?
Q2) Which of the following is true of master-budget capacity utilization?
A) It hides the amount of unused capacity.
B) It represents the maximum units of production intended for current capacity.
C) It provides the best cost estimate for benchmarking purposes.
D) It is an average that provides no meaningful feedback to a firm's marketing manager for a particular year.
Q3) Which of the following costs is inventoried when using variable costing?
A) rent on factory building
B) electricity consumed in manufacturing process
C) sales commission paid on each sale
D) advertising costs incurred for the product
Q4) Absorption-costing income statements usually do not differentiate between variable and fixed costs.
A)True
B)False
Q5) Explain three methods under absorption costing that managers can use to improve operating income.
Page 11
Q6) Discuss the three methods to dispose of production volume variance.
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) Data collection problems arise when ________.
A) data are recorded electronically rather than manually
B) accrual-basis costs are used rather than cash-basis costs
C) fixed and variable costs are not separately identified and both are allocated to products on a per unit basis
D) purely inflationary price effects are removed
Q2) A learning curve is a function ________.
A) that measures the decline in labor-hours per unit due to workers becoming better at a job
B) that increases at a greater rate as workers become more familiar with their tasks
C) where unit costs increase as productivity increases
D) that is linear
Q3) A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.
A)True
B)False
Q4) List and briefly describe the six steps in estimating a cost function under quantitative analysis.
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12
Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Which of the following is an example of sunk costs?
A) wages to security staffs
B) cost of purchasing raw materials
C) cost of an alternative investment
D) wages payable to skilled laborers to make a product
Q2) For decision making, differential costs assist in choosing between alternatives.
A)True
B)False
Q3) A relevant revenue is revenue that is a(n) ________.
A) past revenue and differs among alternative courses of action
B) future revenue and differs among alternative courses of action
C) in-hand revenue
D) earned revenue
Q4) The rent paid for an already existing facility is an example of a sunk cost.
A)True
B)False
Q5) Sunk costs are irrelevant to decision making.
A)True
B)False
Q6) Explain what revenues and costs are relevant when choosing among alternatives.
Page 13
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Chapter 12: Strategy, Balanced Scorecard, and Strategic
Profitability Analysis
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Sample Questions
Q1) Which of the following statements is a disadvantage of balanced scorecards?
A) Balanced scorecards ignore short-run objectives.
B) Balanced scorecards may become unwieldy and difficult to understand.
C) Balanced scorecards use a lot of nonfinancial measures.
D) Balanced scorecards are of little use in influencing managerial behavior.
Q2) The cost leadership strategy is for products and services that are similar to a competitors products and services.
A)True
B)False
Q3) Conversion costs are an example of ________.
A) direct engineered costs
B) indirect engineered costs
C) discretionary costs
D) unused capacity costs
Q4) Which of the following is a measure of the balanced scorecard's internal process perspective?
A) Service response time
B) Customer satisfaction
C) Gross profit percentage
D) Cost reduction
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Chapter 13: Pricing Decisions and Cost Management
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210 Flashcards
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Sample Questions
Q1) Which of the following best describes customer life-cycle costs?
A) costs incurred by the selling company to satisfy the customer.
B) costs to the customers for buying and using a product.
C) same as the selling life-cycle prices.
D) replacement costs of using a product or service.
Q2) Predatory pricing is a type of price discrimination that ________.
A) allows prices to be cut to the level of variable costs
B) is required when a company declares bankruptcy so that it can sell its remaining goods quickly
C) is used in the food industry for perishable goods
D) deliberately sets prices very low, sometimes even below costs, to minimize competition
Q3) Reverse engineering can be used to analyze competitors' products to determine product designs and materials and to understand the technologies competitors use.
A)True
B)False
Q4) Supervision costs can have both value-added and non-value-added components.
A)True
B)False
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Chapter 14: Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) Explain the importance of customer-profitability analysis.
Q2) When using the cause-and-effect criterion, cost drivers are selected as the cost allocation bases.
A)True
B)False
Q3) Using the fairness criterion, the costs are allocated among the beneficiaries in proportion to the benefits each receives.
A)True
B)False
Q4) More insight into the sales-volume variance can be gained by subdividing it into
A) the sales-mix variance and the sales-quantity variance
B) the market-share variance and the sales-mix variance
C) the flexible-budget variance and the market-size variance
D) the flexible-budget variance and the sales-mix variance
Q5) The ability-to-bear criterion is considered superior when the purpose of cost allocation is motivation.
A)True
B)False
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Chapter 15: Allocation of Support-Department Costs, Common
Costs, and Revenues
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Sample Questions
Q1) Which of the following is an example of an allowable cost considered by U.S. government contract?
A) supervision costs
B) costs of lobbying activities
C) costs of alcoholic beverages
D) costs of vacation for executives
Q2) A company sells a software suite that includes a word processor and spreadsheet applications. The suite sells for $250 and the items are also available separately for $200 (spreadsheet) and $170 (word processor). The spreadsheet app is by far the best seller of the standalone product sales. Using the incremental-revenue allocation method and assuming that the spreadsheet is the primary product, how much of the $250 revenue from the bundled product sale would be allocated to the spreadsheet and to the word processing products?
A) $200 of revenue for the spreadsheet and $50 for the word processor
B) $200 of revenue for the spreadsheet and $0 for the word processor
C) $135 of revenue for the spreadsheet and $115 for the word processor
D) $250 of revenue for the spreadsheet and $0 for the word processor
Q3) The issue of "allowable costs" is applicable in government cost-plus contracts.
A)True
B)False
Page 17
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) Define the terms main product, joint product, and byproduct. Give at least one example of each type of product.
Q2) Which of the following is not true of the joint allocation methods?
A) the sales value at the split-off method is the best measure of benefits received
B) when selling prices of all products at the split-off are unavailable, the NRV method is the best alternative
C) the constant gross-margin percentage NRV method treats the joint products as though they comprise a single product
D) when selling prices are at the split-off point are available but further processing is necessary, the NRV method is the preferred allocation method
Q3) The net realizable value (NRV) method method allocates joint costs to joint products produced during the accounting period in such a way that each individual product achieves an identical gross-margin percentage.
A)True
B)False
Q4) What are joint costs, separable costs, and a split-off point?
Q5) Explain why some companies choose not to allocate joint costs to products.
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Page 18
Chapter 17: Process Costing
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Sample Questions
Q1) A production cost worksheet is used to summarize total costs to account for, compute cost per equivalent unit, and assign total costs to units completed and to units in ending work-in-process.
A)True
B)False
Q2) Assembly department of Zahra Technologies had 200 units as work in process at the beginning of the month. These units were 45% complete. It has 300 units which are 35% complete at the end of the month. During the month, it completed and transferred 500 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses weighted-average process-costing method. Calculate the total equivalent units in ending inventory for assignment of conversion costs?
A) 200 units
B) 105 units
C) 195 units
D) 300 units
Q3) What is the difference between a weighted-average method of process costing and a first-in, first-out method of process costing?
Q4) List and describe the five steps in process costing.
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Chapter 18: Spoilage, Rework, and Scrap
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Sample Questions
Q1) Costs of abnormal spoilage are considered inventoriable and are written off as a period expense.
A)True
B)False
Q2) Normal spoilage is spoilage that is NOT considered to be inherent in a production process.
A)True
B)False
Q3) Abnormal spoilage is spoilage that should arise under efficient operating conditions.
A)True
B)False
Q4) If scrap, common to all jobs, is returned to the storeroom, the journal entry is ________.
A) Accounts Receivable Materials Control
B) Materials Control Work-in-Process Control
C) Work-in-Process Control Materials Control
D) Materials Control Manufacturing Overhead Control
Q5) Why do firms often conduct multiple inspections?
Q6) Distinguish among spoilage, reworked units, and scrap. Give an example of each.
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Chapter 19: Balanced Scorecard: Quality and Time
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Sample Questions
Q1) Appraisal costs are costs incurred to preclude the production of products that do not conform to specifications.
A)True
B)False
Q2) Which of the following is considered a cost of quality?
A) external failure costs
B) opportunity costs
C) sunk costs
D) contingent liabilities
Q3) 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?
Q4) A quality improvement program is very costly to implement across a large corporation. Why do they do it? Explain.
Q5) Discuss the methods used to identify quality problems.
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Chapter 20: Inventory Management, Just-in-Time, and Simplified Costing Methods
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Sample Questions
Q1) The reorder point is the quantity level of inventory at which a new purchase order is made.
A)True
B)False
Q2) A "push-through" system, often described as a materials requirement planning system, focuses first on the forecasted amount and timing of finished goods and then determines the demand for materials components and subassemblies at each of the prior stages of production.
A)True
B)False
Q3) Just-in-time purchasing describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations.
A)True
B)False
Q4) What are the principles of lean accounting? Are there any limitations? Discuss.
Q5) Discuss considerations that should be fully taken into account when developing inventory related relevant costs for use in an economic order quantity (EOQ) model.
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) AARR indicates the average rate at which ________.
A) a dollar of investment generates after-tax operating income
B) a dollar of after-tax cash flow generates net income
C) a dollar of investment generates a positive cash flow
D) a dollar of after-tax non-operating income generates net income
Q2) Which of the following is the numerator in the mathematical expression for accrual accounting rate-of-return (AARR)?
A) increase in expected average investment
B) increase in expected average annual after-tax operating income
C) increase in expected average cash flow
D) increase in expected net initial investment
Q3) A company is looking to purchase and replace a fixed asset for $245,000. It will sell the asset that will be replaced for $46,000 but will incur a $20,000 gain upon that sale. It must also commit $30,000 of working-capital to the investment. The firm's tax rate is 35%. What is the amount of the relevant initial investment?
A) $245,000
B) $254,000
C) $199,000
D) $206,000
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Page 23
Chapter 22: Management Control Systems, Transfer
Pricing, and Multinational
Considerations
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Q1) For each of the following statements regarding the satisfaction of transfer pricing criteria, identify whether you would expect the transfer pricing method to meet the criteria. Provide a yes, no, or sometimes for each situation.
________a.Market-Based transfer pricing achieves goal congruence.
________b.Cost-Based transfer pricing achieves goal congruence.
________c.Negotiated transfer pricing achieves goal congruence.
________d.Market-Based transfer pricing motivates management effort.
________e.Cost-Based transfer pricing motivates management effort.
________f.Negotiated transfer pricing motivates management effort.
________g.Market-Based transfer pricing is useful for evaluating subunit performance.
________h.Cost-Based transfer pricing is useful for evaluating subunit performance.
________i.Negotiated transfer pricing is useful for evaluating subunit performance.
________j.Market-Based transfer pricing preserves subunit autonomy.
________k.Cost-Based transfer pricing preserves subunit autonomy.
________l.Negotiated transfer pricing preserves subunit autonomy.
Q2) Briefly explain each of the three methods used to determine a transfer price.
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Chapter 23: Performance Measurement, Compensation, and Multinational Considerations
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Sample Questions
Q1) Which of the following is true of benchmarking two managers against each other if they carry out similar operations?
A) It would lead to better cooperation among the managers.
B) It would reduce the managers' incentives to help one another.
C) It would enhance the accomplishment of organization goals.
D) It would help reduce costs common to both the departments.
Q2) Historical costs are costs recognized in particular situations that are not usually recognized by accrual accounting procedures.
A)True
B)False
Q3) Intrinsic motivation comes from being given greater responsibility, doing interesting and creative work, and having pride in doing that work.
A)True
B)False
Q4) What targets should companies use, and when should they give feedback to managers regarding their performance relative to the targets?
Q5) What are the factors involved in choosing the timing of the feedback in designing accounting-based performance measures?
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