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TRUE-FALSE STATEMENTS

1. Budget reports comparing actual results with planned objectives should be prepared only

once a year.

2. If actual results are different from planned results, the difference must always be

investigated by management to achieve effective budgetary control.

3. Certain budget reports are prepared monthly, whereas others are prepared more

frequently depending on the activities being monitored.

4. The master budget is not used in the budgetary control process.

5. A master budget is most useful in evaluating a manager's performance in controlling

costs.

6. A static budget is one that is geared to one level of activity.

7. A static budget is changed only when actual activity is different from the level of activity

expected.

8. A static budget is most useful for evaluating a manager's performance in controlling

variable costs.

9. A flexible budget can be prepared for each of the types of budgets included in the master

budget.

10. A flexible budget is a series of static budgets at different levels of activities.

11. Flexible budgeting relies on the assumption that unit variable costs will remain constant

within the relevant range of activity.

12. Total budgeted fixed costs appearing on a flexible budget will be the same amount as total

fixed costs on the master budget.

13. A flexible budget is prepared before the master budget.

14. The activity index used in preparing a flexible budget should not influence the variable

costs that are being budgeted.

15. A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total

variable cost per unit × activity level).

16. Flexible budgets are widely used in production and service departments.

17. A flexible budget report will show both actual and budget cost based on the actual activity

level achieved.

18. Management by exception means that management will investigate areas where actual

results differ from planned results if the items are material and controllable.

19. Policies regarding when a difference between actual and planned results should be

investigated are generally more restrictive for noncontrollable items than for controllable

items.

20. A distinction should be made between controllable and noncontrollable costs when

reporting information under responsibility accounting.

21. Cost centers, profit centers, and investment centers can all be classified as responsibility

centers.

22. More costs become controllable as one moves down to each lower level of managerial

responsibility.

23. In a responsibility accounting reporting system, as one moves up each level of

responsibility in an organization, the responsibility reports become more summarized and

show less detailed information.

24. Decentralization means that the control of operations is delegated by top management to

many individuals throughout the organization.

25. A cost item is considered to be controllable if there is not a large difference between

actual cost and budgeted cost for that item.

26. A cost center incurs costs and generates revenues and cost center managers are

evaluated on the profitability of their centers.

27. The terms "direct fixed costs" and "indirect fixed costs" are synonymous with "traceable

costs" and "common costs," respectively.

28. Controllable margin is subtracted from controllable fixed costs to get net income for a

profit center.

29. The denominator in the formula for calculating the return on investment includes operating

and nonoperating assets.

30. The formula for computing return on investment is controllable margin divided by average

operating assets.

31. Budget reports provide the feedback needed by management to see whether actual

operations are on course.

32. A static budget is an effective means to evaluate a manager's ability to control costs,

regardless of the actual activity level.

33. The flexible budget report evaluates a manager's performance in two areas: (1)

production and (2) costs.

34. The terms controllable costs and noncontrollable costs are synonymous with variable

costs and fixed costs, respectively.

35. Most direct fixed costs are not controllable by the profit center manager.

36. The manager of an investment center can improve ROI by reducing average operating

assets.

37. An advantage of the return on investment ratio is that no judgmental factors are involved.

MULTIPLE CHOICE QUESTIONS

38. What is budgetary control?

a. Another name for a flexible budget

b. The degree to which the CFO controls the budget

c. The use of budgets in controlling operations

d. The process of providing information on budget differences to lower level managers

39. A major element in budgetary control is

a. the preparation of long-term plans.

b. the comparison of actual results with planned objectives.

c. the valuation of inventories.

d. approval of the budget by the stockholders.

40. Budget reports should be prepared

a. daily.

b. monthly.

c. weekly.

d. as frequently as needed.

41. On the basis of the budget reports,

a. management analyzes differences between actual and planned results.

b. management may take corrective action.

c. management may modify the future plans.

d. all of these.

42. The purpose of the departmental overhead cost report is to

a. control indirect labor costs.

b. control selling expense.

c. determine the efficient use of materials.

d. control overhead costs.

43. The purpose of the sales budget report is to

a. control selling expenses.

b. determine whether income objectives are being met.

c. determine whether sales goals are being met.

d. control sales commissions.

44. The comparison of differences between actual and planned results

a. is done by the external auditors.

b. appears on the company's external financial statements.

c. is usually done orally in departmental meetings.

d. appears on periodic budget reports.

45. A static budget

a. should not be prepared in a company.

b. is useful in evaluating a manager's performance by comparing actual variable costs

and planned variable costs.

c. shows planned results at the original budgeted activity level.

d. is changed only if the actual level of activity is different than originally budgeted.

46. A static budget report

a. shows costs at only 2 or 3 different levels of activity.

b. is appropriate in evaluating a manager's effectiveness in controlling variable costs.

c. should be used when the actual level of activity is materially different from the master

budget activity level.

d. may be appropriate in evaluating a manager's effectiveness in controlling costs when

the behavior of the costs in response to changes in activity is fixed.

47. A static budget is appropriate in evaluating a manager's performance if

a. actual activity closely approximates the master budget activity.

b. actual activity is less than the master budget activity.

c. the company prepares reports on an annual basis.

d. the company is a not-for-profit organization

48. When budgeted and actual results are not the same amount, there is a budget

a. error.

b. difference.

c. anomaly.

d. by-product.

49. Top management's reaction to a difference between budgeted and actual sales often

depends on

a. whether the difference is favorable or unfavorable.

b. whether management anticipated the difference.

c. the materiality of the difference.

d. the personality of the top managers.

50. If costs are not responsive to changes in activity level, then these costs can be best

described as

a. mixed.

b. flexible.

c. variable.

d. fixed.

51. Assume that actual sales results exceed the planned results for the second quarter. This

favorable difference is greater than the unfavorable difference reported for the first quarter

sales. Which of the following statements about the sales budget report on June 30 is true?

a. The year-to-date results will show a favorable difference.

b. The year-to-date results will show an unfavorable difference.

c. The difference for the first quarter can be ignored.

d. The sales report is not useful if it shows a favorable and unfavorable difference for the

two quarters.

52. A static budget is appropriate for

a. variable overhead costs.

b. direct materials costs.

c. fixed overhead costs.

d. none of these.

53. What is the primary difference between a static budget and a flexible budget?

a. The static budget contains only fixed costs, while the flexible budget contains only

variable costs.

b. The static budget is prepared for a single level of activity, while a flexible budget is

adjusted for different activity levels.

c. The static budget is constructed using input from only upper level management, while

a flexible budget obtains input from all levels of management.

d. The static budget is prepared only for units produced, while a flexible budget reflects

the number of units sold.

54. A flexible budget

a. is prepared when management cannot agree on objectives for the company.

b. projects budget data for various levels of activity.

c. is only useful in controlling fixed costs.

d. cannot be used for evaluation purposes because budgeted data are adjusted to reflect

actual results.

55. The master budget of Rondelli Company shows that the planned activity level for next

year is expected to be 50,000 machine hours. At this level of activity, the following

manufacturing overhead costs are expected:

Indirect labor $240,000

Machine supplies 60,000

Indirect materials 70,000

Depreciation on factory building 50,000

Total manufacturing overhead $420,000

A flexible budget for a level of activity of 60,000 machine hours would show total

manufacturing overhead costs of

a. $494,000.

b. $420,000.

c. $504,000.

d. $454,000.

56. Ashcroft, Inc. prepared a 2010 budget for 60,000 units of product. Actual production in

2010 was 65,000 units. To be most useful, what amounts should a performance report for

this company compare?

a. The actual results for 65,000 units with the original budget for 60,000 units

b. The actual results for 65,000 units with a new budget for 65,000 units.

c. The actual results for 65,000 units with last year's actual results for 67,000 units

d. It doesn't matter. All of these choices are equally useful.

57. A department has budgeted monthly manufacturing overhead cost of $270,000 plus $3

per direct labor hour. If a flexible budget report reflects $522,000 for total budgeted manufacturing

cost for the month, the actual level of activity achieved during the month was

a. 264,000 direct labor hours.

b. 84,000 direct labor hours.

c. 174,000 direct labor hours.

d. Cannot be determined from the information provided.

58. Which one of the following would be the same total amount on a flexible budget and a

static budget if the activity level is different for the two types of budgets?

a. Direct materials cost

b. Direct labor cost

c. Variable manufacturing overhead

d. Fixed manufacturing overhead

59. In developing a flexible budget within a relevant range of activity,

a. only fixed costs are included.

b. it is necessary to relate variable cost data to the activity index chosen.

c. it is necessary to prepare a budget at 1,000 unit increments.

d. variable and fixed costs are combined and are reported as a total cost.

60. What budgeted amounts appear on the flexible budget?

a. Original budgeted amounts at the static budget activity level

b. Actual costs for the budgeted activity level

c. Budgeted amounts for the actual activity level achieved

d. Actual costs for the estimated activity level

61. The flexible budget

a. is prepared before the master budget.

b. is relevant both within and outside the relevant range.

c. eliminates the need for a master budget.

d. is a series of static budgets at different levels of activity.

62. A flexible budget can be prepared for which of the following budgets comprising the

master budget?

a. Sales

b. Overhead

c. Direct materials

d. All of these

63. Another name for the static budget is

a. master budget.

b. overhead budget.

c. permanent budget.

d. flexible budget.

64. If a company plans to sell 24,000 units of product but sells 30,000, the most appropriate

comparison of the cost data associated with the sales will be by a budget based on

a. the original planned level of activity.

b. 27,000 units of activity.

c. 30,000 units of activity.

d. 24,000 units of activity.

65. Within the relevant range of activity, the behavior of total costs is assumed to be

a. linear and upward sloping.

b. linear and downward sloping.

c. curvilinear and upward sloping.

d. linear to a point and then level off.

66. Sales results that are evaluated by a static budget might show

1. favorable differences that are not justified.

2. unfavorable differences that are not justified.

a. 1

b. 2

c. both 1 and 2.

d. neither 1 nor 2.

67. The selection of levels of activity to depict a flexible budget

1. will be within the relevant range.

2. is largely a matter of expediency.

3. is governed by generally accepted accounting principles.

a. 1

b. 2

c. 3

d. 1 and 2

68. Management by exception

a. causes managers to be buried under voluminous paperwork.

b. means that all differences will be investigated.

c. means that only unfavorable differences will be investigated.

d. means that material differences will be investigated.

69. Under management by exception, which differences between planned and actual results

should be investigated?

a. Material and noncontrollable

b. Controllable and noncontrollable

c. Material and controllable

d. All differences should be investigated

70. Hudson Roofing's budgeted manufacturing costs for 25,000 squares of shingles are:

Fixed manufacturing costs $15,000

Variable manufacturing costs $20.00 per square

Hudson produced 20,000 squares of shingles during March. How much are budgeted total

manufacturing costs in March?

a. $400,000

b. $515,000

c. $500,000

d. $415,000

71. A flexible budget depicted graphically

a. is identical to a CVP graph.

b. differs from a CVP graph in the way that fixed costs are shown.

c. differs from a CVP graph in the way that variable costs are shown.

d. differs from a CVP graph in that sales revenue is not shown.

72. The activity index used in preparing the flexible budget

a. is prescribed by generally accepted accounting principles.

b. is only applicable to fixed manufacturing costs.

c. is the same for all departments.

d. should significantly influence the costs that are being budgeted.

73. A static budget is not appropriate in evaluating a manager's effectiveness if a company

has

a. substantial fixed costs.

b. substantial variable costs.

c. planned activity levels that match actual activity levels.

d. no variable costs.

74. Dryden Manufacturing Company prepared a fixed budget of 40,000 direct labor hours,

with estimated overhead costs of $200,000 for variable overhead and $60,000 for fixed

overhead. Dryden then prepared a flexible budget at 38,000 labor hours. How much is

total overhead costs at this level of activity?

a. $190,000

b. $250,000

c. $247,000

d. $260,000

75. For June, Wynn Manufacturing estimated sales revenue at $200,000. It pays sales

commissions that are 4% of sales. The sales manager's salary is $95,000, estimated

shipping expenses total 1% of sales, and miscellaneous selling expenses are $5,000.

How much are budgeted selling expenses for the month of July if sales are expected to be

$180,000?

a. $14,000

b. $109,000

c. $9,000

d. $110,000

76. Yancey’s Sipit Company budgeted manufacturing costs for 25,000 sipits are:

Fixed manufacturing costs $25,000 per month

Variable manufacturing costs $12.00 per sipit

Yancey’s produced 20,000 sipits during March. How much is the flexible budget for total

manufacturing costs for March?

a. $260,000

b. $325,000

c. $240,000

d. $265,000

77. True Masons budgeted costs for 25,000 linear feet of block are:

Fixed manufacturing costs $12,000 per month

Variable manufacturing costs $16.00 per linear

True Masons installed 20,000 linear feet of block during March. How much is budgeted

total manufacturing costs in March?

a. $320,000

b. $412,000

c. $400,000

d. $332,000

78. In the Harrelson Company, indirect labor is budgeted for $36,000 and factory supervision

is budgeted for $12,000 at normal capacity of 80,000 direct labor hours. If 90,000 direct

labor hours are worked, flexible budget total for these costs is

a. $48,000.

b. $54,000.

c. $52,500.

d. $49,500.

79. Cannon Company uses flexible budgets. At normal capacity of 8,000 units, budgeted

manufacturing overhead is: $48,000 variable and $135,000 fixed. If Cannon had actual

overhead costs of $187,500 for 9,000 units produced, what is the difference between

actual and budgeted costs?

a. $1,500 unfavorable

b. $1,500 favorable

c. $4,500 unfavorable

d. $6,000 favorable

80. A company's planned activity level for next year is expected to be 100,000 machine hours.

At this level of activity, the company budgeted the following manufacturing overhead

costs:

Variable Fixed

Indirect materials $140,000 Depreciation $60,000

Indirect labor 200,000 Taxes 10,000

Factory supplies 20,000 Supervision 50,000

A flexible budget prepared at the 80,000 machine hours level of activity would show total

manufacturing overhead costs of

a. $288,000.

b. $360,000.

c. $384,000.

d. $408,000.

81. In the Klugman Company, indirect labor is budgeted for $54,000 and factory supervision is

budgeted for $18,000 at normal capacity of 80,000 direct labor hours. If 90,000 direct

labor hours are worked, flexible budget total for these costs is:

a. $72,000.

b. $81,000.

c. $78,750.

d. $74,250.

82. Wilson Company uses flexible budgets. At normal capacity of 8,000 units, budgeted

manufacturing overhead is: $32,000 variable and $90,000 fixed. If Wilson had actual

overhead costs of $125,000 for 9,000 units produced, what is the difference between

actual and budgeted costs?

a. $1,000 unfavorable.

b. $1,000 favorable.

c. $3,000 unfavorable.

d. $4,000 favorable.

83. A company's planned activity level for next year is expected to be 100,000 machine hours.

At this level of activity, the company budgeted the following manufacturing overhead

costs:

Variable Fixed

Indirect materials $120,000 Depreciation $50,000

Indirect labor 160,000 Taxes 10,000

Factory supplies 20,000 Supervision 40,000

A flexible budget prepared at the 90,000 machine hours level of activity would show total

manufacturing overhead costs of

a. $270,000.

b. $360,000.

c. $370,000.

d. $300,000.

84. Pine Company produced 128,000 units in 60,000 direct labor hours. Production for the

period was estimated at 132,000 units and 66,000 direct labor hours. A flexible budget

would compare budgeted costs and actual costs, respectively, at

a. 64,000 hours and 66,000 hours.

b. 66,000 hours and 60,000 hours.

c. 64,000 hours and 60,000 hours.

d. 60,000 hours and 60,000 hours.

85. A company's planned activity level for next year is expected to be 100,000 machine hours.

At this level of activity, the company budgeted the following manufacturing overhead

costs:

Variable Fixed

Indirect materials $90,000 Depreciation $37,500

Indirect labor 120,000 Taxes 7,500

Factory supplies 15,000 Supervision 30,000

A flexible budget prepared at the 90,000 machine hours level of activity would show total

manufacturing overhead costs of

a. $202,500.

b. $270,000.

c. $277,500.

d. $225,000.

86. Reed Company produced 160,000 units in 75,000 direct labor hours. Production for the

period was estimated at 165,000 units and 82,500 direct labor hours. A flexible budget

would compare budgeted costs and actual costs, respectively, at

a. 80,000 hours and 82,500 hours.

b. 82,500 hours and 75,000 hours.

c. 80,000 hours and 75,000 hours.

d. 75,000 hours and 75,000 hours.

87. At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects

the vertical axis at $20,000. At 10,000 direct labor hours, a horizontal line drawn from the

total budgeted cost line intersects the vertical axis at $60,000. Fixed and variable costs

may be expressed as:

a. $20,000 fixed plus $4 per direct labor hour variable.

b. $20,000 fixed plus $6 per direct labor hour variable.

c. $40,000 fixed plus $2 per direct labor hour variable.

d. $40,000 fixed plus $4 per direct labor hour variable.

88. At 9,000 direct labor hours, the flexible budget for indirect materials is $18,000. If $18,700

are incurred at 9,200 direct labor hours, the flexible budget report should show the

following difference for indirect materials:

a. $700 unfavorable.

b. $700 favorable.

c. $300 favorable.

d. $300 unfavorable.

89. The accumulation of accounting data on the basis of the individual manager who has the

authority to make day-to-day decisions about activities in an area is called

a. static reporting.

b. flexible accounting.

c. responsibility accounting.

d. master budgeting.

90. Dobson Company recorded operating data for its shoe division for the year.

Sales $750,000

Contribution margin 150,000

Controllable fixed costs 90,000

Average total operating assets 300,000

How much is controllable margin for the year?

a. 20%

b. 50%

c. $150,000

d. $60,000

91. A cost is considered controllable at a given level of managerial responsibility if

a. the manager has the power to incur the cost within a given time period.

b. the cost has not exceeded the budget amount in the master budget.

c. it is a variable cost, but it is uncontrollable if it is a fixed cost.

d. it changes in magnitude in a flexible budget.

92. As one moves up to each higher level of managerial responsibility,

a. fewer costs are controllable.

b. the responsibility for cost incurrence diminishes.

c. a greater number of costs are controllable.

d. performance evaluation becomes less important

.

93. A responsibility report should

a. be prepared in accordance with generally accepted accounting principles.

b. show only those costs that a manager can control.

c. only show variable costs.

d. only be prepared at the highest level of managerial responsibility.

94. Top management can control

a. only controllable costs.

b. only noncontrollable costs.

c. all costs.

d. some noncontrollable costs and all controllable costs.

95. Not-for-profit entities

a. do not use responsibility accounting.

b. utilize responsibility accounting in trying to maximize net income.

c. utilize responsibility accounting in trying to minimize the cost of providing services.

d. have only noncontrollable costs.

96. Which of the following is not a true statement?

a. All costs are controllable at some level within a company.

b. Responsibility accounting applies to both profit and not-for-profit entities.

c. Fewer costs are controllable as one moves up to each higher level of managerial

responsibility.

d. The term segment is sometimes used to identify areas of responsibility in

decentralized operations.

97. Costs incurred indirectly and allocated to a responsibility level are considered to be

a. nonmaterial.

b. mixed.

c. controllable.

d. noncontrollable.

98. Management by exception

a. is most effective at top levels of management.

b. can be implemented at each level of responsibility within an organization.

c. can only be applied when comparing actual results with the master budget.

d. is the opposite of goal congruence.

99. Which responsibility centers generate both revenues and costs?

a. Investment and profit centers

b. Profit and cost centers

c. Cost and investment centers

d. Only profit centers

100. The linens department of a large department store is

a. not a responsibility center.

b. a profit center.

c. a cost center.

d. an investment center.

101. The foreign subsidiary of a large corporation is

a. not a responsibility center.

b. a profit center.

c. a cost center.

d. an investment center.

102. The maintenance department of a manufacturing company is a(n)

a. segment.

b. profit center.

c. cost center.

d. investment center.

103. Which of the following is not a correct match?

1. Incurs costs

2. Generates revenue

3. Controls investment funds

a. Investment Center 1, 2, 3

b. Cost Center 1

c. Profit Center 1, 2, 3

d. All are correct matches.

104. A cost center

a. only incurs costs and does not directly generate revenues.

b. incurs costs and generates revenues.

c. is a responsibility center of a company which incurs losses.

d. is a responsibility center which generates profits and evaluates the investment cost of

earning the profit.

105. A manager of a cost center is evaluated mainly on

a. the profit that the center generates.

b. his or her ability to control costs.

c. the amount of investment it takes to support the cost center.

d. the amount of revenue that can be generated.

106. Performance reports for cost centers compare actual

a. total costs with static budget data.

b. total costs with flexible budget data.

c. controllable costs with static budget data.

d. controllable costs with flexible budget data.

107. In the performance report for cost centers,

a. controllable and noncontrollable costs are reported.

b. fixed costs are not reported.

c. no distinction is made between fixed and variable costs.

d. only materials and controllable costs are reported.

108. Of the following choices, which contain both a traceable fixed cost and a common fixed

cost?

a. Profit center manager's salary and timekeeping costs for a responsibility center's

employees.

b. Company president's salary and company personnel department costs.

c. Company personnel department costs and timekeeping costs for a responsibility

center's employees.

d. Depreciation on a responsibility center's equipment and supervisory salaries for the

center.

109. Which of the following is not an indirect fixed cost?

a. Company president's salary

b. Depreciation on the company building housing several profit centers

c. Company personnel department costs

d. Profit center supervisory salaries

110. A profit center is

a. a responsibility center that always reports a profit.

b. a responsibility center that incurs costs and generates revenues.

c. evaluated by the rate of return earned on the investment allocated to the center.

d. referred to as a loss center when operations do not meet the company's objectives.

111. The best measure of the performance of the manager of a profit center is the

a. rate of return on investment.

b. success in meeting budgeted goals for controllable costs.

c. amount of controllable margin generated by the profit center.

d. amount of contribution margin generated by the profit center.

112. Controllable margin is defined as

a. sales minus variable costs.

b. sales minus contribution margin.

c. contribution margin less controllable fixed costs.

d. contribution margin less noncontrollable fixed costs.

Ans: C, 113. Controllable margin is most useful for

a. external financial reporting.

b. preparing the master budget.

c. performance evaluation of profit centers.

d. break-even analysis.

114. Which of the following will not result in an unfavorable controllable margin difference?

a. Sales exceeding budget; costs under budget

b. Sales exceeding budget; costs over budget

c. Sales under budget; costs under budget

d. Sales under budget; costs over budget

115. Given below is an excerpt from a management performance report:

Budget Actual Difference

Contribution margin $1,000,000 $1,050,000 $50,000

Controllable fixed costs $ 500,000 $ 450,000 $50,000

The manager's overall performance

a. is 20% below expectations.

b. is 20% above expectations.

c. is equal to expectations.

d. cannot be determined from information given.

116. Which of the following are financial measures of performance?

1. Controllable margin

2. Product quality

3. Labor productivity

a. 1

b. 2

c. 3

d. 1 and 3

117. Given below is an excerpt from a management performance report:

Budget Actual Difference

Contribution margin $600,000 $580,000 $20,000 U

Controllable fixed costs $200,000 $220,000 $20,000 U

The manager's overall performance

a. is 10% above expectations.

b. is 10% below expectations.

c. is equal to expectations.

d. cannot be determined from the information provided.

118. A responsibility report for a profit center will

a. not show controllable fixed costs.

b. not show indirect fixed costs.

c. show noncontrollable fixed costs.

d. not show cumulative year-to-date results.

119. The dollar amount of the controllable margin

a. is usually higher than the contribution margin.

b. is usually lower than the contribution margin.

c. is always equal to the contribution margin.

d. cannot be a negative figure.

120. Harbaugh Company recorded operating data for its shoe division for the year. The

company’s desired return is 5%.

Sales $500,000

Contribution margin 100,000

Total direct fixed costs 60,000

Average total operating assets 200,000

Which one of the following reflects the controllable margin for the year?

a. 20%

b. 50%

c. $30,000

d. $40,000

121. Powers Company had average operating assets of $2,000,000 and sales of $1,000,000 in

2010. If the controllable margin was $300,000, the ROI was

a. 60%

b. 50%

c. 30%

d. 15%

122. Miles Company had average operating assets of $4,000,000 and sales of $2,000,000 in

2010. If the controllable margin was $400,000, the ROI was

a. 50%

b. 40%

c. 20%

d. 10%

123. The area manager of the Little Italy Restaurants is considering two possible expansion

alternatives. The required investments, expected controllable margins, and the ROIs of

each are as follows:

Project Investment Controllable Margin ROI

Charlotte $120,000 $30,000 25%

Richmond $540,000 $50,000 9.25%

The Little Italy segment has currently $2,000,000 in invested capital and a controllable

margin of $250,000. Which one of following projects will increase the Little Italy division’s

ROI?

a. Both the Charlotte and Richmond options

b. Only the Charlotte option

c. Only the Richmond option

d. Neither the Charlotte nor the Richmond options

124. Janes Corporation recorded operating data for its Cheap division for the year. Janes

requires its return to be 10%.

Sales $ 700,000

Controllable margin 80,000

Total average assets 2,000,000

Fixed costs 50,000

What is the ROI for the year?

a. 4%

b. 35%

c. –6%

d. 1.5%

125. Edmunds Division’s operating results include: controllable margin of $150,000, sales

totaling $1,200,000, and average operating assets of $500,000. Edmunds is considering a

project with sales of $100,000, expenses of $86,000, and an investment of average

operating assets of $200,000. Edmunds’s required rate of return is 9%. Should Edmunds

accept this project?

a. Yes, ROI will drop by 6.6% which is still above the required rate of return.

b. No, the return is less than the required rate of 9%.

c. Yes, ROI still exceeds the cost of capital.

d. No, ROI will decrease to 7%.

126. Neill Manufacturing reported the following items for 2010:

Income tax expense $ 30,000

Contribution margin 100,000

Controllable fixed costs 40,000

Interest expense 20,000

Total operating assets 325,000

How much is controllable margin?

a. $100,000

b. $60,000

c. $30,000

d. $10,000

127. Kenco Pharmaceuticals is evaluating its Brown division, an investment center. The

division has a $45,000 controllable margin and $300,000 of sales. How much will Kenco’s

average operating assets be when its return on investment is 10%?

a. $450,000

b. $495,000

c. $300,000

d. $255,000

128. An investment center generated a contribution margin of $200,000, fixed costs of

$100,000 and sales of $1,000,000. The center’s average operating assets were $400,000.

How much is the return on investment?

a. 25%

b. 175%

c. 50%

d. 75%

129. Michaelson Company recorded operating data for its auto accessories division for the

year.

Sales $375,000

Contribution margin 75,000

Total direct fixed costs 45,000

Average total operating assets 200,000

How much is ROI for the year if management is able to identify a way to improve the

contribution margin by $15,000, assuming fixed costs are held constant?

a. 45.0%

b. 22.5%

c. 15.0%

d. 12.0%

130. The current controllable margin for Frederick Division is $62,000. Its current operating

assets are $200,000. The division is considering purchasing equipment for $60,000 that

will increase annual controllable margin by an estimated $10,000. If the equipment is

purchased, what will happen to the return on investment for Frederick Division?

a. An increase of 16.1%

b. A decrease of 13.3%

c. A decrease of 3.3%

d. A decrease of 7.2%

131. DeLong Corporation recorded operating data for its Waterhole division for the year.

DeLong requires its return to be 9%.

Sales $500,000

Controllable margin 90,000

Total average assets 300,000

Fixed costs 30,000

How much is ROI for the year?

a. 10%

b. 16.7%

c. 20%

d. 30%

132. Rob Haughton is the North Division manager and his performance is evaluated by

executive management based on Division ROI. The current controllable margin for North

Division is $46,000. Its current operating assets total $210,000. The division is considering

purchasing equipment for $40,000 that will increase sales by an estimated $10,000, with

annual depreciation of $10,000. If the equipment is purchased, what will happen to the

return on investment for the division?

a. An increase of 0.5%

b. A decrease of 0.5%

c. A decrease of 3.5%

d. It will remain unchanged.

133. Olathe Division of Hartley Company’s operating results include: controllable margin,

$200,000; sales $2,200,000; and operating assets, $800,000. The Olathe Division’s ROI

is 25%. Management is considering a project with sales of $100,000, variable expenses of

$60,000, fixed costs of $40,000; and an asset investment of $150,000. Should

management accept this new project?

a. No, since ROI will be lowered.

b. Yes, since ROI will increase.

c. Yes, since additional sales always mean more customers.

d. No, since a loss will be incurred.

134. The Western Division of Guinn Corp. had an ROI of 25% when sales were $1 million and

controllable margin was $200,000. What were the average operating assets?

a. $50,000

b. $250,000

c. $800,000

d. $4,000

135. Burk Company recorded operating data for its shoe division for the year.

Sales $500,000

Contribution margin 90,000

Total fixed costs 60,000

Average total operating assets 200,000

How much is ROI for the year if management is able to identify a way to improve the

contribution margin by $20,000, assuming fixed costs are held constant?

a. 25%

b. 18%

c. 45%

d. 12%

136. A distinguishing characteristic of an investment center is that

a. revenues are generated by selling and buying stocks and bonds.

b. interest revenue is the major source of revenues.

c. the profitability of the center is related to the funds invested in the center.

d. it is a responsibility center which only generates revenues.

137. A measure frequently used to evaluate the performance of the manager of an investment

center is

a. the amount of profit generated.

b. the rate of return on funds invested in the center.

c. the percentage increase in profit over the previous year.

d. departmental gross profit.

138. Return on investment is calculated by dividing

a. contribution margin by sales.

b. controllable margin by sales.

c. contribution margin by average operating assets.

d. controllable margin by average operating assets.

139. Which one of the following will not increase return on investment?

a. Variable costs are increased

b. An increase in sales

c. Average operating assets are decreased

d. Variable costs are decreased

140. If an investment center has generated a controllable margin of $75,000 and sales of

$300,000, what is the return on investment for the investment center if average operating

assets were $500,000 during the period?

a. 15%

b. 25%

c. 45%

d. 60%

141. Which statement is true?

a. An investment center is responsible for revenues and expenses, as well as earning a

return on assets.

b. An investment center is only responsible for its investments.

c. An investment center is only responsible for revenues and expenses.

d. A profit center is evaluated using contribution margin, while an investment center is

evaluated using ROI.

142. The denominator in the formula for return on investment calculation is

a. investment center controllable margin.

b. dependent on the specific type of profit center.

c. average investment center operating assets.

d. sales for the period.

143. In the formula for ROI, idle plant assets are

a. included in the calculation of controllable margin.

b. included in the calculation of operating assets.

c. excluded in the calculation of operating assets.

d. excluded from total assets.

144. In computing ROI, land held for future use

a. will hurt the performance measurement of an investment center's manager.

b. is important in evaluating the performance of a profit center manager.

c. is included in the calculation of operating assets.

d. is considered a nonoperating asset.

145. Lounsbury Parts has a current return on investment of 10% and the company has

established an 8% minimum rate of return for the division. The division manager has two

investment projects available, for which the following estimates have been made:

Project A - Annual controllable margin = $24,000, operating assets = $400,000

Project B - Annual controllable margin = $60,000, operating assets = $550,000

Which project should be funded?

a. Both projects

b. Project A

c. Project B

d. Neither project

146. If an investment center has a $45,000 controllable margin and $600,000 of sales, what

average operating assets are needed to have a return on investment of 10%?

a. $60,000

b. $105,000

c. $450,000

d. $600,000

147. Which of the following valuations of operating assets is not readily available from the

accounting records?

a. Cost

b. Book value

c. Market value

d. Both cost and market value

148. Which of the following would not be considered an aspect of budgetary control?

a. It assists in the determination of differences between actual and planned results.

b. It provides feedback value needed by management to see whether actual operations

are on course.

c. It assists management in controlling operations.

d. It provides a guarantee for favorable results.

149. A static budget is usually appropriate in evaluating a manager's effectiveness in controlling

a. fixed manufacturing costs and fixed selling and administrative expenses.

b. variable manufacturing costs and variable selling and administrative expenses.

c. fixed manufacturing costs and variable selling and administrative expenses.

d. variable manufacturing costs and fixed selling and administrative expenses.

150. A static budget report is appropriate for

a. fixed manufacturing costs.

b. fixed selling and administrative expenses.

c. variable selling and administrative expenses.

d. both fixed manufacturing costs and fixed selling and administrative expenses.

151. Lamont Company uses flexible budgets. At normal capacity of 8,000 units, budgeted

manufacturing overhead is $64,000 variable and $180,000 fixed. If Lamont had actual

overhead costs of $250,000 for 9,000 units produced, what is the difference between

actual and budgeted costs?

a. $2,000 unfavorable

b. $2,000 favorable

c. $6,000 unfavorable

d. $8,000 favorable

152. To develop the flexible budget, management takes all of the following steps except

identify the

a. activity index and the relevant range of activity.

b. variable costs and determine the budgeted variable cost per unit.

c. fixed costs and determine the budgeted fixed cost per unit.

d. All of these options are steps in developing the flexible budget.

153. A flexible budget is appropriate for

Direct Labor Costs Manufacturing Overhead Costs

a. No No

b. Yes Yes

c. Yes No

d. No Yes

154. All of the following statements are correct about management by exception except it

a. enables top management to focus on problem areas that need attention.

b. means that management has to investigate every budget difference.

c. requires that there must be some guidelines for identifying an exception.

d. means that top management's review of a budget report is focused primarily on

differences between actual results and planned objectives.

155. Controllable costs for responsibility accounting purposes are those costs that are directly

influenced by

a. a given manager within a given period of time.

b. a change in activity.

c. production volume.

d. sales volume.

156. All of the following statements are correct about controllable costs except

a. all costs are controllable at some level of responsibility within a company.

b. all costs are controllable by top management.

c. fewer costs are controllable as one moves up to each higher level of managerial

responsibility.

d. costs incurred directly by a level of responsibility are controllable at that level.

157. Which of the following will cause an increase in ROI?

a. An increase in variable costs

b. An increase in average operating assets

c. An increase in sales

d. An increase in controllable fixed costs

158. Costs that relate specifically to one center and are incurred for the sole benefit of that

center are

a. common fixed costs.

b. direct fixed costs.

c. indirect fixed costs.

d. noncontrollable fixed costs.

159. If controllable margin is $300,000 and the average investment center operating assets are

$1,000,000, the return on investment is

a. .33%.

b. 3.33%.

c. 10%.

d. 30%.

BRIEF EXERCISES

BE 160

Roark Productions makes a single product. Expected manufacturing costs are as follows:

Variable costs

Direct materials $6.50 per unit

Direct labor 2.40 per unit

Manufacturing overhead 1.10 per unit

Fixed costs per month

Supervisory salaries $12,600

Depreciation 3,500

Other fixed costs 2,200

Instructions

Determine the amount of manufacturing costs for a flexible budget level of 3,200 units per month.

BE 161

Worley Company uses flexible budgets. Items from the budget for March in which 2,000 units

were produced and sold appear below:

Direct materials $18,000

Indirect materials - variable 2,000

Supervisor salaries 15,000

Depreciation on factory equipment 4,000

Direct labor 10,000

Property taxes on factory 1,000

Instructions

If Worley prepares a flexible budget at 3,000 units, compute its total variable cost.

BE 162

Vernon Inc.’s manufacturing costs for August when production was 1,000 units appear below:

Direct material $12 per unit

Direct labor $6,500

Variable overhead 5,000

Factory depreciation 9,000

Factory supervisory salaries 7,800

Other fixed factory costs 2,500

Instructions

Compute the flexible budget manufacturing cost amount for a month when 800 units are

produced.

BE 163

Sager Company’s budgeted sales for April were estimated at $500,000, sales commissions at 4%

of sales, and the sales manager's salary at $80,000. Shipping expenses were estimated at 1% of

sales and miscellaneous selling expenses were estimated at $1,000, plus 0.5% of sales.

BE 163 (Cont.)

Instructions

Determine the budgeted selling expenses on a flexible budget for April.

BE 164

Polzin Company produces men’s shirts. The following budgeted and actual amounts are for 2010:

Cost Budget at 2,500 units Actual Amounts at 2,900 units

Direct materials $55,000 $65,500

Direct labor 70,000 81,000

Fixed overhead 35,000 34,500

Instructions

Prepare a performance report for Polzin Company for the year.

BE 165

Nichols Inc. reported the following items for 2010:

Controllable fixed costs $ 77,000

Contribution margin 142,000

Interest expense 20,000

Variable costs 80,000

Total assets $925,000

Instructions

Compute the controllable margin for 2010.

BE 166

The data for an investment center is given below.

January 1, 2010 December 31, 2010

Current Assets $ 400,000 $ 800,000

Plant Assets 3,000,000 4,000,000

The controllable margin is $615,000.

Instructions

Compute the return on investment for the center for 2010.

BE 167

Data for the Electric Division of Nordmeyer Company which is operated as an investment center

follows:

Sales $6,000,000

Contribution Margin 800,000

Controllable Fixed Costs 500,000

Return on Investment 12%

Instructions

Calculate controllable margin and average operating assets.

BE 168

Reimer Division’s operating results include:

? Controllable margin, $150,000

? Sales revenue, $1,200,000

? Operating assets, $500,000

Reimer is considering a project with sales of $120,000, expenses of $84,000, and an investment

of $180,000. Reimer’s required rate of return is 15%.

BE 168 (Cont.)

Instructions

Determine whether Reimer should accept this project.

BE 169

An investment center manager is considering three possible investments. The company’s

required return is 10%. The required asset investment, controllable margins, and the ROIs of

each investment are as follows:

Project Average Investment Controllable Margin ROI

AA $160,000 $32,000 20.0%

BB 140,000 16,000 11.4%

CC 220,000 66,000 30%

The investment center is currently generating an ROI of 25% based on $1,200,000 in operating

assets and a controllable margin of $300,000.

Instructions

If the manager can select only one project, determine which one is the best choice to increase the

investment center's ROI. Compute how much the investment center’s ROI will be if the manager

selects your recommendation.

EXERCISES

Ex. 170

Houser Company's master budget reflects budgeted sales information for the month of June,

2010, as follows:

Budgeted Quantity Budgeted Unit Sales Price

Product A 20,000 $7

Product B 24,000 $9

During June, the company actually sold 19,500 units of Product A at an average unit price of

$7.10 and 24,800 units of Product B at an average unit price of $8.90.

Instructions

Prepare a Sales Budget Report for the month of June for Houser Company which shows whether

the company achieved its planned objectives.

Ex. 171

Helms Manufacturing Co.'s static budget at 6,000 units of production includes $36,000 for direct

labor and $6,000 for direct materials. Total fixed costs are $24,000.

Instructions

a. Determine how much would appear on Helms's flexible budget for 2010 if 9,000 units are

produced and sold.

b. How would this comparison differ if a static budget were used instead of a flexible budget for

performance evaluation?

Ex. 172

Henson Company developed its annual manufacturing overhead budget for its master budget for

2010 as follows:

Expected annual operating capacity 120,000 Direct Labor Hours

Variable overhead costs

Indirect labor $420,000

Indirect materials 90,000

Factory supplies 30,000

Total variable 540,000

Fixed overhead costs

Depreciation 180,000

Supervision 120,000

Property taxes 96,000

Total fixed 396,000

Total costs $936,000

The relevant range for monthly activity is expected to be between 8,000 and 12,000 direct labor

hours.

Instructions

Prepare a flexible budget for a monthly activity level of 8,000 and 9,000 direct labor hours.

Ex. 173

Grimes Company has prepared the following monthly flexible manufacturing overhead budget for

its Mixing Department:

GRIMES COMPANY

Monthly Flexible Manufacturing Overhead Budget

Mixing Department

Activity level

Direct labor hours 3,000 4,000

Variable costs

Indirect materials $ 1,500 $ 2,000

Indirect labor 15,000 20,000

Factory supplies 4,500 6,000

Total variable 21,000 28,000

Fixed costs

Depreciation 20,000 20,000

Supervision 10,000 10,000

Property taxes 15,000 15,000

Total fixed 45,000 45,000

Total costs $66,000 $73,000

Instructions

Prepare a flexible budget at the 5,000 direct labor hours of activity.

Ex. 174

Doane Company uses a flexible budget for manufacturing overhead based on machine hours.

Variable manufacturing overhead costs per machine hour are as follows:

Indirect labor $5.00

Indirect materials 2.50

Maintenance .50

Utilities .30

Fixed overhead costs per month are:

Supervision $600

Insurance 200

Property taxes 300

Depreciation 900

The company believes it will normally operate in a range of 2,000 to 4,000 machine hours per

month.

Instructions

Prepare a flexible manufacturing overhead budget for the expected range of activity, using

increments of 1,000 machine hours.

Ex. 175

Greenlee Corporation's manufacturing costs for July when production was 1,000 units appears

below:

Direct materials $10 per unit

Factory depreciation $8,000

Variable overhead 5,000

Direct labor 2,000

Factory supervisory salaries 5,800

Other fixed factory costs 1,500

Instructions

How much is the flexible budget manufacturing cost amount for a month when 1,100 units are

produced?

Ex. 176

Haren Company uses a flexible budget for manufacturing overhead based on machine hours.

Variable manufacturing overhead costs per machine hour are as follows:

Indirect labor $5.00

Indirect materials 2.50

Maintenance .50

Utilities .30

Fixed overhead costs per month are:

Supervision $600

Insurance 200

Property taxes 300

Depreciation 900

The company believes it will normally operate in a range of 2,000 to 4,000 machine hours per

month. During the month of August, 2010, the company incurs the following manufacturing

overhead costs:

Indirect labor $14,000

Indirect materials 8,100

Maintenance 1,400

Utilities 950

Supervision 720

Insurance 200

Property taxes 300

Depreciation 930

Ex. 176 (Cont.)

Instructions

Prepare a flexible budget report, assuming that the company used 3,000 machine hours during

August.

Ex. 177

Kraus Company uses flexible budgets to control its selling expenses. Monthly sales are expected

to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are:

Sales commissions 6%

Advertising 4%

Traveling 5%

Delivery 1%

Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment

$10,000.

Instructions

Prepare a flexible budget for increments of $20,000 of sales within the relevant range.

Ex. 178

Kraus Company uses flexible budgets to control its selling expenses. Monthly sales are expected

to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are:

Sales commissions 6%

Advertising 4%

Traveling 5%

Delivery 1%

Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment

$10,000.

The actual selling expenses incurred in February, 2010, by Molle Company are as follows:

Sales commissions $13,700

Advertising 8,000

Traveling 11,300

Delivery 1,600

Fixed selling expenses consist of sales salaries $41,000 and depreciation on delivery equipment

$10,000.

Instructions

Prepare a flexible budget performance report, assuming that February sales were $220,000.

Ex. 179

A flexible budget graph for the Assembly Department shows the following:

1. At zero direct labor hours, the total budgeted cost line intersects the vertical axis at $60,000.

2. At normal capacity of 50,000 direct labor hours, the line drawn from the total budgeted cost

line intersects the vertical axis at $180,000.

Instructions

Develop the budgeted cost formula for the Assembly Department and identify the fixed and

variable costs.

Ex. 180

Simmons Company has two production departments, Fabricating and Assembling. At a

department managers' meeting, the controller uses flexible budget graphs to explain total

budgeted costs. Separate graphs based on direct labor hours are used for each department. The

graphs show the following.

1. At zero direct labor hours, the total budgeted cost line and the fixed cost line intersect the

vertical axis at $50,000 in the Fabricating Department, and $40,000 in the Assembling

Department.

Ex. 180 (Cont.)

2. At normal capacity of 50,000 direct labor hours, the line drawn from the total budgeted cost

line intersects the vertical axis at $180,000 in the Fabricating Department, and $145,000 in

the Assembling Department.

Instructions

(a) State the total budgeted cost formula for each department.

(b) Compute the total budgeted cost for each department, assuming actual direct labor hours

worked were 53,000 and 47,000, in the Fabricating and Assembling Departments,

respectively.

Ex. 181

Lock Clothing Company's static budget at 2,000 units of production includes $8,000 for direct

labor, $2,000 for utilities (variable), and total fixed costs of $16,000. Actual production and sales

for the year was 6,000 units, with an actual cost of $47,200.

Instructions

Determine if Lock Clothing is over or under budget.

.

Ex. 182

Heerey Company produces men's ties. The following budgeted and actual amounts are for 2010:

Cost Budget at 5,000 Units Actual Amounts at 5,800 Units

Direct materials $60,000 $71,000

Direct labor 75,000 86,500

Equipment depreciation 5,000 5,000

Indirect labor 7,500 8,600

Indirect materials 9,000 9,600

Rent and insurance 12,000 13,000

Instructions

Prepare a performance budget report for Heerey Company for the year.

Ex. 183

Data concerning manufacturing overhead for Barkley Company are presented below. The Mixing

Department is a cost center.

An analysis of the overhead costs reveals that all variable costs are controllable by the manager

of the Mixing Department and that 50% of supervisory costs are controllable at the department

level.

Ex. 183 (Cont.)

The flexible budget formula and the cost and activity for the months of July and August are as

follows:

Flexible Budget Per

Direct Labor Hour Actual Costs and Activity

July August

Direct labor hours 6,000 7,000

Overhead costs

Variable

Indirect materials $3.50 $ 20,500 $ 25,100

Indirect labor 6.00 39,500 40,700

Factory supplies 1.00 7,600 8,200

Fixed

Depreciation $20,000 15,000 15,000

Supervision 25,000 23,000 26,000

Property taxes 10,000 12,000 12,000

Total costs $117,600 $127,000

Instructions

(a) Prepare the responsibility reports for the Mixing Department for each month.

(b) Comment on the manager's performance in controlling costs during the two month period.

Ex. 184

Neuman Company's manufacturing overhead budget for the first quarter of 2010 contained the

following data:

Variable Costs

Indirect materials $20,000

Indirect labor 12,000

Utilities 10,000

Maintenance 6,000

Ex. 184 (Cont.)

Fixed Costs

Supervisor's salary $40,000

Depreciation 8,000

Property taxes 4,500

Actual variable costs for the first quarter were:

Indirect materials $18,600

Indirect labor 13,200

Utilities 10,500

Maintenance 5,300

Actual fixed costs were as expected except for property taxes which were $4,500. All costs are

considered controllable by the department manager except for the supervisor's salary.

Instructions

Prepare a manufacturing overhead responsibility performance report for the first quarter.

Ex. 185

The East Division, a profit center of Baden Engineering Company, reported the following data for

the first quarter of 2010:

Sales $6,000,000

Variable costs 4,200,000

Controllable direct fixed costs 800,000

Noncontrollable direct fixed costs 530,000

Indirect fixed costs 200,000

Instructions

(a) Prepare a performance report for the manager of the East Division.

(b) What is the best measure of the manager's performance? Why?

(c) How would the responsibility report differ if the division was an investment center?

Ex. 186

Ramirez Manufacturing Inc. has three divisions which are operated as profit centers. Actual

operating data for the divisions listed alphabetically are as follows.

Operating Data Women's Shoes Men's Shoes Children's Shoes

Contribution margin $210,000 (3) $200,000

Controllable fixed costs 100,000 (4) (5)

Controllable margin (1) $ 90,000 96,000

Sales 600,000 480,000 (6)

Variable costs (2) 330,000 250,000

Instructions

(a) Compute the missing amounts. Show computations.

(b) Prepare a responsibility report for the Women's Shoe Division assuming (1) the data are for

the month ended June 30, 2010, and (2) all data equal budget except variable costs which

are $15,000 over budget.

Ex. 187

The Pacific Division of Patterson Company is operated as a profit center. Sales for the division

were budgeted for 2010 at $1,200,000. The only variable costs budgeted for the division were

cost of goods sold ($590,000) and selling and administrative ($80,000). Fixed costs were

budgeted at $130,000 for cost of goods sold, $120,000 for selling and administrative and $95,000

for noncontrollable fixed costs. Actual results for these items were:

Sales $1,175,000

Cost of goods sold

Variable 545,000

Fixed 140,000

Selling and administrative

Variable 82,000

Fixed 90,000

Noncontrollable fixed 105,000

Instructions

(a) Prepare a responsibility report for the Pacific Division for 2010.

(b) Assume the division is an investment center, and average operating assets were

$1,200,000. Compute ROI.

Ex. 188

The West Division of Pierce Company reported the following data for the current year.

Sales $4,000,000

Variable costs 2,600,000

Controllable fixed costs 800,000

Average operating assets 6,000,000

Top management is unhappy with the investment center's return on investment (ROI). It asks the

manager of the West Division to submit plans to improve ROI in the next year. The manager

believes it is feasible to consider the following independent courses of action.

1. Increase sales by $420,000 with no change in the contribution margin percentage.

2. Reduce variable costs by $120,000.

3. Reduce average operating assets by 4%

Instructions

(a) Compute the return on investment (ROI) for the current year.

(b) Using the ROI formula, compute the ROI under each of the proposed courses of action.

(Round to one decimal.)

Ex. 189

The National Transportation Company uses a responsibility reporting system to measure the

performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is

measured using a system of responsibility reports and return on investment calculations. The

allocation of resources within the company and the segment managers' bonuses are based in

part on the results shown in these reports.

Recently, the company was the victim of a computer virus that deleted portions of the company's

accounting records. This was discovered when the current period's responsibility reports were

being prepared. The printout of the actual operating results appeared as follows.

Planes Taxis Limos

Service revenue $ ? $450,000 $ ?

Variable costs 5,000,000 ? 320,000

Contribution margin ? 180,000 380,000

Controllable fixed costs 1,500,000 ? ?

Controllable margin ? 70,000 160,000

Average operating assets 20,000,000 ? 1,600,000

Return on investment 12% 10% ?

Instructions

Determine the missing pieces of information above.

Ex. 190

SEK Rental Company reported the following:

Beginning of year operating assets $2,200,000

End of year operating assets 2,000,000

Contribution margin 1,000,000

Sales 5,000,000

Controllable fixed costs 643,000

Its required return is 10%.

Instructions

Compute the company’s ROI.

Ans: N/A

Ex. 191

Payne Company has two investment centers and has developed the following information:

Department A Department B

Departmental controllable margin $120,000 ?

Average operating assets ? $400,000

Sales 800,000 250,000

ROI 10% 12%

Instructions

Answer the following questions about Department A and Department B.

1. What was the amount of Department A's average operating assets? $____________.

2. What was the amount of Department B's controllable margin? $____________.

3. If Department B is able to reduce its operating assets by $100,000, Department B's new

ROI would be ____________.

4. If Department A is able to increase its controllable margin by $60,000 as a result of reducing

variable costs, Department A's new ROI would be _________________.

Ex. 192

The Appliance Division of Quayle Manufacturing Company reported the following results for 2010:

Sales $4,000,000

Variable costs 3,200,000

Controllable fixed costs 300,000

Average operating assets 2,000,000

Management is considering the following independent alternative courses of action in 2011 in

order to maximize the return on investment for the division.

1. Reduce controllable fixed costs by 20% with no change in sales or variable costs.

2. Reduce average operating assets by 20% with no change in controllable margin.

3. Increase sales $400,000 with no change in the contribution margin percentage.

Instructions

(a) Compute the return on investment for 2010.

(b) Compute the expected return on investment for each of the alternative courses of action.

Ex. 193

Data for the following subsidiaries of Roberts Company, which are operated as investment

centers, are as follows:

Black Company Greer Company

Sales $3,000,000 $2,000,000

Controllable margin (1) (3)

Average operating assets (2) 4,000,000

Contribution margin 1,200,000 800,000

Controllable fixed costs 500,000 200,000

Return on Investment 10% (4)

Instructions

Compute the missing amounts using the ROI formula.

Ex. 194

The data for an investment center is given below.

1/1/10 12/31/10

Current assets $ 300,000 $ 500,000

Plant assets 3,000,000 4,000,000

Idle plant assets 250,000 330,000

Land held for future use 1,200,000 1,200,000

The controllable margin is $780,000.

Instructions

What is the return on investment for the center for 2010?

COMPLETION STATEMENTS

195. The use of budgets in controlling operations is known as ________________.

196. A major aspect of budgeting control is the use of budget reports that compare

_____________________ with _______________________.

197. In analyzing differences from planned objectives, management may take

___________________, or it could decide to modify ___________________.

198. The master budget is a __________________ budget which is based on operating at one

budgeted activity level.

199. A __________________ budget projects budget data for various levels of activity.

200. Total ________________ costs will be the same on the master budget and on a flexible

budget which reflects the actual level of activity.

201. Under ___________________ accounting, the evaluation of a manager's performance is

based on the costs and revenues directly under that manager's control.

202. A cost is __________________ at a given level of managerial responsibility if a manager

has the authority to incur the cost in a given time period.

.

203. In general, costs ____________________ directly by the level of responsibility are

_______________, whereas costs that are ____________________ to the responsibility

level are __________________.

204. Responsibility centers may be classified into three types: (1)____________________,

(2)___________________ and, (3)____________________.

205. The primary basis for evaluating the performance of a manager of an investment center is

_________________.

206. Return on investment is calculated by dividing _________________________ by

________________________.

MATCHING

207. Match the items below by entering the appropriate code letter in the space provided.

A. Budgetary control G. Responsibility reporting system

B. Static budget H. Return on Investment

C. Flexible budget I. Profit center

D. Responsibility accounting J. Investment center

E. Controllable costs K. Indirect fixed costs

F. Management by exception L. Direct fixed costs

____ 1. The review of budget reports by top management directed entirely or primarily to

differences between actual results and planned objectives.

____ 2. A part of management accounting that involves accumulating and reporting revenues

and costs on the basis of the individual manager who has the authority to make the

day-to-day decisions about the items.

____ 3. The preparation of reports for each level of responsibility shown in the company's

organization chart.

____ 4. A projection of budget data at one level of activity.

____ 5. Costs that a manager has the authority to incur within a given period of time.

____ 6. The use of budgets to control operations.

____ 7. A projection of budget data for various levels of activity.

____ 8. A responsibility center that incurs costs, generates revenues, and has control over the

investment funds available for use.

____ 9. Costs that relate specifically to a responsibility center and are incurred for the sole

benefit of the center.

____ 10. A responsibility center that incurs costs and also generates revenues.

____ 11. Costs which are incurred for the benefit of more than one profit center.

____ 12. A measure of the profitability of an investment center computed by dividing

controllable margin (in dollars) by average operating assets.

SHORT-ANSWER ESSAY QUESTIONS

S-A E 208

The master budget and flexible budgets are important aids to management in performing the

management functions of planning and control. Briefly describe how planning and control are

facilitated by preparing a master budget and flexible budgets. How are these two types of budgets

interrelated with planning and control?

S-A E 209

Jane Olney is confused about how a flexible budget is prepared. Identify the steps for Jane.

Ans: N/A,

S-A E 210

Managers are motivated to accomplish objectives if they feel that their efforts will be fairly

evaluated. Explain why an organization may use different bases for evaluating the performance of

managers of different types of responsibility centers.

Ans: N/A

S-A E 211

What is responsibility accounting? Explain the purpose of responsibility accounting.

.

S-A E 212 (Ethics)

Winsor Corporation evaluates its managers based on return on investment (ROI). Sue Jenson

and Ruth Sands, managers of the electronics and housewares departments respectively, have

recently suffered from declining profits in their departments. Over lunch, they discuss the

problem, and how they could improve performance. Most of the discussion centers around ways

to increase sales. Near the end of the lunch period, however, Ruth remarks that there are two

components to consider, and that they have considered only one. She wonders whether there is

some way to reduce investment, and by decreasing the denominator of the ROI fraction, to

improve the final result.

Back at work, Sue continues to mull over Ruth's remarks. She decides to pursue the matter

further, and before the end of the quarter she has sold quite a bit of older equipment and replaced

it with equipment obtained with a short-term lease. Her performance, measured by ROI, is

markedly improved, although sales continue to be disappointing.

Required:

1. Who are the stakeholders in this situation?

2. Is Sue's action ethical? Briefly explain.

S-A E 213 (Communication)

Castagno County Electronics manufactures circuit boards for computer-controlled appliances for

the home. The sales have been very volatile, sometimes stressing the plant's capacity, and

sometimes depressingly slow. During a recent slow period, Bill Garner, a production supervisor,

complained to Kim Maley, accounting manager, about the flexible budget.

"I try as hard as I can to meet the budget," he says, "and then I find out that just meeting the

budget's not good enough. Last month, when we sold 8,000 units, I was $10,000 under my

budget, and then you all blow me out of the water with your report that I actually was $5,000 over,

because sales were slow. I thought this responsibility accounting business was supposed to

mean we are held accountable just for things we can control. How do we control sales? At the

beginning of the year, you gave us all targets. Mine says that for an average month of 10,000 unit

sales, I should spend about $82,000. I spend less, and get an unfavorable budget report. What

gives?"

Required:

Write a short memo to respond to Mr. Garner.

Created Date Thursday, 02 January 2014
Filesize 348 Kilobytes

Accounting Exercises

Exercises

E15-1

Prepare entries for factory labor.

(SO 2, 3), AP

The gross earnings of the factory workers for Vargas Company during the month of January are $66,000. The employer's payroll taxes for the factory payroll are $8,000. The fringe benefits to be paid by the employer on this payroll are $6,000. Of the total accumulated cost of factory labor, 85% is related to direct labor and 15% is attributable to indirect labor.

Instructions

(a)

Prepare the entry to record the factory labor costs for the month of January.

(b)

Prepare the entry to assign factory labor to production.

E15-2

Prepare journal entries for manufacturing costs.

(SO 2, 3, 4, 5), AP

Stine Manufacturing uses a job order costing system. On May 1, the company has a balance in Work in Process Inventory of $3,500 and two jobs in process: Job No. 429 $2,000, and Job No. 430 $1,500. During May, a summary of source documents reveals the following.

Job Number

Materials Requisition Slips

Labor Time Tickets

429

$2,500

$1,900

430

3,500

3,000

431

4,400

$10,400

7,600

$12,500

General use

800

1,200

$11,200

$13,700

Stine Manufacturing applies manufacturing overhead to jobs at an overhead rate of 60% of direct labor cost. Job No. 429 is completed during the month.

Instructions

(a)

Prepare summary journal entries to record: (i) the requisition slips, (ii) the time tickets, (iii) the assignment of manufacturing overhead to jobs, and (iv) the completion of Job No. 429.

(b)

Post the entries to Work in Process Inventory, and prove the agreement of the control account with the job cost sheets. (Use a T account.)

E15-3

Analyze a job cost sheet and prepare entries for manufacturing costs.

(SO 2, 3, 4, 5), AP

A job order cost sheet for Lowry Company is shown below.

Job No. 92

For 2,000 Units

Date

Direct Materials

Direct Labor

Manufacturing Overhead

Beg. bal. Jan. 1

5,000

6,000

5,100

8

6,000

12

8,000

6,400

25

2,000

27

4,000

3,200

13,000

18,000

14,700

Cost of completed job:

Direct materials

$13,000

Direct labor

18,000

Manufacturing overhead

14,700

Total cost

$45,700

Unit cost

$22.85

Instructions

(a)

On the basis of the foregoing data, answer the following questions.

1.

What was the balance in Work in Process Inventory on January 1 if this was the only unfinished job?

2.

If manufacturing overhead is applied on the basis of direct labor cost, what overhead rate was used in each year?

(b)

Prepare summary entries at January 31 to record the current year's transactions pertaining to Job No. 92.

E15-4

Analyze costs of manufacturing and determine missing amounts.

(SO 2, 5), AN

Manufacturing cost data for Orlando Company, which uses a job order cost system, are presented below.

Case A

Case B

Case C

Direct materials used

$ (a)

$ 83,000

$ 63,150

Direct labor

50,000

140,000

(h)

Manufacturing overhead applied

42,500

(d)

(i)

Total manufacturing costs

145,650

(e)

213,000

Work in process 1/1/12

(b)

15,500

18,000

Total cost of work in process

201,500

(f)

(j)

Work in process 12/31/12

(c)

11,800

(k)

Cost of goods manufactured

192,300

(g)

222,000

Instructions

Indicate the missing amount for each letter. Assume that in all cases manufacturing overhead is applied on the basis of direct labor cost and the rate is the same.

E15-5

Compute the manufacturing overhead rate and under- or overapplied overhead.

(SO 4, 6), AN

Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $325,000 for the year, and machine usage is estimated at 125,000 hours.

For the year, $342,000 of overhead costs are incurred and 130,000 hours are used.

Instructions

(a)

Compute the manufacturing overhead rate for the year.

(b)

What is the amount of under- or overapplied overhead at December 31?

(c)

Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

E15-6

Analyze job cost sheet and prepare entry for completed job.

(SO 2, 3, 4, 5), AP

A job cost sheet of Sandoval Company is given below.

Job Cost Sheet

JOB NO. 469

Quantity 2,500

ITEM White Lion Cages

Date Requested 7/2

FOR Todd Company

Date Completed 7/31

Date

Direct Materials

Direct Labor

Manufacturing Overhead

7/10

700

12

900

15

440

550

22

380

475

24

1,600

27

1,500

31

540

675

Cost of completed job:

________

Direct materials

________

Direct labor

________

Manufacturing overhead

________

Total cost

________

Unit cost

________

Instructions

(a)

Answer the following questions.

1.

What are the source documents for direct materials, direct labor, and manufacturing overhead costs assigned to this job?

2.

What is the predetermined manufacturing overhead rate?

3.

What are the total cost and the unit cost of the completed job? (Round unit cost to nearest cent.)

(b)

Prepare the entry to record the completion of the job.

E15-7

Prepare entries for manufacturing costs.

(SO 2, 3, 4, 5), AP

Torre Corporation incurred the following transactions.

1.

Purchased raw materials on account $46,300.

2.

Raw Materials of $36,000 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $6,800 was classified as indirect materials.

3.

Factory labor costs incurred were $55,900, of which $51,000 pertained to factory wages payable and $4,900 pertained to employer payroll taxes payable.

4.

Time tickets indicated that $50,000 was direct labor and $5,900 was indirect labor.

5.

Overhead costs incurred on account were $80,500.

6.

Manufacturing overhead was applied at the rate of 150% of direct labor cost.

7.

Goods costing $88,000 were completed and transferred to finished goods.

8.

Finished goods costing $75,000 to manufacture were sold on account for $103,000.

Instructions

Journalize the transactions. (Omit explanations.)

E15-8

Prepare entries for manufacturing costs.

(SO 2, 3, 4, 5), AP

Enos Printing Corp. uses a job order cost system. The following data summarize the operations related to the first quarter's production.

1.

Materials purchased on account $192,000, and factory wages incurred $87,300.

2.

Materials requisitioned and factory labor used by job:

Job Number

Materials

Factory Labor

A20

$ 35,240

$18,000

A21

42,920

22,000

A22

36,100

15,000

A23

39,270

25,000

General factory use

4,470

7,300

$158,000

$87,300

 

 

3.

Manufacturing overhead costs incurred on account $49,500.

4.

Depreciation on equipment $14,550.

5.

Manufacturing overhead rate is 90% of direct labor cost.

6.

Jobs completed during the quarter: A20, A21, and A23.

 

Instructions

Prepare entries to record the operations summarized above. (Prepare a schedule showing the individual cost elements and total cost for each job in item 6.)

E15-9

Prepare a cost of goods manufactured schedule and partial financial statements.

(SO 2, 5), AP

At May 31, 2012, the accounts of Mantle Manufacturing Company show the following.

E15-

1.

May 1 inventories—finished goods $12,600, work in process $14,700, and raw materials $8,200.

2.

May 31 inventories—finished goods $9,500, work in process $17,900, and raw materials $7,100.

3.

Debit postings to work in process were: direct materials $62,400, direct labor $50,000, and manufacturing overhead applied $40,000.

4.

Sales totaled $210,000.

 

 

Instructions

(a)

Prepare a condensed cost of goods manufactured schedule.

(b)

Prepare an income statement for May through gross profit.

(c)

Indicate the balance sheet presentation of the manufacturing inventories at May 31, 2012.

 

E15-10

Compute work in process and finished goods from job cost sheets.

(SO 3, 5), AP

Tierney Company begins operations on April 1. Information from job cost sheets shows the following.

Manufacturing Costs Assigned

Job Number

April

May

June

Month Completed

10

$5,200

$4,400

May

11

4,100

3,900

$2,000

June

12

1,200

April

13

4,700

4,500

June

14

5,900

3,600

Not complete

 

 

Job 12 was completed in April. Job 10 was completed in May. Jobs 11 and 13 were completed in June. Each job was sold for 25% above its cost in the month following completion.

Instructions

(a)

What is the balance in Work in Process Inventory at the end of each month?

(b)

What is the balance in Finished Goods Inventory at the end of each month?

(c)

What is the gross profit for May, June, and July?

 

E15-11

Prepare entries for costs of services provided.

(SO 2, 4, 5), AP

Shown below are the job cost related accounts for the law firm of Jack, Bob, and Will and their manufacturing equivalents:

Law Firm Accounts

Manufacturing Firm Accounts

Supplies

Raw Materials

Salaries and Wages Payable

Factory Wages Payable

Operating Overhead

Manufacturing Overhead

Service Contracts in Process

Work in Process

Cost of Completed Service Contracts

Cost of Goods Sold

 

 

Cost data for the month of March follow.

1.

Purchased supplies on account $1,500.

2.

Issued supplies $1,200 (60% direct and 40% indirect).

3.

Time cards for the month indicated labor costs of $60,000 (80% direct and 20% indirect).

4.

Operating overhead costs incurred for cash totaled $40,000.

5.

Operating overhead is applied at a rate of 90% of direct attorney cost.

6.

Work completed totaled $75,000.

 

Instructions

(a)

Journalize the transactions for March. Omit explanations.

(b)

Determine the balance of the Work in Process account. Use a T account.

 

E15-12

Determine cost of jobs and ending balance in work in process and overhead accounts.

(SO 3, 4, 6), AP

Don Lieberman and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November.

Lynn

Brian

Mike

Direct materials

$600

$400

$200

Auditor labor costs

$5,400

$6,600

$3,375

Auditor hours

72

88

45

 

 

Overhead costs are applied to jobs on the basis of auditor hours, and the predetermined overhead rate is $50 per auditor hour. The Lynn job is the only incomplete job at the end of November. Actual overhead for the month was $11,000.

Instructions

(a)

Determine the cost of each job.

(b)

Indicate the balance of the Work in Process account at the end of November.

(c)

Calculate the ending balance of the Manufacturing Overhead account for November.

 

E15-13

Determine predetermined overhead rate, apply overhead and determine whether balance under- or overapplied.

(SO 4, 6), AP

Pure Decorating uses a job order costing system to collect the costs of its interior decorating business. Each client's consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year.

Estimated overhead

$920,000

Actual overhead

$942,800

Estimated decorator hours

40,000

Actual decorator hours

40,500

 

 

The company uses Operating Overhead in place of Manufacturing Overhead.

Instructions

(a)

Compute the predetermined overhead rate.

(b)

Prepare the entry to apply the overhead for the year.

(c)

Determine whether the overhead was under- or overapplied and by how much.

 

Created Date Thursday, 02 January 2014
Filesize 24 Kilobytes

Accounting quiz

1. The corporate form of business limits the legal liability of its owners.

 

2. A corporation's charter establishes the market value of the company's stock.

3. The balance in Retained Earnings represents the amount of capital contributed by owners in exchange for stock plus the amount of net income earned.

 

 

4. Preferred stock is generally classified as stockholders' equity.

 

5. All other things equal, the higher the Return on Equity ratio the better the financial performance of the company.

 

6. A major advantage of debt financing is that interest expense is tax deductible.

 

7. Earnings per share is calculated for common stock (shares) outstanding.

Created Date Thursday, 02 January 2014
Filesize 24 Kilobytes

Accounting Quiz 1

1. One reason why a company may choose a stock split over a stock dividend is that the stock split does not reduce retained earnings.

 

2. The owner's salary is frequently the largest expense of a sole proprietorship.

 

3. At the beginning of each accounting period, the capital account for a proprietor starts with a zero balance.

4. Treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corporation.

 

5. The market value of stock is the par value of the stock.

 

6. A corporation does not have a legal obligation to pay dividends.

7. When a stock dividend occurs, the assets of the company are not changed.

Created Date Thursday, 02 January 2014
Filesize 30 Kilobytes

Accounting_Chapter_10

Multiple-Choice 1. The chapter argues that gender is not a matter simply of difference, but also a matter of 2. Margaret Mead's research on gender in three societies showed that 3. The point in describing gender in the Israeli kibbutzim is to show that 4. The “beauty myth” refers to the idea that 5. Which of the following job categories has mostly women as workers? 6. Most violence against women occurs 7. Which of the following is NOT a goal of feminism? True/False ________ 8. Since very few societies have existed without patriarchy, we must conclude that it is inevitable. ________ 9. Intersection theory looks at the interplay of class, race, and gender. Short-Answer 10. What three factors account for most of the income disparity between men and women? MULTIPLE-CHOICE QUESTIONS 1. The concept of gender refers to 2. The text argues that male-female differences are 3. A comparison of the athletic performances of females and males over time shows 4. On average, do women or men live longer? 5. Young men show greater ________ ability than young women; young women show greater ________ ability than young men. 6. The point of describing gender in the Israeli kibbutzim is 7. Margaret Mead's research on gender in three societies supports the conclusion that 8. Margaret Mead's research on gender in three societies in New Guinea concluded that 9. Based on George Murdock's global study of gender, we should conclude that 10. Which of the following concepts refers to social organization in which males dominate females? 11. What is a form of social organization in which females dominate males? 12. Based on the map and the discussion in the text, where would you go to find societies in which women’s social power is lowest compared to men? 13. In the United States, the costs of sexism for men include 14. Which of the following concepts refers to attitudes and activities that a society links to people of each sex? 15. Drawing on Janet Leer’s observations of children at play, which of the following would you conclude to be true? 16. Where would you look in U.S. schools to find course in which men outnumber women? 17. The “beauty myth” refers to the idea that 18. What share of today’s U.S. women are working for income? 19. Which of the following factors has been a cause of the rising share of women in the U.S. paid labor force during the last century? 20. What share of married U.S. couples depend on two incomes? 21. In the U.S. work force, 22. "Pink-collar" work refers to what type of jobs? 23. Which of the following job categories has mostly women as workers? 24. Which of the following is an important exception to male domination of the U.S. workplace? 25. Which of the following statements about gender and housework is CORRECT? 26. The concept “comparable worth” refers to the idea that 27. In the United States in 2008, women in the labor force working full time earned __________ of the income earned by men working full time. 28. Which factor accounts for the largest share of difference in the earnings of working women and men in the United States? 29. Which of the following concepts refers to an invisible, yet real, barrier that prevents many women from rising beyond middle-management positions? 30. In 2009, research revealed that about what share of our country’s richest people are women? 31. Women today earn a majority of all the following degrees EXCEPT for one. Which degree is earned by slightly more men than women? 32. In 2009, U.S. women held about __________ of seats in Congress. 33. In which of the following nations do women have the greatest political power relative to men? 34. Women have served in the U.S. armed forces 35. Which of the following statement is at the heart of the controversy over women's participation in the military? 36. Which of the following statements is the best reason to view women as a minority in the United States? 37. In the United States, on average, minority women 38. If you could end violence against women in one setting, which of the following would reduce this type of violence the most? 39. Intersection theory focuses on 40. In about __________ of all cases of rape and attempted rape on U.S. college campuses, a woman knows her attacker. 41. Feminists claim that rape is mostly about 42. Sexual harassment is an important social issue because 43. Pornography is of concern to 44. Structural-functional analysis points out that industrialization encourages 45. Talcott Parsons described gender in terms of 46. Talcott Parsons explained that society encourages __________ behavior in males, and ________ in females. 47. Friedrich Engels claimed that capitalism 48. Friedrich Engels claimed men’s desire to control their property brought about 49. As a social movement, feminism began with its “first wave” back in the 50. Feminists support all but one of the following. Which is NOT a goal of feminism? 51. Which type of feminism accepts the basic organization of U.S. society, but seeks to expand the rights and opportunities of women? 52. Which type of feminism links the social disadvantages of women to the capitalist economic system? 53. Which type of feminism seeks to end patriarchy by eliminating the idea of gender itself? 54. Opposition to feminism is 55. Looking back over U.S. history, we see a general trend by which women TRUE / FALSE QUESTIONS 56. Gender refers simply to whether people are female or male. 57. Like race or social class, gender is a major dimension of social stratification. 58. Gender affects the opportunities and constraints each of us encounters throughout our lives. 59. In athletics, the performance gap between males and females is increasing. 60. Research shows that young females seem to have less mathematical ability but stronger writing ability than young males. 61. On average, males are both taller and heavier than females. 62. In the United States, on average, males live longer than females. 63. Evidence from the Israeli kibbutzim suggests that cultures have the ability to define what is masculine and feminine in various ways. 64. Margaret Mead argued that gender was mostly a matter of biology rather than culture. 65. In her famous study, Margaret Mead compared gender patterns in eight African societies. 66. In his global study of work, George Murdock found that what one society considers “masculine” another may call “feminine.” 67. Sexism is the assertion that one sex is innately superior to the other. 68. In global perspective, the region where women have the least social power is North America. 69. Most sociological research suggests that gender is largely a creation of society, and thus is subject to change. 70. Since very few societies have existed without patriarchy, we must conclude that it is inevitable. 71. The question commonly asked of new parents—“Is it a boy or a girl?”—suggests that gender may shape a child's life in important ways. 72. While playing in peer groups, girls tend to avoid the “win-lose” games favored by boys. 73. The beauty myth is the idea that beauty helps women succeed. 74. In the United States today, less than half of all adult women are in the labor force. 75. In the United States today, women working for income is the rule rather than the exception. 76. It is probably correct to say that over the course of the last century, there was more change in women’s labor force participation rate than in men’s. 77. In the United States today, fewer than 20 percent of married couples earn two incomes. 78. In the United States, most engineers, architects, and surgeons are men. 79. In the teaching profession, the higher the level of education, the larger the share of teachers who are women. 80. In the United States, working women are concentrated in administrative support and service jobs. 81. In 2008, U.S. women earned 77 cents for every dollar earned by men. 82. Married women who are employed do more housework than married men who are employed. 83. In the United States, a majority of bachelor’s degrees are earned by men. 84. In the United States, women gained the right to vote in 1820. 85. Women first served in the U.S. military during World War II. 86. About 14 percent of all deployed U.S. troops are women. 87. Most white women in the United States think of themselves as a minority. 88. Pornography dehumanizes women as the sexual play things of men. 89. In general, western states have a higher percentage of legislators who are women than southeastern states. 90. In just 20 percent of campus rape cases, the victim knew the offender. 91. Talcott Parsons described gender in terms of complementarity. 92. Friedrich Engels claimed that the historical development of capitalism made patriarchy stronger. 93. Liberal feminism seeks the elimination of gender itself. SHORT-ANSWER QUESTIONS 94. Define "gender." Why is gender an important dimension of social stratification? 95. After conducting research in New Guinea, what did Margaret Mead conclude about gender? 96. Define "patriarchy" and "matriarchy." 97. What is the "beauty myth"? Give examples of how the idea of beauty supports gender stratification. 98. What three factors account for most of the income difference between women and men? 99. Describe differences in the types of work men and women do. How much do full-time working women earn for every dollar earned by men working full time? 100. What share of the members of the U.S. Congress are women? What about state governors? 101. Explain the basic idea behind intersection theory. 102. What are the general goals of the feminist movement? ESSAY QUESTIONS / TOPICS FOR SHORT PAPERS 103. The socialization process links gender to personal identity (“gender identity”) and to distinctive behavior and activities (“gender roles”). Describe the importance of gender to socialization across the life course from birth through early adulthood. Begin by addressing the fact that people are quick to ask about the sex of a newborn child. Consider the lessons about gender we learn from parents, peer groups, and schools. 104. Explain how gender shapes a person's life. Consider whether gender is more important, equally important, or less important than social class in its effects on individuals’ lives. Provide specific reasons for your position. Finally, consider how social class and gender interact. 105. Apply the structural-functional and social-conflict approaches to the issue of gender. What key insights are offered by each approach? How does each approach view gender differences and gender inequality? How does each explain changes in gender stratification across the last century? 106. Define feminism. Describe the three main types of feminist thinking in the United States today. What do the approaches have in common? How do they differ? Also, suggest reasons for resistance to feminism. What is your view of the various types of feminism? (Conceptual) 107. Make the case that gender is or is not a central dimension of social stratification in the United States. Consider issues such as income and wealth, work, schooling, and power. In other words, to what extent do males represent a privileged class of people in this country today? Provide specific evidence to support your position. 108. Why are issues such as sexual violence, sexual harassment, and pornography discussed in a chapter on gender stratification? That is, exactly how does each issue involve stratification? 109. In what specific ways are women unequal to men in the United States? Provide specific data on income, occupations, education, and political power in developing your answer. 110. Read Chapter 10’s “Seeing Sociology in the News” article on page 280. Explain how this article supports the claim that gender is not only about difference but is also a dimension of social stratification. 111. Look carefully at Chapter 10’s “Seeing Sociology in Everyday Life” photo essay on pages 294-95. Describe the messages about gender that are found in the ads shown there. Then find two additional ads on your own and “decode” the messages about gender that these ads contain.
Created Date Thursday, 02 January 2014
Filesize 33 Kilobytes

Accounting_Chapter_11

Multiple Choice 1. While race refers to _________ considered important by a society, ethnicity refers to _________. 2. The claim that defining members of some minority as inferior will make them inferior is one application of 3. Stereotypes are 4. Today, minorities are the majority in four states. For which of the following states is this true? 5. The adoption of the English language by Mexican immigrants to the United States is an example of 6. What is the meaning of the term “WASP”? 7. Most of today’s immigrants to the United States come from True / False ________ 8. Scientific research shows that there are three biologically pure races. ________ 9. There is a trend in the United States toward more interracial marriage and multiracial children. Short-Answer 10. Describe four patterns of minority and majority interaction. MULTIPLE-CHOICE QUESTIONS 1. The sociology class discussion of race and ethnicity that opens Chapter 11 suggests that more and more people 2. The concept “race” refers to 3. The physical differences that may become part of racial categories have their origins in 4. Typically, people who live in _____ perceive fewer racial categories than people who live in _____. 5. Read the following statements about race. Which statement is CORRECT? 6. Race refers to __________ considered important by a society, and ethnicity refers to __________. 7. Which of the following concepts refers to cultural heritage? 8. A family leaves Russia and takes up residence in the United States, where they gradually lose their Russian cultural traditions. They have modified their 9. In the United States, most people 10. Which of the following concepts refers to a category of people, distinguished by physical or cultural traits, who are socially disadvantaged? 11. Which of the following is the largest minority category within the U.S. population? 12. A minority is defined as a category of people who are 13. According to the most recent data, African Americans accounted for about what percentage of the U.S. population? 14. Read the following statements about minorities. Which statement is NOT correct? 15. Four states currently have a “minority-majority.” Which of the following is NOT one of them? 16. Which of the following concepts refers to a rigid and irrational generalization about an entire category of people? 17. You would be expressing a “stereotype” if you 18. Read the following statements about immigrant workers in the United States. Which statement is CORRECT? 19. Recent research on social distance among U.S. college students shows that 20. __________ refers to a belief that one racial category is innately superior or inferior to another. 21. Based on scapegoat theory, you would conclude that prejudice is caused by 22. Authoritarian personality theory states that extreme prejudice is 23. According to T.W. Adorno’s authoritarian personality theory, prejudice people 24. Thomas Sowell studied the intelligence (IQ) test scores of categories of people and concluded that 25. Which of the following represents a culture theory of prejudice? 26. Conflict theory states that prejudice is 27. While prejudice is a matter of __________, discrimination is a matter of __________. 28. “Institutional prejudice and discrimination” refers to the fact that 29. The idea that prejudice and discrimination form a vicious circle leads to the conclusion that 30. Which of the following situations is NOT an example of institutional discrimination? 31. Which of the following concepts refers to a state in which racial and ethnic minorities are distinct but have social equality? 32. The United States is not truly pluralistic because 33. Assimilation refers to the pattern by which 34. Multiculturalists oppose the goal of assimilation because 35. __________ refers to biological reproduction by people of different racial categories. 36. The Matsui family came to the United States thirty years ago. They now speak English at home and the children date non-Japanese students at college. This family’s story is closest to which of the following concepts? 37. The existence of the “Negro leagues” in professional baseball in the United States during the 1930s and 1940s is an example of 38. Which of the following concepts refers to the physical and social separation of categories of people? 39. Douglas Massey and Nancy Denton documented which of the following patterns in U.S. inner cities? 40. The killing of people in the Darfur region of Africa is a recent example of 41. The ancestors of which of the following first settled the lands of the Western Hemisphere? 42. When the first Europeans arrived in the Americas in the fifteenth century, Native Americans 43. Native Americans gained the right to U.S. citizenship in 44. The overall social standing of Native Americans today is 45. The term “WASP” refers to 46. A landmark in the decline of WASP social power in the United States was 47. What Gunnar Myrdal called the “American dilemma” was 48. A national civil rights movement, which ended legal support for most cases of racial discrimination, took place during the 49. Which of the following statements about African American political leaders is CORRECT? 50. The largest category of Asian Americans in the United States is people of __________ ancestry. 51. Significant immigration of Asians to the United States was sparked by 52. For Chinese immigrants, one advantage of living in Chinatowns is __________; one disadvantage is __________. 53. Japanese immigrants differed from earlier Chinese immigrants by 54. The rate of small business ownership is high among Asian Americans. This pattern reflects 55. The Hispanic population of the United States is 56. Which of the following categories of Hispanics in the United States is largest in terms of population size? 57. Which of the following best describes “the Arab world”? 58. Read the following statements about Arabs and Muslims. Which statement is NOT correct? 59. The term “white ethnics” refers to 60. Currently, about how many immigrants come to the United States each year? 61. Most immigrants to the United States today come from TRUE / FALSE QUESTIONS 62. Although based on physical traits like skin color, the concept of “race” is socially constructed, or defined by society. 63. Scientific research confirms that everyone on Earth falls into one of three racial categories. 64. Some "white" people actually have darker skin than some "black" people. 65. There is a trend in the United States toward more interracial marriage and multiracial children. 66. In most cases, race and ethnicity amount to the same thing. 67. Being Greek, Italian, or Vietnamese involves a distinctive ethnicity. 68. Ethnicity is harder to change than racial identity. 69. All members of a minority category are socially and economically disadvantaged. 70. Members of a minority typically have a distinctive identity. 71. Sociologically speaking, a minority is any category that is numerically less than half of a society’s total population. 72. Currently, four states in the United States now have a “minority-majority.” 73. Prejudice is a rigid and distorted generalization about an entire category of people. 74. Research using the social distance scale shows that today's college students are less tolerant of racial and ethnic difference than students in the past. 75. Racism is an extreme form of prejudice. 76. Thomas Sowell demonstrated the importance of culture in shaping IQ test performance of various categories of the U.S. population. 77. T.W. Adorno linked extreme prejudice to a certain personality type. 78. Culture theory states that prejudice remains widespread despite the fact that our culture defines all prejudice as wrong. 79. Conflict theory says that prejudice benefits powerful people by dividing society. 80. Prejudice and discrimination can be either positive or negative. 81. Prejudice and discrimination are found not just in individuals, but also in the operation of society’s institutions. 82. Prejudice and discrimination can reinforce one another. 83. Pluralism is the idea that people should live with others like themselves. 84. Assimilation refers to all people in a society giving up their traditions and “melting” into a population that shares new cultural patterns. 85. Assimilation refers to changing cultural traditions; miscegenation refers to reproduction by partners of different racial categories. 86. Segregation refers to the physical and social separation of categories of people. 87. Racial segregation has existed, but it has never been legal in the United States. 88. The mass killings in Rwanda are one example of genocide. 89. Native Americans immigrated to these shores about the same time Christopher Columbus came to the Americas. 90. Gambling casinos have enabled Native Americans, as a category, to achieve above-average income in the United States. 91. WASPs have been the dominant category of the U.S. population through much of this nation’s history. 92. The U.S. Supreme Court outlawed slavery in the Dred Scott case of 1857. 93. More than one-third of African Americans earn more than $50,000 a year. 94. Not only were people of Chinese ancestry the first Asian Americans to come to the United States, but today they remain the largest in terms of population. 95. Of all categories of Asian Americans, Korean Americans have the highest median family income. 96. Asian Americans have a high rate of owning and operating small businesses. 97. The largest Hispanic minority in terms of population is Cuban Americans. 98. The poverty rate of Mexican American families is almost twice the U.S. average. 99. Arab Americans come from more than twenty different nations in Northern Africa and the Middle East. 100. Today’s immigrants to the United States are more likely to come from Latin America or Asia than from Europe. 101. Define the concept of race. Why is race said to be “socially constructed”? 102. Distinguish race and ethnicity. Give an example of each. 103. What traits define a minority? 104. What is a stereotype? 105. How does social distance research measure prejudice? 106. What is racism? 107. What is a scapegoat? How are minorities used as scapegoats? 108. How is prejudice different from discrimination? Give an example of each. 109. What is institutional prejudice and institutional discrimination? Give an example of each. 110. List and define four patterns of minority and majority interaction. 111. When and by what Constitutional amendment did the United States outlaw slavery? 112. Which category of people is sometimes called the “model minority”? What is the basis for this claim? Why is this claim misleading? 113. What were several differences between early immigrants to the United States from China and those from Japan? 114. What region of the country has a high concentration of Hispanic Americans? What about African Americans? What residential patterns involve Asian Americans? Arab Americans? 115. Explain the difference between the terms “Arab” and “Muslim.” 116. From which areas of the world are most of today's immigrants arriving? How is this different from the pattern a century ago? ESSAY QUESTIONS / TOPICS FOR SHORT PAPERS 117. Explain the assertion made in the text that race is socially constructed. That is, explain what biological traits may be used in defining race, but also explain why race is a creation of society. Provide examples to illustrate your argument. 118. How are race and ethnicity dimensions of social stratification in the United States? Provide evidence that many racial and ethnic categories of people are minorities—both visible and disadvantaged. Consider ways in which race and ethnicity combine with gender and class to compound disadvantage. 119. Describe the findings of recent research that used the social distance scale to measure prejudice. Comparing these results to similar research done over the last eighty years, what trends can you identify? 120. Describe the history of one of the following minorities—Native Americans, African Americans, Asian Americans, Hispanic Americans, or Arab Americans—in terms of the following models of interaction with society as a whole: pluralism, assimilation, segregation, and genocide. Provide as much historical evidence as you can. In your opinion, which of these four patterns of interaction is most pronounced in the case of the minority you chose to write about? Why? 121. Why do various racial and ethnic categories of the U.S. population have different social standing? Why do some categories surpass the national average in annual income, while others do not? Consider both structural-functional (cultural) and social-conflict (power) explanations. 122. Write an essay critically evaluating affirmative action as a social policy. Begin with a look at the Thinking Critically box (pages 322-23) and do additional research as necessary. What is this policy, and what is it supposed to achieve? How successful has it been? What arguments are made in support of, and in opposition to, affirmative action? Which position do you find more convincing? Why? 123. Read Chapter 11’s “Seeing Sociology in the News” article on pages 308-9. Explain how some young people have found race to be a serious obstacle in today’s job market. In a similar way, do you think race can be an advantage in today’s job market? Give examples of how race can serve as both a type of disadvantage and a source of privilege in the job market as well as in other aspects of everyday life. 124. Look closely at Chapter 11’s “Seeing Sociology in Everyday Life” photo essay on pages 324-25. Do you agree with the claim made here that advertising today reflects more racial and ethnic diversity than it did fifty years ago? Can you point to other examples of advertising in support of your position?
Created Date Thursday, 02 January 2014
Filesize 40 Kilobytes

Accounting_Chapter_12

1. Over the course of human history, changes in __________ have brought the greatest changes to the economy. 2. The development of agriculture was set in motion by 3. The expansion of service work marks the growth of the economy’s 4. Globalization of the economy means that 5. As a social institution, politics refers to 6. Terrorism refers to 7. A Preindustrial societies, explained Max Weber, are characterized by having True/False ________ 8. Capitalism is more productive than socialism, and capitalism also creates greater economic inequality. ________ 9. Most people in the United States strongly identify with one or the other major political party. Short-Answer 10. What are three defining traits of capitalism? Three defining traits of socialism? MULTIPLE-CHOICE QUESTIONS 1. Social institutions are defined as 2. Over the course of human history, changes in which of the following brought the greatest changes to the economy? 3. The text describes three technological revolutions that transformed all of social life. Which of the following is NOT one of them? 4. The development of agriculture was set in motion by 5. The economy became a distinct social institution during which historical era of societal development? 6. Which of the following did NOT play a part in the emergence of the economy as a distinct social institution? 7. The Industrial Revolution was based on 8. The Industrial Revolution accelerated with the development of which of the following new source of energy? 9. The postindustrial economy is defined by 10. Which of the following concepts refers to an economy based on service work and computer technology? 11. Read the following statements about the Information Revolution. Which statement is NOT correct? 12. Which sector of the economy generates raw materials directly from the natural environment? 13. Turning metals into automobiles is work that falls within the economy's 14. The expansion of office work marks the growth of the economy’s 15. The primary sector accounts for some share of economic output in countries at all income levels. In which category of nations would you expect the share of economic output from the primary sector relative to the other two sectors to be the largest? 16. In the United States and other high-income nations, about what percentage of the labor force performs service (tertiary) sector work? 17. The concept “global economy” refers to 18. Read the following statements about the global economy. Which statement is CORRECT? 19. Capitalism is an economic system in which there is 20. In a capitalist economic system, “justice” amounts to 21. The social thinker who analyzed and celebrated the operation of a free-market economy was 22. The United States is considered a mostly capitalist nation because 23. Socialism is an economic system in which there is 24. Which of the following traits would NOT be used correctly to describe the operation of a socialist economy? 25. In a socialist economic system, “justice” means 26. Ilze lives in a European country that combines a mostly market-based economy with extensive social welfare programs. Which of the following concepts best describes her country? 27. The concept of “state capitalism” refers to a system in which 28. Compared to socialist economic systems, capitalist economic systems are generally 29. Compared to mostly capitalist societies, mostly socialist societies 30. Compared with socialist economic systems, capitalist economic systems generally produce 31. Concerning the issue of personal freedom, capitalist systems emphasize people’s __________, while socialist systems emphasize people’s __________. 32. The most recent shift toward socialism has occurred in several countries in _______. 33. In the United States, about what share of the population aged sixteen and older is in the paid labor force? 34. Yesterday’s family farms have given way to 35. Since about 1950, most of the people in the U.S. labor force have held __________. 36. Over the course of the last century in the United States, the number of people involved in agricultural work 37. In recent decades, union membership 38. Which of the following is NOT a trait that defines a "profession”? 39. What percentage of today’s U.S. workers are self-employed today. 40. At the end of 2009, about __________ of the U.S. labor force was unemployed. 41. Which category of the U.S. population is showing the greatest labor-force increase in terms of percentage? 42. Which of the following statements correctly describes the effect of computers on the workplace? 43. A corporation is defined as 44. The concept “oligopoly” refers to 45. Politics is a social institution that is defined in terms of a society’s 46. Max Weber defined power as 47. Which of the following concepts refers to the formal organization that directs the political life of a society? 48. Industrialization brings about an emphasis on which type of authority? 49. People who attract followers, including Mahatma Gandhi and Martin Luther King Jr., display 50. As Max Weber saw it, the essential difference between power and authority is that 51. What Weber called the “routinization of charisma” takes place when charismatic authority 52. __________ refers to a political system in which a single family rules from generation to generation. 53. In which of the following types of societies would you expect to find monarchy as the political system? 54. In Max Weber’s view, monarchy is a form of 55. __________ refers to a political system in which power resides in the hands of the people as a whole. 56. One reason that someone might claim that the United States is not truly democratic is that 57. The concept “authoritarianism” refers to a political system that 58. Between 1989 and 2009, political freedom around the world 59. A totalitarian political system 60. Which of the following statements correctly describes how the U.S. population falls on the political spectrum? 61. Which of the following topics of political controversy would be described as an economic issue? 62. Which of the following topics of political controversy would be described as a social issue? 63. In general, high-income people tend to be __________ on social issues and __________ on economic issues. 64. An organizations that speaks out in favor of the right to own handguns is an example of a 65. As a general rule across the United States, __________ people tend to vote Democratic, while __________ people tend to vote Republican. 66. Read the following statements about political parties in the United States. Which statement is CORRECT? 67. In the 2008 U.S. presidential election, about __________ of registered voters went to the polls 68. Which of the following categories of the U.S. population is LEAST likely to vote in national elections? 69. Which of the following statements correctly describes the link between income and voting? 70. A pluralist approach to the U.S. political system claims that 71. A power-elite approach to the U.S. political system claims that 72. The Marxist political-economy model claims that 73. Political revolution almost always produces 74. Terrorism refers to 75. In general, terrorism is a strategy favored by 76. __________ refers to the use of violence by governments, often against their own people. 77. Read the following statements about terrorism. Which statement is CORRECT? 78. Of all wars in which the United States was involved, __________ was the most deadly in terms of loss of (U.S.) lives. 79. A sociological approach to war shows us that 80. Terrorism has been described as a new kind of warfare because 81. The world as a whole spends about __________ each year for military purposes. 82. The concept "arms race" refers to efforts by the United States and ________ to increase their military power. 83. The military-industrial complex refers to 84. For almost fifty years during the Cold War, a strategy of __________ kept the peace between the world’s two nuclear superpowers. 85. Around the world, one category of nations that, at this point in time, has a low share of democratic governments is TRUE / FALSE QUESTIONS 86. The economy organizes the production, distribution, and consumption of goods and services. 87. The economy did not emerge as a distinct social institution until the Agricultural Revolution. 88. One key to starting the Industrial Revolution was developing new sources of energy. 89. Compared with agricultural work, industrial jobs involve less specialization. 90. If you were living in a postindustrial society shaped by the Information Revolution, you would be smart to gain literacy skills instead of learning technical skills. 91. The Information Revolution has resulted in a concentration of workers in offices, generally within the central cities. 92. The terms “primary sector,” “secondary sector,” and “tertiary sector” reflect the relative importance of these sectors in terms of dollar value of economic output. 93. The global economy focuses increased attention on the importance of national borders. 94. An Iowa farmer is part of the secondary sector of the U.S. economy. 95. Adam Smith’s idea was that in a capitalist system, government tells businesses what to produce. 96. Although there are many privately owned companies in the United States, most of the U.S. economy is owned and operated by the government. 97. Taken together, local, state, and federal governments are this nation’s largest employer. 98. Socialism is sometimes called a “laissez-faire” economic system. 99. The concept “state capitalism” refers to all productive enterprises in a country being owned by the government. 100. Capitalism is more productive than socialism, and capitalism also creates greater economic inequality. 101. Socialist societies create greater economic equality than capitalism, but they provide a lower overall living standard. 102. Only about 2 percent of today’s U.S. labor force works in agriculture. 103. In the United States today, the share of workers who are members of labor unions is higher than at any time in the past. 104. Most professions involve blue-collar work. 105. The term “paraprofessional” refers to work that requires skills but typically does not require a broad theoretical knowledge of a field. 106. Most self-employed persons are professionals. 107. Self-employed people in the United States are more likely to have white-collar jobs than blue-collar jobs. 108. A recent trend in the United States is the rise in the share of small businesses owned by women. 109. In recent years, the lowest U.S. unemployment rates have been among teenagers. 110. Even as immigration rates rise, the U.S. work force is becoming more “white.” 111. One effect of computer technology is giving workers greater power over their employers. 112. The increasing use of computers in the workplace tends to “deskill” labor. 113. Corporations are often linked to one another through inter-locking directorates. 114. Conglomerates are giant corporations composed of many smaller corporations. 115. Oligopoly refers to any company that operates in more than one country. 116. Monopoly refers to a corporation that operates within only one sector of the economy. 117. The largest U.S. corporations dominate the country’s economy. 118. According to Max Weber, authority is just another word for power. 119. Traditional authority gains importance as a society becomes industrialized. 120. Authority refers to power that people feel to be unjust and coercive. 121. Charismatic authority plays a larger role than rational-legal authority in U.S. political life. 122. Charismatic authority typically is an expression of a special individual’s personality. 123. Rational-legal authority is also called “bureaucratic authority.” 124. Weber’s concept of “the routinization of charisma" asserts that charisma does not exist in the modern world. 125. In absolute monarchies, hereditary rulers claim a virtual monopoly of power based on divine right. 126. Democracy and rational-legal authority are linked, just as monarchy and traditional authority are linked. 127. Most political officials in the United States who run the government are never elected by the voters. 128. One reason some people say that the U.S. political system is not truly democratic is that, in the game of politics, “money talks.” 129. A large majority of the world’s people live in nations that are considered to be politically free. 130. Authoritarian governments give people little voice in politics. 131. In a totalitarian political system, one political party claims total control of society. 132. Just as the economy is becoming more and more global, so is the world developing a single global political system. 133. Relative to population size, the U.S. government is about the same size today as it was when this nation was founded more than two centuries ago. 134. Most people are a mix of conservative and liberal attitudes, depending on the issue. 135. Most people in the United States strongly identify with one or the other major political party. 136. Special-interest groups represent liberal interests, while political action committees represent conservative interests. 137. In the next U.S. presidential election, it would be safe to predict that rural people will support the Democratic candidate. 138. In the United States, African Americans are much more likely than Hispanic Americans to vote in national elections. 139. In the United States, people with higher incomes and more education are more likely to vote in national elections than people with lower incomes and less education. 140. The pluralist model suggests that the United States is far less democratic than most people would like to think. 141. The sociologist closely associated with the power-elite model is C. Wright Mills. 142. The Marxist political-economy model suggests that capitalist societies are democratic, giving some political voice to everyone. 143. Political revolutions are more likely to occur when and where living standards are improving and there are rising expectations. 144. Extensive civil liberties make democratic societies very vulnerable to terrorism. 145. Terrorism is considered to be a new form of asymmetrical warfare. 146. The concept “military-industrial complex” refers to the close association among the federal government, the military, and defense industries. 147. More than 100 of the world’s nations now have nuclear weapons. SHORT-ANSWER QUESTIONS 148. What is a social institution? What is the economy? 149. Name three technological revolutions that reorganized societal production and resulted in broad changes to many other dimensions of social life. 150. What four factors played a part in making the economy a social institution distinct from the family and other institutions? 151. What five changes defined the onset of the Industrial Revolution? 152. Name the three sectors of the economy. Give an example of production in each sector. 153. What are the three defining traits of capitalism as an economic system? 154. What are the three defining traits of socialism as an economic system? 155. How do capitalism and socialism differ in terms of economic productivity? What about in terms of economic equality? 156. What is a profession? What are four characteristics of professional work? 157. Explain how several social factors (race, gender, age, and schooling) affect unemployment rates. 158. Define “monopoly” and “oligopoly.” Do these concepts apply to the U.S. economy? Explain. 159. What is the difference between power and authority? 160. Define the three types of authority identified by Max Weber. 161. What are key differences between monarchy and democracy? 162. Define both authoritarianism and totalitarianism. 163. What is the welfare state? 164. What is the political spectrum? Describe the distribution of U.S. adults on the political spectrum. 165. How are social issues different from economic issues? Give an example of each type of issue. 166. Describe patterns of voter participation and voter apathy in the United States by identifying which categories of people are more or less likely to vote. 167. Provide a short description of the U.S. political system according to the pluralist model, the powerelite model, and the Marxist political-economy model. 168. What four factors encourage political revolution? 169. Define “terrorism” and also “state terrorism.” 170. What is the military-industrial complex? 171. What role can the news media play in warfare? ESSAY QUESTIONS / TOPICS FOR SHORT PAPERS 172. Compare and contrast three types of societies according to their economic technology: agrarian, industrial, and postindustrial. Precisely what are the characteristics of each? In what ways does each type of economy shape social life? 173. State the defining characteristics of two economic systems: capitalism and socialism. How do these systems compare in terms of (a) overall productivity, (b) economic equality, and (c) political freedoms? How is welfare capitalism an effort to combine benefits of both systems? 174. Describe trends in the U.S. labor force over the course of the last century. What technological changes have accompanied the shift from agricultural work to blue-collar work and then to white-collar service jobs? What changes in other social patterns have accompanied this shift? Consider rural-urban residential patterns, family patterns, and the relationship between work and home. 175. What do people mean when they speak of the "global economy"? Identify various ways in which the U.S. economy is becoming global. 176. Explain the claim that corporations operate as the core of the U.S. economy. How has the globalization of the economy made many corporations much larger? What are conglomerates? Look ahead to the world’s economy at mid-century: Do you think large multinational corporations will dominate the world more than they do now? Is this good for the world’s people? Why or why not? 177. What arguments are made in favor of a free-market economy? What are the arguments made by critics who favor giving government a large regulatory role or even placing the economy entirely under government control? Consider issues such as economic productivity, economic inequality, and the extent of corporate welfare. Also, how do scandals on Wall Street (such as the recent subprime mortgage crisis) play into this debate? 178. Read the “Seeing Sociology in the News” article on pages 358-59. Cite several reasons that some people oppose expanding the role of women in the military, especially in combat. What have we learned about the performance of women in combat from our experience in Iraq? 179. Why, according to Max Weber, does society need to transform power into authority? In what three ways does this transformation take place? Consider the link between traditional authority and preindustrial production and the link between rational-legal authority and industrial/postindustrial production. 180. Describe the political spectrum. Distinguish between social issues and economic issues and explain what categories of the U.S. population tend to be liberal and conservative with regard to each type of issue. How do the major political parties fall on the political spectrum? 181. Summarize the major arguments of the three models of political power. What do the three models have in common? What are their major differences? To what extent does each assess U.S. society as democratic? Why? 182. What have sociologists learned about the causes and character of war? That is, why do nations go to war? What strategies seem able to prevent war? Finally, how is terrorism a new form of twenty-firstcentury warfare? 183. What is terrorism? What can you say about the kind of political organization that uses terror? How is terrorism against a powerful nation a form of “asymmetrical warfare”? What makes responding to terror difficult? 184. Read the Thinking Globally box on page 337 that describes the economic and political system of Denmark. To what extent would you describe Denmark as capitalist? As socialist? Do you find this economic and political system attractive or not? Why? 185. Look carefully at the Seeing Sociology in Everyday Life photo essay on pages 362-63 of the text. Based on this material, and also what you have read in Chapter 12 of the text, how are young people coming to have a larger voice in U.S. politics? To what extent are you personally engaged in the political process?
Created Date Thursday, 02 January 2014
Filesize 42 Kilobytes

Accounting_Chapter_13

Multiple-Choice 1. The family is a social institution that is found in 2. A trend over the course of the last century in high-income nations such as the United States is that families have become 3. In the United States, family violence is 4. The most difficult transition in married life is typically 5. Religion is best defined as a social institution involving 6. Durkheim pointed to three functions of religion for society. Which of the following is NOT one of them? 7. Which of the following is an example of civil religion? True/False ________ 8. One reason for today’s high divorce rate in the United States is that women are more economically dependent on men. ________ 9. One of the societal functions of religion is as a system of social control. Short-Answer 10. How are each of these types of religious organizations distinctive: (a) church, (b) sect, and (c) cult?. MULTIPLE-CHOICE QUESTIONS 1. The chapter-opening story of Rosa Yniguez, who came from Mexico and is now living in California, makes the point that immigrant women in the United States 2. The family is a social institution that is found in 3. Kinship is defined as two or more people who 4. Today’s television shows, such as Modern Family, tend to present the family 5. Jane is a woman married to one man. When she took a sociology course, she discovered that such marriages are described as 6. A family unit that includes parents and children, as well as other kin, is called 7. A family composed of one or two parents and their children is called 8. In general, industrialization tends to change the dominant family form from 9. The concept "endogamy" refers to marriage between 10. A system of marriage that unites two partners is called 11. A system of marriage that unites three or more people is called 12. To which region of the world would you travel if you wanted to visit many countries where the law permits polygamy? 13. The concept “patrilocality” refers to 14. Around the world, the most common form of marriage is 15. Assume you were visiting a society in which people trace family ties only through women. This society would correctly be called 16. Typically, high-income societies make use of __________ to trace ancestry. 17. Over the course of the last century, in high-income nations such as the United States, families have become 18. Which of the following is NOT counted among the functions of the family? 19. The incest taboo 20. According to the structural-functional approach, the family 21. A social-exchange analysis of family life might consider 22. The text identifies one region of the world where arranged marriage, although illegal, still takes place in rural areas. That global region is 23. In traditional regions of many lower-income nations, such as Sri Lanka, marriage is 24. The concept “homogamy” means that 25. One concern about the great importance most people in the United States give to romantic love as the basis of marriage is that 26. What is the effect of industrialization on the typical number of children in a family? 27. In today’s high-income societies, children are 28. In the United States, a recent trend involving parenting is that 29. In most low-income nations around the world, the typical number of children per family is 30. The most difficult transition in married life is typically 31. The concept “empty nest” refers to 32. Today’s baby boomers are often called the “sandwich generation” because 33. Describing the lives of working-class women, Lillian Rubin reported that most women said they wanted husbands who 34. Describing the lives of middle-class women, Lillian Rubin reported that most women said they wanted husbands who 35. American Indians who migrate from tribal reservations to cities, typically 36. Compared to white women of the same age, forty-year-old African American women are 37. Patterns that describe many Latino families include 38. Which of the following categories of our population has the highest share of female-headed households? 39. Regardless of race, families headed by single women are 40.The recent trend in racially mixed marriages has been 41. Jessie Bernard claimed that traditional marriages 42. Compared to what it was a century ago, the U.S. divorce rate today is 43. Which of the following factors is NOT a reason for the long-term upward trend in divorce rates? 44. Which of the following people would you pick as being at the highest risk of divorce? 45. Most people in the United States who divorce 46. In the United States, family violence is 47. Adults who abuse children typically 48. Research shows that growing up in a single-parent family 49. Mounting research suggests that cohabitation 50. As of 2010, seven countries have national laws that permit same-sex marriage—both in name and in practice. Which of the following is NOT one of them? 51. In 1950, 90 percent of U.S. households were families, meaning that they contained two or more people related by blood, marriage, or adoption. In 2009, __________ of U.S. households were families. 52. Looking ahead twenty years in the United States, the one thing we can be sure of is that 53. Emile Durkheim described the ordinary elements of everyday life as 54. The concept of sacred refers to what is 55. Religion is best defined as a social institution involving 56. Durkheim explained that what people understand as profane are things 57. Ritual is a matter of 58. Faith is a way of knowing based on 59. Sociological analysis of religion is concerned with 60. Which of the following concepts was used by Emile Durkheim to refer to an object in the natural world collectively defined as sacred? 61. Emile Durkheim pointed to three societal functions of religion. Which of the following is NOT one of them? 62. Which of the following is a correct criticism of the structural-functional approach to religion? 63. Based on the symbolic-interaction approach, we would study how religion and religious ideas 64. Which sociologist claimed that religion turned people’s attention away from social inequality in the world? 65. Karl Marx believed that religion 66. An analysis of how religion supports the interests of a society’s elites would fall under which of the following theoretical approaches? 67. According to a social-conflict approach, what is one thing the sacred texts of Christianity, Judaism, and Islam have in common? 68. In his analysis of Protestantism and the rise of capitalism, Max Weber argued that 69. As Max Weber saw it, capitalism amounted to 70. __________ refers to the fusion of Christian principles with political activism, often Marxist in character 71. Which type of religious organization includes leaders who are formally trained and ordained? 72. A religious organization well integrated into the larger society is called a 73. Over the course of its history, the Roman Catholic Church has been a 74. As the official Church of England, the Anglican Church is best described as a 75. In the United States, the Amish would be an example of a 76. A sect is a type of religious organization that 77. A __________ typically forms as a group of people break away from some established religious organization. 78. Which of the following would you expect to be the least stable type of religious organizations? 79. A religious organization that is largely outside a society's cultural traditions is called a 80. Animism is a set of beliefs that encourage people to 81. Throughout the Southeast region in the United States, the largest number of Protestants are of which denomination? 82. Animism is the belief that 83. Animism is closely associated with __________ societies. 84. Although science has great importance in modern societies, religion continues because 85. On national surveys, about what percentage of adults in the United States claim to believe in a divine power? 86. In the United States, a slight majority of people claim they are 87. If you were to travel through New England, you would find the most common religious affiliation is 88. In the United States, being more religious is linked to 89. Which of the following statements about religion in the United States is CORRECT? 90. Secularization refers to the historical 91. Which of the following is an example of civil religion? 92. The claim that the United States is a postdenominational society is based on a movement 93. Which of the following is NOT a trait of religious fundamentalism? 94. Most sociologists agree that 95. Kinship is based on common ancestry, marriage, or adoption. 96. One concern about defining "families" as only married couples and children is that this view implies that everyone should embrace a single standard of moral conduct. 97. Parents and their children form an extended family. 98. The extended family is also called the conjugal family. 99. In practice, endogamy means people marry others who are socially like themselves. 100. A caste system favors exogamous marriage, meaning that people are expected to marry someone from a caste that differs from their own. 101. In high-income nations, most marriages are monogamous. 102. Polyandry is a form of marriage that unites one man with two or more females. 103. In almost all African nations, the law permits a man to have more than one wife. 104. The dominant residential form in the United States is neolocality. 105. Bilateral descent is typically found in pastoral and agrarian societies in which men produce the most valued resources. 106. The structural-functional approach points out how family perpetuates social inequality. 107. Feminist analysis links the operation of the family to patriarchy. 108. We think of families as “intimate”; the word “intimacy” has Latin roots meaning “sharing fear.” 109. Romantic love is the basis of marriage in most preindustrial societies. 110. Research indicates that a majority of U.S. married males report having been sexually faithful to their wives during their marriage. 111. Social class affects what women expect in a husband. 112. Prenuptial agreements are a sensible way to prepare for eventual separation, divorce, or death of a spouse. 113. In the United States, the most difficult transition in married life is the birth of a child. 114. African Americans and Asian Americans show significant differences in typical family form. 115. The trend in the United States is toward more racially mixed marriages. 116. Jesse Bernard claimed that women would be happier in marriage if men did not expect them to do almost all the housework. 117. One reason for today’s high divorce rate in the United States is that women are more economically dependent on men. 118. Today, people in the United States are more accepting of divorce that they were a century ago. 119. One out of four people in the United States who divorce remarry at some point. 120. Most cases of family violence involve men as both victims and offenders. 121. Most research suggests that growing up in a one-parent family disadvantages children. 122. Before they reach the age of eighteen, half of U.S. children live with only one parent for some period of time. 123. Single parenting is more common among Asian Americans than among African Americans. 124. Same-sex marriages are legal everywhere in the United States. 125. Nine out of ten people in the United States marry at some point in their lives. 126. Singlehood is becoming more common among young adults in the United States. 127. In vitro fertilization refers to conception by an unmarried couple. 128. Based on the text discussion, it is reasonable to expect that twenty-first-century families will be quite diverse in form. 129. The concept “sacred” refers to the familiar, everyday elements of life. 130. The exact same elements of life are defined as sacred throughout the world. 131. Religion is a social institution involving beliefs and practices based on what is sacred. 132. "Ritual" refers to activity in which the sacred is embodied into ceremonial behavior. 133. Faith refers to knowledge that we gain from using all the human senses. 134. According to Emile Durkheim, through religion people celebrate the awesome power of their society. 135. A totem is any object defined as profane. 136. One of the societal functions of religion is as a system of social control. 137. The symbolic-interaction approach treats religion as a socially constructed system of meanings. 138. Karl Marx emphasized the many positive functions of religion for society. 139. A common theme in world religions is the idea that women should have power over men. 140. In his analysis of how Calvinism encouraged the development of capitalism, Max Weber showed the power of religious ideas to bring about social change. 141. A sect is a type of social organization well integrated into the larger society. 142. State churches limit the political power of religion and support the “separation of church and state.” 143. Members of denominations typically accept religious pluralism. 144. Charisma is a personal quality that allows a person to attract followers. 145. Members of a sect accept the surrounding society as good. 146. Members of churches place greater importance on the personal experience of conversion than members of sects do. 147. A cult is a religious organization well outside of a society’s cultural traditions. 148. Animism refers to the belief that God is an active force in the world. 149. How a researcher operationalizes the concept of "religiosity" affects the share of people in the United States who are religious. 150. In the United States, both Baptists and Lutherans have relatively high social standing. 151. Around the world, religion is often tied to ethnicity. 152. Secularization refers to the historical rise in the importance of religion. 153. Flying the flag and singing the national anthem at sporting events are examples of civil religion. 154. “Seekers” who pursue “New Age” spirituality believe that everything and everyone is connected by a divine force or plan. 155. Fundamentalism encourages a highly intellectual view of the world. 156. Research indicates that about 44 percent of U.S. adults claim that they have changed their religious affiliation at some point in their lives. 157. In the United States, people who hold fundamentalist beliefs generally support traditional, otherworldly religion. SHORT-ANSWER QUESTIONS 158. Define the following concepts, clearly distinguishing each from the others: family, kinship, and marriage. 159. How does the nuclear family differ from the extended family? 160. Why do all societies have rules of exogamy and endogamy? Give an illustration of how each type of rule works. 161. Distinguish patrilocality, matrilocality, and neolocality. Which pattern is favored in the United States? Why? 162. Distinguish patrilineal descent, matrilineal descent, and bilateral descent. Which pattern is favored in the United States? Why? 163. Identify four societal functions of the family. 164. How does the family perpetuate social inequality with regard to class, gender, and race? 165. What does social-exchange analysis suggest about courtship? 166. What is the family experience of “empty nest”? 167. Why, according to Jessie Bernard, is every marriage actually two different relationships? 168. Identify six reasons that the U.S. divorce rate is higher today than it was a century ago. 169. Explain the distinction between the sacred and the profane. 170. Identify three societal functions of religion pointed out by Emile Durkheim. 171. Express in one sentence Karl Marx’s concern about the effect of religion on society. 172. What did Max Weber say about Protestantism and the rise of capitalism? 173. Distinguish between three types of religious organizations: church, sect, and cult. 174. What is religiosity? Why is this variable difficult to measure? 175. What is secularization? 176. What is civil religion? 177. What are five defining traits of fundamentalism? ESSAY QUESTIONS / TOPICS FOR SHORT PAPERS 178. Why do some people (especially when guided by the structural-functional approach) describe the family as “the backbone of society”? That is, what are the societal functions of families? To what degree could other social institutions (including government) perform these tasks in place of the family? 179. Why do some people (especially when guided by the social-conflict approach) describe the family as a system that perpetuates social inequality? Consider (a) class stratification, (b) gender stratification, and (c) racial and ethnic stratification. Can you envision a family form that would not play a part in supporting social inequality? Explain. 180. Sociologists tell us that families in the United States are socially diverse. Exactly how are they diverse? Describe differences in marriage and family life that are linked to (a) class, (b) gender, (c) race and ethnicity, and (d) personal choice. Why are families becoming more diverse? Do you view this trend as positive or negative? Why? 181. Any family is really many families as it changes over time. Consider how families typically change as people move through the life course. What are the major traits of family life, beginning with courtship, settling in to marriage, child rearing, and later life? What special opportunities and challenges can you see in each stage? 182. Looking ahead fifty years, predict the state of the U.S. family. How will families differ from families today? In what ways will they remain the same? Consider factors such as the popularity of marriage, the likelihood of divorce, the number of children people will have, and gender role differences in marriage. 183. Read Chapter 13’s “Seeing Sociology in the News” article on pages 376-77. What is a prenuptial agreement? What arguments are made about the value of such an agreement for people entering into marriage? What does all this suggest about marriage itself? 184. Based on the ideas of Emile Durkheim, identify three societal functions of religion. In light of these functions, do you think that a decline in the importance of religion might threaten U.S. society? If so, how? Could the family and, perhaps, the school take over some of religion’s functions? Why or why not? 185. Discuss the various types of religious organizations: church (and its two sub-types, state church and denomination), sect, and cult. Exactly how are they different? Do they come into being for the same reasons? What evidence is there that they appeal to different categories of people? 186. How religious are the people of the United States? Obviously, the answer to this question depends on precisely how one measures “religiosity.” Discuss various ways to do this and how they yield somewhat different pictures of religiosity. 187. What is New Age religion? How does this type of religious experience differ from conventional religion? 188. What is secularization? Is secularization a reality in the United States? That is, is religion getting weaker, stronger, or simply changing its character? Provide evidence to support your argument. 189. What are some of the most significant changes in patterns of U.S. religious affiliation during recent decades? Consider changes in the popularity of mainstream churches, fundamentalist organizations, and New Age religion, and include some discussion of patterns of religious affiliation over a person’s lifetime. 190. Look carefully at Chapter 13’s “Seeing Sociology in Everyday Life” photo essay on pages 400-401. What is civil religion? What elements of civil religion (or conventional religion) do you see in these images? Can you point to other examples of civil religion that take place at some point during the year in your local community?
Created Date Thursday, 02 January 2014
Filesize 44 Kilobytes

Accounting_Chapter_14

Multiple-Choice 1. Education is the social institution by which society provides people with important knowledge, including teaching them 2. From a structural-functionalist point of view, which of the following is NOT a societal function of schooling? 3. Jonathan Kozol criticizes the U.S. educational system for 4. Society shapes human health because 5. The greatest preventable cause of death in the United States is 6. Euthanasia refers to 7. In the United States, an important medical issue is True/False ________ 8. Most private schools in the U.S. are “prep schools” that typically enroll well-to-do families. ________ 9. As a direct result of cigarette smoking, more than 400,000 people in the United States die prematurely every year. Short-Answer 10. What are several reasons that community colleges are important to higher education? MULTIPLE-CHOICE QUESTIONS 1. Which of the following statements about education is NOT correct? 2. In low-income nations, most education is a matter of 3. If you were to enter a school in ancient Greece of China, the students you would find there would be mainly 4. Around the world, about __________ of children never get to the secondary grades of school. 5. The basic reason that schooling is limited in India is 6. Mandatory schooling came to Japan after 7. In Japan—compared with the United States—getting into college is more a matter of 8. The United States reached the point where half the adult population had earned a high school diploma by 9. In the United States today, about __________ of the adult population has a high school diploma. 10. In the United States in 2009, __________ of people over the age of twenty-five had earned a fouryear college degree. 11. In the United States, the focus of education has always been 12. States began enacting mandatory education laws about a century ago, at the time that 13. Which of the following is a latent function of schooling? 14. Jane Elliott's “blue eyes/brown eyes” experiment in her Iowa classroom confirmed 15. According to Jonathan Kozol, one result of tracking is that 16. The classic study of U.S. education by James Coleman concluded that 17. Parents spending more time reading to their children is an example of 18. Jonathan Kozol condemns the U.S. educational system for 19. Conducting research on how students from different social backgrounds perform in schools, Douglas Downey concluded that 20. Comparing high-income U.S. families to families with low income, we find that among the highincome families, 21. Read the following statements about U.S. community colleges. Which statement is NOT correct? 22. Which of the following correctly states the effect of additional schooling on average personal income? 23. According to the social-conflict approach, schooling in the United States 24. Theodore Sizer claims that rigid bureaucracy harms schooling. Which of the following statements is NOT one of the arguments made by Sizer? 25. For the United States as a whole, about __________ of people between age sixteen and twenty-four drop out before completing high school. 26. The school dropout rate is highest (18 percent) for 27. The problem of functional illiteracy refers to the fact that 28. The average grades given in U.S. high schools today, compared to those given thirty-five years ago, are 29. People who support the school choice movement claim that U.S. public schools perform poorly Because 30. Magnet schools encourage 31. Charter schools are 32. "Schooling for profit" refers to 33. The practice of including people with disabilities in regular educational classes and programs is called 34. In the United States today 35. On the typical U.S. college campus, about __________ of the students are men. 36. Older adults—people over the age of twenty-five—now account for about __________ of all students in degree-granting programs in the United States. 37. A general lesson we learn from sociological research about education is that 38. A sociological approach suggests that health is 39. Read the following four statements. Which statement is NOT correct? 40. Members of hunting and gathering societies 41. Advancing medical technology has attacked infectious disease in poor countries with what result? 42. The World Health Organization states that about __________ people in the world suffer from poor health caused by poverty. 43. If you were to visit a low-income nation to study its high death rates, what would you suspect to be the most common causes of death? 44. In 2007, the leading cause of death in the United States was 45. In Western Europe and North America, scientists began to understand the causes of infectious diseases at about what point in history? 46. Back in 1900, a leading causes of death was influenza, a disease that 47. Centuries ago in Europe, __________ was a leading cause of death; today, __________ is the leading cause of death. 48. Which of the following is an example of a chronic illness? 49. Social epidemiology is the study of 50. Research shows that masculinity is linked to health because 51. A major cause of death among young people in the United States is 52. Across the life course 53. Being socialized as a male in the United States is likely to encourage 54. Read the following statements about health in the United States. Which statement is CORRECT? 55. Which of the following categories of the U.S. population has the highest life-expectancy? 56. The greatest preventable cause of death in the United States is 57. Which category of people in the United States is most likely to smoke cigarettes? 58. Research shows that college women 59. In which region of the United States is the problem of obesity most widespread? 60. Read the following statements that explain the rise of obesity in the United States. Which statement is NOT correct? 61. An exception to the downward trend in infectious disease in the United States over past decades is 62. Upon infection, people with HIV typically 63. Which of the following world regions is experiencing the most severe epidemic of AIDS? 64. Which of the following is NOT considered a behavior that increases the risk of HIV infection? 65. "Euthanasia" refers to 66. Read the following statements about the right-to-die debate. Which statement is NOT correct? 67. The rise of scientific medicine in the United States began about when? 68. About __________ of U.S. physicians are women. 69. The medical establishment in the United States can be described as oriented toward 70. Holistic medicine asserts that 71. “Barefoot doctors,” acupuncture, and the use of medicinal herbs are all part of the medical system in 72. Of the following high-income nations, which country relies the most on a direct-fee market system to pay for medical treatment? 73. The U.S. government pays __________ of the population’s medical costs. 74. The 2010 health care reform bill passed by Congress 75. In the United States, an important medical issue is 76. In general, a structural-functional approach to health and medicine treats illness as 77. Talcott Parsons claimed that society responds to illness by 78. Talcott Parsons describes the physician-patient relationship as 79. A valid criticism of Talcott Parsons’s sick-role concept is that it 80. A symbolic-interaction approach to health and medicine emphasizes 81. The topic of psychosomatic disorders (cases in which the mind affects the body) is of greatest interest to sociologists guided by the __________ approach. 82. An analysis guided by the social-conflict approach would emphasize which of the following as an important factor shaping patterns of health and illness? 83. From a social-conflict point of view, capitalism fails to support human health because 84. Read the following four statements. Which statement is NOT correct? 85. Education is the social institution that provides members of a society with important skills and knowledge. 86. The extent of schooling in a society is closely tied to its level of economic development. 87. World-wide, even today, one-third of children never get to the secondary grades. 88. Schooling in all countries—both high-income and low-income—reflects cultural values. 89. In Japan a larger share of students graduate from high school than in the United States. 90. In India, fewer boys than girls reach secondary school. 91. Schooling in the United States seeks to promote equality of opportunity. 92. Schooling in the United States has always favored theoretical understanding over practical learning. 93. One latent function of schooling is establishing social relationships and networks. 94. According to the symbolic-interaction approach, what teachers expect of students is likely to create a self-fulfilling prophecy, directly impacting student performance. 95. Because the United States is so rich, almost 90 percent of students attend private schools. 96. Most private school students in the United States attend a school that is church-related. 97. Regardless of the level of a school’s funding, some students benefit from more “cultural capital” than others. 98. Jonathan Kozol characterizes the differences in funding between rich and poor communities as the “savage inequality” of U.S. education. 99. James Coleman concluded that the only factor needed to improve schooling was increased school funding. 100. Two-thirds of U.S. children who grow up in families with incomes over $75,000 end up enrolling in college. 101. Over a lifetime, a college degree can add as much as $1 million to a person's income. 102. In general, the higher a family's income, the more likely it is that children in the family will attend college. 103. In the United States, almost half of all African American and Hispanic students in college attend community colleges. 104. Community colleges enroll 41 percent of all undergraduates in the United States. 105. About 20 percent of foreign students studying in the United States attend community colleges. 106 From a social-conflict point of view, schooling in the United States transforms social privilege into personal merit. 107. Rather than creating violence, in most cases violence spills into schools from the surrounding society. 108. Research suggests that operating schools in a rigid bureaucratic way encourages students to be active learners. 109. In the United States, African Americans are more likely to graduate from high school than Hispanics. 110. In a number of large U.S. cities, a majority of young people never complete high school. 111. There has been a recent boom in community college enrollments. 112. Theodore Sizer maintains that, in order to do their job, U.S. schools need to be large and bureaucratic. 113. David Karp and William Yoels found that in the typical college classroom, most students were active participants in class discussion. 114. For the United States as a whole, more than one-third of young people drop out before achieving a high school diploma. 115. The dropout rate is higher for young people from rich families, who may have many opportunities to succeed without going to school. 116. The concept “functional illiteracy” refers to leaving school before graduating. 117. There has been significant grade inflation during the last several decades. 118. Supporters of the school-choice movement argue that competition is a good way to improve public school education. 119. Only 43 percent of all students on U.S. college and university campuses are women. 120. Currently, there is a surplus of teachers in the United States. 121. Cultural patterns define what is or is not healthy. 122. From a sociological point of view, health is sometimes a matter of having the same diseases as one's neighbors. 123. Changing health standards are evident in the fact that fifty years ago, people in the United States bathed more frequently, on average, than they do today. 124. Diseases such as heart disease and cancer are leading killers in low-income nations. 125. According to the World Health Organization, five billion of the more than six billion people living on Earth suffer from serious illnesses caused by poverty. 126. In much of the world, illness and poverty form a vicious circle, with each causing the other. 127. Industrialization gradually brings dramatic improvements in human health. 128. Over the course of the last century, an important health trend in the United States has been a rising death rate from infectious diseases. 129. Social epidemiology is the study of how health and disease are distributed throughout a society’s population. 130. “Type A personalities” which are linked to masculinity, are harmful to human health. 131. In the United States, infant mortality rates among low-income children are now about the same as rates for the children of the wealthy. 132. One indicator of male privilege in the United States is the fact that men, on average, outlive women. 133. In the United States, people with higher incomes have a more positive assessment of their personal health. 134. The rate of cigarette smoking among adults in the United States has been rising rapidly in recent decades. 135. As a result of cigarette smoking, about 443,000 people in the United States die prematurely every year. 136. Eating disorders have much to do with how our society defines femininity. 137. People with more money to spend are more likely to become obese. 138. Genital herpes is a curable sexually transmitted disease. 139. AIDS is the most deadly of all sexually transmitted diseases (STDs). 140. About one month after being infected, most people with HIV begin to display symptoms. 141. Sharing needles is a behavior that places people at high risk for transmitting HIV. 142. The world region with the highest rate of HIV infection is the Middle East. 143. More than 1 million cases of HIV infection have been recorded in the United States. 144. In the world as a whole, AIDS is most often transmitted from person to person by heterosexual sex. 145. Today’s advanced medical technology often allows death to be a choice. 146. Active euthanasia refers to using a physician’s services to bring on a quick death. 147. One important point marking the development of scientific medicine in the United States was the founding of the American Medical Association in 1847. 148. Holistic medicine seeks to change the focus of medical practice from treating symptoms of disease to preventing disease and promoting health. 149. If you were a physician in the Russian Federation, you would expect to earn a higher income than the typical physician in the United States. 150. The role of government in paying for medical care is greater in the United States than in all other high-income nations. 151. The U.S. health care system may be accurately described as “socialized medicine.” 152. In the United States today, there are many more nurses than there are nursing jobs. 153. Talcott Parsons claimed that, to qualify for the sick role, a person must want to become healthy. 154. Social definitions have little to do with health and illness, which are medical conditions involving human biology. 155. Social-conflict analysis claims that the profit motive enhances the quality of medical care in the United States. 156. One criticism of the social-conflict approach is that it minimizes the improvements in health care brought about by scientific medicine. 157. Advances in human genetics hold out promise to prevent disease but also raise ethical issues about how technology should be used. SHORT-ANSWER QUESTIONS 158. Define “education” and “schooling.” 159. How is schooling linked to a society’s level of economic development? 160. By global standards, what can you say about the extent of schooling in the United States? 161. According to the structural-functional approach, how does schooling advance the goal of equal opportunity? 162. Point out several functions of schooling. What are particular goals of schooling in the United States? 163. How does the "self-fulfilling prophecy" apply to the way teachers and students act in a school? 164. What is school tracking? Give an argument in support of this policy and an argument against it. 165. What is the “savage inequality” in U.S. schools described by Jonathan Kozol? 166. Give several reasons for the importance of community colleges in higher education in the United States. 167. How does schooling transform privilege into personal merit? 168. List five consequences of bureaucracy in U.S. schools, according to Theodore Sizer. 169. What is “functional illiteracy”? How extensive is this problem in the United States? 170. List four ways in which sociologists show that health is a societal as well as a medical issue. 171. What diseases were leading causes of death in the United States in 1900? In 2007? Describe the pattern of change. 172. What is social epidemiology? 173. How does social class affect human health? What data can you provide to support the importance of this link? 174. Why do many people consider cigarette smoking a major health problem in the United States? 175. Why are eating disorders not just a medical issue but a social issue? 176. How widespread is the problem of obesity in the United States? What are several factors that contribute to this problem? 177. Define euthanasia. What is active euthanasia? 178. What three principles define holistic medicine? 179. Define socialized medicine. How does it differ from a direct-fee medical care system? ESSAY QUESTIONS / TOPICS FOR SHORT PAPERS 180. Write an essay in which you demonstrate that schooling (or lack of it) around the world is linked to (a) level of economic development and (b) national cultural patterns. Include the United States in your comparative analysis. 181. Describe the changes that have taken place in the scope of schooling over the course of this nation's history. When did mandatory education become universal? At what point did a majority of the population hold high school diplomas? What is the extent of U.S. educational achievement today? 182. Following the social-conflict approach, what are the problems in the U.S. educational system? Consider quality of public schooling, inequality among schools, and access to higher education. Also consider the role of class, gender, race, and ethnicity in people’s experience of these problems. 183. What is the school choice movement? Why do many people support this initiative? Why do many others oppose it? Present your own views on this debate, providing evidence to support your argument and conclusion. 184. Why, in your opinion, is there a teacher shortage in the United States? Do you think we pay teachers enough? Do you think teachers, on average, are sufficiently trained and motivated? Why or why not? What steps would you take to improve the quality of teaching in the United States? 185. How do community colleges differ from other types of colleges and universities? What special contributions do community colleges make to higher education in the United States? 186. Describe patterns of health in low-income countries. What are the most common diseases and causes of death? How, and why, are patterns of health in high-income nations different? 187. What is social epidemiology? Answer by sketching patterns of health for the U.S. population, taking into account (a) age, (b) gender, (c) social class, and (d) race. 188. Why is cigarette smoking considered the leading preventable cause of death in the United States? Describe the health consequences of smoking cigarettes. What categories of people are most, and least, likely to smoke? How have attitudes toward smoking changed in recent decades? Why, in your opinion, is cigarette smoking still as common as it is in this country? 189. Use either the case of eating disorders or obesity as the focus of an essay that explains why health and illness are more a societal and cultural issue than a medical issue. 190. Explain the contribution to understanding health and medicine made by each of the three major theoretical approaches in sociology: structural-functional, symbolic-interaction, and social-conflict. On what specific points do they agree? How do they disagree? 191. Discuss the right-to-die debate. How has modern technology created this debate in the first place? What are the arguments for legal euthanasia? What are the arguments against it? Which side do you find more correct? Why? 192. In an essay, consider the issues raised in the Controversy & Debate box, “The Genetic Crystal Ball: Do We Really Want to Look?” on page 439. What are the potential benefits of this type of genetic research? What are the dangers of this research? On balance, do you favor or oppose genetic research? Why? 193. Explain the 2010 health care reforms in the United States. Why are they controversial? What arguments are made in support and in opposition to these reforms? 194. Look carefully at Chapter 14’s “Seeing Ourselves in Everyday Life” photo essay on pages 440-41. What types of jobs are especially dangerous to workers? What can you say about the categories of people who perform these jobs?
Created Date Thursday, 02 January 2014
Filesize 32 Kilobytes

Accounting_Chapter_15

Multiple-Choice 1. Demography is defined as the study of 2. The United States is a high income country; its population growth is likely to result from 3. Which global region has BOTH the world’s highest birth rate and the world’s highest infant mortality rate? 4. Due to migration within the United States, the region of the country where a number of counties have actually lost population in recent years is the 5. According to Emile Durkheim, while traditional, rural societies are held together by _______, modern urban societies are held together by ______. 6. Which of the following accounts for most of the water use in the world today? 7. Mounting evidence suggests that human society is causing the average temperature of the planet to True/False ________ 8. Thomas Robert Malthus expected population to increase according to arithmetic progression. ________ 9. Protecting the rain forests is important to maintaining Earth’s biodiversity. Short-Answer 10. What is “environmental racism?” MULTIPLE-CHOICE QUESTIONS 1. The population of the world began to rise rapidly about 2. Today, the world is home to about __________ people. 3. Demography is defined as the study of 4. Fertility refers to 5. Fecundity refers to 6. In global perspective, fertility in North America is 7. __________ refers to the number of live births in a given year for every 1,000 people in a population. 8. Which global region has BOTH the world’s highest birth rate and the world’s highest infant mortality rate? 9. In global perspective, North America’s crude birth rate is 10. Among which of the following categories of the U.S. population is fertility especially low? 11. In which of the following global regions do people have the highest life expectancy? 12. The region of the United States where a number of counties have lost population due to out-migration is 13. Read the following four statements about migration. Which statement is NOT correct? 14. Typically, low-income nations grow mostly from __________, while high-income nations grow from __________. 15. In general, what is the relationship between average level of income and population increase for countries around the world? 16. To obtain a society's "doubling time," divide its annual population growth rate in percent into the Number 17. The demographic measure called "sex ratio" refers to 18. Why are sex ratios usually below 100? 19. Compared with the United States, Mexico has a population that 20. If a society has a sex ratio of 110, it is very likely that people there 21. Throughout most of human history, families had many children. Which statement below is NOT a reason for families favoring a high number of children? 22. For the first time, the world’s population reached one billion by 23. During the twentieth century, the population of the world 24. Currently, about __________ of the global population increase is taking place in low-income nations. 25. Thomas Robert Malthus believed that 26. Thomas Robert Malthus argued that 27. The basic idea behind demographic transition theory is that 28. According to demographic transition theory, in the preindustrial stage of economic development, Population 29. For societies at the postindustrial level of economic development, population 30. In the United States, the birth rate is currently 31. “Zero population growth” refers to the level of reproduction that 32. Read the following statements about population decline in high-income nations. Which statement is CORRECT? 33. Which of the following nations would you expect to be most concerned about declining population? 34. In low-income countries, most population increase is due to 35. The first permanent settlements emerged about __________ ago. 36. Looking back in history, the first city we know of was 37. Which of the following characterized the medieval cities of Europe? 38. With the Industrial Revolution, how did cities change? 39. A majority of the U.S. population lived in urban places by 40. In the United States, the industrial metropolis reached its peak about 41. With the beginning of urban decentralization, which of the following trends were evident? 42. Among rural places in the United States, the greatest population increase has generally been those areas where people find 43. The concept “megalopolis” refers to 44. If you were to compare Sunbelt cities, such as Houston, to Snowbelt cities, such as Chicago, what differences would you find? 45. According to Ferdinand Tönnies, social organization in which people come together only on the basis of individual self-interest is called 46. Which of the following is Emile Durkheim's concept that parallels Tönnies's Gesellschaft? 47. According to Emile Durkheim, while traditional rural societies are held together based on __________, modern urban societies are based on __________. 48. The Industrial Revolution influenced urbanization in many ways, including where cities were cited. If you were to look back in history, you would find that almost every U.S. city was founded 49. A third urban revolution is now taking place in 50. What is the study of the interaction of living organisms and the natural environment? 51. The concept "environmental deficit" refers to 52. Which of the following statements is NOT correct? 53. Which of the following concepts refers to the optimistic approach to environmental issues that claims science can promote progress and solve environmental problems? 54. Which of the following statements expresses the “limits to growth” thesis? 55. Read the following statements. Which statement is CORRECT? 56. Which of the following activities consumes the largest amount of Earth's water? 57. Which of the following regions of the world is currently facing the most serious lack of fresh water? 58. The gradual loss of the world’s rain forests is a source of concern because they are 59. Mounting evidence suggests that the average temperature of the planet is 60. Based on what you know of sociology’s theoretical approaches, environmental racism is an issue based on TRUE / FALSE QUESTIONS 61. Demography studies the size and composition of a society’s population. 62. Within U.S. society, all racial and ethnic categories of people have the same patterns of fertility. 63. To calculate a crude birth rate, divide the number of live births in a year by the total population and multiply the result by 1,000. 64. The crude birth rate for North America is lower than that for the world as a whole. 65. The crude death rate is a good measure of a society's overall fertility. 66. The crude death rate for North America is very high by world standards. 67. The infant mortality rate for African Americans is much higher than it is for white people. 68. The average life expectancy of U.S. children born in 2007 is about 65 years. 69. The forced transport of 10 million slaves from Africa to the Americas is an example of involuntary immigration. 70. Most people migrate due to a combination of “push” and “pull” factors. 71. Rich nations typically grow much less from immigration as from natural increase. 72. In general, low-income countries grow more from immigration than they do from natural increase. 73. An annual growth rate of about two percent will cause a society’s population to double in about thirty-five years. 74. Looking all around the world, sex ratios are typically much higher than 100. 75. In many low-income nations, parents value sons more than daughters, which explains why age-sex ratios in these nations may be higher than 100. 76. An age-sex pyramid is useful, in part, because it helps predict the demographic future of a society. 77. Earth's population reached one billion about the year 1800. 78. Thomas Robert Malthus predicted population would increase according to an arithmetic progression. 79. It would be fair to say that Malthus was optimistic about the future of the world. 80. Demographic transition theory states that humanity must take drastic action to reduce fertility if we are to save the planet. 81. More than seventy nations, including the United States, have a birth rate below the zero population growth point. 82. Expanding opportunities for women around the world is one important strategy that will help limit global population increase. 83. “Zero population growth” refers to cases in which no more people are born. 84. By about 1750, industrialization triggered rapid urbanization in Europe and cities expanded around new central business districts. 85. A metropolis is a large city that socially and economically dominates an urban area. 86. In general, Snowbelt cities are larger in physical size than Sunbelt cities. 87. Since about 1990, there has been a resurgence in the rural population of the United States. 88. Durkheim's concept of organic solidarity is much the same as Tönnies's concept of Gemeinschaft. 89. Georg Simmel claimed that urbanites are so interested in each other’s lives that there is little privacy in cities. 90. An early focus on cities and urban life was found at the University of Chicago’s sociology department. 91. As societies gain technological power, they have a greater and greater effect on the natural environment. 92. The “limits to growth” thesis states that humans can expect to solve whatever environmental problems come along. 93. The “limits to growth” thesis has a similar concern about the planet's future as the ideas expressed by Malthus. 94. On a planet that is mostly covered with oceans, there is no shortage of fresh water. 95. At the present rate of loss, almost all of the rain forests will be gone by the end of this century. 96. Global warming could cause the oceans to rise during this century, covering many major world cities. 97. Protecting the rain forests is vital to maintaining Earth’s biodiversity. 98. Environmental racism is a pattern by which environmental hazards are greatest for the poor, especially minority poor. SHORT-ANSWER QUESTIONS 99. How do you calculate a crude birth rate? Why is the crude birth rate "crude"? 100. Compared to world standards, how would you describe the crude birth rate, crude death rate, and infant mortality rate of the United States? 101. What is an in-migration rate? An out-migration rate? A net migration rate? 102. What is "push-pull" migration? 103. What two assertions about population and resources were made by Thomas Robert Malthus? 104. What are the four stages in demographic transition theory? 105. Point to several differences in population patterns in high- and low-income nations. 106. Why is empowering women important to controlling global population? 107. What are the three urban revolutions that have reshaped human societies? 108. State the basic idea of the “logic of growth” thesis. 109. State the basic idea of the “limits to growth” thesis. 110. What is environmental racism? ESSAY QUESTIONS / TOPICS FOR SHORT PAPERS 111. Clearly state the warning given to the world by Thomas Robert Malthus. How does demographic transition theory respond to this warning? What evidence can you provide that supports Malthus’s view? What is your assessment of demographic transition theory? Which position do you find more correct? Why? 112. Examine the two age-sex pyramids on page 450 of the text. Write an essay in which you analyze these pyramids showing how they provide information about the past, present, and future of a society’s population. 113. What is meant by “urbanism as a way of life”? Develop a description of urbanism drawing on the ideas of Tönnies, Durkheim, Simmel, and Wirth. In what ways do they agree? Note points of disagreement. 114. Describe the state of the natural environment in the United States. Consider solid waste, water supply, water pollution, and air pollution. Do you think the state of the natural environment is improving or getting worse? Why? 115. What do we learn from the urban political-economy approach? How does this approach differ from the “urbanism as a way of life” theory developed by Louis Wirth and others? (Consider whether cities are self-defining on the basis of population size, density, and diversity or whether cities reflect larger economic forces such as capitalism.) 116. What can Grandma Macionis (see the box on page 467) teach us about living a life that does not strain the natural environment? In what specific ways has life changed since her time? How have these changes affected the environment? What are the chances of regaining some of her environment-friendly ways of living? 117. Carefully review Chapter 15’s “Seeing Sociology in Everyday Life” photo essay on pages 472-73. Based on this essay, as well as what you have read in Chapter 15 of the text, explain why the state of the natural environment has much to do with our culture and level of technology. In short, explain why the environment is a social issue.
Created Date Thursday, 02 January 2014
Filesize 35 Kilobytes

Accounting_Chapter_16

Multiple-Choice 1. __________ is the concept used to describe changes in social patterns brought on by the Industrial Revolution. 2. Sociologists explain that social change 3. Which of the following is a common cause of social change? 4. Social movements are defined as 5. Of the various types of social movements, which is the least threatening to the status quo? 6. Durkheim’s concept of organic solidarity is roughly the same as Tönnies’ concept of 7. Postmodernity refers to societies that True/False ________ 8. Kai Erikson claims that, as serious as many disasters are, they usually are over quickly. ________ 9. Modernization means that fewer people live in small, traditional communities. Short-Answer 10. Name and describe four types of social movements. MULTIPLE-CHOICE QUESTIONS 1. The chapter-opening story about the inhabitants of the same New York apartment who lived a century apart shows us that 2. __________ refers to social patterns brought on by the Industrial Revolution. 3. __________ refers to changes brought on by the Information Revolution 4. The concept "cultural lag" refers to the fact that 5. Sociologists point out that 6. Sociologists explain that social change 7. Read the following statements about social change. Which statement is NOT correct? 8. The observation that many familiar aspects of U.S. culture came from other lands was made by 9. The fact that the coins we use is an idea that came from the Middle East centuries ago is an example of which of the following? 10. Ralph Linton made the point that many familiar elements in today’s way of life 11. Karl Marx highlighted which of the following in the process of social change? 12. Max Weber’s thesis on the Protestant work ethic and the spirit of capitalism highlighted the importance of __________ in the process of social change. 13. "Moving on" has always been an important part of our national culture. Remembering the map in the chapter, in which part of the country do we find the largest share of households where the same people have lived for thirty years or more? 14. A century ago in the United States, the typical household was 15. Social movements are defined as 16. Of the various types of social movements, which is LEAST threatening to the status quo? 17. Jen has joined a social movement that seeks radical social change but only in some people. Which type of movement has she joined? 18. Efforts by activists to get the public to recognize the danger of AIDS in the early 1980s is a good example of what process related to social movements? 19. Alcoholics Anonymous, an organization that seeks to help alcoholics achieve a sober life, is one example of 20. The concept of relative deprivation is based on the idea that 21. Mass-society theory predicts that social movements will involve people who 22. Political economy theory claims that social movements arise in capitalist societies 23. Resource mobilization theory states that social movements require 24. __________ states that social movements depend not just on material resources but on rallying around symbols and gaining a sense of unity in action. 25. In what way do “new social movements” differ from those in the past? 26. Which of the following is the best example of an issue that defines a “new social movement”? 27. The stage of a social movement called “bureaucratization” refers to 28. The Gulf of Mexico oil spill in 2010 is one example of 29. Kai Erikson explains that disasters 30. Read the following statements about changes during the last century. Three actually happened; one did not. Which statement is NOT correct? 31. Modernity is the concept used for the social patterns that emerged in the wake of the 32. Peter Berger describes modernization as ALL BUT WHICH of the following? 33. Ferdinand Tönnies described modernity as the loss of 34. For Ferdinand Tönnies, the essence of Gesellschaft is 35. A correct criticism of Tönnies’s ideas about modernity is that he 36. Emile Durkheim claimed that the defining trait of modernity is 37. Durkheim’s concept of organic solidarity corresponds to Tönnies’s concept of 38. Durkheim’s greatest concern about modern societies was what he saw as the increase in 39. Emile Durkheim claimed that anomie exists when society fails to 40. Max Weber’s view of modernity stressed 41. Max Weber claimed that modernization was evident in 42. For Max Weber, preindustrial societies are characterized by 43. Karl Marx understood the onset of modernity in terms of 44. A mass society is one 45. A number of sociologists contributed to the mass-society theory of modernity. Which of the following is NOT one of them? 46. Which of the following statements does NOT correctly describe modernity as mass society? 47. To say that modern society has a “mass scale” means that many people 48. Mass-society theory claims that modern society has 49. The problem mass-society theory sees with the expansion of the bureaucratic state is that 50. The class-society theory of modernity draws its inspiration from which of the following sociologists? 51. When describing U.S. society as a modern, class society, sociologists point to 52. According to class-society theory, the single factor that shapes modern society the most is 53. Mass-society theory claims that modern individuals face the problem of 54. In modern mass societies, individuals experience 55. David Riesman described “tradition-directed” social character as 56. David Riesman described “other-directed” social character as 57. According to class-society theory, the key problem of living in a modern society is 58. Overall, mass-society theory suggests that the problem of living in modern society is 59. Overall, class-society theory suggests that the problem of living in modern society is 60. Herbert Marcuse challenged Max Weber by claiming that modern societies are not rational because 61. In the opinion of Herbert Marcuse, science 62. In the United States, people tend to link the concept of modernity to 63. The Kaiapo people of Brazil’s rain forest as well as members of the Gullah community in Georgia show us that 64. Postmodernity refers to societies that 65. Scholars who take a “postmodernist” approach claim that 66. Read the four statements below about postmodernism. One of them is not correct; which is it? 67. The communitarian movement is based on the claim that TRUE / FALSE QUESTIONS 68. Modernity is the product of social changes brought on by the Industrial Revolution. 69. In global perspective, some societies change; others do not. 70. William Ogburn's theory of “cultural lag” states that non-material culture, such as ideas, usually changes faster than material culture, such as medical technology. 71. Social change is usually controversial. 72. Social change can result from invention, discovery, or cultural diffusion. 73. Karl Marx claimed that conflict between classes typically prevents social change. 74. All social movements call for basic change to all of society. 75. Social movements often depend upon “claims making,” a process of trying to convince the public about the importance of some issue. 76. Mass-society theory of social movements suggests that social movements often emerged among people with weak social ties. 77. Marxist political economy theory states that social movements arise in reaction to the injustices of capitalism. 78. Resource mobilization theory states that social movements need resources, including members, in order to succeed. 79. Culture theory would argue that a photograph, song, or some other symbol often serves as the rallying point for forming a social movement. 80. “New social movements” tend to be about bread-and-butter economic issues. 81. A major oil spill from a ship would be an example of a “natural disaster.” 82. The social damage from a disaster is especially great when a toxic substance is involved. 83. Modernization means that fewer people live in small, traditional communities. 84. Peter Berger suggests that the rising popularity of wearing wristwatches is a good indicator that a traditional society is beginning to modernize. 85. Ferdinand Tönnies described Gesellschaft as a strong community that has power over the individual. 86. The phrase “essentially united in spite of all separating factors” is a good description of what Tönnies called Gemeinschaft. 87. Emile Durkheim’s concept of organic solidarity parallels Tönnies’s concept of Gesellschaft. 88. According to Emile Durkheim, modern societies are held together by difference, especially productive specialization. 89. Emile Durkheim understood modernization as changing the basis of societal solidarity from difference to likeness. 90. Durkheim considered a rising suicide rate a good indicator of stronger mechanical solidarity. 91. Max Weber stated that modern societies were prone to a condition he called anomie. 92. Max Weber described modern societies as “disenchanted.” 93. While Max Weber linked modern alienation to inequality and capitalism, Karl Marx linked modern alienation to increasing rationalization. 94. Karl Marx considered the defining trait of modern society to be capitalism. 95. Karl Marx was a major architect of mass-society theory. 96. Mass-society theory argues that the mass media transform people in countless local communities forming a national culture. 97. According to mass-society theory, modernization makes people less tolerant of social diversity. 98. A criticism of mass-society theory is that it pays little attention to social inequality. 99. Class-society theory is derived largely from the social-conflict approach of Karl Marx. 100. Class-society theory states that modernization has greatly reduced social inequality. 101. The problem of forming a clear personal identity in modern society is highlighted by mass-society theory. 102. Modern people, according to David Riesman, tend to develop tradition-directed personalities in which they imitate others . 103. David Riesman's other-directed people are characterized by superficiality, weak beliefs, and change. 104. Other-directed people have little interest in fashions and fads. 105. Class-society theory claims that most people living in modern, capitalist societies experience a great deal of powerlessness. 106. Social change always means progress; almost all evidence suggests that life is getting better. 107. Postmodernity refers to societies transformed by the Industrial Revolution. 108. The theory of postmodernity claims that, in important respects, modernity has failed to live up to its promise. 109. The case of Brazil’s Kaiapo clearly shows that material prosperity is the key to strong connections to our traditions. SHORT-ANSWER QUESTIONS 110. What are the four key characteristics of the process of social change? 111. What are the three important sources of cultural change? 112. Name and define four types of social movements. 113. What is “claims making”? Why is this process important to understanding social movements? 114. Identify six theories that explain social movements and briefly state their essential ideas. 115. What are the four stages in the life course of a social movement? 116. What are Peter Berger’s four major characteristics of modernization? 117. Define the concepts "Gemeinschaft" and "Gesellschaft" in ways that make their differences clear. 118. Why did Emile Durkheim label modern society "organic”? 119. What did Emile Durkheim say about modernization and social solidarity? What did he say about modernization and specialization? 120. How did Max Weber characterize modern society? 121. In a sentence, what is the basic idea behind mass-society theory? 122. In a sentence, what is the basic idea behind class-society theory? 123. What is postmodernity? 124. What do we learn about social change by looking at the history of the Kaiapo people of Brazil and the Gullah people from Georgia? ESSAY QUESTIONS / TOPICS FOR SHORT PAPERS 125. Social change has as many causes as it does consequences. In this essay, identify and discuss several causes of social change, including cultural processes (invention, discovery, and diffusion), social conflict, ideas, and demographic patterns. Where you can, point to specific changes in the United States brought about by each of these causes. 126. Name several of today’s social movements. Why do you think social movements are common in modern societies? Explain how "new social movements" differ from traditional social movements. 127. To what extent does the current Tea Party qualify as a social movement? What is it trying to accomplish? What do the various theories of social movements suggest about how to make such an effort successful? What are some of the claims made by the Tea Party? What are some counterclaims? 128. Explain how disasters are harmful examples of "unexpected change." What are the three types of disasters? What factors make disasters especially harmful? 129. What is modernity? How are modern societies different from traditional societies? Begin with Peter Berger’s ideas about the traits of modernity. Then consider the defining traits of modernity according to Tönnies, Durkheim, Weber, and Marx. 130. Develop an essay that highlights various qualities of modern societies following (a) mass-society theory and (b) class-society theory. Carefully describe modern societies in such a way as to bring out the differences in the two approaches. On what points do they agree? Which seems, on balance, the more convincing argument? Why? 131. People in the United States are inclined to speak of social change as “progress.” In this essay, critically assess that contention. As evidence, consider some of the patterns of change included in the box on page 504. Does the idea of “change as progress” hold up? Try to develop a more complex statement of the link between social change and quality of life. 132. Summarize the main arguments of modernization theory and dependency theory with respect to the transformation of poor societies. How does the former approach see social change as more positive and easier than the second? What is the role of high-income nations such as the United States, according to each approach? On balance, which approach do you find more convincing? Why? 133. Many of the sociologists we have read about in this chapter saw traditional societies as opposed to modern societies—that is, they defined the concepts of “tradition” and “modernity” in opposing terms. Explain how traditional and modern elements combine in today’s world, both in the United States and in other societies around the world. Do you think “traditional” and “modern” actually go together better than some of the thinkers in this chapter suggest? 134. Look carefully at Chapter 16’s “Seeing Sociology in Everyday Life” photo essay on pages 500-501. Based on this essay, as well as what you have read in this chapter, write an essay explaining how tradition and modernity can be polar opposites, but how the two also sometimes combine in unexpected ways.
Created Date Thursday, 02 January 2014
Filesize 74 Kilobytes

Accounting_Chapter_17

TRUE-FALSE STATEMENTS 1. The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet, and retained earnings statement. 2. For external reporting, a company must prepare either an income statement or a statement of cash flows, but not both. 3. A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions. 4. A statement of cash flows indicates the sources and uses of cash during a period. 5. In preparing a statement of cash flows, cash equivalents are subtracted from cash in order to compute the net change in cash during a period. 6. Cash equivalents are highly-liquid investments that have maturities of less than three months. 7. The use of cash to purchase highly liquid short-term investments (cash equivalents) would be reported on the statement of cash flows as an investing activity. 8. In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt. 9. Noncash investing and financing activities must be reported in the body of a statement of cash flows. 10. The statement of cash flows classifies cash receipts and payments as operating, nonoperating, financial, and extraordinary activities. 11. The sale of land for cash would be classified as a cash inflow from an investing activity. 12. Cash flow from investing activities is considered the most important category on the statement of cash flows because it is considered the best measure of expected income. 13. The receipt of dividends from long-term investments in stock is classified as a cash inflow from investing activities. 14. The payment of interest on bonds payable is classified as a cash outflow from operating activities. 15. Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities. 16. The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash. 17. All major financing and investing activities affect cash. 18. Cash provided by operations is generally equal to operating income. 19. Using the indirect method, an increase in accounts receivable during a period is deducted from net income in calculating cash provided by perations. 20. Using the indirect method, an increase in accounts payable during a period is deducted from net income in calculating cash provided by operations. 21. A loss on sale of equipment is added to net income in determining cash provided by operations under the indirect method. 22. In preparing a statement of cash flows, an increase in the Common Stock and Treasury Stock accounts during a period would be an investing activity. 23. Cash provided by operating activities fails to take into account that a company must invest in new fixed assets just to maintain its current level of operations. 24. Free cash flow equals cash provided by operations less capital expenditures and cash dividends. a25. The use of a worksheet to prepare a statement of cash flows is optional. a26. During the year, Income Tax Expense amounted to $30,000 and Income Taxes Payable increased by $4,000; therefore, the cash paid for income taxes was $26,000. a27. In preparing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the accrual basis to the cash basis. a28. Using the direct method, major classes of investing and financing activities are listed in the operating activities section. a29. During a period, cost of goods sold + an increase in inventory + an increase in accounts payable = cash paid to suppliers. a30. Operating expenses + an increase in prepaid expenses – a decrease in accrued expenses payable = cash payments for operating expenses. 31. The statement of cash flows classifies cash receipts and cash payments into two categories: operating activities and nonoperating activities. 32. Financing activities include the obtaining of cash from issuing debt and repaying the amounts borrowed. 33. The adjusted trial balance is the only item needed to prepare the Statement of Cash Flows. 34. Under the indirect method, retained earnings is adjusted for items that affected reported net income but did not affect cash. a35. The reconciling entry for depreciation expense in a worksheet is a credit to Accumulated Depreciation and a debit to Operating-Depreciation Expense. a36. Under the direct method, the formula for computing cash collections from customers is sales revenues plus the increase in accounts receivable or minus the decrease in accounts receivable. MULTIPLE CHOICE QUESTIONS 37. The statement of cash flows should help investors and creditors assess each of the following except the a. entity's ability to generate future income. b. entity's ability to pay dividends. c. reasons for the difference between net income and net cash provided by operating activities. d. cash investing and financing transactions during the period. 38. The statement of cash flows a. must be prepared on a daily basis. b. summarizes the operating, financing, and investing activities of an entity. c. is another name for the income statement. d. is a special section of the income statement. 39. Which one of the following items is not generally used in preparing a statement of cash flows? a. Adjusted trial balance b. Comparative balance sheets c. Current income statement d. Additional information 40. The primary purpose of the statement of cash flows is to a. provide information about the investing and financing activities during a period. b. prove that revenues exceed expenses if there is a net income. c. provide information about the cash receipts and cash payments during a period. d. facilitate banking relationships. 41. If a company reports a net loss, it a. may still have a net increase in cash. b. will not be able to pay cash dividends. c. will not be able to get a loan. d. will not be able to make capital expenditures. 42. In addition to the three basic financial statements, which of the following is also a required financial statement? a. the "Cash Budget" b. the Statement of Cash Flows c. the Statement of Cash Inflows and Outflows d. the "Cash Reconciliation" 43. The statement of cash flows will not report the a. amount of checks outstanding at the end of the period. b. sources of cash in the current period. c. uses of cash in the current period. d. change in the cash balance for the current period. 44. Cash equivalents do not include a. short-term corporate notes. b. treasury bills. c. money market funds. d. 2-year certificates of deposit. 45. Which of the following characteristics does not apply to cash equivalents? a. Short-term b. Highly-liquid c. Readily convertible into cash d. Sensitive to interest rate changes 46. Cash equivalents are generally investments with maturities of a. $1,000 or more. b. three months or less. c. at least six months. d. one year or the operating cycle, whichever is less. 47. The best measure of a company's ability to generate sufficient cash to continue as a going concern is net cash provided by a. financing activities. b. investing activities. c. operating activities. d. processing activities. 48. The acquisition of land by issuing common stock is a. a noncash transaction which is not reported in the body of a statement of cash flows. b. a cash transaction and would be reported in the body of a statement of cash flows. c. a noncash transaction and would be reported in the body of a statement of cash flows. d. only reported if the statement of cash flows is prepared using the direct method. 49. The order of presentation of activities on the statement of cash flows is a. operating, investing, and financing. b. operating, financing, and investing. c. financing, operating, and investing. d. financing, investing, and operating. 50. Financing activities involve a. lending money. b. acquiring investments. c. issuing debt. d. acquiring long-lived assets. 51. Investing activities include a. collecting cash on loans made. b. obtaining cash from creditors. c. obtaining capital from owners. d. repaying money previously borrowed. 52. Generally, the most important category on the statement of cash flows is cash flows from a. operating activities. b. investing activities. c. financing activities. d. significant noncash activities. 53. The category that is generally considered to be the best measure of a company's ability to continue as a going concern is a. cash flows from operating activities. b. cash flows from investing activities. c. cash flows from financing activities. d. usually different from year to year. 54. Cash receipts from interest and dividends are classified as a. financing activities. b. investing activities. c. operating activities. d. either financing or investing activities. 55. Each of the following is an example of a significant noncash activity except a. conversion of bonds into common stock. b. exchanges of plant assets. c. issuance of debt to purchase assets. d. stock dividends. 56. If a company has both an inflow and outflow of cash related to property, plant, and equipment, the a. two cash effects can be netted and presented as one item in the investing activities section. b. cash inflow and cash outflow should be reported separately in the investing activities section. c. two cash effects can be netted and presented as one item in the financing activities section. d. cash inflow and cash outflow should be reported separately in the financing activities section. 57. Of the items below, the one that appears first on the statement of cash flows is a. noncash investing and financing activities. b. net increase (decrease) in cash. c. cash at the end of the period. d. cash at the beginning of the period. 58. Which of the following transactions does not affect cash during a period? a. Write-off of an uncollectible account b. Collection of an accounts receivable c. Sale of treasury stock d. Exercise of the call option on bonds payable 59. Significant noncash transactions would not include a. conversion of bonds into common stock. b. asset acquisition through bond issuance. c. treasury stock acquisition. d. exchange of plant assets. 60. In preparing a statement of cash flows, a conversion of bonds into common stock will be reported in a. the financing section. b. the "extraordinary" section. c. a separate schedule or note to the financial statements. d. the stockholders' equity section. 61. Indicate where the event paid income taxes would appear, if at all, on the statement of cash flows. a. Operating activities section b. Investing activities section c. Financing activities section d. Does not represent a cash flow 62. Indicate where the event common stock issued for cash would appear, if at all, on the indirect statement of cash flows. a. Operating activities section b. Investing activities section c. Financing activities section d. Does not represent a cash flow 63. Indicate where the event purchased land for cash would appear, if at all, on the indirect statement of cash flows. a. Operating activities section b. Investing activities section c. Financing activities section d. Does not represent a cash flow 64. Indicate where the event purchased land and a building with a mortgage would appear, if at all, on the indirect statement of cash flows. a. Operating activities section b. Investing activities section c. Financing activities section d. Does not represent a cash flow 65. Joy Elle’s Vegetable Market had the following transactions during 2010: 1. Issued $50,000 of par value common stock for cash. 2. Repaid a 6 year note payable in the amount of $22,000. 3. Acquired land by issuing common stock of par value $100,000. 4. Declared and paid a cash dividend of $2,000. 5. Sold a long-term investment (cost $63,000) for cash of $6,000. 6. Acquired an investment in IBM stock for cash of $12,000. What is the net cash provided by financing activities? a. $26,000 b. $50,000 c. $28,000 d. $18,000 66. Joy Elle’s Vegetable Market had the following transactions during 2010: 1. Issued $50,000 of par value common stock for cash. 2. Repaid a 6 year note payable in the amount of $22,000. 3. Acquired land by issuing common stock of par value $100,000. 4. Declared and paid a cash dividend of $2,000. 5. Sold a long-term investment (cost $63,000) for cash of $6,000. 6. Acquired an investment in IBM stock for cash of $12,000. What is the net cash provided by investing activities? a. $12,000 b. $32,000 c. ($6,000) d. $6,000 67. Miller Company purchased treasury stock with a cost of $15,000 during 2010. During the year, the company paid dividends of $20,000 and issued bonds payable for proceeds of $866,000. Cash flows from financing activities for 2010 total a. $846,000 net cash inflow. b. $861,000 net cash inflow. c. $866,000 net cash outflow. d. $831,000 net cash inflow. 68. Cline Company issued common stock for proceeds of $372,000 during 2010. The company paid dividends of $66,000 and issued a long-term note payable for $90,000 in exchange for equipment during the year. The company also purchased treasury stock that had a cost of $14,000. The financing section of the statement of cash flows will report net cash inflows of a. $292,000. b. $404,000. c. $306,000. d. $358,000. 69. In Gentry Company, land decreased $140,000 because of a cash sale for $140,000, the equipment account increased $40,000 as a result of a cash purchase, and Bonds Payable increased $130,000 from issuance for cash at face value. The net cash provided by investing activities is a. $140,000. b. $230,000. c. $100,000. d. $110,000. 70. Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $280,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is a. $280,000. b. $290,000. c. $350,000. d. $270,000. 71. Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $150,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is a. $150,000. b. $155,000. c. $185,000. d. $145,000. 72. Wilton Company reported net income of $50,000 for the year. During the year, accounts receivable decreased by $7,000, accounts payable increased by $3,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is a. $40,000. b. $65,000. c. $49,000. d. $45,000. 73. Buster Company reported a net loss of $6,000 for the year ended December 31, 2010. During the year, accounts receivable increased $14,000, merchandise inventory decreased $10,000, accounts payable decreased by $20,000, and depreciation expense of $10,000 was recorded. During 2010, operating activities a. used net cash of $20,000. b. used net cash of $28,000. c. provided net cash of $28,000. d. provided net cash of $18,000. 74. The net income reported on the income statement for the current year was $225,000. Depreciation recorded on plant assets was $38,000. Accounts receivable and inventories increased by $2,000 and $8,000, respectively. Prepaid expenses and accounts payable decreased by $1,000 and $11,000 respectively. How much cash was provided by operating activities? a. $205,000 b. $243,000 c. $225,000 d. $259,000 75. The net income reported on the income statement for the current year was $240,000. Depreciation was $50,000. Account receivable and inventories decreased by $10,000 and $30,000, respectively. Prepaid expenses and accounts payable increased, respectively, by $1,000 and $8,000. How much cash was provided by operating activities? a. $301,000 b. $337,000 c. $321,000 d. $329,000 76. If a gain of $15,000 is incurred in selling (for cash) office equipment having a book value of $100,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a. $95,000. b. $115,000. c. $100,000. d. $15,000. 77. If a loss of $20,000 is incurred in selling (for cash) office equipment having a book value of $80,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a. $60,000. b. $80,000. c. $100,000. d. $20,000. 78. Harbor Company reported net income of $90,000 for the year ended December 31, 2010. During the year, inventories decreased by $12,000, accounts payable decreased by $18,000, depreciation expense was $20,000 and a gain on disposal of equipment of $9,000 was recorded. Net cash provided by operating activities in 2010 using the indirect method was a. $149,000. b. $95,000. c. $107,000. d. $85,000. 79. The third (final) step in preparing the statement of cash flows is to a. analyze changes in noncurrent asset and liability accounts. b. compare the net change in cash with the change in the cash account reported on the balance sheet. c. determine net cash provided by operating activities. d. list the noncash activities. 80. Which one of the following items is not necessary in preparing a statement of cash flows? a. Determine the change in cash b. Determine the cash provided by operations c. Determine cash from financing and investing activities d. Determine the cash in all bank accounts 81. If accounts receivable have increased during the period, a. revenues on an accrual basis are less than revenues on a cash basis. b. revenues on an accrual basis are greater than revenues on a cash basis. c. revenues on an accrual basis are the same as revenues on a cash basis. d. expenses on an accrual basis are greater than expenses on a cash basis. 82. If accounts payable have increased during a period, a. revenues on an accrual basis are less than revenues on a cash basis. b. expenses on an accrual basis are less than expenses on a cash basis. c. expenses on an accrual basis are greater than expenses on a cash basis. d. expenses on an accrual basis are the same as expenses on a cash basis. 83. Which one of the following affects cash during a period? a. Recording depreciation expense b. Declaration of a cash dividend c. Write-off of an uncollectible account receivable d. Payment of an accounts payable 84. In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is a. added to net income. b. deducted from net income. c. ignored because it does not affect cash. d. not reported on a statement of cash flows. 85. Meyer Company reported net income of $70,000 for the year. During the year, accounts receivable increased by $7,000, accounts payable decreased by $3,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is a. $65,000. b. $85,000. c. $69,000. d. $70,000. 86. Flynn Company reported a net loss of $30,000 for the year ended December 31, 2010. During the year, accounts receivable decreased $15,000, merchandise inventory increased $24,000, accounts payable increased by $30,000, and depreciation expense of $15,000 was recorded. During 2010, operating activities a. used net cash of $6,000. b. used net cash of $24,000. c. provided net cash of $6,000. d. provided net cash of $24,000. 87. Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the a. direct method. b. indirect method. c. working capital method. d. cost-benefit method. 88. In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is a. deducted from net income. b. added to net income. c. ignored because it does not affect income. d. ignored because it does not affect expenses. 89. Using the indirect method, patent amortization expense for the period a. is deducted from net income. b. causes cash to increase. c. causes cash to decrease. d. is added to net income. 90. In developing the cash flows from operating activities, most companies in the U. S. a. use the direct method. b. use the indirect method. c. present both the indirect and direct methods in their financial reports. d. prepare the operating activities section on the accrual basis. 91. Each of the following is added to net income in computing net cash provided by operating activities except a. amortization expense. b. an increase in accrued expenses payable. c. a gain on sale of equipment. d. a decrease in inventory. 92. Which of the following would be subtracted from net income using the indirect method? a. Depreciation expense b. An increase in accounts receivable c. An increase in accounts payable d. A decrease in prepaid expenses 93. Which of the following would be added to net income using the indirect method? a. An increase in accounts receivable b. An increase in prepaid expenses c. Depreciation expense d. A decrease in accounts payable 94. Which of the following would not be an adjustment to net income using the indirect method? a. Depreciation Expense b. An increase in Prepaid Insurance c. Amortization Expense d. An increase in Land 95. In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n) a. subtraction from net income. b. addition to net income. c. addition to cash flow from investing activities. d. subtraction from cash flow from investing activities. 96. Which of the following adjustments to convert net income to net cash provided by operating activities is correct? Add to Net Income Deduct from Net Income a. Accounts Receivable increase decrease b. Prepaid Expenses increase decrease c. Inventory decrease increase d. Taxes Payable decrease increase 97. Which of the following adjustments to convert net income to net cash provided by operating activities is incorrect? Add to Net Income Deduct from Net Income a. Accounts Receivable decrease increase b. Prepaid Expenses increase decrease c. Inventory decrease increase d. Accounts Payable increase decrease 98. Which of the following adjustments to convert net income to net cash provided by operating activities is not added to net income? a. Gain on Sale of Equipment b. Depreciation Expense c. Patent Amortization Expense d. Depletion Expense 99. Using the indirect method, if equipment is sold at a gain, the a. sale proceeds received are deducted in the operating activities section. b. sale proceeds received are added in the operating activities section. c. amount of the gain is added in the operating activities section. d. amount of the gain is deducted in the operating activities section. 100. A company had net income of $210,000. Depreciation expense is $26,000. During the year, Accounts Receivable and Inventory increased $15,000 and $40,000, respectively. Prepaid Expenses and Accounts Payable decreased $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of $3,000. How much cash was provided by operating activities? a. $176,000 b. $182,000 c. $256,000 d. $268,000 101. On the statement of cash flows using the indirect method, patent amortization expense will a. be added to net income in the operating section. b. be deducted from net income in the operating section. c. appear as an inflow of cash in the investing section. d. appear as an outflow of cash in the investing section. 102. The indirect and direct methods of preparing the statement of cash flows are identical except for the a. significant noncash activity section. b. operating activities section. c. investing activities section. d. financing activities section. 103. Land acquired from the issuance of common stock is reported a. as a financing activity. b. as an investing activity. c. as an operating activity. d. in a separate schedule at the bottom of the statement. 104. In Rooney Company, Treasury Stock increased $30,000 from a cash purchase, and Retained Earnings increased $80,000 as a result of net income of $124,000 and cash dividends paid of $44,000. Net cash used by financing activities is: a. $30,000. b. $44,000. c. $110,000. d. $74,000. 105. In Wallace Company, net income is $260,000. If accounts receivable increased $140,000 and accounts payable decreased $40,000, net cash provided by operating activities using the indirect method is: a. $80,000. b. $160,000. c. $360,000. d. $440,000. 106. In Shannon Company, there was an increase in the land account during the year of $48,000. Analysis reveals that the change resulted form a cash sale of land at cost $110,000, and a cash purchase of land for $158,000. In the statement of cash flows, the change in the land account should be reported in the investment section: a. as a net purchase of land, $48,000. b. only as a purchase of land $158,000. c. as a purchase of land $158,000 and a sale of land $110,000. d. only as a sale of land $110,000. 107. The following data are available for Springer Corporation. Net income $300,000 Depreciation expense 60,000 Dividends paid 90,000 Gain on sale of land 15,000 Decrease in accounts receivable 30,000 Decrease in accounts payable 45,000 MC. 107 (cont.) Net cash provided by operating activities is: a. $240,000. b. $330,000. c. $360,000. d. $420,000. 108. The following data are available for Nichols Corporation. Sale of land $200,000 Sale of equipment 100,000 Issuance of common stock 140,000 Purchase of equipment 60,000 Payment of cash dividends 120,000 Net cash provided by investing activities is: a. $240,000. b. $260,000. c. $300,000. d. $380,000. 109. The following data are available for Cole Company. Increase in accounts payable $120,000 Increase in bonds payable 300,000 Sale of investments 150,000 Issuance of common stock 180,000 Payment of cash dividends 90,000 Net cash provided by financing activities is: a. $270,000. b. $390,000. c. $480,000. d. $510,000. 110. If $250,000 of bonds are issued during the year but $100,000 of old bonds are retired during the year, the statement of cash flows will show a(n) a. net increase in cash of $150,000. b. net decrease in cash of $150,000. c. increase in cash of $250,000 and a decrease in cash of $100,000. d. net gain on retirement of bonds of $150,000. 111. Which of the following changes in retained earnings during a period will be reported in the financing activities section of the statement of cash flows? 1. Declaration of a cash dividend paid during the period. 2. Net income for the period. a. 1 b. 2 c. Neither 1 nor 2. d. Both 1 and 2. 112. The statement of cash flows a. is prepared instead of an income statement under generally accepted accounting principles. b. is used to assess an entity's ability to pay dividends and meet obligations. c. is prepared from comparative income statements. d. reflects earnings per share figures on a cash basis and on an accrual basis in the body of the statement. 113. In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of a. the adjusted trial balance. b. the current period's balance sheet. c. a comparative balance sheet. d. a comparative income statement. 114. To determine the net cash provided (used) by operating activities, it is necessary to analyze a. the current year's income statement. b. a comparative balance sheet. c. additional information. d. all of these. 115. Which of the following would not be needed to determine net cash provided by operating activities? a. Depreciation expense b. Change in accounts receivable c. Payment of cash dividends d. Change in prepaid expenses 116. When equipment is sold for cash, the amount received is reflected as a cash a. inflow in the operating section. b. inflow in the financing section. c. inflow in the investing section. d. outflow in the operating section. 117. The statement of cash flows will not provide insight into a. why dividends were not increased. b. whether cash flow is greater than net income. c. the exact proceeds of a future bond issue. d. how the retirement of debt was accomplished. 118. Which of the following transactions would not be classified as a financing activity? a. Purchase of treasury stock b. Payment of dividends c. Issuance of bonds at a discount d. Purchase of a long-term investment in bonds 119. A measure that describes the cash remaining from operations after adjustment for capital expenditures and dividends is a. adjusted cash from operations. b. cash provided by operations. c. free cash flow. d. net cash provided by operating activities. 120. Free cash flow equals cash provided by a. operations less capital expenditures and cash dividends. b. operations less cash dividends. c. investing activities less capital expenditures and cash dividends. d. operations less capital expenditures. 121. LF’s Pest Control Products has the following information available: Net Income $25,000 Cash Provided by Operations 31,000 Cash Sales 65,000 Capital Expenditures 11,000 Dividends Paid 3,000 What is LF’s free cash flow? a. $28,000 b. $20,000 c. $17,000 d. $11,000 122. During 2010, Klugman Industries reported cash provided by operations of $690,000, cash used in investing of $1,029,000, and cash used in financing of $135,000. In addition, cash spent for fixed assets during the period was $414,000. No dividends were paid. Based on this information, what was Klugman's free cash flow? a. ($339,000) b. $1,440,000 c. $276,000 d. ($888,000) a124. In the Green Company, the beginning and ending balances in Land were $198,000 and $240,000 respectively. During the year, land costing $45,000 was sold for $45,000 cash, and land costing $87,000 was purchased for cash. The entries in the reconciling columns of the worksheet will include a: a. credit to Land $45,000 and a debit to Sale of Land $45,000 under investing activities. b. debit to Land $87,000 and a credit to Purchase of Land $87,000 under financing activities. c. net debit to Land $42,000 and a credit to Purchase of Land $42,000 under investing activities. d. credit to Land $45,000 and a debit to Sale of Land $45,000 under financing activities. 125. When listing accounts in the statement of cash flows worksheet, the accumulated depreciation account is shown a. with accounts that have credit balances. b. with accounts that have debit balances. c. as a credit under the reconciling items. d. as a debit under the reconciling items. a126. In the bottom portion of the statement of cash flows worksheet, a. inflows of cash are debits in the reconciling columns. b. outflows of cash are debits in the reconciling columns. c. information pertaining to investing and financing activities only is entered. d. only significant noncash transactions are entered. a127. On the statement of cash flows worksheet, a. significant noncash investing and financing activities are not entered in the reconciling columns. b. a decrease in cash will be offset by a debit in the reconciling items columns at the bottom of the worksheet. c. an increase in cash will be offset by a debit in the reconciling items column at the bottom of the worksheet. d. income statement accounts are listed after balance sheet accounts in the top half of the worksheet under the indirect method. 128. In the Roswell Corporation, cash receipts from customers were $138,000, cash payments for operating expenses were $102,000, and one-third of the company's $6.300 income taxes were paid during the year. Net cash provided by operating activities is: a. $36,000. b. $29,700. c. $33,900. d. $31,800. a129. Each of the following would be reported under operating activities except cash receipts a. from sales of goods. b. from sales of investments. c. of interest on loans. d. of dividends from investments. a130. Which of the following statements concerning the statement of cash flows is true? a. The statement of cash flows is usually more accurate when using the indirect method. b. If the direct method is used, a supplementary schedule reconciling the net income to a net cash from operating activities must still be provided. c. The statement of cash flows reflects both earnings per share and cash per share. d. The statement of cash flows is an optional financial statement for external reporting purposes. a131. Carter Company reports the following: End of Year Beginning of Year Inventory $25,000 $40,000 Accounts Payable 30,000 10,000 If cost of goods sold for the year is $210,000, the amount of cash paid to suppliers is a. $215,000. b. $205,000. c. $175,000. d. $245,000. a132. During the year, Salaries Payable decreased by $6,000. If Salary Expense amounted to $170,000 for the year, the cash paid to employees (including deductions from gross pay) is a. $176,000. b. $170,000. c. $164,000. d. $182,000. a133. Gary Company reports a $15,000 increase in inventory and a $5,000 increase in accounts payable during the year. Cost of Goods Sold for the year was $160,000. The cash payments made to suppliers were a. $160,000. b. $170,000. c. $140,000. d. $155,000. a134. Rader Company had credit sales of $550,000. The beginning accounts receivable balance was $40,000 and the ending accounts receivable balance was $140,000. What were the cash collections from customers during the period? a. $650,000 b. $550,000 c. $450,000 d. $590,000 a135. Haden Inc. had cash sales of $300,000 and credit sales of $1,050,000. The accounts receivable balance increased $15,000 during the year. How much cash did Haden receive from its customers during the year? a. $1,335,000 b. $1,365,000 c. $1,035,000 d. $1,065,000 a136. Utley Company had a cost of purchases of $250,000. The comparative balance sheet analysis revealed a $10,000 decrease in inventory and a $20,000 increase in accounts payable. What were Utley's cash payments to suppliers? a. $230,000 b. $220,000 c. $260,000 d. $280,000 a137. Tatum Company had an increase in inventory of $40,000. The cost of goods sold was $90,000. There was a $5,000 decrease in accounts payable from the prior period. What were Tatum's cash payments to suppliers? a. $135,000 b. $85,000 c. $125,000 d. $95,000 a138. Which of the following items does not appear in the statement of cash flows under the direct method? a. Cash payments to suppliers b. Cash collections from customers c. Depreciation Expense d. Cash from the sale of equipment a139. Largo Company has other operating expenses of $75,000. There has been a decrease in prepaid expenses of $4,000 during the year, and accrued liabilities are $6,000 larger than in the prior period. What were Largo's cash payments for operating expenses? a. $77,000 b. $73,000 c. $65,000 d. $75,000 a140. Dobson Corporation shows income tax expense of $80,000. There has been a $5,000 decrease in federal income taxes payable and a $7,000 increase in state income taxes payable during the year. What was Dobson's cash payment for income taxes? a. $80,000 b. $78,000 c. $75,000 d. $82,000 a141. Which of the following would not appear in the operating activities section of a statement of cash flows prepared under the direct method? a. Cash receipts from customers b. Cash paid for income taxes c. Gain on sale of equipment d. Cash paid to employees a142. The cost of goods sold during the year was $185,000. Merchandise inventory decreased by $6,000 during the year and accounts payable decreased by $3,000 during the year. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total a. $188,000. b. $182,000. c. $176,000. d. $194,000. a143. Bent Company reports a $20,000 increase in inventory and a $5,000 decrease in accounts payable during the year. Cost of Goods Sold for the year was $170,000. Using the direct method of reporting cash flows from operating activities, cash payments made to suppliers were a. $170,000. b. $185,000. c. $195,000. d. $155,000. a144. During 2010, Unruh Company had $160,000 in cash sales and $1,200,000 in credit sales. The accounts receivable balances were $180,000 and $212,000 at December 31, 2009 and 2010, respectively. Using the direct method of reporting cash flows from operating activities, what was the total cash collected from all customers during 2010? a. $1,168,000 b. $1,392,000 c. $1,360,000 d. $1,328,000 a145. Marsh Company has other operating expenses of $240,000. There has been an increase in prepaid expenses of $16,000 during the year, and accrued liabilities are $24,000 lower than in the prior period. Using the direct method of reporting cash flows from operating activities, what were Marsh's cash payments for operating expenses? a. $228,000 b. $232,000 c. $200,000 d. $280,000 146. Which of the following steps is not required in preparing the statement of cash flows? a. Determine the net change in cash. b. Determine the net cash provided by operating activities. c. Determine cash from investing and financing activities. d. Determine the change in current assets. 147. Financing activities involve a. lending money to other entities and collecting on those loans. b. cash receipts from sales of goods and services. c. acquiring and disposing of productive long-lived assets. d. long-term liability and owners' equity items. 148. The information to prepare the statement of cash flows usually comes from each of the following except a. the comparative balance sheet. b. the retained earnings statement. c. additional information. d. the current income statement. 149. The statement of cash flows is prepared from all of the following except a. the adjusted trial balance. b. comparative balance sheets. c. selected transaction data. d. the current income statement. 150. The information in a statement of cash flows will not help investors to assess the entity's ability to a. generate future cash flows. b. obtain favorable borrowing terms at a bank. c. pay dividends. d. pay its obligations when they become due. 151. In converting net income to net cash provided by operating activities, under the indirect method: a. decreases in accounts receivable and increases in prepaid expenses are added. b. decreases in inventory and increases in accrued liabilities are added. c. decreases in accounts payable and decreases in inventory are deducted. d. increases in accounts receivable and increases in accrued liabilities are deducted. 152. In the Freyfogle Company, land decreased $75,000 because of a cash sale for $75,000, the equipment account increased $20,000 as a result of a cash purchase, and Bonds Payable increased $70,000 from an issuance for cash at face value. The net cash provided by investing activities is a. $75,000. b. $125,000. c. $55,000. d. $50,000. a153. Cribbets Company uses the direct method in determining net cash provided by operating activities, During the year, operating expenses were $290,000, prepaid expenses increased $20,000, and accrued expenses payable increased $30,000. Cash payments for operating expenses were a. $240,000. b. $340,000. c. $300,000. d. $280,000. a154. Bainbridge Company uses the direct method in determining net cash provided by operating activities. The income statement shows income tax expense $70,000. Income taxes payable were $25,000 at the beginning of the year and $18,000 at the end of the year. Cash payments for income taxes are a. $63,000. b. $70,000. c. $77,000. d. $88,000. a155. When a worksheet is used, all but one of the following statements is correct. The incorrect statement is a. Reconciling items on the worksheet are not journalized or posted. b. The bottom portion of the worksheet shows the statement of cash flows effects. c. The balance sheet accounts portion of the worksheet is divided into two parts: assets, and liabilities and stockholders' equity. d. Each line pertaining to a balance sheet account should foot across. BRIEF EXERCISES BE 156 Selected transactions for the Eldon Company are listed below. 1. Collected accounts receivable. 2. Declared and paid dividends on common stock. 3. Sold long-term investments for cash. 4. Issued stock for equipment. 5. Repaid five year note payable. 6. Paid employee wages. 7. Converted bonds payable to common stock. 8. Acquired long-term investment with cash. 9. Sold buildings and equipment for cash. 10. Sold merchandise to customers. Instructions Classify each transaction as either (a) an operating activity, (b) an investing activity, (c) a financing activity, or (d) a noncash investing and financing activity. BE 157 Bertucci Company had net income of $184,000 in 2010. Depreciation expense for the year is $45,000. During the year, Accounts Receivable increased $7,000 and Prepaid Expenses decreased $1,000. The company also sold equipment at a loss of $2,000. Instructions Calculate net cash flows from operating activities using the indirect method. BE 158 During 2010, Baxter Company sold a building with a book value of $145,000 for proceeds of $162,000. The company also sold long-term investments for proceeds of $45,000. The company purchased land and a new building for $320,000 by signing a long-term note payable. No other transactions impacted long-term asset accounts during 2010. Instructions Compute net cash flows from investing activities. BE 159 Mover Company issued common stock for proceeds of $19,000 during 2010. The company paid dividends of $2,000. The company also issued a long-term note payable for $30,000 in exchange for equipment during the year. The company sold treasury stock that had a cost of $2,000 for $4,000. Instructions Compute net cash flows from financing activities. BE 160 At January 1, 2010, Bergman Enterprises reported a balance in the Equipment account of $45,000. During the year the company purchased equipment with a cost of $60,000 and sold equipment with a book value of $30,000. The company reported a loss on the sale of equipment of $4,000. Assume the indirect method is used. Instructions Determine what amount will be reported in (a) the operating activities section and (b) the investing activities section with regard to the purchase and sale of equipment. BE 161 Assume the indirect method is used to compute cash flows from operations. For each item listed below, indicate the effect on net income in arriving at cash flows from operations by choosing one of the following code letters. Code Cash Flows From Operating Activities Add to Net Income A Deduct from Net Income D 1. Increase in accounts receivable 2. Increase in inventory 3. Decrease in prepaid expenses 4. Decrease in accounts payable 5. Increase in accrued liabilities 6. Increase in income taxes payable 7. Depreciation expense 8. Loss on sale of investment 9. Gain on disposal of equipment 10. Amortization expense BE 162 Dutton Company prepared the tabulation below at December 31, 2010. Net Income............................................................................................................ $255,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense, $25,000 .................................................................... ______ Decrease in accounts receivable, $50,000 ................................................... ______ Increase in inventory, $12,000...................................................................... ______ Decrease in accounts payable, $8,600 ......................................................... ______ Increase in income taxes payable, $1,500.................................................... ______ Loss on sale of land, $5,000......................................................................... ______ Net cash provided (used) by operating activities........................................... ______ BE 162 (Cont.) Instructions Show how each item should be reported in the statement of cash flows. Use parentheses for deductions. BE 163 Daimler Enterprises reported cash flow from operations of $312,000. The company made capital expenditures of $112,000 and paid dividends of $34,000. Instructions Compute free cash flow. aBE 164 Schick Company reported cost of goods sold of $172,000 on its 2010 income statement. The company’s beginning inventory was $35,000. The ending inventory was valued at $40,000. The Accounts Payable balance at January 1 was $25,000. The December 31 balance in Accounts Payable was $22,000. Instructions Compute cash payments to suppliers. aBE 165 Hiller Company had total operating expenses of $155,000 in 2010, which included Depreciation Expense of $25,000. Also during 2010, prepaid expenses decreased by $9,000 and accrued expenses increased by $7,500. Instructions Calculate the amount of cash payments for operating expenses in 2010 using the direct method. EXERCISES Ex. 166 Classify each of the following as a(n): A. Operating Activity B. Investing Activity C. Financing Activity _____ 1 Issuance of bonds. _____ 2. Sale of equipment. _____ 3. Amortization expense. _____ 4. Purchase of treasury stock. _____ 5. Receipt of dividends on investment. _____ 6. Purchase of land. Ex. 167 Selected transactions of Eller Company are listed below. 1. Common stock is sold for cash above par value. 2. Bonds payable are issued for cash at a discount. 3. Interest receivable on a short-term note receivable is collected. 4. Land is sold for cash at book value. 5. Accounts payable are paid in cash. 6. Equipment is purchased by signing a 3-year, 10% note payable. 7. Cash dividends on common stock are declared and paid. 8. 100 shares of XYZ common stock are purchased for cash. 9. Merchandise is sold to customers for cash. 10. Bonds payable are converted into common stock. Instructions Classify each transaction as either (a) an operating activity, (b) an investing activity, (c) a financing activity, or (d) a noncash investing and financing activity. Ex. 168 (a) Identify several alternatives for presenting significant noncash activities in financial statements. (b) Give three examples of significant noncash transactions. Ex. 169 The following information is available for Snider Company: Receipts from customers $190,000 Dividends from stock investments 3,000 Proceeds from sale of equipment 18,000 Proceeds from issuance of stock 90,000 Payments for goods 100,000 Payments for operating expenses 75,000 Interest paid 5,000 Taxes paid 4,000 Dividends paid 20,000 Instructions Based on the preceding information, compute the net cash provided by operating activities. Ex. 170 Pierce Company reported net income of $180,000 for the current year. Depreciation recorded on buildings and equipment amounted to $80,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $20,000 $15,000 Accounts receivable 24,000 32,000 Inventories 50,000 65,000 Prepaid expenses 9,500 5,000 Accounts payable 12,000 18,000 Income taxes payable 1,600 1,200 Instructions Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method. Ex. 171 Neal Company reported net income of $140,000. For 2010, depreciation was $30,000, and the company reported a gain on sale of investments of $10,000. Accounts receivable increased $25,000 and accounts payable decreased $20,000. Instructions Compute net cash provided by operating activities using the indirect method. Ex. 172 Assuming a statement of cash flows is prepared, indicate the reporting of the transactions and events listed below by major categories on the statement. Use the following code letters to indicate the appropriate category under which the item would appear on the statement of cash flows. Code Cash Flows From Operating Activities Add to Net Income A Deduct from Net Income D Cash Flows From Investing Activities IA Cash Flows From Financing Activities FA Category 1. Common stock is issued for cash at an amount above par value. _____ 2. Merchandise inventory increased during the period. _____ 3. Depreciation expense recorded for the period. _____ 4. Building was purchased for cash. _____ 5. Bonds payable were acquired and retired at their carrying value. _____ 6. Accounts payable decreased during the period. _____ 7. Prepaid expenses decreased during the period. _____ 8. Treasury stock was acquired for cash. _____ 9. Land is sold for cash at an amount equal to book value. _____ 10. Patent amortization expense recorded for a period. _____ Ex. 173 A comparative balance sheet for Mann Company appears below: MANN COMPANY Comparative Balance Sheet Dec. 31, 2010 Dec. 31, 2009 Assets Cash $ 27,000 $10,000 Accounts receivable 18,000 14,000 Inventory 25,000 18,000 Prepaid expenses 6,000 9,000 Long-term investments -0- 18,000 Equipment 60,000 32,000 Accumulated depreciation—equipment (20,000) (14,000) Total assets $116,000 $87,000 Liabilities and Stockholders' Equity Accounts payable $ 17,000 $ 7,000 Bonds payable 37,000 47,000 Common stock 40,000 23,000 Retained earnings 22,000 10,000 Total liabilities and stockholders' equity $116,000 $87,000 Ex. 173 (Cont.) Additional information: 1. Net income for the year ending December 31, 2010 was $27,000. 2. Cash dividends of $15,000 were declared and paid during the year. 3. Long-term investments that had a cost of $18,000 were sold for $14,000. 4. Sales for 2010 were $120,000. Instructions Prepare a statement of cash flows for the year ended December 31, 2010, using the indirect method. Ex. 174 A comparative balance sheet for Hartman Corporation is presented below: HARTMAN CORPORATION Comparative Balance Sheet 2010 2009 Assets Cash $ 46,000 $ 31,000 Accounts receivable (net) 70,000 60,000 Prepaid insurance 25,000 17,000 Land 18,000 40,000 Equipment 70,000 60,000 Accumulated depreciation (20,000) (13,000) Total Assets $209,000 $195,000 Liabilities and Stockholders' Equity Accounts payable $ 11,000 $ 6,000 Bonds payable 27,000 19,000 Common stock 140,000 115,000 Retained earnings 31,000 55,000 Total liabilities and stockholders' equity $209,000 $195,000 Ex. 174 (cont.) Additional information: 1. Net loss for 2010 is $10,000. 2. Cash dividends of $14,000 were declared and paid in 2010. 3. Land was sold for cash at a loss of $4,000. This was the only land transaction during the year. 4. Equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold for $5,000 cash. 5. $22,000 of bonds were retired during the year at carrying (book) value. 6. Equipment was acquired for common stock. The fair market value of the stock at the time of the exchange was $25,000. Instructions Prepare a statement of cash flows for the year ended 2010, using the indirect method. Solution 174 (cont.) (a) Accumulated Depreciation 12/31/09 $13,000 Accumulated Depreciation 12/31/10 20,000 Difference 7,000 Add: Accumulated depreciation on equipment sold 10,000 Depreciation expense $17,000 (b) Cost of land sold $22,000 Less: Loss on sale of land (4,000) Proceeds from sale of land $18,000 Ex. 175 The following information is available for Greer Corporation for the year ended December 31, 2010: Collection of principal on long-term loan to a supplier $15,000 Acquisition of equipment for cash 10,000 Proceeds from the sale of long-term investment at book value 22,000 Issuance of common stock for cash 25,000 Depreciation expense 30,000 Redemption of bonds payable at carrying (book) value 34,000 Payment of cash dividends 14,000 Net income 20,000 Purchase of land by issuing bonds payable 40,000 In addition, the following information is available from the comparative balance sheet for Greer at the end of 2009 and 2010: 2010 2009 Cash $ 67,000 $14,000 Accounts receivable (net) 20,000 15,000 Prepaid insurance 17,000 13,000 Total current assets $104,000 $42,000 Accounts payable $ 30,000 $19,000 Salaries payable 4,000 7,000 Total current liabilities $ 34,000 $26,000 Instructions Prepare Greer's statement of cash flows for the year ended December 31, 2010 using the indirect method. Ex. 176 Trent Company prepared the tabulation below at December 31, 2010. Net Income ............................................................................................................ $340,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense, $35,000 ..................................................................... ______ Increase in accounts receivable, $50,000...................................................... ______ Decrease in inventory, $13,000 ..................................................................... ______ Amortization of patent, $4,000....................................................................... ______ Increase in accounts payable, $5,600 ........................................................... ______ Decrease in interest receivable, $7,000......................................................... ______ Increase in prepaid expenses, $6,000........................................................... ______ Decrease in income taxes payable, $1,500 ................................................... ______ Gain on sale of land, $5,000.......................................................................... ______ Net cash provided (used) by operating activities ........................................... ______ Instructions Show how each item should be reported in the statement of cash flows. Use parentheses for deductions. Ex. 177 The current sections of Robertson Inc.'s balance sheets at December 31, 2009 and 2010, are presented here. Robertson's net income for 2010 was $203,000. Depreciation expense was $24,000. 2010 2009 Current assets Cash $115,000 $99,000 Accounts receivable 105,000 89,000 Inventory 153,000 172,000 Prepaid expense 27,000 22,000 Total current assets $400,000 $382,000 Current liabilities Accrued expenses payable $ 15,000 $ 5,000 Accounts payable 85,000 92,000 Total current liabilities $100,000 $ 97,000 Instructions Prepare the net cash provided by operating activities section of the company's statement of cash flows for the year ended December 31, 2010, using the indirect method. Ex. 178 Wintz Company reported net income of $295,000 for 2010. Wintz also reported depreciation expense of $45,000 and a loss of $8,000 on the sale of equipment. The comparative balance sheet shows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $6,000 decrease in prepaid expenses. Instructions Prepare the operating activities section of the statement of cash flows for 2010. Use the indirect method. Ex. 179 The three accounts shown below appear in the general ledger of Glaus Corp. during 2010. Equipment Date Debit Credit Balance Jan. 1 Balance 160,000 July 31 Purchase of equipment 70,000 230,000 Sept. 2 Cost of equipment constructed 58,000 288,000 Nov. 10 Cost of equipment sold 46,000 242,000 Accumulated Depreciation—Equipment Date Debit Credit Balance Jan. 1 Balance 71,000 Nov. 10 Accumulated depreciation on equipment sold 30,000 41,000 Dec. 31 Depreciation for year 23,000 64,000 Retained Equipment Date Debit Credit Balance Jan. 1 Balance 105,000 Aug. 23 Dividends (cash) 14,000 91,000 Dec. 31 Net income 52,000 143,000 Instructions From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on sale of equipment was $5,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $58,000.) Ex. 180 Powell Corporation's comparative balance sheets are presented below. POWELL CORPORATION Comparative Balance Sheets December 31 2010 2009 Cash $ 19,300 $ 10,700 Accounts receivable 18,200 23,400 Land 18,000 26,000 Building 70,000 70,000 Accumulated depreciation (15,000) (10,000) Total $110,500 $120,100 Accounts payable $ 12,370 $31,100 Common stock 75,000 69,000 Retained earnings 23,130 20,000 Total $110,500 $120,100 Additional information: 1. Net income was $25,630. Dividends declared and paid were $22,500. 2. All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. The land was sold for $5,900. Instruction (a) Prepare a statement of cash flows for 2010 using the indirect method. (b) Compute free cash flow. Ex. 181 Newman Corporation's comparative balance sheets are presented below. NEWMAN CORPORATION Comparative Balance Sheets December 31 2010 2009 Cash $ 10,200 $ 17,700 Accounts receivable 25,200 22,300 Investments 25,000 16,000 Equipment 60,000 70,000 Accumulated depreciation (14,000) (10,000) Total $106,400 $116,000 Accounts payable $ 14,600 $11,100 Bonds payable 10,000 30,000 Common stock 50,000 45,000 Retained earnings 31,800 29,900 Total $106,400 $116,000 Additional information: 1. Net income was $15,300. Dividends declared and paid were $13,400. 2. Equipment which cost $10,000 and had accumulated depreciation of $2,200 was sold for $3,800. 3. All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. Instruction (a) Prepare a statement of cash flows for 2010 using the indirect method. (b) Compute free cash flow. aEx. 182 The following information is available for Yates Corporation: Capital expenditures $105,000 Cash dividends 65,000 Cash provided by operations 200,000 Net income 130,000 Sales 600,000 Instructions Compute Yates Corporation's free cash flow. aEx. 183 Jenner Company has begun a worksheet for preparing a statement of cash flows. The following additional information is provided: 1. Cash dividends of $10,000 were paid during the year. 2. Land which originally cost $60,000 was sold for $52,000. 3. Common stock was issued at par value for cash. Instructions Complete the worksheet for Jenner Company. JENNER COMPANY Worksheet Statement of Cash Flows For the Year Ended December 31, 2010 Balance Reconciling Items Balance Balance Sheet Accounts 12/31/09 Debits Credits 12/31/10 Debits Cash 30,000 65,000 Accounts receivable 40,000 53,000 Inventory 90,000 110,000 Land 60,000 -0- Equipment 131,000 140,000 Total 351,000 368,000 Credits Accounts payable 15,000 12,000 Bonds payable 25,000 10,000 Accumulated depreciation— equipment 81,000 95,000 Common stock 170,000 180,000 Retained earnings 60,000 71,000 Total 351,000 368,000 Statement of Cash Flows Effects Operating activities Net income 21,000 aEx. 184 Dolan Company's income statement showed revenues of $230,000 and operating expenses of $150,000. Accounts receivable decreased by $60,000 and accounts payable increased by $40,000 during the year. Instructions Compute (a) cash receipts from customers and (b) cash payments for operating expenses using the direct method. aEx. 185 Banner Company had total operating expenses of $160,000 in 2010, which included Depreciation Expense of $25,000. Also, during 2010, prepaid expenses increased by $5,000 and accrued expenses decreased by $6,700. Instructions Calculate the amount of cash payments for operating expenses in 2010 using the direct method. aEx. 186 The general ledger of Lopez Company provides the following information: End of Year Beginning of Year Accounts Receivable $ 55,000 $ 94,000 Inventory 310,000 210,000 Accounts Payable 40,000 65,000 The company's net sales for the year was $2,200,000 and cost of goods sold amounted to $1,500,000. Instructions Compute the following: (a) Cash receipts from customers. (b) Cash payments to suppliers. aEx. 187 The income statement of Redman Inc. for the year ended December 31, 2010, reported the following condensed information: Service revenue $600,000 Operating expenses 360,000 Income from operations 240,000 Income tax expense 60,000 Net income $180,000 Redman's balance sheet contained the following comparative data at December 31: 2010 2009 Accounts receivable $60,000 $40,000 Accounts payable 40,000 50,000 Income taxes payable 6,000 3,000 Redman has no depreciable assets. Accounts payable pertains to operating expenses. Instructions Prepare the operating activities section of the statement of cash flows using the direct method. aEx. 188 The income statement of Falcone Company is shown below: FALCONE COMPANY Income Statement For the Year Ended December 31, 2010 Sales $8,000,000 Cost of goods sold 5,400,000 Gross profit 2,600,000 Operating expenses Selling expenses $500,000 Administrative expense 700,000 Depreciation expense 90,000 Amortization expense 30,000 1,320,000 Net income $1,280,000 Additional information: 1. Accounts receivable increased $400,000 during the year. 2. Inventory increased $250,000 during the year. 3. Prepaid expenses increased $200,000 during the year. 4. Accounts payable to merchandise suppliers increased $100,000 during the year. 5. Accrued expenses payable increased $160,000 during the year. Instructions Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2010, for Falcone Company, using the direct method. aEx. 189 The financial statements of Meenan Company appear below: MEENAN COMPANY Comparative Balance Sheet December 31 2010 2009 Assets Cash $ 38,000 $ 23,000 Accounts receivable 26,000 34,000 Merchandise inventory 30,000 15,000 Property, plant, and equipment 50,000 78,000 Accumulated depreciation (20,000) (24,000) Total $124,000 $126,000 Liabilities and Stockholders' Equity Accounts payable $ 17,000 $ 23,000 Income taxes payable 13,000 8,000 Bonds payable 7,000 33,000 Common stock 41,000 24,000 Retained earnings 46,000 38,000 Total $124,000 $126,000 MEENAN COMPANY Income Statement For the Year Ended December 31, 2010 Sales $400,000 Cost of goods sold 280,000 Gross profit 120,000 Operating expenses 46,000 Income from operations 74,000 Interest expense 4,000 Income before income taxes 70,000 Income tax expense 21,000 Net income $ 49,000 The following additional data were provided: 1. Dividends declared and paid were $41,000. 2. During the year, equipment was sold for $15,000 cash. This equipment cost $28,000 originally and had a book value of $15,000 at the time of sale. 3. All depreciation expense is in the operating expenses. 4. All sales and purchases are on account. 5. Accounts payable pertain to merchandise suppliers. 6. All operating expenses except for depreciation were paid in cash. Instructions Prepare a statement of cash flows for Meenan Company using the direct method. +Ex. 190 Condensed financial data of Popler Company appear below: POPLER COMPANY Comparative Balance Sheet December 31 2010 2009 Assets Cash $ 61,000 $ 35,000 Accounts receivable 75,000 53,000 Inventories 120,000 132,000 Prepaid expenses 19,000 25,000 Investments 100,000 75,000 Plant assets 325,000 250,000 Accumulated depreciation (65,000) (60,000) Total $635,000 $510,000 Liabilities and Stockholders' Equity Accounts payable $ 93,000 $ 75,000 Accrued expenses payable 29,000 24,000 Bonds payable 120,000 160,000 Common stock 275,000 170,000 Retained earnings 118,000 81,000 Total $635,000 $510,000 POPLER COMPANY Income Statement For the Year Ended December 31, 2010 Sales $470,000 Less: Cost of goods sold $300,000 Operating expenses (excluding depreciation) 60,000 Depreciation expense 17,000 Income taxes 20,000 Interest expense 18,000 Loss on sale of plant assets 3,000 418,000 Net income $ 52,000 Additional information: 1. New plant assets costing $100,000 were purchased for cash in 2010. 2. Old plant assets costing $25,000 were sold for $10,000 cash when book value was $13,000. 3. Bonds with a face value of $40,000 were converted into $40,000 of common stock. 4. A cash dividend of $15,000 was declared and paid during the year. 5. Accounts payable pertain to merchandise purchases. Instructions Prepare a statement of cash flows for the year using the direct method. aEx. 191 The income statement for Javier Company showed cost of goods sold of $85,000 and operating expenses of $55,000. The comparative balance sheets for the year show that inventory decreased $3,000, prepaid expenses increased $7,000, accounts payable increased $4,000, and accrued expenses payable decreased $5,000. Instructions Compute (a) cash payments to suppliers and (b) cash payments for operating expenses using the direct method. 192. A statement of cash flows summarizes the operating, ____________, and ___________ activities of an entity. 193. The cash effects of selling goods and services appears in the ______________ activities section of a statement of cash flows. 194. The operating activities section of the statement of cash flows may be prepared using the ______________ method or the ______________ method. 195. Net income from operations is generally not the same as cash provided from operations because revenues and expenses are recognized in the income statement on the ______________ basis. 196. Using the indirect approach, noncash charges in the income statement are ______________ to net income and noncash credits are ______________ to compute cash provided by operations. 197. If accounts receivable increase during a period, revenues on an accrual basis are ______________ than revenues on a cash basis. 198. The sale of equipment at less than its book value is a(n) ______________ of cash that is reported in the ______________ activities section. 199. Free _______________ equals cash provided by operations less capital expenditures and cash dividends. a200. Under the direct method, noncash charges, such as depreciation, are _______________ in the statement of cash flows. a201. Under the direct method, the two largest classes of items in the operating activities section for a merchandising company are cash ________________________ and cash _________________________. a202. Cost of goods sold for the year amounted to $130,000, and during the year, accounts payable ______________ by $8,000 and inventory ______________ by $7,000 resulting in cash paid to suppliers of $115,000. a203. In computing cash payments for operating expenses, a decrease in prepaid expenses is ______________ and an increase in accrued expenses payable is ______________ to (from) operating expenses, exclusive of depreciation. a204. In computing cash payments for income taxes, a decrease in income taxes payable is ______________ to (from) income tax expense. MATCHING Set 1 — Indirect Method 205. For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. A. Added to net income B. Deducted from net income C. Cash outflow—investing activity D. Cash inflow—investing activity E. Cash outflow—financing activity F. Cash inflow—financing activity G. Significant noncash investing and financing activity ____ 1. Decrease in accounts payable during a period ____ 2. Declaration and payment of a cash dividend. ____ 3. Loss on sale of land. ____ 4. Decrease in accounts receivable during a period. ____ 5. Redemption of bonds for cash. ____ 6. Proceeds from sale of equipment at book value. ____ 7. Issuance of common stock for cash. ____ 8. Purchase of a building for cash. ____ 9. Acquisition of land in exchange for common stock. ____ 10. Increase in merchandise inventory during a period. a206. For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the direct method. A. Added in determining cash receipts from customers B. Deducted in determining cash receipts from customers C. Added in determining cash payments to suppliers D. Deducted in determining cash payments to suppliers E. Cash outflow—investing activity F. Cash inflow—investing activity G. Cash outflow—financing activity H. Cash inflow—financing activity I. Significant noncash investing and financing activity J. Is not shown ____ 1. Decrease in accounts payable during a period. ____ 2. Declaration and payment of a cash dividend. ____ 3. Decrease in accounts receivable during a period. ____ 4. Depreciation expense. ____ 5. Conversion of bonds payable into common stock. ____ 6. Decrease in merchandise inventory during a period. ____ 7. Sale of equipment for cash at book value. ____ 8. Issuance of preferred stock for cash. ____ 9. Purchase of land for cash. ____ 10. Loss on sale of a plant asset. SHORT-ANSWER ESSAY QUESTIONS S-A E 207 Distinguish among the three types of activities reported in the statement of cash flows The three activities are: S-A E 208 Why is the statement of cash flows useful? S-A E 209 The statement of cash flows is the only required financial statement that is not prepared from an adjusted trial balance. What are the sources of information for preparing a statement of cash flows? Explain how the accrual basis of accounting affects the statement of cash flows. S-A E 210 Cash flows from operating activities can be calculated using the indirect or direct method. Briefly describe how the two methods differ yet arrive at the same information about the net cash flows from operating activities. S-A E 211 How is it possible for a company to suffer a net loss for a given year, yet produce a positive net cash flow from operating activities? S-A E 212 (Ethics) Flint Hills Company's most recent financial statements showed dismal performance. There was a net loss of $10,000 and the statement of cash flows showed a net cash decrease in all categories. The company president called all the managers together and asked them to do all they could to make sure the next quarter's performance was better. Ed Gray, manager of the manufacturing division, sold off old manufacturing equipment. He also reclassified several workers to part time (30 hours per week) and hired additional temporary workers to take up the slack. This saved the company money, since part-time workers do not have the same insurance and other benefits as full-time workers. Mike Cane, financial manager, immediately suspended payments on all accounts except those on which interest would accrue. He also instituted aggressive collection procedures. Required: 1. Were Ed Gray's actions ethical? Explain. 2. Were Mike Cane's actions ethical? Explain. 3. Were the company president's actions ethical? Explain. . S-A E 213 (Communication) You are the accountant for a small manufacturing firm. Your company is privately held, so there is no current requirement to issue financial statements using GAAP. You were hired four years ago, and at that time you instituted a cash budgeting system. Presently, you present a schedule of predicted cash sources and cash needs at the end of each week for the following week. Ken Harmon, the company's president, has asked whether a statement of cash flows would also be useful. Required: Prepare a short memorandum to the president indicating whether you believe such an addition to the financial statements to be useful. Include in your memo the benefits that might be expected from a statement of cash flows and whether those are different from the benefits of a cash sources and cash needs listing.
Created Date Thursday, 02 January 2014
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Accounting_Chapter_18

TRUE-FALSE STATEMENTS 1. Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends. 2. Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles. 3. Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments. 4. Analysis of financial statements is enhanced with the use of comparative data. 5. Comparisons of company data with industry averages can provide some insight into the company's relative position in the industry. 6. Vertical and horizontal analyses are concerned with the format used to prepare financial statements. 7. Horizontal, vertical, and circular analyses are the most common tools of financial statement analysis. 8. Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year. 9. Another name for trend analysis is horizontal analysis. 10. If a company has sales of $110 in 2010 and $154 in 2011, the percentage increase in sales from 2010 to 2011 is 140%. 11. In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed. 12. Common size analysis expresses each item within a financial statement in terms of a percent of a base amount. 13. Vertical analysis is a more sophisticated analytical tool than horizontal analysis. 14. Vertical analysis is useful in making comparisons of companies of different sizes. 15. Meaningful analysis of financial statements will include either horizontal or vertical analysis, but not both. 16. Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales must be 90%. 17. In the vertical analysis of the income statement, each item is generally stated as a percentage of net income. 18. A ratio can be expressed as a percentage, a rate, or a proportion. 19. A solvency ratio measures the income or operating success of an enterprise for a given period of time. 20. The current ratio is a measure of all the ratios calculated for the current year. 21. Inventory turnover measures the number of times on the average the inventory was sold during the period. 22. Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness. 23. The rate of return on total assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain. 24. From a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations. 25. A current ratio of 1.2 to 1 indicates that a company's current assets exceed its current liabilities. 26. Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity." 27. When the disposal of a significant segment occurs, the income statement should report both income from continuing operations and income (loss) from discontinued operations. 28. An event or transaction should be classified as an extraordinary item if it is unusual in nature or if it occurs infrequently. 29. Variations among companies in the application of generally accepted accounting principles may reduce quality of earnings. 30. Pro forma income usually excludes items that the company thinks are unusual or nonrecurring. 31. The three basic tools of analysis are horizontal analysis, vertical analysis, and ratio analysis. 32. A percentage change can be computed only if the base amount is zero or positive. 33. In vertical analysis, the base amount in an income statement is usually net sales. 34. Profitability ratios measure the ability of the enterprise to survive over a long period of time. 35. The days in inventory is computed by multiplying inventory turnover by 365. 36. Extraordinary items are reported net of applicable taxes in a separate section of the income statement. MULTIPLE CHOICE QUESTIONS 37. Which one of the following is primarily interested in the liquidity of a company? a. Federal government b. Stockholders c. Long-term creditors d. Short-term creditors 38. Which one of the following is not a characteristic generally evaluated in analyzing financial statements? a. Liquidity b. Profitability c. Marketability d. Solvency 39. In analyzing the financial statements of a company, a single item on the financial statements a. should be reported in bold-face type. b. is more meaningful if compared to other financial information. c. is significant only if it is large. d. should be accompanied by a footnote. 40. Short-term creditors are usually most interested in evaluating a. solvency. b. liquidity. c. marketability. d. profitability. 41. Long-term creditors are usually most interested in evaluating a. liquidity and solvency. b. solvency and marketability. c. liquidity and profitability. d. profitability and solvency. 42. Stockholders are most interested in evaluating a. liquidity and solvency. b. profitability and solvency. c. liquidity and profitability. d. marketability and solvency. 43. A stockholder is interested in the ability of a firm to a. pay consistent dividends. b. appreciate in share price. c. survive over a long period. d. all of these. 44. Comparisons of financial data made within a company are called a. intracompany comparisons. b. interior comparisons. c. intercompany comparisons. d. intramural comparisons. 45. A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is a. common size analysis. b. horizontal analysis. c. ratio analysis. d. vertical analysis. 46. Which one of the following is not a tool in financial statement analysis? a. Horizontal analysis b. Circular analysis c. Vertical analysis d. Ratio analysis 47. In analyzing financial statements, horizontal analysis is a a. requirement. b. tool. c. principle. d. theory. 48. Horizontal analysis is also called a. linear analysis. b. vertical analysis. c. trend analysis. d. common size analysis. 49. Vertical analysis is also known as a. perpendicular analysis. b. common size analysis. c. trend analysis. d. straight-line analysis. 50. In ratio analysis, the ratios are never expressed as a a. rate. b. negative figure. c. percentage. d. simple proportion. 51. The formula for horizontal analysis of changes since the base period is the current year amount a. divided by the base year amount. b. minus the base year amount divided by the base year amount. c. minus the base year amount divided by the current year amount. d. plus the base year amount divided by the base year amount. 52. Horizontal analysis evaluates a series of financial statement data over a period of time a. that has been arranged from the highest number to the lowest number. b. that has been arranged from the lowest number to the highest number. c. to determine which items are in error. d. to determine the amount and/or percentage increase or decrease that has taken place. 53. Horizontal analysis evaluates financial statement data a. within a period of time. b. over a period of time. c. on a certain date. d. as it may appear in the future. 54. Assume the following sales data for a company: 2012 $1,200,000 2011 960,000 2010 840,000 2009 600,000 If 2009 is the base year, what is the percentage increase in sales from 2009 to 2011? a. 100% b. 160% c. 60% d. 62.5% 55. Comparative balance sheets are usually prepared for a. one year. b. two years. c. three years. d. four years. 56. Horizontal analysis is appropriately performed a. only on the income statement. b. only on the balance sheet. c. only on the statement of retained earnings. d. on all three of these statements. 57. A horizontal analysis performed on a statement of retained earnings would not show a percentage change in a. dividends paid. b. net income. c. expenses. d. beginning retained earnings. 58. Under which of the following cases may a percentage change be computed? a. The trend of the balances is decreasing but all balances are positive. b. There is no balance in the base year. c. There is a positive balance in the base year and a negative balance in the subsequent year. d. There is a negative balance in the base year and a positive balance in the subsequent year. 59. Assume the following sales data for a company: 2011 $945,000 2010 845,000 2009 650,000 If 2009 is the base year, what is the percentage increase in sales from 2009 to 2010? a. 23% b. 30% c. 77% d. 130% 60. Assume the following cost of goods sold data for a company: 2011 $1,500,000 2010 1,200,000 2009 1,000,000 If 2009 is the base year, what is the percentage increase in cost of goods sold from 2009 to 2011? a. 150% b. 50% c. 67% d. 33% 61. Blanco, Inc. has the following income statement (in millions): BLANCO, INC. Income Statement For the Year Ended December 31, 2010 Net Sales $200 Cost of Goods Sold 120 Gross Profit 80 Operating Expenses 44 Net Income $ 36 MC 61.(Cont.) Using vertical analysis, what percentage is assigned to Cost of Goods Sold? a. 60% b. 40% c. 100% d. None of the above 62. Blanco, Inc. has the following income statement (in millions): BLANCO, INC. Income Statement For the Year Ended December 31, 2010 Net Sales $200 Cost of Goods Sold 120 Gross Profit 80 Operating Expenses 44 Net Income $ 36 Using vertical analysis, what percentage is assigned to Net Income? a. 100% b. 82% c. 18% d. None of the above 63. Vertical analysis is also called a. common size analysis. b. horizontal analysis. c. ratio analysis. d. trend analysis. 64. Vertical analysis is a technique which expresses each item within a financial statement a. in dollars and cents. b. in terms of a percentage of the item in the previous year. c. in terms of a percent of a base amount. d. starting with the highest value down to the lowest value. 65. In common size analysis, a. a base amount is required. b. a base amount is optional. c. the same base is used across all financial statements analyzed. d. the results of the horizontal analysis are necessary inputs for performing the analysis. , 66. In performing a vertical analysis, the base for prepaid expenses is a. total current assets. b. total assets. c. total liabilities and stockholders' equity. d. prepaid expenses. 67. In performing a vertical analysis, the base for sales revenues on the income statement is a. net sales. b. sales. c. net income. d. cost of goods available for sale. 68. In performing a vertical analysis, the base for sales returns and allowances is a. sales. b. sales discounts. c. net sales. d. total revenues. 69. In performing a vertical analysis, the base for cost of goods sold is a. total selling expenses. b. net sales. c. total revenues. d. total expenses. 70. Each of the following is a liquidity ratio except the a. acid-test ratio. b. current ratio. c. debt to total assets ratio. d. inventory turnover. 71. A ratio calculated in the analysis of financial statements a. expresses a mathematical relationship between two numbers. b. shows the percentage increase from one year to another. c. restates all items on a financial statement in terms of dollars of the same purchasing power. d. is meaningful only if the numerator is greater than the denominator. 72. A liquidity ratio measures the a. income or operating success of an enterprise over a period of time. b. ability of the enterprise to survive over a long period of time. c. short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash. d. number of times interest is earned. 73. The current ratio is a. calculated by dividing current liabilities by current assets. b. used to evaluate a company's liquidity and short-term debt paying ability. c. used to evaluate a company's solvency and long-term debt paying ability. d. calculated by subtracting current liabilities from current assets. 74. The acid-test (quick) ratio a. is used to quickly determine a company's solvency and long-term debt paying ability. b. relates cash, short-term investments, and net receivables to current liabilities. c. is calculated by taking one item from the income statement and one item from the balance sheet. d. is the same as the current ratio except it is rounded to the nearest whole percent. 75. Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year. Net credit sales during the year amounted to $2,000,000. The average collection period of the receivables in terms of days was a. 30 days. b. 365 days. c. 146 days. d. 73 days. 76. Parr Hardware Store had net credit sales of $6,500,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The receivables turnover was a. 7.7 times. b. 10.8 times. c. 9.3 times. d. 10 times. 77. Waters Department Store had net credit sales of $16,000,000 and cost of goods sold of $12,000,000 for the year. The average inventory for the year amounted to $2,000,000. Inventory turnover for the year is a. 8 times. b. 14 times. c. 6 times. d. 4 times. 78. Waters Department Store had net credit sales of $16,000,000 and cost of goods sold of $12,000,000 for the year. The average inventory for the year amounted to $2,000,000. The average number of days in inventory during the year was a. 91 days. b. 61 days. c. 46 days. d. 26 days. 79. Each of the following is included in computing the acid-test ratio except a. cash. b. inventory. c. receivables. d. short-term investments. 80. Which one of the following would not be considered a liquidity ratio? a. Current ratio b. Inventory turnover c. Acid-test ratio d. Return on assets 81. Asset turnover measures a. how often a company replaces its assets. b. how efficiently a company uses its assets to generate sales. c. the portion of the assets that have been financed by creditors. d. the overall rate of return on assets. 82. Profit margin is calculated by dividing a. sales by cost of goods sold. b. gross profit by net sales. c. net income by stockholders' equity. d. net income by net sales. 83. Silas Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Silas Corporation's common stock is selling for $60 per share on the New York Stock Exchange. Silas Corporation's price-earnings ratio is a. 3.8 times. b. 15 times. c. 18.8 times. d. 6 times. 84 Silas Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Silas Corporation's common stock is selling for $60 per share on the New York Stock Exchange. Silas Corporation's payout ratio for 2010 is a. $4 per share. b 25%. c. 20%. d. 12.5%. 85 Farr Company reported the following on its income statement: Income before income taxes $400,000 Income tax expense 100,000 Net income $300,000 An analysis of the income statement revealed that interest expense was $100,000. Farr Company's times interest earned was a. 5 times. b. 4 times. c. 3.5 times. d. 3 times. 86. The debt to total assets ratio measures a. the company's profitability. b. whether interest can be paid on debt in the current year. c. the proportion of interest paid relative to dividends paid. d. the percentage of the total assets provided by creditors. 87. Trading on the equity (leverage) refers to the a. amount of working capital. b. amount of capital provided by owners. c. use of borrowed money to increase the return to owners. d. number of times interest is earned. 88. The current assets of Kile Company are $150,000. The current liabilities are $100,000. The current ratio expressed as a proportion is a. 150%. b. 1.5 : 1 c. .67 : 1 d. $150,000 ÷ $100,000. 89. The current ratio may also be referred to as the a. short run ratio. b. acid-test ratio. c. working capital ratio. d. contemporary ratio. 90. A weakness of the current ratio is a. the difficulty of the calculation. b. that it doesn't take into account the composition of the current assets. c. that it is rarely used by sophisticated analysts. d. that it can be expressed as a percentage, as a rate, or as a proportion. 91. A supplier to a company would be most interested in the company’s a. asset turnover. b. profit margin. c. current ratio. d. earnings per share. 92. Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company? a. Current ratio b. Acid-test ratio c. Asset turnover d. Receivables turnover 93. Ratios are used as tools in financial analysis a. instead of horizontal and vertical analyses. b. because they may provide information that is not apparent from inspection of the individual components of the ratio. c. because even single ratios by themselves are quite meaningful. d. because they are prescribed by GAAP. 94. The ratios that are used to determine a company's short-term debt paying ability are a. asset turnover, times interest earned, current ratio, and receivables turnover. b. times interest earned, inventory turnover, current ratio, and receivables turnover. c. times interest earned, acid-test ratio, current ratio, and inventory turnover. d. current ratio, acid-test ratio, receivables turnover, and inventory turnover. 95. A measure of the percentage of each dollar of sales that results in net income is a. profit margin. b. return on assets. c. return on common stockholders' equity. d. earnings per share. 96. Baden Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $75,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on the amount of Baden Company's working capital? a. No effect b. $75,000 increase c. $150,000 increase d. $75,000 decrease 97. Baden Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $75,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Baden Company's current ratio? a. The ratio remained unchanged. b. The change in the current ratio cannot be determined. c. The ratio decreased. d. The ratio increased. 98. If equal amounts are added to the numerator and the denominator of the current ratio, the ratio will always a. increase. b. decrease. c. stay the same. d. equal zero. 99. The acid-test ratio a. is a quick calculation of an approximation of the current ratio. b. does not include all current liabilities in the calculation. c. does not include inventory as part of the numerator. d. does include prepaid expenses as part of the numerator. 100. If a company has an acid-test ratio of 1.2:1, what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio? Short-term Borrowing Collection of Receivable a. Increase No effect b. Increase Increase c. Decrease No effect d. Decrease Decrease 101. A company has a receivables turnover of 10 times. The average netceivables during the period are $400,000. What is the amount of net credit sales for the period? a. $40,000 b. $4,000,000 c. $480,000 d. Cannot be determined from the information given 102. If the average collection period is 30 days, what is the receivables turnover? a. 11.1 times b. 12.2 times c. 6.1 times d. None of these 103. A general rule to use in assessing the average collection period is that a. it should not exceed 30 days. b. it can be any length as long as the customer continues to buy merchandise. c. it should not greatly exceed the discount period. d. it should not greatly exceed the credit term period. 104. Inventory turnover is calculated by dividing a. cost of goods sold by the ending inventory. b. cost of goods sold by the beginning inventory. c. cost of goods sold by the average inventory. d. average inventory by cost of goods sold. 105. A company has an average inventory on hand of $40,000 and the days in inventory is 73 days. What is the cost of goods sold? a. $200,000 b. $2,920,000 c. $400,000 d. $1,460,000 106. A successful grocery store would probably have a. a low inventory turnover. b. a high inventory turnover. c. zero profit margin. d. low volume. 107. An aircraft company would most likely have a. a high inventory turnover. b. low profit margin. c. high volume. d. a low inventory turnover. 108. Net sales are $6,000,000, beginning total assets are $2,800,000, and the asset turnover is 2.0 times. What is the ending total asset balance? a. $3,000,000 b. $3,200,000 c. $2,800,000 d. $2,200,000 109. Earnings per share is calculated a. only for common stock. b. only for preferred stock. c. for common and preferred stock. d. only for treasury stock. 110. Which of the following is not a profitability ratio? a. Payout ratio b. Profit margin c. Times interest earned d. Return on common stockholders' equity 111. Times interest earned is also called the a. money multiplier. b. interest coverage ratio. c. coupon coverage ratio. d. premium ratio. 112. The ratio that uses weighted average common shares outstanding in the denominator is the a. price-earnings ratio. b. return on common stockholders' equity. c. earnings per share. d. payout ratio. 113. Net income does not appear in the numerator of the a. profit margin. b. return on assets. c. return on common stockholders' equity. d. payout ratio. 114. Gold Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year. Net credit sales during the year amounted to $7,650,000. The receivables turnover ratio was a. 9.0 times. b. 4.5 times. c. 8.7 times. d. 9.3 times. 115. Gold Clothing Store had a balance in the Accounts Receivable account of $810,000 at the beginning of the year and a balance of $850,000 at the end of the year. Net credit sales during the year amounted to $6,640,000. The average collection period of the receivables in terms of days was a. 91.3 days. b. 45.6 days. c. 30 days. d. 46.7 days. 116. Dooley Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Dooley Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Dooley Corporation's price-earnings ratio is a. 3.2 times. b. 12.5 times. c. 8 times. d. 15.6 times. 117. Dooley Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Dooley Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Dooley Corporation's payout ratio for 2010 is a. $4 per share. b. 20%. c. 25%. d. 10%. 18. Tate Company reported the following on its income statement: Income before income taxes $500,000 Income tax expense 150,000 Net income $350,000 An analysis of the income statement revealed that interest expense was $100,000. Tate Company's times interest earned was a. 4 times. b. 6 times. c. 5 times. d. 3.5 times. 119. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets $300,000 Liabilities and Stockholders’ Equity Current liabilities $ 50,000 Long-term liabilities 90,000 Stockholders’ equity—common 160,000 Total Liabilities and Stockholders’ Equity $300,000 Income Statement Sales $ 120,000 Cost of goods sold 66,000 Gross margin 54,000 Operating expenses 30,000 Net income $ 24,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share .50 MC 119. (Cont.) What is the current ratio for Soho? a. 1.80 b. 1.30 c. 1.40 d. .64 120. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets $300,000 Liabilities and Stockholders’ Equity Current liabilities $ 50,000 Long-term liabilities 90,000 Stockholders’ equity—common 160,000 Total Liabilities and Stockholders’ Equity $300,000 Income Statement Sales $ 120,000 Cost of goods sold 66,000 Gross margin 54,000 Operating expenses 30,000 Net income $ 24,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share .50 What is the receivables turnover for Soho? a. 2.1 times b. 2 times c. 4.8 times d. 9.6 times 121. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets $300,000 Liabilities and Stockholders’ Equity Current liabilities $ 50,000 Long-term liabilities 90,000 Stockholders’ equity—common 160,000 Total Liabilities and Stockholders’ Equity $300,000 Income Statement Sales $ 120,000 Cost of goods sold 66,000 Gross margin 54,000 Operating expenses 30,000 Net income $ 24,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share .50 What is the inventory turnover for Soho? a. 2 times b. 3.3 times c. 6 time d. .30 times 122. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets $300,000 Liabilities and Stockholders’ Equity Current liabilities $ 50,000 Long-term liabilities 90,000 Stockholders’ equity—common 160,000 Total Liabilities and Stockholders’ Equity $300,000 MC 122. (Cont.) Income Statement Sales $ 120,000 Cost of goods sold 66,000 Gross margin 54,000 Operating expenses 30,000 Net income $ 24,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share .50 What is the return on assets for Soho? a. 8.0% b. 7.0% c. 18.0% d. 16.0% 123. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets $300,000 Liabilities and Stockholders’ Equity Current liabilities $ 50,000 Long-term liabilities 90,000 Stockholders’ equity—common 160,000 Total Liabilities and Stockholders’ Equity $300,000 Income Statement Sales $ 120,000 Cost of goods sold 66,000 Gross margin 54,000 Operating expenses 30,000 Net income $ 24,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share .50 MC 123. (Cont.) What is the profit margin for Soho? a. 45.0% b. 40.0% c. 20.0% d. 17.5% 124. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets $300,000 Liabilities and Stockholders’ Equity Current liabilities $ 50,000 Long-term liabilities 90,000 Stockholders’ equity—common 160,000 Total Liabilities and Stockholders’ Equity $300,000 Income Statement Sales $ 120,000 Cost of goods sold 66,000 Gross margin 54,000 Operating expenses 30,000 Net income $ 24,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share .50 What is the return on common stockholders’ equity for Soho? a. 15.0% b. 13.1% c. 26.3% d. 30.0% 125. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets $300,000 Liabilities and Stockholders’ Equity Current liabilities $ 50,000 Long-term liabilities 90,000 Stockholders’ equity—common 160,000 Total Liabilities and Stockholders’ Equity $300,000 Income Statement Sales $ 120,000 Cost of goods sold 66,000 Gross margin 54,000 Operating expenses 30,000 Net income $ 24,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share .50 What is the price-earnings ratio for Soho? a. 5.0 times b. 4.0 times c. 3.8 times d. 2.0 times 126. The following information pertains to Cashe Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 40,000 Accounts receivable (net) 30,000 Inventory 25,000 Property, plant and equipment 215,000 Total Assets $310,000 Liabilities and Stockholders’ Equity Current liabilities $ 60,000 Long-term liabilities 75,000 Stockholders’ equity—common 175,000 Total Liabilities and Stockholders’ Equity $310,000 MC 126. (Cont.) Income Statement Sales $ 90,000 Cost of goods sold 45,000 Gross margin 45,000 Operating expenses 25,000 Net income $ 20,000 Number of shares of common stock 5,000 Market price of common stock $22 Dividends per share 1.00 What is the return on assets for Cache? a. 4.8% b. 9.7% c. 6.5% d. 12.9% 127. The following information pertains to Cashe Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 40,000 Accounts receivable (net) 30,000 Inventory 25,000 Property, plant and equipment 215,000 Total Assets $310,000 Liabilities and Stockholders’ Equity Current liabilities $ 60,000 Long-term liabilities 75,000 Stockholders’ equity—common 175,000 Total Liabilities and Stockholders’ Equity $310,000 Income Statement Sales $ 90,000 Cost of goods sold 45,000 Gross margin 45,000 Operating expenses 25,000 Net income $ 20,000 Number of shares of common stock 5,000 Market price of common stock $22 Dividends per share 1.00 What is the profit margin for Cache? a. 50.0% b. 16.7% c. 44.4% d. 22.2% 128. The following information pertains to Cashe Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 40,000 Accounts receivable (net) 30,000 Inventory 25,000 Property, plant and equipment 215,000 Total Assets $310,000 Liabilities and Stockholders’ Equity Current liabilities $ 60,000 Long-term liabilities 75,000 Stockholders’ equity—common 175,000 Total Liabilities and Stockholders’ Equity $310,000 Income Statement Sales $ 90,000 Cost of goods sold 45,000 Gross margin 45,000 Operating expenses 25,000 Net income $ 20,000 Number of shares of common stock 5,000 Market price of common stock $22 Dividends per share 1.00 What is the return on common stockholders’ equity for Cache? a. 8.6% b. 11.4% c. 22.9% d. 25.7% 129. The following information pertains to Cashe Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 40,000 Accounts receivable (net) 30,000 Inventory 25,000 Property, plant and equipment 215,000 Total Assets $310,000 Liabilities and Stockholders’ Equity Current liabilities $ 60,000 Long-term liabilities 75,000 Stockholders’ equity—common 175,000 Total Liabilities and Stockholders’ Equity $310,000 MC 129. (Cont.) Income Statement Sales $ 90,000 Cost of goods sold 45,000 Gross margin 45,000 Operating expenses 25,000 Net income $ 20,000 Number of shares of common stock 5,000 Market price of common stock $22 Dividends per share 1.00 What is the price-earnings ratio for Cache? a. 5 times b. 4.0 times c. 7.3 times d. 5.5 times 130. The following information is available for Charles Company: 2010 2009 Accounts receivable $ 360,000 $ 400,000 Inventory 280,000 320,000 Net credit sales 2,470,000 1,400,000 Cost of goods sold 1,860,000 1,060,000 Net income 300,000 170,000 The receivables turnover ratio for 2010 is a. 6.8 times. b. 3.5 times. c. 6.5 times. d. 3.3 times. 131. The following information is available for Charles Company: 2010 2009 Accounts receivable $ 360,000 $ 400,000 Inventory 280,000 320,000 Net credit sales 2,470,000 1,400,000 Cost of goods sold 1,860,000 1,060,000 Net income 300,000 170,000 The inventory turnover ratio for 2010 is a. 6.6 times. b. 6.2 times. c. 3.3 times. d. 3.1 times. 132. The following amounts were taken from the financial statements of Palmer Company: 2010 2009 Total assets $800,000 $1,000,000 Net sales 720,000 650,000 Gross profit 352,000 320,000 Net income 126,000 117,000 Weighted average number of common shares outstanding 90,000 90,000 Market price of common stock $35 $39 The return on assets ratio for 2010 is a. 16%. b. 14%. c. 32%. d. 28%. 133. The following amounts were taken from the financial statements of Palmer Company: 2010 2009 Total assets $800,000 $1,000,000 Net sales 720,000 650,000 Gross profit 352,000 320,000 Net income 126,000 117,000 Weighted average number of common shares outstanding 90,000 90,000 Market price of common stock $35 $39 The profit margin ratio for 2010 is a. 18.4%. b. 18.0%. c. 17.5%. d. 36.0%. 134. The following amounts were taken from the financial statements of Palmer Company: 2010 2009 Total assets $800,000 $1,000,000 Net sales 720,000 650,000 Gross profit 352,000 320,000 Net income 126,000 117,000 Weighted average number of common shares outstanding 90,000 90,000 Market price of common stock $35 $39 The price-earnings ratio for 2010 is a. 25 times. b. 30 times. c. 14 times. d. 8 times. 135. Miley Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Miley Corporation's common stock is selling for $30 per share on the New York Stock Exchange. Miley Corporation's price-earnings ratio is a. 4 times. b. 6 times. c. 7.5 times. d. 5 times. 136. Miley Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Miley Corporation's common stock is selling for $30 per share on the New York Stock Exchange. Miley Corporation's payout ratio for 2010 is a. 25%. b. 20%. c. 12.5%. d. $5 per share. 137. The following financial statement information is available for Houser Corporation: 2010 2009 Inventory $ 44,000 $ 43,000 Current assets 81,000 106,000 Total assets 432,000 358,000 Current liabilities 30,000 36,000 Total liabilities 102,000 88,000 The current ratio for 2010 is a. .37:1. b. 2.7:1. c. .79:1. d. 4.24:1. 138. The following financial statement information is available for Jackson Corporation: 2010 2009 Net sales $784,000 $697,000 Cost of goods sold 406,000 377,000 Net income 112,000 80,000 Tax expense 48,000 29,000 Interest expense 14,000 14,000 The profit margin ratio for 2010 is a. 14.3%. b. 16.1%. c. 48.2%. d. 11.7%. 139. The following financial statement information is available for Howard Corporation: 2010 2009 Stockholders' equity common $330,000 $270,000 Net sales 784,000 697,000 Cost of goods sold 406,000 377,000 Net income 112,000 80,000 Tax expense 48,000 29,000 Interest expense 14,000 14,000 Dividends paid to preferred stockholders 22,000 20,000 Dividends paid to common stockholders 15,000 10,000 The return on common stockholders’ equity for 2010 is a. 25.0%. b. 37.3%. c. 27.3%. d. 30.0%. 140. The following financial statement information is available for Barrett Corporation: 2010 2009 Net income $112,000 $ 80,000 Tax expense 48,000 29,000 Interest expense 14,000 14,000 Tax expense 48,000 29,000 Dividends paid to preferred stockholders 22,000 20,000 Dividends paid to preferred stockholders 15,000 10,000 The times interest earned for 2010 is a. 8.0 times. b. 10.4 times. c. 12.4 times. d. 11.4 times. 141. Davis Corporation reported net income $36,000, net sales $400,000, and average assets $800,000 for 2010. The 2010 profit margin was: a. 4.5%. b. 9%. c. 50%. d. 200%. 142. Gomez Company reports the following amounts for 2010: Net income $ 120,000 Average stockholders’ equity 1,500,000 Preferred dividends 36,000 Par value preferred stock 300,000 The 2010 rate of return on common stockholders’ equity is: a. 5.6%. b. 7.0%. c. 8.0%. d. 10.0%. 143. Giambi Corporation had beginning inventory $100,000, cost of goods purchased $700,000, and ending inventory $140,000. What was Giambi's inventory turnover? a. 5 times. b. 5.5 times. c. 5.83 times. d. 6.6 times. 144. In 2010 Jackson Corporation reported income from operations $180,000, interest expense $50,000, and income tax expense $40,000. Jackson’s times interest earned ratio was: a. 5.4 times. b. 4.6 times. c. 4.4 times. d. 3.6 times. 145. Rasmus Company has income before taxes of $330,000 and an extraordinary loss of $100,000. If the income tax rate is 30% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of: a. $330,000 and ($100,000) b. $231,000 and ($30,000) c. $231,000 and ($70,000) d. $99,000 and ($30,000) 146. All of the following statements regarding changes in accounting principles are true except: a. Most changes in accounting principles are only reported in current periods when the principle change takes place. b. Changes in accounting principles are allowed when new principles are preferable to old ones. c. Most changes in accounting principles are retroactively reported. d. Consistency is one of the biggest concerns when a change in accounting principle is undertaken. 147. Ester’s Bunny Barn has experienced a $60,000 loss due to tornado damage to its inventory. Tornados have never before occurred in this area. Assuming that the company’s tax rate is 30%, what amount will be reported for this loss on the income statement? a. $60,000 b. $42,000 c. $18,000 d. $54,000 148. Wenger Company reported income before taxes of $800,000 and an extraordinary loss of $200,000. Assume that the company’s tax rate is 30%. What amounts will be reported on the income statement for income before irregular items and extraordinary items, respectively? a. $560,000 and $200,000 b. $560,000 and $140,000 c. $660,000 and $200,000 d. $660,000 and $140,000 149. Kandy Kane Corporation has income before taxes of $800,000 and an extraordinary gain of $200,000. If the income tax rate is 25% on all items, the income statement should show income before irregular items and extraordinary items, respectively, of a. $650,000 and $200,000. b. $650,000 and $150,000. c. $600,000 and $200,000. d. $600,000 and $150,000. 150. Hardy Inc. has an investment in available-for-sale securities of $80,000. This investment experienced an unrealized loss of $5,000 during the current year. Assuming a 35% tax rate, the effect of this loss on comprehensive income will be a. no effect. b. $80,000 increase. c. $28,000 decrease. d. $5,000 decrease. 151. The disposal of a significant segment of a business is called a. a change in accounting principle. b. an extraordinary item. c. an other expense. d. discontinued operations. 152. ABC Company reports income before income taxes of $2,400,000 and had an extraordinary loss of $800,000. If the tax rate is 30%, a. the income before the extraordinary item is $1,920,000. b. the extraordinary loss would be reported on the income statement at $800,000. c. the income before the extraordinary item is $1,680,000. d. the extraordinary loss will be reported at $240,000. 153. Evers, Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $360,000 loss in the year of disposal. The loss on disposal of the segment was $180,000. If the tax rate is 30%, and income before income taxes was $2,250,000, a. the income tax expense on the income before discontinued operations is $513,000. b. the income from continuing operations is $1,575,000. c. net income is $1,710,000. d. the losses from discontinued operations are reported net of income taxes at $270,000. 154. Each of the following is an extraordinary item except the a. effects of major casualties, if rare in the area. b. effects of a newly enacted law or regulation. c. expropriation of property by a foreign government. d. losses attributable to labor strikes. 155. The discontinued operations section of the income statement refers to a. discontinuance of a product line. b. the income or loss on products that have been completed and sold. c. obsolete equipment and discontinued inventory items. d. the disposal of a significant segment of a business. 156. Which one of the following would be classified as an extraordinary item? a. Expropriation of property by a foreign government b. Losses attributed to a labor strike c. Write-down of inventories d. Gains or losses from sales of equipment 157. A loss on the write down of obsolete inventory should be reported as a. "other expenses and losses." b. part of discontinued operations. c. an operating expense. d. an extraordinary item. 158. If an item meets one (but not both) of the criteria for an extraordinary item, it a. only needs to be disclosed in the footnotes of the financial statements. b. may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a loss). c. is reported as an "other revenue or gain" or "other expense and loss," net of tax. d. is reported at its gross amount as an "other revenue or gain" or "other expense or loss." 159. The order of presentation of nontypical items that may appear on the income statement is a. Extraordinary items, Discontinued operations, Other revenues and expenses. b. Discontinued operations, Extraordinary items, Other revenues and expenses. c. Other revenues and expenses, Discontinued operations, Extraordinary items. d. Other revenues and expenses, Extraordinary items, Discontinued operations. 160. Each of the following is a factor affecting quality of earnings except a. alternative accounting methods. b. improper recognition. c. pro forma income. d. extraordinary items. 161. Comparisons can be made on each of the following bases except a. industry averages. b. intercompany basis. c. intracompany basis. d. Each of these is a basis for comparison. 162. Comparisons of data within a company are an example of the following comparative basis: a. Industry averages b. Intercompany c. Intracompany d. Interregional 163. Silva Corporation reported net sales of $200,000, $350,000, and $450,000 in the years 2009, 2010, and 2011 respectively. If 2009 is the base year, what is the trend percentage for 2011? a. 129% b. 135% c. 164% d. 225% 164. In vertical analysis, the base amount for each income statement item is a. gross profit. b. net income. c. net sales. d. sales. 165. When performing vertical analysis, the base amount for administrative expense is generally a. administrative expense in a previous year. b. net sales. c. gross profit. d. fixed assets. 166. Ratios that measure the short-term ability of the company to pay its maturing obligations are a. liquidity ratios. b. profitability ratios. c. solvency ratios. d. trend ratios. 167. What type of ratios best measure the short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash? a. Leverage b. Solvency c. Profitability d. Liquidity 168. The acid-test ratio is also known as the a. current ratio. b. quick ratio. c. fast ratio. d. times interest earned ratio. 169. The debt to total assets ratio a. is a solvency ratio. b. is computed by dividing total assets by total debt. c. measures the total assets provided by stockholders. d. is a profitability ratio. 170. An extraordinary item is one that a. occurs infrequently and is uncontrollable in nature. b. occurs infrequently and is unusual in nature. c. is material and is unusual in nature. d. is material and is uncontrollable in nature. 171. Patrick, Inc. decided on January 1 to discontinue its telescope manufacturing division. On July 1, the division’s assets with a book value of $1,050,000 are sold for $750,000. Operating income from January 1 to June 30 for the division amounted to $125,000. Ignoring income taxes, what total amount should be reported on Patrick’s income statement for the current year under the caption, Discontinued Operations? a. $125,000 b. $175,000 loss c. $300,000 loss d. $425,000 172. When there has been a change in accounting principle, a. the old principle should be used in reporting the results of operations for the current year. b. the cumulative effect of the change should be reported in the current year’s retained earnings statement. c. the change should be reported retroactively. d. the new principle should be used un reporting the results of operations of the current year, but there is no change to prior years. , BRIEF EXERCISES BE 173 The following items were taken from the financial statements of Horace, Inc., over a three-year period: Item 2011 2010 2009 Net Sales $355,000 $330,000 $300,000 Cost of Goods Sold 214,000 202,000 186,000 Gross Profit $141,000 $128,000 $114,000 Instructions Compute the following for each of the above time periods. a. The amount and percentage change from 2009 to 2010. b. The amount and percentage change from 2010 to 2011. BE 174 If Parthenon Company had net income of $540,000 in 2011 and it experienced a 20% increase in net income over 2010, what was its 2010 net income? BE 175 Horizontal analysis (trend analysis) percentages for Watson Company’s sales, cost of goods sold, and expenses are listed here. Horizontal Analysis 2011 2010 2009 Sales 98.2% 104.8% 100.0% Cost of goods sold 102.5 98.0 100.0 Expenses 108.6 96.4 100.0 BE 175 (Cont.) Instructions Explain whether Watson’s net income increased, decreased, or remained unchanged over the 3- year period. BE 176 Using the following operating data for Steiner Corporation, illustrate horizontal analysis. 2010 2009 Net sales $350,000 $320,000 Cost of goods sold 210,000 180,000 Operating expenses 112,000 100,000 Net income 28,000 40,000 BE 177 Using the following operating data for Steiner Corporation, prepare a schedule showing a vertical analysis for 2010. 2010 2009 Net sales $350,000 $320,000 Cost of goods sold 210,000 180,000 Operating expenses 112,000 100,000 Net income 28,000 40,000 BE 178 Using these data from the comparative balance sheet of Luca Company, perform vertical analysis. December 31, 2011 December 31, 2010 Accounts receivable $ 510,000 $ 400,000 Inventory 780,000 600,000 Total assets 3,000,000 2,500,000 BE 179 For each of the ratios listed below, indicate by the appropriate code letter, whether it is a liquidity ratio (L), a profitability ratio (P), or a solvency ratio (S). ____ 1. Times interest earned ratio ____ 2. Asset turnover ____ 3. Receivables turnover ____ 4. Debt to total assets ratio ____ 5. Current ratio ____ 6. Payout ratio BE 180 Selected financial statement data for Meyer Company are presented below. 12/31/10 Cash $ 10,000 Short-term investments 15,000 Accounts receivable 60,000 Inventories 75,000 Total current liabilities 100,000 Instructions Compute the following ratios at December 31, 2010: (a) Current. (b) Acid-test. BE 181 Breaktown Company had net income of $175,000 and net sales of $625,000 in 2010. The company’s total assets for 2009/2010 averaged $4,000,000. Its common stockholders’ equity for the period averaged $2,340,000. Calculate (a) profit margin, (b) return on assets, and (c) return on common stockholders’ equity. BE 182 Berman Company reported the following financial information: 12/31/10 12/31/09 Accounts receivable $ 320,000 $ 360,000 Net credit sales 2,550,000 2,420,000 Compute (a) the receivables turnover and (b) the average collection period for 2010. BE 183 Prepare a partial income statement, beginning with income before income taxes using the following information for Simpson Corporation for the fiscal year ended December 31, 2010: Sales $750,000 Extraordinary loss 80,000 Operating expenses 180,000 Cost of goods sold 500,000 Loss on sale of land 25,000 Simpson Corporation is subject to a 30% income tax rate. EXERCISES Ex. 184 Selected financial information for Bradley Corporation is presented below. December 31, 2011 December 31, 2010 Current assets $ 55,000 $ 50,000 Long-term liabilities 92,000 80,000 Retained earnings 120,000 100,000 Instructions Prepare a schedule showing a horizontal analysis for 2011 using 2010 as the base year. Ex. 185 Comparative information taken from the Wells Company financial statements is shown below: 2011 2010 (a) Notes receivable $ 20,000 $ -0- (b) Accounts receivable 175,000 140,000 (c) Retained earnings 30,000 (40,000) (d) Income taxes payable 45,000 20,000 (e) Sales 900,000 750,000 (f) Operating expenses 170,000 200,000 Instructions Using horizontal analysis, show the percentage change from 2010 to 2011 with 2010 as the base year. Ex. 186 Flynn Corporation had net income of $2,000,000 in 2009. Using 2009 as the base year, net income decreased by 70% in 2010 and increased by 175% in 2011. Instructions Compute the net income reported by Flynn Corporation for 2010 and 2011. Ex. 187 The following items were taken from the financial statements of Ritz, Inc., over a four-year period: Item 2012 2011 2010 2009 Net Sales $800,000 $650,000 $600,000 $500,000 Cost of Goods Sold 580,000 460,000 420,000 400,000 Gross Profit $220,000 $190,000 $180,000 $100,000 Instructions Using horizontal analysis and 2009 as the base year, compute the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable or unfavorable for each item. Ex. 188 The comparative balance sheet of Haley Company appears below: HALEY COMPANY Comparative Balance Sheet December 31, ——————————————————————————————————————————— Assets 2011 2010 Current assets ..................................................................................... $ 360 $300 Plant assets ......................................................................................... 640 500 Total assets ......................................................................................... $1,000 $800 Liabilities and stockholders' equity Current liabilities .................................................................................. $ 150 $120 Long-term debt .................................................................................... 240 160 Common stock .................................................................................... 350 320 Retained earnings ............................................................................... 260 200 Total liabilities and stockholders' equity ......................................... $1,000 $800 Instructions (a) Using horizontal analysis, show the percentage change for each balance sheet item using 2010 as a base year. (b) Using vertical analysis, prepare a common size comparative balance sheet. Ex. 189 Using the following selected items from the comparative balance sheet of Anders Company, illustrate horizontal and vertical analysis. December 31, 2011 December 31, 2010 Accounts Receivable $ 840,000 $ 600,000 Inventory 975,000 780,000 Total Assets 4,000,000 2,500,000 Ex. 190 The comparative condensed balance sheets of Bailey Corporation are presented below. BAILEY CORPORATION Comparative Condensed Balance Sheets December 31 2011 2010 Assets Current assets $ 72,000 $ 80,000 Property, plant, and equipment (net) 94,500 90,000 Intangibles 33,500 40,000 Total assets $200,000 $210,000 Liabilities and stockholders' equity Current liabilities $ 40,800 $ 48,000 Long-term liabilities 141,000 150,000 Stockholders' equity 18,200 12,000 Total liabilities and stockholders' equity $200,000 $210,000 Instructions (a) Prepare a horizontal analysis of the balance sheet data for Bailey Corporation using 2010 as a base. (b) Prepare a vertical analysis of the balance sheet data for Bailey Corporation in columnar form for 2011. Ex. 191 The comparative condensed income statements of Moran Corporation are shown below. MORAN CORPORATION Comparative Condensed Income Statements For the Years Ended December 31 2011 2010 Net sales $600,000 $500,000 Cost of goods sold 450,000 400,000 Gross profit 150,000 100,000 Operating expenses 54,000 40,000 Net income $ 96,000 $ 60,000 Instructions (a) Prepare a horizontal analysis of the income statement data for Moran Corporation using 2010 as a base. (Show the amounts of increase or decrease.) (b) Prepare a vertical analysis of the income statement data for Moran Corporation in columnar form for both years. Ex. 192 Operating data for Manning Corporation are presented below. 2010 Net sales $500,000 Cost of goods sold 320,000 Operating expenses 130,000 Net income 50,000 Instructions Prepare a schedule showing a vertical analysis for 2010. Ex. 193 The following information was taken from the financial statements of Lee Company: 2011 2010 Gross profit on sales ........................................................... $900,000 $840,000 Income before income taxes ............................................... 280,000 230,000 Net income.......................................................................... 240,000 216,000 Net income as a percentage of net sales............................. 8% 9% Instructions (a) Compute the net sales for each year. (b) Compute the cost of goods sold in dollars and as a percentage of net sales for each year. (c) Compute operating expenses in dollars and as a percentage of net sales for each year. (Income taxes are not operating expenses). Ex. 194 Selected financial statement data for Morton Company are presented below. December 31, 2011 December 31, 2010 Cash $ 40,000 $30,000 Short-term investments 25,000 18,000 Receivables (net) 100,000 80,000 Inventories 85,000 65,000 Total current liabilities 100,000 90,000 Ex. 194 (Cont.) During 2011, net sales were $900,000, and cost of goods sold was $705,000. Instructions Compute the following ratios at December 31, 2011: (a) Current. (b) Acid-test. (c) Receivables turnover. (d) Inventory turnover. Ex. 195 Selected information from the comparative financial statements of Fryman Company for the year ended December 31, appears below: 2011 2010 Accounts receivable (net) $ 180,000 $200,000 Inventory 140,000 160,000 Total assets 1,200,000 800,000 Current liabilities 140,000 110,000 Long-term debt 400,000 300,000 Net credit sales 1,330,000 700,000 Cost of goods sold 900,000 530,000 Interest expense 50,000 25,000 Income tax expense 60,000 29,000 Net income 150,000 85,000 Instructions Answer the following questions relating to the year ended December 31, 2011. Show computations. 1. Inventory turnover for 2011 is __________. 2. Times interest earned in 2011 is __________. 3. The debt to total assets ratio for 2011 is __________. 4. Receivables turnover for 2011 is __________. 5. Return on assets for 2011 is __________. Ex. 196 The financial statements of Grogan Company appear below: GROGAN COMPANY Comparative Balance Sheet December 31, ——————————————————————————————————————————— Assets 2011 2010 Cash .............................................................................................. $ 25,000 $ 40,000 Short-term investments.................................................................. 15,000 60,000 Accounts receivable (net)............................................................... 50,000 30,000 Inventory........................................................................................ 50,000 70,000 Property, plant and equipment (net) ............................................... 260,000 300,000 Total assets ............................................................................. $400,000 $500,000 Liabilities and stockholders' equity Accounts payable........................................................................... $ 20,000 $ 30,000 Short-term notes payable............................................................... 30,000 90,000 Bonds payable ............................................................................... 90,000 160,000 Common stock............................................................................... 150,000 150,000 Retained earnings.......................................................................... 110,000 70,000 Total liabilities and stockholders' equity.................................... $400,000 $500,000 Ex. 196 (cont.) GROGAN COMPANY Income Statement For the Year Ended December 31, 2011 Net sales ........................................................................................ $400,000 Cost of goods sold.......................................................................... 240,000 Gross profit..................................................................................... 160,000 Expenses Operating expenses ................................................................. $52,000 Interest expense....................................................................... 18,000 Total expenses ................................................................... 70,000 Income before income taxes .......................................................... 90,000 Income tax expense ....................................................................... 27,000 Net income..................................................................................... $ 63,000 Additional information: a. Cash dividends of $23,000 were declared and paid in 2011. b. Weighted-average number of shares of common stock outstanding during 2011 was 30,000 shares. c. Market value of common stock on December 31, 2011, was $21 per share. Instructions Using the financial statements and additional information, compute the following ratios for Grogan Company for 2011. Show all computations. Computations 1. Current ratio _________. 2. Return on common stockholders' equity _________. 3. Price-earnings ratio _________. 4. Acid-test ratio _________. 5. Receivables turnover _________. 6. Times interest earned _________. 7. Profit margin _________. 8. Days in inventory _________. 9. Payout ratio _________. 10. Return on assets _________. Ex. 197 The following ratios have been computed for Morgan Company for 2011. Profit margin 20% Times interest earned 9 times Receivables turnover 3 times Acid-test ratio 2 : 1 Current ratio 3 : 1 Debt to total assets ratio 20% Morgan Company’s 2011 financial statements with missing information follow: MORGAN COMPANY Comparative Balance Sheet December 31, ——————————————————————————————————————————— Assets 2011 2010 Cash......................................................................................... $ 30,000 $ 45,000 Short-term Investments ............................................................ 10,000 25,000 Accounts receivable (net) ......................................................... ? (6) 40,000 Inventory .................................................................................. ? (8) 50,000 Property, plant, and equipment (net) ........................................ 200,000 160,000 Total assets....................................................................... $ ? (9) $320,000 Liabilities and stockholders' equity Accounts payable..................................................................... $ ? (7) $ 30,000 Short-term notes payable ......................................................... 40,000 35,000 Bonds payable ......................................................................... ? (10) 20,000 Common stock ......................................................................... 220,000 200,000 Retained earnings .................................................................... 60,000 35,000 Total liabilities and stockholders' equity............................. $ ? (11) $320,000 MORGAN COMPANY Income Statement For the Year Ended December 31, 2011 ——————————————————————————————————————————— Net sales .................................................................................. $150,000 Cost of goods sold.................................................................... 75,000 Gross profit............................................................................... 75,000 Expenses: Depreciation expense......................................................... $ ? (5) Interest expense................................................................. 5,000 Selling expenses ................................................................ 8,000 Administrative expenses..................................................... 12,000 Total expenses ............................................................. ? (4) Income before income taxes .................................................... ? (2) Income tax expense ........................................................... ? (3) Net income............................................................................... $ ? (1) Ex. 197 (Cont.) Instructions Use the above ratios and information from the Morgan Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers. Ex. 198 Selected data for Nancy's Store appear below. 2011 2010 Net sales $800,000 $520,000 Cost of goods sold 600,000 345,000 Inventory at end of year 65,000 85,000 Accounts receivable at end of year 90,000 70,000 Instructions Compute the following for 2011: (a) Gross profit rate. (b) Inventory turnover. (c) Receivables turnover. Ex. 199 Selected financial statement data for Holmes Company are presented below. Net sales $1,000,000 Cost of goods sold 700,000 Interest expense 10,000 Net income 144,000 Total assets (ending) 850,000 Total common stockholders' equity (ending) 650,000 Total assets at the beginning of the year were $750,000; total common stockholders' equity was $550,000 at the beginning of the period. Instructions Compute each of the following: (a) Asset turnover (b) Profit margin (c) Return on assets (d) Return on common stockholders' equity Ex. 200 Winter Corporation has issued common stock only. The company has been successful and has a gross profit rate of 20%. The information shown below was taken from the company's financial statements. Beginning inventory $ 482,000 Purchases 4,836,000 Ending inventory ? Average accounts receivable 800,000 Average common stockholders' equity 3,500,000 Sales (all on credit) 6,000,000 Net income 420,000 Instructions Compute the following: (a) Receivables turnover and the average collection period. (b) Inventory turnover and the days in inventory. (c) Return on common stockholders' equity. Ex. 201 Boyle Corporation had the following comparative current assets and current liabilities: Dec. 31, 2011 Dec. 31, 2010 Current assets Cash $ 60,000 $ 30,000 Short-term investments 40,000 10,000 Accounts receivable 55,000 95,000 Inventory 110,000 90,000 Prepaid expenses 35,000 20,000 Total current assets $300,000 $245,000 Current liabilities Accounts payable $140,000 $110,000 Salaries payable 40,000 30,000 Income tax payable 20,000 15,000 Total current liabilities $200,000 $155,000 During 2011, credit sales and cost of goods sold were $750,000 and $400,000, respectively. Ex. 201 (Cont.) Instructions Compute the following liquidity measures for 2011: 1. Current ratio. 2. Working capital. 3. Acid-test ratio. 4. Receivables turnover. 5. Inventory turnover. Ex. 202 Selected data from Oates Company are presented below: Total assets $1,600,000 Average assets 1,750,000 Net income 245,000 Net sales 1,400,000 Average common stockholders' equity 1,000,000 Instructions Calculate the profitability ratios that can be computed from the above information. Ex. 203 The following data are taken from the financial statements of Doyle Company: 2011 2010 Monthly average accounts receivable $ 520,000 $ 500,000 Net sales on account 5,200,000 4,500,000 Terms for all sales are 2/10, n/30 Instructions (a) Compute the receivables turnover and the average collection period for both years. (b) What conclusion can an analyst draw about the management of the accounts receivable? Ex. 204 State the effect of the following transactions on the current ratio. Use increase, decrease, or no effect for your answer. (a) Collection of an accounts receivable. (b) Declaration of cash dividends. (c) Additional stock is sold for cash. (d) Short-term investments are purchased for cash. (e) Equipment is purchased for cash. (f) Inventory purchases are made for cash. (g) Accounts payable are paid. Ex. 205 The balance sheet for Farley Corporation at the end of the current year indicates the following: Bonds payable, 8% ............................................................. $4,000,000 6% Preferred stock, $100 par.............................................. 1,000,000 Common stock, $10 par ...................................................... 2,000,000 Income before income taxes was $480,000 and income taxes expense for the current year amounted to $144,000. Cash dividends paid on common stock were $300,000, and the common stock was selling for $22 per share at the end of the year. There were no ownership changes during the year. Instructions Determine each of the following: (a) times that bond interest was earned. (b) earnings per share for common stock. (c) price-earnings ratio. Ex. 206 The income statement for Dibble Company for the year ended December 31, 2010 appears below. Sales $620,000 Cost of goods sold 380,000 Gross profit 240,000 Expenses 190,000* Net income $ 50,000 *Includes $20,000 of interest expense and $22,000 of income tax expense. Additional information: 1. Common stock outstanding on January 1, 2010 was 50,000 shares. On July 1, 2010, 10,000 more shares were issued. 2. The market price of Dibble's stock was $12 at the end of 2010. 3. Cash dividends of $30,000 were paid, $6,000 of which were paid to preferred stockholders. Instructions Compute the following ratios for 2010: (a) earnings per share. (b) price-earnings. (c) times interest earned. Ex. 207 Selected comparative statement data for Willingham Products Company are presented below. All balance sheet data are as of December 31. 2011 2010 Net sales $800,000 $720,000 Cost of goods sold 480,000 440,000 Interest expense 7,000 5,000 Net income 60,000 42,000 Accounts receivable 120,000 100,000 Inventory 85,000 75,000 Total assets 600,000 500,000 Total common stockholders' equity 430,000 320,000 Instructions Compute the following ratios for 2011: (a) Profit margin. (b) Asset turnover. (c) Return on assets. (d) Return on common stockholders' equity. Ex. 208 Santo Corporation experienced a fire on December 31, 2011, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following balances. December 31, 2011 December 31, 2010 Cash $ 30,000 $ 10,000 Receivables (net) 84,000 126,000 Inventory 200,000 180,000 Accounts payable 50,000 90,000 Notes payable 30,000 60,000 Common stock, $100 par 400,000 400,000 Retained earnings 130,000 101,000 Additional information: 1. The inventory turnover is 4.5 times 2. The return on common stockholders' equity is 22%. The company had no additional paid-in capital. 3. The receivables turnover is 8.8 times. 4. The return on assets is 20%. 5. Total assets at December 31, 2010, were $585,000. Instructions Compute the following for Santo Corporation. (a) Cost of goods sold for 2011. (b) Net sales (credit) for 2011. (c) Net income for 2011. (d) Total assets at December 31, 2011. Ex. 209 For its fiscal year ending October 31, 2010, Conrad Corporation reported the following partial data Income before income taxes $900,000 Income tax expense (30% x 650,000) 195,000 Income before extraordinary items 705,000 Extraordinary loss from flood 250,000 Net income 455,000 The flood loss is considered an extraordinary item. The income tax rate is 30% on all items. Instructions Prepare a correct income statement, beginning with income before income taxes. Ex. 210 Gumble Corporation had income from continuing operations of $300,000 for the year ended December 31, 2010. It also had the following items (before income taxes): 1. Extraordinary flood loss of $120,000. 2. Loss of $50,000 on discontinuance of a division. All items are subject to income taxes at a 30% tax rate. Instructions Prepare a partial income statement, beginning with income from continuing operations. Ex. 211 Winfrey Corporation gathered the following information for the fiscal year ended December 31, 2010: Sales $1,300,000 Extraordinary fire loss 110,000 Selling and administrative expenses 160,000 Cost of goods sold 900,000 Loss on sale of equipment 40,000 Winfrey Corporation is subject to a 30% income tax rate. Instructions Prepare a partial income statement, beginning with income before income taxes. Ex. 212 Windsor Corporation had the information listed below available in preparing an income statement for the year ended December 31, 2010. All amounts are before income taxes. Assume a 30% income tax rate for all items. Sales $ 600,000 Expropriation of property by a foreign government (loss) $ (90,000) Income from operation of discontinued cement division $ 100,000 Loss from disposal of cement division $ (80,000) Operating expenses $ 125,000 Gain on sale of equipment $ 65,000 Cost of goods sold $ 420,000 Instructions Prepare a multiple-step income statement in good form which takes into account intraperiod income tax allocation. Ignore EPS computations. Ex. 213 Indicate whether the following items would be reported as an ordinary or an extraordinary item in Maris Corporation's income statement. (a) Loss attributable to labor strike. (b) Gain on sale of fixed assets. (c) Loss from fire. Logan is a chemical company. (d) Loss from sale of short-term investments. (e) Expropriation of property by a foreign government. (f) Loss from tornado damage. Maris Corporation is located in the Midwest's tornado alley. (g) Loss from government condemnation of property through newly enacted law. Ex. 214 Milton Company has income from continuing operations of $480,000 for the year ended December 31, 2010. It also has the following items (before considering income taxes): (1) An extraordinary fire loss of $150,000. (2) A gain of $90,000 on the discontinuance of a major segment. (3) A correction of an error in last year's financial statement that resulted in a $70,000 overstatement of 2009 net income. Assume all items are subject to income taxes at a 30% tax rate. Instructions (a) Prepare an income statement, beginning with income from continuing operations. (b) Indicate the statement presentation of any item not included in (a) above. COMPLETION STATEMENTS 215. In analyzing and interpreting financial statement information, three major characteristics are generally evaluated: (1)____________, (2)_____________, and (3)_____________. , 216. ______________ analysis, also called trend analysis, is a technique for evaluating a percentage increase or decrease for a financial statement item over a period of time. 217. Expressing each item within a financial statement as a percentage of a base amount is called ______________ analysis. 218. The ratios used in evaluating a company's liquidity and short-term debt paying ability that complement each other are the ______________ ratio and the ______________ ratio. 219. The receivables turnover is calculated by dividing _________________ by average ___________________. 220. If inventory turnover is 10 times, and the average inventory was $400,000, the cost of goods sold during the year was $______________ and the days in inventory was ______________ days. 221. Hansen Corporation had net income for the year of $200,000 and a profit margin of 25%. If total average assets were $400,000, the asset turnover ratio was ____________ times. 222. The ______________ ratio measures the percentage of earnings distributed in the form of cash dividends. 223. The lower the ______________ to ______________ ratio, the more equity "buffer" there is available to the creditors. 224. Times interest earned is calculated by dividing _____________ before _______________ and ________________ by interest expense. 225. Discontinued operations refers to the disposal of a ______________ of a business. 226. The two criteria necessary for an item to be classified as an extraordinary item are that the transaction or event must be (1) __________________ and (2) ___________________. 227. A change in inventory methods during the year would be classified as a change in __________________. MATCHING SET A 228. For each of the ratios listed below, indicate by the appropriate code letter, whether it is a liquidity ratio, a profitability ratio, or a solvency ratio. Code: L = Liquidity ratio P = Profitability ratio S = Solvency ratio ____ 1. Price-earnings ratio ____ 2. Asset turnover ____ 3. Receivables turnover ____ 4. Earnings per share ____ 5. Payout ratio ____ 6. Current ratio ____ 7. Acid-test ratio ____ 8. Debt to total assets ratio ____ 9. Times interest earned ____ 10. Inventory turnover 229. Match the ratios with the appropriate ratio computation by entering the appropriate letter in the space provided. A. Current ratio F. Times interest earned B. Acid-test ratio G. Inventory turnover C. Profit margin H. Average collection period D. Asset turnover I. Days in inventory E. Price-earnings ratio J. Payout ratio Cost of goods sold ____ 1. ————————— Average inventory Net income ____ 2. ————— Net sales Cash dividends ____ 3. ——————— Net income Net sales ____ 4. ——————— Average assets Current assets ____ 5. ———————— Current liabilities 365 days ____ 6. —————————— Receivables turnover Market price per share of stock ____ 7. —————————————— Earnings per share 365 days ____ 8. ———————— Inventory turnover Income before income taxes and interest expense ____ 9. —————————————————————— Interest expense Cash + short-term investments + receivables (net) ____ 10. ——————————————————————— Current liabilities SHORT-ANSWER ESSAY QUESTIONS S-A E 230 Horizontal and vertical analyses are analytical tools frequently used to analyze financial statements. What type of information or insights can be obtained by using these two techniques? Explain how the output of horizontal analysis and vertical analysis can be compared to industry averages and/or competitive companies. S-A E 231 Eric Harden, the CEO of Mystical Products, is a successful entrepreneur but a poor student of accounting. He asks you to explain to him, in a memo, the bases of comparison for ratio analysis. S-A E 232 What do the following classes of ratios measure? (a) Liquidity ratios. (b) Profitability ratios. (c) Solvency ratios. S-A E 233 (a) What is meant by trading on the equity? (b) How would you determine the profitability of trading on the equity? S-A E 234 Why is it important to report discontinued operations separately from income from continuing operations? S-A E 235 (Ethics) A trusted employee of Wilderness Tours was caught in the act of embezzling funds. He confessed to earlier embezzlements, but retracted the confession on the advice of his attorney. Over the course of the most recent quarter, it has been determined that $20,000 was embezzled. Wilderness Tours has suffered adverse publicity in the recent past because of serious injury to five tourists that occurred during a two week "Winter Wilds Adventure" tour. The company has therefore decided to avoid publicity and has agreed to drop all charges against the embezzling employee. In return, the employee has agreed to a notation of "Terminated—Not to be Rehired" to be appended to his personnel file. Required: 1. Who are the stakeholders in the decision not to prosecute? 2. Was it ethical for the company to decide not to prosecute? Explain. S-A E 236 (Communication) Kwik Express specializes in the overnight transportation of medical equipment and laboratory specimens. The company has selected the following information from its most recent annual report to be the subject of an immediate press release. • The financial statements are being released. • Net income this year was $2.1 million. Last year's net income had been $2.0 million. • The current ratio has changed to 2:1 from last year's 1.5:1 • The debt/total assets ratio has changed to 4:5 from last year's 3:5 • The company expanded its truck fleet substantially by purchasing ten new delivery vans. The company already had twelve delivery vans. • The company is now the largest medical courier in the mid-Atlantic region. Required: Prepare a brief press release incorporating the information above. Include all information. Think carefully which information (if any) is good news for the company, and which (if any) is bad news.
Created Date Thursday, 02 January 2014
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Accounting_Chapter_19

TRUE-FALSE STATEMENTS 1. Reports prepared in financial accounting are general-purpose reports, whereas reports prepared in managerial accounting are usually special-purpose reports. 2. Managerial accounting information generally pertains to an entity as a whole and is highly aggregated. 3. Managerial accounting applies to all forms of business organizations. 4. Determining the unit cost of manufacturing a product is an output of financial accounting. 5. Managerial accounting internal reports are prepared more frequently than are classified financial statements. 6. The management function of organizing and directing is mainly concerned with setting goals and objectives for the entity. 7. The Sarbanes-Oxley Act replaces generally accepted accounting principles in a manufacturing company. 8. Controlling is the process of determining whether planned goals are being met. 9. Decision-making is an integral part of the planning, directing, and controlling functions. 10. Both direct labor cost and indirect labor cost are product costs. 11. Manufacturing costs that cannot be classified as direct materials or direct labor are classified as manufacturing overhead. 12. Raw materials are equal to direct materials minus indirect materials. 13. Raw materials that can be conveniently and directly associated with a finished product are called materials overhead. 14. The total cost of a finished product does not generally contain equal amounts of materials, labor, and overhead costs. 15. Direct materials costs and indirect materials costs are manufacturing overhead. 16. Period costs include selling and administrative expenses. 17. Indirect materials and indirect labor are both inventoriable costs. 18. Direct materials and direct labor are the only product costs. 19. Total period costs are deducted from total cost of work in process to calculate cost of goods manufactured. 20. Period costs are not inventoriable costs. 21. Ending finished goods inventory appears on both the balance sheet and the income statement of a manufacturing company. 22. The beginning work in process inventory appears on both the balance sheet and the cost of goods manufactured schedule of a manufacturing company. 23. In calculating gross profit for a manufacturing company, the cost of goods manufactured is deducted from net sales. 24. Finished goods inventory does not appear on a cost of goods manufactured schedule. 25. If the ending work in process inventory is greater than the beginning work in process inventory, then the cost of goods manufactured will be less than total manufacturing costs for the period. 26. Finished goods inventory for a manufacturing company is equivalent to merchandise inventory for a merchandising company. 27. Raw materials inventory shows the cost of completed goods available for sale to customers. 28. The balanced scorecard approach attempts to maintain as little inventory on hand as possible. 29. The supply chain is all the activities associated with providing a product or service. 30. Many companies have significantly lowered inventory levels and costs using just-in-time inventory methods. 31. Managerial accounting is primarily concerned with managers and external users. 32. Planning involves coordinating the diverse activities and human resources of a company to produce a smooth running operation. 33. When the physical association of raw materials with the finished product is too small to trace in terms of cost, they are usually classified as indirect materials. 34. Product costs are also called inventoriable costs. 35. Direct materials become a cost of the finished goods manufactured when they are acquired, not when they are used. 36. The sum of the direct materials costs, direct labor costs, and beginning work in process is the total manufacturing costs for the year. 37. In a manufacturing company balance sheet, manufacturing inventories are reported in the current assets section in the order of their expected use in production. MULTIPLE CHOICE QUESTIONS 38. Managerial accounting applies to each of the following types of businesses except a. service firms. b. merchandising firms. c. manufacturing firms. d. Managerial accounting applies to all types of firms. 39. Managerial accounting information is generally prepared for a. stockholders. b. creditors. c. managers. d. regulatory agencies. 40. Managerial accounting information a. pertains to the entity as a whole and is highly aggregated. b. pertains to subunits of the entity and may be very detailed. c. is prepared only once a year. d. is constrained by the requirements of generally accepted accounting principles. 41. The major reporting standard for presenting managerial accounting information is a. relevance. b. generally accepted accounting principles. c. the cost principle. d. the current tax law. 42. Managerial accounting is also called a. management accounting. b. controlling. c. analytical accounting. d. inside reporting. 43. Which of the following is not an internal user? a. Creditor b. Department manager c. Controller d. Treasurer 44. Managerial accounting does not encompass a. calculating product cost. b. calculating earnings per share. c. determining cost behavior. d. profit planning. 45. Managerial accounting is applicable to a. service entities. b. manufacturing entities. c. not-for-profit entities. d. all of these. 46. Management accountants would not a. assist in budget planning. b. prepare reports primarily for external users. c. determine cost behavior. d. be concerned with the impact of cost and volume on profits. 47. Internal reports must be communicated a. daily. b. monthly. c. annually. d. as needed. 48. Financial statements for external users can be described as a. user-specific. b. general-purpose. c. special-purpose. d. managerial reports. 49. Managerial accounting reports can be described as a. general-purpose. b. macro-reports. c. special-purpose. d. classified financial statements. 50. The reporting standard for external financial reports is a. industry-specific. b. company-specific. c. generally accepted accounting principles. d. department-specific. 51. Which of the following statements about internal reports is not true? a. The content of internal reports may extend beyond the double-entry accounting system. b. Internal reports may show all amounts at market values. c. Internal reports may discuss prospective events. d. Most internal reports are summarized rather than detailed. 52. In an analogous sense, external user is to internal user as generally accepted accounting principles are to a. timely. b. special-purpose. c. relevance to decision. d. SEC. 53. Internal reports are generally a. aggregated.