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problem 1: Company X purchased all of the outstanding stock of company Y for $3,000,000 in cash. At the date of the acquisition company Y’s stockholders’ equity consisted of $2,250,000 of common stock and $250,000 of retained earnings. What is the amount of the difference between cost and book value of the subsidiary interest:

a. Excess of cost over book value of subsidiary interest of $500,000
b. Excess of cost over book value of subsidiary interest of $750,000
c. Excess of book value over cost of subsidiary interest of $500,000
d. Excess of book value over cost of subsidiary interest of $750,000

problem 2: On May 10, 2011 a sale on account for $20,000 to a Mexican company was billed for 250,000 pesos. The exchange rate was $0.08 per peso on the date of the sale. On May 17, 2011 the cash was received on account and the exchange rate was $0.10 per peso. Which of the following statements identifies the exchange gain or loss related to this transaction at the end of the fiscal year (December 31, 2011):

a. Realized exchange loss of $5,000
b. Realized exchange gain of $5,000
c. Unrealized exchange loss of $5,000
d. Unrealized exchange gain of $5,000

problem 3
: Which of the given is an ex of a cash flow from a financing activity:

a. Payment of cash for dividends
b. Payment of cash to acquire marketable securities
c. Receipt of cash from the sale of equipment
d. Receipt of cash from customers on account

problem 4: What type of analysis is indicated by the following:

 a. Contribution margin analysis
 b. Differential analysis
 c. Horizontal analysis
 d. Vertical analysis

problem 5: The ratio determined by dividing quick assets (cash, receivables and marketable securities) by total current liabilities is:

a. Acid-test ratio
b. Current ratio
c. Debt to equity ratio
d. All of the above

problem 6: Which of the following is generally considered a variable cost:

a. Indirect labor cost
b. Direct materials cost
c. Factory overhead cost
d. Sales salaries

problem 7. If the factory overhead account has a debit balance the factory overhead is said to be:

a. In error
b. Over-applied
c. Over-absorbed
d. Under-applied

problem 8: For which of the following would the process cost system be appropriate:

a. Antique furniture repair shop
b. Building contractor
c. Custom bike manufacturer
d. Oil refinery

problem 9: Suppose sales are $800,000, variable costs are $600,000, and fixed costs are $100,000. What is the contribution margin ratio:

a. 12.5%
b. 25%
c. 37.5%
d. 87.5%

problem 10:The process by which management allocates investment funds among competing capital investment oppurtunities is termed as:

a. Capital leasing
b. Capital prioritization
c. Capital rationing
d. Capital expenditure budgeting

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M92840

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