2ND YEAR CLINCHER ROUND

The process of ___________ causes the need for cost accounting.

• Conversion
• Sales
• Controlling
• Allocating

Given the following notation, what is the break-even sales level in units? SP = selling price per unit, FC = total fixed cost, VC = variable cost per unit

• SP/(FC/VC)
• FC/(VC/SP)
• VC/(SP - FC)
• FC/(SP - VC)

As projected net income increases the

• degree of operating leverage declines.
• margin of safety stays constant.
• break-even point goes down.
• contribution margin ratio goes up.

Heath Co.’s current ratio is 4:1. Which of the following transactions would normally increase its current ratio?

• Purchasing inventory on account.
• Selling inventory on account.
• Collecting an account receivable.
• Purchasing machinery for cash.

When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account

• Decreases both accounts receivable and the allowance for uncollectible accounts.
• Decreases accounts receivable and increases the allowance for uncollectible accounts.
• Increases the allowance for uncollectible accounts and decreases net income.
• Decreases both accounts receivable and net income.

In which of the following situations is the units-of-production method of depreciation most appropriate?

• An asset’s service potential declines with use.
• An asset’s service potential declines with the passage of time.
• An asset is subject to rapid obsolescence.
• An asset incurs increasing repairs and maintenance with use.

According to the net method, which of the following items should be included in the cost of inventory?

• Freight costs - Yes Purchase discounts not taken-No
• Freight costs - Yes Purchase discounts not taken-Yes
• Freight costs - No Purchase discounts not taken-Yes
• Freight costs - No Purchase discounts not taken-No

Which of the following statements is correct?

• Negligence signifies the idea of delay in the fulfillment of an obligation.
• Delay or default means the failure to perform the obligation on the date agreed upon by the parties.
• Incidental fraud is one committed in the performance of an obligation.
• Proper diligence of a good father of a family means extra-ordinary diligence.

Statement No. 1 - the same act of negligence of the defendant that causes injury to another may give rise to a liability based on culpa aquiliana and culpa criminal and the injured party may recover twice from the same act or omission of the defendant. Statement No. 2 - When the defendant causes damage to the plaintiff through the former’s fault or negligence, there being no contractual relationship between them, the basis of the defendant’s liability is a quasi-contract.

• Both statements are true.
• Both statements are false.
• Only Statement No. 1 is true.
• Only Statement No. 2 is true

Which of the following is not an acceptable basis for the recognition of expense?

• Systematic and rational allocation
• Cause and effect association
• Immediate recognition
• Cash disbursement