Tag Archives: week 3 quiz

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ACC 206 Week 3 Quiz – Strayer

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Chapter 11

 

 

ACC 303 Week 3 Quiz – Strayer NEW

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Chapter 2

 

 

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Week 3 Quiz 2: Chapter 9

 

 

ACC 350 Week 3 Quiz – Strayer

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Quiz 2 Chapter 2

 

 

ACC 401 Week 3 Quiz – Strayer

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Quiz 2 Chapter 3

 

 

ACC 410 Week 3 Quiz – Strayer

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Quiz 2 Chapter 2 and 3

 

 

ACC 557 Week 3 Homework Problems – Strayer

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Chapter 4

 

 

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Assignment 1: Activity-based Costing (ABC) in Service Industries

 

 

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Week 3 Homework

 

 

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Week 3 Quiz 2: Chapter 2 and 3

 

 

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Assignment 1: Madoff Securities

 

 

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Week 3 Homework

 

 

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Week 3 Quiz 2: Chapters 2 and 3

 

 

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BUS 230 Week 3 Quiz – Strayer

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Chapter 2 and 3

 

 

BUS 309 Week 3 Quiz – Strayer

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Quiz 2 Chapter 2

 

 

BUS 310 Week 3 Discussion Questions – Strayer

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BUS 322 Assignment 1: Organizational Environment

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BUS 322 Week 3 Discussion Questions

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BUS 325 Week 3 Quiz – Strayer

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Quiz 2 Chapter 2

 

 

BUS 335 Week 3 Quiz – Strayer

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Quiz 2 Chapter 2 and 3

 

 

BUS 365 Week 3 Quiz – Strayer

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Quiz 2 Chapter 3

 

 

BUS 402 Week 3 Discussion Questions

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Assignment 1: The Independent Government Cost Estimate and the Statement of Work

 

 

BUS 508 Week 3 Assignment 1 – Strayer New
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Assignment 1: Corporate Responsibility and Marketing Strategies

 

 

BUS 508 Week 3 Discussion Question

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Assignment 1: Vice President of Operations, Part 1

 

 

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BUS 517 Week 3 Assignment 1 – Strayer
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Assignment 1: Project Proposal

 

 

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Assignment 1: A Peaceful Evacuation: Building a Multi-Project Battalion by Leading Upward

 

 

BUS 518 Week 3 Discussion Questions – Strayer New

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BUS 519 Week 3 Assignment 1 – Strayer

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Assignment 1: Assess Organizational Readiness

 

 

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BUS 521 Week 3 Assignment 1 – Strayer

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Assignment 1: Business Plan Part I – Business Vision

 

 

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Project Deliverable 1: SWOT Analysis

 

 

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Assignment 1: Yahoo and Amazon: Building a Competitive Advantage

 

 

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Case Study 1: Building an Access Control System

 

 

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Case Study 1: Advanced Persistent Threats Against RSA Tokens

 

 

CIS 505 Week 3 Assignment 2
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Assignment 2: Requirements for the Corporate Computing Function

 

 

CIS 505 Week 3 Discussion Questions

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Assignment 1: Cloud Computing

 

 

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Case Study 1: Emerging Wireless Technology in the Healthcare Industry

 

 

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Assignment 3: University Database

 

 

CIS 518 Week 3 Assignment 1 – Strayer
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Assignment 1: Activity Graph

 

 

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Assignment 2: Too Far Ahead of the IT Curve

 

 

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Assignment 1: Accessibility

 

 

CIS 524 Week 3 Discussion Questions – Strayer

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Case Study 1: Reaching Success through Best Project Management Practices

 

 

ECO 302 Week 3 Quiz – Strayer

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Chapter 2 and 3

 

 

ECO 305 Week 3 Quiz – Strayer

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Quiz 2 Chapter 3 and 4

 

 

ECO 405 Week 3 Quiz – Strayer

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Quiz 2 Chapter 2 and 3

 

 

ECO 410 Week 3 Quiz – Strayer

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Quiz 2 Chapter 3 and 4

 

 

ECO 450 Week 3 Quiz – Strayer

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Quiz 2 Chapter 2 and 3

 

 

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Assignment 1: Demand Estimation

 

 

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FIN 320 Week 3 Quiz – Strayer

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Quiz 2 Chapter 3 and 4

 

 

FIN 350 Week 3 Quiz – Strayer

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Quiz 2 Chapter 3 and 4

 

 

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Chapter 20 and 21

 

 

HRM 500 Week 3 Assignment 1
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Assignment 1: Trends in the Workplace

 

 

HRM 500 Week 3 Discussion Questions

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Assignment 1: Alignment of HRM and Business Strategies

 

 

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Assignment 1: Bank of America or McDonald’s Case Study

 

 

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Assignment 1: Health Care Human Resources Management

 

 

LEG 320 Week 3 Quiz – Strayer

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Quiz 3 Chapter 4 and 5

 

 

LEG 500 Week 3 Assignment 1 – Strayer

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Assignment 1: Whistleblowing and Sarbanes-Oxley Due

 

 

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LEG 505 Week 3 Assignment 1 – Strayer
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Assignment 1: Code of Conduct Assessment

 

 

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Assignment 1: Starbucks’ Strategy

 

 

MKT 475 Week 3 Quiz – Strayer

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Quiz 2 Chapter 2 and 3

 

 

MKT 500 Week 3 Discussion Question

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Assignment 1: Marketing Models

 

 

PAD 500 Week 3 Assignment 1 – Strayer
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Assignment 1: Centralia No. 5

 

 

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Week 3 Exam, Quiz, Assignments, Discussion Questions, Homework Problems

BUS 365 Week 3 Quiz 2 Chapter 3 – Strayer

BUS 365 E-Business Security and Controls Week 3 Quiz – Strayer (All Possible Questions With Answers)

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Chapter 3 Data, Text, and Document Management

Multiple Choice

1. __________ consists of powerful software tools to discover and extract knowledge from text documents.
a) Document mining
b) Master data management
c) Knowledge mining
d) Text mining

2. What is the goal of data management?
a) To store data and documents in multiple locations to insure that they are accessible to everyone on demand.
b) To capture financial data in real-time from transactions and Web sites.
c) To provide the infrastructure and tools to transform raw data into usable corporate information of the highest quality.
d) To link databases of supply chain partners so all data can be shared.

3. As a general rule, in order to maximize earnings, companies invest in data management technologies that increase:
a) the opportunity to earn revenues.
b) the ability to cut expenses.
c) employee turnover.
d) both a and b

4. Which of the following is not a reason why managers and information workers may be constrained by data?
a) data are incomplete
b) data are stored in a data warehouse
c) data are out of context
d) data are so overwhelming that they require too much time to analyze

5. In the healthcare industry, data errors __________.
a) increase healthcare costs by billions of dollars
b) have minimized healthcare costs
c) have no impact on patient care
d) have been eliminated by the use of data warehousing

6. Each year, billions of dollars are wasted in the healthcare supply chain because of the lack of __________.
a) data synchronization
b) data processing
c) real-time data
d) document management

7. __________ is a structured approach for capturing, storing, processing, integrating, distributing, securing, and archiving data effectively throughout their life cycle.
a) Data mining
b) Data management
c) Metadata
d) Data visualization

8. According to the principle of __________, the more recent the data, the more valuable they are.
a) data uncertainty
b) 90/90 data use
c) diminishing data value
d) data in context

9. According to the principle of __________, data must be integrated, processed, analyzed, and formatted into “actionable information.”
a) data uncertainty
b) 90/90 data use
c) diminishing data value
d) data in context

10. According to the principle of __________, a majority of data lose much of their value after three months.
a) data uncertainty
b) 90/90 data use
c) diminishing data value
d) data in context

11. Although vendors may claim that their __________ solution creates “a single version of the truth,” this claim is probably not true.
a) master data management
b) RFID
c) data mining
d) client/server

12. Which is not a benefit of having a unified view of customers?
a) More accurate customer data to support marketing, sales, support, and service initiatives.
b) Better responsiveness to ensure that customer service representatives have up-to-date, reliable information on the customers.
c) Faster transaction processing by organizing the data in one location.
d) Better revenue management and more responsive business decisions.

13. Businesses that collect data about employees and customers have the legal duty to __________.
a) destroy that data after 30 days
b) protect that data
c) retain that data for seven years
d) Both a and b

14. All companies create __________, which are documents that record business activities and functions such as contracts, research and development, accounting source documents, memos, and customer/client communications.
a) business records
b) transactions
c) computer files
d) databases

15. A computer system organizes data into a hierarchy that begins with __________, which are the smallest unit of data a computer can process.
a) bits
b) attributes
c) fields
d) bytes

16. Customer name, invoice number, and order date are examples of __________.
a) attributes
b) bytes
c) sectors
d) primary keys

17. Which of the following best represents a unique identifier field or primary key?
a) zip code
b) customer last name
c) product type
d) product ID

18. Records can be arranged in several ways on a storage medium. The arrangement of records determines:
a) how individual records can be accessed.
b) how long it takes to access records.
c) how individual records can be accessed and how long it takes to access them.
d) the storage media used for storage.

19. In __________ file organization, which is the way files are organized on tape, data records must be retrieved in the same physical sequence in which they are stored.
a) direct
b) random
c) sequential
d) primary

20. Magnetic tape uses __________ file organization, whereas magnetic disks and DVDs use __________ file organization.
a) sequential; direct
b) primary; secondary
c) random; direct
d) random; sequential

21. __________ programs can provide access to all organizational data and overcome many of the problems associated with data file environments.
a) Sequential data
b) Database management
c) Business record
d) ISAM

22. Disadvantages of centralized databases are all of the following except:
a) they are vulnerable to a single point of failure.
b) when users are widely dispersed and need data manipulations, they can experience transmission delays.
c) when the centralized database computer fails to function properly, all users are affected.
d) much more expensive to set up and maintain than a distributed database.

23. An advantage of __________ is that they provide the response speed of localized files without the need to replicate all changes in multiple locations.
a) centralized databases
b) replicated databases
c) partitioned databases
d) file systems

24. Database management systems range in size and capabilities from the simple __________ to full-featured __________ solutions.
a) Microsoft Access; Oracle
b) Microsoft Excel; Microsoft Access
c) LANs; DB2
d) Oracle; DB2

25. Which is not an advantage and capability of a DBMS?
a) security
b) audit trail
c) backup
d) physical view

26. Being a smart company involves each of the following except:
a) having on-demand access to relevant data.
b) being able to understand the data, usually with the help of data visualization tools.
c) organizing data in a centralized database management system.
d) using what you learn from the data to increase productivity or profitability.

27. The main difference between a database and data warehouse is that:
a) databases are designed and optimized to store data, whereas data warehouses are designed and optimized to respond to analysis questions that are critical for a business.
b) databases are designed and optimized to analyze data, whereas data warehouses are designed and optimized to store data for sharing.
c) databases are designed to detect trends in the data, whereas data warehouses are designed to support supply chains.
d) databases are designed to support traditional commerce, whereas data warehouses are designed to support e-commerce.

28. __________ for banking and debit cards are designed to ensure that every transaction gets recorded and processed online and in real-time.
a) File systems
b) Database systems
c) OLAP systems
d) Data warehouses

29. A financial institution’s databases are __________ because every deposit, withdrawal, loan payment, or other transaction adds or changes data, which makes data analysis __________.
a) poor quality; unnecessary
b) high quality; easy
c) volatile; too difficult
d) volatile; easy

30. Data warehouses are designed as __________ systems, meaning that the data can be queried and analyzed much more efficiently than online databases.
a) online transaction processing (OLTP)
b) online analytical processing (OLAP)
c) real-time transaction
d) ETL

31. The credit card company Capital One uses __________ to track each customer’s profitability and uses that score to determine the level of customer service.
a) OLTP
b) a centralized database
c) strategic database management systems
d) active data warehousing

32. Which of the following statements about data warehousing is false?
a) Data in the data warehouse are constantly updated and volatile.
b) Many organizations built data warehouses because they were frustrated with inconsistent decision support data.
c) Data warehouses are infrastructure investments that companies make to support current and future decision making.
d) Data warehouses deliver information more effectively and efficiently than database systems.

33. Which is not a characteristic of a data warehouse?
a) Data are organized by subject, such as customer, vendor, or product.
b) Data are coded in a consistent manner.
c) Data are kept for many years to be used for identifying trends, forecasting, and comparisons over time.
d) Most applications of data warehousing are in real-time.

34. An extremely economical and effective method of delivering data from a data warehouse to decision makers throughout the enterprise is via __________.
a) data marts
b) data cubes
c) an intranet
d) operational data stores

35. Data warehousing is most appropriate for organizations that any of the following characteristics except:
a) end users need to access large amounts of data.
b) the organization serves a large, diverse customer base.
c) end-users perform a lot of data analysis.
d) operational data needed to support business processes are centralized.

36. The high costs of data warehouses can make them too expensive for a company to implement. As an alternative, many firms create lower-cost, scaled-down __________.
a) data marts
b) data stores
c) multidimensional databases
d) SBUs

37. Advantages of data marts over data warehouses are all of the following except:
a) data marts require shorter lead times for implementation, often less than 90 days.
b) data marts allow for local rather than central control, giving end-users more power or control.
c) data marts have higher quality and more complete enterprise data.
d) data marts are easier to understand and navigate because they contain less data.

38. Despite their potential benefits, implementations of large data warehouses may fail. Reasons for data warehousing failures are all of the following except:
a) vendors overselling capabilities.
b) lack of attention to cultural issues.
c) poor data quality.
d) integration with operations.

39. __________ are facilities containing mission-critical ISs and components that deliver data and IT services to the enterprise.
a) Data servers
b) Data marts
c) Data centers
d) Data warehouses

40. A(n) __________ is a database for transaction processing systems (TPSs) that uses data warehouse concepts to provide clean data.
a) data mart
b) operational data store
c) strategic data store
d) multidimensional database

41. Companies implement __________ systems to retain and archive their business records that are not needed for current operations or decisions, but that must be accessible for legal or auditing obligations.
a) electronic records management
b) database management
c) archive management
d) infrastructure management

42. To be retrievable, a company’s electronic records must be __________ like structured data in a database.
a) organized
b) indexed
c) organized and indexed
d) organized, indexed, and encrypted

43. Creating backups of records is not a form of electronic records management (ERM) because:
a) the content on backups is not organized so that it can be accurately and easily retrieved.
b) business records and documents may need to be modified.
c) records and documents cannot be stored together.
d) the requirement to save records is new.

44. Nearly __________ percent of U.S. corporations become engaged in lawsuits and at any one time, the average $1 billion company in the U.S. faces 147 lawsuits.
a) 25
b) 50
c) 75
d) 90

45. __________ is the process of finding, gathering, and filtering of electronic files and information in preparation for trial, legal or regulatory investigation, or administrative action as required by law.
a) Archiving
b) Discovery
c) Electronic discovery
d) Litigation

True/False

46. Data management is important because no enterprise can be effective without high quality data that is accessible when needed.

47. A spreadsheet mistake created an error that cost TransAlta $24 million because they bought power transmission hedging contracts at higher prices than it would have if the decision had been based on accurate information.

48. Every day, healthcare administrators and others in the healthcare supply chain waste up to 10 percent of their time correcting data errors at an estimated cost of $20 per error to correct.

49. According to the principle of 90/90 data use, most organizations cannot operate at peak performance with blind spots (lack of data availability) of 90 days or longer.

50. According to the 90/90 data-use principle, a majority of stored data, as high as 90 percent, is frequently accessed after 90 days.

51. Data that are accurate, timely, and clean might not be usable if people do not get data in the format they need to do their jobs.

52. According to the market intelligence firm IDC, organizations with at least 1,000 knowledge workers lose over $5 million annually in time wasted by employees reformatting data as they move among applications.

53. Enterprise portals are a set of software applications that consolidate, manage, analyze, and transmit data to users through Web-based interface.

54. As businesses become more complex and their volumes of enterprise data expand rapidly, organizations are investing in master data management (MDM) as a way to isolate and archive different types of data.

55. Although vendors may claim that their MDM solution creates “a single version of the truth,” this claim is not true because constructing a completely unified view of all master data is simply not possible.

56. Businesses run on raw data.

57. A data mart is a small data warehouse designed for a strategic business unit (SBU) or a single department.

58. Data warehouses are designed as online analytical processing (OLAP) systems, meaning that the data can be queried and analyzed much more efficiently than OLTP application databases.

59. Business records are different from documents in records cannot be modified or deleted, except in controlled circumstances. In contrast, documents generally are subject to revision.

60. When they are properly managed, electronic records are strategic assets. But when they are improperly managed or destroyed, they are liabilities to an organization.

Short Answer

61. __________ are resources with recognized value that are under the control of an individual or organization.

62. A(n) __________ is a specialized type of database that aggregates data from transaction databases so they can be analyzed.

63. __________(poor-quality data) lack integrity and cannot be trusted.

64. Data __________ refers to presenting data in context and in ways that are faster and easier for users to understand.

65. __________ is a process whereby companies integrate data from various sources or enterprise applications to provide a more unified view of the data.

66. Each record in a database needs an attribute (field) to uniquely identify it so that the record can be retrieved, updated, and sorted. This unique identifier field is called the __________.

67. A program, such as Access and Oracle 11g, that provides access to databases is known as a(n) __________.

68. Databases are online __________ systems in which every transaction has to be recorded quickly and correctly.

69. Data warehouses are designed as online __________ systems, meaning that the data can be queried and analyzed much more efficiently than OLTP application databases.

70. __________ is the process of gathering electronic files and information in preparation for trial, legal or regulatory investigation, or administrative action as required by law.

Essay

71. Although having high-quality data are essential for business success, numerous organizational and technical issues make it difficult to reach this objective. Give two reasons why companies don’t achieve high-quality data.

72. Identify three data management problems arising from the file environment approach. Give an example of each problem.

73. What are three of the major data functions performed by a DBMS? Briefly explain the functions.

74. List four reasons why data warehouses fail?

75. Explain discovery and electronic discovery (e-discovery). Why do companies need to be prepared for discovery?

BUS 335 Week 3 Quiz 2 Chapter 2 and 3 – Strayer

BUS 335 Staffing Organizations Week 3 Quiz – Strayer (All Possible Questions With Answers)

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Chapter 2
Student: ___________________________________________________________________________
1. The employer-employee relationship is the most prevalent type of employment relationship. 
True False

2. Employment contracts may be written but not in oral form. 
True False

3. The specificity of the language used in an employment contract must be very extensive. 
True False

4. The formal agreement which specifies the employment terms and conditions for the employee and employer is called an employment contract. 
True False

5. An employer does not incur any legal responsibilities or liabilities regarding its employees. 
True False

6. The common law principle of employment-at-will says that, in the absence of any contract language to the contrary, either the employer or employee may terminate the employment relationship at any time, but only for certain reasons. 
True False

7. There are some restrictions on employment-at-will, such as statutory requirements for nondiscriminatory termination. 
True False

8. An independent contractor is legally considered an employee of the employer who hired him/her. 
True False

9. If an employer hires an independent contractor, it may reduce the employer’s exposure to laws and regulations governing the employment relationship. 
True False

10. A person is more likely to be considered an independent contractor if they work without supervision or oversight from the employer. 
True False

11. Temporary employees are considered to be employees of the temporary help agency that obtained them through its own staffing process. 
True False

12. Court cases suggest that permatemps (employees from a staffing agency who have been with the employer for extended period of time) are still exclusively considered employees of the staffing agency. 
True False

13. Regarding employment contracts, ________. 
A. both written and oral contracts are enforceable
B. employment-at-will is defined under set-term contracts
C. most employees have a contractual right to be discharged only for cause
D. all of the above are correct

14. The most prevalent form of the employment relationship is _________. 
A. independent contractor
B. employer-employee
C. temporary employee
D. employer-employer

15. The common law principle which states that, in the absence of any contract language to the contrary, either the employer or employee may terminate the employment relationship at any time is called _________. 
A. employment-at-will
B. affirmative action
C. equal employment opportunity
D. a consent decree

16. An example of an exception to the principle of employment-at-will would be _________. 
A. employers cannot discharge employees on the basis of poor performance
B. employers cannot discharge employees on the basis of race
C. employers cannot discharge employees for stealing from the company
D. none of the above

17. Which of the following statements is true regarding independent contractors? 
A. An independent contractor is a legal employee of the company which hired him/her.
B. Using an independent contractor increases the employer’s exposure to laws and regulations governing the employment relationship.
C. Using an independent contractor frees an employer from the tax withholding and tax payment obligations it has for its employees.
D. Using an independent contractor substantially increases the right of the employer to control the contractor.

18. Which of the following factors increase the likelihood that a worker will be considered an independent contractor? 
A. The independent contractor works without supervision or oversight from the employer.
B. The independent contractor sets his or her own work hours.
C. The independent contractor is paid by the project rather than by the time spent.
D. All of the above.

19. Which of the following is true regarding temporary employees? 
A. Temporary employees are considered to be employees of the organization which is using their services, not the temporary help agency.
B. During job assignments, temporary workers are on the payroll of the organization using their services.
C. Use of temporary workers can often raise issues of “co-employment.”
D. All of the above are correct.

20. What can employers do to ensure that permatemps, that is, individuals from staffing firms who have long-term relationships with an employer, are not considered employees of their firm? 
A. Never exercise direct control over these people and treat them separate from regular employees.
B. Ensure they provide sufficient training and supervision.
C. Provide permatemps with special hats indicating their status as temporary.
D. None of the above are correct.

21. Employment laws and regulations exist, in part, to reduce or limit the employer’s power in the employment relationship. 
True False

22. Laws and regulations provide protections to employees that they could not possibly acquire individually in an employment contract. 
True False

23. The Civil Rights Act specifically mentions employment practices that are permitted for employers. 
True False

24. The majority of common law decisions are made at the federal level. 
True False

25. Constitutional law supersedes any other source of law or regulation. 
True False

26. Examples of common law include the Fifth and Fourteenth Amendments to the Constitution. 
True False

27. The Civil Rights Act is a statutory source of law/regulations. 
True False

28. Agencies that enforce staffing laws typically do not rely on written documents to perform their functions. 
True False

29. Which of the following statements is true regarding the laws and regulations which govern the employment relationship? 
A. Their purpose is to create a reasonable balance of power between the employer and employee.
B. Their purpose is to create a reasonable power advantage for employees.
C. Their purpose is to create a reasonable power advantage for employers.
D. Their purpose is to provide protections for employees only.

30. The primary source of common law is ________. 
A. the Constitution
B. federal statutes
C. past court decisions
D. federal agency guidelines

31. Due process rights have their primary source in _________. 
A. EEOC guidelines
B. federal statutes
C. state statutes
D. the U.S. Constitution Amendments

32. A _________ is a civil wrong that occurs when the employer violates a duty owed to its employees or customers that results in harm or damages. 
A. tort
B. crime
C. constitutional law violation
D. failure of due process

33. Statutory law is derived from ________. 
A. court cases
B. the US constitution and its amendments
C. written documents passed by legislative bodies
D. agencies at the federal, state and local levels

34. Agencies that regulate fair employment practice exist at which level? 
A. federal
B. state
C. local
D. all of the above

35. The role of federal agencies is to __________. 
A. develop, create, and implement the law
B. interpret, administer, and enforce the law
C. facilitate greater communication between courts
D. render decisions in court cases regarding employment law

36. Whether an organization is covered by the Civil Rights Act, Age Discrimination in Employment Act (ADEA), and Americans With Disabilities Act (ADA) depends on its number of employees. 
True False

37. When determining if an organization large enough to be covered by ADA law, only full-time employees should be included in the employee count. 
True False

38. Company officials and individual managers can be held personally liable for discrimination under the Civil Rights Act, the ADA, or the ADEA. 
True False

39. The Civil Rights Act prohibits discrimination on the basis of age or disability status. 
True False

40. The Age Discrimination in Employment Act covers individuals over the age of 40. 
True False

41. Employers are required to post notices to all employees advising them of their rights under the laws EEOC enforces and their right to be free from retaliation. 
True False

42. Claims of disparate treatment focus on the effect of employment practices, rather than on the motive or intent underlying them. 
True False

43. Claims of disparate impact focus on the effect of employment practices, rather than on the motive or intent underlying them. 
True False

44. Applicant flow statistics look at differences in selection rates (proportion of applicants hired) among different groups for a particular job. 
True False

45. The EEOC’s preferred method of settlement for employment discrimination claims is a lawsuit. 
True False

46. In disparate treatment cases, the employee attempts to demonstrate that the defendant’s stated reasons for a practice are a pretext, or smoke screen, for the discriminatory intent of practice. 
True False

47. The consent decree usually contains only an agreement to halt certain practices, and seldom extends to providing monetary relief or AA programs. 
True False

48. Enforcement mechanisms used by the OFCCP closely mirror those used by the EEOC. 
True False

49. Which of the following is(are) true regarding federal EEO/AA laws? 
A. They are very narrow in their coverage of employers.
B. Specific agencies exist which regulate administration and enforcement.
C. They cover only women, minorities, and certain religious groups.
D. None of the above are true.

50. Which of the following is not covered by the Civil Rights Act ________? 
A. race
B. sex
C. disability status
D. all of the above are covered by the Civil Rights Act

51. The Age Discrimination in Employment Act focuses on individuals over the age of ________. 
A. 40
B. 30
C. 20
D. 50

52. Disparate treatment focuses on _________. 
A. allegations and evidence about the effects of discriminatory actions
B. allegations and evidence about intentions to discriminate
C. adverse impact
D. quotas

53. The initial burden of proof in discrimination claims lies ______. 
A. with the defendant
B. with the court
C. equally with the court and the federal agency
D. with the plaintiff

54. When using stock statistics in job selection discrimination cases, the comparison being made is __________. 
A. differences in proportions of groups hired
B. percentages of groups concentrated in certain job categories
C. percentages of groups in job categories relative to their availability in the population
D. percentages of union versus non-unionized employees

55. The key to a successful rebuttal in a disparate treatment case is _________. 
A. to prove adverse impact
B. to provide nondiscriminatory reasons for the practice(s) in question
C. to show the presence of a “mixed motive”
D. to prove discrimination

56. In EEOC cases, a consent decree is ________. 
A. mandated by law
B. court approved
C. limited to non-monetary relief
D. limited to affirmative action remedies

57. Enforcement mechanisms used by the OFCCP ________. 
A. rarely involve employer site visits
B. are identical to those used by the EEOC
C. are unrelated to specific AA plans
D. may involve conciliation agreements

58. It is unlawful to discriminate in hiring, firing, compensation, or classification of employees on the basis of race, color, religion, sex, or national origin. 
True False

59. Staffing practices that may seem unfair, outrageous, or of dubious value to the employer, but that do not cause adverse impact, are legal. 
True False

60. If an employer has a selection system in which applicants first take a written test and those who pass it are interviewed, the plaintiff must show adverse impact for the two components combined. 
True False

61. A prison with mostly male inmates might successfully use the concept of BFOQ to argue that it is a business necessity to hire only male prison guards on the grounds that by doing so it ensures the safety, security, and privacy of inmates. 
True False

62. Although civil rights legislation does not explicitly mention the use of tests in staffing, most courts have found that the use of such tests is permissible. 
True False

63. Employers can adjust the scores of employment-related tests on the basis of race, color, religion, sex, or national origin. 
True False

64. The Civil Rights Act of 1964 explicitly permits the use of seniority and merit systems as a basis for applying different terms and conditions to employees. 
True False

65. The Age Discrimination Act of 1967 prohibits all discrimination on the basis of age. 
True False

66. It is permissible to use terms or phrases that express a preference for older workers, such as “over age 60,” “retirees,” or “supplement your pension” in employment advertising. 
True False

67. Recovering former drug users and recovering alcoholics are covered by the Americans with Disabilities Act. 
True False

68. A broken arm or leg would be considered a covered, short-disability for ADA coverage purposes. 
True False

69. The Americans with Disabilities Act does not cover individuals with psychiatric disorders, such as depression or schizophrenia. 
True False

70. Examples of reasonable accommodations under the Americans with Disabilities Act include work schedule changes, modifications to company policy, adjusting supervisory methods, and medication monitoring. 
True False

71. Accommodations such as job restructuring, telework, changes in work schedules, or purchase of adaptive devices for those with disabilities are considered undue hardships. 
True False

72. Employers may refuse to hire an individual who poses a direct threat to him/herself or the health and safety of others. 
True False

73. The law prohibits the use of genetic information in employment. 
True False

74. Which of the following is prohibited discrimination under civil rights law? 
A. discrimination in hiring
B. discrimination in compensation
C. discrimination in classification
D. all of the above

75. The essence of a BFOQ is that _________. 
A. it is always illegal
B. it reduces discrimination
C. it justifies discrimination based on reasonable necessity of the job
D. it prohibits selection through use of a protected characteristic (e.g., gender)

76. Regarding the use of tests in staffing, it can be said that ______. 
A. they are permitted by law
B. they are illegal
C. they should be adjusted by protected characteristics to be fair
D. they should be “race normed” for fairness

77. The legal status of seniority and merit systems is that _______. 
A. seniority is legal
B. merit systems are legal
C. both are legal
D. both are illegal

78. The Age Discrimination In Employment Act (1967) prohibits discrimination against individuals who are ____ years or older. 
A. 40
B. 50
C. 60
D. 65

79. Employers can use which of the following techniques without violating the Age Discrimination in Employment Act. 
A. using reasonable factors other than age in making employment decisions
B. using seniority systems
C. using terms or phrases that express a preference for older workers
D. all of the above

80. Where the Americans with Disabilities Act is concerned, ______? 
A. the law only applies to disabled individuals who are otherwise qualified
B. the law requires the hiring of all disabled people
C. the law prohibits refusal to hire a disabled person
D. the law provides advantages to disabled people

81. Where reasonable accommodations for disabled individuals are concerned, it can be said that _______? 
A. accommodation is always required for an otherwise qualified individual
B. specific examples of accommodations are rarely indicated in laws and regulations
C. the issue of “undue hardship” to the employer is not addressed by the law
D. the need to accommodate often hinges on whether or not a given job function is necessary or essential

82. Which of the following is not prohibited by the ADA? 
A. medical exams of job applicants
B. asking a job applicant if he/she is disabled
C. asking a job applicant to undergo a medical exam after a job offer has been made
D. refusing to interview a person who is disabled

83. Executive Order 11246 covers _________. 
A. local government employers
B. private employers with under 15 employees
C. federal contractors with contracts in excess of $10,000
D. private employers with 20 or more employees
E. Other Staffing Laws

84. Substantive assessment methods are used to reduce the applicant pool to candidates. 
True False

85. It is unlawful to recruit an unauthorized alien for employment in the United States. 
True False

86. The Immigration Reform and Control Act prohibits employment discrimination on the basis of national origin or citizenship status. 
True False

87. Nearly everyone who wishes to work in the United States is eligible for an H-1B visa. 
True False

88. Those who get an H-1B are typically employed in occupations such as architect, engineer, computer programmer, accountant, doctor, and professor. 
True False

89. Most private employers cannot legally require applicants or employees to take a polygraph test, except in special circumstances. 
True False

90. Polygraphs cannot be used to investigate theft, embezzlement, or sabotage that causes economic loss to the employer. 
True False

91. Employers are allowed to take actions like terminating or demoting members of the uniformed services if they have to serve for an extended period of time overseas. 
True False

92. Some state laws prohibit discrimination on the basis of sexual orientation and gender identity or expression. 
True False

93. Both private and public employers have a legal mandate to test applicants only for KSAOs that are directly job related. 
True False

94. Applicants for jobs covered by civil service laws and regulations often have rights to appeal hiring decisions, testing processes, or test contents and methods. 
True False

95. Noncompliance with the Immigration Reform and Control Act (1986) could result in __________. 
A. imprisonment for up to six months
B. fines equal to $50,000 for each unauthorized alien employed
C. summary closing of a business
D. imprisonment of the alien for up to five years

96. Which of the following is true regarding EEO laws? 
A. State (but not local) government employees are immune from lawsuits by employees who allege violation of ADA or ADEA.
B. States must pursue age and disability discrimination claims under applicable state laws.
C. A foreign company which is owned or controlled by an American employer and is doing business overseas generally also must comply with Title VII, the ADA, and the ADEA.
D. All of the above

97. Which of the following is true regarding discrimination on the basis of sexual orientation? 
A. there are no laws covering sexual orientation discrimination
B. federal law prohibits all discrimination on the basis of sexual orientation
C. although such discrimination is not covered by federal law, it is covered by some state and local laws
D. some state and local laws encourage discrimination on the basis of sexual orientation

98. Which of the following is true regarding H-1B visas? 
A. Employers may apply for permanent H-1B visas for foreign workers.
B. There is a cap of 50,000 workers per year who can obtain such visas.
C. H-1B visa holders may not change jobs as soon as their employer files an approval petition and they are restricted to their current geographic area.
D. None of the above

Chapter 3
Student: ___________________________________________________________________________
1. The four major source of external influence on HR and planning are economic conditions, labor markets, technology, and labor unions. 
True False

2. Job creation and growth is largely independent of the overall economic climate. 
True False

3. Most data suggest that there will be job growth in the service sector, the education sector, and in business/professional services. 
True False

4. Data collected by the Bureau of Labor Statistics suggest the demand for individuals with college degrees or more peaked a while back, and will decrease in the near future. 
True False

5. There is a trend toward increasingly fewer new entrants to the labor force. 
True False

6. The American workforce is increasingly made up of young people. 
True False

7. HR professionals generally report that high school graduates have sufficient basic skills in reading comprehension, writing, and math for entry-level jobs. 
True False

8. The apparent skills gap in the American workforce appears to be arising because of an increase in demand for highly skilled workers. 
True False

9. Very few people prefer part-time work, as surveys suggest 88% of part-time workers are seeking full-time employment. 
True False

10. Technology can serve to create new jobs and eliminate old jobs. 
True False

11. There has been a major workforce trend in reduced costs of health care for employers. 
True False

12. Human resource managers are concerned that as the workforce ages, increases in retirement, will lead to shortage of skilled workers in some fields. 
True False

13. Federal laws prohibit labor unions from bargaining regarding any practices related to human resources planning. 
True False

14. Which of the following are likely to occur during job expansion periods? 
A. New hire rates increase for entry level jobs, but decrease for higher level jobs
B. Departure of some employees to take opportunities at other firms
C. Stagnation of movement through internal labor markets
D. Reductions in turnover rates

15. Projections suggest that there will be growth in which of the following sectors of the economy? 
A. Manufacturing
B. Education
C. Health services
D. Both B and C

16. In general, the labor force is becoming ____. 
A. younger
B. older
C. less skilled
D. less diverse

17. What percentage of employers believe high school graduates are deficient in work habits such as professionalism, critical thinking, personal accountability, and time management? 
A. 70%
B. 15%
C. 40%
D. 95%

18. Which of the following are likely responses to labor shortages? 
A. Decreased pay and benefits packages
B. Hiring bonuses and stock options
C. Decreased use of temporary employees
D. Higher hiring standards

19. Which of the following is a likely effect of technology on employment demand? 
A. Changes in the skill requirements of the workforce
B. Elimination of some jobs
C. Creation of new jobs
D. All of the above

20. What proportion of the workforce is unionized? 
A. About 7% of the private sector and about 36% of the public sector
B. About 36% of the private sector and about 7% of the public sector
C. About 12% of the private sector and about 12% of the public sector
D. About 30% of the private sector and about 30% of the public sector

21. In human resources planning, a comparison is made between labor force requirements and labor availability. 
True False

22. The gap between current workforce size and available workforce size is a critical part of the reconciliation process. 
True False

23. In plan-based HR planning, the organization’s representatives set up a system that is integrally related to the organization’s strategic planning process. 
True False

24. In project based HR planning, the organization’s representatives set up a system that looks far into the future and tries to avoid consideration of short term perturbations in the market. 
True False

25. Planning based on a specific group of employees, such as faculty in specialized areas of a university or nursing employees, is called population-based HRP. 
True False

26. The unit of human resource planning and analysis is the KSAO. 
True False

27. Counting the number of employees on payroll may be a misleading indicator of the workforce because it ignores the amount of scheduled time worked by each employee relative to a full workweek. 
True False

28. Statistical techniques are of little importance to HR managers and should usually be rejected as methods for evaluating HRP needs. 
True False

29. In regression analysis, historical predictors of workforce size, like sales or new customers, are used to predict staffing levels. 
True False

30. Trend analysis directly takes into account external factors that might change trends. 
True False

31. Manager judgment is an ideal method for forecasting workforce availabilities for companies with large numbers of employees in many job categories. 
True False

32. Markov Analysis is used to assess a previous period’s workforce demands on the basis of historical patterns of external applications. 
True False

33. When conducting Markov analysis, it is desirable to have 20 or more employees in each job category/level. 
True False

34. The key to ratio analysis is assessing each promotable employee for KSAO or competency gaps, and where there are gaps, creating employee training and development plans that will close the gap. 
True False

35. Through replacement and succession planning the organization constructs internal talent pipelines. 
True False

36. Succession planning precedes replacement planning. 
True False

37. Replacement and succession planning are conducted primarily for managerial jobs. 
True False

38. The quality of a replacement or succession plan is largely independent of the quality of an organization’s performance appraisal systems. 
True False

39. Human resource planning activities most directly involve _____. 
A. assessing external environmental factors
B. forecasting labor requirements and availabilities
C. generating technological replacements for labor
D. all of the above

40. The process of determining reconciliation and gaps tells managers _____. 
A. how many employees will be needed for jobs in the coming period
B. why employees are leaving the organization
C. which activities should be performed to place new employees in appropriate positions
D. when employees are most likely to quit

41. Plan-based HRP consists of _________. 
A. organizational responses to sudden changes in the environment
B. planning focused on a specific employee group
C. planning that is part of the organization’s strategic planning process
D. planning based on best practices of competitors

42. Project-based HRP consists of _________. 
A. organizational responses to sudden changes in the environment
B. planning focused on a specific employee group
C. planning that is part of the organization’s strategic planning process
D. planning based on best practices of competitors

43. Population-based HRP consists of _________. 
A. organizational responses to sudden changes in the environment
B. planning focused on a specific employee group
C. planning that is part of the organization’s strategic planning process
D. planning based on best practices of competitors

44. A manager has gathered data on staffing levels over time, and then predicts future requirements based on the pattern of demand, taking seasonal variations in demand into account. This equation is used to predict future staffing levels. This is an example of _______________. 
A. regression analysis
B. ratio analysis
C. trend analysis
D. Markov analysis

45. A manager has collected data on the dollar value of sales and has divided this by the number of FTE. Assuming this relationship will hold in the future, and using projected sales, the manager estimates the number of employees required. This is an example of _______________. 
A. regression analysis
B. ratio analysis
C. trend analysis
D. Markov analysis

46. A manager has collected data on sales, the economy, and taxes over a number of years, and statistically estimates an equation that describes how each of these predictors has affected staffing levels in the past. This equation is used to predict future staffing levels. This is an example of _______________. 
A. regression analysis
B. ratio analysis
C. trend analysis
D. Markov analysis

47. Which of the following would not be addressed in forecasting HR availabilities? 
A. Promotions
B. Transfers
C. Exits
D. Motivation level

48. Markov analysis is a technique for __________. 
A. job analysis
B. availability forecasting
C. HR requirement forecasting
D. seniority estimation

49. A transition matrix would appear in a _________. 
A. regression analysis
B. stochastic analysis
C. Markov analysis
D. time series analysis

50. In Markov analysis for staffing, __________ is used to forecast future workforce availabilities. 
A. cost data
B. product demand
C. transition probabilities
D. Bayesian inference

51. Which of the following creates a problem for Markov analysis? 
A. large sample sizes
B. lack of employee moves
C. poor economic conditions
D. small sample sizes

52. Manager judgment is an important method for staffing in _________. 
A. organizations with extensive records on human resources outcomes
B. smaller organizations
C. organizations with lateral diffusion of responsibility
D. organizations in the manufacturing sector

53. Which of the following is not a shortcoming of using manager judgment for forecasting availability? 
A. managers may not know employee intentions
B. the complexity of forecasting may overwhelm the manager
C. managers are always overly aggressive in making estimates of hiring requirements
D. none of the above are shortcomings of manager judgment

54. Employment reconciliation analyzes gaps between ________. 
A. AA requirements and the external labor force
B. future HR requirements and AA requirements
C. future HR requirements and HR availability
D. all of the above

55. For succession planning to work, organizations must also have _____. 
A. historical data on product demand
B. training and development systems in place
C. reimbursable expenditure accounts
D. none of the above

56. Human resource information systems provide which of the following functions for succession planning? 
A. Creating lists of employees who are ready to move into specific positions
B. Seeking out passive candidates within the organization
C. Tracking candidates across a variety of locations
D. all of the above

57. Staffing objectives are derived from identified gaps between requirements and availabilities. 
True False

58. Long term options for dealing with an employee shortage include hires, transfers into the position, retraining workers, or transferring the work out of the firm. 
True False

59. If an organization faces a surplus of workers, it is likely that they will have to either downsize or encourage voluntary retirement, because there aren’t many alternatives to these actions. 
True False

60. One advantage of a core workforce is that the organization maintains the legal right to control employees working in its behalf, in terms of both work process and expected results. 
True False

61. A core workforce is nearly always less expensive than a flexible workforce because the core workforce will accept lower pay and benefits. 
True False

62. A core workforce is an excellent technique for acquiring new technical and administrative knowledge. 
True False

63. A flexible workforce can bring in new technical and administrative knowledge that isn’t available from the core workforce. 
True False

64. Sometimes members of the internal workforce will resent external hires, which can limit the effectiveness of external hiring. 
True False

65. Internal hiring methods are often less expensive than external hiring methods. 
True False

66. Companies often prefer internal hiring because it gives them a large labor market to recruit from. 
True False

67. Employing organizations usually have a lot of control over the quality of the flexible workforce. 
True False

68. A flexible workforce can be obtained by using staffing firms or independent contractors. 
True False

69. Outsourcing is a more drastic step than using independent contractors or temporary employees. 
True False

70. Outsourcing is confined almost exclusively to manufacturing work. 
True False

71. One reason organizations outsource is because specialized vendors can achieve economies of scale for routine tasks that would be performed across many organizations. 
True False

72. A key advantage of having a core work force is that it provides _________. 
A. greater predictability
B. increased ability to rapidly modify organizational plans
C. greater organizational profitability
D. lower costs

73. A major disadvantage of a flexible work force is that ________. 
A. it leads to loss of some control over workers
B. it can lead to conflict between core and flexible workers
C. flexible workers are often less familiar with equipment
D. all of the above

74. Advantages of a core workforce include ______________. 
A. stability, continuity, and predictability
B. a sense of commitment and shared purpose toward the organization’s purpose
C. an organization can directly control how it acquires its workforce
D. all of the above

75. Which of the following are advantages of external staffing? 
A. bringing in employees with new KSAOs
B. quick method to identify job applicants
C. it’s less expensive than internal staffing
D. all of the above

76. Which of the following services is not provided by staffing firms? 
A. Advance screening of job candidates
B. They may provide on-site managers to help with training
C. They absorb full legal liability for temporary workers
D. None of the above

77. A(n) ______ provides specific task and project assistance to the organization, such as maintenance, bookkeeping, advertising, programming, and consulting, with payment contingent on completion of the project (rather than time worked or methods of completing the task). 
A. external service provider
B. independent contractor
C. temporary worker
D. offshore site

78. Firms offshore work because ______________. 
A. wages are often lower overseas
B. there is a growing pool of highly qualified workers overseas
C. overseas manufacturing always has strict quality control
D. both A and B

79. Organizations need to take diversity into account because the workforce has become more diverse. 
True False

80. Despite popular press to the contrary, there hasn’t really been an increase in the number of Latinos and Asians in the American workforce. 
True False

81. Active diversity planning occurs when the organization encourages underrepresented minorities to apply for positions, actively recruits from a variety of sources, and provides additional training and mentoring to underrepresented groups. 
True False

82. Evidence suggests that demographically diverse teams are far more effective than homogeneous teams. 
True False

83. Studies show that women and minorities are largely indifferent to whether an organization has a commitment to diversity in their recruiting efforts. 
True False

84. Many organizations do not take demographic shifts in the workplace into account when developing staffing plans. 
True False

85. Targeted recruitment, inclusion of women and African-Americans on top management teams, work family accommodations, and affirmative action plans increase the racial and gender diversity of the organization’s managerial workforce. 
True False

86. In recent years there has been an increase in the number of _________ in the workforce. 
A. women
B. Latinos
C. individuals with disabilities
D. all of the above

87. Managers are especially concerned about all of the following issues because of the aging workforce except _______. 
A. loss of skills due to retirement
B. decreased ability to learn new material
C. increases in medical expenses
D. employee elder-care responsibilities

88. Passive diversity planning means _______. 
A. reviewing policies and practices to ensure there is no discrimination
B. encouraging underrepresented groups to apply
C. actively recruiting from a variety of sources that are likely to be seen by underrepresented groups
D. providing additional training for underrepresented groups

89. AAPs are organization-specific plans that have a legal origin and basis. 
True False

90. The components of AAPs are enforced by the Department of Workforce Diversity (DWD). 
True False

91. Federal contractors are legally required to have AAPs in place. 
True False

92. A general rule of thumb is that if the ratio of incumbency percentage for a group to their availability is less than 80%, the organization should establish a placement goal to increase minority representation. 
True False

93. Replacement goals from AAPs are often legally termed “quotas” for minorities and women in an organization. 
True False

94. Some states have banned the use of AAPs for government contractors and educational institutions. 
True False

95. The major legal issue for HR strategy and planning is _______. 
A. affirmative action plans
B. disparate treatment
C. disparate impact
D. sexual harassment

96. Affirmative action plans and programs do not originate from _______. 
A. voluntary employer efforts
B. court-imposed remedies for discriminatory practices
C. consent agreements
D. international treaties

97. To have a high probability of being acceptable in the eyes of the Supreme Court, an organization’s AAP should _________. 
A. not necessarily interfere with the job status of non-minority and male employees
B. concentrate on future, rather than past discrimination
C. not focus on underutilization
D. be a permanent feature of organizational structure

BUS 325 Week 3 Quiz 2 Chapter 2 – Strayer

BUS 325 Global Human Resource Management Week 3 Quiz – Strayer (All Possible Questions With Answers)

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CHAPTER 2: The Cultural Context of IHRM

TRUE/FALSE

1. The first contributions to cross-cultural management research were made in the late 1930s.

2. Unforeseen conflicts and lower performance in many foreign business enterprises created doubts about how easily concepts and management research from the English speaking world could be transferred to other cultures.

3. One of the advantages of cross cultural studies is that there is one, widely accepted definition of the meaning of culture.

4. Hansen emphasizes culture as the standardization – the consistency of collective behavior.

5. Hofstede the Dutch researcher, famously likens or company’s culture to the “software of the mind”.

6. Schein considers “artefacts” as the invisible and unconscious conventions and perceptions deeply held by members on a culture.

7. There may be large similarities of the artefact level within the European Union, but values and assumptions held by members of various nations in the EU may differ significantly.

8. Cross cultural management studies aim to describe and compare the working behavior in various cultures.

9. Hofstede finally distinguished three cultural dimensions: power distance, femininity vs. masculinity and individualism vs. collectivism.

10. Power Distance refers to the extent to which the members feel threatened by uncertainty, ambiguous or unstructured situations.

11. According to Hofstede a feminine orientation comprises the pursuit of financial success and a strong performance management approach.

12. Countries with weaker uncertainty avoidance are more likely to bring about fundamental innovations in weak processes as they have a greater tolerance for deviant thinking.

13. Collectivist society companies have more informal relationships between supervisors and employees.

14. The Mediterranean culture (France, Italy, Belgium and Spain) are characterized by small power distance and high collectivism.

15. The German speaking countries such as Germany, Austria and Switzerland are characterized by a strong tendency of uncertainty avoidance and relatively low power distance.

16. A criticism of Hofstede’s research is that he equates culture to national borders.

17. The Globe study distinguishes between practices (what should be) and values (what is).

18. The participation of 17 scholars from around the world helps to avoid a one-sided, Western focus to the research project.

19. The Trompenaars and Hampden-Turner study presents three aspects to culture: relationships between people, concept of time and the concept of nature.

20. Cultural convergence relates to assuming a long-term stability in cultural differences.

MULTIPLE CHOICE

1. Cross-cultural management research is based on the assumption that:
a. There are no real differences in management practices in various countries and the respective environments do not matter.
b. There are differences in management practices in various countries but the respective environments do not explain these differences.
c. There are differences in management practices in various countries and the respective environment explains these differences.
d. There are differences in management practices in various countries and these differences are explained by company strategy alone.

2. A major criticism of cross-cultural management studies is:
a. The construct of “culture” is undefined or inadequately defined and/or operationalized at the start of the study.
b. The construct of “culture” is defined too specifically for use across nations.
c. Research is done almost exclusively from a North American perspective.
d. There have been too few cross cultural research studies completed to assess the research.

3. Schein’s concept of culture consists of:
a. Ways of thinking, feeling and reacting
b. Customs, practices and standardization
c. Research containing dense infinitive descriptions
d. Artefacts, values and assumptions

4. Hofstede’s cultural dimensions are:
a. Universality, uncertainty avoidance, individualism vs. collectivism, aspiration vs. resignation and referentism.
b. Power distance, uncertainty avoidance, femininity vs. masculinity, individualism vs. collectivism dynamics.
c. Power distance, uncertainty avoidance, individualism vs. collectivism and contextualism vs. universalism.
d. Universalism vs. contextualism Confucian dynamics, individualism vs. collectivism and consumerism vs. theft

5. Individualism vs. collectivism refers to:
a. How government agencies act towards citizens
b. The extent to which individual initiative and responsibility to close family is valued in society as contrasted to group initiative and responsibility to an extended definition of family as socially valued
c. The extent to which individuals relate to the government as opposed to individuals being alienated from their government
d. The extent to which individual achievements are socially recognized and rewarded as opposed to recognition of wider social collectives – groups, organizations, etc.

6. Under Confucianism dynamics, orientations can be either:
a. Long-term or short-term c. Adaptable or subordinate
b. Paternal or individualistic d. Political or idealistic

7. According to the results of the Hofstede study:
a. U.S. culture is characterized more by collectivity behavior, unlike Anglo Saxon countries such as Australia or the United Kingdom
b. U.S. culture is characterized more by collectivity behavior, like Anglo Saxon countries such Australia or the United Kingdom
c. U.S. culture is characterized more by individualist behavior, unlike Anglo Saxon countries such as Australia or the United Kingdom.
d. U.S. culture is characterized more by individualist behavior, like Anglo Saxon countries such as Australia or the United Kingdom.

8. According to Hofstede, some Asian cultures such as Singapore and Hong Kong:
a. Score low on uncertainty avoidance and low on power distance
b. Score low on uncertainty avoidance and high on power distance
c. Score high on uncertainty avoidance and low on power distance
d. Score high on uncertainty avoidance and low on power distance

9. The cultural context impacts HRM practices:
a. Not at all
b. Only in the HR practice areas of Compensational Task Distribution
c. In the HR practice areas of Recruitment, Selection, Training and Development, Compensation and Task Distribution
d. Only in the HR practice areas of Training and Development and Task Distribution

10. Hofstede identifies a strong tendency or masculinity with a high tendency for uncertainty avoidance in:
a. The Scandinavian cluster c. The German speaking cluster
b. The Asian Tigers clusters d. The Gallic cluster

11. Hofstede’s approach to cross cultural management research:
a. Has been the subject of ongoing debate and criticism.
b. Has been largely ignored by other researches
c. Has been almost universally accepted
d. Has not been integrated into a wide range of alternative cross cultural research projects

12. Hofstede’s study is classified or based on:
a. Cultures c. Countries
b. Ethnic subgroup d. Common cultural regions

13. The GLOBE research tries to study the complex relationships between:
a. Culture, leadership behavior, organizational effectiveness, social co-habitation conditions and the economic success of societies.
b. Culture, leadership behavior, political institutions, social legislations, corporate strategies and the economic success of societies.
c. Culture, economic development, social progress, and multinational dynamism.
d. Culture, leadership behavior, organizational effectiveness, employee commitments and satisfaction, social dynamics and the economic success of societies.

14. The GLOBE study survey contains:
a. Contains exactly the same dimensions as Hofstede’s surveys
b. Contains far fewer dimensions than the Hofstede surveys
c. Distinguish between practices (as is) and values (should be).
d. Contains only questions on values (should be).

15. Results from the GLOBE study were used to distinguish ______”cultural regions.”
a. Five c. Ten
b. Seven d. Twelve

16. One criticism of the GLOBE study is:
a. That the research team is too much weighted to North American researchers
b. The dimensions are less refined and detailed than Hofstede’s dimensions of culture
c. The research focuses too much on very small firms
d. The focus of the study is only in three industries – finance, food and telecommunications

17. The GLOBE study:
a. Distinguishes between organizational cultures and national cultures.
b. Does not distinguish between organizational cultures and national cultures
c. Never distinguishes between subcultures in some nations for which data was collected
d. Distinguishes between subcultures in all 62 nations for which data was collected

18. The Trompenaars and Hamplen-Turner study distinguishes three overarching aspects of culture, namely:
a. Artefacts, values and assumptions
b. Relationships between people, the concept of time and the concept of nature
c. Reality, time and space
d. Descriptive values, aspirational values and critical values

19. Trompenaars and Hampden-Turner’s cultural dimensions is Ascription vs. :
a. Description c. Achievements
b. Conscription d. Acclimation

20. According to Trompenaars and Hampden-Turner, societies that attempt to control nature to a very high degree are described as having:
a. External control c. Distinct control
b. Internal control d. General control

21. As applied research, the Trompenaars and Hampden-Turner study:
a. Is backed up by extensive duplicate studies in a variety of countries and industries
b. Has repeatedly demonstrated validity and reliability
c. Has not demonstrated validity nor reliability
d. Provides an explicit rationale for the origins and operationalization of the seven cultures/dimensions

22. According to Trompenaars and Hampden-Turner, members of specified cultures:
a. See business relationship more personally
b. Take subjective and contextual variables into consideration when making a decision
c. Demand precise, unobjective analysis of circumstances and presentation of results
d. Emphasize intentions and emotions in making a decision

23. Hall and Hall’s research emphasizes four cultural dimensions:
a. Context of communications, spatial orientation, the concept of time and information speed
b. Context of communications, precision of communications, objectivity in communication and information speed
c. Context of communication, privacy of communication, the concept of time and information speed
d. Context of communications, spatial orientation, distribution of communication and feedback mechanisms

24. Hall and Hall’s research:
a. Focuses on the relationship between geography and culture
b. Focuses on the relationship between regional resource bases on culture
c. Focuses on the relationship between communication and culture
d. Focuses on the relationship between faith and culture

25. Hall and Hall, Trompenaars and Hampden-Turner all:
a. Provide academically valid, rigorous and reliable research bases for their models
b. Largely agree on the underlying dimensions of culture
c. Have large, geographically diverse data sets to draw on to support their models
d. Focus on offering a practical template allowing individuals to perceive and handle cultural differences

26. According to researchers like Barry Gerhart:
a. Cross-cultural research or emphasizes the influence of culture and business practices
b. Cross-cultural research actually understates the influences of culture on business practices
c. Cross cultural research as yet to show any influence of culture on business practices
d. Cross cultural research is insufficient in quantity or quality of findings to make any judgment of how culture may or may not influence business practices

27. Cultures develop over time:
a. So quickly and so unpredictable that studies become almost immediately obsolete
b. In a very slow and predictable manner
c. Such that surface level artefacts may change relatively quickly, but deeper behaviors and assumptions may take much longer to change
d. Inevitably toward a convergent, single “superculture”

28. One study by Child, reviewing research on the development of cultures concluded:
a. Studies on the macro level (organizations structure) found evidence for divergence or growing differences in cultures
b. Studies on the micro level (behaviors by employees) found enhance for convergence or the lessening of differences in cultures
c. Studies on the macro level (organizational structure) found evidence for convergence, or the lessening of differences in cultures
d. Studies on both the macro and micro level found evidence for convergence or the lessening of differences in cultures

29. Due to growing interdependence and a high flow of migration:
a. Culture is not confined to a territorially limited area
b. Culture is still largely confined to a territorially limited area
c. Cross-cultural issues are not nearly as important as they were on the past
d. HR will largely be unaffected

30. Generational changes in world societies:
a. Create no real changes in the demand for professional relationship and employee retention
b. Result in potential employees who have been brought up with computers and are fast self-organized learners as in Generation Y
c. Result in potential employees who have been brought up with computers and who are therefore inflexible as to work routine and multitasking as in Generation Y
d. Result in potential employees who are willing to sacrifice their personal lives for their careers as in Generation Y.

SHORT ANSWER

1. Present the general definition of the concept of culture as presented in the text.

2. Discuss the five cultural dimensions as presented in Hofstede’s cross-culture management study.

3. Outline and discuss the ways in which cultural context can impact HRM policies of recruitment and selection, training and development, compensation and task distribution.

4. In what significant ways is the GLOBE study (a) similar to Hofstede’s research, (b) different from Hofstede’s research?

5. What does the discussion on “the development of cultures” lead you to conclude about the issues of convergence and divergence?

BUS 309 Week 3 Quiz 2 Chapter 2 – Strayer

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Chapter 2—Normative Theories of Ethics

MULTIPLE CHOICE

1. Consequentialism
a. is best represented by Ross’s theory of ethics.
b. states that sometimes the consequences of our actions can be morally relevant.
c. states that the moral rightness of an action is determined solely by its results.
d. differs from nonconsequentialism because nonconsequentialism denies that consequences have any moral significance.

2. If you adopt ethical egoism as your moral code, then
a. you can never act honestly or be gracious or helpful to others.
b. you must endorse hedonism.
c. you must always avoid any unpleasant or painful experiences.
d. you believe that it is morally right to do whatever promotes your self-interest.

3. Egoism as a psychological theory
a. states that self-interest is the only thing that ever motivates anyone.
b. is the same thing as ethical egoism.
c. states that people are sometimes selfish.
d. is based on egoism as an ethical theory.

4. Which of the following represents a utilitarian belief?
a. Rightness is determined by what most people want, i.e., by majority rule.
b. Rightness is determined by what will bring about the most good.
c. We should concern ourselves only with the immediate results of our actions.
d. We must always disregard our own happiness when deciding what to do.

5. According to the utilitarian theory, an action is morally right if and only if
a. it makes the person who does it happy.
b. everyone prefers that action to any other action.
c. it maximizes total, net happiness.
d. it brings only happiness and causes no pain.

6. Utilitarians believe that
a. knowledge, friendship, and aesthetic satisfaction are intrinsically valuable (or inherently good).
b. we can predict with certainty the future consequences of our actions.
c. an action that leads to unhappiness is morally right if any other action that you could have performed instead would have brought about even more unhappiness.
d. an action can’t be right if the people who are made happy by it are outnumbered by the people who are made unhappy by it.

7. Which of the following considerations about utilitarianism is correct?
a. The great 19th century utilitarians, Jeremy Bentham and John Stuart Mill, believed that pleasure and happiness were different things.
b. Unlike Mill, Bentham was only concerned with the amount of pleasure that an action produces, not the quality of the pleasure.
c. Act utilitarianism and rule utilitarianism boil down to the same thing.
d. Utilitarians believe that we can’t compare one person’s happiness with that of another.

8. The case of the “deathbed promise” shows that
a. utilitarianism may lead to conclusions that conflict with commonsense morality.
b. keeping your promises never maximizes happiness.
c. it was wrong to have made the promise in the first place.
d. utilitarianism boils down to egoism.

9. Utilitarianism is appealing as a standard for moral decision making in business. Which of the following provides a reason for this?
a. Utilitarianism provides an objective way of resolving conflicts of self-interest.
b. Utilitarianism provides a rigid approach to moral decision making.
c. Utilitarianism provides a fuzzy standard for formulating and testing policies.
d. Utilitarianism gives us firm rules to follow, rules that don’t permit exceptions.

10. Which of the following is true regarding Immanuel Kant’s beliefs?
a. He defended a consequentialist theory of right and wrong.
b. He believed that all duties are prima facie duties.
c. He believed that moral principles rest on empirical data, on observation and experiment.
d. He believed that reason by itself can reveal the basic principles of morality.

11. According to Kant
a. good will is the only thing that is good in itself.
b. an action has moral worth if it is consistent with the categorical imperative.
c. only actions based on feeling or sentiment have moral worth.
d. a self-interested person can never do the right action.

12. Imagine a shopkeeper who is honest because being honest is good for business. When the shopkeeper refrains from cheating a customer, Kant would say this action
a. was wrong because its motive was impure.
b. was in accordance with duty, but not done from duty.
c. displayed a high level of moral worth.
d. shows that he was following the categorical imperative.

13. “If you want to go to law school, then you must take the LSAT exam.” This statement is an example of
a. the transcendental imperative. c. a hypothetical imperative.
b. the categorical imperative. d. irrational behavior.

14. Kant believed that we should always act
a. in such a way that we can will the maxim of our action to be a local law.
b. in a way that treats success as an end in itself, never merely as means.
c. in a way that would be universally unacceptable to all rational beings.
d. in a way that we can will the maxim of our action to become a universal law.

15. According to W. D. Ross’s theory
a. a prima facie obligation is absolute and can never be overridden.
b. what we should do in any specific set of circumstances will always be self-evident.
c. it would be wrong to lie to a murderer even to save the life of a friend.
d. we have various moral duties that can’t be reduced to a single, overarching obligation.

16. Nonconsequentialists like Ross believe that
a. we have no obligation to promote general welfare.
b. utilitarianism doesn’t require us to sacrifice as much as we should to help other people.
c. morality permits each of us a sphere in which to pursue our own plans and goals.
d. people’s so-called “moral rights” are unimportant when determining the right course of action.

17. Supererogatory actions are
a. actions that are normally wrong to do, but can sometimes be right.
b. actions that it would be good to do but not immoral not to do.
c. actions that we are morally required to do, all things considered.
d. actions that are wrong even though they produce some good.

18. The statement that best defines rights is
a. all moral rights are legal rights.
b. a negative right is a right to receive certain benefits.
c. a right is an entitlement to act or to have others act in a certain way.
d. all moral rights are human rights.

19. Which of the following statements is true regarding human rights?
a. Human rights are equal rights; if X is a human right, then everyone has this right.
b. Human rights are transferable and thus “alienable”.
c. Human rights rest on particular roles and special relationships.
d. Human rights are not natural but are always grounded in a specific legal or political system.

20. Rule utilitarians
a. believe that the optimal moral code will not normally produce 100% compliance.
b. believe that the optimal moral code would consist of only one rule, namely, always act so as to maximize happiness.
c. assume that everyone will always follow the rules, all the time.
d. believe that an action is wrong if it fails to maximize happiness.

21. For those who are trying to make moral decisions,
a. it is impossible to make progress on controversial ethical issues unless everyone shares the same moral theory.
b. endorsing a moral principle doesn’t require you to apply it in all similar situations.
c. moral judgments don’t have to be related to some general moral principles.
d. in a moral discussion, clarifying the facts and spelling out the principles to which people are appealing can help us to reach a solution.

22. A practical basis for discussing moral issues involves taking account of
a. effects, ideals, and obligations.
b. effort, duties, and organization.
c. compassion, intellect, and patience.
d. compliance, contribution, and consequences.

23. The only accurate statement about consequentalism is:
a. Utilitarianism is a nonconsequentialist ethical theory.
b. Utilitarianism is an egoistic normative theory.
c. Consequentialism says that the moral rightness of an action is determined solely by its results.
d. Nonconsequentialists deny that consequences have any moral significance.

24. A key idea of Immanuel Kant’s ethical theory is that:
a. all duties are prima facie duties.
b. the moral permissibility of our actions depends entirely upon their consequences.
c. we should treat people as ends in themselves, never merely as means.
d. only pleasure has intrinsic value.

25. Which of the following is true regarding utilitarian beliefs?
a. Utilitarians wish to maximize happiness not simply immediately, but in the long run as well.
b. Utilitarians contend that we can determine with certainty what the future consequences of our present actions will be.
c. When choosing among possible actions, utilitarianism requires us to disregard our own happiness.
d. For the hedonistic utilitarian, knowledge, friendship, and aesthetic satisfaction are inherently good.

TRUE/FALSE

1. Adam Smith made the point that individual pursuit of self-interest (egoistic conduct), even when subject to rules and constraints, always undermines the utilitarian goal of producing the most good for all.

2. Rule utilitarianism applies the utilitarian standard, not to individual actions, but to moral codes as a whole.

3. When a utilitarian like Jeremy Bentham advocates “the greatest happiness for the greatest number,” we must consider unhappiness or pain as well as happiness.

4. The connection between rights and duties is that, generally speaking, if you have a right to do something, then someone else has a correlative duty to act in a certain way.

5. According to Immanuel Kant, moral reasoning is based on observation.

6. According to Jeremy Bentham and John Stuart Mill, pleasure is the one thing that is intrinsically good or worthwhile.

7. The rights guaranteed in the Bill of Rights are positive rights, not negative rights.

8. According to W. D. Ross, we have immediate intuitive knowledge of the basic prima facie moral obligations/principles.

9. Richard Brandt defends a form of act utilitarianism.

10. All moral rights are legal rights.

11. By “maxim,” Immanuel Kant meant the subjective principle of an action, the principle that people in effect formulate in determining their conduct.

12. Normative theories of ethics propose some principle or principles for distinguishing right actions from wrong actions.

13. Nonconsequentialist theories of ethics never consider the consequences of an action or rule when making a moral judgment.

14. The view that equates morality with self-interest is egoism.

15. Egoists only do what they feel like doing.

16. Ethical egoism says that human beings are, as a matter of fact, so constructed that they must behave selfishly.

17. Jeremy Bentham thought that a community is no more than the individuals who compose it and that the interests of the community are simply the sum of the interests of its members.

18. One feature about utilitarianism that makes it appealing as a standard for moral decisions in business and nonbusiness organizations is that it provides a clear and straightforward basis for formulating and testing policies.

19. According to Adam Smith, if business is left to pursue its self-interest, the good of society will be compromised and harmed.

20. Immanuel Kant believed that it is only when we act out of empathy for others that our actions have moral worth.

21. A hypothetical imperative tells us to act as we would want everyone to act in that situation.

22. Immanuel Kant believed that prostitution was immoral because, by selling their sexual services, prostitutes allow themselves to be treated as only a means to an end.

23. A prima facie obligation is an obligation that can be overridden by a more important obligation.

24. A supererogatory act is an act that would be good to do, but not doing it is not wrong.

25. W. D. Ross denied that we have immediate, intuitive knowledge of the basic prima facie obligations.

SHORT ANSWER

1. What is the difference between legal rights and moral rights and between negative rights and positive rights?

2. According to Kant, when does an action have moral worth?

3. What is the difference between the categorical imperative and a hypothetical imperative?

4. State two alternative formulations of Immanuel Kant’s categorical imperative. Explain what they mean.

5. Identify two forms of ethical egoism. What are these two forms and how do they differ from one another?

6. What is a prima facie obligation?

7. Explain one of the two criticisms of Kant’s ethics.

8. Explain one of the three criticisms of Utilitarianism.

9. What is the difference between egoism as an ethical theory and psychological egoism?

10. According to Immanuel Kant, lying is never morally permissible. Why does he believe this?

ESSAY

1. Choose two theories of ethics from the reading and explain how you would properly apply them to the “Blood for Sale” case.

2. How would the six points of utilitarianism be applied to “The Ford Pinto” case to come to a proper resolution?

BUS 230 Week 3 Quiz Chapters 2 and 3 – Strayer

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CHAPTER 2

Supply Strategy

11. An effective supply strategy primarily focuses on linking:

a. current needs to current markets.
b. future needs to future markets.
c. current needs to future markets.
d. future needs to current markets.
e. current and future needs to current and future markets.

12. Organizational objectives and supply objectives typically are expressed:

a. differently, making it difficult to translate organizational objectives into supply objectives.
b. differently, providing the supply manager multiple opportunities to tap into organizational resources.
c. the same (survival, growth, financial, and environmental), making it easy to translate organizational objectives into supply objectives.
d. the same factors (quality, quantity, price, delivery and service), but long-term at the organizational level and short-term at the supply level.
e. in ways that are very specific to the organization, making it difficult to convey objectives to suppliers.

13. Which one of the following is NOT one of the six major supply strategy areas:

a. competitive-edge strategies.
b. environmental-change strategies.
c. new-product design strategies.
d. risk-management strategies.
e. cost-reduction strategies.

14. When developing supply strategies related to “how to buy,” decisions must be made
about:

i. systems and procedures
ii. goals and objectives.
iii. make or buy.
iv. large or small inventories.
v. none of the above.

15. The key question in strategic supply management is:

a. How can supply strategy be kept separate from and equal to organizational strategy?
b. How can first tier suppliers contribute to the buying organization’s objectives and strategy?
c. How can first, second, third- and subsequent tiers of suppliers contribute to the buying organization’s objectives and strategy?
d. How can the supply manager develop a network of suppliers that contribute to the buying organization’s strategies and goals?
e. How can supply and the supply chain contribute effectively to organizational objectives and strategy?

16. Three major challenges exist when setting supply objectives and strategies:

a. adopting efficient electronic transaction systems, designing effective strategic supply processes, and increasing internal compliance with both.
b. effectively interpreting corporate and supply objectives, selecting appropriate actions to achieve objectives, and integrating supply information into organizational strategies.
c. hiring professionals educated specifically in supply management, providing them with technical expertise, and developing leadership skills for the long-term.
d. emphasizing strategic cost management, involving key suppliers early in the process, and measuring the reduction in total cost of ownership.
e. identifying internal stakeholders, building consensus among these stakeholders, and selling top management on the results.

17. To effectively manage supply risks, the supply manager must:

a. inform the corporate risk officer of a potential risk, await instructions, and implement the directive.
b. seek input from senior executives in other functional areas, propose a risk mitigation plan, and await instructions from senior management.
c. identify and classify risks, assess the potential impact, and develop a risk mitigation strategy.
d. review the commodity strategy, revise it as needed, and implement the strategy revision.
e. confer with the organization’s management consultant, provide all requested data, and implement the consultant’s plan.

18. Linking supply strategy to corporate strategy is:

a. essential only in manufacturing, and most have the mechanisms to link them..
b. essential only in the service sector, and most lack the mechanisms to link them.
c. essential in all organizations, and most have the mechanisms to link them.
d. essential in all organizations, and many lack the mechanisms to link them.
e. non-essential in most types of organizations.

19. Strategic planning can be defined as:

a. how each functional area will achieve its specific goals and objectives.
b. a procedure for allocating resources to appropriate functions in the organization.
c. taking big risks to maximize current period benefits.
d. an action plan to achieve specific long-term goals and objectives.
e. an action plan to achieve specific operational and tactical goals.

20. Supply strategies that are based on changes in demand and supply are known as:
a. risk-management strategies.
b. assurance-of-supply strategies.
c. cost-reduction strategies.
d. environmental-change strategies.
e. supply chain support strategies.

True and False

1. The three levels of strategic planning are: function, unit, and corporate.

2. Environmental-change strategies are designed to anticipate and recognize shifts in the natural world that affect supply availability.
3. Even if a supply manager identifies and eliminates the causes of uncertainty and risk in the supply chain, the organization may still need to carry the same amount of inventory.

4. Risks in the supply chain can be classified into three main categories: (1) operational, (2) financial, and (3) strategic.

5. There is a growing emphasis on strategic supply management processes and less on purchase transactions.

6. A corporate risk management group headed by a chief risk officer has emerged in many organizations to assess total risk exposure and develop strategies to best manage all risks.

7. Assurance-of-supply strategies emphasize quality over all other considerations.

8. The most fundamental question facing an organization is whether to make or buy.

9. Supply managers may be able to provide information to identify risks to the organization and they can develop strategies to mitigate those risks.

10. Seldom do the actions of supply managers impact the organization’s reputation either positively or negatively.

Chapter 3

Supply Organization

21. Close to 70 percent of the value of any given requirement is established when needs are recognized and described. Therefore, the following functions should work together during need recognition and description:

a. the primary user and specifier.
b. the primary user and supply.
c. the primary user, design engineering and supply.
d. the primary user, design engineering, supply and accounting.
e. the primary user, design engineering, supply and all other relevant functional areas such as accounting/finance, marketing and operations.

22. A change in how supply is organized and structured is the result of:

a. the changing preference of the Chief Purchasing Officer.
b. an assessment of the best purchasing structure given the supply base.
c. a change in the overall corporate organizational structure.
d. a determination of the easiest change to manage internally.
e. a consensus among the supply management professionals in the company.

3. Which factors have a major influence on supply’s level in the organization:

a. the ratio of purchased material and services costs as a percentage of total costs or income.
b. the size of the supply base.
c. the nature of the products or services acquired.
d. the extent to which supply and suppliers can provide competitive advantage.
e. the credentials of the existing supply personnel.

a. a and b
b. c and d.
c. d and e
d. a, c and d.
e. a, d and e.

4. Organizations commit resources to cross-functional team development to:

a. give internal users ownership of tasks and problems.
b. achieve time, quality, or cost-reduction targets
c. promote diversity in the workplace.
d. give supply ownership of tasks and problems.
e. cross-train employees in case of downsizing.

5. Supply can provide an uninterrupted flow of materials, supplies and services by:

a. holding large inventories.
b. holding small inventories.
c. standardizing capital equipment, materials, MRO and services.
d. b and c.
e. a and c

6. A purchasing consortium:

a. speeds up the purchasing process, but does not usually result in price concessions from suppliers.
b. consists of two or more independent organizations that combine requirements for materials, services and capital goods to gain better pricing, service and technology from suppliers.
c. results in price concessions from suppliers, but usually does not speed up the purchasing process.
d. consists of two or more divisions of the same organization that combine requirements for materials, services and capital goods to gain better pricing, service and technology from suppliers.
e. is a form of collaborative purchasing used only by the public sector to deliver a wider range of services at a lower total cost.

7. Hybrid supply structures typically:

a. amplify the disadvantages of centralization.
b. amplify the advantages of decentralization.
c. capture the benefits of both centralized and decentralized structures.
d. are used in small to medium-sized organizations.
e. are used in service organizations of all sizes.

8. The organizational structure (centralized, decentralized, or hybrid) of the supply function:

a. has little influence on supply processes, internal cross-functional relationships, or the procedures and systems employed.
b. influences supply processes, internal cross-functional relationships, and the procedures and systems employed.
c. influences supply processes, but not internal cross-functional relationships, or the procedures and systems employed.
d. influences internal cross-functional relationships, and the procedures and systems employed, but not supply processes.
e. influences the procedures and systems employed, but not supply processes or internal cross-functional relationships.

9. Supply’s contribution to the organization’s competitive position depends on its ability to:

a. reduce costs.
b. enhance revenues.
c. manage assets.
d. a and c.
e. a, b and c.

10. Specialization within the supply function:

a. allows staff to develop expertise in particular areas.
b. is unnecessary because most tasks are transactional.
c. has no impact on talent management or organization within supply.
d. increases operating costs beyond the benefits of specialization.
e. is seldom required now that so many tasks are automated.

True and False

1. Eliminating process inefficiencies is the best way to accomplish supply objectives at the lowest total operating costs.

2. Decentralization refers to a supply organization that is physically located at corporate headquarters from which all organizational spending decisions are made.

3. There is an inherent conflict between supply’s objective to provide an uninterrupted flow of materials, supplies and services required to operate the organization and the objective to keep inventory investment and loss at a minimum.

4. Products, services and processes can be standardized and, if done effectively, will lower total cost of ownership.
5. The executive to whom the Chief Supply Officer reports has no relationship to the status of purchasing and the degree to which it is emphasized within the organization.

6. The supply process and structure for managing indirect spend is typically different than that for managing direct spend.

7. In a decentralized purchasing structure, those tasks which are more effectively handled at the business unit level include establishing policies, procedures, controls, and systems.

8. Some of the disadvantages of decentralization are narrow specialization and job boredom, lack of job flexibility, and a tendency to minimize legitimate differences in requirements.

9. Supply should obtain needed goods and services at the lowest total cost of ownership meaning that other cost factors—such as quality levels, after-sales service, warranties, inventory and spare parts requirements, and downtime—must be considered even though in the long term these factors seldom have a cost impact greater than the original purchase price.

10. The degree of centralization is reflected by the number of supply professionals working throughout all functional areas of the organization.

ACC 410 Week 3 Quiz 2 Chapter 2 and 3 – Strayer

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Chapter 2

Fund Accounting

TRUE/FALSE (CHAPTER 2)

1. A fund is a separate fiscal and accounting entity with a self-balancing set of accounts.

2. Fund accounting promotes control and accountability over restricted resources.

3. The basis of accounting determines what transactions and events are recognized.

4. An entity’s measurement focus determines when transactions and events are recognized.

5. If an entity adopts a full accrual basis of accounting, its measurement focus will automatically be on all economic resources.

6. If an entity adopts a modified accrual basis of accounting, its measurement focus will automatically be on current financial resources.

7. A government may report some of its funds on a full accrual basis.

8. A government may have as many general funds as it deems necessary.

9. Funds divide a government into functional departments.

10. General funds are established to account for resources legally restricted for specified purposes.

11. Fiduciary activities only benefit parties other than the government itself.

12. The Financial Accounting Standards Board requires all nongovernmental not-for-profit entities to use fund accounting.

MULTIPLE CHOICE (CHAPTER 2)

1. What is the primary reason that governmental entities use fund accounting?
a) Fund accounting is required by law.
b) Fund accounting is required by GAAP.
c) Fund accounting promotes control and accountability over restricted resources.
d) Fund accounting promotes better control over operating activities.

2. Basis of accounting determines which of the following?
a) When transactions and events are recognized.
b) What transactions and events will be reported.
c) Where transactions and events will be reported.
d) Why transactions and events will be reported.

3. A fund is
a) A separate legal entity.
b) A separate fiscal and accounting entity.
c) A separate self-balancing set of accounts for inventory purposes.
d) None of the above.

4. Which of the following funds is a fiduciary fund?
a) Permanent fund.
b) Agency fund.
c) Capital project fund.
d) Debt service fund.

5. When a governmental entity adopts a basis of accounting other than full accrual and a measurement focus that excludes long-lived assets and liabilities in its governmental fund types:
a) It is in violation of the law.
b) It is in violation of GAAP.
c) It has recorded transactions in accordance with standards for presentation in the fund financial statement required by the new GASB reporting model.
d) It has the ability to better measure the results of operations.

6. A city receives a donation from a citizen who specifies that the principal must be invested and the earnings must be used to support operations of a city-owned recreational facility. The principal of this gift should be accounted for in which of the following funds?
a) Trust fund.
b) Special revenue fund.
c) Permanent fund.
d) Internal service fund.

7. Which of the following is NOT a governmental fund?
a) City Hall Debt Service Fund.
b) City Utilities Enterprise Fund.
c) Gasoline Tax Special Revenue Fund.
d) City Hall Capital Project Fund.

8. Which of the following accounts would you least expect to see in a debt service fund?
a) Principal payments.
b) Interest charges.
c) Interest earned.
d) Outstanding balance of the debt being serviced.

9. Which of the following funds is a proprietary fund?
a) Internal service fund.
b) Special revenue fund.
c) Capital project fund.
d) Permanent fund.

10. Which of the following funds is a governmental fund?
a) Enterprise fund.
b) Debt service fund.
c) Internal service fund.
d) Agency fund.

11. Which of the following activities should the City of Highland account for in a trust fund?
a) General fund contributions received by the City pension plan.
b) Greens fees received from golfers at the City-owned golf course.
c) Grants received from the Federal government to purchase buses to be used for public transit.
d) Proceeds of bonds issued to construct a new city hall building.

12. The state collects a gasoline tax that must be used to support highway construction and maintenance. The gasoline tax should be accounted for in which of the following funds?
a) General fund.
b) Special revenue fund.
c) Debt service fund.
d) Internal service fund.

13. The City of San Jose built a new city hall and financed construction by issuing bonds due in installments over the next 30 years. The bond principal and interest will be paid by a special tax levied on property in the City. The money received from this special tax should be accounted for in which of the following funds?
a) General fund.
b) Special revenue fund.
c) Capital project fund.
d) Debt service fund.

14. Riverside Golf Course is a City-owned golf course that collects greens fees in amounts sufficient to cover its expenses. Riverside Golf Course should be accounted for in which of the following funds?
a) Internal service fund.
b) Enterprise fund.
c) General fund.
d) Special revenue fund.

15. To fulfill the printing needs of its various departments and agencies, the City has established a Central Print Shop which bills the various departments and agencies of the city for printing services rendered. The Central Print Shop should be accounted for in which of the following funds.
a) Internal service fund.
b) Enterprise fund.
c) General fund.
d) Special revenue fund.

16. Which of the following funds is accounted for on the modified accrual basis of accounting?
a) General fund.
b) Internal service fund.
c) Proprietary fund.
d) Pension trust fund.

17. Which of the following assets would NOT be found in the fund balance sheet of the General Fund of the City of Harrison?
a) Cash.
b) Capital assets.
c) Receivable from Special Revenue Fund.
d) Receivable from State.

18. Which of the following liabilities would NOT be found in the fund balance sheet of the General Fund of the City of Marmaduke?
a) Accounts payable.
b) Payable to the special revenue fund.
c) Deferred revenue.
d) Bonds payable, due in 5 years.

19. For which of the following entities is fund accounting mandated?
a) American Hospital Association.
b) City of New York.
c) Grace Lutheran Church.
d) United Way.

20. Governments most commonly separate resources into funds to assure that they adhere to restrictions placed on them by
a) legislators.
b) grantors.
c) donors.
d) all of the above.

PROBLEMS (CHAPTER 2)

1. Assume that the City of Ft. Smith maintains its books and records in a manner that facilitates the preparation of the fund financial statements. For each of the following events indicate in which fund(s) of the City of Ft. Smith the event would be recorded and justify your fund selection.

a. The City collected property taxes levied for the general operations of the City.
b. The City collected property taxes levied to pay principal and interest on bonds issued several years in the past to construct a new fire station.
c. The City collected property taxes levied on a specific area of the City for the purposes of providing more frequent snow removal than is enjoyed by the rest of the City.
d. The City sold bonds to finance the construction of a new City Hall.
e. The City sold bonds to finance major renovations at the city-owned electric utility.

2. Assume that the City of Amber maintains its books and records in a manner that facilitates the preparation of the fund financial statements. Amber City maintains a general fund, a capital project fund, and a special revenue fund. During 2002, the City engaged in the following transactions. Record all transactions. Be sure to clearly indicate the fund in which the entry is made.

a. The City sold bonds, face value $26 million, at par to finance the construction of a new City Hall.
b. The City purchased two new police cars at a total cost of $50,000.
c. The City collected $8,000 in taxes dedicated for the eradication of noxious weeds.
d. The City spent $6,000 on pesticides for noxious weeds.
e. The City acquired a new tractor for $75,000. The City paid $20,000 in cash, and signed a $55,000 note which is due in three years.

3. Assume that the Blackfoot County maintains its books and records in a manner that facilitates the preparation of the fund financial statements. Blackfoot County engaged in the following transactions during the current month. Prepare journal entries in the general fund to record these events.

a. Paid salaries to County employees, $100,000.
b. Borrowed $35,000 at a local bank to use to buy a County car.
c. Purchased an automobile for the use by County administrative officials, $35,000.
d. Made a $7,000 payment on the outstanding accounts payable.
e. Collected $3,500,000 of the current property tax lavy.
f. Received a $50,000 grant from the State to support general government activities.

4. For each of the following funds list the basis of accounting it should use, either modified accrual or full accrual.

a. General fund
b. Debt service fund
c. Internal service fund
d. Investment trusts
e. Private purpose trusts
5. For each of the following funds list the measurement focus it should use, either current financial resources or economic resources.

a. General fund
b. Special revenue funds
c. Capital projects funds
d. Enterprise funds
e. Pension trusts

ESSAYS (CHAPTER 2)

1. Why do governments and not-for-profit entities use fund accounting?

2. Governments use the modified accrual basis of accounting and a current financial resources measurement focus when presenting the fund financial statements of the governmental funds, but they use the accrual basis of accounting and the flow of economic resources for the government-wide financial statements. What is a basis of accounting? What is measurement focus? How does the selection of one affect the selection of the other?

3. For what purposes do governmental and not-for-profit entities use agency funds? What are the distinguishing characteristics of agency funds?

4. Briefly describe the three broad categories of activities that most general-purpose governments engage in.

Chapter 3

Government Financial Reporting

TRUE/FALSE (CHAPTER 3)

1. In addition to preparing fund financial statements, governments should also prepare consolidated financial statements to provide information on the financial position and operating results of the government as a single economic entity.

2. Fiduciary activities should be reported in fund statements, but should be excluded from the government-wide statements.

3. To prepare their government-wide statements, governments must adjust the governmental fund statements from the full accrual basis to the modified accrual basis.

4. The format that may now be used for the government-wide statement of net assets is “assets plus liabilities equals net assets.”

5. The government-wide statement of activities bears little resemblance to the income statement of a business.

6. A reservation of fund balance is, in essence, an additional restriction on fund resources.

7. Internal service fund balances generally are included in the governmental activities column of the government-wide statement of net assets, rather than in the business-type activities column.

8. A governmental funds balance sheet does not include capital or other noncurrent assets.

9. Fund balance is equal to fund assets plus fund liabilities.

10. Footnotes are not required to be included as part of the basic financial statements of governments.

MULTIPLE CHOICE (CHAPTER 3)

1. __________ is governments’ responsibility to report the extent to which they have met their operating objectives efficiently and effectively, using all resources available for that purpose, and whether they can continue to meet their objectives for the foreseeable future.
a) Fund accountability.
b) Fiscal accountability.
c) Operational accountability.
d) Government accountability.

2. __________ is the responsibility of governments to justify that their actions in the current period have complied with public decisions concerning the raising and spending of public moneys in the short term.
a) Fund accountability.
b) Fiscal accountability.
c) Operational accountability.
d) Government accountability.

3. Which of the following is NOT considered Required Supplementary Information (RSI)?
a) Notes to the financial statements.
b) Management’s Discussion and Analysis.
c) Budgetary comparisons.
d) Pension schedules.

4. Government-wide financial statements should include
a) the statement of net assets, and the statement of activities.
b) the statement of net assets only.
c) the statement of activities only.
d) the statement of net assets, the statement of activities, and the statement of cash flows.

5. In addition to government-wide statements, GASB Statement No. 34 requires fund financial statements be included in the government’s basic set of financial statements. The basic fund financial statements that should be included for governmental funds are
a) the Balance Sheet and
the Statement of Revenues, Expenditures, and Changes in Fund Balance.
b) the Statement of Nets Assets,
the Statement of Revenues, Expenses, and Changes in Fund Net Assets, and
the Statement of Cash Flows.
c) the Statement of Fiduciary Net Assets, and
the Statement of Changes in Fiduciary Net Assets.
d) the Balance Sheet,
the Income Statement,
the Statement of Cash Flows, and
the Statement of Retained Earnings.

6. In addition to government-wide statements, GASB Statement No. 34 requires fund financial statements be included in the government’s basic set of financial statements. The basic fund financial statements that should be included for proprietary funds are
a) the Balance Sheet and
the Statement of Revenues, Expenditures, and Changes in Fund Balance.
b) the Statement of Nets Assets,
the Statement of Revenues, Expenses, and Changes in Fund Net Assets, and
the Statement of Cash Flows.
c) the Statement of Fiduciary Net Assets, and
the Statement of Changes in Fiduciary Net Assets.
d) the Balance Sheet,
the Income Statement,
the Statement of Cash Flows, and
the Statement of Retained Earnings.

7. In addition to government-wide statements, GASB Statement No. 34 requires fund financial statements be included in the government’s basic set of financial statements. The basic fund financial statements that should be included for fiduciary funds are
a) the Balance Sheet and
the Statement of Revenues, Expenditures, and Changes in Fund Balance.
b) the Statement of Nets Assets,
the Statement of Revenues, Expenses, and Changes in Fund Net Assets, and
the Statement of Cash Flows.
c) the Statement of Fiduciary Net Assets, and
the Statement of Changes in Fiduciary Net Assets.
d) the Balance Sheet,
the Income Statement,
the Statement of Cash Flows, and
the Statement of Retained Earnings.

8. The aim of the government-wide statement of activities is to show
a) the net cost of each of the government’s main functions and programs.
b) the net income for the government as a whole.
c) the net income for the government’s governmental activities and fiduciary activities.
d) the net income for the government’s governmental activities and proprietary activities.

9. The government-wide statements should be prepared using
a) the cash basis.
b) the full accrual basis.
c) the modified accrual basis.
d) the modified accrual basis for the governmental activities, and the full accrual basis for the business-type activities.

10. In the fund financial statements, the statements for the governmental funds should be prepared using
a) the cash basis.
b) the full accrual basis.
c) the modified accrual basis.
d) the modified cash basis.

11. In the fund financial statements, the statements for the proprietary funds should be prepared using
a) the cash basis.
b) the full accrual basis.
c) the modified accrual basis.
d) the modified cash basis.

12. In the fund financial statements, the statements for the fiduciary funds should be prepared using
a) the cash basis.
b) the full accrual basis.
c) the modified accrual basis.
d) the modified cash basis.

13. Per Statement No. 34, the GASB requires that governments present their budget versus actual comparisons on a __________ and include a schedule that reconciles the actual amounts per the budgetary comparison with the GAAP amounts per the financial statements.
a) full accrual basis
b) modified accrual basis
c) cash basis
d) budgetary basis

14. How many government-wide statements is a municipality required to prepare?
a) One.
b) Two.
c) Eight.
d) Ten.

15. The Basic Financial Statements of a city do not include which of the following?
a) Government-wide Statement of Net Assets.
b) Government-wide Statement of Activities.
c) Government-wide Statement of Cash Flows.
d) Balance Sheet for each governmental and proprietary fund.

16. Which of the following would NOT be found in the business-type activity column of the government-wide Statement of Net Assets of the City of Smithville?
a) Cash.
b) Inventory.
c) Capital assets.
d) Receivable from general fund.

17. Which of the following would NOT be found in the Statement of Net Assets of Teton City?
a) Cash.
b) Capital assets.
c) Receivable from special revenue fund.
d) Inventories.

18. The focus of the Statement of Activities of the city of West Hills is on which of the following?
a) Determining the total expenses by natural classification.
b) Determining the total expenses by function.
c) Determining the total revenues by function.
d) Determining the net cost of functions.

19. Under the new GASB reporting model for governmental entities, which of the following is required?
a) Only one set of financial statements, prepared on the full accrual basis of accounting.
b) Only one set of financial statements, prepared on the modified accrual basis of accounting.
c) Two sets of financial statements, one similar to the pre-GASB #34 reporting requirements using the current financial resources measurement focus and modified accrual basis of accounting and one that combines all governmental activities in one column and all business-type activities in another column using the full accrual basis of accounting for both columns.
d) Two sets of financial statements, one exactly like the pre-GASB #34 reporting requirements using the current financial resources measurement focus and modified accrual basis of accounting and one that combines all governmental activities in one column and all business-type activities in another column using the full accrual basis of accounting for both columns.

20. Under the new GASB reporting model for governmental entities, the entity-wide balance sheet will display which of the following?
a) Assets, Liabilities, and Net Assets.
b) Assets, Liabilities, and Fund Balances.
c) Assets, Liabilities, and Fund Equity.
d) Assets, Liabilities, and Owner’s Equity.

21. Under the new GASB reporting model for governmental entities, the focus of the entity-wide activity/operating statement is on which of the following?
a) Program revenues and expenditures.
b) Program revenues and expenses.
c) Net income.
d) Net program revenues/expenses.

PROBLEMS (CHAPTER 3)

1. Listed below are the names of the two government-wide financials statements and the seven fund statements that should be included in the government’s basic financial statements. Identify each as either a government-wide statement, a governmental funds statement, a proprietary funds statements, or a fiduciary funds statement.

________________ (a) Statement of Activities

________________ (b) Statement of Fiduciary Net Assets

________________ (c) Statement of Cash Flows

________________ (d) Statement of Revenues, Expenses, and Changes in Fund Net Assets

________________ (e) Statement of Revenues, Expenditures, and Changes in Fund Balance

________________ (f) Balance Sheet

________________ (g) Statement of Net Assets (or a Balance Sheet)

________________ (h) Statement of Net Assets

________________ (i) Statement of Changes in Fiduciary Net Assets

2. Listed below are the names of the two government-wide financials statements and the seven fund statements that should be included in the government’s basic financial statements. Identify the appropriate basis of accounting, either modified accrual or full accrual, that should be used to prepare that statement.

________________ (a) Statement of Activities

________________ (b) Statement of Fiduciary Net Assets

________________ (c) Statement of Cash Flows

________________ (d) Statement of Revenues, Expenses, and Changes in Fund Net Assets

________________ (e) Statement of Revenues, Expenditures, and Changes in Fund Balance

________________ (f) Balance Sheet

________________ (g) Statement of Net Assets (or a Balance Sheet)

________________ (h) Statement of Net Assets

________________ (i) Statement of Changes in Fiduciary Net Assets

3. Listed below are the names of the two government-wide financials statements and the seven fund statements that should be included in the government’s basic financial statements. Identify the appropriate measurement focus, either economic resources or current financial resources, that should be followed to prepare that statement.

________________ (a) Statement of Activities

________________ (b) Statement of Fiduciary Net Assets

________________ (c) Statement of Cash Flows

________________ (d) Statement of Revenues, Expenses, and Changes in Fund Net Assets

________________ (e) Statement of Revenues, Expenditures, and Changes in Fund Balance

________________ (f) Balance Sheet

________________ (g) Statement of Net Assets (or a Balance Sheet)

________________ (h) Statement of Net Assets

________________ (i) Statement of Changes in Fiduciary Net Assets

ESSAYS (CHAPTER 3)

1. Concerning the government-wide statement of net assets, describe what information is included in the governmental activities column, the business-type activities column, and the column for the total primary government.

2. The activities of an internal service fund are presented on the Statement of Revenues, Expenses, and Changes in Fund Net Assets in the fund financial statements. Why? Where are the activities of an internal service fund presented on the Government-wide Statement of Activities? Why?

3. Contrast the reporting of major funds in the governmental funds financial statements versus that of nonmajor funds.

ACC 401 Week 3 Quiz 2 Chapter 3 – Strayer

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Chapter 3

Consolidated Financial Statements—Date of Acquisition

Multiple Choice

1. A majority-owned subsidiary that is in legal reorganization should normally be accounted for using
a. consolidated financial statements.
b. the equity method.
c. the market value method.
d. the cost method.

2. Under the acquisition method, indirect costs relating to acquisitions should be
a. included in the investment cost.
b. expensed as incurred.
c. deducted from other contributed capital.
d. none of these.

3. Eliminating entries are made to cancel the effects of intercompany transactions and are made on the
a. books of the parent company.
b. books of the subsidiary company.
c. workpaper only.
d. books of both the parent company and the subsidiary.

4. One reason a parent company may pay an amount less than the book value of the subsidiary’s stock acquired is
a. an undervaluation of the subsidiary’s assets.
b. the existence of unrecorded goodwill.
c. an overvaluation of the subsidiary’s liabilities.
d. none of these.

5. In a business combination accounted for as an acquisition, registration costs related to common stock issued by the parent company are
a. expensed as incurred.
b. deducted from other contributed capital.
c. included in the investment cost.
d. deducted from the investment cost.

6. On the consolidated balance sheet, consolidated stockholders’ equity is
a. equal to the sum of the parent and subsidiary stockholders’ equity.
b. greater than the parent’s stockholders’ equity.
c. less than the parent’s stockholders’ equity.
d. equal to the parent’s stockholders’ equity.

7. Majority-owned subsidiaries should be excluded from the consolidated statements when
a. control does not rest with the majority owner.
b. the subsidiary operates under governmentally imposed uncertainty.
c. a foreign subsidiary is domiciled in a country with foreign exchange restrictions or controls.
d. any of these circumstances exist.

8. Under the economic entity concept, consolidated financial statements are intended primarily for the benefit of the
a. stockholders of the parent company.
b. creditors of the parent company.
c. minority stockholders.
d. all of the above.

9. Reasons a parent company may pay more than book value for the subsidiary company’s stock include all of the following except
a. the fair value of one of the subsidiary’s assets may exceed its recorded value because of appreciation.
b. the existence of unrecorded goodwill.
c. liabilities may be overvalued.
d. stockholders’ equity may be undervalued.

10. What is the method of presentation required by SFAS 160 of “non-controlling interest” on a consolidated balance sheet?
a. As a deduction from goodwill from consolidation.
b. As a separate item within the long-term liabilities section.
c. As a part of stockholders’ equity.
d. As a separate item between liabilities and stockholders’ equity.

11. Which of the following is a limitation of consolidated financial statements?
a. Consolidated statements provide no benefit for the stockholders and creditors of the parent company.
b. Consolidated statements of highly diversified companies cannot be compared with industry standards.
c. Consolidated statements are beneficial only when the consolidated companies operate within the same industry.
d. Consolidated statements are beneficial only when the consolidated companies operate in different industries.

12. Pine Corp. owns 60% of Sage Corp.’s outstanding common stock. On May 1, 2011, Pine advanced Sage $90,000 in cash, which was still outstanding at December 31, 2011. What portion of this advance should be eliminated in the preparation of the December 31, 2011 consolidated balance sheet?
a. $90,000.
b. $54,000.
c. $36,000.
d. $-0-.

Use the following information for questions 13-15.

On January 1, 2011, Polk Company and Sigler Company had condensed balance sheets as follows:
Polk Sigler
Current assets $ 280,000 $ 80,000
Noncurrent assets _360,000 __160,000
Total assets $ 640,000 $240,000

Current liabilities $ 120,000 $ 40,000
Long-term debt 200,000 -0-
Stockholders’ equity __320,000 200,000
Total liabilities & stockholders’ equity $ 640,000 $240,000
On January 2, 2011 Polk borrowed $240,000 and used the proceeds to purchase 90% of the outstanding common stock of Sigler. This debt is payable in 10 equal annual principal payments, plus interest, starting December 30, 2011. Any difference between book value and the value implied by the purchase price relates to land.

On Polk’s January 2, 2011 consolidated balance sheet,

13. Noncurrent assets should be
a. $520,000.
b. $536,000.
c. $544,000.
d. $586,667.

14. Current liabilities should be
a. $200,000.
b. $184,000.
c. $160,000.
d. $120,000.

15. Noncurrent liabilities should be
a. $440,000.
b. $416,000.
c. $240,000.
d. $216,000.

16. A newly acquired subsidiary has pre-existing goodwill on its books. The parent company’s consolidated balance sheet will:
a. treat the goodwill the same as other intangible assets of the acquired company.
b. will always show the pre-existing goodwill of the subsidiary at its book value.
c. not show any value for the subsidiary’s pre-existing goodwill.
d. do an impairment test to see if any of it has been impaired.

17. The Difference between Implied and Book Value account is:
a. an account necessary for the preparation of consolidated working papers.
b. used in allocating the amounts paid for recorded balance sheet accounts that are different than
their fair values.
c. the excess implied value assigned to goodwill.
d. the unamortized excess that cannot be assigned to any related balance sheet accounts

18. The main evidence of control for purposes of consolidated financial statements involves
a. possessing majority ownership
b. having decision-making ability that is not shared with others.
c. being the sole shareholder
d. having the parent company and the subsidiary participating in the same industry.

19. In which of the following cases would consolidation be inappropriate?
a. The subsidiary is in bankruptcy.
b. Subsidiary’s operations are dissimilar from those of the parent.
c. The parent owns 90 percent of the subsidiary’s common stock, but all of the subsidiary’s nonvoting preferred stock is held by a single investor.
d. Subsidiary is foreign.

20. Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 2011. On the date of acquisition, Princeton held land with a book value of $150,000 and a fair value of $300,000; Sheffield held land with a book value of $100,000 and fair value of $500,000. What amount would land be reported in the consolidated balance sheet prepared immediately after the combination?
a. $650,000
b. $500,000
c. $550,000
d. $375,000

Use the following information to answer questions 21 – 23.

On January 1, 2011, Pena Company and Shelby Company had condensed balanced sheets as follows:

Pena Shelby

Current assets $ 210,000 $ 60,000
Noncurrent assets 270,000 120,000
Total assets $480,000 $180,000

Current liabilities $ 90,000 $ 30,000
Long-term debt 150,000 -0-
Stock holders’ equity 240,000 150,000
Total liabilities & stockholders’ equity $ 480,000 $ 180,000

On January 2, 2011 Pena borrowed $180,000 and used the proceeds to purchase 90% of the outstanding common stock of Shelby. This debt is payable in 10 equal annual principal payments, plus interest, starting December 30, 2011. Any difference between book value and the value implied by the purchase price relates to land.

On Pena’s January 2, 2011 consolidated balance sheet,

21. Noncurrent assets should be
a. $390,000.
b. $402,000.
c. $408,000.
d. $440,000.

22. Current liabilities should be
a. $150,000.
b. $138,000.
c. $120,000.
d. $90,000.

23. Noncurrent liabilities should be
a. $330,000.
b. $312,000.
c. $180,000.
d. $162,000.

24. On January 1, 2011, Primer Corporation acquired 80 percent of Sutter Corporation’s voting common stock.
Sutters’s buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the time of
acquisition. At what amount will Sutter’s buildings and equipment will be reported in the consolidated
statements ?
a. $350,000
b. $340,000
c. $280,000
d. $300,000

Problems

3-1 On December 31, 2011, Page Company purchased 80% of the outstanding common stock of Snead Company for cash. At the time of acquisition, Snead Company’s balance sheet was as follows:

Current assets $ 1,680,000
Plant and equipment 1,580,000
Land 280,000
Total assets $3,540,000

Liabilities $ 1,320,000
Common stock, $10 par value 1,440,000
Other contributed capital 700,000
Retained earnings 240,000
Total $3,700,000
Treasury stock at cost, 5,000 shares 160,000
Total equities $3,540,000

Required:

Prepare the elimination entry(s) required for the preparation of a consolidated balance sheet workpaper on December 31, 2011, assuming the purchase price of the stock was $1,670,000. Any difference between the value implied by the purchase price of the investment and the book value of net assets acquired relates to subsidiary land.

3-2 P Company purchased 80% of the outstanding common stock of S Company on January 2, 2011, for $380,000. Balance sheets for P Company and S Company immediately after the stock acquisition were as follows:

P Company S Company
Current assets $ 166,000 $ 96,000
Investment in S Company 380,000 -0-
Plant and equipment (net) 560,000 224,000
Land 40,000 120,000
$1,146,000 $440,000

Current liabilities $ 120,000 $ 44,000
Long-term notes payable -0- 36,000
Common stock 480,000 160,000
Other contributed capital 244,000 64,000
Retained earnings 302,000 136,000
$1,146,000 $440,000

S Company owed P Company $16,000 on open account on the date of acquisition.

Required:

Prepare a consolidated balance sheet for P and S Companies on the date of acquisition. Any difference between the value implied by the purchase price of the investment and the book value of net assets acquired relates to subsidiary land. The book values of S Company’s other assets and liabilities are equal to their fair values.

3-3 P Company acquired 54,000 shares of the common stock of S Company on January 1, 2011, for $950,000 cash. The stockholders’ equity section of S Company’s balance sheet on that date was as follows:

Common stock, $10 par value $600,000
Other contributed capital 80,000
Retained earnings 320,000
Total $1,000,000

On the date of acquisition, S Company owed P Company $10,000 on open account.

Required:
Present, in general journal form, the elimination entries for the preparation of a consolidated balance sheet workpaper on January 1, 2011. The difference between the value implied by the purchase price of the investment and the book value of the net assets acquired relates to subsidiary land.

3-4 On January 2, 2011, Potter Company acquired 90% of the outstanding common stock of Smiley Company for $480,000 cash. Just before the acquisition, the balance sheets of the two companies were as follows:

Potter Smiley
Cash $ 650,000 $ 160,000
Accounts Receivable (net) 360,000 60,000
Inventory 290,000 140,000
Plant and Equipment (net) 970,000 240,000
Land 150,000 80,000
Total Assets $2,420,000 $680,000

Accounts Payable $ 260,000 $ 120,000
Mortgage Payable 180,000 100,000
Common Stock, $2 par value 1,000,000 170,000
Other Contributed Capital 520,000 50,000
Retained Earnings 460,000 240,000
Total Equities $2,420,000 $680,000

The fair values of Smiley’s assets and liabilities are equal to their book values with the exception of land.

Required:

A. Prepare the journal entry necessary to record the purchase of Smiley’s common stock.
B. Prepare a consolidated balance sheet at the date of acquisition.

3-5 P Corporation paid $420,000 for 70% of S Corporation’s $10 par common stock on December 31, 2011, when S Corporation’s stockholders’ equity was made up of $300,000 of Common Stock, $90,000 of Other Contributed Capital and $60,000 of Retained Earnings. S’s identifiable assets and liabilities reflected their fair values on December 31, 2011, except for S’s inventory which was undervalued by $60,000 and their land which was undervalued by $25,000. Balance sheets for P and S immediately after the business combination are presented in the partially completed work-paper below.

Eliminations
P S Debit Credit
Noncontrolling Interest Consolidated Balances
ASSETS
Cash $40,000 $30,000
Accounts
receivable-net 30,000 45,000
Inventories 185,000 165,000
Land 45,000 120,000
Plant assets-
net 480,000 240,000
Investment in
S Corp. 420,000
Difference between implied and book value
Goodwill
Total Assets $1,200,000 $600,000
EQUITIES
Current
liabilities $170,000 $150,000
Capital stock 600,000 300,000
Additional paid-in capital 150,000 90,000
Retained earnings 280,000 60,000
Noncontrolling interest
Total Equities $1,200,000 $600,000

Required:
Complete the consolidated balance sheet workpaper for P Corporation and Subsidiary.

3-6 Prepare in general journal form the workpaper entries to eliminate Porter Company’s investment in Sewell Company in the preparation of a consolidated balance sheet at the date of acquisition for each of the following independent cases:

Sewell Company Equity Balances
Cash Percent of Stock Owned Investment Cost Common Stock Other Contributed Capital Retained Earnings
a. 90 $675,000 $450,000 $180,000 $75,000
b. 80 318,000 620,000 140,000 20,000

Any difference between book value of net assets acquired and the value implied by the purchase price relates to subsidiary property, plant, and equipment except for case (b). In case (b) assume that all book values and fair values are the same.

3-7 On December 31, 2011, Pryor Company purchased a controlling interest in Shelby Company for $1,060,000. The consolidated balance sheet on December 31, 2011 reported noncontrolling interest in Shelby Company of $265,000.

On the date of acquisition, the stockholders’ equity section of Shelby Company’s balance sheet was as follows:

Common stock $520,000
Other contributed capital 380,000
Retained earnings 280,000
Total 1,180,000

Required:

A. Compute the noncontrolling interest percentage on December 31, 2011.
B. Prepare the investment elimination entry made to prepare a consolidated balance sheet workpaper. Any difference between book value and the value implied by the purchase price relates to subsidiary land.

3-8 On January 1, 2011, Primer Company issued 1,500 of its $20 par value common shares with a fair value of $50 per share in exchange for 2,000 outstanding common shares of Swartz Company in a purchase transaction. Registration costs amounted to $1,700 paid in cash. Just prior to the acquisition, the balance sheets of the two companies were as follows:

Primer Swartz

Cash $ 73,000 $13,000
Accounts Receivable (net) 95,000 19,000
Inventory 58,000 25,000
Plant and Equipment (net) 95,000 43,000
Land 26,000 20,000
Total Assets $ 347,000 $ 120,000

Accounts Payable $ 66,000 16,000
Notes Payable 82,000 21,000
Common Stock, $20 par value 100,000 40,000
Other Contributed Capital 60,000 24,000
Retained Earnings 39,000 19,000
Total Liabilities and Equities $ 347,000 $ 120,000

Any differences between the book value of equity and the value implied by the purchase price relates to Land.

Required:
A. Prepare the journal entry on Primer’s books to record the exchange of stock.
B. Prepare a Computation and Allocation Schedule for the Difference between book value and value implied by the purchase price.
C. Calculate the consolidated balance for each of the following accounts as of December 31, 2011:
1. Cash
2. Land
3. Common Stock
4. Other Contributed Capital

Short Answer

1. There are several reasons why a company would acquire a subsidiary’s voting common stock rather than its net assets. Identify at least two advantages to acquiring a controlling interest in the voting stock of another company rather than its assets.

2. A useful first step in the consolidating process is to prepare a Computation and Allocation of Difference (CAD) Schedule. Identify the steps involved in preparing the CAD schedule.

Short Answer Questions from the Textbook

1. What are the advantages of acquiring the majority of the voting stock of another company rather than acquiring all its voting stock?

2. What is the justification for preparing consolidated financial statements when, in fact, it is ap-parent that the consolidated group is not a legal entity?

3. Why is it often necessary to prepare separate financial statements for each legal entity in a consolidated group even though consolidated statements provide a better economic picture of the combined activities?

4. What aspects of control must exist before a subsidiary is consolidated?

5. Why are consolidated work papers used in pre-paring consolidated financial statements?

6. Define noncontrolling (minority) interest. List three methods that might be used for reporting the noncontrolling interest in a consolidated balance sheet, and state which is preferred under the SFAS No. 160[topic 810].

7. Give several reasons why a parent company would be willing to pay more than book value for subsidiary stock acquired.

8. What effect do subsidiary treasury stock holdings have at the time the subsidiary is acquired? How should the treasury stock be treated on consolidated work papers?

9. What effect does a noncontrolling interest have on the amount of intercompany receivables and payables eliminated on a consolidated balance sheet?

10 A.SFAS No. 109and SFAS No. 141R[ASC 740 and805] require that a deferred tax asset or liability be recognized for likely differences between the reported values and tax bases of assets and liabilities recognized in business combinations (for example, in exchanges that are nontaxable to the selling shareholders). Does this decision change the amount of consolidated net income reported in years subsequent to the business combination? Explain.

Business Ethics Question from the Textbook

Part I. You are working on the valuation of accounts receivable, and bad debt reserves for the current year’s annual report. The CFO stops by and asks you to reduce the reserve by enough to increase the current year’s EPS by 2 cents a share. The company’s policy has always been to use the previous year’s actual bad debt percentage adjusted for a specific economic index. The CFO’s suggested change would still be within acceptable GAAP. However, later, you learn that with the increased EPS, the CFO would qualify for a significant bonus. What do you do and why?

Part II. Consider the following: Accounting firm KPMG created tax shelters called BLIPS, FLIP, OPIS, and SOS that were based largely in the Cayman Islands and allowed wealthy clients (there were 186) to create $5 billion in losses, which were then deducted from their income for IRS tax purposes. BLIPS (Bond Linked Issue Premium Structures) had clients borrow from an offshore bank for purposes of purchasing currency. The client would then sell the currency back to the lender for a loss. However, the IRS contends the losses were phony and that there was never any risk to the client in the deals. The IRS has indicted eight former KPMG partners and an outside lawyer alleging that the transactions were shams, illegal methods for avoiding taxes. KPMG has agreed to pay a$456 million fine, no longer to do tax shelters, and to cooperate with the government in its prosecution of the nine individuals involved in the tax shelter scheme. Many argue that the courts have not always held that such tax avoidance schemes show criminal intent because the tax laws permit individuals to minimize taxes. However, the IRS argues that these shelters evidence intent because of the lack of risk.

Question
In this case, the IRS contends that the losses generated by the tax shelters were phony and that the clients never incurred any risk. Do tax avoidance schemes indicate criminal intent if the tax laws permit individuals to minimize taxes? Justify your answer.

ACC 350 Week 3 Quiz 2 Chapter 2 – Strayer

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Chapter 2

An Introduction to Cost Terms and Purposes

1)

Products, services, departments, and customers may be cost objects.

2)

Costs are accounted for in two basic stages: assignment followed by accumulation.

3)

Actual costs and budgeted costs are two different terms referring to the same thing.

4)

Accountants define a cost as a resource to be sacrificed to achieve a specific objective.

5)

A cost object is always either a product or a service.

6)

A department could be considered a cost object.

7)

The same cost may be direct for one cost object and indirect for another cost object.

8)

Assigning direct costs poses more problems than assigning indirect costs.

9)

Improvements in information-gathering technologies are making it possible to trace more costs as direct.

10)

Misallocated indirect costs may lead to promoting products that are not profitable.

11)

The materiality of the cost is a factor in classifying the cost as a direct or indirect cost.

12)

The cost of a customized machine only used in the production of a single product would be classified as a direct cost.

13)

Some fixed costs may be classified as direct manufacturing costs.

14)

The distinction between direct and indirect costs is clearly set forth in Generally Accepted Accounting Principles (GAAP).

15)

Fixed costs have no cost driver in the short run, but may have a cost driver in the long run.

16)

Costs that are difficult to change over the short run are always variable over the long run.

17)

A decision maker cannot adjust capacity over the short run.

18)

Fixed costs vary with the level of production or sales volume.

19)

Currently, most administrative personnel costs would be classified as fixed costs.

20)

Fixed costs depend on the resources used, not the resources acquired.

21)

The variable cost per unit of a product should stay the same throughout the relevant range of production.

22)

An appropriate cost driver for shipping costs might be the number of units shipped.
23)

When making decisions using fixed costs, the focus should be on total costs and not unit costs.

24)

When 50,000 units are produced the fixed cost is $10 per unit. Therefore, when 100,000 units are produced fixed costs will remain at $10 per unit.

25)

A unit cost is computed by dividing total cost by the number of units.

26)

Unit costs and average costs are really the same thing.

27)

Service-sector companies provide services or intangible products to their customers.

28)

America on Line (AOL) would be an example of a merchandising company.

29)

Merchandising companies purchase products and sell them to customers without changing their basic form.

30)

Merchandising companies only hold two types of inventories: merchandise inventory, and direct material.

31)

Manufacturing sector firms normally hold three types of inventory: direct materials inventory, work-in-process inventory, and finished goods inventory.

32)

Work-in-process inventory are goods partially worked on but not yet completed.

33)

Direct material costs are the acquisition costs of all materials that eventually become part of the cost object and cannot be traced to the cost object in an economically feasible way.
34)

Acquisition costs of direct materials include freight-in charges, sales taxes, and custom duties.

35)

Indirect manufacturing costs include the compensation of all manufacturing labor that can be traced to the cost object in an economically feasible way.

36)

Direct manufacturing labor includes wages and fringe benefits paid to machine operators.

37)

Inventoriable costs are reported as an asset when incurred and expensed on the income statement when the product is sold.

38)

Cost of goods sold refers to the products brought to completion, whether they were started before or during the current accounting period.

39)

Operating income is sales revenue minus cost of goods manufactured.

40)

All manufacturing costs are inventoriable costs.

41)

All costs reported on the income statement of a service-sector company are period costs.

42)

Period costs are never included as part of inventory.

43)

Conversion costs include all direct manufacturing costs.

44)

Inventory of a manufacturing firm includes goods partially worked on but not yet fully completed.
45)

The wages of a plant supervisor would be classified as a period cost.

46)

For external reporting, GAAP requires that costs be classified as either variable or fixed.

47)

Depreciation can be classified as either an inventoriable cost or a period cost, depending on what is being depreciated.

48)

Insurance on a factory can be classified as a period cost.

49)

Overtime premium consists of the wages paid to all workers (for both direct labor and indirect labor) in excess of their straight-time wage rates.

50)

A product cost that is useful for one decision may not be useful information for another decision.

51)

For external reporting purposes, indirect manufacturing costs must be allocated to individual units.

52)

Overtime premium is normally considered as a component of direct labor.

53)

If a worker is paid for 8 hours, but is idle for 1 of those 8 hours, the 1 hour of idle time would be considered a component of direct labor.

54)

The role of the cost accountant is to tailor the cost calculation to fit the current decision situation.

55)

Cost accounting and cost management include calculating various costs, obtaining financial and nonfinancial information, and analyzing relevant information for decision making.

56)

A costing system traces direct costs and allocates indirect costs to products.

57)

Management accountants help managers identify which information is relevant to a particular decision.

58)

When making strategic decisions about which products to produce, managers do not need to know how revenues and costs vary with changes in output level.

59)

Cost objects include:
A)

products
B)

customers
C)

departments
D)

All of these answers are correct.

60)

Actual costs are:
A)

the costs incurred
B)

budgeted costs
C)

estimated costs
D)

forecasted costs

61)

The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is:
A)

cost accumulation
B)

cost assignment
C)

cost tracing
D)

conversion costing

62)

In order to make decisions, managers need to know:
A)

actual costs
B)

budgeted costs
C)

both costs
D)

neither cost

63)

The collection of accounting data in some organized way is:
A)

cost accumulation
B)

cost assignment
C)

cost tracing
D)

conversion costing

64)

Budgeted costs are:
A)

the costs incurred this year
B)

the costs incurred last year
C)

planned or forecasted costs
D)

competitor’s costs

65)

Cost assignment is:
A)

always arbitrary
B)

includes tracing and allocating
C)

the same as cost accumulation
D)

finding the difference between budgeted and actual costs

66)

A cost system determines the cost of a cost object by:
A)

accumulating and then assigning costs
B)

accumulating costs
C)

assigning and then accumulating costs
D)

assigning costs

67)

Which of the following does NOT affect the direct/indirect classification of a cost?
A)

the level of budgeted profit for the next year
B)

the materiality of the cost in question
C)

available technology to gather information about the cost
D)

the design of the operation

68)

Which of the following statements about the direct/indirect cost classification is NOT true?
A)

Direct costs are always traced.
B)

Direct costs are always allocated.
C)

The design of operations affects the direct/indirect classification.
D)

The direct/indirect classification depends on the choice of cost object.

69)

Cost tracing is:
A)

the assignment of direct costs to the chosen cost object
B)

a function of cost allocation
C)

the process of tracking both direct and indirect costs associated with a cost object
D)

the process of determining the actual cost of the cost object

70)

Cost allocation is:
A)

the process of tracking both direct and indirect costs associated with a cost object
B)

the process of determining the actual cost of the cost object
C)

the assignment of indirect costs to the chosen cost object
D)

a function of cost tracing

71)

The determination of a cost as either direct or indirect depends upon the:
A)

accounting system
B)

allocation system
C)

cost tracing system
D)

cost object chosen

72)

Classifying a cost as either direct or indirect depends upon:
A)

the behavior of the cost in response to volume changes
B)

whether the cost is expensed in the period in which it is incurred
C)

whether the cost can be easily identified with the cost object
D)

whether an expenditure is avoidable or not in the future

73)

A manufacturing plant produces two product lines: football equipment and hockey equipment. Direct costs for the football equipment line are the:
A)

beverages provided daily in the plant break room
B)

monthly lease payments for a specialized piece of equipment needed to manufacture the football helmet
C)

salaries of the clerical staff that work in the company administrative offices
D)

utilities paid for the manufacturing plant

74)

A manufacturing plant produces two product lines: football equipment and hockey equipment. An indirect cost for the hockey equipment line is the:
A)

material used to make the hockey sticks
B)

labor to bind the shaft to the blade of the hockey stick
C)

shift supervisor for the hockey line
D)

plant supervisor

75)

Which one of the following items is a direct cost?
A)

Customer-service costs of a multiproduct firm; Product A is the cost object.
B)

Printing costs incurred for payroll check processing; payroll check processing is the cost object.
C)

The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object.
D)

Utility costs of the administrative offices; the accounting department is the cost object.

76)

Indirect manufacturing costs:
A)

can be traced to the product that created the costs
B)

can be easily identified with the cost object
C)

generally include the cost of material and the cost of labor
D)

may include both variable and fixed costs

77)

All of the following are true EXCEPT that indirect costs:
A)

may be included in prime costs
B)

are not easily traced to products or services
C)

vary with the selection of the cost object
D)

may be included in manufacturing overhead

78)

Which statement is TRUE?
A)

All variable costs are direct costs.
B)

Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs.
C)

All fixed costs are indirect costs.
D)

All direct costs are variable costs.

79)

A mixed cost is:
A)

a fixed cost
B)

a cost with fixed and variable elements
C)

a variable cost
D)

always an indirect cost

80)

Which of the following is a mixed cost?
A)

monthly rent payment
B)

manager’s salary
C)

monthly telephone bill
D)

direct materials

81)

Which statement is TRUE?
A)

A direct cost of one cost object cannot be an indirect cost of another cost object.
B)

All variable costs are direct costs.
C)

A direct cost of one cost object can be an indirect cost of another cost object.
D)

All fixed costs are direct costs.

82)

Cost behavior refers to:
A)

how costs react to a change in the level of activity
B)

whether a cost is incurred in a manufacturing, merchandising, or service company
C)

classifying costs as either inventoriable or period costs
D)

whether a particular expense has been ethically incurred

83)

An understanding of the underlying behavior of costs helps in all of the following EXCEPT:
A)

costs can be better estimated as volume expands and contracts
B)

true costs can be better evaluated
C)

process inefficiencies can be better identified and as a result improved
D)

sales volume can be better estimated

84)

At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually:
A)

are considered a variable cost
B)

are considered a fixed cost
C)

depend on the scheduling of floor workers
D)

depend on the scheduling of production runs

85)

Variable costs:
A)

are always indirect costs
B)

increase in total when the actual level of activity increases
C)

include most personnel costs and depreciation on machinery
D)

can always be traced directly to the cost object

86)

Fixed costs:
A)

may include either direct or indirect costs
B)

vary with production or sales volumes
C)

include parts and materials used to manufacture a product
D)

can be adjusted in the short run to meet actual demands

87)

Fixed costs depend on the:
A)

amount of resources used
B)

amount of resources acquired
C)

volume of production
D)

volume of sales

88)

Which one of the following is a variable cost for an insurance company?
A)

rent
B)

president’s salary
C)

sales commissions
D)

property taxes

89)

Which of the following is a fixed cost for an automobile manufacturing plant?
A)

administrative salaries
B)

electricity used by assembly-line machines
C)

sales commissions
D)

windows for each car produced

90)

If each furnace requires a hose that costs $20 and 2,000 furnaces are produced for the month, the total cost for hoses is:
A)

considered to be a direct fixed cost
B)

considered to be a direct variable cost
C)

considered to be an indirect fixed cost
D)

considered to be an indirect variable cost

91)

The MOST likely cost driver of distribution costs is the:
A)

number of parts within the product
B)

number of miles driven
C)

number of products manufactured
D)

number of production hours

92)

The MOST likely cost driver of direct material costs is the:
A)

number of parts within the product
B)

number of miles driven
C)

number of products manufactured
D)

number of production hours

93)

Which of the following statements is FALSE?
A)

There is a cause-and-effect relationship between the cost driver and the level of activity.
B)

Fixed costs have cost drivers over the short run.
C)

Over the long run all costs have cost drivers.
D)

Volume of production is a cost driver of direct manufacturing costs.

94)

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the:
A)

average range
B)

cost-allocation range
C)

cost driver range
D)

relevant range

95)

Within the relevant range, if there is a change in the level of the cost driver, then:
A)

total fixed costs and total variable costs will change
B)

total fixed costs and total variable costs will remain the same
C)

total fixed costs will remain the same and total variable costs will change
D)

total fixed costs will change and total variable costs will remain the same

96)

Within the relevant range, if there is a change in the level of the cost driver, then:
A)

fixed and variable costs per unit will change
B)

fixed and variable costs per unit will remain the same
C)

fixed costs per unit will remain the same and variable costs per unit will change
D)

fixed costs per unit will change and variable costs per unit will remain the same

97)

Which of the following would be LEAST likely to be a cost driver for a company’s accounting costs?
A)

the number of employees in the accounting department
B)

the number of invoices processed
C)

the number of units sold
D)

the square footage of the office space used by the accounting department

98)

A unit cost is computed by:
A)

multiplying total cost by the number of units
B)

dividing total cost by the number of units
C)

dividing variable cost by the number of units
D)

adding variable cost to fixed cost

99)

In making product mix and pricing decisions, managers should focus on:
A)

total costs
B)

unit costs
C)

variable costs
D)

fixed costs

100)

When 10,000 units are produced, fixed costs are $14 per unit. Therefore, when 20,000 units are produced fixed costs will:
A)

increase to $28 per unit
B)

remain at $14 per unit
C)

decrease to $7 per unit
D)

total $280,000

101)

When 10,000 units are produced, variable costs are $6 per unit. Therefore, when 20,000 units are produced:
A)

variable costs will total $120,000
B)

variable costs will total $60,000
C)

variable unit costs will increase to $12 per unit
D)

variable unit costs will decrease to $3 per unit

102)

Christi Manufacturing provided the following information for last month:

Sales $10,000
Variable costs 3,000
Fixed costs 5,000
Operating income $2,000

If sales double next month, what is the projected operating income?
A)

$4,000
B)

$7,000
C)

$9,000
D)

$12,000

103)

Kym Manufacturing provided the following information for last month:

Sales $12,000
Variable costs 4,000
Fixed costs 1,000
Operating income $7,000

If sales double next month, what is the projected operating income?
A)

$14,000
B)

$15,000
C)

$18,000
D)

$19,000

104)

Wheel and Tire Manufacturing currently produces 1,000 tires per month. The following per unit data apply for sales to regular customers:

Direct materials $20
Direct manufacturing labor 3
Variable manufacturing overhead 6
Fixed manufacturing overhead 10
Total manufacturing costs $39

The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires?
A)

$39,000
B)

$78,000
C)

$68,000
D)

$62,000

105)

XIAN Manufacturing produces a unique valve, and has the capacity to produce 50,000 valves annually. Currently XIAN produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change?
A)

Total manufacturing costs will increase and unit manufacturing costs will stay the same.
B)

Total manufacturing costs will increase and unit manufacturing costs will decrease.
C)

Total manufacturing costs will stay the same and unit manufacturing costs will stay the same.
D)

Total manufacturing costs will stay the same and unit manufacturing costs will decrease.

106)

Tire and Spoke Manufacturing currently produces 1,000 bicycles per month. The following per unit data apply for sales to regular customers:

Direct materials $50
Direct manufacturing labor 5
Variable manufacturing overhead 14
Fixed manufacturing overhead 10
Total manufacturing costs $79

The plant has capacity for 3,000 bicycles and is considering expanding production to 2,000 bicycles. What is the per unit cost of producing 2,000 bicycles?
A)

$79 per unit
B)

$158 per unit
C)

$74 per unit
D)

$134 per unit

107)

The plant has capacity for 2,000 axles and is considering expanding production to 1,500 axles. What is the total cost of producing 1,500 axles?
A)

$85,000
B)

$170,000
C)

$107,500
D)

$102,500

108)

What is the per unit cost when producing 1,500 axles?
A)

$71.67
B)

$107.50
C)

$85.00
D)

$170.00

109)

What is the average manufacturing cost per unit?
A)

$40.00
B)

$42.55
C)

$0.025
D)

$75.00

110)

What is the amount of ending finished goods inventory?
A)

$1,880,000
B)

$120,000
C)

$225,000
D)

$105,000

111)

________ – sector companies purchase materials and components and convert them into finished goods.
A)

Merchandising
B)

Service
C)

Manufacturing
D)

Professional

112)

________ – sector companies purchase and then sell tangible products without changing their basic form.
A)

Merchandising
B)

Professional
C)

Service
D)

Manufacturing

113)

________ – sector companies provide intangible products.
A)

Professional
B)

Manufacturing
C)

Merchandising
D)

Service

114)

What is the amount of gross margin?
A)

$1,750,000
B)

$3,525,000
C)

$5,405,000
D)

$1,645,000

115)

What is the average manufacturing cost per unit?
A)

$50.00
B)

$50.85
C)

$17.65
D)

$85.00

116)

What is the amount of ending finished goods inventory?
A)

$42,500
B)

$25,424
C)

$25,000
D)

$1,475,000

117)

What is the amount of gross margin?
A)

$1,475,000
B)

$1,500,000
C)

$2,507,500
D)

$1,032,500

118)

Which of the following companies is part of the service sector of our economy?
A)

Wal-Mart
B)

Bank of America
C)

General Motors
D)

Amazon.com

119)

Which of the following companies is part of the merchandising sector of our economy?
A)

General Motors
B)

Intel
C)

The GAP
D)

Robert Meyer Accounting Firm

120)

Which of the following companies is part of the manufacturing sector of our economy?
A)

Nike
B)

Barnes & Noble
C)

Corvette Law Firm
D)

Sears, Roebuck, and Company

121)

Google, an internet search firm, would be classified as:
A)

a manufacturing-sector company
B)

a merchandising-sector company
C)

a service sector company
D)

None of these answers are correct.

122)

Service-sector companies report:
A)

only merchandise inventory
B)

only finished goods inventory
C)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts
D)

no inventory accounts

123)

Manufacturing-sector companies report:
A)

only merchandise inventory
B)

only finished goods inventory
C)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts
D)

no inventory accounts

124)

For a manufacturing company, direct material costs may be included in:
A)

direct materials inventory only
B)

merchandise inventory only
C)

both work-in-process inventory and finished goods inventory
D)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts

125)

For a manufacturing company, direct labor costs may be included in:
A)

direct materials inventory only
B)

merchandise inventory only
C)

both work-in-process inventory and finished goods inventory
D)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts

126)

For a manufacturing company, indirect manufacturing costs may be included in:
A)

direct materials inventory only
B)

merchandise inventory only
C)

both work-in-process inventory and finished goods inventory
D)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts

127)

For a manufacturing-sector company, the cost of factory insurance is classified as a:
A)

direct material cost
B)

direct manufacturing labor cost
C)

manufacturing overhead cost
D)

period cost

128)

For a printing company, the cost of paper is classified as a:
A)

direct material cost
B)

direct manufacturing labor cost
C)

manufacturing overhead cost
D)

period cost

129)

Wages paid to machine operators on an assembly line are classified as a:
A)

direct material cost
B)

direct manufacturing labor cost
C)

manufacturing overhead cost
D)

period cost

130)

Manufacturing overhead costs in an automobile manufacturing plant MOST likely include:
A)

labor costs of the painting department
B)

indirect material costs such as lubricants
C)

sales commissions
D)

steering wheel costs

131)

Manufacturing overhead costs are also referred to as:
A)

indirect manufacturing costs
B)

prime costs
C)

period costs
D)

direct material

132)

Merchandising companies normally report:
A)

only merchandise inventory
B)

only finished goods inventory
C)

direct materials inventory, work-in-process inventory, and finished goods inventory accounts
D)

no inventory accounts

133)

Direct materials inventory would normally include:
A)

direct materials in stock and awaiting use in the manufacturing process
B)

goods partially worked on but not yet fully completed
C)

goods fully completed but not yet sold
D)

products in their original form intended to be sold without changing their basic form

134)

Work-in-process inventory would normally include:
A)

direct materials in stock and awaiting use in the manufacturing process
B)

goods partially worked on but not yet fully completed
C)

goods fully completed but not yet sold
D)

products in their original form intended to be sold without changing their basic form

135)

Finished goods inventory would normally include:
A)

direct materials in stock and awaiting use in the manufacturing process
B)

goods partially worked on but not yet fully completed
C)

goods fully completed but not yet sold
D)

products in their original form intended to be sold without changing their basic form

136)

Merchandise inventory would normally include:
A)

direct materials in stock and awaiting use in the manufacturing process
B)

goods partially worked on but not yet fully completed
C)

goods fully completed but not yet sold
D)

products in their original form intended to be sold without changing their basic form

137)

________ are the acquisition costs of all materials that eventually become part of the cost object and can be traced to the cost object.
A)

Direct manufacturing labor costs
B)

Direct material costs
C)

Indirect manufacturing costs
D)

Manufacturing overhead costs

138)

________ include the compensation of all manufacturing labor that can be traced to the cost object.
A)

Direct manufacturing labor costs
B)

Indirect manufacturing costs
C)

Direct material costs
D)

Manufacturing overhead costs

139)

________ are all manufacturing costs that are related to the cost object but cannot be traced to that cost object.
A)

Direct material costs
B)

Period costs
C)

Indirect manufacturing costs
D)

Direct manufacturing labor costs

140)

The income statement of a manufacturing firm reports:
A)

period costs only
B)

inventoriable costs only
C)

both period and inventoriable costs
D)

period and inventoriable costs but at different times; the reporting varies

141)

The income statement of a service-sector firm reports:
A)

period costs only
B)

inventoriable costs only
C)

both period and inventoriable costs
D)

period and inventoriable costs but at different times; the reporting varies

142)

Manufacturing costs include all of the following EXCEPT:
A)

costs incurred inside the factory
B)

both direct and indirect costs
C)

both variable and fixed costs
D)

both inventoriable and period costs

143)

Inventoriable costs:
A)

include administrative and marketing costs
B)

are expensed in the accounting period in which the products are sold
C)

are particularly useful in management accounting
D)

are also referred to as nonmanufacturing costs
144)

Inventoriable costs are expensed on the income statement:
A)

when direct materials for the product are purchased
B)

after the products are manufactured
C)

when the products are sold
D)

not at any particular time, it varies

145)

Costs that are initially recorded as assets and expensed when sold are called:
A)

period costs
B)

inventoriable costs
C)

variable costs
D)

fixed costs

146)

For merchandising companies, inventoriable costs include:
A)

the cost of the goods themselves
B)

incoming freight costs
C)

insurance costs for the goods
D)

All of these answers are correct.

147)

For manufacturing firms, inventoriable costs include:
A)

plant supervisor salaries
B)

research and development costs
C)

costs of dealing with customers after the sale
D)

distribution costs

148)

A plant manufactures several different products. The wages of the plant supervisor can be classified as a(n):
A)

direct cost
B)

inventoriable cost
C)

variable cost
D)

period cost

149)

The cost of inventory reported on the balance sheet may include all of the following EXCEPT:
A)

customer-service costs
B)

wages of the plant supervisor
C)

depreciation of the factory equipment
D)

the cost of parts used in the manufacturing process

150)

For a computer manufacturer, period costs include the cost of:
A)

the keyboard
B)

labor used for assembly and packaging
C)

distribution
D)

assembly-line equipment

151)

Period costs:
A)

include only fixed costs
B)

seldom influence financial success or failure
C)

include the cost of selling, delivering, and after-sales support for customers
D)

should be treated as an indirect cost rather than as a direct manufacturing cost

152)

Period costs:
A)

are treated as expenses in the period they are incurred
B)

are directly traceable to products
C)

include direct labor
D)

are also referred to as manufacturing overhead costs

153)

Which of the following is NOT a period cost?
A)

marketing costs
B)

general and administrative costs
C)

research and development costs
D)

manufacturing costs

154)

Costs expensed on the income statement in the accounting period incurred are called:
A)

direct costs
B)

indirect costs
C)

period costs
D)

inventoriable costs

155)

Prime costs include:
A)

direct materials and direct manufacturing labor costs
B)

direct manufacturing labor and manufacturing overhead costs
C)

direct materials and manufacturing overhead costs
D)

only direct materials

156)

Conversion costs include:
A)

direct materials and direct manufacturing labor costs
B)

direct manufacturing labor and manufacturing overhead costs
C)

direct materials and manufacturing overhead costs
D)

only direct materials

157)

Total manufacturing costs equal:
A)

direct materials + prime costs
B)

direct materials + conversion costs
C)

direct manufacturing labor costs + prime costs
D)

direct manufacturing labor costs + conversion costs

158)

In the cost classification system used by manufacturing firms, assembly workers’ wages would be included in all of the following EXCEPT:
A)

product cost
B)

prime cost
C)

conversion cost
D)

period cost

159)

In the cost classification system used by manufacturing firms, total manufacturing costs would include all of the following EXCEPT:
A)

direct materials costs and conversion costs
B)

direct materials costs, direct manufacturing labor costs, and manufacturing overhead costs
C)

indirect materials costs, indirect manufacturing labor costs, and manufacturing overhead costs
D)

prime costs and manufacturing overhead costs

160)

Manufacturing overhead costs may include all of the following EXCEPT:
A)

salaries of the plant janitorial staff
B)

labor that can be traced to individual products
C)

wages paid for unproductive time due to machine breakdowns
D)

overtime premiums paid to plant workers

161)

Which of the following formulas determine cost of goods sold in a merchandising entity?
A)

Beginning inventory + Purchases + Ending inventory = Cost of goods sold
B)

Beginning inventory + Purchases – Ending inventory = Costs of goods sold
C)

Beginning inventory – Purchases + Ending inventory = Cost of goods sold
D)

Beginning inventory – Ending inventory – Purchases = Cost of goods sold

162)

Which of the following formulas determine cost of goods sold in a manufacturing entity?
A)

Beginning work-in-process inventory + Cost of goods manufactured – Ending work-in-process inventory = Cost of goods sold
B)

Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process inventory = Cost of goods sold
C)

Cost of goods manufactured – Beginning finished goods inventory – Ending finished goods inventory = Cost of goods sold
D)

Cost of goods manufactured + Beginning finished goods inventory – Ending finished goods inventory = Cost of goods sold

163)

Product cost for pricing and product-mix decisions may include all costs EXCEPT:
A)

research and development costs
B)

customer-service costs
C)

marketing costs
D)

design costs
E)

All of the above may be included

164)

Product cost for reimbursement under government contracts may include all costs EXCEPT:
A)

marketing costs
B)

design costs
C)

production costs
D)

research and development costs

165)

Product cost for financial statement purposes may include:
A)

all costs allowed by government agencies
B)

all costs included for pricing and product-mix decisions
C)

production costs
D)

all costs except marketing costs

166)

The following information pertains to the Cannady Corporation:

Beginning work-in-process inventory $ 50,000
Ending work-in-process inventory 48,000
Beginning finished goods inventory 180,000
Ending finished goods inventory 195,000
Cost of goods manufactured 1,220,000

What is cost of goods sold?
A)

$1,235,000
B)

$1,205,000
C)

$1,218,000
D)

$1,222,000

167)

The following information pertains to the Duggan Corporation:

Beginning work-in-process inventory $ 20,000
Ending work-in-process inventory 23,000
Beginning finished goods inventory 36,000
Ending finished goods inventory 34,000
Cost of goods manufactured 246,000

What is cost of goods sold?
A)

$244,000
B)

$248,000
C)

$243,000
D)

$249,000

168)

What is cost of goods manufactured for 20X3?
A)

$230,000
B)

$257,000
C)

$283,000
D)

$355,000

169)

What is gross margin for 20X3?
A)

$283,000
B)

$355,000
C)

$230,000
D)

$257,000

170)

What is operating income for 20X3?
A)

$85,000
B)

$112,000
C)

$62,000
D)

$230,000

171)

What is cost of goods manufactured for 20X5?
A)

$257,000
B)

$350,000
C)

$243,000
D)

$250,000

172)

What is gross margin for 20X5?
A)

$243,000
B)

$527,000
C)

$357,000
D)

$350,000

173)

What is operating income for 20X5?
A)

$230,000
B)

$123,000
C)

$107,000
D)

$157,000

174)

What are the variable costs per unit associated with Product ICT101?
A)

$18
B)

$22
C)

$88
D)

$92

175)

What are the fixed costs per unit associated with Product ICT101?
A)

$102
B)

$48
C)

$52
D)

$32

176)

What are the inventoriable costs per unit associated with Product ICT101?
A)

$120
B)

$140
C)

$50
D)

$88

177)

What are the period costs per unit associated with Product ICT101?
A)

$4
B)

$16
C)

$20
D)

$52

178)

What are the variable costs per unit associated with Product ORD203?
A)

$60
B)

$83
C)

$66
D)

$48

179)

What are the fixed costs per unit associated with Product ORD203?
A)

$23
B)

$32
C)

$35
D)

$44

180)

What are the inventoriable costs per unit associated with Product ORD203?
A)

$60
B)

$66
C)

$48
D)

$83

181)

What are the period costs per unit associated with Product ORD203?
A)

$15
B)

$6
C)

$9
D)

$27

182)

For last year, Wampum Enterprises reported revenues of $420,000, cost of goods sold of $108,000, cost of goods manufactured of $101,000, and total operating costs of $70,000. Operating income for that year was:
A)

$319,000
B)

$312,000
C)

$249,000
D)

$242,000

183)

For last year, Wampum Enterprises reported revenues of $420,000, cost of goods sold of $108,000, cost of goods manufactured of $101,000, and total operating costs of $70,000. Gross margin for last year was:
A)

$319,000
B)

$312,000
C)

$249,000
D)

$242,000

184)

For last year, Lewisburn Manufacturing reported the following:

Revenue $420,000
Beginning inventory of direct materials, January 1 22,000
Purchases of direct materials 146,000
Ending inventory of direct materials, December 31 16,000
Direct manufacturing labor 18,000
Indirect manufacturing costs 40,000
Beginning inventory of finished goods, January 1 35,000
Cost of goods manufactured 104,000
Ending inventory of finished goods, December 31 36,000
Operating costs 140,000

What was Lewisburn’s cost of goods sold?
A)

$103,000
B)

$152,000
C)

$268,000
D)

$317,000

185)

For last year, Lewisburn Manufacturing reported the following:

Revenue $420,000
Beginning inventory of direct materials, January 1 22,000
Purchases of direct materials 146,000
Ending inventory of direct materials, December 31 16,000
Direct manufacturing labor 18,000
Indirect manufacturing costs 40,000
Beginning inventory of finished goods, January 1 35,000
Cost of goods manufactured 104,000
Ending inventory of finished goods, December 31 36,000
Operating costs 140,000

What was Lewisburn’s gross margin (or gross profit)?
A)

$103,000
B)

$152,000
C)

$268,000
D)

$317,000

186)

For last year, Lewisburn Manufacturing reported the following:

Revenue $420,000
Beginning inventory of direct materials, January 1 22,000
Purchases of direct materials 146,000
Ending inventory of direct materials, December 31 16,000
Direct manufacturing labor 18,000
Indirect manufacturing costs 40,000
Beginning inventory of finished goods, January 1 35,000
Cost of goods manufactured 104,000
Ending inventory of finished goods, December 31 36,000
Operating costs 140,000

What was Lewisburn’s operating income?
A)

$76,000
B)

$128,000
C)

$177,000
D)

$280,000

187)

For last year, Lewisburn Manufacturing reported the following:

Revenue $420,000
Beginning inventory of direct materials, January 1 22,000
Purchases of direct materials 146,000
Ending inventory of direct materials, December 31 16,000
Direct manufacturing labor 18,000
Indirect manufacturing costs 40,000
Beginning inventory of finished goods, January 1 35,000
Cost of goods manufactured 104,000
Ending inventory of finished goods, December 31 36,000
Operating costs 140,000

How much of the above would be considered period costs for Lewisburn Manufacturing?
A)

$104,000
B)

$140,000
C)

$246,000
D)

$390,000

188)

Product costs may refer to:
A)

inventoriable costs for external reporting
B)

design costs plus manufacturing costs for government contracts
C)

all costs incurred along the value chain for pricing decisions
D)

All of these answers are correct.

189)

Product costs used for pricing and product-mix decisions generally include:
A)

manufacturing costs only
B)

design costs plus manufacturing costs
C)

all costs incurred along the value chain
D)

distribution costs only

190)

Product costs used for government contracts generally include:
A)

manufacturing costs only
B)

design costs plus manufacturing costs
C)

all costs incurred along the value chain
D)

distribution costs only

191)

Product costs used for external reporting generally include:
A)

manufacturing costs only
B)

design costs plus manufacturing costs
C)

all costs incurred along the value chain
D)

All of these answers are correct.

192)

Inventoriable costs for external reporting purposes are also called:
A)

product costs
B)

period costs
C)

variable costs
D)

direct manufacturing costs

193)

For external reporting:
A)

costs are classified as either inventoriable or period costs
B)

costs reflect current values
C)

there are no prescribed rules since no one is exactly sure how investors and creditors will use these numbers
D)

costs include amounts that reflect both current and future benefits

194)

Which of the following statements is FALSE?
A)

Product costs and inventoriable costs are interchangeable terms.
B)

Inventoriable costs are important for GAAP.
C)

Inventoriable costs are a special case of product costs.
D)

“Product costs” refers to the particular costs of a product for the purpose at hand.

195)

Debated items that some companies include as direct manufacturing labor include:
A)

fringe benefits
B)

vacation pay
C)

training time
D)

All of these answers are correct.

196)

Brenda Hicks is paid $10 an hour for straight-time and $15 an hour for overtime. One week she worked 42 hours, which included 2 hours of overtime. Compensation would be reported as:
A)

$400 of direct labor and $30 of manufacturing overhead
B)

$400 of direct labor and $0 of manufacturing overhead
C)

$420 of direct labor and $10 of manufacturing overhead
D)

$430 of direct labor and $0 of manufacturing overhead

197)

Rodney Worsham is paid $10 an hour for straight-time and $15 an hour for overtime. One week he worked 45 hours, which included 5 hours of overtime, and 3 hours of idle time caused by material shortages. Compensation would be reported as:
A)

$370 of direct labor and $105 of manufacturing overhead
B)

$420 of direct labor and $55 of manufacturing overhead
C)

$450 of direct labor and $25 of manufacturing overhead
D)

$445 of direct labor and $30 of manufacturing overhead

198)

Joseph Davis worked 44 hours last week for Breakgood Manufacturing. Of the 44 hours 4 hours were considered overtime, and also Davis was idle for 5 of the 44 hours due to an equipment malfunction. Davis makes $20 per hour and is paid $30 an hour (time and a half) for overtime. Davis’ total compensation for that week would be ________, and assuming Breakgood charges overtime premium and idle time to indirect labor, the amount of this compensation credited to indirect labor would be ________.
A)

$840; $40
B)

$840; $140
C)

$920; $40
D)

$920; $140

199)

When making decisions:
A)

it is best to use average costs
B)

it is best to use unit costs
C)

it is best to use total costs rather than unit costs
D)

All of these types of costs can be used for decision making; it varies depending on the decision required.

200)

Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are:

Cost object #1: The physical buildings and equipment
Cost object #2: The use of buildings and equipment
Cost object #3: The availability and use of manufacturing labor

The following manufacturing overhead cost categories are found in the accounting records:
a. Depreciation on buildings and equipment
b. Lubricants for machines
c. Property insurance
d. Supervisors’ salaries
e. Fringe benefits
f. Property taxes
g. Utilities

Required:

Assign each of the above costs to the most appropriate cost object.

201)

Archambeau Products Company manufactures office furniture. Recently, the company decided to develop a formal cost accounting system and classify all costs into three categories. Categorize each of the following items as being appropriate for (1) cost tracing to the finished furniture, (2) cost allocation of an indirect manufacturing cost to the finished furniture, or (3) as a nonmanufacturing item.

Cost Cost Nonmanu-
Item Tracing Allocation facturing

Carpenter wages ________ ________ ________
Depreciation – office building ________ ________ ________
Glue for assembly ________ ________ ________
Lathe department supervisor ________ ________ ________
Lathe depreciation ________ ________ ________
Lathe maintenance ________ ________ ________
Lathe operator wages ________ ________ ________
Lumber ________ ________ ________
Samples for trade shows ________ ________ ________
Metal brackets for drawers ________ ________ ________
Factory washroom supplies ________ ________ ________

202)

Butler Hospital wants to estimate the cost for each patient stay. It is a general health care facility offering only basic services and not specialized services such as organ transplants.

Required:

a. Classify each of the following costs as either direct or indirect with respect to each patient.
b. Classify each of the following costs as either fixed or variable with respect to hospital costs per day.

Direct Indirect Fixed Variable

Electronic monitoring ________ ________ ________ ________
Meals for patients ________ ________ ________ ________
Nurses’ salaries ________ ________ ________ ________
Parking maintenance ________ ________ ________ ________
Security ________ ________ ________ ________

203)

Springfield Manufacturing produces electronic storage devices, and uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labor, and indirect manufacturing costs. Total indirect manufacturing costs for January were $300 million, and were allocated to each product on the basis of direct manufacturing labor costs of each line. Summary data (in millions) for January for the most popular electronic storage device, the Big Bertha, was:

Big Bertha
Direct manufacturing costs $9,000,000
Direct manufacturing labor costs $3,000,000
Indirect manufacturing costs $8,500,000
Units produced 40,000

Required:

a. Compute the manufacturing cost per unit for each product produced in January.

b. Suppose production will be reduced to 30,000 units in February. Speculate as to whether the unit costs in February will most likely be higher or lower than unit costs in January; it is not necessary to calculate the exact February unit cost. Briefly explain your reasoning.

204)

Whippany manufacturing wants to estimate costs for each product they produce at its Troy plant. The Troy plant produces three products at this plant, and runs two flexible assembly lines. Each assembly line can produce all three products.

Required:

a. Classify each of the following costs as either direct or indirect for each product.

b. Classify each of the following costs as either fixed or variable with respect to the number of units produced of each product.

Direct Indirect Fixed Variable

Assembly line labor wages ________ ________ ________ ________
Plant manager’s wages ________ ________ ________ ________
Depreciation on the assembly
line equipment ________ ________ ________ ________
Component parts for the product ________ ________ ________ ________
Wages of security personnel for the
factory ________ ________ ________ ________

205)

The list of representative cost drivers in the right column below are randomized with respect to the list of functions in the left column. That is, they do not match.

Function Representative Cost Driver
1. Purchasing A. Number of employees
2. Billing B. Number of shipments
3. Shipping C. Number of customers
4. Computer Support D. Number of invoices
5. Personnel E. Number of desktop computers
6. Customer Service F. Number of purchase orders

Required:

Match each business function with its representative cost driver.

Function Insert letter of appropriate driver (A through F)
1. Purchasing
2. Billing
3. Shipping
4. Computer Support
5. Personnel
6. Customer Service

206)

Combs, Inc., reports the following information for September sales:

Sales $15,000
Variable costs 3,000
Fixed costs 4,000
Operating income $ 8,000

Required:

If sales double in October, what is the projected operating income?

207)

Axle and Wheel Manufacturing currently produces 1,000 axles per month. The following per unit data apply for sales to regular customers:

Direct materials $200
Direct manufacturing labor 30
Variable manufacturing overhead 60
Fixed manufacturing overhead 40
Total manufacturing costs $330

The plant has capacity for 2,000 axles.

Required:

a. What is the total cost of producing 1,000 axles?
b. What is the total cost of producing 1,500 axles?
c. What is the per unit cost when producing 1,500 axles?

208)

The following information pertains to Ball Company:

Manufacturing costs $2,400,000
Units manufactured 40,000
Beginning inventory 0 units

39,800 units are sold during the year for $100 per unit.

Required:

a. What is the average manufacturing cost per unit?
b. What is the amount of ending finished goods inventory?
c. What is the amount of gross margin?

209)

During 2009, Favata Corporation incurred manufacturing expenses of $20,000,000 to produce 400,000 finished units. At year-end, it was determined that 370,000 units were sold while 30,000 units remained in ending inventory.

Required:

a. What is the cost of producing one unit?
b. What is the amount that will be reported on the income statement for cost of goods sold?
c. What is the amount that will be reported on the balance sheet for ending inventory?

210)

Evans Inc., had the following activities during 20X5:

Direct materials:
Beginning inventory $ 40,000
Purchases 123,200
Ending inventory 20,800
Direct manufacturing labor 32,000
Manufacturing overhead 24,000
Beginning work-in-process inventory 1,600
Ending work-in-process inventory 8,000
Beginning finished goods inventory 48,000
Ending finished goods inventory 32,000

Required:

a. What is the cost of direct materials used during 20X5?
b. What is cost of goods manufactured for 20X5?
c. What is cost of goods sold for 20X5?
d. What amount of prime costs was added to production during 20X5?
e. What amount of conversion costs was added to production during 20X5?

211)

Helmer Sporting Goods Company manufactured 100,000 units in 20X5 and reported the following costs:

Sandpaper $ 32,000 Leasing costs-plant $ 384,000
Materials handling 320,000 Depreciation-equipment 224,000
Coolants & lubricants 22,400 Property taxes-equipment 32,000
Indirect manufacturing labor 275,200 Fire insurance-equipment 16,000
Direct manufacturing labor 2,176,000 Direct material purchases 3,136,000
Direct materials, 1/1/X5 384,000 Direct materials, 12/31/X5 275,200
Finished goods, 1/1/X5 672,000 Sales revenue 12,800,000
Finished goods, 12/31/X5 1,280,000 Sales commissions 640,000
Work-in-process, 1/1/X5 96,000 Sales salaries 576,000
Work-in-process, 12/31/X5 64,000 Advertising costs 480,000
Administration costs 800,000

Required:

a. What is the amount of direct materials used during 20X5?
b. What manufacturing costs were added to WIP during 20X5?
c. What is cost of goods manufactured for 20X5?
d. What is cost of goods sold for 20X5?

212)

Messinger Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted:

Work-in-process inventory (January 1) $ 140,400
Work-in-process inventory (March 31) 171,000
Finished goods inventory (January 1) 540,000
Finished goods inventory (March 31) 510,000
Direct materials used 378,000
Indirect materials used 84,000
Direct manufacturing labor 480,000
Indirect manufacturing labor 186,000
Property taxes on manufacturing plant building 28,800
Salespersons’ company vehicle costs 12,000
Depreciation of manufacturing equipment 264,000
Depreciation of office equipment 123,600
Miscellaneous plant overhead 135,000
Plant utilities 92,400
General office expenses 305,400
Marketing distribution costs 30,000

Required:

a. Prepare a cost of goods manufactured schedule for the quarter.
b. Prepare a cost of goods sold schedule for the quarter.

213)

Using the following information find the unknown amounts. Assume each set of information is an independent case.

a. Merchandise Inventory Purchases $420,000
Cost of goods sold 446,000
Beginning balance 82,000
Ending balance ?

b. Direct Materials Beginning balance $ 14,000
Ending balance 28,000
Purchases 96,000
Direct materials used ?

c. Work-in-process Inventory Ending balance $ 44,000
Cost of goods manufactured 42,000
Beginning balance 16,000
Current manufacturing costs ?

d. Finished Goods Inventory Cost of goods manufactured $124,000
Ending balance 40,000
Cost of goods sold 122,000
Beginning balance ?

214)

Each of the following items pertains to one of these companies: Bedell Electronics (a manufacturing company), Gregory Food Retailers (a merchandising company), and Larson Real Estate (a service sector company). Classify each item as either inventoriable (I) costs or period (P) costs.

inventoriable (I) costs or period (P) costs
a. Salary of Bedell Electronics president
b. Depreciation on Bedell Electronics assembly equipment.
c. Salaries of Bedell’s assembly line workers
d. Purchase of frozen food for sale to customers by Gregory Food Retailers
e. Salaries of frozen food personnel at Gregory Food Retailing
f. Depreciation on freezers at Gregory Food Retailing
g. Salary of a receptionist at Larson Real Estate
h. Depreciation on a computer at Larson Real Estate
i. Salary of a real estate agent at Larson Real Estate

215)

On the assembly floor, Cynthia Evans is paid $20 an hour for straight-time and $30 an hour for overtime. One week she worked 43 hours, which included 3 hours of overtime.

Required:

a. What is Cynthia’s total compensation for the week?
b. What amount of compensation would be reported as direct manufacturing labor?
c. What amount of compensation would be reported as manufacturing overhead?

216)

In the manufacturing plant, Leslie Grant is paid $20 an hour for straight-time and $30 an hour for overtime. One week she worked 46 hours, which included 6 hours of overtime, and 4 hours of idle time caused by material shortages.

Required:

a. What is Leslie’s total compensation for the week?
b. What amount of compensation would be reported as direct manufacturing labor?
c. What amount of compensation would be reported as manufacturing overhead?

217)

Bosely Manufacturing Co. wants to classify costs for the product produced at its facility. The company produces only one product at the facility and operates continually. The cost categories are:

Product cost
Prime cost
Conversion cost
Period cost

The following costs are found in the accounting records:

a. Quality control inspection wages
b. Raw material purchases
c. Sales commissions
d. Factory depreciation
e. Assembly wages

Required:

Assign each of the above costs to the most appropriate cost categories.

218)

What is the meaning of the term “cost object”? Give an example of a cost object that would be used in a manufacturing company, a merchandising company, and a service sector company?

219)

Why is it possible that a raw material such as glue might be considered as an indirect material for one furniture manufacturer and as a direct material for another furniture manufacture?

220)

What are the differences between direct costs and indirect costs? Give an example of each.

221)

Describe a variable cost. Describe a fixed cost. Explain why the distinction between variable and fixed costs is important in cost accounting.

222)

Explain the difference between an inventoriable cost and a period cost. What potential problems does an inaccurate classification of product and period costs cause?

223)

When should the overtime premium of direct manufacturing labor be considered an indirect manufacturing cost? A direct manufacturing cost?

224)

In determining product cost, what concerns does a manufacturing firm have when contracting with a government agency?

ACC 206 Week 3 Quiz 2 Chapter 11 – Strayer

ACC 206 Accounting Principles II Week 3 Quiz – Strayer (All Possible Questions With Answers)

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CHAPTER 11

CURRENT LIABILITIES AND PAYROLL ACCOUNTING

CHAPTERSTUDY OBJECTIVES

1. Explain a current liability, and identify the major types of current liabilities.

2. Describe the accounting for notes payable.

3. Explain the accounting for other current liabilities.

4. Explain the financial statement presentation and analysis of current liabilities.

5. Describe the accounting and disclosure requirements for contingent liabilities.

6. Compute and record the payroll for a pay period.

7. Describe and record employer payroll taxes.

8. Discuss the objectives of internal control for payroll.

9. Identify additional fringe benefits associated with employee compensation.

TRUE-FALSESTATEMENTS

1. A current liability must be paid out of current earnings.

2. Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

3. The relationship between current liabilities and current assets is important in evaluating a company’s ability to pay off its long-term debt.

4. A company whose current liabilities exceed its current assets may have a liquidity problem.

5. Notes payable usually require the borrower to pay interest.

6. Notes payable are often used instead of accounts payable.

7. A note payable must always be paid before an account payable.

8. A $30,000, 8%, 9-month note payable requires an interest payment of $1,800 at maturity.

9. Most notes are not interest bearing.

10. With an interest-bearing note, the amount of cash received upon issuance of the note generally exceeds the note’s face value.

11. Interest expense on a note payable is only recorded at maturity.

12. Interest expense is reported under Other Expenses and Losses in the income statement.

13. Unearned revenues should be classified as Other Revenues and Gains on the Income Statement.

14. The higher the sales tax rate, the more profit a retailer can earn.

15. Metropolitan Symphony sells 200 season tickets for $60,000 that includes a five concert season. The amount of Unearned Ticket Revenue after the second concert is $24,000.

16. During the month, a company sells goods for a total of $108,000, which includes sales taxes of $8,000; therefore, the company should recognize $100,000 in Sales Revenues and $8,000 in Sales Tax Expense.

17. Current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

18. The current ratio permits analysts to compare the liquidity of different sized companies.

19. Working capital is current assets divided by current liabilities.

20. Contingent liabilities should be recorded in the accounts if there is a remote possibility that the contingency will actually occur.

21. A contingent liability is a liability that may occur if some future event takes place.

22. In concept, the estimating of Warranty Expense when products are sold under warranty is similar to the estimating of Bad Debts Expense based on credit sales.

23. FICA taxes and federal income taxes are levied on employees’ earnings without limit.

24. FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.

25. The employer incurs a payroll tax expense equal to the amount withheld from the employees’ wages for federal income taxes.

26. Internal control over payroll is not necessary because employees will complain if they do not receive the correct amount on their payroll checks.

27. The timekeeping function includes supervisors monitoring hours worked through time cards and time reports.

28. The human resources department documents and authorizes employment of new employees.

29. Payroll activities involve three functions: hiring employees, preparing the payroll, and paying the payroll.

a30. Post-retirement benefits consist of payments by employers to retired employees for health care, life insurance, and pensions.

Additional True-False Questions

31. A debt that is expected to be paid within one year through the creation of long-term debt is a current liability.

32. Notes payable usually are issued to meet long-term financing needs.

33. Current maturities of long-term debt are often identified as long-term debt due within one year on the balance sheet.

34. In a given year, total warranty expense is the sum of actual warranty costs incurred on units sold plus the estimated cost of servicing those units in the future.

35. FICA taxes are a voluntary deduction from employee earnings.

36. FICA taxes are a deduction from employee earnings and are also imposed upon employers as an expense.

37. The objectives of internal accounting control for payrolls are (a) to safeguard company assets from unauthorized payments of payrolls and (b) to assure accuracy and reliability of the accounting records pertaining to payroll.

a38. When a company gives employees rights to receive compensation for absences and the payment for such absences is probable and the amount can be reasonably estimated, the company should accrue a liability.

MULTIPLECHOICE QUESTIONS

39. All of the following are reported as current liabilities except a. accounts payable.
b. bonds payable. c. notes payable.
d. unearned revenues.

40. The relationship between current liabilities and current assets is a. useful in determining income.
b. useful in evaluating a company’s liquidity. c. called the matching principle.
d. useful in determining the amount of a company’s long-term debt.

41. Most companies pay current liabilities a. out of current assets.
b. by issuing interest-bearing notes payable. c. by issuing stock.
d. by creating long-term liabilities.

42. A current liability is a debt that can reasonably be expected to be paid a. within one year.
b. between 6 months and 18 months.
c. out of currently recognized revenues. d. out of cash currently on hand.

43. Liabilities are classified on the balance sheet as current or a. deferred.
b. unearned. c. long-term. d. accrued.

44. From a liquidity standpoint, it is more desirable for a company to have current a. assets equal current liabilities.
b. liabilities exceed current assets. c. assets exceed current liabilities.
d. liabilities exceed long-term liabilities.

45. The relationship of current assets to current liabilities is used in evaluating a company’s a. operating cycle.
b. revenue-producing ability.
c. short-term debt paying ability. d. long-range solvency.

46. Which of the following is usually not an accrued liability? a. Interest payable
b. Wages payable c. Taxes payable d. Notes payable

47. In most companies, current liabilities are paid within
a. one year through the creation of other current liabilities.
b. the operating cycle through the creation of other current liabilities. c. one year out of current assets.
d. the operating cycle out of current assets.

48. The entry to record the issuance of an interest-bearing note credits Notes Payable for the note’s
a. maturity value. b. market value. c. face value.
d. cash realizable value.

49. With an interest-bearing note, the amount of assets received upon issuance of the note is generally
a. equal to the note’s face value.
b. greater than the note’s face value. c. less than the note’s face value.
d. equal to the note’s maturity value.
11 – 8

50. A note payable is in the form of
a. a contingency that is reasonably likely to occur. b. a written promissory note.
c. an oral agreement.
d. a standing agreement.

51. The entry to record the proceeds upon issuing an interest-bearing note is a. Interest Expense
Cash
Notes Payable b. Cash
Notes Payable c. Notes Payable
Cash d. Cash
Notes Payable Interest Payable

Use the following information for questions 52–54.

Coffey County Bank agrees to lend Adcock Brick Company $200,000 on January 1. Adcock Brick Company signs a $200,000, 8%, 9-month note.

52. The entry made by Adcock Brick Company on January 1 to record the proceeds and issuance of the note is
a. Interest Expense………………………………………………………… 12,000 Cash………………………………………………………………………… 188,000
Notes Payable …………………………………………………… 200,000 b. Cash………………………………………………………………………… 200,000
Notes Payable …………………………………………………… 200,000 c. Cash………………………………………………………………………… 200,000
Interest Expense………………………………………………………… 12,000
Notes Payable …………………………………………………… 212,000 d. Cash………………………………………………………………………… 200,000
Interest Expense………………………………………………………… 12,000
Notes Payable …………………………………………………… 200,000 Interest Payable…………………………………………………. 12,000

53. What is the adjusting entry required if Adcock Brick Company prepares financial statements on June 30?
a. Interest Expense………………………………………………………… 8,000
Interest Payable…………………………………………………. 8,000 b. Interest Expense………………………………………………………… 8,000
Cash ………………………………………………………………… 8,000 c. Interest Payable…………………………………………………………. 8,000
Cash ………………………………………………………………… 8,000 d. Interest Payable…………………………………………………………. 8,000
Interest Expense………………………………………………… 8,000
Current Liabilities and Payroll Accounting 11 – 9

54. What entry will Adcock Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?
a. Notes Payable……………………………………………………………. 212,000 Cash…………………………………………………………………. 212,000
b. Notes Payable……………………………………………………………. 200,000 Interest Payable…………………………………………………………. 12,000
Cash…………………………………………………………………. 212,000 c. Interest Expense………………………………………………………… 12,000
Notes Payable……………………………………………………………. 200,000 Cash…………………………………………………………………. 212,000
d. Interest Payable…………………………………………………………. 8,000 Notes Payable……………………………………………………………. 200,000 Interest Expense………………………………………………………… 4,000
Cash…………………………………………………………………. 212,000

55. As interest is recorded on an interest-bearing note, the Interest Expense account is a. increased; the Notes Payable account is increased.
b. increased; the Notes Payable account is decreased. c. increased; the Interest Payable account is increased. d. decreased; the Interest Payable account is increased.

56. When an interest-bearing note matures, the balance in the Notes Payable account is a. less than the total amount repaid by the borrower.
b. the difference between the maturity value of the note and the face value of the note. c. equal to the total amount repaid by the borrower.
d. greater than the total amount repaid by the borrower.

Use the following information for questions 57–58.

On October 1, Jerry’s Carpet Service borrows $250,000 from First National Bank on a 3-month, $250,000,8% note.

57. What entry must Jerry’s Carpet Service make on December 31 before financial statements are prepared?

a. Interest Payable…………………………………………………………. 5,000
Interest Expense…………………………………………………. 5,000

b. Interest Expense………………………………………………………… 20,000
Interest Payable………………………………………………….. 20,000

c. Interest Expense………………………………………………………… 5,000
Interest Payable………………………………………………….. 5,000

d. Interest Expense………………………………………………………… 5,000
Notes Payable……………………………………………………. 5,000

58. The entry by Jerry’s Carpet Service to record payment of the note and accrued interest on January1 is

a. Notes Payable……………………………………………………………. Cash………………………………………………………………….

b. Notes Payable……………………………………………………………. Interest Payable………………………………………………………….
Cash………………………………………………………………….
255,000

250,000 5,000

255,000

255,000
11 – 10

58. (cont.)

c. Notes Payable…………………………………………………………… Interest Payable…………………………………………………………. Cash …………………………………………………………………

d. Notes Payable…………………………………………………………… Interest Expense………………………………………………………… Cash …………………………………………………………………
250,000 20,000

250,000 5,000

270,000

255,000

59. Interest expense on an interest-bearing note is a. always equal to zero.
b. accrued over the life of the note.
c. only recorded at the time the note is issued.
d. only recorded at maturity when the note is paid.

60. The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is
a. Notes Payable Interest Payable
Cash
b. Notes Payable Interest Expense Cash
c. Notes Payable Cash

d. Notes Payable Cash
Interest Payable

61. Sales taxes collected by a retailer are recorded by a. crediting Sales Taxes Revenue.
b. debiting Sales Taxes Expense. c. crediting Sales Taxes Payable. d. debiting Sales Taxes Payable.

62. Unearned Rental Revenue is
a. a contra account to Rental Revenue. b. a revenue account.
c. reported as a current liability.
d. debited when rent is received in advance.

63. Sales taxes collected by the retailer are recorded as a(n) a. revenue.
b. liability. c. expense. d. asset.

Use the following information for questions 64–65.

On September 1, Ken’s Painting Service borrows $50,000 from National Bank on a 4-month, $50,000,6% note.
Current Liabilities and Payroll Accounting 11 – 11

64. What entry must Ken’s Painting Service make on December 31 before statements are prepared?
a. Interest Payable…………………………………………………………. 1,000 Interest Expense………………………………………………….
b. Interest Expense………………………………………………………… 3,000 Interest Payable…………………………………………………..
c. Interest Expense………………………………………………………… 1,000 InterestPayable…………………………………………………..
d. Interest Expense………………………………………………………… 1,000 Notes Payable…………………………………………………….
financial

1,000

3,000

1,000

1,000

65. The entry by Ken’s Painting Service to record payment of the note and accrued interest on January1 is
a. Notes Payable……………………………………………………………. 51,000 Cash…………………………………………………………………. 51,000
b. Notes Payable……………………………………………………………. 50,000 Interest Payable…………………………………………………………. 1,000
Cash…………………………………………………………………. 51,000 c. Notes Payable……………………………………………………………. 50,000
Interest Payable…………………………………………………………. 3,000 Cash…………………………………………………………………. 53,000
d. Notes Payable……………………………………………………………. 50,000 Interest Expense………………………………………………………… 1,000
Cash…………………………………………………………………. 51,000

66. The interest charged on a $100,000 note payable, at the rate of 8%, on a 90-day note would be
a. $8,000. b. $4,444. c. $2,000. d. $667.

67. The interest charged on a $100,000 note payable, at the rate of 6%, on a 60-day note would be
a. $6,000. b. $3,333. c. $1,500. d. $1,000.

68. The interest charged on a $50,000 note payable, at the rate of 8%, on a 3-month note would be
a. $4,000. b. $2,000. c. $1,000. d. $667.

69. The interest charged on a $50,000 note payable, at the rate of 6%, on a 2-month note would be
a. $3,000. b. $1,500. c. $750. d. $500.
11 – 12

70. A company receives $132, of which $12 is for sales tax. The journal entry to record the sale would include a
a. debit to Sales Tax Expense for $12. b. credit to Sales Tax Payable for $12. c. debit to Sales for $132.
d. debit to Cash for $120.

71. A company receives $174, of which $14 is for sales tax. The journal entry to record the sale would include a
a debit to Sales Tax Expense for $14. b. debit to Sales Tax Payable for $14. c. debit to Sales for $174.
d. debit to Cash for $174.

72. A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $315,000,what is the amount of the sales taxes owed to the taxing agency?
a. $300,000 b. $315,000 c. $15,750 d. $15,000

73. On January 1, 2008, Dunnon Company, a calendar-year company, issued $600,000 of notes payable, of which $150,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2008, is
a. Current Liabilities, $600,000. b. Long-term Debt, $600,000.
c. Current Liabilities, $300,000; Long-term Debt, $300,000. d. Current Liabilities, $150,000; Long-term Debt, $450,000.

74. On January 1, 2008, Brunson Company, a calendar-year company, issued $400,000 of notes payable, of which $100,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2008, is
a. Current Liabilities, $400,000. b. Long-term Debt , $400,000.
c. Current Liabilities, $100,000; Long-term Debt, $300,000. d. Current Liabilities, $300,000; Long-term Debt, $100,000.

75. A cash register tape shows cash sales of $1,500 and sales taxes of $120. The journal entry to record this information is
a. Cash………………………………………………………………………… 1,620 Sales………………………………………………………………… 1,620
b. Cash………………………………………………………………………… 1,620
Sales Tax Payable……………………………………………… 120 Sales………………………………………………………………… 1,500
c. Cash………………………………………………………………………… 1,500 Sales Tax Expense…………………………………………………….. 120
Sales………………………………………………………………… 1,620 d. Cash………………………………………………………………………… 1,620
Sales………………………………………………………………… 1,500 Sales Taxes Revenue…………………………………………. 120
Current Liabilities and Payroll Accounting 11 – 13

76. Jo’s Bookstore has collected $750 in sales taxes during April. If sales taxes must be remitted to the state government monthly, what entry will Jo’s Bookstore make to show the April remittance?
a. Sales Taxes Payable…………………………………………………… 750 Cash…………………………………………………………………. 750
b. Sales Tax Expense……………………………………………………. 750 Cash…………………………………………………………………. 750
c. Sales Tax Expense…………………………………………………….. 750
Sales Taxes Payable…………………………………………… 750 d. No entry required.

77. Jordon Company does not ring up sales taxes separately on the cash register. Total receipts for October amounted to $18,900. If the sales tax rate is 5%, what amount must be remitted to the state for October’s sales taxes?
a. $900 b. $945 c. $45
d. It cannot be determined.

78. Enrique’s Salon has total receipts for the month of $16,430 including sales taxes. If the sales tax rate is 6%, what are Enrique’s sales for the month?
a. $15,444.20 b. $17,415.80 c. $15,500.00
d. It cannot be determined.

79. The amount of sales tax collected by a retail store when making sales is a. a miscellaneous revenue for the store.
b. a current liability.
c. not recorded because it is a tax paid by the customer. d. recorded as an operating expense.

80. A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $189,000,what is the amount of the sales taxes owed to the taxing agency?
a. $180,000 b. $189,000 c. $9,450 d. $9,000

81. Advances from customers are classified as a(n) a. revenue.
b. expense.
c. current asset. d. current liability.

82. The current portion of long-term debt should a. be paid immediately.
b. be reclassified as a current liability. c. be classified as a long-term liability.
d. not be separated from the long-term portion of debt.
11 – 14

83. Sales taxes collected by a retailer are expenses a. of the retailer.
b. of the customers. c. of the government.
d. that are not recognized by the retailer until they are submitted to the government.

84. Sales taxes collected by a retailer are reported as a. contingent liabilities.
b. revenues. c. expenses.
d. current liabilities.

85. Linda’s Boutique has total receipts for the month of $29,295 including sales taxes. If the sales tax rate is 5%, what are Linda’s sales for the month?
a. $27,831 b. $27,900 c. $29,295
d. It cannot be determined.

86. A cash register tape shows cash sales of $1,500 and sales taxes of $90. The journal entry to record this information is

a. Cash………………………………………………………………………… 1,500 Sales………………………………………………………………… 1,500

b. Cash………………………………………………………………………… 1,590
Sales Tax Revenue…………………………………………….. 90 Sales………………………………………………………………… 1,500

c. Cash………………………………………………………………………… 1,500 Sales Tax Expense…………………………………………………….. 90
Sales………………………………………………………………… 1,590

d. Cash………………………………………………………………………… 1,590 Sales………………………………………………………………… 1,500 Sales Taxes Payable………………………………………….. 90

87. Tim’s Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Tim’s Pharmacy make to show the March remittance?
a. Sales Tax Expense…………………………………………………….. 600
Cash ………………………………………………………………… 600 b. Sales Taxes Payable………………………………………………….. 600
Cash ………………………………………………………………… 600 c. Sales Tax Expense…………………………………………………….. 600
Sales Taxes Payable………………………………………….. 600 d. No entry required.

88. Langer Company does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $28,600. If the sales tax rate is 4%, what amount must be remitted to the state for February’s sales taxes?
a. $1,144 b. $1,100 c. $1,716
d. It cannot be determined.
Current Liabilities and Payroll Accounting 11 – 15

89. Any balance in an unearned revenue account is reported as a(n) a. current liability.
b. long-term debt. c. revenue.
d. unearned liability.

90. Stanley Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 60,000 subscriptions in January at $15 each. What entry is made in January to record the sale of the subscriptions?

a. Subscriptions Receivable…………………………………………….. SubscriptionRevenue………………………………………….

b. Cash…………………………………………………………………………. UnearnedSubscriptionRevenue……………………………

c. Subscriptions Receivable…………………………………………….. UnearnedSubscriptionRevenue……………………………

d. Prepaid Subscriptions…………………………………………………. Cash………………………………………………………………….
900,000

900,000

150,000

900,000

900,000

900,000

150,000

900,000

91. Milton Company issued a four-year interest-bearing note payable for $300,000 on January 1, 2007. Each January the company is required to pay $75,000 on the note. How will this note be reported on the December 31, 2008 balance sheet?
a. Long-term debt, $300,000. b. Long-term debt, $225,000.
c. Long-term debt, $150,000; Long-term debt due within one year, $75,000. d. Long-term debt, $225,000; Long-term debt due within one year, $75,000.

92. Janis Knot has a large consulting practice. New clients are required to pay one-half of the consulting fees up front. The balance is paid at the conclusion of the consultation. How does Knot account for the cash received at the end of the engagement?
a. Cash
UnearnedConsulting Revenue b. Cash
Earned Consulting Revenue c. Prepaid Consulting Fees
Earned Consulting Revenue
d. No entry is required when the engagement is concluded.

93. Which one of the following is shown first under current liabilities by many companies as a matter of custom?
a. Accrued expenses
b. Current maturities of long-term debt c. Sales taxes payable
d. Notes payable and accounts payable

94. Working capital is
a. current assets plus current liabilities. b. current assets minus current liabilities.
c. current assets divided by current liabilities. d. current assets multiplied by current liabilities.
11 – 16

95. The current ratio is
a. current assets plus current liabilities. b. current assets minus current liabilities.
c. current assets divided by current liabilities. d. current assets multiplied by current liabilities.

96. A contingent liability need only be disclosed in the financial statement notes when the likelihood of the contingency is
a. reasonably possible. b. probable.
c. remote. d. unlikely.

97. If a contingent liability is reasonably estimable and it is reasonably possible that the contingency will occur, the contingent liability
a. should be recorded in the accounts.
b. should be disclosed in the notes accompanying the financial statements.
c. should not be recorded or disclosed in the notes until the contingency actually happens.
d. must be paid for the amount estimated.

98. The accounting for warranty cost is based on the matching principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense
a. when the product is brought in for repairs. b. in the period in which the product was sold. c. at the end of the warranty period.
d. only if the repairs are expected to be made within one year.

99. If a liability is dependent on a future event, it is called a a. potential liability.
b. hypothetical liability. c. probabilistic liability. d. contingent liability.

100. Current maturities of long-term debt a. require an adjusting entry.
b. are optionally reported on the balance sheet.
c. can be properly classified during balance sheet preparation, with no adjusting entry required.
d. are not considered to be current liabilities.

101. A contingency that is remote
a. should be disclosed in the financial statements. b. must be accrued as a loss.
c. does not need to be disclosed.
d. is recorded as a contingent liability.

102. The accounting for warranty costs is based on the a. going concern principle.
b. matching principle.
c. conservatismprinciple. d. objectivity principle.
Current Liabilities and Payroll Accounting 11 – 17

103. Warranty expenses are reported on the income statement as a. administrative expenses.
b. part of cost of goods sold. c. contra-revenues.
d. selling expenses.

Use the following information for questions 104–105.

Neer Company sells 2,000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 40 units for a total cost of $2,000.

104. What amount should Neer Company accrue on December 31 for estimated warranty costs?
a. $3,000 b. $2,000 c. $1,000 d. $15,000

105. What amount will be reported on Neer Company’s balance sheet as Estimated Warranty Liabilityon December 31, 2008?
a. $2,000 b. $3,000 c. $1,000
d. It cannot be determined.

106. Which of the following items would not be identified if a contingent liability were disclosed in a financial statement footnote?
a. The nature of the item
b. The expected outcome of the future event c. A numerical probability of the expected loss d. The amount of the contingency, if known

107. Disclosure of a contingent liability is usually made
a. parenthetically, in the body of the balance sheet.
b. parenthetically, in the body of the income statement. c. in a note to the financial statements.
d. in the management discussion section of the financial statement.

108. Current liabilities generally appear
a. after long-term debt on the balance sheet.
b. in decreasing order of magnitude on the balance sheet. c. in order of maturity on the balance sheet.
d. in increasing order of magnitude on the balance sheet.

109. Which of the following employees would likely receive a salary instead of wages? a. Store clerk
b. Factory employee c. Sales manager
d. Manual laborer
11 – 18

110. The total compensation earned by an employee is called a. take-home pay.
b. net pay.
c. net earnings. d. gross earnings.

111. Which one of the following payroll taxes does not result in a payroll tax expense for the employer?
a. FICA tax
b. Federal income tax
c. Federal unemployment tax d. State unemploymenttax

112. Sue Stein’s regular rate of pay is $12 per hour with one and one-half times her regular rate for any hours which exceed 40 hours per week. She worked 48 hours last week. Therefore, her gross wages were
a. $576. b. $480. c. $624. d. $864.

113. Assuming a FICA tax rate of 8% on the first $90,000 in wages, and a federal income tax rate of 20% on all wages, what would be an employee’s net pay for the year if he earned $100,000for the year?
a. $92,800 b. $72,000 c. $80,000 d. $72,800

114. Most companies involved in interstate commerce are required to compute overtime at a. the worker’s regular hourly wage.
b. 1.25 times the worker’s regular hourly wage. c. 1.5 times the worker’s regular hourly wage. d. 2.5 times the worker’s regular hourly wage.

115. Sue Rice has worked 44 hours this week. She worked in excess of 8 hours each day. Her regular hourly wage is $15 per hour. What are Sue’s gross wages for the week? (The company Sue works for is in compliance with the Fair Labor Standards Act.)
a. $660 b. $690 c. $990 d. $720

116. FICA taxes do not provide workers with a. life insurance.
b. supplemental retirement. c. employment disability. d. medical benefits.
Current Liabilities and Payroll Accounting 11 – 19

117. Employee payroll deductions include each of the following except a. federal unemployment taxes.
b. federal income taxes. c. FICA taxes.
d. insurance, pension plans, and union dues.

118. The journal entry to record the payroll for a period will include a credit to Wages and Salaries Payable for the gross
a. amount less all payroll deductions. b. amount of all paychecks issued. c. pay less taxes payable.
d. pay less voluntary deductions.

119. The amount of income taxes withheld from employees is dependent on each of the following except the
a. employee’s gross earnings. b. employee’s net pay.
c. length of the pay period.
d. number of allowances claimed by the employee.

Use the following information for questions 120–123.

The following totals for the month of April were taken from the payroll register of Main Company.

Salaries
FICA taxes withheld Incometaxes withheld Medical insurance deductions Federal unemployment taxes State unemployment taxes
$24,000 1,100 5,000 900
64 432

120. The journal entry to record the monthly payroll on April 30 would include a a. debit to Salaries Expense for $24,000.
b. credit to Salaries Payable for $24,000. c. debit to Salaries Payable for $24,000. d. debit to Salaries Expense for $17,000.

121. The entry to record the payment of net payroll would include a a. debit to Salaries Payable for $16,504.
b. debit to Salaries Payable for $17,000. c. debit to Salaries Payable for $15,900. d. credit to Cash for $18,100.

122. The entry to record accrual of Main Company’s payroll taxes would include a a. debit to Payroll Tax Expense for $496.
b. debit to Payroll Tax Expense for $1,596. c. credit to FICA Taxes Payable for $2,200. d. credit to Payroll Tax Expense for $496.
11 – 20

123. The entry to record the accrual of federal unemployment taxes would include a a. credit to Federal UnemploymentTaxes Payable for $64.
b. debit to Federal UnemploymentTaxes Expense for $64. c. credit to Payroll Tax Expense for $64.
d. debit to Federal UnemploymentTaxes Payable for $64

Use the following information for questions 124–127.

The following totals for the month of June were taken from the payroll register of Lane Company.

Salaries
FICA taxes withheld Incometaxes withheld Medical insurance deductions Federal unemployment taxes State unemployment taxes
$20,000 1,533 4,400 800
160 1,000

124. The journal entry to record the monthly payroll on June 30 would include a a. debit to Salaries Expense for $20,000.
b. credit to Salaries Payable for $20,000. c. debit to Salaries Payable for $20,000. d. debit to Salaries Expense for $13,267

125. The entry to record the payment of net payroll would include a a. debit to Salaries Payable for $12,107.
b. debit to Salaries Payable for $13,267. c. debit to Salaries Payable for $12,267. d. credit to Cash for $12,267.

126. The entry to record accrual of Lane Company’s payroll taxes would include a a. debit to Payroll Tax Expense for $2,693
b. credit to Payroll Tax Expense for $2,693 c. credit to FICA Taxes Payable for $1,160. d. credit to Payroll Tax Expense for $1,160.

127. The entry to record the accrual of federal unemployment taxes would include a a. credit to Federal UnemploymentTaxes Payable for $160.
b. credit to Federal UnemploymentTaxes Expense for $160. c. credit to Payroll Tax Expense for $160.
d. debit to Federal UnemploymentTaxes Payable for $160.

128. Which one of the following payroll taxes is not withheld from an employee’s wages because it is not levied on the employee?
a. Federal income tax
b. Federal unemployment tax c. State income tax
d. FICA tax
Current Liabilities and Payroll Accounting 11 – 21

129. By January 31 following the end of a calendar year, an employer is required to provide each employee with a(n)
a. state unemployment tax form.
b. federal unemployment tax form 940. c. wage and tax statement form W-2.
d. employee’s withholding allowance certificate form W-4.

130. Which of the following payroll taxes are usually filed and remitted annually? a. Federal unemployment taxes
b. FICA taxes
c. State unemploymenttaxes
d. Federal and state unemployment taxes

131. The tax that is paid equally by the employer and employee is the a. federal income tax.
b. federal unemployment tax. c. state unemployment tax. d. FICA tax.

132. The effective federal unemployment tax rate is usually a. 6.2%.
b. 0.8%. c. 5.4%. d. 8.0%.

133. The treasurer’s department is responsible for a. approving the payroll.
b. maintaining payroll records. c. preparing payroll tax returns. d. signing payroll checks.

134. The payroll is paid by the a. personnel department. b. payroll department.
c. cashier.
d. treasurer’s department.

a135. Post-retirementbenefits consist of payments by employers to retired employees for a. health care and life insurance only.
b. health care and pensions only. c. life insurance and pensions only.
d. health care, life insurance, and pensions.

a136. The paid absence that is most commonly accrued is a. voting leave.
b. vacation time. c. maternity leave. d. disability leave.
11 – 22

a137. Blake Company has ten employees who each earn $160 per day. If they accumulate vacation time at the rate of 1.5 vacation days for each month worked, the amount of vacation benefits that should be accrued at the end of the month is
a. $160. b. $1,600. c. $2,400. d. $240.

a138. An employer’s estimated cost for post-retirement benefits for its employees should be a. recognized as an expense when paid.
b. recognized as an expense during the employees’ work years.
c. recognized as an expense during the employees’ retirement years.
d. charged to the goodwill account because providing employees with benefits generates employee goodwill.

Additional Multiple Choice Questions

139. A current liability is a debt the company reasonably expects to pay from existing current assets within
a. one year.
b. the operating cycle.
c. one year or the operating cycle, whichever is longer. d. one year or the operating cycle, whichever is shorter.

140. Which of the following statements concerning current liabilities is incorrect? a. Current liabilities include unearned revenues.
b. A company that has more current liabilities than current assets is usually the subject of some concern.
c. Current liabilities include prepaid expenses.
d. A current liability is a debt that can reasonably be expected to be paid out of existing current assets or result in the creation of other current liabilities.

141. On August 1, 2008, a company borrowed cash and signed a one-year interest-bearing note on which both the face value and interest are payable on August 1, 2009. How will the note payable and the related interest be classified in the December 31, 2008, balance sheet?
Note Payable Interest Payable a. Current liability Noncurrentliability b. Noncurrentliability Current liability
c. Current liability Current liability d. Noncurrentliability Not shown

142. Companies report current liabilities on the balance sheet in a. alphabetical order.
b. order of maturity. c. random order.
d. order of magnitude.
Current Liabilities and Payroll Accounting 11 – 23

143. A contingency need not be recorded nor disclosed when
a. it is probable the contingency will happen and the amount can be reasonably estimated.
b. it is probable the contingency will happen but the amount cannot be reasonably estimated.
c. it is reasonably possible the contingency will happen and the amount can be reasonably estimated.
d. the possibility of the contingencyhappening is remote.

144. A contingent liability is recorded when the likelihood of the contingency is a. remote.
b. reasonably possible. c. probable.
d. nil or zero.

145. Mike Kohl, an employee of Spottswood Company, has gross earnings for the month of October of $6,000. FICA taxes are 8% of gross earnings, federal income taxes amount to $952 for the month, state income taxes are 2% of gross earnings, and Mike authorizes voluntary deductions of $15 per month to the United Fund. What is the net pay for Mike Kohl?
a. $4,442 b. $4,433 c. $4,448 d. $4,452

146. A payroll record that accumulates the gross earnings, deductions, and net pay by employee for each pay period is the
a. withholding tax table.
b. employee earnings record. c. payroll register.
d. Wage and Tax Statement.

147. The journal entry to record the payroll for Marcus Garvey Company for the week ending January8, would probably include a
a. credit to Office Salaries. b. credit to Wages Expense.
c. debit to Federal Income Taxes Payable. d. credit to FICA Taxes Payable.

148. Employer payroll taxes include all of the following except a. FICA taxes.
b. federal unemployment taxes. c. state unemployment taxes. d. federal income taxes.

149. The record that provides a cumulative summary of each employee’s gross earnings, payroll deductions, and net pay during the year and is required to be maintained to comply with state and local federal law is the
a. register.
b. employee earnings record. c. statement of earnings.
d. wage and tax statement.
11 – 24

a150. Post-retirementbenefits include all of the following except a. health care.
b. life insurance. c. pensions.
d. vacation benefits.

BRIEFEXERCISES

BE 151

SaldanaSales Company has the following selected accounts after posting adjusting entries:

AccountsPayable Notes Payable, 3-month
AccumulatedDepreciation—Equipment Notes Payable, 5-year, 6%
Payroll Tax Expense Interest Payable MortgagePayable Sales Tax Payable
$ 62,000 50,000 14,000 80,000 4,000 3,000 120,000 38,000

Instructions
Prepare the current liability section of Saldana Sales Company’s balance sheet, assuming $20,000of the mortgage is payable next year.

BE 152

Identifywhich of the following would be classified as current liabilities as of December 31, 2008: 1. Wages Payable
2. Bonds Payable, maturing in 2013 3. Interest Payable, due July 1, 2009 4. Taxes Payable
5. Notes Payable, due January 30, 2010

BE 153

On December 1, Destin Corporation borrowed $5,000 on a 90-day, 6% note. Prepare the entries to record the issuance of the note, the accrual of interest at year end, and the payment of the note.

BE 154
During December 2008, Fashion Vixen Publishing sold 2,500 12-month annual magazine subscriptions at a rate of $30 each. The first issues were mailed in February 2009. Prepare the entries on Fashion Vixen’s books to record the sale of the subscriptions and the mailing of the first issues.

BE 155

Landen Company had cash sales of $54,250 (including taxes) for the month of June. Sales are subject to 8.5% sales tax. Prepare the entry to record the sale.

BE 156

On December 1, Wynn Company introduces a new product that includes a one-year warranty on parts. In December, 500 units are sold. Management believes that 5% of the units will be defective and that the average warranty costs will be $60 per unit. Prepare the adjusting entry at December 31 to accrue the estimated warranty cost.

BE 157

Mary Stine’s regular hourly wage rate is $12, and she receives an hourly rate of $18 for work in excess of 40 hours. During a March pay period, Mary works 47 hours. Mary’s federal income tax withholding is $70, and she has no voluntary deductions. Compute Mary Stine’s gross earnings and net pay for the pay period.

BE 158

Data for Mary Stine are presented in BE 157. Prepare the journal entry to record Mary’s pay for the period. Use March 15 for the end of the pay period.

BE 159

In February, gross earnings in Zenn Company totaled $50,000. All earnings are subject to 8% FICA taxes, 5.4% state unemployment taxes, and 0.8% federal unemployment taxes. Prepare the entry to record January payroll tax expense.

*BE 160

Weaver Company employees are entitled to one day’s vacation for each month worked. In February, 60 employees worked the full month. Record the vacation pay liability for February assuming the average daily pay for each employee is $90.

EXERCISES
Ex. 161
Stiner Company has the following selected accounts after posting adjusting entries:

AccountsPayable Notes Payable, 3-month
AccumulatedDepreciation—Equipment Payroll and Benefits Payable
Notes Payable, 5-year, 8% EstimatedWarranty Liability Payroll Tax Expense Interest Payable MortgagePayable
Sales Tax Payable
$ 45,000 80,000 14,000 27,000 30,000 34,000 6,000 3,000 200,000 16,000

Instructions
(a) Prepare the current liability section of Stiner Company’s balance sheet, assuming $25,000 of the mortgage is payable next year. (List liabilities in magnitude order, with largest first.)

(b) Comment on Stiner ‘s liquidity, assuming total current assets are $450,000.

Ex. 162

Preparethe necessary journal entries for the following transactions:
(a) On September 1, Lore Company borrowed $150,000 from National Bank on a 6-month, 8% note.
(b) On December 31, Lore Company accrued interest (assume adjusting entries are only made at the end of the year).
Current Liabilities and Payroll Accounting 11 – 29

Ex. 163

On March 1, Felton Company borrows $90,000 from Ottawa State Bank by signing a 6-month, 8%, interest-bearing note.

Instructions
Prepare the necessary entries below associated with the note payable on the books of Felton Company.
(a) Prepare the entry on March 1 when the note was issued.
(b) Prepare any adjusting entries necessary on June 30 in order to prepare the semi-annual financial statements. Assume no other interest accrual entries have been made.
(c) Prepare the adjusting entry at August 31 to accrue interest. (d) Prepare the entry to record payment of the note at maturity.

Ex. 164

Tom Byers sells televisions with a 2-year warranty. Past experience indicates that 2% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is estimated to be $50 per unit. During 2008, 7,000 units were sold at an average price of $400. During the year, repairs were made on 55 units at a cost of $2,400.

Instructions
Prepare journal entries to record the repairs made under warranty and estimated warranty expense for the year.

Ex. 165

Sommers Company billed its customers a total of $1,575,000 for the month of November. The total includes a 5% state sales tax.

Instructions
(a) Determine the proper amount of revenue to report for the month.
(b) Prepare the general journal entry to record the revenue and related liabilities for the month.

Ex. 166

Stevens Company does not segregate sales and sales taxes on its cash register. Its register total for the month is $259,700, which includes a 6% sales tax.

Instructions

Computesales taxes payable, and make the entry to record sales and sales taxes payable.

Ex. 167

Sutton Coat Company, which prepares annual financial statements, is preparing adjusting entries on December 31. Analysis indicates the following:

1. The company is the defendant in an employee discrimination lawsuit involving $50,000 of damages. Legal counsel believes it is unlikely that the company will have to pay any damages.

2. December 31st is a Friday. The employees of the company have been paid on Monday, December 27th for the previous week which ended on Friday, December 24th. The company employs 30 people who earn $100 per day and 15 people who earn $150 per day. All employees work 5-day weeks.

3. The company is a defendant in a $500,000 product liability lawsuit. Legal counsel believes the company probably will have to pay the amount requested.

a4. Employees are entitled to one day’s vacation for each month worked. All employees described above in (2.) worked the month of December.

Instructions
Prepareany adjusting entries necessary at the end of the year.

Ex. 168

Based on the following information, compute the (1) current ratio and (2) working capital.

Current assets Total assets Current liabilities Total liabilities
$240,000 900,000 80,000 500,000

Ex. 169

Linda Estes sells exercise machines for home use. The machines carry a 2-year warranty. Past experience indicates that 6% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is $60 for labor and $90 for parts per unit. During 2008, 2,500 exercise machines were sold at an average price of $800. During the year, 60 of the machines that were sold were repaired at the average price per unit.

Instructions
(a) Prepare the journal entry to record the repairs made under warranty.
(b) Prepare the journal entry to record the estimated warranty expense for the year.

Ex. 170

Golf World Publications publishes a golf magazine for women. The magazine sells for $3 a copy on the newsstand. Yearly subscriptions to the magazine cost $24 per year (12 issues). During December 2008, Golf World Publications sells 9,000 copies of the golf magazine at newsstands and receives payment for 15,000 subscriptions for 2009. Financial statements are prepared monthly.

Instructions
(a) Prepare the December 2008 journal entries to record the newsstand sales and subscriptions received.

(b) Prepare the necessary adjusting entry on January 31, 2009. The January 2009 issue has been mailed to subscribers.
Current Liabilities and Payroll Accounting 11 – 33

Ex. 171

Presley Company sells a product that includes a one-year warranty on parts and labor. During the year, 10,000 units are sold. Presley expects that 3% of the units will be defective and that the average warranty cost will be $50 per unit. Actual warranty costs incurred during the year were $14,000.

Instructions

Preparethe journal entries to record (a) the estimated warranty costs and (b) the actual costs incurred.

Ex. 172

Dobson Company is preparing adjusting entries at December 31. An analysis reveals the following:

1. During December, Dobson Company sold 2,000 units of a product that carries a 60-day warranty. The sales for this product totaled $100,000. The company expects 4% of the units to need repair under the warranty and it estimates that the average repair cost per unit will be $15.

2. The company has been sued by a disgruntled employee. Legal counsel believes that it is reasonably possible that the company will have to pay $200,000 in damages.

3. The company has been named as one of several defendants in a $400,000 damage suit. Legal counsel believes it is unlikely that the company will have to pay any damages.

a4. Employees earn vacation pay at a rate of 1 day per month. During December, ten employees qualify for vacation pay. Their average daily wage is $90 per employee.

Instructions

Prepareadjusting entries, if required, for each of the four items.

Ex. 173

Match the codes assigned to the following payroll functions to the procedures listed below:

H Hiring Employees T Timekeeping
PRE Preparing the Payroll PAY Paying the Payroll

1. Distributionof checks by the treasurer 2. Supervisorapproves hours worked
3. Documentationof employee hiring 4. Maintenanceof payroll records
5. Verificationof payroll calculations

6. Screeningand interviewing of job applicants 7. Use of a timeclock
8. Signing prenumbered payroll checks

Ex. 174

Sue Wiebe’s regular hourly wage is $14 an hour. She receives overtime pay at the rate of time and a half. The FICA tax rate is 8%. Sue is paid every two weeks. For the first pay period in January, Sue worked 86 hours of which 6 were overtime hours. Sue’s federal income tax withholding is $300 and her state income tax withholding is $100. Sue has authorized that $50 be withheld from her check each pay period for savings bonds.

Instructions

Compute Sue Wiebe’s gross earnings and net pay for the pay period showing each payroll deduction in arriving at net pay.

Ex. 175

Stacy Cooper’s regular hourly wage rate is $12, and she receives a wage of 1 1/2 times her regular rate for work in excess of 40 hours. During a June pay period, Stacy worked 46 hours. Stacy’s federal income tax withholding is $58, and her only voluntary deduction is $25 for group hospitalization insurance.

Instructions
ComputeStacy’s (a) gross earnings and (b) net pay for the pay period.

Ex. 176

Oates Company’s payroll for the week ending January 15 amounted to $95,000 for Office Salaries and $150,000 for Store Wages. None of the employees has reached the earnings limits specified for federal or state employer payroll taxes. The following deductions were withheld from employees’ salaries and wages:

FederalIncome Tax StateIncome Tax FICA Taxes
Union Dues United Fund
$50,000 9,000 19,600 2,700 1,800

Federal unemployment tax (FUTA) rate is 6.2% less a credit equal to the rate paid for state unemployment taxes. The state unemployment tax (SUTA) rate is 5.4%.

Instructions

Prepare the journal entry to record the weekly payroll ending January 15 and also the employer’s payroll tax expense on the payroll.

Ex. 177

Ann Finley had earned (accumulated) salary of $86,000 through November 30. Her December salary amounted to $7,800. Jim Lane began employment on December 1 and will be paid his first month’s salary of $5,000 on December 31. Income tax withholding for December for each employee is as follows:
Ann Finley Jim Lane FederalIncome Tax $2,180 $990 StateIncome Tax 390 180
Current Liabilities and Payroll Accounting 11 – 37

Ex. 177 (cont.)

The following payroll tax rates are applicable:
FICA tax on first $90,000 8% FUTA tax on first $7,000 6.2%* SUTA tax on first $7,000 5.4%

*Less a credit equal to the state unemployment contribution

Instructions

Record the payroll for the two employees at December 31 and record the employer’s share of payroll tax expense for the December 31 payroll.

Ex. 178

Assume that the payroll records of Gibbs Oil Company provided the following information for the weekly payroll ended November 30, 2008.
Year-to-Date Hourly Federal EarningsThrough
Employee Hours Worked Pay Rate Income Tax Union Dues Previous Week

C. White 44 J. Ward 46 K. Hurt 39 M. King 42
$45 $362 10 65 20 118 22 169
$9 $91,000 5 23,200 — 5,700 7 49,500

Ex. 178 (cont.)

Additional information: All employees are paid overtime at time and a half for hours worked in excess of 40 per week. The FICA tax rate is 8% for the first $90,000 of each employee’s annual earnings. The employer pays unemployment taxes of 6.2% (5.4% for state and .8% for federal) on the first $7,000 of each employee’s annual earnings.

Instructions
(a) Prepare the payroll register for the pay period.
(b) Prepare general journal entries to record the payroll and payroll taxes.

Ex. 179

Diane Jenks earns a salary of $8,000 per month during the year. FICA taxes are 8% on the first $90,000 of gross earnings. Federal unemployment insurance taxes are 6.2% of the first $7,000; however, a credit is allowed equal to the state unemployment insurance taxes of 5.4% on the $7,000. During the year, $27,300 was withheld for federal income taxes and $5,700 was withheld for state income taxes.
Current Liabilities and Payroll Accounting 11 – 39

Ex. 179 (cont.)

Instructions
(a) Prepare a journal entry summarizing the payment of Jenks’ total salary during the year.

(b) Prepare a journal entry summarizing the employer payroll tax expense on Jenks’ salary for the year.

(c) Determine the cost of employing Jenks for the year.

Ex. 180

Tolan Company had the following payroll data for the year:

Gross earnings of employees Employeeearnings not subject to FICA tax
Employeeearnings not subject to FUTA or SUTA tax
$640,000 140,000 490,000

Assumingthe following: FICA tax rate
State Unemployment tax rate Federal Unemploymenttax rate

8%
5.4% (SUTA) .8% (FUTA)

Instructions
Compute Tolan’s payroll tax expense for the year. Make a summary journal entry to record the payroll tax expense.

Ex. 181

In March, gross earnings of Milner Company totaled $150,000. All earnings are subject to FICA taxes, 5.4% state unemployment taxes, and 0.8% federal unemployment taxes.

Instructions

(a) Compute the employer’s payroll tax expense. (b) Prepare the entry to record payroll taxes.

Ex. 182

The following payroll liability accounts are included in the ledger of Clements Company on January1, 2008:

FICA Taxes Payable $1,750 FederalIncome Taxes Payable 4,000 StateIncome Taxes Payable 665 Federal Unemployment Taxes Payable 175 State Unemployment Taxes Payable 1,190 Union Dues Payable 400 Health Insurance Premium Payable 5,000 ChristmasClub Savings Payable 1,500

In January, the following transactions occurred:

Jan. 9 Sent a check for $5,000 to Blue Cross and Blue Shield.
11 Deposited a check for $5,750 in Federal Reserve Bank for FICA taxes and federal income taxes withheld.
14 Sent a check for $400 to the union treasurer for union dues. 18 Paid state income taxes withheld from employees.
21 Paid state and federal unemployment taxes.
22 Sent a $1,500 check to a Savings and Loan for the Christmas Club withholdings.

Instructions
Journalizethe January transactions

COMPLETION STATEMENTS

183. A current liability is a debt that can be expected to be paid within year or the , whichever is longer.

184. Liabilities are classified on the balance sheet as being liabilities or

liabilities.

185. Obligations in written form are called and usually require the borrower to pay interest.

186. With an interest-bearing note, a borrower must pay the of the note plus at maturity.

187. Sales taxes collected from customers are a of the business until they are remitted to the taxing agency.

188. The current ratio is current assets divided by .

189. A contingent liability should be recorded in the accounts if it is that the contingency will occur and the amount is .

190. Two federal taxes which are levied against employees’ wages that must be deducted in arriving at net pay are (1) taxes and (2) taxes.

191. The employer incurs a payroll tax expense equal to the amount contributed by each employee for taxes.

192. A payroll tax expense which is borne entirely by the employer is the federal

tax.

MATCHING

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

A. Current liability B. Notes Payable
C. Wage and Tax Statement D. Currentratio
E. Contingentliabilities
F. Federal income taxes G. FICA taxes
H. Federal unemployment taxes aI. Post-retirementbenefits
aJ. Pension plan

1. Levied against employees’ wages without limit.

2. An obligation in the form of a written promissory note.

3. An agreement whereby an employer provides benefits to employees after they retire.

4. A payroll tax expense levied only against the employer based on employees’ wages.

5. A measure of a company’s liquidity.

6. A debt than can reasonably be expected to be paid from current assets.

7. A form showing gross earnings and income taxes withheld.

8. Levied against employees’ wages with a maximum limit.

9. Paymentsby employers to retired employees.

10. A potential liability that may become an actual liability in the future.

SHORT-ANSWERESSAY QUESTIONS
S-AE 194
A company will incur product repair costs in the future if products that it sells currently under warranty are brought in for repair during the warranty period. The company will also incur bad debts expense in the future if customers who buy on credit currently are unable to pay their accounts. Are the accounting procedures for these two contingent costs (warranty expense and bad debt expense) related or guided by the same accounting principle? Briefly explain.

S-AE 195

An employee’s net pay consists of gross pay less mandatory and voluntary payroll deductions. Identify the mandatory payroll deductions and give two or three examples of common voluntary deductions. Are these deductions recognized as payroll expenses by the employer? What type of payroll expenses does the employer incur related to having a payroll?

S-AE 196 (Ethics)

Quaney Company maintains two separate accounts payable computer systems. One is known to all the users, and is used to process payments to vendors. Employees enter the vendor code, or the name and address of new vendors, the amount, the account, and so on. The other system is a secret one. It is used to cross-check the vendors against an approved vendor list. If a vendor is not listed as approved, the payment process is halted. Internal audit employees seek to verify the existence of a bona fide claim by the vendor. All inquiries are made at the top management level, and very discreetly. No one but top management, the internal audit staff, and the Board of Directors of the company is even aware of the second system.

Required:
Is it ethical for a company to have a secret system like the one described? Explain.

S-AE 197 (Communication)

Al-Fab is a manufacturing company that makes various industrial components out of aluminum. Al-Fab is located in a large city in the northeastern United States. Various labor disputes have occurred in the city, some with acrimonious public debate concerning the honesty of management. During one of Al-Fab’s routine employee meetings, Jack Grant, a production worker, brought up the issue of the cost of a worker as reported in the company’s annual report.

The cost was given as $32,000 per year. Jack points out that the average wage rate of $12 per hour is at most around $25,000 in gross wages. He asks whether the company is adding in overtime, because if so, the figures are misleading because the employees are not allowed to work overtime.

Required:

Prepare a note explaining to Mr. Grant how Al-Fab might calculate a cost per employee that is greater than gross wages. Explain in general terms only. Do not use any calculations.