Accounting SmartBook Practice Test

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• For operating leases under ASC 842, the right-of-use asset is amortized using which method?
• What was the actual fixed overhead cost incurred in the provided data?
• How are research and development costs treated for financial reporting under U.S. GAAP?
• What is the primary purpose of management's discussion and analysis (MD&A) in financial reporting?
• Why is controllable variance termed 'controllable'?
• A favorable variance means that actual costs are less than standard costs.
• A manufacturing company has the following budgeted overhead costs: Indirect materials $0.50 per unit; Utilities $0.25 per unit; Supervisory salaries $60,000; Building rent $80,000. If the company expects to produce 200,000 units using 100,000 hours of direct labor, the standard overhead rate will be $____ per direct labor hour.
• During the preparation of a standard costing income statement, favorable variances reduce the standard cost of goods sold by being what?
• What was the applied fixed overhead in the provided data?
• Fixed overhead volume variance is computed as Budgeted fixed overhead minus Applied fixed overhead. Given Budgeted $20,000 and Applied $24,000, what is the variance and its classification?
• Which statement best describes cash and cash equivalents on the balance sheet?
• What is the primary purpose of depreciation?
• A flexible budget has which of the following characteristics?
• How are prepaid expenses and accruals treated in adjusting entries?
• A flexible budget prepared before the period begins allows management to make adjustments to increase profits or decrease losses.
• Which statement about standard costs is true?
• Which statement defines the break-even point in sales terms?
• Which term describes the difference between actual total overhead and the standard overhead applied?
• What does the break-even point indicate in cost-volume-profit analysis?
• Which two qualitative characteristics are foundational in the Conceptual Framework?
• Which statement about current liabilities is true?
• Using the same direct labor data, what is the direct labor rate variance?
• When preparing a flexible budget, variable costs are expressed as a constant amount _____, and fixed costs are expressed as a constant amount _____.
• In the statement of cash flows, how is depreciation treated under the indirect method and under the direct method?
• Which method does diluted EPS use to account for potential dilutive securities?
• What is variable consideration and what constraint applies under ASC 606?
• What is the first step in ASC 606 revenue recognition?
• Given AH × AR = $83,000 and SH × SR = $85,000, what is the direct labor efficiency variance?
• What does a favorable overhead volume variance indicate about production relative to plan?
• Compute the direct labor variance given production of 35,000 units, standard of 1 hour at $10 per hour, and actual of 36,000 hours at $374,400.
• The difference between the actual amount paid and the standard price paid to purchase an overhead item is called a ______.
• Variance analysis serves which primary purpose?
• Which statement about IRR and its relation to the required rate of return is true?
• How is a gain or loss on disposal of a fixed asset reflected in financial records?
• Net realizable value (NRV) is defined as what?
• In a standard cost system, how are variances calculated and analyzed?
• What is a common use of standard costs in manufacturing?
• Direct labor rate variance is unfavorable when which condition holds true?
• A flexible budget is useful to compare what-if scenarios.
• The standard overhead applied is based on the ______ level of activity multiplied by the predetermined overhead rate.
• At a sales volume of 60 units, budgeted direct materials will be ______.
• Note payable vs bond payable and their typical accounting treatments?
• If actual overhead exceeds overhead absorbed, the overhead variance is typically considered:
• Under ASC 606, revenue for a contract with a single performance obligation that is satisfied at a point in time is recognized when what occurs?
• In a standard costing income statement, unfavorable variances are ______ cost of goods sold at standard cost.
• The fixed budget indicates a sales of $50,000. Actual sales were $55,000. The variance is:
• Which ASC 606 step requires allocation of the transaction price to each performance obligation?
• How are bond discounts or premiums amortized over the life of the bond?
• Which journal entry correctly records a bond issue at a premium?
• When is impairment test required for long-lived assets?
• What was the actual variable overhead cost incurred in the variable overhead data?
• Under ASC 842, how are leases recorded and what is the difference in expense recognition between finance leases and operating leases?
• Standard costs are used for which purpose in relation to variances?
• The fixed budget indicates direct labor costs of $27,500. Actual direct labor costs were $27,000. The variance is:
• Under US GAAP, are write-downs to NRV reversible?
• Preset costs for delivering a product or service under normal conditions are called ______ costs.
• ABC Company standard: direct materials are 0.5 pounds per unit at $1.00 per pound. The company produced 35,000 units. Actual direct materials used were 18,000 pounds costing $17,280. What is the direct materials quantity variance?
• Which of the following best describes how favorable variances affect cost of goods sold at standard cost?
• Which statement about volume variances is true?
• What type of account is the allowance for doubtful accounts?
• Which of the following is Step 1 in computing a standard overhead rate?
• What is the purpose of variance analysis in standard costing?
• Which statement correctly describes a common recognition between finance leases and operating leases under ASC 842?
• When standard direct labor hours differ from actual direct labor hours used, the company experienced a(n):
• Which fair value measurement level uses unobservable inputs?
• How is the transaction price allocated to multiple performance obligations when standalone selling prices are observable?
• How does absorption costing differ from variable costing in terms of fixed manufacturing overhead and inventory valuation?
• In standard costing, what do price variances and quantity variances represent?
• Under ASC 606, which approach describes recognizing revenue over time when progress toward completion can be measured reliably?
• Which formula correctly defines cost variance?
• What is the purpose of a trial balance and what is its limitation?
• Which statement best describes temporary differences under accrual accounting for tax vs book?
• A manufacturing company accumulates variable overhead data: Actual $61,000; Budgeted variable overhead at actual hours used $64,000; Applied variable overhead $60,000. The variable overhead spending variance is:
• The static budget is an example of a:
• Under absorption costing, how can net income be affected by changes in inventory levels?
• Which accounting basis does GAAP require for financial reporting?
• When compared to the budgeted amount, if the actual cost or revenue contributes to a higher income, the variance is considered
• Which statement best describes the treatment of favorable variances in the standard costing format for cost of goods sold?
• Which of the following is an example of an overhead allocation base?
• In the standard costing income statement, favorable variances are accounted for as a deduction from cost of goods sold at standard cost. Which statement best describes this treatment?
• What is the formula for the total direct materials variance in standard costing?
• Under the effective interest method, which calculation represents interest expense?
• When should you capitalize a cost?
• Which formula defines break-even in units?
• In impairment testing, the recoverable amount is the greater of which two measures?
• XYZ Company presents the following materials data: AQ × AP = $150,000; AQ × SP = $145,000; SQ × SP = $152,000. Compute the direct materials quantity variance.
• Which statement best describes the income statement impact of finance leases versus operating leases?
• Which statement correctly describes cash and cash equivalents?
• A report which presents overhead variance information along with variances from budgeted amounts is called a(n):
• A(n) _____ variance occurs when management pays an amount different from the standard price to acquire an overhead item.
• What is the standard allowed quantity for actual output if standard is 0.5 pound per unit and actual output is 35,000 units?
• An unfavorable sales variance is most likely caused by which condition?
• A company budgets total overhead of $10,400 for actual units produced. Actual total overhead is $12,000. The controllable variance is:
• Compute the direct labor rate variance given actual cost $374,400 for 36,000 hours and a standard rate of $10 per hour.
• Which statement about asset retirement obligations and contingent liabilities is true?
• During variance analysis, management is most likely to focus on which variance scenarios?
• Which statement is true about the analytical focus in standard costing?
• In the overhead budget, what is the fixed overhead amount represented by supervisory salaries?
• Management uses a(n) ______ budget to establish the standard overhead rate.
• A(n) ______ variance occurs when the standard direct labor hours expected for actual production differs from the actual direct labor hours used.
• What is the formula for Basic Earnings Per Share (EPS)?
• An impairment loss is recognized when carrying amount exceeds recoverable amount. Which option reflects this condition?
• A company had standard price $1.79 per unit and expected to sell 10,000 units. Actual price is $1.59 per unit and actual sales volume is 9,500 units. What is the sales volume variance?
• Under ASC 842, what drives the amount of the lease liability recognized at inception?
• The budgeted direct materials of 108 correspond to which sales volume?
• What is the purpose of the allowance for credit losses (ACD) and how is it presented?
• In standard costing, favorable variances are applied to cost of goods sold by performing which operation?
• In a standard costing income statement, favorable variances are _____ cost of goods sold at standard cost.
• Which operation corresponds to the treatment of favorable variances in standard costing when calculating cost of goods sold?
• Compute the labor efficiency variance using standard rate $10, actual hours 36,000, and standard hours allowed 35,000.
• Favorable variances in a standard costing framework affect cost of goods sold by being which action?
• In standard costing reporting, favorable variances are reflected in COGS through which operation on the standard cost?
• Given AQ x AP = $150,000 and AQ x SP = $145,000, compute the direct materials price variance.
• Which statement best describes Net Present Value (NPV)?
• The standard overhead rate per direct labor hour is determined by dividing total overhead by total hours. If variable overhead is $2.50 per unit and fixed costs are $5,000 per month, with 2,000 units and 4 hours per unit, the rate is:
• When presenting a standard costing income statement, the effect of favorable variances on cost of goods sold is to reduce COGS by which treatment?
• If the actual cost or revenue contributes to a lower income than the budgeted amount, the variance is considered
• Which statement about goodwill and impairment testing is correct?
• Favorable variances in standard costing are incorporated into COGS by which mechanism?
• Which groups typically assist in setting standard costs?
• In standard costing, the effect of favorable variances on the cost of goods sold is to be ______ from the standard amount.
• Journal entries for production costs using a standard cost accounting system, the favorable variances are recorded as ______ and the unfavorable variances are recorded as ______.
• The fixed overhead spending variance is derived from these data: Actual fixed overhead cost incurred $21,000; Budgeted fixed overhead $20,000; Applied fixed overhead $24,000.
• Which statement about standard costs is true?
• A company sells a product for $3. Direct materials are $1.80 per unit. The company prepares a flexible budget at two sales volumes. At a sales volume of 50 units, budgeted direct materials will be ______.
• Using the direct labor data where AH × AR = $84,000, AH × SR = $83,000, and SH × SR = $85,000, what is the direct labor cost variance?
• Volume variance is primarily driven by differences between actual and planned production, affecting fixed overhead allocation. True or False?
• For 2,000 units produced with standard labor of 4 hours per unit, what are the total standard direct labor hours?
• Which statement describes treasury stock and its effect on equity?
• Which variance is caused by incurring actual overhead costs at a rate different from the standard overhead rate?
• The controllable variance is the difference between the actual total overhead and:
• The volume variance is computed as:
• Which formula correctly represents the direct materials price variance?
• The formula for computing the materials budget at a given volume is unit material cost multiplied by the number of units.
• A company sells a product for $3. The company prepares a flexible budget at two sales volumes. At a sales volume of 50 units, budgeted sales will be $_____. At a sales volume of 60 units, budgeted sales will be $._____
• Actual sales volume for a period is 5,000 units. Budgeted sales volume is 4,500 units. Actual selling price per unit is $15 and budgeted price per unit is $15.75. The sales volume variance is $7,875.
• The standard overhead rate is computed separately for which of the following?
• For a standard costing income statement, the proper treatment of a favorable variance on cost of goods sold at standard cost is to have it ______.
• In a period of rising prices, which inventory costing method yields the lowest cost of goods sold (COGS) and therefore the highest ending inventory?
• Cost variance is defined as which of the following?
• What is a key feature of the indirect method for the statement of cash flows?
• Which depreciation methods are commonly used?
• Which statement best describes a price variance?
• A manufacturing company has an unfavorable volume variance. Which statement is true?
• Which statement best describes variances in standard costing?
• Using the same data as above, what is the direct materials total variance (actual cost minus standard cost for actual output)?
• XYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = $84,000; AH x SR = $83,000; SH x SR = $85,000. Compute the labor efficiency variance.
• Direct materials variance is calculated as the difference between actual cost and standard cost. If actual cost is $150,000 and standard cost is $152,000, what is the variance?
• Which variance arises when actual production volume differs from the budgeted activity?
• What is the direct materials price variance given actual materials cost $17,280 for 18,000 pounds and standard price $1.00 per pound?
• Which statement best describes a flexible budget versus the master budget?
• A company has budgeted overhead of $8,750 and standard overhead applied of $9,250. The volume variance is:
• Which scenario is most likely measured at Level 3 fair value?
• If the predetermined overhead rate is $2.00 per direct labor hour and actual activity is 5,000 hours, overhead applied is:
• The first step in preparing a flexible budget is to:
• Which is the first step in cost variance analysis?
• True or false: Volume variances are due to not producing at the predicted activity level. Therefore, the volume variance does not need to be investigated.
• Which operation best describes how favorable variances are treated in the standard costing presentation of cost of goods sold?
• Which statement describes discontinued operation accounting?
• In a flexible budget, fixed costs are expressed as a constant amount in total.
• Under ASC 842, what is recognized for a lease?
• Which cost flow assumption uses the most recent costs to calculate COGS?
• In an operating lease, how is the lease expense recognized over the lease term?
• Under standard costing reporting, favorable variances reduce the reported cost of goods sold by being which of the following on the standard cost?
• What is the primary purpose of the general ledger?
• The overhead variance is the difference between:
• A company has budgeted total overhead of $10,575 at actual units produced and actual total overhead of $9,775. The controllable variance is:
• Which statement best describes contingent liabilities compared to actual liabilities?
• Which statement is true about standard costing variances?
• A company expected to sell 10,000 units at a standard price of $1.79, but actually sold 9,500 units at $1.59. What is the sales price variance?
• A zero variance occurs when actual results equal budgeted results.
• A company had actual selling price per unit of $15, standard selling price per unit of $15.75, and sold 5,000 units. What is the sales price variance?
• How is working capital calculated and why is it important?
• Which statement about standard costs is true?
• What was the budgeted variable overhead at hours used in the variable overhead data?
• Which statement describes the difference between cash basis and accrual basis for taxes under GAAP?
• A company has budgeted overhead of $10,000 and standard overhead applied of $10,400. The volume variance is:
• A(n) ______ variance occurs when the company operates at a different capacity level than predicted.
• What is the formula for labor efficiency variance in standard costing?
• What is the difference between gross margin and net profit?
• Which statement correctly distinguishes an ideal standard from a practical standard?
• What is the primary purpose of a flexible budget?
• Direct labor efficiency variance problem: If the standard hours for actual production are 6,000 and actual hours used are 6,250, with a standard rate of $12 per hour, the efficiency variance is?
• A(n) _____ budget is based on one predicted amount of sales or other activity measure.
• Which statement describes a flexible budget?
• A manufacturing company accumulates the following data on variable overhead: Actual cost incurred $61,000; Budgeted variable overhead at hours used $64,000; Applied variable overhead $60,000. The variable overhead efficiency variance is:
• If actual total overhead is less than the standard overhead applied, the overhead variance is:
• The report that compares actual performance and budgeted performance based on actual activity level is called a ______ budget performance report.
• Which statement about discontinued operations is correct?
• Which condition would support recognizing revenue over time for a performance obligation?
• Which statement accurately describes the LCNRV rule for inventory under GAAP?
• A company budgets administrative salaries at $5,000 at a sales level of 1,000 units. At a sales level of 1,200 units, budgeted administrative salaries will be $
• Which statement about accrual and deferral adjustments is correct?
• In variance calculations, SQ x SP represents which concept?
• At the end of the accounting period, if the net amount of the variances is immaterial, the variance accounts are closed to:
• Under accrual adjusting entries, what do accruals result in?
• Budget reports are commonly prepared for all of the following periods except
• In budgeting, variance is defined as the difference between actual and budgeted amounts.
• For another dataset, AQ × SP = $145,000 and SQ × SP = $152,000. Compute the direct materials quantity variance and its sign.
• Budget ____compare actual results to budgeted results.
• What is the purpose of internal controls over cash receipts?
• Labor efficiency variance: If the standard hours for actual production are 8,000 and actual hours used are 7,600 with a standard rate of $15 per hour, the variance is?
• In cost behavior within a flexible budget, which statement is most accurate?
• Which definition best describes an ideal standard?
• What is the primary difference between subsidiary ledgers and the general ledger?
• Which documents constitute a complete set of financial statements?
• True or false: An overhead variance report can be used to help management identify individual overhead costs to investigate.
• Which statement correctly defines a practical standard?
• Which approach best describes how revenue is allocated when a contract has multiple performance obligations with different standalone selling prices?