51. In a fast food restaurant which of the following is a product cost?
A. The manager's salary.
B. The cashier's wages.
C. The cost of the meat.
D. The cost of rent for the month.
52. Which of the following is not a cost that normally needs to be estimated for revenue to be recognized?
A. Bad debt expense
B. Cost of goods sold
C. Warranty expense
D. Cost of returns
53. A company sold $10 million of electronics equipment during 2012. They estimate that the warranty costs are normally 1.5% of sales and the company normally has difficulty in collecting 2% of its sales. What amount should they record as revenue in 2012?
A. $9.65 million
B. $9.80 million
C. $9.85 million
D. $10 million
54. A company sold $10 million of electronics equipment during 2012. The cost of the goods sold was $5.4 million. They estimate that the warranty costs are normally 1.5% of sales and the company normally has difficulty in collecting 2% of its sales. What amount should they record as expenses related to those sales in 2012?
A. $5.4 million
B. $5.55 million
C. $5.6 million
D. $5.75 million
5.4m + (.015 x $10m) + (.02 x $10m)
55. Barry Bay runs a small contracting business that he operates as a corporation. He never had to borrow money, and he is the only shareholder. What is most likely to be the objective when preparing his financial statements?
A. Performance evaluation
B. Cash flow prediction
C. Income smoothing
D. Tax minimization
56. Little Flowers Day Care operates as a parent-run organization. A group of parents meets monthly to review expenditures, both recent and forthcoming. They also set the fees, which are reviewed annually. As a non-profit group they do not pay taxes. What is most likely the objective when they prepare their financial statements?
A. Performance evaluation
B. Cash flow prediction
C. Income smoothing
D. Tax minimization
57. Magic Tubs uses a process of covering old bathtubs and showers with acrylic inserts. Luxurious Baths has a licence granted by Magic Tubs to be the exclusive provider of the technology developed by Magic Tubs. Magic Tubs also lent Luxurious Baths money to help start-up their business. Luxurious Baths must send a copy of their financial statements to Magic Tubs every month. What is the most likely objective of Luxurious Baths' financial statements?
A. Performance evaluation
B. Cash flow prediction
C. Contract compliance
D. Tax minimization
58. Which of the following is not a potential objective of financial reporting?
A. Stewardship
B. Income smoothing
C. Contract compliance
D. GAAP
59. When the people who provide the money to a business are different from the people who manage the business, which financial reporting objective becomes important?
A. Stewardship
B. Minimum compliance
C. Income smoothing
D. Tax minimization
60. Books for Africa is a not-for-profit organization that collects used books and ships them to schools and villages in Africa. They have no government support and try to raise most of their funds from wealthy individuals. Which of the following would be an objective of Books for Africa's financial reporting?
A. Performance evaluation
B. Minimum compliance
C. Income smoothing
D. Tax minimization