1) An ordinary annuity refers to a series of equal payments made or received at the end
of each period.
2) When the contract rate on a bond issue is less than the market rate, the bonds will
generally sell at a discount.
3) In process costing there is never a balance remaining in Factory Overhead that needs
to be closed at period end.
4) When using the allowance method of accounting for uncollectible accounts, the
recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts
Expense.
5) Outstanding checks are checks the bank has paid and deducted from the customer’s
account during the month.
6) A single-step income statement includes cost of goods sold as another expense, and
shows only one subtotal for total expenses.
7) Internal control of cash receipts aims to ensure that all cash received is properly
recorded and deposited.
8) Merchandise inventory is reported in the long-term assets section of the balance
sheet.
9) Sparrow Company had net income of $63,000. The company had 9,000 weighted
average common shares outstanding. The basic earnings per share equal $7.00 per
share.
10) After preparing a bank reconciliation, adjustments must be made for items
reconciling the bank balance and items reconciling the book balance.
11) Separation of duties divides responsibility for a transaction or a series of related
transactions between two or more individuals or departments. Separation of duties
reduces the risk of error and fraud.
12) Financing activities include receiving cash from issuing debt and receiving cash
dividends from investments in other companies’ stocks.
13) The accounting equation implies that: Assets + Liabilities = Equity.
14) The cost of fees for insuring the title and any accrued property taxes are included in
the cost of land.
15) Equivalent units of production refer to the number of units that would be completed
if all effort during a period had been applied only to those units that were started and
completed in a period.
16) Process and job order manufacturing operations both combine materials, labor, and
overhead items in the process of producing products.
17) The master budget consists of three major groups of budget components: the
operating budgets, the capital expenditures budgets, and the financial budgets.
18) When an asset is purchased (or disposed of) at a time other than the beginning or
the end of an accounting period, depreciation is recorded for part of a year so that the
year of purchase or the year of disposal is charged with its share of the asset’s
depreciation.
19) An owner’s investment in a business always creates an asset (cash), a liability (note
payable), and owner’s equity (investment.)
20) Tops had cost of goods sold of $8,321 million and its ending inventory was $2,027
million. Therefore its days’ sales in inventory equals 89 days.
21) A company had average total assets of $982,450 and net income of $190,700, and
reports various segment information. Segment A had average total assets of $437,800
and segment operating income of $98,230. Segment B had average assets of $151,200
and segment operating income of $16,190. Calculate the segment return on assets for
Segment B.
A.19.4%
B.22.4%
C.26.1%
D.10.7%
E.20.2%
22) The Wage and Tax Statement is:
A.Form 940
B.Form 941
C.Form 1040
D.Form W-2
E.Form W-4
23) Smith, West, and Krug form a partnership. Smith contributes $180,000, West
contributes $150,000, and Krug contributes $270,000. Their partnership agreement calls
for a 5% interest allowance on the partner’s capital balances with the remaining income
or loss to be allocated equally. If the partnership reports income of $174,000 for its first
year, what amount of income is credited to Krug’s capital account?
A.$58,000
B.$57,000
C.$61,500
D.$55,500
E.$48,000
24) Indicate whether a debit or credit entry would be made to record the following
changes in each account.
a. To decrease Cash.
b. To increase Owner, Capital.
c. To decrease Accounts Payable.
d. To increase Salaries Expense.
e. To decrease Supplies.
f. To increase Revenue.
g. To decrease Accounts Receivable.
h. To increase Owner, Withdrawals.
25) A method that charges the same amount of expense to each period of the asset’s
useful life is called:
A.Accelerated depreciation
B.Declining-balance depreciation
C.Straight-line depreciation
D.Units-of-production depreciation
E.Modified accelerated cost recovery system (MACRS) depreciation
26) A management concept that encourages all managers and employees to be in tune
with the wants and needs of customers, and which leads to flexible product designs and
production processes, is called:
A.Continuous improvement
B.Customer orientation
C.Just-in-time
D.Theory of constraints
E.Total quality management
27) The following data were reported by a corporation:
The number of outstanding shares is:
A.12,000
B.15,000
C.17,000
D.20,000
E.23,000
28) The maturity date of a note receivable:
A.Is the day of the credit sale
B.Is the day the note was signed
C.Is the day the note is due to be repaid
D.Is the date of the first payment
E.Is the last day of the month
29) The Unadjusted Trial Balance columns of a company’s work sheet show the balance
in the Office Supplies account as $750. The Adjustments columns show that $425 of
these supplies were used during the period. The amount shown as Office Supplies in the
Balance Sheet columns of the work sheet is:
A.$325 debit
B.$325 credit
C.$425 debit
D.$750 debit
E.$750 credit
30) A system of accounting for production operations that uses a periodic inventory
system is called a:
A.Manufacturing accounting system
B.Production accounting system
C.General accounting system
D.Cost accounting system
E.Finished goods accounting system
31) Everrine Corporation owns 3,000 shares of JRW Corporation. JRW Corporation has
25,000 shares of stock outstanding. JRW paid $4 per share in cash dividends to its
stockholders. The entry to record the receipt of these dividends is:
A.Debit Cash, $12,000; credit Long-Term Investments, $12,000
B.Debt Long-Term Investment, $12,000; credit Cash, $12,000
C.Debit Cash, $12,000; credit Dividend Revenue, $12,000
D.Debit Unrealized Gain-Equity, $12,000; credit Cash, $12,000
E.Debit Cash, $12,000; credit Unrealized Gain-Equity, $12,000
32) Que Corporation uses a process cost accounting system. The company
manufactured certain goods at a cost of $800 and sold them on credit to Are
Corporation for $1,075. The complete journal entry to be made by Que at the time of
this sale is:
A.Debit Accounts Receivable $1,075; credit Sales $1,075; debit Cost of Goods Sold
$800; credit Finished Goods Inventory $800
B.Debit Accounts Receivable $1,075; credit Sales $275; credit Finished Goods
Inventory $800
C.Debit Cost of Goods Sold $1,075; credit Sales $1,075
D.Debit Finished Goods Inventory $800; debit Sales $1,075; credit Accounts
Receivable $1,075; credit Cost of Goods Sold $800
E.Debit Accounts Receivable $1,075; debit Selling expense $800; credit Sales $1,075;
credit Cost of Goods Sold $800
33) Selected current year company information follows:
The return on total assets is:
A.2.24%
B.2.81%
C.3.64%
D.4.67%
E.6.28%
34) Match each of the following terms with the appropriate definitions.
1>Earnings per share A. Income earned by each share of a company’s outstanding
common stock.
2>Statement of stockholders’ equity B. The total amount of cash and other assets a
corporation receives from its stockholders in exchange for its stock.
3>Large stock dividend C. A financial statement that lists the beginning and ending
balances of each equity account and describes the changes in these accounts during the
period.
4>Date of declaration D. A correction of an error in a prior year that is reported in the
statement of retained earnings or changes in stockholders’ equity net of any income tax
effects.
5>Change in accounting estimate E. Corrections to previous estimates of future events
and outcomes accounted for in current and future periods.
6>Paid-in Capital F. A corporation’s own stock that was reacquired and is still held by
the corporation.
7>Nonparticipating preferred stock G. A stock dividend that is more than 25% of the
previously outstanding shares.
8>Treasury stock H. The date a corporation’s directors vote to issue a dividend.
9>Prior period adjustment I. An abnormal debit balance in retained earnings.
10>Deficit J. A feature that limits dividends to a maximum amount each year regardless
of excess dividends declared.
35) Cash equivalents:
A.Are short-term, highly liquid investment assets
B.Include 6-month CDs
C.Include checking accounts
D.Are recorded in petty cash
E.Include money orders
36) A company’s product sells at $12 per unit and has a $5 per unit variable cost. The
company’s total fixed costs are $98,000. The break-even point in units is:
A.5,158
B.7,000
C.8,167
D.14,000
E.19,600
37) Owners of preferred stock often do not have:
A.Ownership rights to assets of the corporation
B.Voting rights
C.Preference to dividends
D.The right to sell their stock on the open market
E.Preference to assets at liquidation
38) Chase and Hatch are partners and share equally in income or loss. Chase’s current
capital balance is $135,000 and Hatch’s is $120,000. Chase and Hatch agree to accept
Flax with a 30% interest in the partnership. Flax invests $115,000 in the partnership.
The amount credited to Flax’s capital account is:
A.$111,000
B.$115,000
C.$92,500
D.$120,000
E.$119,000
39) The Footwear Department of Lee’s Department Store had sales of $188,000, cost of
goods sold of $132,500, indirect expenses of $13,250, and direct expenses of $27,500
for the current period. The Footwear Department’s contribution to overhead as a percent
of sales is:
A.7.8%
B.14.9%
C.29.5%
D.66.7%
E.85.4%
40) A corporation had 10,000 shares of $10 par value common stock outstanding when
the board of directors declared a stock dividend of 3,000 shares. At the time of the stock
dividend, the market value per share was $12. The entry to record this dividend is:
A.Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable
$36,000
B.Debit Retained Earnings $36,000; credit Common Stock Dividend Distributable
$30,000; credit Paid-In Capital in Excess of Par Value, Common Stock $6,000
C.Debit Common Stock Dividend Distributable $36,000; credit Retained Earnings
$36,000
D.Debit Retained Earnings $30,000; credit Common Stock Dividend Distributable
$30,000
E.No entry is needed
41) Dunkin Company manufactures and sells a single product that sells for $480 per
unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is
$4,200,000. Compute the break-even point in units.
A.3,750
B.10,000
C.5,500
D.3,300
E.6,000
42) The accounting rate of return is calculated as:
A.The after-tax income divided by the total investment
B.The after-tax income divided by the annual average investment
C.The cash flows divided by the annual average investment
D.The cash flows divided by the total investment
E.The annual average investment divided by the after-tax income
43) A classified balance sheet:
A.Measures a company’s ability to pay its bills on time
B.Organizes assets and liabilities into important subgroups
C.Presents revenues, expenses, and net income
D.Reports operating, investing, and financing activities
E.Reports the effect of profit and withdrawals on owner’s capital
44) A company records purchases using the net method. On February 1, they purchased
merchandise inventory on account for $8,300 with terms of 1/10, n/30. The February 1
journal entry to record this transaction would include a:
A.Debit to Merchandise Inventory of $8,300
B.Debit to Merchandise Inventory of $8,217
C.Debit to Merchandise Inventory of $83
D.Credit to Merchandise Inventory of $83
E.Credit to Accounts Payable of $8,300
45) On October 1, Courtland Company sold merchandise in the amount of $5,800 to
Carter Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000.
Courtland uses the periodic inventory system. On October 4, Carter returns some of the
merchandise. The selling price of the merchandise is $500 and the cost of the
merchandise returned is $350. The entry or entries that Courtland must make on
October 4 is:
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
46) Comparative calendar year financial data for a company are shown below. Calculate
the following ratios for 2012:
(a) return on total assets.
(b) return on common stockholders’ equity.
47) A company purchased property for a building site. The costs associated with the
property were:
What portion of these costs should be allocated to the cost of the land and what portion
should be allocated to the cost of the new building?
A.$175,800 to Land; $18,800 to Building
B.$190,000 to Land; $3,800 to Building
C.$190,800 to Land; $1,000 to Building
D.$192,800 to Land; $0 to Building
E.$193,800 to Land; $0 to Building
48) On May 1, a company’s board of directors declared a 10% stock dividend to be
distributed on June 1 to the stockholders of record on May 21. The company had
250,000 shares of $10 par value common stock outstanding with a market value of $22
per share. Prepare the journal entries required on May 1, May 21, and June 1.
49) A corporation received its charter and began business this year. The company is
authorized to issue 50,000 shares of $100 par, 10%, noncumulative, nonparticipating
preferred stock, and 500,000 shares of no-par common stock. The following selected
transactions occurred during this year:
Prepare journal entries to record these transactions.
50) On June 1, a company issued $200,000 of 12% bonds at their par value plus
accrued interest. The interest on these bonds is payable semiannually on January 1 and
July 1 . Prepare the issuer’s journal entry to record the bond issuance of June 1 .
51) A company reported $990,000 in net income for the current year. Total
weighted-average number of common shares outstanding are 150,000 shares, and the
year-end market price is $79.20 per common share. Calculate the company’s price
earnings ratio.
52) The document that is an itemized statement of goods prepared by the vendor listing
the customer’s name, items sold, sales prices, and terms of the sale is the
_________________________.