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1) A manager in a cost center also has responsibility and authority over the revenues
and the costs.
2) When a business receives a bill from the utility company, no entry should be made
until the invoice is paid.
3) Once the adjusted trial balance is in balance, the flow of accounts will now go into
the financial statements.
4) A company can use comparisons of its financial data to the data of other companies
and industry values to evaluate its position.
5) When a corporation issues bonds, it executes a contract with the bondholders, known
as a bond debenture.
6) When a clerk enters a sale and the customer can see the amount displayed and is
given a cash receipt, this is an example of a preventive control.
7) If the debit portion of an adjusting entry is to an asset account, then the credit portion
must be to a liability account.
8) In applying the first-in, first-out method of costing inventories, if 8,000 units which
are 30% completed are in process at June 1, 28,000 units are completed during June,
and 4,000 units were 80% completed at June 30, the number of equivalent units of
production for June was 28,600.
9) Planning is the process of developing the companys objectives or goals and
translating these objectives into courses of action.
10) The accounting equation can be expressed as Assets - Liabilities = Stockholders
Equity.
11) The costs of initially producing an intermediate product should be considered in
deciding whether to further process a product, even though the costs will not change,
regardless of the decision.
12) An installment note is a debt that requires the borrower to make equal periodic
payments to the lender for the term of the note.
13) A company realizes that the last two day's revenue for the month was billed but not
recorded. The adjusting entry on December 31 is debit Accounts Receivable and credit
Fees Earned.
14) The service department will determine its service department charge rate and charge
the companys divisions or departments according to their use of that particular service
department.
15) Which type of accountant typically practices as an individual or as a member of a
public accounting firm?
A.Certified Public Accountant
B.Certified Payroll Professional
C.Certified Internal Auditor
D.Certified Management Accountant
16) Which of the following are features of the just-in-time manufacturing system?
(a) maintaining excess inventory to ensure that products will always be available
(b) cross training of employees
(c) giving employees additional authority and responsibility
(d) product oriented layout
(e) increased set-up time
17) A company with $70,000 in current assets and $50,000 in current liabilities pays a
$1,000 current liability. As a result of this transaction, the current ratio and working
capital will
A.both decrease
B.both increase
C.increase and remain the same, respectively
D.remain the same and decrease, respectively
18) An employee of Morgan Corporation has found some partially completed units of
Model X in a dusty corner of the warehouse. A job ticket attached to the units indicates
that a total of $750 in manufacturing costs have been used to bring the materials to this
point in the manufacturing process. The units can be sold in their current condition for
$275 to a scrap metal dealer. If Morgan spends $250 to complete the units, they could
be sold for $600.
Required: A. What should Morgan do? Why?
B. Identify the sunk cost, if any.
19) The budgeted finished goods inventory and cost of goods sold for a manufacturing
company for the year 2012 are as follows: January 1 finished goods, $765,000;
December 31 finished goods, $640,000; cost of goods sold for the year, $2,560,000.
The budgeted costs of goods manufactured for the year is?
A.$1,405,000
B.$2,560,000
C.$2,435,000
D.$3,965,000
20) A responsibility center in which the department manager is responsible for costs,
revenues, and assets for a department is called:
A.a cost center
B.a profit center
C.an operating center
D.an investment center
21) Which of the following would not normally operate as a service business?
A.pet groomer
B.supermarket
C.lawn care company
D.styling salon
22) In a job order cost accounting system, the entry to record the flow of direct
materials into production is:
A.debit Work in Process, credit Materials
B.debit Materials, credit Work in Process
C.debit Factory Overhead, credit Materials
D.debit Work in Process, credit Supplies
23) For accounting purposes, the method used to account for investments in common
stock is determined by
A.the amount paid for the stock by the investor
B.whether the acquisition of the stock by the investor was "friendly" or "hostile."
C.the extent of an investor's influence over the operating and financial affairs of the
investee
D.whether the stock has paid dividends in past years
24) On the statement of cash flows prepared by the indirect method, the cash flows
from operating activities section would include
A.receipts from the sale of investments
B.amortization of premium on bonds payable
C.payments for cash dividends
D.receipts from the issuance of capital stock
25) The interest rate specified in the bond indenture is called the
A.discount rate
B.contract rate
C.market rate
D.effective rate
26) Which of the following is not a right possessed by common stockholders of a
corporation?
A.the right to vote in the election of the board of directors
B.the right to receive a minimum amount of dividends
C.the right to sell their stock to anyone they choose
D.the right to share in assets upon liquidation
27) Rent expense on a factory building would be treated as a(n):
A.period cost
B.product cost
C.direct cost
D.both A and C are correct
28) Bargain Wholesalers sells pet supplies to retailers including Pet World Supplies.
Bargain Wholesalers uses perpetual inventory. Use a General Journal to journalize the
following three transactions during the month of May:
(a) On May 4th, Bargain Wholesalers sells inventory to Pet World Supplies for
$8,250.00 with terms 1/10, n/30. The cost of the merchandise is $5,755.00.
(b) On May 13th, Bargain Wholesalers sells an additional $10,985 in inventory to Pet
World Supplies with terms 1/10, n/30. The cost of the merchandise is $6,925.00.
(c) On May 23rd, Bargain Wholesalers receives a check from Pet World Supplies
paying the balance due.
29) The manufacturing cost of Carrie Industries for the first three months of the year are
provided below:
Using the high-low method, determine the (a) variable cost per unit, and (b) the total
fixed cost.
30) As time passes, fixed assets other than land lose their capacity to provide useful
services. To account for this decrease in usefulness, the cost of fixed assets is
systematically allocated to expense through a process called
A.equipment allocation
B.depreciation
C.accumulation
D.matching
31) If variable selling and administrative expenses totaled $120,000 for the year
(80,000 units at $1.50 each) and the planned variable selling and administrative
expenses totaled $136,500 (78,000 units at $1.75 each), the effect of the unit cost factor
on the change in variable selling and administrative expenses is:
A.$19,500 decrease
B.$19,500 increase
C.$20,000 decrease
D.$20,000 increase
32) Which of the following entries records the collection of cash from cash customers?
A.Fees Earned, debit; Cash, credit
B.Fees Earned, debit; Accounts Receivable, credit
C.Cash, debit; Fees Earned, credit
D.Accounts Receivable, debit; Fees Earned, credit
33) Complete the missing items in the following chart:
Prepaid Expenses
Examples Adjusting Entry Financial Statement Impact if Adjusting Entry is
Omitted
Supplies,(a) Dr. Expense Cr. Asset Income Statement: Revenues: No effect Expenses:
Understated Net income: (b)Balance Sheet: Assets: (c) Liabilities: (d) Stockholders
equity: Overstated
Unearned Revenues
Examples Adjusting Entry Financial Statement Impact if Adjusting Entry is
Omitted
Unearned rent,(e) (f) Income Statement: Revenues: (g) Expenses: No effect Net
income: (h)Balance Sheet: Assets: (i) Liabilities: Overstated Stockholders equity: (j)
Accrued Revenues
Examples Adjusting Entry Financial Statement Impact if Adjusting Entry is
Omitted
Interest income due on a note,(k) Dr. Asset Cr. Revenue Income Statement: Revenues:
(l) Expenses: (m) Net income: UnderstatedBalance Sheet: Assets: (n) Liabilities: (o)
Stockholders equity: Understated
Accrued Expenses
Examples Adjusting Entry Financial Statement Impact if Adjusting Entry is
Omitted
Interest due on a notes payable, (p) (q) Income Statement: Revenues: No effect
Expenses: (r) Net income: (s)Balance Sheet: Assets: (t) Liabilities: Understated
Stockholders equity: (u)
34) Which of the following describes the classification and normal balance of the fees
earned account?
A.an asset with a credit balance
B.a liability with a credit balance
C.an expense with a debit balance
D.a revenue with a credit balance
35) The Cunningham Factory has determined that its budgeted factory overhead budget
for the year is $6,750,000 and budgeted direct labor hours are 5,000,000. If the actual
direct labors for the period are 175,000 how much overhead would be allocated to the
period?
A.$675,000
B.$129,630
C.$236,250
D.$175,000
36) Determine the activity-based cost for each tape drive unit.
A.$97.73
B.$232.69
C.$394.12
D.$103.84
37) Which of the following is not a short-cut in finding errors on the trial balance?
A.Determine the difference between debits and credits and look for the amount
B.Determine the amount and change any account to make the trial balance correct
C.Determine the difference between debits and credits, divide the amount by 2, look for
the amount
D.Determine the difference between debits and credits, divide the amount by 9, if it
divides evenly, look for a transposition or slide error
38) Identify the following as a Fixed Asset (FA), or Intangible Asset (IA), or Natural
Resource (NR), or Neither (N)
(a) computer
(b) patent
(c) oil reserve
(d) goodwill
(e) U. S. Treasury note
(f) land used for employee parking
(g) gold mine
39) In a lease contract, the party who legally owns the asset is the
A.lessee
B.lessor
C.operator
D.banker
40) On January 1, 2011, Cary Parsons established Carys Catering Service. Listed below
are accounts to use for transactions (a) through (e), each identified by a number.
Following this list are the transactions that occurred during the first month of
operations. You are to indicate for each transaction the accounts that should be debited
and credited by placing the account number(s) in the appropriate box.
Transactions Account(s) Debited Account(s) Credited
a. Purchased supplies for cash.
b. Paid the annual premiums on property and casualty insurance.
c. Received cash for a job previously recorded on account.
d. Paid a creditor a portion of the amount owed for equipment previously purchased on
account.
e. Received cash for a completed job.
41) The production budgets are used to prepare which of the following budgets.
A.Operating expenses
B.Direct materials purchases, direct labor cost, factory overhead cost
C.Sales in dollars
D.Sales in units
42) If sales are $400,000, variable costs are 75% of sales, and operating income is
$50,000, what is the operating leverage?
A.2.5
B.7.5
C.2.0
D.0
43) Which of the following groups of accounts have a normal debit balance?
A.revenues, liabilities
B.assets, liabilities
C.liabilities, expenses
D.assets, expenses
44) After net income is entered on the work sheet, the Balance Sheet Debit and Credit
columns must
A.be the same amount as the total amount of the Income Statement Debit and Credit
columns
B.equal each other
C.be the same amount as the total amount in the Adjusted Trial Balance Debit and
Credit columns
D.not be equal to each other and need not be the same total amounts as any other pair of
columns on the work sheet
45) The summary of the payroll for the monthly pay period ending July 15 indicated the
following:
Journalize the entries to record (a) the payroll and (b) the employer's payroll tax
expense for the month. The state unemployment tax rate is 3.1%, and the federal
unemployment tax rate is 0.8%. Only $25,000 of salaries are subject to unemployment
taxes.
46) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 2 during the period for
applied overhead is:
A.Factory Overhead--Department 280,000
Work in Process--Department 280,000
B.Work in Process--Department 2230,000
Factory Overhead--Department 2230,000
C.Work in Process--Department 280,000
Factory Overhead--Department 280,000
D.Work in Process--Department 2150,000
Factory Overhead--Department 2150,000
47) A voucher is usually supported by
A.a supplier's invoice
B.a purchase order
C.a receiving report
D.all of the above
48) On October 1, Black Company receives a 9% interest bearing note from Reese
Company to settle a $20,000 account receivable. The note is due in six months. At
December 31, Black should record interest revenue of
A.$0
B.$450
C.$900
D.$1,800
49) If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00
each) and the planned variable cost of goods sold totaled $86,250 (15,000 units at $5.75
each), the effect of the quantity factor on the change in variable cost of goods sold is:
A.$5,000 decrease
B.$5,000 increase
C.$5750 increase
D.$5,750 decrease
50) Perfect Stampers makes and sells aftermarket hub caps. The variable cost for each
hub cap is $4.75 and the hub cap sells for $9.95. Perfect Stampers has fixed costs per
month of $3,120. Compute the contribution margin per unit and break-even sales in
units and in dollars for the month.
51) An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40
hours per week. Assume that the employee worked 60 hours during the week, and that
the gross pay prior to the current week totaled $58,000. Assume further that the social
security tax rate was 7.0% (on earnings up to $100,000), the Medicare tax rate was
1.5%, and the federal income tax to be withheld was $614.
Required:
(1) Determine the gross pay for the week.
(2) Determine the net pay for the week.
53) Describe at least five benefits of budgeting.
54) The following data regarding purchases and sales of a commodity were taken from
the related perpetual inventory account:
55) On April 10, Maranda Corporation issued for cash 11,000 shares of no-par common
stock at $25. On May 5, Maranda issued at par 1,000 shares of 4%, $50 par preferred
stock for cash. On May 25, Maranda issued for cash 15,000 shares of 4%, $50 par
preferred stock at $55.
Journalize the entries to record the April 10, May 5, and May 25 transactions.
