1) The minimum amount of desired divisional income from operations is set by top
management by establishing a minimum rate of return considered acceptable for
invested assets.
2) A business that requires all cash payments be made by check can not use a petty cash
system.
3) There are two alternatives to reporting cash flows from operating activities in the
statement of cash flows: (1) the direct method and (2) the indirect method.
4) In deciding whether to accept business at a special price, the short-run price should
be set high enough to cover all variable costs and expenses.
5) The master budget is an integrated set of budgets that tie together a companys
operating, financing and investing activities into an integrated plan for the coming year.
6) Internal controls for cash payments also apply to payrolls.
7) A cost that will not be affected by later decisions is termed a sunk cost.
8) A trial balance determines the accuracy of the numbers.
9) Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential cost of producing Product P is $13 per pound.
10) The closing process is sometimes referred to as closing the books.
11) If employees accept a wage contract that increases the unit contribution margin, the
break-even point will decrease.
12) Other receivables include non trade receivables such as loans to company officers.
13) The borrower is the one who issues a note payable to a creditor.
14) Ordinarily, a corporation owning more than 20% and less than 50% of voting stock
of another corporation accounts for the investment using the equity method.
15) A notation in the post reference column of the general journal indicates that the
amount has been posted to the ledger.
16) If fixed costs are $650,000 and the unit contribution margin is $30, the sales
necessary to earn an operating income of $30,000 are 14,000 units.
17) When the terms of sale are FOB shipping point, the buyer should pay the freight
charges.
18) A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30days after
the invoice date to take advantage of the cash discount.
19) A manufacturing business reports just two types of inventory on its balance sheet:
work in process inventory and finished goods inventory.
20) When land is purchased to construct a new building, the cost of removing any
structures on the land should be charged to the building account.
21) The excess of sales price of treasury stock over its cost should be credited to
A.Treasury Stock Receivable
B.Premium on Capital Stock
C.Paid-In Capital from Sale of Treasury Stock
D.Income from Sale of Treasury Stock
22) Earning revenue
A.increases assets, increases stockholders equity
B.increases assets, decreases stockholders equity
C.increases one asset, decreases another asset
D.decreases assets, increases liabilities
23) For which of the following businesses would a process cost system be appropriate?
A.An oil refinery
B.Yacht builder
C.Specialty furniture company
D.Custom electronics manufacturer
24) 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 2 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 3 were $50,000, $60,000, and $70,000,
respectively. In addition, work in process at the beginning of the period for Department
3 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 3 during the period for direct
materials is:
A.Work in Process–Department 3100,000
Materials100,000
B.Work in Process–Department 3125,000
Materials125,000
C.Work in Process–Department 350,000
Materials50,000
D.Work in Process–Department 370,000
Materials70,000
25) Prime costs are
A.direct materials and factory overhead
B.direct materials and direct labor
C.direct labor and factory overhead
D.period costs and factory overhead
26) To calculate income from operations, total service department charges are:
A.added to income from operations before service department charges
B.subtracted from operating expenses
C.subtracted from income from operations before service department charges
D.subtracted from gross profit margin
27) State the section(s) of the statement of cash flows prepared by the indirect method
(operating activities, investing activities, financing activities, or not reported) and the
amount that would be reported for each of the following transactions:
(a) Received $120,000 from the sale of land costing $70,000.
(b) Purchased investments for $75,000.
(c) Declared $35,000 cash dividends on stock. $5,000 dividends were payable at the
beginning of the year, and $6,000 were payable at the end of the year.
(d) Acquired equipment for $64,000 cash.
(e) Declared and issued 100 shares of $20 par common stock as a stock dividend, when
the market price of the stock was $32 a share.
(f) Recognized depreciation for the year, $37,000.
(g) Issued 85,000 shares of $10 par common stock for $25 a share, receiving cash.
(h) Issued $500,000 of 20-year, 10% bonds payable at 99.
(i) Borrowed $43,000 from Regional Bank, issuing a 5-year, 8% note for that amount.
28) Which of the following is not true about why a service firm will use the job order
costing system?
A.to help control costs
B.to determine client billing
C.to determine department costs within the firm
D.to determine profit
29) The formula to compute direct labor time variance is to calculate the difference
between
A.actual costs – standard costs
B.actual costs + standard costs
C.(actual hours * standard rate) – standard costs
D.actual costs – (actual hours * standard rate)
30) The present value of $40,000 to be received in one year, at 6% compounded
annually, is (rounded to nearest dollar)
A.$37,736
B.$42,400
C.$40,000
D.$2,400
31) Horizontal analysis is a technique for evaluating financial statement data
A.for one period of time
B.over a period of time
C.on a certain date
D.as it may appear in the future
32) One potential advantage of financing corporations through the use of bonds rather
than common stock is
A.the interest on bonds must be paid when due
B.the corporation must pay the bonds at maturity
C.the interest expense is deductible for tax purposes by the corporation
D.a higher earnings per share is guaranteed for existing common shareholders
33) Use the work sheet for Finley Company to answer the questions that follow.
The entry to close expenses would be
A.Wages Expense 63,000
Rent Expense 27,000
Depreciation Expense 15,000
Income Summary 105,000
B.Expenses 105,000
Income Summary 105,000
C.Wages Expense 63,000
Rent Expense 27,000
Depreciation Expense 15,000
Dividends 105,000
D.Income Summary 105,000
Wages Expense 63,000Rent Expense 27,000Depreciation Expense 15,000
34) When using the product cost concept of applying the cost-plus approach to product
pricing, what is included in the markup?
A.Desired profit
B.Total fixed manufacturing costs, total fixed selling and administrative expenses, and
desired profit
C.Total costs plus desired profit
D.Total selling and administrative expenses plus desired profit
35) At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to
employees was omitted. Which of the following statements is true?
A.Salary expense for the year was understated
B.The total of the liabilities at the end of the year was overstated
C.Net income for the year was understated
D.Stockholders equity at the end of the year was understated
36) Which of the following is a noncash investing and financing activity?
A.payment of a cash dividend
B.payment of a six-month note payable
C.purchase of merchandise inventory on account
D.issuance of common stock to acquire land
37) Donner Company is selling a piece of land adjacent to their business. An appraisal
reported the market value of the land to be $220,000. The Focus Company initially
offered to buy the land for $177,000. The companies settled on a purchase price of
$212,000. On the same day, another piece of land on the same block sold for $232,000.
Under the cost concept, what is the amount that will be used to record this transaction in
the accounting records?
A.$177,000
B.$212,000
C.$220,000
D.$232,000
38) Which of the following is not an assumption underlying cost-volume-profit
analysis?
A.The break-even point will be passed during the period
B.Total sales and total costs can be represented by straight lines
C.Costs can be accurately divided into fixed and variable components
D.The sales mix is constant
39) On July 1st, Hartford Construction purchases a bulldozer for $228,000. The
equipment has a 9 year life with a residual value of $16,000. Hartford uses
units-of-production method depreciation and the bulldozer is expected to yield 26,500
operating hours.
(a) Calculate the depreciation expense per hour of operation.
(b) The bulldozer is operated 1,250 hours in the first year, 2,755 hours in the second
year, and 1,225 hours in the third year of operations. Journalize the depreciation
expense for each year.
40) Accompanying the bank statement was a credit memo for a short-term note
collected by the bank for the company. This item is a(n)
A.deduction from the balance per company’s records
B.addition to the balance per bank statement
C.deduction from the balance per bank statement
D.addition to the balance per company’s records
41) Merchandise with an invoice price of $3,000 is purchased on September 2 subject
to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200.
What is the cost of the merchandise if paid on September 12, assuming the discount is
taken?
A.$3,140
B.$3,136
C.$2,744
D.$2,940
42) Department E had 4,000 units in Work in Process that were 40% completed at the
beginning of the period at a cost of $12,500. 14,000 units of direct materials were added
during the period at a cost of $28,700. 15,000 units were completed during the period,
and 3,000 units were 75% completed at the end of the period. All materials are added at
the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710. The number of equivalent units of production for the period for conversion if
the first-in, first-out method is used to cost inventories was:
A.15,650
B.14,850
C.14,150
D.14,650
43) In process cost accounting, the costs of direct materials and direct labor are charged
directly to:
A.service departments
B.processing departments
C.customer accounts receivable
D.job orders
44) Which account is not classified as a selling expense?
A.Sales Salaries
B.Freight-Out
C.Freight-In
D.Advertising Expense
45) Prepare the following journal entries and calculations:
(a) A patent that was acquired for $410,000 at the beginning of the current year expires
in 15 years and is expected to have value for 4 years. Present the adjusting entry to
amortize the patent for the current year.
(b) Mineral rights on an ore deposit estimated at 4,000,000 tons of ore were acquired
for $2,800,000. Present the adjusting entry to record depletion for the current year,
during which 350,000 tons of ore were removed.
(c) Legal costs incurred to defend the rights that a patent provided in (a) were $60,000.
At the time the patent had been in existence for 5 years. Determine the amount to be
amortized for the current fiscal year.
46) The journal entry a company uses to record the issuance of a discounted note for the
purpose of borrowing funds for the business is
A.debit Cash and Interest Expense; credit Notes Payable
B.debit Cash and Interest Payable; credit Notes Payable
C.debit Accounts Payable; credit Notes Payable
D.debit Notes Payable; credit Cash
47) Which of the following below is an example of a capital expenditure?
A.cleaning the carpet in the front room
B.tune-up for a company truck
C.replacing an engine in a company car
D.replacing all burned-out light bulbs in the factory
48) Depreciation on Office Equipment is $3,300. The adjusting entry on December 31,
2011 would be
49) Krammer Company has liabilities equal to one fourth of the total assets. Krammers
stockholders equity is $45,000. Using the accounting equation, what is the amount of
liabilities for Krammer?
50) On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond
that pays semi-annual interest of $20,000 ($500,000 8% 1/2), receiving cash of
$437,740. Journalize the entry to record the issuance of the bonds.
51) Doran Technologies produces a single product. Expected manufacturing costs are as
follows:
Variable costs
Fixed costs per month
Required:
Estimate manufacturing costs for production levels of 25,000 units, 30,000 units, and
35,000 units per month.
52) The Dean Company has sales of $500,000, and the break-even point in sales dollars
of $300,000. Determine the companys margin of safety percentage.
53) Falcon Company acquired an adjacent lot to construct a new warehouse, paying
$40,000 and giving a short-term note for $410,000. Legal fees paid were $13,275,
delinquent taxes assessed were $14,500, and fees paid to remove an old building from
the land were $15,800. Materials salvaged from the demolition of the building were
sold for $6,800. A contractor was paid $890,000 to construct a new warehouse.
Determine the cost of the land to be reported on the balance sheet and show your work.
54) Collins Landscape Company purchased various landscaping supplies on account to
be used for landscape designs for its customers. How will this business transaction
affect the accounting equation?