1) A debenture bond is an unsecured bond which is issued against the general credit of
the borrower.
2) Allowance for Doubtful Accounts is a contra asset account.
3) The book value of a plant asset is always equal to its fair market value.
4) When finished goods are sold, the entry to record the cost of goods sold is a debit to
Finished Goods Inventory and a credit to Cost of Goods Sold.
5) The fair value of a plant asset is always the same as its book value.
6) The cash payback capital budgeting technique is a quick way to calculate a project’s
net present value.
7) For available-for-sale securities, the unrealized gain or loss account is carried
forward to future periods.
8) An accounting information system should be cost effective; that is, the benefits of the
information must outweigh the cost of providing it.
9) Under the cost method, Treasury Stock is debited at the price paid to reacquire the
shares, and the same amount is credited to Treasury Stock when the shares are sold.
10) The post-closing trial balance will contain only owner’s equity statement accounts
and balance sheet accounts.
11) Retained earnings that are restricted are unavailable for dividends.
12) Most direct fixed costs are not controllable by the profit center manager.
13) Comparisons of company data with industry averages can provide some insight into
the company’s relative position in the industry.
14) The revenue recognition principle dictates that revenue be recognized in the
accounting period in which cash is received.
15) Variable costing is not acceptable in reporting to stockholders under generally
accepted accounting principles.
16) Sales revenues are earned during the period cash is collected from the buyer.
17) Sales revenue should be recorded in accordance with the matching principle.
18) If a company has no beginning inventory and the unit cost of inventory items does
not change during the year, the value assigned to the ending inventory will be the same
under LIFO and average cost flow assumptions.
19) Cash realizable value is determined by subtracting Allowance for Doubtful
Accounts from Net Sales.
20) In a process cost system, total costs are determined at the end of a month or year.
21) Keeping a systematic, chronological diary of events that are measured in dollars
and cents is called
a.communicating
b.identifying
c.processing
d.recording
22) Which of the following statements is true?
a.Debits increase assets and increase liabilities
b.Credits decrease assets and decrease liabilities
c.Credits decrease assets and increase liabilities
d.Debits decrease liabilities and decrease assets
23) The standard rate of pay is $20 per direct labor hour. If the actual direct labor
payroll was $117,600 for 6,000 direct labor hours worked, the direct labor price (rate)
variance is
a.$2,400 unfavorable
b.$2,400 favorable
c.$3,000 unfavorable
d.$3,000 favorable
24) Athletics, Inc. completed Job No. C04 during 2014 . The job cost sheet listed the
following:
Direct materials$55,000
Direct labor$30,000
Manufacturing overhead applied$27,000
Units produced4,000 units
Units sold1,500 units
How much is the cost of the finished goods on hand from this job?
a.$112,000
b.$70,000
c.$42,000
d.$112,000
25) A $600,000, 8%, 20-year bond was issued at 102. The proceeds received from the
bond issuance are:
a.$588,000
b.$594,000
c.$600,000
d.$612,000
26) The ratios that are used to determine a company’s short-term debt paying ability are
a.asset turnover, times interest earned, current ratio, and accounts receivable turnover
b.times interest earned, inventory turnover, current ratio, and accounts receivable
turnover
c.times interest earned, acid-test ratio, current ratio, and inventory turnover
d.current ratio, acid-test ratio, accounts receivable turnover, and inventory turnover
27) Priscilla has the following inventory information.
July1Beginning Inventory20 units at $19$ 380
7Purchases70 units at $201,400
22Purchases10 units at $23 230
$2,010
A physical count of merchandise inventory on July 31 reveals that there are 35 units on
hand. Using the average-cost method, the value of ending inventory is
a.$680
b.$704
c.$723
d.$730
28) Which of the following journal entries is recorded correctly and in the standard
format?
a.Salaries and Wages Expense 500
Cash 1,500
Advertising Expense .1,000
b.Salaries and Wages Expense .500
Advertising Expense .1,000
Cash 1,500
c.Cash 1,500
Salaries and Wages Expense 500
Advertising Expense 1,000
d.Salaries and Wages Expense 500
Advertising Expense 1,000
Cash .1,500
29) $100,000$300,000
2.40,000240,000
3.90,00090,000
4.50,000150,000
a.1 and 2
b.1 and 4
c.only 1
d.only 2
30) The following information was taken from the annual manufacturing overhead cost
budget of Moen Company.
Variable manufacturing overhead costs$69,300
Fixed manufacturing overhead costs$41,580
Normal production level in labor hours23,100
Normal production level in units5,775
Standard labor hours per unit4
During the year, 5,500 units were produced, 18,340 hours were worked, and the actual
manufacturing overhead was $113,400. Actual fixed manufacturing overhead costs
equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis
of direct labor hours. Moens volume overhead variance is
a.$1,980 U
b.$5,900 U
c.$7,800 U
d.$16,500 U
31) If a check correctly written and paid by the bank for $427 is incorrectly recorded on
the company’s books for $472, the appropriate treatment on the bank reconciliation
would be to
a.add $45 to the bank’s balance
b.add $45 to the book’s balance
c.deduct $45 from the bank’s balance
d.deduct $427 from the book’s balance
32) Costs that relate specifically to one center and are incurred for the sole benefit of
that center are
a.common fixed costs
b.direct fixed costs
c.indirect fixed costs
d.noncontrollable fixed costs
33) In performing a vertical analysis, the base for sales returns and allowances is
a.sales
b.sales discounts
c.net sales
d.total revenues
34) A reasonable amount of uncollectible accounts is evidence
a.that the credit policy is too strict
b.that the credit policy is too lenient
c.of a sound credit policy
d.of poor judgments on the part of the credit manager
35) Langer Company has the following inventory information.
July1Beginning Inventory10 units at $90
5Purchases60 units at $92
14Sale40 units
21Purchases30 units at $95
30Sale28 units
Assuming that a perpetual inventory system is used, what is the ending inventory
(round all calculations to nearest dollar) under the moving-average cost method?
a.$2,930
b.$2,966
c.$2,986
d.$3,054
36) Each of the following is used in computing revised annual depreciation for a change
in estimate except
a.book value
b.cost
c.depreciable cost
d.remaining useful life
37) Posting
a.should be performed in account number order
b.accumulates the effects of journalized transactions in the individual accounts
c.involves transferring all debits and credits on a journal page to the trial balance
d.is accomplished by examining ledger accounts and seeing which ones need updating
38) Accounting’s contribution to the decision-making process occurs in all of the
following steps except to
a.identify the problem and assign responsibility
b.determine possible courses of action
c.review results of the decision
d.make a decision
39) LRRP Company had credit sales of $650,000. The beginning accounts receivable
balance was $15,000 and the ending accounts receivable balance was $140,000. What
were the cash collections from customers during the period?
a.$775,000
b.$650,000
c.$525,000
d.$665,000
40) The total cost of borrowing is increased only if the
a.bonds were issued at a premium
b.bonds were issued at a discount
c.bonds were sold at face value
d.market interest rate is less than the contractual interest rate on that date
41) TNT has the following transactions during April of the current year. Indicate
(a) the effect on the accounting equation and (b) the debit-credit analysis.
Apr. 1 Opens a law office, investing $25,000 in cash.
4 Pays rent in advance for 6 months, $9,000 cash.
16 Receives $8,000 from clients for services provided.
27 Pays secretary $2,800 salary.
42) If a company reports a net loss, it
a.may still have a net increase in cash
b.will not be able to pay cash dividends
c.will not be able to get a loan
d.will not be able to make capital expenditures
43) Variable costs for Hogan, Inc. are 25% of sales. Its selling price is $70 per unit. If
Hogan sells one unit more than break-even units, how much will profit increase?
a.$52.50
b.$17.50
c.$20
d.$280
44) Which of the following represents the largest number of common shares?
a.Treasury shares
b.Issued shares
c.Outstanding shares
d.Authorized shares
45) In using the internal rate of return method, the internal rate of return factor was 5.0
and the equal annual cash inflows were $40,000. The initial investment in the project
must have been
a.$40,000
b.$8,000
c.$200,000
d.an amount which cannot be determined
46) A sales invoice is a source document that
a.provides support for goods purchased for resale
b.provides evidence of incurred operating expenses
c.provides evidence of credit sales
d.serves only as a customer receipt
47) Physical units are 40,000. Total conversion costs are $237,000. There are 1,000
units in ending inventory which are 50% complete as to conversion costs. How much
are conversion costs per unit?
a.$6.00
b.$5.92
c.$11.86
d.$5.78
48) Both direct materials and indirect materials are
a.raw materials
b.manufacturing overhead
c.merchandise inventory
d.sold directly to customers by a manufacturing company
49) In the Shaping Department of Perkins Company the unit materials cost is $2.50 and
the unit conversion cost is $1.50. The department transferred out 6,000 units and had
2,000 units in ending work in process 30% complete. If all materials are added at the
beginning of the process, the total cost to be assigned to the ending work in process is
a.$2,400
b.$5,000
c.$5,900
d.$6,000
50) Which one of the following is not necessarily a party to a check?
a.Maker
b.Buyer
c.Payee
d.Payer
51) Which of the following statements is not true?
a.Comparability means using the same accounting principles from year to year within a
company
b.Faithful representation is the quality of information that gives assurance that it is free
from error
c.Relevant accounting information must be capable of making a difference in the
decision
d.The primary objective of financial reporting is to provide financial information that is
useful to investors and creditors for making decision
52) Phast Delivery Service reports the following costs and expenses in June 2014 .
Indirect materials$ 8,100Drivers salaries$13,000
Depreciation on deliveryAdvertising5,600
equipment11,900Delivery equipment
Dispatcher’s salary5,200repairs500
Property taxes on officeOffice supplies560
building780Office utilities1,940
CEO’s salary12,300Repairs on office
Gas and oil for delivery trucks2,300equipment140
Instructions
Determine the total amount of (a) delivery service (product) costs and (b) period costs.
53) Variable costs, as activity increases, will:
a.increase per unit
b.increase in total
c.remain constant per unit
d.both b. and c. above are correct
54) At May 1, 2014, Kibbee Company had beginning inventory consisting of 200 units
with a unit cost of $7. During May, the company purchased inventory as follows:
800 units at $7
600 units at $8
The company sold 1,000 units during the month for $12 per unit. Kibbee uses the
average cost method. The value of Kibbees inventory at May 31, 2014 is
a.$3,000
b.$4,425
c.$4,500
d.$7,500
55) Match the items below by entering the appropriate code letter in the space provided.
A.Prenumbered documentsG.Bank signature card
B.Custody of an asset should be kept H.Payee
separate from the record-keeping I.Maker
for that assetJ.Canceled checks
C.Cash registers, garment sensors K.NSF checks
and burglar alarms are examplesL.Outstanding checks
D.Bonding employeesM.Petty cash receipt
E.CollusionN.Cash equivalents
F.CashO.Voucher system
1>Segregation of duties.
2>One to whom a check is payable.
3>Two or more employees circumventing prescribed procedures.
4>Prevent a transaction from being recorded more than once.
5>Checks which have been returned by the maker’s bank for lack of funds.
6>Checks which have been paid by the depositor’s bank.
7>Indicates those people authorized to sign checks.
8>Anything that a bank will accept for deposit.
9>Mechanical and electronic control devices.
10>One who issues a check.
11>Insurance protection against misappropriation of assets.
12>An extensive network of approvals by authorized individuals.
13>Document indicating the purpose of a petty cash expenditure.
14>Issued checks that have not been paid by the bank.
15>Highly liquid investments.
56) Mofros Computer Repair Shop started the year with total assets of $300,000 and
total liabilities of $200,000. During the year, the business recorded $500,000 in
computer repair revenues, $300,000 in expenses, and Mofro withdrew $50,000. The net
income reported by Mofro’s Computer Repair Shop for the year was
a.$100,000
b.$150,000
c.$200,000
d.$250,000
57) (a)What is the term used to describe the owner’s equity section of a corporation? (b)
Identify the two owners’ equity accounts in a corporation and indicate the purpose of
each.
58) A bank statement
a.lets a depositor know the financial position of the bank as of a certain date
b.is a credit reference letter written by the depositor’s bank
c.is a bill from the bank for services rendered
d.shows the activity which increased or decreased the depositor’s account balance
59) The requirement that only transaction data capable of being expressed in terms of
money be included in the accounting records relates to the
economic entity assumption
cost principle
c.monetary unit assumption
d.both the cost principle and the monetary unit assumption
60) The income statement is an important financial statement used by individuals who
are interested in the operations of a business enterprise. Explain how the time period
assumption and the revenue recognition and expense recognition principles provide
guidance to accountants in preparing an income statement.
61) Failure to adjust a prepaid expense account for the amount expired will cause
______________ to be understated and ________________ to be overstated.
62) An income statement which emphasizes cost behavior is prepared using the
_________________________ format.
63) Denny’s Fish Camp has sales of $1,600,000 for the first quarter of 2014 . In making
the sales, the company incurred the following costs and expenses.
Instructions
Calculate net income under CVP for 2014 .
64) Oceanview Wholesale Merchandise had 20,000 shares of 6%, $20 par value
preferred stock and 15,000 shares of $25 par value common stock outstanding
throughout 2014 . These data apply to each of the independent situations below.
1>Assuming that total dividends declared in 2014 were $25,000 and that the preferred
stock is not cumulative, common stockholders should receive total 2014 dividends of:
$________________.
2>Assuming that total dividends declared in 2014 were $80,000 and that the preferred
stock is cumulative with two years’ preferred dividends in arrears on December 31,
2013, the preferred stockholders should receive 2014 dividends totaling:
$________________.
3>Assuming that total dividends in 2014 were $35,000 and that the preferred stock is
cumulative with one year’s preferred dividends in arrears on December 31, 2013, the
preferred stockholders should receive 2014 dividends totaling:
$________________.
4>Assuming that total dividends declared in 2014 were $45,000, that the cumulative
preferred stock was issued on January 1, 2013, and that $10,000 of preferred dividends
were declared and paid in 2013, the common stockholders should receive 2014
dividends totaling:
$________________.
5>Assuming that total dividends declared in 2014 were $60,000 and that the cumulative
preferred stock dividends have not been paid after 2012, the common stockholders
should receive total 2014 dividends of:
$________________.
6>Assuming that the total dividends declared in 2014 were $190,000 and that the
cumulative preferred stock received dividends in the following manner: In full up to
2010, $18,000 in 2011, $4,000 in 2012, and $15,000 in 2013; common stockholders
should receive total 2014 dividends of:
$________________.
65) The adjusted trial balance of Rocky Acre Spread Inc. on December 31, 2014
includes the following accounts: Accumulated Depreciation, $6,000; Depreciation
Expense, $2,000; Notes Payable $7,500; Interest Expense $150; Utilities Expense,
$300; Rent Expense, $500; Service Revenue, $19,600; Salaries and Wages Expense,
$6,000; Supplies, $200; Supplies Expense, $1,200; Salaries and Wages Payable, $600.
Prepare an income statement for the month of December.