1) Multiple production department factory overhead rates are less accurate and less
costly than are plantwide factory overhead rates.
2) An account receivable is a claim against a customer arising from a sale on account.
3) Goods that are partway through the manufacturing process, but not yet complete, are
referred to as materials inventory.
4) In preparing a bank reconciliation, the amount of a canceled check omitted from the
journal is added to the balance per company’s records.
5) Owners rights to assets rank ahead of creditors’ rights to assets.
6) Treasury Stock is listed in the stockholders’ equity section onthe balance sheet.
7) The bank reconciles its statement to the company’s records.
8) A disadvantage to using the residual income performance measure is that it
encourages managers to spend only the minimum acceptable rate of return on assets set
by upper management.
9) Any twelve-month accounting period adopted by a company is known as its fiscal
year.
10) Investments in bonds that management intends to hold to maturity are called trading
securities.
11) In computing the maturity date of a note, the date the note is issued is included but
the due date is omitted.
12) If the standard to produce a given amount of product is 600 direct labor hours at
$17 and the actual was 500 hours at $15, the time variance was $1,500 unfavorable.
13) Part of the cash budget is based on information drawn from the capital expenditures
budget.
14) The payment of dividends is an example of a cost.
15) In valuing damaged merchandise for inventory purposes, net realizable value is the
estimated selling price less any direct costs of disposal.
16) The FIFO method of process costing is simpler than the Average cost method.
17) Expense accounts are increased by credits.
18) The updating of accounts is called the adjusting process.
19) The adoption of variable costing for managerial decision making is based on the
premise that fixed factory overhead costs are related to productive capacity of the
manufacturing plant and are normally not affected by the number of units produced.
20) The Clydesdale Company has sales of $4,500,000. It also has invested assets of
$2,000,000 and operating expenses of $3,600,000. The company has established a
minimum rate of return of 7%.
What is Clydesdale Company’s investment turnover?
A.1.80
B.2.25
C.1.25
D.1.4
21) Which of the following causes he difference between the planned and actual
contribution margin?
A.an increase or decrease in the amount of sales
B.an increase in the amount of variable costs and expenses
C.a decrease in the amount of variable costs and expenses
D.all of the above
22) Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts
journal as $2,300. What entry is required in the company’s accounts?
A.debit Sales; credit Cash
B.debit Cash; credit Accounts Receivable
C.debit Cash; credit Sales
D.debit Accounts Receivable; credit Cash
23) Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45.
The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for
$3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the
invoice within the discount period. What is the amount of gross profit earned by Abbey
Co. on the above transactions?
A.10,500
B.30,772
C.7,972
D.31,400
24) The relative distribution of sales among various products sold is referred to as the:
A.by-product mix
B.joint product mix
C.profit mix
D.sales mix
25) After all of the account balances have been extended to the Balance Sheet columns
of the work sheet, the totals of the debit and credit columns show debits of $37,686 and
the credits of $41,101. This indicates that
A.neither net income or loss can be calculated because it is found on the income
statement
B.the company has a net loss of $3,415 for the period
C.the company has a net income of $3,415 for the period
D.the amounts are out of balance and need to be corrected
26) A $300,000 bond was redeemed at 104 when the carrying value of the bond was
$315,000. The entry to record the redemption would include a
A.loss on bond redemption of $3,000
B.gain on bond redemption of $3,000
C.gain on bond redemption of $4,000
D.loss on bond redemption of $4,000
27) For higher levels of management, responsibility accounting reports:
A.are more detailed than for lower levels of management
B.are more summarized than for lower levels of management
C.contain about the same level of detail as reports for lower levels of management
D.are rarely provided or reviewed
28) Gadget Palace is a retailer selling unique hardware. Gadget Palace uses perpetual
inventory. Use a General Journal to journalize the following four transactions during the
month of August:
(a) On July 5th, Gadget Palace purchases inventory for sale from Turbo Tools for
$11,400.00 with terms 2/10, n/30.
(b) On July 6th, Gadget Palace pays Fast Truck Transport $75 for freight-in on the July
5th order.
(c) Gadget Palace gets a credit memo from Turbo Tools for $215.00 for damaged
merchandise on July 8th.
(d) On July 15th, Gadget Palace pays Turbo Tools the balance due.
29) Costs that vary in total in direct proportion to changes in an activity level are called:
A.fixed costs
B.sunk costs
C.variable costs
D.differential costs
30) If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned
sales totaled $799,500 (78,000 units at $10.25 each), the effect of the unit price factor
on the change in sales is:
A.$19,500 decrease
B.$19,500 increase
C.$20,000 decrease
D.$20,000 increase
31) If merchandise inventory is being valued at cost and the price level is steadily
rising, the method of costing that will yield the highest net income is
A.periodic
B.LIFO
C.FIFO
D.average
32) Land acquired so it can be resold in the future is listed in the balance sheet as a(n)
A.fixed asset
B.current asset
C.investment
D.intangible asset
33) The following data (in thousands of dollars) have been taken from the accounting
records of Rayburn Corporation for the current year.
Required: (Present all reports and calculations in thousands of dollars)
(a) What was the cost of the raw materials used in production during the year?
(b) What was the cost of goods manufactured (finished) for the year?
(c) What was the cost of goods sold for the year?
(d) What was the net income for the year?
34) During the taking of its physical inventory on December 31, 2014, Barrys Bike
Shop incorrectly counted its inventory as $350,000 instead of the correct amount of
$280,000. The effect on the balance sheet and income statement would be as follows:
A.assets overstated by $70,000;retained earnings understated by $70,000; net income
statement understated by $70,000
B.assets overstated by $70,000;retained earnings understated by $70,000; no effect on
the income statement
C.assets and retained earnings overstated by $70,000; net income overstated by $70,000
D.assets and retained earnings overstated by $70,000; net income understated by
$70,000
35) The following are steps in the accounting cycle. Of the following, which would be
prepared last?
A.An adjusted trial balance is prepared
B.Transactions are posted to the ledger
C.An unadjusted trial balance is prepared
D.Adjusting entries are journalized and posted to the ledger
36) If $1,000,000 of 8% bonds are issued at 105, the amount of cash received from the
sale is
A.$1,080,000
B.$950,000
C.$1,000,000
D.$1,050,000
37) If fixed costs are $1,500,000, the unit selling price is $250, and the unit variable
costs are $130, what is the amount of sales required to realize an operating income of
$200,000?
A.14,166 units
B.12,500 units
C.16,000 units
D.11,538 units
38) Sinking Fund Investments would be classified on the balance sheet as
A.a current asset
B.a fixed asset
C.an investment
D.a deferred debit
39) The journal entry a company uses to record pension rights that have not been
funded for its salaried employees, at the end of the year is
A.debit Salary Expense; credit Cash
B.debit Pension Expense; credit Unfunded Pension Liability
C.debit Pension Expense; credit Unfunded Pension Liability and Cash
D.debit Pension Expense; credit Cash
40) If the direct write-off method of accounting for uncollectible receivables is used,
what general ledger account is credited to write off a customer’s account as
uncollectible?
A.Uncollectible Accounts Expense
B.Accounts Receivable
C.Allowance for Doubtful Accounts
D.Interest Expense
41) Falcon Co. produces a single product. Its normal selling price is $30.00 per unit.
The variable costs are $19.00 per unit. Fixed costs are $25,000 for a normal production
run of 5,000 units per month. Falcon received a request for a special order that would
not interfere with normal sales. The order was for 1,500 units and a special price of
$20.00 per unit. Falcon Co. has the capacity to handle the special order and, for this
order, a variable selling cost of $1.00 per unit would be eliminated.
If the order is accepted, what would be the impact on net income?
A.decrease of $750
B.decrease of $4,500
C.increase of $3,000
D.increase of $1,500
42) The Eastern Division of Kentucky Company has a rate of return on investment of
28% and a profit margin of 20%. What is the investment turnover?
A.3.6
B.1.4
C.5.0
D..7
43) The revenue recognition concept
A.is not in conflict with the cash method of accounting
B.determines when revenue is credited to a revenue account
C.states that revenue is not recorded until the cash is received
D.controls all revenue reporting for the cash basis of accounting
44) When management seeks to achieve personal departmental objectives that may
work to the detriment of the entire company, the manager is experiencing:
A.budgetary slack
B.padding
C.goal conflict
D.cushions
45) What is the purpose of the adjusted trial balance?
A.to verify that all of the adjusting entries have been posted
B.to verify that the net income (loss) is correctly reported
C.to verify that no adjusting journal entry has been omitted
D.to verify the equality of the debit and credit balances
46) Which of the following stockholder equity accounts follow the same debit and
credit rules as liabilities?
A.Capital Stock only
B.Dividends only
C.Retained Earnings and Capital Stock
D.Retained Earnings, Capital Stock, and Dividends
47) An overpayment error was discovered in computing and paying the wages of a
Jamison Tree Trimming employee. When Jamison receives cash from the employee for
the amount of the overpayment, which of the following entries will Jamison make?
A.Cash, debit; Wages Expense, credit
B.Wages Payable, debit; Wages Expense, credit
C.Wages Expense, debit, Cash, credit
D.Cash, debit; Wages Payable, credit
48) Dalton Company uses the allowance method to account for uncollectible
receivables. Dalton has determined that the Irish Company account is uncollectible. To
write-off this account, Dalton should debit
A.Bad Debt Expense and credit Accounts Receivable
B.Bad Debt Expense and credit Allowance for Doubtful Accounts
C.Allowance for Doubtful Accounts and credit Accounts Receivable
D.Accounts receivable and credit Allowance for Doubtful Accounts
49) Which of the following stock investments should be accounted for using the cost
method?
A.investments of less than 20%
B.investments between 20 % and 50%
C.investments of less than 20% and investments between 20% and 50%
D.all stock investments should be accounted for using the cost method
50) Machinery is purchased on July 1 of the current fiscal year for $240,000. It is
expected to have a useful life of 4 years, or 25,000 operating hours, and a residual value
of $15,000. Compute the depreciation for the last six months of the current fiscal year
ending December 31 by each of the following methods:
(a) straight-line
(b) declining-balance at twice the straight-line rate
(c) units-of-production (used for 1,600 hours during the current year)
(Round the answer to the nearest dollar.)
51) A company reports the following:
Determine the (a) rate earned on stockholders equity, and (b) rate earned on common
stockholders equity. Round your answer to one decimal place.
52) Raptor Company is considering replacing equipment which originally cost
$500,000 and which has $420,000 accumulated depreciation to date. A new machine
will cost $790,000 and the old equipment can be sold for $8,000. What is the sunk cost
in this situation?
A.$72,000
B.$80,000
C.$88,000
D.$290,000
53) On the balance sheet, stockholders equity is
A.added to assets and the two are equal to liabilities
B.added to liabilities and the sum of the two are equal to assets
C.subtracted from liabilities and the net amount is equal to assets
D.subtracted from assets and the net amount is equal to net income
54) Which of the following abbreviations are correct?
A.Debit Dr, Credit Cd
B.Debit Db, Credit Cr
C.Debit Db, Credit Cd
D.Debit Dr, Credit Cr
55) The period costs of a textbook publisher would include:
A.wages of a press operator
B.factory utility costs
C.advertising expenses
D.paper costs
56) Accounts receivable from sales to customers amounted to $40,000 and $32,000 at
the beginning and end of the year, respectively. Income reported on the income
statement for the year was $110,000. Exclusive of the effect of other adjustments, the
cash flows from operating activities to be reported on the statement of cash flows is
A.$118,000
B.$110,000
C.$102,000
D.$150,000
57) A legal document that indicates the name of the issuer, the face value of the bond
and such other data is called
A.trading on the equity
B.convertible bond
C.a bond debenture
D.a bond certificate
58) 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 1 during the period for
direct materials is:
A.Work in Process–Department 1100,000
Materials100,000
B.Work in Process–Department 155,000
Materials55,000
C.Materials100,000
Work in Process–Department 1100,000
D.Materials55,000
Work in Process–Department 155,000
59) Which of the following would most likely be classified as a current liability?
A.Two-year Notes Payable
B.Bonds Payable
C.Mortgage Payable
D.Unearned Rent
60) Discuss the appropriate financial treatment when an investor has a greater than 50%
ownership in another company.
61) For the following, enter a D if the account normally has a debit balance and enter a
C if the account normally has a credit balance.
1> Notes Payable
2> Mortgage Payable
3> Dividends
4> Accounts Receivable
5> Capital Stock
6> Rent Revenue
7> Unearned Income
8> Utility Expense
9> Automobiles
62) Vincent Corporation has 100,000 share of $100 par common stock outstanding. On
June 30, Vincent Corporation declared a 5% stock dividend to be issued on July 30 to
stockholders of record July 15. The market price of the stock was $132 a share on June
30. Journalize the entries required on June 30, July 15 and July 30.
63) You began your new job as the accountant at Bolivar Industries during the month of
December. During your first month, you found several interesting issues.
1) While looking through the invoices, you found Invoices 213-242, 245-271, and
275-290. It appears that invoices 243, 244, 272, 273, and 274 are missing.
2) During the month, Clerk # 3 issued $250 in refunds as compared to Clerks #1, #2,
and #4 who issued less than $50 each.
3) The daily cash receipts and bank deposits reconcile, except on Tuesdays during the
month.
4) Business is generally brisk during the holiday season, but two weeks before
Christmas there was a sudden increase in slow payments.
REQUIRED:
Part A: What kind of warning signs could be associated with these issues?
Part B: What control could you put in place regarding cash refunds mentioned in Part A
(2)?
64) Given the following information:
Variable cost per unit = $5.00
July fixed cost per unit = $7.00
Units sold and produced in July 25,000
What is total estimated cost for August if 30,000 units are projected to be produced and
sold?