1) When a large quantity of merchandise is purchased, a reduction allowed on the sale
price is called a trade discount.
2) When an accounts payable account is paid in cash, company expenses increase.
3) Investment in Bonds are reported on the balance sheet at lower of cost or market.
4) Factory overhead cost is sometimes referred to as factory burden.
5) For efficiency of operations and better control over cash, a company should maintain
only one bank account.
6) The bank reconciliation is an important part of the system of internal controls.
7) Under the cost method, when treasury stock is purchased by the corporation, the par
value and the price at which the stock was originally issued are important.
8) If the standard to produce a given amount of product is 1,000 units of direct materials
at $11 and the actual was 800 units at $12, the direct materials price variance was $800
favorable.
9) If an adjustment for an NSF check is made in a companys bank reconciliation, then
the company must have written a bad check during the month.
10) Cost accounting systems are used to supply cost data information on costs incurred
by a manufacturing process or department.
11) A check drawn by a company in payment of a voucher for $965 was recorded in the
journal as $695. This item would be included in the bank reconciliation as a(n)
A.deduction from the balance per the company’s records
B.addition to the balance per the bank statement
C.deduction from the balance per the bank statement
D.addition to the balance per the company’s records
12) Which of the following is not a use of the cost of production report?
A.To help managers control operations
B.To help managers isolate problems
C.To project production
D.To help managers improve operations
13) Which of the following would be least likely to be considered a managerial
accounting report?
A.a report to analyze potential efficiencies and savings for the purchase of new
production equipment
B.a schedule of total manufacturing costs incurred
C.a statement of cost of goods manufactured
D.a statement of stockholders equity
14) The beginning inventory is 10,000 units. All of the units manufactured during the
period and 8,000 units of the beginning inventory were sold. The beginning inventory
fixed costs are $50 per unit, and variable costs are $300 per unit. Determine (a) whether
variable costing income from operations is less than or greater than absorption costing
income from operations, and (b) the difference in variable costing and absorption
income from operations.
15) Which of the following is an example of a cost that varies in total as the number of
units produced changes?
A.Salary of a production supervisor
B.Direct materials cost
C.Property taxes on factory buildings
D.Straight-line depreciation on factory equipment
16) Beginning inventory, purchases, and sales for Product – Weld TM are as follows:
Assuming a perpetual inventory system and the first-in, first-out method, determine (a)
the cost of the merchandise sold for the September 30 sale and (b) the inventory on
September 30.
17) The Cavy Company estimates that the factory overhead for the following year will
be $1,250,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 40,000 hours. The machine hours for
the month of April for all of the jobs was 4,780. If the actual factory overhead totaled
$141,800, determine the over or under applied amount for the month.
A.$7,575 underapplied
B.$35,220 underapplied
C.$7,575 overapplied
D.$35,220 overapplied
18) An employee receives an hourly rate of $30, with time and a half for all hours
worked in excess of 40 during a week. Payroll data for the current week are as follows:
hours worked, 48; federal income tax withheld, $300; cumulative earnings for year
prior to current week, $90,700; social security tax rate, 6.0% on maximum of $100,000;
and Medicare tax rate, 1.5% on all earnings. What is the net amount to be paid to the
employee?
A.$1,032.00
B.$1,143.00
C.$1,053.60
D.$1,166.40
19) Which method of evaluating capital investment proposals uses the concept of
present value to compute a rate of return?
A.Average rate of return
B.Accounting rate of return
C.Cash payback period
D.Internal rate of return
20) Relevant revenues and costs refer to:
A.activities that occurred in the past
B.monies already earned and/or spent
C.last year’s net income
D.differences between the alternatives being considered
21) On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable on an overdue
account payable to Seller Co. Assume that the fiscal year of Alton Co. ends June 30.
Which of the following relationships is true?
A.Alton is the creditor and credits Accounts Receivable
B.Seller is the creditor and debits Accounts Receivable
C.Seller is the borrower and credits Accounts Payable
D.Alton is the borrower and debits Accounts Payable
22) Equipment with a cost of $220,000 has an estimated residual value of $30,000 and
an estimated life of 10 years or 19,000 hours. It is to be depreciated by the straight-line
method. What is the amount of depreciation for the first full year, during which the
equipment was used 2,100 hours?
A.$19,000
B.$21,000
C.$22,000
D.$30,000
23) Which of the following should be added to net income in calculating net cash flow
from operating activities using the indirect method?
A.an increase in inventory
B.a decrease in accounts payable
C.preferred dividends declared and paid
D.a decrease in accounts receivable
24) Current liabilities are those liabilities that
A.will be paid in less than one year
B.are due to be paid in 5 to 10 years
C.are due to be paid in more than one year
D.are owed to the stockholders and will never be paid
25) The liability for a dividend is recorded on which of the following dates?
A.the date of record
B.the date of payment
C.the last day of the fiscal year
D.the date of declaration
26) On March 3rd, Blowout Sales makes $3,450.00 in cash sales of general
merchandise which have a cost of $1,215.00. Blowout uses a perpetual inventory
system.
(a) Journalize the sale event.
27) Which of the following receivables would not be classified as an “other receivable?
A.Advance to an employee
B.Interest receivable
C.Refundable income tax
D.Notes receivable
28) Which of the following is the most desirable quick ratio?
A.1.20
B.1.00
C.0.95
D.0.50
29) In the normal operation of business you receive a check from a customer and
deposit it into your checking account. With your bank statement you are advised that
this check for $775 is NSF. The bank also informs you that due to the amount of
activity on your business account the monthly service charge is $75. During a bank
reconciliation, you will:
A.subtract both values from balance according to bank
B.add both values from balance according to books
C.add both values from balance according to bank
D.subtract both values from balance according to books
30) Selling the bonds at a premium has the effect of
A.raising the effective interest rate above the stated interest rate
B.attracting investors that are willing to pay a lower rate of interest than on similar
bonds
C.causing the interest expense to be higher than the bond interest paid
D.causing the interest expense to be lower than the bond interest paid
31) Accumulated depreciation appears on the
A.balance sheet in the current assets section
B.balance sheet in the property, plant and equipment section
C.balance sheet in the long-term liabilities section
D.income statement as an operating expense
32) a. A vacant lot acquired for $83,000 cash is sold for $127,000 in cash. What is the
effect of the sale on the total amount of the sellers (1) assets, (2) liabilities, and (3)
stockholders equity?
b. Assume that the seller owes $52,000 on a loan for the land. After receiving the
$127,000 cash in (a), the seller pays the $52,000 owed. What is the effect of the
payment on the total amount of the sellers (1) assets, (2) liabilities, and (3) stockholders
equity?
33) Which account will be included in both service and merchandising companies
closing entries?
A.Sales
B.Cost of Merchandise Sold
C.Purchase Discounts
D.Sales Returns and Allowances
34) On the statement of cash flows, the cash flows from investing activities section
would include
A.receipts from the issuance of capital stock
B.payments for dividends
C.payments for retirement of bonds payable
D.receipts from the sale of investments
35) Which of the following is not a business transaction?
A.Erin Adams receives stock in exchange for depositing $15,000 in a bank account in
the name of Erins Lawn Service
B.Erins Lawn Service provided services to customers earning fees of $600
C.Erin Adams purchased hedge trimmers for her lawn service, agreeing to pay the
supplier next month
D.Erin Adams pays her monthly personal credit card bill
36) The order of presentation of activities on the statement of cash flows is
A.operating, investing, and financing
B.operating, financing, and investing
C.financing, operating, and investing
D.financing, investing, and operating
37) Some organizations use internal service departments to provide like services to
several divisions or departments within an organization. Which of the following would
probably not lend itself as a service department?
A.Inventory Control
B.Payroll Accounting
C.Information Systems
D.Human Resources
38) The recording of the jobs shipped and customers billed would include a credit to:
A.Accounts Payable
B.Cash
C.Finished Goods
D.Cost of Goods Sold
39) On August 1, 2011, Airport Company sold Paxton Company $1,000,000 of 10-year,
6% bonds, dated July 1 at 100 plus accrued interest. On March 1, 2012, Paxton sold
half of the bonds for $520,000 plus accrued interest. Present entries to record the
following transactions:
40) Sinclair Companys accumulated depreciation-equipment increased by $6,000, while
patents decreased by $2,200 between balance sheet dates. There were no purchases or
sales of depreciable or intangible assets during the year. In addition, the income
statement showed a loss of $3,200 from the sale of investments.
Required:
Reconcile a net income of $92,000 to net cash flow from operating activities.
41) Gyro Company manufactures Products T and W and is operating at full capacity. To
manufacture Product W requires three times the number of machine hours required for
Product T. Market research indicates that 1,000 additional units of Product W could be
sold. The contribution margin by unit of product is as follows:
Calculate the increase or decrease in total contribution margin if 1,000 additional units
of Product W are produced and sold.
42) Journalize the following transactions for both Abbott Co. (seller) and Dalton Co.
(buyer). Assume both the companies use the perpetual inventory system.
43) The Tulsa Company allocates overhead based on a predetermined overhead rate of
$9.00 per direct labor hour. Job S35 required 8 tons of direct material at a cost of
$600.00 per ton and took employees who earn $21.00 per hour a total of 80 hours to
complete. What is the total cost of Job S35?
44) Ski Master Company pays weekly salaries of $18,000 on Friday for a five-day week
ending on that day. Journalize the necessary adjusting entry at the end of the accounting
period, assuming that the period ends on Wednesday.
45) Mundall Company is considering a project that will require an initial investment of
$600,000 and is expected to generate the following cash flows:
46) Record in good journal entry format the following transactions:
47) Beachside Realty rents condominiums and furnishings. Its adjusted trial balance at
December 31, 2011, is as follows:
Prepare the entry required to close the dividends account at the end of the period.
48) The balances for the accounts listed below appear in the Adjusted Trial balance
columns of the end-of-period spreadsheet (work sheet). Indicate whether each balance
should be extended to an Income Statement column or (b) a Balance Sheet column.
1> Capital Stock
2> Retained Earnings
3> Depreciation Expense
4> Accumulated Depreciation
5> Fees Earned
6> Unearned Fees
7> Supplies
8> Supplies Expense