1) An account consists of
a.one part
b.two parts
c.three parts
d.four parts
2) Companies cannot use the
a.periodic inventory system under GAAP
b.periodic inventory system under IFRS
c.perpetual system under IFRS
d.both periodic and perpetual can be used under GAAP and IFRS
3) Lenand Company has beginning and ending raw materials inventories of $130,000
and $170,000, respectively. If direct materials used were $530,000, what was the cost of
raw materials purchased?
a.$530,000
b.$660,000
c.$570,000
d.$700,000
4) A proprietorship business with total owner’s equity of $90,000 paid a $12,000
business debt. As a result of this transaction, total owner’s equity:
a.increased to $90,000
b.increased by $12,000
c.decreased by $12,000
d.did not change
5) IFRS sometimes refers to allowances as
a.revenues
b.discounts
c.provisions
d.reserves
6) A company requires $1,360,000 in sales to meet its net income target. Its contribution
margin is 30%, and fixed costs are $240,000. What is the target net income?
a.$408,000
b.$312,000
c.$560,000
d.$168,000
7) Temple Manufacturing Company produces a product in two departments: (1) Mixing
and (2) Finishing. The company uses a process cost accounting system.
(a)Purchased raw materials for $50,000 on account.
(b)Raw materials requisitioned for production were:
Direct materials
Mixing department$20,000
Finishing department14,000
(c)Incurred labor costs of $69,000.
(d)Factory labor used:
Mixing department$34,000
Finishing department25,000
(e)Manufacturing overhead is applied to the product based on machine hours used in
each department:
Mixing department300 machine hours at $30 per machine hour.
Finishing department500 machine hours at $20 per machine hour.
(f)Units costing $56,000 were completed in the Mixing Department and were
transferred to the Finishing Department.
(g)Units costing $60,000 were completed in the Finishing Department and were
transferred to finished goods.
(h)Finished goods costing $35,000 were sold on account for $55,000.
Instructions
Prepare the journal entries to record the preceding transactions for Temple
Manufacturing Company.
8) The method of accounting for uncollectible accounts that results in a better matching
of expenses with revenues is the
a.aging accounts receivable method
b.direct write-off method
c.percentage of receivables method
d.percentage of sales method
9) Income from operations appears on
a.both a multiple-step and a single-step income statement
b.neither a multiple-step nor a single-step income statement
c.a single-step income statement
d.a multiple-step income statement
10) How much sales are required to earn a target income of $170,000 if total fixed costs
are $200,000 and the contribution margin ratio is 40%?
a.$616,667
b.$425,000
c.$925,000
d.$666,667
11) An account consists of
a.a title, a debit balance, and a credit balance
b.a title, a left side, and a debit balance
c.a title, a debit side, and a credit side
d.a title, a right side, and a debit balance
12) The cost method of accounting for long-term investments in stock should be
employed when the
a.investor owns more than 50% of the investee’s stock
b.investor has significant influence on the investee and the stock held by the investor
are marketable equity securities
c.market value of the shares held is greater than their historical cost
d.investor’s influence on the investee is insignificant
13) Effie Company uses a periodic inventory system. Details for the inventory account
for the month of January, 2014 are as follows:
UnitsPer unit priceTotal
Balance, 1/1/14200$5.00$1,000
Purchase, 1/15/141005.30530
Purchase, 1/28/141005.50550
An end of the month (1/31/14) inventory showed that 160 units were on hand. If the
company uses FIFO and sells the units for $10 each, what is the gross profit for the
month?
a.$1,120
b.$1,188
c.$1,532
d.$1,600
14) A company has the following assets:
Buildings and Equipment, less accumulated depreciation of $2,000,000$9,600,000
Copyrights960,000
Patents4,000,000
Timberlands, less accumulated depletion of $2,800,0004,800,000
The total amount reported under Property, Plant, and Equipment would be
a.$19,360,000
b.$14,400,000
c.$18,400,000
d.$15,360,000
15) Watunga County Bank agrees to lend Hoffman Granite Company $600,000 on
January 1 . Hoffman Granite Company signs a $600,000, 8%, 9-month note. The entry
made by Hoffman Granite on January 1 to record the proceeds and issuance of the note
is
a.Interest Expense36,000
Cash.564,000
Notes Payable600,000
b.Cash600,000
Notes Payable600,000
c.Cash600,000
Interest Expense36,000
Notes Payable636,000
d.Cash600,000
Interest Expense36,000
Notes Payable600,000
Interest Payable36,000
16) Randall Company bought real estate, on which there was an old office building, for
$400,000. It paid $30,000 in cash as a down payment and signed an 8% mortgage for
the remainder. It immediately had the old building razed at a net cost of $25,000.
Attorneys were paid $8,000 in connection with the land purchase and an additional
$4,000 in connection with permits and zoning variances necessary for Randall’s new
office building. $25,000 was paid for excavation for the basement of the new building,
$1,600,000 was paid for construction of the new building, and $55,000 was paid for a
parking lot and necessary walkways and driveways. For how much should the new
office building be recorded?
a.$1,662,000
b.$1,680,000
c.$1,684,000
d.$1,629,000
17) Investors who receive checks in their names for interest paid on bonds must hold
a.registered bonds
b.coupon bonds
c.bearer bonds
d.direct bonds
18) Flamingo Music produces 60,000 CDs on which to record music. The CDs have the
following costs:
Direct Materials$11,000
Direct Labor15,000
Variable Overhead3,000
Fixed Overhead7,000
None of Flamingos fixed overhead costs can be reduced, but another product could be
made that would increase profit contribution by $4,000 if the CDs were acquired
externally. If cost minimization is the major consideration and the company would
prefer to buy the CDs, what is the maximum external price that Flamingo would be
willing to accept to acquire the 60,000 units externally?
a.$36,000
b.$32,000
c.$33,000
d.$40,000
19) Gnswold Company’s budgeted sales and direct materials purchases are as follows.
Budgeted SalesBudgeted D.M. Purchases
January$300,000$60,000
February330,00075,000
March400,00082,000
Gnswold sales are 40% cash and 60% credit. Credit sales are collected 10% in the
month of sale, 50% in the month following sale, and 36% in the second month
following sale; 4% are uncollectible. Gnswold purchases are 50% cash and 50% on
account. Purchases on account are paid 40% in the month of purchase, and 60% in the
month following purchase.
Instructions
(a)Prepare a schedule of expected collections from customers for March.
(b)Prepare a schedule of expected payments for direct materials for March.
20) An unacceptable way to make a correcting entry is to
a.reverse the incorrect entry
b.erase the incorrect entry
c.compare the incorrect entry with the correct entry and make a correcting entry to
correct the accounts
d.correct it immediately upon discovery
21) In the first month of operations, the total of the debit entries to the cash account
amounted to $1,200 and the total of the credit entries to the cash account amounted to
$800. The cash account has a(n)
a.$800 credit balance
b.$1,200 debit balance
c.$400 debit balance
d.$400 credit balance
22) S. Pellah (beginning capital, $80,000) and M. Berry (beginning capital $120,000)
are partners. During 2014 the partnership earned net income of $90,000, and Pellah
made drawings of $24,000 while Berry made drawings of $32,000.
Instructions
(a)Assume the partnership income-sharing agreement calls for income to be divided
40% to Pellah and 60% to Berry. Prepare the journal entry to record the allocation of
net income.
(b)Assume the partnership income-sharing agreement calls for income to be divided
with a salary of $40,000 to Pellah and $35,000 to Berry, with the remainder divided
40% to Pellah and 60% to Berry. Prepare the journal entry to record the allocation of
net income.
(c)Assume the partnership income-sharing agreement calls for income to be divided
with a salary of $50,000 to Pellah and $45,000 to Berry, interest of 10% on beginning
capital, and the remainder divided 50%-50%. Prepare the journal entry to record the
allocation of net income.
(d)Compute the partners ending capital balances under the assumption in part (c).
23) Blaque Manufacturing Company has the following data: direct labor $450,000,
direct materials used $427,000, total manufacturing overhead $216,000, and beginning
work in process $49,000.
Instructions
Compute (a) total manufacturing costs and (b) total cost of work in process.
24) Kate Taylor Co. reported the following information for 2014:
OctoberNovemberDecember
Budgeted sales$460,000$540,000$440,000
Budgeted purchases$240,000$256,000$288,000
All sales are on credit.
Customer amounts on account are collected 50% in the month of sale and 50% in the
following month.
Cost of goods sold is 35% of sales.
Kate Taylor purchases and pays for merchandise 70% in the month of acquisition and
30% in the following month.
Accounts payable is used only for inventory acquisitions.
How much is the budgeted balance for Accounts Payable at October 31, 2014?
a.$72,000
b.$168,000
c.$138,000
d.$76,800
25) The comparative condensed balance sheets of Able Corporation are presented
below.
ABLE CORPORATION
Comparative Condensed Balance Sheets
December 31
20152014
Assets
Current assets$ 72,000$ 80,000
Property, plant, and equipment (net)95,40090,000
Intangibles 33,600 40,000
Total assets$201,000$210,000
Liabilities and stockholders’ equity
Current liabilities$ 40,320$ 48,000
Long-term liabilities142,500150,000
Stockholders’ equity 18,180 12,000
Total liabilities and stockholders’ equity$201,000$210,000
Instructions
(a)Prepare a horizontal analysis of the balance sheet data for Able Corporation using
2014 as a base.
(b)Prepare a vertical analysis of the balance sheet data for Able Corporation in
columnar form for 2015 .
26) An accrued revenue account represents revenue for which
a.services have been performed and received in cash
b.services have not been performed nor received in cash
c.services have been performed, but not received in cash or recorded
d.cash has been received and recorded, but services have not been performed
27) Comprehensive income under IFRS
a.includes unrealized gains and losses included in net income, in contrast to GAAP
b.includes unrealized gains and losses included in net income, similar to GAAP
c.excludes unrealized gains and losses included in net income, in contrast to GAAP
d.excludes unrealized gains and losses included in net income, similar to GAAP
28) Prepare the necessary journal entries to record the following transactions, assuming
Eustace Company uses a perpetual inventory system.
(a)Eustace sells $45,000 of merchandise, terms 1/10, n/30. The merchandise cost
$30,000.
(b)The customer in (a) returned $4,000 of merchandise to Eustace. The merchandise
returned cost $2,400.
(c)Eustace received the balance due within the discount period.
29) On July 4, 2014, Wyoming Mining Company purchased the mineral rights to a
granite deposit for $1,600,000. It is estimated that the recoverable granite will be
400,000 tons. During 2014, 100,000 tons of granite was extracted and 60,000 tons were
sold. The amount of the Depletion Expense recognized for 2014 would be
a.$200,000
b.$120,000
c.$240,000
d.$400,000
30) A partner invests into a partnership a building with an original cost of $360,000 and
accumulated depreciation of $160,000. This building has a $280,000 fair value. As a
result of the investment, the partners capital account will be credited for
a.$280,000
b.$200,000
c.$360,000
d.$480,000
31) Under IFRS, some companies present which section of the cash flow statement as a
single line item?
a.Operating activities
b.Investing activities
c.Financing activities
d.Noncash investing and financing activities
32) Comparative information taken from the Foren Company financial statements is
shown below:
2015 2014
(a)Notes receivable$ 20,000$ -0-
(b)Accounts receivable175,000140,000
(c)Retained earnings30,000(40,000)
(d)Income taxes payable55,00020,000
(e)Sales900,000750,000
(f)Operating expenses160,000200,000
Instructions
Using horizontal analysis, show the percentage change from 2014 to 2015 with 2014 as
the base year.
33) Securities bought and held primarily for sale in the near term to generate income on
short-term price differences are
a.trading securities
b.available-for-sale securities
c.never-sell securities
d.held-to-maturity securities
34) Each of the following is a factor affecting quality of earnings except
a.alternative accounting methods
b.improper recognition
c.pro forma income
d.extraordinary items
35) In accounting for available-for-sale securities, the Unrealized LossEquity account
should be classified as a:
a.liability on the balance sheet
b.loss on the income statement
c.contra asset on the balance sheet
d.deduction in the stockholders’ equity section of the balance sheet
36) To develop the flexible budget, management takes all of the following steps except
identify the
a.activity index and the relevant range of activity
b.variable costs and determine the budgeted variable cost per unit
c.fixed costs and determine the budgeted fixed cost per unit
d.All of these options are steps in developing the flexible budget
37) Which of the following statements is not true?
a.Expenses increase owner’s equity
b.Expenses have normal debit balances
c.Expenses decrease owner’s equity
d.Expenses are a negative factor in the computation of net income
38) At January 1, 2014, Grand Corporation held one available-for-sale security: 1,500
shares of Nettle common stock purchased for $40 per share. At December 31, 2014, the
fair value per share for Nettle was $42. Prepare the adjusting entry to report the
portfolio at fair value at December 31, 2014 .
39) During October, 2014, Reds Catering Company generated revenues of $14,000.
Sales discounts totaled $200 for the month. Expenses were as follows: Cost of goods
sold of $7,700 and operating expenses of $2,000.
Calculate (1) gross profit and (2) income from operations for the month.
40) Listed below are various column headings that may appear in special journals.
Using the following code letters, identify for each column heading (1) the special
journal where the column heading would appear, and (2) whether the amounts entered
under the column heading would be posted in total, individually, or both in total and
individually. (Note: column headings may appear in more than one special journal)
Code:Special JournalsCode:Posting
S=Sales journalI=Individual posting
P=Single-column purchases journalT=Total posting
CR=Cash receipts journalB=Both individual and total posting
CP=Cash payments journal
HeadingSpecial JournalPosting
1>Accounts PayableCr.
2>Sales RevenueCr.
3>Sales DiscountsDr.
4>InventoryDr.
5>CashCr.
6>Accounts ReceivableDr.
7>Other AccountsCr.
8>InventoryCr.
9>Accounts ReceivableCr.
10>Accounts PayableDr.
41) Plough Company reported net income of $180,000 for the current year.
Depreciation recorded on buildings and equipment amounted to $80,000 for the year.
Balances of the current asset and current liability accounts at the beginning and end of
the year are as follows:
End of YearBeginning of Year
Cash$20,000$15,000
Accounts receivable24,00032,000
Inventories50,00065,000
Prepaid expenses9,5005,000
Accounts payable12,00018,000
Income taxes payable1,6001,200
Instructions
Prepare the cash flows from the operating activities section of the statement of cash
flows using the indirect method.
42) The following selected transactions pertain to L. Lewis Corporation:
Jan.3Issued 100,000 shares, $10 par value, common stock for $25 per share.
Feb.10Issued 6,000 shares, $10 par value, common stock in exchange for special
purpose equipment. L. Lewis Corporation’s common stock has been actively traded on
the stock exchange at $30 per share.
Instructions
Journalize the transactions.
43) The ledger accounts of the Fabulous Muscles Gym at June 30, 2014 are shown
below:
Accounts Payable$ 9,100
Accounts Receivable8,050
Buildings43,000
Owners Capital61,800
Cash6,100
Equipment42,900
Notes Payable40,000
Supplies350
Owners Drawings10,500
Instructions
Prepare a trial balance with the ledger accounts arranged in the proper financial
statement order. Include the appropriate heading.