1) Dividend yield shows the annual amount of cash dividends distributed to common
shares relative to the stock’s market price.
2) A work sheet contains all of the balances for each account and therefore may be used
as a substitute for the set of financial statements.
3) A company has assets of $350,000 and total liabilities of $200,000. Its debt-to-equity
ratio is 0.6.
4) Since service departments do not generate revenues, it is unnecessary to accumulate
and allocate their costs.
5) The reporting of financing activities in the statement of cash flows is identical under
either the direct or indirect methods.
6) Joint costs are costs incurred in producing or purchasing a single product.
7) In a process costing system, with the exception of the first department, each
department receives output from the prior department as a partially processed product.
8) Accounting procedures for both C corporations and S corporations are the same in all
aspects.
9) When consolidated financial statement are prepared, the parent company uses the
equity method and reports the investment accounts for the subsidiaries on the balance
sheet.
10) After preparing a bank reconciliation, adjustments must be made for items
reconciling the book balance.
11) An opportunity cost is the potential benefit lost by taking a specific action when two
or more alternative choices are available.
12) Held-to-maturity securities are equity securities a company intends and is able to
hold until maturity.
13) Managers only use the cash flow statement to evaluate the net cash increase or
decrease, and do not pay much attention to the details of cash flows from operating
activities, cash flows from investing activities, and cash flows from financing activities.
14) Prime costs consist of direct labor and factory overhead.
15) Use the following information to calculate cash paid for income taxes:
A.$23,700.
B.$52,100.
C.$53,200.
D.$41,900.
E.$43,000.
16) When preparing a statement of cash flows using the indirect method, which of the
following is correct?
A.Proceeds from the sale of equipment should be added to net income in the operating
activities section.
B.A loss on the sale of land should be added to net income in the operating activities
section.
C.The declaration of a cash dividend should be a use of cash in the financing activities
section.
D.The issuance of a stock dividend should be a use of cash in the financing activities
section.
E.The purchase of land and a building by issuing a long-term note payable should be a
source of cash in the financing activities section.
17) Wexim Toys purchased merchandise from a supplier on credit, terms 2/10, n/30 for
$9,300. Three days later the company returned $1,100 of the merchandise. When
recording the return transaction, the company would record:
A.$1,100 in the Accounts Payable Cr. column and $1,100 in the Inventory Dr. column
of the purchases journal.
B.Debit Accounts Payable $1,100 and credit Inventory $1,100 in the general journal.
C.$1,100 in the Cash Cr. column and $1,100 in the Inventory Cr. column in the cash
disbursements journal.
D.Debit Cash $1,100 and credit Inventory $1,100 in the general journal.
E.$1,100 in the Accounts Payable Dr. column and $1,100 in the Cash Cr. column of the
cash disbursements journal.
18) Bioclean Co. sells a biodegradable cleaning product and has predicted the following
sales for the first four months of the current year:
Ending inventory for each month should be 20% of the next month’s sales, and the
December 31 inventory is consistent with that policy. How many units should be
purchased in February?
A.2,000.
B.2,420.
C.2,020.
D.1,600.
E.2,820.
19) Barber and Atkins are partners in an accounting firm and share net income and loss
equally. Barber’s beginning partnership capital balance for the current year is $285,000,
and Atkins’ beginning partnership capital balance for the current year is $370,000. The
partnership had net income of $250,000 for the year. Barber withdrew $90,000 during
the year and Atkins withdrew $100,000. What is Barber’s ending equity?
A.$357,500
B.$362,500
C.$445,000
D.$320,000
E.$195,000
20) Which of the following statements is incorrect?
A.Adjustments to prepaid expenses and unearned revenues involve previously recorded
assets and liabilities.
B.Accrued expenses and accrued revenues involve assets and liabilities that had not
previously been recorded.
C.Adjusting entries can be used to record both accrued expenses and accrued revenues.
D.Prepaid expenses, depreciation, and unearned revenues often require adjusting entries
to record the effects of the passage of time.
E.Adjusting entries affect only balance sheet accounts.
21) Dazzle, Inc. produces beads for jewelry making use. The following information
summarizes production operations for June. The journal entry to record June production
activities for direct material usage is:
A.Debit Raw Materials Inventory $87,000; credit Accounts Payable $87,000.
B.Debit Raw Materials Inventory $87,000; credit Finished Goods Inventory $87,000.
C.Debit Cost of Goods Sold $87,000; credit Finished Goods Inventory $87,000.
D.Debit Work in Process Inventory $87,000; credit Raw Materials Inventory $87,000.
E.Debit Work in Process Inventory $87,000; credit Cost of Goods Sold $87,000.
22) The usual starting point for preparing a master budget is forecasting or estimating:
A.Expenditures.
B.Sales.
C.Production.
D.Income.
E.Cash payments.
23) Which of the following is a benefit derived from budgeting?
A.Budgeting focuses management’s attention on past performance.
B.Budgeting avoids needing industry and economic factors in decision making.
C.Budgeting provides a basis for evaluating performance.
D.Budgeting avoids the need for incentives to improve employee performance.
E.Budgeting eliminates the need for coordination across departments.
24) Halverstein Company’s outstanding stock consists of 7,000 shares of cumulative 5%
preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par
value. During the first three years of operation, the corporation declared and paid the
following total cash dividends.
The amount of dividends paid to preferred and common shareholders in 2016 is:
A.$3,500 preferred; $2,500 common.
B.$3,000 preferred; $3,000 common.
C.$0 preferred; $6,000 common.
D.$4,200 preferred; $1,800 common.
E.$6,000 preferred; $0 common.
25) Refer to the following selected financial information from McCormik, LLC.
Compute the company’s current ratio for Year 2.
A.2.26.
B.1.98.
C.2.95.
D.3.05.
E.1.88.
26) Dividing ending inventory by cost of goods sold and multiplying the result by 365
is the:
A.Inventory turnover ratio.
B.Profit margin.
C.Days’ sales in inventory.
D.Current ratio.
E.Total asset turnover.
27) An additional cost incurred only if a company pursues a particular course of action
is a(n):
A.Period cost.
B.Pocket cost.
C.Discount cost.
D.Incremental cost.
E.Sunk cost.
28) On July 1 of the current year, Timberlake Company signed a contract to sublease
space in a building for 7 years. Timberlake Company paid $56,000 for the right to
sublease this space. After taking possession of the leased space, Timberlake pays
$140,000 for improving the office portion of the lease space. The improvements are
paid on July 6 of the current year, and are estimated to have a useful life equal to the 14
years remaining in the life of the building. Prepare entries for Timberlake to record (a)
its payment for the right to sublease the building space, (b) its payment for the office
improvements, (c) the December 31 year-end entry to amortize the cost of the sublease,
(d) the December 31 year-end entry to amortize the office improvements.
29) Adams Manufacturing allocates overhead to production on the basis of direct labor
costs. At the beginning of the year, Adams estimated total overhead of $396,000;
materials of $410,000 and direct labor of $220,000. During the year Adams incurred
$418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor
costs. Compute the amount of overhead applied to jobs during the year.
A.$396,000.
B.$424,450.
C.$413,190.
D.$413,200.
E.$403,200.
30) An expense that is readily traced to a department because it is incurred for that
department’s sole benefit is a(n):
A.Common expense.
B.Indirect expense.
C.Direct expense.
D.Administrative expense.
E.Recurring expense.
31) Refer to the following selected financial information from Frankle Corp. Compute
the company’s working capital.
A.$536,650.
B.$230,200.
C.$568,200.
D.$198,650.
E.$231,450.
32) Mullis Company sold merchandise on account to a customer for $625, terms n/30.
The journal entry to record this sale transaction would be:
A.Debit Cash of $625 and credit Sales $625.
B.Debit Cash of $625 and credit Accounts Receivable $625.
C.Debit Accounts Receivable $625 and credit Sales $625.
D.Debit Accounts Receivable $625 and credit Cash $625.
E.Debit Sales $625 and credit Accounts Receivable $625.
33) Wheeler Company can produce a product that incurs the following costs per unit:
direct materials, $10; direct labor, $24, and overhead, $16. An outside supplier has
offered to sell the product to Axle for $45. If Wheeler buys from the supplier, it will still
incur 45% of its overhead cost. Compute the net incremental cost or savings of buying.
A.$4.00 savings per unit.
B.$4.00 cost per unit.
C.$2.20 cost per unit.
D.$3.80 cost per unit.
E.$2.20 savings per unit.
34) An _______________ is a series of equal payments at equal time intervals.
35) On December 3, the ABBJ Company paid $1,400 cash in salaries to office
personnel. Prepare the general journal entry to record this transaction.
36) A company is considering the purchase of new equipment for $42,000. The
projected annual cash inflow is $18,000. The machine has a useful life of 3 years and no
salvage value. Management of the company requires a 12% return on investment. The
present value of an annuity of $1 for various periods follows:
What is the net present value of this machine assuming all cash flows occur at
year-end?
37) Additional costs of plant assets that do not materially increase the asset’s life or
productive capabilities are recorded as ______________________________.
38) How do companies decide what allocation bases to use to allocate indirect costs to
departments?
39) Andrew’s net income was $280,000; its total assets were $1,050,000; and its net
sales were $3,500,000. Calculate the company’s profit margin ratio.
40) A company traded an old forklift for a new forklift, receiving a $13,500 trade-in
allowance and paying the remaining $47,200 in cash. The old forklift had cost $43,000,
a 5-year useful life and a $5,000 salvage value. Straight-line accumulated depreciation
of $27,200 had been recorded as of the exchange date.
1) What was the book value of the old forklift on the date of the exchange?
2) What amount of gain or loss (indicate which) should be recognized in recording the
exchange, assuming the transaction has commercial substance?
3) What amount should be recorded as the cost of the new forklift?
41) The sum of the variable overhead spending variance, the variable overhead
efficiency variance, the fixed overhead spending variance is the
____________________________.
42) A __________ is calculated by relating total estimated factory overhead to an
allocation factor such as total estimated direct labor cost, and is used to allocate factory
overhead to specific jobs.