1) Callable preferred stock gives a corporation the option of exchanging preferred
shares into common shares at a specified rate.
2) When no-par stock is not assigned a stated value, the total amount received is
recorded in the Common Stock account.
3) An accelerated depreciation method yields larger depreciation expense in the early
years of an asset’s life and less depreciation expense in later years.
4) Trend analysis of financial statement items can include comparisons of relations
between items on different financial statements.
5) A rough guideline states that for a company with no discounts offered, days’ sales
uncollected should not exceed 1 1/3 times the days in its credit period.
6) In a process costing system, the purchase of raw materials is credited to the Raw
Materials Inventory.
7) The use of debt financing ensures an increase in return on equity.
8) Organization expenses of a corporation often include legal fees and promoter fees.
9) The times interest earned ratio reflects:
A.A company’s ability to pay its operating expenses on time.
B.A company’s ability to pay interest even if sales decline.
C.A company’s profitability.
D.The relation between income and debt.
E.The relation between assets and liabilities.
10) A company’s Inventory balance at 12/31/16 was $188,000 and $200,000 at
12/31/15. Its Accounts Payable balance at 12/31/16 was $84,000 and $80,000 at
12/31/15, and its cost of goods sold for 2016 was $720,000. The company’s total
amount of cash payments for merchandise in 2016 equals:
A.$704,000.
B.$712,000.
C.$720,000.
D.$728,000.
E.$736,000.
11) In preparing a company’s statement of cash flows for the most recent year, Ransom
Corp. reported the following information:
Net cash flows from financing activities for the year were:
A.$230,000 of net cash used.
B.$230,000 of net cash provided.
C.$108,000 of net cash used.
D.$138,000 of net cash used.
E.$138,000 of net cash provided.
12) A company’s inventory records report the following:
On August 15, it sold 30 units. Using the FIFO perpetual inventory method, what is the
value of the inventory at August 15 after the sale?
A.$140
B.$160
C.$210
D.$380
E.$590
13) Brownley Company has two service departments and two operating (production)
departments. The Payroll Department services all three of the other departments in
proportion to the number of employees in each. The Maintenance Department costs are
allocated to the two operating departments in proportion to the floor space used by
each. Listed below are the operating data for the current period:
The total cost of operating the Cutting Department for the current period is:
A.$14,280.
B.$15,912.
C.$76,500.
D.$90,780.
E.$92,412.
14) The balance column in a ledger account is:
A.An account entered on the balance sheet.
B.A column for showing the balance of the account after each entry is posted.
C.Another name for the withdrawals account.
D.An account used to record the transfers of assets from a business to its owner.
E.A simple form of account that is widely used in accounting to illustrate the debits and
credits required in recording a transaction.
15) Webster Corporation is preparing a master budget for the first quarter of the year.
The company budgets production of 2,680 units in January, 2,600 units in February and
2,740 units in March. Each unit requires 0.6 hours of direct labor. The direct labor rate
is $12 per hour. Compute the budgeted direct labor cost for the first quarter budget.
A.$56,160.
B.$57,744.
C.$96,240.
D.$93,600.
E.$48,120.
16) The overhead cost applied to a job during a period is recorded with a credit to
Factory Overhead and a debit to:
A.Jobs Overhead Expense.
B.Cost of Goods Sold.
C.Finished Goods Inventory.
D.Indirect Labor.
E.Work in Process Inventory.
17) Last year, Flash Company sold 15,000 units of its only product. If sales decreased
by 17% in the current year, how will total variable cost and total fixed cost be affected?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
18) Which of the following is not a limitation of activity-based costing?
A.Maintaining an activity-based costing system is more costly than maintaining a
traditional direct labor-based costing system.
B.Changing from a traditional direct labor-based costing system to an activity-based
costing system changes product margins and other key performance indicators used by
managers. Such changes are often resisted by managers.
C.In practice, most managers insist on fully allocating all costs to products, customers,
and other costing objects in an activity-based costing system. This results in overstated
costs.
D.More accurate product costs may result in increasing the selling prices of some
products.
E.Complex products are assigned a larger portion of overhead.
19) The following is taken from Jeffers Company’s internal records of its factory with
two operating departments. The cost driver for indirect labor is direct labor costs, and
the cost driver for the remaining items is number of hours of machine use. Compute the
total amount of overhead allocated to Dept. 2 using activity-based costing.
A.$16,392.
B.$19,877.
C.$28,830.
D.$22,243.
E.$73,600.
20) Kragle Corporation reported the following financial data for one of its divisions for
the year; average invested assets of $470,000; sales of $930,000; and income of
$105,000. The investment turnover is:
A.22.3.
B.50.5.
C.1.98.
D.447.6.
E.11.3.
21) Copy Center pays an average wage of $12 per hour to employees for printing and
copying jobs, and allocates $18 of overhead for each employee hour worked. Materials
are assigned to each job according to actual cost. If Job M-47 used $350 of materials
and took 20 hours of labor to complete, what is the total cost that should be assigned to
the job?
A.$590
B.$600
C.$380
D.$950
E.$710
22) On May 31, Cray has $375,800 of accounts receivable. Cray uses the allowance
method of accounting for bad debts and has an existing credit balance in the allowance
for doubtful accounts of $14,250.
1> Prepare journal entries to record the following selected May transactions. The
company uses the perpetual inventory system.
2> Show how Accounts Receivable and the Allowance for Doubtful Accounts appear
on its May 31 balance sheet.
a. Sold $415,200 of merchandise (that cost $249,000) to customers on credit.
b. Received $465,800 cash in payment of accounts receivable.
c. Wrote off $15,800 of uncollectible accounts receivable.
d. In adjusting the accounts on May 31, its fiscal year-end, the company estimated that
4.0% of accounts receivable will be uncollectible.
23) Expenses that are easily traced and assigned to a specific department because they
are incurred for the sole benefit of that department are called:
A.Direct expenses.
B.Indirect expenses.
C.Controllable expenses.
D.Uncontrollable expenses.
E.Fixed expenses.
24) The two basic types of cost accounting systems are:
A.Job order costing and perpetual costing.
B.Job order costing and customized product costing.
C.Job order costing and customized service costing.
D.Job order costing and process costing.
E.Job order costing and periodic costing.
25) Greene Company purchased a machine for $75,000 that was expected to last 6 years
and to have a salvage value of $6,000. At the beginning of the machine’s fourth year the
company decided that the estimated useful life should be revised to a total of 10 years
instead of 6 years. Also, the salvage value was re-estimated to be $5,500. Straight-line
depreciation was used throughout the machine’s life. Calculate the depreciation expense
for the fourth year of the machine’s useful life.
26) The allowance method of accounting for bad debts requires an estimate of bad debt
expense at the end of each accounting period. The two common methods to determine
the estimate amount are the percent of sales method and the percent of receivables
method. Explain the basic differences between the two methods.
27) Prior to recording adjusting entries on December 31, a company’s Office Supplies
account had an $780 debit balance. A physical count of the supplies showed $425 of
unused supplies available as of December 31. Prepare the required adjusting entry.
28) On January 1, a company issued 10%, 10-year bonds payable with a par value of
$720,000. The bonds pay interest on July 1 and January 1. The bonds were issued for
$817,860 cash, which provided the holders an annual yield of 8%. Prepare the journal
entry to record the first semiannual interest payment, assuming it uses the straight-line
method of amortization.
29) On December 31, of the current year, Spectrum Company’s unadjusted trial balance
revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000;
(75% were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance).
Prepare the adjusting journal entry to record Spectrum’s estimate for bad debts
assuming:
1> 6.0% of the accounts receivable balance is assumed to be uncollectible.
2> Bad debts expense is estimated to be 1.5% of credit sales.
3> Show how Accounts Receivable and the Allowance for Doubtful Accounts would
appear on the balance sheet after adjustment assuming the percentage of sales method is
used.
4> Prepare the entry to write off a $1,500 account receivable on January 1 of the next
year.
5> Show how Accounts Receivable and the Allowance for Doubtful Accounts would
appear on the balance sheet immediately after writing off the account in part 4 assuming
the percentage of sales method is used.
30) A _______________________ is a contractual agreement between an employer and
its employees for the employer to provide benefits (payments) to employees after they
retire.
31) In the analysis of variances, management commonly focuses on four categories of
production costs: __________________ cost, ___________________ cost;
_____________ cost; and _________________ cost.