1) Mary Ehrat, an employee of Eddington Company, has gross earnings for the month
of October of $8,000. FICA taxes are 7.65% of gross earnings, federal income taxes
amount to $1,270 for the month, state income taxes are 2% of gross earnings, and Mary
authorizes voluntary deductions of $20 per month to the United Fund. What is the net
pay for Mary Ehrat?
a.$6,118
b.$5,938
c.$5,958
d.$6,098
2) Dorie Greenspan Publications publishes a food and travel magazine. The magazine
sells for $3 a copy on the newsstand. Yearly subscriptions to the magazine cost $24 per
year (12 issues). During December 2014, Dorie Greenspan Publications sells 12,000
copies of the food and travel magazine at newsstands and receives payment for 20,000
subscriptions for 2015 . Financial statements are prepared monthly.
Instructions
(a)Prepare the December 2014 journal entries to record the newsstand sales and
subscriptions received.
(b)Prepare the necessary adjusting entry on January 31, 2015 . The January 2015 issue
has been mailed to subscribers.
3) In the month of November, Kinsey Company Inc. wrote checks in the amount of
$27,750. In December, checks in the amount of $37,974 were written. In November,
$25,404 of these checks were presented to the bank for payment, and $32,649 were
presented in December. What is the amount of outstanding checks at the end of
December?
a.$2,346
b.$7,245
c.$7,671
d.$10,224
4) The process of recording transactions has become more efficient because
a.fewer events can be quantified in financial terms
b.computers are used in processing business events
c.more people have been hired to record business transactions
d.business events are recorded only at the end of the year
5) Nina Corporations December 31, 2014 balance sheet showed the following:
8% preferred stock, $20 par value, cumulative, 40,000 shares
authorized; 20,000 shares issued$ 400,000
Common stock, $10 par value, 4,000,000 shares authorized;
3,900,000 shares issued, 3,860,000 shares outstanding39,000,000
Paid-in capital in excess of parpreferred stock120,000
Paid-in capital in excess of parcommon stock54,000,000
Retained earnings15,300,000
Treasury stock (40,000 shares)1,260,000
Ninas total paid-in capital was
a.$93,520,000
b.$94,780,000
c.$92,260,000
d.$54,120,000
6) Heckel Manufacturing makes and sells blenders. The company is in the process of
preparing its Selling and Administrative Expense Budget for the last half of the year.
The following budget data are available:
Variable Cost Per Unit SoldMonthly Fixed Cost
Sales commissions$0.60$ 6,000
Shipping1.20
Advertising0.30
Executive salaries40,000
Depreciation on office equipment8,000
Other0.3028,000
Expenses are paid in the month incurred. If the company has budgeted to sell 8,000
blenders in October, how much is the total budgeted variable selling and administrative
expenses for October?
a.$16,800
b.$14,400
c.$101,200
d.$19,200
7) Identify which of the following items would be reported as additions (A) or
deductions (D) in a Retained Earnings Statement.
1>Net Income
2>Net Loss
3>Cash Dividends
4> Stock Dividends
5> Prior period adjustments to correct for overstatement of prior years net income
6>Prior period adjustments to correct for understatement of prior years net income
8) In the expanded purchases journal, debits are made in which columns?
a.Accounts Payable, Inventory, and Supplies
b.Inventory, Supplies, and Other Accounts
c.Cash, Supplies, and Other Accounts
d.Accounts Payable, Cash, and Inventory
9) The fair value principle is applied for
a.all assets
b.current assets
c.buildings
d.investment securities
10) The interest rate specified on any note is for a
a.day
b.month
c.week
d.year
11) Hayes Construction Company issued 1,200 shares of no-par common stock for
$17,600. Which of the following journal entries would be made if the stock has no
stated value?
a.Cash17,600
Common Stock17,600
b.Cash17,600
Common Stock1,200
Paid-in Capital in Excess of Par16,400
c.Cash17,600
Common Stock1,200
Paid-in Capital in Excess of Stated Value16,400
d.Common Stock17,600
Cash17,600
12) Equipment was purchased for $85,000 on January 1, 2014 . Freight charges
amounted to $3,500 and there was a cost of $10,000 for building a foundation and
installing the equipment. It is estimated that the equipment will have a $15,000 salvage
value at the end of its 5-year useful life. What is the amount of accumulated
depreciation at December 31, 2015, if the straight-line method of depreciation is used?
a.$33,400
b.$16,700
c.$14,300
d.$28,600
13) Conrad Company reported the following balances at June 30, 2014:
Sales Revenue$16,200
Sales Returns and Allowances600
Sales Discounts300
Cost of Goods Sold7,500
Net sales for the month is
a.$7,800
b.$15,300
c.$15,600
d.$16,200
14) A product requires processing in two departments, the Baking Department and then
the Packaging Department, before it is completed. Costs transferred out of the Baking
Department will be transferred to:
a.Finished Goods Inventory
b.Cost of Goods Sold
c.Work in ProcessPackaging Department
d.Manufacturing Overhead
15) The final step in the recording process is to transfer the journal information to the
a.trial balance
b.financial statements
c.ledger
d.file cabinets
16) A cost that increases in total, but not proportionately with increases in the activity
level, is a(n):
a.fixed cost
b.variable cost
c.variable cost with an unusual behavior pattern
d.mixed cost
17) Stetson Company bought furniture on account. Their accountant debited Furniture
and credited Accounts Receivable. An appropriate correcting entry is:
a.debit Furniture and credit Accounts Payable
b.debit Accounts Receivable and credit Accounts Payable
c.debit Miscellaneous Expense and credit Accounts Payable
d.No correcting entry is needed
18) Net purchases plus freight-in determines
a.cost of goods sold
b.cost of goods available for sale
c.cost of goods purchased
d.total goods available for sale
19) Distinguishing normal levels of income from irregular items is of interest for the
FASBIASB
a.nono
b.noyes
c.yesno
d.yesyes
20) The collection of an account that had been previously written off under the
allowance method of accounting for uncollectibles
a.will increase income in the period it is collected
b.will decrease income in the period it is collected
c.requires a correcting entry for the period in which the account was written off
d.does not affect income in the period it is collected
21) De Longo Inc. has excess capacity. Under what situations should the company
accept a special order for less than the current selling price?
a.Never
b.When additional fixed costs must be incurred to accommodate the order
c.When the company thinks it can use the cheaper materials without the customer’s
knowledge
d.When incremental revenues exceed incremental costs
22) Partners Cantor and Dickens have capital balances in a partnership of $160,000 and
$240,000, respectively. They agree to share profits and losses as follows:
CantorDickens
As salaries$40,000$48,000
As interest on capital at the beginning of the year10%10%
Remaining profits or losses50%50%
If income for the year was $200,000, what will be the distribution of income to Dickens
?
a.$92,000
b.$108,000
c.$80,000
d.$40,000
23) Prepare the necessary journal entries to record the following transactions, assuming
Dakin Company uses a perpetual inventory system.
(a)Purchased $35,000 of merchandise on account, terms 2/10, n/30.
(b)Returned $700 of damaged merchandise for credit.
(c)Paid for the merchandise purchased within 10 days.
24) Major advantages of credit cards to the retailer include all of the following except
the
a.issuer does the credit investigation of customers
b.issuer undertakes the collection process
c.retailer receives more cash from the credit card issuer
d.All of these are advantages
25) Rosco Manufacturing Company is considering three new projects, each requiring an
equipment investment of $20,000. Each project will last for 3 years and produce the
following cash inflows.
Year AA BB CC
1$ 7,000$ 9,600$11,000
29,0009,600 10,000
3 15,000 9,600 9,000
Total$31,000$28,800$30,000
The equipment’s salvage value is zero. Rosco uses straight-line depreciation. Rosco will
not accept any project with a payback period over 2 years. Rosco ‘s minimum required
rate of return is 12%.
Instructions
(a)Compute each project’s payback period, indicating the most desirable project and the
least desirable project using this method. (Round to two decimals.)
(b)Compute the net present value of each project. Does your evaluation change?
(Round to nearest dollar.)
26) Autotether, Inc. sells 1,200 units of a product that has a one-year warranty on parts.
The average cost of honoring one warranty contract is $60. During the year 60 contracts
are honored at a cost of $3,600. It is estimated that 120 contracts will be honored in the
following year. The adjusting entry at the end of the current year will include a
a.credit to Warranty Liability for $7,200
b.credit to Warranty Liability for $10,800
c.debit to Warranty Expense for $3,600
d.debit to Warranty Expense for $10,800
27) A computer company has $2,800,000 in research and development costs. Before
accounting for these costs, the net income of the company is $2,000,000. What is the
amount of net income or loss after these R & D costs are accounted for?
a.$800,000 loss
b.$2,000,000 net income
c.$0
d.Cannot be determined from the information provided
28) Equipment was purchased for $210,000 and currently has a book value of $145,000
and a depreciable cost of $180,000. The estimated salvage value is:
a.$35,000
b.$30,000
c.$65,000
d.$115,000
29) The preparation of adjusting entries is
a.straight forward because the accounts that need adjustment will be out of balance
b.often an involved process requiring the skills of a professional
c.only required for accounts that do not have a normal balance
d.optional when financial statements are prepared
30) The depreciation method that applies a constant percentage to depreciable cost in
calculating depreciation is
a.straight-line
b.units-of-activity
c.declining-balance
d.none of these
31) A credit is not the normal balance for which account listed below?
a.Capital account
b.Revenue account
c.Liability account
d.Drawings account
32) Newman Company sells MP3 players for $60 each. Variable costs are $40 per unit,
and fixed costs total $90,000. How many MP3 players must Newman sell to earn net
income of $210,000?
a.15,000
b.5,250
c.3,750
d.4,500
33) If disposal of a plant asset occurs during the year, depreciation is
a.not recorded for the year
b.recorded for the whole year
c.recorded for the fraction of the year to the date of the disposal
d.not recorded if the asset is scrapped
34) Nicholson Company purchased equipment on January 1, 2012, for $80,000 with an
estimated salvage value of $20,000 and estimated useful life of 8 years. On January 1,
2014, Nicholson decided the equipment will last 12 years from the date of purchase.
The salvage value is still estimated at $20,000. Using the straight-line method the new
annual depreciation will be:
a.$4,500
b.$5,000
c.$6,000
d.$6,667
35) Which of the following will not result in an unfavorable controllable margin
difference?
a.Sales exceeding budget; costs under budget
b.Sales exceeding budget; costs over budget
c.Sales under budget; costs under budget
d.Sales under budget; costs over budget
36) Iverson Company purchased a delivery truck for $45,000 on January 1, 2014 . The
truck was assigned an estimated useful life of 100,000 miles and has a residual value of
$10,000. The truck was driven 18,000 miles in 2014 and 22,000 miles in 2015 .
Compute depreciation expense using the units-of-activity method for the years 2014
and 2015 .
SO: 3, Bloom: AP,
37) Instructions: Indicate in which journal the transactions given below would be
recorded by placing the appropriate journal abbreviation in the space provided.
AbbreviationJournal
GGeneral Journal
CRCash Receipts Journal
SSales Journal
CPCash Payments Journal
PPurchases Journal
1>Recorded adjusting entries
2>Sold merchandise to customer on account
3>Received cash on account from customer
4>Purchased merchandise for resale on account
5>Paid shipping charges on merchandise purchased on account
6>Customer returned merchandise sold on account
7>Owner withdrew cash for personal use
8>Purchased equipment on account
38) In a job order system, raw materials purchased are charged to the ______________
account.
39) Cisadhouse Manufacturing Company has two investment centers and has developed
the following information:
Department ADepartment B
Departmental controllable margin$130,000?
Average operating assets?$400,000
Sales revenue800,000250,000
ROI10%12%
Instructions
Answer the following questions about Department A and Department B.
1>What was the amount of Department A’s average operating assets? $____________.
2>What was the amount of Department B’s controllable margin? $____________.
3>If Department B is able to reduce its operating assets by $100,000, Department B’s
new ROI would be ____________.
4>If Department A is able to increase its controllable margin by $60,000 as a result of
reducing variable costs, Department A’s new ROI would be _________________.
40) Coos Manufacturing Company has budgeted direct materials purchases of $400,000
in March and $600,000 in April. Past experience indicates that the company pays for
65% of its purchases in the month of purchase and the remaining 35% in the next
month. Other costs are all paid during the month incurred. During April, the following
items were budgeted:
Wages expense$130,000
Purchase of office equipment200,000
Selling and administrative expenses126,000
Depreciation expense18,000
Instructions
Compute the amount of budgeted cash disbursements for April.
41) A selected list of accounts used by Kobe Manufacturing Company follows:
CodeCode
A Cash FAccounts Payable
BAccounts Receivable GFactory Labor
CRaw Materials Inventory HManufacturing Overhead
DWork In Process Inventory ICost of Goods Sold
EFinished Goods Inventory JSales Revenue
Kobe Manufacturing Company uses a job order system and maintains perpetual
inventory records.
Instructions
Place the appropriate code letter in the columns indicating the appropriate account(s) to
be debited and credited for the transactions listed below.
Account(s)Account(s)
TransactionsDebitedCredited
1>Raw materials were purchased on account.
2>Issued a check to Tutle Machine Shop for
repair work on factory equipment.
3>Direct materials were requisitioned for Job 280 .
4>Factory labor was paid as incurred.
5>Recognized direct labor and indirect labor used.
6>The production department requisitioned indirect
materials for use in the factory.
7>Overhead was applied to production based on a
predetermined overhead rate of $9 per labor hour.
8>Goods that were completed were transferred to
finished goods.
9>Goods costing $90,000 were sold for $125,000
on account.
10>Paid for raw materials purchased previously
on account.