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1) A controlling account is used to record the details of the individual accounts.
2) Purchasing supplies on account increases liabilities and decreases equity.
3) One reason a dollar today is worth more than a dollar 1 year from today is the time
value of money.
4) In preparing flexible budgets, the first step is to identify the fixed and variable
components of the various costs and expenses being budgeted.
5) Payroll taxes only include social security taxes and federal unemployment and state
unemployment taxes.
6) The average cost method will always yield results between FIFO and LIFO.
7) In a general partnership, each partner is individually liable to creditors for debts
incurred by the partnership, to the extent of the partner's capital balance.
8) Conversion costs include materials, direct labor, and factory overhead.
9) The cost concept is the basis for entering the exchange price into the accounting
records.
10) It is correct to rely exclusively on past cost data when establishing standards.
11) A company is planning to purchase a machine that will cost $24,000, have a
six-year life, and have no salvage value. The company expects to sell the machines
output of 3,000 units evenly throughout each year. Total income over the life of the
machine is estimated to be $12,000. The machine will generate cash flows per year of
$6,000. The payback period for the machine is 12 years.
12) Sales Discounts is a revenue account with a credit balance.
13) The budgeted volume of production is based on the sum of (1) the expected sales
volume and (2) the desired ending inventory, less (3) the estimated beginning inventory.
14) All bank memos reported on the bank reconciliation require entries in the
company's accounts.
15) When a new partner purchases the entire interest of an old partner, the new partner's
capital account should be credited for the amount he or she paid to the old partner.
16) The Drawings account is an example of an expense.
17) The statement of members equity is used for equity reporting of a partnership.
18) FIFO is the inventory costing method that follows the physical flow of the goods.
19) When an owner invests assets in the business, the capital account increases due to
revenue being earned.
20) A cost that will not be affected by later decisions is termed a sunk cost.
21) The condensed income statement for a business for the past year is presented as
follows:
Management is considering the discontinuance of the manufacture and sale of Product
G at the beginning of the current year. The discontinuance would have no effect on the
total fixed costs and expenses or on the sales of Products F and H. What is the amount
of change in net income for the current year that will result from the discontinuance of
Product G?
A.$20,000 increase
B.$30,000 increase
C.$20,000 decrease
D.$30,000 decrease
22) Two income statements for Debras Design Services are shown below:
(a) Prepare a vertical analysis of Debras Design Services income statements.
(b) What type of trend(s) are indicated: favorable or unfavorable trend?
(c) What other information would enhance the analysis?
23) Which of the accounting steps in the accounting process below would be completed
last?
A.preparing the adjusted trial balance
B.posting
C.preparing the financial statements
D.journalizing
24) In process cost accounting, the costs of direct materials and direct labor are charged
directly to:
A.service departments
B.processing departments
C.customer accounts receivable
D.job orders
25) Immediately prior to the admission of Allen, the Sanson-Jeremy Partnership assets
had been adjusted to current market prices, and the capital balances of Sanson and
Jeremy were $80,000 and $120,000 respectively. If the parties agree that the business is
worth $240,000, what is the amount of bonus that should be recognized in the accounts
at the admission of Allen?
A.$60,000
B.$80,000
C.$40,000
D.$100,000
26) The following data is given for the Zoyza Company:
Overhead is applied on standard labor hours.
The factory overhead controllable variance is:
A.$73,250F
B.$73,250U
C.$59,400F
D.$59,400U
27) Penny, Inc. employs a process costing system. Direct materials are added at the
beginning of the process. Here is information about Julys activities:
Using the FIFO method, the number of equivalent units of conversion costs was
A.14,400
B.14,380
C.14,550
D.15,850
28) Motorcycle Manufacturers, Inc. projected sales of 78,000 machines for 2012. The
estimated January 1, 2012, inventory is 6,500 units, and the desired December 31, 2012,
inventory is 7,000 units. What is the budgeted production (in units) for 2012?
A.77,500
B.71,000
C.78,500
D.71,500
29) The graph of a variable cost when plotted against its related activity base appears as
a:
A.circle
B.rectangle
C.straight line
D.curved line
30) Explain the difference between
A) Accrued revenues and unearned revenues.
B) Accrued expenses and prepaid expenses.
C) Give an example of each.
31) Prepare adjusting entries for the following transactions:
(a) The beginning balance of the Supplies account was $245. During the month the
company bought additional supplies in the amount of $735. At the end of the month a
physical inventory showed $343 of unused supplies.
(b) The company has a 12% Note Payable in the amount of $17,000 due in 6 months.
The interest expense for the month has not been recorded.
(c) The company has two employees. The manager is paid on the 15th of every month
for work performed during the first half of the month and on the 1st of the following
month for the work performed during the second half of the month. His monthly salary
is $5,500. The other employee is paid $650 for each 5 day work week (Monday -
Friday). The last day of the month fell on Thursday.
(d) The unearned revenue account shows a balance of $46,000. According to the
manager 60% of that amount has been earned.
(e) At the end of the month $5,700 of services had been performed but not yet billed.
32) The following financial information was summarized from the accounting records
of Train Corporation for the current year ended December 31:
The gross profit for the Rails Division is:
A.$60,800
B.$33,600
C.$8,700
D.$21,150
33) Which of the following accounts would be included in the chart of accounts of a
merchandising company using the: (a) periodic inventory system, (b) perpetual
inventory system, or (c) both systems?
(1) Purchases
(2) Freight in
(3) Sales Returns and Allowances
(4) Delivery Expense
(5) Purchases Returns and Allowances
34) The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 40,000 shares were originally issued and 10,000 were subsequently
reacquired. What is the number of shares outstanding?
A.10,000
B.40,000
C.30,000
D.50,000
35) Which of the following would not be found in a Schedule of Noncash Investing and
Financing Activities, reported at the end of a Statement of Cash Flows?
A.equipment acquired in exchange for a note payable
B.bonds payable exchanged for capital stock
C.purchase of treasury stock
D.capital stock issued to acquire fixed assets
36) The proper journal entry to record the purchase of $30,000 of raw materials on
account would be:
A.Raw Material Inventory 30,000
Accounts Receivable 30,000
B.Raw Material Inventory 30,000
Accounts Payable 30,000
C.Inventory 30,000
Accounts Receivable 30,000
D.Inventory 30,000
Cash 30,000
37) A company with $70,000 in current assets and $50,000 in current liabilities pays a
$1,000 current liability. As a result of this transaction, the current ratio and working
capital will
A.both decrease
B.both increase
C.increase and remain the same, respectively
D.remain the same and decrease, respectively
38) If a company borrows money from a bank as an installment note, the interest
portion of each annual payment will:
A.equal the interest rate on the note times the carrying amount of the note at the
beginning of the period
B.remain constant over the term of the note
C.equal the interest rate on the note times the face amount
D.increase over the term of the note
39) Fast-Flow Paints produces mixer base paint through a two stage process, Mixing
and Packaging. The following events depict the movement of value into and out of
production. Journalize each event if appropriate, if not, provide a short narrative reason
as to why you choose not to journalize that action. Bob, the Production Manager,
accepts an order to continue processing the current run of mixer base paint.
(a) $27,000.00 worth of materials are withdrawn from Raw Materials inventory. Of this
amount, $25,500.00 will be issued to the Mixing Department and the balance will be
issued to the Maintenance Department to be used on production line machines.
(b) Bob calculates that labor for the period is $12,500.00. Of this value $1,750.00 is for
maintenance and indirect labor. The remainder is directly associated with mixing.
(c) Bob, who is paid a salary but earns about $35.00 / hour, spends 1 hour inspecting the
production line.
(d) The manufacturing overhead drivers for Mixing are (1) hours of mixer time at
$575.00 per hour, and material movements from Raw Materials at $125.00 per
movement. An inspection of the machine timers reveals that a total of 8 hours has been
consumed in making this product. An inspection of Stocking Orders indicates that only
one material movement was utilized to load the raw materials. (Note: All values have
been journalized to Factory Overhead, you need only apply it to the production run.)
(e) Within Fast-Flow items are transferred between departments at a standard cost or
value. This production run has created 4,015 gallons of mixer base paint. This paint is
transferred to Packaging at a standard cost of $10.05 per gallon.
(f) Packaging draws $755.00 in raw materials for packaging of this production run.
(g) Packaging documents that 12 hours of direct labor at $10.25 per hour were
consumed in the packaging of this production run.
(h) Packaging uses a driver of direct labor hours to allocate manufacturing overhead at
the rate of $25.00 per hour.
(i) Packaging transfers these 4,015 gallons of packaged goods to Finished Goods
Inventory at a standard cost of $10.34 per gallon.
Round total cost to nearest dollar value.
40)
Calculate the Direct Labor Rate Variance using the above information
A.$4,488.75 Unfavorable
B.$6,851.25 Favorable
C.$4,488.75 Favorable
D.$6,851.25 Unfavorable
41) At the beginning of the period, the Assembly Department budgeted direct labor of
$110,000, direct material of $170,000 and fixed factory overhead of $28,000 for 8,000
hours of production. The department actually completed 10,000 hours of production.
What is the appropriate total budget for the department, assuming it uses flexible
budgeting.
A.$288,000
B.$305,000
C.$350,000
D.$378,000
42) How will the following adjusting journal entry affect the accounting equation?
A.Increase assets, increase revenues
B.Increase liabilities, increase revenues
C.Decrease liabilities, increase revenues
D.Decrease liabilities, decrease revenues
43) Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income
from operations amounting to $302,500, and a desired minimum rate of return of 15%.
The residual income for Chicks is:
A.$165,000
B.$302,500
C.$137,500
D.$191,500
44) In horizontal analysis, each item is expressed as a percentage of the
A.base year figure
B.retained earnings figure
C.total assets figure
D.net income figure
45) Calculate the following:
46) If fixed costs are $240,000, the unit selling price is $32, and the unit variable costs
are $20, what are the old and new break-even sales (units) if the unit selling price
increases by $4?
A.7,500 units and 6,667 units
B.20,000 units and 30,000 units
C.20,000 units and 15,000 units
D.12,000 units and 15,000 units
47) Distinguish preventive controls from detective controls and give examples of each
as they relate to cash.
48) Snipe Company has been purchasing a component, Part Q, for $19.20 a unit. Snipe
is currently operating at 70% of capacity and no significant increase in production is
anticipated in the near future. The cost of manufacturing a unit of Part Q, determined by
the absorption costing method, is estimated as follows:
Prepare a differential analysis report, dated March 12 of the current year, on the
decision to make or buy Part Q.
49) On May 1, 2015, Chase Inc. purchases $60,000 of 10-year, Manus Corporation 6%
bonds dated March 1, 2015 at 100 plus accrued interest. What entry would Chase record
when receiving its semiannual interest on September 1?
50) Marcus Enterprises was started by Damien Marcus in 2010. During 2010, Damien
Marcus invested $8,000 in the business. Based on the following worksheet, prepare an
income statement, statement of owners equity, and balance sheet for Marcus Enterprises
for the year ended December 31, 2010
Marcus Enterprises
Worksheet
For the Year Ended December 31, 2010
51) The following are all the steps in the accounting cycle. List them in the order in
which they should be done.
- Closing entries are journalized and posted to the ledger.
- An unadjusted trial balance is prepared.
- An optional end-of-period spreadsheet (work sheet) is prepared.
- A post-closing trial balance is prepared.
- Adjusting entries are journalized and posted to the ledger.
- Transactions are analyzed and recorded in the journal.
- Adjustment data are assembled and analyzed.
- Financial statements are prepared.
- An adjusted trial balance is prepared.
- Transactions are posted to the ledger.
52) Louis Company sells a single product at a price of $65 per unit. Variable costs per
unit are $45 and total fixed costs are $625,500. Louis is considering the purchase of a
new piece of equipment that would increase the fixed costs to $800,000, but decrease
the variable costs per unit to $42.
Required:
If Louis Company expects to sell 44,000 units next year, should they purchase this new
equipment?
53) On April 1, 10,000 shares of $5 par common stock were issued at $22, and on April
7, 5,000 shares of $50 par preferred stock were issued at $104. Journalize the entries for
April 1 and 7.
54) Define nonfinancial performance measures. What are they used for and what are
some common examples?
