1) The declaration and issuance of a stock dividend does not affect the total amount of a
corporation’s assets, liabilities, or stockholders’ equity.
2) Depreciation on factory plant and equipment is an example of factory overhead cost.
3) The ratio of sales to investment is termed the rate of return on investment.
4) The role of accounting is to provide many different users with financial information
to make economic decisions.
5) Proper reporting of revenues and expenses in a period is due to the accounting period
concept.
6) Posting a transaction twice will cause the trial balance totals to be equal.
7) In a just-in-time (JIT) environment, the journal entry to record conversion costs
would include a debit to the manufacturing overhead control account.
8) A performance report that identifies the amount of employee downtime is a financial
accounting report.
9) The units of production depreciation method provides a good match of expenses
against revenue.
10) Cost of merchandise sold is the amount that the merchandising company pays for
the merchandise it intends to sell.
11) The amount of depreciation expense for the first full year of use of a fixed asset
costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years,
is $19,000 by the straight-line method.
12) In the long run, for a business to remain in operation, the selling price of a product
should normally cover all costs and expenses and provide a reasonable income.
13) Conversion costs include materials, direct labor, and factory overhead.
14) Match the following documents used for inventory control:
1>authorizes the purchase of inventory from an approved vendor A. Vendors Invoice
2>last document in the chain, use to compare all three for accuracy B. Purchase Order
3>establishes an initial record of the receipt of inventory C. Receiving Report
15) Rent expense incurred on a factory building would be treated as a(n):
A.indirect cost
B.period cost
C.product cost
D.both A and C are correct
16) Use the correct number to designate each item below:
1) direct materials
2) selling and administrative expense
3) factory overhead
4) direct labor
a) rent expense on factory building
b) sales supplies used
c) factory supplies used
d) indirect materials used
e) wages of assembly line personnel
f) cost of primary material used to make product
g) depreciation on office equipment
h) rent on office facilities
i) insurance expired on factory equipment
j) utilities incurred in the office
k) advertising expense
17) If fixed costs are $700,000 and the unit contribution margin is $17, what amount of
units must be sold in order to realize an operating income of $100,000?
A. 5,000
B.41,176
C.47,059
D.58,882
18) The trial balance is out of balance and the accountant suspects that a transposition
or slide error has occurred. What will the accountant do to find the error?
A.Determine the amount of the error and look for that amount on the trial balance
B.Determine the amount of the error and divide by two, then look for that amount on
the trial balance
C.Determine the amount of the error and refer to the journal entries for that amount
D.Determine the amount of the error and divide by nine. If the result is evenly divided,
then this type of error is likely
19) What is the major difference between a periodic and perpetual inventory system?
A.Under the periodic inventory system, the purchase of inventory will be debited to the
Purchases account
B.Under the periodic inventory system, no journal entry is recorded at the time of the
sale of inventory for the cost of the inventory
C.Under the periodic inventory system, all adjustments such as purchases returns and
allowances and discounts are reconciled at the end of the month
D.All are correct
20) The notification accompanying a check that indicates the specific invoice being
paid is called a
A.remittance advice
B.voucher
C.debit memo
D.credit memo
21) 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
22) Match the following elements of internal control:
1>Control Procedures A. overall attitude of management and employees
2>Risk Assessment B. identify, analyze and assess likeliness of vulnerabilities
3>Information and Communication C. provides reasonable assurance that business
goals will be achieved
4>Control Environment D. used to locate weaknesses and improve controls
5>Monitoring E. used by management for guiding operations and ensuring compliance
with requirements
23) Which one of the following below is not an element of internal control?
A.risk assessment
B.monitoring
C.information and communication
D.cost-benefit considerations
24) On January 1, 2014, the Baker Corporation issued 10% bonds with a face value of
$50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June
30 and December 31 and the maturity date is December 31, 2023. Baker records
straight-line amortization of the bond discount. The bond interest expense for the year
ended December 31, 2014, is
A.$5,000
B.$5,200
C.$5,800
D.$5,400
25) Supplies are recorded as assets when purchased. Therefore, the credit to supplies in
the adjusting entry is for the amount of supplies
A.still on hand
B.purchased
C.used
D.required for the next accounting period
26) Which of the following is an example of direct materials cost for an automobile
manufacturer?
A.Cost of oil lubricants for factory machinery
B.Cost of wages of assembly worker
C.Salary of production supervisor
D.Cost of interior upholstery
27) 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
28) Equipment with a cost of $160,000, an estimated residual value of $40,000, and an
estimated life of 15 years was depreciated by the straight-line method for 4 years. Due
to obsolescence, it was determined that the useful life should be shortened by 3 years
and the residual value changed to zero. The depreciation expense for the current and
future years is
A.$11,636
B.$16,000
C.$11,000
D.$8,000
29) When the market rate of interest was 11%, Munson Corporation issued $1,000,000,
12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue
was
A.$1,052,310
B.$1,154,387
C.$1,000,000
D.$ 720,495
30) Everest Co. uses a plantwide factory overhead rate based on direct labor hours.
Overhead costs would be overcharged to which of the following departments?
A.A labor-intensive department
B.A capital-intensive department
C.A materials-intensive department
D.All of the above
31) Which of the following entries records the payment of rent for the current month?
A.Cash, debit; Rent Expense, credit
B.Rent Expense, debit; Cash, credit
C.Rent Expense, debit; Accounts Receivable, credit
D.Accounts Payable, debit; Rent Expense, credit
32) A 60-day, 12% note for $7,000, dated April 15, is received from a customer on
account. The face value of the note is
A.$6,860
B.$7,140
C.$7,840
D.$7,000
33) The percent of fixed assets to total assets is an example of
A.vertical analysis
B.solvency analysis
C.profitability analysis
D.horizontal analysis
34) Which of the following statements is false?
A.There is no overlap between financial and managerial accounting
B.Managerial accounting sometimes relies on past information
C.Managerial accounting does not need to conform to GAAP
D.Financial accounting must conform to GAAP
35) Copy equipment was acquired at the beginning of the year at a cost of $72,000 that
has an estimated residual value of $9,000 and an estimated useful life of 5 years. It is
estimated that the machine has an estimated 1,000,000 copies. This year 315,000 copies
were made. Determine the (a) depreciable cost, (b) depreciation rate, and (c) the
units-of-production depreciation for the year.
36) Dove Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $250,000, $320,000, and
$410,000, respectively, for September, October, and November. The company expects
to sell 25% of its merchandise for cash. Of sales on account, 70% are expected to be
collected in the month of the sale, 30% in the month following the sale.
The cash collections in October are:
A.$320,000
B.$248,000
C.$304,250
D.$382,500
37) Budgets need to be fair and attainable for employees to consider the budget
important in their normal daily activities. Which of the following is not considered a
human behavior problem?
A.Setting goals among managers that conflict with one another
B.Setting goals too tightly making it difficult to meet performance expectation
C.Allowing employees the opportunity to be a part of the budget process
D.Allowing goals to be so low that employees develop a spend it or lose it attitude
38) Leveraging implies that a company
A.contains debt financing
B.contains equity financing
C.has a high current ratio
D.has a high earnings per share
39) Match the following stockholders equity concepts to the best answer.
1>the date that a share of stock must be owned to receive current dividend A. stock
dividends distributable
2>distribution of a companys earnings to stockholders B. treasury stock
3>when dividends are actually distributed to stockholders C. preferred stock
4>equity account reflecting shares owed to stockholders D. cash dividend
5>entitled to receive dividends first E. additional paid in capital
6>this event creates a liability to company F. declaration date
7>Shares of common stock re-acquired by a company G. record date
8>account used when shares are issued for an amount greater than par value H.
payment date
40) The work sheet
A.is an integral part of the accounting cycle
B.eliminates the need to rewrite the financial statements
C.is a working paper that is required
D.is used to summarize account balances and adjustments for the financial statements
41) Which of the following costs is an example of a cost that remains the same in total
as the number of units produced changes?
A.Direct labor
B.Salary of a factory supervisor
C.Units of production depreciation on factory equipment
D.Direct materials
42) Cash equivalents
A.are illegal in some states
B.will be converted to cash within two years
C.will be converted to cash within 90 days
D.will be converted to cash within 120 days
43) An employee receives an hourly rate of $45, with time and a half for all hours
worked in excess of 40 during the week. Payroll data for the current week are as
follows: hours worked, 48; federal income tax withheld, $950; Social security tax rate,
6.5% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings; state
unemployment compensation tax, 3.4% on the first $7,000; federal unemployment
compensation tax, .8% on the first $7,000.
Calculate the employer’s payroll tax expense if:
a. this is the first payroll of the year and the employee has no cumulative earnings for
the year to date.
b. the employees cumulative earnings for the year prior to this week equal $6,200.
c. the employees cumulative earnings for the year prior to this week equal $98,700.
44) Which of the following accounts will only be found in the chart of accounts of a
merchandising company?
A.Sales
B.Accounts Receivable
C.Merchandise Inventory
D.Accounts Payable
45) Which of the following is false in regards to direct materials for an auto
manufacturer?
A.Steel would probably be a direct material
B.Upholstery fabric would probably be a direct material
C.Oil to lubricate factory machines would not be a direct material
D.Small plastic clips to hold on door panels, that become part of the auto, must be
accounted for as direct materials
46) Explain the meaning of:
(a) the objectivity concept
(b) the unit of measure concept
47) The gross increases in retained earnings attributable to business activities are called
A.assets
B.liabilities
C.revenues
D.expenses
48) When using a perpetual inventory system, the journal entry to record the cost of
merchandise sold is:
A.debit Cost of Merchandise Sold; credit Sales
B.debit Cost of Merchandise Sold; credit Merchandise Inventory
C.debit Merchandise Inventory; credit Cost of Merchandise Sold
D.No journal entry is made to record the cost of merchandise sold.
49) Blanton Corporation purchased 35% of the outstanding shares of common stock of
Worton Corporation as a long-term investment. Subsequently, Worton Corporation
reported net income and declared and paid cash dividends. What journal entry would
Blanton Corporation use to record the dividends it receives from Worton Corporation?
A.debit Investment in Worton Corporation; credit Cash
B.debit Cash; credit Dividend Revenue
C.debit Investment in Worton Corporation; credit Income of Worton Corporation
D.debit Cash; credit Investment in Worton Corporation
50) In accordance with the rules of debit and credit, which of the following is true?
A.Debits increase assets
B.Credits increase assets
C.Debits increase both assets and retained earnings
D.Credits increase both assets and liabilities
51) .Which of the following is true in regard to a Limited Liability Company?
A.Makes up 10% of business organizations in the United States
B.Combines the attributes of a partnership and a corporation
C.Provides tax and legal liability advantages to the owners
D.All are correct
52) If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00
each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40
each), the effect of the unit cost factor on the change in variable cost of goods sold is:
A.$6,400 decrease
B.$6,400 increase
C.$7,200 increase
D.$7,200 decrease
53) A summary of cash flows for Alex Design Services for the year ended December
31, 2012, is shown below.
Prepare a statement of cash flows for Alex Design Services for the year ended
December 31, 2012.
54) Eagle Country Club has acquired a lot to construct a clubhouse. Eagle had the
following costs related to the construction:
Determine the cost of the Club House to be reported on the balance sheet.
55) For a business that uses the allowance method of accounting for uncollectible
receivables:
56) Prepare an income statement for the year ended December 31, 2012, through gross
profit for Aframe Company using the following information. Assume Aframe Company
sold 8,600 units at $125 per unit. (Note: Normal production is 9,000 units)
57) The Cavy Company estimates that the factory overhead for the following year will
be $1,470,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 40,000 hours. Calculate the
predetermined overhead rate to apply factory overhead.
58) On January 1, 2010 Orange Retail Co. issued a $300,000, 3 year, 6% installment
note payable with payments of $100,000 principal and interest due on January 1st for
each of the next 3 years.
1> Prepare the adjusting journal entry to accrue interest at the end of the 2nd year –
12/31/11.
2> Show the account(s) and amount (s) and where the account(s) will appear on a
multi-step income statement prepared on December 31, 2011
3> Show the account(s) and amount(s) and where the account(s) will appear on a
classified balance sheet prepared on December 31, 2011
59) The following data were taken from Bowman Inc.
Determine the inventory turnover ratio and the number of days sales in inventory for
Bowman Inc. Round to two decimal places.