1) The first step in solving an ethical dilemma is to
a.identify and analyze the principal elements in the situation
b.identify the alternatives
c.recognize an ethical situation and the ethical issues involved
d.weigh the impact of each alternative on various stakeholders
2) A company’s planned activity level for next year is expected to be 100,000 machine
hours. At this level of activity, the company budgeted the following manufacturing
overhead costs:
VariableFixed
Indirect materials$120,000Depreciation$50,000
Indirect labor160,000Taxes10,000
Factory supplies20,000Supervision40,000
A flexible budget prepared at the 110,000 machine hours level of activity would show
total manufacturing overhead costs of:
a.$300,000
b.$370,000
c.$400,000
d.$430,000
3) Deborah Company’s account balances at December 31 for Accounts Receivable and
Allowance for Doubtful Accounts were $2,100,000 and $50,000 (Cr.), respectively. An
aging of accounts receivable indicated that $180,000 are expected to become
uncollectible. The amount of the adjusting entry for bad debts at December 31 is
a.$130,000
b.$180,000
c.$210,000
d.$230,000
4) Mackenzie Insurance Company collected a premium of $15,000 for a 1-year
insurance policy on May 1 . What amount should Mackenzie report as a current liability
for Unearned Insurance Revene at December 31?
a.$0
b.$5,000
c.$10,000
d.$15,000
5) Managerial accounting reports can be described as
a.general-purpose
b.macro-reports
c.special-purpose
d.classified financial statements
6) Jacks, a popular pizza hang-out, has a thriving delivery business. Jacks has a fleet of
three delivery automobiles. Prior to making the entry for this year’s depreciation
expense, the subsidiary ledger for the fleet is as follows:
Accumulated
EstimatedDepr.Beg.Miles Operated
Car CostSalvage ValueLife in Milesof the YearDuring Year
1$21,000$3,00075,000$2,52020,000
218,0002,40060,0002,34022,000
323,5002,50070,0002,00019,000
Instructions
(a)Determine the depreciation rates per mile for each car.
(b)Determine the depreciation expense for each car for the current year.
(c)Make one compound journal entry to record the annual depreciation expense for the
fleet.
7) An income statement
a.summarizes the changes in owner’s equity for a specific period of time
b.reports the changes in assets, liabilities, and owner’s equity over a period of time
c.reports the assets, liabilities, and owner’s equity at a specific date
d.presents the revenues and expenses for a specific period of time
8) IFRS allows companies to revalue plant assets to fair value. When an asset has
increased in value, where is the account Revaluation Surplus reported?
a.On the income statement as part of income from continuing operations (other
revenues and gains)
b.On the income statement as part of discontinued operations (discontinuing historical
cost)
c.On the statement of financial position as part of accumulated comprehensive income
(equity)
d.All of the choices are acceptable methods for the reporting of Revaluation Surplus
9) If a bond has a stated rate of 8% and is discounted at 8%, then the proceeds received
at issuance will be
a.equal to the par value of the bonds
b.greater than the par value of the bonds
c.less than the par value of the bonds
d.zero
10) Ada Marion earns a salary of $7,500 per month during the year. FICA taxes are
7.65% on the first $110,100 of gross earnings. Federal unemployment insurance taxes
are 6.2% of the first $7,000; however, a credit is allowed equal to the state
unemployment insurance taxes of 5.4% on the $7,000. During the year, $25,600 was
withheld for federal income taxes and $5,700 was withheld for state income taxes.
Instructions
(a)Prepare a journal entry summarizing the payment of Adas total salary during the
year.
(b)Prepare a journal entry summarizing the employer payroll tax expense on Adas
salary for the year.
(c)Determine the cost of employing Grace for the year.
11) When goods are returned that relate to a prior cash sale,
a.the Sales Returns and Allowances account should not be used
b.the cash account will be credited
c.Sales Returns and Allowances will be credited
d.Accounts Receivable will be credited
12) Available-for-sale securities are classified as
a.short-term investments only
b.long-term investments only
c.either short-term or long-term investments
d.current assets only
13) In recording an accounting transaction in a double-entry system
a.the number of debit accounts must equal the number of credit accounts
b.there must always be entries made on both sides of the accounting equation
c.the amount of the debits must equal the amount of the credits
d.there must only be two accounts affected by any transaction
14) (a)What is the present value of $40,000 due seven years from now, discounted at
9%?
(b)What is the present value of $120,000 due five years from now, discounted at 12%?
15) Closing entries are initially recorded in
a.a special journal
b.the general journal
c.the general ledger
d.a closing journal
16) The sale of receivables by a business
a.indicates that the business is in financial difficulty
b.is generally the major revenue item on its income statement
c.is an indication that the business is owned by a factor
d.can be a quick way to generate cash for operating needs
17) Beacon, Inc. disposes of an unprofitable segment of its business. The operation of
the segment suffered a $350,000 loss in the year of disposal. The loss on disposal of the
segment was $150,000. If the tax rate is 30%, and income before income taxes was
$2,300,000,
a.the income tax expense on the income before discontinued operations is $540,000
b.the income from continuing operations is $1,610,000
c.net income is $1,800,000
d.the losses from discontinued operations are reported net of income taxes at $150,000
18) Which of the following is not a true statement about a multiple-step income
statement?
a.Operating expenses are similar for merchandising and service enterprises
b.There may be a section for nonoperating activities
c.There may be a section for operating assets
d.There is a section for cost of goods sold
19) If merchandise from a cash sale is returned by a customer for a refund, the sales
return is recorded in the
a.general journal
b.cash receipts journal
c.cash payments journal
d.sales journal
20) CVP analysis is not important in
a.calculating depreciation expense
b.setting selling prices
c.determining the product mix
d.utilizing production facilities
21) Principles of an efficient and effective accounting information system include all of
the following except
a.cost effectiveness
b.flexibility
c.useful output
d.All of these answer choices are principles
22) A department had the following information for the month:
Total materials costs$220,000
Conversion cost per unit$3.00
Total manufacturing cost per unit$5.00
What are the equivalent units of production for materials?
a.110,000
b.73,333
c.44,000
d.Cannot be determined
23) If a gain of $12,000 is incurred in selling (for cash) office equipment having a book
value of $110,000, the total amount reported in the cash flows from investing activities
section of the statement of cash flows is
a.$98,000
b.$122,000
c.$110,000
d.$12,000
24) Which of the following adjustments to convert net income to net cash provided by
operating activities is incorrect?
Add to Net IncomeDeduct from Net Income
a.Accounts Receivabledecreaseincrease
b.Prepaid Expensesincreasedecrease
c.Inventorydecreaseincrease
d.Accounts Payableincreasedecrease
25) FICA Taxes Payable was credited for $27,000 in the entry when Highlands
Company recorded payroll. When Highlands Company records employer’s payroll
taxes, FICA Taxes Payable should be credited for:
a.$0
b.$27,000
c.$54,000
d.some other amount
26) Sales taxes collected by a retailer are recorded by
a.crediting Sales Tax Revenue
b.debiting Sales Tax Expense
c.crediting Sales Taxes Payable
d.debiting Sales Taxes Payable
27) Which one of the following items would not be considered cash?
a.Coins
b.Money orders
c.Currency
d.Postdated checks
28) Which of the following are the same under both GAAP and IFRS?
a.The journal
b.The ledger
c.The chart of accounts
d.All of these answer choices are correct
29) On January 1, 2014, the stockholders equity section of Intercontinental Corporation
shows: Common stock ($5 par value) $1,500,000; paid-in capital in excess of par value
$1,000,000; and retained earnings $1,200,000. During the year, the following treasury
stock transactions occurred.
Mar.1 Purchased 30,000 shares for cash at $20 per share.
July1 Sold 6,000 treasury shares for cash at $27 per share.
Sept.1 Sold 5,000 treasury shares for cash at $19 per share.
Instructions
(a)Journalize the treasury stock transactions.
(b)Restate the entry for September 1, assuming the treasury shares were sold at $10 per
share.
30) Listed below are various column headings that may appear in special journals.
Using the following code letters, identify for each column heading (1) the special
journal where the column heading would appear, and (2) whether the amounts entered
under the column heading would be posted in total, individually, or both in total and
individually. (Note: column headings may appear in more than one special journal)
Code:Special JournalsCode:Posting
S=Sales journalI=Individual posting
P=One column purchases journalT=Total posting
CR=Cash receipts journalB=Both individual and total posting
CP=Cash payments journal
HeadingSpecial JournalPosting
1>Accounts PayableDr.
2>Other AccountsCr.
3>Sales DiscountsDr.
4>Accounts ReceivableDr.
5>InventoryDr.
31) Allowance for Doubtful Accounts is a _____________ account which is
______________ from Accounts Receivable on the balance sheet.
32) On January 1, 2014, Morgan Enterprises issued 8%, 20-year bonds with a face
amount of $5,000,000 at 101 . Interest is payable semiannually on June 30 and
December 31 .
Instructions
Prepare the entries to record the issuance of the bonds and the first semiannual interest
payment assuming that the company uses straight-line amortization.
33) One item is omitted in each of the following summaries of balance sheet and
income statement data for three different sole proprietorships, X, Y, and Z. Determine
the amounts of the missing items, identifying each proprietorship by letter.
Proprietorship
X Y Z
Beginning of the Year:
Assets$390,000$150,000$219,000
Liabilities250,000105,000168,000
End of the Year:
Assets450,000175,000195,000
Liabilities280,00095,000169,000
During the Year:
Additional Investment by the owner ? 79,00080,000
Withdrawals by the owner90,00083,000 ?
Revenue195,000 ?187,000
Expenses170,000113,000175,000
34) Tortola Company reported the following balances at December 31, 2013: common
stock $500,000; paid-in capital in excess of par value $100,000; retained earnings
$250,000. During 2014, the following transactions affected stockholders equity.
1>Issued preferred stock with a par value of $150,000 for $200,000.
2>Purchased treasury stock (common) for $40,000.
3>Earned net income of $140,000.
4>Declared and paid cash dividends of $75,000.
Instructions
Prepare the stockholders’ equity section of Tortola Company’s December 31, 2014,
balance sheet.
35) Blume Company purchased equipment for $250,000 cash on January 1, 2013 . The
estimated life is 4 years or 300,000 units; salvage value is estimated at $10,000. Actual
activity was 52,500 units in 2013 and 67,500 units in 2014 .
Instructions: Compute the annual depreciation expense for 2013 and 2014, and book
value at December 31, 2014, under the following depreciation methods: (1)
units-of-activity, (2) straight-line, and (3) double-declining-balance.
1>Units-of-activity
2013 depreciation =$_______________.
2014 depreciation =$_______________.
12/31/14 book value =$_______________.
2>Straight-line
2013 depreciation =$_______________.
2014 depreciation =$_______________.
12/31/14 book value =$_______________.
3>Double-declining-balance
2013 depreciation =$_______________.
2014 depreciation =$_______________.
12/31/14 book value =$_______________.
36) The capital account balances on January 1, 2014, for Christine and Dave were
$140,000 and $210,000, respectively. During 2014, the Christine and Dave partnership
had sales of $520,000, cost of goods sold of $182,000, and operating expenses of
$46,000.
Instructions: Prepare a schedule which clearly sets out the division of income or loss to
the partners for 2014 .
1>Since Christine will work only part time in the partnership, she will be allocated a
salary allowance that is one half the salary allowance allocated to Dave. Dave’s salary
allowance will be 20% of sales.
2>Both partners will be given an interest allowance of 20% on their
beginning-of-the-year capital account balances.
3>The remaining income and loss is to be divided 40% to Christine and 60% to Dave.
37) Hamilton Company uses a periodic inventory system and has the following account
balances: Beginning Inventory $140,000, Ending Inventory $120,000, Freight-in
$20,000, Purchases $680,000, Purchase Returns and Allowances $8,000, and Purchase
Discounts $4,000.
Instructions: Compute each of the following:
1>Net purchases
2>Cost of goods available for sale
3>Cost of goods sold