1) The trial balance prepared after all the closing entries have been posted is called a
pre-closing trial balance.
2) The accounting rate of return is a measure of profitability computed by dividing the
average annual cash flows from an asset by the average amount invested in the asset.
3) When companies use a perpetual inventory system, the recording of the purchase of
inventory will include a debit to purchases.
4) A voucher is a written authorization to make a cash payment.
5) 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
accounting rate of return for the machine is 50%.
6) If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of
24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted
volume of production for 2012 is 198,000 units.
7) Because many companies use computerized accounting systems, periodic inventory
is widely used.
8) The contribution margin and the manufacturing margin are usually equal.
9) A qualitative characteristic that may impact upon capital investment analysis is
manufacturing productivity.
10) The rates at which services are charged to each division are called service
department charge rates.
11) The budget procedure that requires all levels of management to start from zero in
estimating sales, production, and other operating data is called zero-based budgeting.
12) If two companies have the same current ratio, their ability to pay short-term debt is
the same.
13) If in evaluating a proposal by use of the net present value method there is a
deficiency of the present value of future cash inflows over the amount to be invested,
the proposal should be accepted.
14) A perpetual inventory system is an effective means of control over inventory.
15) Multiple production department factory overhead rates are most useful when
production departments are very similar in their manufacturing processes.
16) Under the variable cost concept, only variable costs are included in the cost amount
per unit to which the markup is added.
17) If a company mistakenly counts less items during a physical inventory than actually
exist, how will the error affect the cost of merchandise sold?
A.Understated
B.Overstated
C.No change
D.Only inventory is affected
18) Countries outside the United States use financial accounting standards issued by the
A.LLC
B.SEC
C.IASB
D.GAAP
19) If fixed costs increased and variable costs per unit decreased, the break-even point
would:
A.increase
B.decrease
C.remain the same
D.cannot be determined from the data provided
20) Which of the following should be added to net income in calculating net cash flow
from operating activities using the indirect method?
A.depreciation expense
B.an increase in inventory
C.a gain on the sale of equipment
D.dividends declared and paid
21) A department store has budgeted sales of 12,000 mens suits in September.
Management wants to have 6,000 suits in inventory at the end of the month to prepare
for the winter season. Beginning inventory for September is expected to be 4,000 units.
What is the dollar amount of the purchase of suits? Each suit has a cost of $75.
A.$900,000
B.$1,050,000
C.$1,350,000
D.$1,200,000
22) If the company can not cut costs any lower than they already are what would the
profit margin on sales be if they meet the market selling price?
A.9.3%
B.7.3%
C.10.3%
D.8.3%
23) When the perpetual inventory system is used, the inventory sold is debited to
A.supplies expense
B.cost of merchandise sold
C.merchandise inventory
D.sales
24) A net loss appears on the work sheet in the
A.debit column of the Balance Sheet columns
B.credit column of the Balance Sheet columns
C.debit column of the Income Statement columns
D.credit column of the Adjustments columns
25) Kettle Factory produces two similar products – gloves and mittens. The total plant
budget is $1,050,000 with 600,000 estimated direct labor hours. It is further estimated
that glove production will require 375,000 direct labor hours and mitten production will
require 225,000 direct labor hours.
(a) Determine the single plant factory overhead rate based on direct labor hours.
(b) How much is the factory overhead cost per pair of gloves if each pair requires 2
hours to produce?
(c) How much is the factory overhead cost per pair of mittens if each pair takes 1.5
hours to produce?
(d) How much total factory overhead will be allocated to gloves production if 187,500
pairs are budgeted and 190,000 pairs are actually produced during the period?
(e) How much total factory overhead will be allocated to mittens production if 150,000
pairs are budgeted and 140,000 pairs are actually produced during the period?
26) The inventory at June 1 and costs charged to Work in Process – Department 60
during June are as follows:
During June, 32,000 units were placed into production and 31,200 units were
completed, including those in inventory on June On June 30, the inventory of work in
process consisted of 4,600 units which were 40% completed. Inventories are costed by
the average cost method and all materials are added at the beginning of the process.
Determine the following, presenting your computations:
(a) equivalent units of production for conversion cost
(b) conversion cost per equivalent unit and material cost per equivalent unit.
(c) total and unit cost of finished goods completed in the current period
(d) total cost of work in process inventory at June 30
27) Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are
$600,000, and fixed costs are $130,000. How much will operating income change if
sales increase by $40,000?
A.$8,000 increase
B.$8,000 decrease
C.$30,000 decrease
D.$30,000 increase
28) On November 10th, JumpStart Co. provides $2,900 in services to clients. At the
time of service, the clients paid $600.00 in cash and put the balance on account.
(a) Journalize this event.
(b) On November 20th, JumpStart Co. clients paid an additional $900 on their accounts
due. Journalize this event.
(c) Calculate the amount of accounts receivable on November 30th.
29) Which types of inventories does a manufacturing business report on the balance
sheet?
A.Finished goods inventory and work in process inventory
B.Direct materials inventory and work in process inventory
C.Direct materials inventory, work in process inventory, and finished goods inventory
D.Direct materials inventory and finished goods inventory
30) A copy machine acquired with a cost of $1,410 has an estimated useful life of 4
years. It is also expected to have a useful operating life of 13,350 copies. Assuming that
it will have a residual value of $75, determine the depreciation for the first year by the
a. straight-line method
b. double declining-balance method
c. production method (4,500 copies were made the first year)
31) The Sneed Corporation issues 10,000 shares of $50 par value preferred stock for
cash at $75 per share. The entry to record the transaction will consist of a debit to Cash
for $750,000 and a credit or credits to
A.Preferred Stock for $750,000
B.Preferred stock for $500,000 and Paid-in Capital in Excess of Par ValuePreferred
Stock for $250,000
C.Preferred Stock for $500,000 and Retained Earnings for $250,000
D.Paid-in Capital from Preferred Stock for $750,000
32) On October 1, Ramos Co. signed a $90,000, 60-day discounted note at the bank.
The discount rate was 6%, and the note was paid on November 30. (Assume a 360-day
year is used for interest calculations.)
33) Which of the following is most associated with financial accounting?
A.Can have both objective and subjective information
B.Can be prepared periodically, or as needed
C.Prepared in accordance with GAAP
D.Can be prepared for the entity or segment
34) For each of the following errors, considered individually, indicate whether the error
would cause the adjusted trial balance totals to be unequal. If the error would cause the
adjusted trial balance totals to be unequal, indicate whether the debit or credit total is
higher and by how much.
35) Match the following terms with the best definition given.
1>Normal standard A. Nonfinancial performance measure
2>An example is number of customer complaints. B. Unfavorable cost variance
3>Actual cost > standard cost at actual volumes C. Favorable cost variance
4>Actual cost < standard cost at actual volumes D. Currently attainable standard
5>Theoretical standard E. Ideal standard
36) If $2,000,000 of 10% bonds are issued at 95, the amount of cash received from the
sale is
A.$2,200,000
B.$2,000,000
C.$2,100,000
D.$1,900,000
37) The sales, income from operations, and invested assets for each division of Wren
Company are as follows:
Management has established a minimum rate of return for invested assets of 8%.
38) The budgetary unit of an organization which is led by a manager who has both the
authority over and responsibility for the unit’s performance is known as a:
A.control center
B.budgetary area
C.responsibility center
D.managerial department
39) Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later
sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the
sale of the bonds would be:
A.Debit: Cash $105,000; Credit: Investment in Bonds $104,500 and Interest Revenue
$500
B.Debit: Cash $105,000; Credit: Investment in Bonds $100,000 and Gain on Sale of
Investments $5,000
C.Debit: Cash $104,500 and Interest Receivable $500; Credit: Investment in Bonds
$100,000, Gain on Sale of Investments $4,500 and Interest Revenue $500
D.Debit: Cash $105,000; Credit: Investment in Bonds $100,000; Gain on Sale of
Investments $4,500 and Interest Revenue $500
40) On January 1, the Newman Company estimated its property tax to be $5,100 for the
year.
(a) How much should the company accrue each month for property taxes?
(b) Calculate the balance in the Property Tax Accrual account as of August 31.
(c) Prepare the adjusting journal entry for the month of September.
41) Pheasant Co. can further process Product B to produce Product C. Product B is
currently selling for $30 per pound and costs $28 per pound to produce. Product C
would sell for $60 per pound and would require an additional cost of $24 per pound to
produce. What is the differential cost of producing Product C?
A.$30 per pound
B.$24 per pound
C.$28 per pound
D.$60 per pound
42) The assets section of the balance sheet normally presents assets in
A.alphabetical order
B.order of largest to smallest dollar amounts
C.in the order that they will be converted into cash or used in operations
D.any order
43) The amount of income under absorption costing will equal the amount of income
under variable costing when units manufactured:
A.exceed units sold
B.equal units sold
C.are less than units sold
D.are equal to or greater than units sold
44) Heston and Burton, CPAs, currently work a five-day week. They estimate that net
income for the firm would increase by $75,000 annually if they worked an additional
day each month. The cost associated with the decision to continue the practice of a
five-day work week is an example of:
A.differential revenue
B.sunk cost
C.differential income
D.opportunity cost
45) Assume that social security taxes are payable at a 6% rate on the first $100,000 of
earnings and Medicare taxes are payable at a 1.5% rate with no maximum earnings, and
that federal and state unemployment compensation taxes total 4.6% on the first $7,000
of earnings. If an employee, George Jones, earns $2,500 for the current week and Jones’
year-to-date earnings before this week were $6,800, what is the total payroll taxes
related to the current week?
A.$187.50
B.$196.70
C.$344.50
D.$9.20
46) If a company uses a process costing system to account for the costs in its four
production departments, how many Work-in-Process will it use?
A.3
B.4
C.1
D.2
47) Direct labor and direct materials are classified as:
A.product costs and expensed when the goods are sold
B.product costs and expensed when incurred
C.period costs and expensed when incurred
D.period costs and expensed when the goods are sold
48) Skyline, Inc. purchased a portfolio of trading securities during 2012. The cost and
fair value of this portfolio on December 31, 2012, was as follows:
Required:
Provide the journal entry to record the adjustment of the trading security portfolio to
fair value on December 31, 2012.
Where will the information from the journal entry be reported on the financial
statements?
49) Posner Company wrote off the following accounts receivable as uncollectible for
the first year of its operations ending December 31, 2011:
Required:
50) On the basis of the following data for Larson Co. for the year ending December 31,
2011 and the preceding year ended December 31, 2010, prepare a statement of cash
flows. Use the indirect method of reporting cash flows from operating activities. In
addition to the balance sheet data, assume that:
Equipment costing $125,000 was purchased for cash.
Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for
$15,000.
The stock was issued for cash.
The only entries in the retained earnings account were net income of $51,000 and cash
dividends declared of $13,000.
51) Dickerson Co. is evaluating a project requiring a capital expenditure of $810,000.
The project has an estimated life of four years and no salvage value. The estimated net
income and net cash flow from the project are as follows:
The company’s minimum desired rate of return is 12%. The present value of $1 at
compound interest of 12% for 1, 2, 3, and 4 years is .893, .797, .712, and .636,
respectively.
52) Norton Company is considering a project that will require an initial investment of
$750,000 and will return $200,000 each year for five years.
53) Condensed data taken from the ledger of Joplin Company at December 31, 2012
and 2011, are as follows:
Prepare a comparative balance sheet, with horizontal analysis, for December 31, 2012
and 2011. (Round percents to one decimal point.)