1) Incidental costs for acquiring merchandise inventory, such as import duties, freight,
storage, and insurance, should not be added to the cost of inventory.
2) In a make or buy decision, management should focus on costs that are the same
under the two alternatives.
3) On a spreadsheet used to prepare the operating activities section of the statement of
cash flows, depreciation expense does not require an entry in the Analysis of Changes
columns because it is a noncash item.
4) A basic present value concept is that cash paid or received in the future has more
value now than the same amount of cash received today.
5) The schedule of cost of goods manufactured for a job costing system includes total
actual factory overhead.
6) An income statement account that is used to record cash overages and cash shortages
arising from petty cash transactions or from errors in making change is titled:
A.Cash Lost.
B.Bank Reconciliation.
C.Petty Cash.
D.Cash Over and Short.
E.Cash Receivable.
7) Using the information below, calculate cost of goods sold for the period.
A.$774,000.
B.$769,000.
C.$530,000.
D.$535,000.
E.$448,000.
8) Intra-company standards for financial statement analysis:
A.Are based on a company’s prior performance and relations between its financial
items.
B.Are often set by competitors.
C.Are set by the company’s industry through published statistics.
D.Are based on rules of thumb.
E.Are published in Dun and Bradstreet.
9) Juniper Company uses a perpetual inventory system. The company purchased $9,750
of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500
worth of merchandise. On August 26, it paid the full amount due. The amount of the
cash paid on August 26 equals:
A.$8,167.50.
B.$9,652.50.
C.$9,750.00.
D.$8,250.00.
E.$8,152.50.
10) Majesty Productions accepted a $7,200, 120-day, 6% note from Swartz Studio on
March 1. On the date the note matures, Swartz is unable to pay, but Majesty intends to
continue collection efforts. What entry should Majesty record on the maturity date for
this dishonored note?
A.Debit Accounts Receivable $7,200; credit Notes Receivable $7,200.
B.Debit Accounts Receivable $7,200; credit Allowance for Doubtful Accounts $7,200.
C.Debit Bad Debt Expense $7,344; credit Notes Receivable $7,344.
D.Debit Accounts Receivable $7,344; credit Interest Revenue $144; credit Notes
Receivable $7,200.
E.Debit Accounts Receivable $7,056; debit Interest Revenue $144; credit Notes
Receivable $7,200.
11) During June, Vixen Fur Company sells $850,000 in merchandise that has a one year
warranty. Experience shows that warranty expenses average about 3% of the selling
price. Customers returned $14,000 of merchandise for warranty replacement during the
month. The entry to settle the customer warranties is:
A.Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500.
B.Debit Estimated Warranty Liability $25,500; credit Warranty Expense $25,500.
C.Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000.
D.Debit Estimated Warranty Liability $11,500; credit Merchandise Inventory $11,500.
E.Debit Estimated Warranty Liability $14,000; credit Merchandise Inventory $14,000.
12) Which one of the following methods considers the time value of money in
evaluating alternative capital expenditures?
A.Accounting rate of return.
B.Net present value.
C.Payback period.
D.Cash flow method.
E.Return on average investment.
13) Minstrel Manufacturing uses a job order costing system. During one month
Minstrel purchased $198,000 of raw materials on credit; issued materials to production
of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of
$150,000, paid in cash, of which $40,000 was indirect labor. Minstrel uses a
predetermined overhead application rate of 150% of direct labor cost. If Minstrel
incurred total overhead costs of $167,800 during the month, compute the amount of
under- or overapplied overhead:
A.$2,800 overapplied.
B.$17,800 underapplied.
C.$2,800 underapplied.
D.$17,800 overapplied.
E.$57,200 overapplied.
14) Which of the following is not an output device?
A.Printers.
B.Monitors.
C.Projectors.
D.Web communications.
E.Bar code readers.
15) The chronological record of each complete transaction that has occurred is called
the:
A.Account balance.
B.Ledger.
C.Journal.
D.Trial balance.
E.Cash account.
16) Mayan Company had net income of $132,000. The weighted-average common
shares outstanding were 80,000. The company sold 3,000 shares before the end of the
year. There were no other stock transactions. The company’s earnings per share is:
A.$1.65.
B.$1.59.
C.$44.00.
D.$26.67.
E.$1.71.
17) On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to
Kagome of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 on the
date of sale. On December 31, when Higgins prepared its financial statements, the
exchange rate was $0.00843. Kagome paid in full on January 12, when the exchange
rate was $0.00861. On January 12, Higgins should prepare the following journal entry:
A.Debit Cash $12,915; credit Accounts Receivable-Kagome $12,555; credit Foreign
Exchange Gain $360.
B.Debit Cash $12,555; debit Foreign Exchange Loss $360; credit Accounts
Receivable-Kagome $12,915.
C.Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign
Exchange Gain $90.
D.Debit Cash $12,645; debit Foreign Exchange Loss $90; credit Accounts
Receivable-Kagome $12,915.
E.Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign
Exchange Gain $270.
18) On April 1, Griffith Publishing Company received $1,548 from Santa Fe, Inc. for
36-month subscriptions to several different magazines. The subscriptions started
immediately. What is the amount of revenue that should be recorded by Griffith
Publishing Company for the second year of the subscription assuming the company
uses a calendar reporting period?
A.$0.
B.$516.
C.$387.
D.$129.
E.$430.
19) Describe the differences in how the direct write-off method and the allowance
method are applied in accounting for uncollectible accounts receivables.
20) Explain how transactions (both sales and purchases) in a foreign currency are
recorded and reported.
21) Franklin Co. has three departments: purchasing, human resources, and assembly. In
a recent month the three departments incurred two shared indirect expenses. The
amounts of the indirect expenses and the bases used to allocate them follow. Use this
information to allocate each of the two indirect expenses across the three departments
using the tables provided below.
Departmental data for the company’s recent reporting period follow.
22) A company had net income of $45,000, net sales of $390,000, and average total
assets of $450,000 for the current year. Calculate the company’s profit margin, total
asset turnover, and return on total assets.
23) Cornelia’s Closet has the following account balances for the dates given:
Also, its net income, for October 1 through October 31 was $20,000 and there were no
investments or withdrawals by the owner. Determine the equity at both October 1 and
October 31
24) Beluga Corp. has developed standard costs based on a predicted operating level of
352,000 units of production, which is 80% of capacity. Variable overhead is $281,600 at
this level of activity, or $0.80 per unit. Fixed overhead is $440,000. The standard costs
per unit are:
Beluga actually produced 330,000 units at 75% of capacity and actual costs for the
period were:
Calculate the following variances and indicate whether each variance is favorable or
unfavorable:
(1) Direct labor efficiency variance: $__________________
(2) Direct materials price variance: $__________________
(3) Controllable overhead variance: $__________________
