1) To arrive at cash flows from operations, it is necessary to convert the income
statement from an accrual basis to the cash basis of accounting.
2) Depositing all cash, checks, etc. in a bank and paying with checks is an internal
control procedure over cash.
3) When using the FIFO inventory costing method, the most recent costs are assigned to
the cost of goods sold.
4) Methods that ignore present value in capital investment analysis include the net
present value method.
5) Make or buy decisions should be made only with related parties.
6) Only managers are encouraged to submit capital investment proposals because they
know the processes and are able to match investments with long-term goals.
7) A disadvantage to using the residual income performance measure is that it
encourages managers to spend only the minimum acceptable rate of return on assets set
by upper management.
8) The equation for computing interest on an interest-bearing note is as follows: interest
equals maturity value times interest rate times time.
9) There are two methods of amortizing a bond discount or premium: the straight-line
method and the double-declining-balance method.
10) A capitalized asset will appear on the balance sheet as a long term asset.
11) Prepaid Insurance is an example of a current asset.
12) When a bond is purchased for an investment, the purchase price, minus the
brokerage commission, plus any accrued interest is recorded.
13) Sellers and buyers are required to record trade discounts.
14) A $300,000 bond was redeemed at 98 when the carrying value of the bond was
$296,000. The entry to record the redemption would include a
A.loss on bond redemption of $4,000
B.gain on bond redemption of $4,000
C.gain on bond redemption of $2,000
D.loss on bond redemption of $2,000
15) Department W had 2,400 units, one-third completed at the beginning of the period,
16,000 units were transferred to Department X from Department W during the period,
and 1,800 units were one-half completed at the end of the period. Assume the
completion ratios apply to direct materials and conversion costs.
What are the total gross number of units to be assigned cost on the cost of production
report for Department W?
A.12,000 units
B.13,600 units
C.18,500 units
D.17,800 units
16) If the market rate of interest is 8%, the price of 6% bonds paying interest
semiannually with a face value of $250,000 will be
A.Equal to $250,000
B.Greater than $250,000
C.Less than $250,000
D.Greater than or less than $250,000, depending on the maturity date of the bonds
17) Zach Company owns 45% of the voting stock of Tomas Corporation and uses the
equity method in recording this investment. Tomas Corporation reported a $20,000 net
loss. Zach Company’s entry would include a
A.Credit to cash for $9,000
B.Debit to the investment account for $9,000
C.Credit to the investment account for $9,000
D.Credit to a loss account for $9,000
18) Which of the following is an advantage of the cash payback method?
A.It is easy to use
B.It takes into consideration the time value of money
C.It includes the cash flow over the entire life of the proposal
D.It emphasizes accounting income
19) A balance sheet that displays only component percentages is called
A.trend balance sheet
B.comparative balance sheet
C.condensed balance sheet
D.common-sized balance sheet
20) The balance in the supplies account, before adjustment at the end of the year is
$6,250. The proper adjusting entry if the amount of supplies on hand at the end of the
year is $1,500 would be
A.debit Supplies $1,500, credit Supplies Expense $1,500
B.debit Supplies Expense $4,750, credit Supplies $4,750
C.debit Supplies Expense $1,500, credit Supplies $1,500
D.debit Supplies $4,750, credit Supplies Expense $4,750
21) Job cost sheets can provide information to managers for all but the following:
A.cost impact of materials changes
B.cost impact of continuous improvement in the manufacturing process
C.cost impact of materials price or direct labor rate changes over time
D.utilities, managerial salaries, and depreciation of computers in the corporate office
22) Prior to the adjusting process, accrued expenses have
A.not yet been incurred, paid, or recorded
B.been incurred, not paid, but have been recorded
C.been incurred, not paid, and not recorded
D.been paid but have not yet been incurred
23) The Clydesdale Company has sales of $4,500,000. It also has invested assets of
$2,000,000 and operating expenses of $3,600,000. The company has established a
minimum rate of return of 7%.
What is Clydesdale Company’s investment turnover?
A.1.80
B.2.25
C.1.25
D.1.4
24) Ruby Company produces a chair that requires 5 yds. of material per unit. The
standard price of one yard of material is $7.60. During the month, 8,500 chairs were
manufactured, using 40,000 yards at a cost of $7.50. Determine the (a) price variance,
(b) quantity variance, and (c) cost variance.
25) Deferred expenses have
A.not yet been recorded as expenses or paid
B.been recorded as expenses and paid
C.been incurred and paid
D.not yet been recorded as expenses
26) The method of computing inventory that uses records of the selling prices of the
merchandise is called
A.retail method
B.last-in, first-out
C.first-in, first-out
D.average cost
27) Use the following information in the adjusted trial balance for Stockton Company
to answer the following questions.
Determine total assets.
A.$24,130
B.$15,830
C.$21,930
D.$23,030
28) Net income plus operating expenses is equal to
A.cost of merchandise sold
B.cost of merchandise available for sale
C.net sales
D.gross profit
29) A company has 10,000 shares of $10 par common stock outstanding. Prepare entries
to record the following:
(a) Purchased 1,500 shares of treasury stock at $16. The treasury stock is accounted for
by the cost method.
(b) Sold 1,000 shares of treasury stock at $19.
(c) Purchased equipment for $80,000, paying $25,000 in cash and issuing 4,000 shares
of common stock for the remaining.
(d) Sold 500 shares of treasury stock at $14.
30) Which of the following accounts ordinarily appears in the post-closing trial
balance?
A.Fees Earned
B.Supplies Expense
C.Zane White, Drawing
D.Unearned Rent
31) Which of the following is not classified as paid-in capital on the balance sheet?
A.common stock
B.common stock distributable
C.donated capital
D.treasury stock
32) 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 November are:
A.$317,750
B.$389,750
C.$490,000
D.$410,000
33) Which statement(s) concerning cash is (are) true?
A.cash will always have more debits than credits
B.cash will never have a credit balance
C.cash is increased by debiting
D.all of the above
34) A ten-year bond was issued at par for $250,000 cash. This transaction should be
shown on a statement of cash flows under
A.investing activities
B.financing activities
C.noncash investing and financing activities
D.operating activities
35) Calculate the total amount of interest expense over the life of the bonds for the
following independent situations.
a) $100,000 face value, 10%, 10-year bonds issued at 101.
b) $240,000 face value, 5%, 5-year bonds issued at 100.
c) $300,000 face value, 9%, 6-year bonds issued at 98.
36) The following is an example of:
A.product analysis
B.vertical analysis
C.horizontal analysis
D.percentage analysis
37) Yankton Company began the year without an investment portfolio. During the year
they purchased investments classified as trading securities at a cost of $13,000. At the
end of the year, the market value of the securities was $11,000. The Yankton Company’s
financial statements for the current year should show
A.a loss of $2,000 on the income statement and net trading securities of $13,000 on the
balance sheet
B.no loss on the income statement and net trading securities of $13,000 on the balance
sheet
C.no loss on the income statement, net trading securities of $11,000 and an unrealized
loss of $2,000 as a stockholders equity adjustment on the balance sheet
D.a loss of $2,000 on the income statement and temporary investments of $11,000 on
the balance sheet
38) On the statement of cash flows, the cash flows from investing activities section
would include
A.receipts from the issuance of capital stock
B.payments for dividends
C.payments for retirement of bonds payable
D.receipts from the sale of investments
39) Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and
100,000 shares of $50 par common stock. The following amounts were distributed as
dividends:
Determine the dividends in arrears for preferred stock for the second year.
A.$25,000
B.$10,000
C.$0
D.$30,000
40) A cost that has characteristics of both a variable cost and a fixed cost is called a:
A.variable/fixed cost
B.mixed cost
C.discretionary cost
D.sunk cost
41) Simpson Designers began operations on April 1, 2011. The financial statements for
Simpson Designers are shown below for the month ended April 30, 2011 (the first
month of operations). Determine the missing amounts for letters (a) through (o).
Simpson DesignersIncome StatementFor the Month Ended April 30, 2011
Fees earned $27,000
Operating expenses:
Wages expense $5,250
Rent expense (a)
Supplies expense 4,600
Utilities expense 400
Miscellaneous expense 1,250
Total operating expenses (b)
Net income $(c)
Place your answers in the space provided below. Hint: Use the interrelationships among
the financial statements to solve this problem.
(a) ___________
(b) ___________
(c) ___________
(d) ___________
(e) ___________
(f) ___________
(g) ___________
(h) ___________
(i) ___________
(j) ___________
(k) ___________
(l) ___________
(m) ___________
(n) ___________
(o) ___________
42) Which of the following are the two main types of cost accounting systems for
manufacturing operations?
A.Process cost and general accounting systems
B.Job order cost and process cost systems
C.Job order and general accounting systems
D.Process cost and replacement cost systems
43) Define solvency and profitability. How are they alike?
44) Prepare a journal entry on October 12 for the fees earned on account, $14,600.
45) Lockrite Security Company manufacturers home alarms. Currently it is
manufacturing one of its components at a total cost of $45 which includes fixed costs of
$15 per unit. An outside provider of this component has offered to sell them the
component for $40. Provide a differential analysis of the outside purchase proposal.
46) Keeton Company had the following data:
Cost of Materials Used $60,000
Direct Labor costs $58,000
Factory Overhead $33,000
Work in Process, beg. $29,000
Work in Process, end. $18,000
Finished Goods,beg. $32,000
Finished Goods, end. $18,000
47) Indicate with a Yes or No whether or not each of the following accounts would,
under normal circumstances, require an adjusting entry.
1> Cash
2> Prepaid Expenses
3> Depreciation Expense
4> Accounts Payable
5> Accumulated Depreciation
6> Equipment
48) After discontinuing the ordinary business operations and closing the accounts on
May 7, the ledger of the partnership of Anna, Brian, and Cole indicated the following:
49) A $375,000 bond issue on which there is an unamortized discount of $40,000 is
redeemed for $320,000. Journalize the redemption of the bonds.
50) Compare and contrast why companies invest cash in short-term temporary
investments vs. long-term investments.
51) What is the major difference between the objective of financial accounting and the
objective of managerial accounting?
52) On January 1st, Great Designs Company had a debit balance of $1,450 in the Office
Supplies account. During the month, Great Designs purchased $115 and $160 of office
supplies and journalized them to the Office Supplies asset account upon purchasing. On
January 31st, an inspection of the office supplies cabinet shows that only $350 of Office
Supplies remains in the locker. Prepare the January 31st adjusting entry for Office
Supplies.
