1) A physical inventory should be taken at the end of every month.
2) The process by which management allocates available investment funds among
competing capital investment proposals is termed capital rationing.
3) A voucher system is an example of an internal control procedure over cash payments.
4) The factory superintendent’s salary would be included as part of the cost of products
manufactured under the absorption costing concept.
5) The acquisition costs of property, plant, and equipment should include all normal,
reasonable and necessary costs to get the asset in place and ready for use.
6) Adjusting journal entries are dated on the last day of the period.
7) Receiving a bill or otherwise being notified that an amount is owed is not recorded
until the amount is paid.
8) Equivalent units are the sum of direct materials used and direct labor incurred.
9) When cities give land or buildings to a company to locate in the community, no entry
is made since there is no cost to the company.
10) The day on which the board of directors of the corporation distributes a dividend is
called the declaration date.
11) In contribution margin analysis, the effect of a difference in unit sales price or unit
cost on the number of units sold is termed the quantity factor.
12) The accounts payable account is listed in the chart of accounts as an asset.
13) If the total unit cost of manufacturing Product Y is currently $36 and the total unit
cost after modifying the style is estimated to be $48, the differential cost for this
situation is $12.
14) The equity method causes the investment account to mirror the proportional
changes in book value of the investee.
15) The buyer will include the sales tax as part of the cost of items purchased for use.
16) The main source of paid-in-capital is from issuing stock.
17) The interest portion of an installment note payment is computed by multiplying the
interest rate by the carrying amount of the note at the end of the period.
18) The three categories of manufacturing costs comprising the cost of work in process
are direct labor, direct materials, and:
A.office expenses
B.direct expenses
C.sales salaries expense
D.factory overhead
19) Presented below are the major categories or captions that would appear on an
income statement prepared in the variable costing format:
Contribution margin
Fixed costs
Income from operations
Manufacturing margin
Sales
Variable cost of goods sold
Variable selling and administrative expenses
20) A company with a break-even point at $900,000 in sales revenue had fixed costs of
$225,000. When actual sales were $1,000,000 variable costs were $750,000. Determine
(a) the margin of safety expressed in dollars, (b) the margin of safety expressed as a
percentage of sales, (c) the contribution margin ratio, and (d) the operating income.
21) On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7%
bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the
bonds on the issue date for the issue price. If the company uses the straight-line method
for amortizing the premium, the journal entry to record the first semiannual interest
payment by Lisbon Co. would include a debit to:
A.Interest Payable for $30,000
B.Interest Expense for $32,500
C.Cash for $70,000
D.Premium on Bonds Payable for $5,500
22) The primary advantages of the average rate of return method are its ease of
computation and the fact that:
A.it is especially useful to managers whose primary concern is liquidity
B.there is less possibility of loss from changes in economic conditions and
obsolescence when the commitment is short-term
C.it emphasizes the amount of income earned over the life of the proposal
D.rankings of proposals are necessary
23) Which of the following is required by the Sarbanes-Oxley Act of 2002?
A.A price-earnings ratio
B.A report on internal control
C.A vertical analysis
D.A common-sized statement
24) One reason that a common-size statement is a useful tool in financial analysis is that
it enables the user to
A.judge the relative potential of two companies of similar size in different industries
B.determine which companies in a single industry are of the same value
C.determine which companies in a single industry are of the same size
D.make a better comparison of two companies of different sizes in the same industry
25) The following procedures were recently implemented at the Health Station, Inc. For
each procedure, indicate whether the internal control over cash represents (1) a strength
or (2) a weakness. If it is a weakness, please explain why.
(a) All mail is opened by the mail clerk, who forwards all cash remittances to the
cashier. The cashier prepares a listing of the cash receipts and forwards a copy of the
list to the accounts receivable clerk for recording in the accounts.
(b) The accounts payable clerk prepares a voucher for each disbursement. The voucher
along with the supporting documentation is forwarded to the treasurers office for
approval.
(c) At the end of each day, all cash receipts are placed in the banks night depository.
(d) The bank reconciliation is prepared by the cashier, who works under the supervision
of the treasurer.
26) Match the following terms with the best definition given.
1>An accounting report that presents predicted amounts of the companys assets,
liabilities, and equity as of the end of the budget period. A. budgeted balance sheet
2>A formal statement of future plans, usually expressed in monetary terms. B. budget
3>A plan that lists dollar amounts to be both received from disposing of plant assets and
spent on purchasing additional pant assets to carry out the budgeted business activities.
C. sales budget
4>A plan showing the number of units to be produced each month. D. capital
expenditure budget
5>A plan that shows the expected cash inflows and outflows during the budget period,
including receipts from loans needed to maintain a minimum cash balance and
repayments of such loans. E. production budget
6>A plan showing the units of goods to be sold and the sales to be derived; usually the
starting point in the budgeting process. F. cash budget
27) On December 31, Strike Company has decided to sell one of its batting cages. The
initial cost of the equipment was $310,000 with an accumulated depreciation of
$260,000. Depreciation has been taken up to the end of the year. The company found a
company that is willing to buy the equipment for $50,000. What is the amount of the
gain or loss on this transaction?
A.Gain of $50,000
B.Loss of $50,000
C.No gain or loss
D.Cannot be determined
28) Xtra Company purchased goodwill from Argus for $96,000. Argus had developed
the goodwill over 12 years. How much would Xtra amortize the goodwill for its first
year?
A.$7,000
B.$ 8,000
C.Goodwill is not amortized
D.Not enough information
29) Which of the following below generally is the most useful in analyzing companies
of different sizes
A.comparative statements
B.common-sized financial statements
C.price-level accounting
D.audit report
30) The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of
$12.40 per hour. Original production had been budgeted for 1,100 units, but only 1,000
units were actually produced. Labor standards were 7.6 hours per completed unit at a
standard rate of $13.00 per hour.
Compute the labor rate variance.
A.4,920U
B.4,920F
C.4,560U
D.4,560U
31) On January 1, 2011, Cary Parsons established Carys Catering Service. Listed below
are accounts to use for transactions (a) through (d), each identified by a number.
Following this list are the transactions that occurred during the first month of
operations. You are to indicate for each transaction the accounts that should be debited
and credited by placing the account number(s) in the appropriate box.
Transactions Account(s) Debited Account(s) Credited
a. Cary transferred cash from a personal bank account to an account for the business in
exchange for stock.
b. Paid rent for the period of January 3 to the end of the month.
c. Purchased a truck for $30,000 with a cash down payment of $5,000 and the
remainder on a note.
d. Purchased equipment on account.
32) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. Work in process at the beginning of the period for Department 1
was $75,000, and work in process at the end of the period totaled $60,000. The records
indicate that direct materials, direct labor, and applied factory overhead for Department
2 were $50,000, $60,000, and $70,000, respectively. In addition, work in process at the
beginning of the period for Department 2 totaled $75,000, and work in process at the
end of the period totaled $60,000. The journal entry to record the flow of costs into
Department 3 during the period is:
A.Work in Process–Department 3585,000
Work in Process–Department 2585,000
B.Work in Process–Department 3570,000
Work in Process–Department 2570,000
C.Work in Process–Department 3555,000
Work in Process–Department 2555,000
D.Work in Process–Department 3165,000
Work in Process–Department 2165,000
33) The balance in the office supplies account on June 1 was $7,500, supplies
purchased during June were $3,100, and the supplies on hand at June 30 were $2,300.
The amount to be used for the appropriate adjusting entry is
A.$2,100
B.$12,900
C.$6,700
D.$8,300
34) Which of the following is a disadvantage of decentralization?
A.Decisions made by one manager may negatively affect the profitability of the entire
company
B.Helps retain quality managers
C.Decision making by managers closest to the operations
D.Managers are able to acquire expertise in their areas of responsibility
35) Sifton Electronics Corporation manufactures and assembles electronic motor drives
for video cameras. The company assembles the motor drives for several accounts. The
process consists of a just-in-time cell for each customer. The following information
relates only to one customer’s just-in-time cell for the coming year. Projected labor and
overhead, $7,370,000; materials costs, $28 per unit. Planned production included 4,000
hours to produce 27,500 motor drives. Actual production for August was 1,600 units,
and motor drives shipped amounted to 1,380 units.
From the foregoing information, determine the budgeted cell conversion cost per unit.
A.$240.00
B.$268.00
C.$296.00
D.$1,842.50
36) The cost of a manufactured product generally consists of which of the following
costs?
A.Direct materials cost and factory overhead cost
B.Direct labor cost and factory overhead cost
C.Direct labor cost, direct materials cost, and factory overhead cost
D.Direct materials cost and direct labor cost
37) When the market rate of interest was 12%, Halprin Corporation issued $1,000,000,
11%, 10-year bonds that pay interest annually. The selling price of this bond issue was
A.$ 321,970
B.$1,000,000
C.$ 943,494
D.$621,524
38) Darius Company has the following information for the pay period of January 15 –
31, 20xx.
39) On the basis of the following data, determine the value of the inventory at the lower
of cost or market. Apply lower of cost or market to each inventory item. Show your
work.
40) During the current year, merchandise is sold for $117,500 cash and $241,750 on
account. The cost of the merchandise sold is $157,400. What is the amount of the gross
profit?
41) Dennis Corp. issued $2,500,000 of 20-year, 9% callable bonds on July 1, 2007, with
interest payable on June 30 and December 31. The fiscal year of the company is the
calendar year. Journalize the entries to record the following selected transactions:
42) On September 1st, Erika Company purchased land for $47,500 cash. Prepare the
journal entry to record this transaction.