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1) Liability accounts are increased by debits.
2) The updating of accounts is called the adjusting process.
3) The recording of cash payments from the cash account is done by entering the
amount as a credit.
4) The profit margin component of rate of return on investment analysis focuses on
profitability by indicating the rate of profit earned on each sales dollar.
5) Purchases of store equipment on account are recorded in the general journal.
6) When using the analysis of receivables method for estimating uncollectible
receivables, the amount computed in the analysis is usually the amount that would be
recorded in the end-of-period adjusting entry.
7) Eliminating a product or segment may have the long-term effect of reducing fixed
costs.
8) Controlling deals with choosing goals and deciding how to achieve them.
9) Retailers record all credit card sales as credit sales.
10) Purchase requisitions for Purchasing and the number of payroll checks for Payroll
Accounting are examples of activity bases.
11) At the end of a period (before adjustment), Allowance for Doubtful Accounts has a
credit balance of $5,000. The Accounts Receivable balance is analyzed by aging the
accounts and the amount estimated to be uncollectible is $50,000. The amount to be
recorded in the adjusting entry for the Bad Debt Expense is $45,000.
12) Since there are few rules to restrict how an organization chooses to arrange its own
internal data for decision making, managerial accounting provides ample opportunity
for creativity and change.
13) Assets, liabilities, and owners capital are real accounts and do not get closed at the
end of the period.
14) Paid-in capital may originate from real estate donated to thecorporation.
15) Transactions are initially entered into a record called a journal.
16) Control is the process of monitoring operating results and comparing actual results
with the expected results.
17) Net income for the year was $29,500. Accounts receivable increased $2,500, and
accounts payable increased $5,400. Under the indirect method, the cash flow from
operations is $32,400.
18) The process of developing budget estimates by requiring all levels of management
to estimate sales, production, and other operating data as though operations were being
initiated for the first time is referred to as:
A.flexible budgeting
B.continuous budgeting
C.zero-based budgeting
D.master budgeting
19) Carla and Eliza share income equally. During the current year the partnership net
income was $40,000. Carla made withdrawals of $12,000 and Eliza made withdrawals
of $17,000. At the beginning of the year, the capital account balances were: Carla
capital, $42,000; Eliza capital, $55,000. Elizas capital account balance at the end of the
year is
A.$52,000
B.$58,000
C.$82,000
D.$75,000
20) Present entries to record the following selected transactions of Masterson Co.
(a) Purchased 600 shares of the 100,000 shares outstanding $10 par common shares of
Dankin Corporation for $5,100.
(b) Purchased 3,500 shares of the 10,000 shares no par common shares of Ramon Co.
for $45,700. The investment was accounted for by the equity method.
(c) Received a cash dividend of $1 per share on the Dankin Corporation stock acquired
in (a).
(d) Received a cash dividend of $2 per share on the Ramon Co. stock acquired in (b).
(e) Sold 100 shares of the Dankin Corporation shares acquired in (a) for $2,100.
(f) Dankin Corporation reported net income of $30,000 and Ramon Companys reported
net income was $50,000.
21) Equipment purchased at the beginning of the fiscal year for $360,000 is expected to
have a useful life of 5 years, or 14,000 operating hours, and a residual value of $10,000.
Compute the depreciation for the first and second years of use by each of the following
methods:
(a) straight-line
(b) units-of-production (1,200 hours first year; 2,250 hours second year)
(c) declining-balance at twice the straight-line rate
(Round the answer to the nearest dollar.)
22) Taking advantage of a 2/10, n/30 purchases discount is equal to a savings yearly
rate of approximately
A.2%
B.24%
C.20%
D.36%
23) A business received an offer from an exporter for 30,000 units of product at $16 per
unit. The acceptance of the offer will not affect normal production or domestic sales
prices. The following data are available:
What is the amount of the gain or loss from acceptance of the offer?
A.$30,000 loss
B.$40,000 gain
C.$150,000 gain
D.$50,000 gain
24) Assets are
A.always lower than liabilities
B.equal to liabilities less owners equity
C.the same as expenses because they are acquired with cash
D.financed by the owner and/or creditors
25) Favorable volume variances may be harmful when:
A.machine repairs cause work stoppages
B.supervisors fail to maintain an even flow of work
C.production in excess of normal capacity cannot be sold
D.all of the above
26) Put the following in the order of the flow of manufacturing costs for a company
a. Closing under/over applied factory overhead to cost of goods sold
b. Materials purchased
c. Factory labor used and factory overhead incurred in production
d. Completed jobs moved to finished goods
e. Factory overhead applied to jobs according to the predetermined overhead rate
f. Materials requisitioned to jobs
g. Selling of finished product
h. Preparation of financial statements to determine gross profit
27) Beachside Coffee Shop, in an effort to stream line its accounting system, has
decided to utilize a Cash Receipts Journal in its operation. What will be recorded on the
post ref column of this transaction?
A.10
B.15
C.42
D.
28) Below is a table for the present value of $1 at Compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Using the tables above, what would be the internal rate of return of an investment that
required an investment of $189,550, and would generate an annual cash inflow of
$50,000 for the next 5 years?
A.6%
B.10%
C.12%
D.cannot be determined from the data given
29) For each of the following, calculate the cost of inventory reported on the balance
sheet.
(a) The total merchandise on hand at the end of the year as determined by taking a
physical inventory is $62,000. Of the $62,000, $8,000 has been sold FOB destination
and is awaiting pickup by the carrier.
(b) The total merchandise inventory counted at the end of the year was $63,000.
Purchases for $6,000 are in transit under FOB shipping point terms.
(c) The total merchandise inventory counted at the end of the year was $75,000.
Purchases for $5,000 are in transit under FOB destination terms.
30) Which of the following budgets is not directly associated with the production
budget?
A.Direct materials purchases budget
B.Factory overhead cost budget
C.Capital Expenditures budget
D.Direct labor cost budget
31) The unit of measure concept:
A.is only used in the financial statements of manufacturing companies
B.is not important when applying the cost concept
C.requires that different units be used for assets and liabilities
D.requires that economic data be reported in yen in Japan or dollars in the U.S
32) Pia and Ramona are partners who share income in the ratio of 3:2. Their capital
balances are $90,000 and $130,000 respectively. Income Summary has a credit balance
of $40,000. What is Pias capital balance after closing Income Summary to Capital?
A.$70,000
B.$114,000
C.$110,000
D.$74,000
33) Period costs are
A.found on the balance sheet
B.not involved in the production process
C.classified as direct labor, direct material, or factory overhead
D.found on the job order cost sheets
34) Lone Star Company received a 90-day, 6% note for $80,000, dated March 12 from
a customer on account. (Assume a 360-day year when calculating interest.)
a. Determine the due date of the note.
b. Determine the maturity value of the note.
c. Journalize the entry to record the receipt of the payment of the note at maturity.
35) If fixed costs are $350,000, the unit selling price is $29, and the unit variable costs
are $20, what is the break-even sales (units) if the variable costs are decreased by $4?
A.26,924 units
B.12,069 units
C.21,875 units
D.38,889 units
36) When goods are shipped FOB destination and the seller pays the freight charges, the
buyer
A.journalizes a reduction for the cost of the merchandise
B.journalizes a reimbursement to the seller
C.does not take a discount
D.makes no journal entry for the freight
37) The inventory method that assigns the most recent costs to cost of goods sold is
A.FIFO
B.LIFO
C.average
D.specific identification
38) Miramar Industries manufactures two products, A and B. The manufacturing
operation involves three overhead activities - production setup, material handling, and
general factory activities. Miramar uses activity-based costing to allocate overhead to
products. An activity analysis of the overhead revealed the following estimated costs
and activity bases for these activities:
Each products total activity in each of the three areas are as follows:
What is the activity rate for Production Setup?
A.$2,500 per setup
B.$833 per setup
C.$625 per setup
D.$400 per setup
39) The amount of deposits in transit is included on the bank reconciliation as a(n)
A.deduction from the balance per the company's books
B.deduction from the balance per bank statement
C.addition to the balance per bank statement
D.addition to the balance per company books
40) Segment data:
A.can be used for vertical, but not horizontal analysis
B.is gathered from invoice data
C.is only useful by product line
D.analysis is required by GAAP
41) Which of the following accounts would be increased with a credit?
A.Land, Accounts Payable, Drawing
B.Accounts Payable, Unearned revenue, Collins Capital
C.Collins Capital, Accounts Receivable, Unearned Revenue
D.Cash, Accounts Receivable, Collins Capital
42) The formula for depreciable cost is
A.initial cost + residual value
B.initial cost - residual value
C.initial cost - accumulated depreciation
D.depreciable cost = initial cost
43) The Boxwood Company sells blankets for $60 each. The following was taken from
the inventory records during May. The company had no beginning inventory on May 1.
Assuming that the company uses the perpetual inventory system, determine the ending
inventory value for the month of May using the FIFO inventory cost method.
A.$364
B.$372
C.$324
D.$320
44) Indicate whether each of the following activities would be reported on the
Statement of Cash Flows as an Operating Activity, an Investing Activity, a Financing
Activity, or does not appear on the Cash Flow Statement.
(a) Cash paid for building
(b) Cash paid to suppliers
(c) Cash paid for owner's withdrawal
(d) Cash received from customers
(e) Cash received from the owner's investment
(f) Cash received from the sale of a building
(g) Borrowed cash from a bank
45) Computerized accounting systems
A.are only used by medium and large sized companies
B.are generally not as accurate as manual systems
C.record and post transactions at the same time
D.must make use of special journals
46) According to a summary of the payroll of Scotland Company, $450,000 was subject
to the 7.0% social security tax and $500,000 was subject to the 1.5% Medicare tax.
Federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%)
and federal (0.8%) unemployment taxes. The journal entry to record accrued salaries
would include:
A.a debit to Salary Payable of $313,000
B.a credit to Salary Payable of $363,000
C.a debit to Salary Expense of $363,000
D.a credit to Salary Expense of $313,000
47) On April 1, 2011, Albert Company purchased $50,000 of Tetter Companys 12%
bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Albert received its first
semiannual interest. On February 1, 2012, Albert sold $40,000 of the bonds at 103 plus
accrued interest. The journal entry Albert will record on April 1, 2011 for the purchase
of the bonds will include:
A.a credit to Interest Payable for $2,000
B.a debit to Investments - Tetter Company for $52,000
C.a debit for Cash of $50,000
D.a debit to Investments - Tetter Company for $50,000
48) At the beginning of 2011, the Gilbert Companys work in process inventory account
had a balance of $30,000. During 2011, $68,000 of direct materials were used in
production, and $66,000 of direct labor costs were incurred. Factory overhead in 2011
amounted to $90,000. Cost of goods manufactured is $230,000 in 2011. The balance in
work in process inventory on December 31, 2011, is:
A.$24,000
B.$44,000
C.$66,000
D.$36,000
49) A company with 100,000 authorized shares of $4 par common stock issued 40,000
shares at $8. Subsequently, the company declared a 2% stock dividend on a date when
the market price was $11 a share. What is the amount transferred from the retained
earnings account to paid-in capital accounts as a result of the stock dividend?
A.$3,200
B.$6,400
C.$4,800
D.$8,800
50) Fixed assets are ordinarily presented in the balance sheet
A.at current market values
B.at replacement costs
C.at cost less accumulated depreciation
D.in a separate section along with intangible assets
51) The adjusting entry to record the depreciation of equipment for the fiscal period is
A.debit Depreciation Expense; credit Equipment
B.debit Depreciation Expense; credit Accumulated Depreciation
C.debit Accumulated Depreciation; credit Depreciation Expense
D.debit Equipment; credit Depreciation Expense
52) Doug Miller is the owner and operator of Millers Arcade. At the end of its
accounting period, December 31, 2010, Millers Arcade has assets of $450,000 and
liabilities of $125,000. Using the accounting equation, determine the following
amounts:
53) 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 1. 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
54) Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Using the tables above, what is the present value of $6,000 (rounded to the nearest
dollar) to be received at the end of each of the next 4 years, assuming an earnings rate
of 10%?
A.$20,790
B.$19,020
C.$14,412
D.$25,272
55) For purposes of analysis, mixed costs are generally:
A.classified as fixed costs
B.classified as variable costs
C.classified as period costs
D.separated into their variable and fixed cost components
56) A business is considering a cash outlay of $250,000 for the purchase of land, which
it could lease for $35,000 per year. If alternative investments are available which yield
an 18% return, the opportunity cost of the purchase of the land is:
A.$35,000
B.$45,000
C.$10,000
D.$6,300
57) Which of the following entries records the collection of cash from cash customers?
A.Fees Earned, debit; Cash, credit
B.Fees Earned, debit; Accounts Receivable, credit
C.Cash, debit; Fees Earned, credit
D.Accounts Receivable, debit; Fees Earned, credit
58) The following two problems are independent of one another.
59) A $550,000 capital investment proposal has an estimated life of four years and no
residual value. The estimated net cash flows are as follows:
The minimum desired rate of return for net present value analysis 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. Determine the net present value.
60) During the current year, merchandise is sold for $86,000 cash and for $93,950 on
account. The cost of the merchandise sold is $76,240. What is the amount of the gross
profit?
61) A company reports the following:
Determine the ratio of net sales to total assets. Round your answer to one decimal place.
62) Dixon Sales has seven sales employees which receive weekly paychecks. Each
earns $10.25 per hour and each has worked 40 hours in the pay period. Each employee
pays 12% of gross in Federal Income Tax, 3% in State Income Tax, 6% of gross in
Social Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State Disability
Insurance. Journalize the recognition of the pay period ending January 19th which will
be paid to the employees January 26th. (Keep in mind that none of the employees is
subject to a ceiling amount for social security.)
