1) A variable cost remains constant per unit at various levels of activity.
2) When goods are sold, the Cost of Goods Sold account is debited and Work in Process
Inventory account is credited.
3) Partnership income or loss need not be closed to partners’ capital accounts each
period because of the unlimited life characteristic of partnerships.
4) The double-entry system of accounting refers to the placement of a double line at the
end of a column of figures.
5) A percentage change can be computed only if the base amount is zero or positive.
6) Cash flow from investing activities is considered the most important category on the
statement of cash flows because it is considered the best measure of expected income.
7) Managerial accounting is primarily concerned with managers and external users.
8) Cost centers, profit centers, and investment centers can all be classified as
responsibility centers.
9) The contractual interest rate is always equal to the market interest rate on the date
that bonds are issued.
10) After a transaction has been posted, the reference column in the journal should not
be blank.
11) The margin of safety ratio is equal to the margin of safety in dollars divided by the
actual or (expected) sales.
12) Goodwill is not recognized in accounting unless it is acquired from another
business enterprise.
13) A coal company invests $15 million in a mine estimated to have 20 million tons of
coal and no salvage value. It is expected that the mine will be in operation for 5 years.
In the first year, 1,000,000 tons of coal are extracted and sold. What is the depletion
expense for the first year?
a.$750,000
b.$300,000
c.$75,000
d.Cannot be determined from the information provided
14) Dave Divine invests $30,000 and will earn 10% annual compound interest. How
many years will it take for him to have the $103,569 to buy the car he wants?
a.10
b.12
c.13
d.15
15) On June 30, 2014, Agent Products sold equipment with an original cost of $600,000
for $150,000. The equipment was purchased January 1, 2011, and was depreciated
using the straight-line method assuming a four-year useful life and $60,000 salvage
value. The necessary entries for 2014 include a
a.debit to Accumulated DepreciationEquipment for $135,000
b.debit to Loss on Sale of Plant Assets for $22,500
c.credit to Gain on Sale of Plant Assets for $22,500
d.credit to Accumulated DepreciationEquipment for $202,500
16) An account is a part of the financial information system and is described by all
except which one of the following?
a.An account has a debit and credit side
b.An account is a source document
c.An account may be part of a manual or a computerized accounting system
d.An account has a title
17) A new accountant working for Spirit Walker Company records $900 Depreciation
Expense on store equipment as follows:
Dr.Depreciation Expense 900
Cr.Cash 900
The effect of this entry is to
a.adjust the accounts to their proper amounts on December 31
b.understate total assets on the balance sheet as of December 31
c.overstate the book value of the depreciable assets at December 31
d.understate the book value of the depreciable assets as of December 31
18) Manufacturing cost data for Mikey Company, which uses a job order cost system,
are presented below:
Case A Case B
Direct Materials Used(a)$113,000
Direct Labor$ 70,000150,000
Manufacturing Overhead Applied56,000(d)
Total Manufacturing Costs218,000(e)
Work in Process, 1/1/14(b)46,000
Total Cost of Work in Process300,000(f)
Work in Process, 12/31/14(c)43,000
Cost of Goods Manufactured209,000(g)
Instructions
Indicate the missing amount for each letter. Assume that overhead is applied on the
basis of direct labor cost and that the rate is the same for both cases.
19) The denominator in the formula for return on investment calculation is
a.investment center controllable margin
b.dependent on the specific type of profit center
c.average investment center operating assets
d.sales revenue for the period
20) In a process cost system, units to be accounted for in a department are equal to the
a.number of units started or transferred into the department
b.number of units transferred out of the department
c.units in the beginning inventory plus the units started or transferred into the
department
d.ending inventory plus the units started or transferred into the department
21) On October 1, 2014, Milago Company sells (factors) $700,000 of receivables to
Beanfield Factors, Inc. Beanfield assesses a service charge of 3% of the amount of
receivables sold. The journal entry to record the sale by Milago will include
a.a debit of $700,000 to Accounts Receivable
b.a credit of $721,000 to Cash
c.a debit of $721,000 to Cash
d.a debit of $21,000 to Service Charge Expense
22) Preston Company purchased equipment for $1,200 cash. As a result of this event:
a.total assets increased by $1,200
b.owners equity decreased by $1,200
c.total assets remained unchanged
d.Both a and b
23) Salem Co. is contemplating the replacement of an old machine with a new one. The
following information has been gathered:
Old MachineNew Machine
Price$390,000$530,000
Accumulated Depreciation 170,000-0-
Remaining useful life 6 years-0-
Useful life-0-10 years
Annual operating costs$167,000$151,500
If the old machine is replaced, it can be sold for $120,000.
Which of the following amounts is relevant to the replacement decision?
a.$170,000
b.$390,000
c.$151,500
d.$0
24) The information to prepare the statement of cash flows usually comes from each of
the following except
a.the comparative balance sheet
b.the prior years income statement
c.additional information
d.the current income statement
25) Wesley Hospital installs a new parking lot. The paving cost $40,000 and the lights
to illuminate the new parking area cost $25,000. Which of the following statements is
true with respect to these additions?
a.$40,000 should be debited to the Land account
b.$25,000 should be debited to Land Improvements
c.$65,000 should be debited to the Land account
d.$65,000 should be debited to Land Improvements
26) Yanik Company’s delivery truck, which originally cost $84,000, was destroyed by
fire. At the time of the fire, the balance of the Accumulated Depreciation account
amounted to $57,000. The company received $48,000 reimbursement from its insurance
company. The gain or loss as a result of the fire was
a.$36,000 loss
b.$21,000 loss
c.$36,000 gain
d.$21,000 gain
27) Monkee’s Company has current assets of $45,000, current liabilities of $50,000,
long-term assets of $90,000 and long-term liabilities of $40,000. Monkee’s Company’s
working capital and its current ratio are:
a.$45,000 and .90:1
b.$5,000 and 1.50:1
c.$5,000 and .90:1
d.-$5,000 and .90:1
28) On October 3, Karl Schickele, a carpenter, received a cash payment for services
previously billed to a client. Karl paid his telephone bill, and he also bought equipment
on credit. For the three transactions, at least one of the entries will include a
a.credit to Owners Capital
b.credit to Notes Payable
c.debit to Accounts Receivable
d.credit to Accounts Payable
29) Xavier Company has the following stock outstanding:
7% Preferred stock, $100 par value, cumulative$500,000
Common stock, $50 par value$800,000
Preferred stock dividends are in arrears for 2010 and 2011 . If the company declares and
pays $150,000 in dividends in 2012, the amount received by the preferred stockholders
would be:
a.$35,000
b.$42,000
c.$70,000
d.$105,000
30) Debt investments are recorded at the
a.face value of the bonds purchased
b.face value of the bonds purchased plus interest
c.price paid for the bonds plus interest
d.price paid for the bonds plus brokerage fees
31) The equity method of accounting for an investment in the common stock of another
company should be used by the investor when the investment
a.is composed of common stock and it is the investor’s intent to vote the common stock
b.ensures a source of supply of raw materials for the investor
c.enables the investor to exercise significant influence over the investee
d.is obtained by an exchange of stock for stock
32) The cash records of Barry Company show the following:
1>In September, deposits per the bank statement totaled $38,600; deposits per books
$39,000; and deposits in transit at September 30 were $4,600.
2>In September, cash disbursements per books were $36,500; checks clearing the bank
were $39,800; and outstanding checks at September 30 were $3,100.
There were no bank debit or credit memoranda and no errors were made by either the
bank or Barry Company.
Answer the following questions:
(a)What were the deposits in transit at August 31?
(b)What were the outstanding checks at August 31?
33) If no-par stock is issued without a stated value, then
a.the par value is automatically $1 per share
b.the entire proceeds are considered to be legal capital
c.there is no legal capital
d.the corporation is automatically in violation of its state charter
34) Under the direct write-off method of accounting for uncollectible accounts
a.the allowance account is increased for the actual amount of bad debt at the time of
write-off
b.a specific account receivable is decreased for the actual amount of bad debt at the
time of write-off
c.balance sheet relationships are emphasized
d.bad debt expense is always recorded in the period in which the revenue was recorded
35) Lasey Company has fixed costs of $2,500,000 and variable costs are 40% of sales.
What are the required sales if Lasey Company desires net income of $275,000?
a.$4,625,000
b.$4,166,667
c.$6,937,500
d.$6,250,000
36) Receivables might be sold to
a.lengthen the cash-to-cash operating cycle
b.take advantage of deep discounts on the cash realizable value of receivables
c.generate cash quickly
d.finance companies at an amount greater than cash realizable value
37) Characteristics associated with faithfully representative accounting information are
a.verifiable and timely
b.neutral and verifiable
c.complete and neutral
d.relevance and verifiable
38) Misra Company compiled the following financial information as of December 31,
2014:
Revenues$340,000
Owners Capital (1/1/14)140,000
Equipment80,000
Expenses250,000
Cash90,000
Owners Drawings20,000
Supplies10,000
Accounts payable40,000
Accounts receivable70,000
Misras owners equity on December 31, 2014 is
a.$90,000
b.$140,000
c.$210,000
d.$250,000
39) To determine the net cash provided (used) by operating activities, it is necessary to
analyze
a.the current year’s income statement
b.a comparative balance sheet
c.additional information
d.all of these
40) Camper Van Company purchased equipment for $2,600 cash. As a result of this
event,
a.owners equity decreased by $2,600
b.total assets increased by $2,600
c.total assets remained unchanged
d.owner’s equity decreased and total assets increased by $2,600
41) Overapplied manufacturing overhead exists when overhead assigned to work in
process is
a.more than overhead incurred and there is a debit balance in Manufacturing Overhead
at the end of a period
b.less than overhead incurred and there is a debit balance in Manufacturing Overhead at
the end of a period
c.more than overhead incurred and there is a credit balance in Manufacturing Overhead
at the end of a period
d.less than overhead incurred and there is a credit balance in Manufacturing Overhead
at the end of a period
42) Three important dates associated with dividends are the: (1)__________________,
(2)__________________, and (3)__________________.
43) Prepare a partial income statement, beginning with income before income taxes
using the following information for Stone Corporation for the fiscal year ended
December 31, 2014:
Sales$720,000
Extraordinary loss80,000
Operating expenses180,000
Cost of goods sold400,000
Loss on sale of land25,000
Stone Corporation is subject to a 30% income tax rate.
44) Identify whether each of the following is classified as a product cost or a period
cost.
______________1>Direct labor
______________2>Direct materials
______________3>Factory utilities
______________4>Repairs to office equipment
______________5>Property taxes on factory building
______________6>Sales salaries
45) Equivalent units of production measure the work done during the period, expressed
in fully ________________ units.
46) Three factors that affect the computation of periodic depreciation expense are (1)
_______________, (2) _______________, and (3) _________________.