1) An example of a general-purpose financial statement would be a report about
projected price increases related to transportation costs.
2) The presence of a subsidiary ledger requires the presence of a summarizing
controlling account.
3) The current year’s advertising costs are normally considered period costs.
4) A qualitative characteristic that may impact upon capital investment analysis is
manufacturing flexibility.
5) The journal entry to record the cost of warranty repairs that were incurred during the
current period, but related to sales made in prior years, includes a debit to Warranty
Expense.
6) When a large number of individual accounts with a common characteristic are
grouped together, accounting calls this a controlling account.
7) The service department will determine its service department charge rate and charge
the companys divisions or departments according to their use of that particular service
department.
8) The major shortcoming of income from operations as an investment center
performance measure is that it ignores the amount of revenues earned by the center.
9) When a corporation discontinues a segment of its operations at a loss, the loss should
be reported as a separate item after income from continuing operations on the income
statement.
10) The service fee that credit card companies charge retailers varies and is the primary
reason why some businesses do not accept all credit cards.
11) The work sheet is a working paper that accountants can use to summarize adjusting
entries and the account balances for the financial statements.
12) A bond is usually divided into a number of individual bonds of $500 each.
13) In applying the first-in, first-out method of costing inventories, if 8,000 units which
are 30% completed are in process at June 1, 28,000 units are completed during June,
and 4,000 units were 75% completed at June 30, the number of equivalent units of
production for June was 33,400.
14) The budgeting process is used to effectively communicate planned expectations
regarding profits and expenses to the entire organization.
15) A trial balance determines the accuracy of the numbers.
16) The negotiated price approach allows the managers of decentralized units to agree
among themselves as to the transfer price.
17) The cost of merchandise sold during the year was $50,000. Merchandise inventories
were $12,500 and $10,500 at the beginning and end of the year, respectively. Accounts
payable were $6,000 and $5,000 at the beginning and end of the year, respectively.
Using the direct method of reporting cash flows from operating activities, cash
payments for merchandise total
A.$49,000
B.$47,000
C.$51,000
D.$53,000
18) 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 present value of $10,000 (rounded to the
nearest dollar) to be received three years from today, assuming an earnings rate of 6%?
A.$8,400
B.$8,900
C.$7,920
D.$11,905
19) Soledad and Winston are partners who share income in the ratio of 1:3 and have
capital balances of $100,000 and $140,000 at the time they decide to terminate the
partnership. After all noncash assets are sold and all liabilities are paid, there is a cash
balance of $130,000. What amount of loss on realization should be allocated to
Soledad?
A.$60,000
B.$27,500
C.$92,500
D.$32,500
20) In a process cost system, the amount of work in process inventory is valued by:
A.finding the sum of all open job costs
B.allocating departmental costs between completed and partially completed units
C.multiplying units in ending inventory by the direct materials cost per unit
D.all of the above
21) A list of the accounts is called
A.ledger
B.chart of accounts
C.T-Account
D.Debit
22) ABC Printing Company uses a job order cost system.
(a) Indicate the source of the data for debiting Work in Process for each of the
following:
(1) Direct materials requisitioned
(2) Direct labor used
(b) Indicate the source of the data for crediting Work in Process for jobs completed.
(c) Present a list of the three controlling accounts used in the general ledger to record
the inventories and, in each case, indicate the related subsidiary ledger.
23) 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.
24) Based on the following data, what is the acid-test ratio, rounded to one decimal
point?
A.3.4
B.3.0
C.2.2
D.1.8
25) Some items are omitted from each of the following condensed divisional income
statements of Demi Inc.
26) Total dollar amount of the debits equal the total dollar amount of the credits in the
ledger can be verified through:
A.ledger
B.trial balance
C.account
D.balance sheet
27) Match the following documents used for inventory control:
1>last document in the chain, use to compare all three for accuracy A. Vendors Invoice
2>establishes an initial record of the receipt of inventory B. Purchase Order
3>authorizes the purchase of inventory from an approved vendor C. Receiving Report
28) Which statement below is not a determinate in calculating the amount of federal
income taxes withheld from an individuals pay?
A.filing status
B.types of earnings
C.gross pay
D.number of exemptions
29) A purchase of supplies for cash is recorded in the
A.Revenue journal
B.Purchases journal
C.Cash Receipts journal
D.Cash Payments journal
30) Indicate whether each of the following would be added to or deducted from net
income in determining net cash flow from operating activities by the indirect method:
(a) Increase in prepaid expenses
(b) Amortization of patents
(c) Increase in salaries payable
(d) Gain on sale of fixed assets
(e) Decrease in accounts receivable
(f) Increase in notes receivable due in 60 days
(g) Amortization of discount on bonds payable
(h) Decrease in merchandise inventory
(i) Depreciation of fixed assets
(j) Loss on retirement of long-term debt
(k) Decrease in accounts payable
(l) Increase in notes payable due in 30 days
(m) Increase in income taxes payable
31) For the current year ending January 31, Harp Company expects fixed costs of
$188,500 and a unit variable cost of $51.50. For the coming year, a new wage contract
will increase the unit variable cost to $55.50. The selling price of $70.00 per unit is
expected to remain the same.
Round your answer to the nearest whole number.
32) At the end of the current year, Accounts Receivable has a balance of $550,000;
Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the
year total $2,500,000. An analysis of receivables estimates uncollectible receivables as
$25,000.
Determine the amount of the adjusting entry for bad debt expense and the adjusted
balance of Allowance of Doubtful Accounts, respectively.
A.$19,500 and $25,000
B.$30,500 and $525,000
C.$19,500 and $525,000
D.$30,500 and $25,000
33) A necessary element of internal control is
A.database
B.systems design
C.systems analysis
D.information and communication
34) Which of the following will have no effect on an employees take-home pay?
A.Social security tax
B.Unemployment tax
C.Marital status
D.Number of exemptions claimed
35) Bank reconciliation information for Cole Co. for May 31, 2011 is as follows:
(a) The bank statement balance is $2,936.
(b) The cash account balance is $3,194.
(c) Outstanding checks amounted to $465.
(d) Deposits in transit are $655.
(e) The bank service charge is $50.
(f) A check for $97 for supplies was recorded as $79 in the ledger.
Record the appropriate journal entry for Cole Co.
36) The balance sheet of Morgan and Rockwell was as follows immediately prior to the
partnership’s being liquidated: cash, $20,000; other assets, $160,000; liabilities,
$40,000; Morgan capital, $60,000; Rockwell capital, $80,000. The other assets were
sold for $139,000. Morgan and Rockwell share profits and losses in a 2:1 ratio. As a
final cash distribution from the liquidation, Morgan will receive cash totaling
A.$46,000
B.$51,000
C.$60,000
D.$49,500
37) 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. The journal entry to record the amortization
of the premium (by the straight line method) for the year by Lisbon Co. includes a debit
to:
A.Interest Expense for $2,500
B.Premium on Bonds Payable for $2,500
C.Interest Expense for $5,000
D.Premium on Bonds Payable for $5,000
38) For accounting purposes, the business entity should be considered separate from its
owners if the entity is
A.a corporation
B.a proprietorship
C.a partnership
D.all of the above
39) After all of the account balances have been extended to the Balance Sheet columns
of the work sheet, the totals of the debit and credit columns are $38,755 and $32,735,
respectively. What is the amount of net income or net loss for the period?
A.$6,020 net income
B.$38,755 net loss
C.$6,020 net loss
D.$32,735 net income
40) Production and sales estimates for May for the Robin Co. are as follows:
The number of units expected to be sold in May is:
A.22,000
B. 2,700
C.21,800
D.19,300
41) The accounts in the ledger of Monroe Entertainment Co. are listed in alphabetical
order. All accounts have normal balances.
The total of all the assets is:
A.$10,000
B.$8,000
C.$9,700
D.$9,800
42) The term “inventory” can indicate
A.merchandise held for sale in the normal course ofbusiness
B.equipment used to manufacture products
C.supplies
D.any asset
43) BAM Co. is evaluating a project requiring a capital expenditure of $806,250. The
project has an estimated life of four years and no salvage value. The estimated net
income and net cash flow from the project are as follows:
The company’s minimum desired rate of return 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: (a) the average rate of return on investment, including the effect of
depreciation on the investment, and (b) the net present value.
44) Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling
prices are: $55; $78; and $32, respectively. The variable costs for each product are: $20;
$50; and $15, respectively. Each product must go through the same processing in a
machine that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales
take 7 hours, and Wales take 1 hour.
What is the contribution margin per machine hour for Tales?
A.$4
B.$7
C.$28
D.$35
45) The following information pertains to Newman Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Liabilities and Stockholders Equity
Income Statement
What is the price earnings ratio for this company?
A.6.0 times
B.4.2 times
C.8.0 times
D.9.6 times
46) During the end-of-period processing which of the following best describes the
logical order of this process
A.Preparation of adjustments, adjusted trial balance, financial statements
B.Preparation of Income Statement, adjusted trial balance, Balance Sheet
C.Preparation of adjusted trial balance, cross-referencing, journalizing
D.Preparation of adjustments, adjusted trial balance, posting
47) Identify the three main advantages of a computerized accounting system over a
manual accounting system.
48) Assume that three identical units of merchandise are purchased during October, as
follows:
Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold,
Gross profit, and Ending Inventory under the FIFO method.
49) Robin Company purchased and used 500 pounds of direct materials to produce a
product with a 520 pound standard direct materials requirement. The standard materials
price is $1.90 per pound. The actual materials price was $2.00 per pound. Prepare the
journal entries to record (1) the purchase of the materials and (2) the material entering
production. Robin records standards and variances in the general ledger.
50) Sienna Company has the following information for January.
Show your calculations to find the cost of goods manufactured.
51) Using a LIFO perpetual cost flow, calculate the value of the ending inventory and
the cost of goods sold for the month of November of Beamer Company using the data
below.
Nov 1 Purchased 600 units $80 each
Nov 4 Sold 200 units
Nov 11 Purchased 350 units $82 each
Nov 12 Sold 275 units
Nov 22 Purchased 175 units $84 each
Nov 23 Sold 155 units
Calculate the following:
1> Inventory valuation at the end of November
2> Calculate the Cost of Goods Sold for November
52) Ptarmigan Company produces two products. Product A has a contribution margin of
$20 and requires 4 machine hours. Product B has a contribution margin of $18 and
requires 3 machine hours. Determine the most profitable product assuming the machine
hours are the constraint.
53) On February 1, Marine Company reacquired 7,500 shares of its common stock at
$30 per share. On March 15, Marine sold 4,500 of the reacquired shares at $34 per
share. On June 2, Marine sold the remaining shares at $28 per share.
Required: Journalize the transaction of February 1, March 15, and June 2.