Shown below is information relating to the stockholders’ equity of Grant Corporation at
December 31, 2015:
Dividends have been declared and paid for 2015.
Refer to the information above. The book value per share of common stock is:
A. $7.90.
B. $13.17.
C. $9.10.
D. $15.17.
A statement of retained earnings shows:
A. The changes in the Cash account occurring during the accounting period.
B. The revenue, expense, and dividends of the period.
C. The types of assets which have been purchased with the earnings retained during the
accounting period.
D. The changes in the Retained Earnings account occurring during the accounting
period.
Refer to the information above. What is the amount of working capital?
A. $225,000.
B. $300,000.
C. $150,000.
D. $450,000.
Which of the following is a characteristic of a corporation?
A. Mutual agency.
B. Stockholder liability for business debts.
C. Indefinite existence.
D. Taxable at individual rates.
Lewis Imports sold a depreciable plant asset for cash of $135,000. The accumulated
depreciation amounted to $170,000, and a loss of $15,000 was recognized on the sale.
Under these circumstances, the original cost of the asset must have been:
A. $120,000.
B. $155,000.
C. $185,000.
D. $320,000.
The gain or loss on the disposal of a depreciable asset reported in financial statements
often differs from that reported for income tax purposes. The principal reason for the
difference is:
A. The cost of the asset is different for financial reporting and income tax purposes.
B. The sales price of the asset is different for financial reporting and income tax
purposes.
C. Different depreciation methods have been used in financial statements and in income
tax returns.
D. The company has made an error because the same amount of gain or loss should
appear in the income tax return as in the financial statements.
The Starbright Corporation has compiled the following data. The company intends to
use this information to develop standard costs per unit for its single product:
Direct materials = $50 per ton
Direct labor = $12.75 per hour
Variable manufacturing overhead = $5 per direct labor hour
Fixed manufacturing overhead = $18,700
Expected production = 1,700 units
Each unit of the company’s single product requires 2.5 tons of direct materials and 22.5
hours to manufacture.
Refer to the information above. What is the standard cost for direct labor per unit for
Starbright’s single product (closest to)?
A. $100 per unit.
B. $287 per unit.
C. $180 per unit.
D. $285 per unit.
Which of the following is a measure of profitability?
A. Inventory turnover rate.
B. Quick ratio.
C. Interest coverage ratio.
D. Return on assets.
Colonial Systems prepares monthly financial statements. Colonial would record a
prepaid expense in each of the following situations except:
A. Colonial Systems purchased a two-year fire insurance policy.
B. Colonial Systems paid for six months’ gardening services in advance.
C. A tenant paid Colonial Systems three months’ rent in advance.
D. Colonial Systems purchased enough office supplies to last several months.
Generally accepted accounting principles:
A. Are based on official decrees only.
B. Are based on tradition only.
C. Are based on an accountant’s experience only.
D. May change over time.
A strong statement of financial position shows:
A. Large amounts of liquid assets relative to the liabilities due in the near future.
B. Large amounts of debt relative to stockholders’ equity.
C. That cash is being generated by operations.
D. That profits are being generated by operations.
Favorable standard cost variances are normally closed at the end of the period by:
A. Crediting the variance account and debiting Cost of Goods Sold.
B. Debiting the variance account and crediting Cost of Goods Sold.
C. Debiting the variance account and crediting Work in Process.
D. Crediting the variance account and debiting Work in Process.
The concept of adequate disclosure means that:
A. The accounting department of a business must inform management of the accounting
principles used in preparing the financial statements.
B. The company must inform users of any significant facts necessary for proper
interpretation of the financial statements, including events occurring after the financial
statement date.
C. The independent auditors must disclose in the financial statements any and all errors
detected in the company’s accounting records.
D. The financial statements should include a comprehensive list of each transaction that
occurred during the year.
The principal difference between management accounting and financial accounting is
that financial accounting information is:
A. Prepared by managers.
B. Intended primarily for use by decision makers outside the business organization.
C. Prepared in accordance with a set of accounting principles developed by the Institute
of Certified Management Accountants.
D. Oriented toward measuring solvency rather than profitability.
Execucomp Corporation’s financial statements in the current year show a loss from
discontinued operations, a prior period adjustment, and an extraordinary gain. If
Execucomp’s income statement is prepared according to generally accepted accounting
principles (as illustrated in your text), which of the following four items would appear
second in sequence in the income statement?
A. Prior period adjustment.
B. Income from continuing operations.
C. Loss from discontinued operations.
D. Extraordinary gain.
On November 1 of the current year, Garcia Company borrowed $50,000 by issuing a
9%, six-month note payable, all due at maturity date. Interest expense on this note to be
recognized during the current year amounts to:
A. $500.
B. $750.
C. $1,500.
D. $4,500.
The Finishing Department of Berle Industries works on only one product, and all costs
are incurred uniformly while these units remain in the department. On March 1, 6,000
units were in process that were 45% completed. An additional 60,000 units were
transferred into the Finishing Department during March. At March 31, there were
25,000 units in process that were 75% completed. Compute the equivalent units of
production for the Finishing Department during March.
A. 81,450 units.
B. 60,000 units.
C. 57,050 units.
D. 69,550 units.
An example of a profit center is:
A. The accounting department in a manufacturing company.
B. The maintenance department of a university.
C. The furniture department of a retail department store.
D. The human resources department in a hospital.
During May, the number of equivalent units of materials applied to units produced by
Department Q totaled 48,000, computed as follows: beginning inventory, 5,000
equivalent units; units started and completed in May, 37,000 equivalent units; and
ending inventory, 6,000 equivalent units.
Refer to the information above. Assuming that the cost of direct materials used by
Department Q in May was $440,000, the materials cost assigned to unfinished units at
May 31 would be: Do not round intermediate calculations
A. $55,000.
B. $26,400.
C. $70,400.
D. Impossible to determine unless we know the percentage of completion for ending
inventory units.
Canfield Construction applies overhead to its projects at a rate of $65 per direct labor
hour. Laborers are paid an average rate of $30 per hour. The Jefferson Apartments
project was charged a total of $1,200,000 in direct materials and $450,000 in direct
labor costs.
Refer to the information above. The journal entry to transfer the completed Jefferson
Apartments project to Canfield’s finished goods inventory would include:
A. A debit to the Finished Goods Inventory account of $975,000.
B. A debit to the Finished Goods Inventory account of $2,625,000.
C. A debit to the Finished Goods Inventory account of $1,650,000.
D. A credit to the Work in Process Inventory account of $2,175,000.
A bond that is not secured is also known as:
A. A sinking fund.
B. A mortgage.
C. A debenture.
D. A junk bond.
The Sarbanes-Oxley Act of 2002 created:
A. The Security and Exchange Commission.
B. The Financial Accounting Standards Board.
C. The Public Company Accounting Oversight Board.
D. The Income Tax Return Overview Board.
A predetermined overhead application rate:
A. Expresses an expected relationship between overhead costs and an activity base.
B. Can be determined by dividing budgeted direct labor cost by the budgeted factory
overhead costs.
C. Is computed at the end of the period once actual overhead costs are known.
D. Applies the same amount of overhead to each product or service.
At the start of the current year, Minuteman Corporation had a credit balance in the
Allowance for Doubtful Accounts of $1,800. During the year a monthly provision of
2% of sales was made for uncollectible accounts. Sales for the year were $600,000, and
$5,600 of accounts receivable were written off as worthless. No recoveries of accounts
previously written off were made during the year. The year-end financial statements
should show:
A. Uncollectible accounts expense of $13,800.
B. Allowance for Doubtful Accounts with a credit balance of $8,200.
C. Allowance for Doubtful Accounts with a credit balance of $6,400.
D. Uncollectible accounts expense of $5,600.
An unfavorable volume variance in a factory is generally:
A. The responsibility of the production manager.
B. Viewed as an idle capacity loss.
C. The result of actual volume exceeding normal volume.
D. Treated as part of the controllable factory overhead variance.
With respect to depreciation policies, the principle of consistency means:
A. A company should use the same depreciation methods in its financial statements that
it uses in its income tax returns.
B. A company should use the same depreciation methods as other companies in the
same industry.
C. A company should use the same depreciation method from year to year for a given
plant asset.
D. A company should use the same depreciation method in computing depreciation
expense on all its assets.
Which of the following is true?
A. The existence of generally accepted accounting principles (GAAP) virtually
eliminates the need for professional judgment except in very unusual circumstances.
B. Federal securities laws regarding the issuance of misleading financial statements
apply not only to the independent auditors, but to management of the company as well.
C. Attaining a passing score on the part of the Uniform CPA Examination that covers
professional ethics is evidence of integrity and commitment to ethical conduct.
D. A professional accountant should resign his position rather than become involved in
the distribution of financial statements indicating insolvency.
Inventory shrinkage is not caused by:
A. Shoplifting.
B. Breakage.
C. Price reductions by competitors.
D. Spoilage.
If a retail store has a current ratio of 2.5 and working capital of $117,000. What are the
total of the current assets?
A. $46,800.
B. $117,000.
C. $195,000.
D. $292,500.
Adjusting entries help achieve the goals of accrual accounting by applying the
following two accounting principles:
A. Business entity concept and realization principle.
B. Cost principle and the accounting equation.
C. Realization principle and matching principle.
D. Matching principle and safety principle.
Refer to the information above. If the Notes Payable balance is $25,000, then the total
assets of Gordon, Inc. at December 31, 2014 amount to:
A. $27,500.
B. $152,500.
C. $120,000.
D. $165,000.
A/P ($2,500) + N/P ($25,000) + Capital Stock ($12,500) + R.E. ($125,000) = $165,000
Stone Corporation has 25 employees and incurs total wages and salaries expense of
$900,000 per year. The following table shows various payroll amounts as a percentage
of this annual wage and salaries expense:
In addition, Stone provides group health insurance for its entire workforce. The cost of
this insurance is $350 per month for each employee.
Refer to the information above. The company’s annual payroll-related expenses amount
to approximately:
A. $1,085,600.
B. $1,181,850.
C. $1,250,700.
D. $900,000.
All of the following are characteristics of the products of process costing except:
A. High volume.
B. Different amounts of direct materials.
C. Identical amounts of direct labor.
D. Repetitive operations.