1) An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds
actual cost.
2) Vertical analysis compares each item in a financial statement with a total amount
from the same statement.
3) Indirect labor and indirect materials would be part of factory overhead.
4) Trading securities should be reported on the financial statements at fair market value.
5) Total variable costs change as the level of activity changes.
6) A corporation is a business that is legally separate and distinct from its owners.
7) If employees accept a wage contract that decreases the unit contribution margin, the
break-even point will decrease.
8) Of the two methods of accounting for uncollectible receivables, the allowance
method provides in advance for uncollectible receivables.
9) If a company has preferred stock, the preferred stock dividend is added to net income
when computing earnings per common share.
10) The work sheet is not considered a part of the formal accounting records.
11) Revenue recognition concept requires that the reporting of revenue be included in
the period when cash for the service is received.
12) The balances of the equity accounts from the Adjusted Trial Balance columns of the
work sheet are extended to the Retained Earnings Statement columns.
13) Purchase requisitions for Purchasing and the number of payroll checks for Payroll
Accounting are examples of activity bases.
14) To a major resort, timeshare properties would be classified as property, plant and
equipment.
15) In order to be a recorded contingent liability, the liability must be possible and
easily estimated.
16) The retained earnings statement may be combined with the income statement.
17) For purposes of analysis, mixed costs can generally be separated into their variable
and fixed components.
18) Accounts
A.do not reflect money amounts
B.are not used by entities that manufacture products
C.are records of increases and decreases in individual financial statement items
D.are only used by large entities with many transactions
19) Indicate whether each of the following represents an asset, liability, or stockholders
equity item.
(a) accounts payable
(b) wages expense
(c) capital stock
(d) accounts receivable
(e) dividends
(f) land
20) Which of the following is not true when determining the selling price for a product?
A.Absorption costing should be used to determine routine pricing which include both
fixed and variable costs
B.As long as the selling price is set above the variable costs, the company will make a
profit in short run
C.Variable costing is effective when determining short run decisions, but absorption
costing is only used for long-term pricing policies
D.Both variable and absorption pricing plans should be considered, to include several
pricing alternatives
21) Periodic comparisons between planned objectives and actual performance are
reported in:
A.zero-base reports
B.budget performance reports
C.master budgets
D.budgets
22) A new machine with a purchase price of $109,000, with transportation costs of
$12,000, installation costs of $5,000, and special acquisition fees of $6,000, would have
a cost basis of
A.$114,000
B.$126,000
C.$121,000
D.$132,000
23) All of the following are factors that may complicate capital investment analysis
except:
A.possible leasing alternatives.
B.changes in price levels.
C.sunk costs.
D.federal income tax ramifications.
24) You have just received notice that a customer of yours with an Account Receivable
balance of $100 has gone bankrupt and will not make any future payments. Assuming
you use the allowance method, the entry you make is to
A.debit Bad Debt Expense and credit Allowance for Doubtful Accounts
B.debit Bad Debt Expense and credit Accounts Receivable
C.debit Allowance for Doubtful Accounts and credit Accounts Receivable
D.debit Allowance for Doubtful Accounts and credit Bad Debt Expense
25) Debenture bonds are
A.bonds secured by specific assets of the issuing corporation
B.bonds that have a single maturity date
C.issued only by the federal government
D.issued on the general credit of the corporation and do not pledge specific assets as
collateral
26) All of the following are advantages of decentralization except:
A.Managers make better decisions when closer to the operation of the company
B.Expertise in all areas of the business is difficult, decentralization makes it better to
delegate certain responsibilities
C.Each decentralized operation purchases their own assets and pays for operating costs
D.Decentralized managers can respond quickly to customer satisfaction and quality
service
27) A factor in determining the rate of return on investment–the ratio of income from
operations to sales–is called:
A.profit margin
B.indirect expenses
C.investment turnover
D.cost
28) The Lucy Corporation purchased and used 129,000 board feet of lumber in
production, at a total cost of $1,548,000. Original production had been budgeted for
22,000 units with a standard material quantity of 5.7 board feet per unit and a standard
price of $12 per board foot. Actual production was 23,500 units.
Compute the material price variance.
A.0
B.59,400U
C.59,400F
D.6,000U
29) Prepaid expenses are eventually expected to
A.become expenses when their future economic value expires
B.become revenues when services are performed
C.become expenses in the period when they are paid
D.become revenues when the liability is no longer owed
30) Determine the depreciation, for the year of acquisition and for the following year, of
a fixed asset acquired on October 1 for $500,000, with an estimated life of 5 years, and
residual value of $50,000, using (a) the declining-balance method at twice the
straight-line rate and (b) the straight-line method. Assume a fiscal year ending
December 31.
31) If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00
each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40
each), the effect of the quantity factor on the change in variable cost of goods sold is:
A.$10,800 decrease
B.$10,800 increase
C.$10,000 increase
D.$10,000 decrease
32) Axelgold Company produces parts for the auto industry. Part X2 is machined in
Department #1, which has the following budgeted conversion costs:
All costs are driven by machine hours. Total possible hours for the year are 2,800. It
takes .03 hours to machine one unit of Part X2.
33) The amount of income under absorption costing will be less than the amount of
income under variable costing when units manufactured:
A.exceed units sold
B.equal units sold
C.are less than units sold
D.are equal to or greater than units sold
34) Which of the following groups are considered to be internal usersof accounting
information?
A.Employees and customers
B.Customers and vendors
C.Employees and managers
D.Government and banks
35) Beginning inventory, purchases, and sales for Product – Weld TM are as follows:
Assuming a perpetual inventory system and the last-in, first-out method, determine (a)
the cost of the merchandise sold for the September 30 sale and (b) the inventory on
September 30.
36) Cash equivalents include
A.checks
B.coins and currency
C.money market accounts and commercial paper
D.stocks and short-term bonds
37) 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
38) Which of the following should be included in the acquisition cost of a piece of
equipment?
A.transportation costs
B.installation costs
C.testing costs prior to placing the equipment into production
D.all are correct
39) The costs of services charged to a profit center on the basis of its use of those
services are called:
A.operating expenses
B.noncontrollable charges
C.service department charges
D.activity charges
40) The process by which management allocates available investment funds among
competing investment proposals is called:
A.investment capital
B.investment rationing
C.cost-volume-profit analysis
D.capital rationing
41) The investment turnover is the:
A.ratio of income from operations to sales
B.ratio of income from operations to invested assets
C.ratio of assets to liabilities
D.ratio of sales to invested assets
42) Using accrual accounting, expenses are recorded and reported only
A.when they are incurred, whether or not cash is paid
B.when they are incurred and paid at the same time
C.if they are paid before they are incurred
D.if they are paid after they are incurred
43) The total assets and total liabilities of Pauls Pools, a corporation, at the beginning
and at the end of the current fiscal year are as follows:
(a) Determine the amount of net income earned during the year. No capital stock was
issued and no dividends were paid during the year.
(b) Determine the amount of net income during the year. The assets and liabilities at the
beginning and at the end of the year are unchanged from the amounts presented above.
Dividends of $53,000 were paid in cash during the year. No capital stock was issued.
(c) Determine the amount of net income earned during the year. The assets and
liabilities at the beginning and at the end of the year are unchanged from the amounts
presented above. Capital stock of $35,000 was issued for cash and no dividends were
paid.
(d) Determine the amount of net income earned during the year. The assets and
liabilities at the beginning and at the end of the year are unchanged from the amounts
presented above. Capital stock of $12,000 was issued for cash and $1,500 of dividends
were paid each month during the year.
44) Once the adjusting entries are posted, the adjusted trial balance is prepared to
A.verify that the debits and credits are in balance
B.verify that all of the adjustments were posted in the correct accounts
C.verify that the net income (loss) is correct for the period
D.verify the correct flow of accounts into the financial statements
45) A bond indenture is
A.a contract between the corporation issuing the bonds and the underwriters selling the
bonds
B.the amount due at the maturity date of the bonds
C.a contract between the corporation issuing the bonds and the bond trustee, who is
acting on behalf of the bondholders
D.the amount for which the corporation can buy back the bonds prior to the maturity
date
46) Rabbitt Co. operates in a just-in-time manufacturing environment. For June
production, Rabbitt purchased 5,000 units of raw materials at $6.00 per unit on account.
The journal entry required to record this transaction is:
A.Raw and In Process Inventory 30,000
Accounts Payable 30,000
B.Cost of Goods Manufactured 30,000
Accounts Payable 30,000
C.Finished Goods 30,000
Accounts Payable 30,000
D.Raw Materials Inventory 30,000
47) Cavy Company estimates that total factory overhead costs will be $660,000 for the
year. Direct labor hours are estimated to be 100,000. Determine (a) the predetermined
factory overhead rate, (b) the amount of factory overhead applied to Job 345 if the
amount of direct labor hours is 560 and Job 777 if the amount of direct labor hours is
800, and (c) prepare the journal entry to apply factory overhead in April according to
the predetermined overhead rate.
48) The term “receivables” includes all
A.money claims against other entities
B.merchandise to be collected from individuals or companies
C.cash to be paid to creditors
D.cash to be paid to debtors
49) Characteristics of a corporation include
A.shareholders who are mutual agents
B.direct management by the shareholders (owners)
C.its inability to own property
D.shareholders who have limited liability
50) The cost of direct materials transferred into the Bottling Department of the
Mountain Springs Water Company is $27,225. The conversion cost for the period in the
Bottling Department is $7,596. The total equivalent units for direct materials and
conversion are 60,500 and 63,300 respectively. Determine the direct materials and
conversion cost per equivalent unit.
Round answers to nearest cent.
51) Sabas Company has 20,000 shares of $100 par, 1% non-cumulative preferred stock
and 100,000 shares of $50 par common stock. The following amounts were distributed
as dividends:
Determine the dividends per share for preferred and common stock for each year.
52) Icon Company acquired patent rights on January 1, 2009 for $1,125,000. The patent
has a useful life equal to its legal life of 15 years. On January 2, 2012, Icon successfully
defended the patent in a lawsuit at a cost of $90,000.
Required:
53) On October 31, the end of the first month of operations, Morristown & Co.
prepared the following income statement based on absorption costing:
If the fixed manufacturing costs were $42,900 and the variable selling and
administrative expenses were $14,600, prepare an income statement using variable
costing.
54) Bobby Company has fixed costs of $160,000. The unit selling price, variable cost
per unit, and contribution margin per unit for the companys two products are provided
below.
The sales mix for product X and Y is 60% and 40% respectively. Determine the
break-even point in units of X and Y.
55) On November 30th, it was discovered that a $550 of a transaction recording the
purchase of office supplies was really office equipment. Prepare the journal entry to
correct this situation.
56) 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 LIFO method.