1) A manufacturer’s cost of goods manufactured is the sum of direct materials, direct
labor, and factory overhead costs incurred in producing products.
2) Overapplied overhead is the amount by which overhead applied to jobs using the
predetermined overhead rate exceeds the overhead incurred during a period.
3) Production budgets always show both budgeted units of product and total costs for
the budgeted units.
4) Segment return on assets is calculated by dividing segment average assets by
segment operating income.
5) The predetermined overhead rate is used to allocate overhead cost to jobs.
6) A preemptive right means shareholders can purchase their proportional share of
common stock issued later by the corporation.
7) A note that the maker is unable or refuses to pay at maturity is called a dishonored
note.
8) It is necessary to report both the cost and the accumulated depreciation of plant
assets in the financial statements.
9) A lessee has substantially all of the benefits and risks of ownership in an operating
lease.
10) The price-earnings ratio reveals information about the stock market’s expectations
for a company’s future earnings growth.
11) The merchandise purchases budget is the starting point for preparing the master
budget.
12) Mortgage contracts grant the lender the right to be paid from the cash proceeds of
the sale of a borrower’s assets identified in the mortgage if the borrower fails to make
the required payments.
13) One possible explanation for direct labor rate and efficiency variances is the use of
workers with different skill levels.
14) The consistency concept allows a company use different accounting methods from
period to period in order to maximize profits.
15) To buy into an existing partnership, the new partner must contribute cash to the
partnership.
16) On February 1, a customer’s account balance of $2,300 was deemed to be
uncollectible. What entry should be recorded on February 1 to record the write-off
assuming the company uses the allowance method?
A.Debit Bad Debts Expense $2,300; credit Accounts Receivable $2,300.
B.Debit Allowance for Doubtful Accounts $2,300; credit Bad Debts Expense $2,300.
C.Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable $2,300.
D.Debit Bad Debts Expense $2,300; credit Allowance for Doubtful Accounts $2,300.
E.Debit Accounts Receivable $250; credit Allowance for Doubtful Accounts $2,300.
17) Current information for the Healey Company follows:
All raw materials used were traceable to specific units of product. Healey Company’s
total manufacturing costs for the year are:
A.$125,800.
B.$128,600.
C.$131,400.
D.$137,000.
E.$139,000.
18) Billington Corp. borrows $80,000 cash from Second National Bank. How does this
transaction affect the accounting equation for Billington?
A.Assets would decrease $80,000 and liabilities would decrease $80,000.
B.Assets would decrease $80,000 and equity would increase $80,000.
C.Assets would increase $80,000 and equity would decrease $80,000.
D.Assets would increase $80,000 and liabilities would increase $80,000.
E.Liabilities would decrease $80,000 and equity would increase $80,000.
19) In preparing a company’s statement of cash flows for the most recent year using the
indirect method, the following information is available:
Net cash provided by operating activities was:
A.$120,000.
B.$60,000.
C.$70,000.
D.$80,000.
E.$130,000.
20) Corporations may buy back their own stock for any of the following reasons except
to:
A.Avoid a hostile take-over.
B.Have shares available for a merger or acquisition.
C.Have shares available for employee compensation.
D.Maintain market value for the company stock.
E.Allow management to assume the voting rights.
21) If a check that was outstanding on last period’s bank reconciliation was not among
the cancelled checks returned by the bank this period, in preparing this period’s
reconciliation, the amount of this check should be:
A.Added to the book balance of cash.
B.Deducted from the book balance of cash.
C.Added to the bank balance of cash.
D.Deducted from the bank balance of cash.
E.Ignored in preparing the period’s bank reconciliation.
22) A decrease in the inventory account during the year should be reported on the
statement of cash flows as:
A.An increase in cash flows from operating activities
B.An increase in cash flows from investing activities
C.A decrease in cash flows from operating activities
D.A decrease in cash flows from investing activities
E.An increase in cash flows from financing activities
23) A company issues 9% bonds with a par value of $100,000 at par on April 1, which
is 4 months after the most recent interest date. The cash received for accrued interest on
April 1 by the bond issuer is:
A.$750.
B.$5,250.
C.$1,500.
D.$3,000.
E.$6,000.
24) Which of the following is not part of the flow of events in variance analysis:
A.Preparing a standard cost performance report.
B.Identifying questions and their explanations.
C.Taking corrective and strategic actions.
D.Computing and analyzing variances.
E.Working to ensure that all variances are favorable.
25) Financial information for Sigma Company is presented below. Calculate the
following ratios for 2016:
(a) Inventory turnover.
(b) Accounts receivable turnover.
(c) Return on total assets.
(d) Times interest earned.
(e) Total asset turnover.
26) When raw materials are purchased on account for use in a process costing system,
the corresponding journal entry that should be recorded will include:
A.A debit to Work in Process Inventory.
B.A debit to Accounts Payable.
C.A credit to Cash.
D.A debit to Raw Materials Inventory.
E.A credit to Raw Materials Inventory.
27) During March, the production department of a process operations system completed
and transferred to finished goods 25,000 units that were in process at the beginning of
March and 110,000 units that were started and completed in March. March’s beginning
inventory units were 100% complete with respect to materials and 55% complete with
respect to conversion. At the end of March, 30,000 additional units were in process in
the production department and were 100% complete with respect to materials and 30%
complete with respect to conversion. Compute the number of physical units transferred
to finished goods.
A.110,000.
B.135,000.
C.105,000.
D.165,000.
E.144,000.
28) Interest expense is not:
A.Incurred on current liabilities.
B.Likely to stay the same when sales change.
C.A fixed expense.
D.Likely to fluctuate when sales change.
E.A factor in determining a company’s borrowing risk.
29) A company that reports segment information had average total assets of $1,522,450
and total net income of $590,700. Segment A had average total assets of $927,800 and
segment operating income of $298,300. Segment B had average assets of $594,650 and
segment operating income of $292,400. The segment return on assets for Segment B is:
A.60.9%.
B.32.2%.
C.50.5%.
D.38.8%.
E.49.2%.
30) Using the following year-end information for Calvin’s Clothing, calculate the
current ratio and acid-test ratio for the business:
A.1.80 and 1
B.1.97 and 1.52
C.2.73 and 1.52
D.3.50 and 0.90
E.1.80 and 0.90
31) Explain how to calculate the price-earnings ratio and describe how it is used in
analysis of a company’s financial condition and performance.
32) The statement of cash flows is divided into three sections called the
_____________, _____________, and _______________ sections.
33) Prepare general journal entries for the following transactions for the current year:
34) Bannister invested $110,000 and Wilder invested $99,000 in a new partnership.
Their partnership agreement called for Wilder to receive a $70,000 annual salary
allowance. They also agreed to an annual interest allowance of 5% on the partners’
beginning-year capital balance, with the balance of income or loss to be divided
equally. Under this agreement, what are the income or loss shares of the partners if the
annual partnership income is $82,000?
35) The Skyview Company uses a sales journal, purchases journal, cash receipts
journal, cash disbursements journal, and general journal. They use the periodic
inventory method. The following sales and cash collections transactions occurred
during the month of December:
Record these transactions using the journals below.
36) A company manufactures two products. Each unit of product X requires 10 machine
hours and each unit of product Y requires 4 machine hours. The company’s productive
capacity is limited to 180,000 machine hours. Each unit of product X sells for $15 and
has variable costs of $7. Each unit of product Y sells for $8 and has variable costs of $3.
If the company can sell all that it produces of both products, what should the sales mix
be?
37) During the current year ended December 31, clients paid fees in advance for
accounting services amounting to $15,000. These fees were recorded in an account
called Unearned Accounting Fees. If $3,500 of these fees remains unearned on
December 31 of this year, present the December 31 adjusting entry to bring the
accounts up to date.
38) Identify the four steps in the budgetary control process.
39) The _________________ method of accounting for bad debts records the loss from
an uncollectible account receivable at the time it is determined to be uncollectible (and
not before).