1) The product cost concept includes the selling and administrative expenses in the cost
amount to which the markup is added to determine product price.
2) During deflationary periods, the use of the LIFO method of costing inventory will
result in a greater amount of net income than would result from the use of the FIFO
method of inventory costing.
3) After the goods are completed, their costs are transferred from Work in Process to
Finished Goods.
4) Money orders are considered cash.
5) A sale of $600 on account subject to a sales tax of 5% would increase account
receivable by $570.
6) A change in fixed costs as a result of increase in yearly insurance premium will
decrease the break-even point.
7) Average rate of return equals average investment divided by estimated average
annual income.
8) A responsibility center in which the department manager has responsibility for and
authority over costs in the department is termed a cost center.
9) If cash dividends of $145,000 were declared during the year and the decrease in
dividends payable from the beginning to the end of the year was $7,000, the statement
of cash flows would report $152,000 in the financing activities section.
10) If the unit selling price is $40, the volume of sales is $3,000,000, sales at the
break-even point amount to $2,500,000, and the maximum possible sales are
$3,300,000, the margin of safety will be 12,500 units.
11) The independent auditor’s report does which of the following?
A.Describes that the common-sized statements are covered by the audit
B.Gives the auditor’s opinion regarding the fairness of the financial statements
C.Summarizes what the auditor did
D.States that the financial statements are effective
12) The following financial information was summarized from the accounting records
of Block Corporation for the current year ended December 31:
The net income for Block Corporation is:
A.$68,200
B.$44,700
C.$54,700
D.$54,900
13) Gross profit is equal to:
A.sales less (sales discounts and sales returns and allowances) plus cost of merchandise
sold
B.sales plus sales returns and allowances less sales discounts less cost of merchandise
sold
C.sales plus sales discounts less sales returns and allowances less cost of merchandise
sold
D.sales less (sales discounts and sales returns and allowances) less cost of merchandise
sold
14) If the rate of earnings is 10% and the cash to be received in two years is $10,000,
determine the present value amount, using the following partial table of present value of
$1 at compound interest.
A.$8,900
B.$8,260
C.$7,970
D.$9,090
15) Beginning inventory, purchases, and sales for Product XCX are as follows:
Assuming a periodic inventory system and the last-in, first-out method, determine (a)
the cost of the merchandise sold for the October 30 sale and (b) the inventory on
October 31 .
16) A company acquired mineral rights for $7,500,000. The mineral deposit is estimated
at 600,000 tons and during the year 100,000 tons were extracted and sold.
(a) Calculate depletion expense for the year.
(b) Show the effects of (a) on the accounts and the financial statements of the company.
(c) What is the book value of the mineral rights at the end of the current year?
17) The exclusive right to use a certain name or symbol is called a:
A.franchise
B.patent
C.trademark
D.copyright
18) Which of the following businesses use a premium-price emphasis?
A.Value City Furniture selling furniture at affordable prices
B.Tommy Hilfiger selling products that have a unique image
C.Wal-Mart reselling standardized products
D.Southwest Airlines providing standardized services
19) The market interest rate related to a bond is also called the:
A.stated interest rate
B.effective interest rate
C.contract interest rate
D.straight-line rate
20) The bank statement for Marley Co. indicates a cash balance of $10,000.50 on June
30, 2013 . The cash account in Marley’s records had a balance of $4,677.10. Illustrate
the adjustments to the accounts and their effect on Marley’s financial statements, based
on the following reconciling items:
(a) Cash sales of $342 had been erroneously recorded in the cash receipts journal as
$324.
(b) Deposits in transit not recorded by bank, $700.
(c) Bank debit memorandum for service charges, $30.
(d) Bank credit memorandum for note collected by bank, $2,050, including $50 interest.
(e) Bank debit memorandum for $207.40 NSF (not sufficient funds) check from Alice
Martin, a customer.
(f) Checks outstanding, $4,192.80.
21) How do the responsibilities of a manager in an investment center compare to the
responsibilities of managers in a cost or profit center?
A.Investment center managers have more authority and responsibility than managers of
a cost or profit center
B.Investment center managers have more authority and responsibility than managers of
a cost center but less than managers of a profit center
C.Investment center managers have about the same authority and responsibility as
managers of a cost or profit center
D.Investment center managers have more authority and responsibility than managers of
a profit center but less than managers of a cost center
22) Production and sales estimates for June are as follows:
The budgeted total sales for June is:
A.$300,000
B.$337,500
C.$312,500
D.$287,500
23) In general, present value methods of analyzing capital investments are more
desirable than methods ignoring present values because:
A.the calculations in methods that ignore present value are more complex than those in
methods using present value
B.the present value methods consider that a dollar today is worth more than a dollar in
the future due to the potential earning power of that dollar
C.the calculations in methods that consider present value are less complex than those
methods ignoring present value
D.the present value methods consider that a dollar in the future is worth more than a
dollar today due to the potential earning power of that dollar
24) A company sold office furniture costing $16,500 with accumulated depreciation of
$14,000 for $1,800 cash. The entry to record the sale would include:
A.a loss for $700
B.an increase in accumulated depreciation for $14,000
C.a total decrease in office furniture for $2,500
D.a decrease in cash for $1,800
25) The number of times interest charges are earned is computed as:
A.net income plus interest expense, divided by interest expense
B.income before income tax plus interest expense, divided by interest expense
C.net income divided by interest expense
D.income before income tax divided by interest expense
26) Which method of evaluating capital investment proposals uses the concept of
present value to compute a rate of return?
A.Average rate of return
B.Internal rate of return
C.Cash payback period
D.Accounting rate of return
27) Costs that remain constant on a per-unit level as the level of activity changes are
called:
A.fixed costs
B.mixed costs
C.opportunity costs
D.variable costs
28) The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable
factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of
80,000 machine hours. The standard cost and the actual cost of factory overhead for the
production of 15,000 units during August were as follows:
What is the amount of the fixed factory overhead volume variance?
A.$26,000 unfavorable
B.$12,000 favorable
C.$26,000 favorable
D.$12,000 unfavorable
29) Updating accrual accounting records prior to preparing financial statements is
called:
A.the closing process
B.converting to cash basis accounting
C.the adjustment process
D.going concern adjustments
30) What is the term applied to the excess of net revenue from sales over the cost of
merchandise sold?
A.Gross profit
B.Income from operations
C.Net income
D.Gross sales
31) Identify each of the following as related to (a) the control environment, (b) risk
assessment, or (c) control procedures.
(1) Mandatory vacations
(2) Personnel policies
(3) Report of outside consultants on future market changes
32) Merchandise not sold at the end of the period is reported as:
A.cost of goods sold
B.old stock
C.merchandise inventory
D.net purchases
33) For EFG Co., the transaction “purchase of store equipment with cash” would:
A.increase total assets
B.decrease total assets
C.have no effect on total assets
D.decrease stockholders equity
34) A series of budgets for varying rates of activity is termed a(n):
A.flexible budget
B.variable budget
C.master budget
D.activity budget
35) XYZ Co. received $3,000 in payments from clients for services billed in a previous
month. Which accounts will be affected and by what amounts under the accrual basis of
accounting?
A.Cash will increase by $3,000 and accounts receivable decrease by $3,000
B.Cash will increase by $3,000 and revenues will increase $3,000
C.Accounts receivable will increase by $3,000 and revenue will increase by $3,000
D.Accounts receivable will increase by $3,000 and cash will increase by $3,000
36) Applying of factory overhead costs to jobs would decrease:
A.Factory Overhead
B.Wages Payable
C.Work-in-Process
D.Cost of Goods Sold
37) Prepare the Current Assets section of a balance sheet using some or all of the
following accounts:
Cash
Property, Plant, and Equipment
Accounts Receivable
Notes Receivable–90-day note
Merchandise Inventory
Allowance for Doubtful Accounts
Interest Receivable
Prepaid Advertising
Sales Returns and Allowances
38) Trapp Co. was organized on August 1 of the current year. Projected sales for the
next three months are as follows:
The company expects to sell 40% of its merchandise for cash. Of the sales on account,
one third are expected to be collected in the month of the sale and the remainder in the
following month.
Prepare a schedule indicating cash collections of accounts receivable for August,
September, and October.
39) What is a special-purpose cash fund? What is its purpose? Give two examples.
40) What is the basic accounting equation, and which financial statement is prepared
from this equation?
41) June Co. is considering the following alternative plans for financing the company:
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing
plans, assuming income before bond interest and income tax is $1,000,000.
42)
Refer to Cokes Statement of Cash Flows. What amount of depreciation and
amortization did Coke record in 2008?