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1) The budget is developed within the framework of a sales forecast.
2) The flow of costs is essentially the same in job order and process cost accounting.
3) Financing activities include the obtaining of cash from issuing debt and repaying the
amounts borrowed.
4) All major financing and investing activities affect cash.
5) Generally accepted accounting principles require that the direct write-off method be
used for financial reporting purposes if it is also used for tax purposes.
6) Income tax expense usually appears as a separate section on a corporation income
statement.
7) The Accumulated Depreciation account is a contra asset account that is reported on
the balance sheet.
8) In a period of falling prices, the LIFO method results in a lower cost of goods sold
than the FIFO method.
9) In concept, the estimating of Warranty Expense when products are sold under
warranty is similar to the estimating of Bad Debt Expense based on credit sales.
10) The longer the budget period, the more reliable the estimates of future outcomes.
11) When making a payment from the petty cash fund for postage stamps, the following
journal entry is made.
a.SuppliesXXXX
Petty CashXXXX
b.Postage ExpenseXXXX
Petty CashXXXX
c.Miscellaneous ExpenseXXXX
Petty CashXXXX
d.No entry is made.
12) A number in the reference column in a general journal indicates
a.that the entry has been posted to a particular account
b.the page number of the journal
c.the dollar amount of the transaction
d.the date of the transaction
13) In the bottom portion of the statement of cash flows worksheet,
a.inflows of cash are debits in the reconciling columns
b.outflows of cash are debits in the reconciling columns
c.information pertaining to investing and financing activities only is entered
d.only significant noncash transactions are entered
14) The partnership form of business is
a.restricted to law and medical practices
b.restricted to firms having fewer than 10 partners
c.not restricted to any particular type of business
d.most often used in relatively large companies
15) Which of the following transactions would not be classified as a financing activity?
a.Purchase of treasury stock
b.Payment of dividends
c.Issuance of bonds at a discount
d.Purchase of a long-term investment in bonds
16) If a company fails to record estimated bad debts expense,
a.cash realizable value is understated
b.expenses are understated
c.revenues are understated
d.receivables are understated
17) Which permits partial derecognition of receivables?
GAAPIFRS
a.yesno
b.yesyes
c.nono
d.noyes
18) The income statement for Manassa Inc. shows income before income taxes
$1,600,000, income tax expenses $820,000, and net income $780,000. If Manassa
declared $300,000 of cash dividends on preferred stock and has 200,000 shares of
common stock outstanding throughout the year, earnings per share is:
a.$8.00
b.$2.40
c.$1.50
d.$3.90
19) What do the following classes of ratios measure? (a)Liquidity ratios. (b)Profitability
ratios.
(c)Solvency ratios.
20) In the formula for ROI, idle plant assets are
a.included in the calculation of controllable margin
b.included in the calculation of operating assets
c.excluded in the calculation of operating assets
d.excluded from total assets
21) Land acquired from the issuance of common stock is reported
a.as a financing activity
b.as an investing activity
c.as an operating activity
d.in a separate schedule at the bottom of the statement of cash flows
22) Fugazi City College sold season tickets for the 2014 football season for $240,000. A
total of 8 games will be played during September, October and November. In
September, two games were played. In October, three games were played. The balance
in Unearned Ticket Revenue at October 31 is
a.$0
b.$60,000
c.$90,000
d.$150,000
23) Jameson Company desires net income of $1,100,000 when it has $2,500,000 of
fixed costs and variable costs of 60% of sales. Required sales equals:
a.$2,750,000
b.$6,000,000
c.$6,250,000
d.$9,000,000
24) Which of the following is not viewed as part of assigning manufacturing costs in a
job order cost system?
a.Manufacturing overhead is applied
b.Raw materials are used
c.Manufacturing overhead is incurred
d.Completed goods are recognized
25) Which of the following items will increase inventoriable costs for the buyer of
goods?
a.Purchase returns and allowances granted by the seller
b.Purchase discounts taken by the purchaser
c.Freight charges paid by the seller
d.Freight charges paid by the purchaser
26) Cash equivalents include each of the following except
a.bank certificates of deposit
b.money market funds
c.petty cash
d.U.S. Treasury bills
27) The statement of cash flows is the only required financial statement that is not
prepared from an adjusted trial balance. (a) What are the sources of information for
preparing a statement of cash flows? (b) Explain how the accrual basis of accounting
affects the statement of cash flows.
28) A company incurred costs of $8,000 in producing 1,000 gallons of Apex. Apex can
be sold for $24 per gallon now or processed further at a cost of $14,000 and then sold
for $40 per gallon. Which one of the following actions would be most advantageous to
the company and what is the economic effect?
a.Sell Apex now; the company would be $2,000 better off
b.Process Apex further; the company would be $16,000 better off
c.Sell Apex now; the company would be $10,000 better off
d.Process Apex further; the company would be $2,000 better off
29) Which of the following statements concerning bonds is not a true statement?
a.Bonds are generally sold through an investment company
b.The bond indenture is prepared after the bonds are printed
c.The bond indenture and bond certificate are separate documents
d.The trustee keeps records of each bondholder
30) As of December 31, 2014, Calexico Company has assets of $42,000 and owner's
equity of $20,000. What are the liabilities for Calexico Company as of December 31,
2014?
a.$22,000
b.$20,000
c.$42,000
d.$62,000
31) Each of the following is correct regarding treasury stock except that it has been
a.issued
b.fully paid for
c.reacquired
d.retired
32) Lionel Company has beginning work in process inventory of $220,000 and total
manufacturing costs of $950,000. If cost of goods manufactured is $940,000, what is
the cost of the ending work in process inventory?
a.$210,000
b.$230,000
c.$240,000
d.$206,000
33) Which of the following is a true statement about manual and electronic accounting
systems?
a.Few small companies begin with manual systems
b.The design and structure of manual and electronic systems are essentially the same
c.Many companies convert from electronic to manual systems
d.The design and structure of manual and electronic systems are fundamentally
different
34) GAAPs definition for inventory and provision of guidelines for inventory
accounting, as compared to IFRS are:
Definitions for InventoryGuideliness for inventory accounting
a.essentially similarmore detailed
b.essentially differentmore detailed
c.essentially similarless detailed
d.essentially differentless detailed
35) The most common budget period is
a.one month
b.three months
c.six months
d.one year
36) Myles Manufacturing Company's accounting records reflect the following
inventories:
Dec. 31, 2014Dec. 31, 2013
Raw materials inventory$620,000$520,000
Work in process inventory600,000220,000
Finished goods inventory380,000100,000
During 2014, $900,000 of raw materials were purchased, direct labor costs amounted to
$1,000,000, and manufacturing overhead incurred was $960,000.
If Myles Manufacturing Company's cost of goods manufactured for 2014 amounted to
$2,760,000, its cost of goods sold for the year is
a.$2,400,000
b.$2,480,000
c.$2,300,000
d.$2,660,000
37) Allowing only designated personnel to handle cash receipts is an example of
a.establishment of responsibility
b.segregation of duties
c.documentation procedures
d.independent internal verification
38) For the income statement, IFRS requires
a.single-step approach
b.multiple-step approach
c.single-step approach or multiple-step approach
d.no specific income statement approach
39) Romanoff Industries had the following inventory transactions occur during 2014:
UnitsCost/unit
2/1/14Purchase54$45
3/14/14Purchase93$47
5/1/14Purchase66$49
The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the companys gross profit using LIFO?
(rounded to whole dollars)
a.$3,318
b.$3,552
c.$6,948
d.$7,182
40) Which of the following entries made to record the payment of $1,000 on account
will cause the trial balance to be out of balance?
a.Cash is debited for $1,000 and Service Revenue is credited for $1,000
b.Cash is debited for $100 and Accounts Payable is credited for $100
c.Both Cash and Accounts Payable are credited for $1,000
d.A transaction is not recorded
41) Equipment was purchased for $300,000. Freight charges amounted to $14,000 and
there was a cost of $40,000 for building a foundation and installing the equipment. It is
estimated that the equipment will have a $60,000 salvage value at the end of its 5-year
useful life. Depreciation expense each year using the straight-line method will be
a.$70,800
b.$58,800
c.$49,200
d.$48,000
42) The cost of land does not include
a.real estate brokers' commission
b.annual property taxes
c.accrued property taxes assumed by the purchaser
d.title fees
43) Sargent Corporation bought equipment on January 1, 2014 . The equipment cost
$360,000 and had an expected salvage value of $60,000. The life of the equipment was
estimated to be 6 years. The depreciable cost of the equipment is
a.$360,000
b.$300,000
c.$200,000
d.$50,000
44) Burr, Inc. provided the following information:
July August
Projected sales$220,000$260,000
Projected merchandise purchases$150,000$180,000
Burr estimates that it will collect 40% of its sales in the month of sale, 35% in the
month after the sale, and 22% in the second month following the sale. Three percent of
all sales are estimated to be bad debts.
Burr pays 30% of merchandise purchases in the month purchased and 70% in the
following month.
General operating expenses are budgeted to be $20,000 per month of which
depreciation is $2,000 of this amount. Burr pays operating expenses in the month
incurred.
Burr makes loan payments of $3,000 per month of which $400 is interest and the
remainder is principal.
Instructions
Calculate Burr's budgeted cash disbursements for August.
45) Gross profit is obtained by subtracting ________________ from
________________.
46) Prepare the entry to replenish the $200 petty cash fund of Erin Company, assuming
the fund has receipts for: freight-out $60, postage $105, and miscellaneous expense
$25. The fund contains $8 in cash.
47) Rob Rote, the president and CEO of RRR Waste Management, was recently
hospitalized, suffering from exhaustion and a heart ailment. Immediately prior to his
hospitalization, RRR had experienced a sharp decline in its stock price, and trading
activity became almost nonexistent. The primary reason for this was concern expressed
in the media over a new untested waste management system implemented by the
company. Mr. Rote had been unwilling to submit the procedure to testing before
implementation, but he reluctantly agreed to limited tests after the system was
operational. No problems have been identified by the tests to date.
The other members of management called a meeting to determine what they should do.
Randy Smith, the marketing manager, suggested that the company purchase a large
number of shares of treasury stock. In that way, investors might notice that activity had
picked up, and might decide to buy some more shares. This plan would use up most of
the company's available cash, so that there will be no money available for a cash
dividend. RRR has paid cash dividends every quarter for over ten years.
Required:
1>Is Mr. Smiths suggestion ethical? Explain.
2>Is it ethical to discontinue the cash dividend? Explain.
48) Identify at least six characteristics of the corporate form of business organization.
Contrast each one with the partnership form of organization.
49) The transactions of Medina Information Service are recorded in the general journal
below. You are to post the journal entries to the accounts in the general ledger. After all
entries have been posted, you are to prepare a trial balance on the form provided.
General JournalJ1
DateAccount Titles and ExplanationRef.DebitCredit
2014
Sept.1Cash25,000
Owners Capital25,000
(Invested cash in business)
4Equipment30,000
Cash10,000
Notes Payable20,000
(Paid cash and issued 2-year, 9%, note for
equipment)
8Rent Expense1,000
Cash1,000
(Paid September rent)
15Prepaid Insurance400
Cash400
(Paid one-year liability insurance)
18Cash2,500
Service Revenue2,500
(Received cash for delivery services)
20Salaries and Wages Expense500
Cash500
(Paid salaries for current period)
25Utilities Expense100
Accounts Payable100
(Received a bill for September utilities)
30Owners Drawings1,500
Cash1,500
(Withdrew cash for personal use)
30Accounts Receivable4,000
Service Revenue4,000
(Billed customer for delivery service)
General Ledger
CashAccount No. 101
DateExplanationRef.DebitCreditBalance
Accounts ReceivableAccount No. 112
DateExplanationRef.DebitCreditBalance
Prepaid InsuranceAccount No. 130
DateExplanationRef.DebitCreditBalance
EquipmentAccount No. 155
DateExplanationRef.DebitCreditBalance
Accounts PayableAccount No. 201
DateExplanationRef.DebitCreditBalance
Notes PayableAccount No. 205
DateExplanationRef.DebitCreditBalance
Owners CapitalAccount No. 301
DateExplanationRef.DebitCreditBalance
Owners DrawingAccount No. 306
DateExplanationRef.DebitCreditBalance
Service RevenueAccount No. 400
DateExplanationRef.DebitCreditBalance
Rent ExpenseAccount No. 719
DateExplanationRef.DebitCreditBalance
Salaries and Wages ExpenseAccount No. 726
DateExplanationRef.DebitCreditBalance
Utilities ExpenseAccount No. 735
DateExplanationRef.DebitCreditBalance
MEDINA INFORMATION SERVICE
Trial Balance
September 30, 2012
AccountsDebitCredit
50) In September 2014, the budget committee of Cole Company assembles the
following data:
1>Expected Sales
October$1,800,000
November1,700,000
December1,600,000
2>Cost of goods sold is expected to be 60% of sales.
3>Desired ending merchandise inventory is 25% of the next month's cost of goods sold.
4>The beginning inventory at October 1 will be the desired amount.
Instructions
Prepare the budgeted income statement for October through gross profit on sales,
including a cost of goods sold schedule.
51) Sandhurst Widget Company has the following production data for March.
Instructions
Compute the physical units for March.
52) The accounts receivable ______________ provides detailed information about
customer accounts which is summarized in one ______________ account in the general
ledger.
