1) The interest on a 6%, 60-day note for $5,000 is $300.
2) Factory overhead is applied to production using a predetermined overhead rate.
3) The payback method can be used only when net cash inflows are the same for each
period.
4) The budgeted direct materials purchases is normally computed as the sum of (1) the
materials for production and (2) the desired ending inventory.
5) A prior period adjustment should be reported as an adjustment to the retained
earnings balance at the beginning of the period in which the adjustment was made.
6) A bottleneck happens when a key piece of manufacturing machinery can produce
1000 units per hour and demand for the product supports a production rate of 1200 units
per hour.
7) Office Equipment is an example of a current asset account.
8) The double-entry accounting system records each transaction twice.
9) Cash and other assets that may reasonably be expected to be realized in cash, sold, or
consumed through the normal operations of a business, usually longer than one year,
are called current assets.
10) The post-closing trial balance will generally have fewer accounts than the trial
balance.
11) Each account in the cost ledger in a job order system is called a job cost sheet.
12) Direct materials and direct labor costs are examples of variable costs of production.
13) Internal control is enhanced by separating the control of a transaction from the
record-keeping function.
14) In a pull manufacturing system, raw materials are released to production based on
actual customer orders.
15) Current position analysis indicates a company’s ability to liquidate current
liabilities.
16) Bondholders are creditors of the issuing corporation.
17) If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is
zero when sales revenue is $930,000.
18) Planning for capital expenditures is necessary for all of the following reasons
except:
A.machinery and other fixed assets wear out
B.expansion may be necessary to meet increased demand
C.amounts spent for office equipment may be immaterial
D.fixed assets may fall below minimum standards of efficiency
19) If there is a balance in the unearned subscriptions account after adjusting entries are
made, it represents a(n)
A.deferral
B.accrual
C.dividend
D.revenue
20) When preparing the retained earnings statement, the beginning retained earnings
balance can always be found
A.in the Income Statement columns of the work sheet
B.in the statement of cash flows
C.in the general ledger
D.in the Adjustments columns of the work sheet
21) Match the value to the appropriate account. For the year ended 2012 ABC had the
following transactions:
– issued 10,000 shares of $2.00 par value common stock for $12.00 per share
– issued 3,000 shares of $50 par value 6% preferred stock for $70 per share
– purchased 1000 shares of previously issued common stock for $15.00 per share
-reported net income of $200,000
– declared and paid a total dividend of $40,000
Assume that retained earnings had a beginning balance of $75,000.
1>15,000 A.Preferred Stock
2>60,000 B. Additional Paid in Capital – Common Stock
3>550,000 C. Additional Paid in Capital – Preferred Stock
4>20,000 D. Common Stock
5>100,000 E. Retained Earnings
6>330,000 F. Total Paid in Capital
7>$150,000 G. Total Stockholders Equity
8>235,000 H. Treasury Stock
22) Prepare entries to record the following:
(a) Issued 1,000 shares of $10 par common stock at $59 for cash.
(b) Issued 1,400 shares of common stock in exchange for equipment with a fair market
price of $60,000.
(c) Purchased 100 shares of treasury stock at $32.
(d) Sold 100 shares of treasury stock at $42.
23) Accompanying the bank statement was a debit memo for an NSF check received
from a customer. What entry is required in the company’s accounts?
A.debit Other Income; credit Cash
B.debit Cash; credit Other Income
C.debit Cash; credit Accounts Receivable
D.debit Accounts Receivable; credit Cash
24) Which of the following is the principle reason for preparing managerial accounting
reports?
A.Usefulness to management
B.Cost of preparation
C.Clarity
D.GAAP
25) Net income will result when
A.revenues (credits) > expenses (debits)
B.revenues (credits) < expenses (debits)
C.expenses (credits) = revenues (debits)
D.expenses (debits) > revenues (credits)
26) Which of the following types of transactions would be reported as a cash flow from
investing activity on the statement of cash flows?
A.issuance of bonds payable
B.issuance of capital stock
C.purchase of treasury stock
D.purchase of noncurrent assets
27) If fixed costs are $256,000, the unit selling price is $36, and the unit variable costs
are $20, what is the break-even sales (units)?
A.12,800 units
B. 4,571 units
C.16,000 units
D.7,111 units
28) An analysis of a proposal by the net present value method indicated that the present
value of future cash inflows exceeded the amount to be invested. Which of the
following statements best describes the results of this analysis?
A.The proposal is desirable and the rate of return expected from the proposal exceeds
the minimum rate used for the analysis.
B.The proposal is desirable and the rate of return expected from the proposal is less
than the minimum rate used for the analysis.
C.The proposal is undesirable and the rate of return expected from the proposal is less
than the minimum rate used for the analysis.
D.The proposal is undesirable and the rate of return expected from the proposal exceeds
the minimum rate used for the analysis.
29) Which of the following is (are) objective(s) of just-in-time (JIT) manufacturing?
A.eliminating waste
B.increasing inventory levels
C.increased number of inspections
D.all of the above
30) Clifford Moore purchased $15,000 of Star Tech stock for cash. Star Tech would
A.increase Assets (Cash) and increase Liabilities (Accounts Payable)
B.increase Assets (Cash) and increase Stockholders Equity (Capital Stock)
C.Increase Assets (Accounts Receivable) and decrease Liabilities (Accounts Payable)
D.Increase Assets (Cash) and increase Assets (Accounts Receivable)
31) Which method for evaluating capital investment proposals reduces the expected
future net cash flows originating from the proposals to their present values and
computes a net present value?
A.Net present value
B.Average rate of return
C.Internal rate of return
D.Cash payback
32) Residual value is also known as all of the following except
A.scrap value
B.trade in value
C.salvage value
D.net book value
33) Expenses are recorded when
A.cash is paid for services rendered
B.a bill is received in advance of services rendered
C.assets are used in the process of earning revenue
D.none of these
34) A company records their inventory purchases at standard cost but also records
purchase price variances. The company purchased 5,000 widgets $8.00. The standard
cost for the widgets is $7.60. Which of the following would be included in the journal
entry?
A.$38,000 Debit to Accounts Payable
B.$ 2,000 Credit to Direct Materials Price Variance
C.$ 2,000 Debit to Accounts Payable
D.$ 2,000 Debit to Direct Materials Price Variance
35) Which of the following accounts will be closed to the retained earnings account at
the end of the fiscal year?
A.Rent Expense
B.Fees Earned
C.Income Summary
D.Depreciation Expense
36) The independent auditor’s report does which of the following?
A.describes which financial 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 were presented on time
37) The method of accounting for investments in equity securities in which the investor
records its share of periodic net income of the investee is the
A.cost method
B.market method
C.income method
D.equity method
38) Using the perpetual inventory system, journalize the entries for the following
selected transactions:
(a) Sold merchandise on account, for $12,000. The cost of the merchandise sold was
$6,500.
(b) Sold merchandise to customers who used MasterCard and VISA, $9,500. The cost
of the merchandise sold was $5,300.
(c) Sold merchandise to customers who used American Express, $2,900. The cost of the
merchandise sold was $1,700.
(d) Paid an invoice from First National Bank for $385, representing a service fee for
processing MasterCard and VISA sales.
(e) Received $4,325 from American Express Company after a $115 collection fee had
been deducted.
39) Based on the following information, compute (a) Inventory turnover; (b) Average
daily cost of merchandise sold using a 365 day year; and (c) Number of days sales in
inventory.
40) Classify the following costs as either a product cost or a period cost:
a) direct materials used
b) factory utilities
c) salespersons commissions
d) salary of plant manager
e) indirect materials used
f) depreciation on store equipment
g) indirect labor incurred
h) advertising expense
i) direct labor incurred
j) factory machinery repairs and maintenance
k) _____________ depreciation on factory machinery
l) plant insurance expired
41) Standard costs are used in companies for a variety of reasons. Which of the
following is not one of the benefits for using standard costs?
A.Used to indicate where changes in technology and machinery need to be made
B.Used to identify inventory
C.Used to plan direct materials, direct labor, and factory factory overhead
D.Used to control costs
42) Ratchford Clocks manufactures alarm clocks and wall clocks and allocates
overhead based on direct labor hour. The production process is set up in three
departments: assembly, finishing, and calibrating. The following is information
regarding the direct labor used to produce one unit of the two clocks:
The budget includes the following factory overhead by department:
Ratchford Clocks is planning to manufacture 50,000 alarm clocks and 10,000 wall
clocks.
(a) Determine the total number of hours that will be needed by department.
(b) Determine the factory overhead rate by department using the multiple production
department factory overhead rate method.
(c) Determine the amount of factory overhead to be allocated to each unit of alarm
clocks and wall clocks.
(d) Determine the amount of total factory overhead to be allocated to the alarm clocks
and wall clocks.
43) Which of the following applications of the rules of debit and credit is true?
A.decrease Prepaid Insurance with a credit and the normal balance is a credit
B.increase Accounts Payable with a credit and the normal balance is a debit
C.increase Supplies Expense with a debit and the normal balance is a debit
D.decrease Cash with a debit and the normal balance is a credit
44) Which of the following items should not be included in the cost of ending
merchandise inventory?
A.purchased units in transit, shipped FOB shipping point
B.purchased units in transit, shipped FOB destination
C.units on hand in the warehouse
D.sold units in transit, not invoiced and shipped FOB destination
45) The work sheet at the end of July has $5,950 in the Balance Sheet credit column for
Accumulated Depreciation. The work sheet at the end of August has $7,600 in the
Balance Sheet credit column for Accumulated Depreciation. What was the amount of
the depreciation expense adjustment for the month of August?
A.amount can not be determined
B.$7,600
C.$5,950
D.$1,650
46) The Sharpe Company reports the following information for 2012:
Compute:
a) product costs
b) period costs
47) From the following data, determine for the current year the (a) rate earned on total
assets, (b) rate earned on stockholders’ equity, (c) rate earned on common stockholders’
equity, (d) earnings per share on common stock, (e) price-earnings ratio on common
stock, and (f) dividend yield on common stock. Assume that the current market price
per share of common stock is $25. (Present key figures used in your computations.)
Round percentage values to one decimal place, dollar values to two decimal places, and
other ratios to one decimal place.
48) Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the
year (before adjustment), and an analysis of customers’ accounts indicates uncollectible
receivables of $12,900. Which of the following entries records the proper adjustment
for Bad Debt Expense?
A.debit Bad Debt Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000
B.debit Allowance for Doubtful Accounts, $14,000; credit Bad Debt Expense, $14,000
C.debit Allowance for Doubtful Accounts, $11,800; credit Bad Debt Expense, $11,800
D.debit Bad Debt Expense, $11,800; credit Allowance for Doubtful Accounts, $11,800
49) Harper Company lends Hewell Company $40,000 on March 1, accepting a
four-month, 6% interest note. Harper Company prepares financial statements on March
31. What adjusting entry should be made before the financial statements can be
prepared?
A.Cash 200
Interest Revenue 200
B.Interest Receivable 800
Interest Revenue 800
C.Interest Receivable 200
Interest Revenue 200
D.Note Receivable 40,000 Cash 40,000
50) The process by which management plans, evaluates, and controls long-term
investment decisions involving fixed assets is called:
A.absorption cost analysis
B.variable cost analysis
C.capital investment analysis
D.cost-volume-profit analysis
51) A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day
period ending on that day. The last pay day of December is Friday, December 27.
Assuming the next pay period begins on Monday, December 30, journalize the
adjusting entry necessary at the end of the fiscal period (December 31).
52) The Owl Company produces and sells Product X at a total cost of $35 per unit, of
which $28 is product cost and $7 is selling and administrative expenses. In addition, the
total cost of $35 is made up of $24 variable cost and $11 fixed cost. The desired profit
is $6 per unit. Determine the mark up percentage on product cost.
53) Record the following transactions for Sparkys Pet Shop using the general journal
form provided below. Assume Sparkys uses a perpetual inventory system. Omit
transaction descriptions from entries:
54) A corporation was organized on January 1 of the current year, with an authorization
of 20,000 shares of $4 preferred stock, $12 par, and 100,000 shares of $3 par common
stock.
The following selected transactions were completed during the first year of operations:
Required: Journalize the transactions.
55) The following information is from Madison Corporations accounting records for
May 20XX. Check # 3269 was returned as a double payment and voided. Checks that
have not cleared the bank include 3252, 3260, and series 3275-3278.
In addition to the above list of the checks, Madison had check #2264 for $32.98 and
check #2655 for $45.99 outstanding previously that have not cleared.
1> Create an outstanding checks list for Madison at the end of May 20XX.
2> What is the total amount of checks that cleared the bank (written in May)?
56) Florida Keys Construction installs swimming pools. They calculate that warranty
obligations are 3% of gross sales. For the year just ending Florida Keys gross sales
were $1,450,000. Due to previous quarter recognitions, the Warranty Liability account
has a credit balance of $28,700. Determine the years total warranty liability and
journalize any necessary value to establish the years liability at December 31st.
Due to sales, $1,450,000, warranty liability is $43,500 ($1,450,000 3%). Since $28,700
has already been recognized, $14,800 (or $43,500 – $28,700) must still be recognized.
57) Based upon the following data estimate the cost of ending merchandise inventory:
58) Based on the following, what is free cash flow?
Operations includes $2,000 for depreciation. Investing includes the purchase of a
replacement asset for $100,000 and the sale of the one used in production, which is now
obsolete, for $70,000. Financing is made up of $70,000 of borrowing and $25,000 of
dividends paid.