1) A company’s prime costs total $4,500,000 and its conversion costs total $5,500,000.
If direct materials are $2,000,000, calculate the overhead costs:
A.$2,500,000.
B.$3,500,000.
C.$2,000,000.
D.$1,000,000.
E.$3,000,000.
2) Hunter Sailing Company exchanged an old sailboat for a new one. The old sailboat
had a cost of $160,000 and accumulated depreciation of $100,000. The new sailboat
had an invoice price of $270,000. Hunter received a trade in allowance of $70,000 on
the old sailboat, which meant the company paid $200,000 in addition to the old sailboat
to acquire the new sailboat. If this transaction lacks commercial substance, what
amount of gain or loss should be recorded on this exchange?
A.$0 gain or loss.
B.$10,000 gain.
C.$10,000 loss.
D.$60,000 loss.
E.$70,000 loss.
3) On December 1, Casualty Insurance Company borrowed $50,000 at a 6.0% interest
rate from One Mutual Bank. The note payable plus interest will not be paid until April 1
of the following year. The company’s annual accounting period ends on December 31.
The adjusting entry needed on December 31 is:
A.No entry required.
B.Debit Interest Expense, $250; credit Interest Payable, $250.
C.Debit Interest Expense, $250; credit Note Payable, $250.
D.Debit Interest Payable, $1,000; credit Interest Expense, $1,000.
E.Debit Interest Expense, $1,000; credit Interest Payable, $1,000.
4) Poe Company is considering the purchase of new equipment costing $80,000. The
projected annual cash inflows are $30,200, to be received at the end of each year. The
machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on
its investments. The present value of an annuity of 1 and present value of an annuity for
different periods is presented below. Compute the net present value of the machine.
A.$(15,731).
B.$(4,896).
C.$15,731.
D.$4,896.
E.$32,334.
5) For the year ended December 31, a company has revenues of $317,000 and expenses
of $196,000. The owner withdrew $50,000 during the year. The balance in the owner’s
capital account before closing is $81,000. Which of the following entries would be used
to close the withdrawal account?
A.Debit Income Summary $50,000; credit Owner’s, Capital $50,000.
B.Debit Owner’s Capital $50,000; credit Owner Withdrawals $50,000.
C.Debit Owner’s Capital $81,000; credit Income Summary $81,000.
D.Debit Income Summary $81,000, credit Owner’s Withdrawals $81,000.
E.Debit Owner’s Withdrawals $50,000; credit Owner’s Capital $50,000.
6) Allocating joint costs to products using a value basis method is based on their
relative:
A.Sales values.
B.Direct costs.
C.Gross margins.
D.Total costs.
E.Variable costs.
7) Managerial accounting is different from financial accounting in that:
A.Managerial accounting is more focused on the organization as a whole and financial
accounting is more focused on subdivisions of the organization.
B.Managerial accounting never includes nonmonetary information.
C.Managerial accounting includes many projections and estimates whereas financial
accounting has a minimum of predictions.
D.Managerial accounting is used extensively by investors, whereas financial accounting
is used only by creditors.
E.Managerial accounting is mainly used to set stock prices.
8) A company issued 10-year, 7% bonds with a par value of $100,000. The company
received $96,526 for the bonds. Using the straight-line method, the amount of interest
expense for the first semiannual interest period is:
A.$3,326.
B.$3,500.00.
C.$3,673.70.
D.$7,000.00.
E.$7,347.40.
9) The ability to provide financial rewards sufficient to attract and retain financing is
called:
A.Liquidity and efficiency.
B.Solvency.
C.Profitability.
D.Market prospects.
E.Creditworthiness.
10) Investments in trading securities:
A.Include only equity securities.
B.Are reported as current assets.
C.Include only debt securities.
D.Are reported at their cost, no matter what their market value.
E. Are long-term investments.
11) MacKenzie Company sold $300 of merchandise to a customer who used a Regional
Bank credit card. Regional Bank deducts a 1.5% service charge for sales on its credit
cards and credits MacKenzie’s account immediately when sales are made. The journal
entry to record this sale transaction would be:
A.Debit Cash of $300 and credit Sales $300.
B.Debit Cash of $300 and credit Accounts Receivable $300.
C.Debit Accounts Receivable $300 and credit Sales $300.
D.Debit Cash $295.50; debit Credit Card Expense $4.50 and credit Sales $300.
E.Debit Cash $295.50 and credit Sales $295.50.
12) Based on the information in the following income statement and balance sheet for
Monterey Corporation, determine the cash flows from operating activities using the
direct method.
13) A company wants to decrease its $200 petty cash fund to $175. The entry to reduce
the fund is:
A.Debit Cash Over and Short for $25; credit Petty Cash $25.
B.Debit to Cash $25; credit Petty Cash $25.
C.Debit Miscellaneous Expenses $25; credit Cash $25.
D.Debit Petty Cash for $175; debit Cash Over and Short $25; credit Cash $200.
E.Debit Petty Cash $25; credit Cash $25.
14) Which of the following would be classified as a natural resource?
A.Patent on an oil extraction process.
B.Land held as an investment.
C.Timber purchased by a lumber yard.
D.Diamond mine.
E. Goodwill.
15) The following information describes a company’s usage of direct labor in a recent
period. The direct labor efficiency variance is:
A.$29,000 unfavorable.
B.$29,000 favorable.
C.$22,500 unfavorable.
D.$52,500 favorable.
E.$52,500 unfavorable.
16) The accountant for Crusoe Company is preparing the company’s statement of cash
flows for the fiscal year just ended. The following information is available:
The amount of cash dividends paid during the year would be:
A.$48,000.
B.$46,000.
C.$8,000.
D.$64,000.
E.$44,000.
17) A company had total sales of $600,000, net sales of $550,000, and an average
accounts receivable of $95,000. Its accounts receivable turnover equals:
A.6.1
B.63.0
C.54.8
D.1.1
E.6.3
18)
19) In a job order costing system, raw materials requisitioned as direct materials are
debited to __________________; indirect materials are debited to ________________.
20) Boron Company is authorized to issue 50,000 shares of $50 par value, 8%,
cumulative, fully participating preferred stock, and 750,000 shares of $5 par value
common stock. Prepare journal entries to record the following selected transactions that
occurred during the company’s first year of operations:
21) A company’s inventory records indicate the following data for the month of January:
If the company uses the last-in, first-out perpetual inventory system, what is the amount
of cost of goods sold for January?
22) When a partner invests in a partnership, his/her capital account is __________ for
the invested amount.
23) A corporation had stockholders’ equity on January 1 as follows: Common Stock, $1
par value, 1,500,000 shares authorized, 600,000 shares issued; Paid-in Capital in Excess
of Par Value, Common Stock, $1,100,000; Retained Earnings, $2,300,000. Prepare
journal entries to record the following transactions:
24) The stockholders’ equity section of a company’s year-end balance sheet follows:
The preferred stock has a call price of $51.50 per share plus dividends in arrears. Only
one year of dividends is in arrears. Calculate the book value per (1) preferred share, and
(2) common share.
25) Generalware, Inc. sells a single product and reports the following results from sales
of 100,000 units:
A foreign company wants to purchase 15,000 units. However, they are willing to pay
only $36 per unit for this one-time order. They also agree to pay all freight costs. To fill
the order, Generalware will incur normal production costs. Total fixed overhead will
have to be increased by $60,000 to pay for equipment rentals and insurance. No
additional administrative costs (variable or fixed) will be incurred in association with
this special order.
Required:
(1) Should Generalware accept the order if it does not affect regular sales? Explain.
(2) Assume that Generalware can accept the special order only by giving up 5,000 units
of its normal sales. Should the company accept the special order under these
circumstances?
26) Identify the advantages and disadvantages of bond financing.
27) What is a bond? Identify and discuss the different characteristics and features bonds
may possess.