1) Both callable and non-callable bonds can be purchased by the issuing corporation in
the open market.
2) A post-closing trial balance contains only asset and liability accounts.
3) In a perpetual inventory system, merchandise returned to vendors reduces the
merchandise inventory account.
4) When exchanging equipment, if the trade-in allowance is greater than the book value
a loss results.
5) Sales Discounts is a revenue account with a credit balance.
6) Direct labor costs are included in the conversion costs of a product.
7) The report on internal control required by the Sarbanes-Oxley Act of 2002 may be
prepared by either management or the companys auditors.
8) In computing the ratio of net sales to assets, long-term investments are excluded
from average total assets.
9) The proceeds of a discounted note are equal to the face value of the note.
10) When a portion of a bond issue is redeemed, a related proportion of the unamortized
premium or discount must be written off.
11) The selection of an inventory costing method has no significant impact on the
financial statements.
12) In a just-in-time system, processing functions are combined into work centers,
sometimes called departments.
13) The first budget to be prepared is usually the production budget.
14) If the activities causing overhead costs are different across different departments
and products, use of a plantwide factory overhead rate will cause distorted product
costs.
15) Costs of ending work in process inventory are included in the cost per equivalent
unit computation.
16) The entry to adjust the accounts for wages accrued at the end of the accounting
period is
A.debit Wages Payable; credit Wages Income
B.debit Wages Income; credit Wages Payable
C.debit Wages Payable; credit Wages Expense
D.debit Wages Expense; credit Wages Payable
17) Department B had 3,000 units in Work in Process that were 25% completed at the
beginning of the period at a cost of $12,500. 13,700 units of direct materials were added
during the period at a cost of $28,700. 15,000 units were completed during the period,
and 1,700 units were 95% completed at the end of the period. All materials are added at
the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710.
The number of equivalent units of production for the period for conversion if the
first-in, first-out method is used to cost inventories was:
A.14,365
B.13,615
C.12,000
D.15,865
18) Mia Enterprises sells a product for $90 per unit. The variable cost is $40 per unit,
while fixed costs are $75,000. Determine the (a) break-even point in sales units, and (b)
break-even point in sales units if the selling price increased to $100 per unit.
19) Standard and actual costs for direct materials for the manufacture of 1,000 units of
product were as follows:
Determine the (a) quantity variance, (b) price variance, and (c) total direct materials
cost variance.
20) Accrued salaries of $600 owed to employees for December 29, 30, and 31 are not
taken into consideration in preparing the financial statements for the year ended
December 31. Indicate which items will be erroneously stated, because of the error, on
(a) the income statement for the year and (b) the balance sheet as of December 31. Also
indicate whether the items in error will be overstated or understated.
21) A $150 petty cash fund has cash of $44 and receipts of $93. The journal entry to
replenish the account would include a
A.credit to Petty Cash for $49
B.debit to Cash for $93
C.debit to Cash Over and Short for $13
D.credit to Cash for $44
22) Materials used by Jefferson Company in producing Division C’s product are
currently purchased from outside suppliers at a cost of $10 per unit. However, the same
materials are available from Division A. Division A has unused capacity and can
produce the materials needed by Division C at a variable cost of $8.50 per unit. A
transfer price of $9.50 per unit is negotiated and 25,000 units of material are
transferred, with no reduction in Division A’s current sales.
How much would Division C’s income from operations increase?
A.$0
B.$75,000
C.$12,500
D.$50,000
23) Next years sales forecast shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12 per unit, respectively. The
desired ending inventory of Product A is 20% higher than its beginning inventory of
2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
Total budgeted sales of both products for the year would be:
A.$42,000
B.$200,000
C.$264,000
D.$464,000
24) The fiscal year selected by companies
A.is the same as the calendar year
B.begins with the first day of the month and ends on the last day of the twelfth month
C.must always begin on January 1
D.will change each year
25) Net income plus operating expenses is equal to
A.cost of merchandise sold
B.cost of merchandise available for sale
C.net sales
D.gross profit
26) The graph of a variable cost when plotted against its related activity base appears as
a:
A.circle
B.rectangle
C.straight line
D.curved line
27) The detailed record indicating the data for each employee for each payroll period
and the cumulative total earnings for each employee is called the
A.payroll register
B.payroll check
C.employee’s earnings record
D.employer’s earnings record
28) Merchandise inventory at the end of the year was inadvertently overstated. Which
of the following statements correctly states the effect of the error on net income, assets,
and owner’s equity?
A.net income is overstated, assets are overstated, owner’s equity is understated
B.net income is overstated, assets are overstated, owner’s equity is overstated
C.net income is understated, assets are understated, owner’s equity is understated
D.net income is understated, assets are understated, owner’s equity is overstated
29) For each of the following, identify whether it would be disclosed as an operating
(O), financing (F), or investing (I) activity on the statement of cash flows under the
indirect method.
a. Purchased buildings
b. Sold Patents
c. Net income
d. Issued Common Stock
e. Paid cash dividends
f. Depreciation expense
30) Which of the following is not true regarding depreciation?
A.Depreciation allocates the cost of a fixed asset over its estimated life
B.Depreciation expense reflects the decrease in market value each year
C.Depreciation is an allocation not a valuation method
D.Depreciation expense does not measure changes in market value
31) Which of the following errors will cause the trial balance totals to be unequal?
A.posting the debit portion of a journal entry incorrectly when the credit portion of the
entry is correctly posted
B.failure to record a transaction or to post a transaction
C.recording the same transaction more than once
D.recording the same erroneous amount for both the debit and the credit parts of a
transaction
32) If the cost of direct materials is a small portion of total production cost, it may be
classified as part of:
A.direct labor cost
B.selling and administrative costs
C.miscellaneous costs
D.factory overhead cost
33) You began your new job as the accountant for Morton Company. You were
surprised to find that the company had a $2,000 petty cash fund, which sits in the break
room. The President of the company told you: Our petty cash system here works quite
smoothly. Since everyone is honest here, everyone has access to the fund for incidentals
that might pop up in the course of the business day. Most of these situations dont have
any receipts tied to them, so I just put the money back in the fund when my secretary
tells me that we have run out and debit the amount to Miscellaneous Expense.
Required:
(a) Should you implement some controls on petty cash? Why?
(b) If so, what controls could be used for petty cash?
34) Select the type of business that is most likely to obtain large amounts of resources
by issuing stock.
A.partnership
B.corporation
C.proprietorship
D.none of these
35) Using the following information, prepare a bank reconciliation for Cole Co. for
May 31, 2011:
(a) The bank statement balance is $2,936.
(b) The cash account balance is $3,194.
(c) Outstanding checks amounted to $465.
(d) Deposits in transit are $655.
(e) The bank service charge is $50.
(f) A check for $97 for supplies was recorded as $79 in the ledger.
36) For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries
for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned,
and (3) insurance of $5,000 that expired. For the year ending December 31, what is the
effect of these errors on revenues, expenses, and net income?
A.Revenues are overstated by $4,200
B.Net income is overstated by $2,300
C.Expenses are overstated by $6,500
D.Expenses are understated by $3,500
37) Assuming a 360-day year, when a $30,000, 90-day, 5% interest-bearing note
payable matures, total payment will amount to:
A.$31,500
B.$1,500
C.$30,375
D.$375
38) A firm produces its products by a continuous process involving three production
departments, 1 through 3. Present entries to record the following selected transactions
related to production during August:
(a) Materials purchased on account, $120,000.
(b) Material requisitioned for use in Department 1, $125,700, of which $124,200
entered directly into the product.
(c) Labor cost incurred in Department 1, $195,400, of which $174,000 was used
directly in the manufacture of the product.
(d) Factory overhead costs for Department 1 incurred on account, $54,700.
(e) Depreciation on machinery in Department 1, $29,200.
(f) Expiration of prepaid insurance chargeable to Department 1, $7,000.
(g) Factory overhead applied to production, $106,300.
(h) Output of Department 1 transferred to Department 2, $362,700.
39) Generally, period costs are classified as either
A.selling expenses or production expenses
B.administrative expense or production expenses
C.selling expenses or administrative expenses
D.general expenses or selling expenses
40) The Zoe Corporation has the following information for the month of March.
Prepare a (a) schedule of cost of goods manufactured, (b) an income statement for the
month ended March 31, and (c) prepare only the inventory section of the balance sheet.
41) Spice Inc.’s unit selling price is $60, the unit variable costs are $35, fixed costs are
$125,000, and current sales are 10,000 units. How much will operating income change
if sales increase by 8,000 units?
A.$150,000 decrease
B.$175,000 increase
C.$200,000 increase
D.$150,000 increase
42) The entry to record the flow of direct labor costs into production in a job order cost
accounting system is:
A.debit Factory Overhead, credit Work in Process
B.debit Finished Goods, credit Wages Payable
C.debit Work in Process, credit Wages Payable
D.debit Factory Overhead, credit Wages Payable
43) Ruby Company produces a chair that requires 5 yds. of material per unit. The
standard price of one yard of material is $7.60. During the month, 8,500 chairs were
manufactured, using 40,000 yards at a cost of $7.50. Determine the (a) price variance,
(b) quantity variance, and (c) cost variance.
44) Zeke Company is a manufacturing company that has worked on several production
jobs during the 1st quarter of the year. Below is a list of all the jobs for the quarter:
Job 356, 357, 358 & 359 were completed. Jobs 356 & 357 were sold at a profit of $500
on each job.
What is Sales for Zeke Company as of the end of the 1st quarter?
A.$1,685
B.$2,685
C.$1,000
D.$685
45) Which of the following is not a factory overhead allocation method?
A.single plantwide rate
B.multiple departmental rates
C.factory costing
D.activity-based costing
46) The following data is given for the Zoyza Company:
Overhead is applied on standard labor hours.
The factory overhead volume variance is:
A.$73,250U
B.$73,250F
C.$59,400F
D.$59,400U
47) Which of the following is the proper adjusting entry, based on a prepaid insurance
account balance before adjustment of $14,000 and unexpired insurance of $3,000, for
the fiscal year ending on April 30?
A.debit Insurance Expense, $3,000; credit Prepaid Insurance, $3,000
B.debit Insurance Expense, $14,000; credit Prepaid Insurance, $14,000
C.debit Prepaid Insurance, $11,000; credit Insurance Expense, $11,000
D.debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000
48) The following selected transactions were completed by Daniels Company during
May:
Note: Each transaction has two entries.
49) An oven with a book value of $67,000 has an estimated 5 year life. A proposal is
offered to sell the oven for $8,500 and replace it with a new oven costing $110,000. The
new machine has a five year life with no residual value. The new machine would reduce
annual maintenance costs by $23,000. Provide a differential analysis on the proposal to
replace the machine.
50) The following selected data were taken from the financial statements of the Berrol
Group for December 31, 2012, 2011, and 2010:
The 2012 net income was $242,000 and the 2011 net income was $308,000. No
dividends on common stock were declared between 2010 and 2012.
Required:
(1) Determine the rate earned on total assets, the rate earned on stockholders equity, and
the rate earned on common stockholders equity for the years 2012 and 2011. Round to
one decimal place.
(2) What conclusion can be drawn from these data as to the companys profitability?
51) Job order manufacturing and process manufacturing are two major costing systems
used in manufacturing. Briefly contrast the characteristics of these two systems.
52) The assets and liabilities of S&P Day Spa at December 31, 2014 and expenses for
the year are listed below. The retained earnings balance was $68,000 at January 1, 2014.
Prepare a retained earnings statement for the current year ended December 31, 2014.
53) Selected data from the Carmen Company at year end are presented below:
Instructions
Calculate the profitability ratios that can be computed from the above
information.Assume the company had no preferred stock or interest expense. Round
percentage value to one decimal place and dollar value to zero decimal place.
54) Convert each of the following estimates of useful life to a straight-line depreciation
rate, stated as a percentage.
55) The board of directors declared cash dividends totaling $252,000 during the current
year. The comparative balance sheet indicates dividends payable of $48,000 at the
beginning of the year and $63,000 at the end of the year. What was the amount of cash
payments to stockholders during the year?
56) List the four basic types of accounts that require adjusting entries and give an
example of each.
57) The units of an item available for sale during the year were as follows:
There are 19 units of the item in the physical inventory at December 31. The periodic
inventory system is used. Determine the ending inventory cost using LIFO.
58) Journalize the following transactions assuming the perpetual inventory system:
Journal
