1) In horizontal analysis, the current year is the base year.
2) A voucher is a written authorization to make a cash payment.
3) If the bonds are purchased between interest dates, the purchase price includes
accrued interest since the last interest payment.
4) Businesses must implement controls to help guide the behavior of their employees
toward business objectives.
5) Proper ethical conduct implies that you only consider what’s in your best interest.
6) If income from operations for a division is $120,000, sales are $975,000, and
invested assets are $750,000, the investment turnover is 1.3.
7) If the adjustment for depreciation for the year is inadvertently omitted, the assets on
the balance sheet at the end of the period will be understated.
8) Yield measures the ratio of the materials output quantity to the materials input
quantity.
9) Under the variable cost concept, only variable costs are included in the cost amount
per unit to which the markup is added.
10) Safeguarding inventory and proper reporting of the inventory in the books are the
reasons for controlling the inventory.
11) When merchandise that was sold is returned, a credit to sales returns and allowances
is made.
12) Assuming that the quantities of inventory on hand during the current year were
sufficient to meet all demands for sales, a decrease in the inventory turnover for the
current year when compared with the turnover for the preceding year indicates an
improvement in inventory management.
13) In addition to the differential costs in an equipment replacement decision, the
remaining useful life of the old equipment and the estimated life of the new equipment
are important considerations.
14) The payment of dividends is an example of a cost.
15) Obligations that depend on past events and that are based on future possible events
are contingent liabilities.
16) Capital expenditures are costs of acquiring, constructing, adding, or replacing
property, plant and equipment.
17) The ratio that indicates the percentage of each sales dollar available to cover the
fixed costs and to provide operating income is termed the contribution margin ratio.
18) Cash withdrawals by owners decrease assets and increase equity.
19) If an adjustment for an NSF check is made in a companys bank reconciliation, then
the company must have written a bad check during the month.
20) The expected average rate of return for a proposed investment of $500,000 in a
fixed asset, with a useful life of four years, straight-line depreciation, no residual value,
and an expected total net income of $240,000 for the 4 years, is:
A.18%
B.48%
C.24%
D.12%
21) Identify the following costs as a (a) product cost or (b) period cost for a cake
factory.
1. _____ Frosting
2. _____ Baker’s wages
3. _____ Advertising fees
4. _____ Transportation out
22) The source of the data for debiting Work-in-Process for direct materials is the:
A.purchase order
B.purchase requisition
C.materials requisition
D.receiving report
23) The journal entry for recording an operating lease payment would
A.be a memo entry only
B.debit the fixed asset and credit Cash
C.debit an expense and credit Cash
D.debit a liability and credit Cash
24) At the end of April, the first month of the year, the usual adjusting entry transferring
rent earned to a revenue account from the unearned rent account was omitted. Indicate
which items will be incorrectly stated, because of the error, on (a) the income statement
for April and (b) the balance sheet as of April 30. Also indicate whether the items in
error will be overstated or understated.
25) Which of the following would be used to compute the federal income taxes to be
withheld from an employee’s earnings?
A.FICA tax rate
B.wage and tax statement
C.FUTA tax rate
D.wage bracket and withholding table
26) The following data relate to direct labor costs for the current period:
What is the direct labor time variance?
A.$36,000 unfavorable
B.$35,000 unfavorable
C.$23,000 favorable
D.$22,000 favorable
27) Short-term liabilities are those liabilities that
A.will be paid in less than one year
B.are due to be paid in 5 to 10 years
C.are due to be paid in more than one year
D.are owed to the owner and will never be paid
28) Waller Company does business in two regional segments: North and South. The
following annual revenue information was determined from the accounting systems
invoice information:
Using horizontal analysis, determine the percentage change in revenues for the South
region.
Round to one decimal place.
A.30.0%
B.77.6%
C.(30.0%)
D.(77.6%)
29) On January 5, 2014, Garrett Company, a calendar-year company, issued $1,000,000
of notes payable, of which $200,000 is due on January 1 for each of the next five years.
The proper balance sheet presentation on December 31, 2014, is
A.Current Liabilities, $1,000,000
B.Current Liabilities, $200,000; Long-term Debt, $800,000
C.Long-term Debt, $1,000,00
D.Current Liabilities, $800,000; Long-term Debt, $200,000
30) Bargain Wholesalers sells pet supplies to retailers including Pet World Supplies.
Bargain Wholesalers uses perpetual inventory. Use a General Journal to journalize the
following three transactions during the month of May:
(a) On May 4th, Bargain Wholesalers sells inventory to Pet World Supplies for
$8,250.00 with terms 1/10, n/30. The cost of the merchandise is $5,755.00.
(b) On May 13th, Bargain Wholesalers sells an additional $10,985 in inventory to Pet
World Supplies with terms 1/10, n/30. The cost of the merchandise is $6,925.00.
(c) On May 23rd, Bargain Wholesalers receives a check from Pet World Supplies
paying the balance due.
31) The depreciation method that does not use residual value in calculating the first
year’s depreciation expense is
A.straight-line
B.units-of-production
C.double-declining-balance
D.none of the above
32) Which of the accounts below would not appear in the balance sheet columns of the
worksheet?
A.Chad Daniels, Drawing
B.Rent Earned
C.Unearned Revenue
D.Chad Daniels, Drawing and Unearned Revenue
33) Bob Evans owns a business, Beachside Realty, that rents condominiums and
furnishings. Below is the adjusted trial balance at December 31, 2014.
The entry required to close the revenue accounts at the end of the period includes a:
A.debit to Income Summary for $37,000
B.credit to Income Summary for $38,300
C.debit to Income Summary for $38,200
D.credit to Income Summary for $37,000
34) Allen Marks is the sole owner and operator of Great Marks Company. As of the end
of its accounting period, December 31, 2013, Great Marks Company has assets of
$940,000 and liabilities of $300,000. During 2014, Allen Marks invested an additional
$73,000 and withdrew $33,000 from the business. What is the amount of net income
during 2014, assuming that as of December 31, 2014, assets were $995,000, and
liabilities were $270,000?
A.$ 45,000
B.$ 50,000
C.$106,000
D.$370,000
35) Determine the total value of the merchandise using Net Realizable Value:
A.$35
B.$80
C.$115
D.$25
36) Treasury stock which was purchased for $3,000 is sold for $3,500. As a result of
these two transactions combined
A.income will be increased by $500
B.stockholders’ equity will be increased by $3,500
C.stockholders’ equity will be increased by $500
D.stockholders’ equity will not change
37) The following information is available from the current period financial statements:
The net cash flow from operating activities using the indirect method is
A.$166,000
B.$184,000
C.$110,000
D.$240,000
38) Accompanying the bank statement was a debit memo for bank service charges.
What entry is required in the company’s accounts?
A.debit Miscellaneous Administrative Expense; credit Cash
B.debit Cash; credit Other Income
C.debit Cash; credit Accounts Payable
D.debit Accounts Payable; credit Cash
39) A common measure of liquidity is
A.ratio of net sales to assets
B.dividends per share of common stock
C.receivable turnover
D.profit margin
40) Dalton Company uses the allowance method to account for uncollectible
receivables. Dalton has determined that the Irish Company account is uncollectible. To
write-off this account, Dalton should debit
A.Bad Debt Expense and credit Accounts Receivable
B.Bad Debt Expense and credit Allowance for Doubtful Accounts
C.Allowance for Doubtful Accounts and credit Accounts Receivable
D.Accounts receivable and credit Allowance for Doubtful Accounts
41) Benson and Orton are partners who share income in the ratio of 2:3 and have capital
balances of $60,000 and $40,000 respectively. Ramsey is admitted to the partnership
and is given a 10% interest by investing $20,000. What is Ortons capital balance after
admitting Ramsey?
A.$44,800
B.$35,200
C.$20,000
D.$16,000
42) Which of the following is not a business transaction?
A.Erin deposits $15,000 in a bank account in the name of Erins Lawn Service
B.Erin provided services to customers earning fees of $600
C.Erin purchased hedge trimmers for her lawn service agreeing to pay the supplier next
month
D.Erin pays her monthly personal credit card bill
43) Which of the following is not a characteristic of a job order costing system?
A.It accumulates cost for each department within the factory
B.It provides a separate record for the cost of each quantity of product that passes
through the factory
C.It is best suited for industries that manufactures custom goods
D.Uses only one work in process account
44) Blanton Corporation purchased 15% of the outstanding shares of common stock of
Worton Corporation as a long-term investment. Subsequently, Worton Corporation
reported net income and declared and paid cash dividends. What journal entry would
Blanton Corporation use to record the dividends it receives?
A.debit Investment in Worton Corporation; credit Cash
B.debit Cash; credit Dividend Revenue
C.debit Investment in Worton Corporation; credit Income of Worton Corporation
D.debit Cash; credit Investment in Worton Corporation
45) Soledad and Winston are partners who share income in the ratio of 1:3 and have
capital balances of $100,000 and $140,000 at the time they decide to terminate the
partnership. After all noncash assets are sold and all liabilities are paid, there is a cash
balance of $130,000. What amount of loss on realization should be allocated to
Winston?
A.$110,000
B.$97,500
C.$42,500
D.$82,500
46) Partner A has a capital balance of $40,000 and devotes full time to the partnership.
Partner B has a capital balance of $50,000 and devotes half time to the partnership. If
no other information is available regarding distributions, in what ratio is net income to
be divided?
A.4:5
B.1:1
C.5:4
D.1:2
47) Nuthatch Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $260,000, $375,000, and
$400,000, respectively, for September, October, and November. The company expects
to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be
collected in the month of the sale and 20% in the month following the sale.
The cash collections in October from accounts receivable are:
A.$246,400
B.$262,500
C.$210,000
D.$294,500
48) The following units of an inventory item were available for sale during the year:
The firm uses the periodic inventory system. During the year, 60 units of the item were
sold.
The value of ending inventory using FIFO is:
A.$1,250
B.$1,350
C.$1,375
D.$1,150
49) At the end of the fiscal year, the usual adjusting entry to Prepaid Insurance to record
expired insurance was omitted. Which of the following statements is true?
A.Total assets at the end of the year will be understated
B.Owner’s equity at the end of the year will be understated
C.Net income for the year will be overstated
D.Insurance Expense will be overstated
50) Equipment was purchased on January 5, 2011, at a cost of $90,000. The equipment
had an estimated useful life of 8 years and an estimated residual value of $8,000.
After using the equipment for 3 years, the useful life was revised to a total of 10 years
and the residual value was reduced to $2,004.
Determine the straight-line depreciation expense for the year 2014 and following years.
51) The following purchase transactions occurred during August for Backcountry
Kayak Company.
Record these transactions in a purchase journal.
52) List and describe the purpose of the four closing entries.
53) On the basis of the following information taken from the Adjusted Trial Balance
columns of the work sheet for the month ended September 30th, journalize the closing
entries for Perez Roofing Company.
54) The income statement for Dodson Corporation reported net income of $22,400 for
the year ended December 31, 2012 before considering the following:
During the year the company purchased available-for-sale securities. At year end, the
fair value of the investment portfolio was $2,100 more than cost.
The balance of retained earnings was $83,000 on December 31, 2011. Dobson
Corporation paid $9,000 in cash dividends in 2012. Calculate the balance of retained
earnings on December 31, 2012.
55) Bob Evans owns a business, Beachside Realty, that rents condominiums and
furnishings. Below is the adjusted trial balance at December 31, 2010.
Prepare the entry required to close the expense accounts at the end of the period.
56) On November 30th, Damien Lawson is informed by his accountant that $550 of a
transaction recording the purchase of office supplies was really office equipment. He
has been asked to correct this journal entry. Write the journal entry to correct this
situation.
57) The Dean Company has sales of $500,000, and the break-even point in sales dollars
of $300,000. Determine the companys margin of safety percentage.