1) Process cost accounting systems are used only by companies that manufacture
physical products; meaning that companies and other organizations that provide
services to their customers do not use process cost accounting.
2) In a periodic inventory system, cost of goods sold is recorded as each sale occurs.
3) The time value of money is considered when calculating the payback period of an
investment.
4) Both financial and managerial accounting influence user’s decisions and actions.
5) Sales discounts on credit sales can benefit a seller by decreasing the delay in
receiving cash and reducing future collections efforts.
6) Segment information is often useful to investors for evaluating a company’s
profitability, risk, and growth.
7) All disbursements from petty cash should be documented by a petty cash receipt.
8) The base amount for a common-size balance sheet is usually total assets.
9) It is not necessary to report both the cost and the accumulated depreciation of plant
assets in the financial statements.
10) From an accounting perspective, an event is a happening that affects the accounting
equation, but cannot be measured.
11) Cash and office supplies are both classified as current assets.
12) A merchandiser’s classified balance sheet reports merchandise inventory as a current
asset.
13) A proxy is a document that gives a designated agent the right to vote a shareholder’s
stock.
14) An internal control system consists of the policies and procedures companies use to
protect assets, ensure reliable accounting, promote efficient operations, and urge
adherence to company policies.
15) Accounts are normally decreased by debits.
16) Account balances in the general ledger and the subsidiary ledgers should be proved
for accuracy after posting is complete.
17) A lease is a contractual agreement between a lessor and a lessee that grants the
lessee the right to use the asset for a period of time in return for cash payment(s) to the
lessor.
18) The first step in the processing of a transaction is to analyze the transaction and
source documents.
19) The Factory Overhead account will have a credit balance at the end of a period if
overhead applied during the period is greater than the overhead incurred.
20) Expenses of promoting sales by displaying and advertising merchandise, making
sales, and delivering goods to customers are:
A.General and administrative expenses.
B.Cost of goods sold.
C.Selling expenses.
D.Purchasing expenses.
E.Nonoperating activities.
21) Western Company had $500 of store supplies available at the beginning of the
current year. During the year Western Company purchased $2,750 worth of store
supplies. On December 31 of this year $375 worth of store supplies remained.
a. Calculate the amount of Western Company’s store supplies expense for the current
year. (Show your calculations.)
b. Prepare the journal entry to adjust the supplies account.
22) A company had average total assets of $2,316,000, total cash flows of $1,320,000,
cash flows from operations of $455,000, and cash flows for plant assets of $850,000.
The cash flow on total assets ratio equals:
A.17.33%
B.20.97%
C.53.53%
D.34.47%
E.19.65%
23) Use the following information to calculate the net cash provided or used by
financing activities for the Brooks Corporation:
(a) Net income, $10,000
(b) Sold common stock for $4,000 cash
(c) Paid cash dividend of $3,000
(d) Paid bond payable, $8,000
(e) Purchased equipment for $12,000 cash
24) Edgar Company is considering the purchase of new equipment costing $80,000.
The projected net cash flows are $35,000 for the first two years and $30,000 for years
three and four. The revenue is to be received at the end of each year. The machine has a
useful life of 4 years and no salvage value. Edgar requires a 10% return on its
investments. The present value of an annuity of 1 and present value of an annuity for
different periods is presented below. Compute the net present value of the machine.
A.$(15,731)
B.$(4,896)
C.$15,731
D.$4,896
E.$23,775
25) The total amount of cash and other assets received by a corporation from its
stockholders in exchange for its stock is:
A.Always equal to its par value
B.Always equal to its stated value
C.Referred to as paid-in capital
D.Referred to as retained earnings
E.Always below its stated value
26) Match each of the following terms with the appropriate definitions.
1>Extraordinary repairs A.An estimate of an asset’s value at the end its benefit period.
2>Depletion B.Major repairs that extend the useful life of a plant asset beyond its
original estimate.
3>Amortization C.The process of allocating the cost of an intangible asset to expense
over its estimated useful life.
4>Inadequacy D.A right granted that gives its owner the exclusive privilege to publish
and sell musical, literary, or artistic work during the life of the creator plus 70 years.
5>Salvage value E.A condition which, because of new inventions and improvements, a
plant asset is no longer useful in producing goods or services with a competitive
advantage.
6>Patent F.The total cost of a plant asset less its accumulated depreciation.
7>Land improvements G.The process of allocating the cost of natural resources to the
periods when they are consumed.
8>Copyright H.An exclusive right granted to its owner to manufacture and sell an item,
or to use a process, for 20 years.
9>Obsolescence I.The insufficient capacity of plant assets to meet the company’s
productive demands.
10>Book value J.Assets that increase the benefits of land, have a limited useful life, and
are subject to depreciation.
27) A report that accumulates the actual costs that a manager is responsible for and their
budgeted amounts is a:
A.Segmental accounting report
B.Managerial cost report
C.Controllable expense report
D.Departmental accounting report
E.Responsibility accounting performance report
28) Chung owns 40% of Lu’s common stock. Lu pays $97,000 in total cash dividends to
its shareholders. Chung’s entry to record this transaction should include a:
A.Debit to Dividends for $97,000
B.Debit to Dividends for $38,800
C.Debit to Long-Term investments for $97,000
D.Credit to Long-Term Investments for $38,800
E.Credit to Cash for $97,000
29) The difference between the amount received from issuing a note payable and the
amount repaid is referred to as:
A.Interest
B.Principle
C.Face Value
D.Cash
E.Accounts Payable
30) Mack, Harris, and Huss are dissolving their partnership. Their partnership
agreement allocates income and losses equally among the partners. The current period’s
ending capital account balances are Mack, $15,000, Harris, $15,000, Huss, $(2,000).
After all the assets are sold and liabilities are paid, but before any contributions to cover
any deficiencies, there is $28,000 in cash to be distributed. Huss pays $2,000 to cover
the deficiency in his account. The general journal entry to record the final distribution
would be:
A.Debit Mack, Capital $15,000; debit Harris, Capital $15,000; credit Cash $30,000
B.Debit Mack, Capital $14,000; debit Harris, Capital $14,000; credit Cash $28,000
C.Debit Mack, Capital $15,000; debit Harris, Capital $15,000; credit Huss, Capital
$2,000; credit Cash $28,000
D.Debit Cash $28,000; debit Huss, Capital $2,000; credit Mack, Capital $15,000; credit
Harris, Capital $15,000
E.Debit Mack, Capital $9,334; debit Harris, Capital $9,333; debit Huss, Capital $9,333;
credit Cash $28,000
31) A company used straight-line depreciation for an item of equipment that cost
$12,000, had a salvage value of $2,000, and had a five-year useful life. After
depreciating the asset for three complete years, the salvage value was reduced to $1,200
and its total useful life was increased from 5 years to 6 years. Determine the amount of
depreciation to be charged against the machine during each of the remaining years of its
useful life:
A.$1,000
B.$1,800
C.$1,467
D.$1,600
E.$2,160
32) Fairway’s April sales forecast projects that 6,000 units will sell at a price of $10.50
per unit. The desired ending inventory is 30% higher than the beginning inventory,
which was 1,000 units. Budgeted purchases of units in April would be:
A.6,000 units
B.7,000 units
C.6,300 units
D.7,300 units
E.Some other amount
33) Identify each of the following accounts as a revenue (R), expense (E), asset (A),
liability (L), or equity (OE) by placing initials (R,E,A,L or OE) in the blanks.
1>asset A. Salary Expense
2>asset B. Cash
3>Expense C. Equipment
4>Asset D. Owner, Capital
5>asset E. Fees Revenue
6>liability F. Accounts Receivable
7>or equity G. Accounts Payable
8>liability H. Owner, Withdrawals
9>asset I. Supplies
10>or equity J. Unearned Fee Revenue
11>Asset K. Prepaid Insurance
12>revenue L. Office Furniture
34) A bondholder that owns a $1,000, 10%, 10-year bond has:
A.Ownership rights in the issuing company
B.The right to receive $10 per year until maturity
C.The right to receive $1,000 at maturity
D.The right to receive $10,000 at maturity
E.The right to receive dividends of $1,000 per year
35) The internal document that is prepared to notify the appropriate persons that
ordered goods have been received and describes the quantities and condition of the
goods is the
A.Purchase requisition
B.Purchase order
C.Invoice
D.Receiving report
E.Invoice approval
36) The Dina Corp. has applied overhead to jobs during the period as follows:
The application of overhead has resulted in a $5,600 credit balance in the Factory
Overhead account, and this amount is not material. The entry to dispose of this
remaining factory overhead balance is:
A.Debit Cost of Goods Sold $5,600; credit Factory Overhead $5,600
B.Debit Factory Overhead $5,600; credit Cost of Goods Sold $5,600
C.Debit Factory Overhead $5,600; credit Goods in Process Inventory $5,600
D.Debit Goods in Process Inventory $5,600; credit Factory Overhead $5,600
E.No entry is needed
37) A process cost summary is a managerial accounting report that describes:
A.The costs charged to a department
B.The equivalent units of production by the department
C.How the costs were assigned to the output
D.Physical transfers for a department
E.All of these
38) On January 1 of the current year, Bob’s Lawn Care Service reported owner’s capital
totaling $122,500. During the current year, total revenues were $96,000 while total
expenses were $85,500. Also, during the current year Bob withdrew $20,000 from the
company. No other changes in equity occurred during the year. If, on December 31 of
the current year, total assets are $196,000, the change in owner’s capital during the year
was:
A.A decrease of $9,500
B.An increase of $9,500
C.An increase of $30,500
D.A decrease of $30,500
E.Impossible to determine from the information provided
39) Cool Tours had beginning equity of $72,000; revenues of $90,000, expenses of
$65,000, and withdrawals by owners of $9,000. Calculate the ending equity.
A.$88,000
B.$25,000
C.$97,000
D.$38,000
E.$47,000
40) Stockholders’ equity consists of:
A.Long-term assets
B.Paid-in capital and retained earnings
C.Paid-in capital and par value
D.Retained earnings and cash
E.Premiums and discounts
41) Based on the unadjusted trial balance for Bella’s Beauty Salon and the adjusting
information given below, prepare the adjusting journal entries for Bella’s Beauty Salon.
After completing the adjusting entries, prepare the trial balance for Bella’s Beauty
Salon.
Bella Beauty Salon’s unadjusted trial balance for the current year follows:
Additional information:
a. An insurance policy examination showed $1,240 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments, and this $200 of accrued revenues
was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The
employee was paid last week but has worked four days this week for which she has not
been paid.
h. Three months’ property taxes, totaling $450, have accrued. This additional amount of
property taxes expense has not been recorded.
i. One month’s interest on the note payable, $600, has accrued but is unrecorded. Use
the
above information to prepare the adjusted trial balance for Bella’s Beauty Salon.
42) All of the following statements regarding accounting for noninfluential securities
under U.S. GAAP and IFRS are True except:
A.Trading securities are accounted for using fair values with unrealized gains and losses
reported in other comprehensive income
B.Trading securities are accounted for using fair values with unrealized gains and losses
reported in net income
C.Available-for-sale securities are accounted for using fair values with unrealized gains
and losses reported in other comprehensive income
D.Held-to-maturity securities are accounted for using amortized cost
E.Both systems examine held-to-maturity securities for impairment
43) The average number of times a company’s inventory is sold during an accounting
period, calculated by dividing cost of goods sold by the average inventory balance, is
the:
A.Accounts receivable turnover
B.Inventory turnover
C.Days’ sales uncollected
D.Current ratio
E.Price earnings ratio
44) An income statement that includes cost of goods sold as another expense and shows
only one subtotal for total expenses is a:
A.Balanced income statement.
B.Single-step income statement.
C.Multiple-step income statement.
D.Combined income statement.
E.Simplified income statement.
45) Cabot Company collected the following data regarding production of one of its
products. Compute the variable overhead cost variance.
A.$18,000 favorable
B.$4,000 favorable
C.$18,000 unfavorable
D.$18,300 favorable
E.$14,300 unfavorable
46) If a parcel of land that was originally purchased for $85,000 is offered for sale at
$150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as
easily being worth $140,000, and is sold for $137,000. At the time of the sale, assume
that the seller still owed $30,000 to TrustOne Bank on the land that was purchased for
$85,000. Immediately after the sale, the seller paid off the loan to TrustOne Bank. What
is the effect of the sale and the payoff of the loan on the accounting equation?
A.Assets increase $52,000; owner’s equity increases $22,000; liabilities decrease
$30,000
B.Assets increase $52,000; owner’s equity increases $30,000; liabilities decrease
$30,000
C.Assets increase $22,000; owner’s equity increases $52,000; liabilities decrease
$30,000
D.Assets decrease $30,000; owner’s equity decreases $30,000; liabilities decrease
$30,000
E.Assets decrease $55,000; owner’s equity decreases $55,000; liabilities decrease
$30,000
47) A company issued 5-year, 7% bonds with a par value of $100,000. The market rate
when the bonds were issued was 6.5%. The company received $101,137 cash for the
bonds. Using the straight-line method, the amount of recorded interest expense for the
first semiannual interest period is:
A.$3,386.30
B.$3,500.00
C.$3,613,70
D.$6,633.70
E.$7,000.00
48) A company entered into the following transactions. For each transaction, indicate
the appropriate journal.
1>Purchases Journal A. Purchased merchandise for cash.
2>Cash Receipts Journal B. Sold merchandise for cash.
3>Cash Disbursements Journal C. Purchased merchandise on credit.
4>Sales Journal D. Sold merchandise on credit
5>Cash Disbursements Journal E. Paid cash to settle the utility bill.
6>Cash Disbursements Journal F. Owner invested more cash in the business.
7>General Journal G. Recorded depreciation for the period.
8>Cash Receipts Journal H. Borrowed cash from the bank.
9>Cash Receipts Journal I. Bought store supplies for cash.
10>Cash Receipts Journal J. Customer sent in cash to settle an account receivable.
49) A company’s beginning work in process inventory consisted of 20,000 units that
were 1/5 complete with respect to direct labor. These beginning units were completed
and another 90,000 units were started during the current period. Of those started, 60,000
were finished and the remaining 30,000 were 1/3 complete at the end of the period.
Using the weighted-average method, the equivalent units of production with regard to
direct labor were:
A.60,000
B.74,000
C.76,000
D.90,000
E.96,000
50) An error is indicated if the following account has a balance appearing on the
post-closing trial balance:
A.Office Equipment
B.Accumulated Depreciation-Office Equipment
C.Depreciation Expense-Office Equipment
D.Ted Nash, Capital
E.Salaries Payable
51) Kyle, Inc. has collected the following data on one of its products. The direct
materials quantity variance is:
A.$30,000 favorable
B.$13,750 unfavorable
C.$16,250 favorable
D.$30,000 unfavorable
E.$13,750 favorable
52) A managerial accounting report that presents predicted amounts of the company’s
revenues and expenses for the budget period is called a:
A.Budgeted income statement
B.Budgeted balance sheet
C.Master plan
D.Rolling income statement
E.Continuous income statement
53) In preparing a company’s statement of cash flows for the year just ended, the
following information is available:
Net cash flows from financing activities for the year were:
A.$130,000 of net cash used by financing activities
B.$165,000 of net cash used by financing activities
C.$222,000 of net cash used by financing activities
D.$88,000 of net cash used by financing activities
E.$206,000 of net cash used by financing activities
54) Identify each of the following items 1 through 10 as either (a) cash or (b) cash
equivalent.
1>cash A. Coins
2>cash equivalent B. Petty cash
3>cash C. Three-month certificate of deposit
4>cash equivalent D. Commercial paper
5>cash E. Currency
55) ____________________ are the means to take information out of an accounting
system and make it available to users.
56) Roller Blade Company uses the perpetual inventory system and had the following
transactions during October:
Prepare journal entries to record each of the preceding transactions.
57) The ___________________________ is prepared by manufacturing firms, and
takes the place of the purchases budget prepared by merchandising firms.
58) An ______________________________ is the potential benefit lost by taking a
specific action when two or more alternative choices are available.
59) _____________________ bonds can be exchanged for a fixed number of shares of
the issuing corporation’s common stock.
60) The difference between the amount borrowed and the amount repaid is referred to
as _____________.
61) What are some causes of direct labor rate and efficiency variances?
62) Del Carpio, Inc., sells two products, Widgets and Gadgets. The sales forecast in
units for the first quarter of the coming year is:
Cash sales are 30% of each product’s monthly sales. The remaining sales are credit sales
which are collected as follows: 70% in the month of sale, 20% the next month, and 10%
in the following month. Unit sale prices are $30 and $20 for Widgets and Gadgets,
respectively.
Determine the company’s cash receipts for March from its current and past sales.