1) Period costs are costs that are incurred for the production requirements of a certain
period.
2) The cash account will always be debited.
3) The effective interest method produces a constant dollar amount of interest expense
to be reported each interest period.
4) The excess of current assets over current liabilities is referred to as working capital.
5) If divisional income from operations is $100,000, invested assets are $850,000, and
the minimum rate of return on invested assets is 8%, the residual income is $68,000.
6) Depending upon when an unfunded pension liability is to be paid, it will be classified
on the balance sheet as either a long-term or a current liability.
7) For a month’s transactions for a typical medium-sized business, the accounts payable
account is likely to have only credit entries.
8) An income statement is a summary of the revenues and expenses of a business as of a
specific date.
9) Cash flows from investing activities, as part of the statement of cash flows, include
payments for the acquisition of fixed assets.
10) Supervisor salaries, maintenance, and indirect factory wages would normally
appear in the operating expenses budget.
11) If direct materials cost per unit increases, the break-even point will decrease.
12) The chart of accounts, the journal, and the ledger are essential parts of the
accounting system.
13) Cash flows from operating activities, as part of the statement of cash flows, include
cash transactions that enter into the determination of net income.
14) The income statement is prepared from the adjusted trial balance or the income
statement columns on the work sheet.
15) The specific identification inventory method should be used when the inventory
consists of identical, low cost units that are purchased and sold frequently.
16) The equity method causes the investment account to mirror the proportional
changes in book value of the investee.
17) Revenue is earned only when money is received.
18) In a just-in-time system, processing functions are combined into work centers,
sometimes called departments.
19) Izabelle and Marta are forming a partnership. Izabelle will invest a piece of
equipment with a book value of $7,500 and a fair market value of $20,000. Marta will
invest a building with a book value of $40,000 and a fair market value of $58,000.
What amount will be recorded to Izabelles capital account?
A.$20,000
B.$7,500
C.$27,500
D.$12,500
20) Calculate the gross profit for Jonas Company based on the data given below:
A.$753,250
B.$700,750
C.$162,750
D.$215,250
21) Which of the following below is an example of a capital expenditure?
A.cleaning the carpet in the front room
B.tune-up for a company truck
C.replacing an engine in a company car
D.replacing all burned-out light bulbs in the factory
22) The standard factory overhead rate is $10 per direct labor hour ($8 for variable
factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000
direct labor hours. The standard cost and the actual cost of factory overhead for the
production of 5,000 units during May were as follows:
What is the amount of the factory overhead volume variance?
A.$12,500 favorable
B.$10,000 unfavorable
C.$12,500 unfavorable
D.$10,000 favorable
23) If bonds payable are not callable, the issuing corporation
A.can exchange it for common stock
B.can repurchase them in the open market
C.must get special permission from the SEC to repurchase them
D.is more likely to repurchase them if the interest rates increase
24) After the accounts are adjusted and closed at the end of the fiscal year, Accounts
Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a
balance of $51,000. What is the net realizable value of the accounts receivable?
A.$51,000
B.$289,000
C.$340,000
D.$391,000
25) A responsibility center in which the department manager has responsibility for and
authority over costs and revenues is called a(n):
A.profit center
B.investment center
C.volume center
D.cost center
26) Which of the following is true about the revenue journal?
A.cash revenues and revenues on account are recorded in the revenue journal
B.only cash revenues are recorded in the revenue journal
C.only revenues on account are recorded in the revenue journal
D.unearned revenues are also recorded in the revenue journal
27) The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable
factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of
80,000 machine hours. The standard cost and the actual cost of factory overhead for the
production of 15,000 units during August were as follows:
What is the amount of the factory overhead controllable variance?
A.$12,000 unfavorable
B.$12,000 favorable
C.$14,000 unfavorable
D.$26,000 unfavorable
28) The amount of a promissory note is called the
A.realizable value
B.maturity value
C.face value
D.proceeds
29) Barker invested $128,000 in the Granger and Monroe partnership for ownership
equity of $128,000. Prior to the investment, equipment was revalued to a market value
of $90,000 from a book value of $66,000. Granger and Monroe share net income in a
2:1 ratio.
Required:
a. Provide the journal entry for the revaluation of equipment.
b. Provide the journal entry to admit Barker.
30) Which of the following is not true of a corporation?
A.It may enter into binding legal contracts in its own name
B.It may sue and be sued
C.The acts of its owners bind the corporation
D.It may buy, own, and sell property
31) Estimating and recording product warranty expense in the period of the sale best
follows which of the following accounting concepts?
A.cost concept
B.business entity concept
C.matching concept
D.materiality concept
32) When merchandise is returned under the perpetual inventory system, the buyer
would credit
A.Merchandise Inventory
B.Purchases Returns and Allowances
C.Accounts Payable
D.Accounts Receivable
33) The following balance sheet contains errors.
(a) List the errors in the balance sheet above and (b) prepare a corrected balance sheet.
34) Who pays the freight cost when the terms are FOB destination?
A.the seller
B.the buyer
C.the customer
D.either the buyer or the seller
35) A separate account for each material is found in a
A.general ledger
B.materials ledger
C.receiving report
D.job cost sheet
36) Mighty Safe Fire Alarm is currently buying 50,000 motherboard from
MotherBoard, Inc. at a price of $65 per board. Mighty Safe is considering making its
own boards. The costs to make the board are as follows: Direct Materials $32 per unit,
Direct labor $10 per unit, Variable Factory Overhead $16.00, Fixed Costs for the plant
would increase by $75,000. Which option should be selected and why?
A.Buy – $75,000 more in profits
B.Make – $275,000 increase in profits
C.Buy – $275,000 more in profits
D.Make – $350,000 increase in profits
37) Production and sales estimates for March for the Robin Co. are as follows:
The number of units expected to be manufactured in March is:
A.24,000
B.27,000
C.27,300
D.21,300
38) Contractors who sell to government agencies would be most likely to use which of
the following cost concepts in pricing their products?
A.Variable cost
B.Product cost
C.Total cost
D.Fixed cost
39) Which of the following would be most likely to use process costing?
A.A custom furniture manufacturer
B.An auto body repair shop
C.A law firm
D.A lawn fertilizer manufacturer
40) A cash investment made by the owner should be recorded on the
A.cash receipts journal
B.purchases journal
C.cash payments journal
D.revenue journal
41) The point where the profit line intersects the horizontal axis on the profit-volume
chart represents:
A.the maximum possible operating loss
B.the maximum possible operating income
C.the total fixed costs
D.the break-even point
42) Which of the following taxes would be deducted in determining an employee’s net
pay?
A.FUTA taxes
B.SUTA taxes
C.FICA taxes
D.all of the above
43) If a company uses a process costing system to account for the costs in its four
production departments, how many Work-in-Process will it use?
A.3
B.4
C.1
D.2
44) After net income is entered on the work sheet, the Balance Sheet debit and credit
columns must
A.be the same amount as the total amount of the Income Statement debit and credit
columns
B.equal each other
C.be the same amount as the total amount in the Adjusted Trial Balance debit and credit
columns
D.not be equal to each other and need not be the same total amounts as any other pair of
columns on the work sheet
45) The following are true regarding product costs except
A.product costs are found on the balance sheet until they are sold
B.product costs consist of direct labor, direct materials, and factory overhead
C.product costs can be found in three accounts in the balance sheet
D.product costs include sales and administrative expenses
46) Investment in certificates of deposit and other securities that do not change in value
are reported in the balance sheet as:
A.equity investments
B.available-for-sale securities
C.cash and cash equivalents
D.held to maturity securities
47) The balanced scorecard measures financial and nonfinancial performance of a
business. The balanced scorecard measures four areas. Identify one of the following that
is not included as a performance measurement.
A.Internal Process
B.Financial
C.Innovation and Learning
D.Employees
48) Prepare an amortization schedule for the 1st 2 years (straight line method) using the
following data:
1> On January 1, 2010 XYZ Co. issued $3,000,000, 6%, 10 year bonds, interest
payable on June 30th and December 31st to yield 5%. Use the following format and
round to the nearest dollar (may have small rounding error). The bonds were issued for
$3,233,834.
Date Cash paid Interest expense Amortization Bond Carry Value
2> Show how this bond would be reported on the balance sheet on 12/31/11.
49) The units of an item available for sale during the year were as follows:
There are 30 units of the item in the physical inventory at December 31. The periodic
inventory system is used. Determine the ending inventory cost using FIFO.
50) The debits and credits from two transactions are presented in the following
suppliers (creditors) account:
NAME: Banner Computer Services, Inc.
Address: 890 Novice Lane
Describe each transaction and the source of each posting.
51) If working papers are not considered part of the formal accounting records, then
why are they used?
52) Selected data from the ledger of Morrison Co. after adjustment at September 30,
2011 the end of the fiscal year, are listed as follows:
Prepare an income statement, using the single-step form, and a statement of owner’s
equity.
