1) The direct method for computing and reporting net cash flows from operating
activities involves adjusting the net income figure to obtain net cash provided or used
by operating activities.
2) Incremental costs should be considered in a make or buy decision.
3) Payments on an installment note normally include the accrued interest expense plus a
portion of the amount borrowed.
4) A capital deficiency can arise from liquidation losses, excessive withdrawals before
liquidation, or recurring losses in prior periods.
5) Accounting for contingent liabilities covers three possibilities: (1) The future event is
probable and the amount cannot be reasonably estimated; (2) The future event is remote
or unlikely to recur; (3) The likelihood of the liability to occur is impossible.
6) A financial statement analysis report does not include:
A.An auditor statement.
B.An analysis overview.
C.Evidential matter.
D.Qualitative and quantitative key factors.
E.Inferences such as forecasts.
7) Refer to the following selected financial information from Marston Company.
Compute the company’s days’ sales uncollected for Year 2.
A.43.9.
B.43.7.
C.46.2.
D.85.4.
E.42.7.
8) Use the following company information to prepare a schedule of significant noncash
investing and financing activities:
(a) Sold a building with a book value of $300,000 for $225,000 cash and sold land with
a book value of $40,000 for $65,000 cash.
(b) Issued 15,000 shares of $10 par value common stock in exchange for equipment
with a market value of $175,000.
(c) Retired a $100,000, 8% bond by issuing another $100,000, 7% bond issue.
(d) Acquired land by issuing a twenty-year, 5%, $73,000 note payable.
9) A company rents a building with a total of 50,000 square feet, which are evenly
divided between two floors. The company allocates the rent for space on the first floor
at twice the rate of space on the second floor. The total monthly rent for the building is
$30,000. How much of the monthly rental expense should be allocated to a department
that occupies 10,000 square feet on the first floor?
A.$6,000.
B.$5,000.
C.$3,000.
D.$4,000.
E.$2,000.
10) Employers’ responsibilities for payroll do not include:
A.Providing each employee with an annual report of his or her wages subject to FICA
and federal income taxes along with the amount of these taxes withheld.
B.Filing Form 941, the Employer’s Quarterly Federal Tax Return.
C.Filing Form 940, the Annual Federal Unemployment Tax Return.
D.Maintaining individual earnings records for each employee.
E.Recording an expense for the employee Federal Income Tax withholding.
11) A company makes a payment of $5,000 on a long-term note payable. The journal
the transaction would be recorded in is the.
A.Cash disbursements journal.
B.Sales journal.
C.Cash receipts journal.
D.Purchases journal.
E.General journal.
12) A budget based on several different levels of activity, often including both a
best-case and worst-case scenario, is called a:
A.Rolling budget.
B.Production budget.
C.Flexible budget.
D.Merchandise purchases budget.
E.Fixed budget.
13) A document in a job order costing system that is used to record the costs of
producing a job is a(n):
A.Job cost sheet.
B.Job lot.
C.Finished goods summary.
D.Process cost system.
E.Units-of-production sheet.
14) A stock dividend is recorded with a transfer from:
A.Contributed capital to retained earnings.
B.Retained earnings to contributed capital.
C.Retained earnings to assets.
D.Contributed capital to assets.
E.Assets to contributed capital.
15) A decrease in the fair value of a security that has not yet been realized through an
actual sale of the security is called a(n):
A.Contingent loss.
B.Realizable loss.
C.Unrealized loss.
D.Capitalized loss.
E.Market loss.
16) Partnership accounting does not:
A.Use a capital account for each partner.
B.Use a withdrawals account for each partner.
C.Allocate net income to each partner according to the partnership agreement.
D.Allocate net loss to each partner according to the partnership agreement.
E.Tax the business entity.
17) The following information comes from the flexible budget performance report of
Jackal Corp. for the current period. Prepare the journal entries to charge direct materials
and direct labor costs to work in process and the materials and labor variances to their
proper accounts.
18) Immaterial amounts of overapplied overhead should be _____________ to the
_____________________ account when closed.
19) On January 1, a machine costing $260,000 with a 6-year life and an estimated
$5,000 salvage value was purchased. It was also estimated that the machine would
produce 500,000 units during its life. The actual units produced during its first year of
operation were 110,000. Determine the amount of depreciation expense for the first
year under each of the following assumptions:
1) The company uses the straight-line method of depreciation.
2) The company uses the units-of-production method of depreciation.
3) The company uses the double-declining-balance method of depreciation.
20) The Tacky Company manufactures staples. Costs for October were direct labor,
$84,000; indirect labor, $36,700; direct materials, $55,900; factory maintenance,
$4,800; factory utilities, $3,200; and insurance on plant and equipment, $700. What is
Tacky Company’s factory overhead for October?
21) Zip-up Company provides the following data developed for its master budget:
Required:
Prepare flexible budgets for sales of 20,000, 22,000 and 24,000 units. Use a
contribution margin format.
22) What is a lease? Explain the difference between an operating lease and a capital
lease.
23) White Company allows customers to make purchases on credit. The terms of all
credit sales are 2/10, n/30, and all sales are recorded at the gross price. Other customers
can use a bank credit card where the bank deducts a 4% service charge for credit card
sales and credits the bank account of White immediately when credit card receipts are
deposited. White uses the perpetual inventory method. Prepare journal entries to record
the following selected transactions and events.
24) The Income Statement columns of the work sheet prepared for Jolly Auto Service at
current year-end are shown below. In addition, B. Jolly, Capital had a credit balance of
$235,000 and B. Jolly, Withdrawals had a debit balance of $40,000 at year end. Prepare
closing journal entries for this company.
25) Based on the following information provided about a company’s operations,
calculate its cost of goods purchased and its cash paid for merchandise.