1) The three major types of business activities are operating, financing, and investing.
2) A stock dividend reduces a corporation’s assets and its stockholders’ equity.
3) Process cost accounting systems are commonly used by companies that produce a
large volume of standardized units on a continuous basis.
4) The withdrawals account is normally closed by debiting it.
5) A company had net sales of $500,000 and an average accounts receivable of $80,000.
Its accounts receivable turnover equals 6.25.
6) Special rights often granted to preferred stock include a preference for receiving
dividends and for the distribution of assets if the corporation is liquidated.
7) Input devices include journal entries, keyboards, scanners, and modems.
8) The relevant range of operations excludes extremely high and low levels of
production that are not likely to occur.
9) In preparing statements from the adjusted trial balance, the balance sheet must be
prepared first.
10) A plant asset’s useful life might not be the same as its productive life.
11) Quick assets include cash, inventory, and current receivables.
12) When standard costs are used, factory overhead is assigned to products with a
predetermined standard overhead rate.
13) A ratio expresses a mathematical relation between two quantities and can be
expressed as a percent, rate, or proportion.
14) The present value of an annuity factor for 6 years at 10% is 4.3553. This implies
that an annuity of six $2,000 payments at 10% would equal $8,710.60.
15) The journal entry for petty cash reimbursement involves a debit to the appropriate
expenses and a credit to Petty Cash.
16) A transaction that decreases an asset account and increases a liability account must
also affect one or more other accounts.
17) Product A has a sales price of $10 per unit. Based on a 10,000-unit production level,
the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible
budget for 12,500 units, what is the budgeted operating income from Product A?
A.$12,500
B.$25,000
C.$20,000
D.$30,000
E.$35,000
18) Natural resources:
A.Include standing timber, mineral deposits, and oil and gas fields
B.Are also called wasting assets
C.Are long-term assets
D.Are depleted
E.All of these
19) Which of the following statements is correct?
A.The left side of a T-account is the credit side
B.Debits decrease asset and expense accounts, and increase liability, equity, and
revenue accounts
C.The left side of a T-account is the debit side
D.Credits increase asset and expense accounts, and decrease liability, equity, and
revenue accounts
E.In certain circumstances the total amount debited need not equal the total amount
credited for a particular transaction
20) Using the information below for Hardy Company; determine the cost of goods
manufactured during the current year:
A.$12,000
B.$16,100
C.$17,100
D.$18,100
E.$13,600
21) For each of the following independent transactions a through d, prepare the
necessary journal entry:
(a) Declared a $0.40 per share cash dividend on 200,000 shares of preferred stock
outstanding.
(b) Declared and distributed a 12% stock dividend on 800,000 shares of $5 par value
common stock outstanding. Market price per common share on this date was $25.
(c) Declared and distributed a 2-for-1 stock split on 500,000 shares of $10 par value
common stock outstanding.
(d) Declared and distributed a 30% stock dividend on 400,000 common shares of $5 par
value common stock outstanding. Market price per common share on this date was $20.
22) Available-for-sale equity securities:
A.Are recorded at cost when acquired
B.May earn dividends that are reported in that year’s income statement
C.May be classified as either short-term or long-term securities
D.Are reported at market value on the balance sheet
E.All of these
23) Extraordinary repairs:
A.Are revenue expenditures
B.Extend an asset’s useful life beyond its original estimate
C.Are credited to accumulated depreciation
D.Are additional costs of plants assets that do not materially increase the asset’s life
E.Are expensed as incurred
24) Harold’s expects its September sales to be 20% higher than its August sales of
$150,000. Purchases were $100,000 in August and are expected to be $120,000 in
September. All sales are on credit and are collected as follows: 30% in the month of the
sale and 70% in the following month. Merchandise purchases are paid as follows: 25%
in the month of purchase and 75% in the following month. The beginning cash balance
on September 1 is $7,500. The ending cash balance on September 30 would be:
A.$31,500
B.$67,500
C.$54,000
D.$61,500
E.$136,500
25) The assets of a company total $700,000; the liabilities, $200,000. What are the
claims of the owners?
A.$900,000
B.$700,000
C.$500,000
D.$200,000
E.It is impossible to determine unless the amount of this owners’ investment is known.
26) Good management accounting indicates that projects be evaluated using relevant
data. In choosing among alternatives, what factors (considerations) are relevant?
27) Larabee Company produces two types of product, flat and round, on the same
production line. For the current period, the company reports the following data.
Larabee’s controller wishes to apply activity-based costing (ABC) to allocate the
$60,000 of overhead costs incurred by the two product lines to see whether cost per unit
would change markedly from that reported above. She has collected the following
information.
She has also collected the following information about the cost drivers for each
category (cost pool) and the amount of each driver used by the two product lines.
Assign these three overhead cost pools to each of the two products using ABC. Show
each overhead cost allocation by product and the total overhead allocated to each
product. Determine average cost per unit for each of the two products using ABC.
(Round your answer to 2 decimal places.) Which overhead cost allocation method
would you recommend to the controller?
28) All of the following statements regarding the Income Statement columns on the
worksheet are true except:
A.The balances in the Income Statement credit column are revenues
B.The balances in the Income Statement credit column are unearned revenues
C.The balances in the Income Statement debit column are expenses
D.The difference between the totals of the Income Statement columns is net income or
net loss
E.The net income or net loss from the Income Statement columns is entered in the
Balance Sheet & Statement of Owner’s Equity columns
29) Presented below are terms preceded by letters a through g and followed by a list of
definitions 1 through 7. Match the letter of the term with the definition. Use the space
provided preceding each definition.
1>Net Cash Flow A. A discount rate that results in a net present value of zero.
2>Net Present Value B. Cash inflows minus cash outflows for the period.
3>Internal Rate of Return C. A minimum acceptable rate of return.
4>Hurdle Rate D. The time expected to pass before the net cash flows from an
investment equals its initial cost.
5>Capital Budgeting E. Annual after-tax net income divided by annual average
investment.
6>Accounting Rate of Return F. A process of analyzing alternative long-term
investments.
7>Payback Period G. Initial cost of an investment subtracted from discounted future
cash flows from the investment.
30) The stockholders’ equity section of a company’s year-end balance sheet follows:
The preferred stock has a call price of $103 per share plus dividends in arrears. Only
one year of dividends is in arrears. Calculate the book value per (1) preferred share, and
(2) common share.
31) The production activities for a customized product represent a(n):
A.Operation
B.Job
C.Unit
D.Pool
E.Process
32) At the end of the current year, Norman Company reported total liabilities of
$300,000 and total equity of $100,000. The company’s debt ratio on the last year-end
was:
A.300%
B.33.3%
C.75.0%
D.$400,000
E.Cannot be determined from the information provided
33) A company normally sells its product for $20 per unit. However, the selling price
has fallen to $15 per unit. This company’s current inventory consists of 200 units
purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate
the value of this company’s inventory at the lower of cost or market.
A.$2,550
B.$2,600
C.$2,700
D.$3,000
E.$3,200
34) Bradford Company budgeted 4,000 pounds of material costing $5.00 per pound to
produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per
pound to produce 2,000 units. What is the direct materials quantity variance?
A.$400 unfavorable
B.$450 unfavorable
C.$2,500 unfavorable
D.$2,550 unfavorable
E.$2,950 unfavorable
35) How long will it take an investment of $25,000 at 6% compounded annually to
accumulate to a total of $35,462.50?
A.4 years
B.5 years
C.6 years
D.2 years
E.10 years
36) A company manufactures a product and sells it for $120 per unit. The total fixed
costs of manufacturing and selling the product are expected to be $155,250, and the
variable costs are expected to be $75 per unit. What is the company’s break-even point
in (a) units and (b) dollar sales?
37) Yoho Company reported the following financial numbers for one of its divisions for
the year; average total assets of $5,800,000; sales of $5,375,000; cost of goods sold of
$3,225,000; and operating expenses of $1,147,000. Compute the division’s return on
assets:
A.18.6%
B.21.3%
C.17.3%
D.10.4%
E.14.7%
38) The system of preparing financial statements based on recognizing revenues when
the cash is received and reporting expenses when the cash is paid is called:
A.Accrual basis accounting
B.Operating cycle accounting
C.Cash basis accounting
D.Revenue recognition accounting
E.Current basis accounting
39) A company manufactures and sells a product for $120 per unit. The company’s fixed
costs are $68,760, and its variable costs are $90 per unit. The company’s break-even
point in dollars is:
A.$91,680
B.$68,760
C.$2,292
D.$275,040
E.$206,280
40) On November 1, Carter Company signed a 120-day, 10% note payable, with a face
value of $9,000. Carter made the appropriate year-end accrual. What is the journal entry
as of March 1 to record the payment of the note assuming no reversing entry was made?
A.Debit Notes Payable $9,000; debit Interest Payable $150; credit Cash $9,150
B.Debit Cash $9,300; credit Notes Payable $9,300
C.Debit Notes Payable $9,300; credit Interest Payable $150; credit Interest Expense
$150; credit Cash $9,000
D.Debit Notes Payable $9,000; debit Interest Payable $150; debit Interest Expense
$150; credit Cash $9,300
E.Debit Notes Payable $9,000; debit Interest Expense $300; credit Cash $9,300
41) The adjusting entry to record an accrued expense is:
A.Increase an expense; increase a liability
B.Increase an asset; increase revenue
C.Decrease a liability; increase revenue
D.Increase an expense; decrease an asset
E.Increase an expense; decrease a liability
42) Liquidity problems are likely to exist when a company’s acid-test ratio:
A.Is less than the current ratio.
B.Is 1 to 1.
C.Is higher than 1 to 1.
D.Is substantially lower than 1 to 1.
E.Is higher than the current ratio.
43) A voucher system is a series of prescribed control procedures:
A.Designed to eliminate the need for subsidiary ledgers
B.Designed to determine if the company is operating profitably
C.Used almost exclusively by small companies
D.Used to ensure that the company sells on credit only to creditworthy customers
E.Designed to control cash disbursements and the acceptance of obligations
44) A company is planning to introduce a new portable TV to its existing product line.
Management must decide whether to make the TV case or buy it from an outside
supplier. The lowest outside price is $100. If the case is produced internally, the
company will have to purchase new equipment that will yield annual depreciation of
$130,000. The company will also need to rent a new production facility at $200,000 a
year. At 20,000 cases per year, a preliminary analysis of production costs shows the
following:
Required:
(1) Determine whether the company should make the cases or buy them from the
outside supplier.
(2) What decision should be made if only 15,000 cases are needed?
(3) What other factors, besides cost, should the company consider?
45) List and explain the steps in preparing a 10-column worksheet.
46) Define plant assets and identify the four primary issues in accounting for them.
47) If a 60-day note receivable is dated September 22, what is the maturity date of the
note?
48) ________________ reflects the liquidity of a company’s accounts receivable.