1) Indirect labor and indirect materials would be part of factory overhead.
2) Property tax expense for a department store’s store equipment is an example of a
direct expense.
3) If two companies have the same current ratio, their ability to pay short-term debt is
the same.
4) If $500,000 of 10-year bonds, with interest payable semiannually, are sold for
$494,040 based on (1) the present value of $500,000 due in 20 periods at 5% plus (2)
the present value of twenty, $25,000 payments at 5%, the nominal or contract rate and
the market rate of interest for the bonds are both 10%.
5) A subsidiary inventory ledger can be an aid in maintaining inventory levels at their
proper levels.
6) The balance in Premium on Bonds Payable should be reported as a deduction from
Bonds Payable on the balance sheet.
7) The first budget to be prepared is usually the sales budget.
8) If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the profit margin is 20%.
9) If the balance in Cash Short and Over at the end of a period is a credit, it should be
reported as an “other income” item on the income statement.
10) The financial statements of a proprietorship should include the owner’s personal
assets and liabilities.
11) Debits will increase Unearned Revenues and Revenues.
12) Although marketable securities may be retained for several years, they continue to
be classified as temporary, provided they are readily marketable and can be sold for
cash at any time.
13) An example of an external user of accounting information is the federal
government.
14) Which of the following items would affect the cost of merchandise inventory
acquired during the period?
A.quantity discounts
B.cash discounts
C.freight-in
D.all of these costs
15) A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is
sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?
A.$2,000 loss
B.$1,500 loss
C.$3,500 gain
D.$2,000 gain
16) If common stock is issued for an amount greater than par value, the excess should
be credited to
A.Retained Earnings
B.Cash
C.Legal Capital
D.Paid-in Capital in Excess of Par Value
17) The controller’s staff often consists of several management accountants. All of the
following would most likely be on the controller’s staff EXCEPT:
A.general accountants
B.budgets and budget analysts
C.investments and shareholder relations managers
D.cost accountants
18) Kala and Leah, partners in Best Designs, have capital balances of $40,000 and
$60,000 respectively. Adam joins the partnership by buying one-half of Kalas interest
for $30,000. In addition, because of Adams outstanding sales skills, the partners agree
to increase his interest to 40% if he invests another $10,000. The income-sharing ratio
of Kala, Leah, and Adam is 4:3:1.
19) The standard costs and actual costs for direct materials for the manufacture of 2,500
actual units of product are as follows:
The amount of the direct materials quantity variance is:
A.$875 favorable
B.$800 unfavorable
C.$800 favorable
D.$875 unfavorable
20) The Boxwood Company sells blankets for $60 each. The following was taken from
the inventory records during May. The company had no beginning inventory on May 1.
Assuming that the company uses the perpetual inventory system, determine the ending
inventory for the month of May using the LIFO inventory cost method.
A.$324
B.$372
C.$320
D.$364
21) A company that has 25,000 shares of $5.00 par value common stock issued and
outstanding paid a dividend of $0.40 per share. The market value of the stock is $16 per
share. The companys dividend yield is:
A.2.5%
B.400%
C.16%
D.40%
22) The Balance Sheet should be prepared
A.before the income statement and the statement of owners equity
B.before the income statement and after the statement of owners equity
C.after the income statement and the statement of owners equity
D.after the income statement and before the statement of owners equity
23) The cost of goods sold for Heedy manufacturing in 2011 was $233,000. The
January 1, 2011, finished goods inventory balance was $31,600, and the December 31,
2011, finished goods inventory balance was $24,200. Cost of goods manufactured
during the period was:
A.$233,000
B.$225,600
C.$288,800
D.$240,400
24) The Western Division of Bestboot Company has a rate of return on investment of
15% and an investment turnover of 1.2. What is the profit margin?
A.10%
B.12.5%
C.9%
D.6%
25) Office salaries, depreciation of office equipment, and office supplies are examples
of what type of expense?
A.selling expense
B.miscellaneous expense
C.administrative expense
D.other expense
26) When does an account become uncollectible?
A.when accounts receivable is converted into notes receivable
B.when discount is availed on notes receivable
C.there is no general rule for when an account becomes uncollectible
D.at the end of the fiscal year
27) Gentry, sole proprietor of a hardware business, decides to form a partnership with
Noel. Gentrys accounts are as follows:
Noel agrees to contribute $80,000 for a 20% interest. Journalize the entries to record (a)
Gentrys investment and (b) Noels investment.
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 North
region.
Round to one decimal place.
A.22.4%
B.(25.0%)
C.25.0%
D.(22.4%)
29) ABC Corporation has three service departments with the following costs and
activity base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
How much service department cost would be allocated to the Macro Division?
A.$405,000
B.$175,000
C.$130,000
D.$305,000
30) The cash flows from operating activities are reported by the direct method on the
statement of cash flows. Determine the following:
31) Which of the following is not true about closing entries?
A.There are four closing entries that update the owners equity account
B.After the second closing entry, the income summary account is equal to the net
income or (loss) for the period
C.All real accounts are closed at the end of the period
D.By closing nominal accounts at the end of the period to zero, it is possible to isolate
next periods information correctly
32) Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital
balances are $80,000 and $120,000 respectively. Income Summary has a credit balance
of $30,000. What is Tomas capital balance after closing Income Summary to Capital?
A.$102,500
B.$22,500
C.$57,500
D.$127,500
33) Which of the following is not an internal control procedure for payroll?
A.observe clocking in and out time for the employees
B.payroll depends on a fired employee’s supervisor to notify them when an employee
has been fired
C.payroll requires employees to show identification when picking up their paychecks
D.changes in pay rates on a computerized system must be tested by someone
independent of payroll
34) Which is the best example of a decentralized operation?
A.One owner who prepares plans and makes decisions for the entire company
B.Each unit is responsible for their own operations and decision making
C.In a major company, operating decisions are made by top management
D.None of the above. All are examples of a centralized management
35) The budget process involves doing all the following except:
A.establishing specific goals
B.executing plans to achieve the goals
C.periodically comparing actual results with the goals
D.dismissing all managers who fail to achieve operational goals specified in the budget
36) Which of the following is not an internal control activity for cash?
A.The number of persons who have access to cash should be limited
B.All cash receipts should be recorded promptly
C.The functions of record keeping and maintaining custody of cash should be combined
D.Surprise audits of cash on hand should be made occasionally
37) A debit balance in which of the following accounts would indicate a likely error?
A.Salaries Expense
B.Notes Payable
C.Edgar Martin, Drawing
D.Supplies
38) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs from Department 1 into Department 2
during the period is:
A.Work in Process–Department 2390,000
Work in Process–Department 1390,000
B.Work in Process–Department 2330,000
Work in Process–Department 1330,000
C.Work in Process–Department 2215,000
Work in Process–Department 1215,000
D.Work in Process–Department 2375,000
Work in Process–Department 1375,000
39) Another term often used to refer to factory overhead is:
A.surplus
B.period cost
C.supervisory cost
D.factory burden
40) Which of the following is not a characteristic of useful managerial accounting
reports?
A.Accuracy
B.GAAP
C.historical and estimated data
D.reports prepared as needed
41) A check drawn by a company for $340 in payment of a liability was recorded in the
journal as $430. What entry is required in the company’s accounts?
A.debit Accounts Payable; credit Cash
B.debit Cash; credit Accounts Receivable
C.debit Cash; credit Accounts Payable
D.debit Accounts Receivable; credit Cash
42) The matching concept
A.addresses the relationship between the journal and the balance sheet
B.determines whether the normal balance of an account is a debit or credit
C.requires that the dollar amount of debits equal the dollar amount of credits on a trial
balance
D.states that the revenues and related expenses should be reported in the same period
43) Balance sheet and income statement data indicate the following:
Based on the data presented above, what is the number of times bond interest charges
were earned (round to one decimal point)?
A.3.7
B.4.4
C.4.5
D.3.5
44) On January 1, 2010, Cary Parsons established a catering service. Listed below are
accounts to use for transactions (a) through (e), each identified by a number. Following
this list are the transactions that occurred in Parsons first month of operation. You are to
indicate for each transaction the accounts that should be debited and credited by placing
the account number(s) in the appropriate box.
Transactions Account(s) Debited Account(s) Credited
a. Purchased supplies for cash.
b. Paid the annual premiums on property and casualty insurance.
c. Received cash for a job previously recorded on account.
d. Paid a creditor a portion of the amount owed for equipment previously purchased on
account.
e. Received cash for a completed job.
45) The following adjusting journal entry does not include an explanation. Select the
best explanation for the entry.
A.Record payment of fees earned
B.Record fees earned at the end of the month
C.Record fees that have not been earned at the end of the month
D.Record payment of fees to be earned
46) Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a
balance of $10,000. If the issuing corporation redeems the bonds at 97.5, what is the
amount of gain or loss on redemption?
A.$10,000 loss
B.$25,000 loss
C.$25,000 gain
D.$15,000 gain
47) When the perpetual inventory system is used, the inventory sold is debited to
A.supplies expense
B.cost of merchandise sold
C.merchandise inventory
D.sales
48) Discuss the characteristics of a LLC (Limited liability company).
49) On the basis of the following data, estimate the cost of the merchandise inventory at
March 31 by the retail method:
50) A machine costing $57,000 with a 6-year life and $54,000 depreciable cost was
purchased January 1, 2015. Compute the yearly depreciation expense using straight-line
depreciation.
51) Ramierez Company received their first electric bill in the amount of $60 which will
be paid next month. How will this transaction affect the accounting equation?
52) Prior to adjustment at August 31, 2014, Salary Expense has a debit balance of
$298,500. Salaries owed but not paid as of the same date total $7,200.
53) Groceries R Us, Inc. reported the following date in its December 31, 2011 annual
report.
Cash and cash equivalents $2,280,000
Cash flow from operations (240,000)
(1) What is the companys cash burn per month?
(2) What is the companys ratio of cash to monthly cash expenses?
(3) Interpret the ratio you computed in part 2. What are the implications for Groceries R
Us, Inc.?
54) Journalize the following selected transactions for April 2011 in a two-column
journal. Journal entry explanations may be omitted.
55) The following items may appear on a bank statement:
Indicate whether the item would appear as debit or credit memo on the bank statement
and whether the item would increase or decrease the balance of your account. Use the
following format:
56) On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22
per share plus a $240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per
share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a
$160 brokerage fee.
Required:
Prepare the journal entries for the original purchase, dividend and sale.
