1) The task of preparing a budget should be the sole task of the most important
department in an organization.
2) Separation of duties involves dividing responsibility for a transaction or a series of
related transactions between two or more individuals or departments.
3) Cost concepts such as variable, fixed, mixed, direct and indirect apply only to
manufacturers and not to service companies.
4) Salary allowances are reported as salaries expense on a partnership income
statement.
5) A company purchased a plant asset for $60,000. The asset has an estimated salvage
value of $4,000, and an estimated useful life of 7 years. The annual depreciation
expense using the straight-line method is $4,000 per year.
6) Which of the following items is reported on the statement of cash flows under
financing activities?
A.Declaration of a cash dividend.
B.Payment of a cash dividend.
C.Declaration of a stock dividend.
D.Payment of a stock dividend.
E.Stock split.
7) When there is a difference between the actual volume of production and the standard
volume of production, which of the following, based solely on fixed overhead, occurs:
A.Production variance.
B.Volume variance.
C.Overhead cost variance.
D.Quantity variance.
E.Controllable variance.
8) Which of the following statements regarding increases in the value of plant assets
under U.S. GAAP and IFRS is true?
A.U.S. GAAP allows companies to record increases in the value of plant assets.
B.IFRS prohibits upward asset revaluations.
C.Under GAAP, a company can reverse an impairment and record that increase in
income.
D.U.S. GAAP prohibits companies from recording increases in the value of plant assets.
E.Under IFRS, an impairment increase beyond as asset’s original cost is not recorded.
9) A company purchased equipment and signed a 7-year installment loan at 9% annual
interest. The annual payments equal $9,000. The present value of an annuity factor for 7
years at 9% is 5.0330. The present value of the loan is:
A.$9,000.
B.$5,033.
C.$63,000.
D.$57,330.
E.$45,297.
10) Masterson Company’s budgeted production calls for 56,000 liters in April and
52,000 liters in May of a key raw material that costs $1.85 per liter. Each month’s
ending raw materials inventory should equal 30% of the following month’s budgeted
materials. The January 1 inventory for this material is 16,800 liters. What is the
budgeted cost of materials purchases for April?
A.$106,560.
B.$101,380.
C.$103,600.
D.$72,520.
E.$132,460.
11) A company earned $3,000 in net income for October. Its net sales for October were
$10,000. Its profit margin is:
A.3%.
B.30%.
C.33%.
D.333%.
E.$7,000.
12) Arial Company has two products: A and B. The company uses activity-based
costing. The total cost and activity for each of the company’s three activity cost pools
are as follows:
The activity rate under the activity-based costing system for Activity 3 is closest to:
A.$70.45
B.$28.87
C.$19.47
D.$58.40
E.$32.55
13) A company had $7,000,000 in net income for the year. Its net sales were
$15,200,000 for the same period. Calculate its profit margin.
A.85.4%.
B.117.1%.
C.53.9%.
D.217.1%.
E.46.1%.
14) Use the following information for Ephron Company to compute days’ sales in
inventory for 2015.
A.52.4
B.82.3
C.50.5
D.76.8
E.79.3
15) After-tax net income divided by the average amount invested in a project, is the:
A.Net present value rate.
B.Payback rate.
C.Accounting rate of return.
D.Earnings from investment.
E.Profit rate.
16) Using the information below for Singing Dolls, Inc., determine the total
manufacturing costs incurred during the year:
A.$13,000.
B.$44,500.
C.$57,500.
D.$94,500.
E.$89,000.
17) Financial statements with data for two or more successive accounting periods
placed in columns side by side, sometimes with changes shown in both dollar amounts
and percentages, are referred to as:
A.Period-to-period statements.
B.Controlling statements.
C.Successive statements.
D.Comparative statements.
E.Serial statements.
18) A capital deficiency means that:
A.The partnership has a loss.
B.The partnership has more liabilities than assets.
C.At least one partner has a debit balance in his/her capital account.
D.At least one partner has a credit balance in his/her capital account.
E.The partnership has been sold at a loss.
19) Olivia Greer is a partner in Made for You. An analysis of Greer’s capital account
indicates that during the most recent year, she withdrew $30,000 from the partnership.
Her share of the partnership’s net loss was $16,000 and she made an additional equity
contribution of $10,000. Her capital account ended the year at $150,000. What was her
capital balance at the beginning of the year?
A.$154,000
B.$170,000
C.$180,000
D.$186,000
E.$196,000
20) Chang Industries has 2,000 defective units of product that have already cost $14
each to produce. A salvage company will purchase the defective units as they are for $5
each. Chang’s production manager reports that the defects can be corrected for $6 per
unit, enabling them to be sold at their regular market price of $21. The incremental
income or loss on reworking the units is:
A.$20,000 loss.
B.$20,000 income.
C.$12,000 loss.
D.$32,000 income.
21) A job cost sheet shows information about each of the following items except:
A.The direct labor costs assigned to the job.
B.The name of the customer.
C.The costs incurred by the marketing department in selling the job.
D.The overhead costs assigned to the job.
E.The direct materials costs assigned to the job.
22) Mega Skateboard Supplier had net sales of $2.8 million, its cost of goods sold was
$1.6 million, and its net income was $0.9 million. Its gross margin ratio equals:
A.32%.
B.175%.
C.43%.
D.57%.
E.56%.
23) The costs of bringing a corporation into existence, including legal fees, promoter
fees, and amounts paid to obtain a charter are called:
A.Minimum legal capital.
B.Stock subscriptions.
C.Organization expenses.
D.Selling expenses.
E.Prepaid fees.
24) McCarthy Company has inventory of 8 units at a cost of $200 each on October 1.
On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4. Using
the FIFO perpetual inventory method, what amount will be reported in cost of goods
sold for the 11 units that were sold?
A.$2,239.
B.$2,255.
C.$2,200.
D.$2,228.
E.$2,215.
25) What are prime costs? What are conversion costs?
26) Describe how accounts receivable arise and how they accounted for, including the
use of a subsidiary ledger and an allowance account.
27) Explain how cash flows from investing and financing activities are determined.
28) Explain how to account for available-for-sale debt and equity securities at and after
acquisition and how they are reported in financial statements.
29) A petty cash fund was originally established with a check for $100. On August 31,
which is the period end, the petty cash fund included the following:
Prepare the general journal entry to record the replenishment of the petty cash fund on
August 31.
30) Use the information below to determine the sales revenue, cost of goods sold and
gross profit that would be reported for the company related to the March 16 sale
assuming the company uses LIFO inventory valuation and a perpetual inventory
system.
31) A company had the following stockholders’ equity on January 1:
On January 10, the company declared a 40% stock dividend to stockholders of record
on January 25, to be distributed January 31. The market value of the stock on January
10 prior to the dividend was $20 per share. What is the book value per common share
on February 1?