1) The doomsday ratio includes both cash and cash equivalents in the numerator.
2) The amount of depreciation expense for the first full year of use of a fixed asset
costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years,
is $19,000 by the straight-line method.
3) A loan in which the lender deducts interest from the amount borrowed before the
money is advanced to the borrower is called an interest bearing note.
4) The totals at the bottom of the trial balance and the totals at the bottom of the balance
sheet both show equality and balancing, and therefore should be equal.
5) A large retained earnings account means that there is cash available to pay dividends.
6) Principle of exceptions allows managers to focus on correcting variances between
standard costs and actual costs.
7) There are two internal control objectives and they are to ensure accurate financial
reports, and ensure compliance with applicable laws.
8) In the vertical analysis of a balance sheet, the base for current liabilities is total
liabilities.
9) A receiving report is prepared when purchased materials are first received by the
manufacturing department.
10) The three common types of responsibility centers are referred to as cost centers,
profit centers, and investment centers.
11) Investments in bonds that management intends to hold to maturity are called trading
securities.
12) The amount of income that would result from an alternative use of cash is called
opportunity cost.
13) The Clydesdale Company has sales of $4,500,000. It also has invested assets of
$2,000,000 and operating expenses of $3,600,000. The company has established a
minimum rate of return of 7%.
What is Clydesdale Company’s profit margin?
A.20%
B.80%
C.44.4%
D.18%
14) The Victor Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1,
2011, at 96. The journal entry to record the issuance will show a
A.debit to Cash of $1,000,000
B.credit to Discount on Bonds Payable for $40,000
C.credit to Bonds Payable for $960,000
D.debit to Cash for $960,000
15) Which of the following below increases cash?
A.depreciation expense
B.acquisition of treasury stock
C.borrowing money by issuing a six-month note
D.the declaration of a cash dividend
16) On the statement of cash flows, the cash flows from operating activities section
would include
A.receipts from the issuance of capital stock
B.receipts from the sale of investments
C.payments for the acquisition of investments
D.cash receipts from sales activities
17) The budget that summarizes future plans for the acquisition of fixed assets is the:
A.direct materials purchases budget
B.production budget
C.sales budget
D.capital expenditures budget
18)
19) The profit margin for Division B is 8% and the investment turnover is 1.20. What is
the rate of return on investment for Division B?
A.8%
B.6.7%
C.7.3%
D.9.6%
20) Six selected transactions for the current month are indicated by letters in the
following T accounts in a job order cost accounting system:
Materials Work in Process
(a) (a) (d)
(b)
(c)
Wages Payable (f)
(b)
Factory Overhead Finished Goods
(a) (c) (d) (e)
(b) (f) (f)
Cost of Goods Sold
(e)
(f)
Describe each of the six transactions.
21) Finished goods inventory is reported on the:
A.income statement as a period cost
B.balance sheet as a long-term asset
C.balance sheet as a current asset
D.income statement as revenue
22) Department J had no work in process at the beginning of the period, 18,000 units
were completed during the period, 2,000 units were 30% completed at the end of the
period, and the following manufacturing costs were debited to the departmental work in
process account during the period (Assuming the company uses FIFO and rounds
average cost per unit to two decimal places):
Assuming that all direct materials are placed in process at the beginning of production,
what is the total cost of the departmental work in process inventory at the end of the
period?
A.$90,000
B.$283,140
C.$199,500
D.$16,438
23) The following information is available for Dorman Company:
Which of the following statements is correct?
A.The dividend yield is 6.0%, which is of interest to investors seeking an increase in
market price of their stocks
B.The dividend yield is 6.0%, which is of special interest to investors seeking to earn
revenue on their investments
C.The dividend yield is 16.7%, which is of interest to bondholders
D.The dividend yield is 16.7% which is an important measure of solvency
24) Each individual entry in the Revenue Journal is posted to
A.the Accounts Receivable controlling account
B.the accounts receivable subsidiary ledger
C.the Revenue controlling account
D.the accounts receivable subsidiary ledger and the controlling account
25) What cost concept used in applying the cost-plus approach to product pricing
includes only desired profit in the “markup”?
A.Product cost concept
B.Variable cost concept
C.Sunk cost concept
D.Total cost concept
26) The numerator of the rate earned on total assets ratio is equal to
A.net income
B.net income plus tax expense
C.net income plus interest expense
D.net income minus preferred dividends
27) If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs
are $50, what are the old and new break-even sales (units) if the unit selling price
increases by $10?
A.6,000 units and 5,294 units
B.18,000 units and 6,000 units
C.18,000 units and 12,858 units
D.9,000 units and 15,000 units
28) The following information pertains to Carlton Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Liabilities and Stockholders Equity
Income Statement
What are the dividends per common share for this company?
A.$20.00
B.$3.33
C.$1.11
D.$0.90
29) Par value
A.is the monetary value assigned per share in the corporate charter
B.represents what a share of stock is worth
C.represents the original selling price for a share of stock
D.is established for a share of stock after it is issued
30) Journalize the entries to correct the following errors:
31) The primary purpose of a stock split is to
A.increase paid-in capital
B.reduce the market price of the stock per share
C.increase the market price of the stock per share
D.increase retained earnings
32) Which of the following items that appeared on the bank reconciliation did not
require an adjusting entry?
A.bank service charges
B.deposits in transit
C.NSF checks
D.A check for $630, recorded in the check register for $360
33) When using the variable cost concept of applying the cost-plus approach to product
pricing, what is included in the markup?
A.Total costs plus desired profit
B.Desired profit
C.Total selling and administrative expenses plus desired profit
D.Total fixed manufacturing costs, total fixed selling and administrative expenses, and
desired profit
34) The Mountain Springs Water Company has two departments. Purifying and
Bottling. The Bottling Department received 67,000 liters from the Purifying
Department. During the period, the Bottling Department completed 65,000 liters,
including 3,000 liters of work in process at the beginning of the period. The ending
work in process was 5,000 liters. How many liters were started and completed during
the period?
A.62,000
B.64,000
C.60,000
D.70,000
35) Cash paid for preferred stock dividends should be shown on the statement of cash
flows under
A.investing activities
B.financing activities
C.noncash investing and financing activities
D.operating activities
36) Which of the following owners equity accounts follows the same debit and credit
rules as liabilities?
A.Expense accounts only
B.Drawing accounts only
C.Revenues accounts only
D.Expenses and drawing accounts
37) Expenditures that add to the utility of fixed assets for more than one accounting
period are
A.committed expenditures
B.revenue expenditures
C.utility expenditures
D.capital expenditures
38)
Calculate the variable factory overhead controllable variance using the above
information:
A.$8,981.75 Favorable
B.$7,280.75 Unfavorable
C.$8,981.75 Unfavorable
D.$7,280.75 Favorable
39) Department G had 3,600 units, 40% completed at the beginning of the period,
12,000 units were completed during the period, 2,000 units were one-fifth completed at
the end of the period, and the following manufacturing costs were debited to the
departmental work in process account during the period:
Assuming that all direct materials are placed in process at the beginning of production
and that the first-in, first-out method of inventory costing is used, what is the material
and conversion cost per unit (to the nearest penny), respectively.
A.$5.94 and $5.86
B.$5.94 and $6.38
C.$8.00 and $8.68
D.$9.84 and $9.58
40) Proper payroll accounting methods are important for a business for all the reasons
below except
A.good employee morale requires timely and accurate payroll payments
B.payroll is subject to various federal and state regulations
C.to help a business with cash flow problems by delayed payments of payroll taxes to
federal and state agencies
D.payroll and related payroll taxes have a significant effect on the net income of most
businesses
41) The authorized stock of a corporation
A.must be recorded in a formal accounting entry
B.only reflects the initial capital needs of the company
C.is indicated in its by-laws
D.is indicated in its charter
42) Prepare (a) a single-step income statement, (b) a statement of owner’s equity, and
(c) a balance sheet in report form from the following data for Kooper Co., taken from
the ledger after adjustment on December 31, 2010 the end of the fiscal year.
43) Which of the following is characteristic of a general partnership?
A.The partners have co-ownership of partnership property
B.The partnership is subject to federal income tax
C.The partnership has an unlimited life
D.The partners have limited liability
44) Which of the following is true regarding normal balances of accounts?
A.All accounts have a normal debit balance
B.The normal balance of all accounts will have either a positive or negative balance.
C.Accounts that have a normal debit balance will only have debit entries, never credit
entries
D.The normal balance is the side of the account that increases the account
45) Journalize the following five transactions for Nexium & Associates, Inc. Omit
explanations.
46) On April 10, a company acquired land in exchange for 1,000 shares of $20 par
common stock with a current market price of $73. Journalize this transaction.
47) After all adjustments have been made, but before the accounts have been closed, the
following balances were taken from the ledger of Ramonas Designs:
Journalize the entries to close the appropriate accounts.
48) A machine costing $85,000 with a 5-year life and $5,000 residual value was
purchased January 2, 2011. Compute depreciation for each of the five years, using the
declining-balance method at twice the straight-line rate.
49) Journalize the following transactions assuming a perpetual inventory system.:
Journal
50) Damien Lawson invests $45,000 to initiate the operation of his business, JumpStart,
on January 7th. Journalize this transaction.