1) The most useful allocation basis for the departmental costs of an advertising
campaign for a storewide sale is likely to be:
A.Floor space of each department.
B.Relative number of items each department had on sale.
C.Number of customers to enter each department.
D.An equal amount of cost for each department.
E.Proportion of sales of each department.
2) Technology:
A.Has replaced accounting.
B.Has not improved the clerical accuracy of accounting.
C.Reduces the time, effort and cost of recordkeeping.
D.In accounting has replaced the need for decision makers.
E.In accounting is only available to large corporations.
3) On January 1, a company issues bonds dated January 1 with a par value of $300,000.
The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually
on June 30 and December 31. The market rate is 8% and the bonds are sold for
$312,177. The journal entry to record the issuance of the bond is:
A.Debit Cash $312,177; credit Discount on Bonds Payable $12,177; credit Bonds
Payable $300,000.
B.Debit Cash $300,000; debit Premium on Bonds Payable $12,177; credit Bonds
Payable $312,177.
C.Debit Bonds Payable $300,000; debit Bond Interest Expense $12,177; credit Cash
$312,177.
D.Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds
Payable $300,000.
E.Debit Cash $312,177; credit Bonds Payable $312,177.
4) Maxie’s Game World sold games to a customer on credit for $2,600, terms 1/10, n/30
and the cost of the games was $1,700. When recording the sales transaction in its sales
journal, Maxie’s would enter:
A.$1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cost of
Goods Sold Dr./Inventory Cr. column.
B.$2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Accounts
Payable Dr./Purchases Cr. column.
C.$2,600 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cash Cr.
column.
D.$2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Cost of
Goods Sold Dr./Inventory Cr. column.
E.$1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Other
Accounts column Dr. column.
5) Refer to the following selected financial information from Graphics, Inc. Compute
the company’s times interest earned.
A.6.2.
B.2.5.
C.8.7.
D.9.7.
E.3.7.
6) Adams Manufacturing allocates overhead to production on the basis of direct labor
costs. At the beginning of the year, Adams estimated total overhead of $396,000;
materials of $410,000 and direct labor of $220,000. During the year Adams incurred
$418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor
costs. Compute the amount of under- or overapplied overhead for the year.
A.$10,000 overapplied.
B.$17,200 overapplied.
C.$10,000 underapplied.
D.$17,200 underapplied.
E.$4,800 underapplied.
7) An approach to managing inventories and production operations such that units of
materials and products are obtained and provided only as they are needed is called:
A.Continuous improvement.
B.Customer orientation.
C.Just-in-time manufacturing.
D.Theory of constraints.
E.Total quality management.
8) A corporation sold 14,000 shares of its $1 par value common stock at a cash price of
$13 per share. The entry to record this transaction would include:
A.A debit to Paid-in Capital in Excess of Par Value, Common Stock for $182,000.
B.A debit to Cash for $14,000.
C.A credit to Common Stock for $182,000.
D.A credit to Common Stock for $14,000.
E.A credit to Paid-in Capital in Excess of Par Value, Common Stock for $196,000.
9) Based on the information provided below for Krackle Corp., complete the following
worksheet to be used to prepare the statement of cash flows using the indirect method.
(a) Net income for the year was $30,000.
(b) Dividends of $10,000 were declared and paid.
(c) Krackle’s only noncash expense was depreciation which totaled $50,000.
(d) The company purchased plant assets for $70,000.
(e) Notes payable in the amount of $40,000 were issued during the year for cash.
10) Lu Lu’s Catering has a debt ratio equal to .3 and its competitor, Able’s Bakery, has a
debt ratio equal to .7. Determine the statement below that is correct.
A.Able’s Bakery has a smaller percentage of its assets financed with liabilities as
compared to Lu Lu’s.
B.Able’s Bakery’s financial leverage is less than Lu Lu’s.
C.Able’s Bakery’s financial leverage is greater than Lu Lu’s.
D.Lu Lu’s has a higher risk from its financial leverage.
E.Higher financial leverage involves lower risk.
11) Carter Company reported the following financial numbers for one of its divisions
for the year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold
of $2,550,000; and operating expenses of $1,372,000. Compute the division’s return on
investment:
A.30.3%.
B.23.6%.
C.13.3%.
D.10.4%.
E.14.7%.
12) On November 1, Alan Company signed a 120-day, 8% note payable, with a face
value of $9,000. What is the adjusting entry for the accrued interest at December 31 on
the note?
A.Debit interest expense, $0; credit interest payable, $0.
B.Debit interest payable, $120; credit interest expense, $120.
C.Debit interest expense, $120; credit interest payable, $120.
D.Debit interest expense, $720; credit interest payable, $720.
E.Debit interest payable, $240; credit interest expense, $240.
13) The following information is available for the Noir Detective Agency. After these
closing entries what will be the balance in the G. Noir, Capital account?
A.$239,400.
B.$274,600.
C.$303,400.
D.$289,000.
E.$257,000.
14) The following information is for Barrel and its competitor Crate.
Required:
1> Calculate the dollar amount of gross margin and the gross margin ratio to the nearest
percent, for each company for both years.
2> Which company had the more favorable ratio for each year?
3> Which company had the more favorable change in the gross margin ratio over this
2-year period?
15) A company had net sales of $230,000 for 2015 and $288,000 for 2016. The
company’s average total assets for 2015 were $150,000 and $180,000 for 2016.
Calculate the total asset turnover for each year and comment on the company’s
efficiency in the use of its assets.
16) The minimum acceptable rate of return on an investment, often the company’s cost
of capital, is called the _________________.
17) A company was organized in January 2014 and has 20,000 shares of $10 par value,
10%, nonparticipating preferred stock outstanding and 150,000 shares of $2 par value
common stock outstanding. It has declared and paid cash dividends each year as shown
below. Calculate the total dividends distributed to each class of stockholder under each
of the assumptions given.
18) A retail store has three departments, A, B, and C, each of which has four full-time
employees. The store does general advertising that benefits all departments. Advertising
expense totaled $90,000 for the current year, and departmental sales were:
Calculate the amount of advertising expense that should be allocated to each
department?
19) Describe the adjusting entries, including the accounts used, for 1) prepaid expenses,
2) depreciation and 3) unearned revenues.
20) If a process has _______________ or _______________ inventory of partially
completed production, equivalent units must be calculated so that total costs incurred
during the period are assigned to all units worked on.
21) Identify and discuss the factors involved in computing federal income taxes
withheld from employees.