1) Which of the following is not a common cost flow assumption used in costing
inventory?
a.First-in, first-out
b.Middle-in, first-out
c.Last-in, first-out
d.Average cost
2) (a)Identify several alternatives for presenting significant noncash activities in
financial statements.
(b)Give three examples of significant noncash transactions.
3) On January 15, 2014, Craig Company received a two-month, 9%, $9,000 note from
William Pentel for the settlement of his open account. The entry by Craig Company on
January 15, 2014 would include a:
a.debit of $9,135 to Notes Receivable
b.debit of $9,000 to Notes Receivable
c.credit of $9,135 to Accounts Receivable
d.credit of $9,000 to Notes Receivable
4) A patent should
a.be amortized over a period of 20 years
b.not be amortized if it has an indefinite life
c.be amortized over its useful life or 20 years, whichever is longer
d.be amortized over its useful life or 20 years, whichever is shorter
5) Faget and Hein sell to Melges a 1/3 interest in the Faget – Hein partnership. Melges
will pay Faget and Hein each $140,000 for admission into the organization. Before this
transaction, Faget and Hein show capital balances of $210,000 each. The journal entry
to record the admission of Melges will
a.show a debit to Cash for $280,000
b.not show a debit to Cash
c.show a debit to Hein, Capital for $140,000
d.show a credit to Melges, Capital for $280,000
6) In a perpetual inventory system, cost of goods sold is recorded
a.on a daily basis
b.on a monthly basis
c.on an annual basis
d.with each sale
7) Dean Corporation reported net income $58,000, net sales $500,000, and average
assets $800,000 for 2014 . The 2014 profit margin was:
a.5.8%
b.11.6%
c.62.5%
d.160%
8) R&R Company purchased some equipment 3 years ago. The company’s required rate
of return is 12%, and the net present value of the project was $(550). Annual cost
savings were: $5,000 for year 1; $4,000 for year 2; and $3,000 for year 3 . The amount
of the initial investment was
Present ValuePV of an Annuity
Year of 1 at 12% of 1 at 12%
1.893.893
2.7971.690
3.7122.402
a.$9,239
b.$10,014
c.$9,789
d.$10,339
9) Top management’s reaction to a difference between budgeted and actual sales often
depends on
a.whether the difference is favorable or unfavorable
b.whether management anticipated the difference
c.the materiality of the difference
d.the personality of the top managers
10) The option to value inventory at fair value exists under
GAAPIFRS
a.YesNo
b.YesYes
c.NoNo
d.NoYes
11) As inventoriable costs expire, they become
a.selling expenses
b.gross profit
c.cost of goods sold
d.sales revenue
12) Consolidated financial statements are prepared when a company owns _________
of the common stock of another company.
a.less than 20%
b.between 20% and 50%
c.less than 50%
d.more than 50%
13) A company developed the following per unit materials standards for its product: 3
pounds of direct materials at $5 per pound. If 12,000 units of product were produced
last month and 37,500 pounds of direct materials were used, the direct materials
quantity variance was
a.$4,500 favorable
b.$7,500 unfavorable
c.$4,500 unfavorable
d.$7,500 favorable
14) The work of factory employees that can be physically and directly associated with
converting raw materials into finished goods is
a.manufacturing overhead
b.indirect materials
c.indirect labor
d.direct labor
15) Sutton Inc. can produce 100 units of a component part with the following costs:
Direct Materials$130,000
Direct Labor103,000
Variable Overhead82,000
Fixed Overhead62,000
If Sutton Inc. can purchase the units externally for $300,000, by what amount will its
total costs change?
a.An decrease of 67,000
b.An increase of $15,000
c.An increase of $135,000
d.A decrease of $47,000
16) A journal is not useful for
a.disclosing in one place the complete effect of a transaction
b.preparing financial statements
c.providing a record of transactions
d.locating and preventing errors
17) The revenue recognition principle dictates that revenue be recognized in the
accounting period
a.before it is earned
b.after it is earned
c.in which the performance obligation is satisfied
d.in which it is collected
18) The final step in the accounting cycle is to prepare
a.closing entries
b.financial statements
c.a post-closing trial balance
d.adjusting entries
19) The following information is available for Ness Company.
January 1, 20142014December 31, 2014
Raw materials inventory$ 25,000$31,000
Work in process inventory14,50020,200
Finished goods inventory32,00027,000
Materials purchased$175,000
Direct labor230,000
Manufacturing overhead190,000
Sales840,000
Instructions
(a)Compute cost of goods manufactured.
(b)Prepare an income statement through gross profit.
20) Which of the following time periods would not be referred to as an interim period?
a.Monthly
b.Quarterly
c.Semi-annually
d.Annually
21) Lundquist Manufacturing had average operating assets of $8,000,000 and sales of
$6,000,000 in 2014 . If the controllable margin was $800,000, the ROI was
a.50%
b.40%
c.20%
d.10%
22) Sufjan Stevens Ito began the Sufjan Company by investing $75,000 of cash in the
business. The company recorded revenues of $555,000, expenses of $420,000, and had
owner drawings of $30,000. What was Sufjans net income for the year?
a.$105,000
b.$135,000
c.$165,000
d.$180,000
23) Kreig Corporation has income before taxes of $900,000 and an extraordinary gain
of $300,000. If the income tax rate is 35% on all items, the income statement should
show income before irregular items and extraordinary items, respectively, of
a.$600,000 and $300,000
b.$600,000 and $195,000
c.$585,000 and $300,000
d.$585,000 and $195,000
24) The income summary account
a.is a permanent account
b.appears on the balance sheet
c.appears on the income statement
d.is a temporary account
25) Under IFRS, the trial balance
a.follows the same format as under GAAP
b.shows credits on the left and debits on the right
c.includes less accounts than under GAAP
d.includes more accounts than under GAAP
26) A company has a accounts receivable turnover of 10 times. The average accounts
receivable during the period are $400,000. What is the amount of net credit sales for the
period?
a.$40,000
b.$4,000,000
c.$400,000
d.Cannot be determined from the information given
27) The budgeted overhead costs for standard hours allowed and the overhead costs
applied to the product are the same amount
a.for both variable and fixed overhead costs
b.only when standard hours allowed are less than normal capacity
c.for variable overhead costs
d.for fixed overhead costs
28) Alistair Corporation sells 500 shares of common stock being held as a short-term
investment. The shares were acquired six months ago at a cost of $55 a share. Alistair
sold the shares for $40 a share. The entry to record the sale is
a.Cash20,000
Loss on Sale of Stock Investments7,500
Stock Investments27,500
b.Cash27,500
Gain on Sale of Stock Investments7,500
Stock Investments20,000
c.Cash20,000
Stock Investments20,000
d.Stock Investments20,000
Loss on Sale of Stock Investments7,500
Cash27,000
29) In preparing its August 31, 2014 bank reconciliation, Annie Corp. has available the
following information:
Balance per bank statement, 8/31/14$64,950
Deposit in transit, 8/31/1411,700
Return of customers check not sufficient funds, 8/30/141,800
Outstanding checks, 8/31/148,250
Bank service charges for August300
At August 31, 2014, Annies adjusted cash balance is
a.$56,700
b.$56,400
c.$68,400
d.$61,500
30) Mott Company uses the units-of-activity method in computing depreciation. A new
plant asset is purchased for $48,000 that will produce an estimated 100,000 units over
its useful life. Estimated salvage value at the end of its useful life is $4,000. What is the
depreciation cost per unit?
a.$4.40
b.$4.80
c.$.44
d.$.48
31) A credit sale of $3,600 is made on July 15, terms 2/10, n/30, on which a return of
$200 is granted on July 18. What amount is received as payment in full on July 24?
a.$3,332
b.$3,440
c.$3,528
d$3,600
32) An expense is recorded under the cash basis only when
a.services are performed
b.it is earned
c.cash is paid
d.it is incurred
33) Marke Inc. had cash sales of $400,000 and credit sales of $1,150,000. The accounts
receivable balance increased $30,000 during the year. How much cash did Hark receive
from its customers during the year?
a.$1,520,000
b.$1,120,000
c.$1,550,000
d.$780,000
34) Centro-matic Company began the year with owners equity of $30,000. During the
year, Centro-matic received additional owner investments of $42,000, recorded
expenses of $120,000, and had owner drawings of $8,000. If Centro-matics ending
owners equity was $112,000, what was the companys revenue for the year?
a.$160,000
b.$168,000
c.$202,000
d.$210,000
35) A company is considering eliminating a product line. The fixed costs currently
allocated to the product line will be allocated to other product lines upon
discontinuance. If the product line is discontinued,
a.total net income will increase by the amount of the product line’s fixed costs
b.total net income will decrease by the amount of the product line’s fixed costs
c.the contribution margin of the product line will indicate the net income increase or
decrease
d.the company’s total fixed costs will decrease
36) Using the percentage-of-receivables basis, the uncollectible accounts for the year is
estimated to be $38,000. If the balance for the Allowance for Doubtful Accounts is a
$7,000 credit before adjustment, what is the amount of bad debt expense for the period?
a.$7,000
b.$31,000
c.$38,000
d.$45,000
37) Ale Corporation had net income of $240,000 and paid dividends to common
stockholders of $40,000 in 2014 . The weighted average number of shares outstanding
in 2014 was 60,000 shares. Ale Corporation’s common stock is selling for $60 per share
on the New York Stock Exchange. Ale Corporation’s payout ratio for 2014 is
a.$0.71 per share
b25%
c.16.7%
d.8%
38) In a lease contract,
a.the owner of the property is called the lessee
b.the presence of a bargain purchase option indicates that it is a capital lease
c.the renter of the property is called the lessor
d.there is always a transfer of ownership at the end of the lease term
39) Comment on the validity of the following statements: As an asset loses its ability to
provide services, cash needs to be set aside to replace it. Depreciation accomplishes this
goal.
40) Hawk Company uses a single-column purchases journal, a cash payments journal,
and a general journal to record transactions with its suppliers and others. Record the
following transactions in the appropriate journals.
Transactions
Oct.5Purchased merchandise on account for $19,000 from Harrelson Company.
Oct.6Paid $6,600 to Kens Insurance Company for a two-year fire insurance policy.
Oct.8Purchased store supplies on account for $600 from Stone Pony Supply Company.
Oct.11Purchased merchandise on account for $15,000 from Steve Corporation.
Oct.13Granted a reduction of $3,000 from Steve Corporation for merchandise
purchased on October 11 and returned because of damage.
Oct.15Paid Harrelson Company for merchandise purchased on October 5, less discount.
Oct.16Purchased merchandise for $9,000 cash from Williams Company.
Oct.21Paid Steve Corporation for merchandise purchased on October 11, less
merchandise returned on October 13, less discount.
Oct.25Purchased merchandise on account for $21,000 from Ozzle Company.
Oct.31Purchased equipment for $27,000 cash from Guillen Office Supply Company.
HAWK COMPANY
Purchases Journal
P1
InventoryDr.
DateAccount CreditedRef.Accounts PayableCr.
HAWK COMPANY
General Journal
G1
DateExplanationRef.DebitCredit
———–
HAWK COMPANY
Cash Payments Journal
CP1
OtherAccounts
AccountsAccountsPayableInventoryCash
DateDebitedRef.Dr.Dr.Cr.Cr.
———–
41) The one characteristic that all entries recorded in a cash receipts journal have in
common is
a debit to the Cash account
a credit to the Cash account
c.that they all represent collections from customers
d.that they originate from the sales of merchandise
42) The work of factory employees that can be physically and directly associated with
converting raw materials into products is classified as ______________.
43) Cash flows from operating activities can be calculated using the indirect or direct
method. Briefly describe how the two methods differ yet arrive at the same information
about the net cash flows from operating activities.
44) Bronze Company reported the following items for 2014:
Controllable fixed costs$ 154,000
Contribution margin294,000
Interest expense40,000
Variable costs 160,000
Total assets$1,850,000
Instructions
Compute the controllable margin for 2014 .
45) A 75-day note receivable dated June 10 would mature on ______________.