1) Transactions must first be recorded into the general journal before they can be
entered into specialized journals.
2) Purchases of merchandise are typically credited to the merchandise inventory
account under the perpetual inventory system.
3) The present value of an annuity is the sum of the present values of each cash flow.
4) If the maker of a note fails to pay the debt on the due date, the note is said to be
dishonored.
5) Closing entries are entered directly on to the work sheet.
6) The basic difference between manufacturing and merchandising companies is the
completion level of the products they purchase for resale to customers.
7) Comparable financial statements are designed to compare the financial statements of
two or more corporations.
8) When long-term investments in bonds are sold before their maturity date, the seller
deducts any accrued interest since the last interest payment date from the selling price.
9) A qualitative characteristic that may impact upon capital investment analysis is
manufacturing productivity.
10) A company is planning to purchase a machine that will cost $24,000, have a
six-year life, and have no salvage value. The company expects to sell the machines
output of 3,000 units evenly throughout each year. Total income over the life of the
machine is estimated to be $12,000. The machine will generate cash flows per year of
$6,000. The accounting rate of return for the machine is 16.7%.
11) The range of activity over which changes in cost are of interest to management is
called the relevant range.
12) The time expected to pass before the net cash flows from an investment would
return its initial cost is called the amortization period.
13) If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of
sales, the contribution margin ratio is 60%.
14) The task of preparing a budget should be the sole task of the most important
department in an organization.
15) Since the costs of producing an intermediate product do not change regardless of
whether the intermediate product is sold or processed further, these costs are not
considered in deciding whether to further process a product.
16) If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be
reported in the cash flows from financing activities section of the statement of cash
flows.
17) If a building is appraised for $85,000, offered for sale at $90,000, and the buyer
pays $80,000 cash for it, the buyer would record the building at $85,000.
18) The rate of return on investment may be computed by multiplying investment
turnover by the profit margin.
19) Federal unemployment taxes are paid by the employer and the employee.
20) Even though GAAP requires the accrual basis of accounting, some businesses
prefer using the cash basis of accounting.
21) The amount of the estimated average income for a proposed investment of $90,000
in a fixed asset, giving effect to depreciation (straight-line method), with a useful life of
four years, no residual value, and an expected total income yield of $21,600, is:
A.$10,800
B.$21,600
C.$ 5,400
D.$45,000
22) The Everest Company has income from operations of $80,000, invested assets of
$500,000, and sales of $1,050,000.
What is the profit margin?
A.47.6%
B.7.6%
C.55.2%
D.4.8%
23) The following selected transactions relate to cash collections for a firm that
maintains a $100 change fund at all times. Present entries to record the transactions for
each of the two days of cash receipts from sales.
24) Mocha Coffee Shop has asked the accountant to keep track of the purchases for
beverage, food, and retail items. The accountant has implemented a purchases journal.
Which of the following columns should be included in the new purchases journal?
A.Accounts Payable – Cr., Beverage Supplies – Dr, Food Supplies – Dr, Retail Items
Supplies – Dr, Other – Dr
B.Accounts Payable – Dr, Other – Dr, Beverage Supplies – Cr, Food Supplies -Cr, Retain
Items Supplies – Cr
C.Beverage Supplies – Dr, Food Supplies – Dr, Retail Items Supplies – Dr, Other – Dr,
Cash – Cr
D.Beverage Supplies – Dr, Food Supplies – Dr, Retail Items Supplies – Dr, Other – Cr,
Accounts Payable – Dr
25) Stevens Company started the year with an inventory cost of $145,000. During the
month of January they purchased inventory that cost of $53,000. January sales totaled
$140,000. Estimated gross profit is 35%. The estimated ending inventory as of January
31 is
A.$58,000
B.$91,000
C.$107,000
D.$69,300
26) Below is budgeted production and sales information for Flushing Company for the
month of December:
The unit selling price for product XXX is $5 and for product ZZZ is $15.
Budgeted sales for the month are:
A.$3,180,000
B.$5,820,000
C.$1,800,000
D.$8,500,000
27) If fixed costs are $1,200,000, the unit selling price is $240, and the unit variable
costs are $110, what is the amount of sales required to realize an operating income of
$200,000?
A. 9,231 units
B.12,000 units
C.10,769 units
D. 5,833 units
28) If sales are $820,000, variable costs are 45% of sales, and operating income is
$260,000, what is the contribution margin ratio?
A.45%
B.55%
C.62%
D.32%
29) The production department is proposing the purchase of an automatic insertion
machine. They have identified 3 machines, each with an estimated life of 10 years.
Which machine offers the best internal rate of return?
A.Machine B
B.Machine C
C.Machine A and B
D.Machine A
30) A new machine with a purchase price of $109,000, with transportation costs of
$12,000, installation costs of $5,000, and special acquisition fees of $6,000, would have
a cost basis of
A.$114,000
B.$126,000
C.$121,000
D.$132,000
31) Based on the following data and using a 365-day year, compute (a) the accounts
receivable turnover and (b) the number of days’ sales in receivables. The industry
average is a collection period of once every 20 days, and the number of days’ sales in
receivables averages 25. (c) Comment on this situation.
32) Indicate whether each of the following represents an asset, liability, or owner’s
equity:
(a) accounts payable
(b) wages expense
(c) capital
(d) accounts receivable
(e) withdrawal
(f) land
33) The method of determining depreciation that yields successive reductions in the
periodic depreciation charge over the estimated life of the asset is
A.units-of-production
B.declining-balance
C.straight-line
D.time-valuation
34) Paper Company receives a $6,000, 3-month, 6% promissory note from Dame
Company in settlement of an open accounts receivable. What entry will Paper Company
make upon receiving the note?
A.Notes Receivable 6,000
Accounts ReceivableDame Company 6,000
B.Notes Receivable 6,090
Accounts ReceivableDame Company 6,090
C.Notes Receivable 6,090
Accounts ReceivableDame Company 6,000
Interest Revenue 90
D.Notes Receivable 6,000
35) 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:
What is the service department charge rate for the Personnel Department?
A.$2,758
B.$3,200
C.$3,077
D.$1,000
36) For each of the following, identify whether it would be disclosed as an operating
(O), financing (F), or investing (I) activity on the statement of cash flows under the
indirect method.
a. Purchased buildings
b. Sold Patents
c. Net income
d. Issued Common Stock
e. Paid cash dividends
f. Depreciation expense
37) Cost of goods sold for a manufacturer equals cost of goods manufactured plus:
A.beginning work in process inventory less ending work in process inventory
B.ending work in process inventory less beginning work in process inventory
C.beginning finished goods inventory less ending finished goods inventory
D.ending finished goods inventory less beginning finished goods inventory
38) Calculate income from operations for Jonas Company based on the data given
below:
A.753,250
B.700,750
C.162,750
D.215,250
39) The Swan Company produces their product at a total cost of $43 per unit. Of this
amount $8 per unit is selling and administrative costs. The total variable cost is $30 per
unit The desired profit is $20 per unit.
Determine the mark up percentage on product cost.
A.80%
B.46.5%
C.70%
D.110%
40) The following budget data are available for Happy Company:
If factory overhead is to be applied based on direct labor hours as the cost allocation
base for the predetermined overhead rate, the amount of overhead applied into
production is
A.$180,000
B.$181,000
C.$172,500
D.$184,000
41) The account Valuation Allowance for Trading Securities is found on the:
A.Income statement as Other Revenue (Expenses)
B.Balance sheet as an adjustment to the asset account
C.Balance sheet as an adjustment to Stockholders’ Equity
D.Statement of Retained Earnings
42) A restriction/appropriation of retained earnings
A.decreases total assets
B.increases total retained earnings
C.decreases total retained earnings
D.has no effect on total retained earnings
43) Based on the following data for the current year, what is the number of days’ sales
in accounts receivable?
A.7.3
B.2.5
C.14.6
D.25
44) The costs of services charged to a profit center on the basis of its use of those
services are called:
A.operating expenses
B.noncontrollable charges
C.service department charges
D.activity charges
45) Which of the accounts below would be closed by posting a debit to the account?
A.Unearned Revenue
B.Fees Earned
C.Josh Morton, Drawing
D.Miscellaneous Expense
46) Residual value is also known as all of the following except
A.scrap value
B.trade in value
C.salvage value
D.net book value
47) Blanton Corporation purchased 35% of the outstanding shares of common stock of
Worton Corporation as a long-term investment. Subsequently, Worton Corporation
reported net income and declared and paid cash dividends. What journal entry would
Blanton Corporation use to record the dividends it receives from Worton Corporation?
A.debit Investment in Worton Corporation; credit Cash
B.debit Cash; credit Dividend Revenue
C.debit Investment in Worton Corporation; credit Income of Worton Corporation
D.debit Cash; credit Investment in Worton Corporation
48) Ofelia and Teresa share income and losses in a 2:1 ratio after allowing for salaries
to Ofelia of $48,000 and $60,000 to Teresa. Net income for the partnership is $132,000.
Income should be divided as follows:
A.Ofelia, $56,000; Teresa, $76,000
B.Ofelia, $60,000; Teresa, $72,000
C.Ofelia, $72,000; Teresa, $60,000
D.Ofelia, $64,000; Teresa, $68,000
49) At the end of the current year, Accounts Receivable has a balance of $550,000;
Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the
year total $2,500,000. An analysis of receivables estimates uncollectible receivables as
$25,000.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted
balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt
Expense; and (c) the net realizable value of accounts receivable.
50) Net income appears on the work sheet in the
A.debit column of the Balance Sheet columns
B.debit column of the Adjustments columns
C.debit column of the Income Statement columns
D.credit column of the Income Statement columns
51)
Calculate the total factory overhead cost variance using the above information:
A.$4,866.75 Unfavorable
B.$4,866.75 Favorable
C.$8,981.75 Favorable
D.$8,981.75 Unfavorable
52) DogMart Company records depreciation to Office Equipment and Production
Equipment. Depreciation for the period ending December 31 is $1,400 for Office
Equipment and $2,650 for Production Equipment. Prepare two entries to record the
Office Equipment and Production Equipment depreciation.
53) Trumpet Company produced 8,700 units of product that required 3.25 standard
hours per unit. The standard variable overhead cost per unit is $4.00 per hour. The
actual variance factory overhead was $111,000. Determine the variable factory
overhead controllable variance.
54)
55) Given the following data, determine the times interest earned ratio.
56) The cost of direct materials transferred into the Bottling Department of the
Mountain Springs Water Company is $28,072. The conversion cost for the period in the
Bottling Department is $10,275. The total equivalent units for direct materials and
conversion are 63,800 and 68,500 respectively. Determine the direct materials and
conversion cost per equivalent unit.
Round answers to nearest cent.
57) Beginning inventory, purchases and sales data for tennis rackets are as follows:
Complete the inventory cost card assuming the business maintains a perpetual
inventory system and calculates the cost of merchandise sold and ending inventory
using FIFO.
58) Prepare a trial balance, listing the following accounts in proper sequence. The
accounts (all normal balances) were taken from the ledger of Sophie Designs Co. on
April 30, 2014.
