1) U.S. Government Treasury bonds provide low return and low risk to investors.
2) A high level of expected risk suggests a low price-earnings (PE) ratio.
3) The primary objective of managerial accounting is to provide general purpose
financial statements to help external users analyze and interpret an organization’s
activities.
4) Transactions are recorded first in the ledger and then transferred to the journal.
5) If the indirect labor cost in August for clerical and maintenance that help production
in all departments was $123,000, the following journal entry would be recorded in a
process costing system:
6) When auditors audit financial statements and a company’s controls they rely on
accounting system databases.
7) Consolidated financial statements show the financial position, results of operations,
and cash flows of all entities under the parent’s control, including all subsidiaries.
8) If the predetermined overhead allocation rate is 250% of direct labor cost and the
Finishing Department’s direct labor cost for the reporting period is $20,000, the
following entry would record the allocation of overhead to the products processed in
this department:
9) Manufacturers that utilize process operations produce large quantities of identical
products.
10) A budget can be an effective means of communicating management’s plans to the
employees of a business.
11) Preparation of the statement of cash flows does not involve:
A.Computing the net increase or decrease in cash.
B.Computing and reporting net cash provided or used by operations.
C.Computing the profit compared to the net increase or decrease in cash.
D.Computing and reporting net cash provided or used by financing activities.
E.Computing and reporting net cash provided or used by investing activities.
12) On April 1, Santa Fe, Inc. paid Griffith Publishing Company $1,548 for 36-month
subscriptions to several different magazines. Santa Fe debited the prepayment to a
Prepaid Subscriptions account, and the subscriptions started immediately. What amount
should appear in the Prepaid Subscription account for Santa Fe, Inc. after adjustments
on December 31 of the first year assuming the company is using a calendar reporting
period and no previous adjustment has been made?
A.$1,548.
B.$387.
C.$516.
D.$1,161.
E.$0.
13) A company’s income statement showed the following: net income, $124,000 and
depreciation expense, $30,000. An examination of the company’s current assets and
current liabilities showed the following changes as a result of operating activities:
accounts receivable decreased $9,400; merchandise inventory increased $18,000; and
accounts payable increased $3,400. Calculate the net cash provided or used by
operating activities.
A.$118,000.
B.$159,200.
C.$123,200.
D.$148,800.
E.$178,000.
14) Carducci Corporation reported Net sales of $3.6 million and average Total assets of
$1.1 million. The Total asset turnover is:
A.0.31 times.
B.3.27 times.
C.4.30 times.
D.2.27 times.
E.0.77 times.
15) The relevant factors in computing depreciation do not include:
A.Cost.
B.Salvage value.
C.Useful life.
D.Depreciation method.
E.Market value.
16) Mirkle Corporation uses the following activity rates from its activity-based costing
to assign overhead costs to products:
Data for one of the company’s products follow:
The company produced 4,000 units of product during the period. Direct materials cost
$7.30 per unit and direct labor cost $5.45 per unit. How much total cost would be
assigned to the 4,000 units of Product P59G using the activity-based costing system?
A.$61,014.40
B.$39,214.40
C.$10,014.40
D.$51,000.00
E.$31,814.40
17) Intangible assets do not include:
A.Patents.
B.Copyrights.
C.Trademarks.
D.Goodwill.
E.Land held as an investment.
18) Which of the following is not part of the production activity in the flow of
manufacturing activities?
A.Beginning Work in Process Inventory
B.Cost of goods manufactured
C.Direct labor
D.Factory overhead
E.Total finished goods available for sale
19) Secured bonds:
A.Are called debentures.
B.Have specific assets of the issuing company pledged as collateral.
C.Are backed by the issuer’s bank.
D.Are subordinated to those of other unsecured liabilities.
E.Are the same as sinking fund bonds.
20) Granite Company purchased a machine costing $120,000, terms 1/10, n/30. The
machine was shipped FOB shipping point and freight charges were $2,000. The
machine requires special mounting and wiring connections costing $10,000. When
installing the machine, $1,300 in damages occurred. Compute the cost recorded for this
machine assuming Granite paid within the discount period.
A.$129,800.
B.$132,100.
C.$130,800.
D.$118,800.
E.$120,100.
21) On April 1, Santa Fe, Inc. paid Griffith Publishing Company $1,548 for 36-month
subscriptions to several different magazines. Santa Fe debited the prepayment to a
Prepaid Subscriptions account, and the subscriptions started immediately. What
adjusting entry should be made by Santa Fe, Inc. for the adjustment on December 31 of
the first year assuming the company is using a calendar reporting period and no
previous adjustments had been made?
A.Debit Subscription Expense $516 and credit Prepaid Subscriptions $516.
B.Debit Prepaid Subscriptions $516 and credit Subscription Expense $516.
C.Debit Subscription Expense $387 and credit Cash $387.
D.Debit Unearned Subscriptions $387 and credit Subscription Expense $387.
E.Debit Subscription Expense $387 and credit Prepaid Subscriptions $387.
22) Match the following terms with the definitions.
23) _______________ bonds are bonds that mature at more than one date, often in a
series, and thus are usually repaid over a number of periods.
24) Job order costing and process costing are two major costing systems used in
manufacturing. Briefly contrast the characteristics of these two systems.
25) There are at least five benefits from budgeting. Identify two of these benefits:
(1) _______________________________________
(2) _______________________________________
26) Describe the flow of the raw materials, both direct and indirect, through the
inventory accounts from purchase to use.
27) A company reported the following data related to its ending inventory:
Calculate the lower-of-cost-or-market on the inventory applied separately to each
product.
28) The net present value decision rule requires that when an asset’s expected cash
flows are discounted at the required rate and yield a positive net present value, the
project should be ____________________.
29) A company had net income of $86,000 in Year 1 and $118,000 in Year 2. Its net
sales were $640,000 in Year 1 and $611,000 in Year 2. Its average total assets in Year 1
were $1,670,000 and $1,712,000 in Year 2. Calculate the profit margin, total asset
turnover and return on total assets for both years. Comment on the results.
