1) An account has three parts to it; a title, an increase side, and a decrease side.
2) The principal ledger that contains all the balance sheet and income statement
accounts is the general ledger.
3) The direct materials costs and direct labor costs incurred by a production department
are referred to as conversion costs.
4) If the underapplied factory overhead amount is immaterial, it is transferred to Cost of
Goods Sold at the end of the fiscal year.
5) Each account in the cost ledger in a job order system is called a job cost sheet.
6) If not enough partnership cash or other assets are available to pay the withdrawing
partner, a liability may be created for the amount owed the withdrawing partner.
7) A stock split results in a transfer at market value from retained earnings to paid-in
capital.
8) Federal income taxes withheld increase the employer’s payroll tax expense.
9) A payment system that uses computerized electronic impulses to effect a cash
transaction is called electronic funds transfer (EFT).
10) Purchased goods in transit should be included in the ending inventory of the buyer
if the goods were shipped FOB shipping point.
11) During the first year of operations, a company granted warranties on its products.
The estimated cost of the product warranty liability at the end of the year is $8,500. The
product warranty expense of $8,500 should be recorded in the years of the expenditures
to repair the products covered by the warranty payments.
12) Identify the formula for the rate of return on investment.
A.Invested Assets/Income From Operations
B.Sales/Invested Assets
C.Income From Operations/Sales
D.Income From Operations/Invested Assets
13) Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to
a customer for $25,000. The seller paid freight costs of $2,000 and issued a credit
memo for $10,000 prior to payment. What is the amount of the cash discount
allowable?
A.$170
B.$150
C.$130
D.$250
14) Assuming a 360-day year, proceeds of $48,750 were received from discounting a
$50,000, 90-day note at a bank. The discount rate used by the bank in computing the
proceeds was
A.6.25%
B.10.00%
C.10.26%
D.9.75%
15) Investing activities include
A.collecting cash on loans made
B.obtaining cash from customers
C.obtaining capital from owners
D.repaying money previously borrowed
16) Rogers Company reported net income of $35,000 for the year. During the year,
accounts receivable increased by $7,000, accounts payable decreased by $3,000 and
depreciation expense of $8,000 was recorded. Net cash provided by operating activities
for the year is
A.$53,000
B.$47,000
C.$33,000
D.$37,000
17) For March, sales revenue is $1,000,000; sales commissions are 5% of sales; the
sales manager’s salary is $80,000; advertising expenses are $75,000; shipping expenses
total 1% of sales; and miscellaneous selling expenses are $2,100 plus 1% of sales. Total
selling expenses for the month of March are:
A.$227,100
B.$215,000
C.$217,100
D.$152,100
18) Xavier and Yolonda have original investments of $50,000 and $100,000
respectively in a partnership. The articles of partnership include the following
provisions regarding the division of net income: interest on original investment at 15%,
salary allowances of $22,000 and $20,000 respectively, and the remainder equally. How
much of the net income of $90,000 is allocated to Xavier?
A.$30,250
B.$47,750
C.$45,000
D.$42,250
19) The following information is available from the current period financial statements:
The net cash flow from operating activities using the indirect method is
A.$230,000
B.$188,000
C.$198,000
D.$156,000
20) If there is a balance in the unearned subscriptions account after adjusting entries are
made, it represents a(n)
A.deferral
B.accrual
C.drawing
D.revenue
21) The Winston Company estimates that the factory overhead for the following year
will be $1,250,000. The company has decided that the basis for applying factory
overhead should be machine hours, which is estimated to be 50,000 hours. The total
machine hours for the year was 54,300. The actual factory overhead for the year was
$1,348,800.
a) Determine the total factory overhead amount applied.
b) Calculate the over or under applied amount for the year.
c) Prepare the journal entry to close factory overhead into Cost of Goods Sold.
22) Supplies purchased on account were incorrectly recorded as Office Equipment. The
correcting entry would be
A.Supplies, debit; Office Equipment, credit
B.Accounts Receivable, debit; Supplies, credit
C.Office Equipment, debit; Supplies Expense, credit
D.Supplies, debit; Accounts Payable, credit
23) A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is
traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $3,000,
the recognized loss on the trade is
A.$3,000
B.$4,500
C.$ 500
D.$1,500
24) Who pays the freight costs when the terms are FOB shipping point?
A.the ultimate customer
B.the buyer
C.the seller
D.either the seller or the buyer
25) Magpie Corporation uses the total cost concept of product pricing. Below is cost
information for the production and sale of 60,000 units of its sole product. Magpie
desires a profit equal to a 25% rate of return on invested assets of $700,000.
The unit selling price for the company’s product is:
A.$15.00
B.$13.82
C.$15.80
D.$14.76
26) The accumulated depletion account is
A.an expense account
B.an intangible asset account
C.reported on the income statement as other expense
D.reported on the balance sheet as a deduction from the cost of the mineral deposit
27) The principle of exceptions allows managers to
A.focus on correcting variances between standard costs and actual costs
B.focus on correcting variances between variable costs and actual costs
C.focus on correcting variances between competitors costs and actual costs
D.focus on correcting variances between competitors costs and standard costs
28) Selected accounts with a credit amount omitted are presented as follows:
What was the balance of Work in Process as of April 30?
A.$8,100
B.$35,000
C.$29,900
D.$22,900
29) Assuming no employees are subject to ceilings for their earnings, Moore Company
has the following information for the pay period of December 15 – 31, 20xx.
Salaries Payable would be recorded for
A.$16,000
B.$ 9,808
C.$10,800
D.$11,040
30) The entry to record the return of merchandise from a customer would include a
A.debit to Sales
B.credit to Sales
C.debit to Sales Returns and Allowances
D.credit to Sales returns and Allowances
31) The Boxwood Company sells blankets for $60 each. The following was taken from
the inventory records during May. The company had no beginning inventory on May 1.
Assuming that the company uses the perpetual inventory system, determine the cost of
merchandise sold for the sale of May 20 using the LIFO inventory cost method.
A.$136
B.$144
C.$180
D.$120
32) All of the following statements regarding a horizontal analysis are true except:
A.A horizontal analysis is used to compare an item in a current statement with the same
item in prior statements
B.A horizontal analysis can be performed on a balance sheet and income statement, but
not on a statement of cash flows
C.If Fees Earned in 2013 is $125,000 and Fees Earned in 2014 is $143,750, a horizontal
analysis will indicate a 15% increase over this period
D.When two statement are compared in horizontal analysis, the earlier statement is used
as the base for computing the amount and the percent of change
33) When the maturities of a bond issue are spread over several dates, the bonds are
called
A.serial bonds
B.bearer bonds
C.debenture bonds
D.term bonds
34) The amount of income that would result from an alternative use of cash is called:
A.differential income
B.sunk cost
C.differential revenue
D.opportunity cost
35) Which of the following reasons would cause a company to reject an offer to accept
business at a special price?
A.The additional sale will not conflict with regular sales
B.The additional sales will increase differential income
C.The additional sales will not increase fixed expenses
D.The additional sales will increase fixed expenses
36) Using the following information, prepare a bank reconciliation for Young Co. for
August 31, 2014:
(a) The bank statement balance is $4,690
(b) The cash account balance is $5,080.
(c) Outstanding checks amounted to $715.
(d) Deposits in transit are $1,020.
(e) The bank service charge is $40.
(f) A check for $72 for supplies was recorded as $27 in the ledger.
37) A bank reconciliation should be prepared
A.whenever the bank refuses to lend the company money
B.to explain any difference between the company’s balance per books with the balance
per bank
C.by the company’s bank
D.by the person who is authorized to sign checks
38) A fiscal year
A.ordinarily begins on the first day of a month and ends on the last day of the following
twelfth month
B.for a business is determined by the federal government
C.always begins on January 1 and ends on December 31 of the same year
D.should end at the height of the business’s annual operating cycle
39) The most widely used depreciation method is
A.straight-line
B.double-declining-balance
C.units-of-production
D.units-of-production or double-declining-balance
40) Machinery is purchased on July 1 of the current fiscal year for $240,000. It is
expected to have a useful life of 4 years, or 25,000 operating hours, and a residual value
of $15,000. Compute the depreciation for the last six months of the current fiscal year
ending December 31 by each of the following methods:
(a) straight-line
(b) declining-balance at twice the straight-line rate
(c) units-of-production (used for 1,600 hours during the current year)
(Round the answer to the nearest dollar.)
41) When several alternative investment proposals of the same amount are being
considered, the one with the largest net present value is the most desirable. If the
alternative proposals involve different amounts of investment, it is useful to prepare a
relative ranking of the proposals by using a(n):
A.average rate of return
B.consumer price index
C.present value index
D.price-level index
42) Balances of the current asset and current liability accounts at the end and beginning
of the year are as follows:
Use the direct method to prepare the cash flows from operating activities section of a
statement of cash flows.
43) The records of Nevada Co. indicated that $420,000 of merchandise should be on
hand on December 31, 2010. The physical inventory indicates that $370,000 of
merchandise is actually on hand. Journalize the adjusting entry for the inventory
shrinkage for the year ended December 31, 2010.
44) What is a partnership? List three advantages and three disadvantages of the
partnership form of business organization.
45) Star Co. was organized on August 1 of the current year. Projected sales for the next
three months are as follows:
The company expects to sell 50% of its merchandise for cash. Of the sales on account,
30% are expected to be collected in the month of the sale and the remainder in the
following month.
Prepare a schedule indicating cash collections for August, September, and October.
46) Journalize the following entries on the books of the borrower and creditor. Label
accordingly. (Assume a 360-day year is used for interest calculations.)
