1) Sales to customers who use bank credit cards, such as MasterCard and VISA, are
generally treated as credit sales.
2) In contribution margin analysis, the effect of a difference in unit sales price or unit
cost on the number of units sold is termed the unit price or unit cost factor.
3) The financial loss that each stockholder in a corporation can incur is usually limited
to the amount invested by the stockholder.
4) Only a single line, which represents the difference between total sales revenues and
total costs, is plotted on the profit-volume chart.
5) Flexible budgeting requires all levels of management to start from zero and estimate
sales, production, and other operating data as though operations were being started for
the first time.
6) Employers are required to compute and report payroll taxes on a calendar-year basis,
even if a different fiscal year is used for financial reporting and income tax purposes.
7) Sales commissions expense for a department store is an example of a direct expense.
8) Prepaid Insurance is an example of a current asset.
9) When old equipment is traded in for a new equipment, the difference between the list
price and the trade in allowance is called boot.
10) Differential revenue is the amount of increase or decrease in revenue expected from
a particular course of action as compared with an alternative.
11) The investor carrying an investment by the equity method records cash dividends
received as an increase in the carrying amount of the investment.
12) The double-declining-balance method is an accelerated depreciation method.
13) Comprehensive income is all changes in stockholders’ equity during the period
except those resulting from dividends and stockholders’ investments.
14) For an interest bearing note payable, the amount borrowed is equal to the face
amount of the note.
15) In variable costing, the cost of products manufactured is composed of only those
manufacturing costs that increase or decrease as the volume of production rises or falls.
16) A business is an organization in which basic resources or inputs, like materials and
labor, are assembled and processed to provide outputs in the form of goods or services
to customers.
17) Activity-based costing can only be used to allocate manufacturing factory overhead.
18) The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
A.$40,000
B.$40,400
C.$43,600
D.$44,000
19) A company with 100,000 authorized shares of $4 par common stock issued 40,000
shares at $8. Subsequently, the company declared a 4% stock dividend on a date when
the market price was $12 a share. What is the amount transferred from the Retained
Earnings account to Paid-in Capital accounts as a result of the stock dividend?
A.$12,800
B.$19,200
C.$32,000
D.$48,800
20) Which of the following would not be an appropriate activity base for cost analysis
in a service firm?
A.lawns mowed
B.inventory produced
C.customers served
D.haircuts given
21) Fashion Jeans, Inc. sells two lines of jeans; Simple Life and Fancy Life. Simple
Life sells for $85.00 a pair and Fancy Life sells for $100.00 a pair. The company sells
all of its jeans on credit and estimates that 60% is collected in the month of the sale,
35% is collected in the following month, and the rest is considered to be uncollectible.
The estimated sales for Simple are as follows: January 20,000 jeans, February 27,500
jeans, and March 25,000 jeans. The estimated sales for Fancy are as follows: January
18,000 jeans, February 19,000, and March 20,500 jeans. What are the expected cash
receipts for the month of March?
A.$3,988,125
B.$2,505,000
C.$2,125,000
D.$4,175,000
22) What additional information is needed to find the rate of return on investment if
income from operations is known?
A.Invested assets
B.Residual income
C.Direct expenses
D.Sales
23) A company reports the following:
Determine the (a) accounts receivable turnover, and (b) number of days sales in
receivables. Round your answer to one decimal place.
24) Which of the following is not characteristic of a corporation?
A.The financial loss that a stockholder may suffer from owning stock in a public
company is limited
B.Cash dividends paid by a corporation are deductible as expenses by the corporation
C.A corporation can own property in its name
D.Corporations are required to file federal income taxreturns
25) At the end of the current year, Accounts Receivable has a balance of $675,000;
Allowance for Doubtful Accounts has a debit balance of $5,400; and net sales for the
year total $3,000,000. An analysis of receivables indicates the uncollectible receivables
are estimated to be $45,000.
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.
26) The beginning inventory and purchases of an item for the period were as follows:
The company uses the periodic system, and there were 15 units in the inventory at the
end of the period. Determine the cost of the 15 units in the inventory by each of the
following methods, presenting details of your computations: (a) first-in, first-out; (b)
last-in, first-out; (c) average cost. Do not round your intermediate calculations. Round
your final answer to two decimal places.
27) A debit or credit memo describing entries in the company’s bank account may be
enclosed with the bank statement. An example of a credit memo is
A.deposited checks returned for insufficient funds
B.a promissory note left for collection
C.a service charge
D.notification that a customer’s check for $375 was recorded by the company as $735
on the deposit ticket
28) Which of the following is an example of value-added time?
A.Processing time
B.Wait time during inspection
C.Wait time in inventory
D.Both B and C
29) Unearned Fees appear on the
A.balance sheet in the current assets section
B.balance sheet as a current liability
C.balance sheet in the stockholders equity section
D.income statement as revenue
30) If variable costs per unit decreased because of a decrease in utility rates, the
break-even point would:
A.decrease
B.increase
C.remain the same
D.increase or decrease, depending upon the percentage increase in utility rates
31) Materials used by Square Yard Products Inc. in producing Division 3’s product are
currently purchased from outside suppliers at a cost of $5 per unit. However, the same
materials are available from Division 6. Division 6 has unused capacity and can
produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer
price of $3.20 per unit is established, and 40,000 units of material are transferred, with
no reduction in Division 6’s current sales.
How much would Division 6’s income from operations increase?
A.$8,000
B.$15,000
C.$80,000
D.$150,000
32) Prepaid insurance is reported on the balance sheet as a
A.current asset
B.fixed asset
C.current liability
D.long-term liability
33) During a period of consistently rising prices, the method of inventory that will
result in reporting the greatest cost of merchandise sold is
A.FIFO
B.LIFO
C.average cost
D.weighted average
34) A corporation purchased 1,000 shares of its $5 par common stock at $10 and
subsequently sold 500 of the shares at $20. What is the amount of revenue realized from
the sale?
A.$0
B.$5,000
C.$2,500
D.$10,000
35) Marcye Co. manufactures office furniture. During the most productive month of the
year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the
company made 1,100 desks at a cost of $46,000. Using the high-low method of cost
estimation, total fixed costs are:
A.$56,000
B.$28,400
C.$17,600
D.cannot be determined from the data given
36) The chart of accounts classifies the accounts to make identification of the accounts
easier. This is done by way of assigning a number to each account. The first number
identifies the classification of the type of account. Which of the following indicates the
use of this classification?
A.1-Assets, 2-Liabilities, 3-Stockholders Equity, 4-Expenses, 5-Revenues
B.1-Assets, 2-Liabilities, 3-Stockholders Equity, 4-Revenues, 5-Expenses
C.1-Assets, 2-Stockholders Equity, 3-Revenues, 4-Expenses, 5-Dividends
D.1-Stockholders Equity, 2-Dividends, 3-Revenues, 4-Expenses
37) A balance sheet that displays only component percentages is called
A.trend balance sheet
B.comparative balance sheet
C.condensed balance sheet
D.common-sized balance sheet
38) Proper payroll accounting methods are important for a business for all the reasons
below except
A.good employee morale requires timely and accurate payroll payments
B.payroll is subject to various federal and state regulations
C.to help a business with cash flow problems by delayed payments of payroll taxes to
federal and state agencies
D.payroll and related payroll taxes have a significant effect on the net income of most
businesses
39) Two income statements for Galaxy Services are shown below:
(a) Prepare a vertical analysis of Galaxy Services income statements.
(b) What type of trend(s) are indicated: favorable or unfavorable trend?
(c) What other information would enhance the analysis?
40) Department B had 3,000 units in Work in Process that were 25% completed at the
beginning of the period at a cost of $12,500. 13,700 units of direct materials were added
during the period at a cost of $28,700. 15,000 units were completed during the period,
and 1,700 units were 95% completed at the end of the period. All materials are added at
the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710.
The number of equivalent units of production for the period for materials if the first-in,
first-out method is used to cost inventories was:
A.16,700
B.12,000
C.1,700
D.13,700
41) The journal entry a company records for the issuance of bonds when the contract
rate is less than the market rate would be
A.debit Bonds Payable, credit Cash
B.debit Cash and Discount on Bonds Payable, credit Bonds Payable
C.debit Cash, credit Premium on Bonds Payable and Bonds Payable
D.debit Cash, credit Bonds Payable
42) Which of the following is an example of a non-financial measure?
A.lead time
B.setup time
C.units scrapped
D.all of the above
43) Several items are missing from the following table of rate of return on investment
and residual income. Determine the missing items, identifying each item by the
appropriate letter.
InvestedAssets IncomefromOper. Rate ofReturnon Inv. Min.Rate ofReturn Min. Amt.of
IncomefromOper. ResidualIncome
(a) (b) (c) 16% $128,000 $10,000
$850,000 $153,000 (d) 12% (e) (f)
$825,000 (g) 20% (h) (i) $24,000
(j) $129,000 24% (k) $60,000 (l)
Round percentage values to one decimal point.
44) Activity rates are determined by
A.dividing the actual cost for each activity pool by the actual activity base for that pool
B.dividing the cost budgeted for each activity pool by the estimated activity base for
that pool
C.dividing the actual cost for each activity pool by the estimated activity base for that
pool
D.dividing the cost budgeted for each activity pool by the actual activity base in that
pool
45) Which of the following statements below is not a reason a company may purchase
another company’s stock?
A.earning a return on excess cash
B.sustain the other company’s stock price
C.gaining control of another company’s operations
D.developing or maintaining business relationships
46) Balance sheet and income statement data indicate the following:
47) The proper journal entry to purchase a computer costing $975 on account on
January 2 to be utilized within the business would be:
A.Jan 2 Office Supplies 975
Accounts Payable 975
B.Jan 2 Office Equipment 975
Accounts Payable 975
C.Jan 2 Office Supplies 975
Accounts Receivable 975
D.Jan 2 Office Equipment 975
Accounts Receivable 975
48) Which are the parts of the T account?
A.title, date, total
B.date, debit side, credit side
C.title, debit side, credit side
D.title, debit side, total
49) A company uses the allowance method to account for uncollectible accounts
receivables. When the firm writes off a specific customer’s account receivable
A.total current assets are reduced
B.total expenses for the period are increased
C.net realizable value of accounts receivable increases
D.there is no effect on total current assets or total expenses
50) Which of the following is not a role of accounting in business?
A.to provide reports to users about the economic activities and conditions of a business
B.to personally guarantee loans of the business
C.to provide information to other users to determine the economic performance and
condition of the business
D.to assess the various informational needs of users and design its accounting system to
meet those needs
51) For which of the following businesses would the process cost system be
appropriate?
A.Book retailer
B.Dress designer
C.Lumber mill
D.Printing firm
52) If stockholders wanted to know how money flowed into and out of the company,
what financial statement would they use?
A.income statement
B.statement of cash flows
C.balance sheet
D.none of these
53) The following is a measure of a managers performance working in an investment
center.
A.rate of return on investment
B.residual income
C.divisional income statements
D.all of the responses
54) Most operating decisions of management focus on a narrow range of activity called
the:
A.relevant range of production
B.strategic level of production
C.optimal level of production
D.tactical operating level of production
55) Which of the following is not an asset?
A.investment
B.cash
C.inventory
D.stockholders equity
56) Department A had 4,000 units in work in process that were 60% completed as to
labor and overhead at the beginning of the period, 29,000 units of direct materials were
added during the period, 31,000 units were completed during the period, and 2,000
units were 80% completed as to labor and overhead at the end of the period. All
materials are added at the beginning of the process. The first-in, first-out method is used
to cost inventories.
The number of equivalent units of production for material costs for the period was:
A.33,000
B.29,800
C.29,000
D.32,000
57) The inventory costing method that reports the earliest costs in ending inventory is
A.FIFO
B.LIFO
C.Average cost
D.Specific identification
58) Each of the events below may have an effect on the statement of cash flows.
Designate how the event should be reported within the statement of cash flows using
the codes provided below. Codes may be used more than once, or not at all.
Codes
Events
59) Using the variable cost concept determine the selling price for 30,000 units using
the following data: Variable cost per unit $15.00, total fixed costs $90,000 and desired
profit $150,000.
60) Journalize the following transactions in the accounts of Simmons Company:
Mar 1 Received a $60,000, 60-day, 6% note dated March 1 from Bynum Company on
account.
Mar 18 Received a $25,000, 60-day, 9% note dated March 18 from Solo Company on
account.
Apr. 30 The note dated March 1 from Bynum Company is dishonored, and the
customers account is charged for the note, including interest.
May 17 The note dated March 18 from Solo Company is dishonored, and the customers
account is charged for the note, including interest.
July 29 Cash is received for the amount due on the dishonored note dated March 1 plus
interest for 90 days at 8% on the total amount debited to Bynum Company on April 30.
Aug. 23 Wrote off against the allowance account the amount charged to Solo Company
on May 17 for the dishonored note dated March 18.
61) Company G has a ratio of liabilities to stockholders equity of 0.12 and 0.28 for
2010 and 2011, respectively. In contrast, Company M has a ratio of liabilities to
stockholders equity of 1.13 and 1.29 for the same period.
REQUIRED:
Based on this information, which company’s creditors are more at risk and why? Should
the creditors of either company fear the risk of nonpayment?
62) Describe the flow of materials in a process cost accounting system.