1) Ban Co. purchased 50, 5% Waylan Company bonds for $50,000 cash plus brokerage
fees of $500. Interest is payable semiannually on July 1 and January 1 . The entry to
record the December 31 interest accrual would include a
a.debit to Interest Receivable for $1,250
b.debit to Interest Revenue for $1,250
c.credit to Interest Revenue for $1,262.50
d.debit to Debt Investments for $1,262.50
2) Planning is a function that involves
a.hiring the right people for a particular job
b.coordinating the accounting information system
c.setting goals and objectives for an entity
d.analyzing financial statements
3) Selected worksheet data for Patinkin Company are presented below.
Adjusted
Account Titles Trial Balance Trial Balance
Dr. Cr. Dr. Cr.
Accounts Receivable?31,000
Prepaid Insurance24,00018,000
Supplies7,000?
Accumulated Depreciation12,000?
Salaries and Wages Payable?7,600
Service Revenue85,000100,000
Insurance Expense?
Depreciation Expense9,000
Supplies Expense5,200
Salaries and Wages Expense?49,000
Instructions
(a)Fill in the missing amounts.
(b)Prepare the adjusting entries that were made.
4) The principal difference between a merchandising and a manufacturing income
statement is the
a.cost of goods sold section
b.extraordinary item section
c.operating expense section
d.revenue section
5) When bonds are converted into common stock,
a.the market price of the stock on the date of conversion is credited to the Common
Stock account
b.the market price of the bonds on the date of conversion is credited to the Common
Stock account
c.the market price of the stock and the bonds is ignored when recording the conversion
d.gains or losses on the conversion are recognized
6) Selma Bosco is on the capital budgeting committee for her company, Magnificent
Tile. Bill Baumhauer is an engineer for the firm. Bill expresses his disappointment to
Selma that a project that was given to him to review before submission looks extremely
good on paper. “I really hoped that the cost projections wouldn’t pan out,” he tells his
friend. “The technology used in this is pie in the sky kind of stuff. There are a hundred
things that could go wrong. But the figures are very convincing. I haven’t sent it on yet,
though I probably should.”
“You can keep it if it’s really that bad,” assures Selma. “Anyway, you can probably get
it shot out of the water pretty easily, and not have the guy who submitted it mad at you
for not turning it in. Just fix the numbers. If you figure, for instance, that a cost is only
50% likely to be that low, then double it. We do it all the time, informally. Best of all,
the rank and file don’t get to come to those sessions. Your engineering genius need
never know. He’ll just think someone else’s project was even better than his.”
Required:
1>Who are the stakeholders in this situation?
2>Is it ethical to adjust the figures to compensate for risk? Explain.
3>Is it ethical to change the proposal before submitting it? Explain.
7) The credit terms offered to a customer by a business firm are 2/10, n/30, which
means that
a.the customer must pay the bill within 10 days
b.the customer can deduct a 2% discount if the bill is paid between the 10th and 30th
day from the invoice date
c.the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice
date
d.two sales returns can be made within 10 days of the invoice date and no returns
thereafter
8) The method most commonly used to compute depletion is the
a.straight-line method
b.double-declining-balance method
c.units-of-activity method
d.effective interest method
9) Bagley invests personally owned equipment, which originally cost $220,000 and has
accumulated depreciation of $60,000 in the Bagley and Eggers partnership. Both
partners agree that the fair value of the equipment was $120,000. The entry made by the
partnership to record Bagleys investment should be
a.Equipment220,000
Accumulated DepreciationEquipment60,000
Bagley, Capital160,000
b.Equipment160,000
Bagley, Capital160,000
c.Equipment120,000
Loss on Purchase of Equipment40,000
Accumulated DepreciationEquipment60,000
Bagley, Capital220,000
d.Equipment120,000
Bagley, Capital120,000
10) Which one of the following is not considered as material costs?
a.Partially completed motor engines for a motorcycle plant
b.Bolts used in manufacturing the compressor of an engine
c.Rivets for the wings of a new commercial jet aircraft
d.Lumber used to build tables
11) In preparing its bank reconciliation for the month of April 2014, Delano, Inc. has
available the following information.
Balance per bank statement, 4/30/14$78,600
NSF check returned with 4/30/14 bank statement940
Deposits in transit, 4/30/1410,000
Outstanding checks, 4/30/1410,400
Bank service charges for April60
What should be the adjusted cash balance at April 30, 2014?
a.$77,260
b.$77,600
c.$78,020
d.$78,200
12) Which one of the following payroll taxes does not result in a payroll tax expense for
the employer?
a.FICA tax
b.Federal income tax
c.Federal unemployment tax
d.State unemployment tax
13) The Salinas-Milliken partnership is terminated when creditor claims exceed
partnership assets by $80,000. Salinas is a millionaire and Milliken has no personal
assets. Millikens partnership interest is 75% and Salinass is 25%. Creditors
a.must collect their claims equally from Milliken and Salinas
b.may collect the entire $80,000 from Salinas
c.must collect their claims 75% from Milliken and 25% from Salinas
d.may not require Salinas to use his personal assets to satisfy the $80,000 in claims
14) A company desires to earn target net income of $90,000 from the sale of its product.
If the unit sales price is $30, unit variable cost is $18, and total fixed costs are
$150,000, the number of units that the company must sell to earn its target net income
is:
a.8,000 units
b.12,000 units
c.16,000 units
d.20,000 units
15) Mystle Company issued $500,000, 8%, 10-year bonds on December 31, 2014, for
$470,000. Interest is payable semiannually on June 30 and December 31 . Mystle uses
the straight-line method of amortization and has a calendar year end.
Instructions
Prepare the appropriate journal entries on
(a)December 31, 2014 .
(b)June 30, 2015 .
16) Starting with net income and adjusting it for items that affected reported net income
but which did not affect cash is called the
a.direct method
b.indirect method
c.working capital method
d.cost-benefit method
17) Niles Company produces only one product. Monthly fixed expenses are $12,000,
monthly unit sales are 2,500, and the unit contribution margin is $12. How much is
monthly net profit?
a.$30,000
b.$18,000
c.$0
d.$42,000
18) Which of the following would not be true of a privately held corporation?
a.It is sometimes called a closely held corporation
b.Its shares are regularly traded on the New York Stock Exchange
c.It does not offer its shares for sale to the general public
d.It is usually smaller than a publicly held company
19) Using the percentage-of-receivables method for recording bad debt expense,
estimated uncollectible accounts are $15,000. If the balance of the Allowance for
Doubtful Accounts is $2,000 credit before adjustment, what is the amount of bad debt
expense for that period?
a.$2,000
b.$13,000
c.$15,000
d.$17,000
20) Presented here are the components in Bradley Companys income statement.
Determine the missing amounts.
Sales Cost ofGrossOperatingNet
RevenueGoods Sold_Profit ExpensesIncome
$75,000(a)$35,000(b)$17,000
(c)$86,000$59,000$48,000(d)
21) Incremental analysis is most useful
a.in developing relevant information for management decisions
b.in choosing between the net present value method and the internal rate of return
method
c.in evaluating the master budget
d.as a replacement technique for variance analysis
22) The following information was taken from the annual manufacturing overhead cost
budget of Moen Company.
Variable manufacturing overhead costs$69,300
Fixed manufacturing overhead costs$41,580
Normal production level in labor hours23,100
Normal production level in units5,775
Standard labor hours per unit4
During the year, 5,500 units were produced, 18,340 hours were worked, and the actual
manufacturing overhead was $113,400. Actual fixed manufacturing overhead costs
equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis
of direct labor hours. Moen total overhead rate is
a.$1.80
b.$3.00
c.$4.80
d.$4.91
23) The accounting for warranty costs is based on the
a.going concern principle
b.expense recognition principle
c.conservatism principle
d.historical cost principle
24) Myles Manufacturing Company’s accounting records reflect the following
inventories:
Dec. 31, 2014Dec. 31, 2013
Raw materials inventory$620,000$520,000
Work in process inventory600,000320,000
Finished goods inventory380,000300,000
During 2014, $900,000 of raw materials were purchased, direct labor costs amounted to
$1,000,000, and manufacturing overhead incurred was $960,000.
The total raw materials available for use during 2014 for Myles Manufacturing
Company is
a.$1,420,000
b.$620,000
c.$800,000
d.$1,520,000
25) Which of the following statements about internal reports is not true?
a.The content of internal reports may extend beyond the double-entry accounting
system
b.Internal reports may show all amounts at market values
c.Internal reports may discuss prospective events
d.Most internal reports are summarized rather than detailed
26) The Felton and Burchell Partnership has partner capital account balances as
follows:
Felton, Capital$550,000
Burchell, Capital200,000
The partners share income and losses in the ratio of 60% to Felton and 40% to Burchell.
Instructions
Prepare the journal entry on the books of the partnership to record the admission of
Santos as a new partner under the following three independent circumstances.
1>Santos pays $400,000 to Felton and $150,000 to Burchell for one-half of each of
their ownership interest in a personal transaction.
2>Santos invests $600,000 in the partnership for a one-third interest in partnership
capital.
3>Santos invests $240,000 in the partnership for a one-third interest in partnership
capital.
27) The trial balance of Red House Painters shown below does not balance.
RED HOUSE PAINTERS
Trial Balance
June 30, 2014
Debit Credit
Cash$ 2,780
Accounts Receivable7,420
Supplies600
Equipment8,300
Accounts Payable$ 9,777
Owners Capital1,952
Owners Drawings1,300
Service Revenue15,200
Salaries and Wages Expense3,800
Repair Expense 1,600
Totals$25,800$26,929
An examination of the ledger and journal reveals the following errors:
1>Each of the above listed accounts has a normal balance per the general ledger.
2>Cash of $270 received from a customer on account was debited to Cash $720 and
credited to Accounts Receivable $720.
3>A withdrawal of $400 by the owner was posted as a credit to Owners Drawings, $400
and credit to Cash $400.
4>A debit of $300 was not posted to Salaries and Wages Expense.
5>The purchase of equipment on account for $700 was recorded as a debit to Repair
Expense and a credit to Accounts Payable for $700.
6>Services were performed on account for a customer, $510, for which Accounts
Receivable was debited $510 and Service Revenue was credited $51.
7>A payment on account for $235 was credited to Cash for $235 and credited to
Accounts Payable for $253.
Instructions
Prepare a correct trial balance.
28) The basic steps in the recording process are: _______________ each transaction,
enter the transaction in a ________________, and transfer the _______________
information to appropriate accounts in the ________________.
29) Richey Company maintains four special journals and a general journal to record its
transactions. Using the code below, indicate in the space provided the appropriate
journal for recording the transactions listed.
CodeJournals
SSales journal
CRCash receipts journal
CPCash payments journal
PSingle-column purchases journal
GGeneral journal
1>Mr. Richey invested cash in the business.
2>Purchased store supplies on account.
3>Sold merchandise to customer on account.
4>Purchased a 2-year fire insurance policy for cash.
5>Received a check from a customer as payment on account.
6>Paid for store supplies purchased in transaction 2 .
7>Purchased merchandise on account.
8>Issued a credit memorandum to a customer who returned defective merchandise
previously sold on account.
9>Purchased office equipment for cash.
10>Made an adjusting entry for store supplies used during the period.
30) If the proceeds from the sale of a plant asset exceed its ______________, a gain on
disposal will occur.
31) Molly Jewel is studying for her accounting mid-term examination. Summarize for
Molly what she should know about management functions.