1) A decline in the fair value of a trading security is recorded by debiting an unrealized
loss account and crediting the Fair Value Adjustment account.
2) Requisitions for direct materials are posted daily to the individual job cost sheets.
3) Working capital is current assets divided by current liabilities.
4) If a company has only a certain number of machine hours available for production, it
is generally more profitable to produce and sell the product with the highest unit
contribution margin.
5) A multiple-step income statement provides users with more information about a
companys income performance.
6) After closing entries have been journalized and posted, all temporary accounts in the
ledger should have zero balances.
7) Common Stock Dividends Distributable is shown within the Paid-in Capital
subdivision of the stockholders’ equity section of the balance sheet.
8) The accounting for short-term debt investments and for long-term debt investments is
similar.
9) “Intent to convert” does not include an investment used as a resource that will be
used whenever the need for cash arises.
10) The overhead controllable variance relates primarily to fixed overhead costs.
11) The Accumulated Depreciation account represents a cash fund available to replace
plant assets.
12) Recording the acquisition of raw materials is a part of accumulating manufacturing
costs.
13) The two key parties to a note are the maker and the payee.
14) The primary accounting standard-setting body in the United States is the
International Accounting Standards Board.
15) Recording depreciation on plant assets affects the balance sheet and the income
statement.
16) Equivalent units of production measure the work done during a period, expressed in
fully completed units.
17) The usual sequence of steps in the transaction recording process is:
a.journal analyze ledger
b.analyze journal ledger
c.journal ledger analyze
d.ledger journal analyze
18) Eckman Company purchased equipment for $120,000 on January 1, 2013, and will
use the double-declining-balance method of depreciation. It is estimated that the
equipment will have a 5-year life and a $6,000 salvage value at the end of its useful life.
The amount of depreciation expense recognized in the year 2015 will be
a.$17,280
b.$27,360
c.$28,800
d.$16,416
19) If a stockholder receives a dividend that reduces retained earnings by the fair value
of the stock, the stockholder has received a
a.large stock dividend
b.cash dividend
c.contingent dividend
d.small stock dividend
20) On February 1, Ville Company received a $6,000, 5%, four-month note receivable.
The cash to be received by Ville Company when the note becomes due is
a.$100
b.$6,000
c.$6,100
d.$6,300
21) A company purchased factory equipment on April 1, 2014 for $160,000. It is
estimated that the equipment will have a $20,000 salvage value at the end of its 10-year
useful life. Using the straight-line method of depreciation, the amount to be recorded as
depreciation expense at December 31, 2014 is
a.$16,000
b.$14,000
c.$10,500
d.$12,000
22) The first step in posting involves
a.entering in the appropriate ledger account the date, journal page, and debit amount
shown in the journal
b.writing in the journal the account number to which the debit amount was posted
c.writing in the journal the account number to which the credit amount was posted
d.entering in the appropriate ledger account the date, journal page, and credit amount
shown in the journal
23) During 2014, Alfred Inc. had sales on account of $198,000, cash sales of $81,000,
and collections on account of $126,000. In addition, they collected $2,175 which had
been written off as uncollectible in 2013 . As a result of these transactions, the change
in the accounts receivable balance indicates a
a.$69,825 increase
b.$72,000 increase
c.$150,825 increase
d.$153,000 increase
24) Duggan Company reported total manufacturing costs of $305,000, manufacturing
overhead totaling $58,000, and direct materials totaling $62,000. How much is direct
labor cost?
a.Cannot be determined from the information provided
b.$425,000
c.$185,000
d.$120,000
25) The percentage of sales basis of estimating expected uncollectibles
a.emphasizes the matching of expenses with revenues
b.emphasizes balance sheet relationships
c.emphasizes cash realizable value
d.is not generally accepted as a basis for estimating bad debts
26) In the liquidation of a partnership, the gains and losses from assets sold are
a.divided equally among the partners
b.divided among the partners in the stated income ratio
c.divided among the partners in proportion to their capital equity interests
d.ignored
27) In ratio analysis, the ratios are never expressed as a
a.rate
b.negative figure
c.percentage
d.simple proportion
28) How is annual cash inflow determined?
a.Depreciation is subtracted from net income because it is an expense
b.Depreciation is added back to net income because it is not an outflow of cash
c.Depreciation is subtracted from net income because it is an outflow of cash
d.Depreciation is added back to net income because it is an inflow of cash
29) During July, the following purchases and sales were made by Big Dan Company.
There was no beginning inventory. Big Dan Company uses a perpetual inventory
system.
PurchasesSales
July 340 units @ $12July 1350 units
1140 units @ $132220 units
2020 units @ $15
Under the FIFO method, the cost of goods sold for each sale is:
July 13July 22
a.$600$240
b. 610260
c. 650260
d. 750300
30) In May 2014, the budget committee of Bunker Stores assembles the following data
in preparation of budgeted merchandise purchases for the month of June.
1>Expected sales: June $1,500,000, July $1,800,000.
2>Cost of goods sold is expected to be 75% of sales.
3>Desired ending merchandise inventory is 40% of the following (next) month’s cost of
goods sold.
4>The beginning inventory at June 1 will be the desired amount.
Instructions
(a)Compute the budgeted merchandise purchases for June.
(b)Prepare the budgeted income statement for June through gross profit.
31) Control over cash disbursements is generally more effective when
a.all bills are paid in cash
b.disbursements are made by the accounts payable subsidiary clerk
c.payments are made by check
d.all purchases are made on credit
32) A note payable is in the form of
a.a contingency that is reasonably likely to occur
b.a written promissory note
c.an oral agreement
d.a standing agreement
33) Of the following choices, which contain both a traceable fixed cost and a common
fixed cost?
a.Profit center manager’s salary and timekeeping costs for a responsibility center’s
employees
b.Company president’s salary and company personnel department costs
c.Company personnel department costs and timekeeping costs for a responsibility
center’s employees
d.Depreciation on a responsibility center’s equipment and supervisory salaries for the
center
34) Which of the following is not an advantage of the corporate form of business
organization?
a.Limited liability of stockholders
b.Transferability of ownership
c.Unlimited personal liability for stockholders
d.Unlimited life
35) If controllable margin is $500,000 and the average investment center operating
assets are $2,000,000, the return on investment is
a.40%
b.4%
c.25%
d.10%
36) The one characteristic that all entries recorded in a cash payments journal have in
common is
a.that they all represent purchases of merchandise
b.a credit to the cash account
c.that they are all posted to the accounts payable subsidiary ledger
d.a debit to the accounts payable or purchases accounts
37) Inventory turnover is computed by dividing the average inventories into:
a.net sales
b.total assets
c.cost of goods sold
d.stockholders’ equity
38) Finley Co. manufactures a product requiring two pounds of direct material. During
2014, Finley purchases 24,000 pounds of material for $99,200 when the standard price
per pound is $4.60. During 2014, Finney uses 22,000 pounds to make 12,000 products.
The standard direct material cost per unit of finished product is
a.$9.51
b.$10.36
c.$9.20
d.$9.81
39) The following totals for the month of April were taken from the payroll register of
Asplend Company.
Salaries and wages$72,000
FICA taxes withheld5,508
Income taxes withheld15,000
Medical insurance deductions2,700
Federal unemployment taxes192
State unemployment taxes1,296
The entry to record accrual of Asplend Companys payroll taxes would include a
a.debit to Payroll Tax Expense for $1,488
b.debit to Payroll Tax Expense for $6,996
c.credit to FICA Taxes Payable for $11,016
d.credit to Payroll Tax Expense for $1,488
40) Watunga County Bank agrees to lend Hoffman Granite Company $600,000 on
January 1 . Hoffman Granite Company signs a $600,000, 8%, 9-month note. What entry
will Hoffman Granite make to pay off the note and interest at maturity assuming that
interest has been accrued to September 30?
a.Notes Payable636,000
Cash636,000
b.Notes Payable600,000
Interest Payable36,000
Cash636,000
c.Interest Expense36,000
Notes Payable600,000
Cash636,000
d.Interest Payable24,000
Notes Payable600,000
Interest Expense12,000
Cash636,000
41) The amortization of premium on bonds payable:
a.will increase bond interest expense
b.should take place over a period not to exceed 20 years
c.will increase bond interest revenue
d.will decrease bond interest expense
42) Which one of the following is not an ownership right of a stockholder in a
corporation?
a.To vote in the election of directors
b.To declare dividends on the common stock
c.To share in assets upon liquidation
d.To share in corporate earnings
43) IFRS
a.implies that receivables with different characteristics should be reported separately
b.requires that receivables with different characteristics should be reported separately
c.implies that receivables with different characteristics should be reported as one
unsegregated amount
d.requires that receivables with different characteristics should be reported as one
unsegregated amount
44) Shelly Company reported the following financial information:
12/31/1412/31/13
Accounts receivable$ 340,000$ 360,000
Net credit sales2,450,000 2,420,000
Compute (a) the accounts receivable turnover and (b) the average collection period for
2014 .
45) Which of the following discount rates will produce the smallest present value?
a.9%
b.10%
c.12%
d.6%
46) Manufacturing overhead data for the production of Product C by Eli Company are
as follows.
Overhead incurred for 69,000 actual direct labor hours worked$206,000
Overhead rate (variable $2.00; fixed $1.00) at normal capacity of
72,000 direct labor hours$3.00
Standard hours allowed for work done68,000
Instructions
Compute the controllable and volume overhead variances.
47) You have recently started to work for Storry Malcom, manufacturers of cemetery
markers and monuments. During your first month at work, you inadvertently recorded
as revenue, about $4,000 of prepayments from Budger Company. The financial
statements had been released within the company when you discovered your error. The
month-end closing had not been completed, however, and you were able to correct the
accounts without incident.
Required:
Prepare a short note to accompany the re-released financial statements explaining the
mistake.
Legal/Regulatory,
48) For each item given, identify the budget in which it will appear. If an item will
appear on more than one budget, then indicate as many budgets as are relevant.
Budget Code:
DMDirect Materials Budget
DLDirect Labor Budget
PProduction Budget
SSales Budget
CCash Budget
BBSBudgeted Balance Sheet
BISBudgeted Income Statement
SASelling and Administrative Expense Budget
MOHManufacturing Overhead Budget
1>Ending cash balance
2>Total selling and administrative expenses
3>Total sales (in dollars)
4>Interest expense
5>Ending raw materials inventory (in dollars)
6>Ending finished goods inventory (in dollars)
49) The Omaha Division, an investment center of Nebraska Manufacturing Company,
reported the following data for the current year.
Sales$4,000,000
Variable costs2,400,000
Controllable fixed costs300,000
Noncontrollable fixed costs400,000
Average operating assets3,600,000
Top management is unhappy with the center’s return on investment (ROI). The manager
of the Omaha Division believes ROI can be improved by the following independent
alternatives:
Increase sales by 15% with no change in the contribution margin ratio.
Reduce controllable and noncontrollable fixed costs 30% each.
Reduce average operating assets by 20%.
Instructions:
1>Compute the return on investment for the current year.
2>Compute ROI under each alternative.
50) Sandra Everhart is trying to understand the term “cost of capital.” Define the term,
and indicate its relevance to the decision rule under the annual rate of return technique.
51) Prepare the necessary journal entries for the following transactions for Kennedy Co.
May25Kennedy Co. received a $30,000, 2-month, 6% note from Holt Company in
settlement of an account receivable.
July25Kennedy Co. received payment on the Holt note.