1) Physical controls to safeguard assets do not include
a.cashier department supervisors
b.vaults
c.employee identification badges
d.security guards
2) The process of totaling the columns of a journal is termed
a.ruling
b.columnizing
c.sizing
d.footing
3) In a recent year Luke Corporation had net income of $250,000, interest expense of
$50,000, and a times interest earned ratio of 10 . What was Luke Corporations income
before taxes for the year?
a.$550,000
b.$500,000
c.$450,000
d.None of these answer choices are correct
4) The purpose of the departmental overhead cost report is to
a.control indirect labor costs
b.control selling expense
c.determine the efficient use of materials
d.control overhead costs
5) Powells Courier Service recorded a loss of $9,000 when it sold a van that originally
cost $84,000 for $15,000. Accumulated depreciation on the van must have been
a.$78,000
b.$24,000
c.$75,000
d.$60,000
6) A small neighborhood barber shop that is operated by its owner would likely be
organized as a
a.joint venture
b.partnership
c.corporation
d.proprietorship
7) The balance in the income summary account before it is closed will be equal to
a.the net income or loss on the income statement
b.the beginning balance in the owner’s capital account
c.the ending balance in the owner’s capital account
d.zero
8) Each of the following accounts is closed to Income Summary except
a.Expenses
b.Owner’s Drawings
c.Revenues
d.All of these are closed to Income Summary
9) Lake of Fire Company purchased supplies costing $7,000 and debited Supplies for
the full amount. At the end of the accounting period, a physical count of supplies
revealed $1,900 still on hand. The appropriate adjusting journal entry to be made at the
end of the period would be
a.Debit Supplies Expense, $1,900; Credit Supplies, $1,900
b.Debit Supplies, $5,100; Credit Supplies Expense, $5,100
c.Debit Supplies Expense, $5,100; Credit Supplies, $5,100
d.Debit Supplies, $1,900; Credit Supplies Expense, $1,900
10) The objectives of internal accounting control for payrolls are (a) to safeguard
company assets from unauthorized payments of payrolls and (b) to assure accuracy and
reliability of the accounting records pertaining to payroll.
11) The accounting equation for Quattro Enterprises is as follows:
AssetsLiabilitiesOwners Equity
$120,000=$60,000+$60,000
If Quattro purchases office equipment on account for $25,000, the accounting equation
will change to
AssetsLiabilitiesOwners Equity
a.$120,000 = $60,000 +$60,000
b.$145,000 = $60,000 +$85,000
c.$145,000 = $72,500 +$72,500
d.$145,000 = $85,000 +$60,000
12) Jackson Cement Corporation reported $35 million for sales when it only had $20
million of actual sales. Which of the following qualities of useful information has
Jackson most likely violated?
a.Comparability
b.Relevance
c.Faithful representation
d.Consistency
13) A corporation issues $500,000, 8%, 5-year bonds on January 1, 2014 for $479,000.
Interest is paid semiannually on January 1 and July 1 . If the corporation uses the
straight- line method of amortization of bond discount, the amount of bond interest
expense to be recognized on July 1, 2014 is
a.$42,100
b.$20,000
c.$22,100
d.$17,900
14) In converting net income to net cash provided by operating activities, under the
indirect method:
a.decreases in accounts receivable and increases in prepaid expenses are added
b.decreases in inventory and increases in accrued liabilities are added
c.decreases in accounts payable and decreases in inventory are deducted
d.increases in accounts receivable and increases in accrued liabilities are deducted
15) On January 2, 2014, Superchunk purchased a general liability insurance policy for
$2,700 for coverage for the calendar year. The entire $2,700 was charged to Insurance
Expense on January 2, 2014 . If the firm prepares monthly financial statements, the
proper adjusting entry on January 31, 2014, will be:
a.Insurance Expense2,475
Prepaid Insurance2,475
b.Prepaid Insurance2,475
Insurance Expense2,475
c.Insurance Expense225
Prepaid Insurance225
d.Prepaid Insurance225
Insurance Expense225
16) Communication of economic events is the part of the accounting process that
involves
a.identifying economic events
b.quantifying transactions into dollars and cents
c.preparing accounting reports
d.recording and classifying information
17) Interest may be included in the acquisition cost of a plant asset
a.during the construction period of a self-constructed asset
b.if the asset is purchased on credit
c.if the asset acquisition is financed by a long-term note payable
d.if it is a part of a lump-sum purchase
18) If an owner makes a withdrawal of cash from a proprietorship, then
a.there has been a violation of accounting principles
b.owner’s equity will increase
c.owner’s equity will decrease
d.there will be a new liability showing the owner owes money to the business
19) The elements of JIT do not include
a.dependable suppliers
b.efficient competitors
c.a total quality control system
d.a multiskilled work force
20) In the Mduntrik Company, indirect labor is budgeted for $72,000 and factory
supervision is budgeted for $24,000 at normal capacity of 160,000 direct labor hours. If
170,000 direct labor hours are worked, flexible budget total for these costs is
a.$96,000
b.$100,500
c.$102,000
d.$88,000
21) Vick. Vickers has a large consulting practice. New clients are required to pay
one-half of the consulting fees up front. The balance is paid at the conclusion of the
consultation. How does Vickers account for the cash received at the end of the
engagement?
a.Cash
Unearned Service Revenue
b.Cash
Service Revenue
c.Prepaid Service Fees
Service Revenue
d.No entry is required when the engagement is concluded
22) The following information is available for Sheldon Leonard Company:
Operating expenses$ 85,000
Cost of goods sold 200,000
Sales 325,000
Sales returns and allowances16,000
Instructions
Compute each of the following:
(a)Net sales
(b)Gross profit
(c)Income from operations
23) Match the following terms and definitions.
a.Accounts receivablec.Accounts payable
b.Creditord.Note payable
_______(1)Amounts due from customers
_______(2)Amounts owed to suppliers for goods and services purchased
_______(3)Amounts owed to bank
_______(4)Party to whom money is owed
24) To record estimated uncollectible accounts using the allowance method, the
adjusting entry would be a
a.debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts
b.debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts
c.debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable
d.debit to Loss on Credit Sales Revenue and a credit to Accounts Receivable
25) To determine annual cash inflow, depreciation is
a.subtracted from net income because it is an expense
b.subtracted from net income because it is an outflow of cash
c.added back to net income because it is an inflow of cash
d.added back to net income because it is not an outflow of cash
26) The contra-account, Fair Value Adjustment, is also called a(n)
a.offset account
b.adjustment account
c.valuation account
d.opposite account
27) Which one of the following is not an assumption of CVP analysis?
a.All units produced are sold
b.All costs are variable costs
c.Sales mix remains constant
d.The behavior of costs and revenues are linear within the relevant range
28) The following amounts were taken from the financial statements of Leaf Company:
2014 2013
Total assets$900,000$1,000,000
Net sales840,000650,000
Gross profit352,000320,000
Net income138,600117,000
Weighted average number of common shares outstanding90,00090,000
Market price of common stock$35$39
The profit margin ratio for 2014 is
a.15.4%
b.44.9%
c.16.5%
d.10.7%
29) The first step in the liquidation of a partnership is to
a.allocate a gain or loss on realization to the partners
b.distribute remaining cash to the partners
c.pay partnership liabilities
d.sell noncash assets and recognize a gain or loss on realization
30) Which of the following is one of the components of cost accounting?
a.It involves measuring product costs
b.It involves the determination of company profits
c.It requires GAAP to be applied
d.It requires cost minimizing principles
31) What will most likely occur if a company eliminates an unprofitable segment when
a portion of fixed costs are unavoidable?
a.All expenses of the eliminated segment will be eliminated
b.Net income will decrease
c.Net income will increase
d.The company’s variable costs will increase
32) If an adjusting entry is not made for an accrued expense,
a.expenses will be overstated
b.liabilities will be understated
c.net income will be understated
d.owner’s equity will be understated
33) The rate of return that management expects to pay on all borrowed and equity funds
is the
a.cost of capital
b.cutoff rate
c.hurdle rate
d.minimum rate
34) Financial information is presented below:
Operating Expenses$ 90,000
Sales Returns and Allowances26,000
Sales Discounts12,000
Sales Revenue300,000
Cost of Goods Sold158,000
The gross profit rate would be
a..347
b..397
c..473
d..542
35) Tibbets Company estimated it would produce 6,200 buckets, though actual
production was 6,000 during August. The standard labor cost is 2 buckets per hour at
$18.00 per hour. Actual cost per hour was $18.20 with a total labor cost of $52,780.
Instructions
Determine the amounts of the labor price and the labor quantity variances for August.
36) Draper and Becker decide to organize a partnership. Draper invests $25,000 cash,
and Becker contributes $5,000 and equipment having a book value of $7,000 and a fair
value of $15,000.
Instructions
Prepare the entry to record each partners investment.
37) Your roommate, a marketing major, thinks that debit means decrease and credit
means increase. And, that every account can be debited and credited and as result, every
account can have both a debit and a credit balance. Explain to your roommate (1) the
meaning of debit and credit; (2) which accounts can only be debited, which can only be
credited, and which can be both debited and credited; and (3) which accounts normally
have debit balances and which credit balances.
38) Managerial accounting reports generally pertain to ______________ of a business
and may be very detailed.
39) An inexperienced accountant for Dudley Corporation made the following entries.
July1Cash180,000
Common Stock180,000
(Issued 25,000 shares of common stock,
par value $6 per share)
Sept.1Common Stock24,000
Retained Earnings16,000
Cash40,000
(Purchased 4,000 shares issued on July 1 for the
treasury at $10 per share)
Instructions
On the basis of the explanation for each entry, prepare the entry that should have been
made for the transactions.
40) Jonah Company is considering investing in a project that will cost $136,520 and
have no salvage value at the end of its 5-year life. It is estimated that the project will
generate annual cash inflows of $36,000 each year. The company has a hurdle or cutoff
rate of return of 8% and uses the following compound interest table:
Present Value of an Annuity of 1
Period 6% 8% 10% 12% 15%
54.2123.9933.7913.6053.352
Instructions
Using the internal rate of return method, determine if this project is acceptable by
calculating an approximate interest yield for the project.