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1) The profit center income statement should include only revenues and expenses that
are controlled by the manager.
2) Proprietorships are owned by one owner and provide only services to their
customers.
3) When accounting for uncollectible receivables and using the percentage of sales
method, the matching principle is violated.
4) The debit to factory overhead for the cost of indirect materials is obtained from the
summary of the materials requisitions.
5) Trading securities should be reported on the financial statements at fair market value.
6) The system of accounting where revenues are recorded when they are earned and
expenses are recorded when they are incurred is called the cash basis of accounting.
7) Federal unemployment compensation taxes that are collected by the federal
government are not paid directly to the unemployed but are allocated among the states
for use in state programs.
8) The cumulative effects of other comprehensive income items is included in retained
earnings, on the balance sheet.
9) Custom-made goods would be accounted for using a process costing system.
10) A process cost accounting system provides for a separate record of the cost of each
particular quantity of product that passes through the factory.
11) In 2012 Robert Corporation had net income of $250,000 and paid dividends to
common stockholders of $50,000. They had 50,000 shares of common stock
outstanding during the entire year. Robert Corporation's common stock is selling for
$50 per share on the New York Stock Exchange.
Robert Corporation's price-earnings ratio is
A.10 times
B.5 times
C.2 times
D.8 times
12) Costs that vary in total in direct proportion to changes in an activity level are called:
A.fixed costs
B.sunk costs
C.variable costs
D.differential costs
13) On March 15th Monroe Sales sells $9,525.00 on account to Garrison Brewer with
terms of 2/10, n/30. The cost of merchandise sold was $6,905.00.
(a) Journalize the sale and the recognition of the cost of the sale.
(b) On March 20th a $125.00 credit memo is given to Garrison Brewer due to
merchandise that was the wrong color. Journalize this event. The cost of the returned
merchandise was $65.
(c) On March 25th Garrison Brewer submits payment in full. Journalize this event.
14) What is the term used to describe expenses that are incurred for the benefit of a
specific department?
A.Indirect expenses
B.Margin expenses
C.Departmental expenses
D.Direct expenses
15) Match the following types of journal transactions with the journal in which it would
be entered.
1>Adjusting entry A. Revenue journal
2>Collection on account B. Cash payments journal
3>Equipment purchased on account C. General journal
4>Sale on account D. Cash receipts journal
5>Payment for supplies bought on account E. Purchases journal
16) With the aid of computer software, managers can vary assumptions regarding
selling prices, costs, and volume and can immediately see the effects of each change on
the break-even point and profit. This is called:
A."What if" or sensitivity analysis
B.vary the data analysis
C.computer aided analysis
D.data gathering
17) The last item on the statement of cash flows prior to the schedule of noncash
investing and financing activities reports
A.the increase or decrease in cash
B.cash at the end of the year
C.net cash flow from investing activities
D.net cash flow from financing activities
18) On January 1, 2014, $1,000,000, 5-year, 10% bonds, were issued for $980,000.
Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the
straight-line method to amortize discount on bonds payable, the semiannual
amortization amount is
A.$8,000
B.$4,000
C.$2,000
D.$5,000
19) 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.
20) When a company exchanges machinery and receives a trade-in allowance greater
than the book value, this transaction would be recorded with the following entry
(assuming the exchange was considered to have commercial substance):
A.debit Machinery and Accumulated Depreciation; credit Machinery, Cash, and Gain
on Disposal
B.debit Machinery and Accumulated Depreciation; credit Machinery and Cash
C.debit Cash and Machinery; credit Accumulated Depreciation
D.debit Cash and Machinery; credit Accumulated Depreciation and Machinery
21) Which of the following best describes the effect on direct labor when management
adopts a just-in-time environment?
A.Workers typically perform one function
B.The environment becomes more labor intensive
C.Each employee runs a single machine
D.Workers are often cross-trained to perform more than one function
22) Singer and McMann are partners in a business. Singers original capital was $40,000
and McManns was $60,000. They agree to salaries of $12,000 and $18,000 for Singer
and McMann respectively and 10% interest on original capital. If they agree to share
remaining profits and losses on a 3:2 ratio, what will McManns share of the income be
if the income for the year was $15,000?
A.$6,000
B.$9,400
C.$12,600
D.$14,000
23) The Brass Works is in the process of determining manufacturing overhead.
Journalize events (a) - (d) to Factory Overhead, Miscellaneous Expense, or allocated
between the two as appropriate. All items were paid in cash at the time of acquisition.
Next calculate the overhead application rate and apply overhead to Work-in-Process.
(a) Brass Works purchases an insurance policy for $4,000. It is computed that 80% of
the value of the policy protects production, the balance protects the administrative
offices.
(b) The electric bill is received showing an amount due of $1,200. This meter is utilized
only by production as the office spaces have their own meter.
(c) Payroll reports that the sales managers salary for the period is $3,500 and that
production supervisors wages for the period are $5,500.
(d) The stockroom reports that $2,575 in materials were purchased for the production
maintenance department.
(e) If the driver for the application of overhead is drop-forge strokes and there are
expected to be 1,000 strokes in this period, what is the rate per stroke? Do not round
your answer.
(f) Assuming that there are 1,150 drop-forge strokes in this period, apply factory
overhead to Work In Process. Round your answers to nearest dollar.
Round overhead rate to four decimal places and total cost to nearest dollar.
24) At the end of the current year, Accounts Receivable has a balance of $90,000;
Allowance for Doubtful Accounts has a credit balance of $850; and net sales for the
year total $300,000. Bad debt expense is estimated at 2.5% of net sales.
Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the
adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad
Debt Expense; and (c) the net realizable value of accounts receivable.
25) The balance in the office supplies account on June 1 was $7,500, supplies
purchased during June were $3,100, and the supplies on hand at June 30 were $2,300.
The amount to be used for the appropriate adjusting entry is
A.$2,100
B.$12,900
C.$6,700
D.$8,300
26) The cost of wages paid to employees directly involved in the manufacturing process
in converting materials into finished product is classified as:
A.factory overhead cost
B.direct labor cost
C.miscellaneous costs
D.direct materials cost
27) One of the weaknesses of the direct write-off method is that it
A.understates accounts receivable on the balance sheet
B.violates the matching principle
C.is too difficult to use for many companies
D.is based on estimates
28) When is the adjusted trial balance prepared?
A.Before adjusting journal entries are posted
B.After adjusting journal entries are posted
C.After the adjusting journal entries are journalized
D.Before the adjusting journal entries are journalized
29) The following is a measure of a managers performance working in a cost center.
A.budget performance report
B.rate of return and residual income measures
C.divisional income statements
D.balance sheet
30) Too much inventory on hand
A.reduces solvency
B.increases the cost to safeguard the assets
C.increases the losses due to price declines
D.all of the above
31) If fixed costs are $490,000, the unit selling price is $35, and the unit variable costs
are $20, what is the break-even sales (units) if fixed costs are reduced by $40,000?
A.32,667 units
B.14,000 units
C.30,000 units
D.24,500 units
32) When comparing the direct write-off method and the allowance method of
accounting for uncollectible receivables, a major difference is that the direct write-off
method
A.uses a percentage of sales method to estimate uncollectible accounts
B.is used primarily by large companies with many receivables
C.is used primarily by small companies with few receivables
D.uses an allowance account
33) At the end of the fiscal year, variances from standard costs are usually transferred to
the:
A.direct labor account
B.factory overhead account
C.cost of goods sold account
D.direct materials account
34) Which of the following would most likely be a product cost?
A.Salary of VP of sales
B.Advertising for a particular product
C.Drill bits for a drill press used in the plant assembly area
D.Salary of the company receptionist
35) Which method for evaluating capital investment proposals reduces the expected
future net cash flows originating from the proposals to their present values and
computes a net present value?
A.Net present value
B.Average rate of return
C.Internal rate of return
D.Cash payback
36) Yadkin Valleys April sales forecast projects that 6,000 units will sell at a price of
$10.50 per unit. The desired ending inventory is 30% higher than the beginning
inventory, which was 1,000 units. Budgeted purchases of units in April would be:
A.7,000 units
B.6,000 units
C.6,300 units
D.7,300 units
37) What cost concept used in applying the cost-plus approach to product pricing
covers selling expenses, administrative expenses, and desired profit in the "markup"?
A.Total cost concept
B.Product cost concept
C.Variable cost concept
D.Sunk cost concept
38) Tough Hardware purchases raw materials and processes those purchases through a
receiving/inspection process prior to stocking for production. Tough places 3 purchase
orders for materials for production and receives the goods that day. The first PO is for
2,500 1/2 96 milling blanks at $2.75 each. The second is for 4,000 pieces of 48 96 1
sheet steel at $15.55 each. The third PO is for five 55 gallon drums of Milling
Lubrication Oil at $475.00 per barrel.
The receiving/inspection process is completed and the goods are transferred from
Receiving Inventory to Raw Materials. The Receiving/Inspection Department assigns
manufacturing overhead of $55.00 per purchase order as well as $2.75 per piece on
metal goods and $35.00 per container on fluids. All labor is allocated through overhead.
(a) Write the journal entry to purchase and receive these items to Receiving Inventory
on account.
(b) Assign overhead to the metal goods.
(c) Assign overhead to the fluid goods.
(d) Transfer all goods to Raw Materials Inventory.
39) Which of the following amounts should be disclosed in the stockholders' equity
section of the balance sheet?
A.the number of shares of common stock outstanding
B.the number of shares of common stock issued
C.the number of shares of common stock authorized
D.all of the above
40) Which of the following are two methods of analyzing capital investment proposals
that both ignore present value?
A.Internal rate of return and average rate of return
B.Net present value and average rate of return
C.Internal rate of return and net present value
D.Average rate of return and cash payback method
41) The Tom Company reports the following data.
Determine Tom Companys operating leverage.
42) 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
43) Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and
75% in the month following the sale. If sales on account are budgeted to be $225,000
for March and $250,000 for April, what are the budgeted cash receipts from sales on
account for April?
44) The following selected data were taken from the financial statements of the Berrol
Group for December 31, 2012, 2011, and 2010:
The 2012 net income was $242,000 and the 2011 net income was $308,000. No
dividends on common stock were declared between 2010 and 2012.
Required:
(1) Determine the rate earned on total assets, the rate earned on stockholders equity, and
the rate earned on common stockholders equity for the years 2012 and 2011. Round to
one decimal place.
(2) What conclusion can be drawn from these data as to the companys profitability?
45) At December 31st, the Jeter Company had the following ending balances;
Retained Earnings - $100,000
Preferred Stock ($100 par, 7% cumulative, 10,000 authorized, 5,000 issued and
outstanding) - 500,000
Treasury stock - $35,000
Additional paid in capital - common stock - 400,000
Additional paid in capital - preferred stock - 50,000
Common stock ($5.00 par value, 100,000 shares authorized, 60,000 issued) - 300,000
Prepare the stockholders equity section of the balance sheet in good form with all of the
required disclosures. .
46) On the basis of the following data, determine the value of the inventory at the lower
of cost or market. Apply lower of cost or market to each inventory item. Show your
work.
47) Using the following accounts and balances, prepare the Stockholders Equity section
of the balance sheet. Fifty thousand shares of common stock are authorized, and 5,000
shares have been reacquired.
