1) Direct materials are not usually easily traced to a product.
2) Opportunities in accounting include auditing, consulting, market research, and tax
planning.
3) If an asset is sold above its book value, the selling company records a loss.
4) A clock card is a source document used by an employee to record the total number of
hours worked and serves as a source document for entries to record labor costs.
5) A stock dividend is a distribution of corporate assets that returns part of the original
investment to shareholders.
6) The book value of an asset when using double-declining-balance depreciation is
always greater than the book value from using straight-line depreciation, except at the
beginning and the end of the asset’s useful life, when it is the same.
7) Credit terms of 2/10, n/30 imply that the seller offers the purchaser a 2% cash
discount if the amount is paid within 10 days of the invoice date. Otherwise, the full
amount is due in 30 days.
8) Past performance is the best overall basis for evaluating current performance and
assessing the need for corrective action.
9) Special journals are designed in a manner that is best suited for each business, so
good systems design for a business could include collapsing the sales and cash receipts
journal into one journal.
10) Adjusting entries are necessary so that asset, liability, revenue, and expense account
balances are correctly recorded.
11) Micron owns 30% of JVT stock. Micron received $6,500 in cash dividends from its
investment in JVT. The entry to record receipt of these dividends includes a debit to
Cash for $6,500 and a credit to Long-Term Investments for $6,500.
12) Standard costs can serve as a basis for evaluating actual performance.
13) If the seller is responsible for paying freight charges, then ownership of inventory
passes when goods arrive at their destination.
14) A process cost summary is an accounting report that describes the costs charged to a
department, the equivalent units of production by the department, and how the costs
were assigned to the output.
15) Activity-based budgeting is a budget system based on expected activities and their
activity levels, which helps management plan for the resources required.
16) A company’s post-closing trial balance has total debits of $40,350 and total credits
of $40,650. Accordingly, the company should review for errors in the closing process.
17) Hou Company applies factory overhead to its production departments on the basis
of 90% of direct labor costs. In the Assembly Department, Hou had $125,000 of direct
labor cost, and in the Finishing Department, Hou had $35,000 of direct labor cost. The
entry to apply overhead to these production departments is:
A.Debit Factory Overhead – Assembly $112,500; debit Factory Overhead – Finishing
$31,500; credit Goods in Process Inventory $144,000
B.Debit Factory Overhead $144,000; credit Goods in Process Inventory – Assembly
$112,500; credit Goods in Process – Finishing $31,500
C.Debit Factory Overhead $144,000; credit Factory Payroll $144,000
D.Debit Goods in Process Inventory – Assembly $112,500; debit Goods in Process
Inventory – Finishing $31,500; credit Factory Overhead $144,000
E.Debit Factory Payroll $144,000; credit Cash $144,000
18) For budgets to be effective:
A.Goals should be attainable
B.Employees affected by a budget should be consulted when it is prepared
C.Evaluations should be made carefully with opportunities to explain any failures
D.They should be properly applied to avoid negative effects
E.All of these
19) Plant assets are:
A.Tangible assets used in the operation of a business that have a useful life of more than
one accounting period
B.Current assets
C.Held for sale
D.Intangible assets used in the operations of a business that have a useful life of more
than one accounting period
E.Tangible assets used in the operation of business that have a useful life of less than
one accounting period
20) A company’s Office Supplies account shows a beginning balance of $600 and an
ending balance of $400. If office supplies expense for the year is $3,100, what amount
of office supplies was purchased during the period?
A.$2,700
B.$2,900
C.$3,300
D.$3,500
E.$3,700
21) The following selected transactions took place during the current year for a
company:
(a) Prepare the journal entries for these transactions.
(b) If Retained Earnings had a $75,000 credit balance on January 1, calculate its
year-end
balance as of December 31.
22) Dunkin Company manufactures and sells a single product that sells for $480 per
unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is
$4,200,000. Compute the contribution margin ratio.
A.37.5%
B.62.5%
C.55.0%
D.50.0%
E.47.5%
23) Kyoto, Inc. predicts the following sales in units for the coming four months:
Although each month’s ending inventory of finished units should be 60% of the next
month’s sales, the March 31 finished goods inventory is only 100 units. A finished unit
requires five pounds of raw material B. The March 31 raw materials inventory has 200
pounds of B. Each month’s ending inventory of raw materials should be 30% of the
following month’s production needs. The budgeted purchases of pounds of raw material
B during May should be:
A.1,418 lb
B.1,460 lb
C.1,502 lb
D.264 lb
E.283 lb
24) Barnes manufactures a specialty food product that can currently be sold for $22 per
unit and has 20,000 units on hand. Alternatively, it can be further processed at a cost of
$12,000 and converted into 12,000 units of Exceptional and 6,000 units of Premium.
The selling price of Exceptional and Premium are $30 and $20, respectively. The
incremental net income of processing further would be:
A.$40,000
B.$28,000
C.$18,000
D.$44,000
E.$12,000
25) During March, the production department of a process manufacturing system
completed a number of units of a product and transferred them to finished goods. Of the
units transferred, 25,000 were in process at the beginning of March and 110,000 were
started and completed in March. March’s beginning inventory units were 100%
complete with respect to materials and 55% complete with respect to labor. At the end
of March, 30,000 additional units were in process in the production department and
were 100% complete with respect to materials and 30% complete with respect to labor.
Compute the number of equivalent units with respect to both materials and direct labor
respectively for March using the weighted-average method.
A.165,000; 165,000
B.135,000; 119,000
C.140,000; 130,250
D.165,000; 144,000
E.144,000; 144,000
26) Herald Company had sales of $135,000, sales discounts of $2,000, and sales returns
of $3,200. Herald Company’s net sales equals:
A.$5,200.
B.$129,800.
C.$133,000.
D.$135,000.
E.$140,200.
27) For the current period, Boggs Company’s manufacturing operations yield a $5,250
unfavorable price variance on its direct materials usage. The actual price per pound is
$56.50 and the standard price per pound is $55.00. How many pounds of material are
used in the current period?
A.5,393
B.5,110
C.3,500
D.3,750
E.4,000
28) Which of the following accounts would appear on a budgeted balance sheet?
A.Income tax expense
B.Accounts receivable
C.Sales commissions
D.Depreciation expense
E.All of these
29) In preparing a company’s statement of cash flows for the most recent year, the
following information is available:
Net cash flows from investing activities for the year were:
A.$134,000 of net cash used by investing activities
B.$134,000 of net cash provided by investing activities
C.$120,000 of net cash used by investing activities
D.$252,000 of net cash used by investing activities
E.$221,000 of net cash provided by investing activities
30) All of the following statements regarding FICA taxes are True except:
A.FICA taxes are deducted from the employee
B.Employers must pay withheld FICA taxes to the IRS
C.The amount of FICA deducted from the employee is credited to a liability account
D.A self-employed person is exempt from FICA taxes
E.An employer must pay FICA taxes equal to the amount withheld from the employee
31) If the cost of the beginning goods in process inventory is $10,000, costs of goods
manufactured is $890,000, direct materials cost is $330,000, direct labor cost is
$210,000, and overhead cost is $315,000, calculate the ending goods in process
inventory:
A.$35,000
B.$25,000
C.$45,000
D.$350,000
E.$355,000
32) Calculating return on total assets for an investment center is defined by the
following formula for an investment center:
A.Contribution margin/Ending assets
B.Gross profit/Ending assets
C.Net income/Ending assets
D.Net income/Average invested assets
E.Contribution margin/Average invested assets
33) If a parcel of land that was originally purchased for $85,000 is offered for sale at
$150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as
easily being worth $140,000, and is sold for $137,000, the land account transaction
amount to handle the sale of the land in the seller’s books is:
A.$85,000 increase
B.$85,000 decrease
C.$137,000 increase
D.$137,000 decrease
E.$140,000 decrease
34) Use the following financial statements and additional information to (1) prepare a
statement of cash flows for the year ended December 31, 2011 using the indirect
method, and (2) compute the company’s cash flow on total assets ratio for 2011.
Additional Information
a. A $20,000 note payable is retired at its carrying value in exchange for cash.
b. The only changes affecting retained earnings are net income and cash dividends paid.
c. New equipment is acquired for $120,000 cash.
d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of
$4,700.
e. Prepaid expenses relate to Other Expenses on the income statement.
f. All purchases and sales of merchandise inventory are on credit.
35) The financial statement that identifies where a company’s cash came from and
where it went during the period is the:
A.Statement of financial position
B.Statement of cash flows
C.Balance sheet
D.Income statement
E.Statement of changes in owner’s equity
36) Which of the following statements is correct concerning the elements of cycle time?
A.Move time is the time spent moving (1) raw materials from storage to production and
(2) goods in process from factory location to another factory location
B.Inspection time is the time spent producing the product
C.Process time is considered non-value-added time
D.Wait time is considered value-added time
E.Cycle efficiency is the ratio of non-value-added time to total cycle time
37) The usual order for the asset section of a classified balance sheet is:
A.Current assets, prepaid expenses, long-term investments, intangible assets
B.Long-term investments, current assets, plant assets, intangible assets
C.Current assets, long-term investments, plant assets, intangible assets
D.Intangible assets, current assets, long-term investments, plant assets
E.Plant assets, intangible assets, long-term investments, current assets
38) Match the following definitions and terms by placing the letter that identifies the
best definition in the blank space next to the term.
1>The sources of accounting information A. Source documents
2>A company’s record of each transaction in one place that shows debits and credits for
each transaction B. Debit
3>A file containing all accounts of a company and their balances C. Posting
4>A simple account form used as a helpful tool in showing the effects of transactions
and events on specific accounts D. Double-entry accounting
5>A record of the increases and decreases in a specific asset, liability, equity, revenue,
or expense item. E. Ledger
6>The process of transferring journal entry information to the ledger F. Journal
7>Decrease in an asset and expense account, and increase in a liability, owner’s capital
and revenue account; recorded on the right side of a T-account G. Account
8>An accounting system where each transaction affects and is recorded in at least two
accounts; the sum of the debits for each entry must equal its credits. H. Credit
9>Another name for the accounting books, or simply the books I. account
10>An increase in an asset and expense account, and decrease in a liability, owner’s
capital, and revenue account; recorded on the left side of a T-account. J. Accounting
records
39) A company purchased equipment and signed a 7-year installment loan at 9% annual
interest. The annual payments equal $9,000. The present value of an annuity for 7 years
at 9% is 5.0330. The present value of the loan is:
A.$9,000
B.$5,033
C.$63,000
D.$57,330
E.$45,297
40) An income statement account that is used to record cash overages and cash
shortages arising from petty cash transactions or from errors in making change is titled:
A.Cash Lost
B.Bank Reconciliation
C.Petty Cash
D.Cash Over and Short
E.Cash Receivable
41) A company’s balance sheet shows: cash $22,000, accounts receivable $16,000,
office equipment $50,000, and accounts payable $17,000. What is the amount of
owner’s equity?
A.$17,000
B.$29,000
C.$71,000
D.$88,000
E.$105,000
42) The party that has the right to exercise the call option on callable bonds is(are):
A.The bondholders
B.The bond issuer
C.The bond indenture
D.The bond trustee
E.The bond underwriter
43) On June 1, Martin Company signed a $25,000, 120-day, 6% note payable to cover a
past due account payable.
a. What is the total amount of interest to be paid on this note?
b. Prepare Martin Company’s general journal entry to record the issuance of the note
payable.
c. Prepare Martin Company’s general journal entry to record the payment of the note on
September 29
44) Ginger Company’s product has a contribution margin per unit of $11.25 and a
contribution margin ratio of 22.5%. What is the selling price of the product?
A.$5
B.$20
C.$30
D.$40
E.$50
45) The gross method of recording purchases refers to the method of recording:
A.Purchases at the invoice price less any cash discounts
B.Specified amounts and timing of payments that a buyer agrees to make in return for
being granted credit
C.Purchases at the full invoice price, without deducting any cash discounts
D.Inventory at its selling price
E.Inventory at the lower of cost or market
46) Employees of Artworld Co. have earned but have not been paid $3,500 in salaries
for the last week of the current calendar year.
(a) Prepare the necessary adjusting journal entry(ies) for Artworld at December 31 of
the current year.
(b) Assuming that Artworld makes reversing entries, prepare the necessary reversing
entry. Include the appropriate date for the reversing entry(ies).
47) A company uses the weighted-average method for inventory costing. At the end of
the period, 22,000 units were in the ending goods in process inventory and are 100%
complete for materials and 75% complete for labor and overhead. The equivalent costs
per unit are; materials, $2.65, labor, $2.15, and overhead, $3.20. Compute the cost that
would be assigned to the ending goods in process inventory for the period.
A.$146,575
B.$176,000
C.$87,725
D.$93,775
E.$132,000
48) A corporation:
A.Is a business legally separate from its owners
B.Is controlled by the FASB
C.Has shareholders who have unlimited liability for the acts of the corporation
D.Is the same as a limited liability partnership
E.Is not subject to double taxation
49) One of several ratios that reflects solvency includes the:
A.Acid-test ratio
B.Current ratio
C.Times interest earned ratio
D.Total asset turnover
E.Days’ sales in inventory
50) A company earned $2,000 in net income for October. Its net sales for October were
$10,000. Its profit margin is:
A.2%
B.20%
C.200%
D.500%
E.$8,000
51) A planning budget based on a single predicted amount of sales or production
volume is called a:
A.Sales budget
B.Standard budget
C.Flexible budget
D.Fixed budget
E.Variable budget
52) Winthrop Manufacturing produces a product that sells for $50.00. Fixed costs are
$260,000 and variable costs are $24.00 per unit. Winthrop can buy a new production
machine that will increase fixed costs by $11,400 per year, but will decrease variable
costs by $3.50 per unit. Compute break-even point in units if the new machine is
purchased.
A.10,438 units
B.8,814 units
C.10,000 units
D.9,200 units
E.9,869 units
53) Baker Corporation has two operating departments, Machining and Assembly, and
an office. The three categories of office expenses are allocated to the two departments
using different allocation bases. The following information is available for the current
period:
The amount of the total office expenses that should be allocated to Assembly for the
current period is:
A.$35,750
B.$45,000
C.$54,250
D.$90,000
E.$600,000
54) For each of the following errors, indicate on the table below the amount by which
the trial balance will be out of balance and which trial balance column (debit or credit)
will have the larger total as a result of the error.
a. $100 debit to Cash was debited to the Cash account twice.
b. $1,900 credit to Sales was posted as a $190 credit.
c. $5,000 debit to Office Equipment was debited to Office Supplies.
d. $625 debit to Prepaid Insurance was posted as a $62.50 debit.
e. $520 credit to Accounts Payable was not posted.
55) A company that uses the perpetual inventory system purchased $8,500 on
September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on
October 4. Prepare the journal entries to record these merchandise transactions.
56) A company issued 9.2%, 10-year bonds with a par value of $100,000. Interest is
paid semiannually. The market interest rate on the issue date was 10%, and the issuer
received $95,016 cash for the bonds. The issuer uses the effective interest method for
amortization. On the first semiannual interest date, what amount of discount should
issuer amortize?
57) The summary amounts below appear in the Income Statement and Balance Sheet
columns of a company’s December 31 work sheet. Prepare the necessary closing
entries.
58) Describe the information found on a responsibility accounting performance report.
59) ______________________ ratios include the price-earnings ratio and dividend
yield.
60) Thompson Company has acquired a machine from a dealer that requires a payment
of $45,000 at the end of five years. This transaction includes interest at 8%,
compounded semiannually. What is the value of the machine today?
61) The __________________________ shows expected cash inflows and outflows
during the budget period.