1) The normal balance of the dividends account is a debit.
2) In contribution margin analysis, the effect of a difference in the number of units sold,
assuming no change in unit sales price or cost, is termed the unit price or unit cost
factor.
3) The effective-interest method of amortizing a bond discount or premium is the
preferred method.
4) If the accounts receivable turnover for the current year has decreased when compared
with the ratio for the preceding year, there has been an acceleration in the collection of
receivables.
5) As with other assets, the cost of a bond investment includes all costs related to the
purchase.
6) If factory overhead applied exceeds the actual costs, the factory overhead account
will have a credit balance.
7) Merchandise Inventory normally has a debit balance.
8) If 10,000 units which were 40% completed are in process at November 1, 80,000
units were completed during November, and 12,000 were 20% completed at November
30, the number of equivalent units of production for November was 75,600. (Assume
no loss of units in production and that inventories are costed by the first-in, first-out
method.)
9) After the account balances have been extended from the Adjusted Trial Balance
columns on the work sheet, the difference between the initial totals of the Balance Sheet
debit and credit columns is net income or net loss.
10) A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables,
$150,000 and $222,500 of inventories. Current liabilities are $225,000. The current
ratio is 2.5 to 1.
11) On the variable costing income statement, variable selling and administrative
expenses are deducted from manufacturing margin to yield contribution margin.
12) For accounting purposes, stated value is treated the same way as par value.
13) The statement of cash flows is not one of the basic financial statements.
14) If the adjustment of the unearned rent account at the end of the period to recognize
the amount of rent earned is inadvertently omitted, the net income for the period will be
understated.
15) In applying the first-in, first-out method of costing inventories, if 8,000 units which
are 30% completed are in process at June 1, 28,000 units are completed during June,
and 4,000 units were 75% completed at June 30, the number of equivalent units of
production for June was 33,400.
16) When a company is showing a net loss, it is always best to discontinue the segment
in order not to continue with losses.
17) One reason a dollar today is worth more than a dollar 1 year from today is the time
value of money.
18) The auditor’s report is where the auditor certifies that the financial statements are
correct and accurate.
19) At the end of a period (before adjustment), Allowance for Doubtful Accounts has a
debit balance of $500. Net credit sales for the period totaled $800,000. If bad debt
expense is estimated at 1% of net credit sales, the amount of bad debt expense to be
recorded in the adjusting entry is $8,500.
20) For accounting purposes, the business entity should be considered separate from its
owners in which of the following forms of business?
A.a corporation
B.a proprietorship
C.a partnership
D.all of these
21) Zennia Company provides its employees with varying amount of vacation per year,
depending on the length of employment. The estimated amount of the current years
vacation cost is $135,000. The journal entry to record the adjusting entry required on
December 31, the end of the current year, to record the current months accrued vacation
pay is
A.$135,000
B.$67,500
C.$0
D.$11,250
22) Which of the following statements is correct using the direct costing concept?
A.All manufacturing costs are included in the calculation of cost of goods manufactured
B.Only fixed costs are included in the calculation of cost of goods manufactured while
variable costs are considered period costs
C.Only variable manufacturing costs are included in the calculation of cost of goods
manufactured while fixed costs are considered period costs
D.All manufacturing costs are considered period costs
23) A pension plan which requires the employer to make annual pension contributions,
with no promise to employees regarding future pension payments, is termed
A.funded
B.unfunded
C.defined benefit
D.defined contribution
24) The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of
$12.40 per hour. Original production had been budgeted for 1,100 units, but only 1,000
units were actually produced. Labor standards were 7.6 hours per completed unit at a
standard rate of $13.00 per hour.
Compute the labor time variance.
A.9,880F
B.9,880U
C.7,800U
D.7,800F
25) 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
26) Transactions affecting stockholders equity include
A.shares of capital stock issued to stockholders and payment of liabilities
B.shares of capital stock issued to stockholders, dividends declared and paid to
stockholders, revenues, and expenses
C.shares of capital stock issued to stockholders, revenues, expenses, and collection of
accounts receivable
D.dividends declared and paid to stockholders, revenues, expenses, and purchases of
supplies on account
27) Vacation pay payable is reported on the balance sheet as a(n)
A.current liability or long-term liability, depending upon when the vacations will be
taken by employees
B.current liability
C.expense
D.long-term liability
28) The classification and normal balance of the dividends account is
A.an expense with a credit balance
B.an expense with a debit balance
C.a liability with a credit balance
D.a stockholders equity item with a debit balance
29) Financial statements in which financial data for two or more companies are
combined as a single entity are called
A.conventional statements
B.consolidated statements
C.audited statements
D.constitutional statements
30) On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value
common stock issued and outstanding. All 40,000 shares had been issued in a prior
period at $20.00 per share. On February 1, 20xx, Swenson purchased 4,000 shares of
treasury stock for $24 per share and later sold the treasury shares for $21 per share on
March 1, 20xx.
The journal entry to record the purchase of the treasury shares on February 1, 20xx,
would include a
A.credit to Treasury Stock for $96,000
B.debit to Treasury Stock for $96,000
C.debit to a loss account for $120,000
D.credit to a gain account for $120,000
31) Below are two independent sets of transactions for Welcott Company:
(1) Welcott provides its employees with varying amounts of vacation per year,
depending on the length of employment. The estimated amount of the current years
vacation pay is $78,000. Journalize the adjusting entry required on January 31, the end
of the first month of 2010, to record the accrued vacation pay.
(2) Welcott maintains a defined contribution pension plan for its employees. The plan
requires quarterly installments to be paid to the funding agent, Northern Trust, by the
fifteenth of the month following the end of each quarter. Assuming that the pension cost
is $119,600 for the quarter ended December 31, journalize entries to record (a) the
accrued pension liability on December 31 and (b) the payment to the funding agent on
January 15.
32) Assume in analyzing alternative proposals that Proposal F has a useful life of six
years and Proposal J has a useful life of nine years. What is one widely used method
that makes the proposals comparable?
A.Ignore the fact that Proposal F has a useful life of six years and treat it as if it has a
useful life of nine years.
B.Adjust the life of Proposal J to a time period that is equal to that of Proposal F by
estimating a residual value at the end of year six.
C.Ignore the useful lives of six and nine years and find an average (7 1/2 years).
D.Ignore the useful lives of six and nine years and compute the average rate of return.
33) Which of the following does not support managerial decisions involving accurate
product costing?
A.product constraints
B.emphasis of a product line
C.product mix
D.product price
34) Cash dividends of $50,000 were declared during the year. Cash dividends payable
were $10,000 and $5,000 at the beginning and end of the year, respectively. The amount
of cash for the payment of dividends during the year is
A.$55,000
B.$50,000
C.$65,000
D.$60,000
35) Depreciation on equipment for the year is $6,300.
(a) Record the journal entry if the company adjusts its account once a year.
(b) Record the journal entry if the company adjusts its account on a monthly basis.
36) Which one of the following below should be added to net income in calculating net
cash flow from operating activities using the indirect method?
A.a gain on the sale of land
B.a decrease in accounts payable
C.an increase in accrued liabilities
D.dividends paid on common stock
37) The following data is given for the Stringer Company:
Overhead is applied on standard labor hours.
The direct material price variance is:
A.22,800U
B.22,800F
C.52,000U
D.52,000F
38) Managerial accountants would most likely prepare all of the following reports
except:
A.A performance report identifying amounts of scrap
B.A control report comparing direct material usage over time
C.A sales report targeting monthly sales and potential bonuses
D.An annual report for external regulators such as the SEC
39) Project A requires an original investment of $50,000. The project will yield cash
flows of $15,000 per year for seven years. Project B has a calculated net present value
of $13,500 over a four year life. Project A could be sold at the end of four years for a
price of $25,000. (a) Using the proper table below determine the net present value of
Project A over a four-year life with salvage value assuming a minimum rate of return of
12%. (b) Which project provides the greatest net present value?
40) An aging of a company’s accounts receivable indicates that estimate of the
uncollectible accounts totals $4,000. If Allowance for Doubtful Accounts has a $800
credit balance, the adjustment to record the bad debt expense for the period will require
a
A.debit to Allowance for Doubtful Accounts for $3,200
B.debit to Bad Debt Expense for $3,200
C.debit to Allowance for Doubtful Accounts for $4,000
D.credit to Allowance for Doubtful Accounts for $4,000
41) When merchandise sold is assumed to be in the order in which the purchases were
made, the company is using
A.first-in, last-out
B.last-in, first-out
C.first-in, first-out
D.average cost
42) The general term used to indicate delaying the recognition of an expense already
paid or of a revenue already received is
A.depreciation
B.deferral
C.accrual
D.inventory
43) In order to be useful to managers, management accounting reports should possess
all of the following characteristics EXCEPT:
A.provide objective measures of past operations and subjective estimates about future
decisions
B.be prepared in accordance with generally accepted accounting principles
C.be provided at any time management needs information
D.be prepared to report information for any unit of the business to support decision
making
44) The amount of increase or decrease in revenue that is expected from a particular
course of action as compared with an alternative is termed:
A.manufacturing margin
B.contribution margin
C.differential cost
D.differential revenue
45) Which of the following is not an example for safeguarding inventory?
A.Storing inventory in restricted areas
B.Physical devices such as two-way mirrors, cameras, and alarms
C.Matching receiving documents, purchase orders, and vendors invoice
D.Returning inventory that is defective or broken
46) Which intangible assets are amortized over their useful life?
A.trademarks
B.goodwill
C.patents
D.all of the above
47) Which of the following would be subtracted from the balance per books on a bank
reconciliation?
A.Outstanding checks
B.Deposits in transit
C.Notes collected by the bank
D.Service charges
48) On the bank’s accounting records, customers’ accounts are normally shown as
A.debit balances
B.expenses
C.an asset
D.a liability
49) The debit side of an account
A.depends on whether the account is an asset, liability or stockholders equity item
B.can be either side of the account depending on how the accountant set up the system
C.is the right side of the account
D.is the left side of the account
50) Which of the following types of accounts have a normal credit balance?
A.assets and liabilities
B.liabilities and expenses
C.revenues and liabilities
D.capital stock and dividends
51) A debit balance in which of the following accounts would indicate a likely error?
A.Salaries Expense
B.Notes Payable
C.Dividends
D.Supplies
52) Which of the following drives work-in-process inventory levels higher?
A.Machine breakdowns
B.Production rate losses
C.Rework processes
D.All of the above
53) The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 30,000 shares were originally issued and 5,000 were subsequently
reacquired. What is the number of shares outstanding?
A.35,000
B.70,000
C.25,000
D.30,000
54) The Weber Company purchased a mining site for $1,750,000 on July 1, 2014. The
company expects to mine ore for the next 10 years and anticipates that a total of
400,000 tons will be recovered. The estimated residual value of the property is
$150,000. During 2014 the company extracted 6,500 tons of ore. The depletion expense
for 2014 is
A.$17,500
B.$16,000
C.$26,000
D.$15,000
55) A $500,000 bond issue on which there is an unamortized discount of $20,000 is
redeemed for $475,000. Journalize the redemption of the bonds.
56) During August, the first month of the fiscal year, sales totaled $875,000 and the cost
of merchandise available for sale totaled $700,000. Estimate the cost of the
merchandise inventory as of August 31, based on an estimated gross profit rate of 45%.
57) Holiday Decorations Unique has been approached by the community college to
make special decorations for the faculty and staff. The college is willing to buy 5,000
Christmas ornaments with their own design for $6.00 each. The company normally sells
its decorations for $12.00 each. A break down of their costs is as follows:
Should Holiday Decorations Unique accept the special order made by the college? The
company has enough excess capacity to make this order.
58) Sabas Company has 40,000 shares of $100 par, 1% preferred stock and 100,000
shares of $50 par common stock. The following amounts were distributed as dividends:
Determine the dividends per share for preferred and common stock for each year.
59) The cost and fair value of the trading securities held by AdBrand Company as of
December 31, 2012 are as follows:
Required:
(1) Complete the table above to find the total cost and fair value for the companys
trading securities portfolio.
(2) Calculate and record the required December 31, 2012 adjustment.
(3) Explain how the adjustment from step (2) is reported on AdBrands 2012 financial
statements.