1) Accounting information systems are so accurate that decision makers in practice do
not need a basic knowledge of how the systems work.
2) Revenue and expense balances are transferred from the adjusted trial balance to the
income statement.
3) Measures taken from a selected competitor or a group of competitors are often
excellent standards of comparison for analysis.
4) Plant assets are tangible assets that are usually long-term assets used to produce or
sell products and services.
5) Companies with many employees often use a special payroll bank account to pay
employees.
6) In accrual accounting, accrued revenues are recorded as liabilities.
7) An account balance is the difference between the debits and credits for an account
including any beginning balance.
8) Each sales transaction for a seller that uses a perpetual inventory system involves
recognizing both revenue and cost of merchandise sold.
9) If a department that applies process costing starts the reporting period with 50,000
physical units that were 25% complete with respect to direct materials and 40%
complete with respect to direct labor, it must add 12,500 equivalent units of direct
materials and 20,000 equivalent units of direct labor to complete them.
10) Term bonds are scheduled for maturity on one specified date, whereas serial bonds
mature at more than one date.
11) A check involves 3 parties: the maker who signs the check, the payee who is the
recipient, and the bank on which the check is drawn.
12) Companies have the option of using either the direct or indirect method to prepare
the operating section of the statement of cash flows.
13) A fixed budget performance report never provides useful information for evaluating
variances.
14) Benny, an employee of Parrott Company, used company assets for his own personal
gain. This is an example of
A.embezzlement
B.fraud
C.internal control
D.ethics
E.employment perks
15) Flora Accounting Services completed these transactions in February:
a. Purchased office supplies on account, $300.
b. Completed work for a client on credit, $500.
c. Paid cash for the office supplies purchased in (a).
d. Completed work for a client and received $800 cash.
e. Received $500 cash for the work described in (b).
f. Received $1,000 from a client for accounting services to be performed in March.
Prepare journal entries to record the above transactions. Explanations are not necessary.
16) Using the information below, compute the cycle efficiency:
A.93.8%
B.81.3%
C.100.0%
D.75.0%
E.88.8%
17) A liability for dividends exists:
A.When cumulative preferred stock is sold
B.On the date of declaration
C.On the date of record
D.On the date of payment
E.For dividends in arrears on cumulative preferred stock
18) Acceptable methods of assigning specific costs to inventory and cost of goods sold
include all of the following except:
A.LIFO method
B.FIFO method
C.Specific identification method
D.Weighted average method
E.Retail method
19) The inventory valuation method that results in the lowest taxable income in a period
of inflation is:
A.LIFO method
B.FIFO method
C.Weighted-average cost method
D.Specific identification method
E.Gross profit method
20) A system of performance measures, including nonfinancial measures, used to assess
company and division manager performance is:
A.Hurdle rate
B.Return on investment
C.Balanced scorecard
D.Residual income
E.Investment turnover
21) Refer to the following selected financial information from Hansen’s, LLC. Compute
the company’s times interest earned for Year 2.
A.6.9
B.4.8
C.5.8
D.14.0
E.7.9
22) A company has net sales of $900,000 and average accounts receivable of $300,000.
What is its accounts receivable turnover for the period?
A.0.20
B.5.00
C.20.0
D.73.0
E.3.0
23) A company owns 9% bonds with a par value of $100,000 that pay interest on
October 1 and April 1. The amount of interest accrued on December 31 (the company’s
year-end) would be:
A.$750
B.$1,500
C.$2,250
D.$4,500
E.$9,000
24) The private group that currently has the authority to establish generally accepted
accounting principles in the United States is the:
A.APB
B.FASB
C.AAA
D.
25) Hal Smith opened Smith’s Repairs on March 1 of the current year. During March,
the following transactions occurred and were recorded in the company’s books:
1> Smith invested $25,000 cash in the business.
2> Smith contributed $100,000 of equipment to the business.
3> The company paid $2,000 cash to rent office space for the month.
4> The company received $16,000 cash for repair services provided during March.
5> The company paid $6,200 for salaries for the month.
6> The company provided $3,000 of services to customers on account.
7> The company paid cash of $500 for monthly utilities.
8> The company received $3,100 cash in advance of providing repair services to a
customer.
9> Smith withdrew $5,000 for his personal use from the company.
Based on this information, the balance in Hal Smith, Capital reported on the Statement
of Owner’s Equity at the end of March would be:
A.$133,400
B.$130,300
C.$125,300
D.$8,400
E.$13,500
26) A manufacturing statement is also known as a schedule or listing of the:
A.Raw materials processed
B.Factory supplies used
C.Cost of goods manufactured
D.Total finished goods
E.Cost of goods sold
27) Which of the following does not require an adjusting entry at year-end?
A.Accrued interest on notes payable
B.Supplies used during the period
C.Cash invested by owner
D.Accrued wages
E.Expired portion of prepaid insurance
28) Pfister Co. leases an office to a tenant at the rate of $5,000 per month. The tenant
contacted Pfister and arranged to pay the rent for December on January 8 of the
following year. Pfister agrees to this arrangement.
a.) Prepare the journal entry that Pfister must make at year ended December 31 to
record the accrued rent revenue.
b.) Prepare the journal entry to record the receipt of the rent on January 8 of the
following year.
29) Prepare general journal entries on December 31 to record the following unrelated
year-end adjustments.
a. Estimated depreciation on office equipment for the year, $4,000.
b. The Prepaid Insurance account has a $3,680 debit balance before adjustment. An
examination of insurance policies shows $950 of insurance expired.
c. The Prepaid Insurance account has a $2,400 debit balance before adjustment. An
examination of insurance policies shows $600 of unexpired insurance.
d. The company has three office employees who each earn $100 per day for a five-day
workweek that ends on Friday. The employees were paid on Friday, December 26, and
have worked full days on Monday, Tuesday, and Wednesday, December 29, 30, and 31.
e. On November 1, the company received 6 months’ rent in advance from a tenant
whose rent is $700 per month. The $4,200 was credited to the Unearned Rent account.
f. The company collects rent monthly from its tenants. One tenant whose rent is $750
per month has not paid his rent for December.
30) The cost of land can include:
A.Purchase price
B.Assessments by local governments
C.Costs of removing existing structures
D.Fees for insuring the title
E.All of these
31) The allocation bases for assigning indirect costs include:
A.Only physical bases
B.Only cost bases
C.Only value bases
D.Only unit bases
E.Any appropriate and reasonable bases
32) Use the following company information to calculate its net cash provided or used
by investing activities:
(a) Equipment with a book value of $125,000 and an original cost of $220,000 was sold
at a gain of $22,000.
(b) Paid $49,000 cash for a new truck.
(c) Sold land costing $30,000 for $26,000 cash, realizing a $4,000 loss.
(d) Purchased treasury stock for $53,000 cash.
(e) Long-term investments in stock are sold for $41,000 cash, realizing a gain of
$3,500.
33) The following cost items relate to the Brock Company. Classify each cost as a
variable cost, a fixed cost, or a mixed cost by placing an X in the appropriate column.
Each cost should be evaluated in terms of the volume of units of finished products
produced. Also indicate with an X for each item if it is a product cost or a period cost.
34) Preparing a bank reconciliation on a monthly basis is an example of:
A.Establishing responsibility
B.Separation of duties
C.Protecting assets by proving accuracy of cash records
D.A technological control
E.Poor internal control
35) Doherty Corporation had net income of $30,000, net sales of $1,000,000, and
average total assets of $500,000. Its return on total assets is:
A.3%
B.200%
C.6%
D.17%
E.1.5%
36) Wisconsin Rentals purchased office supplies on credit. The general journal entry
made by Wisconsin Rentals will include a:
A.Debit to Accounts Payable
B.Debit to Accounts Receivable
C.Credit to Cash
D.Credit to Accounts Payable
E.Credit to Wisconsin Rentals, Capital
37) The document that is an itemized statement of goods prepared by a vendor listing
the customer’s name, items sold, sales prices, and terms of the sale is the
A.Purchase requisition
B.Purchase order
C.Invoice
D.Receiving report
E.Invoice approval
38) A broad principle that requires identifying the activities of a business with specific
time periods such as months, quarters, or years is the:
A.Operating cycle of a business.
B.Time period assumption
C.Going-concern assumption
D.Matching principle
E.Accrual basis of accounting
39) A company’s flexible budget for 12,000 units of production showed sales, $48,000;
variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the
company produces and sells 16,000 units is:
A.$2,667
B.$14,000
C.$18,667
D.$24,000
E.$35,000
40) The quick assets are defined as:
A.Cash, short-term investments, and inventory.
B.Cash, short-term investments, and current receivables.
C.Cash, inventory, and current receivables.
D.Cash, noncurrent receivables, and prepaid expenses.
E.Accounts receivable, inventory, and prepaid expenses.
41) A company purchased $60,000 of 5% bonds on May 1 at par value. The bonds pay
interest on February 1 and August 1. The amount of interest accrued on December 31
(the company’s year-end) would be:
A.$250
B.$500
C.$1,250
D.$2,500
E.$3,000
42) A company had a profit margin of 10.5% and total asset turnover of 1.84. Its return
on total assets was:
A.5.71%
B.8.66%
C.12.34%
D.13.61%
E.19.32%
43) The appropriate section in the statement of cash flows for reporting the receipt of
cash dividends from investments in securities is:
A.Operating activities
B.Financing activities
C.Investing activities
D.Schedule of noncash investing or financing activity
E.None of these. This is not reported on the statement of cash flows
44) A company’s income statement showed the following: net income, $124,000;
depreciation expense, $30,000; and gain on sale of plant assets, $14,000. An
examination of the company’s current assets and current liabilities showed the following
changes as a result of operating activities: accounts receivable decreased $9,400;
merchandise inventory increased $18,000; prepaid expenses decreased $6,200; accounts
payable increased $3,400. Calculate the net cash provided or used by operating
activities.
A.$139,000
B.$141,000
C.$145,800
D.$155,000
E.$167,000
45) Match the appropriate definition a through h with the following terms:
1>Compares actual and budgeted costs and expenses under the control of a manager A.
Investment center
2>A department whose manager is judged on the ability to control costs by keeping
them within a satisfactory range B. Performance report
3>A center whose manager is responsible for using the center’s assets to generate
income for the center C. Cost center
4>Departmental sales in excess of its direct costs and expenses D. Departmental
contribution to overhead
5>A temporary account accumulating the costs a company incurs to support an
identified set of activities E. Cost driver
6>A department whose manager is judged on the ability to generate revenues in excess
of the department’s costs F. Profit center
7>Provides information that management can use to evaluate the performance of a
department’s managers G. Cost pool
8>A factor that causes the cost of an activity to go up and down H. Responsibility
accounting system
46) Refer to the following information about the Dipping Department of the Indiana
Factory for the month of August. Indiana Factory uses the FIFO method of inventory
costing.
The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of
labor and overhead is $22.00. Compute the cost that should be assigned to the units that
were started and completed during August.
47) A managerial accounting report that presents predicted amounts of the company’s
assets, liabilities, and equity as of the end of the budget period is called a(n):
A.Rolling balance sheet
B.Continuous balance sheet
C.Budgeted balance sheet
D.Cash balance sheet
E.Operating balance sheet
48) Bok Company’s output for the current period was assigned a $400,000 standard
direct labor cost. The direct labor variances included a $10,000 unfavorable direct labor
rate variance and a $4,000 favorable direct labor efficiency variance. What is the actual
total direct labor cost for the current period?
A.$414,000
B.$386,000
C.$394,000
D.$406,000
E.$410,000
49) Interim financial statements refer to financial reports:
A.That cover less than one year, usually spanning one, three, or six-month periods
B.That are prepared before any adjustments have been recorded
C.That show the assets above the liabilities and the liabilities above the equity
D.Where revenues are reported on the income statement when cash is received and
expenses are reported when cash is paid
E.Where the adjustment process is used to assign revenues to the periods in which they
are earned and to match expenses with revenues
50) Accounting for long-term investments in equity securities with controlling influence
uses the:
A.Controlling method
B.Equity method with consolidation
C.Investor method
D.Investment method
E.Consolidated method
51) Rosser Company sold supplies in the amount of 25,000 euros to a French company
when the exchange rate was $1.21 per euro. At the time of payment, the exchange rate
decreased to $0.82. Rosser must record a:
A.gain of $9,750
B.gain of $20,500
C.loss of $9,750
D.loss of $20,500
E.neither a gain nor loss
52) On September 15, SportsWorld borrowed $75,000 cash from FirstBank by signing a
12%, 60-day note payable.
a. Prepare SportsWorld’s journal entry to record the issuance of the note payable.
b. Prepare SportsWorld’s journal entry to record the payment of the note at maturity.
53) Investments in trading securities:
A.Include only equity securities
B.Are reported as current assets
C.Include only debt securities
D.Are reported at their cost, no matter what their market value
E.Are long-term investments
54) Eleanor Reed, the manager of the Marinette Plant of the Wisconsin Company is
responsible for all of the plant’s costs except her own salary. There are two operating
departments within the plant, Departments A and B. Each department has its own
manager. There is also a maintenance department that provides services equally to the
two operating departments. The following information is available.
Department managers are responsible for the wages and supplies in their department.
They are not responsible for their own salary. Building rent, utilities, and maintenance
are allocated to each department based on square footage.
Complete the responsibility accounting performance reports below that list costs
controllable by the manager of Department A, the manager of Department B, and the
manager of the Marinette plant.
55) ____________________ is the charge for using (not paying) money until a later
date.
56) Samm’s Department Store operates three departments (A, B and C). If total costs of
$4,500 are to be allocated on the basis of square feet of space (Dept. A = 1,500 Sq. Ft.;
Dept. B = 900 Sq. Ft.; Dept. C = 600 Sq. Ft.) then Dept A’s share (in percent) of the
$4,500 cost would be __________%; Dept. B would be ________%, and Dept C would
be ____________%. The amount of cost allocated to Dept. C would be $__________.
57) ___________________ processing enters and processes data as soon as source
documents are available.
58) Dawls Corporation reported stockholders’ equity on December 31 of the prior year
as follows:
The following selected transactions occurred during the current year:
Prepare a statement of retained earnings as of December 31 of the current year.
59) To calculate present value of an amount, two factors are required:
__________________ and __________________.
60) The following series of transactions occurred during Year 1 and Year 2, when
Linwood Co. sold merchandise to John Moore. Linwood’s annual accounting period
ends on December 31
10/01/Yr 1 Sold $12,000 of merchandise to John Moore, terms 2/10, n/30.
11/15/Yr 1 Moore reports that he cannot pay the account until early next year. He
agrees to exchange the account for a 120-day, 12% note receivable.
12/31/Yr 1 Prepared the adjusting journal entry to record accrued interest on the note.
03/15/Yr 2 Linwood receives a check from Moore for the maturity value (with interest)
of the note.
03/22/Yr 2 Linwood receives notification that Moore’s check is being returned for
nonsufficient funds (NSF).
12/31/Yr 2 Linwood writes off Moore’s account as uncollectible.
Prepare Linwood Co.’s journal entries to record the above transactions. The company
uses the allowance method to account for its bad debt expense.
61) The investment center return on total assets is __________________________
divided by ____________________________.