1) When the attitude of continuous improvement exists throughout an organization,
every manager and employee is challenged to continuously experiment with new and
improved business practices.
2) Activity-based costing can be especially effective in situations where many different
types of products are manufactured in the same department or departments.
3) Dividend yield is computed by dividing earnings per share by the market value per
share.
4) The purchase of stock in another company is classified as a financing activity.
5) A job cost sheet is useful for developing financial accounting numbers but does not
contain information that is useful for managing the production process.
6) When an investment in an equity security is sold, the sale proceeds are compared
with the cost, and if the cost is greater than the proceeds, a gain on the sale of the
security is recorded.
7) The state unemployment tax rates applied to an employer are adjusted according to
an employer’s merit rating.
8) A trial balance is completed after posting but before proving the subsidiary ledger by
preparing a schedule of the controlling account.
9) A stock dividend decreases the market price of the company’s stock.
10) A materials consumption report is used instead of materials requisitions in
companies where materials move continuously through the manufacturing process.
11) On March 15, Alan Company purchased 10,000 shares of Cameo Corp. stock for
$35,000. The investment is classified as available-for-sale securities. On June 30, the
stock had a fair value of $34,000. Alan should do which of the following?
A.Record a decrease to the Fair value Adjustment-AFS account.
B.Record an increase to the Unrealized Loss-Equity account.
C.Report a decrease in the Gain on Sale of Investment income statement account.
D.Report an increase in the asset section of the balance sheet.
E.Record an increase to the Unrealized Gain-Income account.
12) A company issued 60 shares of $100 par value common stock for $7,000 cash. The
total amount of paid-in capital is:
A.$100.
B.$600.
C.$1,000.
D.$6,000.
E.$7,000.
13) A contract pledging title to assets as security for a note or bond is known as a(an):
A.Sinking fund.
B.Mortgage.
C.Equity.
D.Lease.
E.Indenture.
14) Use the following information to prepare a budgeted income statement for Stellar
Company for the month of June.
a. Beginning cash balance on June 1 is $52,000.
b. Sales amounts are: April (actual), $1,450,000, May (actual), $1,600,000, and June
(budgeted), $1,700,000.
c. Cost of goods sold is 53% of sales.
d. Budgeted cash disbursements for salaries in June: $260,000. Salaries payable on May
31 are $60,000 and are expected to be $50,000 on June 30.
e. Budgeted depreciation expense for June: $24,000.
f. Other cash expenses budgeted for June: $282,000.
g. Accrued income taxes due in June: $48,000.
h. Bank loan interest due in June: $8,000 which represents the 1% monthly expense on
a bank loan of $800,000.
i. The income tax rate applicable to the company is 30%.
15) A company paid $37,800 plus a broker’s fee of $525 to acquire 8% bonds with a
$40,000 maturity value. The company intends to hold the bonds to maturity. The cash
proceeds the company will receive when the bonds mature equal:
A.$37,800.
B.$38,325.
C.$40,000.
D.$40,525.
E.$43,200.
16) At acquisition, debt securities are:
A.Recorded at their cost, plus total interest that will be received over the life of the
security.
B.Recorded at the amount of interest that will be received over the life of the security.
C.Recorded at cost.
D.Not recorded, because no interest is due yet.
E.Recorded at cost plus the amount of dividend income to be received.
17) A bank that is authorized to accept deposits of amounts payable to the federal
government is a:
A.Credit union.
B.FDIC insured bank.
C.Federal depository bank.
D.National bank.
E.Federal Reserve Bank.
18) Which of the following items is not a management concept that was created to
improve companies’ performances?
A.Just-in-time manufacturing.
B.GAAP constraints and guidelines.
C.Total quality management.
D.Continuous improvement.
E.Customer orientation.
19) Fragment Company is a wholesaler that sells merchandise in large quantities. Its
catalog indicates a list price of $300 on a particular product and a 40% trade discount is
offered for quantity purchases of 50 units or more. The cost of shipping the
merchandise is $7 per unit under terms FOB shipping point. If a customer purchases
100 units of this product, what is the amount of sales revenue that Fragment will record
from this sale?
A.$18,000
B.$30,000
C.$18,700
D.$29,300
E.$30,700
20) 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.
21) When a partner is unable to pay a capital deficiency:
A.The partner must take out a loan to cover the deficient balance.
B.The deficiency is absorbed by the remaining partners before distribution of cash.
C.The partnership ends before distribution of cash.
D.The deficient partner is relieved of the liability.
E.The remaining partners must wait for the deficiency to be paid before cash is
distributed.
22) Peters and Chong are partners and share equally in income or loss. Peters’ current
capital balance is $140,000 and Chong’s is $130,000. Peters and Chong agree to accept
Aaron with a 30% interest in the partnership. Aaron invests $98,000 in the partnership.
The balances in Peters’s and Chong’s capital accounts after admission of the new
partner equal:
A.Peters $140,000; Chong $130,000.
B.Peters $146,200; Chong $136,200.
C.Peters $145,000; Chong $135,000.
D.Peters $133,800; Chong $123,800.
E.Peters $166,027; Chong $156,027.
23) The Malcolm Baldrige National Quality Award that encourages an emphasis on
quality was established by
A.The United Nations.
B.The U.S. Chamber of Commerce.
C.The Malcolm Baldrige Foundation.
D.The U.S. Congress.
E.The SEC.
24) Net income divided by average total assets is:
A.Profit margin.
B.Total asset turnover.
C.Return on total assets.
D.Days’ income in assets.
E.Current ratio.
25) Bedrock Company reported a December 31 ending inventory balance of $412,000.
The following additional information is also available:
ª The ending inventory balance of $412,000 included $72,000 of consigned inventory
for which Bedrock was the consignor.
ª The ending inventory balance of $412,000 included $22,000 of office supplies that
were stored in the warehouse and were to be used by the company’s supervisors and
managers during the coming year.
Based on this information, the correct balance for ending inventory on December 31 is:
A.$412,000
B.$340,000
C.$318,000
D.$362,000
E.$390,000
26) Refer to the following selected financial information from McCormik, LLC.
Compute the company’s days’ sales in inventory for Year 2.
A.43.9.
B.42.3.
C.46.2.
D.80.0.
E.113.3.
27) Prior period adjustments are reported in the:
A.Multiple-step income statement.
B.Balance sheet.
C.Statement of retained earnings.
D.Statement of cash flows.
E.Single-step income statement.
28) Goods on consignment are goods that are shipped by the owner, called the
_______________, to another party called the ______________________ that will sell
the goods for the owner.
29) Cinema Products LP is organized as a limited partnership that sells movie props.
Information related to the capital balances is given below. Compute the partnership
return on equity.
30) Express the following balance sheets for Safety Company in common-size
percentages.
31) City Park College allocates administrative costs to its teaching departments based
on the number of students enrolled, while maintenance and utilities are allocated based
on square feet of classrooms. Based on the information below, what is the total amount
of expenses allocated to each department (rounded to the nearest dollar) if
administrative costs for the college were $180,000, maintenance expenses were
$70,000, and utilities were $85,000?
32) Regal Furniture Company allocates its indirect salaries of $22,500 on the basis of
sales. Determine the indirect salaries allocated to Departments 1 and 2 using the
following information.
Salaries allocated to Dept. 1 _______________
Salaries allocated to Dept. 2 _______________
33) Use the information below to determine the sales revenue, cost of goods sold and
gross profit that would be reported for the company related to the March 16 sale
assuming the company uses LIFO inventory valuation and a perpetual inventory
system.
34) Jarrett 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 $__________.
35) Prepare a December 31 balance sheet in proper form for Cane Property
Management using the following accounts and amounts:
36) Gala Enterprises reports the following information regarding the production of one
of its products for the month. Compute the direct materials cost variance, the direct
materials price variance, the direct materials quantity variance and identify each as
either favorable or unfavorable.
37) The following information is available for the Aarons Corporation:
Additional information:
(1) There was no gain or loss on the sales of the long-term investments, nor on the
bonds retired.
(2) Old equipment with an original cost of $37,550 was sold for $2,100 cash.
(3) New equipment was purchased for $67,550 cash.
(4) Cash dividends of $33,600 were paid.
(5) Additional shares of stock were issued for cash.
Prepare a complete statement of cash flows for calendar-year 2015 using the indirect
method.
