1) The process by which management allocates available investment funds among
competing capital investment proposals is termed present value analysis.
2) A company should only use nonfinancial performance measures when financial
measures cannot be calculated.
3) The job order costing system is used by service firms to determine revenues,
expenses, and ultimately profit.
4) Cost of merchandise sold is the amount that the merchandising company pays for the
merchandise it intends to sell.
5) To determine cash payments for income tax for the cash flow statement using the
direct method, an increase in income taxes payable is added to the income tax expense.
6) The borrower is the one who issues a note payable to a creditor.
7) The relevant range is useful for analyzing cost behavior for management
decision-making purposes.
8) A deduction allowed to wholesalers and retailers from the price of merchandise listed
in catalogs is called cash discounts.
9) Activity-based costing is determined by charging products for only the services
(activities) they used during production.
10) The single-step income statement is easier to prepare, but a criticism of this format
is that gross profit and income from operations are not readily available.
11) The difference between a classified balance sheet and one that is not classified is
that the classified one has subheadings.
12) The cost of treasury stock is deducted from total paid-in capital and retained
earnings in determining total stockholders equity.
13) A petty cash fund is used to pay relatively large amounts.
14) The budgeted balance sheet assumes that all operating and financing plans are met.
15) Differential revenue is the amount of income that would result from the best
available alternative proposed use of cash.
16) The flexible budget is, in effect, a series of static budgets for different levels of
activity.
17) After the sales budget is prepared, the production budget is normally prepared next.
18) In admitting a new partner, where the company chooses to use the purchase of an
interest method, the capital interest of the new partner is obtained from the current
partners and both the total assets and total capital are increased.
19) When a firm adopts a just-in-time operating environment,
A.new, more efficient machinery and equipment must be purchased and installed in the
original layout
B.machinery and equipment are moved into small autonomous production lines called
manufacturing cells
C.new machinery and equipment must be purchased from franchised JIT dealers
D.employees are retrained on different equipment but the plant layout generally stays
unchanged
20) If the actual quantity of direct materials used in producing a commodity differs
from the standard quantity, the variance is termed a:
A.controllable variance
B.price variance
C.quantity variance
D.rate variance
21) Prepaid expenses are eventually expected to
A.become expenses when their future economic value expires
B.become revenues when services are performed
C.become expenses in the period when they are paid
D.become revenues when the liability is no longer owed
22) All of the following would probably be considered a direct material except:
A.steel
B.fabric
C.glue
D.lumber
23) The debits to Work in Process–Assembly Department for April, together with data
concerning production, are as follows:
All direct materials are placed in process at the beginning of the process and the
average cost method is used to cost inventories.
The materials cost per equivalent unit (to the nearest cent) for April is:
A.$2.60
B.$2.81
C.$3.02
D.$2.26
24) Equivalent production units, usually are determined for
A.direct materials and conversion costs
B.direct materials only
C.conversion costs only
D.direct materials and direct labor costs only
25) What is the amount of Raw Materials Used?
A.$5,000
B.$65,000
C.$75,000
D.$30,000
26) The date on which a cash dividend becomes a binding legal obligation is on the
A.declaration date
B.date of record
C.payment date
D.last day of the fiscal year
27) Which of the following is included in the cost of constructing a building?
A.insurance costs during construction
B.cost of paving parking lot
C.cost of repairing vandalism damage during construction
D.cost of removing the demolished building existing on the land when it was purchased
28) If sales are $425,000, variable costs are 62% of sales, and operating income is
$50,000, what is the contribution margin ratio?
A.38%
B.26.8%
C.11.8%
D.62%
29) A company reports the following:
Determine the (a) inventory turnover, and (b) number of days sales in inventory. Round
your answer to one decimal place.
30) In a job order cost accounting system, when goods that have been ordered are
received, the receiving department personnel count, inspect the goods, and complete a:
A.purchase order
B.sales invoice
C.receiving report
D.purchase requisition
31) In which of the following types of accounts are increases recorded by credits?
A.revenues and liabilities
B.drawing and assets
C.liabilities and drawing
D.expenses and liabilities
32) Goshawks Co. produces an automotive product and incurs total manufacturing costs
of $2,600,000 in the production of 80,000 units. The company desires to earn a profit
equal to a 12% rate of return on assets of $960,000. Total selling and administrative
expenses are $105,000.
Round your markup percentage to one decimal place, and other intermediate
calculations and final answer to two decimal places.
33) Costs that remain constant in total dollar amount as the level of activity changes are
called:
A.fixed costs
B.mixed costs
C.product costs
D.variable costs
34) The entry to close the appropriate insurance account at the end of the accounting
period is
A.debit Income Summary; credit Prepaid Insurance
B.debit Prepaid Insurance; credit Income Summary
C.debit Insurance Expense; credit Income Summary
D.debit Income Summary; credit Insurance Expense
35) Emma Co. sold Isabella Co. merchandise on account FOB shipping point,, 2/10, net
30, for $15,000. Emma Co.prepaid the $750 shipping charge. Using the perpetual
inventory method, which of the following entries will Isabella Co. make to record
payment of the merchandise if Isabella Co.pays within the discount period?
A.Accounts Payable-Emma Co., debit $15,000; Freight In, credit $750; Cash, credit
$14,250
B.Accounts Payable-Emma Co., debit $15,750; Merchandise Inventory, credit $300;
Cash, credit $15,450
C.Accounts Payable-Emma Co., debit $15,000; Freight In, debit $750; Cash, credit
$15,750
D.Accounts Payable-Emma Co., debit $15,750; Merchandise Inventory, debit
$300;Cash, credit $16,050
36) Which of the following is not a commonly used approach to setting transfer prices?
A.Market price approach
B.Revenue price approach
C.Negotiated price approach
D.Cost price approach
37) Which of the following is an example of accrued revenue?
A.Swimming pool cleaning that has been paid for three months in advance
B.Swimming pool cleaning that has been provided but has not been billed or paid
C.An agreement has been signed for swimming pool cleaning for the next three months
D.Swimming pool cleaning that has been provided and paid on the same day
38) The chart of accounts classify the accounts to make identification of the accounts
easier. This is done by way of assigning a number to each account. The first number
identifies the classification of the type of account. Which of the following indicates the
use of this classification?
A.1-Assets, 2-Liabilities, 3-Owners Equity, 4-Expenses, 5-Revenues
B.1-Assets, 2-Liabilities, 3-Owners Equity, 4-Revenues, 5-Expenses
C.1-Assets, 2-Owners Equity, 3-Revenues, 4-Expenses, 5-Drawing
D.1-Owners Equity, 2-Drawing, 3-Revenues, 4-Expenses
39) The income statement columns in the worksheet show that debits are equal to
$55,800 and credits are $67,520. What does this information mean to the accountant?
A.Net income of $11,720
B.Net loss of $11,720
C.The accounts are out of balance, indicating an error has been made
D.The accounts have not been updated
40) Machinery was purchased on January 1, 2010 for $51,000. The machinery has an
estimated life of 7 years and an estimated salvage value of $9,000. Double-declining
balance depreciation for 2011 would be
A.$10,929
B.$6,000
C.$10,500
D.$10,408
41) The balances in the ledger of Good Landscape Services as of January 31, 2014
before adjustments, are as follows:
Adjustment data are as follows: supplies on hand, January 31, $900; insurance expired
for January, $1,100; depreciation on equipment for January, $1,600; salaries accrued,
January 31, $1,650.
(a) Prepare a ten-column work sheet for Good Landscape Services for January, 2014.
(b) On the basis of the work sheet in (a), present the following in good order: (1)
income statement, (2) statement of owner’s equity (no additional investments were
made during the month), and (3) balance sheet.
(c) On the basis of the work sheet in (a), journalize the closing entries as of January 31,
2014.
42) The type of account and normal balance of Unearned Rent is
A.revenue, credit
B.expense, debit
C.liability, credit
D.liability, debit
43) Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500
in accrued interest. The bond interest rate is 8% and interest is paid semi-annually. The
journal entry to record the purchase would be:
A.Debit: Investment in Bonds $101,500; Credit: Cash $101,500
B.Debit: Investment in Bonds $100,000; Credit: Interest Revenue $1,500 and Cash
$98,500
C.Debit: Investment in Bonds $100,000 and Interest Receivable $1,500; Credit: Cash
$101,500
D.Investment in Bonds $100,000; Credit: Cash $100,000
44) On March 3rd, Blowout Sales makes $3,450.00 in cash sales of general
merchandise which have a cost of $1,215.00. Blowout uses a perpetual inventory
system.
(a) Journalize the sale event.
(b) Journal the cost of merchandise sold.
45) The initials GAAP stand for
A.General Accounting Procedures
B.Generally Accepted Plans
C.Generally Accepted Accounting Principles
D.Generally Accepted Accounting Practices
46) Jarvis Corporation makes an investment in 100 shares of Saxton Company’s
common stock. The stock is purchased for $45 a share plus brokerage fees of $280. The
entry for the purchase is:
A.Cash 4,500
Stock Investments – Saxton Company 4,500
B.Stock Investments – Saxton Company 4,780
Cash 4,780
C.Stock Investments – Saxton Company 4,500
Brokerage Fee Expense 280
Cash 4,780
D.Stock Investments – Saxton Company 4,500
Cash 4,500
47) Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling
prices are: $55; $78; and $32, respectively. The variable costs for each product are: $20;
$50; and $15, respectively. Each product must go through the same processing in a
machine that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales
take 7 hours, and Wales take 1 hour.
Assume that Widgeon produced enough product with the highest contribution margin
per unit to use 1,000 hours of machine time. Product demand does not warrant any
more production of that product. What is the maximum additional contribution margin
that can be realized by utilizing the remaining 1,000 hours on the product with the
second highest contribution margin per hour?
A.$35,000
B.$7,000
C.$4,000
D.$28,000
48) If total liabilities decreased by $46,000 during a period of time and owner’s equity
increased by $60,000 during the same period, the amount and direction (increase or
decrease) of the period’s change in total assets is
A.$106,000 increase
B.$14,000 increase
C.$14,000 decrease
D.$106,000 decrease
49) Which of the following transactions is recorded in the revenue journal?
A.sale of excess office equipment for cash
B.rendering services for cash
C.rendering services on account
D.sale of excess office equipment on account
50) Using a perpetual inventory system, the entry to record the return of merchandise
purchased on account includes a
A.debit to Cost of Merchandise Sold
B.credit to Accounts Payable
C.credit to Merchandise Inventory
D.credit to Sales
51) The formula to compute direct labor time variance is to calculate the difference
between
A.actual costs – standard costs
B.actual costs + standard costs
C.(actual hours * standard rate) – standard costs
D.actual costs – (actual hours * standard rate)
52) A business issued a 120-day, 6% note for $10,000 to a creditor on account. The
company uses a 360-day year for interest calculations. Journalize the entries to record
(a) the issuance of the note and (b) the payment of the note at maturity, including
interest.
53) Which of the following pairs of accounts could not appear in the same adjusting
entry?
A.Service Revenue and Unearned Revenue
B.Interest Income and Interest Expense
C.Rent Expense and Prepaid Rent
D.Salaries Payable and Salaries Expense
54) Two common areas of accounting that respectively provide information to internal
and external users are:
A.forensic accounting and financial accounting
B.managerial accounting and financial accounting
C.managerial accounting and environmental accounting
D.financial accounting and tax accounting systems
55) Land costing $71,000 was sold for $50,000 cash. The loss on the sale was reported
on the income statement as other expense. On the statement of cash flows, what amount
should be reported as an investing activity from the sale of land?
A.$50,000
B.$71,000
C.$121,000
D.$21,000
56) Which of the following accounts has a normal credit balance?
A.Sales Returns and Allowances
B.Sales
C.Merchandise Inventory
D.Delivery Expense
57) The Mountain Springs Water Company has two departments. Purifying and
Bottling. The Bottling Department received 67,000 liters from the Purifying
Department. During the period, the Bottling Department completed 65,000 liters,
including 3,000 liters of work in process at the beginning of the period. The ending
work in process was 5,000 liters. How many liters were started and completed during
the period?
58) On June 30, 2011, Arlington Company issued $1,500,000 of 10-year, 8% bonds,
dated June 30, for $1,540,000. Present entries to record the following transactions:
59) On July 1 of the current year, the assets and liabilities of John Wong, DVM, are as
follows: Cash, $27,000; Accounts Receivable, $12,300; Supplies, $3,100; Land,
$35,000; Accounts Payable, $13,900. What is the amount of owner’s equity (John
Wongs capital) as of July 1 of the current year?
60) The following adjusted trial balance is the result of the adjustments made at the end
of the month of July for Ladonna Douglas Company. Utilize these adjusted values to
perform the closing entries for Ladonna Douglas Company.
61) Hamir, Darci, and Pete are partners sharing income 3:2:1, respectively. After the
firms loss from liquidation is distributed, the capital account balances were: Hamir,
$45,000 Dr.; Darci, $90,000 Cr., and Pete, $64,000 Cr. If Hamir is personally bankrupt
and unable to pay any of the $45,000, what will be the amount of cash received by
Darci and Pete upon liquidation? Show your work.
62) List the five steps in the process by which accounting provides information to users.
63) On December 31, Bowman Company estimated that goodwill of $80,000 was
impaired. In addition, a patent with an estimated useful economic life of 10 years was
acquired for $252,000 on June 1.
Required:
(1) Journalize the adjusting entry on December 31 for the impaired goodwill.
(2) Journalize the adjusting entry on December 31 for the amortization of the patent
rights.
64) The assets and liabilities of S&P Day Spa at December 31, 2014 and its revenue and
expenses for the year are listed below. The capital of the owner was $68,000 at January
1, 2014. The owner invested an additional $10,000 during the year.
Prepare a balance sheet for the year ended December 31, 2014.
65) The following data were extracted from the accounting records of Meridian Designs
for the year ended March 31, 2014
Prepare the cost of merchandise sold section of the income statement for the year ended
March 31, 2014, using the periodic method. Also determine gross profit.
66) Assume that three identical units of merchandise are purchased during October, as
follows:
Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold,
Gross Profit, and Ending Inventory under the LIFO method.