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1) Conversion costs are generally added evenly throughout the process.
2) Cash flows from investing activities, as part of the statement of cash flows, include
receipts from the issuance of bonds payable.
3) The controller's staff consists of management accountants responsible for systems
and procedures, general accounting, budgets, taxes, and cost accounting.
4) Senior executives cannot be criminally prosecuted for the wrong doings they commit
on behalf of the companies where they work.
5) Discontinuing a segment or product may not be the best choice when the segment is
contributing to fixed expenses.
6) Manufacturers must conform to the Robinson-Patman Act which prohibits price
discrimination within the United States unless differences in prices can be justified by
different costs of serving different customers.
7) The master budget of a small manufacturer would normally include all necessary
component budgets except the capital expenditures budget.
8) When the voucher system is used, the amount due on each voucher represents the
credit balance of an account payable if the voucher is in full payment to a creditor.
9) A performance report that identifies the amount of employee downtime is a financial
accounting report.
10) Once the adjusted trial balance is in balance, the flow of accounts will now go into
the financial statements.
11) An account receivable is typically classified as a revenue.
12) For efficiency of operations and better control over cash, a company should
maintain only one bank account.
13) If the total unit cost of manufacturing Product Y is currently $36 and the total unit
cost after modifying the style is estimated to be $48, the differential cost for this
situation is $12.
14) The theory of constraints is a manufacturing strategy that focuses on reducing the
influence of bottlenecks on a process.
15) Determine the missing amount for each of the following:
Assets Liabilities Owner's Equity
(a) $38,000 $45,000
$30,000 (b) $22,000
$53,000 $32,000 (c)
16) The Everest Company has income from operations of $80,000, invested assets of
$500,000, and sales of $1,050,000.
What is the investment turnover?
A.1.8
B.2.1
C..48
D.13.13
17) Incurring actual indirect factory wages in excess of budgeted amounts for actual
production resultsina:
A.quantity variance
B.controllable variance
C.volume variance
D.rate variance
18) The management of Zesty Corporation is considering the purchase of a new
machine costing $400,000. The company's desired rate of return is 10%. The present
value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability in this situation:
The cash payback period for this investment is:
A.5 years
B.4 years
C.2 years
D.3 years
19) The production budgets are used to prepare which of the following budgets.
A.Operating expenses
B.Direct materials purchases, direct labor cost, factory overhead cost
C.Sales in dollars
D.Sales in units
20) Merchandise is ordered on December 1; the merchandise is shipped by the seller
and the invoice is prepared, dated, and mailed by the seller on December 3; the
merchandise is received by the buyer on December 8; the entry is made in the buyer's
accounts on December 10. The credit period begins with what date?
A.December 1
B.December 3
C.December 8
D.December 10
21) On the first day of the current fiscal year, $2,000,000 of 10-year, 7% bonds, with
interest payable annually, were sold for $2,125,000. Present entries to record the
following transactions for the current fiscal year:
(a) Issuance of the bonds.
(b) First annual interest payment.
(c) Amortization of bond premium for the year, using the straight-line method of
amortization.
22) Which method of evaluating capital investment proposals uses the concept of
present value to compute a rate of return?
A.Average rate of return
B.Accounting rate of return
C.Cash payback period
D.Internal rate of return
23) The two methods of accounting for uncollectible receivables are the allowance
method and the
A.equity method
B.direct write-off method
C.interest method
D.cost method
24) Pia and Ramona are partners who share income in the ratio of 3:2. Their capital
balances are $90,000 and $130,000 respectively. Income Summary has a credit balance
of $40,000. What is Ramonas capital balance after closing Income Summary to Capital?
A.$110,000
B.$146,000
C.$106,000
D.$150,000
25) Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the
year (before adjustment). The company prepares an analysis of customers' accounts to
estimate the amount of uncollectible accounts of $41,900. Which of the following
adjusting entries would be made to record the Bad Debt Expense for the year?
A.debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
B.debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200
C.debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
D.debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600
26) Materials used by Square Yard Products Inc. in producing Division 3's product are
currently purchased from outside suppliers at a cost of $5 per unit. However, the same
materials are available from Division 6. Division 6 has unused capacity and can
produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer
price of $3.20 per unit is established, and 40,000 units of material are transferred, with
no reduction in Division 6's current sales.
How much would Square Yard Products total income from operations increase?
A.$32,000
B.$112,000
C.$80,000
D.$150,000
27) Which of the following is the most desirable quick ratio?
A.1.20
B.1.00
C.0.95
D.0.50
28) Under a perpetual inventory system, the amount of each type of merchandise on
hand is available in the
A.customer's ledger
B.creditor's ledger
C.inventory ledger
D.purchase ledger
29) If fixed costs are $500,000 and the unit contribution margin is $20, what is the
break-even point in units if fixed costs are reduced by $80,000?
A.25,000
B.29,000
C.4,000
D.21,000
30) Which one of the following below reflects a weak internal control system?
A.all employees are well supervised
B.a single employee is responsible for comparing a receiving report to an invoice
C.all employees must take their vacations
D.a single employee is responsible for collecting and recording of cash
31) Singer and McMann are partners in a business. Singers original capital was $40,000
and McManns was $60,000. They agree to salaries of $12,000 and $18,000 for Singer
and McMann respectively and 10% interest on original capital. If they agree to share
remaining profits and losses on a 3:2 ratio, what will Singers share of the income (loss)
be if the net loss for the year was $10,000?
A.($12,600)
B.($14,000)
C.($6,000)
D.($10,000)
32) The following units of an inventory item were available for sale during the year:
The firm uses the periodic inventory system. During the year, 60 units of the item were
sold.
The value of ending inventory using LIFO is:
A.$1,250
B.$1,350
C.$1,375
D.$1,150
33) Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the
year (before adjustment), and an analysis of customers' accounts indicates uncollectible
receivables of $12,900. Which of the following entries records the proper adjustment
for Bad Debt Expense?
A.debit Bad Debt Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000
B.debit Allowance for Doubtful Accounts, $14,000; credit Bad Debt Expense, $14,000
C.debit Allowance for Doubtful Accounts, $11,800; credit Bad Debt Expense, $11,800
D.debit Bad Debt Expense, $11,800; credit Allowance for Doubtful Accounts, $11,800
34) An asset was purchased for $120,000 on January 1, 2010 and originally estimated to
have a useful life of 10 years with a residual value of $10,000. At the beginning of
2012, it was determined that the remaining useful life of the asset was only 4 years with
a residual value of $2,000. Calculate the 2012 depreciation expense using the revised
amounts and straight line method.
A.$25,000
B.$11,000
C.$24,000
D.$24,500
35) 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 receipt of interest on the next interest payment date would
be:
A.Debit: Cash $4,000; Credit: Interest Revenue $4,000
B.Debit: Cash $4,000; Credit: Interest Receivable $4,000
C.Debit: Cash $4,000; Credit: Interest Receivable $1,500 and Interest Revenue $2,500
D.Debit: Cash $2,500; Credit: Interest Revenue $2,500
36) A department store apportions payroll costs on the basis of the number of payroll
checks issued. Accounting costs are apportioned on the basis of the number of reports.
The payroll costs for the year were $231,000 and the accounting costs for the year
totaled $75,500. The departments and the number of payroll checks and accounting
reports for each are as follows:
Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to
each department.
37) Which of the following would be added to the balance per books on a bank
reconciliation?
A.Service charges
B.Outstanding checks
C.Deposits in transit
D.Notes collected by the bank
38) Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit,
and fixed costs are $75,000. The contribution margin ratio and the unit contribution
margin are:
A.47% and $11 per unit
B.53% and $7 per unit
C.47% and $8 per unit
D.52% and $11 per unit
39) Heather Company is considering the acquisition of a machine that costs $432,000.
The machine is expected to have a useful life of 6 years, a negligible residual value, an
annual cash flow of $120,000, and annual operating income of $83,721. What is the
estimated cash payback period for the machine?
A.3.6 years
B.4.3 years
C.5.2 years
D.6 years
40) A project has estimated annual cash flows of $90,000 for three years and is
estimated to cost $250,000. Assume a minimum acceptable rate of return of 10%. Using
the following tables determine the (a) net present value of the project and (b) the
present value index, rounded to two decimal places.
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
41) The recording of the application of factory overhead costs to jobs would include a
credit to:
A.Factory Overhead
B.Wages Payable
C.Work in Process
D.Cost of Goods Sold
42) Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital
balances are $40,000 and $60,000 respectively. Income Summary has a credit balance
of $20,000. What is Saturns capital balance after closing Income Summary to Capital?
A.$55,000
B.$75,000
C.$45,000
D.$65,000
43) Exhibit 2-1
All nine transactions for Ralston Sports Co. for September 2011, the first month of
operations, are recorded in the following T accounts:
Refer to Exhibit 2-1. Prepare a trial balance, listing the accounts in their proper order.
44) Discuss the appropriate financial treatment when an investor has a greater than 50%
ownership in another company.
45) After the tangible assets have been adjusted to current market prices, the capital
accounts of Harper and Kahlil have balances of $60,000 and $90,000, respectively. Fay
is to be admitted to the partnership, contributing $45,000 cash, for which she is to
receive an ownership equity of $60,000. All partners share equally in income.
Required:
(1) Journalize the entry to record the admission of Fay, who is to receive a bonus of
$15,000.
(2) What are the capital balances of each partner after the admission of the new partner?
46) Warmfeet manufactures comforters. Assume the estimated inventories on January 1,
2012, for finished goods, work in process, and materials were $39,000, $33,000 and
$27,000 respectively. Also assume the desired inventories on December 31, 2012, for
finished goods, work in process, and materials were $42,000, $35,000 and $21,000
respectively. Direct material purchases were $575,000. Direct labor was $212,000 for
the year. Factory overhead was $156,000. Prepare a cost of goods sold budget for
Warmfeet, Inc.
47) Bob Johnson is the sole owner of Johnsons Carpet Cleaning Service. Bob purchased
a personal automobile for $10,000 cash plus he took out a loan for $20,000 in his name.
Describe how this transaction is related to the business entity concept.
48) A project is estimated to cost $273,840 and provide annual cash flows of $60,000
for seven years. Determine the internal rate of return for this project, using the
following table.
49) What is capital investment analysis? Why are capital investment analysis decisions
often difficult and risky?
50) Below is the unadjusted trial balance for Dawson Designs.
REQUIRED:
(1) Identify the errors in the following trial balance. All accounts have normal balances.
(2) Prepare a corrected trial balance.
51) The debits and credits from two transactions are presented in the following
customer account:
NAME: Boogie Board Water Wear
ADDRESS: 2340 Xtreme Surf
Describe each transaction and the source of each posting.
52) Dennis Corp. issued $2,500,000 of 20-year, 9% callable bonds on July 1, 2007, with
interest payable on June 30 and December 31. The fiscal year of the company is the
calendar year. Journalize the entries to record the following selected transactions:
