1) The budget itself and the administration of the budget are entirely accounting
responsibilities.
2) Financial statements are the major means of communicating accounting information
to interested parties.
3) A flexible budget is prepared before the master budget.
4) The budgeted income statement indicates the expected profitability of operations for
the next year.
5) The account Allowance for Doubtful Accounts is closed out at the end of the year.
6) If actual results are different from planned results, the difference must always be
investigated by management to achieve effective budgetary control.
7) An unrealized gain or loss on trading securities is reported as a separate component
of stockholders’ equity.
8) A cost-volume-profit graph shows the amount of net income or loss at each level of
sales.
9) In a manufacturing company balance sheet, manufacturing inventories are reported
in the current assets section in the order of their expected use in production.
10) The expense recognition principle requires that expenses be matched with revenues.
11) A debit to an account indicates an increase in that account.
12) Transaction amounts recorded in the general journal are never posted to accounts in
the subsidiary ledger.
13) Trade receivables occur when two companies trade or exchange notes receivables.
14) The primary purpose of a trial balance is to prove the mathematical equality of the
debits and credits after posting.
15) Income from operations will always result if
a.the cost of goods sold exceeds operating expenses
b.revenues exceed cost of goods sold
c.revenues exceed operating expenses
d.gross profit exceeds operating expenses
16) During the year 2014, Dilego Company earned revenues of $90,000, had expenses
of $56,000, purchased assets with a cost of $10,000 and had owner drawings of $6,000.
Net income for the year is
a.$18,000
b.$24,000
c.$28,000
d.$34,000
17) Bevis Company has 12,000 units in beginning finished goods. The sales budget
shows expected sales to be 48,000 units. If the production budget shows that 58,000
units are required for production, what was the desired ending finished goods?
a.2,000
b.12,000
c.22,000
d.36,000
18) Presented below are incomplete 2014 manufacturing cost data for Swayze
Corporation.
Instructions
Determine the missing amounts.
19) Agale Combines, Inc. has $40,000 of ending finished goods inventory as of
December 31, 2014 . If beginning finished goods inventory was $25,000 and cost of
goods sold was $75,000, how much would Agale report for cost of goods
manufactured?
a.$90,000
b.$15,000
c.$115,000
d.$65,000
20) Of the following items, which one is not obtained from an individual operating
budget?
a.Selling and administrative expenses
b.Accounts receivable
c.Cost of goods sold
d.Sales revenue
21) If a company purchases merchandise for cash, the transaction should be recorded in
the
a.purchases journal
b.general journal
c.cash payments journal
d.sales journal
22) The cost flow method that often parallels the actual physical flow of merchandise is
the
a.FIFO method
b.LIFO method
c.average-cost method
d.gross profit method
23) At May 1, 2014, Kibbee Company had beginning inventory consisting of 200 units
with a unit cost of $7. During May, the company purchased inventory as follows:
800 units at $7
600 units at $8
The company sold 1,000 units during the month for $12 per unit. Kibbee uses the
average cost method. Kibbees gross profit for the month of May is
a.$4,625
b.$4,571
c.$4,000
d.$4,500
24) Liabilities are classified on the balance sheet as current or
a.deferred
b.unearned
c.long-term
d.accrued
25) If a retailer regularly sells its receivables to a factor, the service charge of the factor
should be classified as a(n)
a.selling expense
b.interest expense
c.other expense
d.contra asset
26) Using the following information, compute the cost of direct materials used.
Raw materials inventory, January 1$ 35,000
Raw materials inventory, December 3150,000
Work in process, January 118,000
Work in process, December 3127,000
Finished goods, January 148,000
Finished goods, December 3160,000
Raw materials purchases1,100,000
Direct labor700,000
Factory utilities225,000
Indirect labor105,000
Factory depreciation500,000
Operating expenses630,000
a.$1,115,000
b.$1,135,000
c.$1,085,000
d.$1,100,000
27) Which board(s) has(have) worked to implement fair value measurement for
financial instruments?
a.FASB, but not IASB
b.IASB, but not FASB
c.both FASB and IASB
d.neither FASB nor IASB
28) Hansen’s variable costs are 30% of sales. The company is contemplating an
advertising campaign that will cost $33,000. If sales are expected to increase $70,000,
by how much will the company’s net income increase?
a.$37,000
b.$49,000
c.$12,000
d.$16,000
29) Anastasia Corporation began business by issuing 600,000 shares of $5 par value
common stock for $24 per share. During its first year, the corporation sustained a net
loss of $60,000. The year-end balance sheet would show
a.Common stock of $3,000,000
b.Common stock of $14,400,000
c.Total paid-in capital of $14,340,000
d.Total paid-in capital of $11,400,000
30) Taylor Corporation issues 20,000 shares of $50 par value preferred stock for cash at
$90 per share. In the stockholders’ equity section, the effects of the transaction above
will be reported
a.entirely within the capital stock section
b.entirely within the additional paid-in capital section
c.under both the capital stock and additional paid-in capital sections
d.entirely under the retained earnings section
31) Marilou Wheeler’s regular hourly wage rate is $14, and she receives a wage of 1 1/2
times her regular rate for work in excess of 40 hours. During a June pay period, Marilou
worked 46 hours. Marilou’s federal income tax withholding is $68, and her only
voluntary deduction is $25 for group hospitalization insurance. The FICA tax rate is
7.65%.
Instructions
Compute Marilou’s (a) gross earnings and (b) net pay for the pay period.
32) On January 1, 2013, Mudhoney Inc. purchased equipment for $45,000. The
company is depreciating the equipment at the rate of $750 per month. At January 31,
2014, the balance in Accumulated Depreciation is
a.$750
b.$9,000
c.$9,750
d.$35,250
33) When an account becomes uncollectible and must be written off,
a.Allowance for Doubtful Accounts should be credited
b.Accounts Receivable should be credited
c.Bad Debt Expense should be credited
d.Sales Revenue should be debited
34) Two companies report the same cost of goods available for sale but each employs a
different inventory costing method. If the price of goods has increased during the
period, then the company using
a.LIFO will have the highest ending inventory
b.FIFO will have the highest cost of good sold
c.FIFO will have the highest ending inventory
d.LIFO will have the lowest cost of goods sold
35) A truck that cost $72,000 and on which $60,000 of accumulated depreciation has
been recorded was disposed of for $18,000 cash. The entry to record this event would
include a
a.gain of $6,000
b.loss of $6,000
c.credit to the Equipment account for $12,000
d.credit to Accumulated Depreciation for $60,000
36) Navy Divisions operating results include: controllable margin of $300,000, sales
totaling $2,400,000, and average operating assets of $1,000,000. Navy is considering a
project with sales of $200,000, expenses of $182,000, and an investment of average
operating assets of $400,000. Navy required rate of return is 9%. Should Navy accept
this project?
a.Yes, ROI will drop by 7.3% which is still above the required rate of return
b.No, the return is less than the required rate of 9%
c.Yes, ROI still exceeds the cost of capital
d.No, ROI will decrease to 4.5%
37) The reference column of the accounts in the accounts payable subsidiary ledger
after posting may show
a.only P references
b.CP, P, or G references
c.G, P, or S references
d.only CP references
38) Product costs consist of
a.direct materials and direct labor only
b.direct materials, direct labor, and manufacturing overhead
c.selling and administrative expenses
d.period costs
39) The requirement that companies use the same cost flow assumption of all goods of
a similar nature is found in
GAAPIFRS
a.YesNo
b.YesYes
c.NoNo
d.NoYes
40) In a job order cost system, it would be correct in recording the purchase of raw
materials to debit
a.Work in Process Inventory
b.Work in Process and Manufacturing Overhead
c.Raw Materials Inventory
d.Finished Goods Inventory
41) Landfall Navigation began operations in 2014 and provides a one year warranty on
the products it sells. They estimate that 20,000 of the 400,000 units sold in 2014 will be
returned for repairs and that these repairs will cost $8 per unit. The cost of repairing
16,000 units presented for service in 2014 was $128,000. Landfall should report
a.warranty expense of $32,000 for 2014
b.warranty expense of $160,000 for 2014
c.warranty liability of $160,000 on December 31, 2014
d.no warranty obligation on December 31, 2014, since this is only a contingent liability
42) What does the controllable variance measure?
a.Whether a company incurred more or less fixed overhead costs compared to the
amount of overhead applied
b.Whether a company incurred more or less overhead costs than budgeted
c.The efficiency of using variable overhead resources
d.Whether the production manager is able to control the production facility
43) Bedazzle Corporation had 440,000 shares of common stock outstanding during the
year. Norman declared and paid cash dividends of $400,000 on the common stock and
$320,000 on the preferred stock. Net income for the year was $1,760,000. What is
Bedazzles earnings per share?
a.$3.09
b.$4.00
c.$3.27
d.$2.36
44) The standard quantity allowed for the units produced was 4,500 pounds, the
standard price was $2.50 per pound, and the materials quantity variance was $475
favorable. Each unit uses 1 pound of materials. How many units were actually
produced?
a.4,310
b.4,690
c.11,725
d.4,500
45) Reck Company receives a $15,000, 3-month, 8% promissory note from Fey
Company in settlement of an open accounts receivable. What entry will Reck Company
make upon receiving the note?
a.Notes Receivable15,300
Accounts ReceivableFey Company15,300
b.Notes Receivable15,300
Accounts ReceivableFey Company15,000
Interest Revenue300
c.Notes Receivable15,000
Interest Receivable300
Accounts ReceivableFey Company15,000
Interest Revenue300
d.Notes Receivable15,000
Accounts ReceivableFey Company15,000
46) The first part of the accounting process is
a.communicating
b.identifying
c.processing
d.recording
47) Having different individuals receive cash, record cash receipts, and hold the cash is
an example of
a.establishment of responsibility
b.segregation of duties
c.documentation procedures
d.independent internal verification
48) The entry to record the declaration of a stock dividend increases _______________,
and decreases ________________.
49) The following information is available for Carnegie Company, which has an
accounting year-end on December 31, 2014 .
1>A delivery truck was purchased on June 1, 2012, for $60,000. It was estimated to
have a $4,800 salvage value after being driven 115,000 miles. Prior to 2014, the truck
was driven 43,000 miles, and during 2014, the truck was driven 18,500 miles. The
units-of-activity method of depreciation is used.
2>A building was purchased on January 1, 2002, for $2,700,000. It is estimated to have
a $60,000 salvage value at the end of its 30-year useful life. The straight-line method of
depreciation is being used.
3>Equipment was purchased on January 1, 2012, for $140,000. It was estimated that the
equipment would have a $16,000 salvage value at the end of its 4-year useful life. The
double-declining-balance method of depreciation is being used.
Instructions: Complete the table shown below by filling in the appropriate amounts.
AccumulatedDepreciation
DepreciationExpense forBook Value at
Assets 1/1/14 2014 12/31/14
Truck$$$
Building$$$
Equipment$$$
50) The _________________ assumption requires that the activities of an entity be kept
separate from the activities of its owner.
51) Identify and explain the principal characteristics of the partnership form of business
organization.
52) Mason Corporation uses a process cost system and the weighted-average cost flow
assumption. Production begins in the Fabricating Department where materials are added
at the beginning of the process and conversion costs are incurred uniformly throughout
the process. On March 1, the beginning work in process inventory consisted of 20,000
units which were 60% complete and had a cost of $175,000, $140,000 of which were
materials costs. During March, the following occurred:
Materials added$310,000
Conversion costs incurred$115,000
Units completed and transferred out in March65,000
Units in ending work in process March 31 (40% complete)25,000
Instructions
Answer the following questions and show the computations that support your answers.
1>What are the equivalent units of production for materials and conversion costs in the
Fabricating Department for the month of March?
2>What are the costs assigned to the ending work in process inventory on March 31?
3>What are the costs assigned to units completed and transferred out during March?
53) Rich, Tracy, and Mark are partners who share profits 40%, 20%, and 40%. Their
capital balances were $630,000, $420,000, and $210,000, respectively, before Marks
retirement. Mark was paid $240,000 from partnership assets to buy his interest.
Instructions
Compute the capital balances of Rich and Tracy after Mark has withdrawn.
54) Expenses paid and recorded in an asset account before they are used or consumed
are called ______________. Revenue received and recorded as a liability before it is
recognized is referred to as ______________.
55) Identify the accounts to be debited and credited for each of the following
transactions.
1>The owner, O. Gulag, invested $8,000 cash in the business.
2>Purchased supplies on account for $1,000.
3>Billed customers $2,000 for services performed.
4>Paid salaries of $1,200.
56) Natural resources have two distinguishing characteristics (1) they are physically
_______________ in operations, and (2) they are _________________ only by an act
of nature.
57) The _______________ point is when total revenues equal total costs.