1) Departmental contribution to overhead is the same as gross profit generated by that
department.
2) Stated value stock is no-par stock that is assigned a value per share by the
corporation’s board of directors.
3) Vertical analysis is used to reveal patterns in data covering two or more successive
periods.
4) On the work sheet, net income is entered in the Income Statement Credit column as
well as the Balance Sheet or Statement of Owner’s Equity Credit column.
5) A liability is incurred when income is earned because income tax expense is created
by earning income.
6) When preparing the operating activities section of the statement of cash flows using
the indirect method, an increase in income taxes payable is added to net income.
7) Managerial accounting is an activity that helps managers determine costs of products
and services, plan future activities, and compare actual to planned results.
8) The cost of all direct materials issued to production is debited to Work in Process
Inventory.
9) A benefit of using a work sheet is that it aids in the preparation of the financial
statements.
10) Current partners usually require any new partner to pay a bonus for the privilege of
joining when the current value of a partnership is greater than the recorded amounts of
equity.
11) The withdrawals account of each partner is closed to retained earnings at the end of
the accounting period.
12) A company purchased a tract of land for its natural resources at a cost of
$1,000,000. It expects to harvest 5,000,000 board feet of timber from this land. The
salvage value of the land is expected to be $200,000. The depletion expense per board
foot of timber is:
A.$0.75.
B.$0.24.
C.$0.20.
D.$0.16.
E.$0.04.
13) A flexible budget may be prepared:
A.Before the operating period only.
B.After the operating period only.
C.During the operating period only.
D.At any time in the planning period.
E.Only when the company encounters excessive costs.
14) A process cost summary is a managerial accounting report that describes all but
which of the following?
A.The gross profit earned on the sale of products.
B.The equivalent units of production by the department.
C.How the costs were assigned to the output?
D.Physical transfers for a department.
E.The costs charged to a department.
15) Rights to purchase common stock at a fixed price over a specified period are:
A.Preferred stocks.
B.Class B stocks.
C.Stock options.
D.Stock restrictions.
E.Preemptive rights.
16) Henry, Luther, and Gage are dissolving their partnership. Their partnership
agreement allocates each partner 1/3 of all income and losses. The current period’s
ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage,
$(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be
distributed. Gage is unable to pay the deficiency. The journal entry to record the
distribution should be:
A.Debit Henry, Capital $25,667; debit Luther, Capital $25,667; debit Gage, Capital
$25,666; credit Cash $77,000.
B.Debit Henry, Capital $42,500; debit Luther, Capital $34,500; credit Cash $77,000.
C.Debit Henry, Capital $45,000; debit Luther, Capital $37,000; credit Gage, Capital
$5,000; credit Cash $77,000.
D.Debit Cash $77,000, debit Gage, Capital $5,000, credit Henry, Capital $45,000,
credit Luther, Capital $37,000.
E.Debit Cash $77,000; credit Henry, Capital $25,667; credit Luther, Capital $25,667;
credit Gage, Capital $25,666.
17) Bonds that have an option exercisable by the issuer to retire them at a stated dollar
amount prior to maturity are known as:
A.Convertible bonds.
B.Sinking fund bonds.
C.Callable bonds.
D.Serial bonds.
E.Junk bonds.
18) Anniston Co. planned to produce and sell 40,000 units. At that volume level,
variable costs are determined to be $320,000 and fixed costs are $30,000. The planned
selling price is $10 per unit. Anniston actually produced and sold 42,000 units.
Using a contribution margin format:
(a) Prepare a fixed budget income statement for the planned level of sales and
production.
(b) Prepare a flexible budget income statement for the actual level of sales and
production.
19) Webster Corporation’s monthly projected general and administrative expenses
include $5,000 administrative salaries, $2,400 of other cash administrative expenses,
$1,350 of depreciation expense, and 0.5% monthly interest on an outstanding bank loan
of $10,000. Compute the total general and administrative expenses to be reported on the
general and administrative expense budget per month.
A.$17,400.
B.$7,400.
C.$7,450.
D.$5,050.
E.$8,800.
20) The cash flow on total assets ratio is calculated by:
A.Dividing cash flows from operations by average total assets.
B.Dividing total cash flows by average total assets.
C.Dividing average total assets by cash flows from investing activities.
D.Dividing average total assets by total cash flows.
E.Total cash flows divided by average total assets times 365.
21) 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.
22) Percy Corporation was formed on January 1. The corporate charter authorized
100,000 shares of $10 par value common stock. During the first month of operation, the
corporation issued 400 shares to its attorneys in payment of a $5,000 charge for
drawing up the articles of incorporation. The entry to record this transaction would
include:
A.A debit to Organization Expenses for $4,000.
B.A debit to Organization Expenses for $5,000.
C.A credit to Common Stock for $5,000.
D.A credit to Paid-in Capital in Excess of Par Value, Common Stock for $5,000.
E.A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000.
23) Prepare journal entries to record the following production activities for Oaks
Manufacturing.
a. Incurred overhead costs of $79,000 (paid in cash).
b. Applied overhead at 110% of direct labor costs which are $93,900.
c. Transferred completed products with a cost of $258,200 to finished goods inventory.
d. Sold $602,000 of product on credit. Cost is $271,000.
24) A system of accounting for production operations that produces timely information
about inventories and manufacturing costs per unit of product is a:
A.Finished goods accounting system.
B.General accounting system.
C.Manufacturing accounting system.
D.Cost accounting system.
E.Production accounting system.
25) Zhang Company reported Cost of goods sold of $835,000 and ending Inventory of
$41,750. The Days’ sales in inventory (rounded to whole days) is:
A.18 days.
B.418 days.
C.10 days.
D.56 days.
E.20 days.
26) When using a voucher system, what are the steps on the invoice approval checklist
that must be completed before an invoice approval is complete and a voucher prepared?
27) Probably the most important section of the statement of cash flows in analyzing the
financial performance of a company’s ongoing business is the ____________ section.
28) If a 60-day note receivable is dated September 22, what is the maturity date of the
note?
29) Gi Gi’s Dance Studio provided $150 of dance instruction and rented out its dance
studio to the same client for another $100. The client paid immediately. Identify the
general journal entry below that Gi Gi’s will make to record the transaction.
30) Calculate the ending inventory using LIFO for a company that uses a perpetual
inventory system, using the information given below.
31) Under the alternative method for accounting for unearned revenue, which of the
following pairs of journal entry formats is correct?
32) What is the effect of an error in the ending inventory balance on the accounts
reported in the income statement?