1) The profit margin component of rate of return on investment analysis focuses on
profitability by indicating the rate of profit earned on each sales dollar.
2) For paying their payroll, most employers use payroll checks drawn on a special bank
account.
3) The present value of $5,000 to be received in 4 years at a market rate of interest of
6% compounded annually is $3,636.30.
4) Standard costs are determined by multiplying expected price by expected quantity.
5) Three measures of investment center performance are income from operations, rate
of return on investment, and residual income.
6) There are two internal control objectives and they are to ensure accurate financial
reports, and ensure compliance with applicable laws.
7) Since the costs of producing an intermediate product do not change regardless of
whether the intermediate product is sold or processed further, these costs are not
considered in deciding whether to further process a product.
8) Amortization is the allocation process of writing off bond premiums and discounts to
interest expense over the life of the bond issue.
9) A process cost accounting system accumulates costs for each of the departments or
processes within the factory.
10) If the profit margin for a division is 11% and the investment turnover is 1.5, the rate
of return on investment is 7.3%.
11) If the price paid per unit differs from the standard price per unit for direct materials,
the variance is termed a:
A.variable variance
B.controllable variance
C.price variance
D.volume variance
12) The classified balance sheet will have liabilities divided into the following
subsections
A.Current Liabilities and Long-Term Liabilities
B.Current Liabilities and Other Liabilities
C.Other Liabilities and Long-Term Liabilities
D.Present Liabilities and Tomorrows Liabilities
13) If sales totaled $200,000 for the current year (10,000 units at $20 each) and planned
sales totaled $212,500 (12,500 units at $17 each), the effect of the unit price factor on
the change in sales is a:
A.$30,000 increase
B.$12,500 increase
C.$7,500 increase
D.$37,500 decrease
14) For January, sales revenue is $700,000; sales commissions are 5% of sales; the sales
manager’s salary is $96,000; advertising expenses are $90,000; shipping expenses total
2% of sales; and miscellaneous selling expenses are $2,100 plus 1/2 of 1% of sales.
Total selling expenses for the month of January are:
A.$157,100
B.$240,600
C.$183,750
D.$182,100
15) Revenue and expense data for Martinez Company are as follows:
Round percentage to one decimal place.
16) Held-to-Maturity securities
A.are reported at their fair market value on the balance sheet date
B.include both stocks and bonds
C.are primarily purchased to earn interest revenue
D.all of the above
17) A company purchases equipment for $32,000 cash. This transaction should be
shown on the statement of cash flows under
A.investing activities
B.financing activities
C.noncash investing and financing activities
D.operating activities
18) The cash flows from operating activities are reported by the direct method on the
statement of cash flows. Determine the following:
19) Financing activities include
A.lending money
B.acquiring investments
C.issuing debt
D.acquiring long-lived assets
20) Jacki Lopez started JVL Consulting on January 1, 2014. The following are the
account balances at the end of the first month of business, before adjusting entries were
recorded:
Adjustment data:
Supplies on hand at the end of the month: $150
Unbilled Consulting Revenue: $700
Rent expense for the month: $1,000
Depreciation on equipment: $90
(a) Prepare the required adjusting entries, adding accounts as needed.
(b) Prepare an Adjusted Trial Balance for JVL Consulting as of January 31, 2014.
21) Because accountants have financial expertise, they are the only ones that are able to
set standard costs for the production area.
22) Which one of the following is not a difference between a retail business and a
service business?
A.in what is sold
B.the inclusion of gross profit in the income statement
C.accounting equation
D.merchandise inventory included in the balance sheet
23) For each of the following, determine the amount of net income or net loss for the
year.
(a) Revenues for the year totaled $71,300 and expenses totaled $35,500. Additional
capital stock of $15,000 was issued for cash during the year.
(b) Revenues for the year totaled $220,500 and expenses totaled $175,000. Dividends
paid during the year were $40,000. No additional stock was issued.
(c) Revenues for the year totaled $149,000 and expenses totaled $172,000. Capital
stock of $12,000 was issued for cash and dividends of $16,000 were paid during the
year.
(d) Revenues for Konner Co. totaled $198,150 and expenses totaled $174,200. Cash
dividends of $35,000 were paid during the year. No additional stock was issued.
24) Using the data from the Coffee & Cocoa Company,
25) The Swan Company produces their product at a total cost of $43 per unit. Of this
amount $8 per unit is selling and administrative costs. The total variable cost is $30 per
unit The desired profit is $20 per unit.
Determine the mark up percentage on variable cost.
A.100%
B.110%
C.80%
D.46.5%
26) The matching concept
A.addresses the relationship between the journal and the balance sheet
B.determines whether the normal balance of an account is a debit or credit
C.requires that the dollar amount of debits equal the dollar amount of credits on a trial
balance
D.states that expenses related to revenue be reported at the same time the revenue is
reported
27) The following are examples of external users of accounting information except
A.government
B.customers
C.creditors
D.managers
28) Which of the following activity bases would be the most appropriate for gasoline
costs of a delivery service, such as United Postal Service?
A.Number of trucks employed
B.Number of miles driven
C.Number of trucks in service
D.Number of packages delivered
29) The point where the sales line and the total costs line intersect on the
cost-volume-profit chart represents:
A.the maximum possible operating loss
B.the maximum possible operating income
C.the total fixed costs
D.the break-even point
30) On December 31, Strike Company has decided to trade-in one of its batting cages
for another one that has a cost of $500,000. The seller of the batting cage is willing to
allow a trade-in amount of $11,000. The initial cost of the old equipment was $215,000
with an accumulated depreciation of $185,000. Depreciation has been taken up to the
end of the year. The difference will be paid in cash. What is the amount of the gain or
loss on this transaction?
A.Loss of $11,000
B.Gain of $11,000
C.Loss of $19,000
D.No loss or gain will be recorded
31) Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the
year (before adjustment), and an analysis of customers’ accounts indicates uncollectible
receivables of $19,700. Which of the following entries records the proper adjustment
for Bad Debt Expense?
A.debit Allowance for Doubtful Accounts, $17,600; credit Bad Debt Expense, $17,600
B.debit Allowance for Doubtful Accounts, $21,800; credit Bad Debt Expense, $21,800
C.debit Bad Debt Expense $21,800; credit Allowance for Doubtful Accounts, $21,800
D.debit Bad Debt Expense, $17,600; credit Allowance for Doubtful Accounts, $17,600
32) A company reports the following:
Determine the (a) accounts receivable turnover, and (b) number of days sales in
receivables. Round your answer to one decimal place.
33) Department A had 4,000 units in work in process that were 60% completed as to
labor and overhead at the beginning of the period, 29,000 units of direct materials were
added during the period, 31,000 units were completed during the period, and 2,000
units were 80% completed as to labor and overhead at the end of the period. All
materials are added at the beginning of the process. The first-in, first-out method is used
to cost inventories.
The number of equivalent units of production for conversion costs for the period was:
A.30,200
B.29,800
C.33,800
D.33,000
34) 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
35) Incurring actual indirect factory wages in excess of budgeted amounts for actual
production results in a:
A.quantity variance
B.controllable variance
C.volume variance
D.rate variance
36) During its first year of operations, a company granted employees vacation
privileges and pension rights estimated at a cost of $21,500 and $15,000. The vacations
are expected to be taken in the next year and the pension rights are expected to be paid
in the future 5-30 years. What is the total cost of vacation pay and pension rights to be
recognized in the first year?
A.$15,000
B.$36,500
C.$6,500
D.$21,500
37) Par value
A.is the monetary value assigned per share in the corporate charter
B.represents what a share of stock is worth
C.represents the original selling price for a share of stock
D.is established for a share of stock after it is issued
38) Which of the following is not a reason for banks to use activity-based costing?
A.to determine the amounts charged to customers for services provided
B.to determine service quality
C.to determine profitability of services provided
D.all of the above
39) Gerardo Company had a net income of $75,000, and other comprehensive income
of $12,500 for 2012. On January 1, 2012, the Retained Earnings balance was $525,000
and the Accumulated Other Comprehensive Income balance was $55,000. Determine
the (a) comprehensive income for 2012, (b) Retained Earnings balance on December
31, 2012, and (c) the Accumulated Other Comprehensive Income on December 31,
2012.
40) The units of Product Green-2 available for sale during the year were as follows:
There are 17 units of the product in the physical inventory at Sep The periodic
inventory system is used. Determine the cost of merchandise sold by (a) FIFO, (b)
LIFO, and (c) average cost methods.
41) Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income
from operations amounting to $302,500, and a desired minimum rate of return of 15%.
The profit margin for Chicks is:
A.25%
B.22%
C.15%
D.27.5%
42) A pension plan which promises employees a fixed annual pension benefit, based on
years of service and compensation, is called a(n)
A.defined contribution plan
B.defined benefit plan
C.unfunded plan
D.compensation plan
43) The account type and normal balance of Unearned Revenue is
A.revenue, credit
B.expense, debit
C.liability, credit
D.asset, debit
44) When shares of stock held as an investment are sold, the difference between the
proceeds and the carrying amount of the investment is recorded as a(n)
A.prior period adjustment
B.operating income and losses
C.paid-in capital addition
D.gain or loss
45) On June 8, Alton Co. issued an $95,000, 6%, 120-day note payable to Seller Co.
What is the due date of the note?
A.October 8
B.October 7
C.October 6
D.October 5
46) If sales are $400,000, variable costs are 80% of sales, and operating income is
$40,000, what is the operating leverage?
A.0
B.7.500
C.2.0
D.1.333
47) A necessary element of internal control is
A.database
B.systems design
C.systems analysis
D.information and communication
48) The cash account in the company’s ledger is a(n)
A.asset with a debit balance
B.asset with a credit balance
C.liability with a debit balance
D.liability with a credit balance
49) The following data were gathered to use in reconciling the bank account of
Savannah Company:
What is the adjusted balance on the bank reconcilition?
50) On the basis of the following data for Breach Co. for the year ended December 31,
2011 and the preceding year, prepare a statement of cash flows using the indirect
method of reporting cash flows from operating activities.
Assume that equipment costing $25,000 was purchased for cash and no long term assets
were sold during the period.
Stock was issued for cash – 3,200 shares at par.
Net income for 2010 was $76,000.
Cash dividends declared and paid were $13,000.
51) What is a cash budget? How does management use a cash budget?
52) Journalize the entries to record the following:
Sept 1 Established a petty cash fund of $350
Sept 30 The amount of cash in the petty cash fund is now $130. The fund is replenished
based on the following receipts: office supplies, $116; postage $100.
Record any discrepancy in the cash short and over account.
Journal
53) Ecco Company sold $150,000 of kitchen appliances during September under a 6
month warranty. The cost to repair defects under the warranty is estimated at 6% of the
sales price. On October 15 a customer required a $200 part replacement, plus $85 labor
under the warranty.
54) A company reports the following:
Determine the companys price-earnings ratio. Round your answer to one decimal place.