1) Robert Tingle is studying for the next accounting mid-term examination. What
should Robert know about (a) departing from the cost basis of accounting for
inventories and (b) the meaning of “market” in the lower-of-cost-or-market method?
2) During August, 2014, Baxters Supply Store generated revenues of $60,000. The
companys expenses were as follows: cost of goods sold of $36,000 and operating
expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the
sale of a delivery truck of $2,000.
Baxters nonoperating income (loss) for the month of August, 2014 is
a.$0
b.$1,000
c.$2,000
d.$3,000
3) In Lynne Company, there was an increase in the land account during the year of
$43,000. Analysis reveals that the change resulted from a cash sale of land at cost
$115,000, and a cash purchase of land for $158,000. In the statement of cash flows, the
change in the land account should be reported in the investment section:
a.as a net purchase of land, $43,000
b.only as a purchase of land $158,000
c.as a purchase of land $158,000 and a sale of land $115,000
d.only as a sale of land $115,000
4) Which of the following is not a reason one set of international accounting standards
are needed?
a.Multinational corporations
b.Financial markets
c.Information technology
d.All of these answer choices are correct
5) Lagusta Company incurred the following costs for 50,000 units:
Variable costs$180,000
Fixed costs 240,000
Lagusta has received a special order from a foreign company for 5,000 units. There is
sufficient capacity to fill the order without jeopardizing regular sales. Filling the order
will require spending an additional $8,500 for shipping.
If Lagusta wants to earn $9,000 on the order, what should the unit price be?
a.$3.60
b.$11.90
c.$7.10
d.$5.30
6) An account will have a credit balance if the
a.credits exceed the debits
b.first transaction entered was a credit
c.debits exceed the credits
d.last transaction entered was a credit
7) The manager of Brick Company is given a bonus based on income before income
taxes. Net income, after taxes, is $11,200 for FIFO and $9,800 for LIFO. The tax rate is
30%. The bonus rate is 20%. How much higher is the manager’s bonus if FIFO is
adopted instead of LIFO?
a.$84
b.$2,800
c.$400
d.$420
8) The labor time requirements for standards may be determined by the
a.sales manager
b.product manager
c.industrial engineers
d.payroll department manager
9) Owner’s equity is best depicted by the following:
a.Assets = Liabilities
b.Liabilities + Assets
c.Residual equity + Assets
d.Assets Liabilities
10) When two accounts are required in one journal entry, the entry is referred to as a
a.balanced entry
b.simple entry
c.posting
d.nominal entry
11) Some companies implement systems to reduce defects in finished products with the
goal of achieving zero defects. What are these systems called?
a.Activity-based costing systems
b.Balanced scorecard systems
c.Value chain systems
d.Total quality management systems
12) Bond discount should be amortized to comply with
a.the historical cost principle
b.the expense recognition principle
c.the revenue recognition principle
d.conservatism
13) Jackson is admitted to a partnership with a 25% capital interest by a cash
investment of $360,000. If total capital of the partnership is $1,560,000 before
admitting Jackson, the bonus to Jackson is
a.$120,000
b.$60,000
c.$180,000
d.$240,000
14) Company X sells $900 of merchandise on account to Company Y with credit terms
of 2/10, n/30. If Company Y remits a check taking advantage of the discount offered,
what is the amount of Company Y’s check?
a.$630
b.$720
c.$810
d.$882
15) Netta Shutters has the following inventory information.
Nov.1Inventory30 units @$8.00
8Purchase120 units @$8.30
17Purchase60 units @$8.40
25Purchase90 units @$8.80
A physical count of merchandise inventory on November 30 reveals that there are 90
units on hand. Assume a periodic inventory system is used. Cost of goods sold (rounded
to the nearest dollar) under the average-cost method is
a.$1,740
b.$1,772
c.$1,778
d.$1,794
16) In a perpetual inventory system, a return of defective merchandise by a purchaser is
recorded by crediting
a.Purchases
b.Purchase Returns
c.Purchase Allowance
d.Inventory
17) Moroni Industries has the following inventory information.
July1Beginning Inventory40 units at $120
5Purchases240 units at $112
14Sale160 units
21Purchases120 units at $115
30Sale140 units
Assuming that a periodic inventory system is used, what is the amount allocated to
ending inventory on a LIFO basis?
a.$11,500
b.$11,520
c.$33,960
d.$33,980
18) Guid Company had actual sales of $900,000 when break-even sales were $600,000.
What is the margin of safety ratio?
a.50%
b.33.33%
c.66.67%
d.75%
19) A company just starting business made the following four inventory purchases in
June:
June1150 units$ 390
June10200 units585
June15200 units630
June28150 units 510
$2,115
A physical count of merchandise inventory on June 30 reveals that there are 250 units
on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold
for June is
a.$683
b.$825
c.$1,290
d.$1,432
20) Match the items in the two columns below by entering the appropriate code letter in
the space provided.
A.Just-in-time processingF.Units transferred out
B.Equivalent units of productionG.Activity-based costing
C.Total units accounted forH.Physical units
D.Production cost reportI.Unit production costs
E.Cost reconciliation scheduleJ.Total manufacturing cost per unit
____1>A summary of both production quantity and cost data for a production
department.
____2>Shows that the total costs accounted for equal the total costs to be accounted for.
____3>Work done during a period expressed in fully completed units.
____4>Focuses on the activities performed in manufacturing a specific product.
____5>Actual units to be accounted for during a period, irrespective of any work
performed.
____6>Units transferred out during the period plus units in ending work in process.
____7>Unit materials costs plus unit conversion costs.
____8>Total units accounted for minus units in ending work in process.
____9>Costs expressed in terms of equivalent units of production.
____10>Uses a pull approach in manufacturing.
21) Toolworks has a standard of 2 hours of labor per unit, at $18 per hour. In producing
2,000 units, Toolworks used 3,850 hours of labor at a total cost of $70,455. Toolworks
total labor variance is
a.$1,155 U
b.$1,545 F
c.$1,200 U
d.$2,895 F
22) The direct write-off method
a.is acceptable for financial reporting purposes
b.debits Allowance for Doubtful Accounts to record write-offs of accounts
c.shows only actual losses from uncollectible accounts receivable
d.estimates bad debt losses
23) Orr Corporation sold equipment for $30,000. The equipment had an original cost of
$90,000 and accumulated depreciation of $45,000. As a result of the sale,
a.net income will increase $30,000
b.net income will increase $15,000
c.net income will decrease $15,000
d.net income will decrease $30,000
24) Bodkin, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock
and 50,000 shares of $1 par value common stock outstanding at December 31, 2014,
and December 31, 2015 . The board of directors declared and paid a $25,000 dividend
in 2014 . In 2015, $55,000 of dividends are declared and paid. What are the dividends
received by the preferred and common shareholders in 2015?
PreferredCommon
a.$0$55,000
b.$25,000$30,000
c.$27,500$27,500
d.$35,000$20,000
25) Indicate where the event purchase of land and a building with a mortgage would
appear, if at all, on the indirect statement of cash flows.
a.Operating activities section
b.Investing activities section
c.Financing activities section
d.Does not represent a cash flow
26) The opportunity cost of an alternate course of action that is relevant to a
make-or-buy decision is
a.subtracted from the “Make” costs
b.added to the “Make” costs
c.added to the “Buy” costs
d.None of these answer choices are correct
27) An asset that cannot be sold individually in the market place is
a.a patent
b.goodwill
c.a copyright
d.a trade name
28) Trot Company is preparing its manufacturing overhead budget for 2014 . Relevant
data consist of the following.
Units to be produced (by quarters): 10,000, 12,000, 14,000, 16,000.
Direct labor: Time is 1 hour per unit.
Variable overhead costs per direct labor hour: Indirect materials $0.90; indirect labor
$1.20; and maintenance $0.50.
Fixed overhead costs per quarter: Supervisory salaries $39,000; depreciation $16,000;
and maintenance $12,000.
Instructions
Prepare the manufacturing overhead budget for the year, showing quarterly data.
29) Kelly Company produces flash drives for computers, which it sells for $20 each.
Each flash drive costs $15 of variable costs to make. During April, 1,000 drives were
sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How
much is the contribution margin ratio?
a.20%
b.25%
c.75%
d.80%
30) Under IFRS, companies do not use a
a.discount account
b.premium account
c.bonds payable account
d.discount or premium account
31) Angie Rizzoli operates a small business and uses a manual system of accounting.
Transactions are entered in the general journal and posted to accounts in the general
ledger at the end of the month. Although the volume of transactions has increased
significantly in the past year, Ms. Rizzoli does not feel that it would be cost-effective to
install an electronic accounting system. She hires you as a consultant to make
recommendations about how to record transactions more efficiently. Briefly describe
the principles that you would consider in making recommendations to Ms. Rizzoli.
32) Stanton Corporation had net income for the year of $200,000 and a profit margin of
20%. If total average assets were $400,000, the asset turnover ratio was ____________
times.
33) Using the following operating data for Complex Corporation, illustrate horizontal
analysis.
2014 2013
Net sales$350,000$300,000
Cost of goods sold240,000160,000
Operating expenses80,000120,000
Net income30,00020,000
34) The adjusted trial balance of J. W. Hatch Company appears below.
J. W. HATCH
Adjusted Trial Balance
December 31, 2014
Debit Credit
Cash12,000
Accounts Receivable25,000
Inventory35,000
Buildings140,000
Accumulated Depreciation
Buildings20,000
Accounts Payable12,000
Owners Capital144,000
Owners Drawings30,000
Sales Revenue310,000
Sales Discounts6,000
Sales Returns & Allowances8,000
Cost of Goods Sold188,000
Operating Expenses 42,000
486,000486,000
Instructions
Using the information given, prepare the year-end closing entries.
35) 1>Yaz Inc. retired $500,000 face value, 8% bonds on June 30, 2012, at 97 . The
carrying value of the bonds at the redemption date was $475,000. The interest payment
due on June 30, 2012, has been made and recorded.
Instructions: Prepare the necessary journal entry for the conversion and retirement of
the bonds.
2>Muskete Corporation has $600,000, 10%, 10-year convertible bonds that were sold at
face value. The bonds are convertible into 20 shares of Muskete $10 par value common
stock for each $1,000 bond. On December 31, 2012, after bond interest had been paid,
$300,000 face value bonds were converted.
Instructions: Prepare the necessary journal entry for the conversion and retirement of
the bonds.
36) Clay Co.s projected sales are as follows:
August$400,000
September$450,000
October$550,000
Clay estimates that it will collect 30% in the month of sale, 50% in the month after the
sale, and 18% in the second month following the sale. Two percent of all sales are
estimated to be bad debts.
Instructions
How much are Clay Co.’s budgeted cash receipts for October?
37) Grouperman Corporation currently manufactures a subassembly for its main
product. The costs per unit are as follows:
Direct materials$10
Direct labor10
Variable overhead7
Fixed overhead 9
Total$36
Fez Company has contacted Grouperman with an offer to sell it 7,000 of the
subassemblies for $30 each. If Troutman makes the subassemblies, $4 of the fixed
overhead per unit will be allocated to other products.
Instructions
Should Grouperman make or buy the subassemblies? Explain your answer.
38) Horizontal and vertical analyses are analytical tools frequently used to analyze
financial statements. What type of information or insights can be obtained by using
these two techniques? Explain how the output of horizontal analysis and vertical
analysis can be compared to industry averages and/or competitive companies.
39) Grave Co. incurred direct labor costs of $54,000 for 6,000 hours. The standard labor
cost was $57,000. During the month, Grave assigned 6,000 direct labor hours costing
$54,000 to production. The standard hours were 6,200.
Instructions
Journalize the transactions for Grave Co. to account for this activity.
40) Three dates are important in connection with cash dividends. Identify these dates,
and explain their significance to the corporation and its stockholders.