1) When preparing an income statement vertical analysis, each revenue and expense is
expressed as a percent of net income.
2) Employees view budgeting more positively when goals are established for them by
senior management.
3) Money market accounts, commercial paper, and United States Treasury Notes are
examples of cash equivalents.
4) Standards are set for only direct labor and direct materials.
5) Past performance is the best overall basis for evaluating current performance and
assessing the need for corrective action.
6) The drawing account is a temporary account.
7) Owners capital will be reduced by the amount in the drawing account.
8) The sales budget is the starting point for preparation of the direct labor cost budget.
9) Adjusting entries are made at the end of an accounting period to adjust accounts on
the balance sheet.
10) If total assets increased by $190,000 during a specific period and liabilities
decreased by $10,000 during the same period, the period’s change in total owner’s
equity was a $200,000 increase.
11) The term B2C refers to transactions conducted between two companies.
12) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 2 during the period for
direct labor is:
A.Work in Process–Department 265,000
Wages Payable65,000
B.Wages Payable65,000
Work in Process–Department 265,000
C.Work in Process–Department 2125,000
Wages Payable125,000
D.Work in Process–Department 2185,000
Wages Payable185,000
13) The management of Wyoming Corporation is considering the purchase of a new
machine costing $375,000. The company’s desired rate of return is 6%. The present
value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the
foregoing information, use the following data in determining the acceptability in this
situation:
The average rate of return for this investment is:
A.5%
B.10%
C.25%
D.15%
14) An investor purchased 500 shares of common stock, $25 par, for $19,250.
Subsequently, 100 shares were sold for $35 per share. What is the amount of gain or
loss on the sale?
A.$3,500 gain
B.$350 gain
C.$350 loss
D.$500 gain
15) Derek Company gathered the following reconciling information in preparing its
September bank reconciliation:
A.$5,150
B.$3,710
C.$3,060
D.$1,610
16) Unearned Fees appear on the
A.balance sheet in the current assets section
B.balance sheet as a current liability
C.balance sheet in the owner’s equity section
D.income statement as revenue
17) Unearned rent, representing rent for the next six months’ occupancy, would be
reported on the landlord’s balance sheet as a(n)
A.asset
B.liability
C.capital account
D.contra liability
18) Department S had no work in process at the beginning of the period. 12,000 units of
direct materials were added during the period at a cost of $84,000, 9,000 units were
completed during the period, and 3,000 units were 30% completed as to labor and
overhead at the end of the period. All materials are added at the beginning of the
process. Direct labor was $49,500 and factory overhead was $9,900.
The total conversion costs for the period were:
A.$59,400
B.$49,500
C.$143,400
D.$9,900
19) Based on the following information, compute (a) Inventory turnover; (b) Average
daily cost of merchandise sold using a 365 day year; and (c) Number of days sales in
inventory.
April 30, 2012
Cost of merchandise sold $195,640
Inventory:
Beginning 20,500
Ending 18,628
20) The Stewart Cake Factory sells chocolate cakes, birthday decorated cakes, and
specialty cakes. The factory is experiencing a bottleneck and is trying to determine
which cake is more profitable. Even though the company may have to limit the orders
that it takes, they are concerned about customer service and satisfaction.
(A) Calculate the contribution margin per hour per cake.
(B) Determine which cakes the company should try to sell more of first, second, and
then last.
21) The notification accompanying a check that indicates the specific invoice being
paid is called a
A.remittance advice
B.voucher
C.debit memo
D.credit memo
22) The ability of a business to pay its debts as they come due and to earn a reasonable
amount of income is referred to as
A.solvency and leverage
B.solvency and profitability
C.solvency and liquidity
D.solvency and equity
23) A capital expenditure results in a debit to
A.an expense account
B.a capital account
C.a liability account
D.an asset account
24) Aaron and Kim form a partnership by combining the assets of their separate
businesses. Aaron contributes accounts receivable with a face amount of $50,000 and
equipment with a cost of $180,000 and accumulated depreciation of $100,000. The
partners agree that the equipment is to be priced at $68,000, that $3,500 of the accounts
receivable are completely worthless and are not to be accepted by the partnership, and
that $2,000 is a reasonable allowance for the uncollectibility of the remaining accounts
receivable. Kim contributes cash of $21,000 and merchandise inventory of $44,500.
The partners agree that the merchandise inventory is to be priced at $48,000. Journalize
the entries to record in the partnership accounts (a) Aarons investment and (b) Kims
investment.
25) Credit memos from the bank
A.decrease a bank customer’s account
B.are used to show a bank service charge
C.show that a company has deposited a customer’s NSF check
D.show the bank has collected a note receivable for the customer
26) The equity method of accounting for investments
A.requires a year-end adjustment to revalue the stock to lower of cost or market
B.requires the investment to be reported at its original cost
C.requires the investment be increased by the reported net income of the investee
D.requires the investment be increased by the dividends paid by the investee
27) For each of the following scenarios, indicate the amount of the adjusting journal
entry for Bad Debt Expense to be recorded in 2014, the balance in Allowance for
Doubtful Accounts after adjustment at December 31, 2014, and the net realizable value
of Accounts Receivable at December 31, 2014:
a) Based on an analysis of Simmons Companys $380,000 balance in Accounts
Receivable at December 31, 2014, is was estimated that $15,500 will be uncollectible.
There is a credit balance of $1,200 in Allowance for Doubtful Accounts before
adjustment.
b) Blake Company had net credit sales of $900,000 during 2014, and has an Accounts
Receivable balance of $425,000 at December 31, 2014, and an Allowance for Doubtful
Accounts credit balance of $11,000 before adjustment. Blake estimates Bad Debt
Expense as 3/4 of 1% of net credit sales.
c) Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31,
2014. An analysis of those receivables shows $24,000 will probably not be collected.
Before adjusting entries are prepared, the Allowance for Doubtful Accounts has a debit
balance of $750.
28) Work in process inventory increased by $20,000 during 2011. Cost of goods
manufactured was $180,000. Total manufacturing costs incurred in 2011 are:
A.$198,000
B.$160,000
C.$189,000
D.$200,000
29) When the fixed costs are $120,000 and the contribution margin is $30, the
break-even point is
A.16,000 units
B. 8,000 units
C. 6,000 units
D. 4,000 units
30) When determining whether to record an asset as a fixed asset, what two criteria
must be met?
A.Must be an investment and must be long lived
B.Must be long lived and must use the asset in a productive manner
C.Must be short lived and must be a tangible asset
D.Must be a tangible asset and must be an investment
31) Which of the following is not true regarding depreciation?
A.Depreciation allocates the cost of a fixed asset over its estimated life
B.Depreciation expense reflects the decrease in market value each year
C.Depreciation is an allocation not a valuation method
D.Depreciation expense does not measure changes in market value
32) When using a purchases journal
A.all cash and credit purchases are recorded in the journal
B.posting to creditor accounts is only done at the end of the month
C.the Other Accounts total is posted to Accounts Payable at months end
D.there will always be an Accounts Payable Cr. column
33) Long-term investments are held for all of the listed reasons below except
A.to earn the interest or dividend income
B.for its long-term gain potential
C.to influence over another business entity
D.to meet current cash needs
34) During 2010, Tempo Inc has monthly cash expenses of $115,000. On December 31,
2010, their cash balance is $1,437,500. The ratio of cash to monthly cash expenses is
A.8.0
B.12.5
C.87.5
D.11.5
35) Holly and Luke formed a partnership, investing $240,000 and $80,000,
respectively. Determine their participation in the years net income of $200,000 under
each of the following independent assumptions:
(a) No agreement concerning division of net income;
(b) Divided in the ratio of original capital investment;
(c) Interest at the rate of 15% allowed on original investments and the remainder
divided in the ratio of 2:3;
(d) Salary allowances of $50,000 and $70,000, respectively, and the balance divided
equally;
(e) Allowance of interest at the rate of 15% on original investments, salary allowances
of $50,000 and $70,000, respectively, and the remainder divided equally.
36) The ____ is where a transaction can first be found on the accounting records.
A.chart of accounts
B.income statement
C.balance sheet
D.journal
37) Which of the following items should be classified as an extraordinary item on a
corporate income statement?
A.gain on the retirement of a bond payable
B.loss from land condemned for public use
C.loss due to an discontinued operation
D.selling treasury stock for more than the company paid for it
38) Transactions affecting owner’s equity include
A.owner’s investments and payment of liabilities
B.owner’s investments and owner’s withdrawals, revenues, and expenses
C.owner’s investments, revenues, expenses, and collection of accounts receivable
D.owner’s withdrawals, revenues, expenses, and purchase of supplies on account
39) Periodic comparisons between planned objectives and actual performance are
reported in:
A.zero-base reports
B.budget performance reports
C.master budgets
D.budgets
40) Round tripping is a fraudulent scheme where business A artificially inflates revenue
by lending money to customer B who uses that money to buy products from A.
41) During a period of falling prices, which of the following inventory methods
generally results in the lowest balance sheet amount for inventory.
A.average method
B.LIFO method
C.FIFO method
D.can not tell without more information
42) After posting the second closing entry to the income summary account, the balance
will be equal to
A.zero
B.owners equity
C.revenues for the period
D.the net income or (loss) for the period
43) Use the following information in the adjusted trial balance for Stockton Company
to answer the following questions.
Determine the total liabilities for the period.
A.$1,900
B.$6,200
C.$4,300
D.$20,240
44) A ratio of 3:2:1 is the same as
A.30%:20%:10%
B.3/6:2/6:1/6
C.3/10:2/10:1/20
D.None of these
45) The following are steps to the accounting cycle. Of the following, which step
should be done first?
A.Closing entries are journalized and posted to the ledger
B.Transactions are posted to the ledger
C.Adjusting entries are journalized and posted to the ledger
D.Financial statements are prepared
46) When a limited partnership is formed
A.the partnership activities are limited
B.all partners have limited liability
C.some of the partners have limited liability
D.none of the partners have limited liability
47) The following lots of a particular commodity were available for sale during the
year:
The firm uses the periodic system and there are 25 units of the commodity on hand at
the end of the year.
What is the amount of the inventory at the end of the year using the FIFO method?
A.$1,685
B.$1,575
C.$1,805
D.$3,585
48) The following cash receipts journal heading have been suggested for Tower
Tree-Trimming Service Company. What problems do you see with these headings?
49) Malcolm has a capital balance of $90,000 after adjusting to fair market value.
Celeste contributes $45,000 to receive a 25% interest in a new partnership with
Malcolm.
Determine the amount and recipient of the partner bonus.
50) Based upon the following data, determine the cost of merchandise sold for August.
51) Prepare an amortization schedule for the 1st 2 years (effective method) using the
following data:
1> On January 1, 2010, ABC Co. issued $2,000,000, 5%, 10 year bonds, interest
payable on June 30th and December 31st to yield 6%. Use the following format and
round to nearest dollar (may have small rounding error). The bonds were issued for
$1,851,234.
Date Cash paid Interest expense Amortization Bond carry Value
2> Show how this bond would be reported on the balance sheet at 12/31/11.
52) The Cavy Company estimates that the factory overhead for the following year will
be $1,250,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 40,000 hours. The machine hours for
the month of April for all of the jobs was 4,780. What is the amount that will be applied
to all of the jobs for the month of April?
53) The Torre Company has the following balances in stockholders equity on December
31st.
Common Stock – $5.00 par, 60,000 issued $300,000
Additional paid in capital – common 600,000
Preferred stock – $100 par, 5,000 issued 500,000
Additional paid in capital – preferred 100,000
Retained earnings 200,000
Treasury stock (cost – $12.00 per share) 60,000
Answer the following questions:
1> How many shares of treasury stock are owned?
2> What was the average market price per share at which common stock was issued?
3> What was the average market price per share at which preferred stock was issued?
4> What is the total value of the Paid in Capital portion of stockholders equity?
5. What is the total value of stockholders equity?
6> How many shares of common stock are outstanding?
7> If net income for the year was $75,000 and a preferred stock dividend of $20,000
was paid,
what was the beginning value of retained earnings? How much is earnings per share for
the year?
54) Selected ledger accounts appear below for Fulton Surveying Services for 2014.
Prepare a statement of owner’s equity.