1) Comparing dividends per share to earnings per share indicates the extent to which
the corporation is retaining its earnings for use in operations.
2) If a fire destroys the merchandise inventory, the gross profit method can be used to
estimate the cost of merchandise destroyed.
3) A primary difference between the direct write-off and allowance method is whether
or not bad debts is based on a percentage of sales.
4) If a proposed expenditure of $70,000 for a fixed asset with a 4-year life has an
annual expected net cash flow and net income of $32,000 and $12,000, respectively, the
cash payback period is 2.5 years.
5) Standby equipment held for use in the event of a breakdown of regular equipment is
reported as property, plant, and equipment on the balance sheet.
6) In the liquidating process, any uncollected cash becomes a loss to the partnership and
is divided among the remaining partners’ capital balances based on their income-sharing
ratio.
7) Once journal entries are posted to accounts, each account will show a new balance
after each entry.
8) Depending on the account title, the right side of the account is referred to as the
credit side.
9) A diagram of the operating structure of an organization is called an organization
chart.
10) Equivalent units should be computed separately for direct materials and conversion
costs.
11) If sinking fund cash is used to purchase investments, those investments are reported
on the balance sheet as marketable securities.
12) If the total unit cost of manufacturing Product Y is currently $36 and the total unit
cost after modifying the style is estimated to be $48, the differential cost for this
situation is $48.
13) Net income is shown on the work sheet in the Income Statement debit column and
the Balance Sheet credit column.
14) Under the total cost concept, manufacturing cost plus desired profit is included in
the total cost per unit.
15) The transfer to expense of the cost of intangible assets attributed to the passage of
time or decline in usefulness is called amortization.
16) The number of days sales in receivables is an estimate of the length of time the
accounts receivables have been outstanding.
17) In an absorption costing income statement, the manufacturing margin is the excess
of sales over the variable cost of goods sold.
18) Free cash flow is cash flow from operations, less cash used to purchase fixed assets
to maintain productive capacity and cash used for dividends.
19) Accumulated Depreciation is a permanent account.
20) Those most responsible for the major policy decisions of a corporation are the
A.management
B.board of directors
C.employees
D.stockholders
21) Equipment acquired at a cost of $126,000 has a book value of $42,000. Journalize
the disposal of the equipment under the following independent assumptions.
a. The equipment had no market value and was discarded.
b. The equipment is sold for $54,000.
c. The equipment is sold for $24,000.
d. The equipment is traded-in for a similar asset. The list price of the new equipment is
$63,000. The buyer gave no cash in the exchange. The transaction lacks commercial
substance.
Journal
22) The debits to Work in Process–Assembly Department for April, together with data
concerning production, are as follows:
All direct materials are placed in process at the beginning of the process and the first-in,
first-out method is used to cost inventories. The conversion cost per equivalent unit for
April is:
A.$2.48
B.$2.75
C.$2.50
D.$5.25
23) Ramon Ramos has withdrawn $750 from Ramos Repair Companys cash account to
deposit in his personal account. How does this transaction affect Ramos Repair
Companys accounting equation?
A.Increase Assets (Accounts Receivable) and decrease Assets (Cash)
B.Decrease Assets (Cash) and decrease Owners Equity (Owners Withdrawal)
C.Decrease Assets (Cash) and decrease Liabilities (Accounts Payable)
D.Increase Assets (Cash) and decrease Owners Equity (Owners Withdrawal)
24) Which of the following is not one of the three phases needed when changing an
accounting system, either in its entirety or in part?
A.analysis
B.design
C.review
D.implementation
25) 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. The owner
made an additional investment of $15,000 during the year.
(b) Revenues for the year totaled $220,500 and expenses totaled $175,000. The owner
withdrew $40,000 during the year.
(c) Revenues for the year totaled $149,000 and expenses totaled $172,000. The owner
invested an additional $12,000 and withdrew $16,000 during the year.
(d) Revenues for Konner Co. totaled $198,150 and expenses totaled $174,200. Cash
withdrawals of $35,000 were paid during the year.
26) The materials requisition is used to
A.release materials from the storeroom to the factory
B.release finished goods to the shipping department
C.record the acquisition of materials from a vendor
D.record and electronically transmit materials data in place of a receiving report
27) The purchase of supplies on account was recorded and posted as a debit to Supplies
for $500 and a credit to Accounts Receivable for $500. The correcting entry would
include a:
A.credit to Accounts Receivable for $500
B.credit to Accounts Receivable for $1,000
C.credit to Accounts Payable for $500
D.credit to Accounts Payable for $1,000
28) Hsu Company reported the following on its income statement:
An analysis of the income statement revealed that interest expense was $80,000. Hsu
Company’s times interest earned was
A.8 times
B.6.25 times
C.5.25 times
D.5 times
29) Profit is the difference between
A.assets and liabilities
B.the incoming cash and outgoing cash
C.the assets purchased with cash contributed by the owner and the cash spent to operate
the business
D.the amounts received from customers for goods or services and the amounts paid for
30) Owners Equity is
A.added to assets and the two are equal to liabilities
B.added to liabilities and the two are equal to assets
C.subtracted from liabilities and the net amount is equal to assets
D.equal to the total of assets and liabilities
31) The journal entry a company records for the issuance of bonds when the contract
rate and the market rate are the same is
A.debit Bonds Payable, credit Cash
B.debit Cash and Discount on Bonds Payable, credit Bonds Payable
C.debit Cash, credit Premium on Bonds Payable and Bonds Payable
D.debit Cash, credit Bonds Payable
32) The beginning inventory and purchases of an item for the period were as follows:
The company uses the periodic system, and there were 15 units in the inventory at the
end of the period. Determine the cost of the 15 units in the inventory by each of the
following methods, presenting details of your computations: (a) first-in, first-out; (b)
last-in, first-out; (c) average cost. Do not round your intermediate calculations. Round
your final answer to two decimal places.
33) Current liabilities are:
A.due and receivable within one year
B.due and to be paid out of current assets within one year
C.due, but not payable for more than one year
D.payable if a possible subsequent event occurs
34) Cash receipts from interest and dividends are classified as
A.financing activities
B.operating activities
C.investing activities
D.either financing or investing activities
35) In calculating cash flows from operating activities using the indirect method, a gain
on the sale of equipment is
A.added to net income
B.deducted from net income
C.ignored because it does not affect cash
D.reported supplementally as a non-cash investing and financing activity
36) The standard costs and actual costs for direct materials, direct labor, and factory
overhead for the manufacture of 2,500 units of product are as follows:
The amount of the direct labor time variance is:
A.$1,180 favorable
B.$1,140 unfavorable
C.$1,180 unfavorable
D.$1,140 favorable
37) The journal entry to record a note received from a customer to replace an account is
A.debit Notes Receivable; credit Accounts Receivable
B.debit Accounts Receivable; credit Notes Receivable
C.debit Cash; credit Notes Receivable
D.debit Notes Receivable; credit Notes Payable
38) Finch Company began its operations on March 31 of the current year. Finch Co. has
the following projected costs:
(1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is
paid in the following month.
(2) Insurance expense is $1,000 a month, however, the insurance is paid four times
yearly in the first month of the quarter, i.e. January, April, July, and October.
(3) Property tax is paid once a year in November.
The cash payments for Finch Company in the month of May are:
A.$185,600
B.$149,900
C.$187,600
D.$189,100
39) Which of the following would not be considered an internal centralized service
department?
A.Payroll accounting department
B.Manufacturing department
C.Information systems department
D.Purchasing department
40) Identify each of the following as an (1) increase in owner’s equity, or a (2) decrease
in owner’s equity.
(a) Fees Earned
(b) Wages Expense
(c) Withdrawal
(d) Lawn Care Revenue
(e) Investment
(f) Supplies Expense
41) A firm operated at 80% of capacity for the past year, during which fixed costs were
$210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating
profit was:
A.$90,000
B.$210,000
C.$590,000
D.$490,000
42) Inventory costing methods place primary emphasis on assumptions about
A.flow of goods
B.flow of costs
C.flow of goods or flow of costs depending on the method
D.neither flow of goods or flow of costs
43) Using the data from the Coffee & Cocoa Company,
44) Match the following terms with the best definition given.
1>Shows expected results at several activity levels. A. Master budget
2>Shows expected results at only one activity level. B. Sales budget
3>Integrated set of operating, investing and financing budgets for a period of time. C.
Flexible budget
4>Begins by estimating the quantity of sales. D. Production budget
5>Estimates the number of units to be manufactured to meet sales and inventory levels.
E. Static budget
45) In a lease contract, the party who legally owns the asset is the
A.lessee
B.lessor
C.operator
D.banker
46) Most businesses in the United States are
A.proprietorships
B.partnerships
C.corporations
D.co-operatives
47) 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
48) Selling the bonds at a premium has the effect of
A.raising the effective interest rate above the stated interest rate
B.attracting investors that are willing to pay a lower rate of interest than on similar
bonds
C.causing the interest expense to be higher than the bond interest paid
D.causing the interest expense to be lower than the bond interest paid
49) Green Valley Bank sent Comstock Industries their end of month bank statement for
July. The end of month balance by the bank is $11,237.00. The statement shows that a
deposit for $4,250.00 is in transit at the end of the statement period. The statement also
revealed that checks for $87.00, $105.00, and $95.00 are outstanding. Green Valley
collected a 90 day, 12% interest $4,000.00 note receivable charging $20.00 for the
service. No interest has been accrued on the note. The bank charges a monthly account
fee of $35.00. The end of month balance per company books is $11,135.00.
Complete a bank/account reconciliation and write any necessary journal entries for the
reconciliation.
50) Doran Technologies produces a single product. Expected manufacturing costs are as
follows:
Variable costs
Direct materials $4.00 per unit
Direct labor $1.20 per unit
Manufacturing overhead $0.95 per unit
Fixed costs per month
Depreciation $6,000
Supervisory salaries $13,500
Other fixed costs $3,850
Required:
Estimate manufacturing costs for production levels of 25,000 units, 30,000 units, and
35,000 units per month.
51) On March 1, Upton Companys packaging department had Work in Process
inventory of
8,820 units, which had been transferred in from the finishing department. These units
had accumulated costs of $315,000 in previous departments and $16,000 for conversion
costs in the packaging department.
During March, 30,000 units were transferred into the department. These units had
accumulated costs of $770,000 in the previous departments. The packaging department
incurred $54,000 in conversion costs during the month.
Seven hundred units remained in ending inventory on March 31. These units were 80%
complete with respect to conversion costs.
Required:
Calculate the cost per equivalent unit for transferred-in costs and for conversion costs
for the packaging department using the average cost method.
52) The Svelte Jeans Company produces two different types of jeans. One is called the
Simple Life and the other is called the Fancy Life. The company sales budget estimates
that 350,000 of the Simple Life Jeans and 200,000 of the Fancy Life will be sold during
20xx. The Production Budget requires 353,500 units of Simple Life jeans and 196,000
Fancy Life jeans be manufactured. The Simple Life jeans require 3 yards of denim
material, a zipper, and 25 yards of thread. The Fancy Life jeans require 4.5 yards of
denim material, a zipper, and 40 yards of thread. Each yard of denim material costs
$3.25, the zipper costs $.75 each, and the thread is $.01 per yard. There is enough
material to make 2,000 jeans of each type at the beginning of the year. The desired
amount of materials left in ending inventory is to have enough to manufacture 3,500
jeans of each type. Prepare a Direct Materials Purchases Budget.
53) Use the following tables to calculate the present value of a $25,000 7%, 5 year bond
that pays $1,750 ($25,000 7%) interest annually, if the market rate of interest is 7%
Present Value of $1 at Compound Interest
Present Value of Annuity of $1 at Compound Interest
