1) The return on common stockholders equity is computed by dividing
a.net income by ending common stockholders equity
b.net income by average common stockholders equity
c.net income less preferred dividends by ending common stockholders equity
d.net income less preferred dividends by average common stockholders equity
2) For prepaid expense adjusting entries
a.an expenseliability account relationship exists
b.prior to adjustment, expenses are overstated and assets are understated
c.the adjusting entry results in a debit to an expense account and a credit to an asset
account
d.none of these answer choices are correct
3) Spencer Company is contemplating the replacement of an old machine with a new
one. The following information has been gathered:
Old MachineNew Machine
Price$390,000$530,000
Accumulated Depreciation 170,000-0-
Remaining useful life 6 years-0-
Useful life-0-10 years
Annual operating costs$167,000$151,500
If the old machine is replaced, it can be sold for $120,000.
Which of the following amounts is a sunk cost?
a.$167,000
b.$151,500
c.$220,000
d.$170,000
4) At January 1, 2014, Zella Company has beginning inventory of 2,000 DVD players.
Zella estimates it will sell 10,000 units during the first quarter of 2014 with a 12%
increase in sales each quarter. Zellas policy is to maintain an ending inventory equal to
25% of the next quarters sales. Each DVD player costs $100 and is sold for $140. How
much is budgeted sales revenue for the third quarter of 2014?
a.$420,000
b.$1,820,000
c.$1,756,160
d.$12,544
5) Costners Market recorded the following events involving a recent purchase of
merchandise:
Received goods for $40,000, terms 2/10, n/30.
Returned $800 of the shipment for credit.
Paid $200 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the companys inventory
a.increased by $38,416
b.increased by $38,612
c.increased by $38,616
d.increased by $39,400
6) A current asset is
a.the last asset purchased by a business
b.an asset which is currently being used to produce a product or service
c.usually found as a separate classification in the income statement
d.an asset that a company expects to convert to cash or use up within one year
7) Which ledger account should management examine in order to determine the
amounts due from customers?
a.Supplies
b.Accounts Payable
c.Service Revenue
d.Accounts Receivable
8) Reimer Company reported total manufacturing costs of $425,000, manufacturing
overhead totaling $80,000, and direct materials totaling $100,000. How much is direct
labor cost?
a.Cannot be determined from the information provided
b.$245,000
c.$180,000
d.$605,000
9) A distinguishing characteristic of an investment center is that
a.revenues are generated by selling and buying stocks and bonds
b.interest revenue is the major source of revenues
c.the profitability of the center is related to the funds invested in the center
d.it is a responsibility center which only generates revenues
10) When the company assigns factory labor costs to jobs, the direct labor cost is
debited to
a.Direct Labor
b.Factory Labor
c.Manufacturing Overhead
d.Work in Process Inventory
11) A petty cash fund of $100 is replenished when the fund contains $4 in cash and
receipts for $93. The entry to replenish the fund would
a.credit Cash Over and Short for $3
b.credit Miscellaneous Revenue for $3
c.debit Cash Over and Short for $3
d.debit Miscellaneous Expense for $3
12) The income statement for the year 2014 of Fugazi Co. contains the following
information:
Revenues$70,000
Expenses:
Salaries and Wages Expense$45,000
Rent Expense12,000
Advertising Expense10,000
Supplies Expense6,000
Utilities Expense2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss)$ (7,500)
After the revenue and expense accounts have been closed, the balance in Income
Summary will be
a.$0
b.a debit balance of $7,500
c.a credit balance of $7,500
d.a credit balance of $70,000
13) The Hartley Clinic purchased a new surgical laser for $90,000. The estimated
salvage value is $5,000. The laser has a useful life of five years and the clinic expects to
use it 10,000 hours. It was used 1,600 hours in year 1; 2,200 hours in year 2; 2,400
hours in year 3; 1,800 hours in year 4; 2,000 hours in year 5 .
Instructions
(a)Compute the annual depreciation for each of the five years under each of the
following methods:
(1)straight-line.
(2)units-of-activity.
(b)If you were the administrator of the clinic, which method would you deem as most
appropriate? Justify your answer.
(c)Which method would result in the lowest reported income in the first year? Which
method would result in the lowest total reported income over the five-year period?
14) At May 1, 2014, Kibbee Company had beginning inventory consisting of 200 units
with a unit cost of $7. During May, the company purchased inventory as follows:
800 units at $7
600 units at $8
The company sold 1,000 units during the month for $12 per unit. Kibbee uses the
average cost method. The average cost per unit for May is
a.$7.000
b.$7.375
c.$7.500
d.$8.000
15) Corsica Company had the following department data:
Physical Units
Work in process, beginning-0-
Completed and transferred out60,000
Work in process, ending7,000
Materials are added at the beginning of the process. What is the total number of
equivalent units for materials during the period?
a.67,000
b.7,000
c.60,000
d.53,000
16) Nick’s Place recorded the following data:
Units Unit
DateReceivedSoldOn HandCost
1/1 Inventory600$2.50
1/8 Purchased1,0001,6003.00
1/12 Sold1,200300
The weighted average unit cost of the inventory at January 31 is:
a.$2.50
b.$2.75
c.$2.81
d.$3.400
17) Which one of the following will not increase return on investment?
a.Variable costs are increased
b.An increase in sales
c.Average operating assets are decreased
d.Variable costs are decreased
18) Records of individual items of raw materials would not be maintained
a.electronically
b.manually
c.on stores ledger cards
d.in the Raw Materials Inventory account
19) Allowance for Doubtful Accounts is reported in the:
a.balance sheet as a contra liability account
b.income statement under other expenses and losses
c.balance sheet as a contra asset
d.income statement under other revenues and gains
20) A truck costing $110,000 was destroyed when its engine caught fire. At the date of
the fire, the accumulated depreciation on the truck was $50,000. An insurance check for
$125,000 was received based on the replacement cost of the truck. The entry to record
the insurance proceeds and the disposition of the truck will include a
a.Gain on Disposal of $15,000
b.credit to the Truck account of $60,000
c.credit to the Accumulated Depreciation account for $50,000
d.Gain on Disposal of $65,000
21) As of December 31, 2014, Walking Tall Industries had $3,500 of raw materials
inventory. At the beginning of 2014, there was $2,000 of materials on hand. During the
year, the company purchased $314,500 of materials; however, it paid for only $302,500.
How much inventory was requisitioned for use on jobs during 2014?
a.$301,000
b.$304,000
c.$316,000
d.$313,000
22) Each payment on a mortgage note payable consists of
a.interest on the original balance of the loan
b.reduction of loan principal only
c.interest on the original balance of the loan and reduction of loan principal
d.interest on the unpaid balance of the loan and reduction of loan principal
23) Todd is investing in a partnership with Joseph. Todd contributes equipment that
originally cost $42,000, has a book value of $20,000, and a fair value of $26,000. The
entry that the partnership makes to record Todds initial contribution includes a
a.debit to Equipment for $22,000
b.debit to Equipment for $42,000
c.debit to Equipment for $26,000
d.credit to Accumulated Depreciation for $22,000
24) On January 1, 2014, Brenner Company purchased at face value, a $1,000, 10%
bond that pays interest on January 1 and July 1 . Brenner Company has a calendar year
end.
The entry for the receipt of interest on January 1, 2015 is
a.Cash50
Interest Revenue50
b.Cash50
Interest Receivable50
c.Cash50
Interest Revenue50
d.Cash50
Interest Receivable50
25) Brian and Sandy are forming a partnership. Brian will invest a truck with a book
value of $10,000 and a fair value of $14,000. Sandy will invest a building with a book
value of $30,000 and a fair value of $42,000 with a mortgage of $15,000. What amount
should be recorded in Brians capital account?
a.$30,000
b.$27,000
c.$42,000
d.$14,000
26) An aircraft company would most likely have
a.a high inventory turnover
b.low profit margin
c.high volume
d.a low inventory turnover
27) Fess Hardware Store had net credit sales of $8,500,000 and cost of goods sold of
$5,000,000 for the year. The Accounts Receivable balances at the beginning and end of
the year were $600,000 and $760,000, respectively. The accounts receivable turnover
was
a.7.4 times
b.5.9 times
c.11.2 times
d.12.5 times
28) On June 30, Griffin Company issued a $18,000, 8%, 6-month note to National
Bank. The entry on Griffin’s books to record the payment of the note at maturity will
include a credit to Cash for:
a.$19,440
b.$18,720
c.$18,000
d.$18,360
29) A characteristic of products that are mass-produced in a continuous fashion is that
a.the products are identical or very similar in nature
b.they are grouped in batches
c.they are produced at the time an order is received
d.their costs are accumulated on job cost sheets
30) 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. Toolsworks
labor quantity variance is
a.$1,155 U
b.$1,545 F
c.$2,895 F
d.$2,700 F
31) Which of the following shows entries only to control accounts?
a.Factory Labor
Factory Wages Payable
b.Work in Process
Factory Labor
Raw Materials Inventory
Factory Wages Payable
c.Work in Process
Manufacturing Overhead
Raw Materials Inventory
d.Factory Labor
Raw Materials Inventory
Accounts Payable
Factory Wages Payable
32) The types of reports prepared in managerial accounting are often
______________-purpose reports prepared for a specific decision.
33) Tucker Company uses a flexible budget for overhead based on direct labor hours
(DLH). Master budget figures, based on 900,000 direct labor hours, and actual
overhead for June, when 88,000 labor hours were worked, are as follows:
Master BudgetJune Actual
Variable:
Indirect labor$ 315,000$ 32,000
Indirect materials1,800,000174,000
Other1,215,000121,000
Fixed:
Supervision540,00044,000
Depreciation1,020,00085,000
Other810,00071,000
Instructions: Prepare a flexible budget performance report for June. Omit headings
other than descriptive columnar headings.
FLEXIBLE BUDGET PERFORMANCE REPORT:
34) Condensed financial data of Drake Company appear below:
DRAKE COMPANY
Comparative Balance Sheet
December 31
2014 2013
Assets
Cash$ 41,000$ 35,000
Accounts receivable75,00053,000
Inventories120,000132,000
Prepaid expenses19,00025,000
Investments100,00075,000
Plant assets325,000250,000
Accumulated depreciation (65,000) (60,000)
Total$615,000$510,000
Liabilities and Stockholders’ Equity
Accounts payable$ 93,000$ 75,000
Accrued expenses payable29,00024,000
Bonds payable120,000160,000
Common stock275,000170,000
Retained earnings 98,000 81,000
Total$615,000$510,000
DRAKE COMPANY
Income Statement
For the Year Ended December 31, 4
Sales$450,000
Less:
Cost of goods sold$300,000
Operating expenses (excluding depreciation)60,000
Depreciation expense17,000
Income taxes20,000
Interest expense18,000
Loss on sale of plant assets 3,000 418,000
Net income$ 32,000
Additional information:
1>New plant assets costing $100,000 were purchased for cash in 2014 .
2>Old plant assets costing $25,000 were sold for $10,000 cash when book value was
$13,000.
3>Bonds with a face value of $40,000 were converted into $40,000 of common stock.
4>A cash dividend of $15,000 was declared and paid during the year.
5>Accounts payable pertain to merchandise purchases.
Instructions
Prepare a statement of cash flows for the year using the direct method.
35) Freight terms of FOB shipping point mean that the
seller must bear the freight costs
buyer must bear the freight costs
c.seller must debit the Freight-Out account
d.goods are placed free on board at the buyer’s place of business
36) Cost accounting involves the measuring, recording, and reporting of
______________ costs.
37) Presented below is information related to the sole proprietorship of Anthony Scalici,
consultant.
Service revenue2014 $320,000
Total expenses2014 213,000
Assets, January 1, 2014 85,000
Liabilities, January 1, 2014 64,000
Assets, December 31, 2014 165,000
Liabilities, December 31, 2014 90,000
Drawings2014 ?
Instructions
Prepare the 2014 owners equity statement for Anthony Scalicis consulting company.
38) The acquisition of inventory is debited to the ____________ account when a
perpetual inventory system is used.
39) Rhodes National purchased software on October 1, 2014 for $14,400. The company
expects to use the software for 3 years. It has no salvage value.
1>What adjusting journal entry should the company make at the end of each month if
monthly financials are prepared? (annual depreciation is $4,800)
2>What balance will be reported on the December 31, 2014 balance sheet for
Accumulated Depreciation?