1) A proxy is a document that gives a designated agent the right to vote a shareholder’s
stock.
2) A noncash investing transaction should be disclosed in either a footnote or at the
bottom of the statement of cash flows.
3) The series of activities that add value to a company’s products or services is called a
value chain.
4) A company had net sales of $550,000 and an average accounts receivable of
$110,000. Its accounts receivable turnover equals 5.0.
5) Long-term investments in available-for-sale securities are reported at fair value on
the balance sheet.
6) A customer’s promise to pay on credit is classified as an account payable by the
seller.
7) A fixed budget performance report never provides useful information for evaluating
variances.
8) The schedule of cost of goods manufactured must be prepared monthly as it is a
required general-purpose financial statement.
9) A controlling investor is called the parent, and the investee company is called the
subsidiary.
10) Jenny, an employee of Toucan Company, used company assets for her own personal
gain. This is an example of
A.embezzlement.
B.fraud.
C.internal control.
D.ethics.
E.employment perks.
11) The following data were reported by a corporation:
3,000
The number of outstanding shares is:
A.12,000.
B.15,000.
C.17,000.
D.20,000.
E.23,000.
12) Jax Recording Studio purchased $7,800 in electronic components from Music
World. Jax signed a 60-day, 8% promissory note for $7,800. Music World’s journal
entry to record the collection on the maturity date is:
A.Debit Cash $7,800; credit Accounts Receivable $7,800
B.Debit Accounts Receivable $7,904; credit Notes Receivable $7,800; credit Interest
Receivable $104
C.Debit Notes Receivable $7,800; credit Cash $7,904; credit Interest Revenue $104
D.Debit Cash $7,904; credit Notes Receivable $7,800; credit Interest Revenue $104
E.Debit Cash $7,904; credit Notes Receivable $7,904
13) On April 1 of the current year, a company purchased and placed in service a
machine with a cost of $240,000. The company estimated the machine’s useful life to be
four years or 60,000 units of output with an estimated salvage value of $60,000. During
the current year, 12,000 units were produced.
Prepare the necessary December 31 adjusting journal entry to record depreciation for
the current year assuming the company uses:
a. The straight-line method of depreciation
b. The units-of-production method of depreciation
c. The double-declining balance method of depreciation
14) The adjusting entry to record the salaries earned due to employees for services
provided but unpaid at the end of the accounting period affects the accounts in which of
the following ways?
A.Debit Salaries Payable and credit Salaries Expense.
B.Debit Salaries Expense and credit Cash.
C.Debit Accrued Salaries and credit Salaries Payable.
D.Debit Cash and credit Salaries Expense.
E.Debit Salaries Expense and credit Salaries Payable.
15) Claremont Company specializes in selling refurbished copiers. During the month,
the company sold 180 copiers at an average price of $3,000 each. The budget for the
month was to sell 175 copiers at an average price of $3,200. The expected total sales for
180 copiers were.
A.$540,000.
B.$576,000.
C.$525,000.
D.$560,000.
E.$550,000.
16) Rent expense appears on which of the following statements?
A.Balance sheet.
B.Income statement.
C.Statement of owner’s equity.
D.Statement of periodic expenses.
E.Statement of cash flows only.
17) When preparing a statement of cash flows using the indirect method, each of the
following should be classified as an operating cash flow except:
A.An increase in accounts receivable.
B.A decrease in accounts payable.
C.Proceeds from the disposal of a long-term asset with no gain or loss.
D.An increase in prepaid expenses.
E.A decrease in accrued expenses payable.
18) Data pertaining to a company’s joint production for the current period follows:
Compute the cost to be allocated to Product L for this period’s $660 of joint costs if the
value basis is used.
A.$264.
B.$396.
C.$330.
D.$1,364.
E.$796.
19) Fill in the blanks (a) through (g) for the Corman Company for each of the income
statements for 2014 and 2015.
20) Refer to the following selected financial information from Shakley’s Incorporated.
Compute the company’s debt-to-equity ratio for Year 2.
A.1.75.
B.2.34.
C.0.75.
D.1.34.
E.2.63.
21) R. Stetson contributed $14,000 in cash plus office equipment valued at $7,000 to
the SJ Partnership. The journal entry to record the transaction for the partnership is:
A.Debit Cash $14,000; debit Office Equipment $7,000; credit R Stetson, Capital
$21,000.
B.Debit Cash $14,000; debit Office Equipment $7,000; credit SJ Partnership, Capital
$21,000.
C.Debit SJ Partnership $21,000; credit R. Stetson, Capital $21,000.
D.Debit R. Stetson, Capital $21,000; credit SJ Partnership, Capital $21,000.
E.Debit Cash $14,000; debit Office Equipment $7,000; credit Common Stock $21,000.
22) A partnership designed to protect innocent partners from malpractice or negligence
claims resulting from acts of another partner is a(n):
A.Partnership.
B.Limited partnership.
C.Limited liability partnership.
D.General partnership.
E.Unlimited liability company.
23) Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa
Studios signed a 60-day, 10% promissory note for $7,800. If the note is dishonored,
what is the journal entry to record the dishonored note?
A.Debit Accounts Receivable $7,930; debit Bad Debt Expense $130; credit Notes
Receivable $7,800.
B.Debit Bad Debt Expense $7,930; credit Accounts Receivable $7,930.
C.Debit Bad Debt Expense $7,800; credit Notes Receivable $7,800.
D.Debit Accounts Receivable-Valley Spa $7,800; credit Notes Receivable $7,800.
E.Debit Accounts Receivable-Valley Spa $7,930, credit Interest Revenue $130; credit
Notes Receivable $7,800.
24) Seafarer Company established a standard direct materials cost of 1.5 gallons at $2
per gallon for one unit of its product. During the past month, actual production was
6,500 units. The material quantity variance was $700 favorable and the material price
variance was $470 unfavorable. The entry to charge Work in Process Inventory for the
standard material costs during the month and to record the direct material variances in
the accounts would include all of the following except:
A.A debit to Work in Process for $19,500.
B.A credit to Raw Materials for $19,270.
C.A debit to Direct Material Price Variance for $470.
D.A credit to Direct Material Quantity Variance for $700.
E.A debit to Cost of Goods Sold for $230.
25) Identify the account below that is classified as a liability in a company’s chart of
accounts:
A.Cash
B.Unearned Revenue
C.Salaries Expense
D.Accounts Receivable
E.Supplies
26) An asset can be disposed of by all of the following except:
A.Discarding it.
B.Selling it.
C.Exchanging it for another asset.
D.Donating it to charity.
E.Continuing to use it after it is fully depreciated.
27) West Company declared a $0.50 per share cash dividend. The company has 190,000
shares issued, and 10,000 shares in treasury stock. The journal entry to record the
payment of the dividend is:
A.Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000.
B.Debit Common Dividends Payable $95,000; credit Cash $95,000.
C.Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000.
D.Debit Common Dividends Payable $90,000; credit Cash $90,000.
E.Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000.
28) The amount of income earned per share of a company’s outstanding common stock
is known as:
A.Restricted retained earnings per share.
B.Earnings per share.
C.Continuing operations per share.
D.Dividends per share.
E.Book value per share.
29) Identify the balance sheet classification of each of the following assets by placing
an X in the correct classification: Plant Assets, Natural Resources, or Intangibles.
30) The use of a spreadsheet for analysis is especially useful when preparing the
statement of cash flows using the _____________ method.
31) Explain how a service firm, such as an advertising agency, might use job order
costing.
32) A company is authorized to issue 750,000 shares of $2 par value common stock.
Prepare journal entries to record the following selected transactions that occurred
during the company’s first year of operations:
33) Explain how to compute book value per common share and discuss how it can be
used to analyze the financial condition of a corporation.
34) A ________________ fund is used to make cash disbursements of small amounts to
avoid the time and cost of writing checks.
35) Creditors’ claims on assets that reflect company obligations to provide assets,
products, or services to others are called ____________________.
36) During the year, LT Corp. introduced 132,000 units into production and 144,000
units were completed and transferred to finished goods. At the end of the year, the
company had 13,600 units in process that were 80% complete. Determine how many
units the company had in Work in Process at the beginning of the year.
