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1) A compensating balance occurs when a bank may require a company to maintain a
maximum cash balance.
2) During the closing process, some balance sheet accounts are closed and end the
period with a zero balance.
3) The direct labor time variance measures the efficiency of the direct labor force.
4) A drawing account represents the amount of withdrawals made by the owner.
5) At the end of a period, (before adjustment), Allowance for Doubtful Accounts has a
credit balance of $250. The net credit sales for the period total $500,000. If the
company estimates uncollectible accounts expense at 1% of net credit sales, the amount
of bad debt expense to be recorded in an adjusting entry is $4,750.
6) The double declining balance depreciation method calculates depreciation each year
by taking twice the straight line rate times the book value of the asset at the beginning
of each year.
7) Journalizing a transaction with both the debit and the credit for $69 instead of $96
will cause the trial balance to be out of balance.
8) Sales reported on the income statement were $372,000. The accounts receivable
balance declined $4,500 over the year. The amount of cash received from customers
was $367,500.
9) When compared to a corporation, one of the major advantages of a partnerships is its
relative ease of formation.
10) Conversion cost is the combination of direct materials cost and factory overhead
cost.
11) Adjusting journal entries are recorded in a special journal.
12) If the proceeds from the sale of bond investments exceeds the carrying amount of
the bonds, a gain is realized.
13) An exchange is said to have commercial substance if future cash flows remain the
same as a result of the exchange.
14) A company is considering the purchase of a new machine for $48,000. Management
expects that the machine can produce sales of $16,000 each year for the next 10 years.
Expenses are expected to include direct materials, direct labor, and factory overhead
totaling $8,000 per year plus depreciation of $4,000 per year. All revenues and expenses
except depreciation are on a cash basis. The payback period for the machine is 12 years.
15) Fair value accounting is used more under Generally Accepted Accounting
Principles (GAAP) than it is under International Financial Reporting Standards (IRFS).
16) One of the advantages of decentralization is that delegating authority to managers
closest to the operation always results in better decisions.
17) The main disadvantage of the direct method of reporting cash flows from operating
activities is that the necessary data are often costly to accumulate.
18) The excess of revenue over the expenses incurred in earning the revenue is called
capital.
19) Penny, Inc. employs a process costing system. Direct materials are added at the
beginning of the process. Here is information about Julys activities:
Using the FIFO method, the cost per equivalent unit for materials used during July was
A.$10.78
B.$10.33
C.$9.78
D.$10.65
20) Consider the cash account below.
Additional Information: cash disbursements were 80% of collections.
How much was the Beginning Balance of the Cash Account?
A.$57,200
B.$92,300
C.$103,350
D.$35,100
21) An August sales forecast projects 6,000 units are going to be sold at a price of
$11.50 per unit. The desired ending iventory in units is 15% higher than the beginning
inventory of 1,000 units. Total August sales are anticipated to be:
A.$80,500
B.$69,000
C.$60,000
D.$57,500
22) On January 1, the Newman Company estimated its property tax to be $5,100 for the
year.
(a) How much should the company accrue each month for property taxes?
(b) Calculate the balance in the Property Tax Payable account as of August 31.
(c) Prepare the adjusting journal entry for the month of September.
23) Xavier and Yolanda have original investments of $50,000 and $100,000
respectively in a partnership. The articles of partnership include the following
provisions regarding the division of net income: interest on original investment at 10%,
salary allowances of $38,000 and $28,000 respectively, and the remainder equally. How
much of the net income of $75,000 is allocated to Xavier?
A.$66,000
B.$40,000
C.$35,000
D.$43,000
24) As time passes, fixed assets other than land lose their capacity to provide useful
services. To account for this decrease in usefulness, the cost of fixed assets is
systematically allocated to expense through a process called
A.equipment allocation
B.depreciation
C.accumulation
D.matching
25) Which of the following items appear on the corporate income statement before
income from continuing operations?
A.cumulative effect of a change in accounting principle
B.income tax expense
C.extraordinary gain
D.loss on discontinued operations
26) Accumulated Depreciation appears on the
A.balance sheet in the current assets section
B.balance sheet in the property, plant and equipment section
C.balance sheet in the long-term liabilities section
D.income statement as an operating expense
27) All of the following employees hold line positions in Anthea Electric EXCEPT:
A.vice president of production
B.vice president of finance
C.manager of the Valhalla Plant
D.vice president of sales
28)
Calculate the Total Direct Materials cost variance using the above information:
A.$9,262.50 Unfavorable
B.$9,262.50 Favorable
C.$3,780.00 Unfavorable
D.$3,562.50 Favorable
29) The interest rate specified in the bond indenture is called the
A.discount rate
B.contract rate
C.market rate
D.effective rate
30) Sharp and Townson had capital balances of $60,000 and $90,000 respectively at the
beginning of the current fiscal year. The articles of partnership provide for salary
allowances of $25,000 and $30,000 respectively, an allowance of interest at 12% on the
capital balances at the beginning of the year, with the remaining net income divided
equally. Net income for the current year was $110,000.
31) Match each of the following terms with the phrase that most closely describes it.
Each answer may be used only once.
1>Expenses of the current period. A. Activity based costing
2>Typically used by companies that make custom products. B. Period costs
3>Applied overhead is more than actual overhead incurred. C. Overapplied overhead
4>The stock ledger. D. Job order cost system
5>System that uses a different overhead rate for each activity. E. Process cost system
6>Typically used by companies whose products are indistinguishable from each other.
F. Finished goods ledger
7>Applied overhead is less than actual overhead incurred. G. Underapplied overhead
32) Revenue and expense data for Martinez Company are as follows:
Round percentage to one decimal place.
33) Stockholders' equity
A.is usually equal to cash on hand
B.includes paid-in capital and liabilities
C.includes retained earnings and paid-in capital
D.is shown on the income statement
34) The reconciliation of the cash register tape with the cash in the register is an
example of
A.other controls
B.independent internal verification
C.establishment of responsibility
D.segregation of duties
35) A $300,000 bond was redeemed at 104 when the carrying value of the bond was
$315,000. The entry to record the redemption would include a
A.loss on bond redemption of $3,000
B.gain on bond redemption of $3,000
C.gain on bond redemption of $4,000
D.loss on bond redemption of $4,000
36) Zeke Company is a manufacturing company that has worked on several production
jobs during the 1st quarter of the year. Below is a list of all the jobs for the quarter:
Job 356, 357, 358 & 359 were completed. Jobs 356 & 357 were sold at a profit of $500
on each job.
What is the ending balance of Finished Goods for Zeke Company as of the end of the
1st quarter?
A.$456
B.$1,067
C.$1,685
D.$2,752
37) Which side of the account increases a cash account?
A.credit
B.neither a debit or a credit
C.debit
D.either a debit or a credit
38) If merchandise sold on account is returned to the seller, the seller may inform the
customer of the details by issuing a
A.sales invoice
B.purchase invoice
C.credit memo
D.debit memo
39) Materials purchased on account during the month amounted to $180,000. Materials
requisitioned and placed in production totaled $165,000. From the following, select the
entry to record the transaction on the day the materials were requisitioned by the
production department.
A.Materials165,000
Work in Process165,000
B.Work in Process180,000
Materials180,000
C.Work in Process165,000
Materials165,000
D.Work in Process165,000
Cash165,000
40) Gilberts expects its September sales to be 20% higher than its August sales of
$150,000. Purchases were $100,000 in August and are expected to be $120,000 in
September. All sales are on credit and are collected as follows: 30% in the month of the
sale and 70% in the following month. Merchandise purchases are paid as follows: 25%
in the month of purchase and 75% in the following month. The beginning cash balance
on September 1 is $7,500. The ending balance on September 30 would be:
A.$61,500
B.$75,000
C.$72,300
D.$71,500
41) The excess of issue price over par of common stock is termed a(n)
A.discount
B.income
C.deficit
D.premium
42) When a stock dividend is declared, which of the following accounts is credited?
A.Common Sock
B.Dividend Payable
C.Stock Dividends Distributable
D.Retained Earnings
43)
Calculate the Direct Materials Quantity variance using the above information:
A.$4,512.50 Unfavorable
B.$4,512.50 Favorable
C.$4,750 Unfavorable
D.$4,750 Favorable
44) Identify the following costs as (a) direct materials, (b) direct labor, or (c) factory
overhead for a cake manufacturer.
1> _____ Frosting
2> _____ Depreciation on oven
3> _____ Wages of bakers
4> _____ Sprinkles for topping
45) The journal entry a company uses to record fully funded pension rights for its
salaried employees at the end of the year is
A.debit Salary Expense; credit Cash
B.debit Pension Expense; credit Unfunded Pension Liability
C.debit Pension Expense; credit Unfunded Pension Liability and Cash
D.debit Pension Expense; credit Cash
46) A variant of fiscal-year budgeting whereby a twelve-month projection into the
future is maintained at all times is termed:
A.flexible budgeting
B.continuous budgeting
C.zero-based budgeting
D.master budgeting
47) Payroll entries are made with data from the
A.wage and tax statement
B.employee's earning record
C.employer's quarterly federal tax return
D.payroll register
48) Explain whether each of the following would usually be used in a computerized
accounting system and why.
1> Special journals
2> Accounts receivable control accounts
3> Electronic invoice form
4> Month-end postings to the general ledger
49) The Mountain Springs Water Company has two departments. Purifying and
Bottling. The Bottling Department received 58,000 liters from the Purifying
Department. During the period, the Bottling Department completed 56,000 liters,
including 4,000 liters of work in process at the beginning of the period. The ending
work in process was 6,000 liters. How many liters were started and completed during
the period?
50) Discuss the two methods for recording bad-debt expense. What type of company
uses each method?
51) Ulmer Company is considering the following alternative financing plans:
Income tax is estimated at 35% of income. Dividends of $1 per share were declared and
paid on the preferred stock.
Required: Determine the earnings per share of common stock, assuming income before
bond interest and income tax is $600,000.
52) Sunrise Inc. is considering a capital investment proposal that costs $227,500 and
has an estimated life of four years and no residual value. The estimated net cash flows
are as follows:
The minimum desired rate of return for net present value analysis is 10%. The present
value of $1 at compound interest rates of 10% for 1, 2, 3, and 4 years is .909, .826, .
751, and .683, respectively. Determine the net present value.
53) Sales reported on the income statement were $690,000. The accounts receivable
balance declined $39,000 over the year. Determine the amount of cash received from
customers.
54) On January 2, Safe Boating Monthly received a check for $96 from a subscriber for
a 12-month subscription. The January issue was mailed on January 15th. Prepare the
necessary entries for the month of January.
