1) Gardaner Company had the following department information about physical units
and percentage of completion:
Physical Units
Work in process, May 1 (60%)60,000
Completed and transferred out150,000
Work in process, May 31 (40%)40,000
If materials are added at the beginning of the production process, what is the total
number of equivalent units for materials during May?
a.210,000
b.202,000
c.190,000
d.166,000
2) Financing activities involve
a.lending money
b.acquiring investments
c.issuing debt
d.acquiring long-lived assets
3) Chen Company is considering purchasing equipment. The equipment will produce
the following cash flows:
Year 1$200,000
Year 2$240,000
Chen requires a minimum rate of return of 9%. What is the maximum price Chen
should pay for this equipment?
a.$385,490
b.$380,166
c.$440,000
d.$390,948
4) Under the corporate form of business organization
a.a stockholder is personally liable for the debts of the corporation
b.stockholders’ acts can bind the corporation even though the stockholders have not
been appointed as agents of the corporation
c.the corporation’s life is stipulated in its charter
d.stockholders wishing to sell their corporation shares must get the approval of other
stockholders
5) Identify the effect the declaration and distribution of a stock dividend has on the par
value per share.
a. Increase
b. Decrease
c. Increase or decrease
d. No effect
6) A classmate is considering dropping his accounting class because he cannot
understand the rules of debits and credits.
a.Can the student be successful in the course without an understanding of the rules of
debits and credits?
b.Explain the rules of debits and credits in a way that will help him understand them.
7) Which of the following events cannot be quantified into dollars and cents and
recorded as an accounting transaction?
a.The appointment of a new CPA firm to perform an audit
b.The purchase of a new computer
c.The sale of store equipment
d.Payment of income taxes
8) Wilson Company has gathered the following information.
Units in beginning work in process-0-
Units started into production60,000
Units in ending work in process10,000
Percent complete for conversion costs in
ending work in process40%
Costs incurred:
Direct materials$ 81,000
Direct labor$ 98,000
Overhead$131,500
Instructions
(a)Compute equivalent units of production for materials and for conversion costs.
(b)Determine the unit costs of production.
(c)Show the assignment of costs to units transferred out and in process.
9) In order to compute the present value of an annuity, it is necessary to know the
1>discount rate.
2>number of discount periods and the amount of the periodic payments or receipts.
a.1
b.2
c.Both 1 and 2
d.Something in addition to 1 and 2
10) The name given to entering transaction data in the journal is
a.chronicling
b.listing
c.posting
d.journalizing
11) A business that enjoy limited liability is a
a.proprietorship
b.partnership
c.corporation
d.sole proprietorship
12) Under the retail inventory method, the estimated cost of ending inventory is
computed by multiplying the cost-to-retail ratio by
a.net sales
b.goods available for sale at retail
c.goods purchased at retail
d.ending inventory at retail
13) Conecuh Manufacturing Corporation purchased 8,000 shares of its own previously
issued $10 par common stock for $184,000. As a result of this event,
a.Conecuhs Common Stock account decreased $80,000
b.Conecuhs total stockholders equity decreased $184,000
c.Conecuhs Paid-in Capital in Excess of Par account decreased $104,000
d.All of these answer choices are correct
14) A small company may be able to justify using a cash basis of accounting if they
have
a.sales under $1,000,000
b.no accountants on staff
c.few receivables and payables
d.all sales and purchases on account
15) The production cost report shows both quantities and costs. Costs are reported in
three sections: (1) costs accounted for, (2) unit costs, and (3) costs charged to
department. The sections are listed in the following order:
a.(1), (2), (3)
b.(1), (3), (2)
c.(2), (3), (1)
d.(2), (1), (3)
16) A problem with the specific identification method is that
a.inventories can be reported at actual costs
b.management can manipulate income
c.matching is not achieved
d.the lower-of-cost-or-market basis cannot be applied
17) Red October Company has 2,000 shares of 6%, $100 par cumulative preferred stock
outstanding at December 31, 2014 . No dividends have been paid on this stock for 2013
or 2012. Dividends in arrears at December 31, 2014 total
a.$0
b.$1,200
c.$12,000
d.$24,000
18) Which one of the following would not be considered an advantage of the corporate
form of organization?
a.Limited liability of owners
b.Separate legal existence
c.Continuous life
d.Government regulation
19) Allowing only the treasurer to sign checks is an example of
a.documentation procedures
b.segregation of duties
c.other controls
d.establishment of responsibility
20) A promissory note
a.is not a formal credit instrument
b.may be used to settle an accounts receivable
c.has the party to whom the money is due as the maker
d.cannot be factored to another party
21) Use the following account balance information for Granobfin Partnership with
income ratios of 2:4:4 for Granger, Noble, and Finn, respectively.
Assets Liabilities and Owners Equity
Cash$ 54,000Accounts payable$ 126,000
AccountsGranger, Capital138,000
receivable132,000Noble, Capital48,000
Inventory 438,000Finn, Capital 312,000
$624,000$624,000
Assume that, as part of liquidation proceedings, Granobfin sells its noncash assets for
$360,000. As a result, one of the partners has a capital deficiency which that partner
decides not to repay. The amount of cash that would ultimately be distributed to Finn
would be
a.$312,000
b.$228,000
c.$144,000
d.$204,000
22) A liquidity ratio measures the
a.income or operating success of an enterprise over a period of time
b.ability of the enterprise to survive over a long period of time
c.short-term ability of the enterprise to pay its maturing obligations and to meet
unexpected needs for cash
d.number of times interest is earned
23) On January 1, Sly Corporation had 120,000 shares of $10 par value common stock
outstanding. On March 17, the company declared a 18% stock dividend to stockholders
of record on March 20 . Market value of the stock was $13 on March 17 . The stock
was distributed on March 30 . The entry to record the transaction of March 30 would
include a
a.credit to Cash for $216,000
b.debit to Common Stock Dividends Distributable for $216,000
c.credit to Paid-in Capital in Excess of Par for $64,800
d.debit to Stock Dividends for $64,800
24) The break-even point is where
a.total sales equal total variable costs
b.contribution margin equals total fixed costs
c.total variable costs equal total fixed costs
d.total sales equal total fixed costs
25) The following items are taken from the financial statements of the Postal Service
for the year ending December 31, 2014:
Accounts payable$ 18,000
Accounts receivable11,000
Accumulated depreciation equipment28,000
Advertising expense21,000
Cash15,000
Owners capital (1/1/14)102,000
Owners drawings14,000
Depreciation expense12,000
Insurance expense3,000
Note payable, due 6/30/1570,000
Prepaid insurance (12-month policy)6,000
Rent expense17,000
Salaries and wages expense32,000
Service revenue133,000
Supplies4,000
Supplies expense6,000
Equipment210,000
What is the companys net income for the year ending December 31, 2014?
a.$12,000
b.$28,000
c.$42,000
d.$133,000
26) When valuing ending inventory under a perpetual inventory system, the
a.valuation using the LIFO assumption is the same as the valuation using the LIFO
assumption under the periodic inventory system
b.moving average requires that a new average be computed after every sale
c.valuation using the FIFO assumption is the same as under the periodic inventory
system
d.earliest units purchased during the period using the LIFO assumption are allocated to
the cost of goods sold when units are sold
27) A remittance advice attached to a company check provides
a.details about the running cash balance in the checking account
b.the magnetic bank routing numbers
c.the explanation of the purpose of the check
d.the signature space for the maker
28) The equation which reflects a CVP income statement is
a.Sales = Cost of goods sold + Operating expenses + Net income
b.Sales + Fixed costs = Variable costs + Net income
c.Sales Variable costs + Fixed costs = Net income
d.Sales Variable costs Fixed costs = Net income
29) During 2014, Wave Company had an asset turnover of 3 times with sales totaling
$1,200,000. If net income was $60,000, Wave Company’s return on assets in 2014 was:
a.5%
b.6%
c.15%
d.40%
30) When a corporation has both preferred and common stock outstanding, earnings per
share is computed by dividing net income
a.by ending common shares outstanding
b.by weighted average common shares outstanding
c.less preferred dividends by ending common shares outstanding
d.less preferred dividends by the weighted average of common shares outstanding
31) Which one of the following is not an external user of accounting information?
a.Regulatory agencies
b.Customers
c.Investors
d.All of these answers choices are external users
32) The order of presentation of activities on the statement of cash flows is
a.operating, investing, and financing
b.operating, financing, and investing
c.financing, operating, and investing
d.financing, investing, and operating
33) The cost classification scheme most relevant to responsibility accounting is:
a.controllable vs. uncontrollable
b.direct vs. indirect
c.semivariable vs. mixed
d.fixed vs. variable
34) Shrub Company had a balance in the Merchandise Inventory account of $260,000 at
the beginning of the year and a balance of $340,000 at the end of the year. Inventory
turnover for 2014 was 5 times. If gross profit as a percentage of sales was 40%, the
amount of sales for 2014 was:
a.$3,750,000
b.$2,500,000
c.$1,500,000
d.$937,500
35) Sequa Company has the following production data for June: units transferred out
60,000, and ending work in process 6,000 units that are 100% complete for materials
and 30% complete for conversion costs. Unit materials cost is $5 and unit conversion
cost is $9.
Instructions
Determine the costs to be assigned to the units transferred out and the units in ending
work in process.
36) Proxy Inc. issues a $1,300,000, 10%, 10-year mortgage note on December 31,
2014, to obtain financing for a new building. The terms provide for semiannual
installment payments of $106,291.
Instructions
Prepare the entry to record the mortgage loan on December 31, 2014, and the first
installment payment.
37) To compute the present value of a bond, both the _______________ amount and the
________________ payments must be discounted.
38) Capital balances in Carson Co. are Dene $50,000, Aneta $38,000, and Harriet
$25,000. The partners share income equally. Harriet receives $31,000 from partnership
assets in withdrawing from the firm.
Instructions
Journalize the withdrawal of Harriet.
39) Record the following transactions for Lett Company.
1>On August 4, Lett sold merchandise on account to Smiley Company for $610, terms
2/10, n/30.
2>On August 7, Lett granted Smiley a sales allowance and reduced the cost of the
merchandise by $60 because some of the goods were slightly damaged.
3>On August 12, Smiley paid the account in full.
40) In general, how does one determine whether or not an expenditure should be
included in the acquisition cost of property, plant, and equipment?
41) Fraud experts often say that there are three primary factors that contribute to
employee fraud. Identify the three factors and explain what is meant by each.
42) A corporation has a separate __________________________ apart from its owners.
43) Journalizing and posting closing entries is a required step in the accounting cycle.
Discuss why it is necessary to close the books at the end of an accounting period. If
closing entries were not made, how would the preparation of financial statements be
affected?