1) Policies regarding when a difference between actual and planned results should be
investigated are generally more restrictive for noncontrollable items than for
controllable items.
2) Direct materials requisitioned from the storeroom should be charged to the Work In
Process Inventory account and the job cost sheets for the individual jobs on which the
materials were used.
3) If a new partner is admitted into a partnership by investment, the total assets and total
capital will change.
4) In accordance with the historical cost principle, the cost of debt investments includes
brokerage fees and accrued interest.
5) A new account is opened for each transaction entered into by a business firm.
6) A loss on disposal of a plant asset as a result of a sale or a retirement is calculated in
the same way.
7) Ending finished goods inventory appears on both the balance sheet and the income
statement of a manufacturing company.
8) If bonds are issued at a premium, the carrying value of the bonds will be greater than
the face value of the bonds for all periods prior to the bond maturity date.
9) An adjusting entry requiring a credit to Insurance Expense indicates that the initial
transaction was charged to an asset account.
10) The terms controllable costs and noncontrollable costs are synonymous with
variable costs and fixed costs, respectively.
11) A bonus to the remaining partners results when a retiring partner receives
partnership assets which are less than his or her capital balance on the date of
withdrawal.
12) Notes payable usually are issued to meet long-term financing needs.
13) Cash provided by operating activities fails to take into account that a company must
invest in new fixed assets just to maintain its current level of operations.
14) Notes receivable represent claims for which formal instruments of credit are issued
as evidence of debt.
15) The chart of accounts is a listing of the accounts and the account numbers which
identify their location in the ledger.
16) Depletion cost per unit is computed by dividing the total cost of a natural resource
by the estimated number of units in the resource.
17) The monetary unit assumption states that transactions that can be measured in terms
of money should be recorded in the accounting records.
18) Sivenchy Company sells 100,000 wrenches for $18 per unit. Fixed costs are
$625,000 and net income is $375,000. What should be reported as variable expenses in
the CVP income statement?
a.$1,000,000
b.$800,000
c.$1,425,000
d.$1175
19) D.Nozzo Company applies overhead on the basis of machine hours. Given the
following data, compute overhead applied and the under- or overapplication of
overhead for the period:
Estimated annual overhead cost$1,500,000
Actual annual overhead cost$1,100,000
Estimated machine hours500,000
Actual machine hours370,000
a.$1,110,000 applied and $10,000 overapplied
b.$1,500,000 applied and $10,000 overapplied
c.$1,110,000 applied and $10,000 underapplied
d.$1,500,000 applied and neither under- nor overapplied
20) Roxy Corporation makes a short-term investment in 180 shares of Sager Company’s
common stock. The stock is purchased for $53 a share. The entry for the purchase is
a.Debt Investments9,540
Cash9,540
b.Stock Investments9,540
Cash9,540
c.Stock Investments9,000
Cash9,000
d.Stock Investments9,000
Cash9,000
21) Manta’s Music, Inc. produces a hip-hop CD that is sold for $20. The contribution
margin ratio is 40%. Fixed expenses total $9,200.
Instructions
(a)Compute the variable cost per unit.
(b)Compute how many CDs Manta’s Music will have to sell in order to break even.
(c)Compute how many CDs Manta’s Music will have to sell in order to make a target
net income of $15,200.
22) Kagan Corporation was organized on January 2, 2014 . During 2014, Kagan issued
40,000 shares at $24 per share, purchased 6,000 shares of treasury stock at $26 per
share, and had net income of $600,000. What is the total amount of stockholders equity
at December 31, 2014?
a.$1,280,000
b.$1,404,000
c.$1,416,000
d.$1,440,000
23) Intangible assets are
a.listed under current assets on the balance sheet
b.not listed on the balance sheet because they do not have physical substance
c.long-lived assets that are often very valuable
d.listed as a long-term investment on the balance sheet
24) Medina Company has beginning and ending work in process inventories of
$265,000 and $300,000 respectively. If total manufacturing costs are $1,250,000, what
is the total cost of goods manufactured?
a.$1,515,000
b.$1,550,000
c.$1,285,000
d.$1,215,000
25) A successful grocery store would probably have
a.a low inventory turnover
b.a high inventory turnover
c.zero profit margin
d.low volume
26) In CVP analysis, the term “cost”
a.includes only manufacturing costs
b.means cost of goods sold
c.includes manufacturing costs plus selling and administrative expenses
d.excludes all fixed manufacturing costs
27) The specific identification method of costing inventories is used when the
a.physical flow of units cannot be determined
b.company sells large quantities of relatively low cost homogeneous items
c.company sells large quantities of relatively low cost heterogeneous items
d.company sells a limited quantity of high-unit cost items
28) The Molding Department of Kenst Company has the following production data:
beginning work in process 40,000 units (60% complete), started into production
680,000 units, completed and transferred out 690,000 units, and ending work in process
70,000 units (40% complete). Assuming conversion costs are incurred uniformly during
the process, the equivalent units for conversion costs are:
a.718,000
b.694,000
c.760,000
d.690,000
29) The only acceptable cost flow assumptions under IFRS are
a.FIFO and LIFO
b.FIFO and average
c.LIFO and average
d.FIFO, LIFO and average
30) Sales taxes collected by a retailer are reported as
a.contingent liabilities
b.revenues
c.expenses
d.current liabilities
31) On January 1, Key Corporation had 2,000,000 shares of $10 par value common
stock outstanding. On March 31, the company declared a 20% stock dividend. Market
value of the stock was $15/share. As a result of this event,
a.Keys Paid-in Capital in Excess of Par account increased $2,000,000
b.Keys total stockholders equity was unaffected
c.Keys Stock Dividends account increased $6,000,000
dAll of these answer choices are correct
32) IFRS defines market for lower-of-cost-or market as
a.net realizable value
b.estimated selling price in the ordinary course of business
c.replacement cost
d.replacement cost less costs of disposal
33) Switzer, Inc. has 8 computers which have been part of the inventory for over two
years. Each computer cost $600 and originally retailed for $900. At the statement date,
each computer has a current replacement cost of $400. What value should Switzer, Inc.,
have for the computers at the end of the year?
a.$2,400
b.$3,200
c.$4,800
d.$7,200
34) Bowan Company reported the following information for the current year: Sales
(50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable
costs $50,000, and fixed costs $288,000. What is Bowan break-even point in units?
a.26,182
b.32,000
c.40,890
d.45,000
35) The information for preparing a trial balance on a worksheet is obtained from
a.financial statements
b.general ledger accounts
c.general journal entries
d.business documents
36) All of the financial statements are for a period of time except the
a.income statement
b.owner’s equity statement
c.balance sheet
d.statement of cash flows
37) Which of the following is not a cost classification?
a.Mixed
b.Multiple
c.Variable
d.Fixed
38) Beginning inventory plus the cost of goods purchased equals
a.cost of goods sold
b.cost of goods available for sale
c.net purchases
d.total goods purchased
39) Which receivables accounting and reporting issue is not essentially the same for
IFRS and GAAP?
a.The use of allowance accounts and the allowance method
b.How to record discounts
c.How to record factoring
d.All of these are essentially the same for IFRS and GAAP
40) TB Nelson Company prepares monthly financial statements and uses the gross
profit method to estimate ending inventories. Historically, the company has had a 40%
gross profit rate. During June, net sales amounted to $180,000; the beginning inventory
on June 1 was $54,000; and the cost of goods purchased during June amounted to
$90,000. The estimated cost of TB Nelson Company’s inventory on June 30 is
a.$21,600
b.$36,000
c.$72,000
d.$126,000
41) During 2014, Rathke Corporation reported net sales of $3,000,000, net income of
$1,200,000, and depreciation expense of $100,000. Rathke also reported beginning total
assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and
accumulated depreciation of $500,000. Rathkes asset turnover is
a.3 times
b.2.4 times
c.2.0 times
d..96 times
42) Buena Vista Social Club accumulates the following adjustment data at December 31
.
1>Revenue of $1,600 collected in advance has been recognized.
2>Salaries of $600 are unpaid.
3>Prepaid rent totaling $500 has expired.
4>Supplies of $450 have been used.
5>Revenue recognized but unbilled total $750.
6>Utility expenses of $250 are unpaid.
7>Interest of $300 has accrued on a note payable.
Instructions
(a)For each of the above items indicate:
1>The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or
accrued expense).
2>The account relationship (asset/liability, liability/revenue, etc.).
3>The status of account balances before adjustment (understatement or overstatement).
4>The adjusting entry.
(b)Assume net income before the adjustments listed above was $15,500. What is the
adjusted net income?
Prepare your answer in the tabular form presented below.
Account Balances
Before Adjustment
Type ofAccount(Understatement
AdjustmentRelationshipor Overstatement)Adjusting Entry
43) When a partner withdraws from the firm, which of the following reflects the correct
partnership effects?
Payment fromPayment from
Partners’ Personal AssetsPartnership Assets
a.Total net assetsdecreaseddecreased
b.Total capitaldecreaseddecreased
c.Total net assetsunchangeddecreased
d.Total capitalunchangedunchanged
44) Kennedy Company had the following account balances at year-end: cost of goods
sold $85,000; inventory $15,000; operating expenses $39,000; sales revenue $144,000;
sales discounts $1,600; and sales returns and allowances $2,300. A physical count of
inventory determines that inventory on hand is $14,400.
Instructions
(a)Prepare the adjusting entry necessary as a result of the physical count.
(b)Prepare closing entries.
45) Carter Company sells merchandise on account for $4,000 to Hannah Company with
credit terms of 2/10, n/30. Hannah Company returns $600 of merchandise that was
damaged, along with a check to settle the account within the discount period. What
entry does Carter Company make upon receipt of the check?
a.Cash3,400
Accounts Receivable3,400
b.Cash3,332
Sales Returns and Allowances668
Accounts Receivable4,000
c. Cash3,332
Sales Returns and Allowances600
Sales Discounts68
Accounts Receivable4,000
d.Cash3,920
Sales Discounts80
Sales Returns and Allowances600
Accounts Receivable3,400
46) A payroll tax expense which is borne entirely by the employer is the federal
_______________ tax.
47) Distinguish among the three types of activities reported in the statement of cash
flows
The three activities are:
48) Under variable costing, ____________________ manufacturing costs are
considered to be period costs.
49) Schweigert Paint Company, which prepares annual financial statements, is
preparing adjusting entries on December 31 . Analysis indicates the following:
1>The company is the defendant in an employee discrimination lawsuit involving
$50,000 of damages. Legal counsel believes it is unlikely that the company will have to
pay any damages.
2>December 31st is a Friday. The employees of the company have been paid on
Monday, December 27th for the previous week which ended on Friday, December 24th.
The company employs 30 people who earn $100 per day and 15 people who earn $160
per day. All employees work 5-day weeks.
3>The company is a defendant in a $500,000 product liability lawsuit. Legal counsel
believes the company probably will have to pay the amount requested.
4>Employees are entitled to one day’s vacation for each month worked. All employees
described above in (2.) worked the month of December.
Instructions
Prepare any adjusting entries necessary at the end of the year.
50) Indirect materials and indirect labor are classified as ______________.
51) Derek Fuller is a new production manager. After a great deal of effort, including
considerable market research, he completes his budget and submits it to his boss,
Alexandra Bricker. Without even looking at it, she asks him what his “fudge factor”
was, and which items contained the most slack. Derek, very surprised, responds that he
doesn’t use any “fudge factor,” and that all his figures are honest. Ms. Bricker counters
by asking him how he would respond if he had to cut about 20% from his budget, as it
is. She tells him that most budgets are trimmed in committee, and he had better be
ready. She returns the budget to him, and tells him to come back with something
reasonable.
Required:
1>Is it ethical to build slack into a budget? Explain.
2>Was it ethical for Ms. Bricker to refuse to accept a budget without slack? Briefly
explain.