1) The total interest expense over the entire life of a bond is equal to the sum of the
interest payments plus the total discount or minus the total premium related to the bond.
2) The difference between the balance of a fixed asset account and the balance of its
related accumulated depreciation account is termed the book value of the asset.
3) The excess of revenue over the expenses incurred in earning the revenue is called
capital stock.
4) In an effort to simplify the multiple production department factory overhead rate
method, the same rate can be used for all departments.
5) A series of equal cash flows at fixed intervals is termed an annuity.
6) When a property, plant, and equipment asset is sold for cash, any gain or loss on the
asset sold should be recorded.
7) Accumulated Depreciation is reported on the income statement.
8) In a periodic inventory system, the cost of merchandise purchased includes the cost
of freight-in.
9) When using the worksheet method to analyzing noncash accounts , no order of
analysis is required, but it is more efficient to start with Retained Earnings and proceed
upward in the account listing.
10) A gain can be realized when a fixed asset is discarded.
11) Identify each of the following as either internal or external users of accounting
information.
A. Payroll Manager
B. Bank
C. Presidents Secretary
D. Internal Revenue Service
E. Raw Material Vendors
F. Social Security Administration
G. Health Insurance Provider
H. Managerial Accountant
12) The adjusting entry for rent earned that was previously recorded in the unearned
rent account is
A.debit Unearned Rent; credit Rent Revenue
B.debit Rent Revenue; credit Unearned Rent
C.debit Unearned Rent; credit Prepaid Rent
D.debit Rent Expense; credit Unearned Rent
13) The most widely used depreciation method is
A.straight-line
B.double-declining-balance
C.units-of-production
D.units-of-production or double-declining-balance
14) Journal entries based on the bank reconciliation are required in the company’s
accounts for
A.outstanding checks
B.deposits in transit
C.bank errors
D.book errors
15) A company is contemplating investing in a new piece of manufacturing machinery.
The amount to be invested is $150,000. The present value of the future cash flows
generated by the project is $145,000. Should they invest in this project?
A.yes, because the rate of return on the project exceeds the desired rate of return used to
calculate the present value of the future cash flows.
B.no, because the rate of return on the project is less than the desired rate of return used
to calculate the present value of the future cash flows.
C.no, because net present value is +$5,000
D.yes, because the rate of return on the project is equal to the desired rate of return used
to calculate the present value of the future cash flows.
16) Sunshine Service Center received a 120-day, 6% note for $40,000, dated April 12
from a customer on account.
a. Determine the due date of the note.
b. Determine the maturity value of the note.
c. Journalize the entry to record the receipt of the payment of the note at maturity.
17) Match the correct term with the statement that describes it.
1>Prime costs A. FIFO method
2>Conversion costs B. equivalent units
3>Costing system used by a company producing computer chips C. direct labor and
factory overhead
4>Summary of the activity in a processing department for a specific period D. cost of
production report
5>Costing system used by a company producing by a company producing custom
window treatments E. process costing
6>Costs incurred in a previous process that are carried forward as part of the products
cost when it moves to the next department F. direct labor and direct materials
7>A process costing method that costs each periods equivalent units of work with that
periods costs per equivalent unit G. transferred-in costs
8>Measure of the work done during a production period, expressed in terms of fully
complete units of output H. job costing
18) The equity method of accounting for investments
A.requires a year-end adjustment to revalue the stock to lower of cost or market
B.requires the investment to be reported at its original cost
C.requires the investment be increased by the reported net income of the investee
D.requires the investment be increased by the dividends paid by the investee
19) Under the perpetual inventory system, all purchases of merchandise are debited to
the account entitled
A.Merchandise Inventory
B.Cost of Merchandise Sold
C.Cost of Merchandise Available for Sale
D.Purchases
20) The benefits of comparing actual performance of the operations against planned
goals include all of the following except:
A.providing prompt feedback to employees about their performance relative to the goal
B.preventing unplanned expenditures
C.helping to establish spending priorities
D.determining how managers are performing against prior years’ actual operating
results
21) In contribution margin analysis, the quantity factor is computed as:
A.the increase or decrease in the number of units sold multiplied by the planned unit
sales price or unit cost
B.the increase or decrease in unit sales price or unit cost multiplied by the planned
number of units to be sold
C.the increase or decrease in the number of units sold multiplied by the actual unit sales
price or unit cost
D.the increase or decrease in the unit sales price or unit cost multiplied by the actual
number of units sold
22) The purchase of supplies on account was recorded and posted as a debit to Supplies
for $500 and a credit to Accounts Receivable for $500. The correcting entry would
include a:
A.credit to Accounts Receivable for $500
B.credit to Accounts Receivable for $1,000
C.credit to Accounts Payable for $500
D.credit to Accounts Payable for $1,000
23) Following the completion of the bank reconciliation, an adjusting entry was made
that debited cash and credited Interest Revenue. Therefore the bank reconciliation must
have included an item that was
A.deducted from the balance per company’s records
B.deducted from the balance per bank statement
C.added to the balance per bank statement
D.added to the balance per company’s records
24) The journal entry a company uses to record the payment of an interest-bearing note
is
A.debit Cash; credit Notes Payable
B.debit Accounts Payable; credit Cash
C.debit Notes Payable and Interest Expense; credit Cash
D.debit Notes Payable and Interest Receivable; credit Cash
25) Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year
(before adjustment), and bad debt expense is estimated at 3% of net credit sales. If net
credit sales are $300,000, the amount of the adjusting entry to record the estimated
uncollectible accounts receivables is
A.$8,500
B.$8,500
C.$9,000
D.Cannot be determined
26) The direct write-off method of accounting for uncollectible accounts
A.emphasizes balance sheet relationships
B.is often used by small companies and companies with few receivables
C.emphasizes cash realizable value
D.emphasizes the matching of expenses with revenues
27) The cost of a product warranty should be included as an expense in the
A.period the cash is collected for a product sold on account
B.future period when the cost of repairing the product is paid
C.period of the sale of the product
D.future period when the product is repaired or replaced
28) The Clydesdale Company has sales of $4,500,000. It also has invested assets of
$2,000,000 and operating expenses of $3,600,000. The company has established a
minimum rate of return of 7%.
What is Clydesdale Company’s rate of return on investment?
A.56%
B.20%
C.45%
D.25%
29) The ability of a corporation to obtain capital is
A.less than a partnership
B.about the same as a partnership
C.restricted because of the limited life of the corporation
D.enhanced because of limited liability and ease of share transferability
30) Budgeting supports the planning process by encouraging all of the following
activities except:
A.requiring all organizational units to establish their goals for the upcoming period
B.increasing the motivation of managers and employees by providing agreed-upon
expectations
C.directing and coordinating operations during the period
D.improving overall decision making by considering all viewpoints, options, and cost
reduction possibilities
31) The methods of evaluating capital investment proposals can be separated into two
general groups–present value methods and:
A.past value methods
B.straight-line methods
C.reducing value methods
D.methods that ignore present value
32) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 1 during the period for
applied overhead is:
A.Factory Overhead–Department 1150,000
Work in Process–Department 1150,000
B.Work in Process–Department 1125,000
Factory Overhead–Department 1125,000
C.Work in Process–Department 180,000
Factory Overhead–Department 180,000
D.Work in Process–Department 1150,000
Factory Overhead–Department 1150,000
33) The Cardinal Company had a finished goods inventory of 55,000 units on January
1. Its projected sales for the next four months were: January – 200,000 units; February –
180,000 units; March – 210,000 units; and April – 230,000 units. The Cardinal Company
wishes to maintain a desired ending finished goods inventory of 20% of the following
months sales.
What would be the budgeted production for February?
A.186,000
B.181,000
C.222,000
D.174,000
34) All of the following qualitative considerations may impact upon capital investment
analysis except:
A.time value of money
B.employee morale
C.the impact on product quality
D.manufacturing flexibility
35) Which statement below is not a determinate in calculating the amount of federal
income taxes withheld from an individuals pay?
A.filing status
B.types of earnings
C.gross pay
D.number of exemptions
36) In evaluating the profit center manager, the income from operations should be
compared:
A.across profit centers
B.to historical performance or budget
C.to the competitor’s net income
D.to the total company earnings per share
37) If the company meets the new target cost number, how much will they have to cut
costs per unit, if any?
A.$1
B.$3
C.$2
D.$0
38) Which item would appear in the Income Statement columns of the work sheet?
A.Equipment
B.Unearned Fees
C.Prepaid Expense
D.Net Loss
39) On the variable costing income statement, the figure representing the difference
between manufacturing margin and contribution margin is the:
A.fixed manufacturing costs
B.variable cost of goods sold
C.fixed selling and administrative expenses
D.variable selling and administrative expenses
40) An acceleration in the collection of receivables will tend to cause the accounts
receivable turnover to
A.decrease
B.remain the same
C.either increase or decrease
D.increase
41) The inventory method that assigns the most recent costs to cost of goods sold is
A.FIFO
B.LIFO
C.average
D.specific identification
42) For the fiscal years 2009 and 2010, Apple Co. reported the following:
a. Compute the accounts receivable turnover for 2010.
b. Compute the number of days sales in receivable at the end of
43) The present value of $30,000 to be received in two years, at 12% compounded
annually, is (rounded to nearest dollar)
A.$23,916
B.$37,632
C.$23,700
D.$30,000
44) The unearned rent account has a balance of $72,000. If $18,000 of the $72,000 is
unearned at the end of the accounting period, the amount of the adjusting entry is
A.$18,000
B.$90,000
C.$54,000
D.$36,000
45) Which of the following items should be classified as an extraordinary item on a
corporate income statement?
A.gain on the retirement of a bond payable
B.loss from land condemned for public use
C.loss due to an discontinued operation
D.selling treasury stock for more than the company paid for it
46) On May 1, 2012, Chase Inc. purchases $60,000 of 10-year, Manus Corporation 8%
bonds dated March 1, 2012 at 100 plus accrued interest. What entry would Chase record
when receiving its semiannual interest on March 1, 2013?
47) 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.
48) Farm Store, Inc. reported the following data in its December 31, 2011 annual report.
Required:
(1) What is the companys cash burn per month?
(2) What is the companys ratio of cash to monthly cash expenses?
(3) Interpret the ratio you computed in part 2. What are the implications for Farm Store,
Inc.
49) Following is data for the available-for-sale securities held by AdBrand Company as
of December 31, 2012.
Required:
(1) Complete the table above to find the total cost and fair value for the companys
available-for-sale securities portfolio.
(2) Calculate and record the required December 31, 2012 adjustment.
(3) Explain how the adjustment from step (2) is reported on AdBrands 2012 financial
statements.
50) Journalize the following transactions for Solley Company that occurred during 2011
and 2012.
November 14, 2011 Received a $4,800.00, 90-day, 9% note from Alan Hibbetts in
payment of his account.
December 31, 2011 Accrued interest on the Hibbetts note.
February 12, 2012 Received the amount due from Hibbetts on his note.
51) Marcus Enterprises began in 2011 when Damien Marcus invested $8,000 in
exchange for capital stock. The following is the work sheet for the company at the end
of the first year in business.
Marcus Enterprises
Work Sheet
For the Year Ended December 31, 2011
Prepare an income statement, retained earnings statement, and classified balance sheet
for Marcus Enterprises for the year ended December 31, 2011.
52) On March 4, of the current year, Barefoot Bay, Inc. reacquired 5,000 shares of its
common stock at $89 per share. On August 7, Barefoot Bay sold 3,500 of the
reacquired shares at $100 per share. The remaining 1,500 shares were sold at $88 per
share on November 29.
Required:
53) 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.
54) Given below are the accounts and amounts for Bright Futures Company as of
August 31, 2011. All of the revenue and expense amounts are for the month of August.
Based on the data provided for Bright Futures Company, prepare in good format a
balance sheet as of August 31, 2011.
