1) If a business sells two products, it is not possible to estimate the break-even point.
2) If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the profit margin calculated would be 20%.
3) Under the accrual basis of accounting, the accounting records are normally updated
after the preparation of the financial statements.
4) Under the cash basis of accounting, a business records only transactions involving
increases or decreases of its cash.
5) In using the total cost concept of applying the cost-plus approach to product pricing,
only profit is covered in the markup.
6) The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years
and no residual value, is expected to yield total net income of $200,000 for 5 years. The
expected average rate of return on investment computed is 20%.
7) The double-declining-balance method of depreciation is also referred to as an
accelerated depreciation method.
8) The ratio of sales to invested assets is termed the investment turnover, a component
of the rate of return on investment.
9) The balance in Accumulated Depreciation account is deducted from the cost of fixed
assets on the balance sheet.
10) In the rate of return on investment analysis, the investment turnover component
focuses on the efficiency in the use of assets and indicates the number of sales dollar
generated for each dollar of invested assets.
11) Dividends are an example of an expense.
12) By keeping a running total of the effects of transactions, the accounting equation
provides a framework for summarizing the effects of a series of transactions.
13) If factory overhead applied is less than the actual costs, the overhead is said to be
underapplied.
14) The due date of a 60-day note dated July 10 is September 9 .
15) In deciding whether to accept business at a special price when the company is
operating at full capacity, the special price should be set high enough to cover all fixed
and variable costs and expenses.
16) Washington Corporation has the following financial data for 2013 and 2012 .
Based on Washingtons current ratio, which of the following statements is true regarding
the company?
A.Washingtons current ratio has increased, indicating that the company is in a more
favorable position to obtain short-term credit than in 2012
B.Washingtons current ratio has decreased, indicating that the company is in a less
favorable position to obtain short-term credit than in 2012
C.Washingtons current ratio has increased, indicating that the company is in a less
favorable position to obtain short-term credit than in 2012
D.Washingtons current ratio has decreased, indicating that the company is in a more
favorable position to obtain short-term credit than in 2012
17) The following assets are included in Bruce Auto Parts, Inc.’s December 31, 2010,
balance sheet.
The total dollar amount of assets classified as property, plant, and equipment on Bruce
Auto Parts’ December 31, 2010, classified balance sheet is:
A.$200,000
B.$230,000
C.$240,000
D.$310,000
18) Frogue Corporation uses a standard cost system. The following information was
provided for the period that just ended:
The direct labor cost variance is:
A.$1,310 favorable
B.$820 favorable
C.$1,310 unfavorable
D.$820 unfavorable
19) In cost-volume-profit analysis, all costs are classified into the following two
categories:
A.mixed costs and variable costs
B.sunk costs and fixed costs
C.discretionary costs and sunk costs
D.variable costs and fixed costs
20) As production increases, what should happen to the variable costs per unit?
A.Remain constant
B.Increase
C.Decrease
D.Either increase or decrease, depending on the fixed costs
21) Blancher Corporation had $495,000 in invested assets, sales of $660,000, income
from operations amounting to $99,000, and a desired minimum rate of return of 15%.
The profit margin for Blancher is:
A.16%
B.20%
C.18%
D.15%
22) Pauls Delivery Service is considering selling one of its smaller trucks that is no
longer needed in the business. The truck originally costed $23,000 and has accumulated
depreciation of $10,000. The truck can be sold for $14,000. Another company is
interested in leasing the truck. It will pay $4,800 per year for three years. Pauls
Delivery Service will continue to pay the taxes and license fees for the truck, but all
other expenses will be paid by the lessee. Management assumes the expenses for the
taxes and license will be $300 per year. Which of the following statements is correct?
A.Pauls Delivery Service should sell the truck because the differential loss from leasing
is $500
B.Pauls Delivery Service should lease the truck because the differential income from
leasing is $12,200
C.Pauls Delivery Service should lease the truck because the differential income from
leasing is $300
D.Pauls Delivery Service is indifferent as to whether the company should lease or sell
the truck because there is no differential income or loss between the alternatives
23) A pressurized spray painter was purchased on April 1 of the fiscal year for $3,900.
It has a useful life of 4 years and a residual value of $300. Determine depreciation
expense for the first two years, assuming a fiscal year end of December 31 and using (a)
the straight-line method and (b) the double-declining-balance method.
24) Based on the following information, what would be recorded as purchases discount
if the invoice is paid within the discount period?
A.$100
B.$30
C.$43
D.$33
25) A business received an offer from an exporter for 5,000 units of product at $10 per
unit. The acceptance of the offer will not affect normal production or domestic sales
prices. The following data are available:
Based on the above data, what is the amount of gain or loss from acceptance of the
offer?
A.$5,000 gain
B.$10,000 loss
C.$5,000 loss
D.$10,000 gain
26) The following information is available for the first month of operations for
Crawford, Inc.:
Refer to the information provided for Crawford Inc. Calculate direct materials cost used
in production.
A.$231,000
B.$240,000
C.$250,000
D.$249,000
27) The present value index is computed using which of the following formulas?
A.Amount to be invested/Average rate of return
B.Total present value of net cash flow/Amount to be invested
C.Total present value of net cash flow/Average rate of return
D.Amount to be invested/Total present value of net cash flow
28) Income from operations of the Commercial Aviation Division is $2,500,000. If
income from operations before service department charges is $3,250,000,:
A.operating expenses are $750,000
B.total service department charges are $750,000
C.noncontrollable charges are $1,025,000
D.direct manufacturing charges are $1,025,000
29) The following data relate to direct materials costs of Texas Inc. for November:
Refer to the information provided for Texas Inc. What is the direct materials quantity
variance?
A.$550 unfavorable
B.$550 favorable
C.$600 favorable
D.$600 unfavorable
30) Employing internal auditors is part of which element of internal control?
A.Monitoring
B.Control procedures
C.Risk assessment
D.Control environment
31) The payback period is determined using which of the following formulas?
A.Amount to be invested/Annual average net income
B.Annual net cash flow/Amount to be invested
C.Annual average net income/Amount to be invested
D.Amount to be invested/Annual net cash flows
32) All of the following qualitative considerations may impact upon capital investments
analysis except:
A.manufacturing productivity
B.manufacturing sunk cost
C.manufacturing flexibility
D.manufacturing control
33) Fixed assets are ordinarily presented in the balance sheet:
A.at its current market value
B.at its replacement cost
C.at its cost less accumulated depreciation
D.under intangible assets
34) Which of the following situations increase stockholders equity?
A.Supplies are purchased on account
B.Services are provided on account
C.Cash is received from customers
D.Utility bill will be paid next month
35) The financial statement that presents a summary of the revenues and expenses of a
business for a specific period of time, such as a month or an year, is called a(n):
A.prior period statement
B.statement of retained earnings
C.income statement
D.balance sheet
36) The due date of a 60-day note dated July 12 is:
A.September 11
B.September 8
C.September 9
D.September 10
37) What is one criticism of the single-step income statement?
A.It is too complex
B.It has too many subsections
C.Gross profit and income from operations are not available for analysis
D.Income taxes are given too much weight
38) A 60-day, 10% note for $6,000 dated April 15 is received from a customer on
account. The face value of the note is:
A.$6,100
B.$5,400
C.$5,900
D.$6,000
39) Which of the following is not an analysis used in assessing solvency?
A.Inventory analysis
B.Number of times interest charges are earned
C.Asset turnover
D.Accounts receivable analysis
40) Using the following partial table of present value of $1 at compound interest,
determine the present value of $20,000 to be received three years hence, with earnings
at the rate of 10% a year.
A.$14,240
B.$16,800
C.$15,020
D.$15,840
41) The following information is available for the first month of operations for
Crawford, Inc.:
Refer to the information provided for Crawford Inc. What is the cost of goods sold?
A.$420,000
B.$370,000
C.$360,000
D.$276,500
42) In using the variable cost concept of applying the cost-plus approach to product
pricing, what is included in the markup?
A.Total costs plus desired profit
B.Desired profit
C.Total selling and administrative expenses plus desired profit
D.Total fixed manufacturing costs, total fixed selling and administrative expenses, and
desired profit
43) Gold Co. sold merchandise to Bronze Co. on account, $25,000, terms 2/15, net 45 .
The cost of the merchandise sold is $18,500. Gold Co. issued a credit memorandum for
$2,500 for merchandise returned that originally cost $1,900. Bronze Co. paid the
invoice within the discount period. What is amount of net sales from the transactions?
A.$22,500
B.$22,000
C.$5,450
D.$22,050
44) An equipment was purchased for $18,000. It has a useful life of 5 years and a
residual value of $2,000. Determine the depreciation expense for the first year using the
double-declining-balance method?
A.$6,400
B.$3,200
C.$7,200
D.$3,600
45) The following data relate to direct labor costs for the current period:
What is the direct labor time variance?
A.$23,000 unfavorable
B.$23,500 unfavorable
C.$23,500 favorable
D.$23,000 favorable
46) A company sold a delivery truck for $18,000 cash. The truck cost $47,500 and had
accumulated depreciation of $36,000 as of the date of sale. The entry to record the sale
would include:
A.an increase in accumulated depreciation for $36,000
B.a total decrease in delivery truck for $11,500
C.a loss for $6,500
D.a gain for $6,500
47) Debts owed by a business are referred to as:
A.accounts receivable
B.equities
C.stockholders equity
D.liabilities
48) Wyandott Co. produces two products. Both products pass through a firing process
that is operating at full capacity and is a production bottleneck. Product A requires 2
hours of processing and has a contribution margin per unit of $60. Product B requires 1
hour of processing and has a contribution margin of $40. Which of the following
provides the most accurate assessment of the situation assuming unlimited demand for
each product?
A.Production of Product B rather than Product A will generate the maximum
profitability for Wyandotte
B.Production of Product A rather than Product B will generate the maximum
profitability for Wyandotte
C.Raising the selling price of Product B by $20 will cause management to be indifferent
between producing Product A or Product B
D.Raising the selling price of Product A by $10 will cause management to be indifferent
between producing Product A or Product B
49) If $4,000,000 of 12% bonds are issued at 103 1/4, the amount of cash received from
the sale is:
A.$4,040,000
B.$4,000,000
C.$4,130,000
D.$3,520,000
50) Which of the following is considered a part of factory overhead cost?
A.Sales commissions
B.Depreciation of factory buildings
C.Depreciation of office equipment
D.Direct materials used
51) The following accounts and their balances appear in the ledger on December 31 of
the current year:
Prepare the Stockholders’ Equity section of the balance sheet as of December 31 .
Twenty five thousand shares of common stock are authorized, and 1,000 shares have
been reacquired.
52) Product J is one of the many products manufactured and sold by Gooble Company.
An income statement by product line for the past year indicated a net loss for Product J
of $7,250. This net loss resulted from sales of $265,000, cost of goods sold of
$186,500, and operating expenses of $85,750. It is estimated that 30% of the cost of
goods sold represents fixed factory overhead costs and that 40% of the operating
expense is fixed. If Product J is retained, the revenue, costs, and expenses are not
expected to change significantly from those of the current year. However, because of
the net loss, management is considering the elimination of the unprofitable endeavor.
Because of the large number of products manufactured, the total fixed costs and
expenses are not expected to decline significantly if Product J is discontinued.
Prepare a differential analysis report, dated February 8 of the current year, on the
proposal to discontinue Product J.
53) Name the three different types of businesses that operate for profit and their
respective characteristics.
54) List the advantages of Electronic Funds Transfers.
55) Using the lower-of-cost-or-market method of inventory valuation, what should the
total inventory value be for the following items: