Accounting 287 | Course Paper

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1) Under the double-declining-balance method, the depreciation rate used each year

remains constant.

2) A solvency ratio measures the income or operating success of an enterprise for a

given period of time.

3) Gains and losses are not recognized when convertible bonds are converted into

common stock.

4) A credit to a Materials Quantity Variance account indicates that the actual quantity of

direct materials used was greater than the standard quantity of direct materials allowed.

5) The three primary accounting problems with accounts receivable are: (1)

recognizing, (2) depreciating, and (3) disposing.

6) All business transactions must be entered first in the general ledger.

7) The formula for the predetermined overhead rate is estimated annual overhead costs

divided by an expected annual operating activity.

8) A merchandising company using a perpetual inventory system will usually need to

make an adjusting entry to ensure that the recorded inventory agrees with physical

inventory count.

9) A liability is classified as a current liability if the company is to pay it within the

forthcoming year.

10) Preferred dividends paid are added back to net income in calculating earnings per

share for common stockholders.

11) If a company uses the allowance method to account for uncollectible accounts, the

entry to write off an uncollectible account only involves balance sheet accounts.

12) Financial data are developed for a course of action under an incremental basis and

then it is compared to data developed under a differential basis before a decision is

made.

13) Owners of business firms are the only people who need accounting information.

14) Special journals are used to record unique transactions which do not occur very

often.

15) Actual costs that vary from standard costs always indicate inefficiencies.

16) Control over cash disbursements is improved if major expenditures are paid by

check.

17) When special journals are employed, all postings must be monthly or daily but

cannot be both.

18) The partners’ income and loss sharing ratio is 2:3:5, respectively.

CHENARD, JENNINGS, AND BLAIR PARTNERSHIP

Balance Sheet

December 31, 2014

AssetsLiabilities and Owners’ Equity

Cash$ 45,000Liabilities$150,000

Noncash assets285,000Chenard, Capital60,000

Jennings, Capital90,000

Blair, Capital 30,000

Total$330,000Total$330,000

If the CHENARD, JENNINGS, and BLAIR Partnership is liquidated by selling the

noncash assets for $195,000 and creditors are paid in full, what is the amount of cash

that can be safely distributed to each partner?

a.CHENARD, $36,000; JENNINGS, $54,000; BLAIR, $0

b.CHENARD, $42,000; JENNINGS, $63,000; BLAIR, $15,000

c.CHENARD, $34,500; JENNINGS, $55,500; BLAIR, $0

d.CHENARD, $33,000; JENNINGS, $57,000; BLAIR, $0

19) In process cost accounting, manufacturing costs are summarized on a

a.job order cost sheet

b.process order cost sheet

c.production cost report

d.manufacturing cost sheet

20) Which of the following is not a correct match?

1>Incurs costs

2>Generates revenue

3>Controls investment funds

a.Investment Center1, 2, 3

b.Cost Center1

c.Profit Center1, 2, 3

d.All of these answer choices are correct

21) Cash from sales of merchandise will be recorded in the

a.purchases journal

b.sales journal

c.cash receipts journal

d.general journal

22) The reference column of a multi-column cash payments journal after posting

a.will only contain check marks

b.will be blank

c.will only contain account numbers

d.may contain either account numbers or check marks

23) The general ledger of Link Company provides the following information:

End of YearBeginning of Year

Accounts Receivable$ 55,000$ 94,000

Inventory310,000210,000

Accounts Payable40,00065,000

The company’s net sales for the year was $2,200,000 and cost of goods sold amounted

to $1,500,000.

Instructions

Compute the following:

(a)Cash receipts from customers.

(b)Cash payments to suppliers.

24) Restricting retained earnings for the cost of treasury stock purchased is a

a.contractual restriction

b.legal restriction

c.stock restriction

d.voluntary restriction

25) The cost of goods available for sale is allocated between

a.beginning inventory and ending inventory

b.beginning inventory and cost of goods on hand

c.ending inventory and cost of goods sold

d.beginning inventory and cost of goods purchased

26) Nola, Inc. declares a 10% common stock dividend when it has 60,000 shares of $10

par value common stock outstanding. If the market value of $24 per share is used, the

amounts debited to Stock Dividends and credited to Paid-in Capital in Excess of Par

are:

Paid-in Capital in

Stock Dividends Excess of Par

a.$60,000$0

b.$144,000$84,000

c.$144,000$60,000

d.$60,000$84,000

27) Under GAPP, income statement items are generally described as

a.administration, distribution, manufacturing, etc

b.salaries, depreciation, utilities, etc

c.administration, depreciation, manufacturing, etc

d.salaries, distribution, utilities, etc

28) Which of the following is not a control account?

a.Manufacturing Overhead

b.Factory Labor

c.Accounts Receivable

d.Raw Materials Inventory

29) The labor costs that have been identified as indirect labor should be charged to

a.manufacturing overhead

b.direct labor

c.the individual jobs worked on

d.salaries and wages expense

30) Ideal standards

a.are rigorous but attainable

b.are the standards generally used in a master budget

c.reflect optimal performance under perfect operating conditions

d.will always motivate employees to achieve the maximum output

31) Sander Farms recorded a payment of cash on account to a creditor by debiting

Accounts Receivable and crediting Cash. Which of the following is the correcting

entry?

a.Debit Accounts Payable and credit Cash

b.Debit Cash and credit Accounts Receivable

c.Debit Accounts Receivable and credit Accounts Payable

d.Debit Accounts Payable and credit Accounts Receivable

32) The financing section of a cash budget is needed if there is a cash deficiency or if

the ending cash balance is less than

a.the prior years

b.management’s minimum required balance

c.the amount needed to avoid a service charge at the bank

d.the industry average

33) A general partner in a partnership

a.has unlimited liability for all partnership debts

b.is always the general manager of the firm

c.is the partner who lacks a specialization

d.is liable for partnership liabilities only to the extent of that partner’s capital equity

34) Which one of the following does not appear on the balance sheet of a

manufacturing company?

a.Finished goods inventory

b.Work in process inventory

c.Cost of goods manufactured

d.Raw materials inventory

35) Which one of the following is not necessary in order for a corporation to pay a cash

dividend?

a.Adequate cash

b.Approval of stockholders

c.Declaration of dividends by the board of directors

d.Retained earnings

36) The relationship between current assets and current liabilities is important in

evaluating a company’s

a.profitability

b.liquidity

c.market value

d.accounting cycle

37) The income statement for the year 2014 of Fugazi Co. contains the following

information:

Revenues$70,000

Expenses:

Salaries and Wages Expense$45,000

Rent Expense12,000

Advertising Expense10,000

Supplies Expense6,000

Utilities Expense2,500

Insurance Expense 2,000

Total expenses 77,500

Net income (loss)$ (7,500)

After all closing entries have been posted, the Income Summary account will have a

balance of

a.$0

b.$7,500 debit

c.$7,500 credit

d.$77,500 credit

38) Each of the following is correct regarding bonds except they are

a.a form of interest-bearing notes payable

b.attractive to many investors

c.issued by corporations and governmental agencies

d.sold in large denominations

39) When equipment is sold for cash, the amount received is reflected as a cash

a.inflow in the operating section

b.inflow in the financing section

c.inflow in the investing section

d.outflow in the operating section

40) The focus of a sell or process further decision is

a.incremental revenue

b.incremental cost

c.both incremental revenue and incremental cost

d.neither incremental revenue nor incremental cost

41) In the month of September, Thai Company sold 800 units of product. The average

sales price was $30. During the month, fixed costs were $6,000 and variable costs were

70% of sales.

Instructions

(a)Determine the contribution margin in dollars, per unit, and as a ratio.

(b)Using the contribution margin technique, compute the break-even point in dollars

and in units.

42) Equipment was purchased for $150,000. Freight charges amounted to $7,000 and

there was a cost of $20,000 for building a foundation and installing the equipment. It is

estimated that the equipment will have a $30,000 salvage value at the end of its 5-year

useful life. Depreciation expense each year using the straight-line method will be

a.$35,400

b.$29,400

c.$24,600

d.$24,000

43) Manufacturing cost data for Salte Company are presented below.

Case ACase BCase C

Direct materials used(a)$65,600$132,000

Direct labor$ 56,00078,000(g)

Manufacturing overhead48,50081,900103,000

Total manufacturing costs195,650(d)263,900

Work-in-process, 1/1/12(b)14,500(h)

Total cost of work in process224,500(e)325,000

Work-in-process, 12/31/12(c)8,00070,000

Cost of goods manufactured182,275(f)(i)

Instructions

Indicate the missing amount for each letter (a) through (i).

44) Match the items in the two columns below by entering the appropriate code letter in

the space provided.

A.VariancesF.Materials price variance

B.Standard costsG.Labor quantity variance

C.Standard cost accounting systemaH.Overhead controllable variance

D.Normal standardsaI.Overhead volume variance

E.Ideal standardsJ.Standard hours allowed

____1>The difference between actual overhead incurred and overhead budgeted for the

standard hours allowed.

____2>The hours that should have been worked for the units produced.

____3>The difference between the actual quantity times the actual price and the actual

quantity times the standard price.

____4>The difference between total actual costs and total standard costs.

____5>The difference between actual hours times the standard rate and standard hours

times the standard rate.

____6>Predetermined unit costs that are measures of performance.

____7>The difference between normal capacity hours and standard hours allowed times

the fixed overhead rate.

____8>Standards based on an efficient level of performance that are attainable under

expected operating conditions.

____9>Standards based on the optimum level of performance under perfect operating

conditions.

____10>A double-entry system of accounting in which standard costs are used in

making entries and variances are recognized in the accounts.

45) It is important that budgets be accepted by

a.division managers

b.department heads

c.supervisors

d.all of these answers are correct

46) Which is the true statement?

a.In a CVP income statement, costs and expenses are classified only by function

b.The CVP income statement is prepared for both internal and external use

c.The CVP income statement shows contribution margin instead of gross profit

d.In a traditional income statement, costs and expenses are classified as either variable

or fixed

47) During 2014, Radia Corporation reported net sales of $1,800,000 and net income of

$400,000. Radia also reported beginning total assets of $800,000 and ending total assets

of $1,200,000. How much is Radias asset turnover ratio?

a.1.5 times

b.1.8 times

c.2.25 times

d..5 times

48) Given below is an excerpt from a management performance report:

Budget ActualDifference

Contribution margin$2,000,000$2,100,000$100,000

Controllable fixed costs$1,000,000$ 900,000$100,000

The manager’s overall performance

a.is 20% below expectations

b.is 20% above expectations

c.is equal to expectations

d.cannot be determined from information given

49) The following information is available for Anderson Company:

Sales$105,000Freight-in$3,500

Ending Inventory9,000Purchase Returns and Allowances1,500

Purchases60,000Beginning Inventory11,000

Andersons cost of goods sold is:

a.$94,000

b.$92,500

c.$64,000

d.$62,000

50) Which of the following is not a condition under which the lessee must record the

lease of an asset?

a.The lease contains a bargain purchase option

b.The lease transfers ownership of the property to the lessee

c.The lease term is equal to 60% of the economic life of the lease property

d.The present value of the lease payments is 90% of the fair value of the leased property

51) Interest that is computed on the principal and on any interest earned that has not

been paid or withdrawn is __________________________.

52) Carson Company uses a standard cost accounting system. During April, 2014, the

company reported the following manufacturing variances:

Materials price variance$1,600F

Materials quantity variance2,400U

Labor price variance600U

Labor quantity variance2,200U

Overhead controllable500F

Overhead volume3,000U

In addition, 15,000 units of product were sold at $18 per unit. Each unit sold had a

standard cost of $15. Selling and administrative expenses for the month were $15,000.

Instructions

Prepare an income statement for management for the month ending April 30, 2014 .

53) Assuming a statement of cash flows is prepared, indicate the reporting of the

transactions and events listed below by major categories on the statement. Use the

following code letters to indicate the appropriate category under which the item would

appear on the statement of cash flows.

Code

Cash Flows From Operating Activities

Add to Net IncomeA

Deduct from Net IncomeD

Cash Flows From Investing ActivitiesIA

Cash Flows From Financing ActivitiesFA