Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
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
Category
1>Common stock is issued for cash at an amount above par value.
2>Merchandise inventory increased during the period.
3>Depreciation expense recorded for the period.
4>Building was purchased for cash.
5>Bonds payable were acquired and retired at their carrying value.
6>Accounts payable decreased during the period.
7>Prepaid expenses decreased during the period.
8>Treasury stock was acquired for cash.
9>Land is sold for cash at an amount equal to book value.
10>Patent amortization expense recorded for a period.
54) If stock is issued in exchange for noncash assets, the assets should be valued at the
____________________ of the consideration ___________________ or the assets
____________________, whichever is more clearly evident.
55) Phast Express specializes in the overnight transportation of medical equipment and
laboratory specimens. The company has selected the following information from its
most recent annual report to be the subject of an immediate press release.
The financial statements are being released.
Net income this year was $2.12 million. Last year's net income had been $2.0 million.
The current ratio has changed to 2:1 from last year's 1.4:1
The debt/assets ratio has changed to 3:5 from last year's 2:5
The company expanded its truck fleet substantially by purchasing ten new delivery
vans. The company already had twelve delivery vans.
The company is now the largest medical courier in the mid-Atlantic region.
Required:
Prepare a brief press release incorporating the information above. Include all
information. Think carefully which information (if any) is good news for the company,
and which (if any) is bad news.
56) Use the accounting equation to answer the following questions.
1>Picaresque Sails Co. has total assets of $140,000 and total liabilities of $45,000.
What is owners equity?
2>The Natenal Fun Center has total assets of $225,000 and owners equity of $100,000.
What are total liabilities?
3>Okkervil River Restaurant has total liabilities of $50,000 and owners equity of
$100,000. What are total assets?
