1) The depositor reconciles the bank’s statement to the depositor’s records.
2) An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds
actual cost.
3) Qualitative considerations in capital investment decisions are most appropriate for
strategic investments or those that are designed to affect a companys long-term ability
to generate profits.
4) When choosing whether or not to replace a fixed asset, management will consider the
price at which the asset can be sold.
5) Money market funds, commercial paper, and U.S. Treasury Bills are examples of
cash equivalents.
6) Personnel administration expense for a department in a store is an indirect expense.
7) The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years
and a $40,000 residual value, is expected to yield total net income of $500,000 for 5
years. The expected average rate of return is 50%.
8) If the total unit cost of manufacturing Product Y is currently $40 and the total unit
cost after modifying the style is estimated to be $48, the differential cost for this
situation is $48.
9) In a perpetual inventory system, merchandise returned to vendors reduces the
merchandise inventory account.
10) Internal control is enhanced by combining the control of a transaction with the
record-keeping function.
11) The following information is available for the first month of operations for Brandt,
Inc.:
Calculate direct labor cost for Brandt, Inc.
A.$226,000
B.$206,000
C.$231,000
D.$218,000
12) For the perpetual inventory system, which of the following effects does not occur
upon the return from a customer of merchandise sold on account?
A.Increases Sales Returns and Allowances and decreases Accounts Receivable
B.Decreases Cost of Merchandise Sold and increases Merchandise Inventory
C.Increases Purchase Returns and Allowances and decreases Merchandise Inventory
D.All of these occur
13) Use the following data to calculate the cost of ending inventory using the LIFO
method.
A.$825
B.$750
C.$675
D.$600
14)
15) The two methods of accounting for uncollectible receivables are the allowance
method and the:
A.equity method
B.direct write-off method
C.interest method
D.cost method
16) On April 1, Bear, Inc. paid $2,400 for an insurance premium on a three-year
insurance policy. At the end of December, Bear’s fiscal year-end, what should be the
balance in the prepaid insurance account?
A.$2,700
B.$3,000
C.$2,400
D.$1,800
17) Benjamin Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $250,000, $300,000, and
$420,000, respectively, for September, October, and November. The company expects
to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be
collected in the month of the sale, 25% in the month following the sale, and the
remainder in the following month.
Refer to the information provided for Benjamin Corporation. The cash collections from
accounts receivable in September are:
A.$175,000
B.$140,000
C.$190,000
D.$168,000
18) Given below are the two independent situations:
19) The amount of time spent by each employee and the labor costs incurred for each
individual job or for factory overhead are recorded on the:
A.employees earnings records
B.in-and-out board
C.time tickets
D.receiving order
20) Max, Inc. can sell a large piece of machinery for $90,000. The machinery originally
cost $240,000 and has accumulated depreciation of $130,000. Max will have to pay a
5% sales commission on the sale. Rather than sell, Max is considering leasing the
machine. It can be leased for 4 years for $24,000 per year. Max has estimated future
operating expenses to be $3,000 per year, and Max will be responsible for those
expenses. Which of the following options most accurately describes the analysis and
decision for Max?
A.Lease – because differential revenues are $6,000 if Max leases rather than sells
B.Lease – because Max will lose $20,000 if it sells the equipment for less than its
$110,000 book value
C.Sell – because differential income of selling rather than leasing is $6,000
D.Sell – because differential income is $1,500 if Max sells rather than leases
21) Anthony, Inc. buys land for $50,000 cash. The net effect on assets is:
A.$50,000 increase
B.$0
C.$50,000 decrease
D.$25,000 increase
22) A patent was purchased for $670,000 with a legal life of 20 years. Management
estimates that the patent has an 12-year economic life. The entry to record amortization
would include:
A.an increase in amortization expense for $33,500
B.an increase in research and development expense for $670,000
C.a decrease in patent for $55,833
D.an increase in accumulated amortization for $670,000
23) In capital rationing, an initial screening of alternative proposals is usually
performed by establishing minimum standards. Which of the following evaluation
methods are normally used?
A.Cash payback method and average rate of return method
B.Average rate of return method and net present value method
C.Net present value method and cash payback method
D.Internal rate of return and net present value methods
24) Depreciation Expense and Accumulated Depreciation are classified, respectively,
as:
A.expense and contra asset
B.asset and contra liability
C.revenue and asset
D.contra asset and expense
25) Receipts from cash sales of $5,700 were recorded incorrectly by the depositor as
$7,500. The $1,800 difference would be included on the bank reconciliation as a(n):
A.addition to the cash balance per books
B.addition to the cash balance per bank
C.deduction from the cash balance per bank
D.deduction from the cash balance per books
26) Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of
the year, and uncollectible accounts expense is estimated at 1% of net sales. If net sales
are $950,000, the amount of the adjustment to record the provision for doubtful
accounts is:
A.$9,500
B.$500
C.$8,500
D.$9,000
27) An increase in Stockholders’ Equity from revenues earned will also result in an
increase in:
A.liabilities
B.assets
C.expenses
D.cash flow from financing activities
28) Under the indirect method for preparing the statement of cash flows, increases in
current liabilities are _____ the net income in the cash flows from operating activities
section.
A.subtracted from
B.added to
C.not used when calculating
D.equal to
29) Expenses that cannot be traced directly to operations are identified as:
A.other income
B.operating expenses
C.cost of goods sold
D.other expenses
30) Pull manufacturing is driven by:
A.customer demand
B.forecasting customers requirements
C.a production schedule rather than line status
D.pushing inventory ahead to the next station
31) Materials used by Beta-Products Inc. in producing Division 3’s product are
currently purchased from outside suppliers at a cost of $15 per unit. However, the same
materials are available from Division 6 . Division 6 has unused capacity and can
produce the materials needed by Division 3 at a variable cost of $12 per unit. A transfer
price of $13 per unit is established, and 50,000 units of material are transferred with no
reduction in Division 6’s current sales.
How much would Division 3’s income from operations increase?
A.$150,000
B.$50,000
C.$100,000
D.$25,000
32) An entity that is organized according to state or federal statutes and in which
ownership is divided into shares of stock is a:
A.proprietorship
B.corporation
C.partnership
D.governmental unit
33) The relative distribution of sales among the various products sold by a business is
termed as:
A.business’s basket of goods
B.contribution margin mix
C.sales mix
D.product portfolio
34) Fill in the missing amounts of the following balance sheet:
Bruce CompanyBalance SheetDecember 31, 2010
Assets
Cash $3,600
Accounts Receivable 2,700
Supplies (a)
Inventory 5,000
Equipment 7,500
Land 9,300
Total Assets $30,100
Liabilities
Accounts Payable $700
Notes Payable (b)
Total Liabilities $(c)
Stockholders’ Equity
Common Stock $19,500
Retained Earnings 3,300
Total Stockholders’ Equity $22,800
Total Liabilities and Stockholders’ Equity $ (d)
35) The relationship of $225,000 to $100,000, expressed as a ratio, is:
A.2.0 to 1
B.1.8 to 1
C.1.5 to 1
D.2.25 to 1
36) June Co. is evaluating a project requiring a capital expenditure of $620,000. The
project has an estimated life of four years and no salvage value. The estimated net
income and net cash flow from the project are as follows:
The company’s minimum desired rate of return is 12%. The present value of $1 at
compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636,
respectively.
Determine: (a) the average rate of return on investment, giving effect to depreciation on
the investment, and (b) the net present value.
37) Which of the following best describes the behavior of the variable cost per unit?
A.Decreases with increase in production
B.Decreases with decrease in production
C.Remains constant with change in production
D.Increases with increase in production
38) The credit terms of a sale are normally indicated on a(n):
A.purchase order
B.invoice
C.bill of lading
D.check
39) The first month of operation showed the net cash from operating activities to be
$3,760, the net cash from investing activities to be ($5,415), and the ending cash
balance to be $3,425. The net cash from financing activities must be:
A.$1,770
B.$5,080
C.$5,750
D.$12,600
40) A series of equal cash flows at fixed intervals is termed as a(n):
A.present value index
B.price-level index
C.net cash flow
D.annuity
41) Which of the following would be added to the cash balance per books on a bank
reconciliation?
A.Service charges
B.Outstanding checks
C.Deposits in transit
D.Notes collected by the bank
42) The recording of the jobs shipped and customers billed would increase:
A.Accounts Payable
B.Cash
C.Finished Goods
D.Cost of Goods Sold
43) Favorable volume variances may be harmful when:
A.machine repairs cause work stoppages
B.supervisors fail to maintain an even flow of work
C.production in excess of normal capacity cannot be sold
D.there are insufficient sales orders to keep the factory operating at normal capacity
44) If a business had sales of $4,000,000, fixed costs of $1,200,000, a margin of safety
of 25%, and a contribution margin ratio of 40%, what was the break-even point?
A.$3,000,000
B.$2,800,000
C.$4,800,000
D.$2,000,000
45) The inventory data for an item for November are:
Using the last-in, first-out method, what is the cost of the merchandise inventory of 30
units on November 30?
A.$640
B.$630
C.$600
D.$605
46) Which of the following intangible assets are amortized over their useful life?
A.Trademarks
B.Goodwill
C.Patents
D.All of the above
47) Paying expenses affects which financial statement elements?
A.Assets only
B.Stockholders’ equity only
C.Assets and stockholders’ equity
D.Assets and liabilities
48) If there was no beginning retained earnings, net income of $20,000, and ending
retained earnings of $6,000, how much were dividends?
A.$10,000
B.$4,000
C.$6,000
D.$14,000
49) Eagle Eye, Inc., a corporation, received an additional investment of $6,000 cash in
exchange for shares of capital stock. How does this transaction affect Eagle Eye’s
accounts?
A.Increase in stock expense and decrease cash by $6,000 each
B.Increase capital stock and increase cash by $6,000 each
C.Increase capital stock and increase revenue by $6,000 each
D.Increase capital stock and decrease retained earnings by $6,000 each
50) An element of internal control is:
A.generally accepted accounting principles
B.control procedures
C.special-purpose fund
D.electronic funds transfer
51) The following data for the year ended June 30, 2013, were extracted from the
accounting records of Roof Co.:
Prepare a multiple-step income statement for the current year ended June 30, 2013 .
52) Identify the type of adjustment necessary (the type of item involved) and record the
transaction for the event. Make sure to include the ending balances after adjustment.
Assume that on June 1, 2013, Tasty Sausage Corp. received $9,000 in advance to
provide sausages over the next three months. The June 30 adjustment is:
53) Gold Co. sold merchandise to Bronze Co. on account, $23,000, 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 the amount of net income earned by Gold
Co. on the transactions?
54) Explain how the four financial statements are linked.
55) Beginning inventory, purchases, and sales data for May are as follows:
The business uses the first-in, first-out inventory costing method. Determine the cost of
the inventory on hand at the end of May.