1) Most employers are required to withhold federal unemployment taxes from
employee earnings.
2) Paid-in capital and retained earnings are the two major categories of stockholders’
equity for a corporation.
3) FICA tax is a payroll tax that is paid by both the employee and the employer.
4) The percentage analysis of increases and decreases in corresponding items in
comparative financial statements is referred as vertical analysis.
5) Merchandise Inventory is presented on the balance sheet in the current assets section.
6) A customer’s check received in settlement of an account receivable is considered
cash.
7) Miscellaneous expenses are expenses that have an undetermined amount to be paid.
8) If the standard to produce a given amount of product is 1,000 units of direct materials
at $11 and the actual was 800 units at $12, the direct materials price variance was
$1,000 favorable.
9) It is easy to objectively determine the physical decline in the ability of fixed assets to
provide service.
10) Solvency analysis focuses on the ability of a business to make a profit.
11) Reporting under managerial accounting is not restricted by specific rules such as
generally accepted accounting principles (GAAP).
12) Browning, Inc. had revenues of $234,000, expenses of $175,000, and dividends of
$30,000 during 2012 . Which of the following statements is correct?
A.Net income for 2012 totaled $29,000
B.Net income for 2012 totaled $59,000
C.Total retained earnings increased by $59,000 during 2012
D.Total retained earnings decreased by $30,000 during 2012
13) A corporation has 50,000 shares of $100 par value stock outstanding. If the
corporation issues a 4-for-1 stock split, the number of shares outstanding after the split
will be:
A.200,000 shares
B.50,000 shares
C.250,000 shares
D.12,500 shares
14) As interest is recorded on an interest-bearing note, the Interest Expense account is:
A.decreased; the Interest Payable account is increased
B.increased; the Interest Payable account is increased
C.increased; the Notes Payable account is decreased
D.increased; the Notes Payable account is increased
15) A&M Co. provided services of $1,000,000 to clients on account. How does this
transaction affect A&M’s accounts?
A.Increase accounts receivable and cash by $1,000,000 each
B.Increase accounts receivable and revenues by $1,000,000 each
C.Increase accounts receivable and unearned revenues by $1,000,000 each
D.Increase cash and decrease accounts receivable by $1,000,000 each
16) Which of the following is not considered under the double-declining-balance
method?
A.The assets book value
B.The assets initial cost
C.The assets expected useful life
D.The assets residual value
17) Which of the following is an example of direct labor cost for an airplane
manufacturer?
A.Cost of wages of janitors
B.Cost of wages of assembly worker
C.Salary of plant supervisor
D.Salary of the chairman
18) What is subtracted from sales to arrive at net sales?
A.Sales returns and allowances
B.Sales discounts
C.Both sales discounts and sales returns and allowances
D.Neither sales discounts nor sales returns and allowances
19) Raphael Corporation uses the product cost concept of product pricing. Below is cost
information for the production and sale of 50,000 units of its sole product. Raphael
desires a profit equal to a 12% rate of return on invested assets of $1,000,000.
Refer to the information provided for Raphael Corporation. The dollar amount of
desired profit from the production and sale of the companys product is:
A.$117,600
B.$250,000
C.$120,000
D.$245,000
20) A 90-day, 8% note for $10,000 dated May 1 is received from a customer on
account. The maturity value of the note is (Assume 360 days in a year):
A.$10,000
B.$10,800
C.$10,200
D.$9,800
21) Declaring and paying cash dividends affects which account/ accounts?
A.Cash only
B.Capital stock only
C.Cash and retained earnings
D.Cash and capital stock
22) Currently, fixed costs are $500,000 and the unit contribution margin is $40. What
would be the break-even point in units if fixed costs are reduced by $80,000?
A.14,500 units
B.20,000 units
C.10,500 units
D.12,500 units
23) Based on the following information, what is earnings per share?
A.$3.39
B.$3.04
C.$2.96
D.$2.70
24) The balance sheets at the end of each of the first two years of operations indicate
the following:
Based on the above information, if net income is $130,000 and interest expense is
$40,000 for 2013, what is the rate earned on stockholders’ equity for 2013 (round to one
decimal place)?
A.12.0%
B.12.7%
C.13.2%
D.16.5%
25) Which of the following budgets provides the starting point for the preparation of the
direct labor cost budget?
A.Direct materials purchases budget
B.Cash budget
C.Production budget
D.Factory overhead budget
26) Which of the following would not lend itself to applying direct labor variances?
A.Computer help desk operator
B.Administrative assistant
C.Customer service personnel
D.Telemarketer
27) Receipts from cash sales of $7,500 were recorded incorrectly by the depositor as
$5,700. What adjustment is required in the banks accounts?
A.Decrease Sales; decrease Cash
B.Increase Cash; decrease Accounts Receivable
C.Increase Cash; increase Sales
D.No adjustment needed
28) The ability of a business to earn a reasonable amount of income is referred to as the
factor of:
A.leverage
B.profitability
C.wealth
D.solvency
29) Use the correct number to designate each item below:
1) direct materials
2) selling and administrative expenses
3) factory overhead
4) direct labor
a) rent expense on factory building
b) sales supplies used
c) factory supplies used
d) indirect materials used
e) wages of assembly line personnel
f) depreciation on office equipment
g) rent on office facilities
h) insurance expired on factory equipment
i) cost of primary material used to assemble product
30) Cash receipts from interest and dividends are classified as:
A.investing activities
B.operating activities
C.either financing or investing activities
D.financing activities
31) When a product is sold, the cost of the product sold is often called:
A.cost of goods sold
B.selling cost
C.period cost
D.retained cost
32) A voucher:
A.is received from customers to explain the purpose of a payment
B.is normally prepared in the Accounting Department
C.system is used to control cash receipts
D.system is an internal control procedure to verify that the assets in the records are the
ones the company owns
33) Assume that Division X has generated sales revenue of $3,025,000 and achieved
income from operations of $242,000 using $1,800,000 of invested assets. If
management desires a minimum rate of return of 12%, the profit margin would be:
A.59.5%
B.13.4%
C.12%
D.8%
34) The payment of a liability:
A.decreases assets and stockholders’ equity
B.increases assets and decreases liabilities
C.decreases assets and increases liabilities
D.decreases assets and decreases liabilities
35) Assume that divisional income from operations amounts to $187,000 and top
management has established 12% as the minimum rate of return on divisional assets
totaling $1,000,000. The residual income for the division is:
A.$67,000
B.$22,440
C.$120,000
D.$0
36) For EFG Co., the transaction “payment to creditors” would:
A.increase total assets
B.decrease total assets
C.have no effect on total assets
D.decrease stockholders equity
37) St. Nick Corporation’s Toy-Making Supplies account showed a beginning balance
of $200 and supplies purchased of $800. There were $400 of supplies on hand at
year-end. The year-end adjustment would include an increase in Toy-Making Supplies
Expense for
A.$1,000
B.$800
C.$600
D.$400
38) Multiple-step income statements show:
A.gross profit but not net income
B.neither gross profit nor net income
C.gross profit but not cost of merchandise sold
D.gross profit, cost of merchandise sold, income from operations and net income
39) The profit margin for Division K is 9% and the investment turnover is 1.20 . What
is the rate of return on investment for Division K?
A.10.8%
B.6.7%
C.7.5%
D.9.6%