1) During periods of increasing costs, the use of the FIFO method of costing inventory
will result in a greater amount of net income than would result from the use of the LIFO
cost method.
2) In a process costing system, costs flow into finished goods inventory only from the
work in process inventory of the last manufacturing process.
3) The balance sheet represents the accounting equation.
4) Break-even analysis is one type of cost-volume-profit analysis.
5) The carrying amount of the bonds is defined as the face value of the bonds plus any
unamortized discount or less any unamortized premium.
6) Generally accepted accounting principles require accrual-basis accounting.
7) Costs of ending work in process inventory are included in the cost per equivalent unit
computation.
8) It is beneficial for two related companies to use the cost price approach for transfer
pricing when both of the companies operate as cost centers and are not concerned with
the revenue.
9) Adjusting entries affect only expense and asset accounts.
10) If the share of losses on realization of the sale of noncash assets exceed the balance
in a partner’s capital account, the resulting balance is called a deficiency.
11) Direct materials, direct labor, and factory overhead are assigned to each
manufacturing process in a process costing system.
12) Total variable costs change as the level of activity changes.
13) The process of recording a transaction in the journal is called
A.recording
B.journalizing
C.posting
D.summarizing
14) Ruby Company produces a chair that requires 5 yds. of material per unit. The
standard price of one yard of material is $7.50. During the month, 8,400 chairs were
manufactured, using 43,700 yards at a cost of $7.30 per yard. Determine the (a) price
variance, (b) quantity variance, and (c) cost variance.
15) The following units of an inventory item were available for sale during the year:
The firm uses the periodic inventory system. During the year, 60 units of the item were
sold.
The value of ending inventory using average cost is:
A.$1,353
B.$1,263
C.$1,375
D.$1,150
16) Goods that are partially completed by a manufacturer are referred to as:
A.merchandise inventory
B.work in process inventory
C.finished goods inventory
D.materials inventory
17) If the maker of a promissory note fails to pay the note on the due date, the note is
said to be
A.displaced
B.disallowed
C.dishonored
D.discounted
18) As production increases, what should happen to the variable costs per unit?
A.Stay the same
B.Increase
C.Decrease
D.Either increase or decrease, depending on the fixed costs
19) Dove Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $250,000, $320,000, and
$410,000, respectively, for September, October, and November. The company expects
to sell 25% of its merchandise for cash. Of sales on account, 70% are expected to be
collected in the month of the sale, 30% in the month following the sale.
The cash collections in October are:
A.$320,000
B.$248,000
C.$304,250
D.$382,500
20) For each of the following, identify whether it would be disclosed as an operating
(O), financing (F), or investing (I) activity on the statement of cash flows under the
indirect method.
a. Purchased treasury stock
b. Sold equipment at book value
c. Net income
d. Sold long-term investments
e. Issued common stock
f. Depreciation expense
21) XYZ Co. incurred the following costs related to the office building used in
operating its sports supply company:
a. Replaced a broken window.
b. Replaced the roof that had been on the building 23 years.
c. Serviced all the air conditioners before summer started.
d. Replaced the air conditioners with refrigerated air conditioners in the customer
service areas.
e. Added a warehouse to the back of the building.
f. Repainted the interior walls.
g. Installed window shutters on all windows.
Classify each of the costs as a capital expenditure or a revenue expenditure. For those
costs identified as capital expenditures, classify each as an additional or replacement
component.
22) Down-Under, an aquatic supply store, makes the following five payments during
August. Journalize them in the Cash Payments Journal as appropriate.
(a) On August 2nd, Down-Under paid Pondmaster, Inc with check 6420 for 6 pumps at
$435.00 each. The pumps had been purchased in July on account.
(b) On August 10th, Down-Under purchased $785.00 of office supplies from Business
Systems with check 6421
(c) On August 15th, Down-Under pays Aqua Magic $215.00 on account with check
6422
(d) On August 27th, Down-Under pays an invoice for merchandise received earlier
from Spindrifter, Inc. for eight drains at $73.50 each. They wrote check 6423.
(e) On August 31st, Down-Under purchased $65.00 of Koi clay from The Natural
Wonder Company by writing check 6424 (Utilize Pond Supplies Expense).
23) Costs which are reported on the income statement as part of cost of goods sold are
referred to as:
A.administrative expenses
B.period costs
C.cost of goods manufactured
D.operating expenses
24) For January, sales revenue is $700,000; sales commissions are 5% of sales; the sales
manager’s salary is $96,000; advertising expenses are $90,000; shipping expenses total
2% of sales; and miscellaneous selling expenses are $2,100 plus 1/2 of 1% of sales.
Total selling expenses for the month of January are:
A.$157,100
B.$240,600
C.$183,750
D.$182,100
25) There are three parties to a check. The drawer is
A.a written document signed by the company
B.is the one who signs the check ordering payment by the bank
C.the bank on which the check is drawn
D.the party to whom payment is to be made
26) On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment
note from Regional Bank. The note requires annual payments consisting of principal
and interest of $15,179, beginning on December 31, 2011. The December 31, 2011
carrying amount in the amortization table for this installment note will be equal to:
A.$27,635
B.$40,201
C.$36,821
D.$48,620
27) Which of the following is the best description of accountings role in business?
A.Accounting provides stockholders with information regarding the market value of the
companys stocks
B.Accounting provides information to managers to operate the business and to other
users to make decisions regarding the economic condition of the company
C.Accounting helps in decreasing the credit risk of the company
D.Accounting is not responsible for providing any form of information to users. That is
the role of the Information Systems Department
28) The balance of the account is determined by
A.adding all of the debits to all of the credits
B.always subtracting the debits from the credits
C.always subtracting the credits from the debits
D.adding all of the debits, adding all of the credits, and then subtracting the smaller sum
from the larger sum
29) Cash dividends of $45,000 were declared during the year. Cash dividends payable
were $10,000 at the beginning of the year and $15,000 at the end of the year. The
amount of cash for the payment of dividends during the year is
A.$50,000
B.$40,000
C.$55,000
D.$35,000
30) Under which of the following cases may a percentage change be computed?
A.There is no amount in the base year
B.There is a negative amount in the base year and a negative amount in the subsequent
year
C.The trend of the amounts is decreasing but all amounts are positive
D.There is a negative amount in the base year and a positive amount in the subsequent
year
31) At the end of the year, overhead applied was $35,000,000. Actual overhead was
$34,300,000. Closing over/under applied overhead into cost of goods sold would cause
net income to:
A.Increase by $700,000
B.Decrease by $700,000
C.Remain constant
D.Decrease by $300,000
32) Equipment was acquired at the beginning of the year at a cost of $75,000. The
equipment was depreciated using the straight-line method based upon an estimated
useful life of 6 years and an estimated residual value of $7,500.
a) What was the depreciation expense for the first year?
b) Assuming the equipment was sold at the end of the second year for $59,000,
determine the gain or loss on sale of the equipment.
c) Journalize the entry to record the sale.
33) Selected data for the current year ended December 31 are as follows:
During the current year, the cost of merchandise sold was $620,000 and the operating
expenses other than depreciation were $142,000. The direct method is used for
presenting the cash flows from operating activities on the statement of cash flows.
Determine the amount reported on the statement of cash flows for (a) cash payments for
merchandise and (b) cash payments for operating expenses.
34) When a partner dies, the capital account balances of the remaining partners
A.will increase
B.will decrease
C.will remain the same
D.may increase, decrease, or remain the same
35) If fixed costs are $750,000 and variable costs are 60% of sales, what is the
break-even point in sales dollars?
A.$1,250,000
B.$450,000
C.$1,875,000
D.$300,000
36) Singer and McMann are partners in a business. Singers original capital was $40,000
and McManns was $60,000. They agree to salaries of $12,000 and $18,000 for Singer
and McMann respectively and 10% interest on original capital. If they agree to share
remaining profits and losses on a 3:2 ratio, what will Singers share of the income be if
the income for the year was $50,000?
A.$24,000
B.$22,000
C.$16,000
D.$23,400
37) On the statement of cash flows, the cash flows from financing activities section
would include all of the following except
A.receipts from the sale of bonds payable
B.payments for dividends
C.payments for purchase of treasury stock
D.payments of interest on bonds payable
38) Identify the following as a Fixed Asset (FA), or Intangible Asset (IA), or Natural
Resource (NR), or Neither (N)
(a) computer
(b) patent
(c) oil reserve
(d) goodwill
(e) U. S. Treasury note
(f) land used for employee parking
(g) gold mine
39) Which of the following abbreviations is correct?
A.Debit Dr, Credit Cd
B.Debit Db, Credit Cr
C.Debit Db, Credit Cd
D.Debit Dr, Credit Cr
40) The following financial information was summarized from the accounting records
of Train Corporation for the current year ended December 31:
The income from operations for the Locomotive Division is:
A.$57,960
B.$14,790
C.$27,240
D.$47,280
41) A summary of cash flows for Lopez Wedding Planning for the year ended
December 31, 2011 is shown below.
Prepare a statement of cash flows for Lopez Wedding Planning for the year ended
December 31, 2011.
42) Determine the average rate of return for a project that is estimated to yield total
income of $250,000 over four years, cost $480,000, and has a $20,000 residual value.
43) On March 4, of the current year, Barefoot Bay, Inc. reacquired 5,000 shares of its
common stock at $89 per share. On August 7, Barefoot Bay sold 3,500 of the
reacquired shares at $100 per share. The remaining 1,500 shares were sold at $88 per
share on November 29.
Required:
44) To meet projected annual sales, Greenleaf Manufacturers, Inc. needs to produce
75,000 machines for 2012. The estimated January 1, 2012, inventory is 7,000 units, and
the desired December 31, 2012, inventory is 12,000 units. What are projected sales
units for 2012?
45) Crane Company Division B recorded sales of $360,000, variable cost of goods sold
of $315,000, variable selling expenses of $13,000, and fixed costs of $61,000, creating
a loss from operations of $29,000. Determine the differential income or loss from the
sales of Division B. Should this division be discontinued?
46) The end-of-period spreadsheet (work sheet) for the current year for Jamal Company
shows Balance Sheet columns with a debit total of $630,430 and a credit total of
$614,210. This is before the amount for net income or net loss has been included. In
preparing the income statement from work sheet, what is the amount of net income or
net loss?