1) A corporation must be incorporated in each state in which it does business.
2) The trial balance will not balance when incorrect account titles are used in
journalizing or posting.
3) The chart of accounts is a special ledger used in accounting systems.
4) A note is dishonored when it is not fully paid at maturity.
5) If the unit contribution margin is $1 and unit sales are 10,000 units above the
break-even volume, then net income will be $10,000.
6) Costs will not change in total within the relevant range of activity.
7) The amount of a cash dividend liability is recorded on the date of record because it is
on that date that the persons or entities who will receive the dividend are identified.
8) Operating expenses are different for merchandising and service enterprises.
9) The statement of cash flows classifies cash receipts and payments as operating,
nonoperating, financial, and extraordinary activities.
10) Controllable margin is subtracted from controllable fixed costs to get net income for
a profit center.
11) Long-range plans are used more as a review of progress toward long-term goals
rather than an evaluation of specific results to be achieved.
12) A master budget is most useful in evaluating a manager’s performance in controlling
costs.
13) A contribution format income statement classifies costs by function, but a
traditional income statement classifies costs by cost behavior (variable or fixed).
14) In the vertical analysis of the income statement, each item is generally stated as a
percentage of net income.
15) Managerial accounting applies to all forms of business organizations.
16) The basic decision rule in a sell or process further decision is: sell without further
processing as long as the incremental revenue from processing exceeds the incremental
processing costs.
17) The custodian of the petty cash fund has the responsibility of recording a journal
entry every time cash is used from the fund.
18) The three basic tools of analysis are horizontal analysis, vertical analysis, and ratio
analysis.
19) The cost of natural resources is not allocated to expense because the natural
resources are replaceable only by an act of nature.
20) If an item meets one (but not both) of the criteria for an extraordinary item, it
a.only needs to be disclosed in the footnotes of the financial statements
b.may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a
loss)
c.is reported as an “other revenue or gain” or “other expense and loss,” net of tax
d.is reported at its gross amount as an “other revenue or gain” or “other expense or loss”
21) The market interest rate is often called the
a.stated rate
b.effective rate
c.coupon rate
d.contractual rate
22) Three accounting issues associated with accounts receivable are
a.depreciating, returns, and valuing
b.depreciating, valuing, and collecting
c.recognizing, valuing, and disposing
d.accrual, bad debts, and disposing
23) Bylander Company’s records show the following for the month of March:
Total Owner’s Equity at March 1$140,000
Total Owner’s Equity at March 31210,000
Total Revenues530,000
Total Withdrawals by Owner25,000
There were no investments made during March. Total expenses for March were:
a.$505,000
b.$435,000
c.$530,000
d.$460,000
24) Preferred stock that is required to be redeemed at a specific point in time in the
future is reported
a.as equity
b.as debt
c.as debt or equity depending on the circumstances
d.in a “mezzanine” area between debt and equity
25) Jakes Market recorded the following events involving a recent purchase of
merchandise:
Received goods for $60,000, terms 2/10, n/30.
Returned $1,200 of the shipment for credit.
Paid $300 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the companys inventory increased by
a.$57,624
b.$57,918
c.$57,924
d.$59,100
26) Shakey Company issued $500,000 of 6%, 5-year bonds at 98, with interest paid
annually. Assuming straight-line amortization, what is the total interest cost of the
bonds?
a.$150,000
b.$160,000
c.$145,000
d.$140,000
27) Kent Co. manufactures a product with a standard direct labor cost of two hours at
$18.10 per hour. During August, 2,000 units were produced using 4,200 hours at $18.30
per hour. The labor price variance was
a.$840 U
b.$800 U
c.$3,660 F
d.$3,620 U
28) Match the principle of internal control to each of the following cases.
a)Establishment of responsibility
b)Segregation of duties
c)Accountability for assets
d)Documentation procedures
e)Physical controls
1>Cash is locked in a safe overnight.
2>Employees who receive shipments of goods do not have access to the accounting
records for merchandise.
3>Shipping documents are prenumbered.
4>The bookkeeper does not have physical custody of assets.
5>Only the treasurer of the company can sign checks.
29) Barsuk Company began the year with owners equity of $108,000. During the year,
Barsuk received additional owner investments of $147,000, recorded expenses of
$420,000, and had owner drawings of $28,000. If Barsuks ending owners equity was
$290,000, what was the companys revenue for the year?
a.$455,000
b.$483,000
c.$602,000
d.$630,000
30) Materials costs of $500,000 and conversion costs of $535,500 were charged to a
processing department in the month of September. Materials are added at the beginning
of the process, while conversion costs are incurred uniformly throughout the process.
There were no units in beginning work in process, 100,000 units were started into
production in September, and there were 8,000 units in ending work in process that
were 40% complete at the end of September.
What was the total amount of manufacturing costs assigned to those units that were
completed and transferred out of the process in September?
a.$460,000
b.$977,500
c.$1,035,500
d.$1,063,000
31) The entry to replenish a petty cash fund includes a credit to
a.Petty Cash
b.Cash
c.Freight-in
d.Postage Expense
32) The following information pertains to Rural Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Cash and short-term investments$ 40,000
Accounts receivable (net)30,000
Inventory25,000
Property, plant and equipment 215,000
Total Assets$310,000
Liabilities and Stockholders Equity
Current liabilities$ 60,000
Long-term liabilities75,000
Stockholders equitycommon 175,000
Total Liabilities and Stockholders Equity$310,000
Income Statement
Sales$ 95,000
Cost of goods sold 45,000
Gross profit50,000
Operating expenses 15,000
Net income$ 35,000
Number of shares of common stock5,000
Market price of common stock$21
Dividends per share1.00
What is the price-earnings ratio for Rural?
a.8 times
b.4.0 times
c.7.0 times
d.3.0 times
33) Turnbull Manufacturing Company reported the following year-end information:
Beginning work in process inventory $ 35,000
Beginning raw materials inventory20,000
Ending work in process inventory40,000
Ending raw materials inventory10,000
Raw materials purchased560,000
Direct labor180,000
Manufacturing overhead150,000
How much is Turnbull Manufacturings total cost of work in process for the year?
a.$900,000
b.$895,000
c.$935,000
d.$885,000
34) Which of the following errors will cause a trial balance to be out of balance? The
entry to record a payment on account was:
a.posted as a debit to Accounts Receivable and a credit to Cash
b.posted as a debit to Cash and a credit to Accounts Payable
c.posted as a debit to Cash and a debit to Accounts Payable
d.not posted at all
35) A corporation purchases 60,000 shares of its own $30 par common stock for $45
per share, recording it at cost. What will be the effect on total stockholders equity?
a.Increase by $2,700,000
b.Decrease by $1,800,000
c.Decrease by $2,700,000
d.Increase by $1,800,000
36) A correcting entry
a.must involve one balance sheet account and one income statement account
b.is another name for a closing entry
c.may involve any combination of accounts
d.is a required step in the accounting cycle
37) Examples of provisions include each of the following except provisions for
a.anticipated losses
b.defined contribution plans
c.employee vacation pay
d.warranties
38) Internal users of accounting information include all of the following except
a.company officers
b.investors
c.marketing managers
d.production supervisors
39) Which of the following would not be considered an external user of accounting data
for the GHI Company?
a.Internal Revenue Service Agent
b.Management
c.Creditors
d.Customers
40) Hoot Division of Taylor Companys operating results include: controllable margin,
$400,000; sales $4,400,000; and operating assets, $1,600,000. The Hoot Divisions ROI
is 25%. Management is considering a project with sales of $200,000, variable expenses
of $120,000, fixed costs of $80,000; and an asset investment of $275,000. Should
management accept this new project?
a.No, since ROI will be lowered
b.Yes, since ROI will increase
c.Yes, since additional sales always mean more customers
d.No, since a loss will be incurred
41) Timber Company had the following department information for the month:
Total materials costs$ 90,000
Equivalent units of materials10,000
Total conversion costs$100,000
Equivalent units of conversion costs20,000
How much is the total manufacturing cost per unit?
a.$14.00
b.$6.33
c.$6.5
d.$8.9
42) The face value of a note refers to the amount
a.that can be received if sold to a factor
b.borrowed plus interest received at maturity from the maker
c.that is identified on the formal instrument of credit
d.remaining after a service charge has been deducted
43) The journal entry to record a credit sale is
a.Cash
Sales Revenue
b.Cash
Service Revenue
c.Accounts Receivable
Service Revenue
d.Accounts Receivable
Sales Revenue
44) Which of the following statements concerning the statement of cash flows is true?
a.The statement of cash flows is usually more accurate when using the indirect method
b.If the direct method is used, a supplementary schedule reconciling the net income to
net cash from operating activities must still be provided
c.The statement of cash flows reflects both earnings per share and cash per share
d.The statement of cash flows is an optional financial statement for external reporting
purposes
45) The total units to be accounted for is computed by adding
a.beginning units in process to units transferred out
b.ending units in process to units started into production
c.beginning units in process to units started into production
d.ending units in process to total units accounted for
46) If the standard hours allowed are less than the standard hours at normal capacity,
a.the overhead volume variance will be unfavorable
b.variable overhead costs will be under applied
c.the overhead controllable variance will be favorable
d.variable overhead costs will be overapplied
47) Ale Company has other operating expenses of $80,000. There has been a decrease
in prepaid expenses of $6,000 during the year, and accrued liabilities are $5,000 larger
than in the prior period. What were Ale’s cash payments for operating expenses?
a.$81,000
b.$82,000
c.$69,000
d.$80,000
48) At December 31, 2014, before any year-end adjustments, Murmur Company’s
Insurance Expense account had a balance of $2,450 and its Prepaid Insurance account
had a balance of $3,800. It was determined that $2,800 of the Prepaid Insurance had
expired. The adjusted balance for Insurance Expense for the year would be
a.$2,450
b.$3,450
c.$2,800
d.$5,250
49) If the manufacturing overhead costs applied to jobs worked on were greater than the
actual manufacturing costs incurred during a period, overhead is said to be
a.underapplied
b.overapplied
c.in error
d.prepaid
50) Carey Company buys land for $50,000 on 12/31/13 . As of 3/31/14, the land has
appreciated in value to $50,700. On 12/31/14, the land has an appraised value of
$51,800. By what amount should the Land account be increased in 2014?
a.$0
b.$700
c.$1,100
d.$1,800
51) The information below relates to the Cash account in the ledger of Lee Company.
Balance September 1$25,725; Cash deposited$96,000.
Balance September 30$22,225; Checks written$99,500.
The September bank statement shows a balance of $24,635 on September 30 and the
following memoranda.
CreditsDebits
Collection of $4,250 note plus interest $50$4,300NSF check: J. E. Hoover$735
Interest earned on checking account$40Safety deposit box rent$75
At September 30, deposits in transit were $4,695, and outstanding checks totaled
$3,575.
Instructions
Prepare the bank reconciliation at September 30 .
52) The reporting standard for external financial reports is
a.industry-specific
b.company-specific
c.generally accepted accounting principles
d.department-specific
53) The date a cash dividend becomes a binding legal obligation to a corporation is the
a.declaration date
b.earnings date
c.payment date
d.record date
54) Jeans Vegetable Market had the following transactions during 2014:
1>Issued $50,000 of par value common stock for cash.
2>Repaid a 6 year note payable in the amount of $22,000.
3>Acquired land by issuing common stock of par value $100,000.
4>Declared and paid a cash dividend of $2,000.
5>Sold a long-term investment (cost $3,000) for cash of $8,000.
6>Acquired an investment in IBM stock for cash of $15,000.
What is the net cash provided used by investing activities?
a.$15,000
b.$33,000
c.($7,000)
d.$8,000
Solution; $8,000 $15,000 ($7,000)
55) XYZ Company accepted a national credit card for a $4,000 purchase. The cost of
the goods sold is $2,400. The credit card company charges a 3% fee. What is the impact
of this transaction on net operating income?
a.Increase by $1,480
b.Increase by $1,552
c.Increase by $1,600
d.Increase by $3,880
56) The trial balances before and after adjustments for Old Julian Calendars at the end
of its fiscal year are presented below.
Old Julian Calendars
Trial Balance
September 31, 2014
Before AdjustmentAfter Adjustment
Dr. Cr. Dr. Cr.
Cash$ 15,080$ 15,080
Accounts Receivable14,96016,110
Supplies2,760885
Prepaid Insurance5,8001,450
Equipment13,30013,300
Accumulated Depreciation Equip$ 5,220$ 6,960
Accounts Payable9,8609,860
Salaries and Wages Payable4,500
Unearned Sales Revenue2,1751,150
Unearned Rent Revenue2,100525
Owner’s Capital18,39518,395
Sales Revenue48,80050,975
Rent Revenue1,5753,150
Salaries and Wages Expense36,22540,725
Supplies Expense1,875
Insurance Expense04,350
Depreciation Expense 0 0 1,740 0
$ 88,125$ 88,125$ 95,515$ 95,515
Instructions
Prepare the adjusting entries that were made.
57) The standard number of hours allowed times the predetermined overhead rate is the
amount of ________________ to the products produced.
58) Gigberry Company provided the following information concerning two products:
Contribution margin per unitProduct 13 $23
Contribution margin per unitProduct 44 $18
Machine hours required for one unitProduct 132.5 hours
Machine hours required for one unitProduct 441.5 hours
Instructions
Compute the contribution margin per unit of limited resource for each product. Which
product should Gigberry tell its sales personnel to push to customers?
59) Based on the following information, compute the (1) current ratio and (2) working
capital.
Current assets$200,000
Total assets900,000
Current liabilities80,000
Total liabilities500,000
60) For each of the following, indicate whether the transaction affects revenue (R),
expense (E), owner’s drawing (D), owner’s investment (I), or no effect on owner’s
equity (NOE).
1>Made an investment to start the business.
2>Billed customers for services performed.
3>Purchased equipment on account.
4>Paid monthly rent.
5>Withdrew cash for personal use.
61) On February 1, Brutus Company purchased 1,000 shares (2% ownership) of Wynne
Company common stock for $25 per share. On March 20, Brutus Company sold 200
shares of Wynne stock for $4,700. Brutus received a dividend of $1.20 per share on
April 25 . On June 15, Marcus sold 300 shares of Wynne stock for $8,500.
Instructions
Prepare the journal entries to record the transactions described above.
62) Jamison Company received a bank statement for the month of July 2014, which
showed a balance per bank of $2,750. The company’s Cash account in the general
ledger showed a balance of $2,140 at July 31 . Other information that may be relevant
in preparing a bank reconciliation for July follows:
1>The bank returned an NSF check from a customer for $255.
2>The company recorded cash receipts of $405 on July 31 but this amount does not
appear on the bank statement.
3>A payroll check correctly written and paid by the bank for $560 was incorrectly
recorded in the cash payments journal for $650.
4>Checks which were written in June but still had not been presented to the bank for
payment at July 31 amounted to $125.
5>The bank included a credit memorandum for $600, which represents a collection of a
customer’s note by the bank for the company; principal amount of the note was $450
and the remainder was interest.
6>The bank included a $15 debit memorandum for service charges for the month of
July.
7>Checks written in July which have not been paid by the bank at July 31 amounted to
$470.
Instructions:
1>Prepare a bank reconciliation for Jamison Company for July which reconciles the
balance per books and the balance per bank to their adjusted correct balances.
2>Prepare the necessary adjusting entries for Jamison Company at July 31, 2014 .
63) The balance sheets of Red House Painters include the following:
12/31/1412/31/13
Interest Receivable$0$4,300
Supplies3,0005,000
Salaries and Wages Payable3,8005,600
Unearned Service Revenue4,000-0-
The income statement for 2014 shows the following:
Interest Revenue$18,400
Service Revenue72,700
Supplies Expense8,700
Salaries and Wages Expense39,000
Instructions
Calculate the following for 2014:
1>Cash received for interest.
2>Cash paid for supplies.
3>Cash paid for salaries and wages.
4>Cash received for revenue.
