1) Accrued revenues are revenues which have been received but not yet recognized.
2) The time period assumption is often referred to as the expense recognition principle.
3) The adjustments on a worksheet can be posted directly to the accounts in the ledger
from the worksheet.
4) The acquisition of treasury stock by a corporation increases total assets and total
stockholders’ equity.
5) The manager of an investment center can improve ROI by reducing average
operating assets.
6) Once an asset is fully depreciated, no additional depreciation can be taken even
though the asset is still being used by the business.
7) A benefit of budgeting is that it provides definite objectives for evaluating
performance.
8) Earnings per share indicates the net income earned by each share of outstanding
common stock.
9) The manufacturing overhead budget generally has separate sections for variable,
mixed, and fixed costs.
10) The basic principles of an accounting information system are cost awareness,
usefulness, and fixed structure.
11) The major difference between the balance sheets of a service company and a
merchandising company is inventory.
12) Only transactions that cannot be entered in a special journal are recorded in the
general journal.
13) Using vertical analysis of the income statement, a company’s net income as a
percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales
must be 90%.
14) The cash payments journal only has one column because all entries recorded in this
journal require a credit to the Cash account.
15) If bonds sell at a premium, the interest expense recognized each year will be greater
than the contractual interest rate.
16) In an admission of a partner by investment of assets, the total net assets and total
capital of the partnership do not change.
17) A job order cost system is most appropriate when a large volume of uniform
products are produced.
18) Large inventories of raw materials must be maintained in a just-in-time system.
19) Carter Corporation reported net sales of $250,000, $400,000, and $600,000 in the
years 2013, 2014, and 2015 respectively. If 2013 is the base year, what is the trend
percentage for 2015?
a.100%
b.40%
c.140%
d.240%
20) The following information is available for Heller Company:
Beginning inventory$ 60,000
Cost of goods sold640,000
Ending inventory100,000
Sales revenue1,000,000
Instructions
Compute each of the following:
(a)Inventory turnover.
(b)Days in inventory.
21) (a)Karns Company purchased merchandise on account from Bailey Office Suppliers
for $174,000, with terms of 2/10, n/30. During the discount period, Karns returned
some merchandise and paid $156,800 as payment in full. Karns uses a perpetual
inventory system. Prepare the journal entries that Karns Company made to record:
(1)the purchase of merchandise.
(2)the return of merchandise.
(3)the payment on account.
(b)Hinds Company sold merchandise to Peter Company on account for $146,000 with
credit terms of ?/10, n/30. The cost of the merchandise sold was $86,140. During the
discount period, Peter Company returned $6,000 of merchandise and paid its account in
full (minus the discount) by remitting $137,200 in cash. Both companies use a perpetual
inventory system. Prepare the journal entries that Hinds Company made to record:
(1)the sale of merchandise.
(2)the return of merchandise.
(3)the collection on account.
22) Equivalent units for materials total 30,000. There were 24,000 units completed and
transferred out. Equivalent units for conversion costs equals 27,000. How much are the
physical units for conversion costs if ending work in process is 50% complete?
a.27,000
b.30,000
c.6,000
d.24,000
23) At March 31, account balances after adjustments for Vizzini Cinema are as follows:
Account Balances
Accounts(After Adjustment)
Cash$ 11,000
Supplies4,000
Equipment50,000
Accumulated DepreciationEquipment12,000
Accounts Payable5,000
Owners, Capital20,000
Owners, Drawings12,000
Ticket Revenue65,000
Service Revenue53,000
Advertising Expense18,000
Supplies Expense19,000
Depreciation Expense4,000
Rent Expense28,000
Salaries and Wages Expense24,000
Utilities Expense5,000
Instructions
Prepare the closing journal entries for Vizzini Cinema.
24) Karpentry Company is unsure of whether to sell its product assembled or
unassembled. The unit cost of the unassembled product is $30 and Karpentry would sell
it for $66. The cost to assemble the product is estimated at $21 per unit and the
company believes the market would support a price of $85 on the assembled unit. What
decision should Karpentry make?
a.Sell before assembly, the company will be better off by $1 per unit
b.Sell before assembly, the company will be better off by $2 per unit
c.Process further, the company will be better off by $29 per unit
d.Process further, the company will be better off by $14 per unit
25) Deerhoof Company purchases equipment for $2,700 and supplies for $400 from
Milkman Co. for $3,100 cash. The entry for this transaction will include a
a.debit to Equipment $2,700 and a debit to Supplies Expense $400 for Milkman
b.credit to Cash for Milkman
c.credit to Accounts Payable for Deerhoof
d.debit to Equipment $2,700 and a debit to Supplies $400 for Deerhoof
26) In calculating net cash provided by operating activities using the indirect method,
an increase in prepaid expenses during a period is
a.deducted from net income
b.added to net income
c.ignored because it does not affect income
d.ignored because it does not affect expenses
27) Zaliff Co. has 22,000 units in beginning finished goods. If sales are expected to be
120,000 units for the year and Baliff desires ending finished goods of 30,000 units, how
many units must the company produce?
a.112,000
b.120,000
c.128,000
d.150,000
28) A new average cost is computed each time a purchase is made in the
a.average-cost method
b.moving-average cost method
c.weighted-average cost method
d.All of these choices are correct
29) Internal controls are concerned with
a.only manual systems of accounting
b.the extent of government regulations
c.safeguarding assets
d.preparing income tax returns
30) The Uniform Partnership Act provides that
a.a purchaser of a partnership interest is not a partner until he or she is accepted into the
firm by the continuing partners
b.a partner must obtain the approval of other partners before selling his or her interest
c.the price paid in a purchase of partner’s interest must be equal to the capital equity
acquired
d.the price paid in a purchase of partner’s interest must be greater than the capital equity
acquired
31) A flexible budget
a.is prepared when management cannot agree on objectives for the company
b.projects budget data for various levels of activity
c.is only useful in controlling fixed costs
d.cannot be used for evaluation purposes because budgeted data are adjusted to reflect
actual results
32) Match the items below by entering the appropriate letter in the space.
1>Partnership
2>Liabilities
3>Revenues
4>General ledger
5>Expense Recognition Principle
6>Unearned service revenue
7>Income summary
8>Intangible assets
9>Freight-out
10>Sales returns and allowances
A.A contra-revenue account.
B.Creditorship claims on total assets.
C.Noncurrent resources that do not have a physical substance.
D.Gross increases in owner’s equity resulting from business activities entered into for
the purpose of earning income.
E.The matching of efforts (expenses) with accomplishments (revenues).
F.Freight costs incurred by the seller.
G.An economic entity which is not a separate legal entity.
H.A temporary account used in closing revenue and expense accounts.
I.Contains all assets, liabilities, and owner’s equity accounts.
J.A liability created when cash is received in advance of performing a service for a
customer.
33) The cost of goods sold during the year was $183,000. Merchandise inventory
decreased by $8,000 during the year and accounts payable decreased by $4,000 during
the year. Using the direct method of reporting cash flows from operating activities, cash
payments for merchandise total
a.$187,000
b.$179,000
c.$171,000
d.$195,000
34) A company can sell all the units it can produce of either Product A or Product B but
not both. Product A has a unit contribution margin of $16 and takes two machine hours
to make and Product B has a unit contribution margin of $30 and takes three machine
hours to make. If there are 1,000 machine hours available to manufacture a product,
income will be
a.$2,000 more if Product A is made
b.$2,000 less if Product B is made
c.$2,000 less if Product A is made
d.the same if either product is made
35) Matador Company purchases $1,300 of equipment from Danger Mouse Inc. for
cash. The effect on the components of the basic accounting equation of Matador
Company is
a.an increase in assets and liabilities
b.a decrease in assets and liabilities
c.no change in total assets
d.an increase in assets and a decrease in liabilities
36) To be classified as a short-term investment, an investment must meet the following
criteria:
Intent to Convert Within
No LossOne Year or Operating
Readily MarketableOn DisposalCycle Whichever is Longer
a.YesYesYes
b.YesNoYes
c.NoNoYes
d.NoYesNo
37) On January 1, 2014, Key Company, a calendar-year company, issued $250,000 of
notes payable, of which $62,500 is due on January 1 for each of the next four years. The
proper balance sheet presentation on December 31, 2014, is
a.Current Liabilities, $250,000
b.Long-term Debt , $250,000
c.Current Liabilities, $62,500; Long-term Debt, $187,500
d.Current Liabilities, $187,500; Long-term Debt, $62,500
38) The Polishing Department of Eia Manufacturing Company has the following
production and manufacturing cost data for September. Materials are entered at the
beginning of the process.
Production: Beginning inventory 2,000 units that are 100% complete as to materials and
30% complete as to conversion costs; units started during the period are 40,000, ending
inventory of 8,000 units 7.5% complete as to conversion costs.
Manufacturing costs: Beginning inventory costs, comprised of $18,500 of materials and
$13,000 of conversion costs; materials costs added in Polishing during the month,
$202,000 labor and overhead applied in Polishing during the month $176,200 and
$312,500 respectively.
Instructions
(a)Compute the equivalent units of productions for materials and conversion costs for
the month of September.
(b)Compute the unit costs for materials and conversion costs for the month.
(c)Determine the costs to be assigned to the units transferred out and in process.
39) UltraPure has a contribution margin per unit of $24 and it takes 2 machine hours to
produce one unit. The contribution margin per unit of limited resource is:
a.$12
b.$22
c.$24
d.$26
40) Zeus Corporation issued 5,000 shares of stock.
Instructions
Prepare the entry for the issuance under the following assumptions.
(a)The stock had a par value of $5 per share and was issued for a total of $65,000.
(b)The stock had a stated value of $5 per share and was issued for a total of $65,000.
(c)The stock had a par value of $5 per share and was issued to attorneys for services
during in-corporation valued at $65,000.
(d)The stock had a par value of $5 per share and was issued for land worth $65,000.
41) When the allowance method is used for bad debts, the entry to write off an
individual account known to be uncollectible involves a:
a.debit to an expense account
b.credit to an expense account
c.credit to the allowance account
d.debit to the allowance account
42) Carmine Company budgets on an annual basis for its fiscal year. The following
beginning and ending inventory levels are planned for the fiscal year of July 1, 2014 to
June 30, 2015:
June 30, 2015June 30, 2014
Raw Materials3,000 kilos4,000 kilos
Three kilos of raw materials are needed to produce each unit of finished product. If
Carmine plans to produce 560,000 units during the 2014-2015 fiscal year, how many
kilos of materials will the company need to purchase for its production during the year?
a.1,681,000
b.1,683,000
c.1,680,000
d.1,679,000
43) If a company fails to make an adjusting entry to record supplies expense, then
a.owner’s equity will be understated
b.expense will be understated
c.assets will be understated
d.net income will be understated
44) Carelli Company has old inventory on hand that cost $36,000. Its scrap value is
$48,000. The inventory could be sold for $120,000 if manufactured further at an
additional cost of $38,000. What should Carelli do?
a.Sell the inventory for $48,000 scrap value
b.Dispose of the inventory to avoid any further decline in value
c.Hold the inventory at its $36,000 cost
d.Manufacture further and sell it for $120,000
45) In a period of rising prices, the inventory method that results in the lowest income
tax payment is:
a.LIFO
b.FIFO
c.average cost
d.specific identification
46) A T-account is
a.a way of depicting the basic form of an account
b.what the computer uses to organize bytes of information
c.a special account used instead of a trial balance
d.used for accounts that have both a debit and credit balance
47) The market value (present value) of a bond is a function of all of the following
except the
a.dollar amounts to be received
b.length of time until the amounts are received
c.market rate of interest
d.length of time until the bond is sold
48) All of the following are contra revenue accounts except
a.sales revenue
b.sales allowances
c.sales discounts
d.sales returns
49) U.S. standards are referred to as
a.IFRS
b.GAAP
c.IASB
d.FASB
50) Information pertaining to long-term stock investments in 2014 by Bell Corporation
follows:
Acquired 18% of the 250,000 shares of common stock of Kansas Company at a total
cost of $8 per share on January 1, 2014 . On July 1, Kansas Company declared and paid
a cash dividend of $2 per share. On December 31, Kansas’s reported net income was
$654,000 for the year.
Obtained significant influence over Toto Company by buying 30% of Toto’s 100,000
outstanding shares of common stock at a total cost of $22 per share on January 1, 2014.
On June 15, Toto Company declared and paid a cash dividend of $1.50 per share. On
December 31, Toto’s reported net income was $280,000.
Instructions
Prepare all necessary journal entries for 2014 for Bell Corporation.
51) The Fig & Olive Co. reports net income of $24,000. Interest allowances are Fig
$3,000 and Olive $5,000; partner salary allowances are Fig $18,000 and Olive $10,000
and the remainder is shared equally.
Instructions
Indicate the division of net income to each partner, and prepare the entry to distribute
the net income.
52) The management of Ventura Industries estimates that credit sales for August,
September, October, and November will be $540,000, $750,000, $840,000, and
$460,000, respectively. Experience has shown that collections are made as follows:
In month of sale25%
In first month after sale60%
In second month after sale10%
Instructions
Determine the collections from customers in October and November. Show all
computations.
53) A ________________ is expressed as a unit amount, whereas a
_________________ is expressed as a total amount.
54) The expense recognition principle attempts to match ______________ with
______________.