1) At the end of the fiscal year, the variances from standard are usually transferred to
the finished goods account.
2) The price of a bond is equal to the sum of the interest payments and the face amount
of the bonds.
3) If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are held as
treasury stock, a cash dividend of $1 per share would amount to $15,000.
4) Bonds are sold at face value when the contract rate is equal to the market rate of
interest.
5) Long-lived assets that are intangible in nature, used in the operations of the business,
and not held for sale in the ordinary course of business are called fixed assets.
6) When an account receivable that has been written off is subsequently collected, the
account receivable is said to be reinstated.
7) A process cost accounting system records all actual factory overhead costs directly in
the Work in Process account.
8) Analysis of user needs is the final phase in the creation or revision of an accounting
system.
9) The due date of a 60-day note dated July 10 is September 10.
10) Indirect labor would be included in factory overhead.
11) Transactions are listed in the journal chronologically.
12) Cash, as the term is used for the statement of cash flows, could indicate either cash
or cash equivalents.
13) Most accounting systems evolve as the business grows and requires changes in their
methods for collecting, accumulating, and reporting information.
14) Cost accounting systems are used to supply cost data information on costs incurred
by a manufacturing process or department.
15) At the end of a period (before adjustment), Allowance for Doubtful Accounts has a
debit balance of $500. Net credit sales for the period totaled $800,000. If bad debt
expense is estimated at 1% of net credit sales, the amount of bad debt expense to be
recorded in the adjusting entry is $8,500.
16) When the petty cash fund is replenished, the petty cash account is credited for the
total of all expenditures made since the fund was last replenished.
17) The chart of accounts for a partnership, with the exception of drawing and capital
accounts, does not differ from the chart of accounts for a sole proprietorship.
18) Before a stock dividend can be declared or paid, there must be sufficient cash.
19) If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of
sales, the contribution margin ratio is 40%.
20) The following information pertains to Carlton Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Liabilities and Stockholders Equity
Income Statement
What is the rate earned on total assets for this company? Round your answer to one
decimal point.
A.8.5%
B.6.8%
C.10.3%
D.13.3%
21) The classified Balance Sheet will divide its Liabilities Section as the following
subsections
A.Current Liabilities and Long-Term Liabilities
B.Current Liabilities and Other Liabilities
C.Other Liabilities and Long-Term Liabilities
D.Present Liabilities and Tomorrows Liabilities
22) When a new partner is admitted to a partnership, there should be a(n)
A.increase in the total assets of the partnership
B.new capital account added to the ledger for the new partner
C.increase in the total owner’s equity of the partnership
D.debit amount to the partners capital account for the cash received by the current
partner
23) Department G had 3,600 units, 25% completed at the beginning of the period,
11,000 units were completed during the period, 3,000 units were one-fifth completed at
the end of the period, and the following manufacturing costs were debited to the
departmental work in process account during the period:
Assuming that all direct materials are placed in process at the beginning of production
and that the first-in, first-out method of inventory costing is used, what is the total cost
of the departmental work in process inventory at the end of the period (round unit cost
calculations to four decimal places)?
A.$16,163
B.$21,432
C.$35,670
D.$28,935
24) Notes Receivable due in 350 days appear on the
A.balance sheet in the current assets section
B.balance sheet in the fixed assets section
C.balance sheet in the current liabilities section
D.income statement as an expense
25) On the first day of the fiscal year, a new walk-in cooler with a list price of $58,000
was acquired in exchange for an old cooler and $44,000 cash. The old cooler had a cost
of $25,000 and accumulated depreciation of $16,000.
Assume the transaction has commercial substance.
26) Based on the following production and sales estimates for May, determine the
number of units expected to be manufactured in May.
A.75,000
B.90,000
C.85,000
D.115,000
27) The journal entry a company uses to record pension rights that have not been
funded for its salaried employees, at the end of the year is
A.debit Salary Expense; credit Cash
B.debit Pension Expense; credit Unfunded Pension Liability
C.debit Pension Expense; credit Unfunded Pension Liability and Cash
D.debit Pension Expense; credit Cash
28) On August 1, Batson Company issued a 60-day note with a face amount of
$140,000 to Jergens Company for merchandise inventory. (Assume a 360-day year is
used for interest calculations.)
29) Office supplies purchased by Aris Alarm Service on account were returned. Which
of the following entries for Aris Alarm Service records this transaction?
A.Cash, debit; Office Supplies, credit
B.Office Supplies, debit; Accounts Receivable, credit
C.Accounts Payable, debit; Office Supplies, credit
D.Office Supplies, debit; Accounts Payable, credit
30) The profit margin is the:
A.ratio of income from operations to sales
B.ratio of income from operations to invested assets
C.ratio of assets to liabilities
D.ratio of sales to invested assets
31) The Boxwood Company sells blankets for $60 each. The following was taken from
the inventory records during May. The company had no beginning inventory on May 1.
Assuming that the company uses the perpetual inventory system, determine the Gross
Profit for the month of May using the LIFO cost method
A.$348
B.$452
C.$444
D.$356
32) Match the following terms with their definitions.
1>A specific activity range over which the cost changes are of interest. A. Variable costs
2>Where a businesss revenues exactly equal costs B. Fixed costs
3>The excess of sales revenues over variable costs C. Break-even point
4>Remain the same in total dollar amount as the level of activity changes D. Relevant
range
5>Vary in proportion to changes in activity levels. E. Contribution margin
33) Most employers are levied a tax on payrolls for
A.sales tax
B.medical insurance premiums
C.federal unemployment compensation tax
D.union dues
34) Top Notch, LLC provides repair services for oil rigs. The firm has 5 members in the
LLC, which did not change between 2011 and 2012. During 2012, the business
expanded into three new regions of the country. The following revenue and employee
information is provided:
Required:
a. For 2011 and 2012, determine the revenue per employee (excluding members).
b. Interpret the trend between the two years.
35) The balance sheets at the end of each of the first two years of operations indicate
the following:
If net income is $115,000 and interest expense is $30,000 for 2012, what is the rate
earned on stockholders’ equity for 2012 (round percent to one decimal point)?
A.10.6%
B.11.1%
C.12.4%
D.14.0%
36) Which of the following types of accounts have a normal credit balance?
A.assets and liabilities
B.liabilities and expenses
C.revenues and liabilities
D.capital and drawing
37) Department E had 4,000 units in Work in Process that were 40% completed at the
beginning of the period at a cost of $12,500. Of the $12,500, $8,000 was for material
and $4,500 was for conversion costs. 14,000 units of direct materials were added during
the period at a cost of $28,700. 15,000 units were completed during the period, and
3,000 units were 75% completed at the end of the period. All materials are added at the
beginning of the process. Direct labor was $32,450 and factory overhead was $18,710.
If the average cost method is used the conversion cost per unit (to the nearest cent)
would be:
A.$3.71
B.$2.84
C.$2.97
D.$3.23
38) The following lots of a particular commodity were available for sale during the
year:
The firm uses the periodic system and there are 25 units of the commodity on hand at
the end of the year.
What is the amount of the inventory at the end of the year using the LIFO method?
A.$1,685
B.$1,575
C.$1,805
D.$3,815
39) The Bottlebrush Company has income from operations of $60,000, invested assets
of $345,000, and sales of $786,000. Use the DuPont formula to calculate the rate of
return on investment, and show (a) the profit margin, (b) the investment turnover, and
(c) rate of return on investment. Round profit margin percentage to two decimal places
and investment turnover to three decimal places.
40) The manufacturing cost of Carrie Industries for the first three months of the year are
provided below:
Using the high-low method, determine the (a) variable cost per unit, and (b) the total
fixed cost.
41) The post-closing trial balance differs from the adjusted trial balance in that it
A.does not take into account closing entries
B.does not take into account adjusting entries
C.does not include balance sheet accounts
D.does not include income statement accounts
42) A corporation issues 2,500 shares of common stock for $ 45,000. The stock has a
stated value of $10 per share. The journal entry to record the stock issuance would
include a credit to Common Stock for
A.$25,000
B.$45,000
C.$20,000
D.$ 5,000
43) Which of the following is considered a part of factory overhead cost?
A.Sales commissions
B.Depreciation of factory buildings
C.Depreciation of office equipment
D.Direct materials used
44) Anderson, Inc. incurred the following transactions during the month of February,
2010. Record the appropriate ones in the Cash payments journal. If a transaction should
not be recorded in the Cash payments journal, indicate where it should be posted.
(a) On February 3rd the company purchased $650 worth of supplies on account. The
Supplies account number is 15.
(b) On February 5th Anderson made a payment on account to Sanders Industries in the
amount of $1,125 – check number 2004.
(c) On February 14th Anderson bought a one-year insurance policy for $1,500. The
Prepaid Insurance account number is 14 – check number 2005
(d) On February 22nd Anderson paid monthly rent of $2,000. The Rent Expense
account number is 63 – check number 2006.
(e) On February 26th Anderson purchased equipment making a down payment of
$3,000 (check number 2007) and agreeing to pay the $4,000 balance in 30 days. The
Equipment account number is 18.
45) Match each of the following terms with the correct definition below.
1>Inventory system that updates the Merchandise Inventory account only at the end of
the accounting period based on a physical count of merchandise on hand. A. FOB
Destination
2>Losses of inventory due to theft, damage, spoilage, etc. that cause the actual
inventory on hand to be less than that on record. B. Inventory Shrinkage
3>Statement where net income is determined by deducting all expenses from all
revenues. C. Single-Step Income Statement
4>Payment arrangements determined by the seller as to when invoices are due and
whether early payment discount is offered. D. Credit terms
5>Shipping terms where the ownership of merchandise passes to the buyer when the
seller delivers the merchandise to the freight carrier. E. Perpetual Inventory system
6>Shipping terms where the ownership of merchandise passes to the buyer when the
buyer receives the merchandise. F. Periodic Inventory system
7>Inventory system that updates the Merchandise Inventory account for every purchase
and sale transaction. G. Multiple-Step Income Statement
8>Statement that includes subtotals for net sales, gross profit and net operating income
in determining net income. H. FOB Shipping Point
46) On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7%
bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the
bonds on the issue date for the issue price. The journal entry to record the amoritization
of the bond premium (by straight-line method) for the year by Orange Inc. includes a
credit to:
A.Interest Revenue for $5,000
B.Interest Revenue for $2,500
C.Investment in Lisbon Co. Bonds $5,000
D.Investment in Lisbon Co. Bonds $2,500
47) The entry to record the issuance of 150 shares of $5 par common stock at par to an
attorney in payment of legal fees for organizing the corporation includes a credit to
A.Organizational Expenses
B.Goodwill
C.Common Stock
D.Cash
48) Vacation pay payable is reported on the balance sheet as a(n)
A.current liability or long-term liability, depending upon when the vacations will be
taken by employees
B.current liability
C.expense
D.long-term liability
49) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 2 during the period for
direct materials is:
A.Work in Process–Department 2100,000
Materials100,000
B.Work in Process–Department 255,000
Materials55,000
C.Work in Process–Department 2150,000
Materials150,000
D.Materials55,000
Work in Process–Department 255,000
50) Record the following selected transactions for April in a two-column journal,
identifying each entry by letter:
(a) Received $18,000 from Katie Long, owner.
(b) Purchased equipment for $27,000, paying $10,000 in cash and giving a note payable
for the remainder.
(c) Paid $2,300 for rent for April.
(d) Purchased $1,500 of supplies on account.
(e) Recorded $9,800 of fees earned on account.
(f) Received $7,500 in cash for fees earned.
(g) Paid $1,200 to creditors on account.
(h) Paid wages of $3,425.
(i) Received $7,900 from customers on account.
(j) Recorded owner’s withdrawal of $1,875.
51) Process cost systems use job order cost cards to accumulate cost data.
52) The debit balance in Cash Short and Over at the end of an accounting period is
reported as
A.an expense on the income statement
B.income on the income statement
C.an asset on the balance sheet
D.a liability on the balance sheet
53) The debt created by a business when it makes a purchase on account is referred to
as an
A.account payable
B.account receivable
C.asset
D.expense payable
54) The treasurer of Systems Company has accumulated the following budget
information for the first two months of the coming year:
The company expects to sell about 35% of its merchandise for cash. Of sales on
account, 80% are expected to be collected in full in the month of the sale and the
remainder in the month following the sale. One-fourth of the manufacturing costs are
expected to be paid in the month in which they are incurred and the other three-fourths
in the following month. Depreciation, insurance, and property taxes represent $6,400 of
the probable monthly selling and administrative expenses. Insurance is paid in February
and a $40,000 installment on income taxes is expected to be paid in April. Of the
remainder of the selling and administrative expenses, one-half are expected to be paid
in the month in which they are incurred and the balance in the following month. Capital
additions of $250,000 are expected to be paid in March.
Current assets as of March 1 are composed of cash of $45,000 and accounts receivable
of $51,000. Current liabilities as of March 1 are composed of accounts payable of
$121,500 ($102,000 for materials purchases and $19,500 for operating expenses).
Management desires to maintain a minimum cash balance of $20,000.
Prepare a monthly cash budget for March and April.
55) Icon Company acquired patent rights on January 1, 2009 for $1,125,000. The patent
has a useful life equal to its legal life of 15 years. On January 2, 2012, Icon successfully
defended the patent in a lawsuit at a cost of $90,000.
Required:
56) You have just accepted your first job out of college, which requires you to evaluate
loan requests at Beach Front National Bank. The first loan request you receive is from
Surfer Dude Enterprises, a small proprietorship. Marty Monroe, the owner, is requesting
$75,000 and brings you the following trial balance (or Statement of Accounts) for his
first year of operations ended December 31, 2010.
Which of the following accounts do you think might need to be adjusted before an
accurate set of financial statements could be prepared?
57) Trevor Smith contributed equipment, inventory, and $54,000 cash to a partnership.
The equipment had a book value of $30,000 and a market value of $36,000. The
inventory had a book value of $60,000, but only had a market value of $20,000, due to
obsolescence. The partnership also assumed a $17,000 note payable owed by Smith that
was used originally to purchase the equipment.
Provide the journal entry for Smiths contribution to the partnership.
58) Briefly describe the three-step process of accounting system development.
59) Amos Companys molding department opened on October 1, 2012. During October,
35,000 units were completed and transferred out to the next department. On October 31,
2012, the 9,000 units which remained in inventory were 40% complete with respect to
conversion costs and 100% complete with respect to materials.
Required:
How many equivalent units of work did the molding department complete during
October for materials and conversion costs?
60) The following information was taken from a recent annual report of Harrison
Company: (in millions)
Required:
61) The following purchases journal headings have been suggested for Tower
Tree-Trimming Service Company. What problems do you see with these headings?
62) On January 1, 2010, Cary Parsons established a catering service. Listed below are
accounts she would like to open in the general ledger. List the accounts in the order in
which they should appear in the ledger and propose a two digit account numbering
scheme that is consistent with the rules of a proper chart of accounts.
63) On the basis of the following data, determine the estimated cost of the inventory as
of March 31 by the retail method, presenting details of the computation in good order.
