1) The equal total payments pattern for installment notes consists of changing amounts
of interest but constant amounts of principal over the life of the note.
2) Receivables can be used to obtain cash by either selling them or using them as
security for a loan.
3) When computing payback period, the year in which a capital investment is made is
year 1.
4) A compound journal entry affects no more than two accounts.
5) Activity-based costing attempts to better allocate costs to the proper users of
overhead by focusing on activities.
6) An opportunity cost requires a future cash outlay and is relevant for decision making.
7) Corporations issue preferred stock to raise capital without sacrificing control of the
corporation and/or to boost the return earned by common shareholders.
8) Fixed budget performance reports compare actual results with the expected amounts
in the fixed budget.
9) Return on investment is a useful measure to evaluate the performance of a cost center
manager.
10) The trial balance can serve as a replacement for the balance sheet, since debits must
equal with credits.
11) The voucher register is a journal that is used to record approved vouchers.
12) Few companies take a physical count of inventory each year, and rely on inventory
records alone to determine the inventory value.
13) The present value of an annuity factor at 8% for 10 years is 6.7101. This implies
that an annuity of ten $15,000 payments at 8% yields a present value of $2,235.
14) The consistency concept prescribes that a company use the same accounting
methods period after period, so that financial statements are comparable across periods.
15) Federal depository banks are authorized to accept deposits of amounts payable to
the federal government.
16) The days’ sales in inventory ratio is computed by dividing ending inventory by cost
of goods sold and multiplying the result by 365.
17) Due to electronic files and Web communications, source documents are no longer
required.
18) A limited liability company offers the limited liability of a partnership or
proprietorship and the tax treatment of a corporation.
19) Money orders, cashier’s checks, and certified checks are examples of cash
equivalents.
20) An example of an investing activity is:
A.Paying wages of employees
B.Withdrawals by the owner
C.Purchase of land
D.Selling inventory
E.Contribution from owner
21) The following selected account balances are taken from a merchandising company’s
records:
(a) Calculate the cash payments made during 2011 for merchandise. Assume all of the
company’s accounts payable balances result from merchandise purchases.
(b) Calculate the cash receipts from customer sales during 2011.
(c) Calculate the cash payments for salaries during 2011.
22) A company declared a $0.50 per share cash dividend. The company has 20,000
shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding.
The journal entry to record the dividend declaration is:
A.Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000
B.Debit Common Dividends Payable $4,000; credit Cash $4,000
C.Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500
D.Debit Common Dividends Payable $4,500; credit Cash $4,500
E.Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000
23) Use the following information to prepare a budgeted balance sheet Magee
Company for the month of June.
a. The budgeted net income for the month of June is $236,000.
b. The beginning cash balance is $62,000; budgeted cash receipts are $1,660,000;
budgeted cash disbursements are $1,580,000.
c. Budgeted sales for May and June are $1,600,000 and $1,700,000 respectively.
Collections are 40% in the month of sale and 60% in the month following.
d. The projected inventory balance is 10% of the following month’s sales. Sales for July
are projected to be $1,750,000.
e. Purchases of inventory are paid 80% in the month of purchase, and 20% in the month
following. Budgeted purchases for June are $900,000.
f. The equipment account balance is $1,400,000 on June 30. On May 31, the
accumulated depreciation on equipment is $276,000. Depreciation expense for June is
estimated to be $24,000.
g. There is an outstanding loan balance of $800,000.
h. Accrued income taxes payable for June 30 are $71,000; and accrued salaries payable
are $50,000.
i. The only other balance sheet accounts are: Common Stock, with a balance of
$800,000 on May 31, and Retained Earnings with a balance of $300,000 on May 31.
24) FUTA taxes are:
A.Social Security taxes
B.Medicare taxes
C.Employee income taxes
D.Unemployment taxes
E.Employee deductions
25) Shamrock Company had net income of $30,000. The weighted-average common
shares outstanding were 8,000. The company sold 3,000 shares before the end of the
year. There were no other stock transactions. The company’s earnings per share is:
A.$3.75
B.$3.00
C.$3.33
D.$10.00
E.$3.16
26) The following is a partially completed lower section of a departmental expense
allocation spreadsheet for Stoneham. It reports the total amounts of direct and indirect
expenses for the four departments. Purchasing department expenses are allocated to the
operating departments on the basis of purchase orders. Maintenance department
expenses are allocated based on square footage. Compute the amount of Purchasing
department expense to be allocated to Fabrication.
A.$6,400
B.$9,900
C.$8,100
D.$17,600
E.$25,600
27) The full disclosure principle:
A.Prescribes that when a change in inventory valuation method is made, the notes to the
statements report the type of change, its justification and its effect on net income
B.Requires that companies use the same accounting method for inventory valuation
period after period
C.Is not subject to the materiality principle
D.Is only applied to retailers
E.Is also called the consistency principle
28) When a petty cash fund is in use:
A.Expenses paid with petty cash are recorded when the fund is replenished
B.Petty Cash is debited when funds are replenished
C.Petty Cash is credited when funds are replenished
D.Expenses are not recorded
E.Cash is debited when funds are replenished
29) Which of the following cash flows is not considered when using the net present
value method?
A.Future cash inflows
B.Future cash outflows
C.Past cash outflows
D.Non-uniform cash inflows
E.All of these are considered
30) Debt guarantees:
A.Are never disclosed in the financial statements
B.Are considered to be a contingent liability
C.Are a bad business practice
D.Are recorded as a liability even though it is highly unlikely that the original debtor
will default
E.All of these
31) A bond traded at 102 means that:
A.The bond pays 2.5% interest
B.The bond traded at $1,025 per $1,000 bond
C.The market rate of interest is 2.5%
D.The bonds were retired at $1,025 each
E.The market rate of interest is 2 % above the contract rate
32) If a firm’s forecasted sales are $250,000 and its break-even sales are $190,000, the
margin of safety in dollars is:
A.$60,000
B.$250,000
C.$190,000
D.$440,000
E.$24,000
33) A sporting goods store purchased $7,000 of ski boots in October. The store had
$3,000 of ski boots in inventory at the beginning of October, and expects to have
$2,000 of ski boots in inventory at the end of October to cover part of anticipated
November sales. What is the budgeted cost of goods sold for October?
A.$5,000
B.$7,000
C.$8,000
D.$9,000
E.$10,000
34) A table that shows the amount of federal income tax to be withheld from an
employee’s pay is the:
A.Form 941
B.Tax table
C.Wage bracket withholding table
D.W-2
E.W-4
35) Perch Company reported the following purchases and sales for its only product.
Perch uses a perpetual inventory system. Determine the cost assigned to the ending
inventory using FIFO.
A.$2,260
B.$3,180
C.$1,860
D.$3,580
E.$2,100
36) The process of transferring general journal information to the ledger is:
A.Double-entry accounting
B.Posting
C.Balancing an account
D.Journalizing
E.Not required unless debits do not equal credits
37) Quantity variances for direct cost categories (direct materials and direct labor) are
based on differences between the actual inputs used and the standard inputs allowed for
the actual output achieved. A key difference in the analysis of quantity variances for
direct cost categories and the analysis of the efficiency variance for variable overhead
is:
A.An efficiency variance for variable overhead cannot be calculated
B.The flexible-budget variance for variable overhead is always equal to the efficiency
variance for variable overhead
C.The efficiency variance for variable overhead is based on the cost effectiveness in
using the cost-allocation base
D.The flexible-budget variance for variable overhead is always equal to the spending
variance for variable overhead
E.There is no key difference between the analysis of quantity variances for direct cost
categories and the analysis of the efficiency variance for variable overhead; they should
be evaluated in exactly the same manner
38) Assume that a company uses a sales journal, a purchases journal, a cash receipts
journal, a cash disbursements journal, and a general journal. A sales return for credit on
account would be recorded in the:
A.Sales journal
B.General journal
C.Cash receipts journal
D.Accounts receivable ledger
E.Cash disbursements journal
39) A company issued 7% preferred stock with a $100 par value. This means that:
A.Preferred shareholders have a guaranteed dividend
B.The amount of the potential dividend is $7 per year per preferred share
C.Preferred shareholders are entitled to 7% of the annual income
D.The market price per share will approximate $100 per share
E.Only 7% of the total paid-in capital can be preferred stock
40) A firm sells two different products, A and B. For each unit of B, the firm sells two
units of A. Total fixed costs for this firm are $1,260,000. Additional selling prices and
cost information for both products follow:
Required: (a) Calculate the contribution margin per composite unit.
(b) Calculate the break-even point in units of each individual product.
(c) If pretax income before taxes of $294,000 is desired, how many units of A and B
must be sold?
41) A trial balance prepared after the closing entries have been journalized and posted is
the:
A.Unadjusted trial balance
B.Post-closing trial balance
C.General ledger
D.Adjusted trial balance
E.Work sheet
42) A company’s history indicates that 20% of its sales are for cash and the rest are on
credit. Collections on credit sales are 30% in the month of the sale, 50% in the next
month, and 15% the following month. Projected sales for January, February, and March
are $60,000, $85,000 and $95,000, respectively. The March expected cash receipts from
all current and prior credit sales is:
A.$57,000
B.$63,080
C.$64,000
D.$80,750
E.$90,250
43) An individual is planning to set-up an education fund for her children. She plans to
invest $10,000 annually at the end of each year. She expects to withdraw money from
the fund at the end of 10 years and expects to earn an annual return of 8%. What will be
the total value of the fund at the end of 10 years?
A.$46,320
B.$67,107
C.$100,000
D.$144,870
E.$215,890
44) All of the following statements regarding long-term liabilities are True except?
A.Liabilities not expected to be paid within the longer of one year or the company’s
operating cycle are reported as long-term liabilities
B.Long-term liabilities include long-term notes payable, warranty liabilities, lease
liabilities, and bonds payable
C.Liabilities that do not have a fixed due date, but are payable on demand, are reported
as long-term liabilities
D.Long-term liabilities can be reported on the balance sheet in a single total or in
multiple categories
E.A single long-term liability can be divided between current and noncurrent sections
on the balance sheet
45) A corporation’s minimum legal capital is established by recording the par or stated
value of the number of shares:
A.Issued
B.Authorized
C.Subscribed
D.Outstanding
E.In treasury
46) Which of the following events would cause a bank to debit a depositor’s account?
A.The depositor authorizes the bank to charge the depositor’s account $50 for new
checks
B.The bank collects a note receivable and related interest on the depositor’s behalf
C.The depositor determines there are outstanding checks drawn on the account at
month-end
D.The depositor determines there are deposits in transit on the account at month-end
E.The bank determines it incorrectly charged the depositor’s account twice for the
monthly service charge in a previous month
47) For a retailer required to collect sales taxes from customers, all of the following
adaptations would be made to the sales journal except:
A.Column totals would continue to be posted as usual
B.A Sales Taxes Payable credit column would be added
C.There would be a separate Accounts Receivable debit column
D.A Sales Taxes Payable debit column would be added
E.There would be a separate Sales credit column
48) Selwyn’s Service applied overhead on the basis of direct labor costs during the
current year. Overhead applied was $16,500. Actual overhead incurred was $17,200.
(a) Prepare a journal entry to remove this difference assuming that it is not material.
(b) Instead, assume actual overhead incurred was only $24,000. Describe (without
computations) the alternative procedure that Selwyn might use to record this material
difference.
49) The Malcolm Baldridge Award was established by
A.The United Nations
B.The U.S. Chamber of Commerce
C.The Malcolm Baldridge Foundation
D.The U.S. Congress
E.The SEC
50) Shown below are selected data taken from the unadjusted and adjusted trial
balances for the Simonson Company for the current year ended December 31.
Determine the items A through H below.
51) Adjusting is a three-step process (1) ____________________________, (2)
__________________________, and (3) ____________________________.
52) Hornet Corporation has a loan agreement that provides it with cash today, and the
company must pay $25,000 one year from today, $15,000 two years from today, and
$5,000 three years from today. Hornet agrees to pay 10% interest. The following are
factors from a present value table:
What is the amount of cash that Hornet receives today?
53) The following calendar year information about the Tahoma Corporation is available
on December 31:
The company applies overhead on the basis of 125% of direct labor costs. Calculate the
amount of over- or underapplied overhead.
54) Describe the accounting for intangible assets, including their acquisition, cost
allocation, and accounts involved.
55) A company issued 10-year, 9% bonds with a par value of $500,000 when the market
rate was 9.5%. The company received $484,087 in cash proceeds. Using the effective
interest method, prepare the issuer’s journal entry to record the first semiannual interest
payment and the amortization of any bond discount or premium.
56) Explain how the cash flows from operating activities section of the statement of
cash flows is prepared using the indirect method.
57) A company reports the following results in its financial statements:
Calculate the company accounts receivable turnover for Year 2 and Year 3. Compare
these two results and give a possible explanation for any significant change.
58) ______________________ depreciation charges a varying amount to expense for
each period of an asset’s useful life depending on its usage.