1) The most important element of the fraud triangle is
a.financial pressure
b.incompatible duties
c.opportunity
d.rationalization
2) Under IFRS, the components of other comprehensive income can be reported in each
of the following ways except
a.the one-statement approach
b.the two-statement approach
c.the statement of stockholders’ equity approach
d.All of these answer choices are correct
3) Equipment was purchased for $45,000. Freight charges amounted to $2,500 and
there was a cost of $8,500 for building a foundation and installing the equipment. It is
estimated that the equipment will have a $5,000 salvage value at the end of its 4-year
useful life. Depreciation expense each year using the straight-line method will be:
a.$12,750
b.$13,375
c.$14,000
d.$11,875
4) The first item listed under current liabilities is usually
a.accounts payable
b.notes payable
c.salaries and wages payable
d.taxes payable
5) If an investment firm underwrites a stock issue, the
a.risk of being unable to sell the shares stays with the issuing corporation
b.corporation obtains cash immediately from the investment firm
c.investment firm has guaranteed profits on the sale of the stock
d.issuance of stock is likely to be directly to creditors
6) Freight terms of FOB shipping point mean that the
a.seller must debit freight out
b.buyer must bear the freight costs
c.goods are placed free on board at the buyer’s place of business
d.seller must bear the freight costs
7) The following information is available for completed Job No. 404: Direct materials,
$60,000; direct labor, $90,000; manufacturing overhead applied, $120,000; units
produced, 6,000 units; units sold, 5,000 units. The cost of the finished goods on hand
from this job is
a.$45,000
b.$270,000
c.$54,000
d.$225,000
8) Kang Company has just purchased equipment that requires annual payments of
$50,000 to be paid at the end of each of the next 4 years. The appropriate discount rate
is 15%. What is the present value of the payments?
a.$142,749
b.$200,000
c.$58,718
d.$187,668
9) Cost behavior analysis is a study of how a firm’s costs
a.relate to competitors’ costs
b.relate to general price level changes
c.respond to changes in the level of business activity
d.respond to changes in the gross national product
10) The balanced scorecard approach
a.uses only financial measures to evaluate performance
b.uses rather vague, open statements when setting objectives in order to allow managers
and employees flexibility
c.normally sets the financial objectives first, and then sets the objectives in the other
perspectives to accomplish the financial objectives
d.evaluates performance using about 10 different perspectives in order to effectively
incorporate all areas of the organization
11) Jawbreaker Company paid $940 on account to a creditor. The transaction was
erroneously recorded as a debit to Cash of $490 and a credit to Accounts Receivable,
$490. The correcting entry is
a.Accounts Payable940
Cash940
b.Accounts Receivable490
Cash490
c.Accounts Receivable490
Accounts Payable490
d.Accounts Receivable490
Accounts Payable940
Cash1,430
12) After journal entries are posted, the reference column
a.of the general journal will be blank
b.of the general ledger will show journal page numbers
c.of the general journal will show “Dr” or “Cr”
d.of the general ledger will show account numbers
13) In 2014 Rome Corporation reported income from operations $190,000, interest
expense $60,000, and income tax expense $40,000. Romes times interest earned ratio
was:
a.4.2 times
b.3.8 times
c.3.2 times
d.4.8 times
14) If a company determines cost of goods sold each time a sale occurs, it
a.must have a computer accounting system
b.uses a combination of the perpetual and periodic inventory systems
c.uses a periodic inventory system
d.uses a perpetual inventory system
15) Merriweather Post Pavillion received a $820 check from a customer for the balance
due. The transaction was erroneously recorded as a debit to Cash $280 and a credit to
Service Revenue $280. The correcting entry is
a.debit Cash, $820; credit Accounts Receivable, $820
b.debit Cash, $540 and Accounts Receivable, $280; credit Service Revenue, $820
c.debit Cash, $540 and Service Revenue, $280; credit Accounts Receivable, $820
d.debit Accounts Receivable, $820; credit Cash, $560 and Service Revenue, $280
16) Proprietorships, partnerships, and corporations
a.are the three most common forms of business organizations in the U.S
b.are the three most common forms of business organizations internationally
c.are used in different proportions in different countries
d.all of these answer choices are correct
17) Robin Corporation retires its $800,000 face value bonds at 104 on January 1,
following the payment of annual interest. The carrying value of the bonds at the
redemption date is $829,960. The entry to record the redemption will include a
a.credit of $2,040 to Loss on Bond Redemption
b.debit of $2,040 to Loss on Bond Redemption
c.credit of $32,040 to Premium on Bonds Payable
d.debit of $32,000 to Premium on Bonds Payable
18) Another name for a journal is
a.listing
b.book of original entry
c.book of accounts
d.book of source documents
19) A critical factor in budgeting for a service firm is to
a.hire professional staff to perform the budgeting work
b.coordinate professional staff needs with anticipated services
c.classify all personnel as either variable or fixed
d.budget expenditures before anticipated receipts
20) In reporting variances,
a.promptness is relatively unimportant
b.management normally investigates all variances
c.the reports should facilitate management by exception
d.the reports are not departmentalized
21) Reporting investments at fair value is applicable to:
a.available-for-sale securities only
b.held-to-maturity securities
c.trading securities only
d.both available-for-sale and trading securities
22) Which of the following activities is excluded from the statement of cash flows
under IFRS?
a.Financing activities
b.Investing activities
c.Noncash investing and financing activities
d.Operating activities
23) Proving the equality of the totals in the columns of multiple-column special journals
is called
a.posting to the subsidiary
b.debiting and crediting
c.footing and crossfooting
d.updating the master file
24) Casey’s, Inc. plans to sell 4,000 backpacks during May; 3,800 in June, and 5,000
during July. The company keeps 15% of the next months sales as ending inventory.
How many units should Casey’s produce during June?
a.3,980
b.4,550
c.3,620
d.Not enough information to determine
25) Which of the following is not viewed as part of accumulating manufacturing costs
in a job order cost system?
a.Cost of goods sold is recognized
b.Raw materials are purchased
c.Factory labor is incurred
d.Manufacturing overhead is incurred
26) Mangino Company has a balance in its Accounts Receivable control account of
$15,000 on January 1, 2014 . The subsidiary ledger contains three accounts: Jones
Company, balance $6,000; Black Company, balance $2,500 and Denny Company.
During January, the following receivable-related transactions occurred.
Credit SalesCollectionsReturns
Jones Company$12,000$8,000$ -0-
Black Company9,0002,5002,000
Denny Company 8,5006,000-0-
Instructions
(a)What is the January 1 balance in the Denny Company subsidiary account?
(b)What is the January 31 balance in the control account?
(c)Compute the balances in the subsidiary accounts at the end of the month.
(d)Which January transaction would not be recorded in a special journal?
O: 2, Bloom: AP,
27) (a)Identify the three types of employer payroll taxes.
(b)How are tax liability accounts and payroll tax expense accounts classified in the
financial statements?
28) The partners’ drawing accounts are
a.reported on the income statement
b.reported on the balance sheet
c.closed to Income Summary
d.closed to the partners’ capital accounts
29) In recording the sale of accounts receivable, the commission charged by a factor is
recorded as
a.Bad Debt Expense
b.Commission Expense
c.Loss on Sale of Receivables
d.Service Charge Expense
30) Which one of the following items is not considered a part of the cost of a truck
purchased for business use?
a.Sales tax
b.Truck license
c.Freight charges
d.Cost of lettering on side of truck
31) An error has occurred in the closing entry process if
a.revenue and expense accounts have zero balances
b.the owner’s capital account is credited for the amount of net income
c.the owner’s drawings account is closed to the owner’s capital account
d.the balance sheet accounts have zero balances
32) The following section is taken from Greene Corps balance sheet at December 31,
2013 .
Current liabilities
Interest Payable$ 90,000
Long-term liabilities
Bonds Payable, 9%, due January 1, 2018 2,000,000
Interest is payable semiannually on January 1 and July 1 . The bonds are callable on any
interest date.
Instructions
(a)Journalize the payment of the bond interest on January 1, 2014 .
Assume that on January 1, 2012, after paying interest, Greene calls bonds having a face
value of $800,000. The call price is 106. Record the redemption of the bonds.
Prepare the entry to record the payment of interest on July 1, 2014, assuming no
previous accrual of interest on the remaining bonds.
33) Companies record credit purchases of equipment or supplies in the
a.cash payments journal
b.cash receipts journal
c.general journal
d.one-column purchases journal
34) If services are rendered for credit, then
a.assets will decrease
b.liabilities will increase
c.owner’s equity will increase
d.liabilities will decrease
35) Indicate in which journal each of the following transactions is recorded.
1>Cash purchase of merchandise._______________________
2>Owner investment of cash._______________________
3>Sale of merchandise on account._______________________
4>Purchase of supplies for cash._______________________
5>Credit purchase of merchandise._______________________
6>Collection on account from customers._______________________
36) Jason Gorni, the president and CEO of Better Earth, Inc., a waste management firm,
was recently hospitalized, suffering from exhaustion and a heart ailment. Immediately
prior to his hospitalization, Better Earth had experienced a sharp decline in its stock
price, and trading activity became almost nonexistent. The primary reason for this was
concern expressed in the media over a new untested waste management system
implemented by the company. Mr. Gomi had been unwilling to submit the procedure to
testing before implementation, but he reluctantly agreed to limited tests after the system
was operational. No problems have been identified by the tests to date.
The other members of management called a meeting to determine what they should do.
Sean Casey, the marketing manager, suggested that the company purchase a large
number of shares of treasury stock. In that way, investors might notice that activity had
picked up, and might decide to buy some more shares. This plan would use up most of
the company’s available cash, so that there will be no money available for a cash
dividend. Better Earth has paid cash dividends every quarter for over ten years.
Required:
1>Is Mr. Caseys suggestion ethical? Explain.
2>Is it ethical to discontinue the cash dividend? Explain.
37) Weston Company budgeted the following information for 2014:
MayJuneJuly
Budgeted purchases$104,000$110,000$102,000
Cost of goods sold is 40% of sales. Accounts payable is used only for inventory
acquisitions.
Weston purchases and pays for merchandise 60% in the month of acquisition and 40%
in the following month.
Selling and administrative expenses are budgeted at $40,000 for May and are expected
to increase 5% per month. They are paid during the month of acquisition. In addition,
budgeted depreciation is $10,000 per month.
Income taxes are $34,800 for July and are paid in the month incurred.
Instructions
Compute the amount of budgeted cash disbursements for July.
38) Debt investments are investments in government and _____________ bonds.
39) Talkington Rae Company reports goods available for sale at cost, $76,800.
Beginning inventory at retail is $40,000 and goods purchased during the period at retail
were $80,000. Sales for the period amounted to $85,000.
Instructions
Determine the estimated cost of the ending inventory using the retail inventory method.
40) Transactions that cannot be entered in a special journal are recorded in the
_______________, and if control and subsidiary accounts are involved, there must be a
_______________ posting.
41) On January 5, 2014, Grouse Company purchased the following stock securities as a
long-term investment:
300 shares Bonter Corporation common stock for $4,500.
500 shares Wane Corporation common stock for $10,000.
800 shares Strauss Corporation common stock for $22,800.
Assume that Grouse Company cannot exercise significant influence over the activities
of the investee companies and that the cost method is used to account for the
investments.
On June 30, 2014, Grouse Company received the following cash dividends:
Bonter Corporation$2.00 per share
Wane Corporation$1.00 per share
Strauss Corporation$1.50 per share
On November 15, 2014, Grouse Company sold 160 shares of Strauss Corporation
common stock for $7,200.
On December 31, 2014, the fair value of the securities held by Grouse Company is as
follows:
Per Share
Bonter Corporation common stock$10
Wane Corporation common stock16
Strauss Corporation common stock28
Instructions
Prepare the appropriate journal entries that Grouse Company should make on the
following dates:
January 5, 2014
June 30, 2014
November 15, 2014
December 31, 2014
42) At the beginning of the year, Shaolin Company had total assets of $520,000 and
total liabilities of $210,000. Answer the following questions viewing each situation as
being independent of the others.
(1)If total assets increased $200,000 during the year, and total liabilities decreased
$75,000, what is the amount of owner’s equity at the end of the year?
(2)During the year, total liabilities increased $230,000 and owner’s equity decreased
$90,000. What is the amount of total assets at the end of the year?
(3)If total assets decreased $40,000 and owner’s equity increased $130,000 during the
year, what is the amount of total liabilities at the end of the year?
43) On November 1, 2012, Nixon Corporations stockholders equity section is as
follows:
Common stock, $10 par value$600,000
Paid-in capital in excess of par180,000
Retained earnings 200,000
Total stockholders equity$980,000
On November 1, Nixon declares and distributes an 18% stock dividend when the
market value of the stock is $14 per share.
Instructions
Indicate the balances in the stockholders equity accounts after the stock dividend has
been distributed.