1) Purchase discounts are the same as trade discounts.
2) A purchase of land in exchange for a long-term note payable is reported in the
investing section of the statement of cash flows.
3) Cash paid for merchandise is an operating activity.
4) In a limited partnership the general partner has unlimited liability.
5) Segment return on assets is segment operating income divided by segment average
assets.
6) Unpaid and undeclared preferred dividends are called dividends in arrears.
7) On a work sheet, the adjusted balances of revenues and expenses are sorted to the
Income Statement columns of the work sheet.
8) The last four steps in the accounting cycle include preparing the adjusted trial
balance, preparing financial statements and recording closing and adjusting entries.
9) In process cost accounting, direct labor includes only the labor that is applied directly
to the products.
10) A manufacturing budget should include a list of equipment to be scrapped and
additional equipment to be purchased if the proposed production budget is carried out.
11) The first section of the income statement reports cash flows from operating
activities.
12) The date of record is the date that directors vote to pay a cash dividend to
shareholders.
13) Long-term investments in debt securities not classified as trading or
held-to-maturity securities are classified as available-for-sale securities.
14) Which of the following is never included in direct materials costs?
A.Invoice costs of direct materials
B.Outgoing delivery charges
C.Materials storage costs
D.Materials handling costs
E.All of these are direct material costs
15) An activity-based cost allocation system:
A.Is one form of a direct or variable costing system
B.Does not provide total unit cost data
C.Traces costs to products on the basis of activities performed on them
D.Does not provide for the allocation of any cost to products that cannot be directly
attributable to those products
E.Does not involve the level of detail and the number of allocations that companies
make with traditional allocation methods
16) An approach to managing inventories and production operations such that units of
materials and products are obtained and provided only as they are needed is called:
A.Continuous improvement
B.Customer orientation
C.Just-in-time manufacturing
D.Theory of constraints
E.Total quality management
17) If equity is $300,000 and liabilities are $192,000, then assets equal:
A.$108,000
B.$192,000
C.$300,000
D.$492,000
E.$792,000
18) On October 1, Whaley Company sold merchandise in the amount of $5,800 to Lee
Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Whaley
uses the perpetual inventory system. Lee pays the invoice on October 8, and takes the
appropriate discount. The journal entry that Whaley makes on October 8 is:
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
19) The predetermined overhead allocation rate for Millay Manufacturing is based on
estimated direct labor costs of $350,000 and estimated factory overhead of $770,000.
Actual costs incurred were:
a. Calculate the predetermined overhead rate and calculate the overhead applied during
the year.
b. Determine the amount of over- or underapplied overhead and prepare the journal
entry to eliminate the over- or underapplied overhead assuming that it is not material in
amount.
20) Which of the following statements is correct?
A.When a future expense is paid in advance, the payment is normally recorded in a
liability account called Prepaid Expense
B.Promises of future payment are called accounts receivable
C.Increases and decreases in cash are always recorded in the owner’s capital account
D.An account called Land is commonly used to record increases and decreases in both
the land and buildings owned by a business
E.Accrued liabilities include accounts receivable
21) Assume that sales are predicted to be $3,750, the expected contribution margin is
$1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:
A.$1,750
B.$2,500
C.$4,000
D.$4,250
E.$4,375
22) The total cost of goods completed during the accounting period for a manufacturer
is called:
A.Ending finished goods inventory
B.Total manufacturing costs
C.Ending goods in process inventory
D.Cost of goods manufactured
E.Cost of goods sold
23) Financial statement analysis:
A.Is the application of analytical tools to general-purpose financial statements and
related data for making business decisions
B.Involves transforming accounting data into useful information for decision-making
C.Helps users to make better decisions
D.Helps to reduce uncertainty in decision-making
E.All of these
24) The process of analyzing alternative investments and deciding which assets to
acquire or sell is known as:
A.Planning and control
B.Capital budgeting
C.Variance analysis
D.Master budgeting
E.Managerial accounting
25) The Woodview Company uses a sales journal, purchases journal, cash receipts
journal, cash disbursements journal, and general journal. They use the perpetual
method. The following transactions occurred during the current month of December:
Record the above transactions into the appropriate journals shown below.
26) Benson Company had cash sales of $94,275, credit sales of $83,450, sales returns
and allowances of $1,700, and sales discounts of $3,475. Benson’s net sales for this
period equal:
A.$94,275.
B.$172,550.
C.$174,250.
D.$176,025.
E.$177,725.
27) Maxtel had net sales of $4,235 million and ending accounts receivable of $775
million. Its days’ sales uncollected equals:
A.298 days
B.66.8 days
C.19.4 days
D.81.8 days
E.65.2 days
28) Deltan Corp. allocates overhead to production on the basis of direct labor costs.
Deltan’s total estimated overhead is $450,000 and estimated direct labor is $180,000.
Determine the amount of overhead to be allocated to finished goods inventory if there is
$20,000 of total direct labor cost in the jobs in the finished goods inventory.
A.$8,000
B.$20,000
C.$70,000
D.$50,000
E.$90,000
29) The salary paid to the supervisor of an assembly line would normally be classified
as:
A.Direct labor
B.Indirect labor
C.A period cost
D.A general cost
E.An assembly cost
30) If Tim Jones, the owner of Jones Hardware proprietorship, uses cash of the business
to purchase a family automobile, the business should record this use of cash with an
entry to:
A.Debit Salary Expense and credit Cash
B.Debit Tim Jones, Salary and credit Cash
C.Debit Cash and credit Tim Jones, Withdrawals
D.Debit Tim Jones, Withdrawals and credit Cash
E.Debit Automobiles and credit Cash
31) Long-term investments include:
A.Investments in bonds and stocks that are not readily convertible to cash
B.Investments in marketable stocks that are intended to be converted into cash in the
short-term
C.Investments in marketable bonds that are intended to be converted into cash in the
short-term
D.Only investments readily convertible to cash
E.Investments intended to be converted to cash within one year
32) A business segment:
A.Requires only internal reporting
B.Is a part of a company that is separately identified by its products, services, or
geographic market
C.Requires special journals
D.Requires subsidiary ledgers
E.Cannot report its results separately
33) On May 31, Rayco has $375,800 of accounts receivable. Rayco uses the allowance
method of accounting for bad debts and has an existing credit balance in the allowance
for doubtful accounts of $14,250.
1> Prepare journal entries to record the following selected May transactions. The
company uses the perpetual inventory system.
2> Show how Accounts Receivable and the Allowance for Doubtful Accounts appear
on its May 31 balance sheet.
a. Sold $415,200 of merchandise (that cost $249,000) to customers on credit.
b. Received $465,800 cash in payment of accounts receivable.
c. Wrote off $15,800 of uncollectible accounts receivable.
d. In adjusting the accounts on May 31, its fiscal year-end, the company estimated that
4.0% of accounts receivable will be uncollectible.
34) A company’s current assets are $23,420, its quick assets were $13,890 and its
current liabilities were $12,220. Its acid-test ratio equals:
A.0.88.
B.1.91.
C.1.14.
D..52.
E.1.41.
35) Edgar Company is considering the purchase of new equipment costing $80,000.
The projected annual after-tax net income from the equipment is $10,200, after
deducting $20,000 for depreciation. The revenue is to be received at the end of each
year. The machine has a useful life of 4 years and no salvage value. Edgar requires a
10% return on its investments. The present value of an annuity of 1 and present value of
an annuity for different periods is presented below. Compute the net present value of
the machine.
A.$(15,731)
B.$(4,896)
C.$15,731
D.$4,896
E.$32,334
36) Spruce Company is considering the production and sale of a new product with the
following sales and cost data: unit sales price, $350; unit variable costs, $180; total
fixed costs, $399,500; and projected sales, $910,000. Round your answers to the nearest
whole unit or dollar.
(a) Calculate break-even in units.
(b) Calculate break-even in dollars (use four decimal places when calculating the
contribution margin ratio).
(c) Calculate number of units that would need to be sold to generate an after-tax profit
of $420,000 assuming a 30% tax rate.
(d) Calculate dollar sales that would be needed to generate the same profit as above.
(e) Calculate the margin of safety stated as a percentage using the $910,000 projected
sales level.
Be sure to label each calculation and show all calculations.
37) A company retires its bonds at 105. The face value is $100,000 and the carrying
value of the bonds at the retirement date is $103,745. The issuer’s journal entry to
record the retirement will include a:
A.Debit to Premium on Bonds
B.Credit to Premium on Bonds
C.Debit to Discount on Bonds
D.Credit to Gain on Bond Retirement
E.Credit to Bonds Payable
38) Cambria owns equipment that cost $93,500 with accumulated depreciation of
$64,000. Cambria asks $35,000 for the equipment but sells the equipment for $33,000.
Compute the amount of gain or loss on the sale. The journal entry to record the disposal
of the asset would involve all of the following except:
A.Debit Accumulated Depreciation $64,000
B.Credit Equipment $93,500
C.Debit Loss on Disposal of Equipment $3,500
D.Credit Gain on Disposal of Equipment $3,500
E.Debit Cash $33,000
39) Use the following information to prepare the manufacturing statement for Forsythe
Company for the month ended June 30.
40) An employee devises a payroll scheme that costs the employer $150. The employer
discovers the fraud but decides not to confront the employee since the amount of the
fraud is small. Discuss why this course of action is not advisable.
41) On April 30, Steinbeck Co. has $448,800 of accounts receivable. 1. Prepare journal
entries to record the following selected May transactions. The company uses the
perpetual inventory system. 2. Also prepare any footnotes to the May 31 financial
statements that result from these transactions. 3. Calculate the balance in the Accounts
Receivable account as of May 10.
42) With respect to cycle time, companies strive to reduce non-value added time in
order to improve ________________________.
43) If Falcon Company’s actual overhead incurred during a period was $32,700 and the
company reported a favorable overhead controllable variance of $1,200 and an
unfavorable overhead volume variance of $900, how much standard overhead cost was
assigned to the products produced during the period?
44) Trend percentage is calculated by dividing _________________________ by
___________________________ and multiplying the result by 100.
45) What are prime costs? What are conversion costs?
46) Describe employer responsibilities for reporting payroll taxes. (To the extent
possible, reference the form to be filed for each tax.)