1) Vertical analysis refers to comparing the financial statements of a single company for
several years.
2) Liabilities are debts owed by the business entity.
3) In most business organizations, the chief accountant is called the treasurer.
4) If a business sells four products, it is not possible to estimate the break-even point.
5) Comprehensive income does not affect net income or retained earnings.
6) The discount on a note payable is charged to an account that has a normal credit
balance.
7) Financial accounting provides information to all users, while the main focus for
managerial accounting is to provide information to the management.
8) The equation for computing interest on an interest-bearing note is as follows: interest
equals maturity value times interest rate times time.
9) Direct materials, direct labor, and factory overhead are assigned to each
manufacturing process in a process costing system.
10) Journal entries can have more than two accounts as long as the debits equal the
credits.
11) Prepaid expenses are an example of an expense.
12) The objectives of budgeting are (1) establishing specific goals for future operations,
(2) executing plans to achieve the goals, and (3) periodically comparing actual results
with these goals.
13) A cost can be a payment of cash for the purpose of generating revenues.
14) Accounts are records of increases and decreases in individual financial statement
items.
15) Under the periodic inventory system, the cost of merchandise sold is equal to the
beginning merchandise inventory plus the cost of merchandise purchased plus the
ending merchandise inventory.
16) Managerial accounting information is used by external and internal users equally.
17) A change in the amount of sales can be due to either a change in the units sold or a
change in price or both.
18) If the balance in Cash Short and Over at the end of a period is a credit, it indicates
that cash shortages have exceeded cash overages for the period.
19) In a cost-volume-profit chart, the
A.total cost line begins at zero
B.slope of the total cost line is dependent on the fixed cost per unit
C.total cost line begins at the total fixed cost value on the vertical axis
D.total cost line normally ends at the highest sales value
20) In the accounting cycle, the last step is
A.preparing the financial statements
B.journalizing and posting the adjusting entries
C.preparing a post-closing trial balance
D.journalizing and posting the closing entries
21) The arrangements between buyer and seller as to when payments for merchandise
are to be made are called
A.credit terms
B.net cash
C.cash on demand
D.gross cash
22) According to a summary of the payroll of Scotland Company, $450,000 was subject
to the 7.0% social security tax and $500,000 was subject to the 1.5% Medicare tax.
Federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%)
and federal (0.8%) unemployment taxes. The journal entry to record accrued payroll
taxes would include:
A.a debit to SUTA Payable of $630
B.a debit to SUTA Payable of $18,900
C.a credit to SUTA Payable of $630
D.a credit to SUTA Payable of $18,900
23) Which of the following is a value-added activity?
A.scrap processing
B.rework
C.preventive maintenance
D.warranty work
24) Austin, Inc. made a Prepaid Rent payment of $3,500 on January 1st. The companys
monthly rent is $700. The amount of Prepaid Rent that would appear on the January 31
balance sheet after adjustment is:
A.$2,800
B.$700
C.$3,500
D.$1,750
25) Accounts Receivable Turnover measures
A.how frequently during the year the accounts receivable are converted to cash
B.the number of days of accounts receivable outstanding
C.the fair market value of accounts receivable
D.the efficiency of the accounts payable function
26) Income tax was $175,000 for the year. Income tax payable was $30,000 and
$40,000 at the beginning and end of the year. Cash payments for income tax reported on
the cash flow statement using the direct method is
A.$175,000
B.$165,000
C.$205,000
D.$215,000
27) The Marx Company issued $100,000 of 12% bonds on April 1, 2010 at face value.
The bonds pay interest semiannually on January 1 and July 1. The bonds are dated
January 1, 2010, and mature on January 1, 2014. The total interest expense related to
these bonds for the year ended December 31, 2010 is
A.$1,000
B.$3,000
C.$9,000
D.12,000
28) Under the _________ inventory method, accounting records maintain a
continuously updated inventory value.
A.retail
B.periodic
C.physical
D.perpetual
29) Quick assets include
A.cash; cash equivalents, receivables, prepaid expenses, and inventory
B.cash; cash equivalents, receivables, and prepaid expenses
C.cash; cash equivalents, receivables, and inventory
D.cash; cash equivalents, and receivables
30) Income from operations for Division Z is $250,000, total service department
charges are $400,000 and operating expenses are $2,266,000. What are the revenues for
Division Z?
A.$650,000
B.$2,516,000
C.$2,916,000
D.$2,666,000
31) Under the allowance method of accounting for uncollectible receivables, writing off
an uncollectible account.
A.affects only income statement accounts
B.is not an acceptable practice
C.affects only balance sheet accounts
D.affects both balance sheet and income statement accounts
32) When is the adjusted trial balance prepared?
A.before adjusting journal entries are posted
B.after adjusting journal entries are posted
C.after the adjusting journal entries are journalized
D.before the adjusting journal entries are journalized
33) Cash receipts from interest and dividends are classified as
A.financing activities
B.operating activities
C.investing activities
D.either financing or investing activities
34) Cool-It Company manufactures and sells commercial air conditioners. Because of
current trends, it expects to increase sales by 10 percent next year. If this expected level
of production and sales occurs and plant expansion is not needed, how should this
increase affect next years total amounts for the following costs.
Variable Costs Fixed Costs Mixed Costs
A. increase increase increase
B. increase no change increase
C. no change no change increase
D. decrease increase increase
35) The Campers Edge Factory produces two products – canopies and tents. It has two
separate departments – cutting and sewing. The budget is $350,000 for the cutting
department and $400,000 for the sewing department. Each canopy requires 2 hours of
cutting and 1 hour of sewing. Each tent requires 1 hour of cutting and 6 hours of
sewing. The budget estimates that 20,000 canopies and 10,000 tents will be
manufactured during the year. Determine (a) the total number of budgeted direct labor
hours for the year in each department, (b) the departmental factory overhead rates for
both departments, and (c) the factory overhead allocated per unit each product using the
department factory overhead allocation rates using direct labor hours as the base.
36) On October 30, Seba Salon, Inc. issued a 90-day note with a face amount of
$60,000 to Reyes Products, Inc. for merchandise inventory. Assuming a 360-day year,
determine the proceeds of the note assuming the note is discounted at 8%.
A.$55,200
B.$64,800
C.$58,800
D.$61,200
37) Proof that the dollar amount of the debits equals the dollar amount of the credits in
the ledger means
A.all of the information from the journal was correctly transferred to the ledger
B.all accounts have their correct balances in the ledger
C.only the journal is accurate; the ledger may be incorrect
D.only that the debit dollar amounts equal the credit dollar amounts
38) The cash basis of accounting records revenues and expenses when the cash is
exchanged while the accrual basis of accounting
A.records revenues when they are earned and expenses when they are paid
B.records revenues and expenses when they are incurred
C.records revenues when cash is received and expenses when they are incurred
D.records revenues and expenses when the company needs to apply for a loan
39) Which of the following is included in the cost of land?
A.cost of paving a parking lot
B.brokerage commission
C.outdoor parking lot lighting attached to the land
D.fences on the land
40) A bank reconciliation should be prepared
A.whenever the bank refuses to lend the company money
B.to explain any difference between the company’s balance per books with the balance
per bank
C.by the company’s bank
D.by the person who is authorized to sign checks
41) Ramos Repair Company paid $750 in dividends to its stockholders. How does this
transaction affect Ramos Repair Companys accounting equation?
A.Increase Assets (Accounts Receivable) and decrease Assets (Cash)
B.Decrease Assets (Cash) and decrease Stockholders Equity (Dividends)
C.Decrease Assets (Cash) and decrease Liabilities (Accounts Payable)
D.Increase Assets (Cash) and decrease Stockholders Equity (Dividends)
42) Heather Company is considering the acquisition of a machine that costs $432,000.
The machine is expected to have a useful life of 6 years, a negligible residual value, an
annual cash flow of $120,000, and annual operating income of $83,721. What is the
estimated cash payback period for the machine?
A.3.6 years
B.4.3 years
C.5.2 years
D.6 years
43) The Lucy Corporation purchased and used 129,000 board feet of lumber in
production, at a total cost of $1,548,000. Original production had been budgeted for
22,000 units with a standard material quantity of 5.7 board feet per unit and a standard
price of $12 per board foot. Actual production was 23,500 units.
Compute the material quantity variance.
A.63,000F
B.63,000U
C.59,400F
D.59,400U
44) If fixed costs are $490,000, the unit selling price is $35, and the unit variable costs
are $20, what is the break-even sales (units) if fixed costs are reduced by $40,000?
A.32,667 units
B.14,000 units
C.30,000 units
D.24,500 units
45) Under absorption costing, which of the following costs would not be included in
finished goods inventory?
A.direct labor cost
B.direct materials cost
C.variable and fixed factory overhead cost
D.variable and fixed selling and administrative expenses
46) Which of the following conditions normally would not indicate that standard costs
should be revised?
A.The engineering department has revised product specifications in responding to
customer suggestions
B.The company has signed a new union contract which increases the factory wages on
average by $5.00 an hour
C.Actual costs differed from standard costs for the preceding week
D.The world price of raw materials increased
47) Process cost systems use job order cost cards to accumulate cost data.
48) A firm operated at 80% of capacity for the past year, during which fixed costs were
$330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating
profit was:
A.$140,000
B.($30,000)
C.$370,000
D.$670,000
49) Cost-volume-profit analysis cannot be used if which of the following occurs?
A.Costs cannot be properly classified into fixed and variable costs
B.The total fixed costs change
C.The per unit variable costs change
D.Per unit sales prices change
50) Robin Company purchased and used 500 pounds of direct materials to produce a
product with a 520 pound standard direct materials requirement. The standard materials
price is $1.90 per pound. The actual materials price was $2.00 per pound. Prepare the
journal entries to record (1) the purchase of the materials and (2) the material entering
production. Robin records standards and variances in the general ledger.
51) Cordell, Inc. has an operating leverage of 3. Sales are expected to increase by 9%
next year. What is the expected change in operating income next year?
If sales increase 9% and the operating leverage is 3, operating income is expected to
increase by 27% (9% x 3).
52) Proposals L and K each cost $500,000, have 6-year lives, and have expected total
cash flows of $720,000. Proposal L is expected to provide equal annual net cash flows
of $140,000, while the net cash flows for Proposal K are as follows:
Determine the cash payback period for each proposal. Round your answers to two
decimal places. Proposal L: $500,000/$140,000 = 3.57 years
53) The Cavy Company estimates that the factory overhead for the following year will
be $1,250,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 40,000 hours. The machine hours for
the month of April for all of the jobs was 4,780. What is the amount that will be applied
to all of the jobs for the month of April?
54) Define nonfinancial performance measures. What are they used for and what are
some common examples?