1) On January 1, 2014, Cat Power Company reported owners equity of $705,000.
During the year, the owner withdrew cash of $30,000. At December 31, 2014, the
balance in owners equity was $825,000. What amount of net income or net loss would
the company report for 2014?
a.Net loss of $30,000
b.Net income of $90,000
c.Net income of $120,000
d.Net income of $150,000
2) Yocum Company has just signed a capital lease contract for equipment that requires
annual lease payments of $60,000 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 lease payments?
a.$171,299
b.$240,000
c.$70,462
d.$225,201
3) As of June 30, 2014, Actual Tigers Company has assets of $100,000 and owners
equity of $40,000. What are the liabilities for Actual Tigers Company as of June 30,
2014?
a.$40,000
b.$60,000
c.$100,000
d.$140,000
4) Revenue is recognized when cash dividends are received under
a.the controlling interest method
b.the cost method
c.the equity method
d.both the cost and equity methods
5) The interest on a $9,000, 6%, 90-day note receivable is
a.$135
b.$270
c.$405
d.$540
6) A deposit made by a company will appear on the bank statement as a
a.debit
b.credit
c.debit memorandum
d.credit memorandum
7) Unrealized gains and losses related to available-for-sale/non-trading equity
investments are reported in other comprehensive income under
a.GAAP only
b.IFRS only
c.Both GAAP and IFRS
d.Neither GAAP or IFRS
8) In periods of inflation, phantom or paper profits may be reported as a result of using
the
a.perpetual inventory method
b.FIFO costing assumption
c.LIFO costing assumption
d.periodic inventory method
9) In the Cabana Company, maintenance costs are a mixed cost. At the low level of
activity (160 direct labor hours), maintenance costs are $600. At the high level of
activity (400 direct labor hours), maintenance costs are $1,200. Using the high-low
method, what is the variable maintenance cost per unit and the total fixed maintenance
cost?
Variable Cost Per UnitTotal Fixed Cost
a.$2.50$200
b.$2.50$600
c.$2.75$220
d.$3.75$400
10) Farr Company purchased a new van for floral deliveries on January 1, 2014 . The
van cost $56,000 with an estimated life of 5 years and $14,000 salvage value at the end
of its useful life. The double-declining-balance method of depreciation will be used.
What is the balance of the Accumulated Depreciation account at the end of 2015?
a.$8,960
b.$26,880
c.$35,840
d.$13,440
11) A corporation recognizes a gain or loss
a.only when bonds are converted into common stock
b.only when bonds are redeemed before maturity
c.when bonds are redeemed at or before maturity
d.when bonds are converted into common stock and when they are redeemed before
maturity
12) Proctor Corporation had beginning inventory $100,000, cost of goods sold
$750,000, and ending inventory $150,000. What was Proctor’s inventory turnover?
a.3 times
b.6 times
c.7.5 times
d.5 times
13) Under the allowance method of accounting for uncollectible accounts,
a.the cash realizable value of accounts receivable is greater before an account is written
off than after it is written off
b.Bad Debt Expense is debited when a specific account is written off as uncollectible
c.the cash realizable value of accounts receivable in the balance sheet is the same before
and after an account is written off
d.Allowance for Doubtful Accounts is closed each year to Income Summary
14) The present value of a bond is also known as its
a.face value
b.market price
c.future value
d.deferred value
15) The foreign subsidiary of a large corporation is
a.not a responsibility center
b.a profit center
c.a cost center
d.an investment center
16) Presented below are two independent situations:
(a)Yount Company exchanged an old machine (cost $150,000 less $90,000 accumulated
depreciation) plus $10,000 cash for a new machine. The old machine had a fair value of
$54,000. Prepare the entry to record the exchange of assets by Yount Company.
(b)Lawson Company trades old equipment (cost $90,000 less $54,000 accumulated
deprecia-tion) for new equipment. Lawson paid $36,000 cash in the trade. The old
equipment that was traded had a fair value of $54,000. Prepare the entry to record the
exchange of assets by Lawson Company. The transaction has commercial substance.
17) Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1,
2014 for $60,000.
The journal entry to record this investment includes a debit to
a.Debt Investments for $64,800
b.Debt Investments for $60,000
c.Cash for $60,000
d.Stock Investments for $60,000
18) Revenue recognition fraud is
a.a major issue in the U.S. but not worldwide
b.a major issue internationally, but not in the U.S
c.a major issue in the U.S. and worldwide
d.not a major issue anywhere
19) Pavement Company purchased a truck from Bee Thousand Corp. by issuing a
6-month, 8% note payable for $90,000 on November 1 . On December 31, the accrued
expense adjusting entry is
a.No entry is required.
b.Interest Expense7,200
Interest Payable7,200
c.Interest Expense3,600
Interest Payable3,600
d.Interest Expense1,200
Interest Payable1,200
20) Lewis Company earns 11% on an investment that pays back $660,000 at the end of
each of the next 5 years. Lewis’s finance department has the following values related to
the time value of money to help in its planning process and compound interest
decisions.
Present Value of 1 for 5 periods at 11%0.59345
Future Value of 1 for 5 periods at 11%1.68506
Present Value of an Annuity of 1 for 5 periods at 11%3.69590
Future Value of an Annuity of 1 for 5 periods at 11%6.22780
To the closest dollar, what is the amount Lewis invested to earn the 11% rate of return?
a.$1,112,139
b.$2,439,294
c.$1,785,750
d.$391,677
21) Hoppmann Company wrote checks totaling $25,620 during October and $27,975
during November. $24,360 of these checks cleared the bank in October, and $27,330
cleared the bank in November. What was the amount of outstanding checks on
November 30?
a.$645
b.$1,260
c.$1,905
d.$2,355
22) An intangible asset
a.does not have physical substance, yet often is very valuable
b.is worthless because it has no physical substance
c.is converted into a tangible asset during the operating cycle
d.cannot be classified on the balance sheet because it lacks physical substance
23) Which of the following is not classified as direct labor?
a.Bottlers of beer in a brewery
b.Copy machine operators at a copy shop
c.Wages of supervisors
d.Bakers in a bakery
24) Sunshine Company issued 4,000 shares of its $5 par value common stock in
payment of its attorney’s bill of $80,000. The bill was for services performed in helping
the company incorporate. Crain should record this transaction by debiting
a.Legal Expense for $20,000
b.Legal Expense for $80,000
c.Organization Expense for $20,000
d.Organization Expense for $80,000
25) Munro Company applies overhead to products based on direct labor hours.
Manufacturing overhead at the expected normal level of activity is $30,000 per month
plus $3 per direct labor hour. During June, actual manufacturing overhead costs
amounted to $51,000 when 6,100 actual direct labor hours were worked. The standard
number of direct labor hours that should have been worked for the output achieved was
6,000 direct labor hours. The overhead controllable variance for June was:
a.$3,000 unfavorable
b.$2,700 unfavorable
c.$2,040 favorable
d.$3,000 favorable
26) A company can produce and sell only one of the following two products:
MachineContribution
Hours RequiredMargin Per Unit
Product 13$30
Product 22$25
If the company has machine capacity of 3,000 hours, what is the total contribution
margin of the product it should produce to maximize net income?
a.$37,500
b.$30,000
c.$36,000
d.$33,000
27) If Baylor Company issues 8,000 shares of $5 par value common stock for $280,000,
a.Common Stock will be credited for $280,000
b.Paid-In Capital in Excess of Par will be credited for $40,000
c.Paid-In Capital in Excess of Par will be credited for $240,000
d.Cash will be debited for $240,000
28) Dustin Company planned to produce 20,000 units of product and work at the
60,000 direct labor hours level of activity for 2014 . Manufacturing overhead at this
level of activity and the predetermined overhead rate are as follows:
Predetermined
Overhead Rate per
Direct Labor Hour
Variable manufacturing overhead$300,000$5
Fixed manufacturing overhead 120,000 2
Total manufacturing overhead$420,000$7
At the end of 2014, 21,200 units were actually produced and 61,500 direct labor hours
were actually worked. Total actual manufacturing overhead costs were $430,000.
Instructions
Using a two-variance analysis of manufacturing overhead, calculate the following
variances and indicate whether they are favorable or unfavorable:
(a)Overhead controllable variance.
(b)Overhead volume variance.
29) Lerner Merchandising has budgeted its activity for December according to the
following information:
1>Sales at $800,000, all for cash.
2>Budgeted depreciation for December is $20,000.
4>The cash balance at December 1 was $20,000.
5>Selling and administrative expenses are budgeted at $70,000 for December and are
paid for in cash.
6>The planned merchandise inventory on December 31 and December 1 is $24,000.
7>The invoice cost for merchandise purchases represents 75% of the sales price. All
purchases are paid in cash.
How much are the budgeted cash disbursements for December?
a.$600,000
b. $690,000
c. $670,000
d.$666,000
30) Stahl Consulting started the year with total assets of $60,000 and total liabilities of
$15,000. During the year, the business recorded $48,000 in catering revenues and
$30,000 in expenses. Stahl made an additional investment of $9,000 and withdrew cash
of $15,000 during the year. The owners equity at the end of the year was
a.$33,000
b.$54,000
c.$57,000
d.$63,000
31) Which department is usually responsible for a labor price variance attributable to
misallocation of workers?
a.Quality control
b.Purchasing
c.Engineering
d.Production
32) A company just starting in business purchased three merchandise inventory items at
the following prices. First purchase $64; Second purchase $76; Third purchase $68. If
the company sold two units for a total of $200 and used FIFO costing, the gross profit
for the period would be
a.$56
b.$60
c.$62
d.$68
33) In the balance sheet, the account, Premium on Bonds Payable, is
a.added to bonds payable
b.deducted from bonds payable
c.classified as a stockholders’ equity account
d.classified as a revenue account
34) Most companies that use standards set them at
a.the normal level
b.a conceivable level
c.the ideal level
d.last year’s level
35) A plant asset cost $90,000 when it was purchased on January 1, 2007 . It was
depreciated by the straight-line method based on a 9-year life with no salvage value. On
June 30, 2014, the asset was discarded with no cash proceeds. What gain or loss should
be recognized on the retirement?
a.No gain or loss
b.$20,000 loss
c.$15,000 loss
d.$10,000 gain
36) The following direct materials data pertain to the operations of Oswell
Manufacturing Company for the month of December.
Standard materials price $5.00 per pound
Actual quantity of materials purchased and used 16,500 pounds
The standard cost card shows that a finished product contains 4 pounds of materials.
The 16,500 pounds were purchased in December at a discount of 3% from the standard
price. In December, 4,000 units of finished product were manufactured.
Instructions
Prepare a matrix for materials and calculate the materials variances.
Price VarianceQuantity Variance
Total
Materials Variance
37) Nona Manufacturing Company uses a job order cost accounting system and keeps
perpetual inventory records. Prepare journal entries to record the following transactions
during the month of June.
June1Purchased raw materials for $22,000 on account.
8Raw materials requisitioned by production:
Direct materials$8,500
Indirect materials1,500
15Paid factory utilities, $2,400 and repairs for factory equipment, $7,500.
25Incurred $93,000 of factory labor.
25Time tickets indicated the following:
Direct Labor(6,000 hrs $13 per hr)=$78,000
Indirect Labor(2,500 hrs $8 per hr)= 20,000
$98,000
25Applied manufacturing overhead to production based on a predetermined overhead
rate of $8 per direct labor hour worked.
28Goods costing $20,000 were completed in the factory and were transferred to
finished goods.
30Goods costing $16,000 were sold for $23,000 on account.
38) Selected data from Decco Company are presented below:
Total assets$1,600,000
Average assets2,000,000
Net income380,000
Net sales1,500,000
Average common stockholders’ equity1,000,000
Instructions
Calculate the profitability ratios that can be computed from the above information.
39) Tyranny Company issues a three-year, zero interest-bearing note of $30,000. The
interest rate used to discount the zero interest-bearing note is 5%. What are the cash
proceeds that Tyranny Company should receive? (Round to the nearest dollar.)
40) Cascade Company budgeted a level of activity of 20,000 machine hours to be
worked each month in the Machining Department. At this level of activity,
manufacturing overhead costs were budgeted as follows:
Variable manufacturing overhead
Indirect materials$ 25,000
Indirect labor38,000
Repairs4,000
Utilities10,000
Fixed manufacturing overhead
Supervisory salaries20,000
Property taxes1,000
Depreciation 12,000
Total manufacturing overhead$110,000
Instructions: The actual manufacturing costs incurred for the month of March, when
24,000 machine hours were worked, are listed below on a partially completed budget
report. Complete the budget report in a manner that would be most useful for evaluating
the performance of the Machining Department manager for the month of March, 2014 .
CASCADE COMPANY
Manufacturing Overhead Budget Report
Machining Department
For the Month Ended March 31, 2014
Difference
Favorable F
Budget at Actual atUnfavorable U
Variable manufacturing overhead
Indirect materials$$ 30,800$
Indirect labor44,500
Repairs7,000
Utilities 11,000
Total variable 93,300
Fixed manufacturing overhead
Supervisory salaries20,000
Property taxes1,000
Depreciation 12,000
Total fixed 33,000
Total costs$$126,300$
41) In accordance with the revenue recognition principle, sales revenues are recorded
when
the accountant determines which period’s income statement “needs” more revenue
the performance obligation is satisfied, which typically occurs when the goods are
transferred from the seller to the buyer
c.cash is received from the customer for items already delivered
d.an order is received from a customer with delivery of the product expected to take
place within the next 30 days
42) At December 31, 2014, the following information was available for Deen
Company: ending inventory $22,600; beginning inventory $21,400; cost of goods sold
$171,000; and sales revenue $430,000.
Calculate the inventory turnover and days in inventory for Deen.
43) The first step in preparing a worksheet is to prepare a ______________ from the
general ledger accounts.