1) For a current liability to exist, the following two tests must be met. The liability must
be due usually within a year and must be paid out of current assets.
2) The number of days’ sales in receivables is one means of expressing the relationship
between average daily sales and accounts receivable.
3) The journal includes both debit and credit accounts for each transaction.
4) A report analyzing how many products need to be sold to cover operating costs is not
typically a managerial accounting report.
5) A proof of the equality of debits and credits in the ledger at the end of an accounting
period is called a balance sheet.
6) The initial owners of stock of a newly formed corporation are called directors.
7) Net income is shown on the work sheet in the Income Statement Debit column and
the Balance Sheet Credit column.
8) Organizational expenses are classified as intangible assets on the balance sheet.
9) Managerial accounting provides useful information to managers on product costs.
10) Responsibility accounting reports for profit centers are normally in the form of
income statements.
11) If the standard to produce a given amount of product is 1,000 units of direct
materials at $11 and the actual was 800 units at $12, the direct materials quantity
variance was $2,200 unfavorable.
12) Dollar amounts of working capital are difficult to assess when comparing
companies of different sizes or in comparing such amounts with industry figures.
13) It is beneficial for two related companies to use the cost price approach for transfer
pricing when both of the companies operate as cost centers and are not concerned with
the revenue.
14) In a push manufacturing system, raw materials are released to production based on
actual customer orders.
15) Receiving payments on an account receivable increases both equity and assets.
16) The due date of a 60-day note dated July 10 is September 10.
17) Assuming that the quantities of inventory on hand during the current year were
sufficient to meet all demands for sales, a decrease in the inventory turnover for the
current year when compared with the turnover for the preceding year indicates an
improvement in inventory management.
18) If the standard to produce a given amount of product is 1,000 units of direct
materials at $11 and the actual was 800 units at $12, the direct materials price variance
was $800 unfavorable.
19) If the costs for direct materials, direct labor, and factory overhead were $522,200,
$82,700, and $45,300, respectively, for 16,000 equivalent units of production, the
conversion cost per equivalent unit was $8.00.
20) No significant differences exist between the accounting standards issued by the
FASB and the IASB.
21) A $375,000 bond issue on which there is an unamortized discount of $40,000 is
redeemed for $320,000. Journalize the redemption of the bonds.
22) Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and
100,000 shares of $50 par common stock. The following amounts were distributed as
dividends:
Determine the dividends per share for preferred and common stock for each year.
23) Equipment was purchased on January 5, 2011, at a cost of $90,000. The equipment
had an estimated useful life of 8 years and an estimated residual value of $8,000.
After using the equipment for 3 years, the useful life was revised to a total of 10 years
and the residual value was reduced to $2,004.
Determine the straight-line depreciation expense for the year 2014 and following years.
24) Mobile Sales has five sales employees which receive weekly paychecks. Each earns
$11.50 per hour and each has worked 40 hours in the pay period. Each employee pays
12% of gross in Federal Income Tax, 3% in State Income Tax, 6% of gross in Social
Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State Disability Insurance.
Journalize the recognition the pay period ending January 19th which will be paid to the
employees January 26th. (Keep in mind that none of the employees is subject to a
ceiling amount for social security.)
25) The following data for the current year ended June 30 were extracted from the
accounting records of Excel Co.:
Prepare a multiple-step income statement for the year ended June 30, 2014.
26) The Svelte Jeans Company produces two different types of jeans. One is called the
Simple Life and the other is called the Fancy Life. The company sales budget estimates
that 350,000 of the Simple Life Jeans and 200,000 of the Fancy Life will be sold during
20xx. The Production Budget requires 353,500 units of Simple Life jeans and 196,000
Fancy Life jeans be manufactured. The Simple Life jeans require 3 yards of denim
material, a zipper, and 25 yards of thread. The Fancy Life jeans require 4.5 yards of
denim material, a zipper, and 40 yards of thread. Each yard of denim material costs
$3.25, the zipper costs $.75 each, and the thread is $.01 per yard. There is enough
material to make 2,000 jeans of each type at the beginning of the year. The desired
amount of materials left in ending inventory is to have enough to manufacture 3,500
jeans of each type. Prepare a Direct Materials Purchases Budget.
27) What information does the income statement give to business users?
28) Fill in the missing numbers using the formula for Fixed Asset Turnover:
