1) On October 17 of the current year, a company determined that a customer’s account
receivable was uncollectible and that the account should be written off. Assuming the
allowance method is used to account for bad debts, what effect will this write-off have
on the company’s net income and total assets?
A.Decrease in net income; no effect on total assets.
B.No effect on net income; no effect on total assets.
C.Decrease in net income; decrease in total assets.
D.Increase in net income; no effect on total assets.
E.No effect on net income; decrease in total assets.
2) Operating budgets include all of the following budgets except the:
A.Sales budget.
B.Selling expense budget.
C.Cash budget.
D.Merchandise purchases budget.
E.General and administrative expense budget.
3) When a petty cash fund is in use:
A.Expenses paid with petty cash are recorded when the fund is replenished.
B.Petty Cash is debited when funds are replenished.
C.Petty Cash is credited when funds are replenished.
D.Expenses are not recorded.
E.Cash is debited when funds are replenished.
4) If a company has advance subscription sales totaling $45,000 for the upcoming year
when four quarterly journals will mailed to customers, the receipt of cash would be
journalized as:
A.Debit Cash $45,000; credit Unearned Revenue $45,000.
B.Debit Unearned Revenue $45,000; credit Sales $45,000.
C.Debit Cash $45,000, credit Sales $45,000.
D.Debit Sales $45,000, credit Unearned Revenue $45,000.
E.Debit Prepaid Subscriptions $45,000, credit Sales $45,000.
5) A managerial accounting report that presents predicted amounts of the company’s
revenues and expenses for the budget period is called a:
A.Budgeted income statement.
B.Budgeted balance sheet.
C.Master plan.
D.Rolling income statement.
E.Continuous profit statement.
6) The following information is available for the Higgins Travel Agency. After these
closing entries what will be the balance in the C. Higgins, Capital account?
A.$75,500.
B.$184,500.
C.$99,500.
D.$160,500.
E.$130,000.
7) Tower, Knight, and Spears are partners who share income and loss in a 3:2:2 ratio.
The partnership’s capital balances are as follows: Tower, $332,000; Knight, $124,000;
and Spears, $214,000. Spears decides to withdraw from the partnership, and the
partners agree not to have the assets revalued upon Spears’ retirement. Prepare journal
entries to record Spears’ withdrawal from the partnership under each of the following
separate assumptions: Spears (a) sells his interest to Conner for $200,000 after Tower
and Knight approve the entry of Conner as a partner; (b) is paid $214,000 in partnership
cash for his equity; (c) is paid $205,000 in partnership cash for his equity; (d) is paid
$220,000 in partnership cash for his equity.
8) A classification of costs that determines whether a cost is expensed to the income
statement or capitalized to inventory is:
A.Fixed versus variable.
B.Direct versus indirect.
C.Financial versus managerial.
D.Service versus manufacturing.
E.Product versus period.
9) All of the following are considered effective cash management principles except:
A.Encouraging collection of receivables by offering discounts for early payments.
B.Keeping only necessary levels of assets.
C.Planning expenditures.
D.Retaining excess cash for unexpected expenditures.
E.Delaying payment of liabilities until the last possible day.
10) Oxford Company uses a job order costing system. In the last month, the system
accumulated labor time tickets total $24,600 for direct labor and $4,300 for indirect
labor. These costs were accumulated in Factory Payroll as they were paid. Which entry
should Oxford make to assign the Factory Payroll?
A.Debit Payroll Expense $28,900; credit Cash $28,900.
B.Debit Payroll Expense $24,600; debit Factory Overhead $4,300; credit Factory
Payroll $28,900.
C.Debit Work in Process Inventory $24,600; debit Factory Overhead $4,300; credit
Factory Payroll $28,900.
D.Debit Work in Process Inventory $24,600; debit Factory Overhead $4,300; credit
Wages Payable $28,900.
E.Debit Work in Process Inventory $28,900; credit Factory Payroll $28,900.
11) Havermill Co. establishes a $250 petty cash fund on September 1. On September
30, the fund is replenished. The accumulated receipts on that date represent $73 for
Office Supplies, $137 for merchandise inventory, and $22 for miscellaneous expenses.
The fund has a balance of $18. On October 1, the accountant determines that the fund
should be increased by $50. The journal entry to record the reimbursement of the fund
on September 30 includes a:
A.Debit to Office Supplies for $73.
B.Credit to Merchandise Inventory for $137.
C.Credit to Cash for $250.
D.Debit Petty Cash for $232.
E.Credit to Cash for $18.
12) A company purchased a delivery van for $28,000 with a salvage value of $3,000 on
September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line
method, how much depreciation expense should the company recognize on December
31, Year 1?
A.$5,000.
B.$1,667.
C.$1,400.
D.$1,250.
E.$2,067.
13) Minor Company installs a machine in its factory at the beginning of the year at a
cost of $135,000. The machine’s useful life is estimated to be 5 years, or 300,000 units
of product, with a $15,000 salvage value. During its first year, the machine produces
64,500 units of product. Determine the machines’ first year depreciation under the
straight-line method.
A.$27,000.
B.$29,025.
C.$25,800.
D.$23,779.
E.$24,000.
14) Ratchet Manufacturing’s August sales budget calls for sales of 8,000 units. Each
month’s sales are expected to exceed the prior month’s results by 5%. The product
selling price is $25 per unit. The expected total sales dollars for September’s sales
budget are:
A.$200,000.
B.$190,000.
C.$210,000.
D.$220,000.
E.$8,400.
15) A company’s prime costs total $3,000,000 and its conversion costs total $7,000,000.
If direct materials are $1,000,000 and factory overhead is $5,000,000, then direct labor
is:
A.$4,000,000.
B.$14,000,000.
C.$2,000,000.
D.$1,000,000.
E.$3,000,000.
16) A company’s has fixed interest expense of $52,000, income taxes expense of
$121,000, and net income of $281,000. The company’s times interest earned ratio
equals:
A.8.73.
B.5.40.
C.7.73.
D.2.33.
E.0.11.
17) Minstrel Manufacturing uses a job order costing system. During one month
Minstrel purchased $198,000 of raw materials on credit; issued materials to production
of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of
$150,000, paid in cash, of which $40,000 was indirect labor. Minstrel uses a
predetermined overhead rate of 150% of direct labor cost. The journal entry to record
the issuance of materials to production is:
A.Debit Raw Materials Inventory $195,000; credit Accounts Payable $195,000.
B.Debit Work in Process Inventory $195,000; credit Raw Materials Inventory
$195,000.
C.Debit Raw Materials Inventory $195,000; credit Work in Process Inventory
$195,000.
D.Debit Work in Process Inventory $165,000; debit Factory Overhead $30,000; credit
Raw Materials Inventory $195,000.
E.Debit Finished Goods Inventory $195,000; credit Raw Materials Inventory $195,000.
18) On August 1, a company issues 6%, 10 year, $600,000 par value bonds that pay
interest semiannually each February 1 and August 1. The bonds sold at $592,000. The
company uses the straight-line method of amortizing bond discounts. The company’s
year-end is December 31. Prepare the general journal entry to record the interest
accrued at December 31.
19) A company established a petty cash fund in November of the current year and
experienced the following transactions affecting the fund during November:
Prepare the journal entries to establish the fund on November 1 and to reimburse the
fund on November 28.
20) A company’s income before interest expense and income taxes is $302,400, and its
interest expense is $62,000. Calculate the company’s times interest earned ratio.
21) A(n) _____________________ is the potential benefit lost by taking a specific
action when two or more alternative choices are available.
22) A number of accounts are listed below. Use the table to classify each account by
indicating whether it is a temporary or permanent account, whether it is included in the
Income Statement or Balance sheet, and if it is closed at the end of the accounting
period, and, if so, whether it is closed with a debit or credit. The first one is done as an
example.
23) The Branson Company uses the percent of sales method of accounting for
uncollectible accounts receivable. During the current year, the following transactions
occurred:
Prepare the general journal entries to record these transactions.
24) The purpose of managerial accounting information is to help ________________
users make decisions while the purpose of financial accounting is to help
_____________ users make decisions.
25) _______________ is the deliberate misuse of the employer’s assets for the
employee’s personal gain.
26) Bonds issued in the names and addresses of their holders are ________________
bonds.