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1) A work sheet heading is dated for a period of time.
2) Factors which reflect the ability of a business to pay its debts and earn a reasonable
amount of income are referred to as solvency and profitability.
3) An account receivable is typically classified as a revenue.
4) All long-term liabilities eventually become current liabilities.
5) Federal income taxes withheld increase the employer's payroll tax expense.
6) In the vertical analysis of an income statement, each item is generally stated as a
percentage of total assets.
7) The budgeted volume of production is normally computed as the sum of (1) the
expected sales volume and (2) the desired ending inventory.
8) The amount of the net income for a period appears on both the income statement and
the balance sheet for that period.
9) A loan in which the lender deducts interest from the amount borrowed before the
money is advanced to the borrower is called an interest bearing note.
10) Fair value accounting is used more under Generally Accepted Accounting
Principles (GAAP) than it is under International Financial Reporting Standards (IRFS).
11) The amount of capital paid in by the stockholders of the corporation is called legal
capital.
12) The production budget is the starting point for preparation of the direct labor cost
budget.
13) FIFO is the inventory costing method that follows the physical flow of the goods.
14) FICA tax is a payroll tax that is paid only by employers.
15) The accounts receivables turnover ratio is computed by dividing total gross sales by
the average net receivables during the year.
16) The point in operations at which revenues and expired costs are exactly equal is
called the break-even point.
17) Temporary investments
A.are reported as current assets
B.include cash equivalents
C.do not include equity securities
D.all of the above
18)
Which of the graphs in Figure 20-1 illustrates the nature of a mixed cost?
A.Graph 2
B.Graph 3
C.Graph 4
D.Graph 1
19) Sifton Electronics Corporation manufactures and assembles electronic motor drives
for video cameras. The company assembles the motor drives for several accounts. The
process consists of a just-in-time cell for each customer. The following information
relates only to one customer's just-in-time cell for the coming year. Projected labor and
overhead, $7,370,000; materials costs, $28 per unit. Planned production included 4,000
hours to produce 27,500 motor drives. Actual production for August was 1,600 units,
and motor drives shipped amounted to 1,380 units.
From the foregoing information, determine the amount of the conversion costs charged
to Raw and In Process Inventory during August.
A.$369,840
B.$408,480
C.$428,800
D.$473,600
20) When purchases of merchandise are made for cash, the transaction may be recorded
with the following entry
A.debit Cash; credit Merchandise Inventory
B.debit Merchandise Inventory; credit Cash
C.debit Merchandise Inventory; credit Cash Discounts
D.debit Merchandise Inventory; credit Purchases
21) Logan Electronics Corporation manufactures and assembles electronic motor drives
for video cameras. The company assembles the motor drives for several accounts. The
process consists of a just-in-time cell for each customer. The following information
relates only to one customer's just-in-time cell. For the year planned labor and overhead
was $76,800,000; materials costs, $25 per unit. Planned production included 9,600
hours to produce 76,800 motor drives. Actual production for the month of August was
5,200 units, and motor drives shipped amounted to 5,040 units. From the foregoing
information, determine the budgeted cell conversion cost per hour.
A.$8,025
B.$800
C.$7,200
D.$8,000
22) The amount of the outstanding checks is included on the bank reconciliation as a(n)
A.deduction from the balance per company's records
B.addition to the balance per bank statement
C.deduction from the balance per bank statement
D.addition to the balance per company's records
23) The budgeted finished goods inventory and cost of goods sold for a manufacturing
company for the year 2012 are as follows: January 1 finished goods, $765,000;
December 31 finished goods, $540,000; cost of goods sold for the year, $2,560,000.
The budgeted costs of goods manufactured for the year is?
A.$1,255,000
B.$2,335,000
C.$2,785,000
D.$3100,000
24) Determine the missing amount for each of the following:
Assets Liabilities Stockholders Equity
(a) $38,000 $45,000
$30,000 (b) $22,000
$53,000 $32,000 (c)
25) State for each account whether it is likely to have from normal business operations
(a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. Also,
indicate the normal balance of each account.
26) The journal entry to record a note received from a customer to replace an account is
A.debit Notes Receivable; credit Accounts Receivable
B.debit Accounts Receivable; credit Notes Receivable
C.debit Cash; credit Notes Receivable
D.debit Notes Receivable; credit Notes Payable
27) The method of computing inventory that uses records of the selling prices of the
merchandise is called
A.retail method
B.last-in, first-out
C.first-in, first-out
D.average cost
28) On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co.
Assume that the fiscal year of Seller Co. ends June 30. Using the 360-day year in your
calculations, what is the amount of interest revenue recognized by Seller in the
following year?
A.$1,200.00
B.$1,208.89
C.$1,306.67
D.$1,600.00
29) A loss on disposal of a segment would be reported in the income statement as a(n)
A.administrative expense
B.other expense
C.deduction from income from continuing operations
D.selling expense
30) Fees receivable would appear on the balance sheet as a(n)
A.asset
B.liability
C.fixed asset
D.unearned revenue
31) For a supervisor of a manufacturing department, which of the following costs is
controllable?
A.direct materials
B.insurance on factory building
C.depreciation of factory building
D.rent on factory building
32) Indirect costs incurred in a manufacturing environment that cannot be traced
directly to a product are treated as:
A.period costs and expensed when incurred
B.product costs and expensed when the goods are sold
C.product costs and expenses when incurred
D.period costs and expensed when the goods are sold
33) The amount of time spent by each employee and the labor cost incurred for each
individual job or for factory overhead are recorded on:
A.pay stubs
B.in-and-out cards
C.time tickets
D.employees' earnings records
34) Which of the following is the best description of accountings role in business?
A.Accounting provides stockholders with information regarding the market value of the
companys stocks
B.Accounting provides information to managers to operate the business and to other
users to make decisions regarding the economic condition of the company
C.Accounting helps in decreasing the credit risk of the company
D.Accounting is not responsible for providing any form of information to users. That is
the role of the Information Systems Department
35) Under a JIT environment, employees have the responsibility and authority to
A.purchase inventory
B.determine output amounts
C.make decisions about operations, rather than waiting for management
D.make engineering changes
36) A department store apportions payroll costs on the basis of the number of payroll
checks issued. Accounting costs are apportioned on the basis of the number of reports.
The payroll costs for the year were $231,000 and the accounting costs for the year
totaled $75,500. The departments and the number of payroll checks and accounting
reports for each are as follows:
Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to
each department.
37) Accompanying the bank statement was a credit memo for a short-term note
collected by the bank for the customer. What entry is required in the company's
accounts?
A.debit Notes Receivable; credit Cash
B.debit Cash; credit Miscellaneous Income
C.debit Cash; credit Notes Receivable
D.debit Accounts Receivable; credit Cash
38) A project has estimated annual cash flows of $95,000 for four years and is estimated
to cost $260,000. Assume a minimum acceptable rate of return of 10%. Using the
following tables determine the (a) net present value of the project and (b) the present
value index, rounded to two decimal places.
39) On March 1, a business paid $3,600 for a twelve month liability insurance policy.
On April 1 the same business entered into a two-year rental contract for equipment at a
total cost of $18,000. Determine the following amounts:
(a) insurance expense for the month of March
(b) prepaid insurance as of March 31
(c) equipment rent expense for the month of April
(d) prepaid equipment rental as of April 30
40) On January 1, 2014, Gemstone Company obtained a $165,000, 10-year, 7%
installment note from Guarantee Bank. The note requires annual payments of $23,492,
with the first payment occurring on the last day of the fiscal year. The first payment
consists of interest of $11,550 and principal repayment of $11,942. The journal entry to
record the payment of the first annual amount due on the note would include:
A.a debit to cash of $11,942
B.a credit to Interest Payable of $11,550
C.a debit to Notes Payable of $11,942
D.a debit to Interest Expense of $23,492
41) Assume that Penguin Co. is considering disposing of equipment that cost $50,000
and has $40,000 of accumulated depreciation to date. Penguin Co. can sell the
equipment through a broker for $25,000 less 5% commission. Alternatively, Teal Co.
has offered to lease the equipment for five years for a total of $48,750. Penguin will
incur repair, insurance, and property tax expenses estimated at $10,000. At lease-end,
the equipment is expected to have no residual value. The net differential income from
the lease alternative is:
A.$15,000
B.$ 5,000
C.$25,000
D.$12,500
42) Match the following terms to the most appropriate answer:
1>if the contract rate is less than the effective rate A. amortization
2>the return required by the market on the day of issuance B. interest expense
3>the allocation of a premium or discount over the life of a bond C. effective rate
4>if the contract rate exceeds the effective rate D. bond premium
5>the rate printed on the bond certificate E. contract rate
6>the value reported on the income statement F. bond discount
7>face value times contract rate G. interest payment
43) A $135 petty cash fund has cash of $28 and receipts of $110. The journal entry to
replenish the account would include a
A.credit to Petty Cash for $110
B.debit to Cash for $110
C.credit to Cash Over and Short for $3
D.credit to Cash for $82
44) Which of the following accounts ordinarily appears in the post-closing trial
balance?
A.Fees Earned
B.Supplies Expense
C.Dividends
D.Unearned Rent
45) The Stewart Cake Factory sells chocolate cakes, birthday decorated cakes, and
specialty cakes. The factory is experiencing a bottleneck and is trying to determine
which cake is more profitable. Even though the company may have to limit the orders
that it takes, they are concerned about customer service and satisfaction.
(A) Calculate the contribution margin per hour per cake.
(B) Determine which cakes the company should try to sell more of first, second, and
then last.
46) The accumulated depletion account is
A.an expense account
B.an intangible asset account
C.reported on the income statement as other expense
D.reported on the balance sheet as a deduction from the cost of the mineral deposit
47) The amount of federal income taxes withheld from an employee's gross pay is
recorded as a(n)
A.payroll expense
B.contra account
C.asset
D.liability
48) Revenues are reported when
A.a contract is signed
B.cash is received from the customer
C.work is begun on the job
D.work is completed on the job
49) A cost that will not be affected by later decisions is termed a(n):
A.period cost
B.differential cost
C.sunk cost
D.replacement cost
50) A used machine with a purchase price of $77,000, requiring an overhaul costing
$8,000, installation costs of $5,000, and special acquisition fees of $3,000, would have
a cost basis of
A.$93,000
B.$90,000
C.$82,000
D.$85,000
51) The cost system best suited to industries that manufacture a large number of
identical units of commodities on a continuous basis is:
A.process
B.departmental
C.first-in, first-out
D.job order
52) For March, sales revenue is $1,000,000; sales commissions are 5% of sales; the
sales manager's salary is $80,000; advertising expenses are $75,000; shipping expenses
total 1% of sales; and miscellaneous selling expenses are $2,100 plus 1% of sales. Total
selling expenses for the month of March are:
A.$227,100
B.$215,000
C.$217,100
D.$152,100
53) Which of the following pairs of accounts could not appear in the same adjusting
entry?
A.Service Revenue and Unearned Revenue
B.Interest Income and Interest Expense
C.Rent Expense and Prepaid Rent
D.Salaries Payable and Salaries Expense
54) The Waterfall Company sells a product for $150 per unit. The variable cost is $80
per unit, and fixed costs are $270,000. Determine the (a) break-even point in sales units,
and (b) break-even points in sales units if the company desires a target profit of
$36,000. Round your answer to the nearest whole number.
55) Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45.
The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for
$3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the
invoice within the discount period. What is the amount of gross profit earned by Abbey
Co. on the above transactions?
56) For Garrison Corporation, the working capital at the end of the current year is
$10,000 more than the working capital at the end of the preceding year, reported as
follows:
Required:
Has the current position improved? Explain.
57) On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22
per share plus a $240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per
share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a
$160 brokerage fee.
Required:
Prepare the journal entries for the original purchase, dividend and sale.
58) Discuss the two methods for recording bad-debt expense. What type of company
uses each method?
59) The Cavy Company accumulated 560 hours of direct labor on Job 345 and 800
hours on Job 777. The direct labor was incurred at a rate of $20 per direct labor hour for
Job 345 and $21 per direct labor for Job 777. Journalize the entry to record the flow of
labor costs into production.
60) For each of the following fixed assets, determine the depreciation expense and the
book value for the dates requested:
Disposal date is N/A if asset is still in use.
Method: SL = Straight Line; DDB = Double Declining Balance
Assume the estimated life was 5 years for each asset.
61) The actual cash received during the week ended October 31 for cash sales was
$23,447.00 and the amount indicated by the cash register total was $23,457.00.
Journalize the entry to record the cash receipts and cash sales.
Journal
62) Construct a chart of accounts, assigning account numbers and arranging the
accounts in balance sheet and income statement order (1 for assets, and so on). Each
account number is three digits. Contra accounts should designated with a decimal of the
account (100.1 for contra of account 100). Assets and liabilities should be in order of
liquidity, expenses should be in alphabetical order.
