1) The first five steps in the accounting cycle include analyzing transactions,
journalizing, posting, preparing an unadjusted trial balance, and recording adjusting
entries.
2) A corporation can issue two kinds of stock – common and preferred.
3) Paid-in capital is the total amount of cash and other assets the corporation receives
from its stockholders in exchange for its stock.
4) Receipts of cash dividends and interest earned on loans are classified as investing
activities.
5) In a process cost accounting system, a department’s production should be measured
in terms of equivalent units when its beginning or ending inventory includes goods in
process.
6) Comparative horizontal analysis is used to reveal patterns in data covering
successive periods.
7) An annuity is a series of equal payments at equal time intervals.
8) The budgeted balance sheet is prepared from data contained in the previously
prepared components of the master budget.
9) Extraordinary repairs are expenditures extending the asset’s useful life beyond its
original estimate, and are capital expenditures because they benefit future periods.
10) The predetermined overhead allocation rate is used to allocate overhead cost to
jobs.
11) Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2.
Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40.
Fixed costs are $418,500. Compute the number of units of Product Z Baines must sell
to break even.
A.5,080
B.6,200
C.2,540
D.3,100
E.2,790
12) The amount by which the overhead applied to jobs during a period exceeds the
overhead incurred during the period is known as:
A.Adjusted overhead
B.Estimated overhead
C.Predetermined overhead
D.Underapplied overhead
E.Overapplied overhead
13) On November 1, Carter Company signed a 120-day, 10% note payable, with a face
value of $9,000. What is the adjusting entry for the accrued interest at December 31 on
the note?
A.Debit interest expense, $0; credit interest payable, $0
B.Debit interest expense, $100; credit interest payable, $100
C.Debit interest expense, $150; credit interest payable, $150
D.Debit interest expense, $200; credit interest payable, $200
E.Debit interest expense, $300; credit interest payable, $300
14) Two common subgroups for liabilities on a classified balance sheet are:
A.current liabilities and intangible liabilities
B.present liabilities and operating liabilities
C.general liabilities and specific liabilities
D.intangible liabilities and long-term liabilities
E.current liabilities and long-term liabilities
15) M.A.E. charged the following amounts of overhead to jobs during the year: $20,000
to jobs still in process, $60,000 to jobs completed but not sold, and $120,000 to jobs
finished and sold. At year-end, M.A.E. Company’s Factory Overhead account has a
credit balance of $5,000, which is not a material amount. What entry should M.A.E.
make at year-end?
A.No entry is needed.
B.Debit Factory Overhead $5,000; credit Cost of Goods Sold $5,000
C.Debit Cost of Goods Sold $5,000; credit Factory Overhead $5,000
D.Debit Factory Overhead $5,000; credit Goods in Process Inventory $5,000
E.Debit Factory Overhead $5,000; credit Finished Goods Inventory $5,000
16) Dresden, Inc. has four departments. Information about these departments follows is
listed below. If allocated maintenance cost is based on floor space occupied by each,
compute the amount of maintenance cost allocated to the Cutting Department.
A.$2,769
B.$3,000
C.$3,724
D.$6,000
E.$18,000
17) Contingent liabilities must be recorded if:
A.The future event is probable and the amount owed can be reasonably estimated
B.The future event is remote
C.The future event is reasonably possible
D.The amount owed cannot be reasonably estimated
E.All of these
18) Bonds that mature at different dates with the result that the entire principal amount
is repaid gradually over a number of periods are known as:
A.Registered bonds
B.Bearer bonds
C.Callable bonds
D.Sinking fund bonds
E.Serial bonds
19) The sales budget for Carmel shows that 20,000 units of Product A and 22,000 units
of Product B are going to be sold for prices of $10 and $12, respectively. The desired
ending inventory of Product A is 20% higher than its beginning inventory of 2,000
units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units. Total budgeted sales of both products for the year would
be:
A.$42,000
B.$200,000
C.$264,000
D.$464,000
E.$500,000
20) A cost-volume-profit chart is also known as a(n)
A.Operating profit chart
B.Operating leverage chart
C.Break-even chart
D.Margin of safety chart
E.Sales chart
21) Refer to the following selected financial information from Fennie’s, LLC. Compute
the company’s acid-test ratio for Year 2.
A.2.26
B.1.98
C.2.95
D.3.05
E.1.88
22) Refer to the following selected financial information from Hansen’s, LLC. Compute
the company’s return on total assets for Year 2.
A.9.6%
B.15.2%
C.2.6%
D.22.2%
E.14.5%
23) The statement of changes in stockholders’ equity:
A.Is part of the statement of retained earnings
B.Shows only the ending balances in stockholders’ equity
C.Describes changes in paid-in capital and retained earnings subcategories
D.Does not include changes in treasury stock
E.Is reported by very few companies
24) Use the financial data shown below to calculate the following ratios for the current
year:
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days’ sales uncollected.
(e) Inventory turnover.
(f) Days’ sales in inventory.
25) The amount recorded for merchandise inventory includes all of the following
except:
A.Purchase discounts.
B.Returns and allowances.
C.Freight costs paid by the buyer.
D.Freight costs paid by the seller.
E.Trade discounts.
26) Match the following terms with the appropriate definition.
1>Recordkeeping A. An information and measurement system that identifies, records
and communicates relevant reliable and comparable information about an organization’s
business activities.
2>Internal users B. The part of accounting that involves recording transactions and
events, either electronically or manually.
3>Ethics C. Persons using accounting information who are not directly involved in the
running of the organization.
4>Accounting D. Persons using accounting information who are directly involved in
managing the organization.
5>Operating activities E. The use of resources to research, develop, purchase, produce,
distribute, and market products and services.
6>External users F. The acquisition and disposing of resources that an organization uses
to acquire and sell products and services.
7>Financing activities G. Provide the means organizations use to pay for resources such
as land, buildings, and equipment to carry out plans.
8>Social responsibility H. Beliefs that distinguish right from wrong.
9>Investing activities I. Concern for the impact of actions on society.
27) Summers and Winters formed a partnership on January 1. Summers contributed
$90,000 cash and equipment with a market value of $60,000. Winters’ investment
consisted of: cash, $30,000; inventory, $20,000; all at market values. Partnership net
income for year 1 and year 2 was $75,000 and $120,000, respectively.
1> Determine each partner’s share of the net income for each year, assuming each of the
following independent situations:
(a) Income is divided based on the partners’ failure to sign an agreement.
(b) Income is divided based on a 2:1 ratio (Summers: Winters).
(c) Income is divided based on the ratio of the partners’ original capital investments.
(d) Income is divided based on interest allowance of 12% on the original capital
investments; salary allowance to Summers of $30,000 and Winters of $25,000; and the
remainder to be divided equally.
2> Prepare the journal entry to record the allocation of the Year 1 income under
alternative (d) above.
28) A company purchased new computers at a cost of $14,000 on September 30. The
computers are estimated to have a useful life of 4 years and a salvage value of $2,000.
The company uses the straight-line method of depreciation. How much depreciation
expense will be recorded for the computers for the first year ended December 31?
A.$250
B.$750
C.$875
D.$1,000
E.$3,000
29) A depreciable asset costing $75,000 is purchased on September 1, Year 1. The asset
is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years.
Double-declining-balance depreciation is used. If the asset is sold on December 31,
Year 3 for $13,000, the journal entry to record the sale will include:
A.A credit to gain on sale for $8,000
B.A debit to loss on sale for $2,625
C.A credit to accumulated depreciation for $59,375
D.A debit to loss on sale for $3,042
E.A credit to gain on sale for $4,979
30) When recording the journal entry for labor, the Goods in Process Inventory account
is
A.Debited for standard labor cost
B.Debited for actual labor cost
C.Credited for standard labor cost
D.Credited for actual labor cost
E.Not used
31) In the process of completing a work sheet, you determine that the Income Statement
debit column totals $83,000, while the Income Statement credit column totals $65,000.
To enter net income (or net loss) for the period into the work sheet would require an
entry to
A.the Adjustments debit column and the Adjustments credit column
B.the Unadjusted Trial Balance debit column and the Adjustments credit column
C.it is not practical to enter Net Income (or Net Loss) on the work sheet
D.the Balance Sheet & Statement of Owner’s Equity debit column and the Income
Statement credit column
E.the Income Statement debit column and the Balance Sheet & Statement of Owner’s
Equity credit column
32) A corporation issued 8% bonds with a par value of $1,000,000, receiving a $20,000
premium. On the interest date 5 years later, after the bond interest was paid and after
40% of the premium had been amortized, the corporation purchased the entire issue on
the open market at 99 and retired it. The gain or loss on this retirement is:
A.$0
B.$10,000 gain
C.$10,000 loss
D.$22,000 gain
E.$22,000 loss
33) A company’s flexible budget for 48,000 units of production showed variable
overhead costs of $72,000 and fixed overhead costs of $64,000. The company incurred
overhead costs of $122,800 while operating at a volume of 40,000 units. The total
controllable cost variance is:
A.$1,200 favorable
B.$1,200 unfavorable
C.$13,200 favorable
D.$13,200 unfavorable
E.$15,200 favorable
34) Given the following information, determine the cost of the inventory at June 30
using the LIFO perpetual inventory method.
The cost of the ending inventory is
A.$200
B.$220
C.$380
D.$275
E.$300
35) An accountant has debited an account for $3,500 and credited a liability account for
$2,000. Which of the following would be an incorrect way to complete the recording of
this transaction?
A.Credit another asset account for $1,500
B.Credit another liability account for $1,500
C.Credit an expense account for $1,500
D.Credit the owner’s capital account for $1,500
E.Debit another asset account for $1,500
36) A company uses the periodic inventory system and had the following activity during
the current monthly period.
In a periodic inventory system, using the weighted-average inventory method, the
company’s ending inventory would be:
A.$2,000
B.$2,200
C.$2,250
D.$2,400
E.$4,400
37) An important tool in predicting the volume of activity, the costs to be incurred, the
sales to be earned, and the profit to be received is:
A.Target income analysis
B.Cost-volume-profit analysis
C.Least-squares regression of costs
D.Variance analysis
E.Process costing
38) An equivalent unit of production is an estimate of efforts that is used to calculate the
______________ of each production component.
39) The accounts of Garfield Company with the increases or decreases that occurred
during the past year are as follows:
Except for net income, an investment of $3,000 by the owner, and a withdrawal of
$11,000 by the owner, no other items affected the owner’s capital account. Using the
balance sheet equation, compute net income for the past year.
40) A company reports the following stockholders’ equity:
Paid-in Capital:
Compute the (1) number of common shares outstanding and (2) book value per
common share.
41) When purchase costs regularly rise, the ___________________ method of
inventory valuation yields the highest gross profit and net income.
42) A company puts four products through a common production process. This process
costs $100,000 each year. The four products can be sold when they emerge from this
process at the ‘split-off point”, or processed further and then sold. Data about the four
products for the coming period are:
Determine which products should be sold at the split-off point and which should be
processed further.
43) _________ are beliefs that separate right from wrong.
44) _____________________ are revenue expenditures to keep an asset in normal,
good operating condition; they are necessary if an asset is to perform to expectations
over its useful life.
45) Given the table below, indicate the impact of the following errors made during the
adjusting entry process. Use a “+” followed by the amount for overstatements, a “-”
followed by the amount for understatements, and a “0” for no effect. The first one is
done as an example.
Ex. Failed to recognize that $600 of unearned revenues, previously recorded as
liabilities, had been earned by year-end.
1> Failed to accrue salaries expense of $1,200.
2> Forgot to record $2,700 of depreciation on office equipment.
3> Failed to accrue $300 of interest on a note receivable.
46) Reversing entries are linked to ____________________ and _____________ that
were created by adjusting entries at the end of the prior accounting period.
47) The _____________________ is a measure of how quickly a merchandiser sells its
merchandise inventory.