1) The normal balance of a capital account is a debit.
2) Budget preparation is best determined in a top-down managerial approach.
3) The methods or procedures used to record and report financial data are called the
accounting system.
4) Generally, the lower the number of days’ sales in inventory, the better.
5) Product costs are not expensed until the product is sold.
6) Receiving payments on an account receivable increases both equity and assets.
7) Process manufacturing usually reflects a manufacturer that produces small quantities
of unique items.
8) A backlog in recording transactions is an example of a warning sign from the
accounting system.
9) If the standard to produce a given amount of product is 500 direct labor hours at $15
and the actual was 600 hours at $17, the rate variance was $1,200 favorable.
10) Payroll taxes are based on the employee’s net pay.
11) The normal balance of the accumulated depreciation account is debit.
12) To determine the balance in an account, always subtract credits from debits.
13) Assets are increased with debits and decreased with credits.
14) Which of the following is not a use of the cost of production report?
A.To help managers control operations
B.To help managers isolate problems
C.To project production
D.To help managers improve operations
15) The details concerning the costs incurred on each job order are accumulated in a
work in process account, which is supported by a:
A.stock ledger
B.materials ledger
C.cost ledger
D.creditors ledger
16) Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are
$600,000, and fixed costs are $130,000. How much will operating income change if
sales increase by $40,000?
A.$8,000 increase
B.$8,000 decrease
C.$30,000 decrease
D.$30,000 increase
17) Discuss and describe how errors in accounts can be found.
18) On January 1, 2010 Orange Retail Co. issued a $300,000, 3 year, 6% installment
note payable with payments of $100,000 principal and interest due on January 1st for
each of the next 3 years.
1> Prepare the adjusting journal entry to accrue interest at the end of the 2nd year –
12/31/11.
2> Show the account(s) and amount (s) and where the account(s) will appear on a
multi-step income statement prepared on December 31, 2011.
3> Show the account(s) and amount(s) and where the account(s) will appear on a
classified balance sheet prepared on December 31, 2011.
19) The Cash and Accounts Receivable for a company are provided below:
Based on this information, what is the amount and percentage of increase or decrease
that would be shown in a balance sheet with horizontal analysis?
20) 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 400,000 of the Simple Life Jeans and 250,000 of the Fancy Life will be sold during
20–. The company begins with 8,000 Simple Life Jeans and 17,000 Fancy Life Jeans.
The company desires ending inventory of 7,500 of Simple Life Jeans and 10,000 Fancy
Life Jeans. Prepare a Production Budget for the 20–.
21) The current assets and current liabilities for Kolbie Company and Newton Company
are shown as follows at the end of 2012.
*These represent prepaid expenses and other non-quick current assets.
Required:
(1) Determine the quick ratio for both companies. Round to two decimal places.
(2) Interpret the quick ratio difference between the two companies.
