1) The amount of capital paid in by the stockholders of the corporation is called legal
capital.
2) The trial balance prepared after all the closing entries have been posted is called a
pre-closing trial balance.
3) One of the more popular defined contribution plans is the 401k plan.
4) If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would
be added to net income in of the operating activities section of the statement of cash
flows (prepared by the indirect method).
5) The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry
after the financial scandals of the early 2000s.
6) Some of the major fraudulent acts by senior executives started as what they
considered to be small ethical lapses which grew out of control.
7) In preparing the cash flows from operating activities section of the statement of cash
flows by the indirect method, the amortization of bond discount for the period is
deducted from the net income for the period.
8) In a periodic inventory system, the cost of merchandise purchased includes the cost
of freight-in.
9) The selection of an inventory costing method has no significant impact on the
financial statements.
10) The relevant activity base for a cost depends upon which base is most closely
associated with the cost and the decision-making needs of management.
11) Conversion and direct materials are generally both added at the end of the
production process.
12) Rental charges of $40,000 per year plus $3 for each machine hour over 18,000
hours is an example of a fixed cost.
13) A customer’s check received in settlement of an account receivable is considered
cash.
14) When a new partner is admitted by making an investment of assets in the
partnership and the new partner has to pay a premium for admission, a bonus is divided
among the old partners’ capital accounts.
15) The profit center income statement should include only controllable revenues and
expenses.
16) In preparing a bank reconciliation, the amount indicated by a debit memo for bank
service charges is added to the balance per company’s records.
17) Deferred expenses that benefit a relatively short period of time are listed on the
balance sheet as current assets.
18) 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?
A.10,500
B.30,772
C.7,972
D.31,400
19) The document authorizing the issuance of materials from the storeroom is the:
A.materials requisition
B.purchase requisition
C.receiving report
D.purchase order
20) The Sharpe Company reports the following information for 2015:
Determine period costs for 2015.
A.$24,500
B.$30,300
C.$29,200
D.$35,000
21) When using the total cost concept of applying the cost-plus approach to product
pricing, what is included in the markup?
A.Total selling and administrative expenses plus desired profit
B.Total fixed manufacturing costs, total fixed selling and administrative expenses, and
desired profit
C.Total costs plus desired profit
D.Desired profit
22) When merchandise sold is assumed to be in the order in which the purchases were
made, the company is using
A.first-in, last-out
B.last-in, first-out
C.first-in, first-out
D.average cost
23) Which of the following is not an essential part of the accounting records?
A.The journal
B.The ledger
C.The chart of accounts
D.The work sheet
24) Raven Company is considering replacing equipment which originally cost $500,000
and which has $420,000 accumulated depreciation to date. A new machine will cost
$790,000. What is the sunk cost in this situation?
A.$370,000
B.$790,000
C.$80,000
D.$290,000
25) Which of the following is not a prerequisite to paying a cash dividend?
A.formal action by the board of directors
B.market value in excess of par value per share
C.sufficient cash
D.sufficient retained earnings
26) A check drawn by a company for $340 in payment of a liability was recorded in the
journal as $430. This item would be included on the bank reconciliation as a(n)
A.addition to the balance per the company’s records
B.addition to the balance per the bank statement
C.deduction from the balance per the bank statement
D.deduction from the balance per the company’s records
27) If the wage rate paid per hour differs from the standard wage rate per hour for direct
labor, the variance is termed a:
A.variable variance
B.rate variance
C.quantity variance
D.volume variance
28) The units of Manganese Plus available for sale during the year were as follows:
There are 15 units of the product in the physical inventory at November 30. The
periodic inventory system is used. Determine the inventory cost by (a) FIFO, (b) LIFO,
and (c) average cost methods.
29) If fixed costs are $500,000, the unit selling price is $55, and the unit variable costs
are $30, what is the break-even sales (units) if fixed costs are increased by $80,000?
A.10,545 units
B.19,333 units
C.23,200 units
D.25,000 units
30) The following data relate to direct labor costs for the current period:
What is the direct labor time variance?
A.$ 4,500 favorable
B.$18,000 unfavorable
C.$ 3,600 favorable
D.$17,100 favorable
31) Dotterel Corporation uses the variable cost concept of product pricing. Below is
cost information for the production and sale of 35,000 units of its sole product. Dotterel
desires a profit equal to a 11.2% rate of return on invested assets of $350,000.
The unit selling price for the company’s product is:
A.$16.32
B.$13.44
C.$12.10
D.$13.72
32) On the bank’s accounting records, customers’ accounts are normally shown as
A.debit balances
B.expenses
C.an asset
D.a liability
33) The amount of time spent by an employee in the factory is usually recorded on:
A.time tickets
B.job order cost sheets
C.employees’ earnings records
D.statement of owners equity
34) Partners Ken and Macki each have a $40,000 capital balance and share income and
losses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities
equal $60,000. If the noncash assets are sold for $50,000, and each partner is personally
insolvent, Partner Macki will eventually receive cash of
A.$0
B.$10,000
C.$12,000
D.$20,000
35) What ratio indicates the percentage of each sales dollar that is available to cover
fixed costs and to provide a profit?
A.Margin of safety ratio
B.Contribution margin ratio
C.Costs and expenses ratio
D.Profit ratio
36) The company whose more than 50% stock is owned by the another company is
called the
A.controlling company
B.investee company
C.subsidiary company
D.sibling company
37) Goods purchased on account for future use in the business, such as supplies, are
called
A.prepaid liabilities
B.revenues
C.prepaid expenses
D.liabilities
38) Which of the following is not one of the four basic financial statements?
A.balance sheet
B.statement of cash flows
C.statement of changes in financial position
D.income statement
39) Which group of accounts is comprised of only assets?
A.Cash, Accounts Payable, Buildings
B.Accounts Receivable, Revenue, Cash
C.Prepaid Expenses, Buildings, Patents
D.Unearned Revenues, Prepaid Expenses, Cash
40) The monetary value charged to customers for the performance of services sold is
called a(n)
A.asset
B.net income
C.capital
D.revenue
41) Financial Statement data for the years ended December 31 for Parker Corporation is
as follows:
2012 2011
Net Sales $2,595,600 $2,409,498
Fixed Assets:
Beginning of the year $ 901,070 $820,000
End of the year 829,330 901,070
a) Determine the Fixed Asset Turnover for 2012 and 2011.
b) Does the change in Fixed Asset Turnover from 2011 to 2012 indicate a favorable or
unfavorable trend.?
42) Carmen Company a publicly traded company with preferred and common stock
issued. As of January 1st, it had 50,000 shares of $100 par, 2% preferred stock
outstanding and 250,000 shares of $10 par common stock outstanding.
(a) On January 31st, the Board of Directors issues a requirement to purchase 5,000
shares of its common stock at market price. The shares are purchased at a market price
of $22 per share. Journalize the purchase utilizing the cost concept.
(b) On March 15th, Carmen declares a dividend on preferred stock of $2.75 per share.
The date of record is March 25th and the date of payment is March 31st. Journalize
these events.
(c) On December 1st, Carmen declares a cash dividend on common stock of $0.12 per
share. The date of record is December 15th and the date of payment is December 21st.
Journalize these events.
(d) On December 27th the board orders that 2,500 shares of treasury stock be sold. The
sale price is $25 per share. Journalize this event.
43) Expected useful life is
A.calculated when the asset is sold
B.estimated at the time that the asset is placed in service
C.determined each year that the depreciation calculation is made
D.none of the answers are correct
44) In a job order cost accounting system used by a service business, which of the
following items would normally not be included as part of overhead?
A.Materials
B.Direct labor
C.Rent
D.Supplies
45) On August 1, Clayton Co. issued $1,300,000 of 20-year, 9% bonds, dated August 1,
for $1,225,000. Interest is payable semiannually on February 1 and August 1. Present
the entries to record the following transactions for the current year:
46) Which of the following conditions would cause the break-even point to decrease?
A.Total fixed costs increase
B.Unit selling price decreases
C.Unit variable cost decreases
D.Unit variable cost increases
47) Which of the following measures would not help managers to control and improve
operations?
A.Units produced per time period
B.Cost trends of a product
C.Yield trends
D.Commissions paid per time period
48) Following the completion of the bank reconciliation, an adjusting entry was made
that debited cash and credited Interest Revenue. Therefore the bank reconciliation must
have included an item that was
A.deducted from the balance per company’s records
B.deducted from the balance per bank statement
C.added to the balance per bank statement
D.added to the balance per company’s records
49) The following data were taken from Harrison Companys balance sheet:
Dec. 31, 2012 Dec. 31, 2011
Total liabilities $150,000 $105,000
Total owners equity 75,000 60,000
a. Compute the ratio of liabilities to owners equity.
b. Has the creditors risk increased or decreased from December 31, 2011, to December
31, 2012?
50) 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
51) Countries outside the U.S. use financial accounting standards issued by the:
A. AICPA
B. SEC
C. IASB
D. FASB
52) Ramiro Company purchased 40% of the outstanding stock of Marco Company on
January 1, 2015. Marco reported net income of $95,000 and declared dividends of
$35,000 during 2015. How much would Ramiro adjust their investment in Marco
Company under the equity method?
53) 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.)
54) Prepare a multiple-step income statement for Armour Co. from the following data
for the year ended December 31, 2014.
Sales, $790,000; cost of merchandise sold, $330,000; administrative expenses, $35,000;
interest expense, $20,000; rent revenue, $25,000; sales returns and allowances,
$35,000; selling expenses, $50,000.
55) During 2012, its first year of operations, Makala Company purchased two
available-for-sale investments as follows:
Assume that as of December 31, 2012, the Oceanna Company stock had a market value
of $49 per share and Rockledge, Inc. stock had a market value of $20 per share.
Makala had 10,000 shares of no par stock outstanding that was issued for $150,000. For
the year ending December 31, 2012, Makala had a net income of $105,000. No
dividends were paid.
Required:
56) While taking a physical inventory, a company counts their inventory as less than the
actual amount on hand. How will this error affect the income statement?
57) Douglas Company has a contribution margin ratio of 30%. If Douglas has $336,420
in fixed costs, what amount of sales will need to be generated in order for the company
to break even?
58) The balances for the accounts listed below appear in the Adjusted Trial balance
columns of the end-of-period spreadsheet (work sheet). Indicate whether each balance
should be extended to an Income Statement column or (b) a Balance Sheet column.
1> Dobson, Capital
2> Dobson, Drawing
3> Depreciation Expense
4> Accumulated Depreciation
5> Fees earned
6> Unearned Fees
7> Supplies
8> Supplies Expense