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1) The acquisition costs of property, plant, and equipment should include all normal,
reasonable and necessary costs to get the asset in place and ready for use.
2) The amount of the net income for a period appears on both the income statement and
the balance sheet for that period.
3) Debiting the cash account will increase the account.
4) Accumulated Depreciation accounts are liability accounts.
5) The rights or claims to the assets of a business may be subdivided into rights of
creditors and rights of owners.
6) Standards are more widely used for nonmanufacturing expenses than for
manufacturing costs.
7) When a clerk enters a sale and the customer can see the amount displayed and is
given a cash receipt, this is an example of a preventive control.
8) The product cost concept includes all manufacturing costs in the cost amount to
which the markup is added to determine product price.
9) The direct labor and overhead costs of providing services to clients are accumulated
in a work-in-process account.
10) Comprehensive income must be reported on the income statement.
11) Cash flows from investing activities, as part of the statement of cash flows, include
receipts from the sale of land.
12) Because variable costs are assumed to change in direct proportion to changes in the
activity level, the graph of the variable costs when plotted against the activity level
appears as a circle.
13) In an investment center, the manager has the responsibility and the authority to
make decisions that affect not only costs and revenues, but also the plant assets invested
in the center.
14) Managers use managerial information to evaluate performance of a companys
operation.
15) If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the investment turnover is 1.2.
16) A statement of owner's equity reports the changes in the owner's equity for a period
of time.
17) Standard and actual costs for direct materials for the manufacture of 1,000 units of
product were as follows:
Determine the (a) quantity variance, (b) price variance, and (c) total direct materials
cost variance.
18) The recording of the jobs completed would include a credit to:
A.Factory Overhead
B.Finished Goods
C.Work in Process
D.Cost of Goods Sold
19) Gross profit is equal to:
A.sales plus (sales discounts and sales returns and allowances) plus cost of merchandise
sold
B.sales plus sales returns and allowances less sales discounts less cost of merchandise
sold
C.sales plus sales discounts less sales returns and allowances less cost of merchandise
sold
D.sales less (sales discounts and sales returns and allowances) less cost of merchandise
sold
20) A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is
traded for a similar asset priced at $60,000 in a transaction with commercial substance.
Assuming a trade-in allowance of $5,000, the cost basis of the new asset is
A.$54,000
B.$59,500
C.$60,000
D.$60,500
21) In performing a vertical analysis, the base for cost of goods sold is
A.total selling expenses
B.net sales
C.total expenses
D.gross profit
22) Power Company sells merchandise with a one year warranty. In 2012, sales
consisted of 1,600 units. It is estimated that warranty repairs will average $10 per unit
sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income
statement, Power should show warranty expense of
A.$4,800
B.$11,200
C.$16,000
D.$0
23) Relevant revenues and costs refer to:
A.activities that occurred in the past
B.monies already earned and/or spent
C.last year's net income
D.differences between the alternatives being considered
24) The general term employed to indicate an expense that has not been paid and has
not yet been recognized in the accounts by a routine entry is
A.capital
B.deferral
C.accrual
D.inventory
25) Cost behavior refers to the manner in which:
A.a cost changes as the related activity changes
B.a cost is allocated to products
C.a cost is used in setting selling prices
D.a cost is estimated
26) Xavier and Yolonda have original investments of $50,000 and $100,000
respectively in a partnership. The articles of partnership include the following
provisions regarding the division of net income: interest on original investment at 10%,
salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How
much of the net loss of $6,000 is allocated to Xavier?
A.$4,000
B.$1,000
C.$3,000
D.$6,000
27) Marcye Co. manufactures office furniture. During the most productive month of the
year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the
company made 1,100 desks at a cost of $46,000. Using the high-low method of cost
estimation, total fixed costs are:
A.$56,000
B.$28,400
C.$17,600
D.cannot be determined from the data given
28) If there is a balance in the prepaid rent account after adjusting entries are made, it
represents a(n)
A.deferral
B.accrual
C.revenue
D.liability
29) On December 31, Strike Company has decided to sell one of its batting cages. The
initial cost of the equipment was $310,000 with an accumulated depreciation of
$260,000. Depreciation has been taken up to the end of the year. The company found a
company that is willing to buy the equipment for $55,000. What is the amount of the
gain or loss on this transaction?
A.Cannot be determined
B.No gain or loss
C.Gain of $ 5,000
D.Gain of $55,000
30) When a buyer returns merchandise purchased for cash, the buyer may record the
transaction using the following entry
A.debit Merchandise Inventory; credit Cash
B.debit Cash; credit Merchandise Inventory
C.debit Cash; credit Sales Returns and Allowances
D.debit Sales Returns and Allowances; credit Cash
31) The term "receivables" includes all
A.money claims against other entities
B.merchandise to be collected from individuals or companies
C.cash to be paid to creditors
D.cash to be paid to debtors
32)
If a fixed asset, such as a computer, were purchased on January 1st for $3,750 with an
estimated life of 3 years and a salvage or residual value of $150, the journal entry for
monthly expense under straight-line depreciation is:
(Note: EOM indicates the last day of each month.)
A.EOM Depreciation Expense 100
Accumulated Depreciation 100
B.EOM Depreciation Expense 1,200
Accumulated Depreciation 1,200
C.EOM Accumulated Depreciation 1,200
Depreciation Expense 1,200
D.EOM Accumulated Depreciation 100
Depreciation Expense 100
33) The market interest rate related to a bond is also called the
A.stated interest rate
B.effective interest rate
C.contract interest rate
D.straight-line rate
34) The year-end balance of the owner's capital account appears in
A.both the statement of owner's equity and the income statement
B.only the statement of owner's equity
C.both the statement of owner's equity and the balance sheet
D.both the statement of owner's equity and the statement of cash flows
35) Which of the following groups of accounts have a normal debit balance?
A.revenues, liabilities, and capital
B.capital and assets
C.liabilities and expenses
D.assets and expenses
36) Companies may report comprehensive income on each of the statements below
except
A.income statement
B.separate statement of comprehensive income
C.statement of cash flows
D.retained earnings statement
37) The three most common cost behavior classifications are:
A.variable costs, product costs, and sunk costs
B.fixed costs, variable costs, and mixed costs
C.variable costs, period costs, and differential costs
D.variable costs, sunk costs, and opportunity costs
38) Watson Company issued a 60-day, 8% note for $18,000, dated April 5, to Laker
Company on account. (Assume a 360-day year when calculating interest.)
(a) Determine the due date of the note.
(b) Determine the maturity value of the note.
(c) Journalize the entries to record the following:
(1) receipt of the note by the payee, and
(2) receipt by the payee of the amount due on the note at maturity. Round answers to
the nearest $1.
39) Gadget Palace is a retailer selling unique hardware. Gadget Palace uses perpetual
inventory. Use a General Journal to journalize the following four transactions during the
month of August:
(a) On July 5th, Gadget Palace purchases inventory for sale from Turbo Tools for
$11,400.00 with terms 2/10, n/30.
(b) On July 6th, Gadget Palace pays Fast Truck Transport $75 for freight-in on the July
5th order.
(c) Gadget Palace gets a credit memo from Turbo Tools for $215.00 for damaged
merchandise on July 8th.
(d) On July 15th, Gadget Palace pays Turbo Tools the balance due.
40) The excess of sales price of treasury stock over its cost should be credited to
A.Treasury Stock Receivable
B.Premium on Capital Stock
C.Paid-In Capital from Sale of Treasury Stock
D.Income from Sale of Treasury Stock
41) Beachside Coffee Shop, in an effort to stream line its accounting system, has
decided to utilize a Cash Receipts Journal in its operation. If the company is to record
the cash sale of food for $18 which is the correct entry?
A.Cash Cr. $18, Food Revenue Dr. $18
B.Cash Dr. $18, Food Revenue Dr. $18
C.Cash Dr. $18, Food Revenue Cr. $18
D.Cash Cr. $18, Food Revenue Cr. $18
42) Which one of the following items below would not affect the investor's income for
the period?
A.interest received on a temporary investment in bonds
B.dividends received on a long-term investment in stock where the investor owns 10%
of the investee's stock
C.dividends received on a long-term investment in stock where the investor owns 30%
of the investee's stock
D.interest received on a long-term investment in bonds
43) An overpayment error was discovered in computing and paying the wages of a
Jamison Tree Trimming employee. When Jamison receives cash from the employee for
the amount of the overpayment, which of the following entries will Jamison make?
A.Cash, debit; Wages Expense, credit
B.Wages Payable, debit; Wages Expense, credit
C.Wages Expense, debit, Cash, credit
D.Cash, debit; Wages Payable, credit
44) The following financial information was summarized from the accounting records
of Train Corporation for the current year ended December 31:
The income from operations for the Rails Division is:
A.$60,800
B.$33,600
C.$8,700
D.$21,150
45) Standard costs are used in companies for a variety of reasons. Which of the
following is not one of the benefits for using standard costs?
A.Used to indicate where changes in technology and machinery need to be made
B.Used to identify inventory
C.Used to plan direct materials, direct labor, and factory factory overhead
D.Used to control costs
46) Match each of the following terms with the best definition.
1>Possible result of using an inappropriate overhead allocation method. A. Product cost
distortion
2>Evaluation of how income will change based on an alternative course of action. B.
Opportunity cost
3>Revenue forgone from an alternative use of an asset. C. Theory of constraints
4>Strategy that focuses on reducing bottlenecks. D. Sunk cost
5>Not relevant to future decisions. E. Differential analysis
47) Which types of inventories does a manufacturing business report on the balance
sheet?
A.Finished goods inventory and work in process inventory
B.Direct materials inventory and work in process inventory
C.Direct materials inventory, work in process inventory, and finished goods inventory
D.Direct materials inventory and finished goods inventory
48) Factors contributing to a decline in the usefulness of a fixed asset may be divided
into the following two categories
A.salvage and functional
B.physical and functional
C.residual and salvage
D.functional and residual
49) The budget for Department 10 of Treble Company for the current month ending
March 31 is as follows:
During March, the costs incurred in Department 10 of Treble Company were materials,
$204,000; factory wages, $285,000; supervisory salaries, $63,600; depreciation of plant
and equipment, $35,000; power and light, $21,360; insurance and property taxes,
$14,400; maintenance, $9,456.
50) Gale Company owns 87% of the outstanding stock of Leonardo Company.
Leonardo Company is referred to as the
A.parent
B.minority interest
C.affiliate
D.subsidiary
51) If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400,
and budgeted cost of goods sold is $10,260, budgeted purchases should be:
A.$1,100
B.$9,300
C.$11,360
D.$11,250
52) Xavier and Yolonda have original investments of $50,000 and $100,000
respectively in a partnership. The articles of partnership include the following
provisions regarding the division of net income: interest on original investment at 10%,
salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How
much of the net income of $40,000 is allocated to Xavier?
A.$20,000
B.$22,000
C.$32,000
D.$0
53) The following data were gathered to use in reconciling the bank account of
Savannah Company:
What is the adjusted balance on the bank reconcilition?
54) Using the lower of cost or market, what should the total inventory value be for the
following items:
Apply the lower-of-cost-or-market method to inventory as a whole.
55) On March 25, 2014, Patton Company sold merchandise on account,$10,000. The
applicable sales tax percentage is 8.5%. Record the transaction.
56) On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond
that pays semi-annual interest of $20,000 ($500,000 8% 1/2), receiving cash of
$520,000. Journalize the entry to record the first interest payment and amortization of
premium using the straight-line method.
57) 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.
58) The following adjusted trial balance is the result of the adjustments made at the end
of the month of March for Erik Martin Company. Utilize these adjusted values to
perform the closing entries for Erik Martin Company.
59) Finewood Cabinet Manufacturers uses flexible budgets that are based on the
following manufacturing data for the month of July:
Prepare a flexible budget for Finewood based on production of 10,000, 15,000, and
20,000 units.
60) Roper Electronics received its bank statement for the month of August with an
ending balance of $11,740.00. Roper determined that check #613 for $155.00 and check
#601 for $420.00 were both outstanding. Also, a $6,900.00 deposit for August 30th was
in transit as of the end of the month. Northern Regional Bank also collected a $5,000.00
notes receivable on August 1st that was issued March 1st at 12% annual interest. No
interest revenue has been accrued on this note and Northern Regional Bank charged a
$35.00 fee for the collection service.The bank statement reveals a bank service charge
of $20.00. A customer check for $68.00 was returned with the bank statement marked
NSF. The ending balance of the Roper cash account is $12,938.00.
Complete a bank/account reconciliation and prepare any necessary journal entries for
the reconciliation.
