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1) A qualitative characteristic that may impact upon capital investment analysis is
manufacturing control.
2) Under the perpetual inventory system, when a sale is made, both the sale and cost of
merchandise sold are recorded.
3) When a seller allows a buyer an amount for old equipment that is traded in for new
equipment of similar use, this amount is known as boot.
4) Equivalent units of production are the number of units that could have been
manufactured from start to finish during an accounting period.
5) In a merchandise business, sales minus operating expenses equals net income.
6) If a fixed asset with a book value of $10,000 is traded for a similar fixed asset, and a
trade-in allowance of $15,000 is granted by the seller, if the transaction is deemed to
have commercial substance, the buyer would report a gain on disposal of fixed assets of
$5,000.
7) Liabilities that will be due within one year or less and that are to be paid out of
current assets are called current liabilities.
8) The direct method of preparing the operating activities section of the statement of
cash flows reports major classes of gross cash receipts and gross cash payments.
9) If 50,000 shares are authorized, 41,000 shares are issued, and 2,000 shares are
reacquired, the number of outstanding shares is 43,000.
10) If a company uses average costing instead of FIFO they will still get the same unit
costs.
11) A fixed assets market value is reflected in the Balance Sheet.
12) Each partner may withdraw the assets he or she contributed to the partnership at any
time.
13) If the volume of sales is $7,000,000 and sales at the break-even point amount to
$4,800,000, the margin of safety is 45.8%.
14) When a major corporation develops its own trademark and over time it becomes
very valuable, the trademark may not be shown on their balance sheet due to lack of a
material cost.
15) During times of rising prices, which of the following is not an accurate statement?
A.Average costing will yield results that are between those of FIFO and LIFO
B.LIFO will result in a higher cost of goods sold than FIFO
C.FIFO will result in a higher net income than LIFO
D.LIFO will result in higher income taxes than FIFO
16) A corporation issues for cash $9,000,000 of 8%, 25-year bonds, interest payable
semiannually. The amount received for the bonds will be
A.present value of 50 semiannual interest payments of $360,000, plus present value of
$9,000,000 to be repaid in 25 years
B.present value of 25 annual interest payments of $720,000
C.present value of 25 annual interest payments of $720,000, plus present value of
$9,000,000 to be repaid in 25 years
D.present value of $9,000,000 to be repaid in 25 years, less present value of 50
semiannual interest payments of $360,000
17) The comparative balance sheet of Ramos Company appears below:
(a) RAMOS COMPANY
Comparative Balance Sheet
December 31, 2012 and 2011
Instructions
Round percentage to one decimal place.
18) 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. The journal entry to record the purchase would include:
A.a debit to Investments for $132,000
B.a credit to Cash for $132,000
C.a debit to Investments for $132,240
D.a credit to Investments for $240
19) Treasury stock that had been purchased for $5,600 last month was reissued this
month for $8,500. The journal entry to record the reissuance would include a credit to
A.Treasury Stock for $8,500
B.Paid-In Capital from Treasury Stock for $8,500
C.Paid-In Capital in Excess of Par/Common for $2,900
D.Paid-In Capital from Treasury Stock for $2,900
20) Prepare the journal entries for the following transactions for Morgan Co.
(a) Morgan Co. purchased 32,000 shares of the total of 100,000 outstanding shares of
Gordon Corp. stock for $10 per share plus a $400 commission.
(b) Gordon Corp.'s total earnings for the period are $80,000.
(c) Gordon Corp. paid a total of $45,000 in cash dividends.
21) Which of the following is not considered to be a liability?
A.Wages Payable
B.Accounts Receivable
C.Unearned Revenues
D.Accounts Payable
22) An activity base is used to charge service department expenses. Match each of the
following questions with an activity base.
1>Number of computers in department A. Maintenance
2>Number of advertising campaigns B. Human Resources
3>Number of work orders C. Payroll Accounting
4>Number of miles D. Purchasing
5>Number of payroll checks E. Presidents office
6>Number of purchase requisitions F. Marketing
7>Number of employees G. Transportation
8>Equally amongst divisions H. Information Systems
23) Which of the following is a disadvantage of a partnership when compared to a
corporation?
A.The partnership is more likely to have a net loss
B.The partnership is easier to organize
C.The partnership is less expensive to organize
D.The partnership has limited life
24) Given the following data:
Dec. 31,2014 Dec. 31,2013
Total liabilities $128,250 $120,000
Total owners equity 95,000 80,000
Compute the ratio of liabilities to owners equity for each year. Round to two decimal
places.
A.1.50 and 1.07, respectively
B.1.35 and 1.50, respectively
C.1.07 and 1.19, respectively
D.1.19 and 1.35, respectively
25) Addison, Inc. uses a perpetual inventory system. The following is information about
one inventory item for the month of September:
If Addison uses LIFO, the cost of the ending merchandise inventory on September 30 is
A.$800
B.$650
C.$750
D.$700
26) Xtra Company purchased goodwill from Argus for $96,000. Argus had developed
the goodwill over 12 years. How much would Xtra amortize the goodwill for its first
year?
A.$7,000
B.$ 8,000
C.Goodwill is not amortized
D.Not enough information
27) The management of Arkansas Corporation is considering the purchase of a new
machine costing $490,000. The company's desired rate of return is 10%. The present
value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability in this situation:
The net present value for this investment is:
A.positive $36,400
B.positive $55,200
C.Negative $16,170
D.Negative $126,800
28) All of the following are examples of indirect labor except:
A.maintenance personnel
B.janitorial personnel
C.machine operators
D.plant managers
29) A minimum cash balance required by a bank is called
A.cash in bank
B.cash equivalent
C.compensating balance
D.EFT
30) The owners equity will be reduced by all of the following accounts except:
A.Revenues
B.Expenses
C.Drawing account
D.All are true.
31) A manufacturing company applies factory overhead based on direct labor hours. At
the beginning of the year, it estimated that factory overhead costs would be $360,000
and direct labor hours would be 30,000. Actual manufacturing overhead costs incurred
were $377,200, and actual direct labor hours were 36,000. The entry to apply the
factory overhead costs for the year would include a
A.debit to factory overhead for $360,000
B.credit to factory overhead for $432,000
C.debit to factory overhead for $377,200
D.credit to factory overhead for $360,000
32) Calzone Co. has budgeted salary increases to factory supervisors totaling 8%. If
selling prices and all other cost relationships are held constant, next year's break-even
point:
A.will decrease by 8%
B.will increase by 8%
C.cannot be determined from the data given
D.will increase at a rate greater than 8%
33) 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
34) Which of the following accounts normally has a subsidiary ledger?
A.capital stock
B.retained earnings
C.supplies
D.accounts payable
35) When the market rate of interest was 11%, Munson Corporation issued $1,000,000,
12%, 8-year bonds that pay interest semiannually. The selling price of this bond issue
was
A.$1,052,310
B.$1,154,387
C.$1,000,000
D.$ 720,495
36) The amount of the total cash paid to the seller for merchandise purchased for
consumption would normally include
A.only the list price
B.only the sales tax
C.the list price plus the sales tax
D.the list price less the sales tax
37) Financial Statement data for the years ended December 31 for Parker Corporation is
as follows:
2012 2011
Net Sales $2,595,600 $2,409,500
Accounts Receivable
Beginning of the year $ 390,000 $400,000
End of the year 434,000 390,000
a) Determine the accounts receivable turnover for 2012 and 2011.
b) Determine the number of days sales in receivables for 2012 and 2011.
c) Does the change in accounts receivable turnover and number of days sales in
receivables from 2011 to 2012 indicate a favorable or unfavorable trend.?
38) Depreciation on factory equipment would be reported in the statement of cash flows
prepared by the indirect method in
A.the cash flows from financing activities section
B.the cash flows from investing activities section
C.a separate schedule
D.the cash flows from operating activities section
39) The receivable that is usually evidenced by a formal instrument of credit is a(n)
A.trade receivable
B.note receivable
C.accounts receivable
D.income tax receivable
40) Finch Company began its operations on March 31 of the current year. Finch Co. has
the following projected costs:
(1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is
paid in the following month.
(2) Insurance expense is $1,000 a month, however, the insurance is paid four times
yearly in the first month of the quarter, i.e. January, April, July, and October.
(3) Property tax is paid once a year in November.
The cash payments for Finch Company in the month of June are:
A.$215,500
B.$188,800
C.$214,000
D.$212,000
41) Depreciation Expense and Accumulated Depreciation are classified, respectively, as
A.expense, contra asset
B.asset, contra liability
C.revenue, asset
D.contra asset, expense
42) Copper Hill Inc. manufactures laser printers within a relevant range of production
of 70,000 to 100,000 printers per year. The following partially completed
manufacturing cost schedule has been prepared:
Number of Printers Produced
70,000 90,000 100,000
Total costs:
Total variable costs $350,000 (d) (j)
Total fixed costs 630,000 (e) (k)
Total costs $980,000 (f) (l)
Cost per unit:
Variable cost per unit (a) (g) (m)
Fixed cost per unit (b) (h) (n)
Total cost per unit (c) (i) (o)
Complete the preceding cost schedule, identifying each cost by the appropriate letter (a)
through (o).
43) A summary of the materials requisitions completed during a period serves as the
basis for transferring the cost of the materials from the controlling account in the
general ledger to the controlling accounts for:
A.work in process and cost of goods sold
B.work in process and factory overhead
C.finished goods and cost of goods sold
D.work in process and finished goods
44) For accounting purposes, the method used to account for investments in common
stock is determined by
A.the amount paid for the stock by the investor
B.whether the acquisition of the stock by the investor was "friendly" or "hostile."
C.the extent of an investor's influence over the operating and financial affairs of the
investee
D.whether the stock has paid dividends in past years
45) If a manufacturer ships merchandise to a retailer on consignment, the unsold
merchandise should be included in the inventory of the
A.consignee
B.retailer
C.manufacturer
D.shipper
46) Which of the following will increase owners equity?
A.Expenses > revenues
B.the owner draws money for personal use
C.Revenues > expenses
D.Cash is received from customers on account
47) Which of the following is an example of a prepaid expense?
A.Supplies
B.Accounts Receivable
C.Unearned Subscriptions
D.Unearned Fees
48) Which of the following is an example of direct labor cost for an airplane
manufacturer?
A.Cost of oil lubricants for factory machinery
B.Cost of wages of assembly worker
C.Salary of plant supervisor
D.Cost of jet engines
49) Franklin Industries has several divisions. The Northern Division has $350,000 of
invested assets, income from operations of $200,000, and residual income of $158,000.
Determine the minimum acceptable rate of return on divisional assets.
50) Norton Company is considering a project that will require an initial investment of
$750,000 and will return $200,000 each year for five years.
Required:
If taxes are ignored and the required rate of return is 9%, what is the projects net
present value? Based on this analysis, should Norton Company proceed with the
project?
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
51) Record in good journal entry format the following transactions:
52) If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000,
break-even sales of $4,200,000, fixed costs of $1,800,000, and variable costs of 60% of
sales, what is the margin of safety expressed as a percentage of sales?
53) Prepare an income statement (through income before income tax) for presentation
to management, using the following data from the records of Greenway Manufacturing
Company for November of the current year:
54) A one-year insurance policy was purchased on October 1, 2011 for $4,200. The
adjusting entry on December 31, 2010 would be:
55) On January 2, Todd Company acquired 40% of the outstanding stock of McGuire
Company for $205,000. For the year ending, December 31, McGuire earned income of
$48,000 and paid dividends of $14,000.
Required:
Prepare the entries for Todd Company for the purchase of the stock, share of McGuire
income and dividends received from McGuire.
56) On May 10, a company issued for cash 1,500 shares of no-par common stock (with
a stated value of $2) at $14, and on May 15, it issued for cash 2,000 shares of $15 par
preferred stock at $58.
Journalize the entries for May 10 and 15, assuming that the common stock is to be
credited with the stated value.
57) The actual cash received during the week ended June 7 for cash sales was
$18,632.00, and the amount indicated by the cash register total was $18,628.00.
Journalize the entry to record the cash receipts and cash sales.
Journal
58) Protonix Corp has a payroll of $8,000 for a five-day workweek. Its employees are
paid each Friday for the five-day workweek. The adjusting entry on December 31, 2015
assuming the year ends on Thursday would be:
