1) As soon as a corporation is authorized to issue stock, an accounting journal entry
should be made recording the total value of the shares authorized.
2) Neither corporate bond interest nor dividends are deductible for tax purposes.
3) In concept, standards and budgets are essentially the same.
4) In developing a standard cost for direct materials, a price factor and a quantity factor
must be considered.
5) The account titles used in journalizing transactions need not be identical to the
account titles in the ledger.
6) In the stockholders equity section, paid-in capital and retained earnings are reported
and the specific sources of paid-in capital are identified.
7) Under the direct write-off method, no attempt is made to match bad debts expense to
sales revenues in the same accounting period.
8) From a quantitative standpoint, a segment should be eliminated if its contribution
margin is less than the fixed costs that can be eliminated.
9) The perpetual inventory method cannot be used in a job order cost system.
10) Managerial accounting information generally pertains to an entity as a whole and is
highly aggregated.
11) Decentralization means that the control of operations is delegated by top
management to many individuals throughout the organization.
12) Nonoperating activities exclude revenues and expenses that result from secondary
or auxiliary operations.
13) Gable and Devito share partnership profits and losses in the ratio of 6:4. Gables
Capital account balance is $160,000 and Devitos Capital account balance is $100,000.
Nance is admitted to the partnership by investing $180,000 and is to receive a
one-fourth ownership interest. Gable, Devito and Nances capital balances after Nances
investment will be
Gable Devito Nance
a.$160,000$100,000$180,000
b.$202,000$128,000$110,000
c.$198,000$132,000$110,000
d.$195,000$135,000$110,000
14) Jukebox Company had checks outstanding totaling $10,800 on its June bank
reconciliation. In July, Jukebox Company issued checks totaling $77,800. The July
bank statement shows that $76,600 in checks cleared the bank in July. A check from one
of Jukebox Company’s customers in the amount of $1,000 was also returned marked
“NSF.” The amount of outstanding checks on Jukebox Company’s July bank
reconciliation should be
a.$1,200
b.$11,000
c.$12,000
d.$13,000
15) Ellen Company manufactures kitchen utensils. Bolla Company has approached
Ellen with a proposal to sell the company spatulas at a price of $100,000 for 100,000
units. Elllen is currently making the spatulas in its own factory. The following costs are
associated with this part of the process when 100,000 spatulas are produced:
Direct material$ 41,000
Direct labor19,000
Manufacturing overhead 50,000
Total$110,000
The manufacturing overhead consists of $36,000 of costs that will be eliminated if the
components are no longer produced by Ellen. From Ellen’s point of view, how much is
the incremental cost or savings if the spatulas are bought instead of made?
a.$10,000 incremental savings
b.$4,000 incremental cost
c.$4,000 incremental savings
d.$10,000 incremental cost
16) Management should select the depreciation method that
a.is easiest to apply
b.best measures the plant asset’s market value over its useful life
c.best measures the plant asset’s contribution to revenue over its useful life
d.has been used most often in the past by the company
17) Managerial accounting information
a.pertains to the entity as a whole and is highly aggregated
b.pertains to subunits of the entity and may be very detailed
c.is prepared only once a year
d.is constrained by the requirements of generally accepted accounting principles
18) The return on common stockholders’ equity is computed by dividing
a.net income by ending common stockholders’ equity
b.net income by average common stockholders’ equity
c.net income minus preferred dividends by ending common stockholders’ equity
d.net income minus preferred dividends by average common stockholders’ equity
19) A company developed the following per-unit standards for its product: 2 gallons of
direct materials at $8 per gallon. Last month, 3,000 gallons of direct materials were
purchased for $22,500. The direct materials price variance for last month was
a.$22,500 favorable
b.$750 favorable
c.$1,500 favorable
d.$1,500 unfavorable
20) If the materials price variance is $3,600 F and the materials quantity and labor
variances are each $2,800 U, what is the total materials variance?
a.$3,600 F
b.$2,800 U
c.$6,300 F
d.$800 F
21) Which of the following items does not appear in the statement of cash flows under
the direct method?
a.Cash payments to suppliers
b.Cash collections from customers
c.Depreciation Expense
d.Cash from the sale of equipment
22) As a recent graduate of State University youre aware that IFRS requires component
depreciation for plant assets. A friend has asked you to succinctly explain what
component depreciation means. Which of the following correctly describes component
depreciation?
a.The method used to ensure that the depreciation rate remains constant from year to
year
b.The method that requires that significant parts of a plant asset with different useful
lives be depreciated separately
c.The method used to prorate annual depreciation on a time basis
d.The method of depreciation recommended for an asset that is expected to be
significantly more productive in the first half of its useful life
23) Proper control for over-the-counter cash receipts includes
a.a cash register with totals visible to the customer
b.using electronic cash registers with no tapes
c.cash count sheets requiring only the supervisor’s signature
d.cash count sheets requiring only the cashier’s signature
24) Don’s Copy Shop bought equipment for $450,000 on January 1, 2013 . Don
estimated the useful life to be 3 years with no salvage value, and the straight-line
method of depreciation will be used. On January 1, 2014, Don decides that the business
will use the equipment for a total of 5 years. What is the revised depreciation expense
for 2014?
a.$150,000
b.$ 60,000
c.$ 75,000
d.$112,500
25) Which of the following is correct when admitting a new partner into an existing
partnership?
Purchase of an InterestAdmission by Investment
a.Total net assetsunchangedunchanged
b.Total capitalincreasedunchanged
c.Total net assetsunchangedincreased
d.Total capitalunchangedunchanged
26) Which of the following expressions is incorrect?
a.Gross profit operating expenses = net income
b.Sales revenue cost of goods sold operating expenses = net income
c.Net income + operating expenses = gross profit
d.Operating expenses cost of goods sold = gross profit
27) aWhich list below best describes the major services performed by public
accountants?
a.Bookkeeping, mergers, budgets
b.Employee training, auditing, bookkeeping
c.Auditing, taxation, management consulting
d.Cost accounting, production scheduling, recruiting
28) Which of the following accounts is not closed to Income Summary?
a.Cost of Goods Sold
b.Inventory
c.Sales Revenue
d.Sales Discounts
29) Cobb Company’s accounting records show the following at the year ending on
December 31, 2014:
Purchase Discounts$ 11,200
Freight – In15,600
Purchases402,000
Beginning Inventory47,000
Ending Inventory57,600
Purchase Returns12,800
Using the periodic system, the cost of goods sold is
a.$378,000
b.$383,000
c.$393,600
d.$404,200
30) Which of the following is an optional step in the accounting cycle?
a.Adjusting entries
b.Closing entries
c.Correcting entries
d.Reversing entries
31) A plant asset cost $288,000 and is estimated to have a $36,000 salvage value at the
end of its 8-year useful life. The annual depreciation expense recorded for the third year
using the double-declining-balance method would be
a.$24,120
b.$40,500
c.$35,436
d.$27,570
32) Manufacturing costs for Carson Company for selected months are as follows:
April JulyOctober
Beginning work in process$ 85,000(f)$ 98,400
Direct materials used270,000$192,000155,800
Direct labor185,000170,000(j)
Manufacturing overhead(a)150,00093,000
Total manufacturing costs880,000512,000452,000
Total cost of work in process(b)630,000(k)
Ending work in process70,000(g)(l)
Cost of goods manufactured(c)520,000375,000
Beginning finished goods(d)36,000(m)
Cost of goods available for sale970,000(h)485,000
Ending finished goods(e)79,000(n)
Cost of goods sold825,000(i)350,000
Instructions
Indicate the missing amounts. (Show computations.)
33) The primary accounting standard-setting body in the United States is the
a.Financial Accounting Standards Board
b.International Accounting Standards Board
c.Internal Revenue Service
d.Securities and Exchange Commission
34) Bekins Manufacturing Company reported the following year-end information:
Beginning work in process inventory $ 46,000
Beginning raw materials inventory24,000
Ending work in process inventory50,000
Ending raw materials inventory20,000
Raw materials purchased640,000
Direct labor250,000
Manufacturing overhead120,000
How much is Bekins Manufacturings cost of goods manufactured for the year?
a.$1,014,000
b.$1,060,000
c.$1,064,000
d.$1,010,000
35) The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies
Balance Sheet
December 31, 2014
Cash$ 40,000Accounts Payable$ 130,000
Prepaid Insurance80,000Salaries and Wages Payable50,000
Accounts Receivable100,000Mortgage Payable 150,000
Inventory140,000Total Liabilities330,000
Land Held for Investment180,000
Land250,000
Building$200,000
Less AccumulatedOwners Capital 740,000
Depreciation(60,000)140,000
Trademark 140,000Total Liabilities and
Total Assets$1,070,000Owners Equity$1,070,000
The total dollar amount of assets to be classified as property, plant, and equipment is
a.$390,000
b.$450,000
c.$570,000
d.$630,000
36) Maxwell Company has fixed costs of $300,000 and variable costs are 60% of sales.
How much will Maxwell Company report as sales when its net income equals $30,000?
a.$825,000
b.$550,000
c.$780,000
d.$198,000
37) Which would be an appropriate cost driver for the delivery activity?
a.Customers
b.Purchase orders
c.Shipments
d.Inspections
38) Which of the following adjustments to convert net income to net cash provided by
operating activities is not added to net income?
a.Gain on Sale of Equipment
b.Depreciation Expense
c.Patent Amortization Expense
d.Depletion Expense
39) Trade accounts receivable are valued and reported on the balance sheet
a.in the investment section
b.at gross amounts less sales returns and allowances
c.at net realizable value
d.only if they are not past due
40) Additional paid-in capital includes all of the following except
a.paid-in capital from treasury stock
b.paid-in capital in excess of par
c.paid-in capital in excess of stated value
d.paid-in capital in excess of book value
41) HecTech, Inc. thinks machine hours is the best activity base for its manufacturing
overhead. The estimate of annual overhead costs for its jobs was $1,175,000. The
company used 1,200 hours of processing on Job No. B12 during the period and incurred
overhead costs totaling $1,200,000. The budgeted machine hours for the year totaled
25,000. How much overhead should be applied to Job No. B12?
a.$57,600
b.$1,000
c.$56,400
d.$979
42) The amount you must deposit now in your savings account, paying 4% compound
interest, in order to accumulate $5,000 for a down payment 4 years from now on a new
car is
a.$4,110
b.$4,274
c.$4,114
d.$4,200
43) When there is beginning work in process, units transferred out are computed by
subtracting:
a.beginning work in process units from the units to be accounted for
b.ending work in process units from the units started into production
c.beginning work in process units from the units started into production
d.ending work in process units from the units accounted for
44) The account, Stock Investments, is
a.a subsidiary ledger account
b.a long-term liability account
c.a general ledger control account
d.another name for Debt Investments
45) If the amount of “Cost of goods manufactured” during a period exceeds the amount
of “Total manufacturing costs” for the period, then
a.ending work in process inventory is greater than or equal to the amount of the
beginning work in process inventory
b.ending work in process is greater than the amount of the beginning work in process
inventory
c.ending work in process is equal to the cost of goods manufactured
d.ending work in process is less than the amount of the beginning work in process
inventory
46) The party who has the right to exercise a call option on bonds is the
a.investment banker
b.bondholder
c.bearer
d.issuer
47) If a corporation declares a 10% stock dividend on its common stock, the account to
be debited on the date of declaration is
a.Common Stock Dividends Distributable
b.Common Stock
c.Paid-in Capital in Excess of Par
d.Stock Dividends
48) The income statement and balance sheet columns of Iron and Wine Company’s
worksheet reflect the following totals:
Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals$72,000$44,000$60,000$88,000
The net income (or loss) for the period is
a.$44,000 income
b.$28,000 income
c.$28,000 loss
d.not determinable
49) The basic similarities between job order cost and process cost systems include all of
the following except the
a.manufacturing cost elements
b.flow of costs
c.point at which costs are totaled
d.accumulation of the costs of materials, labor, and overhead
50) At September 1, the balance sheet accounts for Stanleys Restaurant were as follows:
Accounts Payable$ 3,800Land$33,000
Accounts Receivable9,600Owners Capital?
Buildings68,000Notes Payable48,000
Cash10,000Supplies6,600
Equipment18,700
The following transactions occurred during the next two days:
Stanley invested an additional $22,000 cash in the business. The accounts payable were
paid in full. (No payment was made on the notes payable.)
Instructions
Prepare a balance sheet at September 3, 2014 .
51) Butler Manufacturing manufactures two products, (1) Regular and (2) Deluxe. The
budgeted units to be produced are as follows:
Units of Product
2013Regular Deluxe Total
July10,00015,00025,000
August6,00010,00016,000
September9,00014,00023,000
October8,00012,00020,000
It takes 2 pounds of direct materials to produce the Regular product and 5 pounds of
direct materials to produce the Deluxe product. It is the company’s policy to maintain an
inventory of direct materials on hand at the end of each month equal to 30% of the next
month’s production needs for the Regular product and 20% of the next month’s
production needs for the Deluxe product. Direct materials inventory on hand at June 30
were 6,000 pounds for the Regular product and 15,000 pounds for the Deluxe product.
The cost per pound of materials is $5 Regular and $8 Deluxe.
Instructions
Prepare separate direct materials budgets for each product for the third quarter of 2013 .
52) The primary basis for evaluating the performance of a manager of an investment
center is _________________.
53) An unrealized loss on trading securities is reported under Other
____________________ on the income statement.
54) When a customer returns merchandise previously purchased on credit, the entry for
the seller to record the return requires a debit to the ________________ account and a
credit to the ________________ account.
55) Preferred stock has contractual provisions that give it a preference over common
stock as to ___________________ and to ___________________ in the event of
liquidation.
56) For each of the ratios listed below, indicate by the appropriate code letter, whether it
is a liquidity ratio, a profitability ratio, or a solvency ratio.
Code:
L =Liquidity ratio
P =Profitability ratio
S=Solvency ratio
____1>Price-earnings ratio
____2>Asset turnover
____3>Accounts receivable turnover
____4>Earnings per share
____5>Payout ratio
____6>Current ratio
____7>Acid-test ratio
____8>Debt to assets ratio
____9>Times interest earned
____10>Inventory turnover
57) Management uses several capital budgeting approaches in evaluating projects for
possible investment. Identify those approaches that are more desirable from a
conceptual standpoint, and briefly explain what features these approaches have that
make them more desirable than other approaches. Also identify the least desirable
approach and explain its major weaknesses.
58) Compute Whiz Companys adjusted cash balance per books based on the following
information:
Beginning cash balance per books$4,200
Deposit in transit900
Check printing charge20
Note collected by bank for Whiz1,600
59) If inventory turnover is 8 times, and the average inventory was $400,000, the cost
of goods sold during the year was $______________ and the days in inventory was
______________ days.