1) The adjusting entry to record inventory shrinkage would generally include a debit to
Cost of Merchandise Sold.
2) If the totals of the Income Statement debit and credit columns of a work sheet are
$27,000 and $29,000, respectively, after all account balances have been extended, the
amount of the net loss is $2,000.
3) When the allowance method for accounting for uncollectible receivables is used, net
income is reduced when a specific receivable is written off.
4) If a new partner is to be admitted to a partnership and a bonus is attributed to the old
partnership, the bonus should be divided between the capital accounts of the original
partners according to their capital balances.
5) The balance in Retained Earnings at the end of the period is created by closing
entries.
6) Factory overhead is an example of a product cost.
7) Materials are transferred from the storeroom to the factory in response to materials
requisitions.
8) One negative effect of carrying too much inventory is risk that customers will change
their buying habits.
9) Managerial accounting reports are prepared according to generally accepted
accounting principles.
10) A report analyzing how many products need to be sold to cover operating costs is
not typically a managerial accounting report.
11) Treasury Stock is listed in the stockholders’ equity section onthe balance sheet.
12) A 10% stock dividend will increase the number of shares outstanding but the book
value per share will decrease.
13) Because many companies use computerized accounting systems, periodic inventory
is widely used.
14) Accounts payable are accounts that you expect will be paid to you.
15) Investment in Bonds is listed on the balance sheet after Bonds Payable.
16) Any twelve-month accounting period adopted by a company is known as its fiscal
year.
17) The number of days’ sales in receivables is one means of expressing the relationship
between average daily sales and accounts receivable.
18) By ignoring and not posting the adjusting journal entries to the appropriate
accounts, net income will always be overstated.
19) For a month’s transactions for a typical medium-sized business, the salary expense
account is likely to have only credit entries.
20) Which of the following would be considered a sunk cost?
A.Purchase price of new equipment
B.Equipment rental for the production area
C.Net book value of equipment that has no market value
D.Warehouse lease expense
21) Which of the following would not normally operate as a service business?
A.Pet Groomers
B.Grocers
C.Lawn Care Company
D.Styling Salon
22) According to the just-in-time philosophy,
A.finished goods should always be available in case a customer wants something
B.employees should be expert at one function rather than be cross-trained for multiple
functions
C.movement of the product and material is reduced
D.the product moves from process to process until completion
23) What pricing concept considers the price that other providers charge for the same
product?
A.Demand-based concept
B.Total cost concept
C.Cost-plus concept
D.Competition-based concept
24) A plant managers salary may be referred to as:
A.either a direct cost or an indirect cost since managerial accounting is not restricted by
GAAP
B.a direct cost
C.an indirect cost
D.a period cost
25) The following lots of a particular commodity were available for sale during the
year:
The firm uses the periodic system and there are 20 units of the commodity on hand at
the end of the year. What is the amount of inventory at the end of the year according to
the FIFO method?
A.$655
B.$620
C.$690
D.$659
26) Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a
balance of $15,500. If the issuing corporation redeems the bonds at 98.5, what is the
amount of gain or loss on redemption?
A.$500 loss
B.$15,500 loss
C.$15,500 gain
D.$500 gain
27) All of the following are general-purpose financial statements except:
A.balance sheet
B.income statement
C.statement of owners equity
D.cash budget
28) For which of the following taxes is there no ceiling on the amount of employee
annual earnings subject to the tax?
A.only Social Security tax
B.only Medicare tax
C.only unemployment compensation tax
D.none of the above
29) The calculation for annual depreciation using the units-of-production method is
A.(initial cost/estimated output) * the actual yearly output
B.(depreciable cost / yearly output) * estimated output
C.depreciable cost / yearly output
D.(depreciable cost / estimated output) * the actual yearly output
30) On the first day of the fiscal year, Hawthorne Company obtained a $ 88,000,
seven-year, 5% installment note from Sea Side Bank. The note requires annual
payments of $15,208, with the first payment occurring on the last day of the fiscal year.
The first payment consists of interest of $4,400 and principal repayment of $10,808.
The journal entry Hawthorne would record to make the first annual payment due on the
note would include:
A.a debit to Cash of $15,208
B.a credit to Notes Payable for $10,808
C.a debit to Interest Expense for $4,400
D.a debit to Notes Payable for $15,208
31) When the market rate of interest was 11%, Valley Corporation issued $100,000, 8%,
10-year bonds that pay interest semiannually. Using the straight-line method, the
amount of discount or premium to be amortized each interest period would be
A.$4,000
B.$896
C.$17,926
D.$1,793
32) The methods of evaluating capital investment proposals can be separated into two
general groups–present value methods and:
A.past value methods
B.straight-line methods
C.reducing value methods
D.methods that ignore present value
33) On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that
has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000
hours.
Using straight line depreciation, prepare the journal entry to record depreciation
expense for (a) the first year, (b) the second year and (c) the last year.
34)
Based on the above data, what is the amount of working capital?
A.$238,000
B.$128,000
C.$168,000
D.$203,000
35) If a two-column (all-purpose) general journal, a purchases journal, and a cash
payments journal are used, indicate the journal in which each of the following
transactions should be recorded:
(a) Payment of rent.
(b) Purchase of supplies on account.
(c) Purchase of computer on account.
(d) Purchase of supplies for cash.
(e) Advance payment of a one-year fire insurance policy on the office.
(f) Adjustment to record accrued salaries at the end of the period.
(g) Adjustment to record depreciation at the end of the month.
(h) Payment of an account payable.
36) The following data is given for the Bahia Company:
Overhead is applied on standard labor hours.
The factory overhead volume variance is:
A.$65U
B.$65F
C.$540U
D.$540F
37) Based on the following data for the current year, what is the number of days’ sales
in inventory?
A.51.2
B.44.4
C.6.5
D.7.5
38) The financial statement that presents a summary of the revenues and expenses of a
business for a specific period of time, such as a month or year, is called a(n)
A.prior period statement
B.statement of owner’s equity
C.income statement
D.balance sheet
39) An extraordinary item results from
A.a segment of the business being sold
B.corporate income tax being paid
C.a change from one accounting method to another acceptable accounting method
D.a transaction or event that is unusual and occurs infrequently
40) Compton and Danson form a partnership in which Compton contributes $70,000 in
assets and agrees to devote half time to the partnership. Danson contributed $50,000 in
assets and agrees to devote full time to the partnership. If no additional information is
available, how will Compton and Danson share in the division of income?
A.5:7
B.1:2
C.1:1
D.5:2
41) If variable costs per unit increased because of an increase in hourly wage rates, the
break-even point would:
A.decrease
B.increase
C.remain the same
D.increase or decrease, depending upon the percentage increase in wage rates
42) Which of the following would record the labor costs to an individual job?
A.Clock card
B.In-and-out cards
C.Time tickets
D.Payroll register
43) If title to merchandise purchases passes to the buyer when the goods are shipped
from the seller, the terms are
A.n/30
B.FOB shipping point
C.FOB destination
D.consigned
44) On October 30, Seba Salon, Inc. issued a 90-day note with a face amount of
$60,000 to Reyes Products, Inc. for merchandise inventory. Assuming a 360-day year,
determine the proceeds of the note assuming the note is discounted at 8%.
A.$55,200
B.$64,800
C.$58,800
D.$61,200
45) Gomez Service Company paid their first installment on their Notes Payable in the
amount of $2,000. How will this transaction affect the accounting equation?
A.Increase Liabilities (Notes Payable) and decrease Assets (Cash)
B.Decrease Assets (Cash) and decrease Owners equity (Note Payable Expense)
C.Decrease Assets (Cash) and decrease Assets (Notes Receivable)
D.Decrease Assets (Cash) and decrease Liabilities (Notes Payable)
46) Which of the following is not an advantage of the average rate of return method?
A.It is easy to use
B.It takes into consideration the time value of money
C.It includes the amount of income earned over the entire life of the proposal
D.It emphasizes accounting income
47) Alpha and Beta are partners who share income in the ratio of 1:2 and have capital
balances of $40,000 and $70,000 at the time they decide to terminate the partnership.
After all noncash assets are sold and all liabilities are paid, there is a cash balance of
$50,000. What amount of loss on realization should be allocated to Alpha?
A.$60,000
B.$20,000
C.$30,000
D.$50,000
48) The numerator used to calculate accounts receivable turnover is
A.total sales
B.net sales
C.accounts receivable at year-end
D.average accounts receivable
49) 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.
Using the tables above, what would be the present value of $8,000 (rounded to the
nearest dollar) to be received one year from today, assuming an earnings rate of 12%?
A.$7,544
B.$7,120
C.$7,272
D.$7,144
50) A 60-day, 9% note for $10,000, dated May 1, is received from a customer on
account. The maturity value of the note is
A.$10,000
B.$10,150
C.$10,900
D.$9,100
51) The following units of a particular item were available for sale during the year:
The firm uses the perpetual inventory system and there are 240 units of the item on
hand at the end of the year. What is the total cost of ending inventory according to
FIFO?
52) At the end of the current year, $3,700 fees have been earned but have not been
billed to clients. Journalize the adjusting entry to record the accrued fees.
53) A company reports the following:
Determine the number of times interest charges are earned. Round your answer to one
decimal place.
54) Solar Company has 600,000 shares of $75 par common stock outstanding. On
February 13, Solar declared a 3% stock dividend to be issued on April 30 to
stockholders of record on March 14. The market price of the stock was $90 per share on
February 13.
Required: Journalize the entries required on February 13, March 14, and April 30.
55) Brutus Corporation, a newly formed corporation, has the following transactions
during May, 2011, its first month of operation.
May 1 Purchased 500 units @ $25.00 each
May 4 Purchased 300 units @ $24.00 each
May 6 Sold 400 units @ $38.00 each
May 8 Purchased 700 units @ $23.00 each
May 13 Sold 450 units @ $37.50 each
May 20 Purchased 250 units @ $25.25 each
May 22 Sold 275 units @ $36.00 each
May 27 Sold 300 units @ $37.00 each
May 28 Purchased 550 units @ $26.00 each
May 30 Sold 100 units @ $39.00 each
Calculate total sales, cost of goods sold, gross profit and ending inventory using each of
the following inventory methods:
1> FIFO Perpetual
2> FIFO Periodic
3> LIFO Perpetual
4> LIFO Periodic
5> Average Cost Periodic (round average to nearest cent)
56) Voyager Electronic Services has three customers in its Accounts Receivable
Subsidiary Ledger with the following detail:
Fred Yao Ming Beginning balance $1,150.00
Kohl Townson Beginning balance $850.00
Chandra Jahi Beginning balance $1,075.00
Accounts Receivable controlling Account balance $3,075.00
Journalize then post the following five transactions to the General Journal. Then post
the journal entries to the Accounts Receivable Subsidiary Ledger. Update the balance of
the Accounts Receivable controlling Account balance.
On June 3rd, Kohl Townson pays $325.00 on account.
On June 10th, Chandra Jahi purchases $475.00 on account.
On June 15th, Fred Yao Ming pays $395.00 on account.
On June 16th, Fred Yao Ming purchases $685.00 on account.
On June 23rd, Kohl Townson purchases $155.00 on account.
57) Townson Company had gross wages of $200,000 during the week ended December
10. The amount of wages subject to social security tax was $180,000, while the amount
of wages subject to federal and state unemployment taxes was $24,000. Tax rates are as
follows:
The total amount withheld from employee wages for federal taxes was $32,000.
Required:
58) On February 13, Epperson Company issue for cash 75,000 shares of no-par
common stock (with a stated value of $125) at $140. On September 9, Epperson issued
at par 15,000 share of 1%, $60 par preferred stock at par for cash On November 23,
Epperson issued for cash 8,000 shares of 1%, $60 par preferred stock at $70.
Required: Journalize the entries to record the February 13, September 9 and November
23 transactions.
59) Purple Inc. production budget for Product X for the year ended December 31 is as
follows:
In Purple’s production operations, Materials A, B, and C are required to make Product
X. The quantities of direct materials expected to be used for each unit of product are as
follows:
Prepare a direct materials purchases budget for Product X, assuming that there are no
beginning or ending inventories for direct materials (all units purchased are used in
production).