1) The data needed to adjust a depositor’s books are shown in the “adjustments to the
depositor’s records” section of a bank reconciliation.
2) The accounting equation is expressed as follows: Assets = Liabilities + Stockholders’
Equity.
3) Employee fraud is the intentional act of deceiving an employer for personal gain.
4) A formal written statement of management’s plans for the future, expressed in
financial terms, is called a budget.
5) A rental cost of $40,000 plus $0.50 per machine hour of use is an example of a mixed
cost.
6) A balance sheet shows cash, $75,000; marketable securities, $110,000; receivables,
$90,000; and $225,000 of inventories. Current liabilities are $200,000. The current ratio
is 1.375 to 1 .
7) The effect of a sales return and allowance is a reduction in sales revenue and a
decrease in cash or accounts receivable.
8) In preparing a bank reconciliation, the amount indicated by a debit memorandum for
bank service charges is added to the cash balance per books.
9) When evaluating whether to lease or sell an equipment, book value is considered to
be the cost of selling the equipment.
10) If a company has issued only one class of stock, the earnings per share is
determined by dividing net income by the number of shares outstanding.
11) Budget performance reports prepared for the vice-president of production would
generally contain less detail than the reports prepared for the various plant managers.
12) The expected period of time that will elapse between the date of a capital
investment and the complete recovery in cash of the amount invested is called the
discount period.
13) When the terms of sale are FOB shipping point, the buyer should pay the
transportation charges.
14) Cost-volume-profit analysis can be presented in both graphically and equation
form.
15) The service department will determine its service department charge rate and charge
the companys divisions or departments based on the usage of the service by each
department.
16) The Sarbanes-Oxley Act of 2002 requires companies to maintain strong and
effective internal controls over recording transactions and preparing financial
statements.
17) If the profit margin for a division is 8% and the investment turnover is 1.20, the rate
of return on investment computed would be 6.7%.
18) The methods of evaluating capital investment proposals can be grouped into two
general categories: (1) average rate of return method and (2) cash payback method.
19) Costs that are treated as assets until the product is sold are called:
A.product costs
B.period costs
C.conversion costs
D.selling expenses
20) Current liabilities are:
A.due but not receivable for more than one year
B.due but not payable for more than one year
C.due and receivable within one year
D.due and payable within one year
21) An employee receives an hourly rate of $30, with time and a half for all hours
worked in excess of 40 during a week. Payroll data for the current week are as follows:
hours worked, 46; federal income tax withheld, $300; cumulative earnings for year
prior to current week, $90,700; social security tax rate, 6.0% on maximum of $106,800;
and Medicare tax rate, 1.5% on all earnings. What is the net pay for the employee?
A.$1,147.95
B.$1,059.75
C.$1,470.00
D.$1,359.75
22) In October, cash is received in advance of rendering services. Assuming that half of
the services have been performed by December 31, the year-end adjustment would:
A.decrease Unearned Service Revenue and decrease Cash
B.increase Accounts Receivable and increase Service Revenue
C.increase Cash and increase Service Revenue
D.decrease Unearned Service Revenue and increase Service Revenue
23) During the year, Cambridge Corporation applied factory overhead costs of
$205,000 to production. At the end of the year, total overapplied factory overhead is
$17,000. What was the amount of actual factory overhead cost incurred during the
year?
A.$222,000
B.$200,000
C.$205,000
D.$188,000
24) Using the following partial table of present value of $1 at compound interest,
determine the present value of $20,000 to be received four years hence with earnings at
the rate of 12% a year:
A.$13,660
B.$15,840
C.$12,720
D.$10,400
25) Based on the following data, what is the quick ratio, rounded to one decimal place?
A.3.2
B.2.1
C.1.9
D.1.4
26) Which of the following expenses incurred by a department store is an indirect
expense?
A.Insurance on merchandise inventory
B.Sales salaries
C.Depreciation on store equipment
D.Salary of vice-president of finance
27) The “rules” of accounting are called:
A.income tax regulations
B.SEC regulations
C.Internet rules
D.Generally Accepted Accounting Principles
28) Businesses that are separated into two or more manageable units and in which
managers have authority and responsibility for operations are said to be:
A.centralized
B.consolidated
C.diversified
D.decentralized
29) The contribution margin ratio is:
A.the same as the variable cost ratio
B.the same as profit
C.the portion of equity contributed by the stockholders
D.the same as the profit-volume ratio
30) The budget that summarizes future plans for the acquisition of fixed assets is the:
A.direct materials purchases budget
B.production budget
C.sales budget
D.capital expenditures budget
31) A summary of the materials requisitions completed during a period serves as the
basis for transferring the cost of the materials from the Materials account to:
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
32) Which of the following should be deducted from net income in calculating net cash
flow from operating activities using the indirect method?
A.A decrease in inventory
B.A decrease in accounts payable
C.Preferred dividends declared and paid
D.A decrease in accounts receivable
33) Which of the following is included in the computation of the quick ratio?
A.Prepaid rent
B.Accounts receivable
C.Inventory
D.Supplies
34) The point where the profit line intersects the left vertical axis on the profit-volume
chart represents:
A.the maximum possible operating loss
B.the maximum possible operating income
C.the total fixed costs
D.the break-even point
35) An element of internal control is:
A.business
B.management
C.monitoring
D.personnel policies
36) The Sarbanes-Oxley Act of 2002 requires companies and their independent
accountants to:
A.report on the effectiveness of the companys internal controls
B.report on any fraud and theft detected in the company
C.report on the state of the economy and likelihood of fraud
D.report on the financial activities of the company
37) The cost of a patent should be amortized :
A.over 10 years
B.over its economic life
C.over 20 years or its economic life, whichever is shorter
D.only if an impairment occurs
38) Which of the following is an example of a capital expenditure?
A.Cleaning the carpet in the front-office room
B.Regular tune-up for a company truck
C.Replacing an engine in a company car
D.Replacing all burned-out light bulbs in the factory
39) The form of income statement that derives its name from the fact that the total of all
expenses is deducted from the total of all revenues is called a:
A.multiple-step statement
B.revenue statement
C.report-form statement
D.single-step statement
40) Following is the information about Standard Inc.
The standard costs and actual costs for direct materials, direct labor, and factory
overhead for the manufacture of 2,500 units of product are as follows:
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
Refer to the information provided for Standard Inc. The amount of the direct materials
quantity variance is:
A.$875 favorable
B.$875 unfavorable
C.$800 favorable
D.$800 unfavorable
41) Which of the following will increase stockholders equity?
A.Expenses > revenues
B.Owners investment
C.Accounts payable
D.Dividends paid
42) Which of the following is an example of an accrued expense?
A.Salary owed but not yet paid
B.Fees received but not yet earned
C.Supplies on hand
D.A two-year premium paid on a fire insurance policy
43) If the expected sales volume for the current period is 22,000 units, the desired
ending inventory is 800 units, and the beginning inventory is 500 units, the number of
units set forth in the production budget, representing total production for the current
period, is:
A.21,700 units
B.21,500 units
C.22,300 units
D.22,800 units
44) Which of the following is not a subsection in a multiple-step income statement?
A.Purchase discounts
B.Gross profit
C.Operating income
D.Income before taxes
45) Where are selling and administrative expenses found on the multi-step income
statement?
A.Before gross profit
B.After sales and before gross profit
C.After net income and before expenses
D.After gross profit
46) All of the following qualitative considerations may influence capital investments
analysis except:
A.time value of money
B.employee morale
C.product quality
D.manufacturing flexibility
47) 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.
48) Managers who often make special pricing decisions are more likely to use which of
the following cost concepts in their work?
A.Total cost
B.Product cost
C.Variable cost
D.Fixed cost
49) Which of the following is not a characteristic of accumulated depreciation account?
A.Accumulated depreciation represents cash reserved for asset replacement
B.Accumulated depreciation account is a contra-asset account
C.Accumulated depreciation may be disclosed in the notes to the financial statements
D.Accumulated depreciation is reported on the balance sheet as a deduction from the
cost of the asset
50) If fixed costs are $250,000, the unit selling price is $105, and the unit variable cost
is $65, what is the break-even sales (in units)?
A.6,250 units
B.2,381 units
C.10,000 units
D.3,846 units
51) Recording revenue when a sale is made most directly relates to which concept?
A.Going concern concept
B.Periodicity concept
C.Matching concept
D.Adequate disclosure concept
52) Stockholders Equity will be increased by all of the following accounts except:
A.dividends
B.revenues
C.owners investments
D.all of the above increase Stockholders Equity
53) Which of the following is usually not a prerequisite to paying cash dividends?
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