1) If an account is collected after having been previously written off,
a.the allowance account should be debited
b.only the control account needs to be credited
c.both income statement and balance sheet accounts will be affected
d.there will be both a debit and a credit to accounts receivable
2) A company expected its annual overhead costs to be $1,950,000 and direct labor
costs to be $1,500,000. Actual overhead was $1,890,000, and actual labor costs totaled
$1,160,000. How much is the companys predetermined overhead rate to the nearest
cent?
a.$1.26
b.$1.30
c.$1.18
d.$1.22
3) To be useful, the information outputs of a system should be
a.relevant, reliable, timely, and accurate
b.reliable, flexible, understandable and timeless
c.such that one report meets all different users needs
d.distributed only to management personnel
4) What is budgetary control?
a.Another name for a flexible budget
b.The degree to which the CFO controls the budget
c.The use of budgets in controlling operations
d.The process of providing information on budget differences to lower level managers
5) Lowe Company has $1,500,000 of bonds outstanding. The unamortized premium is
$19,600. If the company redeemed the bonds at 101, what would be the gain or loss on
the redemption?
a.$4,600 gain
b.$4,600 loss
c.$15,000 gain
d.$15,000 loss
6) Tyson Field would like to have $100,000 in the bank 3 years from now in order to
purchase a new car. How much would he have to deposit today in a bank savings
account that pays 5% interest in order to have the $100,000 three years from now?
(n)Present Value of 1 at 5%Present Value of an Annuity of 1 at 5%
1.95238.95238
2.907031.85941
3.863842.72325
a.$36,720
b.$85,740
c.$86,384
d.$90,784
7) A company’s break-even point can be decreased by decreasing:
a.the contribution margin
b.variable costs per unit
c.the selling price
d.the contribution margin ratio
8) At December 31, 2014, the available-for-sale securities for Allison, Inc. are as
follows.
Security Cost Fair Value
X$27,500$24,000
Y 12,500 13,000
Z 23,000 18,000
$63,000$55,000
Instructions
(a)Prepare the adjusting entry at December 31, 2014, to report the securities at fair
value.
(b)Show the balance sheet and income statement presentation at December 31, 2014,
after adjustment to fair value. The securities are considered to be a long-term
investment.
9) Nicklaus Company has decided to sell one of its old machines on June 30, 2014 . The
machine was purchased for $200,000 on January 1, 2010, and was depreciated on a
straight-line basis for 10 years with no salvage value. If the machine was sold for
$65,000, what was the amount of the gain or loss recorded at the time of the sale?
a.$45,000
b.$135,000
c.$55,000
d.$115,000
10) Short-term stock investments should be valued on the balance sheet at
a.the lower of cost or fair value
b.the higher of cost or fair value
c.cost
d.fair value
11) A typical investment to house excess cash until needed is
a.stocks of companies in a related industry
b.debt securities
c.low-risk, highly liquid securities
d.stock securities
12) Raw materials inventory, January 1$ 20,000
Raw materials inventory, December 3110,000
Work in process, January 16,000
Work in process, December 319,000
Finished goods, January 116,000
Finished goods, December 3120,000
Raw materials purchases400,000
Direct labor200,000
Factory utilities75,000
Indirect labor45,000
Factory depreciation180,000
Selling and administrative expenses210,000
Direct materials used is:
a.$390,000
b.$400,000
c.$410,000
d.$430,000
13) Using the percentage of receivables method for recording bad debt expense,
estimated uncollectible accounts are $14,000. If the balance of the Allowance for
Doubtful Accounts is $2,000 debit before adjustment, what is the balance after
adjustment?
a.$2,000
b.$12,000
c.$14,000
d.$16,000
14) Any balance in an unearned revenue account is reported as a(n)
a.current liability
b.long-term debt
c.revenue
d.unearned liability
15) When constructing a worksheet, accounts are often needed that are not listed in the
trial balance already entered on the worksheet from the ledger. Where should these
additional accounts be shown on the worksheet?
a.They should be inserted in alphabetical order into the trial balance accounts already
given
b.They should be inserted in chart of account order into the trial balance already given
c.They should be inserted on the lines immediately below the trial balance totals
d.They should not be inserted on the trial balance until the next accounting period
16) Claire Companys Assembly Department has materials cost at $3 per unit and
conversion cost at $8 per unit. There are 20,000 units in ending work in process, all of
which are 70% complete as to conversion costs. How much are total costs to be
assigned to inventory?
a.$112,000
b.$220,000
c.$154,000
d.$172,000
17) H. Tillman performed legal services for J. Laney. Due to a cash shortage, an
agreement was reached whereby J. Laney. would pay H. Tillman a legal fee of
approximately $4,000 by issuing 1,000 shares of its common stock (par $1). The stock
trades on a daily basis and the market price of the stock on the day the debt was settled
is $4.50 per share. Given this information, the journal entry for J. Laney. to record this
transaction is:
a.Legal Expense4,500
Common Stock 4,500
b.Legal Expense4,000
Common Stock4,000
c.Legal Expense4,000
Common Stock 1,000
Paid-in Capital in Excess of Par Common3,000
d.Legal Expense4,500
Common Stock1,000
Paid-in Capital in Excess of Par Common3,500
18) Red Company produces 1,000 units of a necessary component with the following
costs:
Direct Materials$34,000
Direct Labor15,000
Variable Overhead8,000
Fixed Overhead10,000
None of Red fixed overhead costs can be reduced, but another product could be made
that would increase profit contribution by $12,000 if the components were acquired
externally. If cost minimization is the major consideration and the company would
prefer to buy the components, what is the maximum external price that Red Company
would be willing to accept to acquire the 1,000 units externally?
a.$55,000
b.$46,000
c.$79,000
d.$69,000
19) In determining earnings per share, dividends for the current year on noncumulative
preferred stock should be
a.disregarded
b.added back to net income whether declared or not
c.deducted from net income only if declared
d.deducted from net income whether declared or not
20) Which of the following should be included in the physical inventory of a company?
a.Goods held on consignment from another company
b.Goods in transit to another company shipped FOB shipping point
c.Goods in transit from another company shipped FOB shipping point
d.Both b and c above
21) The principle of establishing responsibility does not include
a.one person being responsible for one task
b.authorization of transactions
c.independent internal verification
d.approval of transactions
22) With an interest-bearing note, the amount of assets received upon issuance of the
note is generally
a.equal to the note’s face value
b.greater than the note’s face value
c.less than the note’s face value
d.equal to the note’s maturity value
23) Inventory written down under lower-of-cost-or market may be written back up to
original cost in a subsequent period under
GAAPIFRS
a.YesNo
b.YesYes
c.NoNo
d.NoYes
24) Beginning cash balance plus total receipts
a.equals ending cash balance
b.must equal total disbursements
c.equals total available cash
d.is the excess of available cash over disbursements
25) Which of the following is not a common method of capital budgeting?
a.Gross profit method
b.Payback method
c.Discounted cash flow method
d.Annual rate of return method
26) The following items were taken from the financial statements of Henager, Inc., over
a three-year period:
Item 2015 2014 2013
Net Sales$355,000$340,000$300,000
Cost of Goods Sold 214,000 202,000 186,000
Gross Profit$141,000$138,000$114,000
Instructions
Compute the following for each of the above time periods.
a.The amount and percentage change from 2013 to 2014 .
b.The amount and percentage change from 2014 to 2015 .
27) In the liquidation of a partnership, any partner who has a capital deficiency
a.has a personal debt to the partnership for the amount of the deficiency
b.is automatically terminated as a partner
c.will receive a cash distribution only on the basis of his or her income-sharing ratio
d.is not obligated to make up the capital deficiency
28) Owners’ equity for a corporation is identified as each of the following except
a.corporate capital
b.paid-in capital
c.partners’ equity
d.stockholders’ equity
29) The balance of a control account in the general ledger
a.must always be zero
b.must equal the amount of total assets
c.is always greater than the composite balance of individual accounts in a related
subsidiary ledger
d.must equal the composite balance of individual accounts in a related subsidiary ledger
30) A company just starting business made the following four inventory purchases in
June:
June1150 units$ 390
June10200 units585
June15200 units630
June28150 units 510
$2,115
A physical count of merchandise inventory on June 30 reveals that there are 250 units
on hand.
The inventory method which results in the highest gross profit for June is
a.the FIFO method
b.the LIFO method
c.the weighted average unit cost method
d.not determinable
31) Rubble Company reported net income of $70,000 for the year. During the year,
accounts receivable increased by $6,000, accounts payable decreased by $5,000 and
depreciation expense of $8,000 was recorded. Net cash provided by operating activities
for the year is
a.$67,000
b.$89,000
c.$63,000
d.$70,000
32) Retailers generally consider sales from the use of national credit card sales as a
a.credit sale
b.collection of an accounts receivable
c.cash sale
d.collection of a note receivable
33) Which one of the following amounts increases each period when accounting for
long-term notes payable?
a.Cash payment
b.Interest expense
c.Principal balance
d.Reduction of principal
34) The budget that is often considered to be the most important financial budget is the
a.cash budget
b.capital expenditure budget
c.budgeted income statement
d.budgeted balance sheet
35) Nord Company had $375,000 of current assets and $150,000 of current liabilities
before borrowing $70,000 from the bank with a 3-month note payable. What effect did
the borrowing transaction have on the amount of Nord Company’s working capital?
a.No effect
b.$70,000 increase
c.$140,000 increase
d.$70,000 decrease
36) A 90-day note dated May 14 has a maturity date of
a.August 14
b.August 12
c.August 13
d.August 15
37) Internal reports must be communicated
a.daily
b.monthly
c.annually
d.as needed
38) Meyer Company had $125,000 of net income in 2014 when the selling price per
unit was $100, the variable costs per unit were $70, and the fixed costs were $475,000.
Management expects per unit data and total fixed costs to remain the same in 2015 .
The president of Meyer Company is under pressure from stockholders to increase net
income by $70,000 in 2015 .
Instructions
(a)Compute the number of units sold in 2014 .
(b)Compute the number of units that would have to be sold in 2015 to reach the
stockholders’ desired profit level.
(c)Assume that Meyen Company sells the same number of units in 2015 as it did in
2014 . What would the selling price have to be in order to reach the stockholders’
desired profit level.
39) Financial accounting information and managerial accounting information have a
number of distinguishing characteristics. For each of the characteristics listed below,
indicate which characteristics are more closely related to financial accounting by
placing the letter “F” in the space to the left of the item and indicate those
characteristics which are more closely associated with managerial accounting by
placing the letter “M” to the left of the item.
____1>General-purpose reports
____2>Reports are used internally
____3>Prepared in accordance with generally accepted accounting principles
____4>Special purpose reports
____5>Limited to historical cost data
____6>Reporting standard is relevant to the decision to be made
____7>Financial statements
____8>Reports generally pertain to the business as a whole
____9>Reports generally pertain to subunits
____10>Reports issued quarterly or annually
40) ______________ are a series of equal dollar amounts to be received or paid
periodically.
41) A worksheet is an optional working tool used by accountants to facilitate the
preparation of financial statements. Consider the steps followed in preparing a
worksheet. How does the use of a worksheet assist the accountant. Could financial
statements be prepared without a worksheet? Evaluate how the process would differ.
Consider factors such as timeliness, accuracy, and efficiency in your evaluation.
42) Record the following transactions for Tri-State Corporation on the dates indicated.
1>On March 31, 2014, Tri-State Corporation discovered that Depreciation Expense on
equipment for the year ended December 31, 2013, had been recorded twice, for a total
amount of $84,000 instead of the correct amount of $42,000.
2>On June 30, 2014, the company’s internal auditors discovered that the April 2014
telephone bill for $3,700 had erroneously been charged to the Interest Expense account.
3>On August 14, 2014, cash dividends on preferred stock of $150,000 declared on July
1, 2014, were paid.
43) Internal control over cash disbursements is more effective when payments are made
by ______________, rather than by ______________.
44) What is participative budgeting? What are its potential benefits? What are its
potential shortcomings?
45) For each of the following accounts indicate the effect of a debit or a credit on the
account and the normal balance. Increase (+), Decrease ().
Debit__Credit_Normal Balance
1>Salaries and wages expense.
2>Accounts receivable.
3>Service revenue.
4>Owners Capital.
5>Owners Drawings.