1) Mehring Company reported net sales of $540,000, net income of $72,000, beginning
total assets of $240,000, and ending total assets of $360,000. What was the company’s
asset turnover?
a.2.3 times
b.0.6 times
c.1.8 times
d.1.5 times
2) Bish Company had an investment which cost $270,000 and had a salvage value at
the end of its useful life of zero. If Bish’s expected annual net income is $16,200, the
annual rate of return is:
a.6%
b.8.3%
c.16.7%
d.12%
3) Haley Company had the following department data on physical units:
Work in process, beginning3,000
Completed and transferred out6,600
Work in process, ending2,400
Materials are added at the beginning of the process. What is the total number of
equivalent units for materials during the period?
a.7,200
b.2,400
c.3,600
d.9,000
4) Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014
for $60,000.
Assume Community pays interest on January 1 and July 1, and the July 1 entry was
done correctly. The journal entry at December 31, 2014 would include a credit to
a.Interest Receivable for $2,400
b.Interest Revenue for $4,800
c.Accrued Expense for $4,800
d.Interest Revenue for $2,400
5) Evidence that the monthly posting of the sales journal total has been accomplished is
indicated by
a.a signature of the accountant doing the posting
b.a date under the double-line total
c.the general ledger account numbers under the double-lined total
d.inspecting the postings in the accounts payable subsidiary ledger
6) The percentage of receivables basis for estimating uncollectible accounts emphasizes
a.cash realizable value
b.the relationship between accounts receivable and bad debts expense
c.income statement relationships
d.the relationship between sales and accounts receivable
7) Rogers and Wissinger have partnership capital balances of $576,000 and $432,000,
respectively. Wissinger negotiates to sell his partnership interest to Mergenthaler for
$504,000. Rogers agrees to accept Mergenthaler as a new partner. The partnership entry
to record this transaction is
a.Cash504,000
Mergenthaler, Capital504,000
b.Wissinger, Capital504,000
Mergenthaler, Capital504,000
c.Cash72,000
Wissinger, Capital432,000
Mergenthaler, Capital504,000
d.Wissinger, Capital432,000
Mergenthaler, Capital432,000
8) Which of the following statements related to the adjusted trial balance is incorrect?
a.It shows the balances of all accounts at the end of the accounting period
b.It is prepared before adjusting entries have been made
c.It proves the equality of the total debit balances and the total credit balances in the
ledger
d.Financial statements can be prepared directly from the adjusted trial balance
9) If costs are not responsive to changes in activity level, then these costs can be best
described as
a.mixed
b.flexible
c.variable
d.fixed
10) Joe’s Supply Co. has the following transactions related to notes receivable during
the last 2 months of 2014 .
Nov. 1Loaned $20,000 cash to Sara Rondelli on a 1-year, 12% note.
Dec. 11Sold goods to Phair, Inc., receiving a $11,700, 90-day, 8% note.
16Received an $12,000, 6-month, 9% note in exchange for Grace Tanner’s outstanding
accounts receivable.
31Accrued interest revenue on all notes receivable.
Instructions
(a)Journalize the transactions for Joe’s Supply Co.
(b)Record the collection of the Rondelli note at its maturity in 2015 .
11) A $10,000, 8%, 3-year note payable that pays interest quarterly would be discounted
back to its present value by using tables that would indicate which one of the following
period-interest combinations?
a.3 interest periods, 8% interest
b.12 interest periods, 8% interest
c.12 interest periods, 2.0% interest
d.3 interest periods, 2.0% interest
12) Which accounts in the general ledger are affected when the monthly posting is
made from the sales journal?
a.Accounts Receivable; accounts receivable subsidiary accounts
b.Accounts receivable subsidiary accounts; Sales Revenue
c.Accounts Receivable; Sales Revenue
d.Accounts Receivable; Purchases
13) Which one of the following would be the same total amount on a flexible budget
and a static budget if the activity level is different for the two types of budgets?
a.Direct materials cost
b.Direct labor cost
c.Variable manufacturing overhead
d.Fixed manufacturing overhead
14) Sebastian Belle has performed $2,000 of CPA services for a client but has not billed
the client as of the end of the accounting period. What adjusting entry must Sebastian
make?
a.Debit Cash and credit Unearned Service Revenue
b.Debit Accounts Receivable and credit Unearned Service Revenue
c.Debit Accounts Receivable and credit Service Revenue
d.Debit Unearned Service Revenue and credit Service Revenue
15) The worksheet for Gibler Rental Company appears below. Using the adjustment
data below, complete the worksheet. Add any accounts that are necessary.
Adjustment data:
(a)Prepaid rent expired during August, $3
(b)Depreciation expense on equipment for the month of August, $8
(c)Supplies on hand on August 31 amounted to $6
(d)Salaries and wages expense incurred at August 31 but not yet paid amounted to $10
16) When manufacturing overhead costs are assigned to production in a process cost
system, they are debited to
a.the Finished Goods Inventory account
b.Cost of Goods Sold
c.a Manufacturing Overhead account
d.the Work in Process account
17) Bordeaux Company has three product lines, one of which reflects the following
results:
Sales$215,000
Variable expenses 125,000
Contribution margin90,000
Fixed expenses 150,000
Net loss$ (60,000)
If this product line is eliminated, 50% of the fixed expenses can be eliminated and the
other 50% will be allocated to other product lines. If management decides to eliminate
this product line, the company’s net income will
a.increase by $60,000
b.decrease by $90,000
c.decrease by $15,000
d.increase by $15,000
18) The two basic types of cost accounting systems are
a.job order and job accumulation systems
b.job order and process cost systems
c.process cost and batch systems
d.job order and batch systems
19) Which of the following is incorrect regarding a trial balance?
a.It proves that the debits equal the credits after posting
b.It proves that the company has recorded all transactions
c.A trial balance uncovers errors in journalizing and posting
d.A trial balance is useful in the preparation of financial statements
20) Natural resources are generally shown on the balance sheet under
a.Intangibles
b.Investments
c.Property, Plant, and Equipment
d.Owner’s Equity
21) Klinc, Inc. wants to sell a sufficient quantity of products to earn a profit of $70,000.
If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $120,000,
how many units must be sold to earn income of $70,000?
a.95,000 units
b.70,000 units
c.23,750 units
d.950,000 units
22) Jeans Vegetable Market had the following transactions during 2014:
1>Issued $50,000 of par value common stock for cash.
2>Repaid a 6 year note payable in the amount of $22,000.
3>Acquired land by issuing common stock of par value $50,000.
4>Declared and paid a cash dividend of $7,000.
5>Sold a long-term investment (cost $3,000) for cash of $6,000.
6>Acquired an investment in IBM stock for cash of $10,000.
What is the net cash provided by financing activities?
a.$21,000
b.$67,000
c.$28,000
d.$0
23) The contractual interest rate is always stated as a(n)
a.monthly rate
b.daily rate
c.semiannual rate
d.annual rate
24) Peter Cook, CPA, was asked by Carol Kane to review the accounting records and
prepare the financial statements for her upholstering shop. Peter reviewed the records
and found three errors.
1>Cash paid on accounts payable for $930 was recorded as a debit to Accounts Payable
$390 and a credit to Cash $390.
2>The purchase of supplies on account for $600 was debited to Equipment $600 and
credited to Accounts Payable $600.
3>Carol withdrew $1,300 of cash and the bookkeeper debited Accounts Receivable for
$130 and credited Cash $130.
Instructions
Prepare an analysis of each error showing the
(a)incorrect entry.
(b)correct entry.
(c)correcting entry.
25) (a)A company purchased a patent on January 1, 2014, for $2,500,000. The patent’s
legal life is 20 years but the company estimates that the patent’s useful life will only be
5 years from the date of acquisition. On June 30, 2014, the company paid legal costs of
$135,000 in successfully defending the patent in an infringement suit. Prepare the
journal entry to amortize the patent at year end on December 31, 2014 .
(b)Trent Company purchased a franchise from Tastee Food Company for $400,000 on
January 1, 2014 . The franchise is for an indefinite time period and gives Trent
Company the exclusive rights to sell Tastee Wings in a particular territory. Prepare the
journal entry to record the acquisition of the franchise and any necessary adjusting entry
at year end on December 31, 2014 .
(c)Kline Company incurred research and development costs of $500,000 in 2014 in
developing a new product. Prepare the necessary journal entries during 2014 to record
these events and any adjustments at year end on December 31, 2014 .
26) The linens department of a large department store is
a.not a responsibility center
b.a profit center
c.a cost center
d.an investment center
27) In applying the high-low method, what is the fixed cost?
Month MilesTotal Cost
January80,000$144,000
February50,000120,000
March70,000141,000
April90,000$180,000
a.$45,000
b.$44,000
c.$20,600
d.$70,000
28) In a period of rising prices, the costs allocated to ending inventory may be
understated in the
a.average-cost method
b.FIFO method
c.gross profit method
d.LIFO method
29) If 10,000 pounds of direct materials are purchased for $9,300 on account and the
standard cost is $.90 per pound, the journal entry to record the purchase is
a.Raw Materials Inventory9,300
Accounts Payable9,300
b.Work In Process Inventory9,300
Accounts Payable9,000
Materials Quantity Variance300
c.Raw Materials Inventory9,200
Accounts Payable9,000
Materials Price Variance300
d.Raw Materials Inventory9,000
Materials Price Variance300
Accounts Payable9,300
30) Outstanding stock of the Crevusse Corporation included 40,000 shares of $5 par
common stock and 20,000 shares of 5%, $10 par noncumulative preferred stock. In
2013, Crevusse declared and paid dividends of $8,000. In 2014, Crevusse declared and
paid dividends of $24,000. How much of the 2014 dividend was distributed to preferred
shareholders?
a.$14,000
b.$8,000
c.$10,000
d.None of these answer choices are correct
31) Inventories are defined by IFRS as
a.held-for-sale in the ordinary course of business
b.in the process of production for sale in the ordinary course of business
c.in the form of materials or supplies to be consumed in the production process or in the
providing of services
d.all of the above
32) The factor which determines whether or not goods should be included in a physical
count of inventory is
a.physical possession
b.legal title
c.management’s judgment
d.whether or not the purchase price has been paid
33) When two or more people get together for the purpose of circumventing prescribed
controls, it is called
a.a fraud committee
b.collusion
c.a division of duties
d.bonding of employees
34) The most useful measure for evaluating the performance of the manager of an
investment center is:
a.contribution margin
b.controllable margin
c.income from operations
d.return on investment
35) Closing entries may be prepared from all of the following except
a.Adjusted balances in the ledger
b.Income statement and balance sheet columns of the worksheet
c.Balance sheet
d.Income and owner’s equity statements
36) The interest on a $10,000, 8%, 1-year note receivable is
a.$800
b.$10,000
c.$10,080
d.$10,800
37) When a worksheet is used, all but one of the following statements is correct. The
incorrect statement is
a.Reconciling items on the worksheet are not journalized or posted
b.The bottom portion of the worksheet shows the statement of cash flows effects
c.The balance sheet accounts portion of the worksheet is divided into two parts: assets,
and liabilities and stockholders’ equity
d.Each line pertaining to a balance sheet account should foot across
38) The first step in designing a computerized accounting system is the creation of the
a.general ledger
b.general journal
c.trial balance
d.chart of accounts
39) A statement of comprehensive income is presented in
a.a single-statement format only
b.a two-statement format only
c.an operating format
d.either a one- or two-statement format
40) Agler Company suffered a loss of its inventory on March 28 due to a fire in its
warehouse. As a basis for filing a claim with its insurance company, Agler Company
developed the following information:
March net sales through March 28$350,000
Beginning Inventory, March 1100,000
Merchandise purchases through March 28180,000
The company has experienced an average gross profit rate of 35% in the past and this
rate appears to be appropriate in the current period.
Instructions
Using the gross profit method, prepare an estimate of the cost of the inventory
destroyed by fire on March 28 . Show all computations in good form.
41) Standards which represent optimum performance under perfect operating conditions
are called _______________ standards, but most companies use _________________
standards which are rigorous but attainable.
42) Inventoriable costs are allocated to ______________ and cost of goods
____________.
43) During 2014, Cabo Company incurred the following direct labor costs: January
$20,000 and February $30,000. Cabo uses a predetermined overhead rate of 130% of
direct labor cost. Estimated overhead for the 2 months, respectively, totaled $19,500
and $35,700. Actual overhead for the 2 months, respectively, totaled $25,000 and
$39,400.
Instructions
Determine if overhead is over- or underapplied for each of the two months and the
respective amounts.
44) Chez Company has budgeted sales revenue as follows for the next 4 months:
February$240,000
March300,000
April210,000
May330,000
Past experience indicates that 80% of sales each month are on credit and that collection
of credit sales occurs as follows: 60% in the month of sale, 35% in the month following
the sale, and 3% in the second month following the sale. The other 2% is uncollectible.
Instructions
Prepare a schedule which shows expected cash receipts from sales for the month of
May.
45) Alvarado Company purchased a new machine for $400,000. It is estimated that the
machine will have a $40,000 salvage value at the end of its 5-year useful service life.
The double-declining-balance method of depreciation will be used.
Instructions
Prepare a depreciation schedule which shows the annual depreciation expense on the
machine for its 5-year life.