1) Cash outflows from financing activities include the payment of cash dividends, the
acquisition of treasury stock, and the repayment of amounts borrowed.
2) The average rate of return method of capital investment analysis gives consideration
to the present value of future cash flows.
3) Activity-based costing is a method of accumulating and allocating costs by
department.
4) Depreciation Expense is reported on the balance sheet as an addition to the related
asset.
5) Federal unemployment compensation tax becomes an employer’s liability at the time
the employee is paid.
6) In a process cost system, product costs are accumulated by processing department
rather than by job.
7) Employers are required to compute and report payroll taxes on a calendar-year basis,
even if a different fiscal year is used for financial reporting and income tax purposes.
8) If a promissory note is dishonored, the payee should still record interest revenue.
9) The document that serves as the basis for recording direct labor on a job cost sheet is
the time ticket.
10) In a common-sized income statement, each item is expressed as a percentage of net
income.
11) A budget procedure that provides for the maintenance at all times of a twelve-month
projection into the future is called continuous budgeting.
12) If nothing is stated, partnership income is divided in proportion to the individual
partner’s capital balance.
13) Pacific Division for Bean Company has a rate of return on investment of 28% and
an investment turnover of 1.4. What is the profit margin?
A.28%
B.20%
C.14%
D.39.2%
14) Antonio and Barbara 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 $80,000. What amount of loss on realization should be allocated to Barbara?
A.$80,000
B.$10,000
C.$20,000
D.$30,000
15)
Based on the above data, what is the amount of quick assets?
A.$205,000
B.$203,000
C.$131,000
D.$66,000
16) On April 25, Gregg Repair Service extended an offer of $115,000 for land that had
been priced for sale at $140,000. On May 3, Gregg Repair Service accepted the sellers
counteroffer of $125,000. On June 20, the land was assessed at a value of $95,000 for
property tax purposes. On August 4, Gregg Repair Service was offered $150,000 for the
land by a national retail chain. At what value should the land be recorded in Gregg
Repair Services records?
A.$115,000
B.$95,000
C.$140,000
D.$125,000
17) Classify the following items as: (1) prepaid expense, (2) unearned revenue, (3)
accrued expense, or (4) accrued revenue.
a) Fees received but not yet earned.
b) Fees earned but not yet received.
c) Paid premium on a one-year insurance policy.
d) Property tax accrual
18) The standard costs and actual costs for direct materials for the manufacture of 3,000
actual units of product are as follows:
The amount of direct materials price variance is:
A.$2,250 unfavorable
B.$1,950 favorable
C.$1,875 favorable
D.$1,950 unfavorable
19) Treasury stock shares are
A.shares held by the U.S. Treasury Department
B.part of the total outstanding shares but not part of the total issued shares of a
corporation
C.unissued shares that are held by the treasurer of the corporation
D.issued shares that have been reacquired by a corporation
20) All of the following would be reported on the balance sheet as a current asset
except:
A.factory overhead
B.materials inventory
C.finished goods inventory
D.work in process inventory
21) A company reports the following:
Determine the companys earnings per share on common stock.
A.$7.50
B.$7.00
C.$8.00
D.$35.00
22) The management of Nebraska Corporation is considering the purchase of a new
machine costing $490,000. The company’s desired rate of return is 10%. The present
value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability in this situation:
The cash payback period for this investment is:
A.5 years
B.4 years
C.2 years
D.3 years
23) The following information is for employee Ella Dodd for the week ended March15.
Total hours worked: 48
Rate: $15 per hour, with double time for all hours in excess of 40
Federal income tax withheld: $200
United Fund deduction: $50
Cumulative earnings prior to current week: $6,400
Tax rates:
Social security: 6% on maximum earnings of $100,000. Medicare tax:
1.5% on all earnings.
State unemployment: 3.4% on maximum earnings of $7,000; on employer
Federal unemployment: 0.8% on maximum earnings of $7,000; on employer
24) Ramone Company had $600,000 in Net Sales for the year 2010. The total assets at
the beginning of the year were $240,000 and total assets at the end of the year were
$280,000. The ratio of net sales to total assets is (round answer to 2 decimal places):
A.2.31
B.1.15
C..43
D..87
25) The unearned rent account has a balance of $72,000. If $18,000 of the $72,000 is
unearned at the end of the accounting period, the amount of the adjusting entry is
A.$18,000
B.$90,000
C.$54,000
D.$36,000
26) The inventory costing method that reports the most current prices in ending
inventory is
A.FIFO
B.Specific identification
C.LIFO
D.Average cost
27) An analysis of a proposal by the net present value method indicated that the present
value of future cash inflows exceeded the amount to be invested. Which of the
following statements best describes the results of this analysis?
A.The proposal is desirable and the rate of return expected from the proposal exceeds
the minimum rate used for the analysis
B.The proposal is desirable and the rate of return expected from the proposal is less
than the minimum rate used for the analysis
C.The proposal is undesirable and the rate of return expected from the proposal is less
than the minimum rate used for the analysis
D.The proposal is undesirable and the rate of return expected from the proposal exceeds
the minimum rate used for the analysis
28) A gain or loss on realization is divided among partners according to their
A.income sharing ratio
B.capital balances
C.drawing balances
D.contribution of assets
29) Prarie Clinic purchased X-ray equipment for $7,500, paid $2,250 down, with the
remainder to be paid later. The correct entry would be
A.Equipment 2,250
Cash 2,250
B.Cash 2,250
Accounts Payable 5,250
Equipment 7,500
C.Equipment Expense 7,500
Accounts Payable 2,250
Cash 5,250
D.Equipment 7,500
Accounts Payable 5,250Cash 2,250
30) Which of the following is a noncash investing and financing activity?
A.payment of a cash dividend
B.payment of a six-month note payable
C.purchase of merchandise inventory on account
D.issuance of common stock to acquire land
31) Below are two independent sets of transactions for Welcott Company:
(1) Welcott provides its employees with varying amounts of vacation per year,
depending on the length of employment. The estimated amount of the current years
vacation pay is $78,000. Journalize the adjusting entry required on January 31, the end
of the first month of 2010, to record the accrued vacation pay.
(2) Welcott maintains a defined contribution pension plan for its employees. The plan
requires quarterly installments to be paid to the funding agent, Northern Trust, by the
fifteenth of the month following the end of each quarter. Assuming that the pension cost
is $119,600 for the quarter ended December 31, journalize entries to record (a) the
accrued pension liability on December 31 and (b) the payment to the funding agent on
January 15.
32) Jacki Lopez started JVL Consulting on January 1, 2014. The following are the
account balances at the end of the first month of business, before adjusting entries were
recorded:
Adjustment data:
Supplies on hand at the end of the month: $150
Unbilled Consulting Revenue: $700
Rent expense for the month: $1,000
Depreciation on equipment: $90
(a) Prepare the required adjusting entries, adding accounts as needed.
(b) Prepare an Adjusted Trial Balance for JVL Consulting as of January 31, 2014.
33) Temporary investments such as in trading securities are
A.recorded at cost but reported at fair market value
B.recorded at cost and reported at cost
C.recorded at cost but reported at lower of cost or fair market value
D.recorded at fair market value and reported at fair market value
34) Match the following stockholders equity concepts to the best answer.
1>the date that a share of stock must be owned to receive current dividend A. stock
dividends distributable
2>Shares of common stock re-acquired by a company B. treasury stock
3>this event creates a liability to company C. preferred stock
4>account used when shares are issued for an amount greater than par value D. cash
dividend
5>when dividends are actually distributed to stockholders E. additional paid in capital
6>distribution of a companys earnings to stockholders F. declaration date
7>equity account reflecting shares owed to stockholders G. record date
8>entitled to receive dividends first H. payment date
35) If the estimated rate of gross profit is 30%, what is the estimated cost of the
merchandise inventory on September 30, based on the following data?
A.$320,000
B.$192,500
C.$275,000
D.$105,000
36) The Canine Company has total estimated factory overhead for the year of
$2,400,000, divided into four activities: Fabrication, $1,200,000; Assembly, $480,000;
Setup, $400,000; and Materials Handling $320,000. Canine manufactures two products:
Standard Crates and Deluxe Crates. The activity-base usage quantities for each product
by each activity are as follows:
Each product is budgeted for 20,000 units of production for the year. Determine (a) the
activity rates for each activity and (b) the factory overhead cost per unit for each
product using activity-based costing.
37) What term is used to describe the process of monitoring operating results and
comparing actual results with the expected results?
A.Improving
B.Controlling
C.Directing
D.Planning
38) When a new partner is admitted to a partnership
A.a bonus may be attributable to the old partner
B.a bonus may only result from more cash being given by the new partner than the
value of the of the assets being purchased
C.a bonus agreed upon by the partners is recorded as an asset so long as the amount is
within the range set by the SEC
D.a bonus is not recorded
39) The cash and securities comprising a sinking fund established to redeem bonds at
maturity in 2015 should be classified on the balance sheet as
A.fixed assets
B.current assets
C.intangible assets
D.investments
40) Simpson Auto Body Repair purchased $20,000 of Machinery. The company paid
$8,000 in cash at the time of the purchase and signed a promissory note for the
remainder to be paid in four monthly installments.
(a) How will the purchase affect the accounting equation?
(b) How will the payment of the first monthly installment affect the accounting
equation?
41) Which of the following entries records the receipt of a utility bill from the water
company?
A.debit Utilities Expense; credit Accounts Payable
B.debit Utilities Payable; credit Accounts Receivable
C.debit Accounts Payable; credit Cash
D.debit Accounts Payable; credit Utilities Payable
42) Cleary Company had total Sales of $550,000; Sales Discounts of $10,000; Sales
Returns of $40,000 and Cost of Merchandise Sold of $200,000 during 2010. The total
asset balance at the beginning of the year was $175,000 and at the end of the year was
$167,000. Calculate the ratio of net sales to total assets (Round answer to 2 decimal
points).
A.1.75
B.2.92
C..34
D..57
43) Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of Xs and
35,000 units of Ys. Related data are:
What was Rusty Co.s sales mix last year?
A.58% Xs, 42% Ys
B.60% Xs, 40% Ys
C.30% Xs, 70% Ys
D.12.5% Xs, 87.5% Ys
44) The income statement is prepared from:
A.the adjusted trial balance
B.the income statement columns of the work sheet
C.either the adjusted trial balance or the income statement columns of the work sheet
D.both the adjusted trial balance and the income statement columns of the work sheet
45) In a profit center, the manager has responsibility and authority for making decisions
that affect:
A.liabilities
B.assets
C.investments
D.costs
46) All of the following should be considered in a make or buy decision except
A.cost savings
B.quality issues with the supplier
C.future growth in the plant and other production opportunities
D.whether the supplier will make a profit that would no longer belong to the business
47) A company reports the following:
Determine the (a) accounts receivable turnover, and (b) number of days sales in
receivables. Round your answer to one decimal place.
48) A firm produces its products by a continuous process involving three production
departments, 1 through 3. Present entries to record the following selected transactions
related to production during August:
(a) Materials purchased on account, $120,000.
(b) Material requisitioned for use in Department 1, $125,700, of which $124,200
entered directly into the product.
(c) Labor cost incurred in Department 1, $195,400, of which $174,000 was used
directly in the manufacture of the product.
(d) Factory overhead costs for Department 1 incurred on account, $54,700.
(e) Depreciation on machinery in Department 1, $29,200.
(f) Expiration of prepaid insurance chargeable to Department 1, $7,000.
(g) Factory overhead applied to production, $106,300.
(h) Output of Department 1 transferred to Department 2, $362,700.
49) Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and
100,000 shares of $50 par common stock. The following amounts were distributed as
dividends:
Determine the dividends per share for preferred and common stock for the third year.
A.$4.50 and $0.25
B.$3.25 and $0.25
C.$4.50 and $0.90
D.$2.00 and $0.25
50) Marshall Supplies is a janitorial supply store. Marshall Supplies uses perpetual
inventory. Use a General Journal to journalize the following four transactions during the
month of July:
(a) On July 4th, Marshall purchases inventory for sale from Tidy Wholesalers for
$8,500.00 with terms 1/10, n/30.
(b) On July 5th, Marshall pays Express Transfer $45 for freight-in on the July 4th order.
(c) On July 12th, Marshall buys an additional $11,985 in inventory from Tidy
Wholesalers with terms 1/10, n/30.
(d) On July 22nd, Marshall pays Tidy Wholesalers the balance due.
51) Match each of the following terms associated with the best description of that term.
1>A receivable created from selling merchandise or services on account. A. Accounts
Receivable
2>The difference between Accounts Receivable and Allowance for Doubtful Accounts.
B. Aging Report
3>Records bad debt expense only when a specific customers account is deemed
worthless. C. Allowance for Doubtful Accounts
4>Operating expense recorded as a result of receivables becoming uncollectible. D.
Direct Write-off Method
5>A list of customer accounts sorted by age classes. E. Bad Debt Expense
6>Another term for selling receivables. F. Net Realizable Value
7>All money claims against other entities. G. Factoring
8>Measures how frequently during the year accounts receivables are being turned into
cash. H. Receivables
9>A contra asset that represents the amount of estimated uncollectible receivables at a
specific date. H. Accounts Receivable Turnover
52) Rachel Cake Factory normally sells their specialty cake for $22. An offer to buy
100 cakes for $19 per cake was made by an organization hosting a national event in the
city. The variable cost per cake is $11. A special decoration per cake will add another $1
to the cost. Determine the differential income or loss per cake from selling the cakes.
53) Using the following data taken from Martinez Inc., prepare the cost of merchandise
sold section of the income statement for the year ended May 31, 2011.
54) On the basis of the following data for Grant Co. for 2011 and the preceding year
ended December 31, 2010, prepare a statement of cash flows. Use the indirect method
of reporting cash flows from operating activities. Assume that equipment costing
$125,000 was purchased for cash and equipment costing $85,000 with accumulated
depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and
that the only entries in the retained earnings account were net income of $56,000 and
cash dividends declared of $18,000.
55) On January 31, the cash account balance was $96,750. During January, cash
receipts totaled $305,000 and cash payments totaled was $375,880. Determine the cash
balance on January 1.
56) On January 1, 2015, Valuation Allowance for Trading Investment has a zero balance
. On December 31, 2015, the cost of trading securities portfolio was $64,200, and the
fair value was $67,000.
Required:
Prepare the December 31, 2015, adjusting journal entry to record the unrealized gain or
loss on trading investments.
57) Gallant Company reported net income of $2,500,000. The income statement
included one extraordinary item: a $500,000 gain from condemnation of land and a
$200,000 loss on discontinued operations, both after applicable income tax.
There were 100,000 shares of $10 par common stock and 40,000 shares 4% preferred
stock of $100 par outstanding throughout the current year.
Required: Prepare the earnings per share section of Gallant Companys income
statement.
