1) Sarbanes-Oxleys purpose is to improve financial reporting.
2) Sales reported on the income statement were $372,000. The accounts receivable
balance declined $4,500 over the year. The amount of cash received from customers
was $367,500.
3) In a process cost system, product costs are accumulated by processing department
rather than by job.
4) A qualitative characteristic that may impact upon capital investment analysis is
manufacturing flexibility.
5) When a process cost accounting system records the purchase of materials, the
Materials account is credited.
6) The use of the lower-of-cost-or-market method of inventory valuation increases net
income for the period in which the inventory replacement price declined.
7) Separation of businesses into more manageable operating units is termed
decentralization.
8) The balance in the Allowance for Doubtful Accounts account at the end of the year
includes the total of all accounts written-off since the beginning year.
9) The last step of the accounting cycle is to prepare a post-closing trial balance.
10) “Market,” as used in the phrase “lower of cost or market” for valuing inventory,
refers to the price at which the inventory is being offered for sale by its owner.
11) Net present value and the payback period are examples of discounted cash flow
methods used in capital budgeting decisions.
12) The cost of merchandise inventory is limited to the purchase price less any purchase
discounts.
13) Unearned revenue is a liability.
14) The average rate of return method of capital investment analysis gives consideration
to the present value of future cash flows.
15) If the standard to produce a given amount of product is 500 direct labor hours at
$15 and the actual was 600 hours at $17, the rate variance was $1,200 favorable.
16) The total net pay for a period is determined from the payroll register.
17) Bonds that are subject to retirement at a stated dollar amount prior to maturity at the
option of the issuer are called
A.debentures
B.callable bonds
C.early retirement bonds
D.options
18) Which of the following expressions is termed the investment turnover factor as used
in determining the rate of return on investment?
A.Invested Assets/Sales
B.Income From Operations/Invested Assets
C.Income From Operations/Sales
D.Sales/Invested Assets
19) Which of the following account groups are all considered nominal accounts?
A.Cash, Retained Earnings, Wages Payable
B.Prepaid Insurance, Property, Plant & Equipment, Fees Earned
C.Capital Stock, Dividends, Income Summary
D.Rent Revenue, Fees Earned, Miscellaneous Expense
20) Allowance for Doubtful Accounts is classified as a(n) ______ and has a normal
______ balance.
A.owners equity, credit
B.contra-asset, debit
C.owners equity, debit
D.contra-asset, credit
21) Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the
year (before adjustment). The company prepares an analysis of customers’ accounts to
estimate the amount of uncollectible accounts of $41,900. Which of the following
adjusting entries would be made to record the Bad Debt Expense for the year?
A.debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
B.debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200
C.debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
D.debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600
22) If the straight-line method of amortization of bond premium or discount is used,
which of the following statements is true?
A.Annual interest expense will increase over the life of the bonds with the amortization
of bond premium
B.Annual interest expense will remain the same over the life of the bonds with the
amortization of bond discount
C.Annual interest expense will decrease over the life of the bonds with the amortization
of bond discount
D.Annual interest expense will increase over the life of the bonds with the amortization
of bond discount
23) The following data is given for the Harry Company:
Overhead is applied on standard labor hours.
The direct labor time variance is:
A.6,000F
B.6,000U
C.33,000U
D.33,000F
24) A current liability is a debt that is reasonably expected to be paid
A.between 6 months and 18 months.
B.out of currently recognized revenues.
C.within one year.
D.out of cash currently on hand.
25) Excel Products Inc. pays its employees semimonthly. The summary of the payroll
for December 31, 2012 indicated the following:
For the year ended 2012, $40,000 of the December 31 payroll is subject to social
security tax of 6%; $120,000 is subject to Medicare tax of 1.5%; $10,000 is subject to
state unemployment tax of 4.3% and federal unemployment tax of 0.8%. As of January
1, 2013 all of the $120,000 is subject to all payroll taxes. Present the journal entries for
payroll tax expense if the employees are paid (a) December 31 of the current year, (b)
January 2 of the following year.
26) Which of the following items would affect the cost of merchandise inventory
acquired during the period?
A.quantity discounts
B.cash discounts
C.freight-in
D.all of these costs
27) 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
28) Which of the following is an example of a variable component of a payroll system?
A.hours worked
B.medicare tax rate
C.rate of pay
D.social security number
29) Assuming that the standard fixed overhead rate is based on full capacity, the cost of
available but unused productive capacity is indicated by the:
A.factory overhead cost volume variance
B.direct labor cost time variance
C.direct labor cost rate variance
D.factory overhead cost controllable variance
30) For the manufacturing business, inventory which is in the process of being
manufactured is referred to as:
A.supplies inventory
B.work in process inventory
C.finished goods inventory
D.direct materials inventory
31) Estimating and recording product warranty expense in the period of the sale best
follows which of the following accounting concepts?
A.cost concept
B.business entity concept
C.matching concept
D.materiality concept
32) Which one of the following below is not a factor that influences a business’s control
environment?
A.management’s philosophy and operating style
B.organizational structure
C.proofs and security measurers
D.personnel policies
33) All leases are classified as either
A.capital leases or long-term leases
B.capital leases or operating leases
C.operating leases or current leases
D.long-term leases or current leases
34) The journal entry for recording an operating lease payment would
A.be a memo entry only
B.debit the fixed asset and credit Cash
C.debit an expense and credit Cash
D.debit a liability and credit Cash
35) Which of the following conditions would cause the break-even point to decrease?
A.Total fixed costs increase
B.Unit selling price decreases
C.Unit variable cost decreases
D.Unit variable cost increases
36) The local college is aggressively working in reducing the time that a student needs
to enroll for each semester. Which of the following changes would not help achieve this
goal?
A.Counselors are specializing in common degree plans
B.One application is good at the community college and at the transferring university
C.A one stop area includes admissions, advising, registration and student IDs
D.Having more number of counters to facilitate admission process
37) Cash paid for equipment would be reported in the statement of cash flows in
A.the cash flows from operating activities section
B.the cash flows from financing activities section
C.the cash flows from investing activities section
D.a separate schedule
38) What entry is required in the company’s accounts to record outstanding checks?
A.debit Accounts Receivable; credit Cash
B.debit Cash; credit Accounts Receivable
C.debit Cash; credit Accounts Payable
D.none
39) Which of the following is not a characteristic of a process cost system?
A.Manufacturing costs are grouped by departments
B.The system may use several Work-in-Process accounts
C.The system measures costs for each completed job
D.The system allocates costs between completed and partially completed units within a
department
40) The Warbler Jeans Company produces two different types of jeans. One is called
the Simple Life and the other is called the Fancy Life The companys Production Budget
requires 353,500 units of Simple jeans and 196,000 Fancy jeans to be manufactured. It
is estimated that 2.5 direct labor hours will be needed to manufacture one pair of
Simple Life jeans and 3.75 hours of direct labor hours for each pair of Fancy Life jeans.
What is the total number of direct labor hours needed for both lines of jeans?
A.883,750 direct labor hours
B.1,618,750 direct labor hours
C.735,000 direct labor hours
D.353,500 direct labor hours
41) Identify each of the following reconciling items as (a) an addition to the cash
balance according to the bank statement, (b) deduction from the cash balance according
to the bank statement, (c) an addition to the cash balance according to the companys
records, or (d) a deduction from the cash balance according to the companys records.
Assume that none of the transactions reported by bank debit and credit memos have
been recorded by the company. Also, indicate by writing (Entry) those items that will
require a journal entry in the companys accounts.
42) Prior to the adjusting process, accrued expenses have
A.not yet been incurred, paid, or recorded
B.been incurred, not paid, but have been recorded
C.been incurred, not paid, and not recorded
D.been paid but have not yet been incurred
43) If fixed costs are $240,000, the unit selling price is $32, and the unit variable costs
are $20, what are the old and new break-even sales (units) if the unit selling price
increases by $4?
A.7,500 units and 6,667 units
B.20,000 units and 30,000 units
C.20,000 units and 15,000 units
D.12,000 units and 15,000 units
44) All of the following are disadvantages of fair value use except:
A.fair values may not be readily obtainable
B.fair values may cause more fluctuations as change occurs from period to period
C.comparability between companies may be impacted by different fair value
measurement
D.fair values can only be used on balance sheet accounts
45) Sineath Industries had a fire and some of its accounting records were destroyed.
Available information is presented below for the year ended December 31, 2011.
Additional information is as follows:
Factory overhead is 150% of direct labor cost.
Finished goods inventory decreased by $18,000 during the year.
Work in process inventory increased by $12,000 during the year.
Calculate:
a) materials inventory, January 1, 2011
b) direct labor cost
c) factory overhead incurred
d) cost of goods sold
46) A corporation, which had 18,000 shares of common stock outstanding, declared
a3-for-1 stock split.
(a) What will be the number of shares outstanding after the split?
(b) If the common stock had a market price of $240 per share before the stock split,
what would be an approximate market price per share after the split?
(c) Journalize the entry to record the stock split.
47) Elgin Company sells merchandise with a one year warranty. Sales consisted of
2,500 units in 2012 and 2,000 units in 2013. It is estimated that warranty repairs will
average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in
2013 for the 2012 sales. Similarly, 30% of repairs will be made in 2013 and 70% in
2014 for the 2013 sales. In the 2013 income statement, how much of the warranty
expense shown will be due to 2012 sales?
A.$7,500
B.$17,500
C.$25,000
D.$0
48) Sales territory profitability analysis can determine profit differences between
territories due to
A.pricing, variable costs, and selling costs
B.variable costs, selling costs, and types of products sold
C.pricing, selling costs, and type of products sold
D.sales volumes, pricing, and variable costs
49) Present entries to record the following transactions:
(a) Established a petty cash fund of $235.00.
(b) The petty cash fund now has a balance of $42.80. Replenished the fund, based on
the following disbursements as indicated by a summary of the petty cash receipts: office
supplies, $74.50; miscellaneous administrative expense, $92.75; and miscellaneous
selling expense, $18.60.
(c) Increased the petty cash fund to $300.00.
50) Blackwelder Factory produces two similar products – small lamps and desk lamps.
The total plant overhead budget is $640,000 with 400,000 estimated direct labor hours.
It is further estimated that small lamp production will require 275,000 direct labor hours
and desk lamp production will need 125,000 direct labor hours.
Using the single plantwide factory overhead rate with an allocation base of direct labor
hours, how much factory overhead will be allocated to the desk lamp production if the
actual direct hours for the period is 118,000?
A.$118,000
B.$200,000
C.$188,800
D.$125,000
51) Which of the following is true about a T account?
A.The left-hand side of the T account is called the debit side
B.The left-hand side of the T account is called the credit side
C.The right-hand side of the T account is called the debit side
D.None of these are true
52) If a gain of $11,000 is realized in selling (for cash) office equipment having a book
value of $55,000, the total amount reported in the cash flows from investing activities
section of the statement of cash flows is
A.$44,000
B.$11,000
C.$55,000
D.$66,000
53) Which of the following is a method of analyzing capital investment proposals that
ignores present value?
A.Internal rate of return
B.Net present value
C.Discounted cash flow
D.Average rate of return
54) ABC Printing Company uses a job order cost system.
(a) Indicate the source of the data for debiting Work in Process for each of the
following:
(1) Direct materials requisitioned
(2) Direct labor used
(b) Indicate the source of the data for crediting Work in Process for jobs completed.
(c) Present a list of the three controlling accounts used in the general ledger to record
the inventories and, in each case, indicate the related subsidiary ledger.
55) 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.
56) After all adjustments have been made, but before the accounts have been closed, the
following balances were taken from the ledger of Ramonas Designs:
Journalize the entries to close the appropriate accounts.
57) Sienna Company has the following information for January.
Show your calculations to find the cost of goods manufactured.
58) Olsen Company produces two products. Product A has a contribution margin of $30
and requires 10 machine hours. Product B has a contribution margin of $24 and requires
4 machine hours. Determine the most profitable product assuming the machine hours
are the constraint.
59) Proposals M and N each cost $600,000, have 6-year lives, and have expected total
cash flows of $750,000. Proposal M is expected to provide equal annual net cash flows
of $125,000, while the net cash flows for Proposal N are as follows:
Determine the cash payback period for each proposal. Proposal M: $600,000/$125,000
= 4.8 years