1) A flexible budget is a series of static budgets at different levels of activities.
2) The cost of goods available for sale consists of the beginning inventory plus the cost
of goods purchased.
3) If the unit price of inventory is increasing during a period, a company using the LIFO
inventory method will show less gross profit for the period, than if it had used the FIFO
inventory method.
4) Period costs are not inventoriable costs.
5) For planning purposes, mixed costs are generally grouped with fixed costs.
6) Conceptually, the cost allocation procedures for natural resources parallels that of
plant assets.
7) Another name for trend analysis is horizontal analysis.
8) Manufacturing costs are generally incurred in one period and recorded in a
subsequent period.
9) Both the gross amount of receivables and the allowance for doubtful accounts should
be reported in the financial statements.
10) A 10% stock dividend will increase the number of shares outstanding but the par
value per share will stay the same.
11) The beginning work in process inventory appears on both the balance sheet and the
cost of goods manufactured schedule of a manufacturing company.
12) Dividends may be declared and paid in cash or stock.
13) Both correcting entries and adjusting entries always affect at least one balance sheet
account and one income statement account.
14) The number of direct labor hours needed for production is obtained from the
production budget.
15) The statement of cash flows classifies cash receipts and cash payments into two
categories: operating activities and nonoperating activities.
16) Managerial accounting internal reports are prepared more frequently than are
classified financial statements.
17) One of the reasons a corporation may purchase investments is that it has excess
cash.
18) If a partner invests noncash assets in a partnership, they should be recorded by the
partnership at their fair value.
19) Equivalent units of production are used to determine the cost per unit of completed
products.
20) Retained earnings is increased by each of the following except
a.net income
b.prior period adjustments
c.some disposals of treasury stock
d.All of these increase retained earnings
21) The assumption that the unit of measure remains sufficiently constant over time is
part of the
a.economic entity assumption
b.cost principle
c.historical cost principle
d.monetary unit assumption
22) Changes in activity have a(n) _________ effect on fixed costs per unit.
a.positive
b.negative
c.inverse
d.neutral
23) In the current asset section of the balance sheet, manufacturing inventories are
listed in the following order:
a.finished goods, work in process, raw materials
b.raw materials, work in process, finished goods
c.work in process, finished goods, raw materials
d.finished goods, raw materials, work in process
24) Edmund Industries budgeted manufacturing costs for 50,000 sip-its are:
Fixed manufacturing costs $50,000 per month
Variable manufacturing costs $12.00 per sip-it
Edmund produced 45,000 sip-its during March. How much is the flexible budget for
total manufacturing costs for March?
a.$585,000
b. $650,000
c. $540,000
d. $590,000
25) A merchandising company using a perpetual system may record an adjusting entry
by
a.debiting Income Summary
b.crediting Income Summary
c.debiting Cost of Goods Sold
d.debiting Sales Revenue
26) The Freight-In account
a.increases the cost of merchandise purchased
b.is contra to the Purchases account
c.is a permanent account
d.has a normal credit balance
27) Sales taxes collected by a retailer are expenses
a.of the retailer
b.of the customers
c.of the government
d.that are not recognized by the retailer until they are submitted to the government
28) The daily cash count of cash register receipts made by department supervisors is an
example of
a.other controls
b.independent internal verification
c.establishment of responsibility
d.segregation of duties
29) An adjusted trial balance
a.is prepared after the financial statements are completed
b.proves the equality of the total debit balances and total credit balances of ledger
accounts after all adjustments have been made
c.is a required financial statement under generally accepted accounting principles
d.cannot be used to prepare financial statements
30) When considering controllable versus noncontrollable costs:
a.costs allocated to, and thus identifiable with, a particular responsibility level are
controllable
b.costs incurred directly by a level of responsibility are controllable at that level
c.controllable cost and noncontrollable cost, respectively, are synonymous with variable
cost and fixed cost
d.more costs are controllable as one moves down to the lower levels where actual
production takes place
31) A company receives $396, of which $36 is for sales tax. The journal entry to record
the sale would include a
a.debit to Sales Tax Expense for $36
b.credit to Sales Taxes Payable for $36
c.debit to Sales Revenue for $396
d.debit to Cash for $360
32) The objectives of internal control are to
a.safeguard assets and enhance the accuracy and reliability of the accounting records
b.prevent unintentional errors and irregularities
c.comply with the Sarbanes-Oxley Act
d.safeguard assets and prevent fraud
33) Truelson Corporation issues an 8%, 9-year mortgage note on January 1, 2014, to
obtain financing for new equipment. Land is used as collateral for the note. The terms
provide for semiannual installment payments of $329,000. The following values related
to the time value of money were available to Truelson to help them with their planning
process and compound interest decisions.
Present Value of 1 for 9 periods at 8%0.50025
Present Value of 1 for 18 periods at 4%0.49363
Future Value of 1 for 9 periods at 8%1.99900
Future Value of 1 for 18 periods at 4%2.02582
Present Value of an Annuity of 1 for 9 periods at 8%6.24689
Present Value of an Annuity of 1 for 18 periods at 4%12.65930
Future Value of an Annuity of 1 for 9 periods at 8%12.48756
Future Value of an Annuity of 1 for 18 periods at 4%25.64541
To the closest dollar, what were the cash proceeds received from the issuance of the
note?
a.$2,055,228
b.$2,368,800
c.$4,164,910
d.$4,108,408
34) Miroz Corporation’s comparative balance sheets are presented below.
MIROZ CORPORATION
Comparative Balance Sheets
December 31
2014 2013
Cash$ 18,700$ 22,700
Accounts receivable 24,70022,300
Investments25,00016,000
Equipment59,00070,000
Accumulated depreciation (14,500) (10,000)
Total$112,900$121,000
Accounts payable $ 13,600$11,100
Bonds payable 6,000 30,000
Common stock 50,00045,000
Retained earnings 43,300 34,900
Total $112,900$121,000
Additional information:
1>Net income was $17,700. Dividends declared and paid were $9,300.
2>Equipment which cost $11,000 and had accumulated depreciation of $2,000 was sold
for $4,000.
3>All other changes in noncurrent account balances had a direct effect on cash flows,
except the change in accumulated depreciation.
Instruction
(a)Prepare a statement of cash flows for 2014 using the indirect method.
(b)Compute free cash flow.
35) If budgets are to be effective, all of the following must be present except
a.acceptance at all levels of management
b.research and analysis in setting realistic goals
c.stockholders’ approval of the budget
d.sound organizational structure
36) Adama Company reported a net loss of $6,000 for the year ended December 31,
2014 . During the year, accounts receivable increased $15,000, merchandise inventory
decreased $12,000, accounts payable decreased by $20,000, and depreciation expense
of $12,000 was recorded. During 2014, operating activities
a.used net cash of $17,000
b.used net cash of $29,000
c.provided net cash of $24,000
d.provided net cash of $21,000
37) The accounting is essentially the same under IFRS and GAAP for
a.prior period adjustments
b.revaluation surplus
c.treasury stock
d.All of the answer choices are correct
38) Candy Industries recorded operating data for its chocolate division for the year.
Sales$1,000,000
Contribution margin180,000
Total fixed costs100,000
Average total operating assets400,000
How much is ROI for the year if management is able to identify a way to improve the
contribution margin by $40,000, assuming fixed costs are held constant?
a.30%
b.18%
c.45%
d.10%
39) If a resource has been consumed but a bill has not been received at the end of the
accounting period, then
a.an expense should be recorded when the bill is received
b.an expense should be recorded when the cash is paid out
c.an adjusting entry should be made recognizing the expense
d.it is optional whether to record the expense before the bill is received
40) Era Company has 6,000 shares of 5%, $100 par non-cumulative preferred stock
outstanding at December 31, 2014 . No dividends have been paid on this stock for 2013
or 2014. Dividends in arrears at December 31, 2014 total
a.$0
b.$3,000
c.$30,000
d.$60,000
41) A department has budgeted monthly manufacturing overhead cost of $540,000 plus
$3 per direct labor hour. If a flexible budget report reflects $1,044,000 for total
budgeted manufacturing cost for the month, the actual level of activity achieved during
the month was
a.528,000 direct labor hours
b.168,000 direct labor hours
c.348,000 direct labor hours
d.Cannot be determined from the information provided
42) Monia Hupta invests $149,738 now for a series of $20,000 annual returns beginning
one year from now. Monia will earn 9% on the initial investment. How many annual
payments will Monia receive?
a.8
b.10
c.12
d.13
43) The accounting principle that requires that the cost flow assumption be consistent
with the physical movement of goods is
a.called the expense recognition principle
b.called the consistency principle
c.nonexistent; that is, there is no accounting requirement
d.called the physical flow assumption
44) On January 1, 2014, Mazzeo Company, a calendar-year company, issued
$1,600,000 of notes payable, of which $400,000 is due on January 1 for each of the
next four years. The proper balance sheet presentation on December 31, 2014, is
a.Current Liabilities, $1,600,000
b.Long-term Debt, $1,600,000
c.Current Liabilities, $800,000; Long-term Debt, $800,000
d.Current Liabilities, $400,000; Long-term Debt, $1,200,000
45) Under the perpetual system, cash freight costs incurred by the buyer for the
transporting of goods is recorded in
a.Freight Expense
b.Freight – In
c.Inventory
dFreight – Out
46) At January 1, 2014, the available-for-sale securities portfolio held by Hyde
Corporation consisted of the following investments:
1>2,500 shares of Park common stock purchased for $42 per share.
2>1,500 shares of Grace common stock purchased for $60 per share.
At December 31, 2014, the market values per share were Park $36 and Grace $68.
Instructions
(a)Prepare a schedule showing the cost and fair value of the portfolio at December 31,
2014 .
(b)Prepare the adjusting entry to report the portfolio at fair value at December 31,
2014 .
47) Limited partnerships
a.must have at least one general partner
b.guarantee that a partner will receive a return
c.guarantee that a partner will get back his original investment
d.are limited to only three partners
48) Dandy Decorating uses a job order costing system to collect the costs of its interior
decorating business. Each client’s consultation is treated as a separate job. Overhead is
applied to each job based on the number of decorator hours incurred. Listed below are
data for the current year.
Budgeted overhead$850,000
Actual overhead$855,000
Budgeted decorator hours42,500
Actual decorator hours43,000
The company uses Operating Overhead in place of Manufacturing Overhead.
Instructions
(a)Compute the predetermined overhead rate.
(b)Prepare the entry to apply the overhead for the year.
(c)Determine whether the overhead was under – or overapplied and by how much.
49) Cobb Company’s accounting records show the following at the year ending on
December 31, 2014:
Purchase Discounts$ 11,200
Freight – In15,600
Purchases402,000
Beginning Inventory47,000
Ending Inventory57,600
Purchase Returns12,800
Using the periodic system, the cost of goods purchased is
a.$378,000
b.$383,000
c.$393,600
d.$404,200
50) If the equity method is being used, cash dividends received
a.are credited to Dividend Revenue
b.require no entry because investee net income has already been recorded at the proper
proportion on the investor’s books
c.are credited to the Stock Investments account
d.are credited to the Revenue from Stock Investments account
51) Which of the following is not one of the main factors that contribute to fraudulent
activity?
a.Opportunity
b.Incompatible duties
c.Financial Pressure
d.Rationalization
52) Which of the following techniques are not used by accountants to interpret and
report financial information?
a.Graphs
b.Special memos for each class of external users
c.Charts
d.Ratios
53) Romanoff Industries had the following inventory transactions occur during 2014:
UnitsCost/unit
2/1/14Purchase54$45
3/14/14Purchase93$47
5/1/14Purchase66$49
The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the companys gross profit using FIFO?
(rounded to whole dollars)
a.$3,318
b.$3,552
c.$6,948
d.$7,182
54) The income statement for the month of June, 2014 of Camera Obscura Enterprises
contains the following information:
Revenues$7,000
Expenses:
Salaries and Wages Expense$3,000
Rent Expense1,500
Advertising Expense800
Supplies Expense300
Insurance Expense 100
Total expenses 5,700
Net income$1,300
The entry to close the expense accounts includes a
a.debit to Income Summary for $1,300
b.credit to Rent Expense for $1,500
c.credit to Income Summary for $5,700
d.debit to Salaries and Wages Expense for $3,000
55) Companies report current liabilities on the balance sheet in
a.alphabetical order
b.order of maturity
c.random order
d.order of magnitude
56) Sullentrop Company issued $500,000, 10%, 2-year bonds which pay interest
semiannually. Compute the amount at which the bonds would be issued if investors
required a rate of return of 8%.
57) Hoyt Company provides this information for the month of November, 2014: sales
on credit $170,000; cash sales $70,000; sales discounts $2,000; and sales returns and
allowances $9,000. Prepare the sales revenues section of the income statement based on
this information.
58) On June 30, 2014, Lipton, Inc. sold $3,000,000 (face value) of bonds. The bonds
are dated June 30, 2014, pay interest semiannually on December 31 and June 30, and
will mature on June 30, 2017 . The following schedule was prepared by the accountant
for 2014 .
Semi-AnnualInterest toInterestUnamortizedBond
Interest Period be Paid ExpenseAmortization Amount Carrying Value
$75,000$2,936,625
1$120,000$131,625$11,62563,3751,936,625
Instructions
On the basis of the above information, answer the following questions. (Round your
answer to the nearest dollar or percent.)
1>What is the stated interest rate for this bond issue?
2>What is the market interest rate for this bond issue?
3>What was the selling price of the bonds as a percentage of the face value?
4>Prepare the journal entry to record the sale of the bond issue on June 30, 2014 .
5>Prepare the journal entry to record the payment of interest and amortization on
December 31, 2014 .
59) A voucher is recorded in the ________________ and filed according to the date on
which it is to be paid.
60) Two federal taxes which are levied against employees’ wages that must be deducted
in arriving at net pay are (1)______________ taxes and (2)______________ taxes.