1) The cash budget summarizes future plans for acquisition of fixed assets.
2) A company is planning to purchase a machine that will cost $24,000, have a six-year
life, and have no salvage value. The company expects to sell the machines output of
3,000 units evenly throughout each year. Total income over the life of the machine is
estimated to be $12,000. The machine will generate cash flows per year of $6,000. The
payback period for the machine is 4 years.
3) Medicare taxes are paid by both the employee and the employer.
4) The customers subsidiary ledger is controlled by the general ledger account entitled
Accounts Payable.
5) When a new partner is admitted to a partnership, all partnership assets should be
revised to reflect current prices.
6) Expenditures from a petty cash fund are documented by a petty cash receipt.
7) The number of shares of outstanding stock is equal to the number of shares
authorized minus the number of shares issued.
8) If factory overhead applied exceeds the actual costs, overhead is said to be
underapplied.
9) The accounting rate of return is a measure of profitability computed by dividing the
average annual cash flows from an asset by the average amount invested in the asset.
10) The proceeds from discounting a $20,000, 60-day, note payable at 6% is $20,200.
11) The declaration of a cash dividend decreases a corporation’s stockholders equity and
decreases its assets.
12) The difference between the balance in a fixed asset account and its related
accumulated depreciation account is the asset’s book value.
13) The bank often informs the company of bank service charges by including a credit
memo with the monthly bank statement.
14) If 100 shares of treasury stock were purchased for $50 per share and then sold at
$60 per share, $1,000 of income is reported in the income statement.
15) The cost of repairing damage to a machine during installation is debited to a fixed
asset account.
16) Receivables that are expected to be collected in cash in eighteen months or less are
reported in the Current Asset section of the balance sheet.
17) One reason that distributions of income and loss are prepared is to obtain the
information to record a closing entry.
18) In order to be a recorded contingent liability, the liability must be possible and
easily estimated.
19) The Clydesdale Company has sales of $4,500,000. It also has invested assets of
$2,000,000 and operating expenses of $3,600,000. The company has established a
minimum rate of return of 7%.
What is Clydesdale Company’s rate of return on investment?
A.56%
B.20%
C.45%
D.25%
20) Which of the following should be added to net income in calculating net cash flow
from operating activities using the indirect method?
A.an increase in inventory
B.a decrease in accounts payable
C.preferred dividends declared and paid
D.a decrease in accounts receivable
21) The journal entry a company uses to record the estimated accrued product warranty
liability is
A.debit Product Warranty Expense; credit Product Warranty Payable
B.debit Product Warranty Payable; credit Cash
C.debit Product Warranty Expense; credit Cash
D.debit Product Warranty Payable; credit Product Warranty Expense
22) Project A requires an original investment of $65,000. The project will yield cash
flows of $15,000 per year for seven years. Project B has a calculated net present value
of $5,500 over a five year life. Project A could be sold at the end of five years for a
price of $30,000. (a) Using the proper table below determine the net present value of
Project A over a five-year life with salvage value assuming a minimum rate of return of
12%. (b) Which project provides the greatest net present value?
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
23) 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
24) The capital accounts of Hawk and Martin have balances of $160,000 and $140,000,
respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10,
Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew
$86,000 and $68,000, respectively, and net income for the year was $258,000. The
articles of partnership make no reference to the division of net income.
Based on this information, the statement of partners equity for 2010 would show what
amount in the capital account for Hawk on December 31, 2010?
A.$211,600
B.$213,000
C.$201,000
D.$203,000
25) Journalize the entries to record the following selected transactions:
26) The cost of production of completed and finished goods during the period amounted
to $450,000, and the finished products shipped to customers had total production costs
of $357,000. From the following, select the entry to record the transfer of costs from
finished goods to cost of goods sold.
A.Finished Goods450,000
Cost of Goods Sold450,000
B.Finished Goods357,000
Cost of Goods Sold 357,000
C.Cost of Goods Sold357,000
Finished Goods357,000
D.Cost of Goods Sold450,000
Finished Goods450,000
27) Based on the following data for the current year, what is the accounts receivable
turnover?
A.17.5
B.2.6
C.20.0
D.15.5
28) For the year ended December 31, 2014 Depot Maxs cost of merchandise sold was
$56,900. Inventory at the beginning of the year was $6,540. Ending inventory was
$7,250. Depot Maxs number of days sales in inventory is closest to
A.42
B.46
C.8
D.44
29) A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is
traded for a similar asset priced at $50,000. Assuming a trade-in allowance of $4,000,
the cost basis of the new asset is
A.$54,000
B.$45,000
C.$51,000
D.$50,000
30) If the physical count of the inventory revealed $158,000 of merchandise on hand
and the inventory records reported $163,000, what would be the necessary adjusting
entry to record inventory shortage?
A.Merchandise inventory debit $158,000; Cost of Merchandise Sold credit $158,000
B.Merchandise inventory debit $5,000; Cost of Merchandise Sold credit $5,000
C.Cost of Merchandise Sold debit $163,000; Merchandise Inventory credit $158,000
D.Cost of Merchandise Sold debit $5,000; Merchandise Inventory credit $5,000
31) The balance in Premium on Bonds Payable
A.should be reported on the balance sheet as a deduction from the related bonds
payable
B.should be allocated to the remaining periods for the life of the bonds by the
straight-line method, if the results obtained by that method materially differ from the
results that would be obtained by the interest method
C.would be added to the related bonds payable on the balance sheet
D.should be reported in the paid-in capital section of the balance sheet
32) Match the following terms with their definitions.
1>Measures the quantity of output of production relative to the inputs. A. yield
2>Focuses on reducing time, cost, and poor quality within the process B. cost of
production report
3>The portion of whole units that are complete with respect to materials or conversion
costs. C. just-in-time processing
4>Work centers for processing in a just in time system. D. equivalent units of
production
5>Provides information for controlling and improving operations. E. manufacturing
cells
33) Cash dividends paid on capital stock would be reported in the statement of cash
flows in
A.the cash flows from financing activities section
B.the cash flows from investing activities section
C.a separate schedule
D.the cash flows from operating activities section
34) Encore Consulting is completing the accounting information processing at the end
of the fiscal year, December 31, 2011. The following trial balances are available.
A. Reconstruct the adjusting entries and give a brief explanation of each.
B. What is the amount of net income?
35)
McMann Company has a condensed income statement as shown::
Using horizontal analysis, calculate the amount and percent change for Sales. Round to
one decimal place.
A.(17,000), (11.3%)
B.(15,500), (10.3%)
C.($18,000), (10.9%)
D.($15,500), (9.4%)
36) The post reference columns are used to trace transactions from the journal to the
accounts. What will be posted on the post reference column of (a) the journal and (b) on
the account?
A.(a) the amount of the debit or credit (b) the journal page number
B.(a) the journal page number (b) the date of the transaction
C.(a) the journal page number, (b) the account number
D.(a) the account number, (b) the journal page number
37) Under a periodic inventory system, closing entries will include
A.Dr. Sales, Purchases Returns and Allowances, Purchases Discounts
B.Cr. Purchases, Sales Discounts, Sales Returns and Allowances
C.Adjust Merchandise Inventory account to match physical inventory
D.All are correct
38) The entry to record the amortization of a premium on bonds payable on an interest
payment date includes:
A.debit Premium on Bonds Payable, credit Interest Revenue
B.debit Interest Expense, credit Premium on Bond Payable
C.debit Interest Expense, debit Premium on Bonds Payable, credit Cash
D.debit Bonds Payable, credit Interest Expense
39) The management of Wyoming Corporation is considering the purchase of a new
machine costing $375,000. The company’s desired rate of return is 6%. The present
value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the
foregoing information, use the following data in determining the acceptability in this
situation:
The present value index for this investment is:
A.1.00
B..95
C.1.25
D.1.05
40) On May 1, 2014, Stanton Company purchased $60,000 of Harris Companys 12%
bonds at 100 plus accrued interest of $2,400. On June 30, 2014, Stanton received its
first semiannual interest. On February 1, 2015, Stanton sold $50,000 of the bonds at
103 plus accrued interest.
The journal entry Stanton will record on February 1, 2015, will include:
A.a credit to Interest Revenue for $1,500
B.a credit to Gain on Sale of Investments for $1,500
C.a credit to Cash for $52,500
D.a credit to Interest Receivable for $600
41) Division X of O’Blarney Company has sales of $300,000, cost of goods sold of
$120,000, operating expenses of $58,000, and invested assets of $150,000.
What is the rate of return on investment for Division X?
A.9.15%
B.81.3%
C.40.7%
D.200%
42) .Daja and Whitnee had capital balances of $140,000 and $160,000 respectively at
the beginning of the current fiscal year. The articles of partnership provide for salary
allowances of $25,000 and $35,000 respectively, an allowance of interest at 12% on the
capital balances at the beginning of the year, with the remaining net income divided
equally. Net income for the current year was $120,000.
43) A company is contemplating investing in a new piece of manufacturing machinery.
The amount to be invested is $150,000. The present value of the future cash flows is
$143,000. Should the company invest in this project?
A.yes, because net present value is +$7,000
B.yes, because net present value is -$7,000
C.no, because net present value is +$7,000
D.no, because net present value is -$7,000
44) Which of the following is recorded in the cash receipts journal?
A.cash withdrawn by the owner
B.cash purchase of equipment
C.cash received on customer’s account
D.adjusting entry for depreciation
45) An aging of a company’s accounts receivable indicates the estimate of uncollectible
receivables totals $7,900. If Allowance for Doubtful Accounts has a $700 credit
balance, the adjustment to record the bad debt expense for the period will require a
A.debit to Bad Debt Expense for $8,600
B.debit to Bad Debt Expense for $7,900
C.debit to Bad Debt Expense for $7,200
D.credit to Allowance for Doubtful Accounts for $700
46) The cash receipts journal will be used for
A.only cash received from customers on account
B.all cash received
C.cash received from customers on account and cash sales
D.only cash received from cash sales
47) Under the allowance method of accounting for uncollectible receivables, writing off
an uncollectible account.
A.affects only income statement accounts
B.is not an acceptable practice
C.affects only balance sheet accounts
D.affects both balance sheet and income statement accounts
48) On November 14th the Milling Department has accepted Job 111407A for 1,000
pounds of Cereal Mix. The bill of materials (BOM) for the Cereal Mix is:
Manufacturing overhead is applied at $5.75 per pound completed, and $75.75 of
materials are returned to Raw Materials Inventory. The recipe produced 1,025 pounds
of cereal mix.
(a) Write the journal entry to transfer raw materials to Job 111407A.
(b) Write the journal entry to provide labor to Job 111407A.
(c) Write the journal entry to return 50 pounds oats, 5 pounds of barley, and 5 quarts of
honey back to raw materials inventory.
(d) Write the journal entry to apply manufacturing overhead to Job 111407A.
(e) Write the journal entry to transfer Job 111407A to finished goods on November
14th.
49) What is the type of account and normal balance of Allowance for Doubtful
Accounts?
A.Contra asset, credit
B.Asset, debit
C.Asset, credit
D.Contra asset, debit
50) Which of the following can be used to place capital investment proposals involving
different amounts of investment on a comparable basis for purposes of net present value
analysis?
A.Price-level index
B.Future value index
C.Rate of investment index
D.Present value index
51) A machine with a cost of $120,000 has an estimated residual value of $15,000 and
an estimated life of 5 years or 15,000 hours. It is to be depreciated by the
units-of-production method. What is the amount of depreciation for the second full
year, during which the machine was used 5,000 hours?
A.$ 5,000
B.$35,000
C.$21,000
D.$45,000
52) Mallard Corporation uses the product cost concept of product pricing. Below is cost
information for the production and sale of 45,000 units of its sole product. Mallard
desires a profit equal to a 12% rate of return on invested assets of $800,000.
The markup percentage on product cost for the company’s product is:
A.23.4%
B.10.98%
C.26.1%
D.18%
53) Adjusting entries are
A.the same as correcting entries
B.needed to bring accounts up to date and match revenue and expense
C.optional under generally accepted accounting principles
D.rarely needed in large companies
54) The current portion of long-term debt should
A.be classified as a long-term liability
B.not be separated from the long-term portion of debt
C.be paid immediately
D.be reclassified as a current liability
55) Fashion Jeans, Inc. sells two lines of jeans; Simple Life and Fancy Life. Simple
Life sells for $85.00 a pair and Fancy Life sells for $100.00 a pair. The company sells
all of its jeans on credit and estimates that 60% is collected in the month of the sale,
35% is collected in the following month, and the rest is considered to be uncollectible.
The estimated sales for Simple are as follows: January 20,000 jeans, February 27,500
jeans, and March 25,000 jeans. The estimated sales for Fancy are as follows: January
18,000 jeans, February 19,000, and March 20,500 jeans. What are the expected cash
receipts for the month of March?
A.$3,988,125
B.$2,505,000
C.$2,125,000
D.$4,175,000
56) The Calvin-Dogwood Partnership owns inventory that was purchased for $90,000,
has a current replacement cost of $85,900, and is priced to sell for $125,000. At what
amount should the inventory be recorded in the accounts of the new partnership if
Alexis is to be admitted?
A.$129,100
B.$85,900
C.$90,000
D.$125,000
57) Conquest Company uses a perpetual inventory system. Conquest purchased $1,500
of merchandise on account and payment was made within the discount period. The
credit terms were 2/10,n/30. Journalize Conquests purchase and payment.
58)
59) Future Sources, Inc. reported the following results for the year ending July 31,
2012:
Prepare a retained earnings statement for the fiscal year ended July 31, 2012.
60) You evaluate loan requests as part of your job at Beach Front National Bank. One
loan request you received is from Surfer Dude Supplies, a small proprietorship. Tracy
Roberts, the owner, is requesting $75,000 and brings you a trial balance (or Statement
of Accounts) for his first year of operations ended December 31, 2010.
REQUIRED: While you are willing to work with Tracy, how would you explain to him
that a complete set of financial statements from his accountant would be more useful
for evaluating the loan request?
61) Journalize the following transactions assuming the perpetual inventory system:
Journal
62) Explain the difference between accrual basis accounting and cash basis accounting.
63)
Determine the due date and the amount of interest due at maturity on the following
notes:
