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1) The double-entry system is a logical method for recording transactions and results in
equal debits and credits for each transaction.
2) Standard costs may be incorporated into the accounts in the general ledger.
3) A credit balance in a liability account indicates that an error in recording has
occurred.
4) A job order cost system and a process cost system are two alternative methods for
valuing inventories.
5) For purposes of CVP analysis, mixed costs must be classified into their fixed and
variable elements.
6) Accountants do not have to worry about issues of ethics.
7) A major advantage of national credit cards to retailers is that there is no charge to the
retailer by the credit card companies for their services.
8) If actual costs are less than standard costs, the variance is favorable.
9) Cash register overages are deposited in the petty cash fund and cash shortages are
made-up from the petty cash fund.
10) The distribution of cash to partners in a partnership liquidation is always made
based on the partners' income sharing ratio.
11) Internal transactions do not affect the basic accounting equation because they are
economic events that occur entirely within one company.
12) During the month, a company sells goods for a total of $54,000, which includes
sales taxes of $4,000; therefore, the company should recognize $50,000 in Sales
Revenues and $4,000 in Sales Tax Expense.
13) On January 1, Focus Corporation issued $500,000, 6%, 5-year bonds at face value.
Interest is payable semiannually on July 1 and January 1 .
Instructions
Prepare journal entries to record the
(a)Issuance of the bonds.
(b)Payment of interest on July 1, assuming no previous accrual of interest.
(c)Accrual of interest on December 31 .
14) A responsibility report for a profit center shows:
a.gross profit and income from operations
b.gross profit, income from operations, and net income
c.contribution margin, controllable margin, and return on investment
d.contribution margin and controllable margin
15) The entry to record the dishonor of a note receivable assuming the payee expects
eventual collection includes a debit to
a.Notes Receivable
b.Cash
c.Allowance for Doubtful Accounts
d.Accounts Receivable
16) Green Company reported net income of $100,000 for the year ended December 31,
2014 . During the year, inventories decreased by $21,000, accounts payable decreased
by $24,000, depreciation expense was $30,000, and a gain on disposal of equipment of
$17,000 was recorded. Net cash provided by operations in 2014 using the indirect
method was:
a.$90,000
b.$110,000
c.$144,000
d.$158,000
17) Comparisons can be made on each of the following bases except
a.industry averages
b.intercompany basis
c.intracompany basis
d.Each of these is a basis for comparison
18) Income statements prepared internally for management often show cost of goods
sold at standard cost and variances are
a.separately disclosed
b.deducted as other expenses and revenues
c.added to cost of goods sold
d.closed directly to retained earnings
19) In reviewing the accounts receivable, the cash realizable value is $16,000 before the
write-off of a $1,500 account. What is the cash realizable value after the write-off?
a.$1,500
b.$14,500
c.$16,000
d.$17,500
20) Which of the following depicts the proper sequence of steps in the accounting
cycle?
a.Journalize the transactions, analyze business transactions, prepare a trial balance
b.Prepare a trial balance, prepare financial statements, prepare adjusting entries
c.Prepare a trial balance, prepare adjusting entries, prepare financial statements
d.Prepare a trial balance, post to ledger accounts, post adjusting entries
21) Match the items below by entering the appropriate code letter in the space provided.
A.Time period assumptionF.Accrued revenues
B.Fiscal yearG.Depreciation
C.Revenue recognition principleH.Accumulated depreciation
D.Prepaid expensesI.Accrued expenses
E.Expense recognition principleJ.Book value
1>A twelve month accounting period
2>Expenses paid before they are incurred
3>Cost less accumulated depreciation
4>Divides the economic life of a business into artificial time periods
5>Efforts are related to accomplishments
6>A contra asset account
7>Recognition of revenue when the performance obligation is satisfied
8>Revenues recognized but not yet received
9>Expenses incurred but not yet paid
10>A cost allocation process
22) In addition to the three basic financial statements, which of the following is also a
required financial statement?
a.the "Cash Budget"
b.the Statement of Cash Flows
c.the Statement of Cash Inflows and Outflows
d.the "Cash Reconciliation"
23) Fleming Sign Company uses the allowance method in accounting for uncollectible
accounts. Past experience indicates that 1% of net credit sales will eventually be
uncollectible. Selected account balances at December 31, 2013, and December 31,
2014, appear below:
12/31/1312/31/14
Net Credit Sales$400,000$500,000
Accounts Receivable60,00080,000
Allowance for Doubtful Accounts5,200?
Instructions
(a)Record the following events in 2014 .
Aug.10Determined that the account of Sue King for $800 is uncollectible.
Sept.12Determined that the account of Tom Young for $3,700 is uncollectible.
Oct.10Received a check for $500 as payment on account from Sue King, whose
account had previously been written off as uncollectible. She indicated the remainder of
her account would be paid in November.
Nov.15Received a check for $300 from Sue King as payment on her account.
(b)Prepare the adjusting journal entry to record the bad debt provision for the year
ended December 31, 2014 .
(c)What is the balance of Allowance for Doubtful Accounts at December 31, 2014?
24) Partners Eli and Alex have agreed to share profits and losses in an 80:20 ratio
respectively, after Eli is allowed a salary allowance of $70,000 and Alex is allowed a
salary allowance of $35,000. If the partnership had net income of $70,000 for 2014,
Alexs share of the income would be
a.$35,000
b.$28,000
c.$42,000
d.$7,000
25) Dabney, Inc., has 5,000 shares of 5%, $100 par value, noncumulative preferred
stock and 40,000 shares of $1 par value common stock outstanding at December 31,
2014 . There were no dividends declared in 2013 . The board of directors declares and
pays a $60,000 dividend in 2014 . What is the amount of dividends received by the
common stockholders in 2014?
a.$0
b.$25,000
c.$10,000
d.$35,000
26) Book value is also referred to as
a.accumulated depreciation
b.carrying value
c.fair value
d.original cost
27) Good Cabin Company manufactures cappuccino makers. For the first ten months of
2014, the company reported the following operating results while operating at 80% of
plant capacity:
Sales (500,000 units)$90,000,000
Cost of goods sold 54,000,000
Gross profit36,000,000
Operating expenses 24,000,000
Net income$12,000,000
An analysis of costs and expenses reveals that variable cost of goods sold is $85 per
unit and variable operating expenses are $35 per unit.
In November, Good Cabin Company receives a special order for 30,000 machines at
$135 each from a major coffee shop franchise. Acceptance of the order would result in
$10,000 of shipping costs but no increase in fixed expenses.
Instructions
(a)Prepare an incremental analysis for the special order.
(b)Should Good Cabin Company accept the special order? Justify your answer.
28) Which one of the following is not needed in preparing a production budget?
a.Budgeted unit sales
b.Budgeted raw materials
c.Beginning finished goods units
d.Ending finished goods units
29) For accounting purposes, postdated checks (checks payable in the future) are
considered to be
a.money orders
b.cash
c.petty cash
d.accounts receivable
30) Which of the following statements is correct?
a.Salaries to partners and interest on partners' capital are expenses of the partnership
b.Salaries to partners are expenses of the partnership but not interest on partners' capital
c.Interest on partners' capital is an expense of the partnership but not salaries to partners
d.Neither salaries to partners nor interest on partners' capital are expenses of the
partnership
31) All of the following statements about short-term investments are true except:
a.Short-term investments are also called marketable securities
b.Trading securities are always classified as short-term investments
c.Short-term investments are listed below accounts receivable in the current asset
section of the balance sheet
d.Short-term assets must be readily marketable
32) Julie contributes, as part of her initial investment, accounts receivable with an
allowance for doubtful accounts. Which of the following reflects a proper treatment?
a.The balance of the accounts receivable account should be recorded on the books of
the partnership at its net realizable value
b.The allowance account may be set up on the books of the partnership because it
relates to the existing accounts that are being contributed
c.The allowance account should not be carried onto the books of the partnership
d.The accounts receivable and allowance should not be recorded on the books of the
partnership because a partner must invest cash in the business
33) Fixed costs are $2,400,000 and the contribution margin per unit is $120. What is the
break-even point?
a.$2,000,000
b.$20,000,000
c.2,000 units
d.20,000 units
34) Short-term investments are listed on the balance sheet immediately below
a.cash
b.inventory
c.accounts receivable
d.prepaid expenses
35) Partners Gary and Elaine have agreed to share profits and losses in an 80:20 ratio
respectively, after Gary is allowed a salary allowance of $30,000 and Elaine is allowed
a salary allowance of $15,000. If the partnership had net income of $30,000 for 2014,
Elaines share of the income would be
a.$15,000
b.$12,000
c.$18,000
d.$3,000
36) If the payback period for a project is greater than its economic life, the
a.project will always be profitable
b.entire initial investment will never be recovered
c.project would only be acceptable if the company's cost of capital was low
d.project's return will always exceed the company's cost of capital
37) The post-closing trial balance contains only
a.income statement accounts
b.balance sheet accounts
c.balance sheet and income statement accounts
d.income statement, balance sheet, and owner's equity statement accounts
38) The following accounts were included on Aeroplane Consultants adjusted trial
balance at December 31, 2014:
Accounts payable$ 9,200
Accounts receivable12,000
Cash5,500
Owners Capital40,000
Owners Drawings10,000
Interest expense3,000
Note payable, due 8/31/1760,000
Supplies1,000
Service revenue39,000
Equipment5,000
(a)What are total current assets?
(b)What are total current liabilities?
39) Cunningham Company's records indicate the following information for the year:
Merchandise inventory, 1/1$ 150,000
Purchases850,000
Net Sales1,200,000
On December 31, a physical inventory determined that ending inventory of $200,000
was in the warehouse. Cunningham's gross profit on sales has remained constant at
40%. Cunningham suspects some of the inventory may have been taken by some new
employees. At December 31, what is the estimated cost of missing inventory?
a.$300,000
b.$80,000
c.$280,000
d.$180,000
40) A chart of accounts for a business firm
a.is a graph
b.indicates the amount of profit or loss for the period
c.lists the accounts and account numbers that identify their location in the ledger
d.shows the balance of each account in the general ledger
41) The following information is available for Dennehy Company:
Sales Revenue$390,000Freight-In$30,000
Ending Inventory37,500Purchase Returns and Allowances15,000
Purchases270,000Beginning Inventory45,000
Dennehy's cost of goods sold is
a.$262,500
b.$285,000
c.$292,500
d.$345,000
42) Depreciation is a ______________ allocation process rather than a process of
______________.
43) The Kirkland Department of United Manufacturing began the month of December
with beginning work in process of 4,000 units that are 100% complete as to materials
and 30% complete as to conversion costs. Units transferred out are 11,000 units. Ending
work in process contains 5,000 units that are 100% complete as to materials and 60%
complete as to conversion costs.
Instructions
Compute the equivalent units of production for materials and conversion costs for the
month of December.
44) Gen Industries has budgeted the following unit sales:
2014 Units
April60,000
May100,000
June150,000
July90,000
Of the units budgeted, 40% are sold by the Northern Division at an average price of $15
per unit and the remainder are sold by the Western Division at an average price of $12
per unit.
Instructions
Prepare separate sales budgets for each division and for the company in total for the
second quarter of 2014 .
45) Charleston Corporation has the following accounts at December 31: Common
Stock, $10 par 7,000 shares issued, $70,000; Paid-in Capital in Excess of Par $10,000;
Retained Earnings $45,000; and Treasury StockCommon, 500 shares, $10,000. Prepare
the stockholders' equity section of the balance sheet.
46) Pulham Company is preparing its direct labor budget for 2013 from the following
production budget based on a calendar year:
Quarter Units
160,000
230,000
345,000
475,000
Each unit requires 2 hours of direct labor. The union contract provides for a 10%
increase in wage rate to $11 per hour on October 1 .
Instructions
Prepare a direct labor budget for 2013 .
