1) Debt guarantees are usually disclosed as a contingent liability.
2) An owner’s withdrawal account normally has a debit balance.
3) One application of internal control when taking a physical count of inventory is the
use of pre-numbered inventory tickets.
4) A cost center does not directly generate revenues.
5) At a given point in time, a business’s trial balance is a list of all of its general ledger
accounts and their balances.
6) Long-term investments can include funds earmarked for special purposes such as
bond sinking funds.
7) The declaration of cash dividends increases retained earnings.
8) Prepare journal entries to record the following production activities for Oaks
Manufacturing.
a. Used $93,900 of direct labor in the production department.
b. Used $11,200 of indirect labor.
9) The following is taken from Jeffers Company’s internal records of its factory with
two operating departments. The cost driver for indirect labor is direct labor costs, and
the cost driver for the remaining items is number of hours of machine use. Compute the
total amount of overhead allocated to Dept. 1 using activity-based costing.
A.$22,069.
B.$19,877.
C.$47,512.
D.$22,243.
E.$18,703.
10) Static budget is another name for:
A.Standard budget.
B.Flexible budget.
C.Variable budget.
D.Fixed budget.
E.Master budget.
11) Dividend yield is the percent of cash dividends paid to common shareholders
relative to the:
A.Common stock’s market value.
B.Earnings per share.
C.Investors’ purchase price of the stock.
D.Amount of retained earnings.
E.Amount of cash.
12) Just-in-time manufacturing techniques can be useful in _____________ days’ sales
in raw materials inventory.
A.keeping constant
B.changing upward
C.adding to
D.lowering
E.increasing
13) Nestor Company is considering the purchase of an asset for $100,000. It is expected
to produce the following net cash flows. The cash flows occur evenly throughout each
year. Compute the break-even time (BET) period for this investment. (Round to two
decimal places.)
A.2.85 years.
B.2.57 years.
C.3.17 years.
D.2.98 years.
E.3.62 years.
14) Cox, North, and Lee form a partnership. Cox contributes $180,000, North
contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls
for the income or loss division to be based on the ratio of capital invested. If the
partnership reports income of $150,000 for its first year, what amount of income is
credited to Cox’s capital account?
A.$50,000.
B.$64,286.
C.$45,000.
D.$36,000.
E.$60,000.
15) The schedule of cost of goods manufactured is divided into four parts consisting of
all of the following except:
A.Direct materials.
B.Computation of cost of goods sold.
C.Overhead.
D.Computation of cost of goods manufactured.
E.Direct labor.
16) A company is considering purchasing a machine for $21,000. The machine will
generate an after-tax net income of $2,000 per year. Annual depreciation expense would
be $1,500. What is the payback period for the new machine?
A.4 years.
B.6 years.
C.10.5 years.
D.14 years.
E.42 years.
17) A company’s board of directors votes to declare a cash dividend of $1.00 per share
on its 12,000 common shares outstanding. The journal entry to record the declaration of
the cash dividend is:
A.Debit Dividend Expense $12,000; credit Cash $12,000.
B.Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.
C.Debit Common Dividend Payable $12,000; credit Cash $12,000.
D.Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
E.Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.
18) Rainier Importers purchases automotive parts from Austria. Prepare journal entries
for the following transactions of Rainier.
19) On November 1, Jovel Company loaned another company $100,000 at a 6.0%
interest rate. The note receivable plus interest will not be collected until March 1 of the
following year. The company’s annual accounting period ends on December 31. The
amount of interest revenue that should be reported in the first year is:
A.$0.
B.$6,000.
C.$5,000.
D.$16,667.
E.$1,000.
20) A company uses the following standard costs to produce a single unit of output.
During the latest month, the company purchased and used 58,000 pounds of direct
materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor
costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable
manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing
overhead incurred was $10,400. Based on this information, the direct labor efficiency
variance for the month was:
A.$3,650 favorable
B.$2,450 favorable
C.$1,200 unfavorable
D.$1,200 favorable
E.$2,450 unfavorable
21) Bagwell’s net income for the year ended December 31, Year 2 was $175,000.
Information from Bagwell’s comparative balance sheets is given below. Compute the
cash paid for dividends during Year 2.
A.$79,000.
B.$201,000.
C.$95,000.
D.$50,000.
E.$69,000.
22) If a company has excess space in its building that it rents to another company for
$700, what is the effect on the accounting equation when the first rent payment is
collected?
A.Assets would decrease $700 and liabilities would decrease $700.
B.Assets would decrease $700 and equity would increase $700.
C.Assets would increase $700 and equity would decrease $700.
D.Assets would increase $700 and equity would increase $700.
E.Liabilities would decrease $700 and equity would increase $700.
23) Prepare journal entries to record the following transactions and events for April
using a job order costing system.
(a) Purchased raw materials on credit, $69,000.
(b) Raw materials requisitioned: $26,000 direct and $5,400 indirect.
(c) Factory payroll totaled $46,000, including $9,500 indirect labor.
(d) Paid other actual overhead costs totaling $14,500 cash.
(e) Applied overhead totaling $28,200.
(f) Finished and transferred jobs totaling $77,500.
(g) Jobs costing $58,800 were sold on credit for $103,000.
24) The following selected transactions took place during the current year for a
company:
(a) Prepare the journal entries for these transactions.
(b) If Retained Earnings had a $155,000 credit balance on January 1, calculate its
year-end balance as of December 31.
25) Describe installment notes and the nature of the typical payment pattern.
26) Prepare a April 30 balance sheet in proper form for Two Rivers Vending Service
from the following alphabetical list of the accounts at April 30:
27) Lionaire, Inc. has developed the following standard cost data based on 60,000 direct
labor hours, which is 75% of capacity.
During the last period, the company operated at 80% of capacity and produced 128,000
units. Actual costs were:
Determine the direct materials price and quantity variances and the direct labor rate and
efficiency variances. Indicate whether each variance is favorable or unfavorable.
28) Beagle Company earned $90,000 in income and paid cash dividends of $7,000 to
preferred shareholders during the current year. Beagle had 15,500 weighted-average
shares of common stock outstanding for the year. Calculate the company’s earnings per
share.
29) The ___________________ account is a temporary account used only in the
closing process.
30) How are unfavorable variances recorded? How are favorable variances recorded?
31) _____________________ inventory consists of goods a company acquires to use in
making products.
32) Trapper Company’s unadjusted and adjusted trial balances on December 31 of the
current year are as follows:
Present the four adjusting journal entries that were recorded by Trapper
Company.
33) Compute the ending work in process inventory for a manufacturer with the
following information.
