1) A double rule applied to accounts in the ledger during the closing process implies
that
a.the account is a temporary account
b.the account is a balance sheet account
c.the account balance is not zero
d.a mistake has been made, since double ruling is prescribed
2) Cost of raw materials is debited to Raw Materials Inventory when the
a.materials are ordered
b.materials are received
c.materials are put into production
d.bill for the materials is paid
3) Which of the following should be classified as an extraordinary item?
a.Effects of major casualties not infrequent in the area
b.Write-off of a significant amount of receivables
c.Losses due to a bitter, lengthy labor strike
d.Loss from the expropriation of facilities by a foreign government
4) Closing entries are necessary for
a.permanent accounts only
b.temporary accounts only
c.both permanent and temporary accounts
d.permanent or real accounts only
5) Prepare the journal entries to record the following transactions for Ogleby Company
which has a calendar year end and uses the straight-line method of depreciation.
a)On September 30, 2014, the company exchanged old delivery equipment and $36,000
for new delivery equipment. The old delivery equipment was purchased on January 1,
2012, for $126,000 and was estimated to have a $18,000 salvage value at the end of its
5-year life. Depreciation on the delivery equipment has been recorded through
December 31, 2013 . It is estimated that the fair value of the old delivery equipment is
$54,000 on September 30, 2014 .
(b)On June 30, 2014, the company exchanged old office equipment and $40,000 for
new office equipment. The old office equipment originally cost $80,000 and had
accumulated depreciation to the date of disposal of $35,000. It is estimated that the fair
market value of the old office equipment on June 30 was $60,000. The transaction has
commercial substance.
6) Rumsy Company is considering buying equipment for $240,000 with a useful life of
five years and an estimated salvage value of $10,000. If annual expected income is
$21,000, the denominator in computing the annual rate of return is
a.$250,000
b.$120,000
c.$240,000
d.$125,000
7) The explanation column of the general ledger
a.is completed without exception
b.is nonexistent
c.is used infrequently
d.shows account titles
8) A customer charges a treadmill at Annie’s Sport Shop. The price is $4,000 and the
financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to
pay the bill within 30 days and a finance charge is added to the customer’s account.
What is the amount of the finance charge?
a.$8
b.$20
c.$80
d.$240
9) Entries in the purchases journal are made
a.from sales invoices
b.from the general journal
c.without supporting documentation
d.from purchase invoices
10) The amount of income taxes withheld from employees is dependent on each of the
following except the
a.employee’s gross earnings
b.employee’s net pay
c.length of the pay period
d.number of allowances claimed by the employee
11) Accounting for treasury stock is done by the
a.FIFO method
b.LIFO method
c.cost method
d.lower of cost or market method
12) The requirements for accounting for and reporting of inventories under IFRS,
compared to GAAP, tend to be more
a.detailed
b.rules-based
c.principles-based
d.full of disclosure requirements
13) Country Company reported the following on its income statement:
Income before income taxes$850,000
Income tax expense 250,000
Net income$650,000
An analysis of the income statement revealed that interest expense was $100,000.
Country Company’s times interest earned was
a.3.4 times
b.9.5 times
c.6.5 times
d.8.5 times
14) Equity investments are generally recorded and reported at
a.amortized cost
b.fair value
c.original cost
d.maturity value
15) Blaine Company had these transactions pertaining to stock investments:
Feb. 1 Purchased 2,000 shares of Norton Company (10%) for $51,000.
June 1 Received cash dividends of $2 per share on Horton stock.
Oct. 1 Sold 1,200 shares of Horton stock for $33,000 less brokerage fees of $600.
The entry to record the sale of the stock would include a
a.debit to Cash for $32,400
b.credit to Gain on Sale of Stock Investments for $1,200
c.debit to Stock Investments for $30,600
d.credit to Gain on Sale of Stock Investments for $1,800
16) Engler Company purchases a new delivery truck for $55,000. The sales taxes are
$4,000. The logo of the company is painted on the side of the truck for $1,600. The
truck license is $160. The truck undergoes safety testing for $290. What does Engler
record as the cost of the new truck?
a.$61,050
b.$60,890
c.$59,000
d.$60,600
17) R. Schoen purchases a 25% interest for $60,000 when the Hise, Poole, Lagos
partnership has total capital of $540,000. Prior to the admission of Schoen, each partner
has a capital balance of $180,000. Each partner relinquishes an equal amount of his
capital balance to Schoen. The amount to be relinquished by Lagos is
a.$30,000
b.$38,000
c.$45,000
d.$75,000
18) All of the following are intangible assets except:
a.patents
b.oil deposits
c.goodwill
d.franchises
19) The historical cost of an asset and its fair value are
a.never the same
b.the same when the asset is sold
c.irrelevant when the asset is used by the business in its operations
d.the same on the date of acquisition
20) Which one of the following is an example of a period cost?
a.A change in benefits for the union workers who work in the New York plant of a
Fortune 1000 manufacturer
b.Workers’ compensation insurance on factory workers’ wages allocated to the factory
c.A box cost associated with computers
d.A manager’s salary for work that is done in the corporate head office
21) On August 13, 2014, Swell Maps Enterprises purchased office equipment for
$1,500 and office supplies of $200 on account. Which of the following journal entries is
recorded correctly and in the standard format?
a.Equipment1,500
Account Payable1,700
Supplies200
b.Equipment.1,500
Supplies200
Accounts Payable1,700
c.Accounts Payable1,700
Equipment1,500
Supplies200
d.Equipment1,500
Supplies200
Accounts Payable.1,700
22) Most companies that follow IFRS present balance sheet (statement of financial
position) information in this order:
a.current assets; investments; property, plant and equipment; intangible assets; current
liabilities; long term liabilities; owners’ equity
b.intangible assets; property, plant and equipment; investments; current assets; current
liabilities; owners’ equity; long term liabilities
c.current assets; noncurrent assets; current liabilities; noncurrent liabilities; equity
d.noncurrent assets; current assets; equity; noncurrent liabilities; current liabilities
IFRS.
23) When is a variance considered to be ‘material’?
a.When it is large compared to the actual cost
b.When it is infrequent
c.When it is unfavorable
d.When it could have been controlled more effectively
24) The admission of a new partner to an existing partnership
a.may be accomplished only by investing assets in the partnership
b.requires purchasing the interest of one or more existing partners
c.causes a legal dissolution of the existing partnership
d.is almost always accompanied by the liquidation of the business
25) The current ratio may also be referred to as the
a.short run ratio
b.acid-test ratio
c.working capital ratio
d.contemporary ratio
26) On January 2, 2014, Kerwin Company purchased a patent for $48,000. The patent
has an estimated useful life of 25 years and a 20-year legal life. What entry would the
company make at December 31, 2014 to record amortization expense on the patent?
27) Beta Guard Corporation manufactures fertilizer. The standard cost for one bag is as
follows:
Cost ElementQuantityPrice Cost
Direct Materials50 lbs.$ 0.10$ 5.00
Direct Labor2 hrs.10.0020.00
Overhead2 hrs.6.00 12.00
$37.00
During the month, the following transactions occurred in manufacturing 100,000 bags:
(1)Purchased and used 5,400,000 pounds at $0.09 per pound.
(2)195,000 direct labor hours were worked at a total cost of $1,920,750.
(3)Variable manufacturing overhead incurred was $848,000 and fixed overhead was
$448,000.
(4)The manufacturing overhead rate of $6.00 is based on a normal capacity of 216,000
direct labor hours. The total budget at this capacity is $800,000 variable and $432,000
fixed.
Instructions: Compute and label (“F” for favorable and “U” for unfavorable) the
variances listed below. Present supporting calculations.
1>Direct Materials:
Price = $___________; Quantity = $____________; Total = $____________.
2>Direct Labor:
Price = $___________; Quantity = $____________; Total = $____________.
3>Overhead:
Controllable = $_________; Volume = $___________; Total = $__________.
28) The process used to identify the financial data that change under alternative courses
of action is called __________________ analysis.
29) Ken White plans to buy a surround sound stereo for $3,200 after 3 years. If the
interest rate is 6%, how much money should Ken set aside today for the purchase?
30) Total fixed costs are ___________ over various levels of activities, whereas total
variable costs __________________ directly and ________________ with changes in
the activity level.
31) If $23,000 direct materials are requisitioned for a job and $8,000 of indirect
materials are requisitioned for general use, the debit to Work In Process Inventory
should be for $______________.
32) The following errors were made in journalizing and posting transactions in
September in the Marburg Company.
Instructions: Prepare the correcting entries at September 30 assuming the incorrect
entry is not reversed. (Omit explanations.)
1>The receipt of $9,000 from a customer for future service was recorded as a debit to
Cash $900 and a credit to Service Revenue $900.
2>A bill for $8,000 for new office equipment was debited to Supplies $8,000 and
credited to Accounts Payable $8,000.
3>A $1,000 payment for freight charges incurred on inventory purchased in September
was debited to Inventory $1,000 and credited to Cash $1,000.
4>A collection of $8,500 on account from a customer was recorded as a debit to Cash
$8,500 and a credit to Service Revenue $8,500.
33) Gazette, Inc. has the following production data for June:
Transferred out50,000 units
Ending work in process5,000 units
The units in work in process are 100% complete for materials and 60% complete for
conversion costs. Materials costs are $4 per unit and conversion costs are $8 per unit.
Instructions
Determine the costs to be assigned to the units transferred out and the units in ending
work in process.
34) Renth Corporation entered into the following transactions:
1>On January 1, 2014 Lee Car Rental leased a car to Renth Corporation for one year.
Terms of the operating lease call for monthly payments of $650.
2>On January 1, 2014, Renth Corporation entered into an agreement to lease 20
machines from Sweis Corporation. The terms of the lease agreement require an initial
payment of $500,000 and then three annual rental payments of $600,000 beginning on
December 31, 2014 . The present value of the three rental payments is $1,492,108. The
lease is a capital lease.
Instructions
Prepare the appropriate journal entries to be made by Renth Corporation in January
related to the lease transactions.