1) All reconciling items in determining the adjusted cash balance per books require the
depositor to make adjusting journal entries to the Cash account.
2) The complete effect of a transaction on the accounts is disclosed in the journal.
3) The quality of consistency pertains to the use of the same accounting principles by
firms in the same industry.
4) A good system of internal control requires that the job order cost sheet be destroyed
as soon as the job is complete.
5) The cost of a patent should be amortized over its legal life or useful life, whichever is
shorter.
6) Financial statement readers can determine future investing and financing transactions
by examining a companys statement of cash flows.
7) Even though a partnership is not a separate legal entity, for accounting purposes the
partnership affairs should be kept separate from the personal activities of the owners.
8) A bonus to old partners results when the new partner’s capital credit on the date of
admittance is greater than his or her investment in the firm.
9) Many business transactions affect more than one time period.
10) The hiring of a new company president is an economic event recorded by the
financial information system.
11) Art, Inc., has 2,500 shares of 5%, $100 par value, cumulative preferred stock and
20,000 shares of $1 par value common stock outstanding from December 31, 2013
through Dec. 31, 2015. There were no dividends declared in 2013 . The board of
directors declares and pays a $22,500 dividend in 2014 and in 2015 . What is the
amount of dividends received by the common stockholders in 2015?
a.$7,500
b.$12,500
c.$22,500
d.$0
12) During August, 2014, Baxters Supply Store generated revenues of $60,000. The
companys expenses were as follows: cost of goods sold of $36,000 and operating
expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the
sale of a delivery truck of $2,000.
Baxters net income for August, 2014 is
a.$20,000
b.$21,000
c.$23,000
d.$24,000
13) Rebekah Grace has worked for Specoly Inc., for 20 years without taking a vacation.
An internal control feature that would address this situation would be
a.other controls
b.establishment of responsibility
c.physical controls
d.documentation procedures
14) A manufacturing company calculates cost of goods sold as follows:
a.Beginning FG inventory + cost of goods purchased ending FG inventory
b.Ending FG inventory cost of goods manufactured + beginning FG inventory
c.Beginning FG inventory cost of goods manufactured ending FG inventory
d.Beginning FG inventory + cost of goods manufactured ending FG inventory
15) The graph of variable costs that behave in a curvilinear fashion will
a.approximate a straight line within the relevant range
b.be sharply kinked on both sides of the relevant range
c.be downward sloping
d.be a stair-step pattern
16) A stock split
a.may occur in the absence of retained earnings
b.will increase total paid-in capital
c.will increase the total par value of the stock
d.will have no effect on the par value per share of stock
17) In Saint-Siyon, Inc., the Assembly Department started 30,000 units and completed
35,000 units. If beginning work in process was 15,000 units, how many units are in
ending work in process?
a.0
b.5,000
c.10,000
d.20,000
18) At the end of its first year, the trading securities portfolio consisted of the following
common stocks.
Cost Fair Value
Atrium Corporation $ 46,500$ 50,000
Barnes Inc. 60,000 58,000
Cantor Corporation 80,000 76,400
$186,500$184,400
The unrealized loss to be recognized under the fair value method is
a.$2,000
b.$5,600
c.$2,100
d.$3,600
19) VAS Corporation had net income of $500,000 and paid dividends of $800,000 to
common stockholders and $20,000 to preferred stockholders in 2014 . VAS
Corporations common stockholders equity at the beginning and end of 2014 was
$1,740,000 and $2,260,000, respectively. There are 200,000 weighted-average shares of
common stock outstanding.
VAS Corporations return on common stockholders equity was
a.10%
b.24%
c.20%
d.17.7%
20) In preparing the statement of cash flows, determining the net increase or decrease in
cash requires the use of
a.the adjusted trial balance
b.the current period’s balance sheet
c.a comparative balance sheet
d.a comparative income statement
21) The ACER Company has five plants nationwide that cost $60 million. The current
market value of the plants is $190 million. The plants will be recorded and reported as
assets at:
a.$60 million
b.$250 million
c.$190 million
d.$130 million
22) The adjustments entered in the adjustments columns of a worksheet are
a.not journalized
b.posted to the ledger but not journalized
c.not journalized until after the financial statements are prepared
d.journalized before the worksheet is completed
23) Inventory is reported in the financial statements at
a.cost
b.market
c.the higher-of-cost-or-market
d.the lower-of-cost-or-market
24) A company purchased inventory as follows:
150 units at $5
350 units at $6
The average unit cost for inventory is
a.$5.00
b.$5.50
c.$5.70
d.$6.00
25) The following information was taken from the annual manufacturing overhead cost
budget of Clint Company:
Variable manufacturing overhead costs$93,000
Fixed manufacturing overhead costs$62,000
Normal production level in direct labor hours31,000
Normal production level in units15,500
During the year, 14,000 units were produced, 32,000 hours were worked, and the actual
manufacturing overhead costs were $155,000. The actual fixed manufacturing overhead
costs did not deviate from the budgeted fixed manufacturing overhead costs. Overhead
is applied on the basis of direct labor hours.
Instructions
(a)Compute the total, fixed, and variable predetermined manufacturing overhead rates.
(b)Compute the total, controllable, and volume overhead variances.
26) Lime Landscaping Inc. is preparing its budget for the first quarter of 2014 . The
next step in the budgeting process is to prepare a cash receipts schedule and a cash
payments schedule. To that end the following information has been collected.
Clients usually pay 60% of their fee in the month that service is provided, 30% the
month after, and 10% the second month after receiving service.
Actual service revenue for 2013 and expected service revenues for 2014 are: November
2013, $120,000; December 2013, $110,000; January 2014, $130,000; February 2014,
$160,000; March 2014, $170,000.
Purchases on landscaping supplies (direct materials) are paid 40% in the month of
purchase and 60% the following month. Actual purchases for 2013 and expected
purchases for 2014 are: December 2013, $21,000; January 2014, $18,000; February
2014, $22,000; March 2014, $26,000.
Instructions
(a)Prepare the following schedules for each month in the first quarter of 2014 and for
the quarter in total:
(1)Expected collections from clients.
(2)Expected payments for landscaping supplies.
(b)Determine the following balances at March 31, 2014:
(1)Accounts receivable.
(2)Accounts payable.
27) Casey Company has a materials price standard of $2.10 per pound. Six thousand
pounds of materials were purchased at $2.20 a pound. The actual quantity of materials
used was 6,000 pounds, although the standard quantity allowed for the output was
5,400 pounds.
Casey Company’s total materials variance is
a.$1,860 U
b.$1,860 F
c.$1,920 U
d.$1,920 F
28) Which of the following is not a necessary action that the partnership must take upon
the death of a partner?
a.Determine the net income or net loss for the year to date
b.Discontinue business operations
c.Close the books
d.Prepare financial statements
29) Tomko Company purchased machinery with a list price of $96,000. They were
given a 10% discount by the manufacturer. They paid $600 for shipping and sales tax of
$4,500. Tomko estimates that the machinery will have a useful life of 10 years and a
residual value of $30,000. If Tomko uses straight-line depreciation, annual depreciation
will be
a.$6,150
b.$6,108
c.$9,150
d.$5,640
30) In liquidation, balances prior to the distribution of cash to the partners are: Cash
$204,000; Paley, Capital $112,000; Stengel, Capital $104,000, and King, Capital
$12,000 deficiency. The income ratio is 6:2:2, respectively. How much cash should be
distributed to Stengel if King does not pay his deficiency?
a.$98,000
b.$101,000
c.$95,000
d.$104,000
31) The product cost that is most difficult to associate with a product is
a.direct materials
b.direct labor
c.manufacturing overhead
d.advertising
32) Owner’s equity is increased by
a.drawings
b.revenues
c.expenses
d.liabilities
33) Mize Company owns 30% interest in the stock of Lyte Corporation. During the
year, Lyte pays $20,000 in dividends to Mize, and reports $300,000 in net income. Mize
Companys investment in Lyte will increase Mizes net income by
a.$6,000
b.$90,000
c.$96,000
d.$10,000
34) Deposits in transit
a.have been recorded on the company’s books but not yet by the bank
b.have been recorded by the bank but not yet by the company
c.have not been recorded by the bank or the company
d.are checks from customers which have not yet been received by the company
35) The statement of cash flows is prepared from all of the following except
a.the adjusted trial balance
b.comparative balance sheets
c.selected transaction data
d.the current income statement
36) An accountant has debited an asset account for $1,300 and credited a liability
account for $500. Which of the following would be an incorrect way to complete the
recording of the transaction?
a.Credit an asset account for $800
b.Credit another liability account for $800
c.Credit an owner’s equity account for $800
d.Debit an owner’s equity account for $800
37) The selection of levels of activity to depict a flexible budget
1>will be within the relevant range.
2>is largely a matter of expediency.
3>is governed by generally accepted accounting principles.
a.1
b.2
c.3
d.1 and 2
38) A gain on sale of a plant asset occurs when the proceeds of the sale are greater than
the
a.salvage value of the asset sold
b.market value of the asset sold
c.book value of the asset sold
d.accumulated depreciation on the asset sold
39) A sales forecast
a.shows a forecast for the firm only
b.shows a forecast for the industry only
c.shows forecasts for the industry and for the firm
d.plays a minor role in the development of the master budget
40) Greene Corporation had the information listed below available in preparing an
income statement for the year ended December 31, 2014 . All amounts are before
income taxes. Assume a 30% income tax rate for all items.
Sales$ 800,000
Expropriation of property by a foreign government (loss)$ (120,000)
Income from operation of discontinued cement division$ 100,000
Loss from disposal of cement division$ (90,000)
Operating expenses$ 175,000
Gain on sale of equipment$ 60,000
Cost of goods sold$ 420,000
Instructions
Prepare a multiple-step income statement in good form which takes into account
intraperiod income tax allocation. Ignore EPS computations.
41) Terra Cotta Company has the following data at December 31, 2014 for its
securities:
Securities Cost Fair Value
Available-for-sale$34,000$39,000
Trading 46,000 42,000
Instructions
Journalize the December 31 adjusting entries.
42) Jane Olney is confused about how a flexible budget is prepared. Identify the steps
for Jane.
43) The Restor-It is a company specializing in the restoration of old homes. To
showcase its work, the company purchased an old Victorian home in downtown
Pittsburg, Kansas. The original home was purchased for $125,000. A new heating and
air-conditioning system was added for $30,000. The house was completely rewired and
re-plumbed at a cost of $50,000. Custom cabinets were added, and the floors and trim
were refurbished to their original condition, at a cost of $75,000.
The project was such a success, that Restor-It decided to purchase another very large
home, this time in nearby Joplin, Missouri. A realtor offered to purchase the home in
Pittsburg for $175,000. He plans to lease it as luxury short-term apartments for visiting
dignitaries. Restor-It decided that a modest return was all that was required, and so they
agreed to sell. Only afterward did they learn that they had a $10,000 loss on the sale.
The president of the company, Dan Easler, does not believe that a loss is possible. “We
sold that house for more than we paid for it,” he said. “I know we put some money in it,
but we had depreciated it for three years. How in the world can we have a loss?”
Required:
Write a short memo to Mr. Easler explaining how it would be possible to have a loss.
Do not try to use specific numbers for cost or depreciation.
44) During October, Yodle Company purchases and uses 8,800 pounds of materials
costing $35,640 to make 4,000 tiles. Yodle Companys standard material cost per tile is
$8 (2 pounds of material $4.00).
Instructions
Compute the total, price, and quantity material variances for Yodle Company for
March.
45) Fill in the missing information on the cost of goods manufactured schedule of
Alfredo Manufacturing Company:
ALFREDO MANUFACTURING COMPANY
Cost of Goods Manufactured Schedule
For the Year Ended December 31, 2014
Work in process (1/1)$325,000
Direct materials
Raw materials inventory (1/1)$?
Raw materials purchases 247,000
Raw materials available for use ?
Raw materials inventory (12/31) 39,000
Direct materials used$258,000
Direct labor ?
Manufacturing overhead
Indirect labor18,000
Factory depreciation37,000
Factory utilities38,000
Total overhead ?
Total manufacturing costs?
Total cost of work in process?
Less: Work in process (12/31) 320,000
Cost of goods manufactured$444,000
46) Sue Garner is the daughter of Fred Garner, the founder and president of Big Sky
Enterprises. She has been working in various departments during school vacations
throughout high school. She burst into the accounting department excitedly one
morning. She said that the stock prices of several of the firm’s available-for-sale
securities are up, and that her father said that the company had made over $10,000
because of this jump in stock prices. She asks to see how the increase is recorded. It is a
very busy time in the accounting department, and so her question is deferred.
Required:
Prepare a brief note to answer Sue’s question.
47) The four subdivisions of owner’s equity are: ________________,
________________, ________________, and ________________.
48) Three broad managerial functions are: (1)______________, (2)______________,
and (3)______________.