1) If merchandise costing $3,500, terms FOB destination, 2/10, n/30, with prepaid
freight costs of $125, is paid within 10 days, the amount of the purchases discount is
$70.
2) 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.
3) Direct labor cost is an example of a controllable cost for the supervisor of a
manufacturing department.
4) When a seller allows a buyer an amount for old equipment that is traded in for new
equipment of similar use, this amount is known as boot.
5) Make-to-order companies typically produce in small batch sizes.
6) In a process costing system, a separate work in process inventory account is
maintained for each customers job.
7) The systematic allocation of land’s cost to expense is called depreciation.
8) Depreciation expense on store equipment for a department store is an indirect
expense.
9) The rate earned on total assets measures the profitability of total assets, without
considering how the assets are financed.
10) If 16,000 units of materials enter production during the first year of operations,
12,000 of the units are finished, and 4,000 are 75% completed, the number of
equivalent units of production would be 15,000.
11) In preparing a bank reconciliation, the amount of deposits in transit is deducted
from the balance per bank statement.
12) Based on the following production and sales data of Shingle Co. for March of the
current year, prepare (a) a sales budget and (b) a production budget.
13) Shiny Kar Company had the following transactions. For each transaction, show the
effect on the accounting equation by putting the amount and direction (plus, minus, or
NC for no change) in each box of the table below.
Assets Liabilities Stockholders Equity
a. Shiny Kar paid $5,000 in cash dividends to stockholders.
b. Shiny Kar Company sold 2 cars for a total of $55,000 on account.
c. The cost of the cars sold in (b) above was $40,000.
d. Shiny Kar received $35,000 payment for a car previously sold on account.
e. Shiny Kar paid $450 for advertising.
f. Shiny Kar purchased $150 of cleaning supplies on account.
14) In the variable costing income statement, deduction of variable selling and
administrative expenses from manufacturing margin yields:
A.differential margin
B.contribution margin
C.gross profit
D.marginal expenses
15) At the end of the current year, Accounts Receivable has a balance of $90,000;
Allowance for Doubtful Accounts has a credit balance of $850; and net sales for the
year total $300,000. Bad debt expense is estimated at 2.5% of net sales.
Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the
adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad
Debt Expense; and (c) the net realizable value of accounts receivable.
16) If fixed costs are $1,200,000, the unit selling price is $240, and the unit variable
costs are $110, what is the amount of sales required to realize an operating income of
$200,000?
A. 9,231 units
B.12,000 units
C.10,769 units
D. 5,833 units
17) Which of the following isnot a characteristic of a corporation?
A.Corporations are organized as a separate legal taxable entity
B.Ownership is divided into shares of stock
C.Corporations experience an ease in obtaining large amounts of resources by issuing
stock
D.Corporations resources are limited to its individual owners resources
18) Cost behavior refers to the manner in which:
A.a cost changes as the related activity changes
B.a cost is allocated to products
C.a cost is used in setting selling prices
D.a cost is estimated
19) The bond indenture may provide that funds for the payment of bonds at maturity be
accumulated over the life of the issue. The amounts set aside are kept separate from
other assets in a special fund called a(n)
A.enterprise fund
B.sinking fund
C.special assessments fund
D.general fund
20) The following data is given for the Zoyza Company:
Overhead is applied on standard labor hours.
The factory overhead controllable variance is:
A.$73,250F
B.$73,250U
C.$59,400F
D.$59,400U
21) Jarvis Corporation makes an investment in 100 shares of Saxton Company’s
common stock. The stock is purchased for $45 a share plus brokerage fees of $280. The
entry for the purchase is:
A.Cash 4,500
Stock Investments – Saxton Company 4,500
B.Stock Investments – Saxton Company 4,780
Cash 4,780
C.Stock Investments – Saxton Company 4,500
Brokerage Fee Expense 280
Cash 4,780
D.Stock Investments – Saxton Company 4,500
Cash 4,500
22) Under which inventory costing method could increases or decreases in income from
operations be misinterpreted to be the result of operating efficiencies or inefficiencies?
A.only variable costing
B.only absorption costing
C.both variable and absorption costing
D.neither variable nor absorption costing
23) The balances for the accounts listed below appeared in the Adjusted Trial Balance
columns of the work sheet. Indicate whether each balance should be extended to (a) the
Income Statement columns or (b) the Balance Sheet columns.
24) Debts owed by a business are referred to as
A.accounts receivables
B.assets
C.stockholders equity
D.liabilities
25) Present entries to record the selected transactions described below:
(a) Issued $2,750,000 of 10-year, 8% bonds at 97.
(b) Amortized bond discount for a full year, using the straight-line method.
(c) Called bonds at 98. The bonds were carried at $2,692,250 at the time of the
redemption.
26) All of the following would be reported on the balance sheet as a current asset
except:
A.factory overhead
B.materials inventory
C.finished goods inventory
D.work in process inventory
27) On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that
has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000
hours.
Using straight line depreciation, prepare the journal entry to record depreciation
expense for (a) the first year, (b) the second year and (c) the last year.
28) Using accrual accounting, revenue is recorded and reported only
A.when cash is received without regard to when the services are rendered
B.when the services are rendered without regard to when cash is received
C.when cash is received at the time services are rendered
D.if cash is received after the services are rendered
29) Match the following terms with the best definition given.
1>(Actual price – Standard price) x Actual quantity A. Direct labor time variance
2>(Actual rate per hour – Standard rate per hour) x Actual hours B. Direct labor rate
variance
3>(Actual direct hours – Standard direct hours) x Standard Rate per Hour C. Direct
materials price variance
4>(Actual quantity – Standard quantity) x Standard Price D. Direct materials quantity
variance
5>Standard variable overhead for actual units produced E. Budgeted variable factory
overhead
30) If a business had sales of $4,000,000 and a margin of safety of 25%, the break-even
point was:
A.$5,000,000
B.$3,000,000
C.$12,000,000
D.$1,000,000
31) Under absorption costing, which of the following costs would not be included in
finished goods inventory?
A.hourly wages of assembly worker
B.straight-line depreciation on factory equipment
C.overtime wages paid to factory workers
D.advertising costs for a furniture manufacturer
32) When the allowance method is used to account for uncollectible accounts, Bad
Debts Expense is debited when
A.a customer’s account becomes past due
B.an account becomes bad and is written off
C.a sale is made
D.management estimates the amount of uncollectibles
33) At the end of the fiscal year, the usual adjusting entry to Prepaid Insurance to record
expired insurance was omitted. Which of the following statements is true?
A.Total assets at the end of the year will be understated
B.Stockholders equity at the end of the year will be understated
C.Net income for the year will be overstated
D.Insurance Expense will be overstated
34) Which of the following should be classified as an extraordinary item on the income
statement?
A.Gain on a sale of a long term investment
B.Loss due to discontinued operations
C.Restructuring charges
D.Loss resulting from an infrequent natural disaster
35) The Miracle Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1,
2011, at 96. The journal entry to record the issuance will show a
A.debit to Discount on Bonds Payable for $40,000
B.debit to Cash of $1,000,000
C.credit to Bonds Payable for $960,000
D.credit to Cash for $960,000
36) Deferred revenue is revenue that is
A.earned and the cash has been received
B.earned but the cash has not been received
C.not earned and the cash has not been received
D.not earned but the cash has been received
37) If selling and administrative expenses are allocated to different products, they
should be reported as a
A.product cost
B.factory overhead cost
C.period cost
D.cost of goods sold
38) It would be acceptable to have the selling price of a product just above the variable
costs and expenses of making and selling it in:
A.the long run
B.the short run
C.both the short run and long run
D.monopoly situations
39) Notes may be issued
A.when assets are purchased
B.to creditor’s to temporarily satisfy an account payable created earlier
C.when borrowing money
D.all of the above
40) If the wage rate paid per hour differs from the standard wage rate per hour for direct
labor, the variance is termed a:
A.variable variance
B.rate variance
C.quantity variance
D.volume variance
41) The following account appears in the ledger after only part of the postings have
been completed for July, the first month of the current fiscal year:
Factory overhead is applied to jobs at the rate of 60% of direct labor cost. The actual
factory overhead incurred for July was $75,000. Jobs completed during the month
totaled $301,200.
(a) Prepare the journal entries to record (1) the application of factory overhead to
production during July and (2) the jobs completed duringJuly.
(b) What is the balance of the factory overhead account on July 31?
(c) Was factory overhead overapplied or underapplied on July 31?
(d) Determine the cost of the unfinished jobs on July 31.
42) The journal entry to record the conversion of an $4,700 accounts payable to a notes
payable would be:
A.Cash 4,700
Notes Payable 4,700
B.Notes Receivable 4,700
Notes Payable 4,700
C.Notes Payable 4,700
Cash 4,700
D.Accounts Payable 4,700
Notes Payable 4,700
43) (a) On October 10th, Nikle Company purchased supplies worth $1,800 on account.
Prepare the journal entry to record this transaction.
(b) Nikle Company paid for the supplies purchased in (a) on October 25th. Prepare the
journal entry to record this transaction.
44) Which of the following is an example of an accrued expense?
A.Salary owed but not yet paid
B.Fees received but not yet earned
C.Supplies on hand
D.A two-year premium paid on a fire insurance policy
45) Using a perpetual inventory system, the entry to record the purchase of $30,000 of
merchandise on account would include a
A.debit to Accounts Payable
B.debit to Merchandise Inventory
C.credit to Merchandise Inventory
D.credit to Sales
46) On August 1, Batson Company issued a 60-day note with a face amount of
$140,000 to Jergens Company for merchandise inventory. (Assume a 360-day year is
used for interest calculations.)
47) A company that has 25,000 shares of $5.00 par value common stock issued and
outstanding paid a dividend of $0.40 per share. The market value of the stock is $16 per
share. The companys dividend yield is:
A.2.5%
B.400%
C.16%
D.40%
48) An unsecured bond is the same as a
A.debenture bond
B.zero coupon bond
C.term bond
D.bond indenture
49) At the end of the fiscal year, the following adjusting entries were omitted:
Assuming that financial statements were prepared before the errors were discovered,
indicate the effect of each error, considered individually, by inserting the dollar amount
in the appropriate spaces. Insert “0” if the error does not affect the item.
50) At the end of the current year, $3,700 fees have been earned but have not been
billed to clients. Journalize the adjusting entry to record the accrued fees.
51) During the month of April, Cavy Company incurred factory overhead as follows:
Journalize the entry to record the factory overhead incurred during April.
52) Prepare an income statement (through income before income tax) for presentation
to management, using the following data from the records of Greenway Manufacturing
Company for November of the current year:
53) Given the following:
Variable cost as a percentage of sales = 60%
Unit Variable cost = $30
Fixed costs = $200,000
What is the break-even point in units?
54) The Svelte Jeans Company produces two different types of jeans. One is called the
Simple Life and the other is called the Fancy Life. The company sales budget estimates
that 400,000 of the Simple Life Jeans and 250,000 of the Fancy Life will be sold during
20–. The company begins with 8,000 Simple Life Jeans and 17,000 Fancy Life Jeans.
The company desires ending inventory of 7,500 of Simple Life Jeans and 10,000 Fancy
Life Jeans. Prepare a Production Budget for the 20–.
55) Schedule of Activity Costs
From the above schedule, compute the percentage of non-value-added activities.
56) Sampson Co. sold merchandise to Batson Co. on account, $46,000, terms 2/15, net
45. The cost of the merchandise sold is $38,500. Sampson Co. issued a credit memo for
$1,500 for merchandise returned that originally cost $950. The Batson Co. paid the
invoice within the discount period. Prepare the entries that both Sampson and Batson
Companies would record for the above. Assume both Sampson and Batson use a
perpetual inventory system.
57) The following data were taken from the Balance Sheet columns of the work sheet
for April 30, 2011 for Mackenzie Company:
Prepare a classified balance sheet.
58) List the principal advantage of Electronic Funds Transfers.
59) Journalize the following transactions for Donnell Inc. using both the periodic
inventory system and the perpetual inventory system, presented in a side-by-side format
shown at the end of this exercise.
Oct. 5 Purchased $18,000 of merchandise from Rex on account, terms 2/10, n/30.
Oct. 8 Returned merchandise purchased on account on Oct. 5 amounting to $3,500.
Oct. 15 Paid for purchase of Oct. 5, less Oct. 8 return and purchase discount.
Oct. 5 Purchased $180,000 of merchandise from Rex on account, terms 2/10, n/30.
Oct. 8 Returned merchandise purchased on account on Oct. 5 amounting to $3,500.
Oct. 15 Paid for purchase of Oct. 5, less Oct. 8 return and purchase discount.