1) If direct materials cost per unit decreases, the amount of sales necessary to earn a
desired amount of profit will decrease.
2) A staff department or unit is one that provides services, assistance, and advice to the
departments with line or other staff responsibilities.
3) The budgeted direct materials purchases is based on the sum of (1) the materials
needed for production and (2) the desired ending materials inventory, less (3) the
estimated beginning materials inventory.
4) Standard costs are a useful management tool that can be used solely as a statistical
device apart from the ledger or they can be incorporated in the accounts.
5) There are only four legal structures to form and operate a business.
6) During construction of a building, the cost of interest on a construction loan should
be charged to an expense account.
7) The special fund that is set aside to provide for the payment of bonds at maturity is
called a sinking fund.
8) A capital lease is accounted for as if the asset has been purchased.
9) A qualitative characteristic that may impact upon capital investment analysis is the
impact of investment proposals on product quality.
10) Specialized journals are books of original entry.
11) If 30,000 units of materials enter production during the first year of operations,
25,000 of the units are finished, and 5,000 are 50% completed, the number of
equivalent units of production would be 28,500.
12) Purchase journals will have an Other Accounts Cr. column.
13) A present value index can be used to rank competing capital investment proposals
when the net present value method is used.
14) Prior to the last weekly payroll period of the calendar year, the cumulative earnings
of employees A and B are $99,350 and $91,000 respectively. Their earnings for the last
completed payroll period of the year are $850 each. The maximum amount of earnings
subject to social security tax at 6% is $100,000. All earnings are subject to Medicare tax
of 1.5%. Assuming that the payroll will be paid on December 29, what will be the
employer’s total FICA tax for this payroll period on the two salary amounts of $850
each?
A.$127.50
B.$115.50
C.$112.50
D.$0
15) Zeke Company is a manufacturing company that has worked on several production
jobs during the 1st quarter of the year. Below is a list of all the jobs for the quarter:
Job 356, 357, 358 & 359 were completed. Jobs 356 & 357 were sold at a profit of $500
on each job.
What is Gross Margin for Zeke Company as of the end of the 1st quarter?
A.$1,685
B.$2,685
C.$1,000
D.$685
16) Department B had 3,000 units in Work in Process that were 25% completed at the
beginning of the period at a cost of $12,500. 13,700 units of direct materials were added
during the period at a cost of $28,700. 15,000 units were completed during the period,
and 1,700 units were 95% completed at the end of the period. All materials are added at
the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710.
The number of equivalent units of production for the period for materials if the first-in,
first-out method is used to cost inventories was:
A.16,700
B.12,000
C.1,700
D.13,700
17) Which of the following is not a role of accounting in business?
A.To provide reports to users about the economic activities and conditions of a business
B.To personally guarantee loans of the business
C.To provide information to other users to determine the economic performance and
condition of the business
D.To assess the various informational needs of users and design its accounting system
to meet those needs
18) Which one of the following would not be considered an advantage of the corporate
form of organization?
A.Government regulation
B.Separate legal existence
C.Continuous life
D.Limited liability of stockholders
19) Franco and Elisa share income equally. During the current year the partnership net
income was $40,000. Franco made withdrawals of $12,000 and Elisa made withdrawals
of $17,000. At the beginning of the year, the capital account balances were: Franco
capital, $40,000; Elisa capital, $58,000. Francos capital account balance at the end of
the year is
A.$74,500
B.$62,500
C.$60,000
D.$48,000
20) There are four transactions that affect Owners equity.
(a) What are the two types of transactions that increase Owners equity?
(b) What are the two types of transactions that decrease Owners equity?
21) Which of the following is false in regards to direct materials for an auto
manufacturer?
A.Steel would probably be a direct material
B.Upholstery fabric would probably be a direct material
C.Oil to lubricate factory machines would not be a direct material
D.Small plastic clips to hold on door panels, that become part of the auto, must be
accounted for as direct materials
22) Easy Sailing, LLC provides repair services for commercially-owned boats and
yachts. The firm has 5 members in the LLC, which did not change between 2011 and
2012. During 2012, the business expanded into three new regions of the country. The
following revenue and employee information is provided:
Required:
a. For 2011 and 2012, determine the revenue per employee (excluding members).
b. Interpret the trend between the two years.
23) The entry to adjust the accounts for wages accrued at the end of the accounting
period is
A.debit Wages Payable; credit Wages Income
B.debit Wages Income; credit Wages Payable
C.debit Wages Payable; credit Wages Expense
D.debit Wages Expense; credit Wages Payable
24) Classify the following costs as direct, indirect, or neither:
a) indirect labor incurred
b) factory equipment depreciation
c) indirect materials used
d) office equipment depreciation
e) direct materials used
25) At the end of the current year, Accounts Receivable has a balance of $750,000;
Allowance for Doubtful Accounts has a debit balance of $6,200; and net sales for the
year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted
balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt
Expense; and (c) the net realizable value of accounts receivable.
26) Holly and Luke formed a partnership, investing $240,000 and $80,000,
respectively. Determine their participation in the years net income of $380,000 under
each of the following independent assumptions:
(a) No agreement concerning division of net income;
(b) Divided in the ratio of original capital investment;
(c) Interest at the rate of 15% allowed on original investments and the remainder
divided in the ratio of 2:3;
(d) Salary allowances of $50,000 and $70,000, respectively, and the balance divided
equally;
(e) Allowance of interest at the rate of 15% on original investments, salary allowances
of $50,000 and $70,000, respectively, and the remainder divided equally.
27) The current period statement of cash flows includes the flowing:
The cash balance at the end of the period is
A.$45,000
B.$635,000
C.$355,000
D.$125,000
28) An aid in internal control over payrolls that indicates employee attendance is
A.time card
B.voucher system
C.payroll register
D.employee’s earnings record
29) Division A of Mocha Company has sales of $155,000, cost of goods sold of
$83,000, operating expenses of $43,000, and invested assets of $150,000.
What is the profit margin for Division A?
A.19.3%
B.48.0%
C.18.7%
D.5.47%
30) The following data were gathered to use in reconciling the bank account of
Savannah Company:
What is the adjusted balance on the bank reconcilition?
A.$14,470
B.$10,705
C.$15,095
D.$15,720
31) Which of the following below generally is the most useful in analyzing companies
of different sizes
A.comparative statements
B.common-sized financial statements
C.price-level accounting
D.audit report
32) The asset created by a business when it makes a sale on account is termed
A.accounts payable
B.prepaid expense
C.unearned revenue
D.accounts receivable
33) Woodpecker Co. has $296,000 in accounts receivable on January 1. Budgeted sales
for January are $860,000. Woodpecker Co. expects to sell 20% of its merchandise for
cash. Of the remaining 80% of sales on account, 75% are expected to be collected in the
month of sale and the remainder the following month. The January cash collections
from sales are:
A.$812,000
B.$688,000
C.$468,000
D.$984,000
34) Direct labor and direct materials are classified as:
A.product costs and expensed when the goods are sold
B.product costs and expensed when incurred
C.period costs and expensed when incurred
D.period costs and expensed when the goods are sold
35) There are four closing entries. The first one is to close ____, the second one is to
close ____, the third one is to close ____, and the last one is to close ____.
A.Revenues, expenses, income summary, drawing account
B.Expenses, assets, income summary, capital account
C.Capital account, drawing account, income summary, assets
D.Drawing account, income summary, expenses, revenues
36) Using the following information, what is the amount of merchandise available for
sale?
A.$35,540
B.$36,580
C.$37,700
D.$34,500
37) The following totals for the month of June were taken from the payroll register of
Young Company:
The entry to record the accrual of employers payroll taxes would include a
A.debit to Payroll Taxes Expense for $2,498
B.debit to Social Security and Medicare Tax Payable for $2,250
C.debit to Payroll Taxes Expense for $1,373
D.Debit to Payroll Tax Expense for $1,125
38) 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, calculate depreciation expense for the last year.
A.$17,500
B.$30,000
C.$12,500
D.$40,000
39) Current assets are usually listed in order
A.of the due date
B.of the size
C.alphabetically
D.of liquidity
40) The Trumpet Company produced 8,700 units of a product that required 3.25
standard hours per unit. The standard fixed overhead cost per unit is $1.20 per hour at
29,000 hours, which is 100% of normal capacity. Determine the fixed factory overhead
volume variance.
41) During the current year, merchandise is sold for $137,500 cash and $425,600 on
account. The cost of the merchandise sold is $322,325. What is the amount of the gross
profit?
42) On the basis of the following data for Breach Co. for the year ended December 31,
2011 and the preceding year, prepare a statement of cash flows using the indirect
method of reporting cash flows from operating activities.
Assume that equipment costing $25,000 was purchased for cash and no long term assets
were sold during the period.
Stock was issued for cash – 3,200 shares at par.
Net income for 2010 was $76,000.
Cash dividends declared and paid were $13,000.
43) For each of the following businesses, explain how a purchase journal might be
modified for the specific business.
1> North County Medical Center
2> Tri-County Farms, Inc.
3> Prescotts Quick Lube and Tire Store
44) The Mountain Springs Water Company has two departments, Purifying and
Bottling. The Bottling Department had 3,000 liters in beginning work in process
inventory (30% complete). During the period 71,000 liters were completed. The ending
work in process was 5,000 liters (70% completed). What are the total equivalent units
for direct materials (using the FIFO method) if materials were added at the beginning of
the process?
45) What is a business segment? How can business segments be analyzed?