1) A corporation acts under its own name rather than in the name of its stockholders.
2) Bonds are a form of interest-bearing notes payable.
3) In using variance reports, top management normally looks carefully at every
variance.
4) Each stockholder in a corporation has a separate capital account in the stockholders’
equity section of the balance sheet.
5) Overapplied overhead means that actual manufacturing overhead costs were greater
than the manufacturing overhead costs applied to jobs.
6) Expressing an opinion as to the fairness of the information presented in financial
statements is a service performed by CPAs.
7) A budget can be used as a basis for evaluating performance.
8) Recording depreciation each period is an application of the expense recognition
principle.
9) An effective system of internal control requires that at least two individuals be
assigned to one cash drawer so that each can serve as check on the other.
10) Actual manufacturing overhead costs should be charged to the Work in Process
Inventory account as they are incurred.
11) The revenue recognition principle applies to merchandisers by recognizing sales
revenues when the performance obligation is satisfied.
12) Standard cost cards are the subsidiary ledger for the Work in Process account in a
standard cost system.
13) A loss on sale of equipment is added to net income in determining cash provided by
operations under the indirect method.
14) Cash dividends are not a liability of the corporation until they are declared by the
board of directors.
15) Ten thousand shares of treasury stock of E. Marcos, Inc., previously acquired at $14
per share, are sold at $20 per share. The entry to record this transaction will include a
a.credit to Treasury Stock for $200,000
b.debit to Paid-In Capital from Treasury Stock for $60,000
c.debit to Treasury Stock for $140,000
d.credit to Paid-In Capital from Treasury Stock for $60,000
16) A post-closing trial balance should be prepared
a.before closing entries are posted to the ledger accounts
b.after closing entries are posted to the ledger accounts
c.before adjusting entries are posted to the ledger accounts
d.only if an error in the accounts is detected
17) Financial statements for external users can be described as
a.user-specific
b.general-purpose
c.special-purpose
d.managerial reports
18) Heidi Company had the following information at December 31:
Finished goods inventory, January 1$80,000
Finished goods inventory, December 31115,000
If the cost of goods manufactured during the year amounted to $1,895,000 and annual
sales were $2,884,000, how much is the amount of gross profit for the year?
a.$1,860,000
b.$909,000
c.$1,975,000
d.$1,024,000
19) Raymond Industries expects to purchase $180,000 of materials in July and
$215,000 of materials in August. Three-quarters of all purchases are paid for in the
month of purchase, and the other one-fourth are paid for in the month following the
month of purchase. How much will August’s cash disbursements for materials
purchases be?
a.$206,250
b.$161,250
c.$135,000
d.$215,000
20) In the month of November, Kinsey Company Inc. wrote checks in the amount of
$18,500. In December, checks in the amount of $25,316 were written. In November,
$16,936 of these checks were presented to the bank for payment, and $21,766 were
presented in December. What is the amount of outstanding checks at the end of
November?
a.$1,564
b.$4,830
c.$5,114
d.$6,816
21) At the time of acquisition of a debt investment,
a.no journal entry is required
b.the historical cost principle applies
c.the Stock Investments account is debited when bonds are purchased
d.the Investment account is credited for its cost plus brokerage fees
22) Postings are made daily to subsidiary ledgers so that
a.employees are kept busy
b.debits equal credits
c.individual account information is kept current
d.the control account will balance to the subsidiary ledger
23) Identify whether each of the following items would be (a) added to the book
balance, (b) deducted from the book balance in a bank reconciliation, (c) added to the
bank balance, or (d) deducted from the bank balance.
24) Which of the following receivables would not be classified as an “other
receivable”?
a.Advance to an employee
b.Refundable income tax
c.Notes receivable
d.Interest receivable
25) Which one of the following is not a primary problem associated with accounts
receivable?
a.Depreciating accounts receivable
b.Recognizing accounts receivable
c.Valuing accounts receivable
d.Disposing of accounts receivable
26) Moreno Company purchased equipment for $900,000 on January 1, 2013, and will
use the double-declining-balance method of depreciation. It is estimated that the
equipment will have a 3-year life and a $40,000 salvage value at the end of its useful
life. The amount of depreciation expense recognized in the year 2015 will be
a.$100,000
b.$60,000
c.$108,880
d.$68,880
27) The Duce Company has five plants nationwide that cost a total of $100 million. The
current fair value of the plants is $500 million. The plants will be recorded and reported
as assets at
a.$100 million
b.$600 million
c.$400 million
d.$500 million
28) A flower shop makes a large sale for $1,200 on November 30 . The customer is sent
a statement on December 5 and a check is received on December 10 . The flower shop
follows GAAP and applies the revenue recognition principle. When is the $1,200
considered to be recognized?
a.December 5
b.December 10
c.November 30
d.December 1
29) The Sorrento Skies Corporation issues 16,000 shares of $100 par value preferred
stock for cash at $120 per share. The entry to record the transaction will consist of a
debit to Cash for $1,920,000 and a credit or credits to
a.Preferred Stock for $1,920,000
b.Paid-in Capital from Preferred Stock for $1,920,000
c.Preferred Stock for $1,600,000 and Retained Earnings for $320,000
d.Preferred Stock for $1,600,000 and Paid-in Capital in Excess of ParPreferred Stock
for $320,000
30) Which of the following is not a separate management function?
a.Planning
b.Directing
c.Decision-making
d.Controlling
31) Presented here is a partial amortization schedule for Graceland Company who sold
$100,000, five year 10% bonds on January 1, 2014 for $108,000 and uses annual
straight-line amortization.
Which of the following amounts should be shown in cell (ii)?
a.$11,600
b.$8,400
c.$10,800
d.$9,200
32) Current liabilities generally appear
a.after long-term debt on the balance sheet
b.in decreasing order of magnitude on the balance sheet
c.in order of maturity on the balance sheet
d.in increasing order of magnitude on the balance sheet
33) Short-term creditors are usually most interested in evaluating
a.solvency
b.liquidity
c.marketability
d.profitability
34) A company has contribution margin per unit of $60 and a contribution margin ratio
of 40%. What is the unit selling price?
a.$100.00
b.$150.00
c.$24.00
d.Cannot be determined
35) In a process cost system, a production cost report is prepared
a.only for the first processing department
b.for all departments in the aggregate
c.for each processing department
d.only for the last processing department
36) Calico Company is starting business and is unsure of whether to sell its product
assembled or unassembled. The unit cost of the unassembled product is $90 and Calico
Company would sell it for $180. The cost to assemble the product is estimated at $36
per unit and Calico Company believes the market would support a price of $232 on the
assembled unit. What is the correct decision using the sell or process further decision
rule?
a.Sell before assembly, the company will be better off by $36 per unit
b.Sell before assembly, the company will be better off by $52 per unit
c.Process further, the company will be better off by $52 per unit
d.Process further, the company will be better off by $16 per unit
37) Country Outfilter’s 2014 financial statements contained the following data (in
millions).
Current assets$16,890Accounts receivable$1,550
Total assets 42,430Interest expense980
Current liabilities 12,000Income tax expense1,270
Total liabilities 32,580Net income2,230
Cash 380
Instructions
Compute these values:
(a)Working capital.(b)Current ratio.
38) The comparative condensed income statements of Marks Corporation are shown
below.
MARKS CORPORATION
Comparative Condensed Income Statements
For the Years Ended December 31
2015 2014
Net sales$620,000$500,000
Cost of goods sold 450,000 400,000
Gross profit170,000100,000
Operating expenses 54,000 40,000
Net income$116,000$ 60,000
Instructions
(a)Prepare a horizontal analysis of the income statement data for Marks Corporation
using 2014 as a base. (Show the amounts of increase or decrease.)
(b)Prepare a vertical analysis of the income statement data for Marks Corporation in
columnar form for both years.
39) Bonds that are issued in the name of the owner are
a.coupon bonds
b.bearer bonds
c.serial bonds
d.registered bonds
40) The expense recognition principle states that expenses should be matched with
revenues. Another way of stating the principle is to say that
a.assets should be matched with liabilities
b.efforts should be matched with accomplishments
c.owner withdrawals should be matched with owner contributions
d.cash payments should be matched with cash receipts
41) Druganaut Company buys a $21,000 van on credit. The transaction will affect the
a.income statement only
b.balance sheet only
c.income statement and owner’s equity statement only
d.income statement, owner’s equity statement, and balance sheet
42) From an internal control standpoint, the asset most susceptible to improper
diversion and use is
a.prepaid insurance
b.cash
c.buildings
d.land
43) The data for an investment center is given below.
1/1/14 12/31/14
Current assets$ 300,000$ 500,000
Plant assets3,000,0004,000,000
Idle plant assets250,000330,000
Land held for future use1,200,0001,200,000
The controllable margin is $880,000.
Instructions
What is the return on investment for the center for 2014?
44) Allied Company allocates manufacturing overhead at $8 per direct labor hour. Job
A45 required 5 boxes of direct materials at a cost of $35 per box and took employees 16
hours to complete. Employees earn $18 per hour.
Instructions
Compute the total cost of Job A45 .
45) Total stockholders’ equity$1,090,000
46) Ravienda Industries provided the following information about its standard costing
system for 2014:
Standard DataActual Data
Materials10 lbs. @ $4 per lbs.Produced4,000 units
Labor3 hrs. @ $22 per hr.Materials purchased50,000 lbs. for $210,000
Budgeted production3,500 unitsMaterials used41,000 lbs.
Labor worked11,000 hrs. costing $220,000
Instructions
Calculate the labor price variance and the labor quantity variance.
47) The following information is available for Grey Goose Inc.:
Beginning retained earnings$600,000
Cash dividends declared60,000
Net income for 2014120,000
Stock dividend declared15,000
Understatement of last year’s depreciation expense30,000
Instructions
Based on the preceding information, prepare a retained earnings statement for 2014 .
48) In computing cash payments for income taxes, a decrease in income taxes payable
is ______________ to (from) income tax expense.
49) Brislin, Humphreys, and Watkins share income and losses in a ratio of 3:2:5,
respectively. The capital account balances of the partners are as follows:
Brislin Capital$600,000
Humphreys, Capital360,000
Watkins, Capital260,000
Instructions
Prepare the journal entry on the books of the partnership to record the withdrawal of
Watkins under the following independent circumstances:
1>The partners agree that Watkins should be paid $280,000 by the partnership for his
interest.
2>The partners agree that Watkins should be paid $220,000 by the partnership for his
interest.
3>Brislin agrees to pay Watkins $180,000 for one-half of his capital interest and Heller
agrees to pay Watkins $180,000 for one-half of his capital interest in a personal
transaction among the partners.
Ans: N/A
50) The ledger accounts given below, with an identification number for each, are used
by Mersa Company. The company uses a perpetual inventory system.
Instructions: Prepare appropriate entries for the month of July for each of the listed
petty cash fund transactions by placing the appropriate identification number(s) in the
debit and credit columns provided. Write “N/A” if no entry is appropriate.
1>Petty Cash6>Supplies
2>Accounts Receivable7>Cash Over and Short
3>Cash8>Miscellaneous Expense
4>Inventory9>Postage Expense
5>Supplies Expense10>Freight-out
Account(s)Account(s)
Entry InformationDebitedCredited
July1Issued a check for $400 to establish a petty cash fund.
July3Disbursed $35 for donuts and coffee for a breakfast meeting.
July5Paid Fast Freight for the shipping cost on goods purchased for resale $50.
(July 6 – 17 various other disbursements took place.)
July18Replenished the petty cash fund by writing a check for $360. On this date the
fund consisted of $40 in cash plus the following petty cash receipts: Freight on
inventory purchased $92, supplies $160, and miscellaneous expense $119.
July21A check was written for $100 to increase the stipulated amount of the fund.