1) It is not possible for one company to influence the operating policies of another
company unless it owns more than 50% interest in that company.
2) In many retail businesses, inventory is the largest current asset.
3) The amount of the “adjusted balance” appearing on the bank reconciliation as of a
given date is the amount that is shown on the balance sheet for that date.
4) The balance of the account can be determined by adding all of the debits, adding all
of the credits, and adding the amounts together.
5) Accounting for the sale of stock is the same for both the cost and the equity methods
of accounting for investments.
6) In the periodic inventory system, purchases of merchandise for resale are debited to
the Purchases account.
7) When a corporation discontinues a segment of its operations at a loss, the loss should
be reported as a separate item before income from continuing operations on the income
statement.
8) A mixed cost has characteristics of both a variable and a fixed cost.
9) If the straight-line method of amortization is used, the amount of unamortized
premium on bonds payable will decrease as the bonds approach maturity.
10) The three inventory costing methods will normally each yield different amounts of
net income.
11) When a company establishes an outstanding reputation and has a competitive
advantage because of it, the company should record goodwill on its financial
statements.
12) No significant differences exist between the accounting standards issued by the
FASB and the IASB.
13) Examples of temporary accounts are supplies and prepaid expenses which are in the
ledger for just a short time before they expire.
14) Of the three widely used inventory costing methods (FIFO, LIFO, and average
cost), the LIFO method of costing inventory assumes costs are charged based on the
most recent purchases first.
15) A cost that will not be affected by later decisions is termed an opportunity cost.
16) Available-for-sale securities are securities that management expects to sell in the
future, but are not actively traded for profit.
17) The amount of depreciation expense for a fixed asset costing $95,000, with an
estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating
hours, is $21,375 by the units-of-production method during a period when the asset was
used for 4,500 hours.
18) The cost of materials transferred into the Bottling Department of Mountain Springs
Water Company is $32,400, with $26,000 from the Purifying Department, plus
additional $6,400 from the materials storeroom. The conversion cost for the period in
the Bottling Department is $8,750 ($3,750 factory applied and $5,000 direct labor.) The
total costs transferred to finished goods for the period was $31,980. The Bottling
Department had a beginning inventory of $1,860.
19) A company with 100,000 authorized shares of $4 par common stock issued 50,000
shares at $9. Subsequently, the company declared a 2% stock dividend on a date when
the market price was $10 a share. The effect of the declaration and issuance of the stock
dividend is to
A.decrease retained earnings, increase common stock, and increase paid-in capital
B.increase retained earnings, decrease common stock, and decrease paid-in capital
C.increase retained earnings, decrease common stock, and increase paid-in capital
D.decrease retained earnings, increase common stock, and decrease paid-in capital
20) The debits to Work in Process–Assembly Department for April, together with data
concerning production, are as follows:
All direct materials are placed in process at the beginning of the process and the first-in,
first-out method is used to cost inventories. The materials cost per equivalent unit for
April is:
A.$3.00
B.$3.80
C.$2.92
D.$2.31
21) The journal entry to close the Fees Earned, $750, and Rent Revenue, $175, accounts
on December 31st during the closing process would be:
A.Dec. 31 Fees Earned 750
Rent Revenue 175
Income Summary 925
B.Dec. 31 Income Summary 925
Fees Earned 750
Rent Revenue 175
C.Dec. 31 Revenues 925
Income Summary 925
D.Dec. 31 Income Summary 925
22) The Atlantic Company sells a product with a break-even point of 3,000 sales units.
The variable cost is $60 per unit, and fixed costs are $270,000. Determine the (a) unit
sales price, and (b) break-even points in sales units if the company desires a target profit
of $36,000.
23) Which of the following groups are considered to be internal users of accounting
information?
A.Employees and customers
B.Customers and vendors
C.Employees and managers
D.Government and banks
24) If at the end of the fiscal year the variances from standard are significant, the
variances should be transferred to the:
A.work in process account only
B.cost of goods sold account only
C.finished goods account only
D.work in process, cost of goods sold, and finished goods accounts
25) Net income will result when
A.revenues (credits) > expenses (debits)
B.revenues (debits) > expenses (credits)
C.expenses (credits) = revenues (debits)
D.revenues (credits) = expenses (debits)
26) For a business that uses the allowance method of accounting for uncollectible
receivables:
27)
Which of the graphs in Figure 20-1 illustrates the behavior of a total fixed cost?
A.Graph 2
B.Graph 3
C.Graph 4
D.Graph 1
28) The type of account and normal balance of Petty Cash is a(n)
A.revenue, credit
B.asset, debit
C.liability, credit
D.expense, debit
29) The amount of the outstanding checks is included on the bank reconciliation as a(n)
A.deduction from the balance per company’s records
B.addition to the balance per bank statement
C.deduction from the balance per bank statement
D.addition to the balance per company’s records
30) Jackson and Campbell have capital balances of $100,000 and $300,000
respectively. Jackson devotes full time and Campbell one-half time to the business.
Determine the division of $150,000 of net income under each of the following
assumptions:
(a) No agreement as to division of net income.
(b) In ratio of capital balances.
(c) In ratio of time devoted to business.
31) The form of income statement that derives its name from the fact that the total of all
expenses is deducted from the total of all revenues is called a
A.multiple-step statement
B.revenue statement
C.report-form statement
D.single-step statement
32) The following production data were taken from the records of the Finishing
Department for June:
Determine the number of conversion equivalent units of production in the June 30
Finishing Department inventory, assuming that the first-in, first-out method is used to
cost inventories.
A.68,000 units
B.70,400 units
C.66,200 units
D.4,200 units
33) As production increases, what would you expect to happen to fixed cost per unit?
A.Increase
B.Decrease
C.Remain the same
D.Either increase or decrease, depending on the variable costs
34) When an additional partner is admitted to a partnership by contribution of assets to
the partnership
A.the total assets of the partnership do not change
B.no liabilities can be contributed at the same time
C.the amount of the cash contribution is the same as the amount of the debit to the new
partner’s capital account
D.the total of the owner’s equity accounts increases
35) The Statement of Owners Equity begins with the beginning balance followed by
A.plus Net Income (loss) less withdrawals
B.plus Net Income (loss) plus investments
C.plus investments less withdrawals
D.plus investments plus Net Income (loss) less withdrawals
36) 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
37) The journal entry a company records for the payment of interest, interest expense,
and amortization of bond discount is
A.debit Interest Expense, credit Cash and Discount on Bonds Payable
B.debit Interest Expense, credit Cash
C.debit Interest Expense and Discount on Bonds Payable, credit Cash
D.debit Interest Expense, credit Interest Payable and Discount on Bonds Payable
38) If the expected sales volume for the current period is 9,000 units, the desired ending
inventory is 200 units, and the beginning inventory is 300 units, the number of units set
forth in the production budget, representing total production for the current period, is:
A.9,000
B.8,900
C.8,700
D.9,100
39) Which of the following products probably would be manufactured using a job order
costing system?
A.Number 2 pencils
B.Computer monitors
C.Wedding invitations
D.Paper
40) What is the major difference between the Unadjusted Trial Balance and the
Adjusted Trial Balance?
A.The Adjusted Trial Balance will show the net income (loss) as an additional account
B.Unlike the Adjusted Trial Balance, the Unadjusted Trial Balance will continue with
the end-of-period processing even if it is not in balance
C.The Adjusted Trial Balance includes the postings of the adjustments for the period in
the balance of the accounts
D.The Adjusted Trial Balance will be used to record the adjustments for the period
41) The following totals for the month of April were taken from the payroll register of
Magnum Company.
The entry to record accrual of employers payroll taxes would include a
A.debit to Payroll Tax Expense for $248
B.debit to FICA Taxes Payable for $1,800
C.credit to Payroll Tax Expense for $248
D.debit to Payroll Tax Expense for $1,148
42) The summary of the payroll for the monthly pay period ending July 15 indicated the
following:
Journalize the entries to record (a) the payroll and (b) the employer’s payroll tax
expense for the month. The state unemployment tax rate is 3.1%, and the federal
unemployment tax rate is 0.8%. Only $25,000 of salaries are subject to unemployment
taxes.
43) The primary difference between a static budget and a flexible budget is that a static
budget
A.is suitable in volatile demand situation while flexible budget is suitable in a stable
demand situation
B.is concerned only with future acquisitions of fixed assets, whereas a flexible budget is
concerned with expenses that vary with sales
C.includes only fixed costs, whereas a flexible budget includes only variable costs
D.is a plan for a single level of production, whereas a flexible budget can be converted
to any level of production
44) Which of the following accounts usually has a debit balance?
A.Purchase Discounts
B.Sales Tax Payable
C.Allowance for Doubtful Accounts
D.Freight-In
45) Currently, the unit selling price is $50, the variable cost, $34, and the total fixed
costs, $108,000. A proposal is being evaluated to increase the selling price to $54.
46) Expenditures for research and development are generally recorded as
A.current operating expenses
B.assets and amortized over their estimated useful life
C.assets and amortized over 40 years
D.current assets
47) 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
48) Gerardo Company had a net income of $75,000, and other comprehensive income
of $12,500 for 2012. On January 1, 2012, the Retained Earnings balance was $525,000
and the Accumulated Other Comprehensive Income balance was $55,000. Determine
the (a) comprehensive income for 2012, (b) Retained Earnings balance on December
31, 2012, and (c) the Accumulated Other Comprehensive Income on December 31,
2012.
49) Which of the following is the most desirable quick ratio?
A.2.20
B.1.80
C.1.95
D.1.50
50) The statement of cash flows is not useful for:
A.planning future investing and financing activities
B.determining a companys ability to pay its debts
C.determining a companys ability to pay dividends
D.calculating the net worth of a company
51) If Department H had 600 units, 60% completed, in process at the beginning of the
period, 8,000 units were completed during the period, and 500 units were 30%
completed at the end of the period, what was the number of equivalent units of
production for the period for conversion if the first-in, first-out method is used to cost
inventories? Assume the completion percentage applies to both direct materials and
conversion cost.
A.7,790
B.8,390
C.8,600
D.8,000
52)
The journal entry will:
A.Increase Capital and decrease Cash
B.Increase Cash and decrease Capital
C.Increase Cash and increase Capital
D.Decrease Cash and decrease Capital
53) The goal of systems analysis is to determine
A.when to implement a system
B.information needs
C.the size of the competitor’s system
D.changes to the present system
54) Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500.
Sold $250,000 of bonds at 97. The journal entry for the purchase would include:
A.a credit to Interest Receivable for $4,500
B.a credit to Interest Revenue for $4,500
C.a debit to Interest Receivable for $4,500
D.a debit to Interest Revenue for $4,500
55) Journalize the entries to record the following:
Sept 1 Established a petty cash fund of $350
Sept 30 The amount of cash in the petty cash fund is now $130. The fund is replenished
based on the following receipts: office supplies, $116; postage $100.
Record any discrepancy in the cash short and over account.
Journal
56) Darnell Company purchased $88,000 of computer equipment from Joseph
Company. Darnell Company paid for the equipment using cash that had been obtained
from the initial investment by Donnie Darnell.
Which entity or entities (Darnell Company, Joseph Company, Donnie Darnell) should
record the transaction involving the computer equipment on their accounting records?
57) Sunrise Coffee Shop, in an effort to stream line their accounting system, has
decided to utilize a Cash Receipts Journal in its operation. Record the following
transactions to the Cash Receipts Journal for the first two weeks in March, add the
columns, and include the Post Reference information from the accounts given.
Are there any additional columns you would add to this journal?
58) Reconstruct the adjusting and closing entries from the following T-Accounts.
Adjusting Entries:
Closing Entries:
59) A company had stock outstanding as follows during each of its first three years of
operations: 2,500 shares of $10, $100 par, cumulative preferred stock and 50,000 shares
of $10 par common stock. The amounts distributed as dividends are presented below.
Determine the total and per share dividends for each class of stock for each year by
completing the schedule.
60) Magnus Industries has the following data: