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1) Budgetary slack can be avoided if lower and mid-level managers are requested to
support all of their spending requirements with specific operational plans.
2) After the sales budget is prepared, the production budget is normally prepared next.
3) At the end of a period, (before adjustment), Allowance for Doubtful Accounts has a
credit balance of $250. The net credit sales for the period total $500,000. If the
company estimates uncollectible accounts expense at 1% of net credit sales, the amount
of bad debt expense to be recorded in an adjusting entry is $4,750.
4) If the budgeted factory overhead cost is $460,000, the budgeted direct labor hours is
80,000, and the actual direct labor hours is 6,700 for the month, the amount of factory
overhead to be allocated is $38,525 (if the allocation is based on direct labor hours).
5) When the effective interest method of amortization is used, the amount of interest
expense for a given period is calculated by multiplying the face rate of interest by the
bonds carrying value at the beginning of the given period.
6) Accumulated Depreciation accounts are liability accounts.
7) Average rate of return equals average investment divided by estimated average
annual income.
8) Companies prepare contribution margin reports by market segments and product
segments because products contribute to profitability in various ways.
9) In a company's annual report, the section called management discussion and analysis
provides critical information in interpreting the financial statements and assessing the
future of the company.
10) In preparing the cash flows from operating activities section of the statement of
cash flows by the indirect method, the net decrease in inventories from the beginning to
the end of the period is added to net income for the period.
11) The cash payback method of capital investment analysis is one of the methods
referred to as a present value method.
12) If the trial balance is in balance, it can be assumed that all journal entries were
posted correctly and no errors were made.
13) Intangible assets differ from property, plant and equipment assets in that they lack
physical substance.
14) Callable bonds can be redeemed by the issuing corporation at the fair market price
of the bonds.
15) Generally accepted accounting principles regulate how and what financial
information is reported by businesses.
16) In a factory with several processing departments, a single factory overhead rate may
not provide accurate product costs and effective cost control.
17) A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at
maturity. The journal entry to recognize this event is
A.debit Cash, $6,120; credit Notes Receivable, $6,120
B.debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest
Receivable, $120
C.debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
D.debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest
Revenue, $120
18) Expenses can result from
A.paying dividends
B.consuming services
C.using up liabilities
D.all of these
19) What term is commonly used to describe the concept whereby the cost of
manufactured products is composed of direct materials cost, direct labor cost, and all
factory overhead cost?
A.Standard costing
B.Variable costing
C.Absorption costing
D.Marginal costing
20) What pricing concept considers the price that other providers charge for the same
product?
A.Demand-based concept
B.Total cost concept
C.Cost-plus concept
D.Competition-based concept
21) Use the accounting equation to answer each of the independent questions below.
a. At the beginning of the year, Norton Company assets were $75,000 and its
stockholders equity was $38,000. During the year, assets increased by $18,000 and
liabilities increased by $4,000. What was the stockholders equity at the end of the year?
b. At the beginning of the year, Turpin Industries had liabilities of $44,000 and
stockholders equity of $66,000. If assets increased by $10,000 and liabilities decreased
by $5,000, what was the stockholders equity at the end of the year?
22) Which of the following group of accounts are increased with a debit?
A.assets, liabilities, stockholders equity
B.assets, dividends, expenses
C.assets, revenues, expenses
D.assets, liabilities, revenues
23) Machinery acquired at a cost of $80,000 and on which there is accumulated
depreciation of $55,000 (including depreciation for the current year to date) is
exchanged for similar machinery. For financial reporting purposes, present entries to
record the disposition of the old machinery and the acquisition of new machinery under
each of the following assumptions:
24) Variable costs are $80 per unit, and fixed costs are $40,000. Sales are estimated to
be 4,000 units. (a) How much would absorption costing income from operations differ
between a plan to produce 4,000 units and a plan to produce 5,000 units? (b) How much
would variable costing income from operations differ between the two production
plans?
25) Dove Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $250,000, $320,000, and
$410,000, respectively, for September, October, and November. The company expects
to sell 25% of its merchandise for cash. Of sales on account, 70% are expected to be
collected in the month of the sale, 30% in the month following the sale.
The cash collections in November are:
A.$317,750
B.$389,750
C.$490,000
D.$410,000
26) 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.
27) The comparative balance sheet of Ramos Company appears below:
(a) RAMOS COMPANY
Comparative Balance Sheet
December 31, 2012 and 2011
Instructions
28) Watson Company issued a 60-day, 8% note for $18,000, dated April 5, to Laker
Company on account. (Assume a 360-day year when calculating interest.)
(a) Determine the due date of the note.
(b) Determine the maturity value of the note.
(c) Journalize the entries to record the following:
(1) receipt of the note by the payee, and
(2) receipt by the payee of the amount due on the note at maturity. Round answers to
the nearest $1.
29) The following data are taken from the financial statements:
30) How are the objectives of just-in-time (JIT) manufacturing achieved?
A.Product-oriented production layout
B.Employee involvement
C.Supplier partnering
D.All of the above
31) The chart of accounts is designed to
A.alphabetize the accounts to make reading easier for its financial statement users
B.analyze the accounts and organize them in order of dollar amount to simplify the
accounting information for users
C.summarize the transactions and determine their ending balances
D.meet the information needs of a company and other financial statement users
32) Which one of the following below reflects a weak internal control system?
A.all employees are well supervised
B.a single employee is responsible for comparing a receiving report to an invoice
C.all employees must take their vacations
D.a single employee is responsible for collecting and recording of cash
33) The following selected transactions relate to cash collections for a firm that
maintains a $100 change fund at all times. Present entries to record the transactions for
each of the two days of cash receipts from sales.
34) Which of the following statements is not true about a 2-for-1 split?
A.Par value per share is reduced to half of what it was before the split
B.Total contributed capital increases
C.The market price will probably decrease
D.A stockholder with ten shares before the split owns twenty shares after the split
35) Tippi Company produces lamps that require 2.25 standard hours per unit at an
hourly rate of $15.00 per hour. If 7,700 units required 17,550 hours at an hourly rate of
$15.20 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost
variance?
36) Zipee Inc.'s unit selling price is $90, the unit variable costs are $40.50, fixed costs
are $170,000, and current sales are 12,000 units. How much will operating income
change if sales increase by 5,000 units?
A.$125,000 decrease
B.$175,000 increase
C.$75,000 increase
D.$247,500 increase
37) Accumulated Depreciation
A.is used to show the amount of cost expiration of intangibles
B.is the same as Depreciation Expense
C.is a contra asset account
D.is used to show the amount of cost expiration of natural resources
38) The last item on the statement of cash flows prior to the schedule of noncash
investing and financing activities reports
A.the increase or decrease in cash
B.cash at the end of the year
C.net cash flow from investing activities
D.net cash flow from financing activities
39) Which of the following would not be used in preparing a cash budget for October?
A.Beginning cash balance on October 1
B.Budgeted salaries expense for October
C.Estimated depreciation expense for October
D.Budgeted sales and collections for October
40) On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7%
bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the
bonds on the issue date for the issue price. Present entries to record the following
transactions for the current fiscal year:
Lisbon Co.
(a) Issuance of the bonds.
(b) Second semiannual interest payment.
(c) Amortization of bond premium for the year, using the straight-line method of
amortization.
Orange Inc.
(d) Purchase of the bonds.
(e) Receipt of second semiannual interest payment.
(f) Amortization of bond premium for the year, using the straight-line method of
amortization.
41) A summary of the materials requisitions completed during a period serves as the
basis for transferring the cost of the materials from the controlling account in the
general ledger to the controlling accounts for:
A.work in process and cost of goods sold
B.work in process and factory overhead
C.finished goods and cost of goods sold
D.work in process and finished goods
43) The Thudaka Company has budgeted its conversion cost for the small lamp
production as $65,000 for 1,300 production hours. Each unit produced by the cell
requires 15 minutes of process time. During the month, 3,800 units are manufactured in
the cell. the estimated material cost is $18 per unit. Provide the following journal
entries.
(a) Materials are purchased to produce 4,000 units.
(b) Conversion costs are applied to 3,800 units of production.
(c) 3,650 units are placed into finished goods.
44) The direct labor and overhead costs of providing services to clients are accumulated
in:
A.finished services expense
B.work in process
C.administrative salaries expense
D.overhead
45) Which of the following accounts will not be found on the Cost of Merchandise Sold
section on the Income Statement?
A.Purchases
B.Freight In
C.Sales Returns and Allowances
D.Merchandise Inventory
46) Which of the following would not be considered a good managerial tool in making
a decision for determining a capital investment?
A.Further evaluate assets that are dissimilar in nature or have different useful lives.
B.Using only quantitative measures to purchase an asset.
C.Analyzing the lease vs purchase option.
D.Considering income tax ramifications.
47) Discuss the (1) focus and (2) financial statement emphasis of (a) the percent of sales
and (b) the analysis of receivables methods of estimating bad debts.
48) Contribution margin reporting can be beneficial for analyzing, which of the
following?
A.sales personnel
B.products
C.sales territory
D.all of the above
49) Companies like Enron, WorldCom, and Tyco International, Ltd. have been caught in
the midst of ethical lapses that led to fines, firings, and criminal and/or civil
prosecution. List and briefly describe three factors that are responsible for what went
wrong in these companies.
50) Tracy Roberts, the sole stockholder of Surfer Dude Supplies, is requesting a
$75,000 loan from the bank where you work as a loan officer. He brings to you the
following trial balance (or statement of accounts) as of the end of his first year of
operations.
What three accounts do you think should be relabeled for greater clarity?
51) The Dickinson Company reported net income of $155,000 for the current year.
Depreciation recorded on buildings and equipment amounted to $65,000 for the year. In
addition, a building with an original cost of $250,000 and accumulated depreciation of
$190,000 on the date of the sale, was sold for $75,000. Balances of the current asset and
current liability accounts at the beginning and end of the year are as follows:
Instructions
Prepare the cash flows from the operating activities section of the statement of cash
flows using the indirect method.
52) On May 1, 2015, Chase Inc. purchases $60,000 of 10-year, Manus Corporation 6%
bonds dated March 1, 2015 at 100 plus accrued interest. What entry would Chase record
when receiving its semiannual interest on September 1?
53) The following is the adjusted trial balance for Sandeep Company.
Prepare closing entries and the post closing trial balance.
54) The payroll register of Seaside Architecture Company indicates $970 of Social
Security and $257 of Medicare tax withheld on total salaries of $16,500 for the period.
Federal withholding for the period totaled $4,235. Provide the journal entry for the
periods payroll.
55) On the first day of the fiscal year, a company issues a $500,000, 8%, 10 year bond
that pays semi-annual interest of $20,000 ($500,000 8% 1/2), receiving cash of
$530,000. Journalize the entry to record the issuance of the bonds.
56) Complete the following work sheet for Danilo Enterprises.
Danilo Enterprises
Work Sheet
For the Year Ended December 31, 2011
