Which of the following is not considered as a complicating factor in capital investment
decisions?
A.Income tax
B.Lease versus capital investment
C.Equal proposed lives
D.Qualitative considerations
Answer:
Stockholders’ equity
A.is usually equal to cash on hand
B.includes paid-in capital and liabilities
C.includes retained earnings and paid-in capital
D.is shown on the income statement
Answer:
An August sales forecast projects 6,000 units are going to be sold at a price of $11.50
per unit. The desired ending iventory in units is 15% higher than the beginning
inventory of 1,000 units. Total August sales are anticipated to be:
A.$80,500
B.$69,000
C.$60,000
D.$57,500
Answer:
Estimated cash payments are planned reductions in cash from all of the following
except:
A.manufacturing and operating expenses
B.capital expenditures
C.notes and accounts receivable collections
D.payments for interest or dividends
Answer:
Which of the following is not a business transaction?
A.Erin deposits $15,000 in a bank account in the name of Erin’s Lawn Service.
B.Erin provided services to customers earning fees of $600.
C.Erin purchased hedge trimmers for her lawn service agreeing to pay the supplier next
month.
D.Erin pays her monthly personal credit card bill.
Answer:
The portion of whole units that were completed with respect to either materials or
conversion costs within a given accounting period is the definition of
A.units started and completed.
B.equivalent units.
C.conversion costs.
D.ending work in process.
Answer:
Materials used by Jefferson Company in producing Division C’s product are currently
purchased from outside suppliers at a cost of $10 per unit. However, the same materials
are available from Division A. Division A has unused capacity and can produce the
materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of
$9.50 per unit is negotiated and 25,000 units of material are transferred, with no
reduction in Division A’s current sales.
How much would Division A’s income from operations increase?
A.$0
B.$75,000
C.$25,000
D.$50,000
Answer:
On January 1, 2014, $1,000,000, 5-year, 10% bonds, were issued for $980,000. Interest
is paid semiannually on January 1 and July 1. If the issuing corporation uses the
straight-line method to amortize discount on bonds payable, the semiannual
amortization amount is
A.$8,000.
B.$4,000.
C.$2,000
D.$5,000
Answer:
The journal entry a company uses to record the issuance of an interest-bearing note for
the purpose of borrowing funds for the business is
A.debit Accounts Payable; credit Notes Payable
B.debit Cash; credit Notes Payable
C.debit Notes Payable; credit Cash
D.debit Cash and Interest Expense; credit Notes Payable
Answer:
Merchandise with an invoice price of $3,000 is purchased on September 2 subject to
terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What
is the cost of the merchandise if paid on September 12, assuming the discount is taken?
A.$3,140
B.$3,136
C.$2,744
D.$2,940
Answer:
Which of the following is a present value method of analyzing capital investment
proposals?
A.Average rate of return
B.Cash payback method
C.Accounting rate of return
D.Net present value
Answer:
The journal entry a company uses to record the issuance of a discounted note for the
purpose of borrowing funds for the business is
A.debit Cash and Interest Expense; credit Notes Payable
B.debit Cash and Interest Payable; credit Notes Payable
C.debit Accounts Payable; credit Notes Payable
D.debit Notes Payable; credit Cash
Answer:
Determine the amount to be added to Allowance for Doubtful Accounts in each of the
following cases and indicate the ending balance in each case.
Answer:
If the direct write-off method of accounting for uncollectible receivables is used, what
general ledger account is credited to write off a customer’s account as uncollectible?
A.Uncollectible Accounts Expense
B.Accounts Receivable
C.Allowance for Doubtful Accounts
D.Interest Expense
Answer:
Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in
a partnership. The articles of partnership include the following provisions regarding the
division of net income: interest on original investment at 20%, salary allowances of
$27,000 and $18,000 respectively, and the remainder equally. How much of the net
income of $91,000 is allocated to Yolanda?
A.$26,500
B.$46,000
C.$45,000
D.$45,500
Answer:
Which of the following accounts are debited to record increase in balances?
A.assets and liabilities
B.drawing and liabilities
C.expenses and liabilities
D.assets and expenses
Answer:
Goods that are partially completed by a manufacturer are referred to as:
A.merchandise inventory
B.work in process inventory
C.finished goods inventory
D.materials inventory
Answer:
A financial statement user would determine if a company was profitable or not during a
specific period of time by reviewing
A.the Income Statement.
B.the Balance Sheet.
C.the Statement of Cash Flows.
D.cannot be determined.
Answer:
Southern Company is preparing a cash budget for April. The company has $12,000 cash
at the beginning of April and anticipates $30,000 in cash receipts and $34,500 in cash
disbursements during April. Southern Company has an agreement with its bank to
maintain a cash balance of at least $10,000. To maintain the $10,000 required balance,
during April the company must:
A.borrow $4,500.
B.borrow $2,500.
C.borrow $7,500.
D.borrow $5,000.
Answer:
If the expected sales volume for the current period is 7,000 units, the desired ending
inventory is 400 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.6,900
B.7,000
C.7,200
D.7,100
Answer:
Bonds with a face amount $1,000,000, are sold at 108. The entry to record the issuance
is
A.Cash 1,000,000
Premium on Bonds Payable 80,000
Bonds Payable 1,080,000
B.Cash 1,080,000
Premium on Bonds Payable 80,000
Bonds Payable 1,000,000
C.Cash 1,080,000
Discount on Bonds Payable 80,000
Bonds Payable 1,000,000
D.Cash 1,080,000
Bonds Payable 1,080,000
Answer:
The balance in Discount on Bonds Payable that is applicable to bonds due in 2015
would be reported on the balance sheet in the section entitled
A.investments
B.long-term liabilities
C.current assets
D.intangible assets
Answer:
Garrett Company sells merchandise with a one year warranty. In 2012, sales consisted
of 3,500 units. It is estimated that warranty repairs will average $15 per unit sold, and
30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income
statement, Garrett should show warranty expense of
A.$36,750
B.$15,750
C.$52,500
D.$0
Answer:
A gain or loss on realization is divided among partners according to their
A.income sharing ratio
B.capital balances
C.drawing balances
D.contribution of assets
Answer:
If merchandise inventory is being valued at cost and the price level is steadily rising,
the method of costing that will yield the highest net income is
A.periodic
B.LIFO
C.FIFO
D.average
Answer:
In general, consolidated financial statements should be prepared
A.when a corporation owns more than 20% and less than 40% of the common stock of
another company
B.when a corporation owns more than 50% of the common stock of another company
C.only when a corporation owns 100% of the common stock of another company
D.whenever the market value of the stock investment is significantly lower than its cost
Answer:
Which of the following types of accounts have a normal credit balance?
A.assets and liabilities
B.liabilities and expenses
C.revenues and liabilities
D.capital and drawing
Answer:
Which of the following is not a use of the cost of production report?
A.To help managers control operations.
B.To help managers isolate problems.
C.To project production.
D.To help managers improve operations.
Answer:
The primary difference between a periodic and perpetual inventory system is that a
A.periodic system determines the inventory on hand only at the end of the accounting
period
B.periodic system keeps a record showing the inventory on hand at all times
C.periodic system provides an easy means to determine inventory shrinkage
D.periodic system records the cost of the sale on the date the sale is made
Answer:
Where are selling and administrative expenses found on the multiple-step income
statement?
A.before gross profit
B.after sales and before gross profit
C.after net income before expenses
D.after gross profit
Answer:
Prarie Clinic purchased X-ray equipment for $7,500, paid $2,250 down, with the
remainder to be paid later. The correct entry would be
A.Equipment 2,250
Cash 2,250
B.Cash 2,250
Accounts Payable 5,250
Equipment 7,500
C.Equipment Expense 7,500
Accounts Payable 2,250
Cash 5,250
D.Equipment 7,500
Accounts Payable 5,250
Cash 2,250
Answer:
The purchase of supplies on account was recorded and posted as a debit to Supplies for
$500 and a credit to Accounts Receivable for $500. The correcting entry would include
a:
A.credit to Accounts Receivable for $500
B.credit to Accounts Receivable for $1,000
C.credit to Accounts Payable for $500
D.credit to Accounts Payable for $1,000
Answer:
A copy machine acquired with a cost of $1,410 has an estimated useful life of 4 years. It
is also expected to have a useful operating life of 13,350 copies. Assuming that it will
have a residual value of $75, determine the depreciation for the first year by the
a. straight-line method
b. double declining-balance method
c. production method (4,500 copies were made the first year)
Answer: